Masimo Corporation (MASI), a leader in the pulse oximetry (a measurement of the amount of oxygen attached to the hemoglobin) monitoring equipment market, recently launched its latest sub-45 milliwatt technology platform, the MS-2040. The new platform requires almost one-third the electricity, and comes with one-half the board dimensions of former Signal Extraction Pulse Oximetry solutions, while facilitating the time-tested low perfusion oxygen saturation (SpO2), measure-through-motion, perfusion index, pulse rate and other capabilities. The Masimo MS-2040 boards use under 45 milliwatts of power. They may be purchased in a double-stack model with dimensions of 1.8" x 1.15" x 0.46" as well as a single-stack type measuring 2.0" x 1.38" x 0.36". The reduced size and low power consumption of Masimo MS-2040 boards facilitate their fitment with portable, modern medical devices that must be light, miniaturized and mobile. Masimo asserts that it has a track record of implementing circuitry modernization programs, which have reduced the measurement of its boards by 90% and electricity consumption by as much as 98%. This has enabled the company, along with its partners, to bring to market lighter and less bulky circuit boards which are supportive of superior pulse oximetry capabilities. In addition, the MS-2040 circuit board is also marketed as an external "board-in-cable" solution. This solution imparts external Masimo SET pulse oximetry capabilities to older devices that do not currently possess a composite pulse oximetry capability. Masimo is a market leader in the pulse oximetry monitoring equipment industry. It has successfully defended its intellectual property and continues forging new relationships with OEMs. Masimo’s patented signal extraction technology provides the ability to measure various components of blood through motion and low perfusion pulse oximetry. This addresses the primary limitations of conventional pulse oximetry. The company launched its Rainbow SET Pulse CO-Oximetry technology in 2005, which allows non-invasive and continuous monitoring of additional blood constituents that earlier required invasive procedures. Moreover, in 2009, the company introduced Rainbow SET Accoustic Monitoring for continuous non-invasive monitoring of acoustic respiration rate. Higher demand for Masimo SET and Rainbow SET monitors continues to spur revenue growth. Masimo recently extended its agreement (signed in January 2006) with Covidien (COV). Under the amended terms, Covidien will reportedly pay Masimo a royalty of 7.75% on its sale of the latter’s pulse oximetry products in the U.S. for three more years, starting March 15, 2011. We are optimistic about the prospects of Masimo due to the steady growth in shipments, sizeable market opportunity and expanded pulse oximetry utilization into non-critical care areas in hospitals. Moreover, recurring revenues from sale of consumables are increasing at a brisk pace and shaping up as a long-term growth driver. Also, the renewal of the royalty agreement with Covidien provides additional impetus. That said, we remain cognizant about intense competition and the company’s dependence upon its OEM partners. Our Neutral long-term rating for the stock is supported by a short-term Zacks #3 Rank (Hold). COVIDIEN PLC (COV): Free Stock Analysis Report
updated May 20, 2011
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