Masimo Corp. Chief Executive Joe Kiani is singing the gospel of recurring revenue as his answer to tough economic times.
Kiani, who cofounded the Irvine company known for its pulse oximeters and other patient monitors, talked about Masimo’s business model during Roth Capital Partners LLC’s growth stock conference in Dana Point last month.
Masimo gets the majority of its revenue from long-term contracts for disposable sensors and other equipment used with its pulse oximeters, which measure oxygen levels in the blood, and other machines.
“The scarcity of capital has put a lot of pressure (on hospitals),” Kiani said. “But, so far, we’ve not been impacted because we place equipment in exchange for sensor contracts.”
Kiani declined to talk specifics about Masimo’s finances during his presentation. The company is set to release its 2008 financial results on Tuesday.
Wall Street expects Masimo to post a fourth-quarter profit of $9.7 million, which would be down 15% from a year earlier, and sales of $80.4 million, up 16%.
Masimo was one of Orange County’s best local stocks in 2007, when it raised $233 million in its initial public offering and its shares rose 50% in its first two months to a market value of about $1.7 billion.
The company joined Wall Street’s downturn in 2008, dropping about 15% in the past year, still better than the market’s 40% drop. The company had a market value of about $1.5 billion last week.
Kiani also touched on several traditional Masimo themes at the conference, including how the device maker is “battle tested” after a seven-year struggle with Nellcor Puritan Bennett Inc., a division of Covidien Ltd. that had about 90% of the pulse oximetry market when the two first clashed.
Masimo has a guaranteed stream of royalty revenue through 2011 thanks to a $300 million-plus patent lawsuit settlement with Nellcor, Kiani said.
But the payments are shrinking each year, which partly is why Wall Street expects lower fourth-quarter profits for Masimo.
Other local healthcare companies appeared at the Roth conference, including San Clemente-based device maker ICU Medical Inc.; Clarient Inc., an Aliso Viejo diagnostic testing company; and I-Flow Corp., a Lake Forest maker of drug delivery systems.
Reducing ER Costs
In these tough times, one local medical group is trying to prevent patients from using pricey emergency rooms for non-emergencies.
Fullerton-based St. Jude Heritage Medical Group, which treats some 250,000 patients in North Orange County a year, recently sent a letter to members saying they should “talk to their doctors” before reducing their medications or putting off medical care, which can lead to emergency room visits.
During economic slowdowns, some patients reduce their medication or hold off on receiving treatment because they are unsure how the economy is affecting their healthcare plans.
St. Jude, part of Orange-based hospital operator St. Joseph Health System, also suggested that its patients use its “afterhours care” medical centers in Fullerton and Yorba Linda for the same copayment as regular doctor visits. The medical group also touted its nurse advice line for weekends and holidays.
Because federal law requires emergency rooms to treat patients under any circumstance, hospitals often encourage insured patients to use walk-in, urgent care centers instead of emergency rooms and encourage uninsured patients to use community clinics.
St. Jude Heritage also suggested in its letter that patients should “consider switching to FDA-approved, high quality generic” drugs to cut costs.
Many health plans already provide discount generic drugs for their members.
SenoRx Makes International Moves
Aliso Viejo-based SenoRx Inc. is continuing its global push.
SenoRx, a maker of devices for treating and diagnosing breast cancer, said a few weeks ago it was starting to sell its products in Egypt, Greece, Poland, Saudi Arabia, Thailand, Turkey and the United Arab Emirates.
The company is tapping distributors for its EnCor breast biopsy system and GelMark, a device that allows doctors to identify a breast biopsy site.
The company had positive results with earlier efforts abroad and still sees room for growth in other countries, said Lloyd Malchow, chief executive at SenoRx.
The device maker has distributors in Australia, Austria, Belgium, Britain, Denmark, Finland, France, Germany, Hong Kong, Iceland, Ireland, Italy, Luxembourg, Mexico, the Netherlands, Norway, Portugal, Russia, Singapore, South Korea, Spain, Sweden, Switzerland and Taiwan.
SenoRx was among the bigger initial public offerings in the county in 2007, raising $45 million and seeing its shares rise 30% in its first couple of months of trading.
In the past year, the device maker has seen its shares fall 70% with a recent market value of about $45 million.
