A pullback in spending by hospitals is being felt at Irvine’s Masimo Corp.
The maker of patient monitors and supplies said earlier this month that it was cutting its full-year sales guidance for a new device that measures hemoglobin in a patient’s blood.
Masimo forecast sales of $16 million to $18 million for the latest device in its Rainbow line, down from a prior estimate of $23 million to $25 million.
The company cut its forecast because “the whole environment where cost cutting is en vogue does not bode as well” for new devices, among other reasons, Chief Executive Joe Kiani said.
Hospitals, which generally are immune to recessions, are reacting differently this time around. Many have cut spending for medical devices and big-ticket equipment in the wake of the economic slowdown.
Executives cite an increase in caring for patients who don’t have health insurance as well as declines in investment income from the stock market meltdown late last year.
That’s prompted hospitals to put off buying all but essential equipment. Masimo, Fullerton’s Beckman Coulter Inc. and other local medical products makers have felt the fallout.
Those whose products are essential,including Irvine heart valve maker Edwards Lifesciences Corp. and B. Braun Medical Inc. in Irvine, a unit of Germany’s B. Braun Melsungen AG that makes intravenous solutions and bags,have held up better.
Masimo makes devices that attach to a finger or toe and monitor oxygen, hemoglobin and other substances in patients.
It came out with its latest device in March. Some analysts said the market for measuring blood oxygen via hemoglobin eventually could grow to more than $1 billion yearly.
Kiani calls the company’s reduced forecast realistic.
“We feel very good about meeting the numbers we’ve given now,” he said.
One analyst, William Blair & Co.’s Brian Weinstein, seemed unfazed.
“While we understand why investors are focused on the hemoglobin (and Rainbow) revenue, we would not make too much out of the early results of these products or the reduction to revenue guidance for Rainbow for 2009,” he said in a research report.
Weinstein argued that the true value of investing in Masimo is what he calls the long-term applicability of hemoglobin and Rainbow “in a variety of settings, and we remain bullish that this will develop over time.”
Masimo has been pushing to land its devices in more places than just hospitals, including surgery centers and doctor’s offices.
Investors shouldn’t “miss the forest for the trees with this product by focusing too much on the number of interested accounts or trying to guess what hemoglobin revenue is in a particular quarter,” Weinstein said.
Clarient Operating Profit
Clarient Inc., an Aliso Viejo-based cancer testing provider, said it reached its first operating profit in its history earlier this month.
Clarient swung to an operating profit of $771,000 in the second quarter, compared to a loss of $1.7 million a year earlier.
Quarterly revenue grew 40% to $24 million. Clarient said it’s now posted 20 consecutive quarters of revenue growth.
After a dividend related to the second part of a private stock placement done with Connecticut’s Oak Investment Partners, the company posted a net loss of $4.3 million, unchanged from a year earlier.
In March, Oak Investment Partners said it planned to invest up to $50 million in Clarient as part of an exit by former majority owner Safeguard Scientifics Inc. of Pennsylvania.
“In our opinion, Clarient delivered another strong quarter of growth and this momentum will persist in the coming quarters,” said Matt Dolan, a senior research analyst with Roth Capital Partners LLC in Newport Beach.
Specifically, Dolan said he expects Clarient’s business to continue to expand as new sales representatives add customers and as “the organization becomes increasingly productive.”
Bits and Pieces:
Kaiser Permanente said it expects steel for its Anaheim hospital project to arrive this week and that concrete was placed for the building’s foundation earlier this month. Kaiser, an Oakland-based not-for-profit that operates OC’s largest health maintenance organization, is building an $850 million healthcare complex that will include a hospital, two medical office buildings, central utility plant and parking structure ICU Medical Inc., a San Clemente medical device maker, said it and Medegen Inc., a privately held device maker based in Ontario, reached a deal to end a patent lawsuit. Medegen originally sued ICU in 2006, alleging the ICU’s Tego and CLC-2000 connectors infringed on Medegen patents Irvine drug developer Spectrum Pharmaceuticals Inc. has acquired the full rights and patents for RenaZorb, a compound that’s being developed for treating chronic kidney disease, from Altair Nanotechnologies of Reno, for $750,000 in stock.
