Masimo Annual Report 2009

Plain-text annual report

Closer to the Heart® Closer to the Heart For over 20 years, Masimo has been the leader in developing breakthrough noninvasive monitoring technologies. But what sets Masimo apart is not just what we do, but why and how we do it. We call it staying “Closer to the Heart”, an attitude and philosophy that permeates everything we do. Closer to the Heart means always doing what is right in our hearts – not just what is immediately rewarding. By staying Closer to the Heart, we remain focused on: > Solving unsolvable problems by getting to the heart of the issue > Protecting patients by having the heart to go after the clinical solutions that are needed – even when the path is long and uncharted > Innovating for the future to allow clinicians to get at the heart of what is wrong with their patients 2 3 A Letter from the Chairman & CEO DELIVERING ON OUR MISSION AND GUIDING PRINCIPLES Over 20 years ago, Masimo started with a bold mission to improve patient outcomes and reduce the cost of care by taking noninvasive monitoring to new sites and applications. We also set forth guiding principles that stay with us today: > Remain faithful to your promises > Strive to make each year better than the year and responsibilities before both personally and for the team > Thrive on fascination and accomplishment > Make each day as fun as possible and not on greed and power > Do what is best for patient care In Masimo’s 20th anniversary year, we celebrated by launching more breakthrough noninvasive measurements, growing the number of customers and partners, and expanding the markets for our products. In the process, we delivered record 2009 ﬁ nancial results in a challenging global economy. STAYING CLOSER TO THE HEART Much has changed since 1989, when I founded Masimo in By standing and striving for truth while relentlessly pursuing my home. But after two decades of technical innovation, our mission and adhering to our guiding principles, we broad clinical impact, and solid growth, one very important have remained Closer to the Heart and focused on solving thing has remained the same – our commitment to staying unsolvable problems, protecting patients, and innovating Closer to the Heart. From the outset, Masimo resolved to for the future. In the process, we have built an enterprise in be diﬀ erent from any other company. We didn’t just set which over 2,000 talented people deliver on their promises out to create breakthrough technologies, we also wanted in an environment where fascination, accomplishment, to impact patient lives more signiﬁ cantly than any patient and fun can thrive. monitoring company. And at the same time, by the way we conducted ourselves, we truly hoped to improve the way business is practiced in our industry. ‘89 Company founded by Massi Joe E. Kiani. Mohamed Diab joins six months later and Masimo (“Massi” + “Mo”) is formed 20 YEARS OF FIRSTS Masimo’s innovation engine has fueled many industry ﬁ rsts over the past 20 years, signiﬁ cantly improving patient care in the process Joe Kiani Chairman & CEO 4 5 Installed Base (estimated units)* 4,000 16,000 38,000 100,000 62,000 214,000 150,000 724,000 625,000 507,000 392,000 296,000 Revenues (millions of dollars) 1.7 6.7 14.4 20.9 40.6 46.7 107.9 69.4 349.1 49.0 300.1 307.1 47.5 259.6 256.3 56.1 200.2 224.3 68.8 1111 155.5 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 * Excludes Handheld Devices Product Revenues Royalty Revenues PROVING WE MEAN IT lawsuit against Nellcor, we received enough funds to take technological limitations of conventional pulse oximetry and ﬁ rst-ever noninvasive and continuous total hemoglobin The pages of this annual report are full of innovations that are advantage of the automatic stock redemption of early made pulse oximetry accurate during challenging conditions. (SpHb®) and oxygen content (SpOC™) monitor, which testaments to everything we originally set out to accomplish. investors. While this would have resulted in great personal Masimo’s success in solving this previously “unsolvable” we believe will have a profound impact on healthcare by It has been said that the true test of character is what you gain to some insiders, we instead let stockholders keep their problem resulted in earning the trust and conﬁ dence of reducing unnecessary blood transfusions and allowing earlier do when no one else is looking. While less noticeable, there preferred shares and fully beneﬁ t from a large dividend while clinicians worldwide. Approximately 10 years after the detection of bleeding for more timely intervention. At the have been many other things that happened along Masimo’s we geared up to take our company public. introduction of Masimo SET, Masimo Rainbow® SET has end of 2009, we received FDA clearance for our breakthrough journey that also stand as proud examples of the promises ushered in noninvasive and continuous measurements Masimo Rainbow Acoustic Monitoring™ technology, which we made to ourselves 20 years ago. When other companies refused to provide their pulse that previously required invasive procedures, allowing provides noninvasive and continuous respiration rate (RRa™) When we discovered our Rad-9® product (acquired in 2002 liabilities vis-à-vis high-risk patients, we decided to make our patients in ways they never thought possible. patient compliance. We believe Rainbow Acoustic Monitoring oximeters for use in home care because of the potential clinicians to make earlier and better decisions to care for monitoring that is accurate, easy-to-use, and enhances from one of our OEMs) could visually but not audibly alarm if products available because we knew they provided the best a sensor failed, we proactively issued a recall for the device and sometimes only solution possible for patient care. When to ensure the highest level of patient safety – while the FDA we won the antitrust lawsuit against Nellcor in Federal Court, stated it didn’t require one as the behavior met industry we kept ﬁ ghting for a ﬁ nal ruling so our case could help other standards. When no other pulse oximetry company put two companies avoid what we experienced – instead of focusing speakers in their devices to ensure that patient alarms would on a possible large settlement. And when the ﬁ nal rulings were be heard, even in the rarest cases of component failure, we in, instead of banking the legal proceeds, we used a signiﬁ cant looked beyond product costs and did it for all of our bedside portion of those funds to set up the Masimo Foundation for devices anyway. When we won the patent infringement Ethics, Innovation, and Competition in Healthcare. ‘95 Masimo SET Pulse Oximetry First Measure-through Motion and Low Perfusion pulse oximetry – debuts at the Society for Technology in Anesthesia and wins Excellence in Technology Innovation Award CONTINUING INNOVATION Masimo’s innovation engine has fueled many industry ﬁ rsts over the past 20 years, which have signiﬁ cantly improved patient care and reduced costs. Masimo SET® overcame the ‘95 MS-1 Board™ Masimo SET overcame the technological limitations of conventional pulse oximetry and made pulse oximetry accurate during challenging conditions. will make a signiﬁ cant diﬀ erence in the way healthcare is provided by allowing more patients in all areas of the hospital to be monitored more safely than ever before. As 2009 drew to a close, we also received word that a landmark study would soon be published showing that Masimo SET pulse oximetry and Patient SafetyNet™ helped clinicians caring for post-surgical patients on the general ﬂ oor dramatically improve patient care, decreasing rescue In early 2009, we continued to enhance the value of our events and intensive care transfers while also providing Masimo Rainbow SET technology platform by adding new a signiﬁ cant positive ﬁ nancial impact. We know that measurements, starting with the full market release of the many lives will be saved and unnecessary costs avoided as Masimo’s technologies are used on the general ﬂ oor in hospitals worldwide. ‘95 Diagnostic-Quality Pleth Waveform First true diagnostic-quality pleth waveform PI ‘95 Perfusion Index First accurate quantiﬁ cation of amplitude of the pleth waveform to 0.02% 6 7 THE MASIMO PRODUCT OFFERING CIRCUIT BOARDS MONITORS PATIENT SAFETYNET SYSTEM SENSORS/CABLES The leading pulse oximetry solution, available in more than 100 OEM monitors from 50 leading brands. A complete line of bedside and handheld monitors for clinicians in acute and alternate care settings. Wireless remote monitoring and clinician notiﬁ cation system designed to keep patients safe on general care ﬂ oors. Available for either single- or multi-patient use with over 100 diﬀ erent sensor and cable combinations for virtually every clinical need. INCREASING MARKET ADOPTION FOR BETTER disease in newborns, reduce medical errors in critical care, CARE AT A LOWER COST wean patients from the ventilator faster, improve ﬂ uid Hospitals around the world continue to see signiﬁ cant management, and save lives and costs on the general advantages provided by Measure-through Motion and Low ﬂ oor. These improvements in the process of care have Perfusion Masimo SET pulse oximetry. We shipped 111,000 resulted in real cost savings to hospitals using Masimo drivers in 2009, increasing our estimated worldwide technologies. In total, we estimate that U.S. hospitals installed base to over 700,000 drivers. We believe we alone could save over $5 billion when their clinicians Rainbow measurements have Rainbow measurements have also allowed us to increasingly extend Masimo’s reach beyond the hospital. results in what proved to be a challenging global economy. Our total revenues grew to $349.1 million while product revenues rose 16% to $300.1 million and Rainbow revenues rose 46% to $19.5 million. Net income grew from $31.9 million or $0.53 per diluted share in 2008 to $53.2 million or $0.88 per diluted share in 2009. We anticipate that our core business in Masimo SET pulse oximetry will continue will see increased growth in our installed base as more use Masimo technologies to their fullest potential. GROWING OUR INTERNATIONAL FOOTPRINT to grow steadily while Rainbow Pulse CO-Oximetry™ and clinicians choose the Masimo Rainbow SET platform. We estimate that U.S. hospitals alone could save over $5 billion when their clinicians use Masimo technologies to their fullest potential. EXPANDING TO NEW MARKETS Masimo SET has allowed pulse oximetry to succeed in markets where conventional pulse oximetry has failed, including home and long-term acute care facilities. Rainbow measurements have also allowed us to increasingly extend Masimo’s reach beyond the hospital, from the detection of carbon monoxide poisoning at the Recognizing the growing international demand for our Rainbow Acoustic Monitoring will increasingly contribute products, we opened our new international operations to our growth as more OEM partners integrate and more center in Neuchâtel, Switzerland in 2009. Staﬀ ed with a hospitals adopt Rainbow technologies. dedicated team in key business areas – all focused exclusively on servicing our growing international customer base – LOOKING TO THE FUTURE, BUILT ON THE Neuchâtel will be the nerve center of our international SOLID FOUNDATION OF THE PAST operations. Ultimately, this will ensure that we are proactively With a 20-year track record of industry ﬁ rsts, a talented and and aggressively working to meet the needs of healthcare dedicated team of individuals, and a continued commitment Masimo SET has been proven to help clinicians reduce scene of a ﬁ re to hemoglobin spot-check testing in the providers and patients in international markets. to staying Closer to the Heart, we are conﬁ dent our greatest retinopathy of prematurity and detect congenital heart physician oﬃ ce. And as more healthcare professionals contributions lie ahead. Today we renew our pledge made gain access to our products, we know that more lives PERFORMING IN A CHALLENGING CLIMATE in 1989 – to impact patient lives in a way that no patient will be improved and saved. By helping clinicians improve the quality and eﬃ ciency of monitoring company has done before and to continue to patient care, we delivered another year of record ﬁ nancial change the way business is practiced in our industry. ‘97 Study shows Masimo SET sensitivity and speciﬁ city exceeds competing pulse oximeter technologies1 ‘96 LNOP® Sensors Highest signal-to-noise ratio sensor with non- absorbent material, rejuvenating adhesive, and replaceable tapes – minimizing waste ‘98 Study shows Masimo LNOP sensors last nearly twice as long as the market leading adhesive disposable sensors2 Best personal regards, Best personal regards, ‘98 IVY 2000™ Pulse Oximeter First blue LCD display Joe Kiani Joe Kiani Chairman & CEO 8 9 Closer to the Heart of Solving Unsolvable Problems 10 11 Signal Extraction Technology®: Solving the “Unsolvable” Twenty years ago, two young engineers asked themselves why pulse oximetry wouldn’t work during patient motion and low perfusion – and by doing so, set a new course that created a revolution in patient monitoring. OVERCOMING THE LIMITATIONS OF CONVENTIONAL PULSE OXIMETRY Since its inception, pulse oximetry was Conventional pulse oximetry works pulsating component is arterial blood. plagued by unreliability when it was under the assumption that by looking Unfortunately for conventional pulse needed most – during patient motion at only the pulse and normalizing the oximetry, venous blood moves every and low perfusion. The industry had pulsating signal over the non-pulsating time the patient moves or breathes. given up and considered the problem signal, oxygen saturation (SpO2) can This causes conventional pulse “unsolvable”. Clinicians were forced to be measured without calibration. oximeters to display false low or high live with the results – excessive false Although this was a big step forward in SpO2 and pulse rates – resulting in alarms, delayed notiﬁ cation due to long the evolution of pulse oximetry, it has false alarms as high as 90% in ICUs averaging times, inaccurate data, and one major ﬂ aw – it assumes the only and recovery rooms. an inability to obtain data on the most critical patients. Patient care suﬀ ered. ‘98 SmarTone™ Ability to maintain saturation tones with variable pitch during low signal-to-noise conditions FALSE ALARM REDUCTION LARM REDUCCTIOCTIO LARM REDUC S Conventional pulse oximeters are a fair-weather friend. Masimo SET is a foul-weather friend. ” JEREMY SWAN, MD Former Chairman of Masimo’s Scientiﬁ c Advisory Board and Chairman Emeritus Cedars-Sinai Medical Center’s Division of Cardiology LARM DETECCTIOCTIO LARM DETEC TRUE ALARM DETECTION UNLEASHING BREAKTHROUGH PERFORMANCE When Joe Kiani and Mohamed Diab looked at the same Excellence in Technology Innovation Award. Thereafter, pulse oximetry signal diﬀ erently than anyone had before, skeptical clinicians around the world sought actively they created possibilities that never before existed. to compare Masimo SET to the best pulse oximetry By employing advanced signal processing techniques technologies other companies had to oﬀ er. But in study – including parallel engines and adaptive ﬁ lters – they after study, the breakthrough signal processing of believed they could ﬁ nd the true arterial signal that would Masimo SET consistently resulted in signiﬁ cantly fewer allow accurate monitoring of arterial oxygen saturation and false alarms and far superior true alarm detection. pulse rate even during the most challenging conditions. Signal Extraction Technology, or Masimo SET, assumes With Masimo SET, false alarms have been reduced by over 95% that both the arterial and venous blood can move and while true alarm detection has increased to over 97%3 – even uses parallel signal processing engines – DST,® SST,™ FST,® during the challenging conditions of motion and low perfusion. and MST™ – to separate the arterial signal from sources of noise (including the venous signal) to measure SpO2 and pulse rate accurately, even during motion. After six years of dedicated and focused research and development, Masimo SET debuted in 1995 at the Society for Technology in Anesthesia and won the prestigious ‘98 SofTouch™ First sensors designed for sensitive skin of neonates ‘98 First FDA 510K clearance for Measure-through Motion pulse oximetry ‘98 ll Datascope, along with multiple OEMs, begins worldwide commercialization of Masimo SET integrated in their patient monitors 12 13 The Gold Standard Pulse Oximetry Solution Masimo SET is the world’s leading pulse oximetry technology, proven by both independent and objective research and the real-world success of our customers and partners. THE CHOICE OF CLINICIANS IN THE WORLD’S LEADING HOSPITALS Because of its unmatched accuracy and Masimo SET pulse oximetry technology, the patients who need the most reliability, clinicians at well over 2,000 more are converting every day. attention. With more trustworthy hospitals around the world count on measurements, clinicians can more Masimo SET every day to help them These hospitals and clinicians trust tightly control oxygenation levels. care for patients. And while more than Masimo SET to help them deliver the And with more timely detection of half the hospitals on the U.S. News & most eﬀ ective and eﬃ cient patient true events, clinicians can intervene World Report Honor Roll – including four care possible. With signiﬁ cantly fewer earlier for better patient outcomes of the top ﬁ ve – have already integrated false alarms, clinicians can focus on and improved patient safety. INTEGRATED IN MORE INDUSTRY-LEADING PRODUCTS THAN ANY OTHER PULSE OXIMETRY TECHNOLOGY Each company manufacturing – available in more than 100 OEM multiparameter monitors has a monitors from 50 leading choice as to which pulse oximetry brands. In many of technologies it oﬀ ers in its products. these monitors, Today, Masimo SET is integrated in Masimo SET is the more industry-leading products than only pulse oximetry any other pulse oximetry technology technology provided. VALIDATED BY INDEPENDENT AND OBJECTIVE RESEARCH To date, more than 100 independent and objective providing clinicians with unmatched sensitivity and peer-reviewed studies have shown that Masimo SET speciﬁ city to make critical patient care decisions. outperforms all other pulse oximetry technologies, ) % ( e t a R m r a l A e u r T 100 90 80 70 60 50 40 30 20 10 00 Philips 24C Philips CMS-B Datex-Ohmeda 3740 Nellcor N-395 Datex-Ohmeda AS-3 Datex-Ohmeda 3800 Datex-Ohmeda 3900 Nellcor N-200 Philips CMS Nellcor N-295 GE 8000 Novametrix MARS Nellcor NPB-190 Nellcor NPB-180 Novametrix 520A Spacelabs 90308 Nonin 8600 BCI 3304 Criticare 5040 00 10 20 30 40 50 60 70 80 90 100 False Alarm Rate (%) True and false SpO2 alarm rate of Masimo SET versus 19 competing pulse oximetry technologies.4 “ Masimo SET is advantageous because even though it signiﬁ cantly reduces false alarms, it doesn’t do that by ignoring physiological changes. ” CHRISTIAN POETS, MD Director, Neonatal Intensive Care Medical School, Hanover, Germany ‘99 First FDA 510K clearance for Measure-through Low Perfusion pulse oximetry ‘98 Max™ Sensitivity Setting Allowing reliable measurement in the most challenging conditions of low perfusion ‘00 Radical® Pulse Oximeter First 3-in-1 pulse oximeter – standalone device for bedside monitoring with detachable handheld unit with built-in rotational display for portable monitoring, and SatShare interface to upgrade conventional pulse oximetry in multi-parameter patient monitors to Masimo SET ‘00 Signal IQ® First to quantify signal quality and give clinicians conﬁ dence in the displayed SpO2 and pulse rate values, even during motion and low perfusion ‘00 FastSat® Enabling accurate tracking of rapid saturation changes 14 15 Helping Change an Industry Masimo has also helped change and improve healthcare by being a champion for free choice in the market and the protection of new technology development. FREEING HOSPITALS TO CHOOSE THE BEST TECHNOLOGY FOR PATIENT CARE GROUP PURCHASING REFORM and bringing a successful antitrust suit against Nellcor, a A short decade ago, many hospitals wanted to choose division of Tyco Healthcare (now Covidien). Masimo has also Masimo SET pulse oximetry to provide the best care for their worked diligently to overcome the decision of some patient patients, but could not do so because their group purchasing monitoring companies to limit access to technologies with organization (GPO) did not oﬀ er Masimo SET – instead proven patient care beneﬁ ts. engaging in exclusive arrangements with a competitor which inhibited Masimo’s innovative technology from entering the market. The struggles that hospitals endured ﬁ ghting to choose Masimo created broader awareness of the need for GPO reform – leading to fewer exclusive arrangements for higher-priced and sometimes even inferior products. “ Masimo has led the industry’s eﬀ orts to encourage innovation and free choice by healthcare providers. ” FIGHTING ANTICOMPETITIVE BEHAVIOR When large medical technology companies tie discounts MARK LEAHEY President & CEO of the Medical Device Manufacturers Association of unrelated products to the exclusive purchase of their These eﬀ orts are just a few examples of how Masimo has products across multiple categories, it can be considered stood for transparency and truth to open markets so that anticompetitive if it is done in a large enough market. medical products are judged on their individual merits Masimo has fought hard to prevent this type of behavior, rather than on artiﬁ cial restraints on hospital purchasing. testifying twice at Senate Hearings regarding these practices With open competition in the pulse oximetry market, pulse oximetry pricing has decreased by an estimated 30% or more over the last decade while in the previous decade prices were estimated to have hardly changed. But more importantly, countless lives have either been saved or improved as a direct result of access to Masimo SET. ‘00 FastStart™ SpO2 value in less than 10 seconds from the time the instrument is turned on 16 “ Masimo’s victory against Nellcor buttresses the importance of patenting in guarding the innovations of the emerging companies against established market participants. ” FROST AND SULLIVAN ENABLING INNOVATION THROUGH PROTECTION OF INTELLECTUAL PROPERTY RIGHTS Innovation can ﬂ ourish if companies have the ability to some chose to mimic Masimo technology instead. protect their inventions for the term of their patents. Masimo was forced to defend its intellectual property The patent system is designed to protect intellectual from Nellcor, and the court ruled that Nellcor infringed property rights, but some companies still infringe on on Masimo’s patents and ordered that Nellcor’s infringing legitimate patents of small companies who are unable to products should be enjoined. The decision for Masimo defend themselves. While Masimo made its revolutionary served as a larger victory for stimulating innovation that Masimo SET pulse oximetry available to every company, is critical to advancing patient care in the future. ‘02 Study shows Masimo SET helps wean patients from the ventilator faster and reduce FiO2 levels6 ‘00 Study shows Masimo SET helps increase caregiver eﬃ ciency and reduce arterial blood gas measurements5 ‘02 Study shows Masimo SET linked to reduced medical errors in critical care medicine7 17 Closer to the Heart of Protecting Patients 18 19 Focusing on the Most Vulnerable From the very beginning, we have kept infants and children closest to our hearts and focused on how our technologies could improve their care – even though the market is considered small. As a result, Masimo leads the industry in solutions designed exclusively for these patients with the brightest future. ENABLING CONGENITAL HEART DISEASE DETECTION The breakthrough performance of Masimo SET is often at the time of hospital discharge after birth. While pulse most appreciated by the clinicians caring for fragile oximetry oﬀ ers a simple and cost-eﬀ ective method to newborns. Up to 30% of all congenital heart disease (CHD) screen newborns for CHD, only Masimo SET pulse oximetry deaths occurring in the ﬁ rst year of life are unrecognized has been shown to reliably assist in the detection of CHD.8 “ Screening all well babies in maternity units with Masimo SET pulse oximetry signiﬁ cantly improves detection of duct-dependent CHD. ” ANNE DE-WAHL GRANELLI, PhD Queen Silvia Children’s Hospital Gothenburg, Sweden “ Masimo has helped save countless babies’ lives and plays a critical role in helping to virtually eliminate severe infant eye damage. ” AUGUSTO SOLA, MD American Academy of Pediatrics Christopherson Award Winner r for his contributions to International Child Health REAL-TIME NEWBORN MONITORING AND ASSESSMENT PREVENTION OF RETINOPATHY OF PREMATURITY When each second matters during newborn resuscitation, Premature infants requiring neonatal intensive care need the Masimo Newborn Sensor ensures the fastest response enough oxygen to preserve vital organ function, but too time at the highest sensitivity – allowing clinicians to much oxygen can cause severe eye damage from retinopathy focus on real-time patient management instead of the of prematurity (ROP). Using Masimo SET to help more tightly device. In addition, Masimo SET is increasingly being used control oxygen therapy has been shown to help clinicians to supplement the standard APGAR score to more reliably dramatically reduce ROP.10 assess general newborn health. EMPOWERING CARE FOR THE TINIEST AND MOST FRAGILE PATIENTS In cyanotic infants, only the Masimo Blue™ Sensor has been proven accurate in oxygen saturations as low as 60% – enabling accurate maintenance of targeted low saturation levels.9 And for very low birth weight babies, only the Masimo NeoPt-500™ Sensors are designed for both size and performance in infants as small as 500 grams. Center Severe ROP (pre-policy change) Severe ROP (post-policy change) #1 #2 11.1% with Nellcor 13.0% with Nellcor 6.0% with Masimo 13.0% with Nellcor % Reduction in ROP 40% 0% The protocol and caregivers were identical in each center, but only Center #1 switched to Masimo SET.10 ‘03 Adaptive Probe Oﬀ Detection™ (APOD™) Reducing false display of SpO2 values by 83% when the probe is not on the patient, compared to competing pulse oximeters Birth Weight 500 to 749 g 750 to 999 g 1,000 to 1,249 g Severe ROP (pre-policy change without Masimo) 38% 12 - 15% 12 - 15% Severe ROP (post-policy change with Masimo) 10 - 12% 0% 0% ‘03 Study shows Masimo SET linked to reduced retinopathy of prematurity in neonatal patients11 ‘03 Rad-9® Pulse Oximeter 20 21 Improving Safety on the General Floor As part of our mission to take noninvasive monitoring to new sites and applications, Masimo SET has enabled accurate and reliable monitoring in care areas where conventional pulse oximetry has faltered, such as the general ﬂ oor of hospitals. REDUCING RESCUES AND ICU TRANSFERS For many years, clinicians have that Masimo SET also improves care in the OR, PACU, and ICU, we now understood the risks of not clinical outcomes in adults. After believe that pulse oximetry will become continuously monitoring patients on implementing Masimo SET and Masimo a standard of care on the general the general ﬂ oor. However, excessive Patient SafetyNet remote monitoring ﬂ oor. With Masimo technologies on false alarms due to patient motion and wireless notiﬁ cation in a post- the general ﬂ oor, clinicians can now made improving the safety of these surgical ﬂ oor where only intermittent be conﬁ dent their patients are being patients an elusive goal. In the spot checking was used before, watched even when they aren’t at last decade, Masimo SET has been Dartmouth-Hitchcock Medical Center the bedside, while families can be shown in multiple studies to improve achieved 65% fewer rescue events, assured their loved ones are receiving the process of care in neonates 48% fewer ICU transfers, reduced maximum protection. and pediatric patients due to its annualized ICU time by 135 days, and Measure-through Motion and Low had no sentinel events.12 Just as pulse Perfusion performance, but a recent oximetry has become a standard of landmark study was the ﬁ rst to show DECREASE IN DISTRESS CODES AND RESCUE ACTIVATIONS DECREASE IN PATIENT TRANSFERS TO INTENSIVE CARE UNITS ICU DAYS SAVED ANNUALLY In my opinion as Quality and Safety Oﬃ cer, our study results strongly demonstrate that continuous patient surveillance with Masimo SET and Masimo Patient SafetyNet increases healthcare value by signiﬁ cantly improving clinical outcomes while reducing costs. ” GEORGE BLIKE, MD Dartmouth-Hitchcock Medical Center PROVEN COST-EFFECTIVENESS The landmark general ﬂ oor study also demonstrated how and reducing costs associated with emergency rescue Masimo helped hospitals improve outcomes and decrease events.13 With both the clinical and ﬁ nancial rationale now the cost of care. When translated into ﬁ nancial beneﬁ ts, in place, hospitals are increasingly implementing general the study showed that implementing Masimo SET and ﬂ oor monitoring with Masimo technologies. Masimo Patient SafetyNet to more safely monitor post- surgical patients could also have a signiﬁ cant impact on the hospital’s bottom line by increasing ICU bed availability ‘04 Rad-5® Handheld Pulse Oximeter First handheld incorporating Masimo SET ‘04 Blue™ Sensor First sensor for accurate measurements in cyanotic infants and children ‘04 Newborn™ Sensor First sensor designed for newborn monitoring 22 23 Expanding Impact Outside of the Hospital Gold-standard Masimo SET is increasingly being used to enhance the quality of patient care outside of the hospital. A NEW LEVEL OF CARE IN THE HOME For pediatric patients with life-threatening conditions requiring continuous pulse oximetry monitoring at home, Masimo SET oﬀ ers the best pulse oximetry monitoring for parents caring for special needs children – dramatically reducing false alarms that can complicate an already diﬃ cult situation. “ I’m convinced that the Masimo Rad-8® saved my baby’s life. ” TIFFANY KELLOGG Mother of Grayson, a child with severe medical problems requiring home monitoring “ Masimo technology has raised the bar in the quality of care that can be delivered in a post-acute setting – the right thing to do for patient safety. ” GENE GANTT, RRT Linde Respiratory Support Services ADDING A SAFETY NET IN POST-ACUTE CARE As hospital costs rise, more patients are receiving care in long- care facilities integrating Masimo SET bedside pulse oximeters term acute care and skilled nursing facilities. A major challenge and the Masimo Patient SafetyNet remote monitoring and in these facilities is weaning patients oﬀ ventilator care, which notiﬁ cation system have experienced considerable reduction in can put patients at increased risk of adverse events. Post-acute rapid response activations as well as emergency “transfer outs”. “ The sensitivity and motion RELIABLE SLEEP LAB MONITORING artifact rejection characteristics of the non-Masimo SET pulse oximeters we tested were not adequate for a pediatric sleep laboratory setting. ” BOB BROUILLETTE, MD Montreal Children’s Hospital During sleep lab monitoring, conventional pulse oximetry fails to provide the ﬁ delity and accuracy required to help clinicians detect signiﬁ cant physiologic events. Masimo SET technology is integrated in leading sleep lab monitoring systems, enabling clinicians and patients to beneﬁ t from its unmatched reliability in this challenging environment. ‘04 LNCS® Sensors Low noise cable sensor design enables mass market appeal sensor for standardized connections to Masimo, OEM, and a large number of competitor devices ‘05 Rainbow SET in MX-1® Board First noninvasive blood constituent platform 24 25 Breakthrough Noninvasive Applications Made Possible Our mission to take noninvasive monitoring to new sites and applications led us to invent Rainbow technology and with it, Pulse CO-Oximetry, using more than seven wavelengths of light and leveraging Masimo Signal Extraction Technology to detect new blood constituents that previously required invasive procedures. A DEADLY POISON REVEALED WITH SpCO® Carbon monoxide (CO) poisoning is SpCO is making an impact in for hospitals that do have invasive the most common cause of poisoning emergency departments around CO-testing capabilities, a large study in industrialized countries, but is the world, where many hospitals showed that quick and painless SpCO often misdiagnosed because its do not even have on-site access assessment helped clinicians identify symptoms are similar to the ﬂ u and to a laboratory device that allows 60% more CO poisoning cases than moderate poisoning is possible with invasive CO measurement. And with invasive testing alone.14 no symptoms at all. Our ﬁ rst Rainbow measurement was noninvasive carboxyhemoglobin (SpCO), enabling quick and easy assessment of CO levels in the blood and faster detection and treatment of CO poisoning. “ We believe that all 50+ people in the hotel would have been dead at dawn if it were not for this lifesaving intervention from Masimo. ” SKIP KIRKWOOD, MS, JD, EMT-P Chief, EMS Division, Wake County Dept. of Emergency Services Any ﬁ reﬁ ghter expo “ CO poisoning or pres with... symptoms osed to enting s at an incident where CO is p should be assessed poisoning with a present for CO a Pulse CO-Oxim meter. ” NATIONAL FIRE PROTECTION A 1584 FIRE REHAB ASSOCIATION B STANDARDS SAVING LIVES EVERY DAY In emergency medical services, SpCO is helping protect brain damage. When even mild levels of CO are circulating in both victims and ﬁ rst responders from the dangers of the blood, the heart and brain are robbed of critical oxygen. CO poisoning. SpCO allows paramedics and emergency This can cause mental confusion that leads to poor decision medical technicians to quickly detect CO poisoning in making and also increases the risk of heart disease or homes, hotels, and places of work – enabling prompt stroke – two conditions already accounting for nearly 50% of treatment and removal of those exposed to deadly CO. on-duty ﬁ reﬁ ghter deaths. These factors are why industry leading organizations have recently lined up to support SpCO is also helping ﬁ reﬁ ghters reduce the risk of CO CO education and the National Fire Protection Association poisoning that they face every day. Just one severe CO (NFPA) introduced a new ﬁ re rehabilitation standard – NFPA poisoning nearly doubles the risk of premature death and 1584 – that requires on-scene CO assessment of ﬁ reﬁ ghters. consistent CO exposure may cause long-term heart and 100% Desat Index Alarm Limit 93% Low SpO2 Alarm Limit 90% 2 O p S Time (in minutes) 20 40 60 80 ‘05 3D Desat Index Alarm™ First alarm to alert clinicians to patterns of transient desaturation that may predict respiratory depression SpCO ‘05 SpCO® First noninvasive carboxyhemoglobin ‘05 Rad-57™ First handheld capable of noninvasively measuring carbon monoxide levels in the blood 26 27 ENABLING QUICK TREATMENT WITH SpMet® Masimo noninvasive methemoglobin (SpMet) allows methemoglobinemia are used most often, such as clinicians to rapidly detect methemoglobinemia procedure labs and the operating room. This enables and initiate immediate treatment to reduce patient them to quickly adjust exposure to the dangerous risk – especially in care areas where drugs that cause drug and initiate potentially life-saving treatment. # of Methemoglobinemia Cases Patient Age Care Areas Fatalities 138 (2.5 cases per hospital per month) 4 days to 86 years Surgery, intensive care, outpatient clinics, pediatrics, emergency department, cardiac cath lab 1 fatality, 3 near fatalities Results from a retrospective study at two teaching hospitals over a 28-month period, using laboratory CO-oximeter results and patient electronic medical records.15 “ Masimo SpMet helps detect methemoglobinemia, allowing clinicians to accurately diagnose and treat this life-threatening condition. ” MARK MACKNET, MD Assistant Professor of Anesthesiology Loma Linda University Keeping Patients Safe From Hidden Dangers Rainbow technology is also shielding patients from the unintended consequences of drugs commonly given in hospitals and during certain procedures. ADDRESSING THE RISK OF DANGEROUS DRUG REACTIONS Many drugs commonly used in hospitals – such as lidocaine, it is often unrecognized and undiagnosed. If not detected and benzocaine, dapsone, and nitrates – cause a dangerous treated immediately, it can result in avoidable injury or death. reaction known as acquired methemoglobinemia that reduces the delivery of oxygen to the tissues. While methemoglobinemia can occur in all care areas and patients, “ Acquired methemogloobinemia is fairly common and ccauses morbidity and mortality in both the inpatient aand outpatient settings. AAcquired methemoglobinemia is often unrecognized annd thus untreated. ” RACHEEL ASH-BERNAL, MD15 and other researchers at Joohns Hopkins Hospital Medications Known to Cause Methemoglobinemia: Benzocaine, Cetacaine, Chloroquine, Dapsone, EMLA topical, Flutamide, Lidocaine, Metoclopramide, Nitrates, Nitric oxide, Nitroglycerin, Nitroprusside, Nitrous oxide, Phenazopyridine (Pyridium), Prilocaine, Primaquine, Riluzole, Silver Nitrate, Sodium Nitrate, Sulfonamides x e d n I n o i s u f r e P 1.0 0.9 0.8 0.7 0.6 0.5 0.4 PI Baseline determined by the Radical-7 PI Delta % Change = 25 (within a 1 hour period) Time Alarm triggered ‘05 3D Perfusion Index Delta Alarm™ First alarm to alert clinicians of changing peripheral perfusion status that may indicate worsening condition ‘05 Study shows screening with Masimo SET improves congenital heart disease detection in newborns8 SpMet ‘06 SpMet® First ever noninvasive methemoglobin 28 29 Helping Improve Fluid Management with PVI® Fluid administration is one of the most common hospital interventions. Although it is critical to improving patient status and enabling end organ preservation, unnecessary ﬂ uid administration is associated with increased morbidity and mortality. ASSESSING FLUID RESPONSIVENESS Masimo continuous and noninvasive Pleth Variability Index (PVI) to help assess which patients will become hemodynamically has been shown in multiple studies to help clinicians assess ﬂ uid unstable with the addition of Positive End Expiratory Pressure responsiveness in adult surgical and intensive care patients (PEEP), which may allow clinicians to more carefully select under mechanical ventilation.16, 17 PVI has also been shown ventilator settings and monitor eﬀ ects more closely. AIDING CLINICIANS IN PATIENT RISK REDUCTION A recent randomized trial showed that compared to risk – as evidenced by lower lactate levels.18 By helping standard care without PVI, clinicians using PVI were able to clinicians maintain appropriate ﬂ uid and oxygen levels improve ﬂ uid management and as a result, reduce patient in the blood, important organs are protected. “ With Masimo PVI, I can predict when my patients will beneﬁ t from ﬂ uid administration – and when it might harm them. ” MAXIME CANNESSON, MD University of California, Irvine ) % ( y t i v i t i s n e S 100 80 60 40 20 0 0 Pleth Variability Index (PVI) Arterial Pulse Pressure (APP) Cardiac Index (CI) Pulmonary Capillary Wedge Pressure (PCWP) Central Venous Pressure (CVP) Masimo PVI has been shown to help assess ﬂ uid responsiveness as reliably as new invasive parameters and better than traditional invasive parameters. 20 40 60 80 100 Adapted from Cannesson et al.16 100-Specificity (%) ‘06 First easy ﬁ eld upgradability of software through sensor port PVI ‘07 Pleth Variability Index (PVI)® First noninvasive and continuous ﬂ uid responsiveness ‘05 Radical-7™ First bedside Pulse CO-Oximeter featuring color display screen 30 31 ) L d / g ( l i n b o g o m e H SpHb Monitoring During Surgery Lab CO-Oximeter SpHb 10.7 10.7 Track the patients’ rising hemoglobin levels as they happen 11.7 9.6 7.9 8.2 6.5 12 11 10 9 8 7 6 11.1 Know when the patients’ hemoglobin levels are dropping between lab tests 7.5 6.4 6.7 00:00 01:00 02:00 03:00 04:00 Actual data from a liver transplant case shows the precision of Masimo SpHb, illustrating how real-time SpHb monitoring may facilitate earlier and better decision making. In this research case, SpHb values were blinded to the clinicians so that the frequency of lab measurements was unaﬀ ected. Time (hours) “ In cases of severe hemorrhaging during and after childbirth, SpHb has enabled us to immediately identify and continuously assess blood loss severity to better manage internal bleeding, prevent overloading of ﬂ uid, and decrease maternal death. ” MADHAVA KARUNARATHNA, MD OB/GYN, Balangoda Hospital, Sri Lanka Earlier and Better Decisions to Improve Patient Care With the expansion of Rainbow measurements to include total hemoglobin, Masimo technologies can now aid some of the most common, costly, and critical decisions made in healthcare. REDUCING UNNECESSARY BLOOD TRANSFUSIONS While blood transfusions are critical to avoid organ damage “ Masimo SpHb is an impressive new and sustain life when hemoglobin levels are unstable or very low, mounting evidence shows that transfusions increase 30-day mortality by up to 38% and 30-day morbidity by up to 40%19, 20 – with a cost up to $1,200 per unit.21 Clinicians using Masimo SpHb report that it plays an important role in helping them continuously identify stable and safe hemoglobin levels that prevent unnecessary blood transfusions, especially during surgery. tool. I believe that the ability to continuously trend hemoglobin will be of tremendous value to us and help us more safely guide patients in surgery through recovery. ” RONALD D. MILLER, MD Professor of Anesthesia & Perioperative Care, University of California, San Francisco EARLIER INDICATION OF POTENTIAL BLEEDING Total hemoglobin is among the most common invasive noninvasive hemoglobin (SpHb) allows real-time hemoglobin laboratory measurements performed in and out of the assessment, which clinicians indicate has enabled them to hospital and directly aids the assessment of blood loss. more quickly identify blood loss. In these situations, earlier However, intermittent hemoglobin measurements often identiﬁ cation allows clinicians to act sooner to treat detect bleeding late, sometimes even hours or days after the patient, which can make an enormous diﬀ erence in it has begun. For the ﬁ rst time, Masimo continuous and recovery and the ICU. “ Masimo SpHb and PVI allow us to more tightly and proactively manage both hemoglobin and ﬂ uid levels, which optimizes surgical status and health management. ” THOMAS CRIMI, MD Director Blood Conservation Program Brookdale University Hospital and Medical Center ‘07 Patient SafetyNet™ First remote notiﬁ cation system capable of Rainbow measurements – with optional central monitoring ‘08 National Fire Protection Association Releases NFPA 1584 standards for ﬁ re rehab and includes CO screening during ﬁ re rehab SpHb ‘08 SpHb® First noninvasive and continuous total hemoglobin 32 33 Closer to the Heart of Innovating for the Future 34 35 From Light to Sound: A New Measurement Emerges from a New Signal with Masimo’s Breakthrough Signal Processing To expand the Rainbow platform’s promise of breakthrough noninvasive measurements, Masimo is growing our optically based technologies to include clinical measurements derived from sound with Rainbow Acoustic Monitoring. PROTECTING MORE PATIENTS BY MONITORING EVERY BREATH Continuous monitoring of respiration continuous oxygenation and ventilation is accurate, easy-to-use, and enhances rate is especially important for monitoring in all patients receiving patient compliance.23 Masimo Rainbow post-surgical patients receiving opioid-based pain medications.22 Acoustic Monitoring may enable earlier patient-controlled analgesia for pain However, current methods for detection of respiratory compromise management. Conscious sedation can respiration rate monitoring are limited and patient distress – oﬀ ering a induce respiratory depression and place by accuracy and patient tolerance. breakthrough in patient safety for post- patients at considerable risk of serious Masimo Rainbow Acoustic Monitoring surgical patients on the general ﬂ oor injury or death. The Anesthesia Patient now provides noninvasive and and for procedures requiring Safety Foundation recommends continuous respiration rate (RRa) that conscious sedation. “ Breathing adequately is what matters most. Masimo Acoustic Respiration Rate automatically and continuously monitors the breathing status of post-surgical patients – alerting clinicians to the ﬁ rst sign of an abnormal or compromised breathing pattern. ” MICHAEL RAMSAY, MD Chief of the Department of Anesthesiology and Pain Management, Baylor University Medical Center, Dallas, TX Rainbow Acoustic Monitoring features an innovative adhesive sensor with an integrated acoustic transducer that is easily and comfortably applied to the patient’s neck. Using patented acoustic signal processing that leverages Masimo’s revolutionary Signal Extraction Technology (SET), the respiratory signal is separated from background sounds and processed to display continuous respiration rate. ALLOWING MORE PATIENTS TO BE MONITORED, MORE SAFELY THAN EVER BEFORE When Masimo Rainbow Acoustic Monitoring is used in SpO2, ventilation with the breakthrough RRa, circulation conjunction with Masimo Rainbow SET Pulse CO-Oximetry with Masimo Measure-through Motion pulse rate (PR), and and the Masimo Patient SafetyNet Remote Monitoring potential bleeding with Masimo continuous and noninvasive and Clinician Notiﬁ cation System, clinicians can follow key hemoglobin (SpHb) – enabling clinicians to monitor more indicators of oxygenation with Masimo ‘gold standard’ patients, more safely than ever before. ‘08 Study shows PVI predicts ﬂ uid responsiveness during surgery16 ‘08 Study shows SpCO identiﬁ es unsuspected CO poisoning in the ER14 ‘08 Rad-87™ First pulse oximeter with integrated 802.11 wireless radio 36 37 Advancing the Gold Standard Masimo’s newest innovations demonstrate that our commitment to pulse oximetry technology has never been stronger. MORE MEANINGFUL NOTIFICATION WITH ADAPTIVE THRESHOLD ALARM™ False and nuisance alarms can 100 98 96 94 92 90 88 86 84 82 80 desensitize clinicians. Masimo SET broke through past barriers and reduced false alarms by over 95% so in an area like the ICU where up to 90% of all alarms were false, today, % 2 O p S with Masimo, they are only 5%. Masimo Adaptive Threshold Alarm can reduce non-actionable Sp02 alarms by up to 86%. (cid:116) (cid:116) (cid:116) (cid:116) 100 150 200 250 Time in Minutes Baseline SpO2 Fixed Threshold Alarm Event Adaptive Threshold Alarm Event (cid:116) Adaptive Threshold Fixed Threshold Alarm frequency of ﬁ xed threshold alarm and Adaptive Threshold Alarm, both with 10 second delay. (cid:116)(cid:116)(cid:116)(cid:116) 300 Despite the dramatic reduction in false and delays sometimes reduce non- notify clinicians only when signiﬁ cant alarms Masimo has brought forth, there actionable alarms but with potentially changes in physiology have occurred. are still true alarms that are considered delayed notiﬁ cation of signiﬁ cant events. Evidence from over 32 million data non-actionable by some clinicians. points shows that Masimo Adaptive Conventional approaches to alarm With false alarm problems largely Threshold Alarm can reduce non- SUPERIOR CENTRAL MONITORING WITH THE FIRST SINGLE-PATIENT-USE EAR SENSOR Monitoring oxygenation centrally can be beneﬁ cial, but to date, the available single-patient-use sensors for the head have been fraught with inaccuracy and unreliability. That’s why, working with clinicians at the University of California, San Diego, Masimo developed the ﬁ rst-ever, single-patient-use ear sensor that is placed securely in the concha, so clinicians can combine Masimo SET performance and central monitoring to provide reliable and responsive assessment of oxygenation during surgery and resuscitation. ENHANCING COMFORT DURING LONG-TERM MONITORING WITH CABLED SENSORS In the past, single-use pulse oximeter sensors have been limited in their comfort and ﬂ exibility by the size of the emitter and detector. After an intense development eﬀ ort, Masimo’s new SpO2 sensor components are nearly half the thickness of those of our competitors – increasing patient comfort by increasing sensor ﬂ exibility and reducing bulk while maintaining the Masimo SET performance that management were developed mainly to solved, Masimo’s Adaptive Threshold actionable SpO2 alarms by up to 86%.24 clinicians expect. address the problems of conventional Alarm was designed to deal with non- And together with Masimo SET, false pulse oximetry’s inability to measure actionable alarms, breaking through the alarms and non-actionable alarms can through motion. Fixed alarm thresholds limited alarm paradigms of the past to be reduced by up to 99%. Relative size of new detector (left) and emitter (right) ‘08 NeoPt-500™ First sensor for extremely low birth weight babies ‘08 SpCO and SpMet receive CPT reimbursement codes and Medicare pricing in the U.S. ‘09 Medtronic Physio-Control becomes ﬁ rst OEM to begin worldwide commercialization of Masimo Rainbow SET SpCO & SpMet integrated in their deﬁ brillators ‘09 Study shows PVI improves ﬂ uid management and decreases lactate levels in surgical patients18 ‘09 Pronto® First noninvasive spot-check hemoglobin device RRa ‘09 Rainbow Acoustic Monitoring (RAM™) First noninvasive and continuous respiration rate with acoustic sensor 38 39 Industry-Leading Green Solutions Masimo oﬀ ers more products than any other pulse oximeter company to help hospitals meet environmental objectives while reducing costs. MULTIPLE OPTIONS TO REDUCE WASTE AND COST GREEN DESIGNED IN™ WITH RESPOSABLE™ (REUSABLE + DISPOSABLE) The Masimo ReSposable Sensor System is based on more the best features of our LNOP, LNCS, M-LNCS, and Rainbow than ten years of research and development stemming from sensors into an innovative design that features a reusable the feedback of hundreds of clinicians who told us what they optical sensor (ROS™) for use over multiple patients and a wanted most in a sensor – less waste and more value with disposable optical sensor (DOS™) for single-patient use. Masimo LNOP Sensors were the ﬁ rst green single-use For hospitals seeking the best in performance, convenience, superior performance. The ReSposable system combines sensors to work accurately through motion and low waste reduction, and cost-eﬀ ectiveness, our new ReSposable perfusion. In addition, our reprocessed sensors are the only Sensor line oﬀ ers a revolutionary combination of beneﬁ ts – reprocessed sensors guaranteed to provide new sensor equivalent to 100% recycling at the point of care. performance because we replace every emitter and detector. Masimo ReSposable Sensors can cut an average hospital’s waste by 75% – over 1,700 pounds per year.25 Standard Sensors Masimo LNCS Reprocessed Sensors Masimo LNOP Sensors Masimo ReSposable Sensors Foundation for Ethics, Foundation for Ethics, Innovation, and Competition in Health Care ‘10 Masimo foundation created with $10 million gift ‘09 ReSposable™ Sensor System Featuring performance of adhesive sensors with Green Designed In™ ‘10 Study shows Masimo SET and Masimo Patient SafetyNet improve outcomes in adults on the general ﬂ oor – fewer rapid response activations, ICU transfers, and ICU days12 ‘10 Study shows PVI helps assess which patients will become hemodynamically unstable with the addition of PEEP26 ‘09 SpHb receives new CPT reimbursement code and Medicare pricing in the U.S. 40 41 Integrating Measurements to Enable Meaningful Use Quick and Painless Anemia Assessment Today’s challenging hospital environment exposes clinicians to increasing amounts of Masimo Pronto-7™ is designed speciﬁ cally for faster and more accurate information with expanding documentation requirements. Masimo innovation simpliﬁ es noninvasive hemoglobin (SpHb) spot-check testing, along with and automates this process, streamlining workﬂ ow and improving patient safety by SpO2, pulse rate, and perfusion index. empowering clinicians to focus on patients rather than technology. WIRELESS DEVICES AND SYSTEMS TO KEEP CLINICIANS AND PATIENTS CONNECTED New standards for hospitals require meaningful use of information systems. The Masimo Connectivity Engine the electronic health record (EHR) by charting changes signiﬁ cantly reduces the time and complexity to in vital signs as well as documentation of interventions. integrate and validate custom HL7 implementations, Masimo enables automatic recording and transmission of and demonstrates Masimo’s commitment to key data into the EHR so clinicians spend their time caring innovation that automates patient for patients, not recording data. Masimo’s pulse oximeters care with open, scalable, also feature a built-in wireless radio for communication and standards-based through a hospital’s wireless network – with seamless connectivity architecture. integration to the EHR through either a Capsule Technologies interface or a Cerner CareAware link. Masimo Patient SafetyNet incorporates the Masimo Adaptive Connectivity Engine,™ which enables two- way, HL7-based connectivity to clinical/hospital A REVOLUTIONARY DEVICE FOR A VARIETY OF CLINICAL SETTINGS Hemoglobin is one of the most commonly ordered tests in both hospital and non-hospital settings because it is critical to assessing anemia. However, traditional lab testing requires a painful needle stick for the patient, time-consuming blood draws for the clinician, and typically provides delayed results. The Pronto-7 represents a breakthrough new solution for measuring hemoglobin in just 45 seconds – without needles, time-consuming laboratory analysis, or the risk of blood contamination or hazardous medical waste. The Pronto-7 is also the ﬁ rst Masimo device to feature Rainbow 4D™ technology for faster and more accurate spot-check hemoglobin measurements. The palm-sized Masimo Pronto-7 – with dimensions at just 5.1” x 2.8” x 1” and weight of 10.5 ounces – puts the power of noninvasive hemoglobin spot-check testing into any clinician’s hands in almost any environment, including hospitals, clinics, blood donation centers, and emergency medical services. Operation is easy and intuitive with the Pronto- 7’s touch-screen interface. And because of the device’s embedded 802.11 b/g and Bluetooth communication capability, wireless printing or emailing of test results is available today – with future upgrades to allow for wireless transmission to EHR systems. ‘10 Pronto-7™ First device designed from the start for noninvasive spot checking of SpHb – featuring touchscreen and wireless communication and printing ‘10 New Radical-7 Featuring touch screen display, wireless capability, external display functionality ‘10 Adaptive Threshold Alarm™ First dynamic physiologic alarm threshold based on changes from each patient’s baseline value 42 43 Products & Technology Overview MASIMO TECHNOLOGIES SELECT MASIMO SENSORS Below are just some of the over 100 diﬀ erent sensors that Masimo oﬀ ers. Masimo SET Measure-through Motion and Low Masimo Rainbow Pulse CO-Oximetry Noninvasive blood constituent and ﬂ uid Masimo Rainbow Acoustic Monitoring (RAM) Noninvasive acoustic monitoring Perfusion pulse oximetry. responsiveness monitoring. > Respiration rate (RRa) > Oxygen Saturation (SpO2), > Carboxyhemoglobin (SpCO), Pulse Rate (PR), Perfusion Index (PI) Methemoglobin (SpMet), Pleth Variability Index (PVI), Total Hemoglobin (SpHb), and Oxygen Content (SpOC) MASIMO MONITORS Masimo SET Sensors SpO2, PR, PI, PVI Masimo Rainbow SET Sensors SpO2, PR, PI, PVI, SpHb, SpOC, SpCO, SpMet Masimo Rainbow Acoustic Sensors RRa Masimo Rad-5v® Masimo SET Masimo Rad-57™ Masimo Rainbow SET Pulse CO-Oximetry Masimo Pronto® Masimo Rainbow SET with SpHb spot-check Masimo Pronto-7™ Masimo Rainbow 4D with SpHb spot-check SELECT MASIMO OEM PARTNERS Masimo Rad-8® Masimo SET, LED display Masimo Rad-87™ Complete Masimo Rainbow SET Pulse CO-Oximetry and Rainbow Acoustic Monitoring, upgradable, LED display, optional wireless radio Masimo Radical-7™ Complete Masimo Rainbow SET Pulse CO-Oximetry and Rainbow Acoustic Monitoring, upgradable, color touchscreen display, optional wireless radio MASIMO PATIENT SAFETYNET SYSTEM Remote monitoring and notiﬁ cation system > Direct alarms to nurse via pager > Leverages hospital’s existing wireless network > Central monitoring option > Open-architecture with HL7 interface to hospital EHR 44 45 Masimo’s Global Reach Masimo is committed to improving patient care globally, with more than 2,000 talented people worldwide and operations in North America, Europe, Latin America, Asia, and Australia. Headquarters International Operations Center Regional Offices OEM Partners Distributors ff HEADQUARTERS MASIMO CORPORATE HEADQUARTERS 40 Parker Irvine, CA 92618 USA Tel: 949 297 7000 INTERNATIONAL OPERATIONS CENTER MASIMO INTERNATIONAL SARL Puits-Godet 10 2000 Neuchâtel Switzerland Tel: +41 327201111 COUNTRY OFFICES MASIMO CANADA 4901 Levy St Saint-Laurent, QC H4R 2P9 Canada Tel: 888 336 0043 MASIMO SPAIN Ronda de Poniente 12 2F 28760 Tres Cantos Spain Tel: +34 918049734 MASIMO UK Unit Q, Loddon Business Centre Roentgen Road Basingstoke. Hants. RG24 8NG United Kingdom Tel: +44 01256479988 MASIMO FRANCE Le Bois des Côtes II 304 RN6 69760 Limonest France Tel: +33 0472179370 MASIMO NETHERLANDS Hart van Brabantlaan 12-14-16 5038 JL Tilburg Netherlands Tel: +31 135832479 MASIMO AUSTRIA Rotenturmstrasse 13 1010 Wien Austria Tel: +43 15337361 MASIMO ITALY Filiale Italiana Piazza Duca D’Aosta 8 20124 Milano Italy Tel: +39 0245076308 MASIMO GERMANY Niederlassung Deutschland Lindberghstr 11 82178 Puchheim Germany Tel: +49 89800658990 MASIMO ASIA PACIFIC 572A Serangoon Road Singapore 218187 Singapore Tel: +65 63924085 MASIMO CHINA Room 502, Building 6, 170 Beiyuan Road, Chaoyang District, Beijing 100101 China Tel: +86 1058236155 MASIMO JAPAN World Times Building 4F, 10-7, Ichiban-Cho Chiyoda-Ku, Tokyo 102-0082 Japan Tel: +81 338685201 MASIMO AUSTRALIA ABN 71 124 372 701 Suite 5, Building 5 49 Frenchs Forest Road Frenchs Forest NSW 2086 Australia Tel: +61 294523763 46 47 Masimo’s National and International Awards for Excellence Financial Performance 1995 STA Excellence in Technology Innovation 2007 STA Excellence in Technology Innovation 2000 SCCM Technology Excellence 2000 Outstanding Medical Device Company 2007 Ground-breaking Innovation of Rainbow SET Technology 2007 Patient Monitoring Technology Leadership of the Year 2001 Innovative Product and Technology 2007 Brand Development Strategy Leadership 2001 Distinguished Leadership 2008 Excellence in Medical Technology 2001 Excellence in Leadership 2008 Outstanding Growth 2001 Medical Design Excellence 2008 Outstanding Medical Device Company 2003 New Standard of Care 2008 Best in Class 2003 Technology of the Year in Patient Monitoring 2003 Platform ABBY for Innovations in Healthcare 2008 AARC Zenith Award American Association for Respitory Care 2009 Best in Class 2005 Innovative Product and Technology 2009 AARC Zenith Award American Association for Respitory Care 2006 Application of Technology 2009 Patient Monitoring CEO of the Year 2006 Medical Design Excellence 2009 Masimo SET and the Patient SafetyNet System help Dartmouth-Hitchcock Medical Center win the 4th Annual Health Devices Achievement Award “ While leading innovation and industry change, Masimo and Mr. Kiani have also been guided by the highest principles and ethics, resulting in recognition by customers and partners alike for their integrity in conducting business. ” FROST AND SULLIVAN 2009 CEO of the Year Award CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) Year ended January 2, 2010 Year ended January 3, 2009 ASSETS Current assets Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$132,054 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,989 Accounts receivable, net of allowance for doubtful accounts of $1,972 and $1,300 at January 2, 2010 and January 3, 2009, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,897 Royalties receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,500 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,559 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,742 Prepaid income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,705 Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,585 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,357 Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,388 Deferred cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,163 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,682 Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,500 Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,829 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,742 $146,910 ––– 30,715 11,375 27,400 3,908 872 10,511 551 232,242 28,431 12,979 8,781 577 7,410 448 2,480 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $356,345 $293,348 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,716 Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17,793 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,754 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,641 Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ––– Current portion of capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,441 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 Capital lease obligation, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,775 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $66,657 Commitments and contingencies Stockholders’ equity Preferred stock, $0.001 par value; 5,000,000 shares authorized at January 2, 2010 and January 3, 2009; 0 shares issued and outstanding at January 2, 2010 and January 3, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ––– Common stock, $0.001 par value; 100,000,000 shares authorized at January 2, 2010 and January 3, 2009; 57,876,450 and 57,326,527 shares issued and outstanding at January 2, 2010 and January 3, 2009, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Treasury stock, 156,240 shares at January 2, 2010 and January 3, 2009 . . . . . . . . . . . . . . . . . . . . . . (1,209) Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,690 Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,112 Total Masimo Corporation stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .288,714 Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 974 Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,688 Total liabilities and stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $356,345 $15,914 15,607 5,566 10,862 17,233 395 70 65,647 213 157 7,833 $73,850 ––– 57 (1,209) 179,666 (7) 40,884 219,391 107 219,498 $293,348 48 49 Financial Performance CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE INFORMATION) CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Year ended January 2, 2010 Year ended January 3, 2009 Year ended January 2, 2010 Year ended January 3, 2009 Revenue Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,143 Royalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,972 Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .349,115 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,313 Gross proﬁ t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248,802 Operating expenses: Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,701 Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,577 Antitrust litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 Total operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,576 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,226 Non-operating income (expense): Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (149) Total non-operating income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46) Income before provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,180 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,158 Net income including noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,022 Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (794) Net income attributable to Masimo Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,228 Net income per common share attributable to Masimo Corporation Stockholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$0.92 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$0.88 $259,592 47,482 307,074 89,454 217,620 25,495 120,069 706 146,270 71,350 2,305 (753) (511) 1,041 72,391 40,464 31,927 ––– $31,927 $0.57 $0.53 Weighted-average number of common shares: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,602,646 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,170,848 56,320,712 60,190,335 Cash ﬂ ows from operating activities: Net income including noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,022 Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,979 Share-based payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,674 Loss on disposal of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 733 Provision for obsolete inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Provision for warranty costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,220 Provision (beneﬁ t) for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,566) Income tax beneﬁ t from exercise of stock options granted prior to January 1, 2006. . . . . . . . . . . . . . . . . 2,758 Excess tax benefits from share-based payment arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (215) Changes in operating assets and liabilities: Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,982) (Increase) decrease in royalties receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (125) Decrease in accounts receivable from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ––– Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,929) (Increase) decrease in deferred cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 (Increase) decrease in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 (Increase) decrease in prepaid income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (833) (Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,065) Increase in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 777 Decrease in accounts payable to related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ––– Increase in accrued compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,926 Increase (decrease) in accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,935 Increase (decrease) in income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,169) Increase (decrease) in deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(2,518) Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,244) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,121 Cash ﬂ ows from investing activities: Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,636) Purchase of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,989) Increase in intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,851) Increase in restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(15) Cash paid in acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,981) Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,472) Cash ﬂ ows from ﬁ nancing activities: Repayments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (450) Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,575 Excess tax beneﬁ ts from share-based payment arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ––– Net cash provided by (used in) ﬁ nancing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,340 Eﬀ ect of foreign currency exchange rates on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,856) Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,910 Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$132,054 $31,927 5,745 7,716 91 108 1,352 1,646 447 17,201 (1,889) (6,244) 2,491 3,053 (5,588) (2,232) (54) 2,376 1,163 1,847 (583) 3,121 (2,485) 12,754 111 4,104 78,178 (6,852) ––– (2,523) (67) ––– (9,442) (30,436) 9,755 1,889 (13) (18,805) 246 50,177 96,733 $146,910 50 51 FORWARD-LOOKING STATEMENTS MASIMO EXECUTIVE MANAGEMENT TEAM MASIMO BOARD OF DIRECTORS Joe Kiani Chief Executive Oﬃ cer Tony Allan Chief Operating Oﬃ cer Jon Coleman President, International Yongsam Lee Executive Vice President, Regulatory Aﬀ airs & Chief Information Oﬃ cer Michael O’Reilly, MD, MS Executive Vice President, Medical Aﬀ airs Mark de Raad Executive Vice President & Chief Financial Oﬃ cer Stephen Paul Executive Vice President, U.S. Acute Care Sales Anand Sampath Executive Vice President, Engineering Rick Fishel President of Worldwide OEM Business, Business Development, & Masimo America Paul Jansen Executive Vice President, Marketing Joe Kiani Chairman of the Board of Directors Steven Barker, MD, PhD Director Edward Cahill Director Robert Coleman, PhD Director Sanford Fitch Director Jack Lasersohn Director This document may include forward-looking statements. These statements include but are not limited to: statements regarding our goals and focus; estimates about our future market potential; our belief that we will continue to develop “breakthrough” technologies; and statements regarding expectations for total hemoglobin (SpHb), RAM (RRa), and the general ﬂ oor monitoring market. These forward-looking statements are based on current expectations about future events aﬀ ecting us and are subject to uncertainties and factors, all of which are diﬃ cult to predict and many of which are beyond our control, including but not limited to: risks related to obtaining regulatory approval from the U.S. Food and Drug Administration (FDA) and other regulatory agencies; dependence on our patents and proprietary rights; the development or availability of competitive products or technologies; our assumption that Masimo SET and Masimo Rainbow SET will deliver a suﬃ cient level of clinical improvement over alternative pulse oximetry and patient-monitoring systems to allow for rapid adoption of the technology; and other factors discussed in the “Risk Factors” section of our annual report on Form 10-K for the year ended January 2, 2010, ﬁ led with the Securities and Exchange Commission (SEC) on February 16, 2010. Although we believe that the expectations reﬂ ected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of April 23, 2010. We do not undertake any obligation to update, amend, or clarify these forward-looking statements or the risk factors contained in our annual report on Form 10-K for the year ended January 2, 2010, whether as a result of new information, future events, or otherwise, except as may be required under the federal securities laws. NOTE REGARDING THIS ANNUAL REPORT: Please note that this annual report does not constitute the Company’s “annual report to security holders” for purposes of the requirements of the SEC. For a copy of the Company’s annual report to security holders required under Rule 14a-3 of Regulation 14A of the Securities Exchange Act of 1934, as amended, please refer to the Company’s annual report on Form 10-K for the ﬁ scal year ended January 2, 2010, available in the Investor Information section of our website at www.masimo.com. REGULATORY NOTICE Some of the products featured in this Annual Report are currently or planned to be marketed worldwide by Masimo. Not all products or features proﬁ led in this report have US FDA 510k or other regulatory agencies clearances (such as EU, Canada, Japan, etc.) at the time of printing. As of April 23, 2010, the following products/ features have not been FDA cleared for sales and marketing in the US: New Radical-7 (as featured on page 8, 23, 29, 31, 32, 33, 37, 43, and 44), ReSposable sensors (page 9, 41, and 45), Single-patient-use Ear sensor (page 39 and 45), Pronto-7 (page 43 and 44), Adaptive Threshold Alarm (page 38 and 43), and PVI as an IFU for Fluid Management (page 30, 31, 37, and 44). Submissions for these products or features either have been ﬁ led or plan to be ﬁ led for all regulated markets. CITATIONS 1 Barker SJ et al. Anesthesiology. 1997;86(1):101-108. 2 Thomas A et al. Respir Care. 1998;43(10):860. 3 Shah N et al. Anesthesiology. 2006;105:A929. 4 Barker SJ. Anesth Analg. 2002;95(4):967-972. 5 Durbin CG et al. Anesthesiology. 2000;B14:93. 6 Durbin CG et al. Crit Care Med. 2002;30(8):1735-1740. 7 Durbin CG et al. Anesth Analg. 2002;94:S81-S83. 8 Granelli AW et al. Acta Paediatr. 2005;94:1590-1596. 9 Cox PN et al. Anesthesiology. 2007;107:A1540. 10 Castillo AR et al. Pediatric Academic Societies Annual Meeting. 2007. 11 Chow L et al. Pediatrics. 2003;111(20):339-345. 12 Taenzer AH et al. Anesthesiology. 2010;112(2):282-287. 13 Morgan JA et al. International Anesthesia Research Society Meeting. 2010:S-249. 14 Suner S et al. J Emerg Med, 2008;34(4):441-450. 15 Ash-Bernal RA et al. Medicine. 2004;83:265-273. 16 Cannesson M et al. Br J Anaesth. 2008;101(2):200-6. 17 Feissel M et al. Critical Care. 2009;13(1):P205. 18 Forget P et al. Critical Care. 2009;13(1):P204. 19 Bernard AC et al. J Am Coll Surg. 2009;208:931-937. 20 Surgenor SD et al. Anesthesia & Analgesia 2009;108:1741-1746. 21 Shander A et al. Transfusion. 2010;50(4):753-765. 22 Weinger MB. APSF Newsletter, 2006. 23 Macknet MR et al. Anesthesiology 2007;107:A84. 24 Masimo Internal Report. Masimo Adaptive Threshold Alarm Analysis. 2010. 25 Sensor waste reduction estimates based on yearly waste from 50,000 adult sensors, butterﬂ y type, assuming 50% yield from reprocessed sensors. 26 Desebbe OB et al. Anesthesia & Analgesia. 2010;10(3):792-798. 52 53 Masimo Corporation : : 40 Parker • Irvine, CA 92618 : : Tel: 949 297 7000 : : www.masimo.com © 2010 Masimo Corporation. Masimo, SET, Rainbow, Rainbow Acoustic Monitoring, RRa, RAM, SpHb, SpCO, SpMet, SpOC, PVI, Adaptive Connectivity Engine, Adaptive Threshold Alarm, Adaptive Probe Oﬀ Detection, APOD, Green Designed In, Measure-through Motion and Low Perfusion Pulse Oximetry, Pulse CO-Oximetry, Signal Extraction Technology, Signal IQ, Patient SafetyNet, Radical, Radical-7, Rad-87, Rad-57, Pronto, Pronto-7, Rad-8, Rad-5, Rad-5v, Rad-9, Blue, LNCS, LNOP, Max, NeoPT-500, Newborn, MS-1, MX-1, MX-3, DST, SST, FST, MST, RAS, DOS, ROS, Rainbow 4D, ReSposables, SatShare, SmarTone, FastSat, FastStart, Sof Touch, Improve patient outcomes and reduce the cost of care by taking noninvasive monitoring to new sites and new applications, and Closer to the Heart are trademarks, registered trademarks, or servicemarks of Masimo Corporation. All rights reserved. All other products or logos are trademarks and/or registered trademarks of each respective company. 0 1 4 0 - A 0 1 4 6 - 0 6 0 6

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