(OMCL) Omnicell Earns Second Consecutive Best in Klas Award

Omnicell (OMCL), recently announced that it has received recognition for its OmniRx automated dispensing system from leading research firm, KLAS for the second consecutive year.  Along with the  2011 “Best in KLAS” award for Automated Medication Dispensing Units for large hospitals with more than 200 beds category, Omnicell was also  recognized  as the Category Leader for OmniRx for hospitals under 200 beds. This is the sixth consecutive year that OmniRx has received this KLAS ranking as Category Leader.

Omnicell, for the second consecutive year, was adjudged Category Leader for Pharmacy Automation: Medication Carousels for its WorkflowRx Carousel and Category Leader in the new Anesthesia Cabinets award category for Omnicell’s Anesthesia Workstation.

Moreover, Omnicell’s OmniLinkRx received the Category Leader Distinction for Medication Order Management Systems in Klas’ Software & Professional Services Report for the second consecutive year.

Omnicell operates in the niche automated medication distribution industry and stands to benefit from favorable demographic trends, regulatory environments and a lack of nursing staff. As the information technology market is growing in leaps and bounds coupled with increasing investment by healthcare industries, Omnicell is confident about its success in the near to medium term, aided by its industry leading products  such as SinglePointe and Anywhere RN.

Currently, an increasing number of institutions are planning to switch over to the automated mode by procuring medication and supply solutions to address the shortage of nursing facilities in the US. In 2010, Omnicell entered into several partnerships to expand its business, including Wellmont Health System(selected Omnicell’s OmniRx, SinglePointe software, Anesthesia Workstations and other solutions to monitor and streamline medication management throughout its facilities).

Furthermore, OmniRx and SecureVault system were also selected by Sentara Healthcare and Deaconess Health System. Omnicell’s Anywhere RN automated medication solution was chosen by Orange Regional Medical Center. Further,  in December 2010, the company entered into a partnership with Cardinal Health (CAH) to support  the CardinalASSIST automatic replenishment program.

Further, in May 2011, the company launched its highly advanced single database G4 platform, which is expected to bolster Omnicell’s automated dispensing cabinet systems. Omnicell expects this platform to be the backbone of all its products, making medication management less prone to administrative errors and inefficiencies, which can harm patients. We expect these developments to bode well for the company’s growth.

Additionally, Omnicell with its full potential and various strategies of expanding into the international market aims to boost its top line. Presently, outside US, it operates in Canada, Europe, the Middle East and Asia with supply chain sourcing in Asia. We are optimistic about Omnicell’s international growth prospects.

Although Omnicell expects to boost its sales going forward, the company’s products, primarily purchased by hospitals and nursing homes, are still suffering from  weak credit markets and higher unemployment. Constrained hospital spending is a primary headwind for  the company. Moreover, the company faces intense competition in the medication management and supply chain solutions market from major players such as CareFusion Corporation (CFN) and McKesson Automation (MCK).

However, we believe that a slowly recovering economy will help the company to tap the under-penetrated healthcare IT market. In addition, the company’s recent acquisitions and collaborations leading to pipeline expansion are expected to drive growth further.

Presently, we remain ‘Neutral’ on Omnicell.

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