iRhythm is a San-Francisco based company that has created the Zio. The heart monitor can provide uninterrupted ECG monitoring for up to 14 days. It is designed to fit in with the users lifestyle and allows them to sleep, exercise, and shower normally.
What is iRhythm?
iRhythm (NASDAQ:IRTC) is a US-based company founded in 2008 and operates in the digital healthcare industry. Given the company name, you probably guessed that iRhythm operates in the heart monitoring sector. iRhythm’s mission is to discover signals and symptoms early to provide a longer, better quality of life.
It attempts to tackle the problem of cardiac arrhythmias. This is the medical term for an irregular heart rhythm. It has many variations, but common ones include fast or irregular heart rates such as atrial fibrillation. Some people have no symptoms, mild symptoms, and in severe cases, it can be serious enough to cause death. It’s a common condition affecting more than 2 million people in the UK. In this USA, it is about 11 million people, it causes 158 000 deaths per year, and costs the American health system tens of billions of dollars. Therefore, identifying cases and treating them is vital for patients and healthcare systems while providing a significant opportunity to companies.
iRhythm’s Zio Platform
Zio is iRhythm’s patented platform that is FDA-approved and used by medical professionals to detect cardiac arrhythmias. The platform is 90% effective in determining a diagnosis and the patient only has to wear a small patch that is hardly visible and easily covered. In addition, compared to traditional monitoring, known as a Holter monitor, Zio is less cumbersome and can be worn for 14 days compared to 48-72 hours.
Zio also utilises a deep-learning AI platform that uses 34-layer deep neural net technology. This software is fully integrated with the Zio patch, and you can even log symptoms with the Zio mobile app. All of this is a part of Zio’s fully scalable digital platform that provides medical practitioners with a full scope of the patient’s history and utilises advances in cloud computing.
iRhythm has already had over 4 million Zio users and over 35 peer-reviewed publications, proving that it has the legitimacy and track record to continue growing. iRhythm has some impressive figures for a high-growth but a not-yet profitable company in terms of its financials.
First, it already has gross margins of over 66%, which is high for such an early-stage company. Management anticipates that it’s $400 million in annual revenue in 2022 will continue to grow at a 30% CAGR, showing that the company is positioned for steady growth in the future.
Finally, while management estimates its US total addressable market is around $2 billion, iRhythm is making great strides for global expansion. For example, iRhythm has already initiated a rollout into the UK and Japan, which combine for over 2 million ambulatory cardiac monitoring tests every year.
Competition is always a concern for hyper-focused medical technology companies. In 2020, one of its largest competitors, BioTelemetry was acquired by the industrial conglomerate, Phillips. Earlier this year, Phillips unveiled an at-home ECG for clinical trials. This is a similar patch system that feeds patient data to medical professionals without the need for regular visits or consultations. Other competitors include a slew of privately owned firms like Life Plus, VitalTech, and AllyAlign Health. Each company is developing non-invasive forms of arrhythmia detection, although none have met the market share or customer base that iRhythm possesses.
Is iRhythm a Good Investment?
iRhythm’s stock is currently trading right near its 52-week highs in March 2022 after falling to a multi-year low of just over $40 per share in August of 2021. Despite the elevated stock price, iRhythm is not trading at much of a premium. It has a price to sales ratio of 12.7. This means for every dollar of sales, it costs the company 12.7 dollars, it’s high but also not terrible for a growth or tech company.
In its recent quarterly earnings report, iRhythm exhibited overall year over year growth. Revenue for the full-year 2021 rose by 21.7% year over year, although rising expenses did lead to a broader loss than was seen in 2020 – 101 million loss in 2021 compared to 43 million in 2020. Overall, while the figures weren’t as impressive as some investors would have liked, the underlying theme is that of growth.
iRhythm has a strong foothold in the hearth monitoring, medtech and wearable cross-section of the digital healthcare industry. It is taking right steps to continue its growth into the future, and global expansion will only add another dimension to the company’s revenue streams. While the threat of a larger company entering the space is always a risk on shareholders’ minds, it seems to be generating enough business to establish itself as a brand synonymous with cardiac arrhythmias. iRhythm is using cutting edge technology, and its disruptive Zio platform has revolutionised the way we can approach a common condition.
“A closer look at the balance sheet and income sheet is always helpful to gain information readily available to everyone. Interestingly, the gross margin fell to 66.2% in 2021 from 73.5% in 2020. The accounts show a significant increase in operating expenses to 313 million in 2021, an increase from 238 million in the previous year.
While this seems a concern for investors, the changes are linked to a decrease in reimbursements for the Zio from Medicare insurance repayments and higher costs related to expanding clinical capacity. So this can be seen as a sign of expansion rather than changes in performance alone. Additionally, the forecasts for 2022 look satisfactory, with gross margins expected around the 68% range. This helps us make assumptions about future revenues and a path to profit. ” – Dr Vinay Shankar