Will wireless patch replace Holter monitor?

A mouse trap it isn’t, but the world’s Holter monitor wearers may want to beat a path to the door of medical technology stock iRhythm Technologies Inc., a digital health care solutions company focused on the advancement of cardiac care, and its new Zio® XT heart monitor device. It’s caught BMO Capital Markets’ attention.

Medical_Technology_StockRedefining the way cardiac arrhythmia is diagnosed, medical technology stock iRhythm Technologies Inc. (NASDAQ—IRTC) has caught New York-based BMO Capital Markets’ managing director Joanne Wuensch’s attention enough to initiate coverage.

The company’s wireless Zio® XT competes against traditional Holter monitors. However this device can be worn for longer periods of time and is boasted as being more comfortable. Its data analytics also improve work-flow and diagnostic accuracy. Ms. Wuensch gives the stock an inaugural ‘outperform’ rating and $76 target share price.

The analyst goes on to note: “iRhythm may be one of the more interesting MedTech emerging growth stories. With reimbursement in place and clinical trials to expand the market opportunity, iRhythm has plenty to give. The company’s Zio® System is a differentiated platform that includes a wearable Zio® Patch bio-sensor which continuously records and stores ECG data from every patient heartbeat for up to 14 days.

“The system also performs a cloud-based analysis of the recorded cardiac rhythms using proprietary algorithms and a final quality assessment review of the data. The Zio® Report includes a summary of findings that is sent directly to the physician and can be integrated into a patient’s electronic health record.”

The analyst sees a few key drivers for iRhythm in 2018, such as building out its sales force to 106 to 112 representatives from 86 to drive further Zio® XT adoption. Another driver would be capturing in-network contracts for its real-time monitoring device Zio® AT and continuing clinical work for expanded indications, including the mSToPS one-year data presentation.

She says: “We forecast revenue of $130.9 million, up 32.9 per cent in fiscal 2018, $176.9 million, up 35.1 per cent, in fiscal 2019, and $228.9 million, up 29.4 per cent in fiscal 2020, yielding a fiscal 2016 to 2020 compound annual growth rate of 37.5 per cent. Like many emerging growth companies, iRhythm is not profitable, nor do we expect it to reach earnings per share break-even over the next several years.

“iRhythm’s growth rate is outpacing its peers at 35 per cent versus 20 per cent, and it is relatively early in its growth trajectory; and there is a very large, under-penetrated current market opportunity and a push into other areas of the arrhythmia monitoring market. It trades at eight times the fiscal 2019 enterprise value over revenue, versus the peer group’s 6.8 times.”

In the analyst’s upside scenario, management is able to increase market awareness and secure in-network contracts for its Zio® XT and AT services, faster than expected.

This is an edited version of an article that was originally published for subscribers in the April 6, 2018, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.

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