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The Device Market That Drove One Company From $2.50 to $65 Has a New Entrant

  • The move to get patients out of doctors offices and hospitals quickly using virtual care and remote monitoring is underway. Technology is enabling the switch, and few sub-sectors have benefited more than remote cardiac care. Companies like Biotelemetry (BEAT) have grown by leaps and bounds in the last few years as their proprietary remote cardiac monitoring devices have gained traction. They're doing $400M in annual sales, and their stock has climbed from trough lows at $2.50 in 2013 to $65 in 5 years.
  • Biotricity (BTCY) is a small monitoring company with an attractive valuation compared to its bigger peers, just entering the market after their first FDA clearance. The stock is near 52-week lows after post-approval doldrums and could rebound in 2019 as this product launch gets under full steam. It doesn't take much to demonstrate traction with a great device in this huge market, and with the right execution and sales figures, BTCY could look like BEAT's trough a few years back.

NEW YORK, NY / ACCESSWIRE / March 8, 2019 / Every year, millions of people experience symptoms associated with cardiac arrhythmias, a condition in which the electrical pulses that coordinate heartbeats happen out of typical coordination. The result is slow, fast, or irregular heartbeats, and it can lead to much bigger problems left untreated.

That's why doctors are focused on diagnosing these problems before they get worse, and it's created a booming market for monitoring devices that take repeat ECG (electrocardiogram) readings. Years ago, doctors had to keep patients in the hospital hooked to clunky ECG devices while they watched and monitored for the sometimes sporadic arrhythmia event. Today, things are much simpler: doctors can send patients home with a small device the size of a cell phone with a few small leads stuck to their chest.

Telemedicineand Remote Monitoring Companies Are Ripping In This $19B+ Industry

According to Markets and Markets research, the total cardiac monitoring and cardiac rhythm management devices market was over $19B in 2016 and climbing to $25 billion by 2022. [1] Now these MCOT devices (mobile cardiac outpatient telemetry) are taking the cardiac market by storm, and investors in this new technology have done well.

Biotelemetry (BEAT) made a pivot a few years back to focus on this emerging technology. From $2.50 in 2013, BEAT climbed to over $70 in 2018. They're making money hand-over-fist on their portfolio of remote cardiac monitoring products, with guidance for revenue in 2018 of $400 million.

Another company, iRhythm (IRTC) has rocketed from a $17 IPO in 2016 to as high as $95 per share in 2018 as they've increased sales of their one and only monitoring device called Zio. The company had revenue in 2018 of $143.7 million after launching in 2011.

BTCY: A New EntrantAt A Much Smaller Valuation

The market is clearly there for quality devices, making another new entrant intriguing at the current market value of about $20 million. Biotricity Inc (BTCY) received FDA clearance for their MCOT device, called Bioflux, at the end of 2017 and launched the product in mid-2018. The second half of 2018 was focused on building the sales organization and infrastructure, and 2019 is all about expansion now that the sales process is being cemented.

So far Bioflux, which is a 3-lead device like some of the offerings at Biotelemetry, appears off to a strong early start. Bioflux was named MedTech Breakthrough's "Best Remote Patient Monitoring Solution of 2018," and the caliber of board and advisory members that have attached themselves to the project is encouraging as well. Former AARP COO Thomas C. Nelson and Cisco's former chief medical informatics officer Daniel Sands, MD, MPH both sit on the company's board, and the medical advisory board consists of high-profile cardiac experts like Rony Shimony, MD, FACC, director of Clinical Cardiology at Mount Sinai West.

Biotricity plans to launch a second device, called Bioflux Patch, to help round out their cardiac offerings for providers - it's another tool in the physician's toolbelt with a slightly smaller physical profile, much like the Zio device from iRhythm.

The benefits of these devices has been spelled out in published research over the years. Research from the Scripps Translational Science Institute (STSI) in 2014 found that physicians who reviewed data from Zio and traditional Holter monitors (another older technology) ''reported reaching a definitive diagnosis 90 percent of the time when using the [Zio] patch results and 64 percent of the time when using Holter monitor data. A survey of study participants found that 81 percent of them preferred wearing the patch over the Holter monitor, with 76 percent saying the Holter monitor affected their daily living activities.'' [2]

Product LaunchHeating Up at BTCY

The road map to success can take time for medical device startups. At the end of 2014, almost 4 years after launching their one and only Zio product (which is not connected by telemetry), IRTC had 36 people in their sales organization generating $21.7 million in sales that year. They ended 2015 with 83 in the sales organization and $38 million in sales. We can estimate that this sales organization is running at roughly $500-750K in annual revenue per sales staff.

Comparing Biotricity at $20M in market capitalization, this company is just building out their team, and and now it's a matter of executing on the commercial process over the next few years. With even 3-5 sales staff, they could be generating substantial revenue for such a small company, and the addressable market is immense. 2019 and 2020 are about growing the sales organization, and the coming 2-3 years will be critical to understanding product uptake.

Consider the market valuations already in this sector. Biotelemetry is a $1.9 billion company based on $400m in annual sales. IRTC is a $1.6B company based on sales last year of around $140m. In 2017, Biotelemetry acquired a smaller troubled European company called Lifewatch for $250M, specifically to pick up their portfolio of MCOT devices. For successful companies, these valuations stand out.

Near Lows,BTCY Rebound Could Be Due

Investing in health care companies can be hit or miss. Many will fail completely to develop any new products or find commercial success, while others will hit the nail on the head and turn their story around quickly. This happens regularly in the world of healthcare equities. Bio-Path Holdings (BPTH) became one of the most heavily traded stocks on the Nasdaq recently, with shares up 185% in one day after the company announced an update to a trial of their drug prexigebersen. Novavax (NVAX) had the opposite outcome recently when their stock plummeted after a phase III drug trial failure.

BTCY's stock price is in the trough as they have moved from development story to execution story, but this is also the time when investors may be able to find a bargain betting on management executing well in the long-run. BEAT returned over 25X for investors who bought the lows in 2013, and IRTC IPO buyers, when the company was in the middle of their commercial launch, at $17 have seen their investment quadruple since. BTCY is near its own lows, and while performance hinges on the company doing well with their launch in the next year, the market and upside potential are large based on these peers.

Sources:

1. https://www.marketsandmarkets.com/Market-Reports/cardiac-monitoring-advanced-technologies-and-global-market-55.html

2. https://www.scripps.org/news_items/4702-patch-outperforms-holter-for-prolonged-heart-rhythm-tracking

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