iRhythm's Pain = Biotelemetry's Gain
02 April 2019
iRhythm's Pain = Biotelemetry's Gain
- In the last few weeks Biotelemetry, one of the largest positions in our Bionics’ certificate, has been under pressure. There is no news to justify this movement except few negative comments from Kerrisdale (NY based Investment management) and Washington Analysis (Independent Institutional Research Boutique focused on anticipating and analyzing changes in public policy) about potential reimbursement cuts for iRhythm, one of Biotelemetry’s main competitors in the Holter monitoring devices market.
- iRhythm generates almost all of its revenues from the Zio XT Patch, a Long-term/Extended Holter Monitor, which is replacing the 1-2 day short-term Holter monitor with a 14-day patch, providing a better diagnostic yield in difficult cases of Atrial Fibrillation.
- Biotelemetry, which is the leader in remote monitoring technology, dominates the Mobile Cardiac Telemetry (MCT) space with ~60% market share, with the more obsolete Holter monitoring segment accounting for less than 5% of its total revenue.
- The reimbursement level for medical devices is associated with a coding process assigned to the analysis of the data generated. iRhythm procedure falls currently under the Category III codes providing for automatic reimbursement for up to 5 years after implementation, after which the code can be transitioned to Category I codes if the underlying procedure has become more widespread and supported by the literature. Devices that are under Category I have normally a much lower level of reimbursement.
- It is true that iRhythm's historical growth in long-term Holter is being usurped by highly motivated, well-funded competitors who have leap-frogged the Company's technology and Biotelemetry is definitely one of them.
- If a reimbursement cut comes, iRhythm could lose more than 60% of their sales in one go, and it will open up the market to its competitors. Biotelemetry, in particular, will take advantage of the lower price point to increase its market share in this market.
- We think that the recent weakness in the stock is not justified by any fundamental reason.
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