iRhythm (IRTC)

If anyone has posted about this company before I apologize in advance. I did a quick ticker search and didn’t see anything.

iRhythm is a healthcare technology company specializing in rhythm detection using a novel “patch” device. This is currently their only revenue stream. Their device is unique in that it has a small footprint, requires no wires nor a procedure to place. This is opposed to the usual which is either a holter/event monitor or the implant of something called a loop recorder. I use both Holter’s and implant loop recorders on a regular basis. Holter’s are cheap but have low diagnostic yield as they are generally only worn for 1-2 days. Loop recorders (specifically the Medtronic Reveal) have higher yield but require a procedure in either a clinic procedure room or recovery area of a hospital so they are expensive (I do mine without sedation, local anesthesia only). I have yet to use this device but will begin transitioning my practice to this technology within the next month after meeting with their representative for a presentation today. This is a very cool device with the potential to replace Holter monitoring completely and even eat into some of Medtronic’s loop recorder business. It actually sticks to the patient’s skin with a powerful adhesive and has a button on top to push to notify the device that they are having symptoms. You can wear it up to 14 days and do all other activities while wearing it including exercise and showering. No adverse events from the adhesive have been reported as of yet.

IPO was this past October at $17, went up to a high in the low 40’s, now sitting around $34. I estimate market cap to be around $750 million currently. They have grown revenue by 66% and 77% in the lasts 2 years and gross margin has increased from 51% to 67% over the same time frame. They are operating a net loss of 20.9 million in 2016 but that was lower than the 22.8 million from the prior year.

Let me know what you guys think. I thought this was a very Saul like stock and am considering opening a position but haven’t yet.



I forgot to mention guidance for 2017.

iRhythm projects revenue for the full year 2017 to range from $85 to $90 million, gross margins for the full year 2017 to range from 69% to 71% and operating expenses for the full year 2017 to be between $82 and $86 million. So they could be near profitable or slightly profitable by the year end.


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Very interesting technology. Appears BEAT which was brought to the board recently is a competitor. Of interest, it appears the lockup period for 14.7 million shares to enter market was today.



Definitely a competitor. Advantage of iRhythm would be the leadless technology. BEAT devices all require leads applied to the chest leading to wires attached to a sensor worn around the neck. Cumbersome for sure compared to the Zio device by iRhythm which needs none of that. Interestingly, the Zio uses Splunk tech (I have no idea how) which I believe has been discussed on this board as well.

Youtube video link here if you desire to see the device and how it’s placed.



No adverse events from the adhesive have been reported as of yet.

I don’t suffer from any allergy yet when a 3M bandage (with a little transparent window) was applied to my back after spinal surgery it caused a rash.

The earnings report guidance: Revenue is moderate compared to previous two years and if they hit the target profitability happens in 2018, not this year.

Guidance for Full Year 2017

iRhythm projects revenue for the full year 2017 to range from $85 to $90 million, gross margins for the full year 2017 to range from 69% to 71% and operating expenses for the full year 2017 to be between $82 and $86 million.…

Interesting video but even more interesting is that YouTube shows other health monitors. From an investor’s point of view the question is whether many will continue to compete in the market (like multiple food items) or whether the technology will consolidate in a winner takes all manner (like Windows). In The Gorilla Game Geoffrey Moore suggests (assuming a winner takes all product) buying the basket and selling the losers. I think a safer alternative is to wait for the winner to emerge before investing. In a winner takes all market “path dependance” (a head start) is very influential in the outcome. BioTelemetry (BEAT) has a big head start and they are bulking up with the tender offer for their big Swiss competitor. The issue about the holter wires is not critical in as far as they could switch to a wireless device if that technology is good enough. Big data collected and analyzed is probably a bigger factor – maybe not – just guessing.

Like I mentioned I bought some BEAT on Monday. I would have delayed had iRhythm been brought to my attention sooner. Now I’ll monitor my BEAT position with a different perspective. In any case, remote monitoring is here to stay, the question is who the big winner will be (disruptive technology) or if it gets absorbed into big-pharma suppliers (sustaining technology).

Denny Schlesinger


Hi MC,

What’s the cost to patients for the Zio vs Holter vs Medtronic Reveal.

This seems a great product as the 24, 48 hr ecgs, as you said, are usually pretty useless.

Is the Zio replicable by other companies?

Looking 5, maybe 10 years into the future, couldn’t smartwatches be able to do this? I know apple are putting a lot of money into the pipedream of being able to accurately monitor blood sugars with their watches. ECG monitoring seems far easier and doable.

Going through annual report briefly:
They advise expenses will increase as they’re now publicly traded, and they will devote substantially more resources to increased adoption of the Zio (to be expected and encouraged).

To be successful they need to manufacture and sell large numbers of the Zio. Currently some of the key components are from one supplier. They don’t have a large inventory. They’ve identified that they will need to source more supply sources, get them qualified, expand and qualify their manufacturing facilities, and attract and retain qualified employees.
They have limited experience in expanding to commercial quantities.
However, they expect their current manufacturing facilities to satisfy their needs for at least the next 4 years.

290 million individuals in the US have government or private insurance that covers the Zio.
The company believes their TAM is $1.4 billion.

A small study showed the ZIO to have a 57% better improvement diagnostic yield vs the Holter monitor.

These competitors have also developed other patch-based mobile cardiac monitors that have recently received FDA and foreign regulatory
clearances. For example, LifeWatch AG received FDA clearance and CE mark for its mobile cardiac telemetry monitoring patch in January 2016 and
December 2015, respectively. In addition, in July 2016, BioTelemetry, Inc. announced FDA clearance for its patch-based mobile cardiac telemetry monitor.
We are also aware of some small start-up companies entering the patch-based cardiac monitoring market. Large medical device companies may continue to
acquire or form alliances with these smaller companies in order to diversify their product offering and participate in the digital health space. For example, in
2014 Medtronic, Inc. acquired Corventis, Inc. Many of our competitors have substantially greater financial, manufacturing, marketing and technical
resources than we do. Furthermore, many of our competitors have well-established brands, widespread distribution channels, broader product offerings and an
established customer base.

So what’s their advantage? They’ve already sold and used 700k+ and have 150million hours of ECGs. They claim that because of this, they have a significant advantage in their diagnostic algorithms. I suppose much in the same vein as say CRTO claim that the more customers they have, the more info they gain, the better their product becomes, creating a moat vs any new startups.
I do not believe this advantage is anything significant at all. Having seen many of the new ECG monitors over the last few years and had a few sales pitches myself…they all tout the same thing, claiming to be better than the competitors. To myself, they all seemed pretty much similar.

Looks like a great new product. These patches will definitely disrupt the current first-line monitors/holters. With 290 million people covered…that’s pretty much the whole of the US. Pt’s doctors don’t even have to do anything as all the analysis is done by irhythm cardiac technicians and billed to the pt/insurance. Seems like a no-brainer over the other monitors.
However, what’s to stop the bigger, badder, richer companies from doing the same thing and muscling iRhythm out of the business?


iRhythm projects revenue for the full year 2017 to range from $85 to $90 million, gross margins for the full year 2017 to range from 69% to 71% and operating expenses for the full year 2017 to be between $82 and $86 million. So they could be near profitable or slightly profitable by the year end.

Hi MC, Very interesting company. There’s something wrong with your calculations though.

If we take the middle of guidance of $87.5 million revenue … and the middle of gross margins of 70%… we get a gross profit in dollars of $61.25 million.

The middle of their operating expense guidance is $84 million, which would give them an operating loss of
$61.25 minus $84.00 = a loss of $22.75 million (or about where they’ve been the past two years).

Okay, let’s be generous and assume they hit the top of their guidance on all three factors: Revenue of $90 million, Gross Margins of 71% and Operating expense of only $82 million.

That would give them a gross profit in dollars of $63.9 million and operating expense of $82 million, and still a loss of $18.1 million.

It’s hard to imagine them profitable by year end, or even the end of 2018. Doesn’t mean they won’t be a good investment, but just saying…



Denny I think most of these adhesive type rashes are not true contact dermatitis allergy like poison ivy but are just irritation. Especially if you hsve to take them on and off ( not with the device discussed) The rash heals on it’s own or more quickly with a couple of days of using a corticosteroid cream
But most of these glues apparently have a rubber base and some are truly allergenic . This true allergy tends to be far more severe with blisters etc, poison ivy being the protypical example.

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Obviously you are correct sir. Accounting is clearly not my strength! For some reason my brain thought they had a 100% margin when I typed that statement. Thanks for pointing out that correction.


There is no cost difference to the patient with the Zio vs. any other external monitor. A loop implant is a different matter as it has to be placed in a hospital or a hospital based clinic as there is no code for implanting the device in a stand alone clinic at this time. That price will depend on patient insurance so it will vary but will invariably be pricier.

I think their advantage is earlier to market. I haven’t seen any other patch device brought to my attention as of yet either by indirect or direct marketing. Diagnostic algorithms are very important and that is definitely an advantage so I disagree with you there. The reason is your other statement which is false: “Pt’s doctors don’t even have to do anything at all.” That’s completely inaccurate. The reason the algorithms are important is that it makes my life easier to where I have to do less, not nothing at all. I will always have to look at the strips to confirm/contradict what the algorithm thinks is occurring. These algorithms will never be perfect and will always require confirmation by a human. Even the Medtronic Reveal loop recorder has issues like T-wave over sensing creating false positives and can miss significant pauses or create them due to its “blanking interval” after a detected QRS. The reasons for that are complicated but stated simply, algorithms are looking for rate change and regularity of the rhythm. They are not good at looking at morphology, which can be very important in certain instances especially if the QRS morphology is changing like after a PVC.

Anyway, thanks for all the input. I will give you guys an update after I’ve gotten some experience with the device, the reports and customer service. CS will be a very important factor in determining who comes out on top here IMO.



The comments on that video don’t seem very positive …

Hard to take an ECG from the wrist …

Hard to take an ECG from the wrist …

But maybe not hard to detect a rhythm abnormality from the wrist (or any other artery)…

But are you talking about the iRhythm device? The video I looked at showed it being placed right over the heart.


I suspect it is going to be quite difficult to detect rhythm abnormality from the blood stream. For starters, the abnormality can be atrial or ventricular and the real thing one is detecting is the electrical pattern … what is happening to the blood itself is much murkier.

The comment about the wrist was specifically directed at the observation of Apple working on detecting blood glucose.