- Healthcare Stocks Ripping Higher Amid Acquisitions and Expectations for More in 2018. Cardio Monitoring Companies like IRTC and BEAT have been Great Performers as They Penetrate Huge Market
- Upstart BTCY could be Undervalued by 250-500% Based on Comparison to IRTC's IPO Two Years Ago and More Recent Acquisitions in the Segment
- BTCY is Overlooked; Fundamentals and Technicals Aligned, BTCY Could be Poised for Breakout Move back to Highs at $9.00, or a 100% Move Quickly
When iRhythm (IRTC) went public in October of 2016, the mid-cap healthcare company had done about $36 million in revenue the year before - not much. But investors were willing to invest at a huge valuation - $550 million at the time of the IPO - valuing the company at over 15 times their previous year's revenue. Why?
IRhythym developed and markets the ZIO Patch, a small biosensor that can be worn for up to 14 day, and the ZIO Service, algorithms that distill data from millions of heartbeats (through EKG readings) into clinically relevant information to help doctors diagnose and treat heart irregularities.
Savvy investors knew that this company had potential. Indeed, a little over one year later, IRTC expects to announce $95 million in sales in 2017, and the stock has appreciated by 3-fold from the IPO, to a $1.39 billion market valuation based on these sales and, more importantly, the tremendous market opportunity ahead.
The small upstart Biotricity (BTCY) has just started to receive attention for the same reason - its newly FDA approved Bioflux device is entering this same, huge market. IRTC believe the ZIO Patch could do $1.4 billion in sales, and Bioflux could be considered an improved device. With healthcare stocks on fire, Biotricity's small market cap could be set to appreciate by 2-3X quickly, and the stock is ripe for a technical breakout.
Ambulatory Heart Monitoring Taking Off, Remote Cardiac Stocks Big Winners
The ZIO service allows a patient to leave the hospital when they have a suspected arrhythmia, and their EKG readings are taken over the subsequent two weeks. The ZIO Patch is then mailed into a data collection center, and the results allow physicians to diagnose many arrhythmias quickly and efficiently, more so than traditional technologies like clunky Holter monitors, and avoid multiple indeterminate tests. Early detection of heart rhythm disorders such as atrial fibrillation and other clinically relevant arrhythmias allows for appropriate medical intervention and helps avoid more serious subsequent medical events, like stroke.
It's a booming sector. Older technology is rapidly falling by the wayside as less expensive, more accurate, and more convenient products come to market. Healthcare providers can cut expenses by gathering data on patients outside of the expensive hospital environment with devices that are tracked from data centers, remotely. These "telemetry" devices have seen an increase in recent years, and with reimbursement provided when devices are monitored 24/7, remote cardiac monitoring services have become a lucrative and competitive market. The cardiac care industry is expected to rise to $28 billion in total by 2021, and IRTC believes that they're playing in a $1.4B subsegment of their own.
"Cardiovascular disease, or CVD, continues to be the world's leading cause of death among men and women, and cardiac care is placing a major strain on healthcare providers," according to Nicola Goatman, market analyst for the analytics firm IHS Technology. "With limited physician resources to cover the ever-increasing number of cardiac patients, remote monitoring enables patients to be observed away from the hospital over longer periods of time, providing a much needed cost-saving initiative. Furthermore, remote detection's early discovery of cardiac disease is vital for reducing costly acute care later down the line."
Players in this market have been on fire, like IRTC and BioTelemetry (BEAT), which has screamed higher by 300% over the last few years to a $1.2 billion market value as the pivot from in-hospital and bulky monitors to streamlined, remotely monitored devices continues.
With New, FDA Cleared Device, BTCY Could Be Worth 4-5X Rapidly
The market for these small remote monitors is tremendous, and companies in this space are getting bid up quickly. One upstart, called Biotricity (BTCY), received U.S. FDA clearance of their own new and highly competitive remote EKG device in December, one month ago. The stock is barely known by most investors, and as a result is significantly undervalued based on some simple metrics.
Biotricity's new device is called the Bioflux MCT (mobile cardiac telemetry) device. It's a small, phone-sized 3-lead EKG monitor that transmits heartbeat readings by cellular connection to remote monitoring facilities. The device can be worn for a few weeks while physicians collect and analyze the EKG data remotely. This is top-of-the-line technology, and it may be even more attractive than some competing devices like the ZIO Device, which requires mailing the product back to the facility for analysis - Bioflux transmits in real time and can capture irregularities on the fly.
As has become clear, the opportunity in this segment is immense, with companies like IRTC positing that ZIO alone could be a $1.4 billion product.
Biotricity doesn't have to do $500 million in sales to be a significant position for investors...getting to $30 or $50 million in revenue could be worth 500% of upside for BTCY. At its IPO, IRTC traded at 15 times their previous annual revenue of $36 million. With $30M in sales, BTCY could be valued the same way, at $450 million based on this same metric, or $20.80 per share... 400-500% of upside from recent prices!
Tax Bill Puts Money Into Large Companies' Hands, And They're Looking to Acquire
With the latest tax bill, large drug and healthcare companies have been on a spending spree just 30 days into 2018. Sanofi (SNY) bought Ablynx (ABLX) for $4.8 billion, and Celgene (CELG) acquired Juno Therapeutics (JUNO) for $9 billion. Seattle Genetics (SGEN) purchased Cascadian Therapeutics (CASC) last week for $600 million.
Health care stocks have been on fire as a result, as investors understand that large companies need to BUY growth, and small innovative companies is where they're finding it.
The case for significant upside for BTCY if/when sales materialize is fairly simple based on the metrics above, but BTCY may not even last that long as acquisitions abound in 2018. Last year, BioTelemetry (BEAT) acquired LifeWatch Ag for their similar remote cardiac business, for $250 million up front, or about 2.5X BTCY's current market capitalization.
BTCY is not without risks, and an investment or trade in the stock could be worth nothing if the company can't execute on the launch and introduction of further products - that's the biggest risk as the company may need to capitalize their balance sheet further.
Converging Trend Lines, BTCY Could Break Out Imminently
2018 could be a breakout year with the launch of Bioflux, and the stock is ready to break out from a technical perspective as well. As BTCY has retraced some of its gains from the December FDA clearance, the issue has been stuck between its uptrend and recent consolidation trend, and this wedge could be about to breakout to the upside. These kinds of breakout moves happen rapidly, like the rallies in Viking Therapeutics (NASDAQ: VKTX) and Mannkind Corp (NASDAQ: MNKD), which both ripped higher as the stocks have broken out of their technical constraints. BTCY could be primed for a similar move as the technicals and fundamentals align.
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