- Wearable healthcare technology hasn't translated into gains for these companies and their stocks yet, despite hype around the potential for health tracking
- Medical-grade products are producing massively for medical device companies, meanwhile, with medical device ETF climbing 300% over last few years as tech has advanced
- BTCY is a standout, despite being undiscovered by public market investors. Newly FDA-cleared device about to be launch commercially, and tiny valuation could soar as first sales emerge in hot remote cardiac monitoring market. Similar BEAT has been a big winner, up 1300% in give years
The future of prevention in healthcare is small, mobile, and wearable. Just ask health insurance companies, which for the last year have been adopting programs that allow their members to receive discounts on their premiums for wearing fitness trackers - an incentive to get active each day. After all, heart disease and stroke are still the leading causes of death and disability globally, killing more than 17 million people a year, and they have been for nearly 20 years. Fitbit (NYSE:FIT) was an early mover with their wearable fitness trackers, partnering with UnitedHealth Group (UNH) and Qualcomm (NASDAQ:QCOM), as well as Blue Cross Blue Shield.
The effort to use smaller, smarter and connected technology to improve health outcomes is a noble one, but it hasn't translated into gains for the maker of smart watches and fitness trackers. Shares in Fitbit have lost more than 50% of their value in the last two years, despite deepening their reach into healthcare, even partnering with Medtronic PLC (MDT).
So, who is benefiting from sleeker, cheaper technology to keep consumers - and moreso, patients - monitored and healthy? True medical device makers, especially those that can get physicians onboard and prescribing a new class of mobile telemetry devices. Penetrating the gatekeepers of the healthcare industry - doctors AND payors like insurance companies and medicare/medicaid - has been no easy task for tech companies unfamiliar with the healthcare landscape.
This is where the real money is being made - in medical devices that get prescribed and used by physicians and healthcare providers, which is why recent activity at Biotricity (BTCY) makes this little company so compelling. Biotricity just received U.S. Food and Drug Administration clearance for their unique remote cardiac monitoring device, called Bioflux. With this device launching imminently into a $22 billion market annually, a clear path for physician uptake, and peers trading at gargantuan market capitalizations with achievable revenues, BTCY could be a top small-cap healthcare name in 2018 worth as much as 200-300% more with 2018 events.
Despite The Hype, Wearables Not Translating Yet
As technology has gotten cheaper and smaller, so too has the potential for mobile and wearable devices to change how we do healthcare in a drastic way. Fitbit has been at the forefront of this move, with newer versions of their fitness tracking devices including more and more technology; heart rate sensors are almost ubiquitous. Fitbit now has partnerships with major insurance companies to get their clients out and active, and the company has even partnered with DexCom, Inc. (DXCM) on diabetes focused products.
Still, consumer-directed wearables have been remarkably slow to impact how we DO healthcare, and the promised improved outcomes have been slow to materialize in any empirical form.
Despite much hype around Apple (AAPL), Samsung and so many tech companies getting into the healthcare game, physicians aren't much for these consumer products. According to the 2017 Physicians Practice Technology Survey, only 5% of physician respondents say they use technology that monitors their patients' health status, like fitness or sleep trackers.
The adoption rate is shockingly low because the data just isn't that useful! According to Dan Ledger, founder of the research and advisory firm Path Collaborative, "A lot of the consumer wearables are living outside the sphere of healthcare. Doctors might say, 'You should get a Fitbit,' and that's where the conversations end. They don't say, 'Bring me the data.'"
Doctors just aren't getting useful insights from wearables...yet.
Small, Medical-Grade Remote Monitoring Companies Are A Runaway Success
Meanwhile, the money is being made in medical-grade devices, which institutions and doctors incorporate right into their procedure and diagnostic process. Newer, faster, and more connected devices are being used hand over first directly in the treatment setting. In places where doctors make the decisions and can use a monitoring technology directly in their practice, you can bet money is being made. Distinct CPT codes already allow doctors to bill payors like insurance and Medicare for very specific products, like for the "collection and interpretation of physiologic data...digitally stored and/or transmitted by the patient and/or caregiver..."
The rally in medical device stocks is evidence of this, with the iShares US Medical Devices ETF (IHI) climbing almost three-fold in five years!
One of the fastest-growing and largest use cases is in heart monitoring, where newer devices gather and transmit needed information directly to a care team for a diagnosis or monitoring after a hospital stay. According to the Centers for Disease Control and Prevention, 11 million patients in the United States have a heart rhythm disorder or arrhythmia. Diagnosis relies on tests such as ECGs (electrocardiograms) to determine the severity of the disorder. Initially, this includes an in-hospital ECG, but arrhythmias can be sporadic, and keeping patients in the hospital hooked to an ECG is unrealistically expensive and inconvenient for days or weeks at a time.
The most recent advancement in cardiac monitoring is Continual Mobile Cardiac Telemetry (MCT), consisting of around-the-clock patient heart monitoring through small unobtrusive leads on the chest and a small, phone-like device that the patient carries with them. The device transmits the data via cell signal to remote monitoring centers, or can be periodically dumped or sent back to a data center. The MCT space has grown with improved technology, similar to wearables, and doctors are increasingly turning to simple Remote devices as opposed to older, bulkier devices that require a carrying case.
Smaller upstarts have been huge beneficiaries. Biotelemetry's (BEAT) sole focus is remote cardiac monitoring, and since re-positioning the business a few years ago, is now doing $287 million in revenue from their cardiac monitoring services business. The company is valued at $1.1 billion in market capitalization, and has climbed from $2.50 to $35 in just five years - a 1300% return.
IRhythym (IRTC) did $99 million last year with their sole product, the Zio Device, just two years since their IPO. IRTC is up almost 200% and is loved by Wall Street, with a $1.2 billion valuation based on the growth opportunity in cardiac monitoring.
Biotricity (BTCY) just received FDA clearance for their first proprietary Mobile Cardiac Telemetry (MCT) system, called Bioflux MCT, making this only one of a handful of cleared mobile monitoring devices.
Bioflux was approved two months ago in December of 2017, and it's arguably a superior product to alternatives on the market. Bioflux is a small monitoring device that can provide up to 30 days of near real-time ECG monitoring and allows physicians to understand a patient's early symptoms of arrhythmia, to diagnose and provide proper treatment. Where other monitors require "dumping" their data to providers periodically or at the end of the evaluation period (like IRTC's Zio), Bioflux sends the data in real-time via cellular connection to remote monitoring facilities.
Launch Underway, BTCY Could Be Worth 200 to 300% More With Execution
The Bioflux launch is just getting underway and 2018 could be a banner year for BTCY as this takes off. The European company LifeWatch AG was acquired for almost $300 million last year, not long after their own MCT was approved, and it's now a part of Biotelemetry's cardiac monitoring portfolio. Quality technology like Bioflux may also not last long in a standalone company, but even nominal sales in the coming months could be transformative to BTCY.
The company is still undiscovered despite the tremendous upside potential at an $85 million market valuation. IRTC's $99 million in 2017 sales translates to a 15X Price-to-Sales multiple - even $20 million in sales for Bioflux in the coming year could justify a 250% move higher for BTCY! Cardiac monitoring was a $22.2 billion market globally in 2016 and is expected to reach $28 billion by 2021, thus the company doesn't have to peel off much market share in order to justify a much higher valuation.
With micro-cap stocks, the investment risk is always higher, and the company may never be able to compete against bigger companies despite the strengths of Bioflux. Biotricity should be considered a high-risk, high-reward opportunity, as an investment could be worth nothing at all if the company can't execute on their product launch.
Another facet that has yet to be noticed by the public markets is the company's goal of bringing additional remote monitoring technology to market - they bill themselves as a technology company, and R&D initiatives could bring new products to light in 2018. The company is already working on a second generation Bioflux device that incorporates AI right into the platform - another potential catalyst to send BTCY higher in 2018.
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