Heart disease diagnostic patch maker’s price pulsating way off the scale

If you’re over 65 years old with a medical concern about potential heart disease you have likely worn a Holter heart monitor to see if you have arrhythmia. The Holter heart monitor records and stores information from the body that is interpreted by a specialist to diagnose what, if any, heart-related disease you might have.

This is a powerful and valuable technology to diagnose illness. But the Holter heart monitor gets an A for inconvenience. Strapped to your body, the little black box dangles in the air and in your way. This week’s Bizworld column features a company that invented a replacement for the Holter heart monitor. iRythm of San Francisco has developed a patch trademarked Zio that replaces the Holter monitor and competing test devices with more convenient monitors and shows much better success rates.

In tests on 146 patients the Zio patch outscored the Holter device by far. The Holter device found arrhythmia in 42 per cent of the patients. The Zio patch found arrhythmia in 66 per cent of the patients. The gap in diagnosis isn’t as simple as it sounds. The Zio patch is worn up to 14 days. The Holter monitor is only worn for 24 hours. Anything longer is just so inconvenient.

The tests found a large portion of positive diagnoses occurred after 48 hours of wearing the Zio patch. A more recent study with the patch testing for silent atrial fibrillation on 5,214 Aetna Insurance patients with risk factors revealed new diagnoses in 6.3 per cent of them compared with 2.3 per cent under routine care.

More interesting, the patch found four per cent in the trial had other arrhythmias. iRythm revenues have increased rapidly from $21.7 million in 2014 to $98.5 million last year. Expenses and research have grown fast too.

In those four years, the operation has losses totalling $78.5 million.

The company predicts revenues between $126 million and $131 million this year; expenses between $124 million and $129 million.

That leaves no room for any profit.

During 2018 the focus is on obtaining contracts with medical insurers to use the Zio patch instead of the Holter monitor or competing tests. Persuading health care insurers to sign on the dotted line will not be easy.

The technology seems better with two-thirds more success. But the cost per patient, by iRythm’s own admission, is between two and three times more than the Holter and one other competitor.

On a per diagnosis cost basis, Zio is competitive. A sharp sales team is needed to convince penny-pinching insurers to adopt the patch

While the technology appears to have a good shot at capturing a large share of the annual $1.4 billion U.S. market, nothing is certain.

Investors have bid the stock price up to $63.14 US with a company market value of nearly $1.5 billion. At 15 times annual revenues the price is rather rich unless you like a big gamble.

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