iRhythm sales are up more than 20% amid increasing Zio demand

Jun 11, 2023

August 3, 2023 By Sean Whooley

Shares of IRTC ticked up 5.6% to $103 apiece after the market closed on Thursday. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — closed the day down 0.8%.

At midday on Friday, shares ticked up more than 19%.

The San Francisco-based wearable cardiac monitor maker posted losses of $18.5 million in the quarter. That equals 61¢ per share on sales of $124.1 million for the three months ended June 30, 2023.

iRhythm recorded a more than $5 million bottom-line gain while remaining in the red. It posted sales growth of 21.6%.

Adjusted to exclude one-time items, losses per share came in at 43¢. That beat Wall Street forecasts by 35¢, while revenues topped expectations of $120.3 million.

iRhythm reported its second-highest quarter ever for Zio XT new account openings, plus growth across both Zio XT and Zio AT. Zio growth contributed to the sales uptick, partially offset by a decline in net average selling price. The company also announced that the Japanese Ministry of Health, Labour, and Welfare designated Zio for high medical needs.

“We delivered another strong performance during the second quarter as we realized continued balanced growth across both Zio XT and Zio AT and across multiple channels, building on the solid momentum we achieved earlier this year,” said Quentin Blackford, iRhythm president and CEO. “Revenue growth of 21.6% year-over-year was driven by increasing demand for Zio services as we continue to redefine the standard of cardiac care and demonstrate our unique value proposition to customers, patients, and payers.”

iRhythm projects revenues to grow by 18% to 19% in 2023, ranging from $485 million to $490 million. That marks a rise in the bottom half of the range, previously set at 17% and $480 million.

Analysts don’t think the outlook, which they view as conservative, relates to a recent FDA warning letter received by iRhtyhm. BTIG’s Marie Thibault and Sam Eiber maintained their “Buy” rating.

Beyond the quarterly financial results, a lot unfolded at iRhythm over the course of the three-month period.

In May, the company said it received an FDA warning letter involving the Zio AT mobile cardiac telemetry device.

The letter, made public shortly after the announcement, accused iRhythm of violations of the Federal Food, Drug, and Cosmetic Act’s rules for labeling, quality systems and medical device reporting. In at least two cases, iRhythm did not report patient deaths in the required 30-day window, and instead reported them the following year, the FDA said.

While the FDA said some responses and corrective actions from the company have been adequate, the agency had a long list of action items for the company.

This added to an investigation from the U.S. Justice Department. In announcing its first-quarter results in early May, iRhythm disclosed its third subpoena in more than two years from federal investigators. The company said that, in April, it received a subpoena duces tecum from the U.S. Department of Justice Civil Division’s Consumer Protection Branch. Company officials told analysts that they were fully cooperating. They said it was too early to speculate on the nature or timing of the inquiry.

Thibault and Eiber wrote that iRhythm provided a “largely positive” update on that issue. It received clarification on necessary labeling revisions that would allow Zio AT to continue marketing as a mobile cardiac telemetry monitor.

According to the analysts, iRhtyhm proposed enhanced design features to Zio AT to address focus areas of the warning letter. This may potentially require a 510(k) submission to the FDA, but that remains up in the air. The work to remedy this delayed the company’s planned Zio MCT efforts, though. iRhythm expects an FDA submission in the second half of 2024 and a likely market introduction in 2025.

The company designed Zio MCT to incorporate enhancements initially slated for a later generation. That includes the potential to go beyond a 21-day wear time.

Filed Under: Business/Financial News, Cardiovascular, Digital Health, Featured, Health Technology, MassDevice Earnings Roundup, News Well, Patient Monitoring, Wall Street Beat Tagged With: iRhythm, iRhythm Technologies