Wearable heart monitor company iRhythm
(Nasdaq: IRTC)
saw its stock fall today on news of additional FDA inspection issues and a surprise CFO exit.
IRTC shares were down more than 10% to $75.68 apeice by midday trading today. MassDevice‘s Medtech 100 Index was down half a percent. The disclosures, which came after market close yesterday, accompanied a Street-beating Q2 earnings report.
During an earnings call with analysts yesterday evening, CEO Quentin Blackford reported continued progress when it came to remediating two FDA warning letters from last year over the iRhythm’s Zio AT electrocardiogram (ECG) monitoring system. The San Francisco–based company in January submitted applications for two 510(k)’s to address FDA concerns: One is a catch-up for changes previously made to the Zio AT system, while the second covers design features and labeling updates. Blackford said the company this week submitted the first of its responses to FDA questions over the applications, with a second plan coming soon.
However, the transcript from Seeking Alpha has Blackford going on to say:
“With respect to the FDA, the agency was on-site at our San Francisco and Orange County facilities in the back half of July. The inspections concluded yesterday with several 483 observations noted. We are in the early stages of evaluating these and we intend to provide responses to the FDA in a timely fashion. At a high level, the observations were primarily focused on our quality system and regulatory compliance, including complaint handling and medical device reporting, risk analysis regarding the involvement of the company’s certified technicians to prepare the ECG reports in the CAPA process.”
Also yesterday evening, iRhythm announced that CFO Brice Bobzien is stepping down for personal reasons, effective Aug. 31. Bobzien, who is originally from the Midwest — alluded to the need to care for aging family members with health problems during the earnings call.
“Brice has been an outstanding leader at iRhythm over the past two years, making significant contributions to transform iRhythm’s finance organization during his tenure with the company,” Blackford said in a news release.
Daniel Wilson, iRhythm’s present EVP of corporate development and investor relations, will succeed Bobzien as CFO.
“Dan has a long history with iRhythm, advising the company on its initial public offering and then joining iRhythm in 2019,” Blackford said.
Analysts see the FDA issues and CFO departure as a distraction from good news at iRhythm.
Truist analysts saw the new 483 observations as benign. They especially noted Blackford’s report that iRhythm remains on track to follow up on the two expected Zio AT clearances with a 510(k) submission in late 2024 for the next-gen Zio MCT.
The Truist analysts — as well as analysts at BTIG and Needham & Co. — kept their Buy rating on IRTC shares but lowered their price targets.
Said Marie Thibault and Sam Eiber at BGIT: “While IRTC’s fundamentals remain robust—strong volumes, impressive margins, relatively controlled spend—we think this FDA update may weigh on shares near-term.”
iRhythm lost $20.1 million, or 65¢ per share for the quarter that ended June 30, 2024, compared with a loss of $18.5 million, or 61¢ per share during Q2 2023. Revenue was up more than 19% to $148.0 million. The result beat the Wall Street analyst consensus of a loss of 89¢ on sales of $146.2 million.
The company now expects full-year revenue to grow 18–20%, to $580–590 million, with adjusted EBITA of 3.5–4%. The projection is improved from iRhythm’s previous forecast of sales growth of 17–19%, to $578–588 million, with adjusted EBITA of 3–4%.
“Second quarter revenue growth of 19.3% year-over-year was driven by continued uptake from new accounts opened in the prior twelve months but also expansion of the ambulatory cardiac monitoring market by pushing deeper into primary care channels,” Blackford said. “Zio’s value proposition to address the quintuple aim of healthcare is clearly resonating with providers in integrated delivery networks as well as large, national primary care accounts.
