NEW YORK, March 13, 2019 /PRNewswire/ -- Kerrisdale Capital, a private investment manager, has published a new report explaining its short position in iRhythm Technologies, Inc. (NASDAQ: IRTC), a $2.3bn medical device company that developed the Zio heart rhythm monitoring patch. Since 2011, iRhythm has generated almost all of its revenue through billing third payors using a temporary reimbursement code. Kerrisdale believes that the Zio will likely transition soon to a permanent reimbursement code that will cut reimbursement rates by over a third. Additionally, the explosion in the Zio's utilization will result in red flags at CMS, CMS's key regional contractor, and third party payors, even without a coding change, which will likely also lead to significant cuts in reimbursement rates.
Beyond pricing cuts, iRhythm's competitors have improved upon Zio's diagnostic and reporting capabilities, providing customers with attractive alternatives. Studies show that Bardy Diagnostics' CAM patch is superior to Zio on key endpoints, while also providing a more flexible solution that appeals to a wider set of hospital and physician groups.
"Shares in iRhythm have reached nosebleed valuation levels, despite the looming reimbursement cuts and fierce competition that are likely to dramatically cut revenue growth," said Sahm Adrangi, chief investment officer of Kerrisdale Capital.
Given the encroaching threats on the company's main product, iRhythm has recently tried to diversify by extending its Zio patch into the real-time cardiac monitoring space with its Zio AT device. Kerrisdale's discussions with doctors and industry players reveal, however, that the AT has been a flop, given its inability to effectively compete with rivals' event monitoring and mobile cardiac telemetry offerings. With limited pricing power, minimal customer lock-in, future reimbursement cuts, and a limited TAM, iRhythm's current valuation features substantial downside.
The full report can be found at https://kerr.co/irtc.
Conference Call Schedule
Kerrisdale will host a conference call on Wednesday, March 13 at 11:00am ET to discuss the report on iRhythm.
To participate in the conference call, dial 866-834-3313 (domestic) or 409-981-0700 (international) and reference conference ID 7690368.
Kerrisdale Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 160804.
SOURCE Kerrisdale Capital Management, LLC