I think we're live. Yep, okay. Great, thanks everyone for coming to the conference. We're pleased to have iRhythm Technologies here with us for the fireside. Dan Wilson, the new CFO of the company, and Stephanie Zhadkevich, Director of Investor Relations, will be doing the Q&A with us today. We've got a handful of questions here. I believe you can submit a question through this iPad. I haven't got any yet today, so not necessarily expecting any here, but we've got a full list of questions to go through. Maybe Dan, if we could start, you know, Q2, obviously, you know, moving into the CFO role here, you've been with the company, I think, over five years or so at this point.
A lot during that timeframe has changed for better and in some cases, some challenges that arose along the way, so from a high-level view, could you just talk a little bit about, you know, maybe how that story has evolved over the past several years and kind of when you look over the next five, what you're most excited about, you know, in this role and for the company?
Yeah. Appreciate the question. I'm gonna apologize in advance for my voice. I've been out on the road with investors quite a bit, last couple weeks, so my voice is barely hanging in there, but I hope to get through this okay. So I think what's been consistent in the five years is iRhythm, you know, a pioneer and a disruptor in the market that we're serving, and I think some of the challenges that have come along the way are a result of being a pioneer and a disruptor. We're kind of redefining how care is delivered in this market segment, and, you know, that comes with its own challenges. It's challenges that we accept and take, you know, full responsibility and committed to working through, but the opportunity remains.
I have tremendous excitement in terms of what's ahead of us. I think the opportunities are completely, you know, numerous, and that's always been the case with iRhythm. I think over the last few years here, we've brought the leadership team in, the mindset, to really go after those opportunities. So, incredibly bullish about the future, see a tremendous amount of growth opportunities ahead of us, and then more and more focused on profitability to make sure we're driving that growth profitably.
The competitive landscape over the past five plus years, I think, has changed pretty significantly with some of the, you know, competitive pieces from other devices out there, I think narrowing the gap between what you have and what was there in the prior five-year period. And the company's held on to a very significant portion of that market, despite improvements in the competitive space. And one of the biggest questions that we get from investors is around even with improving competition or intensifying competition, how you've been able to maintain that kind of, you know, competitive share, specifically in the extended wear cardiac monitor market.
So curious on what you see as the biggest competitive, you know, positioning and maybe more on the ground level in the near term, if at all, there's been any change, you know, recently in the competitive market?
Yeah. So we continue to feel really good about our competitive positioning. In fact, we believe we took share last year in the long-term, continuous monitoring segment of the market. Again, we were the pioneer in that market, so started with 100% share at one point. We estimate last year we were about 70% of that market, and again took a point or two of share last year. So I'd say yes. You know, there's been changes within the competitive landscape, but we're also not standing still, right? We continue to invest in all aspects of our innovation stack, whether it's the AI or the hardware, the form factor. And we put some data out yesterday that hopefully folks saw on the new form factor Zio Monitor.
The tagline that we used when we launched that last year was, "The best just got better." And Zio Monitor replaced Zio XT, which was already a best-in-class device. So, again, you know, we're innovating really against ourselves, and trying to maintain that high competitive mode and feel really good about how we're positioned relative to our competitors.
You had the HRX data at the HRX conference yesterday. Camelot came out a few years ago, and that's been something that's built up the clinical data, kinda aspect of the company. I guess more on the ground level in your view from a contracting perspective versus a clinical data perspective, what's the bigger kind of piece to why accounts go with and or stick with, you know, an iRhythm device versus what else is out there?
Yeah, I think, you know, the brand recognition that we've built with Zio, again, being the pioneer, and the market leader, I think that comes with, you know, a lot of, great recognition from our customers that, you know, we are the innovator in this space. You mentioned the Camelot data. I think that is... That's been a very important set of data, for our commercial teams, both driving penetration with providers, but also establishing Zio with payers. That was... I jokingly refer to Camelot as a drop-the-mic type, clinical data. It was over two hundred and eighty thousand Medicare patients, clearly demonstrating, Zio as the, best-in-class from a diagnostic yield standpoint or retest rate, as well as hospital utilization. So pretty profound data.
Our commercial team has really leveraged that incredibly well over the last year since that's been out in the market.
... Last week, I think the company announced the licensing deal, with another company out there. Pulse oximetry, the non-invasive BP accelerometry, capabilities of this new technology. One of the first questions we actually got was if at all this is building out or has anything to do with the ongoing challenges with the warning letter and the 483 , and my initial reaction was probably not. So curious on your thoughts on that. And the second piece, you know, it seems like a little bit of these capabilities are more geared toward, you know, something that could be done in the inpatient setting. And so, you know, curious what your thoughts are on why this deal happened and what the opportunities are out in front with the licensing deal?
Yep, a few different questions in there. But yes, first and foremost, this was by no means, you know, reactionary to what we're going through with the FDA. We've been in conversations with BioIntelliSense, our partner, for over a year and a half, and ultimately got to a transaction that we announced last week. We're incredibly excited about what that means for the long-term, you know, growth of our business, and we can talk about how we're thinking about that. But first and foremost, our focus remains on remediating the FDA, which I'm sure we're gonna talk about.
This, I think, is a unique transaction in that we can continue to make progress towards our long-term goals while leveraging outside partners, and therefore keeping our internal resources focused on, you know, what's in front of us with the FDA, and that's, again, number one corporate priority. We wanna make sure we're putting all resources we can against those efforts, and we are, but we're building a business for the long term, and we think the partnership with BioIntelliSense is gonna set us up incredibly well to grow the business over the next, you know, five, ten years. The way I like to think about it, you know, to this point, Zio is essentially ECG analytics. We're collecting the ECG signal from the patient and delivering clinical insights based on that ECG signal.
We believe we can continue to deliver more and more clinical insights purely based off of ECG alone. But as you bring in additional sensing parameters, you mentioned SpO2, non-invasive blood pressure, respiratory rate, other vital signs, the more data you're collecting, the deeper and broader the clinical insights you can deliver for patients. So we think it's gonna really open up things that we can do. I would say first, you know, continuing to elevate that competitive positioning within our core market, you know, ambulatory cardiac monitoring, but it does open up opportunities in sleep, other disease states that are interesting to us.
Yeah, I was just gonna ask on that. It seems like a couple of these pieces could be what is needed to open up the OSA market, but there still are other segments to monitoring for OSA that are required to fully do that. So, just wondering how we should think about these specific products opening up the door to OSA. There's still more that I'm guessing you have to do there. Again, I asked about the inpatient opportunity. Is that something that this is opening the door to, if you think about what's being reimbursed for today with XT and AT versus the new capabilities you have?
Yeah. And to be clear, the license is specifically for ACM, ambulatory cardiac monitoring, as well as, sleep, at least the exclusive aspects of the license. So that will remain our focus. We do think in time, this has the ability to, you know, get us to the path of a home sleep test. That isn't, you know, immediate near term in terms of our product roadmap. Again, our primary focus is remediating the FDA, getting Zio MCT on file and ultimately cleared, and then think about the additional sensing parameters coming onto the platform as that next generation beyond that.
Okay. Just sticking maybe a little bit on this point of the future of connected care, at the Analyst Day a couple of years ago, you talked about OSA being one, right? Hypertension, heart failure as monitoring, you know, capabilities that the company could move into. When you think about the company going from a company with a cardiac diagnostic device to a platform company with monitoring capabilities, how do you think that we should be thinking about the evolution to get to that point? And then when you look beyond 2027 , what does iRhythm look like five years from then?
Yeah, I think that's a great question. I think, yeah, the licensing transaction we announced last week, I think, does give insight into how we're thinking about it. Again, by bringing in these additional sensing parameters onto the platform, that does start to open up the insights we can deliver in heart failure, hypertension, et cetera. So we haven't mapped out exactly the cadence, you know, from here to there, but we do, you know, we do think this opens up opportunities meaningfully for us. We were working on, you know, initiatives internally, to bring these technologies onto our platform, but saw the opportunity to accelerate those efforts by licensing, you know, with BioIntelliSense, and again, keeping our internal resources focused on FDA matters.
On the Warning Letter, the Form 483, two somewhat separate pieces that you're working on now. It sounds like there's been some discussion in the past couple of weeks around updates since the Q2 call. Sounds like there's some different considerations around the CCT, so can you kinda level set us on what's happened since the Q2 call?
Yep. So we. The most recent set of Form 483 observations, we did receive those the day before our Q2 earnings call. At that point, we were still, yeah, really digesting it and thinking through what, how we would respond. We had fifteen business days to respond to those observations. Our responses went into the FDA on the 21st, August 21st, and I'd say, you know, the right way to think about that response is, we were very clear in terms of our commitment to resolving these matters, taking the matters, you know, incredibly seriously. This is our number one corporate priority, and we're putting all the resources behind it that is required to get us through it.
So we, you know, we believe that came through in our letter to the FDA in terms of our commitment to it. We're bringing in a new head of quality to oversee these efforts. That individual will report directly to Quentin. And again, mention this is our number one corporate priority. Doing everything we can to make sure that the FDA sees that we're committed to a you know culture of quality, and we're gonna work as hard as we can to remediate those observations.
So the August 21st submission was specifically for the 483, correct?
Correct.
The FDA now has a thirty-day rev-
There's no specific timeline, in terms of how they'll or when they will get back to us. Generally, you know, on average, you see the FDA respond within, call it 30-60 days.
Okay. On the warning letter, I think it was maybe the week before earnings, you submitted the first package for the 510(k) catch-ups. I believe the week after was the expected submission or the second piece of the 510(k) catch-up. So where do we stand today with the 510(k) submissions?
Yep, your time, your timelines are right there. There has been some interaction with the FDA in terms of questions back that we've responded to and are responding to. Feel like we're down to the small strokes. These are, you know, small, kind of clarifying type questions, and we've been responsive to that. So, there's engagement with the FDA from that standpoint, and the process continues to move along. We continue to believe September, October is the right time frame to think about the clearances for the two 510(k)s.
Okay. And on the 510(k)s and the 483s, but the specific observations that you have since submitted. We got questions around the number of observations that were in there, the general strokes of what these things are. When you think about this relative to the other, you know, 483s.
Yeah
... in the past, how can you paint that picture for us?
Yep. So there were three observations in two Form 483s. So one at our Orange County facility, one for our San Francisco facility, three observations each. I would say, you know, generalized, these are more around processes and procedures related to our quality management system. A big underlying kind of theme within those observations is whether the certified cardiac technicians are part of the device and should be included under the quality management system accordingly. We've had, you know, the position that CCTs are separate from the device. I think industry also has that belief, and that's, you know, essentially how the device was originally cleared. The FDA has more recently taken a different position that the CCTs should be part of the quality management system.
Ultimately, if that's where the FDA wants us to go, we'll go there and see no problems with that. It will take, you know, essentially time and resources to rebuild the Quality Management System to now encompass the CCTs, and it's making sure our processes and procedures reflect that. You know, how we handle complaints coming in, the risk analyses that we're doing, all be inclusive of the CCTs. So, we'd have to write those processes and procedures and, you know, and document that and then show that those controls are in place and we're following those processes.
The 510(k), right, or sorry, the FDA warning letter associated with the 510(k), in a sense, you have the 483, which are technically two or three separate things. What are the chances that the same person or the same group within the FDA that is working on the 510(k)s is also connected with the 483, and therefore, there is a thought that, well, let's not do anything with the 510(k)s or anything with the next gen submissions for MCT until we have the 483, you know, kind of resolved as well? What, what's the-
Yeah
... interconnected workings of those different groups?
Yeah. Obviously, we don't have full visibility into everything that, you know, is going on at the FDA. But a couple comments there. One, there are two separate divisions in the FDA in terms of the, you know, review part of the house versus the enforcement side of the house. But I'd also point out, keep in mind, the two 510(k)s, the catch-up 510(k) and the new 510(k) for the design modifications that the FDA asked us to incorporate into the device, were in response to the initial 483 observations and warning letters. So, by extension, those two 510(k)s are part of the remediation efforts from the original 483 observation. So from our standpoint, you know, our expectation is the FDA will continue to move those 510(k)s forward.
Again, as I mentioned earlier, you know, I've had some engagement back and forth with the FDA since our-
Yes
... most recent set of responses. So have got no indication that those would be delayed and continue to feel good about the September, October timeframe.
Once the September, October timeframe comes with the 510(k) catch-ups, how quickly can you submit MCT?
Yeah.
And what's the review cycle beyond that?
Yep. So that submission is still coming together. A lot of our, you know, internal resources are focused on AT and getting that cleared. So it won't be the next day that MCT submission goes in or the filing goes in. We continue to believe by the end of the year, that filing will go in.
Okay. And then the review cycle from the FDA, once the submission is in, is it 180 days? Is it... What, you know, what that looks like?
Yeah, so we've guided to second half 2025 as a launch, clearance and launch for Zio MCT. If that goes in end of year, take the midpoint of second half next year, that's nine months. It's, you know, FDA timelines are difficult to predict, particularly in the circumstances that we're dealing with here. But that's generally kind of the right way to think about it.
And you—I think with MCT again, or well, I guess with XT, right, or Monitor, 70+% share in that market, 7% share in the market that MCT will address. How quickly and, you know, do you think you can flip from-
Yeah
7% share to something closer to 70%? Not necessarily saying that it should go to 70%, but how quick can you, you know, double that-
Yeah
Kind of market share you have today based on the installed base with XT or Monitor?
Yeah. Yeah, we think there's real meaningful opportunity with Zio MCT, which is why we're excited about it, why we wanna, you know, work through the issues with the FDA as quickly as we can and get to Zio MCT. Zio AT is a good product, and we are taking share in that market. It grows, you know, above corporate averages, but it does have some, you know, competitive gaps that Zio MCT begins to address. So we do think there's meaningful opportunity to really start to close that gap between the 7% share in MCT versus the 70% long-term continuous monitoring. If you think about it, it's generally the same prescriber base. You know, cardiologists and EPs.
Put primary care aside, which is growing as a percent, you know, overall percentage of our business, but within cardiology and electrophysiology, that's the same prescriber that is prescribing MCT. So we're excited about it, wanna get it on market, and believe that's gonna be a nice inflection point to grow our share in the MCT space.
It sounds like last week, Quentin talked about some interquarter trends in the third quarter. Strong July, softer earlier than expected August. You know, expecting volumes to pick up maybe in September, I think. What was the comments? Can you remind us of what the thoughts are, you know, or what the messaging is on Q3 trends?
Yeah.
I know we're a week beyond where you were last week, but any thoughts on how that September pickup has-
Yep
progressed so far?
Yeah, we were asked about trends that we're seeing in Q3, so we talked about, you know, a bit of a softer, late July, early August. We always see summer seasonality in the Q3 period and we saw that this year. You know, volumes were a bit light to expectations in late July, early August. We have seen volumes pick up nicely in late August into early September, and that's, you know, typical seasonality for us, as people return back from vacations and from schools getting back and everything else, so we're seeing that now. In terms of revenue recognition for us, right, those, the patients that are essentially getting registered today and starting the service, they're right on the cusp of whether or not that will be a Q3 revenue, device for us.
By the time they do their 14 days of wear, return the device back to us, we deliver the report, which is what triggers revenue recognition for us. So, yeah, trends in the business are good. We reiterated full year guidance last week, part of the BioIntelliSense announcement, but gave those trends-
Okay
-that we're seeing with Q3.
I think last year, you talked about the unseasonably, you know, hot, hot summer and ended up kind of beating the numbers-
Mm
... that were out there for Q3 last year. When you think about the comments this year versus maybe some of the comments, any difference in the way that you're thinking about the third quarter relative to the hotter summer last year at all, or?
I think you're picking up on the theme that Q3 is always a tricky quarter for us, given it's, you know, back-end loaded. You see the summer seasonality. Warmer months do lead to, you know, earlier drop-off. The Zio Monitor data we announced last or yesterday, excuse me, you know, that is showing much improved wear times and lower early wear termination. So, yeah, that's a side point but, again, feeling good about the business. We reiterated guidance last week. Q3 is just a bit tricky for us.
And the reiterated guidance, remind me, is that also reiterate the EBITDA kinda margin guide you put out there?
It was with the exception of the transaction that we announced.
Right.
There is a acquired in-process R&D expense that will hit the P&L, but absent that, we reiterated guidance on EBITDA.
Okay. We talked a little bit about OSA as a market opportunity. Asymptomatic is one that also has been out there. I think we saw the GUARD-AF data a couple of weeks ago-
Yep
... or so. Trial stopped early, right, during COVID, so there's the implications there, but it didn't seem like the primary outcome was achieved in that trial. But you still have had pilot phases of accounts using the device for asymptomatic accounts moving beyond the pilot phase to revenue recognition, it seems like. So when you think about the data that we saw from GUARD-AF versus the opportunity that you have with asymptomatic and what you've been seeing so far, how do you kind of balance the level of investment in that opportunity, and how excited, I guess, are you at following the data?
Yeah. Yeah, so yeah, GUARD-AF was unfortunate. It was. That was the trial designed to be the one that, you know, sways USPSTF to a positive recommendation. It was powered for 52,000 patients, to show statistically significant improvement in stroke. Only ended up enrolling 12,000, so it was nowhere near that 52,000, and therefore, didn't see the improvement in outcomes. I would say, you know, USPSTF positive recommendation is really upside from where we're at today. We are seeing really good traction in the Medicare Advantage space. We talked about primary care. There's a number of primary care groups that are at risk and capitated for their, for the patient lives, and are taking the step into proactive screening. They see how easy it is to put Zio on patients.
They see the mSToPS data in terms of its impact on healthcare resource utilization, and they are proactively taking, you know, taking that step. So we think there's a lot of growth here, even without the USPSTF, and we're really just getting started there.
Okay. The Signify deal last year, I believe it was, was an opportunity, right, to get into something bigger, right, in the asymptomatic market. I think there was something around two hundred and fifty thousand, you know, patients that are currently receiving some type of preventative service, whether it's something that you could offer or something else that they have out there. Have you sized up the opportunity of Signify, and what's the progress been like with that so far, and the potential contribution from that, you know, into-
Yeah
... 2025 and 2026?
Yeah, we have not ourselves sized up that opportunity. I think there has been some notes that have gone around in terms of looking at Signify and patients that they serve on an annual basis and trying to quantify what that opportunity is. Our focus is on executing on the pilot in front of us, getting that to a full commercial program, and then we'll... Yeah, then we'll start to factor that into guidance and provide visibility around that. We did have the pilot started with one state, state of Illinois. It has now expanded into three additional states, New York, New Jersey, and Connecticut, and seeing, you know, really good outcomes there in terms of that initial pilot. So have a lot of confidence that's moving in the right direction.
Still in pilot phase, though, and don't wanna get ahead of ourselves. So wanna see that, you know, turn into a full commercial program, and we'll update and factor that in at that time.
When a patient receives the device through the pilot phase, iRhythm is getting paid for that, I think there was original view that it would be given out and offered, but you're definitively getting paid when there is a asymptomatic patient wearing a device?
Correct.
Yeah.
Okay. Not necessarily going back to the Warning Letter, but some of the other overhangs that we've kind of heard on is this MDR database stuff, right? Which popped up a couple of months ago or so, and we actually had a doc dinner in Boston a couple of weeks ago, where we asked them pretty much about all the different devices out there, whether or not there's any difference in adverse event rates between you guys, between the other four competitors that are out there. And the view, generally, was that no devices really have any difference in adverse events than what you see with an iRhythm device.
Obviously, it's an N-of-1 , but you look at the database, right, and there's a higher amount of data for you guys than other competitors. So, remind us again what your view is on why that's there, how you're kind of working through that, if that's impacting volumes at all, really, from a physician perspective -
Yeah
... that'd be helpful.
That's an interesting data point, and I appreciate you sharing that. Yeah, if you do the numbers, the MDRs that we reported, I think in the month of June, was greater than the rest of industry for the entire year. So I think it's... You know, we are going through the situation with the FDA and believe we're kind of the first of the industry to go through this, and I think there's just a recognition that it's, you know, there's a lot of gray area here with the FDA in terms of how to regulate this space. We have been, you know, taking a conservative approach as it relates to MDR reporting. Ultimately, I think we'll get aligned in terms of what the right balance is, and ultimately, that should be applied consistently across the industry.
I would say our commercial teams have done a tremendous job navigating through this, controlling the message, being in front of our physicians, and being transparent about, you know, what we're doing. Really don't believe it's had a commercial impact to this point. We did put a customer advisory notice out late 2022 that did have an impact on AT at that time, but has, you know, seen a nice rebound since then. But ultimately, it will be helpful to get through this as well and get the overhang removed, and we're focused on doing that.
End of August, international approval in several markets out there. What I guess is contemplated in the guide for that, how quickly do you think you can expand to those markets when you think about what the footprint is out there? I mean, do you need an IDTF in every single country that's out there? How do you think about contribution from international now that it's finally getting to a point where it ramps?
Yeah, we're really excited about the international expansion opportunity. Within the four countries that we announced, Austria, Switzerland, Netherlands, and Spain, it's about a million and a half patients per year who could benefit from Zio monitoring. We have not factored anything in necessarily from those countries in 2024, but we believe the more material benefit will be in 2025 and then beyond, and very similarly, Japan, we are also very excited to be moving along with the process there. We're expecting kind of regulatory approval imminently there, and then we'll move on to reimbursement negotiations there, and a commercial launch in early 2025.
Again, about 1.6 million ACM tests per year that are almost exclusively all Holter, and we have a high medical needs designation in the Japanese market that is very much Zio specific, so really excited about that opportunity.
I know we're out of time, but one last one. Just when you laid out the now to 2027 guide or a couple of years ago, 2027, international was, of course, a piece of that. The approval that you have in that market, would you say that the international segment is what gets you to the 20%? You know, does it get you above 20%, the contribution that you have? How do we think about that relative to the 20% top line guide you have in 2025, 2026?
I think there, there's multiple levers there. International, I think, is certainly one of them. It really has not contributed to growth to this point. But to Stephanie's point, getting Japan launched early part of next year, the four additional European countries, that will start to contribute to growth. Of course, Zio MCT is gonna be a nice contributor as well. I would say what we're seeing in primary care and this, you know, shift to undiagnosed or asymptomatic proactive screening, has been a nice contributor, and we expect it to continue to be a contributor as well, and that was not factored into-
No real change to the linear 20% top line growth, 15% adjusted EBITDA margins by 2027 guide.
Correct. That's still how we're thinking about it.
Okay. All right, well, that's it for us. Thank you.
Appreciate it. Thank you.
Thank you.