iRhythm Technologies Inc

iRhythm Technologies Inc (NASDAQ-GS: IRTC) is a US-based digital health Company. The Company is engaged in the business of developing and commercializing solutions integrating medical expertise, analytics, patient data and biosensor technology.

Investment Highlights - iRhythm Technologies Inc – Avoid at USD 175.37

• Despite the improved financial performance in Q3 and 9M FY2020, the Company needs to manage operating expenses more effectively unless it will further hamper profitability in the near future.
• As per valuation metrics, EV/Sales multiple of the iRhythm Technologies Inc is currently higher as compared to the corresponding multiple of the Healthcare Equipment & Supplies industry, reflecting overstretched valuations.
• In the last three months, the Company delivered a negative return of ~25.64% and delivered lower returns compared to the benchmark Index.
• From the technical standpoint, shares were trading below the support level of 20-day simple moving average prices (USD 227.72), which reflects a downtrend in the stock and can move down further.

Key Risks

• Failure in cybersecurity and a critical data breach could hamper the operation as well as the reputation of the company.
• The Company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.

Financial Highlights – Q3 & 9M FY2020 (30 September 2020) (released on 6 November 2020)

(Source: Quarterly Report, Company Website) 

• In the third quarter and nine months period of the financial year 2020, driven by higher revenue from sales of Zio service, the net revenue increased to $71,944 thousand and $186,357 thousand, respectively.
• The Company managed to reduce net loss in the Q3 FY2020, reflecting higher revenue and slightly lower operating expenses.
• The cash and cash equivalent as on 30 September 2020 stood at $95,336 thousand (31 December 2019: $20,462 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance in the third quarter and nine months period of the financial year 2020. Both the revenue and bottom-line performance improved, while profitability margins remained in the negative zone. Despite the improved performance, the Company needs to have more control over its operating expenses unless it will have an adverse impact on financial performance in the near term. IRTC has improved liquidity position along with a well-positioned balance sheet. The Company also faces foreign exchange risk but did not face material impact till now. The stock made a 52-week low and high of USD 56.54 and USD 286.19, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on iRhythm Technologies Inc at the closing price of USD 175.37 (as on 4 February 2021), and with support from few catalysts needs to be evaluated at a later stage such as new contract signed and focus on executing business objectives.

Vyne Therapeutics Inc

Vyne Therapeutics Inc (NASDAQ-GS: VYNE) is a specialty pharmaceutical Company. The Company is focused on the development and commercialization of proprietary therapies to address dermatology related issues.

Investment Highlights - Vyne Therapeutics Inc – Expensive at USD 2.88

• The Company generated revenue for the first time in the financial year 2020, while remained in the development stage and has shown an increased loss.
• As per valuation metrics, Price/Book Value multiple of the Vyne Therapeutics Inc is currently higher as compared to the corresponding multiple of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• In the last one year, the Company delivered a negative return of ~42.86% and delivered lower returns compared to the benchmark Index.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 75 level), which means the stock price could decline in the short term.

Key Risks

• The covid-19 outbreak has resulted in disruptions in clinical trials which will have a negative impact on the Company’s performance.
• Any failure to meet the quality and comply with regulatory laws could lead to increased cost and even recall or suspension of products.

Recent News

On 1 February 2021, Vyne Therapeutics announced that it had received approval from the FDA (US Food and Drug Administration) to include new information for AMZEEQ^® in the product label.

Financial Highlights – Q3 & 9M FY2020 (30 September 2020) (released on 5 November 2020)

(Source: Quarterly Report, Company Website) 

• In the third quarter and the nine months period of the financial year 2020, driven by higher product sales, license revenues and royalty revenue, the revenue increased to $3,269 thousand and $16,707 thousand, respectively.
• Due to higher operating expenses, the operating loss and the loss of the period increased in the Q3 and 9M of the financial year 2020.
• The cash balance as on 30 September 2020 increased to $72,956 thousand (31 December 2019: $43,759 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the third quarter and the first nine months period of the financial year 2020. The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities. VYNE generated revenue for the first time in 2020. The Bottom-line performance has declined, while profitability remained in the negative zone. Vyne Therapeutics operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and reducing its costs to preserve cash. The stock made a 52-week low and high of USD 1.00 and USD 5.84, respectively.

Based on the factors as highlighted above, we believe the stock of Vyne Therapeutics Inc is “Expensive” at the closing price of USD 2.88 (as on 4 February 2021), with support from few catalysts needs to be evaluated at a later stage such as benefits of started commercial product sales.

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