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BTCY under $2
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Biotricity (OTCQB:BTCY) is a company most of you have never heard of, but is poised to disrupt a segment of the cardiac medical device space. Though small, it already has nearly two years of eye-popping sequential and annual growth rates. But that's just the beginning. The company has publicly guidedfor 25-40% sequential growth and continued triple digit annual growth for the next couple years, at least.
As if that growth is not impressive enough, the guidance only includes the expansion of their initial commercialized product, Bioflux, a mobile cardiac telemetry (MCT) device. Yet, in January of this year the company submitted a 510(K) FDA filing for another cardiac device, Biotres, a holter/extended holter device. This device will have a higher total addressable market (TAM) than Bioflux, and the CEO noted on the last conference call that Biotres should quickly add 20-30% more to the top line.
As mentioned, BTCY is currently focused on the cardiac market, most especially the MCT market, which is used primarily now for high-risk cardiac patients. The MCT devices and technology monitor high-risk patients in real time so that if a patient has an adverse cardiac event, such as arrythmia, the physician and patient are immediately alerted to address the problem at that time. Using a holter device, which is usually used on low to medium-risk patients, the adverse event would not be detected until the patient's next physician visit. If the patient had an adverse event while wearing the holter, the physician would not know this in real time, and the patient may have severe damage, or death, from the event not being timely-treated.
Despite the differences between an MCT and holter device and technology, the use and payment process for these devices follows the same pattern. Namely: (1) the doctor prescribes the patient to wear the device for a given period of time, e.g., seven days; (2) the patient wears the monitor for that time; (3) the doctor is paid a nominal fee for reading the device's report; (4) the medical device/clinical company is paid around $800 per use of its device; (5) if insurance does not cover all $800, the device company will likely bill the patient for the remaining balance. So, in this standard model, the doctor is paid a nominal reading fee and the patient may be billed for an amount not paid by their insurance.
BTCY's model is different. In this model, both the physician and the patient benefit. Here's BTCY's model: (1) the doctor purchases the device from BTCY; (2) the doctor prescribes the patient to wear the BTCY device for a given period of time; (3) the patient wears the monitor; (4) the doctor is not only paid the nominal reading fee, but also can bill the $800 per use of the device; (5) the doctor often chooses not to bill any difference between the $800 and the amount paid by insurance because they have a long-term relationship with the patient; (6) the doctor pays BTCY a technology fee for use of their technology in the device.
As you can see, in BTCY's model, the doctor benefits by being paid significantly more money; the patient wins by possibly being billed less, but certainly not being billed anymore; and BTCY wins not primarily through the device sale, but through the reliable, recurring, and high margin revenue from the technology fee. While BTCY sells the device once, the technology fee will repeat several dozen times per year for that one device. Notice the only ones who lose in this model: the device/clinical companies who currently cut out the physician from any meaningful payment in this process. For cardiologists and electrophysiologists who regularly prescribe MCT devices, using BTCY's product and technology (which is the most up-to-date) and billing model (which allows them to make significantly more money) seems like a no brainer. In fact, when I contacted a close friend of mine who himself is an electrophysiologist, he immediately asked me to put him in touch with the company (he lives in one of the 30 states where BTCY currently does not have a salesforce presence). Perhaps this is why BTCY is seeing eye-popping growth rates with its Bioflux device and subsequent technology fees.
While BTCY has plans to expand well beyond the adult cardiac monitoring market, I will focus on more near-term catalysts and expansion. I have already mentioned the Biotres product and technology that management indicated would quickly add 20-30% revenue increases. In addition to those, there are two other exciting developments underway.
First, is BTCY's Bioheart, a direct-to-consumer (DTC) product expected to be launched in June 2021. According to people familiar with the company, BTCY is still doing a full market assessment to see how best to market this product. In any case, Bioheart is essentially Bioflux for non-medical-professional use. I believe Bioheart could have significant appeal to people generally concerned about heart health due to family history, etc., as well as to athletes and "gym rats" who want to monitor their heart (full disclosure: I am personally quite interested in Bioheart for both of these reasons).
Second, according to its presentation from the LD Micro conference in December, the company is working on an app for cardiologists and patients to use to better monitor the patient's heart health between doctor visits. Beyond that tease, the company has not spoken publicly about the app, but they did show on that presentation that the TAM is approximately 10 times as large as the combined TAM for Bioflux and Biotres.
BTCY'S STRENGTHS
1) Gross margins: current gross margins are just a tick under 50%. While that is good, it is nothing compared to where gross margins should eventually land. The company has mentioned that margins will expand as one-time device sales become a smaller portion of revenue, giving way to the higher margin TaaS fees. Based on my own research, I would expect gross margins to easily hit the high 50% to low 60% range by the end of fiscal 2022. Long term, the company will likely eventually settle with at least mid-60% range gross margins.
(2) Churn: So far, BTCY has nearly a 100% customer retention rate. This bodes well for the company because it speaks not only to their effectiveness and good relationships with customers, but also to their visibility into future revenue run rates.
(3) The Board of Directors and management team are experienced. In addition to strong corporate and medical device commercialization experience, the team has members familiar with raising capital for new companies and taking them public. Although BTCY is obviously already public, this experience could help with this final strength I wish to mention.
(4) Uplisting to a Major Exchange: BTCY is working to be listed on a major exchange sometime in calendar year 2021. Based on my review, I believe the only necessary hurdle to being uplisted is the share price. From what I will show in the "Valuation" section, I believe that issue will take care of itself as BTCY continues to execute. But beyond that, being listed on a major exchange will provide a tailwind with analyst coverage being more likely, and additional institutional interest given that some institutions have restrictions from purchasing OTC stocks.
1) Gross margins: current gross margins are just a tick under 50%. While that is good, it is nothing compared to where gross margins should eventually land. The company has mentioned that margins will expand as one-time device sales become a smaller portion of revenue, giving way to the higher margin TaaS fees. Based on my own research, I would expect gross margins to easily hit the high 50% to low 60% range by the end of fiscal 2022. Long term, the company will likely eventually settle with at least mid-60% range gross margins.
(2) Churn: So far, BTCY has nearly a 100% customer retention rate. This bodes well for the company because it speaks not only to their effectiveness and good relationships with customers, but also to their visibility into future revenue run rates.
(3) The Board of Directors and management team are experienced. In addition to strong corporate and medical device commercialization experience, the team has members familiar with raising capital for new companies and taking them public. Although BTCY is obviously already public, this experience could help with this final strength I wish to mention.
(4) Uplisting to a Major Exchange: BTCY is working to be listed on a major exchange sometime in calendar year 2021. Based on my review, I believe the only necessary hurdle to being uplisted is the share price. From what I will show in the "Valuation" section, I believe that issue will take care of itself as BTCY continues to execute. But beyond that, being listed on a major exchange will provide a tailwind with analyst coverage being more likely, and additional institutional interest given that some institutions have restrictions from purchasing OTC stocks.
