Exit of the year: iRhythm Technologies

Initial public offerings were few and far between for much of 2016 in a stark contrast to the frenzy of preceding years. By the time iRhythm Technologies, a developer of arrhythmia diagnostics technology spun out of Stanford University, went public on Nasdaq in October, it joined an illustrious but small rank of companies that completed a flotation that year.
That did not stop iRhythm from exceeding the $75m IPO it had originally envisaged by collecting $107m instead by pricing 6.3 million shares at $17 each – up from a range of $13 to $15 to 5.35 million shares.
On the first day of trading, a Thursday, the stock briefly rose to $28 before dropping to $25.79 by close on Friday. By November 4, the stock had fallen to $23.08 but, crucially, that remains the lowest shares have sold as of the time of writing. Indeed, it has remained mostly stable, hovering between $34 and $40 with the high point so far being $39.84 per share on February 23.
The numbers show that the long-term game of investors such as pharmaceutical firm Novo, which led a $28.5m series E round in 2015, paid off: they had put in a total of $112m in equity funding and an additional $3.5m in debt financing ahead of iRhythm’s flotation, meaning an immediate exit would not actually have netted shareholders much of a profit.
These shareholders notably included two other corporate backers alongside Novo: Kaiser Permanente Ventures, the investment vehicle of the care provider, and medical device manufacturer St Jude Medical. The company is thus an example of how a spinout can benefit from relying on the expertise of corporate venturers.
Venture capital firms of course also got in on the action, with Norwest Venture Partners, Synergy Life Sciences Partners, New Leaf Ventures and Mohr Davidow among the shareholders.
Founded in 2006, iRhythm was the seventh project to emerge out of the Stanford Byers Centre for Biodesign. The company is commercialising the Zio Service, a long-term continuous monitoring system that combines a wearable biosensor with patient data and analytics tools to provide data to medical staff about people with cardiac arrhythmia.
The condition results in a heartbeat that is too fast, too slow or irregular and, while often harmless, can be life threatening as restricted blood flow may damage the brain, organs or the heart itself.
In regulatory filings made at the time of its flotation, iRhythm explained proceeds would go towards R&D, increased sales and operational activities, and may also be used for clinical trials and international expansion.
That its proceeds are being well used was underlined in April 2017 by an announcement that the American College of Cardiology, the American Heart Association and the Heart Rhythm Society all issued new guidelines recommending the use of cardiac monitors such as Zio when evaluating patients suffering from fainting episodes.
The UK’s National Institute for Health and Care Excellence followed suit by issuing a briefing that highlighted the significant diagnostic yield of the Zio system. Indeed, the institute noted that extended monitoring of up to a fortnight with Zio can reduce in-patient and out-patient admissions and associated costs to the country’s public healthcare system NHS.
The IPO, which was led by JPMorgan and Morgan Stanley as joint book-running managers, with Canaccord Genuity and BTIG as co-managers, and the company’s soaring stock and success since October 2016 make iRhythm Technologies a worthy winner of the GUV Award for Exit of the Year.

.