BEAT - HeartBeam Inc. - Developing Heart Attack Detection Diagnostic Technology With Remote Monitoring Capabilities

Summary

• The company's products, HeartBeam AIMI and HeartBeam AIMIGo, are being developed with the aim of providing accurate diagnostic tools for heart attack detection anytime and anywhere.
• The core technology is protected by a strong and expanding IP portfolio comprising multiple patents.
• Both products are equipped with vector electrocardiography (VECG) and baseline concepts in addition to using a 12-lead signal set that provides an accurate and comprehensive diagnostic picture.
• The addressable market for both products is over $10 billion.
• In my opinion, HeartBeam’s stock price does not fully reflect the market potential and competitive advantage of its technology.

Thesis

HeartBeam Inc. (BEAT) has developed a state-of-the-art heart attack detection technology utilizing an innovative sensor in the form of a credit card-sized VECG recording device. It is believed that this system will provide cardiologists and hospitals with an essential diagnostic tool that offers improved accuracy in heart attack detection, benefiting multiple stakeholders, either in the form of reduced costs or saved lives. The company’s offering is expedient and user-friendly, and it can furnish clinicians and patients with precise, punctual, and life-saving information regarding potential myocardial infarction events and other complications arising from coronary artery disease ((CAD)). The market’s possible concerns regarding the company’s path to profitability, product approval, and ability to gain market share are valid but fail to completely reflect/recognize its superior technology, multi-billion-dollar market opportunity, and well-laid-out approval and commercialization pathway.

About HeartBeam

HeartBeam Inc. is a cardiac technology company developing innovative and disruptive solutions within the cardiac disease and health monitoring landscape. The company’s diagnostic product portfolio combines software and hardware to monitor and detect cardiac diseases in the ambulatory and emergency department ((ED)) setting. The company’s first product HeartBeam AIMI is a Software as a Medical Device (SaMD) that assists in diagnosing heart attacks in an ED setting. The second offering, HeartBeam AIMIGo, a credit card-sized ECG device and smartphone app, is accompanied by a cloud-based diagnostic software system that enables remote patient monitoring by recording and communicating a complete set of diagnostic data. The company’s tele-health solution strives to provide a highly underserved patient population suffering from chronic cardiovascular illnesses with effective and accurate disease progression/cardiac health monitoring solutions. Protected by a strong IP portfolio, both offerings have been clinically validated in multiple medical studies and are anticipated to receive FDA clearance and market release by H1 2023.

Need for Effective and Reliable Diagnostic Solutions for Cardiac Care - The Problem

Cardiovascular disease ((CVD)) is one of the leading causes of death around the globe. Every thirty-odd seconds, someone in the U.S. dies from cardiovascular disease. In 2020, that meant one in every five deaths in the U.S., or about 697,000 deaths, were due to some form of heart disease. Globally, this figure was approximately 18 million in 2019, with over 85% of cardiovascular-related deaths being due to heart attack or stroke. Over 100 million adults are living with some form of CVD in the U.S., the most common of which is coronary artery disease (> 20 million adults ). Coronary artery disease, which involves blocked or narrowed coronary arteries, has been found to be a common cause of myocardial infarction ((MI))-- commonly called a heart attack.

More than 800,000 people in the U.S. have a heart attack every year. The most common symptom is chest pain, which is also a common symptom for many other benign conditions, such as indigestion. This often causes indecision and delay in seeking care, potentially leading to an increase in mortality, greater incidence of heart failure, and also wasted healthcare expenditure. A national study aimed at understanding the prevalence of life-threatening conditions arising from chest pain found that only 5.5% of the hospital visits included in the study accounted for serious conditions such as acute coronary syndrome (5.1%), pulmonary embolism, and others.

Exhibit 1: Costs Associated with False Cardio Diagnosis. Source: Company Presentation

Electrocardiogram (ECG or EKG) remains the most commonly used diagnostic and prognostic tool to assess heart conditions, with 12-lead ECG being considered the “gold standard.” Most ECG machines are bulky and large, with multiple electrodes requiring professional assistance. This limits the usage of traditional but effective diagnostic tools to ER, hospital, or clinical settings. Advancements in medical technology have led to the creation of multiple cardiac monitoring devices that can also be used in ambulatory settings, such as handheld ECG machines and wearable monitors. However, even though these portable medical devices have become more common and user-friendly, they typically record via a limited number of wire electrodes, known as leads, and therefore do not provide the same level of detailed, accurate information about a patient's heart health as a traditional 12-lead ECG.

The patient-operated medical devices developed thus far have been largely focused on monitoring arrhythmias, which are irregular heart rhythms. The most common type of arrhythmia is atrial fibrillation, often called AFib. Myocardial infarction and AFib are correlated with each other, sometimes aggravating each other. Approximately 6% to 21% of patients with MI have also been diagnosed with AFib. The risk of MI in AFib patients is largely undefined, and the incidence of MI in AFib patients based on multiple observational studies ranges from 0.4% to 2.5% . AFib is much more common in patients with MI than vice versa, and the most accurate diagnostic tool for MI remains a 12-lead ECG.

There is a clear gap between traditional 12-lead ECG-based solutions, which provide a comprehensive, accurate picture but have limited usage, and modern, recently developed diagnostic solutions, which have broad usage but remain merely screening tools with single-lead ECG capabilities. Most of the devices developed recently can detect and monitor AFib and, at best, atrial flutter, another form of arrhythmia, but they lack the necessary capabilities to detect MI. I believe HeartBeam’s solutions overcome the limitations of both traditional and modern devices by providing mobile, easy-to-use, comprehensive, and accurate monitoring for patients with coronary disease through its 12-L ECG capability using 3D Vector technology.

An Innovative and Disruptive Technology - The Solution

HeartBeam’s novel technology leverages 3D vector electrocardiography ((VECG)), an alternative to the standard 12-lead ECG, to measure the heart’s electrical activity. Multiple investigational studies have concluded that 3D VECG provides better sensitivity than ECG in detecting conditions such as MI, hypertrophy (enlarged muscle), and ischemia (lack of blood flow). Even though 3D VECG has been found to be superior, the requirement of placing additional electrodes and difficulties in interpreting the output have restricted its use. HeartBeam believes its credit card-sized, 12-lead 3D vector electrocardiogram device can solve this problem by recording three orthogonal (x, y and z) projections of the heart vector. Additionally, the platform technology incorporates the concept of a baseline, providing a more comprehensive, personalized 3D view of cardiac activity. The company’s core technology and algorithms have led to the creation of two key products targeting millions of patients in ambulatory or acute care and ED settings.

HeartBeam AIMI Software Solution - Cardiac Monitoring in the Emergency Department

The company’s first offering introduces its proprietary software technology within the acute care setting. The software is incorporated within the center’s ECG diagnostic path, with the aim of improving the accuracy of MI detection through ECG recordings. The HeartBeam AIMI solution instantly compares patients’ standard 12-lead symptomatic and baseline asymptomatic ECGs, providing clinicians with diagnostic suggestions. Multiple publications not related to HeartBeam's technology have supported the case of VECG’s superior sensitivity and accuracy over ECG readings, improving the diagnosis of multiple heart diseases, including MI, ventricular hypertrophy, cardiac ischemia, etc. ( Hurd et al. , Dahlin et al. , Dehnavi et al. )

• HeartBeam AIMIGo - Wearable Device for Ambulatory Cardiac Monitoring

Exhibit 2: HeartBeam 12-Lead 3D Vector ECG Device - HeartBeam AIMIGo. Source: Company Presentation

HeartBeam’s AIMIGo, is designed as a tele-health system that combines a patented, credit card-sized cardiac 3D heart’s electrical signal collection device and a smartphone application that receives its signals with cloud-based software and a web-based clinician portal. These components are being developed to work together to provide an accurate synthesized 12-lead ECG reading which is compared against baseline readings and then communicated to the clinician in the form of a summarized report. The report comprises the patient’s history, symptoms, and other necessary data, allowing the clinician to diagnose whether symptoms such as chest pain or irregular heart rhythm. The clinician portal allows communication via video or text to direct the patient to the closest hospital with the necessary capabilities or just reassure them that they are not having a heart attack. The Company has plans to introduce HeartBeam AIMIGo through a series of FDA 510-K submissions; the first is expected this quarter.

Exhibit 3: HeartBeam AIMIGo in Action. Source: Company Presentation

Clinical Studies Providing the Necessary Validation

HeartBeam’s products have been successfully evaluated in three Harvard-designed clinical studies aimed at assessing the accuracy, sensitivity, and specificity compared to the standard of care. The three clinical studies (HIDES, B Score ED study, and ISPEC study) enrolled over 100 patients with different clinical conditions.

1. HIDES Study - Looked at electrical signal data readings from patients with occluded coronary arteries during a percutaneous coronary intervention (PCI), which is a minimally invasive procedure to open clogged arteries. The study was aimed at evaluating the accuracy of the HeartBeam readings against the gold standard.

1. B Score ED Study - Enrolled patients with the acute coronary syndrome ((ACS)) in an ER setting to evaluate the specificity of HeartBeam’s technology compared to the standard of care.

2. ISPEC Study - Assessed the false positivity rate for non-symptomatic patients.

The results from the studies unequivocally show that HeartBeam’s technology has the potential to achieve or, in some cases, surpass the current standard of care.

Approval Pathway

The company has already submitted a 510-K application to the U.S. FDA for the approval of its HeartBeam AIMI product, with the approval anticipated by the end of Q1 2023 and a limited market release by Q2 2023. HeartBeam’s core telemedicine AIMIGo product is expected to follow a similar regulatory approval pathway via a 510-K application. Potentially categorized as a Class II device, HeartBeam AIMIGo will be evaluated in a simple validation study to demonstrate substantial equivalence to a predicate device. The company is expected to submit an application for FDA approval of the Version 1 HeartBeam AMIGo solution by the end of Q1 2023, with the approval anticipated by the end of Q2 2023.

Marketing it as a SaaS Solution and a Potential D2C Offering

HeartBeam AIMIGo is expected to be marketed as a prescription device initially utilizing an existing reimbursement pathway; the initial release of HeartBeam AIMIGo can take advantage of existing remote physiologic monitoring ((RPM)) codes where HeartBeam is expected to receive a technical fee from the medical practices monitoring their high-risk patients with HeartBeam AIMIGo. Longer-term, I believe that the Company can obtain a new CPT code as they introduce advancements to HeartBeam AIMIGo, reflecting what will be a much greater value than currently available. The company has partnered with Triple Ring Technologies and Evolve Manufacturing Technologies for the design, development, and production of the HeartBeam AIMIGo 12-lead 3D VECG device.

The HeartBeam AIMI software solution is expected to be marketed to acute care facilities and hospitals with the goal of installation in their emergency departments. As over 80% of patients coming into the ED are worried that they may be having a heart attack, the value of HeartBeam AIMI can be to introduce these patients to HeartBeam AIMIGo, so they can be monitored by that hospital system to alleviate their ongoing fears when they are home. The software will be licensed to hospitals with an annual subscription cost of approximately $100,000 per center, which is approximately $4 per use at these larger centers. Additionally, the company has recently broadened its product portfolio pipeline, which now includes a patented 12-lead ECG patch and a patented 12-lead ECG smartwatch, with the potential to create a direct-to-consumer offering.

Innovative Technology Provides a Competitive Edge - The Advantage

The FDA has approved many different medical devices within the CVD landscape, ranging from smart wearables to traditional machines such as Holter monitors for ambulatory cardiac care. The ambulatory cardiac care industry is characterized by fierce competition, evolving technology, and the presence of multiple players. Innovations in sensor technologies over the past decade have led to the creation of smart wearables such as watches, patches, and bands, which have all enhanced out-of-hospital care. The consumer segment of the market, comprising FDA-cleared, direct-to-consumer devices, is populated with multiple players that include technology giants such as Apple (AAPL) and Samsung (SSNLF) and niche Medtech players such as AliveCor, OMRON (OMRNY), iRhythm (IRTC), Corventis Inc., Biotricity (BTCY), BioTelemetry, and others.

Most of these companies market ambulatory cardiac care devices with limited capabilities that restrict their use cases to arrhythmia detection and monitoring. For example, the Apple Watch provides a single-lead ECG, which can only provide basic information about heart rate and heart rhythm, enabling AFib detection. Similar to the Apple Watch, the Zio Patch by iRhythm Technologies is a single-lead ECG developed to detect cardiac arrhythmias. AliveCor’s KardiaMobile 6L is a six-lead ECG device designed to detect AFib and other cardiac arrhythmias. The same is true of other single-lead and three-lead ECG devices like the Nuvant mobile cardiac telemetry device, AfibAlert, Bioflux, etc.

Exhibit 5: Competitive Landscape. Source: Company Presentation

HeartBeam’s technology is far superior to the competing technologies stated above. Encompassing the gold standard 12-lead ECG capabilities and providing a comparison between baseline and symptomatic 3D vector ECGs will result in more accurate readings compared to other technologies. The HeartBeam offerings offer the ability to detect ischemia and enable earlier heart attack identification, as well as the potential to detect AFib and other cardiac arrhythmias.

Angel Medical Systems AngelMed Guardian System and SHL Telemedicine’s CardioSen’C and SmartHeart are FDA-approved, real-time cardiac care products with 12-lead ECG capabilities. The AngelMed Guardian, approved in 2021, is an implantable device for high-risk patients with the acute coronary syndrome. The SHL Telemedicine offering has been approved by the FDA for remote, real-time diagnosis of cardiac arrhythmia, ischemia, and MI . However, HeartBeam’s telehealth solutions are much more user-friendly and compact than SHL’s offerings. Additionally, SHL derives almost all of its revenue from Germany and Israel, with little to no presence in the U.S. markets.

In my view, HeartBeam’s AIMIGo and HeartBeam AIMI products will not only improve patient care compared to other medical devices but also contribute to reducing mortality and minimizing wasted healthcare costs, potentially saving hospitals money, reducing their liability exposure, and cutting their risk of being penalized by Medicare for a high readmission rate.

Ascertaining The Addressable Market Size - The Opportunity

HeartBeam’s AIMIGo product can serve patients with coronary artery diseases and related complications, which include arrhythmias, angina or chest pain, and heart attack. According to CDC estimates, 20.1 million adults aged 20 and older have coronary artery disease, which represents the total addressable market for the company’s solutions. Initially, HeartBeam is likely to focus on the substrata of the patient populations that are at high risk with prior MI. This segment of patients represents those who lack compact, easy-to-use, accurate, and comprehensive ambulatory cardiac care solutions. With an incidence of over 800,000 cases and a prevalence rate of 3% in U.S. adults aged 20 years and older, an MI occurs once every 40 seconds. Based on the prevalence rate for the defined age group, approximately 8 million patients will benefit significantly from adopting HeartBeam’s solutions. The company estimates an additional 2 million patients who represent frequent “false alarm” ER visitors and patients with cardiovascular interventions.

Exhibit 6: Market Opportunity Source: Company Website

Approximately 10 million patients can immediately benefit from HeartBeam’s solutions, which represents an initial market of ~$6 billion based on an annual subscription revenue share of $600 per patient ($600 x 10 million). Additionally, the company estimates the total addressable market for its AIMI software solution at about $500 million based on an estimated 5,000 EDs across the country and a $100,000 per year subscription cost. The primary and key value driver is likely to be the HeartBeam AIMIGo device, given its large addressable market, limited competition, and potential as a consumer-facing business.

HeartBeam’s next-gen product pipeline includes a 12-lead smartwatch, 12-lead ECG patch, and AI solutions, among others. An expanding product pipeline would allow it to address the needs of a broader patient population that includes 126.9 million adults aged ?20 years in the US affected by some form of cardiovascular disease.

Financial Positioning and Valuation

As of Q3 2022, the company has reported $6.5 million in cash and zero debt on its balance sheet. In the past four financial quarters, the average cash burn from operations (including stock-based compensation) per quarter was $2.58 million. The company is likely to raise capital by Q2 2023 to support its operating activities, approval process, and commercialization efforts. Assuming the company can obtain approval for HeartBeam AIMI by Q1 2023, the impact of dilution is likely to be minimal because an optimistic announcement regarding FDA clearance would lead to a rise in market capitalization.

In my view, HeartBeam’s valuation is a function of a few important factors: FDA clearance of HeartBeam AIMI and HeartBeam AIMIGo, and its ability to ramp up sales and market its potentially superior technology. Based on the $10.5 billion market opportunity, even a 1% market share or 100,000 patients (HeartBeam AIMIGo) and 50 hospitals (HeartBeam AIMI) would yield revenue of $105 million. Assuming a P/S of 3x, the potential valuation in this scenario could be well over $300 million. The upside seems exponential from the current levels, but the risks should not be ignored.

Risks

• Dilution Risk - HeartBeam is a pre-revenue company and is completely dependent on its limited internal cash reserves and potential funding from external sources. Equity dilution is highly likely based on the current cash burn and cash balance.

• Regulatory and Approval Risk - Medtech and pharmaceutical companies are exposed to this risk, including delays in clearance and rejection of 510-K applications. Under this circumstance, the company has to go through additional product testing and clinical trials. I believe the robust clinical trial data successfully addresses this risk, minimizing the extent of its impact on HeartBeam’s valuation.

• Product Adoption Risk - The company’s ability to market its technology and create awareness about its differentiated offerings among clinicians, cardiologists, and the end consumer is and will likely remain a major task affecting the company’s valuation.

Concluding Remarks and Catalysts

HeartBeam has developed a disruptive medical technology with a strong foundation that addresses unmet medical needs within the CAD space. The company’s primary goal is to address the delays and under-diagnosis of MI (heart attack), which lead to increased mortality and higher overall healthcare costs. HeartBeam’s products are a much better market fit than most of the currently available technologies within this segment. This innovative technology is further complemented by a multi-billion-dollar market that comprises approximately 10 million patients and 5,000 emergency departments. The two main catalysts highly anticipated by the market are the FDA clearance of HeartBeam AIMI and the 510-K submission of HeartBeam AIMIGo.

*HeartBeam is a client of Quantum Media Group, LLC

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