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Friday, July 1, 2022

Heart Test Labs Files For U.S. IPO For Advanced ECG Device

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A Quick Take On Heart Test Laboratories

Heart Test Laboratories (HSCS) has filed to raise an undisclosed amount in an IPO of its units, consisting of common stock and warrants, according to an S-1 registration statement.

The firm is developing an improved ECG (ElectroCardioGram) cardiac monitoring medical device.

HSCS still has significant and time-consuming regulatory processes to complete before the possibility of obtaining marketing approval from the FDA.

I’ll provide an update when we learn more IPO information from management.

Heart Test Overview

Southlake, Texas-based Heart Test Laboratories (d/b/a HeartSciences) was founded to develop what it calls an ‘AI-based’ ECG for frontline, point-of-care clinical settings.

Management is headed by Chairman, President and CEO Andrew Simpson, who has been with the firm since 2012 and has more than 30 years’ experience in various industries excluding the medical device industry.

The company’s primary device candidate is the MyoVista wavECG, a product to provide enhanced cardiac imaging via its 12-lead system.

Heart Test has booked fair market value investment of $53 million (equity and debt combined) as of January 31, 2022, from investors including Front Range Ventures and others.

Heart Test’s Market & Competition

According to a 2020 market research report by Grand View Research, the global ECG equipment and management systems market size was an estimated $5.6 billion in 2019 and is forecast to reach $9.0 billion by 2027.

This represents a forecast CAGR of 6.1% from 2020 to 2027.

The main drivers for this expected growth are a growing incidence of cardiac arrhythmia among an increasing geriatric population and innovations in ECG monitoring and diagnostic options.

Also, the chart below shows the historical and projected U.S. market for ECG equipment and management systems:

U.S. ECG Equipment and Management Systems Market

U.S. ECG Equipment and Management Systems Market (Grand View Research)

Major competitive or other industry participants include:

  • General Electric (GE)

  • Philips (PHG)

  • Nihon Kohden (OTCPK:NHNKY)

  • BioTelemetry

  • Hill-Rom (BAX)

  • CardioComm Solutions (OTCPK:EKGGF)

  • Device Technologies

  • Others

Heart Test Laboratories Financial Results

The company’s recent financial results can be summarized as follows:

  • Minimal topline revenue

  • Small gross profit

  • Significant operating losses

  • Material cash used in operations

Below are relevant operations financial results from the firm’s registration statement:

Statement of Operations

Statement of Operations (SEC EDGAR)


As of January 31, 2022, HeartSciences had $1.3 million in cash and $6.7 million in total liabilities.

Free cash flow during the twelve months ended January 31, 2022, was negative ($3.2 million).

Heart Test Laboratories IPO Details

Heart Test intends to raise an undisclosed amount in gross proceeds from an IPO of its units consisting of common stock and warrants.

The units will contain one share of common stock (HSCS) and one warrant (HSCSW) to purchase a share of common stock.

The warrants will be immediately exercisable following the consummation of the offering at the IPO price.

No existing shareholders have indicated an interest to purchase shares of the IPO.

Management says it will use the net proceeds from the IPO as follows:

We intend to use the net proceeds from this offering [i] for estimated costs of approximately $3 million directly related to achieving FDA clearance for the MyoVista device, including costs for relevant Company personnel, associated device testing, validation and R&D, and completing the pivotal clinical validation study, [ii] for working capital and general corporate purposes until we can obtain FDA approval, [iii] to pay accrued and unpaid interest to one lender (John Q. Adams, Sr., a former director of the Company) under the $1M Loan and Security Agreement, which was $0.1 million at January 31, 2022, and [iv] with respect to the remainder, if any, for working capital and general corporate purposes needed for sales launch of the MyoVista into the U.S., which may include the hiring of additional personnel, capital expenditures and the costs of operating as a public company.


Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the firm is not currently a party to any legal proceedings that would have a material adverse effect on its financial condition or operations.

The sole listed bookrunner of the IPO is The Benchmark Company.

Commentary About HeartTest’s IPO

HSCS is seeking public investment capital to continue development of its advanced ECG system in preparation for potential commercialization efforts assuming its product candidate is approved by the FDA for marketing.

The company’s financials have produced a small amount of revenue, minimal gross profit, material operating losses and significant cash used in operations.

Free cash flow for the twelve months ended January 31, 2022, was negative ($3.2 million).

The market opportunity for providing improved or enhanced ECG equipment and systems in the United States is large, but is characterized by major competitors who have long-standing distribution advantages.

The Benchmark Company is the sole underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (13.4%) since their IPO. This is a lower-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is delays from its revised submission to the FDA, which it expects to submit by the end of its fiscal year, ending April 30, 2023.

Additional clinical trials are likely to be required, adding to the time it will take to begin its go-to-market processes, if and when it obtains FDA marketing approval.

When we learn more IPO details from management, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.

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