Anatomy of a Flagship Asset: Reliq Health Technologies (TSXV:RHT)

The TSX, TSXV, CSE and NEO exchanges list over 4,000 companies, a daunting number for any investor to sort through.

Parsing prospective opportunities from also-rans begins with narrowing down your investable universe, leaving only companies whose operations mark a clear path forward.

In the interest of expediting that task for TMH readers, our new series, Anatomy of a Flagship Asset, introduces you to the most promising projects and products creating value in the Canadian stock market.

Next up, Reliq Health Technologies (RHT), a rapidly growing telemedicine company whose iUGO virtual care SaaS platform is making headway into the multibillion-dollar digital health market.

Improved health outcomes with proven economics

Reliq’s flagship iUGO Care platform is a comprehensive turnkey solution with a dual mandate:

1. To allow clinicians to easily roll out new billable virtual care services, encompassing:

2. To facilitate simple home-based interventions that can have a dramatic impact on health outcomes, quality of life and costs to the healthcare system

iUGO seeks to capitalize on how chronic conditions account for over 80 per cent of U.S. healthcare costs, representing US$3.2 trillion per year or 18 per cent of GDP in 2020, with US$100 billion encompassing the entire U.S. virtual care market. Factors solidifying this addressable market include the 57 million Medicare and Medicaid patients that have eligible chronic conditions, as well as data suggesting that less than half of chronic disease patients take their medications as prescribed.

According to Statista, revenue in the Canadian digital health market is projected to reach US$2.81 billion in 2023, with growth at a CAGR of 8.95 per cent through 2027 to US$3.96 billion.

iUGO’s business case is objectively attractive. The average practice can generate revenue of over US$400 per patient per month from CMS (Centers for Medicare and Medicaid Services) payments by implementing the platform, while paying only US$40-$100 per patient per month for the service.

Reliq has also found that hospital admissions are reduced by over 90 per cent in chronic disease patients using iUGO Care, while the average cost to the healthcare system is reduced by over 80 per cent, pointing to how virtual care programs for chronic disease patients could save CMS billions of dollars per year.

Recent contract wins stoking the company’s momentum include:

We’ll now take a look at Reliq’s internal projections as it seeks to gain share in the chronic care and digital care markets.

Future catalysts

As populations age and grow, management sees the number of chronic disease patients steadily increasing. This is supported by the fact that CMS has increased reimbursements for virtual care by over 600 per cent and added over 20 billing codes applicable to Reliq since 2018.

CMS has also moved to an outcome-driven model, as opposed to a fee-for-service model, instituting financial penalties for clinicians whose chronic disease patients are hospitalized for preventable conditions.

These tailwinds have led the company to value itself at ~2X projected revenue for calendar 2023 – at expected 75 per cent gross margins and 45 per cent EBITDA margins – with an estimate of over 200,000 patients on the iUGO Care platform by mid-2023. For comparison, typical multiples in the space are well over 25X for profitable, high-growth companies, according to management’s analysis.

Should this performance come to pass, Reliq sees a path to uplisting to the NASDAQ later this year, positioning itself for over C$100 million in annual revenue and an over C$1 billion valuation by 2024.

Given 2022’s grand total of just over C$8.5 million in revenue, should you take this unquestionably lofty outlook at face value? Of course not. But it does indicate a company with enough traction to start believing in its own greatness, the realization of which, contingent on a full due diligence process, holds the potential of outsized long-term returns.

Reliq Health Technologies (RHT), a 2022 Venture 50 Winner, is up by approximately 144 per cent since its COVID low, illustrating the market’s gradual awareness of the company’s steady stream of iUGO contracts.

Sources

Reliq Health Technologies’ investor presentation for January 2023.

The materials provided in this article are for information only and should not be treated as investment advice. For full disclaimer information, please click here.