Is Heart Test Laboratories Inc. IPO a Good Buy?

• While heart disease is the leading cause of death in the U.S., the condition is difficult to pinpoint as many patients don’t suffer from symptoms.
• Early identification at the point of care can be a lifesaver, which is what Heart Test Laboratories aims to be with its groundbreaking ECG system.
• Though one of the most compelling new listings to come out in recent memory, this micro-cap idea may not be appropriate for all investors.

With any dilemma, early identification is often vital to achieving a resolution, but for Heart Test Laboratories Inc., the stakes are significantly high. A medical technology firm, Heart Test specializes in advanced electrocardiogram (ECG) machines designed to be deployed in frontline medical services or at point-of-care clinics. In this manner, medical professionals can identify serious cardiovascular conditions thereby directing patients to appropriate resources.

Unlike standard ECG machines, Heart Test’s iteration is holistic in nature. According to the company’s Form S-1 disclosure, three basic categories of heart disease exist: electrical (such as an arrhythmia), structural (such as valvular disease) and ischemic (such as coronary artery disease or CAD). Conventional ECG machines have limited detection profiles, mainly focused on diagnosing cardiac rhythm abnormalities.

The beauty of Heart Test’s ECG system — and hence interest in its upcoming market debut — is that it diagnoses all three categories of cardiovascular disease. Even better, the platform features a relatively low-cost profile, along with leveraging portability and ease of use, enabling non-specialty centers to detect serious conditions in patients who may otherwise be visiting for routine checkups.

Given that heart disease is the number one cause of death in the U.S. — killing more women than all cancers combined, according to the University of Utah — early and accurate detection is vital. Armed with Heart Test’s ECG machines, health clinics across the nation could potentially facilitate life-saving guidance.

Still, as with any new listing, careful research and due diligence is key. Below are the pros and cons to consider for Heart Test Laboratories.

What Does Heart Test Laboratories do?

One of the most exciting medical technology companies to come down the new-listing pipeline, Heart Test Laboratories aims to manufacture and distribute a comprehensive and accurate cardiac screening platform. Unlike industry standard fare, Heart Test’s ECG machine — called MyoVista wavECG — leverages innovative artificial-intelligence (AI) protocols to expand the utility of cardiovascular screening.

According to the Centers for Disease Control and Prevention (CDC), one person dies every 36 seconds in the U.S. from heart disease. This rate translates to 659,000 deaths per year, accounting for one in every four fatalities. With related conditions like hypertension called silent killers because of their lack of symptoms in many patients, early detection is pivotal.

Fortunately, Heart Test may have the answer with its potentially paradigm-shifting platform. In addition, the company levers these key advantages:

• Comprehensive coverage: As stated earlier, the main headwind for conventional ECG machines is their limited scope of screening ability and accuracy. The MyoVista system broadens the coverage footprint, enabling non-cardiovascular-specialty clinics to identify critical problems in patients and to direct them to appropriate treatment centers.
• Force multiplier: Assuming the MyoVista system successfully meets regulatory requirements and that it works as advertised, Heart Test will essentially become a force multiplier by identifying cardiovascular disease without the use of onerous and expensive diagnostic platforms. This dynamic would be helpful for patients and the already-taxed healthcare infrastructure.
• Low cost: Prior to the development of MyoVista, patients who suspect heart disease must undergo rigorous testing methods such as an echocardiogram (echo), a technology similar to ultrasound and can range between $600 to $3,000. However, the MyoVista should have an overall low-cost profile, a perfect medical mitigation for the current inflationary cycle.

On a final note, Heart Test’s first algorithm for its AI-enabled MyoVista platform is not yet approved by the Food and Drug Administration (FDA). Therefore, the long-term viability of the company’s initial public offering (IPO) — or the first time a private enterprise distributes its equity shares to retail investors — may hinge on whether it achieves regulatory success.

When is the Heart Test Laboratories IPO Date?

After a dreadful lull in public market debuts this year, the IPO calendar is finally seeing growth in entries. Though nowhere near the intensity of participation witnessed in 2020 and 2021, that sentiment for this risky category is a net positive.

Barring unusual circumstances, Heart Test is scheduled to make its entrance in the public arena on June 15, 2022. The Southlake, Texas-based company plans to raise $8.8 million through the distribution of 1.75 million units at a price range between $4.50 and $5.50. Each unit consists of one share of common stock and one warrant exercisable at the initial offering price, which is typically revealed a day prior to the IPO.

Heart Test plans to list its shares on the Nasdaq exchange under the ticker symbol HSCS. The Benchmark Company represents the sole bookrunner for this IPO.

To be clear, the inclusion of warrants adds another layer of risk to the deal. Typically (though it’s not always the case), companies that are stretched cash wise will issue warrants. Further, warrants are necessarily dilutive because their exercise results in the minting of newly issued stock as opposed to the transfer of already-outstanding stock.

What Analysts are Saying About Heart Test Laboratories IPO

As a micro-capitalization company, mainstream analysts have not weighed in on Heart Test Laboratories. That said, the medical tech firm’s Form S-1 disclosure provides plenty of material by which you can conduct independent research.

On the bullish front, Heart Test’s MyoVista platform could be a gamechanger in the diagnostics space. Per the CDC’s data, heart disease cases cost the U.S. economy $363 billion each year between 2016 and 2017, including the cost of health care services, medicines and lost productivity from death.

In addition, the agency reports that 805,000 people in this country suffer from a heart attack every year. Even more startling, one in five heart attack cases are silent, meaning that the “damage is done, but the person is not aware of it.” To mitigate the widespread negative impact of cardiovascular disease, effective screening is necessary, playing directly into the hands of Heart Test’s AI-driven ECG machine.

Just as critically, the MyoVista platform is (relatively) low cost, accessible and intuitive. Potentially, general care clinic can deploy the system and provide lifesaving diagnostics. As well, the effectiveness of MyoVista will help prevent patients from undertaking unnecessarily intensive and costly screening alternatives.

Of course, no investment is without risk, and the main one is the capriciousness of the broader healthcare segment. Should the MyoVista algorithm fail to achieve FDA approval, investors can quickly lose patience, thus flatlining HSCS stock.

Also, innovative medical proposals require plenty of cash to catalyze and maintain forward progress. Even if MyoVista passes regulatory trails with flying colors, the myriad distractions and headwinds of the day could sink HSCS stock.

Heart Test Laboratories Financial History

While Heart Test’s MyoVista appears to command a potential medical breakthrough, every prospective buyer must assess the company’s financial statements. Here, a harsh reality sets in.

For one thing, Heart Test generates minimal revenue: $64,182 in the year ended April 30, 2020, and only $25,604 in fiscal year 2021. In the nine months ended Jan. 31, 2022, the company rang up $10,224 against a staggering net loss of nearly $2.8 million.

With such hefty losses, Heart Test’s issuance of warrants in its IPO should raise eyebrows. Essentially, if the company cannot secure a healthy dose of funding, it’s vulnerable to intense market volatility.

Heart Test Laboratories Potential

While heart disease may be the greatest scourge on the U.S. healthcare system, the tragedy is that it doesn’t have to be. With proper diagnosing and the appropriate treatment course, many affected by cardiovascular conditions may enjoy otherwise healthy and productive lives. However, early and accurate detection is key — and this of course is central to the narrative of Heart Test Laboratories.

At the same time, what will trip up prospective investors of HSCS stock is the underlying financials. With Heart Test suffering steep net losses against very minimal sales, it’s mostly dependent on investor funds. Unfortunately, this sentiment can dry up should regulatory speedbumps materialize.

Ultimately, HSCS stock is a high-risk, high-reward venture that can very well change the paradigm of cardiovascular diagnostics. But to be sure, it’s not an appropriate investment for everyone as the stock is potentially vulnerable to extreme volatility.

Where to Buy Heart Test Laboratories IPO Stock

If you want to participate in Heart Test’s IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of best brokers to consider.

HSCS Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

HSCS Pre-IPO

Those interested in acquiring shares of Heart Test Laboratories on a pre-IPO basis — or shares at their initial offering price — can open an account with ClickIPO. Keep in mind that while buying at this favorable rate is initially advantageous, the market always has the last word.