CardioNet cuts costs, hires Lazard to explore strategic alternatives

Shares of CardioNet (BEAT), which provides remote wireless cardiac monitoring services, were up 16% today after a conference call this morning for investors. The Conshohocken company is still reeling from a decision to cut reimbursement rates for its service last summer by Highmark, and the failure of the Centers for Medicare and Medicaid Services to establish a national rate, and does not foresee a return to full-year profitability until 2011. Management does forecast that its volume - total usage of the service- will increase by 40% next year, and it remains very positive about the need for and the competitive postioning of its offerings.

In the meantime, while still seeking more favorable reimbursement rates longer-term, it is taking the following steps, Chairman & CEO Randy Thurman said :

  • Reducing its annual (expense) run rate by $23 million, $8 million of which has already been achieved, and taking other measures to preserve cash such as better recievables management.
  • Continuing to expand marketing for its sleep disorder monitoring service and preparing for the introduction of the next generation of its main product - Mobile Cardiac Outpatient Telemetry (MCOT)
  • Hiring investment bank Lazard Ltd to help it explore strategic options, which is at least an indication the company will consider a sale or other forms of financing. (Lazard isn't cheap.)
Analysts quoted by the Wall Street Journal (subscription required) expressed some reservations about CardioNet's volume growth forecasts and 2011 financial expectations.
CardioNet was one of the few successful IPOs of 2008 and traded as high as $29.50 before starting a downward slide this past summer. It closed today at $6.00.
They probably should have stayed private so reimbursing agencies couldn't tell how high their margins were.

(Edited to show today's closing price)


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