CardioNet Inc. (NASDAQ: BEAT)

CardioNet Inc. (BEAT), provides continuous, real-time ambulatory outpatient management solutions for monitoring relevant and timely clinical information regarding an individual’s health. The Company has developed an integrated patient monitoring platform that incorporates a wireless data transmission network, internally developed software, the U.S. Food and Drug Administration (FDA)-cleared algorithms and medical devices, and an around-the-clock digital monitoring service center. Its initial efforts are focused on the diagnosis and monitoring of cardiac arrhythmias, or heart rhythm disorders, through its core Mobile Cardiac Outpatient Telemetry (MCOT), event and Holter services.

The Company was incorporated in 1994 and is headquartered in Conshohocken, Pennsylvania.

Source: Reuters.com, SEC Filings.

Financial Summary

Revenues for the third quarter of 2009 increased to $33.3 million compared to $31.2 million in the third quarter of 2008, an increase of $2.1 million, or 6.8%. For the third quarter, the Company’s payor mix was 38% Medicare and 62% commercial. While the increased patient volume drove additional revenue, it was offset by the September 1, 2009, decrease in Medicare reimbursement as well as the declining commercial reimbursement trends as disclosed in the Company’s June 30, 2009, press release. Gross profit increased to $21.5 million in the third quarter of 2009, or 64.5% of revenues, compared to $21.2 million in the third quarter of 2008, or 67.9% of revenues.

On a GAAP basis, operating loss was $5.9 million in the third quarter of 2009 compared to operating income of $1.4 million in the third quarter of 2008. Excluding $1.3 million of expense primarily related to restructuring, adjusted operating loss was $4.6 million in the third quarter of 2009. This compares to adjusted operating income of $4.3 million in the third quarter of 2008, which excludes $2.9 million of expense related to the integration of PDSHeart and other restructuring efforts in the prior year period.

On a GAAP basis, net loss for the third quarter of 2009 was $5.4 million, or a loss of $0.23 per diluted share, compared to net income of $1.0 million, or $0.04 per diluted share, for the third quarter of 2008. Adjusted net loss for the third quarter of 2009 was $2.4 million, or a loss of $0.10 per diluted share, excluding expenses primarily related to restructuring. This compares to adjusted net income of $2.6 million, or $0.11 per diluted share, for the third quarter of 2008, which excludes the impact of integration, restructuring and other nonrecurring charges.

Revenues for the nine months ended September 30, 2009, increased to $107.3 million compared to $86.0 million in the comparable period in the prior year. For the nine months of 2009, gross profit increased to $71.7 million, or 66.8% of revenues, compared to $56.7 million, or 65.9% of revenues, in the comparable period in the prior year.

On a GAAP basis, operating loss for the first nine months of the year was $5.1 million compared to operating income of $3.3 million in the comparable period in the prior year. Excluding $4.5 million of expense related to restructuring and costs incurred in connection with the since-terminated merger agreement to acquire Biotel Inc., adjusted operating loss was $0.7 million in the first nine months of 2009. This compares to adjusted operating income of $8.1 million in the first nine months of 2008, which excludes $4.8 million of integration, restructuring and other nonrecurring charges.

Net loss for the first nine months of 2009 was $4.6 million, or a loss of $0.19 per diluted share, compared to net income of $2.3 million, or $0.10 per diluted share, for the first nine months of 2008. Adjusted net loss for the first nine months of 2009 was $0.1 million excluding expenses related to restructuring and costs incurred in connection with the since-terminated merger agreement to acquire Biotel Inc. This compares to adjusted net income of $5.0 million, or $0.23 per diluted share, for the first nine months of 2008, which excludes the impact of integration, restructuring and other nonrecurring charges.

On a GAAP basis, net loss available to common shareholders, which is derived by reducing net income by the accrued dividends and accretion on mandatorily redeemable convertible preferred stock was a loss of $4.6 million, or a loss of $0.19 per diluted share, for the nine month period ended September 30, 2009, compared to a net loss of $0.3 million, or a loss of $0.02 per diluted share, for the same period last year. The mandatorily redeemable convertible preferred stock, which was issued in part to finance the March 2007 PDSHeart acquisition, was converted to common stock in connection with CardioNet’s March 2008 initial public offering.

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast among 11 polled investment analysts. Against the CardioNet Inc. company.

The 6 analysts offering 12-month price targets for BEAT have a median target of 6.50, with a high estimate of 13.00 and a low estimate of 4.00. The median estimate represents a 25.97% increase from the last price of 5.16.

Source: www.ft.com

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BEAT.W

Investment Highlights

BEAT announced in early November that the Centers for Medicare and Medicaid Services (”CMS”) have not established a national pricing reimbursement rate for mobile cardiovascular telemetry (CPT Code 93229) in the Medicare final rule for the physician fee schedule for calendar year 2010. Reimbursement for mobile cardiovascular telemetry will continue to be carrier priced by Highmark Medicare Services (”HMS”).

BEAT announced in late October that it ranked 288th on Deloitte’s 2009 Technology Fast 500(TM), a ranking of the 500 fastest technology, media, telecommunications, life sciences and clean technology companies in North America. The Company also announced that it ranked 13th on Deloitte’s Fast 50 companies in the Greater Philadelphia region. Rankings are based on percentage of fiscal year revenue growth over five years, from 2004 to 2008. BEAT’s revenue grew 442% during this period. Technology Fast 500(TM) provides a ranking of the fastest growing technology, media, telecommunications, life sciences and clean technology companies in North America. This ranking is compiled from nominations submitted directly to the Technology Fast 500(TM) Web site, and public company database research conducted by Deloitte. Technology Fast 500(TM) award winners for 2009 are selected based on percentage fiscal year revenue growth during the five-year period from 2004 to 2008. In order to be eligible for Technology Fast 500(TM) recognition, companies must own proprietary technology that contributes to a significant portion of the company’s operating revenues. Using other companies’ technology or intellectual property in a unique way does not satisfy this requirement. Consulting companies, professional service firms, etc. are not eligible unless they have proprietary technology that contributes to a significant portion of their operating revenues. Technology Fast 500(TM) award eligibility requirements also include base-year operating revenues of at least $50,000 USD or CD, and current-year operating revenues of at least $5 million USD or CD. These revenues must have more than doubled between 2004 and 2008. Additionally, companies must be in business for a minimum of five years, and be headquartered within North America.

Source: http://www.cardionet.com/index.htm

Technical Analysis

BEAT is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

BEAT’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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