Hythiam Reports 4Q and 2008 Year-End Results

Apr 01, 2009 (Close-Up Media via COMTEX) -- CHCR | Quote | Chart | News | PowerRating -- Hythiam, Inc. has announced financial results for the fourth quarter and fiscal year ended December 31, which include the consolidated results from Comprehensive Care Corp. (CompCare).

In a release on March 31, the Company noted that for the 2008 fourth quarter, the Company reported revenues of $8.6 million, which included $779,000 in revenues from Hythiam's healthcare services business and $7.8 million in revenues from CompCare's operations. During the comparable period a year ago, the Company reported consolidated revenues of $11.8 million, which included $2.0 million and $9.8 million for Hythiam and CompCare, respectively. The $1.2 million decrease in Hythiam's healthcare services revenues was primarily attributable to the Company's decision to streamline operations by reducing operating costs to focus on managed care opportunities. There were a total of 109 patients treated with the PROMETA Treatment Program in the fourth quarter of 2008 compared to 251 patients treated during the fourth quarter of 2007. During the fourth quarter of 2008, there were 26 licensee sites contributing to revenues, versus 50 in the same period last year.

Net loss for the 2008 fourth quarter was $19.3 million, or $0.35 per share, versus a net loss of $8.6 million, or $0.17 per share, in the fourth quarter of 2007. Included in the 2008 fourth quarter net loss was $695,000 of net loss from CompCare's operations and related purchase accounting adjustments and consolidated non-cash charges for depreciation, amortization and stock-based compensation expense of $3.2 million, compared to a $1.2 million net loss for CompCare and $1.5 million in non-cash charges in the same period in 2007. The consolidated net loss for the 2008 fourth quarter also included a goodwill impairment charge of $9.8 million, a $1.4 million other-than-temporary-loss on auction-rate securities and a non-cash gain of $1.0 million from the change in fair value of the Company's warrant liabilities. The consolidated net loss for the 2007 fourth quarter also included a $3.5 million non-cash gain for the change in fair value of the outstanding warrant liability and a non-cash charge of $741,000 recorded on extinguishment of $5 million of debt outstanding.

"We have recently taken a number of steps to deliver our Catasys offering to health plans and other payors," said Terren Peizer, Hythiam's Chairman and CEO. "We have strengthened our management team by adding Kelly Ellston, SVP of Operations, to lead Catasys implementations for expected contracts with payors. We have reduced emphasis on our private pay business to focus on managed care initiatives to reach a broader market and because the economy has significantly impacted consumers. In January 2009, we sold CompCare because its operations required significant capital that we felt was better directed toward our Catasys offering. During the fourth quarter, we reduced our operating expenses significantly, and we continue to monitor our expenses and reduce costs as necessary, while maintaining critical resources to execute our objectives.

"Although we have not yet closed agreements as anticipated, we continue to work closely with prospective clients on meeting their requirements, which have changed often or been delayed due to competing priorities, evolving processes and challenges in their businesses. However, health plans are still focused on working with us as they are currently coping with significant challenges such as rising substance dependence rates due in part to the difficult economy, increased medical costs due to recently passed federal parity legislation, and overall budget constraints. They are monitoring and controlling costs, in part by seeking new, cost effective programs. Catasys is well-positioned to provide substance dependence solutions with its integrated medical and behavioral offering that is focused on improving care for patients, and improving outcomes and reducing costs for payors."

The Company's audited financial statements for the fiscal year ended December 31, included in the Company's Annual Report on Form 10-K, filed , March 31, contained a going concern qualification from its independent registered accounting firm, BDO Seidman. The Company makes this announcement in compliance with NASDAQ Marketplace Rule 4350(b)(1)(B), which requires separate disclosure of receipt of an audit opinion containing a going concern qualification. This announcement does not represent any change or amendment to the Company's financial statements or to its Annual Report on Form 10-K for the fiscal year ended December 31.

In an effort to enhance the Company's ability to fund ongoing operations, management reduced yearly operating expenses by approximately $10 million in the fourth quarter, compared to third quarter 2008 spending levels, resulting in total budgeted operating expenses of $17.7 million for 2009. The Company will continue to monitor and reduce expenses as necessary, and is focused on signing new agreements with health plans for its Catasys offering. In the event that such agreements materialize and external financing is unavailable, the Company has also developed additional contingency plans, including cost reductions that it expects will allow it to maintain all critical operating activities under new Catasys contracts through the remainder of fiscal year 2009.

"We have recently announced the results from two completed double-blind, placebo control studies on the impact of PROMETA alcohol dependent subjects, and have demonstrated statistical significance for key measures," said Rick Anderson, Hythiam's President and COO. "The data from these and other PROMETA studies have demonstrated consistent results, and should be beneficial in leading prospective clients to adoption of Catasys. Substance dependence is a chronic disease and our programs must address both the early treatment issues as well as improve long term compliance to prevent relapse.

"We remain dedicated to achieving our objective of 3 million covered lives for our Catasys offering, and continue to work through multiple opportunities in every stage of the sales pipeline. We recognize that we need to take the significant interest payors are expressing in Catasys, and combine it into necessary steps that shorten the sales cycle. We are making every effort to impact and improve substance dependence treatment through our integrated medical and behavioral Catasys offering, which should ultimately drive adoption," concluded Anderson.

In the release, the Company noted that for the year ended December 31, revenues were $41.2 million, which include $6.1 million in revenues from Hythiam's healthcare services operations and $35.2 million in revenues from CompCare's behavioral health managed care operations. In the comparable 2007 period, consolidated revenues were $44.0 million, which included $7.7 million and $36.3 million for Hythiam and CompCare, respectively. The decrease in Hythiam's healthcare services revenues resulted mainly from the Company's decision to streamline operations by reducing operating costs to focus on managed care opportunities. For the year-ended December 31, there were 49 licensed locations that contributed to revenues, compared to 70 sites in 2007. The total number of licensed sites at December 31, was 84, compared to 101 sites at the end of 2007. For the year ended December 31, the Company's average revenue per patient treated was $6,455 compared to $6,374 per patient in 2007.

Net loss for the year ended December 31, was $50.4 million, or $0.92 per share, compared to a net loss of $45.5 million, or $0.99 per share, in 2007. The net loss in 2008 included $6.1 million of net loss from CompCare's operations and related purchase accounting adjustments, compared to a $4.2 million net loss for CompCare in the same period in 2007. Consolidated non-cash charges for depreciation, amortization and stock-based compensation expenses were $13.1 million in 2008, compared to $5.9 million for similar expenses in the year-earlier period. The consolidated net loss in 2008 also included a goodwill impairment charge of $9.8 million, a $1.4 million other-than-temporary-loss on auction-rate securities and a non-cash gain of $5.7 million from the change in fair value of the Company's warrant liabilities. The consolidated net loss in 2007 also included a $3.5 million non-cash gain for the change in fair value of the outstanding warrant liability and was partially offset by non-cash charges of $2.4 million for an impairment loss and $741,000 for the extinguishment of $5 million of debt outstanding.

As of December 31, the Company had consolidated cash, cash equivalents, and marketable securities of approximately $11.0 million, including $1.1 million held by CompCare, but excluding auction rate securities of $10.1 million.

Hythiam provides, through its Catasys offering, behavioral health management services to health plans, employers and unions through a network of licensed and company managed healthcare providers.

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