x min read

Catasys, Inc. (OTCMKTS:CATS) Is Racing Towards A Full National Rollout

Catasys, Inc. (OTCMKTS:CATS) Is Racing Towards A Full National Rollout
Written by
Chris Sandburg
Published on
July 13, 2016
Copy URL
Share on LinkedIn
Share on Reddit
Share on Twitter/X
Share on Facebook
InsidrFinancial

Cost savings in the healthcare space is big business. At the Federal level alone in the US, the 2016 spend came in at $1.12 trillion. Add in State and local spend, and the bill comes to circa $1.44 trillion, or 22% of total 2016 spend. If a product or service can contribute to a reduction in these figures, it's got a great chance in today's markets. With its OnTrak program, Catasys, Inc. (OTCMKTS:CATS) is attempting to do just that, and so far, it's done pretty well.The company is up 97% YTD, and is currently trading just shy of $0.90 resistance. Mid session on Wednesday in the US, it's up nearly 5% on its open, and could run further if the bulls remain in control.As a macro level description, Catasys is a healthcare management service company based in Los Angeles, California. It designs plans that help healthcare services (insurers, individual facilities, etc.) save money. More specifically, it has designed a program called OnTrak, which, and to quote Catasys's own description, is designed to "improve member health and, at the same time, lower costs to the insurer for underserved populations where behavioral health conditions cause or exacerbate co-existing medical conditions."It's essentially a treatment and monitoring plan designed to help people that are substance abusers, or have mental health issues, or similar, in the hope that the cost of the program to insurers and healthcare facilities is offset by the overall cost of that patient's treatment, if he or she were to continue to abuse the substance in question.Current focus is rollout, and Catasys has been relatively successful to-date. Its program is in twelve states in the US, including the Carolinas, Virginia, Texas, Florida and Kentucky, and with the support of a national agreement signed with Humana late last year, should roll out to the remaining states across the next twelve months.Just this morning, the company announced the inclusion of Georgia to the list. Rick Anderson, Catasys' President and COO had this to say alongside the announcement:

Georgia represents the twelfth state in which we have announced the launch of the OnTrak-H program since announcing our national agreement with the associated leading health plan partner.

The market potential here is huge. Somewhere in the region of 20 million US individuals meet the criteria for substance abuse, and around 43 million suffer some level of anxiety disorder. More than 15 million suffer at least one major depressive episode per year. All of these individuals would qualify for the OnTrak program on some level, and data from Catasys's program suggests it can reduce healthcare costs associated with each individual by 50%.It's a no brainer.Well, not quite. There's a huge dilution risk here. Catasys loses money every quarter, and pays interest on a $900,000 promissory note it issued in March this year. The promissory note affords an entity called Acuitas the opportunity to purchase an aggregate 450,000 shares of common stock, at an exercise price of $0.47 per share, across the next five years. As things stand, this is already a 32% discount to open market price. As the company establishes its rollout going forward, and gains strength on the back of this, the discount will increase. Further, there are going to have to be more financings (and likely of similar structure) near term. Catasys' cash balance came in at $262,000 as of March 31, and this doesn’t even cover its quarterly interest rate expenses. Revenues of circa $700,000 quarterly (likely a little more for the current quarter based on the additional roll out states) negate some of this financing requirement, but far from the entirety.It's essentially an exercise in fast growth, with as little dilution as possible. If the company can get the balance right, there's plenty of reward given the market potential detailed above. Stick with us as we track its efforts to do just that – subscribe to our newsletter below.Disclosure: We have no position in CATS and have not been compensated for this article.

Discover Hidden Gems

Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.