Ontrak Inc (OTRK) 2007 Q4 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Greetings, ladies and gentlemen, and welcome to the Hythiam fourth quarter and fiscal 2007 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Lisa Wilson, Investor Relations for Hythiam. Thank you, Ms. Wilson. You may begin.

  • - Insight Communications, IR

  • Thank you. Good afternoon, everyone, and thank you for participating in the fourth quarter earnings results conference call. My name is Lisa Wilson of Insight Communications, Investor Relations for Hythiam. In a moment I will turn the call over to Chairman and CEO Terren Peizer who will introduce the other participants. Before that I would like to call your attention to the following Safe Harbor statement.

  • Statements which will be made during the course of this call that are not historical in fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, forecasts, and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by the forward-looking statements. Similarly statements herein that describe the Company's business strategy, prospects, opportunities, outlook, objectives, plans, intentions or goals are also forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors that are detailed in the Company's SEC filings. In addition the statements in this call are made as of March 17, 2008. The Company expects that subsequent events or developments will causes its views to change. The Company undertakes no obligation to update any of the forward-looking statements made herein whether as a result of new information, future events, changes in expectations or otherwise. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to March 17, 2008. With that I would like to turn the call over to Terren Peizer. Terren?

  • - Chairman, CEO, President

  • Thank you, Lisa. Welcome everyone and thank you for joining Hythiam's 2007 fourth quarter and fiscal year end conference call. Presenting with me on the call today is Chuck Timpe our Chief Financial Officer. Also available for Q&A will be other members of management including Rick Anderson; Chris Hassan, Tony LaMacchia, Sanjay Sabnani and our newest arriving Dr. Gary Inginito, our Senior Vice President of Scientific Affairs. I will review the quarter with you first and then turn over the call to Chuck for his comments, then he'll turn it back to me and then we'll follow up and take your questions.

  • Before beginning I'd like to emphasize that Hythiam's business can be looked at from two angles, a healthcare services business with the most rigorous approach to treating and managing high cost disease state or as a technology business with assets that lend themselves to the development of a distinct product offering based on the cornerstone of unique ability to reverse brain disregulation. I will touch upon this later in the call when we discuss the significant recent patent wins that we have enjoyed. Hythiam had many accomplishments in the fourth quarter and throughout 2007. Most importantly the benefit of our patented PROMETA treatment program are becoming increasingly clear based on the accumulation and combination of pilot outcomes and study data. By using our treatment providers are able to increase retention and program compliance while providing release from cravings to their patients.

  • Another recent validation and I would like to share with you is the announcement last week by Community Bridges and the results of its pilot study to assess the promoted treatment program as part of a treatment approach for methamphetamine addiction in the Medicaid population that it serves in the state of Arizona. Outcomes were observed for participants to receive either PROMETA Plus Community Bridges Standard manualized, intensive out-patient counseling that consisted of a matrix based approach. Which is the industry standard of care for addiction or participants who received only the matrix based intensive out-patient counseling. I am pleased to note that the group receiving the medical portion of PROMETA with intensive out-patient counseling remained in the program at a much higher level of retention. They also showed a meaningful reduction in cravings over the sixteen-week pilot period. Retention in treatment programs and reduced cravings are important outcome measures in behavioral aftercare as they can lead to improved chances for long-term recovery.

  • Community Bridges has historically struggled to retain this methamphetamine dependant, typically mobile, difficult to treatment population as participants in its behavioral intervention program. Typically only around 2 to 3% of those accepted for treatment are able to cope with their cravings and complete treatment. By leveraging the medical component of our PROMETA treatment program community bridges now has the prospect of a compelling edition to its standard of care treatment. We believe that results from the pilot may support the discussion of adoption in the state of Arizona and by Medicaid plans and HMOs throughout the country.

  • The results of the Community Bridges pilot when coupled with the top line results from Dr. Urschel's double blind placebo controlled study which showed that the pharmacological component of the PROMETA treatment program versus placebo had a statistically significantly reduction of cravings for methamphetamine further validate that our program reduces cravings and improves retention. It also allows recipients to engage more actively in their psyche social counseling and thereby improves treatment outcomes. The Dr. Urschel study was also similar to Community Bridges pilot in that it included matrix in the psyche social regimen. I would also add that Dr. Urschel has been accepted to present the results of this study at two prominent conferences in late spring and early summer of 2008.

  • Beginning in the first half of fiscal 2008 we anticipate completion of four additional double blind placebo controlled studies including Dr. Walter Ling's study out of the UCLA of methamphetamine dependent individuals. Dr. Jeffrey Wilkins study out of Cedars Sinai medical center here in Los Angeles as well on alcohol dependent individuals. [Dr. Bocelli] study on alcohol dependent individuals, and doctor Raymond Anton study out of the Medical University of South Carolina on alcohol dependent individuals. The studies being conducted by Dr. Ling and Dr. Anton could be completed and presented at major industry conferences in the late spring and early summer of 2008. We believe that the release of data from these and other studies will continue to drive increased adoption by commercial managed care entities and have a positive impact on our private pay business lines as well.

  • Hythiam continues to file new intellectual property worldwide and in January the United States Patent and Trademark Office issued Hythiam's U.S. patent which contains claims using a composition of matter for reducing a person's desire to drink alcohol. This adds to our notification of allowances and grants for inventions underlying the PROMETA treatment program in over 28 countries including the U.S. and 19 European Nations. We believe that the value of our intellectual property position is substantial, especially in the context of what this intellectual property is worth in the life sciences and pharmaceutical fields.

  • Recently in the media there have been many articles about the association between addiction and anxiety as well as the role of the GABA system in addiction and anxiety. It appears the scientific community is now catching up to what we have been establishing and validating for the past few years. Hythiam is the pioneering Company exploring and identifying GABA disregulation as a key component of understanding how to treat addiction. In addition it is becoming increasingly well established that the GABA system plays a role in generalizable anxiety disorders. With this growing body of evidence we believe that our repository of intellectual property will have substantial and increasing value to the life sciences and pharmaceutical fields.

  • Our entirely distinct applications for composition of matter and our use patents for treatment approaches for multiple CNS indications in which GABA receptor disregulation may serve as a critical pathology are very meaningful. As a result we are actively pursuing a strategy to significantly monetize these assets separately from our current services focus. As we progress on our plan we will provide appropriate details in due course. CNS. I will now turn the call over to Chuck to provide a quick overview of our financials.

  • - CFO

  • Thank you, Terren. For the fourth quarter 2007 the Company reported revenues of $11.8 million which included $2 million in revenues from Hythiam's healthcare services and $9.8 million from CompCare's operations, compared to Hythiam's revenue of $1 million in fourth quarter of 2006.

  • The net loss in the fourth quarter 2007 was $8.6 million or $0.17 per share, compared to a net loss of $10.8 million or $0.27 per share in the same period last year. Included in the 2007 fourth quarter net loss was $1.2 million net loss from CompCare's operations and related purchase accounting adjustments. The consolidated net loss for the 2007 fourth quarter included non-cash charges for depreciation, amortization and stock-based compensation of $1.5 million which was equal to the amount incurred for similar expenses in the fourth quarter of 2006. The net loss for the 2007 fourth quarter also included noncash charges of $741,000 for debt extinguishment and a non-cash gain of $3.5 million from the change in fair value of the outstanding warrant liability.

  • As of December 31, 2007, the Company had consolidated cash, cash equivalents and marketable securities of approximately $47 million, including $6.3 million held by CompCare. For the fiscal year 2007 revenues were $44 million which included $7.7 million in revenues from Hythiam's healthcare services and $36.3 million from CompCare's operations compared to Hythiam's revenues of $3.9 million in fiscal 2006. The increase in Hythiam's healthcare service revenues was driven by an increase in the number of patients treated across all of Hythiam's markets, expansion of the number of contributing licensees, administrative fees from new licensees, and other revenues from the commencement of international operations and licensees with third party payers.

  • The number of PROMETA patients treated in 2007 increased by 63% to 922 compared to 567 patients in 2006. Managed treatment centers including PROMETA centers contributed 239 PROMETA patients in 2007 and 31% of Hythiam's healthcare services revenues for the year. The Company reported a net loss of $45.5 million, or $0.99 per share, for the year ended December 31, 2007; compared to a net loss of $38.3 million, or $0.96 per share in 2006. The net loss for fiscal 2007 included $4.1 million loss from CompCare's operations and purchase accounting adjustments and consolidated noncash charges for depreciation, amortization and stock-based expense was $5.9 million compared to $5 million for the prior year. Hythiam's consolidated net loss for 2007 also included the fourth quarter noncash charge of $741,000 for debt extinguishment and a noncash gain of $3.5 million from the change in fair value of outstanding warrants and a third quarter impairment charge of $2.4 million.

  • For the year ended December 31, 2007, there were 70 licensed locations that contributed to revenues at some level compared to just 41 locations in 2006. In 2007 the number of licensing agreements with physicians and healthcare providers increased by 40, bringing the total number of licensed sites to 101 at December 31, 2007, as compared to 61 license sites at the end of 2006. For the year the Company's average revenue per PROMETA patients treated was relatively unchanged at $6,374, compared to $6,357 per patient in fiscal 2006. I will now turn the call back over to Terren.

  • - Chairman, CEO, President

  • Thanks, Chuck. I'd like to add that much of our revenue in 2007 was largely based on our private pay business segment. Despite reducing operating expenses that support private pay by 50% we are maintaining private pay revenue levels into the first quarter of 2008, at the same levels as in the fourth quarter. In anticipation of peer review publication of doctor Urschel's double blind placebo controlled study and with results of data from other double blind studies we expect private pay revenue to grow during the remainder of 2008. The accumulation of published peer review data will enable us to articulate the advantages of the PROMETA treatment program to consumers and referral sources and as a result of not having this data we have not yet made to date any claims to drive marketing and ramp revenue.

  • Furthermore, due to the high out of pocket discretionary expense involved, our private pay business must be evaluated in the context of the current economic environment. The private pay substance abuse treatment industry is not immune to the pressures of a weak economy and we have learned that several local to Los Angeles Malibu based high-end residential treatment centers have either ceased or greatly reduced operations in 2008. We continue to focus on areas in private pay where we have traction and strength but also plan to leverage our remaining field force throughout all of our business segments. Our field force is benefiting from this broader experience and is gaining positive momentum by integrating into the community treatment networks in specific states such as California, Florida and Texas.

  • We continue to have third party licensees both for profit and nonprofit and our Company managed PROMETA centers. We currently have third party licensees in the U.S. and abroad but the PROMETA centers are only in the U.S. at this time. The business segments that are addressed by these providers include private pay, government and managed care in the U.S., and private pay in Europe and Panama. The products that we have available to service these segments include both PROMETA treatment program as well as our substance abuse disease management program. Importantly however we are excited about the opportunities in disease management because we believe it provides us with a consistent contracted business that can generate significant revenue and create an operating leverage opportunity.

  • Every year due to substance abuse billions of dollars are lost in medical costs and employers and organized labor throughout the nation are hindered by employee absenteeism, job related injuries and lost productivity. Historically part of the challenges in addressing substance abuse has been the paradigm associated with the fault of the user, the negative stigma commonly associated with substance abuse and the fact that substance abuse is traditionally cheated with a behavioral focus. Third party payers have historically carved out substance abuse population to behavioral health organizations who have sought to drive down the cost of substance abuse treatment without focusing on the resulting high medical costs incurred by the parent payer.

  • While some large payers are trending toward carving in behavioral health to achieve greater operating efficiencies there remains little integration of behavioral and medical approaches to treatment of substance abuse populations. Even with better integration the lack of effective solutions for treating substance abuse within current treatment infrastructure have not made this an area of significant focus. Why focus on the cost of things you have little ability to control? This leaves a largely untreated or under treated substance abuse population for a payer which results in frequent emergency room visits, increased inpatient hospital utilization and long hospital stays in addition to comorbidities or other chronic disease states that the population may not be compliant in addressing. The consequence is that medical costs remain high and the burden continues to be shouldered by the payer.

  • Payers responsible for medical costs recognize that the cost of an untreated substance abuse population are significant and therefore the industry has an unmet need for an integrated solution to address substance abuse treatment in an effort to reduce overall medical costs. Payers are also aware of the impact of untreated substance abuse on the cost of chronic disease due to noncompliance with medical treatment making these patients even more expensive to treat. It is estimated that chronic disease treatment costs can be up to 80% of all medical costs so factors that multiply the cost are extremely expensive.

  • Individuals affected by substance abuse are also more likely to suffer from other medical and mental health conditions. For example, some studies suggest that substance abusers are twice as likely to incur claims for injury and hypertension. As part of our predictive modeling development efforts and as a demonstration of value to our customers we have been using our proprietary software model to evaluate commercial health plan records over a three-year period. The preliminary observation have come from this analysis to further support that substance abuse is significantly impacting health plan costs. Based on the analysis hospital readmission rates for substance abusers are equivalent to those for heart disease and are second only to psychiatric disorders and cancer. If these rates are considered in the context of cost, there is a clear case for interventional treatment of the relapsing substance abuser.

  • Increasingly literature and thought leaders have recognized that substance abuse is a disease and payers see the logic for disease management to address this complex disorder in the same way they address their other chronic conditions. For the first time we are offering payers a solution to the high medical cost of untreated and undertreated substance abuse populations by managing these groups in a cost-effective manner on their behalf.

  • Our substance abuse disease management offering can address a significant challenge and unmet need in the industry. As pioneers in substance abuse disease management and with our proprietary based disease management solution, we will be able to manage a payers substance abuse population through identification and enrollment, care management and coaching, experienced phase treatment and treatment algorithms designed to take advantage of, reduce cravings and better retention and with a specialized network of providers. All across an IT platform that enables efficient info sharing and treatment integration.

  • Our disease management programs are designed for increased enrollment, longer retention and better outcomes so it can help payers achieve lower cost in the form of fewer ER visits, reduced inpatient utilization and hospital readmission rates and help employers and organized labor reduce medical costs, absenteeism, job related injuries from the workplace thereby improving their productivity. In addition to engaging our first commercial reimbursement agreements with third party payers in February, 2008, we continue to garner interest in our disease management offering. We are currently engaged in discussions regarding our disease management services with approximately ten significant third party payers, the vast majority of which include health plans and we will update you accordingly as we sign contracts.

  • In an effort to further augment our reach, we recently welcomed to our executive team Ian Worden, Senior Vice President of Operations who joins us from LifeMasters, a leading national provider of health improvement and disease management services. Ian brings significant disease management experience to the Company and we now have the necessary talent in place to help fully operationalize our existing opportunities and to continue building enhanced functionality and scalability. Ian has been invaluable in addressing prospective customer questions about operational aspects of the disease management program.

  • Recognizing that a substantive value-added disease management program must have multiple components to integrate into a payer we have been diligently assembling the pieces. CompCare to provide the infrastructure, predictive modeling solutions, IT infrastructure, proprietary content and a network of providers to deliver on this promise. Now with the scientific validation of PROMETA continuing and expected throughout 2008 and beyond we have the pieces in place for initial traction and accelerated adoption. Consistent with our realignment and focus towards deploying our disease management offering we streamlined our operations in January of 2008 which is expected to result in an overall reduction of 25 to 30% of cash operating expenses for the fiscal year ending December 31, 2008.

  • We continue to leverage our existing resources to accomplish our strategic objective and anticipate higher revenues for 2008 based on expected agreements from our disease management offering on top of our growing private pay revenue base. Within these reduced operating expenses we are continuing to invest in our disease management solution. We made the decision to focus on where we could provide the best customer benefit with the most efficient near term leverage for us. We are pleased with the level of interest that third party payers are showing in our disease management solution. We are focused on signing up an initial group of third party payers and we expect that it will take time to finalize contracts and to implement and operationalize disease management for our initial customers. As we demonstrate better clinical outcomes and our return on investment over time we will create a foundation of reference customers and these efforts should result in broader adoption of our disease management programs. In those customers and across the industry.

  • The sales cycle involving commercial plans and other third party payers can be long and somewhat unpredictable and we recognize that there is a time factor involved in translating traction into revenue. But the leverage we are gaining with the disease management platform is worth the time required to engage a payer. In addition the results from our remaining double blind placebo controlled studies which we expect will be completed in 2008 and beyond should facilitate our ability to execute our businesses development initiatives. The Company is in a strong position with a healthy balance sheet, scientific validation, and established clinical relevance across the country.

  • Our leadership team remains focused on the most efficient opportunities for 2008 and beyond and we are confident that as PROMETA is leveraged in our unique business model we can preserve capital and effectively allocate resources towards the greatest revenue growth opportunities. Overall there are ample revenue opportunities in the marketplace across all of our business segments. Although we don't yet have significant contributions from our disease management offering we are on target to achieve our budgeted revenue this quarter and are achieving our desired net cash burn. We will continue to target our net burn to effectively modulate operating expenses to match revenues in each of our business segments. We will review our operating expense and revenue match quarterly with a focus on reducing expenses as necessary to more effectively deploy and leverage our resources across our business segments.

  • As we continue to make progress in all of our business segments we are also learning that different levels of available data have an impact on customer perception and how likely they are to proceed with utilizing PROMETA and our disease management offering. Some prospective customers value the data that is currently available. And others are waiting for further results from our double blind placebo controlled studies. Thus the eventual publication of Dr. Urschel's double blind placebo controlled study in a peer review journal will help provide further context for scientific validation to our prospective customers.

  • Each validating result be it top line or published will result in adoption by yet another set of customers. The accumulation of outcomes and data continues to validate PROMETA by showing that patients who are retained in treatment are no longer craving are more able to engage in behavioral therapy thereby improving treatment outcomes and lower cost to the healthcare system. As we have seen at Community Bridges, it is clear how PROMETA could be utilized in the right structure whether as part of an existing treatment program or as leverage in our disease management offering. We will continue to focus on engaging third party payers with our disease management offerings and will leverage our existing resources without incurring significant additional capital outlays. We currently estimate that our existing cash base will be sufficient to fund our operations for at least the next two years or until we achieve positive cash flows and we are utilizing our existing resources across our business segments to execute our business strategy.

  • Lastly, and to reiterate we fully anticipate the results of upcoming double blind placebo controlled studies will add unique differentiating elements of validity to the ProMeta treatment program. We are excited about our opportunities. I look forward to sharing our future successes with you. At this point the management team and I will be happy to take any questions that you may have. Thank you for your time. Operator?

  • Operator

  • (OPERATOR INSTRUCTIONS) You're first question is from line of Jonathan Aschoff with Brean Murray.

  • - Analyst

  • I had a couple of questions. One was has there been any further analysis done by Urschel on the 30-day trial? And I was wondering, given the flatness of 4Q over 3Q you had put out a publication a few months ago saying record bookings in Jan. '08 and record revenues in December. I was wondering, does 1Q, '08 look like it would be significantly higher than 4Q '07 given that disclosure a few months ago?

  • - Chairman, CEO, President

  • Okay, well, first, on the Urschel, obviously when we reported top line results, we had reported the statistical significance versus placebo in the -- amongst the completers and cravings. Now, there was some talk that we shown it in completers and not intensive treat basis and but that again, as we said at the time of the call was a standard in the industry and the advice we got from our Scientific Advisory Board, that would be those that comprise actually the peer review in a peer review publication because that was standard operating procedure. That said, I will point out that an intends to treat basis was also calculated and was also achieved the same statistical significance versus placebo in reducing or eliminating cravings.

  • The second part of your question, we reported that we had a record month in December which was, did still create a flat quarter. There were many articles at the time discussing that expensive elective medical procedures were declining across the country because of the economy. We saw it in the residential treatment centers, the private pay oriented residential treatment centers throughout the country and here in Los Angeles. We did have a tremendous boost in December. That was followed by a tremendous, also a record month in January. December seasonally has been weak because of the holiday concentration, people deferring treatment until after the new year. It's fair to say that we did see a bump related to our 60 Minutes piece in December and January. We have again set out a budgeted revenue for the first quarter with the lower expenses that resulted from our plan of streamlining in early January and it's, obviously there's still some time left in the first quarter but again we are on budget and we are achieving the revenues we set out and we are managing again as we reallocate resources to disease management we are managing the net burn to achieve the two years of cash that we'd like given our model and that said we did it without reducing any expenses in the first quarter because we were achieving our revenue target.

  • - Analyst

  • All right. Thanks a lot, Terren.

  • - Chairman, CEO, President

  • You're welcome.

  • Operator

  • Our next question is from the line of Ryan Daniels with William Blair.

  • - Analyst

  • Yes, good afternoon, guys, just a couple of quick questions. Terren, could you just go over again what you mentioned with the ten health plans? I didn't catch it there. Is that ten health plans that are other organizations that you are currently working with via RFP processes or the PROMETA disease management protocol or those that have expressed interest, just a little more color there?

  • - Chairman, CEO, President

  • Okay, the ten plans, I think actually if it breaks down it's, when I say it's mostly, it's like seven or eight of them are health plans and two very high profile unions. That's how the breakdown would be. And we are, to describe where we are in it, each one is at a different point in their process. A lot of them have given the go-ahead but are working through our internal process. Some are waiting on publication of the Urschel data. One or two may be waiting on the Ling data. As we said they have various levels but I, all of those are people that have expressed, I think what's clear, they have told us that we have the right model. They told us that there's a need for their product. They have told us that they are interested in the product. And I think it's just working through their process. That's just the first wave.

  • Now we are developing a second wave f people that are interested in the disease management product and in fairness we just recently completed the product with the IT software platform that has a lot of proprietary nuances and, given that, for the first time -- actually, we are probably just finally completing it this week. But that said we just have all the pieces gathered that started with CompCare then the Urschel scientific validation, now the IT platform to really have our completed product to sell. But I would say that the people, the first ten definitely are validating our model and it's just a matter of time until we start seeing contracts and then it's fair to say once we see these early adopters we do know of others that will jump on board.

  • - Analyst

  • Sure. And then it sounds like if I'm understanding your prepared comments correctly one of those ten has already given you some access to claims data and that's what you've used to validate the model and potential cost savings that they could achieve using the PROMETA disease management protocol in regards to medical cost and readmissions and things of that nature so that one I would assume is a little further along or they remain highly interested in the product?

  • - Chairman, CEO, President

  • I think in terms of -- we have composite claim data over the country. I can say that we are in the process of getting specific databases from health plans to run it through our completed software platform. We are waiting until some final pieces that actually are in some places this week and as a result we will be running data shortly and they are specific plans. That hasn't stopped the process, though. Over the composite plan across the country, of course every state will be different in its cost. Over the composite plan over the country which obviously has more value to a national health plan than a particular regional plan, I think they've seen an assimilation and the predictive modeling enough to know that there's substantial medical cost savings with the result of the PROMETA disease management program.

  • - Analyst

  • Great. A couple more quick once and I'll hop off. Just on the Arizona pilot or program you did versus the current method of care, standard of care, was there any reason other than keeping it similar to do PROMETA on an inpatient basis versus it's typical out-patient?

  • - Chairman, CEO, President

  • I'm sorry, can you--?

  • - Analyst

  • From the way I'm reading the pilot program with the Medicaid eligible participants in Arizona it looks like PROMETA was provided on an inpatient basis versus the typical out-patient therapy?

  • - Chairman, CEO, President

  • Correct, and that was to match, Gary -- Dr. Gary Inginito might want to add something, or Rick Anderson might want to add something however that was to match the matrix group because they had three days inpatient detox as well. So we were trying to keep it as equal as possible between the comparative groups.

  • - Analyst

  • That's what I assumed. Then last question, you mentioned two of the double blind placebo controlled studies are expected to be by mid year. Do you have any thoughts on when we might see the Wilkins and full Bocelli data? Is that something year end, or can that spill into '09? just curiosity there.

  • - Chairman, CEO, President

  • Right now and as you guys know these are independent studies. They are their study designs. It's their data. So we are somewhat at the whims of their own pace, it's not us allocating more resources to speed up the pace which is a lot of times we wish we had done in the past but were unable to. That said, so if we go to the lineup, just to reiterate, we expect in the not too distant future the Urschel publication which will be incredible value to us and then we expect the Ling data in the late spring and then the Anton data in the early summer and then I, right now based on estimates we expect the Vol Bocelli data somewhere in September-ish, September, October-ish. And then the Wilkins possibly before year end but most likely I would say the first quarter of '09.

  • - Analyst

  • Very helpful. Thanks.

  • Operator

  • Our next question comes from the line of Ram Selvaraju with Rodman and Renshaw.

  • - Analyst

  • Thank you for taking my question. Can you hear me?

  • - Chairman, CEO, President

  • Yes.

  • - Analyst

  • Okay. Just a few guidance related items if I could get some additional clarity here. Are you at this time able to provide some guidance as to what level of growth you expect to see over the course of 2008 and the number of licensed locations that you expect to end the year with?

  • - Chairman, CEO, President

  • Well, Chris hassan will take the license locations. Now that's going to vary a lot with managed care contracts and disease management contracts but can talk in terms of private pay.

  • - SEVP

  • Sure, in terms of private pay we probably -- we are planning to continue to license in the areas where we have the resource. The quality of the licensees that we continue to license is improving and they are addiction experts that are looking for a new modality or a new tool to be able to use in their patient populations and they are frustrated with the outcomes they are currently seeing. That being said, I don't believe that we will continue to license at the exact same rate as we did last year but the rate should remain pretty healthy. We have a number of providers that are in process right now. Both on a regional and even we've engaged some early discussions with some national providers. But preliminarily I would say you should be able to see something about 75%, 60, 75% of the rate that we had last year.

  • - Analyst

  • All right.

  • - SEVP

  • As we engage more managed care contracts as we begin to see those and come in with the DM product we will have to address the needs of the individual opportunities with the payers that -- the providers that are in their networks as well as augment those with the providers that we already have in our network currently. Okay, does that answer your question?

  • - Analyst

  • Yes, and also I just wanted to get a little bit more color on what the national providers are looking for in terms of double blind placebo controlled data? Have they given you an indication that they would be willing to come on board post the release of the Ling data, i.e. are they waiting for that or have they given you an indication that the Urschel data is sufficient or are they waiting for the publication of that data, are they looking for additional details that weren't included in the top line or is it a mixture of both?

  • - Chairman, CEO, President

  • I will let Rick Anderson chime in but let me just start off buy saying that I would say it's a mixture. Certainly there's some national health plans that have engaged and have not brought up the the the condition of waiting for the Ling double blind data. That said we, there are four, five, depending how you look at it, but I think approximately five national health plans and we certainly want to be talking to all of them. I can't say that the ones we are not talking with aren't -- I shouldn't say talking with, we are talking with everyone but in terms of engaged in a process. I can't say that they are not waiting on the Ling data. I have no idea. But there are some plans that as I've stated, there are some plans that are -- but I wouldn't say it's broken down national versus regional that they are. Rick, you want to add anything.

  • - SEVP

  • No, I would agree with that.

  • - Analyst

  • Okay. And with respect to revenue trends per patient, could you just go into that a little bit and give me sort of an idea of how you expect the different sort of tiers of patient, per patient revenue levels to change going forward, if you expect to see a significant difference than percentage breakdowns there? And what impact this is likely to have on the average revenue per patient going forward?

  • - Chairman, CEO, President

  • Well, I will let Chris Hassan--.

  • - SEVP

  • We've seen in the last half of last year we've actually seen an improvement in the average revenue per patient. What we will see through the 60 minutes presentation there was a real clarity with the patients were calling up and contacting us and self referring themselves there was a real clarity as to what the product was, what the program was, what the pricing was. So there was very little presentations of people who were indigent or were financially challenged so that refused up propped up the revenue per patient as it were. We're seeing that remaining this year. We do have a very robust patient assistance program that allows patients to either finance or to be able to engage the treatment program at a reduced cost but realistically right now we've seen it remain pretty fixed and I think we also detailed that out in the call earlier today. So we can't foresee what the economy is going to do in the long-term throughout this, but currently I can only speak to what we are seeing in the short term. It's staying pretty firm.

  • - Analyst

  • Okay. And I just wanted to ask one other thing which is with respect to the acceptance of cravings and the connection between reduction in cravings and reduction in actual usage, what are you seeing in currently in your talks with both providers as well as addiction experts with respect to how well accepted the connection between cravings and usage is and is there any sort of specific support maybe from NIDA or NIDA affiliated experts that you can draw upon in your conversations with these individuals to convince those who may not be 100% convinced?

  • - Chairman, CEO, President

  • Well, it's interesting, thank you for asking that question because it's something that comes up from time to time and I find it one of the major paradoxes. In fact just on the cover of a recent behavioral health magazine it said, addressing cravings. And it's kind of still like the last frontier that we are not really doing too we will with. I think it's fair to say that NIDA, if you look at all the NIDA studies they are all focused, they are called cravings studies. NIDAs focus on cravings spends $1 billion a year on cravings. Most of the thought leaders and scientific leaders all focus on cravings as well. And I would say that amongst the clinicians and the health plans, et al, they get it; cravings is the leading and it's a publication, cravings is the leading determinant of relapse. These are facts. It's not speculation.

  • Now obviously we see in the Community Bridges pilot that there is a clear connection between cravings and use. We assume that the 90, and I will let Dr. Inginito and Rick and Chris chime in but we assume that the 99 to 100% of the patients that dropped out of the matrix only arm were using. Whereas we saw over a longer period of time, and whether it's 54% down to 28%, and most studies are done over a twelve-week time frame, not a sixteen-week time frame in a very mobile Medicaid population that might not even have a home address, we see that the PROMETA patients were retained into treatment and we also see that those that were retained weren't using by and large. So there is, we have shown in that the correlation between cravings and use. We anticipate that in the UCLA data you will see the correlation between cravings and use, although as we've said many a time that patients could want to stop and not be able to stop because of their cravings, conversely there are people that crave that -- people that aren't craving that still want to use for other behavioral reasons and of course, the placebo group in use analysis is also under therapy and they cannot be using, they could be white knuckling it, their cravings could be intense and it might be just a matter of time before they relapse. You guys want to add anything.

  • - SEVP

  • Yes, I will. First off my background originally before this was working with opiate addiction and the whole focus with open yet addiction is in dealing cravings. If you go to the Hythiam.com website there will be a link there for the facts about PROMETA and in there were detail a number of leading thought experts. You were asking how the thought leaders in the industry view cravings. And there is a number of different published references there in the leading journals from Chuck O'Brien from Penn who states that cravings are viewed by many as the primary symptom motivating drug use and the appropriate target of behavioral interventions to hearts, et al, to Dr. [Mance]. So you can go there and if you need additional information beyond those you can feel free to contact us. But it is clearly the biological marker for addiction and it is the foundation for hundreds of millions of dollars that's being spent right now in opiate dependence management alone.

  • - Chairman, CEO, President

  • So yes, if you look at where Chris came from record (inaudible) and to the same extent methadone for heroin or opiate dependence that's all using an agonists or using a safer version of an opiate is all about curbing cravings.

  • - SEVP

  • Terren, I think one of the things that's important in there and one of the studies it was talking about in stimulant dependents it was shown that in the one population in the tough subjects who did reuse their craving scores were 2.7 times higher than those in the group that did not use. So it's clearly a marker that drives relapse.

  • - Analyst

  • Okay. And just a subjective sort of adjunct to that last question is do you see or is there a perception in the addiction expert community that given the type of addiction whether it's cocaine or methamphetamine versus say alcohol or nicotine that the importance of cravings diminution is changed or relatively speaking can be more or less important, i.e. cravings may be very important to knock down in situations where you're confronted with cocaine or methamphetamine addiction but may not be as important in the case of somebody who is addicted to do alcohol, is there any kind of prevailing viewpoint on that?

  • - SEVP

  • No, I think irrespective of your drug of choice or behavior of choice that you use to manage your anxiety whether that's alcohol, opiates, sex addiction, eating disorders, whatever, everyone will tell you that truly managing the cravings is the first and primary step that you have got to do. Otherwise the behavior will just continue to reinforce.

  • - Analyst

  • Okay. Thank you very much.

  • - Chairman, CEO, President

  • This is as an aside, this is one of the view diseases where historically because it's been behavioral based and AA, 12 step, et cetera, oriented, one of the few chronic diseases where there's not a surrogate marker established or there's a behavioral, certainly when you're a diabetic you don't abstain from sugar, you manage the sugar, in cardiovascular disease, you don't abstain from cholesterol, you manage your cholesterol. So it's just, it's a paradox that is slowly breaking down and I think NIDA. has done a great job with that by emphasizing cravings in their studies and I certainly know that everyone we speak with, cravings matter and it's clear that if a patient is retained into treatment which cravings is going to help -- lack of cravings is going to help retain a patient into treatment, then they are not in an emergency room likely or they are not in a hospital stay likely. So it's very important from a disease management context.

  • - Analyst

  • That's very helpful. Thank you.

  • Operator

  • Our next question is from the line of Kevin Ellich of BT Capital Markets.

  • - Analyst

  • Good evening and thanks for taking my question. Almost everything has been answered. I just had one financial question for Chuck. Could you remind us on the balance sheet, how much of your short term investments if any are held in auction rate securities and if so have you seen any of the auction fail?

  • - CFO

  • We had at December 31, we actually had 19 million in auction rate securities but the portfolio was reduced through successful auctions through March, actually through February before they started failing. We have 11.5 million at this point in time.

  • - Chairman, CEO, President

  • And of that, it's further reduced by the ability to borrow against it. And we actually have seen now movement in the secondary market in some of our securities.

  • - Analyst

  • Okay. So.

  • - Chairman, CEO, President

  • More importantly, the point is that the cash we need access to doesn't come, that part, the 4, 5 million of that that we wouldn't have access immediately now, will be, we won't need that money until next year anyway and obviously we anticipate at some point that it clears up.

  • - Analyst

  • Okay. And what was the operating cash flow or cash burn this quarter?

  • - Chairman, CEO, President

  • In which quarter?

  • - Analyst

  • Q4.

  • - Chairman, CEO, President

  • Well, you want to answer.

  • - CFO

  • The Q4 cash burn, operating cost cash burn was about $3.6 million plus R&D so figure about $4 million was our cash burn in the fourth quarter last year.

  • - Analyst

  • $4 million per month.

  • - CFO

  • I'm sorry -- $4 million per month.

  • - Analyst

  • Per month, okay. Excellent. That's it. Thank you.

  • Operator

  • Ladies and gentlemen, we have reached the end of our allotted time for questions, although we do have time for one last question. That question will be from the line of [Robert Cohen] with Western International.

  • - Analyst

  • Yes, hi, guys. Terren, can you briefly go through again, I had heard you speak recently at a couple of conferences and you talked about insurance reimbursements. Are you saying that you don't believe you'll get any insurance reimbursements either from regional or national insurance companies until the Urschel peer review is out and the Ling? Or is there a possibility that you could get some prior to that? Because that's what I felt you were saying in these conferences.

  • - Chairman, CEO, President

  • Well, like we said, it's -- we are in processes and these are big organizations. So the timing is somewhat unpredictable. There are some that seem a lot closer than others. And it's quite possible that we have something before the Urschel publication.

  • - Analyst

  • Okay. Great. Thank you.

  • Operator

  • Ladies and gentlemen, we have reached the end of our allotted time for questions. I would now like to turn the floor back over to management for closing comments.

  • - Chairman, CEO, President

  • Well, thank you again everyone for joining us today. As usual we appreciate your support and look forward to discussing our Company with you at the next quarterly conference call. Thank you.

  • Operator

  • Ladies and gentlemen, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.