Authentidate Shares on the Move

by: Patient Capital
Authentidate (NASDAQ:ADAT) shares are on the move, with volume almost 5 times higher than normal.More than 760,000 shares traded yesterday, while the three-month average is around 160,000 shares. Authentidate is a New Jersey-based company that provides health information exchange solutions. This means that physicians can use their software for workflow management, making their medical records electronic. They also have solutions in patient discharge and telehealth devices. There are a few recent developments that might be playing a role in Authentidate's activity.
  1. In December, they raised $3.4M of capital. They issued 3.4M common shares, along with 3.4M 90-day warrants at a $1 strike. This volume requires sellers, and it’s very likely the warrants are now being exercised. As for the buyers, we can only guess who is buying, but the good news is that someone is clearly picking it up.
  2. As of the last quarterly call, we learned that their Liberty contract for Inscrybe solutions is back again. Liberty’s contract had ended previously, however is running again and significantly impacts their financial results. In the past, it was a customized solution, however now it’s their standard software.
  3. Authentidate’s 2010 fiscal year began July 1st, 2009. This means that we are now in the 2nd half of fiscal 2010. From their January Investor Presentation file, you can see this on Page 14: “Initial sales for the telehealth and hospital discharge solutions are expected in the second half of fiscal 2010”.
  4. Telehealth devices have been around for a while – Bosch's has been in the market for 10 years, and now we’re seeing more competition. Intel (NASDAQ:INTC) and GE (NYSE:GE) are in the market. Intel and GE recently pushed their partnership from just the United States into the United Kingdom according to their announcement on January 5th.
  5. In addition, there are more reasons to suspect that something may be right around the corner, outlined in a previous article here.
This no doubt speculation, but we should remember that management went out and bought 990,000 shares themselves last year.
We also have a healthcare bill being passed that has provisions in it penalizing those who don’t implement the solutions offered by companies such as Allscripts (NASDAQ:MDRX), Cerner (NASDAQ:CERN), etc. including the electronic medical records, and indirectly, the telehealth devices as well as patient discharge.
The government wants to ensure that once a patient leaves the hospital, they are well taken care of and don’t need to be readmitted, because that is a very large cost to healthcare.
With over $19 billion being allocated for health information technology, Authentidate is one of the many companies set to benefit.

Disclosure: Author was long ADAT at the time of this article.