The (CardioNet) Beat Goes On

| About: BioTelemetry, Inc. (BEAT)
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CardioNet (NASDAQ:BEAT), which provides cardiac monitoring, manufacturing, and lab services, has just announced what may prove to be a significant catalyst in the company's development. BEAT with an $82 market cap, operates in the specialty health services industry. People with heart conditions known as arrhythmias need to wear a monitor which translates via information to physicians via wireless sensors any irregularities that would require attention and possibly emergency services. CardioNet has been at the same thing since 2002 when it received FDA approval for its core technology. The company has grown from 3000 initial adopters to over 500,000 users today on a national scale.

While BEAT did receive a national reimbursement code in 2010, which was obviously crucial for product adoption, they have more or less been generating sales on their own. The last three years the company has not witnessed any revenue growth and they continue to lose money every year. The stock price at $3.21, which has rallied strongly in the last two months (which we will refer to shortly), still remains at depressed levels even in the two-year period and significantly so in the five-year range.

You may be thinking: 'opportunity-BEATS me!

Well, actually it need not: BEAT finds itself as a leading player in the multi-billion dollar market for advanced patient monitoring. Its remote technology happens to coincide with a massive secular opportunity in the form of the proliferation and advancement of mobile devices. But like any emerging trend, there is usually at least one piece of the puzzle that's missing. In BEAT'S case that would be scale. CardioNet has until now had to rely on its own admittedly 'largest salesforce in the industry". The last three years' results, as mentioned, have spoken for themselves. However, yesterday, the white elephant just walked into the room: BEAT announced that UnitedHealthcare Insurance (NYSE:UHS) with a membership of 70 Million will be providing coverage all members for one of BEAT's key technologies in a three-year agreement:

"UnitedHealthcare's decision to expand coverage to include CardioNet's MCOTTM was the result of an extensive review of clinical evidence, including the Company's recently published studies. Their research found MCOTTM to be proven for multiple indications, concluding: "Results of studies suggest that mobile outpatient telemetry provides more effective detection of infrequent cardiac arrhythmias than external, loop monitors."

Joseph Capper, President and CEO of CardioNet, commented: "CardioNet is pleased to partner with an industry leader like UnitedHealthcare... By providing access to United's more than 70 million members, this agreement dramatically expands the available market for all of our life-saving technologies..."

This is clearly a game-changer for BEAT and if other insurers follow suit that's just more gravy. It's pretty clear insiders have been privy to this little secret of late. In the last week, volume was up five times its 73K average in the absence of any news. While the price jumped 15%, it would appear there's a few more rungs up the ladder of this still historically depressed story.

Yes, there are downsides: The company is still losing money, it still has not demonstrated the ability to grow revenue and its CFO said on the last call that it expects some pricing pressure. But with positive EBITDA expected for full year 2013, top line growth across all of its businesses, and most importantly, yesterday's big alliance with UHS, the positives are likely to 'beat' down those investor fears going forward.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BEAT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.