Knobias Clip Report (9-5-2007)

Submitted from Knobias ClipReport
The use of devices to access medical records by industry professionals is beginning to expand. With the use of these devices comes a greater need for security that information is not misused or mishandled. Evident with the recent mishaps by WellPoint when some 75,000 members of its Empire Blue Cross and Blue Shield unit in New York had their vital medical and other personal information disappear, security of information is becoming increasingly important. The February 2007 ‘oops’ was the second in the past year by the company. In October of 2006, WellPoint learned that electronic backup tapes with information on 196,000 WellPoint members had been stolen from a data processor in Massachusetts.

In both cases, mishandling of the data caused the information of members to land in the wrong hands, but security and accessibility is a very tight rope these large HMO’s must walk.

One company is attempting to capitalize on this need of additional access, but also additional security. Diversinet Corp. (DVNTF) is a provider of wireless data application and security infrastructure products and services that secure the personal identity, transactions and data of consumers over almost any mobile phone or handheld device.

“This is a big and burgeoning frontier. Providers and health care facilities, as well as insurers want a single portable health record to guard against incorrect or inappropriate treatment and malpractice,” noted John Everitt, Technology Project Manager for Humana Incorporated. “In addition, many providers are testing (some with Humana) PDA devices in their practices that can immediately transmit information inputted by the doctor into a single health record wirelessly which must be transmitted securely due to Federal PHI requirements.”

Diversinet’s vision is to offer several billion mobile phone users around the world, a simple way to activate and download secure applications. Leveraging the power of their MobiSecure technology, the company provides enhanced security and trendsetting new services for access in a mobile world. Their technology helps businesses offer consumer authentication and valuable personal data management, over the Internet and wireless networks, directly to almost any mobile phone.

On Tuesday, the Company announced a fairly substantial license and revenue sharing agreement with AllOne Health Group, Inc which is a wholly owned subsidiary of Hospital Service Association of Northeastern Pennsylvania, d/b/a Blue Cross of Northeastern Pennsylvania.

Under the three year agreement, Diversinet will receive $2 million annually as a minimum commitment from AllOne Health Group. Diversinet and AllOne Health Group will be initially focusing on Blue Cross Blue Shields Association member plans and other customers in the mobile personal health record market in the United States.

“We are expecting to provide a positive outcome for our users and their providers as well as reducing and streamlining overall healthcare costs” says William C. Reed, President and CEO of AHG in the press release. “Secure portability of personal health records at the time of care, the convenience and peace of mind in being able to receive fast and secure coverage confirmation - all accessed securely through a mobile device - makes this solution a trendsetting product that will enable our users to take control of their health care in a cost effective manner.”

The software will allow for confirmation of eligibility and coverage at the time of service, assist in reducing duplications and errors, offer accessible and manageable health information via cell phone, and display and transmit information to practitioners by email or fax.

Diversinet also announced that it successfully closed a $5.0 million private placement with the same parent company it signed the licensing and revenue sharing agreement. Hospital Service Association of Northeastern Pennsylvania, d/b/a Blue Cross of Northeastern Pennsylvania, was issued 6,756,757 shares at 74c a piece.

It’s somewhat of a rarity for a company to announce a licensing/revenue sharing agreement and also be funded by the same entity. The private placement, which was sold at basically market price, is favorable to Diversinet and its holders to aid management in the execution of their sales initiatives. Add to the fact that the Company’s minimum $2 million per year payout from the license agreement while trailing 12 month revenue is only $2.64 million clearly displays that sales traction will most likely be evident with next quarter’s earnings release, and the name easily becomes one investors would be wise to watch.


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