-ATIN- - 06/27/08 - Hythiam Senior Executive Vice President Tony LaMacchia is the highest level of a long string of Hythiam employees that have been fired lately, sources say. The controversial startup has over the past four years been heavily promoting and marketing - spending millions - on its proprietary Prometa Protocol, an intraveneously administered cocktail of FDA approved meds the company says is effective in reducing cravings for alcohol and stimulants like cocaine and methamphetamine. The sources say that as many as 60 employees have been let go since the start of the year.

Hythiam founder and CEO Terren Peizer has been enormously effective at raising funding for the NASDAQ-listed startup over the past several years, gathering over $150M from investors in what has been by far the biggest public capital raise in the history of the addiction treatment industry. Unfortunately, Peizer has not been nearly as effective in executing as CEO, wasting huge sums on big office space in one of Los Angeles' most exclusive and expensive corporate residences, as well as a scandalous annual compensation for himself valued in the 2006 proxy statement at almost $1.3 million. (As owner then of more than 55 percent of Hythiam shares, some say Peizer should have been taking a symbolic $1 per annum salary until the company is solidly in the black.)

And his initial strategy of attempting to produce significant sales from private pay clients for Prometa Protocol has beern an abject failure, as revenues have not even remotely matched the $10M or so per quarter "burn rate" of company cash for the past 2 years. With virtually no proof or studies that Prometa was effective, Peizer hired about 50 sales staff scattered around the nation to promote Prometa, much in the same way drug representatives promote and sell FDA approved drugs. The Hythiam sales staff was extremely expensive for Hythiam to maintain with salary, travel expenses, and the like.

One egrigious example of the wasteful spending was when Peizer sent three top level Hythiam employees to Hawaii on a three day junkett that even if it had been successful would likely have produced little result, because Hawaii is such a small periferal market. And, certainly, one saleman would likely have done the trick.

In a move that is a huge red flag for investors, Peizer, seeing the futility of his earlier approach, has changed strategies in mid-stream. Hythiam is now no longer aggressively marketing directly to consumers. Instead, the company has reinvented itself as an addiction disease management partner for commercial insurers and large self insured entities.

But to be successful with even that strategy, Hythiam must prove beyond a doubt the effectiveness of the Prometa Protocol. Within the next several weeks at least one of the studies undertaken toward that end is expected to be released. If that study does not show conclusively Prometa's efficacy, Hythiam's stock, which is down well over 50 percent in the last few months, may take a nose dive from which it may never recover.

Newswire Staff

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