Specialty pharmacy services provider,
) reported a loss of 7 cents per share from continued operations in
the second quarter of fiscal 2012, worse than the year-ago quarter
loss of 3 cents. However, adjusting for certain one-time items, the
loss per share came in at 3 cents; considerably lagging year-ago
adjusted EPS of 4 cents. The quarter's loss also missed the Zacks
Consensus Estimate by 2 cents.
Total revenue in the reported quarter stood at $155.9 million,
up 18.5% year over year and exceeding the Zacks Consensus Estimate
of $154 million.
In May 2012, BioScrip sold certain Pharmacy Services assets
including pharmacy mail operations and community retail pharmacy
). Following the divestiture, BioScrip restructured its operating
segments from Infusion/Home Health Services and Pharmacy Services
into three new operating divisions: Infusion Services, Home Health
Services and PBM Services.
In the reported quarter, solid revenue growth was attributable
to a 23.5% rise in Infusion Services revenue to $111.0 million, a
16.7% increase in PBM Services segment revenue to $28.1 million,
partially offset by a 4.6% decline in the company's Home Health
Services segment revenues to $17.7 million. Reimbursement
reductions from Medicare and the state of Tennessee TennCare
program resulted in the year-over-year decline in the Home Health
In the reported quarter there was a 32.6% increase in cost of
product revenues ($75.1 million) combined with a 20.1% rise in cost
of service revenues ($27.7 million). Also, low margin therapy mix
in the Infusion Services segment led to a huge 540 basis point (bp)
contraction in gross margin to 34.0% in the quarter. Selling,
general and administrative expenses during the quarter surged 10.5%
to $44.7 million leading to a 330 bp drag in adjusted operating
margin for the quarter to 5.4%.
BioScrip exited the quarter with $138.4 million of cash and cash
equivalents. Year-to-date operating cash flow was $42.8 million
compared with $9.5 million in the comparable year-ago
period. This was due to the collection of accounts receivable
retained after the asset sale, net of accounts payable paid related
to those businesses.
On July 31, 2012, BioScrip acquired
based privately held InfuScience, Inc., a provider of alternate
site infusion pharmacy services. The acquisition price was $38.0
million in cash. However, it could increase by an additional $3
million within 1 year of the acquisition depending on the
performance of the acquired body. InfuScience currently generates
$40.0 million in annual revenues.
BioScrip increased its fiscal 2012 revenue guidance to $620-$650
million from the earlier guidance of $600-$620 million. The company
expects to incur certain short-term expenses and additional costs
through the third quarter of 2012, which will impact results.
While the company demonstrated strong sales growth during the
quarter, the huge pressure on margins was a matter of concern.
However, we believe that the asset sale will help BioScrip to
emphasize more on areas with long-term growth potential and high
returns. With favorable demographic trends, including an aging
population in the U.S., the company is optimistic about the future
prospects of the home health industry. We also think that the
recent acquisition improves the company's position in the Infusion
and Home Health industry where it has meaningful strength and
competitive advantages. According to the estimates of the National
Home Infusion Association ('NHIA'), U.S. health care expenditure in
the alternate-site infusion therapy segment currently represents
$9-$11 billion a year.
BioScrip retains a short-term Zacks #4 Rank (Sell). Over the
long term, we have a 'Neutral' recommendation on the stock.
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