Once again, in the first quarter of 2014, BioScrip delivered a poor
bottom-line. Adjusted net loss from continuing operations of $0.17
per share was much wider than the year-ago adjusted loss per share
of $0.01. The results also considerably lagged the Zacks Consensus
Estimate of a loss of $0.04. The high-margin PBM business witnessed
another quarter of massive downfall, impacted by lower discount
cards revenue and the termination of a large contract. This also
resulted in a decline in gross profit margin. Growing SG&A
expenses following the company's effort to consolidate recent
takeovers adds to our concerns. Meanwhile, reimbursement pressure
looms as a potent cause of worry. The competitive landscape is also
tough with the presence of larger players. With the dearth of any
major near-term catalyst, we downgrade the stock to Underperform.
Bioscrip, Inc. (BIOS), based in Elmsford N.Y., is a provider of
home infusion, home healthcare and pharmacy benefit management
(PBM) services. The company provides condition-specific clinical
management programs for individuals suffering from chronic and
acute healthcare conditions. BioScrip, in partnership with
healthcare payors, pharmaceutical manufacturers, government
agencies and physicians strives to deliver cost-effective programs
As of Mar 31, 2014, BioScrip operated from 81 locations in 29
Earlier in 2010, BioScrip had initiated a strategic assessment
of its business and operations based on which the company started
focusing on the growth of its fast growing Infusion/Home Health
Services segment. As a result, on May 4, 2012 BioScrip sold certain
Pharmacy Services assets including pharmacy mail operations and
community retail pharmacy stores to Walgreens for $225 million.
With the asset divestment, BioScrip restructured its operating
segments from Infusion/Home Health Services and Pharmacy Services
to three new operating divisions: Infusion Services, Home Health
Services and PBM Services.
With the spin-off of substantially all of the company's Home
Health business Deaconess HomeCare, to LHC Group, Inc. Last April,
currently BioScrip operates through two main segments, viz.
Infusion Services (92% of total revenue in the fourth quarter) and
PBM Services (8%).
Infusion Services: This segment provides services consisting of
home infusion therapy, respiratory therapy and the provision of
durable medical equipment, products and services. Infusion services
include the dispensing and administering of infusion-based drugs,
which typically require additional nursing and clinical management
services, equipment to administer the correct dosage and patient
training designed to improve patient outcomes. Home infusion
services also include dispensing self-injectable therapies.
On Jul 31, 2012, BioScrip acquired Illinois-based privately held
InfuScience, a provider of alternate site infusion pharmacy
services for $38.0 million in cash. On Feb 4, 2013, BioScrip
acquired DaVita's majority-owned subsidiary HomeChoice Partners, an
alternate-site infusion pharmacy service provider for $70 million
in cash. The terms of the deal also include a potential additional
consideration based on the post purchase operating performance of
HomeChoice. BioScrip expects to realize an estimated $3.9 million
of future tax benefit as a result of this transaction. Moreover,
post integration (expected in 9-12 months), the company expects
HomeChoice to generate annual revenues of around $70 million.
Pharmacy Benefit Management (PBM) Services: This segment
provides integrated PBM services, which primarily consists of
discount cash card programs. The discount cash card programs
provide a cost effective alternative for individuals who may be
uninsured, underinsured or may have restrictive coverage that
disallows reimbursement for certain medications.
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