We are maintaining our Neutral recommendation on
) with a target price of $8.00.
BioScrip reported a loss of 7 cents per share from continued
operations in the second quarter of fiscal 2012, wider than last
year's loss of 3 cents.
Adjusting for certain one-time items in both periods, the loss
per share was 2 cents; considerably lagging the year-ago adjusted
earnings per share (EPS) of 10 cents. The loss was also a penny
wider than the Zacks Consensus Estimate.
Total revenue was $155.9 million, up 18.5% year over year and
exceeding the Zacks Consensus Estimate of $154 million.
Earlier in 2010, BioScrip initiated a strategic assessment of
its business and operations. Based on its findings, the company
started focusing on its fast-growing Infusion/Home Health Services
segment. As a result, in 2012, BioScrip divested certain
Pharmacy Services assets, including pharmacy mail operations and
community retail pharmacy stores, to
(WAG) for $225 million, including approximately $161 million in
cash and retention.
Based on the huge potential of the Infusion Services business,
which led to BioScrip's persistent growth in this segment,, the
company has shifted its focus to this rising sector. It therefore
repositioned some of its pharmacy business assets and redirected
the resources of the divested business to support the existing
Infusion Services business.
Moreover, in keeping with its strategy to expand its Infusion
footprint to new places, the company acquired InfuScience in July
this year. InfuScience is a provider of alternate site infusion
We are encouraged by the company's decision to invest in the
Infusion and Home Health industry, where it has a strong presence
and enjoys competitive advantages. Our optimism is buoyed by the
estimates of the National Home Infusion Association ('NHIA'), which
stated that the alternate-site infusion therapy sector currently
represents $9 billion to $11 billion per year of the total U.S.
health care expenditure.
The company is also hopeful about the continued growth in
Pharmacy Benefit Management (PBM) and cash card businesses. It
expects revenue in the range of $100 million to $105 million for
fiscal 2012. We remain optimistic about BioScrip's PBM growth and
believe that the company is perfectly positioned to leverage its
strong clinical reputation for growth.
However, big players like
), as well as many other smaller organizations that operate on a
local or regional basis, are increasing the competition. This makes
us cautious about the stock.
We note that increased competition has led to lower pricing and
increased rebate sharing, thereby putting severe pressure on
margins. Moreover, the Home Health industry was impacted by the
reduction in Medicare and Medicaid reimbursements, which we think
could temper BioScrip's sales growth going forward. BioScrip
currently maintains a Zacks #4 Rank, which translates into a
short-term 'Sell' rating.
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