Specialty pharmacy services provider,
), recently took a step forward to further strengthen its
Infusion Services business by entering into an agreement with
DaVita HealthCare Partners Inc.
), the nation's leading provider of dialysis services to patients
suffering from chronic kidney failure. As per the deal, BioScrip
will acquire DaVita's majority-owned subsidiary HomeChoice
Partners, Inc., an alternate-site infusion pharmacy services
provider, for $70 million in cash.
The terms of the deal, which is expected to be closed in the
first quarter of 2013, 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 9−12 months), the company expects
HomeChoice to generate annual revenues of around $70 million with
adjusted EBITDA margin of 12%−14%.
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. We note that BioScrip has been
recording persistent growth in the Infusion Services segment over
the past few quarters. In the last reported quarter, the
company's solid top-line performance was attributable to a 39.5%
rise in Infusion Services revenue.
Giventhe huge potential of this business, the company's focus
on the sector is expected to add to its long-term growth
prospects. Earlier in July, the company acquired InfuScience, a
provider of alternate site infusion pharmacy services with five
locations. Also the company's decision to reposition certain
assets of its pharmacy business to redirect resources for
supporting the existing Infusion Services business will likely be
favorable for BioScrip.
We believe that the company will gain further
competitive edge in the Infusion Services and Home Health segment
by targeting new and under penetrated markets as well as
accessing a huge number of infusion patients. Our views are also
buoyed by the estimates of the National Home Infusion Association
("NHIA"), which stated that the alternate-site infusion therapy
sector currently represents $9-$11 billion per year in the U.S.
health care expenditure.
Given the favorable demographic trends, including an aging
population in the U.S., the company is optimistic about the
future growth prospects of the home health industry. BioScrip
presently retains a short-term Zacks #3 Rank (Hold). Over the
long term, we have a 'Neutral' recommendation on the stock.
BIOSCRIP INC (BIOS): Free Stock Analysis
DAVITA INC (DVA): Free Stock Analysis Report
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