Specialty pharmacy services provider,
) reported a loss of 4 cents per share from continued operations in
the first quarter of fiscal 2012, worse than the year-ago quarter
loss of 2 cents. Reported results also missed the Zacks Consensus
BioScrip had sold certain Pharmacy Services assets including
pharmacy mail operations and community retail pharmacy stores to
) for $225 million, including approximately $161 million in cash
and retention. The deal was closed on May 4, 2012.
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. Accordingly, the company reclassified
its year-ago financial statements and related disclosures in order
to get the current financial position. Total revenue in the
reported quarter stood at $155.6 million, up 19% year over year and
exceeding the Zacks Consensus Estimate of $143 million.
Solid revenue growth was attributable to an 18.9% rise in
Infusion Services revenue to $109.1 million, a 36.4% increase in
PBM Services segment revenue to $29.9 million, partially offset by
a 2.9% decline in the company's Home Health Services segment
revenues to $16.7 million.
However, a 25.5% increase in cost of product revenues combined
with an 18.9% rise in cost of service revenues led to a huge 480
basis points (bps) contraction in gross margin to 34.4%.
Adjusted operating margin for the quarter was 5.7% compared with
7.6% in the year-ago quarter, down 190 bps.
BioScrip's operating cash flow was $2.5 million in the first
quarter of 2012 compared with $31.7 million in the year-ago
period. This was due to a $19.4 million decrease in net cash
provided by operating activities from discontinued operations and a
$9.8 million decrease in net cash provided by operating activities
from continuing operations.
The company reiterated its fiscal 2012 revenues guidance of
$600-$620 million. The company expects to incur certain short-term
factors and additional costs through the second and third quarters
of 2012, which may impact results.
While the company demonstrated strong sales growth during the
quarter, huge pressure on margins remained a matter of concern.
However, we believe the asset divestment will help BioScrip to
emphasize more on areas with long-term growth potentials and high
returns. The company plans to deploy corporate resources more on
Infusion and Home Health industry where it has meaningful strengths
and competitive advantages.
With favorable demographic trends, including an aging population
in the US, the company is optimistic about the future prospect of
the home health industry. According to the estimates of the
National Home Infusion Association ('NHIA'), alternate-site
infusion therapy sector currently represents $9-$11 billion per
year in US health care expenditures.
BioScrip presently retains a short-term Zacks #4 Rank (Sell).
Over the long term, we have a 'Neutral' recommendation on the
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