Loss Widens at BioScrip, Revs Beat - Analyst Blog

By Zacks Equity Research,

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Specialty pharmacy services provider, BioScrip Inc. ( BIOS ) 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 Estimate of break - even . BioScrip had sold certain Pharmacy Services assets including pharmacy mail operations and community retail pharmacy stores to Walgreen ( WAG ) 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.

Our Take

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 stock.

BIOSCRIP INC (BIOS): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: BIOS , WAG

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