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BioScrip: Infusion Services Offers Hope amid Margin Woes

On Dec 21, we issued an updated research report on BioScrip, Inc.BIOS - provider of home infusion and pharmacy benefit management (PBM) services.

We are encouraged by the company's update on its multi-faceted strategic plan to improve its financial position and emerge as a major player in the infusion services space.

Recently, during its third quarter earnings release, BioScrip declared that it is now on track to achieve $19 million in annualized net cost savings on the back of a targeted workforce reduction plan. Additionally, the company has initiated programs that are expected to reduce corporate costs by $5 million annually as well as cost reduction programs that aim at $5 million in projected annual cost savings from other targeted areas including nursing, travel, office expense and technology enhanced applications (effective Jan 2016). BioScrip is also working on additional supply chain programs that are expected to add $3 million in annual savings in 2016.

On Aug 27, 2015, BioScrip substantially divested the entire PBM Services segment to ProCare Pharmacy Benefit Manager Inc. for a total cash consideration of approximately $24.6 million, including an adjustment for estimated closing date net working capital. Following the divestment of PBM Services, Infusion Services remains the only operating segment at the company.

Infusion Services exhibited high single-digit organic growth in the third quarter of 2015, driven by consistent organic improvement, particularly in chronic, nutrition and other therapies. The company's patient census and the therapies that are supported by its Center of Excellence clinical programs also exhibited solid progression.

We remind investors that BioScrip ended third-quarter 2015 on a mixed note. While the top line exceeded the Zacks Consensus Estimate, the bottom line failed to meet the same.

On the flip side, a declining gross margin persists as a major headwind for the company. The significant gross margin contraction in the quarter was primarily brought about by the impact of an Infusion Services segment mix shift from core therapies to more chronic and other therapies. To add to the woes, reimbursement issues continue to hurt BioScrip's performance. The competitive landscape also remains as an overhang.

Currently, BioScrip carries a Zacks Rank #3 (Hold).

Key Picks in the Sector

Some of the better-ranked stocks that warrant a look in the broader medical space are Abaxis, Inc. ABAX , ICU Medical, Inc. ICUI and INSYS Therapeutics, Inc. INSY . All the three stocks carry a Zacks Rank #1 (Strong Buy).

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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