Markets

BioScrip Q3 Loss Wider than Expected; Strategic Plan in Focus

An image of a stock chart on a display
Credit: Shutterstock photo

BioScrip, Inc.BIOS reported adjusted net loss from continuing operations of 19 cents per share in the third quarter of 2015. The figure was a significant 58% narrower than the year-ago adjusted loss per share of 45 cents. However, the same was wider than the Zacks Consensus Estimate of a loss of 10 cents.

On a reported basis, BioScrip's net loss from continuing operations was 38 cents per share, compared to the year-ago net loss of 57 cents per share.

Bioscrip Inc. (BIOS) - Earnings Surprise | FindTheCompany

Revenues

With the completion of the company's non-core PBM business divestment (treated as discontinued operation in the reported quarter), BioScrip currently has a simplified business structure focused on core Infusion Services.

Revenues from continuing operations in the reported quarter rose 6.8% year over year to $247.2 million, beating the Zacks Consensus Estimate of $239 million. This improved performance was on the back of an increase in product revenues associated with chronic, nutrition and other therapies.

The company's core infusion business demonstrated strong performance in the reported quarter, with continued organic year-over-year growth in high-single digits. Core and chronic blood therapies under its clinical programs increased $6.4 million sequentially with strong increase in patient census while Hepatitis C revenues witnessed a decline of $8.4 million.

Gross profit during the third quarter was $63.1 million, up 3.7% year over year. Gross margin, however, contracted 80 basis points (bps) year over year to 25.5%. Adjusted operating income was pegged at $9.5 million, a 107% surge year over year. Selling, general and administrative expenses declined 4.4% to $53.6 million. Consequently, adjusted operating margin expanded 180 bps to 3.8% year over year.

BioScrip exited the quarter with cash and cash equivalents of $29.4 million which compares favorably with $0.74 million at the end of 2014. In addition, the company currently has $39.6 million of undrawn capacity available on its revolving credit facility.

Update on Multi-Level Financial Improvement Plan

As part of its financial improvement plan, BioScrip 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 from Jan 2016). BioScrip is also working on additional supply chain programs that are expected to add $3 million in annual savings in 2016.

Meanwhile, management has authorized a process to concurrently explore a range of strategic alternatives including transitioning chronic therapies to alliance partners or a potential sale or merger of the company.

Guidance

During its second quarter earnings release, BioScrip had stated that, for full year 2016, the company's EBITDA guidance stands at $50-$60 million. Revenues for 2016 were projected between $730 million and $760 million. The company reiterated the guidance provided during the third quarter earnings release.

Our Take

BioScrip posted a mixed third-quarter 2015 with the top line exceeding our estimate and the bottom line missing the same. We are encouraged by the company's update that it is on track with its multi-faceted strategic plan, which was adopted at the end of the second quarter to improve its financial position and enable it to emerge as a major player in the infusion services space. On a promising note, BioScrip is currently trying all means to improve its efficiency in supply chain programs, reduce other controllable expenses and implement improvement initiatives both in clinical operations as well as product pricing. This further bolsters our confidence in the stock. The company's divestment of its non-profitable PBM business also comes across as a prudent move. However, BioScrip's deteriorating gross margin figure in the reported quarter adds to our concern.

Zacks Rank

Currently, BioScrip carries a Zacks Rank #3 (Hold). Some of the better-ranked stocks in the broader medical space are Diadexus, Inc. DDXS , Hill-Rom Holdings, Inc. HRC and SurModics, Inc. SRDX . All the three stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SURMODICS (SRDX): Free Stock Analysis Report

BIOSCRIP INC (BIOS): Free Stock Analysis Report

DIADEXUS INC (DDXS): Free Stock Analysis Report

HILL-ROM HLDGS (HRC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

SRDX OPCH

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More