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BioScrip Works on New Strategies, Margin Concerns Stay

On Oct 14, we issued an updated research report on Bioscrip, Inc.BIOS - provider of home infusion and pharmacy benefit management (PBM) services.

We are positive on the multi-faceted strategic plan that the company has recently adopted to improve its financial position, along with its efforts to emerge as a major player in the infusion services space.

As part of its cost reduction plan, the company plans to cut down 12% of its workforce, which will translate into $19 million in total savings in 2015. In addition, the company plans to sell or transition some of its non-profitable, chronic, non-core infusion patient serving activities to various alliance partners, to bring in expected cost savings of $4 million.

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

As per its latest announcement, BioScrip has agreed to sell its non-core PBM business to ProCare Pharmacy Benefit Manager Inc. - for $25 million in cash. Although PBM was a legacy business for BioScrip and accounted for roughly $66 million of annual revenues, it never came to be a core business for the company's operations. Management expects to use the cash obtained from the divestment to pay down debt and support working capital needs. We believe this transaction will be in the best interests of both the PBM business as well as BioScrip.

Meanwhile, BioScrip delivered mixed second-quarter 2015 financial results. The bottom line exceeded the Zacks Consensus Estimate while the top line failed to meet the same.

On the flip side, declining gross margin continues to be a major headwind for the company. Although BioScrip is working hard to deliver gross margin improvement and expects to achieve the same in 2015, a development in the third quarter looks unlikely.

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 stocks that warrant a look in the broader medical space are Baxter International Inc. BAX , Hill-Rom Holdings, Inc. HRC and NuVasive, Inc. NUVA . All the three stocks sport 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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