BioScrip Loss Narrower than Expected, Strategic Plans in View - Analyst Blog

BioScrip, Inc.BIOS reported adjusted net loss from continuing operations of 3 cents per share (considering stock-based compensation as regular expense) in its second-quarter 2015 results. This adjusted loss figure was narrower than the year-ago adjusted loss per share of 10 cents by 70%. However, Zacks Consensus Estimate for the same was pegged at a loss of 11 cents per share.

On a reported basis, BioScrip’s net loss from continuing operations was $3.60 per share, a marked deterioration from the year-ago net loss of 27 cents per share.

Revenues

Total revenue in the reported quarter rose 6.2% year over year to $262.4 million, but missed the Zacks Consensus Estimate of $270 million.

Currently, BioScrip operates through two main segments, Infusion Services (94.1% of total revenue in the second quarter) and PBM Services (accounting for the rest).

Segments in Detail

The company reported revenues of $247 million in Infusion Services, recording growth of 7.2% year over year. Continued strong organic growth, particularly in chronic, nutrition and other therapies, was the key revenue driver in this segment. Given the overall strength of its Infusion business, the company is confident that staying focused on its core Infusion Services will drive value for shareholders. On the other hand, revenues from the PBM Services segment totaled $15.4 million, down 7.2% from the prior-year quarter.

Multi-Step Strategic Planning

In a parallel press release, BioScrip declared a multi-step plan to enhance shareholder value, improve financial flexibility and position itself as a pure play infusion services company focused on high-growth services.

The company plans to reduce approximately 12% of its workforce, which will result in $19 million in total savings. Further, BioScrip will consolidate its corporate functions in its Eden Prairie, MN facility and close the Elmsford, NY office by Dec 31, 2015.

BioScrip also announced that it has entered into an asset purchase agreement to sell its non-core PBM business to ProCare Pharmacy Benefit Manager Inc. – a privately held pharmacy benefit manager and part of the ProCare Rx companies, for $25 million in cash. The transaction is expected to close in the third quarter, subject to customary closing conditions.

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

BioScrip has also made some changes in its executive leadership positions, naming Chris Luthin as Chief Operating Officer; Scott Davido as Chief Implementation Officer, Kathryn M. Stalmack as the new General Counsel, in addition to some other executive level appointments.

Guidance

As part of its financial improvement plan, BioScrip now expects $35–$40 million in annualized net cost savings to be realized over the next 12 months. This includes savings targeted under the 2015 cost reduction plan.

For full year 2016, the company’s EBITDA guidance stands at $50–$60 million.  Expected revenues for 2016 are projected between $730 million and $760 million. The current Zacks Consensus Estimate for 2016 is pegged at $1.19 billion, much higher than the company’s revenue projection.

Our Take

BioScrip ended second-quarter 2015 on a mixed note wherein the bottom line exceeded our estimate, but the top line failed to meet the same. However, we are encouraged by the multi-faceted strategic plan that the company has adopted at the end of the quarter to improve its financial position as well as its efforts 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.

Moreover, the company has decided to sell off some of its non-profitable chronic noncore infusion patient service activities to various alliance partners. On sale, these noncore assets are expected to result in net cost savings of $4 million.

However, BioScrip’s deteriorating margin figures in the reported quarter adds to our concern. To add to that, the company’s non-profitable chronic therapy business has been weighing heavily on growth for quite some time now.

Zacks Rank

Currently, BioScrip carries a Zacks Rank #3 (Hold). Some of the better-ranked stocks in the broader medical space are Abaxis, Inc. ABAX, Vascular Solutions Inc. VASC and NuVasive, Inc. NUVA. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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