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BioScrip Closes Option Care Merger, Incurs Wider Q2 Loss

Zacks Equity Research

BioScrip Inc. BIOS has completed its highly talked-about merger with the home and alternate site infusion services provider OptionCare Enterprises. Following the completion of this transaction yesterday, shares of the company climbed 3.75% to close at $2.77.

The newly formed publicly held company has been named Option Care Health, Inc. and its common stock will be listed on the Nasdaq Global Select Market index, under the ticker symbol BIOS.

Meanwhile, the combined entity is highly optimistic about the strategic and financial virtues of this merger. Per BioScrip, the integration is going to create the nation’s leading independent provider of home infusion services.

The consolidated entity is expected to drive significant growth for BioScrip. Through this merger, the therapies and strategic partnerships with preferred payers, hospital systems and drug manufacturers will be strengthened to a great extent, thereby enabling the company to attain higher-quality patient outcomes.

The conjoined corporate body will enjoy a nationwide reach in more than 150 locations across 46 states and is expected to generate revenues exceeding $2.6 billion. The integration will result in an optimized capital structure and enhance the newly formed organization’s financial strength and flexibility. Option Care will not only be bringing its own clinical expertise to the table but also supply its exclusive portfolio of several limited distribution drugs.

With the closure of this merger, legacy BioScrip business can now further help leverage Option Care’s operational efficiency, industrial infrastructure and its top-notch management systems. In this regard, Option Care Health will mainly focus on three things, namely Patient-Centered Care Model, Clinical and Market Leadership and Investment in People, Technology and Operations

Meanwhile, let us delve deep into BioScrip’s quarterly earnings release. The company recently announced its second-quarter 2019 financial results.

BioScrip, Inc. Price, Consensus and EPS Surprise

BioScrip, Inc. Price, Consensus and EPS Surprise

BioScrip, Inc. price-consensus-eps-surprise-chart | BioScrip, Inc. Quote

BioScrip incurred a loss from continuing operations of 13 cents per share, wider than the Zacks Consensus Estimate of a loss of 10 cents but narrower than the year-ago loss of 14 cents.

Revenues

Net revenues of $191.5 million in the second quarter rose 8.5% year over year. The figure also exceeded the Zacks Consensus Estimate by 2.5%.

Margins

In the second quarter, gross profit improved 7.8% to $64.7 million. However, gross margin contracted 35 basis points (bps) to 33.8%. Meanwhile, on account of a 7.9% increase in general and administrative expense and 1.1% dip in service location operating expenses along with a 41.9% rise in the operating income, adjusted operating margin expanded 175 bps to 7.5%.

Financials

BioScrip exited the second quarter of 2019 with cash and cash equivalents of $14.4 million compared with $5.7 million at the end of the first quarter.

Guidance

Given the Option Care merger of late, BioScrip has not provided any financial guidance.

Our Take

BioScrip exited the second quarter with loss wider than the consensus estimate and revenues ahead of the mark. We are optimistic about the company’s strategic consolidation with Option Care and particularly, its fortified liquidity and flexibility, which can be achieved via an optimized capital structure post this merger.

Zacks Rank and Key Picks

BioScrip currently carries a Zacks Rank #3 (Hold). A few better-ranked companies flaunting solid results this earnings season are Surmodics, Inc. SRDX, Baxter International Inc. BAX and Zimmer Biomet Holdings, Inc. ZBH.

Surmodics delivered third-quarter fiscal 2019 adjusted EPS of 15 cents, which surpassed the Zacks Consensus Estimate by a whopping 200%. Revenues of $24.3 million too exceeded the Zacks Consensus Estimate by 6.6%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Baxter delivered second-quarter 2019 adjusted EPS of 89 cents, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Revenues of $2.84 billion also beat the Zacks Consensus Estimate of $2.79 billion by 1.9%. The company holds a Zacks Rank #2 (Buy).

Zimmer Biomet reported second-quarter 2019 adjusted EPS of  $1.93, which beat the Zacks Consensus Estimate by a penny. Moreover, revenues were $1.99 billion, topping the Zacks Consensus Estimate of $1.98 billion by a close margin. The company is Zacks #2 Ranked.

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