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Edited Transcript of BIOS earnings conference call or presentation 15-Mar-19 1:00pm GMT

Q4 2018 BioScrip Inc Earnings and Definitive Merger Agreement with Option Care Call

ELMSFORD Mar 20, 2019 (Thomson StreetEvents) -- Edited Transcript of BioScrip Inc earnings conference call or presentation Friday, March 15, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel E. Greenleaf

BioScrip, Inc. - CEO, President & Director

* John C. Rademacher

Option Care Enterprises, Inc. - CEO

* Kathryn M. Stalmack

BioScrip, Inc. - Senior VP, General Counsel & Secretary

* Michael H. Shapiro

Option Care Enterprises, Inc. - CFO

* Stephen M. Deitsch

BioScrip, Inc. - Senior VP, CFO & Treasurer

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Conference Call Participants

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* Brooks Gregory O'Neil

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* David Samuel MacDonald

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Kevin Kim Ellich

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Michael John Petusky

Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst

* Richard Collamer Close

Canaccord Genuity Limited, Research Division - MD & Senior Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the BioScrip and Option Care Merger Transaction Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the call over to Kathryn Stalmack, Senior Vice President and General Counsel for BioScrip. Please go ahead.

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Kathryn M. Stalmack, BioScrip, Inc. - Senior VP, General Counsel & Secretary [2]

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Good morning, and thank you for joining us today.

Earlier this morning, BioScrip jointly announced a definitive merger agreement with Option Care and announced the company's fourth quarter and full year 2018 financial results. Copies of both press releases, along with an investor presentation, summering highlights of the definitive merger agreement with Option Care, can be found in the Investor Relations section of our website at www.bioscrip.com. Within 2 hours of this call's completion, an audio replay will also be available in the Investor Relations section of BioScrip's website.

Please note that today's presentation is neither an offering of securities nor a solicitation of proxy vote. The information discussed today is qualified in its entirety by the registration statement and joint proxy statement that BioScrip and Option Care will be filing with the SEC in the future.

Before I get started, I'd like to remind everyone that our comments may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such forward-looking statements are based on current expectations and there could be no assurance that the results contemplated in these statements will be realized. Please refer to our press releases, our reports filed with the SEC, where you will find factors that could cause actual results to differ materially from these forward-looking statements. These forward-looking statements are based upon information available to BioScrip today, and the company assumes no obligation to update statements as circumstances change.

During this presentation, we will refer to adjusted EBITDA, a non-GAAP financial measure. Reconciliation to the most comparable GAAP financial measure is contained in our press release issued this morning.

Now with me here today, President and Chief Executive Officer, Dan Greenleaf of BioScrip, who will begin the call with opening remarks about the transaction announced this morning; and then Steve Deitsch, Senior Vice President, Chief Financial Officer and Treasurer of BioScrip, will provide a brief recap of BioScrip's fourth quarter and full year financial results. Then John Rademacher, Chief Executive Officer of Option Care; and Mike Shapiro, Chief Financial Officer of Option Care, will provide their remarks on the transaction, and we will leave enough time for Q&A. All 4 members of the management will be available to answer your questions.

And now I'd like to turn the call over to Dan Greenleaf. Dan?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [3]

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Hey, thanks, Kathryn, and good morning, everyone, and thank you for joining us.

I want to draw your attention to Slide 4. Clearly, it is a very exciting day for all of us. We're absolutely thrilled to have entered into definitive merger agreement with Option Care. This historic transaction will transform each of our respective companies in the entire home infusion industry through their creation of a leading independent provider of home and alternate site infusion services.

Our companies have complementary footprints, and the combination creates a well-diversified organization with national reach, including approximately 150 locations in 46 states. It also expands our therapies in preferred partnerships with payers, hospital systems, drug -- and drug manufacturers, allowing us to better serve our patients. We operate in a highly fragmented market, and this transaction gives the combined company the capability to serve more patients with cost-effective care throughout the U.S.

The highly complementary nature of our respective portfolios will enable the delivery of high-quality, cost-effective solutions to providers across the country and will position us to provide superior outcomes for patients, payers and providers. I see a great cultural fit between our 2 organizations, highlighted by our common emphasis on clinical expertise and successful patient outcomes. Together, we will have more than 2,900 skilled clinicians in a footprint that covers 96% of the U.S. population.

By merging with Option Care, we have the potential to drive significant value for BioScrip's shareholders, through a combined operating model and the realization of clearly identified synergies, along with the refinancing of BioScrip's complicated capital structure.

Among the key financial takeaways, the combined company is projected to deliver 2018 pro forma annual revenue of more than $2.6 billion; annual run rate cost synergies of at least $60 million within 2 years; pro forma adjusted 2018 EBITDA exceeding $200 million, including synergies; a pro forma debt-to-EBITDA leverage ratio of approximately 6x providing greater flexibility for the company to grow.

With a simplified capital structure, multiple growth opportunities and achievable run rate cost synergies, the combined company should be able to deliver -- delever, excuse me, while pursuing a balanced capital allocation strategy, which will include market making the appropriate investments to achieve sustainable growth in shareholder value appreciation.

As one of the largest providers of home and alternate site infusion solutions in The United States, the combined companies will be a pure-play upscale. We believe it will offer investors a compelling way to participate in the attractive and growing home and alternate site infusion market. Option Care's CEO, John Rademacher, will become the CEO of the combined companies; and Option Care's Chief Financial Officer, Mike Shapiro, will become the CFO of the combined companies.

John and Mike are accomplished health care professionals with significant health care leadership experience. I will be staying with the company as an adviser to combined companies' Board of Directors. John has held various executive level positions at leading public health care companies, including Cardinal Health, where he served as President and General Manager for both the ambulatory care division and the nuclear and pharmacy services division; and at Cigna Corporation, where he served as President of CareAllies and Chief Operating Officer for the Cigna Behavioral Health business. Mike served as a Senior Vice President and Chief Financial Officer for Catamaran Corporation, a publicly traded pharmacy benefits manager and led the successful process through which the company was sold to UnitedHealthcare Group. He also had a long-standing career with Baxter International, holding several financial positions across several business and corporate functions. Having to got to know John and Mike better the last several months, I'm highly confident that in working with them together we will take the combined company to the next level. In short, this is a great fit. We are joining 2 strong high-performing companies with track records of growth and success. From this position of strength, the 2 companies coming together are positioned to grow at even a greater rate.

I am now pleased to turn the floor over to Steve Deitsch, Chief Financial Officer, who'll provide an overview of our fourth quarter and full year 2018 results. Steve?

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Stephen M. Deitsch, BioScrip, Inc. - Senior VP, CFO & Treasurer [4]

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Thank you, Dan, and good morning, everyone. I am also very excited about this transformative and historic transaction we announced with Option Care this morning.

Before we discuss the transaction further, I will provide a brief overview of BioScrip's fourth quarter and full year 2018 financial results which were released this morning.

Fourth quarter net revenue grew 7.8% on a comparable basis to the fourth quarter of 2017. During the fourth quarter of 2018, the company recorded a bad debt adjustment of $7.5 million, based upon trends and cash collections. The bad debt adjustment reduced net revenue and adjusted EBITDA by $7.5 million.

Adjusted EBITDA was $11.6 million or $19.2 million before the bad debt adjustment compared to $17.1 million in the prior year quarter, an approximate 12% increase. Cash and cash equivalents were $14.5 million at December 31, 2018.

Adjusted EBITDA for the full year was $45.1 million or $52.6 million before the bad debt adjustment compared to $45 million in the prior year, a 16.8% increase. This amount was slightly below the low end of our full year EBITDA guidance, due to slower-than-anticipated revenue growth in December. However, we commenced 2019 on a very strong note, with gross revenue growth accelerating to 9% in both January and February, and March gross revenue to date trending at similar levels. The first quarter of 2019 will mark the third consecutive quarter of organic revenue growth achieved by BioScrip. Finally, given the combination announced today with Option Care, the company will not be providing updated 2019 BioScrip financial guidance.

I'll now turn the call over to John Rademacher to give you some visibility into the Option Care business. John?

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [5]

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Good morning, everyone, and thanks for joining us today. I'm happy to be with you to tell you about -- more about the incredible opportunity we see through the combination of BioScrip and Option Care. And thank you, Dan and Steve, I've enjoyed getting to know both of you and I look forward to working with you as we move towards closing and integration.

I want to underscore how excited I am to be bringing together 2 strong mission-driven companies to create a leading independent provider of home and alternate site infusion services with national reach, comprehensive therapy offering, continued independent and financial capacity and flexibility to succeed and capitalize on growth opportunities.

Taking a step back, Option Care, formerly Walgreens Infusion Services, has been an independent infusion services company since it was separated from Walgreens Boots Alliance in 2015 in a joint investment partnership between Madison Dearborn Partners, a leading private equity firm based in Chicago, and Walgreens Boots Alliance, Inc.

Option Care has nearly -- has a nearly 40-year history of shaping the home infusion services industry. And during our time under private ownership, we have transformed the company, benefiting from the agility of being an independent company with additional investment and access to the expertise, capability and resources of Madison Dearborn and a continued collaboration with Walgreens.

We have enhanced capabilities, a network of over 70 pharmacies and over 90 alternate treatment sites across the country; over 750 payer relationships, including contracts with all 10 of the top 10 national payers; and we are a contracted provider of Medicare and Medicaid in all 50 states.

Option Care is built on a culture that connects our clinical expertise and company success to patient outcomes. We are proud to have skilled clinicians, highly trained in their field, who are focused on providing the best inpatient care and who served over 131,000 unique patients in 2018.

As I touched on previously, BioScrip and Option Care both offer top therapeutic solutions, but Option Care also brings the number of limited distribution drugs and some of those are exclusive to Option Care. And also, like BioScrip, we are focused on innovation with a reputation for high-quality inpatient-centric care, which brings me to Slide 6. As a team, we have worked to drive operational efficiencies throughout the business. From improving our industrial strength and infrastructure, industry-leading quality management system and the deep partnerships with health systems and referral sources. And this has resulted in recognition for Option Care of consistently improving the delivery of service to patients, payers and manufacturers.

We put patient care at the center of everything we do and that is borne out by our high overall patient satisfaction rate, minimal rate of adverse drug reactions and line infections and the substantial average cost savings our services provide that enable patients to avoid expensive and inconvenience hospital stays. In fact, Option Care is the only home and alternate site infusion services provider with all 4 industry accreditations. The satisfaction of our patients is at the center of everything we do and that will remain the case going forward once Option Care and BioScrip combines.

As this transaction brings together 2 organizations and thousands of employees dedicated to creating the -- a best-in-class experience for our patients and their families, patients will benefit from the combined companies' personalized, compassionate approach to care. And together, we will continue focusing on providing the highest quality of care in the home infusion industry.

This transformative transaction also offers a compelling opportunity to invest side-by-side with world-class shareholders who have established track records of driving long-term sustainable value in health care. Madison Dearborn has successfully invested in, in growing health care companies for over 30 years. Some of the firm's notable health care investments include: Sage Products; Sirona Dental Systems, now Dentsply Sirona; Team Health; and VWR International. And we have long benefited from the supported partnership from Walgreens, first as part of the company and since our independence since 2015, they continued to be a great partner as a major shareholder alongside Madison Dearborn.

We expect to continue benefiting from Madison Dearborn and Walgreens' deep health care relationships, additional resources and sector expertise. It should enhance our ability to explore expanded capabilities and services and deliver high-quality infusion therapy to more patients across The United States.

Moving to Slide 8. I now -- I will now spend time going into greater depth describing the numerous benefits of the strategic combination. Importantly, we believe it provides BioScrip shareholders with the opportunity to participate in upside we see resulting from this combination. This upside will be driven by a number of factors.

We have an expanded national geographic presence. And I want to point out that while we will be a leader in the market, it will continue to be a highly fragmented marketplace. Together, we have an independent at scale clinical platform to capitalize on the ongoing shift of health care an infusion services lower cost, safer, patient-preferred setting of the home or an alternate site.

I also want to emphasize that as an independent provider, we will retain the unique ability to deliver high-quality infusion therapy to every commercial and governmental payer. We are not reliant on PBM, and while we will have Medicare and Medicaid exposure, the combined company will experience minimal pen stroke risk. In fact, we estimate that over 3 quarters of the combined company payers will be commercial payers.

Additionally, we have enhanced payer diversity with the top 10 payers all in network, and a strengthened and expanded combined product portfolio, plus the capability to create additional growth through new product and service introductions due to an enhanced scale.

We also expect the transaction to provide achievable cost synergies, including meaningful operating and supply chain efficiencies and our enhanced financial profile will further enable the combined company to pursue a balanced capital allocation strategy, including investing in our people and services to drive growth and capitalize on favorable market trends, while also prudently managing the combined companies' debt profile.

Finally, we are bringing together the best of both businesses, including an experienced leadership team and Board of Directors that we'll draw from the talent -- from both Option Care and BioScrip.

If you turn to Slide 9, you can see the combined company will be a leading independent provider of home and alternative site infusion services. As Dan mentioned, with more than $2.6 billion in combined 2018 pro forma revenue, our collective national reach will include the largest and most skilled group of more than 2,900 clinicians, including pharmacists, pharmacy technicians, nurses and dieticians.

I will let Dan talk about the combined companies' expanded reach.

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [6]

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Thanks, John.

So I think some of you have heard me talk about a desire to expand west of the Mississippi River, I think, a number of you on the phone over the years have heard my descriptions of Louisiana Purchase in Oregon Terry -- Territory, as I like to joke, and I look at this and this really accomplishes that. And I think it's one of the things that among the other opportunities we have here I most excited about.

And one of the great aspects of this transaction is it -- that it provides us with a truly national platform. Our expanded reach will cover 96% of the U.S. population with facilities in 46 states and the ability to spend and serve patients in all 50 states. Indeed, our combined employee base, we'll utilize clinical monitoring and reporting to develop personalized care plans for patients and we'll be able to provide ongoing quality care in support of complex therapy regimens. I can't emphasize enough the value of a best-in-class platform that is of national scope. Due to our scale, we will be positioned as the partner of choice for pharmaceutical manufacturers seeking innovative, distribution channels, inpatient support models to access the market. And in areas we are both present, we intend to leverage our combined expertise to ensure we're able to raise the bar higher. Because together, we will have the resources to successfully and effectively handle the increased volume.

I'll now walk through the terms of the transaction and how we're creating value for BioScrip shareholders.

BioScrip will issue new shares to Option Care's shareholders, which is owned by investment funds, affiliated with Madison Dearborn partners and Walgreens in an all-stock transaction. Upon completion of the transaction, the Madison Dearborn funds and Walgreens will beneficially own approximately 80% of the combined companies on a fully diluted basis with BioScrip shareholders holding the remainder. Our common stock will continue to be listed on the NASDAQ global market. An important element of this transaction is the fact that the company will be run by a management team that draws on the best talent from both BioScrip and Option Care. As I mentioned earlier, John will serve as the CEO of the combined company and Mike Shapiro will be the CFO. I will remain active as a special adviser to the board. The combined companies' board will have 10 members, made up of 8 directors from Option Care and 2 from BioScrip's board.

BioScrip's current Chairman, Carter Pate, will serve as the Director of the combined companies, as will Dave Golding from the BioScrip board. The combined companies' board is expected to benefit from the addition of the industry leaders, such as Harry Kraemer, John Arlotta and Nitin Sahney.

We look forward to introducing you to additional members of the combined companies' board and the leadership team as we approach closing, which we expect in the second half of 2019. There is also committed financing in place to refinance and help optimize and simplify the combined companies' capital structure, and the leadership will focus on pursuing a balanced capital allocation strategy that will enable the combined company to invest in its people and services and to drive organic growth, while paying down debt.

Pro forma combined net leverage ratio is expected to be approximately 6x, which is -- which compares favorably to BioScrip's stand-alone net leverage of approximately 11x and inclusive of BioScrip's preferred equity 13x as of year-end 2018. The transaction has been unanimously approved by the Boards of Directors of both BioScrip and Option Care and is subject to the satisfaction of customary closing conditions, including regulatory approvals and BioScrip shareholder approval.

Looking at Slide 11, let me now underscore the substantial value creation potential of this combination that would result in tangible benefits to shareholders. We are creating a leading independent provider of home and alternate treatment site infusion therapy services. BioScrip's shareholders will have the opportunity to participate in the long-term potential of a diversified business across payers, therapies and geographies, in which no existing payer of the combined company will account for more than 11% of the net revenue across a broad therapy portfolio. BioScrip's shareholders will also benefit from substantial synergies, including over $60 million in run rate cost synergies forecasted within 24 months of the transaction closing.

And as you think about capturing deal synergies and accelerating growth, both Madison Dearborn and Walgreens have a successful track record of driving long-term sustainable value in health care. The transaction provides, what we believe, is the compelling opportunity to invest alongside the seasoned investors in a company with enhanced scale, a simplified and enhanced capital structure and a highly experienced management team and Board of Directors.

Furthermore, the combined companies' capital structure will result in enhanced cash flow profile and a financial capacity to pay down debt and invest in growth opportunities, while enhanced scale will drive opportunities to capture scale efficiencies and create additional vectors of growth through new product and service introductions.

Now John will walk us through the favorable dynamics of our industry and how that provides great opportunity for the combined companies.

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [7]

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Thanks, Dan.

Let me give you a sense of the significant growth opportunity in front of us. We are not only operating in a large and growing industry, but we have many tailwinds operating in our favor. The U.S. infusion industry is approximately $100 billion. And of that, home and alternate site infusion currently accounts for approximately $12 billion. The combined company will be a leader in this highly fragmented industry, which is estimated to grow approximately 5% to 7% per year. Together, we will be one of the largest providers of home and alternate site infusion solutions, and we are both built on -- upon a commitment to provide value-based care, which is driving home infusion share growth. Value-based care not only improves clinical outcomes and lowers overall cost, but it also delivers better results for payers and providers.

With unparalleled breadth and depth, we will be uniquely positioned to capitalize on growth opportunities. We intend to pursue multiple avenues of growth, including organic growth in chronic and acute therapies, along with generating growth through operational efficiencies, improved performance in revenue cycle management and innovative new therapy introductions.

Our ability to grow should be enhanced by the fact that the combined company will continue to be an independent provider, not tied into any single payer.

Turning now to synergies. We expect to generate over $60 million in run rate cost synergy savings, through meaningful operating and supply chain efficiencies, including driving procurement efficiencies, maximizing local coverage, while increasing access to care and optimizing administrative functions across the national network.

We will be leveraging the significant talent and assets of the combined teams, and I look forward to capitalizing on the many growth opportunities that this combination creates. And as I mentioned earlier, we expect the cost synergies to be realized within 24 months of closing.

I will now let Mike Shapiro to discuss the transaction's financial benefits.

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [8]

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Thanks, John. Good morning, everyone.

Turning to Slide 14, I'd like to share a few thoughts regarding the pro forma combined enterprise. The transaction creates an organization with combined 2018 pro forma revenues of more than $2.6 billion and combined 2018 pro forma adjusted EBITDA of more than $200 million, inclusive of a $60 million in run rate synergies John just outlined.

Given the revenue and earnings growth potential, we believe the opportunity to create value for shareholders is significant. And given the broader reach in synergy cap for opportunity, we would expect earnings growth to outpace above-market revenue growth. And as Steve will cover in a minute, we also expect to generate strong cash flow as a result of the earnings expansion in disciplined working capital management.

So with that, I'll turn it back over to Steve to expand on the value creation potential of the combined enterprise.

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Stephen M. Deitsch, BioScrip, Inc. - Senior VP, CFO & Treasurer [9]

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Thanks, Mike.

Taking a look at Slide 15, you can see how the transaction results in a capital structure that enhances the combined companies' cash flow profile and financial capacity to pay down debt and invest in the company's near- and long-term growth initiatives. As the chart demonstrates, instead of paying, as BioScrip currently does, nearly 90% of its adjusted EBITDA to pay down debt, the combined company will reduce that to 50%, thus freeing up cash to invest back into the business and fuel growth. All-in-all, we will be able to drive even more growth opportunities for the business, including continuing to invest and enhance patient experiences as well as investing in our people, processes, technologies and facilities to achieve growth, uphold the highest quality of services and provide innovative solutions to the health care system.

I'll turn it back to Dan for his concluding remarks.

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [10]

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Thanks, Steve.

Before we open the floor to questions, I just like to reiterate my excitement of the value creation of this potential of this transaction. This transaction marks a powerful expansion of our individual product offering and footprints and together we will bring deep clinical expertise in a broad therapy portfolio to make a positive difference in even more peoples' lives. Industry dynamics, as I have stated before, have never been better. This combination creates a leading independent platform to capitalize on the growing demand for home and alternative site infusion services and how we want to deliver care in the future, particularly through our diverse set of life-improving, cost-effective services. I have the utmost confidence that we have the right team in place to first integrate, then capitalize on the opportunities inherent in this (inaudible)combination, particularly with majority owners, that will help achieve growth and significant long-term value appreciation.

Personally, I am thrilled about what this combination will do for all stakeholders, including the industry. And while I continue to -- as CEO of BioScrip, until the close of the transaction, I am excited to be a special adviser to the board of the combined company because I believe in the merits of this transaction and the resulting growth profile. The opportunity that the union of these 2 leading high-performing companies brings to our payers, providers, biopharma, manufacturers, patients, teammates and our valued shareholders is tremendous and greater than we could achieve on our own. Our excitement is obvious, and each of us also would like to thank our teammates and employees for their dedication to providing the highest quality care in the home infusion industry. And I'd also like to make a call out to the Board of Directors at BioScrip because I could not have done this without you. We are confident that together, we will be able to drive even more growth opportunities for the business and provide our team members with professional development opportunities.

We will now take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of David MacDonald with SunTrust.

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David Samuel MacDonald, SunTrust Robinson Humphrey, Inc., Research Division - MD [2]

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Look, I guess, the first question I would have is we're hearing a lot from the payers in terms of the move towards value-based care, site of care redirection, et cetera. I was wondering if you could just dig into that a little bit more conversations you're having with the big national payers? Do you see this deal as an accelerant to some of those value-based care conversations? And then, obviously, there's been some changes in terms of the dynamics, in terms of independence. Can you also talk about the uniqueness of being a scaled independent player, while you're having those conversations?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [3]

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Yes, Dave. I'll start this one out, but I would also love to hear from John and Mike on this as well. And as it relates to the value-based care, there is no question that scale size, scope, breadth matters and in resources. And candidly, Dave, these types of relationships are enhanced by the scale size, breadth, scope and our ability to invest. And I believe this allows us to get on the leading edge of those kind of relationships. And we've done a lot of work, as you know, in this area. Dave and we believe there is significant opportunities to move that forward. So I think that's a really good question, Dave, and I believe this only enhances our ability to address where the market is going. You had a second question too, Dave.

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David Samuel MacDonald, SunTrust Robinson Humphrey, Inc., Research Division - MD [4]

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Yes. Just -- look, there's obviously been some major transactions in the space. And you're now, in terms of your independence, I think that that's probably a little bit more of a differentiator now on a go-forward basis. If you could just speak to that a little bit?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [5]

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Yes. And again, I'll let also John and Mike jump in on this too. But there's no question. I mean, I think, there is real value in having a nimble, high-speed, high-performing, entrepreneurial, innovative, independent company in this space. And I fundamentally believe that we can move faster than our competitors and be more focused than our competitors. And now that the company has the resources, the company that has the scope, the breadth, it really has a chance to be in a position that absolutely unequivocally transform architect define, design this industry. So with that, I'll turn it over to both Mike -- both John and Mike.

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [6]

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Yes. Thanks, Dan. Dave, I look at those 2 questions actually as one. In a sense of, we are in a really strong position as an independent provider. As we outlined with now the expanded reach that we have as well as the enhanced product portfolio, we believe we will be the partner of choice to help drive site of care initiatives, that we are feeling today and working with many of the payers in different conversations. And the opportunity for us to continue to leverage that as we move forward. Those conversations are important. And as Dan said, we believe, we will be leading that chart with our ability to have conversations with all commercial payers before that opportunity. It's all about outcomes. And our focus around driving clinical care and a patient-centric approach is well received by the payers and the patients, and that is something that, again, is the hallmark of us. As an organization, it's focusing around driving high quality at appropriate cost.

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David Samuel MacDonald, SunTrust Robinson Humphrey, Inc., Research Division - MD [7]

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Okay. Then guys, I could just sneak one follow-up in there. Look, obviously, the legacy capital structure of BioScrip has been a little bit challenging. I was wondering with more financial flexibility, if you could just run through the top, maybe a couple of areas, where now that you've got a little bit more money to spend upon closing of investment and opportunity that you see now that you've got, again, a little bit more financial flexibility?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [8]

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Yes. I'd like to have John and Mike answer that one, please.

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [9]

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Yes, Dave. It's Mike Shapiro here. Look, obviously, with more...

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David Samuel MacDonald, SunTrust Robinson Humphrey, Inc., Research Division - MD [10]

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(inaudible).

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [11]

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Great, great. Look one of the things we're excited about is the capital structure that we're putting in place with committed financing at this point. It can be a very patient capital structure, no near-term maturities, very manageable, as Steve clearly outlined around the utilization of run rate EBITDA to service bad debt. And as we relentlessly focus on cash flow generation, again, this is a growing enterprise. So first and foremost, we're going to continue to fund the growth through our people and the technologies and the quality systems that we've established. And frankly beyond that, the near-term priorities, we're going to be utilizing that capital to implement the synergies and bring these organizations together. But we are excited about -- look, longer term, it gives us the flexibility to think about how best to deploy it for value creation, whether it's incremental M&A further down the road, deleveraging or continuing to invest in organic growth, so really excited about the flexibility it offers us.

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Operator [12]

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Our next question comes from the line of Richard Close with Canaccord.

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Richard Collamer Close, Canaccord Genuity Limited, Research Division - MD & Senior Analyst [13]

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I guess, these questions are for Mike and John. I was just wondering if you could provide us some additional details on Option Care's historical financial performance? I see you've got the 2-year CAGR in there. Just curious about the margin trends in the business? Maybe since you've took it private in the transaction back in 2015?

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [14]

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Yes, Rich, sure. It's Mike, and I will start and, obviously, I'll let John fill in. Look over the -- as we've outlined on Slide 4, we've delivered since separation above market top line growth. And as all you know, there have been some reimbursement disruptions in there along the way, so very proud about the top line performance since separation. And as John alluded to, that also included the introduction of some new to world therapies, which we've been able to expand the portfolio across our payer relationships. At the same time, again, after separation, once we stood up, the organization is a -- as an independent organization, we've really started to hit our stride on delivering leverage growth, which as we talk about is driving earnings in excess of the top line expansion. And so that afford us the opportunity to invest in new facilities and new technologies. And so since separation, we're really proud of the track record that we put up.

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [15]

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Yes, and I would add, look, we've made significant investment into people, process, technology in our facilities. And that has allowed us to drive operating efficiencies, as Mike said. We have been maniacally focused around making certain that we were growing EBITDA faster than the top line, using that leverage and strength that we had for the position in order to move that ahead. So proud of the track record that we had. We took a pretty sizable punch with the Cures Act as everyone in the industry did. And not only did we withstand that, but have grown since then. So feel like we're in a really good position and have a fantastic platform for growth.

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Richard Collamer Close, Canaccord Genuity Limited, Research Division - MD & Senior Analyst [16]

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And my follow-up question, I guess, is on the $60 million-plus in synergies. Is there any way you guys can provide areas where you see the savings? Where that $60 million is essentially coming from?

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [17]

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Yes. So we really defined it in 3 primary areas. We think that there are efficiencies in procurement and supply chain efficiencies, that we can operate from that perspective. We believe that there's opportunity in driving just overall execution and operating efficiencies. And the third area that we've identified is really looking at the combination of streamlining the administrative services of both organizations. So we look at those as probably equal buckets in the way that we've defined it, as we look forward. And we are -- we'll be putting it in place a very comprehensive integration plan, as we move forward, so that we can hit the ground running day 1 after the close.

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Operator [18]

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Our next question comes from the line of Brooks O'Neil with Lake Street Capital Markets.

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Brooks Gregory O'Neil, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [19]

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I'm trying to value the new company. You guys have given us a lot of detail. But the 2 pieces that I need to kind of complete my picture are the number of pro forma common shares that will be included at closing? And also, the cash position of the combined company?

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Stephen M. Deitsch, BioScrip, Inc. - Senior VP, CFO & Treasurer [20]

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Mike, do you want to take that one?

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [21]

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Yes. You bet, Steve. Yes. So -- Brooks, look at post-close based on the pro forma ownership, we would expect the post close share count to be approximately $682 million (sic) [682 million.] And as we -- as I mentioned, Brooks, we, at this point, have committed financing in place. Naturally, that will simplify. As Dan mentioned, simplify the capital structure across both enterprises. It's also going to provide us with adequate liquidity to, a, bring these organizations together, integrate and drive the organizations on a combined basis. So we will -- post combination, we will enter the world as a combined organization with a very strong liquidity profile.

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Brooks Gregory O'Neil, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [22]

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That's great. Did you say 182 million shares, Mike?

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [23]

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No, 682 million shares.

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Brooks Gregory O'Neil, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [24]

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682 million shares.

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [25]

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That's correct, Brooks.

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Brooks Gregory O'Neil, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [26]

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Okay. And then, my second question, I'm just curious, maybe for Dan. I see, on Page 4, the pro forma EBITDA, you had $45 million, Option Care $95 million. If I do the math, 32% BioScrip, 68% Option Care. Help us understand how you got comfortable with 20% of the combined company going to BioScrip shareholders?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [27]

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Yes. Thanks, Brooks. I mean, It's really related to the debt and our capital structure, Brooks, that's the delta.

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Operator [28]

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Our next question comes from the line of Mike Petusky with Barrington Research.

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Michael John Petusky, Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst [29]

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So I guess, I want to understand, I'm a little surprised that the margins at Option Care, given the scale with payer mix, aren't a little bit more attractive. And I'm just wondering, is there -- I understand cures and all the rest, but is there a more normalized margin run rate that you guys feel is attainable over the next few years? Or is it got, sort of, mid-single digits about what do you would expect?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [30]

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Yes. So I'll let John and Mike answer that.

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [31]

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Yes. Thanks, Mike, for the question. So first and foremost, when you look at the breadth of our product portfolio, we have some specialty products that are very high in reimbursement rates, but there are lower margins based on the size of that -- the cost of that therapy. And so that drags down, when you look at a blended basis, the overall margin on that. As we've mentioned previously, we've been spending significant amount of time with our investments to drive operating efficiencies and really make certain that we are focused around reducing the cost of service through that -- through those efficiencies and the deployments of that technology. Our expectations is that is going to continue to expand as we move forward. And we can leverage and sweat the asset across the enterprise, and we will continue to really focus on making certain that we're driving that overall EBITDA expansion. We've invested tens of millions of dollars into our -- just overall efficiency model into technology and our facilities. And we really feel good about having an industrial strength infrastructure and that ability to stretch those assets moving forward.

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Michael John Petusky, Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst [32]

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Okay. All right. Fair enough. And I'm sorry, if I may have missed this earlier. But how are you guys going to handle branding going forward from a clinical perspective? And also, just from stock, is this going to continue to trade under BIOS or sell side to that place?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [33]

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Yes. Mike, this is Dan Greenleaf. Well, John, if you'd like to answer that, please.

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [34]

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Yes. No, thanks, Dan. I guess, we were -- as part of the overall integration plan, that is something that we will be working with both teams to really understand and define. We know there is substantial brand equity with both organizations. And so we are going to be thoughtful about what is the decision that we'll make and make certain that we have the right branding to represent the value that we bring into the marketplace.

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Michael John Petusky, Barrington Research Associates, Inc., Research Division - MD & Senior Investment Analyst [35]

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Okay. And then just, is it going to continue to trade under BioScrip in terms of...

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [36]

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Yes, that's yet to be determined.

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Operator [37]

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Our next question comes from the line of Kevin Ellich with Craig-Hallum.

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Kevin Kim Ellich, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [38]

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Congratulations on the transaction. Just wanted to start off with synergies. You guys clearly laid out the cost synergies. Could you talk about if there is any revenue synergies from the combined company, especially with the managed care commercial relationships?

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [39]

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Yes, this is -- I would -- John and Mike, I'll let you answer that.

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Michael H. Shapiro, Option Care Enterprises, Inc. - CFO [40]

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Yes, Kevin. It's Mike Shapiro. So look, the way that we've articulated and outlined the value creation, again, in the deck, as John outlined, we've identified approximately $60 million of synergies. To be clear, that doesn't include any revenue synergies. And I think as you picked up on the excitement from the prepared remarks, there's a tremendous amount of excitement around how we provide that national footprint in broader therapy portfolio. So naturally, we would expect that this resonates with our payers and health systems. There is an opportunity there. But specifically as it relates to how we've outlined the value here today, we have not included any specific revenue synergies.

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Kevin Kim Ellich, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [41]

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Okay. But -- I mean, would you expect to achieve some, I hope?

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [42]

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Yes. This is John. Over the long run, yes, we do. But we also are trying to be thoughtful because we know there will be disruption as we're looking to bring the organizations together. We've tried to be thoughtful and balanced in the way that we're looking at it and provide you with a sense of where we know there are achievable synergies in that 24-month horizon. So our focus is around where those thoughts are and making certain that they are achievable and trackable, as we're looking at moving this forward.

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Kevin Kim Ellich, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [43]

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Okay. And then John, you actually, kind of, segued into my next question.

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [44]

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Hey, Kevin, can I say something too?

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Kevin Kim Ellich, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [45]

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Sure, Dan.

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [46]

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Yes. I think the synergies are -- there's a lot of opportunity here. I don't -- I won't score them for you. But clearly, Kevin, I would not have recommended that we go forward with something like this, unless I felt that there were substantive synergies that our shareholders could take advantage of.

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Kevin Kim Ellich, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [47]

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Great. I appreciate that color there, Dan. And then John, you were talking about a little disruption. Just wondering, clearly, there is a nice footprint combined nationally. Wondering if you've -- what you've modeled in? Or if you can quantify any potential customer attrition? Or expect the divestitures, as you guys might need to get done to complete the transaction?

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John C. Rademacher, Option Care Enterprises, Inc. - CEO [48]

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Yes. Look, we contemplated within the comprehensive way that we've looked at the overall transaction would, inclusive in that $60 million is -- it's net of both cost to achieve as well as where we see the disruption. We didn't really spike that out as to a separate line item, but it's something that has been factored into the overall net.

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Operator [49]

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Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to Dan Greenleaf for closing remarks.

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Daniel E. Greenleaf, BioScrip, Inc. - CEO, President & Director [50]

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All right. Well, thank you, everyone, for joining today's call. Also, I want to thank John and Mike for joining to discuss today's exciting announcement. And I look forward to -- do we have another -- okay. That concludes today's conference call, and you may disconnect.

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Operator [51]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.