BioScrip Misses Estimates - Analyst Blog

BioScrip Inc. (BIOS) reported an EPS of 6 cents in the second quarter of 2010, underperforming both the Zacks Consensus Estimate of 9 cents and the year-ago quarter’s 11 cents. Excluding special items, EPS was 7 cents. Revenues were $412 million, up 25% from the year-ago quarter.

 

Beginning this quarter, BioScrip will report under two segments – Pharmacy Services and Infusion/Home Health Services with revenues of $305.4 million (up 4.5% year over year) and $106.7 million (up 193%), respectively, during the quarter. Earlier, the company used to report under specialty services and traditional pharmacy services.

The primary reason for the increase in Pharmacy Services revenues was organic growth, partially offset by the impact of the industry wide average wholesale price class action settlement and price concessions granted in the first quarter.

 

The huge growth in Infusion Services was driven by contribution from Critical Homecare Solutions Holdings ($64.8 million), which was acquired in March 2010. Critical Homecare is a leading provider of home infusion and home health agency services to patients suffering from chronic and acute medical conditions. The deal is in line with BioScrip’s strategy of expanding its presence in the higher margin infusion market. This acquisition has enabled the company to win new contracts.

 

Selling, general and administrative expenses in the second quarter of 2010 were $54.7 million, up 73% compared to the second quarter of 2009. The increase is primarily due to the consolidation of Critical Homecare’s business, investments in management sales organization, variable selling expenses associated with discount card business and acquisition and integration related expenses.

 

Several therapeutic areas including iron overload (12% year over year), multiple sclerosis (18%), oncology (50%) and rheumatoid arthritis recorded solid growth during the quarter. Besides, BioScrip has witnessed renewed growth in the HIV category which was flat earlier.

 

Following second quarter results, BioScrip provided a revised outlook for 2010. The company now expects revenues at the lower end of its previous estimate of $1.67-$1.72 billion. This is because the company plans to target therapies that have higher profitability.

 

BioScrip is relatively well diversified across several key disease areas including immunology, multiple sclerosis and oncology. Moreover, the company’s effort to expand the higher margin infusion business, both in existing and new markets, should help improve gross and operating margins and drive the bottom line.

 

We have Neutral recommendation on the stock.