BioScrip's Infusion Services Strong, Bottom Line Dwindles - Analyst Blog

On Sep 30, we issued an updated research report on Bioscrip, Inc. (BIOS) – provider of home infusion and pharmacy benefit management (PBM) services.

We are once again disappointed with the second-quarter bottom-line performance at BioScrip. Adjusted net loss from continuing operations of 10 cents per share deteriorated from the year-ago adjusted loss per share of 4 cents. The results were also considerably wider than the Zacks Consensus Estimate of a loss of 5 cents.

However, revenues showed an improvement, as unlike the last quarter, growth in Infusion revenues was also accompanied by a marginal improvement in revenues at the PBM Services segment. Total revenue in the reported quarter rose 43.8% year over year to $247.1 million, breezing past the Zacks Consensus Estimate of $233 million.

We are upbeat about the company’s encouraging results in the Infusion business. BioScrip has been recording consistent growth in the Infusion Services segment (consisting of 92% of the company’s total sales) where it has a strong presence and enjoys competitive advantage. The last reported quarter’s strong performance was primarily on the back of a robust 47.8% rise in Infusion revenues. Going forward, the Infusion franchise should continue to grow via organic and inorganic means.

Yet, the company is concerned about near-term revenue dis-synergies from acquisitions. According to the company, it may take another two to three quarters in bringing out-of-network patients into BioScrip’s network.

Further, margins continue to be under pressure, which remains a major headwind for the company. Huge gross margin contraction in the quarter was primarily due to a shift in the therapy mix in the Infusion Services segment and adverse business mix as revenues from higher-margin PBM business continue to decline.

Moreover, reimbursement issues continue to hurt BioScrip’s performance. The competitive landscape also remains an overhang.

Key Picks in the Sector

BioScrip currently carries a Zacks Rank #5 (Strong Sell). Although we maintain a bearish outlook on the stock, the broader medical sector looks promising with better-ranked stocks like CVS Health Corporation (CVS), Hologic Inc. (HOLX) and Edwards Lifesciences Corp. (EW). All the stocks carry a Zacks Rank #2 (Buy).

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