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BioScrip Inc. Reports Operating Results (10-Q)

November 03, 2010 | About:
10qk

10qk

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BioScrip Inc. (BIOS) filed Quarterly Report for the period ended 2010-09-30.

Bioscrip Inc. has a market cap of $223.8 million; its shares were traded at around $4.2 with a P/E ratio of 18.1 and P/S ratio of 0.1. BIOS is in the portfolios of Jeff Auxier of Auxier Focus Fund, Paul Tudor Jones of The Tudor Group, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

Revenue. Revenue for the three months ended September 30, 2010 was $441.2 million as compared to revenue of $333.5 million for the three months ended September 30, 2009. Pharmacy Services revenue for the three months ended September 30, 2010 was $329.3 million as compared to revenue of $296.7 million for the same period in 2009, an increase of $32.6 million, or 11.0%. That increase was primarily due to revenue on new contracts, the expansion of the number of patients served on existing contracts and industry-wide drug inflation. The acquisition of the prescription pharmacy business of DS Pharmacy resulted in new revenue of $3.6 million in the period. Infusion/Home Health Services revenue for the three months ended September 30, 2010 was $111.8 million, as compared to revenue of $36.8 million for the three months ended September 30, 2009, an increase of $75.0 million, or 203.8%. Excluding revenue associated with the acquired CHS businesses, our infusion revenue increased $7.0 million, or 19.0%, from a year ago. CHS revenue contributed $68.0 million of revenue during the period.

Revenue for the nine months ended September 30, 2010 was $1.2 billion as compared to revenue of $988.0 million for the nine months ended September 30, 2009. Pharmacy Services revenue for the nine months ended September 30, 2010 was $923.6 million as compared to revenue of $880.4 million for the same period in 2009, an increase of $43.2 million, or 4.9%. That increase was primarily due to revenue on new contracts, the expansion of the number of patients served on existing contracts and industry-wide drug inflation. The acquisition of the prescription pharmacy business of DS Pharmacy resulted in new revenue of $3.6 million during the period. Infusion/Home Health Services revenue for the nine months ended September 30, 2010 was $264.6 million, as compared to revenue of $107.6 million for the same period in 2009, an increase of $157.0 million, or 145.9%. The acquired CHS business contributed $137.8 million of revenue for the nine months ended September 30, 2010. Excluding revenue associated with the acquired CHS businesses, our infusion revenue increased $19.2 million, or 17.8%, over the prior period. The growth in revenue excluding the acquired CHS businesses in Infusion/Home Health Services for the nine months ended September 30, 2010 was a result of new infusion contracts.

Cost of Revenue and Gross Profit. Cost of revenue for the three months ended September 30, 2010 was $365.8 million as compared to $292.0 million for the same period in 2009. Gross profit during the three months ended September 30, 2010 was $75.4 million as compared to $41.5 million for the three months ended September 30, 2009, an increase of $33.9 million, or 81.7%. Gross profit as a percentage of revenue increased to 17.1% in the three months ended September 30, 2010 from 12.4% in the three months ended September 30, 2009. The increase in gross profit percentage from 2009 to 2010 was primarily the result of the acquisition of CHS and purchasing synergies generated post-acquisition. The increase in gross profit percentage compared to 2009 was partially offset by effects of certain state governmental agencies that declined to make any adjustment to their reimbursement following the implementation of the industry-wide AWP settlement in September 2009. As such, our reimbursement, as well as those of our peers, for services provided to government funded and/or operated programs were reduced. Also partially offsetting the 2010 increase in gross profit from the CHS acquisition are the effects of unfavorable competitive market conditions in our traditional mail operations.

Selling, General and Administrative Expenses. Selling, general and administrative expenses (“SG&A”) for the three months ended September 30, 2010 were $55.9 million, or 12.7% of total revenue, as compared to $32.4 million, or 9.7% of total revenue, for the same period in 2009. The increase in SG&A was primarily due to $20.2 million of additional expense in the period related to CHS and $1.5 million in additional wages and salaries and an increase of $1.5 million in broker fees related to growth in our prescription discount card business. Due to the acuity level of patients associated with the home health nursing and traditional home infusion services, the Infusion/Home Health Services segment operates at a higher operating expense ratio to revenue than the Pharmacy Services segment.

SG&A for the nine months ended September 30, 2010 were $147.0 million, or 12.4% of total revenue, as compared to $94.3 million, or 9.5% of total revenue, for the same period in 2009. The increase in SG&A was primarily due to $41.7 million of additional expense related to CHS, a $5.8 million increase in wages and salaries to strengthen the management and sales team and an increase of $3.4 million in brokers fees related to growth in our prescription discount card business. Due to the acuity level of patients associated with the home health nursing and traditional home infusion services, the Infusion/Home Health Services segment operates at a higher operating expense ratio to revenue than the Pharmacy Services segment.

For the nine months ended September 30, 2010, bad debt expense was $12.5 million, or 1.1% of revenue, as compared to $5.4 million, or 0.5% of revenue, for the same period in 2009. Of this $7.1 million increase, $1.5 million is increased provision related to uncollected receivables remaining under the Centers for Medicare and Medicaid (“CMS”) Competitive Acquisition Program (“CAP”) contract, which was terminated effective December 31, 2008. The remaining unreserved net CAP receivable balance at September 30, 2010 is $1.6 million. Although the Federal and state governmental agency process to collect these amounts has become protracted, we are pursuing receivables diligently and believe our reserves are adequate. The write-off of CAP receivables in the first quarter resulted in an increase in bad debt expense of 0.2% of revenue for the nine months ended September 30, 2010. Another $2.5 million of the bad debt expense increase was related to the acquisition of CHS. Bad debt expense increased $2.2 million in the nine months ended September 30, 2010 relative to 2009 based on our current collection experience on aged balances, which include government payors as well as non-electronic payors. The remainder of the $7.1 million increase is due to revenue growth which occurred on business mix which experiences a slightly higher bad debt rate than our average mix of business.

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10qk
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