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BioScrip Inc. Reports Operating Results (10-Q)

November 02, 2009 | About:
10qk

10qk

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BioScrip Inc. (BIOS) filed Quarterly Report for the period ended 2009-09-30.

BioScrip provides comprehensive pharmaceutical care solutions. We partner with healthcare payors pharmaceutical manufacturers government agencies physicians and patients to deliver cost effective programs that enhance the quality of patient life. We focus our products and services in two core areas: specialty medication distribution and clinical management services both nationally and community-based and pharmacy benefit management services. Bioscrip Inc. has a market cap of $292.41 million; its shares were traded at around $7.54 with a P/E ratio of 17.95 and P/S ratio of 0.21.

Highlight of Business Operations:

Revenue. Revenue for the third quarter of 2009 was $333.5 million as compared to revenue of $359.4 million in the third quarter of 2008, a decrease of $25.9 million, or 7.2%. Specialty Pharmacy Services revenue for the third quarter of 2009 was $279.0 million as compared to revenue of $307.1 million for the same period a year ago, a decrease of $28.1 million, or 9.2%. The decrease was primarily due to the termination of the CAP and certain UHC contracts offset by revenue generated under new contracts and drug inflation. Traditional Pharmacy Services revenue for the third quarter of 2009 was $54.5 million, as compared to revenue of $52.3 million for the same period a year ago, an increase of $2.2 million, or 4.2%. The increase was primarily attributable to growth in our discount cash card programs.

Revenue for the nine months ended September 30, 2009 was $988.0 million as compared to revenue of $1,035.3 million for the nine months ended September 30, 2008, a decrease of $47.3 million, or 4.6%. Specialty Pharmacy Services revenue for the nine months ended September 30, 2009 was $828.8 million as compared to revenue of $882.6 million for the same period a year ago, a decrease of $53.8 million, or 6.1%. The decrease was primarily due to the termination of the CAP and certain UHC contracts offset by revenue generated under new contracts and drug inflation. Traditional Pharmacy Services revenue for the nine months ended September 30, 2009 was $159.2 million, as compared to revenue of $152.7 million for the same period a year ago, an increase of $6.5 million, or 4.3%. The increase was primarily attributable to growth in our discount cash card programs.

Cost of Revenue and Gross Profit. Cost of revenue for the third quarter of 2009 was $292.0 million as compared to $323.3 million for the same period in 2008. Gross margin dollars were $41.5 million for the third quarter of 2009 as compared to $36.1 million for the same period a year ago, an increase of $5.4 million, or 15.0%. Gross margin as a percentage of revenue increased to 12.4% in the third quarter of 2009 from 10.0% in the third quarter of 2008. The increase in gross margin percentage from 2008 to 2009 was primarily the result of the termination of the CAP and certain UHC contracts which, as expected, reduced volume and increased Specialty Pharmacy Services overall margin percentage. In addition to a more favorable business mix, supply chain programs and reduced shipping costs also contributed to the increase of the gross margin percentage and dollars.

Cost of revenue for the nine months ended September 30, 2009 was $872.1 million as compared to $931.2 million for the same period in 2008. Gross margin dollars were $115.9 million for the nine months ended September 30, 2009 as compared to $104.2 million for the same period a year ago, an increase of $11.7 million, or 11.2%. Gross margin as a percentage of revenue increased to 11.7% in the nine months ended September 30, 2009 from 10.1% in the nine months ended September 30, 2008. The increase in gross margin percentage from 2008 to 2009 was primarily the result of the termination of the CAP and certain UHC contracts which, as expected, reduced volumes and increased Specialty Pharmacy Services overall margin percentage. In addition to a more favorable business mix, supply chain programs and reduced shipping costs also contributed to the increase of the gross margin percentage and dollars. We also experienced an increase in gross margin dollars in 2009 due to action taken to purchase drugs during the fourth quarter of 2008 in anticipation of drug cost increases to take effect during the first quarter of 2009. In early 2008, there was a longer than usual delay in updating the industry price lists used by us and our peers to charge customers for reimbursement, which caused a reduction in gross margin in the three months ended March 31, 2008.

Net cash provided by operating activities totaled $14.0 million during the first nine months of 2009, as compared to $15.4 million of cash used in operating activities during the first nine months of 2008. The increase in cash provided by operating activities was primarily the result of net income of $13.4 million, as well as a decrease in accounts receivable, which was offset by an increase in inventory and by a reduction in accounts payable. The $11.3 million reduction in accounts receivable was due to termination of the CAP and certain UHC contracts. The increase of $2.6 million in inventory was a result of supply chain programs. The decrease of $14.0 million in accounts payable is primarily related to the timing of strategic inventory purchases.

At September 30, 2009, there was $39.6 million in outstanding borrowings under our revolving credit facility (the “Facility”) with an affiliate of Healthcare Finance Group, Inc. (“HFG”), as compared to $50.4 million at December 31, 2008. The Facility provides for borrowing up to $85.0 million at the London Inter-Bank Offered Rate (“LIBOR”) or a pre-determined minimum rate plus the applicable margin and other associated fees, provided a sufficient level of receivable assets are available as collateral. The term of the Facility runs through November 1, 2010. Under the terms of the Facility, we may request to increase the amount available for borrowing up to $100.0 million, and convert a portion of any outstanding borrowings from a Revolving Loan into a Term Loan. The borrowing base utilizes receivable balances and proceeds thereof as security under the Facility. At September 30, 2009 we had $45.4 million of credit available on a borrowing basis of $85.0 million under the Facility.

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