Bioscrip Inc. has a market cap of $307.2 million; its shares were traded at around $7.72 with a P/E ratio of 28.6 and P/S ratio of 0.3. BIOS is in the portfolios of Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations:Revenue. Revenue for the first quarter of 2010 was $335.1 million as compared to revenue of $325.7 million in the first quarter of 2009. Specialty Pharmacy Services revenue for the first quarter of 2010 was $286.3 million as compared to revenue of $274.3 million for the same period a year ago, an increase of $12.0 million, or 4.4%. That increase is primarily due to revenues on new contracts and expansion of the number of patients served on existing contracts as well as drug inflation. Our increase in revenues were partially offset by loss of Specialty Pharmacy Services revenue due to the effects of the termination of the United Health Care HIV/AIDS and solid organ transplant programs in the first quarter of 2009. Excluding revenues associated with these programs, Specialty Pharmacy Services organic revenue growth would have been 9.4%. CHS revenues contributed $5.0 million of revenue during the quarter. Traditional Pharmacy Services revenue for the first quarter of 2010 was $48.8 million, as compared to revenue of $51.4 million in the first quarter of 2009, a decrease of $2.6 million, or 5.1%. The decrease was primarily attributable to the termination of certain PBM contracts.
Cost of Revenue and Gross Profit. Cost of revenue for the first quarter of 2010 was $296.2 million as compared to $289.8 million for the same period in 2009. Gross margin dollars during the first quarter of 2010 were $38.9 million as compared to $36.0 million for the first quarter of 2009, an increase of $2.9 million. Gross margin as a percentage of revenue increased to 11.6% in the first quarter of 2010 from 11.0% in the first quarter of 2009. The increase in gross margin percentage from 2009 to 2010 is primarily the result the acquisition of CHS which operated at gross margin of 47.7% for the period March 26, 2010 through March 31, 2010.
Selling, General and Administrative Expenses. SG&A for the first quarter of 2010 were $41.4 million, or 12.4% of total revenue, as compared to $30.3 million, or 9.3% of total revenue, for the same period in 2009. The increase in SG&A is primarily due to $5.0 million of acquisition and integration related expenses. Excluding acquisition expenses, SG&A was $36.4 million for the first quarter of 2010, an increase of $6.1 million, or 20.1%. The increase excluding acquisition costs was primarily due to an increase in wages and salaries of $2.5 million to strengthen the management and sales team, an increase of $0.9 million in brokers fees related to growth in our prescription discount card business, and an increase in depreciation of $0.3 million related to implementing our new pharmacy dispensing system.
Bad Debt Expense. For the first quarter of 2010, bad debt expense was $3.7 million, or 1.1% of revenue, as compared to $1.4 million, or 0.4% of revenue, in the first quarter of 2009. Of this $2.3 million increase, $1.5 million is related to an 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 net CAP receivable balance at March 31, 2010 is $3.4 million. Although the Federal and state governmental agency process to collect these amounts has become protracted, we are pursuing these monies diligently and believe our reserves are sufficient. The remaining increase in bad debt in the first quarter of 2010 relative to 2009 is due to the provision returning to more normalized levels.
Net (Loss) Income and (Loss) Income Per Share. Net loss for the first quarter of 2010 was $7.2 million, or $0.18 per diluted share, which includes net income of $0.3 million from the acquisition of CHS. This compares to net income of $3.3 million, or $0.08 per diluted share, for the same period last year.
Net cash used in operating activities totaled $21.3 million during the first three months of 2010 as compared to $15.4 million of cash provided by operating activities during the first three months of 2009. The decrease in cash provided by operating activities was primarily the result of a net loss of $7.2 million for the quarter, which includes acquisition related operating expenses and financing fees of $7.3 million. Other charges which contributed to the net loss but had no impact on cash from operations were changes in deferred income tax of $9.7 million, bad debt of $3.7 million, which includes a $1.5 million write off in relation to the terminated CAP contract, depreciation of $1.5 million, stock-based compensation expense of $0.8 million and amortization of intangibles and interest cost of $0.7 million. Also contributing to the decline in cash provided from operations was the use of $26.3 million of cash to pay off accrued expenses and other liabilities, primarily relating to the acquisition of CHS, $6.8 million of cash used for prepaid expenses and $5.4 million of cash used during the quarter ended March 31, 2010 for inventory related supply chain initiatives. Offsetting these uses of cash were $4.0 million increase in accounts payable, due to the timing of vendor payments, which was partially offset by a $5.0 million decrease in accounts receivable due to collections in the quarter.
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