BioScrip Upgraded to Neutral - Analyst Blog
12 Mai 2011 - 6:51PM
Zacks
Following a
significant boost in BioScrip
Inc.‘s (BIOS) top line, triggered by
balanced growth across its segments, we have upgraded our
recommendation on BioScrip to Neutral.
In the first
quarter 2011, BioScrip came up with better-than-expected results,
reflecting strong contributions from the Critical Homecare
Solutions (CHS) acquisition and positive organic growth. EPS,
excluding one-time items, came in at 5 cents, beating the Zacks
Consensus Estimate of a break-even result and the year-ago quarter
loss per share of 18 cents.
A healthy
double-digit revenue growth resulted in a 98% year-over-year jump
in gross profit. As a result gross margin during the quarter
expanded by 600 basis points (bps) (to 17.6%). In addition, while
there were higher selling, general and administrative expenses,
adjusted operating margin increased by 334 bps to 4.1% during the
quarter.
The company
has started to expand its footprint nationally based on the
CHS acquisition. Following this acquisition, BioScrip was able to
access a huge number of infusion patients with a strong potential
for future growth. CHS is gradually helping the company to
integrate across the majority of the existing markets as well as
gain entry in new and under -penetrated locations. Additionally
BioScrip is taking advantage of the local community strengths, as
well as access to the managed care relationships through
CHS.
In addition,
after a few disappointing quarters, BioScrip is gradually gaining
traction in its organic division. In spite of the existing
reimbursement pressure, the company showed strong results in the
pharmacy segment impacted by positive returns from drugstore.com,
new managed care contracts and cash card business.
Thus the
company is in a perfect position to leverage its strong clinical
reputation for growth. Also its strong accessibility to specialty
drugs and relationships with pharmaceutical companies are expected
to drive growth further.
BioScrip’s
strong presence in the infusion and home health market should help
sustain growth. The company is relatively well diversified across
several key disease areas including immunology, multiple sclerosis,
and oncology. Moreover, BioScrip has favorable managed care
relationships on a national basis.
However,
BioScrip’s highly leveraged balance sheet continues to be a drag on
the bottom line which remains key area of concern, in our
view.
Additionally, we remain
apprehensive owing to mounting competitive pressures from players
like CVS
Caremark (CVS),
Medco
Health Solutions (MHS),
Walgreen
(WAG) and
AmerisourceBergen
(ABC) as well as many smaller
organizations that operate on a local or regional basis. Increased
competition has led to lower pricing and increased rebate sharing,
thereby pressurizing margins. Also the reimbursement issues are
adversely affecting the company's performance going
ahead.
AMERISOURCEBRGN (ABC): Free Stock Analysis Report
BIOSCRIP INC (BIOS): Free Stock Analysis Report
CVS CAREMARK CP (CVS): Free Stock Analysis Report
MEDCO HLTH SOL (MHS): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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