BioScrip Maintained at Neutral - Analyst Blog
14 Juin 2012 - 3:15PM
Zacks
We are maintaining our Neutral
recommendation on BioScrip Inc. (BIOS) with a
target price of $7.25.
BioScrip reported a loss of 4 cents
per share from continued operations in the first quarter of fiscal
2012, wider than the year-ago quarter loss of 2 cents. Reported
results also missed the Zacks Consensus Estimate of break-even
results.
Earlier in 2010, BioScrip initiated
a strategic assessment of its business and operations based on
which the company started focusing on its fast growing
Infusion/Home Health Services segment. As a result, on May 4,
2012, BioScrip divested certain Pharmacy Services assets including
pharmacy mail operations and community retail pharmacy stores to
Walgreen Co. (WAG) for $225 million, including
approximately $161 million in cash and retention.
Based onthe huge potential of the
Infusion Services business leading to persistent growth of BioScrip
in this segment (up 18.9% year over year to $109.1 million in the
last reported quarter), the company has taken a strategic
initiative to focus more on this rising sector. The company
recently repositioned certain assets of its pharmacy business and
redirected the resources of the divested business to support the
existing Infusion services business.
We are encouraged by the company’s
decision to invest in the Infusion and Home Health industry where
it has a strong presence and enjoys competitive advantages. Our
views are also buoyed by the estimates of the National Home
Infusion Association ('NHIA'), which stated that the alternate-site
infusion therapy sector currently represents $9–$11 billion per
year in US health care expenditure.
Further, formerly, BioScrip’s
Pharmacy Services segment included community pharmacy stores, mail,
traditional especially pharmacy mail and PBM and Cash Card
services. However, after the recent sale of the assets to Walgreen,
the company now has only the PBM services and cash card business
left with it.
Nevertheless, the company is
hopeful about the continued growth in PBM and cash card business.
The company expects revenue in the range of $100-$105 million for
fiscal 2012. We remain optimistic about BioScrip’s PBM growth and
think that the company is perfectly positioned to leverage its
strong clinical reputation for growth.
However, BioScrip’s highly
leveraged balance sheet continues to be a drag on the bottom line
and remains a key area of concern, in our view. Moreover, the Home
Health industry was impacted by the reduction in Medicare
reimbursement and the new face-to-face requirement. This may temper
BioScrip’s sales growth going forward.
Additionally, we remain
apprehensive owing to mounting competitive pressures from players
like CVS Caremark (CVS), Express
Scripts (ESRX) 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 putting
severe pressure on margins.
BioScrip currently maintains a
Zacks#3 Rank, which translates into a short-term Hold rating.
BIOSCRIP INC (BIOS): Free Stock Analysis Report
CVS CAREMARK CP (CVS): Free Stock Analysis Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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