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BioScrip (BIOS): Soft Revenue Outlook & Weak Margins Linger
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On Jun 13, 2016, we issued an updated research report on BioScrip, Inc. – a provider of home infusion and pharmacy benefit management (PBM) services.
Apart from a solid top-line performance in first-quarter 2016, we are also encouraged by BioScrip’s progress related to its multifaceted strategic plan to improve its financial position and emerge as a major player in the infusion services space.
The company noted that it has substantially completed the previously announced targeted workforce reduction and remains on track to deliver the expected $19 million in annual cost savings in 2016. It has also achieved the anticipated additional supply chain program initiatives that are expected to add $3 million in annual savings this year. Additionally, the initiatives to reduce corporate costs by $5 million in 2016 have started to yield results. Also, the company has implemented cost reduction programs that are expected to reduce infusion field costs by $5 million this year.
We believe these financial improvement initiatives by BioScrip will enable it to successfully drive cash flow and create considerable value for its shareholders, in the long run. With the new initiatives likely to improve overall business, we expect the company to overcome its loss scenario as well, on the back of these steps. Meanwhile, management has authorized a process to concurrently explore a range of strategic alternatives, including transitioning chronic therapies to alliance partners or a potential sale or merger of the company.
However, despite a good start to the year, we remain on the sidelines owing to the concerns related to the company’s expectation of low total revenue in 2016 compared to 2015. This according to BioScrip, will be due to the planned reduction in the percentage of lower-margin chronic revenue as a percentage of total revenue.
Moreover, sluggish gross margin remains another area of major concern for BioScrip. Gross profit during the first quarter was $64.2 million, down 1.1% year over year. Gross margin, however, expanded 35 basis points year over year to 26.9%. This sluggish growth remains a matter of concern. To add to the woes, reimbursement issues continue to hurt BioScrip’s performance. The competitive landscape also remains an overhang.
Currently, BioScrip carries a Zacks Rank #4 (Sell).
Key Picks in the Sector
Some of the stocks worth a look in the broader medical space are HEALTHSOUTH Corp. , LHC Group, Inc. and US Physical Therapy Inc. (USPH - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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BioScrip (BIOS): Soft Revenue Outlook & Weak Margins Linger
On Jun 13, 2016, we issued an updated research report on BioScrip, Inc. – a provider of home infusion and pharmacy benefit management (PBM) services.
Apart from a solid top-line performance in first-quarter 2016, we are also encouraged by BioScrip’s progress related to its multifaceted strategic plan to improve its financial position and emerge as a major player in the infusion services space.
The company noted that it has substantially completed the previously announced targeted workforce reduction and remains on track to deliver the expected $19 million in annual cost savings in 2016. It has also achieved the anticipated additional supply chain program initiatives that are expected to add $3 million in annual savings this year. Additionally, the initiatives to reduce corporate costs by $5 million in 2016 have started to yield results. Also, the company has implemented cost reduction programs that are expected to reduce infusion field costs by $5 million this year.
We believe these financial improvement initiatives by BioScrip will enable it to successfully drive cash flow and create considerable value for its shareholders, in the long run. With the new initiatives likely to improve overall business, we expect the company to overcome its loss scenario as well, on the back of these steps. Meanwhile, management has authorized a process to concurrently explore a range of strategic alternatives, including transitioning chronic therapies to alliance partners or a potential sale or merger of the company.
However, despite a good start to the year, we remain on the sidelines owing to the concerns related to the company’s expectation of low total revenue in 2016 compared to 2015. This according to BioScrip, will be due to the planned reduction in the percentage of lower-margin chronic revenue as a percentage of total revenue.
Moreover, sluggish gross margin remains another area of major concern for BioScrip. Gross profit during the first quarter was $64.2 million, down 1.1% year over year. Gross margin, however, expanded 35 basis points year over year to 26.9%. This sluggish growth remains a matter of concern. To add to the woes, reimbursement issues continue to hurt BioScrip’s performance. The competitive landscape also remains an overhang.
Currently, BioScrip carries a Zacks Rank #4 (Sell).
Key Picks in the Sector
Some of the stocks worth a look in the broader medical space are HEALTHSOUTH Corp. , LHC Group, Inc. and US Physical Therapy Inc. (USPH - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>