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BioScrip's Option Care Merger on Track, Q1 Loss Narrows

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BioScrip Inc. (BIOS - Free Report) released certain updates on its ongoing merger with Option Care along with its first-quarter earnings release recently. The company has entered into a merger agreement with this home and alternate site infusion services provider in March 2019.

According to BioScrip, following the early termination of the Hart–Scott–Rodino Antitrust Improvements Act of 1976 waiting period, the merger transaction with Option Care is proceeding as per plans and the company has already filed a preliminary merger proxy statement to this end. Management of both companies now plans to conduct a series of joint analyst and investor meetings. BioScrip currently anticipates the merger with Option Care to close in the second half of 2019.

Notably, shares of BioScrip have dropped 25.9% to date ever since it made its decision on the aforesaid consolidation public.

Meanwhile, the company is highly optimistic about the strategic and financial virtues of this combination. Per BioScrip, the integration will create the nation’s leading independent national provider of home infusion services.

Post completion of the merger, the combined entity is expected to drive significant growth for BioScrip. Through this merger, the therapies and strategic partnerships with preferred payers, hospital systems and drug manufacturers will be strengthened to a great extent, enabling the company to attain goals of higher-quality patient outcomes.

The conjoined entity will have a nationwide reach in more than 150 locations across 46 states and is expected to generate revenues exceeding $2.6 billion. The merger is projected to result in an optimized capital structure and enhance BioScrip’s financial strength and flexibility. Option Care will not only be bringing its own clinical expertise to the table but also several limited distribution drugs, which are exclusive to the company. Post this takeover, BioScrip can leverage Option Care’s operational efficiency, industrial infrastructure and its top-notch management systems.

Meanwhile, let us delve deep into the company’s quarterly earnings release.

BioScrip, Inc. Price, Consensus and EPS Surprise

BioScrip, Inc. Price, Consensus and EPS Surprise | BioScrip, Inc. Quote

BioScrip incurred a loss from continuing operations of 10 cents per share in first-quarter 2019, narrower than the Zacks Consensus Estimate and the year-ago figure of a loss of 12 cents each.

Revenues

Net revenues of $179 million in the first quarter rose 6.2% year over year. The figure also exceeded the Zacks Consensus Estimate of $178 million.

Margins

In the first quarter, gross profit improved 4.8% to $57.7 million. However, gross margin contracted 43 basis points (bps) to 32.2%. On account of a 7.7% increase in general and administrative costs, adjusted operating margin slid 52 bps to 25.8%.

Financials

BioScrip exited the first quarter of 2019 with cash and cash equivalents of $5.7 million compared with $14.5 million at the end of 2018.

Guidance

Given the pending merger with Option Care, BioScrip has not provided any financial guidance.

Our Take

BioScrip exited the first quarter with loss narrower than the consensus estimate and revenues ahead of the mark. We are optimistic about the company’s imminent merger with Option Care and particularly, its fortified liquidity and flexibility that can be achieved via an optimized capital structure after the merger.

Zacks Rank & Key Picks

BioScrip has a Zacks Rank of #4 (Sell).

Some better-ranked stocks with solid results this earnings season are Stryker Corporation (SYK - Free Report) , DENTSPLY SIRONA (XRAY - Free Report) and CONMED Corporation (CNMD - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Meanwhile, revenues of $3.52 billion were in line with the consensus estimate.

DENTSPLY reported adjusted EPS of 49 cents in the first quarter of 2019, topping the Zacks Consensus Estimate of 38 cents. Moreover, revenues of $946.2 million surpassed the Zacks Consensus Estimate of $917.1 million.

CONMED posted first-quarter 2019 adjusted EPS of 57 cents, which exceeded the Zacks Consensus Estimate of 54 cents. Also, revenues of $218.4 million outshined the consensus mark of $213 million.

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