BioScrip Soars On Progress In Financial Improvement Plan

BioScrip Inc. BIOS recently reported significant progress in the implementation of its cost savings and financial improvement initiatives, under its previously announced Financial Improvement Plan. Following the news, the stock gained an impressive 22.6%, indicating investors’ enthusiasm and confidence in the company.

Additionally, BioScrip announced its preliminary fourth quarter 2015 outcome, along with updated results for its liquidity and capital resources, as well as future strategic alternatives that the company plans to execute.

The Financial Improvement Plan

In an attempt to reduce costs, enhance margins and align its operations around a more focused core infusion business, BioScrip introduced the Financial Improvement Plan in Nov 2015. Management expects this program will enhance BioScrip’s shareholder value and improve the company’s financial flexibility, making way for benefits in 2016. The company continues to expect this program to realize annualized cost savings worth $35-40 million.

So far, since the plan’s announcement, BioScrip has significantly completed its previously announced targeted workforce reduction and is well on track to deliver the expected $19 million in annual cost savings in 2016. Moreover, the company successfully executed certain additional supply chain program initiatives that are anticipated to add $3 million in BioScrip’s annual savings in 2016.

BioScrip also successfully implemented its cost reduction programs, which are expected to reduce infusion field related costs by $5 million in 2016.

Notably, with the continued implementation of BioScrip’s financial improvement programs, FTI Consulting’s engagement has concluded. Scott Davido is no longer acting as chief implementation officer.

Preliminary Fourth Quarter 2015 Guidance

BioScrip expects to deliver total patient census growth of 4% and Core Therapy patient census growth of 9% on a year-over-year basis in the fourth quarter of 2015.

Liquidity and Capital Resources

During the fourth quarter, BioScrip generated increased cash collections sequentially, apart from generating highest quarterly infusion division cash collection total for 2015.  Moreover, in the fourth quarter, BioScrip collected approximately $6.8 million on an account receivable balance from a former PBM vendor.

As of Dec 31, 2015, the company had brought down the amount of borrowings outstanding on its Revolving Line of Credit to $15 million compared to $30 million of borrowings outstanding as of Sep 30, 2015. BioScrip also improved its cash flow in 2015 and expects to achieve positive operating cash flow in 2016. Further, the company expects to pay down more than $12 million of bank term debt in 2016 from operating cash flow.

New Strategic Alternatives

With assistance from its financial advisor, BioScrip is currently exploring a range of strategic alternatives that might also include a potential sale or merger of the company. However, such review of strategic alternatives is expected to have no material impact on the company’s business or the Financial Improvement plan or any transactions or agreements.

Our View

We believe these financial improvement initiatives at BioScrip will enable it to successfully drive cash flow and create considerable value for its shareholders, over the long run. Going by the recently released progress report for these new initiatives, we expect these initiatives to considerably improve the company’s overall business, once fully implemented. This should in turn enable the company to overcome its loss scenario as well.

Zacks Rank

BioScrip currently has a Zacks Rank #3 (Hold). Some better-ranked medical stocks are Abaxis, Inc. ABAX, LeMaitre Vascular, Inc. LMAT and Capricor Therapeutics, Inc. CAPR. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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