Market Overview

BioScrip, Inc.: From Red To Black To Blacker

Forward P/E: 14
Earnings Growth: 280%
Projected Sales Growth: 2%
Market Cap: $388 million

Why It's Featured: Demographic trends in its favor; home infusion and drug delivery heading higher.
Danger Zones: Must close the sale of assets to Walgreen, Inc.

BioScrip, Inc. (NASDAQ: BIOS) provides pharmacy and home health services in the United States.  Its Infusion/Home Health Services segment offers home infusion services that include the intravenous administration of medications to treat various acute and chronic conditions, such as infections, nutritional deficiencies, immunologic and neurologic conditions, cancer, pain, and palliative care; and home infusion therapies comprising parenteral nutrition, enteral nutrition, antimicrobial therapy, chemotherapy, immune globulin therapy, pain management, hemophilia, and respiratory therapy/home medical equipment.

This segment also provides home health services, such as skilled nursing, wound care, oncology nursing and infusion nursing, rehabilitation services, occupational therapy and speech language pathology, medical social services, home health aide services, private duty nursing care, therapy visits, and hospice services to patients suffering from chronic and acute illnesses, those in recovery from surgical procedures, and those who require monitoring or care for other reasons.

The company's Pharmacy Services provides traditional and specialty medications for the treatment of various diseases and medical conditions, such as rheumatoid arthritis, Crohn's disease, multiple sclerosis, psoriasis, short stature, cancer, immune mediated diseases, and HIV/AIDS; hepatitis A, B, C, and related complications; anemias and cytopenias, and to bind excess iron post blood transfusions; and to treat children born prematurely and with incomplete pulmonary and/or cardiac function. This segment also offers specialty therapy management, prescription discount card programs, and pharmacy data services.

As of December 31, 2011, the company had 110 locations in 29 states and the District of Columbia, including 30 community pharmacy locations, 32 home nursing locations, 3 mail service facilities, and 45 home infusion locations.  BioScrip, Inc. was founded in 1993 and is based in Elmsford, New York.

BIOS slipped in 2010, losing 43 cents a share after recording 34 cents in the black in '09.  But it bounced back last year, finishing with 14 cents a share.  This year, expect 50 cents, then 75 cents in 2013. (For more stock ideas, check out: www.theonlineinvestor.com)

These numbers will be adjusted as BioScrip just sold certain assets to Walgreen Co. from their community specialty pharmacies and mail service businesses for $225 million.  It's gotten regulatory approval but still needs certain closing conditions to be satisfied before consummation.  Expect it to finish by the end of April.

Management wants to take most of the new money and invest in its home healthcare services and infusion pharmacy businesses.  Industry trends suggest that more services will be used in the home or at alternate sites.  This plays into BioScrip's strengths.  The impetus is simple: patients prefer being treated at home, and insurance companies don't have to pay hospital fees and costs for patient treatment with home services.   Part of the proceeds from the Walgreen sale will go to pay down debt which is now 51% of capital.  That will cut interest costs and bolster the balance sheet.

Of course, all of those plans depend on the deal closing.  Most investors will want to wait until there's a definitive close before proceeding with more research or if so inclined, buying the stock.  If there's a last minute problem, expect the stock to take a hit.

- Essential Numbers:
- Price to book: 1.75
- Price to sales: .21
- Operating margin: 2.82%
- Profit margin: .43%
- Return on equity: 3.79%
- Return on assets: 4.77%
- Revenues for last 12 months: $1.82 billion
- Total cash: $225 million
- Total debt: $293.46 million
- Debt to equity: 102%
- Current ratio: 1.33
- Book value per share: $3.91
- Beta: 1.44
- 52 week change: 51.21%
- Shares outstanding: 55.42 million
- Float: 37.97 million
- Held by insiders: 26.91%
- Held by institutions: 54.8%
- There is no dividend

Aggressive investors should be intrigued by this small-cap.  It's got a lot of good going for it.  But some of the numbers are little concerning, like a 52 week increase of over 50% and a high price to book ratio.  But if the Walgreen deal goes through, which seems highly likely, there may not be a lot of room left on the stock to advance as it seems pretty well priced in.  However, if the deals falls apart, this stock could take a real hit.  Proceed with caution.

- Company Web site: www.bioscrip.com

- Ted Allrich
April 12, 2012

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Ted Allrich is Chairman of the Board of BofI Holdings Inc. and Bank of Internet USA. He is also the Founder of The Online Investor (www.theonlineinvestor.com), a site that offers investment ideas and in

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