BioScrip, Inc. Reports 2008 Second Quarter Earnings

Business Wire, July 31, 2008

--Revenues of $348.4 Million; EPS of $0.04; Specialty Services Up 25.3%--

ELMSFORD, N.Y. -- BioScrip, Inc. (Nasdaq: BIOS) today reported net income for the quarter ended June 30, 2008 of $1.6 million, or $0.04 per diluted share, on revenues of $348.4 million, compared to $0.5 million, or $0.01 per diluted share, on revenues of $294.7 in the second quarter of 2007.

Second Quarter Highlights

* Consolidated revenues of $348.4 million, an 18.2% increase over the same period last year.

* Operating profit of $3.4 million.

* EBITDAO (earnings before interest, taxes, depreciation, amortization and option expense) of $5.9 million.

* Specialty Services revenue of $298.2 million, an increase of 25.3% over the prior year.

* Gross profit of $35.7 million, or 10.3% of total revenue, compared to $32.9 million, or 11.2% of total revenue, for the same period of 2007.

* Operating expenses as a percentage of revenue decreased to 9.3% from 10.3% over the same period a year ago.

Richard H. Friedman, BioScrip's Chairman and Chief Executive Officer, stated, "Our second quarter results, including a $3.2 million sequential increase in quarterly operating income, demonstrate our positive sales growth trends and the significant progress we have made toward improving our operating performance.

As we work to evolve the paradigm under which patients receive care for chronic conditions, we remain confident in the strength of our market position and the demand for our products and services among pharmaceutical manufacturers and healthcare payors. We are also encouraged by the initial market response to our stand-alone specialty services programs that allow us to leverage our core specialty operational and sales infrastructures while providing higher margins as compared to drug distribution," concluded Friedman.

The Company also reported that it has decided not to re-sign the new CAP contract with CMS for the 2009 renewal term and plans to exit the program upon expiration of the current agreement at the end of 2008. The Company believes that the proposed terms of the new CAP contract present an unacceptable short- and long-term profit risk to our business. In addition, the Company recently received notification from Aetna that our pharmacy network participation agreements with it will be terminated in the fourth quarter of 2008 as they internalize this distribution function. Revenues from Aetna are approximately $27.0 million annually. Management projects that the lost operating income associated with this contract will be offset by the favorable impact of exiting the CAP business and by cost savings initiatives expected to reduce expense during the second half of the year.

Additionally, the Company is closely following the activities surrounding the State of California's reductions to Medi-Cal's pharmacy reimbursement. As of the date of this release, the Company remains a participating Medi-Cal provider and the long-term status of these reductions is uncertain. Less than 2% of BioScrip's sales are derived from this program.

During the quarter, BioScrip continued to make progress in upgrading its technology systems infrastructure and new systems implementation and anticipates that its first store will go online on September 1, 2008. Additional stores are planned in the fourth quarter with full implementation by June 30, 2009.

Results of Operations

Total revenue for the second quarter 2008 was $348.4 million compared to $294.7 million for the same period a year ago.

Second quarter 2008 Specialty Services revenue was $298.2 million, an increase of $60.2 million, or 25. 3% over the prior year, due primarily to additional revenues associated with payor and manufacturer contracting, preferred distribution arrangements with manufacturers, price increases driven by drug acquisition cost increases, and CAP revenue.

Second quarter 2008 PBM Services revenue was $50.3 million, a decrease of $6.5 million, or 11.4%, as compared to the second quarter of 2007. The decline in revenue is primarily due to the loss of previously reported PBM customers.

Gross profit for the second quarter 2008 was $35.7 million, or 10.3% of total revenue, compared to $32.9 million, or 11.2% of total revenue, for the same period of 2007. The gross margin rate as a percentage of revenue decreased primarily due to a payor business mix, and the reduced profitability of the CAP business. The second quarter of 2007 also included a favorable settlement of previously reserved contractual allowances which favorably affected margins by 0.4%.

Second quarter 2008 operating expenses increased $2.0 million to $32.4 million, or 9.3% of total revenue from $30.4 million, or 10.3% of total revenue for the second quarter of 2007. The increase was primarily due to additional SG&A in support of the Company's growth, which was partially offset by lower bad debt expense as a result of improved credit and collection efforts.

Six-Month Period Reported Results

For the six-month period ended June 30, 2008, net income was $1.1 million, or $0.03 per share compared to a net loss of $0.9 million, or $0.02 per share in the same period a year ago. Revenues increased 14.4% to $675.9 million for the six-month period ended June 30, 2008 from $591.0 million reported in the same period of last year.