BioScrip (BIOS) Strong On Infusion, Reimbursement A Drag

On Jun 28, we issued an updated research report on Elmsford, NY-based BioScrip, Inc. (NASDAQ:BIOS) . The company is a leading Infusion Service provider and strives to deliver cost-effective programs to patients. The stock currently has a Zacks Rank #3 (Hold).

Over the last one month, BioScrip has been trading above the Zacks categorized Medical - Outpatient and Home Healthcare industry. The stock has gained 44.2%, way higher than the 5.1% gain of the broader industry. BioScrip currently operates in a lucrative market with favorable dynamics and solid fundamentals. In particular, market factors, developing patient management technologies and an aging U.S. population are enhancing opportunities for home health service providers like BioScrip.

We are encouraged by the company’s progress on its new multi-faceted CORE plan to improve its financial position. The plan involves identifying and executing strategies to accelerate core revenue growth, mix, drive operational efficiency, improve revenue collection and increase employee effectiveness.

Meanwhile, management has been recording consistent growth in its core Infusion Services business where it has a strong presence and enjoys competitive advantage. This is on account of strong organic growth particularly in chronic, nutrition and other therapies. To strengthen the business, the company has executed quite a few takeovers and divestitures in recent times. The company is currently on track to achieve the previously announced $17 million in Home Solutions synergies and other incremental annualized cost reductions of $23–$25 million by the end of 2017.

Of late, restricted spending by many states on Medicare raises apprehension over BioScrip’s prospects. The reason behind the cutbacks is slow revenue growth and rising Medicaid concerns. The Cures Act legislation passed in Dec 2016 has resulted in a significant reduction in Medicare reimbursement rates on certain drugs effective Jan 1. Hence, BioScrip’s 2017 guidance lacks luster as it takes the estimated adverse effect of the Cures Act legislation into account.

Moreover, the healthcare industry is highly competitive. BioScrip’s competitors include large and well-established companies that have higher financial, marketing and technological resources.

Key Picks

A few better-ranked medical stocks are Align Technology, Inc. (NASDAQ:ALGN) , Inogen, Inc. (NASDAQ:INGN) and Accelerate Diagnostics, Inc. (NASDAQ:AXDX) . Notably, Inogen sports a Zacks Rank #1(Strong Buy), while Align Technology and Accelerate Diagnostics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has added almost 30.4% over the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has gained around 21.9% over the last three months.

Accelerate Diagnostics has an expected long-term adjusted earnings growth of 30%. The stock has added roughly 12.9% over the last three months.

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