BioScrip Buys Home Solutions, Strengthens Infusion Business

As expected, after a minor adjustment to the terms of its earlier announced agreement to acquire HS Infusion Holdings, Inc.’s home infusion and home nursing products and services business Home Solutions, BioScrip, Inc. (NASDAQ:BIOS) has finally completed the transaction.

We note that in its effort to focus on its Infusion Services business, the company had decided to acquire Home Solutions in June. Home Solutions particularly caters to patients suffering from chronic and acute medical conditions. According to BioScrip, the consolidated company will be a stronger player in the infusion services market with the complimentary services and enhanced focus on higher margin, core infusion therapies.

We note that, while the initial closing consideration was $85 million, it was reduced to $75 million later on. The cash component of the consideration was lowered to $67.5 million from $80.0 million.

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The combined company is expected to generate revenues of more than $1 billion. Additionally, the acquisition, while accelerating the company’s growth in core business, is likely to generate between $14−$17 million in cost savings within approximately 12−18 months following the completion. In terms of operating synergy, the inclusion of Home Solutions will benefit BioScrip with respect to balance sheet and leverage profile, supply chain efficiencies, infrastructure optimization, and other corporate and organizational improvements.

As per the latest amendment of the Asset Purchase Agreement to facilitate the timely closure of this transaction, BioScrip and Home Solutions now have to arrange for a shareholder meeting to seek BioScrip stockholder approval to increase its authorized share capital. The date of this meeting will be announced accordingly.

We note that over the recent past, BioScrip has been recording consistent growth in its core Infusion Services business where it has a strong presence and enjoys a competitive advantage. BioScrip has already taken a number of steps to focus on the core Infusion business in order to drive further growth therein.

These include the sale of its legacy specialty and mail service pharmacies; the divestiture of its home health services business; the latest divestment of the PBM business to ProCare Rx; and its plan to sell or shift 9 core patient service activities accumulated through acquisitions, to alliance pharmacy providers.

The company has been engaged in a series of takeovers and sell-outs in recent times as well, the latest example being the impending buyout of Home Solutions. Further, BioScrip continues to evaluate a huge pipeline of acquisition opportunities to further expand its infusion footprint in the U.S.

Currently, the company carries a Zacks Rank #3 (Hold).

Key Picks in the Sector

Better-ranked stocks in the broader medical space are Almost Family Inc. (NASDAQ:AFAM) , RadNet, Inc. (NASDAQ:RDNT) and US Physical Therapy Inc. (NYSE:USPH) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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