Bioscrip Home Infusion Unit Could be an M&A Remedy

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NEW YORK ( The Deal ) -- Bioscrip has been divesting assets for a year now, but the health services company could find itself a target for both large strategic and financial players because of the strength of its in-home medicine business, according to industry sources.

"All the likely suspects that touch that channel could be interested," explains Ross Muken an analyst at ISI Group Inc.

Elmsford, N.Y.-based Bioscrip provides in-home infusion services that involve the use of equipment by administering personnel who visit a patient's homes to distribute medication intravenously. Bioscrip also has a pharmacy-benefits management business, but that only makes up about 10% of its total revenue.

Muken added that private equity buyers could enter the picture and acquire Bioscrip to serve as a platform for other deals in the space. Currently, it's been PE-backed platform companies doing rollups in the industry, including Excellere Partners LLC-backed Advanced Infusion Services and KRG Capital Partners LLC-backed Home Solutions, that have also been doing roll-ups in the industry.

"[Infusion services] is a very fragmented industry, but it is clearly a vertical that some of the players have made a priority," he explained.

Meanwhile, the largest strategic players in the infusion space that could be interested in Bioscrip are Walgreens and CVS Caremark , according to Muken and other industry sources.

While it's not clear exactly when Bioscrip began evaluating its strategic options -- the company said Aug. 11 that it would continue to evaluate alternatives but didn't specify when it started the process -- speculation has been flying around Bioscrip for some time.

Muken believes the curiosity about Bioscrip likely started shortly after CVS announced Nov. 27 that it would acquire Coram LLC from Apria Healthcare Group Inc. for about $2.1 billion.

"They were Bioscrip's largest pure-play competitor," Muken said of Coram, adding that the deal highlighted the desire by pharmacy companies to dig further into home-health services space.

Over the years, Bioscrip has "expanded rapidly into the home infusion space," added Brooks O'Neil, an analyst at Dougherty & Co. LLC.

That centerpiece of that expansion came on June 17, 2013, when Bioscrip announced it had acquired Jacksonville, Fla.-based CarePoint Partners Holdings LLC and its subsidiaries for $223 million in cash.

"My gut tells me they are going to continue to grow and then eventually sell the business," Oneil said. "If you look at [Bioscrip CEO Richard M. Smith's] track record, he is a turnaround guy. He knows how to sell companies."

Judging by Bioscrip's recent financial results and its M&A activity, that turnaround is already in action.

For the second quarter ended June 30, Bioscrip's infusion business posted $230.5 million in revenues, a 48% year-over-year increase. The PBM business, meanwhile, contributed $16.6 million, or just a 1.8% increase year-over-year.