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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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BIOSCRIP, INC.
(Name of Registrant as Specified in Its Charter)
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FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
CORPORATE PARTICIPANTS
Richard Friedman
BioScrip, Inc. Chairman, CEO
Richard Smith
BioScrip, Inc. COO
Stanley Rosenbaum
BioScrip, Inc. CFO
CONFERENCE CALL PARTICIPANTS
Art Henderson
Jefferies & Co. Analyst
PRESENTATION
Art Henderson Jefferies & Co. Analyst
Good afternoon. I am Art Henderson, Healthcare Services analyst, Jefferies. I am pleased to
introduce our next presenter. The Company is BioScrip, which is ticker BIOS. The Company is the
leading specialty pharmaceutical health care provider to partners with patients, physicians,
payers, pharmaceutical manufacturers.
It provides access to medications, generally, highly complex medications. And today is a very
special day. They have a big announcement that they made this morning with the announced
acquisition of Critical Homecare Solutions. So we are excited to hear more about that.
With us today is Chairman and CEO, Rich Friedman here on right, President and COO, Rick Smith, and
then CFO, Stan Rosenbaum. And we are very pleased to have you guys here. Heres the slide thing.
Its pretty straightforward, and thank you for joining us.
Richard Friedman BioScrip, Inc. Chairman, CEO
Thank you, Art. It is absolutely a pleasure to be here today. Before we get going, we have to talk
a little bit about Safe Harbor, so I will take a few seconds, slide one, slide two, and then we
will begin.
As Art mentioned, today is an extremely exciting day milestone for BioScrip. Today we announced
that we signed an agreement to acquire CHS. CHS is an incredible organization. We paid $343.2
million we will pay for it, plus issuing 3.4 million warrants at a $10 strike price, five-year
terms.
What this really does is creates the leading independent specialty pharmacy and home care company
in the United States. What was critical to us is that CHS had about 450 payer relationships on top
of the 600 that BioScrip has, so it gave us over 1,000 payer relationships, 28 states and over 100
points of service, which we will get into in a little while.
On a pro forma basis, if you look at the period ending September 30, 2009, the Company would have
generated approximately $1.6 billion in revenue, $73.4 million in EBITDA. And the transaction is
expected to be cash accretive for 2010, and slightly diluted on a GAAP basis.
When you take a look at BioScrip, why did the transaction make sense for us? BioScrip has believed
over a long period of time that the key to health care is going to be management of the chronically
ill. We have emphasized
repeatedly about adherence, compliance and retention, that if you are able to manage the
chronically ill, you will be able to reduce overall medical costs.
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1
FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
When you go on the left hand side of the page we have been able to accumulate a number of assets
over the years. Those assets consist of community pharmacies, of which there are 33, infusion
centers we have four free standing plus five which are integrated within our specialty service
centers, and three mail facilities.
The health care stakeholders all benefit from managing the chronically ill, from patients, to
pharma, to physicians as well as the managed care organizations. Managing the chronically reduces
overall health care costs. And what is critical to us is access, quality and cost.
Long-term strategic goals are really to build clinical leadership across all technologies. And this
includes infusion, oral and injectibles, expanding our national footprint, high touch, high feel
model. We believe that health care is practiced on a local basis. Decisions are made on a local
basis. Relationships are built on a local basis.
What this does also is grows our revenue and expands our margins and our EBITDA margins
significantly from where we were. And again, adherence, compliance, retention, we believe the key
is to healthcare.
Overview of CHS leading provider of home infusion, home health services for patients suffering
with chronic and acute medical conditions. When you take a look at pro forma in the last 12 months
ending September 30, 2009, revenues totaled $252 million and EBITDA of about $39 million. Gross
margin was about 51% and EBITDA margin was approximately 15%.
Comparing that to where BioScrip has been, BioScrip in the last quarters had been reporting in the
mid to the high 11% range on margins. So this does an incredible movement for us on the margin
side, and on the EBITDA side approximately 200 basis points higher. They operate 68 branches across
22 states, 35 infusion, 33 nursing locations. And again, they utilize the local presence, local
relationships to be successful.
Key benefits of the transaction, what this does is it now puts 140 field people on the ground for
cross selling opportunities amongst all lines, whether it is injectible, infusion and orals, we are
there. National footprint over 100 sites of care, Traditional higher margin therapies, we now
expand into the entry TPNs and antibiotics, and its broadened clinical services. Expertise from CHS
with our expertise, we believe we will be the strongest ones out there.
Nursing component we believe strongly in nursing, going forward, to manage the chronically ill.
We believe nursing has to be there on a home setting. Again, access to 450 payers with BioScrip
brings us to over 1,000. And we also talked about annual cost savings, synergies between $5 million
and $7 million.
Now, in our modeling that we talked about today, we did not include revenue synergies within this
modeling. So we believe there is more upside. So when you take a look in the entirety of what
BioScrip will look like, we will be in 28 state coverages. We have 44 specialty infusion. Couple
that with the 17 that we have subcontracts with, brings us to 61. 1,000 managed care relationships,
a patient census of over 100,000, 33 specialty service centers and 33 nursing locations. So we
believe, on a broad base, we are there. We are able to hit all the needs on a local basis. With
that, I will turn it over to Rick, who will go over our market opportunity and transaction
rationale.
Richard Smith BioScrip, Inc. COO
Good afternoon. As Rich mentioned, it provided the opportunity that we see with this acquisition,
as well as building on our core business. As we look at this market opportunity, the opportunity to
expand our access to a $60 billion market that is growing at a 15% to 20% clip, we think that given
the expertise of BioScrip and the opportunity to add CHS to our platform, we enable access and
bring greater capabilities to the marketplace to service our customers.
And as I look at our customers, it begins with the patient, the referral sources, pharma, as well
as the managed care payer organization. We have significant and in depth clinical management
programs that can manage the chronically ill, those with
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2
FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
multiple therapies, those that have a need for acute episodes, and those that need that high touch
clinical services, given the cost of these technologies.
We also are looking at, in our daily reactions with pharma, the opportunity, given our
capabilities, to help them bring their drugs to market at a faster pace, as well. So our clinical
expertise, given where the pipeline is for the existing market is today, and the opportunities in
the deliveries that we have, it puts us in a good position to successfully partner with all of our
constituencies.
The other thing that we see is the evolution of the technologies oral, injectible, infusion. With
this acquisition, we expand our opportunities, we expand our footprint, and we also expand our
regions and new geographies to where we can offer a flexibility in delivery model for both pharma
and the managed care organizations.
Now we also are seeing, that given the acquisition, we will pick up 16 ambulatory treatment
centers. We are seeing that, given reimbursement pressures at the physician level, the fact that
some of these technologies are being pushed into the hospital outpatient department, the relative
cost comparison without giving up on clinical effectiveness, the opportunity to drive these into an
alternative site of administration.
Heres the pipeline as we see it. We have disease management programs, care management programs in
all of these categories. We essentially have the clinical expertise in which we can apply the right
technology at the right and appropriate situation for each patient, the opportunity to bring high
tech pharmaceutical, pharmacy services, high tech nursing services, care management, disease
management, education of the patient, reimbursement expertise and enabling that these patients can
get on service quickly so they can begin their regimen, reporting when they started therapy to the
physician so that there is a coordination in communication for an effective and cost effective
outcome in the right sites, the right setting for this particularly patient.
So these are these disease states that we already have significant expertise in the existing
BioScrip business. And it is also opportunities through the CHS acquisition, given infusion
capabilities, where I think will provide an opportunity for us, given that a third to 50% of drugs
in development are going to be coming through the infused technologies.
Heres the model that we will now have on a national basis, which Rich mentioned, in 61 locations.
The convergence of, specialty pharmacy and home care it is interesting, 15 years ago, the
specialty pharmacy industry grew up out of home infusion. So, essentially, as a result of
technologies coming back home with a high touch service, the level of clinical management that is
dominant in the home infusion model, has essentially been evolving to be applied to the specialty
pharmacy industry.
We have significant amount of expertise. The team that we have added over the last year has
significant experience, in terms of home infusion, specialty pharmacy, care management, essentially
presenting our capabilities to managed care, presenting them to case management, nurses and
physicians, as well as pharma.
We have an opportunity, as the demographics continue to move towards home care, towards our
direction, the opportunity to apply our care management programs to both the acute and the chronic
episode. A number of these technologies are being managed in the same patients through the same
episode of care, the same care plan. And so, the level of clinical expertise does seamlessly
coordinate the levels of care, monitor labs, monitor communication with the physician, adjust the
care plan on an ongoing basis, is critical to the success and effectiveness of this delivery
system.
What we have now is an integrated model, a specialty pharmacy from a central point of service. Our
specialty service centers, which are our community pharmacies, the opportunity in the community to
service, interact, counsel and offering testing services to our patients, the opportunity to expand
our home infusion footprint, cross sell those high tech services, and also to expand our specialty
service centers to offer those capabilities in markets where they can be added.
And now, adding the home nursing and the opportunity to cross sell those critical services that are
needed to offer a highly integrated model to our customers is an opportunity that we see with this
acquisition.
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3
FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
As Rich mentioned, we have, now will have, 61 infusion pharmacies. This includes what we pick up in
the CHS acquisition, the concentration of CHS being primarily in the central to eastern part of the
United States, provides us an opportunity to access the high concentration of US population. We
have coverage through our subcontracted agencies to somewhat of the Rocky Mountain section of the
country. And then, we have a significant concentration in California and in the northwest area of
the country.
We look to continue to focus on the integration of CHS post closing for the first six months. We
believe that, given our national United agreement, we will have the opportunity to accelerate our
pull through opportunities. We have not dialed any revenue synergies into any projections that we
had provided earlier. But we believe that, given the opportunity to work with CHS and communicate
their clinical programs to manage care, that we will have an opportunity to grow their top line, in
conjunction with ours.
We also believe that their managed care relationships offers us a great opportunity for cross
selling specialty pharmacy contracts on a direct basis to service that of our specialty pharmacy
arm. So there is great opportunities that we see through this platform, the local touch, the local
reach, the national presence for the whole network now becomes that much more explosive, in terms
of momentum that we believe we can create with this acquisition. And for that, I will turn it over
to Stan.
Stanley Rosenbaum BioScrip, Inc. CFO
Let me take you for a second through the details of the acquisition that we announced today. The
target is Critical Homecare Solutions. It was for consideration of $242 million, which includes an
estimated $132 million to repay CHS existing debt.
In addition, we will be issuing 12.94 million shares, equivalent to about $101.2 million, based on
last Fridays closing price. We will also issue warrants of 3.4 million, with a $10 strike price
and a five-year term.
When the deal is finalized, the existing CHS shareholders will own about 24% of BioScrip. We have
received a commitment from Jefferies to finance this transaction and we expect it to close on March
31. In addition, the existing CHS shareholders will get two Board seats.
Looking at the pro forma combined financial summary, pro forma LTM revenue was $1.6 million. This
is as of September 30. Pro forma LTM adjusted EBITDAO for those who do not know, O is option
expense. We throw option expense into that number, of $73.4 million. We estimate at the closing
date that we will have $27 million in cash on our balance sheet, $325 million of debt, and our net
debt to pro forma EBITDAO leverage of 4.1.
Giving guidance into 2010, we expect bear in mind that we will only have CHS for nine months in
2010. We fully expect that our revenues will be between $1 billion 670 million and $1 billion 730
million in sales. We expect our gross profit to be between $267 million and $277 million, and our
EBITDAO between $67 million and $71 million. Bear in mind, again, this is nine months of CHS
included in these numbers.
We expect this transaction to be accretive on a cash EPS basis next year and slightly dilutive on a
GAAP basis. Post 2010 we expect to be accretive on both a cash and a GAAP basis. The combined
companies have a very attractive cash flow profile and over the next several years, we certainly
expect to reduce the leverage target to below 2. With that, I will turn it back over to Art
Henderson.
Art Henderson Jefferies & Co. Analyst
Yes.
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4
FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
QUESTIONS AND ANSWERS
Unidentified Audience Member
(inaudible question microphone inaccessible) a couple of questions?
Art Henderson Jefferies & Co. Analyst
Go ahead.
Unidentified Audience Member
Do you have any guidance for free cash flow?
Stanley Rosenbaum BioScrip, Inc. CFO
We have not given it publicly. But we expect it to be somewhere in the $20 million to $25 million
range.
Unidentified Audience Member
Can you explain the warrant rationale?
Stanley Rosenbaum BioScrip, Inc. CFO
It was part of the negotiations. It was given to the existing shareholders with an understanding
there was some value to it, but it has to hit $10 a share before that value would actually
materialize.
Richard Friedman BioScrip, Inc. Chairman, CEO
Yes, Stans right. It was part of the negotiations of how to negotiate final pricing on the deal on
what made sense for both sides. With your $10 strike price, obviously, there has to be performance
in there in order for it to be in money.
It is accounted for under Treasury Stock Method, so that it has to be over $10 before you start
including the shares with the EPS computation. And it just made sense to be part of the way we
structured it.
Art Henderson Jefferies & Co. Analyst
Could you talk a little bit I know you talked about synergies of $5 million to $7 million. What
is the first kind of thing you are going to be focused on with respect to the integration and how
you expect that $5 million to $7 million to be realized, whether its up front or over a period of
time?
Richard Smith BioScrip, Inc. COO
We are looking to focus the bulk of the synergies will come from purchasing, so essentially,
beginning day one, beginning their purchasing on our contracts, which we have a better structure so
we believe that will come in day one, gradually as increase them into our purchasing activities.
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FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
And then, we have identified a particular headcount that will, essentially, most likely leave the
organization at closing or shortly thereafter. And those are the only ones that we have essentially
dialed into the synergy calculation.
Richard Friedman BioScrip, Inc. Chairman, CEO
I think it is important, Art, to point out, and Rick did it earlier, the quality of the people that
we have brought into BioScrip over the past year that had the experience in integrations, running
networks over 100. They have come from all walks, whether it is Walgreens, Corum, HRA, Option Care.
These people all have incredible experience, have put companies together. Along with the CHS
people, their field staff, the operations are terrific. And we believe that we have the plan, and
we will work on the plan to make sure that it works extremely well.
Stanley Rosenbaum BioScrip, Inc. CFO
I think there is one other issue here that we should talk about, that is that they are on the same
computer platform that we are on, so there is little or no integration issues here.
Unidentified Audience Member
From a debt repayment perspective, I know you talked about longer term, but you have a system, how
long you can take the move from the 4.1 down to the 2?
Stanley Rosenbaum BioScrip, Inc. CFO
We have said that over the next three years we will do that.
Richard Friedman BioScrip, Inc. Chairman, CEO
Well, its up to advisors. Yes sir.
Unidentified Audience Member
What about the retention of the CHS management team and (inaudible question microphone
inaccessible)?
Richard Smith BioScrip, Inc. COO
We primarily focused on the field management. The we believe that the corporate management, the
senior corporate management at CHS can move on. We have got our team in place. We have got we
run a functional organization, so we have got a head of sales, and then a head of operations.
We have a head of reimbursement that has been in the industry for about 25 years, and that the head
of clinical services at the field level for CHS, actually, was the former head of clinical services
at a large competitor, who has worked with a number of our people on the team.
So we have outlined a very detailed, cross functional integration plan. We will begin a road show,
visiting their locations to meet and greet and meet all the people. But we do not anticipate, nor
do we expect to disrupt or distract anything at the field level.
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FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
And our focus will be on insuring that we continue to take advantage of their managed care
relationships and build revenue growth and then, at the same time, focus on just pure blocking and
tackling, collecting our cash, billing our cash, servicing the patients and taking the strengths of
their programs and the strengths of ours and seeing how we can increase the overall strength of the
combined entities.
Unidentified Audience Member
Okay, could you describe your strategy with home nursing assets that you are acquiring with the
critical home care? Are you going to is there are you trying to invest in a little bit more
in what you are doing already?
Richard Smith BioScrip, Inc. COO
Yes, I think it is early, but through our due diligence process, we have found that that is a very
good asset, very well run. It throws off some good cash flow, has nice margins. It has a nice
concentration in the areas that it is in to gain market share and be a leader.
We have spoken with some of our managed care organizations that could look to feed that business.
And so, we think that there are some opportunities. Also, from a chronic patient coordination, they
do some home infusion services today. But there are other chronic management services that I think
we can evolve to, in terms of leveraging that asset the right way, as well.
Unidentified Audience Member
(inaudible question microphone inaccessible)
Richard Smith BioScrip, Inc. COO
A number of these managed care relationships would like to have you have a pharmacy in their state.
And so, we believe that on discussions that we have and the people that we know in a number of the
independent Blues plans that have a specialty contract out there that is accessible, that we
believe now we will have some pharmacies in some of those states that we will be able to access the
specialty pharmacy, in addition to the home infusion lines.
Art Henderson Jefferies & Co. Analyst
Should we take the rest in the breakout?
Richard Smith BioScrip, Inc. COO
Sure.
Richard Friedman BioScrip, Inc. Chairman, CEO
Thank you.
Stanley Rosenbaum BioScrip, Inc. CFO
Thank you.
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FINAL TRANSCRIPT
Jan. 25. 2010 / 6:15PM, BIOS BioScrip at Jefferies Global Healthcare Services Conference
D I S C L A I M E R
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8
Additional Information and Where to Find it
BioScrip, Inc. intends to file with the Securities and Exchange Commission (the SEC) a proxy
statement regarding the issuance of stock in connection with the proposed transaction. The proxy
statement will be mailed to the stockholders of BioScrip. INVESTORS AND STOCKHOLDERS ARE ADVISED
TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT BIOSCRIP AND THE PROPOSED TRANSACTION. Investors and
stockholders may obtain free copies of these documents (when they are available) and other
documents filed with the SEC at the SECs web site at www.sec.gov. In addition, the documents
filed by BioScrip with the SEC may be obtained free of charge by contacting BioScrip, Inc.,
Investor Relations, 100 Clearbrook Road, Elmsford, NY 10523 or contacting BioScrip, Inc. Attn:
General Counsel at 914-460-1638.
Participants in the Solicitation
BioScrip and its officers and directors may be deemed to be participants in the solicitation of
proxies from BioScrips stockholders with respect to the issuance of stock in connection with the
proposed transaction. Information about BioScrips executive officers and directors and their
ownership of BioScrips stock is set forth in the proxy statement for BioScrips 2009 Annual
Meeting of Stockholders, which was filed with the SEC on March 27, 2009. Investors and
stockholders may obtain more detailed information regarding the direct and indirect interests of
BioScrip and its respective executive officers and directors in the proposed transaction by
reading the preliminary and definitive proxy statements regarding the issuance of stock in
connection with the proposed transaction, which will be filed with the SEC.
Safe Harbor Statement
This communication includes forward-looking statements regarding the proposed acquisition and
related transactions that are not historical or current facts and deal with potential future
circumstances and developments, in particular information regarding growth opportunities, expected
synergies from the acquisition, and whether and when the transactions contemplated by the merger
agreement will be consummated. Forward-looking statements are qualified by the inherent risk and
uncertainties surrounding future expectations generally and may materially differ from actual
future experience. Risks and uncertainties that could affect forward-looking statements include:
the failure to realize synergies as a result of operational efficiencies, purchasing volume
discounts, cross-selling of services, streamlined distribution and general and administrative
reductions in the timeframe expected or at all; unexpected costs or liabilities; the result of the
review of the proposed transaction by certain regulatory agencies, and any conditions imposed in
connection with the consummation of the transaction; approval of issuance of BioScrips stock in
connection with the transaction by the stockholders of BioScrip and satisfaction of various other
conditions to the closing of the transaction contemplated by the merger agreement; and the risks
that are described from time to time in BioScrips reports filed with the Securities and Exchange
Commission (SEC), including BioScrips annual report on Form 10-K for the year ended December 31,
2008 and quarterly report on Form 10-Q for the quarter ended September 30, 2009, as amended. This
communication speaks only as of its date, and BioScrip disclaims any duty to update the
information herein.
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