CVS Caremark (CVS) Purchase of Apria Healthcare Unit Gives BioScrip (BIOS) a Bounce

Joel Anderson |

The decision by CVS Caremark (CVS) to purchase the Coram unit from Apria Healthcare Group, Inc., a company owned by Blackstone Group (BX) , rippled across the health care sector Wednesday, helping boost shares in BioScrip (BIOS) by more than 18.5 percent in early trading. BioScrip, which sells similar infusion-based therapies as Apria's Coram saw its moribound shares bounce based on the valuation used by CVS.

CVS Purchases Coram from Apria Healthcare

CVS clearly saw potential in the home infusion market, and it moved to secure a piece of it. “Bringing together CVS Caremark’s unique range of specialty pharmacy services with Coram’s infusion capabilities will expand our competitive offerings in the specialty arena,” said CVS president Jonathan Roberts in a statement. “Infusion will be a valuable component of our broad specialty pharmacy offering going forward.”

Breaking into home infusion is a move that could mean big things for CVS. The purchase of the Coram unit is costing CVS $2.1 billion, but it’s expected to generate $1.4 billion in revenue in its first year and should add an estimated $0.03 to $0.05 to CVS Caremark’s earnings starting in 2015.

“They are moving into home infusion, which is a high-growth area,” said ISI Group analyst Ross Muken.

BioScrip (BIOS) Also a Beneficiary

The deal for the Coram unit also provided a benchmark of sorts for the infusion therapy market, giving some solid footing for other companies. BioScrip saw the value of its stock increase by nearly a fifth based on the price CVS was paying Apria. BioScrip is also very active in the home infusion therapy segment.

The timing couldn’t be better for BioScrip, which has been on a serious decline since early August when a disappointing earnings report sent shares plummeting. Since reporting a quarter-over-quarter decline in revenue and losses of $0.13 per share on August 7, the company saw shares plummet almost 65 percent by yesterday’s close, with losses further boosted by the $0.33 per share loss reported after market close on November 6.

Now, the sale of Apria’s Coram unit has investors anticipating a similar sale of BioScrip to a larger company. Jefferies (JEF) analyst Brian Tanquilut estimated in a note to investors that, based on the price paid for Coram, BioScrip could sell for as much as $12-$14 a share, a substantial premium on the current price of just $7 a share. Tanquilut, though, emphasized that if such a sale were to occur, it probably wouldn’t be for at least six months. Tanquilut maintained a buy rating on BioScrip with an $11 price target.

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Companies

Symbol Name Price Change % Volume
BX The Blackstone Group L.P. Representing Limited Par 29.82 1.25 4.38 10,234,998
BIOS BioScrip Inc. 1.14 0.00 0.01 616,122
CVS CVS Health Corporation 77.68 -2.86 -3.55 13,005,353
IPWLO Indpls Pwr & Lt 4.20 Pr 85.65 0.00 0.00 0

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