Q3 2024 Option Care Health Inc Earnings Call
Hello, everyone.
Good day and thank you for standing by.
Speaker Change: Welcome to the Option Care Health third quarter 2024 earnings conference call.
Speaker Change: At this time, all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your questions, please press star one one again.
Speaker Change: Please be advised that today's conference is being reported.
Speaker Change: I would now like to hand the conference over to your first speaker today, Nicole Maggio, Senior Vice President of Finance.
Nicole Maggio: Good morning. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions.
Nicole Maggio: These forward-looking statements are subject to risk den uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release, as well as in our form 10K and latest form 10K, filed with the SEC regarding the specific risks and uncertainties.
Nicole Maggio: We do not undertake any duty to update any forward-looking statements except is required by law.
Nicole Maggio: During this call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of our website. With that, I will turn the call over to John Rademacher, President and Chief Executive Officer.
John Rademacher: Thanks, Nicole. And good morning, everyone. There have been quite a few developments for option care health over the past 90 days, so I'd like to jump right in.
John Rademacher: Overall the third quarter results were quite encouraging and generally consistent with how we've expected the quarter to materialize.
John Rademacher: Mike will provide additional color in a few minutes.
John Rademacher: But we continue to deliver double-digit revenue growth and sequential improvement in gross profit dollar generation through our organic growth initiative.
John Rademacher: while we have substantially recovered operationally from the changed health care incident that we discussed in the past.
John Rademacher: We continue our efforts to catch up on patient payment obligations, which remain impacted and delayed from the disruption earlier in the year.
John Rademacher: In addition to solid revenue and earnings results, even with the delayed collections from patients, cash flow generation continues to be strong, and we finished the quarter with a net debt to EBITDA leverage ratio of 1.5 times, the lowest reported level since our merger with Bioscript in 2019.
John Rademacher: Thank you.
John Rademacher: This performance is inclusive of the repurchase of $41.9 million in stock during the quarter.
John Rademacher: Over the past month, the dedicated team at OptionCare Health has continued our focus on delivering extraordinary care, even in the face of Hurricanes Helene and Milton.
John Rademacher: Hurricane Helene impacted our operations in the southeast in the closing days of the third quarter and the aftermath of Helene continues to impact our operations which I will expand upon in a moment.
John Rademacher: Most importantly, despite considerable disruption, we don't believe our ability to support our patients was materially impacted, and our teams work tirelessly to prepare for and then respond to these disasters.
John Rademacher: The OptionCare Health team in the Southeast helped ensure seamless patient support and collaboration with our referral partners during these considerably challenging conditions.
John Rademacher: I continue to be humbled by our team members focus and dedication and I am grateful for their efforts.
John Rademacher: The supply chain disruption from Hurricane Helene regarding intravenous solution production has had and continues to have a meaningful impact on our operations.
John Rademacher: A large number of our acute patients receive therapeutic doses compounded using intravenous solution containers, also known as IV bags.
John Rademacher: Upon learning of the supplier's plant closure and disruption, our teams in the field implemented immediate inventory conservation initiatives and worked quickly and proactively with manufacturers and distributors to secure supply.
John Rademacher: Having said that, we, along with most other care providers, continue to receive less than optimal levels of IV bags.
John Rademacher: Our first priority has been and will continue to be providing therapies for our existing patients on service.
John Rademacher: We believe we have a sophisticated and agile approach to reacting to market conditions like these using our national logistic capabilities that can adjust operations as supply dynamics hopefully improve in the coming weeks and months.
John Rademacher: However, as we sit here today, we are limited in our ability to onboard new patients who are primarily receiving intravenous antibiotics and nutrition support therapy.
John Rademacher: We intend to be supportive of these patient communities as collaborative with our referral sources as possible and we remain in continuous contact with relevant stakeholder groups.
John Rademacher: At this point, we cannot accurately predict when supply will be more readily available and alleviate restrictions and conservation plans that we have had to put in place.
John Rademacher: Over the past month, we also learned that a certain large infusion provider has announced its intentions to exit certain acute therapies and no longer accept new patients.
John Rademacher: As we have articulated on many occasions, we have made significant investments over the past several years to establish what we believe is an efficient network of compounding pharmacies and clinical capabilities to support acute therapeutic administration in the home and alternate site settings.
John Rademacher: We continue to view these therapeutic areas as an attractive opportunity for us based on these investments and our broad capabilities.
John Rademacher: Notwithstanding the IV solution disruption just discussed, we see these market developments as a growth opportunity over the medium term once supply chain dynamics improve.
John Rademacher: Despite a very competitive marketplace, we continue to believe option care health possesses unique differentiated capabilities that position us well to more deeply collaborate with referral sources and serve their patients in need of acute therapies and clinical oversight.
John Rademacher: Finally, I want to spend a few minutes discussing recent developments impacting our chronic inflammatory therapies portfolio.
John Rademacher: since our second quarter call on July 31st.
At this point, we are not in a position to provide an estimated dollar impact for 2025 as negotiations are ongoing and there remain a number of uncertainties.
John Rademacher: As we have reiterated on many occasions, we do not control drug referenced prices, nor do we stop the spread of the reference prices at which we acquired the drug.
John Rademacher: Rest assured this team remains focused on identifying cost efficiencies and additional growth initiatives to help offset some of these headwinds in 2025.
John Rademacher: So to close to reiterate I am very pleased with the team's performance in the third quarter, especially when considering the unique challenges that we represented within the quarter and continued to impact us today.
John Rademacher: We delivered solid financial results and continued to navigate challenging supply chain dynamics for our acute therapies.
John Rademacher: And the areas in which we have direct control our team has executed well and demonstrated agility and resilience.
John Rademacher: And despite the unexpected drug price actions by certain manufacturer I believe this enterprise is well positioned to deliver growth and serve more patients over the medium term.
Speaker Change: With that I'll hand, the call over to Mike to provide additional details Mike.
Mike: Thanks, John and good morning, everyone. Overall, we believe the third quarter financial results were quite strong.
Mike: Revenue growth of 17% was positively impacted by strong growth within our rare and orphan portfolios and also benefited from continued growth in our more established therapeutic categories.
Mike: As John mentioned, we did see some modest impact in the southeast in the closing days of the quarter from Hurricane Halloween, but the impact was not material to our third quarter results.
Mike: Gross profit dollar generation continues to improve and then the third quarter, we sequentially generated approximately $7 $3 million more than the second quarter, which was consistent with our expectations.
Mike: Spending leverage continues to improve as SG&A was down almost 1% compared to the prior year third quarter.
Mike: And represented 12, 3% of revenue.
Mike: We continue to believe that we can drive considerable spending leverage within this platform in the third quarter results affirm that conviction.
Mike: Adjusted EBITDA of $115 6 million.
Mike: Represented 9% of revenue and five 3% growth over the prior year, which again included transitory procurement benefits that we called out last year.
Cash flow generation continues to be strong and we generated $164 million in cash flow from operations in the quarter.
Mike: We finished the quarter with cash balances of $483 million after deploying approximately $42 million towards share repurchase and as John mentioned finished with our lowest leverage profile since the merger.
Mike: So overall, we believe the balance sheet has never been stronger.
Mike: And we remain engaged on a number of acquisition opportunities.
Mike: Continued belief in our multifaceted capital deployment strategy.
Mike: To that end as you likely saw in this morning's press release, we have begun reporting adjusted earnings per share as an additional key financial metric.
Mike: We believe that adjusted earnings per share is an important financial metric and helps articulate the value created through our capital deployment efforts and our organic operating results.
Mike: Starting in 2025, we expect to provide guidance expectations on adjusted earnings per share. In addition to the other existing metrics on which we provide guidance.
Mike: Regarding guidance for the full year 2024, we now expect to generate revenue of $4 9 billion to $4 95 billion.
Mike: And adjusted EBITDA of $438 million to $443 million.
Mike: Our updated guidance incorporates the IV bags supply chain disruption John discussed earlier, which continues to limit our ability to onboard new patients.
Mike: Additionally, we continue to expect to generate at least $300 million in cash flow from operations.
Consistent with previous years, we anticipate providing initial guidance for 2025 on our fourth quarter call in late February.
Mike: On that call, we will provide additional color on expectations.
Mike: <unk> the dynamics John articulated earlier.
Mike: And while we are not in a position to provide additional color or details on the drug price impact or timing of supply chain improvements on the IV solutions situation. At this time, we will provide an update on the Q4 call.
Mike: And with that we'll open the call for questions operator.
Mike: Sure.
Speaker Change: Thank you at this time, we will conduct a question and answer session.
Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Our first question comes from David Macdonald from Julien Your line is open.
David MacDonald: Hey, good morning, guys.
David MacDonald: So just a couple of things I mean first of all.
David MacDonald: Just on the IV.
David MacDonald: On topic for extra has talked about like 90% to 100% by.
David MacDonald: By year end and we've heard some other manufacturers talk about increased supply can you just talk about how supply has kind of trended since the hurricane are you seeing noticeably better from a couple of weeks ago.
Speaker Change: And then should we think about this hopefully being resolved consistent with what they are saying kind of late <unk> and we are dealing with purchasing inefficiencies in the interim.
John Rademacher: Yes, Dave it's John.
Speaker Change: So.
Speaker Change: From the moment of the closure needless to say there.
Speaker Change: There was immediate actions that we took to not only start to drive conservation, but also to prioritize the way that we're going to.
Speaker Change: Look at the inventory that we had.
Speaker Change: Certainly work closely with suppliers and distributors to secure supply through that process and ensure that we were able to take care of our existing patients as you would expect the patients at the centers, where the highest priority to make certain that we had continuity of care.
Speaker Change: As the weeks have progressed.
Speaker Change: We used a variety of products and so its broad with the different IV.
Speaker Change: Container IV bags that we're utilizing in a broad basis, we are working as aggressively as possible with all of the alternate suppliers.
As well as with.
Speaker Change: The impacted supplier around making certain that we can get the most amount of allocation as possible. We think it's going to continue to improve over the weeks and months as I said in my prepared remarks really hard for us to.
Hazard, a guess as to when it's going to come back fully online through that process, but we're seeing encouraging signs.
Speaker Change: Increased supply as we've started to move through the quarter and our expectations are that that's going to continue to move in alignment as importation.
Speaker Change: It comes into the U S as well as the plant and other producers can start to ramp up their production.
Speaker Change: Dave its Mike the only thing I'd add is naturally you would expect that our guidance range for the fourth quarter.
Speaker Change: A variety of scenarios around basin and.
Speaker Change: And volumes out of recovery. So we are going to play a cautious but we also have built in a variety of solutions based on what we're hearing from them.
Speaker Change: And then guys just I guess second topic, just around some of the pharmacy exits out of a major competitor.
Speaker Change: Should we think about the opportunity is maybe more broad than just kind of where they were exiting I mean, this is going to be I would assume for payers.
Speaker Change: Second scrambled drill this is not the first time, we've seen some exits. So are you guys in a position to go back to payers and be like look we're not going anywhere and we've obviously seen a lot of fluidity in the market in terms of potential pharmacy exits.
Speaker Change: Yes, Dave.
Dave: First and foremost we've talked a lot about the balance of our portfolio and how much we have invested into the infrastructure our network to make certain that we could follow and be able to provide service across that broad spectrum of the acute and chronic patients we believe that.
Dave: The investments that we've made create a really.
Dave: Attractive opportunity for us to continue to capture market demand to be a partner of choice for the referral sources given the breadth of the products that we're able to support and we do think that as payers are looking at their network designs, having organizations that can be able to provide that broad spectrum.
Dave: <unk> solutions for infusion.
Dave: We will continue to position us well in the marketplace now again some of the disruption that we just talked about with the IV bags.
Dave: As has been resolved for us to be able to really ramp that up as I said, we need to make certain that we take care of our existing patient centered but as that starts to alleviate and things start to move back at supply. We believe this creates an attractive opportunity for us to leverage the investments that we've made into our people process technology and <unk>.
Dave: Facilities.
Speaker Change: Okay, and then guys just last one just on <unk> I know you guys have talked before just about.
Speaker Change: Percentage of revenue by that class any additional detail you can provide just to help us kind of ring fence. This a little bit in terms of the.
Speaker Change: The class.
Speaker Change: In terms of how much revenue the product specifically just any additional detail there to help us get a little bit of a box Robyn.
Robyn: Yes, David Mike obviously for obvious reasons, we don't provide therapy specific concentration mix, but what we have said publicly is that chronic inflammatory therapies in which <unk> is one of the therapies roughly represents 20% of our revenue.
Robyn: That's that's a therapy category that includes both Biosimilars primarily for Remicade that include things like <unk> and <unk>. It also does include two branded therapies <unk> and <unk> at this point. So that's the extent to which we provided granularity around store.
Robyn: Sure.
Speaker Change: Okay. Thanks, very much guys.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Constantine DVD from citizens JMP Securities. Your line is open.
Speaker Change: Yes, just following up on Dave's question on <unk> can you give us a sense, maybe just how those.
Speaker Change: Discussions are deviating from some prior precedent I guess around spread and.
Speaker Change: No you said negotiations are ongoing as we sit here today is there potential between now and year end that those economics improve.
Speaker Change: So you kind of see it.
Speaker Change: Sort of arresting where its where it sits today in terms of those negotiations.
Speaker Change: Hey, Constantine it's Mike So maybe I'll start with some mechanics, and John can jump in and address some of the more the broader aspect of your question. So I think just to Rebase.
Speaker Change: Folks again, when we acquire therapies from manufacturers, we're acquiring at a spread off of a reference price. We subsequently build a payer for a spread over referenced price, thereby affording us a margin on that that drug specifics as it relates to.
Speaker Change: Two store that therapy has enabled us because in many instances are in most instances, we're treating patients that have medical necessity, where there is an increased clinical requirement.
Speaker Change: So that spread has afforded us the ability to invest in patient centric investments and so as John alluded from a mechanical perspective.
Speaker Change: What.
Speaker Change: Initial communication is that spread off of that reference price.
Speaker Change: The intention is that that will be dramatically reduced that is atypical from what we had seen in such scenarios in the past, where typically that spread is either consistent or wider and when things go biosimilar or adjust that is primarily felt through the reference price.
Speaker Change: Which is where we have said consistently that when things go biosimilar or evolved from a.
Speaker Change: <unk> therapy maturity, we typically see that through the reference price not through the spread which is why this is such an atypical situation. So maybe I'll hand, it to John for any addition, yes. The only other thing I'd add is.
John Rademacher: Mike's point are are normal.
John Rademacher: I guess the historical precedent that we looked at was that's normally a glide down that we see in that reference price and therefore, you would expect that parallel to happen.
John Rademacher: The fact that this is going in a different direction of that spread.
Being compressed.
John Rademacher: Early in the process and not really following that glide down of the reference price is what is unprecedented and why we are calling that out as being something that.
John Rademacher: That is drastically different than than what we've seen on a historical basis.
Speaker Change: Got it thanks and then.
Speaker Change: Just one follow up can you just give us.
Speaker Change: The revenue split between the chronic and acute therapies this quarter. Thank you.
Speaker Change: Yes, you bet, it's roughly 70 525 chronic acute.
Speaker Change: Okay.
Speaker Change: Thank you.
Our next question comes from Lisa Gill from Jpmorgan. Your line is open.
Lisa Gill: Alright, thanks, very much and good morning.
Lisa Gill: Just coming back I, just want to go back to a comment that you made around <unk> and what's happening that you really believe this is unique Ken can you maybe just walk me through I understand why you think this is unique and not a new norm from a manufacturer perspective, so Jonathan.
John Rademacher: John I think I heard you say that.
John Rademacher: Manufacturer decided that with the Biosimilar coming Theyre, just going to collapse. The gross spread do you think that we could see more of that activity, where the branded manufacturers trying to maintain their market share with a biosimilar coming up I'm, just trying to understand what <unk>.
John Rademacher: So it could be happening in the market.
John Rademacher: Yeah hard for us too.
John Rademacher: Two.
Speaker Change: Comment on manufacturers' pricing strategies on that Lisa so in many instances probably better better for them to answer on that.
Speaker Change: There is some uniqueness with this and the fact that this drug is.
Speaker Change: Part of the Iras and was identified as one of the first pad and there is with Cms's announcement in <unk>.
August and the negotiation there is an endpoint that's a little bit different than what you see in a traditional biochem type of situations. So.
Again within my prepared remarks, I also tried to reflect that is a little bit unique with MFS. So.
Speaker Change: I think as we're thinking through as we move forward.
Speaker Change: Yes, we'll try to factor that in I think as Mike has said multiple times.
Speaker Change: When you think of the portfolio that we have a product.
The acute therapies for the most part our generic or generic equivalent in the marketplace.
Speaker Change: Most of our chronic.
Speaker Change: As in a bio stem there are very few branded products.
Speaker Change: Other than what we have in some of the limited distribution drugs and.
Speaker Change: The rare and orphan space.
Speaker Change: Sure.
Speaker Change: Branded type of of.
Of stance. So this is one where again.
Speaker Change: Probably represents one of the.
Speaker Change: Last.
Speaker Change: The big branded products in our broader portfolio, but we're going to use this as being a opportunity to to continue to monitor and to review as we're thinking about our forward views.
Speaker Change: And the impacts of that buyout.
Speaker Change: Biosimilar events can have on the rest of the portfolio.
Speaker Change: No. That's really helpful. And then just Mike for you when I think about the EBITDA reduction and I look at the fourth quarter, you talked about though what's going on with the IV solution as well as what happened with the hurricane should I assume that that's the only impact of what the changes for the EBITDA Guide.
Speaker Change: <unk> for 2024 or is there anything else that I see a lab.
Speaker Change: Yes. Good morning, Lisa those are the big box cars on the rail as we think about the fourth quarter as well.
Speaker Change: Well no. This is a dynamic.
Speaker Change: Market, we typically do see some seasonal ramp, especially on the acute therapies going into the later part of the year.
I am comfortable with you characterizing that those are the meaningful.
Speaker Change: Variables again as John highlighted Helene continues to impact us through the IV bag shortage.
<unk> got to keep track of all the storms watching the weather channel, but Milton was really in the early stages of October that reached quite a bit of havoc. When you think about our pharmacy and more importantly, our patient footprint in the southeast that created a tremendous amount of patient dislocation and disruption there was some.
Speaker Change: <unk> fees.
Speaker Change: I wouldn't characterize it as overly material, but it did create some hurdles earlier in the quarter and so even though it's in the in the rearview mirror.
Speaker Change: There is still some some recovery. So those those two are the primary variables that we modeled out affecting the range.
Speaker Change: Okay, great. Thanks, Sir thank you.
David MacDonald: Thanks Lisa.
David MacDonald: Thank you so much.
Speaker Change: Our next question comes from Matt L'oreal from William Blair. Your line is open.
Speaker Change: Hi, good morning.
Speaker Change: In the year so.
Speaker Change: Really encouraged by the momentum on the top line again, a lot of that is from our chronic therapy portfolio, both existing as well as some of the new rare and orphan, which do again carry a lower gross profit rate.
Speaker Change: As I mentioned in my prepared remarks, nice momentum sequentially in the gross profit dollar generation again more than $7 million up versus Q3, which is kind of how we socialized things in late July.
Speaker Change: And while we don't provide gross profit growth when you normalize for the procurement benefits last year, we were in the 6% to 7% kind of same store sales gross profit range. So.
Really encouraging and Thats kind of how we're thinking about things obviously.
Speaker Change: With the range going into the fourth quarter.
Speaker Change: We are maniacally focused on gross profit dollar generation, but there are some challenges around our acute therapies, which as you know our higher gross profit therapies for us.
Speaker Change: Okay, Okay that makes sense and then just.
Speaker Change: The patient payment.
Speaker Change: Thank you.
Speaker Change: That's the one only green item from a change disruption.
Speaker Change: Obviously initially post merger patient collections and bad debt was was it really something you improved upon.
Speaker Change: And that was a kind of a nice driving factor for the P&L.
Speaker Change: Just any way to think about what kind of a timeline disruption of our size.
Speaker Change: Yes.
Speaker Change: This might be I assume that's sort of a onetime catch up and hopefully back to normal.
Speaker Change: Yes, I think if you think about where we were entering the third quarter. We were still in recovery mode from change health, we utilized a lot of their capabilities and applications to correspond with patients and enable efficient patient collections and payment through our our website and much of that function.
Speaker Change: <unk> was down even.
Speaker Change: Into the third quarter and that's.
Speaker Change: As an area, where frankly, all health care providers.
Speaker Change: Requires that they have that additional help and oversight. So it's somewhat of a unique cohort of patients in which we serve.
Speaker Change: And there the medical complexity that they have in the clinical oversight that we can provide is a benefit on that.
Speaker Change: Through that process.
Speaker Change: So we're working forward part of it the thing that has to try to be factored in is what is going to be that conversion of these patients that require.
Speaker Change: This health care professional oversight.
Speaker Change: Onto a biosimilar through that process, what we hear from our prescribing physicians is a patient responds well to with their therapy.
Speaker Change: They are not inclined to just immediately move them over to another product through that so part of this is going to be that conversion rate onto the biosimilars part of it is going to be the ability for us to.
Speaker Change: Pull that into our portfolio and the economics around each of those biosimilars through that process and then how we see that conversion move over time. So I think as we're looking at at all of those dynamics and some of the uncertainties in that that kind of what we're we're trying to factor in and will be part of what we provide in our 25 guidance.
Speaker Change: We have all of these different variables that are going to have to be factored into the way that we're looking at 25 and beyond.
Speaker Change: Got it and then maybe Mike I noticed in your prepared remarks, how you must emphasize that where the balance sheet is today in the buyback. So obviously leverages low cash flow generation is pretty good how should we be thinking about M&A and future capital deployment opportunities or this disruption, we still are open to M&A opportunities as well.
Speaker Change: I just want to hear your thoughts on that thanks.
Speaker Change: Yes, first and foremost the team is just.
Speaker Change: Performing incredibly well and driving the cash generation again, converting revenue to cash in and leading to a leverage profile that it brings.
Speaker Change: <unk> is by far the lowest since the merger five years ago and so.
Speaker Change: Generating the capital it just gives us confidence both in the business will continue to invest back in a lot of the acute.
Speaker Change: Capabilities that John talked about but we've really built a capital efficient enterprise that again, we expect will generate more than $300 million of cash how we deploy that in the shareholders' best interest is something as we've talked about in the past, we take very very seriously and we believe that we have the flexibility and the capability to deploy capital.
Two primary avenues.
Speaker Change: Through share repurchase and we haven't been shy about deploying capital towards share repurchase, but with this balance sheet that also affords us the ability to look for both strategic and economically attractive opportunities.
Speaker Change: And again.
Speaker Change: We are incredibly thoughtful we're disciplined we don't chase just to get an M&A headline and we need to make sure Brian that we're looking you in the eye and saying that anything we do is both strategically quite attractive.
Speaker Change: As more.
Speaker Change: <unk> advantage under our ownership as well as its generating an accretive opportunity for the shareholders and we think that Theres a number of those that again, we remain actively involved in and I think the expectation is that we will continue to do what we've been doing which is actively deploying capital.
Speaker Change: Again, we said we've said that we are very comfortable operating up to three times net levered over the medium term, which would imply that we've we built a.
Speaker Change: Balance sheet with considerable dry powder.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Brian Thanks, Brian.
Speaker Change: Jill.
Speaker Change: Our next question comes from Jamie Paris from Goldman Sachs. Your line is open.
Speaker Change: Hey, Thanks, good morning.
Jamie Paris: One short term question just on acute and the IV bag shortage it sounds like acute and antibiotics nutrition are probably the areas. Most affected by that first can you confirm that or if there is more on the chronic side that that's impacted by this and then relatedly just.
Jamie Paris: Thinking about the competitive exits in the acute space I mean, how should we think about sizing there and when you can potentially get back to new patient enrollment within acute.
Speaker Change: Sure Jamie yes on the acute side Youre, absolutely right, we use intravenous solution containers, primarily to support our antibiotic and our parenteral nutrition.
Jamie Paris: Patient cohorts.
Jamie Paris: Those are mostly what are our prepared and clean room settings.
Jamie Paris: Look.
Jamie Paris: Early to tell but again as John mentioned I think we feel.
Jamie Paris: Very good about.
Jamie Paris: The opportunity once we return to a more normal supply chain situation again, I think as we've characterized these therapeutic categories.
Jamie Paris: The broader growth profile is low to mid single digit growth. These are more mature therapies, but I think for a lot of the reasons that John outlined I think we feel very confident in our unique platform. The investments we've made are consistent.
Jamie Paris: Patient support we're not going anywhere with these therapies and I think that should.
Jamie Paris: Enable us to grow faster than the market, how much faster and when that kicks into higher gear I think again as we've said it somewhat contingent on the supply chain situation in the near term, but I think we're we're excited about the opportunities in the future.
Jamie Paris: Okay.
Jamie Paris: And then.
Speaker Change: You guys are calling out these gross profit headwinds next year, you must also be thinking about the other side of things right.
How you refill the gross profit gap that this creates I know thats not an overnight process, but how are you thinking about the.
Speaker Change: The drug portfolio the pipeline, maybe operating infrastructure to kind of build back some of those gross profit and EBITDA dollars over time.
Speaker Change: Yes, Jamie.
Jamie Paris: First and foremost this team is very focused around always looking for operating efficiencies and cost effectiveness in the way that we're operating the model and some of the investments we've made into technology and into our facilities allows us to continue to look for ways to drive that efficiency as we move forward.
Speaker Change: We don't believe that that.
Speaker Change: Has tapped out we think there is ample opportunity and we had announced earlier this year. Some of the work we're doing with talent here around some of the machine.
Speaker Change: Machine learning and and repetitive process automation and other things that we're going to continue to pursue aggressively as we look at those opportunities. We're also encouraged by the investments that we've made into our infusion suites and some of the capabilities that we have within.
Speaker Change: Infusion clinics those advanced practitioner model, we think that all timers.
Speaker Change: <unk>, we're doing some experiments.
Speaker Change: On that of being able to serve all timers patience with the multiple products that are available in the market.
Speaker Change: That are overseen by the nurse practitioner model within that.
Speaker Change: Encouraged by early indications there certainly as you had called out we think there's opportunities in the acute area as supply chain starts to settle as we move forward and we continue to.
Speaker Change: With confidence in the marketplace with a broad spectrum of our products that we have there we continue to invest in the rare and orphan area to look at those opportunities like we had called out with by Dubik of using the platform that we have a national reach and with the payer relationships from a market access standpoint, but we'll continue to do that.
Speaker Change: And we do think that oncology presents some unique opportunities as that marketplace continues to evolve.
Speaker Change: And think about how we can utilize the infrastructure not only of our pharmacy infrastructure, but the infusion suite infrastructure to serve a broader spectrum of therapies. So we think that there remains.
Speaker Change: Significant opportunities for us to find additional vectors of growth of continue to work upstream with biopharma to be a platform of choice for them to help to introduce new products in the rare and orphan as well as a new entrant space and we think there is a robust pipeline of infused products.
Speaker Change: That are moving through the FDA approval process that we think our platform is unique and presents a really.
Speaker Change: A strong partner for them to be able to bring their products into the marketplace and we're going to continue to pursue all of those aspects is where we've always look to reload and continue to.
Speaker Change: Reinvigorate the portfolio products that we've had as we've gone through these different cycles of products, moving either generic or biosimilar or other products, reaching the end of their lifecycle.
As we manage through that.
Speaker Change: All right I'll leave it there thank you.
Jamie Paris: Thanks, Jamie.
Jamie Paris: Yeah.
Speaker Change: Our next question comes from Peter Chickering from Deutsche Bank. Your line is open.
Peter Chickering: Hey, good morning, guys and apologize for sitting on the solar topic here, but I guess first question is.
What percent of your patients on still are the first time, an IV what percent of them are the medically assisted sub Q and what percent of them are on IV, because they can't tolerate sub Q.
Speaker Change: We're not going to get into specifics, but I think based on John's comments, you can assume that the.
Speaker Change: The majority of our patients are ones that are not on the self admin.
Speaker Change: Sub Q.
Speaker Change: Patients that have that medical necessity and required additional clinical oversight.
Speaker Change: Okay and then.
Speaker Change: I think thats or how how does rebates flow as we move into the Biosimilar as the mechanics here, if we collapsed the reference pricing.
Speaker Change: If you ship, 100% of your market.
Speaker Change: Our market share into.
Speaker Change: Biosimilars is it because the new pricing and the Biosimilar is low enough is on the spread for the rebates to offset the lost EBIT theyre getting today is that sort of how this is flowing through.
Speaker Change: I'm not sure I'm following exactly how you map that out <unk>, but look again when things are going to go Biosimilar, we would expected that reference price will compress considerably again in my.
Speaker Change: In my comments earlier in response to one of the questions. One of the things that has enabled us to maintain our investments in patient support and clinical models is maintaining that spread off of which even at a lower reference price due to biosimilar competition, we can maintain a margin which enables us.
Speaker Change: To again invest and maintain that higher level of clinical care base.
Speaker Change: Based on the engagement thus far again, what is unique about this is that not only would we expect over the course of next year that reference price that compress as biosimilars.
Speaker Change: Biosimilars are introduced what we're talking about this morning, it's simply that that margin or that spread based on recent conversations is basically.
Speaker Change: Being dramatically reduced and so.
Speaker Change: Putting aside what we would expect the reference price to do again part of the reason why.
Speaker Change: Things going Biosimilar and previous experience hasnt been as punitive as beef.
Speaker Change: Again in many instances, we were able to expand that spread because of the competitive dynamics.
Speaker Change: So.
Speaker Change: Do you have a range as to where you think that the sore either of the biosimilar and or the new price and net price will be as of January one.
Speaker Change: Because you have to take that came about sort.
Speaker Change: <unk> 5000, <unk> range it sounds like.
Speaker Change: Summing up of Logan.
Speaker Change: Unfortunately for a variety of reasons at this point, we're on a we're not in a position to provide any ranges or more specific expectation.
Speaker Change: Okay.
Speaker Change: Last question here the stocks are up again became pretty hard.
Speaker Change: Getting hit hard hard year as people are trying to underwrite for this commentary on material gross profit impact next year and I know, it's too early to size it up with conviction, but can you give some ranges of when you say material impacted gross profit. So people can help put ranges on that as people look to value the company.
Speaker Change: Thanks.
Speaker Change: Yes look the reason we brought this up is obviously as we've been you know that John and I and Nicole had been spending quite a bit of time engaged with shareholders. We understand that this is a topic that is near the top of the list as people think about 25 and beyond and so while we're not in a position to provide any specific.
Speaker Change: Ranges or any more granularity for obvious reasons, we did want to try to be transparent to highlight that this is something again based on recent dialogues. We believe will be material now again, we're not in a position to debate what material means and put a number behind it but again.
Speaker Change: We have a track record where things come up we strive to be as transparent as responsible.
Speaker Change: With the investors in the enterprise.
Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Joaquin Martinez from Bank of America. Your line is open.
Speaker Change: Hi, This is actually Joanna I gotcha.
Speaker Change: Yeah.
Speaker Change: Hey.
Speaker Change: Yeah, Joanne Crystal clear Hi, how are you yes.
I think quite keen.
Paul: Thanks, Paul.
Speaker Change: This is actually my line, but thank you so much for taking the question. So just to follow up on these comments around that.
Speaker Change: The offsets to gross.
Speaker Change: Gross margin pressure I guess.
Speaker Change: Question like Peter had but 10 equal EBITDA next June.
Speaker Change: Joanne at this point, we're not in a position again as you know we provide guidance on our fourth quarter call, which we would expect to be in late February obviously as I mentioned on that call. We will be in a position to provide initial thoughts on 2005.
Speaker Change: Outlook, we're obviously very much managing real time information on the supply chain dynamics, what are some of the growth opportunities like the acute opportunities that lie in front of us and again based on ongoing dialogues. We would expect by that point that we will have more substandard expectations around that.
Speaker Change: Potential.
Speaker Change: Impact that we talked about from the drug pricing impact at this point, we're not in a position where.
Speaker Change: We're going to stick to our protocol, which is to provide guidance on our February call.
Speaker Change: No I understand and I guess as you're thinking about this.
Speaker Change: Chuck also moving into the Biosimilar.
Speaker Change: And such.
Speaker Change: In fact, your long term growth algorithm looking.
Speaker Change: Beyond 'twenty five.
Speaker Change: Yes look I think we've been consistent in that we believe and we've articulated that on an organic basis. We view this enterprise as a high single digit topline.
Speaker Change: Opportunity and given the leverage ability and the scalability, we think that translates into a low double digit enterprise over the medium and long term I think if you look at the track record over the last five years, we have significantly exceeded both of those guardrails.
Speaker Change: And even when there are things that we've called out like the procurement benefits last year, we try to be as transparent and forthright with the investors.
Speaker Change: On some of these dynamics frankly, some of which we don't control such as the spread on the drug. So does this change our conviction in the medium term growth opportunity no. It does not and I think for a lot of the things that John articulated.
Speaker Change: Around the acute opportunity and our ability to differentiate there we're starting to see some some green shoots around alzheimers with some of our clinical experimentation and some of the opportunities on rare and orphan and chronic categories, either I don't think that.
Speaker Change: I think as we've articulated there will be likely an impact in 2025, but over the medium term.
Speaker Change: Not wavering from our confidence in this platform.
Speaker Change: Thank you and if I may follow up on different topic around here.
Suites any update there or did you add more locations and how youre thinking about this or that.
Speaker Change: How much.
Speaker Change: I'll have maturation of these clinics. Thank you.
Yeah, Julian it's Scott so in the quarter, we added three additional infusion suites.
Speaker Change: Into the network, we continue to drive utilization of that.
Speaker Change: Again, the positive aspects that we've called out before is we see really high patient satisfaction and the utilization of the facilities. It drive operating efficiencies in and certainly as we put more facilities.
Speaker Change: Closer to where the patients are in their activities of daily living.
Speaker Change: Increasing the opportunities for us to move that forward.
Speaker Change: So operator that.
Speaker Change: Multiple I guess.
Speaker Change: Two different models of the infusion suites of operating as a home or alternate treatment site as well as those that have an advanced practitioner.
Speaker Change: It provides that oversight in the model and our ability right now to kind of utilize both of those and experiment and learn as Mike said to make certain that we are approaching and identifying opportunities for expanded use of that advanced practitioner model are things that we're encouraged by and we think we will continue to make.
Speaker Change: <unk> in that space not only in the infusion suite and its traditional center, but alternate treatment site, but also in these infusion clinics that have in advance practitioner.
To oversee the infusion and to help.
Speaker Change: Expand the portfolio of products that we are able to service.
Speaker Change: Thank you.
Speaker Change: Yes, Thanks, Brian.
Speaker Change: Thank you.
Speaker Change: This concludes the question and answer session I would now like to turn it back to management for closing remarks.
Speaker Change: Thank you all for joining us this morning, and participating on our call as we outlined the third quarter was very productive and our team continued to execute at a very high level, even with significant disruptions in the marketplace.
Speaker Change: Despite the unexpected gross margin pressures that will impact our business in 2025, our team remains focused on identifying cost efficiencies and additional growth initiatives to help offset some of these headwinds we understand the important role that we play in delivering care to our patients and their families. This remains the light the guides us as we continue to grow and severity even more pay.
Speaker Change: In 2024 and beyond thank you very much and have a great day.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.
Speaker Change: Yes.
Speaker Change: [music].
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Speaker Change: Okay.