Q3 2025 Option Care Health Inc Earnings Call
Operator: Good day and thank you for standing by. Welcome to the Option Care Health third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nicole Maggio, Senior Vice President, Finance. Please go ahead.
Good day, and thank you for standing by. Welcome to the option. Care Health, third quarter 2025 earnings conference call.
At this time, all participants are in a listen-only mode.
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.
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. These forward-looking statements are subject to risks and 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 10-K filed with the SEC regarding the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements except as required by law. 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.
Nicole Maggio: I will turn the call over to John Rademacher, President and Chief Executive Officer.
John Rademacher: Thanks Nicole and good morning everyone. Before I begin my prepared remarks, I'd like to welcome and introduce some new members of the team. As we announced several weeks back, Mike Shapiro stepped down as CFO and Meenal Sethna joined us as CFO on October 1. I want to thank Mike for his leadership and contributions over the past 10 years. He has been a great partner to me and our leadership team and we appreciate his support during this transition period as he steps into his new role as Strategic Advisor. I'm also excited to welcome Meenal to the Option Care Health team. She brings a wealth of experience leading business imperatives and finance teams across a number of public companies and industries, including health care.
As we announced several weeks back Mike Shapiro stepped down as CFO and mean, will sethna joined us as CFO on October 1st?
I want to thank Mike for his leadership and contributions over the past 10 years.
He has been a great partner to me and our leadership team and we appreciate his support during this transition period, as he steps into his new role as strategic adviser.
I'm also excited to welcome, you know, to the option Care Health Team.
John Rademacher: Her early career and formative years were spent with a global health care products and services company and her recent roles in technology, industrials, and electronic manufacturing will bring fresh perspectives and best practices from across her breadth of experience. I am looking forward to partnering with Meenal as we shape the next chapter of Option Care Health and continue our mission to transform healthcare by providing innovative services and improve outcomes, reduce costs, and deliver hope to our patients and their families. I'm also pleased to welcome Stephan Scholstein as Vice President of Investor Relations reporting to Meenal. Stephan is a seasoned investor relations executive with experience across healthcare and other industries and his primary focus will be on fostering strong relationships across the investment community as we continue to drive shareholder value. With that, let's move on to the third quarter results.
She brings a wealth of experience, leading business, imperatives and finance teams across a number of public companies and industries, including Healthcare.
Her early career and formative years were spent with a global Healthcare products and services company. And her recent roles in technology Industrials and electronic Manufacturing.
Will bring fresh perspectives and best practices from across her breadth of experience.
I am looking forward to partnering with mil as we shape the next chapter of option, Care Health.
And continue our mission to transform healthcare by providing innovative services, improving outcomes, reducing costs, and delivering hope to our patients and their families.
I'm also pleased to welcome Stephen Schultz as vice president of investor relations reporting demo.
Steen is a seasoned investor relations executive with experience across Healthcare and other Industries. And his primary focus will be on fostering strong relationships across the investment Community as we continue to drive shareholder value.
John Rademacher: The Option Care Health team delivered another strong quarter with balanced growth across a portfolio of therapies. I'd like to recognize our team for their strong execution and continued dedication to providing broad access to quality care to more patients. As a leading independent provider of home and alternate site infusion services, we are well positioned to leverage our significant scale, diverse portfolio of therapies, and resilient operating model to win in the marketplace and we demonstrated this again in the third quarter. We continue to benefit from favorable market trends including ongoing shift of care to the home and ambulatory setting. Providing high quality care at an appropriate cost in a setting in which patients want to receive it makes us an important part of the solution to reduce the total cost of care.
With that, let's move on to the third quarter results.
Option Care Health delivered another strong quarter, with balanced growth across the portfolio of therapies.
I'd like to recognize our team for their strong execution, and continued dedication to providing broad access to Quality Care to more patients.
As a leading independent provider of home and alternate site infusion services. We are well positioned to leverage our significant scale, diverse, portfolio therapies and resilient operating models to win in the marketplace. And we demonstrated this again in the third quarter.
We continue to benefit from favorable, market trends, including ongoing shift of care to the home and ambulatory settings.
John Rademacher: We continue to capitalize on changes in the competitive landscape and further enhance our partnership with payers and pharma manufacturers. Our relationships with health plans remain strong. Our ability to provide both acute and chronic therapies on a national scale with local responsiveness uniquely positions us as a partner of choice. The strength of our platform provides a meaningful opportunity to broaden access to their members and provide better, more cost effective care to help reduce the medical loss ratio and improve clinical outcomes. During the quarter, we expanded the utilization of our bed day management programs and site of care initiatives to deliver value to our payer partners. The robust and resilient operating model we have created enables us to deliver consistent results in any operating environment.
Providing high quality Care at an appropriate cost in a setting in which patients want to receive. It makes us an important part of the solution to reduce the total cost of care.
We continue to capitalize on changes in the competitive landscape and further. Enhance our partnership with payers and Pharma manufacturers.
Our relationships with health plans remain strong.
Our ability to provide both acute and chronic therapies on a national scale with local responsiveness, uniquely positions us as a partner of choice.
The strength of our platform provides a meaningful opportunity to broaden access to their members and provide better. More cost-effective Care Health reduced, the medical loss ratio and improved clinical outcomes.
During the quarter, we expanded the utilization of our Bed Day Management Programs and cited a care initiative to deliver value to our payer partners.
John Rademacher: We have demonstrated we are well positioned for success as we continue to navigate changes in regulation, competition and our portfolio of therapies. Neel will go deeper into the financials in a few minutes but to highlight some key takeaways. Our revenue momentum continued in the third quarter as we delivered revenue growth of 12% over last year. Acute therapy growth was in the mid teens and our team has been able to take advantage of shifting competitive landscape allowing us to grow above assumed industry growth rates. Our national scale and local responsiveness are differentiators as we continue to partner with referral sources to safely transition patients out of the hospital setting to the home. As we have mentioned previously, coordinating care for acute patients requires tight collaboration with our referral sources, nurses and exceptional responsiveness by our pharmacies.
The robust and resilient operating model. We have created enables us to deliver consistent results in any operating environment.
We have demonstrated, we are well, positioned for success as we continue to navigate changes in regulation competition and our portfolio of Therapies.
Nino will go deeper into the financials in a few minutes, but to highlight some key takeaways
Our Revenue momentum continued in the third quarter, as we delivered Revenue growth of 12% over last year.
Acute therapy growth was in the mid teens and our team has been able to take advantage of Shifting competitive landscape, allowing us to grow above assumed industry growth rates.
Our national scale and local responsiveness are differentiators. As we continue to partner with referral sources to safely transition patients out of the hospital setting to the home.
John Rademacher: This is done thousands of times a day by our teams at the local level and we believe the investments we have made in our unique platform allow us to be the reliable partner of choice for hospitals and health system. Our chronic therapies grew in the low double digits. We continue to see solid performance in both our core therapies as well as our rare and limited distribution products. We added new therapies and enhanced services to our platform in this quarter, taking advantage of our focus on providing enhanced clinical programs and data service expansion. We have partnered with specific pharma manufacturers to develop programmatic support for unique patient cohorts.
As we had mentioned, previously, coordinating care for acute, patients, requires tight collaboration with our referral sources nurses and exceptional responsiveness by our Pharmacy.
This is done thousands of times a day by our teams, at the local level, and we believe the Investments. We have made in our unique platform, allow us to be the reliable partner of choice for hospitals and Health Systems.
Our chronic therapies grew in the low double digits. We continue to see solid performance in both our core therapies, as well as our rare and limited distribution products.
We added new Therapies in enhanced services to our platform in this order.
Clinical programs and data service expansion.
John Rademacher: The demonstration of our clinical capabilities, including our nursing network, payer access, and national pharmacy infrastructure, are differentiators as we partner with PhRMA to gain share in these new-to-world therapies, and we are encouraged by the pipeline of new therapies that are clinically complex and would benefit from our capability set. Part of our differentiation is our ability to have the right clinical resources available to support the breadth and complexity of our patient community and allow for growth. Nursing is at the forefront of our value proposition, and the efficient and effective use of these resources is a key enabler to this end. We conducted over 175,000 nursing visits, with 34% of those in one of our infusion suites this quarter.
We have partnered with specific Pharma manufacturers, to develop programmatic support for Unique patient, cohorts.
The demonstration of our clinical capabilities including our nursing Network payer access and National Pharmacy. Infrastructure are differentiators as we partner with Pharma to gain, share in these newer World therapies and we are encouraged by the pipeline of new therapies that are clinically complex and would benefit from our capability set.
Part of our differentiation is our ability to have the right clinical resources available to support the breadth and complexity of our patient community and allow for growth.
Nursing is at the Forefront of our value proposition and the efficient and effective use of these resources is a key enabler.
John Rademacher: Additionally, NavenHealth conducted over 55,000 nursing visits in the quarter across their entire customer base, allowing us to capitalize on the positive impact that we can provide at the point of care. We also continued our focus on expanding our advanced practitioner model, which represents an attractive complement to our current home infusion services and provides an opportunity to enhance our clinical competencies to serve higher acuity patients under the oversight of an advanced practitioner. Our investments in our infusion suite platform allow us to leverage our infrastructure more effectively by serving specific patients that benefit from this care model. We believe this will expand our market reach and provide broader access to new patient cohorts.
To this end, we conducted over a 175,000 nursing visits with 34% of those in 1 of our infusion Suites in this corner.
Additionally, Navin Health conducted over 55,000 nursing visits in the quarter across their entire customer base, allowing us to capitalize on the positive impact that we can provide at the point of care.
We also continued our focus on expanding our Advanced practitioner model, which represents an attractive complement to our current home infusion services, and provides an opportunity to enhance our clinical competencies to serve higher Acuity, patients under the oversight of an advanced practitioner.
Our investments. In our infusion Suite platform, allow us to leverage our infrastructure more effectively by serving specific patients that benefit from this care model.
We believe this will expand our Market reach and provide broader access to new patient cohorts.
John Rademacher: As we near the close of 2025, we have raised the midpoints of our full year revenue, adjusted EBITDA, and adjusted EPS guidance, which reflects our continued confidence in our platform and the execution by our team. With that, I'll hand the call over to Meenal to provide more details.
As we near the close of 2025, we have raised the midpoints of our full year Revenue, adjusted IBA and adjusted EPS guidance, which reflects our continued confidence in our platform and the execution by our team.
Nicole Maggio: Meenal, thanks John and good morning everyone. I'm excited to join the team here at Option Care Health. I'm looking forward to continuing our strong track record of growth, resiliency, and disciplined capital deployment. As John mentioned, the third quarter was strong, building off the solid momentum from the first half of the year. Revenue growth of 12% was balanced with mid-teens growth in acute and low double-digit growth in the chronic portfolio. Both the acute and chronic portfolios performed well across the board. However, growth in the chronic portfolio was negatively impacted 380 basis points from the additional adoption of Stelara biosimilars, which carry a lower reference price and reimbursement. Gross profit of $273 million grew 6.3% versus last year. This reflects the benefit from therapy mix with outsized acute and the core chronic therapies.
With that, I'll hand the call over to mil to provide more details mean.
Thanks John and good morning everyone. I'm excited to join the team here at Option. Care Health.
I'm looking forward to continuing our strong track record of growth resiliency and discipline Capital deployment.
As John mentioned, the third quarter was strong, building off the solid momentum from the first half of the year.
Revenue growth of 12% with balanced, with mid teens growth in acute and low double-digit growth. In The Chronic portfolio.
Both the acute and chronic portfolios performed well across the board.
However, growth in The Chronic portfolio was negatively impacted 380 basis points from the additional adoption of Stellar biosimilars, which carry a lower reference price and reimbursement.
Growth profit of 273 million, grew 6.3% versus last year.
Nicole Maggio: Gross margin rate was also negatively impacted by the shifting Stelara dynamics as well as the impact from lower margin, limited distribution, and rare and orphan therapies. Adjusted EBITDA of $119.5 million grew 3.4% over the prior year, with the strength of the top line performance and spend management partially offsetting year-over-year headwinds previously noted. Adjusted EBITDA margin was 8.3%. Adjusted EPS of $0.45 grew 9.8% over last year, benefiting from our share repurchases and a lower tax rate versus last year. Turning to our balance sheet and capital allocation, we had another strong quarter of cash generation. Year to date, we've generated $223 million in cash flow from operations. We also refinanced our term loan, reducing our borrowing costs and extended the maturity while adding an additional $50 million in liquidity. Our net debt to adjusted EBITDA leverage stands at 1.9 times at the end of the third quarter.
This reflects the benefit from therapy, mixed with outsized acute and core chronic therapies growth.
The growth margin rate was also negatively impacted by the shifting stellar dynamics, as well as the impact from lower margins.
Limited distribution and rare and orphan Therapies.
adjusted ibida of 119.5 million grew 3.4% over the prior year with the strength of the Topline performance and spend management partially offsetting year-over-year headwind previously, noted,
Adjusted EBA down. Margin was 8.3%.
Adjusted earnings per share of 45 cents grew 9.8% over last year, benefiting from our share repurchases and a lower tax rate versus last year.
Turning to our balance sheet and capital allocation, we had another strong quarter of cash generation.
Year to date, we've generated 223 million in cash flow from operation.
We also refinanced our Term Loan reducing our borrowing costs and extended the maturity while adding an additional $50 million in liquidity.
Nicole Maggio: As we identify strategic opportunities to deploy capital, our first priority for deployment is internal investments for profitable growth opportunities. In the quarter, we made investments to strengthen our platform. We added new infusion clinics and expanded our advanced practitioner footprint. We continue to look for opportunities to increase both our pharmacy capacity and our presence in key geographies. We also continued to invest in technology, artificial intelligence, and advanced analytics to continue driving operating efficiency. In the quarter, we launched three new enhanced applications that we expect to drive efficiencies in our patient onboarding process along with efficiencies in our staffing, utilization, and deliveries. Strategic acquisitions and related investments are our next priority. We've been working through the integration of the Intramed Plus acquisition from earlier in the year. The business continues to perform extremely well, and the team has met or exceeded our expectations.
Our net debt to adjusted. EBA leverage stands, at 1.9 times. At the end of the third quarter.
As we identify strategic opportunities to deploy Capital, our first priority for deployment is internal Investments for profitable growth opportunities.
In the quarter, we made Investments, the platform. We added new infusion clinics and expanded, our Advanced practitioner footprint.
We continue to look for opportunities to increase both our Pharmacy capacity and our presence in key geography.
Technology, artificial intelligence and advanced analytics to continue driving operating efficiency.
in the quarter, we launched 3 new enhanced applications that we expect to drive efficiencies in our patient onboarding process along with efficiencies in our staffing utilization and deliveries
Strategic Acquisitions and related Investments. Our, our next priority.
We've been working through the integration of the Intramed Plus acquisition from earlier in the year.
Nicole Maggio: As we close out our integration efforts, we remain active in assessing M&A opportunities, focusing on strategic tuck-ins and near adjacency opportunities. We continue to return capital to shareholders via our periodic share repurchases. In the quarter, we bought back over $62 million in shares. The strength of our balance sheet gives us flexibility to execute our growth strategy while balancing return of capital to shareholders. Finally, I want to provide an update on our expectations for the full year 2025. We now expect to generate revenue of $5.6 to $5.65 billion, adjusted EBITDA of $468 to $473 million, and adjusted EPS of $1.68 to $1.72. We continue to expect to generate more than $320 million in cash flow from operations.
The business continues to perform extremely well in the team has met or exceeded our expectations as we close out our integration efforts.
We remain active in assessing m&a, opportunities focusing on strategic tuck-ins and near adjacency opportunities.
We continue to return Capital to shareholders via our periodic share repurchases.
In the quarter, we bought back over 62 million in shares.
The strength of our balance sheet gives us flexibility to execute our growth strategy while balancing return of capital to shareholders.
Finally, I want to provide an update on our expectations for the full year 2025.
We now expect to generate revenue of 5.6 to 5.65 billion dollars.
Adjusted Eva of 468 to 473 million and adjusted earnings per share of a168 to a dollar 72.
Nicole Maggio: Consistent with our previous comments, our guidance incorporates our current expectations on the impact of potential tariffs, most favored nation pricing, and similar policy changes, which we continue to believe will not have a material financial impact in 2025. Overall, we're excited about our performance and look forward to continuing our growth trajectory through 2025 and beyond. With that, I'll turn it back to John.
We continue to expect to generate more than $320 million in cash flow from operations.
Consistent with our previous comments, our guidance incorporates, our current expectations on the impact of potential tariffs,
most favored nation pricing and similar policy changes which we continue to believe will not have a material Financial impact in 2025
Overall, we're excited about our performance and look forward to continuing our growth trajectory through 2025 and Beyond.
John Rademacher: Thanks, Meenal. In closing, I want to highlight our success that's ultimately driven by our responsiveness and strong execution. We have demonstrated our ability to take advantage of market opportunities through our day in and day out focus and consistency, and we continue to grow the business, overcoming challenges and headwinds within the marketplace. I am proud of our accomplishments this quarter and I'm excited about the momentum we are building to deliver on our promise to expand access to the extraordinary care we can provide and to serve more patients and their families. With that, we'll open up the call for questions.
And with that, I'll turn it back to John.
Thanks meal in closing. I want to highlight our success. This ultimately driven by a responsiveness and strong execution.
We have demonstrated our ability to take advantage of Market opportunities through our day in and day out, focus and consistency. And we continue to grow the business overcoming challenges and headwinds within the marketplace.
I am proud of our accomplishments this quarter and I'm excited about the momentum. We are building to deliver on our promise to expand access to the extraordinary care. We can provide and to serve more patients and their families.
Operator: Operator, thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, press Please. Please stand by while we compile the Q&A. Our first question comes from the line of Pito Chickering with Deutsche Bank. Your line is now open.
With that, we'll open up the call for questions.
Operator.
Thank you. At this time. We will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name. To be announced to withdraw, your question. Press star, 91. Please stand by.
John Rademacher: Hey, good morning guys and thanks for taking my question. I guess, you know, what is the uptake of the Stelara biosimilar at this point? How do you think that evolves over the next 12 months? Is it fair to think about the economics of Stelara biosimilar as following the same path as Remicid? Hey Pito, it's John. A couple things that I want to bring up first. First and foremost, love the progress that the team made in the quarter and really the balance of the portfolio across that, as we had said, and Meenal commented in the prepared remarks, we are starting to see the uptake of the biosimilar and knowing that that has a lower reference price, it's going to have a revenue impact as well as gross margin as we had called out. I think it's patterning.
our first question comes from the line of pedo Chickering with Deutsche Bank, your line is now open,
Hey, uh, good morning guys. And thanks for taking my question, I guess, you know, what is the, the uptake of the Stellar biosimilar at this point? You know, how do you think that evolves over the next 12 months? Is there anything about the economics?
Of of solar biosimilars following the same path as Remicade.
John Rademacher: We kind of called out at the end of the second quarter. We started to see the uptick that continued through the third quarter which we put out there. Our expectations as we move forward are, and we contemplated within the guidance that we provided for 2025, is that continued slow uptake that we would feel through that process. We know that with the January 1 roll of the calendar and the Inflation Reduction Act impact, we will expect further step down in the price of the Stelara and the biosimilars will continue to gain momentum there. We're not prepared to give 2026 guidance. We're not in a position really to size up what we think the impact is going to be for Stelara.
Hey, Cheeto. Uh, it's RPO. It's John, um, hey, a couple of things that I want to bring up first, um, first and foremost, love the progress of the team made in the quarter and really, uh, the balance of the portfolio across that as we had said. And, you know, commented, in the prepared remarks, we are starting to see the uptake of the biosimilar, um, and knowing that that has a lower reference price, it's going to have, uh, a revenue impact, uh, as well as gross profit as we had called out. So, you know, I think it's patterning, we we kind of call out at the end of the, uh, of the second quarter. We started to see the uptick that continued through the third quarter, uh, which we, uh, we put out there, you know, our expectations as we move forward are. Um, and we contemplated within the guidance that we provided for 2025.
John Rademacher: I will say given the balance of the portfolio and the momentum we're building, we expect growth and we're going to continue to focus the organization around minimizing the impact that we can as we move forward and continue to support the broad spectrum of formulary that we have available and deepening the relationships that we have with the prescribers, with our payers, and with our pharma partners. Okay, and then a quick follow up here. I mean, just we talked about the Stelara impact for 2025. It was like $5 million in the first quarter and then $20 million, so Q2, Q3, and Q4. As you're moving into the Stelara biosimilars and talking about sort of the gross margin sort of impact there, what would be the Stelara year-over-year headwind in the fourth quarter now that you're moving into the biosimilars? Thanks so much.
For Stelara, but I will say, you know, given the balance of the portfolio and the momentum we're building we expect growth and we're going to continue to focus the organization around um you know, minimizing the impact uh that we can as we move forward and continue to to support the broad spectrum of formulary that we have available and uh and deepening. The relationships that we have with the prescribers with our payers, and with our Pharma partners,
Okay, and a quick follow-up here. I mean, just you, you know, we talked about this to Lara impacts for 25. It was like 5 million in the first quarter and then 20 million. So 2 Q 3 q and 4 q as you're moving into.
John Rademacher: Yeah, as we had put out the original guidance of the $60 million to $70 million and then, you know, as we affirmed at the end of the, at the second quarter that it was going to be at the high end of that range, that is just on the Stelara portion of it. That does not include what we see as the biosim, you know, conversion rate. You know, as we came out with those original numbers, Pito, as we called out, the only view we had was around the discount that we were able to enjoy on that product changing and that that was going to be moving more. It was hard to anticipate what the uptake of the biosimilars was going to be. You know, we talked about it being a revenue event and, you know, it's going to have a drag at that point.
Yeah, the solar bottom similar is, um, and you're talking about the gross profit sort of impact there. You know, what would be the solar year of your uh headwind in 4, in the fourth quarter. Now, you're moving into the bio similars. Thanks so much. Yeah. This as we, as we had put out, the original guidance of the 60 to 70, and then, you know, as we, uh, we affirmed at the end of the, uh, of the second quarter, that it was going to be at the high end of that range. That is just on the Stelara, um, portion of it that does not include, uh, what we see as the bio Sim, um, you know, conversion rate, you know? As we came out with those original, uh, numbers pedo is is, as we called out. The only view we had was around the, uh, the discount that we were able to enjoy on, uh, that, uh, product changing and that, uh, that was going to be moving more, uh,
John Rademacher: As I said, we've contemplated that within the guidance in the remainder of the year and we're working diligently right now in the budget process. As we start to look and try to, you know, size everything with all the variables for 2026, you know, be able to be in a position to provide that when we're ready to do so. Great. Thanks so much. Yeah, thanks, Pito.
And and it was hard to anticipate, what the uptake of the the bio Sims was going to be. So you know, we've talked about it being a revenue event, um, and you know, it's going to have a drag at that point. Um, and as I said, we've contemplated that within the guidance in in the remainder of the year and we're working diligently right now in the budget process and as we start to look and try to, uh, you know, size everything, with all the variables, for the 2026, um, you know, be able to, to be in a position to, uh, to provide that when we're, uh, when we're ready to do. So,
Great. Thanks so much.
Operator: Thank you. Our next question comes from the line of Joanna Gajuk with Bank of America. Your line is now open.
Yeah, thanks Bo.
Thank you.
Nicole Maggio: Great. Thank you so much. I guess that 380 basis points, sorry, just staying on salaries. If I can follow up, the 380 basis points in this quarter, it sounds like there's expectation for additional, like incremental, I guess, headwind as the conversion continues, right? Is that the way to read that comment about next year?
John Rademacher: That is correct, Joanna. As we have been calling out, we would expect to feel the headwinds again. Revenue is going to have that impact. We have been talking about that since really the IRA and the announcement of that, knowing that there's going to be a step down in the reference price associated with that as we move ahead. As I said, that was contemplated in the way that we have put the guidance forward for the remainder of the year, and our confidence and continue to tighten and raise the midpoint across that. We're continuing to work through that. That was contemplated in the way that we have articulated the view of the guidance of the company.
Our next question comes from the line of Joanna galuk with Bank of America. Your line is now open. Great. Thank you so much. Uh, so I guess that's 380 basis points. Sorry, just stay on till tomorrow. For if I can follow up with 380 basis points in this quarter. So, it sounds like, uh, there. There's expectation for additional like incremental, I guess headwind, uh, as the um, conversion continues, right? As the way to beat that comment about the next year.
That that is correct. Joanna. You know as we have been calling out that uh we would expect to feel the headwinds again. It's uh you know revenue is the is going to have that impact. We have been talking about that since really the IRA uh you know and the the announcement of that knowing that there's going to be a step down in uh the reference price uh associated with that, as as we move ahead. And as I said, you know, that was contemplated in the way that we had put the guidance for
For the remainder of the year. And, you know, our confidence and and continue to uh, tighten and raise, uh, the midpoint, uh, you know, across that. So, you know, we we're continue to work through that. But that was contemplating the way that we have uh articulated the view of the guidance of the company.
Nicole Maggio: As we think about the gross margin, because like you said, the biosimilar is a revenue event, so there's a headwind to revenue. The gross margin, I guess, so you had a step down on the Stelara on the brand and because of JJ actions. Now, I guess with the biosimilars coming in, is that also, you know, working the other way on the gross margin percentage or it's too early to talk about that. I guess too early to talk about that gross margin.
And then as we think about the, the gross margin because like you said about similar is the revenue event associated with the headwood to revenue but the, the gross margin I guess. So you had a step down on the Stellar on the brand and because of J&J actions but now I guess with the bio similar it's coming in, is that also, you know, working the other way or the other gross margin percentage,
John Rademacher: Yeah, it's too early to talk about that, Joanna. As you would expect, there's a range of outcomes. Each of the biosimilars have different profile on that. Too soon.
Or it's too early to talk about that or I guess too early to talk about that plus margin. Yeah.
Yeah it's it's totally to talk about that uh Joanna and and as you would expect, you know, there's a range of outcomes, the each of the bio similars have, you know, different profile on that. So 2 too soon.
Nicole Maggio: Okay. Another topic, you mentioned dynamic regulatory environment. Are there any areas you focus on the most, and how is your thinking about high level changes that might be coming that would impact that business? Thank you.
John Rademacher: Yeah, I mean, we're continuing to keep an eye on what's going on in Washington. Very dynamic environment from that standpoint. As we said, we think we've been able to navigate pretty well some of the uncertainty that exists within the rhetoric that's coming out of Washington. There certainly are competitive dynamics in which we're seizing on opportunities within that. We continue to expand our portfolio of products both from a limited distribution as well as deepening our partnerships with pharma. All of those things are within the realm of the things that we're dealing with on a daily basis. We've demonstrated time and time again our ability to have a resilient platform and a resilient operating model that can take on and seize on opportunities that are presented as well as minimize and mitigate wherever we can when it's a headwind against us.
Okay. And so another, I guess topic so you um uh mentioned it, you know, dynamic regular environment. So are there any areas you you for focus on the most? And I guess kind of how is your thinking about high level? Um you know changes that might be coming that would impact that business. Thank you.
John Rademacher: I feel really good about the execution of the team. I feel good about the strength and the momentum in the quarter and carrying that into the fourth quarter, knowing that we've got some of these other dynamic environments that we're going to have to continue to work through and capitalize on where possible.
Uh, within, uh, you know, the, the realm of the things that we're dealing with on a daily basis but we've demonstrated time and time again, our ability to have a resilient platform and a resilient um operating model that can uh you know, take on uh you know and and sees on opportunities that are presented as well as minimize and mitigate, um, wherever we can when it's a headwind against us. So
Feel really good about the executions, uh, of the team. I feel good about the strength and the momentum, you know, in the quarter and carrying that into the fourth quarter, knowing that we've got, you know, some of these other uh Dynamic uh, environments of, we're going to have to continue to work through and and capitalize on where possible
Nicole Maggio: Great, thank you so much.
John Rademacher: Yeah, thanks, Joanna.
Great, thank you so much.
Operator: Thank you. Our next question comes from the line of David MacDonald with Truist. Your line is now open.
Yeah, thanks Joanna.
John Rademacher: Good morning, guys.
Thank you. Our next question comes from the line of David McDonald with Truist. Your line is now open.
[Analyst]: Couple of quick questions. John, look, we've seen the impact this year of a sizable competitor exit on the acute side. We do hear from time to time reports of select provider exits in other markets. I'm just curious, do you expect to see an ongoing opportunity on the acute side? Obviously maybe not to the same degree you saw this year, but just what you're seeing on that front. A follow up question to that is, is it having any impact on pricing or conversations with payers in terms of just that business line, either the growth rate or the profitability of that business line?
Uh, good morning guys. Um, a couple of quick questions. So John, look, we've seen the impact this year.
Of a sizable competitor exit, um, on the acute side. And, you know, we do hear from time to time reports of Select provider exits. In other markets, I'm just curious. Do you expect to see an ongoing opportunity on the acute side? Maybe obviously maybe not to the same degree, you saw this year. Um, but just what you're seeing on that front and then uh, follow-up questions that is. Is it having any impact on pricing or conversations with payers in terms of just, you know, that business line either the growth rate or the profitability that
Business line.
John Rademacher: Yeah, David. First and foremost, we do really feel strongly about the platform that we have put in place and the investments that we've made and the capacity that that provides us to capture market demand. The team has executed extremely well, as you said, given the sizable exits that we saw this year. Our expectations are we're going to continue to capitalize on the strength of our national network, but our local responsiveness and expectations are that we're going to continue to move that, albeit at probably a lower pace than this year, and carry that momentum in 2026. We've talked about the three legs of the stool of our reimbursement and how we have been focusing around certainly making certain that we're paid fair value for the value that we deliver.
Yeah, David. Um, so, first and foremost we uh, we do, uh, really feel strongly about the platform that we have put in place and the Investments that we've made and the capacity that that provides us to capture market demand and, uh, the team is executed extremely well, as you said given, you know, the sizable exits that we saw this year, our expectations are we're going to continue to capitalize on the strengths of our national network but our local responsiveness and expectations are that we're going to continue to move that albeit at probably a lower Pace than this year, uh, and carry that momentum in 2020.
John Rademacher: The opportunities to engage with our payer partners to articulate the value of the balance of our portfolio and how we can help with programs like I highlighted in Bed Day Management and Site of Care initiative are ones that continue to deepen our partnership and the value that we can bring to them. With that, we're always looking to make certain that we're extracting fair value for the value that we're giving. I think that puts us in a position to remain in network to continue to be part of the overall solution as they're thinking about management of medical loss ratio and the total cost of care. We're going to continue to emphasize really the strength of the breadth of our portfolio in the way that we're engaging with them and we're negotiating to make certain that we're in network and we're in a preferred position.
Um, you know, we've talked about the 3 legs of the stool of our reimbursement and, uh, how we have been focusing around certainly, um, you know, making certain that were paid fair value. Um, for the value that we deliver. But, you know, the opportunities to engage with our payer Partners, to articulate the value of the balance of our portfolio and how we can help with programs. Like I highlighted in bed Day Management and cited. Care initiative are 1 that, um, continues to deepen our partnership and the value that we can bring to them with that, you know, we're always looking to make certain that we're extracting fair value for the value that we're we're giving and, um, you know, I think that puts us in a position to remain in that work. Um, to continue to be part of the overall solution, as they're thinking about management of medical loss ratio and the total cost of care and we're going to continue
To empathize really the strength of, uh, the breadth of our portfolio in the way that we're, uh, engaging with them. And we're negotiating, uh, to make certain that we're in that work and we're in a preferred position.
[Analyst]: John, just one other quick, actually a couple of other quick questions just on the advanced practitioner model. Can you frame that up a little bit for us? How many locations currently in, I mean, when we think about 12 months from now or over the next 24 months, can you just give us some sense in terms of how aggressively you expect to roll that model out over the next, again, 12 to 24 months? Any observations since the acquisition that have been either better or worse or a little different than you had expected?
John Rademacher: Yeah. Our growth of our infusion suite opportunity, we're going to continue to go at that pace. As we had called out, we're at 175 facilities today. 24 of those are, you know, advanced practitioner or infusion center capable at this point in time. We're going to continue to look to expand that as we move that forward. Part of that will be, you know, operating and utilizing the infrastructure that we have. Some of it will be greenfield as we're looking to expand into different markets. I think as we called out before, Dave, there are corporate practice of medicine and other things that, you know, have influence on the path and the pace in which we're going to be executing around that. We look at this as being extremely complementary to our pharmacy capabilities, both in the home and the infusion suite.
A and then John just 1 other quick. Actually, a couple of other quick questions just on the advanced practitioner model C. Can you frame that up a little bit for us? Just, you know, how many locations currently in? I mean, and, you know, when we think about 12 months from now, or over the next 24 months, or can you just give us some sense in terms of um, how aggressively you expect to roll that model out over the next, you know, again 12 to 24 months and just you know, any observation since the acquisition that have been um either you know, better or worse or a little different than you would expected.
Yeah. So you know, our our growth of our infusion. Um sweet opportunity, we're going to continue to go at that pace as we had called out. We're at 175 um facilities today, 24 of those are uh, you know, Advanced practitioner or infusion center, uh, cap capable at this point in time. And we're going to continue to look to expand that as we move that forward. Um, part of that will be, um, you know, operating, uh, and, and utilizing the infrastructure that we have, some of it will be Greenfield as we're looking to expand into different markets. I think because we've called out before Dave, um, there are corporate practice of medicine and other things that uh,
John Rademacher: We think it expands access to a broader set of patients and we think for more clinically complex therapies and clinically complex patients, that ability to have that advanced practitioner oversee higher acuity patients, we think is part of a comprehensive strategy. Part of our growth is we're thinking about moving forward, so excited about where we are, learned a lot through the Intramed Plus acquisition as well as the Wasatch Infusion acquisition of years ago. We're taking the best practices and applying that as we're looking to expand across our network and continue to advance this as part of our comprehensive strategy.
[Analyst]: Okay, and then just last one, you mentioned in the prepared remarks the bed day management program. Just in terms of some of these programs that you're working with payers on, are you seeing more impact around some of those programs in terms of share gain? Is it helping kind of grease the skids in terms of pricing conversations and profitability? Just any additional detail in terms of kind of further integrating yourself with the payers around some of these initiatives?
That uh, ability to have that advanced practitioner oversee, higher Acuity patients. We think is part of a comprehensive strategy and part of our growth is we're thinking about moving forward. So, uh, excited about where we are learned a lot through the intramed plus acquisition, as well as the Wasatch, uh, acquisition of years ago. And we're taking the best practices and applying that, as we're looking to expand uh, across our Network and continue to advance um, this uh, as part of our comprehensive strategy.
John Rademacher: Yeah, Dave, it's a little hard to tell the immediate impact just because of some of the market, the competitive dynamics, and some of the growth that we're seeing there. To your question, we see it across all of those dimensions. We think that it is a value driver to the payers. For hospitals and health systems that are on DRG for some of their patients, it's a benefit to them as well to help to safely and effectively transition patients out of the hospital into the home for that lower cost setting. We see benefit across both the payer and the hospital and health system aspect. We think it deepens the partnership. It allows us to have more confidence in the position that we hold.
Okay, and then just last 1 um, you know, you mentioned in in the prepared remarks, the bed Day Management program just in terms of some of these programs that you're working with payers on, um, you know, are you seeing more impact around some of those programs in terms of share gain? Um, is it, you know, helping kind of Grease the skids in terms of um pricing conversations and profitability. Um, you know, just any additional detail in terms of, you know, kind of further integrating yourself with the payers um around some of these initiatives.
It's hard to tell, um, you know, the immediate impact, uh, just because of some of the market, the, the competitive Dynamics, and, and some of the growth that we're seeing there. Um, but to your question, we see it across all of those Dimensions. We, we think that it is a a value driver to the payers, um, for hospitals and health systems that are on drg for some of their patients. It's a, a benefit to them as well to help to
John Rademacher: We think that it's truly part of the solution as payers and health systems are trying to manage the total cost of care and bring the best clinical outcomes to their patients and their members.
[Analyst]: Okay, thanks very much.
Safely and effectively transition patients out of the hospital um, into the home for that lower cost setting. So you know, we see benefit across both the payer and the um, the health, uh, the hospital and health system, uh, aspect and um, we think it, you know, it it deepens the partnership it uh, allows us to have more confidence in, um, in the position that we hold and we think that it's truly part of the solution. Um, as payers and uh, and health systems are trying to manage the total cost of care and and bring the best clinical outcomes to their uh, to their patients and their members.
John Rademacher: Thanks, Dave.
Thanks very much.
Operator: Thank you. Our next question comes from the line of Matt Larew with William Blair. Your line is now open.
Yeah, thanks. Babe.
Thank you.
Our next question comes from the line of Matt LaRue with William Blair. Your line is now open.
[Analyst]: Hi, good morning. The first question, just on the cost side, you know, G&A is up about 10% on a TPM basis. Could you break out what core G&A has been tracking at because I assume Intramed Plus is a piece of that. Absent other M&A, I guess when would you expect to kind of get back to that longer term target of kind of inflation plus for G&A?
Hi. Good morning. The first question, just on, on the cost side in a jiena up about 10% on TPM basis. Could you break out what core GNA has been tracking at? Because I assume intramed is a piece of that and then you know, absence of other m&a you know, I guess when would you expect to kind of get back to the that longer term Target of kind of inflation Plus for GNA?
Nicole Maggio: Sure. Thanks, Matt. Let me give you just some color on the G&A. In the quarter, as part of the prepared remarks, I mentioned that we did some debt refinancing. There's some noise in there with that. Take a percentage point out of that. The remaining drivers are really, as we think about the Intramed Plus acquisition, right, that was a 2023 acquisition. You've got additional cost, additional growth there that wasn't in the prior year. That's one. Secondly, from a variable comp perspective, we were under target, paid out under target last year. Just getting us back to a more normal rate, you end up having to have an adder in the current year. I'd say that's second. The third piece is really just the investments that we're making in ourselves as we think about investing in our growth.
Sure. Um,
thanks Matt. Um, Let me let me give you just some color on the the GNA so in the quarter as part of the prepared remarks, I mentioned that we did some debt refinancing so there's some, you know, there's some uh noise in there with that. Take a percentage point out of that.
Nicole Maggio: John just talked about the advanced practitioner model as we think about new therapy launches and then also just from an efficiency standpoint, as we think about operating efficiency, we're making a number of technology investments. I know we've talked about it on past calls, but with some of the relationships that we have with Palantir and some of the investments we've been making in RPA, machine learning, that's also driving some higher cost over time. We are seeing this from a leverage perspective and that our leverage is down as we think about it sequentially and year over year. Some of that you're going to see in G&A. The other thing I would point out is, some of the benefits we're getting are really coming through our cash flow. Cash flow and the strength of our cash flow generation is really a part of the DNA of the company.
The remaining drivers are really a as we think about the intraday acquisition, right? That that was a 25 acres. So you've got additional costs additional growth there that wasn't in the prior year that that's 1 second perspective. We were under Target. Paid out under Target last year. So just, you know, getting us back to to a more normal rate. You know, you end up having to have a an adder in the current year. I'd say that's second. And then the third piece is really just the Investments that we're making in ourselves, as we think about investing in our growth, John just talked about the advanced practitioner model, you know, as we think about new therapy launches and then also just from an efficiency standpoint. As we think about operating efficiency we're making a number of Technology Investments. I know we've talked about it on past calls, but with some of the relationships that we have with palantir and some of the Investments, we've been making in RPA machine learning. That's also driving some higher cost over time. And and we're, we are seeing this from a
Nicole Maggio: While the P&L may look like costs are a little higher, we're seeing benefits in other places and I feel really good about what we've been doing around better efficiency on our operations. That honestly gives us much more optionality when we think about capital allocation.
Coverage perspective and that are leverages down as we think about it, sequentially and year-over-year, some of that you're going to see in GNA, but the other thing I would point out is, you know, some of the benefits we're getting are really coming through our cash flow, right? I mean, cash flow and our, the strength of our cash flow generation is really a part of the DNA of the company. So yeah. While the p&l may look like costs are a little higher, we're seeing benefits in other places and I feel really good about what we've been doing around better efficiency on our operations that, you know, honestly gives us much more optionality when we think about Capital allocation,
[Analyst]: Okay, thanks. Just another one on Stelara. I appreciate, given the moving pieces with biosimilars and heading into pricing changes next year, that you're not going to put guardrails around at this point, but I guess just at a higher level. Do you view 2026 as another year where the size of the impact or the ranges of the impact will be of the magnitude that you need to call out like you did this year, some range because it is so disruptive to what investors view as the Option Care Health growth algorithm? Is it a year where yes, there's some uncertainty but you still think you can track to kind of your stated long-term algorithm without having to box around what the impact's going to be?
thanks, and
Just another 1 on um on stellar. And again I appreciate giving them moving pieces. Uh,
put guardrails around it at this point, but
I guess it's at a higher level. Do you view 26? As another year, where the size of the impact or the ranges of the impact will be of the magnitude that you need to call out like you did this year some range? Um, because it is so disruptive to, you know what, what investors view as the option care growth algorithm, or is it a year where? Yes, there's some uncertainty. But uh, you still think you can track to kind of your stated long-term algorithm without having to box box around what the impacts going to be.
John Rademacher: Matt, let me take this and certainly I'll look for Meenal to add any color on it. Not in a position to give 2026 guidance and I appreciate the question and the form of it. I guess the way I would answer and continue to help to shape the way people are thinking about it is as we're looking forward and kind of understanding there are a lot of dimensions that we're trying to and variables that we're working through. Number one is we really need to understand what is the census that we have at the end of the year and the exit rate of that census. The second is the uptake of the next generation products that are available to support chronic inflammatory disease. Tremfya, Skyrizi, and TIVIO are all part of that equation as that moves ahead.
Man, let me, let me, let me take this and, and certainly, uh, look for meal to add any, any color on it. It, it, you know, it, we're not in a position to give 26 guidance. And I appreciate the, the, the question and the form of it. I, I guess the way I would answer and continue to, uh, help to shape the way people are thinking about it is, um, as we're looking forward, and kind of understanding, there are a lot of Dimensions that we're trying to variables that we're working through. Number 1 is, we, we really need to understand what is the census that we have at the end of the year and the exit rate of that census. The second is, um, the uptake of, uh, you know, the Next Generation products that are available, uh, to support, chronic inflammatory disease, trim, fias Sky, Rizzi and tibio are all part of that.
John Rademacher: The third is the uptake of the biosimilars and then which biosimilar the patients are transitioning onto that all have some level of impact on the chronic inflammatory disease therapeutic category group and we're working through all of the components of that at this point in time. Again, to reiterate, love the momentum of the business and the breadth of the growth that you saw in the third quarter that overcame even the Stelara impact that we highlighted of 380 basis points. I think that demonstrates the breadth of the portfolio and our ability to execute on all of the other therapies around that. As we continue to move forward we expect that momentum to continue.
That equation, uh, as uh, as that moves ahead. The third is, uh, you know, the uptake of the bio Sims and then which bio Sim, uh, you know, the patients are transitioning onto that all, have some level of impact on The Chronic inflammatory disease, therapeutic category group and we're working through all of the components of that at this point in time.
We again want to reiterate that we love the momentum of the business and the breadth of the growth that you saw in the third quarter, which overcame even the stellar impact that we highlighted of 380 basis points.
John Rademacher: We expect that that will continue into 2026 and we're always going to continue to push our team around how we're thinking about reach and frequency, how we capture market demand, how we are a better partner of choice for referral sources and continuing the depth of the relationship with payers, with site of care initiatives and other things. I feel really good about the strength of the quarter and the momentum that we will carry into it. At this point in time it's just too soon to give anything that's guidance for 2026. I think this organization has demonstrated the ability to take momentum and to build around where we're going to see some changes or shifts in a specific therapy or therapeutic category and find other ways to grow through that.
So, I think that demonstrates, the breadth of the portfolio and our ability to execute, um, on all of the other therapies around that as we continue to move forward, we expect that momentum to continue, we expect that, that will continue into 2026. And we're always going to continue to push our team around how we're thinking about reaching frequency, how we capture market demand, how we are a better partner of choice for referral sources, and continuing the depth of the relationship with payers with cytocare initiatives and other things. So, again, I I feel really good about, uh, the strength of the quarter and the momentum that we will carry into it. And at this point in time, it's just too soon to give anything that's guidance for 26. But um, I think this organization has demonstrated the ability to take momentum and to build around. Um, you know where we're we're going to see.
Nicole Maggio: Let me just add a couple of comments. As you can imagine, first 30 days finding a lot of things. In my top priorities is really looking ahead, understanding the business and looking ahead to 2026 and understanding these dynamics. Echoing what John said, I feel very comfortable with the momentum of the business, the foundation that we've built. We have overcome headwinds over various points in time and I fully expect we'll be able to do that in 2026. Just reiterating what John's been talking about, we do expect to grow going into 2026, no doubt about that. We're working through all the different mechanics and the different drivers that are going on. As soon as we have better clarity, we'll continue to share that with you and be, as we have always been, really transparent about what we're seeing and what we know when we know it.
Some, um, some changes or shifts in a specific therapy or therapeutic category and find other ways to grow through that. So, yeah, I, you know, let me just add a couple of comments as you can imagine first 30 days, finding a lot of things. But, you know, in my top priorities is really looking ahead, understanding the business and looking ahead to 26 and understanding these Dynamics. You know, echoing what John said, I feel very comfortable with momentum of the business. The, the foundation that we've built, we have overcome headwinds over various points in time and I, I fully expect, we'll be able to do that in 2026. So just reiterating, what, what, uh, John's been talking about? We do expect to grow going into 2026, no doubt about that. And so, you know, we're working through all the different mechanics and the different drivers that are going on and as soon as we have better Clarity, you know, we'll continue to do, share that with you and be, you know, as we have always been be really transparent about, you know what?
What we're seeing and what we know when we know it.
[Analyst]: Okay, thank you.
John Rademacher: Thanks, Matt.
Okay, thank you.
Thanks Matt.
Operator: Thank you. Our next question comes from the line of Charles Reed with TD Cowen. Your line is now open.
Thank you.
Our next question comes from the line of Charles Reed with TD Cohen. Your line is now open.
[Analyst]: Hi, this is Lucas on for Charles. Thanks for taking the questions. Actually, my question was answered on the last question there. I guess, you know, I don't know if you guys have sized it for this quarter. You might have, I might have missed it. Should we think about the Stelara impact to gross profit being similar to the size that you gave at Q2, that is being a nudge higher than $20 million.
Hi. This is Lucas on for Charles. Um, thanks for taking questions. Uh, and actually, my question was answered on the, um, the last question there, so I guess, uh,
you know, I don't know if you guys have sliced it for this quarter, you might have, I might have missed it, but, um, it should we think about the Stellar impact to gross profit being, uh, similar to the size that you gave at 2q IE being a nudge, uh, higher than 20 million.
Nicole Maggio: Maybe I'll take that one. You know, we had been talking about a range started at the $60 million to $70 million last quarter. We talked about the impact in 2025 being about $65 million to $70 million, probably at the higher end of that range. Our guidance includes now, just as we thought, it is going to be closer to $70 million for the year. That's baked into our guidance. You see the impact of that in Q3 and the last of the impact in Q4 as well. That works out to be, math wise, a little bit over $20 million in Q3 as well as in Q4.
That the 60 to 70 million last quarter, we talked about the impact in 2025, being about 65 to 70 million at the hot. Probably at the higher end of that range. Our guidance includes now, you know, just as we thought it is going to be closer to 70 million dollars for the year, that's baked into our guidance. You see the impact of that in Q3 and the, the last of the impact in Q4 as well. So that works out to be math, wise, a little bit over 20 million dollars in Q3 as well as in Q4.
[Analyst]: Okay, I appreciate it. At this point in the year, do you guys have a good sense on the moving parts as to what would drive that to maybe above the $65 to $70 million range that we're now looking at or below? What could be the moving pieces within that?
Okay, I appreciate it. Um,
and then I, I guess at this,
Year. Do you guys have a good sense on the moving Parts as to what would drive um, you know that to maybe, you know, to the above the 65 to 70 million range that we're now looking at or uh below. Uh and I guess what could be the moving parts of uh, moving pieces with it within that?
John Rademacher: Yeah. I think we feel pretty strongly about it being at the upper end of the range on the impact of Stelara. We know from the discount that we were able to negotiate on that, which is why we've been able to have a firm view around that range. As Meenal said, we now expect that it will be at the upper end of that range for the full year of 2025.
John Rademacher: The variables that we don't have a line of sight into, trying to answer, I'm not providing 2026 guidance, but the view as we move forward is there are just a lot of variables that will go into not only the patient census that we have under management, the products that they actually transition over to, and then some of the economics associated with the discounts in which we're able to buy the various therapies at that are all at this point in time under negotiation or moving around from that standpoint. As Meenal said, I think we feel very confident in the upper end of the $65 to $70 million as being what we'll see on the Stelara impact for this year. That's been built into the full year guidance.
Yeah, so um, but I think we pre feel pretty strongly about, uh, you know, it being at the upper end of the range on the impact of the Stellar. We know, um, you know, from what, uh, what the discount that we were able to negotiate on that which is why we've been able to have, uh, firm view around that range. And as needle said, um, you know, we we now expect, uh, that it will be at the upper end of that range for the full year of 2025. The, the variables that we don't have a line of sight into and again, again,
John Rademacher: What is still moving forward but we have included in our thinking is that transition over to the biosimilar and some of the impact that that will have on the revenue and then more importantly the drop through on the gross profit.
Trying to answer. Um, I'm not providing 26 guidance, but the, uh, the view as we move forward is there are just a lot of variables that will go into. Um, not only the patient census that we have under management, the products that they actually transition over to, and then some of the economics associated with the, the, uh, the discounts in which we're able to buy the various, uh, therapies at that are all kind of at this point in time, um, under negotiation or moving around from that standpoint. So, again, the as meal said, I I think we feel very confident in the upper end of the 65 to 70 million as being what we'll see on the Stellar impact for this year. Um, and that's been built into the full year guidance. And now the, what is still kind of moving forward, but we have included in our thinking, is that transition over to the bio similar and some of the impact that that will have on the revenue and then more importantly, uh the drop through
on the gross profit.
[Analyst]: Okay, great. Thanks for taking questions.
John Rademacher: Welcome.
Okay, great. Thanks for taking questions.
Operator: Thank you. Our next question comes from the line of Constantine Davides with Citizens. Your line is now open.
Welcome.
[Analyst]: Thanks, John. Can you just talk about the M&A opportunities you're exploring, whether they remain close to the core, if there are some adjacencies that you're increasingly contemplating? I ask this not only to get a sense of what the pipeline looks like, but John, when you look at private transaction multiples occurring at twice the value of where you're trading, how's that impacting your thinking on where you choose to deploy your capital? What is your perspective around this increasing disconnect?
Thank you. Our next question comes from the line of Constantine devid with citizens. Your line is now open.
Thanks. Uh, John. Can you just talk about uh, the m&a opportunities? You're exploring uh, whether they remain close to the core. If there are some adjacencies that you're increasingly contemplating and I and I guess I asked this not only for
you know, to get a sense of what the pipeline looks like, but John, when you look at
Private transaction multiples occurring at twice the value of where you're trading. How's that impacting, your thinking, on, where you choose to deploy your capital? And I guess, what is your perspective around this increasing disconnect?
John Rademacher: Yeah. We are continuing to have a fulsome list of opportunities that we're assessing as Meenal Sethna called out in her prepared remarks. You know, we feel as if there are ample opportunities for us to continue to pursue. We're going to be disciplined in our approach as we move forward with those. Again, we think these are tuck-ins. They truly are ones that will be able to leverage the scale and the infrastructure that we have. Our first goal always is how do we sweat the assets that we have and the install base to its fullest. We're always going to look for those types of opportunities. As we've called out, there certainly are near adjacencies. We're continuing to think about technology and the use of technology and how that helps our business and improve along those lines.
Yeah. So
Um, We are continuing to, um, have a pulsem list of, uh, of opportunities that we're assessing is, as middle. I have called out, uh, in in her prepared remarks. And, you know, we we feel as if, um, you know, there are ample opportunities for us to continue to, uh, pursue. We're going to be disciplined in our approaches. We move, uh, forward with those. But again, we think these are tuck-ins. Um, they, they truly are, uh, ones that, uh, will be able to Leverage The the scale and the infrastructure that we have, you know, our first goal always is, how do we sweat the assets that we have and the install base to its fullest? So we're always willing to look those for those types of opportunities. You know, as we've called out there, there certainly are, uh, near adjacencies. And, you know, we're, we're continuing to, uh, think about, uh, you know, technology and the use of technology and how that helps, uh, you know, our our business. Uh, and
John Rademacher: There are additional things that we can be doing in support of manufacturers or payers that we continue to take a look at as the near adjacencies. I wouldn't leave you with the sense that there's anything that's transformative or significant difference than what you've seen in our patterns, which is around clinical capabilities, pharmacy capabilities, technology enhancements and capabilities that can enhance the relationship to support patient cohorts for manufacturers or others through that process.
Improve along those lines. There are uh you know additional things that we can be doing in support of Manufacturers or payers that we continue to take a look at is the near adjacencies but I don't uh I I wouldn't leave you with the sense that there's anything that's transformative or significant um difference than than what you've seen in our pattern which is around clinical capabilities, Pharmacy capabilities, technology enhancements. And uh and uh you know capabilities that can enhance the relationship to support patient cohorts for manufacturers or others through that process.
[Analyst]: Great. You did also talk about this ongoing shift to home and ambulatory settings. How do you see that sort of playing out over the next several years? I'm also just curious, as we turn the page on 2025, is it a meaningful shift in health plan receptivity to site of care initiatives relative to maybe a year ago, or is it more incremental baby steps along that path?
You did also talk about this ongoing shift to, you know, home and and ambulatory setting. How do you see that sort of playing out over the next several years? And I guess I'm also just curious, you know, as we turn the page on 25 are you, is it a meaningful shift in sort of health plan receptivity to to site of care initiatives, relative to, maybe a year ago or is it more you know incremental sort of baby steps along along that path?
John Rademacher: Yeah, I do think that, you know, when you're looking at high quality care at an appropriate cost in a setting in which patients want to receive it, you know, our solution checks those boxes. Right. There is going to continue to be a movement towards these lower cost settings. We're on the right side of those conversations and the right side of the ledger when you're looking at from that perspective. I do think that in the conversations we're having with our market access team, with our payer partners, they're looking for partners to help reduce the total cost of care. It's well documented some of the challenges that they're having with medical loss ratio and utilization rates, and when they're looking for who can help to drive a better clinical outcome at a lower cost, we're part of that conversation.
John Rademacher: We're seeing, you know, an increase in the level of the conversations that we're having. As I called out in my prepared remarks, we're seeing increased utilization of our capabilities for site of care initiatives and bed day management programs. We expect that's going to continue to carry forward as they're looking at ways to support their members and do it in ways in which they have high quality care and consistent clinical outcomes.
Yeah, I I I do think that um, you know, when you're looking at high quality Care at an appropriate cost in a setting in which patients want to receive it, you know, our solution checks those boxes, right? And so there is going to continue to be a movement towards these lower cost settings. And we're on the right side of those conversations, um, and the right side of the Ledger, when you're looking at from that perspective, I do think that, um, in the conversations we're having with our Market access team, um, with our payer Partners, they're looking for partners to help reduce the total cost of care. Um, it's well, documented, some of the challenges that they're having with medical loss ratio and utilization rates, and when they're looking for, who can help, um, to drive a better clinical outcome at a lower cost, um, we're part of that conversation. And so we're seeing um, you know, an increase in in the level of the conversations that we're having as I called out in my prepared remarks, we're seeing increased utilization of um, our capabilities.
For site of care initiatives and bed Day Management Programs. And we expect that's going to continue to, to, um, you know, uh, carry forward as they're looking at, uh, ways to support their members, um, and do it in ways in which, um, they have high quality care and consistent clinical outcomes.
Operator: Thank you. Our next question comes from the line of Brian Tanquilut with Jefferies. Your line is now open.
Thank you.
[Analyst]: Hey, good morning, guys. John, maybe to follow up on your answer to Matt's question from earlier. As we think about just the dynamics in terms of where patients end up, whether that's Stelara, biosimilar, Trunfaya, Skyrizi, how does that all work out? I mean, maybe what I'm trying to figure out is is there a way for you to encourage greater biosimilar utilization? Back to your point on payers focusing on their MLRs, maybe that's one. I guess the second part of the question is, is there a world where you just say Stelara economics are not enough for us to stay in the therapy and we just exit? I mean, it's down to like, what, 6% to 8% of EBITDA at this point? Just curious how you're thinking about all that.
Our next question comes from the line of Brian Tynkila.
Hey, good morning guys. Um, John maybe to follow up on your uh answer to Matt's question from earlier, as we think about just the Dynamics, in terms of where patients end up whether that's Stelara by similar traumas. I really how does that all work out? I mean, maybe what I'm trying to figure out is, is there a way for you to encourage greater bio? Similar utilization back to your point on payers focusing on their mlrs? Maybe that's 1. And then, I guess the second part of the question is, is there a world where you just say solar economics or not enough for us to stay in the therapy and we just exited. I mean it's down to like what 6 to 8% of of Eva at this point. So just curious how you're thinking about all that.
John Rademacher: Yeah, thanks, Brian, for the question. To be clear, you know, our relationship with Janssen and the margin profile of the product is one in which it's still a benefit to us economically and again, a benefit to the patient. Our pharmacists are part of the care team and you know, they're always working with prescribing physicians around helping select the best product that's available. Certainly there are influences by some of the payers around product selection through that process. We love the breadth of the portfolio that we have and the access to all of the biosimilars and the product portfolio.
John Rademacher: We certainly have strong relations with the branded pharma manufacturers, whether it's Janssen or whether it's Abbvie, in continuing to look for ways to support their patient cohorts and capitalize on the strength of our platform, both clinically as well as the national presence that we have in that local responsiveness. We feel really well positioned to continue to deepen the partnership with the payers, with the pharma companies as well as with the prescribers and health systems to help bring the best clinical outcomes and align the best products to the patients through that process as part of the care team. All of that, I think, factors into where we can help to influence, we will for those clinical outcomes. The economics are one in which, yes, there is a step down given some of the changes in the discount that we're able to enjoy.
Yeah. Um, thanks. Brian for the, the question. Um, to be clear, uh, you know, our relationship with Jansen and the, the margin profile of the product is 1 in which it's still a benefit to, uh, us economically and, um, again, a benefit to the patient. So, um, our pharmacists are part of the Care team. And, um, you know, they're always working with, um, prescribing Physicians around helping select the best, uh, product that's available. Um, certainly there are, um, you know, influences by some of the the payers around, um, uh, product selection, uh, through that process. And so we love the breadth of the portfolio that we have in the access to all of the biosimilars and uh, and the product portfolio. Um, we certainly have strong relations with the Branded Pharma manufacturers, whether it's Jansen or whether it's Abby. Uh in continuing to look for ways to support their patient cohorts and and capitalize on the strengths of our
Platform, um, both clinically as well as the national presence that we have, in that, local responsiveness. So we feel really well positioned to continue to deepen the partnership with the payers with the Pharma companies, as well as with the prescribers and Health Systems to help bring the best clinical outcomes, and align the best products, um, to the patients through that process as part of the Care team. So, you know, all of that. I I think factors into, you know, where we can uh, help
John Rademacher: Stelara is still, you know, a very good product for us and a part of our portfolio as it moves through this transition and has biosimilar kind of competition.
[Analyst]: That makes sense. Maybe, John, as I think about the fact that you're generating a decent amount of free cash flow, back to Constantine's question earlier, and deal multiples are in the high teens range, it seems like. How are you weighing now the buyback versus M&A capital deployment decision?
To influence. Um, we will, uh, for those clinical outcomes and, you know, the, the economics are 1 in which yes, there is a step down, uh, given some of the changes, uh, in in the discount that we're able to enjoy. But Stellar is still, uh, you know, a a, uh, a, a very good product for us, uh, and a part of our portfolio, uh, as it moves through this transition and has biosimilar competitions.
Capital deployment decision.
Nicole Maggio: Yeah, you know what, I'll take that one, Brian. As part of my prepared remarks, I wanted to make sure that we added a little more clarity to our capital allocation strategy. Just reframing that investing in ourselves, we think there's a lot of opportunities around whether you call it organic investment, technology investments. John talked a lot about the advanced practitioner model, really expanding our scale. I talked earlier about some of the operational efficiency that I think we can get that shows up whether it's in OpEx, but also shows up with generating additional cash flow and even just some of the data and insights and some of the work that we're doing with some partnerships there. That's really first priority for us as we think about where we're investing. By the way, that shows up in CapEx and free cash flow.
Yeah, you know what? I'll I'll I'll take that 1 so you know as part of my prepared remarks, I wanted to make sure that we added a little more clarity to our Capital allocation strategy and just, you know,
Nicole Maggio: Also, secondly for us is around the acquisitions and that is going to be a priority for us. It's really no different than what we've been doing, which is focusing on, you know, John talked about the fact that tuck-in near adjacencies make sense for us where we can add some additional capabilities into our portfolio. We're not going that, you know, I call it all within adjacencies that we know and appreciate. Nothing transformative that we're looking at. I would say the share buyback probably comes in after that. It's a balance. Right. We always want to find a mechanism to return capital to shareholders. Where we think we can invest in ourselves, whether that's organically or through M&A, we think ultimately that's going to become a better return for our shareholders. That is a priority for us.
Reframing that, you know, investing in ourselves. We think there's a lot of opportunities around whether you call it organic investment technology Investments. But, you know, John talked a lot about, uh, the advanced practitioner model, really expanding our scale. I talked earlier about some of the operational efficiency, um, that I think we can get that shows up, whether it's an Opex, but also shows up with generating additional cash flow and even just some of the data and insights. And some of the work that we're doing with some Partnerships there. Uh, so that's really first priority for us, uh, as we think about where we're investing and by the way that shows up in capex and and free cash flow. Also, secondly, For Us is around the Acquisitions and that is going to be a priority for us that it's really no different than what we've been doing, which is focusing on. You know, John talked about the fact that tuck-ins near adjacencies make sense for us where we can add some additional capabilities, um, into our portfolio. We're not going that, you know, I call it all with
Been adjacencies that we know and appreciate nothing transformative that we're looking at. And then I would say the share buyback probably comes in after that it's a balance, right? We always want to find a mechanism to return Capital to shareholders but where we think we can invest in ourselves whether that's organically or through m&a, we think ultimately that's going to become a better return for our shareholders. And so that, that is a priority for us.
Operator: Thank you. Our next question comes from the line of Michael Patuski with Barrington Research. Your line is now open.
Thank you.
[Analyst]: Hey, good morning and thanks for all the Q&A here. John, I'm just curious, given the talk about Stelara, not just on this call, but over the last year, would it make sense as we enter 2026 to just be more granular about the revenue attached to the business and patient census and just things that maybe could help investors have a better sense of true, longer term exposure to this issue. Thanks.
Our next question comes from the line of Michael pusky with barington research. Your line is now open
Hey, good morning and thanks for for all the, uh, Q&A here. Um, John. I'm just curious, you know, given, uh, you know, the talk about solar not just on this call. But on over the last year, I mean, what would it make? Would it make sense? Uh, you know, as we enter 26 to just sort of be more granular about, uh, you know, the
The revenue attached to the business and and patient census and and just things that maybe could could help investors have a better sense of of sort of true sort of longer term exposure uh to this issue. Thanks.
John Rademacher: Yeah, Mike, you know, look, it's always a balancing act of how much information we can provide into the public markets and still stay competitive, you know, and be able to have our differentiators in the marketplace on that. We're always going to try to provide as much transparency as possible and provide insights around that, I guess as we enter into 2026 and kind of move beyond. The reality is the size just continues to diminish. It becomes a smaller part of our overall portfolio. You've seen the growth in the other therapeutic categories that we've had. We've called out that there is no other product in our portfolio, no other therapy that has over 5% of the revenue. It's no longer that we have a profile of one product like we had with Stelara.
Yeah Mike uh you know look it's always a balancing act of of how much information we can provide into the public markets and and still stay competitive uh you know and and and be able to have our differentiators in in the marketplace on that.
John Rademacher: We'll do what we can to make certain that we give line of sight around the drivers of the business and why we're as confident around the growth trajectory and the areas that we're investing in that are going to bring that sustainable growth. As we enter into 2026 and beyond, it honestly just isn't going to be as big a part of our portfolio. Spending a lot of time going deep on something that just has a smaller amount of impact just will weigh your comments accordingly.
So we're always going to try to provide um, you know, as much transparency as possible and uh, you know, provide insights around that, you know, I guess as we enter into 26 and and kind of move beyond the the reality is it the uh, the size just continues to diminish. It's, it's becomes a smaller part of our overall portfolio and you've seen the growth in the other therapeutic categories that we've had. We've called out that there is no other product in our portfolio. No other therapy that has o over 5% of the revenue. It it's no longer that um, we have uh, you know, a profile of 1 product like we had with Stellar. So you know, we'll uh we'll we'll do what we can to make certain that we give uh you know line of sight around the drivers of the business and why we're as confident uh around the growth trajectory and and the areas that we're investing in that are going to bring that sustainable growth. Um but you know as we as we enter into 26 and Beyond
[Analyst]: Okay. If I could just sort of follow up on some of the earlier questions around capital allocation, I'm just curious, John, obviously a few years ago you guys made a run at more of a transformative asset, home health. I'm just curious, the adjacent markets that maybe you're most interested in, can you just sort of call out a couple where, hey, these are markets that are interesting to us? Thanks.
Mind it. It, it honestly just isn't going to be as big a part of our portfolio, so spending a lot of time going, deep on something that just has a the, a smaller amount of impact just, you know, we'll we'll weigh your uh, your comments accordingly.
Okay. And and if I could just sort of follow up on some of the earlier questions around, uh, Capital allocation, I I'm just curious John like obviously a few years ago you guys made a run at a more of a transformative asset home health. I'm just curious the adjacent markets that maybe your most interested in I mean, c can you just sort of call out a couple where hey, these these These are? These are markets that are interesting to us. Thanks.
John Rademacher: Yeah, without trying to increase the multiples of areas that we're looking at on that, I'm not going to give you the pipeline of organizations, but as we've called out before, when we talk about near adjacencies, and I tried to articulate that we certainly have depth of relationship with manufacturers and having additional things to support manufacturer services are areas that we're always looking at. The platform that we have, the clinical capabilities from our pharmacists, our dietitians, our nurses, our advanced practitioners, all of that kind of fits into what we think is a comprehensive strategy to support. There are things that we can be looking at that could help enhance or accelerate some of our capabilities. That's there.
John Rademacher: We have done acquisitions of nursing agencies, which is an adjacency but an enabler of our capability set along that we continue to look for those tuck-in and other pharmacy that can bring us either density in a market or in some instances some difference in their operating model. Those are the things that we're looking at as both Meenal and I have said nothing on the horizon on a transformative standpoint. All of these things we look at as being additive and accelerant to some of the strategies that we put in place. We think that there are ample opportunities for us to think about in a disciplined way, deploying capital in order to help grow the business and return value to our shareholders. I'll end with the cash flow generation of this organization is tremendous. Right. We don't take that for granted.
Advanced practitioners, all of that kind of fits into what we think is a comprehensive strategy to support. And there are things that we can be looking at that could help enhance or accelerate, some of our capabilities that's there. We have done Acquisitions of nursing, um, agencies, which is an adjacency, but an enabler of our capabilities that along that, um, we continue to look for those tuck in and other, um, you know, Pharmacy, uh, that uh, can bring us either density in a market or in some instances, um, you know, some differences in in their, uh, operating model. So those are the things that we're looking at as both mean and I have said, nothing on the horizon on a transformative standpoint, all of these things. We look at as being additive and accelerant, um, you know, to some of the strategies that we put in place and, um, you know, we think that there are, um, ample opportunities for us to think about, um, in a disciplined way deploying capital in order to help, uh, you know,
John Rademacher: It's not our money, it's our shareholders' money. We're going to spend it wisely. We truly believe there are opportunities for us to continue to invest in the business and look for these M&A opportunities to continue our growth and to increase our presence and relevance in the healthcare ecosystem. That is the goal and we're going to continue to operate with that mindset.
Grow the business and return, uh, value to our shareholders. So, um, the just I I'll end with the cash flow generation of this organization is tremendous, right? And we don't take that for granted. It's not our money. It's our shareholders money. We're going to spend it wisely, but we truly believe there are opportunities for us to continue to invest in the business. And look for these m&a opportunities to continue our growth and to, uh, increase, uh, you know, our presence and relevance in the
[Analyst]: All right, very good. Thank you.
Healthcare ecosystem. So that is the goal. And uh we're going to continue to to operate with that mindset.
John Rademacher: Yeah, thanks, Mike.
All right, very good. Thank you.
Yeah, thanks. Mike.
Operator: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Nicole Maggio for closing remarks.
Thank you.
I'm showing no further questions at this time. I would now like to turn it back to Nicole, Mazzio for closing remarks.
Nicole Maggio: Thank you all for joining us this morning and participating in our call. We appreciate your interest in Option Care Health. We will be participating in a number of conferences in November and December and look forward to speaking with you then. Conference information, as well as other company collateral, will be posted on the investor relations portion of our website. Take care and have a great day.
Thank you all for joining us this morning and participating. In our call, we appreciate your interest in option. Care Health, we will be participating in a number of conferences in November and December and look forward to speaking with you then conference information as well as other company collateral will be posted on the investor relations portion of our website, take care, and have a great day.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect
[Analyst]: Sam.