Option Care Health Inc (OPCH) 2008 Q2 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to the BioScrip, Inc. second quarter 2008 earnings conference call. During the presentation all participants will be in a listen only mode. Afterwards we will conduct a question and answer session. (OPERATOR INSTRUCTIONS). As a reminder, today's conference is being recorded, Thursday, July 31, 2008.

It's now my pleasure to turn the conference over to Mr. Craig Allison, Director for Corporate Communications with BioScrip. Please go ahead, Sir.

Welcome to BioScrip's second quarter conference call. Joining us today are Richard Freidman, Chairman and Chief Executive Officer; Stanley Rosenbaum, EVP, and Chief Financial Officer; Scott Friedman, EVP Sales & Marketing; and Phillip Keller, VP of Finance. If you have not received it yet, you may find today's press release on the company's website at www.bioscrip.com under the Investor section.

Before we begin, I will remind all listeners that throughout this call we may make statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the statements regarding, among other things, the intent, belief or current expectations of the company, its directors, or its officers with respect to the future of operational performance, the profitability or lack of profitability of certain customers, and the achievement of cost savings initiatives of the company.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in forward-looking statements as a result of various factors. Important factors that could cause such differences are described the in company's periodic filings with the Securities & Exchange Commission.

Earnings before interest, taxes, depreciation, amortization, and option expense, EBITDAO is a non-GAAP financial measure that's defined under US Securities & Exchange Commission Regulation G. As required by Regulation G, BioScrip has provided a reconciliation of this measure to the most comparable GAAP financial measure in the earning's press release disseminated this morning. This information is available under the Investor section of the BioScrip website, www.bioscrip.com.

Today's call will consist of opening comments from Richard Freidman, a financial review of the quarter by Stan Rosenbaum, followed by a short summation by Richard Freidman, and then we will conclude with a brief Q&A session.

I will now turn the call over to Richard Freidman. Please go ahead.

Thank you Craig. Good morning, and thank you for joining us today to review BioScrip's second quarter results. This morning I'm going to discuss the highlights of the quarter, our strategic growth drivers that have contributed to our performance, and provide an update on the progress we are making at both the sales and operational levels. After that, I will turn the call over to our CFO, Stan Rosenbaum, who will walk you though the company's financials.

For the second quarter 2008, BioScrip achieved consolidated revenues of $348.4 million, operating income of $3.4 million, EBITDAO of $5.9 million, and net income of $0.04 per diluted share. We are poised to continue capturing ongoing growth opportunities and remain confident that the investments we've made to correct the systems challenges that we faced are nearly behind us.

We will use this quarter as a new starting point as we execute on our strategic goal of delivering consistent returns and increasing shareholder value. Regarding the second quarter's performance, specialty services revenues grew to $298.2 million representing an increase of 25.2% over the prior year. Our record sales growth is a direct result of the strategy we implemented in early 2007, one which focuses on patient care and increasing the depth of service we provide as a specialty organization.

During this quarter, contributions from new contracts as well as growth from our core therapeutic areas, including oral oncolytics, reinforce our business model of focusing on improving the quality of care among chronic populations.

Adherence and compliance are two key areas which can directly impact quality of life and lead to overall lower medical costs. We are confident that these services, combined with our operational assets including Mail, community and Infusion pharmacies are key components necessary to deliver the results needed by the payors, Pharma companies, patients, and physicians that we service.

Industry trends clearly point to effective therapy and patient management as creating improved result for healthcare stakeholders as opposed to pure price discounting. BioScrip is without question in a leading position to succeed in this environment.

Turing to CAP, we have decided not to resign with CMS as a CAP vendor for the 2009 renewal term. Accordingly, without program modifications we believe that the reimbursement risks create an unacceptable profit risk to our business. Importantly, although our revenue will decrease an estimated $70 million annually, based on the first six months of 2008, we expect a favorable impact to operating income in 2009.

Last quarter, we began the process of identifying and streamlining certain processes and workflows to minimize the potential impact from changes in pricing. We established operational controls to provide us with real-time analysis in order to prevent the situations that we experienced in the first quarter. You may recall that we instituted these measures in response to the external factors that adversely affected last quarter's financial results.

Our model is solid, and we continue to expect our overall sequential sales to trend upward throughout the balance of the year, and that BioScrip will continue on its growth course.

I will now turn the call over to Stan.

Thanks Rich.

Total revenue for the second quarter of 2008 was $348.4 million, an increase of $53.7 million, or 18.2% over the second quarter of 2007. Our Specialty Service business grew $60.3 million, or 25.3% over the comparable period in 2007. This increase in Specialty represents higher revenue with managed care contracts, preferred distribution arrangements, and increases in the competitive acquisition program, or CAP.

Our PBM services segments had revenue of $50.3 million, a decrease of $6.5 million, primarily due to the loss of a previously announced PBM customer. Gross profit for the quarter was $35.7 million, or 10.3% of sales. This represents--excuse me--this compares to $32.9 million, or 11.2% for the comparable period in 2007. The increase in gross profit dollars is essentially due to higher sales. As previously mentioned in prior calls, the decline in margin percentage is essentially due to payor mix.

Operating expenses for the quarter of $32.4 million is $2 million higher than prior year, essentially due to higher compensation related expenses. Accordingly, income from operations was $3.4 million, or $900,000 greater than the second quarter of 2007.

Interest expense declined $180,000 due to lower rates. Income tax expense is essentially unchanged from prior year. As a result of these items we are reporting a net income of $1.6 million, or $0.04 per diluted share as compared to the prior year of $500,000, or $0.01 per share.

EBITDAO improved $1.4 million to $5.9 million. Compared to the first quarter of this year, our revenue increased $21 million, or 6%, reflecting higher sales in our new contracts, ramp up of existing business, and CAP. Gross profit improved $3.4 million to 10.3%, or $35.7 million as a result of higher sales and a normalization of margins associated with the first quarter cost increases.

The company has taken measures to monitor vendor cost increases and changes in reimbursement rates including daily reviews of pricing files to ensure timely and accurate billings following cost increases. Operating expenses were up slightly from the first quarter. As a result of the gross profit increase of $3.4 million, $3.2 million fell through to pretax income.

On a year to date basis, revenue was up $85.9 million, or 14.4%, over the first half of 2007. Specialty Services was up $102.5 million, primarily due to an increase in managed care contract, preferred distribution arrangements, and CAP. This was partially offset by lower PBM services revenue, essentially as a result of losing a certain customer as previously reported. Our net income for the first half of 2008 was $1.1 million, or $0.03 a share, as compared to a net loss of $900,000, or $0.02 a share, a year ago.

Turning now to our balance sheet, our DSO has improved from 43.6 days at December 31, 2007 to 42.2 days at June 30, 2008. Inventory improved from 11.4 days at December 31, 2007 to 9.6 days at June 30, 2008. Our borrowings under our credit facility at June 30, 2008 were $19.8 million. A lower overall borrowings and increased levels of accounts payable at June 30, 2008 was primarily due to the timing of certain vendor payments at the end of the quarter.

The company continues to make progress on its new system implementation. We are scheduled to begin our pilot program in one store on September 1. If all goes well we will begin the rollout to more stores in the fourth quarter. The company has made considerable progress from the first quarter and expects continued profitability.

I will now turn the call back to Rich.

Thank you Stan.

After the end of the quarter we retained In-Site Communications, a healthcare focused investor relations firm headed by Lisa Wilson and her partner Bill Bunting. We selected In-Site to work with us due to their strong background in a healthcare services industry. We plan to work with them to communicate our investment message to a broader universe of institutional investors with the ultimate goal of increasing shareholder value.

We will now open the lines to questions. Operator.

Thank you. Ladies and gentlemen (OPERATOR INSTRUCTIONS). Our first question comes from the line of Mark Arnold, from Piper Jaffray. Please go ahead.

Very nice quarter guys. Let me just start with the CAP business. You haven't broken out CAP revenues for awhile, and now that you've decided not to sign that new contract, can you give us a sense of what the revenue loss will be for 2009?

Sure, good morning, Mark. Yes, I just said that a little while ago, but it's going to be approximate. Based upon a run rate in the second quarter it's about $70 million.

Great. And then do you think anybody's going to sign this contract given the unprofitable nature?

Look, it's up to--I said on the last quarter that we really wanted some modifications made to those contracts, and the modifications weren't made. So it's going to be up to the individual companies to go ahead and do this. I really believe that the government has an incredible opportunity on Medicare Part B with a few modifications that they need to make, but until they do that, it's going to be up to the individual companies. We just believe that the risk is too great.

Any chance they come back begging with the structural changes if nobody signs this in the coming months?

I would hope they will, but I don't know.

Okay, then just on the Untied Health contract. Obviously that's--it's a big growth driver for this year, I know you guys you haven't given any specific guidance, but can you give us a sense of where we are in the ramp up? In Q2 were you maybe 25% of the way there, 50%? Just any sense as to how far along you are with that so we can get maybe a better sense of how strong the back half of the year could be.

Sure, I'd be happy to. But just understand this, United is a driver, but we have significant other business which are fairly large drivers outside of United. At this point in time, we really are pleased with the performance under the contract. However, I believe that we're going to continue to grow but it's going to be at more moderate levels going forward.

So we're please with the performance to date, but it will continue to grow, but it will be at moderate levels.

Scott, do you want to add anything to that?

No, I think that's consistent. Hi, Mark. I think what Rich said is consistent with more moderate levels than we've seen. It's been about a year since the program's been implemented, it has contributed, but that's accurate.

Okay, and then just one final one. On the--maybe if you could give us just a bit on the Infusion business. Anything you might be doing there that could have a positive impact on results here later this year, and specifically any update on the ActiveCare Network relationship?

Sure, we continue to expand our footprint, and we have plans to expand the footprint for our Infusion business. We actually have a few exciting programs going on. One actually related to transplant type business and use of IVIG. So we're pretty excited about where that is going.

In terms of the ActiveCare Network, we continue to work with them. We have nothing to announce at this point. I will tell you that the expansion of Infusion at our Las Vegas community pharmacy is performing extremely well, and based upon the performance at our existing pharmacy we will be rolling out Infusion to other locations.

We are leveraging our sales organization in order to take advantage of that. So we're pretty excited about where Infusion is today.

Great. I'm looking forward to hearing where those locations are. Great quarter guys, thanks.

Thank you, Mark.

Thank you. ladies and gentlemen (OPERATOR INSTRUCTIONS). Our next question comes from the line of Brooks O'Neil from Dougherty & Co. Please go ahead.

That's Dougherty & Company, thank you. I have a number of questions for you guys. I guess I'd start off first by asking you, Stan, perhaps if you believe the cost controls exhibited in both the first and second quarter on an absolute dollar basis can be maintained through the balance of the year.

Yes I do.

I think that's great. Secondly, do you plan to exit Medi-Cal in response to the 10% cuts, and if so would that be a margin enhancing move, or a margin diminishing move?

I think we're in a wait and see position here. We still do not understand what they are doing. We don't know what this is for--the next two months, three months, or permanent situation. So we're going to continue to monitor this going forward as we said in our press release. It's less than 2% of our sales. We'll keep you posted as we know more.

Do you think you'll make money there, Stan?

Currently we do.

Okay, I mean at a 10% diminished reimbursement?

Yes, we probably do.

Okay. And if I read the release properly, you won't be involved with ETNA in 2009, so that business goes away as well?

That is correct.

And then I guess, historically I've been a big believer that you might find other parts of the business that are worth exiting that would reduce revenues, but could essentially enhance your profit margin profile. Have you seen any of those areas, and do you have any additional plans? By the way, I strongly applaud your move in the CAP program. I think that's absolutely the right thing to do.

Thanks Brooks. Like CAP, if we believe that a business or a contract does not make sense for us, we will exit it. And we are comfortable with the businesses we have today, and how they're performing. So there is no plan at all to exit anything that we have.

Okay, and then let's see here. Perhaps--you mentioned just a little bit about some of these new specialty service programs, but maybe you can give us a little bit more color on what exactly are you doing, what are the areas? Perhaps without necessarily naming any clients, maybe you could give us a feel for the revenue and margin impact of the business that you've signed to date and what you think it might be going forward.

Well, in talking about the services we're going to stay away from the revenue and margin impact, but Scott, why don't you talk about the services.

Hi Brooks, it's Scott. We talked in the past about--are you familiar with some of our BioScrip care programs, and patient management initiatives that we began last year, and what we've seen success at of late, and a lot of interest among--primarily among manufacturers to date, but the patient management and disease focus therapy programs on a standalone basis.

So whether it be contracting for patient specific studies within areas like HIV, like oncology, like MS, and in addition hub services that really have begun to gain a lot of legs as a result of FDA risk map requirements, but handling reimbursement, triaging, the triaging of patient referrals, managing registries and databases, operating patient assistance programs, we've really seen a pickup in our activity primarily as a result of the increases in investments we've done on the patient and therapy management side.

Brooks, one of the points is that in the programs that we do manage when we look at adherence and compliance, we run at extremely high levels. So we're excited about we're doing as I said earlier. This is much more than strictly drug discounting. Patient management we believe, therapy management, patient management is the way to control costs in the future, and I believe that BioScrip is situated well to take advantage of that.

I agree with that 1000%. I'm just curious here, Scott mentioned that the manufacturers have been kind of early customers for some of those programs. Do you see on the horizon the potential that you could win business from a payor, from a health insurance company for some of these programs?

I think that's the long-term goal. I think that where the market stands right now there's obviously a lot to prove. With outcomes we've begun to do that. I think the manufacturers are the most likely early purchasers of these types of things. We saw it--we've seen it taking place, and there is managed care interest, but I think the biggest opportunity short-term are going to be Pharma, but the long-term intent is that these are marketable and saleable to both Pharma and managed care.

That's good. Stan, I asked you a few weeks ago about the Tysabri impact. There's been some reports that sales of Tysabri specifically have been accelerating sharply in the marketplace. Can you just comment on whether you're seeing any impact specifically from that drug?

I'm going to let Scott answer that question, all right Brooks?

Yes.

We've seen Tysabri's growing, and we show growth. It's one of the drugs that we have relationships with the manufacturers. We are a--we do participate in the MS space. It's one of the drugs we focus on, and we are seeing growth in that area as well as others. So it's performed.

That's great, and then I think I heard you say this in your formal remarks upfront, but can you just confirm that the United contract in general is performing the way you thought it might as specifically contributing incremental growth margin dollars without incurring significant incremental operating expenses?

It is performing exactly as expected.

That's great. Okay, thank you very much.

Thank you, Brooks.

Thank you. Ladies and gentlemen (OPERATOR INSTRUCTIONS). Our next question comes from the line of [Ahmed Shashki] from [Kineraf] Capital Management. Please go ahead.

On the balance sheet there, I see the accounts receivable at $146 versus $129 million, but the [debt] accounts allowance is the same. Can you explain just why that's the case?

Yes, we review our accounts receivable bad debt reserve every quarter. We run several different models. We continue to see tremendous success in collecting old and fully reserved or written off receivables in the past.

Okay, all right, and then what's the long-term revenue growth rate. In terms of your gross profit margins, it's tough to get a fix on what these really are going to be. I mean, do you guys have any expectation of what you're looking for in the next one, to two, or three years?

I'm sorry, we were just talking, but the other part of your question is the growth in the receivable side. And as Stan reported earlier, we saw the decline in the DSOs but the increase in the receivables is strictly as a result of the increase in the revenues.

Okay, and you guys have looked through the credit aspect of that, and you're comfortable with keeping the [debt] allowance generally the same despite the 14% bump through the midyear?

Yes.

Okay.

We are very comfortable with our bad debt reserve. We go through it every single quarter. We have detailed reviews. We're very comfortable where we are right now.

Okay, and then as far as your long-term revenue growth rate, and the gross profit margins. I mean, how do you guys feel--what's your--when you look into the long-term of the business, where are you looking at in terms of the revenue growth rates, and what the gross profit margin should ultimately square out to be.

As we said at the end of the first quarter, the (inaudible) conference call, our existing business will run in the mid 10 range of gross profit, and percentage, and that future business will in fact be at lower margins. So that while we expect that our margins may be in the low to mid 10s, our overall profitability will be higher because it will drop down to operating income.

But you have about $130 million say in run rate, operating expenses, so if you're on this on track for say doing $1.3 billion in revenues, you guys don't really have much wiggle room incase any of these profit margins in terms of something like CAP get renegotiated to lower margins, then you're not making any money.

Well, let's take a look at it, and that's not true. When we're going forward and the businesses we look at, first of all, we're going to talk about the SG&A of holding SG&A constant. What we see going forward is for the balance of the year, we are going to see in every quarter based upon our business, there's going to be some slight quarterly fluctuations depending upon product and payor mix.

On an annual basis, we see the margins in the low to mid 10s. There may be some business like the service business that may be a little bit higher, there may be some distribution business that is a little bit lower. But what we are proving, and Stan said it earlier, we see it with the United contract, and we're going to see it with other contracts that come in, the SG&A on a dollar basis should remain somewhat constant. We are concentrating heavily on increasing operating income as a percentage of revenues.

So we are very conscious of the profitability on the gross profit line. We are very, very conscious on operating expenses, and the ability to drive more down to the operating income line. So there maybe some fluctuations depending upon mix, but no matter what business we take in, if it's going to be a little bit lower, a little bit higher, we're going to see significant portions of that falling right down to the bottom-line, increasing operating income as a percentage.

So the concentration on the gross margin line is extremely important. The concentration on the operating income line is extremely important.

I understand that, but my point, to say if you're at $1.35 billion for say this year, you're going to lose the $27 million (inaudible) and you say that can be offset in terms of profitability with the CAP exit. Say the[Cali business goes away, so you're back to around $1.3 billion, if you grow that 10% year-round, whatever, $1.43 billion, and if that additional growth comes at a lower gross profit margin, you factor in--say you keep SG&A, all your operating expenses completely constant including your bad debt allowance and stuff like that on a $130 million--you've got basically $13 million in operating income.

So my question is, is that still feel these SG&A--You're going to have to grow revenues tremendously over the next few years to really generate significant operating profits. So is that SG&A scaled too high for this business? And do you think maybe a strategic buyer might find more value in this than what we can find as an individual company?

No.

Okay.

I believe that when you exit some of the businesses there's going to be correlating costs that come out as well. When you exit the CAP business obviously your margins are going to go pick up. I think that what you're going to find is any--the CAP business alone when you take that out, is going to add profitability, you're right, offsetting that will be the loss on the ETNA side. But we still see significant growth.

So everything being equal, you're going to have a reduction of your SG&A costs related to the exiting of those businesses, the addition and the margin related to the new business will more than offset that, bringing more down to the bottom-line.

Okay, and what's--so do you guys have a target operating income margin type of thing to go by? I mean, how is one to evaluate whether this is successful the next couple years? I mean, is it just--I mean, what's the benchmark?

Well, our goal over the number of years going forward is to significantly increase from where we are now. We would--and the measurement factor quite frankly, and I think it's a great question--is going to be increasing on the operating income line as a percentage. And over the coming years, we want to see that to get to a pretty significant amount.

The question is, where could get it to? And that's something--like right now I'm not willing to share because we have to work on it more internally. But our goal is to drive that operating income line as a percentage of revenues significantly higher.

Okay, but I mean, say in 2003 you had operating income margins of 2.7% or so. Is that something that's achievable you think? I mean, is that within, or is that stretching it, or I mean, what's your take on that? And that was when you guys--it was like a $588 million business as MIM.

Numbers in those ranges going out a few years from now, I can't say we're going to get there in the next year or two years, but I think goals of getting up into that range makes sense.

Okay, and finally, just last question on this PBM business that continues, it's only--it seems like the only profitable segment. I mean, do you guys plan to keep this because the revenue it doesn't seem like as much of focus. I mean, why not consider spinning it off, or getting rid of it?

We have--look, the PBM business consists of a few different areas. One is the traditional mail business, the other is a card business. The traditional mail business is run out of the same facility as our Specialty business. It's a business that makes sense for us. It's throwing off EBITDAO for us, and it does not make sense for us to exit that business.

Okay, and then lastly, the--what's your take on the current stock price across management. What are their thoughts?

The current stock price?

Yes, in terms of value and things like that.

It's obvious. I think the price is low.

Okay. I mean, I'm just curious because if it was so obvious I would--you'd think there'd be more insider buying, but there's really--hasn't been much going on across whether it's board members or other management members, so that was just why I was just curious. In fact, the last form 4 I think was the general counsel decided to sell. I know it was a margin call, but if he sold his shares at $2 or so. So I was just--wanted to get a better take on what your thoughts were.

Yes, that's fair question. The general counsel had a settlement type of situation that he could not avoid. We've been in a blackout period. I think you saw one of our director's bought recently. The company right now, and the directors are reviewing stock ownership guidelines for management as well as the board itself, and I think that management as a whole believes that it's an opportunity.

Okay. All right, thank you very much.

Thank you.

Thank you. Our next question comes from the line of Mike Petusky from Noble Research. Please go ahead.

Good morning. A couple questions. It sounds like it's been said at least by the previous questioner, but it doesn't really square up with your release, that CAP mitigates ETNA, but I mean, it mitigates it, but it actually doesn't. It's not a complete offset. Is that correct?

That's correct. There are other cost savings that we have that will--such as a new freight contract that we've negotiated will offset that.

Right, so what percentage of I guess, the CAP savings actually offsets ETNA? I mean, is it half, is it a quarter, I mean, what's the breakdown between other initiatives and CAP as far as mitigating ETNA?

We don't talk about specific profitability associated with contracts. Certain contracts.

Okay. All right. Let me--and I also want to drilldown on a question Brooks asked earlier because I think it's a key one. He essentially seemed like he was drilling down, essentially applauding you guys as I do for separating yourselves from CAP, unless they comeback to you with better terms.

And then he seemed to be going down the track of trying to get a sense of the--if there were other contracts, other pieces of business that were mature that also were unprofitable as you disclosed CAP was, and it sounded like you guys said that there weren't. Are you actually saying that among truly mature contracts that there aren't any unprofitable pieces of business that maybe not be better left by the wayside?

We are constantly reviewing all of our price--all of our contracts to see whether or not they're profitable. And when they're not, we have exited over the last year at least two or three contracts worth about $4 to $5 million that we found were unprofitable. So it's a constant review that we go through here.

Okay, so as far as you know, that CAP was the only unprofitable piece of business?

That's correct.

Okay. All right, great. Thanks guys. Congratulations, great quarter.

Thank you.

Thank you, our next question comes from the line of Bill Nasgovitz from Heartland Funds. Please go ahead.

Good morning guys.

Good morning Bill.

Say, just on the steam--congratulations by the way. We're making progress, so that's terrific. But I really think, again, long-term shareholders have been buffeted around here so much. I think you really owe us as soon as possible some definition in terms of where this company is going in profitability.

There's been numerous questions to it, and it would be good for the board to sit down with management and say, "Okay, we are shooting for this level of gross profit," or operating profit, whatever you way you want to look at it, return on investment. It'd be nice to get back to 2.7% operating margins wouldn't it, Stan?

Yes it would.

Well, we--don't you think shareholders need that clear definition?

Yes, I will agree with you, and that's something that we are working on Bill.

Okay.

(Inaudible).

Well, the sooner the better. Yes, we--

Things you've recommended in the past we've taken to heart as you know--

Okay.

And we've responded in kind.

Okay.

We are working right now--we're looking at '09 what that means, but also be clear what I said earlier. We said on an annual basis we see margins in the low to mid 10s.

Okay.

We've also said--we also said that we expect the operating expense line to remain constant, and in some of the businesses when we exit them we will be taking out the comparable costs. So our goal clearly is we're not satisfied with where the operating income is as a percentage, and we are working quite hard to get to that path. We put in controls--as a result of what happened in the first quarter, we put in system controls, we have daily reviews of what is going on, preventing that that occurred in the first quarter.

We believe over the long-term that we're going to get to those levels. What I can't tell you today, and you're right, we do have an obligation to report over what period of time we believe we can get there. So I hear you loud and clear, and we will respond in kind.

Okay, terrific, and then just on the store count, I might have missed this earlier if you discussed. What is the game plan in terms of the stores just to refresh my memory. Just the highlights. How many do we have today? And where are we going to be in a year or a year and a half?

Okay, we have 36 stores today. We opened one recently as we talked about in the past, Westchester, New York. Right now Tom Ordemann who runs our community pharmacy is in fact looking at a few other locations. If everything goes well, we expect to have a few more into '09. We go very slow with this. As you know, we don't have the capital structure to open up as many as we would prefer doing.

But we look at every market. The stores that we will open up will most likely be in the vicinity of teaching hospitals where there is a great population, where there is a lot of transplant business, where there is a lot of specialty business, and it seems like the model that we have at least put in place in Westchester seems to be working well.

So we are looking hard at this, and then we will report on that in upcoming quarters.

Okay, thank you.

Thank you. Our next question is a follow-up question from the line of Ahmed Shaski from Kineraf Capital management. Please go ahead.

Yes, just one more thing. For the specialty services, can you guys in the future breakout all the different things, whether it's Infusion, or the specialty pharmacies because that's--it's difficult to understand what's going on when there's so many components there.

Well, the truth is, that it really is--when you take a look at the model, and the model is a service model with distribution, that you could do services without distribution, but when you take a look overall, you are providing our customers with the ability of a central service to manage the patient management therapy which is primarily coming out of our Columbus, Ohio facility, the drug distribution side of that could come out of many different locations.

So it really looks more like one, and what we're trying to do is the model of the ability to get it on a local basis from Community with our pharmacist helping to manage the patient by getting involved with the Pharma on a local basis, giving them the ability to handle whether it's delivered Infusion, delivered by injectable, or orals, really doesn't make a difference.

So trying to segregate a service side from a distribution side--it's all part of the same. Like for Infusion, it has nursing as well as drug costs. Or some of business today, it has the management of the therapy as well as the distribution side. It's all kind of interrelated even as part of some of the contracts. So clearly if it's strictly a service without distribution, and it is only labor, clearly the margins will look higher because you don't have a drug related to it.

So going forward, we'll see where the margins end up. If it's a strictly a service model, without any distribution you're obviously going to see higher margins. But you probably won't see as a high a volume as you get on the drug side. So it's something that we'll continue to report on the contracts and the businesses we do, but to break it out is going to be pretty difficult.

Okay, and just, have you guys ever--over the past few years, I mean, given the growth in that Specialty Services business, has any buyer ever approached you guys? I mean, it's just--it's something where this looks like it would have value to someone. Has there ever been anyone approaching you guys whether it's a strategic or a financial buyer?

We're not going to comment on that.

No?

I'm not going to comment on that.

Thank you. Mr. Friedman, there are no more questions at this time. You may continue with your presentation, or closing remarks.

Thank you so much. We appreciate the interest, and we appreciate everybody attending the call. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines.