Option Care Health Inc (OPCH) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the third 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, this conference is being recorded November 4th, 2008.

I would now like to turn the conference over to Lisa Wilson, Investor Relations for BioScrip. Please go ahead.

Good morning, and thank you for joining us today. By now you should have received a copy of our earnings press release issued this morning. If you have not, you may access it through the Investors section at our website. Richard Friedman, Chairman and Chief Executive Officer, Stanley Rosenbaum, Executive Vice President and Chief Financial Officer, and Lois Murray, Senior Vice President, Pharma Relations and Clinical Services, will host this morning's call. Scott Friedman, Executive Vice President Sales & Marketing, and [Phil Teller], Vice President of Finance, will also be present this morning, and are available to answer questions. The call is expected to last about 45 minutes, and may be accessed through our website at bioscrip.com.

Before we get started, I would like to remind everyone that any statements made on the conference call today, or in our press release that expresses beliefs, expectations, or intent, as well as those that are not historical facts are considered forward-looking statements, and are protected under the Safe Harbor of the Private Securities Litigation and Reform Act. These forward-looking statements are based on information available to BioScrip today, and the Company assumes no obligation to update these statements as circumstances change.

These forward-looking statements may involve a number of risks and uncertainties, which may cause the Company's results to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our forms 10-K and 10-Q.

Also the Company urges caution in considering any current trends or guidance that may be discussed on this conference call. The pharmacy services industry is highly competitive, and trends and guidance are subject to numerous factors, risks and influences, which are described in the Company's reports and registration statements filed with the SEC. In addition, the impact of current national and global economic conditions on our business may be difficult to predict.

The Company disclaims any obligation to update information on trends or targets other than it's periodic filings with the SEC. In addition, as required by SEC Regulation G, the recognition of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures, can be found in Schedule 3 to today's press release, and is available on our website at Bioscrip.com on the Investor Relations page, under the link Press Releases.

Thank you, and now I will turn the call over to Rich Friedman.

Thank you, Lisa. Good morning, and thank you for joining us today to review BioScrip's third quarter results.

This morning we are going to discuss the highlights of the quarter, and the key growth drivers that have contributed to our performance, as well as provide an update on the progress we are making at both the sales and operational levels. Stan Rosenbaum, our CFO, will walk you through the Company's operating results, and Lois Murray, our Senior Vice President, Pharma Relations and Clinical Services, will provide you with details of BioScrip's value to the communities we serve.

For the third quarter 2008, BioScrip achieved consolidated revenues of approximately $359 million, Operating income of $2.8 million, EBITDAO of $5.3 million, and net income of $1.4 million, or $0.04 per diluted share. These results include a one-time $795,000, or $0.02 per share charge, as a result of a civil settlement with the US Office of the Inspector General, related to conduct beginning in 2003 and ending when we self-reported in 2006.

Specialty Services revenues for the quarter grew to $307 million, representing an increase of 25.6% over the prior year. More importantly, excluding the United Health and CAP, sales were up 14.4%, and sequentially grew approximately 3%. We believe that these strong results demonstrate the soundness of our Specialty sales strategy.

This growth is primarily attributable to continued marketing efforts to manufacturers, physicians and payors, that has resulted in new contracts, and increases in prescriptions for certain contracted limited distribution products. BioScrip's model of providing access to specialty medications, and improving patient adherence and compliance, remains a core component of our strategy.

Our decision last year to invest in the development of our BioScrip care therapy management programs is directly contributing to current sales results, as the principal elements of our programs have application and value for all our customers, whether a manufacturer, payor, prescriber or patient.

We believe the management of the chronically ill is the best way to control health care costs. Considering the current economic conditions affecting individuals and companies across the country, the Critical healthcare services BioScrip provides, prove even more valuable. While a recent IMS Health report has identified significant slowdowns in overall prescription drug utilization, specialty pharmaceuticals continues to grow at higher rates.

I will now turn the call over to Stan.

Thanks, Rich. Total revenue for the third quarter of 2008 was $359.4 million, an increase of $61.8 million, or 20.8% over the third quarter of 2007. Our Specialty Services business grew $62.6 million, or 25.6% over the top of the period in 2007.

Excluding our United Health Care and CAP contracts, specialty sales increased 14.4%, showing solid growth, as a result of new contracts and increases in utilization. Our PBM Services segment had revenue of $52.3 million, a decrease of $800,000, or 1.4% primarily due to the termination of certain PBM contracts, and the impact of new generics to market.

Gross profit for the quarter was $36.1 million, or 10% of sales. This compares to $35.4 million, or 11.9% for the comparable period in 2007. The decline in gross margin percentage from 2007 to 2008 is primarily the result of CAP and United Health Care. In addition the third quarter of 2007 included a one-time favorable adjustment with the Company's primary drug distributor.

It is important to point out that without United and CAP, the gross profit percentage for the quarter would have been 10.9%. Operating expenses as a percentage of revenue for the quarter decreased to 9.3%, from 10.8% over the same period a year ago, and includes a $795,000 one-time charge, related to our civil settlement with the United States Office of the Inspector General.

The reduction in operating expenses as a percentage of total revenue, is due to the Company's ability to leverage it's overhead structure. Income from operations was $2.8 million, or $300,000 less than the third quarter of 2007. Again, without the one-time charge for the OIG settlement, income from operations would have been $3.5 million, or a 14.3% increase over the prior year. Interest expense and income taxes remained essentially unchanged from prior year.

As a result of these items, we are reporting net income of $1.4 million, or $0.04 per diluted share, which includes the $0.02 charge for our civil settlement, as compared to the prior year of $1.7 million, or $0.04 per diluted share. EBITDAO was $5.3 million. Once again, without this one-time charge, our earnings per share would have been $0.06, and our EBITDAO would have been $6.1 million.

Let's take a few seconds to talk about liquidity. In today's economic environment we feel that having sufficient and improving liquidity is essential. Let me tell you about a few of the steps we are undertaking in this area. During this quarter, we increased our bank line by $10 million to support future growth. We will also generate significant cash flow as we exit the CAP program. Capital spending will be reduced in the coming year, as our new integrated pharmacy system is completed, and our cash flow from operations continues to improve.

As a result of these steps we are anticipating an increase of 15 to $20 million in our liquidity in the coming year. In addition to the cost savings associated with the exiting of the United and CAP programs, we anticipate further cost savings throughout the Company. These expense savings are expected to accelerate in 2009, as our new integrated dispensing system rolls out. Currently the new system is in a pilot test in one store. Roll-out to the rest of our stores and on the operations will ramp up in the first quarter of 2009, with completion anticipated in the third quarter of 2009.

I will now turn the call back to Rich.

Thanks, Stan. BioScrip 's value proposition is a specialty solutions model, where our goal is to be recognized by physicians, manufacturers and payors, as the expert in providing patient access to specialty medications, and working through the clinical, financial, and administrative complexities, commonly associated with these drugs, and the chronic illnesses they treat.

Adherence, compliance, and retention, is the foundation of BioScrip's programs. At BioScrip we provide unmatched commitment, and compete primarily on the breadth and depth of our high touch, highly professional pharmacy and nursing teams. Our clinicians and support staff are experts in the chronic diseases that they service, offering our patients confidence that their best interests are being managed by the most knowledgeable people in the industry.

I will now turn the call over to Lois, who will take you through the key solutions that we offer, why manufacturers choose us, why patients seek us out, why physicians prefer us, and the value we bring to health care payors. Lois.

Thank you, Rich. BioScrip goes far beyond the general standards required of all pharmacies, to accurately and safely dispense medications. Within our pharmacy channels, BioScrip integrates solutions, to ensure patients can navigate through the challenges that if not addressed, could result in the failure to start, or comply with their specialty medications.

BioScrip's strategy is to ensure that the patient's therapy is started as quickly as possible, and never disrupted until complete. BioScrip is there with the patient every step of the way throughout the course of their treatment. Because of the disease states that we are addressing are complex, patient access to medications can be challenging, particularly because each therapy has a set of potential complications associated with it.

So how do we go about addressing these challenges? Helping the patient navigate the financial challenges inherent in getting his or her medication filled is our first step in the process. Today, due to the escalating costs of specialty medications and higher out-of-pocket expenses, more and more patients are challenged to pay for their medications, even those with prescription drug coverage. This situation results in the need for an expert to help patients identify and access the financial resources that are available to help them afford their medication. Without this support, many new prescriptions go unfilled, and patients do not start treatment.

This first step, addressing patient financial challenges, is one of BioScrip's core strengths. We provide patients information on Assistance Programs, foundation support, and co-pay programs. When possible, we assist patients in the application, completion, and submission process. This hands-on support helps to expedite the approval of the financial assistance, which can directly reduce the time to fill, and help the patient avoid delay in treatment. In addition, BioScrip's teams of highly experienced insurance authorization specialists, work on behalf of patients, to get their medications and services authorized by their insurer.

Although critical and needed, specialty drugs are frequently a challenge to get approved, due to their complexity and expense. It takes extensive knowledge of the criteria utilized by health plans and sometimes access to clinical studies and leading clinicians, to gain authorization by prescribed treatment protocols. Chronic illness generally equates to long-term treatment, often requiring not only initial, but also periodic reauthorization by the health plan. BioScrip clinicians gather clinical and laboratory data required, to support the reauthorization decision, to avoid unnecessary treatment interruption.

Once the first fill is complete, we work to keep a patient compliant, and adherent to their treatment, through comprehensive interventions developed specific to the drug or disease being managed. Our efforts include monthly refill reminder calls, patient risk stratification, patient education, and side effect management techniques, depression screening, quality of life assessments, patient forums, and a vast array of other protocols, some of which are proprietary, but all driven by nationally established drug and disease guidelines. It is not uncommon for new biologics to come to market with some form of limited or preferred distribution network arrangement.

So we work directly with manufacturers, an important customer to BioScrip, to ensure they recognize and understand our Specialty Services, so we gain access and in certain cases preferred status, with new to market specialty medications. Our focus is on a niche area of the pharmaceuticals biologic segment, where a high level of touch and expertise is required. The benefit previously described of helping patients to get started on their therapies as quickly as possible, is also valued by manufacturers of specialty medications, and one of the reasons they look to BioScrip.

Our in-depth understanding of the disease state, ability to properly handle and safely dispense a product, and then actively monitor patients' adherence and compliance, are critical factors for manufacturers. We understand and target what is critical for the best patient outcome on a drug therapy, and in addition we collect and deliver important data and information back to the manufacturer.

We have branded our disease and drug focused patient programs under the name BioScrip Care, the programs are founded in evidence based medicine and support therapy optimization through patient education, and help to set appropriate therapy expectations for the patient. Our clinicians also screen for appropriate dosing levels, management of side effects, they provide interventions to avoid inappropriate discontinuation of therapy, and we assess patients co-morbidities and risks associated with their primary disease.

Many therapies new to market in the past few years have required FDA mandated risk management programs. Our teams follow detailed risk mitigation plans to ensure patients' safety. In addition, our clinicians understand that our patients are generally on complex protocols, require adjunctive therapy, and may experience the need for dose reductions, or even therapy interruptions. We closely monitor these patients, and communicate often with their prescribers. We stand out as experienced, and willing to do what it takes to support these complicated medication regimens.

This solutions based approach is valued by the patient, the physician, and of course, the manufacturer. This is a differentiator across the pharmacy industry. Due to the financial, clinical and systems resources required to support new biologics, the barrier to entry for the average pharmacy is relatively high.

We know that our programs and our solutions approach works. Based upon the scorecards that many manufacturers have developed to benchmark the performance of their network specialty pharmacies, these scorecards are developed to measure important drug therapy, and operational metrics. BioScrip has a proven track record in the industry, with respect to scorecard performance for adherence and persistency.

In addition this translates to patient satisfaction. In a recent manufacturer sponsored survey, BioScrip received the highest patient satisfaction ratings. The integral link in all of these services and programs is the prescriber community, who have come to rely on the quality and expertise of our team members. Physicians, nurse practitioners and discharge planners rely on us, because we have the medications they need in stock, and the relevant focus and expertise to work collaboratively with them.

Fundamental to our value proposition is BioScrip's responsiveness. Our local touch through our network of community and Infusion Pharmacies, helps them to get patients complex needs met quickly. BioScrip's value to health plans is based on the same solutions approach. BioScrip has the ability to offer Specialty Services in the most cost-effective delivery models.

Recently we contracted with the health plan to look to BioScrip to help them move their members who were received IVIG in a high cost, hospital-based outpatient setting, to a more cost-effective home infusion services model. Health plans also value our BioScrip care program, as they can help the plans manage their high-cost chronic disease patients, and they support improved health care outcomes.

I will now turn the call back to Rich.

Thank you, Lois. As we look ahead, BioScrip's pharmacy distribution channels will continue to be a perfect match for the biologics pipeline products, which will require a national distribution, community access, home and in-office infusion capabilities.

Our value is beyond just specialty distribution. More manufacturers and clinical research organizations are contracting with BioScrip for our specialty solutions, including reimbursement services, inventory management, nurse administration, injection teaching, and BioScrip care therapy optimization programs.

Ultimately the combination of getting and maintaining the patient on their medication, working with the physician and manufacturer to address their requirements, results in cost savings for the payor, and better outcomes for the patient, delivering value to BioScrip's clients and shareholders. Financially for the fourth quarter of 2008 and into 2009, without CAP and UHG, we expect to see further sales growth and gross profit margins to normalize in the 10.5 to 11% range.

We have identified those operating expenses, directly related to both CAP and UHG, that will be eliminated. We will continue to examine our cost structure to find additional ways to improve operating performance. We have begun testing of our upgraded system, that we expect to be fully functional in the second half of 2009. We believe the full implementation will permit us to reduce further operating expenses, while growing the core business. We anticipate all of the above will result in improved operating profits in 2009.

I will now open the call for questions. Operator.

Thank you. (OPERATOR INSTRUCTIONS). One moment, please for our first question. Our first question comes from the line of Brooks O'Neil with Dougherty & Company. Please go ahead.

Good morning. I have a couple of questions. Either Rich or Stan, can you give us any feel for the magnitude of the SG&A savings you hope to achieve on the termination of United and CAP? I mean, I am not looking for specific line items, but I am just curious, are we talking, a couple hundred thousand, 0.5 million, sort of order of magnitude?

We believe, this is Stan. How are you doing?

I am doing great. Thank you, Stan.

Is that over the course of 2009 we will be able to take out somewhere between 4 and $6 million of additional costs.

Great. That would be very, very helpful to you and your investors. Second question, I am just curious, Rich and maybe Lois, I hope you know I am a huge believer in the value-add you provide, and the need for the value-add you provide in the marketplace in the specialty pharmaceutical industry, however, I am curious if you have been able to assess why you were not able to convince United Health Group, and maybe to a lesser extent Aetna, of the value-add, and their need for your services?

We are going to have Scott address that specific issue.

Thank you.

Good morning, Brooks. Relative to United, I can't speak to Aetna because we were in a different kind of relationship with Aetna. But relative to United, where we know we were contracted to provide HIV and transplant services, I am confident their decision to take it in, wasn't a reflection on the inability to prove our value, but knowing that they are taking it in, and are going to continue running extensive therapy management programs, that they are going to have the internal infrastructure to do that as we understand it, goes more to just show that what we were doing worked.

We had the results to know they work. So I think there was really no from a certain standpoint, combating that decision for them to take it in-house. We continue to work with other payors. We believe that the need for these programs is just going to get stronger over time, and we are going to continue to work them in the market. Brooks, also to add on what Scott was saying, when you look at what we do, there are really two specific areas in the management. You have disease state management, and you have product management. The product management will get down to effectively a branded level, is on behalf of the manufacturers, and we do that extremely well.

We also believe on the disease state side, which is really where you looked at UHG as an example, looking at the organ transplant, as well as HIV, they made the decision to bring that inside, yes, it was disappointing, but I think that the work that we did was outstanding work, and proved to them that it can be done.

Okay. Can you give us any feel for sort of what is involved in sort of reactivating the relationship with Aetna? Did you have to take a big hit on margins to get that, or are there some special things you can provide to them?

Well, when you look at Aetna, first of all, in much of the United States, in many of the states there there are any willing provider statutes, that permit pharmacies to go ahead and do the work they do, if they agree to accept the reimbursement rates that were there. That quite frankly was a big issue. But I will tell you that the rates are at least equal to what they were when they first made the announcement.

Okay. That is good. I will just ask one or two more quick ones. Stan, obviously, the receivables were up quite a bit this quarter, and I think that probably impacted the amount drawn on the line of credit. Could you just talk about what is going on there, and I am guessing, you think you can bring that number down pretty quickly, but help us to understand how that might occur?

Well, clearly, our sales growth in the 50 to $60 million range, our DSO runs around 40, so clearly the big increase there is in Receivables, but it is in the current bucket as well, so we are confident we are okay there.

What is important here is that when we exit the CAP program, Brooks, which is effective December 31 of this year, we will again, we will collect all of the CAP receivables without having to buy any replacement products with the CAP business will be over. That will generate significant cash flow for us in the coming year. So as I talked about it in my talk, I don't think liquidity is an issue in this Company, and receivables are where they are, and runs at 40 days.

Yes. Okay. Thanks. And then just one last question. I am curious if you guys had seen any material change in your business, say in September or October, that might have corresponded with the slowdown in the economy more broadly?

At this point, no.

Okay. Great. Thank you very much.

Our next question comes from the line of Mark Arnold with Piper Jaffray. Please go ahead.

Good morning guys. Before I jumped in with some questions, I just wanted to clarify one thing. In your press release and in your prepared remarks, you said expect sales growth and gross profit margins to both normalize in the range of 10.5 to 11%? Am I reading that correctly?

Oh, no. The gross profit margin will normalize in the 10.5 to 11% range, after the exiting of CAP and United.

Okay. So you are not giving us any guidance or clarity on what sales growth is going to be, only that it is going to grow?

Well, I think I can help you out there. I think in the fourth quarter as we look into the fourth quarter, I would say that sequentially over the third quarter we can look at a 2 to 3% increase over the third quarter results. And looking at 2009 after we remove CAP and United, somewhere in the 10 to 15% range.

Very helpful. Thank you.

Okay.

You brought up an answer to one of the previous callers, do you think you can take I think it was 4 to 6 million in costs, additional costs out in 2009. Can you, without giving us numbers, but can you kind of provide us some color as to what you intend to cut, and how much, kind of where, well you gave us how much, but kind of what you intend to cut, particularly given the loss of those big contracts?

Well, certainly anybody who is associated with those contracts and currently works for us, will either move into additional jobs, but those positions will go away. That is the biggest single deduction there. And as the new system comes online, we expect to get further savings, particularly in our back end operations.

Okay. And then just following up on another question from Brooks earlier, along with the Receivables growing, your bad debts jumped pretty significantly. Do you have some explanation on kind of that big jump here sequentially in Q3?

Well, the bad debt provision as you know, we have been saying all along that a normal bad debt provision for us would be in the 25 to 26% range, and the reason it has been running lower over the last several quarters, is that we have had a lot of success in collecting previously written-off or fully reserved receivables, and that has kept that provision down, but now it is seeking a more normalized number, so I believe it was about 0.4%, and I would expect that number to climb up, as we clean out and clean up, and collect as much as we have in our older receivables.

Okay. Can you provide us some color or perspective on the New York and California Medicaid situations, and kind of how we should expect them to effect results here in the coming quarters?

Hi, Mark, it is Scott.

Hi, Scott. Relative to Medi-Cal, there was the decision midway through the third quarter, to put a halt to the project cuts, and I believe the future of what the rate reductions beyond the reversal will be.

Medi-Cal as a whole is a piece of our overall business within Medicaid, but it is uncertain there. New York Medicaid July 1st, their rate reduction was published at about 2.5% and still carries a pretty healthy margin throughout all of that business, so relative to those two states, that is where we are.

Mark, also to point out, look, we know that Medi-Cal, it was reversed and it went back to the prior reimbursement rates. Looking at the entire economic climate of this country today, looking at the states, we have forecasted in the impact obviously of New York.

What happens with the other states and with their finances, I don't think any of us could predict today, which when you look at forecasting going forward, we are assuming that reimbursement rates remain at the levels that they are at today. Any changes in government funding, or anything else, would obviously have an impact, but that has an impact across everyone in pharmacy. Mark, it is Scott. Just one more thing. There was a recent study put out by the Kaiser Foundation relative to Medicaid and the budgeting process, and it is interesting in the fact that usually immediately after an economic, or in a time of economic downturn, the States are usually delayed in addressing it from a budgetary standpoint. So they don't necessarily anticipate immediate impacts in '09, because the budgets for the most part have been already formed, but more to 2010, so it is not to say that there can't be, but history shows that they are usually a year or so behind in reductions.

That is helpful. Thank you. Just a couple more questions here. Given what has kind of happened on the specialty services side this year, in terms of both growth, but also the loss on some of these big contracts for next year, has your view of the PBM business changed at all?

So I guess my point there is your PBM business has been pretty stable here after the contract losses last year, but now kind of looking forward, have you changed that outlook? Do you still look at the PBM business the same way you did, say 6 or 12 months ago?

The answer is yes. The PBM business really takes on both traditional mail and normal PBM. In a traditional mail is an integral part of the pharmacy that we run.

BioScrip is a pharmacy, as well as being a manager of the chronically ill, so even though it has maybe moved into a segment called PBM, it is still the distribution of the medications that come out of this same facility as specialty medications.

The buying side all is the same. So PBM becomes an integral part of what we do, and as we see opportunities on either side, we are going to take advantage of those.

Okay. So maybe to ask this, I have kind of looked at that business as being just relatively flat here going forward, but could you see, or do you expect to see growth in that PBM business in 2009?

Hi, Mark, Scott again. If within the segment as Rich alluded to, there is the traditional PBM processing business, which is a smaller portion of the whole, and we have a traditional mail order fulfillment piece. Mail order we look at in some regards similar to specialty contracts, as potential other PBMs or payors look to carve out mail, payors it is rare for them to carve out mail, but if we look to them as a PBM, there may be growth opportunities going forward. PBM, I don't expect a lot, I think the mail side benefits from new generics to market over time. I don't expect any huge windfalls, as far as the growth area. It is very opportunistic when it comes in, we certainly respond and look to gain business when it comes, but from a predicting of growth, I don't see it.

Okay. And then I just have one last question. This one is actually for Lois, if she could answer it. Just talking about BioScrip Care, can you talk at all about, are there certain disease states you are having more success than others in selling these services, and getting payors and manufacturers to pay for them?

Our focus to date has been, as you are aware with UHG, with our HIV and organ transplant. Another major area for us has been in the management of iron overload patients. We also manage a Multiple Sclerosis program, and we have developed an oral oncology and a Hepatitis C program.

And Mark, to add in, the programs we have decided to invest in, are really relative to where we see major growth opportunities in the marketplace. Oncology is our single largest growing disease state, due to a lot of the new oncolytics that have hit the markets. So focusing in on there, we see opportunities.

I think short term, based on the market environments, we see manufacturers as probably the greatest opportunity as purchasers of these programs, due to their craving for good information and data, that isn't readily available through sources like IMS, so it is more qualitative information that they are able to extract from us. I think payors are going to need it as we see down the road, but the manufacturers I think as we have said before, are probably our best near-term customers, and we are seeing that in reality.

All right. Thank you, guys.

Thanks, Mark.

Our next question comes from the line of Mike Petusky with Noble Research. Please proceed.

Good morning.

Hi, Mike.

A couple of questions. In terms of the Aetna business, congratulations on being able to retain some of that. I was just curious, essentially if you say 2/3 of the 27 million that you hope to retain, and then that is kind of 18 millionish, and then, could we essentially then say, essentially you can kind of book roughly 4.5 million for the fourth quarter? Because I know that contract was going to run off in the fourth quarter, or is that business that has to kind of be built back up again, to a run rate of 18 million?

No. We never lost. It was retained, Mike. So it is already in the third quarter numbers.

Okay. Okay. So in the fourth quarter, then, essentially it is a run rate of 18 million for--?

Yes. Right, overall what you are going to do is look at the base of the third quarter, and as Stan said earlier, look at the sequential growth rate of 3 over 2, and kind of look in that range into Q4.

Okay. All right. Great. And in terms of, and I know this is just the initial testing of the integrated pharmacy system, but what have you guys learned, or what have you been able to glean, as far as the early testing in the one store?

That we can't wait to have it in all of the stores.

But there are two parts to it. One is obviously we have to dispense, we have to get the receivables to the inventory, but also those accountants have to close the books, so until we actually go through, Mike, until we actually go through a closing cycle, or a couple of them, I would like to hold off a little bit. But right now there is a lot of excitement in our pharmacies.

Hi, this is Scott. I just want to add one more thing. Relative to the system, it is important to note that from a front-end customer service standpoint, it will continue to be flawless. It is not going to impact the front end. All of the services that we had already been providing, we have had the ability to provide, so I think as Stan had referenced, it is more for the internal operations in support of the finance and other areas of the Company, and that from a customer service standpoint it is seamless.

Okay. All right. Great. And I'm sorry to be a pain in the neck about this, but I am going to be a pain in the neck about this. Have you guys given any more thought as to different ways to report, either by disease state or methods of delivery of services, or are there any greater ways to break out your results?

Mike, we are absolutely looking, I think this quarter we tried to be more transparent than the last quarter. I think that is going to continue. We are looking at ways to break out by therapy, and it really is going to be an evolution, as we continue to break out more and more information, in order to provide all our shareholders more information on the value of the Company. What I thought was critical today was really give our investors an idea of why people select BioScrip.

BioScrip is doing 1.3 to $1.4 billion today. There is a reason for it. People seek us out, manufacturers, physicians, payors, they seek us out. So this is our first step of trying to get the message across, as to why, and then we will clearly go further into disease states going forward.

Okay. Terrific. And I do want to say, Rich, I am appreciative and I am sure everybody else is of some of the kind of data you have given us in terms of the go forward, as far as SG&A take-out and revenue growth ex-UNH and CAP, and all the rest of it, I do appreciate that, and just urge you to continue on in that path. Thanks.

We will take that message to heart. Thank you.

(OPERATOR INSTRUCTIONS). Our next question comes from the line of Bill Nasgovitz from Heartland Funds, please proceed with your question.

Yes. Good morning, guys.

Hi, Bill.

Hi. You said the line of credit was increased 10 million to --

$85 million.

85 million?

Yes. That's --

And what (overlapping speakers). I am sorry?

It says it has a further recording that needs to go to 110.

What rate of interest do you pay on that?

We pay a fee over LIBOR, so we are paying at 2.2 over LIBOR in the coming quarter.

Okay.

Or somewhere I think LIBOR is around 2.75 today, so figure somewhere in the 5% range.

Okay. Great.

And we are in compliance --

Good. You mentioned that your CapEx, you expect that to go down, so in '09 what do you think your CapEx will be?

I think it will go in the 3 to $4 million range. We are doing a lot of store renovations is what it is going to be for, I think we have spent about $6 million year to date on CapEx, so figure about 8 million this year, going down to about 3 to 4 million next year.

Okay. And just tell me again what the reason, the Accounts Receivable ballooning to 55?

We sold almost $60 million more, but DSO is 40. You can certainly expect to see an increase in the Accounts Receivable. That is all in the current bucket, by the way, so --

Excuse me. The Accounts Receivable are where?

In the current, they are new sales so they are new receivables. We sell a lot more in this quarter.

All right. And you are comfortable going ahead?

Going ahead --

And with your collection, with your collection processes and --?

Absolutely, absolutely.

All right. Thank you very much. Good luck.

Thanks, Bill.

Thanks, Bill.

(OPERATOR INSTRUCTIONS). And there are no further questions at this time.

Well, thank you. We would like to thank all of you for joining us today, and we look forward to getting more information out to you in the future. Again, thank you very much.

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