Option Care Health Inc (OPCH) 2025 Q3 法說會逐字稿

Good day and thank you for standing by. Welcome to the Option Care Health 3rd 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 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 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 10K filed with the FEC 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 conditions. 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.

And with that, I will turn the call over to John Rademacher, President and Chief Executive Officer.

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 Minal Sena 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 Ninel 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 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'm looking forward to partnering with Minal 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 Stefan Schstein as Vice President of Investor Relations, reporting the meal. Stefan 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 3rd quarter results.

The option care help team 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 of therapies, and resilient operating model to win in the marketplace, and we demonstrated this again in the 3rd 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.

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 cited 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.

We have demonstrated we are well positioned for success as we continue to navigate changes in regulation, competition, and our portfolio of therapy.

Nele will go deeper into the financials in a few minutes, but to highlight some key takeaways.

Our revenue momentum continued in the 3rd 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.

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 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.

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 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 patients, 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 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.

As we near the close of 2025, we have raised the midpoints of our full year revenue, adjusted EBITA, 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 Meenel to provide more details. 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 discipline capital deployment.

As John mentioned, the 3rd quarter was strong, building off the solid momentum from the 1st 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 therapy's growth.

Growth margin rate was also negatively impacted by the shifting Stelara dynamics, as well as the impact from lower margins, limited distribution, and rare in orphan therapies.

Adjusted EEA 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 IBA margin was 8.3%. Adjusted earnings per share 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 loans, reducing our borrowing costs, and extended the maturity while adding an additional $50 million in liquidity.

Our net debt to adjusted EEA 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 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 geography.

We also continue to invest in 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 are our next priority.

We've been working through the integration of the Inframed Plus acquisition from earlier in the year.

The business continues to perform extremely well. 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, a 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 EA of $468 to $473 million and adjusted earnings per share of $1.68 to $1.72.

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 favor 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 we look forward to continuing our growth trajectory through 2025 and beyond.

And with that, I'll turn it back to John.

Thanks, Meenel. 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 am 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.

Operator.

Thank you. At this time, we will conduct the question-and-answer session. As a reminder to ask the question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, press 911. Please stand by while we compile our first question comes from the line of Peter Chickering with Deutsche Bank. Your line is now open.

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 in the next 12 months? Is a fair thing about the economics of Solara biosimilars following the same path as Remicade?

Hey, Tito, it's or Peto, it's John. Hey, a couple of things that I want to bring up 1st.

1st 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 Mino 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 profit as we had called out. So I think it's patterning. We kind of called out at the end of the of the second quarter. We started to see the uptick that continued through the 3rd 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 1st roll of the calendar and the IRA impact we will expect, further step down in the price of the stelara and the biosimilars will continue to gain momentum there. So, we're not prepared to give 26 guidance. We're not in a position really to size up what we think the impact is going to be for Stelara. 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 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 Solara impact for 25. It was like 5 million in the first quarter and then 20 million or 23 and 4Q as you're moving into.

Yeah the solara biosimilars and talking about the gross profits or impact there what would be the solara your headwind in the 4th quarter now that you're moving into the biosimilars. Thanks so much. Yeah.

As we had put out the original guidance of the 60 to 70, and then, as we 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.

Of it that does not include what we see as the biosim you know conversion rate, as we came out with those original numbers, PETO is is as we called out, the only view we had was around the the discount that we were able to enjoy on that product changing and that that was going to be moving more and and it was hard to anticipate what the uptake of the the biosims was. So you know we've talked about it being a revenue event and you know it's going to have a drag at that point and 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 and as we start to look and TRY to, size everything with all the variables for the 2026, be able to be in a position to provide that when we're when we're ready to do so.

Great, thanks so much.

Yeah, thanks, Peter.

Thank you. Our next question comes from the line of Joanna Gajuk with Bank of America. Your line is now open.

Great, thank you so much. So I guess that's 380 basis points, sorry, just staying on until I for I can follow-up the 380 basis points in this quarter, it sounds like, there, there's expectation for additional like incremental, I guess, headwind, as the, conversion continues, right? It's the way to read that comment about next year.

That that is correct, Joanna. As we have been calling out that we would expect to feel the headwinds, again, it's, revenue is is going to have that impact. We have been talking about that since really the IRA, and the the announcement of that, knowing that there's going to be a step down in the reference. I associated with that as we move ahead and as I said, that was contemplated in the way that we have put the guidance forward for the remainder of the year and you know our confidence and continue to tighten and raise the midpoint, across that. So you know we we're continuing to work through that, but that was contemplated in the way that we have articulated the view of the guidance of the company.

And then as you think about the gross margin because like you said, the biosimilar is the revenue in the head with revenue, but the gross margin, I guess so you had a step down on the stela on the brand and because of J&J actions, but now I guess with the biosimilars coming in, is that also, working the other way of the of the gross margin percentage or it's too early to talk about that or I guess I about that gross margin, yeah.

Yeah, it's too early to talk about that, Joanna, and as you would expect, there's a range of outcomes that each of the bio similars have, different profile on that, so too soon.

Okay, and so another, I guess, topic, so you, mentioned it, dynamic regular environment. So are there any areas you foc focus on the most and I guess kind of how is your thinking about high level, changes that might be coming that would impact that business.

Thank you.

Yeah, I mean, we're continuing to keep an eye on what's going on in Washington, very dynamic, environment from that standpoint, and 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, so all of those things are, within 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 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. So 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 4th quarter knowing that we've got, some of these other, dynamic, environments so we're going to have to continue to work through and and capitalize on where possible.

Great.

Thank you so much.

Yeah, thanks, Joanna.

Thank you. Our next question comes from the line of David McDonald with Trust. Your line is now open.

Oh, good morning, guys. A couple of quick questions. So John, look, we've seen the impact this year of a sizable competitor exit 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. But just what you're seeing on that front and then a follow-up question to that 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?

Yeah, David, so 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 and 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, but 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 to Care initiatives are one that continues 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 we're giving, and I think that puts us in a position to remain in that 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, and 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 that work and we're in a preferred position.

And then 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 just, how many locations currently in? I mean, and 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 how aggressively you expect to roll that model out over the next, again 12 to 24 months and just, any observations since the acquisition. That have been either, better, worse, or a little different than you had expected.

Yeah, so, our growth of our infusion suite op 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, advanced practitioner or infusion center cap capable at this point in time, and we're going to continue to look to expand that as we move that. Forward, part of that will be, 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've called out before, Dave, there are corporate practice of medicine and other things that, have influence on the path and the pace in which we're going to be executing around that. But we look at this as being extremely complementary to our pharmacy capabilities, both in the home and the infusion suite. 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 it's part of Comprehensive strategy and part of our growth as 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 acquisition of years ago, and 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.

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 payers, around some of these initiatives.

Yeah, Dave, it's a little hard to tell, the immediate impact just because of some of the market, the competitive dynamics and and some of the growth that we're seeing there.

But to your question, we see it across all of those dimensions. We think that it is a 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. So you know we see benefit across both the payer and the health, the hospital and health system aspect, and we think it's it deepens the partnership. It allows us to have more confidence in in the position that we hold, and 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 to their patients and their members.

Okay, thanks very much.

Yeah I think.

Thank you.

Our next question comes from the line of Matt LaRuee with William Blair. Your line is now open.

Hi, good morning. The first question just on the cost side, G&A is up about 10% on TPM basis. Could you break out what core G&A has been tracking at because I assume Intramed is a piece of that, and then, 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.

Sure, Thanks, Matt. Let me give you just some color on the G&A. So in the quarter as part of the prepared remarks, I mentioned that we did some debt refinancing, so there's some noise in there with that, take a percentage point out of that.

The remaining drivers are really a as we think about the intrame acquisition, right, that that was a 25 acquisitions, so you've got additional cost, additional growth there that wasn't in the prior year. So that's one. Secondly, from a variable comp perspective, we were under target paid out under target last year. So just, getting us back to to a more normal rate, you end up having to have 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, 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 relationship. That we have with Palanttier and some of the investments we've been making in RPA machine learning, that's also driving some higher cost over time and 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, but the other thing I would point out is, some of the benefits we're getting are really coming to our cash. Right, I mean cash flow and 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, H1stly gives us much more optionality when we think about capital allocation.

Okay, thanks. And then just another one on on Stelara and again I appreciate giving the moving pieces, with biosims 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 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 fall out like you did this year, some range, because it is so. Disruptive to you know what investors view as the optiona growth algorithm or 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 is going to be.

Man, let me take this and certainly I'll look for me to add any color on it.

We're not in a position to give 26 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 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. Trimhayas, Skyrizzi, and tibio are all part of that that equation as as that moves ahead. The third is the uptake of the biosims and then which biosim, 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, to reiterate, love the momentum of the business and the breadth of the growth that you saw in the 3rd quarter that overcame even the stelara impact that we highlighted of 380 basis points. So 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. 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 continue in the depth of the relationship with payers with citiccare initiatives and other things. So again, I feel really good about 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 I think this organization has demonstrated the ability to take momentum and to build around, where we're going to see some some changes or shifts in a specific therapy or therapeutic category and find other ways to grow through that. So yeah.

Let me just add a couple of comments as you can imagine, 1st 30 days finding a lot of things, but in my top priorities is. Looking ahead, understanding the business and looking ahead to 26 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. So just reiterating what what John's been talking about, we do expect to grow going into 2026, no doubt about that. And so. We're working through all the different mechanics and the different drivers that are going on and as soon as we have better clarity, we'll continue to share that with you and be, as we have always been, be really transparent about, what we're seeing and what we know when we know it.

Okay, thank you.

Thanks.

Thank you.

Our next question comes from the line of Charles Ree with TD Cohen. Your line is now open.

Hi, this is Lucas I for Charles. Thanks for taking questions. And actually my question was answered on the last question there. So I guess.

I don't know if you guys have size it for this quarter. You might have, I might have missed it, but it should we think about the Stelara impact to gross profit being similar to the size that you gave at 2, i.e. being a nudge higher than 20 million?

So maybe I'll take that one.

We had been talking about a range started at the 60 to $70 million last quarter we talked about the impact in 2025 being about 65 to 70 million at 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. So that works out to be math wise a little bit over $20 million in Q3 as well as in Q4.

Okay, I appreciate it.

And then I guess 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, to the above the 65 to 70 million range that we're now looking at or below, and I guess what could be the moving parts, moving pieces with within that.

Yeah, so I think we feel pretty strongly about, it being at the upper end of the range on the impact of the Stelara. We know, from what the discounts that we're able to negotiate on that, which is why we've been able to have a firm view around that range. And as Needle said, we now expect that it will be at the upper end of that range for the full year of 2025. The variables that we don't have a line of sight into and again again trying to answer I'm not providing 26 guidance, but the the view as we move forward is there are just a lot of variables that will go into not only the patient senses that we have under management, the products that they actually transition over to. And then some of the economics associated with the the discounts in which we're able to buy the various therapies at that are all kind of at this point in time under negotiation or moving around from that standpoint. So again, as Mel 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 and that's been built into the full year guidance and now what is still kind of 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.

Okay, great, thanks for taking questions.

Welcome.

Thank you. Our next question comes from the line of Konstantine David with Citizens. Your line is now open.

Thanks, John, can you just talk about the M&A opportunities you're exploring, whether they remain close to the core or if there are some adjacentcies that you're increasingly contemplating, and I guess I ask this not only for, 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?

Yeah, so we're continuing to have a fulsome list of of opportunities that we're assessing as Minnala called out in her prepared remarks, and 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, but again, we think these are. Tuckins 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 be install based to its fullest. So we're always willing to look for those types of opportunities, as we've called out, there certainly are near adjacent cies and we're we're. Continue to think about, technology and the use of technology and how that helps, our business and improve along those lines. 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 adjacent sea, but I don't, I wouldn't leave you with the sense that. There's anything that's transformative or significant different than than what you've seen in our pattern, which is around clinical capabilities, pharmacy capabilities, technology enhancements and and you know capabilities that can enhance the relationship to support patient cohorts for manufacturers or others through that process.

Great. And then you did also talk about this ongoing shift to, 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, as we turn the page on 25, are you, is it a meaningful shift in sort of health plan receptivity to site of care initiatives relative to maybe a year ago or is it more, incremental sort of baby steps along along that path?

Yeah, I do think that, when you're looking at high-quality care at an appropriate cost in a setting in which patients want to receive it, 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 and the right side of the ledger when you're looking at it 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. Lower cost we're part of that conversation so we're seeing, 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, and we expect that's going to continue to 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.

Thank you.

Our next question comes from the line of Brian Tinquilit with Jeffriess. Your line is now open.

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 reya, Skyridi, 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 of payers focusing on their MLRs? Maybe that's one. And then I guess the second part of the question is there a world where you just say stillla 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 of even that at this point. So just curious how you're saying about all that.

Yeah.

Thanks, Brian, for the question.

To be clear, our relationship with Jansen and the 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. So our pharmacists are part of the care team and they're always working with prescribing physicians around helping to select the best product that's available. Certainly there are, influences by some of the the payers around product selection through that process. And so we love the breadth of the portfolio that we have. And the access to all of the biosimilars and and the product portfolio, we certainly have strong relations with the branded pharma manufacturers, whether it's Jansen or whether it's ABI, 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 response. This 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 to the patients through that process as part of the care team. So all of that I think factors into, where we can help to influence. We will, for those clinical outcomes and, 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, but Stelara is still, a very good product for us, and a part of our portfolio as it moves through this transition and has biosimilar competitions.

That makes sense. And then John, as I think about, the fact that you're generating a decent amount of free cash flow back to Constantine's question earlier on deal multiples or, in the high 10s range it seems like so how are you weighing now like the buyback versus M&A capital deployment decision.

Yeah what, I'll take that one, Brian. So 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 Reframing that, 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 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 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. Partnerships there, so that's really first priority for us as we think about where we're investing and by the way that shows up in CapEx and free cash flow also. Secondly, for us it's 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, John talked about the fact that tins near adjacentcies makes sense for us where we can add some additional capabilities into our portfolio. We're not going that, I call it all within 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.

Thank you.

Our next question comes from the line of Michael Petoskey with Barrington Research. Your line is now open.

Hey, good morning and thanks for for all the Q&A here.

John, I'm just curious, given, the talk about solar, not just on this call, but over the last year, I mean, would it make sense, as we enter 26 to just sort of be more granular about, the revenue attached to the business, and patients senses and just things that maybe could could help investors have a better sense of Of sort of true sort of longer-term exposure to this issue.

Yeah, Mike, look, it's always a balancing act of how much information we can provide into the public markets and and still stay competitive, and be able to have our differentiators in the marketplace on that. So we're always going to TRY to provide, as much transparency as possible and, provide insights around that, I guess as we enter into 26 and kind of move beyond the the reality is the the size just continues to diminish. It it 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 over 5% of the revenue. It's no longer that we have, a profile of one product like we had with Stelara. So, we'll do what we can to make certain that we give, a 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. But as we enter into 26 and beyond, it H1stly 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 smaller amount of impact just, will weigh your your comments accordingly.

Okay, and if I could just sort of follow-up on some of the earlier questions around the capital allocation, I'm just curious, John, like, obviously a few years ago you guys made a run at a more of a transformative asset home house. I'm just curious, the adjacent markets that maybe you're most interested in, I mean, can you just sort of call out a couple where, hey, these are, these are markets that are interesting to us.

Thanks. Yeah, well, without trying to increase the multiples of, areas that we're looking at on that, I mean, I'm not going to give you the pipeline of of, organizations, but as we've called out before, I mean 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 manufacture services are areas that we're always looking at the the platform that We have the clinical capabilities from our pharmacists, our dieticians, our nurses, our 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 sets there. 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. So those are the things that we're looking at as both Mino 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. And we think that there are ample opportunities for us to think about in a disciplined way deploying capital in order to help you know grow the business and return value to our shareholders. So 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 increase, our presence and relevance in the health care ecosystem. So that is the goal and we're going to continue to operate with that mindset.

Alright, very good, thank You.

Yeah, thanks, Mike.

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 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 for your participation in today's conference. This does conclude the program. You may now disconnect.