Okay, great. All right, thank you everyone for joining us for our next session here. We're pleased to have with us Option Care Health. Presenting for the company is Meenal Sethna, Chief Financial Officer, and Nicole Maggio, Senior Vice President, Finance. Thanks everyone. Maybe to start, obviously 2025, you know, a good year overall and I think... It ended up having a lot of the discourse, you know, focused obviously on STELARA. Maybe to start, if we back STELARA out of this picture, maybe share with us sort of, you know, the 2025 performance outside of that and how the business, you know, did overall.
Sure. Good afternoon, everyone. Thanks for having us today, Charles. Thank you. Thank you for having us join your conference. Maybe just taking a step back on 2025. You know, overall, we feel very good with our performance. I'd say overall, we had laid out a number of commitments early in 2025. We overachieved on all our initial commitments from earlier in the year from a, you know, from a growth, profitability perspective. We think overall a good year as that has set us up well in 2026. I'd say another area that was a big focus of ours that's gone well is on the capital allocation front.
You know, I've talked, some of you may have heard as I've just joined the company a few months back, but we've laid out our capital allocation priorities, the first being organic investment. We've made a number of investments that I'll talk about a little bit more through some of the questions. Acquisitions being the second one, and we made the Intramed acquisition earlier last year, which has done really well, both from a financial and a business perspective. Then third, you know, periodic share buybacks, and that was something also that we executed on during the year. That part's been successful.
I would say lastly, just, you know, expansion of our partnerships, definitely across the payer community, the pharma community, our distribution partners, and really grew our number of patients to over 315,000 patients. Really, really a successful year for us.
Okay. That's great, and that's great context, as we kinda think through, you know, as we go into next year. Obviously, I think, you know, there's been some confusion in sort of how when you laid out sort of the outlook a little bit on the call. Maybe just to clarify a little, you know, so where... You talked about sort of a steady even impact from STELARA over the course of 2026. I think the range was, what, $25 million-$35 million. At the same time, you know, we know that there was sort of a one-time inventory benefit in the first quarter.
Maybe first help us understand a little bit, you know, how we should think about what the year-over-year growth in first quarter should look like, and maybe those two pieces a little bit more. Are they the same thing? Different? Maybe help us understand that a little better.
Yeah. No, and that's a great question. We too, between Nicole and myself, we've gotten a number of questions on that. Let me try to break it down. You know, if I go back to 2025 as a starting point, I'm sure many of the folks listening onto this presentation, you're aware that, you know, we've been talking about a particular drug in our portfolio, a therapy in our portfolio around STELARA, which has had an outsized impact on positive early on and then some other detriments more recently.
In 2025, we talked about the fact that we would have with some acquisition pricing from the pharmaceutical manufacturer, that we would have a reduction in our, the price at which we were able to procure it or basically, a higher acquisition cost. I would think of the 2025 issue that we had as strictly being on a procurement basis, right? The drug cost us more. Ultimately in 2025, we said it was going to be a headwind of $70 million versus 2024, and that's a $70 million headwind on a GP and an EBITDA perspective. That was actually the case in 2025.
Given some of the timing and inventory that we had on hand, that $70 million was spread with about a $5 million of that impact being in the first quarter of 2025 of a headwind, while it was about, you know, a little more than $20 million in each of the subsequent quarters, Q2 through Q4. You know, we managed through that, and as I mentioned earlier, you know, our 2025 performance was still very strong.
We take a look at 2026, we take a look at the guidance, we mention that when we issued our guidance both in January as well as last week in February on the earnings call, what we said was we have a $25 million-$35 million incremental headwind over the course of 2026, and that you could think about that as being split evenly across all 4 quarters. This time, though, I would not call it a procurement-related item, but I would say it's a combination of a payer, patient, and therapy mix. The reason I say that is where we are in 2026, there are a number of other therapies that have been released that are competition to STELARA. Now you have payers with different formularies.
You have patients that may choose other treatments. You know, you have areas where, you know, how do you wanna think about which therapy you're going to go on, each of which has different economics. What we've said is when we've done our own modeling based on our patient group, based on our estimate of where we think patients are going to move to, we estimate that's going to be a $25 million-$35 million, again, GP EBITDA headwind for 2026. That is evenly spread over the year. What we've been trying to remind people is as you think about our growth, and you're taking a look at our growth on the face of the financial statements, the comp, meaning the comparable of Q1 2026 versus 2025 is going to be a challenge, right?
Not because of something going on in 2026, but just because of the lower headwind that we had in Q1 2025 compared to the other quarters.
Okay. I guess where the confusion is, I think people hear the word STELARA and they hear it in both instances, and they think it's the same. What you're kinda saying is that think of it in two different issues. One is just the leftover impact from a procurement issue last year, sort of, you know, just kind of that last bit of headwind as you kinda comp it, versus what you're seeing here as a result of IRA changes and, you know, biosimilars coming in this year.
I would maybe characterize it a bit differently, which is, you know, last year, you know, patients who were on STELARA, if I fast-forward 12 months later, there are a number of other therapies, anywhere between 10-15 therapies ranging from not just STELARA, but biosimilars, multiple biosimilars. There are branded drugs. I mean, I think everybody who has been following this knows that there are multiple branded drugs out there. It's not just about economics or procurement on 1 individual drug like STELARA, it's about the mix of the number of possible therapies that are out there, which patients are gonna choose which therapies. It ends up being more of a mix issue, and an economics issue across that mix, as opposed to a procurement issue, which was more a 2025 item.
Okay.
To be clear, that 25- 35 is compared to our 2025 actual results, which included the $70 million headwind. There's no incremental pro forma calculation that we're doing. It is truly versus that the results of 2025, which only included the $70 million headwind.
Maybe just the last thing I'll also add. We've gotten a number of questions from investors about, do you have a Q1 2027 issue? The answer is very simply no. This is not something we expect to be talking about in the first quarter of 2027. There is no wraparound, there is no additional issue we expect by the end of the year. This ends up being out of material I'd talk about any longer, but there's no effect in Q1 of 2027.
Okay. That's really helpful. Maybe just for modeling purposes, simply is it we take the $70 million we know is about $20 million in the back, in the 2Q through 4Q. Just simple math, if we knew that we had about $5 million in the first quarter, we should kind of see like a $15 million kind of year-over-year comp issue and whatever that spits out in terms of growth is probably in the ballpark.
I think that's a better way to articulate it, that the, you know, the lower headwind in Q1 2025 versus the other quarters makes the comparable in Q1 2026 a bit tougher.
Yeah.
As, you know, people may be out there thinking about their modeling to really think hard about what does Q1 2026 really look like when you think about, you know, a year-over-year growth.
Then we've normalized and then once we get to 2027, right, it's just, it's straightforward.
Yeah. It's just straightforward. Yeah. Thank you.
Okay. Now obviously there's a lot of newer agents in the market as well, you know, and we think about the pipeline and certainly as much as we focus on STELARA, I mean, there's obviously newer agents that replace STELARA. You know, I know that our, you know, our, you know, biopharma team, you know, they're excited about TREMFYA, for example. You know, maybe talk about that as an opportunity for you guys. Is that one where you think you can pick up a lot of share and, you know, is that one of those... Like, how often do you get into discussions with manufacturers because you're such a large provider, right, in the market, and so they clearly would like Option Care to be, you know, a provider for their drugs, right? 'Cause of the reach that you have.
How often do manufacturers kinda come to you and say, "Hey, look, you know, we want you to be in our network. We want, you know, and can offer more attractive terms?
Yeah. I think in general, right? I mean, this comes back to, if I take a step back, really the partnerships that we've developed over the years with a number of pharma partners. You know, one of the things we put out in our investor collateral is we have over 600 therapies that are, you know, part of really, part of what we do, part of our portfolio, and those come with countless number of relationships, and we're continuing to grow and expand those. That ranges anywhere from branded to biosim, to generics, et cetera. It's a pretty broad portfolio.
Really, that's, you know, that's a big key to our success as well in terms of, when I, you know, take a step back and think about what do we bring to the market, what do we bring to all of our partners, whether that's payer partners or pharma partners or distribution partners. The scale that we have as the largest national independent provider for home infusion and alternate site infusion, but not only the scale, the portfolio of products we have, over 315,000 patients that we've served, the footprint that we have, the 190 sites we have across the United States, you know, that's really something that tends to be pretty attractive when we talk about building partnerships and, with all the folks that I've mentioned.
Maybe just to follow on there, are there any other new drugs coming into market that you're particularly excited about? Is there one, any that you'd like to highlight?
Yeah, you know, trying to stay away from individual drugs being called out. Again, there are, the pipeline that's out there is robust, and again, very excited about a lot of the products that are coming out there. As we highlighted on the call, we do have very close relationships and partnerships with pharma, and we're involved with them often at the clinical trial stage even. A lot that we're excited about. I wouldn't say anything that I will call out is going to change our trajectory of growth. Again, excited about the pipeline of both infused and injectable drugs and think we have a very nice position in the market to be able to partner with pharma and to the extent any of these are limited distribution.
To Mina's point, again, our network access, our pharmacy footprint, and our clinical resources make us well-positioned to capture that.
Okay. You said the other week, right, you're expecting mid-single digit % acute revenue growth for this year. It's at the high end of your sort of long-term guide, low single digit % versus to mid-single digit %, but obviously a little bit of step down from mid-teens % that you saw in 2025. Is this merely just lapping contributions from, you know, the, you know, competitor exiting the market? Maybe kinda describe were there kinda unique things in 2025 that don't necessarily repeat in 2026, or is there room for upside to that?
I mean, we've talked about the acute business for us really being, you know, when you think about the market being in the low single digit growth rate, you know, clearly in the past couple of years, we've grown well in excess of that, really in the upper single digits to low double digits. You know, we definitely have... I don't wanna say benefited because that makes it sound very passive, but we've been active as others have chosen to drop out of the market. We've been very active in picking up, excuse me, many of their patients, picking up share. I think there's a bit of a maybe a misunderstanding if I think about the acute part of the business where, you know, some maybe people think about this as a commodity business.
I've heard some people ask that question. Actually, I would think about it in reverse, which is, you know, it requires a real careful choreography as you think about operating that business, and I think that is some of the reason why maybe others have chosen to exit the business. You really need to think about serving patients and being there for patients on a same-day basis, right? You may have a patient who's discharged in the morning. We get a phone call. We need to really turn that phone call around into a confirmation that we'll be able to support that patient. It may include us having to compound to provide the therapy for the patient on a same-day basis.
We've got to make sure that we have the right, nursing and clinician staff as necessary to be able to serve that patient, and then we've got to make sure that we're onboarding that patient within the same day. To be able to do that, you know, I'll save us from repeating myself around, you know, the scale and the footprint and the resources that we have. That's not so easy to do when you think about the hundreds and thousands of patients that are being released every single day that, you know, we're saying, "Yes, we can service them." I would say that, you know, we've done really well with the footprint and the people that we have to be able to serve patients well.
That is really another reason that we become a partner of choice because we are able to address a large group of the patient population. I think really finishing off to, you know, to answer your question, while the market is growing in the low single digits, we believe we can grow in the mid-single digits really because we expect. Look, there are others still in the market that I think are also struggling from an economics or from just being able to operationalize this perspective and, you know, we've proven that we can do that, so we feel pretty good about our trajectory here.
When you say it that way, it does seem a little bit more obvious. I guess then, you know, chronic condition is probably a little easier in that sense, right? Because is that really it? You know, obviously the dollars are bigger in chronic medications, and obviously a lot more, you know, the drug cost in that equation. What's more attractive between the two businesses then for you?
Well, I think, one, I don't think I'm gonna call anything easy because I think a number...
Yeah.
of our employees are listening to this call, and they'll say, "Mina, nothing we do is easy. We just do it very well." you know, what I would say is, look, I would look at it as being able to serve patients both with acute as well as chronic conditions are equally important, right? There are some that, you know, need our assistance, and we need to be able to serve patients very quickly on a same-day basis. There's other patients that are relying on the service us for years and years because, again, it's a chronic condition. you know, there's different aspects to it. Therapies may change over time. Their health condition for a patient may change over time if they have a particular chronic condition.
I think it's just different in how you have to go about it and, you know, how you think about the clinical support, the nursing support, the broader pharmaceutical relationships as, you know, therapies may evolve, et cetera. But they require different skill sets but still require a broad footprint with people who can service patients with all types of diseases that they have. Anything?
Yeah. Again, the breadth of our portfolio is one of our value propositions we're working with our payer partners that we can reach and service their members across the United States, whether they need an IV antibiotic or a more complex immunoglobulin therapy. Again, our the number of portfolios we have in our back pocket and the nurses we have to serve them does help us in those conversations as we are looking to help service their members across the country and across disease states.
Okay. Maybe skipping, you know, jumping the topics here. I wanna talk a little bit about the advanced practitioner model. Maybe just kinda give us an update on the development there, and maybe what percentage of suites are you aiming to convert sort of over the long run?
Sure. Yeah, our advanced practitioner model, we have really a footprint today of about 170 suites or so as we take a look at our, you know, across the United States. We are now up to over 25 of them that we consider to be part of our advanced practitioner model. First what that means is it gives us access or gives patients other access to us. You know, you're looking at as we look at it both ways, because we have a nurse practitioner that is part of our, you know, is part of a particular site, they can meet with patients that have more higher acuity diseases that are out there.
For us, what we've done is, rather than saying, well, we're gonna look at 170 different sites, and all of them are going to be under the nurse practitioner model, what we're looking at is where do we feel is the biggest need, the highest need, the largest patient population. For us, you know, the incremental work that we have to do that we've been doing over the past couple of years is really making sure we have the nurse practitioner resources in that particular site. There's, you know, other work that we've gotta be doing around the corporate practice of medicine and different licensing, et cetera, as we go from a state-by-state basis.
It really for us, it, you know, it helps us from being able to service more patients, and at the same time it helps us from an economics perspective where we already have a pretty broad, diverse footprint as we think about the number of our suites that we have and to be able to expand, the number of patients that we can see at a particular suite. You know, we talk about sweating the assets and, you know, this allows us to do that. While we're seeing a number of patients at home, you know, for, on a normal ordinary course, we have a number of patients we're seeing in suites, and now we're seeing an incremental number of patients as well under the advanced practitioner model.
The, uh-
You know, we really view it as a nice complement to our existing footprint, to Minal's point, and again, gives us additional, you know, an additional site of care that we can service patients at, as well as the higher acuity patients. It also does open up fee-for-service Medicare for us as well, as it's not currently does not have a large home infusion benefit that we're able to service those patients. A lot of different reasons why we're doing it, but to Minal's point, being thoughtful about where we were putting them and where that best fits into a hybrid model.
If I can just add, let me add one more point, is that, you know, one of the things we mentioned on our earnings call was the fact that we grew our patient visits in the fourth quarter under the advanced practitioner model over 20%. That was, you know, while we made an acquisition, we pro forma that, but really on an apples to apples basis, we grew our patient visits over 20%. You know, we feel good about the number of additional patients we're able to see, but also as we talk about the continued growth opportunities we have as a company, this is yet another one that we're, you know, with a limited amount of investment, we're starting to really see where that's a good part of our portfolio.
Can I ask a question where, you know, 'cause I think the attractiveness of home infusion, right, from an outcome standpoint, right, you know, patients recover better, they have better outcomes if they're able to recuperate at home? When you introduce the suites, it's almost like you're kinda going in reverse a little bit. Maybe talk about like what patients fit into that model versus others, and does that change sort of how you're going to market, or is it, you know, how do you kinda fit that into sort of the, you know, the historical, you know, kind of set up the value prop at Option Care kind of went to market with?
Yeah. You know, I would say really for us, the suites are really to provide patients with choice is really what it comes down to. As you point out, there are a number of patients that perhaps, you know, it, you know, if I might take an acute patient as an example, and they need to get therapy, their therapies for a particular period of time. They prefer to do that at home. It's more convenient for them. They're still recovering from a particular illness. Perhaps, as an example, you know, they prefer to have their therapies at home. We may have, you know, or we do have patients who have a chronic illness, right, and they will be on a particular therapy for the rest of their life.
For them, perhaps being at home and having to, you know, stay in a particular spot or, you know, on a particular day, perhaps that's not something they wanna do, and perhaps they want to go out and, you know, live their ordinary day and go out to lunch and then do their errands and, being able to take advantage then of the convenience of there being a suite as they're out and about, to be able to, you know, leverage that is maybe a different method for them. We've also seen there's other patients that, it gives them almost like a physical distance where home is my sanctuary versus if I have to go someplace else to go treat my illness, I can separate the two.
You know, the suites serve really a different place for patients to be able to get their treatments, but it's away from home. You know, I would look at it as, again, it's really about choice. There's, you know, we've seen the trend of patients wanting to age in place, and that's always available for them. Many times you've got, we've got patients who would prefer to do something like that outside of their home.
Okay. That makes sense.
We've been very thoughtful about where we've located these suites. Again, starting in 2021, we started really mapping out where the best locations for these would be, and they're really around the activities of the daily, everyday living for our, for our patient population. Again, these aren't massive centers. They are, you know, small column, 8 chairs at most clinics where you're not going into that hospital outpatient department with the much larger space. Again, very convenient to get to, very easy to get to. Good snacks.
Okay. You know, maybe switching gears again a little bit. You talked about investments in specialty areas such as oncology, neurology, rare disease. Can you talk about where do you see the growth opportunities in these areas? Obviously, you know, some of these drugs, it's a different sort of model for infusion, probably a lot more clinical oversight. Maybe talk a little about how can you fit into this model. There's already sort of an existing workflow, right? You know, particularly through you know, physician-owned clinics. Maybe talk a little about how you can fit into that ecosystem.
Sure. You know, again, we've been as we've talked about our, some of our investments this year around our clinical resources and around our commercial resources, you know, we are targeting them to make sure that we've got the right folks calling on the right prescribers with the right reach and frequency. Again, those are investments that we've made to continue to expand our presence. Also have had some good progress, as we've called out on the call, with some of our payer site of care initiatives. Again, we're working with various payers to ensure that they're taking a look at where their patients are receiving their therapy and determining whether or not that is the most appropriate place for them to continue to receive that therapy. Again, we've seen some really good traction on that this year.
I mean, we've had them in place, but given some of the pressures that they are on, again, working closely with both the prescribers as well as the payers, to ensure that we're being able to capture those additional volumes as they look to reduce the total cost of care.
Then last, in the few minutes that we have left, wanna talk about capital deployment. Obviously, you're expecting a good step up in operating cash flow this year. Maybe talk a little bit about your priorities. In particular, you know, I think the last couple years you've bought about $250 million worth of shares for the past 3 years. Can we kind of expect something similar for this year or maybe more given sort of the flexibility on the balance sheet?
Sure. Yeah. As I've just started in the past few months, one of the things and, you know, working with John Rademacher, our CEO, and Nicole and others in the company, you know, we've really tried to lay out a much more structured prioritization around our capital allocation, which aligns to our business strategy and many of the things we've talked about. Our first priority is really reinvesting in the business. I call it organic investment. You've heard us talk a lot about additions we've made with commercial resources, with additional clinical resources, really being able to continue supporting a broader base of patients. That's been a big part of what we've been doing. Also as part of that, is we think about, as we continue to scale, how do we think about scaling efficiently?
A number of investments we're making around operating efficiencies. We've talked about tools that we've used, you know, starting with the robotic process automation all the way to today, you know, much more leaning into AI and advanced AI opportunities. Really, you know, a big area of that is really as I think about the back office that's patient-facing and what can we do to streamline the processes around, you know, patient onboarding and benefits authorization and verification in a number of areas like that.
I'd say the third piece is, as we've talked about our, you know, 190 sites, 170 suites that are out there's always investments that we're making to make sure that these are sites that our patients feel very comfortable in and continue to, you know, be able to have the choice of getting their treatments at home versus suites. There are occasionally new sites that we end up building here and there or maybe consolidating as we have growth. I'd say, you know, that's really where we think about organic investment. Number 2 has really been around M&A. M&A continues to be a big focus for us.
I remind people, you know, there's a lot of work that we're doing to find the right, and the right assets that are a good complement into our portfolio, whether that's tuck-ins that you've seen us do in the past, adjacent areas as we continue to grow. That continues to be a focus for us as we look at opportunities for many of the growth vectors. Lastly, around share buyback. For us, share buyback is periodic, and by that I mean you're not gonna see us going into the market with a standard program for the full year. You know, where we feel like with our balance sheet, leverage is low, maybe, you know, we don't see an acquisition on the near-term horizon.
Maybe there's, you know, some market dislocation on our valuation, but those might be times where you'd see us going into the market and buying back shares. I think that structure really fits in well with the strategy of the business that we've been laying out.
I guess you're kinda saying it's more coincidental that the last three years has been roughly around $250 million or is in some of your mind, like, as we're allocating capital, if there's opportunities, you know, we can set aside X amount?
Yeah. I think, you know, we've been investing organically in the business.
Yeah
... for the past, you know, you've been talking about three years, so for the past three years. As I mentioned, hey, you can see us doing share buyback if maybe there isn't an acquisition, maybe there's market dislocation.
Yep.
We have an opportunity, I think at various points in time, all of those opportunities have arisen, which is why you've seen us periodically going into the market to buy back shares.
All right. Perfect. I think we're pretty much at time. Wanna thank you both for being here. Thank you all for joining us here in the afternoon. Enjoy the rest of your conference.
Thank you, Charles.
Thank you.
Thank you, everybody.