GAMCO Investors and other funds managed by Mario Gabelli continue to aggressively add to their holdings in BioScrip Inc (NASDAQ:BIOS), having increased their position by another 719,418 shares, according to GAMCO’s latest 13D filing with the SEC. All told, GAMCO and its affiliates have now obtained nearly 7.3 million shares, giving them a 10.62% stake in BioScrip, with Gabelli Funds owning the majority of the aggregate stake, holding 4.89 million shares.
GAMCO Investors, founded in 1986 by incumbent manager Mario Gabelli, has been one of the most successful funds of the past three decades. With an equity portfolio now valued at over $18 billion, and assets under management of over $30 billion, the fund has kept pace with the ever changing financial industry, remaining both relevant and lucrative. In particular, their small cap picks have proven especially successful, beating the S&P 500 by several percentage points annually.
When we last reported on GAMCO’s bullish stance on BioScrip Inc (NASDAQ:BIOS), they had just obtained another 700,000 shares between August 7 and October 24, bringing their total up to 5.86 million shares. In another filing on December 4, they disclosed upping that total by another 700,000 to 6.57 million, leading up to the current disclosure of yet another 700,000 shares. That made them BioScrip’s largest shareholder among institutional investors at the time, a position they still hold to this day.
BioScrip Inc (NASDAQ:BIOS) has had a rocky run over the past 18 months, as its stock has crumbled 65% since a 10-year high on August 2, 2013. That downward momentum has continued right into this year, with the stock down over 16% year-to-date, to just $5.75. The pharmacy and home health care services provider’s most recent quarterly earnings report came in well below analysts expectations, with a reported loss of $0.42 cents per share on a net loss of $28.3 million, against an expected loss of just $0.02 cents per share. That followed a year-ago period in which BioScrip earned $1.6 million and $0.01 cent per share. Despite the losses, revenue did greatly increase from the year-ago period, rising to $244 million from $190.6 million.
Some of BioScrip Inc (NASDAQ:BIOS)’s recent woes are partly due to a kickback scheme they were implicated in, which involved Swiss drug maker Novartis AG (ADR) (NYSE:NVS) and their iron-reduction drug Exjade. In January, 2014 BioScrip agreed to pay $15 million in a settlement with the Department of Justice to cover costs related to the excessive Exjade prescriptions. Novartis suffered little ill effects from the revelation, rising 25% in 2014.
Those legal woes seem to be surfacing again for BioScrip, as it was announced yesterday that The Shuman Law Firm was launching an investigation on behalf of shareholders relating to the Novartis case and settlement. That follows an announcement last week that Robbins Arroyo LLP was also launching an investigation into certain officers and directors of BioScrip. It’s unclear whether the two investigations are related in any way.
Analysts are mixed on Bioscrip’s prospects going forward. While their revenue gains were solid, their margins were drastically slashed, and the pharmacy landscape is a difficult one, with many larger players. Zacks has a ‘Neutral’ rating on the stock, and a $7.25 price target. Barrington Research initiated coverage last week and gave the stock an $8 price target and ‘Outperform’ rating. First Call Corporation has rated them a ‘Strong Buy’.
Likewise, hedge fund activity from the funds we track has been relatively split on BioScrip, aside from GAMCO’s bullishness. A handful of funds opened and closed positions on BioScrip during the third quarter of 2014, while there was a good deal of both increasing and decreasing of positions. Brian Taylor’s Pine River Capital Management and Israel Englander’s Millennium Management were the most bullish on the stock, obtaining over 200,000 shares each during the quarter, while Mitchell Blutt’s Consonance Capital Management, one of BioScrip’s largest shareholders, sold off nearly 800,000 of their shares.
It was announced on December 30 that joint activist investors Cloud Gate Capital and Delaware Street Capital (DSC Advisors), which collectively own 3.9 million shares, giving them a 6.1% stake in the company, would seek seats on BioScrip’s board at their 2015 annual meeting, which is expected to be held sometime during the spring.