I received a few inquiries since the initial post on BioScrip Inc. ("(BIOS)" or the "Company") including a phone call from BIOS Investor Relations contact Craig Allison. Craig was frank about the issues facing BIOS as well as being open to increasing transparency in terms of the Company's various operating segments. Nonetheless, after speaking with Craig I continued my review of BIOS and concluded that irrespective of what the "plan" is, execution is paramount and BIOS management is not the team needed to execute in this environment. While CEO Richard Friedman may have had an enjoyable holiday weekend, I spent this past three day weekend working on a presentation that should hopefully cement the notion that BIOS management and Board members should be removed immediately.
Since the Q1 earnings warnings, shares in BIOS are down 70% and roughly 75% for the year. This would be somewhat excusable in this difficult environment, until one reviews the performance of BIOS against its peers in 2008, over the past 2 years, and over the past 5 years. During those periods, BIOS is essentially the worst performing stock amongst its peers. This makes the continued election of Friedman as CEO and continued tenure of BIOS Board members very concerning.
In addition, despite the awful stock performance of the Company, the Board continues to reward Friedman with higher levels of compensation. This should not be a surprise when one reviews the holdings of Board members and realizes that there have been just four insider purchases since 2006 and that the majority of Board members own a bulk of shares through free option grants, as opposed to actually paying for them like real shareholders. Board members receive a free annuity through laughably "earned" Board fees, so why take away the Kool-Aid when directors can bilk an average of $40,000 per member per year from shareholders for doing nothing but destroying value and ignoring Friedman's incompetence? Since they have no real interest in BIOS, Board members are better served not rocking the boat and collecting these fees every year.
What's even more frustrating is that despite reaching multi-year lows, Friedman has yet to make a single open market purchase, further expressing his own lack of confidence in his own abilities and the Company. Despite an $850,000 salary, Friedman refuses to spend a dime on buying shares in the Company he runs and his lack of faith in the Company is also echoed by Board members. They, for the most part, have been reluctant to purchase any shares, even a token amount like the 300 shares Board member Charlotte Collins purchased in September 2006.
Investors and those concerned with BIOS should review the presentation available at the link below. The Company has considerable potential with the right management team due to its fixed cost structure and growth in specialty pharmaceuticals. It's currently an average company run by horrific management and insiders. Shareholders should work together to remedy the current situation and install a real Board and competent management team that can reverse the Company's current direction.
For BIOS Presentation click here. (pdf file)
DISCLOSURE: AUTHOR MANAGES A HEDGE FUND THAT IS LONG BIOS.