Option Care Health Inc. - Registered Shares Stock

Okay. Good afternoon or morning, everyone. My name is Erin Wright. I'm the health care services analyst at Morgan Stanley, and welcome to our 24th Annual Global Morgan Stanley Healthcare Conference. For more important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures.

And with that, we're happy to have Option Care with us today, CEO, John Rademacher; and CFO, Meenal Sethna. Happy to have you with us today. I think, John, you wanted to start out with some prepared remarks or some opening remarks, and then we'll get into the fireside chat.

Yes. Thank you for coming today. Great seeing you again. And as we exited the second quarter, just wanted to reinforce really the momentum that we feel within the business, the execution of the team. As we had called out, first quarter certainly had a step down in the performance as our expectations. And we really wanted to look at the second quarter to identify how to stabilize and then more importantly, start to build the momentum and move forward. And as we reported in the second quarter, that momentum, not only the stabilization happened, but the momentum continued to move forward.

And we really are excited about the breadth of the portfolio that we have really in the 3 areas of focus around our acute therapies, our specialty therapies and then the rare and limited distribution therapy set. And so a lot of activity, a lot of focus of the team around those 3 areas of making certain that we're best-in-class. And more importantly, that we are the partner of choice for our key stakeholders, whether it's a hospital system, whether it's a physician practice, whether it's a clinic, whether it's a pharma partner or if it's working with the payers and identifying opportunities to help reduce the total cost of care.

So really good progress, more to do, but like the momentum of the business and starting to build that path forward.

Okay. Great. So I'll start with your guidance in the most recent quarter, and you adjusted your expected 2026 CID or chronic inflammatory portfolio with Stelara kind of earlier this year, and that headwind moved to about $55 million from $25 million to $35 million originally. So though you've largely maintained your EBITDA guidance, which is encouraging, you're expecting mid-single-digit EBITDA growth in the third quarter and then a pickup in the fourth quarter. Can you talk a little bit about and walk us through that cadence into the second half. I think that's one of the bigger questions we're getting from investors as we think about mapping this out.

Sure. So why don't I start? And again, Erin, thank you for having us. So if I take a step back, our normal seasonal pattern does continue to consecutively grow or sequentially grow throughout the year. So that -- it's not unusual for us to have a larger Q4 versus when you take a look at things in Q1. Given some of what John talked about with some of the Stelara dynamics in the first quarter, this year, we started off with a slightly lower first quarter than we might normally see. And there are a number of different actions and initiatives we put into place that we expect to ramp a little bit more than we might normally see in prior years.

So as an example, we've talked about the fact that we have invested in a significant number of commercial resources starting in the fourth quarter, but going into the first quarter. So as we have these resources on board, productivity increases, their relationships with providers and referral sources continue to increase, we expect to see a continued positive sequential impact through the year, especially across the chronic portfolio on that area.

I'd say, secondly, a number of other initiatives that we have. I'd call them also ordinary course of business, but an increased focus on these where we continue to work with payers on site of care initiatives on really managing through the value realization as they're focused on lower cost of care, and we're a key enabler of that, making sure that we're being compensated for the value that we're providing. And at the same time, also working closely with suppliers and pharma partners as we start to see growth and volume growth in those partnerships what can we do to balance cost and cash basis there.

And then I'd say the last piece is we've also been talking for a while about technology investments that we've been making. We continue to make those. Those have been focused really a lot of that around the patient experience from patient onboarding all the way through the revenue cycle management. But as we continue to focus on reducing our costs through automation, that's going to be an opportunity for us. And we're even looking at opportunities for increased nursing productivity by leveraging more technology around nursing routing and scheduling, which allows them to then spend more time serving patients as well.

So I wouldn't call it one particular vector that we're focused on, but it's a number of different things that we're focused on to really drive the EBITDA expansion in the second half.

And have you built in some buffers around, for instance, how you've modeled CID census growth? And what if you -- how is that commercial productivity and efficiency initiatives playing out to offset that so far? Is that progressing according to plan? Or are there other levers that you can pull in the event that, that doesn't play out according to plan?

Yes. Coming out of the second quarter, as we said, we started to see some of that momentum. As Meenal had called out, that investment into additional resources in the commercial, it takes a while for them to ramp up and to become fully productive through that process. So all that starts to build on it.

One of the things we called out in the first quarter is with some of the shift that we saw in the patient census, the specialty products, those patients that have chronic conditions, that's a building census, right, in the sense of those patients are getting reoccurring infusions or injections through that process. And it might be in a 6- to 8-week regimen, sometimes a little bit longer depending on the therapy. So as that builds and that we stabilize that census and then start building and growing from that, it just creates more of that reoccurring revenue.

So our focus is really around getting the right team members at the right place at the right time. So a lot of that focus is around training and upskilling and getting them on board. It's around targeting and making certain that they're spending their time efficiently, effectively around where they're targeting. And it's deepening the relationships with the existing referral sources that we have to make certain that we're capturing as many of the patients as possible as they're looking for service providers for that patient census.

Okay. And then guidance also assumes into the fourth quarter, what's implied is about 400, 500 basis points margin expansion -- EBITDA margin expansion into the fourth quarter. I guess how do we think about the margins on a normalized basis as we head into 2027? Like what is that right baseline we should be thinking about and just thinking about some of those moving pieces as we head into 2027?

Sure. And I think on the EBITDA, I think it's probably more the 40 or 50 basis points margin expansion. If I take a step back and I look at the full year and I even think about comparing that to 2025, the margins that we're projecting for '26, we expect to be for the full year in the same reasonable range as they were for 2025. Why you -- one of the questions we've been getting is, boy, but the fourth quarter margin looks a little higher than it typically does. And I'd come back to, yes, but we had a lower than typical margin in the first quarter. So -- some of that is balancing that out.

And again, back to my comments about sequential seasonality uptick as we continue to have sequential revenue growth all the way up through the fourth quarter, we're getting better leverage on the fixed costs that are there, which normally provides a margin expansion. So it's really -- we've got more initiatives in the back half of the year. We expect more productivity from those initiatives, and that's really what would drive a higher margin.

Okay. And then so bigger picture, can you speak to Option Care's long-term growth outlook now? When do you think you can return to those levels following kind of some of the dynamics that we're seeing with Stelara and others? Is it high single-digit revenue growth, low double-digit EBITDA growth and EPS growing slightly higher than that is still the right way to think about it?

Let me frame it at the highest level, and then I'll let Meenal kind of talk about the process and how we're looking at moving forward. Coming out of the first quarter, our expectations were we needed to really understand kind of the dynamics and the shifting dynamics that were different than we expected, especially in that chronic inflammatory portfolio as we're moving that ahead. And we wanted to see how that patterned into the second quarter. And again, we're pleased to be able to report a stabilization and kind of the momentum that we felt out of that.

From our perspective, we see that there are vectors of growth as we're looking at that forward view that we're excited about. We continue to drive extreme amount of value in the acute therapies in helping to manage patients safely and effectively to transition out of an inpatient setting into the home and manage them effectively through that process. The product portfolio within the specialty space continues to expand, and there are great opportunities for us to capture more of that market share as we're deploying additional resources on that.

Our capability set when you look at a national network of highly advanced pharmacies as well as the clinical capabilities with our nursing network is unique in the marketplace. And so to be able to partner with pharma to be able to introduce new products and support that through its journey, we feel we are really well positioned to do that. And the conversations that we've been having with payers around helping them manage the total cost of care and their medical loss ratios around utilizing our capabilities, those site of care initiatives, again, continue to pick up momentum through that standpoint.

So I'd say at a whole, across those dimensions of where we see and where we play today, we think there are opportunities for us to continue to drive that growth and utilize our national scale, but our local responsiveness in ways that captures more of the demand that's in the marketplace.

So I'll put it around that, Erin, to contextualize our confidence in this model, our confidence in this business remains intact, trying to understand some of the implications of the chronic inflammatory disease, we just want to be very thoughtful in the way that we approach it.

Yes. And as we start thinking about getting into 2027, we like other companies that have a year-end, December 31 year-end. We're finalizing the long-range plan, and that -- then nicely tends to dovetail into the budgeting process. It's a little early for us at this point to get into what that looks like for 2027 and beyond. But in the coming months as we find the right time frame, we'll definitely be providing more color both on '27, but with some of the aspects that John just talked about as we think about that longer term as well.

Yes. I think sometimes it gets lost in the whole Stelara dynamic, the bigger picture here in terms of the solutions provider across the health care system more broadly. But I do want to dig a little bit into the portfolio, and you've given some great metrics in terms of 4% or no more than 4% of your gross profit is tied to one product. How do you think about therapy -- line of therapy kind of exposure and dynamics around biosimilars or price changes or subcutaneous transitions and how you can kind of navigate that going forward? And how -- I think you're limited in terms of your outsized exposure, but how do you potentially limit that even further going forward?

Yes. We start with the breadth of the portfolio. When you look at how broad the portfolio is and the expansion of bringing new products in, that is front and center like the focus of the enterprise. And we like the fact that we can provide everything from the acute short-duration antibiotics through the most sophisticated specialty drugs. And that shows not only the breadth, but the depth of the clinical team and our capabilities in order to do that.

As you're looking forward around just the diversity of the portfolio, and you called out, I mean, there is no product that is more than 4% of the revenue. And so that just demonstrates the breadth of the portfolio as we move that forward. I think we called out in previous conversations, we have over 600 products that are part of our portfolio, and that's growing every day as our team kind of looks at those opportunities.

The opportunity to support from a specialty pharmacy standpoint, we are a specialty pharmacy. We're URAC accredited. We maintain patients that move from IV induction dose on to subcutaneous. It's part of our normal flow. There's different dynamics associated with that with the economics when -- again, you don't have nursing and other components involved. But we are a full spectrum pharmacy, and we do have that specialty pharmacy capability to continue to support patients on their journey and then wrap around that the clinical competencies of the enterprise.

So sitting here today, there's nothing that we're looking forward that is a significant disruption over that midterm horizon. The products we're watching have dynamics of having a competitive environment today anyways around alternatives in the marketplace. And a lot of our focus is around the new products that are being developed that are moving through the product pipeline and making certain that we are a partner of choice for pharma to introduce those products as being part of our formulary, whether it's in a limited distribution network or in a full spectrum network, we want to be part of that pharmacy solution for them and care team to expand the portfolio broadly.

Okay. And then I want to speak about kind of biosimilars just more broadly, kind of where are some of the puts and takes as you think about how it flows through your model, how you think about how PBM-owned or private label biosimilars like what we -- the dynamic we saw with Stelara and formulary exclusions change that traditional pattern of biosimilars, although I think that it's going to be defined to certain categories, right? And help to explain that in terms of that dynamic and how you think about more broadly biosimilars flowing through?

Do you want to talk about the model first, and I'll talk broadly.

Yes. I mean, first, I'll start out with -- I know we've had a lot of dialogue about Stelara, but Stelara was a pretty unique situation as I start out with that. We talked about a -- I think the way we've described it to many people, it's really we had a branded product with some pretty strong margins, generic like margins. And so we really don't have other products in our portfolio with that type of profile.

What we typically see with biosimilars, and this has been the history we've had on a number of different therapies is as there are biosimilars that have come in because of some event, an LOE event as an example, there's a fair amount of competition that starts in there, which tends to be quite advantageous for us because when it's just a single branded product, that isn't the case. And so with that competition and even with the pricing, the pricing may drop a little bit initially, but we do tend to see improved gross profit as that -- as you see more entrants in that space. And then with -- also with some volume increases as well, that can turn into improved profitability profiles for us overall. So that's more of a typical profile of what we've seen when we see a few biosimilars come in, and it's a big part of our portfolio as well.

Yes. And the only thing I'd add, Erin, is the uniqueness of the situation with Stelara, there's about 10 biosimilars that all entered in a pretty tight time frame. That created a really interesting dynamic when you then had the IRA backdrop of a 66% reduction in the branded pharmaceutical price. So again, sitting here today and looking forward, there really is nothing else in our portfolio that has the similar characteristics. And in a normal process, right, if you expect that there's going to be rational economic decisions that are being made, that ability to bring a biosimilar into market, there has to be an incentive for that biosim manufacturer to have enough volume to be able to support that development and growth and moving forward.

And we expect that when those happen, as Meenal said, it normally creates a very interesting dynamic for us as that glide path of the reference price begins to move down from the branded pharmaceutical price into a biosimilar type of environment and our opportunity to use our scale and our patient census in order to negotiate best acquisition costs through that process.

So we're going to continue to manage and learn from this experience that we've gone through. But we think the dynamic set up pretty well. And again, we're supportive of biosimilar introductions. We think we've got a great platform. We've got an existing patient census in which we're managing. And the clinical competencies that we have that can wrap around those patients is really an important aspect of the value that we bring.

Okay. Let's talk about acute. You mentioned that being a key driver for you and it grew high single digits, for instance, in the second quarter. That's above the underlying market. What are some of the key drivers in acute or any subcategories to note on that front? And how much are you still benefiting from kind of your competitive positioning in terms of some of the competitor exits and what's durable into 2027?

Yes, I'll start at the high level. So we have lapped the competitive closures. So from that aspect, we don't believe that we're feeling much other than the goodwill that was created. As people exited the market, we stepped in. And our team did a really great job of responding to those market dynamics that, again, weren't signaled broadly in the marketplace. And yet our team stepped in and was that partner of choice for discharge planners, for hospitalist, case managers in order to help to facilitate that transition out of the hospital into the home. So our team did a lot of great work there in order to do that.

And again, that developed those deeper relationships with the hospital health systems. We continue to invest in the commercial resources of embedding nurses into more hospitals to be that partner of choice to identify patients that are stable enough to be discharged but still require an infusion as part of their care plan moving forward. And we're continuing to take a look at it from that perspective.

As we look at the market in general, we're under-indexed in some markets. I mean we look at MSA level. I've mentioned before, we like our national scale and the consistency that we can drive across the country with that infrastructure, but health care is still local. And so that opportunity that we have to continue to deepen those relationships, invest in those relationships to capture more of that demand and really drive that forward, I'd say there still is opportunities for that above-market growth from our perspective. That is a broad portfolio of products. Most of those are generic in nature, whether it's the antibiotics nutrition support or other products like inotropes and other things that support those acute discharges.

And so there's opportunities for us to also look for procurement savings as well as we're thinking about ways that we can use that scale in order to make certain that we're getting the best landed cost from an acquisition for some of the inputs on the nutrition as well as the generic products in the antibiotic space.

And I would just add, we talk about the fact that our business is a hospital business as we talk about it. It's really patient by patient. You can really see that as part of the acute business, right? Because it's -- it tends to be -- our referral sources are with our hospitals and health systems that are out there. And these tend to be patients that are coming out of the hospital and need to be -- they still need treatments on a same-day discharge. So you get a phone call, you've got to react very quickly. You've got to be prepared to have a nurse and you've got to have the infrastructure to have nursing to have the therapy delivery to the patient often same day.

And so that's why I think you see a lot of competitors have exited, but we've continued to grow them because we've built out our capabilities and with the foundation that we have that John talked about, we've really figured out the right way to succeed in that space, which has been challenging, I think, for others. So that's why we look at it as further opportunity to gain additional share.

Okay. And across IVIg or Ig and neurology, momentum has been building throughout 2026. I guess what's driving some of this strength? And how do you think about VYVGART or VYVGART Hytrulo and that impacting that portfolio?

Yes. We had called out both first quarter and second quarter that we continue to see momentum within the Ig neuro category broadly. And that's across a broad, not only formulary within the Ig space and the subcutaneous Ig space, but also some of the emerging products in neuro, whether it's cognitive impairment or other products within that.

We had called out that fourth quarter of last year and really into the first quarter of this year, we continue to invest in the commercial resources in that group of our team that focuses around those call points of Ig neurology as well as in support of hospitals that have specialty capabilities within that space.

The team continues to make really good headways in not only developing and deepening those relationships, but also serving those patients well. When you look at our patient satisfaction scores in the 90s, you look at our Net Promoter Scores in the 70s, like we're doing the things to not only put the patient at the center of everything that we do and really deliver that extraordinary care, but also wrapping around the service model in which we're getting high value from a Promoter Score basis based on the services that we provide.

So as an organization, that has been an area of focus of kind of putting the team better division around their call points, those relationships that they're developing and then their focus around really capturing more of that market demand. And then we have a team that focuses around the other specialty areas that really drives around those call points and the value proposition that we have for those therapies.

And one more on the portfolio, rare and orphan, you mentioned adding new therapies in this category, some going live late 2026 and into 2027. I guess, can you provide more specifics around some of the newer programs, the disease states that they address? Any sort of expected contribution? Will these move the needle for you? And your ability also to compete on that LDD -- for some of those LDD type of relationships?

So I'll start at the highest level on the compete on the LDD and the platform and how unique it is when you think about what we're able to do. So the conversations that we have with our pharma partners as they're thinking about what is their go-to-market strategy, their channel management process really is focused around access -- and whether that's your pharmacy infrastructure and your ability to reach and get to the patients, it's access in your payer relationships and the ability for them to have broad access for the product. It's the clinical capabilities of the enterprise, both at the pharmacy as well as at the point of care. And it's your infrastructure to be able to serve in the home or in a facility.

And so when you look at what we have as an organization, what we've built, it is very unique in that platform. And it is one that really resonates well with pharma through that process as they're making their selections of who to partner with, especially when they have a medically complex patients, a medical -- a complex therapy that may require additional manipulation or aseptic compounding to be able to dispense that into the marketplace or that nursing network that can wrap around and provide consistent high-quality care.

So that is part of the way that we put the value proposition as we're engaging with pharma around what we can do and how we can drive that forward. And we think we're extremely well positioned in order to do that. Then you start to take a look at the clinical competencies of the enterprise and then the way that we can manage those unique patients, not only in deploying training and clinical protocol at point of service so that our nurses can be trained and educated and qualified in order to do that, but also in the way that we're developing the care management plans in alignment with what the pharma partner wants to do. And so those are capabilities that really, again, continues to position us well and position us uniquely in the marketplace.

We had called out that we had won a few limited distribution rare. The only thing I'll caution is they're a little bit choppy in the sense of a lot of that has to do with how the pharma manufacturer goes with their commercialization and their rollout. Some of it is the recruiting of patients on the service, and these are high-dollar products that normally carry a little bit lower margin within that process, and you'll see a ramp over time.

So what we had called out, there were some delays, but we're seeing them move into portfolio today, and we expect we'll start to see that into the fourth quarter, but it won't be a material impact in 2026, but it will build then into 2027 and beyond. And we have a very fulsome pipeline of products that we are engaged in today that we are working with manufacturers to be a partner of choice as they're making decisions around their channel partners moving forward, and we believe that will continue into '27, '28 and beyond.

Okay. Great. So I want to ask a regulatory question. So just CMS proposed kind of to expand Medicare coverage for certain home infusion pumps and drugs. You said it was narrow, I think, as you've previously commented. But how do you think about that multiyear opportunity if CMS were to meaningfully expand in terms of home infusion -- in terms of the home infusion benefit? And also, anything else to keep in mind from a regulatory standpoint that's really top of mind for you?

Yes. We've been consistent and a strong advocate of expanding access to the home for the elderly, right? And for those that are participating in Medicare fee-for-service programs. I mean we have been one of the leaders in alignment with the National Home Infusion Association of really trying to drive this forward. At this point in time, it's hard to hazard a guess of anything moving forward in Washington along those lines, just it will require bipartisan support and that's a little bit elusive at this point in time.

The product that you had mentioned and really the expansion there, it does create a -- it's very narrow, but it creates a unique opportunity for expansion of -- with an infusion pump of products into the home through that process. Again, we're partnering and trying to support that product as we move forward, but we think it's narrow. But we think it does demonstrate the value of an expanded benefit for Medicare beneficiaries. We're using that to educate and expand the understanding of the value that can come there.

And more importantly, the savings it can drive to the U.S. taxpayers in the sense of if you can be able to serve these patients with high quality of care in these lower-cost settings, there's a real benefit to Medicare and the Medicare fund associated with that by taking waste and cost out of the process.

Okay. And then anything else from a regulatory perspective, whether it's in the IRA that you're really focused on and then also 340B exposure, if you could comment on that?

Yes. On the near-term horizon, there's nothing in the IRA that really has a significant impact on our portfolio. As you're then starting to look with 340B, again, a lot of conversations going on. Certainly, pharma is putting some restrictive aspects around the way that they're looking at products that would be qualified for 340B. We support 340B today, and we work with our health system partners along those lines in support of patients that could qualify for those savings. We pass those savings back to the hospital.

So from an economic standpoint, it really -- we look at if there is a restriction in 340B and that moves in a different direction. It may create opportunities for those volumes to come our way where it may be done by a hospital specialty pharmacy that no longer can continue to do that. It may move in our direction. And we also continue to support as a contract pharmacy, those 340B programs in order to provide those savings back to the health system for any qualified patients under the definition of the 340B program.

But at this point, you don't see any sort of fluctuation there in terms of contribution?

It's product by product that you're seeing in the news, but we don't see a major -- a significant change in the program, at least over the near term.

Okay. I want to talk about the footprint. You've added 5 new ambulatory infusion centers or clinics in the second quarter. That still is a key component in terms of complementing your pharmacy model. And then you also have these 32 locations that you're -- with advanced practitioner capabilities. Can you talk about sort of how you think about the bigger picture view of sort of the footprint of Option Care longer term?

When you look at the footprint of Option Care and kind of what we are designing, it really is focused around that ability to serve patients in the best setting possible and expanding the access more broadly. And so the program that we have in place and what we're driving to allows us to be focused around if a patient needs to be served in a facility, we can serve them in a facility either under the practice of pharmacy in one of our infusion suites or we can serve them under the nurse practitioner model in one of our clinics.

This is important because of some of the things that you just talked about. If it's a patient that could qualify for 340B, that ability to actually run it through the pharmacy and the pharmacy benefit allows that health system to be able to participate in the savings there. If it's a patient that doesn't have broad access and doesn't have a benefit for home infusion, it allows through the nurse practitioner model to really expand and to be able to address what is a market that cannot be addressed by the pharmacy.

So we look at this omnichannel approach to be able to be better positioned to support the needs of the patient first and then align it around the different mechanisms that are available either through the practice of pharmacy or through the physician office fee schedule, which the nurse practitioner would qualify under in looking for the best path for that patient and for the service.

Okay. And then lastly, Meenal, can you talk a little bit about how you would characterize the capital deployment priorities overall? Near-term focus has shifted a little bit more towards internal investment and share repurchases with $150 million repurchased in the second quarter. How do we think about that going into the third quarter? What's embedded into the second half in terms of guidance? And then how do you compare kind of expected returns from some of the organic investments, the repurchases -- repurchase activity going forward as well as M&A opportunities?

Sure. So we -- historically, we've always prioritized internal organic investments as our first priority. There's a number of areas. John just talked about the ambulatory infusion clinics. That's been a big area. We've also talked about a number of the technology and technology advancements that we've been doing for the past several years as well. So those -- and then commercial resources, et cetera. So that -- we find that, that has a direct much quicker impact to the business. And so that ends up continuing to be our priority there. We did more recently, but we've been doing this in the past few years where we've been buying back our shares. It's a positive way of return of capital to shareholders in a shareholder-friendly way. And so I know a number of our investors, we get feedback on that, and they've appreciated that.

But at the same time, I don't want to lose sight of acquisitions. What we've been talking about the past few years have been more around adjacencies and tuck-ins. And when you think about the breadth of the portfolio that John and I have been talking about, whether that could be hospitals that are making decisions on, can I run my outpatient center economically or not? Is that where we can continue to be a partner. The industry, the broader infusion industry is also still quite fragmented. And so there's a number of opportunities for us to go and take a look at assets in that fashion. So that continues to remain a strong contender on our list of how we think about capital allocation.

Okay. Great. Thanks so much for the time. We really appreciate it.

Yes. Great. Thanks, Erin.

Thank you.

Good day, and welcome to the Option Care Health Second Quarter 2026 Earnings Call. [Operator Instructions]. I would now like to hand the conference over to your speaker, Mr. Bob Okunski, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Option Care Health's Second Quarter 2026 Earnings Conference Call. With me today are John Rademacher, President and Chief Executive Officer; and Meenal Sethna, Executive Vice President and Chief Financial Officer. Before we begin, a reminder that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from our expectations.

We assume no obligation to update any forward-looking statements, except as required by law. We will also use non-GAAP financial measures when talking about the company's performance and financial condition. For more information on the specific risks and uncertainties as well as our non-GAAP measures, we encourage you to review the information in today's press release, which is posted on the Investor Relations portion of our website as well as in our Form 10-K and 10-Q filed with the SEC.

Finally, for the question-and-answer portion of today's call, we ask that you limit questions to one question and one follow-up per participant. With that, I will turn the call over to John. John?

Thanks, Bob. Good morning, everyone, and thank you for joining us. We're pleased to share updates on our second quarter of 2026 today. Before I do this, I want to take a moment to say thank you to the Option Care Health team for their unwavering commitment to the patients and communities that we serve every day. I am grateful to our team members whose dedication to clinical excellence, patient outcomes, and service quality continues to differentiate Option Care Health in the marketplace.

Their efforts continue to strengthen our foundation and have contributed to the positive momentum we are seeing across the business. And as recognition of the great work our team does on a daily basis, we're incredibly proud to be ranked #15 on TIME's World's Most Impactful Companies of 2026 list that was presented by TIME and Statista earlier in the second quarter. At a high level, as the nation's largest independent provider of home and alternate site infusion therapy, our strategy is built on a national scale with local responsiveness.

Our comprehensive network of home infusion pharmacies and infusion suites, URAC accredited specialty pharmacy centers of excellence, along with the breadth and depth of our nursing resources uniquely positions us in the marketplace. We combine consistent high-quality clinical care with local access, leveraging our platform of infusion suites and clinics to drive clinical innovation while meeting patients where they want to be. This model not only helps us deliver reliable clinically excellent care for hospitals and health systems, specialty physician practices and health plans across the country, but also positions us as an important solution to help drive down rising health care costs.

And our platform provides broad payer access, expanded pharmacy capabilities and a robust nursing network that can oversee patients in their home or one of our more than 190 facilities, making us a strong solution for pharma partners who require these services from a channel partner in support of their medicines. Turning to our results. We delivered a strong second quarter performance, reflecting the strength of our operational execution and the positive impact of our 2026 strategic initiatives and focus on recovery.

Although I am pleased with our progress in the second quarter, I am not satisfied with our performance, knowing we have much greater potential given the strength of our platform and the quality of our team. In the quarter, revenue, adjusted EBITDA and EPS were all ahead of our expectations, and we had a strong quarter of cash generation. Additionally, we repurchased $150 million in stock under our buyback program in the second quarter, reinforcing our commitment to disciplined capital allocation and shareholders returns.

Finally, we made significant progress on many of our strategic initiatives to position us for long-term growth. Diving into revenue dynamics within our acute therapy portfolio, we posted another strong quarter of organic growth in the high single digits as we continue to be the partner of choice for many hospitals, health systems and providers. As a reminder, acute is a very time-sensitive and local therapy platform, requiring close coordination with hospitals and health care providers to safely and effectively transition patients to home-based environment, and we do this on a national scale.

Our ability to consistently deliver for providers and their patients drove another quarter of above-market high single-digit revenue growth. With acute, we saw both sequential and year-over-year growth across all key therapeutic categories and the number of patients served. Looking ahead, we expect our acute portfolio to continue to grow faster than the broader industry as we deepen our partnerships with hospitals and health systems. Across our chronic platform, revenue for the quarter was in line with last year and up high single digits sequentially from the first quarter.

Breaking this down across the larger therapeutic categories we serve, we delivered another strong quarter in IG/neuro portfolio, showing sequential and year-over-year revenue growth. We remain excited about the opportunities in this portfolio and expect to continue the momentum as the key drivers for the company moving forward.

Across our chronic inflammatory portfolio, as we refer to as CID, we began to stabilize our portfolio coming out of the first quarter reset and saw our second quarter patient census rise sequentially. As we move through the remainder of the year, we expect to further grow our patient census in CID products as we monitor this patient base and product mix closely. Our rare and orphan portfolio also delivered solid results for revenue growth, both sequentially and year-over-year.

Growth was broad-based across a range of therapies and reflect our close relationships with our pharma partners and the strength of our clinical capabilities. We are excited about the momentum we are building and continue to focus on expanding our rare and orphan portfolio and have added new therapies to our portfolio.

Some of these will not go live until late 2026, early 2027. However, this is a sign of strength of our offering. We believe we possess a competitive advantage given our national scale with local reach, broad market access for both pharmacy and medical benefits, along with consistent clinical execution through our dedicated program teams. This, combined with specialized data capture and reporting positions us as a strong partner for pharmaceutical manufacturers. We remain confident in the strength of our platform to support these clinically complex therapies and the value they provide for our patients and partners.

Additionally, we have made good progress on advancing on our strategic initiatives to sharpen our execution, improve our operational competitiveness and identify the best opportunities to invest in the business to resume our growth trajectory. These initiatives include strengthening our commercial team, enhancing our go-to-market strategy and improving our operational effectiveness.

Additionally, we have realigned resources and rebalanced coverage across our top specialty practices and accounts to increase reach and frequency and drive growth. Technology and data analytics also remains important enablers of our strategy as well. We are continuing to invest in artificial intelligence, digital tools, workflow automation and advanced analytics that improve care coordination, reduce administrative complexity and enhance the experience for patients, referral sources and employees.

We believe these capabilities will become increasingly important as health care continues its transition towards more connected, efficient and patient-centered models of care. We are also advancing a coordinated set of technology and process improvements across a number of areas to provide a more frictionless experience for our patients and providers. These investments include developing tools in areas such as patient admission and onboarding, claims processing and patient communication.

Additionally, we are deploying technology solutions incorporating artificial intelligence to improve field productivity and operational effectiveness while improving profitability. Our approach with these initiatives is to combine advanced technology with experienced teams to identify patient requirements earlier, strengthen authorization and claim submission and reduce repetitive work.

Ultimately, we believe the application of artificial intelligence will reduce the cost of health care while improving clinician efficiency, enabling them to spend more time with their patients. Finally, we further expanded our ambulatory infusion clinic footprint, adding 5 new facilities in the second quarter. Utilization of these facilities continues to expand with visits growing more than 20% year-over-year.

We are now operating with advanced practitioner capabilities in key markets, and we will continue to drive performance through deeper partnership with local providers. These trends reinforce our confidence in clinic-based growth as an important complement to our pharmacy model. And we continue to leverage our entire network of infusion suites, conducting over 35% of our nursing visits in one of our suites or clinics during the quarter.

In closing, I want to again thank our team for their outstanding work and commitment. The strength of our second quarter results reinforces our confidence in the underlying fundamentals of the business. While we are encouraged by our progress, we are not satisfied with the results. There are still significant opportunities to improve process, enhance productivity, strengthen patient access, expand our clinical reach and drive growth.

Our team is committed to continuous improvement and to delivering sustainable long-term value for our patients, partners and shareholders. And with that, I will turn the call over to Meenal. Meenal?

Thanks, John, and good morning, everyone. Our second quarter revenue was $1.4 billion, up 2% compared to last year and up 7% sequentially. We had strong execution across our acute portfolio with chronic showing strength in our IG/neuro and rare orphan platforms. As John mentioned, we were encouraged with the stabilization in our CID therapy portfolio. Gross profit dollars grew 2% sequentially with a slight decline versus last year.

As a reminder, our 2026 full year revenue and gross profit projections incorporate the CID portfolio headwinds we noted last quarter. We continue to expect year-over-year revenue headwinds to be approximately 600 basis points and the gross profit headwind to be $55 million. And we continue to expect STELARA and related biosimilars will represent less than 1% of 2026 company net revenue and gross profit.

SG&A declined 3% versus last year to approximately 11% of revenue, primarily driven by lower indirect labor costs and the benefits of our expense control initiatives, including a reduction in variable compensation. We continue to invest in commercial resources to support future growth. Adjusted EBITDA of $117.5 million was up 3% over last year and up 12% sequentially, reflecting our second quarter revenue growth, improved operational efficiency as well as SG&A savings.

Adjusted EPS was $0.45, an increase of $0.04 over last year with an uplift of about $0.03 from the benefit of share repurchases. Our operating cash flow finished very strong in the quarter at $184 million. This was led by benefits from a number of our working capital initiatives we implemented over the last few quarters. Our balance sheet remains strong, and we ended the quarter at a net debt to leverage ratio of 2.1x.

Finally, we remain committed to our current capital allocation strategy. As a reminder, our near-term capital allocation priorities start with organic investments to drive revenue growth, capacity and optimization of our cost structure. Second is return of capital to our shareholders through periodic share buybacks. During the second quarter, we repurchased $150 million of our shares, representing nearly 5% of our shares outstanding. This reduces our share repurchase authorization to $525 million.

And lastly, we continue to evaluate potential acquisitions, focusing on adjacencies and tuck-ins that align with the breadth of our portfolio. Moving on to our full year forecast, our revenue guidance remains unchanged in the range of $5.675 billion to $5.775 billion. We are narrowing both our adjusted EBITDA and EPS ranges as has been our historical practice through the year. We now expect adjusted EBITDA to be in the range of $480 million to $495 million, and we expect adjusted EPS to be in the range of $1.85 to $1.92.

Our EBITDA and EPS guidance reflects a number of actions we continue to take, including initiatives to drive additional revenue and gross profit growth, implementing programs to drive further reductions in our cost structure and reducing operating costs, including other cost management initiatives and variable incentive compensation. We continue to expect SG&A growth to remain at or slightly below gross profit growth for the full year 2026.

Additionally, for the year, we're maintaining our estimates of net interest expense to be in the range of $50 million to $55 million and a full year tax rate range of 26% to 28% -- we are also maintaining our operating cash flow target of at least $320 million for the year. Similar to last quarter, I also wanted to provide some color on the third quarter for modeling purposes.

The following assumptions are on a sequential basis, reflecting third quarter growth over the second quarter of 2026. For the third quarter, we expect sequential revenue growth in the low to mid-single digits with sequential EBITDA growth in the mid-single-digit range. We anticipate seasonality to be consistent with prior years with sequential growth through the year. And with that, I'll turn it over to the operator to open it up for questions. Operator?

And our first question will come from the line of Lisa Gill with JPMorgan. Your line is open.

I just wanted to ask a numbers question. I just want to understand 2 things. One, based on the guidance that you've given for the third quarter and I look at the margin, can you maybe just talk about the mix that you're expecting when I think about what the margin implied guidance is? And then your thoughts on cadence for the third and the fourth quarter?

Sure, Lisa. Yes, as we think about the Q3 guide, and I know there's going to be questions coming up about revenue and our progress on revenue growth. We're making some broad assumptions where, as an example, in the second quarter, we talked about high single-digit acute revenue growth. We expect that to continue as we think about the year.

We're making good progress on our chronic side, and we'll talk more about our CID performance, but we're seeing patient census growth there. We expect that to continue as we progress through the year as well. And then just other initiatives that are going on around site of care and other areas as well. So I would say we would expect the revenue mix to continue, but also recognizing a bit that we'll see probably more growth coming through chronic as we continue to progress through the year.

And just as a follow-up. So is that what's driving -- if I just look at, again, the growth versus the expectation of us and the Street is stronger growth on the revenue line. And so obviously, chronic is generally more expensive of drug than we see on the chronic side, but the margins are generally a little bit lower. So is that the right way to think about it?

And if I just look at kind of the midpoint of what you're talking about for each, we're talking about roughly a margin in the 8.3-ish percent range as we get into the third quarter. I just want to make sure we're thinking about this correctly as we start to see that improvement here moving into the back half of the year.

Yes. I mean I would think about that mix as we talked about. I guess I'm just trying to understand the exact question. Are you saying, is it revenue mix?

I just want to make sure we understand. Yes. Well, I just want to make sure I understand like the revenue mix and what that means to margin, right? So when I think about the adjusted EBITDA sequential growth that you're talking about. So again, if we use that 5% is the midpoint of a mid-single-digit number, and we use the midpoint of 3% growth on revenue, that's going to put the margin on EBITDA somewhere in the range of 8.3%.

I just want to make sure that we're thinking about that correctly, and there's not something else that we need to consider. And how we think about all of the initiatives that you have, et cetera, right, on that margin impact. And again, the mix to what I talked about chronic versus acute. I just -- again, I just want to make sure we have this correct.

Sure. No, that makes sense, and thanks for the clarification. Yes, the assumptions and how you're thinking about it makes sense, I would say that's pretty reasonable and in line with how we're thinking about our guidance for the third quarter.

One moment for our next question. That will come from the line of David MacDonald with Truist. Your line is open.

John, I just had a quick question. I mean on the first quarter call, you laid out a handful of different initiatives broadening the specialty call points, expanding the commercial team, realigning resources. You touched on a couple of them in your prepared remarks. I'm just curious if you can kind of give us a little bit of an update in terms of -- since you guys have put those in place, and I realize it's early, are there a couple of those that are gaining traction pretty quickly?

Which ones should we think about being more on the come as we get through 2026 into 2027? Just any additional perspective on some of those initiatives and the timing of impacts would be helpful.

Yes. Dave, thanks for the question. Very good progress on the reset that we had identified within the commercial team and realigning those resources. In my prepared remarks, I did call out we realigned the resources around the call points. We look to expand reach and frequency. We have put additional resources in place as well as realigned some of those resources. within the markets that they serve.

And I'd say that is indicative of some of the comments around, number one, the stabilization of the CID census and beginning to grow again in the second quarter, the strength of what we saw within our IG/neuro portfolio and again, the capture of the market demand by reaching into those call points. So the reach and frequency continues to improve from that standpoint.

And the ability for us to deploy some technology that helps us better target our activities was also deployed. As you called out, these things take time, and we expect that it will continue to build as we go through the back half of the year and continue into 2027. But I'm pleased with the progress that the team is making. I know there's a lot more opportunity that sits before us as we drive that forward.

But that commercial go-to-market strategy and the alignment of the commercial resources, I'd say we made significant headways in the quarter of setting the right framework and putting some of the pieces in place to drive that growth as we move forward. The only other thing I'd tell you, Dave, is we did make significant progress in the deployment of some of the advanced technology and artificial intelligence within the portfolio.

As we have called out before, a lot of that sits in back-office capabilities, but things that help support nursing optimization and getting our nurses more productive and efficient by route optimizing and looking at scheduling on that. We look at things around deliveries and optimizing the delivery and the path that we utilize for that. We're deploying the technology to really help our patient registration and onboarding aspect.

And again, really solid progress in either deploying some of that technology into test markets and expanding from there or deploying it broadly as part of enhancements that we put into our base technology solutions. So good progress there, and I think you saw that in the results in the second quarter, and we expect that's going to continue to build momentum as we move through the back half of the year and then continue with our focus in driving growth over the near and long term.

Okay. And then just my quick follow-up. Look, John, I know you mentioned still work to be done. But as we think about STELARA and that kind of finally being put to bed and just some of the momentum that you're going to build throughout the year, not asking you to comment on '27, but how do you think about just getting back to a more normalized cadence relative to the long-term growth algorithm and just how we should think about that?

Yes. We are putting the pieces in place right now to drive the performance of the organization. As I said in my comments, good progress. We knew coming out of the reset in the first quarter, we need to be building on that and feel as if we're making progress against that and continue to push that as we move through the second half of the year. As you would expect, we'll be a little bit elusive.

We're not prepared to give '27 guidance on that. But we like the building momentum that we have. We like the build that you see in the back half of the year as we're looking quarter after quarter. And our belief is that we're putting the right pieces in place. There's still more work to do.

The team is focused around continuous improvement, and we will be driving that as we move forward. But we like the pace, and we think that we can continue to push on the sequential growth and getting back towards the growth view that we've had in this organization and being able to be the partner of choice with our referral sources and being able to continue to expand our patient census as we move forward.

One moment for our next question, and that will come from the line of Brian Tanquilut with Jefferies.

Meenal, when I think of the guidance that you've given here, especially with Q3, it looks like there's a step-up implied in Q4 that's sort of in the 11% to 19% quarter-over-quarter range. Just curious what drives that when considering last year, that number was like 7% ex procurement. So just curious how you're thinking about the sequential drivers here more from Q3 to Q4 than the Q2 to Q3 ramp.

Sure. Yes. So on the Q3 to Q4, and I'm not going to quote specific numbers because I'm sure everybody has got their own consensus out there on what they think Q4 looks like. But in general, if you take a look at some history beyond just last year, but going back a few years, we've seen, one, that half 2, the second half of the year versus first half of the year, there's been somewhere around high single-digit, low double-digit growth rate that's out there.

And even if you just look at percent of what's achieved, it tends to be a little bit -- the EBITDA tends to be a little bit lower in the first half of the year as a percentage of the full year versus half 2. So that sequential growth has been there, and it's more of an expectation as we think about it. Maybe I'll just add on what are some of the specific drivers that we think about for the second half. John talked a lot about just the building momentum that we have around revenue, which includes the commercial resources.

We talked about the fact that we had been investing in more commercial resources starting late last year into the beginning part of this year, and we expect the -- I'll call it, the increased productivity as these resources ramp up. And so that's going to be a positive to revenue that, that drops through. As part of that also just our chronic census recovery, right? We started that build in the second quarter.

We expect that to continue in the third and fourth quarter. So you've got that sequence going as well. And some of that is also cost initiatives. And I want to point out, it's not just a onetime cost reduction. You're always looking at that as part of a broader portfolio and how you operate the company. But at the same time, John just mentioned some of the deployment that we've done around technology, some AI pieces.

We are in the process of -- in some cases, we just started deploying it in the first half of the year, more to go in the back half. So that's part of that ramp. So -- and then just a number of things we talked around our normal procurement initiatives that we're going after, we continue to work with payers around value realization and site of care programs. So it's a broad basket of things. But again, we expect continued progressive improvement to the year. That's how we're thinking about with the guidance that we put forward in Q3, but then continued momentum into Q4 as well.

Got it. And then maybe, John, just as I think about the market backdrop here, I mean, obviously, you're gaining strength continuously in acute. If you can just walk me through how you're thinking about what's going on in the competitive dynamics of infusion, number one. And then just curious what you're seeing in terms of the formulary changes that have occurred in the market, including the CVS changes, I think it was midyear.

Yes. Again, it's always been a competitive market, and we do feel that we're well positioned with the capability set that we have and this national scale that has local responsiveness. The dynamics continue to be strong, as you know, Brian, in the marketplace, but we are making progress against that and continue to invest in what we believe are the right areas to continue on our growth and continue to be a partner of choice and capture that market demand.

And it starts with the breadth of our portfolio, as you called out, the ability that we have to be able to serve hospitals, health systems with our solutions team on that end, our continued to build within the specialty practices, the clinics and then our focus around manufacturer programs that support limited distribution drugs as well as rare and orphan.

All of that, we think, continues to really demonstrate the breadth of our capabilities, utilizes our clinical resources to their fullest and capitalizes on a unique platform that we have that has national scale in that local responsiveness.

So I feel like we're well positioned. We don't underestimate the competitive dynamics. We know that we've got to win every single day. That's kind of the rally cry for the team into the marketplace is to be that partner of choice and capture that market demand. But we really believe that the breadth of our portfolio and the partnerships that we're developing with key referral sources and within the health care providers within the markets that we serve that we're very well positioned to continue to grow and to continue to capture market demand.

And that will come from the line of Scott Fidel with Goldman Sachs.

You have Valentine [ Vlasov ] on for Scott Fidel. Earlier this month, CMS proposed expanding Medicare coverage for certain home infusion pumps and drugs beginning in 2027. How do you think about the potential impact of that proposal, would be helpful.

Yes. As we have said in previous calls, we continue to be active in Washington, both in the support of the NHIA, the National Home Infusion Association and their activities to expand coverage to Medicare beneficiaries as well as activities that we take on as an independent company within that marketplace.

What had been proposed and what is moving forward is a very narrow set of therapies and therapeutic categories that will, again, receive coverage in an expanded basis within Medicare. We think we're well positioned to participate in that and support that expansion in the marketplace. I don't believe it's going to be a significant material aspect given the limited therapies that are combined there.

But any opportunity that there is to expand market access, any opportunity that there is to demonstrate to CMS the value of being able to treat patients safely in the home and in site of care that reduces the total cost, we think, is a positive aspect and one that we'll continue to build on in the way that we're engaging in Washington and helping to provide additional insights around the value that can be derived and the cost savings that could be generated if CMS were to expand access to the home and to alternate site infusion therapy.

Our next question will come from the line of Erin Wright with Morgan Stanley.

How much of the guide at this point is reliant on underlying kind of proactive administrative cost cuts? And can you talk about what's in your control on that front as we go into the second half and how to think about some of those moving pieces as we go into 2027, like what's the right jumping off point?

And then also just from a capital deployment standpoint, I just want to make sure like future buybacks are not embedded in your current guidance, right, at least outside of what has been announced so far? Or can you speak on kind of the buyback opportunity, too?

Yes. Thanks, Erin. So maybe just answering the second question first. Our current guidance does not include any new or prospective buybacks. It only incorporates the buyback that we did, the $150 million buyback that we did as part of the second quarter. So nothing incremental is assumed in there.

As to the assumptions for the guidance as we think about Q3 and Q4, look, we've got -- and I think as I talked about this just on a previous question, we have a number of things that we're working on a number of initiatives. I would not put cost reductions like G&A cost reductions as the top driver of how we're getting to our guide.

I would start with commercial, both revenue growth, the positive impact from the investments that we're making with our commercial resources starting from late last year and seeing progressive improvement, and we started to see that in the second quarter. The continued improvement in our CID census with the first quarter being the base, et cetera. So I'd use that as the first piece of the foundation.

But then along the way, as we normally do, there will be a number of, I'll say, whether it's GP or SG&A things that we're going after. It's not necessarily cost cuts just to cut, but it may be, again, as we talked about, technology deployment that we're doing that overall requires fewer resources or the resources that we have, as an example, in nursing become more productive if they're able to spend more time with patients as opposed to some other less productive activities, et cetera.

And just some of the other technology deployment we talked about with patient registration and patient administration, those sorts of things. Again, everything we can do to make it a more paperless, frictionless experience where we think about the perfect claim as an example, that also improves our cost position and it doesn't necessarily require just standard cuts. So we've got a lot of things that we're going after, and I feel good about the progress that we're making and what's in the hopper.

One moment for our next question. That will come from the line of Philip Chickering with Deutsche Bank. Your line is open.

I guess the first one here is just looking at SG&A in the quarter and then the full year guidance. How should we think about bonuses and executive comps and sort of changes that we may have made sort of going through the year versus where we are today? And as you plan on sort of 2027, how could those impact sort of next year, if they're pulled out this year, or do we add them back into the [ tranche ]?

So maybe just a couple of things on the variable compensation. Just a reminder, right, it's not a -- variable compensation isn't a number that we make a decision on. It's really a function of our performance. And our focus right now is really driving our performance really as we think about that. So it's not really around trying to figure out where that variable compensation ends.

At this point, I know the question is what are your assumptions around that. It really is a factor of the performance and the performance drivers. And so given that there's a lot of moving pieces, I've been talking about some of the initiatives that we're going -- that are going on, the exact number ends up becoming a moving target.

The one thing I do want to mention, though, is as part of our second quarter performance, the assumptions we made around variable compensation for Q2 versus where we actually finished were identical. So maybe said another way, our finish in the second quarter was not driven by changes in the variable comp assumptions that we have made. So as we think about this, we're progressing through the year, we're focused on the initiatives that we have going on, and we really want to drive the performance in the business first and foremost. And then as we get further into the year, we'll see what and how that may impact 2027.

Okay. Fair enough. And then can you talk about what you saw with IVIG this quarter? I guess, how is growth versus last quarter in '25? And any change in the margin profile? I'm just looking at VYVGART. Curious if that's an impact or if things are continuing as they always have been.

Yes, Pito, it's John. I'll take that one. We continue to see strength, as we had called out in the IG/neuro area and the momentum within IG specifically continued to build as we've gone through the year. Again, as part of our overall portfolio, we do have VYVGART and Hytrulo as part of the product portfolio and patients that we have on census and continue to work with our partners at Argenx around access to the product and making certain that we're serving those patients well.

As we have called out before, the relationship we have with neurologists and with the patients that we have on census, what we find is that when patients are responding well to the therapy that they're on, the physicians normally keep them on that therapy. So although we expect that we'll see some drive from naive patients, and those that are presenting with the disease and continue down that path.

We are very bullish on Ig as a therapeutic category across all of the products that we have within that category as well as both the IV and subcutaneous indications that we're able to dispense through our team. And we expect that we're going to continue to see growth as the fractionators have called out kind of in the way that they've looked at this as well. So we expect ramps to continue to increase and our expectations are that we're going to continue to be well positioned to capture that market demand and continue to grow.

Great. If I can just squeeze in just to put this together, just you think about 2027, just to be very clear, with all the moving parts, do we still think that '27 growth should be in line with historical levels or anything that we should be thinking about changing, whether it's executive comp or the other aspects? Is there anything that could impact '27 from a normalized growth rate of what you're seeing today?

Yes. Look, right now, we're focused on 2026 and our performance through the year. When it comes to revenue and revenue growth, that's really our biggest focus right now, and we really want to be able to drive that to where we've been from a historical level on that. I think all the other pieces as we get through the rest of this year into early '27, we're working through all the assumptions.

A lot of that, frankly, depends on our performance in '26. And so I think as we work through it, we'll definitely understand that everybody wants to get a little bit more clarity on that. And as we progress through the year, we'll work on that with you.

And that will come from the line of Joanna Gajuk with Bank of America.

So first my question, and then I have a follow-up. So I guess somewhat related to Peter, both of these questions. But the first one, in terms of -- I know you're not in a position to talk about '27 specifically. But just big picture, with the progress you're making on CID and some of these commercial efforts and such and some of these cost initiatives and such, how should we think about your long-term growth algorithm? Is it still intact? Or there some things we should consider or think about it differently? I'm not as specific '27, but just say multiyear.

Yes. I'll start, Joanna, and then certainly, Meenal can add some additional color if needed. The progress that we're making, again, as we had called out, we like the progress in the second quarter, ahead of our expectations as we had put into the quarterly guidance that we had provided after the end of the first quarter. So I feel like the team is reacting well and responding well and developing and executing our plans effectively through that process. We expect that, that's going to continue to move forward.

The CID portfolio is an important portfolio of broad products, right, moving beyond just a single product, but the breadth of that product. And we expect that given the position that we have and the reach and frequency of our team, we'll continue to capture market demand there and continue to use that as a relevant portion of our portfolio.

Again, albeit at a lower level, given some of the biosimilar from a revenue standpoint and the economics associated with that. But it still is an important call point for us. It still is an important group of therapies around inflammatory disease. And we expect that we're going to now continue to build on the census as we had called out of the stabilization and growth as we move forward. So feel good about that aspect.

I feel good that, again, we're making progress again in the specialty area of positioning the team well from that standpoint. And I feel good about the progress that we're making with hospitals and health systems in being able to be a partner of choice with their discharges on many of the acute therapies and expanding on that. So we continue to build on those aspects, Joanna, and we're going to continue to push on that, right?

We know what this business is capable of. We like the foundation that we have and that we're building towards. And we are not satisfied that we are at the levels that we need to be, and we're going to continue to push on that aspect.

I think as we go through the back half of the year and you see kind of the sequencing of that, that sequential growth quarter-over-quarter and building on the momentum of that is the focus of the organization and carrying that into '27 is the goal and what we're trying to establish around the foundation and the activities today that are driving that growth into the future. So we like the pharma programs that we put in place.

I called out that we continue to make progress in winning new opportunities there in the partnerships that we have, given the platform. Again, really great progress with the acute therapies with the hospitals and health systems and the partnerships there and an emerging resurgence in the specialty area, given the focus that we put there and the leadership team and the tools that are being deployed across that. So I'd sum it up in good progress, not satisfied. There's a lot more opportunity for this organization and knowing the quality of this team, I feel confident that we're going to continue to push and drive forward.

Yes. And the only other thing I'll add beyond what John has talked about, the progress we're making on revenue and revenue growth. A number of the initiatives we're going after, right, we absolutely expected benefits in 2026, but we're now at a point where you'll get a wraparound also into 2027, right? So technology deployments that we're going after and they're continuing to accelerate as we're implementing those, they're going to benefit.

Yes, there's some benefit in gross profit as we think about how do we improve nurse productivity through optimization around scheduling and routing as an example. That's something we've been talking about, and we're deploying that now. We'll see that benefit this year going into next year.

A number of other actions that we're taking, again, technology-related around the patient administration process I talked about. So it's not just a, hey, are you going to look at cost reductions, but it's actually broader sustainable programs that we're putting in place that are going to drive not just reduce cost, but really improve productivity and really where we -- and where our teams spend their time working with patients.

One moment for our next question. That will come from the line of Raj Kumar with Stephens.

Maybe just one on the accrual comp kind of sequential movement. I think if we look back a couple of years, that sequentially moved less so from 1Q to 2Q. So curious on if there was any reversal based on your prior 1Q assumptions on that balance item that drove the 2Q balance.

Yes. Maybe I'll just reecho what I said before, just for clarity. We made -- going into our second quarter, we had offered up the second quarter guidance when we talked about sequential growth Q1 to Q2. As part of that second quarter guidance, we made assumptions around the variable compensation.

The actual finish for Q2 was no different, meaning that the assumption we made on the variable compensation is what is included in the second quarter. So our performance in the second quarter was really driven by the -- we've been talking about the revenue growth and the other actions and activities that we took. It is not related to changes in the variable comp assumption versus actuals.

Got it. And then maybe as a follow-up, as you kind of think about the 4Q implied ramp, and I think, John, you alluded to maybe some rare and orphan kind of portfolio drugs coming online in late '26 or early '27. So is there an embedded assumption within the range of the high end representing that some of those drugs come online in 2026 and then low end kind of alluding to that, that pushes out to 2027. Just any clarification on that would be helpful.

Yes. On some of those products, as we've called out, the ramp is a little bit hard to predict on them. And so I think you're thinking about the right way, right? The range that we put out there have the range of possibilities, some of them positive, some of them that it's just the existing portfolio that we have moving forward. And so we're working in close partnership with our pharma partners and being ready to assist them in their commercialization and go-to-market strategies as they're launching those products.

Some of it will depend upon approvals and other things that are a little bit out of our control as we had called out in the first half of the year or in the first quarter. So as you look at the range of outcomes, and again, that's why we put a range out there is there are variables that, in some ways, could be a positive on that.

But right now, as we're looking at it and what's incorporated within the way that we're guiding is really based on the momentum that we have, the core business and the foundation that we've established and then the momentum that we believe we will build through the back half of the year without a big portion of that coming from unknown or products that aren't currently being served within our portfolio.

And our next question will come from the line of Charles Rhyee with TD Cowen.

Just wanted to follow up on some of the earlier questions. Meenal, there was a question asked about sort of your comfort with the second half ramp, particularly in EBITDA as we get to the back half of the year, particularly 3Q to 4Q. And you kind of mentioned, if we look back historically, we've seen periods of reaching that kind of impact. So the question, I guess, is, so certainly looking at, obviously, low double digits is achievable.

But the way at least it seems to us is that the range would imply low double digits, probably the high double digits is the range. What helps get you to the high end given where we are looking at relatively more flat sequential revenues in the 4Q, and you had mentioned costs aren't necessarily the biggest point. Is it really a mix shift? Should we be expecting more acute drugs in the mix as we get into -- particular in the end of the year? Any help there would be helpful. And then I have one follow-up.

Sure. And I guess if I step back and just talk about the first half versus the second half, separate from this year, we typically have a sequential growth rate that progresses over the course of the year. So it's a bit of a natural phenomenon. Q2 to Q3, Q3 to Q4, we grow. What I had pointed out was if you go back and you take an average over the past few years, our second half ramp versus first half tends to be somewhere around the high single digits to the low double digits in terms of growth rates.

Again, a lot of that being driven by seasonal growth and the fourth quarter tends to be our largest quarter. I would say for us, some of the incremental ramps that we would see above and beyond seasonality are an example, we've talked about ramping up our revenue growth rate with the CID.

As we think about the CID portfolio, we continue to grow that census base -- we think about the commercial resources, it's a little bit different this year in that we brought in and invested in more commercial resources in the fourth quarter going into the first quarter. And we expect continued improved productivity as we go through the year. And so that will add growth as well as some bottom line performance there as well.

And then just a number of the initiatives that we have at this point, as we are focusing on them, you know that as an example, whether we think about procurement initiatives or when we think about market access and as we're talking to our partners, they take a little bit of time. We started those efforts in the second quarter.

We're starting to see the fruits of our labor. There's more going on in the third quarter. And so we'll see them building on top of one another, which is part of the ramp that's there. So at this point, as we think about Q3 going into Q4, that's what really for us builds up that guide that we have out there.

So it's really if certain kind of procurement benefits come through or some of these initiatives, that's what kind of drives you sort of to the higher end of the range. Is that the right way to think of it?

Yes. I mean if I step back and think about the basket of initiatives, I think revenue growth, I would say, is probably one of the first ones that we think about is, hey, as we -- the acceleration of that ramp, we absolutely expect to ramp. But if it accelerates a little better, we thought through all the actions we're taking and everything John has been talking about, that definitely would put us at the higher end as an example.

Okay. And my follow-up question then is, obviously, I appreciate what's -- all the changes that are going on in the market, and I understand the earlier question regarding CVS' shift on STELARA.

But more broadly, maybe, John, can you talk to sort of what you're seeing in terms of increased white bagging efforts by some of the PBMs, particularly as it relates to some of these higher-cost therapies because we're hearing it's spreading maybe even beyond drugs like STELARA into some other high-cost infusion drugs. Maybe talk a little bit about what you're seeing in regards to that and how you guys operate in that kind of environment?

Yes. So the continued progress that we're making on the CID portfolio and what we have put forward as our guide for the remainder of the year contemplates the census and formulary shifts that are known in the marketplace on that. And I would say the team has done a really good job of navigating that and thinking about how do we position ourselves as we move forward. We have not seen a significant impact on white bagging as you would expect. We are a pharmacy.

The vast amount of what we're doing is a pharmacy and a lot of the white bagging is into the physician office practices or into clinics within that process. And so we continue to be in network. We continue to have a broad spectrum of products, over 600 products that are part of our portfolio. We expect that the conversations we're having with the PBMs and the health plans continue to be productive.

We're on the right side of the cost quality equation. We continue to see forward progress in the site of care initiatives that we're working on with national and regional payers. And so we think there still is a significant amount of room for us to continue to grow, to continue to execute and to continue to be a partner of choice for the health plans and the PBMs as they're thinking about ways to manage the total cost of care and mitigate the medical loss ratios that they had spikes on towards the end of last year and earlier in this year.

And our next question will come from the line of Jared Haase with William Blair. Your line is open.

This is Matt Larew. Maybe no time frame in terms of the answer I'm looking for here. But do you still see, given when everybody is asked about formulary changes and the portfolio changes, do you still see the chronic home infusion business as a low double-digit growth market over the long term? And do you still believe that Option Care can be a company that grows at or above market growth?

Matt, it's John. I appreciate the question. Let me try to answer it in this way. We continue to have strong partnerships across the value chain. And so it starts with the relationship and the continued deepening of relationship with our pharma partners and being a part of their go-to-market strategy and access strategy that they have. And we continue to make investments in that area, and I feel we're well positioned to continue to expand the portfolio of products and help with the introduction of new products in that.

As we look forward and get past some of the initial CID reset and those aspects that we're dealing with, we feel that Option Care Health is extremely well positioned to continue to participate in the breadth of the portfolio and an expanding portfolio as we look forward.

The ability that we have to have a hybrid model that can do both medical billing and pharmacy billing, our ability to use advanced practitioner as well as pharmacy benefit through that process, we think positions us uniquely in the marketplace. We continue to invest in the infusion clinic capability and expanding from that end. We do think that there is continued opportunities if there is expansion in Medicare to provide broader access to beneficiaries. We see that we are on the right side of the cost quality equation.

And again, given the breadth of the portfolio and the ability to serve patients that are being discharged from the hospital all the way to the most complex patients from a rare and orphan standpoint, we believe we are well positioned to be in network and part of the payer solution as they're trying to manage that total cost of care. So a long answer to the fundamentals remain strong.

The portfolio continues to expand, our ability to utilize our clinical resources and our clinical capabilities, everything from nursing to pharmacists to dietitians to our physicians, all of that really sets us up to continue to participate vigorously in the market and the market growth. So again, we know we have work to do. We're not satisfied with the second quarter, but we think we are doing everything we can to be well positioned to really drive the business and to capture that market demand.

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. John Rademacher for any closing remarks.

Thanks, Sherry. In closing, while we posted improved second quarter results, there is still work to do. However, we believe the actions we have taken so far, combined with the strength of our clinical platform and market position provide a strong foundation to reaccelerate our long-term growth trajectory and create meaningful value for patients, partners and shareholders. Thank you very much for attending the call, and we hope you have a great day. Take care.

This concludes today's program. Thank you all for participating. You may now disconnect.

Thank you so much for joining the Bank of America Health Conference. My name is Joanna Gajuk. I cover health care providers here at Bank of America. It's my pleasure now to host this session with Option Care, who is the largest home infusion provider in the U.S. And today with us, we have John Rademacher, the CEO; Meenal, CFO; Nicole, in the audience right there. And John has some very little of the slide presentation. He's going to walk through, and then we'll go right into Q&A.

Great. Thanks, Joanna. Thank you, everyone, for joining. We thought it was important given so many people are interested in the story to kind of set the stage around who Option Care Health is. Certainly, for those of you that have been following the organization for a while, little bit repetitive, but it was important. Certain disclaimers, housekeeping, as you would expect, we may make some forward-looking statements. Again, please review any of the information on our website, our Investor Relations website or the 10-K on some of the risk factors associated with that. .

As Joanna said, Option Care Health is the nation's largest provider of home and alternate site infusion therapy. And our strategy is built on this national scale, but local responsiveness that is really important in health care and important for us to put a patient at the center of what we do, but be part of the communities that we serve. Our network of pharmacies include those local pharmacies as well as specialty centers of excellence as well as a broad aspect that really supports specialty and chronic patients as well as those being discharged from the hospital on acute therapies. We have a comprehensive network of nurses in across the country. They really are focused around providing that extraordinary care in the home in one of our infusion suites or in one of our clinics.

And when you think about the high-quality care that we can provide at an appropriate cost and the setting, which patients want to receive it, we add an incredible amount of value to the health care ecosystem and especially as part of the post-acute space. So our coverage map is broad. We cover about 96% of the U.S. population, given the reach that we have. Our nursing environment allows us to really reach into those homes or into the infusion suites. And we have over 750 chairs and over 190 facilities to be local, where it's important and really drive the business performance from that standpoint. We have a broad portfolio of products. We have over 600 therapies that are part of the portfolio of products that we provide broadly across that spectrum.

And our strong cash flow and cash generation of the organization really allows us to build on that strength and continue to invest in the business and invest in the capabilities that are required to continue to innovate and drive the process forward. When you think about the industry itself and some of the secular trends that are really driving that, we're well positioned given the footprint that we have and given the relationships that we have broadly across the health care ecosystem and the payer community to really drive value, knowing that we've got shifting demographics and the aging population and prevalence of the disease, that really continues to have high value around the products and services that we offer.

We know that patients want to age in place as that continues to move forward. And we can help enable that as an enterprise in what we do in the support that we wrap around the patient, not only the compounding dispensing distributing of the product, but the care plan and the care coordination that we're able to execute to. There certainly is a preference around site of care, looking at the total cost of care, both at the patient level as well as at the payer level to make certain that you're getting the most efficient and high-quality outcome. Significant amount of pharma innovation that continues to bring innovative new therapies into the marketplace that require health care professional oversight, whether it's an IV administration, injectable administration or subcutaneous administration and a lot of new launches certainly in those products in our position with the platform that we have positioned us well to be a partner of choice.

We continue to invest in technology. We know that a greater use of data and analytics is going to be important to drive waste and cost out of the process as well as to help to automate and improve the overall supply chain and the supply aspect of the products moving forward. And the policy reimbursement landscape, again, is an important aspect. And ongoing, we are a part of the solution as we're having conversations with payers around how to look at the total cost of care and how to bend that overall cost trend. We have called out today as we're sitting here. We have 26 priorities that really are aligned with some of the mixed performance that we had in the first quarter, knowing that we need to respond and reaccelerate the business. And that focus is really around taking some of the decisive actions to really drive growth and get us back on that growth trajectory, really focusing around 3 key areas.

One is around just coverage and making certain that we have the right team in the right place to build the relationships and capture the market demand. The second is really around conversion, taking those referrals and converting them to [ starts ] in a very efficient and effective manner. And the third, I'd say, is convenience is the ease of doing business with Option Care and more importantly, the operational excellence that we can provide. We had called out earlier today as part of this is on a near-term basis, we are refocusing some of our capital allocation priorities to reinvesting in the business and making certain that we're continuing to invest in growth, but also to take a look at the opportunities for share repurchase given the dislocation of the stock price and where we think there is value that can be created.

And then our focus is around really rebuilding the momentum of the enterprise as we're looking sequentially quarter-over-quarter in rebuilding from this point forward. We believe the foundation of the business is strong. We believe the value that we provide to the key stakeholders is extremely valuable. And we think we are well positioned to continue to build on the trends of moving more care to the home, moving to a better cost effectiveness equation and to utilize our clinical resources to the fullest. So with that...

Right, let's dive in. So maybe I appreciate the last slide. I want to touch base on a couple of these things. But maybe before we do that, to your point about the stock being dislocated maybe just less flashback Q1, very disruptive. A lot of things kind of not really going the way you originally anticipated. And I know you adjusted the guidance to reflect this, right? So now the revenue came down, but your EBITDA guidance wasn't changed. So kind of walk us through what gives you confidence, right, that you can ramp the EBITDA to get to fill your target for the year?

Sure. Why don't I go ahead and get started. Good morning, everyone. I'm Meenal Sethna. I'm the Chief Financial Officer, and thanks for having us today, Joanna. So let me just touch a little bit on Q1. As John mentioned, we -- and Joanna also mentioned, we had some challenges in the first quarter. And as we are working through those and have been working through those. One of the things that we took a look at was what our challenges in the first quarter meant as we looked ahead to the full year. And given some of the revenue impacts that we had in the full year, which really were related to a decrease in a patient -- in our patient census on a particular set of therapies.

What we looked at was rebuilding that revenue, rebuilding that census. We expect it is going to take a little longer than we were going to be able to accomplish in a year. And so that was really what drove our revenue guidance to come down $175 million at the midpoint. We don't take that lightly, especially as we're sitting here in the first quarter and doing that, but we felt that right now given the circumstances that reflected where we were, the business. However, having said that, when we took a look at EBITDA, we felt that there were things we could do that could have an impact during the upcoming quarters during the year. And so we left our EBITDA range as it is. It's a pretty broad range, but there's work that we definitely are focused on, on driving reduced cost, driving some opportunities around procurement savings, taking a look at the clinical value that we're driving and working with our partners on making sure that we're recognized for that, financially as well.

And then also just cost savings that we also need to take a look at when you have a revenue reduction of that amount we want to make sure that our cost structure is aligned with that. And then also, in part, is related to the management incentives, the variable management incentive compensation as well. So that's what gives us confidence as we look at 2026 to be able to drive some of those plans that we have.

And would you be able to quantify some of these buckets because I guess your Stelara CID headwinds went up, call it, $20 million versus your original guidance with a headwind. So is it fair to say of that $20 million like the cost savings is the most. So is there something you're doing in terms of changing the cost structure in that portfolio because the revenue kind of came down? Can you help us understand like where is it coming from.

Sure. Yes. So what we articulated as part of the first quarter, so we expected an additional $25 million of headwind of gross profit headwind, which generally aligns the EBITDA. And that's really what we're looking to offset. I would say, really, the cost structure and just the other initiatives I mentioned are not specific to that portfolio, and we refer to that as our chronic inflammatory portfolio with a lot of autoimmune diseases, that's a piece of the business. But when we take a step back, a lot of our business goes to supporting patients across multiple therapies. So whether we can drive additional revenue in other parts of the portfolio where within the first quarter, our acute side of our business has been doing really well. Our IG and our neuro side of the business, also very solid results for the quarter. So are there opportunities where we can drive revenue, are there some cost opportunities across the portfolio, not specific to our CID chronic inflammatory portfolio. And that goes -- that's the same with procurement. That's the same with clinical value realization. So it's not specific to any one area, but we're looking across the company.

The only other thing I do want to add is as we're going through that exercise to make certain that we're rightsizing the organization and aligning around some of those. We continue to invest in the business. So as I called out on the areas that we're focusing on, certainly around our our commercial team and some of the coverage. We continue to invest in that team, both in size and strength from that as well as we are focusing around training and tools that will allow them to be better at targeting and selection when you're taking a look at the way that they're spending their time through that process.

So these fit together, but I don't want to walk past the fact that we continue to invest in the business. We think there's opportunities to enhance our go-to-market strategy associated with that, and we think that also helps to drive that growth and get back on that reacceleration math.

Yes. And that's a good point, John. The other thing I would add to that is we -- specifically, we've gotten some questions. We are continuing to invest in our commercial resources. That's really what's driving the strength of our growth across some of the areas of our portfolio. So that's not something that we're going to let, let's put off the gas on that. We really started that at the back part of 2025 going into 2026. And that's a key part as we think looking ahead and we think about our growth trajectory and the opportunities as we take a look at the market, that's definitely a focus for us.

And when it comes to that specific headwind you outlined a $55 million Stelara CID headwinds there what gives you confidence that you kind of -- you have a handle on things, right? Because clearly, that Q1 experience deteriorated dramatically, right? So initially, I think you gave this guidance in late January, maybe, or February, right? And then I still call it like 2 months later, right, things change dramatically. So where you sit right now? Like is there still some variability in the outcome for the year when it comes to the $55 million? Or kind of -- you kind of set on that number?

I'll start, and then certainly, Meenal can add around the way that we've looked at it. As you would expect with this patient population, really in the first quarter, we get a view around their coming on service or staying on service with us through that process. Most of these therapies are every 4-, 8-, 12-week type of regimen. And a lot of patients try to schedule in December. So that they can kind of get through the January timeframe without having to get an infusion through that process. So as we exited the first quarter, the -- I'd say the vast majority of our census has gone through the process of benefit verification and revalidation through that process.

And so we feel confident around the exit as we exited the third quarter. It was a little bit elongated given the quantity of patients that had changes this year around with either they switched payers in some of the reenrollments that we saw in Medicare and other aspects as well as they had benefit design and/or formulary change within that process. But we feel as if we had gotten through, and that is when we had the clarity around how we saw the census patterning out through that process Joanna. So again, we reverify before every dispense. As you would expect, patients switch employers, patients switch health plans. So we always go through that process, but we have gone through the vast majority of the patients that are on census were all done through that first quarter that gave us confidence around where we were going to end and then what the carryforward was as we looked at it from that perspective.

Yes. And so I'll add a couple of other comments to what John mentioned. So when we talk about this particular census of patients, we were tracking a census as of January 1. And so when we refer to a drop in the patient census, it's that particular group of patients that we've been serving. But on any given day, we continue to add patients to our census, right? So it's not as if, okay, once -- if that census dropped off in the first quarter, nothing else is growing. That's not the case at all, even with the therapies where we had some shifts going on, on any given day, any given week, we have new patients that are coming under our service that we're continuing to support, et cetera. So as I talk about whether that's growth or whether that's just the ongoing focus of the business, that's part of what we expect to continue to drive going forward for the year. And then really just articulating your question about we talked about a $55 million headwind for the full year from a gross profit perspective relating to this transition of this patient cohort group on Stelara moving to other therapies.

We had originally estimated that headwind impact was going to be around $30 million. We had talked about a $25 million to $35 million range, which was largely due to the shift in -- because of the IRA implications that came through the shift in economics, net of patients moving into other therapies under our census. When we fast forwarded to our April earnings call, our first quarter earnings call, what we noted was the fact that there were more patients that left our census than we had estimated as part of that process, even though we had put together a number of different assumptions of patients, which therapies, what was going to happen. The census drop was higher than that and a little bit of a mix issue as well, and that's what really drove the incremental $20 million to make that headwind now $55 million for the year.

And just to clarify, so your guidance does assume there's a little bit of a growth in that census for the CID population? And where is it coming from?

Yes. Again, with the investments that we've made into the commercial team and even through the first quarter of the year, we've continued to go and to work with the prescribing physicians and the practices to identify patients that could benefit to come on to service with Option Care Health. So that continues, and we believe that there's still opportunities to capture those referrals to convert those to starts within the portfolio as we move it ahead. We also, again, have a broad portfolio of products. So as our team is out selling, not only inflammatory disease therapies, they're selling the other therapies along that. We want to be a full-service provider to the practices if they have a patient that requires infused or injectable products, that require a health care professional or could use our specialty pharmacy infrastructure.

We're trying to capture all of that as we move forward. So our expectations are we're going to continue to see that growth. It's just the reset that we had in the first quarter of that loss of census, take some of the reoccurring revenue aspect of a chronic patient out of the base, and then we build forward from there.

And on other development, I guess, since you gave this update was that CVS removed Stelara from the formulary. And also, I guess there were a couple of other branded therapies. So any impact to your views of things based on that on that announcement?

Yes. So again, we saw the announcement, as you called out. it really is focused around their commercial population in which we do not have a big exposure to that. I will say that the products that they also called out on Tysabri as well as Soliris those are products, the alternative products we have in our portfolio. So we have the ability to offer those as part of our full spectrum of therapies that we offer into any of our referral sources at any of the payers. So we feel we're well positioned given the breadth of the portfolio, but we don't see a significant impact from that announcement.

And I guess stepping back, it sounds like that experience in can very disruptive, and you kind of said foundation is still strong in your prepared remarks. So should I read this as in your long-term growth algo is still intact in terms of can you still grow high single digit topline and EBITDA, high single digits or maybe double digits over time?

Yes, I guess what I would say is, the foundation of the business remains strong. And we executed extremely well on the vast number of therapies and the clinical competencies that we have as an enterprise. And that has not changed. And we believe in the value that, that creates across the entire ecosystem. We understand the reset that happened and are working aggressively to try to reaccelerate the business through that process. And the other thing is we believe there is a significant amount of new products that are in the pipeline that will be -- we're in active conversations today with pharma to be part of their go-to-market and launch strategy as they're bringing those forward.

So I don't think anything has changed within the fundamentals of the business. This certainly was a setback on the expectations that we had and how we thought this was going to pattern out we had worked very closely with the branded manufacturers around how they thought some of the transition was going to happen. We looked at this across multiple dimensions of how this was going to play out. And it just didn't pattern the way that we had expected. But at the core of this business, at the core of the clinical competencies, at the core of the capability set and the breadth of the portfolio that we have now that no product is more than 4% of our gross profit across the entire portfolio, we believe we are in a position of strength to begin to grow forward from here.

And we talk about -- a lot about CID and Stelara, but there are a couple of other products there of interest, ENTYVIO Ocrevus, the way -- they have subcutaneous formulations now or maybe coming. So kind of walk us through the thought process around that switch in some of these categories where you have the subcutaneous formulation as an option to for that product. So kind of what's your -- or what option curve can do when that is still happening.

Yes. So as an enterprise, we offer a full spectrum as a pharmacy. So we do both the home infusion compounded dispense, distributed products where we're actually compounding in clean room. We have the health care professionally overseen infusions and injectables. And we also have a specialty pharmacy capability that allows us to continue to support those patients as they move to subcutaneous, whether it requires a health care professional or it doesn't through that process. So again, we see the opportunities that exist there as we move forward. We don't think that subcutaneous changes the overall view and the way that we look at the strength of the business.

The vast majority of the patients we have on service today require a health care professional to oversee and infuse an injectable or a health care professional overseeing drug within that process, and we're well positioned to continue to deliver value as things transition. And we don't see overnight a transition from an IV administration to a subcutaneous administration. We've called out before and people have asked questions around things like IG, which has had a subcutaneous indication for years. It has a valuable place within the marketplace, but it is not something that has changed over the entire IG infrastructure from that.

So we'll work closely with the prescribers, we'll be part of the solution set. We have specialty pharmacy capabilities. We'll continue to try to follow patients on a longitudinal basis where value is created from that. But we don't see that as being something that changes the foundation of what we offer and the value that we can bring into the marketplace.

So to clarify. So your point is that with subcutaneous formulations, as long as there's a health care professional requirement, you still participate. And should we say that this is sort of comparable revenue and margin versus, say, an IV or things kind of change when there's another, I guess, option that's available there.

And I would say we continue -- we can also support and we do support just subcutaneous that doesn't have a health care professional on that. As you would expect, and we've explained this, they are very responsive the way that we get reimbursed. So there's really 3 legs of our reimbursement stool. One is a spread on the drug that we receive. The second is on a clinical per diem in which we get to really cover the dispense in all of those aspects. And the third is a nursing where we're overseeing the nursing event. If it is a self-administered drug, we're not getting the nursing, as you would expect. There's no nursing that is involved in that.

But depending on the way that it's structured, either we're getting the spread on the drug and/or the per diem is being part of the way that dispense happens, depending on where that moves. So the economics do look different on those different forms, but the cost structure also looks different on those as well. If we're not having to deploy a nurse as being part of that solution.

And I guess it's somewhat related to this, but you also mentioned when it comes to Stelara and CID and how the PBM-owned pharmacies and how those formulary is changing and kind of these guys, so to speak, took over some of that product. So is there a risk there could be something similar, say, for these other product categories where you would say that you would expect a white label type competition to come in and kind of creating the same pressure you're seeing in Stelara in the future?

Yes. I mean it's hard to deal in hypotheticals. Part of the interesting thing, first and foremost, Stelara was unique. It just had different characteristics than other products that we've had in our portfolio or have in our portfolio today. The second thing is you had 2 things kind of working at the same time an IRA force that was driving down the price of the drug as well as an introduction of a significant number of biosimilars all at the same time. As we look forward at the portfolio that we have today, there certainly are some products that enter into the IRA conversation moving forward, but they don't have biosimilars and they're under patent protection at least until that expiry happens.

When you look at where biosimilars are being introduced, the starting point from the profit pool that we have, given that they're branded pharmaceuticals that don't have the same dynamics as Stelara, it just doesn't possess the same aspect. In a normal form, when a biosimilar enters into the marketplace, and there's 1, 2, 3 biosimilars that are entering in as that moves forward, that actually is normally sets up as being a positive for us in the sense of it allows us to negotiate with the innovator that has the branded pharmaceutical as they're trying to maintain their market presence. It allows us to negotiate with the biosimilar manufacturer because they're looking for an entry point and we have a sense as to patients that they want to have access to.

And so it allows us to probably do that a little bit differently than what set up as part of the uniqueness of the Stelara situation. So again, just looking forward, at least over the midterm horizon, we don't see any setup that is the same as what we saw with Stelara.

And I want to go back to your slide because it was also one of the things I want to ask you, and you put it out there in terms of just maybe changing your capital deployment priorities a little bit this year. And also, as I think about you raise your revolver capacity and now you're talking about maybe pivoting more into share repurchase type capital deployment versus maybe acquisitions. So kind of how do you balance those 2? Should we expect you guys being very aggressive on that front and kind of your leverage going up from the current levels?

Sure. So let me answer it in 2 parts. One, talking about capital allocation and then with the revolver, virtually more around capital structure. From a capital allocation perspective, we've been talking about the past several quarters regarding the prioritization being investing in the business, just like you heard John talk about the fact that we're investing, whether it's on commercial resources, investing in technology to make the business more efficient. The second had been around M&A, much more around tuck-in and adjacencies that we felt were accretive and would add to our existing portfolio. And the third really being around periodic share buyback.

What we've always said about share buyback was at times when we felt that our -- maybe our acquisition funnel was a little lighter. We were -- we continue to generate strong cash or where we see our share price being a bit more dislocated. Those are times when you would typically see us in the market. So given what we're seeing right now with the market, with our share price in the market. And frankly, also really trying to respond to shareholders when we talk about return on capital to shareholders. We don't have a dividend program. So really, the share buyback program is one of the ways that we can return capital to shareholders. So we've said in the near term, we're prioritizing that, we're prioritizing internal investments and periodic share buyback.

As it relates to the revolver, we doubled the size of the revolver in late March from $400 million to $850 million. That was really -- the basis of that started with capital structure. For a company of our size, we've grown pretty rapidly over the past several years, double-digit growth every single year. And so a revolver really is for a couple of functions. One is it's a safety net. I mean, for those who lived through COVID that was the time that comes back to me when you want to make sure you have a revolver just in case?

And then secondly, when you want to be able to access capital quickly for whether that's internal investments and/or working capital, it might be for a tuck-in M&A. And it may also be for the share buyback that we've talked about. So having the revolver size aligned with the size of the company made sense, and that was really the impetus of moving forward with that.

And can you remind us how much you have on share retail authorization.

It is $675 million, right now, as of the end of the first quarter.

And I guess, last question, Option Care up as the company, and you guys could highlight some of the investments around AI to kind of very quickly high level where you are on this investment and also of the deployment is there more kind of room to utilize that technology.

Yes. I'll take it and try to be quick. Yes, we continue to invest in it. I mean we think there is opportunities to continue to innovate around the back office, a lot of that being around the efficiency from a patient registration through revenue cycle management. Team is working aggressively on that too, to look for ways to take waste and cost out of the process, look for repetitive process automation and using analytics and advanced intelligence to really drive that forward.

We're not in a point where we're putting it in the pathway of clinicians. We think that it has to mature a little bit longer before we do that. But we think there is significant opportunities to take cost and waste out of the process. The last thing I'll say, and I know we're out of time is, look, we've demonstrated we're an execution-driven organization. And we understand and the focus right now is on reaccelerating the business and really gaining momentum from this reset. That's going to happen through coverage. It's going to happen through conversion. It's going to happen through convenience in the way that we drive that forward. But we believe that translates into sustainable growth and long-term value creation for our shareholders. So our focus is there. Our commitment is there, and we're driving the business to make certain that we get back that momentum, and we really build on the strength of this enterprise.

Thank you so much.

Thank you, everyone.

Good day, and thank you for standing by. Welcome to the Option Care Health First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Nicole Maggio, Senior Vice President of Finance.

Good morning, and welcome to the Option Care Health First Quarter 2026 Earnings Conference Call. With me today are John Rademacher, President and Chief Executive Officer; and Meenal Sethna, Executive Vice President and Chief Financial Officer.

Before we begin, a reminder that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We assume no obligation to update any forward-looking statements, except as required by law. We will also use non-GAAP financial measures when talking about the company's performance and financial condition.

For more information on the specific risks and uncertainties as well as non-GAAP measures, we encourage you to review the information in today's press release and presentation posted on the Investor Relations portion of our website as well as our Form 10-K filed with the SEC.

Additionally, for the Q&A portion of today's call, we ask that you limit questions to one question and one follow-up participant.

With that, I will turn the call over to John. John?

Thanks, Nicole. Good morning, and thank you for joining us. We're pleased to share updates on our first quarter of 2026 today.

Before I do this, I want to take a moment to say thank you to the Option Care Health team for managing through a dynamic first quarter with an unwavering commitment to our mission of transforming health care by improving outcomes, lowering the total cost of care and delivering hope to patients and their families.

As the nation's largest independent provider of home and alternate site infusion therapy, our strategy is built on national scale with the patient at the center of everything we do. Our network of home infusion pharmacies and specialty pharmacy centers of excellence that focus on chronic and rare disease therapies along with our comprehensive nursing capabilities uniquely positions us in the marketplace.

We combine consistent high-quality clinical care with local responsiveness, leveraging our platform of infusion suites and clinics to drive clinical innovation while meeting patients where they want to be. This model helps us deliver reliable, clinically excellent care for hospitals and health systems, specialty physician practices and health plans across the country.

In an environment of ongoing economic pressures across health care, we are on the right side of the cost curve, partnering to deliver high-quality care at the appropriate cost in settings where patients prefer to receive it.

As affirmation of the great work our team does every single day, we continue to receive patient satisfaction scores in the low 90s and Net Promoter Scores in the mid-70s.

Turning to our results. The first quarter reflected mixed performance for our business. Adjusted EBITDA and adjusted EPS performance were aligned with our expectations, but our revenue growth of 1% did not meet our expectations. We had strong execution across our acute therapy portfolio, a transitional period for our chronic therapy portfolio and continued focus on strategic initiatives that will better position us to win.

On the acute side, our commitment to strengthening our capabilities to transition patients on to service, invest in broadening our referral source relationships and focus on resources driving clinical value realization helped us deliver revenue growth in the high-single digits, well above market growth.

As I've mentioned previously, providing these therapies require strong partnerships with hospitals and health systems, are very time-sensitive and demand tight coordination across our expert and clinical resources. This area of service is hyper local, and our teams continue to operate at a very high level and position Option Care Health as the partner of choice.

Across our chronic therapies, revenue for the quarter was a slight decline versus last year, reflecting certain industry dynamics that were more challenging than we anticipated.

Breaking this down across the larger therapeutic categories we serve, we delivered solid growth in our Ig Neuro Portfolio in alignment with our expectations. Across our autoimmune and Chronic Inflammatory Portfolio, which we refer to as [ CID ]. We saw a greater reset than anticipated in patient census.

Our guidance from earlier this year included a number of assumptions given the multitude of variables impacting shifts in our patient census and therapy mix. As we discussed on our last earnings call, patient registration activities throughout the first quarter are a key input in understanding whether results align with our assumptions. We saw a significantly higher volume of patients that had insurance plan, benefit design or formulary management changes, doubling the number of patients requiring benefit reverification and reauthorization versus last year. This elongated many approval decisions into late March.

As we closed out the quarter, therapy transition and patient retention patterned differently than we expected, reducing our patient census more than we anticipated. In addition, the therapy mix of our remaining patient census was less favorable than originally planned.

As we have previously discussed, given the recurring nature of revenues for patients on chronic therapies, an unfavorable drop in census will take some time to recover.

Moving beyond CID, in our other specialty portfolio, we saw slower-than-expected growth of certain therapies. We expanded the breadth of our targeted specialty call points but did not achieve the acceleration we initially expected. Across our rare and orphan program portfolio, we were also notified of launch delays or slower ramp for a few of our rare and orphan programs due to regulatory or commercial launch readiness that will impact our growth expectations for later in the year. We remain confident in the strength of our platform to support these clinically complex therapies and the value they will provide despite these delays.

With these forces converging as we exit Q1, we are revising our full year revenue guidance as the industry dynamics are more impactful than anticipated. Meenal will provide additional details in her commentary.

In response, we are taking decisive actions to sharpen execution, focus and invest in the most attractive growth opportunities and strengthen our commercial and operational competitiveness. We are increasing the strength and size of our commercial team, realigning resources and rebalancing coverage across our top specialty practices and accounts. We continue to focus on operational excellence to further capture therapy level economics and enhance our admission conversion rate while deploying technology designed to ensure a more seamless workflow from referral to start. And we are refining our go-to-market model to scale efficiently, simplify the provider experience and strengthen our specialty pharmacy offerings for chronic and rare disease.

Moving on to our alliances. We continue to foster positive momentum across the relationships with payer and pharma partners. Our relationships with health plans and conveners continue to provide significant value to their members as we partner to rightsize care. Our existing site of care initiatives are performing better than expected, and we anticipate this momentum to carry throughout the year. The consistent feedback from the various plan sponsors who have active programs with us is that these initiatives bring real cost savings to the plans and provide increased choice and satisfaction to their members.

Our portfolio breadth of both acute and chronic therapies as well as our ability to provide clinical insights and our quality and cost efficiency make us well aligned with our payer partners to help them lower the total cost of care and reduce waste in the system. We believe our performance positions us well to both capitalize on current programs as well as capture new offerings.

Pharma program development also progressed as expected, and we are preparing for new launches later this year. We continue to actively pursue additional opportunities to support pharma partners in commercialization of their new-to-market products, and we believe our unique pharmacy network, nursing excellence and clinical competencies make us a logical choice.

We are also seeing a strong pipeline of infused and injectable drugs to treat clinically complex patients, and we are engaged with pharma manufacturers and innovators who are seeking partners with our capabilities to add to our over 600 therapies already in our portfolio. We believe these opportunities will continue to be an important catalyst to drive our growth.

Our ambulatory infusion clinic utilization continues to increase with visits growing 14% year-over-year, driven by commercial and operational collaboration and market access expansion. We are now operating in 28 locations with advanced practitioner capabilities in key markets, and we will continue to drive performance through deeper partnership with local providers.

These trends reinforce our confidence in clinic-based growth as an important complement to our diversified model. And we continue to leverage our entire network of infusion suites, conducting 34% of our nursing visits in one of our suites or clinics during the quarter.

We also saw continued traction in our oncology portfolio, a small but growing part of our business. We believe this represents a meaningful opportunity for continued growth as the market dynamics shift and more oncology products move into the infusion clinic and home setting.

I want to close by emphasizing that while I am not satisfied with our revenue growth momentum, I do believe our business fundamentals remain intact and solid. We are in an execution-driven organization and are focused on building from this reset through coverage, conversion and enhanced service levels, which we believe will translate into sustainable growth and long-term value creation.

And with that, I will turn the call over to Meenal. Meenal?

Thanks, John, and good morning, everyone. Our first quarter revenue was $1.4 billion, up slightly over 1% compared to last year. Our acute revenue growth was in the high single digits and our chronic revenue declined slightly versus last year.

Total company revenue growth in the quarter was negatively impacted by approximately 600 basis points due to headwinds within our CID portfolio.

As a reminder, our CID portfolio incorporates a number of different therapies, and we still expect the Stelara and related biosimilar subsets of these therapies to represent less than 1% of 2026 company net revenue and gross profit. Gross profit dollars also declined slightly over last year due to the decline in chronic revenue. We had previously estimated that the gross profit dollar headwind related to the CID portfolio would be $25 million to $35 million. With clarity of those CID portfolio resets, we now estimate an approximately $55 million gross profit headwind for the year, which includes the additional patient loss John spoke about earlier.

SG&A grew 4%, reflecting the wraparound of investments made in 2025, along with ongoing investments in commercial resources to support future growth. Adjusted EBITDA of $105 million was down 6% over prior year, but in line with our expectations as the acute performance and execution on our strategic initiatives offset the dynamics in the chronic portfolio. Adjusted EPS of $0.40 was flat with prior year with an uplift of $0.02 from the year-over-year benefit of share repurchases.

Operating cash flow for the quarter was a usage of $12 million, in line with our seasonal expectations. First quarter is typically the lowest quarter in the year due to seasonal patterns and incentive compensation payments. We saw measurable improvement from our early inventory management initiatives in the quarter, including better supply and demand alignment.

We expect to see additional benefits from our working capital initiatives as the year progresses. And we ended the quarter at a net debt to leverage ratio of 2.2x.

During the quarter, we also expanded our revolving credit facility to enhance financial flexibility from $400 million to $850 million. This increased capacity better aligns our capital structure to our capital allocation strategy.

As a reminder, our capital allocation priorities start with organic investments to drive revenue growth, capacity and optimization of our cost structure. Acquisitions are next, focusing on adjacencies and tuck-ins that align with the breadth of our portfolio. And our final priority is periodic share buybacks. In the first quarter, we repurchased over $17 million of our shares.

Moving on to our full year forecast. We are adjusting our full year net revenue guidance to a range of $5.675 billion to $5.775 billion. This represents just over 1% growth versus prior year at the midpoint. This incorporates a negative 600 basis point revenue growth headwind higher than the 400 basis point headwind we had previously estimated due to the lower CID patient retention and therapy mix noted earlier.

We are maintaining our full year EBITDA and adjusted EPS ranges with our February guidance with projected EBITDA of $480 million to $505 million and adjusted EPS range of $1.82 to $1.92. That corresponds to growth at the midpoint of 5% and 9%, respectively.

Our EBITDA guidance range incorporates the forecasted $55 million CID portfolio headwind noted earlier. We expect that to be realized evenly through the year.

Our EBITDA guidance also reflects reductions in variable operating costs, including variable incentive compensation and other cost management actions.

We now expect SG&A growth to remain at or slightly below gross profit growth for the full year 2026. Additionally, for the year, we're maintaining our estimates of net interest expense to be in the range of $50 million to $55 million and a full year tax rate in the range of 26% to 28%. We are adjusting our operating cash flow target to at least $320 million, which incorporates the lower revenue and cash-based EBITDA reduction.

I also wanted to provide some color on the second quarter for modeling purposes. The following assumptions are on a sequential basis, reflecting second quarter growth over the first quarter of 2026. We expect second quarter sequential revenue growth in the mid-single digits with EBITDA sequential growth in the high single digits. We anticipate seasonality to be consistent with prior years with sequential growth over the course of the year.

And with that, I'll turn it over to the operator to open up for questions. Operator?

[Operator Instructions] Our first question comes from the line of Lisa Gill of JPMorgan.

Just two things I just want to try to understand a little bit better. I understand looking at the IQVIA data, what happened with Stelara in the quarter. But can you help me to understand the increase in the headwind versus the initial on the gross profit side? I understand the revenue side, but help me to understand that.

And then just secondly, I just wanted to follow up on the benefit reverification that you talked about as far as timing goes and what you saw in the quarter? Is that commercial? Is that some of the changes that we've had, whether it's the ACA or something else? Just want to understand what's happening there and how we'll see that come back around as we go through the other quarters.

Yes, Lisa, it's John. I'll start with your second question first, and then I'll turn it to Meenal to talk about the product profit drivers and the headwinds from that perspective.

So as we went through the quarter, we called out, and I think everyone is aware that the first quarter is a really important quarter as you go through the process of turning the calendar and all of the things associated with benefit reverification and authorizations and those types of things.

As we had called out in the prepared remarks, we saw a significant increase in the patients that we had on service that either had a switch in health plans, had a benefit design or a formulary change that increased the amount of work we had to do to qualify them and to move them on to service as we went into the new year. And this doubled the amount of patients that were impacted on that.

We also saw that the payers increased some of the standards that they had set to qualify patients for the enhanced clinical services that were provided and also that influenced some of the product selection that the formulary management moved forward.

This elongated that process over the quarter. And many of those determinations and decisions really weren't made until the March time frame as we went through the process and really worked through that bolus of activity.

And as we exited the quarter, we saw not only that changes in the portfolio and the census due to the switch out of Stelara, but also the mix of products we had talked about not all biosimilars have the same economic value to us on that as well as not all of the products, and there's about 40 different products in what we categorize as the chronic inflammatory disease have the same profit dynamics.

So as we looked at the -- as we rolled through the end of the quarter and looked where we were exiting, we saw that this was different than how we had originally modeled and planned for it due to these different factors through that process. And so starting with that lower census and then carrying that through the rest of the year is really what is driving a big portion of where the revenue reset is, knowing that it's going to take time for us to fill, knowing that you lose that annuity of a patient that is on census for a chronic condition and carry that forward.

So that's what we saw, and it was really pushed towards the back half of the quarter as that increase in volume and the increase of activities associated with all of the changes given this year and the dynamics in Medicare Advantage plans, the IRA implications and the biosimilar switch in a formulary management perspective.

And then, Lisa, it's Meenal. So your first question was about the GP headwind and the increase to the $55 million. So just going back a couple -- a few months here, we had originally, as we put forward our assumptions for our full year guide back in January, we had assumed that, that headwind would be $25 million to $35 million, somewhere in the middle there, really with a focus around Stelara, the Stelara IRA and then the biosimilar conversion.

As John just mentioned, as we've gone through the quarter, through the first quarter, what we found was there were some significant changes versus what our assumptions were, one, in the patient census itself. but then also therapy mix. So this $55 million now represents. The bigger part of that change is really related to the change in the patient census, where we had assumed a number of Stelara patients converting to some other therapy as part of our portfolio, and that didn't happen. So the loss of that patient is what that is.

And then secondly, with the patients we did retain on census, we saw a slightly unfavorable mix when all is said and done given the multiple therapies out there. I'm sure that one of the next questions will be how do you feel about the $55 million over the course of the year, given the fact that we have this reset in the first quarter, and we -- it's going to take us a while to build up the census, but we're assuming this particular headwind will pattern out evenly through the rest of the year through the rest of 2026.

And the only thing I would add to that, Lisa, is we now have clarity around how we are -- how the portfolio evolved and how the patient census moved forward. We believe that we have gone through the process of the reverification and reauthorization with the patients as you do at the beginning of the year. And the first quarter is really that driving force to give us that clarity and now confidence that we will build sequentially moving forward.

Our next question comes from the line of Pito Chickering of Deutsche Bank.

On the guidance, you talked about 2Q EBITDA up high single digits. So that's $112 million, $114 million range, which implies a very large ramp-up into the back half of the year. Can you bridge us, one, how we get to the 2Q EBITDA growth of high single digits? And then two, I think just solving into the back half of the year ramp, I'm looking at teens sequential growth in 3Q and 4Q and how we accelerate from, I guess, from 2Q. So basically, how can you bridge us from 1Q to 2Q growth? And then can you bridge us from the large back half of the year ramp?

It's John. Let me start. As I said in my prepared remarks, it was a mixed result, but there were positive aspects of the business. And again, we remain -- we believe that the fundamentals remain intact. When you look at the progress that we've made and really the strength of the results in our acute therapies, which tend to have higher gross profit as well as really good dynamics for us on that.

You look at the growth that we saw that was continue to move forward in our IG Neuro portfolio. You look at how we have been partnering with payers on site of care initiatives and that moving better than we had expected, the continued work with our pharma partners and the programs and the pipeline that remains, and we're going to continue to move that forward.

As well as what we're seeing in the infusion clinic, there is a lot of areas that continue to make really solid progress and continue to drive that growth, which is why you saw the adjusted EBITDA strength that we had in the first quarter, even though we were going through this reset.

So I do want to emphasize that there are really positive things happening in the business and the foundation, and we're going to continue to focus our energy and effort on driving the growth, not only in those areas where we're having success, but then shoring up in these areas where we know we have to accelerate, reaccelerate our growth through that process.

Sure. And Pito, it's Meenal. I'll add just a few other comments to what John mentioned. Specifically, we wanted to give -- wanted to offer just some ramping thoughts, which is why we provided the second quarter guidance. As I mentioned in some of my prepared remarks, there's work that we have been doing around some cost reductions. And so that's some of the carry that goes forward as well as naturally, we, of course, have some variable costs also that are aligned to revenue.

So we're doing a little more scrubbing there with some cost down. But importantly, I also want to reiterate what John said, we've got large parts of our business that are doing very, very well, like on the acute side of the house, on the IG neuro side of house within our chronic portfolio. So we expect to drive some growth through there, which will also help us from an EBITDA perspective as well as gross profit dollars that we're working on also.

On your question on the back half of the year, I'll take a step back and also say, look, we have a normal seasonal pattern on top of everything else, which is in any normal year, we tend to see sequential growth starting from the first quarter, which we've always said is our lowest point up to the fourth quarter, which tends to be our busiest quarter of the year.

So there is a natural lift that we have. And then also, John talked about, look, it's going to take us some time to rebuild that census loss that we have. Our expectation is that rebuild starts now, right? We're working on the rebuild starting in the second quarter, a number of actions that we're taking going forward to move that.

So we would expect to get some continued tailwind from our efforts with all the investments that we're making in our commercial resources as well to really drive some additional growth on a sequential basis, Q3 and Q4.

Our next question comes from the line of David MacDonald of Truist.

John, just a quick question. You talked about conversion and that being a little bit lower which I just want to make sure I'm interpreting this right, suggests to me that on the front end, you guys weren't able to kind of muscle through some of the administrative workload just given the heavier design changes and things like that. A, is that correct? And then B, in terms of fixing that, is it a matter of kind of adding more resources on the front end? And was it just competitors were processing these folks a little bit more quickly than you guys and you were losing a little bit of share? Just a little bit more detail there would be helpful.

Yes, Dave, thanks for the question. What we saw is that elongated process was really part of the -- just the reverification process. I would say, yes, it passed the team, but we're prepared for that. I don't want to make it that it was -- we were not processing them through. What we found was there are some PBMs that have preferred biosimilars. And so we expect that we lost some of the patients to some of the competitors through that process. The economics are not the same on all of the biosimilars for us. So there are some that just didn't make sense for us to take if that was the preferred route of therapy.

And then as I said in my comments, there were higher standards. If you remember, a lot of our patients required additional or enhanced clinical services that wrapped around that. And therefore, there were some denials and other aspects where patients no longer qualify based on those higher standards. And so they moved to other forms of administration, whether it's self administration with the products that within that.

So that's where we really looked at it. Yes, we're always looking at making certain we have the right staff in place and that we're being responsive as possible in that it took longer this time around given all of the different things associated with it. But I think as we're moving forward and we've gotten through the bolus of activity, I don't see that as being anything that would be -- would hold us back for getting back on and reaccelerating our growth as we're looking to bring on new referrals and new patients into Option Care Health service lines.

And Dave, I just wanted to add one other point to John's is what we were trying to emphasize when we talked about really double the number of patient authorizations and reverifications that we needed to work through, it just took a bit longer, not because of necessarily just us and our resources, but also the multitude of back and forth that had to happen, and it really went into late March this year, which is longer than the typical cycle that we see given a lot of the market dynamics going on with plan changes, I'd say, a lot more dialogue around the verification and prior authorization work.

Our next question comes from the line of Brian Tanquilut of Jefferies.

Maybe just to double-click on this, right? I mean these patients need to go somewhere is my guess. I mean they obviously still need the drug. So just curious, like, I mean, back to David's question, how confident are we? I mean, it seems like this is a market share loss situation on one hand. And also curious like your visibility into this given that you did your earnings call in March, and it feels like it's the first time we're hearing about it. So just curious like how can you impart confidence in the investor base to believe that this is an issue that will improve quickly and to have visibility into guidance for the year?

Yes, Brian. So as we called out, the first quarter is the busiest quarter for all of the work associated with the benefit reverification and authorization process. And as we exit the quarter, we have gone through the entire patient census as part of that activity associated with it. So to your -- I guess, your question, but again, we reaffirm, yes, we lost those patients to other service providers. So it was retention loss and those patients went somewhere.

As we have talked about before, there is a portion of this where there is self-administration as part of the therapy plan moving forward. And so some of those patients potentially converted over to self-administration. We can continue to try to support them through our specialty pharmacy capability set. But there's also opportunities where it just didn't make economic sense for us to hold on to those patients given some of the dynamics with different biosimilars and others through that process. So we expect that they did go somewhere else and they're not on census with us.

But we believe we are through the work that's necessary in that first quarter to get through the entire patient census and understand where that is. And now this is the base that we believe is where we're building on as we move forward.

To your comment, when we had the earnings call and as we've called out, a vast number of the patients that we had on service had not gone through that process. If you look at the therapies, many of the patients aren't receiving care for 8 to 12 weeks is their cycle. So many of them had not even gone through the process of their next dose by the time we had and we laid the earnings call. So there was still a lot of unknown. We tried to call out that the first quarter was going to be something that we were monitoring closely. But at that point in time, we didn't have enough evidence to know where the patient census was going to land. And so that's where, again, as we now have this clarity, as we're exiting the first quarter, we are bringing forward kind of our new view that is different than the modeling that we've done as we entered into the year.

And Brian, I just wanted to take a step back and maybe just add some comments. This was a really unique situation across Stelara and one that is -- we expect at this point, this is onetime and it's done, and this gives us clarity going forward. But when we've been -- I know talking about this for a while, with the IRA backdrop, which really drove some significant shifts that we see now in the first quarter around categories and a lot of different category economics going on.

Separately, there were a lot of market shifts that also occurred, right, significant changes in Medicare Advantage plans and memberships and enrollments and transfers. And actually, a large portion of our patient census -- Stelara patient census were skewed towards MA plans as well. So that added to the complexity of this, along with this particular transition also included a large number of biosimilars and other brands. So I would call this a pretty unusual, pretty unique set of circumstances. We believe at this point that we've had the reset. We have a patient census now we have clarity. And from here, we're going to move forward with the -- starting with the second quarter sequential growth that I talked about earlier.

Our next question comes from the line of Joanna Gajuk of Bank of America.

So a couple of follow-ups. Just to confirm, when you're talking about the therapy mix changes and lower patient census, are we still talking about Stelara and therapies sort of in that category? Or are we talking about the sort of impacting some other therapies like ENTYVIO, I guess, which is also big for you?

Yes. I mean it's primarily around the shift of the Stelara patient census. Again, as we had outlined, the full chronic inflammatory disease, therapeutic set was in alignment with that. But the vast amount of this is the reset of those Stelara patients as they have transitioned to other products moving forward.

Yes. I think, Joanna, you could think about it this way, right? We had a census of ex Stelara patients, there were multiple different therapy choices that those Stelara patients had, which were when we refer to the CID portfolio, there are a number of different therapies, some of which you mentioned that those patients could go to as well as some other biosimilars as well as potentially staying on Stelara. So that's how we think about it is Stelara patients with a lot of different choices as they were working with their providers and their particular insurance plans.

And if I may, a clarification. So I appreciate the answer around the ramp-up you expect. And it sounds like there's some cost savings that allowed you to keep your EBITDA guidance the same even until now this headwind is $20 million or so higher than previously assumed. So is that really the $20 million is the cost savings? Or can you help us kind of break down that offset, that number into buckets?

Sure. So I think just for reference, what you're referring to is, back in January we talked about a gross profit headwind of approximately $25 million to $35 million relating to Stelara and the biosimilar conversion.

Based on where we are today, we estimate that headwind to be $55 million. And again, in large part because of the patient census and the loss of the patient census and a little bit on the therapy mix. For us, as we took a step back and looked at this, I don't want us to forget that we had really good momentum across other parts of the business. So when we take a look at the acute side of the business, which was growing in the high single digits, very solid growth across our IG neuro portfolio as well.

So part one, to answer your question is we really want to maximize the momentum across areas of the business to really drive some additional gross profit, and we've been successful doing that. I think that's part of it.

Clearly, we are going to have to take a look at cost. We've already been doing that. We've already taken some actions this year, and there's some other things that we will do. That's also net of reinvesting into the business with the additional commercial resources that John spoke about. So we're continuing to do that.

And then invariably, we have some -- as we've reduced our revenue guidance, we have some variable costs now that we're going to scrub through and as we reduce some additional variable costs, including, frankly, some incentive compensation that will be reduced. The combination of all that is why we felt comfortable maintaining both our EBITDA and our earnings per share EPS guide.

Our next question comes from the line of Constantine Davides of Citizens.

Just a couple of quick ones. Maybe a follow-up on guidance. Can you just talk about maybe some of the assumptions, low end versus high end? Is that purely a function of kind of the revenue brackets you provided? And where is your conviction? Or what would have to happen to get to the higher end of your EBITDA outlook?

And then second, John, you kind of called out the acute performance still pretty strong in the first quarter. What are you seeing now that you've kind of lapped that competitor withdrawal? And what's your expectation for growth here as you're seeing it in the second quarter?

Yes, Constantine, it's John, I'll start and then I'll let Meenal reply to really the first part of your question. On the acute, again, the team continues to perform extremely well. As you called out, I mean, we've lapped some of the competitive closure and continue to see strength in the growth of that business. We believe there still is opportunity. We are deepening our partnerships with health plans or with health systems and hospitals in those local markets.

We know this business is one that requires to be very local and very responsive in helping to transition those patients on to care. The investments that we've made into our people, our process, our technology allows us to do that. Our nursing network is a strength of this enterprise and one that we will continue to rely on as we move forward. So we are extremely confident that we can continue to grow and be that partner of choice given the investments we've made, but also given the way that the team is executing and performing and deepening those relationships.

Yes. And Constantine, just your questions on the guidance, I would say, one, first quarter for us really gave us the clarity that we've been talking about, right? We've had this patient reset. And from here, we're going to grow, we'll grow sequentially throughout the year. I'd say our confidence, we feel good about the guidance that we put out from a revenue perspective. And if you'll -- you probably noticed that we reduced the range of the guidance and that's part of that confidence. I would say what are some of the levers that we have.

First of all, at close to a $6 billion revenue, there's always going to be some puts and takes that go on over the course of the year. But our team is very execution oriented. So I would say everybody is on deck, all of our commercial resources and those supporting those commercial resources are on deck to really look at how do we grow? What are the vectors of growth that we have, ones that we've been going after, new ones that we're going after? How do we rebuild that patient census? What are some other areas of growth opportunities that we can add into the pipeline, and I feel good about that.

So that's what gives us confidence in the low end -- or sorry, in the high end, but just thinking about a number of variables. And I would say revenue growth for us is the single largest opportunity when you think about fall-through from an EBITDA perspective. So that's our primary growth. But again, we're not going to forget that as needed, we will make adjustments into our cost structure if that's what it takes. So I feel confident about both the revenue guide we put forward as well as the EBITDA and the earnings per share guide.

And the only other thing I'd add is, look, our decisive actions and what we're looking to do to really drive the reacceleration of the business focuses around coverage, conversion and enhanced service levels. And so we have plans in place that we are executing around that, that elevate the commercial execution, that increase the size and strength of our commercial presence to capture more of the market demand.

We're focusing around converting more of the patients that we receive as referrals on to service with us. And we are focused around some of the enhancements in our service capabilities and service levels to not only attract with payers and pharma partners, the strength of that portfolio, but also to continue to execute and be that partner of choice for the providers that are referring patients on to us.

Our next question comes from the line of Erin Wright of Morgan Stanley.

This is Michelle on for Erin. So I just wanted to check for this headwind with Stelara and the chronic therapies. So would you still expect now that there's any risk transitioning into 2027, where prior, we thought we would be through this period now that we have this reset census data? And is it possible that throughout the rest of 2026, there would be any other resetting expectations or that it won't sequence kind of the way you're thinking in terms of being relatively stable over the next few quarters in terms of the headwind?

Sure, Michelle. It's Meenal. So I'll give you the short answer is no, we don't expect additional headwind in 2026 nor any carryover in 2027. As we've been talking about, we feel that Q1 was the reset. We now have clarity and we now know what our patient census is from here. We don't expect any shifts other than normal patient shifts as they're working with their particular provider, but we don't expect anything outsized from that.

We expect 2026. Our hope is also that this is the last year that we're having to talk about Stelara. And from here, we really want to be able to talk about the other growth vectors and other growth opportunities that we have as we continue to expand our portfolio.

Our next question comes from the line of Charles Rhyee of TD Cowen.

This is Lucas on for Charles. I want to ask about the strong acute revenue growth you saw in the first quarter, high single digits above your medium- to long-term target of mid-single digits. Does your '26 guide assume that this high single-digit growth continues throughout the rest of 2026? And then also thinking about the margin profile in the past as well as on this call, you talked about acute having a higher gross margin compared to the chronic portfolio. Can you help us understand how those two categories compare at the EBITDA margin level?

Yes. Why don't I -- Lucas, why don't I start with just the acute growth? So we've been -- as both John and I've talked about, we've been very pleased with how well the team has really been driving the growth opportunities that we believe we have in acute.

I would say we have lapped the number of the competitive closures that we've been talking about for a while. But at the same time, the team has done a great job at really building those even more relationships with referral sources and really driving both additional patient growth, but also clinical value realization opportunities as well.

So our -- as we look ahead to the acute side of the business, we feel really good about being able to continue a momentum that is above market growth, which we're doing right now. And I think the team is really executing on all cylinders when we think about that.

Beyond that, we haven't gotten into a lot of detail around profit markers between acute and chronic. But I would just say that overall, both parts of the business are important to our portfolio. They really fit together when we think about the value that we provide to all of our stakeholders, the payer communities, the pharma communities and frankly, to our patients at different points in time, there may be patients who need both sets of therapies. So we become a real important part of the health care ecosystem to all of our stakeholders. And that's why we really want to ensure that portfolio we have, the therapy mix we have is quite broad.

Our next question comes from the line of Michael Petusky of Barrington Research.

So I guess probably this is for Meenal. In terms of what you guys expect from the mix between chronic and acute and sort of putting together what you said about the second half and full year guidance and all the rest. And I know historically, you guys like to talk about gross profit dollars. But to me, it looks like gross margin needs to lift for the remainder of the year sort of to get to your guidance. I mean, is that a fair statement in your view?

Look, I would say as it comes to both gross profit dollars and margin, we do look at both. So I don't want to minimize one or the other. I think ultimately, right, the dollars are the ones that drop to the bottom line when we think about are we growing our EBITDA, are we growing our earnings per share. But we also do take a look at the margin profiles of the different therapy mixes and the different parts of our business.

So we are focused on both, but ultimately, it's the gross profit dollars. And by the way, we always ensure that the therapies that we are providing are profitable. So that's a key element of what we're doing. The gross profit dollars really allow us to reinvest back into the business as we've talked about the commercial resources and other areas, but the margin is one of the many metrics we keep an eye on.

Okay. And then just sort of a follow-up in terms of the modeling of this. You alluded to stock comp may be one place that you guys can look to. The last year, 1.5 years or so, including the first quarter, you guys basically have sort of looked at sort of $40 million on a yearly basis and sort of track to that in the first quarter. I mean, what might that look like for the remainder of the year? I mean could that go more towards like a run rate of $30 million in terms of stock comp going forward?

Yes. And if I misspoke, I apologize. When I was talking earlier about cost reduction opportunities, I was referring to variable cash comp more than anything without getting into a lot of detail. So that's really -- look, if I take a step back, we have lowered our guidance. That was not a decision that we took lightly. And if we don't achieve what we felt was our guidance, there are going to be implications to our variable compensation, but it's more on the cash side. It was not a comment about our stock compensation.

Our next question comes from the line of Matt Larew of William Blair.

John, if I think back over the years, I think this is one of the first times probably where you referenced losing some patients to competitors. And I realize there's some idiosyncrasies involving Stelara here that maybe make it an anomaly. But this is also the time, I think, in an industry has always been competitive, where there's been more competitive entrants that have been popping up. You've had a number of the larger payer-owned entities that have exited acute and are exclusively focused on chronic. So it does seem like that market may be becoming more competitive.

So I'm just curious, as you think about -- you referenced the reset of patient census in March and then the guide and sort of your forward outlook being predicated on building back that census and getting patients back. You referenced needing to deploy or expand commercial resources.

I guess what do you assume about your share going forward or about your ability to get patients back on census? And is it possible, I guess, that the sort of costs for patient acquisition may be higher either temporarily or sustainably going forward given the competitive dynamics?

Yes, Matt. So it has always been a competitive environment. As we have called out before, I mean, there's over 800 providers of home infusion and alternate site infusion therapy. So it's -- the competitive dynamics have always been there, and we believe we have a competitive product that we can sell and service in the marketplace. I think what you called out is what we're seeing.

There's just some very unique circumstances with the Stelara and the IRA that changed this part of our portfolio dramatically, right, as these events happen, both with -- you look at a significant number of patients that change their health plans. You look at benefit design changes and formulary changes with the introduction of all of the biosimilars and some preferred products that are in those formularies for some of the different payers through that process. So I would say this is unique to that situation. I do believe in the strength of the enterprise.

I do believe in the strength of the foundation that we have. When you think of a position for being both a national provider, but also being very local in our responsiveness, I think we will continue to be well positioned as we move forward. This is just one of those situations where there was a shift away from some of the enhanced clinical services that we were providing for the patient cohort. And I think that has been the biggest driver behind the changes that we've seen as well as some of the formulary management aspects that have driven different decisions around what product to move on and how that either remains or moves away from our service model.

Our next question comes from the line of Raj Kumar of Stephens.

Maybe just some data-related questions here on the kind of chronic growth. You called out the strength in IG and neuro, but you kind of also saw some weakness in some of the other specialties just related to delays of program integration. So it would be helpful just to kind of see how that chronic business grew relative to the kind of high single digit to low double digit that you kind of had at the beginning of the year ex the CID impact.

Yes. We -- again, as we had called out, when we take a look at some of the other categories, we were very pleased with the progress that we're making on IG Neuro. That was an area, again, that had really solid growth across a broad spectrum of products within there. We saw across various other specialty products, again, continued strong growth on that.

What we called out on the other specialty is we had made some shifts in our commercial resources and made some investments in having better coverage across other specialties in order to enhance and to grow through that process.

That has not accelerated the way that we had anticipated in the first quarter. It is one that we are continuing to be focused on and drive forward. But we think that when you look at the breadth of the portfolio that we have, there are still opportunities for us to drive that growth as we move forward. But we were calling out that we had less than expected performance and that, that is an area that we will focus on as we move ahead.

I don't believe that the rest of the portfolio is feeling what we felt in the chronic inflammatory. We are still seeing growth in those areas. It's just not at the pace that we had anticipated given some of the investments that we made.

Got it. And then just maybe following up and kind of appreciate all the color on the revenue acceleration efforts. And so as we kind of think about what it means from a capital investment standpoint and then some of the time lines associated with the different pillars, I guess, does that kind of drive still confidence in the overall long-term framework of high single-digit top line growth? And maybe just kind of any color around the conviction around that going forward?

Yes. Our investments are to reaccelerate growth, right? And we are clear around the mandate. And as Meenal called out, I mean, the organization entirely, not just our commercial team, our entire organization understands the importance of getting us back on a growth trajectory in alignment with those expectations that are set.

These investments and -- really our focus on the near term around these three pillars is to drive that acceleration and reacceleration and the focus as we move forward.

Again, our belief in the fundamentals of this business, our belief in the foundation that we have, our belief in the clinical value and the clinical realization that we can drive given this platform remains intact. This was a reset based on some of these unique market dynamics. And our belief is that we are going to drive the business and as an execution-minded organization, we are going to be able to get back on that moving forward.

Our next question comes from the line of A.J. Rice of UBS.

This is James on for A.J. My question is kind of similar to the last one you just answered, maybe just expanding on a little bit about the capital deployment priorities. It sounds like maybe that M&A and share repurchases, will that kind of just be on the back burner for the remainder of the year, more of a 2027 item as you focus on getting back to that stronger revenue growth?

Sure, James. This is Meenal. I'd say the short answer is no, we have priorities, and we're going to continue to focus on all of those. We have been talking a lot on the call and even recently about the organic investments that we're making, but that's also because that's really our first priority is how do we reinvest in the business to grow organically.

We're absolutely still committed to M&A activity. We've talked about adjacencies and tuck-ins. We have a very active process and an active funnel going on. And you probably saw that we expanded our revolving credit facility. We more than doubled it. And that was in large part to be able to enable us to fairly seamlessly move forward with some nice M&A deals. So that's why we've expanded that revolver because it gives us quick access to capital when that happens.

And then lastly, I've been talking about for several months now that we would continue to focus on periodic share buyback, but that's our third priority. So you're not going to see us in the market all the time with a standard program. But where it makes sense on multiple variables, we'll definitely -- you'll definitely see us in the market buying back shares. So our capital allocation priorities remain intact, organic M&A, periodic share buyback, and there's no change to that.

This concludes the question-and-answer session. I would now like to turn it back to John Rademacher for closing remarks.

Thanks, Elliot. In closing, we have demonstrated consistently over the years that we are a resilient and agile organization with a team that recognizes the important role we play in serving patients and delivering on our promises. We are moving quickly to develop and execute our near-term recovery plan while we continue to invest in the long-term growth of Option Care Health. The resolve of our team has never been stronger nor have the opportunities been greater. Thank you for joining us this morning. Take care.

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

Good day, and thank you for standing by. Welcome to the Option Care Health Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 of 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 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 10-K filed with the SEC regarding the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements as required by law.

During this call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. 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.

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

Thanks, Nicole, and good morning, everyone. Thank you for joining us, and we're excited to share updates on our productive year and the 2025 results today. Before I do this, I want to take a moment to say thank you to the entire Option Care Health team for their consistent execution and commitment to our mission of transforming health care by improving outcomes, lowering total cost of care and delivering hope to our patients and their families.

Before I get into the details on our business and financial performance, I'd like to reinforce our critical role across the health care industry. Option Care Health is uniquely positioned as the nation's largest independent provider of home and alternate site infusion therapy. We've built a strategy on a national scale that starts with putting the patient at the center, provides high-quality care with cost advantages and foster's clinical innovation with local responsiveness. Last year, we served over 315,000 unique patients across a range of therapeutic categories ranging from IV antibiotics to some of the most sophisticated rare and orphan products in the marketplace. In fact, last year, we completed over 2.5 million infusion events.

Our 50-state licensure, expansive footprint and comprehensive nursing team help us deliver consistent clinical outcomes and same-day service for large health systems and national payers across the country. This includes helping payers shift care into lower-cost settings and reduce inpatient utilization where clinically appropriate. With the ongoing economic pressures the health care industry is facing, we are on the right side of the health care cost curve, partnering to provide high-quality care at an appropriate cost in a setting in which patients want to receive it.

As we reported this morning, our results were in line with what we preannounced in January. Meenal will provide more detail, but I wanted to highlight the solid execution that drove our performance this past year. In 2025, the Option Care Health team continued to capitalize on industry dynamics and made significant progress in our efforts to create a sustainable growth enterprise. We opened new infusion suites and pharmacies, deployed innovative technology, deepened our referral base and expanded our formulary while navigating a dynamic environment and shifting economics on certain therapies.

As we reaffirmed this morning, our current views on 2026 are also in line with the guidance that we communicated in January. The team continues to execute at a high level every single day and the strength of our platform, our clinicians, our local market operations and the consistency of clinical outcomes across our national infrastructure continue to differentiate us and provide value to our stakeholders. Our partnership with payers continues to deepen as we help them navigate affordability challenges and find opportunities to rightsize care. We understand the pressure our payer partners are facing with rising health care costs, as well as rate pressure for those with Medicare Advantage exposure. We see strong alignment between our capabilities and the outcome the payers are trying to achieve, and we expect that momentum to continue.

We have active site of care programs with the largest national payers. And this year, we added 5 new programs with regional health plans and 2 additional with nontraditional payers. These programs are seeing traction, and we expect that number will continue to grow in 2026 and beyond. We remain committed to leveraging our platform to help manage the total cost of care while producing quality outcomes through clinical oversight and helping to ensure adherence to medication care plans.

On the formulary front, we see a strong pipeline of infused and injectable drugs to treat clinically complex patients, and we're encouraged by the engagement with pharma manufacturers and innovators who are seeking partners with our capabilities. Our comprehensive clinical competencies, including one of the nation's largest network of infusion nurses as well as broad market access national scale and local pharmacy resources positions us as a partner of choice to help new-to-market products reach their targeted patient cohorts. And our pharma partnerships also continue to expand including earlier involvement through clinical trial support and enhanced service and data insight programs.

We continue to invest in and strengthen our programs to create specialized service offerings clinical effectiveness reporting and operational discipline to scale and configure programs with efficiency capture. Today, we are privileged to operate over 20 enhanced programs in service to pharma manufacturers. And we are excited about the pipeline of new programs we expect to launch in 2026 and beyond.

Our referral source relationships remain strong as we have proven to be a reliable partner across health systems and specialty prescribers. Our consistent and disciplined approach helps us capture additional demand through increased reach and frequency with these referral sources. With the specialty prescriber space, we have aligned our commercial resources to improve focus on key call points.

We see attractive growth vectors in neurology, autoimmune, dermatology, oncology and rare diseases and we expect these therapeutic areas to play a larger role over time. The breadth of our portfolio continues to expand as additional therapies and indications are added, and we are excited about the opportunities ahead.

We also continue to invest in growth across our platform throughout 2025. We added talents across commercial sales, operation and our clinical teams. We strengthened our technology stack to drive efficiency and scale. We continue to deploy artificial intelligence and automate key patient administration functions, including invoice processing and cash posting. Today, approximately 40% of our claims are processed without human intervention. We believe these initiatives will help us to grow without significant incremental labor within these functions while improving the quality and productivity of our team members.

Our ambulatory infusion clinic investments continue to progress well, with over 25 centers offering advanced practitioner capabilities. These additional investments complement our home-based and alternate site model, expand patient choice and can support higher acuity therapies in cost-effective settings. To provide some context, on a pro forma basis for Intramed Plus, which we acquired in 2025, our infusion clinic visits grew over 25% in the fourth quarter over prior year. And we've seen continued momentum in both the Intramed Plus sites in South Carolina as well as within our other infusion clinic locations. We expect to further leverage our model as we navigate regulatory compliance and identify strategic locations for new clinics.

Additionally, over 34% of our nursing visits this quarter occurred in one of our infusion suites or clinics, and we expect to continue to leverage the infrastructure we've built which contributed to the results in both clinical capacity and efficiency.

And with that, I will turn it over to Meenal for a closer look at the financial results. Meenal?

Thanks, John, and good morning, everyone. As John noted, 2025 was a strong year for the organization, and our results reflect both the resilience of the business and the strength of our team. For the full year 2025, net revenue was $5.6 billion, up 13% over prior year, driven by balanced growth across acute and chronic therapies. Our teams continue to capitalize on evolving industry dynamics to capture volumes from both health systems and specialty prescribers. Acute revenue grew in the mid-teens while chronic therapies grew in the low double digits.

As discussed in our third quarter call, we began to see Stelara biosimilar adoption which carries a lower reference price and reimbursement. For the full year 2025, we absorbed a company revenue headwind of 160 basis points from patient transitions to Stelara biosimilars, impacting our chronic portfolio.

Gross profit dollars grew 7.4%, and our SG&A percent of sales declined 50 basis points versus last year to 12.1% as we continue to see the positive impact of our efficiency initiatives and leverage. Adjusted EBITDA of $471 million increased 6% over prior year, and our EBITDA margin was 8.3%. Adjusted diluted EPS was $1.72, growing 9% and reflecting the strength of our operating performance and the impact of repurchasing our shares over the course of the year. We generated $258 million in cash flow from operations for the full year 2025 and finished the year at a net debt-to-leverage ratio of 2.0x. As we shared in early January, we expected to finish below our prior guidance of $320 million.

Consistent with prior years, we executed on some opportunities for strategic inventory buys where we could achieve some favorable economics, including some opportunities that arose later in the fourth quarter. Additionally, we ramped up our working capital for certain limited distribution therapies more than we had estimated as clinical and operational investment is essential to support long-term growth. And overall, as we grew sales 13% this year, we naturally have some higher working capital carry to support the growth of our business.

We are setting our 2026 operating cash flow guidance to be greater than $340 million, reflecting a 30-plus percent growth in cash generation versus last year. We are already executing on initiatives to reduce our working capital with a focus on inventory as we believe a significant portion is timing related. We are also taking a fresh look at our processes and practices around working capital management to continue driving our strong cash conversion cycle. Consistent with prior years, our cash generation is seasonal with the first quarter historically being the low point and the majority of our cash being generated in the back half of the year.

Turning to capital allocation. We executed on all fronts in 2025, and our priorities remain consistent. Our primary focus remains internal investment to support profitable growth capacity and efficiency initiatives. In 2025, we added over 80 infusion shares as we continue to build out our suite and clinic footprint where we identified strategic geographic growth opportunities, but we remain focused on maximizing utilization within our current infrastructure.

We also invested in adding key clinical and commercial resources to the team. On our second priority, M&A, we remain active on identifying complementary tuck-ins and adjacencies. We acquired Intramed Plus earlier in the year and the business and financial performance beat our initial expectations. We will continue to exercise discipline as we evaluate potential acquisitions ensuring they are both strategic and financially attractive.

And finally, we will periodically buy back our shares. We repurchased over $300 million of our shares during 2025, and as we announced in early January, the Board expanded our share repurchase program authorization by $500 million.

As we look forward to 2026, we are reaffirming the guidance we announced in January. We expect full year 2026 revenue of $5.8 billion to $6 billion which reflects a 4% growth at the midpoint and a 400 basis point revenue growth headwind driven by Stelara IRA and Stelara biosimilars conversion. We are guiding to adjusted EBITDA of $480 million to $505 million. This includes a $25 million to $35 million gross profit headwind related to Stelara and Stelara biosimilars conversion with the financial impact expected to be realized evenly over the year. We expect adjusted diluted EPS of $1.82 to $1.92 and as I noted earlier, expect to generate at least $340 million in operating cash flow.

On some modeling items for the full year 2026. We're forecasting net interest expense to be in the range of $50 million to $55 million. We are estimating a full year tax rate in the range of 26% to 28% and we are assuming a share count of 159 million shares for the first quarter. We are confident in the guidance we are putting forth and look forward to continuing our track record of execution.

And with that, I'll turn it over to the operator to open up for questions. Operator?

[Operator Instructions] Our first question comes from David MacDonald of Truist.

Just a couple of quick questions. John, can you talk in a little bit more detail? I mean, it's hard to kind of get through a day without hearing about affordability. You talked a little bit in your prepared remarks about the payers. But can you also talk about not only just what you're seeing in terms of the payers. It sounds like those conversations are certainly incrementally ramping up, let me know if that's accurate.

And then secondly, just what you're seeing in terms of conversations with potential hospital systems, just given some of the pressures that they're seeing and chatter around things potentially down the road in terms of maybe like site neutrality. Just any additional color there would be helpful.

Yes, absolutely. So on the affordability, as I said in the prepared remarks, we're working closely with the payer community around helping to enable their focus around total cost of care and reducing that as it moves forward. We have in place, as we called out, site-of-care initiatives that help to identify opportunities to transition patients on to service with us and help to reduce that total cost of care, whether it's in the home, whether it's in one of our infusion suites or in one of our infusion clinics.

So we've had programs in place. I would say the pace of those conversations has increased as the payers have been focusing around really, their MLRs and looking for opportunities to maintain quality, but do it at a lower cost. And we're encouraged by those conversations and the opportunities that we believe that brings to us as well as to the patients that we have the privilege to serve.

On the hospital system front, I'd say similar. There have certainly been strong relationships across the country with key hospital systems, focusing on helping to transition patients safely and effectively on to care with us, especially when they have a capitated DRG type of payment plan. They are always looking for the ways to help to transition those patients safely out of their facilities. We embed our ends into those hospital systems to help with that transition of care. We believe that that's going to continue to be a strong point, given the national scale we have, but that local responsiveness that we talk about.

And that is the balance of the portfolio. We talked a lot about the acute and chronic portfolio that we have, that ability to serve the breadth of products as well as the breadth of patient population, just positions us well to support the hospitals and health systems whether it's an acute discharge for a patient on an IV antibiotic, whether it's supporting a 340B program on some of the specialty drugs, we have a wide range of programs that we work with the hospitals and health systems to enable them to be able to achieve the best outcomes.

Okay. And then just, John, a couple of other quick ones. Just in terms of advanced practitioner, I just want to make sure I caught that right. Could you just run through -- were those pro forma numbers across the entire advanced practitioner 25 locations? Was that just Intramed, just want to make sure that I had that correctly -- down correct.

And then one other quick question. You talked about driving increased utilization of your existing footprint. Can you give us a sense, is it fair to assume that as some of these have matured that roughly 20% increase that you've seen in nursing efficiency goes higher as these things mature and you further drive utilization within those centers?

Yes. So starting with the prepared remarks, the 25% increase was the Intramed site. As we took that over on a year-over-year basis, just in the comparable continue to make investments into that marketplace as we went through the integration of that asset as being part of the Option Care Health family. So really pleased about that. The rest of the sites are seeing the momentum. We didn't necessarily scale or call out the exact growth on that, Dave, but I just wanted to put it into perspective on the Intramed sites.

On the overall efficiencies that we expect, yes, we continue to see growth in our patient census. I mean, as I called out in the prepared remarks, we served over 315,000 unique patients last year. That is an all-time high for this organization. It just shows the strength of the platform and our ability to reach into that. Continue to utilize the footprint, especially in the infusion suites and the infusion clinic just allows us to drive both capacity and efficiency of the nursing network and continue to drive that forward.

So we had called out before the -- about a 20% improvement that we see in the nursing efficiencies over time. And that's part of that equation of where we're seeing the use of those sites to really help us drive the operating efficiency and leverage but also to increase the capacity of our nursing community.

Our next question comes from Matt Larew of William Blair.

This is Jacob on for Matt. I just wanted to touch on the outlook to start. I appreciate you first guided about a month ago and today reiterated that guide. But just wondering if you see anything that has made you maybe more cautious on the outlook for the year, whether that be updated numbers, expectations for Stelara. I know you reiterated the guide you had previously given for that. But just what kind of maybe early trends in the first quarter have showed you? Maybe any ramping drugs or drug classes or anything from the recent IRA announcements as well as any upcoming biosimilar launches you'd highlight that could potentially affect numbers to the -- both ends of the guidance range this year?

Sure. Jacob, so I'll answer your question. I'll give you the short answer, which is no. We didn't change anything related to our guidance that we provided in January. We, of course, are keeping track of the landscape and the number of puts and takes that are going on, a lot of noise in the news these days. But from where we sit in the plan that we put together, we still feel very good about the guidance that we've set forward both from a sales growth perspective as well as profitability. And then we also added into the cash flow guide in that. So we feel -- we haven't really seen anything that would lead us to changing anything in the guide right now. I don't know, John, if you want to speak to trends?

Yes. I think the overall trend is in alignment with our expectations, we had done a lot of planning heading into the year. And certainly, when we were formulating what was going to be that pre-release guide that we put forward. I think what we're seeing at this point in time is that things are trending in alignment with kind of our expectations. As you know, the first quarter is a very busy time with benefit verification and reauthorization and prior authorization for new patients coming on to service. And so there's always a bolus of activity that kind of comes at the beginning of the year. It really takes the quarter to fully shake a lot of that out. But at this point in time, we're very confident in the '26 guide and continue to believe that everything is patterning in alignment with our expectations.

To your broader question, as Meenal said, there is a lot of noise in the marketplace at this point in time. We're trying to separate the signal from the noise. And again, we don't see anything in '26 that really is changing our perspective around where we see the growth and where we see the opportunities that lie ahead. So I think the team is staying close to any of those developments. But at this point in time, feel very good with the guidance that we have reaffirmed this morning.

Got it. And I wanted to go back just quickly on the advanced practitioner model. I think in last quarter, you mentioned 24 of your 175 total facilities were equipped with this model. I think I heard over 25% this quarter. So just wondering what your target [indiscernible] learning and opening new sites in 2026 and beyond is?

And maybe as a follow-up to that, as you scale both the infusion and these advanced traditional models, what are kind of the key limiting factors for increasing the pace of the new site openings? And maybe what does the plan to invest in those capabilities look like in the next couple of years versus what that looked like in the last couple?

Yes. So as we've expressed before, I mean, we have a pretty big installed base of our infusion suites, and there's kind of a collective approach that we're taking on our infusion clinic build-out. Some of them are new sites that are greenfield that we are building when we find strategic geographies in which we want to have that capability. And others are the conversion of our existing sites to transition them over and get the licensure and there's a modest amount of refurb that needs to happen in order to make them an infusion clinic. So we're kind of going about it in both ways as we see the market opportunities and driving that forward. As we called out and as you heard, we have continued to grow that in the fourth quarter, and we expect that we're going to continue that conversion and growth into 2026.

I don't know that I'm willing to put a target out there at this point in time. It moves in some way, an interesting pace. I think as we've explained before, a lot of it has to do with corporate practice of medicine at a state level and the ability to get credentialing with the payers through that process. And so we're actively moving forward with that. One of the big aspects of where we really can drive the utilization is the investments that we also called out in investing in our commercial resources, having the sales team that is making the call, certainly investing in the clinical resources that are necessary to be able to oversee those clinics and operate within that environment. And then this balance of the operating model, where a patient is best served under the practice of pharmacy or where patient is better served under the advanced practitioner model and balancing those out. So we continue to make investments across all those dimensions. We believe this is additive to our overarching strategy of being a partner of choice and having a choice for patients to select the best site for their care. And so we're going to continue down the pace, and I would expect that you're going to continue to hear us talk about the growth that we're seeing in the existing installed base as well as continue to make additional investments to expand our capabilities and expand the network of advanced practice clinics.

Our next question comes from Pito Chickering of Deutsche Bank.

I guess the first one here, just a quick housekeeping. Can you quantify the Stelara impact you guys saw in the fourth quarter. I just want a [ view of a model ], what gross profit growth year-over-year was excluding Stelara. Was that in line with your sort of $20 million to $22 million EBITDA impact in the fourth quarter?

Yes, the short answer is yes. In the end, for Stelara and the headwind that we talked about, which was close to the $70 million or so, it patterned out exactly as we thought. And so if you assume about $20 million of an impact in the fourth quarter, maybe a little more, that's over a 100 basis point impact to gross profit.

Okay. Perfect. And then looking at your split between acute and chronic growth for '26. Just sort of curious how you view the acute growth this year, obviously, it's been a couple of big years post -- like your competitors exiting is how do you view the revenue growth of acute in '26? And also the same question, how do you view the chronic growth in '26?

And then the follow-up there from a margin perspective, is there any reason why the margins in '26, excluding Stelara would change versus the last couple of years within those two segments?

Yes. So we expect to continue to see strength in our acute offering. As you called out, Pito, the marketplace continues to be dynamic there, but we believe we're well positioned and the infrastructure that we have and the capability set really plays well to capture that market demand. I think we have characterized that the industry of those types of product is a low single digit. Our expectations is probably a mid-single digit on that so that we will continue to capture the market demand as it moves forward. Again, that's a step down from the prior year where we had the competitive closures, but it still is a strong result on that. I would say the profit contribution on the acute would be consistent with what we would expect and what we've seen in prior years. There are no major changes from that perspective.

On the chronic, again, given that some of the headwinds of the biosim and the Stelara, we still expect that to be in the high single-digit, low double-digit growth on the chronic standpoint. Again, as you had called out, certainly, we have the headwind of the biosimilar and Stelara impact on a year-over-year basis. But the rest of the portfolio, I would say, is in alignment with kind of what the historical expectations or the historical performance has been from that.

We're going to continue to have to fight through a little bit of a mix challenge in the sense we're going to be growing our chronic faster than the acute. And that's going to put some pressure on the gross margin as a percentage aspect. But again, we feel good about the strength and the breadth of the portfolio. And as we called out, we are punching above our weight class in some of that aspect where you're working through the headwinds of Stelara and putting that behind us in 2026.

Our next question comes from Brian Tanquilut of Jefferies.

John, maybe to follow up on your points to Pito. As I listened to your prepared remarks and heard all the things you were talking about these of the drivers of the business going forward, your AI benefits and the fact that your business probably can't be AI. So when we think through all that and the fact that Stelara is behind us now, is it right to think that we should revert back to sort of a double-digit EBITDA trajectory once we get to 2027?

I mean, look, Brian, we don't give '27 guidance on the day that we gave out '26 as you expect. But the fundamentals of the business, I guess, part of the prepared remarks were around the fundamentals of the business being strong. We believe we're on the right side of the cost-quality equation. We believe that we continue to partner with payers and pharma and really have a unique platform for our stakeholders to help achieve their goals as we're achieving our goals. There is -- there will continue to be opportunities as we see the portfolio of products that are entering the marketplace as well as the ability to use our clinical resources to the fullest across that. So I think things are setting up really well for us to continue to drive the business forward. I think we're extremely well positioned to capture that market demand and deepen the partnerships with those key stakeholders. And I think as we move through the year and continue to make progress against the objectives that we've outlined, I am confident in the strength of the position that we hold and really confident in the opportunities that we have to continue to capture market demand and really drive around those new vectors of growth that I outlined.

Yes. It's Meenal. Just the other thing I'll add when we put forward our '26 guide, we talked about there's a couple of headwinds in there, 400 basis points related to, hopefully, the last couple of quarters, we'll talk about Stelara. So 400 basis points headwind on the revenue side. But then with the $25 million to $35 million EBITDA impact we talked about, if you take that out of the growth rate that the guidance implies, that puts us at a double-digit EBITDA. So that's what we're striving for. Echoing everything John said about a lot of the initiatives, a lot of the work that we're doing and we're just really focused on 2026 as a year of execution on a number of different initiatives and investments that we've made.

That's very helpful, Meenal. Maybe my follow-up, as I think about your guidance for the year, what assumptions have you made in terms of biosimilar shifting within the Stelara portfolio or even to other therapies like TREMFYA or should I ask differently maybe is there upside opportunity as those things occur over the course of the year?

Yes. I mean we entered the year with assumptions around the portfolio and the census of chronic inflammatory disease, kind of the broader category, Brian, inclusive of that, Stelara, knowing that there were going to be shifts to biosimilars that were going to be shifted to other products in the portfolio, and some of it was going to be led by the PBMs and payers around their formulary management in the way that they were aligning around those opportunities. I think as I said in the previous question that was asked, I think it's patterning the way we expected it to or at least close to that, which gave us confidence to reaffirm the guidance today.

It's those shifts, the first quarter is a really important quarter just because of all the prior authorization and reset that happens through that process. I think as we get through the end of Q1, we'll have a better sense around how everything is going to shake out on that. But at this point in time, it's in alignment with kind of our expectations. There's really nothing else that is on the horizon in 2026 that we think has a material impact on the portfolio either with new product entrants or biosimilar conversion other than the Stelara as we have called out.

Our next question comes from Lisa Gill of JPMorgan.

John, I want to go back to your comments around the expanded formulary. You talked about a strong pipeline in infused and injectable products. Can you maybe just talk about any specific opportunities that you see? I know in the past, you've called out, for example, rare and orphan products and large dollar amounts, but smaller gross margin percentages. Anything that we should keep our eye on as we think about '26. And then just kind of dovetailing into that, when I think about the strategic inventory buys that you talked about, should we think about that also as more of a first quarter impact? Or is that also going to be spread throughout the year? How do I think about the cadence of some of this?

Yes. So I'll start, Lisa. Yes, thanks for the question. I think when you look at the formulary and kind of the opportunities that we see in the pipeline, I would guide us a little bit more towards some of the rare products. The platform that we have, the clinical capabilities -- we had and we had announced earlier that we have two additional platforms that are going to be starting in 2026. A little bit hard on some of those products to know what the uptake is going to be and with PDUFA dates and things of that nature as to when the actual launch will happen. But we have two programs that will come online in 2026 in addition to the portfolio that we have. We think the platform itself is really has strength in the pharmacy infrastructure the infusion suite infrastructure and the clinic infrastructure as well as the clinical competencies that we have to continue to partner deeply with pharma on that. So I think you'll hear more about that as things progress, and those are areas of focus. There are additional products that are coming in, in the chronic space. that again, we feel encouraged about either expanded indications and/or an opportunity for entrance of new products into the portfolio. So look, I'm not going to call out single products for various reasons. But the strength of the team that we have in place that works with pharma manufacturers to identify those opportunities to make certain that we're on formulary or it's a part of our formulary and we're able to bring it in. And in some instances, either through a limited distribution or exclusive arrangement. We're always looking for how to leverage our infrastructure to the fullest and be a really strong partner to pharma as they're looking for channel partners to be able to reach their patient cohorts.

Yes. And Lisa, I'll answer the cash flow question for you. In general, we would expect -- and maybe I'll take a step back, I talked about in the prepared remarks, that we had -- as we've typically done, we made some strategic inventory purchases, some, there were some decisions late in the fourth quarter when we did that. As typical during the year, we'd expect it to get used up, whether that's exactly evenly through the quarters, it's a little chunkier with cash flow, but I would expect it would go through the year. And just a reminder, I would also say that as we think about cash flow seasonality, we've historically seen where Q1 tends to be the lightest cash flow quarter tends to be much stronger in the back half. So it's hard to see where the inventory patterns will match in there, but we will comment on it and you'll see tracking coming through with just inventory balances shrinking throughout the year.

Just to follow on to your capital allocation strategy. I heard both you and John talked about Intramed being very successful. How should I think about '26? Do you see incremental opportunities for another Intramed, or other types of tuck-in acquisitions in '26 versus share repurchase?

Yes. I mean I'll start with this. As I think about our M&A strategy, we're absolutely -- that's a big focus. We've talked about organic investment followed by M&A. We have added additional resources really focused focus on this area. And so we're continuing to evaluate a number of different opportunities that are out there. I just remind folks, right, you see what's above the water line. You don't see all the swimming going on underneath the water line, but there's definitely a lot of activity and M&A remains something that we'd go after. Intramed-like assets have been terrific for us as we've gone through in the past. So that's definitely a focus area for us. John?

Yes. And I would just echo that. I think that we're managing a pipeline of opportunities at this point in time. And as Meenal said, we continue to invest in that team and the capabilities to assess and then do that. The only thing I will continue to remind everyone is it's got to be both strategic and financially accretive for us as we're looking forward. That's the discipline that we've demonstrated historically, and it's one that we'll continue to maintain as we look ahead.

Our next question comes from A.J. Rice of UBS.

Thanks, everybody. Just to put a finer point on the seasonality, I'm interested on the income statement. You got the $25 million to $35 million gross profit headwind. I think the assumption with the way things played out last year was because you had forward buying that mitigated the impact of Stelara in the first quarter last year, the comp will be particularly tough in the first quarter of this year and then get more normalized for the rest of the year. It sounds like you've got forward buying, you're doing again this year. So should we think of that $25 million to $35 million headwind as being evenly distributed? Or is first quarter still going to be a tougher comp than the rest of the year with respect to that?

Yes. So let me answer both questions, A.J. So one is it relates to 2026 and I talked about, and this hasn't changed that the $25 million to $35 million headwind, we would expect to pattern out fairly evenly throughout the year. So there isn't that first quarter phenomenon that occurred last year. Having said that, when you look at the year-over-year comp, because of what happened in 2025, there is a bit of a year-over-year comp issue in Q1 where it was more favorable in Q1 last year but not necessarily this year. So hopefully that answers what you were trying to get at.

Okay. I got it. And then I know John mentioned the application of AI and claims processing and things you're doing there. We're hearing providers talk about AI applications in various ways. I was curious when you go beyond that, is there any other applications that you're looking at for AI, whether clinician utilization, staffing, other things that would be worth highlighting?

Yes, A.J., I would highlight that we're doing work with some agentic aspects for, as you would expect, call center capabilities and the ability to help better support customer service. We're doing work around workforce optimization and making certain that we have the right resources in the right places. As part of the overarching comments that Meenal made around strengthening some of the things on working capital, we're looking at tools to help better manage inventory and things of that nature. So I'd say it's broader than just revenue cycle managed at this point in time. The use cases that we have are expanding. And these are all, I guess, tools that augment our team. They help our teams work more efficiently, more effectively and in instances, reinforce quality through that process. We have not done anything at this point in time to really put it in front of the clinician. We believe that the models are still a little bit immature in order to do that. We may look for opportunities to help support our clinicians in not capture in other aspects. But at this point in time, we have not done anything to put it in the pathway of the clinical protocol.

Yes. And the other thing that I'd add, A.J., is just as AI becomes, dare I say, more mainstream, et cetera, there's a lot more, as John referred to, there's certain things that are now off the shelf that we're looking at or even when we're working with other vendors and partners where they're utilizing AI and other tools to help us help what they're doing for us on efficiencies, those are other areas that are going on as well. So it's much broader, as John said, it's much broader than just looking at the revenue cycle management area.

Our next question comes from Joanna Gajuk of Bank of America.

Just a couple of follow-ups. In the prepared remarks, when you talk about payers, you have mentioned 5 new programs with regional and 2 with known traditional payers. Can you give us a little bit more color, especially the nontraditional players, what exactly are you referring to?

Yes, Joanna, it's John. So there are conveners in the marketplace that are either trying to create a better solution for payers themselves and/or direct to employers. So those are the nontraditional partners that we're working with that allow us to expand our reach into the marketplace, but also be a partner across the payer community at the national, regional and the convener level.

So when you work with these conveners and I guess it sounds like direct-to-employer relationships. I guess are these [ pays ] comparable to what you negotiated with commercial [ pays ]? Or maybe that's better because it sounds like these parties look for solutions, so maybe they will [ pay ] a little bit better rate? I don't know. Can you give us a little bit of flavor on that?

Yes. I would say they're comparable within the way that the reimbursement -- although some of the conveners and some of the, I guess, the more innovative organizations are continuing to take a look at capitated programs and looking for ways to help to manage the patient base in a more comprehensive way. So they're trying to innovate around those aspects. And we're working with them around thinking about new models as well as existing models that they're operating with. So -- but I would say we're seeing that it's -- they're comparable in the reimbursement. And in some ways, they just help us continue to innovate and make certain that we're thinking about the total cost of care in a broader sense.

Okay. That makes sense. And if I may, another follow-up to you, we're talking on multiple occasions, I guess, around cash flows, but also in terms of the product and portfolio around limited distribution drugs. So can you give us a sense of, I guess, how many you have? And how many, I guess, you added in '25? How many you're adding in '26? And I guess, are you seeing any increased competition for this limited distribution drugs in the marketplace right now or less competition for that matter? But just any additional, I guess, commentary will be helpful.

Yes, Joanna. So we have over 20 platforms that we operate today that are either rare or limited distribution drugs that are part of our portfolio. We had called out in previous calls that we were adding 2 additional programs in '26 as of this point. These are normally -- especially on the rare side, they tend to be higher-priced products. There is some working capital build that comes with that is we're putting inventory into our infrastructure and helping support the commercialization of those products. So that's part of the working capital that Meenal had called out in some of the things that we use cash in '25, and we'll -- '26 as we move forward.

But we feel really good about the platform. When you think about the breadth on a national scale the access points that we have, the relationships we have with the payers and then the clinical competencies of this enterprise, we continue to believe we are well positioned to compete for those.

There are competitors in the space. It's -- as you would expect, in all of health care, it's highly competitive. But we believe that we're creating a very unique platform and have an opportunity to win our fair share of those type of programs as we move forward.

Our next question comes from Charles Rhyee of TD Cowen.

Maybe John and Meenal, a month back when you guys sort of outlined sort of the initial guidance for the year. I think there was a sort of an assumption that you'd be looking at sort of -- it was early, you didn't know what your Stelara [indiscernible] would look like. And so certainly something you're putting out there, I think you were trying to -- if I understood it correctly, was taking kind of a conservative assumption on that. We fast forward here about 1.5 months, you kind of reaffirm the guide. Anything about that in terms of what you have been maybe thought of what your census look like versus what you're actually seeing now? Has anything changed or gotten better or worse?

And then, John, I think you mentioned 340B in one of the response to one of the questions earlier. Can you kind of talk about how you support 340B? And what is your -- maybe any kind of exposure you have to the program? I know there's some concerns around -- obviously, there's some regulatory risks that pop up now and then around. I'm just curious how you are -- how do you work within the 340B program with your acute care partners?

Yes. Charles, why don't I -- I'll take the first part of your question on Stelara. So as we talked a little bit earlier, there's a lot of activity that always goes on in the first quarter with new year benefit verification and formulary changes and just with a lot of the broader noise across the industry right now, it's been probably a lot more than that. Despite all that, when we look through all the activities and where we are today, we're not really seeing any substantial differences versus what we had assumed a month ago when we thought about, I'd call it, Stelara and all the different potential formulary options that could be out there for patients. So if there was anything that would have it caused us to rethink our guide, we would have incorporated here. But as I think John mentioned earlier, there really isn't anything that's substantially different. And it's still going to take us another month or so through the end of the quarter really to get through all of this the new year activity as it's pretty typical, but a little more enhanced this year just with other industry noise going on.

Yes. And then, Charles, on the 340B side, again, this is an additive program that we operate in support of our health system and hospital partners. Our model is one in which we either qualify as a pharmacy under the 340B criteria and we just pass the savings on to the hospital. So like we're -- we certainly dispense the product and are able to get the economics that are normal with that. But any of the 340B savings is just a transfer of those savings back to the hospital. So we help to facilitate that and drive that forward. I wouldn't say it's a meaningful part of our overall economics in our overall program, but we like to support the hospital and health systems. We like to be able to bring them the benefits and the savings that could be generated when they're a disproportionate hospital. And we work with the clearing houses and across that in order to facilitate the savings to be passed on to the hospital.

So just to be clear, that if there were to be any changes in 340B pricing, that would have no impact for you guys because that's sort of a pass-through on your end?

Correct. Yes. I mean that's the way we've approached it.

All right. That's really helpful. And maybe just one quick follow-up on OpEx growth for this year, how we should be thinking about it? I think last year, we saw some elevated expense related to the Intramed acquisition and investments in the business. Can you give us a sense, Meenal, sort of what we should be thinking about in terms of OpEx growth? Anything kind of onetime or any things that are coming out?

Yes. When I take a step back and maybe I'll answer it in a '25 context and looking forward, when I think about 2025, our SG&A on print does look like it's up a little bit versus gross profit, and that's the lever that we're taking a look at. When you start to strip out, as you point out, Intramed, and there's some GAAP-only charges that are sitting in SG&A, and you take some of that out, we're actually in line or a little bit down on SG&A growth versus gross profit growth. So that's -- I mean, that's where we expect to trend as we think about going forward. We still have, I think, '26 maybe a little bit more on the investment side that we're doing. So you may see a pattern slightly higher than gross profit. But as we look forward, we look for something closer to a leveraged model versus gross profit.

Our next question comes from Erin Wright of Morgan Stanley.

I just have kind of one bigger picture, just a higher-level question. Just on the competitive landscape and just thinking about some of the historical tailwinds with competitors exiting the market. I guess, can you talk a little bit about the runway left on that front? How much does that continue in terms of a tailwind for you? And are there other dynamics, I guess, to call out in terms of looking at the landscape and your ability to take advantage of some of those opportunities?

Erin, I think as we're looking ahead, we certainly don't see as big a significant shift that we've seen over the last couple of years with two major competitors kind of resetting their network design and the product portfolio that they were serving. We still believe there's opportunities to take share in the market. We're well positioned. We like the infrastructure that we've built. We love the breadth of the network, but also understand health care is very local, and we have to win at the local level. So we're doing everything we can to be that reliable and consistent partner to be able to help with the transition of care for patients or be able to help them live their best life through the activities of our clinical teams in support of those care plans. So the market in general, I mean, if you take a look at some of the data, the market for infused products is over $100 billion, we're $6 billion of that. So we think there's still continued runway for us to be that partner of choice and to compete vigorously, but know that this is a hustle business, and you got to do it every single day.

Our last question comes from Raj Kumar of Stephens.

Maybe just kind of thinking about the kind of investment thesis around kind of just the internal spend and kind of the opportunity set they've talked about around oncology and neuro. As we think about the kind of investment spend in 2026 and the capturing of said opportunity, is that more so that there needs to be internal capabilities that still need to be built out or potentially acquired to capture oncology in the home-based care setting? Or is it kind of more on the sites of care initiatives front in terms of just payer or a hospital partner, [indiscernible] partner education.

And then maybe kind of on the AI initiative front and thinking about what was realized on 2025. Any way to frame the benefit in terms of if it drove increased throughput or any cost efficiencies, that would be kind of helpful.

Yes. So let me start with maybe the AI first. So as we had called out, I think the measurable responses when you're able to do 40% of your claim processing without actually having human intervention, you can see the benefits that are driven on that. Again, that allows our team to focus on the higher complexity claims, those that need additional support in order for us to get fair reimbursement for the services that we rendered. So our focus has been around there, but we're seeing those tangible results. And I think you see it in both cost of service as well as SG&A over time, knowing that you've got to invest a little bit ahead of benefit on some of those to be able to drive that forward.

On the overall investments in our business, I think we remain a capital-light enterprise. I mean, I think for the next year, we'll be in that $40 million to $50 million range of CapEx as we're looking at the range of opportunities to deploy capital to grow our business. We'll go about your call out on [ oncology others ], that's a two-pronged approach. There is investments that are required in the commercial team and being able to reach into the call points. There are some capabilities around the clinical protocols and the clinical programs that need to be developed in support of that. There's certainly the utilization of our infusion suites and our infusion clinics as part of that comprehensive view as well as the ability to transition patients to the home.

So I'd say it's across all of those dimensions. And as we're looking at where we deploy our capital and the return we expect on those, we have a disciplined approach that Meenal and team lead to help to us to really assess the value that can be created there. But we think there's a significant amount of opportunities for us to look at those new vectors and continue to invest in the people, process, technology and facilities that will be required for us to win.

And the last comment I'll add on that is with all the investments John is talking about, we definitely have made investments in 2025, and you can see that. So you're going to see an annualization of that into '26. And plus like on the commercial resources side, that's an area that we're really leaning into and there's some additional investments we're making. That's part of the comments that I was addressing previously on still a little bit more SG&A growth that's going in ahead of the growth and the benefits we expect to achieve.

Thank you. I am showing no further questions at this time. I would now like to turn it back to the President and CEO, John Rademacher for closing remarks.

Yes. Thanks, Amber. In closing, I want to highlight the resilience of our platform and strength of our team and the underlying fundamentals of the business. We're well positioned to take advantage of the opportunities ahead of us, and I've never been more confident in the team's ability to capture demand for the extraordinary care and hope we deliver to patients and their loved ones. Thank you, and take care.

This includes today's participation in the conference today. You may now disconnect.

This is Lisa Gill. I head up Healthcare Services here at JPMorgan. It is with great pleasure this morning that we have Option Care. With us, we have CEO, John Rademacher and new CFO, Meenal Sethna? No.

Yes.

Okay. What we're going to do here is John is going to -- and John and Meenal are going to run through the presentation, and then I'm going to have a quick little 20-minute fireside chat. So with that, let me turn it over to John.

Great. Thank you, Lisa. Thank you, everyone. Pleasure being with you today. And again, excited to share some updates around the business, both as we have preliminary results for 2024 and then our forward view into -- 2025 and our forward view into 2026.

Normal housekeeping matters. I certainly want to call out that we may be making forward-looking statements. I ask that you take a look at our safe harbor and other statements, both in our Investor Relations site as well as in the presentation as we have put forward.

As an organization, our focus is around providing extraordinary care to our patients and their families. At the center of everything we do is the patient. Our team and our organization is really oriented around that opportunity to really make a difference in the lives of others and knowing that there's a loved one at the receiving end of every dose that we dispense and every nursing event that we oversee.

I think that's important when you think about what we do as an organization. And really, that's a driving force behind all of our actions and the partnerships that we have broadly across the health care ecosystem. Reflecting on '25 and really looking at 2026, the solid foundation of the business. Again, this is a team sport. The team continued to execute extremely well, taking advantage of opportunities that we've had with some industry changes and just differences that are happening in the way that care is being delivered across the country. But we were extremely well positioned and the team capitalized on that, delivering strong preliminary results, again, unaudited financials, but preliminary results were about a 13% revenue growth for the year, about a 6% adjusted EBITDA growth and about 10% adjusted EPS growth at the midpoint.

So again, solid foundation continued really great progress from that standpoint and really executing the business. Really proud at expanding the patient census in which we manage and have the ability to support. So during the year, we served over 315,000 unique patients as part of our service model, really driving that forward. And that capitalized on some of the changes in the industry dynamics, some of the investments that we made in improving our patient acquisition and really driving additional products within our product portfolio to expand that.

And then we made some investments into the business, whether it was through M&A and our acquisition of Intramed Plus and that continued to be just a great addition to our business and expansion into a really important marketplace in the Southeast, continued investments into our infusion clinics, our pharmacies and really our operating model as we move that forward. So that ability to continue to build out a national network, have that local responsiveness was important.

That foundation and really the momentum that we carried through the back half of the year continues as we now look forward into 2026. And so we're well positioned as we move forward, knowing that we still had some work to do and a step-down that was going to be expected within the Stelara and biosimilar space. But we had committed in the third quarter call around our ability to continue to grow and continue to capitalize on the incredible position that we hold in the marketplace and that ability to drive not only growth in adjusted EBITDA of 5% at the midpoint as well as 7% on the EPS growth just shows the strength of the breadth of the portfolio as well as the opportunities that we see that sit before us.

Continue to invest in the business as we think about how we can continue to grow and look for additional vectors of growth, whether it's additional therapies, therapeutic categories and deepening the relationships in those local markets and really driving that excellence of the clinical care that we deliver in alignment with our payer partners and helping to think about that total cost of care and the ability to drive better outcomes at a lower cost.

We announced earlier in the announcement that we had an expansion of the authorization for share repurchase. And as we think about our capital deployment strategy, first and foremost, continue to invest in the business, making certain that we are driving the state-of-the-art facilities and really capitalizing on the market aspects, investing in our people, our process, our technology, our facilities, continue to pursue adjacent and accretive M&A opportunities as we move forward in a very disciplined way, but we're going to continue to look for those opportunities like what we found with Intramed Plus.

And then continue on our path of periodic share repurchase as part of the way that we're looking at a capital deployment strategy. Option Care Health, again, as a national provider, as I mentioned previously, we have this national scale that allows us to really leverage the capability set and the clinical competency to be very local. Health care is still a local business, that ability to be responsive at the local level, serve the unique needs of those different markets really allows us to differentiate ourselves in the marketplace.

We have over 190 locations in which we serve patients through our pharmacies and our infusion clinics. We have over 750 chairs that we operate as part of that expansion of the home, the infusion suite and the infusion clinic. And when you look at kind of the breadth that we have with the payer relationships, we have about 96% coverage of the U.S. population in the way that we have looked at managing being in all 10 of the top 10 national payers, but also those regional payers.

We have over 800 payer relationships, over 1,400 contracts that brings us broad market access as we move that forward. And the business continues to generate really strong cash flow that allows us to continue to invest back into the business, allow us to have flexibility within our balance sheet and allow us to make certain that we are making the investments that are required for us to capitalize on what we think is market dynamics that are going to continue to drive care into the home and allow people to age in place and continue to execute at a lower cost setting.

When we talk about just the overall demand on that home infusion continues to grow as part of the overall infusion therapy set that's a bigger part of that. We continue to capitalize on our position and making certain that we're collecting our fair share that we're capturing that market demand that we're making investments into our commercial teams so that reach and frequency and that partner of choice status remains high for Option Care Health as being a partner to help either transition patients out of a hospital into their home safely and effectively and/or to capture that chronic condition management or really be well positioned to support patients that have rare disease that we have those products with part of our portfolio.

That is a wide range of products that we have in the portfolio. I know over the last few years, we've kind of focused on one. But the reality is we have a broad portfolio of products. We have a full spectrum within the pharmacy. And the reach of our clinical team at the point of care is a big part of the value that we can drive that oversight and the insights that we can gain by being able to serve that patient in the home or in one of our infusion suites.

As I mentioned previously, some of the stats and the resilience that we have over 2.5 million deliveries and infusions were administered by Option Care Health during the year. As I called out, we have over 600 therapies within our formulary and our portfolio that we serve and that we're dispensing on an annual basis. And 88% of our revenue is coming from a commercial counterparty. So that ability for us to partner with the payer community, whether it's in ASO business, at-risk business, MA business that they have, we continue to be well positioned to capitalize on that as we move forward and continue to work to look for ways to expand and grow that ability to serve Medicare beneficiaries on a broader basis.

I talked about the diversified portfolio, some of the numbers that we had put forward, and Meenal will go into a bit more detail, but the diversification of the revenue and gross profit mix really drives sustainable growth for us as an organization. Solid foundation, multiple vectors that we can continue to pursue that opportunity for us to utilize the breadth of our clinical capabilities and the pharmacy infrastructure just sets us up well.

When you look at kind of the breakout of the revenue mix, the branded pharmaceuticals, again, having that higher sticker price certainly are a bigger portion of the revenue. But when you look at the gross profit mix, it's a smaller part. And that is a big part of the driver of the sustainability that we have in both that opportunity to capitalize on generic events, biosimilar events and really driving that business as we move forward of having the ability to bring those patients on to service regardless of the script that's being written by the prescribing physicians. So a breadth of diversification and breadth of portfolio, and I think it shows the sustainability and durability of the business and why we're excited about the growth trajectory as we move forward.

One of the things that we called out and again, an important aspect of that is, and we clarified some of the comments that we've made previously, we do not have a single therapy in that breadth of therapies that represents more than 4% of the company gross profit. So again, that just shows the breadth of the product portfolio, the balance that we have across the profit pools and the way that we're looking at managing the business as we drive that moving forward.

So with that, I'll turn it over to Meenal to give a little bit more detail.

Great. Thanks. Good morning, and thank you, John. So let me keep going here. Just real quick on our '25 results. John highlighted a couple of things. I'll say, in general, we finished across revenue, EPS, EBITDA a little bit above our guide. So we feel really good where we finished the year overall with a 13% top line and really bottom line and EPS side, 10%.

We're still in the midst as every company is in closing the books for the year. So we're still working through cash flow. We'll be a little -- we'll be less than the $320 million, but really as we looked ahead, we thought about how do we leverage our balance sheet for some strategic working capital initiatives, whether that's inventory purchases, maybe getting some better payment terms, that sort of thing. So we'll have more detail on that when we talk to you in February in our formal earnings call and then I'll cover shares in a moment as we talk about capital allocation.

I want to spend a couple of minutes here. I know this has been a slide that a lot of our investors and partners have been waiting for. So our '26 guidance, we had talked about in the fourth quarter that we expected to grow in 2026. I think with our guide, this represents the percentage growth represents the midpoint of our guide. That's a 4% growth year-over-year. We're looking at EBITDA a little bit above that at a 5% growth and then EPS at a 7 -- diluted EPS at a 7% growth. But I want to talk through some of the assumptions. I know that's where many of the questions start.

From a revenue perspective, we talked about the fact that between the Stelara IRA, the IRA impacts with what's going on with similars that have been coming into that space. We're seeing some revenue headwind going into next year. That is baked into that. But that 400 basis point of revenue headwind is really what takes an 8% growth down to 4% for the year.

As we think about our -- the gross profit impact, it's not just Stelara, but it's Stelara and some related biosimilars, Stelara biosimilars. We're estimating at this point, it's a $25 million to $35 million headwind. Again, year-over-year, you can think about that as largely being also an EBITDA headwind as well. So that would really take -- without that headwind would take our EBITDA from a 5% growth to something closer to 11%.

The other thing I wanted to clarify on that headwind is it's different than the conversation that we were having with you about a year ago. This headwind is not related to a single drug, Stelara, at a particular price, but it's really the fact that Stelara remains part of a formulary. Prices have come down on Stelara. The number of biosimilars have come into the market. So those prices are -- they vary. They're also similar, though, to a Stelara pricing. There's also next-gen drug.

So we have a number of patients that have different choices. They've got to decide with their physician, what it is that they want to do in terms of which therapy makes sense for them. So it's a broader portfolio of choices for patients that they're going to be weighing in on as it relates to what's on a payer formulary and what a patient -- or what do physicians think is best for the patient.

And then last piece I just wanted to add also lot of discussion, but Stelara and the biosimilar, so that's an aggregate number that we're talking about, represent both less than 1% of the company revenue and less than 1% of the gross profit in 2026 going forward. So when we think about concentration, this really doesn't have much materiality anymore as we think about '26 and going forward. So we were pleased to get this out there. I know a lot of people have been asking, and I think this really helps people understand the breadth of the business going forward.

A couple of things I want to point out. I know there's been a lot of discussion about a year-over-year growth in what's been going on. But if you really take a step back, if we look at a 5-year CAGR, and we take a look at what has our revenue and EBITDA done over 2020 to '25 period, double-digit growth, right, a 13% revenue growth, that, of course, embeds in a number of acquisitions that we've done over the years, but also a 16% EBITDA growth as well.

So seeing that we're getting good leverage off of the revenue growth that we have. And while it's not in the charts, if you take a look at our 2021 financial results and you can go back on any portal and look at that in the midpoint of our '26 guide, that's an 11% revenue growth and 11% EBITDA growth. And I bring that up because when you think about book ending all the discussions we've been having in the past few years about Stelara, 2021 really not much Stelara, 2026 not much Stelara. So that gives you really a view of strength of the business when you think about that over the 5-year period and 11% revenue growth, 11% EBITDA growth.

Just a couple of comments on capital allocation. I've been talking about this since the third quarter earnings call when I joined and conferences from that. I mean the great news is this is a strong cash-generating business, and I think that's what really gives us a lot of confidence in the growth trajectory that we can really drive, whether that's, as John talked about, investments we're making in the business for future growth, as we think about getting some better cost leverage as we continue to scale.

We think about acquisitions. That's our second priority, some nice tuck-ins that are adjacent, accretive, that's important to us. And then we talked about the fact that we announced an expansion to our share authorization as well. Really, what it does is it gives us the latitude to think about periodic share repurchases when it makes sense. The great news is with our cash generation capabilities, we have the opportunity to do all of those simultaneously, and that's what we've been doing. And at a leverage at finishing the third quarter at less than 2x, we feel really good about where we are from a balance sheet perspective. And last one for John.

Thanks. As we look at the business and kind of as we move into this next generation of thinking forward for '26 and beyond, extremely well positioned as an enterprise. Really, there continues to be a shift to lower cost settings where you're looking for high-quality care at a more appropriate cost, well positioned to capture that demand as that moves forward. We have long-standing partnerships with both payers as well as pharma and looking for ways to leverage our infrastructure and to provide meaningful value to them as they're thinking about managing the total cost of care or getting access for their products in the marketplace.

That national scale with local responsiveness is something that, again, puts us in a unique position to be able to be that partner of choice and be able to reach into the marketplace and really provide that. As Meenal called, the foundation is solid, continues to grow that broad foundation of that double-digit growth and looking at the breadth of the portfolio across all 600-plus therapies is the way that we look at that.

And again, we have a proven team that can execute, right? This is a business that requires that local execution, that responsiveness at that local level. Having that management team and really this is a team sport broadly across that enterprise of being well positioned to capture on those market opportunities at the local level, but leverage that national scale and use that diversification of the portfolio of products and therapies that we have, again, we think, puts us in a really great position to continue on that path of sustainable growth and really thinking more broadly around how we drive that into '26 and beyond.

So with that, open for questions.

Thank you so much, John, and thank you for all the comments. Meenal, welcome to your first JPMorgan Healthcare Conference. So I really want to start with a few things. One, thank you for all the details. We have been talking about Stelara for over a year now. So I'm happy we can put that in the rearview mirror. But when I think about this slide that you put up around biosimilars and the benefit around biosimilars. Is it simply that the IRA pricing is so low around the reimbursement for Stelara as to why the biosimilar wouldn't be beneficial in some way?

Yes. So I think as we've been talking about, that product just had some unique characteristics in the sense of the gross profit that we were able to enjoy or the product profit on that was at such a differentiated rate than the rest of our branded products, that as that continued to move down, the ability of the biosimilars to catch up just was difficult. Nothing else in the portfolio has that characteristic.

So I don't look at the Stelara situation and/or the IRA is changing kind of our perspective around biosimilars. In most instances, the biosimilar is a good event in the sense of normally with a branded pharmaceutical, the innovator has an opportunity to not have to discount their product substantially. Once we get biosimilars manufacturers into that equation, we have the ability to use our scale to compete to get best acquisition cost on that. And so we expect that pattern to maintain as we move forward.

Again, knowing that you have a falling price in the fact that the biosimilar is entering into the marketplace that you're kind of working that through. But we think the dynamics continue to set up well for future biosimilars, [ Stelara ] just being a different animal.

From that point, John, Meenal made a point when she was talking about capital allocation and talked about that you're making some investments in inventory. Do you see some incremental opportunities in '26, whether it's around biosimilars or generics?

Yes. We are looking at the portfolio broadly and that ability to use that balance sheet to whether it's working capital or other investments that we want to make, we're always going to capitalize on can we hit a new tier for rebates? Can we think about discounts for prepayments or prior payments ahead of that. We're always looking at that. We're looking at the safety stock that we have on hand. We did some work during the year around thinking about tariffs and some of that is expensed in med supplies. But that's the strength of the balance sheet. We have that ability to really be thoughtful and strategic in the way that we're utilizing the balance sheet in order to capitalize on those opportunities as they present themselves.

And I know over the last 4-plus years that I followed your company, there's always been this investor focus on the mix between chronic and acute and what that means to your gross margins. Perhaps we can start to talk about the split in profit and contribution and growth rates with no drug now making up more than 4% of your portfolio that as you talked about in [ Stelara ] now less than 1%. How should we think about the different drivers on the different therapies going forward? And what the key drivers are for the growth rates as we move beyond Stelara?

Yes. So last year, we capitalized on some industry dynamics in which one of our major competitor started to step away from the acute. So you saw outsized acute growth in '25. That's not going to repeat in 2026. I think we'll go back towards more of our traditional in that, let's call it, mid-single digit on the acute growth.

We still think there's opportunities for probably more accelerated growth in the chronic space just based on new product entry as well as some of the price points of that. So as we move forward, you're going to still feel a little bit of a bigger growth in the chronic space than what you're going to feel in the acute. But we're always looking for opportunities to leverage the investments that we've made to really drive efficiency, looking for that leverage growth as we move forward and capitalizing on the infrastructure so that we're the most efficient and effective at being able to administer those drugs.

So I think you'll see a higher growth rate in the chronic than you will in the acute, that will put a little bit of pressure on the gross profit percentage, but the dollars are real, and the drop-through is meaningful.

You highlighted that the number of infusion suites you have today. You've also talked about the increase in growth of utilization of your infusion suite to really capture future growth more so than what benefits you see in the home. Can you talk about how that flows through the margin and some of the leverage you can get in a suite versus that, as you call it, the windshield time of the clinicians?

Yes. It does a couple of things. Number one is it does allow us to offer some additional products that potentially don't make sense in the home and expand that portfolio. A lot of it is really around the efficiency that we get with the nursing community. The ability for us to oversee multiple infusions at the same time, safely, effectively in one of our infusion suites as opposed to the one-to-one relationship that you have with the nurse in the home. You don't have the drive time going to and from the patient's residents in order to do that.

So there's that efficiency gain that we get out of that and that expansion of the product. So we're really encouraged by the investments that we've made there. I think as we look about 35% of our nursing visits are being done in one of our infusion suites. We get the question, what could that be? I would tell you it will be more than 35%. But we want to give patient choice. That's an important part of it.

We will always offer the home for the medically fragile, the immunocompromised, the ambulatory constraint. That ability to reach into the home is a big part of the value proposition that we have. But offering them choice so that if they're out doing activities, daily living, they're able to be out and about in the community and to be able to schedule and stop by and utilize one of the infusion suites as opposed to having to get home, clean their house and welcome somebody into it is something that we like to offer, and we see that, that uptake continues to increase.

John, you and I have talked in the past about site neutrality. It feels like there is some momentum gaining in D.C. from both sides around site neutrality. Can you talk about what the potential benefit would be to your business if we were to see site neutrality?

There's a couple of things that are underway. We've been very active really since 2017 and trying to get the 21st Century Cures Act fixed on that and having a broader access for home infusion for Medicare fee-for-service beneficiaries. And that activity continues to be underway. I would say there's been some positive movement on that.

So the PPHIA, Preserving Patient Access to Home Infusion Act something that we have been a sponsor and supporter of as we move forward with the industry. That is -- it's gone before Ways and Means Committee. We testified the Head of National Home Infusion Association, Connie Sullivan, was able to go and testify to Congress on that and the benefits that, that would bring.

So like we're getting some good movement there. It's Washington, how things actually move from conversation actually to legislation and into act is still yet to be determined. But there's some positive movement, Lisa, that I'd say I'm more optimistic today than I have been given those conversations underway. That as well as site neutrality, when you think about low-cost setting, when you look at what we can offer in home infusion, in most instances, we're anywhere between 20% and 30% less expensive than a hospital outpatient department and to eliminate a bed day, it's anywhere between 40% and 50% less. So that opportunity for us to continue to articulate that we are on the right side of that cost quality equation and that we're part of the solution and the total cost of care, we think is an important aspect.

And the infection rate for the patient is materially lower in the outpatient setting.

Less risk associated with hospital-acquired infections and other aspects. So -- and the first question a patient asks when they're admitted to the hospital is when can I go home? So our ability to help facilitate that and safely and effectively move them in that direction. Again, we want to capitalize that as we move forward.

Knowing that most of your contracts even for Medicare advantage are all commercially based, 95%. As we think about changes that are coming about, whether we think about IRA, MFN, WACC changes, is there any potential impact to the way you're reimbursed from an insurance perspective?

We have not seen much of our portfolio being recognized within any of the most favored nation or any of those types of pricing. And you've seen Rose Garden celebrations and signings and those types of things. And those tend to be those bigger blockbuster oral, solid type of drugs. And the pharma manufacturers are finding ways to give some value back to CMS through that. But at this point in time, we don't see anything that's really on the near-term horizon that will have an impact there. But we're always keeping our eye on that.

We know that in some instances, the cost of health care in this country is not sustainable. We've got to be on the right side of driving the efficiencies and effectiveness of care delivery. And we're -- our focus is around that efficiency. I would tell you, a lot of the conversations with the payer community as they have been working and trying to find solves for their medical loss ratios and some of the spikes that they're feeling there, we're on the right side of those conversations, right?

The utilization of home infusion and our infusion suites is part of that solution set, helps to reduce that total cost of care. And so a lot of our conversations around that total cost of care and how we can help them manage those medical loss ratios to more acceptable levels.

And from that perspective, John, are you having different conversations? Are the managed care organizations putting in different levels of prior authorization so that the patient is -- I hate to use the word steered, but steered more towards home infusion or an infusion suite rather than even if the physician writes the prescription to be done at a hospital outpatient setting?

Yes. There is a lot more conversation, a lot more movement around site of care initiatives that are really helping to identify those opportunities to write site care, to help to influence the member to make that best choice. There are some conveners that are looking at changing benefit design so that there's more out-of-pocket if you're choosing a more expensive setting. So like all those things we think are positive trends, but again, just reinforce this total cost of care and why we're part of that solution moving forward.

When we think about new drug development, there's definitely enthusiasm building again around a potential Alzheimer's drug coming to market. I remember back a couple of years ago, we talked about this, and there was a lot of buzz. Can you maybe talk about where we are today? And do you see a potential opportunity here and the time line?

Yes. We continue to be, I think, as optimistic as you can be around neurological disorders. We think that gastro continues to be a big important area. We think there's opportunities in oncology to move more of that into the infusion suites into the home and being able to manage that patient census. So we think that continues to move forward.

We are starting to see some movement on the Alzheimer's drugs moving out of the academic medical centers into the community setting. As you hear of some of the developments of some of the diagnostic -- blood-based diagnostics associated with that. When you think about the progression of disease and especially in Alzheimer's, time is not your friend. And some of the challenges that have existed is when you have as many hurdles that you have to go through getting a PET scan, getting a read of that PET scan and all of the aspects that have kind of been the precursors to getting the patient on to service.

If that starts to move forward and it moves closer to the general practitioner, or moves farther up the stream as opposed to just the neurologist in the academic medical center. That time is really important. So none of the products that have come forward actually cure. They slow the progression of the disease. And so the sooner you can actually diagnose and get the patient on to treatment, the better the outcome. And so a lot of the conversations with the pharma manufacturers as well as with some of those neurologists are around how do we start to move that closer and how do we make that diagnosis sooner.

And again, that could benefit us as we're thinking about moving that forward. So it doesn't have to go to the academic medical center, and it doesn't have to go to the top neurologists in order to make that diagnosis and that prescription.

When I think about other therapy areas, obviously, we're talking about Alzheimer here, but you and I in the past have talked about cell and gene therapy and the opportunities there. Can you maybe just spend a couple of minutes talking about what areas you're most excited about?

Yes. When you look at the platform that we have and especially with the build-out of the infusion suites and the infusion clinics across the country, the conversations as we're talking about, I'd say, in the areas of neurological disorders, I'd say, in gastro. And I continue to call out that oncology is going to be an area that we think that there's opportunities. We don't do a lot of oncology today.

Is there a reason, why?

Historically, it's been kept at the oncology clinic or the hospital outpatient department. And you called out a couple of things that could put some changes in the economics associated with that with site neutrality, et cetera. as well as products like KEYTRUDA, Opdivo, Yervoy, those PD-1s have a lot of the same characteristics that the rest of our portfolio has. Our nursing community can serve those patients extremely well. Our infusion suites are well equipped to be able to do that. So we think that, that will be something that we'll continue to invest in, and we think that there's a value proposition for all parties as we think about moving that forward.

And I'm sorry, the first part of my question, is there anything beyond like what you just talked about? Is there any like specific new drug therapy that you're saying, hey, like -- and I know there's a lot of conversations that go on here and we hear a lot of new innovations.

You'll see my pause because I'm not calling out single products ever again.

I'll never ask that question again.

Exactly. I was going with categories, Lisa, just because I don't want to have to talk about the next Stelara within the portfolio. But in all seriousness, we continue to work on some of the limited distribution in the rare space. We think there are some -- those are a little bit harder to predict in the sense of PDUFA dates, we don't control end points, whether they achieve them, we don't control. Like so we -- but we are working. We support clinical trials today with our nursing community and with our infrastructure that gets us earlier into those conversations. And then it positions us well to be a channel partner as those products move towards commercialization. So like we feel good about that, but I'm a little bit reluctant to call out single products on that, given the breadth of the portfolio that we have and the strength of the overall platform.

One of the themes for the conference, obviously, is innovation, and we've talked about that from a drug perspective, et cetera. But the other side is artificial intelligence and how it will play into health care. Can you talk about how it impacts your business and how you're utilizing it?

We had called out really over a year ago, a partnership with Palantir in which we're utilizing their foundry to advance some of the things that we're doing. As a health care services organization, we have a significant amount of administration that has to happen in order to bring the patient on to service, whether it's through benefit verification, authorization, all of the steps associated with that.

So a lot of the use cases that we're doing right now are really focused around that pathway from the moment we receive a referral and trying to streamline that. I've heard the term before, and I really like it. Like we think of it as being cobot and not robot in the sense of we think that there's ways that we can provide tools to our team members to make them more efficient and effective as we drive that forward. We're not looking at dislocation of our workforce.

We think we can make them more efficient. We can take some of the rote activities out of that and streamline that process. And that allows us to grow our patient census without having to grow our labor force, right, associated with that, the more efficient and the more effective we can make them. We're doing things like nurse route optimization and scheduling. There's ways that we can use the advanced analytics and some of the AI to improve the efficiency that we have there.

When you think of 2.5 million infusions that we see, that ability to leverage and utilize that workforce in the most efficient and effective way. Those are the types of things that we're doing. There's inventory management in those types of aspects where you can use AI to help better predict where you need to have product in those points in time. So those are the types of things the backroom.

We haven't really spent a lot of time in putting it in front of the clinician. A lot of that, we still have -- it's still early that point of care is an important aspect of our business, and we're going to be thoughtful before we would start to utilize it from that perspective. But there's so much administrative process that we think we can just drive efficiencies with.

One of the things that also stood out today is that your leverage is down to 1.9x. I remember 5 years ago where you were. And I look at what's happening in the marketplace when we think about home infusion and the number of acquisitions you've made, it's still a fairly cottage industry where there's a lot of probably opportunity. So how do you view the marketplace right now? Is it -- we're going to look for things specific like I think about Rochester, right, which really made a lot of sense being near the Mayo Clinic, South Carolina, which got you into a new market. How do I think about rolling up some of those other players? And what we see right now for valuations?

Yes. It still is a very fragmented market. If you take a look at the NHIA data, there's over 800 infusion providers across the country. We think there's opportunities for us to be a logical organization to help roll that up. I think that sits kind of across the spectrum, whether it's single site, smaller operators that are looking for the exit and thinking it that way. I think there are health systems that have some home infusion assets that are reevaluating their strategy and trying to figure out where they want to deploy their capital that, that might create opportunities.

We think that we're, again, through what we've demonstrated with organizations like Intramed Plus, not only are we a good acquirer and are we able to drive that value but we're a good custodian for those owners that have kind of built their business and they want to turn it over to an organization that has the integrity focused around compliance and really bringing their team members as being part of our team into the equation. I think we've demonstrated that ability to do that in a very efficient and effective way.

Before I give John the opportunity to give his closing thoughts, Meenal, anything you'd like to initially share kind of with your thoughts on the company, what your thoughts were coming in and how you feel today?

Sure. I would say, to me, good companies are built on people and culture. And I think that really is -- you can see it, you can see what people have had access to, and we want to be able to broaden more people to meet with investors from the company, but I think that's been important. And I think really everything we've been able to accomplish as the company starts with our people. It starts with our culture.

And then being in a great space where we're not just doing good for ourselves, but doing good much more broadly, I think those pieces are important. So it's been really -- it's 100 days. It's my 100 days mark. So happy to be here. A lot is going on in those 100 days, but I'm really excited to be here and really take the company from this point where we can put Stelara aside and really talk about the rest of the business and all the opportunities that we have.

Well, we really appreciate the fact that you gave us guidance again this year. So now you have set the precedent going forward. John, we have one minute left. I'd like to end this with -- is there anything we didn't touch on today or any thoughts you want to leave the investor community with and how to think about Option Care?

Yes. We've been saying this for years. The strength of the -- just the enterprise, the foundation, it's never been in question. I understand some of the nuances of the product and some of the anomalies that created in the returns. But at its core, the value that we deliver to our patients, to the prescribing physicians, to their families on that as well as the partnership with both payers and pharma, we are extremely well positioned.

There is no other organization that has the national reach, but that local responsiveness. And as Meenal said, it really is a team sport. We've got a team that understands the important role that we play in the communities that we serve, but also the value that we can extract out of that as we operate efficiently. So really excited about the position we're in, but I think, more importantly, about the future as we're looking forward.

Great. We are too. So thank you very much. Thank you, everybody, for joining.

Thanks, Lisa. Appreciate. Thank you, everyone.

Ladies and gentlemen, the program is about to begin. At this time, it is my pleasure to turn the program over to your host, Joanna Gajuk. Thank you.

Thank you. Thanks, everyone, for joining us. Again, welcome to the -- to our Fifth Annual Home Care Conference. And now it's my pleasure to have this session with Option Care, I think, the largest -- one of the largest home infusion providers in the U.S. And today with us, we have Meenal Sethna, who's the CFO. And also in the room with her is Stephen Shulstein and also Nicole Maggio.

So thanks so much for joining us. Thanks, everyone, for tuning in. So the team agreed to jump into -- right into Q&A. And I guess a note to the audience, you have an option there on your screen where you can post your questions. So I'm more than happy to also incorporate your questions into my list.

But with that, obviously, there's a lot of interest on the topic of Stelara. But before we talk about that, maybe can we start with your high-level views of the company's outlook when it comes to, say, next 2, 5, 10 years?

Sure. Thanks, Joanna. Thank you for having us at your conference today, and good morning, everyone. It's great to be here at this virtual conference. So maybe I could just do a little bit of a step back, talk a little bit briefly about the company and then what we see as our growth drivers looking forward. As Joanna mentioned, we are Option Care Health, really the largest stand-alone independent home infusion services provider, over $5.5 billion. We have a coverage map in terms of 170 sites across the United States and can cover about 96% of the United States in what we do.

And really, our focus, our mission is really thinking about how we transform health care through innovation at a reasonable cost as we think about all the dynamics going on in the health care industry and most importantly, really thinking about how we can continue to support a number of patients and really their loved ones with everything we do. Really -- the road map that we have really thinks about how do we provide high-quality care at an appropriate cost in a setting in which patients want to receive it. And so we're -- when we think about our patients and our broad patient group, we continue to service patients at home as we think about home infusion care.

But we also have, as I mentioned, a footprint of about 170 different sites where we're able to service many of those same patients at a setting away from their home, and we find a lot of patients that's something that they're looking for to be able to take their disease or medical state outside of their home. We have -- really, we sit in the middle of a very broad ecosystem ranging from payers providers, right, doctors and really who the patients are working with patients, of course, and pharma companies. So we really have to have relationships across the board with all of these groups, which we do, which really helps drive our success and impacts our reach.

As we look ahead to the next 2, 5, 10 years, as Joanna talked about it, really, a lot of it comes down to the state of the health care industry as we -- there's been a lot of discussion across the United States where we want choice, we want availability, we want speed. We want to be able to make decisions when we need to make those decisions as patients as consumers. And so we believe that our model really works with payers and with providers to be able to provide all that to be able to provide choice and the decisions that need to be made. But again, at a more appropriate -- at an appropriate cost in a setting in which patients want to receive that. There's been a lot of discussion in the marketplace about payers, medical loss ratios, general profitability. And as payers and providers are looking for alternate ways to think about the cost structure of the industry, I think we are a big part of that solution, right?

We are -- we just don't have the same overhead structure that you find in different medical settings. And so that cost structure we have, we think, is really going to help drive our growth in that we are able to support patients that have long-term chronic diseases, and we tend to talk about that as the chronic space. But even much more so, and this has been a great growth area for the past 3 or 4 years for us, patients that have more acute illnesses, more short-term illnesses, say, in the 4- to 12-week time frame where they need immediate care as they're leaving a hospital.

And we're able to provide with the scale that we have, able to provide the therapies that they need in their home location, in a location where they need it when we get phone calls on our relationships, that's really going to drive above-market growth when we think about the chronic side of the house, acute side of the house as well as additional growth vectors, which I'm sure Joanna is going to ask me about, and I can talk about those more.

Is there kind of a framework in terms of the growth algorithm we should be thinking about when it comes to revenue, EBITDA, EPS?

Sure. Sure. We talked about -- as we think about the medium term and we look ahead, we've talked about our algorithm being revenue growing in the high single digits, getting leverage from our EBITDA growth in a low double-digit EBITDA growth and then earnings per share as we think about capital allocation, really earnings per share growing a bit better than EBITDA. So that's a framework that we're looking at. We've got a number of dynamics that we're working through right now that we're running a little bit lower than that framework now, and that's why we talk about in the medium term, that's really what we're looking at for our financial outlook.

And when it comes to this high single-digit revenue growth, how much of that is market share gains versus just the underlying market growth?

Yes. No, great question. So right now, the underlying market from the data that we've seen over time, when we think about the acute side of our business, the market is growing low single digits. The chronic side of the business, the market is growing in the low double digits. And so there's a market element of growth that contributes to growth that contributes to our goal of the high single-digit growth. But then on top of that, we think about how do we pick up additional share. And as an example, within the acute side of the business, we've seen a number of different competitors, big and small, that have exited the business over the past few years.

I think it's definitely a more complex operation to support in that you're getting new patient groups anywhere from every 4 to 12 weeks. You need to be able to provide same-day service in terms of the therapies that the patients need, in terms of the nursing and the staffing that we need. And so with our agility and our scale, we've been able to do that. We've been able to pick up more share as an example. And that's been one of the many factors that has been continuing to drive our growth rate above market.

So it's both, I guess, if I were to summarize, it's a market growth that's happening. It's share that we've gained but it's also the fact that when we think about the settings, more and more treatments are starting to occur outside of the hospital in general, and that's also where we want to make sure we're picking up more than our fair share on that as well.

And then just thinking about the end market growth and such, right, especially in the chronic. So the acute therapies right, not the market -- the end market are growing fast, but it's really chronic, right? So most of it is really the drug pipeline, right, the new infusion drugs coming. So can you talk about that in terms of kind of your expectations in terms of what you are looking out in terms of the next couple of years in terms of the big therapy categories that may be coming your way and kind of frame it in the context of, say, the next 5, 10 years versus how things have been -- what the pipeline was, say, the last 5 years?

Sure. I can take that one?

Sure.

Because I've seen the pipeline and come through our portfolio over the past 5 years or so. And we continue to be very excited about the drugs, which are in the FDA pipeline as well as new indications for therapies that are already within our portfolio. I know that there's been a lot of questions on subcutaneous administration. And just because something is subcutaneous doesn't mean it's not part of our portfolio. Again, a couple of things we need to consider as far as whether or not there's health care professional oversight required for those. And the combination of infused and injectable drugs that are coming through the pipeline, we're still very excited about.

We did call out a number of LDD wins that we have for this year and continue to look at those as a complement to our existing portfolio of therapies. We continue to see, to Meenal's point, growth within our existing categories, so chronic inflammatory immunoglobulins and the other chronic disease states that we treat. And in addition to capturing that additional share, I'd say to Meenal's earlier point, we're also finding the opportunity to make share as we find ways to shift the administration outside of those hospital settings, whether it be through site of care initiatives or just through the overall market shifting towards that way.

I think we're in a really good place heading into 2026 and beyond. And I would say I'm as excited about it today as I was 5 years ago.

Yes. And maybe one other thing I'll add, as I think about the past several quarters, we've announced partnerships with Gilead, with UroGen, with Quince. These are just some of them as new therapies are released. And so that's also a big part of our model is really continuing to build on the pharma partnerships we have. We of course, have a number of partnerships on many of the drugs that have been in our portfolio for a while. But then if there are new breakthrough drugs coming through, that's an element of our success as well.

And to that point, right, on your third quarter call, you said you expect to grow revenue, EBITDA and EPS next year despite Stelara, you talk about that. But when you think about the core, to say, put the Stelara dynamic outside, is there anything next year that we should consider? Or should we just think about the kind of the core business growing in that framework into next year?

Yes. So as we look ahead to 2026, one of the things -- well, one of the many things we talked about in the third quarter earnings call was we do expect to grow in 2026. We expect to grow revenue. We expect to grow our earnings and our earnings per share, our EBITDA and our earnings per share. This may not quite be a growth algorithm year in terms for 2026 but we do expect to deliver solid growth next year. I think some of the things that both Nicole and I have talked about, whether it's continuing to capture additional share in pockets, right, where I think there's still continued opportunities on the acute side of the business where while maybe there's -- we've seen big names drop out, but there are also small names that keep dropping out.

And I think also with our now reputation and presence, that's also helped us. I think the relationships that we've built and the success that we've had in growing our acute side of the business is also helping us in our relationships on the chronic side. So where we're working with other payers and with hospitals around growing our business on the chronic side because of the -- again, because of the scale that we have, that's also been a big part of our help. And then we just -- we're continuing as new drugs are being launched, what can we do on some of those pharma partnerships and continuing to grow those. I think that's a third piece of growth.

And then lastly, we've been talking about the past several quarters about our advanced practitioner model. And I think while that's -- while we're continuing to work through expanding that model, really, that takes our existing footprint that we have with 170 sites and thinking about how do we get additional -- additional patients really coming through our sites and what the advanced practitioner model does is by having a nurse practitioner in some of these sites, it allows a different patient group coming in more of a Medicare fee-for-service group of patients coming in as a physician office visit. And again, it allows us to leverage capacity we've already built for another group of patients.

And maybe getting closer to talking about Stelara. But in terms of just in general, right, the other dynamic that's pretty common, right, in this industry is switching to generics or biosimilars. Can you talk about just like a typical conversion, what tends to happen when it comes to revenue and EBITDA? And also to that end, how quickly you see these things play out, right, through P&L? Obviously, there's revenue piece but then the gross margin percentage, how quickly can you see improvement post like a biosimilar launch or generic launch?

Sure. I'll answer that question just more -- no pun intended generically but more generally versus -- because I think the Stelara dynamics are different than what we see in a typical model. Typically, when a branded drug is launched, as you can imagine, right, we have great pharma partnerships, and we want to be a partner with those pharma companies. Many times, we are a preferred partner there. And it's good for the pharma company. They spent a lot of time and as you can imagine a lot of money. And so the profitability tends to stay much more with the pharma company, and it's really us getting in early with that particular drug. So we've always talked about profit margins somewhere in the 5% to 30% range depending on where a drug is in the life cycle.

The profit margins tend to be on the lower side when it comes to the branded drug. Over time, right, as there are maybe biosimilars that are announced or generics that are announced over the years, right, the branded drug is going to start declining in price and/or this is where we may then have discussions on discounts, maybe a more favorable discount that we get with that particular pharma company so that we'll continue to partner with pharma company on that particular drug in the patients. But at the same time, got biosimilars, generics that are introduced, while the dollars, the revenue dollars may drop off, the profitability tends to be in terms of margin percent tends to be better. So that's where you get to the higher end of that 5% to 30% range.

And typically, what you find is you'll find a slope over time, over years. And so that gives us time to think about how we can continue to service the customers, how we can do that economically, how we can do it at scale, how we can do it efficiently. So that gives us the opportunity to build the profitability as we think about the tail of generics and biosimilars.

Nicole, is there anything else you would add to that?

No, I think that describes how we see a typical biosimilar event, although that glide path on the revenue is different for every event because you won't necessarily see the reference price decline upon the first biosimilar entrant, but on the second or the third, you do start to see it come down a little bit. And just we'll add that typically, the biosimilars will come in at a lower price point than the branded drug from a reimbursement perspective but much closer to where they are currently being reimbursed, so as to maximize the dollar but still remain competitive from a payer perspective.

And now moving on to the Stelara situation, which, like you said, very unique, right? Because here, there's some actions being taken by this maker ahead of the biosimilar competition really coming to the market wait and it sounds like this was partially because of also the dynamics around the government reimbursement, right, for these drugs under the IRA, Inflation Reduction Act. So -- but then moving forward from earlier in the year now, Stelara biosimilars were launched, you're seeing some impact there. So kind of can you walk us through the initial kind of uptake there? Is it really the biosimilar dynamic? Is it really the new patients coming to the market? Or is it the existing Stelara patients being converted?

Sure. Maybe just a little backdrop if there are folks on this conference that maybe don't have all the story. Compared to the last question that Joanna asked us, the relationship that we have with Janssen on Stelara was a little bit different, and it was really around a unique patient cohort where normally, as we talked about Stelara, a branded drug that I'm sure everyone has seen all the right commercials on that. But -- and it's normally a self-injectable drug. What was different is this was a relationship we had with Janssen where they have a group of patients where they said really needed medical oversight either because of dexterity issues or cognitive issues.

And so that there was a structure that was put in place where we could serve these patients but the economics for us were a little bit more like a generic. So even though it was a branded drug, it was profitability was better because of the service we were providing. The patient cohort group, as you would imagine, as we built up that patient cohort group and found others that needed that help that ended up being some strong economics for us. Fast forward to where we were in '24 and '25 as Stelara was one of the drugs that was put on the IRA, Janssen started coming back with us -- coming back to us in 2024 and adjusted the pricing down or basically lowered our discount, also anticipating the biosimilars would be coming into the market in '25, which is what we've seen. So that was some of the discussion that we had almost a year ago with many of you was really trying to understand what that -- what the profitability impact would be going into '25. We managed through that.

Again, great relationship with Janssen, and we managed the profitability. Fast forward to where we are now in mid-'25 going into 2026. And we started to see biosimilars coming out. The biosimilar pricing is coming in really more like what we expect the Stelara market pricing to look like in 2026 because of the IRA. So really for us, what we've been doing now over the past several months is, to your question, it's -- you've got patients that are on Stelara today. They will either continue to stay on Stelara in some cases. They will move to a biosimilar, and it's not just one biosimilar, but there's 5 or 6 biosimilars out there now. They could move to the next-generation drugs, which would be Tremfya, also a Janssen product or Skyrizi.

And so now it becomes a discussion with the patient, with their provider and with the payers themselves because as we start into the January, February time frame, payers are going through which drugs we're going to reimburse for and how much and we're having those discussions, which drugs are they going to cover for patients. So pharma companies are involved with that. And then also really putting the patient in the middle of this equation, if the therapy is worked well or there's a switch that makes sense for the patient, they'll look at that, and there's also that consideration.

So I think the dynamics differ quite a bit this year than last year because it's not just about Stelara and the price of Stelara but now it's what therapy makes best for the patient, how are payers going to work with providers and patients when they think about coverage and then what does that mean for reimbursement. So it's a much more complex equation this year. We have great -- again, great partnerships with pharma, and we're working through all that. And so as we go into '26, we'll have more color for you as all this starts to unfold more.

So like you said, there are discussions with payers decisions in terms of formularies and such and any initial indications where this is headed and also how the new -- like you said, the next-gen therapy being placed against the Stelara and biosimilars?

Yes. I would say there are -- the short answer is it's all in progress now. I think the big date starts to be January 1, right? Because January 1 is when you'll see payers start releasing their formularies more and then doctors will start needing to have discussions with their patients based on that but also based on the treatments that they're getting today. And also Stelara is it's not a daily or weekly treatment. It happens a little less frequently. So these discussions are taking place now. I expect these discussions to take place in January. So I would expect you're going to see transition over the course of the first quarter.

Okay. So you're saying that we might not really be able -- or you might not be able to tell what's happening even January, so you need more kind of time to see how everything kind of positioned.

Yes. It's a good question. We will start to -- I mean, we're starting to get some indications. But again, it's really going to be January 1 before we see -- because there's multiple variables, right? It's the patient, it's the provider, it's the payer. So really looking to see how that transition goes. I think we'll see some direction in January but I really do think this is going to go well into February also.

And I guess to that end, right, you alluded to the idea of how you were able to manage through the headwind this year, right, with the Janssen changing the discounts and such. And the latest commentary was, right? So just to clarify the $70million headwind to EBITDA, right, for this year, and that includes actually now the biosimilar headwind, right? So when we think about that number, because it sounds like there were some launches earlier in the year, but you really started to see in Q3. So how should we think? Is it the biosimilar headwind you kind of have Q3 and then Q4 is sort of like a ramp-up from Q3 when it comes to that. So just trying to understand like what's included in your $70 million headwind now?

Yes. I would think about -- so what Joanna is referencing is we have been guiding over the course of 2025 that our gross profit headwind as it related to Stelara originally as it related to Stelara and the pricing dynamics, that headwind was about $60 million to $70 million. That's what we said at the beginning of January. And at this point, we've said, assume it's closer to $70 million, and it really covers not just the Stelara pricing dynamics, but also the impact from whether a patient is taking out Stelara or a biosimilar. So that's all wrapped up into that $70 million impact. Our guidance really didn't materially change. If anything, we raised our guidance on sales, and we raised our guidance on earnings. So we've been able to navigate through that $70 million in 2025.

And this $70 million headwind, right, like you said, it started small in Q1, right? And then it actually grew through the year because you were kind of calling out different numbers through the year. So I guess the market seems to be still a little bit confusing on what it means for next year. I know you don't have a guidance, right, yet, but should we expect year-over-year growth in first quarter of '26 to be smaller than the full year, whatever the number is, right, just because of this kind of ramp-up in that headwind.

Yes. So again, to what Joanna is talking about, in the first quarter of 2025, we were able to -- with some really good discussions with Janssen, we were able to leverage our balance sheet, right, strong balance sheet, good cash flow, and we were able to purchase some inventory in advance, which mitigated some of the discount and the pricing reductions that we saw in the rest of 2025. At this point, right, it's no longer just about Stelara and the specific price to Stelara but it's the entire basket of therapies that we could be providing, whether it's one of the many biosimilars or Tremfya or Skyrizi. So all those discussions are going on around what the economics could look like for us with them in 2026.

And part of it is they all have an incentive to work with us because there's a patient cohort group that we're working with. And there's a number of different options potentially that patients could have. So we're talking to all of these -- the providers here in terms of the pharma partnerships and those who are providing the drug.

And I'll just add that at the beginning of the year, we gave a range because there are a number of variables that get into that equation. The fact that Q1 was a smaller impact to Meenal's point, wasn't necessarily that things have gotten worse beyond our expectations. That was part of our calculus when we put out that $60 million to $70 million, knowing what we had on our balance sheet and the way we're able to leverage that to minimize the impact in Q1.

And I know you're not in a position to give guidance today for next year '26, right? But like you said, a couple of things you still kind of have to see. Can you walk us through the different items and the different pieces you really need to know to have greater visibility into, I guess, revenues and profits? And I guess, talk about the Stelara and it sounds like other pieces of that maybe patient cohort, so to speak. But is there anything else, I guess, we should be thinking about when it comes to next year?

Yes. So I can try to summarize this again. As it relates specifically to Stelara and the related therapies for 2026, right? We know we're starting to see what and we're in discussions right now on the pricing with Stelara as well as biosimilar manufacturers as well as other pharma companies on some of these other therapies. So don't think of it as just one drug that we need to negotiate. Now it's probably up to 10 that we're actually in discussions on. So I'd say that's one. Secondly, because there are now -- it's not just one drug, it's now 10, you now have a number of payers that are going to be having discussions and sorting out what their formulary is in 2026 and what they're going to cover.

And then third, it's also a discussion that providers or doctors are going to be having with their patients on who might have been on Stelara before, does it make sense to change? And if so, what and who's their payer and different things. So that's where the variables come in, a lot of which is really not in our control on what payers are doing in terms of their formulary and in terms of -- we can talk with a doctor perhaps, it's really the doctor and the patients that are making that decision. We don't get involved in that decision.

Right. And the other dynamic here, right, because the Stelara biosimilar dynamic is one but the IRA specifically right and the price I guess production for Medicare for that therapy. And how quickly does it flow through to other payers, right? Because the idea is like, Medicare is paying less, like why would Medicare Advantage have to pay the higher price. So is this sort of one-to-one like Gen 1, the MA plans also have a different sort of reimbursement to reflect that?

Yes. I would expect all these discussions, right, the formularies are going on now. I mean all great questions because it's more than one drug now. It's multiple options that they have. So I'm sure they're all assessing what makes sense as part of our formulary.

Okay. So that's the sort of TBD in terms of the coverage and what they're going to cover and how much it is the...

Yes. Right.

Right. And I guess switching maybe gears a little bit because I guess Nicole mentioned the subcutaneous formulations, right? A lot of discussions there. And there are 2 key therapies, right, that you guys do Entyvio and Ocrevus, right? They either already have or they will have subcutaneous formulations very soon. So kind of how we should think about those dynamics impacting the business specifically?

Yes. So maybe I'll take a step back as I talk about subcutaneous in general because we get this question often. I mean, clearly, the hope of every pharma company and even for a lot of patients is, boy, can I take my medication with a pill with a little bit of water every day, right, as opposed to the complexity that -- in terms of drugs and how they're administered. We see that in a number of cases, right, there are some subcutaneous therapies that are out there. That's always been the case. And so this is nothing new at this point. What I would say is there's probably a few dynamics to consider. One is if a patient is on a particular therapy and that therapy is working well for them, providers as well as patients are not always excited to convert off of that.

So I think that's one because it's really in the end, what does that therapy do for the patient? If they do make a decision to convert, then you get to the point of not every patient can actually self-administer like we were talking about the Stelara example but we have a number of examples where there needs to be either sometimes medical oversight where we would play a role in that. In other cases where the drug needs to be compounded, and so we would play a role in something like that. So there's an opportunity for us there.

And also then you have the payer aspect of things that many times some sort of subcutaneous or even an oral formulary might be more expensive. And so a payer is not necessarily always willing to reimburse for that. So I think a broader answer to say that drugs moving to a subcutaneous administration is not new for us, and that's something that we work through. And behind us, there's always a new pipeline of drugs but I would call it as just the life cycle of therapies that we continue to work through and to deal with.

Anything you think I've missed?

No. Again, those are therapies that have been part of our portfolio today and will continue to be part of the dynamic nature of our portfolio but I think you covered it. Thank you.

And anything specific on Entyvio, Stelara and Ocrevus in terms of like how it's been sort of impacted by these new formulations?

Yes. I mean keep in mind, whether it's Entyvio or we were even talking about the Stelara example, most patients on Stelara are on a self-injectable pen today, right? So people might say, well, I don't really understand them why has this been such a complex equation for you. Well, it was a small patient cohort group that for various reasons, right, either dexterity issues, cognitive issues, other issues, they were unable to administer themselves. And so they needed medical oversight to do that, and that's where they came in. And so one of the questions we get is, well, if patients are converting from one therapy to another, if they weren't able to self-administer under that therapy and they go to a new therapy, they probably will still need some sort of oversight and administration for self-administration. So that -- again, that's a place where we can service patients and really work with them as well.

And nothing that we've called out on either of those 2 drugs specifically.

Yes. I don't think they're atypical or unusual from anything else in our portfolio.

And I guess Different drug category here, the IVIg. Can we talk about the competitive dynamics there? Because obviously, there's the Vyvgart, which is prefilled. This is also self-administrated drug. So do you envision this being disruptive for your business?

Yes. I would put it in the same category as just the conversation we just had where -- so first of all, we actually have a relationship with Vyvgart already. So that's one of the many relationships that we have. I think IVIg falls into a similar category where you have patients that are on these therapies for years when it comes to IVIg. And so if they have a doctor, if that therapy is working, given the longevity of the therapy, it's not so simple to say we're just going to switch because it could have different effects on the patients. So I think that's one set of dynamics going on.

On top of that, the therapy to self-administration is more expensive, at least it has been running right now. And so you've got now payers once again that are entering the equation and what are they going to cover when it comes to that. So again, similar to what I was talking about before, there are a lot of dynamics before assuming just because something is released doesn't mean patients will migrate to it. And even if a patient does migrate to it, there ends up many times being a role for us in assisting patients that cannot self-administer on their own or is there work that we need to do around compounding the drug?

And I guess to just wrap up that topic around the infusion versus subcutaneous. So I guess, subcutaneous doesn't mean that you're not involved, right? So if you were involved, if you do actually service that patient for subcutaneous formulation. So outside of Stelara, that was very unique but how should we think about the gross margin? Is there a delta, but -- or is it pretty much comparable? It's just because you still deliver the services, so you still make a margin on that component on top of the drug. So is it kind of like thinking about the subcutaneous formulation, if you involve, that means like you're still making a very comparable margin on that business?

Yes. I think the short answer is it depends. It depends on the level of service we're providing. If it's that we're still having to go and assist the patient with a self-administered drug, then it's a nursing visit, right? And that's something that we would negotiate as part of that as opposed to is it just a compounding of the drug. So it depends on the level of service or the different services we're providing for something like that.

All right. So I guess it depends. But I guess we mentioned that, too, in terms of just the dynamic around the health plans. And like you said, it's all about like what are you going to cover because some of these new drugs are expensive. But I guess stepping away from like the specifics the subcutaneous or subcutaneous. But just in general, the other dynamic, when these plans are looking for just essentially manage their costs, and we're hearing a lot of these plans calling out specialty drug spending as being one of the areas where it is driving their cost trend. So is it -- on the flip side, is it sort of a tailwind to you guys? Because like you said, you want to be the solution, right? You want to be the lower cost setting solution for these payers. So are you seeing a lot of interest or more of these sort of side of care management initiatives from the plans that kind of benefit your business?

Yes. And we continue to have very productive relationships with our payer counterparts, even those with captive capabilities. We've seen some of the additional services that we've been able to provide on the acute side really puts us in a good position to be able to negotiate across the payer contract. Again, the -- our services, to your point, make us part of that solution to reducing the total cost of care, and that remains a focus for the payers as well as for us for being able to partner with them. We did call out the site of care management programs on the Q3 call. We are seeing some good traction with those as well as our bed management program. So we continue to see progress as we move forward and hopefully see more care shift to the home and alternate side.

Meenal, anything you'd add on that, Meenal ?

Yes. I would just add to this, the partnership that we have with payers is important, right? And really, they have medical loss ratio issues and they're really looking for ways to reduce their costs. So ultimately, we're on the right side of health care, right? We're an important partner to them because we can continue to provide the services for our patients, their patients in a setting that is lower cost. And that's really back to your original question, when we think about the long term and we think 5 to 10 years out, this is the direction where medicine is going, right? It's can I get my care elsewhere for payers at a lower cost but at the same level of support that I needed. And I think that's what continues to be a strong tailwind for us as we look out 10 years.

And I guess just talking about health plans, the other kind of topic out there, right, is the potential for PBM reforms because a lot of these plans also own PBMs. So kind of how are you thinking about that? If there were some of these -- the most recent discussed elements, I guess, of reforms, if they were to happen, would there be any impact to you guys?

Our -- the impact of the PBM reform on our business isn't very significant. I know that we called out some rebates that we have in our financial statements that have generated a number of questions. Those are truly volume-based rebates that are negotiated with the manufacturers and not tied to rebates coming back through PBM. So we don't participate in that part of the channel.

Right. I think we're right out of time. So I guess we have to stop here. But obviously, yes, there's a couple of other topics we want to cover. So hopefully, if there's another chance we can continue the discussion. Thank you so much to the Option Care team, and thanks, everyone, for joining. And please stick around because I guess there's another session we're going to continue on the home infusion topic right after. So thanks, everyone.

Thank you, Joanna.

Thanks for having us. Bye-bye.

Our next presentation, and thank you, Nicole, for coming to join this conference. Next presentation, we have the team from Option Care Health, Nicole Maggio, Senior Vice President and Corporate Controller, will be joining. And I figured, Nicole, thought we'd just start out with coming out of '24, there's a tremendous amount of disruption into the business, the hurricanes and so forth and create some conflict certainly in the Southeast and so forth. So maybe we'd start there and you've carried it forward into what very strong numbers recently. Maybe you could walk us through kind of your thinking. And if you want to just do that as kind of part of your slide presentation, it would be great.

Sure. And obviously, 2024 did have quite a bit of disruption between Change Health and the supply chain shortages, but have made some really good progress this year and really excited about where the team landed. I know given this is a Leveraged Finance sponsored and a generalist conference, I will go back a little bit more just to give a very high-level overview of Option Care Health, starting with our disclaimer. Everybody can read that.

Option Care Health is the leading home and alternate site infusion provider in the United States. We operate in over 90 full-service pharmacies and have coverage across 96% of the population. Our mission is to serve health care, and we infuse patients both in the home and one of our over 700 alternate site suites. We've got a full network of therapies across acute and chronic. And what we do from an infusion perspective is we compound the drug, deliver that drug to the patient either in their home or one of their alternate site -- one of our alternate site suites and marry it up with the nurse to provide that patient their life-saving therapy.

We've got a very strong financial track record as well as cash flow generation profile, strong cash flow and a very attractive capital structure. And as we alluded through, Q3 was a great quarter with 12% top line growth and adjusted EBITDA growth of 3.4% as well as adjusted diluted EPS growth of 9.8%. Also raised our guidance. One thing that I'll highlight is that the team has performed extremely well this year. From the beginning of the year, we've raised our adjusted EBITDA guidance $15 million as well as increase our adjusted EPS projection to be an additional $0.06. So again, very good progress and even better than we expected at the beginning of the year.

Additionally, we still expect to generate over $320 million of cash flow from operations and have a very strong record of producing cash flow and being able to actually collect on the revenue that we generate. One other item I'll highlight is also in the third quarter, we did refinance our first lien debt. So we decreased our interest spread and extended the principal out to 2032 as well as added about $50 million to our capital profile, still at 1.9x levered. So very impressed with where we've come from. Again, just a little bit of additional history. So we became public back in 2019 through a reverse merger with BioScrip. At that time, we were 6.2x levered on an extremely pro forma adjusted basis. And so again, the progress that we've made in this area is nothing that we take lightly.

Just a little bit more on the overall home infusion landscape. So we do operate in a very fragmented market. We believe we represent about 25% to 30% of the market in the home infusion space, which is part of the broader infusion space, which we believe is about $100 billion. Again, that numbers are a little bit grave because it's not exact data that you can pull out of anywhere because it does involve HOPDs, in-hospital infusions as well as other alternative provider sites. But again, represents a very attractive opportunity and still significant opportunities for growth. Additionally, our portfolio, just a little bit of additional color. We do operate in both the acute and chronic therapy portfolios and have low direct government exposure, about 12%, which is comprised of direct fee-for-service Medicaid -- fee-for-service Medicare, Medicaid and some VA programs.

Diving a little bit more into the acute chronic therapy mix. Our acute therapies are really about 25% of our portfolio, and these represent really a hustle part of the business. And so think of this as your patients coming out of the hospital after acute event, IV antibiotics, parental nutrition, more mature therapies, lower and mostly generic, lower growth just given their maturity, low single digits, although we've typically performed slightly above that. Our chronic therapies represent about 75% of our portfolio, and that's the faster-growing piece of the organization with new market drugs as well as a number of other biosimilars, which are still in that more chronic therapy. So think of these as referrals coming out of physicians' offices with chronic patients that are going to be diagnosed and need infusions for a number of years, if not for the rest of their lives.

Again, much faster-growing category, higher dollars on the revenue line, but again, still a very attractive part of our portfolio. Just another quick highlight on how that translates into gross profit. So again, higher dollar chronic drugs are 50% of our portfolio. But if you take a look at where it drops through to the gross profit, it's only about 25% of the gross profit margin. So a lot of the questions we get around the patent cliffs and drugs moving to biosimilar. But again, the risk profile of our business and where that profit is coming from is much more skewed towards generic and biosimilar already.

Again, just highlighting the financial track record. Again, the one I want to point it out here is that cash flow from operations with the 26% CAGR. Again, as I had just mentioned, our ability to generate cash to continue to collect on the revenue that we generate is one of the hallmarks of our team. Quick bullet on capital deployment, $1.2 billion deployed since 2021. And again, with a nice balance between strategic tuck-in M&A, internal investment as well as share repurchase. Again, we have the priorities listed down there at the bottom in a slightly different order than they appear on the chart over there. But honestly, that's really just given some of the M&A marketplace and some of the multiples that are out there. We're very thoughtful about the dollars that we deploy. It's our investors' money, not ours. And so I want to be thoughtful in the way that we deploy it. And to the extent there isn't strategic M&A out there, we have the other option to return through capital deployment.

So I just wanted to give that brief update, and we can dive back in now to your Q4 question. So obviously, we did have a unique opportunity that began in Q4 of last year with Quorum exiting the acute space really across the country. We were able to execute on that. I do want to highlight, we weren't the only competitor in any market. So it truly is a testament to the team on being able to capture that share. We will start to lap it in Q4 of this year. We were facing at the end of last year, the North Cove bag shortage and a number of different things. But we did see a little bit of a pop in acute there. We'll fully lap it in Q1 of this year. Again, Baxter did a great job of getting back online and getting the supply back out there.

So expect to fully lap that. But given the relationships that we've built, we do expect to continue to grow at a slightly above market rate, so call it, mid-single digits, but mid-teens are not the new expectation for acute.

It's not. Okay. So you see that's kind of a near-term bump, if you will, on the acute side and therapy side, yes.

Yes, a near-term bump on the acute, but we've been through this in the past mid-2022, a number of our other competitors exited. And we did see a return to a more normalized growth rate, but at a higher altitude. So we are able to keep that share and grow off of the new base.

Okay. How do you see -- like from a competitive landscape perspective, I mean, how -- maybe just ask, what is truly your competitive landscape? I mean, is it other large consolidators? Or is it more of other providers in the space?

It does vary market by market, but we have a variety of competitors in the space, both in acute and in chronic. We believe we're about 25% to 30% of the market. And again, possibly a little bit higher in acute and it varies market by market. But we continue to see that evolve as competitors exit the acute space, and they're still in the chronic space in many instances. We compete with captive assets. We compete with private equity-owned infusion. We compete with hospital owned infusion, and we compete with the alternative clinic model, which is run by advanced practitioners. So a variety of competition in there, but we feel like we're very well positioned in all of the markets to be able to take -- continue to take share as well as to make share.

Does scale factor into that? Does it enable in given markets, does your scale? Is it -- can you leverage that scale?

It certainly does. I would say really the fact that we're in network with all top 10 payers really gives us that -- the confidence in the discharge planners or in the physicians to know that, yes, Option Care is likely going to be in network. They're going to be able to serve that patient, and it gives us access to all of those patients. From a payer perspective, it does provide that advantage as they're looking to give choice to their members and they have a provider that has the breadth of services across both acute and chronic as well as our limited distribution drugs and that ability to reach all of their members does provide us with an advantage there.

Again, not everybody is in the acute space. And if we're in network for acute, we're in network for the whole portfolio of therapies. Only thing I'd add to that is from a from a manufacturer perspective, as they're looking to commercialize drugs and looking for partners for their limited distribution network, knowing that we have a national reach able to reach over 96% of the population and to be able to reach all the patients into their therapies, does provide us with another advantage. We've got over 50 limited distribution drugs in our portfolio today.

Are you out of network any of the major payers?

There are certain carve-outs of individual therapies, but we are in network with all of them and in network with just about all of the therapies.

Okay. And can you speak to your payer relationships broadly.

Our payer relationships remain extremely strong. And honestly, some of the noise in the acute space have provided us with an additional benefit to be able to offer them. If you think about where the cost of the MLRs are being driven up, a hospital bed day is extremely expensive and moving to a home or alternate site can provide up to 50% depending on therapy savings for them. And so they do recognize that we are part of the solution to reducing the total cost of care.

So they're looking to you to help them manage their discharge process in some way.

We are, and we've been working very closely and have seen an uptick in some of the site of care initiatives. If you recall, back pre-COVID, there was a big focus on that and kind of dissipated when MLRs went down, have seen a renewed interest in that as they are looking to manage their costs. And we're a great partner for that, both on the acute and the chronic therapy. Again, they do -- some of them do have captive resources. So obviously, United has Optum, and they are our largest payer. They've been 14%, 15% of our revenue since I've started here almost 10 years ago, and we've been growing in double digits. So they continue to grow with us, and we continue to have a really great relationship with the health plan side of the house.

They do. Okay. Even though they [indiscernible]. It's really interesting for us, I guess, 5 or 6 years since BioScrip and you came together and so forth. Your leverage profile obviously is materially different inside 2x. What are their opportunities core? I guess -- maybe I'm asking core competency and kind of noncore competency. I know it's obviously been a transaction in the past that you referenced, but I mean what is your thinking around -- what is your thinking around that metric today in terms of M&A, given your leverage profile, significant cash generation, I mean what is your thought around the environment where opportunities could arise?

Sure. And we continue to see a very active M&A market. A lot comes across our desk. But as I mentioned, we're extremely disciplined in our capital deployment strategy. So not everything makes it past the first desk on to the rest of the company, but continue to see some very attractive assets out there. Primarily, we're looking at tuck-ins and adjacencies. So whether it be a home infusion provider in a space where we're in the market, but we could use a deeper presence, whether they have a strategic relationship, new clinical competencies or ancillary services. Again, our nursing network that we've built out in Naven has provided a significant ability to allow us to grow by being able to accept patients and not say no due to lack of nursing. So we're really still looking at areas like that in very close adjacencies, not looking for transformative deals at this point.

And since you make an acquisition, a tuck-in acquisition in the market, is it -- how does that fit? Does that you have -- presume you have the payer relationships in that market. You're basically acquiring the patient base? How does the formula work with the tuck-in?

It depends on the tuck-in. So at times, if there's a carve-out, we can acquire a patient base. There are certain relationships. I'll point to our acquisition of Rochester a number of years ago where that particular company has a strategic relationship. In that instance, they had a pharmacy right on the Mayo campus. And as you can imagine, most patients that go to Mayo aren't necessarily from Rochester, Minnesota. And so to provide that additional catchment area to be able to take patients out of the hospital and to bring them back to wherever their home might be really provided a strategic view for us. So it depends on the market, but there -- while we are the largest player, we are not the largest provider in every single market.

Right. So the opportunity to gain share in a given market, on tuck-in. To what you're saying outside of -- you're in no way -- I shouldn't say no way, but right [indiscernible] see yourself potentially pursuing anything outside of your core competency.

Core competencies and adjacencies. So again, the Intramed Plus infusion from earlier this year is a good example of that. And while they were a home infusion provider, they also had a very unique hybrid model that also involved alternative infusion clinics in that advanced practitioner model. We've made some really good progress with them and have had some great learnings and continue to advance our own organic growth of our infusion clinic portfolio, up to 24 sites by the end of Q3.

Up to 24. Okay. I know it's -- you've been talking about [indiscernible] on Stelara.

I don't know if he's asked...

Exactly. Would you mind just kind of rolling out what the -- what you've seen through '25 relative to expectations and kind of your thinking, I guess, you can't get into '26 guidance, but certainly, your kind of puts and takes around your experience year-to-date and relative to expectations, what you may see going forward?

Sure. And at the beginning of '25, when we gave our guidance, we outlined a $60 million to $70 million headwind. At that time, we only knew our Stelara patient base, and we knew the change to the discount that we'd be receiving from Janssen. As the year has progressed, we knew that biosimilars would be coming out, but we didn't know how quickly they would come out or what their pricing strategy would be. As we ended Q3, we do believe we are still in that $60 million to $70 million range, albeit at the higher end. But -- the breakout of that is both now comprised of the patients which are still on Stelara, which are being impacted by that discount as well as patients which have moved to biosimilars.

So we called out a 380 basis point headwind to the chronic revenue in Q3, but the gross profit dollars are still within that range. Reason being is with the unique dynamics of Stelara and knowing where the pricing will be come 1/1/26, most of the biosimilar entrants have come in lower to the 2026 price to try to gain market share and to be competitive in the current environment, whereas in other biosimilar events, they would typically come in much higher to that branded price. So it created a revenue headwind, but from an overall gross profit impact, we do believe it's still within that range, albeit towards the higher end.

Right. Okay. But at the higher end, you said the higher end of the $60 million.

The $60 million to $70 million, but...

But is there incremental impact in '26?

We are not ready to talk about 2026, but what that will depend on are a number of things. We do expect a revenue headwind for patients that are still on Stelara, just given the IRA impact and the way that will flow through the financials. For patients that are already on the biosimilar at this point and remain on the biosimilar, you won't see that step change in the revenue.

And again, for a gross profit impact, right now, we're still in negotiations with Janssen for both Tremfya and for Stelara, negotiations with AbbVie on Skyrizi and negotiations with the biosimilar manufacturers. So a lot of those factors do play into our calculus for 2026. And again, where those patients end up and if they're still on Stelara is one of the pieces that impact the negotiation with Janssen. If you can imagine if we've got -- and these are fake numbers, we've got 10,000 patients on Stelara versus 10, it does make a difference in how much that negotiation impacts both of us.

Right. But those -- the other products that you referenced, you said you've not given any type of indication of potential impact.

No, we have not. But again, we do have relationships in our negotiations as well as in our budgeting process right now and looking where -- as we look every year, where to allocate resources to.

But was there anything unique to the Stelara's model and the Stelara's profitability that translate into a greater impact with that particular product or [indiscernible] anything to that product?

So just to kind of relevel set on Stelara. So when Stelara moved on to the SAD list, the self-administered drug list back in 2021, '22, most of those patient volumes went to a self-administered drug administering for themselves at home. Janssen had identified a small group of patients which could not self-inject, whether it be due to dexterity compromise, immunity compromised or other issues that they were not able to self-inject. They needed a partner to be able to continue to service these patients. And these patients all have a letter of medical necessity. And in return for that program that we developed with them, knowing that we would get kind of self-administered reimbursement, they did reward us with a larger discount.

At the time, we had a very small patient population on Stelara. And truly, the level that we were able to grow it to was based on our team's ability to execute on this opportunity and to identify those patients. Again, when you're looking at the kind of Stelara volumes, most of that truly is self-administered, but we found a way to continue to participate to keep these patients on Stelara. So we did enjoy a much healthier discount than we typically would on a branded drug, which, again, when a branded drug comes out and there's no competition, there isn't necessarily that need to negotiate or provide an additional incentive because they are the only player out there.

Right. Okay. And longer term, maybe I'm asking for your business model, but I know -- perhaps this question. What's your vision towards really kind of your mix of home infusion versus infusion suites? Like where do you kind of see that longer term?

We don't necessarily have a target for infusion suites. I will say there will always be a need for patients to be serviced in the home. That is at the heart of what we do, patients that are coming out of the hospital, patients that have other issues where they shouldn't be leaving the home. That will always be a core part of our business. We have seen great progress in the infusion suite utilization. Again, back in 2021, we really started taking a look at where our suites were and started moving them from where it was convenient to us, meaning in our pharmacies, industrial part to where it was convenient to the patient in more metropolitan areas or where patients were doing their activities of everyday living. We've seen that move up from about 16% in 2021 to 34% in 2024...

That 34% being...

34% of our nursing visits occurred in one of our suites or clinics. And I expect to continue to see that ratchet up. Again, we do often see chronic patients who prefer being in one of our suites. They're out anyway doing their daily living. They just have to go once a month for a 4-hour infusion and to put that square convenience to them allows them to schedule it when works for them, not have to wait it to home for the nurse and also leaves their disease state out of the home. But again, expect continued progress. We don't have a target for X percentage.

Yes. Okay. There's no specific target. Okay. Do we have questions in the audience?

All right. I want to get back to just the whole leverage message. I look at the model and kind of see 1.9x leverage. You said your reference point about its really tuck-in acquisitions that [indiscernible]. How do you -- are there other capital deployment? I mean, you generate a wealth of cash. Your leverage profile is obviously very, very well disciplined. What do you think about longer term in terms of where driving value off of that leverage metric? It's -- that's not an easy question. There's a lot of moving parts there, but I'm just kind of curious how you think about driving value off that leverage metric.

Sure. And we continue to be a capital-light organization. We've put a lot of investment into our pharmacy footprint and into our infrastructure, but continue to look for opportunities to do that, either to advance our clinical capabilities, continue to look to build out our advanced practitioner model or to look for ways to just generate organic growth within the business. So we always will look for those internal opportunities. Beyond that, again, M&A, it's a little bit choppy. But with the number of assets that are out there that are very attractive and fit well within our portfolio of capabilities, continue we'll look for those. And at the absence of that, we do have our share repurchase authorization.

So again, we'll continue to look for ways to bring -- deploy capital to shareholders. And we don't see a need to go much lower than 1.9x. And for the right acquisition, we'd be willing to go up to 3x levered. But again, doing so, we want to make sure that we had a plan to strategically delever relatively quickly. Again, from where we came from, we don't take for granted the capital structure that we have today, and we'll continue to try to maintain that and our cash flow generation speaks for itself.

What is the capital -- the advanced practitioner model, what is the capital deployment that's necessary for that model? Is it material?

So what's great about the advanced practitioner model is that we're able to use the infusion suite model that we've already built out. So we have over 700 chairs. And in order to convert one of those to an advanced practitioner to a clinic, there's a couple of like capital improvements need. You need to lock door to keep the drugs in. You need to find the advanced practitioner, go through the credentialing and the licensing. But we really are able to leverage that model that we -- the footprint that we already have. And none of these suites are at capacity yet. So we believe that we can leverage them to be able to do both to execute both an infusion suite and an advanced practitioner model within the same suite.

So plenty of opportunity to leverage what we've already put in place and think it's a really nice complement to the services that we already offer. So I guess just a little bit more on the difference between the 2. So for the traditional infusion suite model, so we get paid under the home infusion benefit, which means that we are paid for a spread on the drug, the time a nurse is with the patient as well as a clinical per diem, which is covering our pharmacy infrastructure, delivery costs, pump costs and all of the other things that go into the clinical monitoring of the patient.

Under the advanced practitioner model, we actually bill off of the physician's fee schedule, albeit at a discount to the physician's fee schedule. So still a lower cost site of care as well as with a spread to the drug. What that does for us is it allows us to open ourselves up to more acute therapies because we have that more advanced -- that advanced practitioner who can treat -- think neurology, think oncology, think patients with higher needs as well as it does open up Medicare fee-for-service for patients that could be seen in that space because with only 12% government exposure, Medicare is only a slice of that. So it does provide additional access to those patients as well.

And what's most challenging -- is it sourcing the advanced practitioner and the licensing -- in terms of building out that model on this site?

We're very thoughtful about where we're building out that model, making sure that we understand state level corporate practice of medicine to be able to execute them properly. Yes, we do need to find the advanced practitioner and do the credentialing, but we are being very thoughtful about where we put them. We have -- typically, we will add a number in the same area rather than trying to have one in each of the 50 states just to be able to build out that presence in those specific markets.

Okay. Thank you, Nicole. Unless there's any other questions in the audience, we'll go ahead and wrap up. Thank you, everyone. Thank you, Nicole.

All right. Thank you.

Okay. We're ready to get going. So next up is Option Care. We're very pleased to have management with us, Meenal, this is Chief Financial Officer. This is her first conference. Glad and we got Nicole as well.

I guess I should ask, you're new in the role, but you had some history with the company and the management. What have you found? You've only been here a couple of weeks or 2 months, I guess, now, right? So what have you found? What is your impression? Is it what your thoughts?

Yes. You know what -- well, first, I wanted to say thank you, A.J. And really thank you to you and to UBS for having us here. It's Option Care Health. We're really excited to be here, and we really appreciate everyone's interest in the company. What I've been talking to folks about is that as I went through a typical interview process and got a chance to meet a number of members of management, John, our CEO and members of the Board, I describe it as what I heard is what I got, which is great, right? The best thing that you can find is that if you talk to people and you get to know the company, you get a good feel of the culture and what I thought it was going to be like is exactly what it's like.

And that's really a big part of what drew me to the company as well. And then when I take a look at Option Care Health across the broader health care ecosystem, it really seemed like the right place to be given our ultimate mission is really to provide patients and their families with hope as we have the privilege of serving them. And so beyond being a CFO and beyond a lot of the things and a lot of the questions, I think that, of course, you're going to ask me about having a bigger, broader mission and the impact that we have has been really important to me as well.

Okay. That's great. So -- and I may lean on the call a little bit to help you out on this one. We're 10 months into the year. How would you sort of assess how things have gone year-to-date relative to expectations coming into the year?

Yes. Again, it's been a great year. Again, from where we started at the beginning of the year, if you recall, we put some guidance out at the beginning of January, we've raised our adjusted EBITDA guidance by $15 million, and we've raised our adjusted EPS target by $0.06. So again, a great year and patterning out better than expected on all fronts. Again, a lot of dynamics that we've seen throughout the year, but very pleased with how the year is shaking out and again, feel very confident in the guidance that we've outlined for the full year 2025.

And there's always some new people to the Option Care story or to any story at an event like this. For those who are new to Option Care, how would you briefly describe the company's business? How would you size the growth opportunity broadly and the extent to which underlying industry is growing?

Sure. Maybe I can take a step back. I know what it's like to be new. So I think I can offer just a quick summary here. For those who may be less familiar with Option Care Health, we're the nation's largest independent home and alternate site infusion services business. So you can find us across all 50 states. We cover about 96% of the footprint across the nation. We have the privilege of serving close to 300,000 patients a year. And really, we provide our services through -- either through going to individual patients' home. We have the privilege of being invited into their home as well as we have about 170 sites across the United States covering clinics and pharmacies. And so many of our patients choose to get their treatments by visiting one of our sites as well. So really pleased about that.

The other thing just from a couple of financial metrics. The company went public in late 2019. So since 2020, we've been able to grow our revenue by 13%, a 13% CAGR. We've grown our EBITDA by 19%, and we've grown our operating cash flow by 26%. So again, just back to some of my opening comments, it's a privilege to be able to serve patients and do everything we do every day. And at the same time, really share in that with our shareholders and really continue to drive shareholder value.

That's great. When you sort of alluded to some of the growth dynamics. When you think about the long-term growth algorithm of high single-digit top line growth, low double-digit EBITDA growth, I know Stelara, and we can talk about that in a minute, has had some impact on that. But do you see a return in '26 and '27 after putting behind you, the company headwinds around the Stelara restructuring?

Yes. That's been -- as you can imagine, that's been a topic of conversation with a number of investors. First, I would just talk about the long-term growth algorithm, as you articulated, right, high single-digit revenue growth, low double-digit EBITDA growth and then EPS a bit higher than that. And as I look out even just in my 6 weeks so far with the company, I feel good. I feel good about that long-term growth algorithm. As I'm getting to know the business more, I feel confident in a number of the different growth vectors we have, a number of the different initiatives we have going on, whether that's with our pharma partners, with a number of our payer partners as well.

We have coverage with the top 10 payers and numerous, numerous other payers as well. So I feel good about all of the different initiatives that we have to drive that. I think as we look -- we've talked about the fact that in '25, we knew we were going to have some headwinds. And we pointed out the fact, as Nicole just did, despite the fact that we had these headwinds relating to some of the situation with the Stelara drug, we were still able to grow is what we're projecting as part of our guidance on a revenue, EBITDA and earnings per share basis.

And as we look ahead to 2026, one of the things we mentioned on our third quarter earnings call is it's still early for us to offer some guidance as many companies are, we're in the middle of our planning processes and have some work to do, but we feel confident in looking at growth again in '26. despite the fact that we will have some headwinds that we've got to mitigate in '26. But if I look beyond that, I feel that growth algorithm is intact.

Okay. Okay. Stelara is sort of dominated the discussion for the last 12 months for better for worse, I guess. First of all, I think there's a perception that maybe there was a change in the way it's played out that it was basically this tough comp that you were going to have in the first quarter because of the forward buying and then that it would be more normal for them with the $60 million to $70 million headwind. Now we're sort of talking about a second round of negotiations. Just to level set people, is that how you -- have you been surprised by the way it's played out? Or is that the way you basically thought it was going to be all year long pretty much?

Yes. If I step back, I know there's been a number of different questions. What we talked about in the fall of '24, almost a little over 12 months ago or so is that as part of our discussions -- ongoing discussions we have with Janssen, who, of course, continues to be a great partner, and we have a number of different initiatives going on with them. There was -- we knew at that time for Janssen that their pricing was going to drop as part of the IRA in 2026, and it was going to drop 66%. And so as they were -- as we were in discussions with them, there was a change that we ultimately settled on relating to the discount rate off the reference price. And that's what created our headwind, our gross profit headwind in 2025. as we fast forward into 2026, we're, again, in some discussions, but it's different and it's broader now because we now have seen in the middle of 2025, just within the past few months, there were a number of biosimilars that have been approved and released. We did know at the beginning of 2025 that there were likely going to be some biosimilars that would be coming out.

Exactly when, how many would be approved, that was unknown at the beginning of '25. But as we're starting to see that as well as there are the next-generation drugs that are being launched, both from Janssen, who's launching TREMFYA and then also Skyrizi. So now there's a lot of discussion of patients transitioning to other therapies that may be better for them, and it's really each patient working with their prescribing physician around that. But for us, in terms of the economics, we have a lot of discussions going on beyond with Janssen with other -- with the biosimilar manufacturers and things like that. So I wouldn't call it a surprise, but these things are in terms of approvals and what's going to be released, you don't really know exactly when they're going to happen until they do and then you've got to figure out how you react to that. But again, I would just emphasize that we knew that these things were going to eventually happen. And that's why really as part of our earnings call, we put -- sort of put that line in the sand saying, despite these headwinds, we know what to do, and we do expect to grow in 2026.

And there did seem to be a little confusion on the third quarter call around some of your comments on gross profit. I think some thought the company was calling out an incremental impact to the previously announced $70 million headwind. related to biosimilars and what you were seeing. That doesn't actually seem to be the case. But maybe can you update us or maybe try to put some clarity around that and how it's incorporated in your updated outlook?

Sure. So just referencing what A.J. no problem. what A.J. is speaking about. As part of our guidance in the beginning of 2025, we talked about the fact that with the lower discount that we were getting from the Stelara drug discussions with Janssen, we expected about a $60 million to $70 million gross profit headwind. As the year has progressed and as Nicole mentioned, it's patterned out as we expected. I mentioned earlier that there had been some -- a number of biosimilars that were approved and released late in the summer. And so within the third quarter, we started to see that some patients were starting to transition to some other products. As part of that, as the biosimilars have come to market, the typical pricing that we would see, they would be pricing underneath the pricing of the branded drug. But in this case, because everybody knows that the branded drug is going to be dropping 66% in price, the biosimilars have come out at a much lower price point. So when we talked about the 380 basis point headwind to our revenue as part of our third quarter earnings call, we were trying to point out 2 things.

One, mentioning that we were starting to see some biosimilars that were approved in patients transitioning. But just as importantly, despite the fact that we had a 380 basis point revenue headwind to our chronic sales, we still grew double digits in our product sales. So really just trying to point out that the strength of our portfolio is strong. It's not linked to one drug only that we still expected to see some strong results as we move on into the next year.

And I'll just add that at the beginning of the year, all we knew was our Stelara census at the time and the change in our discount that we were going to receive. And to Meenal's point, we knew that biosimilars would come into play, but we didn't know how quickly and what their pricing strategy should be. So when we clarified that we were at the upper end of that 60% to 70% range, that is inclusive of both patients still on our Stelara census as well as those that have moved to the biosimilar alternatives.

And so as we think about '26 and when you -- what information is outstanding to, I guess, Janssen and you, that needs to be resolved to get to a point where you can start to quantify what the impact will be in '26. What are some of those? Maybe just give a little sense about the negotiation, how the process works and when you think you might have an update.

Sure. So in terms of the process, in addition to continued discussions that we're having with Janssen, which again, are good productive discussions. And as always, they take a little bit of time. What's different this year is we have new therapies that are being released, right? So the discussions with Janssen as an example, include both Stelara as well as TREMFYA. We have a number of biosimilar manufacturers, and we're having some similar discussions around what the pricing will look like with those biosimilar manufacturers. So I would say it's not just one set of conversations. It's multiple conversations.

We, like a lot of other -- I call it, a lot of other December 31 year-end companies, we're in the throes of our planning process. And so this is one of many things that we're working through right now. But I still feel good that as we're working through not just the Stelara and byproduct impacts, but other parts of our portfolio, we feel good going into '26. We understand the fact that investors are looking for more clarity from us on what 2026 looks like. So as soon as we have a better view and we have confidence in what '26 looks like, that's part of our plan to make sure that we communicate that clearly.

There may not be much to be said on this, but I'm going to ask anyway. So you absorbed -- you're saying a $70 million headwind this year on this product. I think people rightly or wrongly estimated maybe you started in '25 with it being $110 million, $120 million contributor to at least gross profit, if not operating profit. I think you've said you won't do it losing money. You won't provide them. So is there any way to bracket? Is it 0 to 40 sort of the bracket on what the exposure might be here? Or how would you react to that?

Well, I appreciate you started out with -- I'm guessing you won't answer the question, but I'm going to try anyway. We've been getting asked that question a lot, as you can imagine. And really for us, we try to take a look at the portfolio in buckets. You can imagine with a lot of people listening to this conversation now, people would love to get some details on really our profitability by individual drug or therapy. And it's just not something that we get into that level of detail. I would just circle back to my comments of 2026, right? I'd say we're in a different today than we were a year ago, where a year ago, this was unknown, and we were in some early discussions. We continue to be in discussions, but also in some new discussions. But given the state of those discussions, but also more importantly, the fact that we've been able to grow through this headwind in '25, that really gives us confidence as we look ahead to '26 that we feel comfortable, which is why we said this on our earnings call that we're going to grow through this in 2026.

Okay. Okay. Given the issues in Stelara, we are often asked, what would be the next largest drug? And is there another Stelara out there? Can you just comment on that and give some perspective on that?

Sure. And again, we try not to give too much color on individual drugs because they are such a one part of a much larger portfolio. We don't have any other significant concentrations like Stelara, which again, was a very unique program that we had put in place for a small cohort of patients. Typically, the higher dollar branded drugs carry a much lower product margin. And in this case, we were able to squeeze quite a few extra additional basis points out of it given the program we had put in place. What I would say to that question is if you look at our overall portfolio, even though about 50% of our revenue comes from those branded drugs, only about 25% of our profit margin comes from those drugs. So really no other place to have a large concentration for something as profitable as Stelara was for us.

Okay. If you were to take the core business ex Stelara, is that basically trending toward your long-term algorithm for growth? I mean will we -- is there anything else that's really deviating from that in any way?

Yes. I would generally say I think that's sort of a back-ended way to come back to Stelara impact. But what I would say is this is coming back to the long-term growth algorithm, we feel good about that as we look forward. 2026 is still going to be a year that we have to work through some of this. It's -- again, we're working through that now. We'll have a better view coming up in the next few months or so. But I feel confident as I look out further that, that growth algorithm is intact. we haven't had a chance to talk about a number of the different initiatives that we have going on between other therapies with other pharma partnerships that we have, between the work that we're doing around our advanced practitioner model.

There's a number of programs that we're working on with our payers today around bed day management and site of care management. I feel good about those being profitable growth drivers to be able to deliver as we look ahead on the long-term growth algorithm.

And I'll just highlight, we obviously had the benefit of this year of some unique competitive dynamics in the acute market. And even though we're going to eventually lap those really starting a little bit in the fourth quarter, I just want to highlight the execution by our team on that opportunity. We are not the only competitor in any of these markets where we had the chance to continue to capture share and the team's daily hourly execution, if I'm being honest, really shows the strength of our platform and our ability to continue to endure ourselves to both referral sources and payers to show our value and to capture that share. So again, I'm really excited about the progress the team has made, but it truly was execution and not something that was just handed over to us.

And I was going to ask you about the opportunities to drive future growth. You mentioned new therapies, advanced practitioner model. I think infusion suite adds has been another aspect of it. What -- how do we think about those relative to the overall company and the growth potential those contribute?

Yes. I think for us, right, we've talked about the fact that we're not -- even though we have been talking a bit about Stelara, as we think about the broader portfolio, I think with the relationships we've built, we talk about the fact that we're -- we have partnerships are in network with the top 10 payers and numerous other payers beyond that, a lot of long-standing relationships with a number of pharma partners. And I think as I step back even as being a little new and you take a look at the broader health care ecosystem, we're on the right side of health care, right, in terms of cost and cost structure and more and more conversations are taking place, both from a payer perspective of what's the affordability, how do I think about reducing my medical loss ratios.

But if you also think about it from a patient perspective, right, how many of you have had a loved one that's in the hospital and the first question they're asking is, how many days do I have to be here? When can I leave? When can I go home? So being -- doing what we do, being able to provide alternate settings, whether that's at a patient's home, whether that's in one of our clinics where patients can receive the services they need that give them hope, they give their families hope. I think that's important. And we've had a number of payers, of course, that recognize that, but that's a service we can provide. So that's why those partnerships are extremely important to us.

Okay. Infusion suite adds, are you -- what's the plan on that going forward at pace?

Yes. So we have a footprint of about 170 facilities that are suites, including some pharmacies. Of those, about 24 of them now as of the end of the third quarter have that additional advanced practitioner capabilities as part of that. As I sit here today, and that's part of my first 6 weeks, just really getting an understanding of the footprint and what we're doing. But I think we've got good coverage across the United States with the footprint that we have. That doesn't mean that we don't need another site or 2 or that acquisitions wouldn't add another site or 2. But I think we have pretty good coverage. What we are trying to do are really 2 things.

One is by adding the advanced practitioner model in, that brings in an additional grouping of patients that maybe weren't getting care under a home infusion umbrella because of the payer coverage that they have, but coming in under the advanced practitioner model, it's considered a medical office visit. So you get maybe a different cohort of patients coming in that also need some different services, maybe need some more complex medical attention, et cetera. So there's that.

So more that we can do around that becomes important. And then whether it's additional therapies, additional use cases as we think about the old adage of how do you sweat the assets, right? How do we think about attracting more patients to our model where they would feel more comfortable, a little bit more like a home-like setting or an alternate setting close to their home.

To Meenal's point, we spent a significant amount of time building out that footprint really starting in 2021, again, where we moved our patients or nursing events that happened in one of our suites from about 15%, 16% up to 34%. So to her point, really, the focus now is maximizing that capacity, perhaps identifying some new de novo locations, but the speed at which we need brand-new locations probably won't be as quick. It's more of that focus on which ones make sense to convert to the advanced practitioner model and how do we best utilize what we already have in place.

Where are you at in terms of capacity across those infusion suites?

We have capacity in all of our infusion suites. And again, that capacity as not even being open 7 days a week, not having extended hours. So plenty of room to continue to do that as well as the way that we build these. We have that ability to get some additional modular walls add a couple of additional chairs to actually increase capacity on our existing sites.

I got you. Okay. This is a little granular, but fourth quarter a year ago, you had CVS exit the market, and we'll start to lap that. But I know you didn't get full benefit because you had the Baxter IV issues. How should we think about the comparisons for the next few quarters relative to those 2 dynamics?

Sure. I just want to echo what something that Nicole said a little bit earlier, and I really want to give really some public accolades to our team. There's -- I think perhaps we made it look or our team made it look a little too easy. But as Nicole was saying, when you think about acute patients, these are patients that need immediate care, right? They've been discharged from the hospital. Maybe we get a call at 10:00 in the morning saying, okay, we need to be working with this patient by 4:00 in the afternoon at their home. We need to think about readjusting schedules to be able to really meet with that patient. We need to think about the medication that they're going to need, compounding that's going to be necessary and really getting to know that patient in a very short time frame.

So you need to have the right staffing models in place, the right processes, the right resources in place. And I give a lot of credit to our team that's really been able to put that together, which is really why we have been successful in the past year because it wasn't even about taking share. In some cases, there weren't others to even really serve those patients. And so we feel lucky that we had the opportunity to do that, but that also came with a lot of a lot of efforts involved. As we look ahead to next year, there's a couple of things.

One is the fourth quarter is a little bit of a partial overlap, a partial not as we "lap the year." But even as we look at that, we're now at a different base level, meaning that even though acute patients might only be with us for, say, on average, 4 to 12 weeks, we now have the referral sources, and we're -- we've got the relationships and the proven track record now with a lot of those referrals that we'll continue to build on that base. It's a market that we think is this acute market that grows in the low single digits or so. But we think with everything we've done, the track record that we now have that we'd be able to grow that part of our business in the mid-single digits.

Okay. And I think you got low double-digit growth for the chronic. Is there any dynamic that's likely to change that? Or is that just stable and predictable on both sides pretty much?

As Neil highlighted, we had really great performance across the entire chronic portfolio, both in -- I know we've been highlighting some of the rare orphan or LDDs over the past couple of quarters, but also in our core therapies, so in our IgG portfolio as well as the other parts of our business. So obviously, with some of the higher dollar rare orphan drugs, they do have a bit of a ramp that we'll see right at the beginning of it. We called out a couple that we've added to our portfolio for this year or for next year. I wouldn't say that any of those are going to necessarily change our growth trajectory upfront. But again, lots of opportunity ahead with both those and with our existing portfolio of therapies.

And you think about the margin profile between acute and chronic, is -- are you at a stable point, I guess, putting aside Stelara and all? And is there either of those segments where you'd see it materially changing?

I'd say with the acute portfolio, again, those are primarily generic drugs and pricing is pretty stable on those. So I wouldn't expect much pricing pressure or tailwinds on those. On the chronic side, again, as we called out, of the 50% of our revenue that's branded, only 1/4 of our profit is actually coming from those branded drugs. And so biosimilars already make up a meaningful portion of that portfolio. Again, rare orphans, as we've called out, do typically come in at a lower margin profile.

That does take some time to try to squeeze additional basis points out of those, but always looking for opportunities as we continue to expand the patient cohort, but nothing significant that I'd call out.

When you think about labor trends, are those relatively stable? Or is there anything to call out there with your clinicians and so forth?

Yes. I know there have been a lot of discussions about post-COVID, what was going on with labor trends. We think we've passed a lot of that now. We're back to pre-COVID levels as we think about our staffing. One of the things that we've built out a little bit as we think about our Naven nursing network, right? That's also been a great add to the organization as we think about the group, but also allowing us to have some flexibility in being able to serve patients. Sometimes if we see a rise in a particular location or at a particular time, it gives us a little bit more flex.

But at the same time, Naven also does some work with other parties as well. So from a cost perspective, it gives us a nice balance there, too. So the model is working well for us, and we're really glad that we've put that in place.

And how about on the SG&A front? Do you see leverage there? Or how do we think about SG&A?

Yes. So we have -- we've been talking about the fact that we've made and are continuing to make some investments in SG&A. I think we announced -- it's been a little over a year where we announced our partnership with Palantir around AI. I know everybody has jumped into the AI well at this point. But for us, as we think about a number of our different processes and people that are spending time on patient registration and billing and different areas, there's a lot of opportunity for us to be able to look at and try and streamline those processes. And so we're doing things like that.

We talked about the fact that we had 3 initiatives that we were undertaking this past quarter, ranging from scheduling, really doing more on automating scheduling and delivery and routing. And a number of people will say, well, Meenal, when do I see the benefits coming out of SG&A? And I'm pointing out, look, we're putting these in place. We're absolutely getting benefits coming through SG&A. But the other thing that I think I really wanted to articulate is the benefits we're seeing coming through from cash flow. I think that's an important part of what makes our company successful is when you take a step back and we talk about a number of financial metrics, Option Care Health is a really strong cash generator.

We've got a cash conversion cycle when we think about working capital management in single days or so. And a lot of these initiatives, right, when we talk about streamlining our processes, impact not just the resources we need, but the working capital as well. So I feel really excited by a lot of the work that we're doing and a lot of people have gotten a lot of traction from that.

Cash flow brings up something I was thinking about. In the first quarter, there was a lot of discussion about the fact you did some forward buying, and that was helping mitigate some of the pressure. But I think it's also sort of come out that, that was part of your negotiation that they agreed to let you do the forward buying. Are we at a point where for most of your drug categories, it's just part of the negotiation as opposed to something you can strategically have the opportunity to do proactively. How should we think about inventory management as a lever to drive incremental profitability?

Yes. I think the great news is when you are a strong cash generator, I would say it gives us optionality, right? It gives us optionality from a broader capital allocation perspective, some of which may be from a timing perspective, it can invest a little bit more in inventory, knowing that that's going to give us a bit of a better cost position, knowing that if we need to build another clinic, if we need to think about another site, we have the ability to do that in M&A, share buyback, et cetera. So those are always things that we're looking at and where it makes sense, economically, we absolutely will do that.

And we will always look for opportunities to make strategic buys on the inventory front as we're looking towards price increases. As you would imagine, you can't just go ahead and buy a full year of inventory to keep buying yourselves ahead of a price increase, but always look for those opportunities when we've got the chance. And to Meenal's point, we have the balance sheet to be able to do so.

And it's -- but it's mostly in discussion about the overall way you're working with the manufacturer as opposed to just -- I think there's going to be a rate increase, so I'm taking forward buying action. It's it's really a feather in your cap or...

You can imagine pharmas are pretty sophisticated with monitoring allocations and what our purchasing patterns are. So...

But to the extent that we can do that and it's part of the discussions, we would absolutely do that. But on their side, they also realize what's going on. So it's part of a broader discussion that we're having.

Okay. That's what I figured. We always get asked about the self -- conversion to self-administer. There's been a couple of drug categories that people have asked about that. What -- how do you think broadly about that?

We recognize that the ultimate goal of pharma is to have a little white pill that every patient takes in the morning. But this is really part of the calculus and part of the trends that we've seen over the course of the nearly 10 years that I've been here. There is still significant utility in the IV formulations of drugs. And while some therapies may shift administration or may come into or disappear from our portfolio altogether, it's what we've grown through over my time here and what I expect will continue to grow through really over the next iteration of Option Care here.

Yes. And I would add, even with the subcutaneous applications that are out there, many times, they still need a medical -- they need a medical professional oversight as well. So that's something that -- that's a service that we provide. Sometimes you still need the specialty pharma because there's compounding, the drug comes in a vial. So that's also services we provide. And then many times, when there are more self-administration products that come out, the payers aren't always happy because they can be a lot more expensive, right?

So there's a lot of different variables that enter into it. In many cases, we can still be part of that delivery to the patient. In other cases, there may be some time and evolution before that actually catches on as well.

Maybe just to finally wrap up a little bit on capital deployment. M&A opportunities, what's sort of in your sweet spot there? What about share repurchases? Maybe some comments on that.

Sure. As part of our third quarter earnings call, we talked a little bit about that. We've talked already about some of the organic internal investments we're making in ourselves. We see some nice payback there. With M&A, our focus is really around tuck-ins. We feel like in the home infusion space, there's still a vast amount of market left for us to take a look at, which we'll continue to do. We've also talked about some adjacencies and some other clinical capabilities.

We've talked about nursing, specialty pharmacies and even just some of the data and analytics, right, as we think about AI, is there something we can do there. Share buyback continues to be the way that we return capital to shareholders. And I think especially our model has been periodic, and I would even say a bit opportunistic when we feel like we're not quite at the valuation we deserve. There might be a time where you see us buying back more shares as well. But overall, the great news is we generate a lot of cash flow. And so it gives us the optionality more broadly on how we think about capital deployment across all the vectors.

So you're going to tell us that this is a good time to be stepping up and buying -- you're buying your stock?

Okay. Stay tuned. There you go.

All right. Well, we appreciate Option Care participating in the conference this year. And thank everyone for joining, and have a great afternoon.

Thanks, A.J.

Thanks, A.J.

Good day, and thank you for standing by. Welcome to the Option Care Health Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 10-K filed with the SEC 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 condition. 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 Meenal Sethna joined us as CFO on October 1. 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 Meenal 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 health care. Her early career and formative years were spent with a global health care 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 Meenal as we shape the next chapter of Option Care Health and continue our mission to transform health care by providing innovative services and improve outcomes, reduce costs and deliver hope to our patients and their families.

I'm also pleased to welcome Stephen Shulstein as Vice President of Investor Relations, reporting to Meenal. Stephen is a seasoned Investor Relations executive with experience across health care 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 third quarter results. The Option Care Health 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 of 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 third 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 site of 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. Meenal will go deeper into the financials in a few minutes, but to highlight some key takeaways.

Our revenue momentum continued in the third 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 patient 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 quarter. Additionally, Naven 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 EBITDA 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 Meenal 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 disciplined capital deployment.

As John mentioned, the third quarter was strong, building off the solid momentum from the first 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 therapies growth. Gross margin rate was also negatively impacted by the shifting Stelara dynamics as well as the impact from lower margin, limited distribution and rare and orphan therapies.

Adjusted EBITDA 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 EBITDA 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 loan, reducing our borrowing costs and extended the maturity, while adding an additional $50 million in liquidity.

Our net debt to adjusted EBITDA leverage stands at 1.9x 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 geographies. 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 Intramed Plus acquisition from earlier in the year. The business continues to perform extremely well, and 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 while 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 billion to $5.65 billion, adjusted EBITDA of $468 million 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 favored 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 look forward to continuing our growth trajectory through 2025 and beyond.

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

Thanks, Meenal. 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'm 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?

[Operator Instructions] our first question comes from the line of Pito Chickering with Deutsche Bank.

I guess what is the uptake of the Stelara biosimilar at this point? How do you think that evolves in the next 12 months? And is it fair to think about the economics of Stelara biosimilars following the same path as REMICADE?

Pito, it's John. A couple of things that I want to bring up first. First 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 Meenal 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 second quarter, we started to see the uptick. That continued through the third 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 1 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. But 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 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 Stelara impact for '25. It was like $5 million in the first quarter and then $20 million sort of 2Q, 3Q and 4Q.

As you're moving into the Stelara biosimilars and talking about sort of the gross profit sort of impact there, what would be the Stelara year-over-year headwind in the fourth quarter now that you're moving into the biosimilars?

Yes. As we had put out the original guidance of the $60 million to $70 million and then as we affirmed at the end of the second quarter that it was going to be at the high end of that range. That is just on the Stelara portion of it. That does not include what we see as the biosim conversion rate.

As we came out with those original numbers, Pito, as we called out, the only view we had was around the discount that we were able to enjoy on that product changing and that, that was going to be moving more -- and it was hard to anticipate what the uptake of the biosims was going to be.

So we've talked about it being a revenue event, and 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 ready to do so.

Our next question comes from the line of Joanna Gajuk with Bank of America.

So I guess the 380 basis points -- sorry, just staying on Stelara for a second, a follow up. The 380 basis points in this quarter, so it sounds like there is expectation for additional like incremental, I guess, headwind as the conversion continues, right? Is the way to read that comment about next year?

That is correct, Joanna. As we have been calling out that we would expect to feel the headwinds. Again, it's -- revenue is going to have that impact. We have been talking about that since really the IRA and the announcement of that, knowing that there's going to be a step down in the reference price 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 our confidence in continuing to tighten and raise the midpoint across that. So 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 we think about the gross margin because like you said the biosimilar is a revenue event, there's a headwind to revenue, but the gross margin, I guess, so you had a step down on the Stelara 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 on the gross margin percentage? Or it's too early to talk about that? Or I guess...

It's too early to talk about, yes...

How should we think about that gross margin, yes...

Yes. It's too early to talk about that, Joanna. And as you would expect, there's a range of outcomes. Each of the biosimilars have a different profile on that. So too soon.

Okay. And so another, I guess, topic. So you mentioned dynamic regulatory environment. So are there any areas you 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?

Yes. 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 I 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 fourth quarter, knowing that we've got some of these other dynamic environments that we're going to have to continue to work through and capitalize on where possible.

Our next question comes from the line of David MacDonald with Truist.

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 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, 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?

Yes, 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 into 2026.

We've talked about the 3 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 of 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 giving. And I think that puts us in a position to remain in 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 network 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 or worse or a little different than you had expected?

Yes. So our growth of our infusion suite 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 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 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, is part of a 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 the payers around some of these initiatives?

Yes, Dave, it's a little hard to tell the immediate impact just because of some of the market -- the competitive dynamics 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 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 we see benefit across both the payer and the hospital and health system aspect.

And we think it deepens the partnership. It allows us to have more confidence 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 patients and their members.

Our next question comes from the line of Matt Larew with William Blair.

The first question, just on the cost side. G&A is up about 10% on a TTM 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 and 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 Intramed acquisition, right, that was a '25 acquisition. So you've got additional cost, additional growth there that wasn't in the prior year. I say that's one.

Secondly, from a variable comp perspective, we were under target and paid out under target last year. So just getting us back 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 relationships that we have with Palantir 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 through our cash flow, right? I mean cash flow and our -- the strength of our cash flow generation is really a part of the DNA of the company. So yes, 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 honestly gives us much more optionality when we think about capital allocation.

Okay. And then just another one on Stelara. And again, I appreciate given the moving pieces with biosims and heading into pricing changes next year that you're not going to put guardrails around it at this point. But I guess just at a high 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 call out like you did this year, some range because it is so disruptive to what investors view as the Option Care 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?

Matt, let me take this and certainly look for Meenal 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 -- and 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. TREMFYA, Skyrizi, and ENTYVIO are all part of that equation as that moves ahead.

The third is the uptake of the biosims and then which biosim the patients are transitioning on to 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 third 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 reach and frequency, how we capture market demand, how we are a better partner of choice for referral sources and continuing the depth of the relationship with payers with site of care 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 changes or shifts in a specific therapy or therapeutic category and find other ways to grow through that. So Meenal?

Yes. Let me just add a couple of comments. As you can imagine, first 30 days, finding a lot of things. But in my top priorities is really 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 John has 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.

Our next question comes from the line of Charles Rhyee with TD Cowen.

This is Lucas on for Charles. And actually, my question was answered on the last question there. So I guess, I don't know if you guys have sized it for this quarter, you might have -- I might have missed it. But should we think about the Stelara impact to gross profit being similar to the size that you gave at 2Q, 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 million to $70 million last quarter, we talked about the impact in 2025 being about $65 million to $70 million at the -- 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 above the $65 million to $70 million range that we're now looking at or below? And I guess what could be the moving pieces within that?

Yes. 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 were able to negotiate on that, which is why we've been able to have a firm view around that range. And as Meenal 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, trying to answer, I'm not providing '26 guidance, but the view as we move forward is there are just a lot of variables that will go into not only the patient census that we have under management, the products that they actually transition over to and then some of the economics associated with 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 Meenal said, I think we feel very confident in the upper end of the $65 million 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.

Our next question comes from the line of Constantine Davides with Citizens.

John, can you just talk about the M&A opportunities you're exploring, whether they remain close to the core, if there are some adjacencies 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 is that impacting your thinking on where you choose to deploy your capital? And I guess, what is your perspective around this increasing disconnect?

Yes. So we are continuing to have a fulsome list of opportunities that we're assessing, as Meenal had 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 tuck-ins. 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 select the assets that we have and the installed base to its fullest. So we're always going to look for those types of opportunities.

As we've called out, there certainly are near adjacencies, and we're continuing 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 adjacencies.

But I don't -- I wouldn't leave you with the sense that there's anything that's transformative or significant difference than what you've seen in our pattern, which is around clinical capabilities, pharmacy capabilities, technology enhancements and 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 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 that path?

Yes. 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 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 at a lower cost, we're part of that conversation.

And 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 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.

Our next question comes from the line of Brian Tanquilut with Jefferies.

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, TREMFYA, Skyrizi, 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 on payers focusing their MLRs. Maybe that's one.

And then I guess the second part of the question is, is there a world where you just say Stelara economics are not enough for us to stay in the therapy and we just exited, I mean down to like, what, 6% to 8% of EBITDA at this point. So just curious how you're thinking about all that.

Yes. Thanks, Brian, for the question. To be clear, our relationship with Janssen and 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 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 the product portfolio. We certainly have strong relations with the branded pharma manufacturers, whether it's Janssen or whether it's AbbVie and 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 responsiveness.

So we feel really well positioned to continue to deepen the partnerships 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 competition.

That makes sense. And then maybe, 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 are in the high teens range, it seems like. So how are you weighing now like the buyback versus M&A capital deployment position?

Yes. 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 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 in 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 some 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 is 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 tuck-ins and near adjacencies make 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 is a priority for us.

Our next question comes from the line of Michael Petusky with Barrington Research.

John, I'm just curious, given the talk about Stelara, 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 patient census and just things that maybe could help investors have a better sense of sort of true sort of longer-term exposure to this issue?

Yes, Mike. Look, it's always a balancing act of how much information we can provide into the public markets 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 reality is the size just continues to diminish. 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 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 honestly 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 comments accordingly.

Okay. And if I can just sort of follow up on some of the earlier questions around capital allocation. I'm just curious, John, like obviously, a few years ago, you guys made a run at more of a transformative asset in home health. 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 markets that are interesting to us?

Yes. 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 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 manufacturer services are areas that we're always looking at.

The platform that we have, the clinical capabilities from our pharmacists, our dietitians, 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 capability 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 Meenal and I have said, nothing on the horizon on a transformative standpoint. All of these things we look at as being additive and accelerants 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 grow the business and return value to our shareholders.

So just 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.

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.