Participants

Nicole Maggio; Senior Vice President, Corporate Controller; Option Care Health Inc

John Rademacher; President, Chief Executive Officer, Director; Option Care Health Inc

Mike Shapiro; Chief Financial Officer; Option Care Health Inc

Lisa Gill; Analyst; J.P. Morgan Securities LLC

Constantine Davides; Analyst; Citizens JMP Securities, LLC

Matt Larew; Analyst; William Blair & Company, L.L.C.

David MacDonald; Analyst; Truist Securities

Pito Chickering; Analyst; Deutsche Bank Securities Inc.

Brian Tanquilut; Analyst; Jefferies LLC

Joanna Gajuk; Analyst; BofA Global Research (US)

Michael Petusky; Analyst; Barrington Research Associates, Inc.

Presentation

Operator

Good day, and thank you for standing by. Welcome to the Option Care Health second-quarter 2024 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.

Nicole Maggio

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 and latest Form 10-Q 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.
With that, I will turn the call over to John Rademacher, Chief Executive Officer.

John Rademacher

Thanks, Nicole, and good morning, everyone. The second quarter was another productive quarter for the Option Care Health team despite a number of challenging dynamics. On our last call, we were in the midst of one of the most disruptive cyberattacks on the healthcare ecosystem in history and managing through a number of supply chain disruptions that we're putting pressure on our business. As we sit here today, I am pleased to report that the team has made significant progress in managing through and recovering from these challenges.
Building upon the momentum exiting the first quarter, the top line continues to perform well as the team delivered year-over-year growth of 14.8%. Growth was balanced across the portfolio. And consistent with the first quarter, we saw especially robust growth from our newer limited distribution and rare orphan therapies within our chronic portfolio.
Throughout the challenges in the first half, the Option Care Health team's ability to collaborate with referral sources to onboard new and service existing patients was never disrupted. In the face of adversity, the team more than rose to the challenge and developed innovative workarounds and modified processes. Mike will provide more granular perspective on the financials as always.
But the revenue mix as well as the lingering supply chain and remediation efforts related to the Change Healthcare incident did impact gross profit in the second quarter. However, we did generate approximately $10 million of incremental gross margin in the second quarter relative to the first quarter and continue to fight for every basis point. And given our expense leverage and efficiency mindset, we dropped the $10 million to the adjusted EBITDA line.
On our first quarter call, we identified two significant challenges that were affecting the enterprise, including disruptions in sourcing key therapeutic inputs and the operational impact of the Change Healthcare cyberattack. I'm pleased to report that consistent with our previous comments, we resolved the sourcing challenges later in the second quarter with alternative procurement strategies.
Regarding the Change Healthcare situation, we have effectively reestablished connectivity with their key applications or established relationships with alternative service providers for various critical applications and tools we utilize across our operations in support of patient administration and revenue cycle management. With these primary tools largely back online earlier in the second quarter, we have made strong progress in our recovery efforts. Some of the advanced functionality around the revenue cycle continues to be remediated. And operationally, we have substantially recovered.
Having said that, we still have some receivables to be posted and patient pay collections have been delayed. This continues to be an area of focus, and we expect there to be some modest inefficiencies in the third quarter as we complete our recovery. But as you'll see from our cash flow statement, we have made tremendous progress in reducing our accounts receivable and monetizing revenue in the quarter.
As Mike will expand upon, given the progress around cash flow generation and the building strength of the balance sheet, we reengaged on capital deployment efforts and repurchased approximately $78 million of stock in the quarter. Our ability to respond quickly and adeptly to dynamics such as the Change Healthcare cyberattack or the procurement challenges is a direct result of our internal efforts to maintain robust enterprise risk management process, which regularly test our ability to identify, assess and mitigate key risks to the organization and develop well-coordinated, multifunctional responses.
The emergence of these risks in the first half as well as our strong response reaffirms the critical need to continue to manage effectively and invest in our information technology and risk management functions. During the second quarter, we maintained our active effort to engage with the investment community through a myriad of investor conferences and other venues. Feedback and interaction with our shareholder base is invaluable, and I believe better enables us to manage the enterprise.
One of the key areas of interest has been around our growth profile in the face of therapeutic advancements. I thought I would take a few minutes to reiterate how we view the growth profile of this enterprise. I believe we operate in an attractive area of the broader health care ecosystem, given that we provide clinically advanced, high-quality care at an appropriate cost in a setting where patients want to receive their care.
Our revenue base is comprised of dozens of therapeutic categories and hundreds of drugs, some growing north of 20% and some in decline. We believe our diversified therapeutic base, which ranges from mature, slower-growing therapies such as intravenous antibiotics, to rapidly growing new rare therapies such as VYJUVEK is one of our key strengths. The breadth enables us to better collaborate with referral sources and payers across a much broader spectrum of patients and also helps mitigate our exposure to declines in individual therapies or categories.
From the merger with BioScrip in 2019 through the first quarter of this year, we have delivered on average more than 11% top-line growth. This is despite several significant headwinds and shifts in prescribing patterns.
For example, over that time horizon, a number of biosimilars were launched for Remicade, and we saw reference prices for that therapy drop more than 80%. Cubicin, which was one of the last branded antibiotics and a significant drug within our antibiotic portfolio, when generic as daptomycin and reference prices declined more than 90%.
As we shared last year, RADICAVA, which was a novel-infused therapy for ALS went oral, and our revenue base for that therapy declined rapidly beginning in late 2022. Yet, despite all of these and other therapeutic developments, we've demonstrated the strength of our platform and continued to deliver attractive top-line growth.
Our team never rests in their efforts to refine our therapeutic portfolio, and we constantly monitor and prepare for new product introductions or additional forms of administration. We all know that therapies will see new biosimilar entrants, subcutaneous formulations of infused therapies will be introduced, and existing products may receive broader indications. As these developments are identified, they are incorporated into our perspective regarding our top-line trajectory over the medium term.
As we look at the drug pipeline, we see opportunities as well as risks, and we remain steadfast in our conviction regarding the growth opportunities for this enterprise. We believe we have a unique platform that provides extraordinary value to pharma manufacturers, payers, prescribers, and patients. And we will continue to capitalize on the strength of our position to drive growth, capture market demand, and serve more patients.
As we look forward, we see a number of therapeutic dynamics on the horizon. And unfortunately, there is no standard script or certainty for how they will impact our enterprise, positively or negatively. Every therapeutic introduction, every biosimilar or generic evolution, every label, change is unique. And many of the variables, including pharma pricing and rebating strategies, pharma channel prioritization, and payer provider adoption strategies are frankly out of our control. But as we have demonstrated in the past, we have a resilient team and a strong platform to respond to these market dynamics, and we will do our best to respond to the developments as they unfold.
So as we sit here today midway through 2024, I could not be prouder of the Option Care Health team and the level of patient care we provided despite challenges in the first half. The enterprise is well positioned heading into the second half of the year. And based on the revised guidance provided this morning, we expect to deliver on our commitments for another strong year of growth.
With that, I'll hand the call over to Mike. Mike?

Mike Shapiro

Thanks, John. Good morning, everyone. Revenue growth in the second quarter of 14.8% versus prior year Q2 accelerated off the first quarter momentum. We drove solid growth in our more mature therapies across the acute and chronic portfolios and continue to see considerable contribution from new limited distribution and rare and orphan therapies that we have launched over the last year or two.
Gross profit of just under $250 million grew approximately 3% when normalizing for the $8 million to $10 million of transitory procurement benefits included in the prior-year second-quarter results. As discussed on the first-quarter call and as we expected, gross profit in the second quarter continued to be impacted by supply chain challenges for certain drugs and inputs as well as the Change Healthcare situation, which affected our pharmacy operations and led to considerable inefficiencies in the quarter.
Consistent with the expectations articulated on the first-quarter call, we believe we have effectively resolved the supply chain challenges late in the second quarter. And as John mentioned in his comments, we have made significant progress in recovering from the Change Healthcare situation.
SG&A was flat in the quarter as we continued to drive efficiencies through investments in technology and operational excellence. SG&A as a percent of revenue dropped to 12.5%, our lowest ratio on record. Adjusted EBITDA of $108.4 million was up $10 million sequentially over the first quarter and represented 8.8% of revenue.
Earnings per share is another great story in the quarter. We earned $0.30 per share in the second quarter, which benefited from our share repurchase efforts that I'll touch upon in a minute. Cash flow rebounded in the quarter, and we are quite pleased with the recovery efforts. We generated almost $196 million in cash flow from operations in the quarter and reduced outstanding accounts receivable by more than $100 million which spiked at the end of the first quarter due to the Change Healthcare situation.
As we sit here today, our cash flow position has effectively recovered from the situation and working capital is back in line with where we would expect it to be in the ordinary course. And at the end of the second quarter, we are comfortably back under 2 times net debt levered.
As we articulated on the first-quarter call and reaffirmed at various investor events and engagements over the past few months, as our cash flows recovered from the Change Healthcare situation, we would reengage on strategic capital deployment efforts. To that end, we remain focused on M&A efforts and continue to assess acquisition opportunities. We have also reengaged on share repurchase activities and repurchased approximately $78 million of stock in the second quarter.
Our efforts ramped up as our cash flows improved in the quarter, and year to date, we have repurchased more than $118 million of stock. And given the momentum in cash flow generation, we intend to remain focused on deploying capital through M&A and share repurchase strategies.
Finally, based on the first-half results and our revised expectations, we are increasing our revenue expectations for the year to $4.75 billion to $4.85 billion. We have raised the bottom end of our adjusted EBITDA expectations and now expect to generate $435 million to $450 million for the year, and we continue to expect to generate more than $300 million in cash flow from operations.
And with that, we'll open the call for questions. Operator?

Question and Answer Session

Operator

Thank you. At this time, we will conduct the question-and-answer session. (Operator Instructions). Lisa Gill, JPMorgan.

Lisa Gill

Good morning and thanks for all the detail. First, Mike, can I start with just the mix in the quarter? Can you talk about what was chronic versus acute? And then secondly, I just want to better understand John's comments as we think about the shifting therapeutic environment and think about biosimilars. As we think about generics traditionally being a much better margin for Option Care, how do I think about biosimilars And why would they not have a similar impact when we think about margins?

Mike Shapiro

Yeah, Lisa. I'll start with some of the mechanics and hand it over for John, if you want to address your second question. Mix in the second quarter was right around three-quarters of our revenue; was comprised of the chronic portfolio. So roughly right around 75-25, which makes sense because as we've talked about, that cohort of therapies continues to outpace growth on the acute side.

John Rademacher

Yeah. And Lisa, to my comments, a little bit hard to predict exactly how things are going to move. A lot of it depends on how many biosimilars enter into the marketplace. As we called out in the prepared remarks, as we saw with Remicade, it took time for that to kind of move forward as more products entered into the marketplace on the biosimilar.
We normally see, as we've talked about publicly, the biosimilar events normally are more of a revenue event than a margin dollar event on that. We do everything we can to make certain that we're better positioned there's competition in the marketplace to look at cost of goods and be able to negotiate with manufacturers a better acquisition cost for those products.
So that's what we've been able to do with some of the biosimilars on a historical basis and looking for that opportunity to look at margin expansion as a percentage and trying to hold on to the dollars of the margin as we're negotiating better acquisition costs for the product. But there's a lot of variables in that, as you know. And that's why there is that level of uncertainty that I tried to call out within the prepared remarks.

Lisa Gill

And then, John, just as a follow-up to your prepared remarks, you talked about uses of cash. You talked about the stock that you bought back year to date, but you also mentioned the M&A environment. Can you maybe just touch on that a little bit as to how you're thinking about share repurchase versus M&A? And what are you seeing in the market right now from a target perspective?

Mike Shapiro

Yeah. Look, Lisa, maybe I'll jump in on the capital allocation. Look, as we talked about, we're thrilled that starting in early '23, we added a different arrow in the quiver, so to speak, in terms of our ability to deploy capital for shareholder value creation. Look, and as we said, we're going to continue to focus on M&A activities. I think there are a number of assets that we find intriguing that we think represent both strategic and economic value.
As we'd like to say, this is a small neighborhood. We know everybody that lives on the street, and we're not waiting for a process. We're very proactive in having those corporate development discussions.
Given the strength of the balance sheet now that we're well under 2 times levered and continuing to improve our leverage profile, look, we've got a very supportive balance sheet, and we think that we can continue to pursue both activities. So I think the expectation should be that while we'll obviously continue to look forward and try to anticipate capital needs for M&A investments, I think that you should expect to see us also continuing to deploy capital through share repurchase as well.

Lisa Gill

Okay. Great. Well, congrats on the quarter, and thanks for the questions.

John Rademacher

Yeah, thanks, Lisa.

Operator

Constantine Davides, Citizens JMP.

Constantine Davides

Thanks, good morning. Just wondering on the change front, can you maybe just expand a little bit on where you guys are on efforts to neutralize the impact there? Some of the steps from a technology standpoint, you're taking clinical management processes. And if it's possible, Mike, can you just put a box around maybe what kind of drag that's been on cost of revenue or SG&A or maybe in terms of consolidated margins? Thanks.

John Rademacher

Yeah, Constantine. Thanks for the question. It's John. I'll start with kind of a broader picture and then certainly turn it to Mike to try to box that.
So I just need to really call out the great work our team did in the quarter not only to reestablish our ability to submit those claims, and more importantly, to collect the cash on that. A lot of work we've done behind the scenes, not only to validate and to certify the system was ready to go back online. But also, as I called out in the prepared remarks, move forward with alternative solutions where necessary in order to augment that patient registration through revenue cycle management process.
We still have some work to do. As we had called out really in the first-quarter earnings call, we talked about by the end of the year, we would be done. We're probably ahead of that by every measure that we have. But there are going to be some lingering effects into the third quarter as we're focusing around posting cash and some of the aspects that we have to do on the back end as well as now we'll turn a lot of focus towards patient pay collections. As you would expect, that's going to lag because we had to submit the claims to the payers first and get that adjudicated to really understand what was the amount of deductible that was owed by the patient.
So as that kind of moves forward, we'll feel some of that linger into the third quarter, but it is well behind us, the bolus of activity that we have and really tremendous progress in the quarter and continued momentum as we're in the third quarter now.

Mike Shapiro

Hey, Constantine, it's Mike. Yeah, in terms of the impact, look, we haven't put a specific number on the impact largely because despite some of those challenges, we're actually in a position to increase our expectations for the year. And so we typically will call out these types of items with a specific dollar amount if it's causing us to deviate out of our guidance range.
But having said that, look, the larger impact was on our SG&A and on our indirect spend as we've talked about our ability to onboard and have a highly efficient revenue cycle and patient registration efforts was hampered considerably in the quarter with a lot of the automated tools that we utilize to onboard patients quickly as well as to process and drop claims efficiently. We're offline.
There was an impact within our cost of service, which is in gross margin as well, primarily attributed to the fact that while going into onboarding patients, we have a disciplined process to make sure we're responsive to referral sources. That runway to onboard verified benefits and get compounded therapies out the door was considerably shorter. So there were some pharmacy and operational inefficiencies that, again, as John reiterated, we think we're pretty much out of the work on that. And so we would expect a cleaner expense base going into the third quarter.

Constantine Davides

And just one quick follow-up. Any sort of benefit maybe longer term or intermediate term around your ability to take share, just standing with referral sources as other competitors might have stumbled through that?

John Rademacher

Yeah, Constantine, both through beef type of events as well as just our overall focus of being a partner of choice for referral sources continues to strengthen when we are able to respond to these type events. So we always focus around reach and frequency of our commercial team of developing those relationships and trying to be that reliable source.
And I will call out that this is a hustle business. I mean, we've got to earn those referrals and bringing those patients on board every single day. But our teams are really well positioned. And I think the consistency of our service model as well as the consistency of our message in being able to take patients on through any of that disruption, I think, created goodwill with our referral base.

Constantine Davides

Thank you.

Mike Shapiro

Thanks, Constantine.

Operator

Matt Larew, William Blair.

Matt Larew

Hi, good morning. Thanks for taking the question. Maybe just on the cost side quickly. So despite the disruptions you identified and had a deal with in the quarter, SG&A was down sequentially and basically flat year over year despite 15% revenue growth. Just moving into the back half of the year, I guess as we just think about gross profit growth relative to the 10% revenue growth in [plating] guidance, and any sort of benefits you're getting from recent cost actions or other incoming costs to think about? And maybe just help us think about more of the cost side of the equation, given John's comments on more of the top-line side of the equation.

Mike Shapiro

Yeah, Matt, I think, look, obviously, you know one of the things we preach is the scalability and the leveragability of this platform. And the culture is we're always looking for coins in the sofa cushions.
Having said that, we continue to invest in growth initiatives and invest in our commercial capabilities every single quarter. The great thing is behind the scenes, we have a very disciplined process to prioritize and ensure that not only are we investing for the growth of this platform but also harvesting efficiencies as we deploy automation, technology, and other means.
I think going into the back half of the year, I think the second quarter is very illustrative to John's comments around, look, we generated $10 million of incremental gross margin. We were able to drop that almost dollar for dollar to the bottom line. And that's why, like I said, behind the curtains, we're continuing to invest. We have a high degree of confidence that that thesis will continue.
And so I think going into the back half, while we don't give individual line guidance, I think the second quarter is a decent proxy for how we view our spending levels. I mean, as we grow the level, again, at 12.5%, that's key to the algorithm of this enterprise is continuing to drive that spending leverage as a percent of revenue.

Matt Larew

Okay, thanks. And maybe I'll circle back to John's comments on the growth profile. There, I think, had been a record number of biologics that proved year to date, and that's going to continue in the back half of the year. I think some kind of reading -- [feeling some] payers, some maybe reengagement about care in the home or preference in the home.
If I had John's comments up, I mean, typically, you guided more to the high single digits. But as you alluded to, you've delivered double-digit growth in your time as a public company. I mean, do you have a view that sort of market forces post-COVID are making this a sustainably higher underlying market growth? Is the competitive -- your competitive position shifted so that you should take more of that market? I mean, what [are we really] -- to make up John's comments because I guess my take would be that we should be modeling higher in the future?

John Rademacher

Yeah, Matt. So a couple of things. From the best insights that we have from industry studies, et cetera, we expect that home infusion is going to be growing in that mid-single-digit range. As I said, we've got dozens of therapeutic categories, and we've got hundreds of drugs that are part of the overall portfolio. And they're not all moving in the same direction.
We certainly try to look for every opportunity we have to capitalize on the position and the investments that we've made. And our focus around limited distribution drugs and the ability to use our platform of not only clinical competencies, but the ability to reach consistently 96% of the US population as being a part of that value proposition that we bring into the marketplace.
We expect that there's going to be these puts and takes that are going to move forward. There are a lot of unknowns around practice patterns of the prescribing physicians. And we've heard loud and clear from some of our prescribing physicians that if a patient is responding well to the therapy they're on, they're not inclined to move them on to a new indication.
So as this kind of moves and develops as it moves forward, we're going to try to take every advantage that we have, continue to build on the momentum of the organization. And we -- our expectations of our commercial team is that we're outhustling the competition and that we're going to continue to be a partner of choice for referral sources for payers, et cetera.
So all those things, I think, kind of fit into our expectations that we should be beating that the market on that, given that focus around our ability to execute. But I would probably put it into that band that we've normally said, which is we expect the marketplace to be growing in that mid-single digits, and we expect that we would to be able to beat that in the high single digits is kind of where we would focus our energy.

Matt Larew

All right, thank you.

Mike Shapiro

Thanks, Matt.

Operator

David MacDonald, Truist.

David MacDonald

Hey, good morning, guys. A couple of quick questions. Mike, I just want to make sure I got the timing right. I think you said that the supply chain drag wasn't resolved until the end of the quarter. Is that correct? So you guys absorbed that through the entire quarter. Is that correct on timing?

Mike Shapiro

Yeah, later innings. There is absolutely an impact in the second quarter for the most part.

David MacDonald

Okay. And then, Mike, can you just help us a little bit with the top line and pull it apart just a little bit? When we think about the strength of the top-line growth, was the acute kind of growing that low single digit that we expect? And then I guess the kind of installed chronic, maybe low double digit and then the [LDD], really what kind of pushed that higher if we kind of do the math backwards into that? Just any additional detail there?

Mike Shapiro

Yeah. I think it was in hand grenade range, Dave. I think, look, the more established therapies were more in line with the growth profile that we've generally come to expect. I think -- and if you think back to our initial guidance range, we were really guiding folks to that high single-digit, low double-digit top line for the year. I think the delta between that range and where we're delivering today is generally due to some of those newer novel, as John mentioned, the LDDs in the rare and orphans, where, frankly, going into the year, we were still commercializing some of those. So we were more conservative with expectations.
That obviously has an impact on the margin rate, as you've heard us preach time and time again. Because upfront, a lot of that, what I'll call that revenue over performance, comes at mid-single-digit gross margin rate. Which, again, the rate is depressed, but it's on a much higher revenue event. And so the dollars are still attractive, but it does have that impact on the margin rate.

David MacDonald

And then I guess just last couple. When we think about the patient characteristics of chronic and how much more quickly that's growing, is there any reason to not think about this business as a high single-digit SG&A business three to five years down the road?

Mike Shapiro

High single-digit SG&A -- as a percent of revenue? Yeah. I mean, look, we're going to absolutely continue to drive that leverage. How fast it's going to be the toggle -- as a percent of revenue, the denominator, to some extent, is out of our control because there's ASPs of drugs. But I would absolutely expect that SG&A leverage will continue to drift southward.

David MacDonald

Okay. And then, guys, just last one, just wanted to quickly ask on the infusion suites. It feels like you guys are pretty close to steady state in terms of how many you've got out there. I was just wondering what kind of nursing efficiency lift you are now seeing in some of your most mature or highest utilizing suites.

Mike Shapiro

Yeah. Look, this continues to be a great lever for us to drive operational efficiency. In the quarter, we're approaching 32% of all of our nursing events are occurring in one of our suites. And again, we don't force patients into them. We make them aware of conveniently located suites. And frankly, we found that the patient experience is quite favorable in those.
As you remember, we really started our infusion suite expansion strategy, and now we're right about 700 shares coast to coast. For those earlier tranches, we're seeing north of 20% nurse productivity, which the savings that we are able to drive from avoiding windshield time and concurrent infusion efficiencies more than pays for the utilities and drops about a 20% improvement in that clinical cost for nursing event. And so, A, it obviously helps margins; but B, we think of it as it's creating almost 20% more nurse capacity, which is vital to fuel our continued growth.

David MacDonald

Okay, thanks very much, guys. Appreciate it.

Mike Shapiro

Thanks, Dave.

Operator

Pito Chickering, Deutsche Bank.

Pito Chickering

Hey, good morning, guys. Looking at the implied guidance, can you give us any color on how is your modeling gross profit dollar growth in the back half of the year versus what we saw in the first half of the year? And if we're modeling high single-digit growth, excluding new procurement benefits, is there anything wrong with that?

Mike Shapiro

Hey, Pito. It's Mike. Obviously, we don't provide specific guidance on individual P&L lines, and you can go a little [cross-eyed] with kind of normalizing with some of the moving pieces relative to the base.
Back to my comment a couple of minutes ago, I think the second-quarter proxy where you saw us generating $10 million of incremental gross margin over the first quarter, not saying the number in Q3 is a plus 10%, but I think that's the kind of leverage and sequential improvement as we think about the back half that frankly isn't dissimilar to normalized previous years. And I think that's kind of how we're thinking.
Look, for us to deliver on the second half of the year in which we have a high degree of confidence, obviously, that comes through incremental gross margin dollars. Again, the way we've talked, Pito, is we're maximizing the gross margin dollar performance of the platform.
What it's growing versus the prior year? Again, we got a couple of tough comps coming up with the procurement benefits, which creates a little bit of a tougher comp.

Pito Chickering

Right. But if we're thinking about gross profit dollars or high single digit, excluding procurement, that's maybe in the ballpark. Is there anything wrong with that intellectually?

Mike Shapiro

I think it's generally in the ballpark.

Pito Chickering

All right. Perfect. So for your script, like you talked a lot about, obviously, the impact of biosimilars. And there's a lot of concern where the impact for 2025 come from this. If you look at the class of all the drugs you've had the last couple of years move from brand into biosimilars, is there any sort of color that you can give us on what is the gross profit per script and how that's changed? If I think about that as sort of down 5%, 10% where we are today versus what is under brands, is that in the ballpark?

Mike Shapiro

The only thing I would say, Pito, and I'll hand it over to John, there is no script. We've had quite a few generic in biosimilar events. A lot of it, as John mentioned in some of his comments, a lot of it around channel adoption, how the manufacturers are pricing and approaching the channel is completely out of our control. And so I know that folks are -- and we tried to provide some prepared remarks because this has been a constant question over the last couple of months.
There just isn't any prescribed pathway where the ASP is going to compress X percent after the third biosimilar and margin dollars will be plus or minus X dollars. It really depends, and it's pursuant to a number of variables that frankly are out of our control.

John Rademacher

Yeah. The only other thing I'd add, Pito, is what we do see is with the introduction -- let's even move from the biosimilars. But when we see some introduction of new branded products that are entering into the marketplace and some of the awareness campaigns that come with that, we see a lift of some of the existing products that we have within the portfolio as well as those new products that are entering in. So there's a lot of advertisement dollars and awareness campaigns that happen with that. And that kind of benefits the existing products that are in the portfolio as well as that opportunity to bring the new product into our formulary and be able to dispense those as well.
So some moving pieces there. And as we tried to put some -- contextualize around, we've seen these before. They've all operated a little bit differently, but the organization has been able to respond very efficiently and effectively to either offset some of the revenue decline or make certain that we are trying to preserve every basis point of profit that we can through the way that we negotiate with the manufacturers.

Pito Chickering

A quick sort of follow-up on the segue. What are your thoughts around Lilly's new Alzheimer's drug and the impact that could have on your sort of future pipeline? Thank you.

John Rademacher

Yeah. And first and foremost, again, continue to be very thrilled that new products are entering for this therapeutic category. Anyone that has a loved one that is afflicted with Alzheimer's -- the fact that we're starting to have some products that are starting to address cognitive impairment, again, is pretty amazing.
We are still very conservative in our view until we have better understanding around what's the path to payment and the medical policies that we'll be adhered to. As you know, a vast majority of this is for the elderly population that's really going to fall under the Medicare banner, both for fee-for-service or Medicare Advantage. We're in active conversations with the payers and the sponsors for the MA plans to try to understand how they're looking at bringing these products forward.
And I think as we start to see the prescription patterns and the adoption of the product, we think we're well positioned with our infusion suites and with our capabilities to be a partner of choice for Lilly or for Biogen or anyone that has infused or HCP overseeing injectable associated with that.
And so we're going to continue to have constructive conversations there. But it's really hard to tell at this point in time how that's going to have impact until we get better certainty around path to payment and medical policy.

Pito Chickering

Great. Thanks so much.

John Rademacher

Thanks, Pito.

Operator

Brian Tanquilut, Jefferies.

Brian Tanquilut

Hey, good morning, guys. Mike, maybe as I think about just all the moving pieces that you've talked about this morning, and as I look out to 2025, is it right to think that next year should be a normalized year without a lot of noise as I think about relative to the medium growth targets that you've set out?

Mike Shapiro

Hey, Brian, it's Mike. Obviously, I'm going to give you the answer that's going to be on fulfilling. But at this point, we're just not in a position to provide any granularity or thoughts on 2025. We're just starting to kick off our efforts around developing our 2025 expectations, which we'll share on our call in February.

Brian Tanquilut

No, I understand. And then maybe just on the biosimilar discussion and maybe putting your PBM hat back on. As we think about -- obviously, ASPs will come down when a biosimilar is introduced. But from a payer perspective, is it right to think that they understand your economics and the value that you bring to the table and the gross profit dollar that you're making on the drug should not really change much? I mean, is that a good way to think about that dynamic?

John Rademacher

Hey, Brian, it's John. I'll start and then Mike can add color. We always are trying to reinforce the value that we bring to the payers in helping to reduce total cost of care. When they're looking at the alternative as to where care can be delivered, we are on the right side of the cost quality equation in that.
And so we think that there are some constructive conversations. We've had -- we've talked about the fact that there's three legs to our stool on reimbursement, being the cost of the drug and the margin associated with that, our clinical per diems and then the nursing rate. And we're always looking for getting balance within that as to the contribution on that. We don't break it out. We don't provide that level of detail, but there's always that focus for us as an organization.
And I think in the conversations that we have with our payer partners through that, I think they have a recognition of that value and how we can help bend the trend of the total cost of care in that equation, but it's competitive. And no one's calling us and asking to give us more money as you would expect. And so we're going to have to continue to fight for every basis point as we always have, and we're going to negotiate strongly.
But we like the breadth of our portfolio. We like the fact that we have both acute and chronic within that, our ability to serve consistently in all 50 states, all those things, Brian, are part of our comprehensive go-to-market strategy in the way that we position ourselves to preserve as much value and be paid fairly for the value that we deliver to the overall ecosystem.

Brian Tanquilut

Awesome. Thank you.

John Rademacher

Yeah, thanks, Brian.

Mike Shapiro

Thanks, Brian.

Operator

Joanna Gajuk, Bank of America.

Joanna Gajuk

Hi, good morning. Thanks for taking the questions here. So I guess if I may follow up a couple of things here. So first, on these new therapies, right? And clearly, you said these are the headwind to gross margin percentages where -- [either] to the dollar, obviously. But is there any commentary for me that we can have in terms of the trajectory. So as of now, you have maybe two quarters or three quarters, especially in one of these therapies that you've been distributing. So kind of are you on track on these gross margin percentages improving? And when would you expect to get those closer to more normalized percent margin -- on gross margin?

Mike Shapiro

Yeah, Joanna, I think -- look, as John kind of articulated, there isn't a road map. There isn't a standard tracker for how the margin evolves. Again, the way we approach it, naturally, if something has biosimilars that are introduced, the expectation especially using some of the proxies that John outlined in his prepared remarks, the expectation should be that those reference prices over time will decline. At what rate and over how many quarters is completely out of our control because a lot of it has to do with pricing strategies by pharma, how competitive, how many biosimilars are introduced, at what pace.
From our perspective, with things going biosimilar from a procurement strategy, as John articulated, it helps de-risk our procurement strategies because you're not beholding to one manufacturer, but you have a multisource procurement strategy that you can pursue. So typically, over time -- and again, if you're looking for a specific time line, we unfortunately don't have one to provide -- you see that revenue per patient event erode, but the percent of that lower revenue that we retain as gross margin, that typically expands from a rate perspective.
Your question is going to be, well, where are the dollars taking out? And we don't have an answer. Sometimes, the dollars are lower, sometimes the dollars are higher. But I think it's important to underscore what John just talked about, which is -- regardless of what the ASPs for therapies do over time, we have a value proposition to providers and to payers where we're providing that service wrap, which still drives efficiency.
So having said that, if a drug is being administered in an HOPD or in an acute care setting, we can articulate that the net cost to the payer is considerably lower in a setting where the patients want to receive it. And so that gives us confidence that even as our portfolio, which, frankly, today, the majority of our dollars of revenue are either comprised of biosimilar or generic drugs today, we'll continue to be able to generate decent margins because of that value proposition.

Joanna Gajuk

I think actually I was asking the opposite as the new therapies like VYJUVEK that you've been ramping up. And the prior discussion was around how initially they compressed the gross margin percentages, but I guess with time, the margins improved. So I was actually asking like where you are in the trajectory of some of these therapies without calling out specifics. And then should we expect this year to kind of have some contribution as these revenues and the gross margin percentage improve on these new therapies? Or is it more like 2025 event?

Mike Shapiro

Yeah, my mistake. I appreciate the clarity, Joanna. Look, we have a very proven track record of commercializing new rare orphan and LDD therapies. Again, these are typically very high cost per patient event because you have very costly new-to-world therapies. The margin rate is typically single digits. And the dollars are still attractive.
We don't launch therapies at a loss. We have internal hurdles that we want to make sure that we're covering. And out of the gate, they're typically lower because we're building that patient cohort in that clinical service model. And over time -- and this is years, not quarters -- you can gradually improve those margins as you build a patient cohort. You can reengage with the manufacturer around advanced services and capabilities and things we can bring to the table clinically. And so you can typically drive those margin rates up into the high single digits and going back to patient one that may still be on service because these are typically lifelong chronic conditions.
That's a way that we can create value over time. I would just say the launch of the more recent ones, I'd say are on track or ahead of track from a revenue basis perspective. And again, I think that's going to be definitely a part of the story going forward.

Joanna Gajuk

Right, exactly. Thank you. And if I may, another follow-up. So we're talking about subcutaneous formulations and you mentioned it all depends, I guess, on the channel and I guess the referral sources, their preference. And if something works for a patient that not necessarily means that they're going to try a different formulation, but I guess the new (inaudible) subcutaneous launched. So any kind of, I guess, early read to how this is impacting your existing patient base, if at all? And kind of what your expectation is for penetration for this particular one?
And then I guess, in particular, what response, I guess, in the market you're seeing from either the insurers or prescribers or even pharmaceutical companies? Are they actively trying to kind of move that drug from the infusion to the subcutaneous?

John Rademacher

Yeah, Joanna. It's John. I'll respond to that. So at this point in time, we haven't seen a significant shift in our patient census of moving towards the subcutaneous. There are -- we've been trying to call out. I mean, there's just -- there's a lot of dimensions in that.
In some instances, the subcutaneous formulation is more expensive. So therefore, the payers aren't necessarily looking to move patients on to that service or on to that product given that it's a higher price on that. So those types of things kind of factor in. At this point in time, our census and our patient base has remained pretty stable. We haven't seen a significant shift of moving from the IV to the subcutaneous. In many instances, though, we will retain that patient on the subcu given that it's part of our formulary for many of these products.
So early to tell on some of that. We're always looking to understand what are the migration trends that we may see on it. But at this point in time, the patient census and the prescribing patterns have remained consistent with our expectations and consistent with the IV therapy as being still front and center within the way that they're prescribing the doses.

Mike Shapiro

I want to add that, Joanna. Look, obviously, so subcu evolution is a great development for certain patients. But frankly, we have not seen where a subcutaneous administration introduction becomes the standard of care quickly. Use the example of immune globulin. Subcu IG has been around for more than a decade, yet 75% of all IG patients still receive their therapies intravenously because it's more efficient. It's better for higher doses. And frankly, some patients prefer it or given clinical circumstances, it still requires and suggest healthcare professional oversight.
So obviously, we get a lot of questions on -- again, for some patients, it's a great development. But we have not seen where the subcu version becomes the standard of care over an abbreviated short time frame.

Joanna Gajuk

And if I may just follow up on the comment around that, in many instances, the patient stays with you because of the former. So if that was to happen, what kind of impact that is to you for -- on the gross margin, I guess, dollars and percentages? So I guess are you still going to bill for that and collect for the cost of the drug? But then maybe there's no nursing component, but still maybe there's per diem. So help us understand like what happens if that was to be happening in terms of these patients still staying with you but switching to the subcu versus infusion.

Mike Shapiro

Yeah. It really depends on the therapy and the payer situation. I think, Joanna, as you know, as we've always tried to outline for folks, typically, when we provide infusion therapy, we bill for the drug, we bill for the nursing. If a nursing is present, then we bill for a clinical per diem, which is a charge per day of therapy to cover all the pharmacy infrastructure and other care model assets that we bring to the table.
Naturally, the economics for subcutaneous therapy is different. It's a higher reference price in most instances, to John's point. There's obviously a spread we're making on that. There's not a nurse present in most cases. So it changes -- it's a different revenue event, but also, that preserves that nursing capacity for other infused patients. So it's just different. We underwrite accordingly as we approach payers. So that's about all the color we can provide on that perspective.

Joanna Gajuk

Great. Thank you. If I may, the last follow-up, sir, on the question around the new suites. Can you give us a sense of how many did you add this quarter and kind of plans for this year? Thank you.

Mike Shapiro

Yeah,, we've added three in the quarter, so I think we're up to around seven new sites in the quarter. And again, we feel very good about the 700 shares that we have coast to coast.

Joanna Gajuk

Great. Thanks.

John Rademacher

Thanks, Joanna.

Operator

Michael Petusky, Barrington Research.

Michael Petusky

Good morning. Mike, understanding that you reaffirmed the cash flow guidance. I'm just curious, has the cadence of the cash flow recovery related to change, does that come in about as you expected? Is it better or worse? I mean, can you just sort of characterize sort of the cadence of what you've seen so far, obviously, being 90 or so days smarter than you were when you've last talked about it?

Mike Shapiro

Yeah, Mike. Look, I mean, relative to where -- I'm feeling a whole lot better than I was 90 days ago. I think candidly -- and hats off to the rev cycle team. I think the pace of recovery and the collaboration with payers to be responsive given the circumstances, I think, it's probably a bit ahead of where we expect it to be. And just really, really pleased with where we exited the quarter from a cap structure perspective.

Michael Petusky

And then on the nursing, I want to make sure, you said 7% for the quarter -- and then -- I'm sorry, you said 3% for the quarter and then you said -- was it 7% for the first half? Is that what the 7 was?

Mike Shapiro

You got it.

Michael Petusky

Okay. And in terms of just -- as you think about that, I guess, initiative longer term, I mean, does 32% -- I mean, what success if you look out three to five years? I mean, can that move to 40%? Can you just talk about what success would look like three or five years out on that piece?

Mike Shapiro

Yes. I think not to give you a non-answer, I think success looks like considerably more than 32%. When we first initiated this, the question was, could this be 30% of all nursing events? And I think we've answered that, obviously.
Look, the way we think about it is we're going to continue to invest and add to our network of infusion suites. The great thing is we have tremendous capacity in the chairs that we've expanded. So we can accommodate significantly more patient events in our existing footprint.
So as we said, entering the year don't equate a slowing pace of opening these with a lack of confidence in the strategy. We just added a considerable amount of capacity, which is already generating significant value for the enterprise, and we think there's a long runway.
So I think success down the road is considerably higher utilization than where we are today. But the great thing is it doesn't have to be 40% to 50% to drop considerable economic value to the enterprise.

Michael Petusky

And then just -- I want to try to dial this in slightly. You sort of commented earlier around chronic and acute. But I'm just curious, did acute therapy revenue grow year over year in the quarter or not? Just to confirm.

Mike Shapiro

Yes, it did.

Michael Petusky

It did? Okay, terrific. Thank you.

John Rademacher

Thanks, Mike.

Mike Shapiro

Thanks, Mike.

Operator

All right. Thank you. I am showing no further questions at this time. I would now like to turn it back to management for closing remarks.

John Rademacher

Yeah. Thank you all for joining us this morning and participating in our call. As we outlined, the second quarter was very productive and our team continued to execute at a very high level even with significant disruptions in the marketplace. We understand the important role that we play in delivering care to our patients and their families, and this remains a light that guides us as we continue to serve more patients in 2024.
Thank you, everyone, for your attendance. Take care and have a great day.

Operator

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