Option Care Health’s Q3 2025 Earnings Call: Stelara Biosimilar Impact, Advanced Practitioner Expansion, and Payer Strategy Contradictions Emerge

Date of Call: October 30, 2025

Financials Results

• Revenue: Revenue grew 12% year-over-year (Q3 momentum; full-year guidance raised)
• EPS: Adjusted EPS $0.45, up 9.8% YOY
• Gross Margin: Gross profit $273.0M, up 6.3% YOY; gross margin rate was negatively impacted by Stelara biosimilars and lower-margin limited-distribution/rare therapies
• Operating Margin: Adjusted EBITDA $119.5M, up 3.4% YOY; Adjusted EBITDA margin 8.3%

Guidance:

• Full-year revenue expected $5.6B to $5.65B (midpoint raised)
• Adjusted EBITDA expected $468M to $473M (midpoint raised)
• Adjusted adjusted EPS expected $1.68 to $1.72 (midpoint raised)
• Free cash flow / cash flow from operations expected > $320M
• Guidance assumes potential tariffs/MFN pricing will not have a material 2025 impact

Business Commentary:

* Revenue and Therapy Growth: - Option Care Health reported revenue growth of 12% for Q3 compared to the previous year, with acute therapies growing at a mid-teens percentage and chronic therapies increasing in the low double digits. - The growth was driven by the shifting competitive landscape, favorable market trends for care transitions to home settings, and enhanced partnerships with payers and pharma manufacturers.

• Impact of Stelara Biosimilars:
• The adoption of Stelara biosimilars negatively impacted revenue by 380 basis points in Q3, with an expected $70 million impact for the full year.

• This was due to biosimilars having lower reference prices and reimbursement rates compared to the branded product.

• Capital Allocation and Investments:

• The company generated $223 million in cash flow from operations year-to-date and refinanced its term loan, reducing borrowing costs and extending maturity.

• Investments were made in expanding the infusion clinic footprint and advanced practitioner model, as well as technology enhancements, aimed at driving operational efficiency and growth opportunities.

• Financial Performance and Guidance:

• Adjusted earnings per share grew by 9.8%, and Option Care Health raised its full-year guidance for revenue, adjusted EBITDA, and adjusted EPS, reflecting confidence in its platform and execution.
• The guidance incorporates potential impacts from policy changes like potential tariffs, most favored nation pricing, and similar policies, which are not expected to materially affect 2025 financials.

Sentiment Analysis:

Overall Tone: Positive

• "delivered another strong quarter"; "revenue growth of 12% over last year"; "we have raised the midpoints of our full year revenue, adjusted EBITDA and adjusted EPS guidance." Management emphasized momentum, platform resilience and raised guidance.

Q&A:

• Question from Pito Chickering (Deutsche Bank AG): 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?
  Response: Uptake has started (continued from Q2 into Q3); gradual biosimilar adoption and Jan 1 price step-downs are expected and are contemplated in 2025 guidance; too early to quantify 2026 impact.

• Question from Pito Chickering (Deutsche Bank AG): As you're moving into the Stelara biosimilars and talking about the gross profit impact, what would be the Stelara year-over-year headwind in the fourth quarter now that you're moving into the biosimilars?
  Response: Stelara headwind for 2025 is expected at the high end of the previously disclosed $60–$70M range (~$70M); that estimate covers Stelara and does not include additional biosimilar conversion variables.

• Question from Joanna Gajuk (BofA Securities): The 380 basis points this quarter—does that imply additional incremental headwind next year as conversion continues?
  Response: Yes—management expects continued headwinds from Stelara conversion and has factored expectations into current guidance.

• Question from Joanna Gajuk (BofA Securities): With biosimilars coming in, is that working the other way on gross-margin percentage or is it too early to talk about?
  Response: Too early to assess gross-margin impact of biosimilars; outcomes vary by each biosimilar product.

• Question from Joanna Gajuk (BofA Securities): Any specific regulatory areas you focus on most and how might high-level changes impact the business?
  Response: Monitoring Washington policy (tariffs/MFN) closely; platform seen as resilient—focus remains on product expansion, payer/pharma partnerships and site-of-care initiatives to mitigate/regulate impacts.

• Question from David MacDonald (Truist Securities): Given competitor exits on the acute side, do you expect ongoing opportunity there and is it affecting pricing or payer conversations?
  Response: Expect continued acute share gains but at a slower pace than this year; leveraging national scale and payer value programs to secure fair reimbursement and preferred positioning.

• Question from David MacDonald (Truist Securities): Can you frame the advanced practitioner model—how many locations now and rollout expectations over 12–24 months?
  Response: 175 infusion facilities today, 24 are advanced-practitioner/infusion-capable; plan measured expansion (existing sites plus greenfield) with pace shaped by local regulations.

• Question from David MacDonald (Truist Securities): Are bed-day management/site-of-care programs driving share gain or aiding pricing/profitability with payers?
  Response: Programs deepen payer and hospital partnerships, help transition patients to lower-cost settings and support value discussions—benefits evident across stakeholders though immediate isolated impact is hard to quantify.

• Question from Matthew Larew (William Blair): G&A is up ~10% TTM—break out core drivers and when would you return to inflation-plus targets absent M&A?
  Response: G&A increase driven by refinancing noise, Intramed acquisition, variable-comp normalization and tech/efficiency investments; expect leverage and cash-flow improvements over time as investments realize benefits.

• Question from Matthew Larew (William Blair): Do you view 2026 as another year where Stelara's impact will require explicit ranges, or can you still track to long-term algorithm?
  Response: Too early to give 2026 guidance; key variables (year-end census, uptake of alternative therapies, biosimilar adoption/products) must be understood—management expects continued growth and will provide clarity when ready.

• Question from Lucas Romanski (TD Cowen) for Charles Rhyee: Should we think the Stelara impact to gross profit is similar to Q2 (a nudge above $20M)?
  Response: Yes—management expects the Stelara impact to be near the upper end (~$70M for 2025), which translates to a little over $20M impact in Q3 and Q4 each.

• Question from Constantine Davides (Citizens JMP Securities): Can you describe the M&A opportunities you're exploring, core vs adjacencies, and how private-market multiples affect capital deployment thinking?
  Response: Pursuing disciplined tuck-ins and near-adjacencies (clinical, pharmacy, technology) to leverage scale; prioritizing assets that accelerate capabilities—no pursuit of transformative deals despite elevated private-market multiples.

• Question from Constantine Davides (Citizens JMP Securities): How do you see the shift to home/ambulatory care playing out and has payer receptivity meaningfully changed?
  Response: Shift to home/ambulatory care should continue; payer receptivity is increasing—Option Care is seeing more engagement on site-of-care and bed-day programs as payers seek partners to reduce total cost of care.

• Question from Brian Tanquilut (Jefferies): Can you encourage greater biosimilar utilization and is there a scenario where Stelara economics force exit from the therapy?
  Response: Pharmacists engage prescribers and payers on product selection; Stelara remains economically viable and part of the portfolio—management will support appropriate therapy selection rather than exit currently.

• Question from Brian Tanquilut (Jefferies): How are you weighing buybacks versus M&A given free cash flow and transaction multiples?
  Response: Capital allocation priority is: 1) internal/organic investments, 2) strategic tuck-in M&A, 3) share buybacks—preference to deploy capital where it accelerates growth and returns.

• Question from Michael Petusky (Barrington Research): Would it make sense to be more granular on revenue/patient census to show longer-term exposure to Stelara?
  Response: Balance transparency with competitive concerns; Stelara's share is shrinking and no single product exceeds ~5% of revenue, so extreme granularity on Stelara is less critical going forward.

• Question from Michael Petusky (Barrington Research): Which adjacent markets are most interesting?
  Response: Interested in adjacencies that enhance manufacturer services, nursing agencies, pharmacy density and complementary operating models—focus on tuck-ins that accelerate capabilities rather than transformative acquisitions.

Contradiction Point 1

Stelara Economic Impact and Guidance

It involves the financial impact and guidance related to the Stelara biosimilar, which directly impacts company revenue and investor expectations.

Are there expected additional headwinds as the Stelara transition progresses into 2026? - Joanna Gajuk (BofA Securities, Research Division)

2025Q3: The headwinds from the Stelara transition are expected to continue, reflected in the guidance. The company is prepared to manage these impacts and continues to expect growth despite the headwinds. - John Rademacher(CEO)

How will the seasonal impact of STELARA resets affect annual guidance? - Pito Chickering (Deutsche Bank AG, Research Division)

2025Q1: The STELARA economic reset impact is expected to be $60 million to $70 million for the year, with about half realized in the first quarter. - Mike Shapiro(CFO)

Contradiction Point 2

Advanced Practitioner Model Expansion

It involves changes in the company's strategic expansion plans for the advanced practitioner model, which impacts operational growth and capacity planning.

How many locations are currently in the advanced practitioner model, and what is the expected rollout over the next 12-24 months? - David MacDonald (Truist Securities, Inc., Research Division)

2025Q3: Expanding the model to leverage our infrastructure, considering greenfield expansions. - John Rademacher(CEO, President & Director)

Can you elaborate on the advanced practitioner model and how it enables you to service patients in your portfolio, particularly in relation to reimbursement? - Constantine Kyriakos Davides (Citizens JMP Securities, LLC, Research Division)

2025Q2: We don't have broad access for Medicare fee-for-service beneficiaries, allowing us to expand our portfolio to serve patients utilizing the advanced practitioner model. - John C. Rademacher(CEO, President & Director)

Contradiction Point 3

Payer Conversations and Site of Care Initiatives

It involves changes in the company's strategic positioning and messaging regarding payer conversations and site of care initiatives, which directly impact operational and financial forecasts.

Can you discuss recent conversations with payers? - David Samuel MacDonald (Truist Securities, Inc., Research Division)

2025Q3: Very productive conversations. Heightened interest in utilizing our services, offering high-quality care at an appropriate cost in a setting in which patients want to receive it. - John Rademacher(CEO, President & Director)

Can you discuss payer conversations? - David Samuel MacDonald (Truist Securities, Inc., Research Division)

2025Q2: Heightened interest in utilizing our services, offering high-quality care at an appropriate cost in a setting in which patients want to receive it. - John C. Rademacher(CEO, President & Director)

Contradiction Point 4

Stelara Biosimilar Impact on Revenue and Gross Profit

It involves the financial impact of the Stelara biosimilar on revenue and gross profit, which are crucial aspects for investors.

What is the projected year-over-year headwind for Stelara in Q4 with the introduction of biosimilars? - Pito Chickering (Deutsche Bank AG, Research Division)

2025Q3: The Stelara headwind is already accounted for in the original guidance of $60 million to $70 million, which does not include the biosimilar conversion rates. - John Rademacher(CEO)

What is the impact of STELARA biosimilars on guidance, and do they accrue to your guidance? - Pito Chickering (Deutsche Bank)

2024Q4: The STELARA impact assumes changes in procurement dynamics but does not expect material impact from biosimilars this year. - Michael Shapiro(CFO)

Contradiction Point 5

G&A Growth and Inflation Plus Growth Target

It concerns the company's approach to managing general and administrative expenses and aligning them with long-term growth targets.

What are current core G&A levels and when do you expect to return to the long-term target (inflation plus growth)? - Matthew Larew (William Blair & Company L.L.C., Research Division)

2025Q3: G&A growth includes the Impact of debt refinancing, the Intramed acquisition, and investments in operational efficiency. The company is generating strong cash flow, which benefits the balance sheet and is focused on profitable growth opportunities. - Meenal Sethna(CFO)

How does adjusted EPS in guidance align with long-term growth, and are there other headwinds in '25 or '26 besides STELARA dynamics? - Matthew Larew (William Blair)

2024Q4: We expect adjusted EPS to grow faster than adjusted EBITDA due to share repurchase efforts. - Michael Shapiro(CFO)