Lisa Wilson – Investor Relations, In-Site Communications Richard Friedman – Chairman and Chief Executive Officer Stanley Rosenbaum – Executive Vice President and Chief Financial Officer Rick Smith – President and Chief Operating Officer

Brooks O'Neil – Dougherty & Company Mark Arnold – Piper Jaffray Mike Petusky – Noble Research

Ladies and gentlemen, thank you very much for standing by and welcome to the BioScrip, Incorporated third quarter earnings results conference call. (Operator Instructions). It's now my pleasure to turn the conference over to Lisa Wilson of BioScrip, Incorporated.

Thank you for joining us today. By now you should have received a copy of our earnings press release issued this morning. If you have not, you may access it through the Investor Relations section at our website. Richard Friedman, chairman and chief executive officer, Rick Smith, president and chief operating officer, and Stanley Rosenbaum, executive vice president and chief financial officer, will host this morning's call. The call is expected to last about 45 minutes and may be accessed through our website at bioscrip.com. Before we get started, I'd like to remind everyone that any statements made on the conference call today or in our press release that express a belief, expectation or intent, as well as those that are historical fact, are considered forward-looking statements and are protected under the state's Safe Harbor of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to BioScrip today and we assume no obligation to update these statements as circumstances change. These forward-looking statements may involve a number or risks and uncertainties which may cause the company's results to differ materially from such statements, including the impact of the AWP class action settlement. These risks and uncertainties include factors detailed in our SEC periodic filings including our most recent annual report Form 10-K and our 2009 quarter results on Forms 10-Q. Also the company urges caution in considering any current trends or guidance that may be discussed on this conference call. The pharmacy services industry is highly competitive and trends and guidance are subject to various numerous factors, risks and influences, which are described in the company's periodic reports filed with the SEC. In addition, the impact of current national and global economic conditions on our business may be difficult to predict. The company disclaims any obligation to update information on trends and targets other than its periodic filings with the SEC. In addition, as required by SEC Regulation G, reconciliation of non-GAAP financial measures mentioned during our call today to the most comparable GAAP financial measures can be found in Schedule C of today's press release. That schedule is available on our website under the link to news found in the About Us section of our home page at bioscrip.com. Thank you, and now I'd like to turn the call over to Rich Friedman.

We are pleased with our operating performance and financial results. Our strategy remains the same. The message is consistent. The management of the chronically ill consisting of adherence, compliance, and retention is the cornerstone of BioScrip and the key to our strategy. Our focus is to deliver the full continuum of care through the clinical management of infusion, injectable and oral technologies. We continue to focus on improving this system by which patient care is delivered. We aim to control costs and improve quality of life for our patients through education and support. This approach also provides us a cost-effective and customized management solution for payers and physicians, while providing critical medical data for manufacturers and other health care constituents. Our strategy is providing us with a competitive edge in the marketplace. The results we have achieved this year validate the value of our high-touch clinical model. Our strategy is working. We are delivering higher margins, higher profits and more importantly, increased value to our customers and shareholders. Stan will now review the third quarter financials in more detail, and then Rick will review our third quarter operating performance.

Today we announced third quarter net income of $5.7 million, or $0.14 per share on revenues of $333.5 million. These results compare to net income of $1.4 million or $0.04 a share on revenues of $359.4 million for the comparable period in 2008. EBITDAO was $8.9 million compared with $5.3 million for the same period a year ago. Let me share some of the highlights of the third quarter. Excluding cap in the UHG, HIV and organ transplant programs, revenues increased 7.9% over the comparable period of last year. This increase occurred across all of our business lines. Gross profit for the third quarter of 2009 was $41.5 million or 12.4% compared to $36.1 million or 10% for the third quarter of 2008. The increase in gross margin in the third quarter of 2009 was the result of improved product mix, the elimination of lower margin business and improved supply chain programs. Included in the third quarter results is a $1.2 million annual rebate related to these programs. Operating profit was $6.7 million with 2% of revenues as compared to $2.8 million or 0.8% in the comparable 2008 period. EBITDAO in the third quarter was $8.9 million compared to $5.3 million for the third quarter of 2008. Our interest expense continues to decline due to lower average borrowings. For the nine months ended September 30th, we reported net income of $13.4 million or $0.34 per share on revenues of $988 million. These results compared to net income of $2.6 million or $0.07 per share on revenues of $1.04 billion for 2008. Again, without CAP and United, our sales would have been 7.4%. Our recorded gross margin increased to 11.7%. The increasing gross margin for the nine months was the result of improved product mix, the elimination of lower margin business and improved purchasing activities. Operating profit for the nine months ended September 30th were $16.1 million compared to $6.4 million last year. EBITDAO was $22.1 million for the nine-month period compared to last year's reported EBITDAO of $13.9 million. Our effective tax rate for the quarter and nine-month period was 7.5% and 8.5% respectively as a result of the expected utilization of net operating losses which were previously reserved and the reduction of our amortization of the definite-lived assets commonly referred to as a naked credit. In determining our 2009 tax rate, we suggest you use 6% state income tax provision in addition to the annual $800,000 amortization of our naked credit. At September 30th, our borrowings under our credit facility were approximately $39.6 million. This represents an improvement of $11 million for December 31st, 2008. Our average outstanding debt in the quarter rose slightly to $29.3 million. This increase in average outstanding debt is due to lower accounts payable and higher average inventory, partially offset by our improving operating performance. We continue to remain focused on strengthening our balance sheet and improving our liquidity. As many of you are aware, the AWP class action settlement was effective on September 26th of this year. We expect this to impact our Medicaid business by approximately $5 million annually. We expect that the impact of the AWP settlement will be more than offset by continued organic growth, higher margin in business and normal drug inflation. Our system implementation continues to progress. We now have 15 stores operating on our new platform and plan to add six more before year end. We expect all stores as well as our mail operations to be operational by the end of the second quarter of 2010. I will now turn the call over to Rick.

As we have previously stated 2009 is focused on generating a higher quality of revenue and operating income for our business. This objective will be met by successfully positioning our company for expansion of our national reach and local presence. We've established an aggressive agenda this year and we are making good progress in our priorities and toward achieving our goals. Since Q2 we've specifically have realized organic specialty growth of 8% on a same store year-over-year basis. Organic specialty growth of 3% from Q2 to Q3 of this year, double digit growth in several therapeutic categories year-over-year in iron overload, MS, oncology and infusion therapies. In Q2 to Q3 organic growth was 22% in our West Coast infusion business reflecting pull through from our United Health Care and other managed care agreements. During the quarter we have increased our sales force from 15 to 24. Most of these recruits were added in Q3. We also added four new infusion sales reps in October and expect some revenue contribution in Q4 from these new investments. We will seek to leverage these resources to increase our local market pull through and market share position to drive revenue across many therapeutic lines. We also continue to add experienced management talent to assist in the sales and operations area. We added [Michael Sirocco] as Senior Vice President of Specialty Services and [Jim Malonson] as Vice President of Managed Care. Together, these gentleman have over 30 years of expertise and experience in specialty, pharma and managed care. We have also added several operational and clinical resources to support our specialty mail operations and the evolution of care management programs. We are working diligently on our plan to be the industries clinical leader with the focus on establishing our centers of excellence model and multiple therapeutic categories including infusion, oral and injectable technologies. With that I'll turn the call over to the operator to open up the lines for questions.

(Operations Instructions). Our first question comes from the line of Brooks O'Neil – Dougherty & Company. Brooks O'Neil – Dougherty & Company: So I have a few questions. I'm curious if you would be willing to comment on whether you think the margin trends we've seen in the past few quarters are sustainable going forward?

Brooks, as we've said on the last call we are anticipating our gross margins to normalize in between 10.5 – excuse me, 11.5% and 12%. And we expect that to continue as we go forward. Brooks O'Neil – Dougherty & Company: How about the operating margin, Stan?

We have also said, Brooks, that our goal is to get to 3% and that continues to be our goal. Brooks O'Neil – Dougherty & Company: Could you comment just briefly on what specifically drove the increase in bad debt expense and do you feel like a higher percentage relative to revenues going forward is appropriate at this time?

I've always said on our calls, Brooks, that our bad debt expense would normalize between 0.5% and 0.6% it's slightly higher than that this quarter but I still think that it would be between 0.5% and 0.6%. Probably closer to the 0.6% as we do more and more business in the medical side as opposed to the pharmaceutical side. Brooks O'Neil – Dougherty & Company: And are you feeling at this time any significant pressures from the state budget woes that are so frequently reported in the press or in the impact from the slowing consumer economy?

Brooks, we continue to get payments from the states not as quickly as they have been in the past but they continue to come. Brooks O'Neil – Dougherty & Company: So they haven't cut reimbursement in any way? They're just being slow at this time?

Other than the changes in AWP there have been no other changes. Brooks O'Neil – Dougherty & Company: And then one last question, I'm hopeful that perhaps Rick could talk a little bit about the efforts you've made recently to increase your infusion capacity and what you might do going forward to take advantage of that and build further?

I think we've, as we've talked previously, we are in 23 markets today with owned and managed infusion capabilities. We continue to work our plan and moves and expand our existing community stores to add the infusion capacity to that especially in the United markets with high numbers of members. We are not currently scheduled to open up any infusion capacity between now and the end of the year, but we are scheduled to try to accelerate the pull through out of the existing resource that we've had. We've added the infusion sales reps during this quarter in the markets where we have existing locations to expand our opportunities for infusion growth in the heavily concentrated market.

Our next question comes from the line of Mark Arnold – Piper Jaffray. Mark Arnold – Piper Jaffray: I was hoping, Stan, you could clarify something you said in your prepared remarks and just comment further on it. The $1.2 million annual rebate from the programs, can you just restate that and what that's from?

It's part of our overall supply change management programs. It's based on achieving a certain level of volume in terms of our purchasing and supplied programs. It is something that we have incorporated and went effective this year and we achieved it in the third quarter. And we expect that just due to the timing of the anniversary of our agreement that it will occur each year but most specifically in the third quarter over the next couple of years. Mark Arnold – Piper Jaffray: So there is a lumpiness to that. If you exclude them, and I could actually do this calculation myself, but if you exclude that $1.2 million I assume that coming off the cost of sales line? So what would the gross margin have been without that? Is that the right way to look at kind of the normalized margin in the quarter?

No, not really, because I think what you need to do is annualize that. If it wasn't all in the quarter it would have been in every quarter so you've got to take the differential. So if you would have annualized it would have been $300,000 per quarter. So I think the best way to it is maybe at 10 basis point in Q2 and take out 30 basis in Q 3 if you want to get an apples-to-apples comparison. So Q2 would have been closer to 11.8 and Q 3 closer to 12.1. Mark Arnold – Piper Jaffray: Then I wanted to, I guess Brooks asked a few of these questions, but can you talk about revenue mix in the quarter? Are you walking away from some business that you've historically fulfilled because of low margins?

We are still bringing those – that business in. We think there is therapeutic category that have a high net revenue per patient are needed in terms of our clinical services in our programs, so they still fit into what our strategy is as we go to market. But we are also looking to take advantage of the same call points, the same physicians specialists as well as the hospital call points that we have to identify those areas where we can bring all of our clinical expertise, the pharmacy, the nursing and the long-term care management to these patient populations wherein it has a higher margin opportunity for us. And so we look at our businesses based on clinical difficult, execution and level of opportunity for us given all of the technology that we can deliver. Mark Arnold – Piper Jaffray: Is it fair to assume that the new revenue growth that you achieve going forward that you expect the gross margins on that new business to be comparable to what it appears the gross margins were on the growth that occurred here in Q3?

Our goal is to continue to inch up, I think, to maintain the mix and take advantage of the opportunities. I think that you see the oral oncology business continues to grow strong for us double digits. That we don't anticipate will be going away so that will continue to be a strong part of our business, but we also have the opportunity to identify other mix opportunities that we can manage through all of our locations and our markets to try to continue to inch that gross margin up in the next several quarters and over the next year. Mark Arnold – Piper Jaffray: And then jumping to the average wholesale price, the AWP issues, you said you expect a $5 million impact from that change. So that's an impact to revenues. How should we think about that, the impact to gross margins from that change?

It's going to have some pressure, dollar-for-dollar on the gross margin side but we believe that as we manage our mix, as we continue to grow our revenue, we should be able to mitigate that through other payer relationships and the pull through activities that we have underway.

And Mark we're basically looking. We said it's around $5 million, which is about 1.25 per quarter so you've got to look at that as effectively 40 basis points off of the current revenue. Mark Arnold – Piper Jaffray: Okay, just so I understand when you guys go through that, that's your own internal analysis of your exposure to states that have just rolled forward with that change without adjusting their formulas? Or is that kind of a broader assumption on your entire Medicaid business?

We did a specific analysis as to each payer source and that is our expected impact. Mark Arnold – Piper Jaffray: Is there – maybe just one more question on this – any thoughts on the lawsuits pending in some of those states, in particular some of the larger states for you guys and kind of how you expect the next year to kind of play out from that perspective?

I think we hope industry wins. But I think we clearly have not baked it into our forecast. We essentially have what we believe where the current environment is and if it does change positively then we'll see the benefits of that. Mark Arnold – Piper Jaffray: I just have one last question and, Rick, you answered this to some extent previously, but can you give us a sense of any kind of the roadmap that you have over the next 12 months regarding kind of important steps to expanding the infusion strategy?

The thing is we have added the sales talent. We have invested in that. We are going to next move towards adding clinical liaisons in marketplaces to get a stronger in-hospital presence. We are going to aggressively look to reposition our community stores to add the infusion capability and we have begun that process in several of our markets. And so we believe we have the leverage of our platform to keep going forward. We also will look at the opportunities to maybe tuck in some smaller acquisitions that are of strategic importance to us in certain markets. We have put in place and will continue to add management with infusion and specialty experience. We are going to aggressively start to pull from our histories those clinicians and salespeople that have a track record in successful infusion execution and sales. And we'll continue to focus on those relationships that we know of and clinical programs that we also know will win in the market as we have seen before. So we're going to start bringing in those that have the relationship, the expertise and start strategically looking at those markets where there's high concentration of managed care lives for us to accelerate our pull through opportunities. Mark Arnold – Piper Jaffray: Just one follow-up to that, when you are repositioning the stores, adding the capabilities, what is the process there in terms of – I mean your initial step is probably being able to compound the drugs, but what are the kind of in order kind of steps that you'd add in terms of services that you'd add in a store that you are repositioning.?

We would add clearly an infusion-trained pharmacist to complement the existing staff. We need an additional 300 square feet to build out the clean room. We would also anticipate putting in some inventory treatment chairs as part of the reformatted design and then it is really open book. We can handle all therapies today. Our clinical services organization has the ability to get our people up to speed quickly. We have 2,500 nurses nationally already either per diem or through a contracted relationship to where we already have the opportunity to bring patients home on service. And so I think we've spent the last six months really preparing ourselves for a pretty aggressive launch into 2010.

Our next question comes from the line of Mike Petusky – Noble Research. Mike Petusky – Noble Research: Stan, I didn't – if you mentioned it I didn't catch it – but did you break out the revenues between specialty and PBM?

We have not, but I could. Our specialty was $279 million and our traditional services was $54.5 million. Mike Petusky – Noble Research: And in terms of the transition you've got 15 stores operating on the new system, six more before year end and then the balance into 2010. Can you just talk about how that's going, has customer service been maintained? Any issues there or are you just kind of taking your time in making sure you do this thing right?

There's been no impact on some of the transition. We have increased our training staff so we've got some temporary help in our SG&A that is reflected in this quarter and so we are essentially taking the steps necessary to bring it online. We also had mentioned that we had taken additional time to invest in the partner collaboration capabilities of the system itself. So we are identifying those that we can continue to tuck in and convert. And those next that we identify will enable us to continue to do the same on a successful basis. So we're just looking at the year end and other activities we have going on just to ensure that we continue to move forward with the conversions but at the same time don't necessarily rush it into the year end as we've got other priorities. Mike Petusky – Noble Research: Then jumping back to the AWP, in terms of the $5 million impact, when you guys are speaking to that is that $5 million is that after any mitigation efforts or are there things that you can do? Can you go to the pharmaceutical companies and try to get some help there? Can you adjust pharmacy hours or pharmacy services? I mean is the $5 million kind of after anything you might do to mitigate or is the $5 million kind of --

This is essentially the raw number. It doesn't reflect anything that we believe can be done to mitigate. We put it out there. That's the effect. We believe that we can mitigate it, too, as Stan mentioned in his script, revenue growth, targeting the higher margin therapies that requires less patients to essentially cover that as well as next year we expect a level of some drug inflation across our entire book of business that should help to mitigate that as well. Mike Petusky – Noble Research: But you don't have plans to, say, walk away from some state Medicaid business or adjust pharmacy hours or adjust services that you'll provide to those particular –

No, we look at our business and the pricing and revenue and margins in all of our businesses and we determine what is adequate to continue to service. And so what we take in the price cut but I think we still identify those as patients that we want to continue to serve. Mike Petusky – Noble Research: Maybe this one's for Rich, but I guess anybody who wants to weigh in – Allion Healthcare, one of your publicly traded competitors and one that is probably most compared to you guys is being acquired by a private equity group. I was just wondering if you guys have any thoughts on that, if that presents any opportunities competitively or thoughts on the valuation or for anything else in terms of that deal?

Mike, we really don't comment on it. As you know this industry has been under consolidation for a long time and I'm sure they did what they felt was best for all their shareholders. Mike Petusky – Noble Research: Let me ask you one other open-ended question – health care reform. Do you want to speak to that in terms of either opportunities or risks that you see for BioScrip going forward?

As you know, and we've spoken about this quite often, we're pretty excited about health care reform. We have lobbied Congress strongly with our people. We believe that the language that is currently the Senate Finance Committee's mark has the opportunity to benefit BioScrip. It talks about continuum of care in Title 3, Improving the Quality of Health. So we're pretty excited. I still have to get through the House side. I think it's under 3,200 but I think what's going on today is there's a real recognition, whether it's re-hospitalizations, whether it's doing a better job of education and control of patients, fits exactly what BioScrip has been doing. When you talk about access and care and education and quality, it's what we've been trying to do for years now and I'm very happy that at least Congress has identified those areas that can improve the quality of life but at the same time help reduce costs. So I think hopefully there are certain sections of the bill that will be passed. We believe that this is a cost reduction, not a cost-additive and has the support of the various members so we're pretty excited about this end of it.

(Operator Instructions). We now have a follow-up from Mr. Brooks O'Neil – Dougherty & Company. Brooks O'Neil – Dougherty & Company: I was just curious in light of the significant number of people that you guys have talked about adding in the relatively recent past, how are you thinking about SG&A trends going forward specifically? I guess we should probably model the addition of some SG&A dollars in the fourth quarter and into 2010, is that right?

Not a material amount, Brooks, from where we are. I think there's ins and outs of SG&A all the time in different investments. I think we've added the sales investment but on a relative basis it's not material. We also have some variable costs that are unpredictable in terms of related to our traditional pharmacy services line which is the mail side. And so I think that that variability has already occurred in terms of costs. And so those will come at ebb and flow so I don't think there will be a material change. I think Q3 could be the run rate that you could work with on that. Brooks O'Neil – Dougherty & Company: Great, that's fantastic. Any update on the implementation of the IT systems?

I think we've talked about it. We increased the number of installed from 12 to 15 during the quarter and expect to get another six in before year end. But we're still on track to get everything in by the end of Q1 next year – Q2. Brooks O'Neil – Dougherty & Company: And then lastly I'm just curious, Stan, as you think about capital needs clearly you've been doing a great job of using cash flow to repay debt. How do you feel about your financial situation as it relates to paying for some of the initiatives you have planned and underway going forward?

We feel we have an adequate line and our cash flow generation's more than adequate to cover all of our investment needs.

Thank you Mr. O'Neil and Mr. Friedman, now, I'm going to turn the conference back to you for your closing remarks. Thank you.

Thank you all for joining us today. Again we were pleased with our operating performance. We look forward to getting back together in three months from now. Thank you very much.

Thank you, Mr. Friedman. Ladies and gentlemen that does end the conference call for today. We thank you all for your participation and I ask that you please disconnect. Thank you once again. Have a great weekend.