: Stanley Rosenbaum - EVP and CFO Rick Smith - President and COO

Mark Arnold - Piper Jaffray Kyle Smith - Jefferies & Company Brooks O'Neil - Dougherty & Company Mike Petusky - Noble Research Brian Tanquilut

Ladies and gentlemen, thank you for standing by. Welcome to the BioScrip, Inc. 2010 second quarter conference call. (Operator Instructions). As a reminder, this conference is being recorded today, Friday, July 30, 2010. I would now like to turn the conference over to Mr. Bill Bunting. Please go ahead, sir.

Good morning and thank you for joining us today. By now you should have received a copy of our press release issued this morning. If you have not, you may access it through the Investor Relations section at our website. Rich Friedman, Chairman and Chief Executive Officer; Stanley Rosenbaum, Executive Vice President and Chief Financial Officer; and Rick Smith, President and Chief Operating 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. A replay of the conference call will be available shortly after the call. Interested parties can access the replay by dialing 800-633-8284 in the United States or 402-977-9140 internationally and enter the access code 21476669. 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 expressed a belief, expectation, anticipation or intent as well as those that are historical facts, are considered forward-looking statements and are protected under the Safe Harbor of the Private Securities Litigation and Reform Act. These forward-looking statements are based on information available to BioScrip today and the company assumes no obligation to update these statements as circumstances change. These forward-looking statements may involve a number of risks and uncertainties which may cause the company's results to differ materially from such statements. Forward looking statements are qualified by inherent risk and uncertainties surrounding future expectations generally and may differ materially from the actual future experience. Risks and uncertainties that could affect forward-looking statements including the failure to realize synergies as a result of operational efficiencies or revenue opportunities, and the risks that are described from time to time in BioScrip's reports filed with the SEC, including BioScrip's annual report on Form 10-K for the year ended December 31, 2009. Also the company urges caution in considering any trends and guidance that maybe disclosed and discussed on the conference call. The pharmacy services, home infusion, home health industries are competitive and trends and guidance are subject to various factors, risks and influences, which are described in the company's periodic reports filed with the SEC. In addition, as required by Regulation G, reconciliation of non-GAAP financial measures mentioned during our call today most comparable to GAAP financial measures can be found in Schedule 5 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. Rich.

Thank you, Bill and good morning and thank you for joining today's call. We are extremely pleased with the accomplishments this quarter especially the seamless integration of CHS, a transformative event for BioScrip. This brings BioScrip to a whole new level in our market. Today, we reported for the second quarter revenues of $412 million, EBITDA of $18.4 million, net income of $3.1 million or $0.06 cent per diluted share and on an adjusted basis $0.07 cents per diluted share. Second quarter results is the first full quarter inclusive of CHS acquired on March 25th. As such, it represents an important milestone for BioScrip. We now have over 120 points of service and 1,000 plus managed care relationships, direct contact with over 100,000 prescribing physicians and a patient census of over 125,000. Our clinical expertise combined with our expanding infrastructure consisting of community and infusion pharmacies, now order and nursing capabilities provide us with a comprehensive package of services for the healthcare community. We are seeing the tangible results of our vision, consisting of margin and geographic expansion and to be one of the leading national pharmacy and Infusion Home/Health services organization. Our model is to dispense specialty pharmaceuticals, administer IV therapies, provide comprehensive nursing services and offer clinical solutions that deliver optimal outcomes for our key constituents. Patients, physicians, payers and pharmaceutical partners. Optical outcomes are achieved through the management of the chronically ill, focusing on education and relationships then improve compliance, adherence and retention. I want to share a few of my observations regarding BioScrip, the CHS acquisition and integration efforts. The acquisition of CHS is meeting all of our financial expectations including access to higher margin therapies as well as providing us higher margin therapies as well as providing us addition clinical expertise. Again, I am extremely pleased with the improvement and consolidated results in the second quarter. We have achieved our internal targeted goals. We are on track and on schedule to realize the full potential that the combined CHS BioScrip organization brings to the market. Momentum is building across all our businesses. As an example, we have seen increased new patient census, in the targeted therapies. The combined organization shares a consistent work effort in business philosophy and commitment to patient care. Our focus is on profitability. We are targeting those therapies that can generate the greatest profitability to the bottom-line per patient. Rick will provide more detail regarding our plans for continued profit generation, in targeted therapies and in new relationships developed with manufacturers. BioScrip is well established, reputable and focused on delivering programs to meet the pharmacy service needs of the manufactures, providers, pairs and patients. One of the key services that BioScrip provides which resulted in us securing a new and exciting manufacturing agreement, is the multiple delivery options for patients, including open-eye delivery, home delivery and fusion home healthcare and retail pharmacies nationally in major metropolitan areas. We believe, offering various methods of distribution can significantly increase patient compliance and ultimately provide an important additional tool to help improve the treatment outcome. BioScrip has significant resources, deep capabilities and a strong commitment to our patients and to healthcare community we serve. One more note before I the call over to Rick, there have been some questions from analysts and our investors, regarding the recent senate finance committee and SEC inquiries into the billing practices of certain home healthcare companies. Since the acquisition of CHS, we continue to review our billing practices and believe that they are appropriate. With that, I would like to turn the call over to Rick, for his comments regarding our operations and outlook. Rich?

Thanks Richard. Good morning, this is our first full quarter with CHS as part of out strategic platform. We have been working hard as a team to integrate the two companies into one that is focused on clinical leadership, hired quality revenue generation and increasing levels of earnings and cash flow performance. We move quickly do eliminate the duplicate cost and the combined organization. We achieved our objective on time and cost reductions are ahead of plan. Originally, we estimated total synergies of $7.3 million. Now we believe we will deliver $8.5 million on an annualized basis, the full impact will be realized in 2011. We stated that this acquisition was a revenue synergy opportunity for BioScrip. As such, we launched a company wide sales initiative to the combined sales force in Q2 to bring everyone into a singular focus of targeted revenue growth and sales momentum. We saw a significant positive impact in this quarter of combined sales direction and performance. In fact, we experienced double-digit growth in new patient census; in the Home Infusion Therapies and our Infusion/Home Health segment achieve record performance in generating strong organic revenue growth and EBITDA contribution. The sales and operations team in Infusion are creating a strong, cohesive environment that bodes well for continued success. The strategic coordination between BioScrip Infusion and CHS locations, clinical services, nursing and management has become fully integrated. The strategic investments we made in our pharmacy services sales force contributed approximately $2 million more of operating income sequentially over the first quarter from new patient census. These results reflect double-digit growth in the targeted therapies. We expect the contributions from our sales organization to continue to increase. Our targeted therapies are those that we believe will yield the greatest profitability to BioScrip, namely the traditional infusion therapies. On our last call, we mentioned that our March and April net revenue per day returned to expected levels. Since April, we increased net revenue per day by approximately $300,000. We expect net revenue per day to continue to increase from organic sources, new managed care contracts, existing managed care contracts and contribution from the business acquired later today from drugstore.com. More importantly, profitability per patient is increasing. During June, we were able to add off 35 CHS locations on to the United HealthCare national infusion agreement which we will expect to continue to contribute to the ongoing increase in net revenue per day. With this robust platform we believe BioScrip has a significant opportunity to further its managed care relationships on a national basis. Recently we added experienced resources to pursue these opportunities. We plan to invest in our regional managed care professionals to provide the focused effort on the strategic pull-through activities from our 1000 plus managed care relationships. We believe these relationships will provide us a significant area of future organic growth. We now have the strongest pipeline of perspective news account than ever before. We have secured a number of regional contracts that will start at various times in the second half of this year. As part of CHS acquisition, we were able to add to the clinical strength of the company through its very successful clinical programs and experienced clinicians. To support our geographic and margin expansion, we are taking those clinical programs to the rest of the BioScrip platform and adding infusion capabilities to select community pharmacies. We will market to new and existing pharmacy patients and referral sources. Strategically, we want to be the leading provider in the local markets we serve. Each of our locations will be a center of excellence based upon industry-accepted standards and our own stringent internal criteria in clinically managing chronic and acute patients and specialty and fusion and maintenance medication. We complement pharmacy management with our high tech nursing services. We are able to offer expertise in infusion injectable, in oral technologies and home/house nursing to ensure right drug and service for the patients. Our capabilities make us a reliable partner to the physicians we work with and innovative solutions provided to the managed care relationships we support both locally and nationally and a clinical expert in all technologies to drug manufactures that bring new drug to market. We are focused on building this platform to its maximum potential and transforming the competitive position of our company to be the industry's clinical leader and the most innovative solutions provider. We are focused on changing the delivery of healthcare services in the alternate site and homecare setting. All of our efforts are aimed to capitalizing and [transforming] home/healthcare and specialty pharmacy. I will now turn the call over to Stan.

Thanks Rick and good morning. Today, we reported second quarter net income of $3.1 million or $0.06 cents per diluted share and revenues of $412 million. BioScrip also reported gross margins of 17.8% and consolidated adjusted EBITDA of $18.4 million. Beginning with this quarter, our reporting segments will consist of pharmacy services and Infusion/Home Health services. Also to provide greater transparencies to these segments, corporate overhead has been recorded at the separate line item. The Infusion Home/Health segment consists of BioScrip's infusion business combined with CHS's infusion and nursing businesses. Our Infusion Home/Health segment provide a dispensing and administrating of fusion-based drugs and typically require additional medical supervision and equipment to administer the correct dosage as well as tracking and improving patient outcomes. It also contains homecare nursing services such as rehabilitation as well as physical and occupational therapies. The pharmacy services segment consists of the more generalized pharmacy services mainly the dispensing of drugs to the company's central mail pharmacy operations, community pharmacies and the offering of prescription discount programs. Our segment report includes revenues, adjusted EBITDA, capital expenditures, depreciation expense, total assets and goodwill. We believe this reporting provides a better indication of the individual segment operating performance. Schedule four of this morning's press release contains this information. Again, revenues in the second quarter of 2010 totaled $412 million compared to $328.7 million from the second quarter of 2009. Our pharmacy services segment revenues were $305.4 million in the second quarter of 2010 compared to $292.3 million in the prior year period. Infusion Home/Health services generated $106.7 million of revenue during the second quarter of 2010 compared to $36.4 million in the same period last year. BioScrip's consolidated gross profits in the second quarter of 2010 was $73.5 million or 17.8% compared to $35.7 million or 11.7% in the same period of 2009. The increase is primarily the result of the acquisition of CHS and the focus on targeted therapies. For the second quarter, the combined segments generated $26.3 million in operating segment EBITDA compared to $14 million from the prior year period. After corporate expense, adjusted EBITDA was $18.4 million compared to $7 million for the prior year period. Increase in our consolidated adjusted EBITDA was primarily related to the acquisition of CHS. Net income for the 2010 second quarter totaled $3.1 million or $0.06 per diluted share compared to $4.4 million or $0.11 per diluted share in the second quarter of 2009. In 2009, our effective tax rate was 7.9%. Adjusting for one-time transaction related expenses in 2010, and assuming a tax rate of 41% during the second quarter of 2009. Earnings per share would have been $0.07 in both periods. As I noted, pharmacy services revenues were $305.4 million, in the second quarter of 2010, an increase in $13 million or 4.4% in the second quarter of 2009. The increase is primarily related to organic sales growth, combined with normalized drug inflation. This increase more than offset the impact of the industry's AWP class action settlement and price concession discussed in prior quarters. On Infusion/Home Health Services revenue in the second quarter of 2010 was $106.7 million, an increase of $70.3 million compared to the same period in 2009. Of this increase, CHS revenue contributed $63.5 million. Without seeing adjust our Infusion/Home Health Services revenues grew organic at 19%. We reported pharmacy services segment EBITDA of $12.5 million in the second quarter of 2010 compared to $11.3 million in the prior period. The Infusion/Home Health segment EBITDA was $12.8 million in the second quarter, compared to $2.7 million in the second quarter last year. SG&A expenses in the second quarter of 2010 were $55.7 million, compared to $31.6 million from the same period in 2009. The increase is primarily due to the consolidation of CHS's SG&A of $20 million, $1.9 million of investment in our management sales organization, $1million in variable selling expenses associated with our discount card business and $1.1 million acquisition and integration related expenses. These acquisition and integration expenses were related to stay bonuses, registration costs associated with our S-4 filing and provision for the closing of an overlapping facility. Net debt expense from the second quarter of 2010 was $3.6 million or 0.9% of revenue, as compared to $1.6 million or 0.5% of revenue in the second quarter of 2009. Of the $2 million increase, $1.3 million is related to CHS. Our debt net expense is in line with our expectation and we expect that our debt net expense will average 1% going forward. For the second quarter 2010 we recorded amortization intangibles $700,000. There's was no amortization of intangibles recorded in the same period 2009. We will report quarterly amortization of intangibles of $819,000 through the fourth quarter of 2012 and $727,000 in the first quarter of 2013. At that time all amortization of intangibles related to the CHS acquisition will be complete. As Rick mentioned recognition earlier, today we will acquire certain assets of drugstore.com for $10 million of which we take $4.5 million at closing, and we'll pay approximately $5.5 million into escrow over the next 12 months to fund the balance of the purchase, based on meeting certain performance criteria. Net interest expense was $8.2 million in the second quarter of 2010 compared to $430,000 in the second quarter 2009. The increase of interest expense is due to our new desk structure from the acquisition of CHS and includes $7.5 million of interest associated with the company's debt and $700,000 related to the amortization and financing fees and expenses. In the second quarter we reported $2.2 million provision for taxes on pretax income of $5.3 million or 40.9% effective tax rate. This compares to 7.9% effective tax rate during the second quarter of 2009. 7.9% tax rate was due to reduction in the company's valuation allowance associated with the expected utilization of a portion of the net operating losses in 2009. As I discussed from our year-end conference call, due to the strong outlook for our business, we reversed this valuation allowance. As a result our tax provision reflects statutory rates. During the first quarter of 2010, our effective tax rate was 24% as we treated certain acquisition expenses as discreet items for tax purposes. Going forward we believe our tax rate will normalize between 41% and 42%. Turning now to our balance sheet. As of June 30th, 2010, cash was $34.6 million. Our average cash during the second quarter was close to $50 million. We are in compliance with all debt covenants. Our inventory returns were $24.3, our DSO was at $41.7, free cash flow in the quarter was $14.1 million and our working capital was $184 million. I will now turn the call back to Rich.

Thank you, Stan. Regarding guidance. As noted in our press release, we are reaffirming our EBITDA guidance of $67 million to $71 million. As Rick and I have mentioned, the sales focus is targeted towards more profitable activities and the objective is to drive the bottom line. Going forward, we have undertaken to rationalize our therapy mix to optimize the profitability. As Rick and Stan also reported, today we are concluding the acquisition of certain assets of drugstore.com. We originally planned to close this acquisition on April 1with estimated quarterly revenues of $9 million. As a result of the above, regarding our revenue guidance for 2010, we now expect to be at the lower end of our guided range. We are confident that the underlying strength of our business and the opportunity within them will position us well for the remainder of 2010 and in to the future. We will now open up the lines for questions.

Thank you. (Operator Instructions). Our first question is from the line Mark Arnold with Piper Jaffray. Please proceed with you question. Mark Arnold - Piper Jaffray: So, I guess operationally everything seems to be headed in the right direction here and I am very happy with the way CHS appears to be integrated but I guess I am a little confused on the core business particularly going back to the last conference call and kind of how you guys talked about the normalization of volumes and utilization in March. It would appear that revenues here reverted back a bit from those March levels in the second quarter, in the month in the second quarter and I guess I am just a little confused by that, can you just talk us through why revenues were a little bit lighter than what we expected here in the second quarter.

I think we gave full year guidance as to where we thought we would be, we saw net revenue per day grow in all of our businesses. I think we talked on the last conference calls in terms of impact of AWP, that we were muscling through and then also the impact in the traditional mail side where there was a decrease in revenues as a result of contract renegotiation of price renegotiation. But I think that we've consistently stated that in the traditional side which is a decent part of our business if you remember the old segments that business has not been given a lot of attention in terms of growth. I think that on the community and the specialty pharmacy areas, we are continuing to see strong double-digit growth in the oncology, the MS, the RA categories and the iron overload, XJ. So we have started to see renewed growth in our HIV category which essentially has been kind of flat over the last year or so. So, I think that our focus is to continue to drive all the technologies, but the traditional side kind of brings down the overall consolidated growth levels of the other segment. Mark Arnold - Piper Jaffray & Co.: Well, let me ask it a different way. To get to the bottom end of your guidance for the year, you guys are have going to have to average about $461 million in revenues quarterly, which is about 10% above where you were in the second quarter. And I know you mentioned in the prepared remarks, the CHS locations being added to the United Health contracts in June on the infusion side. I assume that's one of the places where growth is going to come from. But can you just give us a sense of what's going to drive that growth, just to get to the bottom end of the revenue range, kind of where it's going to come from?

I think we mentioned that the drugstore.com which was essentially we talked to you for in terms of something that we thought would close earlier in the year was forecasted to be about $9 million a quarter so that will close today. We will get a couple of months of that and then the full fourth quarter, and then we also have some new managed care contracts that will begin, we expect to begin over the next several months with one of them starting in the fourth quarter, and so we also have the organic pull-through activities that we are focused in on and I think based on the trends we are seeing in the productivity out of our sales organization, we essentially believe that there is enough in the pipeline in terms of expectations and commitments that we feel pretty comfortable that we will continue to build each net revenue per day for the rest of the year. Mark Arnold - Piper Jaffray & Co: United Health contract for CHS locations, I assume that's one of the revenues synergies you guys have hoped you will able to captured, any expectations for that, I mean is that just a $2 million bucks, is it something that could be a lot bigger than that. How should we think about that?

I think that's based into our guidance as we looked at the combined opportunities of this year and we know that the CHS locations did not have significant amount of business from United, not all their locations were contracted and once we loaded in June we saw some very nice patient census referral activity and we expect that to continue to build over the remaining course of the year.

Thank you, our next question comes from the line of Kyle Smith with Jefferies & Company. Kyle Smith - Jefferies & Company: Yes, first, I wanted to just focus in a little bit more on the revenues. It sounds like the pointing towards the lower end of the guidance range is a function of the delay of drugstore.com. But was drugstore.com baked into the initial revenues guidance for the year that you gave back in the first quarter?

Yes, basically we had included that as part of our overall plan, and so we knew that the pricing concessions were been made and we identified this opportunity to reposition and enhance our platform there and so it was part of our original program. Kyle Smith - Jefferies & Company: Okay, and can you quantify the numerical impact of the AWP settlement in the quarter.

We've basically have estimated about $5 million a year, so we're seeing about that level in terms of quarterly impact from a year ago and definitely from Q4.

It was $1.250 million per quarter. Kyle Smith - Jefferies & Company: And in terms of the cost synergies, it looks like there is a small ratchet upward in the expectation for what you will see in 2011. Can you give us a sense of what the dollar amount that you realized in Q2 was and what the incremental we should be seeing in the third quarter is?

We received about $1.5 million of the benefit in the second quarter. We've said that we expect to get somewhere in the $5 million range for the balance of this year. Kyle Smith - Jefferies & Company: Looking at the balance sheets, the AR was up a bit from March 31. As we think about that item going forward, should we be assuming DSO roughly stable, or is there possibly some additional build that we should expect on the AR line?

Carl I would say it will be stable, but you know our balance sheet is a point in time and the $223 million number there, the next day we guided to $10 million in cash, so it's just a point in time. We're very comfortable with our DSO levels. Kyle Smith - Jefferies & Company: And then I have one thing that is not footing on my model here. The long-term debt at the end of the quarter, including current portion of long-term debt, was $319 million. That is down from March and about $5 million or $6 million off from what I would expect just adding up your term loans and your bonds. I don't see anything on the cash flow statements. Did you prepay any term loans or buy back any bonds during the quarter?

The debt that is on our balance sheet is net of fees and expenses which we amortize upward over the course of the five years. So accounting does not record the 325, it records a lower number and we accrete it upward in overtime Kyle Smith - Jefferies & Company: And at March 31 that adjustment hadn't been made?

We had certain other adjustments to be debt financing post March 31st.

Our next question comes from the line Brooks O'Neil with Dougherty & Company. Please proceed with your question.

As you guys probably recall, I have always believed that in addition to growing the top line you have a great opportunity to shrink the top line by exiting some of your lower margin business. You mentioned that you focused on the higher margin therapies and tried to rationalize your effort. Have you exited any businesses or lines of business or do you plan to during the balance of the year? Neil - Dougherty & Company: As you guys probably recall, I have always believed that in addition to growing the top line you have a great opportunity to shrink the top line by exiting some of your lower margin business. You mentioned that you focused on the higher margin therapies and tried to rationalize your effort. Have you exited any businesses or lines of business or do you plan to during the balance of the year?

I think what we've done Brooks is as we talked about last year, early last year, our focus has been on essentially higher margins and cash flow generation, higher quality of revenue. We have some lines of our business technology, the old technologies that are high on a net revenue per basis and the industry and essentially the prescription levels will essentially continue to drive that at normal levels. However, we've changed our direction of our sales force to focus on the high margin therapies and as a result of that those patients will have a net revenue per patient per month lower than some of the specialty technology that are in our book of business. So our focus will be to always be the expert and essentially work with the physicians and the patients and the plans on the appropriate technology but clearly our focus long-term is to continue to evaluate the amount of work that goes into each line of business and the activities associated with different therapies. So it's really on the direction of building on the CHS acquisition and transforming this company.

Brooke, and the other part of that is out as Rick and the team focuses their sales efforts towards these therapies which are extremely profitable. We've seen the double digit increases and the increases in patient census. So it is working exactly the way that we were hoping it would.

That's good. You mentioned the United Contract and if I recall, I think you announced the contract with Humana which might be one of the things you are going to ramp up over the next few months. Are there any other visible and important contracts that you can highlight at this point or is it more a situation where we might see something during the balance of the year? Neil - Dougherty & Company: That's good. You mentioned the United Contract and if I recall, I think you announced the contract with Humana which might be one of the things you are going to ramp up over the next few months. Are there any other visible and important contracts that you can highlight at this point or is it more a situation where we might see something during the balance of the year?

Yes I think the balance of the year, we got in some regional contracts that will start the second half of the year. We got to do more work on Humana and pull-through activities. As we mentioned in my script we recently added a Director of National Accounts and putting more focus in terms of those relationships and pull-through activities in presenting our programs. We will also continue to build out the regional managed care infrastructure in a more robust way to take advantage of the 450 managed care relationships we've picked up from DHS and our pipeline is very strong. We still have a couple of national common fusion agreements that we'd like to get and so our people are focused on continuing to enable our organization, have as many direct hunting licenses as possible so that we can continue to build our market share in all managed care plan.

That's great. You mentioned the 19% organic growth in the BioScrip Infusion business. Just give us a little color on what's going on there and how would you characterize the profitability of the new business that you're generating in that side of things Neil - Dougherty & Company: That's great. You mentioned the 19% organic growth in the BioScrip Infusion business. Just give us a little color on what's going on there and how would you characterize the profitability of the new business that you're generating in that side of things

These were businesses that I think we have talked about some of this is related to business I was supposed to start, early Q1 that got delayed, it kicked in March and April and stepped up some more in the second quarter. Our sales organization were also beneficiary of this fifth plan that we rolled out to the entire organization until we saw a significant level of focus on the traditional therapies which benefited the legacy BioScrip Infusion Business.

That's great. And then obviously one of the key drivers for the company going forward is the ability to maintain the profitability of the CHS business that you brought in. Can you just comment on whether you think you can maintain those profit margins or whether we should expect them to go up or down, over the next twelve months say. Neil - Dougherty & Company: That's great. And then obviously one of the key drivers for the company going forward is the ability to maintain the profitability of the CHS business that you brought in. Can you just comment on whether you think you can maintain those profit margins or whether we should expect them to go up or down, over the next twelve months say.

We believe we can maintain the profitability and actually, we believe that we continue to identify cost-to-good synergies. We believe that will continue identify opportunities to strengthen their traditional therapy mix as we continue to standardize all locations with the clinical programs that have been strong in a number of markets with CHS but not has been as consistent as I think they could have been, and so I think there is significant amount of excitement in strengthening all of our locations, not only CHS but also the Infusion on our side in terms of clinical capabilities and in a more standardized way. So our focus is on continue drive a higher operating income margin in all of our locations, all of our businesses. We've essentially have stopped looking at CHS as a separate entity, it's really one combined Infusion Home/Health segment. A significant amount of coordination, team work, communication that has occurred and we'll continue to streamline the two organizations into one to maximize our opportunities for revenue generation.

That's great, just following on that for a second then. If I recall correctly the profitability of your traditional Home Infusion business maybe wasn't as great as CHS. So possible there is opportunity to expand profitability of your quarter as well? Obviously like you said it's all one now but will that be a reasonable expectation? Neil - Dougherty & Company: That's great, just following on that for a second then. If I recall correctly the profitability of your traditional Home Infusion business maybe wasn't as great as CHS. So possible there is opportunity to expand profitability of your quarter as well? Obviously like you said it's all one now but will that be a reasonable expectation?

Yes, I think we've talked before, our side was primarily more of a chronic focus and so we've talked before where that focus has been. We actually have invested in traditional infusion sales reps in the BioScrip side and essentially those programs and areas are getting significant amount focus. The level of traditional infusion revenues they had, had consistent gross margins depending on the market and the patient, and so the opportunity to grow and change that mix is before us and we're running very hard to take advantage of our opportunities.

That's great, I guess the last question I'd have is for Stan, I am just curious if you can help us to sort of think about the pace of cash flow generation and debt repayment, let's say over the next six quarters or so. I think you talked at the time of the CHS acquisition that you intended to be pretty aggressive at attempting to get the debt to EBITDA down. Any color there would be helpful. Neil - Dougherty & Company: That's great, I guess the last question I'd have is for Stan, I am just curious if you can help us to sort of think about the pace of cash flow generation and debt repayment, let's say over the next six quarters or so. I think you talked at the time of the CHS acquisition that you intended to be pretty aggressive at attempting to get the debt to EBITDA down. Any color there would be helpful.

We have payments to do at the end of each quarter on our terms loan, about $625,000 and then after the first four it goes up to a $1, 250,000 for the next four after that. There is a free cash flow test and it is done at the end of the year, or cash flow test and we feel that at the end of this year, there might be some money that will have to be prepaid to pin it down further. I believe what I have said in the guidance is over a three-year period we expect to get our leverage ratio down into the two range, through a combination of paying the debt as well as increases in our EBITDA number.

Our next question is from the line of Mike Petusky with Noble Research. Mike Petusky - Noble Research: I guess the first question, in terms of gross margin, looking forward, if I take what you guys are saying, essentially to me it seems like gross margin of 17.8% probably should roughly be a baseline as we look out over the next several quarters. Is that a fair interpretation of what you guys have said and what you expect?

I think we believe the range is going to be in the 17.5% to 18 %. I think that our focus is on the areas that are targeted there because we have talked about, but there was also the counterbalancing areas in our book of business where you have some of the specialty technologies that are growing at high-double digits, but that's just the direction of the prescribing pattern. So I think we're going look to manage what we can and continue to position the company for the long term going into 2011, but I think that you the range of where we're at, and a little bit better is clearly our target. Mike Petusky - Noble Research: And then just on the SG&A line. Is this a high watermark as we look out over the next four or six quarters? As a percentage?

Other than variable selling expenses, the answer would be yes. Mike Petusky - Noble Research: Rick, I don't know if it was last quarter, but certainly a number of quarters you have given kind of percentage increases by disease state. You mentioned oncology was up X percent, MS was up X percent. Do you have any of that data by any chance?

We saw the same about 50% year-over-year on the oncology side, about 12% on the overload, and then about 18% on the MS category. Mike Petusky - Noble Research: I am sorry, the oncology was 15 or 50?

50. Mike Petusky - Noble Research: And as I'm looking at trying to just get my hands around the different pieces here, and I know you didn't specifically break this out. But I want to throw something out, and hopefully you can say hey that is roughly in the ballpark. If I'm putting this together to me it looks like the home health business is roughly $80 million to $90 million and the home infusion is maybe $335 million to $345 million on an annualized basis. Is that about right?

Mike, you are talking about nursing versus… Mike Petusky - Noble Research: I should say the nursing piece, $80 million to $90 million. The home infusion piece?

What we said before when we were on the road show, I believe it was about one-third of CHS which was roughly running around $250 million, about one third of that was a nursing component. Mike Petusky - Noble Research: Okay, so those numbers are right then?

To the ballpark. Mike Petusky - Noble Research: And this maybe goes back a few quarters, but you guys had been in an effort to rationalize your IT systems. And I think at one time there were more than a dozen that you were running, and then you were trying to get down to maybe a couple, two, three, with one being Infusion focused and one being more on the Traditional Pharmacy side. Has that been accomplished, or is it close to being accomplished? Can you guys comment on that?

We are down to three on the operating systems so infusion, actually four because home health has its own system, but everything is on the same platform. But our infusion division is on the same system, and then the community stores and our specialty pharmacy central mail is on the same system. We have a couple more I think about four locations in total to install on the new system. But we are beginning to take advantage of central services, central sale activities and we will see some impact to the second half of this year. We've talked before that we have made some program enhancements in our care management program and that essentially requires some additional programming. But we have had glitches in terms of the installation, it has helped to improve visibility in the controlled environment, and now we are looking to leverage it to essentially coordinate and provide a lot more efficiency in our own internal operations and then we have the module that we built was essentially partner collaboration tools to work better and communicate more effectively with physicians and managed care patients. Mike Petusky - Noble Research: So essentially, if I'm hearing you right then, most of that work because I know at one time that was thought to be at least somewhat of a significant risk to your business, and there could be customer service interruptions. Maybe you guys didn't that, but certainly some folks counted that as a risk. Essentially what I'm hearing is most of that is done, and most of that has been done without any customer disruptions, et cetera. Is that a fair characterization?

Yes, we've put in 29 stores in the last 12 months and we just managed sort of the wins effectively, we had good training, good plan, moved the data over and moved the patients over, and so just continuing to merge to our plan. Mike Petusky - Noble Research: And then just I guess the last issue, and I think I already know the answer to this. But in terms of our use of free cash, obviously you acquired the assets of drugstore.com in a small transaction, but I guess the vast majority of free cash is debt pay down going forward?

The answer is yes. We are seeing great cash generation, we are happy with that. We believe it's going to increase and its meeting lot of our expectations from a cash standpoint.

And we have said that we understand that deleveraging is a primary focus of this company and we'll continue to do that.

(Operator Instructions). Our next question is from the line of Art Henderson with Jefferies & Company. Please proceed with your question.

Hey guys it's actually Brian Tanquilut. Good morning. How you doing? First question just piggybacking on Mike's questions on home health. Can you guys provide what percentage, because I know you said one-third of revenue from CHS was kind of from home nursing. From a margin perspective or profitability perspective, am I right in assuming that's a higher margin business for them? And follow-up to that is, as CMS contemplates rate cuts for next year to home nursing, how are you guys thinking about that in terms of adjusting the business to adapt to those upcoming rate cuts?

We don't talk to specific margins, but I think we've mentioned before approximately the same and so we're seeing consistency on both sides. And I think as it relates to next year, we've done an estimate of what could that be and its really not, we don't believe its going to be material at all in terms of what the monthly revenue expectation impact could be based on those proposed rates.

Yes, the other Brian I think is really important is the direction Rick talked about earlier (inaudible) is the direction of home healthcare of moving from the institutions to the home, the need for the nursing component there as well as infusion. So we are extremely excited about that part of the business and the potential growth opportunities there.

Okay. And then you guys have talked a lot today about how you are focusing on higher margin revenue and then that's obviously showing your numbers. So I want to hear your thoughts on how drugstore.com comes into play or from a strategic perspective, how that ties into the strategy or I guess the other way to think about, how should we think about drugstore.com margins relative to your pharmacy margin.

They are higher. I mean there is the opportunity that we saw was just really all of the needs of the chronic patients we serve in terms of maintenance meds, in terms of working and providing education and also new patient generation leads that come in, and so there is opportunities for us to incorporate the drugstore strengths and competencies and what they have been doing for a long time into what we do and it enables us another sales regeneration in terms of outpatient census as well.

Also in drugstore, do they have relationship with Medco?

They have relationships with a number of people, so yes there is something there. We're essentially going be the pharmacy on the drugstore site. I mean we're exclusive as it relates to that.

Okay, got it and then last question. You talked about some new contract starts in the back half of the year that bridges the revenue through the guidance or the current revenue run rate to the guidance. Just wondering what your visibility is on those new contracts starts? Have they started already or are they upcoming in the next few weeks or month?

Some have begun. Others will begin in the later part of this quarter essentially, the first part of the fourth quarter.

Thank you. (Operator Instructions). There are no further questions at this time Mr. Friedman; I will now turn the conference back over to you to continue with your presentation or closing remarks.

Thank you, operator. Again, thank you all for joining us today. We are extremely pleased with the progress we've made in this quarter. We think we had the platform to take this company to the next level and we're excited about the remainder of the year. Again thank you for joining us.

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and we ask that you disconnect your lines. Thank you.