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The Oncology Institute, Inc. (NASDAQ:TOI): A Pioneering Oncology Group Committed to Value-Based Care
Published on November 27, 2024 | Ticker: TOI
Business Overview and History
The Oncology Institute, Inc. (TOI) is a leading value-based oncology group that has been at the forefront of delivering specialized, community-based cancer care since its inception in 2007. With a steadfast commitment to improving patient outcomes and reducing the financial burden associated with cancer treatment, TOI has rapidly expanded its footprint, establishing a robust network of 72 clinics across four states and serving a patient population of over 64,000.
TOI was originally founded in 2007 as a community oncology practice focused on providing comprehensive cancer care services. The company, initially known as TOI Parent, Inc., established itself as a leading provider of integrated cancer care in the community setting. TOI's innovative approach brought services traditionally associated with academic and tertiary care settings, such as clinical trials, palliative care programs, and stem cell transplants, to its community-based oncology practices.
In 2021, TOI underwent a transformative business combination, merging with DFP Healthcare Acquisitions Corp., a special purpose acquisition company. This merger resulted in the company's rebranding as The Oncology Institute, Inc. and its emergence as a publicly-traded entity listed on the NASDAQ under the ticker symbol TOI. This pivotal event marked a significant milestone in the company's growth trajectory, providing access to additional capital and resources to further expand its unique value-based oncology platform.
By 2019, TOI had significantly expanded its operations, reaching 72 clinic locations staffed by 120 providers employed by its affiliated physician-owned professional corporations, known as the TOI PCs. This rapid growth underscored the company's success in implementing its community-based, value-driven oncology care model.
However, TOI has faced some financial challenges in recent years. In 2022, the company reported a net loss of $83 million, primarily driven by goodwill impairment charges of $16.9 million and changes in the fair value of various liabilities. Additionally, TOI experienced reimbursement challenges related to Part D drugs that impacted its financial performance in 2023.
Despite these obstacles, TOI has continued to pursue growth and operational improvements. The company has taken steps to optimize its operations and cost structure, including negotiating improved contracts and renegotiating purchase terms with suppliers. These efforts have contributed to the company's ability to navigate the complex healthcare landscape while maintaining its commitment to delivering high-quality, value-based oncology care.
Today, TOI operates a diversified business model, encompassing patient services, dispensary, and clinical trials. The patient services segment, which accounts for 52.8% of the company's total revenue, offers a comprehensive suite of medical oncology services, including physician services, in-house infusion and pharmacy, radiation therapy, and supportive care programs. The dispensary segment, representing 45.1% of revenue, manages the company's network of on-site pharmacies, delivering oral medications to patients. The clinical trials segment, contributing 2.1% of revenue, leverages TOI's extensive patient base and specialized expertise to conduct cutting-edge cancer research.
TOI's mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care. The company seeks to deliver both better quality care and lower cost of care by reducing wasteful, inefficient or counterproductive care that drives up costs but does not improve outcomes. TOI has contractual relationships with multiple payors, serving Medicare, including Medicare Advantage, Medi-Cal, and commercial patients. The company also provides management services on behalf of 14 clinic locations owned by independent oncology practices.
Financial Performance and Ratios
TOI's financial performance has been marked by robust top-line growth, with revenue increasing from $203.0 million in 2021 to $324.2 million in 2023, representing a compound annual growth rate of 26.2%. However, the company has faced challenges in translating this growth into consistent profitability, reporting a net loss of $83.1 million in 2023.
For the most recent fiscal year (2023), TOI reported revenue of $324.24 million, a net loss of $83.07 million, operating cash flow (OCF) of -$36.32 million, and free cash flow (FCF) of -$40.88 million.
In the most recent quarter (Q3 2024), the company reported revenue of $99.90 million, representing a year-over-year growth of 21.8%. The net loss for the quarter was $16.11 million. Operating cash flow improved to $0.819 million, and free cash flow turned positive at $1.221 million.
The increase in revenue was primarily driven by an 86.5% increase in the number of prescriptions filled at the company's California pharmacy, offset by a 3.5% decrease in the average revenue per fill. The company continues to set new monthly fill records and now projects revenue of more than $75 million from the California pharmacy in 2024.
Liquidity
The company's liquidity position remains relatively strong, with a current ratio of 2.49 and a quick ratio of 2.27 as of September 30, 2024. The cash conversion cycle, a measure of the company's working capital efficiency, stands at 36.8 days, indicating a healthy management of its operating cycle.
TOI's debt burden has increased in recent years, with a debt-to-equity ratio of 6.35 as of September 30, 2024. The company's interest coverage ratio, however, remains a concern, standing at -7.68 as of the same date, underscoring the need for improved profitability to service its debt obligations.
As of the most recent reporting period, TOI held $47.40 million in cash and cash equivalents. The company's current ratio of 2.49 and quick ratio of 2.27 indicate a solid ability to meet short-term obligations.
Operational Highlights and Initiatives
Over the past year, TOI has made significant strides in expanding its value-based care model, signing 13 new capitation contracts across various markets, including a second contract in Florida and the company's first contract in Oregon. These new agreements, which bring the total estimated Medicare Advantage lives under TOI's management to 27,000, are expected to drive improved financial performance in the coming quarters.
In addition, the company has made notable progress in diversifying its service offerings, achieving certification to administer radiopharmaceutical therapy in its California radiation oncology clinics. This milestone not only enhances TOI's ability to provide cutting-edge cancer care but also positions the company as one of the few community-based practices on the West Coast to offer this specialized treatment.
Another key strategic initiative has been the company's focus on cost optimization. TOI has implemented targeted initiatives to improve working capital management, including streamlining its receivables processes and renegotiating supplier contracts. These efforts have contributed to a 6% reduction in selling, general, and administrative expenses during the third quarter of 2024, despite the company's robust top-line growth.
Segment Performance
Patient Services Segment: This segment is the primary driver of TOI's business, comprising 52.80% of the company's total operating revenue for the nine months ended September 30, 2024. It includes capitation revenue and fee-for-service (FFS) revenue generated from the provision of medical services by TOI's affiliated physician-owned professional entities (TOI PCs) to patients. During the nine months ended September 30, 2024, patient services revenue decreased 1.70% to $154.67 million compared to the same period in the prior year, primarily due to a 1.60% decrease in FFS revenue.
Dispensary Segment: Accounting for 45.10% of TOI's total operating revenue for the nine months ended September 30, 2024, this segment generates revenue from the sale of oral prescription drugs prescribed by doctors and dispensed directly through the TOI PCs' clinic-based pharmacies. For the nine months ended September 30, 2024, dispensary revenue increased 73.60% to $132.33 million compared to the same period in the prior year, driven by an 82.50% increase in the number of prescriptions filled.
Clinical Trials & Other Segment: This segment accounted for 2.10% of TOI's total operating revenue for the nine months ended September 30, 2024. It generates revenue from contracts to perform cancer clinical research trials on behalf of pharmaceutical and medical device companies. For the nine months ended September 30, 2024, clinical trials and other revenue increased 25.80% to $6.15 million compared to the same period in the prior year.
Outlook and Guidance
For the full year 2024, TOI has reaffirmed its guidance, expecting consolidated revenue to be in the range of $380 million to $400 million, representing a year-over-year increase of 17% to 23%. The company expects revenue of more than $75 million from their California pharmacy in 2024 and an adjusted EBITDA contribution of over $1 million from their radiopharmaceutical therapy services in 2025.
TOI noted that the annualized revenue of the new capitation deals signed so far this year is over $50 million. They expect significant improvement in their net loss in Q4 2024 and beyond, driven by the new capitation contracts.
However, the company has cautioned that its bottom-line performance may continue to be impacted by the ongoing reimbursement challenges in the Part D drug segment, as well as investments in its growth initiatives.
Despite these near-term headwinds, TOI remains confident in its ability to achieve sustainable profitability in the coming years, driven by the successful execution of its value-based care strategy, cost optimization efforts, and the continued expansion of its specialized service offerings.
Conclusion
The Oncology Institute, Inc. is a unique player in the oncology landscape, leveraging its community-based approach and value-based care model to deliver comprehensive, high-quality cancer care to patients across multiple states. While the company has faced some financial challenges in recent years, its recent operational achievements, strategic initiatives, and strong liquidity position suggest a promising path forward. As TOI continues to navigate the evolving healthcare landscape, investors will closely monitor the company's ability to translate its growth into consistent profitability and long-term shareholder value.
https://stkt.co/0NcgqB0c
Search for symbols or companies...
The Oncology Institute, Inc. (NASDAQ:TOI): A Pioneering Oncology Group Committed to Value-Based Care
Published on November 27, 2024 | Ticker: TOI
Business Overview and History
The Oncology Institute, Inc. (TOI) is a leading value-based oncology group that has been at the forefront of delivering specialized, community-based cancer care since its inception in 2007. With a steadfast commitment to improving patient outcomes and reducing the financial burden associated with cancer treatment, TOI has rapidly expanded its footprint, establishing a robust network of 72 clinics across four states and serving a patient population of over 64,000.
TOI was originally founded in 2007 as a community oncology practice focused on providing comprehensive cancer care services. The company, initially known as TOI Parent, Inc., established itself as a leading provider of integrated cancer care in the community setting. TOI's innovative approach brought services traditionally associated with academic and tertiary care settings, such as clinical trials, palliative care programs, and stem cell transplants, to its community-based oncology practices.
In 2021, TOI underwent a transformative business combination, merging with DFP Healthcare Acquisitions Corp., a special purpose acquisition company. This merger resulted in the company's rebranding as The Oncology Institute, Inc. and its emergence as a publicly-traded entity listed on the NASDAQ under the ticker symbol TOI. This pivotal event marked a significant milestone in the company's growth trajectory, providing access to additional capital and resources to further expand its unique value-based oncology platform.
By 2019, TOI had significantly expanded its operations, reaching 72 clinic locations staffed by 120 providers employed by its affiliated physician-owned professional corporations, known as the TOI PCs. This rapid growth underscored the company's success in implementing its community-based, value-driven oncology care model.
However, TOI has faced some financial challenges in recent years. In 2022, the company reported a net loss of $83 million, primarily driven by goodwill impairment charges of $16.9 million and changes in the fair value of various liabilities. Additionally, TOI experienced reimbursement challenges related to Part D drugs that impacted its financial performance in 2023.
Despite these obstacles, TOI has continued to pursue growth and operational improvements. The company has taken steps to optimize its operations and cost structure, including negotiating improved contracts and renegotiating purchase terms with suppliers. These efforts have contributed to the company's ability to navigate the complex healthcare landscape while maintaining its commitment to delivering high-quality, value-based oncology care.
Today, TOI operates a diversified business model, encompassing patient services, dispensary, and clinical trials. The patient services segment, which accounts for 52.8% of the company's total revenue, offers a comprehensive suite of medical oncology services, including physician services, in-house infusion and pharmacy, radiation therapy, and supportive care programs. The dispensary segment, representing 45.1% of revenue, manages the company's network of on-site pharmacies, delivering oral medications to patients. The clinical trials segment, contributing 2.1% of revenue, leverages TOI's extensive patient base and specialized expertise to conduct cutting-edge cancer research.
TOI's mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care. The company seeks to deliver both better quality care and lower cost of care by reducing wasteful, inefficient or counterproductive care that drives up costs but does not improve outcomes. TOI has contractual relationships with multiple payors, serving Medicare, including Medicare Advantage, Medi-Cal, and commercial patients. The company also provides management services on behalf of 14 clinic locations owned by independent oncology practices.
Financial Performance and Ratios
TOI's financial performance has been marked by robust top-line growth, with revenue increasing from $203.0 million in 2021 to $324.2 million in 2023, representing a compound annual growth rate of 26.2%. However, the company has faced challenges in translating this growth into consistent profitability, reporting a net loss of $83.1 million in 2023.
For the most recent fiscal year (2023), TOI reported revenue of $324.24 million, a net loss of $83.07 million, operating cash flow (OCF) of -$36.32 million, and free cash flow (FCF) of -$40.88 million.
In the most recent quarter (Q3 2024), the company reported revenue of $99.90 million, representing a year-over-year growth of 21.8%. The net loss for the quarter was $16.11 million. Operating cash flow improved to $0.819 million, and free cash flow turned positive at $1.221 million.
The increase in revenue was primarily driven by an 86.5% increase in the number of prescriptions filled at the company's California pharmacy, offset by a 3.5% decrease in the average revenue per fill. The company continues to set new monthly fill records and now projects revenue of more than $75 million from the California pharmacy in 2024.
Liquidity
The company's liquidity position remains relatively strong, with a current ratio of 2.49 and a quick ratio of 2.27 as of September 30, 2024. The cash conversion cycle, a measure of the company's working capital efficiency, stands at 36.8 days, indicating a healthy management of its operating cycle.
TOI's debt burden has increased in recent years, with a debt-to-equity ratio of 6.35 as of September 30, 2024. The company's interest coverage ratio, however, remains a concern, standing at -7.68 as of the same date, underscoring the need for improved profitability to service its debt obligations.
As of the most recent reporting period, TOI held $47.40 million in cash and cash equivalents. The company's current ratio of 2.49 and quick ratio of 2.27 indicate a solid ability to meet short-term obligations.
Operational Highlights and Initiatives
Over the past year, TOI has made significant strides in expanding its value-based care model, signing 13 new capitation contracts across various markets, including a second contract in Florida and the company's first contract in Oregon. These new agreements, which bring the total estimated Medicare Advantage lives under TOI's management to 27,000, are expected to drive improved financial performance in the coming quarters.
In addition, the company has made notable progress in diversifying its service offerings, achieving certification to administer radiopharmaceutical therapy in its California radiation oncology clinics. This milestone not only enhances TOI's ability to provide cutting-edge cancer care but also positions the company as one of the few community-based practices on the West Coast to offer this specialized treatment.
Another key strategic initiative has been the company's focus on cost optimization. TOI has implemented targeted initiatives to improve working capital management, including streamlining its receivables processes and renegotiating supplier contracts. These efforts have contributed to a 6% reduction in selling, general, and administrative expenses during the third quarter of 2024, despite the company's robust top-line growth.
Segment Performance
Patient Services Segment: This segment is the primary driver of TOI's business, comprising 52.80% of the company's total operating revenue for the nine months ended September 30, 2024. It includes capitation revenue and fee-for-service (FFS) revenue generated from the provision of medical services by TOI's affiliated physician-owned professional entities (TOI PCs) to patients. During the nine months ended September 30, 2024, patient services revenue decreased 1.70% to $154.67 million compared to the same period in the prior year, primarily due to a 1.60% decrease in FFS revenue.
Dispensary Segment: Accounting for 45.10% of TOI's total operating revenue for the nine months ended September 30, 2024, this segment generates revenue from the sale of oral prescription drugs prescribed by doctors and dispensed directly through the TOI PCs' clinic-based pharmacies. For the nine months ended September 30, 2024, dispensary revenue increased 73.60% to $132.33 million compared to the same period in the prior year, driven by an 82.50% increase in the number of prescriptions filled.
Clinical Trials & Other Segment: This segment accounted for 2.10% of TOI's total operating revenue for the nine months ended September 30, 2024. It generates revenue from contracts to perform cancer clinical research trials on behalf of pharmaceutical and medical device companies. For the nine months ended September 30, 2024, clinical trials and other revenue increased 25.80% to $6.15 million compared to the same period in the prior year.
Outlook and Guidance
For the full year 2024, TOI has reaffirmed its guidance, expecting consolidated revenue to be in the range of $380 million to $400 million, representing a year-over-year increase of 17% to 23%. The company expects revenue of more than $75 million from their California pharmacy in 2024 and an adjusted EBITDA contribution of over $1 million from their radiopharmaceutical therapy services in 2025.
TOI noted that the annualized revenue of the new capitation deals signed so far this year is over $50 million. They expect significant improvement in their net loss in Q4 2024 and beyond, driven by the new capitation contracts.
However, the company has cautioned that its bottom-line performance may continue to be impacted by the ongoing reimbursement challenges in the Part D drug segment, as well as investments in its growth initiatives.
Despite these near-term headwinds, TOI remains confident in its ability to achieve sustainable profitability in the coming years, driven by the successful execution of its value-based care strategy, cost optimization efforts, and the continued expansion of its specialized service offerings.
Conclusion
The Oncology Institute, Inc. is a unique player in the oncology landscape, leveraging its community-based approach and value-based care model to deliver comprehensive, high-quality cancer care to patients across multiple states. While the company has faced some financial challenges in recent years, its recent operational achievements, strategic initiatives, and strong liquidity position suggest a promising path forward. As TOI continues to navigate the evolving healthcare landscape, investors will closely monitor the company's ability to translate its growth into consistent profitability and long-term shareholder value.
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