OPCH - NASDAQ

Good day, and thank you for standing by. Welcome to the Option Care Health Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nicole Maggio, Senior Vice President and Corporate Controller. Please go ahead.

Good morning. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release as well as in our Form 10-K and latest Form 10-Q filed with the SEC regarding the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements, except as required by law. During this call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of our website. With that, I will turn the call over to John Rademacher, President and Chief Executive Officer.

Thanks, Nicole, and good morning, everyone. We appreciate you joining us for this morning's call to review the progress the Option Care Health team made in 2024 and discuss our outlook for 2025. As you'll recall, in early January, we preannounced our preliminary expected results for the fourth quarter and full year 2024. And as we reported this morning, our results were in line with the preliminary results as communicated. We will go into greater detail as well as provide more insights into the expectations for the current year later in the call. As we shared previously, the fourth quarter was a very productive for the Option Care Health team, and we made significant progress on our efforts to create a sustainable growth enterprise. And the fourth quarter marks the 20th consecutive quarter that we have delivered on the financial commitments we've communicated to the investor community. We delivered high teen revenue growth which was comprised of a balanced performance across the portfolio, with considerable contribution from our rare and orphan and limited distribution portfolio of therapies. As the quarter progressed, we saw a notable improvement with respect to some of the supply chain challenges we outlined on our third quarter call. Specifically, the IV solution supply dynamics improved significantly throughout the quarter and is no longer a constraint with respect to onboarding new patients. We also invested in enhancing local responsiveness by opening 2 new state-of-the-art compounding pharmacies in New York City and Tampa. As I've stated on multiple occasions, we intend to continue to invest in our national integrated network of compounding pharmacies and infusion suites to help ensure high quality and responsive care for our patients and referral sources. I would also like to highlight the incredible execution by our team to work around and overcome the devastating impacts of the various natural disasters and weather events that happened at the end of the third quarter and carried into the fourth. The strength and resilience of our team and the platform was certainly tested but through strong teamwork and collaboration with key partners across the value chain, we were able to continue to support our patients and deliver our key operational and financial results. I believe that our organic growth, along with the strength of our free cash flow, uniquely positions us to continue to deploy capital towards value creation for our shareholders. In demonstration of this, I'm pleased to share that we closed on our acquisition of Intramed Plus in late January. As discussed earlier, Intramed Plus is a highly regarded infusion provider in the Southeastern United States with multiple locations and a long-standing and exceptional reputation of providing high-quality care. We are thrilled to welcome the Intramed Plus team to the Option Care Health family, and our integration efforts are well underway. This transaction is yet another example of how we believe we can bring our national scale, leading technology and integrated pharmacy platform to local areas through acquisitions to further expand access to care. Our revised guidance, as communicated this morning, now includes the impact of the acquisition. One of the attractive aspects of the Intramed Plus acquisition is the expansion of our advanced practitioner model, which we initiated with our Wasatch Infusion acquisition a few years ago. As of today, we have established a footprint of more than 175 Infusion locations, including 15 sites with advanced practitioner capabilities. We believe the advanced practitioner clinical model is highly complementary to our network of compounding pharmacies, and we intend to continue enhancing and expanding our infusion site network to incorporate broader clinical capabilities. And the expansion of our advanced practitioner model remains a priority in 2025 and beyond as we look to provide the most comprehensive set of infusion care solutions to our key stakeholders. Also in the fourth quarter, we exhausted our prior share repurchase authorization, having repurchased $90 million of shares in the quarter. In early January, our Board of Directors approved a new $500 million authorization going forward. As we have discussed previously, given the strength of our balance sheet and cash flow generation, we have various options to deploy capital available to us. We believe deploying capital through both accretive acquisitions and share repurchase will create value over the longer term for our shareholders. Before I turn the call over to Mike, I wanted to share a few thoughts on our expectations for 2025. Despite a meaningful gross profit reset due to less favorable economics for Stelara, which we estimate at $60 million to $70 million for the year. We expect to deliver overall earnings growth from 2024 through our balanced portfolio and focus on delivering value to referral sources to drive top line growth. While the Stelara impact is unfortunate, managing through therapy portfolio dynamics is nothing new for this team. And we believe the clinical program we established to treat complex Stelara patients is a testament to the clinical capabilities and power of this national platform. In 2025, we intend to continue to invest in our pharmacy and infusion suite network, technology and clinical capabilities to help strengthen our position as a national provider with local responsiveness, further solidifying our confidence in the growth profile of this enterprise. I would like to remind you of our addition of adjusted earnings per share as a part of the metrics we provide for guidance as we believe this provides investors with a better reflection of our business performance and capital deployment activities. With that, I'll hand the call over to Mike to provide additional details.

Thanks, John, and good morning, everyone. Revenue growth was quite strong in the fourth quarter at 19.7% growth over Q4 2023. As John mentioned, we saw balanced growth across the portfolio with considerable contribution from rare and orphan and limited distribution therapy. The team navigated the IV solutions supply chain disruption quite effectively, which directly impacted our ability to take on new patients within our acute therapy portfolio earlier in the quarter. Despite the challenges and with meaningful supply chain improvements over the course of the quarter, we were able to deliver high single-digit acute therapy growth, which as all of you know, carries a higher gross margin profile than chronic therapies. With respect to gross profit, we drove 8.6% growth over the prior year fourth quarter on balanced top line growth. Gross profit dollar growth is a key metric we manage, and I believe the team did a phenomenal job in driving gross profit growth in the quarter. SG&A as a percentage of revenue continues to drop and represented 12.2% of revenue in the quarter. For the year, spending growth was under 4% despite continued investments in suite capacity and other growth initiatives. Q4 adjusted EBITDA of $121.6 million grew almost 9% and recall that the fourth quarter of 2023 included approximately $8 million in nonrecurring procurement benefits and adjusted earnings per share in the quarter of $0.44 represented 15.8% growth over the prior year. Adjusted earnings per share for the full year of $1.58 represented more than 10% growth year-over-year. And again, that's inclusive of approximately $33 million to $35 million in 2023 procurement benefit that didn't continue into 2024. And we are quite pleased with the cash flow generation performance in 2024. For the full year, we generated $323 million in cash flow and invested more than $35 million back into our infrastructure and repurchased $250 million of stock. Finally, for the full year 2025, we now expect to deliver revenue of $5.3 billion to $5.5 billion, adjusted EBITDA of $450 million to $470 million and adjusted earnings per share of $1.59 to $1.69 a share. Net interest expense is projected to be $55 million to $60 million, and the effective tax rate is expected to be 25% to 27%. Finally, we expect to generate at least $320 million in cash flow from operations. Note that our revisions to the preliminary guidance communicated in January primarily represent inclusion of the impact of the Intramed Plus acquisition, which closed in late January. So as you can see, despite a $60 million to $70 million headwind from Stelara Dynamics, we expect to deliver another year of growth. And with that, we'll open the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Matt Larew with William Blair.

I wanted to ask on the acute side. Obviously, you referenced the slide chain alleviation of those challenges. Obviously, there were some larger competitors that were departing. So you're up high single digits in the quarter. Just in terms of what you're seeing vis-a-vis competition as well as supply chain and other dynamics, what's your expectation for how that trends throughout this year?

Matt, it's John. Yes, thanks for the question. As I said in the prepared remarks, throughout the quarter, it continued to improve the supply chain dynamics. And we work across the value chain to make certain that we were doing a few things. Number one is conserving the product that we did have and making certain that we were being very efficient in the way that we're utilizing it and then finding additional supply lines in order to do that as Baxter continues to improve their production. I would tell you, as we exited the quarter, we were back to being in a really strong position. We are not hindered today by being able to take on new patients. So we are back to, I'd say, normal, if you want to think of it that way. In the comment or a question around the competitive environment, certainly, there were shifts in the competitive dynamics in the third and fourth quarter with some folks exiting and kind of resetting their portfolio of products. As we've said multiple times, there isn't a market in which we don't have multiple competitors in that. There's over 800 home infusion providers that are part of the marketplace. We feel we're well positioned to capture market demand, our focus around reach and frequency and our commercial team is one in which we want to be that partner of choice, the ability for us to show consistent high-quality care and be reliable as a resource to help with that transition of those patients out of the hospital setting to their homes, we think earns us goodwill and earns us credit and credibility with those referral sources. So our focus as we go through the year is going to be to continue to execute at that local level to make certain that we are a partner of choice and that our team is out there hustling with reach and frequency to work with those referral sources to bring those patients on. But I feel really good about supply chain conditions. And I feel as if the national platform with the local responsiveness is one that is resonating well within those marketplaces.

Okay. And then Mike, you've added adjusted EPS as a metric you're guiding to? And historically, you've framed sort of the long-term algorithm with revenue and adjusted EBITDA. Could you update us on your view of those metrics, but now with maybe a longer-term view of adjusted EPS growth as well. That's kind of part one. And then the second part would be, obviously, between the last 2 calls, we've sort of round-tripped the Stelara [ Saga ], and now we have an idea of the impact in '25. As we think about getting back to this long-term algorithm, are there any other sort of things you guys have your eye on to the one-offs over the course of '25 or into '26 that could prevent the return to long-term growth algorithm in '26?

Yes. Let me unpack that a little bit, Matt. First and foremost, really appreciate the question on adjusted EPS. Look, we've consistently been steadfast in articulating that we view this as a high single-digit top line, low double-digit EBITDA growth enterprise over the longer term. I think one of the things that we are now injecting is that, look, through to John's point around the confidence in the cash flow generation and the strength of the balance sheet, look, over the last 2 years, we've deployed $0.5 billion towards share repurchase while also actively pursuing M&A. And I think as we articulate the value creation through share repurchase efforts to reduce the outstanding shares, I think that should result in adjusted EPS growing at a pace faster than adjusted EBITDA. To what extent that obviously is going to be predicated on the pace of capital deployment. But as we said a couple of weeks ago, I think given where we are, we're at 1.6x levered at the end of the year, I think the shareholders should expect that we would at least deploy our free cash flow generation, the common denominator would be share repurchase other than M&A activities that one could presume that, that would represent a more accretive opportunity for us than share repurchase, which I think will continue to be the measuring stick. As it relates to the portfolio, as John said but this team is used to managing through dynamics in the portfolio. I think a misconception is that it is a static portfolio of therapies that we oversee. And we knew that Stelara was going to eventually subside in terms of the margin contribution as we articulated a couple of weeks ago, 75% of our product profit comes from generics and biosimilars, which are relatively stable. And so there will always be therapies that evolve to an oral or subcu and that's something that doesn't catch us by surprise. But on the other side of the ledger, Matt, we're excited through our business development efforts, looking at the number of rare and orphan, limited distribution and product evolutions that are emerging, as well as, as John talked about with the advanced practitioner model, that opens up the aperture, so to speak, on therapies that we could administer as well. So I think our conviction, as John said, is that the growth algorithm remains firmly intact.

Our next question comes from the line of Brian Tanquilut with Jefferies.

Congrats on the quarter. Maybe, Mike, as I think about the guidance here, I appreciate all the detail if I think about typical seasonality and all the moving pieces, any callouts that we need to consider even qualitatively for Q1?

Not necessarily. Again, I think you've been following this -- you're old enough to have been following this industry for a while, Brian. Look, there's always a little bit of early Q1 disruption where you typically see a Q4 to Q1 step down as benefits get reverified plan designs and new contract terms are entered. Folks typically are a little slow to go to the dock as deductibles and co-pays reset. But look, as we pivoted more towards chronic therapies, we were around 75% of our revenue was chronic in the quarter. That's a more stable revenue base. So again, on the acute side, a little bit of an atypical year, yes, you would typically see some of that seasonal step down. But as John said, we saw considerable momentum coming out of the fourth quarter with the supply chain dynamics and competitive environment. So I think there would be a modest amount of what you would have historically seen from a Q1 seasonality.

Got it. And then maybe as I think about the Stelara impact again, so I appreciate the gross profit dollar impact disclosure. I know you spent a decent bit of money on supporting those patients on the G&A side. How should we be thinking about what you're doing there as a way to adjust or adapt to the changes in the economics for that specific drug?

Yes. Look, I mean, a, as John said, I think, first and foremost, I think it's a testament to the ability for us to devise and develop targeted clinical programs for highly complex patient cohorts. I think, look, as Stelara evolves as a therapy, it's still a therapy that is attractive for us, maybe not as attractive as it was in the past. But we're going to continue to put the patient first and maintain the clinical support for those complex patients. How behind the scenes we reallocate and redeploy scarce spending resources to support the growth initiatives is something that has been a hallmark of this platform that we've done for years. And so look, we were confident in the low single-digit growth profile of spending. And behind the curtain, so to speak, there's a lot of redeployment and reallocation. But our commitment is that given the complexity of these patients, we will continue to support them as we have in the past.

Our next question comes from the line of Lisa Gill with JPMorgan.

Great. Just have a couple of questions. So first, Mike, I have a number of questions. You talked about raising revenue by $100 million EBITDA by $5 million and said primarily that's Intramed. How should I think about the margins at Intramed? I mean that would assume that there's roughly a 5% EBITDA margin on that business based on your comments. Is there an opportunity to get that towards the low double-digit overall -- or I'm sorry, high single-digit EBITDA that you have on the business overall? Or is there something that we should think about within that line of business would be my first question.

Yes. I think Lisa, as we think about the Intramed, as John said, we're really excited about the expansion and the local presence that they have in South Carolina, which is an important market, and it was really unmatched. I think, look, this has been an algorithm that we've focused as we think about accretive M&A is looking at folks that might not have the same procurement leverage technology tools and capabilities that we have. And so I think the algorithm that we think about this is naturally this was somewhere in the mid-teens from a multiple. Again, it's not a perfect apples-to-apples comparison. But the strength and conviction we have in pursuing some of these smaller assets is bringing the leverage in the tools and capabilities that we have. And we'd be confident that this would be in low double-digit multiple before too long. And as John mentioned, integration efforts are well underway. You think about the obvious things around some of the limited distribution therapies that we have that, frankly, they did not. The leverage from a procurement perspective as well as just a lot of the efficiencies and rev cycle and other automation tools that we've developed over the last couple of years.

And then just if we think about the comment that John made around 800 home infusion providers out in the marketplace. And as I think about your acquisition strategy, right, you're 1.6x leverage right now. So obviously, a lot of opportunity to make those tuck-in type of acquisitions. How should I think about what you're targeting, what you think you could do in a given year? Is there any parameters around, hey, we only want to do x number of transactions? Or I think you brought up both limited distribution, advanced practitioner, is it specific types of practices that you're looking for? And then just bringing that back to the number side, you talked about what you paid for Intramed, right, a mid-teens kind of multiple. How would you say that the current environment is from a pricing perspective when we think about capital deployment?

Yes, a lot unpack. Look, from our perspective, I'll start and let John jump in. Look, it's a pretty simple lens. And first and foremost, we do not feel capital constrained. We are very active in the M&A area, we see pretty much every book coming to market. And frankly, it's not that big of a neighborhood. We know everybody living on the street. The challenge for us, Lisa, is as we think about going after core infusion providers, again, we have 93 compounding pharmacies across the United States. There isn't a major metropolitan area that we don't have a presence in. So the first question, John and I always ask is, what's the strategic value that's sustainable for this opportunity? And the economics are relatively straightforward in terms of the equation that we bring around procurement leverage and other sources of synergies. But candidly, we have an expansive brick-and-mortar footprint. So the challenge really becomes what's that strategic value. I think Intramed is a perfect example of where we've known and we've been envious of years of the presence that they've had in this local market and they definitely are solidifying our competitive position. So from a -- and we have a very solid integration playbook. So we are not constrained from the number of transactions we can pursue a year. Moreover, it's really more around making sure that we can articulate the shareholders the sustainable strategic value of pursuing these assets.

Yes. And the only other thing I'd add, Lisa, as we have talked about, that ability for us to identify these organizations that have some unique capabilities and/or density in a market. You take a look at Intramed Plus and the model that they were operating at both a blended advanced practitioner as well as the pharmacy infrastructure. There's just some unique capabilities that they had there that we were really excited about through that process. . But as Mike said, with the footprint that we have today, we'll be very disciplined in the way that we'll look to deploy that capital. There are organizations that kind of are in alignment with the characteristics of what we found with Intramed Plus, and I think we'll continue to look for those opportunities and pursue them through the process. But it will be in a very disciplined way. And knowing that we have multi -- multiple ways in which we can deploy capital in our strategy, we don't feel as if we have to do M&A because we have a share buyback program that we think can deliver value to our shareholders or in turn, if we find the right type of assets in the right locations with the right characteristics, we can deploy the capital in an accretive way.

Congratulations on the good numbers.

Our next question comes from the line of Pito Chickering with Deutsche Bank.

Looking at your guidance, do you guys assume any impact of biosimilars for Stelara and as you sign contracts with the biosimilar manufacturers because many of those are interchangeable at the pharmacy level, would those be accretive to your guidance assumptions?

Yes, Pito. I mean the Stelara impact that we called out is really just the change in dynamics from our procurement. Again, it's going to continue to evolve. I know a couple of biosimilars have already been approved. And so the way I would characterize it is we have handicapped behind the curtain how we think that the biosimilars will evolve, but I wouldn't characterize it as any material impact in the current year from the biosimilar impact.

Okay. Fair enough. And then on the acute side of the business, normally, when you see large exits, you guys scale labor pretty quickly and that pressure is your labor costs in the near term. Can you sort of talk about your labor, what you guys saw in the fourth quarter, sort of did that pressure you guys into that fade in 2025? And how should we think about the acute growth in '25 sort of from these market exits?

Pito, look, from a labor standpoint, we feel we're in a pretty strong position. I mean, clinical labor itself is always a bit of a challenge as you know. But as an organization with the stability that we can provide with the programs that we offer from an employee benefit standpoint as well as the opportunity that we can present to team members as they're joining the Option Care team. Our ability to recruit and retain talent, we think we're pretty well positioned to do that. With the shifts in the market dynamics, our team from our search and staffing and recruiting teams were active early. We learned through a couple of other incidents in the marketplace where there were shifting dynamics, what works in that process. We have a pretty strong playbook that we executed around that. And I think that ability to recruit the talent that was necessary to start to take on some additional volumes. We feel like we're well positioned in those markets and have the capacity to take on additional patients as the IV bag shortage started to diminish and the referral sources were looking for alternatives in those marketplace.

Okay. Last one here for me. With the exits of those payers who also do acute home infusion, does that change any of the negotiations as it relates to the chronic side of the business with those payers because they need you more on the acute side and have less capabilities there?

We certainly use the balance of our portfolio as being part of the value proposition that we're offering to the payer community. The ability to take on their members across the various therapeutic categories that we have, we think, is an advantage and something that we're always looking to make certain that we are extracting fair value for the value that we're delivering. So that opportunity that we have to have dialogue around the total cost of care of how we can help support their members by providing that high-quality care at an appropriate cost in a setting which their members want to receive it and help them with the high level of patient satisfaction that we're able to deliver, we think is a very compelling value proposition and one that we will look to make certain we're extracting fair value for.

Our next question comes from the line of Constantine Davides with Citizens.

John, in your prepared remarks, you mentioned those 2 new state-of-the-art pharmacies that opened in the fourth quarter. Can you just maybe expand a little bit about how those might differ from a typical pharmacy? And is there an opportunity to further rationalize your legacy footprint? Or is this just really capacity that you needed to add to support future growth?

Yes. We continue to evolve our thinking and certainly advance from both the technology as well as the build of those facilities based on best practices and learnings over the years of putting shovels in the ground and building pharmacies. Most of the advancements that we see is certainly in the clean room structure, whether we have different redundancies within the clean rooms as well as how we manage them to remain aseptic in the structure, but also the workflow of being able to be more efficient in bringing product in and product out of those clean room facilities. So the New York market, certainly a huge opportunity to continue to grow there, this was as much of a move to upgrade and on the technology and the infrastructure aspect but also to expand capacity in what is a really important market. So we think that helps support not only the Northeast and that Tri-State area, but also gives us plenty of capacity to continue to capture demand in the New York metro area on that. Florida is a really important market for us. And again, similar to what we did in New York, we took that state-of-the-art concept of having redundancy within the infrastructure and really an opportunity to build out a bigger, more regional type of focused facility in Tampa that helps to support the entire Peninsula. We still have other facilities within the state, but that opportunity that we have to have a stronger footprint and an ability to reach across the entire state, which is a really important geography for us, again, gave us that strength and stability within the infrastructure, but also capacity to continue to grow. So we continue to always look at the network design. We like the resilience that we have. We have the ability to move product and doses around, if necessary, due to natural disasters, due to workflow management and load balancing that at times is necessary within this business. But we're always going to look to make certain that we have an optimal network design. And as we continue to say, use this national scale but be able to be very responsive at a local level.

And then I guess just lastly, I don't know if I missed this, but can you just give us an update on the in-suite utilization? And to what extent has the calendar turned to 2025, any payer partners are increasingly looking at maybe mandating certain sites of service this year and beyond?

Yes, it's been a great story, Constantine. I mean today, we're well over 1/3 of our nursing visits are occurring in one of our infusion suites. And just to replay the tape, we really started our aggressive infusion suite expansion in the latter part of 2021 when we were about 16%, 17% of our nurse events were occurring in one of our suites. So not only has the pie grown substantially over the last 4 years. But the concentration of nurse visits into our suites has effectively doubled. That obviously provides us with a more efficient clinical labor deployment equation. We're seeing well over 20% nurse productivity uplift from those suites. And again, I think it's important to underscore and we always do that we don't force patients into a suite. We make them aware of conveniently located suite. This admittedly is a little more applicable for those longer-haul maintenance chronic patients that are on service. But interestingly, we actually see quite a few of our acute patients utilizing the suites as well. And so the payers understand this is part of your first question about our multiyear sustained capital investment to provide the highest quality of care, and that's going to continue. And I think this is an area we'll continue to invest in, especially as we can enhance that footprint of over 175 infusion locations to incorporate our advanced practitioner capabilities, which expands the scope and not just the scale of the suite capacity.

And then the last part of your question, Constantine, we have seen an uptick in activity around site of care initiatives at the payer level, certainly a higher level of interest. And I think as we've been in dialogue with the payer partners, that are looking at this. There's just opportunities as they're looking at the total cost of care to help to influence their members to making good choices around where to receive care within the health care ecosystem on that. So we are seeing an increased level of interest and programs that are being put in place to help to influence those decisions at the patient level and utilize these lower cost high-quality settings of care.

Our next question comes from the line of Joanna Gajuk with Bank of America.

I guess several follow-ups. So first, very quick on the guidance raise versus January, so the $100 million revenue and $5 million EBITDA versus prior range, that's only the deal, correct?

I'd say it's generally, Joanna. There's been a little bit of a revision on the revenue side. But yes, the profitability is really just the inclusion of Intramed, for the most part.

Okay. Great. And then I guess on this last discussion, so maybe 2 topics. First on the suites and specifically these advanced practitioner model. So is this something you're including in your suites? Or is this completely separate clinic because I was under the impression that this is a separate clinic. And also, can you give us a sense of how many of these you have and utilization because I guess when you give us the stats of 1/3 of your nursing visits in suites,does that include this new model? Or this will be separate? And also, can you expand the benefit? It sounds like you can do more -- a different therapy. So what specifically, I guess, those clinics are used for? Is it more oncology, Alzheimer's or anything both picture in terms of the reasoning for having a different model.

Yes, Joanna. So it would be advanced practitioner model. We had acquired Wasatch Infusion a few years back that operated this model. So we have been in a stage of certainly understanding and learning how to operate the advanced practitioner clinics through that process. The 175 locations that we have today as we call out are primarily infusion suites, not these infusion centers with advanced practitioner. But our ability to convert them over to an advanced practitioner model is the things that we're looking at and pursuing. Today, we have about 15 sites that operate with this advanced practitioner model. Our expectations are that's going to grow over time. And what that allows us to do is really 3 things. One is having the advanced practitioner allows us to offer a more comprehensive clinical services for patients that have more complex needs and/or therapies that are more complex in the administration and oversight that's required. The second thing it does is it does provide broader market access, especially in areas for Medicare fee-for-service in which there is not a broad access for home infusion for those patients. So it broadens that market access to be able to do that. The third thing it does is from that clinical complexity standpoint, it does allow us to be a deeper partner with pharma who may have some very unique products that they're bringing forward in that rare and orphan space and/or that have, again, higher levels of complex needs given that the opportunity that the nurse practitioner and that advanced practitioner model had to manage the patient more holistically. So we believe this is an interesting adjacency for us to continue to invest in and grow. One of the real positive things that we found with the Intramed Plus acquisition was they're operating both the pharmacy as well as the advanced practitioner model within South Carolina. There's really good learnings that we can take in and utilize across our platform that we are gaining through that acquisition, and as we look at the integration. And over time, we expect that will expand the number of products that we have available as well as broaden the market access given that we can offer solutions to patients in the home through the pharmacy and one of our infusion suites or with this advanced practitioner model, we think we will have the most comprehensive solution set to be able to provide infusion services to patients in the marketplace.

This is great, wonderful. And if I may just squeeze a very last one, also a follow-up on the discussion around your payers, but I guess specifically on the Medicare Advantage because I guess those guys are seeing pressure on the cost trend and reimbursement and such. But it sounds like you've seen actually the increased push when it comes to the shift right, into the lower cost settings trade. So is that what's happening? Like despite the fact that they are getting pressured, the contracting negotiations are not getting too tough? Or can you kind of talk about where you are on maybe the years you're negotiating now when it comes to those negotiations with MA plan?

Yes. Number one, I mean, we have over 800 payer relationships over 1,200, 1,300 contracts. So not everyone operates the same way on that, Joanna, but I can tell you, we have very constructive relationships with our payer partners. We continue to have conversations around the value that we can provide in helping them manage the total cost of care and really help to support reducing those medical loss ratios as they're trying to manage what is increasing utilization and some pressure on those being pushed higher. We continue to extol the fact that we are high-quality care at an appropriate cost in a setting in which their members want to receive it. And so that ability to partner with them to help be a solution in improving that medical loss ratio. We have very constructive conversations, and those are things that we continue to be in deep conversations across a wide number of payers in that. Our expectations as we move forward is we've always believed that we play a very valuable role in helping them manage that when they're thinking about member satisfaction, when they're thinking about the quality of care and when they're thinking about that total cost, we are well aligned with them, and we've got mutual targets in which we're trying to drive to. So I'm always cautiously optimistic that we're on the right side of the -- and on the same side of the table with them as we're moving those forward. And we're going to make certain that we extract fair value for the value that we're delivering, but we think that it's one in which they benefit as well.

Our next question comes from the line of Jamie Perse with Goldman Sachs.

This is Sarah Conrad on for Jamie. Your SG&A dollars and growth stepped up in 4Q, can you discuss what investments you're making in the operational or commercial infrastructure? And then is this also a good run rate to consider for 2025?

Sure, Sarah. Yes, look, I mean, I think as we talked -- John talked a little bit about what some of the acute opportunities, I think we invested commensurate with what we saw were some of the market opportunities. There are some indirect investments around patient registration, rev cycle, some of the indirect support efforts to make sure that we could be responsive to some of the acute local market opportunities, additional commercial resources, et cetera, to make sure we're being responsive to our referral sources. And I think that's a reasonable expectation. I think the great news is indirect spending as a percent of revenue continues to drop. It was 12.2% of revenue in the fourth quarter. And I think that's back to the earlier question around the growth algorithm, that's central to our thesis. And I think that remains -- we remain confident in that. So I think it's -- to your -- to the latter part of your question, I think it's a reasonable baseline as you think about '25.

Helpful. And then on VYJUVEK, can you provide an update on the traction in that product? And have unit economics changed at all since launch? Or do you expect those to change going forward either from a gross profit or an operating profit perspective?

Yes. Look, I mean, we don't provide specific economics on specific therapies for obvious competitive reasons. I think VYJUVEK is one of several LDD and rare and orphan therapies that I think is a clinical success story as we partnered with Krystal Biotech to commercialize what was a new revolutionary treatment for DEB. And look, I think we've also been very candid that as we launch these rare and orphans, and LDDs. These are typically mid-single-digit gross margin profile therapies because the therapy cost is considerable relative to other therapies in our portfolio. But yet, at the dollar gross profit line, it's still an attractive therapy for us to collaborate on with innovative biotech enterprises. No fundamental change in that. Again, I think as we've tried to articulate this over time as we build patient cohorts, we can drive relatively modest improvement in the margin, but that's over a course of years. So the short answer is, while we remain really excited about our collaboration with Krystal and others, no fundamental way we're thinking about the economics on these therapies.

This concludes the question-and-answer session. I would now like to turn it back to management for closing remarks.

Thank you all for joining us this morning and participating on our call. As we outlined, 2024 was a very productive year, and our team continues to execute at a very high level. We understand the important role that we play in delivering care to our patients and their families and we look forward to serving even more patients and delivering value to our shareholders in 2025. Take care, and have a great day. Thank you.