Bausch Health Reports Q1 Earnings Miss, Shares Under Pressure
Bausch Health Companies reported first-quarter results on Tuesday morning that missed both top- and bottom-line estimates, putting its embattled shares under pressure. Revenue for the three months ended in March increased 11% (about 8% organically) to $2.15 billion, slightly below the Street estimate of $2.16 billion, according to LSEG. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $665 million was up 13% over last year but missed the $710 billion consensus estimate.
Along with the quarterly results, Bausch Health reiterated its forward guidance, but investors remain concerned about two unresolved issues: Xifaxan litigation over generics and the monetization of the firm’s nearly 88.5% stake in eyecare leader Bausch + Lomb, which started trading as a public company in May 2022.
Xifaxan Litigation and Generics
For drug companies, one or two key drugs often drive the story. For Bausch Health, that drug is Xifaxan, which is used to treat irritable bowel syndrome with diarrhea (IBS-D) and overt hepatic encephalopathy (HE). While there is not necessarily expected to be a massive increase in adoption in the future, Xifaxan currently accounts for 41% of Bausch Health sales, excluding B+L.
The prospect of losing exclusivity on a drug responsible for such a large share of sales is a major concern for investors, especially given the debt load on BHC’s balance sheet. Despite a recent favorable appeals court decision putting off Norwich Pharmaceuticals’ application for a Xifaxan generic until October 2029, Bausch Health filed a lawsuit in April against Amneal Pharmaceuticals, which also wants to make a Xifaxan generic. The BHC filing means that there is now a 30-month stay in place before any potential generic approvals by the Food and Drug Administration.
Bausch + Lomb Monetization
The future monetization of the B+L stake is also a key milestone that could help alleviate some of Bausch Health’s debt. Much of the post-earnings conference call focused on these intertwined issues. Management remains committed to separating B+L and forming two adequately capitalized companies, but the Amneal litigation has investors searching for the next milestone/catalyst that will bring us closer to B+L monetization.
Guidance
Management reaffirmed their full-year outlook for fiscal 2024. Including the B+L stake, management expects sales between $9.3 billion to $9.55 billion. That’s ahead of the $9.37 billion estimate at the midpoint. Breaking that down, $4.7 billion to $4.85 billion are attributable to Bausch Health (implying 2% to 5% organic growth), with $4.6 billion to $4.7 billion attributable to Bausch + Lomb. Adjusted EBITDA is expected to fall in a range of $3.2 billion to $3.35 billion — with $2.36 billion to $2.46 billion coming from Bausch Health and the remaining $840 million to $890 coming from the company’s stake in B+L. The overall guidance is better than the Street estimate of $3.22 billion at the midpoint.
