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Bausch (BHC) Q2 Earnings & Sales Miss, View Cut, Stock Down

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Shares of Bausch Health Companies Inc. (BHC - Free Report) were down 11.2% down in response to weak second-quarter 2022 results and lowered guidance.

The company’s adjusted earnings per share of 55 cents missed the Zacks Consensus Estimate of 89 cents and decreased from 98 cents reported in the year-ago quarter.

Total revenues of $1.97 billion missed the Zacks Consensus Estimate of $2 billion and fell 6% year over year. 

Revenues in the quarter were affected by the unfavorable impact of foreign exchange of $61 million and the impact of divestitures and discontinuations of $74 million, primarily due to the sale of Amoun Pharmaceutical Company S.A.E. on Jul 26, 2021. Revenues were flat on an organic basis year over year.

The stock has plunged 81.2% in the year so far compared with the industry’s decline of 20.1%.

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Quarter in Detail

The company reported revenues in five segments – Salix, International, Diversified Products, Solta Medical and Bausch + Lomb.

Salix revenues came in at $501 million, down 3%. The decrease was primarily due to lower sales of Trulance, which was partially offset by increased sales of Xifaxan (rifaximin) and Plenvu. Xifaxan revenues were up 1%.

International Rx revenues in the quarter were $233 million, down 26%.

Diversified Products revenues were $235 million, down 11% from the year-ago quarter, primarily attributable to a decrease in volumes attributable to the neurology business and lower net realized pricing. Revenues from Jublia increased 13% as the brand continues to benefit from marketing investment.
Solta Medical reported revenues of $57 million resulting from the impact of ongoing COVID-related lockdowns

Revenues from Bausch + Lomb were $941 million, up 1% year over year.  Excluding the unfavorable impact of foreign exchange of $46 million and the impact of divestitures and discontinuations of $3 million, revenues increased organically by 6% year over year, driven by sales growth in Vision Care and Surgical, offset by lower revenues from Ophthalmic Pharmaceuticals.

2022 Guidance Lowered

Revenues are now expected in the $8.05-$8.22 billion range (earlier projection: $8.25-$8.40 billion) due to the uncertainties in the overall operating environment.

Initial Public Offering of Bausch + Lomb

Bausch Health's eye health business, Bausch + Lomb, launched its initial public offering (IPO) and subsequently began trading under the ticker "BLCO" on May 6, 2022.

On Jun 16, 2022, Bausch Health announced it was suspending its plans for the Solta IPO as result of challenging market conditions and other factors. Solta will remain part of Bausch Health, as it plans to revisit alternate paths for its Solta medical aesthetic devices business.

Xifaxan Litigation

Bausch Health announced that the U.S. District Court of Delaware issued an Oral Order in the matter litigation regarding the infringement and validity of certain U.S. patents protecting the composition and use of Xifaxan 550 mg tablets for the treatment of irritable bowel syndrome with diarrhea (IBS-D) and reduction in risk of overt hepatic encephalopathy (HE) recurrence.

The Oral Order indicates that the court will find certain U.S. patents protecting the use of Xifaxan 550 mg tablets for the reduction in risk of HE recurrence valid and infringed U.S. patents protecting the composition and use of Xifaxan for treating IBS-D invalid.  Norwich Pharmaceuticals has submitted an abbreviated new drug application (ANDA) for the generic of Xifaxan.

Consequently, the FDA has stated that it plans to make a major revision to the rifaximin product-specific guidance to add an in vivo bioequivalency study.  Until the approval of a revised ANDA is granted by the FDA and the expected injunction modified by the Court, Norwich Pharmaceuticals is not permitted to launch a generic equivalent of Xifaxan.

Bausch Health has settlement agreements with Teva, Sun Pharmaceuticals and Sandoz to permit a generic rifaximin product entry in 2028 or upon an earlier approval and launch of a generic rifaximin product.

Our Take

Bausch's second-quarter results were dismal. The lowering of the guidance disappointed investors. The Xifaxan patent litigation will remain an overhang on the shares, and an earlier-than-expected generic entry will adversely impact the top line.

Zacks Rank and Stocks to Consider

Bausch currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the sector are Alkermes (ALKS - Free Report) , Novavax (NVAX - Free Report) and Dynavax (DVAX - Free Report) All three carry a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ALKS’ earnings estimates for 2022 reversed from a loss of 17 cents to earnings of 20 cents in the past 30 days. Alkermes surpassed earnings in all the trailing four quarters, the average being 325.48%.

Dynavax’s earnings estimates have increased to $1.73 from $1.14 for 2022 over the past 60 days. Earnings of Dynavax have surpassed estimates in two of the trailing four quarters.

Novavax’s earnings estimates for 2022 have remained steady at $24.17 over the past seven days. NVAX delivered a negative earnings surprise of 232.53%, on average.