Contact Lens Supplier Bausch + Lomb Eyes Sale Amid Separation Challenges As Parent Bausch Health Faces Debt Issues

Bausch + Lomb Corp BLCO is reportedly considering a sale as it navigates separation issues from its parent company, Bausch Health Companies BHC.

The potential sale is part of efforts to address concerns from creditors like Apollo Global Management Inc APO following disputes over the separation.

The Bausch + Lomb spin-off was part of Bausch Health’s plan to alleviate its $21 billion debt, a third of which is due by 2027.

The parent company retained an 88% stake after listing Bausch + Lomb in 2022 but struggled to execute the full separation due to concerns about solvency after the split.

The world’s largest contact lens supplier, valued at over $10 billion, has sought advice from Goldman Sachs to explore interest from private equity firms.

In the second quarter of 2024, the eye health company reported sales of $1.22 billion, up 17% year over year, beating the consensus of $1.17 billion.

The company reported adjusted EPS of $0.13, beating the consensus of $0.12.

The Financial Times report adds that Bausch + Lomb stock could increase its sale price if a deal moves forward.

For 2024, the company expects sales of $4.7 billion—$4.8 billion higher than the consensus of $4.66 billion. The report adds that nearly 60% of its revenue will come from its contact lens and eye drug divisions.

Creditors, including Elliott Management and GoldenTree Asset Management, voiced their opposition, worried about the spin-off’s impact on Bausch Health’s financial stability.

Bausch Health’s top shareholders, including Carl Icahn and John Paulson’s Paulson & Co., had supported the spin-off, seeing potential benefits in owning a larger share of the more profitable eye care subsidiary.

The parent company’s financial troubles are further compounded by the uncertainty surrounding its lead drug, Xifaxan, which will lose patent protection by 2029.

Bausch Health is promoting RED-C, which is in late-stage development, to prevent a first episode of hepatic encephalopathy (HE).

However, since Xifaxan is already approved to prevent HE recurrence, it is anticipated that Xifaxan generics may be used off-label for the initial prevention of HE if RED-C gets approved.

YTD, the Bausch Health stock has fallen 13.2% while BLCO has gained 4.2%.

Price Action: BLCO stock is trading higher by 14.40% to $17.80 at the last check on Monday.

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