Citron Calls Bausch Health — Formerly Valeant — The 'Textbook Turnaround'

Three years after Citron Research called Valeant the “pharmaceutical Enron,” the firm said Tuesday that it’s time to give Valeant successor Bausch Health Companies Inc BHC the credit it is due for its rebranding and turnaround efforts.

Turnaround Story

On Tuesday, Citron Research’s Andrew Left said CEO Joe Papa has done a spectacular job since taking over less than four years ago.

In the past three years alone, management has paid down about $8 billion in debt, vastly improving the company’s balance sheet and putting them in a position of financial flexibility.

“In 2019, the debt has become manageable and the company is gaining momentum with recent, successful launches of new drugs, consistent with its ‘pivot to offense,’” Left said. 

'Bausch Is Not Valeant'

Bausch has now reported six consecutive quarters of organic revenue growth, and Left said the company is likely positioned to significantly exceed consensus 2020 revenue and earnings expectations.

Wall Street also doesn’t seem to be appreciating just how much of a blockbuster Doubrii will be, he said. 

"While initially criticized as just another ‘combination drug’ with no widespread appeal or reimbursements, in just the past six months, Duobrii has become the most successful dermatology drug launch in the last 10 years for ANY dermatology product in the U.S."

After several years of skeptical observation, Left is is convinced Bausch deserves credit for its turnaround.

“The new Bausch Health is not Valeant, and investors have an opportunity to buy a well-diversified pharmaceutical company with durable products and a healthy pipeline under a world-class management team that has proven their honesty and dedication,” he said. 

Citron set a $40 price target for Bausch stock, suggesting nearly 100% upside from recent levels.

Benzinga’s Take

Once a company like Valeant/Bausch is hit by accounting/financial scandals, its actions and balance sheet will be analyzed by the market with a fine-toothed comb.

Citron’s confidence that Bausch is now walking the straight-and-narrow path is reassuring to investors. The only question mark will be whether the sour taste of the Valeant fiasco will linger in investor's minds and continue to suppress the stock’s valuation over time.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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