Bausch Health Solvency Remains A Concerns, Analyst Downgrades Stock

On Thursday, Bausch Health Companies BHC reported a second-quarter 2024 GAAP EPS of $0.03 compared to the consensus of $0.28.

The company reported revenues of $2.403 billion, up 11% year-over-year, beating the consensus of $2.339 billion.

Excluding the impact of foreign exchange of $25 million, acquisitions of $104 million, and divestitures and discontinuations of $14 million, revenue increased by 8% organically compared with the second quarter of 2023.

Guidance: Bausch Health Companies expects 2024 revenues of $9.4 billion-$9.65 billion versus prior guidance of $9.3 billion-$9.55 billion and consensus of $9.397 billion.

The company expects adjusted EBITDA of $3.21 billion-$3.36 billion versus the prior guidance of $3.20 billion-$3.35 billion.

Piper Sandler analyst downgraded Bausch to Underweight from Neutral and lowered its price target to $3, a significant decline from $9.

The analyst highlights that with around $9.4 billion in debt maturing in 2027/2028 and Xifaxan set to lose exclusivity by January 2028, Bausch’s solvency remains a critical concern despite their efforts to shift focus.

The conversation inevitably returns to solvency issues even with developments like the next-generation rifaximin formulation (RED-C).

In the second quarter of 2024, Xifaxan sales increased by 10% year over year.

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.

Therefore, it is uncertain whether RED-C will significantly impact Xifaxan’s market share once it loses exclusivity.

Last week, Bausch Health Companies stock witnessed a sharp decline triggered by a report suggesting the company is negotiating a potential prepackaged Chapter 11 bankruptcy with co-op creditor.

The company later issued a statement, firmly denying any discussions related to bankruptcy or insolvency proceedings.

Price Action: BHC stock is down 6.80% at $5.69 at the last check on Friday.

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