Why Bausch Health's Market Cap Was Chopped In Half Thursday: 'A Near Worst-Case Scenario'

Shares of global health company Bausch Health Companies Inc BHC are plunging Thursday after a Delaware federal judge issued an oral order on patents related to the company's Xifaxan drug.

What Happened: Judge Richard Andrews of the U.S. District Court for the District of Delaware ruled Thursday that some patent claims involving Xifaxan were invalid, according to a Bloomberg Law report.

Xifaxan is used for the treatment of irritable bowel syndrome with diarrhea. The ruling clears the stage for Norwich Pharmaceuticals' proposed generic version of the drug. 

"The management of Alvogen, Norwich’s parent company, is very pleased with the district court’s decision which clears a significant hurdle in the path to bringing an affordable alternative to patients taking Xifaxan for IBS-D," Alvogen CEO Lisa Graver told Bloomberg Law.

Following the order, JPMorgan downgraded Bausch from Overweight to Neutral. 

"If the court rules as the oral order is suggesting, it would represent a near-worst-case scenario for BHC and likely enable generic competition for Xifaxan in the late 2024-2025 time frame," the analyst firm wrote in a note to clients.

Although JPMorgan noted that Bausch could still win on appeal, the firm believes the downside risk outweighs the potential upside opportunity.

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BCH Price Action: Bausch Health shares were halted several times before ultimately being cut in half.

The stock was down 50.3% at $4.32 Thursday afternoon, according to data from Benzinga Pro.

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