Bausch (BHC) Misses On Q2 Earnings & Sales, Raises View

Bausch Health Companies Inc.’s (NYSE:BHC) earnings and sales missed estimates in the second quarter of 2019. Nevertheless, the company raised its annual sales guidance for the second consecutive time.

The company’s adjusted earnings per share of $1.03 missed the Zacks Consensus Estimate of $1.06 but increased from 93 cents reported in the year-ago quarter.

Total revenues of $2.152 billion marginally missed the Zacks Consensus Estimate of $2.167 billion but increased 1% year over year.

Quarter in Detail

Revenues in the Bausch + Lomb/International segment were $1.2 billion, almost flat year over year. Excluding the impact of discontinuations and divestitures, the segment organically improved approximately 4%, driven by growth in Global Consumer and Global Vision Care sales.

Despite the loss of exclusivity of Uceris, the Salix segment revenues rose 15.4% year over year to $509 million. The uptick was primarily driven by 21% growth in Xifaxan. The company earlier acquired certain assets of Synergy Pharmaceuticals Inc., including Trulance, which is a treatment for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation (IBS-C). Revenues from Trulance came in at $17 million.

The Ortho Dermatologics segment revenues were $122 million, down 13% year over year due to lower volumes resulting from the loss of exclusivity of Elidel, Zovirax and Solodyn. This was partially offset by revenue growth in the Global Solta business.

Diversified Products segment revenues were $313 million, down 7% from the year-ago quarter primarily due to the loss of exclusivity of certain products.

The company reduced debt by approximately $100 million in the second quarter of 2019. Year to date, the company reduced debt by $350 million.

Pipeline Update

The company announced the U.S. launch of Bausch + Lomb ULTRA Multifocal for Astigmatism contact lenses for patients with both astigmatism and presbyopia. During the first quarter, the FDA approved Lotemax Sm (loteprednol etabonate ophthalmic gel) 0.38%, a new gel formulation for the treatment of postoperative inflammation and pain following ocular surgery. Lotemax was launched in April.

In June 2019, Bausch launched psoriasis lotion, Duobrii, in the United States. In April, the FDA approved Duobrii Lotion for the topical treatment of plaque psoriasis in adults.

Earlier, Bausch had acquired the U.S. rights to Eton Pharmaceuticals’ (NASDAQ:ETON) EM-100, an investigational eye drop for the treatment of ocular itching associated with allergic conjunctivitis. However, the FDA issued a complete response letter (“CRL”) to a regulatory application seeking approval for the candidate.

2019 Guidance Updated

For 2019, revenues are now expected between $8.40 billion and $8.60 billion (previous guidance was $8.35-$8.55 billion). The Zacks Consensus Estimate is $8.51 billion, up from the mid-point of $8.50 billion.

Our Take

While Bausch missed earnings and sales estimates in the second quarter, we are pretty encouraged by the increase in its guidance. The top 10 products grew 13% organically in the quarter. Growth in Xifaxan sales, the launch of Bryhali and Duobrii, and the successful acquisition of Trulance boosted the company’s performance.

Bausch’s stock has rallied 17.7% in the year so far against the decline of 7.7% for the industry.

After a tumultuous period, the company started a rebuilding process. Bausch has narrowed its focus on seven products — Vyzulta, Siliq, Bryhali, Lumify, Duobrii, Relistor and SiHy Daily. All these products have now been launched and hence the company’s performance in the second half of the year is expected to be strong.

Zacks Rank & Stocks to Consider

Bausch currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the healthcare sector are Galectin Therapeutics, Inc. (NASDAQ:GALT) and Portola Pharmaceuticals, Inc. (NASDAQ:PTLA) . Both stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Galectin’s loss per share estimates have narrowed from 59 cents to 51 cents for 2019 in the past 60 days.

Portola’s loss per share estimates have narrowed from $4.13 to $4.12 for 2019 in the past 60 days.

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