Bausch Health's (BHC) Q2 Earnings & Sales Beat, '23 View Raised
Bausch Health Companies Inc.'s BHC second-quarter results were better than expected and consequently management raised the annual revenue guidance.
The company’s adjusted earnings per share of 81 cents beat the Zacks Consensus Estimate of 75 cents and increased from 55 cents reported in the year-ago quarter.
Total revenues of $2.17 billion were up 10% year over year. Revenues beat the Zacks Consensus Estimate of $2 billion.
Revenues in the quarter were affected by the unfavorable impact of foreign exchange of $17 million and the impact of divestitures and discontinuations of $4 million. Revenues were up 11% year over year on an organic basis.
The stock has surged 49.9% year to date compared with the industry’s growth of 35.9%.
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Quarter in Detail
The company reports revenues through five segments – Salix, International, Diversified Products, Solta Medical and Bausch + Lomb.
Salix revenues came in at $557 million, up 11%, driven by growth in Xifaxan, Relistor (up 42%) and Trulance (up 73%). Xifaxan revenues grew by 9% in the quarter and overall demand increased by 3%. Salix revenues beat the Zacks Consensus Estimate of $524 million and our model estimate of $512.9 million.
International Rx revenues in the quarter were $259 million, up 11%, and beat the Zacks Consensus Estimate of $252 million. Revenues increased organically by 11%, driven by growth in Canada and Europe, Middle East, and Africa, after excluding the unfavorable impact of foreign exchange.
Diversified Products revenues were $228 million, down 3% from the year-ago quarter due to decreases in sales across neurology and generics, partially offset by an increase in sales in dentistry (driven by Arestin) and dermatology. Revenues missed the Zacks Consensus Estimate of $236 million and our model estimate of $231.1 million. Jublia sales were impacted by higher coupons and rebates, which offset positive demand.
Solta Medical reported revenues of $88 million, up 54%, and beat the Zacks Consensus Estimate of $80 million and our model estimate of $74.8 million. Revenues were up 60% organically, primarily driven by strong results in Asia Pacific, which offset the decline in the U.S. markets.
Revenues from Bausch + Lomb were $1 billion, up 10% year over year and beating the Zacks Consensus Estimate of $970 million. The reported figure was in-line with our model estimate. Excluding the unfavorable impact of foreign exchange of $18 million, the favorable impacts of acquisitions of $2 million and divestitures and discontinuations of $2 million, the Bausch + Lomb segment revenues increased organically by 12% year over year, driven by increases across all business units.
Bausch + Lomb launched its initial public offering (IPO) and subsequently began trading under the ticker "BLCO" on May 6, 2022.
Pipeline Development
The phase II study on amiselimod, a new oral S1P receptor modulator that targets the treatment of mild to moderate ulcerative colitis, completed enrollment in July. The study is expected to be completed in the second half of the year.
The FDA has accepted the company’s new drug application for IDP-126, the first triple combination product for treating acne vulgaris and set a target action date of Oct 20, 2023.
Other Updates
In June 2023, Bausch entered into a non-recourse receivables financing facility for up to $600 million with KKR and its credit funds and accounts. Following the closing of the receivables facility, Bausch Health (excl. Bausch + Lomb) has liquidity in excess of $1 billion, inclusive of cash and cash equivalents, availability under the company’s existing revolving credit facility and availability under the receivables facility.
This facility, provided by KKR and its credit funds and accounts, will be collateralized by specific accounts receivable generated by a wholly-owned subsidiary of BHC.
The primary objective of this financing facility is to strengthen Bausch Health's overall liquidity for general corporate purposes. By gaining access to this additional liquidity, the company will have greater flexibility to support its operations and pursue strategic initiatives. The facility's term is approximately five years, providing Bausch Health with a long-term financial resource to effectively execute its plans.
The FDA granted tentative approval to Norwich Pharmaceuticals Inc.’s abbreviated new drug application (ANDA) for Xifaxan (rifaximin) 550 mg in a letter dated Jun 2, 2023.
Xifaxan 550 mg tablets are indicated for reducing the risk of overt hepatic encephalopathy (HE) recurrence in adults and for treating irritable bowel syndrome with diarrhea (IBS-D) in adults.
However, the FDA confirmed in its letter that it cannot grant final approval until Oct 2, 2029, which is the date specified by the presiding judge in his final judgment in Salix Pharmaceuticals, LTD. et al. v. Norwich Pharmaceuticals, Inc.
Norwich cannot launch its ANDA product until it receives final approval from the FDA. Norwich has sued the FDA in the United States District Court for the District of Columbia.
Norwich requested that the D.C. District Court direct the FDA to grant final approval of the ANDA, notwithstanding the Delaware Court's final judgment. The FDA opposed Norwich's action and BHC has also intervened in this lawsuit. This matter is currently being briefed and a decision is expected in the fall season.
2023 Guidance Update
Revenues are projected in the range of $8.45-$8.65 billion (previous guidance: $8.35-$8.55 billion). Excluding Bausch + Lomb, revenues are projected to come around $4.50 - $4.65 billion (previous guidance: $4.45- $4.60 billion). The increase is primarily due to favorable movements in foreign exchange.
Gross margin is expected in the 80% range, in line with prior guidance.
Our Take
Bausch's second-quarter results were encouraging, as most of the business units posted growth. The Salix business maintained momentum.
Zacks Rank and Stocks to Consider
Bausch currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the overall healthcare sector are Dynavax Technologies DVAX and Alkermes ALKS. While DVAX sports a Zacks Rank #1 (Strong Buy) at present, Alkermes carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The loss per share estimate for DVAX has narrowed by 5 cents to 51 cents for 2023 in the past 30 days. Dynavax has risen 25.8% in the year-to-date period. DVAX’s earnings beat estimates in two of the trailing four quarters and missed in the remaining two, the average surprise being 25.78%.
The Zacks Consensus Estimate for Alkermes’ earnings per share has moved up from 50 cents to $1.47 for 2023 and from $1.78 to $2.04 for 2024 in the past 60 days. The stock has risen 5.7% in the year-to-date period.
ALKS’ earnings beat estimates in all the trailing four quarters, the average surprise being 81.98%.
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