Bausch Health Worth A Second Look

Like clockwork, Bausch Health (TSX:BHC) rallied to a high of over $26 after the company reported yet another strong quarter. But the stock did not hold those gains as markets fretted over the weakness ahead.

Governments want to lower drug costs. The opioid lawsuit against Teva (NYSE:TEVA) and Endo International (NASDAQ:ENDP) is pulling BHC stock valuations lower. Investors should take another look at Bausch Health as its stock gets set for another rebound.

Bausch reported first-quarter organic revenue growing 5%, with 77% of it coming from B+L/international and Salix segments. It generated $413 million in cash from operations, refinanced $1.5 billion of 2021 and 2023 senior unsecured notes, and still increased R&D spend by 30%.

BHC either received approval for or launched five products that will add meaningfully to results this year: Duobrii, Bryhali, Lotemax, Tangible Hydra-PEG (contact lens), and Thermage FX in the Asia Pacific region. BioTrue ONEday was a notable driver for the B+L division that the market does not appreciate.

Alcon’s (ACL) IPO, a spinoff from Novartis (NYSE:NVS), may convince the market that BHC stock is worth more. Alcon’s IPO debt started strong. Near-term, markets are shying away from drug stocks, which will limit their upside view on Bausch’s B+L value.

Your Takeaway
Bausch continues to lower its debt through the use of free cash flow. With debt at $24.5 billion, down from $25.6 billion last year, the company will get to a debt/equity that investors will not mind. Before then, the stock is still appealing as management turns around the business.