Bausch Health (BHC) usually rallies after its quarterly earnings report. After Bausch posted its Q2 report, that did not happen.
The company reported revenue growing just 1.1% to $2.15B. Though Salix sales topped $509M, up 15% from last year, B+L sales fell 0.1%. Revenue from the Ortho Dermatologics and Diversified Products units also fell. The GAAP EPS net loss of $0.49 (non-GAAP EPS of +$1.04) should not concern investors. BHC generated $339M in cash from operations in the quarter.
The R&D spending increase of 24% is a positive development. BHC is now investing relatively more here than on its debt. And since the company’s enterprise value did not change in the last few years throughout the turnaround, investors are ignoring the value creation.
More Q2 Highlights
Xifaxan’s sales performance is a positive development as it grew ~20% in Q2. LOE (loss of exclusivity) in 2028 is not a concern because the Salix unit has a deep pipeline of other drugs.
The markets ignored the higher guidance and the debt reduction, which stood at $24.37B as of Jun. 30. With FCF of $1.27B and $339M in cash generation from operations, the stock trades at a discount. And although the stock will continue trading in a range, sentiment will eventually shift positive, sending the stock back to the $24 - $26 range.
