Former senior executive at Bausch Health Companies Inc
- Key trends and developments in the generics pharmaceutical space
- Bausch Health’s (NYSE: BHC) product pipeline and capabilities post spin-offs
- Competitive positioning of major players surrounding Bausch Health, such as Johnson & Johnson (NYSE: JNJ) and Teva Pharmaceuticals (TLV: TEVA)
- Cost reduction efforts and ability to generate free cash flow
- 2022 outlook, turnaround potential and business risks
Bausch Health updated its financial guidance for full-year 2022 with revenue of USD 8.25-8.4bn, affirming 3-5% organic growth. The company is projecting full-year 2022 adjusted EBITDA of USD 3.225-3.375bn, including roughly USD 100m of the previously disclosed USD 150m of annual run rate dis-synergies. Does this USD 150m estimate sound right to you, or do you believe there could be greater challenges and headwinds for Bausch Health and Bausch + Lomb post spin-off?
Consensus is projecting USD 8.347bn for Bausch’s 2022 revenue, down 1% YoY vs 2021. Growth is expected to pick back up to the 3-4% vicinity in 2023-25. 2022 adjusted EBITDA is projected at USD 3.267bn, down 5.9% YoY. 2022 adjusted earnings per share are pegged at USD 3.85, down 12.6% YoY. What’s interesting is consensus expects quite a recovery beyond 2023 – adjusted earnings per share are expected to go for USD 4.57 in 2023, a 17% gain on 2022. What are your thoughts on the 2022 projections, which are clearly in line with company guidance? Is it a realistic plan for 2022 and do you expect this acceleration in earnings as we move through 2023?
Bausch Health now operates as two companies, with the completion of Bausch + Lomb’s IPO on 10 May 2022, trading under the ticker BLCO. Management’s rationale for the spin-off of Bausch + Lomb was that it enabled Bausch Health to increase its focus on accelerating growth with some strategic commercial investments and expanding its pipeline with innovative products, which is fairly cliché rationale. What are your thoughts on the reason for the spin-off? Does it make sense to you or do the two parts now equal less than the previous whole?
You’ve talked about the challenges, but what do you think are the biggest opportunities for Bausch + Lomb as a standalone? What are you most excited and most concerned about regarding its future prospects?
In terms of Bausch + Lomb’s key contact lens franchise, do you have any comments on the silicone hydrogel market around daily disposables and where that’s heading? The company talked about 41% organic revenue growth – we’ve got Ultra OneDay, Aqualox and Infuse, the bread-and-butter of the contact lens business. What are your thoughts on its competitive positioning in this space?
What are your thoughts on Xipere [triamcinolone acetonide injectable suspension] and Bausch + Lomb’s relationship with Clearside Biomedical? The two companies announced in March 2022 the US commercial launch of Xipere, which is the first and only FDA-approved therapy for suprachoroidal use for the treatment of macular oedema associated with uveitis, a form of eye inflammation.
Do you have any comments on Bausch + Lomb’s Lumify OTC [over-the-counter] eye drops or Biotrue MPS [Multi-purpose Solution], as well as the vitamin business, Ocuvite and PreserVision?
Thomas Appio is the incoming CEO of Bausch Health, effective upon the closing of the Bausch + Lomb spin-off. Do you have a view on his leadership in terms of managing Bausch Health, and what do you think his vision and priorities are for the company?
What are your thoughts on Bausch Health’s capital structure and ability to reduce its leverage over the coming years, especially with the pending spin-off of Solta, for which we’ve been waiting for some time and the market conditions do not seem ideal? The spin-off is intended to help Bausch reduce its outstanding debt. I mentioned the company ended Q1 2022 with USD 23.168bn of debt, USD 1.249bn cash. Ignoring the recent IPO and its associate ramifications, and based on the company’s guidance for 2022 adjusted EBITDA, I peg Bausch Health’s net leverage at around 6.7x, which I would say is elevated, but I have seen many situations a lot worse than that, so I don’t know if it’s overly concerning.
What are your thoughts on Xifaxan [rifaximin]? Bausch Health is fairly well diversified across products, with over 600. The legacy Salix Xifaxan is really the only large single product across the company, and it is significant – it generated USD 1.644bn sales in 2021, representing 19.5% of the company’s total annual sales. It also continues to post really solid growth – 2021 sales increased 10.9% YoY and the company is looking for that to accelerate from 11% to nearly 17%, or USD 1.9bn, .in 2022, but I’m not sure that’s realistic. This is a short-course therapy that’s FDA-approved for treatment of IBS-D [irritable bowel syndrome with diarrhoea] in adults, but it will face generic competition. Do you think it’s realistic to expect sales to accelerate to 17% in 2022?
Bausch has engaged in litigation over Xifaxan and has settled numerous disputes with names such as Teva, Sun and Norwich. Through settlement negotiations, Teva is the first who can market its own generic version of Xifaxan, beginning 1 January 2028. What is Bausch doing between now and 2028 to prepare for the incoming generic threat, and what can it do to protect the franchise from generic entry?
Circling back to Solta, what are your thoughts on the Clear + Brilliant product and its opportunity? Aesthetics and skincare is certainly a lucrative and high-growth business, but I’m not that close to the story.
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