Company Reports

Bausch & Lomb is one of the largest vision care companies in the U.S. Bausch spun off from its former parent company, Bausch Health, in 2022 and it now operates in three segments: vision care, surgical, and ophthalmic pharmaceuticals.

Narrow-moat Bausch & Lomb reported fourth-quarter earnings that were ahead of our expectations. Total sales were up 17.8% year over year thanks to strong performance across the board. We maintain our fair value estimate of $26 per share (CAD 34.50 per share) as the results didn't significantly change our long-term outlook for the company.

Narrow-moat Bausch & Lomb reported better-than-expected third-quarter results. Total sales were up 6.9% year over year thanks to strong demand and a healthy product mix. Milestones in the quarter include the closing of Xiidra deal (dry-eye drug from Novartis) and the launch of Miebo (the first and only U.S. Food and Drug Administration-approved treatment for dry-eye disease that directly targets tear evaporation). We maintain our fair value estimate of $26 (CAD 34.50) per share.

Narrow-moat Bausch & Lomb reported second-quarter earnings that were ahead of our expectations. Total sales were up 10% year over year thanks to great performance from its consumer vision care and pharmaceutical businesses. Supply chain issues and unfavorable foreign exchange remain, but these challenges were more than offset by robust growth in Bausch’s base business and promising recovery in China, which was up 24% on constant currency. We maintain our fair value estimate of $26 (CAD 34.50) per share.

Bausch & Lomb announced an agreement with Novartis to acquire dry eye drug Xiidra (along with a few early-stage eye care products) for $1.75 billion in upfront cash and potential sales-based milestone payments of up to $750 million. After baking in the impact of the acquisition, we are raising our fair value estimate to $26 from $25 (CAD 34.50 from CAD 34). We expect a roughly $500 million annual top-line contribution from Xiidra and a healthy margin boost until 2030 when we expect Xiidra to start facing generic entry. We are also raising Bausch’s Uncertainty Rating to High from Medium given the level of debt required to finance this deal combined with already high levels of debt outstanding. The company ended 2022 with $380 million in cash and a debt balance of $2.4 billion, but we expect an additional debt raise of $1.0 billion-$1.25 billion to fund the acquisition, raising its net debt/EBITDA to over 4.0. The deal is expected to close by the end of 2023, and we don’t think the deal will have a major impact on the firm’s narrow moat.

Bausch & Lomb is one of the largest vision care companies in the U.S. Bausch spun off from its former parent company, Bausch Health, in 2022 and it now operates in three segments: vision care, surgical, and ophthalmic pharmaceuticals.

Narrow-moat Bausch & Lomb reported first-quarter earnings that were lower than anticipated. We are maintaining our $25 fair value estimate as our lowered near-term assumptions are offset by the time value of money.

Bausch & Lomb is one of the largest vision care companies in the U.S. Bausch spun off from its former parent company, Bausch Health, in 2022 and it now operates in three segments: vision care, surgical, and ophthalmic pharmaceuticals.

After reviewing our key valuation assumptions, we are maintaining our $25 fair value estimate for Bausch & Lomb.

Bausch & Lomb is one of the largest vision care companies in the U.S. Bausch spun off from its former parent company, Bausch Health, in 2022 and it now operates in three segments: vision care, surgical, and ophthalmic pharmaceuticals.

Narrow-moat Bausch & Lomb posted a solid quarter with good top line growth as it ramps up its vision and surgical portfolio. Margins were held back by continued currency headwinds and supply chain inflation, as well as increased research investment. We think the firm is catching up with the more robust portfolios of its peers in the surgical vision space with premium intraocular lens releases like the earlier AcuFocus acquisition and the recent LuxSmart launch in Europe. Guidance for fiscal 2023 will be provided in the first-quarter earnings release by Brent Saunders, who is returning as CEO. While adjusted net income has not yet turned positive, we think the firm is on track to grow its premium sales and improve mix. After evaluating the earnings, we are maintaining our fair value estimate.

Narrow–moat Bausch & Lomb posted moderate third-quarter results. Though organic growth was strong across segments, negative currency conversions brought top-line growth to negative 1% while supply constraints put mild pressure on operating costs. We view these headwinds as temporary compared with our long-term growth outlook for the firm, so we are maintaining our fair value estimate of $25 per share.

As a new public company, Bausch & Lomb will be primarily focused on ramping up research and development to become more competitive in its key markets of contact lens and solution, eyecare surgery, and ophthalmic pharmaceuticals.

Narrow-moat Bausch & Lomb had a decent quarter with 6% constant currency sales growth driven by demand for Lumify redness relieving drops, increased share of daily lenses, and higher demand for lens solution, as consumers traveled and took part in more outdoor activities than in the last year. We just relaunched coverage of the company on August 1 with a $25 fair value estimate, and we are keeping this valuation intact while slightly reducing our full-year expectations to account for the negative effects of inflation and currency changes.

After placing narrow-moat rated Bausch & Lomb under review on July 28, we are restarting coverage of the company with a $25 fair value estimate. Our long-term forecasts are mostly unchanged. However, some minor tinkering to our model to account for recent results has led to a decrease in valuation to $25 per share from $25.50 previously.

As a new public company, Bausch & Lomb will be primarily focused on ramping up research and development to become more competitive in its key markets of contact lens and solution, eyecare surgery, and ophthalmic pharmaceuticals.

We are placing Bausch Health and Bausch & Lomb under review following the July 28 news of a mixed ruling on the rifaximin patent case between Norwich Pharma and Bausch Health. Bausch Health shares fell over 50% following the ruling and trading was halted; Bausch & Lomb shares declined heavily when the market opened but were down a more moderate 7.5% as of afternoon trading. Our Very High Morningstar Uncertainty Rating for Bausch Health was meant to capture some of the risk, though the market’s reaction was perhaps more severe than we had anticipated.

In an unexpected development, narrow-moat Bausch & Lomb announced today that CEO Joseph C. Papa will be stepping down as both chairman of the board and CEO, just two months after he took leadership of the firm following its spinoff. Thomas W. Ross replaced Papa as chairman of the board effective immediately; Ross previously held the title of lead independent director, and Papa will remain on the board and continue to hold the CEO position until a replacement is found. This also follows his departure from the board of directors of Bausch Health on June 24. In contrast to this earlier announcement, there was little stock price movement on the news today, and we maintain our view of shares as significantly undervalued with a $25.50 fair value estimate.

Newly spun off Bausch & Lomb had a mixed first quarter, with growth and margin under pressure from inflation, pandemic restrictions in China, and currency changes. Though we have tempered our near-term expectations, there was little in the earnings release that leads us to review our longer-term forecasts, and our $25.50 fair value estimate and narrow-moat rating are unchanged. Notwithstanding challenges over the most recent quarter, there were some positive developments, such as lighter restrictions in China going into effect recently, and approvals in new markets for key products Vyzulta (ocular hypertension), Lumify (redness), and Infuse (daily contact lens).

We are launching coverage of Bausch & Lomb with narrow moat and stable moat trend ratings and a $25.50 (CAD 33) fair value estimate. Considering the firm's ability to generate free cash flow, we contend the market's view is too bearish, and we see upside for patient investors. While sentiment overhang from the firm's untimely initial public offering may weigh on shares over the near term, the stock looks materially undervalued, in our view.