Bausch & Lomb Earnings: Solid Demand for Lenses and Consumables Continues to Fuel Growth

Narrow-moat Bausch & Lomb BLCO reported slightly better-than-expected third-quarter results. Total sales were up 6.9% year over year thanks to strong demand and a healthy product mix. Notable milestones during the quarter include the closing of Xiidra deal (dry-eye drug from Novartis) and a successful 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.

Vision care continued its strong performance with 8.5% year-over-year growth. Daily silicon hydrogel lenses remain as one of the highest-performing products within the portfolio, which is impressive given that an inflationary environment with a potentially looming recession could cause consumers to pull back their spending and trade down. The consumer business was up 14% on constant currency thanks to solid numbers from market-leading Lumify, eye vitamins, and Artelac eye drops. Lumify extended its lineup with the launch of Eye Illuminations, which expands the brand into the eye beauty category. Management noted that it will utilize the brand’s platform to grow in this new category, and while we think the brand has a big following, we think the new product will face competition from larger beauty players that could make it difficult to win shares as easily as the brand did in the eye redness category. The FDA last week warned consumers to stop using 27 OTC eye drop products due to eye infection risks, and we were happy to see none of Bausch’s products included on the list.

With owning both Xiidra and Miebo, Bausch is now one of the leading players in the dry eye market, and we think the firm can position itself well in this fast-growing market with successful execution. We think the relaunch of Xiidra under Bausch’s ownership could benefit from the firm’s presence among ophthalmologists as well as its investment into bolstering the product’s brand equity.