Shares of Bausch Health, Inc. BHC gained 14.7% in a week on reports of refinancing its debt to enable the impending sale of its eye care company, Bausch + Lomb BLCO. The industry declined 0.6% during this timeframe.
The sale, intended to separate both companies, is stuck for quite some time now. Hence, reports of BHC moving forward have encouraged investors.
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BHC’s Plans to Separate BLCO
In August 2020, BHC announced its plan to separate its eye health business, consisting of its Bausch + Lomb global Vision Care, Surgical and Pharmaceuticals businesses, into an independent publicly traded entity, Bausch + Lomb, from the remainder of the company.
In May 2022, Bausch Health sold common shares of Bausch +Lomb, pursuant to an initial public offering (IPO) of the latter.
Bausch Health held approximately 88% of BLCO’s shares as of June 30, 2024.
The completion of the full separation of Bausch + Lomb includes the transfer of all or a portion of the BHC’s remaining direct or indirect equity interest in BLCO to its shareholders. This is subject to the achievement of targeted debt leverage ratios and the receipt of applicable shareholder and other necessary approvals.
Per a Bloomberg report, BHC is working with Jefferies Financial Group to push out maturities on some of its debt. The move is aimed at achieving the targeted debt leverage ratios that have delayed the full separation for some years now.
BHC is evaluating all options to fulfill all obligations related to the separation.
BHC will use new funds raised through Jefferies to repay some of its debt, which should ease the roadblocks.
Shares of BLCO have also risen last week after there were reports of the company considering to sell itself. This could draw interest from private equity buyers.
BHC Colossal Debt: A Major Concern
The Bausch + Lomb IPO established two separate companies that include — a diversified pharmaceutical company (comprised of the Salix, International, Diversified [neurology, dermatology, generic and dentistry pharmaceutical products] and Solta Medical aesthetic medical device businesses) and a fully integrated eye health company, which consists of the Bausch + Lomb Vision Care, Surgical and Pharmaceuticals businesses.
As of June 30, 2024, the company’s total debt-to-total capital ratio was a staggering 101.1%. A higher ratio indicates higher financial risk.
Earlier in the year, BHC’s shares tanked on rumors that the company was heading toward bankruptcy. These rumors were subsequently squashed by BHC.
BHC’s Zacks Rank and Stocks to Consider
Bausch currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the pharma/biotech sector are Krystal Biotech, Inc. KRYS and Fulcrum Therapeutics, Inc. FULC, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, estimates for Krystal Biotech’s 2024 earnings per share have increased from $2.09 to $2.38. Earnings per share estimates for 2025 have improved from $4.33 to $7.31. Year to date, shares of KRYS have risen 49.7%.
KRYS’ earnings beat estimates in three of the trailing four quarters and missed the same once, the average surprise being 45.95%.
In the past 60 days, estimates for Fulcrum Therapeutics’ 2024 loss per share have narrowed from $1.33 to 28 cents. Loss per share estimates for 2025 have narrowed from $1.71 to $1.14.
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Bausch Health Cos Inc. (BHC) : Free Stock Analysis Report
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Bausch + Lomb Corporation (BLCO) : Free Stock Analysis Report
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