Bausch to spin off eye care business; misses expectations with wide Q2 loss

Bausch to spin off eye care business; misses expectations with wide Q2 loss
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Bausch Health Companies Inc. is planning to spin off its iconic eye care business into an independent publicly traded company, Canada’s largest publicly traded pharmaceutical producer said Thursday.

The firm, based near Montreal in Laval, Que., said the spinoff of Bausch + Lomb would allow it to focus on its gastroenterology, aesthetics/dermatology, neurology and international pharma business.

The former Valeant Pharmaceuticals acquired Bausch + Lomb in August 2013 and adopted its corporate name five years later in 2018.

Bausch Health also said Thursday it sold about US$4 billion in non-core assets, paid down more than US$8 billion of debt, resolved many legacy legal issues and lost patent protection on about US$1.4 billion of products.

Bausch chairman and CEO Joseph Papa said details of the spinoff, including its leadership and capital structure, have not yet been determined.

“We’ve looked at the value of our pure health companies like Alcon and Cooper and believe that Bausch + Lomb would compare very favorably when investors have an opportunity to make a judgment about the relative value of the stand-alone business,” Papa said.

He declined to offer a timeline, but said during a conference call that “it usually takes somewhere around one-and-a-half years” to carry out comparable spinoffs.

The market viewed the announcement favourably as Bausch Health shares rose more than seven per cent or $1.87 to $27.68 in late-morning trading on the Toronto Stock Exchange, the company’s highest stock price since March.

“We see potential for significant value creation for BHC shareholders should the eye care spinoff re-rate higher, more in line with peers,” RBC Dominion Securities analyst Douglas Miehm said in a note to investors.

Bausch also announced that it lost US$326 million or 92 cents per diluted share in the second quarter, compared with a loss of US$171 million or 49 cents per share in the prior year as it felt the effects of the COVID-19 pandemic.

Its adjusted profit plunged 56 per cent to US$165 million from US$372 million in the second quarter of 2019. Revenues for the three months ended June 30 were US$1.66 billion, down from US$2.15 billion a year earlier.

Bausch had been expected to report a net loss equal to 59 cents per share on US$1.79 billion of revenues, according to financial data firm Refinitiv.

This report by The Canadian Press was first published Aug. 6, 2020.

Companies in this story: (TSX:BHC)

Chris Reynolds, The Canadian Press

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