Bausch Health gets Piper Sandler downgrade; weakness of diversified unit cited

  • Piper Sandler has downgraded to Bausch Health (NYSE:BHC) to neutral from overweight questioning the cashflow resilience of the company’s pharmaceutical business.
  • The analysts led by David Amsellem have however raised the price target to ~$30 from $25. Bausch shares are trading ~0.5% higher today.
  • Announced in August, the diversified pharmaceutical unit of Bausch was formed with the spinoff of its eyecare business led by the Bausch + Lomb brand.
  • Calling the eye care business as ‘undoubtedly durable’ the analysts highlight the weakness of the remainder, pointing to Xifaxan expected to generate 40% of the unit’s revenue in 2021 and the Diversified products segment forecast to make up 30% of its top-line.
  • Given the loss of exclusivity for Xifaxan in 2028, and mature/off-patent assets in the diversified segment, the ex-eyecare business, being highly levered, ‘should drive a relatively depressed EBITDA multiple,’ the analysts write.
  • Citing potential asset divestitures ahead of the spin scheduled for Q3 2021, Truist Securities reiterated its buy rating on Bausch Health last week, sending shares sharply higher.

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