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On Thursday, Bausch Health Companies Inc. (NYSE:BHC) experienced a change in its stock rating as Jefferies analysts downgraded the company from Buy to Hold. Accompanying this rating change, the price target was also reduced to $8.00 from the previous $12.00. According to InvestingPro data, the stock currently trades at $6.63, with analyst targets ranging from $7 to $12, suggesting potential upside despite the downgrade.
The downgrade followed the announcement that the Bausch + Lomb Corporation (B+L) spin-off process did not result in a transaction, which was attributed to a likely price discrepancy. This development has put the anticipated near-term (NT) separation of the company on hold. Jefferies analysts had previously recommended Bausch Health based on the belief that the market misunderstood the timing of the generic version of Xifaxan and that the separation of B+L would unlock shareholder value. Despite current challenges, InvestingPro analysis shows the company maintains a "GOOD" overall financial health score, with strong gross profit margins of 71%.
However, with the separation process now paused, the major near-term catalyst for the company’s stock has been removed. Jefferies expects that Bausch Health’s shares will be range-bound following this update.
The analysts also noted that while retaining ownership of B+L could aid in debt restructuring for Bausch Health, the lack of separation diminishes the immediate prospects for the company’s stock appreciation. The hold status reflects a neutral stance on the stock’s potential for price movement in the near future.
In other recent news, Bausch Health Companies Inc. and its division Salix Pharmaceuticals announced that their medication, XIFAXAN, has been selected by the Centers for Medicare and Medicaid Services for upcoming drug price negotiations under the Inflation Reduction Act’s Drug Price Negotiation program. The initial pricing discussions are set for 2027. Meanwhile, Bausch + Lomb Corporation, according to Jefferies, is an undervalued asset with a potential takeout price of $25 per share. Jefferies’ analysis suggests a possible internal rate of return of approximately 21% over a five-year period.
In addition, Bausch + Lomb has authorized its management and advisers to investigate a possible sale of the company, following an inquiry from the Canadian Investment Regulatory Organization. These developments come in light of the company’s strong third quarter results, which showed a 19% increase in revenue to $1.2 billion. This performance led Bausch + Lomb to raise its revenue forecast for 2024.
These recent developments underscore the ongoing strategic moves within Bausch Health Companies Inc. and its divisions. Jefferies’ valuation of Bausch + Lomb and the potential sale of the company are based on their analysis, while the selection of XIFAXAN for drug price negotiations highlights the medication’s significance within the healthcare system.
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