Bausch Health: A Pharmaceutical Giant in Transition #

Bausch Health, formerly Valeant Pharmaceuticals, is a multinational specialty pharmaceutical company headquartered in Canada. The company operates in various therapeutic areas, including dermatology, gastroenterology, neurology, and ophthalmology.

Business Segments #

Bausch Health operates through five main business segments:

1. Bausch + Lomb
2. Salix Pharmaceuticals
3. International Rx
4. Solta Medical
5. Diversified Products

The company’s strength in the health-care sector is particularly notable due to its Bausch + Lomb division in eye care.

Recent Developments #

Activist Investor Involvement #

In early 2021, an activist investor took a significant interest in Bausch Health, leading to changes in the company’s board composition. This involvement aimed to enhance shareholder value through strategic reviews and board representation.

Bausch + Lomb Spin-off #

In May 2022, Bausch + Lomb (BLCO) was spun off as a separate publicly traded entity. However, Bausch Health retained an 88% ownership stake, keeping it a core part of the business.

Board Changes #

The company’s board underwent several changes, including the appointment of new directors and a new chair. Currently, the board consists of 10 directors, including representatives from activist investor groups.

Potential Sale Exploration #

Recent reports suggest that BLCO may be exploring a potential sale, which could significantly impact both BLCO and Bausch Health’s valuations.

Valuation Considerations #

• BLCO’s current enterprise value is approximately $10 billion.
• The valuation is affected by Bausch Health’s control ownership and significant debt.
• A sale could potentially lead to a higher valuation for BLCO.

Comparative Valuation Analysis #

An analysis comparing BLCO to industry peers suggests a potential for significant value increase in the event of a sale:

• Estimated 2025 EBITDA: $966 million
• Potential enterprise value based on peer multiples: $18.35 billion
• Implied equity value: $14 billion
• Potential per share price: $39.79 (compared to recent trading price of $15.55)

Implications for Bausch Health #

A potential sale of BLCO could have substantial benefits for Bausch Health:

• Estimated value from BLCO sale: $12.32 billion
• Additional value from other divisions, particularly the Salix division
• Potential to retire existing debt and maintain profitable business lines

Remaining Business Valuation #

After a hypothetical BLCO sale, the remaining Bausch Health businesses (‘RemainCo’) could be valued based on peer comparisons:

• International Rx
• Diversified Products
• Solta Medical
• Remaining Salix business

Using conservative estimates, RemainCo could be valued at approximately $9.36 billion.

Total Potential Value #

Combining the potential proceeds from a BLCO sale, Xifaxan cash flows, and RemainCo valuation, Bausch Health’s total value could reach $25.93 billion. After debt subtraction, this implies a potential equity value of $10.49 billion or $28.19 per share, significantly higher than recent trading prices.

Conclusion #

While the exploration of a sale does not guarantee a transaction, the current board composition and management structure at both Bausch Health and BLCO suggest a potential openness to value-enhancing deals. The situation remains fluid, and investors should monitor developments closely.