Bausch Health Announces Plan To Spin Off Its Eye Health Business Into an Independent Public Company

By
More Images
LAVAL, Quebec—Bausch Health Companies Inc.  (NYSE/TSX: BHC) this morning announced a plan to spin off its leading Bausch + Lomb eye health business into an independent publicly traded entity separate from the remainder of Bausch Health. The spinoff will establish two separate companies, including a fully integrated, pure play eye-health company built on the iconic Bausch + Lomb brand and long history of innovation. The remaining Bausch Health company would be a diversified pharmaceutical company with leading positions in gastroenterology, aesthetics/dermatology, neurology and international pharmaceuticals, according to Thursday’s announcement.

The move is similar to the action Novartis took in 2019 to spin off its Alcon eyecare business into a standalone public company, as VMAIL reported.

“The benefits of separating these attractive, but disparate businesses include improved strategic focus and enhanced financial transparency to better enable stakeholders to value each business independently,” the announcement noted. “The timing of the anticipated spinoff will be tied to certain conditions and approvals, and the company's completion of several important actions, including the reorganization of the reporting segments, which we expect to begin reporting in the first quarter of 2021.”

Bausch Health's management has initiated a process to determine the future executive leadership teams for each company. As the separation process commences, the Company looks forward to providing additional information on the future management teams and boards of directors for both companies.

The planned new entity “Bausch + Lomb – NewCo” will consist of Bausch Health's global vision care, surgical, consumer and ophthalmic Rx businesses. It would have had 2019 revenue of approximately $3.7 billion and a CAGR of 4.1 percent in the 2017-2019 period. This new unit is “well-positioned to continue delivering consistent organic revenue growth across the globe, with more than half of its sales outside of the United States,” the announcement noted. The combination of pipeline expansion and established durable eyecare brands, including Bausch + Lomb Ultra, Biotrue ONEday, Lumify, Ocuvite and PreserVision, among others, as well as the launch of Bausch + Lomb Infuse contact lenses, is expected to drive this growth.

“We are committed to taking action to unlock what we see as unrecognized value in Bausch Health shares, and we believe that separating our business into two highly focused, stand-alone companies is the way to accomplish that goal," chairman and chief executive officer Joseph C. Papa said in the announcement. “Four years ago, we initiated a multi-phase plan, first to stabilize and then to transform Bausch Health into a company positioned to deliver long-term organic growth. We have divested approximately $4 billion of non-core assets, paid down over $8 billion of debt, resolved numerous legacy legal issues and managed a loss of exclusivity on an approximately $1.4 billion product portfolio, while also investing in R&D, new product launches­­ and core franchises with attractive growth opportunities.”

He added, “Our Board of Directors and management team have been working on alternatives over the last 12 months to determine how to best unlock value across our businesses, and we believe that the time is right to begin the separation process, so each business has greater flexibility to pursue strategic opportunities in their respective markets."

Separately Thursday morning, Bausch Health reported that its second-quarter sales declined 23 percent (21 percent at constant currency) to $1.66 billion from $2.15 billion in the year-ago period. Revenue was negatively impacted by approximately $500 million in the second quarter of 2020 primarily due to the impact of the COVID-19 pandemic, the company noted.

Bausch Health also reported an operating loss of $27 million for the second quarter, which compares with operating income of $257 million in the year-ago period. The decrease in operating results was primarily due to decreases in revenues and gross margins as a result of the COVID-19 pandemic and the accrual of legal reserves established for the resolution of certain legacy litigation matters, the company noted.

Bausch’s net loss in the period was $326 million, as compared to a net loss of $171 million for the second quarter of 2019.

In its Bausch + Lomb/International segment (which includes the contact lens and eyecare businesses), sales decreased 27 percent in the recent quarter. Among the bright spots, the company said reported revenue for Lumify increased 36 percent in the period. In addition, Bausch received 510(k) clearance from the FDA for its new Infuse daily disposable silicone hydrogel (SiHy daily) contact lenses.

Papa noted that Bausch is focused on driving market share for its key products, and working to “reach customers in new ways and executing on our launches, such as the upcoming launch of Bausch + Lomb Infuse SiHy daily contact lenses, while also optimizing our cost structure to protect the profitability of the company.”