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Bausch Health Companies' Organic Growth Streak Continues in the Third Quarter

By Keith Speights - Nov 6, 2018 at 2:00PM

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The drugmaker reported improving performance for all of its business segments in the third quarter.

Bausch Health Companies Inc. (BHC 20.36%) got off to a pretty good start under its new name when the company reported its second-quarter results in August. The drugmaker, previously known as Valeant Pharmaceuticals, delivered organic growth for the second consecutive quarter. But could Bausch Health keep the momentum going into the third quarter?

The company answered that question with its third-quarter results announced before the market opened on Tuesday -- and Bausch Health did indeed achieve three quarters in a row of organic sales growth. Here are the highlights from the drugmaker's quarterly update. 

Pill capsule separated with gold dollar signs spilling out

Image source: Getty Images.

Bausch Health results: The raw numbers

Metric 

Q3 2018 

Q3 2017 

Change (YOY)

Sales

$2.14 billion $2.22 billion

(3.7%)

Net income (loss) from continuing operations

($350 million) $1.3 billion

N/A

Earnings (loss) per share (EPS)

($1.00) $3.59

N/A

Data source: Bausch Health. YOY = year over year.

What happened with Bausch Health this quarter?

At first glance, none of Bausch Health's raw numbers look great. Falling revenue and losses when there were positive earnings in the prior-year period might make you think the company is headed in the wrong direction. But there's more to the story than first meets the eye.

That year-over-year revenue decline stemmed from Bausch Health's divestitures and discontinuations. The company's biggest business segment, Bausch+Lomb/international, posted third-quarter sales of $1.15 billion. This reflected organic sales growth of 3% -- its eighth consecutive quarter of organic growth. The segment is especially enjoying success with Lumify, which is now the No. 1 physician-recommended brand in the redness reliever category and captured a weekly market share of 26%.

Bausch Health reported revenue for its Salix segment of $460 million. This reflected year-over-year revenue growth of 2% despite losing exclusivity for ulcerative colitis drug Uceris. Sales for irritable bowel syndrome with diarrhea drug Xifaxan jumped 11% over the prior-year period, with sales of opioid-induced constipation drug Relistor soaring 88%.

The company's ortho dermatologics segment generated third-quarter revenue of $177 million, flat year over year. However, excluding the impact of currency fluctuations, the segment grew revenue by 1% over the prior-year period. 

Bausch Health also announced that its diversified products segment's revenue totaled $352 million in the third quarter, down 1% from the same period in 2017. But excluding the impact of divestitures and discontinuations, the segment achieved organic growth of 4%.

What about the poor year-over-year comparisons for Bausch Health's bottom line? The prior-year period figures were positive because of a one-time tax benefit. Bausch Health's adjusted net income in the third quarter increased 10% year over year to $403 million.

One of the most obvious areas that shows the company's progress is its operating cash. Bausch Health reported $522 million of cash from operations in the third quarter, up 7% from the same quarter last year. In addition, Bausch Health repaid more than $360 million in debt during the third quarter.

What management had to say

Bausch Health chairman and CEO Joseph Papa stated:

In addition to another consecutive quarter of overall organic growth, the company delivered organic growth across all reporting segments and generated robust cash flow from operations in the third quarter of 2018. These results demonstrate that our progress toward transformation is on track as we continue to execute within our core businesses, launch new products, resolve legacy issues and reduce the total quantum of our debt.

Looking forward

The company reaffirmed its full-year revenue guidance for 2018 of between $8.15 billion and $8.35 billion. However, Bausch Health upped its adjusted EBITDA guidance for the year. It now expects adjusted EBITDA between $3.3 billion and $3.45 billion, compared to the company's previous guidance of $3.2 billion to $3.35 billion.

Joe Papa has stated for a while that his company will be a great turnaround story. Bausch Health's third-quarter performance showed additional signs that he could be right. New products and solid growth for existing products like Xifaxan will be key if the drugmaker's turnaround is to continue.

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