On Thursday, Jefferies, a global investment banking firm, raised its price target for Bausch Health (TSX:BHC) Companies (NYSE:BHC) shares to $10.00, up from the previous target of $9.00. The firm has maintained a Buy rating on the stock. The adjustment comes amid reports of private equity interest in Bausch's eye care business, Bausch + Lomb Corporation (BLCO).
The analyst at Jefferies indicated that a leveraged buyout (LBO) analysis was conducted to assess the potential deal value for BLCO. According to their model, a takeover price of $25 for BLCO could yield an internal rate of return (IRR) of 21% over a five-year period. The analyst further estimated that a transaction at this price would result in proceeds exceeding $7 billion after taxes for Bausch Health.
The firm's analysis suggested that applying a less than five times multiple on the re-capitalized company supports a $10 price target for Bausch Health. The maintained Buy rating reflects the analyst's optimism regarding the ongoing efforts to execute the separation of BLCO from Bausch Health.
The report highlights the financial potential of a BLCO sale for Bausch Health, as well as the progress being made towards this strategic move. The raised price target is a reflection of the anticipated positive financial impact on Bausch Health should the BLCO transaction proceed as analyzed.
In other recent news, Bausch Health Companies Inc. has seen several significant developments. The company reported second-quarter earnings for 2024, posting a diluted non-GAAP EPS of $0.89 on revenue of $2.4 billion. This marks a 5% increase on a reported basis and a 6% increase organically.
Despite these positive earnings, Piper Sandler downgraded Bausch Health's stock rating from Neutral to Underweight due to concerns about the company's significant debt obligations and the impending loss of exclusivity for its key drug, Xifaxan.
Furthermore, Bausch Health received Health Canada approval for PrCABTREO, a novel triple-combination gel for the treatment of acne vulgaris. Clinical trials have demonstrated significant treatment success, with about 50% of patients achieving treatment success and a more than 70% reduction in both inflammatory and non-inflammatory lesions at Week 12. The new treatment is expected to be available in Canadian pharmacies in the fourth quarter of this year.
Despite the challenges noted by Piper Sandler, Bausch Health maintains its full-year guidance with expected revenue between $4.7 billion and $4.85 billion and adjusted EBITDA from $2.36 billion to $2.46 billion.
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