Bausch Health (BHC) remains one of the most perplexing stocks on the market. I have been bearish on the name for a few years now. A few years ago the company received a lot of exposure for aggressive and unusual sales practices to get insurers to pay up for drugs that may have come off patent. Bausch Health dominated the financial news cycle, but no real legal damages have been incurred by the company. Certain of its products were dropped by pharmacies and the company faced loss of exclusivity (“LOE”) for other products.

However, the company seems to have weathered the storm. Through asset sales it has been able to pare debt. The company has also pushed backed certain debt maturities to later years. Its two main products – Bausch & Lomb and Salix – have performed well enough to keep its top line from eroding too much. This has allowed hedge funds and retail investors to speculate on what its sliver of equity is now worth.

Competitive Threats Emerge

Now that the melt up in financial markets appears to have subsided, BHC has fallen over 10% Y/Y. The stock appears to be in correction territory. The Fed continues to take away the punch bowl so BHC will likely fall further. Given its declining revenue and debt at 10x trailing EBITDA the company cannot afford any missteps. That said, a competitive threat has emerged that send BHC even lower. Read more.

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