Dive Brief:

• Bausch + Lomb is exploring a potential sale that would separate the eye care company from parent firm Bausch Health, the Financial Times reported on Saturday, citing unnamed sources.
• A private equity firm could be a likely buyer, J.P. Morgan and Needham analysts wrote in research notes. “There are only a few strategics that would make sense, in our view, and all would likely run into anti-trust challenges,” Needham analyst David Saxon wrote in a Monday note to clients.
• Bausch + Lomb received interest from private equity firms before it went public in 2022, the Financial Times reported. A company spokesperson wrote in an email to MedTech Dive, “We don’t comment on speculation or rumor.”

Dive Insight:

Laval, Canada-based Bausch Health announced plans in 2020 to separate Bausch + Lomb into an independent, publicly traded company. The intent was to separate the eye care business, which includes contact lenses and dry eye and glaucoma treatments, from Bausch Health’s other pharmaceutical products. 

Bausch + Lomb went public in 2022, and Bausch Health sold 10% of its stake in the company. Bausch Health currently has an 88% stake, Saxon wrote.

The parent company plans to spin out the remaining shares eventually, but those plans have been delayed by investor lawsuits, J.P. Morgan analyst Robbie Marcus wrote in a Sunday note. The lawsuits claim that Bausch Health, with $21.6 billion in debt, would be overly leveraged without the cash generated by the eye care business. About $10 billion of debt is due by the end of 2027, according to the Financial Times article. 

Bausch + Lomb is assessing interest from potential buyers as a way around the roadblock, the FT wrote. The company had a market cap of $6.27 billion on Monday. 

A private equity sale seems most likely because a deal with Alcon, Johnson & Johnson or Cooper Companies could face antitrust scrutiny due to their shares of the contact lens market, Needham’s Saxon wrote. A purchase by a pharmaceutical company, such as AbbVie, could also prove challenging with its share of the dry eye market. 

Bausch + Lomb’s global brand recognition, particularly in the contact lens market, could be a draw for a potential buyer, Marcus wrote. However, he cautioned that cutting spending and flipping the company for a profit is an unlikely scenario. Bausch + Lomb’s contact lens and surgical portfolios will require heavy investment to become competitive after years of underinvestment by its parent company, he wrote. 

There’s also the question of whether a sale will be enough for investors who are worried about Bausch Health's solvency. If Bausch + Lomb sold for $26 per share, and its parent company used all of the proceeds to repay debt, it would still have $12.3 billion in remaining debt, Saxon wrote. In that scenario, the sale could be challenged by Bausch Health creditors, he added. 

Shares of Bausch + Lomb opened at $18.15 on Monday. The company reported $1.22 billion in revenue and a $151 million net loss attributable to the company in the quarter ending June 30, as well as $4.6 billion in long-term debt.