Shares of Bausch Health Companies Inc. (BHC) were up 14% in response to fourth-quarter 2022 results.

The company’s adjusted earnings per share of $1.02, which beat the Zacks Consensus Estimate of 92 cents and our estimate of 84 cents but decreased from $1.29 reported in the year-ago quarter.

Total revenues of $2.19 billion beat the Zacks Consensus Estimate by 3.35% and were flat year over year. Revenues also surpassed our estimate of $2.1 billion.

Revenues in the quarter were affected by the unfavorable impact of foreign exchange of $78 million and the impact of divestitures and discontinuations of $6 million. Revenues were up 4% on an organic basis year over year.

The stock has plunged 57.4% in the past year compared with the industry’s decline of 8.4%.

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Quarter in Detail

The company reports revenues through five segments – Salix, International, Diversified Products, Solta Medical and Bausch + Lomb.

Salix revenues came in at $581 million, up 4%, driven by growth in Xifaxan,Relistor, Trulance and Plenvu. Xifaxan revenue grew by 6% in the quarter and overall demand increased by 3%, including an increase in non-retail demand at institutions, including hospitals and outpatient clinics.

International Rx revenues in the quarter were $261 million, down 5%.Revenues increased organically by 2%, driven by growth in Canada and Europe, after excluding the unfavorable impact of foreign exchange.

Diversified Products revenues were $256 million, down 6% from the year-ago quarter as a result of decreases in sales from neurology and generics, which were partially offset by strong sales performance from its dermatology and dentistry businesses for the quarter. Jublia continues to benefit from its direct-to-consumer investments. Script growth was 23%.

The FDA has accepted the company’s new drug application for IDP-126, the first triple combination product for the treatment of acne vulgaris.

Solta Medical reported revenues of $99 million, up 11%. Revenues were up 20% organically, primarily driven by strong results in Asia Pacific (excluding China). Management stated that China continued to recover after the COVID lockdowns in the second quarter.

Revenues from Bausch + Lomb were $996 million, flat year over year. Excluding the unfavorable impact of foreign exchange of $54 million and the impact of divestitures and discontinuations of $3 million, revenues increased 5% year over year organically.

Initial Public Offering of Bausch + Lomb

Bausch Health's eye health business, Bausch + Lomb, launched its initial public offering (IPO) and subsequently began trading under the ticker "BLCO" on May 6, 2022.

On Jun 16, 2022, Bausch Health announced it suspended its plans for the Solta IPO as a result of challenging market conditions and other factors. Solta will remain part of Bausch Health as it plans to revisit alternate paths for its Solta medical aesthetic devices business.

Xifaxan Litigation

Bausch Health previously announced that the U.S. District Court of Delaware issued an Oral Order in the matter litigation regarding the infringement and validity of certain U.S. patents protecting the composition and use of Xifaxan 550 mg tablets for the treatment of irritable bowel syndrome with diarrhea (IBS-D) and reduction in risk of overt hepatic encephalopathy (HE) recurrence.

The company filed its appeal to the U.S. Court of Appeals for the Federal Circuit for the Xifaxan (rifaximin) 550 mg patent.

2022 Results

Revenues came in at $8.1 billion, down 4% year over year.

2023 Guidance

BHC is not providing consolidated full-year guidance, as Bausch + Lomb has not provided full-year guidance. Bausch Health (excl. B+L) has provided guidance for the full year 2023. Revenues are projected in the range of $4.45-$4.6 billion.

Our Take

Bausch's fourth-quarter results were better-than-expected, driven by growth in the Salix, Solta and International businesses. The Salix business showed momentum after declining 2% organically in the first half of the year. It grew 4% in the second half of the year, resulting in 1% growth for the full year.

Zacks Rank and Stocks to Consider

Bausch currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the biotech sector include Dynavax Technologies (DVAX Quick QuoteDVAX - Free Report) and Kala Pharmaceuticals (KALA Quick QuoteKALA - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past 60 days, earnings estimates for Dynavax for 2022 have increased by 11 cents to $1.95. Dynavax surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 73.15%.

Over the past 90 days, earnings estimates for KALA for 2022 have increased by 26 cents. KALA topped earnings estimates in two of the last four quarters and missed in the other two, with a four-quarter earnings surprise of 2.39% on average.

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