Bausch & Lomb Earnings: Gains From Eye Care and Pharma Record Strong Sales and Offset Supply Issues

Jul 27, 2023

Narrow-moat Bausch & Lomb BLCO reported second-quarter earnings that were ahead of our expectations. Total sales were up 10% year over year thanks to great performance from its consumer vision care and pharmaceutical businesses. Supply chain issues and unfavorable foreign exchange remain, but these challenges were more than offset by robust growth in Bausch’s base business and promising recovery in China, which was up 24% on constant currency. We maintain our fair value estimate of $26 (CAD 34.50) per share.

Vision care was up 9.7% and was mainly driven by the consumer business, which grew 17% on constant currency. Lumify, which dominates the redness reliever category with 50% market share, was up 23% and Bausch continues to boast its strong brand equity by launching in other geographies with success. The consumers portfolio was further expanded this quarter through Bausch’s acquisition of Blink, an eye and contact lens drop, from Johnson & Johnson for $106.5 million. While we don’t anticipate material contributions from this product—an annual sales runway of $30 million-$40 million—we appreciate Bausch’s continued effort at expanding its portfolio and see this as yet another attribute to the company’s intangible assets.

U.S. contact lens portfolio was adversely affected by supply challenges and disruptions from a new warehouse management system upgrade, two factors that we believe will continue to pose headwinds for top line and margin throughout the year. While this impacted some of Bausch’s legacy contact lenses, daily silicone hydrogel lenses still reported a 42% growth and this is especially impressive given 60% of the growth came from new fits.

Pharmaceuticals was up 15.5%, driven by robust gains from Vyzulta, up 25%, and U.S. generic drug business, up 10%. Miebo, the first and only Food and Drug Administration-approved treatment for dry-eye disease that directly targets tear evaporation, was approved in May and is targeted to launch next quarter.

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