Bausch Health to spin off eye health business into two separate companies

Bausch Health announced a major reorganization of its business. The company intends to spin off its leading eye health business into an independent publicly traded entity dubbed Bausch + Lomb - NewCo from the remainder of Bausch Health.

The spinoff will establish two separate companies that include a pure-play eye-health company built on the Bausch + Lomb brand, and a pharmaceutical company focused on gastroenterology, aesthetics/dermatology, neurology and international pharmaceuticals.

The company said that the timing of the spinoff will depend on certain conditions and approvals, as well as the completion of efforts that include reorganizing reporting segments, which will begin in the first quarter of 2021.

"We are committed to taking action to unlock what we see as unrecognized value in Bausch Health shares, and we believe that separating our business into two highly focused, stand-alone companies is the way to accomplish that goal," said Joseph Papa, chairman and CEO of Bausch Health.

Papa noted that over the past four years, the company has been executing a plan meant to position Bausch Health for growth, including divesting $4 billion in assets and paying down more than $8 billion in debt while resolving legacy legal issues and managing a loss of exclusivity on products worth roughly $1.4 billion. IT also invested in R&D, new products and core franchises with opportunities for growth, he said.

"Our board of directors and management team have been working on alternatives over the last 12 months to determine how to best unlock value across our businesses, and we believe that the time is right to begin the separation process, so each business has greater flexibility to pursue strategic opportunities in their respective markets," Papa said. 

Bausch + Lomb - NewCo, which will consist of Bausch Health's global vision care, surgical, consumer and ophthalmic Rx businesses, which would have had 2019 revenue of approximately $3.7 billion, demonstrating a compound annual growth rate of 4.1% between 2017 and 2019.

The company said Bausch + Lomb - NewCo is well-positioned to continue delivering consistent organic revenue growth, with more than half of its sales outside of the United States. The combination of pipeline expansion and established durable eye care brands, including Bausch + Lomb Ultra, Biotrue ONEday, Lumify, Ocuvite and PreserVision, among others, as well as the launch of Bausch + Lomb Infuse contact lenses, is expected to drive this growth.

BHC, which would have had 2019 revenue of approximately $4.9 billion and a compound annual growth rate of 1.8% from 2017 to 2019, will comprise a diversified portfolio of leading durable brands across the Salix, International Rx, Solta, neurology and medical dermatology businesses. Core products include Xifaxan, Trulance and Relistor for gastrointestinal diseases; Jublia, DuobrII and Thermage FLX for dermatologic conditions; and Wellbutrin and Aplenzin for neurological conditions.

Bausch Health expects to report Bausch + Lomb as a separate segment beginning in the first quarter of 2021.

Bausch Health's management has initiated a process to determine the future executive leadership teams for each company. As the separation process commences, the company said it will provide additional information on the future management teams and boards of directors for both companies.

Morgan Stanley and Goldman Sachs are serving as financial advisors; Wachtell Lipton Rosen & Katz in the United States, and Osler, Hoskin & Harcourt in Canada are acting as lead legal counsels; and Davis, Polk & Wardwell is acting as tax counsel.