Shares of Bausch Health (BHC) were in focus after an analyst from H.C. Wainwright upgraded the stock and raised his price target on the shares. Meanwhile, an analyst from Wells Fargo commented on the risk to the company from Johnson & Johnson's (JNJ) high-profile talc lawsuit.
WAINWRIGHT UPGRADES TO BUY: In a research note to investors, H.C. Wainwright analyst Raghuram Selvaraju upgraded Bausch Health to Buy from Neutral and upped his price target on the stock to $58 from $25, saying that he believes now is an appropriate time to become more bullish on the story. The analyst said that the significant price target hike is in keeping with the firm's view that continued evidence of organic growth should have a "substantial impact" on the company's debt-to-EBITDA ratio and thus make it a less leveraged company. The analyst added that he believes that the market has underrated and underappreciated the "tuck-in" and "complementarity-driven developments" of the past several months, while these have gradually begun to position Bausch Health "more strongly" in several core markets. In particular, the analyst highlighted the launches of Altreno and Bryhali and the inclusion of Doptelet, a drug complementary to Xifaxan.
SYNERGY BID: Selvaraju also noted that Bausch's "stalking horse bid" for Synergy Pharmaceuticals "intrigues" him. The firm has followed Synergy and its marketed drug Trulance for nearly a decade, and remains convinced that this agent has "best-in-class" properties in the constipation-predominant irritable bowel syndrome and chronic idiopathic constipation indications, Selvaraju said. The analyst added that while Synergy itself has "failed to capitalize on the unique qualities" of Trulance, he believes that Bausch Health's Salix unit could constitute the perfect fit for the drug. In addition, he believes that Bausch Health is likely to view Synergy's pipeline as "ripe for development and rife with possibilities."
WELLS FARGO NOTES J&J RISK: Meanwhile, Wells Fargo analyst David Maris maintained an Underperform rating on Bausch Health, noting that the comapny acquired Johnson & Johnson's Shower to Shower body powder in 2012 and has subsequently been named as a defendant in over 160 lawsuits. Maris pointed out that Bausch Health recently said in a regulatory filing that, "While Johnson & Johnson continues to indemnify the Company, the Company has initiated proceedings in arbitration against Johnson & Johnson relating to the scope and amount of such indemnification." Maris argued that if Bausch is going to arbitration with J&J in an effort to clarify the extent of J&J's indemnification, it should be viewed as a risk investors take into account that J&J and Bausch come to different conclusions as to this indemnification.
WHAT'S NOTABLE: After Bausch Health announced its agreement to acquire Synergy earlier this week, Stifel analyst Annabel Samimy said that Synergy's GI assets "fit squarely" into Bausch's GI wheelhouse, which would immediately leverage the company's sales and payer infrastructure and physician relationships in the space. On the other hand, however, Wells Fargo's Maris called the acquisition "an inconsequential financial deal that points to a bigger picture of [Bausch] returning to its cost-cutting deal roots and a potential lack of confidence in growth of the core business."
PRICE ACTION: In afternoon trading, Bausch Health is down 97c, or 4%, to $22.68.
