Valeant's Ugly Past Recedes for Its Successor Bausch

(Bloomberg Opinion) -- One of the pharmaceutical industry’s biggest cautionary tales has a better story line these days. 

Bausch Health Cos Inc. – the business formerly known as Valeant Pharmaceuticals –  reported earnings results Monday that were a step forward in its a long-promised turnaround under new management. Bausch posted its first quarter of year-over-year revenue growth since 2016 and raised its full year guidance. Granted, it was only a 1 percent sales increase, and the company still has to overcome the significant damage done to its business and balance sheet after years of pursuing an unsustainable strategy of aggressive debt-financed acquisitions and drug-price hikes. Still, in light of the company’s checkered history, the performance was a real achievement.

Valeant's Ugly Past Recedes for Its Successor Bausch

Bausch wants investors to believe that the days of big negative surprises, guidance cuts, and double digit sales declines are safely in the past. Its CEO, Joseph Papa, took pains on the company’s earnings call to emphasize that 77 percent of its revenue comes from its namesake eye business, its international units, and its gut drugs. All of those areas have been relatively stable in recent quarters and several posted solid growth in the first three months of 2019. The company also disclosed that 60 percent of sales come from products like devices, over-the-counter products, and branded generics that are less exposed to pricing pressure and patent expiration in the U.S. Executives also made a point to highlight the many inherited legal cases its counsel has managed to clear out. 

Valeant's Ugly Past Recedes for Its Successor Bausch

The company’s checkered past means that it will take more than a quarter to convince investors that stability is the new normal, let alone growth. But it’s  progress for Bausch, which is surely looking at the robust valuation Novartis eye-care spinoff Alcon has achieved and thinking, “Why not us?”

Valeant's Ugly Past Recedes for Its Successor Bausch

Bausch still has plenty of older products that are likely to see further revenue declines and its once-prized dermatology business is taking a long time to recover. On top of that, the company will be chipping away at its $24.4 billion debt load for many years to come. After selling a number of assets over the past few years, it now has to settle into the long and hard work of paying creditors off with regular old cash flow. That will limit its ability to make acquisitions and constrain spending on research and drug launches; any growth it manages will be particularly hard-won.  

Bausch won’t fully banish its ghosts any time soon. However, investors should appreciate its graduation from constant haunting to occasional nightmares.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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