We’re selling 1,000 shares of Bausch Health Companies at roughly $9.38. Following Thursday’s trade, Jim Cramer’s Charitable Trust will own 2,930 shares of BHC, decreasing its weighting in the portfolio to 0.82% from 1.1%. We’re trimming roughly one-quarter of our Bausch Health position to manage our downside risk ahead of a key event. Sometime late in the first quarter or early in the second quarter, the courts are expected to decide in Bausch’s Xifaxan litigation. Xifaxan is Bausch Health’s most important drug, accounting for approximately 40% of its revenue. If the ruling goes in the company’s favor, it could prevent a Xifaxan generic entry until at least 2028. Preventing generic entry is crucial for the company’s ability to operate independently, allowing it to spin off an 80% stake in the eye health company Bausch + Lomb in a transaction, which would unlock significant value for shareholders. As the likelihood of monetizing its BLCO stake increases, BHC shares are expected to trade appreciably higher. Analysts at Jefferies are the biggest believers that Bausch Health will win the Xifaxan legal battle. In this outcome, Jefferies thinks BHC is worth $16 per share on a sum of the parts basis, valuing the BLCO distribution at $13 and the RemainCo at $3. That’s a lot of upside from the current trading price of roughly $9 per share. But the decision is not so clear-cut. If the courts rule goes against Bausch and Xifaxan faces generic competition earlier than 2028, management may be forced to explore other strategies for its Bausch + Lomb stake, including keeping it on a consolidated basis. In the event of a litigation loss, we would expect BHC shares to trade significantly lower because it effectively rules out the benefit of a value-unlocking transaction. BHC 1Y mountain Bausch Health Companies 1 year What we have on our hands is a binary situation and the outcome could go either way. Jefferies has done a lot of work around the litigation — but at the end of…
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