Bausch + Lomb is an eye-care specialist that has been knocking around for well over a century and is poised to launch its own IPO. But can we see a solid investment here?
The company has applied to list its common shares on the NYSE and the TSX, using the ticker symbol BLCO in both cases. Though the company has not yet identified any amount it wishes to raise beyond a placeholder, Renaissance Capital estimated that the dual offering could raise up to $3bn.
What is Bausch + Lomb?
Bausch + Lomb was founded all the way back in 1853 by John Jacob Bausch and Henry Lomb as a small optical goods shop in Rochester, New York.
Over the course of almost 170 years the business has become a global eye health company dedicated to protecting and enhancing the gift of sight for millions of people around the world.
It has a portfolio of over 400 products, as well as a global research, development, manufacturing and commercial footprint of approximately 12,500 employees and a presence in approximately 100 countries. The company has three operating segments, with these being vision care, pharmaceutical and surgical
Why is Bausch + Lomb Going Public?
At the moment, Bausch + Lomb is a division of Bausch Health Companies Inc (NYSE: BHC). It was acquired by Bausch Health Companies, then known as Valeant Pharmaceuticals, in 2013 for $8.7bn. However, this parent company announced its intention to separate the eye health business into an independent publicly traded entity back in August 2020.
Bausch + Lomb will not receive any proceeds from the sale of the common shares in this offering, with all of the proceeds to be received by Bausch Health Companies.
Bausch Health Companies has listed a number of benefits of the public listing of Bausch + Lomb, including improving the strategic and operational flexibility of both companies, increasing the focus of the management teams on their respective business operations and allowing each company to adopt the capital structure, investment policy and dividend policy best suited to its financial profile and business needs.
Additionally, Bausch + Lomb has cited the ability for potential backers to invest directly into its business as a benefit of the IPO.
Bausch + Lomb Financials
In the company’s revenue from full year 2021 came in at $3.77bn, up from $3.42bn in the same period 12 months prior. The company said these higher sales were primarily the result of the positive impacts of the recovery from the COVID-19 pandemic.
However, figures from the segment’s IPO submission and prospectus show that net income for the first nine months of 2021 came in at $139m, down from $191m the year before. This follows an increase in expenses, with this being driven by higher cost of sales, R&D spend and administration costs.
Additionally, the segment had cash and cash equivalents of $130m at 30 September 2021, along with total assets of $11.04bn. Total current liabilities stood at $1.12bn and total liabilities were $1.64bn. This amounts to a debt-to-equity ratio of 1.20.
Investment Risks
A major risk is the separation of Bausch + Lomb from its parent company, which could lead to unforeseen problems or fail to yield some of the anticipated benefits. The business will also be significantly less diversified than Bausch Health Companies, leaving it without the safety net that this brings.
Additionally, the company clearly suffered a little during the pandemic. Any resurgence of COVID-19 and new spate of lockdowns could hamper the company’s sales, supply chain, R&D efforts and day-to-day operations, ultimately damaging the company’s performance.
Competitors
Alcon AG (SWX: ALC)
Aerie Pharmaceuticals (NASDAQ: AERI)
CooperCompanies (NYSE: COO)
Is Bausch + Lomb a Good Investment?
It’s hard to have concerns about whether Bausch + Lomb is built to last given that the business has been around for nearly 170 years. Additionally, the company seems to be benefitting from a bump after the fall back from the apex of the pandemic, with revenues recovering well.
While costs have been eating into these higher sales, this is sometimes to be expected from a business with over 100 projects in various stages of pre-clinical and clinical development.
The company estimates that the market for all three of its operating segments is growing, and investing in this to ensure it is at the cutting edge of vision care, pharmaceuticals and surgical solutions looks like a solid strategy.
The company is clearly a leading figure in the eyecare world, but going out on its own could present unforeseen risks. At the moment Bausch + Lomb looks like an opportunity for a stable and steady investment, but that will depend on its ability to stand on its own two feet.