BHC Stock Continues to Fall as Bausch Health Responds to Court Decision

  • Pharmaceutical firm Bausch Health (BHC) continues to print red ink from yesterday’s devastating session.
  • A federal district court judge ruled that certain elements of Bausch’s drug does not have valid patent protections.
  • BHC stock is up 8% from yesterday’s prematurely halted session, though it is down 9% against today’s opening price.
BHC stock - BHC Stock Continues to Fall as Bausch Health Responds to Court Decision

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Wall Street is still digesting the legal drama impacting embattled pharmaceutical firm Bausch Health (NYSE:BHC). The company has promised to pursue all available options regarding an unfavorable decision impacting its subsidiary Salix Pharmaceuticals’ key therapeutic, Xifaxan. A federal court’s oral order that essentially invalidates certain patent protections for the drug opens the door for generic competition, namely by Norwich Pharmaceuticals. BHC stock is down around 9% against today’s opening price at the time of writing.

Yesterday, Judge Richard G. Andrews of the U.S. District Court of Delaware issued an oral order, finding that while patent laws protect Xifaxan’s indication for the reduction of risk of hepatic encephalopathy (or HE) recurrence, patent claims over the drug’s composition and use for treating irritable bowel syndrome with diarrhea (or IBS-D) are invalid.

Unfortunately for Bausch Health, the mixed-bag ruling opens the door for generic competition. In particular, Bausch and its subsidiary Salix sued Norwich in 2020 over the latter’s attempt to deliver a copy of Xifaxan to market before its 23 patents expired.

But because of the latest ruling, University of California Hastings Law Professor Robin Feldman stated that the decision “could clear the way for a generic drug to enter, which could eventually drive down the price of IBS medication.” Logically, this dynamic has hugely negative implications for BHC stock.

Big Question Marks Over BHC Stock

To assuage stakeholders of BHC stock, Bausch released a statement emphasizing that it will “vigorously defend the intellectual property” protecting Xifaxan and will “appeal the Court’s decision to the U.S. Court of Appeals for the Federal Circuit.”

“We are disappointed with today’s development. We strongly disagree with any conclusion that our patents are not valid and intend to file an appeal to any such order,” Bausch CEO Thomas J. Appio stated. Further, the head executive noted that its intellectual property is “essential” to its ability to continue developing innovative therapies.

Following Bausch’s spinoff of its lucrative Bausch and Lomb (NYSE:BLCO) contact lenses brand, Xifaxan represents the former enterprise’s largest revenue source. Adding insult to injury, prior to the coronavirus pandemic, analysts regarded Xifaxan and its projected patent protection timeline to 2029 as a major positive for BHC stock. Now, Norwich threatens this projection, leaving Bausch Health extremely exposed.

On Thursday, JPMorgan Chase forecasted that the generic drug maker could introduce an IBS-D alternative therapeutic in the late 2024 to 2025 timeframe. Further, the banking giant downgraded BHC stock to “neutral” from “overweight.”

Also, exchange authorities halted trading in BHC shares during Thursday’s morning session. Technically, the stock is up against the premature closing price of $4.32. However, it remains down substantially against the session performances leading up to the latest patent ruling.

A Devastating Loss

With BHC stock trading below $5, multiple sources have noted that shares are trading at their lowest level since 1995. Previously, Bausch Health operated under the name Valeant Pharmaceuticals. However, the Valeant brand attracted significant negative attention amid an embarrassing accounting scandal.

Moving forward, Bausch’s management must throw everything at its disposal to restore positive momentum in BHC stock. Again, without the contact lenses business, Bausch is highly dependent on Xifaxan. Therefore, both current stakeholders and prospective buyers must keep close tabs on any potential legal challenges.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/bhc-stock-continues-to-fall-bausch-health-responds-court-decision/.

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