Bausch may have shed the Valeant name, but it still leans on price hikes

Bausch Healthcare may have changed its name from Valeant last year, but the company hasn’t gotten away from its often-criticized strategy of leaning on price increases, one analyst says. 

After digging into Bausch’s second-quarter results and a quarterly filing, Wells Fargo analyst David Maris wrote in a Friday note that it seems the company's still relying on "a price-driven model." Without price hikes, the company’s second-quarter sales would’ve declined from last year, the analyst figures. 

Bausch reported second-quarter organic growth of 3%, reaching sales of $2.15 billion. Last quarter, the company posted 8% growth, Maris pointed out. In its quarterly filing, Bausch said it gained on higher pricing primarily in its Salix Pharmaceuticals unit, which sells drugs to treat gastrointestinal conditions. Xifaxan price hikes alone contributed $47 million to the top line, the filing says. 

Meanwhile, the company is still dealing with a heavy debt load and has an "underwhelming" pipeline, the analyst wrote.

"We believe the stock's -10% reaction since the earnings report versus the approximately flat S&P 500 is a reflection of what we consider disappointing results," he added. 

Bausch has been trying to stabilize itself after its dramatic downfall as Valeant, and one of its moves was to change its scandal-plagued name.

Under the Valeant moniker, the company became notorious for buying up assets, cutting costs and raising prices. The strategy worked for awhile, and the stock soared as high as $257 in the summer of 2015. Later, thanks to government scrutiny and a specialty pharmacy scandal, the company's fortunes came crashing down and the stock fell under $10. More recently, the stock is trading at around $20.

In a separate issue from second-quarter earnings, Maris’ team asked at a recent luncheon why Bausch’s R&D head Tage Ramakrishna hasn’t participated in earnings calls or conferences, he wrote. Basuch CEO Joseph Papa responded that Ramakrishna was on the company’s first-quarter 2016 earnings call, and said Ramakrishna has been "extremely busy," according to the note. 

The analysts asked for more information about the R&D head, and management said "they would get back to us," Maris wrote.