Bausch Health (TSX:BHC) topped $32 last week and effectively broke out of a downtrend that lasted from April to October. As the company heads into 2020, investors will look for evidence that revenue is growing. Management successfully stabilized the core business, so the market now expects more.
On Dec. 12, the House passed legislation that will let the fed negotiate prices for expensive drugs that do not face competition. BHC stock is already up on a bet that the Senate will not support this bill. Besides, the argument against restricting price increases is easy.
In general, drug companies need more cash flow to pay down its high debts and to fund R&D to build their pipeline. Specifically, B+L and Teva Pharmaceuticals (NYSE:TEVA) have unhealthy debt/equity levels. The debt is manageable so long as revenue from higher drug prices offset ongoing operating costs.
Despite BHC surging to new highs for the year, value investors may buy the stock at forward P/Es at below 7. The company launched a new low diopter intraocular lens. This is a toric MX60ET hydrophobic acrylic intraocular lens used for patients during cataract surgery.
So long as the company continues to launch innovative new products in the eye care market, BHC revenue could grow steadily.
Ideally, BHC stock pulls back before investors add to the position. Either way, the long-term prospects appear favorable.