Biotech Values

[DewDiligence]

Bausch & Lomb profit rises, shares fall

[BOL remains a dark-horse candidate to be a Squalamine partner, but the company is increasingly focused on lenses and ocular vitamins rather than bona fide pharmaceuticals.]

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NEW YORK, Oct 20 (Reuters) - Bausch & Lomb Inc. (BOL.N: Quote, Profile, Research) on Wednesday reported a 34 percent jump in third-quarter earnings, driven by increased sales of contact lenses and vitamins for the eye and lower research and development spending.

But a full-year earnings forecast that disappointed Wall Street and slower than expected sales growth of its new one-day contact lens in Japan helped push Bausch & Lomb shares down more than 3 percent.

The company boosted its 2004 earnings per share forecast to between $2.85 and $2.90 from its prior outlook of between $2.80 and $2.85 per share. But Chief Executive Ron Zarrella said the raised forecast simply reflected a better-than-expected third quarter and the lower R&D spending, rather than higher projected growth for the rest of the year.

For 2005, the company is projecting constant-currency revenue growth of between 6 and 7 percent, yielding earnings per share between $3.30 and $3.40.

Analysts, on average, expect the company to earn $2.85 and $3.26 per share for 2004 and 2005, respectively, according to Reuters Estimates.

The Rochester, New York-based eye-care products maker posted a net profit of $43.3 million, or 79 cents per share, compared with a profit of $32.3 million, or 60 cents per share, a year ago, beating Wall Street expectations of 73 cents a share.

Sales of contact lenses rose 10 percent in the quarter, led by strong sales of soft lenses. Sales of pharmaceuticals rose 10 percent, driven by sustained growth of ophthalmic vitamins.

But lens care products were down 2 percent.

"Overall results of our vision care business were mixed for this quarter," Zarrella said, adding that he believes lens care revenue will improve in the fourth quarter with the help of new products.

The company said due to a distribution problem with its launch of one-day lenses in Japan, it now expects 2004 revenue to be lower than previous projections of about $20 million.

"We shifted distribution suppliers and frankly that change didn't go very well. We lost momentum in the launch," Zarrella said.

Analysts expect Bausch will eventually capture a significant portion of the $350 million-a-year Japanese one-day lens market now dominated by Johnson & Johnson (JNJ.N: Quote, Profile, Research) , but expressed disappointment in the pull back from prior projections.

Third-quarter revenue rose 8 percent to $548.9 million. Excluding the effect of favorable currency exchange rates, which increase the value of international sales when converted back into dollars, revenue rose 4 percent.

Bausch & Lomb shares were down $2.48, or 3.8 percent, to $61.94 on the New York Stock Exchange.
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