Few Canadian stocks have a past as colourful as Bausch Health (TSX: BHC). Many investors still remember it as Valeant, the drugmaker that renamed itself in 2018 and has spent years chipping away at a mountain of debt.
Last week, that story took a sharp turn. Shares of Bausch Health jumped over 25% following its Q3 results. Valued at a market cap of $4.2 billion, the TSX stock is still down 96% from all-time highs.
Is the Canadian healthcare stock finally a good buy right now?
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Why did Bausch Health stock jump 26% after Q3 earnings?
Excluding its Bausch + Lomb eye care unit, Bausch Health posted revenue of $1.6 billion, up 12% from a year ago, in Q3.
It reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $1 billion. CEO Thomas Appio said it was the first time the company topped $1 billion in EBITDA in a single quarter.
Adjusted cash flow from operations rose $192 million to $539 million. Management used the excess cash to cut net debt by $521 million in the quarter and by more than $1 billion so far this year.
For the second time in 2026, the company raised its full-year targets. Revenue is now projected between $5.525 billion and $5.625 billion while adjusted EBITDA should land between $3.225 billion and $3.275 billion. Both figures exclude Bausch + Lomb, per the company’s press release.
Bausch Health runs five segments, from stomach and liver health to dermatology, aesthetics, and eye care.
Think of Salix as the key revenue driver as sales rose 16% to $831 million, the 17th consecutive quarter of growth. Another star performer was Xifaxan, a gut health drug, which grew 16% on higher net pricing and steady demand.
International revenue reached $299 million, and CFO J.J. Charhon noted that every segment grew revenue and segment profit.
However, organic revenue at Solta Medical, the aesthetics unit, slipped 4%. Management also admitted that Xifaxan volume got a lift from extra inventory in the sales channel.
How Bausch Health is shrinking its debt pile
Bausch Health ended Q3 with $2 billion in cash, and it plans to redeem its 2027 notes early to buy back up to $100 million of its public debt. It also announced a $50 million share buyback, mainly to offset dilution from management stock awards.
The adjusted EBITDA margin has widened by about 740 basis points since 2023.
Appio credited discipline for the performance, stating:
We have greater discipline, accountability, and consistency in our execution across the organization. The result is 14 consecutive quarters of revenue and Adjusted EBITDA growth across a diverse portfolio of businesses and markets.
What could slow Bausch Health stock in the fourth quarter?
Starting January 1, 2027, Medicare will pay a lower negotiated price for Xifaxan, which will trim Q4 revenue growth by eight percentage points and adjusted EBITDA growth by about 14 points.
Inventory at wholesalers and pharmacies should return to normal, which could shave off at least three more points of revenue growth.
Charhon put the net Medicare impact at roughly $400 million to $500 million year over year in 2027. Moreover, legal issues around Xifaxan could impact revenue and profit margins over the next 12 months.
A 26% pop does not erase a heavy debt load or a looming price cut on its top drug. However, it does show the turnaround is positively impacting cash flow.
Investors need to watch three things: Xifaxan prescriptions after the Medicare change, the pace of debt repayment, and new deals in hepatology, dermatology, and neuroscience.
