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Shares of Quebec-based Bausch Health Companies Inc. plummeted more than 50 per cent following an adverse U.S. court ruling in a patent dispute over one of the company’s key drugs.

Bausch Health, formerly Valeant Pharmaceuticals International Inc., had been embroiled in a patent fight in a Delaware court over its gastroenterology drug Xifaxan, a product of its Salix Pharmaceuticals business.

A judge issued an oral ruling Thursday morning that some uses of Xifaxan were not covered by a drug patent.

The judge also found generic drug maker Norwich Pharmaceuticals infringed some Xifaxan patents. He has given Salix and Norwich until Aug. 3 to work out a joint proposed judgment.

Brokerage J.P. Morgan said if the judgment holds as is, “it would represent a near-worst-case scenario” for Bausch Health and may enable generic competition for Xifaxan around late 2024-2025. The U.S. bank downgraded its rating of the company’s shares to “neutral” from “overweight.”

Bausch Health said it would fight the decision once the court tabled a final ruling.

“We strongly disagree with any conclusion that our patents are not valid and intend to file an appeal to any such order,” Thomas Appio, the company’s chief executive officer, said in a statement.

Shares of Bausch Health plunged 51 per cent Thursday to $5.50 on the Toronto Stock Exchange and trading was halted. The stock has fallen dramatically in recent months, having traded above $30 earlier this year.

It is the latest in a series of blows to the company that was once a darling in the pharmaceutical industry.

As Valeant, Laval, Que.-based Bausch Health once attracted major U.S. investors and commanded Canada’s biggest market value on the Toronto Stock Exchange before a years-long slide. The company had racked up a crushing debt load after an acquisition spree that proved unsustainable, amid mounting concerns about its finances and accounting.

Two years ago, the company, by then renamed Bausch Health, agreed to pay US$45-million to the U.S. Securities and Exchange Commission to settle charges it misled investors during its heady growth era about revenue and profits. The SEC also settled with three former executives, including former CEO Michael Pearson.

Bausch Health’s Bausch + Lomb eye products unit became a separate company this year after an initial public offering.

With reports from Reuters

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