Bausch + Lomb Pushes Dry Eye Drop to Phase 3 After Miss
Bausch + Lomb's dual-action dry eye drop missed in Phase 2, yet the company is taking it into a Phase 3 trial. CEO Brent Saunders framed the readout as a win.
Bausch + Lomb said its dual-action dry eye drop failed its Phase 2 study but that the company will still advance the candidate into Phase 3, with CEO Brent Saunders calling the result a "better outcome than we had ever hoped."
Bausch + Lomb (BLCO) has decided to push a dual-action dry eye drop into late-stage testing even though the candidate failed its Phase 2 study, the company disclosed on Monday. In comments to Endpoints News, chief executive Brent Saunders described the outcome as a "better outcome than we had ever hoped" — an unusual characterization for a trial that did not clear its own bar.
Those two statements sit awkwardly together, and reconciling them is the whole story. A mid-stage miss normally means the primary endpoint — the single pre-specified measurement a study is designed to prove — did not separate from control by a statistically convincing margin. Companies that proceed anyway are usually betting that something else in the dataset, a secondary measure, a responder subgroup, or a symptom score rather than a sign score, tells them where a bigger trial should aim.
Why a failed mid-stage study can still buy a Phase 3
Dry eye disease is one of the few therapeutic areas where a missed primary endpoint does not automatically kill a program, and the reason is baked into how regulators evaluate the condition. Approvals in dry eye have historically required a drug to move both a sign of disease — something an ophthalmologist can measure, such as corneal staining — and a symptom, which is what the patient reports. Those two do not always move together, and trials in the field have a long record of hitting one while missing the other.
That structural quirk gives sponsors room to argue that a Phase 2 result was informative even when it was not positive on the stated endpoint. It also explains why a chief executive can call a miss encouraging without contradicting himself outright: the mid-stage study may have told the company which endpoint to pick, which patients to enroll, and how long to dose. What it did not do was clear the goal it was set.
The counterweight is cost and risk. Phase 3 ophthalmology programs are large and expensive, and the base rate for confirming an effect that a smaller trial could not establish is not favorable. Investors evaluating Bausch + Lomb's decision will want to know precisely which endpoint was missed, by how much, and what the company intends to make primary next time — details that will determine whether the Phase 3 is a considered bet or an act of faith.
What the market did with the news
The disclosure did not dent the stock. BLCO finished the Monday session at 17.32, up 0.46% from its prior close of 17.24, with the day's range running from 17.21 to 17.56, according to licensed market data as of 20:00 GMT on Aug. 24, 2026. Bausch Health (BHC), which retains a majority stake in the eye care business, closed at 6.68, up 3.73% from 6.44 and near the top of a 6.43 to 6.71 band.
Both moves ran against a soft tape. The S&P 500 tracker closed at $763.47, down 0.29%, and the Nasdaq 100 proxy fell 1.00% to $706.32; only the Dow tracker was higher, up 0.27% at $533.65. Outperforming a down market on the day of a Phase 2 failure is a signal in itself — it suggests the dry eye asset was carrying little or no value in the current share price, so the miss cost nothing, while the promise of a Phase 3 costs shareholders spending they had not modeled.
That asymmetry is worth holding onto. Programs that are not in the numbers cannot disappoint. They can, however, consume capital, and for a business whose parent company still carries a heavy balance sheet, incremental late-stage development spend is not a rounding error in the way it might be at a larger pharmaceutical company.
A crowded, hard-to-win commercial category
Dry eye is one of the largest ophthalmic markets by patient count and one of the most difficult to monetize. The population is enormous, the symptoms are chronic, and over-the-counter artificial tears absorb a large share of demand at low prices. Prescription entrants have to prove they are worth a co-pay and a prior authorization fight against a bottle a patient can buy at a pharmacy counter without seeing anyone.
Dry eye is one of the largest ophthalmic markets by patient count and one of the most difficult to monetize.
A "dual-action" positioning — a single drop working through more than one mechanism — is an attempt to answer that. If a product can address both the inflammatory component and the tear-film component of the disease, it has a cleaner story for prescribers than a single-mechanism agent competing on marginal improvements. The commercial logic is sound. The clinical execution is what just came up short.
For Bausch + Lomb specifically, eye care is the whole business rather than a division, which raises the strategic value of owning a differentiated dry eye franchise and lowers the internal competition for development dollars. It also means the company has the commercial infrastructure — eye care sales force, optometrist and ophthalmologist relationships, existing shelf presence — to launch a product without building distribution from scratch. That is a real argument for pressing ahead that a development-stage biotech would not have.
The disclosures that matter next
Three things will define whether this decision looks smart in hindsight. First, the full Phase 2 dataset: which endpoint missed, what the secondary measures showed, and whether the effect size in any subgroup was large enough to justify a confirmatory study. Second, the Phase 3 design — the primary endpoint chosen, the comparator, the enrollment size and the timeline to readout. Third, the spend, and whether management quantifies it alongside the rest of the pipeline.
Until those land, the position is straightforward: a trial did not meet its goal, management says it learned enough to run a bigger one, and the market, on the day, treated the whole episode as immaterial. Whether that indifference proves correct depends entirely on what the Phase 3 protocol looks like when it is filed.
Key facts
- BLCO last close: 17.32, +0.46% (as of 20:00 GMT, Aug. 24, 2026)
- BHC last close: 6.68, +3.73% (as of 20:00 GMT, Aug. 24, 2026)
- Trial outcome: Dual-action dry eye drop missed its Phase 2 goal
- Company decision: Phase 3 trial planned despite the mid-stage miss
Frequently asked questions
What did Bausch + Lomb announce about its dry eye drop?
Bausch + Lomb disclosed on Monday that its dual-action dry eye drop failed a Phase 2 study, missing the mid-stage goal the trial was designed to hit. Despite that result, the company said it plans to advance the candidate into a Phase 3 trial. CEO Brent Saunders described the outcome as a "better outcome than we had ever hoped."}
Why would a company run Phase 3 after a Phase 2 failure?
Sponsors sometimes proceed when secondary measures, subgroup results or symptom data suggest a real effect that the chosen primary endpoint failed to capture. In dry eye specifically, approvals have historically required moving both a clinical sign and a patient-reported symptom, and those two do not always move together, which gives companies room to redesign and try again.}
How did Bausch + Lomb shares react?
BLCO closed at 17.32, up 0.46% from its prior close of 17.24, with a day range of 17.21 to 17.56 as of 20:00 GMT on Aug. 24, 2026. Bausch Health, its majority owner, closed at 6.68, up 3.73%. Both gained on a day when the S&P 500 tracker fell 0.29%.}
What does 'dual-action' mean for a dry eye drop?
A dual-action drop is designed to work through more than one biological mechanism in a single formulation — for example addressing inflammation and tear-film stability at once — rather than targeting a single pathway. The commercial appeal is a clearer differentiation story for prescribers against single-mechanism prescription products and over-the-counter artificial tears.}
Why is the dry eye market difficult commercially?
The patient population is very large and the condition is chronic, but over-the-counter artificial tears absorb much of the demand at low prices. Prescription products must justify a co-pay and insurance authorization against a product patients can buy without a visit, which compresses pricing power and slows adoption even for clinically effective drugs.}
What should investors watch next?
Three disclosures matter: the full Phase 2 dataset showing which endpoint missed and by how much; the Phase 3 protocol, including the primary endpoint chosen, enrollment size and expected readout timing; and the incremental development spend the program will require, set against the rest of Bausch + Lomb's pipeline commitments.}
Sources
Photo: cottonbro studio · Pexels Licence — source
