Q3 2019 Earnings Call

November 4, 2019

Good day and welcome to the Bausch <unk> third quarter 2019 earnings Conference call. All participants will be in listen only mode should you need assistance. Please secondly, comfort specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then too.

Please note. This event is being recorded I would now like to turn the conference over to Art Shannon Senior Vice President.

Head of Investor Relations and corporate Communications. Please go ahead.

Thank you Andrew Good morning, everyone and welcome to our third quarter 2019 financial results conference call participating on today's call, our chairman and Chief Executive Officer, Joe Bob and Chief Financial Officer. All parents. In addition to this live webcast a copy of today's slide presentation. In a replay of this conference call will be available on our website under the Investor Relations section.

Arthur Shannon: Thank you, Andrew. Good morning, everyone, and welcome to our Q3 2019 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer Joseph Papa, and Chief Financial Officer Paul Herendeen. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section. Before we begin, we'd like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial measures. More information about these measures, please refer to slide 2 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website.

Before we begin we'd like to remind you that a presentation. Today contains forward looking information we would ask that you take a moment to read the forward looking statement legend at the beginning of our presentation as it contains important information.

This presentation contains non-GAAP financial measures more information about these measures. Please refer to slide to the presentation non-GAAP reconciliations can be found in the appendix to the presentation posted on our website finally, the financial guidance in this presentation as effective as of today only it is our policy generally not update guidance until the following quarter and not.

Arthur Shannon: Finally, the financial guidance in this pre-presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter and not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it is my pleasure to turn the call over to Joe.

To update or affirmed guidance other than through broadly disseminated public disclosure with that it's my pleasure to turn the call over to Jeff.

Joseph Papa: Thank you, Art, and thank you everyone for joining us today. I'll begin with the Q3 highlights before turning the call over to Paul Herrity, our CFO, to review the financial results in detail and update our 2019 guidance. We'll then review the segment highlights and open the line for questions. Beginning with slide 4, we had another strong quarter of sustained performance that demonstrates that our team is continuing to gain traction with our plan to pivot to offense. Total company organic revenue grew by 4% compared to the Q3 2018 and represented the seventh consecutive quarter of total company organic revenue growth. Bausch + Lomb is leading our turnaround with a 12th consecutive quarter of organic revenue growth. Key drivers were a strong LUMIFY launch, strong international prescription results, and the performance of our global vision care business.

Thank you art and thank you everyone for joining us today I'll begin with the third quarter highlights before turning the call over to call heading our CFO to review the financial results in detail and update our 2019 guidance will then review the segment highlights and open the line for questions beginning with slide four.

We had another strong quarter sustained performance demonstrates that our team is can you need to gain traction with our plan to pivot to office total company organic revenue grew by 4% compared to third quarter of 2018 and represented the seven consecutive quarter of total company organic.

Revenue growth being now is leading our turnaround with a 12 consecutive quarter of organic revenue growth key drivers, where a strong little bit by launch strong international prescription results and the performance of our global vision care business Salix reported more than $500 million in total quarterly revenue driven by.

Joseph Papa: Salix reported more than $500 million in total quarterly revenue, driven by Xifaxan's 24% growth. Additionally, we generated $550 million of cash from operations and increased R&D investment by 15% during Q3. As of 30 September, we have utilized approximately $900 million to repay approximately $700 million of debt and approximately $200 million to complete the acquisition of Trulance and enter into a license agreement for amoslimab. In October, we acquired rights to XIPERE. I'll talk more about that later. Moving over to the right of slide four, our new products are also producing results. The Thermage brand is now a top ten Bausch Health franchise following the successful launch of Thermage FLX in the Asia Pacific region.

Hi, facts and 24% growth.

Additionally, we generated $550 million a cash from operations increased R&D investment by 15% during the third quarter as of September Thirtyth, we have utilized approximately $900 million to repay approximately $700 million of debt and approximately 200 million.

To complete the acquisition of Trulia and enter into a license agreement for MSL model in October we cry rights to Zipper I'll talk more about that later.

Moving over to the right of slide for our new product are also producing results that they're much brand is now a top 10 Bausch health franchise. Following the successful launch if they're much Lx and the Asia Pacific region will Mfive generated $21 million your revenue in the third quarter and has achieved a weekly market share of approximately.

Joseph Papa: LUMIFY generated $21 million of revenue in Q3 and has achieved a weekly market share of approximately 43%. Trulance generated $37 million of revenue since our Synergy acquisition and continues to track the full-year guidance of $55 million. DUOBRII is off to a strong start at 4 months post-launch, with weekly TRx tracking right around the 2,300 level. Thanks to a great team effort and the continuing engagement of over 21,000 employees of Bausch Health, we have delivered another strong quarter. We remain focused on launching new products, improving operations, and delivering on the commitments we outlined at the beginning of the year. With that, I'll turn it over to Paul.

43%.

Truly has generated $37 million of revenues since our synergy acquisition and continues to track to full year guidance of $55 million you over is off to a strong start at four months post launch with weekly Trx tracking right around the 2300 level. Thanks to a great team effort. They continued engagement of over 21000.

In employs about how we have delivered another strong quarter, we remain focused on launching new products, improving operations and delivering on the commitments we outlined at the beginning of the year with that I'll turn it over to Paul Yes, Thanks, Joe and I'll start with a quick walk down the Q3 pl now which is on slide five first some housekeeping when we talk about organic.

Paul Herendeen: Yeah. Thanks, Joe. I'll start with a quick walk down the Q3 P&L, which is on slide 5. First, some housekeeping. When we talk about organic growth, we mean on a constant currency basis and adjusted to remove the impact of acquisitions and divestitures. Top line organic revenue growth of 4% in the quarter. As Joe said, the seventh consecutive quarter of organic revenue growth. Pretty good considering we absorbed a growth drag of $85 million from LOE assets versus Q3 of 2018. Revenue in our Bausch + Lomb/International segment grew 5% organically in the quarter.

Growth you mean on a constant currency basis, and adjusted to remove the impact of acquisitions and divestitures. So.

Topline topline organic revenue growth of 4% in the quarter as Joe said, the seventh consecutive quarter of organic revenue growth.

Pretty good considering we absorbed a growth drag of 85 million from Ela, we assets versus Q3 of 2018.

Revenue in our BNL International segment grew 5% organically in the quarter four of the five sub segments within BNL posted growth led by the global consumer business up 7% organically in large part on the continued ramp Lomitapide followed by our international Rx business up 7% organically on strength in Canada, Russia, and the Middle East.

Paul Herendeen: Four of the five subsegments within BNL posted growth led by the global consumer business, up 7% organically, in large part on the continued ramp of LUMIFY, followed by our international RX business, up 7% organically on strength in Canada, Russia, and the Middle East. Next, our global vision care business was up 10% in the US and 4% outside the United States, +6% overall on strength in our Biotrue ONEday lens family, our ULTRA monthly silicone hydrogel lenses, and the ramp of AQUALOX, our daily silicone hydrogel lenses in Japan. Next, Global Surgical was up 5% organically on strength from our Stellaris Elite system and related consumables.

Next our global vision care business was up 10% in the U.S. and 4% outside the United States plus 6% overall on strength in our Biotrue, One day lens family, our ultra monthly silicon hydrogel lenses and the ramp of Aquilex, our daily Silicon Hydrogel lenses in Japan next.

Global surgical was up 5% organically on strength from our Solaris elite system and related consumable and finally to wrap up the BNL segment from a revenue perspective global Opto Rx declined 6% organically, mainly due to the greater erosion of my branded low to Max business in the U.S., including revenue lost to our own.

Paul Herendeen: Finally, to wrap up the Bausch + Lomb segment from a revenue perspective, Global Ophtho Rx declined 6% organically, mainly due to the greater erosion of our branded Lotemax business in the US, including revenue lost to our own authorized generic of Lotemax suspension that shows up in our generics business in our diversified segment. Overall, a solid quarter for the Bausch + Lomb/International segment. Salix delivered another terrific quarter, up 18% organically, which excludes the $14 million of Trulance revenue in the quarter. The star, again, was Xifaxan, as Joe said, up 24% versus Q3 of 2018. I wanna break down the components of that 24% as it's important in how you think about growth rates for Xifaxan in Q4 and into 2020.

Authorized generic of loaded.

Lotemax suspension that shows up in our generics business in our diversified segment. So overall, a solid quarter for the BNL International segment.

Salix delivered another terrific quarter up 18% organically, which excludes the $14 million to Lance revenue in the quarter. Let's start again was that faxon as Joe said up 24% versus Q3 of 2018, but I want to break down the components of that 24% as it's important in how you think about growth rates was.

Thanks, and in Q4 and into 2020 sub the 24% growth versus Q3, 2018 came 8% from volume, meaning more units sold 6% from the net impact of the price increase that we took because I faxon back in January and the balance of the plus 10% came as.

Paul Herendeen: The 24% growth versus Q3 2018 came 8% from volume, meaning more units sold, 6% from the net impact of the price increase that we took for Xifaxan back in January, and the balance of the +10% came as a result of successful initiatives that we implemented as part of our Project CORE to improve gross to nets for Xifaxan. Reminder, CORE stands for Cost Optimization and Revenue Enhancement. This clearly falls into the revenue enhancement category. From a growth perspective, roughly half of the Project CORE-driven growth in Xifaxan in 2019 is durable and will continue on in future Xifaxan results. Think of it as a step function increase in realized net selling prices for Xifaxan. While the other half is more transitory.

The result of successful initiatives that we implemented as part of our project or to improve gross to nets was I facts.

Reminder, core stands for cost optimization and revenue enhancement. This clearly falls into the revenue enhancement category.

From a growth perspective, roughly half of the project core driven growth in.

Action in 2019 is durable and we'll continue on in future Xifaxan results. So think of as a step function increase in realized net selling prices was I faxon, while the other half is more transitory very real value driven by reductions in process gross to net items in 2019 results, but no.

Paul Herendeen: Very real value driven by reductions in process gross to net items in 2019 results, but not repeating in 2020. I'll repeat what I've said in a number of public forums when thinking about Xifaxan's growth prospects in 2020. Growth will be driven by a combination of volume, which is selling more units, and perhaps 200 basis points of net selling price increase if we raise the gross selling price. Important safety tip, while I would and you should expect Xifaxan to deliver net sales growth at an attractive rate in 2020 versus 2019, that growth will not be at the levels you're seeing in 2019.

Not repeating in 2020, I'll repeat what I've said in a number of public form forms when thinking about ISI batson's growth prospects in 2020 growth will be driven by a combination of volume, which is selling more units and perhaps a couple hundred basis points of net selling price increase if we raised the growth selling price so.

Important safety tip, while I would and you should expect type action to deliver net sales growth at an attractive rate in 2020 versus 19 that growth will not be at the levels you're seeing in 2019.

Paul Herendeen: While I'm on the subject, I mentioned on our Q2 call that we expected about 1 more quarter, that's this quarter, of strong performance from Glumetza before that brand sees more pronounced losses of revenue due to an accelerated shift in channel mix resulting in substantial deterioration in net selling prices. As you think about Glumetza, the Q4 run rate for the brand may be half of what we've seen in the first 3 quarters of 2019. On more positive notes, RELISTOR and PLENVU delivered TRX growth in the quarter, and TRULANCE accounted for $14 million of revenue and remains on track to deliver the $55 million of revenue we guided to for 2019. In the Ortho Dermatologics segment, total segment revenue was down 16% organically as growth in Solta could not overcome declines in our medical derm business.

While I'm on the subject I mentioned on our Q2 calls that we expected about one more quarter. That's this quarter of strong performance from Glumetza before that brand sees more pronounced losses that revenue due to an accelerated shipped in channel mix, resulting in substantial deterioration in net selling prices. So as you think about glumetza the Q.

For run rate for the brand maybe half of what we've seen inmate first three quarters of 2019.

On more positive notes Relistor and plainview deliver trx growth in the quarter and truly aunts accounted for 14 million of revenue and remains on track to deliver the 55 million or revenue, we guided to for 2019.

In the Ortho Durham segment total segment revenue was down 16% organically as growth in Solta could not overcome declines in our medical derm business Global sold the delivered organic growth of 62% on continued strong demand for our Thermonics Eplex systems, which in turn feeds demand for the consumable F. Alex.

Paul Herendeen: Global Solta delivered organic growth of 62% on continued strong demand for our Thermage FLX systems, which in turn feeds demand for the consumable FLX tips. Solta has been delivering robust growth, mainly in Asia Pacific, and as we look ahead to 2020, we will be allocating more resources to Tom Hart and his team to enable Solta to pursue similar opportunities in other regions, particularly Western Europe. Our Medical Derm business was down $47 million versus Q3 of 2018, mitigated by the $43 million impact of LOEs for Elidel, Zovirax, Solodyn, and Acanya.

Hips.

Solta has been delivering robust growth mainly in Asia Pac and as we look ahead to 2020, we will be allocating more resources to Tom heart and his team to enable solta to pursue similar opportunities in other regions, particularly western Europe .

Our medical Derm business was down 47 million versus Q3 of 2018 militated by the 43 million impact of Elouise for Ellendale Zovirax solid dine in a konya.

Paul Herendeen: With the bulk of the impact of the LOEs for Medical Derm now reflected in our quarter results, I wanna call out that our Medical Derm business will be rebased in Q4 of 2019 at roughly $85 to 90 million of net sales per quarter and be poised to return to growth with a portfolio of promoted brands including DUOBRII, BRYHALI, SILIQ, ALTRENO, and JUBLIA, plus tail brands including Targretin, Retin-A Micro, Elidel, Onexton, Clindagel, and others. Finally, our diversified segment declined 5% organically. Considering that LOE assets were an approximately nine hundred basis point drag versus Q3 of 2018, that's a pretty good quarter for Barb Purcell and her team. I wanna call out a few highlights.

With the bulk of the impact of the Elouise for medical Durham now reflected in our quarter results I want to call out that our medical derm business will be rebased in Q4, 2019 at roughly $85 million to $90 million of net sales per quarter and be poised to return to growth with a portfolio of promoted brands, including do ovary pre Holly.

Saliq, Altria, though and Jublia.

Plus tail brands, including Targretin Retin, a micro ellendale onexton cleansing gel and others.

Finally, our diversified segment declined 5% organically considering that L. OE assets were in approximately 900 basis point drag versus Q3 in 2018, that's a pretty good quarter for bar Purcell and her team.

I want to call out a few highlights our view probably on franchise in the neuro business, including well below trend XL and plans and grew 12% versus Q3 2018 as a result targeted in effective promotion in collaboration with our market access team led by Bob spur.

Paul Herendeen: Our Bupropion franchise in the neuro business, including Wellbutrin XL and Aplenzin, grew 12% versus Q3 of 2018 as a result of targeted and effective promotion in collaboration with our market access teams led by Bob Spurr. Our generics unit has been the beneficiary of the LOEs of many of our branded products, launching and selling authorized generic versions of those brands. Generic revenues were up 7% versus Q3 of 2018. Now, I've said this before, but here it comes again. We manage the diversified group to maximize the long-term cash flows from a basket of assets that are expected to decline over time. Our objective is to slow that decline and thereby maximize the cash flow, and our team is doing a great job there. Down to the gross margin line.

Our generics unit has been the beneficiary of the Elouise of many of our branded products launching in selling authorized generic versions of those brands.

Generic revenues were up 7% versus Q3 of 2018 now I've said this before about here comes again, we manage the diversified group to maximize the long term cash flows from a basket of assets that are expected to decline over time, our objective is to slow that decline and thereby maximize the cash flow in our team is doing a great job they're down.

The gross margin line, where the growth excuse me blended gross margin of 73.6% in the quarter, we were plus 80 basis points versus Q3 at 2018, our core initiatives within the supply chain drove the majority of the 50 basis point positive variance in the BNL International segment and roughly half the 350 basis point.

Paul Herendeen: With a blended gross margin of 73.6% in the quarter, we were +80 basis points versus Q3 of 2018. Our CORE initiatives within the supply chain drove the majority of the 50 basis point positive variance in the Bausch + Lomb/International segment and roughly half the 350 basis point improvement in Salix. Mix improved gross margins in Salix, decreased gross margins in the Ortho Dermatologics segment, with Solta making up a greater percentage of total sales, and decreased gross margins in Diversified Products, where generics made up a greater percentage of segment revenues. Note that we are guiding to a roughly 73% gross margin for the full year 2019. Our year-to-date gross margin was 73.2%.

Improvement in Salix.

Mix improved gross margins and Salix decreased gross margins in the Ortho Durham segment was sold to making up a greater percentage of total sales and decreased gross margin than diversified with generics made up a greater percentage of segment revenues.

Note that we are guiding to roughly a roughly 73% gross margin for the full year 2019, our year to date gross margin was 73.2%.

Paul Herendeen: Selling, advertising, and promotion expenses increased by $32 million compared with Q3 of 2018, unfavorable by 7% reported and 8% constant currency. Half of that unfavorable movement came from Bausch + Lomb International and was due to our deploying additional promotional resources to drive revenue growth, mainly in the global vision care and the international surgical businesses. The $13 million increase in selling, advertising, and promotion in Salix was mainly due to the addition of roughly 100 sales territories associated with the acquisition of Trulance. Company-wide G&A spending was up 5%, mainly due to increased investment building out our IT infrastructure. Our investment in R&D increased $16 million compared with Q3 of 2018 as we continue the process of building the R&D organization and adding to our portfolio of development projects to enable us to sustain long-term organic growth for our businesses.

Selling advertising and promotion expenses increased by 32 million compared with Q3 at 2018 unfavorable by 7% reported an 8% constant currency.

Half of that unfavorable movement came from BNL International and it was due to our deploying additional promotional resources to drive revenue growth, mainly in the global vision care and the international surgical businesses that 13 million increase in selling in advertising and promotion in Salix was mainly due to the addition of roughly 100 sales territories.

Associated with the acquisition of Trulia.

Companywide DNA spending was up 5%, mainly due to increased investment building out our infrastructure.

Our investment in R&D increased 16 million compared with Q3 of 2018 as we continue the process of building the R&D organization and adding to our portfolio of development projects to enable us to sustain long term organic growth for our businesses.

Paul Herendeen: Our adjusted EBITDA of $942 million in the quarter was up 3% on a reported and 2% on a constant currency basis compared with Q3 of 2018. Good quarter. Slides 6, 7, 8, and 9 show additional details for the segments. I'm not gonna dwell on them as I've covered the main items of note on each. Turn to slide 10, cash flow summary. In the quarter, we generated $515 million of cash from operating activities. The amount, while down slightly from the amount in the prior year quarter, keeps us well in line to deliver between $1.5 and $1.6 billion of cash from operations in 2019. Year to date, our cash provided by operating activities is up $85 million from the prior year.

Our adjusted EBITDA of 942 million in the quarter was up 3% on a reported and 2% on a constant currency basis compared with Q3 at 2018 good quarter.

Slide 678, and nine show additional details for the segments I'm not going to dwell on them as I've covered the main items of note on each so turn to slide 10 cash flow summary.

In the quarter, we generated $515 million of cash from operating activities the amount while down slightly from the amount in the prior year quarter keeps us well in line to deliver between 1.5 and 1.6 billion of cash from operations in 2019.

Year to date, our cash provided by operating activities is up 85 million from the prior year.

Paul Herendeen: If you flip to slide 11, the balance sheet summary. During the quarter, we repaid $303 million of our term loan debt and paid $150 million to reduce our revolving credit borrowings to zero at 30 September 2019. Year to date to 30 September 2019, we've repaid $631 million of long-term debt and reduced revolving credit borrowings by $75 million. I wanna note that we could have repaid more long-term debt year to date, but elected to allocate roughly $200 million of cash flow to what we view as high-value business development activity, mainly, in this case, the acquisition of Trulance. On to slide 12 and our revised guidance. Today, we raised and tightened our full year 2019 guidance for revenue, increasing the low end of the range by $75 million and the top end by $25 million.

If you flip to slide 11, the balance sheet summary, during the quarter, we repaid 303 million of our term loan debt and paid 150 million to reduce our revolving credit borrowings to zero at September Thirtyth of 2019 year to date to September Thirtyth, we've repaid 631 million of long term debt and reduced revolving credit bar.

By 75 million.

I want to note that we could have repaid more long term debt year to date, but elected to allocate roughly 200 million a cash flow to what we view as high value business development activity, mainly in this case the acquisition a true Lance.

On to slide 12, and our revised guidance today, we raised and tightened our full year 2019 guidance for revenue increasing the low end of the range by 75 million and the top end by 25 million. The new range is 8.475 billion to 8.6 to 5 billion. The midpoint of our current revenue guidance is up 50 million from Iraq.

Paul Herendeen: The new range is $8.475 billion to $8.625 billion. The midpoint of our current revenue guidance is up $50 million from our August guidance, from the midpoint in the August guidance. As you'll see on the guidance bridge on slide 13, the raise was in part driven by $40 million increase in revenue expectations for our LOE assets, with the most significant change moving the anticipated LOE date for APRISO to 1H 2020, and $20 million increase in revenue from our base business, offset in part by unfavorable movements in FX since August, which reduces our forecast by about $10 million. We also raised and tightened our guidance for adjusted EBITDA to $3.5 to $3.6 billion. The midpoint of our current guidance is up $50 million from our August guidance.

This guidance from the midpoint of the August guidance as you'll see on the guidance bridge on slide 13, the raises in part driven by $40 million increase in.

Revenue expectations for our low we assets with the most significant change moving the anticipated Ela, we date for pre zero to one 820, and 20 million increase in revenue for our base business offset in part by unfavorable movements in FX since August which reduces our forecast by about 10 million Bucks.

We also raised and tightened our guidance for adjusted EBITDA to 3.5 to 3.6 billion. The midpoint of our current guidance is up $50 million from our August guidance.

Paul Herendeen: $35 million of that came from greater revenue expectations for the LOE assets, $5 million from FX, plus, that's plus $5 million from FX, minus $25 million for the higher than expected investment in R&D, and plus $35 million from a combination of the increased base business revenue, improved gross margins, and other items. Last thing before I turn it back to Joe, I think it's worth looking back at how we now expect to end 2019 compared with our guidance from back in February. At the midpoint of our initial guidance range, we expected revenue of $8.4 billion for 2019. Midpoint of our current guidance revenue is $8.55 billion, so +$150 million.

35 million came of that came from our greater revenue expectations for the yellow we assets $5 million from FX, plus that's plus 5 billion from at from FX minus 25 million for the higher than expected investment in R&D and plus 35 million from a combination of the increased base business revenue.

To improve gross margins and other items last thing before I turn it back to Joe I think it's worth looking back at how we now expect to end 2019 compare with our guidance from back in February .

At the midpoint of our initial guidance range, we expected revenue of 8.4 billion for 29 team midpoint of our current guidance revenue was 8.55 billion, so plus 150 million.

Arthur Shannon: $85 million of the increase in revenue comes from roughly $60 million more expected revenue from the LOE assets, $55 million from the acquisition of Trulance and offset by $30 million of unfavorable movements in FX. That explains the first $85. The remaining $65 million increase comes from both better performance in our base businesses and better gross to nets in some businesses driven by Project CORE than we originally forecast. The point of the story is that our original guidance for revenue on a constant currency basis, and excluding the date uncertain LOEs, was quite tight to how we expect to end up 2019. We're proud of the degree to which we've improved our forecast accuracy. That's back to you, Joe.

Paul Herendeen: $85 million of the increase in revenue comes from roughly $60 million more expected revenue from the LOE assets, $55 million from the acquisition of Trulance and offset by $30 million of unfavorable movements in FX. That explains the first $85. The remaining $65 million increase comes from both better performance in our base businesses and better gross to nets in some businesses driven by Project CORE than we originally forecast. The point of the story is that our original guidance for revenue on a constant currency basis, and excluding the date uncertain LOEs, was quite tight to how we expect to end up 2019. We're proud of the degree to which we've improved our forecast accuracy. That's back to you, Joe.

$85 million of the increase in revenue comes from roughly 60 million more expected revenue from the yellow we assets $55 million from the acquisition a truly ends and offset by $30 million unfavorable movements in FX. So that explains the first 85. The remaining 65 million increase comes from both better performance.

Based businesses and better gross to nets, and some businesses driven by project core than we originally forecast. The pointed a story is that our original guidance for revenue on a constant currency basis and excluding the date uncertain elouise was quite tight to how we expect to end up 29 team. We're proud of the degree to which we've improved.

Our forecast accuracy at back to you Joe.

Joseph Papa: Thank you, Paul. Let's go through some of the highlights in our Bausch + Lomb/International segment. The important takeaway from slide 14, this segment delivered its 12th consecutive quarter of organic growth, up 5% versus last year, as you can see on the chart. Turning now to slide 15. Global Vision Care had a great quarter, up 6% organically, driven by the performance across Biotrue ONEday, up 22%, and ULTRA, up 25%, as well as the AQUALOX launch. We launched the Bausch + Lomb ULTRA Multifocal for Astigmatism in the US in mid-June. These lenses offer consumers seamless transitions between distances from near to far and in between.

Thank you Paul let's go through some of the highlights in our BNL International segment. The important takeaway from slide number 14. This segment delivered 12 consecutive quarter of organic growth up 5% versus last year as you can see on the chart.

Turning now to slide 15, global vision care had a great quarter up 6% organically driven by the performance across Biotrue, one day up 22% and ultra up 25% as well as the backlogs launch.

We launched the ultra multi focal lenses for a stigmatism in the us in mid June these lenses offer consumers seamless transition between distances from near to far in between and its survive patients using ultra multi focal lenses, 92% agree that they are comfortable throughout the day and.

Joseph Papa: In a survey of patients using ULTRA multifocal lenses, 92% agree that they are comfortable throughout the day, and 4 out of 5 patients surveyed preferred Bausch + Lomb ULTRA multifocal over their previous method of vision correction. On slide 16, LUMIFY continues to outpace expectations, having achieved a weekly market share of approximately 43%, as you can see from the chart on the right. Q3 reported revenue of $21 million grew by 91% compared to Q2. LUMIFY is now the No. 1 eye care UPC in the United States and the No. 1 physician-recommended product in the redness reliever category. E-commerce continues to be an important channel for our global consumer products as the Q3 Amazon data demonstrates with 65% growth compared to Q3 2018. Turning now to slide 17 for an update on Salix.

Four out of five patients surveyed preferred bausch and lomb ultra multifocals over their previous method of vision correction.

On slide 16, lower Fi continues to outpace expectations, having achieved a weekly market share of approximately 43% as you could see from the chart on the right third quarter reported revenue of 21 million grew by 91% compared to the second quarter Mummify is not a number one I care you PC in the United.

States and the number one physician recommended product in the redness reliever category.

E Commerce continues to be important channel for our global consumer products as a third quarter Amazon data demonstrate with 65% growth compared to the third quarter 2018.

Turning now to slide 17 for an update on Salix organic revenue grew by 18% compared with the third quarter 2018 in revenue exceeded 500 million for the second consecutive quarter driven by the Trx drifted xifaxan as well as other promoted brands, including Relistor and Plenti since our sales acquisition in 2000.

Joseph Papa: Organic revenue grew by 18% compared with Q3 2018, and revenue exceeded $500 million for the second consecutive quarter, driven by the TRx growth in Xifaxan, as well as other promoted brands including Relistor, and PLENVU. Since our Salix acquisition in 2015, revenues are tracking greater than 12%, as we've shown in the chart on the left. Since 2017, we've been making investments in Salix to drive this growth, including hiring 200 primary care sales reps to expand the commercial field force for Xifaxan, increasing the focus on next-generation Xifaxan formulations, acquiring Trulance and dolcanatide earlier this year, and entering into license agreements to develop and commercialize novel compounds to treat GI conditions. Turning now to slide 18.

15 revenues are tracking greater than 12% as we've shown in the chart on the left since 2017, we've been making investments in sales to drive this growth including.

Hiring 200 primary care sales reps to expand the commercial field force birthday faxon, increasing the focus on next generation Surfaxin formulations, acquiring two lance and depth they'll Cana tied earlier this year and entered into.

Into license agreements to develop and commercialize novel compounds to treat G.I. conditions.

Turning now to slide 18, we've shown the overall quarterly trends since we've added primary care team at the beginning of 2017 in the chart and left with respect to IBSD, specifically trx grew by 14% compared to the prior year quarter in today, so facts and accounts, though for left.

Joseph Papa: We've shown the overall quarterly trends since we've added the primary care team at the beginning of 2017 in the chart on the left. With respect to IBS-D specifically, TRx grew by 14% compared to the prior year quarter year-to-date. Xifaxan accounts, though, for less than 10% of the IBS-D prescriptions. We believe there is a great opportunity to help more IBS-D patients. Moving on to Trulance on the right. Trulance has generated reported revenue of $37 million since the acquisition and remains on track towards full year guidance of $55 million. TRx grew by 25% compared to the prior year quarter and by 10% versus Q2 sequentially.

10% of the IBSD prescriptions. So we believe there is a great opportunity to help more IBSD patients.

Moving on to truly it's on the right truly has has generated reported revenue of $37 million since the acquisition and remains on track towards full year guidance of $55 million Trx grew by 25% compared to the prior year quarter and by 10% versus the second quarter sequentially.

Joseph Papa: Since the Trulance acquisition in Q1 2019, our team has done a great job of improving the market access position for greater than 37 million lives. We've also increased reach and frequency of Trulance's promotion to healthcare providers by more than 90%. Overall, we are pleased with Trulance's progress in the IBS-D category. As we focus on reestablishing momentum for Trulance, we've prioritized our Salix portfolio, and as a result, we mutually agree with US WorldMeds to terminate our arrangement to co-promote Relistor, effective 30 September. Moving on to Ortho Dermatologics on slide 19. While we reported a total segment organic revenue decline in Q3, the performance of global Solta, our aesthetics business, has been outstanding, up 62% organically compared to the prior-year quarter, driven by the strong launch of Thermage FLX in the Asia Pacific region.

Since the Trulia acquisition, the first quarter 2019, our team has done a great job improving the market access position for greater than 37 million lives. We've also increased reach and frequency of truly has the promotion to healthcare providers by more than 90%.

Overall, we're pleased with truly as progress NIE BSC category and as we focus on reestablishing momentum for treatment, we prioritized our sales portfolio and as a result, we mutually agree you ask roadmap to terminate our arrangement co promote Lisa Mira effective September thirtyth.

Moving on to Orthos Derm on slide 19, while we reported a total segment organic revenue decline in the third quarter. The performance of global Solta, our aesthetics business has been outstanding.

Up 62% organically compared to the prior year quarter, driven by the strong launch of Thermonics FX in the Asia Pacific region. We've shown the quarterly growth on the chart on the right. Additional highlights include a strong due over the launch which I'll talk about in the next slide Saliq trx growth of 65% compared to the third quarter.

Joseph Papa: We've shown the quarterly growth on the chart on the right. Additional highlights include a strong DUOBRII launch, which I'll talk about in the next slide. SILIQ TRx growth of 65% compared to Q3 2018. RELISTOR scripts also grew nicely, up 20% from Q2. We expanded our dermatology cash pay prescription program, Dermatology.com, to more than 9,000 Walgreens US retail pharmacies, which offer patients convenient access to our products at a predictable price. We continue to move new treatments through our pipeline. We filed an NDA for Arazlo, an acne treatment, and have a PDUFA date of 22 December. On to slide 20. Since the June launch, DUOBRII TRxs are tracking above the plan. Strong adoption by doctors, patients, and managed care is driving weekly TRx growth.

For 2018 re Holly script also grew nicely up 20% from second quarter, and we expanded our dermatology cash pay prescription program dermatology dotcom to more than 9000, Walgreens us retail pharmacies, which offer patients convenient access to our product at a predictable price.

Finally, we continue to move new treatments through our pipeline, we filed and da for arise low and acne treatment and have it could do for date of December 22nd.

On the slide 20 since the June launch yogurt Trx is are tracking above the plan strong adoption by doctors patients in managed care is driving weekly trx growth.

Joseph Papa: The chart on the left shows weekly TRxs compared to other dermatology launches. As you can see from the data, the DUOBRII launch has been very strong in its first four months on the market, tracking right around 2,300 weekly TRxs. While the early launch has been supported by our couponing strategy, managed care is recognizing DUOBRII's potential, and DUOBRII is quickly gaining commercial access. With the addition of DUOBRII to the CVS Caremark formula at the beginning of November, we are now at approximately 57% commercial access, as you can see in the chart on the right. We continue to believe there is an enormous opportunity for DUOBRII based on early data and remain very optimistic about DUOBRII's potential to improve the lives of patients with psoriasis.

The chart on the left shows weekly Trx as compared to other dermatology launches and as you can see for the data. The do ovary launch has been very strong in its first four months on the market tracking right around 2300 weekly trx. Thus while the early launch has been supported by our couponing strategy managed care is recognizing fuel breeze potential and dual brief.

Quickly gaining commercial access.

The addition of do over to Cvs Caremark Formula at the beginning of November we are now at approximately 57% commercial access as you can see in the chart on the right. We continue to believe there is an enormous opportunity for do ovary based on early data and remain very optimistic about do overs potential to improve the lives of patients with psoriasis.

Yes.

Joseph Papa: As we've shown on slide 21, revenue of $525 million from new products accounts for approximately 10% of our core business revenue year to date, as compared to only 2% in 2017. We expect this number to continue growing as we launch new products. On to slide 22. At the current run rate, 2019 revenue from our Significant Seven products is up 65% versus last year and tracking at approximately $265 million, down from our previous estimate of approximately $300 million. Even though DUOBRII scripts have been better than expected, the expected approval and launch was delayed. We have been couponing to support the long-term DUOBRII opportunity. As you saw with the launch of XIFAXAN IBS-D, early couponing is an effective way to initiate patient trials.

As we've shown on slide 21 revenue of $525 million from new products accounted for approximately 10% of our core business revenue year to date as compared to only 2% in 2017, we expect this number to continue growing as we launch new products.

On to slide 22 at the current run rate 2019 revenue from our significant seven product is up 65% versus last year and tracking at approximately $265 million down from our previous estimate of approximately $300 million, even though do over scripts have been better than expected the expected approval and launch was delayed.

We have been couponing to support the long term drew will be opportunity as you saw the launch of facts and IBSD early couponing as an effective way to initiate patient trial as patients adopt to overall, we expect couponing to fade and the realized selling price to improve we continue to expect the significant seven annualized peak total.

Joseph Papa: As patients adopt DUOBRII, we expect couponing to fade and the realized selling price to improve. We continue to expect the Significant Seven annualized peak total revenues of over $1 billion by the end of 2022. Turning now to slide 23. We show the progress of our late-stage new product pipeline in each of our three core business segments. In eye health, we have a lot of pipeline activity. First, we're expecting to launch SiHy Daily lenses in the United States in late 2020. We are working on line extensions for LUMIFY with further clinical studies planned for 2020. Our surgical business also has a number of late-stage pipeline products, including new ophthalmic viscosurgical device and the enVista trifocal intraocular lenses. Late last month, we announced an exclusive license for the commercialization of XIPERE in the US and Canada.

Revenues of over 1 billion by the end of 2022.

Turning now to slide 23, we show the progress of our late stage new product pipeline in each of our three core business segments and I health. We have a lot of pipeline activity first we are expecting to launch side daily lenses in the United States in late 2020.

We're working on line extensions for Luma Fi with further clinical studies planned for 2020.

Our surgical business also had a number of late stage pipeline products, including new ophthalmology.

Scope surgical device in the Investor Trifocal Intraocular lenses late last month, we announced an exclusive license for the commercialization as IP here in the us in Canada.

Joseph Papa: XIPERE is being developed as a treatment for macular edema associated with uveitis. If approved by the FDA, XIPERE would be the first treatment for this condition. We expect the NDA to be resubmitted in Q1 2020 and believe that FDA will review it within six months of resubmission. Moving on to Salix, we're expecting a readout for the cardiovascular Holter study for Xifaxan around year-end. In addition, we are developing a number of new formulations and indications for rifaximin that we've listed on the slide. Interim analysis for the overt hepatic encephalopathy study is expected in Q1 2020.

I have here is being developed as a treatment for maxillary DEMA associated uveitis and if approved by the FDA zipper here would be the first treatment for this condition. We expect the NDA to be resubmitted. The first quarter 2020 believed that FDA will review it within six months of Resubmission.

Moving on to sales were expecting a readout for the cardiovascular Holter study Ram Celmod around year end. In addition, we are developing a number of new formulations indications for approximate that Weve listed on the slide interim analysis for the over adequate floppy study is expected in the first quarter of 2020.

Joseph Papa: In Ortho Dermatologics, I mentioned the NDA submission for Arazlo earlier, and we have a strong pipeline of other acne and atopic dermatitis treatments in phase three. To wrap up on slide 24, we continue to grow our existing business and invest in future growth drivers. We have a durable business, approximately 60%, which is not exposed to US branded prescription pricing. Q3 was our seventh consecutive quarter of total company organic growth led by Bausch + Lomb/International and Salix, and we expect a strong growth outlook for the next three years. We're continuing to invest in sustainable growth drivers. We are increasing R&D investment and continue to deliver new products while also pursuing value-creating acquisitions, partnerships, and licensing opportunities. We've leveraged our investment for the Xifaxan primary care sales force to now also promote Trulance.

North are derived I mentioned, the NDA submission for Razzle earlier, and we have a strong pipeline of other acne and atopic dermatitis.

Hi, guys treatments in phase three.

To wrap up on slide 24, we continue to grow our existing business and invest in future growth drivers, we have a durable business approximately 60%, which is not exposed to us branded prescription pricing.

The third quarter was our seventh consecutive quarter of total company organic growth led by BNL International sales and we expect a strong growth outlook for the next three years.

We're continuing to invest and sustainable growth drivers, we are increasing R&D investment and continued to deliver new products, while also pursuing value, creating acquisition partnerships and licensing opportunities.

And we've leveraged our investment for this I faxing primary care Salesforce to now also promote Trulia. Finally, we are consistently improving our balance sheet, having reduced debt as of September thirtyth by $8.5 billion since the first quarter of 2016, we have also.

Joseph Papa: Finally, we are consistently improving our balance sheet, having reduced debt as of September 30 by $8.5 billion since Q1 2016. We have also successfully managed the maturity profile of our outstanding debt and produced strong cash flow from operations. For these reasons, we believe that our Q3 results demonstrate that Bausch Health is well-positioned for long-term growth. With that, operator, let's open up the line for questions.

Successfully manage the maturity profile of our outstanding debt and produce strong cash flow from operations.

For these reasons, we believe that our third quarter results demonstrate that Bausch health is well positioned for long term growth with that operator lets open up the line for questions.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Chris Schott of JPMorgan. Please go ahead.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then to at this time, we will pause momentarily.

To assemble our roster. The first question comes from Chris Schott of JP Morgan. Please go ahead.

Chris Schott: Great. Congrats on the quarter, and thanks for the questions. I guess my first one was on DUOBRII. Can you just talk a little bit more about how we should be thinking about gross to net dynamics for this product in the near term? So how long will this couponing strategy continue, as well as any color in terms of where you see gross to net stabilizing longer term as we try to translate this very healthy volume trend we're seeing, what that means from a revenue perspective. My second question was on gross margin upside. We've seen that throughout 2019. Just a little more color in terms of what's driving that and how sustainable the upside is. I was basically trying to get to is this 73% a good number going forward? Does that go up or down?

Great Congrats on a quarter and thanks for the questions I guess my first one was on on dual brief can you just talk a little bit more about how we should be thinking about gross to net dynamics for this product in the near term. So how long will this couponing strategy continue as well as any color in terms of where you see gross to net stabilizing longer term as we try to translate this very healthy volume.

Trend, we're seeing what that means from a revenue perspective.

Second question was on gross margin upside we've seen that throughout 2019 of store color in terms of what's driving that and how sustainable the upside is especially trying to get to is it's a 73% a good number going forward does that go up or down or just any any kind of pushes and pulls or should be thinking about that going forward. Thanks. So much.

Chris Schott: Just any kind of pushes and pulls we should be thinking about that going forward? Thanks so much.

Okay, Chris. Thank you for the question I'll start with two ovary, yes, we're really excited about what we see for the launch of do agree at both the acceptance by by physicians patients and really how we're really make in different than the lives of patients relative to the question. Yes. Our couponing strategy is such that we want to encourage the.

Joseph Papa: Chris, thank you for the question. I'll start with DUOBRII. Yes, we are really excited about what we see for the launch of DUOBRII and both the acceptance by physicians, patients, and really how we're really making a difference in these lives of patients. Relative to the question, yeah, our couponing strategy is such that we wanna encourage the opportunity for patients to give it a try. If you look at what we've been able to do on our slide in looking at the overall market access acceptance, when we were talking last quarter, the acceptance or I'm sorry, should say the market access was about 30% coverage. Then by September, it moved up to 38%.

Opportunity for patients to give it a trial, but if you look if you look at what we've been able to do on our slide and looking at the overall.

Market access acceptance.

When we are talking last quarter.

The acceptance or I'm, sorry, I should say the market access was about 30% coverage event by September moved up to 38 now it's up to 43 and right now we're at the beginning of ever read about 57% commercial covered we think thats going to be a big helped to us as improving the gross to net on the summation question or comment I would.

Joseph Papa: Now it's up to 43, and right now we're at the beginning of November, we're at about 57% commercial coverage. We think that's gonna be a big help to us as improving the gross to net. The summation question or comment I would say is that I would say that we expect to be more of a steady state, gross to net somewhere around 12 months as we, at that point, approach, what we think will be approximately 70-75% market access coverage. It takes about 12 months, I believe, as a general comment for products in the pharmaceutical industry, but it always depends on market access coverage. The second question I think you had was relative to gross margin. Paul, why don't you take that one?

Stays that I would say that we expect to be more of a steady state gross to net somewhere around 12 months as we at that point approach.

What we think will be approximately 70, 75% market access covered.

It takes about 12 months I believe as a general comment for products in the pharmaceutical industry, but it always depends on market access coverage.

The second question I think you had was relative to gross margin poetry take that one yes sure first.

Arthur Shannon: Yeah, sure. Yeah, first, I'm not gonna guide to gross margin percentage for 2020, but just let's comment on, you know, how we've done in 2019, 'cause I think it's pretty impressive. You know, it's really a combination of three things. You know, one is Project CORE, which is, you know, that I've talked about quite a bit already. Dennis Ascherin and our supply chain team have been engaged in this, in a supply chain efficiency initiative since 2016, and boy, are we getting results there and it is helping for sure, you know, drive our aggregate gross margin percentage in the right direction. The second thing is mix. You know, we do have a mix of businesses. Those businesses have different margins, and so that certainly comes into play.

Paul Herendeen: Yeah, sure. Yeah, first, I'm not gonna guide to gross margin percentage for 2020, but just let's comment on, you know, how we've done in 2019, 'cause I think it's pretty impressive. You know, it's really a combination of three things. You know, one is Project CORE, which is, you know, that I've talked about quite a bit already. Dennis Ascherin and our supply chain team have been engaged in this, in a supply chain efficiency initiative since 2016, and boy, are we getting results there and it is helping for sure, you know, drive our aggregate gross margin percentage in the right direction. The second thing is mix. You know, we do have a mix of businesses. Those businesses have different margins, and so that certainly comes into play.

First I'm not going to guide to gross margin percentage for.

Our 2020 by just let's comment on how we done in in 2019, because I think it's pretty impressive.

It's really it's really combination of three things one is project core which has now that I talked about quite a bit already.

Dennis Ashley and in our supply chain team have been engaged in us and its supply chain efficiency initiatives. Since 2000, 2016 and boy are we getting results there and it is helping for sure.

Drive our aggregate gross margin percentage in the right direction. The second thing is mix, we do have a mix of businesses those businesses have different have different margins and so that certainly comes into play I actually called out my prepared remarks, where mix was a helper and may mix was was working against us.

Arthur Shannon: I actually called out in my prepared remarks where mix was a helper and mix was working against us in our Q3 results. That plays a big role in how you forecast into 2020 and beyond. The last piece I wanna mention is the wild card of FX. You know, we are a global company. We have manufacturing facilities around the world. We produce in currencies, and then often we'll sell those products in other markets where they're denominated in a different currency. So it's a bit of a wild card. You know, you saw that we, our year-to-date 73.2%, and we're guiding to circa 73% for this year. It bounces around a little bit.

Paul Herendeen: I actually called out in my prepared remarks where mix was a helper and mix was working against us in our Q3 results. That plays a big role in how you forecast into 2020 and beyond. The last piece I wanna mention is the wild card of FX. You know, we are a global company. We have manufacturing facilities around the world. We produce in currencies, and then often we'll sell those products in other markets where they're denominated in a different currency. So it's a bit of a wild card. You know, you saw that we, our year-to-date 73.2%, and we're guiding to circa 73% for this year. It bounces around a little bit.

In our in our Q3 s results and so that plays a big role and how you forecast into 2020 and beyond in the last piece I want to mention is the wildcard of FX.

We are a global company, we have manufacturing facilities around the world we produce in.

In in currencies, and then often will sell those those products in other markets, where we are where the.

Are they are denominated in a different currency, that's a bit of a wildcard.

You saw that we our year to date, 73.2% and we're guiding to circa 73 for for this year. It bounces around a little bit I mean, I'm not going to guide you for next year I, just say we've made great progress during the fundamental things right that we're supposed to do to keep that percentage as high as it can be.

Arthur Shannon: I mean, I'm not gonna guide you for next year. I just say we've made great progress doing the fundamental things right that we're supposed to do, to keep that percentage as high as it can be. Mix and FX are very big factors.

Paul Herendeen: I mean, I'm not gonna guide you for next year. I just say we've made great progress doing the fundamental things right that we're supposed to do, to keep that percentage as high as it can be. Mix and FX are very big factors.

The mix and FX are very big factors.

Chris Schott: Thank you.

Thanks, Operator next question.

Joseph Papa: Operator, next question please.

The next question comes from Omer runoff of Evercore. Please go ahead.

Operator: The next question comes from Umer Raffat of Evercore. Please go ahead.

Umer Raffat: Hi. Thanks so much for taking my questions. Joe, there's been a lot of commentary on the street, on setting DUOBRII expectations, possibly as high as $2 billion plus.

Hi, Thanks, so much for taking my questions Joe Theres, a lot of commentary on the street.

On setting jewelry expectations, possibly as high as $2 billion, plus and I noticed your slide 20 today and the deck is also doing some of those same non apples to apples comparison in my opinion comparing to Aubrey versus novel Biologics like Dupi. So my questions are number one a Joe are you comfortable with setting expectations at those.

Umer Raffat: I noticed your slide 20 today in the deck is also doing some of those same non-apples to apples comparison, in my opinion, comparing DUOBRII versus novel biologics like Dupixent. My questions are, number one, A, Joe, are you comfortable with setting expectations at those types of numbers? And two, if you take the DUOBRII TRxs quarter, which is 24,000, and you multiply it by a net price of even $500, you get to something like $10 million in sales. Now granted there's a lot of free drug, but that should still at least be $5 million in sales or so. The fact that it was less than $4 million, I'm just curious how much free drug is in those TRxs that people are comparing versus Dupixent. And then finally, just curious why Trulance declined quarter-over-quarter.

The numbers.

Two if you take the dual re trx this quarter, which is 24000 and you multiplied by a net price of even $500 you get to something like.

$10 million in sales now granted there's a lot of free drug, but that should still at least be $5 million in sales or so.

Fact that it was less than 4 million I'm just curious how much free drug is in those trx therapy, Brooklyn comparing versus Dupi.

And then finally, just curious why true Lance declined quarter over quarter and it sounds like based on your guidance for Q might also not be much higher than the twoq levels. Thank you.

Umer Raffat: It sounds like based on your guidance, Q4 might also not be much higher than the Q2 levels. Thank you.

Joseph Papa: Okay. First, I'm not gonna make any comments specifically on the long-term guidance of DUOBRII, specifically to numbers, other than to say we're really excited by what we're seeing. Because for the very first time, we have a product that you can treat patients who have psoriasis topically, and you can treat them to clearance, whereas previously you had a limited duration of treatment. We think it's really exciting what we see. Obviously, the prescription in the first four months we think have been very strong in terms of growth rate. We clearly just wanted to look at some of the other products that have been dermatology specific and compared the uptake of our product versus them.

Okay. So first I am not going to make any comment specifically on the long term guidance of do over specifically to numbers other than say, we're really excited by what we're seeing because for the very first time, we have a product that you can treat patients who have psoriasis topically and you can treat of the clearance, whereas previously you had.

A limited duration of treatment. So we think it's really exciting what we see.

Obviously the prescription in the first four months, we think had been very strong in terms of of growth rate. We clearly just wanted to look at some of the other products that have been dermatology specific and compared the uptake of our product versus them. We're not trying to put numbers out specifically for the future of than say were tickets going.

Joseph Papa: We're not trying to put numbers out, specifically for the future, other than say we think it's gonna be an important part of our future dermatology business and help us with the turnaround of the dermatology business. On the question of the gross to net, we absolutely acknowledge that initial first 9 months, 12 months will be a lower gross to net than what we would normally see and what we'll see at the call it steady state. The reality is it really depends a lot on how successful we are gaining commercial access. We think the uptake in commercial access, market access has been very good and we'll look to continue to do that going forward.

To be important part of our our future dermatology business and help us with it the turnaround of the dermatology business on the on the question of the gross to net we absolutely acknowledge the initial first.

Nine month, 12 months will be a lower gross to net.

Than what we would normally see and what we'll see at at the.

Caught steady state, but the reality is it really depends a lot on how success. We are gaining commercial access we think the uptake in commercial access market access has been very good and we'll look to continue to do that going forward. So that that's really all I can say on the on the do ovary side.

Joseph Papa: That's really all I can say on the DUOBRII side relative to we're not gonna put a specific number out in the plan for future. On the question of Trulance, the Trulance Q2 revenue was higher. That was, if you recall, we acquired the product out of a bankruptcy situation, and there was some stocking in the quarter too. If you look at really the measure of growth prescriptions for Trulance, Q3 versus Q2 was up 10%. We clearly think that's one important metric. There was some noise on the stocking side. Of course, as you think about Q3 this year versus Q3 2018, we were up 25%.

Relative to we're not going put a specific number out in the plan for future on the question of true Lance, Yes that Qs quarter to revenue was higher that was if you recall we've acquired the product.

Out of a bankruptcy situation and there was some stocking in the quarter too, but if you look at really that measure of growth prescriptions for true Lance quarter three versus quarter Q was up 10%. So we clearly think thats one important metric.

There was some noise on the on the stocking side and then of course as you think about quarter three this year versus quarter. Three 2018, we were up 25%. So every metric we look at what drew that gives us a lot of optimism for the future.

Joseph Papa: Every metric we look at with Trulance gives us a lot of optimism for the future, and certainly in line with what we said with our full year guidance on the $55 million. Pleased with Trulance, and especially now that we've moved from 100 reps promoting it to 200 reps, now up to 500 reps. We think there's a great opportunity as we brought together the Xifaxan and Trulance IBS opportunity to have what we believe is a best in class product in IBS-D with Xifaxan, and we believe a best in class label, with the Trulance product for IBS-C. A long way to go in terms of, the performance there, but we think it's a great opportunity for us. Operator, next question.

Certainly inline with what we said with our full year guidance on the 55 million. So pleased with Juliet and especially now that we've moved from 100 reps promoting it to 200 reps now up to 500 reps. We think there's a great opportunity as we brought together thats I facts as a truly is IB asked opportunity you'd have what we believe is a best in class product in IBSD.

With the fact that and we believe a best in class label with the truancy product for IBSD along way to go in terms of the performance there, but we think it's a great opportunity for us.

Operator next question. The next question comes from a cash to worry of Wolfe Research. Please go ahead.

Operator: The next question comes from Akash Tewari of Wolfe Research. Please go ahead.

Hey, thanks, so much so consensus has the germs segment kind of growing at a steady clip. If you include Solta you go from like around 560 to close to 900 by 2025 can you give us a sense of how you expect this segment to grow internally and would it be fair to say that consensus isn't really modeling uptake for your IBP pipe.

Akash Tewari: Hey, thanks so much. So, you know, consensus has the derm segment kind of growing at a steady clip. If you include Solta, you go from like around $560 to close to $900 by 2025. Can you give us a sense of how you expect this segment to grow internally? And would it be fair to say that consensus isn't really modeling uptake for your IDP pipeline products? Of IDP-120, IDP-123, IDP-126, which one of these products are you guys kind of internally most bullish about and why? And then a bit maybe on Xifaxan and the patent case. You've, you know, you've talked about your willingness potentially to settle with Novartis. How do you feel their case is different, if at all, with Teva's?

Fine products. So of anyone 20, 123, 126, which one of these products are you guys kind of internally most bullish about and.

And why and then a bit maybe on is that Saxon and the patent case what is your.

I've talked about your willingness potentially to settle with Novartis. How do you feel their case is different at all with Teva and with that in mind would we would it be unreasonable to expect a settlement or anything sooner than the 2028 that Tibet settled for previously thanks.

Akash Tewari: With that in mind, would it be unreasonable to expect a settlement for anything sooner than the 2028 that Teva had settled for previously? Thanks.

Okay us quite a few questions there I'm going to try to get them, all but if I Miss any pleased to remind me first started dermatology, we're really excited about our dermatology business as most evidenced by my comments relative to do agree. We think do over is a game changer relative to the ability to treat these patients topically.

Joseph Papa: Okay. You asked quite a few questions there. I'm gonna try to get them all, but if I miss any, please do remind me. First starting out in dermatology, we are really excited about our dermatology business as most evidenced by my comments relative to DUOBRII. We think DUOBRII is a game changer relative to the ability to treat these patients topically, which is what most psoriasis patients are looking for, is to treat it topically. We also believe it's a game changer because of the ability for patients to delay the need for biologic. As you know, we did the study that for every patient that you delay the need for biologic or the use of a biologic, you can save payers a significant amount of dollars.

Which is what most psoriasis patients are looking for is to treat their product treat topically. We also believe it to a game changer because of the ability for work for patients to delay the need for biologic and it as you know that we did a study that for every patient that you delay the need for bilateral the use of bye.

Logic and save a plan significant amount of dollars I. My recollection is for the plan with 1 million lives, it's something in that order $3 million to $5 million of savings for that plan on annual basis. So clearly that that is.

Joseph Papa: My recollection is for a plan with a million lives, it's something in the order of $3 to 5 million of savings for that plan on an annual basis. Clearly that is you know the first comment in terms of the overall DUOBRII and derm. I'm not gonna make any comments about the outlook for specifically for our commentary other than to say that we do believe the dermatology business has a significant upside from where we are today. We had to work our way through the LOEs. We believe most of that is behind us, as Paul mentioned. Now as we look we have the growth opportunity, especially with DUOBRII, BRYHALI, SILIQ in the category.

The first comment in terms of the overall do over in derm Im going to make any comments about the outlook for specifically for our commentary other than say that we do believe the dermatology business has a significant upside from where we are today, we had to work our way through the Louise We believe most that is behind US as Paul mentioned now as we look we have the growth.

Opportunity, especially with dual Greenbrier Holly Saliq in the category on the question of other products.

Joseph Papa: On the question of other products, certainly on IDP-120, that's a dual product for acne. IDP-123 is the Arazlo that we also talked about, that we filed and have a December PDUFA date. Clearly that's something that we think also could be an exciting opportunity for us once again in acne. Then IDP-126 is a triple combination we have. A lot of good opportunities for us for the future, we think that's what's gonna build our dermatology business going forward. I think the last question you had was on Xifaxan IP. We think we have a very strong position. We did file suit against Sandoz on 30 September.

Certainly on the one.

I'd PD 120.

Thats a.

A dual product for acne 123 is the rise load that we also talked about for that we filed and have a December PDUFA date. So clearly thats something that we think also could be an exciting opportunity for us, but once again in ethane and then 126 is a triple combination we have so.

A lot of good opportunities for us for the future, we think thats whats going to build our dermatology business going forward I.

I think the last question you had was on Surfaxin IP.

We think we have a very strong position, we did file suit against Sandoz on September Thirtyth, we believe that the 22 patents that we were originally had now was supplemented with one additional patent that we announced we now 23 patents. We believe we have a very strong position there is important commentary.

Joseph Papa: We believe that the 22 patents that we were originally had, now was supplemented with 1 additional patent that we announced. We now have 23 patents. We believe we have a very strong position. There's important commentary on intellectual property. We know that the polymorph patents are very important to us, and the FDA has come out with guidance on how one would need to be shown to be bioequivalent. We think that the differences in the absorption of the polymorphs is a very important consideration and one that gives us, based on our information, a very strong position to defend it. We see nothing in the Sandoz filing that would give us reason to move off of that 2028 date.

On.

Intellectual property, we know that the poly more patents are very important to us in the FDA has come out with guidance on how one would need to be.

Shown to be bio equivalent we think that the differences in the absorption of the polymorph is a very important consideration and one that gives us based on our information a very strong position to defend it and we see nothing in the Sandoz filing that would give us reason to move off of that 22.

Any eight days, so we feel very good about it and obviously, we'll continue to to try to work through within those but feel very strong, but our 2028 days.

Joseph Papa: We feel very good about it, and obviously we'll continue to try to work through it with Sandoz, but feel very strong about our 2028 date. I think I got them all. Operator, next question, please.

I think I've got a mall operator next question. Please for next question comes from Greg Gilbert of Suntrust. Please go ahead.

Operator: The next question comes from Gregg Gilbert of SunTrust. Please go ahead.

Thanks, gentlemen, first Paul I know you're not in the move to give a lot of specifics about 2020, but hoping you could just at least highlight some of the pushes and pulls US you see them and 20.

Gregg Gilbert: Thanks, gentlemen. First, Paul, I know you're not in the mood to give a lot of specifics about 2020, but hoping you could just at least highlight some of the pushes and pulls as you see them in 2020. As part of that, more of a qualitative question about just maybe a little bit quantitative, but how much flexibility do you expect to have next year to consider extracurricular activities and BD, as you continue to emphasize de-leveraging sort of 2020 versus how it has felt in 2019 and previously? Then secondly, on Xifaxan there's a competitive launch coming in traveler's diarrhea.

Part of that more of a qualitative question about just.

Maybe a little bit quantitative how much flexibility they expect to have next year.

I consider extra curricular activities and BT.

As you continue to emphasize deleveraging sort of 2020 versus how it has felt and 19 and previously and then secondly on Xifaxan, there's a competitive launch coming in travelers diarrhea, I know, it's a tiny.

Gregg Gilbert: I know it's a tiny, you know, revenue contributor for Xifaxan, but Joe, maybe you can talk about whether you're seeing or expect to see any signs in the contracting environment that is relevant, even though it's not a head-to-head, sort of comparison to where the business lies. Thanks.

Revenue contributor for Xifaxan, but Joe maybe you could talk about whether you're seeing or expect to see any.

Signs in the contracting environment that that is relevant even though it's not a head to head.

In comparison to where the business lies thanks.

Well I think first off yet yeah sure out as thanks. Thanks for the question Scott, Greg Let me start.

Paul Herendeen: Oh, I'll take it first, and I'll turn it to you.

Paul Herendeen: Yeah.

Paul Herendeen: Thanks for the questions, Greg. Let me start again. Don't wanna provide guidance for 2020, but there are some things that you should be able to take away from our commentary earlier today that help you start thinking about, you know, how, at least how we view 2020. I mean, I'll start with the Bausch + Lomb/International segment. You know, we are, you know, continuing to deliver solid kinda mid-single digit organic revenue growth in that Bausch + Lomb/International segment. We talked in the past how this business over time is a, you know, kind of a mid to maybe even a little better than mid-single digit performer or, you know, could expect to be. That is the majority of our revenue.

I don't want to provide guidance for 2020, but there are some things that you should be able to take away from our commentary earlier today that help you start thinking about.

How at least how we view 2000 2021 mailstore with the BNL International segment, we are continuing to deliver solid kind of mid single digit organic revenue growth in that BNL International segment, and we talked in the past how this business overtime is kind of a mid to maybe even a little better than mid single.

Digit performer or could expect to be that is the majority of our revenue so as you're thinking about it.

Paul Herendeen: As you're thinking about it, you know, that piece, you know, there's one growth driver. You know, second, you know, I called out, you know, Xifaxan, you know, obviously our largest individual asset, and was pretty clear. I mean, you can come up with your own volume expectation, growth for volume in Xifaxan for 2020 vs. 2019, and we said we get a couple of hundred basis points of, we think, of a pickup in price there. You got your largest franchise, which you're expecting to grow at an attractive rate into 2020 vs. 2019.

That piece, there's there's one growth driver second I called out.

Xifaxan, obviously, our largest individual asset and was for pretty clear I mean, you can come up with your own volume expectation.

Growth of our volume enable type act on for 2020 V 19, and we said we get a couple of hundred basis points above of we think of a pickup in price. There. So you got your largest franchise, which are expected to grow at an attractive rate into two into 2020 be 19, I called out that during the last we read.

Paul Herendeen: I called out the derm, you know, as we rebase it here in Q4, you know, we expect the medical derm part of our business to return to a growth profile that's on the strength of the products that we've launched and are launching in the medical derm business. Part of that Ortho Dermatologics segment, Solta, has been growing, you know, very strong growth here in 2019 vs 2018. You know, do I expect it to grow at that same rate, you know, going forward? That would be hard to achieve, but, yeah, I expect it to be, you know, kind of a strong grower. So there's a majority of our business which you'd expect to be, you know, growing into 2020 versus 2019.

They sit here in Q4, we expect the medical during part of our business to return to a two a growth profile thats on the strength of the products that we've launched and are launching in the medical derm business part of that Ortho Durham segments. Solta has been growing very very strong growth here in in 19.

In the 18 now do I expected to grow at that same same rate going forward that that will be hard to achieve but expected to be kind of a strong strong grower. So there's a majority of our business, which you'd expect could be growing into.

Into into 2020 versus 19.

Paul Herendeen: You know, the flip side, you know, the things that could be headwinds for us there. You know, I called out Glumetza. Glumetza has been a great product for us, but as we had called out, I wanna say we started talking about it at the end of Q1, you know, giving people a heads-up, keep an eye on, and it's been really good for us. You know, as that volume, you know, shifts into what I call far less profitable channels for us, you know, that is going to be a year-over-year decliner, and it's kind of a material MD&A item.

The flip side that the the things that could be.

Headwinds to headwinds for us there I called out Glumetza Glumetza was that was has been a great product for us, but as we had called out I want to say, we started talking about at the end of Q1.

Given people a heads up keep an eye on and it's been it's been really it's been really good for us.

But as that that as that volume shifts.

Gifts into.

I will call far less profitable channels for us.

That is going to be a year over year decline earn it in it.

Kind of a material mdna mdna item.

Paul Herendeen: You know, the other thing I call out is we will, when we provide our guidance for 2020, we'll of course update our LOE schedule. The next LOE of significance is something that I did speak about in talking about guidance, which is APRISO. We've moved that out to H1 2020. You know, if that comes 1 January, it's different than if it comes, you know, 29 June. You know, those are the things I'd be looking at when thinking about 2020 from a revenue perspective versus 2019. I hope that helped. On Xifaxan, the competitive launch in traveler's diarrhea, we take every competitor very seriously.

The the other thing I call out as we will and when we provide our guidance for 2020, we'll of course update our rail OE schedule. All the the next Ellen we have significance is something that I did speak about in talking about guidance, which is a pre so we've moved that out to one age 20.

Yes that comes January Onest, it's different than if it comes.

June 29, so those are the things I'd be looking at when thinking about 2020 from a revenue perspective, the 19 I hope that help.

And then by Faxon, the competitive launch in Trevors diarrhea, we take every competitor very seriously.

Paul Herendeen: Having said that, the rifamycin product was approved approximately 1 year ago, and to date, we really haven't seen anything, you know, of consequence there yet. The only point I would add to that is that, you know, for us, the traveler's diarrhea is less than 2% of our TRx. It's still a very small portion of our business. For the most part, managed care doesn't usually cover that. So I think it would be somewhat difficult to get too much contracting with that particular indication. But we'll obviously take it serious and see what happens in the marketplace relative to the traveler's diarrhea indication. Gregg, I'm sorry. It's Paul again. I realize I skipped over your question regarding our flexibility to allocate free cash flow for, you know, business development opportunities.

Being said that the reclamation product was approved approximately one year ago.

We really havent seen anything of consequence, there yet the only point I would ask add to that is that for us. The Travis diarrhea is less than 2% of our Trx is a very small portion of our business and.

For the most part managed care does it usually cover that so I think it would be somewhat difficult to get too much contracting with that.

Or indication, but we will obviously take it series and see what happens in the marketplace relative to the travelers diary indications, Greg I'm, sorry, It's Paul again, I realize I.

Skipped over your question regarding our flexibility to allocate to free cash flow for.

Business development opportunities.

Paul Herendeen: You know, this year, I think early in the year, we were fortunate to be able to acquire the assets of Synergy and get the Trulance asset and drop it into the Salix business. You know, as I want to say, we would do that deal 100 out of 100 times. It was circa $190 million. I wish we could do one of those every quarter, but those sorts of transactions are not always available. As we look ahead to 2020 and beyond, we will continue to prioritize the use of our free cash flow to reduce our debt. I think we've

This year I think early in the year, we are fortunate to be able to acquire the assets of of synergy and again get the truly its asked and drop it into Salix business.

As I want to say, we would do that deal 100 out of 100 times that was circa $190 million and.

A I wish we could do one of those every quarter, but but those sorts of transactions are not always not always available as we look at 2020 beyond that we will continue to prioritize the use of our free cash flow to reduce our debt I think we have reduced the quantum of our debt and we are improving our loan.

Joseph Papa: We have reduced the quantum of our debt, and we're improving our leverage, but we continue to be a very highly levered company and one that needs to work to bring our capital structure to something that is more reasonable for a company that's comprised of the assets that we're comprised of. We'll prioritize that. Now, that said, if there are opportunities out there that fit you know dead center on top of our core areas of focus, that would be eye care, GI, and medical derm. We would certainly consider those things, and you should expect us to you know try to find opportunities where we could deploy capital in business development opportunities that would be value generative. Operator, next question, please.

Average, but we continue to be very highly levered company and one that needs to at needs to work to bring our capital structure to something that is up more more reasonable for our company is comprised of the assets that were comprised of so we will prioritize that now that said if there are opportunities out there that fit dead center on.

Up of our our core areas of focus that would be eyecare, GPI and medical derm.

And we would certainly.

Consider those things and you should expect us to.

We'll try to find Trinet five trying to find opportunities, where we can deploy capital.

In business development opportunities that would be value generative.

Operator next question. Please next question comes from David.

Operator: The next question comes from David Amsellem of Piper Jaffray. Please go ahead.

Element of Piper Jaffray. Please go ahead.

Thanks, just a couple so first on do Aubrey I wanted to come back to the and the topic of access.

David Amsellem: Thanks. Just a couple. First on DUOBRII, I wanted to come back to the topic of access. You said 57% covered commercial lives. I wanted to get a sense of how much of that is hassle-free or maybe another way of asking the question is, what do the step-throughs look like in terms of the covered lives? That's number one. Then on Trulance, I don't know if you're willing to cover this, but can you just talk about how we should envision steady-state gross-to-net for that product? It seems like you've made some gains on contracting and reducing restrictions. How does that affect gross-to-net and what is steady-state gonna look like longer term?

He said 50, 57% all covered commercialized so I wanted to get a sense of how much of that is hassle free or navy.

The other way of asking the question is.

What do the steps rules look like.

In terms of the covered.

So that's number one and then on true Lance.

I don't know if you're willing to covenants you can you just talk about how we should envision.

Steady state.

Gross to net for that product. It seems like you you made some gains on on contracting in reducing institution. So how does that affect all said and steady state than it looks like longer term and then lastly world quite bonds. All 10 inside the anything new to say about that and where you may go into.

David Amsellem: Then lastly, real quick on dolcanatide, do you have anything new to say about that and where you may go in terms of the development of that asset? Thanks.

The development of that asset thanks.

Hey, I'm going to try to get all of them, but.

Joseph Papa: Yeah, I'm gonna try to get all of them, but just let me start with DUOBRII. The question of what do the step-throughs look like for access? I think we've been very fortunate. As I said, we've continued to improve our access with DUOBRII, moving from, as I said, when we're on this call last quarter was 30%, now we're up to 57%. A majority of that has improved, specifically in the unrestricted. For DUOBRII, we expect to have about 44% unrestricted and about 13% has some prior auth and step-throughs.

Let me start with do agree the question of what do the step through his look like for access things, we've been very fortunate as I said weve.

Continued to improve our access with two ovary moving from as I said, we're on this call.

Last quarter was 30% now we're up to 57% a majority of that has improved.

Specifically in the unrestricted for do ovary, we expect to have about 44% unrestricted and about 13% has them. Prior pro often stepped through but you can see the majority of the 57 is specific we an unrestricted access which we think makes a lot of sense because as I said before the first.

Joseph Papa: You can see the majority of the 57 is specifically an unrestricted access, which we think makes a lot of sense because as I said before, it's the first time a patient could use a topical and treat to clearance versus what previously was limited on duration and because of the ability for us to potentially delay the need for a biologic. On the second part of the question, Trulance, how do we envision the steady state of the product going forward? I think when we acquired it, we made the comment about what we were trying to accomplish, and I think we've stayed to that comment.

Time of patient could use a topical and treat to clearance versus what previously it was limited on duration and and because of the ability for us potentially delay the need for biologic on the second part of the question truly is how do we envision the steady state of the product going forward I think when we acquired at we made the comment.

But what we were trying to accomplish and I think we stated that comment first thing. We said we have to improve reach and frequency of admitted made a comment in the call we improve reach rigorously by about 90% additional promotion behind our.

Joseph Papa: First thing we said we have to improve reach and frequency, and as I made a comment in the call, we improved reach frequency by about 90% additional promotion behind our Xifaxan primary care effort, as well as what we have in gastroenterologists, since we acquired it. So clearly, we're doing reach frequency. On the second part of what we said, we needed to improve the market access position, and we've done that. What specifically we've done is improve the availability of this product for about 37 million lives. By improving it, either we got additional formulary additions or we made it easier to use the product more, moving it more towards the unrestricted side of the equation. So those are the things we've done with Trulance.

So I facts and primary care effort as well as what we Havent gastroenterologist since we acquired it so clearly doing reach frequency on the second part of what we said we needed to improve the market access position and we've done that.

Specifically, we done is improve the availability of this product for about 37 million lives and by improving it either we got additional formulary additions or we made it easier to use the product more moving more towards the unrestricted side of the equation. So those are the things.

We've done with Trulia and.

Joseph Papa: As we sit here today, our overall Trulance availability, unrestricted and restricted, is about 88%. So you can see we've made some really good progress there. On the third question you had with dolcanatide, we are continuing to evaluate dolcanatide. We do think it has some significant opportunity for us, relative to us doing some additional preclinical work with the molecule. At the very least, we clearly think it has a life cycle for us relative to improving on Trulance, but we're gonna look at other gastroenterology indications as well, as I said, through preclinical models. I think I got all your questions, David. Operator, next question.

As we sit here today, our overall true units.

Availability unrestricted and restricted is about 80%. So we can see you've made some really good progress there on the third question you had with Bill Cana tied.

We are continuing to evaluate Dole Cana tight we do think it has some significant opportunity for us.

Relative to us doing some additional preclinical work with the molecule at the very lease we clearly think it has.

Lifecycle for us relative to improving on truly hands, but we're going to look at other gastroenterology indications as well as I said through preclinical models.

I think I got all your questions David.

Operator next question.

Operator: The next question comes from Gary Nachman of BMO Capital Markets. Please go ahead.

The next question comes from Gary Nachman of BMO capital markets. Please go ahead.

Gary Nachman: Hi, good morning. First, then in Bausch + Lomb, on the contact lens market, just talk about how you've been able to gain share, particularly in the US, and when will the daily SiHy be ready to launch in the US, and how much share could that potentially take? How will it be differentiated in the market? Is VYZULTA still a major focus for the Bausch + Lomb team? Is Medicare where it needs to be? When should we see this product accelerate? Joe, on the cash pay model for legacy derm products, have those products gained traction yet? How much should the expansion help in Walgreens that you talked about? Thank you.

Hi, Good morning, first and BNL on the contact lens market just talk about how you've been able to gain share, particularly in the U.S. and when will the daily Sai high be ready to launch and U.S. and how much share could that potentially take.

How will it be different differentiated in the market.

And then as Vice health is still a major focus for the BNL team is Medicare where it needs to be and when should we see this product accelerate and then Joe on the cash pay model for legacy Derm products.

Have those products gain traction yet and how much should the expansion help in Walgreens that you talked about thank you.

Okay, you got a lot there I'm going to try to get them all.

Joseph Papa: Okay, you got a lot there. I'm gonna try to get them all in terms of. But if I miss any of them, please do remind me. On the contact lens side, really it's been the new innovation that we brought out, the new ULTRA, the Biotrue, the ULTRA multifocal, the ULTRA toric. That's been really the primary way, 'cause I mentioned to you, Biotrue was up 22%. ULTRA was up 25% quarter versus a year ago. It really shows, I think, great performance by the team. I most certainly wanna also recognize the team. Joseph Gordon and his team have just done an outstanding job, John Ferris, as they've taken over this responsibility. Yang Yang on our international side has also done a great job on our business.

Terms, it, but if I Miss and even with please remind me on the contact lens.

I really it's been the new innovation that we brought out the new ultra and Biotrue. The ultra multifocals torque that's been really the primary way because I mentioned to you Biotrue is up 22% ultra was up 25% quarter versus a year ago. So it really shows I think great performance by the team.

Most certainly want to offer recognize the team Joe Gordon and his team if thats done an outstanding job John fares as they've taken over this responsibility and then young on our international side has also done a great job butter on our business. So a lot of good efforts by the team is really focusing on our new innovation.

Joseph Papa: A lot of good efforts by the teams, really focusing on our new innovation and the opportunities for people to have better optics, more comfort, and the ability to have access to new innovations such as our multifocal for astigmatism. On the question of the SiHy daily, we said it's H2 2020. To date, in the United States, the US, SiHy percentage in market is about 12, 13% of market, but it is growing significantly. We believe we have an opportunity once again to bring some innovation into this marketplace with a new SiHy that we think is gonna be very desirable for patients relative to the current existing SiHy products out in the market, which will help us with the growth of that product.

And the opportunities for people to have better optics more comfort and the ability to have access to new innovations such as our multi focal for stigmatism on the question of the site High Daily We said, it's a second half of 2020 to date.

States the us OSI high percentage in market is about 12, 13% of market, but it is growing significantly and we believe we have an opportunity once again to bring some innovation into this marketplace within a new side high that we think is going to be very.

Desirable for patients relative to the current existing side high products out in the market, which will help us with the growth of that product.

Joseph Papa: VYZULTA, is it still a focus? The answer is absolutely yes. If you look at our performance, the performance in Q3 2019 was up 140% versus Q3 2018. I think you can clearly tell by that, the team is doing a good job with it and continuing to move that product forward for us as a company. Last comment was the Dermatology.com, how much will the cash pay program help us? We've been working very diligently. Bill Humphries and his team has been working very diligently to ensure that as we got greater access, what we felt the problems that we could solve with Dermatology.com is to make sure that the doctors get the brands with the predictable access.

Hi, Salta is it still focused the answer is absolutely yes, if you look at our performance.

The performance in the third quarter 2019.

Was up 140% versus the third quarter of 2018. So I think you can clearly tell by that.

The team is doing a good job with it and continuing to move that product forward for us as a company.

Last comment was that dermatology dot com haven't where the cash pay prone help us we've been working very diligently bill Humphries and his team has been working very diligently to ensure that as we got greater access what we felt the problems that we could solve with dermatology comp dot com is to make sure that the dock.

Stirs get the brand with a predictable access.

Joseph Papa: They get the product that they want and the formulation they want. Then, of course, for patients, that the patients have access at a, you know, at a network that means that they're gonna get the product the doctor wanted. They're going to get the results that the doctor's expecting, in the formulation that they're expecting at a very predictable price point. That's what we expect is gonna help us, and having an additional 9,300 or so stores from Walgreens only makes the model work even better. I think I got all your questions. Operator, next question.

They get the the product that they want in the formulation. They want and then of course are patients that the patients have access at a point in a network that means that theyre going to get the product. The doctor wanted they're going to get the results that the doctors expecting in the formulation that theyre spending at a very.

The predictable price points, if that's what we expect is going to help us.

Having an additional 9300.

So stores from Walgreens, only make that the model work even better.

I think I got all your questions. Operator next question for next question comes from Louise Chen of cancer. Please go ahead.

Operator: The next question comes from Louise Chen of Cantor. Please go ahead.

Louise Chen: Hi. Thanks for taking my questions. First question I had for you is if you could comment more on the growth to nets for Q3 2019. Then second question I wanted to ask you was, as you move through this growth phase between 2019 and 2020, how do you plan to achieve the sales and EBITDA growth that you've forecasted as a CAGR over the next couple of years? The last question I had was just how should we think about R&D spend as we enter 2020 and beyond? Thank you.

Hi, Thanks for taking my questions first question I have for you. If you could comment more on the grid connection in the third COVID-19, and then second question I wanted to ask me was as you move through this growth.

And 2900 2020, how do you plan to exceed the sales and EBITDA growth you forecasted advocate here over the next couple of years and then last question I have a shift how should we think about R&D spend as we enter 2020 and beyond thank you.

Repo and you take that first the growth net two of 19 question, Yes, sure a and at the gross to net is a it's kind of.

Joseph Papa: Yep. Why don't you take that first, the gross-to-net 2019 question?

Paul Herendeen: Yeah, sure. The gross-to-net is a complicated thing. I'll call it. If you look, the gross-to-net pickup that we observed in the quarter and frankly have observed year to date, it's been a theme for us over the last couple of years, and it's not something that just kinda happened in a vacuum. You know, it's been the result of a lot of management focus. We implemented some improved processes. I'll use product returns as an example, if I might. I think it's worth spending a second on this. Year to date through September, the amount of product returns that we actually processed were $77 million less than we had in the same period in the prior year. That's a 30% reduction.

Ill call it a complicated thing.

Yes, but if you look area the gross that pickup that we observed in the quarter end frankly have observed year to date has been a theme for us over the last couple of years and it's not something they just kind of happened in a vacuum.

It's been the result of a lot of management focus we implemented some improved processes and made I'll use product returns as an example, if I might I think it's and it's worth spending a second on this year to date through September the amount of product returns that we actually process were $77 million less.

Then we had in the same period in the prior year Thats, a 30% reduction so for the avoidance of doubt our process return results in a credit against the accounts receivable, meaning we're talking about kind of hard cash here. So I'll repeat 77 million favorable year to date versus that versus 2018. So then why did play.

Arthur Shannon: For the avoidance of doubt, you know, a processed return results in a credit against account receivable, meaning we're talking about cold, hard cash here. I'll repeat, $77 million favorable year to date versus 2018. Why did processed returns go down so much? It's, you know, it's because beginning back in the latter part of 2016 and continuing even as we speak, you know, we've more actively monitored and managed the channel inventories of our products. What we're talking about here is mainly our brand and Rx businesses. I think we're talking about in the US now, Salix, Neuro, Derm, and OtoRx. You know, we tightened up our policies. We successfully challenged channel partners that may have been gaming us in the past. We've worked our channel inventories down, which is in and of itself helpful.

Paul Herendeen: For the avoidance of doubt, you know, a processed return results in a credit against account receivable, meaning we're talking about cold, hard cash here. I'll repeat, $77 million favorable year to date versus 2018. Why did processed returns go down so much? It's, you know, it's because beginning back in the latter part of 2016 and continuing even as we speak, you know, we've more actively monitored and managed the channel inventories of our products. What we're talking about here is mainly our brand and Rx businesses. I think we're talking about in the US now, Salix, Neuro, Derm, and OtoRx. You know, we tightened up our policies. We successfully challenged channel partners that may have been gaming us in the past. We've worked our channel inventories down, which is in and of itself helpful.

Yes returns go down so much it's it's because of beginning back in the latter part of 16 in continuing even as we speak.

Weve more actively monitored and manage the channel inventories of our products and what we're talking about here is mainly our branded Rx business as I think you're you were talking about in the US now Salix neuro derm and Opto Rx, we tightened up our policies. We successfully challenge channel partners that may have been gaming us in the past we've worked.

Story is down which is in of itself helpful and significantly we change our pricing policies such as a large infrequent price increases are not part of our business model. So we're working our way through the situation. We started with and we made great progress and that really resulted in measurable declines in the level of the process right.

Arthur Shannon: Significantly, you know, we've changed our pricing policy such that the large and frequent price increases are not part of our business model.

Paul Herendeen: Significantly, you know, we've changed our pricing policy such that the large and frequent price increases are not part of our business model.

Paul Herendeen: Yeah, we're working our way through, you know, the situation we started with, and we made great progress, and that really resulted in measurable declines in the level of the process returns that you saw beginning in, say, 2018. You're gonna see this or you've seen it already in our 10-K and our 10-Q. Yeah, you look at the revenue recognition footnotes, you can find information there. But as we've developed sufficient data to support an assumption that our future returns be less than we previously estimated and accrued, you know, we change both the amount by which we reduce gross sales for returns during that period and we true up the returns accrual to reflect the lower amount of returns that we now expect to process against previously sold product.

Turns that you saw beginning in say 2018, and you're going to see this well you've seen it already in our 10-K in our 10-Q you look at the revenue recognition footnote you can find information there, but as weve developed sufficient data to support an assumption that our future trends be less than we previously estimate.

In accrued yes, we change both the amount by which we reduced gross sales for returns during that period end, we true up the returns accrual to reflect the lower amount of returns. We now expect a process against previously sold product. So that first part that reduction in in.

Paul Herendeen: That first part, that reduction in you know the deduction amount continues on as an increase in the average selling price for impacted products. I called that out a little bit when I talked about Xifaxan. You know, then the true up of the accrual, that's a helper to revenue in the current period, but does not repeat. As such, you know, it becomes a little bit more of a challenge when we're comparing this period from here forward. I'll stop there. I'll say, you know, it's not just returns by the way. It's a whole host of things. I mean, it's rebates, it's how we manage our co-pay assistance cards.

The deduction amount continues on it as an increased the average selling price for impacted products I'd call that a little bit when I talked about Surfaxin and then the true up the accrual that the helper to revenue in the current period, but does not replete repeat and as such it becomes a little bit more of a challenge when when comparing this period.

From here forward, so I'll stop there I'll say, it's not just returns by the way it's I'd say.

A whole host of things I mean, we had rebates, it's how we manage our co pay assistance cards and the overall trend of our gross to nets has been getting better. Some from 17 to 18 now year to date to 19, and Thats something thats been a real helper for us so far and I think as we go forward what it is right.

Paul Herendeen: The overall trend of our gross net has been getting better from 17 to 18 now year to date to 19, and that's something that's been a real helper for us so far. I think as we go forward, what it is is it results in higher realized average net selling prices for those branded Rx products. That was sort of a long walk, but I hope it helps. The second part of your question, Louise, is about, I think, our three-year growth rates and CAGRs and what we're thinking about there. First and foremost, I'll remind everyone that we're looking at a revenue CAGR of 4% to 6%, on a three-year basis, and on EBITDA 5% to 8% CAGR. That's the mindset we have.

Melts in higher realized average net selling prices for those branded Rx products that was sort of a long walk, but I hope it helps.

The second part of question Louise is about I think our three year growth rates and CAGR is done what we're thinking about their first form of I'll remind everyone that we're looking at revenue CAGR of 4% to 6% on the three year basis and on EBITDA of 5% to 8% CAGR. So thats the mindset we have.

Joseph Papa: Relative to how we will do it, I mean, I think it comes down to just first, look at what we've done and then importantly move forward. If you look at what we've done, the B&L and the Salix business together have done very well for us. They now account for about 77% of our business, so clearly, that's 78% of our business. So it's clearly a large part of our business. But by definition, the Derm business has not been there yet. We now think that we have the Derm business at a point where, with the success of a DUOBRII launch, BRYHALI launch, continuing to grow SOLODYN, and then launching these new products, we think that turnaround is also going to help us with the future growth drivers.

Relative to how we will do it I mean I think it comes down to just first is looked at what we've done and then importantly move forward. If you look at what we've done.

The BNL, the and the Salix business together.

Very well for us they now account for about 77% of our business. So clearly.

That's 70% of our business, it's clearly a large part of a business, but by definition. The dirt business has not been there yet we now think that we have the derm business at a point, where with the success of of a dual relaunch free Holly launch continuing to grow steadily and then launching these new products we.

I think that turnaround is also going to help us with the future growth driver. So yes, yes, it's been.

Joseph Papa: Yes, it's been so far fueled by the Salix and B&L, but we do think the Derm business is also now, as Paul mentioned in his comments, at a point where it can significantly contribute to our growth. That part is clearly the Derm business is important. The second part of it is just new products across all of our business. That, on the slide we showed on page 21, new products in fiscal year 2017 accounted for about 2% of our sales. Today, that's up to be about 10% of our revenue. Clearly that's the second part, new products, and we expect to see that to continue to accelerate as we launch these opportunities.

So far fueled by the Salix and being now, but we do think the derm business.

Is also now as Paul mentioned in his comments at a point, where you can can significantly contribute to our growth.

So that part is clearly the derm business import the second part of his as new products across all of our business that on the slide we showed on page 21 on new products in fiscal year 17 accounted for about 2% of our sales today, that's up to be about 10% of our revenue. So clearly that the second part new products.

We expect to see that to continue to accelerate as we launch these opportunities and then the final thing I'll just pick up on where Paul said, it's all about that project core in terms of making us more efficient and Thats a cost optimization revenue enhancement project that has yielded very good returns for us and we expect to that continue.

Joseph Papa: The final thing, I'll just pick up on where Paul said, it's all about that Project CORE in terms of making us more efficient and that's just a cost optimization, revenue enhancement project that has yielded very good returns for us, and we expect to see that continue going into the future. That helps us both on the revenue side but also on the EBITDA side. Those are the primary ways that we're gonna work through this. The final comment you have was about R&D spend. We did make significant investments in research and development in 2017, 2018, now 2019.

Going into the future and that helps us both on the on the revenue side, but also on the EBITDA side. So those are the primary ways that we're going to work through that the final comment you have was about R&D spend.

We did make significant investments in research and development in 2017, 18, 19, I would look as we go forward I'm not going to guide to it but certainly we think we'll continue to invest in R&D at slightly above our revenue growth rates as we think about the future where we are going with the product.

Joseph Papa: I would look as we go forward. I'm not gonna guide to it, but certainly we think we'll continue to invest in R&D at slightly above our revenue growth rates, as we think about the future of where we are going with the product. That concludes my comments there. Operator, I think I have time for one last question, please.

That concludes my comments there operator, I think as time for one last question. Please and that question will come from David Risinger of Morgan Stanley . Please go ahead.

Operator: Okay, and that question will come from David Risinger of Morgan Stanley. Please go ahead.

Thanks very much.

David Risinger: Thanks very much. So, three questions please. The first is, are there any formulary positioning changes of note for January for VYZULTA or SILIQ that could help their sales potential? Second, consensus isn't quite at the $1 billion level for the Significant Seven by the end of 2022. Are there any products you think consensus may be underappreciating besides DUOBRII? Then third, could you talk a little bit more on a bigger picture level about aesthetics market digital opportunities? It seems like consumers are increasingly receptive to, you know, purchasing products online and paying up for higher value products.

So.

Three questions. Please the first is are there any formulary positioning changes of notes for January for results or saliq that could help their sales potential.

Second.

Consensus isn't quite at the $1 billion level for the significant seven by the end of 2022 are there any products using consensus maybe underappreciating besides to O'brien and.

And then third.

Could you talk a little bit more on a bigger picture level about.

Aesthetics.

The market digital opportunities it seems like consumers are increasingly receptive to.

You know purchasing products online and paying up for higher value products and the seems like it could fit with your.

David Risinger: This seems like it could fit with your ortho derm direct to consumer initiative, but it's still not quite clear to me whether you're really there yet in terms of maximizing that potential for your derm business. Thanks so much.

Ortho derm direct to consumer initiative, but it's still not quite clear to me.

Whether you are really there yet in terms of maximizing that.

For your derm business.

Thanks, so much.

Okay, a lot of good questions, maybe I'll try to take them where in time to fight Salta in Saliq relative formulary positions and where are we today and how we continued to improve on that we're very pleased with the success, we've had with vice Ulta vital to right now is up to about 74%.

Joseph Papa: Okay. A lot of good questions. Maybe I'll try to take them one at a time here. VYZULTA and SILIQ relative to the formulary positions and where are we today and how we've continued to improve on that, we're very pleased with the success we've had with VYZULTA. VYZULTA right now is up to about 74% access, commercial access, and about somewhere around 30% on the Part D side. We know we are going to continue to work on that.

Access commercial access and about somewhere around 30% on the on the part D sites. We we know we are going to continue to work on that I don't have anything specific to say about January contract, but I.

Joseph Papa: I don't have anything specific to say about January contracts, but I can simply say that our market access team has been doing a great job for all of our products, and we'll continue to look to renegotiate some of the positions we have with VYZULTA, both on the commercial side and on the Part D coverage side. On the question of SILIQ. SILIQ is also right around 78% on commercial coverage, less so on Part D, but it's much less of a Part D marketplace. SILIQ has, as I said, 78% coverage. We will continue to look to get better coverage there, but we think we've got pretty close to what we're looking for in terms of what's going on. On the question. Second part of your question was on Significant Seven.

I could simply say that our market access team has been doing a great job for all of our products and we will continue to look to renegotiate some of the physicians, we have with vice oil to both on the commercial side and on the part D covers side on the question of Saliq Saliq is also right around 78%.

On commercial coverage.

Less so on on part D, but it's much less of a part D marketplace. So.

Lee has put us at 78% covered we will continue to look to get better coverage there, but we think we've got pretty close to what we're looking for.

In terms of what's going on on the question second part. Your question was on significant seven we do think there are some significant upside we mentioned do ovary clearly as one of the products that we think.

Joseph Papa: We do think there are some significant upsides. You mentioned DUOBRII clearly is one of the products that we think is a very significant opportunity for us. Beyond that, the other products we think are performing better than people expect is LUMIFY, RELISTOR, and we clearly think that SiHy Daily is a good opportunity. Those would be the ones that I don't wanna comment specifically on any consensus model, but ones that we feel have a good opportunity for the future. On the aesthetics market opportunity, clearly ours, what we're doing there is exactly what we commented before about Dermatology.com and the Solta business. As we put those two businesses together, we think we've got the right prescription for the future.

Is a very significant opportunity for us beyond that the other products, we think arm.

During better than people expect is luma fine relish store and we clearly think decide high daily is a good opportunities to those would be the ones that I want to comment specifically on any consensus model, but ones that we feel have a good opportunity for the future.

Yes that ex market opportunity.

Clearly ours, what we're doing there is exactly what we commented for about dermatology dot com and the Solta business as we put those two business together.

I think we've got the right prescriptions for the future some patients, especially with the treatment of acne are just looking to get a a.

Joseph Papa: Some patients, especially with the treatment of acne, are just looking to get a you know a cash pay option where the cash pay option is not that much different than what they pay on a copay. That's clearly one side. On the aesthetics business, you know, I think the results of Solta and Tom Hart and what he's done there just speak for themselves, with being up, you know, 62%. Clearly, they have done just an outstanding job, and our expectations is that we have a great opportunity for the future because, yes, it's doing really well in Asia, yes, it's doing well here in the United States, but there's a European opportunity that, as Paul mentioned, we're investing in for the future.

Cash pay option, where the cash pay option is not that much different than what they panic. Okay. So that's clearly one side on the aesthetic business I think the results of Solta and Tom Heart and what he has done there to speak for themselves being 62% clearly.

They have done just an outstanding job and our expectations is that we have a great opportunity for the future because.

Yes is doing really well in Asia, yes, it's doing well here in United States, but theres, a European opportunity that as Paul mentioned, we're investing in for the future. So we feel very good about the opportunities, we see with aesthetics and specifically both on the the Solta side, but also what we're doing on cash pay as we solve problems for patients that are looking for predictive.

Joseph Papa: We feel very good about the opportunities we see with aesthetics and specifically both on the Solta side, but also what we're doing on cash pay. As we solve problems for patients that are looking for predictable access and a predictable price point, we think our cash pay model will do exactly that. Operator, that concludes what we wanted to cover today. I thank everyone for joining us, and look forward to having more conversations in the future. Thank you. Have a great day, everyone.

Access and a predictable price point, we think our cash pay model will do exactly that.

Operator that concludes what we wanted to cover today I. Thank everyone for joining us and look forward to having more conversations in the future. Thank you have a great to everyone.

Thank you for attending today's presentation you may now disconnect.

Operator: Thank you for attending today's presentation. You may now disconnect.

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