Q4 2020 Bausch Health Companies Inc Earnings Call
Good morning, and welcome to the Bausch health companies fourth quarter earnings call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded and now I'd like to turn the conference over to Art Shannon. Please go ahead.
Thank you very much good morning, everyone and welcome to our fourth quarter and full year 2020 financial results conference call participating on today's call are chairman and Chief Executive Officer, Mr. Joe Papa and Chief Financial Officer, Mr. Paul Herendeen, and 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 for more information about these measures. Please refer to slide two of the presentation non-GAAP reconciliations can be found in the appendix to the presentation posted on our website finally, the financial guidance and this 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 guide.
Other than through broadly disseminated public disclosure with that it's my pleasure to turn the call over to Joe.
Yes.
Thank you art and thank you everyone for joining us today I'll begin with the 'twenty and 'twenty highlights Paul Herendeen, Our CFO will then review the fourth quarter and full year financial results and discuss our 2021 guidance. I'll then discuss our 2021 strategic focus which includes executing on our business recovery unleashing growth.
<unk> and accelerating strategic alternatives to drive shareholder value before opening the line for questions lets begin with slide five.
And a year with unprecedented business disruption due to Covid. We finished the year strong and outperformed the high and of our latest 'twenty and 'twenty guidance by generating revenue that exceeded $8 billion and most importantly, strong cash flow of over $1 billion helped us to repay approximately nine and.
Hundreds of million dollars of debt.
And the Covid related downturn, we are focused on executing on our business. We grew market share for key promoted products, we manage operating expenses to optimize 'twenty and 'twenty EBITDA, we invested and our pipeline for future growth and we exited the year with strong momentum carrying us into 'twenty and 'twenty, one and are well positioned to benefit from <unk>.
Recovery related tailwind and capitalize on key growth drivers and catalysts, while pursuing alternative to accelerate shareholder value creation, you'll hear more from Paul but excluding the impact of any potential divestitures. We may announce we are targeting approximately $1 billion of debt paid out in 'twenty and 'twenty, one and earlier.
And today, we announced that Icahn enterprises will add two new board members to Bausch health care to help us further our goal to accelerate shareholder value creation.
Turning to slide six the full year fourth quarter results demonstrate the operational recovery is in progress after experiencing significant COVID-19 related declines earlier in 2024th quarter revenue was down only one per share compared to the prior year quarter I wanted to call out a few highlights our vision care.
And business grew and the U S. During 2020.
Vitamin franchise continued to drive strong growth and we launched infused Si Hy daily lenses and the U S and the Ultra one day, and Australia, Hong Kong and Canada.
So, it's actually and coronary revenue hit a record high of $411 million from the fourth quarter and reported revenue per site fax and true Lance and rental share all grew and the 'twenty and 'twenty versus last year.
Cash revenue grew by 47% and 2020 compared to 2019, driven by strong demand in China and expansion into other geographies.
Okay.
Thanks to a great Bausch health team effort and 2020, our supply chain continued to meet demand for all of our customers. We grew market share with our key brands, we manage opex to optimize EBITDA.
And we generated more than $1 $1 billion of cash from operations. During 2020, and we are seeking to accelerate the spin and P&L our eye health business that we believe will unlock shareholder value with that I'll turn it over Paul to cover the financial results in more detail.
Thanks, Joe I'm going to focus mainly on our quarterly results as they show our continuing recovery from the impacts of Covid on slide seven Youll see revenue by segment and business units within the segment for the quarter and the full year.
Start with B and El internationally overall, the segment was flat on an organic basis versus Q4 2019, the top performer and the segment was the international pharma business up 12% organically as that portfolio of products was less impacted by Covid and in fact certain products and this segment saw increased demand, including his iPhone.
And our broad spectrum anti parasitic and.
We saw organic growth and almost all countries and regions led in order by Eastern Europe, Egypt, Lastly, on Poland and Russia.
This business was the star of the quarter under challenging circumstances, and the business heads there, including Fernando's RJ <unk> co.
<unk> case, Hyman Vincenzo <unk> Scott.
And <unk> and their leader Com App, you'll just sort of a lot of credit next up is the global consumer business and was down 1% organically. There's a theme across the P&L consumer P&L vision care and surgical businesses and that is that the recovery in the U S is coming faster than what we're observing outside the United States.
And the consumer.
Segment. The U S business was up 3% organically versus Q4 of 2019, while the O U S business was down 2% driving growth and the U S, where our eye vitamins and luma five outside the U S resurgence of Covid and the associated impact of social restrictions and changes in consumer behaviors slowed the recovery and <unk>.
S geographies.
Global vision care was down 1% organically up 5% and the U S and down 3% outside the United States.
In the U S. The growers worth the recently launched infused daily disposable lenses buyout from one day toric and ultra toric lenses outside the U S. It's the same themes as I just described for consumer recovering from Covid, but at a slower pace and we saw in the U S. Global surgical was down 7% organically flat and the.
Versus Q4, 2019, but down 9%.
Yes.
And I care professionals adapted more quickly to get back up and running with Covid protocols in place.
And then outside the United States, but also the recovery and the U S has been more of a linear progression while U S. O U S. Surgical activity was strengthening in October and then weakened especially in Europe in November and December as new waves of Covid cases emerged.
Finally, global auto Rx was down 10% organically and here in the U S is lagging the recovery.
Outside the United States. The U S was down 15% organically versus Q4 2019, while <unk> were down only 4%.
In the U S. Despite the rebound and surgical procedures and patient flow in the doctor's offices is still well below 2019 levels and that has certainly impacted volumes of our ASO Rx products the impact of the motive and <unk> also contributed to the quarter over quarter decline. So that's b and al International revenue on the sales.
And where revenue was up 2% compared with Q4 of 2019, our key promoted products were all up versus Q4 of 19 with Fairfax and a 4% truly is up 33% and relistor up 7%.
<unk> from <unk> have not yet recovered to pre COVID-19 levels extended EBIT Rx in the quarter were down three 5% versus Q4 of 2019 and Thats a good proxy for unit demand and unit demand. However, our actual sales volume and the quarter was up 2% as retailers rebalanced their inventories during the quarter after.
Substantially reducing them and the depths of Covid note that the fluctuations and XI facts and channel inventories were sorted out during the year and we ended 2020 with appropriate levels based on current sales volumes realized net selling price per <unk> was up 2% truly and continues to grow nicely volume up 45%, which is broad.
Consistent with a 40% increase from <unk> versus Q4, and 2019, it was offset by a 14% decrease and realized net pricing improved managed care companies.
Comes at the cost of increased rebates, but we expect that the expanded coverage will be a cost effective EBITDA to delivering high truly as volume growth in the future a strong finish to the year for Salix next day Ortho Derm segment first I want to note that our colleague Scott Hirsch is now leading the segment and I'm personally excited about the changes that they are under.
<unk> repositioned, our medical derm business to capitalize on the strengths of our ortho derm colleagues and product portfolio.
We will talk about more about this and the coming quarters in Q4, the med derm business was down 22% organically roughly 10% of that decline was due to the losses of exclusivity on products, including solid I'm, a kania elegant and zovirax.
And our promoted brands, particularly those early in their lifecycle continued to be impacted by less patient office visits global Solta under the skillful leadership with our colleague Tom Hart continuous string of impressive quarters, posting 31% organic growth Solta grew and all regions APAC U S EMEA, Canada and Latam.
China alone accounted for more than half of the organic growth.
And finally diversified was down 9% organically with 8% of that decline coming from <unk> and the neurology business.
Setting aside the yellow drag the neuro business had a solid quarter driven by growth of the welbilt and appliance and franchise Libra <unk> and perhaps at the.
And the 15% decline and generics revenue was mainly a function of a very strong performance in Q4 of 19.
Dentistry continues to recover from the effects of Covid and was down only 4%.
So that's revenue and the quarter total company revenue was down 1% organically. We finished the year gathering momentum and we're carrying net forward into 2021.
Turning to slide eight and I'll walk down our P&L for the quarter, we covered revenue our gross profit margin decreased by some 50 basis points versus Q4 of 19 mix was as always a factor and unfavorable manufacturing variances and hits the cost of goods sold precipitated by Covid played a role as well.
Selling advertising and promotional expenses were 8% favorable to Q4 of <unk> 19 on a constant currency basis. As you look back at 2020, you'd see it in Q2, we pulled back dramatically on Opex spending as we work to conserve cash and protect earnings and.
In Q3, we began to ramp up promotional activities and and and I'm going to say this is the important point in Q4, just as our revenue has not yet returned to pre COVID-19 levels. Our promotional efforts will also not back to full strength.
And bringing this up here for context, when I talk about 2021 guidance later.
Adjusted G&A was favorable to Q4 of last year by 4% on a constant currency basis and those expenses also do not reflect full efforts on some foundational projects for example, and it.
That are important to resume with full force.
R&D was 4% higher on a constant currency basis, as we were able to restart activities that were paused. The net result, we posted adjusted EBITDA of $911 million in the quarter up 2% on a constant currency basis from the prior year quarter I'll call that good stuff.
Please flip to slide nine.
Full year 2020 was so colored by Covid that the comparison versus 2019 is not especially meaningful but there are some things here worth mentioning we estimate excuse me, we estimate that the COVID-19 impact for the full year AD revenue was roughly $740 million Bucks per Covid, we would have met our original 2020 revenue.
But the thing I'm. Most proud of is that the BHP team was able to react quickly to reduce expenses and conserve cash and whether the worst of the Covid storm.
And we prioritized the safety of our colleagues adapt to defined ways to serve patients and our customers and we were in a state of readiness to get back to driving our business forward as things began to open up.
The payoff of these efforts is on slide 10.
In Q4, we generated $394 million of cash from operating activities and $1 111 billion for the full year those are both on a GAAP basis.
Adjusted for the settlement of legacy legal settlements and some separation costs, our cash from ops was $475 million per quarter, and 123 5 billion for the year.
Our company has a strong cash generator, we converted a lot of our earnings to cash and part due to our being a Canadian company.
Yeah.
Last quarter, there were some folks that were concerned about our level of cash generation, yes, hopefully our Q4 results put those concerns to rest.
As a result of our strong cash generation and efforts to better utilize our cash around the globe.
Joe said, we were able to repay slightly more than $900 million of debt and 2020 and I'll call that pretty good and this year of years, let's go to slide 11, and the balance sheet summary, total debt at the end of the year was $24 2 billion and I want to point out that the $1 8 billion of cash includes the $1 to $1 billion to settle the U S Securities class.
So net usable cash at year end was some $600 million.
On slide 12, you see the schedule of our debt maturities no maturities or mandatory amortization until 2020 for our active management of our debt complex was an asset for us back in the spring when liquidity concerns were understandably high. So that's Q4 and 2020, let's turn to our guidance for 2021, starting on slide.
2014, our guidance calls for revenue between $8, six and $8 8 billion and adjusted EBITDA between three four to $3 $55 billion first and to be very clear our revenue and operating earnings in 2021 could have been quite different but for COVID-19.
We're fortunate to be a diversified company across a number of different businesses and geographies and each of those businesses have and will recover from the impacts of COVID-19 at different rates. We made great progress in Q3, and Q4 of 2020, but we're not all the way back.
We also expect adjusted cash generation.
We generated from operations to be approximately $1 5 billion and 2021, roughly the same as what we generated in 2019, and we're targeting approximately $1 billion.
Debt paydown during the year on.
On Slide 15, we show a bridge from 2020 actual results to our guidance for 'twenty and 'twenty, one, but I think it's also helpful to look back at the full year 2019 that was undisturbed by Covid.
2019 reported revenue was $8 6 billion and adjusted EBITDA was $3 $5 71 billion and adjusted operating margin of 41, 5% at the midpoint of our 2021 guidance ranges and we do have an operating margin of 40% 150 basis points less than we posted in 2019 why well there.
Our three main factors first our guidance for gross margin in 2021 of roughly 72% as some 70 basis points less and the $72 seven and we saw in 2019, that's due to mix and a bit of a COVID-19 hangover on manufacturing costs that will flow through 2021.
Second our R&D spend in 2019 totaled $471 million and we are guiding the circa $525 million in 2021 50.
And $54 million more and represents 6% of revenue at the midpoint versus five 5% in 2019, and finally, our SG&A as a percentage of revenue is expected to be higher in 2021, as we re prime the promotional pump to drive our revenue to recapture our pre COVID-19 revenue growth trajectory.
I want to point out that our guidance of $2 6 billion for SG&A is a big increase versus 2020, but if you compare back to 2019, the $2 6 billion represents roughly 2% growth per annum off of what we would submit was a tightly managed gear.
And finally I call your attention and the expected growth drag on 2021 revenue and profit from LOE assets. We're looking at a roughly $105 million drag on revenue and 2021. This is substantially less and we've had to overcome and prior years in 2016, our company was facing a mountain of Eloise coming at us and the condensed timeframe and.
So we started disclosing the expected impacts to you. So you could follow along obviously this made it more difficult for us to post growth and.
And the last three years the growth drag range from 290 million to $360 million.
The great news is that the impact of the bolus of value Eloise has dramatically declined and importantly, looking out over the next five years <unk> will be quite manageable.
Louise have have been a long road for us, but this governor on our growth is mostly behind us back to you Joe.
Thank you Paul let's get started with the Bausch and Lomb International highlights on slide 2017.
And top line shows that recovery is in progress.
And global vision care recovery and the U S is ahead of the rest of the world with reported revenue growth of 2% compared to 2019, driven by line extensions for <unk>, One day, and ultra and global consumer and despite the pandemic, our eye vitamin franchises and loom and Fi grew organically, both revenue and procedures and global surgical or <unk>.
<unk> pre pandemic level, and we expect delayed cataract surgeries from 2020 to create a tailwind for 2021 and beyond.
It's also generics as grew by more than 40% and 2020 compared to last year. Finally, as Paul mentioned International Rx was a standout with strong organic revenue growth of 6% compared to last year.
And you can see the strong signs that recoveries and progress from the charts on slide number 18, starting on the top left field consumption from U S vision care shows recovery and progress for the last seven months <unk> T. Rx is also show a positive consistent trend lymphocyte recovery has been and progress since April of 2020, and finally stellaris elite.
And procedures and the U S International surgical revenues are now similar to pre COVID-19 levels.
Growing market share with our focus during the Covid downturn and on slide 19, we show that market share gains we achieved by Solta is up 40 basis points low to Max SM is up 160 basis points and <unk> is up a 180 basis points on the bottom left we show the strong positive trend and mark share for our intraocular lenses.
And the U S and finally and the bottom right U S. Consumers also gained share in key segments.
Moving now to slide 20, and fuse is our daily Si Hy lens, which was launched in the U S and August it's a significant opportunity we estimate the U S market for these lenses will growth from $1 billion today to approximately $3 billion from 2030.
The global opportunity is also significant and which we expect global revenue for Bausch and Lomb side high daily lenses to exceed $250 million.
We peered infused with Oslo protecting its intellectual life and we are encouraged by the results the lenses doing exceptionally well with patients who experienced contact lens join us we have great results from our recent online survey on page 20.
94% of patients agreed that and infused helps keep context Lynn from feeling dry this data supports that and fused addresses one of the big issues and the Si Hy daily market and we believe these lenses will be an important growth driver.
Let's turn to Salix and slide number 21 with organic revenue growth of 2% and the fourth quarter versus last year, we are seeing clear signs that recoveries and progress, let's start with our largest product satisfaction as I mentioned earlier <unk> grew sequentially by 2% compared to the third quarter of 2020.
Truly truly and <unk> grew by 47% and 2020 compared to the overall market growth of about 6%.
And finally, Relistor and <unk> grew by 9% and 2020 compared to a market decline of 4% and slide 22, we've shown the strong recovery trend for <unk> facts, and truly hands and Relistor tier axis and slide 23, we share the Gi market share gains we achieved relative to last year in terms of Trs <unk>.
Sure. So facts and is up 80 basis points truly and is up 170 basis points and Relistor is up 160 basis points. One additional point to note on truly net new Rx market share also increased from five 5% at the time of the acquisition by Bausch Health and March of 2019 to 12.
<unk>, 0.1%, New Rx share and December 2020, we believe this is a great leading indicator for future truly is trs per share gains.
Now onto ortho Dermatologic and slide 24 few highlights to note notwithstanding the impact of Covid.
<unk> had a great 2020 through March reported revenue grew by 47% and 2020 compared to last year, which was driven by China and expansion into new geographies.
We expect the aesthetics market to continue to grow driven by the new zoom culture and by consumers, who have the ability to invest and self care 2021 growth catalysts include continued market penetration in China, and the U S as well as geographic expansion into Europe and.
And another growth catalyst as the U S launch of Salt is clear and brilliant touch laser a treatment that can help prevent the worsening of fine lines and wrinkles. Julia also grew in 2020 compared to last year with reported revenue up 3% and T Rx growth of 18% compared to a flat market finally, our psoriasis.
We believe there is much more to do here, but to be clear do ovary and Italy. Both grew six substantially in 2020 versus last year, <unk> grew 53% compared to 5% market and sleek reported revenue grew by 39%.
The chart on Slide 25 show the recovery and Ortho Dermatologic through March revenue had a great performance in 2020. It benefited from the increased demand for aesthetics. The Jubilee of Trs trends showed solid recovery since April 2020, and lastly, do over here ex has began to recover over the summer we highlight the gains and Trs Mark share we were able to.
Key for key promoted brands globally up 40 basis points jewelry up 140 basis points, and and exited up 70 basis points.
Turning now to slide number 27, we have identified the key growth drivers for our business in 2021 and beyond first we expect a ramp up and additional approvals from the Si Hy daily lenses.
And now launched these lenders and Japan U S, Hong Kong, Australia, and Canada, and we anticipate launching in Europe over the next year.
Next we expect a tailwind going into 2021 from a backlog of cataract surgeries that were delayed and 2020 due to COVID-19 and the U S. We estimate that about 650000 cataract surgeries or roughly 16% were delayed in 2020, while outside the U S. We estimate that approximately 20% of the <unk>.
Surgeries were delayed creating a potential tailwind for 2021 and beyond.
And we are expanding the sales force of the Vermont franchise into Europe, and finally, given the momentum, which we head into the year, we expect to see strong performances and recovery of leading brands, including site fax, It ultra preservation and <unk> and Vice Volta.
We also have a number of near term catalysts and upcoming R&D pipeline, which is outlined on slide number 28, we expect to initiate a phase II trial for MSL and monitor <unk> modulator for patients with mild to moderate ulcerative colitis, we expect a readout of phase three results for Novo three investigational treatment for <unk>.
And I disease, we've also published and Novo three phase two data for dry eye disease, and the data is outstanding and importantly met all of the primary endpoints were also making progress with other rifaximin lifecycle programs and in addition to our program for sickle cell disease. We recently regime you see positive.
Feedback from the FDA and our new Rifaximin formulation for the prevention of the complications of cirrhosis and we are preceding straight to a phase III study for what we refer to as the Red Sea trial, starting and the second half of 2021.
In addition, we are exploring several COVID-19 focused treatments to be clear, we're not a vaccine company, but we have found ways to contribute to the ongoing efforts to combat the disease.
With that as background, let's move to slide number 31, I want to give you a brief update on the progress we are making on and previously announced intention to separate bausch and lomb into an independent company first we took this action because we saw an opportunity to unlock shareholder value, especially relative to our peer.
<unk> health companies that we see from <unk>.
We've been making good progress on our goal since our announcement in August 2020, we are on track for the financial segmentation reporting to be complete by the end of the first quarter of 2021, and we expect all internal objectives necessary for the spin and being now to be achieved by the and the third quarter of 2021.
And at the same time, our operational focus is on taking action that has the potential to expedite the spinoff and.
As I mentioned in 2020, when we hired strategic advisors. We also received a number of inbound calls expressing interest and are great businesses and creative ways to unlock value for all of our stakeholders, which may include divestments. As we have previously stated improving our leverage ratio continues to be a priority and we are focused on that we.
We're planning to increase our EBITDA as Paul mentioned, which will increase cash decreased debt and decrease leverage. We also believe that improving working capital too will also help us to decreased debt.
And we believe pursuing a spinoff that is preceded by an IPO process could also potentially accelerated timing of our P&L spin to be clear, we are and have been actively pursuing all opportunities to expedite leverage improvement and do we deliver shareholder value.
And to answer another investor question to be clear, we are not planning to issue Bausch health care equity at these levels.
To wrap up we exited 2020 with great momentum and we remain strategically focused on executing on our business capitalizing on key growth drivers and catalysts to grow EBITDA, improving working capital efficiency Delever, our company and unlock shareholder value.
With that operator, let's open up the line for questions.
Thank you operator for any questions. Please we will now begin the question and answer session. Thanks for your question you May Press Star then one on your Touchtone phone.
And we're using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
First question is from Chris Schott from Jpmorgan. Please go ahead.
Great. Thanks, so much for the questions, maybe just coming back on asset divestitures.
And just trying to still get a sense.
And just your view on sense of urgency here as I think about how you balance had the speed of unlocking value quickly versus taking your time to maximize full value for existing shareholders and I guess I'm just trying to get sense of.
How you think about.
And he asset value slippage et cetera that could be.
Last I guess and a sale that could accelerate our separation process, Thats, I think where shelter and care hands around.
Kind of how you are approaching this process and and maybe a second question and that same topic based on the interest you have seen and your assets. So far is a 2021 separation a stretch at this point or is that looking more like a base case outcome.
Okay, let.
Let me start and the asset divestiture portion of your question I think clearly as I stated in my comments that we have had a number of inbound interested parties. We've hired some advisors to help us on this and we clearly know that the most important thing that we think will unlock value is as we spin the P&L company.
And as a separate company I will have two great companies, a pure play health company and.
A diversified international pharma business. So we clearly know the most important thing that we are seeking to do is to spin out the P&L as.
Appropriately talked about we are trying to balance that question of speed and getting good value, but we believe the most important thing to do is to us.
Been out the BNS business as soon as possible. So I think the way I'll say it I don't want and negotiate on a conference call, but we are seeking to move with speed and we will seek to do that but but we certainly won't make sure. We get good value for our shareholders I don't want to say maximize full value I want to say get good value for our shareholders.
And <unk> is that we are moving to expedite all of those activities and the question of timing of the.
Overall spin and P&L.
And we'll be ready after the third quarter of 2021 to have all those requirements that are necessary. We will have the all of the things done from a legal entity point of view from an organizational designs at those activities will all be complete we will make sure at that point that we have a very tax efficient strategy.
One of the advantages the Bausch health care company has is our efficiency and our tax.
Because of our legal entity structure that our team has done a great job with that so I think all of those things will be ready. Obviously, we have the style of the question on leverage we think that the way I will attempt to solve that leveraged and.
And I have been talking about I think since August is what are those steps we're going to take we are going to work clearly to increase EBITDA, which will increase cash decreased debt and obviously decreased leverage we will continue to look at working capital efficiency. We've done some things already with our project core activities, but we think that could also help us to.
A decrease debt and obviously the day.
<unk> comment that you made also as part of that and there is the potential of course to proceed. This spin off with an IPO that could also IPO of the <unk> business that could also help us potentially accelerate the timing that those.
It will be the course of actions that I think we'd be best taking to help us to accelerate this which we think will create the value for our shareholders.
Operator next question please.
And the next question is from Omer robot from Evercore. Please go ahead.
Hi, Thanks, so much for taking my questions.
Paul on slide 31 around B and I'll spin off you mentioned the.
And the financial segmentation will be complete and <unk>, which is inline with expectation.
But previously you had also mentioned that leadership team announcements will happen. This quarter is that something we should expect and the next three or four weeks.
And and and and then also a second one for.
Perhaps just thinking about stepping back and thinking about the bigger picture here. It does seem like a meaningful driver of your total some other parts valuation is also a lot to do with the value of the remain co and and I think.
And it can't be overstated, the significance of R&D strategy and R&D programs for that remain co and so I guess where are we with that is there any effort underway at the board level to perhaps bring in a high profile I'm head of R&D or at least have a very well laid out R&D strategy and place just to help us think through the value of that.
<unk>. Thank you.
Over to Joe Papa and to take the first part of that question and the leadership and then I'll turn to quality and remain co part and then I'll.
Potentially come and as well and the R&D and the question. The first question, though on the leadership announcements as I mentioned, we will do the financial reporting and complete that for Q1 2021, we will have that in may of 2021, it seemed to us a very logical time at that point to announce key leadership.
We believe that we have a great Bausch health care team. We've got good succession planning in place that the board has done and we believe will be and are positioned to announce that with the first quarter results, which is planned for may of 2021. So that's the timing that we think that's a very logical timing for us to do the in line with the.
Quarter, one financial reporting on the second part of the question Paul you want to take that yes, yes, sure and in out and we're thanks for the question because yes, there is there.
Remain co and the value of remain called matters and has an opportunity to to enhance that value and it's frankly, something that Joe and myself and our board have been focused on since we are here, which is to take our company and if you go back to 2015 essentially issue.
R&D and said it was all about acquisitions and flip that and started the process of building and internal.
Our portfolio of <unk>.
Projects R&D projects that can sustain the company over an extended period of time I wanted to first frame what does <unk> look like.
Yes.
And interesting and interesting thing and focus on what you end up with is a diversified international pharma company, that's got strength and market leading position in Gi and the U S.
Our strong position and medical derm, and the U S and emerging aesthetics business, which is in the U S, but frankly strongest and in Asia Pac and looking to expand into Western Europe, you've got a strong neuro business, which, albeit not a great growth drivers and the incredible cash generator here and the U S. We have a dentistry business and the U S. We have a diverse.
What I'll call a derivative.
Our <unk> business in the in the U S and and the last piece, which you shouldn't lose sight of is we have this international pharma business, which I called it out on.
And the call earlier.
Earlier was the star of this particular quarter a very durable.
Business that does not face the challenges that U S pharma companies space.
And he has a lot of value.
And it is great and so what do you need to do in order to be able to make that the most value.
Most value that it can be as you hit it right on the head you continually invest in R&D example, this year, where we ramped up our investment to work for <unk>.
And $5 million in 2021 internally and at the board level, we focus.
Lately on ways to ensure that our Gi business.
And the prospects of managing through it.
Pretty much date certain.
LOE of dry box and in early to early 2028, and the projects are outlined Joe went through and I'm not going to from use of time here here here and repeat them, but yes, Joe went through and talked about a couple of those projects now I will tell you, we look constantly too and to that portfolio, whether it's in whether it's and Gi whether it's in.
In <unk>, whether it's in neuro or any other business.
Interestingly, we've had our most success and fleshing out our portfolio over the last call. It 24 months, he has been and our OXXO Rx business and it's part of the spin.
It wasn't that we were focused solely on trying to do deals and also Rx, but that was shortly and area, where we knew we had been under invested for many years and needed to re price net.
Can't use that analogy again, and say we needed a restart.
Investment and build out that portfolio, so that we had incredible and and valuable portfolio and in auto Rx and <unk>.
Do I think a great job.
Of doing that it wasn't that we weren't focused on the same things and Gi.
For example, it was that those with the transactions and that were.
Available to us.
We're in our wheelhouse that we could go ahead and close we expect it will have that same sort of success in each of the other parts of remco.
Did I just described to you.
And our process gets done, but I will tell you that internally.
The high focus area and we've made a lot of progress.
Since the days of about 2015 I'll stop there.
And maybe just a couple of other comments on and they are.
Randy programs I think we've got some great news that came out and sit and our earnings deck that what we're thinking about on that Rifaximin re formulations and the next generation programs. Obviously, we believe the sickle cell is first and foremost a great opportunity for rifaximin because of the efficacy we've seen with the <unk>.
That has a relatively clean safety profile for these patients who have sickle cell disease beyond that we also got great news from the FDA. We now have a rifaximin lifecycle program for next generation that looks at the prevention of cirrhosis complications and we are preceding directly to a phase III trial this year.
We think thats, great news for the opportunity in front of us to reduce the problems of cirrhosis with patients who have.
Unfortunately hepatic issues.
And that we think we've demonstrated great results with Trulia and we think that clearly is another important part of the next generation, we talked about what it's done this year and Thats, obviously significant but I'll give you one other insight.
The opportunity to truly is significant the market leaders over $1 billion.
And we've got and one example, where we had a direct ability to get a good market.
Access position, we've moved now from being about <unk>, 10, and 11% share of the new Rx has to be the market leader and one customer now admittedly that's only one customer but thats certainly. The example that we think we can look at to grow true and from where it is today to be certainly several hundreds of millions of dollars of as an.
<unk> just in terms of what we're doing for that development with true. It. So I do think there is great things there as I mentioned, we also did the MSL Ahmad <unk> modulator phase II trial, which will start and the first half of the year. So we think we've got a number of things underway for the <unk>.
Business, especially in the Salix Salix next generation opportunities.
Let's take the next call. Please net.
Question is from David Epsilon from Piper Sandler. Please go ahead.
Thanks, I wanted to focus just on the Salix business and in particular, I'm still struggling to understand wise and Saxon and.
Ben.
It's really weak.
And the contacts.
The true line, which has done quite well.
Practices and open so and the second half I would have expected to see more recovery out of the tracks and and then still were seeing year over year declines and total prescriptions. So can you just enlighten me as to.
And what is happening with <unk> and do you think the product is maturing.
And its performance vis vis <unk> Lance thanks.
Yeah.
And number one we think Fairfax and still there's a lot of runway in front of it let me say that right upfront. We think the issues for Covid have been two factors number one we have seen reductions and patients being admitted to nursing homes.
Makes sense, knowing what we know about what's happened with Covid and patients and nursing homes and as a result, and some of those patients have just not shown.
The growth that we've seen in the past the second probably more important factor, though is Ibs D. What we know about Ibs D is that particular treatment is more episodic the number of patients that have gone to gastroenterologists as down from where it was a year ago, So and thats mostly related to.
Covid, we think.
And as the patient started to come back to Gastroenterologists. They focused on what we think are the key things for them.
We're doing the Endoscopies colonoscopy and over time, we do think that the Ibs D will pick up. So for example, while <unk> was down to be clear and 2020. The most recent data with Ibs D shows US now flat over the last 10 weeks versus a year.
Year ago. So we are now seeing that starting to turn the other thing data point and I will I'll remind you of is that we know that Ibs D. Still has about 12 million prescriptions a year for anti spasmodic anti diarrheal products like Lomotil.
Bentyl Dicyclomine and things like that that are opportunities and we believe we have a better solution for those patients you don't have to take a chronic medication like bento.
Bentyl Dicyclomine type products.
They can get episodic treatment treat for a couple of weeks and and many patients will respond and they.
We will not need to take a chronic medication. So we do think over the long term there is still a lot of growth.
And especially as we start to take some of these actions for these new indications like reduction and the symptoms of cirrhosis. We think those are going to be really big opportunities for the rifaximin molecule over the long term. So a lot of upside we still believe and what we will see with <unk> and Rifaximin next generation products.
Operator next question please.
The next question is from Greg true it from <unk> Securities. Please go ahead.
Alright, Thank you guys.
Two questions first did.
Did your newest shareholder bring to the table any new ideas that you were not already pursuing or and urgency that you were not pursuing them when I'm trying to understand what's changed there or whether the settlement and it's more of a.
A reduction and distraction.
And then as it relates to P&L and longer term guidance earlier and your tenure she we're asked frequently.
Whether it be and always investing for the long term and.
And could it stand on its own and be competitive maybe you could update us on your thinking there in terms of how <unk> would be.
And versus its peers from an investment rate growth is obviously there but.
Perhaps pros and cons. Thank you.
Sure.
First of all.
We are delighted to welcome a highly respected investor who agrees with us that there is an opportunity to.
Increased shareholder value with the overall Bausch health care business. So we are delighted to welcome highly respected investor Carl Icahn and his team to join the board and the first comment.
Second comment I think it's clear we welcome open communication with all of our shareholders and we have constructive input oil and away from all of our shareholders. We have already on our board to great investors, John Paulson and.
Rob Hale from value add so were delighted to get this important comment I want to make sure is that there has been absolute alignment that number one there's a lot of upside.
Opportunities to unlock upside in our company and significant value upside and I think that's been echoed by our our discussions with Carl Icahn and his team and also that we are in line that we believe the important question is how can we unlock this value by spinning out <unk>, which we.
Think will trade very well with the peers and the.
And I health business.
And I won't go into all the details you all are the experts on comparing us with other companies, but if you look at where.
Companies like Alcon traded.
Cooper traded, whereas ice trade and Theyre all at 25, plus times EBITDA for 2020 numbers. So clearly we think there is a significant upside opportunity for us.
The Bausch and Lomb spin for our business Paul do you want to take the second part of the question in terms of our investments that we've made and P&L and importantly, how we're looking at that sure and thanks for the question Greg.
Yes, I mean, we did talk about this a lot because of detail.
If you went back.
And let's call it pre pre 2016.
And did not have the level of investment.
Certainly, if Joe and I had and it.
At the helm and allocating capital we have allocated more capital to that business is a great business and we would be ahead of where we are today. The easiest example of that.
And is infuse and and what we what we call Ultra one day outside the U S. The daily silicone hydrogel lens like how can you be in the individual care business and not have this and when Joe and I got here and there is one and our first things that we activate it was a program to do that now as a result of that I'd say about investment and investing behind that.
Is this in 17, 18, 19 and 20, the preponderance of our of our Capex.
It really was focused in in the BNS business, where it had been underinvested in.
And it goes.
Capex in P&L to investment and investment and R&D I mean, it's kind of growth that is growth Capex and was decision that even though we were.
And our a Levered company and.
And obviously capital capital is very dear to us are absolutely turned and allocated that kept that Capex. That's one example, second is we have rotated in and and we continue to invest in R&D I used. The example, a moment ago I won't I won't jump all over it but of how we enhance the ASO or ex Europe.
Pipeline by pursuing business business development deals there as an example, another one I would throw out to you is look at how well our consumer business is doing particularly in the U S that is a function of providing Joe Gordon and his team.
And that run that run that business with the resources they need to drive that growth.
And at very attractive rates and most of the easiest example, there is is DTC advertising I hope everybody on this call you are constantly fees are our advertisers for our eye vitamins and for local line.
And we are allocating capital to that business.
In a way that is giving us the opportunity to start to demonstrate on a very consistent basis, the kind of growth that that business.
And that business can do on its own.
And to be perfectly clear that business was was as part of the whole as part of Bac whole benefited from Joes and mine perspective way back then it was a very attractive business that deserve more investment.
Certainly then our head seen under the prior management regime, and and honestly, perhaps even under prior ownership before that.
I think Paul answered it.
Well, Greg the other thing I'm going to add to a closer and as I think the concept that we have and integrated eye health business is the other issues and I think gives us an advantage and by that I mean, the fact that we have a vision correction business. We have a prescription business. We have a surgical business. We have a consumer business. We think those are important and as you think about.
The ability to compete and the eye health business going forward, we know theres a lot of.
Rollouts of the ophthalmology practices, we think having a place where they can get the full line offering thats important to patients and important to our customers is one other things that we will have an advantage and the marketplace and that clearly is something that we think will be important simple example.
And when a patient need surgery for a cataract procedure. They are also going to need the ophthalmology prescription products. We have them. We think we have and integrated offering we think that's the other reason why we will be very successful and competing but obviously, we'll leave it and your hands to make those judgments to peer multiples.
Let's take our next question.
Next question is from a cost to worry from Wolfe Research. Please go ahead.
Hey, guys.
So just a few we've seen a few of your peers recently guide the FX tailwind for 2021, given where you are today and kind of your geographies is it crazy to think that Bausch could you may be at 200 and $300 million.
Ex benefit that's kind of embedded in your guidance and then Paul I know you can't comment on this.
Totally but.
There is some investor speculation that you might be involved and some capacity, whether it's that will remain core that or the spin co.
What is.
Can you kind of maybe with broad strokes speak about your interests and potentially the spin co and the commercial opportunity that stands in front of you and then just lastly.
And on Slide 20, you've noted that GNL Si Hy dailies are expected to exceed $250 million and sales is that a peak number or is that for 2021.
Yeah.
Let me take that last question first because I think I can yes.
Thank you again for FX and yes.
And on the question of the Si Hy dailies to be clear that that is a and opportunity that we believe it can exceed peak sales numbers of over $250 million to be clear that is not a number for 2021 to be clear, we view that and the way we phrased it was a global expectation for our Si Hy dailies.
And that we view that as a peak number not a 2021 number so Paul wanted to take the FX question sure.
And it is a good question and its IP of even if you look at the bridge on Slide 15 now.
And from 'twenty to 'twenty, one you'll see that.
Net revenue.
<unk> is a tailwind.
Of $165 million and arriving at our guidance range of $86 86 to 88, that's as of now and provide yet.
And as Youre going to try to forecast that.
We're expecting FX rates to improve from here.
I will tell you that I've been terrible at forecasting FX rates.
It's one of the reasons why I always talk about constant currency and organic growth because it takes the currency out of the mix.
We benefit from it when it comes and our direction and it feels good but frankly.
And if that was the only thing that caused you to growth it's not it's not all of that.
And so.
Not all that interesting.
I always call it out and always try to isolate it for you and will leave and isolated for you in May when we report our first quarter and and again in August when we re.
<unk>, our second and show you how it changed from from where we were prior so.
Yes, I'm going to hope that hope is currency moves and our direction because it feels good but from a constant currency are up our organic basis.
And not how we measure ourselves, we measure ourselves constant currency and organic.
To get back to what did we do versus.
And the serendipity of how did FX rates.
And go around the globe.
Second question cash around.
And like.
Are you interested in ramp.
I think your former partner Uber asked munis, and I might've been last quarter and a quarter before.
You probably heard it in my in my response to thinking about remco that is a very attractive business.
It will be definitely surely a leveraged business when it comes out and these are all things that I like so yes.
And if you would ask me.
And you'll pick one.
As much as I love the P&L the BNS business.
And probably more suited to to thinking about remco.
So I think I'll just repeat the addition of a ball said, we think and from a leadership point of view, we will have more to say about that in the may timing.
We've got a great team at Bausch Health care, and we think we'll have more to say in terms of how we're looking at leadership and what's going to happen with the business. When we come out with our financial segment reporting and May may of 2021, and then have more comments about the leadership team and.
And individuals that will be involved and how they will be evolved and <unk>.
Net.
Let's take the next question.
Question is from Terence Flynn from Goldman Sachs. Please go ahead.
Great. Thanks for taking the questions maybe.
Maybe two from me. It was just wondering as you think about 2021 and you mentioned this procedure backlog and cataracts is a growth tailwind just wondering if theres anything you can do to capture and maybe a larger share.
And then your current market share of that backlog and.
Then on remain co just wondering if youre still committed to the five five times leverage target. Thank you.
Sure.
And as part of the question I think I'm going to just refer you back to the slide that we put forth and that we are clearly seeing a return.
To pre COVID-19 levels for our procedures as evidenced by.
As a reminder to everyone. We have our stellaris elite machine. It reports on a daily basis whats how much it's being used and so we can track what's happening around the U S. We don't have those capabilities in Europe because of some reporting requirements, but we do have it to see what's happening and U S and we are seeing the.
<unk> ability to show our stellaris elite machines are back to pre COVID-19 levels on the specific question of gaining the share we have shown at least from the U S data that's the U S Bausch and Lomb Io market share as move from I'd say.
Below are around 10, 2% were up to about 11, 6%. So we are gaining share and the IOM markets. We are continuing to move forward with new innovations there.
And our belief is thats, what will drive that but we do believe that as I said, both in the United States and around the world Youre seeing somewhere around 15% to 20%.
Delay and cataract surgeries from because of Covid, our expectation for 2021 and beyond is that those procedures will come back we have looked at some of the IQ via data that has said and.
Looking at elective procedures, one of the procedures that is coming back to the quickest is cataract surgery. So we are tracking that type of data and that is the basis for why we do think there is a tailwind for us for 2021 and beyond so operator, I think we have time from maybe one more question and then we will conclude so one more.
Question. Please okay. Next question is from Doug <unk> from RBC capital markets. Please go ahead.
Yes. Thank you.
So just on net debt.
And you did indicated that you were going to go out and perhaps at four and five five times from the individual businesses.
And just like you to confirm that and then how important is investment grade to the spin co and then finally.
Paul can you comment it looks like you've.
Reiterated your 22.
Growth targets of three five and four to seven but maybe you can comment on why the street remains so far below those numbers right now and I'll leave it there. Thanks.
Sure yes. Thanks.
Thanks for the questions, Doug and let's let's start and start with a net debt leverage. So it may take us in order first we're going to be ready ready to go and as Joe said operationally with the things that we need to do internally and in order to be able to go here by.
By the end of Q3 of this year.
Our primary commitment is to unlocking shareholder value and frankly, the leverage of the entities will be and outcome.
That work to determine what's the best path forward.
The value of remain coal is as important to the equation and frankly the way you described it is important to be investment grade for spin co as I would submit and there is a relationship between the degree of leverage on spin Co Inc. And your ability to attract a higher multiple if you were to lever up spin co.
And to a high level.
Evel, it's unlikely that you would get the right EV multiple in order to unlock and.
That value add.
At the same time the leverage that you put on spin co is important to the leverage yet.
And <unk>. So there are lots of levers that need to be pulled here in order to try to try to find the place where we deliver value to all <unk> shareholders and so we're looking at we're looking at all of those things.
And it is something that day.
There are endless.
Endless array of alternatives here, and we will be ready to execute.
And that spin operationally in 2021 and move forward as expeditiously as possible in order and unlock value.
Joe do you want to take the CAGR, where do you want me to.
And the larger gauge yet we kept it in there because definition and we believe we could still hit that.
And my and my remarks regarding our guidance for <unk> for 2021 and to be Triple clear.
And we would be ahead of this but unquestionably my mind anyway.
In 2021 from both a revenue and profitability standpoint.
But for Covid, we are not in 2021 fully recovered from Covid, but as we regain that we think we have every ability to still produce the results within the ranges that were articulated by that.
Long term longer term CAGR guidance.
I'll stop income.
Thank you for the comment Paul I agree with what Paul said and just let me say and closing thank you everyone for joining us today.
Just quickly summarize by saying, we exited 2020 with great momentum and we remain strategically focused on executing on the business capitalizing on the key growth drivers and catalysts to grow EBITDA, we want to continue to improve working capital efficiency Delever, Our company and importantly, unlock shareholder value with the spin at the BNS business.
So thank you for joining us I'll look forward to having further conversations with everyone in the near future have a great day everyone.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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