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 all.
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 Sir.
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.
And 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 of the presentation posted on the website finally, the financial guidance and this presentation is effective as of today only it is on our policy to generally not update guidance until the following quarter and not to update or affirm guy.
Other than through broadly disseminated public disclosure with that it's my pleasure to turn the call over to Joseph.
Yeah.
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 of the fourth quarter and full year financial results and discuss our 2021 guidance. I'll then discuss our 2021 strategic focus which includes executing our business recovery unleashing growth.
Drivers and accelerating strategic alternatives to drive shareholder value before opening the line for questions.
The game at slide five and.
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 900.
$8 million of debt during the Covid related downturn, we are focused on executing on our business. We grew market share for key promoted products. The 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 on.
Well positioned to benefit from recovery related tailwind and capitalize on key growth drivers and catalysts, while pursuing alternative to accelerate shareholder value creation.
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 2021 and earlier 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.
The 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 of few highlights our vision care business grew and the U S. During 2020.
Item and 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 Faxon true.
True Lance and rental share all grew and the 'twenty and 'twenty versus last year sort of March revenue grew by 47% and 2020 compared to 2019, driven by strong demand in China and expansion into other geographies.
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.
And we generated more than $1.1 billion of cash from operations during 2020.
And we are seeking to accelerate the spin of P&L, our eye health business that we believe will unlock shareholder value with that I'll turn it over Paul the 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 you see revenue by segment and business units within the segments of the quarter and the full year.
I'll start with P&L internationally overall of the segment was flat on an organic basis versus Q4 of 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 the segments saw increased demand, including the iPhone and our broad spectrum anti Paris.
We saw organic growth and almost all countries and regions led in order by Eastern Europe, Egypt, Lastly, on Poland and Russia.
And this business was the star of the quarter under challenging circumstances, and the business heads they are including Fernando's RK Heiko I mean, one day.
Hey, Simon Vincenzo Scott and most of <unk> and their leader Com App, you'll just sort of a lot of credit next up is the global consumer business. It was down 1% organically is the theme across the P&L consumer P&L vision care and surgical businesses and that is that the recovery and 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 Fi outside the U S resurgence of Covid and the associated impact of social restrictions and changes in consumer behaviors.
Slowed the recovery and various 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 were of the recently launched infused daily disposable side of high 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 than we saw on the U S. Global surgical was down 7% organically flat and the U S versus Q4, 2019, but down 9% O U S. U S. Eyecare professionals, the adapted more quickly to get back up and running with Covid protocols in place.
And then the outside the United States.
So 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 of 2019, while O U S. We were down only 4%.
In the U S. Despite the rebound and surgical procedures patient flow and the doctor's offices is still well below 2019 levels and that has certainly impacted volumes of our auto Rx products the impact of the Lord <unk> Taylor. We also contributed to the quarter over quarter decline, so thats being out of the international revenue on the sale of.
And where revenue was up 2% compared with Q4 of 2019, our key promoted price were all up versus Q4 of 19 with the facts and of 4% truly is up 33% and relistor up 7%.
<unk> from <unk> have not yet recovered to pre COVID-19 levels extended EBIT Rx and the quarter were down three 5% versus Q4 of 2019, and that's a good proxy for unit demand and unit demand. However, the sales volume and the quarter was up 2% as retailers rebalanced their inventories during the quarter after.
The substantially reducing them and the depths of Covid note that the fluctuations of XI facts and channel inventories were sorted out during the year and we ended 2020 with appropriate levels based on current sales volumes and realized net selling price per <unk> was up 2% truly and continues to grow nicely volume up 45%, which is broad.
Consistent with the 40% increase of <unk> versus Q4 of 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 age of delivering high truly as volume growth in the future a strong finish to the year for Salix next the ortho Derm segment first I want to note that our colleagues Scott Hirsch is now leading the segment and I'm personally excited about the changes of the or under.
The reposition of our medical derm business to capitalize on the strength of our ortho derm colleagues and product portfolio.
We will talk about more about this and the coming quarters in Q4 of the major of business was down 22% organically roughly 10% of that decline was due to the losses of exclusivity on products, including solid on a con yet elegant and zovirax.
And our promoted brands, particularly those early in their lifecycle continue to be impacted by less patient office visits global Solta under the scope of leadership of our colleague Tom Hart continues with the 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.
Finally diversified was down 9% organically with 8% of that decline coming from <unk> and the neurology business.
The side of 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 15% decline and generics revenue was mainly a function of a very strong performance in Q4 of 19 debt.
Dentistry continues to recover from the effects of Covid and was down only 4%.
And that's revenue and the quarter total company revenue was down 1% organically. We finished the year gathering momentum and we're carrying that forward into 'twenty and 'twenty one.
Turn to slide eight and I'll walk on 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 the 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 the Q4 of <unk> 19 on a constant currency basis. As you look back on 2020, you'd see the during Q2, we pulled back dramatically on the Opex spending as we work to conserve cash and protect the earnings in.
In Q3, we began the ramp up promotional activities 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.
And bringing the us up here for context, what I talked about 2021 guidance later.
Adjusted G&A was favorable the 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 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.
Flip to slide nine.
The full year 2020 was so colored by Covid. The comparison versus 2019 is not especially meaningful but there are sort of 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, but for Covid. We would have met our original 2020 revenue.
But the thing I'm. Most proud of is that the <unk> team was able to react quickly to reduce expenses and conserve cash and whether the worst of the Covid storm, we prioritize the safety of our colleagues adapt the defined ways to serve patients and our customers and we were in the state of readiness to get back to driving our business forward as things begin.
And 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. One 1 million 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 and the quarter and one to $3 5 billion for the year.
Our company has a strong cash generator, we convert 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 current 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'll see the schedule of our debt maturities no maturities or mandatory amortization until 2024 of our active management of our debt complex was an asset for us back of the spring when liquidity concerns of our understandably high. So that's the Q4 and 2020, let's turn to our guidance for 'twenty and 'twenty one starting on slide.
2014, our guidance calls for revenue between $8, six and $8 8 billion and adjusted EBITDA of between three and 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 the diversified company across the 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.
And generated from operations to be approximately $1 5 billion and 2021, roughly the same as what we generated in 2019, and we're targeting of approximately $1 billion.
The 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% of 150 basis points less than we posted in 2019 why well there.
Three main factors first our guidance for gross margin of 2021 of roughly 72% of some 70 basis points less of the $72 seven and we saw in 2019, that's due to mix and a bit of of Covid hangover on manufacturing costs that will flow through 2021.
Second our R&D spend in 2019 total $471 million and we're guiding the circa of $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 of tightly managed gear.
And finally I call your attention of the expected growth drag on 2021 revenue and profit from the low assets. We're looking at of roughly $105 million drag on revenue and 2021. This is substantially less and we've had to overcome and prior years in 2016 of 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 you just 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 Ellie Eloise has dramatically declined and importantly, looking out over the next five years Eloise will be quite manageable.
The alloys have have been a long road for us, but this governor on our growth is mostly behind us back the yugo.
Thank you Paul let's get started the budget.
The highlights on slide 20 on.
The 17th the chart on top of wallet shows that recovery is in progress.
And global vision care and recovery in 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 bio true one day, and ultra and global consumer despite the pandemic, our eye vitamin franchises and loom and Fi grew organically, both revenue and procedures and global surgical our approach.
The pre pandemic level, and we expect delayed cataract surgeries from 2020 to create a tailwind for 2021 and beyond.
<unk> 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.
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 the U S vision care shows recovery and progress for the last seven months next <unk>. Rx is also show a positive consistent trend lymphocyte recovery has been and progress since April of 'twenty, and 'twenty and finally stellaris elite.
<unk> 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 sort of is up 40 basis points flow to Max SM is up 160 basis points and <unk> is that the 180 basis points on the bottom of lastly show the strong positive trend and mark share for our intraocular lenses and the U.
And finally on 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 and the U S and August it's a significant opportunity we estimate the U S market for these lenses will grow from $1 billion today to approximately $3 billion from 2030.
And 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 like and we are encouraged by the results the lenses doing exceptionally well with patients who experienced contact lens joined US we have great results from our recent online the survey on page 29.
94% of patients agree that and infused helps keep contact lens 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 the slide number 21 with organic revenue growth of 2% and the fourth quarter versus last year, we are seeing clear signs of 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.
True truly and <unk> grew by 47% and 2020 compared to the overall market growth of about 6%.
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 the site fax and truly hands and Relistor <unk> on slide 23, we share the Gi market share gains we achieve relative to last year in terms of Trs Mark.
Sure site fax 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.
0.1%, New Rx share in December 2020, we believe this is a great leading indicator for future truly is trs per share gains.
Now onto ortho Dermatologic on slide 24 few highlights to note notwithstanding the impact of Covid.
So all of the 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.
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 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 of the recovery and Ortho Dermatologic. The March revenue head of Great performance in 2020 benefited from the increased demand for aesthetics. The Jubilee of Trs trends showed solid recovery since April of 2020, and lastly, do over here ex has began to recover over the summer we highlight the gains and Trs market share we were able to.
Key for key promoted brands duopoly up 40 basis points jewelry up of 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 for 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 of roughly 16% were delayed in 2020, while outside the U S. We estimate that approximately 20% of the.
Surgeries were delayed creating a potential tailwind for 2021 and beyond.
And we are expanding the sales force of over the third.
The March 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 of <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 the MSL amount of S. <unk> modulator for patients with mild to moderate ulcerative colitis, we expect a readout of phase three results for Novo three investigational treatment for dry eye.
And I disease. We've also published the 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 our Rifaximin lifecycle programs and addition to our program for sickle cell disease. We recently received we've seen positive feed.
Back from the FDA on of 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're 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.
Health companies that we see from being out we've.
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 our internal objectives necessary for the spin of being now to be achieved by the end of the third quarter of 2021.
At the same time, our operational focus is on taking action that has the potential to expedite the spinoff.
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 are planning to increase our EBITDA as Paul mentioned, which will increase cash decreased debt and decrease leverage. We also believe the improving working capital too will also help us to decrease debt.
And we believe pursuing the spinoff that is preceded by an IPO process could also potentially accelerate the 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 the answer another investor question to be clear, we are not planning to issue of 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.
The first question is from Chris Schott from J P. Morgan. Please go ahead.
Great. Thanks, so much for the questions, maybe just coming back on asset divestitures.
And I'm, just trying to still get the sense.
Is that your view on sense of urgency here as I think about how you balance and 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 you know.
How you think about.
And he asset value of slippage et cetera that could be.
The last I guess on a sale that could accelerate our separation process of the garage holter and get our hands around kind.
Kind of how you're approaching this process and and maybe a second question on that same topic based on the interest you've seen any of your assets. So far is a 2021 separation of stretch at this point or is that looking more like a base case outcome.
Okay.
Let me start on 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 no debt. 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 to a pure play health company and <unk>.
The diversified international pharma business. So we clearly know the most important thing that we are seeking to do is the spin out of the P&L.
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 spur.
Been out the BNS business as soon as possible. So I think the way I will say I don't want to negotiate on the conference call, but we are seeking to move with speed and we will seek to do that but but we certainly want to 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. The <unk>.
And point is that we are moving to expedite all of those activities and the question of timing of the.
Overall spin of P&L.
And we'll be ready after the third quarter of 2021 to have all of 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 are of very tax efficient strategy.
The one of the advantages of the Bausch Health care company has is our efficiency and our tax.
Because of our legal entity structure of 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.
Paul 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.
The decrease debt and obviously the divestment comment that you made also as part of that and there is the potential of course to proceed the spin off with an IPO that could also IPO of the <unk> business that could also help us potentially accelerate the timing that those would be the course of actions that I think we'd be best taking the help.
And to accelerate this which we think will create the value for our shareholders.
Operator next question please.
Okay.
Okay.
The next question is from Omer robot from Evercore. Please go ahead hi.
Hi, Thanks, so much for taking my questions.
Paul on on Slide 31 around B and I'll spin off you mentioned the.
And the financial segmentation will be complete and <unk>, which is in line with expectation.
But previously you had also mentioned that the leadership team of announcements will happen. This quarter is that something we should expect on the next three to 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 sum of the parts valuation is also a lot to do with the value of the remain co and and I think.
It can't be overstated, the significance of R&D strategy and R&D programs for that remain co.
Where are we with that is there any effort underway at the board level to perhaps bring in the 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 the remain co and thank you.
And where it's Joe Papa and I'm going to take the first part of that question and the leadership and then I'll turn the call on the on the remain co part and then of.
Potentially comment as well on the R&D point on 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 of very logical time at that point to announced 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 reported on the second part of the question Paul you want to take that yes, yes, sure Andy and out and we're thanks for the question because yes, there the there.
The main called the value of remain called matters and has the opportunity to to.
Enhance that value and it's frankly, something that Joe and myself and our board of been focused on since we are here, which is to take our company and if you go back of 2015, the essentially issue.
R&D and said it was all about acquisitions and flip that and started the process of building and internal.
On a portfolio of <unk>.
Projects are the projects that can sustain the company over the extended period of time I wanted to first frame what those remco look like because of it.
And interesting and interesting thing of focus on what you end up with is a diversified international pharma company, that's got strength of 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, the strongest and in Asia Pac and looking to expand into Western Europe, you've got a strong neuro business, which albeit not of great growth drivers and the incredible cash generator here and the U S. We have of dentistry business and the U S. We have of debris.
And what I'll call the derivative generics 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.
On the kind of 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 then.
He has a lot of al and and.
And it is great and so what do you need to do in order to be able to make that the most the most.
The value of that it can be as you hit it right on the head you will continually invest in R&D example, the are this year, where we ramped up our investment to where we're guiding to circa $525 million in 2021 internally and at the board level, we focus greatly on wave.
And to ensure that our Gi business.
Has the prospects of managing through a pretty much date certain.
Of.
Dry box and in early to early 2028, and the projects are outlined Joe went through a knock on 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 two and two debt portfolio, whether it's in whether it's and Gi whether it's in in terms of weather.
It's in neuro or any other business.
Interestingly, the where we've had our most success.
And fleshing out of portfolio over the last call. It 24 months he has been and our OXXO Rx business, that's part of the spin.
And it wasn't debt we were focused solely on on trying to do deals and off the Rx, but that was shortly and area, where we knew we had been underinvested for many years and needed to re price that I can.
And use that analogy again and say we needed a restart.
And investment and build out debt portfolio. So that we had a credible and and valuable portfolio in off the Rx and our team do I think a great job of.
And 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 that were 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.
That I just described to you.
It's not a process that's done but I will tell you the internally it's the it's a high focus area and we've made a lot of progress.
Since the days of the 2015 I'll stop there.
And maybe just a couple of other comments on and they are.
D programs I think we've got some great news that came out and sit and our earnings deck debt, 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 the great opportunity for Rifaximin because of the efficacy we've seen with a <unk>.
And 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 true Lance we think that clearly is another important part of the next generation, we talked about what it's done this year of that's obviously significant but I'll give you one other insight.
And the opportunity to truly that 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.
The 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 the 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 op.
<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 them on <unk> modulator of 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.
Business, especially in the sale of Salix next generation opportunities.
Let's take the next call. Please.
Next question is from David Amstel and <unk> 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 why the Saks and and.
And it's been.
Until the week.
In the context of <unk>.
Look the true line, which has done quite well.
More practices of open so and the second half I would've expected to see more.
More recovery out of the tracks and and then still were seeing year over year declines and total prescriptions. So can you just enlighten the us too.
What is happening with the sex acts and do you think the product is maturing.
And it's performance fees will be true Lance thanks.
Yeah.
Number one we think Fairfax and still there's a lot of runway in front of it let me say that upfront we think the issues for Covid of bid two factors number one we have seen reductions and patients being admitted to nursing homes and it makes sense, knowing what we know about what's happened with COVID-19 and patients and nursing homes and as a result.
Of those patients have just not shown.
The the growth that we've seen in the past the second probably more important factor, though is the 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.
The Covid we think.
As the patients start to come back to Gastroenterologists. They focused on what we think of the key things for them.
We're doing the endoscopies the colonoscopy and over time, we do think that the Ibs D will pick up. So for example, while Ibs D was down to be clear and 2020. The most recent data with Ibs D shows US now flat over the last 10 weeks versus the.
A year ago. So we are now seeing that starting to turn the other thing data point I will I will remind you of is that we know that Ibs D. Still has about 12 million prescriptions a year for anti spasmodic anti diarrheal on products like la modal 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 of chronic medications like bento.
The Bentyl Dicyclomine type products.
And they can get episodic treatment treat for a couple of weeks and and many patients will respond and they will not need to take of chronic medications. 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 the Rifaximin next generation products.
Operator next question please.
The next question is from Greg true it from true of Securities. Please go ahead.
Alright, Thank you guys.
Two questions the first did.
Did your newest shareholder bring to the table of any new ideas that you were not already pursuing or and urgency that you were not pursuing them when I'm trying to understand whats changed there or whether the settlement and it's more of a a reduction and distraction.
And then as it relates to P&L of longer term guidance earlier and your tenure of so you were asked frequently.
Whether it be and always investing for the long term and could it stand on its own and be competitive maybe you could update us on your thinking there in terms of how P&L with Covid.
And be positioned versus its peers from an investment rate growth is obviously there but.
Perhaps pros and cons. Thank you.
Sure So first.
First of all.
We are delighted to welcome a highly respected investor who agrees with US debt there is an opportunity to.
And increase 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.
Joined the board and the <unk>.
First comment on the second comment I think it's clear we welcome open communication with all of our shareholders and we have constructive input on and away from all of our shareholders. We have already on our board.
Two great investors, John Paulson, and Rob Hale from value Act. 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.
Opportunities the unlock upside in our company 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 <unk>.
We will trade very well with the peers in the eye health business.
And I won't go into all of the details you will all of the experts on comparing us with other companies, but if you look at where.
Companies like Alcon traded where Cooper traded, whereas ice trade and Theyre all of that 25, plus times EBITDA for 2020 numbers. So clearly we think there is of significant upside opportunity for us that at 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 there.
We have made and P&L and important to how we're looking at that sure. Thanks for the question Greg.
I mean, we did talk about this a lot because of the Biennale.
If you went back.
And let's call it free pre 2016.
You did not have the level of investment that debt.
Certainly if Joe and I had and at the helm and allocating capital we heard of allocated more capital to that business is of great business and we would be ahead of where we are today. The easiest example of debt 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 <unk>.
And the vision care business and not have this and when Joe and I got here and there is one of the first things that we activate and was a program to do that now as a result of that and you say about investment and investing behind that business. In 17, 18, 19, and 20, the preponderance of our of our Capex.
Really was focused in in the BNS business, where it had been underinvested in.
The capex in P&L to the investment and investment and R&D I mean, it's kind of growth and that is growth Capex and was decision debt, even though we were.
And our of Levered company and.
And obviously the capital the 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 of a moment ago.
Ill jump all over it but of how we enhance the ASO or ex your 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.
<unk> is doing particularly in the U S that is a function of providing Joe Gordon and his team that debt.
Debt run that debt run that business with the resources that they need to drive that growth.
And at very attractive rates and most of the easiest example, there is is the DTC advertising I hope everybody on this call. The hour constantly fees are our advertisers for our eye vitamins and for global volume.
And we are allocating capital to that business.
In a way that is giving us the opportunity to start to demonstrate on the very consistent basis, the kind of growth that debt business.
And that business can do on its own.
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 the deserve more investment.
Certainly the head seen under the prior management regime, and and honestly, perhaps even under prior ownership before that.
I think Paul the answer.
Well, Greg the other thing I'm going to add to a closer and as I think the concept that we have of an integrated eye health businesses. 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 of surgical business. We have of 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 <unk>.
Rollouts of the ophthalmology practices, we think having a place where they can get the full line offering that's important the patient and important to our customers is one of the things that we will have an advantage and the marketplace and that clearly is something that we think will be important simple example.
The 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.
Take our next question.
Next question is from a cost to worry from Wolfe Research. Please go ahead.
Okay.
Hey, guys.
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 of crazy to think that Bausch could you maybe of 200 and $300 million.
Ex benefit that's kind of embedded in your guidance and then Paul and I know you can't comment on the stuff.
Totally but.
There is some investor speculation that you might be involved and some capacity, whether it's debt will remain core of it or the spin co.
What is.
Can you kind of maybe with broad strokes speak about your interest and potentially the spin co and the commercial opportunity that stand in front of you and then just lastly.
On your on Slide 20, you've noted that GNL Si Hy dailies are expected to exceed $250 million and sales is that of peak number or is that for 2021.
And let me take that the last question first because I think our interest.
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 of that is not a number for 2021 to be clear, we view that and the way we phrased it was of global expectation for IV Si Hy dailies.
And that we view that as of 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 bye from 'twenty to 'twenty, one you'll see that.
Revenue FX as a tailwind of.
The $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.
And 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.
The benefit from it when it comes on our direction and it feels good but frankly.
And if that was the only thing that caused you to grow it's not it's not all of that.
It's not all of that interesting, yes, we always call it out and always try to isolate it for you and we'll even isolated for you in may.
And 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 hold the hope is currency moves and our direction because it feels good but from a constant currency on our organic basis.
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.
The second question you asked around.
Kind of like.
Interest in Remco ahead, and I think your former partner who are asking this but I might of been last quarter on quarter before.
You probably heard in my in my response to thinking about remco that is a very attractive business.
It will be definitely a levered business when it comes out and these are all things that I like so yes.
If you would ask me.
On page one.
Yes, as much as I love the P&L the BNS business.
And im probably more suited to to thinking about remco.
So I think I'll just repeat the addition of of ball said, we think and from a leadership point of view, we will have more to say about that in the may timing. We think we've got a great team at Bausch health care and we think we will 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 Mei.
May of 2021, and then have more comments about the leadership team and.
And the individuals that will be involved and how they will be vault and may I.
Let's take the next question.
Next question is from Terence Flynn from Goldman Sachs. Please go ahead.
Great. Thanks for taking the questions maybe.
Maybe two from me I was just wondering as you think about 2021 and you mentioned this procedure backlog and cataracts is of growth tailwind just wondering if theres anything you can do to capture maybe a larger share.
And then your current market share of that backlog and the.
Then on remain co just wondering if youre still committed to the five five times leverage target. Thank you.
Sure on the first.
And as part of the question I think I'm going on or 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 of 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 reported requirements, but we do have it to see what's happening in the U S and we are seeing the.
The 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 <unk> market share has moved from I would say.
Below of around 10, 2% were up to about 11, 6%. So we are gaining share and the Io market. We are continuing to move forward with new innovations there.
And our belief is that's what will drive that but we do believe that as I said, both the United States and around the world Youre seeing somewhere around 15% to 20%.
The 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 on.
And looking at elective procedures, one of the procedures thats coming back of 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 for maybe one more question and then we'll conclude so one of.
The question please.
Question is from Doug <unk> from RBC capital markets. Please go ahead.
Yeah. Thank you.
So just on the the debt so.
You did indicated that you were going to go perhaps at four and five five times from the individual businesses.
Just like you to confirm that and then how important is investment grade to the spin Cowen and finally.
And Paul can you comment it looks like you.
Reiterated your 'twenty two.
The growth targets of three five and 4% 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 for the questions, Doug and let's let's start and start with the net debt leverage.
And would take us and water first we're going to be ready ready to go as Joe said operationally with the things that we need to do internally and in order to be able to go here and by.
By the end of Q3 of this year on.
Our primary commitment is to unlocking shareholder value and frankly, the leverage of of the entities will be an outcome of the.
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 the spin co Inc. And your ability to attract a higher multiple if you were to lever up the spin co.
And to a high level.
Level, it's unlikely that you would get the right EBITDA multiple in order to Joe and unlock that value at the same time the leverage that you put on spin call is important to the leverage yet.
The rat remco. So there are lots of levers that need to be pull 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 the.
There are endless.
Endless array of alternatives here, and we will be ready to execute.
On that spin operationally in 2021 and move forward as expeditiously as possible in order to and unlock value share.
And you want to take the CAGR of three do you want me to.
And I'll do a closing comment yes sure on.
The larger base, yet we kept it in there because definition and we believe we can still hit that.
And I said in my and my remarks regarding our guidance for <unk> for 2021 and to be Triple clear.
We would be ahead of this.
Unquestionably my mind anyway.
In 2021 from both the 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 range is that were articulated by that they can't long term longer term CAGR guidance.
I'll start of income. Thank you. Thank you for the comment Paul I agree with what Paul said and I, 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 of 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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Okay.
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