Q3 2021 Bausch Health Companies Inc Earnings Call
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 of non-GAAP reconciliations can be found in the appendix to the presentation posted on our website finally, the financial guidance. In 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.
Firm guidance other than through broadly disseminated public disclosure with that it's my pleasure to turn the call over to Joe.
Thank you art and thank you for joining us today I will start with an update on the progress we have made on accelerating strategic alternatives to unlock shareholder value. Then I will briefly cover the third quarter highlights before turning the call over to Sam <unk>, Our CFO to review the financial results in detail and discuss our 2021 guide.
I will then review the segment results before opening the line for questions.
I start let me quickly thanks that 'twenty 1000, Bausch health team members third quarter 2021, with another great effort by our team that simultaneously delivered a strong EBITDA performance advanced our R&D projects and made significant progress with our strategic alternative process to drive shareholder value.
I am pleased to share our great progress on the strategic alternatives process on page four subject to market conditions regulatory and other necessary approvals, we expect to launch the proposed Solta IPO in December 2021, or January 2022, and then we expect to launch the Bausch and Lomb IPO.
Approximately 30 days after the Solta IPO subject again to market conditions and other necessary approvals after that the bausch and lomb spinoff for the remaining shares to existing shareholders can occur following the expiry of customary lockup the achievement of target net leverage ratios, we previously disclosed and subject.
Two the receipt of regulatory approvals. We also are making great progress in reducing debt, we repaid $1 $1 billion of debt in the third quarter of 2021 year to date as of September 30, we have reduced debt by $1 $6 billion. This year.
Total Bausch Health company net leverage as of September 32021 was six four times.
Moving now to slide five our third quarter results demonstrate that despite ongoing impacts from pandemic in certain regions overall, our recovery rates in progress. Thanks to the continued efforts of our team in the third quarter of 21 total company revenue declined by 1% on a reported basis. It was flat on an organic base.
This is due to a strong comparator as the third quarter of 'twenty with a COVID-19 rebound across many of our international markets Importantly.
Our business generated strong cash flows from operations of $564 million on a GAAP basis.
Adjusted for insurance recoveries separation costs and other items adjusted cash generated from operations was $382 million in the third quarter.
We continue to see strong performance and recovery from our leading brands.
For example, <unk> reported revenue grew by 40% during the third quarter 2012, when compared to last year. We also delivered on near term R&D catalysts, including the very exciting news that we now have statistically significant topline results from the second phase III trial for Novo three in dry eye disease.
Associated with my <unk> gland dysfunction.
And we received FDA approval of <unk>, which we expect to launch in the first quarter of 2022, both of which I'll discuss in more detail later to summarize we have made significant progress on accelerating our strategic alternatives to unlock shareholder value.
Third quarter results demonstrate that the recovery remains in progress key.
Key products are growing and gaining market share and we are delivering our near term R&D catalysts with that I'll turn the call over to Sam to cover the financial results in more detail.
Thank you Joe just a reminder, before I discuss our third quarter performance. When we talk about the organic revenue growth, we mean on a constant currency basis and adjusted to remove the impact of divestitures and discontinuation.
As a reminder, during the third quarter, we completed the silver Moon, our Egyptian pharma visits now turning to our results third quarter revenue totaled $2 1 billion down 1% on a reported basis and flat organically.
In the prior year quarter, we saw a surge in demand coming out of the Q2 adaptive COVID-19, so being flat organically is better than <unk> year to date revenues up 7% on a reported basis and 6% organically.
Point, our third quarter revenue confirms that continuation of our recovery from COVID-19, but to be clear, we're not yet fully recovered.
Our markets around the word stabilize and recover our teams are well positioned to return our businesses to pre COVID-19 levels and grow from there. If you turn to slide six starting with the BNS segment third quarter revenue of $949 million was up 3% organically and for the nine months year to date to be announced segment was up 10% organically.
Compared to the same period last year.
Three of the four businesses with NPL closer organic growth starting with the global vision care business third quarter revenue of 226 million was up 6% organically led by 8% growth of international vision care, while the U S was up 2%.
International Vision care growth was driven by our key promoted brands, including <unk>, One day ultra and Southland.
In the U S retail and e-commerce.
<unk> was up 4% from a year ago.
And 15% versus the pre Covid third quarter of 2019.
With our daily Si Hy lens, infuse continuing to gain share and drive growth.
We continue to see a steady recovery in our global vision care business with a year to date growth of 21% organically compared to last year.
Moving onto our global surgical business third quarter revenue of $173 million was up 13% organically versus Q3 2020 with international up 16% and then U S up 6%.
The growth in our surgical business reflects care act on right now procedures recovering and now exceeding 2019 levels.
Year to date, the global surgical business grew 28% organically as compared to 2020.
Turning to global consumer business third quarter revenue of $379 million was up 7% organically with the international consumer business up 15%, while the U S. Consumer business was flat the growth in the international consumer was mainly driven by gaining market share and strengthen our vitamin brands.
Our select renew and <unk> multipurpose solution.
The U S consumer business experienced a very strong quarter, a year ago due to the impact of an opportunistic one time sale suite.
In the current quarter, our eye vitamins occupying preservation and <unk> continued to deliver strong growth in the U S.
Finally, the global <unk> Rx business.
Third quarter revenue of $171 million was down 15% organically versus third quarter of 2020.
The decline was driven by the low and the natural erosion of the generics branded product in the U S business.
Our promoted brands continued to benefit from expanded access in med D coverage in the current quarter. A result of saw a 37% CRX growth versus third quarter of 2020.
Now turning to Salix.
Third quarter revenue of $527 million was up 6% from Q3 2020 performance was mainly driven by the facts and up 12% Relistor up 14% and <unk> of 14% breaking down the components of the 12% increase in the Zika vaccine revenue it was 6% due to volume and six per.
Aside from the net impact of the price increase which we <unk> in the beginning of the year.
The factory direct strength continues to demonstrates recovery was 6% the rx growth versus third quarter of 2020.
As we discussed in prior quarters, COVID-19 negatively impacted the long term care.
<unk> with less patients in those settings.
Long term care is an important segment for today packs and especially for the <unk> indication.
We continued to see steady recovery for XIAFLEX in prescriptions within the long term care channel and we expect the rebound to continue in Q4 2021 and throughout 2022.
The growth in <unk> was up 14% was driven by volume to our successful efforts to expand managed care coverage for the brand.
Relistor was up 14% from a mix of price and volume.
We feel good about the recovery and the growth trajectory within our Salix business year to date that Salix business grew 10% as compared to the same period in 2020.
Now turning to the International Rx segment third quarter revenue of $271 million was down 1% organically. The decline is driven by low impacting Canada combined with a comparison against a very strong quarter last year, driven by <unk> sales in Mexico due to COVID-19 related demand.
These declines were nearly offset by growth in several markets, including Poland that was up 30% organically versus Q3 2020.
Move on to Ortho Derm segment third quarter revenue of $140 million was down 3% organically the medical derm business was down 6%, mainly driven by lower net realized pricing there.
Global Solta business was down 1% organically. This was mainly driven by the COVID-19 shutdown in local markets in southeast Asia and Europe.
Also it's important to point out that in Q3 2020, we saw a large surge in demand for solar products as Mark history opened coming out of COVID-19 shutdown in Q2 2020.
Year to date, the global Solta revenues are up 27% organically.
Continuation of the impressive growth trends for this business.
Finally, our diversified segment third quarter revenue of $224 million declined 19% organically, our neuro business was down 25% due to lower volumes and net realized pricing on multi Youtube.
We also saw lower volumes on Pepcid and AD event, which benefit from the competitor supply issue in the prior year quarter.
Our generics business was down 14% organically with the biggest factor being the natural erosion with volumes and net pricing as additional competitors enter the market and compete with our generic products.
Finally density was up 32% organically driven by volume growth and interesting as it rebounds from prior year COVID-19 impact.
Turning now to the quarter P&L on slide seven.
We covered revenues so I'll start with the gross margin, which was flat versus Q3 2020.
Mix was a key factor for this quarter similar to prior quarters, we continue to identify and implement operating efficiencies within our global supply chain designed to enable us to absorb inflation pressure and other mix impacts.
That in our guidance for the full year gross margin is expected to be roughly 71%.
Within operating expenses on an adjusted basis SG&A costs were unfavorable by $43 million versus Q3 2020.
In the current quarter. We are we have had an elevated level of promotional spending, especially to support our product launches and global vision care.
Coupled with a return to a more normal levels for.
Promotional activities versus Q3 2020.
R&D increased by 17% as compared to Q3 2020, as we continue to return to a more normalized run rate and supporting our future pipeline and key projects.
Adjusted EBITDA of $885 million for the quarter was down 9% on a constant currency basis from Q3 2020, the divestment of our moon reduced adjusted EBITDA by roughly $10 million adjusted EBITDA in the current quarter reflects a more normalized run rate with an adjusted EBITDA margin of 41, 9% compared with.
44, 3% in Q3 2020.
The operating margins, we reported in Q3 and Q4 of last year were terrific, but did not reflect our normal run rate.
We believe that the investments in promotional programs are essential and a key driver to deliver profitable organic growth in the future.
Turning to slide eight.
During the quarter, we generated $564 million of cash from operations on a GAAP basis.
Adjusted for insurance recoveries separation related costs and other items. The adjusted cash generated from operations in Q3, 'twenty, one with $382 million.
Bringing the total to $1 $3 78 billion year to date.
We will be making real strides in improving our operations, our working capital measurement to address our leverage with our cash generated to date. We are in line to deliver roughly $1 6 billion of adjusted cash from operations in 2021.
This implies that our cash generation in Q4 will be at a lower run rate than what we have seen to date. This is mainly due to our expectation on timing of payments in Q4 2021.
Turning to slide nine.
We will continue to make progress on our debt paydown.
During the third quarter, we repaid $1 1 billion of debt with $500 million coming from cash on hand and cash from operations.
And $600 million of cash proceeds from that Moon Divesture.
Our focus and commitment to reducing our debt combined with our strong recovery in 2021 resulted in net leverage of six four times as of the end of the third quarter of 2021.
One thing to keep in mind, while we're very pleased with our debt pay down progress looking ahead to year end 2021, we expect our net leverage to remain flat or even slightly increased versus our six four times leverage that we have today.
On slide 10, we will continue to make nice progress with our debt maturities and as of the end of Q3, we don't have any debt maturities or mandatory amortization payments until 2025.
Before we discuss full year guidance I want to mention one development that we'll be disclosing in our 10-Q filing later today.
The last few years, we disclosed the internal tax restructuring that we did in 2017, knowing that that granite trust transaction.
This transaction resulted in a capital loss.
The IRS is now challenging.
We intend to contest the IRS position and we feel confident that the law is clear I don't know our sites. We don't believe at this time that this will result in any tax liability and therefore, no income tax provision has been recorded.
Now turning to our guidance on slides 12 and 13.
On the side you can see the progression of our full year guidance, while we expect our businesses will continue to grow and overcome the pandemic challenges. It is important to point out that the rate and duration of recovery is different by business.
We're not yet fully recovered and we expect that the recovery will continue in Q4 and into 2022.
Also on a macro level, we have seen inflation and supply chain pressure, which is consistent with what you have seen across the market.
We're taking proactive steps to mitigate and overcome these challenges, but we do expect to see pressure on margin as we move forward.
That being said we're.
We're holding our revenue guidance in the range of $8 four to $8 6 billion and our adjusted EBITDA guidance in the range of $3 35 to $3 5 billion.
We've also updated several of our guidance assumptions to reflect our expectation for the full year now back to you Joe.
Thank you Sam let's begin with Bausch and Lomb on Slide 15, Global vision care saw organic revenue growth of 6% driven by strong worldwide demand in the U S. Organic revenue growth of 2% was driven by positive consumption trends and the ongoing launch of infuse infused U S consumption sale.
Increased sequentially by 42% over the second quarter as we continue to see strong demand for our Si Hy daily lenses, which helped minimize symptoms of contact Lynn China's global consumer organic revenue grew by 7% driven by <unk> with 40% reported revenue growth and occupy and preservation.
Both which gained share.
The 13% organic revenue growth in our global surgical business was primarily driven by a rebound from COVID-19 delayed surgeries in both international and the U S. In the third quarter of last year, we estimate approximately 650000 cataract surgeries or about 16% in the U S were delayed in 2020, while outside.
The U S. We estimate about 20% of the surgeries were delayed creating a tailwind for 2021 and beyond finally in global <unk> Rx by <unk> in the U S grew by 37% compared to the third quarter of 2020, primarily driven by demand and increased market access coverage.
On slide 16, we highlight four of the recent advancements we've achieved in P&L late stage programs.
First the BNS and Hugh <unk> daily lenses, where lots of fastest growing contact lens category U S market for Si Hy dailies mentioned is approximately $1 billion.
We estimate it will be $3 billion by 2030, we also expect to launch our Si Hy daily lenses in several additional countries next year.
Next FDA approval of <unk> and the tremendous top line results from Novo three which I'll cover in more detail on the following slide and finally startup and our partner <unk> anticipate filing an abbreviated biologics license application with the FDA in the fourth quarter of 2021 for Lucentis Biosimilar candidate, which we have exclusive rights with you.
Western Canadian market base.
Based on these catalysts and future opportunities, we believe <unk> is well positioned for an upcoming IPO.
I wanted to spend a minute on our reported topline results of our second phase III trial for Novo three an important milestone in bringing Nova three of the market as a potential first in class treatment for dry eye disease associated with Michael <unk> gland dysfunction.
On page 17, we show the efficacy end points for the second phase III trials on the charts.
Shortly.
All primary and secondary endpoints were achieved including statistically significant changes from baseline as early as day 15.
Findings reinforced the results for the first phase III trial, and further support the efficacy and safety profile of Novo <unk>. Furthermore, we are planning a number of clinical and preclinical trials with the objective of differentiating <unk> from other competitors in the dry eye space, we anticipate filing an NDA for <unk> three in the firm.
First half of 2022.
Moving now to slide 18, we announced last week that the FDA approves <unk> based on results from our phase III clinical trial of 160 patients, which met its primary endpoint <unk> is the first and only therapy available in the U S that utilizes a super choroidal space to treat patients suffering from macular edema associated.
With uveitis, which if left untreated may lead to permanent vision loss.
We anticipate making <unk> available in the U S. In the first quarter of 2022.
The chart on slide 19 shows recovery trends in key areas of fashion.
All of which point to a recovery in progress for this segment turning now to slide 20 for an update on Salix organic revenue recovered to near pre COVID-19 levels in the third quarter of 2021 compared to last year with organic revenue growth of 6%.
<unk> revenue grew by 12% in the quarter, primarily driven by demand in Ibs D and <unk>, New Rx market share was 87% in the third quarter of 2021 compared to 84, 9% last year.
We also see a potential future growth opportunity as occupancy levels and the long term care market have not yet returned to pre pandemic levels.
Trulia CRX volume grew by 24% versus the third quarter last year and significantly outpaced the market growth rate of 4%.
Relistor revenue grew by 14% driven by Relistor oral <unk> volume growth of 11% compared to the third quarter of last year.
Sales recovery very clearly in progress as shown by the favorable trends in the chart on slide number 21.
Moving to slide 22 organic revenue declined by 1% in the International Rx segment, However year to date organic revenue for the International Rx segment is up 6%, reflecting the strength of our broad and diverse portfolio of our prescription product.
Moving on to Salt medical on Slide 23. This business continues to deliver strong performance year to date organic revenue is up 27% on an organic basis Ulta revenue grew by 23% in the U S and 25% in China.
Third quarter organic revenue decline of 1% compared to the prior year quarter reflects headwinds related to COVID-19 impact of parts of Asia Pacific and Europe. Additionally, the third quarter of 2020 was a strong compare driven by demand as markets reopened after COVID-19 closures.
Moving to slide number 25 for an update on our strategic alternative process. We have quantified the key members of the team that will lead to three attractive companies. We are building <unk> pharma will be led by Tom <unk> CEO <unk> <unk> CFO, Shawn Carsten as general Counsel and Bob <unk> President of the U S business I believe Bob.
I'm, a CEO along with <unk> as CFO. In addition to serving as General Counsel Christina Ackermann, we're running a key business for us upon separation as well expanding beyond legal who joined the business as a global leader of the ophthalmology prescription business, Joe Barnet will lead the global consumer vision care and surgical businesses insult.
Medical will be led by Scott Hirsch as CEO, Tom part as the COO and <unk> as General Counsel, we expect to announce a CFO for sulfur in the near term.
Turning now to slide 26, as I mentioned earlier, we expect to launch a proposal to IPO in the December 2021 January 2022 time frame subject to market conditions regulatory and other necessary approvals. The sulfur team has made great progress over the past three months and <unk> had been confidentially submitted to the SEC.
Key leadership appointments have been made we have also prepared carve out financial statements and have engaged with a full banking syndicate and preparation for the IPO.
Turning to slide 27 for an update on the planned spin off of Bausch <unk> Lomb.
We have now completed the internal objectives necessary for spin of being out to be achieved.
We intend to use the proceeds of the proposed filter IPO to pay down debt.
We expect to launch a bausch and Lomb IPO approximately 30 days after the launches Ulta IPO again subject to market conditions regulatory and other necessary approvals.
Thus farmers remaining stake in salt up post <unk> IPO, we will not be spun off to shareholders. It will be utilized as a corporate asset for bausch farmer to delever.
After that full distribution of the remaining P&L chairs or the spinoff can occur following expiry.
Customer lockups customary lockup achievement of target net leverage ratios and receipt of the necessary approvals.
In light of Securities laws limitations, we will not comment on the pending transactions beyond what we have just disclosed to summarize.
Recovery from COVID-19 is ongoing across our businesses.
We have been advancing near term R&D catalysts that will position our business for future growth and our team has been working diligently to accelerate the strategic alternative process and finally, we remain committed to unlocking shareholder value across our three attractive businesses as soon as possible.
With that operator, let me open up the line for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Chris Schott with Jpmorgan. Please go ahead.
Hi, great. Thanks, so much for the questions.
Just two from me I guess first on the business can you just help me a bit on the Solta <unk> results. I think you just mentioned it sounds like there were some impacts in southeast Asia and Europe from Covid.
I guess that those businesses recovered at this point. So is that just kind of a short term impact is recovering or are those still under some pressure, but I'm trying to get our hands around that how we should be thinking about kind of growth in <unk> and going forward given those dynamics.
My second question I don't know how much of this you can answer just given the IPO dynamics, but how quickly should we think about the company's ability to fully separate <unk> posted IPO is that a relatively short timeframe and should we think of the different factors as leverage as the key gating factor and.
And maybe just kind of tied to that do you anticipate that your remaining stake in Solta post the IPO will be netted against your debt as we're thinking about leverage targets or is that going to be treated as a separate kind of asset on the balance sheet. So I'm trying get a sense of.
We're calculating leverage shale if you have a couple of billion dollars taken in Solta is that helpful. In terms of the timelines on the on the P&L separation. Thanks, so much alright.
Alright, great. Thank you for the questions I'm going to let Scott.
Talk to the third quarter results I'll talk quickly about the full separation of <unk> and then.
Sam you can perhaps talk about the how we plan to utilize that value of filter that will be Randy about pharma. So Scott why don't you take that first question sure. Thanks, Joe Good morning, Chris.
We also had a very strong third quarter, especially given what is a seasonally slow quarter for aesthetics in third quarter, given patients and practitioners outside or on holiday with that said <unk> had a dean normalized year over year comp this period, owing to the timing of shutdowns in the market, particularly in 2020 with Covid and COVID-19 shutdown.
Last year, so the more normalized trend our growth metric as the year to date growth rate, which is 32% reported or 27% organic growth. Those are exactly the kind of numbers that we are targeting and executing on I'll say, where we stand today youre seeing vaccine access rates around the world Barry So who has <unk>.
Access to vaccines and the rates of market shutdowns very overall, we're managing quite well globally across biogen across the businesses Salt I included within that through those shutdowns in market and really what we're seeing is a.
The year to date year to date rates are what we're targeting and that's what we're going to keep pushing forward on.
Thank you Scott I'll take the second part of your question, Chris I Am somewhat limited on what I can say about this of course, but.
We're looking at the full separation of being now it will be subject to customary lockup of an IPO also I made mentioned of the regulatory approvals I remind you that we are seeking to use in a very tax efficient way. So we need to make sure we get the appropriate regulatory approvals for that but our expectation.
Is that we will be able to proceed with that.
<unk>.
After the IPO somewhere in that 367 month type timeframe, depending on how things occur, but we are looking forward to doing that full separation.
As quickly as we can and obviously, we want to make sure we take a look at customary lock ups in those regulatory approvals.
I'll take that remaining stake consult evaluation sure Chris Thanks for raising the leverage point, let me try and give a little bit more color here in terms of how we're thinking about the leverage into passport to the leverage so when you think about the solta business.
First total will help us in two ways. The IPO proceeds from Salto will be used to repay the debt back.
Pharma level <unk>.
The remaining salt to ownership, which your question will be the Ria corporate asset for the <unk> pharma to use and help delever either through future equity sell down or EBITDA growth or a combination of the two.
Just to go forward with that when you think also about six five and six seven you have the <unk> IPO, which will will raise.
Proceeds from the IPO from the P&L side as well as the debt that we will be putting in on the P&L, which is roughly about two five net leverage ratio. So when you combine all those items combining with what we've done with the divestiture this quarter with the Moon and the natural Delevering that we expect from cash generation.
We are thinking about in terms of moving forward.
Achieving the target of $6 five to $6 seven.
Thank you operator next question please.
The next question comes from Doug <unk> with RBC. Please go ahead.
Yes. Thank you.
Just wanted to get to satisfaction and review that a little bit more with respect to the long term care facilities can you maybe.
Give us a bit more detail on how you see that rolling out in terms of it being a gating factor with respect to.
Further growth or an acceleration in growth in <unk> and then the second thing is Sam you went through the.
Tax situation very quickly.
Could you review that just in a little bit more detail. Thank you.
Sure I'll start with the facts and long term care clearly.
Clearly COVID-19 had an impact on the population of patients in long term care.
We did see a decline in that overall census, or population that long term care had didn't have anything specifically to do with the fact that it was just the general population in long term care and we do see that starting to.
Regain population census occurring but that is something that is slightly below.
Certainly below where it was pre COVID-19. However in the last 10 weeks, we have been tracking at the Fairfax in long term care growth year over year is now up to about 3%. So a little below what we're seeing for total satisfaction last 10 weeks of total <unk> was up 5%. So we're clearly seeing it.
<unk> to grow but it is a little bit behind.
Where it was pre Covid and we do expect that that will come back that census population in the <unk>.
Long term care will come back, but it is certainly something that we're looking at as a potential <unk>.
<unk> as we think about the rest of 2021 and into 2022, but that's something we're continuing to monitor very closely.
Population.
Of the long term care as a general commentary is about 22% of site fax and so it gives you some sense of it's a market.
Market, we're tracking very closely we are starting to see some growth, but it is slightly behind the overall growth of the site fax in total once again as Sam mentioned I'll make a quick comment on Fairfax in Ibs D that was up about 12% versus a year ago timeframe. So you're seeing a lot of growth there to be clear.
We're waiting for the long term care to continue to rebound and once again, it's mostly on a census of the population that in long term care.
That second part of the question on the tax was.
Sure Doug.
Thank you for thank.
Thanks for the question. So let me start by underscoring just our level of confidence in our position based on the facts and the law.
The granite trust transaction, it's a commonly used structure, where you would recognize the economic cost and monetize that loss.
Based on what we believed our facts and the law, we feel very comfortable with our position.
We have evaluations, both internal and external that supports our position and as we look at how the transaction has been applied and then how much the IRS.
Physicians, who believe that they have no legal basis for Diana and have no merits. So our view here is dark.
Arguments contradicts the current law and our position is pretty clear in both the law as well as in our pack.
Thank you operator next question please.
The next question comes from Jason <unk>.
With Bank of America. Please go ahead.
Hey, guys. Good morning, Thanks for taking my questions.
Can you talk a little bit about how you think how you're thinking about guiding to your business or businesses.
For 2022, given all the moving parts here I imagine Salto, you might be looking to guide.
Sooner than some of the other component parts of the business, but curious if you can talk about that and then also do you have any sense of what.
And we'll get detailed data for <unk> III.
We published that I was looking at <unk> for 2021, it doesn't look like.
The data will be presented in the next couple of weeks at the AAN or medical meeting but.
Do you have a sense of when we can get the data for <unk>. Thanks.
Great Great question. Thanks, Jason for your questions. Let me start with how are you thinking about the 2022 guidance for each of our business.
As is normally our case, we will be guiding.
On the businesses in the February timeframe, having said that so as you think about our plans for Solta and followed by 30 days later by IPO for the BNS business, you can expect us to make comments in that December.
2021 February 2022 for the Solta business, obviously, as we think about the future of it I can't make any more comments right now as you understand because we're going through the IPO process, but then following that as I said within the 30 days after the the Solta IPO, we will follow it up with a bow.
<unk> IPO and our expectations, we will have additional comments on that as we go to that IPO. So that would be the planning timing frame for how we will address the 2022 guidance. Obviously, the remaining badge pharma business, which we will rebrand will have additional comments on that business as well.
In February of 2022 timing. So that's the plan and how we're going to take a look at that.
On the Novo three data.
As you can tell from my comments, we are really very excited about having this type of data.
For patients that have dry eye disease associated with <unk> gland dysfunction.
Think that we will have.
An opportunity to present that data in the very near future I don't have obviously the date specific date, yet as you can understand the second phase two trial.
Obviously late breaking information.
We'll get it published but the important point I would make is that what we see is a product.
If approved by the FDA will have very strong efficacy data and within the 15 day timeframe, we start to see the efficacy and that is statistically significant efficacy in both signs and symptoms of dry eye disease associated <unk> gland dysfunction. So.
If approved we are very excited about what that means we don't have a specific publication date to my knowledge, but we will get it out in the very near future as I said it was late breaking information.
Jody pricing being worthy of being on par with like the branded eye drops like Restasis and <unk> as you think about the pricing for that versus say artificial tears.
Yes, so we have not specifically disclosed a price for it yet, but we think based on the efficacy of this product.
Based on the fact that it has.
What we think is a very rapid onset of action relative to other products. In this space, we do think that pricing for it will be competitive with the other major products out in the category. As you know this category is about a $1 5 billion dollar U S market. So we're very excited once again I'm not going to go into specific.
As you can guess, but very excited about it means it's the fact that we have good efficacy and relatively very rapid onset of activity. We saw it as early as 15 days. So if approved we are really excited what it means for our company.
Operator, let's take next question please.
Next question comes from Gary Nachman with BMO capital markets. Please go ahead.
Hey, guys. Good morning first for the Salt the IPO does that have to happen first in order to facilitate the P&L IPO, so bulk escalade for submarines.
P&L automatically gets delayed.
Is there a valuation range you need to hit with Salto in order for <unk> Alfa Hoffman I, just wanted to get a sense for how dependent or independent those events are.
And then for Scott just on Salto, whereas most of the growth going to come from to maintain that 27% year to date level that you've talked about both from a product and geographic standpoint, just talk about the business a little bit more and how you are confident in achieving that type of growth trajectory.
Yeah.
Alright ill start.
Good question Gary.
Right now our planning for planning purposes, we are planning to IPO as I said in that December 2021 January 2022 timeframe.
The specific question you are asking does it have to happen first how dependent are these events. The incident does not have to happen. We could do this the P&L IPO prior to Solta, but for right now we think the planning.
Horizon, We think total IPO can happen in that December January timeframe, and then followed by the <unk> IPO.
Absolutely linked of if something was to happen with Solta, we could absolutely go forward with the P&L IPO.
But our current planning horizon, we think it's the right one that we do this ulta first.
Got you want to take that second question.
Yes, Gary what I'll talk about probably is more of a long term drivers of the business given a number of the shifting dynamics related to COVID-19 shutdowns in their ask Richard.
Really not kind of a focus point for me right now I think there are four main drivers I've sold a first is just to maximize our growth over the current geographic footprint, which is predominantly Asia Pac and U S. Today.
Second is to expand the portfolio over our current footprint. So right now we do not have our full product portfolio distributed through our current geographic footprint. So we have an expansion opportunity of taking the products that we currently have in some markets and expanding that to all markets.
Third we have geographic expansion and we have just started to expand into the EU five.
So again, we started U S went to Asia Pac and now our brand branching out into EU five and then we have yet to tap Latin America, both Europe and Latin America are impressive opportunities for US and then lastly, we have both pipeline as well as organic and inorganic growth drivers, we will have a <unk>.
Attractive structure with respect to being Canadian and Irish and so our ability to become a straw.
Structure that absorbs products and new products very easily and with cash generation is very attractive for us. So those are the four main growth drivers that all articulated for the long term of Solta.
Operator, let's take another question Blake.
The next question comes from David <unk> with Piper Sandler. Please go ahead.
Thanks, So just a couple of questions on the Bosch pharma piece of the business first.
Medical dermatology.
Segment.
Or so.
Can you just talk about the role of that business.
Yes.
Well pharma organization, particularly given.
<unk>.
Ultimately amex associated with that business.
Reimbursement landscape that you're seeing with key new brands that you had won 12 high hopes or just talk about how youre thinking about.
Further investment in that business.
As you saturate the spin.
So that's number one and then secondly, I know you've talked about this before Joe, but maybe just some updated thoughts on.
How are you thinking about R&D spend for <unk> pharma.
In other words do you manage that business largely for cash or can you.
So a significant amount of resources.
R&D spend just latest thoughts there thanks.
Sure.
On the good questions on the on the Med derm.
We've taken an approach over the last I'd.
I'd say 12 months now is to really focus on what I would refer to as profitable growth, making sure that where we invest in that business, we can find profitable growth.
There were some challenges as everyone knows in terms of the med <unk> in terms of the reimbursement environment and so we've migrated our approach there to make sure that we are focused on profitable growth in terms of looking at the.
Difficult dynamics in the marketplace beyond the profitable growth, we still believe that the opportunity exists for the dermatology Dot com. We do think that that has a place, especially as we think about some of the changes.
In places like the acne market, where we have very efficacious products that we do believe are wanted by the consumers and we're looking at dermatology dot com as a way to make sure that we can make that access available final comment on med Derm is we do have some very good data on a triple therapy.
We call. It <unk> six that we believe has an opportunity to really differentiate itself with what we think is going to be unsurpassed efficacy for the treatment of <unk>. So it is going to be profitable growth dermatology dotcom and we still have some pipeline products that we plan to rollout on the question of R&D.
Spend and what we're thinking about for <unk> pharma.
Business for cash or can we spend in R&D, we absolutely are looking at the spend of the.
The R&D place for our Bausch form a relative to certainly what we've talked about previously we have novel formulations of Rifaximin.
Also going after new indications.
We've talked about it before we think there's an opportunity there for the sickle cell disease as certainly one example, based on what we're seeing in terms of <unk>.
<unk>, reducing circulating activated neutrophils, we do think that's an interesting opportunity one that we will continue to move forward with I also mentioned in past calls some of the things that we are seeing with the reduction in cirrhosis. We look at that is taking us to a space where not only are we able to treat.
Patients that have hepatic encephalopathy, but its potential as we can.
Prevent patients from going into the paddock encephalopathy by treating those patients that have cirrhosis and avoiding the need for hospitalization, if we could prove that out with our clinical.
Clinical trial referred to as Red Sea, we do think that that would be a very important application of our Fox Rifaximin formulations. So theres a number of things we're doing there. The other thing we're tracking very closely is what's happening in the <unk>.
Treatment of inflammatory bowel disease, we clearly know that some of the challenges that some of the products that run into the.
The JAK inhibitors. The TIK two products that we are tracking and therefore, we believe a novel product in the area like our Ams cell Mod could have application. We've started that clinical trial. We have patients enrolled obviously, we got to get to the data point to understand that but if we get some data. There. We think that also could have.
So we do think there is an opportunity to spend money in the R&D side to build that pipeline.
For the <unk> pharma will obviously have to wait to see what the data looks like and I'm sure. Tom App, you and others will continue to move those projects forward.
Operator next question please.
Yes. The next question comes from Omar <unk> with Evercore. Please go ahead.
Thanks for taking my questions.
Maybe three quick ones, if I may 1st.
Super helpful disclosures on salt in the slides today, but I just thought it would be helpful to understand the growth better so perhaps Scott if I look at the prior three or so years of revenue growth for so much how much of that is from the consumable versus machine and I ask in <unk>.
Of.
And in light of the <unk> Gen III device launch in 2018.
Secondly, perhaps Joe on Novo III I realize this will be one of the highest profile launches for the P&L business going forward.
And we're entering the zone, where street will be tweaking the estimates very closely in 2022.
Yes. My question is are you characterizing the commercial opportunity and as a result launch expectations as more of a dry eye drug like restasis or more of an Rx version of an artificial tear because I feel like that could help set expectations appropriately heading into that launch.
And then finally.
Sam perhaps anything to make of the Durham inventory level changes seen in this quarter. Thank you.
Hey, Scott why don't you take that first question on the Sofa I'll take the three questions and then Sanjay.
The final question sure good morning.
For the question I actually think it highlights one of the most significant differentiating characteristics of Solta, which is the fact that the business has approximately 70% to 73% consumable revenues or reusable returnable revenues and so its a great asset for the business. It is a great dynamic in our business model.
<unk> of Solta, we're not looking to just put a piece of equipment on every street corner. What we're really looking to do is make sure that we maximize and operate and extract the opportunity out of every machine that's out there and that means growing the reusable base of our business and so that has been able to do that fantastically well like I said, we have about.
70, 273% consumable ratio in our revenue stream today.
Hi.
On your second question on the Novo <unk> III.
Do think this is a significant commercial opportunity we do believe that based on the phase II data that we have now having two completed phase III clinical trials and we look forward to submitting that information to the FDA very near future. Our view of this is that it has very good efficacy.
<unk>, certainly compared with the commercial opportunity for dry eye disease I want to be clear. We have we are seeking a mid <unk> gland dysfunction associated with dry eye disease. So that is specifically, we're targeting but we look at that time to onset of symptom release at being able to show data within 15 days.
As we believe that that will be very important.
Differentiator versus the marketplace in my comments I made a brief comment, but I will say that we are going to look at preclinical and clinical data to help us differentiate from the existing therapy. So we clearly look at it as a product that compared to a reached stasis or <unk> will have a very significant.
<unk> opportunity now that can be a little bit different patient set fleet segment.
Segment, we get it but nonetheless, we do think that there is a real rx opportunity here for our <unk> III product, Tim do you want to take that less got it and let me touch on the inventories when you look at the <unk> three just the natural fluctuation in the timing of orders overall, when we look at the inventory we've tried to do.
Ron the one month.
Fluctuate a little bit between various scores, but thats really where we target to tell Ron the one months Omar.
Thank you guys.
Okay.
Sure.
Operator next question please.
Thank you. The next question comes from <unk> Prasad with Barclays. Please go ahead.
Hi, good morning, and thanks for the questions. A couple from me Firstly on <unk> can you help us set expectations around the drug in the form of the launch of the commercial launch on the investment that's needed for next year.
And as I think about the spend going into next year kind of whole takes me to the next question.
So <unk> $2 $6 billion for next year I know you said, Joe that you won't be commenting on guidance.
Later on but as we think about the fall in EBITDA.
Can you call out the major league hours towards the radiation in Florida.
The $3 $6 billion cut that content in this forecasting for 2022. Thank you.
Okay I'll take that first one on <unk> and Sam and I add to the combination of the second one in terms of guidance commentary.
First of all in terms of <unk> commercial launch I've made the comment during the.
My comments in the call that we're very excited about it because it will be the first product that treats patients by going into the Super Choroidal space.
We think it's an important way to deliver products to the eye.
Second comment, though in terms of thinking about what does that mean for us.
We're going to be able to launch it in starting in that first quarter of two.
2022, so that is when we think we can be out there with the product.
Probably the commentary on the commercial side, we do believe that we have are in the process of making all the investment needed for it here.
Here in headquarters today, and we have some really ongoing activities with our sales force as I as I sit here today as we get ready for this launch. So we believe we've got the activities that are going to be required to launch it and be successful that activity has already happened as part of our ongoing expense.
Not going to make any specific comments on the <unk>.
Sales expectations, but we believe having a position at the.
The first and only product that can be treated treat patients through the superstore aerospace we think it's an important initiative.
The consequences of not being able to treat this as that patient can lose their vision, we think is important.
Consequence of not treating so we do think theres a real opportunity here.
Another question on the guidance for the 2022 as we've made the comment we're really not going to make any specific comments on 2022, we will talk about solta as we go out with the IPO, We will talk about <unk> as we go out with that IPO.
Prohibited from making anything further on that comment now and then our total pharma will also be in that February 2022 timeframe anything else you can say on this question.
Not at this point, but I think one of the areas where we are.
As Joe mentioned as we start moving forward with the IPO Salto will probably youll hear more from us.
As we launch the IPO.
Okay.
Thank you for the question operator, I have time, maybe for one more question. Please.
Thank you Sir and that question comes from Greg Fraser with Truest. Please go ahead.
Good morning folks thanks for taking the questions.
Can you walk through what you need to address on the debt structure for <unk> pharma ahead of the P&L spin separate from reaching our leverage target such as any necessary refinancings and my second question about unify how big do you think that product to get with the current label and how are you thinking about label expansion opportunities. Thank you.
Thanks, everyone. Jason first of all I think the lymphoma. So Gregg. Thanks for your question. So when you think about our debt and the landscape of our debt.
The things that we've done over the last couple of years did a very nice job in terms of making sure that we manage the maturities. We don't have any maturities until 2025, and when you think about the debt maturity to 2025% Chuck you about $9 7 billion of which.
But Florida is unsecured and about five 5%.
The secured and <unk>.
Term loan.
As we think about where we are today, we don't feel like we need to take any specific action at this point in terms of dealing with anything from a maturity, but as we start thinking about the path to delevering.
As I said do you think about the IPO for Solta is one path, where we will raise money that we'll be able to use to be able to bring down the debt as well as the remaining value of salto.
Which will be either again, monetize and sold or leverage to EBITDA you can bind outweighed the impact of potential proceeds from the IPO of the P&L as well as that that reason be enel and I think that will give you pretty much sufficient proceeds and funds that will be able for us to deal with the majority of what.
What we would see outstanding for 2025 and dealing with that debt level in 2025 that we're how we're thinking.
About it in our approach where at this point.
Our final question you had was on the aluminum side, how do we think about label expansion opportunities. Let me start a little bit in terms of where we start first of all we think that move is a great example of having an integrated platform.
We are seeing doctors the optometrist ophthalmologist both.
For our consumer business, but we're also seeing for the RF business also for the surgical business. We believe the integrated platform. We have allows us to be very successful with the launch of any new product because we're seeing that Dr.
Doctors that treat eye health in many different situations, we think having that was part of the reason we got the number one recommended product by ophthalmologists and optometrists.
Rapid timeframe I think it was within the first 12 months with Plymouth.
Number two.
We clearly see that <unk> will continue to expand the category of the treatment of a bread I simply because of the mechanism of action. We think it's a better mechanism of action. So we think that thats, because we don't constrict the arterial blood flow to the eye, which some of the other products do we have a different mechanism of action, we think of it.
Part of the reason why it continues to be the number one product and it is also growing the category expanding the category because we believe of that mechanism of action rather than just simply.
We're taking share, but we're also expanding the category and I believe that the reason why youre seeing the growth final comment.
In terms of long term opportunity. We also view that there are line extension opportunities for <unk> clearly, we're going to continue to look at trying to bring forth product search.
Health with the redness in the eye, but one can also quickly think about it's more than just readiness of the eye relief. If you also have patients who have allergic eyes. For example, as we can combine.
<unk> unified active ingredients with other products to have combination products. We think there are clear line extension opportunities with new label indications as well so a lot of different ways that we can address lynne.
We're very optimistic about it for the future.
That concludes my comments today first of all I want to tell everyone that we have.
Many plans for a busy inactive next few months, we expect that frequent communication with all of our stakeholders over that time period and I want to thank everyone for joining us today have a great day everyone.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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Yes.
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