Q4 2021 Bausch Health Companies Inc Earnings Call
[music].
Good morning, and welcome to the Bos Health's fourth quarter 2021 earnings conference call.
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Please note. This event is being recorded I would like to turn the conference or to Art Shannon Senior Vice President head of Investor Relations and Communications. Please go ahead.
Thank you Anthony and good morning, everyone and welcome to our fourth quarter and full year 2021 financial results conference call participating on today's call are chairman and Chief Executive Officer, Mr. Joe Papa and Chief Financial Officer, Mr. Sam Elder Suki. In addition, Tom <unk> and Scott Hirsch will be joining Joe and Sam for the Q&A portion of today's call.
In addition to this live webcast a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section before we begin we'd like to remind you that our presentation. Today contains forward looking information we would ask that you take a moment to read the forward looking statement legend at the beginning of our presentation as it contains important information.
This presentation contains non-GAAP financial measures for more information about these measures. Please refer to slide two of the presentation non-GAAP reconciliations can be found in the appendix to the presentation posted on our website finally, the financial guidance. 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 affirm guidance other than through broadly disseminated public disclosure with that it is my pleasure to turn the call over to Joe.
Yes.
Thank you art.
Thank you everyone for joining us today, we have a lot to cover so I'll begin with an update on the Bausch health strategic alternatives process and discuss the 2021 full year highlights Sam <unk>. Our CFO will then review the fourth quarter and full year financial results in detail and discuss our 2020 to Bausch health.
<unk> guidance finally, I'll conclude by reviewing the business results before opening the line for questions.
As you can see on slide five we continue to make great progress in our efforts to unlock value across the company. The most recent milestones, where we raise new debt to refinance certain existing bausch health debt and announced a refinancing of our existing credit facilities each subject to the <unk> IPO to fulfill.
To date, the <unk> IPO and full separation and the publicly filed the registration statement for the proposed Ipos of Bausch and Lomb and Solta medical are planning and preparations to launch the ipos of Bausch alignment soft medical are substantially complete.
And we are prepared to move forward subject to market conditions and other approvals and factors. After the Ipos are complete we plan to distribute the remaining bausch and lomb shares to existing Bausch health shareholders. Following the expiry of customary lockup and achievement of target net leverage ratios and subject to regulatory approval.
Turning to slide six as we have said previously we are targeting net leverage for bausch and lomb of less than two five times and a range of six five to six 7% for the Bausch pharma business at the time of the spin we intend to achieve these target leverage ratios by paying down debt with.
Cash generated from the Amun divestiture that occurred in 2021, the IPO of Bausch <unk> Lomb, a bouchillon debt raise and the IPO of the Solta medical business. We also expect used the remaining value of salt medical to Delever as well as cash generated from operations and <unk>.
Improved working capital efficiency.
I also want to note that beginning with the first quarter of 2022 earnings we will be reporting our financial results in three segments Bausch.
<unk> pharma.
Bausch and Lomb and sold to medical Slide 33 in the appendix shows how the new segment structure lineup against our current segments.
Turning now to slide eight we finished the year with total company organic revenue growth of 6% and reported revenue growth of 5% versus 2020 importantly, strong I guess adjusted cash flows from operations of more than one 6 billion in.
And cash proceeds from the Moon divestiture helped us to exceed our goal of paying down more than $1 billion of debt in 2021 or.
Our leading brand saw a strong performance and recovery in 'twenty one.
Including <unk> with a reported revenue growth of 11% versus 2020, and Trulia, which reported more than $100 million of revenue for the very first time in 2021, the international Rx segment reported organic revenue growth of 7% versus last year and finally, we are delivering.
Near term R&D catalyst with four new product launches in 2021. In addition to the <unk> launch this quarter and the advancement of our late stage clinical trials with statistically significant topline result for both Novo three and our IDP 126, thanks to a great <unk>.
<unk> team effort, we achieved our goals in 2021 and entered 2022 well positioned for continued growth.
The full year and fourth quarter results demonstrate that we are successfully growing market share of key products and capitalizing on key growth drivers and catalysts, while taking steps to unlock shareholder value and create three great companies with that I'll turn it over to Sam to cover the financial results in more detail.
Thank you Joe just a reminder, before I discuss our fourth quarter results. When we talk about the organic revenue growth on a constant currency basis, and adjusted to remove the impact of divestitures and discontinuation.
Now turning to our results on slide nine.
Our fourth quarter results build on our strong performance throughout 2021 and confirmed the continuation of our recovery from Covid, demonstrating the resilience of our businesses.
In the quarter, we posted 3% organic revenue growth for the full year, we posted 6% organic revenue growth with our BNS business up 9%, our Salix business up 9% International are up 7% also up 1% and diversified down 11%.
Now, let me provide more details on each of our segments.
Starting with the BNS segment.
Fourth quarter revenue of $1 billion was up 7% organically.
Of the four businesses with MBA posted organic growth to start.
Starting with the global vision care business fourth quarter revenue of $227 million was up 9% organically.
Led by 21% growth in the U S.
Which was driven by strength in our buy through one day lenses and continued growth in market share of our daily Si Hy lens infuse.
International Vision care was up 3% organically driven.
Driven by our key promoted brands, including <unk> <unk>, one day ultra and soft lines.
We'll continue to see strong performance of our global vision care business with a full year growth of 17% organically as compared to last year.
Moving on to our global surgical business.
Fourth quarter revenue of $198 million was up 10% organically with the U S up 4% and international up 13%.
The growth in our surgical business reflects continued recovery in the number of surgical procedures in all our major markets.
For the full year, the global surgical business grew 2% organically as compared to 2020 with.
With strong growth in the U S Europe and Asia.
Turning to the global consumer business fourth quarter revenue of $399 million was up 9% organically with the U S consumer business up 7%.
<unk> led the growth in the U S with 33% growth in the quarter with.
With this strong performance <unk> exceeded $100 million in annual revenue.
Our eye vitamin brands occupy them preservation in our lens care brands by true and renew multipurpose solutions also gained share in the quarter.
The international consumer business was up 11% organically, mainly driven by gaining market share in <unk>.
Strength in <unk> and in our lens care brands renew and by true multipurpose solution.
For the full year, the global consumer business grew 6% organically versus 2020.
Finally, the global <unk> business fourth quarter revenue of $117 7 million was down 2% organically versus fourth quarter of 2020.
The decline was mainly driven by the low even lower Max and the natural erosion of the generics branded products in the U S business.
Excluding the impact of the Eloise the global Orthotics business was up 4% organically in the fourth quarter.
In the U S. Our promoted brands benefited from expanded patient access.
In the current quarter buys Ulta, so 40% your Rx growth versus Q4 2020.
International <unk> was up 27% organically driven by growth in EMEA and Asia.
Now I'll turn to Salix fourth quarter revenue of $559 million was up 6% from Q4 'twenty four.
Performance was mainly driven by <unk>, which was up 9% driven by higher demand and higher net price.
In the fourth quarter <unk> achieved a milestone by reaching $450 million net sales the highest revenue we reported for the brand.
The factory continues to demonstrate strong growth trends disc.
Despite the long term care, China, not being fully recovered to pre pandemic levels were.
We're seeing a steady recovery in the long term care channel.
<unk> home occupancy rates to remain low we expect the recovery to continue throughout 2022.
<unk> was up 21% driven mainly by volume in part due to our successful efforts to expand managed care coverage for the brand.
<unk> was up 21% mainly from volume, but also from an increase in net price.
For the full year, the Salix business grew 9% as compared to 2020.
Now turning to the international Rx segment.
To remind you that during the quarter third quarter of 2021, we completed the sale of Amun, our Egyptian pharma business.
The International segment was up 7% organically with fourth quarter revenue of $276 million.
The growth was mainly driven by strong performance in Canada, which was up 13% organically in Poland, which was up 16% organically versus Q4 2020.
For the full year, the international Rx segment was up 7% organically.
Moving onto Ortho Derm segment fourth quarter revenue of $146 million was down 7% organically.
The medical Derm business was down 19%, mainly driven by lower net realized pricing.
The global Solta business was up 2% organically with strong performance in the U S and Asia.
For the full year global Solta revenues were up 18% organically.
Finally, our diversified segment fourth quarter revenue of $240 million declined 14% organically, our neuro business was down 9% use of lower volumes on <unk> and AD event, which benefited from a competitor supply issue in the prior year quarter.
Offset by growth in both while different Nf London.
Our generics business was down 30% organically with the biggest factor being the natural erosion of volumes and net pricing as additional competitors enter the market and compete with our generic products.
Finally, <unk> is flat versus the prior year quarter.
Turning to the quarter and full year P&L on slides 10, and 11 I just covered revenues. So let me walk you through key non-GAAP line items.
Starting with the adjusted gross margin, which was up 60 basis points versus Q4 2020.
Mix was a key favorable factors this quarter, which more than offset manufacturing headwinds and enabled us to absorb inflation impacts that we saw in the quarter.
Note that our full year adjusted gross margin of 71, six which is slightly above our full year adjusted gross margin guidance of 71%.
With operating expenses on an adjusted basis SG&A costs were slightly higher by $17 million versus Q4, 2020, as we return to a more normal levels of promotional activity as compared with Q4 2020.
Our full year adjusted SG&A was $2 41 billion, which was favorable to our full year 2021 guidance of $2 $4 5 billion.
R&D was down in the quarter by 2%, mainly as a result of timing of spend for the full year R&D was up 2% to $465 million.
Adjusted EBITDA of $909 million for the quarter was down 1% on a constant currency basis compared with Q4 2020.
Excluding the impact of the Amun divestitures.
Adjusted EBITDA was up 2%.
A solid fourth quarter performance enabled us to posted adjusted EBITDA of $3 42 billion for the full year, which is up 3% on a constant currency basis from 2020, which was at the high end of our final guidance range for 2021.
For modeling purposes, although it may be helpful for you to understand how our 2021 adjusted EBITDA split.
Between our key businesses.
The 2021, adjusted EBITDA is roughly $24 seven four <unk> four 3% for global Solta and the remaining 71% is for our pharma businesses.
Slides 12, and 13 were included to provide additional GAAP information in response to new disclosure requirements.
Now turning to slide 14.
During the quarter, we generated $24 million of cash from operations on a GAAP basis.
As we disclosed during our second quarter earnings we made a payment of $205 million for legacy legal settlements in Q4 2021.
So in the fourth quarter, we made a payment in connection with taxes related to the Moon Divesture.
Adjusting only for the legal settlements legacy legal settlements and separation related costs of $50 million.
The adjusted cash generated from operations in Q4, 2021 was $279 million, bringing.
Bringing the full year adjusted cash flow to $1 $65 to $7 billion.
We're very pleased with our strong cash generation in 2021, which burst above our final 2021 guidance of $1 6 billion.
Turning to slide 15.
We will continue to make progress on our debt paydown.
During 2021, we repaid $1 3 billion of debt.
Now $285 million revolver drawn in Q4.
We subsequently paid in Q1 of 2022 with cash on hand.
Our focus and commitment to reducing our debt combined with our strong performance in 2021 resulted in net leverage of 615 times as of the end of the fourth quarter of 2021.
On slide 16, we will continue to make nice progress with our debt maturities by repaying the outstanding revolver in Q1 2022 with cash on hand as of today, we don't have any debt maturities are mandatory amortization payments until 2025.
Now turning to our guidance on slides 18 and 19.
Our revenue guidance for 2020 is a range of $8 4 billion to $8 6 billion.
And that represents organic growth of 3% 5%.
Considering the $185 million impact of the Amun divestiture in 2021, and the FX pressure based on current rates, which we estimate to be $95 million. The base business performance is an improvement of $405 million.
As we previously communicated the low impact on our business continues to moderate and it is much lower than prior years, we estimate the impact to be approximately $55 million.
Also to help you in your modeling will provide additional details on our organic revenue growth by business.
We expect organic growth for the pharma business to be about 2% to five 3% for <unk> to be about 4%, 5% and 15%, 18% first Volta.
Our adjusted EBITDA guidance for 2022 is a range of $3 45 billion to $3 6 billion.
Considering the impact of the Amun divesture of $65 million and FX pressure, which we estimate to be $30 million, our adjusted EBITDA guidance at just 4% growth at the midpoint of our range.
So with that backdrop, let's go into the details of our full year guidance on slide 19, we expect our.
Our adjusted gross margin to be roughly 72%, which is slightly favorable to our 2021 gross margin.
At a macro level, we are seeing gross margin pressure driven by 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 by taking measure.
Price increases and through supply chain efficiencies.
So product mix has an impact on the overall gross margin.
We expect adjusted SG&A to be in the range of $2 44 billion, which remains relatively flat year over year as a percentage of revenue.
In the last few years, we are taking steps to optimize and manage our baseline cost structure.
Our guidance suggests that we will benefit from the cost optimization that we achieved in 2021 and.
And continuing to leverage our cost structure to support the top line growth.
We are guiding to roughly 500 million and R&D for 2022, which is up $35 million from 2021.
For interest expense, we're guiding to $1 4 billion.
We expect our adjusted tax rate to be roughly 10%.
And we expect full year adjusted cash flows from operations to be in the range of $1 7 billion.
Finally, we provided additional guidance details that will be helpful. For you as you update your models.
In summary, we're very pleased with our 2021 performance, we believe that the strong underlying momentum in the business will continue in 2022.
Our 2022 guidance is based on our expectation of solid organic revenue growth.
And adjusted EBITDA growth improved gross margin optimized cost structure and strong cash flow generation now back to you Joe.
Thank you Sam let me make a few comments on the business results, starting with Bausch <unk> Lomb on slide 21.
A few highlights first the global vision care saw strength, both in the U S and internationally and we believe that the continued rollout of our Si Hy daily lenses will be a tailwind in 2022, as we launched spherical and the multifocal lenses in many new markets, our Si Hy daily lenses continued to accelerate sales and gain share.
Here in the U S. We ended the year with a 140% increase in fish Tech coverage. We now have over 13000 customers. We also grew U S consumption sales by 70% in the second half of 2021 versus the first half of this not only exceeded our plans, but build a strong base for our future launch of the <unk>.
<unk> multifocal and global consumer Tumefy became a $100 million plus brand in 2021 and achieved approximately a 50% market share in the redness reliever category global surgical rebounded from 2020 as markets reopen you saw 25%.
Percent Rep reported revenue growth compared to 2020, driven by Investor day, largely consumables and instrument geographic growth in Europe was driven by strong demand in the UK, France, and Spain I wanted to spend a moment on <unk> on slide number 22.
Illustrated the power of our fully integrated <unk> platform to successfully launch promote and drive the performance of our products in the case of <unk>, we began with a highly differentiated product backed by clinical results. Our team was able to drive education and awareness for the product by collaborating with eyecare professionals while.
Driving awareness among beauty enthusiasts with a strong TV public relations and social media presence.
We are then able to leverage the 400, plus person Bausch and Lomb sales force for detailing and distribution directly to optometrists and ophthalmologists and achieved the distinction of being the number one physician recommended product in the redness reliever category.
These efforts along with a 97% customer satisfaction rate helped to drive patient demand, which we were able to meet through the ongoing partnership with retailers and through E. Commerce channels. We believe these results speak for themselves. After launching in May of 2018, <unk> became a $100 million brand in 2020.
With approximately 50% market share in the redness reliever category <unk> performance is one example of the benefits of a fully integrated eye care platform and we expect to continue to leverage this key bausch and lomb differentiator with future products and innovations.
The chart on slide 23 illustrates the ongoing growth and progress <unk> made over the last few years.
Moving now to slide 24, I'll start by calling out a few highlights for Biopharma Salix reported revenue growth by 9% compared to fiscal year 'twenty driven by Si Factset Trulia and Relistor. We're also driving pipeline advancement for Salix with the initiation of a phase III clinical trial of the Rifaximin.
<unk> formulation and a phase II trial of <unk>.
International Rx revenue grew by 7% versus last year Ortho Dermatologic reported statistically significant topline results from the second pivotal phase III trial of IDP 126, finally in diversified products, where Butrint Anaplasma saw reported revenue growth of 16% versus the prior year.
On a combined basis, driven by net realized pricing on both product and higher <unk> volume and I'm happy to say that.
<unk> also has now crossed the $100 million product level in 2021.
Dentistry, So our reported revenue increased by 38% in 2021 compared to a full year 'twenty as a catalyst for the business. We just launched the or a fifth aligner yesterday, we're very excited about this opportunity on slide 25, Fairfax in fourth quarter revenue of $450 million was the highest quarterly.
Reported revenue on record New Rx market share also grew to 87, 2% in the fourth quarter and while nursing home occupancy levels continued to weigh on say facts into recovery. We believe this represents a potential tailwind for 2022 is nursing home occupancy returns to pre pandemic.
VIX levels <unk> <unk> finished the year strong and generated the highest quarterly revenue on record in the fourth quarter of 2021 trillion to <unk> 2021, total prescription volume grew by 23% versus 2020 and outpaced the market growth of approximately 4%.
I wanted to spend a minute on <unk> on slide 26, since we acquired the product for approximately $180 million in 2019, the Bausch health team successfully <unk> strategies to improve market access and physician targeting while growing geographic footprint, which resulted in more than 120% <unk> growth since.
<unk> as you can see on the slide.
<unk> 26.
We also launched Chileans in Canada earlier. This month, we're proud of the team's coordinated efforts to grow trillium into a $100 million plus brand and believe there is a lot more we can do here.
On slide 27, we show a strong Trs and new Rx share market share gains, we achieved last year for <unk> <unk> and Relistor. We believe these gains are a great leading indicator of the overall strength of our gastroenterology product portfolio.
Turning now to slide 28 International Rx This business have a very diverse portfolio of more than 500 prescription products and the full year and fourth quarter of 2021. This business grew organically by 7% compared to the prior period, we've shown the revenue breakdown by region on the top right enlisted the three products and <unk>.
Each region, along with the evolution index, which shows the growth of these products is outpacing the market growth rate.
Moving on to Solta medical on Slide 29, first we announced the public filing of the Solta Medical registration statement on February eight and we are substantially complete and our preparations and planning for the Solta medical IPO. The Solta business had a very strong 2021 compared to last year ending the year with a 22% reported.
<unk> growth driven by 26% consumable organic growth for the year as we noted in the third quarter call. The comparison with 2020 is D normalize as COVID-19 related shutdown in 2020 shifted our selling days into the second half of 2020 and skews the comparison however.
As a reference point on a more apples to apples basis.
Revenue for the fourth quarter of 2021, with 39% higher than the normalized 2019 fourth quarter and it grew sequentially over the third quarter of 2021 by 20% and.
In the U S growth versus 2020 was impressive with a 46% year over year growth clear brilliant reported revenues grew by 100% versus 2020, primarily due to the successful launch of our clear and brilliant touch in the U S.
On slide 30, we have lifted the key highlights for the company showing in particular, <unk> and Solta medical for Biopharma, we have a differentiated product portfolio. We have a global presence in approximately 70 countries, we have strong cash flow to support Delevering and investment.
We have the advancement of the pipeline opportunities, including novel Rifaximin formulations, we have a global infrastructure that can be leveraged to pursue a robust business development agenda and a fit for purpose operating model supporting top line acceleration in operating margin expansion moving now to Bausch <unk> Lomb, we're going to build on the strong momentum with key free.
<unk> and the continued rollout of our Si Hy daily lenses that new geography, we also anticipate the launch of a <unk> microscope, we plan to build out our premium iOS platform launched the next generation <unk> ecosystem, we continue to rollout by exalted and additional international market, we have the U S launch of <unk>.
<unk>, an NDA filing acceptance for Novo three and finally, a BLA filing acceptance for Lucentis. Biosimilar is also planned for 2022 next Solta medical which has posted an impressive 32% revenue CAGR from 2018 to 2021, we believe.
The market opportunity for <unk> brands is sustainable we will still have substantial room to grow key highlights results of our strong double digit growing aesthetics market cross selling programs to include this full salt of product portfolio.
Geographic expansion, both in Europe , and Latam and also product enhancements and next generation launches Lastly of course, we have organic and inorganic growth opportunities as you can see each of these business segments has a variety of initiatives products and near term catalyst to drive growth.
To wrap up we made great progress in our efforts to unlock value across our company. In addition to completing the preparation of the launching of the Ipos of Bausch <unk> Lomb in Solta, we grew market share for our key products, we paid down debt using strong cash from operations and we advanced our scientific innovations looking ahead our focus.
<unk> significant debt paydown separating three publicly traded companies driving execution of three large distinct and addressable markets and continuing to focus on innovation for the future with that operator, let's 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.
Using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from.
Ken Cacciatore Cowen <unk> Company you May now go ahead.
Good morning, Joe and team I was wondering if we could try to tighten down the timing it looks like the order you've established on slide six can you give us a sense of timing and is there anything in the current markets I know, we're subject to market condition, but I would assume we're not seeing anything currently that would kind of skew the timing so that would be great to review and then I'll.
So one of the questions that we're constantly getting is how do we close the real or perceived operational and of real valuation discount to your peers can you talk about from the <unk> loan business. When you get Standalone, Joe any first priorities as steady as we go really what we need to accomplish.
Wish here or any kind of low hanging fruits in terms of priorities that you want to address when you get standalone. Thanks, so much.
Okay, great great questions, Ken I'll try to make sure I get them all fight we've anyhow. Please remind me on the question of our overall timing of the Ipos.
I think we tried to lay out the specifics here, we are substantially complete and all the information that needs to get accomplished.
To be clear, we will continue to update our financials with the SEC.
We now completed the fourth quarter, we will submit those fourth quarter reports to the SEC on a timely basis, but we will be ready pending market conditions to go with that.
<unk> financials sometime let's call. It mid March we will be ready for mid to end of March to go forward with the Ipos.
Both for the the filter and for the Bausch and Lomb Ipos, we are substantially complete on both of those obviously, we will make sure we manage that.
Prudent way to maximize shareholder value as we think about the overall market conditions that we face for for these two IPO, but we're excited we think we've done all the work that needs to get done in terms of looking at the opportunity. Obviously, we've got to make sure that the markets are correct.
We want to do this with urgency to be clear, but we will also want to make sure we maximize the value for our shareholders on the question of the <unk> and some of the valuation discount to peers. Our expectation is that as these companies are separated to three.
Independent pure play <unk> company, a solta medical aesthetics company and the Biopharma Global company, we believe that the market will have a better way to evaluate the total of these companies.
Well as the amount of debt Paydown that we will realize through the IPO and through the P&L that we put on the enel by reducing that overall quantum of debt. We think that will help in terms of evaluation. The second thing is as we certainly execute on these ipos. We believe that that also will help the market look at.
The pure play Bausch and Lomb for example versus the peer company. So I think all of those things are going to help the marketplace as they assess the overall valuation of the <unk> pure play <unk> company to Solta medical aesthetics company as it compares.
With the likes of the other medical aesthetics company and overall the pharma business on the question of I think the last one was the priorities for P&L. Once were Standalone, obviously will continue to focus on the execution of the business we.
We think thats an important part of it we talked about some of these new products. The Si Hy daily lens as an example, and the launch of that product across the globe as well as launching the multifocal product for all of those things are going to be the absolute focus on how we will move forward, we do believe though that as <unk>.
<unk> goes out as a pure play health company.
With an improved balance.
Balance sheet, it will give us more flexibility to look at additional inorganic growth as well as the year organic growth that I mentioned, so I think those types of things that we'll look at from a priority point of view as we have a little bit more flexibility with the overall <unk> balance sheet as we think about the future. So clearly look at.
<unk> is a balance of both growth organically and look at potential bolt on opportunities for inorganic.
I think I got them all.
Okay. Let me go to next question. Please.
Our next question comes from Chris Schott with Jpmorgan.
May now go ahead.
Great. Thanks, so much for the questions just two for me I guess first can you talk a little bit more about solta dynamics in the quarter. You. Obviously are still seeing healthy kind of two year growth, but it looked like growth slowed a bit as we went through 2021, if we kind of look at that kind of two year CAGR against the 2019, maybe more normalized numbers. So just elaborate.
A bit more what's happening there and maybe just help bridge out to that 15% to 18% growth in 2022 in light of that trend.
And then my second question is just on maybe another timing question I guess, if for whatever reason the solta or <unk> Ipos don't allow you to raise as much capital as youre expecting how does that affect the broader separation plans I guess does that just.
If we're in a situation like that we will have to wait for the company to organically Delever a bit before you can fully spinoff P&L or is there any maybe short term flexibility on some of those leverage targets that you laid out thanks so much.
Okay. Thank you for the questions Chris Scott on the line I'm going to ask Scott to address that filter dynamics in the quarter. We obviously were very pleased with the overall growth for the full year.
Notwithstanding some of the dynamics, but Scott do you want to talk about both and then I'll take the the comment about the IPO.
Sure.
Sure. Thanks, Joe and good morning, Craig So first off at that.
To reiterate some of the metrics 2021 'twenty, 2% reported 18% organic growth with consumables really comprising a big piece of it is 26% of the growth year over year, and clear and brilliant product, which was launched in the U S. In 2021, selling 100% growth year over year for many of our performance goals are hitting right where we're at.
Despite some of the global or Mclaren shutdowns in the carve out structuring demands, which as Joe mentioned manifested into the S. One filing earlier. This month. So overall I'm incredibly pleased with how our target execution is with so much going on.
With respect to the comps that are over 2020 as Joe.
Outlined in his remarks right.
As many of our 2020 numbers were impacted with Covid shutdowns in the first half pushing our selling days substantially into the second half of 2020 that makes for an apples to oranges comparison for this cycle, which is why we pointed to the annual metrics to smooth that out and they are really strong.
For our growth guide right, there's a few underlying factors first.
Obviously as demand and demand has been incredibly strong in fact in fourth quarter, our syndicate consensus had it.
About 10% below where we finished off and so we really came in nicely relative to expectations.
We offer finish with probably another I would say, a little short of $10 million or $9 million of incremental back orders and demand.
That's really out there and it leads to my second point, which is as I said before we are a premium business line and if we can.
Put a machine in every storefront that werent born in an aggressive form their storefront start competing down price against each other which is just something we don't launch. So it has been in this business for 20 years, and we're building a long term platform in aesthetics.
Great clinical results in really strong economics for practitioners.
I'm really proud of the global footprint that we're building out the tax structure, which means that we have a really long term focus of we're replacing placing equipment and then really driving consumables at the ratio, which is now approaching 73% of revenues, which I think is a true differentiator of the business and that's where a lot of that strength is coming from <unk>.
Lastly, I would say that the dynamic as Sam mentioned between price and supply I think that we're under now that the supply chain for electric component treated in high demand and we're making sure that we have a balancing act with price as well as ensuring that we're meeting all the debate.
Our customers and so that not all of it is a really strong economic play on what we're targeting with metrics right in the high teens to 20% levels and I think we're on track for it.
Thank you Scott, Chris I'll take the second part of that question.
Tim if you want to add anything please do but I think I want to start with once again, we are substantially complete in our preparations for the IPO of both Solta and Bausch and Lomb, which we obviously think is the first very important step.
Being complete and obviously, we have a high degree of confidence in the value opportunities for those each of those both the IPO and the Bausch and Lomb IPO, having said that number two we clearly want to make sure we move expeditiously, but we're looking to maximize the shareholder value creation opportunity in each of those.
<unk> businesses, so we're not going to be reckless and the timing, we want to move expeditiously, but not be reckless and that timing. So we're going to look to monitor markets and work with our advisors to make the right decisions. There third point I want to make because I think it's an important comment is that each quarter that we stayed together.
We will increase the amount of cash we generate and that cash will go substantially to pay down debt, which obviously moves us forward in the process of deleveraging. The company. So all those things will be part of the considerations as we think about it but as we've stated publicly our view for <unk>.
<unk> is that we will IPO something less than 20%, we believe thats. The most efficient way to do <unk> is be very tax efficient for us, but we can obviously look at less than 20% as well depending on market conditions. So I think we're going to be flexible thinking through this our overall northstar.
Our goal is to maximize shareholder value creation and that's the way we're going to look at this obviously, we want to move as quickly as we can as well Tim anything you want to add to what I said okay.
I would just add that and Chris if you look at how we ended 2021.
The fundamentals of the business are very strong and we're carrying that momentum with us into 2022 and that's really.
Okay.
Zorba and excitement that as we move forward in 2022 between our performance in 'twenty, one and the guidance that we just provided 2022, we believe that we'll be able to generate a strong business.
As well as cash that will help us also to Delever as we go forward.
Operator next question please.
Next question will come from David <unk> with Piper Sandler you May now go ahead.
Thanks, So I have a few questions on the pharma business. So first.
I appreciate the pipeline update here, but.
We're all aware of the eventual low.
On <unk>, so I guess with that in mind, how do you think about this dev and M&A. Obviously, the business is going to be highly levered, but what do you think you can do there and what kind of sense of urgency do you have in terms of bringing in assets for the pharma business. So that's number one.
Number two on ortho term.
Obviously in the past you had some high hopes for for assets here. It's a smaller portion of the mix can you just talk generally Joe about the fit of ortho derm within the broader pharma business is that something are those assets you would look to divest given the.
The headwinds.
And just just talk generally about.
Again, where where it fits in the future of that segment within the broader pharma business. Thanks.
Sure I'll start, but Tom you might want to also add on Ipos with us.
Assets from <unk>.
Comment.
First of all on the business development I can tell you that Tom <unk> and Tom <unk> <unk> CFO I've been very very active in thinking through business development opportunities for the future in terms of some of the things they have been looking at and thinking about obviously, we're going to have to balance that with the ability.
<unk> to pay down debt, but there clearly is.
The sense of urgency in thinking through that as we think about the the loss of exclusivity of the satisfaction in 2028, so that's something that they're thinking their way through.
Clearly, though I think one of the slides we included in the presentation was truly.
A product that we acquired for approximately $180 million and you can see it's already generating over $100 million.
Of revenue things like those types of bolt on opportunities, we think are going to be the perfect type of.
Programs.
Im going to probably ask Tom to speak specifically before we go to ortho derm, but a little bit maybe about some of the things. He has been able to do in the international pharma business and some of the products that he has been able to acquire helped build that segment of the business as well. So maybe you could talk a little bit about the international pharma business in the past success, you've had in predictor of the future.
Okay, Alright, Joe Thank you.
So when we look at when I look at the R&D pipeline clearly, we will have to accelerate the R&D pipeline and as Joe pointed out.
Clearly there'll be a balance between.
Paying debt versus the assets that we can bring into the organization.
When I look at it clearly we have a wonderful footprint in Gi and with our Salix business and we've already started screening.
The opportunities that we could take a look at their in adjacent categories as well to be able to leverage our footprint there and our scale when we take a look at.
The business internationally, we have whereas as we said in the presentation.
Over 70 countries, we have scale in Eastern Europe , Latin America, Canada.
And over the last few years, we've been able to do.
Any deals that we will call I would call tuck in.
<unk> that are that bring us revenue and EBITDA.
At reasonable rates and reasonable prices given the fact that with the scale that we have and be able to leverage that we already have many deals that are that are sitting there that we can.
Continue to execute on and that's why I see an opportunity to leverage the international business.
With the scale that we have and the ability.
To grow it with no low.
So it's going to be a balanced.
First between the U S business and the international business, and then paying down debt will have to be extremely focused.
What we bring in and making sure.
That we do exquisite due diligence on any deals that come in to make sure that we have success.
A little modestly he's got 45 products that is planning for a 50 different markets in the next five years that he is expecting to launch and I think that's going to be a really important part of what he's done historically of what it can do for the future as well so you'll see that on page 35 of our of our presentation and then the other question was on the <unk>.
Durham business does it fit within the pharma business I think the answer is still yes.
We will continue to look at all opportunities, though in terms of looking at our portfolio, but as we sit here today, we've got a new product IDP 126 that we have now completed two phase III clinical trials that have met their primary endpoints, we do expect to submit that NDA in the second half.
Of 2022, so we're excited about what that means in terms of the opportunity. In addition to what we've previously said.
And I can't leave this without also covenant David as you know that the plans we have for the Rifaximin novel formulations and the MSL market as we mentioned in the call also are a big part of that organic story that there.
We're putting together.
Thank you for the question.
Operator next question please.
Our next question comes from Gary Nachman with BMO capital markets. You May now go ahead.
Hi, good morning.
When you say actively monitoring market conditions for <unk> and Salt Ips do you.
You see the conditions or receptivity to those ipos being very different is it more likely one will happen before the other and if market conditions are not good how long can this potentially be on hold beyond the March timeframe that you just outlined.
And then with all the moving pieces and changing dynamics on capital generation for the spins why are you confident you can still get to the leverage target at <unk>.
Laid out a bunch of months ago are you starting to think any differently about those targets at all so if you could just walk through your confidence there that would be great as well. Thank you.
Yes.
Alright ill start with.
A lot of good questions. There in terms of looking at the market conditions for both IPO. Once again I want to start with we have substantially completed the preparations for both the <unk> IPO and the Solta IPO at this time, which I think thats important we obviously will need to update our financials, which we will do but essentially the mid <unk>.
And in March timing is what we're currently contemplating.
Obviously the market conditions Kian.
Change and we're going to work with our advisers on that particular question as to when to go forward.
What I will say is that we're balancing two things number one the desire to move expeditiously in terms of moving forward with these ipos to unlock what we believe is significant shareholder value.
We would like to move expeditiously, having said that though the bigger commentary that goes along with that is to maximize the shareholder value creation opportunity. So we're going to balance those two things as we think about how we go forward with these ipos I think part of the question Youre asking is there a different mark.
Potential for each these ipos, yet theyre different ipos they have one as a pure play.
Bausch and Lomb eye health business. The other one is a sofa medical aesthetics business.
Differences in valuation in terms of overall valuations determined relative size one of them is a ballpark 4 billion dollar business in terms of revenue. The other is a 350 plus million revenue business, so depending on which one we're talking about there's going to be a different market for each of those.
Both of them, we think are exciting opportunities and once again being a pure play eye health business or a pure play medical aesthetics, we think there's great opportunities for both of them.
How long will we wait in terms of the March timeline, I think once again I'm going to just simply stick with the point that we want to move expeditiously, but we're also looking to maximize our shareholder value creation across the entire Bausch health company.
Our confidence in getting to the leverage targets, where they change them. The answer to that is simply we are highly confident we will get to these leverage targets. We are not going to change that we are looking at these leverage targets being bausch and lomb at less than two five times leverage and about pharma at that six 5% to six seven times.
Is the leverage target that we've spoken about in the past and we will stay with those leverage targets as we look at them right. Now obviously the important thing that would change to that is when we actually do the full separation is the only question.
That's been dependent upon of course of our performance and our ability to raise the capital.
The ipos of the Bausch <unk> Lomb business, the Solta business and the amount of incremental debt that we'll put towards the <unk>.
<unk> two five times leverage.
I think I got all your questions Gary. Thank you very much for the question, yes. Thank you I appreciate it.
Jason.
Our next question comes from Jason <unk> with Bank of America, You May now go ahead.
Hey, guys. Thanks for taking my questions.
I wanted to ask about the <unk> patent litigation situation and basically what can you offer.
I'll, let Jeremy.
To try to drive the settlement as we look at the situation trying to off her early market entry versus the January 2028 entry data the other generic settlements.
Just pull forward the other generics I would assume.
Also looking at a settlement to launch alongside the other generics public back hugely valuable to Albert yet. So just sort of curious what you can offer incrementally and keep driving settlement. We asked to go to court just curious when we could get a decision by the end of the year and worse case, if that goes against you how does that impact the ability to spin off the P&L, because I know that at <unk>.
Aqua to cover something like six months after the IPO. So just curious given the FX and sort of really important to absorbing a lot of the debt for remain co. Thanks.
Sure very good question, maybe I'll just review a couple of the facts and get to your specific question.
There is in fact, a a planned trial.
Norwich on the fact that intellectual property and that's planned for March 'twenty one first.
Backup now in terms of how we view this number one we believe we have very strong intellectual property for the satisfaction product. We have 26 patents were obviously believe very strong intellectual property number two.
As you appropriately pointed out we have previously this is this question three times before we settled with Teva are very.
Leading generic company for 2028.
Number two we settled for Sandoz, a leading generic company for 2028 and number three Sun Pharmaceuticals, leading generic company. We settled for 2028 I think there is a theme. There. These are three very strong very good generic companies they've reviewed our intellectual property that we have.
The conversations and we settled with them for.
2028, I think.
My view have been around the business for over 30 years, Teva Sandoz and <unk> are very capable very competent companies they've looked at intellectual property and they've made the decision to settle for 2028. So we feel very good about our capabilities here in terms of our ability whether to settle or to go to trial, we feel very strong.
About our position.
And I think it's certainly indicated by not just my point of view, but the point of view of what Teva Sandoz and Sun previously decided.
As to the question of how this could impact to be announced spin off once again, we feel very confident in our abilities to prevail in this trial. The other thing, though that has happened since we prevailed.
Since we settled let me say that one of the thing has happened since we settled with Teva, we settled with Sandoz and we settled with Sun for 2028, we've also seen the FDA make a decision to add too.
Two the Rifaximin.
Guidelines product specific guideline and they've added an additional requirement. So we think that even strengthens our position for 2028, when the FDA put forth in.
In vivo bio equivalency study requirements, so feel very good about our situation obviously.
It's up to.
Whether we settle or whether we go forward with the trial I am not going to comment specifically on that but we like our intellectual property position and as evidenced by decisions. That's Teva made decision that <unk> made in decision. This unmated.
Okay. If I could just quickly follow up can you just confirm in a worst case scenario. If we lose on the patent litigation there is nothing in the debt covenants as it pertains to the RP basket that would preclude spinoff.
The only thing I'll say on that is that.
Relative to the full spin off we want to make sure we hit the debt leverage ratios that I talked about previously the six 5% to six seven times for the Bausch farmers. So, we'll obviously consider that but otherwise we have the ability to go forward with them and you want to add to that question no you covered it.
Well, Joe and Jason just.
On the covenants the way I would look at it is we are in full compliance with the covenants were watching the covenants as we go forward with our strategic alternatives on we're going to continue to be in compliance with them.
Great. Thanks, guys.
Thank you.
Operator next question.
Our next question comes from Greg Fraser with Trish Securities You May now go ahead.
Good morning folks thanks for taking the questions.
I was wondering if you could provide some color on the growth assumptions for the.
Stainless business specific things that SaaS and that's contemplated in the revenue guidance and then on cash flow how much do you anticipate paying in 2022 related to the settlement of legacy litigation I'm, just trying to get a sense for how much free cash, but you'll have available to deploy towards debt reduction.
Alright, I'll take the growth assumptions for Salix, and <unk> business and specifically satisfaction.
Obviously, we're very pleased with the overall growth that satisfaction showed specifically the record revenue that we saw in the fourth quarter.
Our view of the growth for Salix business will be a balance it will be a balance of the <unk> growth that we've seen with satisfaction.
And then also.
The ability for <unk> to.
Achieved certain pricing I haven't talked about it but we did take pricing.
On our prescription products in some of our consumer and vision products are early in January of this year. So we do have that pricing that is part of the overall growth assumptions for Salix. So.
But also for the rest of our business I, probably shouldn't say, so it's going to be a balance is going to be a balance of <unk> growth as well as what we expect to have as a realized pricing I remind you that when we take a price increase for Fairfax and specifically if.
If we take somewhere in the 7% range, we expect that we'll realize approximately 50% of that in terms of a net pricing. It can vary from product to product year to year.
A ballpark way to think about it is about half of the price we take will be a net price adjustment.
On the second point Sam.
And Greg on.
On the cash flow, let me just remind you that we have roughly about one 5 billion of cash if any at all.
Our balance sheet as restricted cash and that's G dedicated towards the litigations and legal settlement. We expect that just started going out we are racing.
This person out of the balance and we will continue to see that in 2022, the timing exactly when it's going to happen in 2022 is not really be cleaner because it's in the hands of the judge on multiple administrative processes from an overall cash flow I'm, just going to take opportunities just to comment on the overall cash flow because you touch on the <unk>.
<unk> 7 billion that we are guiding to.
The way you think about it.
Running on the strength that we built in 2021 from a cash conversion, we roughly converted about 47% of our EBITDA.
Adjusted cash and that should be up about 5% from where we were in 2019, which was running in the low.
So we're continuing to run with that high level of cash conversion, which is really very strong things that we're very pleased with.
Thank you Tim operator, we have time, maybe for one last question. Please.
Our last question will come from <unk> Prasad with Barclays. You May now go ahead.
Hi, good morning, and thanks for squeezing me in so I'll just start.
One question.
The guidance that you've provided in Boston for a 5% growth can you contextualize this with broader.
Broad industry trends that you're seeing and also the upside and downside risks to this guidance.
You can also maybe compare does number with the guidance provided by one off of spares Alcon with 77%, 9% growth and what Youll see in the key differences between these two that'll be great. Thank you.
So I'll start with Sam you may want to add as well number one.
As we think about the opportunity.
We're excited about what we see in terms of the overall, the bausch and lomb opportunity the upside for us is going to be we're seeing some very significant.
Growth in the <unk> on the consumer side of the business for example in consumer health area, we're seeing market growing somewhere in that 7% range. So thats a real positive indicator for us number two.
We are seeing some pricing.
Our overall P&L business pricing opportunities in both the vision business as well as what we are seeing a consumer side and of course, we've also seen some on the pharmaceutical prescription side of our business. We think that those are things that we're continuing to monitor and we're looking at selective pricing in each of those categories.
And our help on the overall would be probably on the upside depending on what happens to the overall portfolio. So seeing clear growth in the consumer side of the business seeing clear growth and the vision business, especially for us the opportunity as we are launching our Si Hy daily product.
We think thats, a very important driver of the 2022 opportunity as we launch both the spherical and the multifocal product. So I think all of those would be some of the critical parts of the P&L guidance as we're thinking about the overall overall question.
The only other thing that.
Is there anything else you want to add to this but covenant question there.
Pretty well Joe.
In terms of the guidance I'll look at that we're striking a balance between the positive business performance that we've seen in 2021 and how is that momentum is going in carrying us into 2022. So we're very excited about that.
We're also bouncing of with positive trends that we're seeing in the overall market.
In surgical and as well as in the.
Vision care and consumer business and we're excited about the new launches that we're going to be seeing in 2022 for ophthalmology and go into 2023. So we're balancing all of those factors with I'll call. It the macroeconomics and the.
Different situation emerged and making sure that it is factoring in the positives and negatives as we went through our guidance.
The only thing I'll add to that I think the last part of your question was the outcome Cooper comparisons and what Theyre seeing I can't obviously speak for them, but when I talk about our growth. It comes down to it I think a couple of things number one the new product that I talked about.
The infused with the ultra one day product clearly and the launch of that becomes about <unk>, new product launch opportunity and the additional new products that we expect to launch during the year.
Our surgical business.
I know that outcome and Cooper when they talk about their growth. They are also talking about some of the the bolt on acquisitions. They do we're talking about our growth simply as an only as the true organic growth not including any M&A or business development. So I think thats, maybe a slight differential.
Versus what they talk about they talked about their their growth inclusive of the any business development M&A activity. So maybe thats, probably the only difference that I am aware of right now as I sit here today.
Obviously as we go out as an independent BNS business, we do think theres going to be opportunities for additional bolt on opportunities for us, but at this point, we do not build it into our current 2022 guidance.
Operator, thank you very much everyone. Thank you very much for joining us I think thats going to conclude our compensations for today, but I appreciate everyone's interest in the business. We're excited about what's in front of US we have a simultaneous opportunity to continue to increase our EBITDA also to launch new products and then clearly make progress on our strategic alternatives. Thank you to all for <unk>.
Joining us today have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.