Q2 2023 Bausch Health Companies Inc Earnings Call

August 3, 2023

[Company Representative] (Bausch Health): To differ materially from our expectations. We use non-GAAP financial measures to help investors understand our ongoing business performance. Non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should be considered along with, but not as an alternative to, measures calculated in accordance with GAAP. You will find reconciliations to our non-GAAP measures in the appendix of the slides that accompany this presentation, which are available on Bausch Health's Investor Relations website. Finally, the financial guidance in this presentation is effective as of today only. We do not undertake any obligation to update guidance. Our discussion today will focus on Bausch Health, excluding Bausch + Lomb. However, we will briefly comment on Bausch + Lomb's results announced yesterday. We will refer to year-over-year comparisons with the same period last year, unless otherwise noted.

John O'Connor: To differ materially from our expectations. We use non-GAAP financial measures to help investors understand our ongoing business performance. Non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should be considered along with, but not as an alternative to, measures calculated in accordance with GAAP. You will find reconciliations to our non-GAAP measures in the appendix of the slides that accompany this presentation, which are available on Bausch Health's Investor Relations website. Finally, the financial guidance in this presentation is effective as of today only. We do not undertake any obligation to update guidance. Our discussion today will focus on Bausch Health, excluding Bausch + Lomb. However, we will briefly comment on Bausch + Lomb's results announced yesterday. We will refer to year-over-year comparisons with the same period last year, unless otherwise noted.

Irritation.

We use non-GAAP financial measures to help investors understand our ongoing business performance non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should be considered along with but not as an alternative to measures calculated in accordance with GAAP.

You will find reconciliations to our non-GAAP measures in the appendix of the slides that accompany this presentation, which are available on Bausch health Investor Relations website.

Finally, the financial guidance in this presentation is effective as of today only we do not undertake any obligation to update guidance.

Our discussion today will focus on Bausch health, excluding Boston loan. However, we will briefly comment on <unk> results announced yesterday.

We will refer to year over year comparisons with the same period last year unless otherwise noted.

[Company Representative] (Bausch Health): For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on 3 August 2023. With that, it is my pleasure to turn the call over to our CEO, Thomas Appio. Tom?

John O'Connor: For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on 3 August 2023. With that, it is my pleasure to turn the call over to our CEO, Thomas Appio. Tom?

So the benefit of those who may be listening to the replay or archived webcast. This call was held and recorded on August <unk> 2023.

With that it is my pleasure to turn the call over to our CEO Thomas <unk> Tom.

Thomas Appio: Thank you, John, and welcome to those of you joining the call this morning. At Bausch Health, our team is focused on enriching lives through our relentless drive to create better health outcomes for our patients and physicians. The BHC team is tirelessly dedicated to business performance, delivering results, and progressing key strategic objectives. This dedication was on full display this quarter with a number of highlights that I will touch upon. Turning to slide 6. We had a strong quarter with revenues for Bausch Health, excluding B+L, $1.13 billion, up $106 million, or 10% reported and 11% on an organic basis. We received a favorable motion ruling in the XIFAXAN litigation, which reinforces our continued investments in the Salix growth strategy. We executed an additional proactive balance sheet initiative that further enhances our liquidity profile.

Thank you John and welcome to those of you joining the call. This morning.

Bausch health our team is focused on enriching lives through our relentless drive to create better health outcomes for our patients and physicians.

The <unk> team is tirelessly dedicated to business performance delivering results and progressing key strategic objectives. This dedication was on full display this quarter with a number of highlights that I will touch upon turning to slide six.

We had a strong quarter.

With revenues for both Bausch health, excluding <unk>, one $1 3 billion up $106 million or 10% reported and 11% on an organic basis.

We received a favorable motion ruling and as I faxed in litigation, which reinforces our continued investments in the Salix growth strategy we.

We executed an additional proactive balance sheet initiatives that further enhances our liquidity profile, we continue to take thoughtful steps as we evaluate the optimal implementation of a potential bausch and lomb distribution.

Thomas Appio: We continue to take thoughtful steps as we evaluate the optimal implementation of a potential Bausch + Lomb distribution. We continued to progress our R&D pipeline. Let me start by sharing some of our business performance highlights as shown on slide seven. This quarter, three out of four non-B+L business segments, Salix, International, and Solta Medical, posted double-digit revenue growth, both on a reported and organic basis. The diversified segments saw a modest decline, an improvement from the last few quarters where we have seen double-digit declines. While neurology and generics remain challenging, we are hopeful that the actions the team has taken will help temper the pressure on these businesses. Let's take each segment in turn. Salix. Q2 net sales for this segment were $557 million, growing 11% in the quarter.

And we continued to progress our R&D pipeline.

Let me start by sharing some of our business performance highlights as shown on slide seven.

This quarter three out of four non b.

P&L business segment, Salix International and Solta medical posted double digit revenue growth.

Both on a reported and organic basis. The diversified segment saw a modest decline and improvement from the last few quarters, where we have seen double digit declines while neurology and generics remain challenging we are hopeful that the actions. The team has taken will help temper the pressure on these bids.

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Let's take each segment in turn.

Salix Q2 net sales for this segment were $557 million growing 11% in the quarter.

Thomas Appio: I am pleased to report that the investments we have made in this segment are beginning to pay off. Building on the plan we laid out since I became CEO, we are continuing to increase our commercial investments to higher than historical levels in sales and marketing to drive profitable revenue growth in this segment. I am pleased to share that we have made significant progress in our AI customer engagement initiative. We launched the new AI engine to our XIFAXAN primary care field force team. The AI engine will help our team to understand how to best address patient needs by engaging with the right physicians at the right time. This initiative is a key part of our strategy to improve customer engagement and drive growth.

I am pleased to report that the investments we have made in this segment are beginning to pay off building on the plan. We laid out since I became CEO , we are continuing to increase our commercial investments to higher than historical levels in sales and marketing to drive.

Profitable revenue growth in this segment.

I am pleased to share that we have made significant progress in our AI customer engagement initiative, we launched the new AI engine towards <unk> and primary care field force team.

AI engine will help our team to understand how to best address patient needs by engaging with the right positions at the right time.

This initiative is a key part of our strategy to improve customer engagement and drive growth.

Thomas Appio: We believe that AI has the potential to revolutionize the way we interact with our customers, and we are excited to be at the forefront of this transformation. As part of our continued commitment to improve HE and IBS-D patient care, we expanded XIFAXAN medical field team. The team is now fully trained and working to educate physicians and improve care for thousands of patients. The expanded MSL team leverages insights from advanced analytic models to understand the largest patient care gaps and engage with physicians to reinforce established treatment guidelines. Finally, we have increased our investment in education efforts targeted to undiagnosed, untreated consumers for both of our approved indications, IBS-D and HE. These activation campaigns are currently being deployed across a wide range of media channels, such as connected and addressable TV, as well as many different digital and social media platforms.

We believe that AI has the potential to revolutionize the way, we interact with our customers and we are excited to be at the forefront of this transformation.

As part of our continued commitment to improve <unk>.

In Ibs D patient care, we expanded <unk> medical field team. The team is now fully trained and working to educate physicians and improve care for thousands of patients the.

The expanded MSL team Leverages insights from advanced analytic models to understand the largest patient care gaps and engage with physicians to force established treatment guidelines.

Finally, we have increased our investment in education efforts targeted to undiagnosed untreated consumers for both of our approved indications Ibs D and AG.

These activation campaigns are currently being deployed across a wide range of media channels, such as connected and addressable TV as well as many different digital and social media platforms.

Thomas Appio: We believe XIFAXAN and other products in our GI portfolio are effective options for healthcare providers that have not yet met their full potential to provide patients with the healthcare they need. Turning to international, revenues grew by 11% in Q2 2023, both on a reported, and organic basis, led by strong performances in EMEA and Canada. While the quarter's growth did benefit from a favorable comparison to the prior year, we are still pleased with our growth in the international business, which was impacted in the quarter by a voluntary recall of our Emerade epinephrine auto-injector, which Tom V. will cover in more detail. While voluntary in nature, our decision to act on the recall was, in our view, the prudent and responsible decision to take. Solta Medical.

We believe <unk> and other products in our GI portfolio, our effective options for health care providers that have not yet met their full potential to provide patients with the health care they need.

Turning to international revenues grew by 11% in the second quarter of 2023, both on a reported and organic basis led by strong performances in EMEA and Canada, while the quarters growth did benefit from a favorable comparison to the prior year. We are still pleased with our growth in the international business.

<unk>, which was impacted in the corner by a voluntary recall of our emirate epinephrine auto injector, which Tom will cover in more detail.

While voluntary in nature our decision.

Two action the recall was in our view the prudent and responsible decision to take.

Solta medical revenues increased by 54% on a reported and 60% on an organic basis.

Thomas Appio: Revenues increased by 54% on a reported and 60% on an organic basis, reflecting strong growth in Asia Pacific region, which included the unfavorable impact related to limited activity in China in Q2 of last year due to COVID lockdowns, while performance in other Asia Pacific markets was also very strong. This quarter, I had the pleasure to visit with our US, China, and Hong Kong Solta teams and listen to what they are doing and working to continue to build our aesthetics franchise. The teams are highly motivated and dedicated to deliver results and launch new products as we continue to build a world-class global aesthetics business. More than 70% of Solta revenues are generated from consumable sales, which represent an attractive and very durable business profile where we see significant opportunity for long-term growth.

<unk> strong growth in Asia Pacific region, which included the unfavorable impact related to limited activity in China in Q2 of last year due to Covid Lockdowns, while performance in other Asia Pacific markets was also very strong.

This quarter I had the pleasure to visit with our U S, China, and Hong Kong Solta teams and listen to what they are doing on working to continue to build our aesthetics franchise.

The teams are highly motivated and dedicated to deliver results and launch new products as we continue to build a world class global aesthetics business.

More than 70% of Solta revenues are generated from consumable sales represent an attractive and very durable business profile, where we see significant opportunity for long term growth. We are actively working to accelerate growth in our largest markets by expanding our sales teams in the U S.

Thomas Appio: We are actively working to accelerate growth in our largest markets by expanding our sales teams in the US and Europe and advance our pipeline of new market authorizations and new generation products. Turning to Diversified. Revenues decreased by 3% on a reported and organic basis in the quarter. Dermatology and Dentistry had growth in Q2, which helped moderate the decline in Neurology and the Generics businesses. As noted last quarter, our intention is to increase our marketing and advertising investments for Aplenzin in our Neurology business and to expand our consumer awareness campaign for JUBLIA in our Dermatology business. For Q2, Dentistry revenues grew by 4% year over year, driven by ARESTIN. We have restructured our sales force in this business and expanded our consumer awareness efforts for ARESTIN to drive growth.

And Europe and advance our pipeline of new product, new market authorizations, and new generation products.

So turning to diversify revenues decreased by 3% on a reported and organic basis in the quarter dermatology and dentistry had growth in Q2, which helped moderate the decline in neurology and the generics businesses.

As noted last quarter, our intention is to increase our marketing and advertising investments for our plans and in our neurology business and to expand our consumer awareness campaign for Julia in our dermatology business for the second quarter Dentistry revenues grew by 4% year over year driven by arresting.

Have restructured our sales force in this business and expanded our consumer awareness efforts for arrest and to drive growth.

Thomas Appio: I am pleased with our overall business performance in Q2. We are increasing our revenue guidance for Bausch Health, excluding B+L for this year, and as always, remain committed to delivering long-term value for stakeholders. In addition to the strong business performance, we had a number of other positive developments in the quarter. Turning to Slide 8. We shared in May 2023 the positive news that the US District Court of Delaware denied Norwich Pharmaceuticals' motion to modify the court's final judgment and prevents the US FDA from granting final approval for Norwich's ANDA for XIFAXAN 550 mg before 2 October 2029. You may recall that Norwich filed this motion in order to attempt to get a skinny label approved before October 2029. Norwich appealed this decision.

I am pleased with our overall business performance in the second quarter, we are increasing our revenue guidance for Bausch health, excluding <unk> for this year and as always we remain committed to delivering long term value for stakeholders.

In addition to the strong business performance, we had a number of other positive developments in the quarter.

Turning to slide eight.

We shared in May 2023, the positive news that the U S District Court of Delaware denied Norwich is Norwich Pharmaceuticals motion to modify the court's final judgment and prevents the U S. FDA from granting final approval for <unk> and <unk>.

550 milligrams before October 2nd 2029.

You may recall that Norwich filed this motion in order to attempt to get a skinny label approved before October of 2029, Norwich appealed. This decision Norge appeal is now consolidated with our appeal of the final judgment in validating the Ibs D in the polymorph patents.

Thomas Appio: Norwich appeal is now consolidated with our appeal of the final judgment invalidating the IBS-D and the polymorph patents. We remain confident in our position and expect a decision on the consolidated appeals as early as Q1 2024. Following the denial of Norwich's motion to modify the final judgment, the FDA granted tentative approval to Norwich's ANDA for XIFAXAN 550 mg, but confirmed that it remains barred from granting final approval until 2 October 2029. Norwich cannot launch its ANDA product until it receives final approval from the FDA. Norwich then sued the FDA in the United States District Court for the District of Columbia. This is a separate lawsuit in a different district court than the court that issued the final judgment. Norwich requested that the DC District Court direct the FDA to grant final approval of the ANDA notwithstanding the Delaware Court's final judgment.

We remain confident in our position and expect a decision on the consolidated appeals as early as Q1 2024.

Following the denial of Norges motion to modify the final judgment the FDA granted tentative approval to Norwich and differs by fax and 550 <unk> confirmed that it remained barred from granting final approval until October 2029, Norwich cannot launch at <unk>.

<unk> until it received final approval from the FDA.

Norwich then sued the FDA in the United States District Court for the district of Columbia. This is a separate lawsuit and a different district court and the court issued the final judgment.

<unk> requested that the D. C District court direct the FDA to grant final approval of the and notwithstanding the Delaware Court's final judgment.

Thomas Appio: The FDA opposed Norwich's action, and we have intervened in this lawsuit. This matter is currently being briefed, and we expect a decision in the fall. We are fully committed to vigorously defending our intellectual property and providing healthcare providers and patients with the safe and effective treatment options that XIFAXAN represents. We continued to be successful in proactively addressing our balance sheet, entering into a $600 million non-recourse financing facility with KKR, collateralized by accounts receivable, providing us an additional source of liquidity. We continued to make progress on our efforts to complete the potential distribution of Bausch + Lomb and continue to believe that completing the separation of Bausch + Lomb makes strategic sense. As we continue to evaluate all relevant factors related to any distribution, we are exploring options for optimizing the structure if and when a distribution is completed.

Thomas Appio: Our initial intent was to effectuate a potential distribution by way of plan or arrangement, but we have since determined that the optimal way to implement the distribution may instead be through a tax-free reduction of capital, which would provide additional flexibility to the company and Bausch + Lomb. We're continuing to evaluate the structure of any distribution and its other related details, and any distribution continues to be subject to the receipt of applicable shareholder and other required approvals. We are working hard to progress our pipeline, as shown on slide nine. We remain excited about the RED-C program for XIFAXAN for the reduction of early decompensation in cirrhosis. The global program is focused on developing novel formulations to address unmet medical needs. Specifically, the treatment is aimed at preventing the first occurrence of hepatic encephalopathy, HE, for patients with mild cirrhosis.

Pain or arrangement, but we have since determined that the optimal way to implement the distribution made instead be through a tax free reduction of capital, which would provide additional flexibility to the company and baoshan long.

We're continuing to evaluate the structure of any distribution and other related details and any distribution continues to be subject to the receipt of applicable shareholder and other required approvals.

We are working hard to progress our pipeline is shown on slide nine.

We remain excited about the Red Sea program for Us I fax and for the reduction of early decompensation and cirrhosis.

The global program is focused on developing novel novel formulations to address unmet medical need specifically the treatment is aimed at presenting the first occurrence of Paddick and step Allopathy Haa for patients with mild cirrhosis to global Phase III studies are currently underway.

Thomas Appio: Two global phase 3 studies are currently underway. Enrollment in these studies is progressing, and we expect enrollment to be completed in both trials in Q1 of 2024. To date, we have completed scientific advisory meetings with the Medicines Evaluation Board in the Netherlands and Health Canada, and have received positive feedback on the program from the National Medical Products Administration in China. We are currently planning to meet with the authorities in Japan later this year. As I've noted, these are global programs for Amiselimod, a novel oral selective S1P receptor modulator that targets the treatment of mild to moderate ulcerative colitis. The phase 2 trial completed enrollment in July of this year. In dermatology, we have an upcoming PDUFA date of 20 October 2023 for our NDA for IDP-126.

Enrollment in these studies is progressing and we expect enrollment to be completed in both trials in Q1 of 2024.

To date, we have completed scientific advisory meetings with the medicines evaluation board in the Netherlands, and Health, Canada and had received positive feedback on the program from the National Medical products administration in China.

We are currently planning to meet with the authorities in Japan later this year.

As I have noted these are global programs.

Four <unk> Ah new oral selective <unk> receptor modulator that targets the treatment of mild to moderate ulcerative colitis. The phase two trial completed a rollman in July of this year.

In dermatology, we have an upcoming produce the date of October 20th 2023 for our NDA for IDP 126, if approved this will be a first class treatment for the triple combination of acne Vulgaris and welcome addition to our established acne portfolio.

Thomas Appio: If approved, this will be a first-in-class treatment for the triple combination of acne vulgaris and welcome addition to our established acne portfolio. Our submission in Canada was completed on 30 May 2024. Our Solta pipeline is active as well. Our next-generation Fraxel, a fractionated laser device for skin resurfacing, remains on track for submission to the FDA later this year with the potential to launch in H1 2024. We are excited about the benefits offered by this product, including its effectiveness in fine line wrinkles, surface scarring, pigmentation, and aged spots. Our Clear + Brilliant Touch program is also advancing, with Europe and Canada submissions planned for 2024, Asia Pacific for 2025. Clear + Brilliant Touch is a fractionated laser device for skin rejuvenation.

Our submission in Canada was completed on May 30th of this year.

Our solta pipeline is active as well.

Our next generation Fraxel, a fractionated laser device for skin resurfacing remains on track for submission to the FDA later this year with the potential to launch in the first half of 2024. We are excited about the benefits offered by this product, including including its effectiveness in fine lined wrinkles.

Surface scarring pigmentation and age spots.

Are clear and brilliant touch program is also advancing with Europe , and Canada submissions plan for 2024 Asia Pacific for 2025 clear and brilliant touch is a fraction of a laser device for skin rejuvenation. Our next generation Weser lifeboats system, which uses ultrasound energy for us.

Thomas Appio: Our next-generation VASERlipo, which uses ultrasound energy for aesthetic body contouring, is under development and planned for release in late 2024. Lastly, we are developing several exciting features for Thermage FLX to improve on what is already a leading product in non-invasive skin tightening treatments. Solta is well known for the broad portfolio of products that addresses a range of aesthetic skin and body issues. With continued improvements always in mind, our focus is on providing consumers with aesthetic and therapeutic benefits based on cutting-edge technology, and our R&D team is hard at work on these innovative next-generation enhancements. As a leadership team, we remain committed to driving profitable growth through commercial excellence, intensifying our focus on business development, expanding and progressing our pipeline, and unlocking the value and potential of our company.

Fedex body countering is under development and planned for release in late 2024.

Lastly, we are developing several exciting features for <unk> to improve on what is already a leading products and non invasive skin tightening treatments.

Salter is well known for the broad portfolio of products that dresses dresses a range of aesthetic skin and body issues with continue improvements always in mind, our focus is on providing consumers with the aesthetics and therapeutic benefits based on cutting edge technology in our R&D team is hard at work on these innovative.

Of next generation enhancements.

As a leadership team, we remain committed to driving profitable growth through commercial excellence intensifying our focus on business development, expanding and progressing our pipeline and unlocking the value and potential of our company.

Thomas Appio: It's been an active and productive quarter for Bausch Health, and we are looking forward to building on the momentum across the board. With that, I will turn the call over to Tom Vadaketh, who will provide further details on our Q2 performance. Tom?

It's been an active and productive quarter for Bausch health and we are looking forward to building on the momentum across the board with that I will turn the call over to Tom Valiquette, who provide further details on our second quarter performance Tom. Thanks.

Tom Vadaketh: Thanks, Tom. Hello, everyone, and thanks for joining us. We closed Q2 with consolidated revenues for Bausch Health of $2.2 billion, up 11% on an organic basis over the same quarter last year. Q2 revenues for Bausch Health, excluding B+L, were $1.1 billion, up 11% on an organic basis. We saw growth in our Salix, International, and Solta businesses, while we experienced a more modest decline in our diversified segment than in recent quarters. Let's dive into the revenue performance for each segment in more detail, starting on slide 12 with Salix. Q2 Salix revenues increased 11% on an organic and reported basis to $557 million, driven by growth in our core products, including XIFAXAN 550 mg, RELISTOR, and TRULANCE.

Thanks.

Hello, everyone and thanks for joining us.

We closed the second quarter with consolidated revenues for Bausch health of $2.2 billion of.

11% on an organic basis over the same quarter last year.

Second quarter revenues were bocelli, excluding P&L $1.1 billion up 11% on an organic basis, we saw growth in our Salix international and sold the businesses, while we experienced a more modest decline in our diversified segments than in recent quarters.

Let's dive into the revenue performance for each segment and more details starting on slide 12 with Salix.

Second quarter, Salix revenues increased 11% on an organic and reported basis to $557 million.

Driven by growth in our core products, including side effects, and 550, Relistor and true lands.

Tom Vadaketh: As Tom mentioned, we're seeing our investments in Salix's commercial organization begin to pay off in the form of increased brand awareness and demand. Growth in Salix was led by XIFAXAN, which grew 9% in Q2 compared to the same quarter last year, and overall demand grew 3% year over year. In addition to our demand generation efforts, we are benefiting from a rebound in the long-term care channel with increases in occupancy levels that, while increasing, still remain below pre-pandemic levels. We are also pleased with the Q2 sales performance of RELISTOR and TRULANCE, which posted year-over-year growth of 42% and 73%, with total scripts growth of 20% and 14% respectively.

As Tom mentioned, we're seeing our investments and Salix as commercial organization begin to pay off in the form of increased brand awareness demand.

Growth in Salix was led by side effects, which.

Which grew 9% in the second quarter compared to the same quarter last year and overall demand grew 3% year over year.

In addition to demand generation efforts, we are benefiting from a rebound in the long term care channel.

With increases in occupancy levels.

That while increasing still remained below pre pandemic levels.

We're also pleased with the second quarter sales performance of Relistor, and Trulance, which boasted year over year growth of 42% and 73% with total scripts growth of 20% and 14% respectively.

Tom Vadaketh: International revenues were $259 million during the quarter, an increase of 11% on a reported and organic basis compared to the prior year period, led by strong growth in our promoted portfolio in Canada and key markets in EMEA. In EMEA, the growth was also benefited from a prior year reduction in revenues of $11 million related to a change in our estimates of future returns in one market. In May, Bausch Health recalled Emerade epinephrine auto-injectors for lots distributed between April 2022 and May 2023. While there was limited revenue impact in the quarter, from a cost perspective, we had write-offs of finished goods and other inventory, as well as charges for outstanding purchase commitments together totaling $12 million in the quarter. We are actively working to bring this important product back to market for our patients.

International revenues were $259 million during the quarter, an increase of 11% on undergoing a reported and organic basis compared to the prior year period.

Led by strong growth in our promoted portfolio and Canada and key markets in EMEA.

In EMEA. The growth was also benefited from a prior reduction in revenues of $11 million relate.

Related to a change in our estimates of future returns and one market.

In May bar shelter recalled Emirate epinephrine auto injectors for lots distributed between April 2022, and May 2023.

While there was limited revenue impact in the quarter.

From a cost perspective, we had write offs of finished goods and other other inventory.

As well as charges for outstanding purchase commitments together totaling $12 million in the quarter.

We are actively working to bring this important product back to market for our patients.

Tom Vadaketh: Solta Medical revenues were $88 million during Q2, an increase of 60% on an organic basis over the prior year period. Revenue growth was supported by a soft compare in the prior year quarter due to COVID-related lockdowns in China in Q2 2022. Growth in other Asia Pacific markets was a strong 23%, with overall growth for Solta tempered by a decline in the US in the quarter. With several upcoming pipeline milestones, Solta Medical is primed for continued near and long-term growth. Diversified revenues were $228 million, down 3% on a reported and organic basis in Q2, due primarily to decreases in sales across urology and generics, partially offset by an increase in sales in dermatology and dentistry. We continue to see volume erosion for Wellbutrin.

Soldiers medical revenues were $88 million during the second quarter, an increase of 60% on an organic basis over the prior year period.

Revenue growth was supported by a soft compare in the prior year quarter due to Covid related Lockdowns in China and Q2 2022.

Growth in other Asia Pacific markets with a strong 23% with overall growth for soldiers tempered by a decline in the U S in the quarter.

With several upcoming pipeline milestones Solta medical is primed for continued near and long term growth.

Diversified revenues were $228 million down 3% on a recorded an organic basis in the second quarter due primarily to decreases in sales of neurology and generics.

Partially offset by an increase in sales in dermatology in dentistry.

We continue to see volume erosion for wellbutrin.

Tom Vadaketh: For APLENZIN, positive demand growth was offset by a channel inventory drawdown. Lastly, on JUBLIA, positive demand growth was offset by higher coupons and rebates. Total sales for the segments increased sequentially, due in part to gross to net pricing pressure in Q1 that did not carry over into this quarter. With 70% of the segment's revenues coming from products that are past their LOE dates, we continue to manage the diversified business to optimize the revenue trajectory and maximize profitability and cash with some small targeted investments where there are growth opportunities, for example, for ARESTIN in dentistry and JUBLIA in dermatology. As shown on slide 13, Bausch + Lomb revenues were $1 billion during Q2, up 10% on a reported basis and 12% on an organic basis compared to the prior year, with growth across all B+L segments.

Four of plans and positive demand growth was offset by a channel inventory drawdown.

Lastly, on Julia positive demand growth was offset by higher coupons and rebates.

Total sales for the segments increase sequentially June bought too gross to net pricing pressure in Q1 that did not carry over into this quarter.

With 70% of the segment's revenues coming from products that are passed their law dates we continue to manage the diversified business to optimize the revenue trajectory.

And maximize profitability in cash.

With some small targeted investments where there are growth opportunities for example for <unk> and dentistry and Jubilee in dermatology.

As shown on slide 13.

<unk> and low revenues were $1 billion during the second quarter.

10% on a reported basis and 12% on an organic basis compared to the prior year.

With growth across all P&L segments.

Tom Vadaketh: Turning to the Q2 P&L on slide 16, Q2 consolidated adjusted gross margin was 70.1%, 60 basis points lower compared with the prior year. For Bausch Health, excluding B+L, the adjusted gross margin for the Q2 was 79.4%, 140 basis points lower than last year. The decrease was mainly driven by a change in product mix and the Emerade recall charges in the international segment that I covered earlier. On the B+L side, adjusted gross margin was flat compared with Q2 of 2022. Consolidated adjusted operating expenses for the Q2 were $832 million, an increase of $80 million or 12% on a constant currency basis, driven by higher SG&A expenses reflecting investments in sales and marketing and higher R&D.

Second quarter consolidated adjusted gross margin was 71% 60 basis points lower compared with the prior year.

For about health, excluding P&L the adjusted gross margin for the second quarter was 79, 4% 140 basis points lower than last year.

The decrease was mainly driven by a change in product mix and the emirate recall changes charges in the international segment that I covered earlier.

On the Biennale site adjusted gross margin was flat compared with Q2 of 2022.

Consolidated adjusted operating expenses for the second quarter or $832 million, an increase of $80 million or 12% on a constant currency basis, driven by higher SG&A expenses, reflecting investments in sales and marketing and higher R&D.

Tom Vadaketh: For Bausch Health, excluding B+L, operating expenses increased by approximately $34 million, while B+L reported an increase of $46 million in operating expenses. Selling and marketing increased for Bausch Health excluding B+L due to the investments we are making in the Salix sales force, our go-to-market channels, and advertising and promotional activity. The increase in consolidated adjusted G&A costs reflects the costs associated with standing up two public companies. Adjusted G&A for Bausch Health excluding B+L was flat compared to the prior year. Consolidated R&D expense for the quarter increased 23% compared to the prior year and represented 7% of net sales, compared with 6% for the prior year period.

For abolish health, excluding P&L operating expenses increased by approximately $34 million, while BNS reported an increase of $46 million in operating expenses.

Selling and marketing increased to abolish health, excluding P&L due to the investments we are making the salix salesforce or go to market channels and advertising and promotional activity.

The increase in consolidated consolidated adjusted G&A costs reflects the costs associated with standing up to public companies ajar.

Adjusted G&A for bar shells, excluding P&L was flat compared to the prior year.

Consolidated R&D expense for the quarter increased 23% compared to the prior year.

And represented 7% of net sales compared with 6% for the prior year period for Beauchamp, excluding P&L R&D expenses increased by approximately $19 million due primarily to the focus in our clinical programs and regulatory activities to support our mid and late stage product development.

Tom Vadaketh: For Bausch Health, excluding B+L, R&D expenses increased by approximately $19 million due primarily to the focus on our clinical programs and regulatory activities to support our mid- and late-stage product development in the Salix segment. We have been successful in restructuring our approach with our third-party clinical providers, which is accelerating activity and planned spend in the RED-C program. Q2 consolidated adjusted EBITDA was $727 million, an increase of $26 million or 4% on a reported basis and 7% on a constant currency basis. For Bausch Health, excluding B+L, adjusted EBITDA was $568 million, an increase of 7% from last year, reflecting the factors previously described. On a consolidated basis, the Q2 adjusted EBITDA margin was 33.5%, compared with 35.6% last year.

And the Salix segment.

We have been successful and restructuring our approach without third party clinical providers, which is accelerating activity and plan to spend in the Red Sea program.

Second quarter consolidated adjusted EBITDA was $727 million, an increase of $26 million or 4% on a reported basis and 7% on a constant currency basis.

Four Bausch health, excluding P&L adjusted EBITDA was $568 million, an increase of 7% from last year.

Reflecting the factors previously described.

On a consolidated basis, the second quarter, adjusted EBITDA margin was 33.5% compared with 35.6% last year.

Tom Vadaketh: Adjusted EBITDA margin for Bausch Health, excluding B+L, was 15.2%, and for Bausch + Lomb was 17.3%. Turning to cash flow. On a consolidated basis, Bausch Health generated $360 million in operating cash flow in H1. The increase versus the prior year was due primarily to decreases in payments of accrued legal settlements related to the Glumetza antitrust litigation, the positive impact of insurance recoveries from prior legal settlements, and changes in business performance. As with recent quarters, we have also reclassified a portion of our cash interest payments to financing cash flows as a result of the accounting treatment for bonds issued as part of our 2022 debt exchange. Adjusted cash flow from operations on a consolidated basis in H1 was $196 million.

Justin EBITDA margin for bar shelf, excluding P&L was 52% and for Bosch and long was 17.3%.

Turning to cash flow on a consolidated basis.

Walsh helps generated $360 million operating cash flow in the first six months.

The increase versus the prior year was due primarily to decreases in payments of accrued legal settlements related to the Gamesa antitrust litigation.

The positive impact of insurance recoveries from prior legal settlements and changes in business performance.

As with recent quarters, we have also reclassified a portion of our cash interest payments to financing cash flows as a result of the accounting treatment for bonds issued as part of 2022 that exchange.

Justin cash flow from operations on a consolidated basis in the first half was $196 million for Bausch health, excluding P&L the year to date adjusted cash flow from operations was $234 million from strong cash conversion in the first half which was in line with our expectations ajar.

Tom Vadaketh: For Bausch Health, excluding B+L, the year-to-date adjusted cash flow from operations was $234 million from strong cash conversion in H1, which was in line with our expectations. Adjusted cash flow includes adjustments for the payment of separation costs, business transformation costs, and insurance settlement proceeds, and also includes payment of the full contractual interest. Now let's turn to our balance sheet. We continue to prioritize the delevering of our balance sheet, and in Q2 2023, we reduced our debt for Bausch Health, excluding B+L, by $181 million, including revolver repayments.

Acid cash flow includes adjustments for the payment of separation costs business transformation costs and insurance settlement proceeds and also includes payment of the full contractual interest.

Now, let's turn to our balance sheet.

We continue to Prioritise, the delevering of a balance sheet and in the second quarter of 2023, we reduced our debt for bar shelf, excluding P&L by $181 million, including revolver payments repayments.

Tom Vadaketh: As shown on slides 18 and 19, total debt for Bausch Health, excluding Bausch + Lomb, at the end of the quarter was $16.3 billion, which consisted of $15.3 billion of restricted debt issued by Bausch Health, excluding B+L, and $1 billion of senior secured notes issued by the unrestricted subsidiary created in the Q3 of last year. Excluding B+L debt, approximately 65% of our debt is fixed, and approximately 70% of the company's debt on a consolidated basis is fixed. At the end of the quarter, we entered into a $600 million accounts receivable facility with KKR, giving Bausch Health access to an additional liquidity source for approximately five years, with proceeds available for general corporate purposes.

As shown on slides 18 and 19.

Total debt for Barsh health, excluding Belshe alone at the end of the quarter was $16.3 billion, which consisted of $15 3 billion of restricted debt issued by Bausch health, excluding P&L and $1 billion of senior secured notes issued by the unrestricted subsidiary created in the third quarter of last year.

Excluding P&L that approximately 85% of our debt is fixed and approximately 70% of the companies that consolidated basis is fixed.

At the end of the quarter, we entered into a 600 million dollar accounts receivable facility with KKR, giving bell shelled access to an additional liquidity source for approximately five years.

With proceeds available for general corporate purposes.

Tom Vadaketh: We did not draw on the facility in Q2, but have subsequently drawn $350 million as of 2 August. With the closing of the accounts receivable facility, inclusive of cash and cash equivalents, and available capacity under our revolving credit facility, the company has liquidity in excess of $1 billion. Looking ahead to H2, we have updated our 2022 and 2023 guidance for Bausch Health, excluding B+L, which can be viewed on slide 21. For Bausch Health, excluding B+L, we now expect revenues in the range of $4.5 to $4.65 billion, an increase of $50 million on both the low and high end of the range. This change is primarily due to favorable movements in foreign exchange, leaving our view of organic growth of 2% to 5% unchanged.

We did not draw on the facility in the second quarter, but have subsequently drawn $350 million as of August 2nd.

With the closing of the accounts receivable facility inclusive of cash and cash equivalents and available capacity under our revolving credit facility. The company has liquidity in excess of $1 billion.

Looking ahead towards the second half of the year, we have updated or twenty-two twenty-three guidance for bioshield, excluding P&L, which can be viewed on slide 21.

[noise] robust health, excluding P&L, we now expect revenues in the range of $4.5 billion to $4.65 billion, an increase of $50 million on both the low and high end of the range.

This changes primarily due to favourable movements in foreign exchange <unk>.

Leaving our view of organic growth of 2% to 5% unchanged.

Tom Vadaketh: In terms of H1 and H2 dynamics, within Salix, we typically see a seasonal step-up in sales in the H2, particularly in XIFAXAN, primarily due to wholesaler inventory dynamics, as well as patient-level patterns related to insurance deductible activity. We also expect to see continued positive impact from our investments in the Salix commercial organization. For International, our revenue guidance assumes ongoing momentum with promoted brands and takes into consideration the tailwinds we expect to see as a result of competitor supply shortages. These positives will be somewhat offset by the loss of Emerade revenue due to the recall of that product, as well as new generic entries driving volume declines.

In terms of first half in second half dynamics within Salix, we typically see a seasonal step up in sales in the second half, particularly in sight faxon, primarily due to wholesalers inventory dynamics as well as patient level patterns related to insurance deductible activity.

We also expect to see continued positive impact from our investments in the Salix commercial organization.

For international.

Our revenue guidance assumes ongoing momentum with promoted brands and takes into consideration. The tailwinds, we expect to see as a result of competitors supply shortages.

These positives will be somewhat offset by the loss of emirate revenue due to the recall of that product as well as new generic entries driving volume declines.

Tom Vadaketh: For our diversified segment, we expect sales in H2 to increase sequentially from H1, with H2 revenue relatively flat compared to the prior year, driven by growth in JUBLIA, ARESTIN, and APLENZIN, offsetting declines in mature brands across neurology, generics, and dermatology. We continue to expect gross margin to be in the 80% range, in line with prior guidance. Full-year EBITDA for Bausch Health, excluding B+L, is still expected to be $2.3 to 2.4 billion. Our adjusted guidance reflects the acceleration of approximately $50 million in R&D spend from 2024 for critical programs, and we currently expect higher R&D investment in 2023 than contemplated when initially providing guidance for the year. Adjusted EBITDA also includes the impact of the Emerade recall. These items are partially offset by the favorable impact of foreign exchange and cost savings.

For our diversified segment, we expect sales in the second half to increase sequentially from the first half with second half revenue relatively flat compared to the prior year driven by growth in Juba, they're arresting and of plans in offsetting declines in mature brands across neurology generics and Matala.

<unk>.

We continue to expect gross margin to be in the 80% range in line with prior guidance.

Full year EBITDA for Bausch health, excluding P&L is still expected to be 232 $2.4 billion.

Are adjusted guidance reflects the acceleration of approximately $50 million in R&D spend from 2020 444 critical programs and we currently expect higher R&D investment in 2023, then contemplated when initially providing guidance for the year.

Adjusted EBITDA also includes the impact of the Emirate recall. These items are partially offset by the favorable impact of foreign exchange in cost savings.

Tom Vadaketh: On the expense side, we will continue to invest in sales and marketing activities to drive growth in our key brands in our Salix, International, and Solta Medical segments. These expenditures include sales force expansion, direct-to-consumer advertising, and investments in sales force tools. As Tom mentioned, we're starting to see the positive impacts from these initiatives on revenues, which we expect to continue through this year. Moving below adjusted EBITDA, we continue to expect our full-year effective non-GAAP tax rate to be approximately 15%. We expect our contractual interest costs to remain unchanged at approximately $1.3 billion. Lastly, we continue to expect Bausch Health, excluding B+L, to generate approximately $625 million in adjusted operating cash flow. We have generated less than half of this expected cash flow through Q2, which as I said earlier, is in line with our expectations.

On the expense side, we will continue to invest in sales and marketing activities to drive growth and our key brands Salix International and Solta Medical segment.

These expenditures include Salesforce expansion direct to consumer advertising and investments and Salesforce tools.

As Tom mentioned, we're starting to see the positive impacts from these initiatives on revenues, which we expect to continue through this year.

Moving below adjusted EBITDA, we continue to expect a full year effective non-GAAP tax rate to be approximately 15%.

We expect our contractual interest costs to remain unchanged at approximately $1.3 billion.

Lastly, we continue to expect bar shelf, excluding P&L to generate approximately $625 million and adjusted operating cash flow.

We have generated less than half of this expected cash flow through the second quarter, which as I said earlier is in line with our expectations and adjusted operating cash flow will benefit from the higher second half adjusted EBITDA, we're expecting compared to the first half of the year.

Tom Vadaketh: Adjusted operating cash flow will benefit from the higher H2 adjusted EBITDA we're expecting compared to the H1 of the year. As I said earlier, adjusted cash flow includes adjustments for the payment of separation costs, the payment of the full contractual interest, and also includes impact of cash tax payments inclusive of the tentative Granite Trust settlement, which we expect to be finalized with the IRS in the coming months. I'll now hand the call back to Tom.

As I said earlier adjusted cash flow includes adjustments for the payment of separation costs. The payment of the full contract contractual interest and also includes impact of cash tax payments inclusive of the tentative granted trust settlement, which we expect to be finalized with the IRS in the coming months.

I will now hand, the call back to top.

Thomas Appio: Thank you, Tom. In summary, although we still have much work to do, I am pleased with the quarter business performance and the progress we have made. Our strategic priorities remain intact, as you can see on slide 23. We have a clear purpose on enriching lives through our relentless drive to create better health outcomes for our patients and physicians. We have made key focus investments in our sales teams, marketing programs, and R&D projects, which will drive future growth. We have progressed key strategic objectives. Finally, and importantly, we have an all-in team that is principled, creative, problem solvers, and results focused. On behalf of our entire Bausch Health team, I thank you for your interest in and support of our company. With that, we will now take questions. Operator, please open the line for Q&A.

Thank you Tom.

In summary, although we still have much work to do I am pleased with the quarter business performance and the progress we have made.

Our strategic priority remain intact as you can see on slide twenty-three.

We have a clear purpose on enriching lives through our relentless drive to create better health outcomes for our patients and physicians.

We have made key focused investments and our sales teams marketing programs and R&D projects, which would drive for future growth.

We have progressed key strategic objectives.

Finally, and importantly, we have an all in team that is principled creative <unk>.

Problem solvers and resolve focused.

On behalf of our entire bow shall team I. Thank you for your interest in in support of our company with that we will now take questions. Operator. Please open the line for Q&A.

Operator: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Your first question for today is coming from Glen Santangelo with Jefferies.

Certainly.

At this time, we will be conducting a question and answer session.

Question. Please press star one.

On your telephone keypad.

Indicate your line is in the question queue you.

You May press start.

If you would like to remove the question from the queue.

Participant.

And may be necessary to pick up your handset before.

Pressing the star keys.

One moment, while we poll for questions.

Yeah first question for today is coming from.

Angela with Jeffries.

Glen Santangelo: Oh, yeah. Thanks for taking my question. Hey, Tom, I think I'll ask a question that's kinda on everyone's mind. Everyone's kinda curious about this tax-free reduction of capital. We were wondering if you could maybe put a little bit of a finer point in terms of what you mean. I guess why the pivot at this point, because it seems like you had a plan, and now it seems like you may be pivoting, and I'm kinda curious as to what changed.

Oh, yeah. Thanks for taking my question, Hey, Tom I think I'll ask the question on everyone's mind everyone's kind of curious about this tax free reduction of capital were wondering if you could maybe put a little bit of a finer point in terms of what you mean and and I and I and I guess why the pivot at this point because it seems like you had a plan and now it seems like you may be pivoting in them.

I'm kind of curious as to what changed.

Thomas Appio: Yeah, Glenn, good question. Let me just take it from the top. It's a good question. It's complicated. What I would say is when we look at it, of course, the spin and the IPO was announced three years ago. It was a different management team at that point, really trying to, as I took over as CEO and the team took over, really looking at what was going to be the best way to do it. Basically, when we looked at it, you know, we believed that trying to find a way that could simplify the process to help manage, you know, some of the risks identified.

Mmm Yeah, Glenn Good question, let me just take it from the top.

It's a good question, it's complicated but I would say is is when we look at it.

Of course.

Spin and the IPO was announced three years ago. It was a different management team at that point.

And really trying to as I took over as CEO in the team took over really looking at what was going to be the best way to do it. So basically when we looked at it we we believed.

That trying to find a way that could simplify the process.

Help manage.

Some of the risks identified and we believe that we can create some additional strategic flexibility for both companies if we're able to.

Thomas Appio: We believe that, you know, we can create some additional strategic flexibilities for both companies if we're able to work under a reduction of capital.

Work under reduction of capital.

Tom Vadaketh: Tom, if I'll just add a couple of things. Glenn, just transactionally, what the difference. What this is, like the term suggests, it's a reduction in capital, and in this case, the reduction is the value of B+L and effectively the result of those B+L shares being returned to the shareholders. The end result is exactly the same, in the sense that the B+L shares are distributed, as we intended before. No change there, no change in the tax efficiency, et cetera. What we're really talking about is behind the scenes almost, the bookkeeping changes slightly.

Tommy file just add a couple of things of Glen just transactionally, what the difference so what what this is.

Like the term suggests it's a reduction in capital and in this case the reduction as the value of P&L.

And effectively the result of those Biennale shares being returned to the shareholders. So the end result is exactly the same.

In the sense that the Biennale shares of distributed.

As we intended before no.

No change there no change in the.

Tax efficiency et cetera et cetera.

What we're really talking about is behind the scenes almost the bookkeeping changes slightly.

Glen Santangelo: Tom, can I just clarify that a little bit? Because I thought maybe the obvious move was to sell another 8% or 9% of BLCO, but maintain that 80% threshold so you preserve the tax-free nature of the spin. Are you talking about something different than that?

But but but Tom can I, just clarify that a little bit because I thought maybe the obvious move was to sell another eight or 9% of BLC, but maintain that 80% threshold you preserve the tax free nature of the spin are you talking about something different than that.

Tom Vadaketh: No. Still, the same numbers. They're still the same. The plan right now is the same, to distribute 80%. No change in that.

Still the same numbers. So there is still the same we the plan right now is the same as to distribute 80% no change in that.

Glen Santangelo: Okay, perfect. Maybe just my last question then I'll hop. I'm kinda curious about this $600 million facility and what are the uses of that cash. Because it seems like you already have ample liquidity. You're generating some cash flow, and now you're talking about, you know, selling more of BLCO, which would raise, you know, potentially more money or maybe you're just gonna spin it, you know, depending upon how you transactionally do it. But I just wanna make sure I understand what the use of that capital is, because, you know, you didn't buy back very much debt in the quarter, and I would have expected a little bit more. I'm just kinda curious as to use of those proceeds. Thanks.

Okay, perfect and maybe just my last question I'll hop is I'm kind of curious about 600 million dollar facility and what are the uses of those of that cash because it seems like you already have ample liquidity, you're generating some cash flow and now you are talking about.

Selling more of <unk>, which would raise.

Potentially more money or maybe you just kind of spinach.

Depending upon how you transactionally do it but I just wanted to make sure I understand what the use of that capital is because you didn't buyback very much debt in the quarter.

I would have expected a little bit more so I'm just kind of curious ocu's of those proceeds thanks.

Tom Vadaketh: Yeah. I mean, look, in the grand scheme of things, it's an efficient and cost-effective source of capital for us. It was available, you know, so we like it. It's a source of capital now for the next 5 years. As I said in my prepared remarks, as it happens, just shortly after the end of the quarter, we did draw down about $350 million and have paid down the revolvers. That's one example. It's essentially for general corporate purposes. We haven't earmarked it for anything in particular, but it's available to do all the things that you just kinda listed, including OMRs, et cetera.

Yeah, and we look in the Grand scheme of things.

It's an efficient and cost effective source of capital for us.

It was available so we like it as a source of capital now for the next five years.

As I said in my prepared remarks as it happens the shortly after the end of the quarter, we did draw down about $350 million and pay down the revolvers. So that's one example, but it's essentially for general corporate purposes, we haven't earmarked for anything in particular, but it's available to do all the things that you just kind of listed including Omar et.

Tom Vadaketh: We will, you know, in addition to that, as I said, expect to generate more than $600 million in operating cash flow, and debt reduction and deleveraging continues to be our priority.

We will.

In addition to that as I said expect to generate more than $600 million in operating cash flow and.

That reduction in deleveraging continues to be our priority. So thanks for thanks very much appreciate the details.

Glen Santangelo: Yep, thanks very much. Appreciate the details.

Thomas Appio: Operator, next question.

Operator next question.

Operator: Your next question is coming from Jason Gerberry with Bank of America.

Your next question is coming from.

With bank of America.

Jason Gerberry: Oh, hey, guys. Thanks for taking my question. Just wanted to follow up on Glenn's question a little bit more. Just, so you talked about added strategic flexibility, I think, in the PR, pursuing strategic growth via the RemainCo. Under the revised, I guess, distribution mechanism, would RemainCo carry less debt or have a more favorable leverage ratio? Just kind of curious, thinking about what that entity might look like on the other side and how much firepower the company might have, because we've long thought of, like, RemainCo as a company that was carrying, like, north of 6.5 turns of leverage and not a lot of leeway to deploy capital for M&A. Thanks.

Oh, Hey, guys. Thanks for taking my question.

Wanted to follow up on Clinton's question, a little bit more just so you talked about Adam strategic flexibility I think in the PR pursuing strategic growth.

Via the remained co so.

Wood or under the revised I guess distribution mechanism would remain coke Harry less.

Less data or have a more favourable leverage ratio just kind of curious thinking about what that entity might look like on the other side and and how much firepower. The company might have because we've long part of like remain colors. The company that was carrying like north of six and a half turns of leverage.

And not a lot of leeway to deploy capital R for for M&A banks.

Tom Vadaketh: Yeah,

Thomas Appio: Go ahead, Tom.

Yes.

Tom Vadaketh: I'll start, and Tom, maybe Tom will add some comments. Essentially, there is no change in our plan, right? The company has put out that target of $6.5 to $6.7 billion. That remains the case, and that we put that out as a kind of threshold to in order to complete the distribution. From my perspective, as the CFO of the company, that's too high, and we will continue to, you know, pay that down, pay the debt down and reduce it as we go forward. This particular transaction that we're talking about or this change, the new structure that we are considering has no connection with, you know, those debt targets or the liquidity that we need to be at or anything like that.

Go ahead.

He'll start and maybe some will add add some comments.

Essentially there is no change in our plan right. So the company has put out that target of six and a half to $6 seven that remains the case and that we put that out as a kind of threshold too.

In order to complete the distribution.

From my perspective, as the CFO the company, that's too high and I, we will continue to.

Pay the debt down and reduces as we go forward.

This particular transaction that we're talking about a this change the instructure that we are considering.

Has no connection with those that targets or liquidity that we need to be at or anything like that.

Thomas Appio: Yeah, Jason, this is Tom. Let me just add to that. You know, the objectives and the goals of the transaction haven't changed. We just, you know, when we looked at it, the key was to see, you know, how we could simplify it and then really create as much flexibility strategically as possible for both companies now and in the future.

Yeah, Jason at this time I'm just.

Just add to that the objective and the goal the transaction haven't changed we just when we looked at it. The key was was to see how we could simplify it and then really create as much flexibility strategically as possible for both companies.

Now in in the future.

Jason Gerberry: Thanks. If I could

Thomas Appio: Operator, next question.

Thanks, and your next door squeaked out here.

Jason Gerberry: Uh, squeeze in a-

Thomas Appio: Yeah. Go ahead, Jason.

Yeah go ahead Jason.

Jason Gerberry: Well, I was just gonna ask a follow-up on the XIFAXAN Federal Circuit appeal. So is the court reviewing, you know, all the patent rulings or is the court reviewing whether the injunction should be in place still? Just kind of wondering if we think about early 2024, what that outcome could look like and sort of-

Gas will follow up on the Xifaxan Federal circuit.

So is the court hearing all the patent rulings or the court reviewing whether the injunction.

It should be in place.

Just wondering if you think about early.

Early 2024, what that outcome could look like and.

Thomas Appio: Yeah. As I said in my prepared remarks, you know, we are appealing the patents on IBS-D and on the polymorphs, and Norwich is appealing the Rule 60(b) motion. That's where it stands. Of course, the appeals are now together, and we're expecting the court, you know, to rule in Q1 2024. We feel strongly on our position with our patents, and we're gonna vigorously defend it.

Yeah. So so as I said in my prepared remarks.

We are appealing.

Patents on Ibs's D.

And on the polymorphous, which.

Norwich is appealing the motion on 660 emotion. So that's where it stands of course, the appeals or now together and we're expecting a call.

Court to rule in queue.

Q1 of 2024, we feel strongly.

On our position with our with our patents.

And we're going to vigorously defended.

Jason Gerberry: Got it. Thanks, guys.

Got it thanks, guys. Thanks.

Thomas Appio: Thanks. Next question.

Next question.

Operator: Your next question is coming from Umer Raffat at Evercore ISI.

Your next question is coming from.

At Evercore ISI.

Umer Raffat: Hi, guys. Thanks for taking my question. There's construction behind me, so please bear with me. My question is, going into the XIFAXAN District Court ruling, this is a Norwich versus FDA, what are you expecting and how does that change whatever plan you have now or whatever the updated plan is on the spin? Thank you.

Hi, guys. Thanks for taking my question, there's construction behind me. So please bear with me.

My question is.

Going into the Xifaxan.

District Court ruling this is enormous versus FDA.

What are you expecting and how does that change whatever plan you have now or whatever the updated planners understand thank.

Thank you.

Thomas Appio: Thanks, Umer, for the question. You know, when we look at the case that Norwich filed against the FDA, again, we feel confident here. We have intervened as well. You know, that's going to progress. You know, again, we feel confident in where the FDA position is, they are upholding what the court ruled in Delaware. Therefore, you know, we feel real confident that in that case, we're in good shape. Timeline, you know, again, is the fall of 2023 if we just talk about a timeline, we're thinking of fall of 2023 to hear the outcome of that. Operator, next question.

Thanks for the question.

When we look at the the.

The case that Norwich filed.

Against the FDA.

Again, we feel confident here, we have intervened as well.

So that's going to progress and again, we feel confident in where the FDA <unk>.

Physician is they are upholding the what the court ruled in Delaware. So therefore, we feel real confident that.

In that case, where.

We're in good shape.

Timeline again as the fall of if we just talk about a timeline, we're thinking of fall of 2023 two.

To hear the outcome of that.

Thomas Appio: Operator, next question.

Operator next question.

Operator: Your next question is coming from David Amsellem with Piper Sandler.

Your next question is coming from David Emsellem with Piper Sandler.

David Amsellem: Thanks. So looking longer term as you think about debt maturities in 2027 and 2028 and the LOE for XIFAXAN, this is based on the settlements that are in place, how do you address that given the importance of XIFAXAN to the P&L? And just help us better understand, you know, the long-term solvency of the companies in light of, you know, what you could be facing later in the decade. Thanks. Yeah, I won't get into any specific long-term forecasting here on this call, but what, maybe just in generalities. We have a business that's highly cash generative. This year, as I said, about $600 million. We're investing in growth.

Thanks, So looking longer term as you think about the debt maturities in 27 28.

And the <unk> for that.

<unk> and this is the.

Based on the settlements are in place how are you.

Address that given the importance of Xifaxan.

To the.

The P&L and just help us better understand the long term solvency of the companies in light of.

What you could be facing later in the decade. Thanks.

Tom Vadaketh: Yeah, I won't get into any specific long-term forecasting here on this call, but what, maybe just in generalities. We have a business that's highly cash generative. This year, as I said, about $600 million. We're investing in growth.

Yeah, I won't get into any specific.

Long term forecasting here on this call, but maybe just in generalities, we have a business that is highly cash generative this year as I said.

About $600 million, we're investing in growth, we're starting to see that momentum build and we expect to to see the business grow between now and.

Tom Vadaketh: We're starting to see that momentum build, and we expect to see the business grow between now and say 2027 or 2028, including from XIFAXAN and including from Salix. That will significantly increase the cash generation. Any revenue growth should drop right down to the bottom line. We would expect to use or prioritize debt leverage as we have, as the company has for the last five or six years, and we'll continue to do that. We think we'll knock a chunk out of that debt between now and then, David. At that point, if there is any debt left over, we will have to refinance it, of course. At that time, what lenders are gonna be looking at are forward-looking leverage ratios.

And say 2728, including from side effects and including from savings that will significantly increase the cash generation any revenue growth should drop right down to the bottom line.

And so we would expect to use.

Prioritize that Leverages. We have is a company has for the last five or six years and will continue to do that and so we think will knock a chunk out of that debt.

Between now and then David.

And then at that point, if there is any leftover we will have to refinance it of course at that time, what lenders are going to be looking at a forward looking leverage ratios.

Tom Vadaketh: We're investing in a bunch of these products in the pipeline, as you heard from Tom, and we would expect many of those to come to fruition. Even though XIFAXAN will go generic in 2028 and we will see a drop in revenue, it will be offset by other products coming into play and growing. Obviously it's a very key question. The management team and the board are focused on it, and one of the things that we're, you know, working through.

And.

We we are investing in a bunch of these products in the pipeline as you.

As you heard from Tom and we would expect many of those to come to fruition and even though.

Yes, setbacks, and we'll go generic and 28th and we will see a drop in revenue it will be offset by.

Other products coming into play and growing and so obviously.

A very key question the management team and the board focused on it.

And.

One of the things that we are working through.

Thomas Appio: Yeah. David, let me just add to that, what Tom said. Clearly I talked about in my prepared remarks, you know, the pipeline. That's why, you know, last quarter, this quarter, continue to talk about the progress we're making. As you saw, the investments that we're making in R&D and accelerating the RED-C program, and you know, that is really an exciting program for us. Clearly, we have accelerated now, and making sure that we will have, of course, if the data comes through, the product before we, you know, we will lose, XIFAXAN. We're very, very excited about it. Of course, this is a huge patient population, you know, much larger today than the current XIFAXAN population. RED-C is on track. It's accelerated.

David Let me just add to that with Tom said.

And clearly I talked about in my prepared remarks.

The pipeline that's Y last quarter. This quarter continue to talk about the progress we're making.

And as you saw the investments that we're making an R&D and accelerating the Red Sea program and that is really an exciting program for us clearly we have accelerated now.

And making sure that we will have of course, if the data come through.

The product before we will lose fax.

<unk>, so and we're very very excited about it of course. This is a huge patient population much larger today than the current so I fax in population so red Sea is on track.

Thomas Appio: This is a global program. Therefore we will have the global rights. This will be our first global product at Bausch Health. We're excited about it. Of course, Amiselimod, you know, the phase two studies have completed enrollment, and we are really excited to get the data as it comes through, you know, probably at the end of the year, beginning of next year. Next question, operator.

It has accelerated this is a global program and so therefore, we will have the global rights. This will be our first global product at Bausch health.

We're excited about it of course <unk>, the two face to face.

Phase two studies have completed enrollment and we are really excited as to get the data.

Is it is it come through probably at the end of the year beginning of next year.

Next question operator.

Operator: Your next question is coming from Doug Miehm with RBCCM.

Your next question is coming from Douglass with RBC C N.

Doug Miehm: Yeah, good morning. First question, just going back to the change, the tax-free reduction in capital. Could that be affected by moving the hold co from the parent that has the 38.7% and the $1 billion in bonds to BLCO? Is that an example of what could occur or something like that in addition to, say, the distribution of the remainder of the shares, the 50.1%?

Douglas Miehm: Yeah, good morning. First question, just going back to the change, the tax-free reduction in capital. Could that be affected by moving the hold co from the parent that has the 38.7% and the $1 billion in bonds to BLCO? Is that an example of what could occur or something like that in addition to, say, the distribution of the remainder of the shares, the 50.1%?

Yeah. Good morning, first question, just going back to the <unk>.

Change the tax free.

Production capital.

Be affected by moving the hold co from the parent.

Has the 38.7% in the billing and bonds to BLS names.

An example of what to take for something like that in addition to.

Distribution of the remainder of the shares.

51%.

Tom Vadaketh: Doug, I don't know if I completely followed what you asked, but as I said, I think maybe to the first question, that there is no change in the end result, right? In the sense that we will distribute 80% or more than 80% in order to preserve the tax-free or tax-efficient nature of the spin. I don't know if I got the whole of your question. I know we'll have some follow-up discussion after this call. Happy to talk about it a little bit more.

Doug I don't know if I completely followed what you asked but but.

As I said I think maybe to the first question that there is no change in the end result.

Right in the sense that we will distribute the plan right now is to distribute 80% or more than 80% in order to preserve that.

Free or tax efficient nature of the spin.

It's been I don't know if I got the whole of your question I know will have some for follow up discussion. After this call happy to talk about it a little bit more.

Doug Miehm: Yeah, I'm happy to go through that. Second one, Tom, maybe just has to do with the RED-C. We know that you expect to complete enrollment of those two phase 3 clinical trials in Q1 of 2024, but when do we expect the readout? When do we expect the data in our hands?

Douglas Miehm: Yeah, I'm happy to go through that. Second one, Tom, maybe just has to do with the RED-C. We know that you expect to complete enrollment of those two phase 3 clinical trials in Q1 of 2024, but when do we expect the readout? When do we expect the data in our hands?

And you have to go through that.

Second one Tom maybe just has to do with Red Sea, we noticed that.

You expect to complete an enrollment of those two phase III clinical trials in Q1 24, but when.

When do we expect the reader when do we expect the data in our hands.

Thomas Appio: Yes. Doug, you know, yeah, we've completed enrollment and of course, in order to get this product approved prior to the XIFAXAN going off patent, you know, we'd be looking to see readout of data, probably, in late, you know, maybe, you know, late 2025, early 2026. Of course have to file. That would, I would say, probably somewhere in the 2026 range.

Yes, so Doug Ah.

Yet we've completed enrollment and of course in order to get this product approved prior to Xifaxan going off patent we'd be looking to see read out of data.

Probably in late.

2000, maybe late 2025 early 2026.

And then of course have to file so that would probably I would say probably somewhere in the 22006 range.

Doug Miehm: Okay. That's great. Thanks very much.

Douglas Miehm: Okay. That's great. Thanks very much.

Okay, that's great thanks very much.

Operator: Your next-

Thomas Appio: Next question.

Operator: Coming. Your next question is coming from Michael Nedelcovych at TD Cowen.

Next question.

Your next question is coming from Mike.

Covid at TD Cowan.

Michael Nedelcovych: Thank you for the question. I have two. My first question regards the XIFAXAN litigation. Given what you know now, is it within the realm of possibility that we get a complete resolution of XIFAXAN litigation and IP in the year 2024? That's the first question. The second question relates to RED-C. I know that it's a much bigger patient population, but given that HE lifetime risk in cirrhotic patients is well below 100%, do you have any sense whether physicians are prepared to adopt a prophylactic regimen rather than simply administer XIFAXAN once symptoms present? Thank you.

Mike Nedelcovych: Thank you for the question. I have two. My first question regards the XIFAXAN litigation. Given what you know now, is it within the realm of possibility that we get a complete resolution of XIFAXAN litigation and IP in the year 2024? That's the first question. The second question relates to RED-C. I know that it's a much bigger patient population, but given that HE lifetime risk in cirrhotic patients is well below 100%, do you have any sense whether physicians are prepared to adopt a prophylactic regimen rather than simply administer XIFAXAN once symptoms present? Thank you.

Thank you for the question I have to my first question regards does that vaccine medications given what you know now is there is it within the realm of possibilities.

Reservation dice vaccine litigation and <unk> in the year 2024.

The first question and then the second question relates to the Red Sea.

I know that it's a much bigger patient population, giving the H E lifetime risk.

Patients as well below 100 per cent do you have any sense, whether physicians are prepared to adopt <unk>.

Lactic regimen, rather than simply administered by fax standpoint symptoms per cent. Thank you.

Thomas Appio: Yeah, Mike, two good questions. You know, on the XIFAXAN litigation, this appeal, as I said in my prepared remarks and earlier answers to questions, you know, we expect to have a decision in Q1. You know, it's a complicated appeal 'cause, you know, we are appealing the rulings on IBS-D and the polymorphs, and of course they're appealing the motion. So what I would say is as it plays out, you know, we have submitted our briefs, and we think we have a real good position on our IBS-D patents and polymorph patents.

Mike too too good questions.

On the Xifaxan litigation.

This appeal as I said in my prepared remarks in earlier answers to questions. We expect to have.

It's a complicated appeal because we are.

We are appealing the ruling on Ibs's D.

And the polymorph.

Of course, there are.

Appealing the motion.

What I would say is is as it plays out.

We have submitted our briefs.

And we think we have a real good position on our IBSA patents and polymorph patents. So.

Thomas Appio: If it goes in our favor, you know, clearly, this will be, you know, it will be resolved, you know, specifically on our appeal. All right? We'll have to see how it goes, and but we're feeling confident about it. Getting to the next question on RED-C. Again, we feel, as you said in your question, and as I said previously, it's a much larger patient population. One of the things that we have talked about, and that is one of the reasons why we've invested to accelerate the program. We will have, you know, our sales teams, and our medical teams, will be working to really educate physicians on why prevention is the way to go for HE.

If it goes in our favor.

Clearly this will be.

It will be resolved.

Specifically on our appeal alright, so we'll have to see how it goes.

And but we're feeling confident about it.

Getting to the the next question on Red Sea again, we feel as you said in your question it and as I said previously it's a much larger patient population one of the things that we have talked about and that is one of the reasons why we've invested to accelerate the program we will have our.

Sales teams.

And and our medical teams will be working to really educate physicians on why prevention is the way to go for <unk>. If you take a look today.

Thomas Appio: You know, if you take a look today, you know, the investments that we're making in XIFAXAN in, as I talked about in my prepared remarks on, you know, the medical side, still today, you see patients not getting treatment after the first HE episode. Clearly, if you look at the pharmacoeconomic data, as to prevention versus having an HE episode or then multiple HE episodes, you know, we believe, from a payer perspective, from a patient perspective, that prevention is going to really be something that people will want and be interested in.

The investments that we're making in xifaxan in as I talked about in my prepared remarks on the medical side still today, you see patients not getting treatment after the first.

<unk> and so clearly if you look at the Pharmacoeconomic data.

As to prevention versus having an episode or then multiple Ht episodes.

We believe from a payer perspective from a patient perspective.

Prevention is going to really be something that people will want and be interested in if you look at some of the work that we're doing today.

Thomas Appio: If you look at some of the work that we're doing today, you know, on direct-to-consumer advertising today is to really educate not only patients, but also the caregivers of what happens to them if you have an HE episode, not only to the patient, but to the caregiver. We really think prevention is going to be something that will be very much accepted, but there will be a lot of education between our medical affairs team and our sales teams. It's a good question. Thank you. Next question, operator.

On direct to consumer advertising today is to really educate not only patients.

But also LNG Kate the caregivers of what they go what goes what happens to them. If you have an episode not only to the patient but to the caregiver. So we really think prevention is going to be something that will be.

Very much accepted but there will be a lot of education between our medical affairs team and our sales teams.

But it's a good question. Thank you next question operator.

Operator: There are no further questions in queue.

There are no further questions in queue.

Thomas Appio: With no further questions, I would just say, you know, in summary, we had a solid Q2 performance and made good progress on key strategic objectives. We look forward to H2 2023 with the focus of profitable growth, driving performance, advancing R&D and BD, and unlocking value. Thank you for joining our call today.

Okay. So with no further questions I would just say in summary, we had a solid Q2 performance and make good progress on key strategic objectives. We look forward. The second half of 2023 with the focus of profitable growth.

Driving performance advancing R&D, NBD and unlocking value.

Thank you for joining our call today.

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Q2 2023 Bausch Health Companies Inc Earnings Call

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