Q3 2024 Bausch + Lomb Corp Earnings Call and Business Update
Yes.
[music].
Speaker Change: Good morning, and welcome to Bausch and Lomb <unk> third quarter 2024 earnings call.
Speaker Change: All participants will be in listen only mode.
Speaker Change: Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: Please note. This event is being recorded I would now like to turn the conference over to George got Koski, Vice President of Investor Relations and business insights. Please go ahead.
Speaker Change: Thank you good morning, everyone and welcome to our third quarter 2024 financial results Conference call participating on today's call are chairman and Chief Executive Officer, Mr. Brent Saunders and Chief Financial Officer, Mr. Sam Elder Suki.
Speaker Change: 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.
Speaker Change: Before we begin I would 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 legend at the beginning of our presentation. As it contains important information. This presentation contains non-GAAP financial measures and ratios for more information about these measures and ratios. Please.
Speaker Change: Refer to slide one of the presentation.
Speaker Change: non-GAAP reconciliations can be found in the appendix to the presentation posted on our website.
Speaker Change: The annual guidance in this presentation is effective as of today only it is our policy to generally not update guidance until the following quarter unless required by law and not to update or affirm guidance other than through broadly disseminated public disclosure with that it's my pleasure to turn the call over to Brent.
Brent Saunders: Thank you George and thank you everyone for joining today's call.
Brent Saunders: Going to share the latest chapter in our execution story, Sam will dig into the numbers and I'll close by highlighting some of the diverse products and services that position us for sustained profitable growth.
Brent Saunders: But first an important note on recent speculation around the potential sale of basketball.
Brent Saunders: While all parties remain committed toward full separation from Bausch health and there are multiple paths to making that happen, we don't comment on rumors involving the company.
Brent Saunders: I certainly appreciate that some of you may ask about these rumors in the Q&A portion of today's call as I'm sure. You'll appreciate our standard response.
Brent Saunders: You may be bored by our three areas of focus and that's a good thing.
Brent Saunders: We don't need a dramatic shift in strategy or a change in how we report our progress instead, we need to continue our relentless focus on execution, which is exactly what we are doing.
Brent Saunders: 1920 2019.
Brent Saunders: These figures represent our constant currency revenue growth over the past four quarters.
Brent Saunders: Top line growth is one of the three critical metrics, we're focused on as we work to become the best I Hope company.
Brent Saunders: We obviously made great strides there while steadily improving the other two metrics margin expansion and cash flow, which Sam will cover in his remarks.
Brent Saunders: Our revenue growth is fueled by our sales force, we're giving them a steady stream of new products to place online in store on prescription pads and then the operating suites.
Brent Saunders: But we're also making their jobs easier by enhancing our digital capabilities.
Brent Saunders: On our last earnings call I highlighted glimpse, our new proprietary digital sales platform.
Brent Saunders: Uses AI and machine learning to provide tailor made guidance for gauging eyecare professionals.
Brent Saunders: As our team becomes more comfortable with the platform, we're seeing its impact on both sales and employee engagement.
Brent Saunders: We also launched Opal or digital e-commerce marketplace that I'll go deeper on later.
Brent Saunders: Finally, the ongoing evolution of our R&D function is positioning us to win now and in the future.
Brent Saunders: The most recent example is FDA approval of the Vista Envy, our latest entry into the high margin premium I O L category.
Brent Saunders: But what's happening behind the scenes will dictate our success for years to come.
Brent Saunders: We're making a calculated move to higher margin product portfolio, which means turning our focus to addressing unmet needs and playing in areas where existing therapies aren't moving the needle.
Brent Saunders: We're doing this through an influx of top talent and by partnering with academic institutions and startups that can deliver multiple candidates ready for clinical stage over the next few years.
Speaker Change: Keeping with our boring thing nothing has changed on the roadmap slide save for the position of our progress indicator.
Speaker Change: This slide always represents an opportunity to highlight some of the worst glamorous, but critically important ways. We're changing how we operate with efficiency and continued growth top of mind.
Speaker Change: Europe you examples from the third quarter.
Speaker Change: In July we installed a new line at our facility in Milan to manufacture small bottle products, which is part of a broader network optimization strategy.
Speaker Change: This mirrors a similar move earlier this year in Berlin with one goal in mind getting products to end users faster.
Speaker Change: We continue to deploy AI across our contact lens manufacturing sites to drive yield and output gates.
Speaker Change: It started in Rochester, and last quarter, we extended the program to Waterford.
Speaker Change: <unk> is an AI for ai's sake, using predictive analytics to eliminate downtime on automated lines producing millions of contact lenses can result in real savings.
Speaker Change: Product launches and performance get all the hype, but if we're not constantly optimizing how we operate and getting the small things right, we won't realize our full potential.
Speaker Change: Our holistic strike was once again, a full display in the third quarter and continues to differentiate bausch and lomb and a health industry and beyond.
Speaker Change: And our vision care segment, we continue to see aggressive growth in daily Si Hy lenses with room to run as we progressive we watched multifocal toric options and new geographies.
Speaker Change: Big picture, it's clear, we're taking market share and not at our own expense, there's growth across our lens offerings with infuse ultra and bio true driving switches and new starts.
Speaker Change: Our surgical business, which saw a 12% constant currency revenue growth is a microcosm of our holistic strength, which I'll touch on later.
Speaker Change: We highlighted in Bible, and Zebra revenue, which certainly played an outsized role and 76% constant currency revenue growth for our pharmaceutical segment.
Speaker Change: But it's important to understand the combined revenues from these two products represents less than half of overall sales for that segment last quarter.
Speaker Change: International Pharmaceuticals in particular was a solid contributor with 11% constant currency revenue growth.
Speaker Change: It's worth pointing out that absence of hydro revenue pharmaceuticals saw an impressive 25% organic revenue growth for the quarter.
Speaker Change: I'll now turn it over to Sam for a deeper dive on our financials.
Thank you Brent and good morning, everyone.
Before we begin please note that all my comments today will be focused on growth expressed on constant currency basis, unless specifically indicated otherwise.
Sam: Turning now to our financial results on slide seven.
We're pleased to report another quarter of solid performance with revenue growth across our segments geographies and product franchises.
Sam: We're seeing broad based growth momentum in our business continue.
Sam: Driven by our intense focus on execution.
Sam: Total company revenue of 1.1 96 billion for the quarter reflects growth of 19% and 10% on an organic basis.
Speaker Change: As Brent highlighted we're continuing to execute our strategy, where do you mean focused on driving selling and operational excellence and prioritizing inhibition.
Speaker Change: Our steady stream of product launches continues to drive growth and we're excited about the opportunity ahead of us for the remainder of 'twenty 'twenty four and future years.
Speaker Change: For the third quarter.
Speaker Change: Currency was a headwind of 5 million to revenue.
Speaker Change: Now, let's discuss the results in each of our segments.
Vision care third quarter revenue of $684 million increased by 6% driven by growth in both the consumer and contact lens portfolios.
Speaker Change: The consumer business grew by 3% in Q3, let.
Speaker Change: Let me go over a few highlights.
Speaker Change: In the quarter.
Speaker Change: <unk> grew by 7% and continued to expand its market leading position.
Speaker Change: Our consumer dry eye portfolio delivered 93 million in revenue, representing 19% growth in the quarter.
Speaker Change: Our two key franchises are select hemp link continues to drive this strong performance.
<unk> grew by 19% and blend grew by 35% in the quarter.
Speaker Change: While we continue to see solid retail consumption and market share across our portfolio.
During the third quarter.
Speaker Change: The broader consumer market in the U S experienced disruptions in the drugstore channel and retailer inventory rebalancing.
Speaker Change: These market dynamics had the largest impact on our eye vitamins franchise, which was down 9% in the quarter.
Speaker Change: Both Q3, we're encouraged by the strong consumption growth in our portfolio during the month of October and we'll continue to monitor the retailer market as we move into Q4.
Speaker Change: Contact lens revenue growth was 12%.
Speaker Change: With strong performance across modalities key brands and geographies.
Speaker Change: In Q3, we saw solid growth in both the daily and frequent replacement portfolios.
Speaker Change: We are continuing to see strong momentum with daily Si Hy, which grew 17, 9% in the quarter.
Speaker Change: We also saw growth across key franchises, including <unk>, which was up 4% in the quarter and ultra which was up 6%.
Speaker Change: Contact lens revenue growth was broad based across markets with the U S up 13% in the quarter and international up 11%.
Speaker Change: Outside the U S. We saw solid performance across all of the regions with growth in China, leading the way at 16% in the quarter.
Speaker Change: As Brent will discuss further we are investing in building, our direct to consumer channel and contact lenses.
Speaker Change: We're seeing positive early results from the direct to consumer initiative in China, which we launched at the end of last year.
Moving now to the surgical segment third quarter revenue was $206 million an increase of 12%.
Speaker Change: In Q3.
Speaker Change: We saw growth in each of our three surgical product categories.
Speaker Change: Consumables, our largest product category grew in the quarter by 14%.
Speaker Change: Revenue from equipment was up 6%, mainly driven by solar system sales.
Speaker Change: And the Implantables was up 13% in the quarter with our state of Iowa was up 7% and our premium I was up 23%.
Speaker Change: Our ambitious I O L platform is continuing to perform well.
Speaker Change: With the ambitious aspire lines, making a strong early market entry, we expect the cadence of biologics to continue.
Speaker Change: Our strategy in the surgical business remains the same.
Speaker Change: We are delivering growth by first.
Speaker Change: Focusing on consistent supply of products to our customers.
Speaker Change: And second continuing to deliver innovation and launched premium products with higher margins.
Speaker Change: The Fda's approval of the M Vista N V Tri focal I O L that Brent referred to as a case in point.
Lastly revenue in the pharma segment was 306 million for the quarter.
Speaker Change: Which represents growth of 76% and organic growth of 25%.
Speaker Change: Mike we delivered $49 million in revenue in the quarter and has continued its exceptional launch performance.
Speaker Change: As we've said before we remain committed to making investments to drive that strong growth including.
Speaker Change: Including the recent direct to consumer campaign, and continuing to expand market access, which brands will discuss in more detail.
Speaker Change: <unk> delivered $92 million in revenue in the third quarter.
We continue to make steady progress in executing our strategy.
With investments in direct to consumer marketing campaigns.
Speaker Change: And the field force realignment earlier in the year.
Speaker Change: T Rx strengths continue to move in a positive direction.
Speaker Change: <unk> has reached approximately 22002 directors in the past four weeks.
Speaker Change: As we have highlighted in the past we're excited about our overall dry eye platform.
Speaker Change: I run my vote together have positioned us as a leader in dry eye disease, and strengthen their dry eye franchises, and our consumer and surgical businesses.
Speaker Change: Beyond <unk>, we also saw strong growth across other parts of the pharma business for example, international pharma grew by 11%.
Speaker Change: As expected and as previously mentioned.
Speaker Change: Relenza declined compared to Q3 of 2023 due to generic entry in Q1 of this year.
Speaker Change: Now, let me walk through some of the key non-GAAP line items on slide eight.
Speaker Change: Adjusted gross margin for the third quarter was 63%.
Speaker Change: Which was up 170 basis points compared to Q3 of 'twenty to 'twenty three.
Speaker Change: The increase in adjusted gross margin was media driven by product mix.
Speaker Change: As we continue to execute our strategy to transition to higher margin products.
Speaker Change: In the third quarter, we invested $84 million and adjusted R&D or about 7% of revenue.
Speaker Change: As we discussed before we anticipated entering into collaboration agreements with external partners to drive pipeline inhibition.
Which would result in one time IP R&D investments.
In the third quarter, we made one time investments of approximately $15 billion of IP R&D really it's such agreements.
Speaker Change: Third quarter adjusted EBITDA, excluding acquired IP, R&D was $227 million, which represents 21% growth versus the third quarter of 2023.
Speaker Change: Including the IP R&D investments adjusted EBITDA was $212 million.
Speaker Change: As I mentioned before.
These IP R&D investments are not reflected in our full year 2020 for guidance.
Speaker Change: Net interest expense for the gross $96 million.
Speaker Change: Adjusted EPS, excluding acquired IP R&D was 17 cents for the quarter.
Speaker Change: Including the IP R&D investments adjusted EPS was 13 sets.
Speaker Change: For the quarter Capex was $60 million.
Speaker Change: As Brent referenced.
Speaker Change: We've been focused on driving our cash flow performance.
Speaker Change: Adjusted cash flow from operations was 159 million in the third quarter and $231 million year to date.
Speaker Change: We're continuing to make progress on various cash flow initiatives, including working capital management.
Speaker Change: Turning now to our 2024 guidance on slide 11.
Speaker Change: We are raising our full year revenue guidance to a range of $4 75 to $4 85 billion.
Speaker Change: Up from four seven to $4 8 billion.
We continue to expect full year constant currency growth of approximately 16% to 18%.
Our increased full year revenue guidance reflect strong <unk> performance as well as lower expected currency headwinds.
Speaker Change: In our dry eye portfolio, we are raising our full year guidance, where Michael revenue from a range of $150 million to $160 million to a range of.
$165 million to $170 million.
Speaker Change: We're also encouraged by the positive T Rx growth in Xyrem, as we progress towards our guidance of $355 million to $365 million.
Speaker Change: As we head into 2025, there are two factors owns either that would continue to watch closely which I flagged last quarter.
The first is the potential headwind the impact of the inflation reduction Act.
Speaker Change: And the second.
Speaker Change: Is bad thing our strategy to drive T Rx growth.
Speaker Change: While ensuring we have access to coverage through health plans for as many patients as possible.
Speaker Change: For the full year, we expect currency headwinds of approximately 75 million to revenue down from $19 million.
Speaker Change: Our adjusted EBITDA guidance, excluding acquired IP R&D is at a range of 852 $900 billion into.
Speaker Change: Consistent with our adjusted EBITDA guidance last quarter, which did not include the acquired IP R&D.
Speaker Change: In Q3, IP, R&D was $15 million and $18 million year to date.
Speaker Change: In terms of the other key assumptions underlying our guidance as noted last quarter.
Speaker Change: We expect adjusted gross margin to be 62, 5%, which is at the high end of our previous guidance range.
Speaker Change: I would continue to expect the investments in R&D to be about 7% to 8% of revenue.
Speaker Change: We continue to expect interest expense to be approximately $385 million for the full year.
Speaker Change: And we expect our adjusted tax rate to be roughly 15%.
Speaker Change: And full year Capex is expected to be approximately $250 million.
Speaker Change: To summarize we're very pleased with the solid execution and strong performance in the quarter.
Speaker Change: We continue to make investments across our portfolio and in our innovative product launches and that strategy is paying off.
Speaker Change: We expect our ongoing momentum to continue to drive revenue growth and future margin expansion.
Speaker Change: And now I'll turn the call back to Brent.
Brent Saunders: Thanks Sam.
Let's move to products and services that will be synonymous with bausch and lomb for years to come.
Brent Saunders: We built an impressive and all encompassing dry eye product portfolio with revenue growth that reflects increasing awareness of our common commonly untreated condition.
Brent Saunders: If you're one of the approximately 150 million U S. Adults that experience occasional are frequent symptoms of dry eye or one of around the 38 million living with dry eye disease, we have a treatment option for you.
Brent Saunders: I'll highlight over the counter growth on the next slide so let's focus on our flagship prescription products.
Brent Saunders: We celebrated my one year anniversary in the third quarter.
Brent Saunders: And what we've been able to accomplish since launch has been remarkable approximately 17000 eye care professionals are prescribing by boat to approximately 150000 patients.
Brent Saunders: Feeling is believing for dry eye disease sufferers, which is why we're excited that our new one six ml sample began shipping weeks ago.
Brent Saunders: Those samples will help activate new prescribers, along with a high percentage of covered lives. This early in our launch cycle approximately 70% in commercial and approximately 45% and Medicare part D.
Brent Saunders: Last quarter, we alluded to making a significant investment in direct to consumer campaign for my vote, which launched earlier this month.
Brent Saunders: The ads are memorable and target a somewhat younger demographic as dry eye disease isn't solely age related.
Brent Saunders: We also launched a sizable direct to consumer campaign preside right in Q3 that features Emmy Award winning actress Julie Bowen, our modern family thing.
Brent Saunders: It's early days, but it appears the campaign is already providing a boost designed for prescriptions, which show a positive momentum as we continue to execute on our strategy.
Speaker Change: Joe We took part in an event we hosted in September to coincide with vision Expo West in Las Vegas.
Speaker Change: Well she shared her dry eye journey with a roomful of 300, a prominent eyecare professionals, we took over the sphere, the world's largest leds screen.
Speaker Change: Dry eye symptoms, where overlaid on a real human eye and we drove traffic to know your dry eye dot com, our unbranded dry eye education website.
Speaker Change: Sometimes you have to go bid when there's a big opportunity.
Speaker Change: As more people around the world become dry eye curious, thanks to our own efforts changing habits and environmental factors. This first step is often an OTC treatment.
Speaker Change: Look at two examples of how we're winning in that space.
Speaker Change: After acquiring Blink from Johnson <unk> Johnson vision in July 2023, we reinvented the brand at all levels.
Speaker Change: Our work play link relief direct to consumer campaign, which also targets a younger demographic featured one of the highest rated bausch and lomb adds ever and provided an immediate sales lift.
Speaker Change: We also made blinked, a focal point of optometry meetings and events.
Speaker Change: Highlighting data and hosting symposia for eyecare professionals, whose recommendations of OTC eye drops carry significant weight.
Speaker Change: Our methodical approach to reinvention and bringing a new audience is paying dividends with 35% reported revenue growth for the Blink franchise in the third quarter.
Speaker Change: That growth is even more impressive when you consider that the overall U S. OTC dry eye market grew 8% in Q3.
Speaker Change: Efforts are underway to bring linked to more countries, which would complement art alike are steady and perhaps unsung performer that continues to expand in Europe and middle East.
Speaker Change: Artifact saw a healthy 19% reported revenue growth in Q3.
Speaker Change: Like Blink were touting the science behind the Ottawa to influence the Influencers and.
Speaker Change: In fact, the tear film in the ocular surface Society annual meeting is currently underway in Venice, which we are using as an opportunity to highlight the latest Ottawa findings.
Speaker Change: Oh, Paul our new digital E Commerce marketplace was in beta testing for much of the third quarter with an official launch on October one.
Speaker Change: If the premise sounds simple that's because it is <unk>.
Speaker Change: <unk> provides a streamline ordering process for bausch and lomb contact lenses.
Speaker Change: Why is that important.
Speaker Change: Because we're making life significantly easier for eyecare professionals and their patients.
Speaker Change: <unk> as a complementary offering to eye care practices that is accessible to their patients and teachers order tracking and history appointment reminders and automated prescription reminders.
Speaker Change: All orders made through Opal are delivered with free shipping directly to patients' homes or to the practice and each patient purchase earns points towards the bausch and lomb horizon rewards loyalty program.
Speaker Change: By offering an all in one digital platform that offers faster more convenient ordering of our products, we're helping to save staff time.
Speaker Change: Louis patient loyalty and reduce the administrative burden for participating eye care practices.
Speaker Change: That matters in an industry, where long term relationships per Ted long term success.
We expect that Opel will evolve overtime to mirror, our ongoing investment in digital capabilities in.
Speaker Change: In fact later this year, we plan to start offering select OTC products, including <unk> and Blinked eyedrops.
Speaker Change: Excitement about Israel and not just from the early adopters are awful demo has consistently been one of the most popular features at trade shows as we put our digital embrace on full display.
Speaker Change: We highlighted milestones in our premium IOL journey every quarter and for good reason these are high margin products and we have a rich pipeline.
Earlier I mentioned, the recent FDA approval for <unk> to NV and we already have significant momentum in the first five days there were more than 100 implants by 70 surges.
Speaker Change: We saw 13% constant currency revenue growth for Implantables in the third quarter with 23% constant currency revenue growth for Premier miles.
Speaker Change: But I'd like to take a step back and remind everyone that I O oils are one leg of our surgical store.
Speaker Change: We now have three quarters in a row of growth across the three surgical categories with 6% constant currency revenue growth in equipment, and 14% constant currency revenue growth in consumables, which makes up approximately half of surgical sales.
Speaker Change: At the risk of stating the obvious surgical is an interconnected business continued strength in each area means strength as a whole and that doesn't go unnoticed by ophthalmic surgeons.
Speaker Change: When taking at our launch slide it's important to consider launch cycles.
Speaker Change: We live in an era of hotcakes were opinions are formed almost instantaneously.
Speaker Change: For new market entries. This means some will attempt to determine a products liability based on our limited performance window.
Speaker Change: In reality, one cycles last two or three years, here's why that bodes well for our future.
Speaker Change: We're in the middle of multi dimensional launch cycles around the world.
Speaker Change: Covering all of our businesses and targeting all of our audiences.
Speaker Change: Product launches arent box checking exercise their living breathing commitments that present, new opportunities for growth at every turn.
Speaker Change: When you look at our top 10 products by revenue new products, including products new to us feature prominently.
Speaker Change: Other shown here are knocking at the door.
Speaker Change: <unk> growth from our daily Si Hy franchise has Atlanta at number 11 on the revenue ranking.
Speaker Change: And some like preservation and Luma Fi are being enhanced overtime to appeal to an even broader customer base.
Speaker Change: When considering our freshness index, especially in a compressed timeframe, we're delivering on our innovation goals.
Speaker Change: That's why we continue to be excited about our trajectory.
Speaker Change: None of this would be possible without the ongoing commitment of 13000 colleagues around the globe.
Speaker Change: Impressed me every day.
Operator, let's open the line for questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: And the first question today is coming from Patrick Wood from Morgan Stanley Patrick.
Speaker Change: Patrick Your line is less.
Patrick Wood: Perfect. Thank you so much.
Patrick Wood: I'll tell you two quick ones if I can.
Patrick Wood: And I guess, taking a step back there's been a lot of change in the business today to get us to where we are but from the employee side and then on the product side.
Speaker Change: If you have characterized it I guess, what do you think the biggest factor has been getting us to where we are today and how do you think about you mentioned, obviously the launch cycle in two to three years of living breathing. How you think about investing behind those launches and the interplay between margin and growth going forward I had one quick follow up.
Brent Saunders: Sure. Thank you Patrick I appreciate the two questions. So.
Speaker Change: On the first question.
Speaker Change: Really really interesting a question around what is the biggest factor it's hard to point to one but let me just take a step back in <unk>.
Speaker Change: And give you my two cents. So I joined almost two years ago and laid out a very clear strategy for this company, which was to to really focus on sales excellence operational excellence and innovation and.
Speaker Change: And I think when when you lay out a very clear strategy with very specific actions around it and you get the buy in of 13000 people to really focus relentlessly on an execution. Good things happened now it's easy to say, it's hard to do.
Speaker Change: But the team has been working very hard at doing just that and I think when you.
Speaker Change: When you when you see broad based performance.
Speaker Change: You know that it's really working and so if you think about you know our constant currency growth of 19 organic Ted.
Speaker Change: Across the company, but when you look at like a business like contact lenses, there was up 12% on constant currency basis, and even just drill down on that as an example, you know the U S was up 13 International was up 11, our daily Si Hy was up 79%, but even some of our EF.
Speaker Change: Our <unk> products continued to grow in a bio true up for ultra six even software ends up three are digging even deeper China up 16, and so when you when you see performance and in a business like that you know that the team is really executing with excellence and I think that's partly drew.
Speaker Change: <unk> bye.
Speaker Change: By really enhancing capabilities, whether it be digital DTC. We did in China are open we're launching now in the U S. But also the fact that we have great products and we finally have uninterrupted supply.
Speaker Change: We have we have a great portfolio and in many markets not all markets yet our full portfolio. So the U S. You know infused now has the spherical the multifocal and the toric and we're looking at over the next year or two launching all the modalities in other markets around the world. So that cycle is really in early days.
As as we continue to focus on driving the new products, while maintaining growth in in the existing portfolio and you can do that and in surgical and pharma and consumer as well and so you know I think we feel really good about where we are today and I think as you look at that launch slide that I had in the in the prepared.
Presentation, you know I said this in the remarks, we're at the early stages of many of these launches.
Speaker Change: And we continue to invest in and early innovation that will then continue this robust cycle of new product launches there hopefully over the next decade and beyond so again to summarize probably the biggest factor is just a relentless focus on execution across the world.
Speaker Change: In terms of investing in the launch cycles, it's always a balancing act.
Speaker Change: Obviously, you know we are very committed to both our gross margin expansion EBITDA margin expansion over time.
Speaker Change: But we also can't shortchange the the important.
Speaker Change: Launch.
Speaker Change: Investment that you need to make and you know my view is a great example of that.
Speaker Change: Where we are really continuing to heavily invest.
Speaker Change: To change the curve of that launch because that's a product we expect to have for a decade or more.
Speaker Change: And getting that early first two years or three years right is critical.
Speaker Change: Creating a long term profitable product for the company.
Speaker Change: Other products you know include infuse or the daily Si Hy as other.
Speaker Change: Blink.
And this the NV and this this fire and so we do balance it across the.
Speaker Change: Portfolio.
Speaker Change: And seven high look at ROI at end and continuous investment almost on a daily weekly monthly basis with all of our key business leaders.
Speaker Change: So hopefully that answers your two questions yeah.
Speaker Change: Completely I will pass the commercial in times Square every day after my vote, which is I'm, saying [laughter]. Thank you well hopefully you're visiting a doctor and talking about your your your symptoms too [laughter].
Speaker Change: Yeah.
Speaker Change: Thank you operator next right.
Speaker Change: The next question will be from young Li from Jefferies younger.
Your line is life.
Young Li: Alright, great. Thanks, a lot for taking the question.
Speaker Change: I guess.
Young Li: Maybe just focusing on the thrive portfolio.
Speaker Change: Uh huh.
Speaker Change: Doing really well broadly and it seems like the OTC side, it's also benefiting.
Speaker Change: Some of the pull through of that.
Speaker Change: No.
Speaker Change: On the Scripps side.
Speaker Change: Maybe can you talk a little bit about the sustainability of that pull through growth and.
Speaker Change: There is opportunities to add some incremental OTC products into that portfolio as well.
Speaker Change: Yeah, you're right. So the dry eye portfolio on a comprehensive basis is really important.
Speaker Change: A strategic imperative for us.
Speaker Change: And I'm very pleased with what we saw in.
Speaker Change: In the third quarter on the consumer side, you saw that portfolio up 19% on a constant currency basis with really strong performance from our OTC offerings, Blink and art a lack blink in the end it is R. R.
Speaker Change: Predominantly U S. But also some international markets than in Ottawa is exclusively in the international marketplace and both are really important growth drivers obviously in the U S. A a.
Speaker Change: Pharmaceutical business my boards either are a really important my boat continues to set new records for ocular surface, but the pharmaceutical watch.
Speaker Change: You know outpacing any benchmark that we see and there I think we're just getting started one year in it and you know we just launched a DTC a couple weeks ago I think we have a really strong.
Speaker Change: Creative ad.
Speaker Change: And we're going to look for early signs as that has only been on the on air for probably two weeks at this point.
Speaker Change: But we're also expanding coverage commercial coverage now is at 70% Medicare is up 45 week, we anticipate Medicare to jump over 50% in the first quarter.
Speaker Change: And that's really important.
Speaker Change: Our benchmark for coverage for my bow and so you know that.
Speaker Change: That's important XI draw you know it was obviously a repair situation I think the team did a really nice job in the second quarter stabilizing and then as you look at the third quarter you start to see green shoots of growth, but more importantly, as we look at at prescription trends.
Speaker Change: <unk> in particular, you know you're starting to see solidly <unk>.
Speaker Change: <unk> is above 22000 a week.
Speaker Change: We expect hopefully as we go into the third quarter. Our goal is to get it and solidly into the 23 to 24000 and so you know a lot of lot of things are working well, obviously, Sam called out next year.
The inflation reduction act and some gross to net pressure.
Speaker Change: On a T Rx basis, I think we're seeing really nice growth there and so when you put it all together and you're using your mega phone, whether it being consumer prescription and you look at the market that just take the U S. As an example, 150 million people with symptoms 38 million people with dry eye disease, but only one.
Speaker Change: 5 million actually roughly 1.5, receiving a prescription there is a huge untapped market there, whether we're driving them into Amazon or to a drugstore or a walmart.
Pick up in OTC option, or whether they're going to talk to their physician about their symptoms and getting a <unk> script and so that strategy was very intentional to be able to look at the disease more holistically and I think we're seeing really early signs of paying off and we have a long runway on these <unk>.
Speaker Change: Alex.
Speaker Change: So it's a really important point in part part of growth for us for the next decade or more.
Speaker Change: Alright, great I appreciate that.
Just a follow up was wondering.
Speaker Change: On the contact lens business.
Speaker Change: The premium dairy portfolio driving new starts share taken.
Speaker Change: Wanted to hear.
Speaker Change: So sustainability of that and more broadly.
Speaker Change: Cyber consumer portfolio, what do you see and what's the health of the U S consumer.
Speaker Change: Ability is key to increased prices going forward.
Speaker Change: Industry capacity versus demand dynamic.
Speaker Change: Sure. So let's take the lens business first then we'll come back to consumer so so yes, great performance Holistically and lens around the world.
Speaker Change: Even in markets, like Japan, which which are relatively soft right now we grew about 3% in Japan. So so really nice performance.
Speaker Change: You know as I mentioned earlier, China's 16 International 11, and U S up 13, and what I'm really pleased about is not just the performance of the daily Si Hy, which is exceptional and remember I think that has a long runway of growth because the only market that has the full portfolio of.
Speaker Change: Spiracle multifocal toric as the U S that will roll around the world over the next year or two and so you know a lot a lot of future growth to go there, but growing that business, while maintaining the FRP and non Si Hy Len.
Speaker Change: Lenses is really important part of the strategy and the team is doing just that as I mentioned earlier bio true up for ultra six even soft lines up three and so as we can continue to maintain growth and let's call. It the older portfolio, while we drive growth exceptional growth in the in the new portfolio.
Speaker Change: It is really what you want to see in that business. So I think there's a long runway there and as we continue to embrace digital technologies in markets like China, which is the DTC market, adding opal and the U S. Just a few weeks ago went live October one.
Speaker Change: You know I think we continue to look holistically at how we improve the customer experience through the for the ECP and then make it easier for the consumer to stand our lenses is an important part of that strategy on.
Speaker Change: On consumer.
Speaker Change: A little bit of a multifactorial situation on an actual revenue growth.
Speaker Change: In the quarter, which was about 3% constant currency I'm there you see.
Speaker Change: A lot of Destocking at retailers I'm really working down inventory.
Speaker Change: The drug channel of trade is probably a call out there.
Speaker Change: Probably experienced the most destocking.
Speaker Change: And as we know those companies are dealing with their own issues a lot of store closures, we saw bankruptcy from rite aid as well.
Speaker Change: And all.
Speaker Change: All you have to do is go into one of those stores and you see a lot of product behind glass really.
Speaker Change: Making the shopper experience a little bit more challenging there and so over time, we'll see those consumers continue to find other outlets to shop that are more convenient perhaps or maybe the drug channel.
Speaker Change: Invest in the consumer experience, but the real imported number that we track probably the most important is consumption and there we're seeing very very strong consumption still in the third quarter and frankly, almost a month into the fourth quarter, we're seeing really nice conjunct consumption numbers for our key brands and.
Speaker Change: So you know I would say I am very cautiously optimistic obviously, we continue to watch.
Speaker Change: Consumer sentiment around the world, but for right now our consumption numbers, which are really the most critical number to track remained very strong.
Speaker Change: Thank you.
Speaker Change: The next question is coming from Larry Eagleson from Wells Fargo.
Speaker Change: Gary Your line is live.
Speaker Change: Hey, this is some are non friend Larry Congrats on the quarter and thank you guys for taking the question.
Speaker Change: I'll start off on guidance and then I have a quick follow up.
Brent as you mentioned earlier constant currency growth has been between 19% to 20% over the past four quarters and we see EBITDA margins have steadily moved upward through the year.
If I look at your guidance at the midpoint. It implies you know.
Speaker Change:
Speaker Change: Constant currency growth decelerated to 8% while margin continue to kind of accelerate towards that 20% range in Q4, maybe help bridge the gap for us and how should we think about each.
Speaker Change: These items heading into 2025.
Speaker Change: Sure maybe I'll, let Sam take it and I'll add any color. After he answers sure. We're very pleased with what we've seen in Q3 in terms of the actual results and also when you reflect back and just reflect back on what Brian said when you look at Q1, two and three.
Speaker Change: 24, we're pleased with what we were able to do so when you think about our guidance and we've all we've said this always in terms of how we think about our guidance philosophy on guidance was all of those factors in a range of outcomes.
We tend to be trying to stay balanced with our views when we think about our guidance and you think about.
Speaker Change: This quarter, 20%, 19% constant currency of 10% organic when you think about negative for Q4, our guidance suggests anywhere our still holds for the full year anywhere between 9% to 11% and if youre, taking the midpoint of that is roughly about 10% in terms of our organic growth.
Speaker Change: And just using that number because if you have to remember that <unk>, we had zander for full year last year. So we're lapping that during Q4, two constant currency and organic are going to be almost the same number as you're thinking about Q4.
Speaker Change: We don't see that sort.
Speaker Change: <unk>.
Speaker Change: Slow down into Q4, we actually probably thinking about we're continuing with our mid range of the guidance is still 10%, which is consistent with our performance of the year.
Speaker Change: When you think about EBITDA.
Speaker Change: It was very nice margin expansion as we said in the beginning of the year that we're going to continue to have a steady margin expansion as we go forward throughout 'twenty four and we've seen that play out really between Q1, Q2, and Q3 and we expect that will continue as we push forward into Q4, just remember there's always seasonality in our business our first half of the year.
Speaker Change: To be a little bit slower as we compared to the second half. So we factored that also in our phasing as we thought about Q3 to Q4.
Speaker Change: Okay.
Speaker Change: And maybe just for my follow up can you quantify the impact of Qs I draw in 2025 from the two headwinds that you mentioned earlier and <unk> sales grow in 2025 with the two <unk>.
Speaker Change: Lynn.
Lynn: Yeah, I don't want to guide to 25% on this call.
Lynn: Probably the best way, we think about zero right now.
Lynn: We're still evolving our thinking, especially around our employees can act as well as some of the rebate discussions.
Lynn: A discussion that we highlighted in my script, but you should think about zohydro in two parts here, if we step back and you think about the volume in <unk>, which is one of the key drivers that we think about from a growth perspective, we've seen that really nice sequential growth in volume and holding that your axes at 22000 <unk> average.
Lynn: That we've seen now and will continue to drive that volume as we go into 'twenty five.
Our thinking is still continues to evolve in terms of how we're thinking about the inflation act and rebates and managing sort of the axis versus volume for next year. So I don't want to guide a specific number in this call here today, but what we know is going to be when you look at it on an equal basis. It will be a headwind for us we <unk> anticipated to be a headwind.
Lynn: For us in 'twenty five.
Speaker Change: Next question.
Speaker Change: The next question will be from Matt <unk> from Barclays. Matthew Your line is live.
Speaker Change: Great. Thanks, So much can you hear me okay.
Speaker Change: Yes go ahead.
Speaker Change: Terrific.
Speaker Change: So.
Matthew: One question on.
Matthew: On some of the DTC efforts that you.
Put in place for Zohydro, ER, Mimo, which I've seen both and they look great.
Matthew: Helpful maybe to understand.
Matthew: Sure.
Matthew: What do you think the timing.
Matthew: Hum.
Matthew: Think of those as efforts tends to look like over the next couple of quarters.
Speaker Change: And then I have one follow up.
Speaker Change: Yeah. So thanks for the question so as I drove we launched.
Speaker Change: Towards the end of the second early third quarter. So it's been out.
Speaker Change: For a few weeks its good creative it's a big change from the way Novartis positioned.
Speaker Change: But the drug.
Speaker Change: I think Julie Bowen is a great spokesperson and lead for the for those spot and and in fairness I always joke with my I'm.
Speaker Change: I'm not even sure I'm joking with my commercial leads that.
Speaker Change: Creative is really the best Kpis for great creative as sales growth.
Speaker Change: And since we've launched <unk>, we've seen the best sales growth.
Speaker Change: But in NTR axis, and so you know.
Speaker Change: Early days and we'll have a better measure after it's been out for several months, but but I think that that spot is really working and driving patients in to ask of outsider or talk about their dry eye with their physician.
Speaker Change: <unk> only been out for two weeks, but ive been doing DTC for a long time 20 plus years.
Speaker Change: My intuition is that is an incredibly strong spot, but too early.
Speaker Change: To see any any any results in sales, but I expect that that that that spot will do very well in terms of investment. These are the types of spots. When you start to see see response, you tend to continue to invest and so right now I would say we would continue to invest behind both of these these creative.
Speaker Change: Throughout 25 and <unk>.
Speaker Change: If they continue to do well, we will pulse up.
Speaker Change: And if they dealt with pulse down in salmon I look at it with the commercial leads every quarter and think about our investment based off of an ROI analysis every quarter. So we don't just set a number for the year and say go spend it we really analyze it very quickly and I wouldn't you know I fail to mention the blink spot, which the consumer.
Speaker Change: <unk> put out as is probably one of the best ads of all time and I've I've been doing consumer a long time back to clarity in our Merrill Laxer Coppertone back on my sharing cloud days in AR.
Speaker Change: I got to say that that is one of the strongest thoughts I've seen and I've done a lot, including botox or linzess or others.
Speaker Change: And I'm really excited and we saw what was a 35% growth in blinking in the quarter.
Speaker Change: And so that.
Speaker Change: Probably is the biggest difference in growth is just that spot.
Speaker Change: And so that's what you want to say you want to see a real response in sales and when we see it we continue to invest.
Speaker Change: No that's super helpful. And then just similarly, you know.
Given the interest in sort of a multi mechanism of action strategy for dry eye and the clinician community.
Speaker Change:
Speaker Change: What what's the messaging looked like two <unk>.
Speaker Change: Clinicians on how to how to think about these two products together.
Speaker Change: And maybe what early evidence that youre getting in terms of how they're being used.
Speaker Change: Alternatively, or we're together and drive.
Speaker Change: Michael.
Speaker Change: Anxiety.
Speaker Change: Yeah. So great question, Brian clearly they worked very differently.
<unk> is an anti inflammatory and LIBOR is the only approved anti evaporated.
Speaker Change: Mechanism and so when you look at <unk>, it's really competing against the other anti inflammatories, which tend to be.
Speaker Change: Cyclists foreign based options.
Speaker Change: And <unk> is just better Madison it tends to work.
Obviously, no head to head direct studies. So so take this for what its worth but it tends to work faster.
Speaker Change: And it tends to be more effective and so clearly we believe we have the best anti inflammatory and so when a doctor sees that cascade.
Want them to highly consider XI hydro is the best option for their patients and then <unk> really has has a much simpler proposition. It's the only drug approved for evaporative dry eye and the overwhelming majority of patients experience evaporation.
Speaker Change: Which has tended to be caused by my Belgian gland dysfunction and so.
I think the way we think about it is regardless of the type of dry you have we have an option for physicians to treat their patients.
Speaker Change: And that's really how we look at it and you know.
Speaker Change: When we go out.
And you talk to physicians.
Speaker Change: They get it they understand it we're doing a lot with our medical affairs team to really tell the clinical story about each product and how to position in the practice.
And that seems to be really working quite well I would also did just that you didn't ask this but as a side note. The other the other advantage of being a holistic eye care company and having anchor brands like <unk> with a lot of promotional support behind them, whether it be direct to consumer or even even medical meetings in medical.
Speaker Change: First is that we are getting the attention of a lot of Ecp's and that's that's whether it's in optometry and that helps support the contact lens business.
Speaker Change: If it's in ophthalmology and it helps support the surgical business, because bausch and Lomb is front and center with doctors around the world.
Speaker Change: And that can help support you know an investor lunch or even pulling through mono focal LLS and so there really is a interconnectivity here that's hard to describe unless you get out in the field and you talk to doctors and they they they say bausch and lomb is everywhere, they're back and they've got a lot of energy in.
Speaker Change: Most importantly, a lot of innovation and that really is a rising tide kind of situation and we suspect and we we really arent investing in an early innovation to maintain that for the next decade or longer.
Speaker Change: That's great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is coming from Doug <unk> from RBC capital markets. Your line is live.
Speaker Change: Thank you.
I just wanted to delve a little bit deeper on that with respect to your prescription business.
Speaker Change: Do you mean by that is there are obvious benefits to having a prescription business, even though these businesses do trade at lower multiples and I am curious given the investment that you're making in the.
Speaker Change: Various programs the micra launch getting designed right back on track.
Speaker Change: Do you.
Speaker Change: View investors and potential.
Speaker Change: On larger investors is recognizing the fact that there is an opportunity where you can leverage that capability, but.
Speaker Change: At the same time that today.
Speaker Change:
The EBIT.
Speaker Change: EBITDA.
Speaker Change: Their valuation metrics might be dragging a bit as a result of that.
Speaker Change: Thanks.
Speaker Change: Yeah, it's actually something we spent a lot of time thinking about.
Speaker Change: I think you have to keep it in context, I think pharmaceuticals for US is about 25% of the overall company, which means 75% right as his surgical <unk>.
<unk> care and consumer.
Speaker Change: Very durable businesses and clearly you know.
Speaker Change: Local plus category with very limited competition.
Speaker Change: We are starting to build out one of the probably the top tier <unk> portfolios and so that really portends for great opportunity over the next two years in that business to really drive.
That on an equal footing of pharma same with contact lenses I told that story bunch of times are already in this call. So.
Speaker Change: This isn't really a pharma story. This is an eye health company story.
Speaker Change: And surgical consumer in vision care, our earned incredibly important parts of our future growth.
Excellent and then as a quick follow up for Sam.
Speaker Change: You talked about $62, 5% margins for the full year as a guide.
Speaker Change: That may be conservative, but when you look at the nine month number at $62 seven so far so does that mean, we could see a bit of a <unk>.
Speaker Change: <unk> or are you just being conservative as we look at the.
Speaker Change: The Q4 numbers, which is typically a much stronger quarter for the company and I'll leave it there. Thank you.
Speaker Change: Thanks, Doug.
Speaker Change: I'd, probably say pretty balanced.
Speaker Change: I think about the 60 to $1 five call.
Speaker Change: Call It squiggly 62, and a half as we think it could be a range.
Speaker Change: Based on again, how we think about.
Speaker Change: The range of our revenue as well and it makes a lot of products.
Speaker Change: What's more important here and what I think we should not lose sight of is.
Speaker Change: When you think about just 24% to 22 year to date and what we've been doing so far <unk> been sort of executing what we said we were going to do which is really just trying to drive that product mix.
Speaker Change: Two the higher margin price, who seem to happen in the pharma side were a Brent highlighted.
Speaker Change: <unk>, that's really a very good a nice step forward. So we're seeing that product mix shift, which is exactly what our strategy is and what we are sort of our plan and we're seeing that play out so could it be a 62 five could be $62 seven it's a square going to $62 five right now in terms of the higher end of our range.
Speaker Change: Again, it's there's multiple outcomes, who come from the region of the guidance.
Speaker Change: <unk>.
Speaker Change: Key important is we're showing the improvement in the gross margin.
Speaker Change: And and that's probably the main reason, but Sam any other.
Speaker Change: That's exactly right and we've actually.
Speaker Change: Kim.
Speaker Change: When you think about sort of reflect them from the beginning of the year, even before we give the guidance for the full year as we were.
Speaker Change: Sure.
Speaker Change: One of the first conference at the beginning of the year. We highlight that this year is going to be an investment year for us.
Speaker Change: And really that was coming from the point of knowing that the number of launches that we have.
Speaker Change: And we will want to invest behind those launches and what you've seen right now.
Speaker Change: The work that we've been doing is focusing on the top line and the top line growth.
Speaker Change: And would that topline growth that's given us the margin expansion that we've seen Q1 Q2 Q3 and also it gives us the freedom and deliberately to be able to expand our margin as we go forward into Q4 and beyond as well. So I think the story is still there in terms of investing behind the launches and having the ability to be able to continue to show that.
<unk> margin expansion as we go forward.
Speaker Change: Okay. So maybe just some quick.
Speaker Change: Some quick closing comments.
Speaker Change: Thank you all for joining us.
Speaker Change: The quarter call. We look forward to keeping you all updated as we continue to make progress and with the taking the liberty of not repeating myself here.
Speaker Change: Like Ted to just again.
Call out the really strong relentless focus on execution.
Servicing our customers on supporting our colleagues, who sell and make our products and a special thanks to all 13000 Bosch alarm colleagues for their.
Speaker Change: Focus on execution and driving results. Thank you so much.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yes.