Q3 2024 Bausch Health Co Inc Earnings Call
Greetings. Welcome to the Bouch Health, 3rd quarter 2024 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Per year growth in revenue and an adjusted EBITA.
Well, Jay Jay will talk in more detail about our financial results I will touch briefly on our performance Rev.
Revenues for Bausch health, excluding Bausch and Lomb increased 7% on a reported basis and 8% on an organic basis when compared to the third quarter of 2023 with organic growth in all segments.
Adjusted EBITA for Bausch health, excluding Bausch and lomb increased by approximately 9% compared to the prior year period.
Therefore, we are raising bausch health's full year 2024 guidance, excluding fashion long across multiple metrics, including revenue adjusted EBITDA and adjusted operating cash flow.
Moving on to page six we had a strong quarter.
Underscoring the success of the strategic initiatives, we not only delivered strong financial outcomes, but we made significant strides in meeting our 2024 objectives.
Sustained growth remains one of our key strategic priorities and we are pleased to continue to deliver in this area across segments and geographies.
All segments delivered revenue growth on both reported and organic basis.
Within our Salix segment.
Facts and had a strong performance with 7% growth over the third quarter of 2023, and we continue to see further opportunities for growth.
This past Monday I attended the annual conference held by the American College of Gastroenterology.
Passing on track, we have begun building our internal commercial team that will prepare us to bring this important innovation to market if or when the product is approved let me remind you that this is a global opportunity for Bausch health and may enable us to address.
Unmet need two a novel therapy to cirrhotic patients around the globe.
This is an exciting opportunity and I will be providing updates on future calls.
We also continued to promote operational innovation within our organization you may recall that in the third quarter of last year. We discussed the launch of an AI driven customer engagement initiative for XI facts and to maximize sales effectiveness within our Gi business tailings.
Since the launch over 12 months ago, we have transformed our approach to sales force planning for is a facts and through dynamic health care provider targeting and messaging. This AI enabled customer insights engine is helping our representatives deliver the right message to the right health care.
<unk> at the right time to further accelerate <unk> growth.
Our sales teams has embraced our AI engine with adoption rates maximizing our investment.
Improved efficiency and operational execution is another strategic priority to ensure that the process behind other priorities growth innovation are sustainable.
Yeah.
As Tom noted this is our sixth consecutive quarter of year over year growth for both revenue and adjusted EBITDA.
Revenue growth in the quarter was 7% and adjusted EBITDA grew 9% demonstrating continued operating leverage of our diversified portfolio of businesses.
Even more importantly, we generated $343 million of adjusted cash flow from operations, which is a 75% increase versus the same period a year ago.
This was well ahead of expectations, even when adjusted for the benefit associated with timing of certain outflows.
Our strong performance over the last nine months is now translating to raising our full year guidance for revenue adjusted EBITDA and adjusted operating cash flow.
More specific on that a little bit later moved.
Moving now to our consolidated non-GAAP financial results for the third quarter, which you will find on page nine.
Revenue was $2 billion and $510 million up 12% versus the prior year.
Adjusted gross margin was 73, 1% 80 basis points higher than the same period a year ago.
Without health, excluding Bausch and Lomb adjusted gross margin for the third quarter was 82, 5% or approximately 130 basis points higher when compared to the same period, a year ago, thanks to favorable net pricing and to a lesser extent product.
And channel mix.
Our bausch and Lomb adjusted gross margin was 63% for the third quarter compared to 61% for the third quarter of 2023.
This improvement was driven primarily by product mix, including the impact of Xyrem.
Part as liquidity management, and evaluate alternatives to reduce our overall debt leverage while also focusing on our upcoming maturities obligation.
As you will see on page 17 in the third quarter, we reduced our debt net of cash for Bausch health, excluding Boston loan by approximately $110 million, including of the impact of payments for legacy legal settlements of $216 million.
On a year to date basis, our net debt reduction amounts to $555 million in principal value of 2025, and 2026 maturities capture.
Capturing approximately $25 million of discounts.
We also repaid $94 million towards mandatory term loan amortization and a portion under our <unk> facility.
This rounds up our quarterly performance, which was excellent on many fronts.
Let's now move to our full year guidance for Bausch health, excluding BNS, which you will find on page 19.
As indicated earlier the strength of our profit and cash flow performance over the first nine months of 2024 as allow us to increase our full year guidance as follows.
We now expect revenue to be in the range of $4.775 billion to $4.850 billion in line with our previous outlook.
Separately, we just one quarter to go we have narrowed the range of our revenue guidance by $75 million and increased the midpoint by approximately $40 million.
Our organic growth guidance now stand between 4% and 6% up 100 basis points when compared to our prior guidance.
We are also increasing our guidance for adjusted gross margin to approximately 81%.
Tax rate.
Yes, I don't want to speculate on that but I'll give it to J J to maybe add to that.
J J: Yes, so we don't speculate specifically on any process of projects that haven't concluded. The one thing that I would say is we carry a significant amount of care.
Nols basically at the Canadian level, so any large divestiture of our <unk> ownership would not be associated with significant tax leakage.
Got it thanks, so much.
Operator: Operator next question.
Certainly your next question is from Mike metal Covid from Cowen Mike. Your line is live. Please go ahead.
Thank you for the question.
I'm curious when we begin to contemplate the post <unk> world likely in 2028.
Speaker Change: Do you feel that you have what you need both in terms of the remaining business.
Speaker Change: And the pipeline and the balance sheet to both address that low and continue to service the remaining debt or do you feel that you need to make additional changes prior to 2028.
Operator: Thank you.
Yes, Mike Thanks for the question right now as you saw in the performance strong quarter, so really trying to.
Drive performance throughout this entire company.
Operator: Both with ours, a fact with the facts and the other great products that we have.
So as we as we work towards our two.
Operator: 2028.
I talked about in my prepared remarks, the great opportunity, we have with Red Sea.
This is a really interesting.
Operator: Program that we're running are really excited about it what I would say is as we look at it.
As J J said in his prepared remarks, the levers that we have to create value.
<unk> 2028, and he can comment on that.
As we as we look past the yellow.
Yes, So let me give you a kind of an overview on how we're thinking about it obviously there are a number of variables that were working between now and the time <unk> will lose its exclusivity and we intend to continue to grow a number of our very strong assets and platforms.
Like our diversify international segments, but also obviously solta that.
We will determine the kind of a level of EBITDA run rate that will indicate the quantum of net debt that we need to carry on balance sheet, you have a fit for purpose capital structure.
There is no doubt that our debt needs to come down and will come down as a result of the very strong operating cash flow that we're continuing to generate between now and when XI faxon.
Basically it comes off patent and we will have to think about capital allocation to really bring that net debt leverage to direct level.
Speaker Change: Operator next question.
Certainly your next question is coming from Les Sulewski from Truest Securities less your line is live. Please go ahead.
Good evening. Thank you for taking my questions. Congrats on the progress guys.
One we're starting to think about 2025 can you just walk us through some of the puts and takes for growth opportunities crunchy each each segment.
It's pricing dynamics in script trends or market access across specifically international and then second follow up on that as Tom and JJ appear.
Mentioned you've done.
A site visits can you highlight any specific takeaways that you maybe see a shift in strategy that you did not foresee prior to some of these visits thank you.
Thanks, Les Thank you for the question.
Well, let's just talk about the <unk>.
Overall company in terms of the product portfolio that we have so when we started thinking about 2025, we just.
Speaker Change: As I said had gone around the world visiting the sites and of course talking to the team here in the United States we.
We think we have a really broad portfolio of assets that we can continue to grow so firstly on the on the Salix side, specifically XI faxon.
We see a lot of room for growth there.
Speaker Change: When we also look at just the acceleration that we've seen since we.
Since this new management team took over really starting to focus on investing behind <unk>. Our DTC efforts in hepatic encephalopathy, if our AI engine has really the team has done a wonderful job.
Getting that engine and quickly and then of course, the field force exiting acute against it and really following it really exceeding our expectations. So we've seen an acceleration of the extended unit growth.
So really pleased with that we continue to believe that there is room to grow here I've said on previous calls if we just take a look at <unk>.
Speaker Change: We're treating approximately 100000 patients.
There's 200000 patients out there so lot of room for growth when we look at Ibs D. We're treating about 185000 patients $2 2 million patients in the United States.
Another area for growth if we look at what the new to brand was in the quarter, new patient starts onsite facts and therapy in the third quarter 65000 patients. So we are excited about where where we are and being able to drive further growth on.
The international side as I have spoken on many other calls.
We have a really good business here if you take a look at where we are in Europe, Latin America, and Canada broad portfolio of products as we reported this quarter growing very nicely. We continue to focus to do business development in those respective geographies. So.
The excitement is really building.
As you know the growth that we have and what we can bring in then Solta as I've said also on previous calls loved the Solta business you saw the growth that we've had this quarter and in previous quarters.
Korea outstanding performance in the quarter, China outstanding performance in the quarter.
As you know we have had <unk> approved now in China.
Speaker Change: And we are working strategy, there to really drive value creation in China with our team we have a new GM onboard who will be leading that effort.
So excited of what we can do in 2025, if I if I talk about the when I made the trips around the world talking to the teams we have great momentum we have wonderful teams around the world, who we're excited to be at Bausch health.
And to promise and deliver on our commitments and a lot of energy a lot of discussion of what we can do a lot of discussion on business development of things that they are all working on I'm not going to speculate on the various things that are going on around the world from a business development standpoint, but the team is.
Focus on business development.
Speaker Change: We talk about our Solta franchise. The teams are very excited about what we have in China, what's going to come with our new Frac, So and our clear and brilliant touch. So we believe we have the assets.
Four to continue to grow.
Speaker Change: And have a really good 2025, what I would say is I talked about this earlier about red say, we will continue to look for assets that we can bring into this this portfolio around the world to create value.
You never can have a pipeline full enough. We continue to look for assets that we can beef up our pipeline.
And continue to promise and deliver.
Now and in the future J J I will hand, it over to you were with me on these trips and went through all the budget reviews, maybe you'd like to add something to it yeah. The two things that I would just further emphasize and I think you mentioned that is that there is significant runway still available for a number of our segments I would.
Speaker Change: Mentioned, specifically Solta and international segments, and we have some very strong and resilient brands I think I certainly didn't appreciate.
Speaker Change: Diversity of our portfolio.
And the diversification of our.
Speaker Change: <unk> of our sales across those different segments, which I think bodes well for our growth plan moving forward.
I would also like to add less when you look at the Solta franchise.
Speaker Change: And the split between our capital business in our consumer business that is a durable business that has room for growth. If you look at compare us to our competitors that consumable franchise being able to grow it you mentioned about pricing, having the ability to be flexible.
And two.
Look for ways to grow our business, whereas having a that durable business on the consumable side really is an advantage for our solta print franchise.
Speaker Change: Operator next question.
Your next question is coming from Omar Saad from Evercore ISI Boomer. Your line is live. Please go ahead.
Hi, guys. Thanks for taking my question I have three here, if I may 1st since that facts and generic entry could be so material to the company and its possibilities and its impact on the entirety of your free cash flows can you help us understand why wouldn't a summary judgment be granted in the Norwich and Amnio cases, that's first because if it goes to full trial.
And in of itself could be a win from a timing perspective second regarding any potential dividend to your equity holders, which is widespread market expectation in a scenario you do want to go forward with that for a possible proceeds from <unk>. My question is will you make that decision unilaterally or will you look to establish consensus with your debt holders.
Your equity holders as well as other stakeholders involved.
And finally, I noticed you're still discussing phase III commitments for ulcerative colitis trial for you. That's when P. One which are several years behind and I'm curious what learnings that you're taking from Pfizer's. That's when people on launch date in UC. Thank you.
Thanks for the question I'll take the first part of the question regarding the facts in generic.
As you know the standard.
When you look at it.
Speaker Change: Not going to discuss litigation strategies, what I would say is as you know there are new patents at stake here.
With Norwich and of course different patents with some of the other filings.
So we are vigorously going to defend our intellectual property.
And the team is highly focused on that and working diligently on it regarding the potential of a dividend. All are in terms of have J J Tech that point of the question yes.
Hi, Omar Nice meeting you.
First of all you know.
This is a hypothetical questions, but I'll try to answer it the best way I can.
Our priorities when it comes to dealing.
Speaker Change: Dealing with liquidities and doing capital allocation is first of all to obviously meet our debt maturities and obligation. That's first and foremost the second one is reinvestment into the business and then if there's anything left then there'll be a number of conversations around how we best deploy the capital remaining for.
We're increasing our shareholder value.
And there'll be a number of considerations.
Speaker Change: Return to shareholders could be one of it.
There might be other options that would be considered and of course you know.
Risk associated with those different strategies will be.
Evaluated when compare to two day benefit, but ultimately it's to drive shareholder value.
Yeah I'll take the last part of the question on on UC in Amarillo mud.
We believe when we look at the UC market and you see where it is today.
Speaker Change: Growing at a CAGR of probably about 8%.
By the time, we can bring them a silver mine to market at the end of the decade.
The market probably is around 12 billion.
Speaker Change: We believe we can take a share of that.
Despite the availability of approved therapies response to therapies today is variable and changes over time.
If you look at the data that we had on our phase two we like the data as you know the study was designed from mild to moderate so we're really pleased with that data and we are continuing.
We submitted the draft protocol on phase III.
The F D a.
Our working with the P M D a.
Later in the later in.
Speaker Change: In November to finalize that and the team has put together a plan to move it forward into phase III. So we're excited about it the data is good and we think we can take a piece.
A $12 billion market by the end of the decade operator.
Speaker Change: Next question.
Speaker Change: The next question is from David M sell them from Piper Sandler David Your line is live. Please go ahead.
Thank you I wanted to revisit an earlier question about the business in a post vaccine world, maybe I'll sort of come at it from a different angle, which is what is the extent to which you can.
Speaker Change: Addressed the cost side of the business won back some loses exclusivity.
Speaker Change: Whether that is.
Speaker Change: That's the sales infrastructure.
Speaker Change: Savings on R&D, but just in general help us understand how you're thinking about.
Speaker Change: The cost structure.
Once that vaccine loses exclusivity in the 28 28 timeframe. Thank you.
Thanks, David for the question.
Speaker Change: I'll start it off and then JJ can can add his thoughts as well.
As you know.
Since I took over as CEO, the idea that and that we have been.
Putting in our culture, we've been putting in this company is a fit for purpose model. So every day.
We are looking at the opportunities we have where we can can reduce costs and where we can invest that back into the business and I can give you a series of things that we've done over the last two years of taking that and investing it back into our franchises as we start looking to the L. O ends I faxon.
Speaker Change: I've already spoken about the Red Sea program and the excitement we have behind it and the unmet need there.
And that as we work this through trying to get read see approved prior to the.
The <unk> will be the goal.
Speaker Change: As we look.
Into the future, we will always be looking at a fit for purpose model.
And how we model that also when you look at our businesses.
In the international business is not affected by Eloise and the investments that can be made there to grow and we are fit for purpose. There. If you look at the opportunities to grow with our Solta franchise, we have to continue to invest behind that so when we look at the U S business.
And when we look at what we generate out of our neuro franchise, it's a fit for purpose model today.
And we continue to evaluate that as Ive said in.
In my prepared remarks, looking for profitable scripts and growth and we have made changes there. So overall as we move and we will see what business development opportunities. There are some really interesting things that we're looking at that can be brought into the franchise as a as we are the liver experts.
Speaker Change: And Oh Gee, we have a great opportunity there and there's some really nice assets. So all in all we will be looking and continuing to be guided by the principle of fit for purpose model as we move to an all OE onsite faxon J J you want to comment any further on that I think you've covered it there are two separate decisions that.
We need to be taken in the first one is what is the appropriate level of expenses associated with the business line that we are looking at and then a reinvestment of savings that might be generated depending on the outlook that we're seeing for that.
Auto business or in the franchise and of course, there are a number of variables, which one of them being our R&D programs.
Graham and winter Red Sea will turn into a profitable asset for us.
Speaker Change: All costs are variable, it's just a matter of looking at a long enough time line and we are managing this constantly we're not waiting for <unk> to come off patent the productivity mindset is something that we apply to every business every day and of course.
Before we take out capability in the business, we want to make sure that that capability is not useful elsewhere in our portfolio.
Operator next question.
Certainly the next question is from Glenn Santana Hello from Jefferies. Glenn Your line is live. Please go ahead.
Oh, yeah. Thanks for taking my question.
Tom I, just want to make sure I'm clear on what Youre, saying with respect to the timing with respect to <unk> I mean, if we go back and we look at the and Neil in Norwich filings if.
If we consider the 30 month stay which you seem to be pretty convinced on does that take us to <unk> 27, and then if.
Speaker Change: If we assume.
Some additional patents that you'd like to enforce or some type of an appeals process. I mean, there's all this sort of pointing to your confidence in <unk> 2028 with respect to do we do I have that drive that timeline correct.
At least in terms of what you are saying, yeah, Glenn Schorr. Thanks for the question.
As I said on the previous question is the current state of play with Norwich, where it stands what I would say is.
Speaker Change: Remember Teva still has.
<unk> has first filer status. So that's that's out there as well and you know I don't want to speculate on our strategies of what we think.
But clearly we believe and we're going to vigorously defend our patents until January one of 2028.
Speaker Change: But we have to as I said, you know Teva is out there and that is still something.
Speaker Change: That.
We continue to.
Speaker Change: Pursue alright.
Next question, then maybe yes, Sir sure Glen go ahead.
Glen: Just maybe going to ask one question on the legal side.
Obviously, a lot of new floating around there on <unk> and I fully appreciate you can't comment at all on that but I just wanted to ask with respect to the co op.
And maybe the fraudulent conveyance lawsuit, we don't really talk about that as much anymore would you classify those situations as kind of dormant until maybe those stakeholders ultimately see if and when anything happens to be L. C. L.
Yes, so what I would say is as you know the the cases are in discovery.
Glen: At the present time.
So beyond that I can't comment.
Speaker Change: No more than that.
Okay. Thanks.
Speaker Change: Next question.
The last question will come from Michael Freeman from Raymond James Michael Your line is live. Please go ahead.
Michael Freeman: Hey, Tom and J J, Thanks for taking the question and congrats on some good growth this quarter.
You mentioned.
Michael Freeman: Looking at our specific or more specific indication for the Red cell program.
And I Wonder if you could outline some of your rationale for selecting this specific population as our first prevention target for Red Sea and maybe describe how.
It will best Situate, you do to sort of taxes indication.
Michael Freeman: And pretty potent way.
Sure Mike Thanks for the question.
Michael Freeman: When we looked at it and if you if you look at <unk> and what we've been able to do with the facts and the.
The only treatment approved for OA Chi.
What we did is as you know really looked at how we can maximize the value of this great product with great asset of course developing.
Our new formulation with the SSD formulation and.
Michael Freeman: And how and how that can work within the lumen, but if you look at $4 5 million people are diagnosed with cirrhosis in the United States with probably over 112 million worldwide. So hospitalizations due to this disease caused the healthcare systems billions of <unk>.
Michael Freeman: Each year, so with that with this great product with what how we can help patients here and there is no therapy approved today to prevent cirrhosis patients from moving from compensated cirrhosis to the most serious which is D compensation. So we believe we can.
Michael Freeman: Help patients here.
Michael Freeman: And we also.
Michael Freeman: Are able to help the health care systems as well so if you look at.
We have this study is over a thousand patients globally two studies.
We have a primary endpoint and we have some very interesting secondary endpoints.
And believe that these separate the secondary endpoints when we take a look at it you know time to all cause hospitalization or time to first event of OE Chi that requires hospitalization. We believe we can really help patients here and also be able to create value.
Michael Freeman: For health providers.
For hospitalization in the cost of what an <unk> patient cost the system.
Michael Freeman: No.
It is real interesting program as I said in my prepared remarks, I was just at the meeting in Philadelphia.
A lot of excitement around it.
And discussions around as we proceed with the trial.
So I'm.
Looking forward to bringing you and others updates in the future on this great program.
Michael Freeman: With that thank you very much.
Yeah, Sorry go ahead might you had another question.
Very quickly I noticed that there were $96 million.
Spent on acquisitions this quarter I Wonder if you could describe.
Michael Freeman: Yes.
The content of the acquisitions.
Speaker Change: Yes. This is <unk>.
Speaker Change: It has nothing to do with WC Xbl's here.
Speaker Change: Got it thank you.
Speaker Change: Okay. So with that Theres no further questions I, just would like to conclude the call.
Michael Freeman: Would.
Like to say is we appreciate everyone joining the call. This afternoon and we thank you for your questions. We had our sixth consecutive quarter of year over year growth with strong execution that allowed us to raise our full year guidance. We are focused on our strategic priorities and delivering against our commitments.
Promising and delivering we intend to build on this momentum to close the year continuing to position our business for excellence.
Look I really look forward to keeping you up to date and thanking you for your interest in and support of our company have a good evening.
Michael Freeman: Yeah.
Thank you. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.