Q4 2024 Bausch Health Co Inc Earnings Call

Good night.

Speaker Change: Greetings. Welcome to the Bas Shelf Fourth Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.

Please note, this conference is being recorded.

Speaker Change: I will now turn the conference over to your host, Garen Sarafian, Investor Relations of Bosch. You may begin.

Speaker Change: Good afternoon and welcome to Bausch Health's fourth quarter 2024 earnings conference call. Participating in today's call are Thomas Appio, Chief Executive Officer of Bausch Health, and JJ Charon, Chief Financial Officer.

Speaker Change: Before we begin, I'd like to remind you that our presentation today contains forward-looking information.

Speaker Change: We ask you to take a moment to read the forward-looking statements disclaimer at the beginning of the slides that accompany this presentation.

as it contains important information.

Speaker Change: Our actual results may vary materially from those expressed or implied in our forward-looking statements, and you should not place undue reliance on any forward-looking statements.

Speaker Change: We use non-GAAP financial measures to help investors understand our operating performance.

Speaker Change: 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.

Speaker Change: 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.

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

Speaker Change: Our discussion today, Wednesday, February 19, will focus on Bausch House excluding Bausch and Lomb. However, we will briefly comment on Bausch and Lomb's results announced this morning.

Speaker Change: We will refer to year-over-year comparisons with the same period last year, unless otherwise noted.

Speaker Change: With that, I'd like to turn the call over to our CEO, Tom Appio. Tom?

Tom Appio: Thank you, Garen, and welcome to everyone joining our earnings call today.

Tom Appio: We closed out 2024 with a strong fourth quarter, executing on our strategic priorities and reinforcing our focus on patient-centered outcomes.

Bausch Health continues to deliver.

Tom Appio: marking our seventh consecutive quarter of revenue and adjusted EBITDA growth.

Tom Appio: This performance is a testament to our strong operational execution, disciplined approach, and relentless focus on value creation.

We made tremendous progress as a company in 2024.

Tom Appio: as I could not be more proud of what the Bausch Health team accomplished and the momentum we have heading into 2025.

Tom Appio: Well JJ will discuss our financial results in more detail. I will touch briefly on our performance, our progress driving our strategic priorities forward and key business highlights from the quarter.

starting with our strong fourth quarter and full year results.

Tom Appio: Revenues for Bausch Health, excluding Bausch & Long, increased 4% on a reported basis and 7% on an organic basis when compared to the fourth quarter of 2023 with strong organic growth in our Salix and Salta segments.

Tom Appio: Full-year revenues for Bausch Health, excluding Bausch & Long, increased 5% on a reported basis and 6% on an organic basis.

Tom Appio: For Bausch Health, excluding Bausch and Long, adjusted EBITDA for the fourth quarter of 2024 increased by approximately 7% compared to the prior period.

Tom Appio: For the full year of 2024, all four segments delivered revenue and segment profit growth, demonstrating our ability to drive performance across our diverse businesses.

Tom Appio: Our success translated into strong cash flow from operations for the company in 2024. Bausch Health, excluding Bausch and Lomb, generated approximately 1.3 billion dollars in adjusted operating cash flow for the full year.

Tom Appio: For Bausch Health, excluding Bausch and Long, revenue and organic growth were at the high end of our guidance range and both adjusted EBITDA and adjusted operating cash flow exceeded our guidance.

Tom Appio: These results would not be possible without the hard work and dedication of all our colleagues across the globe, across all segments throughout the year.

Tom Appio: We will carry this momentum into 2025 and look forward to updating you on our performance in the quarters ahead as we execute against the guidance that we provided today.

Tom Appio: Our 2025 outlook builds on the framework we laid out last quarter, which aims to drive value through the organization.

Tom Appio: So, how do we continue generating value and accomplishing our goals?

Tom Appio: by centering on our value creation efforts around three fundamental pillars.

Tom Appio: First, we are relentlessly focused on enhancing the value of Bausch Health's operational assets, driving innovation, strengthening execution, and maximizing the growth potential of a diverse global portfolio of brands.

Tom Appio: Second, we are actively exploring all avenues to unlock the full value of our Bausch & Lomb equity stake, ensuring the greatest benefit for Bausch Health shareholders.

Tom Appio: And third, we are committed to optimizing our capital structure, strategically reducing debt leverage and extending maturities to fortify our financial position for long-term success.

Tom Appio: It is these value creation pillars that will contribute to the success of our long-term strategic priorities.

Tom Appio: In 2024, we made substantial progress against our five strategic priorities, highlighting the success we saw across the company and reinforcing the importance of staying focused on maximizing shareholder value as we head into 2025.

Tom Appio: Our strategic priorities, people, growth, innovation, efficiency, and unlocking value are at the core of everything we do at Bow Shelf.

Tom Appio: Our first priority is people. The success of the company begins with our people. We added experienced leaders to our executive leadership team in three critical areas. This summer, JJ Chiron joined us as CFO, and Amy Lenard joined us as the leader of our U.S. pharma business.

Tom Appio: In December, we appointed a new chief medical officer and head of R&D, Jonathan Seday, who we are excited to welcome to the team.

Tom Appio: In addition to these senior leadership appointments, we are strengthening our teams with exceptional talent by continuing to drive a culture of business ownership, accountability, and compliance.

Tom Appio: We aspire to be principled leaders, creative thinkers, problem solvers, and result seekers.

Tom Appio: We strive to attract the best talent, fostering a purpose-driven mentality and a sense of urgency in everything we do, with an all-in-together, open and collaborative workplace.

Tom Appio: Our second priority is the long-term growth of our business with a focus on operational excellence.

Tom Appio: As I mentioned earlier, this is our seventh consecutive quarter of top and bottom line growth with a strong closing quarter to the year. We have achieved this through focused execution against our plans.

Tom Appio: Innovation, our next strategic priority, is another critical driver of our long-term growth objectives.

Tom Appio: We have made great progress here and I am excited to continue to move our innovation efforts forward in the years ahead. The approval of Thermage FLX as a medical device in China earlier in 2024 have been well received.

Tom Appio: We have developed tools and algorithms that apply AI and machine learning to our sales process for Zyfaxan, and we believe this has been one of the drivers of the performance for the product in 2024.

Tom Appio: While we are still in the early stages of leveraging artificial intelligence in our business, we are exploring other opportunities to leverage AI-enabled capabilities to drive profitable long-term growth.

Tom Appio: As our performance demonstrates, our investments innovation are contributing to our growth.

Our key pipeline programs continue to progress.

Tom Appio: Our RED-C program for the prevention and delay of the first episode of hepatic encephalopathy remains on track.

Tom Appio: We successfully initiated and are in the midst of two global phase 3 trials with top-line results for each expected by early 2026.

Tom Appio: As a reminder, this program for our solid, soluble, dispersion, refactoring product may enable us to address an unmet need through a novel therapy for cirrhotic patients globally and continues to be an exciting opportunity for us.

and Arzolta Business.

Tom Appio: Clear and Brilliant Touch has been approved in additional markets in Asia-Pacific, with regulatory submissions in Canada and EMA in 2024.

Tom Appio: We also received FDA clearance for the next generation Fraxel in the U.S., which we anticipate launching commercially in 2025.

Tom Appio: Overall, I am energized by the prospects for the innovation that lie ahead for Basch Health. We continue to drive the success of our business forward through our R&D efforts, maximizing opportunities to best serve patients across the globe.

Tom Appio: This brings me to our next priority, executing with efficiency, a cost mindset, and operational excellence across the business.

Tom Appio: We are laser-focused on serving our patient populations and their health care providers, and utilizing our strong supply chain expertise to be nimble in meeting unexpected industry supply needs as they arise.

Tom Appio: We have consistently demonstrated that our pharmaceutical manufacturing and supply chain capabilities are agile and can fulfill patient needs globally. This includes the efforts during the fourth quarter to meet unanticipated Welbutrin demand in Canada.

Tom Appio: The four priorities I just discussed propel our company forward and help drive shareholder value at Bausch Health and to that end, let me touch upon our last strategic priority, unlocking value.

Tom Appio: As I outlined through our value creation pillars, this remains a core objective that we continue to pursue across all avenues with a strong sense of urgency, and we are fully committed to delivering on this key priority.

Tom Appio: We look forward to keeping you updated on these key initiatives throughout 2025.

Tom Appio: To summarize, Bausch Health delivered a solid performance throughout 2024 and it has now grown revenues and adjusted EBITDA for seven consecutive quarters.

Tom Appio: Our success in the fourth quarter was broad-based. Zyfaxan delivered 16% revenue growth and with solid volume growth across all channels, resulting in a fourth consecutive quarter of growth.

Salta grew 34% again led by Asia-Pacific region.

Tom Appio: are durable. An underappreciated international business continued to deliver where Canada again had double-digit growth in promoted brands and EMEA business achieved its eighth consecutive quarter of organic growth.

Tom Appio: And we continue to look for ways to grow our international business. In the fourth quarter and in January of this year, we signed two business development deals.

Tom Appio: By expanding into the potentially large cardiometabolic market, which for Mexico alone is over a two billion dollar market,

Tom Appio: This will allow us the opportunity to broaden our portfolio of assets across Mexico and the rest of our Latin American markets for multiple years, as well as in Canada.

Tom Appio: Both of these strategic collaborations are good examples of Bausch Health leveraging partner expertise in portfolio development and our robust market footprints to serve patients globally.

Tom Appio: In summary, Bowsh Health had a strong fourth quarter capping off a great year with contributions from all of our businesses and every one of our valued colleagues across the globe. This momentum sets us up for a great year ahead in 2025.

Tom Appio: With that, I'll hand it over to JJ to provide additional commentary on financial results. JJ?

Thank you, Tom.

Tom Appio: Before we review our results overall and at the segment level, I would like to share some highlights from the fourth quarter for Bausch Health, excluding Bausch and Lomb.

Tom Appio: Our adjusted EBITDA for the full year was $2,553,000,000, growing 8% and demonstrating the continued operating leverage of our business model thanks to tight expense management and positive business mix.

Tom Appio: Adjusted cash flow from operation in 2024 was $1.3 billion, or a 85% growth year-over-year, which was exceptional.

Tom Appio: The primary drivers were, in addition to our operational performance, unusually low cash taxes and the timing of some of our outflows in Q4.

Tom Appio: Even when excluding these one-time benefits, adjusted cash flow from operations for the year was approximately $1 billion or about a 40% increase year-over-year.

Tom Appio: Let me now review our 2024 performance in more detail, overall and by segment, starting with our consolidated performance on page 14.

Tom Appio: Revenue for the fourth quarter was $2,559,000,000, up 6% on a reported basis and 9% on an organic basis versus the same quarter a year ago.

Tom Appio: Revenue for the full year was $9,625,000,000, an increase of 10% on a reported basis and 8% on an organic basis.

Tom Appio: Adjusted gross margin for the fourth quarter was 72.4%, which was 80 basis points higher than the same period a year ago. For the full year, it was 71.9%, an increase of 90 basis points versus 2023.

Tom Appio: Adjusted operating expenses for the fourth quarter were $958 million, an increase of $67 million over the same period last year.

Tom Appio: For the full year, operating expenses were $3,812,000,000 or an increase of 12% year-over-year.

Tom Appio: Adjusted R&D expense for the quarter was $163 million, which was a $12 million increase year-over-year. For the full year?

Tom Appio: are just earned the expense with $615 million or an increase of 2%.

Tom Appio: I just said EBITDA was $935,000,000 in Q4 and $3,307,000,000 for the full year.

Tom Appio: Finally, adjusted operating cash flow, still on a consolidated basis, was $601 million in the fourth quarter and $1,572 million for the full year.

Tom Appio: Focusing now on the performance of Bausch Health, excluding Bausch and Lombard.

Tom Appio: Revenue for the full quarter was $1,279,000,000, up 4% on reported basis and 7% on an organic basis versus the same quarter a year ago.

Tom Appio: Revenue for the full year was $4,834,000,000, an increase of 5% on a reported basis and 6% on an organic basis.

Tom Appio: Adjusted EBITDA was $712 million, a 7% increase from the 4th quarter of 2023.

Tom Appio: For the full year, it was $2,553,000,000 or an increase of 8%.

Tom Appio: Adjusted operating cash flow was $567 million, up $289 million when compared to the full quarter of 2023.

Tom Appio: And on a full-year basis, adjusted operating cash flow was $1,308,000,000, up $600,000,000 when compared to 2023.

Tom Appio: The impressive cash flow generation in the fourth quarter and overall in 2024 were driven primarily by three factors.

First and foremost, a well-balanced operating performance across our segments.

Tom Appio: Second, unusually low cash taxes, and third, the favorable timing of some of our offloads in Q4.

Tom Appio: Turning now to our fourth quarter performance by segment starting with SAILings on page 20.

Tom Appio: CELIC revenues in the fourth quarter were $634 million, an increase of $51 million or 9% growth year-over-year, driven primarily by Zyfaxan, which grew an outstanding 16%.

Tom Appio: We continue to be encouraged by the trend of our scripts following the recent optimization of our Salesforce deployment.

More specifically...

Tom Appio: Total Xyfaxin scripts for new script growth were both up 5% in the fourth quarter. Extended units grew 7% and includes non-retail settings such as hospitals and outpatient clinics which again saw strong double-digit growth.

Now moving to the international segment on page 21.

Tom Appio: Revenues for International were $279 million during the quarter, a decrease of 4% on a reported basis and an increase of 1% on an organic basis compared to the fourth quarter of last year.

Tom Appio: The 5% of growth difference was driven by the strengthening of the dollar mostly against the Mexican peso.

Tom Appio: By geography, Canada and EMEA were the strongest contributors to growth in the quarter.

Tom Appio: Revenue in Canada grew 9% on a reported basis and 16% on an organic basis, driven by the continued benefit of a well-butered generic competitor's supply shortage in the market.

Tom Appio: Also worth noting is the double-digit growth of our promoted products in Canada, which reflects the benefits of our sales deployment optimization across our broad portfolio of commercialized products.

Tom Appio: Revenues in the EMEA grew 4% on a reported basis and 5% when excluding the impact of effects. Finally, in Latin America, revenue decreased 14% on an organic basis, mostly due to the timing of government tenders in Mexico.

Tom Appio: Now I'm moving to page 22 to review our Salter medical segment.

Tom Appio: Revenues for Solta were $138 million during the 4th quarter, an increase of 34% on a reported basis. This capped an outstanding year for Solta for both revenue and segment profit.

Tom Appio: What was even more impressive is that our growth for Salta was primarily driven by volume.

Tom Appio: My country, South Korea, and China continue to be the primary drivers of Salters' growth globally.

Tom Appio: As a reminder, in the second quarter of this year, we relaunched Termage FLX in China, which has since performed exceptionally well.

Tom Appio: We believe this business is well-positioned for sustained growth in the near and long term.

Tom Appio: Turning now our focus to the performance of our diversified segments, which you will find on page 23.

Tom Appio: Revenues for the diversified segments were $228 million during the fourth quarter, a decrease of 12% on a reported basis.

Tom Appio: As a reminder, on our fourth quarter call last year, we referenced marketplace supply constraints that allowed us to capitalize on sales of Ativan.

Tom Appio: This generic supply shortage did not recur this year, impacting overall results in the quarter versus the prior year.

Tom Appio: Finally, let me wrap up the segment discussion for the fourth quarter by commenting briefly on Bausch and Lomb top-line results on page 25 and 26.

Tom Appio: Revenues were $1,280,000,000 during the full quarter, up 9% on a reported basis.

Tom Appio: For the full year, revenues were $4,791,000,000, an increase of 16% versus the prior year on a reported basis.

Turning now to our balance sheet starting with page 28.

Tom Appio: As a result of our exceptional cash flow performance in Q4, we reduced our debt, net of cash, for Bausch Health, excluding Bausch & Lomb, by approximately $520 million.

Tom Appio: For the full year, and after payments associated with restructuring and legal settlements, our net debt reduction amounted to almost a billion dollars.

Tom Appio: This allowed us to reduce our gross debt by about $730 million through primarily to actions.

Tom Appio: First, we executed $555 million of open market purchases in the first half, and second, we continue to reduce our 2027 term loan balance by $125 million as per the mandatory annual amortization obligations.

Tom Appio: The consequence of all these drivers was an increase of our cash on hand by $260 million when compared to where we stood at the end of 2023.

Tom Appio: Overall, the fourth quarter was a strong finish on all fronts that capped off an outstanding year for Bosch Health as we continue to optimize the return of our diversified and resilient set of assets across all five segments.

Tom Appio: We believe we are well positioned for another strong year of operating performance in 2025.

Tom Appio: Let me now provide you with our 2025 financial guidance for Bausch Health, excluding Bausch and Lomb, which you will find on page 30.

Tom Appio: For 2025, we expect revenues to be between $4,950,000,000 and $5,100,000,000.

Tom Appio: The midpoll of that range would translate into a 4% increase year over year.

Tom Appio: Adjusted EBITDA is expected to be between $2,625,000,000 and $2,725,000,000 making the midpoint a 5% increase versus 2024.

Tom Appio: Finally, we expect adjusted cash flow from operations to be between $975 million and $1,025 million.

Tom Appio: Although this translates into a $300 million reduction year-over-year, it represents a more sustainable level of cash flow generation, given the one-time benefits of cash taxes and working capital changes we recorded in 2024.

Tom Appio: Before I hand it back to Tom for his concluding remarks, let me end this performance review by looking at our progress in relation to our value creation framework we introduced last quarter, which you will find on page 32.

Speaker Change: We still believe that there are three primary levers for value creation for bio-shell shareholders.

Speaker Change: The first one is to increase the value of our Bausch Health portfolio. This is the primary focus of our leadership team. We strongly believe we have a broad set of high-performing assets, as evidenced by our outstanding performance in 2024.

Speaker Change: As Tom indicated earlier, this is the seventh quarter in a row we have grown our top and bottom line, and speaks to our performance consistency and the resiliency of our growth strategy.

Speaker Change: It also highlights the operating leverage of our business model through positive business mix and tight expense management.

Speaker Change: What's more, because our margins are high and our capital intensity is low, our business has been producing strong free cash flows.

Speaker Change: Our second lever is to maximize the value of our Bosch and Lomb assets for Bosch Health shareholders.

Speaker Change: As we indicated two weeks ago, the exploration of selling Bausch & Lomb has concluded, at least for now, as it did not lead to an offer that reflected Bausch & Lomb long-term value.

Speaker Change: Nevertheless, the main objective remains the same, which is to complete the separation of Bosch and Lomb from Bosch Health in the most creative way for Bosch Health shareholders.

We will continue to evaluate.

Any and all options to do so.

Speaker Change: And lastly, our third lever is to optimize our capital structure. To that effect, we have made good progress since last October.

Speaker Change: Separately, we have secured a commitment for up to an additional 700 million dollars created facility.

which will increase our operational and financial flexibility.

Speaker Change: We expect to have all the resources we need to address both our 2025 and 2026 debt maturity obligations without the need to access additional sources of funding.

Speaker Change: Obviously, we are not done with our capital structure improvement efforts.

Speaker Change: But this is an important milestone as we redirect the focus towards addressing our 2027 and beyond maturities.

Speaker Change: To that effect, we plan on tapping the capital markets in the first half of 2025, which could include pledging a portion of the Bausch & Lomb shares owned by the company.

Speaker Change: In conclusion, we have made tremendous progress on many fronts in 2024 and look forward to another successful year in 2025. I will now hand it back to Tom for the wrap up.

Tom Appio: Thank you, JJ, and thank you to the entire Bowshell team for another strong year of growth and execution as we delivered on our commitments and our strategic priorities.

Tom Appio: As a reminder, we have placed specific emphasis on our people and culture.

Tom Appio: growing our business, encouraging innovation to drive R&D, operating with efficiency to capture marketplace demand, and unlocking the value of Bausch Health in the short and long term.

Tom Appio: Our results for 2024 provide us with a strong foundation for further success in 2025.

Tom Appio: We look forward to building on this momentum to drive growth across all business segments while serving patients and their health care providers.

Tom Appio: With that, we will now turn to questions. Operator, please open the line for Q&A.

Thank you for watching. Have a great day.

Tom Appio: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Tom Appio: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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 please while we poll for questions.

Tom Appio: Once again, please press star 1 if you have a question or comment.

Tom Appio: Our first question comes from Les Sulewski with Truist Securities. Please proceed.

Les Sulewski: Good afternoon. Thank you for taking my questions. Could you provide the latest status update on the Norwich situation and your timelines around the FDA lawsuit? Do you foresee a possibility of an at-risk launch within the 18-month period? And if there were an at-risk launch to occur, what could be some of your response options?

Les Sulewski: And, I guess, secondarily, what are the potential adverse effects on the timeframes with the other tentative approvals? Thank you.

Tom Appio: Thanks, Les, for the question. Yeah, I can touch upon, you know, where the Norwich starts.

Tom Appio: So, Norwich, you know, gained tentative approval. The FDA denied granting Norwich final approval and concluded that Teva has not.

forfeited their first filer status.

Tom Appio: Norwich has sued the FDA regarding its conclusion and requested the FDA be forced to grant final approval of their ANDA.

So, both Teva and ourselves, Bausch Health, have intervened.

Tom Appio: So, you know, based on Norwich's tentative approval letter, we expect the FDA

Tom Appio: to defend its position on Teva's non-forfeiture, right? So, I would just say, in conclusion, we believe that the FDA is correct in its determination that Teva remains the first filer and has not forfeited.

Tom Appio: I'm not going to speculate on, you know, launching at risk at this time because we believe that the FDA is correct and TEVA is, you know, continues with their rights of first to file.

Next question.

Thank you. Bye.

Speaker Change: Thank you for listening on the discontinuation of the Crohn's disease study.

Speaker Change: You were breaking up, we couldn't hear you come through, what was it?

Speaker Change: Sorry, I'll repeat. On the Amislimad program, what's the reasoning on the discontinuation of the Crohn's disease study?

Speaker Change: Yeah, so we didn't discontinue the study. On the last call, I mentioned that we were evaluating it based on looking at the data.

Speaker Change: and we made the determination when we specifically looked at Crohn's that, you know, this class of drug

Speaker Change: Even though there was some pluses and minuses of looking at it, we determined that it wasn't worth the investment with the SP1's performance.

Speaker Change: in Crohn's of other drugs that have tried it in Crohn's.

Speaker Change: Got it. Thank you for the call. Just one more from me and I'll hop back in the queue. Can you provide a little more color on the two recent deals in the international side on the cardio-metabolic front? Thank you.

Speaker Change: Sure, yeah, so as I said in my prepared remarks, you know, I think that when you look at the international business and I'm looking at it holistically, you know, globally, you know, it's an underappreciated business. It's a branded generic business that is very durable. No, no LOEs.

Speaker Change: And so what we have put together, we have a team that is solely focused on building out

Speaker Change: are brand generic portfolios around the world. The two deals that I mentioned was in Latin America and those are a variety of products. One of them was with MSN.

Speaker Change: which is a broad portfolio of branded generic products. As you know, our Latin America business is very successful in the branded generic space and building brands.

And then a second one was...

Speaker Change: looking at a single-triple combination therapy with commonly used hypertension medicines.

Speaker Change: and which will be novel and it will be proprietary in multiple strengths.

Speaker Change: So, that is going to give us those two deals put together and that we're continuing to look at others of building out a franchise that can really power our growth.

Speaker Change: In Latin America, some of those deals also include other international locations as well, but the focus for the Latin America region will power our growth for the next years to come.

Thank you.

Speaker Change: Up next is Doug Minion with RBC Capital. Please proceed Doug.

Thank you.

Speaker Change: with debt and using a portion of the BLCL holdings. Relative to the 38.5% that was put in for the $999,000,000

Speaker Change: previously. What sort of quantum of potential shareholdings of BLCO would be required?

Speaker Change: under the $700 million. Would it be proportional? It probably wouldn't be.

Speaker Change: Maybe you can walk me through how much would have to be placed within that company.

Thank you. Thank you. Thank you.

Speaker Change: The billion dollars against the number code that holds 38% of the shares, only 30% are really fully encumbered. About 8% can be sold or transferred to another entity.

Speaker Change: These 8% would be added to the remaining 50% that would be used as collateral to that credit facility.

Okay, okay.

Speaker Change: And then on top of that, if you were to go ahead and explore accessing capital markets,

Speaker Change: that this would be incremental in terms of the proportion of shares of Bosch and Lohm that would be pledged or not?

I'm just trying to understand the social basis.

Speaker Change: Yeah, we're looking at different packages, so I'm not going to comment specifically on what we'd be looking at, but the packages we're looking at would be looking at replacing that credit facility so we have more of a permanent structure in place to deal with our 2027 maturities and beyond.

Okay, okay, fine.

Speaker Change: If we go to your guidance, which was strong, on the top line it was in line with what we're looking for and I think most other people, but a bottom line was better, but perhaps you can talk about the contribution on a relative basis that you expect to come from Xifaxin.

Speaker Change: Given the strong growth we've seen recently, when you look at that guide, how much of that is associated with diffraction growth?

Speaker Change: Yeah, so we haven't provided any specifics in terms of quantification, but the two biggest contributors of our growth in 2025 will be, indeed, SELIX with Xifaxin and Solta.

Speaker Change: I think the dynamics that you're seeing, particularly in the second half for Zyfaxan, should be assumed as continue in 2025.

Speaker Change: Okay and then just to wrap up, can you update us on any potential settlements you know with the opt-out groups or Granite Trust where we stand there? That'd be great. Thank you.

Speaker Change: Yeah, of course, on the on the Granite Trust, there is really no meaningful update to the guidance we provided in prior calls, which is that.

Speaker Change: We are all, you know, hoping to get that pretty soon.

On the legal settlement, it's really hard to speculate.

on any future negotiations.

Speaker Change: And so, at this point in time, we've made progress, as you know, in 2024, and we look forward to 2025 in making some further progress.

Speaker Change: Once again, if you have a question or a comment, please press star 1. We do ask that all QA participants please limit to one question and one follow-up.

Speaker Change: The next question comes from Jason Gearberry with Bank of America. Please proceed.

Chi: Oh hey, thanks for taking our questions. This is Chi on for Jason.

Speaker Change: I would like to ask a follow-up on the earlier question on the new Norwich case.

Speaker Change: Is it your understanding that Norwich is not subject to the 30-month stay and the only gating factor for the full approval from the FDA of the generic Zyfaxan?

Speaker Change: is around the 180-day exclusivity. And for that case, do you have a sense of the timing for next steps? Would you expect a trial to be scheduled in the coming couple of months? Thanks so much.

Speaker Change: Yeah, I'll take that question. You know, we believe the 30-month stay applies and that's what the legal team is focused on and getting ready for. So that's where that stands.

Thank you.

Speaker Change: Next question. Do you have a sense of the timing? I apologize if I may follow up. In the legal document, Norwich claimed the FDA has determined that Norwich is not subjected to 30-month stay. Can you talk about that? Thank you.

Thank you.

Speaker Change: Yeah, what I'd say, we believe the 30-month stay still applies. And so, you know, that's the way we're proceeding.

Speaker Change: You know, I really don't want to speculate right now, you know, on what the FDA or what you've said they said, but we believe and we are continuing to work on, you know, where that trial stands and that case stands, and we believe 30 months still applies.

Speaker Change: The next question comes from Michael Freeman with Raymond James. Please proceed.

Michael Freeman: Hi, good evening Tom, JJ, Garen. Congratulations on these earnings. A couple questions from me.

Speaker Change: There have been plenty of government initiatives that may potentially affect your business going forward.

Speaker Change: potentially a material price reduction. And then if you could give a quick comment perhaps on the potential for a pharma-oriented international tariff and how that might affect maybe your supply chains or pricing going forward.

Yeah, Michael, thanks. I'll take those questions.

Speaker Change: So yeah, we were on the list, of course Zyfaxan has had great success.

Speaker Change: We wound up on the list. What I would say is it's still early in the process, and we're going to be in the process of negotiating. Our focus right now is to prepare for that and go through the process with CMS, which will come into effect in 2027.

Speaker Change: I just think it's too early to offer detailed commentary, you know, with that regard. But you know, we...

Speaker Change: continue to remain focused on demonstrating the value of Zyfaxan, you know, during which we're going to share, you know, the information on the value it delivers to patients, providers, and the overall, you know, health care system, you know, in terms of when you look at

Speaker Change: You know, as I factioned on the OHE indication, which is, you know, more than 70% of the business, the amount of cost savings, you know, regarding hospitalizations.

It drives a big benefit.

Speaker Change: So, you know, we're closely monitoring the situation. We have a super fantastic...

Speaker Change: team in the space of market access, and we're looking at all possibilities.

In terms of the tariffs...

Speaker Change: You know, I could say something and then maybe JJ wants to add, again, it's still too early. You know, there's a lot of discussions here on the tariffs.

Speaker Change: of what it would mean for us. And we've been, you know, closely following it, our, you know, in terms of our supply chain, and what impact it would mean. But I'll hand it over to JJ and he has a few further comments on that.

JJ: Yes, so in terms of our setup and our supply chain and of course the fact that

JJ: Cost of goods sold is a relatively small proportion of revenue for a pharmaceutical company. The financial impact of those tariffs, you know, let's assume the scenario that has been the most publicized.

JJ: 25% and that would be for a full year. The impact would be below $50 million in terms of cash flow for the company. So I wanted to give you some order of magnitude on how to think about it.

Speaker Change: there was a choice to not pursue the Crohn's opportunity. I wonder if there are some further changes in approach to your clinical development programs or some new ideas that Dr. Sadeh has brought to the team in his tenure so far.

for patience.

Speaker Change: Again, this is a prevention trial, so we're really excited about that. We did mention that we did not

You're not going to pursue looking at amycilimod and Crohn's.

Speaker Change: and Jonathan, just since he's joined in the last two months.

Speaker Change: We've been actively discussing, you know, what we're going to pursue, what we're going to develop, and then from a business development standpoint.

Speaker Change: Some of the assets that we could possibly look to bring into the portfolio, but we're excited to have Jonathan here and we'll, you know, we'll give more information as things progress on rebuilding and, you know, building up this pipeline.

Okay, thank you, John.

Speaker Change: The next question comes from Mike Nedelkodai with TD Cowan. Mike, please proceed.

Mike Nedelkodai: Alright, thanks for the questions. I have one and a follow-up. My first question relates to Zysaxan and the 2027 IRA price negotiation. Are you able to tell us what portion of sales are derived from the Medicare channel?

Mike Nedelkodai: And then ultimately, regardless of the discount that gets negotiated by CMS, do you anticipate that that pricing will leak into the private insurance channel?

Mike Nedelkodai: That's my first question, and then my follow-up is actually a follow-up on a previous question related to your plan to access the capital markets, possibly by pledging a portion of Bausch and Lomb shares. This is very helpful insight, but can you bracket this for us at all? Is there any level of quantification at all that you could provide? Thank you.

Thank you.

Speaker Change: Yes, so Mike, I'll take the first one on the Zyfax and price negotiation. As you know, our Zyfax in business is, you know, in IBSD and HE and it's blended, you know, again, you know, what would be subjected, you know, to the IRA price negotiation. I can't give you, you know, what the percentage is that would be. As I said, you know, we have been

Speaker Change: the different levers are that we will be able to look at as we go through the negotiation. So it's it's still early in the process and again as you know this comes in January of 2027.

Speaker Change: So, there's still a lot to be done and discussed here.

Speaker Change: As I said previously, already Zyfax on the HE indication is, if you look at hospitalization costs and patients not being in hospital, there already is a very large savings.

Speaker Change: into the healthcare system on Zyfaxan. I'll hand the other question that you had over to JJ.

Yeah, so the...

Speaker Change: I'm not going to comment specifically on the quantum of debt that we're looking at. We're looking at various options. The one thing I would just reinforce and highlight is that we've got $7 billion of maturities between now and the end of 2027. You have obviously to take into consideration the cash on hand, the cash flow that we'll be generating.

Speaker Change: between now and the end of 27, as we indicated in our guidance.

This is a business that's...

Speaker Change: Certainly, in the near term, can generate a billion dollar plus of cash flow per year. And so the objective here is really to deal with as much maturities as possible during that horizon.

Great, thank you.

Speaker Change: Okay, and our last question comes from Glen Santangelo with Jeffries. Please proceed.

Glen Santangelo: Oh yeah, thanks for taking my question. Hey Tom, just two quick ones from me. I mean, it seems pretty obvious why you may be walked away from the BLCO sales process.

Glen Santangelo: And so in your prepared remarks, you seem like you're continuing to sort of actively explore, you know, different processes to maybe monetize this asset. But, you know, what might you do differently going forward versus what you did over the sort of past couple of years? And do you think

Glen Santangelo: you know, could be in the cards to ultimately get a deal done. And then my follow-up to that is for JJ, you know, just on the follow-up question, when you think about, you know, trying to tackle these maturities and pledging some of the BLCO shares, does that in any way impact or say anything about the potential timing or ability to do a deal in the near term? Thanks.

Thank you for watching!

Speaker Change: Yes, hi Glen, this is JJ. I'm going to cover both questions.

Speaker Change: So, as we said, obviously maximizing the value for shareholders of our BLCO equity stake is one of the...

primary value creation levers.

Speaker Change: for us. And there are, you know, many ways you can go and achieve that. The goal is obviously to complete the separation between BLCO and BHC, but the monetization of that asset is going to play a key part.

in our journey over the next three years.

Speaker Change: And listen, there's no real timeline associated with that. I think it's it's more a function of what makes sense for shareholders and whether the transactions that we're considering are creative to BHC share value. So that's.

Speaker Change: That's what I would say on that front, and then in terms of the financing that we're looking at raising

Speaker Change: Obviously, our BSEO equity stake is a big aspect of the company, so we'll use partially or totally as collaterals to some of the financing we may decide to raise, as we indicated in our prepared remarks, and it doesn't really impact

Speaker Change: I think the timing or the decision we would be making on BLCO more what we would be doing with the proceeds as indicated by potential covenants or obligations associated with the debt we are raising.

Okay, thank you.

Speaker Change: I would now like to turn the call back over to management for any closing remarks.

Speaker Change: Thank you all for joining us this afternoon and for your questions.

Speaker Change: We closed out another strong quarter of growth, leading to a strong year, with consistent results across our broad portfolio of assets.

Speaker Change: I want, once again, to thank the entire Bausch Health team across the globe for their hard work and dedication and relentless drive.

Speaker Change: to deliver the products patients need most to enrich their lives. Thank you for your time and your interest in the company, and we look forward to another strong year of execution and progress in 2025.

Enjoy your evening. Thank you.