Bausch Health Companies Q4 2024 Earnings Report

Bausch Health Companies EPS Results

• Actual EPS: $1.21
• Consensus EPS: $1.65
• Beat/Miss: Missed by -$0.44
• One Year Ago EPS: N/A

Bausch Health Companies Revenue Results

• Actual Revenue: $2.56 billion
• Expected Revenue: $2.51 billion
• Beat/Miss: Beat by +$44.04 million
• YoY Revenue Growth: N/A

Bausch Health Companies Announcement Details

• Quarter: Q4 2024
• Date: 2/19/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 19, 2025
• Conference Call Time: 5:00PM ET

Bausch Health Companies (NYSE:BHC) operates as a diversified specialty pharmaceutical and medical device company in the United States and internationally. It develops, manufactures, and markets a range of products primarily in gastroenterology, hepatology, neurology, dermatology, international pharmaceuticals, over-the-counter (OTC) products, aesthetic medical devices, and eye health. The company operates through five segments: Salix, International, Solta Medical, Diversified, and Bausch + Lomb. The Salix segment provides gastroenterology products in the United States. The International segment sells aesthetic medical devices, branded pharmaceuticals, generic pharmaceuticals, and OTC products internationally. The Solta Medical segment engages in the sale of aesthetic medical devices. The Diversified segment offers pharmaceutical products in the areas of neurology and certain other therapeutic classes; generic products; ortho dermatologic; and dentistry products in the United States. The Bausch + Lomb segment offers products in the areas of vision care, surgical, and ophthalmic pharmaceuticals products. The company was formerly known as Valeant Pharmaceuticals International, Inc. and changed its name to Bausch Health Companies Inc. in July 2018. Bausch Health Companies Inc. is headquartered in Laval, Canada.

Bausch Health Companies Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Greetings. Welcome to the Bosch Health Fourth Quarter twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

[Operator]

I will now turn the conference over to your host, Garan Sarafian, Investor Relations of BOSCH. You may begin.

[Garen Sarafian, SVP - Head of IR at Bausch Health]

Good afternoon, and welcome to Bausch Health's fourth quarter twenty twenty four earnings conference call. Participating in today's call are Thomas Appeo, Chief Executive Officer of Bausch Health and JJ Charon, Chief Financial Officer. Before we begin, I'd like to remind you that our presentation today contains forward looking information. 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. 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.

[Garen Sarafian, SVP - Head of IR at Bausch Health]

Please refer to our SEC filings and our filings with the Canadian Securities Administrators for a list of some of the risk factors that could cause our actual results to differ materially from our expectations. We use non GAAP financial measures to help investors understand our operating performance. Non GAAP financial measures may not be comparable to similarly titled measures used by other companies and should be considered along with, but not as an alternative to, measures calculated in accordance with GAAP. You will find reconciliations to our non GAAP measures in the appendix of the slides that accompany this presentation, which are available on Bausch Health's Investor Relations website. Finally, the financial guidance in this presentation is effective as of today only.

[Garen Sarafian, SVP - Head of IR at Bausch Health]

We do not undertake any obligation to update guidance. Our discussion today, Wednesday, February 19, will focus on Bausch Health excluding Bausch and Lomb. However, we will briefly comment on Bausch and Lomb's results announced this morning. We will refer to year over year comparisons with the same period last year unless otherwise noted. With that, I'd like to turn the call over to our CEO, Tom Appeo.

[Garen Sarafian, SVP - Head of IR at Bausch Health]

Tom?

[Thomas Appio, CEO at Bausch Health]

Thank you, Garen, and welcome to everyone joining our earnings call today. We closed out 2024 with a strong fourth quarter, executing on our strategic priorities and reinforcing our focus on patient centered outcomes. Vouch Health continues to deliver, marking our seventh consecutive quarter of revenue and adjusted EBITDA growth. 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.

[Thomas Appio, CEO at Bausch Health]

As I could not be more proud of what the Bausch Health team accomplished and the momentum we have heading into 2025. While 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. Revenues for Bausch Health, excluding Bausch and Lomb, increased 4% on a reported basis and 7% on an organic basis when compared to the fourth quarter of twenty twenty three, with strong organic growth in our Salix and Salta segments. Full year revenues for Bausch Health excluding Bausch and Lomb increased 5% on a reported basis and 6% on an organic basis.

[Thomas Appio, CEO at Bausch Health]

For Bausch Health, excluding Bausch and Lomb, adjusted EBITDA for the fourth quarter of twenty twenty four increased by approximately 7% compared to the prior period. 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. Our success translated into strong cash flow from operations for the company in 2024. Bausch Health, excluding Bausch and Lomb, generated approximately $1,300,000,000 in adjusted operating cash flow for the full year. For Bausch Health, excluding Bausch and Lomb, 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.

[Thomas Appio, CEO at Bausch Health]

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. 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. Our 2025 outlook builds on the framework we laid out last quarter, which aims to drive value through the organization. So how do we continue generating value and accomplishing our goals? By centering on our value creation efforts around three fundamental pillars.

[Thomas Appio, CEO at Bausch Health]

First, we are relentlessly focused on enhancing the value of Bausch Health operational assets, driving innovation, strengthening execution and maximizing the growth potential of our diverse global portfolio of brands. Second, we are actively exploring all avenues to unlock the full value of our Bausch and Lomb equity stake, ensuring the greatest benefit for Bausch Health shareholders. 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. It is these value creation pillars that will contribute to the success of our long term strategic priorities. 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.

[Thomas Appio, CEO at Bausch Health]

Our strategic priorities, people, growth, innovation, efficiency and unlocking value are at the core of everything we do at Bausch Health. 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 Charon joined us as CFO and Amy Lennar joined us as the leader of our U.

[Thomas Appio, CEO at Bausch Health]

S. Pharma business. In December, we appointed a new Chief Medical Officer and Head of R and D, Jonathan Sadei, who we are excited to welcome to the team. 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. We aspire to be principal leaders, creative thinkers, problem solvers and result seekers.

[Thomas Appio, CEO at Bausch Health]

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. Our second priority is the long term growth of our business with a focus on operational excellence. 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. Innovation, our next strategic priority is another critical driver of our long term growth objectives.

[Thomas Appio, CEO at Bausch Health]

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. We have developed tools and algorithms that apply AI and machine learning to our sales process for XIFAXAN and we believe this has been one of the drivers of the performance for the product in 2024. 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. As our performance demonstrates, our investments in innovation are contributing to our growth.

[Thomas Appio, CEO at Bausch Health]

Our key pipeline programs continue to progress. Our Red Sea program for the prevention and delay of the first episode of hepatic encephalopathy remains on track. We successfully initiated and are in the midst of two global Phase three trials with top line results for each expected by early twenty twenty six. As a reminder, this program for our solid soluble dispersion Rifaximin product may enable us to address an unmet need to a novel therapy for cirrhotic patients globally and continues to be an exciting opportunity for us. In our Solta business, Clear plus Brilliant Touch has been approved in additional markets in Asia Pacific with regulatory submissions in Canada and EMA in 2024.

[Thomas Appio, CEO at Bausch Health]

We also received FDA clearance for the next generation Fraxel in The U. S, which we anticipate launching commercially in 2025. Overall, I am energized by the prospects for the innovation that lie ahead for BASH Health. We continue to drive the success of our business forward through our R and D efforts, maximizing opportunities to best serve patients across the globe. This brings me to our next priority, executing with efficiency, a cost mindset and operational excellence across the business.

[Thomas Appio, CEO at Bausch Health]

We are laser focused on serving our patient populations and their healthcare providers and utilizing our strong supply chain expertise to be nimble in meeting unexpected industry supply needs as they arise. 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 Wellbutrin demand in Canada. 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.

[Thomas Appio, CEO at Bausch Health]

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. We look forward to keeping you updated on these key initiatives throughout 2025. To summarize, Bausch Health delivered a solid performance throughout 2024 and has now grown revenues and adjusted EBITDA for seven consecutive quarters. Our success in the fourth quarter was broad based. XIFAXAN delivered 16% revenue growth and with solid volume growth across all channels, resulting in a fourth consecutive quarter of growth.

[Thomas Appio, CEO at Bausch Health]

Solta grew 34%, again led by Asia Pacific region. Our durable and 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. 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. By expanding into the potentially large cardiometabolic market, which for Mexico alone is over a $2,000,000,000 market, 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.

[Thomas Appio, CEO at Bausch Health]

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. In summary, Bausch 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. With that, I'll hand it over to JJ to provide additional commentary on financial results. JJ?

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Thank you, Tom. 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. Revenues for the year were $4,834,000,000 with a year over year growth of 5% or $223,000,000 Adjusted EBITDA for the full year was $553,002,000 growing 8% and demonstrating the continued operating leverage of our business model, thanks to tight expense management and positive business mix. Adjusted cash flow from operation in 2024 was $1,300,000,000 or a 85% growth year over year, which was exceptional. The primary drivers were in addition to our operational performance, unusually low cash taxes and the timing of some of our outflows in Q4.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Even when excluding these one time benefits, adjusted cash flow from operations for the year was approximately $1,000,000,000 or about a 40% increase year over year. Let me now review our 2024 performance in more detail overall and by segment starting with our consolidated performance on Page 14. Revenue for the fourth quarter was $559,002,000 up 6% on a reported basis and 9% on an organic basis versus the same quarter a year ago. Revenue for the full year was $625,009,000 an increase of 10% on a reported basis and 8% on an organic basis. Adjusted gross margin for the fourth quarter was 72.4%, which was 80 basis points higher than the same period a year ago.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

For the full year, it was 71.9%, an increase of 90 basis points versus twenty twenty three. Adjusted operating expenses for the fourth quarter were $958,000,000 an increase of $67,000,000 over the same period last year. For the full year, operating expenses were $812,003,000 or an increase of 12% year over year. Adjusted R and D expense for the quarter was $163,000,000 which was a $12,000,000 increase year over year. For the full year, adjusted R and D expense was $615,000,000 or an increase of 2%.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Adjusted EBITDA was $935,000,000 in Q4 and $307,003,000 for the full year. Finally, adjusted operating cash flow still on a consolidated basis was $6.00 $1,000,000 in the fourth quarter and $1,572,000,000 for the full year. Focusing now on the performance of Bausch Health excluding Bausch and Lomb. Revenue for the fourth quarter was $1,279,000,000 dollars up 4% on a reported basis and 7% on an organic basis versus the same quarter a year ago. Revenue for the full year was $4,834,000,000 an increase of 5% on a reported basis and 6% on an organic basis.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Adjusted EBITDA was seven twelve million dollars a 7% increase from the fourth quarter of twenty twenty three. For the full year, it was $2,553,000,000 or an increase of 8%. Adjusted operating cash flow was $567,000,000 up $289,000,000 when compared to the full quarter of 2023. And on a full year basis, adjusted operating cash flow was $13.00 $8,000,000,000 up $600,000,000 when compared to 2023. The impressive cash flow generation in the fourth quarter and overall in 2024 were driven primarily by three factors.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

First and foremost, a well balanced operating performance across our segment second, unusually low cash taxes and third, the favorable timing of some of our outflows in Q4. Turning now to our fourth quarter performance by segment, starting with Celics on Page 20. Celix revenues in the fourth quarter were $634,000,000 an increase of $51,000,000 or 9% growth year over year driven primarily by XIFAXAN, which grew an outstanding 16%. We continue to be encouraged by the trend of our scripts following the recent optimization of our sales force deployment. More specifically, total XIFAXAN scripts for new script growth were both up 5% in the fourth quarter.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Extended units grew 7% and includes non retail setting such as hospitals and outpatient clinics, which again saw stronger double digit growth. Now moving to the International segment on Page 21. Revenues for International were $279,000,000 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. The 5% of growth difference was driven by the strengthening of the dollar mostly against the Mexican peso. By geography, Canada and EMEA were the strongest contributors to growth in the quarter.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Revenue in Canada grew 9% on a reported basis and 16% on an organic basis, driven by the continued benefit of a Wellbutrin generic competitor supply shortage in the market. 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. Revenues in EMEA grew 4% on a reported basis and 5% when excluding the impact of FX. Finally, in Latin America, revenue decreased year over year 14% on organic basis, mostly due to the timing of government tenders in Mexico. Now moving to Page 22 to review our Solta Medical segment.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Revenues for Solta were $138,000,000 during the fourth quarter, an increase of 34% on a reported basis. This capped an outstanding year for Salta for both revenue and segment profit. What was even more impressive is that our growth for Salta was primarily driven by volume. By country, South Korea and China continue to be the primary drivers of Salta's growth globally. As a reminder, it is second quarter of this year we relaunched Termage FLX in China, which has since performed exceptionally well.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

We believe this business is well positioned for sustained growth in the near and long term. Turning now our focus to the performance of our diversified segments, which you will find on Page 23. Revenues for the Diversify segments were $228,000,000 during the fourth quarter, a decrease of 12% on a reported basis. As a reminder, on our fourth quarter call last year, we referenced marketplace supply constraint that allowed us to capitalize on sales of Atevant. This generic supply shortage did not recur this year impacting overall results in the quarter versus the prior year.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Finally, let me wrap up the segment discussion for the fourth quarter by commenting briefly on Bausch and Lomb top line results on Page twenty five and twenty six. Revenues were $1,280,000,000 dollars during the fourth quarter, up 9% on a reported basis. For the full year, revenues were $791,004,000 an increase of 16% versus the prior year on a reported basis. Turning now to our balance sheet starting with Page 28. As a result of our exceptional cash flow performance in Q4, we reduced our debt net of cash, for Bausch Health excluding Bausch and Lomb by approximately $520,000,000 For the full year and after payments associated with restructuring and legal settlements, our net debt reduction amounted to almost $1,000,000,000 This allowed us to reduce our gross debt by about $730,000,000 through primarily two actions.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

First, we executed $555,000,000 of open market purchases in the first half. And second, we continue to reduce our twenty twenty seven term loan balance by $125,000,000 as per the mandatory annual amortization obligations. The consequence of all these drivers was an increase of our cash on hand by $260,000,000 when compared to where we stood at the end of twenty twenty three. Overall, the fourth quarter was a strong finish on all fronts that capped off an outstanding year for Bausch Health as we continue to optimize the return of our diversified and resilient set of assets across all five segments. We believe we are well positioned for another strong year of operating performance in 2025.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Let me now provide you with our 2025 financial guidance for Bausch Health excluding Bausch and Lomb, which you will find on Page 30. For 2025, we expect revenues to be between $4,950,000,000 and $5,100,000,000 The midpoint of that range would translate into a 4% increase year over year. Adjusted EBITDA is expected to be between $2,625,000,000 and $2,725,000,000 making the midpoint a 5% increase versus 2024. Finally, we expect adjusted cash flow from operations to be between $975,000,000 and $1,025,000,000 dollars Although this translates into a $300,000,000 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. Before I headed 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.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

We still believe that there are three primary levers for value creation for Bausch Health shareholders. 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. 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.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

It also highlights the operating leverage of our business model through positive business mix and tight expense management. What's more, because our margins are high and our capital intensity is low, our business has been producing strong free cash flows. Our second lever is to maximize the value of our Bausch and Lomb asset for Bausch Health shareholders. As we indicated two weeks ago, the exploration of selling Bausch and Lomb has concluded, at least for now, as it did not lead to an offer that reflected Bausch and Lomb long term value. Nevertheless, the main objective remains the same, which is to complete the separation of Bausch and Lomb from Bausch Health in the most accretive way for Bausch Health shareholders.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

We will continue to evaluate any and all options to do so. And lastly, our third lever is to optimize our capital structure. To that effect, we have made good progress since late October. First and foremost, we have accelerated our cash flow generation, which has allowed us to reduce our net debt by almost $1,000,000,000 during 2024. Separately, we have secured a commitment for up to an additional $700,000,000 credit facility, which will increase our operational and financial flexibility.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

With this new facility, together with our cash on hand, our $975,000,000 credit facility, our ARR facility and our anticipated free cash flow generation over the next five quarters, 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. Obviously, we are not done with our capital structure improvement efforts, but this is an important milestone as we redirect the focus towards addressing our 2027 and beyond maturities. To that effect, we plan on tapping the capital markets in the first half of twenty twenty five, which could include pledging a portion of the Bausch and Lomb shares owned by the company. 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.

[Thomas Appio, CEO at Bausch Health]

Thank you, JJ, and thank you to the entire Bausch Health team for another strong year of growth and execution as we delivered on our commitments and our strategic priorities. As a reminder, we have placed specific emphasis on our people and culture, growing our business, encouraging innovation to drive R and D, operating with efficiency to capture marketplace demand and unlocking the value of Bausch Health in the short and long term. Our results for 2024 provide us with a strong foundation for further success in 2025. We look forward to building on this momentum to drive growth across all business segments, while serving patients and their healthcare providers. With that, we will now turn to questions.

[Thomas Appio, CEO at Bausch Health]

Operator, please open the line for Q and A.

[Operator]

Thank you. First question comes from Les Zaleski with Truist Securities. Please proceed.

[Les Sulewski, VP - Biotech Equity Research at Truist Securities]

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, call it, the eighteen month period? And if there were an at risk launch to occur, what could be some of your response options?

[Les Sulewski, VP - Biotech Equity Research at Truist Securities]

And I guess, secondarily, what are the potential at risk loan impacts on the timeframes with the other tentative approval? Thank you.

[Thomas Appio, CEO at Bausch Health]

Thanks, Les, for the question. Yes, I can touch upon where the Norwich starts. So Norwich gained tentative approval. The FDA denied granting Norwich final approval and concluded that Teva has not forfeited their first filer status. So Norwich has sued the FDA regarding its conclusion and requested the FDA be forced to grant final approval of their ANDA.

[Thomas Appio, CEO at Bausch Health]

So both Teva and ourselves, Bausch Health, have intervened. So based on Norwich's tentative approval letter, we expect the FDA to defend its position on Teva's non forfeiture, right? So So I would just say inclusion, we believe that the FDA is correct in its determination that Teva remains the first filer and has not forfeited. I'm not going to speculate on launching at risk at this time because we believe that the FDA is correct and Teva continues with their rights of first to file. Next question?

[Les Sulewski, VP - Biotech Equity Research at Truist Securities]

On the discontinuation of the Crohn's disease study?

[Thomas Appio, CEO at Bausch Health]

You were breaking up.

[Les Sulewski, VP - Biotech Equity Research at Truist Securities]

We couldn't hear you come through. What was it? Sorry, I'll repeat.

[Les Sulewski, VP - Biotech Equity Research at Truist Securities]

On the AMISILIMAD program, what's the reasoning on the discontinuation of the Crohn's disease study?

[Thomas Appio, CEO at Bausch Health]

Yes. So we didn't discontinue the study. On the last call, I mentioned that we were evaluating it based on looking at the data. And we made the determination when we specifically looked at Crohn's that this class of drug, 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 in Crohn's of other drugs that have tried it in Crohn's.

[Les Sulewski, VP - Biotech Equity Research at Truist Securities]

Got it. Thank you for the color. Just one more for 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 cardiometabolic front? Thank you.

[Thomas Appio, CEO at Bausch Health]

Sure. Yes. So as I said in my prepared remarks, I think that when you look at the international business and I'm looking at it holistically, globally, it's an underappreciated business. It's a branded generic business that is very durable, no LOEs. And so what we have put together, we have a team that is solely focused on building out our brand generic portfolios around the world.

[Thomas Appio, CEO at Bausch Health]

The two deals that I mentioned was in Latin America and those are a variety of products. One of them was with MSN, which is a broad portfolio of branded generic products. As you know, our Latin America business is very successful in the branded generic space in building brands. And then a second one was looking at a single triple combination therapy with commonly used hypertension medicines and which will be novel and it will be proprietary in multiple strengths. 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 in Latin America.

[Thomas Appio, CEO at Bausch Health]

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.

[Operator]

Up next is Doug Minhian with RBC Capital. Please proceed Doug.

[Douglas Miehm, Analyst at RBC Capital Markets]

Thank you. A couple

[Douglas Miehm, Analyst at RBC Capital Markets]

of questions. With respect to the 229BC, the $700,000,000 that you're contemplating funding with debt and using a portion of the BLCO holdings. Relative to the 38.5% that was put in for the $999,000,000 previously. What sort of quantum of potential shareholdings of BLCO would be required under the $700,000,000 Would it be proportional? It probably wouldn't be, but maybe you can walk me through how much would have to be placed within that company?

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Hi, Doug. This is JJ. First of all, just as a point of clarification, although the $1,000,000,000 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. These 8% would be added to the remaining 50% that would be used as collateral to that credit facility.

[Douglas Miehm, Analyst at RBC Capital Markets]

Okay.

[Douglas Miehm, Analyst at RBC Capital Markets]

And then on top

[Douglas Miehm, Analyst at RBC Capital Markets]

of that, if you were

[Douglas Miehm, Analyst at RBC Capital Markets]

to go ahead and explore accessing capital markets, this would be incremental in terms of the proportion of shares of Bausch and Lomb that we pledged or not? Just trying to understand

[Douglas Miehm, Analyst at RBC Capital Markets]

on a

[Douglas Miehm, Analyst at RBC Capital Markets]

short basis.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Yes, we're looking at different packages. So I'm not going to comment specifically on what we'll 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 twenty twenty seven maturities in BL.

[Douglas Miehm, Analyst at RBC Capital Markets]

Okay, okay, fine. Then 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 XIFAXAN given the strong growth we've seen in recently. When you look at that guide, how much of that is associated with DITFAXAN growth?

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Yes. So we haven't provided any specifics in terms of quantification, but the two biggest contributors of our growth in 2025 will be indeed CLEX with XIFAXAN and Solta. I think the dynamics that you're seeing, particularly in the second half for XIFAXAN should be assumed as continue in 2025.

[Douglas Miehm, Analyst at RBC Capital Markets]

Okay. And then just to wrap up, can you update us on any potential settlements with the Opto Groups or Granite Trust where we stand there? That would be great. Thank you.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Yes, of course.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

On the Granite Trust, there is really no meaningful update to the guidance we provided in prior calls, which is that we do not expect any meaningful negative cash flow coming out of the settlements. We're still awaiting the final resolution and decisions from the IRS and we are all hoping to get that pretty soon. On the legal settlement, it's really hard to speculate on any future negotiations. 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.

[Operator]

The next question comes from Jason Gerberry with Bank of America. Please proceed.

[Chi Fong, VP - Equity Research at Bank of America Merrill Lynch]

Hey, thanks for taking our questions. This is Chi on for Jason. I would like to ask a follow-up on the early question on the new Norwich case. Is it your understanding that Norweg is not subject to the thirty month stay and the only gating factor for the full approval from the FDA of the generic XIFAXAN is around the one hundred and eighty day exclusivity? And for that case, do you have a sense of the timing for next steps?

[Chi Fong, VP - Equity Research at Bank of America Merrill Lynch]

Would you expect a trial to be scheduled in the coming couple of months? Thanks so much.

[Thomas Appio, CEO at Bausch Health]

Yes, I'll take that question. We believe the thirty month stay applies and that's what the legal team is focused on and getting ready for. So that's where that stands. Next question?

[Chi Fong, VP - Equity Research at Bank of America Merrill Lynch]

Do you have a sense

[Chi Fong, VP - Equity Research at Bank of America Merrill Lynch]

of the timing? I apologize if I may follow-up. In the legal document, Norwich claim the FDA has determined that Norwich is not subject to the thirty month stay. Can you talk about that? Thank you.

[Thomas Appio, CEO at Bausch Health]

Yes. What I'd say, we believe the thirty month stay still applies. And so that's the way we're proceeding. I really don't want to speculate right now on what the FDA or what you've said they said, but we believe and we are continuing to work on where that trial stands and that case stands and we believe thirty months still applies.

[Operator]

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

[Michael Freeman, Equity Research Analyst - Healthcare at Raymond James Financial]

Hi, good evening Tom, JJ, Garrett. Congratulations on these earnings. A couple of questions from me. There have been plenty of government initiatives that may potentially affect your business going forward. So I wonder if you could comment on XIFAXAN being included in the Medicare renegotiation list for 2027.

[Michael Freeman, Equity Research Analyst - Healthcare at Raymond James Financial]

And any sort of preparation for those negotiations and potential preparation for 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 your maybe your supply chains or pricing going forward?

[Thomas Appio, CEO at Bausch Health]

Yes, Michael, thanks. I'll take those questions. So, yes, we were on the list. Of course, XIFAXAN has had great success and we wound up on the risk list. What I would say is, it's still early in the process and we're going to be in the process of negotiating.

[Thomas Appio, CEO at Bausch Health]

Our focus right now is to prepare for that and go through the process with CMS and which will come into effect in 2027. I just think it's too early to offer detailed commentary with that regard. But we continue to remain focused on demonstrating the value of XIFAXAN, during which we're going to share the information on the value it delivers to patients, providers and the overall healthcare system. In terms of when you look at XIFAXAN on the OHE indication, which is more than 70% of the business, the amount of cost savings regarding hospitalizations is it drives a big benefit. So we're closely monitoring the situation.

[Thomas Appio, CEO at Bausch Health]

We have a super fantastic team in the space of market access and we're looking at all possibilities. In terms of the tariffs, I could say something and then maybe JJ wants to add. Again, it's still too early. There's a lot of discussions here on the tariffs of what it would mean for us and we've been closely following it 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.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Yes. So in terms of our setup and our supply chain, of course, the fact that cost of goods sold is a relatively small proportion of revenue for pharmaceutical company. The financial impact of those tariffs, let's assume the scenario that has been the most publicized, 25% and that would be for full year. The impact would be below $50,000,000 in terms of cash flow for the company. So I wanted to give you some order of magnitude on how to think about it.

[Michael Freeman, Equity Research Analyst - Healthcare at Raymond James Financial]

Excellent. That's very helpful. Now just a quick one. We had doctors today join the team as the new CMO and I noticed that 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 Doctor.

[Michael Freeman, Equity Research Analyst - Healthcare at Raymond James Financial]

Sadegh has brought to the team in his tenure so far?

[Thomas Appio, CEO at Bausch Health]

Yes, I think it's a great question. Of course, we are so pleased to have Jonathan join us and discussing how to build our pipeline for the future. As you know, we have the Red Sea program. In fact, today downstairs, we're having advisory boards. We're really excited about the Red Sea program and what that's going to mean for us and what it can mean for patients as again this is a prevention trial.

[Thomas Appio, CEO at Bausch Health]

So we're really excited about that. We did mention that we did not we're not going to pursue looking at amicillumab and Crohn's. And Jonathan, just since he's joined in the last two months, we've been actively discussing what we're going to pursue, what we're going to develop, and then from a business development standpoint, 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 give more information as things progress on rebuilding and building up this pipeline.

[Michael Freeman, Equity Research Analyst - Healthcare at Raymond James Financial]

Okay. Thank you, Tom.

[Operator]

The next question comes from Mike Medalkodi with TD Cowen. Mike, please proceed.

[Michael Nedelcovych, Director - Equity Research at TD Cowen]

All right. Thanks for the questions. I have one and a follow-up. My first question relates to zytheaxanthin and the 20.7% IRA price negotiation. Are you able to tell us what portion of sales are derived from the Medicare channel?

[Michael Nedelcovych, Director - Equity Research at TD Cowen]

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? 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?

[Michael Nedelcovych, Director - Equity Research at TD Cowen]

Thank you.

[Thomas Appio, CEO at Bausch Health]

Yes. So, Mike, I'll take the first one on XIFAXAN price negotiation. As you know, our XIFAXAN business is in IBS D and HE and it's blended. Again, what would be subjected to the IRA price negotiation. I can't give you what the percentage is that would be.

[Thomas Appio, CEO at Bausch Health]

As I said, we have been looking at this carefully for some time of what the different levers are that we will be able to look at as we go through the negotiation. So it's still early in the process. And again, as you know, this comes in January of twenty twenty seven. So there's still a lot to be done and discussed here. And then as I said previously, already XIFAXAN on the HE indication is, if you look at hospitalization costs and patients not being in hospital, there already is a very large savings into the healthcare system on XIFAXAN.

[Thomas Appio, CEO at Bausch Health]

I'll hand the other question that you had over to JJ.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Yes. So, Don, no, 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 $7,000,000,000 of maturities between now and the end of twenty twenty seven. You have obviously to take into consideration the cash on hand, the cash flow that we'll be generating between now and the end of twenty twenty seven.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

As we indicated in our guidance, this is a business that certainly in the near term can generate $1,000,000,000 plus of cash flow per year. And so the objective here is really to deal as is to deal with as much maturities as possible during that horizon.

[Michael Nedelcovych, Director - Equity Research at TD Cowen]

Great. Thank you.

[Operator]

Okay. And our last question comes from Glenn Santangelo with Jefferies. Please proceed.

[Glen Santangelo, Managing Director at Jefferies Financial Group]

Yes. Thanks for taking my question. Hey, Tom, just two quick ones for me. I mean, it seems pretty obvious why you may be walked away from the BLCO sales process. And so in your prepared remarks, you seem like you're continuing to sort of actively explore different processes to maybe monetize this asset.

[Glen Santangelo, Managing Director at Jefferies Financial Group]

But what might you do differently going forward versus what you did over the sort of past couple of years? And do you think 2025 could be in the cards to ultimately get a deal done? And then my follow-up to that is for JJ, just on the follow-up question, when you think about 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.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

Yes. Hi, Glenn, this is JJ. I'm going to cover both questions. So as we said, obviously, the maximizing the value for shareholders of our BLSU equity stake is one of the primary value creation levers for us. And there are many ways you can go and achieve that.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

The goal is obviously to complete the separation between VLCO and BHC, but the monetization of that asset is going to play a key part in our journey over the next three years. And listen, there's no real timeline associated with that. I think it's more a function of what makes sense for shareholders and whether the transactions that we're considering are accretive to BHC share value. So that's what I would say on that front. And then in terms of the financing that we're looking at raising, obviously, our BRCO equity stake is a big asset of the company.

[Jean-Jacques Charhon, Executive VP & CFO at Bausch Health]

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, I think the timing or the decision we'd be making on the LCO more what we will be doing with the proceeds, as indicated by potential covenants or obligation associated with the debt we're raising.

[Glen Santangelo, Managing Director at Jefferies Financial Group]

Okay. Thank you.

[Operator]

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

[Thomas Appio, CEO at Bausch Health]

Thank you all for joining us this afternoon and for your questions. We closed out another strong quarter of growth leading to a strong year with consistent results across our broad portfolio of assets. I want once again to thank the entire Bausch Health team across the globe for their hard work and dedication and relentless drive 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.

[Thomas Appio, CEO at Bausch Health]

Thank you.

[Operator]

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

Participants

Analysts

• Garen Sarafian, SVP - Head of IR at Bausch Health
• Thomas Appio, CEO at Bausch Health
• Jean-Jacques Charhon, Executive VP & CFO at Bausch Health
• Les Sulewski, VP - Biotech Equity Research at Truist Securities
• Douglas Miehm, Analyst at RBC Capital Markets
• Chi Fong, VP - Equity Research at Bank of America Merrill Lynch
• Michael Freeman, Equity Research Analyst - Healthcare at Raymond James Financial
• Michael Nedelcovych, Director - Equity Research at TD Cowen
• Glen Santangelo, Managing Director at Jefferies Financial Group