Bausch Health Cos., Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Strategic Priorities: Sustained growth, innovation, operational excellence, and people focus. Sixth consecutive quarter of year-over-year revenue and adjusted EBITDA growth.
• Salix: XIFAXAN had strong performance, with new trial results showing XIFAXAN monotherapy is more effective than lactulose for reducing hepatic encephalopathy recurrence and mortality. Vigorously defending intellectual property in XIFAXAN litigation.
• International: 8% organic growth, with broad and sustained growth trends in Canada, including strong performance from promoted brands like Contrave.
• Diversified: Launch of Cap trio met expectations, and the company continued to improve profitability of Wellbutrin and Aplenzin even at lower script volumes.
• Solta Medical: 36% organic growth year-over-year, with particular strength in South Korea and China. Investing in sales and marketing resources in Korea and launching new products like Clear and Brilliant touch in the Philippines.
• Innovation: Red Sea program for SSD rifaximin studying compensated cirrhosis, and AI-driven customer engagement initiative for XIFAXAN to accelerate growth.
• Legal Updates: XIFAXAN Hatch-Waxman litigation ongoing, Granite Trust matter settlement expected soon, and trial date set for securities opt-out cases but settled before trial.

Segment Performance

• Salix: Revenues in the third quarter were $642 million, a 5% year-over-year increase. The 3 major brands—XIFAXAN, Relistor, and TRULANCE—all grew at least 7%. XIFAXAN drove most of the revenue, with total scripts up 3%, new scripts up 4%, and extend units up 5%, though impacted by a 15% reduction in wholesaler channel inventory.
• International: Revenues were $291 million, a 6% reported growth and 8% organic growth year-over-year. Canada, EMEA, and Lat Am all saw organic growth. In Latin America, private channel growth was double-digit, and in Canada, promoted brands like Contrave achieved strong double-digit growth.
• Solta Medical: Revenues were $112 million, a 35% reported increase year-over-year. The Asia Pacific region, especially China, South Korea, and Taiwan, was the primary growth driver. Solta saw strong performance in South Korea and China, with Thermage FLX relaunch in China exceeding expectations.
• Diversified: Revenues were $269 million, a 4% reported growth and 7% organic growth year-over-year. Growth was driven by the neurology business, with Wellbutrin and Aplenzin growing 22% and 26% respectively. The launch of Cap trio met expectations, and the company continued to improve profitability of Wellbutrin and Aplenzin even at lower script volumes.
• Bausch + Lomb: Revenues were $1.2 billion, a 19% reported growth and 10% organic growth year-over-year. Growth was well balanced across all businesses and geographies.

Guidance

• Raised full year 2024 guidance for Bausch Health excluding Bausch + Lomb:
  • Revenue expected in the range of $4.775 billion to $4.85 billion, with organic growth guidance between 4% and 6%.
  • Adjusted EBITDA guidance narrowed to between $2.425 billion and $2.475 billion.
  • Adjusted cash flow from operations guidance increased to a range between $975 million and $1.025 billion.

Risks

• Litigation: XIFAXAN Hatch-Waxman litigation with new ANDA filings and different patents than earlier cases. Granite Trust matter settlement process taking longer but not expected to materially impact financials. Securities opt-out cases with trial date set but settled before commencement.

Question and Answer

Q: On XIFAXAN legal dispute, status with Norwich, new patents.

A: Norwich can't launch generic until 2029. There are 3 new Paragraph IV certifications against XIFAXAN 550-milligram with new patents asserted.

Q: Hypothetical divestiture tax.

A: Significant care at Canadian level, no significant tax leakage expected from large divestiture of Bausch + Lomb ownership.

Q: Post XIFAXAN world, growth opportunities.

A: Salix has room for XIFAXAN growth, International has broad portfolio growth, Solta has continued expansion in Asia Pacific.

Q: XIFAXAN generic impact, summary judgment, dividend decision.

A: Vigorously defend intellectual property in XIFAXAN litigation; dividend decision involves considering debt, equity holders, and risk-benefit analysis.

Q: UC trial for amiselimod.

A: Positive Phase II data, submitting draft protocol to FDA, working with PMDA for Phase III.

Q: Cost structure post XIFAXAN.

A: Fit-for-purpose model, evaluating costs and investments to align with future business needs.

Q: XIFAXAN timeline.

A: Belief in defending patents until January 1, 2028, with Teva's first filer status still a factor.

Q: Co-op and fraudulent conveyance lawsuit.

A: Cases in discovery, no further comment beyond that.

Q: Red Sea program rationale.

A: Targeted at compensated cirrhosis to address unmet need, with potential to help patients and healthcare systems.

Q: Acquisitions.

A: BLTO unrelated, no details provided on the $96 million spend on acquisitions