Bausch Health Cos., Inc. Q4 FY2024 earnings call

People: Added experienced leaders, strengthened teams with talent, focused on culture of ownership, accountability, compliance. ### Growth: Seventh consecutive quarter of revenue and adjusted EBITDA growth; strong fourth quarter and full year results. ### Innovation: Thermage FLX approved in China, AI/ML tools for Xifaxan sales, RED-C program in Phase III, Solta's Clear + Brilliant Touch approved in APAC, Next Generation Fraxel cleared by FDA. ### Efficiency: Laser focused on patient population, supply chain expertise, meeting unanticipated needs. ### Unlocking Value: Focus on enhancing operational assets, exploring Bausch + Lomb equity stake value, optimizing capital structure.

For Bausch Health excluding Bausch + Lomb:

• Salix: Fourth quarter revenues $634M, up 9% y-o-y, with Xifaxan growing 16%.
• International: Revenues $279M, down 4% reported but up 1% organic. Canada up 9% reported and 16% organic; EMEA up 4% reported; Latin America down 14% organic.
• Solta Medical: Fourth quarter revenues $138M, up 34% reported, driven by volume, with South Korea and China as primary drivers.
• Diversified Segments: Fourth quarter revenues $228M, down 12% reported due to lack of marketplace supply constraint like previous year.

Bausch Health, excluding Bausch + Lomb, expects 2025 revenues between $4.950B - $5.100B (4% y-o-y growth), adjusted EBITDA between $2.625B - $2.725B (5% y-o-y growth), adjusted cash flow from operations between $975M - $1.025B.

Norwich lawsuit regarding FDA approval of generic Xifaxan, uncertainty around 30-month stay. ### Medicare renegotiation for Xifaxan in 2027 and potential price reduction. ### Potential impact of international tariffs on supply chain and pricing.

Q: Could you provide the latest status update on the Norwich situation and your time lines around the FDA lawsuit?

A: 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. 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 nonforfeiture, 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. I'm not going to speculate on launching at risk at this time because we believe that the FDA is correct and Teva is -- continues with their rights of first to file.

Q: On the amiselimod program, what's the reasoning on the discontinuation of the Crohn’s disease study?

A: You were breaking up. We couldn't hear you come through. What was it?

Q: I'm sorry, I'll repeat. On the amiselimod program, what's the reasoning on the discontinuation of the Crohn’s disease study?

A: Yes. So we didn't discontinue the study. We -- 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 look 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.

Q: Can you provide a little more color on the two recent deals in the international side on the cardiometabolic front?

A: 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 branded 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, 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 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. 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.

Q: With respect to the 229 BC, the $700 million that you're contemplating funding with that and using a portion of the BLCO holdings, relative to the 38.5% that was put in for the $999 million previously, what sort of quantum of potential shareholdings of BLCO would be required under the $700 million?

A: Hi, Doug. This is JJ. First of all, just as a point of clarification, although the $1 billion 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.

Q: Can you update us on any potential settlements with the [indiscernible] or Granite Trust, where we stand there?

A: Yes, of course. 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 settlement. 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.

Q: Is it your understanding that Norwich is not subject to 30-month stay and the only gating factor for the full approval from the FDA of the generic Xifaxan is around the 180-day exclusivity? And for that case, do you have a sense of the timing for next steps? Would you expect the trial to be scheduled in the coming couple of months?

A: Yes, I'll take that question. 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.

Q: 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 a 30-month stay. Can you talk about that?

A: Yes. What I'd say, we believe the 30-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 30 months still applies.

Q: There have been plenty of government initiatives that may potentially affect your business going forward. So I wonder if you can comment on Xifaxan being included in the Medicare renegotiation list for 2027. And any sort of preparation for those negotiations and potential preparation for a -- 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?

A: Yes, Michael, thanks. I'll take those questions. So yes, we were on the list. Of course, Xifaxan has had great success, 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 and -- which will come into effect in 2027. And 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 health care 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. 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. Maybe he has a few further comments on that.

Q: Are you able to tell us what portion of sales are derived from the Medicare channel? 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?

A: Yes. So Mike, I'll take the first one on the 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 negotiations, I can't give you what the percentage is that would be. 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 2027. 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 health care system on Xifaxan.

Q: I mean it seems pretty obvious why you maybe 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. 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?

A: Yes. This is JJ. I'm going to cover both questions. So as we said, obviously, the -- maximizing the value for shareholders of our BLCO equity stake is one of the primary value creation levers for us, and there are 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. And listen, there's no real time line 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 BLCO equity stake is a big asset of the company, so we'll use partially or totally as collateral 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'll be making on the BLCO, more what we will be doing with the proceeds as indicated by potential covenants or obligation associated with the debt we're raising.