Bausch Health Companies Inc.

Good morning, and welcome to the Bosch Health Company's fourth quarter earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. And now I should turn the conference over to Art Shannon.

Please go ahead. Thank you very much. Good morning, everyone, and welcome to our fourth quarter and full year 2020 Financial Results Conference Call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Joe Papa, and Chief Financial Officer, Mr. Paul Herony. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section. Before we begin, we'd like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial measures. For more information about these measures, please refer to slide two of the presentation. Non-GAAP reconciliations can be found in the appendix of the presentation posted on our website. Finally, the financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter and not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it's my pleasure to turn the call over to Joe.

Thank you, Art, and thank you, everyone, for joining us. Today, I will begin with the 2020 highlights. Paul Harradine, our CFO, will then review the fourth quarter and full-year financial results and discuss our 2021 guidance. I'll then discuss our 2021 strategic focus, which includes executing our business recovery, unleashing growth drivers, and accelerating strategic alternatives to drive shareholder value, before opening the line for questions. Let's begin at slide five. In a year with unprecedented business disruption due to COVID, we finished the year strong and outperformed the high end of our latest 2020 guidance by generating revenue that exceeded $8 billion. And most importantly, strong cash flow of over $1 billion helped us to repay approximately $900 million of debt. During the COVID-related downturn, we were focused on executing on our business. We grew market share for key promoted products. We managed operating expenses to optimize 2020 EBITDA. We invested in our pipeline for future growth. And we exited the year with strong momentum carrying us into 2021 and are well positioned to benefit from recovery-related tailwinds and capitalize on key growth drivers and catalysts while pursuing alternatives to accelerate shareholder value creation. You'll hear more from Paul, but excluding the impact of any potential disasters we may announce, we are targeting approximately $1 billion of debt paid out in 2021. And earlier today, we announced that Icon Enterprises will add two new board members to Bouch Health Care to help us further our goal to accelerate shareholder value creation. Turning to slide six, the full-year fourth quarter results demonstrate that operational recovery is in progress. After experiencing significant COVID-related declines earlier in 2020, fourth quarter revenue was down only 1% compared to the prior year quarter. I want to call out a few highlights. Our vision peer business grew in the U.S. during 2020. Our iVitamin franchise continued to drive strong growth, and we launched confused Sci-Hi daily lenses in the U.S. and Ultra One Day in Australia, Hong Kong, and Canada. Sci-Faxon quarter revenue hit a record high of $411 million in the fourth quarter, and reported revenue for Sci-Faxon Trulance and Relater all grew in the 2020 versus last year. Fermage revenue grew by 47% in 2020 compared to 2019, driven by strong demand in China and expansion into other geographies. Thanks to a great Bausch Health team effort in 2020, our supply chain continued to meet demand for all of our customers, we grew market share with our key brands, we managed OpEx to optimize EBITDA, and we generated more than $1.1 billion of cash from operations during 2020. And we are seeking to accelerate the spin of B&L, our iHealth business, that we believe will unlock shareholder value. With that, I'll turn it over to Paul to cover the financial results in more detail. Thanks, Joe. I'm going to focus mainly on our quarterly results as they show our continuing recovery from the impacts of COVID. On slide seven, you see revenue by segment and business units within the segments for the quarter and the full year. I'll start with B&L International. Overall, the segment was flat on an organic basis versus Q4 2019. The top performer in the segment was the international pharma business, up 12% organically. as that portfolio of products was less impacted by COVID. In fact, certain products in this segment saw increased demand, including Zythro and our broad-spectrum anti-parasitic ivermectin. We saw organic growth in almost all countries and regions led in order by Eastern Europe, Egypt, LATAM, Poland, and Russia. This business was the star of the quarter under challenging circumstances, and the business heads there, including Fernando Zarque, Kate Kuhn, Amin Wadi, Case Hyman, Vincenzo Abruscato, and Monty Villaguta, and their leader, Tom Appio, deserve a lot of credit. Next up is the global consumer business. It was down 1% organically. There's a theme across the B&L consumer, B&L vision care, and B&L surgical businesses, and that is that the recovery in the U.S. is coming faster than what we're observing outside the United States. In the consumer segment, the U.S. business was up 3% organically versus Q4 of 2019, while the OUS business was down 2%. Driving growth in the U.S. were our iVitamins and Lumify. Outside the U.S., resurgences of COVID, the associated impact of social restrictions, and changes in consumer behaviors slowed the recovery in various geographies. Global Vision Care was down 1% organically, up 5% in the U.S., and down 3% outside the United States. In the U.S., the growers worked the recently launched infused daily disposable side-eye lenses, bio through one-day torque, and ultra-torque lenses. Outside the U.S., it's the same thing as I just described for consumer, recovering from COVID, but at a slower pace than we saw in the U.S. Global Surgical was down 7% organically, flat in the U.S. versus Q4 2019, but down 9% OUS. U.S. eye care professionals adapted more quickly to get back up and running with COVID protocols in place than outside the United States. Also, the recovery in the U.S. has been more of a linear progression while OUS surgical activity was strengthening in October and then weakened, especially in Europe, in November and December as new waves of COVID cases emerged. Finally, Global OptoRx was down 10% organically, and here the U.S. is lagging the recovery outside the United States. The U.S. was down 15% organically versus Q4 2019, while OUS we were down only 4%. In the U.S., despite the rebound in surgical procedures, patient flow into doctors' offices is still well below 2019 levels, and that has certainly impacted volumes of our OptoRx products. The impact of the Lord Max LOE also contributed to the quarter-over-quarter decline. So that's B&L International revenue. On to Salix, where revenue was up 2% compared with Q4 of 2019. Our key promoted products were all up versus Q4 of 2019, with Syfaxan up 4%, Truliance up 33%, and Relastor up 7%. Syfaxan IRXs have not yet recovered to pre-COVID levels. Extended unit TRX in the quarter were down 3.5% versus Q4 of 2019, and that's a good proxy for unit demand, end unit demand. However, our ZyFax and sales volume in the quarter was up 2% as retailers rebalanced their inventories during the quarter after substantially reducing them in the depths of COVID. Note that the fluctuations of ZyFax and channel inventories were sorted out during the year, and we ended 2020 with appropriate levels based on current sales volumes. realized that selling price was up 2%. Trulance continues to grow nicely, volume up 45%, which is broadly consistent with a 40% increase in TRXs versus before 2019. It was offset by a 14% decrease in realized net pricing. Improved managed care coverage comes at the cost of increased rebates, but we expect that the expanded coverage will be a cost-effective aid to delivering high Trulance volume growth in the future, a strong finish to the year for Salix. orthoderm segment. First, I want to note that our colleague Scott Hirsch is now leading the segment, and I'm personally excited about the changes that are underway to reposition our medical derm business to capitalize on the strengths of our orthoderm colleagues and product portfolio. We'll talk more about this in the coming quarters. In Q4, the med-derm business was down 22% organically. Roughly 10% of that decline was due to the losses of exclusivity on products including solidine, acania, elodel, and xavirinx. Our promoted brands, particularly those early in their life cycle, continue to be impacted by less patient office visits. Global Solta, under the skillful leadership of our colleague Tom Hart, continues its string of impressive cores, posting 31% organic growth. Solta grew in all regions, APAC, U.S., EMEA, Canada, and Latam. China alone accounted for more than half of the organic growth. Finally, Diversified was down 9% organically, with 8% of that decline coming from LOEs in the neurology business. Setting aside the LOE drag, the neuro business had a solid quarter driven by growth of the Wellbutrin and Plensin franchise, Librax, and Pepsin. The 15% decline in generics revenue was mainly a function of a very strong performance in Q4 of 19. Dentistry continues to recover from the effects of COVID and was down only 4%. So that's revenue in the quarter. Total company revenue was down 1% organically. We finished the year gathering momentum, and we're carrying that forward into 2021. Turn to slide eight, and I'll walk down our P&L for the quarter. We covered revenue. Our growth in profit margin decreased by some 50 basis points versus Q4 of 19. Mix was, as always, a factor, and unfavorable manufacturing variances and hits to cost of goods sold precipitated by COVID played a role as well. Selling, advertising, and promotional expenses were 8% favorable to Q4 of 2019 on a constant currency basis. As you look back at 2020, you see that in Q2, we pulled back dramatically on OpEx spending as we worked to conserve cash and protect earnings. In Q3, we began to ramp up promotional activities, and I'm going to say this is the important point. In Q4, just as our revenue had not yet returned to pre-COVID levels, our promotional efforts were also not back to full strength. I'm bringing this up here for context when I talk about 2021 guidance later. Adjusted G&E was favorable to Q4 last year by 4% on a constant currency basis, and those expenses also do not reflect full efforts on some foundational projects, for example in IT, that are important to resume with full force. R&D was 4% higher on a constant currency basis as we were able to restart activities that were paused. The net result? We posted adjusted EBITDA of $911 million in the quarter, up 2% on a constant currency basis from the prior year quarter. I'll call that good stuff. Please flip to slide nine. The full year 2020 was so colored by COVID that the comparison versus 2019 is not especially meaningful. But there are some things here worth mentioning. We estimate, excuse me, we estimate that the COVID impact for the full year at revenue was roughly $740 million. But for COVID, we would have met our original 2020 revenue guidance. The thing I'm most proud of is that the BHC team was able to react quickly to reduce expenses, conserve cash, and weather the worst of the COVID storm. We prioritized the safety of our colleagues, adapted to find ways to serve patients and our customers, and we were in a state of readiness to get back to driving our business forward as things began to open up. The payoff of these efforts is on slide 10. In Q4, we generated $394 million of cash from operating activities and $1.111 billion for the full year. Those are both on a GAAP basis. Adjusted for the settlement of legacy legal settlements and some separation costs, our cash from ops was $475 million in the quarter and $1.235 billion for the year. Our company is a strong cash generator. We convert a lot of our earnings to cash in part due to our being a Canadian company. Last quarter, there were some folks that were concerned about our level of cash generation. Hopefully, our Q4 results put those concerns to rest. As a result of our strong cash generation and efforts to better utilize our cash around the globe, as Joe said, we were able to repay slightly more than $900 million of debt in 2020. And I'll call that pretty good in this year of years. Let's go to slide 11, the balance sheet summary. Total debt at the end of the year was $24.2 billion. And I want to point out that the $1.8 billion of cash includes the $1.21 billion to settle the U.S. securities class action. So net usable cash at year end was some $600 billion. On slide 12, you see the schedule of our debt maturities, no maturities or mandatory amortization until 2024. Our active management of our debt complex was an asset for us back in the spring when liquidity concerns were understandably high. So that's Q4 in 2020. Let's turn to our guidance for 2021 starting on slide 14. Our guidance calls for revenue between $8.6 and $8.8 billion and adjusted EBITDA between $3.4 to $3.55 billion. First, and to be very clear, our revenue and operating earnings in 2021 could have been quite different but for COVID. We're fortunate to be a diversified company across a number of different businesses and geographies, and each of those businesses have and will recover from the impacts of COVID at different rates. We made great progress in Q3 and Q4 of 2020, but we're not all the way back. We also expect adjusted cash generated from operations to be approximately $1.5 billion in 2021, roughly the same as what we generated in 2019. And we're targeting approximately $1 billion of debt paydown during the year. On slide 15, we show a bridge from 2020 actual results to our guidance for 2021. But I think it's also helpful to look back at the full year 2019 that was undisturbed by COVID. 2019 reported revenue was $8.6 billion and adjusted EBITDA was $3.571 billion, an adjusted operating margin of 41.5%. At the midpoint of our 2021 guidance ranges, we'd have an operating margin of 40%, 150 basis points less than we posted in 2019. Why? Well, there are three main factors. First, our guidance for gross margin in 2021 of roughly 72% is some 70 basis points less than the 72.7 we saw in 2019. That's due to mix and a bit of a COVID hangover on manufacturing costs that will flow through 2021. Second, our R&D spend in 2019 totaled $471 million, and we're guiding the circle of $525 million in 2021. $54 million more and represents 6% of revenue at the midpoint, versus 5.5% in 2019. And finally, our SD&A as a percent of revenue is expected to be higher in 2021 as we reprime the promotional pump to drive our revenue to recapture our pre-COVID revenue growth trajectory. I want to point out that our guidance of $2.6 billion for SG&E is a big increase versus 2020, but if you compare it back to 2019, the $2.6 billion represents roughly 2% growth per annum off of what we would submit was a tightly managed year. Finally, I call your attention to the expected growth track on 2021 revenue and profit from LOE assets. We're looking at a roughly $105 million drag on revenue in 2021. This is substantially less than we've had to overcome in prior years. In 2016, our company was facing a mountain of LOEs coming at us in the condensed time frame, and so we started disclosing the expected impacts to you so you could follow along. Obviously, this made it more difficult for us to post growth. In the last three years, the growth drag ranged from $290 million to $360 million. The great news is that the impact of the bolus of LOEs has dramatically declined, and importantly, looking out over the next five years, LOEs will be quite manageable. The LOEs have been a long road for us, but this governor on our road is mostly behind us. Back to you, Joe. Thank you, Paul. Let's get started with the Bausch & Lomb International highlights on slide 17. The chart on top of that shows that recovery is in progress. In global vision here, recovery in the U.S. is ahead of the rest of the world with reported revenue growth of 2% compared to 2019 driven by line extensions for BioTrue One Day and Ultra. In global consumer, despite the pandemic, our iVitamin franchises and Lumify grew organically. Both revenue and procedures in global surgical are approaching pre-pandemic levels, and we expect delayed cataract surgeries from 2020 to create a tailwind for 2021 and beyond. Results of TRX has grew by more than 40% in 2020 compared to last year. Finally, as Paul mentioned, international RX was a standout with strong organic revenue growth of 6% compared to last year. You can see the strong signs that recovery is in progress from the charts on slide number 18. Starting on the top left, field consumption for U.S. VisionCare shows recovery in progress for the last seven months. Next, by Zolta TRXs also show a positive, consistent trend. Lumify recovery has been in progress since April of 2020. And finally, Stellaris Elite procedures in the U.S. and international surgical revenues are now similar to pre-COVID levels. Growing market share was our focus during the COVID downturn, and on slide 19, we showed that market share gains we achieved. Vysolta is up 40 basis points. Lodomax SM is up 160 basis points. And ProLensit is up 180 basis points. On the bottom left, we showed a strong positive trend in market share for our intraocular lenses in the U.S. And finally, on the bottom right, U.S. consumers also gained share in key segments. Moving down to slide 20, Infuse is our daily side-high lens, which was launched in the U.S. in August. It's a significant opportunity. We estimate the U.S. market for these lenses will grow from $1 billion today to approximately $3 billion in 2030. The global opportunity is also significant, and we expect global revenue for Bausch & Lomb side-high daily lenses to exceed $250 million. We paired and fused with Oslo Protectants and Electrolyte, and we are encouraged by the results. The lens is doing exceptionally well with patients who experience contact lens dryness. We have great results from a recent online survey on page 20. 94% of patients agree that Infuse helps keep contact lens from feeling dry. This data supports that Infuse addresses one of the big issues in the sci-fi daily market, and we believe these lenses will be an important growth driver. Let's turn to sales on slide number 21. With organic revenue growth of 2% in the fourth quarter versus last year, we are seeing clear signs that recovery is in progress. Let's start with our largest product, Syfaxon. As I mentioned earlier, Syfaxon TRX has grew sequentially by 2% compared to the third quarter of 2020. Trulance TRX has grew by 47% in 2020 compared to the overall market growth of about 6%. Finally, Relastor TRXs grew by 9% in 2020, compared to a market decline of 4%. On slide 22, we've shown the strong recovery trend for Syfaxon, Trulance, and Relastor TRXs. On slide 23, we show the GDI market share gains we achieved relative to last year. In terms of TRX market share, Syfaxon is up 80 basis points, Trulance is up 170 basis points and Relastor is up 160 basis points. One additional point to note on Trulance, URX market share also increased from 5.5% at the time of the acquisition by Bausch Health in March of 2019 to 12.1% URX share in December 2020. We believe this is a great leading indicator for future Trulance TRX for share gains. Now onto orthodermalogics on slide 24. A few highlights to note. Notwithstanding the impact of COVID, SALTA had a great 2020. Thermage reported revenue grew by 47% in 2020 compared to last year, which was driven by China and expansion into new geographies. We expect the aesthetic market to continue to grow, driven by the new Zoom culture and by consumers who have the ability to invest in self-care. 2021 growth catalysts include continued market penetration in China and the U.S., as well as geographic expansion into Europe. Another growth catalyst is the U.S. launch of Solta's Clear and Brilliant Touch Laser, a treatment that can help prevent the worsening of fine lines and wrinkles. Julia also grew in 2020 compared to last year, with reported revenue up 3% and TRX growth of 18% compared to a flat market. Finally, our psoriasis products. We believe there is much more to do here, but to be clear, Duovre and Selic both grew substantially in 2020 versus last year. Duovre TRXs grew 53% compared to 5% market, and Selic reported revenue grew by 39%. The charts in slide 25 show the recovery in orthodermalogics. The Lodge revenue had a great performance in 2020. It benefited from increased demand for aesthetics. The Julia TRX trends showed solid recovery since April of 2020. And lastly, Duobre TRXs began to recover over the summer. We highlight the gains in TRX market share we were able to achieve for key promoted brands. Duobre up 40 basis points, Julia up 140 basis points, and an exit up 70 basis points. Turning now to slide number 27, we have identified the key growth drivers for our business in 2021 and beyond. First, we expect a ramp-up and additional approval for the SightHide daily lenses. We've now launched these lenses in Japan, U.S., Hong Kong, Australia, and Canada, and we anticipate launching in Europe over the next year. Next, we expect a tailwind going into 2021 from a backlog of cataract surgeries that were delayed in 2020 due to COVID. In the U.S., we estimate that about 650,000 cataract surgeries, or roughly 16%, were delayed in 2020. While outside the U.S., we estimate that approximately 20% of the surgeries were delayed, creating a potential tailwind for 2021 and beyond. and we are expanding the sales force of the Thermage franchise into Europe. And finally, given the momentum which we head into the year, we expect to see strong performances in recovery of leading brands, including Syfaxis, Ultra, Preservision, Lumify, and Visalta. We also have a number of near-term catalysts in upcoming R&D pipeline, which is outlined on slide number 28. We expect to initiate a phase two trial for the MSLM on our S1P modulator for patients with mild to moderate ulcerative colitis. We expect a readout of Phase 3 results for NOVO3, Investigational Treatment for Dry Eye Disease. We've also published the NOVO3 Phase 2 data for dry eye disease, and the data is outstanding, and importantly, met all the primary endpoints. We're also making progress with our rifaximin lifecycle programs. In addition to our program for sickle cell disease, we recently received positive feedback from the FDA on a new rifaximin formulation for the prevention of the complications of cirrhosis, and we are proceeding straight to a Phase III study for what we refer to as the RED-C trial starting in the second half of 2021. In addition, we are exploring several COVID-focused treatments. To be clear, we're not a vaccine company, but we have found ways to contribute to the ongoing efforts to combat the disease. With that in the background, let's move to slide number 31. I want to give a brief update on the progress we are making on a previously announced intention to separate Bausch & Lomb into an independent company. First, we took this action because we saw an opportunity to unlock shareholder value, especially relative to our peer iHealth companies that we see for B&L. We've been making good progress on our goals since our announcement in August 2020. We are on track for the financial segmentation reporting to be complete by the end of the first quarter of 2021, and we expect all internal objectives necessary for the spin of B&L to be achieved by the end of the third quarter of 2021. At the same time, our operational focus is on taking action that has the potential to expedite the spinoff. As I mentioned in 2020, when we hired strategic advisors, we also received a number of inbound calls expressing interest in our great businesses and creative ways to unlock value for all of our stakeholders, which may include divestments. As we have previously stated, improving our leverage ratio continues to be a priority, and we are focused on that. We are planning to increase our EBITDA, as Paul mentioned, which will increase cash, decrease debt, and decrease leverage. We also believe that improving working capital will also help us to decrease debt. And we believe pursuing a spin-off that is preceded by an IPO process could also potentially accelerate the timing of our B&L spin. To be clear, we are and have been actively pursuing all opportunities to expedite leverage improvement and deliver shareholder value. And to answer another investor question, to be clear, we are not planning to issue Bausch Healthcare equity at these levels. To wrap up, we exited 2020 with great momentum and remain strategically focused on executing on our business, capitalizing on key growth drivers and catalysts to grow EBITDA, improving working capital efficiency, deliver our company, and unlock shareholder value. With that, operator, let's open up the line for questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. The first question is from Chris Schott from J.P. Morgan. Please go ahead.

Right, thanks so much for the questions. Maybe just coming back on asset divestitures, I'm just trying to still get a sense, just your view on sense of urgency here. As I think about how you balance the speed of unlocking value quickly versus taking your time to maximize full value for existing shareholders, I guess I'm just trying to get a sense of how you think about you know, any asset value slippage, et cetera, that could be, you know, lost, I guess, in a sale, but could accelerate a separation process. I think we're sheltering our hands around, you know, kind of how you're approaching this process. And maybe a second question on that same topic. Based on the interest you've seen in your assets so far, is a 2021 separation a stretch at this point, or is that looking more like a base case outcome?

Okay, let me start in the asset divestiture portion of your question. I think, clearly, as I stated in my comments, that we have had a number of inbound interested parties. We've hired some advisors to help us on this, and we clearly know that the most important thing that we think will unlock value is as we spin the B&L company out as a separate company, we'll have two great companies, a PurePlay iHealth and a diversified international pharma business. So we clearly know that the most important thing that we are seeking to do is to spin out the B&L. As you appropriately talked about, we are trying to balance that question of speed and getting good value, but we believe the most important thing to do is to spin out the B&L business as soon as possible. So I think the way I'll say it, I don't want to negotiate on a conference call, but we are seeking to move with speed. We will seek to do that. But we certainly want to make sure we get good value for our shareholders. I don't want to say maximize full value. I want to say get good value for our shareholders. The important point is that we are moving to expedite all those activities. On the question of timing of the... Overall spin of B&L, we will be ready after the third quarter of 2021 to have all those requirements that are necessary. We will have all of the things done from a legal entity point of view, from an organizational design. Those activities will all be complete. We will make sure at that point that we have a very tax-efficient strategy. Clearly, one of the advantages that our health care company has is our efficiency and our tax efficiency. because of our legal entity structure. Our team has done a great job with that. So I think all those things will be ready. Obviously, we have to solve the question on leverage. We think that the way I will attempt to solve that leverage, and what Paul and I have been talking about, I think, since August, is what are those steps we're going to take. We're going to work clearly to increase EBITDA, which will increase cash, decrease debt, and obviously decrease leverage. We will continue to look at working capital efficiency. We've done some things already with our project core activities, but we think that could also help us to decrease that, and obviously the investment comment that you made also is part of that. And there's the potential, of course, to proceed this spinoff with an IPO that could also, IPO of the B&L business that could also help us potentially accelerate the timing. Those would be the course of actions that I think would be best taking to help us to accelerate this, which we think will create the value for our shareholders. The next question, please.

The next question is from Umar Rafat from Evercore.

Please go ahead. Hi, thanks so much for taking my questions. Paul, on slide 31 around B&L spinoff, you mentioned the financial segmentation will be complete in 1Q, which is in line with expectation. But previously, you had also mentioned that leadership team announcements will happen this quarter. Is that something we should expect in the next three or four weeks? And then also a second one, perhaps just thinking about, stepping back and thinking about the bigger picture here, it does seem like a meaningful driver of your total sum of the parts valuation is also a lot to do with the value of the Remain Co. And I think it can't be overstated the significance of R&D strategy and R&D programs for that Remain Co. So I guess where are we with that? Is there any effort underway at the board level to perhaps bring in a high-profile head of R&D or at least have a very well-laid-out R&D strategy in place just to help us think through the value of the Remain Co. Thank you.

It's Joe Papa. I'm going to take the first part of that question to leadership, and then I'll turn to Paul on the Remain Co. part, and then I'll potentially comment as well on the R&D point. The first question, though, on the leadership announcement, as I mentioned, we will do the financial reporting and complete that for Q1 2021. We will have that in May of 2021. It seemed to us a very logical time at that point to announce key leadership. We believe that we have a great vouch health care team. We've got good succession planning in place that the board has done. We believe we'll be in a position to announce that with the first quarter results, which is planned for May of 2021. So that's the timing that we think that's a very logical timing for us to do the, in line with the quarter one financial reporting. On the second part of the question, Paul, you want to take that? Yeah, sure. And thanks for the question because, yes, the value of remain cold matters. There's an opportunity to enhance that value, and it's frankly something that Joe, myself, and our board have been focused on since we got here, which is to take a company, if you go back to 2015, you know, R&D and said it was all about acquisitions and flipped that and, you know, started the process of building an internal, you know, portfolio of projects, R&D projects that can sustain the company over an extended period of time. I want to first frame what does Remco look like, because it's an interesting thing to focus on. What you end up with is a diversified international pharma company that's got a market-leading position in GI in the U.S., a strong position in medical derm in the U.S., an emerging aesthetics business, which is in the U.S., but frankly, strongest in Asia, Pat, and looking to expand into Western Europe. You've got a strong neural business, which, albeit not a great growth driver, is an incredible cash generator here in the U.S. We have a dentistry business in the U.S. We have what I'll call a derivative generics business in the U.S. And then the last piece, which you shouldn't lose sight of, is we have this international focus I called it out on the call earlier, was the star of this particular quarter, a very durable business that does not face the challenges that U.S. pharma companies face, that has a lot of value and is a great entity. So what do you need to do in order to be able to make that the most value that it can be is you hit it right on the head. You continually invest in R&D. Example, this year we ramped up our investment to where we're guiding to circa $525 million in 2021. Internally and at the board level, you know, we focus greatly on ways to ensure that our GI business, you know, has prospects of managing through a pretty much date-certain LOE of Zyfaxin in early 2028. You know, the projects are online. Joe went through them. I'm not going to use the time here to repeat them, but, you know, Joe went through and talked about a couple of those projects. Now, I will tell you, we look constantly to add Interestingly, the way we've had our most success in fleshing out a portfolio over the last, call it 24 months, has been in our OptoRx business that's part of Spin Cup. It wasn't that we were focused solely on trying to do deals in OptoRx, but that was certainly an area where we knew we had been underinvested for many years and needed to reprime that. I can't use that analogy again. We needed to restart investing and build out that portfolio so that we had a credible and valuable portfolio in OptoRx. And our team did, I think, a great job. of doing that. It wasn't that we weren't focused on the same things in GI, for example. It was that those were the transactions that were available to us that were in our wheelhouse that we could go ahead and close. We expect that we'll have that same sort of success in each of the other parts of REMCO that I just described to you. It's not a process that's done, but I will tell you that internally, it's a high focus area, and we've made a lot of progress since the days of 2015. I'll stop there. And maybe just a couple other comments on the R&D programs. I think we've got some great news that came out in our earnings deck that we're thinking about on that reflaxman reformulations and the next generation programs. Obviously, we believe that sickle cell is first and foremost a great opportunity for rifaximin because of the efficacy we've seen with a product that has a relatively clean safety profile for these patients that have sickle cell disease. Beyond that, we also got great news from the FDA. We now have their Faxman Life Cycle Program for Next Generation that looks at the prevention of cirrhosis complications, and we are proceeding directly to a Phase 3 trial this year. We think that's great news for the opportunity in front of us to reduce the problems of cirrhosis with patients who have unfortunate hepatic issues. Beyond that, we think we've demonstrated great results with Truliance. We think that clearly is another important part of the next generation. We talked about what it's done this year. That's obviously significant. But I'll give you one other insight. We think the opportunity to Truliance is significant. The market leader is over a billion dollars. And we've got in one example where we had a direct ability to get a good market share access position, we've moved now from being about a 10%, 11% share of the new Rx's to be the market leader in one customer. Now admittedly, that's only one customer, but that's certainly the example that we think we can look at to grow Trulance from where it is today to be certainly several hundreds of millions of dollars as an opportunity just in terms of what we're doing for that development with Trulance. So I do think there's great things there. As I mentioned, we also did the MSL Mod, S1P Modulator Phase 2 trial, which will start in the first half of the year. So we think we've got a number of things underway for the business, especially in the sales next generation opportunities. Let's take the next call, please.

Next question is from David Amsalim from Piper Sandler. Please go ahead.

Thanks. I wanted to focus just on the Salix business in particular. I'm still struggling to understand why the Saxon has been relatively weak in the context of, well, you look at the Trulance, which has done quite well. More practices have opened. So in the second half, I would have expected to see you know, more recovery out of Zyfaxan, and then still we're seeing, you know, year-over-year declines in total prescriptions. So, you know, can you just enlighten me as to, you know, what is happening with Zyfaxan? Do you think the product is maturing and its performance vis-a-vis Trulance? Thanks.

Yeah. Number one, we think that factor throws a lot of runway in front of it. Just let me say that right up front. We think the issues for COVID have been two factors. Number one, we have seen reductions in patients being admitted to nursing homes. It makes sense knowing what we know about what's happened with COVID in patients in nursing homes. And as a result, some of those patients have just not shown the growth that we've seen in the past. The second, probably more important factor, though, is IBSD. What we know about IBSD is that particular treatment is more episodic. The number of patients that have gone to gastroenterologists is down from where it was a year ago, and that's mostly related to COVID. As the patients started coming back to the gastroenterologist, they focused on what we think are the key things for them. We're doing the endoscopies, the colonoscopies, and over time, we do think that the IVFD will pick up. So for an example, while IBSD was down, to be clear, in 2020, the most recent data with IBSD shows us now flat over the last 10 weeks versus a year ago. So we are now seeing that starting to turn. The other data point I will remind you of is that we know that IBSD still has about 12 million prescriptions a year for antispasmodic, antidiarrheals, products like Rimodal, Bento, Dicyclamine, things like that, that are opportunities, and we believe we have a better solution for those patients. You don't have to take a chronic medication like a Bento, Dicyclamine-type product. They can get episodic treatment, treat for a couple weeks, and many patients will respond, and they will not... need to take a chronic medication. So we do think over the long term there's still a lot of growth in our IBSD, and especially as we start to take some of these actions for these new indications, like reduction in the symptoms of cirrhosis, we think those are going to be really big opportunities for the rifaximin molecule over the long term. So a lot of upside we still believe in what we will see with sifaxin and the rifaximin next-generation products. Operator, next question, please.

The next question is from Greg Truitt from Truitt Securities. Please go ahead.

Thank you, guys. Two questions. First, did your newest shareholder bring to the table any new ideas that you were not already pursuing or an urgency that you were not pursuing them with, trying to understand what's changed there or whether the settlement is more of a reduction and distraction? And then as it relates to B&L longer term, guys, earlier in your tenure, you were asked frequently whether B&L was investing for the long term and could it stand on its own and be competitive. Maybe you could update us on your thinking there in terms of how B&L would be positioned versus its peers from an investment rate. Growth is obviously there, but perhaps pros and cons. Thank you.

Sure. So, first of all, we are delighted to welcome a highly respected investor who agrees with us that there is an opportunity to increase shareholder value with the overall Bouch Healthcare business. So, we are delighted to welcome highly respected investor, Carl Icahn, and his team to join the board on the first comment. On the second comment, I think... It's clear we welcome open communication with all of our shareholders, and we have constructive input along the way from all of our shareholders. We have already on our board two great investors, John Paulson and Rob Hale from ValueAct. So we're delighted to get this. The important comment I want to make sure is that there's been absolute alignment that, number one, there's a lot of upside opportunities. opportunities to unlock upside in our company, significant value upside, and I think that's been echoed by our discussions with Carl Icahn and his team, and also that we are aligned, that we believe the important question is how can we unlock this value by spinning out B&L, which we think will trade very well with the peers in the iHealth business. I mean, if you... I won't go into all the details. You all are the experts on... comparing us with other companies, but if you look at where... Companies like Alcon traded, where Cooper traded, where Zeiss traded, they're all at 25-plus times EBITDA for 2020 numbers. So, clearly, we think there is a significant upside opportunity for us at the Bausch & Lomb spin for our business. Paul, do you want to take the second part of the question in terms of our investment that we've made in B&L and, importantly, how we're looking at that? Sure. Thanks for the question, Greg. Yeah, I mean, we did talk about this a lot because the B&L – if you went back, let's call it pre-2016, did not have the level of investment that certainly if Joe and I had been at the helm in allocating capital, we could have allocated more capital to that business. It's a great business, and we would be ahead of where we are today. The easiest example of that is infused in what we call Ultra One Day outside the U.S., the daily silicon hydrogel lens. Like, how can you be in the vision game business and not have this? And when Joe and I got here, it was one of the first things that we activated was a program to do that. Now, as a result of that, I say about investment and investing behind that business, in 17, 18, 19, and 20, the preponderance of our CapEx is, really was focused in the B&L business where it had been underinvested in. I likened the capex in B&L to investment in R&D. I mean, it's kind of growth, that is growth capex, and was a decision that even though we were an R, a levered company, and obviously capital is very dear to us, absolutely turned and allocated that cap back. That's one example. Second is, you know, we have rotated it, and we continue to invest in R&D. I used the example a moment ago. I won't jump all over it, but of how we enhance the up-flow Rx. pipeline by pursuing business development deals. There's an example. Another one I would throw out to you is look at how well our consumer business is doing, particularly in the U.S. That is a function of providing Joe Gordon and his team that run that business with the resources that they need to drive that growth, you know, at very attractive rates. The most, the easiest example there is DTC Advertising. I hope everybody on this call, you know, constantly sees our advertisers for our iVitamins and for Lumify. We are allocating capital to that business in a way that is giving it the opportunity to, you know, to start to demonstrate on a very consistent basis the kind of growth that that business On its own, to be perfectly clear, that business was as part of the whole, as part of BAC whole, benefited from Joe's and mine perspective way back that it was a very attractive business that deserved more investment certainly than it had seen under the prior management regime and honestly perhaps even under prior ownership before that. I think Paul answers it really well, Greg. The only thing I'm going to add to what Paul said is I think the concept that we have of an integrated eye health business is the other issue that I think gives us an advantage. And by that I mean the fact that we have a vision correction business, we have a prescription business, we have a surgical business, we have a consumer business. We think those are important as you think about the ability to compete in the eye health business going forward. We know there's a lot of... roll-ups of the ophthalmology practices. We think having a place where they can get the full-line offering that's important to patients, important to our customers, is one of the things that we will have an advantage in the marketplace, and that clearly is something that we think will be important. A simple example, when a patient needs surgery for a cataract procedure, they're also going to need the ophthalmology prescription product. We have them. We think we have an integrator offering. We think that's the other reason why we'll be very successful. and competing, but obviously we'll leave it in your hands to make those judgments to peer multiples. Let's take our next question.

Next question is from Akash Tiwari from Wolf Research. Please go ahead.

Hey, guys. So just a few. We've seen a few of your peers recently guide the FX lens for 2021. Given where you are today and kind of your geography, is it crazy to think that Bausch could see maybe a $200 million to $300 million FX benefit that's kind of embedded in your guidance? And then, Paul, I know you can't comment on this stuff totally, but there is some investor speculation that you might be involved in some capacity, whether it's with the RemainCo or the SpinCo. What is, you know, can you kind of maybe with broad strokes speak about your interest and potentially the spin co and the commercial opportunity that stands in front of you. And then just lastly, on slide 20, you noted that D&L's die-high dailies are expected to exceed $250 million in sales. Is that a peak number, or is that for 2021? Thanks.

Let me take that last question first, because I think I can do that very quickly. On the question of the Sci-Hi dailies, to be clear, that is an opportunity that we believe it can exceed peak sales numbers of over $250 million, to be clear. That is not a number for 2021, to be clear. We viewed that in the way we phrased it. It was a global... expectation for our side high dailies, and that we view that as a peak number, not a 2021 number. So, Paul, why don't you take the FX question? Sure. And it is a good question. Even if you look at the bridge on slide 15, going from 20 to 21, you see that at revenue, FX is a tailwind of $165 million and arriving at our guidance range of $86 to $86. to 8.8. That's as of now. And if you're going to try to forecast that we're expecting FX rates to improve from here, I will tell you that I've been terrible at forecasting FX rates. It's one of the reasons why I always talk about constant currency and organic growth, because it takes the currency out of the mix. We benefit from it when it comes in our direction, and it feels good, but frankly, if that was the only thing that caused you to grow, it's not all that interesting. We always call it out and always try to isolate it for you, and we'll even isolate it for you in May when we report our first quarter, and again in August when we report our second and show you how it changed from where we were prior. So I'm going to hope that currency moves in our direction because it feels good, but from a constant currency or organic basis, not how we measure ourselves. We measure ourselves constant currency and organic to get back to what did we do versus the serendipity of how did FX rates go around the globe. The second question you asked around, you know, it's kind of like, are you interested in Remco? I think your former partner, Uwe, asked you this, but it might have been last quarter or before. You probably heard it in my response to thinking about Remco. That is a very attractive business. It will be definitely a levered business when it comes out, and these are all things that I like. So, yeah, I'm Pick one. As much as I love the B&L business, I'm probably more suited to thinking about Remco. I think I'll just repeat the addition of what Walt said. We think, from a leadership point of view, we'll have more to say about that in the May timing. We think we've got a great team at Bioshock Healthcare, and we think we'll have more to say in terms of how we're looking at leadership and what's going to happen with the business when we come out with our financial segment reporting in May of 2021, and then have more comments about the leadership team and the individuals that will be involved and how they will be involved in May. Operator, let's take the next question.

Next question is from Terrence Flew from Goldman Sachs. Please go ahead.

Great. Thanks for taking the questions. Maybe two for me. I was just wondering, as you think about 2021, you mentioned this procedure backlog in cataracts as a growth tailwind. Just wondering if there's anything you can do to capture maybe a larger share than your current market share of that backlog. And then on remain code, just wondering if you're still committed to the five-and-a-half times leverage target. Thank you.

Sure. On the first part of the question, I think I'm going to just refer you back to the slide that we put forth in that we are clearly seeing a return to pre-COVID levels for our procedures as evidenced by, as a reminder everyone, we have a Stellaris Elite machine. It reports on a daily basis how much it's being used so we can track what's happening around the U.S. We don't have those capabilities in Europe because of of some reporting requirements, but we do have it to see what's happening in the U.S. And we are seeing the ability to show our solar fleet machines are back to pre-COVID levels. On the specific question of gaining the share, we have shown, at least in the U.S. data, that the U.S. Bausch & Lomb IOL market share has moved from, you know, I'd say a A low of around 10.2%. We're up to about 11.6%. So we are gaining share in the IOL market. We are continuing to move forward with new innovations there. Our belief is that's what will drive that. But we do believe that, as I said, both in the United States and around the world, we're seeing somewhere around a 15% to 20%. delay in cataract surgeries because of COVID. Our expectation for 2021 and beyond is that those procedures will come back. We have looked at some of the IQVIA data that has said in looking at elective procedures, one of the procedures that's coming back the quickest is cataract surgery, so we are tracking that type of data, and that is the basis for why we do think there is a tailwind for us for 2021 and beyond. So, Operator, I think we have time for maybe one more question, and then we'll conclude. So one more question, please.

Okay. Next question is from Doug Mime from RBC Capital Markets. Please go ahead.

Yeah, thank you. So just on the debt, so you did indicate that you were going to go out perhaps at four and five and a half times for the individual businesses. I'd just like you to confirm that. And then how important is investment grade to the spin cone? And then finally, Paul, can you comment? It looks like you've reiterated your 22 growth targets of 3 to 5 and 4 to 7. But maybe you can comment on why the street remains so far below those numbers right now. And I'll leave it there. Thanks.

Yeah, thanks for the questions, Doug. Let's start with the debt leverage. I'm going to take this in order. First, we're going to be ready to go, as Joe said, operationally with the things that we need to do internally in order to be able to go here by the end of Q3 of this year. Our primary commitment is to unlocking shareholder value. And frankly, the leverage of the entities will be an outcome of that work. forward. The value of RemainCo is important to the equation, and frankly, the way you described that, you know, is it important to be investment-grade for SpinCo, as I would submit, there is a relationship between the degree of leverage on SpinCo and your ability to attract a higher multiple. If you were to lever up SpinCo to a high level, it's unlikely that you would get the right EV multiple in order to unlock that value. At the same time, the leverage that you put on SPINCO is important to the leverage at REMCO. So there are lots of levers that need to be pulled here in order to try to find the place where we deliver. And so we're looking at all of those things, and it is something that there are an endless array of alternatives here, and we will be ready to execute on that spin. in 2021 and move forward as expeditiously as possible in order to unlock value. Joe, do you want to take that, Kager, or do you want me to? No, why don't you go ahead, Kager, and I'll do a closing comment. Yeah, sure. On the larger case, yeah, we kept it in there because, definitionally, we believe we could still hit that. I said in my remarks regarding our guidance for 2021, and to be triple clear, my mind anyway, in 2021 from both a revenue and profitability standpoint, you know, but for COVID. We are not in 2021 fully recovered from COVID, but as we regain that, we think we have every ability to still produce the results within the ranges that were articulated by that longer-term CAGR guidance. I'll stop you, Tom. Thank you. Thank you for the comment, Paul. I agree with what Paul said, and I just want to say in closing, thank you everyone for joining us today. I would just quickly summarize by saying we exited 2020 with great momentum and remain strategically focused on executing on the business. capitalizing on the key growth drivers and catalysts to grow EBITDA. We want to continue to improve working capital efficiency, deliver our company, and importantly, unlock shareholder value with the spin of the B&L business. So thank you for joining us. I look forward to having further conversation with everyone in the near future. Have a great day, everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.