Bausch Health Companies Inc.

Greetings. Welcome to the Bosch Health first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Mark Mako, Investor Relations. You may begin.

Thank you, Holly. Good morning, and welcome to Bausch Health's first quarter 2023 earnings conference call. This is Mark Mako, Investor Relations for Bausch Health. Participating in today's call are Thomas Appio, Chief Executive Officer of Bausch Health, and Tom Vadeketh, Chief Financial Officer. Before we begin, I'd like to remind you that our presentation today contains forward-looking information. We would ask you to take a moment to read the forward-looking statements at the beginning of the slides that accompany this presentation as they contain 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. Please refer to our SEC filings and filings with the Canadian Securities Administrators. for a list of some of the factors that could cause our actual results to differ materially from our expectations. We use non-GAAP financial measures to help investors understand our ongoing business 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. We do not undertake any obligation to update guidance. Our discussion today will focus on Bausch Health, excluding B&L. However, we will briefly comment on Bausch & Lomb's results announced yesterday. We will refer to year-over-year comparisons with the same period last year and less otherwise noted. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 4th, 2023. With that, it is my pleasure to turn the call over to our CEO, Thomas Zappio. Tom?

Thank you, Mark, and welcome to those of you joining the call this morning. It has been almost a year since I took over as CEO of Bausch Health. While our business faces challenges, we have some great franchises, and we are continuing to balance the constraints of a tough balance sheet with the need to continue to invest and grow the business and the pipeline. With the IPO of Bausch & Lomb in May last year, we assembled a seasoned, resilient executive leadership team with a track record of hard work dedication, and accountability. While we've had some bumps in the road, we have accomplished a lot in the last year, and we are hopeful and realistic for the future of our company, powering up the potential and creating a great healthcare company. The team and I have been able to focus on improving the remaining Bausch Health businesses. Firstly, through operational excellence and focused investments in key businesses that have growth opportunities such as Salix, Solta, dentistry, and international business. Starting in the back half of 2022 and continuing this year, we are increasing our investments in sales, marketing, and R&D to accelerate growth in Salix. I will touch more on this in a few minutes when we take a closer look at the performance of the business segments. Our international business consists of a branded generic business in the EMEA and Latin America, and a branded business in Canada. Taken together, this business is a profitable and growing business. To maintain sustainable long-term growth, we have to continue to bring in new products into the portfolio, as we have done historically through business development and licensing deals, which in this space are not typically capital Our neurology, dermatology, and generics business operate in a challenging space. Together, over 70% of the revenue from these businesses are from products that lost their exclusivity and are subject to generic competition, which continues to put pressure on both volumes and pricing. Our approach has been to manage these businesses for optimal profits and cash generation, We have a great platform and a talented team, and we will continue to review opportunities to add to the portfolio. Secondly, we have intensified our focus and operating rigor behind R&D and business development, which is critical to the success and health of our company. We are accelerating certain aspects of our planned R&D effort, and Tom Vatikath will discuss this shortly in his commentary on the financial performance. Let me share several pipeline developments which you can see on slide seven. For Amicillimod, the phase two trial is progressing and is expected to be completed in the second half of this year. Amicillimod is a new oral S1P receptor modulator which targets the treatment of mild to moderate ulcerative colitis. Turning to Rifaximin, We are focused on developing novel formulations to address unmet medical needs. We are accelerating our investments related to RED-C program, which stands for Reduction of Early Decompensation in Cirrhosis. This is a global program, and the treatment is targeted at preventing the first occurrence of hepatic encephalopathy, which we call HE, for patients with early decompensation cirrhosis. Two global phase three studies are currently underway with clinical trial sites expected to be open in more than 15 countries by the end of Q3, and the enrollment is on track. We have completed scientific advisory meetings with the Medicines Evaluations Board in the Netherlands, with Health Canada, and with plans to meet with the authorities in Japan and China later this year. In Solta, the next generation Fraxel, a fractionated laser device for skin resurfacing, is on track for FDA submission later this year, and we are excited about this device for skin rejuvenation. Clear and brilliant touch with Canada and with Europe and Canada submissions planned in 2024 and Asia Pacific in 2025. We are also working on the next generation vasoliposystem that is planned to be released in late 2024 and on future features for Thermage FLX as well as additional security measures to prevent the use of counterfeit tips. In dermatology, adding to our established acne portfolio, the FDA has accepted our new drug application for IDP126 with an October 20th, 2023 PDUFA date. If approved by the FDA, IDP-126 would be a first-in-class triple combination treatment for acne vulgaris. Additionally, our submission in Canada is planned for the second quarter of this year. We are actively looking for business development opportunities for our U.S. and international businesses that will synergize with our current capabilities and also looking at new therapeutic areas. We are proud of our R&D team and the work they have done to progress our pipeline and we will continue to focus on obtaining approvals for these products. Now let me turn to the first quarter. Turning to slide eight, I am pleased with the first quarter of the year. We delivered a solid performance in line with our expectations. Total reported revenues declined by 2%, and organic revenues were flat compared with the prior quarter for Bausch Health, excluding B&L. I am pleased to share that for three out of our four business segments, Salix, International, and Solta, grew versus last year on both a reported and organic basis. Let's take a closer look at the first quarter performance of our business segments as shown on slide nine. Starting with Salix, which posted reported and organic revenue growth of 7% in the first quarter with increased demand and encouraging ZyFaction script growth across all channels. We are very pleased with the performance of the Salix business in this quarter. Xifaxin is a fantastic option for healthcare providers for their patients, and we have increased our marketing investments in Xifaxin for both of our approved indication, IBSD, and HE. The increased investments in targeted consumer activation is currently being deployed across a range of media channels, such as connected and addressable TV, as well as many digital and social platforms. As a result, we are seeing very encouraging signs of increased consumer engagement. In addition, we have also expanded our institutional sales footprint by 40%. The increased sales force allows us to engage with new integrated delivery networks, their associated hospitals and clinics, and to continue to educate new healthcare providers on the importance of initiating therapy for AT patients to reduce the risk of reoccurrence and rehospitalization. We expect these efforts will help drive future growth. We are implementing AI-enabled solutions to improve our commercial engagement. These solutions leverage artificial intelligence and machine learning to help our commercial teams optimize their interactions with physicians and direct efforts to the right opportunities at the right time. AI has the potential to significantly improve how we interact with our customers and meaningful expand the number of patients getting on the right treatments. As part of our continued investment to improve HE and IBSD patient care, we are implementing an advanced analytical driven medical approach. This approach leverages multichannel medical engagement, including a meaningful expansion of our specialized medical field team to prove care for thousands of HE and IBSD patients. It will help us educate physicians to address the largest patient care gaps and track the positive impact on patient lives over time. Turning to international, sales grew 5% on an organic basis and 1% on a reported basis with organic growth in all three regions. Key markets such as Poland and Canada saw a double-digit growth for the period. In Europe, our sales and marketing teams are driving growth through HCP education and enhanced digital engagements. And in Canada, we are driving growth of our promoter brands while focusing on the launch of Realtris. Solta grew organically by 6% in the quarter, with strong customer demand in Asia-Pacific markets, excluding China. We are cautiously optimistic for the remainder of the year for return to growth in China following the lifted of the COVID restrictions. In the US, we are focusing on growth drivers, which will include expanding DTC campaigns and building top and sales marketing teams. As I said before, Solta is a great business for BHC. With our global footprint and our product mix between capital equipment and consumables, More than 70% of SALTA's revenues are from consumables, which gives us together a good platform for future growth. Turning to dentistry, which is part of our diversified segment, we delivered 4% organic growth for the quarter. We have refocused our commercial effort on our core product, Arrestin, an antibiotic used in the combination with scaling and root planing procedures to treat patients with adult periodontists. The periodontal treatment market is expected to reach $12.2 billion by 2031, up $7.6 billion in 2021. With this market, we are driving demand with the private practice dentist segment, which is the largest portion of the market, and the corporate DSO dentist, which is the fastest growing segment. In diversified, sales for this segment decreased by 21% on an organic and reported basis in the quarter with declines in neurology, dermatology, and generics. We are striving to stabilize the business in our promoted and non-promoted products within this segment. This year, we intend to make additional investments in the marketing and advertising of Aplenzen and expand our consumer awareness campaign for Jublia, which both saw increased scripts. Again, I am pleased with the performance in the first quarter, which was in line with our expectations. We are reiterating our guidance for Bausch Health, excluding B&L for this year, and as always, remain committed to delivering long-term value for stakeholders. Let me take a few minutes to talk about some key priorities. The process of delivering our balance sheet is ongoing, and in the first quarter of 2023 for Bausch Health, excluding B&L, we reduced our debt by approximately $100 million, including revolver repayments. We have made significant progress in delivering our balance sheet over the past year, reducing debt since the B&L IPO by $3.3 billion, and we will continue to effectively manage and enhance our capital structure. With regard to the Granite Trust, as you know, we've reached a tentative settlement with the IRS during the first quarter, and we expect final resolution of this matter later this year. Regarding the ZIFACs and proceedings, as a reminder, the court's current decision prevents Norwich's ANDA from receiving final FDA approval until October 2029. Norwich advised the court that has sought to remove the HE indication from its ANDA and has filed a motion to modify the judgment to permit the FDA to approve their ANDA before 2029. We have opposed this motion and await decision from the court. Lastly, we continue to believe the separation of Bausch and Lomb makes strategic sense with the end goal of having two independent, strong, financially stable companies. With that, I will turn the call over to Tom Vatikath, who will provide further details on our quarter performance. Tom.