Bausch Health Companies Inc.

Greetings. Welcome to the Bausch Health fourth quarter and full year 2023 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. I would now like to turn the conference over to your host, Maria Lycoris. You may begin.

Good morning and welcome to Bausch Health fourth quarter 2023 earnings conference call. Participating in today's call are Thomas Appio, Chief Executive Officer of Bausch Health, and John Barresi, Interim 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. Please refer to our SEC filings and 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 ongoing business performance. Non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should not 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 Bausch & Lomb, 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, unless otherwise noted. For the benefit of those who may be listening to the replay or archived webcast, this call was held on and recorded on February 22, 2024. With that, it is my pleasure to turn the call over to our CEO, Thomas Appio. Tom?

Thank you, and welcome to those of you joining the call this morning. I want to start today's call by highlighting the strategic priorities we set out to achieve this past year. Growth, performance, focus, and unlocking value. These priorities help support our ambition of being a globally integrated healthcare company trusted and valued by patients, healthcare providers, employees, and investors as we relentlessly drive to deliver better health outcomes. We made significant progress on these priorities in 2023, reinforcing our strong global foundation, which consists of a large portfolio of products across a diverse set of therapeutic areas and geographies. Our significant presence in gastroenterology, hepatology, neurology, dermatology, medical aesthetic devices, and international pharmaceuticals across the branded, generic, and branded generic markets give us a solid platform for growth as we are excited about the opportunities in each of these areas. From a financial perspective, I am pleased to report we achieved or exceeded our February 2023 guidance. For Bausch Health, excluding B&L, full year revenue was $4.61 billion and organic revenue growth was 6%. both slightly above our February 2023 guidance range and in line with our guidance update in November. For Bausch Health, excluding B&L, full-year adjusted EBITDA was $2.36 billion, in line with our guidance, while funding incremental spend on R&D to support our Red Sea and Amicillimod programs. Importantly, we ended the year on a strong note. As the fourth quarter represented our third consecutive quarter of year-over-year growth in adjusted EBITDA, and we delivered adjusted operating cash flow of $708 million above our guidance. For the fourth quarter, revenues for Bausch Health, excluding B&L, were $1.24 billion, up 38 million or 3% on a reported basis and 2% on an organic basis. Adjusted EBITDA was $663 million, an increase of approximately 1% compared to the prior year. We made significant progress across our key R&D initiatives during the quarter. First, we received a positive top-line data from our large global Phase II trial for amicillamide. Second, we completed enrollment for one of our two global phase three trials for Red Sea, with the second trial expected to complete enrollment in the first half of this year. And third, in January, we received approval by the National Medical Products Administration, or NMPA, for Thermage FLX and the TR4 return pad in China. I will touch on these in more detail shortly. I am pleased with the continued momentum in our pipeline. Strengthening our balance sheet also remains a priority as we are focusing on managing our liquidity position. During 2023, we reduced debt, net of cash, for Bausch Health, excluding B&L, by $670 million, and in January 2024, we retired an additional $250 million in principal value of debt through an open market repurchase program. We continue to defend our intellectual property rights for Xifaxan. As discussed on our third quarter 2023 earnings call, on October 6th, 2023, the DC District Court held a hearing in Norwich's lawsuit against the FDA, where Norwich was seeking immediate approval of their ANDA. On November 1st, the court denied Norwich's motion and granted summary judgment in favor of the FDA and Salix. In December, Norwich appealed the District Court's decision to the U.S. Court of Appeals for the D.C. Circuit. The D.C. Circuit has stayed the appeal until the Federal Circuit renders the decision in our SyFaxon litigation. The consolidated appeals from the Delaware District Court are pending at the U.S. Court of Appeals for the Federal Circuit. On January 8th, the Federal Circuit heard oral arguments we expect a decision to follow late in the first quarter or early in the second quarter. We are committed to vigorously defending our intellectual property and providing healthcare providers and patients with safe and effective treatments. You will recall that in January of 2023, we reached a tentative settlement with the IRS to resolve the Granite Trust matter. We continue to expect this settlement to be finalized in the coming months as we have previously said. The anticipated outcome of the settlement does not have a material impact on the company's results or cash flows. Turning now to the potential full separation of Bausch and Long, we continue to believe the separation of Bausch and Long makes strategic sense, and we continue to evaluate strategies regarding the potential full separation with the objective of ensuring that this transaction results in two appropriately capitalized companies. Any decision regarding if and when a separation occurs or its structure will be based on and subject to an assessment of all relevant factors and circumstances. Any potential separation will also be subject to shareholder and other applicable approvals. And in the meantime, we are focused on managing our balance sheet We ended the quarter with more than $1.5 billion of liquidity. We repurchased a small amount of debt in the fourth quarter, and in January 2024, repurchased approximately $250 million in principal value of our debt. Finally, we are introducing our 2024 guidance for Bausch Health, excluding B&L, which reflects our confidence that we can deliver top and bottom line growth again in 2024. John will speak in more detail to this later in the call. Turning now to an overview of our segment performance for the quarter. In Salix, we continued to see strong demand in Q4 for our key products, including Xifaxin. For Xifaxin, we saw approximately 3% TRX growth in Q4 over the prior year, with a strengthening trend in the back half of the quarter. This was led by strong growth for IBSD with a return to growth for HE driven by long-term care channel. Putting this all together, we believe we are starting to see the benefits our investments in AI-enabled Salesforce tools and DTC advertising to spread awareness of the underlying medical conditions and the options that are available to treat them. For 2024, we anticipate maintaining our current level of investment in these areas to drive further growth in this important franchise. Finally, Trulance and Relastore continued to deliver double-digit TRX growth in the quarter. Turning to international, we saw strong year-over-year revenue growth on both a reported and organic basis. In all regions during the fourth quarter, continued growth in our promoted brand portfolios in key markets, including Poland, Mexico, and Canada, more than offset the impact of the Emirate recall earlier in 2023 and increased generic competition for certain products, particularly in Canada. Our focus in 2024 will be continuing to invest in our promoted product portfolio while looking for business development opportunities to drive long-term growth. In Sultan Medical, revenues increased by 4% on a reported and 5% on an organic basis. reflecting solid growth in China as well as growth in the broader Asia-Pacific region. Revenues in the U.S. declined slightly in the quarter. We remain highly focused on maintaining our momentum in Asia, including driving Thermage FLX performance in China, and in 2024, we'll also be focused on growing our U.S. and EMEA markets, where we believe there is meaningful opportunity to expand our presence. To support these efforts, we have added talented, key leadership to the Salta business to advance our leading portfolio of products and have invested in the expansion of the U.S. field force. We are also focusing our R&D organization on our pipeline of new market authorizations and next-generation products as we continue to build upon this world-class, durable aesthetics business. In Diversified, we saw another quarter of healthy performance, particularly in neurology, as we continue to capitalize on opportunities in the market created by competitor supply constraints. We remain focused on managing this mature portfolio of products for profitability and cash generation in a challenging competitive and pricing environment and continue to look for opportunities to make targeted investments where appropriate. Dentistry revenues were in line with a strong Q4 in the prior year, and in the coming year, we are looking to accelerate growth with a focus on the sales force and new marketing tools. In dermatology, Cabtrio is now launched and available for patients in the U.S. at the end of January 2024, and we are excited to be able to provide this new once-a-day triple combination topical acne treatment for patients. We continue to expect that CAB TRIO will be launched in Canada in the second half of 2024. Turning to the latest developments in our R&D pipeline, starting with our GRE pipeline. In December, we announced positive top-line results from our Phase II study evaluating amicillimod, an S1P antagonist in the treatment of ulcerative colitis, or UC. We are very pleased that the study met the primary and key secondary endpoints, including clinical remission and endoscopic improvement during the double-blind period of the study with no unexpected adverse events. We are preparing for our next steps to progress this program, including presenting the detailed results at upcoming scientific conferences and planning to meet with the FDA for an end of phase two meeting. We are planning to advance into phase three in moderate to severe UC patients and could possibly target all UC patients based on our results. We anticipate a step up in R&D spend to support these phase three efforts, as well as exploring opportunities to expand into other therapeutic areas, primarily Crohn's disease with a phase two program. We expect to initiate our global phase three program for UC in late 2024. Our Red C program for Rifaximin for reduction of early decompensation in cirrhosis continues to advance. The global program is focused on delivering a novel formulation and assessing the efficacy of Rifaximin SSD formulation versus placebo to delay the occurrence of HE-related hospitalizations. We completed enrollment for one of two large global phase III trials as of the end of the year, with enrollment for the second trial expected to be completed during the first half of 2024. Together, these studies are expected to include approximately 1,000 patients across the major markets of North America, Europe, and Asia Pacific. Turning now to our aesthetics pipeline, we are very pleased to have received approval for Thermage SLX and TR4 return pad from the NMPA in China in January. We are excited about the opportunities in this market and we see a runway for growth. We expect to start realizing the benefits of this starting in the second quarter of this year. We plan an FDA submission for our next generation Fraxel, a fractionated laser device for skin resurfacing in the second quarter of 2024. We expect approval could be received in the second half of this year. Finally, our program for Clear and Brilliant Touch, a fractionated laser device for skin rejuvenation, continues to advance with regulatory submissions still on track for 2024 in Europe, Canada, and Asia Pacific markets. As a leadership team, we remain committed to driving growth by leveraging our existing assets, making targeted investments, and executing with commercial excellence while continuing to progress our pipeline, all with a patient-centered mentality. With that, I will turn the call over to John Baresi, who will provide further details on our fourth quarter performance and financial outlook for 2024. John?