Bausch Health Companies Inc.

Welcome to the Bosch Health fourth quarter 2024 earnings call. At this time, all participants are in listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Garen Serafian, Investor Relations of Bosch. You may begin.

Good afternoon and welcome to Bosch Health fourth quarter 2024 earnings conference call. Participating in today's call are Thomas Appio, Chief Executive Officer of Bosch Health, and JJ Charon, 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 statement 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 our 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 operating 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 Bosch 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, Wednesday, February 19th, will focus on Bosch Health's excluding Bosch alums. However, we will briefly comment on Bosch alums results announced this morning. We will refer to -over-year comparisons with the same period last year, unless otherwise noted. With that, I'd like to turn the call over to our CEO, Tom Appiope. Tom? Thank

you, Garen, and welcome to everyone joining our earnings call today. We closed out 2024 with a strong fourth quarter, executing on our strategic priorities and reinforcing our focus on patient-centered outcomes. Bosch Health continues to deliver, marking our seventh consecutive quarter of revenue and adjusted EBITDA growth. This performance is a testament to our strong operational execution, disciplined approach, and relentless focus on value creation. We made tremendous progress as a company in 2024, as I could not be more proud of what the Bosch Health team accomplished and the momentum we have heading into 2025. While JJ will discuss our financial results in more detail, I will touch briefly on our performance, our progress driving our strategic priorities forward, and key business highlights from the quarter, starting with our strong fourth quarter and full year results. Revenues for Bosch Health, excluding Bosch and Long, increased 4% on a reported basis and 7% on an organic basis when compared to the fourth quarter of 2023, with strong organic growth in our Salix and Salta segments. Full year revenues for Bosch Health, excluding Bosch and Long, increased 5% on a reported basis and 6% on an organic basis. For Bosch Health, excluding Bosch and Long, adjusted EBITDA for the fourth quarter of 2024 increased by approximately 7% compared to the prior period. For the full year of 2024, all four segments delivered revenue and segment profit growth, demonstrating our ability to drive performance across our diverse businesses. Our success translated into strong cash flow from operations for the company in 2024. Bosch Health, excluding Bosch and Long, generated approximately $1.3 billion in adjusted operating cash flow for the full year. For Bosch Health, excluding Bosch and Long, revenue and organic growth were at the high end of our guidance range and both adjusted EBITDA and adjusted operating cash flow exceeded our guidance. These results would not be possible without the hard work and dedication of all our colleagues across the globe, across all segments throughout the year. We will carry this momentum into 2025 and look forward to updating you on our performance in the quarters ahead as we execute against the guidance that we provided today. Our 2025 outlook builds on the framework we laid out last quarter, which aims to drive value through the organization. So how do we continue generating value and accomplishing our goals? By centering on our value creation efforts around three fundamental pillars. First, we are relentlessly focused on enhancing the value of Bosch Health's operational assets, driving innovation, strengthening execution, and maximizing the growth potential of a diverse global portfolio of brands. Second, we are actively exploring all avenues to unlock the full value of our Bosch and Long equity stake, ensuring the greatest benefit for Bosch Health shareholders. And third, we are committed to optimizing our capital structure, strategically reducing debt leverage and extending maturities to fortify our financial position for long-term success. It is these value creation pillars that will contribute to the success of our long-term strategic priorities. In 2024, we made substantial progress against our five strategic priorities, highlighting the success we saw across the company and reinforcing the importance of staying focused on maximizing shareholder value as we head into 2025. Our strategic priorities, people, growth, innovation, efficiency, and unlocking value are at the core of everything we do at Bosch Health. Our first priority is people. The success of the company begins with our people. We added experienced leaders to our executive leadership team in three critical areas. This summer, JJ Charon joined us as CFO and Amy Lenore joined us as the leader of our U.S. former business. In December, we appointed a new chief medical officer and head of R&D, Jonathan Sadega, who we are excited to welcome to the team. In addition to these senior leadership appointments, we are strengthening our teams with exceptional talent by continuing to drive a culture of business ownership, accountability, and compliance. We aspire to be principal leaders, creative thinkers, problem solvers, and result seekers. We strive to attract the best talent, fostering a purpose-driven mentality and a sense of urgency in everything we do with an all-in together open and collaborative workplace. Our second priority is the long-term growth of our business with a focus on operational excellence. As I mentioned earlier, this is our seventh consecutive quarter of top and bottom line growth with a strong closing quarter to the year. We have achieved this through focused execution against our plans. Innovation, our next strategic priority, is another critical driver of our long-term growth objectives. We have made great progress here, and I am excited to continue to move our innovation efforts forward in the years ahead. The approval of Thermage FLX as a medical device in China earlier in 2024 have been well received. We have developed tools and algorithms that apply AI and machine learning to our sales process for Zyfaxone, and we believe this has been one of the drivers of the performance for the product in 2024. While we are still in the early stages of leveraging artificial intelligence in our business, we are exploring other opportunities to leverage AI-enabled capabilities to drive profitable long-term growth. As our performance demonstrates, our investments in innovation are contributing to our growth. Our key pipeline programs continue to progress. Our Red Sea program for the prevention and delay of the first episode of hepatic encephalopathy remains on track. We successfully initiated and are in the midst of two global Phase III trials with top-line results for each expected by early 2026. As a reminder, this program for our solid soluble dispersion refaxonin product may enable us to address an unmet need to a novel therapy for cirrhotic patients globally and continues to be an exciting opportunity for us. In our Sulta business, Clear and Brilliant Touch has been approved in additional markets in Asia Pacific

with

regulatory submissions in Canada and EMA in 2024. We also received FDA clearance for the next generation Fraxel in the US, which we anticipate launching commercially in 2025. Overall, I am energized by the prospects for the innovation that lie ahead for Bash Health. We continue to drive the success of our business forward through our R&D efforts, maximizing opportunities to best serve patients across the globe. This brings me to our next priority, executing with efficiency, a cost mindset, and operational excellence across the business. We are laser focused on serving our patient populations and their healthcare providers and utilizing our strong supply chain expertise to be nimble in meeting unexpected industry supply needs as they arise. We have consistently demonstrated that our pharmaceutical manufacturing and supply chain capabilities are agile and can fulfill patient needs globally. This includes the efforts during the fourth quarter to meet unanticipated well-butrin demand in Canada. The four priorities I just discussed propel our company forward and help drive shareholder value at Bash Health. And to that end, let me touch upon our last strategic priority, unlocking value. As I outlined through our value creation pillars, this remains a core objective that we continue to pursue across all avenues with a strong sense of urgency, and we are fully committed to delivering on this key priority. We look forward to keeping you updated on these key initiatives throughout 2025. To summarize, Bash Health delivered a solid performance throughout 2024 and has now grown revenues and adjusted EBITDA for seven consecutive quarters. Our success in the fourth quarter was broad-based. Zyfaxone delivered 16% revenue growth and with solid volume growth across all channels, resulting in a fourth consecutive quarter of growth. Solta grew 34%, again led by Asia Pacific region. Our durable and underappreciated international business continued to deliver, where Canada again had double-digit growth in promoted brands, and EMEA business achieved its eighth consecutive quarter of organic growth. And we continue to look for ways to grow our international business. In the fourth quarter and in January of this year, we signed two business development deals by expanding into the potentially large cardio metabolic market, which for Mexico alone is over a $2 billion market. This will allow us the opportunity to broaden our portfolio of assets across Mexico and the rest of our Latin American markets for multiple years, as well as in Canada. Both of these strategic collaborations are good examples of Bash Health leveraging partner expertise in portfolio development and our robust market footprints to serve patients globally. In summary, Bash Health had a strong fourth quarter capping off a great year with contributions from all of our businesses and every one of our valued colleagues across the globe. This momentum sets us up for a great year ahead in 2025. With that, I'll hand it over to JJ to provide additional commentary on financial results. JJ?

Thank you, Tom. Before we review our results overall and at the segment level, I would like to share some highlights from the fourth quarter for Bash Health, excluding Bausch & Lomb. Revenues for the year were ,000,000 with a -over-year growth of 5% or ,000,000. Adjusted EBITDA for the full year was ,000,000, growing 8% and demonstrating the continued operating leverage of our business model thanks to tight expense management and positive business mix. Adjusted cash flow from operation in 2024 was $1.3 billion or a 85% growth -over-year, which was exceptional. The primary drivers were, in addition to our operational performance, unusually low cash taxes and the timing of some of our outflows in Q4. Even when excluding these one-time benefits, adjusted cash flow from operations for the year was approximately $1 billion or about a 40% increase year

-over-year.

Let me now review our 2024 performance in more detail overall and by segment, starting with our consolidated performance on page 14. Revenue for the fourth quarter was ,000,000, up 6% on a reported basis and 9% on an organic basis versus the same quarter a year ago. Revenue for the full year was ,000,000, an increase of 10% on a reported basis and 8% on an organic basis. Adjusted gross margin for the fourth quarter was 72.4%, which was 80 basis points higher than the same period a year ago. For the full year, it was 71.9%, an increase of 90 basis points versus 2023. Adjusted operating expenses for the fourth quarter were ,000,000, an increase of ,000,000, over the same period last year. For the full year, operating expenses were ,000,000, or an increase of 12% -over-year. Adjusted R&D expense for the quarter was ,000,000, which was a ,000,000, increase -over-year. For the full year, adjusted R&D expense was ,000,000, or an increase of 2%. Adjusted EBITDA was ,000,000, in Q4, and ,000,000 for the full year. Finally, adjusted operating cash flow, still on a consolidated basis, was ,000,000, in the fourth quarter, and ,000,000 for the full year. Focusing now on the performance of Bausch Health, excluding Bausch & Lambert. Revenue for the full quarter was ,000,000, up 4% on a reported basis and 7% on an organic basis versus the same quarter a year ago. Revenue for the full year was ,000,000, an increase of 5% on a reported basis and 6% on an organic basis. Adjusted EBITDA was ,000,000, a 7% increase from the full quarter of 2023. For the full year, it was ,000,000, or an increase of 8%. Adjusted operating cash flow was ,000,000, up ,000,000, when compared to the full quarter of 2023. And on a full year basis, adjusted operating cash flow was ,000,000, up ,000,000, when compared to 2023. The impressive cash flow generation in the full quarter and overall in 2024 were driven primarily by three factors. First and foremost, a well-balanced operating performance across all segments. Second, unusually low cash taxes. And third, the favorable timing of some of our off flows in Q4. Turning now to our full quarter performance by segment, starting with Salix on page 20. Salix revenues in the full quarter were ,000,000, an increase of ,000,000, or 9% growth year over year, driven primarily by Zyfaxxin, which grew an outstanding 16%. We continue to be encouraged by the trend of our scripts following the recent optimization of our Salesforce deployment. More specifically, total Zyfaxxin scripts for new script growth were both up 5% in the full quarter. Extended units grew 7% and includes non-retail sending, such as hospitals and outpatient clinics, which again saw strong double-digit growth. Now moving to the international segment on page 21. Revenues for international were ,000,000 during the quarter, a decrease of 4% on reported basis and an increase of 1% on the organic basis compared to the fourth quarter of last year. The 5% of growth difference was driven by the strengthening of the dollar mostly against the Mexican peso. By geography, Canada and EMEA were the strongest contributors to growth in the quarter. Revenue in Canada grew 9% on reported basis and 16% on the organic basis, driven by the continued benefit of a well-brewed generic competitor supply shortage in the markets. Also worth noting is the double-digit growth of our promoted products in Canada, which reflects the benefits of our sales deployment optimization across our broad portfolio of commercialized products. Revenues in the EMEA grew 4% on reported basis and 5% when excluding the impact of effects. Finally, in Latin America, revenue decreased -over-year 14% on organic basis, mostly due to the timing of government tenders in Mexico. Now moving to page 22 to review our SALTA medical segment. Revenues for SALTA were ,000,000 during the fourth quarter, an increase of 34% on reported basis. This kept an outstanding year for SALTA for both revenue and segment profit. What was even more impressive is that our growth for SALTA was primarily driven by volume. By country, South Korea and China continue to be the primary drivers of SALTA's growth globally. As a reminder, in the second quarter of this year, we relaunched TORMASH FLX in China, which has since performed exceptionally well. We believe this business is well positioned for sustained growth in the near and long term. Turning now our focus to the performance of our diversified segments, which you will find on page 23. Revenues for the diversified segments were ,000,000 during the fourth quarter, a decrease of 12% on reported basis. As a reminder, on our fourth quarter call last year, we referenced Marketplace Supply Constraints that allowed us to capitalize on SALTA VATIVAN. This generic supply shortage did not recur this year, impacting overall results in the quarter versus the prior year. Finally, let me wrap up the segment discussion for the fourth quarter by commenting briefly on Barshan Lam top line results on page 25 and 26. Revenues were ,000,000 during the fourth quarter, up 9% on reported basis. For the full year, revenues were ,000,000, an increase of 16% versus the prior year on a reported basis. Turning now to our Bound Sheets, starting with page 28. As a result of our exceptional cash flow performance in Q4, we reduced our debt, net of cash, for Barshe health excluding Barshan Lam by approximately ,000,000. For the full year, and after payments associated with restructuring and legal settlements, our net debt reduction amounted to almost a billion dollars. This allowed us to reduce our gross debt by about ,000,000 through primarily two actions. First, we executed ,000,000 of open market purchases in the first half. And second, we continue to reduce our 2027 term loan balance by ,000,000 as per the mandatory annual amortization obligations. The consequence of all these drivers was an increase of our cash on hand by ,000,000 when compared to where we stood at the end of 2023. Overall, the fourth quarter was a strong finish on all fronts that kept off an outstanding year for Barshe health as we continue to optimize the return of our diversified and resilient set of assets across all five segments. We believe we are well positioned for another strong year of operating performance in 2025. Let me now provide you with our 2025 financial gallons for Barshe health, excluding Barshan Lam, which you will find on page 30. For 2025, we expect revenues to be between ,000,000 and ,000,000. The midpoint of that range would translate into a 4% increase

year over year.

Adjusted EBITDA is expected to be between ,000,000 and ,000,000, making the midpoint a 5% increase versus 2024. Finally, we expect adjusted cash flow from operations to be between ,000,000 and ,000,000. Although this translates into a ,000,000 reduction year over year, it represents a more sustainable level of cash flow generation given the one-time benefits of cash taxes and working capital changes we recorded in 2024. Before I hand it back to Tom for his concluding remarks, let me end this performance review by looking at our progress in relation to our value creation framework we introduced last quarter, which you will find on page 32. We still believe that there are three primary levers for value creation for Barshe health shareholders. The first one is to increase the value of our Barshe health portfolio. This is the primary focus of our leadership team. We strongly believe we have a broad set of high-performing assets as evidenced by our outstanding performance in 2024. As Tom indicated earlier, this is the seventh quarter in a row we have grown our top and bottom line and speaks to our performance consistency and the resiliency of our growth strategy. It also highlights the operating leverage of our business model through positive business mix and tight expense management. What's more, because our margins are high and our capital intensity is low, our business has been producing strong free cash flows. Our second lever is to maximize the value of our Barshe and Lomb asset for Barshe health shareholders. As we indicated two weeks ago, the exploration of selling Barshe and Lomb has concluded, at least for now, as it did not lead to an offer that reflected Barshe and Lomb long-term value. Nevertheless, the main objective remains the same, which is to complete the separation of Barshe and Lomb from Barshe health in the most creative way for Barshe health shareholders. We will continue to evaluate any and all options to do so. And lastly, our third lever is to optimize our capital structure. To that effect, we have made good progress since late October. First and foremost, we have accelerated our cash flow generation, which has allowed us to reduce our net debt by almost a billion dollars during 2024. Separately, we have secured a commitment for up to an additional $700 million credit facility, which will increase our operational and financial flexibility. With this new facility, together with our cash on hand, our $975 million credit facility, our AR facility, and our anticipated free cash flow generation over the next five quarters, we expect to have all the resources we need to address both our 2025 and 2026 debt maturity obligations without the need to access additional sources of funding. Obviously, we are not done with our capital structure improvement efforts, but this is an important milestone as we redirect the focus towards addressing our 2027 and beyond maturities. To that effect, we plan on tapping the capital markets in the first half of 2025, which could include pledging a portion of the Barshe and Lomb shares owned by the company. In conclusion, we have made tremendous progress on many fronts in 2024 and look forward to another successful year in 2025. I will now hand it back to Tom for the wrap up.

Thank you, JJ, and thank you to the entire Bowshell team for another strong year of growth and execution as we delivered on our commitments and our strategic priorities. As a reminder, we have placed specific emphasis on our people and culture, growing our business, encouraging innovation to drive R&D, operating with efficiency to capture marketplace demand, and unlocking the value of Bowshell in the short and long term. Our results for 2024 provide us with a strong foundation for further success in 2025. We look forward to building on this momentum to drive growth across all business segments while serving patients and their health care providers. With that, we will now turn to questions. Operator, please open the line for Q&A.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star

one if you have a question or comment. First question comes from

Les

Seleski

with Truist Securities. Please proceed.

Good afternoon. Thank you for taking my questions. Could you provide the latest status update on the Norwich situation and your timelines around the FDA lawsuit? Do you foresee a possibility of an at-risk launch within the 18-month period? If there were an at-risk launch to occur, what could be some of your response options? And I guess, secondarily, what are the potential at-risk impacts on the timeframes with the other tentative approvals? Thank you.

Thanks, Les, for the question. Yeah, 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 file of 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 non-forfeiture. 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 continues with their rights of first to file.

Next question. On the discontinuation of the Crohn's disease study? You were

breaking up. We

couldn't hear you

come

through. What was it? Sorry, I'll repeat. On the MSLEMAD program, what's the reasoning on the discontinuation of the Crohn's disease study?

Yeah, so we didn't discontinue the study. 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 looked at Crohn's, this class of drug, even though there were 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's.

Got it. Thank you for the color. Just one more for me and I'll hop back into Q. Can you provide a little more color on the two recent deals in the international side on the cardio metabolic front? Thank you.

Sure, yeah. 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 brand 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 of building brands. And then a second one was looking at a single triple combination therapy with commonly used hypertension medicines, 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.

Up next is Doug Minion with RBC Capital. Please proceed, Doug.

Thank you. A couple questions. With respect to the 229 BC, the $700 million that you're contemplating funding with debt and using a portion of the BLCL holdings, relative to the .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? Would it be proportional? I probably wouldn't be, but maybe you can walk me through how much would have to be placed within that company.

Hi, Doug. This is JJ. First of all, just as a point of clarification, although the billion dollars 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.

Okay.

Okay. And then on top of that, if you were to go ahead and explore accessing capital markets, this would be incremental in terms of the proportion of shares of Bosch and Loam that would be pledged or not? Just trying to understand.

Yeah, we're looking at different packages, so I'm not going to comment specifically on what we'd be looking at, but the packages we're looking at would be looking at replacing that credit facility so we have more of a permanent structure in place to deal with our 2027 maturities in BL. Okay.

Okay, fine. Then, if we go to your guidance, which was strong, on the top line, it was in line with what we're looking for and I think most other people, but a bottom line was better. But perhaps you can talk about the contribution on a relative basis that you expect to come from Xyfaxone given the strong growth we've seen recently when you look at that guide, how much of that is associated with Xyfaxone growth?

Yeah, so we haven't provided any specifics in terms of quantification, but the two biggest contributors of our growth in 2025 will be indeed CLX with Xyfaxone and Solta. I think the dynamics that you're seeing, particularly in the second half for Xyfaxone, should be assumed as continue in 2025.

Okay, and then just to wrap up, can you update us on any potential settlements with the opt-out groups or granted trusts where we stand there? That'd be great. Thank you.

Yeah, of course. On the granted 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 settlements. 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.

Once again, if you have a question or a comment, please press star one. We do ask that all QA participants please limit to one question and one follow-up. The next question comes from Jason Gerberi with Bank of America. Please proceed.

Oh, hey, thanks for taking our questions. This is Chi for Jason. I would like to ask a follow-up on the earlier question on the new Norwich case. Is it your understanding that Norwich is not subject to the 30-month stay and the only gating factor for the full approval from the FDA of the generic SIFACs is around the 180-day exclusivity? And for that case, do you have a sense of the timing for next steps? Would you expect a trial to be scheduled in the coming couple of months? Thanks so much.

Yeah, I'll take that question. You know, 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. Next question.

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 subject to the 30-month stay. Can you talk about that? Thank you.

Yeah, what I say, we believe the 30-month stay still applies. And so, you know, that's the way we're proceeding. You know, I really don't want to speculate right now, you know, on what the FDA or what you've said they said, but we believe and we are continuing to work on, you know, where that trial stands and that case stands. And we believe 30 months still applies.

The next question comes from Michael Freeman with Raymond James. Please proceed.

Hi, good evening, Tom, JJ, Garen. Congratulations on these earnings. A couple questions from me. You know, there have been plenty of government initiatives that may potentially affect your business going forward. So I wonder if you could comment on Zyfaxone being included in the Medicare renegotiation list for 2027. And any any sort of preparation for those negotiations and potential preparation for, you know, a potentially a material price reduction. And then if you could give a quick comments, perhaps on the potential for a pharma oriented international tariff and how that might affect your maybe your supply chains or pricing going forward.

Yeah, Michael, thanks. I'll take those questions. So, yeah, we were, you know, we were on the list. Of course, Zyfaxone has great has had great success. And we wound up on the list. What I would say is, you know, it's still early, you know, in the process. And, you know, we're going to be in the process of negotiating. You know, our, you know, our focus right now is to prepare for that and go through the process with CMS and, you know, which will come into effect in 2027. I just think it's it's too early to offer detailed commentary, you know, with with that regard. But, you know, we continue to remain focused on demonstrating the value of Zyfaxone, you know, during which we're going to share. You know, the information on the value it delivers to patients, providers and the overall, you know, health care system, you know, in terms of when you look at, you know, Zyfaxone on the OHE indication, which is more than 70% of the business. You know, the amount of cost savings, you know, regarding hospitalizations is it drives a big benefit. So, you know, we're closely monitoring the situation. We have a super fantastic team in in the space of market access. And we're looking at all possibilities in terms of the tariffs. You know, I could say something and then maybe JJ wants to add again. It's still too early. You know, there's a lot of a lot of discussions here on the tariffs of what it would mean for us. And we've been, you know, closely following it, you know, in terms of our supply chain and what impact it would mean. But I'll hand it over to JJ. Me has a few further comments on that.

Yeah, so in terms of our setup and our supply chain, of course, the fact that cost of goods sold is a relatively small proportion of revenue for pharmaceutical company. The financial impact of those tariffs, you know, let's assume the scenario that has been the most publicized 25%. And that would be for a full year. The impact would be below 50 million dollars in terms of cash flow for the company. So I wanted to give you some some order of magnitude on how to think about it. Excellent.

That's that's very helpful. Now, just a quick one. We had a doctor today join the team as the new CMO. And I noticed that there was a choice to not pursue the Crohn's opportunity. I wonder if there are some further changes in approach to your clinical development programs or some new ideas that Dr. today is brought to the team and is and is tenure so far.

Yeah, I think it's a great question. Of course, we are so pleased to have Jonathan join us and discussing how to build our pipeline for the future. As you know, we have the Red Sea program. In fact, today downstairs, we're all having advisory boards. We're really excited about the Red Sea program and what that's going to mean for us and what it can mean for patients. As again, this is a prevention trial, so we're really excited about that. You know, we we did mention that we did not not going to pursue looking at and the still modern clones and Jonathan. And it just since he's joined in the last two months, we've been actively discussing what what we're going to pursue what we're going to develop. And then from a business development standpoint, some of the assets that we could possibly look to bring into the portfolio. But we're excited to have Jonathan here and we'll, you know, we'll give more information as things progress on rebuilding and building up

this pipeline. Okay, thank you, Tom. The next

question comes from Mike metal. Could I with TD Cowan Mike? Please proceed. Thanks

for the questions. I have one and a follow up. My first question relates to the facts in in the twenty point seven IRA price negotiation. 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? That's my first question. And then my follow up is actually a follow up on a previous question related to your plan to access the capital markets, possibly by pledging a portion of voucher loan shares. This is very helpful insight, but can you bracket this for us at all? Is there any level of quantification at all that you could provide? Thank you.

Yes, so, Mike, I'll take the first one on the facts and price negotiation. As you know, ours are as a fact in business is in IBSD and H. E. and it's blended. You know, again, you know, what would be subjected to the IRA price negotiation? I can't give you what the percentage is that would be. As I said, you know, 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 twenty twenty seven. So there's still a lot to be done and discussed here. And then, as I said previously, already, as I faxing on the H.E. indication is, you know, if you look at hospitalization costs and patients not being in hospital, there are all already is a very large savings into the health care system on Zyfax. And I'll hand the other question that you had over to JJ.

Yeah, so, you know, I'm not going to comment specifically on the quantum of debt that we're looking at. We're looking at various options. The one thing I would just reinforce and highlight is that we've got seven billion dollars of maturities between now and the end of twenty twenty seven. You have obviously to take into consideration the cash on hand, the cash flow that will be generating between now and the end of twenty seven, as we indicated in our guidance. This is a business that certainly in the near term and generate the billion dollar plus of cash flow per year. And and so the the objective here is really to deal as is to deal with as much maturities as possible

during that horizon. Thank you.

OK, and our last question comes from Glenn Santangelo with Jeffries. Please proceed.

Oh, yeah, thanks for taking my question. Hey, Tom, just two quick ones for me. 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 what you did over the sort of past couple of years? And do you think twenty twenty five could be could be in the cards to ultimately get a deal done? And then my follow up to that is for JJ, you know, just on the follow up question, when you think about, you know, 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? Thanks.

Yes, hi, Glenn. This is JJ. I'm going to cover both questions. So as 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 timeline associated with that. I think it's it's more a function of what makes sense for shareholders and whether the transactions that we're considering are creative to BHC share value. So that's 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 would be making on BLCO more what we would be doing with the proceeds as indicated by potential covenants or obligation associated with the debt we're raising.

Okay, thank you.

I would now like to turn the call back over to management for any closing remarks.

Thank you all for joining us this afternoon and for your questions. We closed out another strong quarter of growth, leading to a strong year with consistent results across our broad portfolio of assets. I want once again to thank the entire bash help team across the globe for their hard work and dedication and relentless drive to deliver the products patients need most to enrich their lives. Thank you for your time and your interest in the company. And we look forward to another strong year of execution and progress in twenty twenty five. Enjoy your evening. Thank you.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.