Bausch + Lomb Corporation

Good morning and welcome to Bausch & Lomb's second quarter 2025 earnings call. All participants will be in a 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. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to George Gatkowski. Vice President of Investor Relations and Business Insights. Please go ahead.

Thank you. Good morning, everyone, and welcome to our second quarter 2025 Financial Results Conference Call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Brent Saunders, and Chief Financial Officer, Mr. Sam Aldasuki. 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, I would 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 legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial measures and ratios. For more information about these measures and ratios, please refer to slide 1 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website. 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 unless required by law 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 Brent.

Thank you, George, and thanks to everyone for joining us this morning. I'll start the call with an overview of our second quarter performance and how it aligns to the strategic roadmap we announced when I rejoined the company. Sam will unpack the financials and provide an update on 2025 guidance, and I'll close by highlighting standout products and services driving growth and future offerings with the potential to significantly improve the standard of care in eye health. Maintaining focus in the current environment is easy to talk about but hard to do. I continue to be immensely proud of the way my colleagues have executed on our strategy despite facing unexpected challenges. Our constant currency revenue growth speaks to the breadth and depth of our portfolio and is driven by a mix of hero products and a steady stream of new introductions around the world. Our contact lens performance is worth highlighting as we've continued to outpace industry growth averages thanks to strong execution from the entire team. There's no better example of selling excellence than the exponential growth in our comprehensive dry eye portfolio, which offers something for everyone. One billion is an important revenue milestone and a nice round number. but it will soon be in our rearview mirror as we continue to gain OTC and prescription market share. When it comes to operational excellence, look no further than our return to full production of our Invista intraocular lenses, which I'll speak to later. We continue to have an intense focus on innovation, and our robust pipeline represents the future of the company. We're excited to showcase potential game changers at our November 13th Investor Day. where we'll cover our most promising candidates in each business from concept to commercialization. The look and feel of our roadmap slide has evolved since first being introduced more than two years ago. What hasn't changed is our commitment to methodically moving through each phase, as indicated by incremental advances in our progress with each update. Parts of the first two phases are admittedly boring. but absolutely necessary as we stand on the precipice of phase three, accelerate growth. We've adopted the theme of our upcoming investor day for this update because the growth will largely be driven by what's next. Our commitment to stay in the course for the first two phases has helped fortify our base business and develop the processes, platforms, and talent required to write the next chapter in Bausch & Lomb's storied histories. Invista implants continue to increase as we rapidly resupply the market. Surgeons who love these lenses before the voluntary recall have jumped right back in, and adoption rates among others, including new users, are very encouraging as we make a significant push to recapture our momentum. We recently hired a new head of North American Surgical with more than 30 years of industry experience to help turbocharge that effort. Earlier this month, he attended the American European Congress of Ophthalmic Surgery's summer session, and he was met with excitement for our return and appreciation for our ongoing focus on patient safety and customer trust. Earlier, I mentioned operational excellence, which has been a core component of our strategic roadmap. If based with this recall two years ago, our return to market would have taken much, much longer. That speaks to how far we've come and the importance of resilient, talented operators who are obsessed with getting the small things right. I'd like to draw your attention to the fine print for some of these figures. Big picture, our 3% constant currency revenue growth in the quarter would be doubled if you excluded the investor recall. The difference becomes even more pronounced in our surgical segment. The fact that there was constant currency growth in the quarter is impressive on its own, but it would have been 15% absent the recall. Our pharmaceutical segment performance also has an asterisk, as underperformance in our U.S. generic business brought constant currency revenue growth in the quarter from a would-be 6% to minus 1%. While we're obviously disappointed with the generic results, we're confident there will be a steady improvement in the second half of the year for U.S. generics, which has a new leader as of June. When it comes to our top-performing products in the second quarter, it's once again a story of launches and reinventions driving growth, which means our strategy is working. Nearly all the high-growth products shown here, which are spread out among our businesses, make the top 10 revenue list. That's staying power. I'll now turn it over to Sam, but before I do, it's important to recognize his team's work in revamping our capital structure and securing improved credit agreements. The favorable terms allow for more flexibility going forward, and it's important to take advantage of these opportunities.

Sam. Thank you, Brent, and good morning, everyone. Before we begin, please note that all of my comments today will be focused on growth expressed on constant currency basis, unless specifically indicated otherwise. Turning now to our financial results on slide 8. Total company revenue for the quarter was $1.278 billion, which reflects year-over-year growth of 3%. We delivered a solid quarter led by the performance in consumer, contact lenses, and promoted pharma brands. Our surgical segment grew by 1%, absorbing a $29 million impact from the investor recall in Q2. Excluding the impact of the investor recall, total company revenue grew by 6% in the quarter. As Brent noted, Invista implants continue to increase as we resupply the market, and we are making a significant push to recapture our momentum. For the second quarter, currency was a tailwind of approximately $21 million to revenue. As a reminder, in Q1, we experienced currency headwinds. On a year-to-date basis, Currency has had a nominal impact on both revenue and adjusted EBITDA. Now, let's discuss the results of each of our segments in more detail. VisionCare's second quarter revenue of $753 million increased by 6%, driven by growth in both consumer and contact lenses. The consumer business grew by 6% in Q2 as our key brands continued to perform well, and consumption trends remained steady. Let me go over a few highlights. In the quarter, Lumify grew by 27% and generated $61 million of revenue. We continued our strong execution in the DryEye portfolio, which delivered $115 million of revenue in Q2, representing 19% growth. Our two key franchises, Artelac and Blink, once again contributed to this strong performance. Artelag grew by 34%, and Blink grew by 13% in the quarter. As we mentioned in Q1, we anticipated retail and destocking of inventory to take place in Q2. The destocking impact may affect our I-Vitamins, which declined by 8% in the quarter. It is important to note that consumption trends continue to remain steady and demand remains solid. Contact Lens' revenue growth was 7%. Our Contact Lens business outpaced the market in 2024, and we continued to see strong performance in the first half of this year. In the quarter, we saw solid performance across our key brands. The DailySide High franchise was up 36% in Q2 and continues to be our fastest-growing brand. Our Ultra Monthly franchise grew by 8% And buy-through was up 2% in the quarter. In Q2, our contact lens business saw broad-based growth and strong performance across our key markets. The U.S. was up 11%. EMEA was up 11%. LATAM grew by 25%. Japan grew 3%. And China was up 7%. Moving now to the surgical segment. Second quarter revenue was $216 million, an increase of 1%. As I mentioned, this absorbs the impact of the Invista recall. Excluding the recall, surgical segment growth in Q2 was 15%. Consumables, which represents approximately 56% of surgical revenue, grew by 10%. The Invista recall impacted our implantables business and parts of the equipment portfolio. Implantables declined by 16% in the quarter and equipment declined by 2%. In the quarter, we made solid progress with the investor return to market. As we progress through the year, we expect to continue to build on the performance. From a phasing perspective, we expect to continue to make progress in Q3 and further ramp up in Q4. Lastly, Revenue in the pharma segment was $309 million in Q2, which represents a decline of 1%. Our U.S.-branded RX business was up 8% in the quarter, mainly driven by the continued growth of Maibu. Maibu delivered $63 million of revenue in Q2. This represents sequential growth of 11% and a year-over-year growth of 50%. Zydra delivered $82 million of revenue in the quarter. We continue to see strong growth in Zydra volume, with average weekly TRX up 12% on a year-over-year basis and 5% sequentially. Maibu Zydra and our consumer brands have established us as a clear leader in dry eye. We have built a robust dry eye platform to address all patient needs throughout their care journey. which gives us the confidence that we will continue to drive growth and leverage the portfolio to drive innovation. Our international pharma business was up 2%, with strong performance across our markets in Europe. Our U.S. generics business declined 29% in the quarter. As we have previously stated, we have taken a number of actions which we expect will improve performance in the generics business in the second half of the year. Now, let me walk through some of the key non-GAAP line items on slide 9. Adjusted gross margin for the second quarter was 60.6%, which represents a 130 basis points decrease year over year. This was driven by the one-time impact of the invested recall, product mix, and currency. In Q2, we invested $96 million in adjusted R&D, which represents an increase of approximately 12% over Q2 of 2024. Second-core adjusted EBITDA, excluding acquired IPR&D, was $192 million. This absorbs a one-time impact of $19 million from the invested recall and $18 million impact from the decline in the U.S. generics business. Adjusted cash flow from operations was $86 million in the quarter. Adjusted net interest expense for the quarter was $94 million, and adjusted EPS excluding IPR&D was $0.07 for the quarter. Finally, as part of our efforts to continue to optimize our capital structure, in June, we successfully executed a refinancing of $3.1 billion of our debt. The refinancing extended the majority of our maturities to 2031, and is expected to have a minimal impact on our interest expense. Now turning to our 2025 guidance on slide 12. We are raising our full year revenue guidance from a range of $5 to $5.1 billion to a range of $5.05 to $5.15 billion. The updated revenue guidance represents constant currency growth of approximately 5% to 7% up from 4.5% to 6.5%. This new guidance range continues to absorb approximately 100 basis points from the one-time impact of the investor recall. Shifting to adjusted EBITDA, we are raising our adjusted EBITDA guidance from a range of $850 to $900 million to a range of $860 to $910 million. In terms of the other key assumptions underlying our guidance, we continue to expect adjusted gross margin to be approximately 61.5%. As a reminder, the adjusted gross margin absorbs an estimated one-time 50 basis points headwind from the investor recall. For the full year, we continue to expect investments in R&D to be about 7.5% of revenue. An interest expense to be approximately $375 million. We will continue to monitor the Fed's actions for the rest of the year. We continue to expect our adjusted tax rate to be approximately 15%, and full-year capex to be approximately $280 million. In terms of phasing for the remainder of the year, we expect the fourth quarter to be the highest. This is driven by the natural seasonality of our business, the ramp-up of INVISTA, and the actions we're taking to improve performance in our U.S. genetics business as we progress through the remainder of the year. Consistent with our previous guidance, our current guidance excludes any potential one-time IPR&D charges that we may incur in 2025. Finally, let me briefly address tariffs. The tariff policy remains fluid, and we're continuing to monitor updates. Based on where the policy stands today and the actions we're taking, our updated guidance assumes we will be able to offset the impact of tariffs in 2025. Moving to slide 13, now let me provide some additional color on how to think about the updated revenue and adjust the EBITDA guidance in 2025. Our updated revenue guidance range of 5.05 to 5.15 billion reflects a 25 million raise driven by strong business performance and 25 million from currency tailwinds. The updated 2025 adjusted EBITDA guidance range of 860 to 910 million includes approximately 10 million driven by business performance and our continued focus on disciplined cost management. To sum up, we had a solid quarter The markets are healthy and our business fundamentals remain strong. We are committed to our strategy to drive sustainable growth and margin expansion. And now I will turn the call back to Brent. Thanks, Sam.

Let's focus on some of the more impressive second quarter performances and reasons to be so optimistic about the future of Bausch & Lomb. At the bottom of this slide, there's a simplified view of the dry eye journey for consumers and patients. No matter where they stop, whether it's an Amazon order or a visit to the pharmacy counter, we're there to meet them with solutions that have become among the favorite of eye care professionals. There are a few consumer options worth highlighting based on second quarter performance. Momentum for Blink eye drops continues with 13% reported revenue growth. Artilak performance was even more impressive at 39% reported revenue growth. and it continues to be our most global dry eye option with availability in more than 40 countries and plans to expand further. Those products and others shown here drove a 16% constant currency revenue growth for the dry eye portfolio. Expansion of the dry eye market shows no sign of slowing down, but there remains a gap in education and awareness. In fact, according to our updated state of the dry eye survey, 78% of sufferers wish they had more dry eye resources. We're doing our part to help fill that gap with our latest Dry Eye Awareness Month campaign, which encourages visits to knowyourdryeye.com and reinforces that there are a range of potential relief options available that may be appropriate depending on the cause, severity, and frequency of symptoms. The theme of this slide is Staying the Course. When we acquired Zydra in 2023, we made clear our intentions to nurse the brand back to health and remind eye care professionals of its benefits. Sticking to this playbook has resulted in 12% year-over-year prescription growth and renewed excitement for a medication that produces hundreds of millions of dollars in annual revenue. Our work to improve profitability is far from done, but we're starting to see the benefits. My book continues to be a juggernaut. with 111% year-over-year prescription growth. The playbook hasn't changed there either. Through extensive education and best-in-class field force, we've established Mibo as the prescription solution for evaporative dry eye. Patient feedback continues to be overwhelmingly positive, as made clear in the Phase 4 data published earlier this year. Study participants reported rapid relief of symptoms and most commonly chose silky, smooth, and soothing to describe how the job felt on administration. Effective direct-to-consumer campaigns continue to raise awareness of our flagship-branded dry eye medications, rounding out a thoughtful, all-encompassing approach that accounts for every possible touchpoint. The recent launches of preservative-free OTC options are a prime example of continuous brand reinvention and being responsive to evolving customer needs. Lumify Preservative Free launched in May and brings the same fast-acting redness relief to those with sensitive eyes. While exponential growth has been a constant theme for Lumify, we're thinking well beyond the next few years. In fact, we recently settled patent disputes related to Lumify, enabling continued investment ahead of a date certain for generic launch. Introducing Preservative Free options for Blink. now means there are six dry eye drops to choose from, in addition to multiple contact lens lubricating drops and a once-a-day nutraceutical that's quickly becoming the most trusted among eye care professionals. Optionality matters for consumers looking for OTC relief, and the growing Blink family, a global brand, checks every box. While Daily Sci-Hi was once again the clear standout with 36% constant currency revenue growth in the second quarter, it's important to note that all our key contact lens brands are growing. That includes ultra-monthly contacts with 8% constant currency revenue growth, an impressive figure for a legacy brand bucking the trend of a gradual shift towards daily lenses. Our thoughtful approach to expanding our Daily Sci-Hi portfolio hasn't changed. with plans to introduce multifocal and toric options in several markets next year and realize the expected benefits of offering a full suite of lenses. Those benefits are clear in the U.S., with 40% constant currency revenue growth in the second quarter. In May, we received European approval for LuxLife, full range of vision IOL, the latest example of our push into the high-margin premium market. The lens has an impressive clinical profile, and early feedback from Surgeon mirrors our excitement about the latest addition to the Lux portfolio. Our stage rollout of premium offerings continues with the anticipated soft launch of Invista Envy in Europe later this year, and expected early 2027 US launch for Invista Beyond. Our pipeline slide should be familiar to you by now, but I won't go too deep to avoid spoiling investor day. I'll remind you that we have multiple shots on goal in each of our businesses, and the focus is category disruption as opposed to modest improvement. Importantly, this isn't aspirational. We've initiated clinical studies for several of these products with others to follow soon. I look forward to seeing many of you in November where members of the R&D team and our commercial leaders will bring these products to life. Let's move to Q&A now. Operator?

Thank you, we will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. And the first question today is coming from Matt Mixitch from Barclays. Matt, your line is live.

Thanks so much, and thanks for taking the question. So congrats on the strong quarter here, particularly kind of on an underlying basis, you know, taking out some of the puts and takes as you talked about. Brent, I wanted to ask first about, you know, you've made sort of a recommitment to the company here based on your original contract, and you talk often about the bright future that you see for a lot of the product lines and product launches that you've run through. Maybe just talk about, you know, in the midst of the recent uncertainty, what are some of the key highlights that sort of, you know, inform that decision to sort of recommit for a long period of time? And one follow-up on guidance, if I could.

Yeah, absolutely, Matt. So let me take the first part, and thank you. Look, I'm really excited that I extended my contract to stay at Bausch & Lomb. And I'll tell you, I did it entirely because of my deep confidence in our team, our products, and the strength of our R&D pipeline. I think we have an amazing opportunity as we've worked through our roadmap here to truly transform our company in the next couple years and really focus on accelerating sales growth, importantly expanding margins, and then, of course, advancing our innovations that help us fulfill our mission to help people see better, to live better. If you look at just the challenges we had in the first quarter, whether it be the recall or tariffs, and the resiliency and our ability of our teams to execute and overcome those challenges that were very unexpected and quite impactful and get back on track here in the second quarter, it just underscores what I was saying about the confidence in the team and our ability to really transform our company. And I guess net-net, if you really step back and think about it, the way I really think about it, I really see the opportunity in front of this team right now is really too important and too exciting not to be a part of it. And I'm just incredibly excited for what we can do in the future here.

Oh, it's great. Great to hear. So, and following that line of sort of, you know, some of the challenges and initiatives that factor into guidance, you know, there's a couple I think that folks have some familiarity with or understanding, maybe more so around the recall and the impact that that had and around tariffs to some degree. But if you could talk a little maybe about quantifying the tariff impact and then also just walk us through the strategy in pharma because there's clearly strong growth in Zydra scripts but you know and and strong growth sequentially but um you know but down a little bit year over year maybe walk us through the what's the plan behind that and how do you expect that to play out the rest of the year you know plus anything yeah i mentioned you'd be able to share on on tariff impact would be helpful to folks as they do the puts and takes yeah so if you don't mind matt let me take them in reverse order because then sam can can help me um with the uh the tariff impact um

Look, in pharma, let's start with Mibo, Zydra, and Gross to Net. Throughout last year, I think we told you guys, and at the beginning of this year as well, that we had some headwinds going into 2025 that would kind of reset the base on particularly Zydra, and that those headwinds were a one-time managed care payment, and then the IRA, which we quantified. And so, you know, our focus this year was to drive prescription and demand, right? And so you see it, obviously, in Zydra, you see, you know, 12% TRX year-over-year, 5% sequentially. In MIBO, you know, you see 50% year-over-year and 11% sequentially. And so you see the expansion of the market and clearly now as a franchise where the market leaders in the prescription space. The goal now after 25 and beyond is to now see that pull through the P&L. And I think you'll start to see that in 26, 27 and beyond as we focused on driving not just growth, but profitability through the P&L. And so we're exactly where we thought we would be. I get why it It can look like a step backwards given the gross net headwinds, but I think it's very important for a long-term franchise, and we have these drugs for several years, to make sure that we secured reimbursement and availability for patients and then drive through an education to ECPs the importance of treating both evaporative and inflammatory dry eye. And so I think we're 25 is an interesting year. I think the team is executing well. That being said, I think we're exactly where we want to be. And if we could just have a little patience to see it pull through starting in 26, I think you'll understand the power of what we can do with these franchises. I would also note the generics obviously was a disappointment. and something that we're working hard to reconcile. As I mentioned in the prepared remarks, we have a new leader of generics. We saw modest improvement sequentially from first to second quarter, about 2% improvement. I would say green shoots at best, not where I would want to be, but But we're working with the team, and we're starting to see more improvements in early Q3. But we have a lot of work to do there, and we expect it to resolve in the back half of the year. So that will no longer be a drag, you know, going into 26 as well. And so, you know, net, net, Matt, I think we're well positioned. I'm excited about where we are and the execution that we've seen on our prescription brands. But we have some work to do, and we're focused on getting it done. I think with respect to guidance, I'll turn it over to Sam, but look, I'm proud of our ability to get through what we saw, you know, some unexpected challenges in the first quarter and deliver, you know, a solid second quarter and be positioned to grow with momentum into the back half of the year. And I really do think we have momentum. I think you see it because the market for eye health is vibrant. You see great execution on our team, as I've said several times. And then, of course, there's seasonality where the back half of the year, particularly the fourth quarter, is our strongest.

But I'll turn it over to Sam for some more color on tariffs. Yeah, and Matt, when you think about tariffs, the policy continues to be fluid and flexible. Actually, August 1st is Friday, right? Yeah. So when you think about what we shared in our last earnings call, we estimated roughly about the impact of 120 basis point. But at that point, that was based on the environment that we were reporting then back in April. So a lot has changed since then. One, the policy has changed in 2020. different directions and that helped us in a meaningful way in terms of having favorability in terms of what we think the potential impact for 25. But also the team, our team has done a really great job in terms of navigating around the tariffs and taking steps and mitigating the impact where we see it. And that gives us the confidence to be able to, one, reflect in our guidance and also be able to fully offset it within our guidance.

If I could, Sam, I would also say it's easy for us to say the team helped mitigate, but it was an immense amount of work. And I would just want to acknowledge the hard work that our team and our supply chain and commercial colleagues had to do to really be nimble and reinvent ourselves a little bit to deal with these tariffs.

Yeah. Where we stand here today, we estimate roughly about 40 basis points as an impact for us in 2025. Obviously, we'll continue to monitor what happens on the end of this week and any other further developments from our policy, but that's one of the things we're not going to sit back. We're going to continue to work around what comes our way from tariffs, and we'll continue to work through mitigating that through 2025.

But to be clear, just so there's no confusion, those 40 basis points are absorbed in the guidance. That's correct. So that's not going to get carved out of guidance. That's absorbed in the guidance Sam just provided.

Very, very, very helpful. Thanks so much, and congrats again. Yep. Thanks, Matt.

Thank you. The next question is coming from Young Lee from Jefferies. Young, your line is live.

Great. Thanks for taking our questions. I guess to start on the pharma side, I think previously you talked about investing heavily in LIBEL for the first couple of years basically to prime the market and then that investment will taper off and profitability will increase. But I guess you know, with a pretty big competitor coming into the market. So I'm wondering if that impacts your plans on investments and profitability timing.

Yeah, so great question. And, you know, while we're on the topic of Triptir and Alcon, I'll ask Yahia, our chief medical officer and head of R&D, to comment as well. But look, I don't think our strategy has changed. To be fair, we knew this product was in development all along, so it's no surprise to us. And, you know, I think it's important to understand the dry eye market when you think about competitive environments. And I think two things are really important. Remember, I was running Allergan when Zydra launched. and obviously was deeply involved in the defense of the market. And I remember analysts on calls like this, you know, thinking it was going to be a fight to the death between Restasis and Zydra, and one was going to win and one was going to lose. And the reality is the market expanded to accommodate both, and Restasis and Zydra grew through the launch. And that's because it's a very low penetration prescription market. and a very large untreated market, as I mentioned in the prepared remarks. And so this market has plenty of room to bring more patients in for prescription treatment. And so that's a really important dynamic in this particular market. And so Alcom, which is a great company and a storied company, and eye care with deep relationships, you never want to underestimate them. But I think the second point I'd make is we have a beachhead. And when you have a beachhead and dry eye, it's really hard for competitors to work around us. And I think of even when I was running Allergan and Restasis, you know, we thought we had a beachhead. Our beachhead here is even more comprehensive and deep, given that we have the only evaporative dry eye drug and a best-in-class anti-inflammatory drug, which are the two main parts of the etiology of the disease. And so, And then, of course, all the OTC options as well. And so our ability to work with ECPs and work with consumers and patients is unprecedented versus any of our competitors. And I think we just have a terrific portfolio and a lot of momentum. But maybe, Yahia, talk a little bit about how you see it more clinically.

Yeah, I think from a clinical perspective, We still believe MIBO is unique and it's the only approved treatment for evaporative dry eye. And let me just get a little bit back and just describe from a dry eye perspective, when we look to the etiology of dry eye, there are two main categories. One is either the eye is tear deficient. This means that doesn't secrete much tears. And for that category, you need an increased tear production, which we have multiple options on the market. Triptir is not the first one. Restasis increases the tear production. Tervia increased the tear production. So this is really now coming as a third to the market for increased tear production. But the bigger category of dry eye is really evaporative dry eye. And those are the patients who really have, like, myobobian gland dysfunction. that no matter how you increase the tear production and you still have one of those causes, it will be like leaking bucket syndrome. So basically you increase the tear, but it evaporates immediately. And this is where really the only treatment for these type of patients would be Mibo. So we still believe that it is unique from an etiological perspective. Apart from that, whether it's evaporative or decreased tear production, if the eye remains for a long period of time with dry eye, it will get inflammatory dry eye. And again, unless you have a specific treatment for the inflammation like Zydra to address the inflammatory cytokines, you will not be able to treat the inflammatory component of the dry eye. But the most important piece I would like to mention related to the clinical data is is what matters for the patients are the symptoms of the dry eye. And this is really where we differentiate clearly versus trip tear. So according to the phase three data from a trip tear actually, while 50% have an increased tear production, it's still on the symptom scales. They do not show improvement except at day 14. And in fact, one of the pivotal studies failed the statistical significance and the other one met and they had to pool the data to amplify the effect of the product. So, I think this is a clear indication where the symptom and the patient outcome plays an important role of the use of the treatment because MIBO still in each individual pivotal study have significantly and clinically meaningful effect on the symptoms reduction. In fact, the latest study that we conducted as a phase four study show that the improvement in the symptoms happens within a few minutes of the installation at day one, day three, day 14, and so on. So we do believe that Mibo and Zydra are totally differentiated. And again, needless to say, obviously, tolerability plays an important role in this market. And with a product that could have 50% of burning and stinging after installation, I think from a patient outcome perspective, they could be challenging to use it for a long period of time. So that's why I still have a lot of confidence in our dry eye portfolio, and I still believe that we have a very differentiated product existing on the market.

All right, great. That's a very comprehensive and helpful answer. Appreciate it. I guess switching gears a little bit to contact lenses market, you know, more than or almost half of the market is So far, it's coming in better than expected in the second half. You know, we definitely heard something last quarter around, you know, consumers buying less and channel inventory for all downs. Can you maybe level set us a little bit on what you're seeing in the contactless market from a macro and consumer and channel perspective?

Yeah, we still see it as healthy. You know, we have not seen, obviously we hear what some of our competitors are saying, and frankly, we just don't see it. And perhaps part of the reason why is the investments we've made over the last year in not just innovation, but also direct-to-consumer channel, whether it be in China, where we set up a fully integrated direct-to-consumer, and or in the U.S., where we launched Opal. which is actually exceeding our expectations in terms of adoption and use and pull-through. And so I think that's a large part of it. When I look at our performance, I think it tells the story. We kind of expected our daily Sci-Hi and Fuser Ultra one day outside the U.S. to do well, and you see that 36% growth performance in that daily segment. But what makes me really proud of the team is the fact that Ultra Monthly grew 8% and BioTrue even grew 2%. And so we're really trying to focus on that, you know, sealing the leaky bucket, right? You tend to launch the new products and the old products decline. And I think you see a really nice performance and execution from our contact lens team to drive growth. And so when you get growth from your older products, And stellar growth from your new products, it puts you in a very strong position. So I'm very optimistic about the contact lens market, and I think it's going to remain healthy throughout the year and for years to come.

Thank you very much. Thank you. The next question will be from Larry Beagleson from Wells Fargo. Larry, your line is live.

Hi, good morning. This is Leigh calling in for Larry. Thanks for taking the question, and congrats. Nice quarter. Just starting off, Sam, I know you're not giving guidance for 26 yet, but you did give a lot of color around some of the issues in 25, you know, the investor recall, the relaunch, U.S. generics, et cetera, and all the investment that's going behind the key portfolios. Can you just talk about, you know, for next year as we think about it, is there any reason the business can't grow let's say the 6% to 8%, you would be growing in 25x the recall, especially against the easy comps this year. And related, in terms of EBITDA, do you think you can return to kind of the pre-recall margins next year? Just give them the ramp that we're likely to see. And I have a follow-up.

Yeah, so Leah, I'll let, obviously, Sam answer. But I think One piece of color I would say is I am very optimistic about 26 and beyond. And as I mentioned in the first question from Matt, why I stayed is I think we have a massive opportunity at this company over the next couple years. And as I said, the key opportunities are really accelerating growth, strong improvement in margins, And then, of course, our pull-through of our innovation and R&D pipeline. And so in that context, let me turn it over to Sam to provide a more specific answer.

Yeah, and Lee, I share the exact same thoughts as Brent, and maybe just going through a little bit more, taking a step back, and you think about how 25 plays for us, first half versus second half, and With the raise of our guidance, that really represents our confidence of the core business and what we're seeing in both the consumer business, the lens business performance that Brent just went through, and also seeing the surgical outside sort of the investor recall, as well as the work around sort of the pharma and even generic seeing a sequential improvement in generic, which is encouraging. more work there to be done, but encouraging in terms of how we think about it for the full year of 25. So when you think about that momentum and what we're doing here from 25, it gives us the confidence as we think forward. And I'm not going to give exact guidance for 26 right now. We'll spend more time talking through guidance as well as long-term guidance when we see each other on November 13th on the investor day. But it's really going to be important to how you build on this momentum going to 2026 and really the push forward both on the top line growth as well as on the margin expansion. Just also maybe double clicking a little bit element here as you think about the margins and how we think about the build up of the growth and the margins. Our second half tend to be stronger than the first half because of seasonality in general. But this year is even more pronounced because of just how the ramp up for investor recall is playing out, as well as how the generics actions are taking place and how we're building up with the generics. So I do expect, as we think about the phasing for Q3 and Q4, I would expect Q3 probably a very similar phasing as we saw last year in 24, but that puts really a much bigger emphasis on Q4 for us, which our exit point as we go into 26, which we'll build on from that point.

And I think, Clay, it's important to recognize, you know, I know we tend to think about quarters and we talk about quarters. But, you know, when I joined, I laid out the roadmap and we spent the last two years really stabilizing and fortifying this company, making it more resilient, upgrading talent, and building, you know, processes and customer focus. And, you know, you're starting to see that pay off in some of the resiliency we saw in the first quarter and first half of the year. But I think you're going to see the strategy is working in the second half of the year, but you're really, I think you're going to see the fruits of all the hard work we've done over the last few years really start to pick up in 26 and 27 years. and beyond. And so that's what we're excited to talk to you about in November and really hope you and the team and Larry attend.

That's super helpful. Thank you. And then just for my follow-up question, just a couple of things on the pipeline. Elliot, it looks like you're still looking, the filing is pending. Would you still expect approval by the year end? Any thoughts on adoption once we launch? And then beyond, it looks like it may have been pushed out to 27. Just see if you have any color on that. Thank you so much.

Yeah, I'll let Yahia answer. I'll just say, you know, on Elliot, obviously we're We're super excited about the technology. And I think the point we should just underscore here is having it approved in Europe and seeing the results clinically in Europe is quite encouraging for us. Obviously, a very different reimbursement environment than what the U.S. will be. And so adoption will look entirely different. But clinically, you're seeing really great outcomes and great adoption in Europe. So that gives us a lot of confidence. But Ihi, you want to talk about approval and the file and then, of course, Vista Beyond as well?

Yeah, sure. So for Ilias, I think, as Brent mentioned, we are very confident in the technology. The results we have seen and we are seeing from Europe is really very encouraging. With regard to the file, the strategy we took that we wanted to mitigate the risks once we submit the file, we get a lot of questions about certain areas. from the FDA, so we're trying to do upfront work that can save us the number of questions and cycles that could come. And that's why we have actually put a little bit of time more in order to submit the file in the best shape. The other piece that we also decided to do it upfront is that we are actually introducing another probe which actually, just from a capacity perspective, can work with the probe that we have in Europe, so as when we also launch the product, we don't have issues with regard to the supply. So that's why we have additional supplier that led also that we have to validate and verify that. So we're doing a huge progress. We do expect that we will submit this year. We do expect the approval could come early second half next year.

Yeah, and look, I think it was a tough decision to... rush it in or create a more robust file. And given the promise of this technology, I think we made the right choice of creating a more robust file and approving a second supplier because we think demand will be high, and the last thing you want to do is launch a great product like this and not be able to supply. And so we've been in that position in the past, and I think a few months here will pay off handsomely for us in the future. You want to talk about Invista Beyond? Timeline.

Invista Beyond. Yes. So, Invista Beyond, obviously, we were doing very good in terms of recruitment. However, with the recall, we were affected also because some of the IOL measurements were part of the recall batches. So, we had to hold the recruitment for two months. But actually, we decided after we came back to the market, we also back to the recruitment. We have recruited approximately 32 patients since we are back. And we do expect still that we are trying to catch on the timelines, but we do expect maybe a couple of months of delay launch based on the delay that we had from the report.

Does that answer the question? Yes, perfect. Thank you so much. All right.

Thank you. Thanks. Thank you. The next question will be from Joanne Wunsch from Citibank. Joanne, your line is live.

Good morning, and thank you for taking the question. I appreciate the comments on the contact lens market health, but I'm curious if you can give us an update on how you're thinking about the product pipeline and what we may be able to look forward to in the coming years. Thank you.

Yeah, great question, and I'll ask Yahia again to talk a little bit about it. Obviously, this will be a key topic of the November event, Joanne, and so we don't want to front-run our own investor day here too much, but I think the bottom line, and Yahia can provide a little more details, is I think our contact lens portfolio of R&D projects is probably the best it's ever been in the history of the company. uh, you know, the last 30 years, our R and D has been playing catch up to the market. And as part of our strategy, it was to, to now try to get into a, a lead the market. And, and I think you hear in the, the R and D team and contact lenses has, has cracked the code. And I'm immensely proud of the challenge we gave them a couple of years ago and, and where they are today. But you want to talk a little bit more about.

So, so definitely, uh, uh, The contact lens, actually, we saw the opportunity in the material innovation, and it has been for, as always, Brent said, it's like there's no innovation happened on the material side for so many years. And this, for us, was really one of the areas that we wanted to tackle. However, the bigger challenge for us that we still wanted to produce it on our site internal manufacturing capabilities without additional new lines of manufacturing and also to be considered one of the new segments if we can create a new segment for the contact lens area and this is when we started the biomimetic about two years we're doing a great progress on this project in fact our strategy again as I mentioned that we are trying as much as possible to do a lot of upfront work to save time on the back end so luckily we have done approximately 10 internal studies on the biomimetic lens and the results are showing us great progress giving us a confidence every day and we expect still that we will go for an external clinical study a large one that will be starting around October time frame and this is actually will be the first study and you will hear more about the program and also the expected launches dates at the investor day.

Yeah, we're going to do a deep dive of this in November, Joanne. Anything else, Joanne? Okay, operators, should we?

Yes, we'll take the next question. We'll be from Doug Mime from RBC Capital Markets. Doug, your line is live.

Yeah, thank you. Good morning. I think we've touched on this to a fairly significant degree, but you mentioned about the gross to net on Zydra, and I think that's well understood. Is there anything that you're doing with respect to my bow as well in terms of pricing to really firmly place this market this product in the market, especially in anticipation of the competition that you've already highlighted.

yeah I mean so. we have invested in immensely in my bow and, and, you know, coverage rates on, on my bow or, or, or incredibly strong. In fact, I would say we're at, we're essentially at what would be considered full coverage. Um, and so as you compared it last year, when it was uncovered, obviously to, to full coverage today, you're looking at, you know, a, a hit to gross to net to secure that coverage. But that is, that is where it will, it will be. And so, you know, When you think about 74% commercial coverage and 71% Medicare coverage, that's a great place. We did that regardless of the launch of a competitive product because that's how you win in this market. But it also, in some ways, creates an uphill battle for any competitor because you know how this disease state works. The patient comes in, gets a prescription, goes to fill it at the pharmacy. And if they don't have insurance coverage, they tend to abandon. And so, you know, making sure when you have a chronic medicine that they don't abandon and they stay on therapy because it's effective and tolerable and covered are really the key dynamics. And we are where we need to be. So there's really no further work to be done there. Now it's about driving more adoption and bringing more patients into the marketplace. Okay, perfect.

And then just as a follow-up, with respect to the generics business, I know you're working on fixing this, but I mentioned it does have an impact on the margins within the division. Can we think about the generics business as flat going forward, or do you actually expect that you can gain share in that business? That would be unusual, but it'd be great if you could do it.

You know... I'm quite experienced in the generics world, having run Activist for a few years, right, and selling it to Teva. But look, I mean, there are a couple of things in the generics business that, you know, you have to be quite nimble to be able to handle, right? And what we saw over the last couple of years was a big competitor in the space, in the generics space, Go Out, Acorn. And then, of course, return. And when they're out, it's sort of a commodity-like business. So when supply is out, you have more robustness in the marketplace. And when supply is broad, you have less robustness in the marketplace. And so that's how this business works. But there's also just fundamental execution and other things. And I think we're solving those. And our secret weapon in the generics business businesses, we make the generics in the United States for the United States in our state-of-the-art facility in Tampa where we make most of our pharmaceutical products or will make most of our pharmaceutical products. So, you know, we'll see what happens with tariffs from India. We'll see what happens in other places. But we are a high-quality, reliable supplier of generics, and that's an important part of the dimension there. So, It's a long way of saying it's an unpredictable market. We can do better than we've done in the first half of the year. And so we need to focus on what we can control, which is execution, high quality of reliable supply. And that's exactly what we're going to do to see improvement in the second half. And they're on. Sam, any other cover you want to add?

I think you covered it well, Brent. And Doug, when you think about the generics business, it exactly does go through those cycles. So, for example, we don't talk much about it, but last year we ended generics was up about 10%. And it was going to benefit from the cycle of the secret weapon that Brent talked about in terms of our manufacturing in Tampa, but also having the competitor being out of the market. So one of the things we will look for in this business is, in addition to the steps we're taking for execution, it will continue to be standing ready for capitalizing on those opportunities when they present themselves and grab that market share and turn it into the growth rate that we saw last year.

That's great. Thank you.

Thank you. And the final question today will be from Gary Nachman from Raymond James. Gary, your line is live.

Great, thanks, and good morning. So first, regarding the investor recovery after the recall, Brent, just provide some more detail on physician adoption and confidence in the product offering at this point. You know, how quickly you were able to recapture that with the ECPs? And I guess as far as the investor recall impact on any of your other products or franchises, you specifically mentioned equipment. So just clarify that and how you were able to resolve that and if you're anticipating any other impacts from the recall over the course of the year and then have a follow-up.

Yeah, sure, happy to. So look, when we voluntarily recalled the Invista product line, we did it because it was the right thing to do and we always put patient safety first. The benefit from an unfortunate situation is also an opportunity, and that's about trust, right? And trust can be earned in every interaction with customers. It takes a long time to build a foundation of trust, and it can be destroyed very quickly. And so I think the way we handled it with the transparency and patient safety first mentality really gave us an opportunity to earn more trust in a marketplace like IOL's where surgeon relationships are paramount. And so, you know, when customers trust you, they give you their business. But when they really trust you, they give you their loyalty. And so we hope that our actions here will have a longer-term benefit. As surgeons know, we will always prioritize patient safety. I think when you look at where we stand in the in the context of the recall, I think we're in very good shape. It will take some time. We have shipped about 200,000 lenses, as we said in the prepared remarks. We still don't have full consignment ability in the marketplace. And that will happen over the next few weeks as we continue to ramp up production. And then when you look at adoption, as I mentioned, the Loyalist KOLs came right back in. And even though we don't always have every diopter or every lens, they're working with us to really drive implantation and see strong results. There are a group of surgeons that are starting to implant but haven't fully adopted because we can't provide a full consignment yet. And then, of course, when we get to full consignment, it will be about bringing new new implanters and new surgeons into the business. And so my my my sense of where we are today is that we will be fully back on track and recaptured our momentum by the first quarter of next year. So a work in progress throughout the year, but it will build sequentially and week over week, month over month. And so we're seeing exactly what we want to see. And And, you know, I think this was as well handled as can be, but, you know, we still have a lot of work to do in the second half of the year to get to where we want to be, but we're absolutely on track.

Does that answer your question? Yeah, yeah, yeah, that was perfect. And then just shifting to pharma, just, you know, within DryEye, where we've been seeing a lot of market growth, where are you seeing most of the incremental growth in MIBO prescriptions Is it mostly new patients or switches from other dry eye products? Just, you know, given the unique evaporative nature of the product. And then just, you know, lastly, just how comfortable, I know you'll talk more about this at the R&D Day in November, but how comfortable are you with the pharma pipeline? And do you think you need to add to that meaningfully with BD to help with the long-term growth in that business? You talk a little bit about generics, but I'm curious more on the innovative side of things. Thanks.

Yeah. So, you know, I think what you're seeing in dry eye, which is benefiting Mibo extensively, is an expansion of new patients into the market. That's in part, it's obviously multifactorial, but it's in part based on our DTC and other efforts to expand the market, which are absolutely working. This is I've always said this. I know this market well. It's a very promotionally sensitive marketplace. But I think what's making it better is when you look at a medicine like Mibo and you look at the risk-benefit of it, it tremendously tilts towards the benefit. You have a drug that works almost instantly, as Yahia mentioned from our Phase 4 study we just produced, works consistently. and has essentially, you know, no AEs, right? It's a highly tolerable drug. And so patients, as I said, subscribe it as silky and smooth in the eye. And so when patients are getting that kind of relief, when they're, you know, when you have the type of managed care coverage that we had to invest to get, you know, that makes for kind of the winning formula for success in dry eye, right? A great product, instant, you know, relief, great long-term tolerability and affordability because of the coverage is really where you want to be. And so Mibo is absolutely growing the market. I think the other, I don't have the data in front of me, we can follow up with you, but the refill rate on Mibo is higher than the rest of the category too, which is another sign that patients really do appreciate this therapy. And so, you know, I think Mibo has... A lot of growth in front of it, and obviously we'll talk more about it in the November meeting, but very optimistic on where we can drive MIBO despite noise around competition and the likewise. I don't really think that's going to be an issue for MIBO growth. The pipeline, you know, Yahia can weigh in here. I'm super excited about our pharma pipeline from the combination for dry eye therapy that will enter clinicals this year our novel neuroprotective glaucoma product that will enter clinicals this year. And then, of course, our pain product, I think, has already started.

Actually, we'll be starting recruiting next week.

We'll start next week. So, you know, these programs are going to be in clinical, and we'll be able to talk about that in November. But, you know, earlier in the pipeline, we have a lot of other programs really important programs, whether it be through our collaborations with Citi or Character and the like. So, Yahia, anything you want to chime in there?

I think you addressed almost all points, Brent, but I just would like to mention the philosophy on the pharma pipeline in particular, because I think it's one of the areas that witnessed a lot of transformation in Bausch & Lomb, and just to give you an overall perspective on the strategy. So what we are looking for is areas of high unmet medical need currently either not addressed by any treatment or addressed by treatment that could have the potential we get a better version of these treatments or best-in-class treatments. And you mentioned the innovation part, and I just would like to comment on the innovation part because for ocular pain, it's a new chemical entity. It's the first time that we use this indication. It's not existing before. And if you look at the dry eye area, again, we are developing the first combination therapy in the prescription dry eye market to address inflammation and evaporative dry eye. Glaucoma, we really want to change the standard of care. Glaucoma is a neuropathy disease. We have been addressing glaucoma as an IOP lowering only, but neglecting the neuropathy part that leads to vision loss. And that's why we are very much interested in these new segments. And as Brent mentioned, this is the way of going into the clinical trials this year. But we also are having a second wave coming up next year from character biocollaboration and city therapeutic that address bigger areas in the retina like geographic atrophy, precision medicine. So you will hear a lot more about this at the investor day, but it's one of the most innovative pipelines if we look holistically in the pharma now existing in eye care.

Anything else, Gary? Yeah, that call was really helpful. Thanks, guys.

Great. Well, let me just conclude by thanking everyone for joining. As I opened the call, I think the opportunity in front of us is extraordinary. I think you'll better understand why I have so much optimism for our future after you hear our more detailed thoughts around our strategy, our guidance, and our pipeline in November, which I encourage you all to participate in. And, of course, we're always available to you if you have any questions. George, Sam, and I are happy to follow up, as we always do with you. But thank you for joining us today, and we look forward to keeping you updated.

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