Bausch Health Companies (BHC) /6 Nov 18/2018 Q3 Earnings call transcript
`Company Profile
`
`Transcript mesa
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`Art Shannon
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`Senior Vice President, Head, Investor Relations and Communications
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`Joe Papa
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`Chairman and Chief Executive Officer
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`Paul Herendeen
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`Executive Vice President and Chief Financial Officer
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`Zhu Shen Ng
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`Morgan Stanley
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`Ann-Hunter Van Kirk BMO Capital Markets
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`Umer Raffat
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`Evercore ISl
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`David Amsellem
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`Piper Jaifray
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`Dana Flanders
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`Goldman Sachs
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`Annabel Samimy
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`Stifel
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`Louise Chen
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`Cantor
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`Operator
`Good morning and welcome to the Bausch Health Third Ouarter 2018 Eamings Conference Call. All participants will be in listen-only mode. [Operator
`instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would
`now like to turn the conference over to Art Shannon, Senior Vice President, Head of Investor Relations and Global Communications. Please go ahead.
`
`Art Shannon
`Thank you, Chad. Good morning, everyone, and welcome to our third quarter 2018 financial results conference call. Participating on today’s call are Chairman
`and Chief Executive Officer, Mr. Joe Papa; and Chief Financial Officer, Mr. Paul Herendeen.
`
`In addition to this live webcast, a copy of today’s live presentation and a replay of this conference call will be available on our website under the Investor
`Relations section.
`
`Before we begin, wed like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the
`forward-looking statement legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial
`measures.
`
`For more information about these measures, please refer to Slide 2 of the presentation. Non-GAAP reconciliations can be found in the appendix of the
`presentation posted on our website.
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`Finally, the financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter and
`not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it’s my pleasure to turn the call over to Joe.
`
`Joe Papa
`Thank you, Art. And thanks everyone on the phone for joining us this morning.
`
`Let’s quickly review the topic for today’s call. I’ll begin with the third quarter highlights before turning the call over to Paul Herendeen, our CFO, to review the
`financial results in detail and update our 2018 guidance. Then we will review the segment highlights and catalysts before opening the line for questions.
`Beginning on Slide 4, I’m pleased to say the third quarter results further demonstrate that our progress towards transformation is on track.
`
`In addition to another consecutive of overall organic growth, we successfully delivered organic growth across all reporting segments and generated great cash
`flow from operations in the third quarter. Based on the efforts of the 21,000 pIus Bausch Health team members around the world, we are executing on our
`plans to resolve legacy issues, investing in core franchises and launching new products that we expect to be the foundation of our future growth. On Slide 5
`we’ve called out some of the highlights which demonstrate our continued progress towards transformation.
`
`First and foremost, our businesses are growing. Revenue grew organically by 3% compared to the prior year quarter and third quarter 2018 was our third
`consecutive quarter of overall organic revenue growth.
`
`We also generated $522 million of cash from operations in the third quarter. At the product level, our top 10 products grew organically by 7% in the aggregate
`compared to the prior year quarter.
`
`Moving on the top right of Slide 5, we had a lot of new product activity, including the launches of LUCEMYRA in August, The SiHy Daily lenses, which were
`launched in Japan in September and PLENVU which was also launched in September. I will cover a few other recent and upcoming launches in more detail
`later in the call.
`
`Moving to the bottom left. I’m delighted to say that as of today we have reduced debt by approximately $7.4 billion since the first quarter 2016, bringing total
`debt below $25 billion. This included more than $360 million of debt repaid from cash generated from operations during the third quarter.
`
`Finally, thanks to the hard work of our legal team, we resolved approximately 60 matters since January 1,2018. Notably, we resolved the XIFAXAN intellectual
`property litigation which we expect will preserve market exclusivity until 2028 without making any financial payments.
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`We also resolved the legacy Salix SEC investigation without any monetary penalty. We’ve also resolved the outstanding arbitration with Alfasigma and picked
`up a late stage rifaximin development project. On Slide 6, we present a snapshot of key third quarter financial highlights for our four segments. Approximately
`75% of our total third quarter revenue was generated by the Bausch + Lomb/International and the Salix segments. On a combined basis, these segments grew
`organically by 3% during the third quarter compared to the third quarter 2017.
`
`As I mentioned earlier, third quarter ‘18 was the first quarter that all four of our segments grew organically, Bausch + Lomb/International by 3%, Salix by 2%,
`despite the UCERIS loss of exclusivity during the quarter. Ortho Dermatologics grew by 1% and Diversified Products by 4%, In summary, it was a strong
`quarter across the board. With that, I’ll turn over to Paul to take you through the financial results in further detail.
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`Paul Herendeen
`Thanks, Joe. I’ll start by walking down the P&L slide on Slide 7.
`
`As Joe said, strong quarter, revenue up 3% organically from 03 of ‘17 and adjusted EBITDA was up 5% organically. All four of our segments delivered organic
`revenue growth. Walking down the P&L, providing a little color with respect to the key line items, I’d just want to point out that when we talk about organic
`growth that means on a constant currency basis, adjusted by divestitures and discontinuations. Revenue was down 4% on a GAAP basis, unfavorable
`movement in FX rates decreased our reported revenue by some $30 million. Further, 03 ‘17 included roughly $112 million of revenue from divested assets,
`particularly iNova and Obagi.
`
`So adjusting for both FX and divested assets, our organic growth in 03 versus 2017 was plus 3%. To put that 3% organic growth rate in context, we overcame
`a roughly $87 million growth drag in the quarter associated with the LOE assets that are detailed on slides 27 and 28 in the appendix for our presentation.
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`So a good result.
`
`Next, we saw marked improvement in our reported gross margin compared with the prior year quarter, up some 250 basis points. Three of our four segments
`saw improvement in gross margin led by Salix which was up 470 basis points due to a combination of favorable mix and improved gross to nets.
`
`Within the B&Lilnternational segment, our consumer NRx businesses in Europe and Latam saw improved gross margins due to favorable mix and better
`management of inventories, resulting in lesser write-offs. International Vision Care was also a meaningful contributor to the gross margin expansion. The better
`gross margins enabte us to report organic growth at the gross profit line up 6%, double that of our organic revenue growth rate. Selling, advertising and
`promotional expenses were down or favorable by $20 million, or 4%, 3% on a constant currency basis.
`
`We continued to implement actions to improve the efficiency and effectiveness of the dollars we deployed in these activities with the current focus on our
`launch products.
`
`For example, in 032018 relative to ‘17, we reduced A&P spending for some assets and we allocated some of those savings to roughly $17 million of
`promotional support for LUMIFY with excellent results. G&A expenses were down — excuse me, were $10 million unfavorable to 03 of ‘17. This had more to
`do with the timing of certain expenses in 2018 than an overall increase in G&A spending. Year-to-date G&A expenses are down some $37 million or 8%
`favorable to 2017, which more accurately reflects our progress in controlling costs.
`
`Our investment in R&D in the quarter totaled $107 million up $26 million or 32% compared to 03 of 2017. We’ve been talking for some time about our
`intentions of ramping up our investment in R&D, and I will make an editorial comment here. The process o[ increasing our investment in R&D has been a bit
`slower than we would have liked. That said, we are pleased with where we are in the process and will not sacrifice the productivity of our investments in R&D
`for speed. We revised our guidance for full year R&D down to approximately $415 million and we revised our commitment from expecting increase over 2017
`to be greater than 15% to being approximately 15%. I have no doubt that the level of our investments in R&D will continue to increase over the next several
`years and that the level of investments will be sufficient to enable the company to drive organic growth over the long-term. The net result for the quarter was
`that we posted a solid $916 million of adjusted EBITDA up 5% on an organic basis from 03 ‘17.
`
`While we focus on adjusted EBITDA as our key performance metric, I do want to call out that our adjusted net income for the quarter was up 10% on a
`reported basis and 17% on a constant currency basis. The higher growth relative to adjusted EBITDA was due to two factors; lower interest expense and a
`lower adjusted effective tax rate.
`
`Our average debt balance in 03 of ‘18 with some $2.4 billion less than in 03 of ‘17 and that combined with lower non-cash interest expense reduced our total
`interest expense versus 03 of ‘17 by some $39 million.
`
`Our effective tax rate on adjusted pre-tax earnings in 03 of ‘18 was considerably less than in 03 of ‘17.
`
`Now I wouldn’t read too much into the tax rate at any one quarter in isolation as small changes in our estimates of pre-tax income by jurisdiction for the full
`year can produce large swings in our quarterly effective tax rate. In 03 of ‘18 our ETR on adjusted pre-lax was circa 7%, year-to-date the rate is roughly 10%
`and we are guiding to a rate of roughly 11% for the full year. I want to turn quickly to each of the four segments to provide a little color starting with the
`B&L/lnternational segment on Slide 8. Revenue was up 3% on organic basis, the eighth consecutive quarter of organic growth.
`
`Importantly, the growth of the segment was driven by a 4% increase in volumes and offset by roughly 100 basis point decline in realized net prices. Four of the
`five sub-segments posted organic growth and all five saw increased volume over the prior year quarter. The growth in Global Vision Care was led by the US
`which grew 8% organically. Growth outside the US was strongest in Japan. Global Surgical was up 3% organically and was consistent between the US and o
`US businesses. Global Consumer was up 3% organically also led by the US where we posted strong gains with our eye vitamin Ocuvite and PreserVision and
`from the ramp of LUMIFY. Global Ophtho Rx was up 9% organically aided by revenue from VYZULTA in the US and strong regional performances from our
`Turkey, Greece, Middle East, Africa cluster, the UK and Eastern Europe. The international pharma business was flat organically over the year ago quarter with
`solid growth in our Egyptian business Amoun, and our Latin America business. Growth in those regions was offset by softness in Eastern Europe and Russia.
`
`Moving to the Salix segment on Slide 9. Salix revenue grew $8 million or 2%, despite the impact of LOE5 that totaled some $31 million that’s mainly UCERIS
`tablets. XIFAXAN Grew 11%, mainly from improved realized net pricing. TRxs for XIFAXAN, a proxy for units, were up 9% compared with 03 of ‘17.
`RELISTOR grew 88% on improved realized net pricing and a strong increasing volume. A quick note on the improvements we have seen in the net realized
`pricing of a number of our branded pharma products. In 2017 we kicked off initiatives to improve the gross to nets on our branded pharma products focusing
`on things, including the cost effectiveness of co-payer assistance cards, the level by our discounting at non-retail accounts and the magnitude of product
`returns.
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`You’ve started to see some of the benefits of these activities in 01 of this year.
`
`For example, the improvement you saw in XIFAXAN realized net pricing based on changes to our non-retail discounting practices. I am going to segway to a
`quick tutorial — our accounting tutorial about the gross to net items. If actual levels of gross to net deductions for a product declined during the quarter is an
`obvious improvement in realized net pricing and you can expect that the improvement will confinue until there is a change in the programs driving the reduced
`level of process gross to net deductions. Less obvious is the ephemeral benefit of rebasing the accruals for the gross to net items. With lesser observed
`deductions, the period ending accrual needs to be reduced with the result being a further improvement in the realized net pricing in the period which is on top
`of the already noted improvement driven by the reduced level of process deductions. This so-called true up of gross to net accruals can drive significant
`variances in shorter periods of time like a quarter but normalize over longer periods of time. In our 03 2018 results versus 03 of ‘17 you see this phenomenon
`with RELISTOR and you’re going to see it again when I talk about dermatology and our neurology businesses. On to the Ortho Dermatologics segment on
`Slide 10,
`I want to call your attention to the medical driven part of this segment that was down 1% organically. Volumes in our medical driven business were
`low substantially versus 03 of ‘17, but were neariy offaet by improved realized net pricing driven by our efforts to more effectively manage gross to nets in the
`segment. That’s the initiatives I just spoke of in my review of Salix.
`
`We have not taken price increases in our medical driven portfolio.
`
`So almost the entirety of the improvement in net pricing came from reduced rebates on co-pay assistance cards, lesser actual levels of product retums and the
`beneficial impact of truing up the associated gross to net accruals that have the effect of magnifying the improvement in gross to nets when looking at the
`quarter in isolation. Of those three the true-up of the accruals was the most significant factor. Important, revenue in the medical driven part of this segment in
`04 will revert to something closer to what we saw in the first two quarters of this year as the magnitude of the favorable true up of accruals in 03 will not repeat
`in the future.
`
`Solta has continued to perform very well under leadership of Tom Hart. Revenue was up 15% on an organic basis with a strong growth in equipment sales in
`the US that’s VASER, Fraxel and Clear + Brilliant, and growth in the Asia-Pacific region driven by the launch of Thermage FLX. The growth in Solta was
`volume driven as realized net pricing declined versus 03 of ‘17. On to Diversified on Slide 11. Overall, the segment was up 4% on an organic basis. The neuro
`business was down $16 million or 7% organically. The impact of the LOE assets compared with 03 of ‘17 was minus $54 million but that decline was offset in
`part by growth in the sales of several of the promoted products within this portfolio, mainly Weilbutrin and APLENZIN, which together grouped 15% compared
`with 03 of ‘17 and also the favorable impact of the gross to net initiatives I talked about in covering both Salix and ortho derm. The US generics business with
`the star of this segment up $35 million or plus 43% compared with 03 of ‘17. Roughly half of this growth came from launches of authorized generic versions of
`our products that lost exclusivity, and the other half from our ability to capitalize on market opportunities within our broader generic portfolio. I said this in the
`past, but the leader of our diversified segment Barbara Purcell and her entire team do a great job of maximizing the value of the assets in this segment.
`
`Our dentistry business is facing reimbursement challenges and we saw revenue decline in that business compared with the prior year quarter. Switching gears
`and moving to the balance sheet on Slide 12.
`
`Here you see the progression of our total debt. We were just above $25 billion at quarter dose and we ended with $g73 million of cash. On to the cash flow
`summary on Slide 13, it was a strong cash flow quarter for us as we generated $522 million cash from operations. We use that cash flow to repay more than
`$360 million of debt during the quarter and just two weeks ago we repaid another $125 million of debt to bring our debt under $25 billion today. The $1 .182
`billion of cash from operations generated year-to-date represents an average of $3g4 million per quarter. But that average was depressed by a number of non
`recurring cash payments we’ve made so far in 2018, such as the SOLODYN settlement which was paid out in ‘18 and the Allergan settlement.
`
`We continue to believe that our business has the capacity to generate cash from operations in the low $400 million range per quarter on average.
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`Next, our revised guidance on Slide 14.
`
`On the face of it, we’re holding our revenue guidance in the range of $8.15 billion to $8.35 billion.
`
`However, that’s far from the entire story. FX rates from August until now decreased our full year outlook by $15 million.
`
`Our revised view of the projected LOE assets improved by some $70 million and we increased our forecast for the balance of our business by some $45
`million.
`
`So net-net that would’ve been plus $100 million at the revenue line compared with our prior guidance.
`
`However, as part of our CORE program and I’ll about remind you don’t remember, CORE stands for Cost Optimization and Revenue Enhancement.
`
`We are implementing a change to our distribution strategy for our US branded pharmaceutical products. This change is expected to generate some $15 million
`to $20 million of improvement in our gross to nets per year from here forward.
`
`In addition, this change will enable us to improve our supply chain logistics, thereby improving efficiency and will help us reduce our investment in working
`capital. All good things, good things that come at the one-time cost of absorbing a reduction in wholesale pipeline inventories during 04 of this year. The
`impact of this initiative relative to what’s continuing as we have in the past is that 042018 and full year 2018 net sales will be reduced by some $100 million.
`Since we disclose our wholesale pipeline to you each quarter you’ll be able to see the expected reductions in pipeline inventories while we report our full year
`2018 and 04 results. To be dear, this reduction in our revenue forecast for ‘18 is the result of a tactical decision on our part. The long-term returns that we will
`realize by foregoing near term revenue and the associated profits are unassailable. We’re increasing the range for our full year 2018 adjusted EBITDA
`guidance by $100 million across the range as you will see on the bridge on Slide 15. That’s the combination of: one, the changes in FX rates; second, the
`increased profit from higher forecast revenues for the LOE assets; and third, the improved forecast for our base business. All those three things together would
`have allowed us to raise our adjusted EBITDA range by some $185 million.
`
`However, the decision to change our distribution strategy for our branded pharma products reduces our adjusted EBITDA expectations for [2008], and limits
`the range to $100 million, still wicked good.
`
`You will note that we are maintaining relatively broad guidance ranges for both revenue and adjusted EBITDA, while we stand by our estimates of the impact
`of the change to the US pharma distribution strategy where we actually land with respect to that initiative could vary from our expectations. In summary, we
`had a strong quarter and feel really good about the balance of 2018. Since Joe got here in eariy 2016, we made real strides in improving our operations,
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`investing behind growth, generating cash and using that cash to address our leverage. The cumulative impact of those efforts, plus the steps we’re taking in
`Q4 this year will enable us to enter 2019 in really good shape. Back to you, Joe.
`
`Joe Papa
`Thank you, Paul.
`
`Let’s go through some of the highlights in our Bausch + Lomb/International segment on slide number 16.
`
`First, this segment delivered its eighth consecutive quarters of organic growth as you can see in the graph on the left.
`
`Importantly this growth is driven by increased volume across all five reporting business of the segment. In the aggregate, the top 10 products in this segment
`grew organically by 7% compared to the prior year quarter. The Global Consumer business delivered another quarter of great performance, LUMIFY which
`was launched in May is already number one physician recommended product in the Redness Reliever category, LUMIFY is also one of the top 2 brands in the
`category achieving a weekly market share of 26%, as measured by dollar — retail dollar sales. The e-commerce trend remains positive for our consumer
`product. Amazon continues to be a strong channel with sales up 41% in the third quarter compared to the prior year quarter. And finally for the consumer
`business the Bausch + Lomb eye vitamins PreserVision and Ocuvite together as the number one brand and the number one driver of growth in eye vitamins
`category, these products grew organically by 11% in the third quarter 2018 versus last year on a combined basis.
`
`Moving on to the Vision Care on Slide 17. When it comes to contact lenses, one of our team’s mantras is comfort, vision, health and its clear focus is
`resonating with consumers. Vision Care’s strong performance in the third quarter was driven by continued market share gain outpacing the competitors.
`Internationally growth was driven by Asia, Russia and Latin America. The chart on the left illustrates the performance of our US Vision Care business, since we
`installed new management at the end of the first quarter of 2017, you can see the impact of this change, beginning with the third quarter of 2017, up 9%.
`
`We are up 15% in the fourth quarter, 15% in the first quarter and so on. This is an example of an effective Vision Care team that is delivering great results.
`
`Turning now to VYZULTA, on the bottom right, we’ve included the weekly script data for VYZULTA since the beginning of the year, which shows a growth of
`20% from the second to the third quarter of 2018.
`
`In terms of market access our position is substantially improved.
`
`Our continued coverage now include Express Scripts Commercial, CVS Commercial which started in mid-October and the AARP Part D, which started on
`October the 1st.
`
`We have efforts underway on several other plans and expect to improve overall access in the fourth quarter. On Slide 18 sales revenue growth of 2% was
`driven by continued strong fundamental execution across XIFAXAN and RELISTOR despite the loss of exclusivity for UCERIS. XIFAXAN revenue increased
`by 11% compared to the third quarter of 2017. The RELISTOR franchise revenue increased by 88% compared to the third quarter of 2017. Also we have now
`resolved the significant Salix legal legacy matters and as a result, we have reduced uncertainty around this business. A few more highlights for XIFAXAN TRx
`unit volume grew by 9% versus the prior year quarter and we are seeing continued accelerated growth quarter-over-quarter.
`
`As you can see from the chart in the right, NRx shares continues in Primary Care up 21 share points since February 2017, as a result of strong execution in
`the field.
`
`Let’s move over to Slide 19 and talk about Salix product portfolio.
`
`We have a number of programs in the works for rifaximin.
`
`First, we are continuing to roll patients in a study that we initiated earlier this year with a new formulation of rifaximin for Acute Overt Hepatic Encephalopath.
`Activities are underway for a Small Intestinal Bacterial Overgrowth or SEBO study which is expected to commence in the first half of 2019. Resolving the
`arbitration with Alfasigma has resulted in two important benefits for Salix. One, we have confirmed the rights we have under our existing license agreement to
`the extended intestinal release formulation of rifaximiri. And two, we expect to initiate a late-stage clinical program to study an investigational formulation of
`rifaximin in patients with postoperative Crohn’s disease which is an area of unmet need. According the Crohn’s & Colitis Foundation more than 750,000
`Americans have Crohns disease and of those up to 75% will eventually require surgery. There are two additional partnership opportunities that I want to
`mention.
`
`First, we’ve expanded our microbiome research and discovery through a strategic collaboration with Cedars-Sinai Medical Center. And as we mentioned in the
`last quarter’s call, we have also agreed to expand the license term for three additional budesonide programs from Dr. Falk Pharma. I also want to review a few
`new products in the Salix family that have recently launched or are now launching. LUCEMYRA launched in August as part of a co-promotion arrangement
`with US WorldMeds is the first and only non-opiold medication for the mitigation withdrawal symptoms after abrupt discontinuation of opioid in adults.
`LUCEMYRA is a perfect bolt-on to our ongoing RELISTOR promotions. PLENVU is a 1 liter PEG bowel cleansing preparation for colonoscopies launched in
`the United States in September.
`
`The third product that I want to highlight is DOPTELET which is approved by the FDA in May of 2018 for the treatment of thrombocytopenia in adult patients
`with chronic liver disease or scheduled to undergo a procedure. Under our exclusive co-promotion arrangement with Dova Pharmaceuticals about 100 sales
`reps will begin promoting DOPTELET to gastroenterology healthcare professionals in mid October, another synergistic bolt-on promotion opportunity for
`gastroenterology team.
`
`Moving on to Slide 20 for Ortho Dermatologics. Total segment organic revenue growth was modest in the quarter, up 1% as the business continues to
`stabilize. Global Solta had another strong quarter particularly key markets of US, China, South Korea and Japan. Revenues grew organically by 15% versus
`the third quarter 2017 driven by demand and expansive global launch of Thermage FLX a non-invasive skin tightening treatment. When I think about the future
`of our dermatology business, I think about three things: new products, new products and new products.
`
`Our ability to develop and commercialize these new products will determine our success and the good news is that our recently products are doing well, first
`SILIQ.
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`As you can see chart on the right TRx weekly scripts saw more than a65% TRx growth in the third quarter versus the prior quarter due to continued marketing
`initiatives and increasing REMS certifications. To-date we have REMS certified over 3900 prescribers for SILIQ. TRx weekly scripts for RETIN-A MICRO for
`0.06 and 0.08 on a combined basis saw more than 50% TRx growth versus last year. At the end of October we launched ALTRENO, innovative new acne
`treatment. ALTRENO provides a trusted efficacy of tretinoin but in a lotion formulation that is generally well tolerated and helps hydrate and moisturize the skin.
`
`In addition, we are investing in a number of potential treatment for acne and atopic dermatitis that are progressing nicely through our pipeline, which you can
`see in the bottom right of Slide 20. Phase 3 studies for IDP 120 are expected to begin later this month and we’re expecting to submit an NDA for IDP 123 in
`the first half of 2019. On to Slide 21 let me now take a moment to address BRYHALI and DUOBRII, two novel psoriasis treatments. Psoriasis presents a large
`and growing market opportunity approximately 7.5 million people in United States are living with psonasis and there are 150000 to 260,000 new cases each
`year, It’s important to note that the clinical picture of psonasis is not uniform, because the condition exists on a spectrum of severity ranging from mild and
`occasional to severe and chronic. Treatment options are not uniform either ranging from topical steroid creams to intravenous biologics.
`
`On the left we show you where we believe BRYHALI and DUOBRII would fall on the spectrum of severity.
`
`Our market research has shown that while there is some overlap healthcare proprietors will use BRYHALI differently than DUOBRII with different patient
`population. BRYHALI is expected to be a new potent steroid treatment for plaque psoriasis and a novel vehicle lotion. Safety has been established in clinical
`trials with dosing for up to eight weeks with no increase in epidermal atrophy. It’s art appropriate treatment for patients with mild to moderate symptoms. The
`DUOBRII is expected to be the first and only topical lotion that contains a unique combination halobetasol and tazarotene in one formulation which it allows for
`a potentially expanded duration of use. If approved DUOBRII would be an appropriate treatment for patients for example with more moderate to severe
`symptom including chronic or long lasting episodes and thicker, stubborn plaques. Due to the unique formulation that allows for a longer duration of use
`DUOBRII has the potential to reduce the cost of treatment by up to 75% versus injectable biologics. That’s important for patients, physicians, and payers. On
`Slide 22 we show the current state of the significant seven products, which represent our core growth drivers over the next five years.
`
`As an update from last quarter’s call SiHy Daily lenses launched in Japan this September. BRYHALI is expected to launch later this month, and as a reminder,
`DUOBRII has a PDUFA date coming up in February 2019. On Slide 23 we show our late-stage pipeline and recent launches.
`
`As you can see each of these three segments is working to develop a best-in-class and diversified pipeline of new ophthalmology dermatology and GI
`products that we believe will expand our portfolio and fuel feature growth. In B&L we have a new ophthalmology gel for ocular inflammation with a PDUFA date
`coming up in February. We’re excited about the rifaximin programs and early and our late-stage derma product line has a lot of potential. On an annualized
`basis the products we launched since 2016 are growing and generating approximately $300 million of revenue.
`
`Finally, slide number 24, we review the 2018 commitments and expected targets we outlined at the beginning of the year. Having now delivered three
`consecutive quarters of overall organic revenue growth, we are very pleased with our progress. To summarize all four of our segments grew organically for the
`first time in the third quarter.
`
`Our top 10 products in aggregate grew organically by 7% in the quarter. We generated $522 million of cash from operations. We improved working capital by
`more than 25% since the second quarter of 2016. We reduced our total debt under $25 billion. We raised our full year adjusted EBITDA guidance range for the
`third time this year. We resolved approximately 60 legal matters including three important legacy issues for the Salix business. We resolved the XIFAXAN IP
`litigation and expect to preserve market exclusivity for our top products until 2028. And finally, we have made responsible pricing decisions, are committed to
`continue to do so because approximately 51% of our revenues come from a diversified mix of medical devices, OTC products and prescription branded
`generic products that are not exposed to the US graded prescription drug pricing environment. Overall, great progress towards achieving operational
`excellence. With that, operator, let’s open up the line for questions. Operator?
`
`Operator
`
`[Operator Instructions].
`
`The first question will be from David Risinger with Morgan Stanley. Please go ahead.
`
`Zhu Shen Ng
`
`Hi, this is Zhu Shen here for David Risinger, a couple quick ones.
`
`So could you please comment on LUMIFY’s global potential including the opportunity to be bigger than Visine? And secondly, what should we assume for
`Lotemax, Cuprimine and Apriso’s generic prices in 2019?
`
`Joe Papa
`L