`2019 outlook. Do you see more growth and improvements this year or should we be thinking
`about 2019 more as a year, where its volume and gross price increases driving growth
`there? So in '18 that was a big component of growth, and I'm just trying to -- and then talking
`about the whole business, but XIFAXAN specifically in '19, will that be a component of
`growth? My second question was on organic delevering. You're allocating more capital to the
`yields. You're also pivoting to offense a bit here. I guess, can you elaborate just to how you're
`balancing acquisitions relative to the debt paydown in the story, I guess, in general, should
`we still think about most of your cash flow being allocated to debt paydown at this point with
`some smaller deals mixed in or could these transactions actually account for more
`meaningful piece of your cash flow on a go-forward basis?
`
`Joseph Papa
`
`Sure, good questions. I think the XIFAXAN question and then Paul will comment about the
`organic delevering. On the XIFAXAN, we're really excited by what we're seeing. If I just look
`at what's happening so far in the 2019 time frame, we're seeing somewhere in the -- for
`example, in the month of January, XIFAXAN total prescriptions are up approximately 10%.
`So very strong growth in XIFAXAN volume. But we are projecting though as we think about is
`the combination in 2019 will be a combination of what we're seeing on prescription growth,
`call it high single digits there and then call it some net price improvements, which is a
`combination of gross price and also some gross to net things that we are doing. So I think,
`it's really a combination that we think can get XIFAXAN certainly to high single digit, low
`double digits in terms of the growth rate that we are projecting for XIFAXAN. So we're very
`excited. But one final comment I will say that some of you don't see, but we're also seeing
`very strong nonretail growth with XIFAXAN. That's the nonretail category, thinking of nursing
`homes, convalescent homes, hospital institutions, et cetera, where we're seeing actually
`they're also double-digit growth and that's another big driver, especially in the area of hepatic
`encephalopathy. So those have been the primary growth factors for XIFAXAN in 2019. Paul,
`do you want to take the question on the delevering in the debt?
`
`Paul Herendeen
`
`https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 17 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`
`I do, but I want to chime in on the gross net on XIFAXAN because there's -- as financial
`analyst and I know each one on the phones is financial analyst. It's important, I mean,
`remember that back in -- when we reported our Q1, we talked about a pretty substantial
`improvement in gross to net from better pricing in that nonretail channel, Joe just referenced,
`which is growing quite nicely. We're going to lap that. So that had been kind of a step
`function, it had been a nice tailwind for us in Q1, Q2, Q3, Q4, for the full year. We're going to
`lap that, and it's a good thing. I mean, it's all good, but I think, looking ahead to 2019 via '18,
`Joe said exactly right. It's like we expect something on a unit basis and high single digits and
`price whatever gross selling price increase we take, we don't obviously expect to net that and
`realize all of that, but the 2 drivers next year will be -- next year versus '18 will be volume and
`whatever we can net out of price increases that we take.
`
`With respect to the question around how do we expect to deploy our cash flow, Joe finished
`up with a slide that said, we have a $1 billion to be used for debt and/or bolt-on acquisitions. I
`mean, this is -- our priority is to reduce that debt. Now that said, it's not a priority where you
`say when you have a great opportunity that we think is value generative and helpful to all
`stakeholders. We're going to pursue that, and I think the best example of that is the ongoing
`situation with Synergy, whereas Joe reported in his remarks, we put in a stocking horse bid.
`It's $200 million. It's $200 million. If we were successful at that level, I'm not suggesting that's
`how that will sort out, but if we're successful at that level that $1 billion, $200 million of it
`would definitely be allocated to business development, and there are other smaller items that
`throughout the year, we would expect to pursue to continue to add to our R&D portfolios or to
`our marketed portfolios for each one of our core and important business. So it's a very
`difficult question because in the absence of something value generative, we're going to
`reduce our debt. That's super clear. But if there are these opportunities that we chipped in,
`deploy them against business development, and it makes sense, we're going to do that and
`in my opinion like, for example, the Synergy thing, that is something that makes an incredible
`amount of sense based on the strategic fit within our Salix portfolio. So that we will allocate
`capital to -- for BD and other small things. I don't know if I answer you. I can't answer your
`question specifically, but I hope I provided at least the way we're thinking about it.
`
`Operator
`
`The next question comes from Irina Koffler of Mizuho.
`
`Irina Koffler
`
`I just wanted to verify that your guidance for next year, does it include any benefit from
`TRULANCE or any sales force expansion to Salix?
`
`Joseph Papa
`
`https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 18 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`
`The guidance that we give does not include any M&A, to be clear. It does include our plans
`for XIFAXAN, but not specifically related to what we are planning for incremental sales reps
`or anything along those lines if we are successful in acquiring TRULANCE. Is that clear?
`
`Irina Koffler
`
`Yes, and then just one follow-up. You're obviously doing very well in Solta and cosmetic
`dermatology. Is there any thought to expanding your presence in that segment?
`
`Joseph Papa
`
`Yes, Paul made a comment that we have a leader there, Tom Hart, who's doing a absolute
`phenomenal job in turning around that business, and what we are -- what he's doing is he's
`really focused on a couple of things. Number one, launching some new products. He's got a
`new Thermage product that he's launching, and it's doing very well with that product launch.
`Number two, he is looking at what I would refer to as geographic expansion. He is looking at
`places where we have an opportunity to do better than existing business, so we do very well
`in the United States. We do very well in Asia, but we have a significant opportunity in Europe
`as an example. So Tom is putting some incremental resources to work there to up -- look at
`what we think is a good opportunity for growth in the European and some of the other areas
`of the world that we just are not as well represented. So we do think there's some
`opportunities, a lot of upsides to be clear based on what we think is really strong leadership
`by Tom Hart and the team.
`
`Paul Herendeen
`
`Yes, I want to -- it's Paul. I want to follow-on that as well is I think, the best way to build value
`is to optimize what you own and what you have in your own internal pipeline. And I daresay
`before Tom joined us and he was brought to us by Tom Appio, who runs our international
`business, which was a great thing for us. We had not optimized our existing portfolio nor
`where we positioned to optimize the new products that we already had the ability to roll out
`on our own and drive organic growth. That's why i.e. Joe, you can hear his enthusiasm about
`this business and certainly mine as well. We've called it out a handful of quarter -- quarters in
`a row here. We have an interesting portfolio. If there are opportunities to add to that, we
`surely would. But we have a lot of opportunity within that existing portfolio plus new products
`that we're rolling out from our pipeline. So well positioned in Global Solta.
`
`Operator
`
`Our next question comes from David Amsellem of Piper Jaffray.
`
`David Amsellem
`
`https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 19 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`
`So just have a couple. So just coming back to M&A. I may have missed this, but maybe you
`can put a number on deal capacity or what you're wherewithal is in terms of deal size or
`aggregate transaction size and how much is earmarked for transactions. That's number one.
`And then number two, just talking about the cash pay dermatology model, can you just talk
`about the mechanics here? I mean, is this going to be products primarily dispensed in the
`physicians office, like what the Obagi model was and how many medical derm products do
`you envision falling under this model and then lastly, on the rifaximin studies, you highlighted
`four. Maybe give us some color on timing for data readouts on those studies?
`
`Joseph Papa
`
`Paul, why don't you take the first one? And I'll take the cash pay and rifaximin.
`
`Paul Herendeen
`
`Yes, sure, I mean -- David, thanks for the question. It's hard to put a number on what we
`might be willing to doing in M&A. We obviously have a limited capacity because of the level
`of our debt and limitations of our ability to generate free cash flow, which we can choose to
`either use to reduce debt or to deploy against the value-generative BD opportunities. I
`daresay, if we do Synergy this year it's going to be the -- that takes a good amount of our
`capacity out for 2019. If we're so fortunate as to be able to conclude that deal, it is one of the
`challenges that we face as we are a company that carries a lot of debt. We are highly levered
`and so we need to be incredibly judicious in the deployment of capital for BD, and it's just -(cid:173)
`we don't have a big checkbook. We just don't, and that's the way it is until we can change it.
`And I'm not sure I answered your question, but I can't give you and say, oh, it's 40% of
`whatever. It's not. It's based on our ability to balance between the absolute requirement that
`we continue to prioritize using cash to reduce debt and not -- and being willing to place
`strategic bets on situations that we think are really going to be good for us in the long term.
`
`Joseph Papa
`
`David, on the second part of your questions about the cash pay model and dermatology.
`What we're trying to solve here is what the problems are in the dermatology space and some
`of the products, especially in areas like acne, for example, there is an uncertain environment
`with prior authorizations. There is uncertainty there for both the physician and the patient.
`There is expensive co-pays often in that category, and there is variable formulations from the
`generic companies, especially in the topical products. What we are going to seek to do is to
`bring forward a brand formulation that we believe will have predictable access, in other
`words, your patients will know, physicians will know how to get it, either through the
`physician's office, through retail stores or through a mail-order facility.
`
`https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 20 of 25
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`So predictable access, and it will have known pricing, very predictable pricing otherwise, we'll
`be able to give our belief that we could make this product available at a set price. So that's
`what we think will be very helpful to a large number of patients and physicians because the
`market will become very predictable versus what -- unfortunately, we see today is a very
`unpredictable market. So Bill Humphries, our leader in this derm business is moving forward
`with this. We have a lot more to say about specific products but think about some of the older
`products that we have in the areas of acne, also in some of the topical dermatitis and other
`areas that will be coming forth with our products. So a lot more to say about this as we roll it
`out, but we think it's a good way to look at it. On the third part of your first question was
`rifaximin.
`
`You can hear our excitement that we're doing two things. Number one, coming out with the
`new formulations, and then number two, coming out with the new indications. So I don't know
`I can go through all of the specifics on the call now because there is a lot that's going to go
`on there, but I'll try to hit the highlights. In the post-operative Crohn's disease, it's a Phase Ill
`trial. It's using the EIR product that we are partnering with Alfasigma. I remind you that we
`had an arbitration with Alfasigma, and we found a solution to that. We resolved that. Good
`work by our business development and legal team, and we'll be headed into that Phase Ill
`trial with the post-operative Crohn's, and our expectation is we'll have data on that sometime
`in the, let's call it the 20 -- data sometime in the 2021, '22 time frame depending on what
`happens there. On the second area that we're looking at is the OHE study. That's the acute
`study I mentioned previously on the call. That's really, as I said, it's trying to look at the
`pharmacoeconomics of XIFAXAN, but importantly, giving us some information on SSD that
`we can then leverage and take into additional clinical trials. That will hit some data later this
`year, but I probably don't want to give specifics about filing or anything along those lines
`because that's something that we're still assessing over the long term. On the other area of
`SIBO, that as we mentioned is in a Phase II. There's a lot of patients with SIBO. We're
`looking at 17 million patients in the United States.
`
`As I mentioned before, we're seeing somewhere approximately 12 million patients who were
`treating IBS-D. So it's somewhat of a subset of the SIBO population. So large numbers there.
`I don't have a specific date that I will share right now, but call it -- certainly, it will take a
`couple of years to get the data on that. And then we'll make decision that where we're going
`to go in there, but I think, certainly, in that 2021, '22 time frame for data and then where we
`want to be thinking about for the future. So I think, I've tried to answer all the questions there
`relative to your question on rifaximin study. We're very optimistic, and we are going to invest
`behind our rifaximin franchise.
`
`Operator
`
`Slayback Exhibit 1070, Page 21 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`
`
`David Steinberg
`
`I have a few questions on your GI business. So first, back to XIFAXAN. Your unit growth has
`been steadily improving, I think, up to 8% according to IMS. You've recently had some
`positive data in pain associated with IBS-D and Joe, you mentioned that about 90% of the
`market is untapped. So just curious, now that you've settled with Teva and you have a
`runway for 5, 6, 7 years what sort of unit growth -- given these dynamics what sort of unit
`growth you think you can put up in the near to medium term for XIFAXAN given it's your
`biggest drug? And then secondly, on Synergy, what sort of sales -- it's a good strategic fit, but
`what sort of sales would you need to achieve assuming you get it to start turning a profit, and
`what sort of PK sales expectations would you have for TRULANCE? And then finally, Cosmo
`is now been approved for rifaximin in the case for traveler's diarrhea. From what you can see
`in the market, are they taking share and what's your view on any off-label prescriptions or
`indications like IBS-D and HA?
`
`Joseph Papa
`
`Sure. I think you got a lot of questions in there David, but I'll try to -- if I don't catch them all,
`let me -- remind me. On the first one, though, we're very excited to what we're seeing with
`XIFAXAN. The only thing I'm going to comment on is at least during the month of January,
`we actually saw about 10% growth in our year-over-year growth with XIFAXAN, so very
`strong unit in growth and as I mentioned in the nonretail segment, we're seeing even higher
`growth. So very excited about it, but just in terms of what we're expecting over the long term,
`I think it was really the nature of your question. I think if you think about volume growth in
`XIFAXAN, somewhere in that like, call it high single digit that's probably what I would stick
`with, not going into that double-digit side. Obviously, if we can get some additional net
`pricing, it might help grow -- show even more but high single digits is the unit volume growth I
`would probably think about as you're modeling.
`
`https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 22 of 25
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`On the question of Synergy, I think, I said in the call, we're really excited about it. We think
`there's a great opportunity there with Synergy, especially given the fact that we bring some
`important experience we have experienced in the gastroenterologist office, which we think is
`helpful to what we need to do with Synergy. Number two is we've got a great supply chain
`capability. Dennis Asharin and the team, both of you are doing really well on the supply chain
`and then we've got some problems we have to fix with Synergy. So that is what we think is
`an important competitive advantage that we bring to this situation. And then finally, one of the
`areas that we were concerned about as we were watching externally was the market access
`side for Synergy. We think we also have new leadership in our market access team and a
`good market access team that can help us to get the appropriate opportunity for the future,
`assuming we can get Synergy at the right price. Final comment, question I think you asked
`was in terms of what's happening with Cosmo. I can say that our sales force has not seen
`any activity or sales presence in the gastroenterologist or primary care offices from Cosmo.
`We can say with conviction, we know there are some significant barriers to entry in the GI
`offices, and we're very pleased with our position for rifaximin and specifically, XIFAXAN as
`we sit here today, but we have not seen anything from Cosmo at this time, in the
`marketplace. I think I got all your questions David. Operator, I think we have time for one last
`question.
`
`Operator
`
`Today's final question comes from Louise Chen of Cantor.
`
`Louise Chen
`
`So I have two questions. First question I had was you've said that your Significant Seven
`products are expected to double again in 2019. Just curious which products are driving that?
`And are there any, in particular, that you're very excited about? And then secondly, are you
`still considering options to meaningfully delever your balance sheet? And if so, what are
`some of those key options that you're considering?
`
`Joseph Papa
`
`https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 23 of 25
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`Sure. I'll take that first part and then Paul, you want to take the comment on the second part
`of delevering. On the Significant Seven, I think, probably the best way to say it is that we like
`all the 7. We think all 7 of them are really the opportunity for growth, and we put them
`together specifically because as we talked about going back to 2019, they were under, call it,
`$75 million of revenue, and we thought about what was going to drive the growth of our
`business, and we said, these 7 products are going to be key to us. Clearly, there's a big, big
`opportunity in dermatology as we bring SILIQ to the market. We get BRYHALI approved and
`upon the approval of DUOBRII, we think those 3 products are going to be an important driver
`not only of our Significant Seven but also the turnaround in dermatology. So I'd have to say
`that those are clearly important drivers to our future success with our dermatology
`turnaround. But we do think just to summarize my comment, all 7 products are important to
`us for the point of view of both the growth aspects, but also how we'll turn around the overall
`dermatology business. Paul, do you want to take the second part of Louise's question?
`
`Paul Herendeen
`
`Yes, sure. I mean, obviously, the best way is for us to delever or grow our adjusted EBITDA.
`Secondarily, to prioritize use of cash flow to continue to reduce that debt. And last on that list
`would be to consider potential equity or equity-linked securities. I'd say that we have made
`an enormous amount of progress in managing our cap structure, particularly the liability side
`of our cap structure over the last couple of years. Great leadership from Will Woodfield, our
`treasurer. It's -- right now, we're okay with where we are leverage wise, and if we look at our
`forecast over the next few years, we will generate enough cash to help us significantly
`advance the ball and reducing our leverage in addition of the obvious benefits of growing our
`adjusted EBITDA. So we feel pretty good about where we are right now and not compelled to
`do anything. We'll just continue to look at for managing the cap structure side at opportunities
`to continue to target those debt stacks that come due. I mean, even though we've made such
`great progress I'll -- looking out to 2023, where there's a hefty amount of almost circa $6
`billion of unsecured debt that comes due out there that we want to start looking at and
`thinking about taking that out. But in terms of steps that its stay the course, let's grow our
`EBITDA, let's prioritize use of our cash to reduce debt, and we'll see how it goes.
`
`Joseph Papa
`
`Thank you, everyone, for joining us today, and look forward to having a chance to catch up
`with everyone over the next weeks ahead of us. Thank you. Have a great day, everyone.
`
`Operator
`
`And thank you, sir. Today's conference has now concluded. And we thank you all for
`attending today's presentation. You may now disconnect your lines, and have a wonderful
`day.https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 24 of 25
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`https://seekingalpha.com/article/4242568-bausch-health-companies-inc-bhc-ceo-joseph-papa-on-q4-2018-results-earnings-call-transcript
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`Slayback Exhibit 1070, Page 25 of 25
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