Transcripts
`
`Healthcare
`
`Bausch Health Companies, Inc. {BHC) CEO
`Joseph Papa on Q4 2018 Results - Earnings Call
`Transcript
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`Feb. 20, 2019 2:46 PM ET Bausch Health Companies Inc. (BHC), BHC:CA 15 Comments
`
`SA Transcripts
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`Q4: 2019-02-20 Earnings Summary
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`► Play Call
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`EPS of $1 .05 beats by $0.21 I Revenue of $2.12B (-1 .94% Y/Y) beats by $41.13M
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`Bausch Health Companies, Inc. (NYSE: BHC) Q4 2018 Earnings Conference Call February
`20, 2019 8:00 AM ET
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`Company Participants
`
`Arthur Shannon - SVP and Head, IR & Communications
`
`Joseph Papa - CEO & Chairman
`
`Paul Herendeen - EVP & CFO
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`Conference Call Participants
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`Umer Raffat - Evercore ISi
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`David Risinger - Morgan Stanley
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`Christopher Schott - JPMorgan Chase & Co.
`
`Irina Koffler - Mizuho Securities
`
`David Amsellem - Piper Jaffray Companies
`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 1 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`David Steinberg - Jefferies
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`Louise Chen - Cantor Fitzgerald & Co.
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`Operator
`
`Good morning, and welcome to the Bausch Health Care Fourth Quarter 2018 Earnings
`Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I
`would now like to turn the conference over to Art Shannon, Senior Vice President of Investor
`Relations and Communications. Please go ahead, sir.
`
`Arthur Shannon
`
`Thank you, Rocco. Good morning, everyone, and welcome to our Fourth Quarter and Full
`Year 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 slide presentation and a replay of this
`conference call will be available on our website under the Investor Relations section.
`
`Before we begin, we'd 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.
`
`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. And with that, it is my
`pleasure to turn the call over to Joe.
`
`Joseph Papa
`
`Thank you, Art, and thanks, everyone on the phone for joining us today. Let's quickly review
`the topics we will cover. I'll begin with a brief summary of our 2018 company highlights before
`turning the call over to Paul Herendeen, our CFO. Paul will take us through the fourth quarter
`and the full year financial results and provide our 2019 guidance.
`
`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 2 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`I will then review the segment highlights and catalyst before opening the line for questions.
`Beginning on Slide 4. 2018 was a year of strong execution for Bausch Health. For the full
`year, the total company grew organically by 2%. This was the first year of total company
`organic revenue growth since 2015. We also generated organic revenue growth in all 4
`quarters of 2018. Now international and Salix, our 2 largest segments grew organically by
`6% on a combined basis during 2018.
`
`Our top 10 products grew organically by 11 % in the aggregate compared to 2017. We
`generated $1.5 billion of cash from operations. We increased R&D investment by more than
`30% in the fourth quarter and approximately 15% for the full year. And we improved our
`gross margin through manufacturing efficiencies both in the fourth quarter and the full year.
`And we resolved the XIFAXAN IP litigation, which we believe preserves the products market
`exclusivity until 2028.
`
`Moving to the top right, we launched 10 key products during 2018, including two
`copromotions, 4 of our Significant Seven products were launched during the year, and we
`are expecting a decision from the FDA on DUOBRII shortly. We'll also continue to delever
`our balance sheet, having repaid more than $1 billion of debt in 2018 and cash generated
`from operations.
`
`Finally, in 2018, we refinanced approximately $8.3 billion of debt to extend maturities and
`provide more flexibility, which gives us the ability to pivot to offense in 2019.
`
`Turning to Slide 5. We have a snapshot of the key 2018 financial highlights for each of the 4
`segments. Approximately 75% of our total 2018 revenue was generated by the B +
`L/lnternational segment and the Salix segment combined. B + L/lnternational grew
`organically by 4% compared to 2017 with organic growth across all 5 reporting businesses.
`Salix grew by 12% organically in 2018, driven by XIFAXAN, which had a great year with 22%
`growth. Great results from our two largest segments. Delivering on commitments is important
`to us.
`
`On Slide 6, we show how we perform against the guidance we provided 1 year ago, in
`February 2018. A year ago, we promised to deliver 2018 revenues in the range of $8.1 billion
`to $8.3 billion. We actually delivered $8.38 billion. A year ago, we promised to deliver
`adjusted EBITDA in the range of $3.05 billion to $3.2 billion. We delivered $3.47 billion. Paul
`will walk you through the fourth quarter and the full year results in more detail. So with that,
`I'll turn it over to Paul.
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`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 3 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`Thank you, Joe, I'm going to start on Slide 7, the top level financial results for the quarter.
`Before I begin, I want to point out that when we talk about organic growth that means on a
`constant-currency basis and removing the impact of divestitures and discontinuations in the
`comparative period. One other note, on the Q3 call, I referenced our initiative to reduce the
`level of channel inventories of our branded U.S. pharma products that would have the effect
`of reducing our revenues in Q4 and for the full year 2018 by an estimated $100 million. As it
`turned out, the actual result was a $76 million drag on revenue that was spread across all 4
`of our segments. I'm going to reference this item a lot, and we've included a slide in the
`appendix that shows the impact on revenue and profit by segment.
`
`Okay. Let's go. We had a very strong finish to 2018. We posted our fourth consecutive
`quarter of organic growth despite the completed channel inventory reduction. Q4 revenue
`was up 1 % organically and would have been up 5%, but for the channel inventory reduction,
`a good stuff. The B + L segment comprising 57% of our revenue was up 5% organically, with
`4 of the 5 businesses within that segment delivering organic growth. Salix was up 1 %
`organically despite the dramatic impact of the channel inventory reduction on the Salix
`segment. Ortho Derm was down 2% and Diversified was down 9% organically. Stepping
`down to gross profit and gross margin, we post a 150 basis point improvement in gross
`margin. A good chunk of the improvement was due to mix, but we also realized a meaningful
`improvement in our supply chain efficiency, driven by the ongoing efforts of Dennis Asharin,
`our Head of Global Manufacturing and his team. Over the last couple of years, the
`manufacturing team working together with Dr. Louis Yu and our quality organization, have
`been implementing a right first-time ethos that has decreased costs and reduced supply
`chain disruptions. Down in operating expenses, if you look at the reported selling, advertising
`and promotion line, it looks like we reduced those expenses by 4%. But adjusting for
`currency and divested businesses in the prior year, we actually spent more on our go-forward
`business in Q4 of '18 versus '17, mainly additional sales resources and promotional dollars to
`drive longer-term growth. This will be a theme for us in 2019, and that's why I'm framing it for
`you here.
`
`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 4 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`G&A was flat on a constant-currency basis and reflects our ongoing efforts to control costs
`that don't directly drive revenue. Investment in R&D meanwhile, was up $30 million
`compared with Q4 of '17. Consistent and increase investment in R&D is a significant part of
`the ongoing transformation of our company and is integral to our ability to drive long-term
`organic growth across our core businesses. At the operating profit lines, adjusted EBITA and
`adjusted EBITDA, we were basically flat organically versus the prior year quarter. Pretty
`impressive if you think about the $30 million year-over-year increase investment in R&D and
`the $65 million negative impact of a channel inventory reduction. The low operating profit, net
`interest expense was down versus Q4 of '17 by $33 million and our tax rate on adjusted
`earnings was 3.2% versus 5.8% in the prior year. Those items account for our Q4 adjusted
`net income growing at a faster pace than operating earnings. As I said earlier, a good strong
`finish to 2018.
`
`As I go through the 4 segments, I'm going to focus mainly on revenue. Starting on Slide 8,
`with B + L/lnternational. Really good quarter, 4 of the 5 businesses delivered organic growth
`and the one that didn't, Global Optho Rx would have grown 5%, if not for the channel
`inventory reduction. From a growth perspective, Global Vision Care was the star, up 12%
`organically led by the U.S. business that was up 23%, driven by the impact of increased
`promotional resources we deployed beginning back in 2017 and the successful launch of
`expanded parameters of Biotrue ONEday toric. International Vision Care also delivered
`strong growth, up 8%, driven by strength in Soflens daily disposables, ultra-monthly SPS
`and cosmetic lenses. Geographically, International Vision Care was up 11 % organically in
`China and 9% organically in Japan.
`
`Global Surgical was up 4% organically, up 6% outside the United States and plus 1 % in the
`U.S. A quick comment here. The international surgical business representing roughly 70% of
`Global Surgical has delivered consistent organic growth over the last 7 to 8 quarters, while
`the U.S. surgical business only recently returned to growth in the second half of 2018. As the
`U.S. part of the business continues to deliver more consistent results, the Global Surgical
`business can deliver better growth that we've observed over the last 2 years.
`
`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 5 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`The Global Consumer business was up 4% organically, led by the U.S., that was up 8% on
`strength in our eye vitamins and the successful launch of LUMIFY. Outside the United States,
`consumer was up 1 % as strength in our Latam cluster from new product launches was partly
`offset by lower demand for our topical products in the Russia. The Global Ophtho Rx
`business declined 1 % organically on a 4% volume decline, driven entirely by the channel
`inventory reduction in the U.S. The Global Ophtho Rx business would have grown 5% versus
`Q4 of '17, but for that channel inventory reduction and that growth would have been basically
`split between increased volume and increased net realized selling prices. International
`Pharma, which is our branded generics business in Eastern Europe, Russia, Canada, Africa,
`Middle East and Latam rebounded after 4 quarters of subpar performance.
`
`You may recall that I previously called out some of the challenges we faced in our Eastern
`European Russian cluster and that I suggest that we would start to see improvement there
`based on changes we made in organization and leadership. While it's too soon to declare
`victory, our Russian business turned around from being a growth drag earlier in the year to
`being a significant contributor to the 8% organic growth of this business in Q4. A quick tip of
`the hat to John Connolly and Vladimir Gudkov for their efforts. Meanwhile, in Africa, Middle
`East that cluster continues to deliver strong growth led by Amoun, which was up 25%
`organically for the quarter and 19% for the full year.
`
`We have a great team at Amoun, and we look forward to seeing that team leverage its
`competitive strengths to drive increased business not only in Egypt but ultimately, in other
`Middle Eastern markets. On to Slide 9, in Salix. Salix took the brunt of the impact of the
`planned channel inventory reduction, $4 7 million and absorbed the impact of the mid-year
`loss of the exclusivity of UCERIS and still delivered 1 % organic growth. Excluding the
`channel inventory reduction, Salix would have grown 12% versus Q4 '17, driven by XIFAXAN
`where TRxs were up 8% in the quarter versus the prior year quarter. The nidus of Salix
`performance is the team, including Mark McKenna, Nicola Kayel and Josh Coyle. They have
`performed at a very high level. Note that the Salix segment was one of the major
`beneficiaries of our improved gross profit margin, up some 290 basis points versus Q4 '17,
`due to mix and manufacturing efficiencies.
`
`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 6 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`On to Slide 10, in the Ortho Dermatologies segment. The segment was down 2% organically,
`as spectacular growth in Global Solta was more than offset by an 11 % decline in the medical
`dermatology business. Solta was up 32%, driven mainly by the successful rollout of
`Thermage FLX, but also basic better fundamental performance across many of our regions
`under the terrific leadership of Tom Hart in his canorous Aussie accent. To wrap up the 04
`segment discussion, turn to Slide 11 in the Diversified Products. The segment was down 9%
`organically. Absent the channel inventory reduction, Diversified would have been down a
`rather modest 5% organically. Pretty good when considering the $41 million drag from the
`LOE products versus 04 of '17 fell in the neuro segment there -- business there. Our
`generics business was a star performer based on 2 factors. First, the launch of authorized
`generics for our branded products that lost exclusivity. In 04 '18 versus 04 '17, the big
`contributors were UCERIS AG and Elidel AG. And second, the generics team led by Mary
`Saharyan worked closely with our supply chain to capitalize on market opportunities across
`our generics portfolio, not just in the quarter, but throughout the year. The generics business
`was up 18% versus 04 '17 mostly on volume, but we were able to get some positive
`contribution from price too, a really good job.
`
`Flip to the full year 2018 versus '17 on Slide 12. The themes are similar to what we saw in
`04. Revenue was up 2% on an organic basis and would have been up 3%, but for the $76
`million impact of the completed channel inventory reduction. Salix led the way from a growth
`perspective, up 12% would have been 15%, if not for the channel inventory reduction. We
`posted really strong growth with XIFAXAN, APRISO and the RELISTOR franchise that was
`slightly offset by the impact of the July LOE for UCERIS. B + Ulnternational was up 4%
`organically versus 2017 with all 5 businesses delivering organic growth. The Ortho
`Dermatologies segment was down 13%, as Global Solta's plus 22% growth versus the prior
`year was more than offset by the continued rebasing of the medical dermatology business.
`
`Finally, Diversified posted a 5% organic decline, modest compared with the 24% decline we
`saw in 2017 as the growth drag of the LOE assets moderated in 2018 and was offset in part
`by the solid 19% growth in the generics business. Note the gross margin improvement
`versus 2017 roughly 110 basis points, same things as we saw in 04, mix and supply chain
`efficiency.
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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 7 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`We reduced G&A by some 6% on a constant-currency basis, partly on reduced legal
`expenses. Finally, we increased our investment in R&D by some 15%, with the expectation
`that we'll continue to invest more in R&D in 2019 versus '18. Adjusted EBITDA was up 3%
`organically to $3.474 billion despite the $65 million drag of the completed channel inventory
`reduction. Pretty good, right? Adjusted net income grew faster organically than adjusted
`EBITDA as our net interest expense decreased $154 million compared with 2017, due to our
`successful and continuing efforts to reduce debt. And we saw a decrease in our tax rate on
`adjusted pretax earnings from 13.2% in 2017 to 8.4% in 2018.
`
`Turning to the balance sheet summary slide on Slide 13. You see the progression of our debt
`balance since last year. Debt is down $1.12 billion from the end of 2017. We ended the year
`with $24.6 billion of debt, $723 million of cash and a modest $75 million outstanding under
`our revolving credit facility. After year-end, we did prepay another $100 million of debt. On to
`Slide 14, in our cash flow summary. Cash provided by operating activities for the full year
`totaled $1.501 billion. In the first half of the year, the settlement of several legacy legal cases
`reduced that amount by roughly $225 million. So for the year, our cash provided by operating
`activities was in line with our expectations.
`
`Sequentially, our cash provided by operating activities went from $522 million in Q3 to $319
`million in Q4. Note that as a result of refinancing debt, roughly 1/3 of our cash interest is now
`paid in each of Q2 and Q4. Looking backward, the settlement of interest had been relatively
`consistent across the 4 quarters. This change had a meaningful impact on the phasing of
`cash generated by operating activities in Q4 versus Q3 and that will continue in the future.
`Shifting to our guidance for 2019. The particulars of our guidance are spelled out on Slide 15.
`The highlights, we're expecting revenue in the range of $8.3 billion to $8.5 million and
`adjusted EBITDA in the range of $3.35 billion to $3.50 billion. Our guidance implies organic
`revenue growth in the range of flat to plus 3% and organic growth of adjusted EBITDA from
`minus 2% to plus 2% when compared with 2018. There's a bridge from 2018 actuals to our
`guidance on Slide 16.
`
`The very strong finish to 2018 took a bit of a top off of our growth expectations for 2018, but
`we'll take the good performance that we put on the board and move forward. And adjusted
`EBITDA, when looking at 2019 versus 2018, bear in mind that our guidance contemplates an
`approximately 10% of $40 million increase in investment in R&D and meaningful increases in
`selling and promotional expenses to support our recently launched and to be launched
`brands. If we were managing solely to deliver near-term growth of adjusted EBITDA, I have
`no doubt that we could put a higher EBITDA range on the board for 2019. But we're playing
`the longer game, and that means sacrificing a bit of near-term profits to deliver a better, more
`valuable future.
`
`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 8 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`I want to call your attention to some of the guidance details included on the slide. You see
`that we expect to increase CapEx in 2019. This is mainly growth CapEx for our initiative to
`introduce new daily silicone hydrogel lenses, but also to fund the overdue build out of our
`global IT infrastructure. We've also added a few new line items to our guidance slide, namely
`our expected gross profit margin, which we expect to be in the range of 71 % to 72% in 2019
`and our expected full year cash generated from operations, which we expect to be in the
`range of $1.5 billion to $1.6 billion. Note that our reported gross margin is sensitive to
`changes in FX rates, so please bear that in mind. Finally, we believe that on a constant(cid:173)
`currency basis and for the midpoints of our 2019 guidance, we can grow over the next three
`years to 2022 at compound annual growth rates of between 4% to 6% for revenue and 5% to
`8% for adjusted EBITDA. That's it for me, Joe.
`
`Joseph Papa
`
`Thank you, Paul. Moving now to Page 17, our Bausch + Lomb business is a fully integrated
`eye health business with offerings across the spectrum of vision care, which include contact
`lenses, surgical, consumer products and prescription ophthalmology. Importantly, this
`integrated business is being driven by several global megatrends that we see creating
`increased demand for our eye health products. First, recent statistics indicate that there are
`approximately 1.3 billion people in the world who live with some kind of vision impairment
`and 80% of all vision impairment is generally considered to be avoidable. Another megatrend
`is the graying of the United States population as the baby boomers hit age 65 and above.
`People over the age of 65 use Bx as many eye care products than those under the age of 65.
`Clearly, an important megatrend. In addition, the prevalence of myopia or nearsightedness is
`increasing to epidemic levels. As the graph shows, myopia rates in Hong Kong are steadily
`increasing. About 30% of those born before 1950 to a staggering 87% of those born in the
`last 20-or-so years. This data suggests that environmental factors like increased screen time
`with laptops, cellphones are responsible for the high rates of myopia we are seeing in Hong
`Kong and in other parts of the world.
`
`Myopia statistics are important to our business for obvious reasons, but also because myopia
`is a risk factor for glaucoma, macular degeneration and retinal detachment. Based on these
`megatrends, we are projecting growing demand for eye care, and we believe Bausch &
`Lomb as a global integrated eye health business is well positioned to provide them.
`
`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 9 of 25
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`On Slide 18, the B&L segment delivered its ninth consecutive quarter of organic growth,
`generating 2 years of mid-single-digit growth organically. E-commerce sales through Amazon
`grew by 64% in 2018 versus 2017. And we saw a 44% spike in sales at a B&L flagship store
`and Alibaba Singles' Day during the fourth quarter. The performance of our Global Vision
`Care has been phenomenal, driven by Biotrue ONEday and Bausch+ Lomb ULTRA, the
`U.S. business significantly outperformed the market, up 13% versus 2019 compared to 4% to
`5% growth for the rest of the industry.
`
`Moving now to Global Consumer, LUMIFY, which was launched in May is now the #1 product
`in the Redness Reliever category with approximately 28% market share. LUMIFY is also #1
`product recommended by optometrists and ophthalmologists for redness relief. The B + L
`eye vitamins, PreserVision and Ocuvite grew organically by 7% in 2018 on a combined
`basis.
`
`Finally, in global ophthalmology, VYZUL TA TRx weekly prescriptions grew by more than 50%
`sequentially in the fourth quarter of 2018 versus the third quarter 2018. Also, we know the
`data tells us that patient start on VYZULTA are 34% more likely to stay on it than other
`branded agents, which brings us to market access, where our position has substantially
`improved versus earlier in 2018. We are now up to 80% commercial coverage and Part D
`coverage is up to about 30%. However, more than half of the Part D prescriptions are being
`covered today. We are making good progress here.
`
`Finally, VYZULTA was approved to the second market, Canada last month. So we believe
`the product has good momentum and a lot of opportunity ahead. Over to Slide 19, I want to
`emphasize the strengths of our international business which ties into the megatrends I
`mentioned earlier. As you can see from the map, our branded franchises have market(cid:173)
`leading positions throughout Canada, Latin America, Europe, Middle East, Africa and
`importantly, Asia. Bausch+ Lomb Vision Care is the leader in key emerging markets like
`China, Thailand and India, which represent approximately 40% of the world's population and
`are among the fastest-growing markets. The key takeaways I want to emphasize that
`approximately 58% of our business is not currently exposed to U.S.-branded prescription
`pricing.
`
`Turning now to Slide 20, we've given a sense of the near-term product pipeline across the
`entire eye health business. I'll summarize by saying that Bausch & Lomb is a diversified and
`fully integrated eye care business, our integrated eye -- our integrated platform is a
`significant strength for us, particularly given the trends that we expect to drive global eye
`care consumption. And as you can see from this slide, we have a number of great
`opportunities in our pipeline that we believe will enable us to grow at mid-single-digit growth
`rate.
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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 10 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`Moving now to Salix highlights on Slide 21. Let's start with XIFAXAN. I want to provide
`perspective on the reported 2018 revenue growth of 22%, which is 1 /3 of the volume came
`from strong TRx gains, volume gains. 1/3 from our Project CORE activities that improved
`gross to net with better co-pays, couponing and rebates. And about 1/3 falls in the category
`of gross pricing improvements. We think, though that we are just scratching the surface at
`XIFAXAN when you consider that chart on the right, which shows that 90% of the IBS-D
`market is still being treated by antispasmodic or antidiarrheals. In other words, 90% of the
`market represents a significant growth opportunity for XIFAXAN in IBS-D. Finally, we
`expanded our GI business by obtaining rights to other copromote products. LUCEMYRA,
`DOPTELET and PLENVU complement our existing products, and we expect these additional
`offerings to help drive revenue growth.
`
`Let's move on to Slide 22 and talk about the Salix pipeline. We're continuing our R&D
`investment in rifaximin by developing a number of new formulations and importantly, new
`indications that we listed on the chart. We have great opportunities with XIFAXAN. We also
`have a potential bolt-on acquisition opportunity that we are excited about. We entered into a
`stalking horse agreement to acquire certain assets of Synergy Pharmaceuticals, TRULANCE
`for chronic constipation in IBS-C and also an investigational compound, dolcanatide, which
`has demonstrated proof of concept in treating patients with multiple GI conditions.
`
`We think these assets are a natural fit to what we are already doing gastroenterology and
`primary care. And we have some capabilities in terms of scale, supply chain and managed
`care expertise that can help improve the performance of TRULANCE. If we are successful,
`we expect the transaction to close in March of 2019.
`
`Moving on to Slide 23, Ortho Dermatologies. While this segment has trailed B +
`L/lnternational Salix turnaround, the business continues to stabilize as we launch new
`products. SILIQ generated $6 million of sales in the fourth quarter and as you can see from
`the chart on the right, TRx weekly scripts grew more than 30%, TRx growth in fourth quarter
`2018 versus the prior quarter.
`
`We also launched two products -- new products during the fourth quarter, AL TRENO, an
`innovative new retinoid acne treatment and BRYHALI, a new potent steroid treatment for
`plaque psoriasis. Our aesthetics business, Global Salta was a bright spot driven by strong -(cid:173)
`by the strength in the U.S., Korea and Taiwan and the expected global launch of Thermage
`FLX. We also have announced a transformational new model for our dermatology products in
`the U.S. that we believe will give us an opportunity to grow the overall business. The
`business will pursue two separate access models. Reimbursed medical dermatology, which
`is a continuation of our current model and cash pay prescription dermatology.
`
`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 11 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`In light of the challenging payer environment for dermatology products, we believe this new
`cash pay prescription model offers improved, predictable and sustainable fulfillment options.
`For example, with our new model, adult women prefer our cosmetic elegant formulation of
`0.05% tretinoin lotion will now be able to get AL TRENO from their dermatologists at a
`predictable price, which pushed the treatment decision in the hands of the doctors and the
`patients.
`
`On Slide 24, I want to talk about DUOBRII, which upon approval expected to be the first and
`only topical lotion that contains a unique combination of halobetasol and tazarotene in one
`formulation for the treatment of plaque psoriasis. We announced on Friday that the FDA is
`close to finalizing its review, and we expect a decision from the FDA shortly. We remain
`optimistic about this opportunity. First, there are about 7.5 million psoriasis patients in the
`United States and between 150,000 to 260,000 new cases diagnosed each year. Second,
`research shows that 90% of patients with psoriasis are open to new treatments and third,
`85% of the patients on therapy use a topical medication. Our actuarial model suggests that
`by using DUOBRII, even a small reduction in the number of psoriasis patients that need a
`biological treatment could result in a fairly large net savings for health plans.
`
`On Slide 25, we show the anticipated revenue growth of our Significant Seven products, 6 of
`which have been launched today. As the blue bar shows, this group of products represented
`approximately $75 million of revenue in 2017 and that doubled in 2018 to more than $150
`million. We are projecting another double in 2019 to approximately $300 million, with
`expected peak annualized total revenues of over $1 billion by the end of 2022. We're excited
`by what this means in terms of being able to launch new products that make a difference in
`patients lives.
`
`Finally, Slide 26 sets out our expectations for 2019, a year of growth for Bausch Health as we
`pivot to offense. First and foremost, we expect reported revenue for the total company to
`grow in 2019 versus 2018 at or above the midpoint of our guidance range in the current FX
`rate.
`
`Second, cash generation. We expect to generate $1.5 billion to $1.6 billion of cash from
`operations, and we plan to use more than $1 billion of that cash opportunistically to reduce
`debt and/or for bolt-on acquisitions. R&D investment is expected to increase by about 10% in
`2019 as we continue to develop innovative products that improve patient lives. Revenue
`generated from our Significant Seven products is expected to double in 2019 to
`approximately $300 million.
`
`Our continued efforts to improve operational efficiency, which we refer to internally as Project
`CORE are expected to deliver more than $75 million in operating profit in 2019.
`
`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 12 of 25
`Slayback v. Eye Therapies - IPR2022-00142
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`And finally, we're meeting expectations on our previous growth guidance and adding that
`Bausch Health expects a 3-year compound annual growth rate from the midpoint of our 2019
`g