Transcripts
`
`Healthcare
`
`Bausch Health Companies Inc. (BHC) CEO Joe
`Papa on Q4 2020 Results - Earnings Call
`Transcript
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`Feb. 24, 2021 2:33 PM ET Bausch Health Companies Inc. (BHC), BHC:CA 2 Comments 1 Like
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`Q4: 2021-02-24 Earnings Summary
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`► Play Call
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`EPS of $1 .33 beats by $0.22 I Revenue of $2.21 B (-0.49% Y/Y) beats by $38.39M
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`Bausch Health Companies Inc. (NYSE: BHC) Q4 2020 Earnings Conference Call February
`24, 2021 8:00 AM ET
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`Company Participants
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`Art Shannon - Investor Relations
`
`Joe Papa - Chairman and Chief Executive Officer
`
`Paul Herendeen - Chief Financial Officer
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`Conference Call Participants
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`Chris Schott - JPMorgan
`
`Umer Raffat - Evercore
`
`David Amsellem - Piper Sandler
`
`Gregg Gilbert - Truist Securities
`
`Akash Tewari - Wolfe Research
`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-earnings-call-transcript
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`Slayback Exhibit 1072, Page 1 of 23
`Slayback v. Eye Therapies - IPR2022-00142
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`Terence Flynn - Goldman Sachs
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`Doug Miehm - RBC Capital Markets
`
`Operator
`
`Good morning and welcome to the Bausch Health Companies Fourth Quarter Earnings Call.
`[Operator Instructions] Please note this event is being recorded. I would now like to turn the
`conference over to Art Shannon. Please go ahead.
`
`Art Shannon
`
`Thank you very much. Good morning, everyone and welcome to our fourth quarter and full
`year 2020 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 would like to remind you that our presentation today contains forward(cid:173)
`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.
`
`With that, it's my pleasure to turn the call over to Joe.
`
`Joe Papa
`
`Thank you, Art and thank you everyone for joining us. Today, I will begin with the 2020
`highlights. Paul Herendeen, our CFO will then review the fourth quarter and full year financial
`results and discuss our 2021 guidance. I will then discuss our 2021 strategic focus, which
`includes executing on our business recovery, unleashing growth drivers and accelerating
`strategic alternatives to drive shareholder value before opening the line for questions.
`
`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Slayback Exhibit 1072, Page 2 of 23
`Slayback v. Eye Therapies - IPR2022-00142
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`Let's begin with Slide 5. In a year with unprecedented business disruption due to COVID, we
`finished the year strong and outperformed the high-end of our latest 2020 guidance by
`generating revenue that exceeded $8 billion. And most importantly, strong cash flow of over
`$1 billion helped us to repay approximately $900 million of debt. During the COVID-related
`downturn, we are focused on executing on our business. We grew market share for key
`promoted products. We managed operating expenses to optimize 2020 EBITDA. We
`invested in our pipeline for future growth. And we exited the year with strong momentum
`carrying us into 2021 and are well positioned to benefit from recovery related tailwinds and
`capitalize on key growth drivers and catalysts, while pursuing alternatives to accelerate
`shareholder value creation. You will hear more from Paul, but excluding the impact of any
`potential divestitures we may announce. We are targeting approximately $1 billion of debt
`paid out in 2021. And earlier today, we announced that Icahn Enterprises will add two new
`Board members to Bausch Healthcare to help us further our goal to accelerate shareholder
`value creation.
`
`Turning to Slide 6, the full year fourth quarter results demonstrate that operational recovery is
`in progress. After experiencing significant COVID-related declines earlier in 2020, fourth
`quarter revenues was down only 1 % compared to the prior year quarter. I want to call out a
`few highlights. Our vision care business grew in the U.S. during 2020. Our eye vitamin
`franchise continued to drive strong growth and we launched infused SiHy daily lenses in the
`U.S. and ULTRA ONE DAY in Australia, Hong Kong and Canada. XIFAXAN quarterly
`revenues hit a record high of $411 million in the fourth quarter and reported revenue for
`XIFAXAN, TRULANCE and RELISTOR all grew into 2020 versus last year. Thermage
`revenue grew by 47% in 2020 compared to 2019 driven by strong demand in China and
`expansion into other geographies. Thanks to a great Bausch Health team effort in 2020. Our
`supply chain continued to meet demand for all of our customers. We grew market share with
`our key brands. We managed OpEx to optimize EBITDA and we generated more than $1.1
`billion of cash from operations during 2020. And we are seeking to accelerate the spin of
`B&L our eye health business that we believe will unlock shareholder value.
`
`With that, I will turn it over to Paul to cover the financial results in more detail.
`
`Paul Herendeen
`
`Yes. Thanks, Joe. I am going to focus mainly on our quarterly results as they show our
`continuing recovery for the impacts of COVID.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Slayback v. Eye Therapies - IPR2022-00142
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`On Slide 7, you see revenue by segment and business units within the segments for the
`quarter and the full year. Starting with B&L International, overall, the segment was flat on an
`organic basis versus Q4 2019. The top performer in the segment was the international
`pharma business, up 12% organically as that portfolio of products was less impacted by
`COVID. In fact, certain products in this segment saw increased demand, including
`[indiscernible] and our broad spectrum anti-parasitic ivermectin. We saw organic growth in
`almost all countries and regions led in order by Eastern Europe, Egypt, LatAm, Poland and
`Russia. This business was a star of the quarter under challenging circumstances and the
`business heads there, including Fernando Zarate, [indiscernible], Kate Simon, [indiscernible],
`Muhittin Bilgutay and their leader, Tom Appio, deserving lot of credit.
`
`Next up is the global consumer business. It was down 1 % organically. There is a theme
`across the B&L Consumer, B&L Vision Care and B&L Surgical businesses and that is that
`the recovery in the U.S. is coming faster than what we are observing outside the United
`States. In the consumer segment, the U.S. business was up 3% organically versus Q4 of
`2019. While the o-U.S. business was down 2%, driving growth in the U.S. were our eye
`vitamins and LUMIFY. Outside the U.S., resurgences of COVID, the associated impact of
`social restrictions and changes in consumer behaviors slowed the recovery in various
`geographies. Global vision care was down 1 % organically, up 5% in the U.S. and down 3%
`outside the United States. In the U.S., the growers were of the recently launched infused
`daily disposable SiHy lenses, Biotrue ONEday Torie and Ultra Torie lenses. Outside the U.S.,
`it's the same theme as I just described for consumer, recovering from COVID, but at a slower
`pace than we saw in the U.S.
`
`Global surgical was down 7% organically, flat in the U.S. versus Q4 2019, but down 9% o(cid:173)
`U.S. U.S. eye care professionals adapted more quickly to get back up and running with
`COVID protocols in place than outside the United States. Also, the recovery in the U.S. has
`been more of a linear progression, while o-U.S. surgical activity was strengthening in
`October and then weakened, especially in Europe in November and December as new
`[ways] [ph] of COVID cases emerged. Finally, Global Ophtho Rx was down 10% organically,
`and here, the U.S. is lagging the recovery outside the United States. The U.S. was down
`15% organically versus Q4 2019, while o-U.S. we were down only 4%. In the U.S., despite
`the rebound in surgical procedures, patients flow into doctor's offices is still well below 2019
`levels and that has certainly impacted volumes of our Ophtho Rx products. The impact of the
`Lotemax LOE also contributed to the quarter-over-quarter decline. So, that's B&L
`International revenue.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Slayback v. Eye Therapies - IPR2022-00142
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`On to Salix, where revenue was up 2% compared with Q4 of 2019, our key promoted
`products were all up versus Q4 of '19, with XIFAXAN up 4%, TRULANCE up 33% and
`RELISTOR up 7%. XIFAXAN Rxs have not yet recovered to pre-COVID levels. Extended UV
`TRx in the quarter were down 3.5% versus Q4 of 2019 and that's a good proxy for unit
`demand - end unit demand. However, our XIFAXAN sales volume in the quarter was up 2%
`as retailers rebalanced their inventories during the quarter after substantially reducing them
`in the depths of COVID. Note that the fluctuations of XIFAXAN channel inventories were
`sorted out during the year and we ended 2020 with appropriate levels based on current sales
`volumes. Realized net selling price for XIFAXAN was up 2%. TRULANCE continues to grow
`nicely, volume up 45%, which is broadly consistent with the 40% increase in TRxs versus Q4
`2019, it was offset by a 14% decrease in realized net pricing. Improved managed care
`coverage comes at the cost of increased rebates, but we expect that the expanded coverage
`will be a cost effective aid to delivering high TRULANCE volume growth in the future, a
`strong finish to the year for Salix.
`
`Next, the Ortho Derm segment, first, I want to note that our colleague, Scott Hirsch, is now
`leading this segment and I am personally excited about the changes that are underway to
`reposition our medical derm business to capitalize on the strengths of our Ortho Derm
`colleagues and product portfolio. We will talk more about this in the coming quarters.
`
`In Q4, the med derm business was down 22% organically roughly 10% of that decline was
`due to the losses of exclusivity on products, including Solodyn, Acanya, ELIDEL and
`ZOVIRAX. Our promoted brands, particularly those early in their lifecycle, continue to be
`impacted by less patient office visits. Global Solta, under the skillful leadership of our
`colleague, Tom Hart, continues its string of impressive quarters, posting 31 % organic growth.
`Solta grew in all regions, APAC, U.S., EMEA, Canada and LatAm. China alone accounted for
`more than half of the organic growth.
`
`Finally, diversified was down 9% organically, with 8% of that decline coming from LOEs in the
`neurology business. Setting aside the LOE drag, the neuro business had a solid quarter
`driven by growth of the WELLBUTRIN/APLENZIN franchise, Librax and PEPCID. The 15%
`decline in generics revenue was mainly a function of a very strong performance in Q4 of '19.
`Dentistry continues to recover from the effects of COVID and was down only 4%. So, net
`revenue in the quarter. Total company revenue was down 1 % organically. We finished the
`year gathering momentum and we are carrying that forward into 2021.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Turning to Slide 8 and I will walk down our P&L for the quarter. We covered revenue. Our
`gross profit margin decreased by some 50 basis points versus Q4 of '19. Mix was as always
`a factor and unfavorable manufacturing variances and hits to cost of goods sold precipitated
`by COVID played a role as well. Selling, advertising and promotional expenses were 8%
`favorable to Q4 of '19 on a constant currency basis. As you look back at 2020, you would
`see that in Q2 we pulled back dramatically on OpEx spending as we work to conserve cash
`and protect earnings. In Q3, we began to ramp up promotional activities and - I am going to
`say this is the important point in Q4, just as our revenue had not yet returned to pre-COVID
`levels, our promotional efforts were also not back to full strength. I am bringing this up here
`for context when I talk about 2021 guidance later.
`
`Adjusted G&A was favorable to Q4 last year by 4% on a constant currency basis and those
`expenses also do not reflect full efforts on some foundational projects, for example, in IT that
`are important to resume with full force. R&D was 4% higher on a constant currency basis as
`we were able to restart activities that were paused. The net result, we posted adjusted
`EBITDA of $911 million in the quarter, up 2% on a constant currency basis from the prior
`year quarter, I will call that, good stuff.
`
`Please flip to Slide 9. The full year 2020 was so colored by COVID that the comparison
`versus 2019 is not especially meaningful, but there are some things here worth mentioning.
`We estimate - excuse me we estimate that the COVID impact for the full year at revenue
`was roughly $740 million, but for COVID, we would have met our original 2020 revenue
`guidance. But the thing I am most proud of is that the BHC team was able to react quickly to
`reduce expenses, conserve cash and weather the worst of the COVID storm. We prioritized
`the safety of our colleagues, adapted to find ways to serve patients and our customers and
`we were in the state of readiness to get back to driving our business forward as things began
`to open up.
`
`The payoff of these efforts is on Slide 10. In Q4, we generated $394 million of cash from
`operating activities and $1.111 million for the full year. Those are both on a GAAP basis.
`Adjusted for the settlement of legacy legal settlements and some separation costs, our cash
`from loss was $475 million in the quarter and $1.235 billion for the year. Our company is a
`strong cash generator. We convert a lot of our earnings to cash in part due to our being a
`Canadian company. Last quarter, there were some folks that were concerned about our level
`of cash generation. Now hopefully, our Q4 results put those concerns to rest. As a result of
`our strong cash generation and efforts to better utilize our cash around the globe, as Joe
`said, we were able to repay slightly more than $900 million of debt in 2020 and I will call that
`pretty good in this year of years.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Let's go to Slide 11, the balance sheet summary. Total debt at the end of the year was $24.2
`billion. And I want to point out that the $1.8 billion of cash includes the $1.21 billion to settle
`the U.S. Securities class action, so net usable cash at year end was some $600 million.
`
`On Slide 12, you see the schedule of our debt maturities. No maturities or mandatory
`amortization until 2024. Our active management of our debt complex was an asset for us
`back in the spring when liquidity concerns were understandably high. So, that's Q4 in 2020.
`
`Let's turn to our guidance for 2021 starting on Slide 14. Our guidance calls for revenue
`between $8.6 billion and $8.8 billion and adjusted EBITDA between $3.4 billion to $3.55
`billion. First and to be very clear, our revenue and operating earnings in 2021 could have
`been quite different, but for COVID. We are fortunate to be a diversified company across a
`number of different businesses and geographies and each of those businesses have and will
`recover from the impacts of COVID at different rates. We made great progress in Q3 and Q4
`of 2020, but we are not all the way back. We also expect adjusted cash generated from
`operations to be approximately $1.5 billion in 2021, roughly the same as what we generated
`in 2019 and we are targeting approximately $1 billion of debt pay-down during the year.
`
`On Slide 15, we show a bridge from 2020 actual results to our guidance for 2021. But I think
`it's also helpful to look back at the full year 2019 that was undisturbed by COVID. 2019
`reported revenue was $8.6 billion and adjusted EBITDA was $3.571 billion and adjusted
`operating margin of 41.5%. At the midpoint of our 2021 guidance ranges, we have an
`operating margin of 40%, 150 basis points less than we posted in 2019. Why? Well, there
`are three main factors. First, our guidance for gross margin in 2021 of roughly 72% is some
`70 basis points less than the 72.7% we saw in 2019. That's due to mix and a bit of a COVID
`hangover on manufacturing costs that will flow through 2021. Second, our R&D spend in
`2019 totaled $471 million and we are guiding the circa $525 million in 2021, $54 million more
`and represents 6% of revenue at the midpoint versus 5.5% in 2019. And finally, our SG&A as
`a percent of revenue is expected to be higher in 2021 as we re-prime the promotional pump
`to drive our revenue to recapture our pre-COVID revenue growth trajectory. I want to point
`out that our guidance of $2.6 billion for SG&A is a big increase versus 2020. But if you
`compare it back to 2019, the $2.6 billion represents roughly 2% growth per annum off of what
`we would submit was a tightly managed year.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Slayback v. Eye Therapies - IPR2022-00142
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`Finally, I call your attention to the expected growth drag on 2021 revenue and profit from
`LOE assets. We are looking at a roughly $105 million drag on revenue in 2021. This is
`substantially less than we have had to overcome in prior years. In 2016, our company was
`facing a mountain of LOEs coming at us in the condensed timeframe. And so we started
`disclosing the expected impacts to you so you could follow along. Obviously, this made it
`more difficult for us to post growth. In the last 3 years, the growth drag ranged from $290
`million to $360 million. The great news is that the impact of the bolus of LOEs has
`dramatically declined. And importantly, looking out over the next 5 years, LOEs will be quite
`manageable. The LOEs have been a long road for us, but this governor on our growth is
`mostly behind us.
`
`Back to you, Joe.
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`Joe Papa
`
`Thank you, Paul. Let's get started with the Bausch and Lomb International highlights on Slide
`17. The chart on the top left shows that recovery is in progress. In Global Vision Care,
`recovery in the U.S. is ahead of the rest of the world, with reported revenue growth of 2%
`compared to 2019 driven by line extensions for Biotrue ONEday and Ultra. In global
`consumer, despite the pandemic, our eye vitamin franchises and LUMIFY grew organically,
`both revenue and procedures in global surgical are approaching pre-pandemic levels and we
`expect delayed cataract surgeries from 2020 to create tailwind for 2021 and beyond.
`VYZUL TA TRxs grew by more than 40% in 2020 compared to last year. Finally, as Paul
`mentioned, international Rx was a standout with strong organic revenue growth of 6%
`compared to last year.
`
`You can see the strong signs that recovery is in progress from the charts on Slide #18.
`Starting on the top left, field consumptions for U.S. Vision Care shows recovery in progress
`for the last 7 months. Next, VYZUL TA TRxs also show a positive, consistent trend. LUM I FY
`recovery has been in progress since April of 2020. And finally, Stellaris Elite procedures in
`the U.S. and international surgical revenues are now similar to pre-COVID levels. Growing
`market share was our focus during the COVID downturn. And on Slide 19, we show that
`market share gains we achieved. VYZULTA is up 40 basis points; LOTEMAX SM is up 160
`basis points; and PROLENSA is up 180 basis points. On the bottom left, we show the strong
`positive trend in market share for our intraocular lenses in the U.S. And finally, on the bottom
`right, U.S. consumers also gain share in key segments.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Slayback Exhibit 1072, Page 8 of 23
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`Moving now to Slide 20, INFUSE is our daily SiHy lens, which was launched in the U.S. in
`August. It's a significant opportunity. We estimate the U.S. market for these lenses will grow
`from $1 billion today to approximately $3 billion in 2030. The global opportunity is also
`significant, which we expect global revenue for Bausch and Lomb SiHy Daily lenses to
`exceed $250 million. We paired INFUSE with ocular protections and electrolytes and we are
`encouraged by the results. The lens is doing exceptionally well with patients who
`experienced contact lens dryness. We have great results from a recent online survey on
`Page 20. 94% of patients agreed that INFUSE helps keep contact lens from feeling dry. This
`data supports that INFUSE addresses one of the big issues in the SiHy Daily market and we
`believe these lenses will be an important growth driver.
`
`Let's turn to Salix on Slide #21. With organic revenue growth of 2% in the fourth quarter
`versus last year, we are seeing clear signs of recoveries in progress. Let's start with our
`largest product, XIFAXAN. As I mentioned earlier, XIFAXAN TRxs grew sequentially by 2%
`compared to the third quarter of 2020. TRULANCE TRxs grew by 47% in 2020 compared to
`the overall market growth of about 6%. Finally, RELISTOR TRxs grew by 9% in 2020
`compared to a market decline of 4%. On Slide 22, we have shown the strong recovery trend
`for XIFAXAN, TRULANCE and RELISTOR TRxs.
`
`On Slide 23, we show the GI market share gains we achieved relative to last year. In terms of
`TRx market share, XIFAXAN is up 80 basis points, TRULANCE is up 170 basis points, and
`RELISTOR is up 160 basis points. One additional point to note on TRULANCE, new Rx
`market share also increased from 5.5% at the time of the acquisition by Bausch Health in
`March of 2019 to 12.1 % new Rx share in December 2020. We believe this is a great leading
`indicator for future TRULANCE TRx per share gains.
`
`Now on to Ortho Dermalogics on Slide 24 few highlights to note. Notwithstanding the impact
`of COVID, Salta had a great 2020. Thermage reported revenue grew by 47% in 2020
`compared to last year, which was driven by China and expansion into new geographies. We
`expect the aesthetic market to continue to grow driven by the new Zoom culture and by
`consumers who have the ability to invest in self care. 2021 growth catalyst includes
`continued market penetration in China and the U.S. as well as geographic expansion into
`Europe.
`
`Another growth catalyst is the U.S. launch of Solta's Clear and Brilliant Touch laser, a
`treatment that can help prevent the worsening of fine lines and wrinkles. JUBLIA also grew in
`2020 compared to last year, with reported revenue up 3% and TRx growth up 18% compared
`to a flat market. Finally, our psoriasis products, we believe there is much more to do here, but
`to be clear, DUOBRII and SILIQ both grew substantially in 2020 versus last year. DUOBRII
`TRxs grew 53% compared to 5% market and SILIQ reported revenue grew by 39%.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`Slayback v. Eye Therapies - IPR2022-00142
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`The charts on Slide 25 show the recovery in Ortho Dermalogics. Thermage revenue had a
`great performance in 2020. It benefited from the increased demand for aesthetics, the
`JUBLIA TRx trends showed solid recovery since April 2020. And lastly, DUOBRII TRxs
`began to recover over the summer. We highlight the gains in TRx market share we were able
`to achieve for key promoted brands, DUOBRII, up 40 basis points; JUBLIA, up 140 basis
`points; and ONEXTON up 70 basis points.
`
`Turning now to Slide #27, we have identified the key growth drivers for our business in 2021
`and beyond. First, we expect a ramp up and additional approval for the SiHy Daily lenses.
`We have now launched these lenders in Japan, U.S., Hong Kong, Australia and Canada and
`we anticipate launching in Europe over the next year. Next, we expect a tailwind going into
`2021 from a backlog of cataract surgeries that were delayed in 2020 due to COVID. In the
`U.S., we estimate that about 650,000 cataract surgeries or roughly 16% were delayed in
`2020. While outside the U.S., we estimate that approximately 20% of the surgeries were
`delayed, creating a potential tailwind for 2021 and beyond. And we are expanding the sales
`force of the Thermage franchise into Europe. And finally, given the momentum, which we
`head into the year, we expect to see strong performances in recovery of leading brands,
`including XIFAXAN, Ultra, PreserVision, LUMIFY and VYZULTA.
`
`We also have a number of near-term catalysts at upcoming R&D pipeline, which is outlined
`on Slide #28. We expect to initiate a Phase 2 trial for amiselimod or S1 P modulator for
`patients with mild-to-moderate ulcerative colitis. We expect readout of Phase 3 results for
`NOV03 investigational treatment for dry eye disease. We have also published the NOV03
`Phase 2 data for dry eye disease and the data is outstanding and importantly met all of the
`primary endpoints. We are also making progress with our rifaximin lifecycle programs. In
`addition to our program for sickle cell disease, we recently received positive feedback from
`the FDA on a new rifaximin formulation for the prevention of the complications of cirrhosis
`and we are proceeding straight to a Phase 3 study for what we refer to as the RED-SEA trial
`starting in the second half of 2021. In addition, we are exploring several COVID-focused
`treatments. To be clear, we are not a vaccine company, but we have found ways to contribute
`to the ongoing efforts to combat the disease.
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`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
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`With that as background, let's move to Slide #31. I want to give a brief update on the
`progress we are making on a previously announced intention to separate Bausch and Lomb
`into an independent company. First, we took this action because we saw an opportunity to
`unlock shareholder value, especially relative to our peer eye health companies that we see
`for B&L. We have been making good progress on our goal since our announcement in
`August 2020. We are on track for the financial segmentation reporting to be complete by the
`end of the first quarter of 2021. And we expect all internal objectives necessary for the spin
`of B&L to be achieved by the end of the third quarter of 2021. At the same time, our
`operational focus is on taking action as the potential to expedite the spin-off.
`
`As I mentioned in 2020, when we hired strategic advisors, we also received a number of
`inbound calls expressing interest in our great businesses and creative ways to unlock value
`for all of our stakeholders, which may include divestments. As we have previously stated,
`improving our leverage ratio continues to be a priority and we are focused on that. We are
`planning to increase our EBITDA, as Paul mentioned, which will increase cash decrease
`debt and decrease leverage. We also believe that improving working capital will also help us
`to decrease debt. And we believe pursuing a spin-off that is preceded by an IPO process
`could also potentially accelerate the timing of our B&L spin. To be clear, we are and have
`been actively pursuing all opportunities to expedite leverage improvement and deliver
`shareholder value. And to your answer another investor question, to be clear, we are not
`planning to issue Bausch Healthcare equity at these levels.
`
`To wrap up, we exited 2020 with great momentum and remain strategically focused on
`executing on our business, capitalizing on key growth drivers and catalysts to grow EBITDA,
`improving working capital efficiency, delever our company and unlock shareholder value.
`With that, operator, let's open up the line for questions. Operator, any questions please.
`
`Question-and-Answer Session
`
`Operator
`
`[Operator Instructions] The first question is from Chris Schott from JPMorgan. Please go
`ahead.
`
`Chris Schott
`
`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
`
`Slayback Exhibit 1072, Page 11 of 23
`Slayback v. Eye Therapies - IPR2022-00142
`
`

`

`Great. Thanks so much for the questions. Maybe just coming back on asset divestitures, I
`was just trying to still get a sense - just your view on sense of urgency here. As I think about
`how you balance kind of the speed of unlocking value quickly versus taking your time to
`maximize full value for existing shareholders? I guess I am just trying to get a sense of how
`you think about any asset value slippage, etcetera, that could be lost, I guess, in a sale, but
`could accelerate a separation process [indiscernible] trying to get your hands around kind of
`how you are approaching this process? And maybe a second question on that same topic,
`based on the interest you've seen in your assets so far, is a 2021 separation a stretch at this
`point or is that looking more like a base case outcome?
`
`Joe Papa
`
`Okay. Let me start on the asset divestiture portion of your question. I think clearly, as I stated
`in my comments that we have had a number of inbound interested parties. We have hired
`some advisors to help us on this. And we clearly know that the most important thing that we
`think will unlock value is as we spin the B&L company out as a separate company. We will
`have two great companies, a pure-play eye health company and a diversified international
`pharma business. So, we clearly know that the most important thing that we are seeking to
`do is to spin out the B&L. As you appropriately talked about, we are trying to balance that
`question of speed and getting good value, but we believe the most important thing to do is to
`spin out the B&L business as soon as possible. So, I think the way I will say it, I don't want to
`negotiate on the conference call, but we are seeking to move with speed. We will seek to do
`that, but we certainly want to make sure we get good value for our shareholders. I don't want
`to say maximize full value. I want to say get good value for our shareholders. The important
`point is that we are moving to expedite all those activities.
`
`https://seekingalpha.com/article/4408646-bausch-health-companies-inc-bhc-ceo-joe-papa-on-q4-2020-results-eamings-call-transcript
`
`Slayback Exhibit 1072, Page 12 of 23
`Slayback v. Eye Therapies - IPR2022-00142
`
`

`

`On the question of timing of the overall spin of B&L, we will be ready after the third quarter of
`2021 to have all those requirements that are necessary. We will have the - all of the things
`done from a legal entity point of view, from an organizational design, those activities will all
`be complete. We will make sure at that point that we have a very tax-efficient strategy.
`Clearly, one of the advantages the Bausch Healthcare Company has is our efficiency in our
`tax because of our legal entity structure. Our team has done a great job with that. So, I think
`all of those things will be ready. Obviously, we have to solve the question on leverage. We
`think that the way I will attempt to solve that leverage and what was Paul and I have been
`talking about, I think since August is what are those steps we are going to take. We are going
`to work clearly to increase EBITDA, which will increase cash, decrease debt and obviously
`decrease leverage. We will continue