Bausch Health(BHC) - 2024 Q3 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended September 30, 2024 Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents Bausch Health's unaudited Q3 2024 consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes on key accounting areas Condensed Consolidated Balance Sheets The company's total assets and liabilities decreased, leading to an increased total deficit from December 2023 to September 2024 Financial Position (in millions) | Metric | Sep 30, 2024 (millions) | Dec 31, 2023 (millions) | |:---|:---|:---| | Total Assets | $26,540 | $27,350 | | Total Liabilities | $26,782 | $27,432 | | Total Deficit | $(242) | $(82) | - Total assets decreased by $810 million from December 31, 2023, to September 30, 2024, while total liabilities decreased by $650 million. The total deficit increased from $(82) million to $(242) million[8] Condensed Consolidated Statements of Operations The company reported significant year-over-year revenue and operating income growth, substantially reducing its net loss for both the three and nine months ended September 30, 2024 Consolidated Statements of Operations (in millions, except per share data) | Metric | Three Months Ended Sep 30, 2024 (millions) | Three Months Ended Sep 30, 2023 (millions) | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---|:---|:---| | Revenues | $2,510 | $2,238 | $7,066 | $6,349 | | Operating Income | $318 | $14 | $988 | $601 | | Net Loss Attributable to Bausch Health Companies Inc. | $(85) | $(378) | $(139) | $(553) | | Basic and Diluted Loss Per Share | $(0.23) | $(1.03) | $(0.38) | $(1.52) | - For the three months ended September 30, 2024, revenues increased by $272 million (12.2% YoY), and operating income significantly improved from $14 million to $318 million. Net loss attributable to Bausch Health Companies Inc. decreased from $(378) million to $(85) million[11] - For the nine months ended September 30, 2024, revenues increased by $717 million (11.3% YoY), operating income rose from $601 million to $988 million, and net loss attributable to Bausch Health Companies Inc. decreased from $(553) million to $(139) million[11] Condensed Consolidated Statements of Comprehensive (Loss) Income The company's comprehensive loss improved significantly for the three months ended September 30, 2024, primarily due to favorable foreign currency translation adjustments Consolidated Statements of Comprehensive (Loss) Income (in millions) | Metric | Three Months Ended Sep 30, 2024 (millions) | Three Months Ended Sep 30, 2023 (millions) | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---|:---|:---| | Net Loss | $(92) | $(382) | $(170) | $(564) | | Other Comprehensive Income (Loss) | $54 | $(136) | $(64) | $(2) | | Comprehensive Loss Attributable to Bausch Health Companies Inc. | $(25) | $(527) | $(205) | $(548) | - For the three months ended September 30, 2024, other comprehensive income was $54 million, a significant improvement from a loss of $(136) million in the prior year, primarily due to foreign currency translation adjustments[13] Condensed Consolidated Statements of Shareholders' (Deficit) Equity The total shareholders' deficit increased from January to September 2024, mainly due to accumulated deficit and other comprehensive loss Consolidated Statements of Shareholders' (Deficit) Equity (in millions) | Metric | Balances, Jan 1, 2024 (millions) | Balances, Sep 30, 2024 (millions) | |:---|:---|:---| | Common Shares Amount | $10,423 | $10,489 | | Additional Paid-In Capital | $214 | $201 | | Accumulated Deficit | $(9,778) | $(9,917) | | Accumulated Other Comprehensive Loss | $(1,881) | $(1,947) | | Total Bausch Health Companies Inc. Shareholders' Deficit | $(1,022) | $(1,174) | | Noncontrolling Interest | $940 | $932 | | Total Deficit | $(82) | $(242) | - Total Bausch Health Companies Inc. shareholders' deficit increased from $(1,022) million at January 1, 2024, to $(1,174) million at September 30, 2024, primarily due to accumulated deficit and other comprehensive loss[16] Condensed Consolidated Statements of Cash Flows The company experienced increased operating cash flow and significantly reduced cash used in investing activities, while financing activities shifted to an outflow due to debt repayments Consolidated Statements of Cash Flows (in millions) | Metric | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---| | Net Cash Provided by Operating Activities | $996 | $642 | | Net Cash Used in Investing Activities | $(254) | $(1,997) | | Net Cash (Used in) Provided by Financing Activities | $(953) | $1,554 | | Net (Decrease) Increase in Cash, Cash Equivalents, Restricted Cash and Other Settlement Deposits | $(212) | $189 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $750 | $780 | - Net cash provided by operating activities increased by $354 million to $996 million for the nine months ended September 30, 2024, compared to $642 million in the prior year[18] - Net cash used in investing activities significantly decreased from $(1,997) million in 2023 to $(254) million in 2024, primarily due to lower acquisition spending[18] - Net cash from financing activities shifted from a $1,554 million inflow in 2023 to a $(953) million outflow in 2024, mainly due to debt repayments[18] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the company's financial statements, covering accounting policies, revenue, acquisitions, debt, and legal matters Description of Business Bausch Health Companies Inc. operates as a global, diversified specialty pharmaceutical and medical device company with a significant stake in eye health - Bausch Health Companies Inc. is a global, diversified specialty pharmaceutical and medical device company, primarily focused on gastroenterology, hepatology, neurology, and dermatology. It also holds an approximately 88% ownership in Bausch + Lomb Corporation, focusing on eye health[19] - The Company markets its products directly or indirectly in approximately 90 countries[19] Significant Accounting Policies This section outlines the company's accounting principles, including its plan to separate the Bausch + Lomb business and the evaluation of new accounting standards - The unaudited Condensed Consolidated Financial Statements are prepared in U.S. dollars in accordance with U.S. GAAP for interim financial reporting, consistent with policies used for the annual financial statements[20] - The Company announced a plan to separate its eye health business (Bausch + Lomb) into an independent publicly traded entity, holding approximately 88% of B+L's outstanding common shares as of September 30, 2024. The full separation is subject to debt leverage ratios and necessary approvals[21][22] - New accounting standards issued by FASB, ASU 2023-09 (Income Taxes) and ASU 2023-07 (Segment Reporting), are effective for the Company's 2025 and 2024 annual reports, respectively, with early adoption permitted. The Company is evaluating their impact[27][28] Revenue Recognition The company's revenues are primarily derived from product sales, with gross sales subject to various variable consideration deductions estimated based on market conditions and historical data - Revenues are primarily from product sales in GI, hepatology, neurology, dermatology, and eye health, including branded, generic, OTC, and medical devices. Other revenues include licensing and contract manufacturing[29] - Gross product sales are subject to deductions for variable consideration (discounts, allowances, returns, rebates, chargebacks, distribution fees), which are estimated and adjusted based on market conditions and historical experience[30][32] Variable Consideration Provisions (Nine Months Ended Sep 30, 2024 vs. 2023, in millions) | (in millions) | Jan 1, 2024 | Current Period Provisions | Payments and Credits | Sep 30, 2024 | |:---|:---|:---|:---|:---| | Discounts and Allowances | $191 | $500 | $(501) | $190 | | Returns | $380 | $115 | $(122) | $373 | | Rebates | $1,108 | $2,699 | $(2,459) | $1,348 | | Chargebacks | $216 | $1,465 | $(1,516) | $165 | | Distribution Fees | $44 | $226 | $(196) | $74 | | Total | $1,939 | $5,005 | $(4,794) | $2,150 | | (in millions) | Jan 1, 2023 | Current Period Provisions | Payments and Credits | Sep 30, 2023 | |:---|:---|:---|:---|:---| | Discounts and Allowances | $188 | $457 | $(462) | $183 | | Returns | $427 | $103 | $(147) | $383 | | Rebates | $1,023 | $2,071 | $(2,017) | $1,077 | | Chargebacks | $196 | $1,514 | $(1,501) | $209 | | Distribution Fees | $76 | $190 | $(171) | $95 | | Total | $1,910 | $4,335 | $(4,298) | $1,947 | - The total reserve balances for variable consideration increased from $1,939 million at January 1, 2024, to $2,150 million at September 30, 2024[35] Licensing Agreements and Acquisitions This section details recent strategic acquisitions by Bausch + Lomb, expanding its presence in the dry eye, ophthalmology, and cataract treatment markets - In July 2024, Bausch + Lomb acquired Trukera Medical for approximately $24 million, expanding its dry eye market presence with the ScoutPro device[41] - In September 2023, Bausch + Lomb acquired XIIDRA and other ophthalmology assets from Novartis for an upfront cash payment of $1,750 million, recognizing $1,600 million in identifiable intangible assets[43] - In July 2023, Bausch + Lomb acquired the Blink product line of eye and contact lens drops from Johnson & Johnson Vision for $107 million, aiming to grow its global over-the-counter business[47] - In January 2023, Bausch + Lomb acquired AcuFocus, Inc. for an upfront payment of $35 million, gaining small aperture intraocular technology for cataract treatment[48] Restructuring, Integration and Separation Costs The company's restructuring, integration, and separation costs decreased for the nine-month period ended September 30, 2024 Restructuring, Integration and Separation Costs (Nine Months Ended Sep 30, in millions) | (in millions) | 2024 | 2023 | |:---|:---|:---| | Restructuring and Integration Costs | $23 | $37 | | Separation Costs | $2 | $3 | | Total | $25 | $40 | - Total restructuring, integration, and separation costs decreased from $40 million in 2023 to $25 million in 2024 for the nine-month period[50][53] - Separation-related costs, included in Selling, general and administrative expenses, decreased from $18 million in 2023 to $9 million in 2024[54] Fair Value Measurements and Financial Instruments This section details the fair value measurements of financial assets and liabilities, including acquisition-related contingent consideration and long-term debt Financial Assets and Liabilities Measured at Fair Value (Sep 30, 2024, in millions) | (in millions) | Total | Level 1 | Level 2 | Level 3 | |:---|:---|:---|:---|:---! | Assets: | | | | | | Cash equivalents | $157 | $149 | $8 | $— | | Restricted cash | $31 | $31 | $— | $— | | Foreign currency exchange contracts | $1 | $— | $1 | $— | | Liabilities: | | | | | | Acquisition-related contingent consideration | $285 | $— | $— | $285 | | Cross-currency swaps | $94 | $— | $94 | $— | | Foreign currency exchange contracts | $5 | $— | $5 | $— | - Acquisition-related contingent consideration, measured using Level 3 unobservable inputs, totaled $285 million at September 30, 2024, with a weighted average risk-adjusted discount rate of 8%[58][67] - The fair value of long-term debt was $18,022 million as of September 30, 2024, estimated using Level 2 quoted market prices[69] Inventories The company's net inventories increased from December 2023 to September 2024, primarily driven by an increase in finished goods Inventories, Net (in millions) | Category | Sep 30, 2024 | Dec 31, 2023 | |:---|:---|:---| | Raw materials | $538 | $509 | | Work in process | $108 | $124 | | Finished goods | $1,009 | $911 | | Total Inventories, net | $1,655 | $1,544 | - Total inventories, net, increased by $111 million from $1,544 million at December 31, 2023, to $1,655 million at September 30, 2024, primarily driven by an increase in finished goods[70] Intangible Assets and Goodwill The company's net intangible assets decreased, while goodwill remained stable, with significantly lower impairment charges in 2024 compared to 2023 Intangible Assets, Net (in millions) | Category | Sep 30, 2024 | Dec 31, 2023 | |:---|:---|:---| | Product brands | $3,610 | $4,336 | | Corporate brands | $292 | $352 | | Product rights/patents | $34 | $53 | | Technology and other | $13 | $12 | | Acquired in-process research and development | $5 | $5 | | B&L Trademark | $1,698 | $1,698 | | Total Intangible Assets, net | $5,652 | $6,456 | - Total intangible assets, net, decreased by $804 million from $6,456 million at December 31, 2023, to $5,652 million at September 30, 2024, mainly due to amortization of product and corporate brands[72] - Asset impairments for the nine months ended September 30, 2024, were $6 million, primarily due to the discontinuance of a product brand, significantly lower than $54 million in 2023 which included a $37 million impairment for Uceris Foam[73][74] Goodwill Carrying Amounts by Segment (in millions) | Segment | Dec 31, 2023 | Sep 30, 2024 | |:---|:---|:---| | Bausch + Lomb | $5,314 | $5,320 | | Salix | $3,159 | $3,159 | | International | $862 | $846 | | Solta Medical | $115 | $115 | | Diversified | $1,733 | $1,731 | | Total Goodwill | $11,183 | $11,171 | - Goodwill impairments for the nine months ended September 30, 2024, were $0, compared to $402 million in 2023, which resulted from impairments to the Dermatology ($151 million) and Neurology ($251 million) reporting units[76][81][83] Accrued and Other Current Liabilities Total accrued and other current liabilities increased from December 2023 to September 2024, mainly due to higher product rebates and income taxes payable Accrued and Other Current Liabilities (in millions) | Category | Sep 30, 2024 | Dec 31, 2023 | |:---|:---|:---| | Product rebates | $1,305 | $1,069 | | Product returns | $373 | $380 | | Legal matters and related fees | $337 | $344 | | Employee compensation and benefit costs | $318 | $360 | | Interest | $237 | $236 | | Income taxes payable | $102 | $47 | | Other | $714 | $697 | | Total | $3,386 | $3,133 | - Total accrued and other current liabilities increased by $253 million from $3,133 million at December 31, 2023, to $3,386 million at September 30, 2024, primarily due to an increase in product rebates and income taxes payable[91] Financing Arrangements The company's total debt obligations decreased, and it remains in compliance with financial covenants, with significant debt maturities scheduled for 2025-2028 Principal Amounts of Debt Obligations (in millions) | Category | Sep 30, 2024 | Dec 31, 2023 | |:---|:---|:---| | Senior Secured Credit Facilities | $5,457 | $5,898 | | Senior Secured Notes | $7,306 | $7,306 | | B+L Senior Secured Notes | $1,400 | $1,400 | | 9.00% Intermediate Holdco Secured Notes | $999 | $999 | | Senior Unsecured Notes | $5,734 | $6,397 | | Other | $12 | $12 | | Total Principal Amount | $20,908 | $22,012 | | Less: Current portion of long-term debt | $453 | $450 | | Non-current portion of long-term debt and other | $21,054 | $21,938 | - Total principal amount of debt obligations decreased by $1,104 million from December 31, 2023, to September 30, 2024, primarily due to reductions in Senior Secured Credit Facilities and Senior Unsecured Notes[93] - The Company was in compliance with its financial maintenance covenant as of September 30, 2024, and expects to remain so for the next twelve months[96] - In January and May 2024, the Company repurchased and retired $555 million par value of senior unsecured notes for approximately $530 million, recognizing a net gain of $23 million on extinguishment of debt[142] Maturities of Debt Obligations (in millions) | Year | Amount | |:---|:---| | Remainder of 2024 | $39 | | 2025 | $2,370 | | 2026 | $757 | | 2027 | $6,823 | | 2028 | $7,168 | | 2029 | $1,609 | | Thereafter | $1,593 | | Total debt obligations | $20,359 | Share-Based Compensation The company and Bausch + Lomb amended their incentive plans to authorize additional common shares, with total share-based compensation expenses increasing slightly - Bausch Health's 2014 Omnibus Incentive Plan was amended in May 2024 to authorize an additional 20,000,000 common shares, with approximately 32,688,000 common shares available for future grants as of September 30, 2024[149][150] - Bausch + Lomb's 2022 Omnibus Incentive Plan was amended in May 2024 to increase authorized shares by 14,000,000, totaling 52,000,000 common shares, with approximately 20,900,000 available for future grants as of September 30, 2024[152][154] Share-Based Compensation Expenses (in millions) | Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:---|:---|:---|:---|:---| | Stock options | $4 | $4 | $10 | $14 | | RSUs | $34 | $25 | $97 | $89 | | Total | $38 | $29 | $107 | $103 | Accumulated Other Comprehensive Loss The accumulated other comprehensive loss increased, primarily due to foreign currency translation adjustments Accumulated Other Comprehensive Loss (in millions) | Category | Sep 30, 2024 | Dec 31, 2023 | |:---|:---|:---| | Foreign currency translation adjustment | $(1,929) | $(1,863) | | Pension adjustment, net of tax | $(18) | $(18) | | Total | $(1,947) | $(1,881) | - Accumulated other comprehensive loss increased from $(1,881) million at December 31, 2023, to $(1,947) million at September 30, 2024, primarily due to foreign currency translation adjustments[163] Research and Development Total research and development expenses remained stable for the nine months ended September 30, 2024, with a slight decrease for the three-month period Research and Development Costs (in millions) | Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:---|:---|:---|:---|:---| | Product related research and development | $141 | $146 | $440 | $430 | | Quality assurance | $5 | $7 | $13 | $22 | | Total | $146 | $153 | $453 | $452 | - Total R&D expenses for the three months ended September 30, 2024, decreased by $7 million (5% YoY) to $146 million. For the nine months, R&D expenses remained stable at $453 million[164] Other Expense, Net Other expense, net, significantly increased for both the three and nine months ended September 30, 2024, primarily due to adjustments for legal matters and acquired in-process R&D costs Other Expense, Net (in millions) | Category | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:---|:---|:---|:---|:---| | Litigation and other matters | $188 | $24 | $215 | $(55) | | Acquisition-related contingent consideration | $25 | $26 | $19 | $40 | | Gain on sale of assets, net | $(5) | $(5) | $(10) | $(4) | | Acquired in-process research and development costs | $15 | $— | $18 | $— | | Acquisition-related transaction costs | $2 | $15 | $3 | $18 | | Other, net | $— | $— | $— | $1 | | Total | $225 | $60 | $245 | $— | - Other expense, net, significantly increased to $225 million for the three months ended September 30, 2024, from $60 million in the prior year, primarily due to adjustments for legal matters and acquired in-process R&D costs[165] - For the nine months, other expense, net, was $245 million in 2024, compared to $0 in 2023, driven by litigation adjustments and acquired in-process R&D[165] Income Taxes The provision for income taxes decreased for the nine months ended September 30, 2024, primarily due to a lower income tax provision for ordinary loss and net income tax benefit for discrete items Provision for Income Taxes (in millions) | Period | 2024 | 2023 | |:---|:---|:---| | Nine Months Ended Sep 30 | $128 | $181 | - Provision for income taxes for the nine months ended September 30, 2024, was $128 million, a decrease from $181 million in 2023, primarily due to a lower income tax provision for ordinary loss and net income tax benefit for discrete items[169][170] - The valuation allowance against deferred tax assets increased from approximately $2,254 million at December 31, 2023, to $2,493 million at September 30, 2024[171] - The Company estimates a potential liability of up to $2,100 million (excluding penalties and interest) if unsuccessful in defending against the IRS's proposed disallowance of the 2017 Capital Loss[176] Loss Per Share Basic and diluted loss per share significantly improved for both the three and nine months ended September 30, 2024 Loss Per Share Attributable to Bausch Health Companies Inc. | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:---|:---|:---|:---|:---| | Net loss attributable to Bausch Health Companies Inc. (millions) | $(85) | $(378) | $(139) | $(553) | | Basic and diluted weighted-average common shares outstanding (millions) | 368.4 | 365.4 | 367.7 | 364.5 | | Basic and diluted loss per share | $(0.23) | $(1.03) | $(0.38) | $(1.52) | - Basic and diluted loss per share improved significantly to $(0.23) for the three months ended September 30, 2024, from $(1.03) in the prior year, and to $(0.38) for the nine months, from $(1.52) in the prior year[182] Legal Proceedings The company has accrued $337 million for current loss contingencies related to legal matters, including ongoing securities class actions and patent litigation - As of September 30, 2024, the Company's Condensed Consolidated Balance Sheets includes accrued current loss contingencies of $337 million related to probable and reasonably estimable legal matters[187] - The U.S. District Court for the Northern District of Iowa unsealed a qui tam complaint against the Company regarding sales and marketing of dermatology products, with the U.S. and states declining to intervene[188] - The Company settled the consolidated securities class action in 2019, which became final in 2021. However, 21 individual opt-out actions remain pending in the District of New Jersey, with one case (GMO Trust) recently settled[190][193][196] - The Norwich Appeal Decision affirmed the injunction preventing FDA approval of the Norwich First ANDA for Xifaxan until October 2029. Petitions for writ of certiorari were filed with the Supreme Court in September 2024[74][223] - The Shower to Shower Products Liability Litigation involves 25 pending lawsuits. Johnson & Johnson and its affiliates have indemnification obligations to the Company for these claims[241][243] - A California consumer protection action against the Company and Johnson & Johnson regarding talcum powder products was dismissed with prejudice on October 23, 2024, following a 42-state Attorneys General settlement[251] Segment Information The company operates in five reportable segments, with Bausch + Lomb and Solta Medical showing strong revenue growth for the three and nine months ended September 30, 2024 - The Company operates in five reportable segments: Salix (U.S. GI products, 80% from Xifaxan), International (non-U.S. branded/generic pharma, OTC), Solta Medical (aesthetic medical devices), Diversified (U.S. neurology, dermatology, generics, dentistry), and Bausch + Lomb (global eye health)[255][256][257] Segment Revenues (in millions) | Segment | Three Months Ended Sep 30, 2024 (millions) | Three Months Ended Sep 30, 2023 (millions) | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---|:---|:---| | Salix | $642 | $614 | $1,699 | $1,667 | | International | $291 | $275 | $832 | $781 | | Solta Medical | $112 | $83 | $302 | $244 | | Diversified | $269 | $259 | $722 | $684 | | Bausch + Lomb | $1,196 | $1,007 | $3,511 | $2,973 | | Total Revenues | $2,510 | $2,238 | $7,066 | $6,349 | Segment Profits (in millions) | Segment | Three Months Ended Sep 30, 2024 (millions) | Three Months Ended Sep 30, 2023 (millions) | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---|:---|:---| | Salix | $436 | $429 | $1,142 | $1,129 | | International | $105 | $91 | $278 | $236 | | Solta Medical | $53 | $33 | $140 | $114 | | Diversified | $189 | $172 | $469 | $417 | | Bausch + Lomb | $283 | $244 | $799 | $699 | | Total Segment Profits | $1,066 | $969 | $2,828 | $2,595 | - For the three months ended September 30, 2024, Bausch + Lomb segment revenue increased by 19% YoY to $1,196 million, and Solta Medical segment revenue increased by 35% YoY to $112 million[261] - For the nine months ended September 30, 2024, Bausch + Lomb segment revenue increased by 18% YoY to $3,511 million, and Solta Medical segment revenue increased by 24% YoY to $302 million[261] Revenues by Geographic Region (in millions) | Region | Three Months Ended Sep 30, 2024 (millions) | Three Months Ended Sep 30, 2023 (millions) | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---|:---|:---| | U.S. and Puerto Rico | $1,535 | $1,358 | $4,227 | $3,738 | | China | $132 | $113 | $351 | $315 | | Canada | $104 | $92 | $293 | $268 | | Poland | $92 | $82 | $256 | $232 | | Mexico | $88 | $90 | $248 | $234 | | France | $52 | $49 | $178 | $169 | | Japan | $46 | $47 | $136 | $145 | | Russia | $42 | $35 | $117 | $105 | | Germany | $40 | $34 | $125 | $119 | | South Korea | $38 | $24 | $102 | $69 | | United Kingdom | $34 | $32 | $100 | $92 | | Italy | $23 | $20 | $71 | $64 | | Spain | $21 | $20 | $71 | $67 | | Other | $263 | $242 | $791 | $732 | | Total | $2,510 | $2,238 | $7,066 | $6,349 | Major Customers (Percentage of Total Revenues) | Customer | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:---|:---|:---| | Cencora Inc. | 19% | 19% | | McKesson Corporation | 16% | 15% | | Cardinal Health, Inc. | 14% | 13% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on Bausch Health's Q3 2024 financial condition and results, covering business overview, strategic initiatives, performance highlights, segment analysis, and liquidity Introduction This section introduces the Management's Discussion and Analysis, emphasizing its forward-looking statements and the need to read it with the interim financial statements - The Management's Discussion and Analysis (MD&A) should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements for the quarter ended September 30, 2024[271] - The MD&A contains forward-looking statements regarding business strategy, product pipeline, financial performance, and the B+L Separation[271] Overview Bausch Health is a global, diversified specialty pharmaceutical and medical device company focused on strategic capital management, growth drivers, and the planned separation of Bausch + Lomb - Bausch Health is a global, diversified specialty pharmaceutical and medical device company with five reportable segments: Salix, International, Solta Medical, Diversified, and Bausch + Lomb[273][274][275][276] - The Company plans to separate its eye health business, Bausch + Lomb, into an independent publicly traded entity, holding approximately 88% of B+L's outstanding common shares as of October 23, 2024. The separation aims to allow each company to focus on core businesses and optimize capital allocation[278][279][280][281] - Strategic focus includes managing capital structure, directing capital to core businesses, improving patient access, divesting non-core assets, and investing in sustainable growth drivers[283][284][285] - In January and May 2024, the Company repurchased and retired $555 million of senior unsecured notes for approximately $530 million[289] - Bausch + Lomb acquired XIIDRA and other ophthalmology assets in September 2023, and the Blink OTC product line in July 2023, to expand its dry eye and global OTC businesses[290][302] - Key R&D projects include Phase 3 studies for Rifaximin (RED-C) for hepatic encephalopathy, a Phase 2 study for Amiselimod for ulcerative colitis, and new product launches like CABTREO Topical Gel for acne and SiHy Daily contact lenses[296][297][298] Business Trends This section discusses various business trends, including geopolitical impacts, tax regulations, healthcare reform, potential loss of exclusivity, and compliance status - The Russia-Ukraine war and Middle East regional conflict have not materially impacted the Company's revenues, which were approximately 2% from Russia, Ukraine, and Belarus for the nine months ended September 30, 2024 and 2023[314][315] - The OECD's global minimum corporate tax rate (Pillar 2) is effective in many jurisdictions starting January 2024. The estimated impact on the Company's tax provision is not material, but future implementation could have a material effect[318][319] - Health care reform, including the Inflation Reduction Act (IRA) and state-level price controls, continues to create pricing pressures and regulatory changes for pharmaceutical products[320][322][323] - Certain branded products, including Aplenzin, Bryhali, Relistor Subcutaneous, and Xifaxan in the U.S., and Jublia in Canada, could face loss of exclusivity (LOE) and generic competition between 2026 and 2028[326] - All global operations and facilities are in good compliance standing with relevant health authorities, with FDA sites rated as No Action Indicated or Voluntary Action Indicated[331] Financial Performance Highlights The company achieved significant revenue and operating income growth for both the three and nine months ended September 30, 2024, driven by higher revenues and reduced impairments Financial Performance Summary (in millions, except per share data) | Metric | Three Months Ended Sep 30, 2024 (millions) | Three Months Ended Sep 30, 2023 (millions) | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---|:---|:---| | Revenues | $2,510 | $2,238 | $7,066 | $6,349 | | Operating Income | $318 | $14 | $988 | $601 | | Loss before income taxes | $(21) | $(326) | $(42) | $(383) | | Net loss attributable to Bausch Health Companies Inc. | $(85) | $(378) | $(139) | $(553) | | Basic and diluted loss per share | $(0.23) | $(1.03) | $(0.38) | $(1.52) | - For the three months ended September 30, 2024, revenues increased by $272 million (12% YoY), and operating income increased by $304 million, primarily due to higher revenues and a decrease in goodwill impairments[332][334][335] - For the nine months ended September 30, 2024, revenues increased by $717 million (11% YoY), and operating income increased by $387 million, driven by higher revenues and reduced goodwill and asset impairments[332][339][340] Results of Operations This section provides a detailed analysis of the company's revenues and expenses, highlighting key drivers of financial performance for the reporting periods Revenues (Three Months) Total revenues for the three months ended September 30, 2024, increased by 12%, driven by higher volumes, acquisitions, and improved net pricing - Total revenues for the three months ended September 30, 2024, were $2,510 million, an increase of $272 million (12%) compared to $2,238 million in 2023[345] - The increase was driven by higher volumes ($115 million), incremental sales from acquisitions ($96 million, primarily XIIDRA), and improved net pricing ($86 million), partially offset by divestitures/discontinuations ($16 million) and unfavorable foreign currency impact ($9 million)[345] Provisions to Reduce Gross Product Sales to Net Product Sales (Three Months Ended Sep 30, in millions) | (in millions) | 2024 Amount | 2024 Pct. | 2023 Amount | 2023 Pct. | |:---|:---|:---|:---|:---! | Gross product sales | $4,122 | 100.0% | $3,696 | 100.0% | | Discounts and allowances | $175 | 4.2% | $160 | 4.3% | | Returns | $26 | 0.6% | $24 | 0.6% | | Rebates | $897 | 21.9% | $707 | 19.2% | | Chargebacks | $463 | 11.2% | $525 | 14.2% | | Distribution fees | $79 | 1.9% | $67 | 1.8% | | Total provisions | $1,640 | 39.8% | $1,483 | 40.1% | | Net product sales | $2,482 | 60.2% | $2,213 | 59.9% | | Other revenues | $28 | | $25 | | | Revenues | $2,510 | | $2,238 | | - Total provisions as a percentage of gross product sales decreased by 0.3 percentage points to 39.8% for the three months ended September 30, 2024, primarily due to lower chargebacks, partially offset by higher rebates from acquisitions and new product launches[348] Expenses (Three Months) Operating expenses for the three months ended September 30, 2024, saw increases in cost of goods sold and SG&A, while R&D decreased and goodwill impairments were zero - Cost of goods sold increased by $70 million (11%) to $682 million, primarily due to acquisition-related costs, higher unfavorable manufacturing variances, and increased volumes[351] - Selling, general and administrative (SG&A) expenses increased by $135 million (19%) to $850 million, mainly due to higher selling, advertising, and promotion expenses related to Bausch + Lomb's XIIDRA acquisition and MIEBO launch[354] - Research and development (R&D) expenses decreased by $7 million (5%) to $146 million[356] - Amortization of intangible assets increased by $21 million (8%) to $274 million, driven by assets acquired by Bausch + Lomb in 2023[358] - Goodwill impairments were $0 for the three months ended September 30, 2024, compared to $402 million in 2023[361] - Restructuring, integration, and separation costs decreased by $13 million to $1 million[367] - Other expense, net, increased by $165 million to $225 million, primarily due to adjustments for legal matters and acquired in-process R&D costs[371] Non-Operating Income and Expense (Three Months) Non-operating expenses for the three months ended September 30, 2024, included increased interest expense and an unfavorable change in income tax provision - Interest expense increased by $7 million (2%) to $346 million, mainly due to interest associated with Bausch + Lomb's Secured Notes and Term Facility related to the XIIDRA acquisition[374] - Foreign exchange and other showed a favorable change of $7 million, resulting in $0 for the three months ended September 30, 2024, compared to a loss of $7 million in 2023[377] - Provision for income taxes increased by $15 million to $71 million, an unfavorable change[378] Reportable Segment Revenues and Profits (Three Months) All segments reported revenue and profit growth for the three months ended September 30, 2024, with Bausch + Lomb and Solta Medical showing strong performance Segment Revenues and Profits (Three Months Ended Sep 30, 2024 vs. 2023, in millions) | Segment | 2024 Revenues (millions) | 2023 Revenues (millions) | Revenue Change (%) | 2024 Profits (millions) | 2023 Profits (millions) | Profit Change (%) | |:---|:---|:---|:---|:---|:---|:---! | Salix | $642 | $614 | 5% | $436 | $429 | 2% | | International | $291 | $275 | 6% | $105 | $91 | 15% | | Solta Medical | $112 | $83 | 35% | $53 | $33 | 61% | | Diversified | $269 | $259 | 4% | $189 | $172 | 10% | | Bausch + Lomb | $1,196 | $1,007 | 19% | $283 | $244 | 16% | | Total | $2,510 | $2,238 | 12% | $1,066 | $969 | 10% | - Organic revenue (non-GAAP) growth for the three months ended September 30, 2024, was 9%, with Bausch + Lomb showing 10% growth and Solta Medical 36% growth[391] - Salix segment revenue increased by 5% to $642 million, primarily due to increased net realized pricing for Xifaxan. Segment profit increased by 2% to $436 million[392] - Solta Medical segment revenue increased by 35% to $112 million, primarily due to higher volumes. Segment profit increased by 61% to $53 million[395][399] - Bausch + Lomb segment revenue increased by 19% to $1,196 million, driven by acquisitions ($96 million), higher volumes ($81 million), and improved net pricing ($20 million). Segment profit increased by 16% to $283 million[402][403] Revenues (Nine Months) Total revenues for the nine months ended September 30, 2024, increased by 11%, primarily due to higher volumes, acquisitions, and improved net pricing - Total revenues for the nine months ended September 30, 2024, were $7,066 million, an increase of $717 million (11%) compared to $6,349 million in 2023[404] - The increase was primarily due to higher volumes ($309 million), incremental sales from acquisitions ($288 million, primarily XIIDRA), and improved net pricing ($210 million), partially offset by divestitures/discontinuations ($48 million) and unfavorable foreign currency impact ($42 million)[404] Provisions to Reduce Gross Product Sales to Net Product Sales (Nine Months Ended Sep 30, in millions) | (in millions) | 2024 Amount | 2024 Pct. | 2023 Amount | 2023 Pct. | |:---|:---|:---|:---|:---! | Gross product sales | $11,995 | 100.0% | $10,616 | 100.0% | | Discounts and allowances | $500 | 4.2% | $457 | 4.3% | | Returns | $115 | 1.0% | $103 | 1.0% | | Rebates | $2,699 | 22.4% | $2,071 | 19.5% | | Chargebacks | $1,465 | 12.2% | $1,514 | 14.2% | | Distribution fees | $226 | 1.9% | $190 | 1.8% | | Total provisions | $5,005 | 41.7% | $4,335 | 40.8% | | Net product sales | $6,990 | 58.3% | $6,281 | 59.2% | | Other revenues | $76 | | $68 | | | Revenues | $7,066 | | $6,349 | | - Total provisions as a percentage of gross product sales increased by 0.9 percentage points to 41.7% for the nine months ended September 30, 2024, primarily due to higher rebates from acquisitions and new product launches, partially offset by lower chargebacks[406] Expenses (Nine Months) Operating expenses for the nine months ended September 30, 2024, increased in cost of goods sold and SG&A, while goodwill and asset impairments significantly decreased - Cost of goods sold increased by $194 million (11%) to $2,018 million, driven by acquisition-related costs, higher manufacturing variances, and increased volumes, partially offset by the absence of Injector Recall charges from 2023[407] - Selling, general and administrative (SG&A) expenses increased by $325 million (15%) to $2,476 million, mainly due to higher selling, advertising, and promotion expenses related to Bausch + Lomb's XIIDRA acquisition and MIEBO launch[409] - Research and development (R&D) expenses remained stable at $453 million[410] - Amortization of intangible assets increased by $23 million (3%) to $818 million, primarily due to assets acquired by Bausch + Lomb in 2023[411] - Goodwill impairments were $0 for the nine months ended September 30, 2024, compared to $402 million in 2023[413] - Asset impairments decreased by $48 million (89%) to $6 million, compared to $54 million in 2023, which included a $37 million impairment for Uceris Foam[415][416] - Restructuring, integration, and separation costs decreased by $15 million (38%) to $25 million[417] - Other expense, net, was $245 million in 2024, compared to $0 in 2023, primarily due to adjustments for legal matters and acquired in-process R&D costs[420] Non-Operating Income and Expense (Nine Months) Non-operating expenses for the nine months ended September 30, 2024, included increased interest expense, a gain on debt extinguishment, and a favorable change in income tax provision - Interest expense increased by $86 million (9%) to $1,051 million, mainly due to interest associated with Bausch + Lomb's Secured Notes and Term Facility related to the XIIDRA acquisition[422] - A gain on extinguishment of debt of $23 million was recognized in 2024 due to repurchases of senior unsecured notes, with no comparable gain in 2023[423] - Foreign exchange and other showed a favorable net change of $12 million, resulting in a loss of $26 million in 2024 compared to a loss of $38 million in 2023[424] - Provision for income taxes decreased by $53 million to $128 million, a favorable change[425] Reportable Segment Revenues and Profits (Nine Months) All segments reported revenue and profit growth for the nine months ended September 30, 2024, with Bausch + Lomb and Solta Medical leading the growth Segment Revenues and Profits (Nine Months Ended Sep 30, 2024 vs. 2023, in millions) | Segment | 2024 Revenues (millions) | 2023 Revenues (millions) | Revenue Change (%) | 2024 Profits (millions) | 2023 Profits (millions) | Profit Change (%) | |:---|:---|:---|:---|:---|:---|:---! | Salix | $1,699 | $1,667 | 2% | $1,142 | $1,129 | 1% | | International | $832 | $781 | 7% | $278 | $236 | 18% | | Solta Medical | $302 | $244 | 24% | $140 | $114 | 23% | | Diversified | $722 | $684 | 6% | $469 | $417 | 12% | | Bausch + Lomb | $3,511 | $2,973 | 18% | $799 | $699 | 14% | | Total | $7,066 | $6,349 | 11% | $2,828 | $2,595 | 9% | - Organic revenue (non-GAAP) growth for the nine months ended September 30, 2024, was 8%, with Bausch + Lomb showing 10% growth and Solta Medical 26% growth[430] - Salix segment revenue increased by 2% to $1,699 million, driven by increased net realized pricing and volumes. Segment profit increased by 1% to $1,142 million[432][433] - Solta Medical segment revenue increased by 24% to $302 million, primarily due to higher volumes in the Asia-Pacific region. Segment profit increased by 23% to $140 million[436][437] - Bausch + Lomb segment revenue increased by 18% to $3,511 million, driven by acquisitions ($288 million), higher volumes ($226 million), and improved net pricing ($83 million). Segment profit increased by 14% to $799 million[440][441] Liquidity and Capital Resources The company's liquidity improved with increased operating cash flow and reduced investing activities, while managing debt obligations and maintaining compliance with financial covenants Cash Flows Summary (in millions) | Metric | Nine Months Ended Sep 30, 2024 (millions) | Nine Months Ended Sep 30, 2023 (millions) | |:---|:---|:---| | Net cash provided by operating activities | $996 | $642 | | Net cash used in investing activities | $(254) | $(1,997) | | Net cash (used in) provided by financing activities | $(953) | $1,554 | | Net (decrease) increase in cash, cash equivalents, restricted cash and other settlement Deposits | $(212) | $189 | | Cash, cash equivalents and restricted cash, End of Period | $750 | $780 | - Net cash provided by operating activities increased by $354 million to $996 million for the nine months ended September 30, 2024, primarily due to improved operating performance and favorable changes in operating assets and liabilities[442][443][444] - Net cash used in investing activities significantly decreased from $(1,997) million in 2023 to $(254) million in 2024, mainly due to lower acquisition spending[446][447] - Net cash used in financing activities was $(953) million in 2024, a shift from $1,554 million provided in 2023, primarily due to $1,049 million in debt repayments, partially offset by $155 million in new debt issuance[447][448] - The Company's primary liquidity sources are cash, cash from operations, revolving credit facilities, and potential debt/equity issuances. $350 million of cash is held by Bausch + Lomb entities and is generally not available to Bausch Health[450][451] - Total debt obligations decreased by $647 million to $20,359 million as of September 30, 2024. The weighted average stated interest rate was 7.88% (6.37% as reported in financial statements due to 2022 Exchange accounting)[458][481] - The Company expects to meet its $1,680 million 5.50% Senior Secured Notes due November 2025 using existing liquidity. Future debt obligations, including $535 million of 9.00% Senior Unsecured Notes due December 2025, depend on operating performance and balance sheet improvements[455][456] - As of October 30, 2024, the Company had approximately $950 million remaining availability under the 2027 Revolving Credit Facility and $300 million under the AR Credit Facility. Bausch + Lomb had $121 million remaining availability under its Revolving Credit Facility[473][474][475] - The Company was in compliance with its financial maintenance covenant as of September 30, 2024, and expects to remain so for the next twelve months[476] Credit Ratings as of October 30, 2024 | Rating Agency | Bausch Health Corporate Rating | Bausch Health Senior Secured Rating | Bausch Health Senior Unsecured Rating | Bausch Health Outlook | Bausch + Lomb Corporate Rating | Bausch + Lomb Senior Secured Rating | Bausch + Lomb Outlook | |:---|:---|:---|:---|:---|:---|:---|:---! | Moody's | Caa2 | Caa1 | Ca | Stable | | B1 | Stable | | Standard & Poor's | CCC+ | B- | CCC | Negative | B- | B- | Positive | | Fitch | CCC | B | C | No Outlook | B- | BB- | Rating Watch Evolving | - No material changes to off-balance sheet arrangements. Future cash requirements include $400 million for debt service (Q4 2024), $100 million for capital expenditures (Q4 2024), and $10 million for contingent consideration payments (Q4 2024)[485][487] Outstanding Share Data As of October 25, 2024, Bausch Health had over 367 million common shares issued and outstanding, along with various stock options and restricted share units - As of October 25, 2024, Bausch Health had 367,803,401 issued and outstanding common shares[497] - The Company also had 8,367,591 stock options, 9,266,526 time-based restricted share units, and 1,781,092 performance-based restricted share units outstanding, with a maximum of 3,364,737 common shares issuable upon vesting of performance-based units[497] Critical Accounting Policies and Estimates No significant changes were made to critical accounting policies, but the company continues to monitor for potential goodwill impairment risks in certain reporting units - No significant changes were made to critical accounting policies and estimates during the three months ended September 30, 2024[498] - The Company continues to monitor market conditions and business performance for its Dermatology, Neurology, and Generics reporting units, as future deterioration could lead to material goodwill impairment charges[499] New Accounting Standards No new accounting standards were adopted during the nine months ended September 30, 2024, with future standards under evaluation - There were no new accounting standards adopted during the nine months ended September 30, 2024[27] Forward-Looking Statements This section highlights various forward-looking statements and associated risks, including those related to business strategy, financial performance, and ongoing litigation - This section outlines various forward-looking statements related to business strategy, product pipeline, financial performance, the B+L Separation, litigation outcomes, market conditions, and regulatory changes[503][504] - Key risks and uncertainties include market and economic conditions, ongoing litigation (especially related to B+L IPO and separation), substantial debt, generic competition, and regulatory oversight[505][506][507][508][509][511][512] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses the company's exposure to interest rate and inflation risks, noting no material changes since the last annual report - As of September 30, 2024, the Company had $14,551 million in fixed-rate debt and $5,808 million in variable-rate debt[516] - A 100 basis-point increase in interest rates would result in an annualized pre-tax effect of approximately $58 million in the Condensed Consolidated Statements of Operations and Cash Flows due to variable-rate debt[516] - The Company's ability to raise prices in anticipation of inflation may be limited in some markets due to price control restrictions on pharmaceutical products[517] Item 4. Controls and Procedures Confirms the effectiveness of the company's disclosure controls and procedures, reporting no material changes in internal control over financial reporting - Management, with the participation of the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2024[518] - There were no material changes in internal control over financial reporting during the three months ended September 30, 2024[519] Part II. Other Information This section provides additional disclosures on legal proceedings, risk factors, equity sales, and other corporate information Item 1. Legal Proceedings This section refers to Note 17 of the unaudited interim Condensed Consolidated Financial Statements for detailed information on legal proceedings - For information concerning legal proceedings, refer to Note 17, 'LEGAL PROCEEDINGS' in the unaudited interim Condensed Consolidated Financial Statements[521] Item 1A. Risk Factors States no material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - No material changes to the risk factors as disclosed in Item 1A. 'Risk Factors' included in the Annual Report on Form 10-K for the year ended December 31, 2023[522] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities by the company during the three months ended September 30, 2024 - There were no sales of equity securities by the Company during the three months ended September 30, 2024[523] Item 3. Defaults Upon Senior Securities States that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the reporting period[523] Item 4. Mine Safety Disclosures Indicates that there are no mine safety disclosures to report - No mine safety disclosures are applicable or required[523] Item 5. Other Information Details an update to the Executive Officer Severance Arrangement, effective October 25, 2024, which modifies cash severance payments - Effective October 25, 2024, the cash severance payment for Executive Officers (excluding the CEO) in a qualifying termination will be one and a half times the sum of annual base salary and annual target incentive[524] - This updated severance provision is approved through December 31, 2025, with all other employment agreement terms remaining unchanged[525] Item 6. Exhibits Lists the exhibits filed with the Form 10-Q, including employment agreements, certifications, and XBRL-related documents - Exhibits include employment agreements, certifications by the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[527] Signatures Contains the signatures of the Chief Executive Officer and Chief Financial Officer, certifying the filing of the report - The report is signed by Thomas J. Appio, Chief Executive Officer, and Jean-Jacques Charhon, Executive Vice President, Chief Financial Officer, on October 30, 2024[529]