Thomas Appio: Thank you, Garen, and welcome to everyone joining our earnings call today. Our year concluded with an impressive eleventh consecutive quarter of growth in both revenue and adjusted EBITDA, reflecting our organization's consistent performance. This success is powered by our global team’s unwavering commercial focus and operational excellence, as full year results exceeded our guidance on all key metrics. The fourth quarter gave us an opportunity to reflect on the progress we have made over the ...

Bausch Health (NYSE:BHC) Q4 2025 Earnings call February 18, 2026 05:00 PM ET Company ParticipantsGaren Sarafian - VP and Head of Investor RelationsGlen Santangelo - Managing DirectorJJ Charhon - EVP and CFOJonathan Sadeh - CMO and Head of Research and DevelopmentLes Sulewski - VP of Spec Pharma and Biotech Equity ResearchThomas Appio - CEOUmer Raffat - Equity Research of Biotech, Pharma-major, and Specialty PharmaConference Call ParticipantsMichael Freeman - Equity Research AnalystNone - AnalystNone - Analy ...

Financial Data and Key Metrics Changes - Bausch Health reported a revenue increase of 9% in Q4 2025 compared to Q4 2024, reaching $2,796 million, with adjusted EBITDA rising by 13% to $1,052 million [10][11] - For the full year 2025, revenue grew by 7% and adjusted EBITDA by 10%, indicating strong operational performance [18][19] - Adjusted gross margin was 71.6%, down 80 basis points year-over-year, while adjusted operating expenses increased by $75 million to $1,033 million [10][11] Business Line Data and Key Metrics Changes - Salix revenue in Q4 was $693 million, a 9% increase year-over-year, driven by strong demand and promotional efforts [12] - Solta Medical segment revenues decreased by 1% to $137 million, impacted by distributor transition in China, but would have shown mid-single-digit growth without this effect [15][16] - The diversified segment saw a 12% revenue increase to $255 million, primarily due to improved net pricing [16] Market Data and Key Metrics Changes - International segment revenues were $306 million, up 10% on a reported basis, with EMEA and LatAm showing double-digit growth, while Canada contracted by 6% [13][14] - The Latin American market returned to growth with a 22% revenue increase, while Canada faced challenges due to increased generic competition [14][15] Company Strategy and Development Direction - The company aims to enhance operational assets through innovation and optimize brand growth globally, with a focus on business development opportunities [21][22] - The acquisition of Shibo's aesthetics distribution platform in China is expected to strengthen the company's market presence and enhance direct engagement with providers [7][26] - Strategic priorities for 2026 include maximizing shareholder value and optimizing the capital structure following significant refinancing [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future growth, citing strong cash generation and improved capital structure, allowing for proactive business development [5][7] - The company anticipates a stronger growth rate in the first half of 2026, with a revenue guidance range of $5.25 billion to $5.4 billion [20][21] - Management acknowledged the disappointment regarding the RED-C trial results but remains focused on advancing other development opportunities [9] Other Important Information - The company achieved over $1 billion in adjusted operating cash flow for the year and reduced net debt by approximately $320 million in Q4 [7][12] - The debt maturity profile was improved by approximately $1.7 billion through a debt exchange, providing additional flexibility for future opportunities [7][19] Q&A Session Summary Question: Post RED-C readout, what is the updated decision framework for separation and debt repayments? - Management stated there is no change in focus, continuing to prioritize debt repayment and reinvestment in the business [33] Question: Can you provide more details about business development plans? - Management is screening various assets for potential acquisitions, leveraging their strong commercial team [36][37] Question: What is the impact of the Shibo integration on revenue and EBITDA growth? - The integration is progressing well, with a minor EBITDA impact of $10-$15 million due to accounting adjustments [45][47] Question: What are the expectations for Xifaxan generics? - Management confirmed that a generic is expected by January 1, 2028, and is focused on maximizing current value [84] Question: What is the EBITDA trajectory for 2027? - Management indicated that 2027 EBITDA would likely be around $2.7 billion, reflecting a dip compared to 2025 [86]

Core Insights - Bausch Health Companies Inc. reported its tenth consecutive quarter of revenue and adjusted EBITDA growth, with a 7% year-over-year revenue increase on a reported basis and a 5% increase on an organic basis for the third quarter of 2025 [5][7][11] - The company raised its full-year guidance for revenue, adjusted EBITDA, and adjusted cash flow from operations due to strong performance in the first nine months of the year [6][18][19] Financial Performance - Consolidated revenue for the third quarter was $2.681 billion, reflecting a 7% increase on a reported basis and a 5% increase on an organic basis compared to the same period last year [10] - Adjusted EBITDA was $986 million, an increase of $77 million or 8% year-over-year, while adjusted operating cash flow was $508 million [10] - For Bausch Health excluding Bausch + Lomb, revenue was $1.4 billion, up 7% on a reported basis and 5% on an organic basis, with adjusted EBITDA of $773 million, reflecting a 7% increase [11][12] Segment Performance - The Solta and Salix businesses showed strong performance, with Solta achieving 25% growth and Salix achieving 12% growth on a reported basis [7][12] - XIFAXAN revenue grew 16% in the third quarter, driven by volume growth and a strong marketing campaign [12][23] - The International segment saw mixed performance, with EMEA growing by 12% while Canada and LATAM experienced declines of 8% and 17%, respectively [14] Strategic Initiatives - The company closed its acquisition of Direct Corporation, enhancing its R&D pipeline and focusing on innovation to drive future growth [30] - Bausch Health is committed to optimizing its capital structure, having reduced debt by approximately $600 million [6][21] - The company is focused on executing its five strategic priorities: people, growth, efficiency, innovation, and unlocking value [22] Guidance and Outlook - Full-year revenue is now expected to be between $5 billion and $5.1 billion, representing a 4% increase year-over-year [18] - Adjusted EBITDA outlook is now expected to be between $2.7 billion and $2.75 billion, indicating a 7% increase versus 2024 [19] - Adjusted operating cash flow is projected to be between $975 million and $1.025 billion, reflecting a $150 million increase in the midpoint of the range [19]

Financial Data and Key Metrics Changes - Bausch Health reported a revenue of $2.681 billion for Q3 2025, reflecting a 7% increase on a reported basis and a 5% increase on an organic basis compared to the same period last year [8][9] - Adjusted EBITDA was $986 million, an increase of $77 million or 8% year-over-year, while adjusted operating cash flow was $508 million [8][9] - The company reduced its debt by approximately $600 million using cash on hand, leading to an increase in full-year guidance for revenue, adjusted EBITDA, and adjusted operating cash flow [6][9] Business Line Data and Key Metrics Changes - The Solta business achieved a 25% growth on a reported basis and 24% on an organic basis, while Salix delivered a 12% growth on a reported basis and 11% on an organic basis [7][10] - XIFAXAN revenue grew 16% in Q3, with volume up 9%, driven by strong performance in the AI-driven customer insights engine [10][20] - The diversified segment saw revenues decrease by 4% on a reported basis and 6% on an organic basis, primarily due to challenges in the neurology business [14] Market Data and Key Metrics Changes - International segment revenues were $286 million, a decrease of 2% on a reported basis and 4% on an organic basis, with mixed performance across geographies [11] - EMEA led the international segment with a 12% increase, while Canada and LatAm contracted by 8% and 17%, respectively [11] Company Strategy and Development Direction - The company is focused on five strategic priorities: people, growth, efficiency, innovation, and unlocking value, which guide its vision for the future [18] - Bausch Health is committed to enhancing its patient assistance program while exiting the Medicaid and 340B channels to optimize sales channels [75] - The acquisition of DURECT Corporation is expected to enhance the R&D pipeline and support innovation and growth priorities [24][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a dynamic macro backdrop and achieve financial targets [6][18] - The company anticipates continued growth in its Salix business and is optimistic about the future potential of its Solta Medical segment [21][22] Other Important Information - The company raised its full-year guidance for revenue to between $5 billion and $5.1 billion, with adjusted EBITDA expected to be between $2.7 billion and $2.75 billion [15][16] - The company is assessing all initiatives for driving shareholder value creation following a significant refinancing transaction [16] Q&A Session Summary Question: Revenue growth for XIFAXAN outpacing script growth - Management explained that the disconnect is due to a one-time benefit associated with gross-to-net accrual and strong new patient starts [29][31] Question: Dynamics of XIFAXAN in relation to CMS negotiations - Management confirmed ongoing fruitful negotiations with CMS and expects pricing to be published on November 30, 2025 [34][35] Question: Revised guidance and one-time impacts - Management acknowledged one-time adjustments in Q3 but indicated that the fourth quarter is expected to align with prior expectations [44][45] Question: Impact of IRA on commercial dynamics - Management clarified that the renegotiation impacts 2027 and does not change the commercial dynamics significantly [55] Question: Benefits of exiting the 340B program - Management highlighted that exiting the program allows for an enhanced patient assistance program, providing better access to medications for eligible patients [75][76] Question: Debt refinancing and deleveraging strategy - Management outlined that free cash flow and potential asset sales will be key sources for deleveraging the company [80][81]

Financial Data and Key Metrics Changes - Revenue for the second quarter was $2,530,000,000, up 5% on a reported basis and 4% on an organic basis compared to the same period a year ago [20][21] - Adjusted EBITDA was $871,000,000, an increase of $45,000,000 or 5% year over year [21] - Adjusted operating cash flow was $442,000,000, reflecting strong operational performance [21] Business Line Data and Key Metrics Changes - Salix revenues were $627,000,000, an increase of 12% compared to the same period last year, driven by favorable net pricing and strong volume performance [23] - Solta revenues were $128,000,000, an increase of 25% on a reported basis and 26% on an organic basis, primarily fueled by South Korea [25] - The diversified segment revenues were $219,000,000, a decrease of 13% compared to the same period a year ago, impacted by one-time pricing adjustments in neurology and dermatology [27] Market Data and Key Metrics Changes - EMEA achieved 6% organic growth in the second quarter, marking its tenth consecutive quarter of organic growth [11] - Canada experienced double-digit growth driven by promoted products, with a 12% increase in the top line [24] - LATAM's performance was softer due to ongoing macroeconomic challenges and partial channel destocking [24] Company Strategy and Development Direction - The company is focused on unlocking value, growth, and optimizing its capital structure, with a commitment to R&D and business development [30][31] - The acquisition of Direct Corporation aims to enhance the development of treatments for alcohol hepatitis, showcasing the company's commitment to addressing unmet medical needs in hepatology [17][18] - The company continues to evaluate opportunities to maximize returns for stakeholders and improve its capital structure [7][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute strategic priorities and deliver value for stakeholders, despite a more uncertain macro environment [4][20] - The company reaffirmed its full-year 2025 guidance for revenue and adjusted EBITDA, indicating a positive outlook for the remainder of the year [5][30] Other Important Information - The company completed a $7,900,000,000 debt refinancing, extending maturities and improving its capital structure [7][28] - The company has settled nine more opt-out cases year to date, with 11 remaining, and received communication from the IRS that a significant legal matter has concluded without negative cash flow implications [19] Q&A Session Summary Question: Share buybacks and DTC efforts for XIFAXAN - Management confirmed that share buybacks are still a possibility but have been deprioritized in favor of reinvestment in the business [36][37] - The focus for DTC investments is currently on the OHE indication, with significant growth observed in both indications [38][39] Question: Rifaximin franchise and SSD trials - Management confirmed that lactulose background therapy is allowed in the SSD trials and emphasized the potential patient population for the SSD product [42][44] - The possibility of XIFAXAN being available over-the-counter has not been considered at this time [45] Question: XIFAXAN ROA headwinds and revenue discrepancies - Management discussed ongoing negotiations regarding XIFAXAN and the potential impact of IRA on pricing, emphasizing the importance of presenting their case [48][49] - Discrepancies between revenue growth and prescription growth for RELISTOR and TRULANCE were attributed to favorable gross-to-net adjustments [51] Question: Direct Corporation acquisition details - Management expressed enthusiasm about the Direct Corporation acquisition and its potential to address significant unmet needs in hepatology [53][54] Question: Rifaximin SSD differentiation and head-to-head trials - Management stated that the SSD formulation is different in dosage and action compared to existing formulations, and no head-to-head trials are planned at this time [58][59] Question: IRA negotiations and price points - Management acknowledged the ongoing negotiations and the potential for significant price cuts, while emphasizing their strategy to minimize the impact [62][66]

Financial Data and Key Metrics Changes - Revenue for the second quarter was $2,530 million, up 5% on a reported basis and 4% on an organic basis compared to the same period a year ago [20] - Adjusted EBITDA was $871 million, an increase of $45 million or 5% year over year [21] - Adjusted operating cash flow was $442 million, reflecting strong operational cash flow generation [21] Business Line Data and Key Metrics Changes - Salix revenues were $627 million, an increase of 12% compared to the same period last year, driven by favorable net pricing and strong volume performance [23] - Solta revenues were $128 million, an increase of 25% on a reported basis and 26% on an organic basis compared to the same period last year, primarily fueled by South Korea [26] - Diversified segment revenues were $219 million, a decrease of 13% compared to the same period a year ago, impacted by one-time pricing adjustments in 2024 [28] Market Data and Key Metrics Changes - EMEA achieved 6% organic growth in the second quarter, marking the region's tenth consecutive quarter of organic growth [11] - Canada experienced 12% growth driven by the promoted products portfolio [24] - LATAM's performance was softer due to ongoing macroeconomic challenges and partial channel destocking [25] Company Strategy and Development Direction - The company is focused on unlocking value, growth, and optimizing capital structure, with a commitment to R&D and business development [6][31] - A strategic partnership was announced with YunnV to launch probiotic-based products for acne-prone skin in Poland [13] - The company is evaluating opportunities to reduce the net cost of capital of its debt over the next couple of months [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute strategic priorities and deliver value for stakeholders [20][68] - The company reaffirmed its full-year 2025 guidance for revenue and adjusted EBITDA, expecting revenue between $4,950 million and $5,100 million [30] - Management acknowledged the uncertain macro environment but highlighted strong operational performance and growth opportunities [5][19] Other Important Information - The company completed a $7,900 million debt refinancing, extending maturities and improving capital structure [7] - The acquisition of Direct Corporation is expected to advance the development of a treatment for alcohol hepatitis, pending certain conditions [17][18] Q&A Session Summary Question: Share buybacks and DTC efforts with XIFAXAN - Management indicated that share buybacks are still under evaluation but have taken a back seat to reinvestment in the business [39] - The focus for DTC investments is currently on the OHE indication, with significant growth in patient starts [41] Question: Rifaximin franchise and SSD trials - Management confirmed that lactulose background therapy is allowed in the SSD trials and emphasized the opportunity for expansion in the patient population [46][48] Question: XIFAXAN potential ROA headwinds in 2027 - Management acknowledged ongoing negotiations regarding XIFAXAN and the potential for significant price cuts, while emphasizing efforts to minimize impact [51][63] Question: Direct Corporation acquisition details - Management expressed confidence in the Direct acquisition, highlighting the potential for addressing unmet medical needs in hepatology [55] Question: Rifaximin SSD differentiation and off-label use - Management stated that the SSD formulation is different and does not plan to run head-to-head trials at this time [60]