Bausch Health Companies Inc (BHC) 2024 Q1 法說會逐字稿

Greetings and welcome to the Bausch Health First Quarter 2024 earnings call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Garen Sarafian, Investor Relations at Belden. You may begin.

Good morning, and welcome to Bausch Health First Quarter 2024 earnings conference call. Participating in today's call are Thomas Apio, Chief Executive Officer of Bausch Health, and John veracity, Interim Chief Financial Officer.

Before we begin, I'd like to remind you that our presentation today contains forward-looking information, and we ask you to take a moment to read the forward-looking statements disclaimer at the beginning of the slides that accompany this presentation. As it contains important information, our actual results may vary materially from those expressed or implied in our forward-looking statements, and you should not place undue reliance on any forward looking statements, please refer to our SEC filings and filings with the Canadian securities administrators for a list of some of the risk factors that could cause our actual results to differ materially from our expectations. We use non-GAAP financial measures to help investors understand our ongoing business performance. Non-gaap financial measures may not be comparable to similarly titled measures used by other companies and should be considered along with, but not as an alternative to measures calculated in accordance with GAAP. So I find reconciliations to our non-GAAP measures in the appendix of the slides that accompany this presentation, which are available on Bausch Health Investor Relations website.

Finally, the financial guidance in this presentation is effective as of today only. We do not undertake any obligation to update guidance. Our discussion today, Thursday, May second, will focus on Bausch Health, excluding Bausch & Lomb. However, we will briefly comment on Bausch & Lomb's results announced yesterday. We will refer to year-over-year comparisons with the same period last year, unless otherwise noted.

With that, it is my pleasure to turn the call over to our CEO, Thomas Avio.

Tom, thank you, and welcome to those of you joining the call this morning, we started 2024 on strong footing, building on the momentum we have established last year, while maintaining our focus on operational excellence and our Patient Centered mentality. We delivered another quarter of growth, making our fourth consecutive quarter of year over year growth in both revenue and adjusted EBITDA for the first quarter of 2024. Revenues for Bausch Health, excluding B&L, were $1.05 billion, up $41 million or 4% on a reported basis and 5% on an organic basis. All segments delivered revenue growth on both a reported and organic basis when compared to the first quarter of 2023, led by Solta with 23% organic growth. Adjusted EBITDA for Bausch Health, excluding B&L, was $504 million, an increase of approximately 9% compared to the prior year.

We also continued to make progress on our key R&D initiatives during the quarter, in line with our established timing goals. First, for amiselimod in April, we met with the FDA for an end of Phase two meeting and a Phase three planning meeting for mild to severe ulcerative colitis UC. In addition, we were also pleased for amiselimod to have been accepted for a podium presentation at Digestive week on May 19th.

Second, we completed enrollment for our second global Phase three trial for Red Sea in late April, which is slightly ahead of our goal of completion by the end of the first half of 2024. And third, we are pursuing approval of CAP TRIO for Canada and anticipate this could occur in the second half of the year.

Overall, we continue to feel good about the progress we have made on our R&D pipeline and are progressing according to the timelines we shared in February.

Turning to our litigation with Norwich. On April 11th, 2024, the US Court of Appeals for the Federal Circuit affirmed the US District Court of Delaware's August 10th, 2022 judgment and also the May 17th, 2023 decision that had denied Norwich Pharmaceutical's motion for modification of the court's final order. We are pleased that the Federal Circuit maintain the judgment preventing the approval of Norwich as Anda for Xifaxan until October 2029.

On April fifth, 2024, we filed a patent lawsuit against Amneal Pharmaceuticals following the receipt of a notice of Paragraph four certification stating that Amneal had submitted an NDA to the FDA seeking approval to market a generic version of Rifaximin this action formally initiate the litigation process under the Hatch Waxman Act and triggers a 30 month stay of any potential FDA approval for our meals and <unk> as a leader in gastroenterology health. We continue to vigorously defend our intellectual property and are committed to advocating for the safety of patients who have benefited from continued access to Xifaxan. We look forward to continuing to serve our patients and every patient deserves better health outcomes and the chance to make the most of life on the Granite trust matter. We continue to expect the settlement with the IRS to be finalized in the coming months. As we have previously indicated, the anticipated outcome of the settlement does not have material impact on the Company's results or cash flows. We continue to focus on our balance sheet and liquidity and ended the first quarter with approximately 1.5 billion of liquidity. In Q1, we repaid over 300 million of debt, including the 250 million of bonds with 2025 and 2026 maturities as noted on our year-end call.

Turning now to the potential full separation of Bausch & Lomb. Full separation of Bausch & Lomb continues to be a strategic priority. We continue to evaluate strategies regarding the potential full separation with the objective of ensuring that any transaction result into appropriately capitalized companies. The outcome at the quarter of appeals in the Norwich matter represents a significant milestone toward the full separation of B. and L. Any decision regarding if and when a separation occurs or its structure will be based on and subject to an assessment of all relevant factors and circumstances and a potential separation will also be subject to shareholder and other applicable approvals.

Turning now to an overview of our segment performance for the quarter, starting on Slide 8. Salix revenue grew slightly year over year with reported growth of 1% and organic growth of 2%, driven by Xifaxan and RoE store, offset by net pricing pressure for true Lance and certain non-promoted products during the quarter we continued to see an increase in demand for our key products. Xifaxan relative store true ends with T. Rx growth of 3%, 3% and 9% respectively. Overall, Xifaxan revenues grew 8% over the first quarter of last year, reinforcing our strategy of continuing to make investments primarily in AI enabled sales tools, DTC. advertising, which we expect will drive further growth in this important franchise this year.

Turning to international, we saw solid year-over-year revenue growth during the first quarter with reported growth of 7% and organic growth of 2%. Organic growth was led by Canada, where we saw a strong performance from countries in the quarter. We have begun investing in DTC marketing for this product to build on this momentum. We were also pleased to receive our first public health plan listing for use areas, aerosol foam and Canada across the segment. We are also focused on driving long-term growth through investments in our promoted products and ongoing business development efforts.

In Solta Medical revenues increased by 21% on a reported and 23% on organic basis, led by Asia Pacific. Importantly, we are pleased to see the US returned to growth, posting 14% year-over-year growth in revenue. We remain highly focused on maintaining momentum in Asia with Thermage FLX now approved as a medical device in China and on driving growth in the U.S. and EMEA markets where we believe there is meaningful opportunity in diversified, we delivered a solid quarter with 3% reported and 6% organic growth over the prior year. This was led by dermatology business. As we discussed on our year end call, CAP Trio launched in the US in late January and early script volume has been encouraging. We expect the new product to be a more significant contributor to the dermatology business over the remainder of the year. Neurology revenues grew slightly as we continue to capitalize on the opportunities in the market created by competitor supply constraints. While we did see volume declines in Wellbutrin and Aplenzin as expected improved net pricing led to higher sales of these products, reinforcing our strategy in managing script profitability. This growth was offset by continued pressures on our generics business and a slight decline in our dentistry business, where we expect our investments will lead to consistent growth through the remainder of 2024. Overall, we continue to focus on managing this mature portfolio of products for profitability and cash generation in a challenging competitive and pricing environment while looking for opportunities to make targeted investments where appropriate.

Turning to the latest developments in our R&D pipeline.

On Slide 9, starting with RGI. pipeline. As you will recall, in December, we announced positive top line results from our Phase two study evaluating Amisol Oman and as one P. antagonist for the treatment of UC. We held a Phase three planning meeting with the FDA in April and expect to meet with the international authorities, including in EMEA and Japan later this year.

In the meantime, we are pleased that amiselimod has been selected for a podium presentation on May 19th at Digestive Disease Week's annual conference, one of the largest and most prestigious events for gastroenterology professionals. We continue to move forward with planning for a Phase two program for Crohn's disease and expect to initiate that by the end of the year.

Turning to our red T. program with rifaximin for reduction of early decompensation and cirrhosis, our global program focused on assessing the efficacy of our Rifaximin SSD formulation versus placebo to delay the occurrence of Empatic encephalopathy related hospitalizations. Both global Phase three trials for this program are underway. Enrollment for the first trial, as previously mentioned, completed in December 2023 and the enrollment for the second trial completed in April of 2024, which was ahead of our goal for the first half of 2024. Together, these studies are expected to include over 1,000 patients across North America, Europe and Asia Pacific.

Turning now to our aesthetics pipeline, we are pleased to have their module FLX. and STR. four return path available to customers in China as of the second quarter, following the approval by the National Medical Products Administration in January 2024, we plan to file an FDA submission for our next-generation Fraxel in Q2, a fractionated laser device for skin resurfacing and anticipate approval could be received in the second half of this year.

Finally, our program for Clear and Brilliant touch of fractionated laser device for skin rejuvenation continues to advance. We have received approvals in Australia and New Zealand this year, representing our first approvals outside of the United States and remain on track for regulatory submissions in 2024 in Europe, Canada and other Asia Pacific markets. We feel good about the progress we are making on these key R&D initiatives, and we remain focused on our pipeline of new market authorization and next-generation products as we continue to grow this global Sylvo portfolio of aesthetics products as a leadership team. We are committed to driving growth by leveraging our existing assets, making targeted investments and executing with commercial excellence while continuing to progress our pipeline, all with a patient centered mentality.

With that, I will turn the call over to John Bereznicki, who will provide further details on the first quarter performance.

John?

Thanks, Tom, and hello, everyone, and thanks for joining us. We closed the first quarter with consolidated revenues for Bausch Health of 2.15 billion, up 11% on a reported basis and 8% on an organic basis over the same quarter last year. First quarter revenues for Bausch Health, excluding B&L, were 1.05 billion, up 4% on a reported basis and 5% on an organic basis over the same quarter last year with strong growth in Solta and low to mid single digit reported inorganic growth in our other segments.

Turning to segment revenue performance starting on slide 12, with Salix. First quarter sales revenues increased 3 million on a reported basis to 499 million, driven by TRx growth in our key products including Xifaxan five, 50 Relistor and true Lance revenues grew 12 million in an organic basis, reflecting the impact of divestitures and discontinuations of certain non-promoted products. Xifaxan continued to represent over 80% of Salix segment revenues this quarter and saw strong growth in underlying demand. Xifaxan revenues in Q1 increased 8% compared to the prior year period. Retail prescriptions grew 3% in Q1 versus the prior year. We saw another quarter of solid growth in TRx for IBS-D and the long-term care channel for HE extended units grew 4%, which included double digit growth in non-retail units attributable to outpatient clinics well as store delivered 10% growth over the prior year period with solid TRx growth of 3% and a benefit from favorable net pricing relative to Q1 of the prior year. Trulance revenues declined 7% year over year as solid TRx growth of 9% compared to Q1 of last year. Was offset by net pricing pressure. We also continued to experience meaningful net pricing pressure in our non-promoted portfolio in this segment.

International revenues were 265 million during the quarter, an increase of 7% on a reported basis and 2% on an organic basis compared to the prior year period. Organic growth was led by Canada, while Lat-Am and EMEA were flat on an organic basis. Lat-am was impacted by the timing of government purchases with private channel sales. So in growth, while in Amea growth in key promoted products was offset by the effects of competition on certain of our non-promoted products. Total medical revenues were 88 million during the first quarter, an increase of 21% on a reported basis and 23% on an organic basis over the prior year period. Delta's growth was led by China and South Korea and to a lesser degree, the remainder of Asia Pacific. Importantly, the U.S. returned to growth this quarter with a 14% increase in revenues over the prior year. And we are continuing to invest in our sales force and related tools to drive sustainable growth in this key market.

Diversified revenues were 202 million during the first quarter, an increase of 3% on a reported basis and 6% on an organic basis compared to the prior year period. In dermatology, revenue grew by 16% on a reported basis and 25% on an organic basis in the quarter over the prior year period as we continued to focus on returning this business to consistent growth growth in the quarter, benefit from favorable net pricing comparisons quarter over quarter which we expect will moderate for the remainder of the year, while volumes for our non-promoted products continue to be pressured.

As Tom noted, we are pleased with the early response in the market to cap Treos since its late January launch and expect it to become a more meaningful driver of growth in our dermatology business as the year progresses.

Neurology revenues grew slightly posting a 1% increase year over year as we continued to benefit from competitor supply disruptions, although not at the same levels that we saw in Q4 of 2023, Wellbutrin and Aplenzin revenues grew despite lower volumes as we continue to execute our strategies to improve overall profitability in this business. While dentistry revenues declined modestly in the quarter compared to Q1 of last year. We continue to invest in this durable business for the long term and expect the investments we are making in the sales team and related tools to return this business to growth through the remainder of 2024.

As shown on slide 16, Bausch & Lomb revenues were 1.1 billion during the first quarter, up 18% on a reported basis and 11% on an organic basis compared to the prior year, with growth across all Bausch & Lomb segments, key product franchises and geographies.

Turning to the first quarter P&L on slides 18 and 20st quarter consolidated adjusted gross margin was 71.2%, 110 basis points higher compared with the prior year for Bausch Health, excluding B. and L. adjusted gross margin for the first quarter was 79.5%, approximately 20 basis points higher than last year's first quarter at B. and L. adjusted gross margin was 63.2% for Q1 of 24 compared to 60.0% for Q1 of 2023, driven primarily by product mix, including the impact of Zohydro.

Consolidated adjusted operating expenses for the first quarter were 916 million, an increase of 82 million for Bausch Health, excluding B&L adjusted operating expenses decreased by approximately 16 million compared to the first quarter of 2023. Higher A&P driven by investments in the dermatology and dentistry businesses and R & D were offset by lower G&A expenses. As we continue to focus on cost management, we expect A&P increases to moderate over the course of the year as we begin to annualize our investments in selling and marketing. For Salix, B&L reported an increase of $98 million in adjusted operating expenses due primarily to increased selling and A&P, driven by the addition of Zohydro and product launches, including Weibo.

Consolidated adjusted R&D expense for the quarter was $150 million, an increase of 5% compared to the prior year and represented 7% of product sales compared with 7.4% for the prior year period. For Bausch Health, excluding B. and L. R & D expenses of $69 million increased by approximately 2 million for the first quarter as compared to the same quarter last year. This increase is in line with our expectations as we continued to invest in our GIN. aesthetics pipeline. First quarter consolidated adjusted EBITDA attributable to Bausch Health was $665 million, an increase of $77 million or 13% adjusted EBITDA for Bausch Health, excluding B&L, was $504 million for the quarter, a 9% increase from 462 million in the first quarter of 2023.

Turning to cash flow, on a consolidated basis, Bausch Health generated 211 million of operating cash flow and 181 million of adjusted operating cash flow in the first quarter for Bausch Health, excluding B&L, adjusted operating cash flow was $133 million for the first quarter compared to adjusted operating cash flow of $94 million for the first quarter of 2023, with the changes primarily reflecting improved business performance, as we've discussed in prior quarters, as a result of the accounting treatment for the senior notes issued as part of our 2022 debt exchange. A portion of our cash interest payments are classified as financing cash flows adjusted cash flow includes payments of the full contractual interest as well as adjustments for the payment of separation costs, business transformation costs and litigation and other matters. Net of insurance proceeds Now let's turn to our balance sheet on Slide 19. We continue to prioritize liquidity management and the delevering of our balance sheet. In the first quarter, we reduced our debt from Bausch Health, excluding B&L, by 307 million, while debt net of cash decreased by $110 million, we continue to evaluate alternatives to reduce our overall leverage while also focusing on our maturity profile. As we discussed on the year-end earnings call, in January 2024, we retired 250 million in principal value of 2025 and 2026 maturities through open market repurchases, capturing approximately 12 million of discount in the process. We also repaid 56 million of additional debt consisting of mandatory term loan amortization and repaying a portion of our AR facility. At the end of the first quarter, Bausch Health, excluding B&L, had 325 million outstanding under our AR facility. It had no outstanding borrowings and approximately 950 million of availability under our revolving credit facility. As shown on slides 20 and 21, total debt for Bausch Health, excluding Bausch & Lomb at the end of the quarter was 16.1 billion, which consisted of approximately 14.8 billion of restricted debt issued by Bausch Health, excluding B&L, and approximately 1.3 billion of unrestricted debt, which includes the 1 billion of senior secured notes issued by the UnSub restricted subsidiary created in the third quarter of 2022 and of the $325 million drawn under our AR facility. Excluding D & L debt, approximately 85% of our debt is fixed and approximately 70% of the Company's debt on a consolidated basis is fix. We ended the quarter with approximately 1.5 billion of liquidity, which includes approximately 431 million of cash and 950 million of availability under our revolving credit facility. We are focused on strengthening our balance sheet, including evaluating and utilizing as appropriate various tools and strategies based on the provisions of our existing debt agreements, along with our existing liquidity to manage both our maturity profile and our overall leverage.

Turning to guidance, we are maintaining our guidance for the full year 2024 for Bausch Health, excluding B&L, we continue to expect revenue of 4.7 to $4.85 billion with organic growth of 2% to 5%, along with adjusted EBITDA of 2.36 billion to 2.46 billion and adjusted operating cash flow in a range of approximately 775 to $825 million.

I'll now hand the call back to Tom.

Thank you, John.

We continue to build on our strong global portfolio of businesses and remain highly focused on delivering against the objectives we laid out last quarter, including driving a result oriented culture of accountability, delivering on our revenue adjusted EBITDA and adjusted operating cash flow commitments, executing with operational excellence and cost focused mindset across the enterprise, intensifying our focus and operating rigor behind R&D and business development and continuing to evaluate strategic alternatives. Achieving the full separation of B&L remains a priority. These priorities help support our ambition of being a globally integrated health care company, trusted and valued by patients health care providers, employees and investors as we relentlessly drive to deliver better health outcomes.

I would also once again like to extend my thanks to the entire Bausch Health team for their hard work. They have worked tirelessly and are all in to position our business for the long term. Every patient deserves better health and the chance to make the most of life. This drives us on with urgency and efficiency to deliver the products patients need most to enrich their lives on behalf of the entire Bausch Health team, I thank you for your interest and support of our company.

With that, we will now take questions. Operator, please open the line for Q&A.

(Operator Instructions) Glen Santangelo from Jefferies.

Thanks for taking my question.

Hey, Tom.

Just a couple of quick ones for me. You reiterated a number of times, you know, that you remain committed to the full separation and you highlighted sort of the Norwich decision as being a significant milestone. What are the milestones or major milestones might exist? And then as you think about, you know, the strategies for a full separation, is it in your mind? Is the tax-free spin still the way to go are there or are there other strategies that you might be evaluating? And then maybe I just had a quick follow-up on the balance sheet.

Okay.

Glenn, thanks for the question. Clearly, of course, the Norwich appeal decision is an important milestone. So we are really happy about that and really pleased with the outcome. But as you know, there's there's multi factors here that we need to consider. So as we as we take a look at it, you know, really the timing of the potential distribution, the most fundamental point is making sure that we have to appropriately capitalized companies so as we look at it, you know, as you know, there's moving parts when it comes to our balance sheet when it comes to other things in terms of litigation and what have you. So really kind of thoughtfully going through it and progressing through what what needs to be done?

What I would say is is when we look at it making sure. When when we take a look at the full separation, it is a priority for us as you as you can see, you know, on our priorities for 2024 it is a key priority to the full separation of B&L. And basically, as we've talked about before, you know, making sure again, we're totally in line with appropriately capitalized two companies and Tom, maybe just to follow up on that point on the balance sheet.

When you think about the leverage on RemainCo, we've gotten a lot of pushback from investors. You know, highlighting the leverage related to, you know, the RemainCo post the spin, how you think about what the appropriate leverage ratio might be? I mean, you haven't sort of commented in a while on any of those leverage targets. But it seems you remain committed towards using various tools and strategies as you put it to kind of maybe work that debt level down so any sort of thoughts on how we should think about that through the balance of the year?

Yes. Look, Glenn, what I'll do is let me just take the first point is that and then I'll give it to John. But overall, as you saw this quarter and the last of four consecutive quarters, my focus one of my key focus is really driving growth driving performance. Of course, that always helps us be able to continue to retire debt. So we have a really healthy business globally. And as you saw the you know, the results for this quarter, both in the US and internationally, the business is growing and growing broadly. You saw the the and the performance of Solta. We really feel really great about the performance and the return to the performance in the U.S. of growth. So we have a really the business is healthy and doing well, a diverse portfolio of products and then clearly, we've exited we're back executing on our R&D pipeline and investing appropriately. So as we look at all those things, you know, we're positioning ourselves as we look at our balance sheet and what we can do. I'll hand it over to John to speak specifically on the balance sheet.

Hey, Glenn, it's John. Thanks for the thanks for the question yet to the point of how do we think about a leverage target?

I think it comes back to what Tom said a minute ago, right? Fundamentally, we're focused on to appropriately capitalized companies. And I think that's a there's no one binary point measure for that. It's really about balancing our leverage with our maturity profile. And as we've said, we're very focused on managing both of those effectively. We have a lot of tools at our disposal. As Tom said, we're focused on growing the business and it's a very cash generative business. You were guiding to seven 75 eight, $25 million of adjusted operating cash flow this year. We have a really broad diverse footprint, both product lines and geographically, and we think there's value in that. We're working on the pipeline, as you heard in Tom's prepared remarks earlier, and we'll use all of the tools that we have available, whether that's to do open market repurchases. We've done debt exchanges in the past. We've done asset sales in the past. We have the BLCO. stake of approximately 8% at our disposal and 1.5 billion of liquidity. So it doesn't directly answer your question of a point target, but those are all the things we think about as we think about managing the both the maturity profile and leverage.

Okay.

Thanks for all the detail.

Thank you.

Your next question is coming from Michael Dell Kabbage from TD. Cohen. Your line is live.

Great.

Thank you for the question.

As has been noted, I think this is the first time at least in the recent past that management has explicitly connected the outlook for Xifaxan to the likelihood of completing the full separation of Bausch & Lomb. So that begs the question of when that segment outlook will be secure if we just consider the Amneal challenge and take the 30 month stay at face value, it would mean persistent uncertainty until almost 2027, which puts us right at the doorstep of four generic competition for Xifaxan. So I'm wondering how will it be possible to complete the Bausch & Lomb separation under those circumstances?

Yes, Michael, thanks for the question. It's I'm glad you asked it because I've seen a lot of things going back and forth in the press regarding and Neil. So So firstly, I just want to make sure we're clear is that it's a fax and is a is a huge product. Everybody looks at it. They're interested in it. The performance is great and it continues to perform and grow. You saw the quarter where we wound up with your highest TRXs on record all-time high. So it's doing well and it's growing and the investments we're making behind it. So paragraph fours, the Amneal issue was not unexpected. What I think the most important thing here is number one is that and the patents at issue here, you know, are not the same that were in the Norwich case. So there's new patents. So this is a you know, and we have a legal team. I am really in a great position to have such an outstanding legal team who is looking at it and working on it really, really hard. So they have no issue as we looked at it, what you have many patents there to consider as we work through. So I cannot speculate. You know, you know, again on what the strategy will be, but clearly Onyx, but it was not it wasn't that it was a surprise and we have a team that's working on it. So I don't really see that. And, you know, as we move forward as well, a situation that we're going to continue again, we'll probably see we could see others, but a time frame that it has, you know, we're going to work it real hard.

Let me ask a follow-up.

Sure. Are you are you preparing for Norwich to file a new and just for the IBS indication, you suggested you may see others just now. And is there anything in your settlements with the other generics companies that would prevent them from doing the same thing?

Yes. So right now, as you know, we just got the ruling of the formation of the denial of the motion that Norwich is off the market until October of 2029. This is a a large milestone for us. I can't speculate what nor which will do you know, in the coming weeks or months, what I would say is, is we feel we have a great legal team because I was looking at it and monitoring it and we will see how it works out.

Great.

Thank you.

Thank you.

Your next question is coming from Douglas Miehm from RBC Capital Markets. Your line is live.

I think you first question just see in the past, the Company has discussed whether or not in its approach to and the distribution or the separation, you would comment on whether potentially could be a return of capital or butterfly. Is there anything that you can update us on as to the potential approach that the company may take in the event the you do pursue the separation?

Yes, Doug, thanks for the question. Yes, we have talked about that in the past. At this point, no decision has been made. What I would say is we still are focused on making sure you know, it's deemed a tax-free to shareholders. So continuing to keep all options open and evaluating it as we progress.

Okay.

And then second thing, just maybe you could give an update on the stock crop situation. I know you've been trying to resolve that, but we are getting close to a court data and belief on part of that.

And then finally, Wayne, I know this is really that not that important or material, but why is the IRS situation taking so long relative to when you thought you may be able to resolve that?

Thank you.

Is that the the IRSI. of course, are mostly is moving slow. I'll ask John to take that and then I'll come back to your question on the the opt-out.

Hey, Doug, I think we'd love to have the settlement official and behind us as well. We're working that with with the IRS as expeditiously as we can. It's a really complicated matter as we've disclosed in the past, and we currently still expect that the settlement will not have a material impact on our results or on our cash flows. It's a process a matter of getting through the process?

I think at this point, yes.

And then I'll just take the second. The first part of your question regarding the opt-outs. We've consistently no consistently knew that at some point we're going to have a trial date on, you know, the team has, again, as I pointed out earlier, the legal team has been working on this as you know, we settled the class we had. We've also settled 16 out of 37 opt out actions have either been settled or dismissed. The total remaining opt-out actions are pending or 21?

What I would say is we know we have had, as you know, success on summary, judgment on some of the claims have been narrowed and we'll continue to work on it. And you know, we have what I would say is a strong litigation team, very focused on this, and we'll see how it progresses as we move Torino closer to a trial date.

Okay.

Thank you.

Thank you. Your next question is coming from Huber Raffat from Evercore. Your line is live.

Hey, guys. Thanks so much for taking my question. Maybe a couple of here, if I may. First, is there any regulatory body, US or ex-US or accreditor that needs a clarity on the effects? And within the 24 months post separation, is that an important gating factor for potential investors? That's point number one and number two for some of your debt liabilities coming up in 25 or so what are the plans? Are you intending to go down a very aggressive path? And then finally, do you envision any possible scenario where the spin has to be held off completely to take care of the amount of debt as well as FX situation.

Thank you very much.

Yes, former, thanks for the question. It's a question of right now. Let me just give the debt issue to John, maybe he can comment on that.

Yes, Omar, I think we're certainly focused on our 25, all26 of our expertise really in our levers are 25 and 26.

I'll go back to what I said in one of the earlier questions, right? We have a number of tools at our disposal. We have 1.5 billion of liquidity. We have the ability to generate significant cash flow and a very cash-generative business. And we have the broad portfolio that we have with a number of valuable assets, including the the stake of BBLCO. that we can distribute while staying above that tax-free distribution threshold. And so we're looking at all of those as ways to manage and manage our maturities. Beyond that, I will I won't comment on any specific things that we may do. Other than to say, we've done a combination of all of these things in the past, our MRs, debt exchanges, asset sales, and we'll continue to look at all of those levers.

Yes, Rob, I'll take the first point of your question. I'm not aware of any specific Xifaxan regulatory body, you know, in the U.S. or ex U.S. What I would say is that I've said many times, he's really making sure we have to appropriately capitalized companies.

And to the last part of your question is, you know, our priority is the full separation of B&L. So and as we work through it as I said earlier, it or you have some on my prepared remarks and into earlier questions is really there's a progression as we work it through, and we'll keep everyone updated as we work work it.

But I really appreciate the question.

Thank you.

Thank you. Your next question is coming from Chi Fong from Bank of America. Your line is live.

Hey, good morning.

This is Chi on for Jason Gerberry at CFAI. Thanks for taking our questions. And I guess on the first one, now that you've secured the Norwich ruling, has the Company been in discussion with claimants in the fraudulent conveyance matter about a potential settlement and a couple of follow-ups after this?

Yes, cheap basis, I can't comment you know know what have we been in discussions, you know, can't really and discuss that at this time. But again, we're always open to discussions and looking at the options you had a follow-up question.

Yes. A couple of follow-up. One on the first one is on SG&A. So we look at 1Q, the spend ratio looks a lot of high in the mid 30s. I'm wondering if there's any 1Q seasonality truck drive the ratio higher than usual? Or if not, how do you see that SG&A spend ratio evolving in the coming years at GRE.

Looking consolidated?

Yes, consolidated.

Yes.

So I think on BALCO spoke a little bit to this yesterday as well. There has been a significant A&P investment on the BLCO. side supporting both Cidra and some of their product launches like Maipo. And that is that is on a consolidated basis.

I think the biggest driver there.

Okay, got it. And my last one is on the pipelines on MSL. What were there any surprising points of feedback from the end of Phase two? And as you come off this FDA meeting, I understood that you still have discussions with international agencies, but do you have any early thoughts on your Phase three strategy as you look to capture the entire spectrum of mild-to-moderate UC and then I think you have mentioned that you are still considering a Phase two trial in Crohn's. I'm curious, did the recent Phase two trial of Phase three failure from ozanimod in Crohn's. Also, you're thinking about continued investment in Crohn's there.

We achieved that.

Thank you for the question on the business and the pipeline, I really appreciate that. You know that as you know, a really focused on the pipeline, a Red Sea as we had fully enrolled these two trials really are really interested in getting them completed. When we look at Amisol i-mode. We are really happy that we were accepted on the podium at DDW, which is coming up later this month. And presenting that to, you know, our data as you know in our press release, we were really pleased with the with the data that we had on our Phase two very large Phase two trial of our strategy here is you know the meeting with the FDA, it went well and where we're progressing on this. We know from a UC perspective, when we look at it, we see this market very large and we think we have a product that can compete here very nicely. So, you know, really well, by the time we're ready to launch. We're probably looking at between your market in oh seven to $8 billion. So really a great growth driver for us in the back half of the decade. I'm looking at the Phase three trial hoping to get that up and running later this year or the beginning of 2025.

And on Crohn's, again, as you know, this is a real large market. We would really love to be participating here. We think we have, you know, based on our data what we've seen, you know, out of the UC trial that we were going to run a Phase two plan a Phase two model with moderate to severe and CD. and E., again, nine over $19 billion market. And we think we have a drug that can compete now of course, yes, you mentioned that the failures of S. one piece in Crohn's. But when we look at this trials in Phase two and how we're going to structure it, we think we can have some success.

Thank you for the question, though. Really appreciate the question, pipeline.

Thank you.

Your next question is coming from David Amsellem from Piper Sandler. Your line is live and headache.

So just a couple of questions, a long-term focus question. In terms of your Rifaximin business, how are you thinking about erosion of the franchise once you do see generic competition materialize. And I guess what I'm trying to get at is what are your expectations surrounding the next-generation Rifaximin products as a means of cushioning some of the impact of generic competition. So that's number one.

And then number two, and I know you alluded to it on the prior question, but on emicizumab, did you have a sense based on your own market research, how you're thinking about the sales potential here in the context of an increasingly crowded market with other agents that have novel mechanisms such as the TO. one a. is how do you think about on a sales potential for Fermacell amounts to the extent that you commercialize it?

Thanks it, David. So no, firstly, again, thanks for the question on the pipeline. I'm really glad this kind of questions are on the pipeline in the business today. Red Sea. I just as I look at this program, when I took over as CEO. One of the things I worked with our head of R&D is to really accelerate this trial. Clearly, you mentioned zone with is eFax and going off patent. How do we fill that gap. And when we look at where we're going to get to a timing of launch for Red Sea, we're progressing it and we're really trying to execute with excellence to get there, you know, prior to the effects and going off patent, you know, yes. And also I'd like to point out here we have this is a global program. We have global rights. This is a new formulation. So this really opens us up, as you know, Salix, a long history in the US in gastroenterology and liver. Now this really gives us a platform globally with Red, say, if we just kind of put some numbers around that, just when we look at the just in the U.S. alone, again, this is a prevention. This is going towards prevention. So the pool is much larger homes that we can we can look to in the US. So if you just say, you know, the cirrhotic patients in the US today were around 800, 800,000. And then if you take out the patients that have HE today, given that it's prevention now you're at about six 56, 56 hundred K. And if you look at the facts and today you have 100 and so you have over 150,000 in ag, we're treating only 25% of that. So you look at the pool that we have to have patients on a prevention and then that's just in the U.S. If you then model that out to the US to international markets and building a GI. liver portfolio in the international space, as we talked about our international business is we've got we have really great platforms around the world, and I see a great opportunity here. You know, as we of course, you need the data, but it's a it's really exciting what we're on the Red Sea when we take a look at it.

Your second question is, as I talked about Amisol mode, I'm really excited about it as well. You know, looking forward to getting into our Phase three a Phase three program. And again, yes, the the R&D team, a real focus because we know we had we're losing defects. And so where can we close these gaps? One of them is with Red Sea, another can be with Amatil i-mode. What I would say also is, you know, our BD team, I think one of the things that we have done over the last two years, we have built a really strong BD team. And so therefore, we are looking to be able to find some assets that we can bring in to slot into our businesses in the United States and in international that can close the gap as well.

So this is a real priority for us.

That's why you see it, you know, in our priorities of how to really accelerate the pipeline. But also from a BD perspective, we have screened a number of assets and we have to be we have to be really on pedantic about it to make sure that we bring in the right asset and making sure from what does it fit what does the cost and also remember, you know, one of our you know, our pillars is making sure that that quality product we in the the quality of the products as we do diligence, we're making sure that the products that we can bring into this company are high quality and continue to build a a great pharmaceutical company. But thank you for the question. Really appreciate it.

Thank you.

Your next question is coming from Liz Suzuki from Truist Securities. Your line is live.

Good morning. Thank you for taking my questions. Actually do have a couple of follow up on the pipeline. So on your Reg G program with enrollment in both trials now a complete, can you handicap a time line for top line results in low. Would you disclose data from one study or both together? And is there a possibility we released preliminary data on?

And then secondarily, on cap Trio, if there are any initial feedback from prescribers on regarding the trends that you're seeing and how sizable ultimately this market within the category and also your plans for launching into Canada once approved and then third on Thermage, what does the market strategy to or go-to-market strategy in China? And how big is the opportunity there for you in that product launch?

Thank you, Les.

Thanks, for the question. So on underwritten, I'll take the first one on Red C. Again, trying to make sure that we have read see, you know, prior to the loss of Xifaxan would be keep right now, hoping we get and data, you know, in late 2025, early six, and we'll see again making sure that that trial is on track and can deliver. And then, of course, you know, being able to file it and get it registered not only in the U.S. but around the world. So that's where I see the timeframe really comes down to making sure that again, going back to the previous question on filling our gap and knowing Xifaxan is going where it is going to be going generic in 2028 cap Trio. We're excited about it. You know, they love the product. The R & D team has done a wonderful job here. We think have a great product for acne. The team is really all in and focused on driving this. If I just look at the script growth, it's ahead of our goal that we have set again a very crowded space. But really this is a great product and the feedback from our customers and patients has been really strong.

What I would say also is, is, you know, it's in early stages, we launched it and then we actually launched it ahead of having samples. So we're I'm really excited now that we have we have the samples coming on we also have the DTC campaign that will happen, you know, coming up in the next few months. So this is really a focus for our derm business and the R&D team has done an outstanding job here of bringing a great product to the market for patients at the March FLX in China. Again, I am real excited. As you know, I lived in China for many years. So you know, this market extremely well. I think we have an outstanding opportunity. As you saw the performance of our business this quarter has been was outstanding led by China, led by in Asia Pacific as well. We are looking at our strategies on their mode. I would say we just had the launch meeting last week and it went extremely well. And our strategy here is is again, if you if you look at the opportunities in China today and we and you hear a lot about the economics of China. You know, in terms of post COVID, you hear a lot about the property market. But if you look at the patients that we target an EV and you look at that, even though in China, the COVID had an impact, but there was also a lot of savings that took place. So the so there weren't traveling were doing many things so there we see that our patient population has and the opportunity and the economics to use our products. And what you see also in China, you see that that noninvasive treatments are very, very popular. Solta has a great name in China. We have a great brand. So now having it approved by the NMPA as the first RF device to be approved we think we have a great opportunity. We're building our team. In fact, I'm going to be in China in the next couple of weeks to talk to the team, make sure we have the strategies in place and then executing those strategies accordingly. But I lived there for many years. So I'm really confident we are going to have a real successful business in China. We're and we I'm piggybacking on it, we already do, but we're just going to grow more on that.

Thank you for the question.

Thank you. We've reached the end of the question and answer session. I'll now hand the conference back to Chief Executive Officer, Thomas appeal for closing remarks.

Please go ahead.

Yes.

What I would just tried to say to everyone on the call. I really appreciate everyone's questions today, you know, and really making sure that we're looking at the performance of our business and what the pipeline is. And what the future can be. So I really thank everyone for joining today. As I said many times, we had a solid Q2, fourth consecutive quarter of growth. I really want to build on this momentum in Q2. I would also say is the team here at Bausch Health is all and we know what we need to do and really making sure we execute with excellence. So you know, making sure you saw the priorities, what our priorities are delivering our commitments and continuing to position this Company for the future. And what I lastly, I'd like to say is look forward to keeping you all updated and really thank you for your interest in and support of our company. Really appreciate it and have a great day, everyone.

This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.