On May 7, 2020 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we") reported its first-quarter 2020 financial results (Press release, Bausch Health, MAY 7, 2020, View Source [SID1234557311]).
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"As the COVID-19 pandemic began, our priority was to make sure that our employees were safe and that we took the necessary measures to protect our supply chain operations, which have enabled us to continue to fulfill our mission of improving people’s lives with our health care products," said Joseph C. Papa, chairman and CEO, Bausch Health. "With these measures in place, we expanded our focus to also support global health care systems, frontline health care workers and the patients in their care, including advancing the science to help find solutions for COVID-19, donating medicines and health care products to assist in the fight against the virus and reinforcing our commitment to patient access."
"While the COVID-19 pandemic has presented significant challenges to our business, Bausch Health has a global, diversified and durable business model, and we believe the Company is well-positioned to return to growth after the impact of the pandemic fades," continued Mr. Papa.
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1 Please see the tables at the end of this news release for a reconciliation of this and other non-GAAP measures to the nearest comparable GAAP measure.
2 Organic growth/change, a non-GAAP metric, is defined as a change on a period-over-period basis in revenues on a constant currency basis (if applicable) excluding the impact of recent acquisitions, divestitures and discontinuations.
Company Highlights
Executing on Core Businesses and Advancing Pipeline
The Bausch + Lomb/International segment comprised approximately 55% of the Company’s reported revenue in the first quarter of 2020
Reported revenue in the Bausch + Lomb/International segment was flat compared to the first quarter of 2019; revenue in this segment grew organically1,2 by 2% compared to the first quarter of 2019, driven by organic growth1,2 in the Global Consumer and International Rx business units
Delivered 14th consecutive quarter of organic revenue growth2
Published pivotal Phase 3 data in Ophthalmology for XIPERE (triamcinolone acetonide suprachoroidal injectable suspension), an investigational therapy with a proposed indication of treatment of macular edema associated with uveitis
Launched expanded parameters for Biotrue ONEday for Astigmatism daily disposable contact lenses
Received U.S. 510(k) filing acceptance from the U.S. Food and Drug Administration for the Company’s innovative daily disposable silicone hydrogel contact lenses
The Salix segment comprised approximately 24% of the Company’s reported revenue in the first quarter of 2020
Reported revenue in the Salix segment increased by 7% compared to the first quarter of 2019; revenue in this segment grew organically1,2 by 4% compared to the first quarter of 2019
Reported revenue of XIFAXAN (rifaximin) increased by 23% compared to the first quarter of 2019
Announced topline results from a Phase 2 study evaluating an investigative soluble solid dispersion (SSD) formulation of immediate release (IR) rifaximin in combination with the current standard of care therapy for the treatment of Overt Hepatic Encephalopathy. In the study, the 40 mg BID of rifaximin SSD IR plus standard of care therapy arm met its primary endpoint with statistically significantly superior results compared to the placebo plus standard of care therapy arm
The Ortho Dermatologics segment comprised approximately 7% of the Company’s reported revenue in the first quarter of 2020
Reported revenue in the Global Solta business unit grew by 34% compared to the first quarter of 2019, driven by continued strong demand of Thermage FLX following launches in the Asia Pacific region
Published results from two pivotal Phase 3 studies for ARAZLO (tazarotene) Lotion, 0.045%, in the Journal of Drugs in Dermatology
Strategic Capital Allocation and Debt Management
Increased Research and Development (R&D) by approximately 4%, or $5 million, compared to the first quarter of 2019
Repaid debt by approximately $220 million in the first quarter of 2020 with cash generated from operations
Bausch Health has no mandatory amortization payments or debt maturities until 2022
Response to COVID-19 Pandemic
When the COVID-19 pandemic emerged, Bausch Health acted quickly to implement guidelines, business continuity plans and workstreams that have enabled the Company to ensure the health and well-being of its employees while remaining focused on supporting customers and patients around the world.
Bausch Health management implemented actions to protect the health and safety of its employees, including taking every precaution to ensure that those employees who cannot work remotely, such as manufacturing employees, are working in environments that are as safe as possible
In regions of the world where in-person sales efforts are not viable, sales teams are supporting health care professionals virtually to continue to meet the needs of customers and their patients
The Company has worked to maintain an uninterrupted availability of its health care products by developing additional site-level biosecurity procedures. Supply chain and manufacturing facilities are operational, and to date, Bausch Health has not had any material COVID-19 related supply disruptions
Bausch Health’s R&D organization quickly worked with health authorities and investigators to protect trial participants and personnel involved in its R&D programs. Clinical trials that started prior to governmental shutdowns remain enrolled and existing patients are progressing, while new patient enrollments in clinical trials have been temporarily paused due to most trial sites not being able to accept new patients
Bausch Health also sought several opportunities to support the institutions, patients and health care providers fighting the COVID-19 pandemic.
The Company is pursuing research to determine if its products may offer valuable treatment options, including:
Initiating a clinical trial program in Canada evaluating an investigational use of nebulized antiviral VIRAZOLE (Ribavirin for Inhalation Solution, USP) in combination with standard of care therapy to treat hospitalized adult patients with respiratory distress due to COVID-19
Working toward investigative trials in the United States to evaluate XIFAXAN in combination therapy to potentially address the symptoms of gastrointestinal distress and pulmonary compromise associated with COVID-19 infection. If the trials demonstrate XIFAXAN is successful in resolving these symptoms or reducing the duration of COVID-19, the Bausch Foundation will donate XIFAXAN to various hospitals
Ramped up manufacturing of chloroquine and azithromycin and donated these products to local hospitals in Italy and Spain
Along with the Bausch Foundation, Bausch Health has provided needed medical supplies, including:
Making available for donation nebulized VIRAZOLE for compassionate use in Italian hospitals
Donating ARTELAC Splash eye drops to local hospitals in Spain to reduce eye irritation and risk of eye infection by alleviating possible symptoms of dry eye among health care providers while wearing protective gear
Converting production lines in China and Canada to produce hand sanitizer intended for donation to health care providers, first responders and volunteers
Donating Biotrue ONEday contact lenses to health care providers in Wuhan, China to alleviate reported fogging of eyeglasses while wearing protective gear
The Bausch Health Patient Assistance Program continues to ensure that eligible U.S. patients in need who lack health insurance coverage for certain Bausch Health prescription medicines are able to access their medicines and has increased its efforts to work with patients and physicians’ offices to ensure patients have uninterrupted access to their medicines
First-Quarter 2020 Revenue Performance
Total reported revenues were $2.012 billion for the first quarter of 2020, as compared to $2.016 billion in the first quarter of 2019, a decrease of $4 million. Revenue was negatively impacted by approximately $35 million in the first quarter of 2020 due to the COVID-19 pandemic. Excluding the unfavorable impact of foreign exchange of $18 million, the impact of a 2019 acquisition of $13 million
Bausch + Lomb/International Segment
Bausch + Lomb/International segment revenues were $1.114 billion for the first quarter of 2020, as compared to $1.118 billion for the first quarter of 2019, a decrease of $4 million. Excluding the impact of foreign exchange of $17 million and the impact of divestitures and discontinuations of $7 million, the Bausch + Lomb/International segment grew organically1,2 by approximately 2% compared to the first quarter of 2019 due to growth in the Global Consumer and International Rx business units.
Salix Segment
Salix segment revenues were $477 million for the first quarter of 2020, as compared to $445 million for the first quarter of 2019, an increase of $32 million, or 7%. Adjusting for the impact of a 2019 acquisition of $13 million on revenues, the segment grew organically1,2 by approximately 4% compared to the first quarter of 2019. The increase was primarily driven by XIFAXAN, which grew 23% compared to the first quarter of 2019, and was partially offset by the loss of exclusivity of products in the segment, primarily APRISO (mesalamine), which negatively impacted revenues by $40 million.
Ortho Dermatologics Segment
Ortho Dermatologics segment revenues were $133 million for the first quarter of 2020, as compared to $138 million for the first quarter of 2019, a decrease of $5 million, or 4%. The decline was due to lower volumes primarily driven by the loss of exclusivity of products in the segment, primarily SOLODYN (minocycline HCl), ZOVIRAX (acyclovir) Cream, 5%, and ELIDEL (pimecrolimus) Cream, 1%, which negatively impacted revenues by $15 million, and was partially offset by higher revenues in the Global Solta business unit.
Diversified Products Segment
Diversified Products segment revenues were $288 million for the first quarter of 2020, as compared to $315 million for the first quarter of 2019, a decrease of $27 million, or 9%. The decrease was primarily attributable to the previously reported loss of exclusivity for a basket of products.
Operating Results
Operating income was $248 million for the first quarter of 2020, as compared to operating income of $287 million for the first quarter of 2019, a decrease of $39 million. The decrease in operating income was primarily driven by increases in selling, general and administrative expenses (SG&A), acquisition-related contingent consideration and charges for litigation and other matters included in other expense (income), net partially offset by a decrease in amortization of intangible assets.
Net Loss
Net loss for the first quarter of 2020 was $152 million, as compared to net loss of $52 million for the same period in 2019, an unfavorable change of $100 million. The change was primarily driven by decreases in the benefit from income taxes and by income from operations, as discussed above.
Adjusted net income (non-GAAP)1 for the first quarter of 2020 was $316 million, as compared to $358 million for the first quarter of 2019, a decrease of $42 million, or 12%.
Cash Generated from Operations
The Company generated $261 million of cash from operations in the first quarter of 2020, as compared to $413 million in the first quarter of 2019, a decrease of $152 million, or 37%. The decrease in cash from operations was primarily attributed to an increase in working capital4, timing of interest payments and a licensing agreement.
EPS
GAAP Earnings Per Share (EPS) Diluted for the first quarter of 2020 was ($0.43), as compared to ($0.15) for the first quarter of 2019.
Adjusted EBITDA (non-GAAP)1
Adjusted EBITDA (non-GAAP)1 was $813 million for the first quarter of 2020, as compared to $851 million for the first quarter of 2019, a decrease of $38 million, or 4%. The decrease was primarily due to increased SG&A expenses and loss of exclusivity for certain products, coupled with the unfavorable impact of transactional foreign exchange.
2020 Financial Outlook
Bausch Health lowered its revenue and Adjusted EBITDA (non-GAAP) guidance ranges for the full year of 2020, primarily due to the actual and anticipated impacts of the COVID-19 pandemic:
Lowered full-year revenue range from $8.65 – $8.85 billion to $7.80 – $8.20 billion
Lowered full-year Adjusted EBITDA (non-GAAP) range from $3.50 – $3.65 billion to $3.15 – $3.35 billion
Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, which would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis
with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP). The full-year guidance ranges have been lowered primarily due to the actual and anticipated impacts of the COVID-19 pandemic. These impacts have affected the Company’s assumptions regarding base performance and growth rates and have also resulted in lower expectations regarding cash generated from operations and the amount of cash that is available for use in the reduction of debt and for bolt-on acquisitions for the current year. Furthermore, the COVID-19 pandemic and its impacts also triggered the Company’s reduction of the ranges for its targeted three-year compound annual growth rate of revenue and Adjusted EBITDA (non-GAAP), which have been reduced from 4%-6% to 3%-5% with respect to revenue growth and from 5%-8% to 4%-7% for Adjusted EBITDA (non-GAAP) growth. These statements represent forward-looking information and may represent a financial outlook, and actual results may vary. Please see the risks and assumptions referred to in the Forward-looking Statements section of this news release.
Additional Highlights
Bausch Health’s cash, cash equivalents and restricted cash were $1.923 billion5 at March 31, 2020
The Company’s availability under the Revolving Credit Facility was $1.057 billion at March 31, 2020
Basic weighted average shares outstanding for the quarter were 353.4 million shares. Diluted weighted average shares outstanding for the quarter were 358.6 million shares6