On February 19, 2020 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we") reported its fourth-quarter and full-year 2019 financial results (Press release, Bausch Health, FEB 19, 2020, View Source [SID1234554479]).
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"In 2019, we delivered on our ‘pivot to offense’ strategy. Our fourth-quarter and full-year 2019 results demonstrated the consistency and durability of Bausch Health, as we reported our eighth consecutive quarter of organic revenue growth2 and our first full year of reported revenue growth since 2015," said Joseph C. Papa, chairman and CEO, Bausch Health. "The Salix and Bausch + Lomb/International segments are leading our resurgence with continued strong performance."
"During the year, we invested in our future by increasing our commitment to R&D and by deploying approximately $250 million for bolt-on acquisitions to enhance our current product portfolio and add to our development pipeline," Mr. Papa continued.
Company Highlights
Executing on Core Businesses and Advancing Pipeline
The Bausch + Lomb/International segment comprised approximately 55% of the Company’s reported revenue in 2019
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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.
Reported revenue in the Bausch + Lomb/International segment increased by 2% in 2019 compared to 2018; revenue in this segment grew organically1,2 by 5% compared to 2018, driven by organic growth1,2 across all five business units
Delivered third consecutive year of organic revenue growth2 in 2019
Launched multiple products in 2019, including:
Ocuvite Eye Performance vitamins
PreserVision AREDS 2 Formula minigel eye vitamins
LOTEMAX SM (loteprednol etabonate ophthalmic gel) 0.38%
Bausch + Lomb ULTRA Multifocal for Astigmatism contact lenses
Zen Multifocal scleral lens for Presbyopia
enVista toric MX60ET intraocular lens
Acquired licensing rights for several investigational products, including:
XIPERE (triamcinolone acetonide suprachoroidal injectable suspension), with a proposed indication of treatment for macular edema associated with uveitis
NOV033 (perfluorohexyloctane), a first-in-class drug with a novel mechanism of action to treat Dry Eye Disease associated with Meibomian gland dysfunction
EM-100, an investigational eye drop that, if approved, will be the first over-the-counter preservative-free eye drop for the treatment of itchy eyes associated with allergies
The Salix segment comprised approximately 23% of the Company’s reported revenue in 2019
Reported revenue in the Salix segment increased by 16% in 2019 compared to 2018
Reported revenue of XIFAXAN (rifaximin) increased by 22% in 2019 compared to 2018
Acquired TRULANCE (plecanatide), a treatment for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation
Acquired dolcanatide, an investigational compound that has demonstrated proof-of-concept in treating patients with multiple gastrointestinal conditions
Entered into a licensing agreement with the University of California, Los Angeles to develop and commercialize a novel investigational compound for the treatment of non-alcoholic fatty liver disease and non-alcoholic steatohepatitis
Acquired licensing rights for MT-1303 (amiselimod), a late-stage investigational sphingosine 1-phosphate (S1P) modulator for the treatment of inflammatory bowel disease, and conducted study to evaluate its cardiovascular safety
The Ortho Dermatologics segment comprised approximately 7% of the Company’s revenue in 2019
Reported revenues in the Global Solta business unit grew by 44% in 2019 compared to 2018, driven by continued strong demand for Thermage FLX system following the launch in the Asia Pacific region
Launched DUOBRII (halobetasol propionate and tazarotene) Lotion, 0.01%/0.045%, for the topical treatment of plaque psoriasis in adults
Launched a cash-pay prescription program, Dermatology.com, and expanded it to all Walgreens U.S. retail pharmacy locations
Received approval from the U.S. Food and Drug Administration for ARAZLO (tazarotene) Lotion, 0.045%, for the topical treatment of acne vulgaris in patients nine years of age and older; launch is planned for the first half of 2020
Strategic Capital Allocation and Debt Management
Increased Research and Development (R&D) in 2019 by 14%, or $58 million, compared to 2018
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3 The acquisition of licensing rights for NOV03 was announced in late 2019, and the upfront payment was made in early 2020.
Utilized approximately $1.100 billion in cash generated from operations to repay debt by approximately $900 million and for ‘bolt-on’ acquisitions in 2019
Refinanced $4.240 billion of debt in 2019 to extend maturities and provide flexibility
Raised $1.260 billion of debt in 2019 to fund the settlement of the legacy Valeant U.S. ‘stock drop’ litigation and pay the related financing fees and expenses
Fourth-Quarter and Full-Year 2019 Revenue Performance
Total reported revenues were $2.224 billion for the fourth quarter of 2019, as compared to $2.121 billion in the fourth quarter of 2018, an increase of $103 million, or 5%.
Total reported revenues were $8.601 billion for the full year of 2019, as compared to $8.380 billion for the full year of 2018, an increase of $221 million, or 3%. Excluding the unfavorable impact of foreign exchange of $112 million, the impact of a 2019 acquisition of $55 million and the impact of divestitures and discontinuations of $54 million, revenue grew organically1,2 by approximately 4% compared to the full year of 2018, driven by organic growth1,2 in the Salix and Bausch + Lomb/International segments.
Bausch + Lomb/International segment revenues were $1.238 billion for the fourth quarter of 2019, as compared to $1.205 billion for the fourth quarter of 2018, an increase of $33 million, or 3%. Excluding
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4 To assist investors in evaluating the Company’s performance, we have adjusted for changes in foreign currency exchange rates. Change at constant currency, a non-GAAP metric, is determined by comparing 2019 reported amounts adjusted to exclude currency impact, calculated using 2018 monthly average exchange rates, to the actual 2018 reported amounts.
the impact of divestitures and discontinuations of $6 million, the Bausch + Lomb/International segment grew organically1,2 by approximately 3% compared to the fourth quarter of 2018, primarily due to growth in the Global Consumer, Global Surgical and Global Vision Care business units.
Bausch + Lomb/International segment revenues were $4.739 billion for the full year of 2019, as compared to $4.664 billion for the full year of 2018, an increase of $75 million, or 2%. Excluding the unfavorable impact of foreign exchange of $110 million and the impact of divestitures and discontinuations of $41 million, the Bausch + Lomb/International segment grew organically1,2 by 5% compared to the full year of 2018, due to organic growth1,2 across all five business units.
Salix Segment
Salix segment revenues were $517 million for the fourth quarter of 2019, as compared to $426 million for the fourth quarter of 2018, an increase of $91 million, or 21%. The increase was primarily driven by XIFAXAN, which grew 29% as compared to the fourth quarter of 2018.
Salix segment revenues were $2.022 billion for the full year of 2019, as compared to $1.749 billion for the full year of 2018, an increase of $273 million, or 16%. Growth in the segment was primarily driven by higher sales of XIFAXAN, which grew 22% as compared to the full year of 2018, partially offset by the loss of exclusivity of products in the segment, primarily UCERIS (budesonide) and APRISO (mesalamine), which negatively impacted revenues by $96 million.
Ortho Dermatologics Segment
Ortho Dermatologics segment revenues were $158 million for the fourth quarter of 2019, as compared to $160 million for the fourth quarter of 2018, a decrease of $2 million, or 1%. The decline was due to lower volumes primarily driven by the loss of exclusivity of ELIDEL (pimecrolimus) Cream, 1%, ZOVIRAX (acyclovir) Cream, 5%, and SOLODYN (minocycline HCl), partially offset by higher revenues in the Global Solta business unit and revenues from new product launches in the Ortho Dermatologics business unit.
Ortho Dermatologics segment revenues were $565 million for the full year of 2019, as compared to $617 million for the full year of 2018, a decrease of $52 million, or 8%. The decline was due to lower volumes primarily driven by the loss of exclusivity of ELIDEL, ZOVIRAX, SOLODYN and ACANYA (clindamycin phosphate and benzoyl peroxide) Gel, 1.2%/2.5%, which negatively impacted revenues by $121 million, and was partially offset by higher revenues in the Global Solta business unit and revenues from new product launches in the Ortho Dermatologics business unit.
Diversified Products Segment
Diversified Products segment revenues were $311 million for the fourth quarter of 2019, as compared to $330 million for the fourth quarter of 2018, a decrease of $19 million, or 6%. Diversified Products segment revenues were $1.275 billion for the full year of 2019, as compared to $1.350 billion for the full year of 2018, a decrease of $75 million, or 6%. The decreases in revenue for both the fourth quarter and full year of 2019 were primarily attributed to the previously reported loss of exclusivity for a basket of products.
Operating Results
Operating loss was $1.076 billion for the fourth quarter of 2019, as compared to operating income of $25 million for the fourth quarter of 2018, a decrease of $1.101 billion. The decrease in operating results for the fourth quarter of 2019 was primarily driven by the accrual of legal reserves established
for the resolution of the legacy Valeant U.S. ‘stock drop’ litigation, other related actions and ongoing legacy litigation and investigations, partially offset by lower impairments and increased revenues in the fourth quarter of 2019 versus the fourth quarter of 2018.
Operating loss was $203 million for the full year of 2019, as compared to operating loss of $2.384 billion for the full year of 2018, a favorable change of $2.181 billion. The increase in operating results
primarily reflects goodwill impairment charges recognized in 2018 of $2.322 billion, decreases in the amortization and impairments of intangible assets and increased revenues and gross margins in 2019 versus 2018. The increase in operating results was partially offset by the accrual of legal reserves established for the resolution of the legacy Valeant U.S. ‘stock drop’ litigation, other related actions and ongoing legacy litigation and investigations.
Net Loss
Net loss for the fourth quarter of 2019 was $1.516 billion, as compared to net loss of $344 million for the same period in 2018, an unfavorable change of $1.172 billion. The change is primarily driven by the decrease of $1.101 billion in operating results as discussed above and higher income taxes, partially offset by lower interest expense and debt extinguishment charges.
Net loss for the full year of 2019 was $1.788 billion, as compared to net loss of $4.148 billion for the same period in 2018, a favorable change of $2.360 billion. The change is primarily driven by the increase of $2.181 billion in operating results as discussed above and lower interest expense and debt extinguishment charges.
Adjusted net income (non-GAAP)1 for the fourth quarter of 2019 was $404 million, as compared to $368 million for the fourth quarter of 2018, an increase of $36 million, or 10%.
Adjusted net income (non-GAAP)1 for the full year of 2019 was $1.559 billion, as compared to $1.410 billion for the full year of 2018, an increase of $149 million, or 11%.
Cash Generated from Operations
The Company generated $234 million of cash from operations in the fourth quarter of 2019, as compared to $319 million in the fourth quarter of 2018, a decrease of $85 million, or 27%. The decrease in cash from operations was primarily attributed to the timing of payments and receipts in the ordinary course of business, partially offset by improved operating results.
The Company generated $1.501 billion of cash from operations in 2019, which was in line with 2018.
EPS
GAAP Earnings Per Share (EPS) Diluted for the fourth quarter of 2019 was ($4.30), as compared to ($0.98) for the fourth quarter of 2018. GAAP EPS Diluted for the full year of 2019 was ($5.08), as compared to ($11.81) for the full year of 2018.
Adjusted EBITDA (non-GAAP)1
Adjusted EBITDA (non-GAAP)1 was $898 million for the fourth quarter of 2019, as compared to $858 million for the fourth quarter of 2018, an increase of $40 million, or 5%.
Adjusted EBITDA (non-GAAP)1 was $3.571 billion for the full year of 2019, as compared to $3.474 billion for the full year of 2018, an increase of $97 million, or 3%. The increase was due to higher
revenues, most notably in the Salix segment, which has favorable gross margins, partially offset by higher operating expenditures to support new product launches and R&D projects.
2020 Financial Outlook
Bausch Health provided guidance for the full year of 2020, as follows:
Full-Year revenues in the range of $8.65 – $8.85 billion
Full-Year Adjusted EBITDA (non-GAAP) in the range of $3.50 – $3.65 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 guidance provided in this section represents forward-looking information and 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 $3.244 billion5 at Dec. 31, 2019
The Company’s availability under the Revolving Credit Facility was $1.055 billion at Dec. 31, 2019
Basic weighted average shares outstanding for the fourth quarter of 2019 were 352.6 million shares. Diluted weighted average shares outstanding for the fourth quarter of 2019 were 359.2 million shares6
Basic weighted average shares outstanding for the full year of 2019 were 352.1 million shares. Diluted weighted average shares outstanding for the full year of 2019 were 357.2 million shares6