On February 20, 2019 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we") reported its fourth-quarter and full-year 2018 financial results (Press release, Valeant, FEB 20, 2019, View Source [SID1234533484]).
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"2018 was a strong year for Bausch Health as we delivered organic revenue growth2 across the entire Company while reducing our total debt by more than $1 billion and strategically investing in our core businesses," said Joseph C. Papa, chairman and CEO, Bausch Health.
"As Bausch Health now pivots to offense, we will continue to focus on multiple key launches, including our Significant Seven products. Additionally, we will increase our investment in R&D to enable us to develop and bring to market more products that help improve the lives of patients globally," Mr. Papa continued.
Company Highlights
Executing on Core Businesses and Advancing Pipeline
The Bausch + Lomb/International segment comprised approximately 56% of the Company’s revenue in 2018
Reported revenue in the Bausch + Lomb/International segment decreased by 3% in 2018 compared to 2017, primarily due to the impact of divestitures and discontinuations; revenue in this segment grew organically2 by 4% compared to 2017, due to organic growth2 across all businesses in the segment
Launched multiple products in 2018, including LUMIFY eye drops and AQUALOX silicone hydrogel, or SiHy, daily contact lenses in Japan
The Salix segment comprised approximately 21% of the Company’s revenue in 2018
Grew revenue in the Salix segment by 12% in 2018 compared to 2017 despite generic competition following the loss of exclusivity for UCERIS
XIFAXAN revenue increased by 22% in 2018 compared to 2017
Resolved the XIFAXAN intellectual property litigation with Actavis Laboratories FL, Inc. (Teva), preserving market exclusivity for XIFAXAN 550 mg tablets until 20283
RELISTOR revenue increased by 37% in 2018 compared to 2017
Entered into a "stalking horse" agreement in the fourth quarter of 2018 to acquire certain assets of Synergy Pharmaceuticals Inc., including TRULANCE, a treatment for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation (IBS-C), and dolcanatide, an investigational compound that has demonstrated proof-of-concept in treating patients with multiple gastrointestinal conditions
If approved, the transaction is expected to close in March 20194
Entered into exclusive co-promotional agreements in the United States in 2018, including:
LUCEMYRA, the first and only non-opioid medication for the mitigation of withdrawal symptoms to facilitate abrupt discontinuation of opioids in adults, with US WorldMeds, LLC
DOPTELET, which is indicated for the treatment of thrombocytopenia in adult patients with chronic liver disease who are scheduled to undergo a procedure, with Dova Pharmaceuticals, Inc.
PLENVU, a one-liter PEG bowel cleansing preparation for colonoscopies, was launched in the third quarter of 2018
The Ortho Dermatologics segment comprised approximately 7% of the Company’s revenue in 2018
Revenues in the Global Solta business grew by 22% in 2018 compared to the full year of 2017, driven by the launch of Thermage FLX in markets around the world
Launched multiple products in 2018, including ALTRENO Lotion for the treatment of acne vulgaris and BRYHALI Lotion for the topical treatment of plaque psoriasis in adult patients
Expecting a decision shortly from the U.S. Food and Drug Administration (FDA) on DUOBRII5 Lotion for the topical treatment of plaque psoriasis in adults
Revenues from our Significant Seven portfolio of products doubled to greater than $150 million for the full year of 2018 compared to approximately $75 million for the full year of 2017, driven by:
AQUALOX SiHy daily contact lenses, which launched in Japan in September 2018
BRYHALI, which launched in November 2018
LUMIFY, which achieved a weekly market share of approximately 28%6; LUMIFY launched in May 2018
RELISTOR, a treatment for opioid-induced constipation
SILIQ, an injectable biologic for moderate-to-severe psoriasis; launch was expanded in January 2018
VYZULTA, a treatment option for glaucoma; launch began in late December 2017
Addressing Debt
Repaid approximately $400 million of debt in the fourth quarter of 2018
Repaid more than $1 billion of debt in 2018, using cash generated from operations
Refinanced approximately $8.3 billion of debt in 2018 to extend maturities and provide more flexibility
Reduced net interest expense by $154 million in 2018 compared to 2017
Fourth-Quarter and Full-Year 2018 Revenue Performance
Total reported revenues were $2.121 billion for the fourth quarter of 2018, as compared to $2.163 billion in the fourth quarter of 2017, a decrease of $42 million, or 2%.
Total reported revenues were $8.380 billion for the full year of 2018, as compared to $8.724 billion for the full year of 2017, a decrease of $344 million, or 4%. Excluding the impact of the 2018 divestitures and discontinuations of $541 million and the favorable impact of foreign exchange of $18 million, revenue grew organically2 by 2% compared to the full year of 2017, driven by organic growth2 across the Salix and Bausch + Lomb/International segments.
Bausch + Lomb/International Segment
Bausch + Lomb/International segment revenues were $1.205 billion for the fourth quarter of 2018, as compared to $1.204 billion for the fourth quarter of 2017, an increase of $1 million. Excluding the impact of divestitures and discontinuations of $22 million, and the unfavorable impact of foreign exchange of $41 million, the Bausch + Lomb/International segment grew organically2 by approximately 5% compared to the fourth quarter of 2017, primarily due to higher volumes despite a planned channel inventory reduction of $10 million in the Global Ophtho Rx business that was previously announced.
Bausch + Lomb/International segment revenues were $4.664 billion for the full year of 2018, as compared to $4.795 billion for the full year of 2017, a decrease of $131 million, or 3%. Excluding the impact of divestitures and discontinuations of $312 million, and the favorable impact of foreign exchange of $18 million, the Bausch + Lomb/International segment grew organically2 by approximately 4% compared to the full year of 2017 due to organic growth2, including volume growth of $182 million, across all businesses within the segment.
Salix Segment
Salix segment revenues were $426 million for the fourth quarter of 2018, as compared to $425 million for the fourth quarter of 2017, an increase of $1 million, driven by XIFAXAN, which grew 12% in the quarter, but was offset by a planned channel inventory reduction of $47 million and the loss of exclusivity for UCERIS.
Salix segment revenues were $1.749 billion for the full year of 2018, as compared to $1.566 billion for the full year of 2017, an increase of $183 million, or 12%. Growth in the segment was driven by higher sales of XIFAXAN, RELISTOR and APRISO, compared to the full year of 2017, despite generic competition following the loss of exclusivity for UCERIS.
Ortho Dermatologics Segment
Ortho Dermatologics segment revenues were $165 million for the fourth quarter of 2018, as compared to $169 million for the fourth quarter of 2017, a decrease of $4 million, or 2%, due to lower volumes in the segment, partially offset by 32% revenue growth in the Global Solta business.
Ortho Dermatologics segment revenues were $625 million for the full year of 2018, as compared to $725 million for the full year of 2017, a decrease of $100 million, or 14%, due to lower volumes in the segment. Revenues in the Global Solta business grew by 22% in 2018 compared to the full year of 2017, driven by the launch of Thermage FLX in markets around the world.
Diversified Products Segment
Diversified Products segment revenues were $325 million for the fourth quarter of 2018, as compared to $365 million for the fourth quarter of 2017, a decrease of $40 million, or 11%. The decline was primarily due to decreases attributed to the previously reported loss of exclusivity for a basket of products.
Diversified Products segment revenues were $1.342 billion for the full year of 2018, as compared to $1.638 billion for the full year of 2017, a decrease of $296 million, or 18%. The decline was primarily due to the impact of divestitures and discontinuations of $221 million and decreases attributed to the previously reported loss of exclusivity for a basket of products.
Operating Income/Loss
Operating income was $25 million for the fourth quarter of 2018, as compared to an operating loss of $322 million for the fourth quarter of 2017, an increase of $347 million.
Operating loss was $2.384 billion for the full year of 2018, as compared to an operating income of $102 million for the full year of 2017, a decrease of $2.486 billion. The decrease in operating results for the full year of 2018 reflects goodwill impairment charges of $2.322 billion, including $2.213 billion in charges that were recognized when the Company adopted new accounting guidance from the Financial Accounting Standards Board in January 2018 and gains from the divestitures that occurred in 2017, partially offset by favorable Cost of Goods Sold and Selling, General and Administrative (SG&A) Expenses.
Net Loss
Net loss for the three months ended Dec. 31, 2018 was $344 million, as compared to net income of $513 million for the same period in 2017, a decrease of $857 million.
Net loss for the full year ended Dec. 31, 2018 was $4.148 billion, as compared to net income of $2.404 billion for the same period in 2017, a decrease of $6.552 billion. The decrease is primarily due to a 2017 tax benefit of $4.145 billion primarily associated with our internal restructuring and $2.213 billion in impairment charges that were recognized when the Company adopted new accounting guidance from the Financial Accounting Standards Board in January 2018.
Adjusted net income (non-GAAP) for the fourth quarter of 2018 was $368 million, as compared to $347 million for the fourth quarter of 2017, an increase of $21 million, or 6%.
Adjusted net income (non-GAAP) for the full year of 2018 was $1.410 billion, as compared to $1.349 billion for the full year of 2017, an increase of $61 million, or 5%.
Operating Cash
The Company generated $319 million of cash from operations in the fourth quarter of 2018, as compared to $578 million in the fourth quarter of 2017, a decrease of $259 million, or 45%, partially due to changes in the timing of interest payments, with approximately $125 million more occurring in the fourth quarter of 2018 than the fourth quarter of 2017.
The Company generated $1.501 billion of cash from operations in 2018, as compared to $2.290 billion in 2017, a decrease of $789 million, or 34%. The decrease in cash from operations was primarily attributable to the timing of cash we received from our fulfillment arrangement with Walgreens in 2017.
EPS
GAAP Earnings Per Share (EPS) Diluted for the fourth quarter of 2018 was ($0.98), as compared to $1.45 for the fourth quarter of 2017. GAAP Earnings Per Share (EPS) Diluted for the full year of 2018 was ($11.81), as compared to $6.83 for the full year of 2017.
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA (non-GAAP) was $858 million for the fourth quarter of 2018, as compared to $875 million for the fourth quarter of 2017, a decrease of $17 million, or 2%.
Adjusted EBITDA (non-GAAP) was $3.474 billion for the full year of 2018, as compared to $3.638 billion for the full year of 2017, a decrease of $164 million, or 5%. The decline for the full year of 2018 was due to the impact of the loss of exclusivity of certain products of $290 million, the impact of the 2017 divestitures of $183 million, the unfavorable impact of foreign exchange of $83 million and the planned inventory channel reduction of $65 million. The decline was partially offset by positive base business performance in the Salix and Bausch + Lomb/International segments and improved management of operating expenses.
2019 Financial Outlook
Bausch Health provided guidance for the full year of 2019, as follows:
Full-Year Revenues in the range of $8.30 – $8.50 billion
Full-Year Adjusted EBITDA (non-GAAP) in the range of $3.35 – $3.50 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 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 $723 million at Dec. 31, 2018
The Company’s availability under the Revolving Credit Facility was approximately $980 million at Dec. 31, 2018
Conference Call Details
Date:
Wednesday, Feb. 20, 2019
Time:
8:00 a.m. EST
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