On February 24, 2021 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we") reported its fourth-quarter and full-year 2020 financial results (Press release, Bausch Health, FEB 24, 2021, View Source [SID1234575572]).
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"Despite unprecedented business challenges resulting from the COVID-19 pandemic, I’m proud that Bausch Health finished the year strong and outperformed the high end of our latest revenue guidance range," said Joseph C. Papa, chairman and CEO, Bausch Health. "During the pandemic-related downturn, we focused our efforts on growing market share for key promoted products, carefully managed our expenses and continued to invest in our pipeline for future growth opportunities. We generated cash from operations of more than $1.1 billion, which helped us to repay approximately $900 million of our debt."
"We are continuing to execute on our business recovery from the pandemic, and we are well positioned to benefit from recovery-related tailwinds and capitalize on our key growth drivers and catalysts in 2021 as we remain focused on how best to unlock value in the Company, including the planned spinoff of Bausch + Lomb," continued Mr. Papa.
Executing on Core Businesses and Advancing Pipeline
The Bausch + Lomb/International segment comprised approximately 56% of the Company’s reported revenue in the fourth quarter of 2020
Reported revenue in the Bausch + Lomb/International segment grew nominally compared to the fourth quarter of 2019; organic1,2 revenue in this segment was flat compared to the fourth quarter of 2019
The Bausch + Lomb/International segment comprised approximately 55% of the Company’s reported revenue in 2020
Reported revenue in the Bausch + Lomb/International segment decreased 7% compared to 2019; revenue in this segment declined organically1,2 by 6% compared to 2019
Launched several products in 2020, including:
Bausch + Lomb INFUSE silicone hydrogel (SiHy) daily disposable contact lenses in the United States
BAUSCH + LOMB ULTRA ONE Day SiHy daily disposable contact lenses in Australia, Canada and Hong Kong
SimplifEYE intraocular lens (IOL) delivery system in the United States
Expanded parameters for Biotrue ONEday for Astigmatism daily disposable contact lenses
LuxSmart, the Company’s first Extended Depth of Focus IOL, and LuxGood, a monofocal IOL, in Europe
BAUSCH + LOMB ULTRA monthly silicone hydrogel contact lenses in China in November
Received approval from the U.S. Food and Drug Administration (FDA) for Alaway Preservative Free (ketotifen fumarate) ophthalmic solution, 0.035%, antihistamine eye drops, which launched in February 2021
Entered into multiple licensing and business development agreements, including:
An agreement to acquire an option to purchase all ophthalmology assets of Allegro Ophthalmics, LLC, including global rights for risuteganib (Luminate)3
An exclusive license from Eyenovia, Inc. in the United States and Canada for the development and commercialization of an investigational microdose formulation of atropine ophthalmic solution, which is being investigated for the reduction of pediatric myopia progression in children ages 3-12
An exclusive global license from BHVI for a myopia control contact lens design
Completed enrollment in early 2021 for the first Phase 3 study evaluating NOV034 as a first-in-class investigational drug with a novel mechanism of action to treat the signs and symptoms of dry eye disease associated with Meibomian gland dysfunction, after initiating a second, identical Phase 3 study in November 2020
The Salix segment comprised approximately 24% of the Company’s reported revenue in the fourth quarter of 2020
Reported and organic1,2 revenue in the Salix segment increased by 2% compared to the fourth quarter of 2019
The Salix segment comprised approximately 24% of the Company’s reported revenue in 2020
Reported and organic1,2 revenue in the Salix segment decreased by 6% compared to 2019
Received FDA Orphan Drug Designation for rifaximin for the treatment of sickle cell disease
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, 40 mg BID of rifaximin SSD IR plus standard of care therapy met the study’s primary endpoint with statistically significantly superior results compared to placebo plus standard of care therapy
The Ortho Dermatologics segment comprised approximately 7% of the Company’s reported revenue in the fourth quarter of 2020
Reported revenue in the Ortho Dermatologics segment increased by 1% compared to the fourth quarter of 2019; revenue in this segment declined organically1,2 by 1% compared to the fourth quarter of 2019
The Ortho Dermatologics segment comprised approximately 7% of the Company’s reported revenue in 2020
Reported revenue in the Ortho Dermatologics segment decreased by 2% compared to 2019; revenue in this segment declined organically1,2 by 3% compared to 2019
Launched ARAZLO (tazarotene) Lotion, 0.045%, in the United States
Received an expanded indication in the United States for JUBLIA (efinaconazole) topical solution, 10%, to treat patients as young as six years old
Since announcing its intention to separate Bausch Health’s eye health business into an independent public company, the Company has continued to make progress toward internal objectives necessary for the spin of Bausch + Lomb, and these internal objectives are anticipated to be achieved by the end of the third quarter of 2021
Released both Bausch Foundation Inaugural Activity Report and the Company’s annual Corporate Social Responsibility report in September 2020
Response to COVID-19 Pandemic
When the COVID-19 pandemic emerged, Bausch Health acted quickly to implement business continuity plans that enabled the Company to ensure the health and well-being of its employees, maintain an uninterrupted availability of its health care products and remain focused on supporting customers and patients around the world. Additionally, Bausch Health donated health care products and supplies, ranging from contact lenses to antiviral medicines, through the Company and the Bausch Foundation.
The Company also continued to advance its relief efforts related to the pandemic by researching its existing medicines to determine if any of its products may offer valuable treatment options. Examples include:
DEXAVEN (dexamethasone phosphate), which received an additional new indication in Poland for the treatment of COVID-19 in adult and adolescent patients (12 years of age and older weighing at least 40 kg) who require oxygen therapy
LUMIFY (brimonidine tartrate ophthalmic solution 0.025%), BESIVANCE (besifloxacin ophthalmic suspension) 0.6% and Opcon-A (pheniramine maleate 0.315% and naphazoline HCI 0.02675% ophthalmic solution) eye drops preserved with benzalkonium chloride, for which investigational in vitro data indicated complete inactivation of COVID-19
VIRAZOLE (Ribavirin for Inhalation Solution, USP), which is being studied in an investigational clinical trial in Canada, Greece, Mexico and Brazil to evaluate its use in combination with standard of care therapy to treat hospitalized adult patients with respiratory distress due to COVID-19
IVEXTERM (ivermectin), which is being studied in Latin America to assess an investigational use in treating patients with mild COVID-19; topline results are expected in the first half of 2021
Debt Management
Repaid debt by approximately $480 million in the fourth quarter of 2020 for a total of approximately $900 million in the full year of 2020 using cash generated from operations and more efficient cash management
Refinanced $3.500 billion of debt in 2020 to extend maturities and provide flexibility
Bausch Health has no debt maturities or mandatory amortization payments until 2024
Resolving Legal Matters
The Company resolved multiple legal matters in 2020, including:
Resolving outstanding intellectual property disputes with Sandoz Inc. regarding XIFAXAN (rifaximin) 550 mg tablets and with Sun Pharmaceutical Industries Ltd. regarding XIFAXAN 200 mg and 550 mg tablets. Salix will maintain market exclusivity for XIFAXAN until 20285
Resolving the legacy investigation by the U.S. Securities and Exchange Commission for $45 million regarding the Company’s former relationship with Philidor Rx Services, LLC and certain accounting practices and disclosures related to the 2014 and 2015 reporting periods. The Company neither denied nor admitted the charges
Resolving the Canadian securities class action litigation for $94 million CAD (approximately $71 million USD), plus settlement administration costs. The Company admits no liability and denies all allegations of wrongdoing whatsoever
Fourth-Quarter and Full-Year 2020 Revenue Performance
Total reported revenues were $2.213 billion for the fourth quarter of 2020, as compared to $2.224 billion in the fourth quarter of 2019, a decrease of $11 million.
Total reported revenues were $8.027 billion for the full year of 2020, as compared to $8.601 billion for the full year of 2019, a decrease of $574 million, or 7%. Revenue was negatively impacted by approximately $740 million in 2020 due to the impact of the COVID-19 pandemic. Excluding the unfavorable impact of foreign exchange of $39 million, the impact of divestitures and discontinuations of $20 million and the impact of an acquisition of $13 million, revenue declined 6% organically1,2 compared to the full year of 2019.
Bausch + Lomb/International Segment
Bausch + Lomb/International segment revenues were $1.242 billion for the fourth quarter of 2020, as compared to $1.238 billion for the fourth quarter of 2019, an increase of $4 million. Excluding the favorable impact of foreign exchange of $9 million and the impact of divestitures and discontinuations of $5 million, the Bausch + Lomb/International segment was flat organically1,2 compared to the fourth quarter of 2019 primarily due to the impact of the COVID-19 pandemic.
Bausch + Lomb/International segment revenues were $4.408 billion for the full year of 2020, as compared to $4.739 billion for the full year of 2019, a decrease of $331 million, or 7%. Excluding the unfavorable impact of foreign exchange of $42 million and the impact of divestitures and discontinuations of $19 million, the Bausch + Lomb/International segment declined organically1,2 by 6% compared to the full year of 2019 primarily due to the impact of the COVID-19 pandemic.
Salix Segment
Salix segment reported and organic1,2 revenues were $527 million for the fourth quarter of 2020, as compared to $517 million for the fourth quarter of 2019, an increase of $10 million, or 2%, primarily driven by increased sales of XIFAXAN and TRULANCE (plecanatide), for which sales grew by 4% and by 33%, respectively, compared to the fourth quarter of 2019. The increase was partially offset by the loss of exclusivity of products in the segment, which negatively impacted revenues by approximately $6 million, and an expected decline for GLUMETZA (metformin hydrochloride), for which revenue declined by $7 million due to reduced net selling prices.
Salix segment revenues were $1.904 billion for the full year of 2020, as compared to $2.022 billion for the full year of 2019, a decrease of $118 million, or 6%. Excluding the impact of an acquisition of $13 million, the Salix segment also declined organically1,2 by 6% compared to the full year of 2019. The decrease in revenue was primarily driven by the loss of exclusivity of products in the segment, which negatively impacted revenues by approximately $109 million; by an expected decline for GLUMETZA, for which revenue declined by $70 million due to reduced net selling prices; and by the impact of the COVID-19 pandemic. The decrease in sales for the full year of 2020 was partially offset by increased sales of XIFAXAN and TRULANCE, for which sales grew by 2% and 49%, respectively, compared to the full year of 2019.
Ortho Dermatologics Segment
Ortho Dermatologics segment revenues were $160 million for the fourth quarter of 2020, as compared to $158 million for the fourth quarter of 2019, an increase of $2 million, or 1%. Excluding the favorable impact of foreign exchange of $3 million, the Ortho Dermatologics segment declined organically1,2 by approximately 1% compared to the fourth quarter of 2019 primarily driven by the loss of exclusivity of products in the segment, which negatively impacted revenues by approximately $9 million, partially offset by sales of the Thermage franchise, which grew by 46% compared to the fourth quarter of 2019.
Ortho Dermatologics segment revenues were $553 million for the full year of 2020, as compared to $565 million for the full year of 2019, a decrease of $12 million, or 2%. Excluding the favorable impact of foreign exchange of $3 million, the Ortho Dermatologics segment declined organically1,2 by approximately 3% compared to the full year of 2019 primarily driven by the loss of exclusivity of products in the segment, which negatively impacted revenues by approximately $37 million, partially offset by sales of the Thermage franchise, which grew by 47% compared to the full year of 2019.
Diversified Products Segment
Diversified Products segment reported and organic1,2 revenues were $284 million for the fourth quarter of 2020, as compared to $311 million for the fourth 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 and the impact of the COVID-19 pandemic.
Diversified Products segment revenues were $1.162 million for the full year of 2020, as compared to $1.275 billion for the full year of 2019, a decrease of $113 million, or 9%. Excluding the impact of divestitures and discontinuations of $1 million, the Diversified Products segment also declined organically1,2 by 9% compared to the full year of 2019. The decrease in revenue was primarily attributable to the previously reported loss of exclusivity for a basket of products and the impact of the COVID-19 pandemic.
Operating Results
Operating loss was $5 million for the fourth quarter of 2020, as compared to operating loss of $1.076 billion for the fourth quarter of 2019, an increase in operating results of $1.071 billion. The increase in operating results was primarily due to the accrual of legal reserves established for the resolution of the U.S. securities litigation, other related actions and ongoing legacy litigation and investigations in the fourth quarter of 2019 and profit protection measures taken to manage and reduce operating expenses during the COVID-19 pandemic, partially offset by decreases in revenues and gross margins primarily due to the impact of the COVID-19 pandemic, as discussed above.
Operating income was $676 million for the full year of 2020, as compared to operating loss of $203 million for the full year of 2019, an increase in operating results of $879 million. The increase in operating results was primarily due to the accrual of legal reserves established for the resolution of the U.S. securities litigation, other related actions and ongoing legacy litigation and investigations in 2019 and profit protection measures taken to manage and reduce operating expenses during the COVID-19 pandemic, partially offset by decreases in revenues and gross margins primarily due to the impact of the COVID-19 pandemic, as discussed above.
Net Loss
Net loss was $153 million for the fourth quarter of 2020, as compared to net loss of $1.516 billion for the fourth quarter of 2019, a favorable change of $1.363 billion. The change was primarily driven by the increase in operating results discussed above and the benefit from income taxes in connection with the release of valuation allowance against deferred income taxes.
Net loss was $560 million for the full year of 2020, as compared to net loss of $1.788 billion for the full year of 2019, a favorable change of $1.228 billion. The change was primarily driven by the increase in operating results discussed above, the benefit from income taxes in connection with the release of valuation allowance against deferred income taxes and the decrease in interest expense.
Adjusted net income (non-GAAP)1 for the fourth quarter of 2020 was $478 million, as compared to $404 million for the fourth quarter of 2019, an increase of $74 million, or 18%.
Adjusted net income (non-GAAP)1 for the full year of 2020 was $1.428 billion, as compared to $1.559 billion for the full year of 2019, a decrease of $131 million, or 8%.
Cash Generated from Operations
The Company generated $394 million of cash from operations (GAAP basis) in the fourth quarter of 2020, as compared to $234 million in the fourth quarter of 2019, an increase of $160 million. The increase in cash from operations was primarily attributed to the timing of payments and receipts in the ordinary course of business and profit protection measures taken to manage and reduce operating expenses during the COVID-19 pandemic, partially offset by payments of $79 million for the resolution of certain legacy litigation and investigations in the fourth quarter of 2020.
The Company generated $1.111 billion of cash from operations (GAAP basis) in 2020, as compared to $1.501 billion in 2019, a decrease of $390 million. The decrease in cash from operations was primarily attributed to lower volumes as a result of the COVID-19 pandemic and $122 million of payments for the resolution of certain legacy litigation and investigations in 2020.7
EPS
GAAP Earnings Per Share (EPS) Diluted for the fourth quarter of 2020 was ($0.43), as compared to ($4.30) for the fourth quarter of 2019. GAAP Earnings Per Share (EPS) Diluted for the full year of 2020 was ($1.58), as compared to ($5.08) for the full year of 2019.
Adjusted EBITDA (non-GAAP)1
Adjusted EBITDA (non-GAAP)1 was $911 million for the fourth quarter of 2020, as compared to $898 million for the fourth quarter of 2019, an increase of $13 million, or 1%.
Adjusted EBITDA (non-GAAP)1 was $3.294 billion for the full year of 2020, as compared to $3.571 billion for the full year of 2019, a decrease of $277 million, or 8%. The decrease was primarily due to impact of the COVID-19 pandemic.
2021 Financial Outlook
Bausch Health provided guidance for the full year of 2021 as follows:
Full-year revenue range of $8.60 – $8.80 billion
Full-year Adjusted EBITDA (non-GAAP) range of $3.40 – $3.55 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). 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 $1.816 billion8 at Dec. 31, 2020
The Company’s availability under its Revolving Credit Facility was $1.121 billion at Dec. 31, 2020
Basic weighted average shares outstanding for the fourth quarter of 2020 were 355.8 million shares. Diluted weighted average shares outstanding for the fourth quarter of 2020 were 359.0 million shares9
Basic weighted average shares outstanding for the full year of 2020 were 355.0 million shares. Diluted weighted average shares outstanding for the full year of 2020 were 358.2 million shares9