Bausch Health Companies Inc. Aktie

And it's with Bausch Health Companies today. And we have both Thomas Appio, who's the CEO of the company; and also JJ Charhon, who is the CFO. Now it's interesting. You haven't been here for many years. So it's a pleasure to have you back. And I know you've both been involved in some significant heavy lifting over the last couple of years to rightsize things again.

And maybe I thought what would be helpful is just to level set for us and give us an idea of where we stand with the company in terms of various metrics before I move into some more in-depth questions, if that's okay.

Yes, sure. All right. So as Doug said, there's been a lot of heavy lifting over the last few years since the IPO of B&L. So in terms of -- first of all, let's talk about just the execution from a commercial standpoint. As you saw last quarter, the execution, 12th consecutive quarter the growth on the top and the bottom. I think one of the things that probably the investment community, I don't think we get probably enough credit for appreciation for is the team that we've built and the execution on all these assets that are part of Bausch Health.

So clearly, our Salix franchise led by Xifaxan, the growth has been -- we have a fantastic team that we've built there, and they're executing on all cylinders.

And if you look at -- as I talked about many times of the engine that we built in terms of our commercial excellence -- so really pleased and happy with where we've come from an execution standpoint of our Salix franchise and of course, our international franchise, which always continues to perform and grow nicely on the top and the bottom.

I think the other thing that the investment community probably doesn't appreciate as much or is Solta. I mean the Solta business has -- is an exceptional business for us. Of course, you've seen the outstanding growth there. We just completed the acquisition of our distributor in China, which gives us scale in China. I think that you saw the results of the first quarter. We expect, of course, the EBITDA to be -- continue to improve, and JJ can talk about that of the one-timers that we had in December and in January.

But that asset continues to grow and perform globally, both from an Asia Pacific standpoint and from a U.S. standpoint. So I think that asset has the opportunity to continue to power growth for the future. We just received in China what called AAA trademark status, which if you know what that is, it's -- Thermage has received triple market status AAA status, which not many companies get.

There's only about approximately 190 companies in all of China that have that. So clearly, consumers will see that, and it is the trademark, the gold standard of skin tightening.

So that's a great achievement that we just got over the last few weeks. I'm going to pass it off to JJ to talk about some of the heavy lifting that we've done from a capital structure standpoint because I know you're interested in that. But I also, before I hand it off to him, our legal team has done an outstanding job of defending our intellectual property. And as we announced on the first quarter earnings call in terms of where we are with the opt-outs and all the U.S. opt-outs are settled. So a lot of work has been done from a legal perspective. But I'll turn it over to J.J. to talk about what he's -- the dramatic change of the capital structure.

Yes. Thank you. As you know, Bausch Health is going through some transition. We're in the process of finalizing the path to complete the separation between Bausch Health and Bausch + Lomb -- the portfolio is also going through a transition.

We are assuming that we'll maintain market exclusivity associated with Xifaxan until the end of 2027. That represents a good proportion of our revenue, a good proportion of our cash flows. And so therefore, from a financial priority standpoint, really, the company is focused on 3 elements.

The first one is maximize cash flow between now and the end of '27. And obviously, the commercial execution that Tom has been referring to has been a very important aspects of it. Number two is really setting up our portfolio post Xifaxan for success. What we're doing for -- with our International segments, what we're doing with Salta, as Tom was referring to, is of utmost importance because that's going to be an important element to it.

We're obviously also, as you've seen from our press releases, focusing on some potential selective inorganic opportunities to really supplement our pipeline. And then the third piece of it is really how do we set up the process, the time line for maximizing the value of our stake in B&L.

And the reason why this is so important that when you think about our capital structure and the net leverage we currently have today, it's obviously not fit for purpose when you think about the portfolio post Xifaxan. We are overlevered, and we have to delever the balance sheet further. Some of that will come from organic cash flow that we'll be generating over the next 2 years.

But clearly, there will be a gap. And that gap will have to be filled in 1 of 3 ways. You can either decide to raise some new equity, which obviously would be very expensive and highly dilutive given where BHC is trading right now. So obviously, that's last option. You could try to capture some of that discount. But as you've seen over the last couple of years, our debt has been trading up.

When I joined as the CFO of the company, we had about a debt discount of about $3 billion on $16 billion of gross debt. Now we're under $1 billion. It hovers here and there, but it's mostly that discount is the differential between the coupon and our cost of capital.

So there's not a lot of, I would say, distressed debt discount associated with that. So there's not really much to grab there. So the last source of funding is really proceeds from asset sales. And most likely candidate here is obviously B&L. So that's why the refinancing that we did last year, which was about $9.6 billion, if you add up what we did in April and then the debt exchange we did in December was really designed to provide ourselves with additional runway so we can let B&L and the management team execute on their Vision 2027.

They had an investor meeting in November of last year, where they laid out financial targets for the next 3 years. And so we're very confident in the plan. And the idea is this refinancing not only provide financial flexibility around resource allocation and potentially make some investment along the way, but also provides more time for the B&L team to execute on that plan before we start monetizing our stake, should we decide that's the best path to get the capital structure in order.

Okay. Perfect. So let's drill down on a couple of things. Can we go straight to operating cash flow? I think you've guided to $1.2 billion to $1.275 billion this year. If we adjust for CapEx of $50 million and the legal settlement that was $160 million, we get somewhere between $1 billion, $1.1 billion, let's call it that.

When you think about 2027, if we look at the $160 million that's related to the legal settlements, and the IRA headwind that's coming for Xifaxan, is it fair to say that cash flow probably be roughly the same year-over-year?

Yes. We haven't provided any guidance associated with cash flow for 2027. But I think your -- the way you laid it out makes sense. There'll be ups and minuses versus 2026. I think you highlighted the fact that legal settlements are now behind us. The last installment of the settlement associated with the really was paid out in the first quarter.

So we're happy about that. And then to your point, with the new IRA rebate, there will be a reduction that will offset a lot of that. We continue to see growth or anticipated growth in the rest of our portfolio. So that will also a partial offset to the IRA rebate.

So I think assuming that cash flow is going to be roughly similar to what we have in 2026 is not unreasonable and obviously assumes that we maintain market exclusivity for Xifaxan Until the end of '27.

Okay. So just moving on from there. Tom, you've done a great job with Xifaxan, okay? We do have a little bit of a price increase in there, but the growth in prescriptions has been very strong. Can you -- we talk a little bit about that lingering Medicaid benefit and is growth going to really approximate what we're seeing with prescription growth and adding on a little bit more?

Yes. I think that the team has done an outstanding job with Xifaxan over the last 4 years on both indications. OHE has -- the sales and marketing team have really executed there.

And as I said earlier, our AI engine, which has really been able to deploy our field force and get much more out of our field force to be able to drive growth. Now as we look -- as we exited Medicaid and 340B, if you look at the -- where we're playing today, not in those spaces, we're still seeing growth. J.J. can talk about what's lingering there, some of the volume that's coming through on that other channel.

But we believe that, of course, as we look at what we can bring to physicians and patients that we can continue to grow in where we are competing today. JJ, you want to comment on the LOE?

So the way I think about Xifaxan revenue, I would broke it down into 2 pieces. The revenue associated with the channel we're still in today, which are basically the commercial channel and Medicare. And then Medicaid and 340B, which we exited starting on October 1 of last year. So volume and pricing dynamics are fairly consistent in the channels we've been in over the last few years.

And we're not really seeing any major differences in terms of script trends and also price potential. Now if you look at the revenue associated we make in 340B, we were getting a lot of scripts, but not a lot of revenue, as you might expect, as this was a heavily discounted channel. The residual revenue that we've got at the end of last year and the first quarter of this year were a little bit ahead of what we're expecting.

I mean, obviously, there was some erosion that was going to happen that was anticipated, but the residual revenue has provided some tailwind for us. We expect that to kind of decrease gradually over time throughout the remaining of the year, obviously, on the Medicaid side.

340B is a little bit more complicated because some of those patients are being covered by other channel. But I think the optimization that the team has done for both the commercial channel we're in, but overall, the mix of business that we are has been outstanding and has explained why we continue to enjoy some very strong growth in the first quarter.

Okay. So there has been discussion recently around the two Norwich trials that are now combined. And I have to say that my belief when the judge made his original ruling on a drug product was that this is going to be a January 1, 2028 situation.

But now I'm hearing that it could be a little bit sooner than that based on the potential outcome of these cases. Now we still have the outstanding 180-day exclusivity at Teva. Under what circumstances in your view, could they lose that?

Yes. So right now, the case is with the Federal Circuit in D.C. and the appeal, we're still waiting for the decision. As we said in -- at the last earnings call, any time after we were assuming or estimating any time after April.

Of course, in the meantime, Teva has, as I said on the earnings call as well, they received approval. So as we look at it, we're waiting on that case. But it's also that case, but then there's also the second case in the New Jersey District Court that is there as well. There's no trial date set for that. And those patents are different in terms of what is -- what the patents were on the earlier trials, earlier cases.

So we're continuing to monitor and wait we believe we're going to defend our intellectual property and we have been over the last 4 years. So we'll see what the courts decide. And -- but clearly, Teva getting approval is a nice step.

Yes. There's no doubt about that. But if they don't market it within 75 days, there's still the secondary that would cause them to forfeit, but there is still the secondary factor about the ongoing litigation, and we're going to have to see how that falls out. But that -- could that be the trigger point here for them losing?

In terms -- so right now, in the D.C. district, okay, that's -- but then you have Norwich, what we call Norwich 2, which is that case in New Jersey. So there's many factors, it's multifactorial playing out here on these 2 cases. Again, there's no trial date set for the New Jersey case. I don't want to speculate of what's going to occur with the Federal Circuit in D.C, but then there's a second case.

I don't know how -- as there has no trial date that's set in New Jersey, I don't know how they're viewing it or what they're looking at, at the present time.

Okay. And just to wrap that all up, is there any information that could come out of the Supreme Court ruling between Hikma and Amarin that could inform what may happen with respect to skinny labels?

Yes. That's -- it's a good question. But the skinny label has been an issue. there. I think that what I just would say is that in the end, we are -- we believe in our intellectual property, and we're defending it. And we'll have to wait and see what the Federal Circuit says.

Okay. I'll get to Bausch + Lomb in a second, but I did want to speak a little bit about some of the other businesses, like Solta has been doing extremely well. We saw the growth that you reported in Q1, exceptionally strong, 52% volume growth, et cetera, et cetera.

As we look through the remainder of the year, and I know that, that's likely going to fall a little bit, but how do you see that business growing over the next several years?

Yes. Doug, as I've said many times, I love this business in terms of what -- as a portfolio that we have within Bausch Health, I think there's 2 really strong aspects to this business.

Number one, our capital versus consumable. 30% of our business is capital, but 70% is on the consumable side. So it's very durable and it's cash pay. So -- and of course, a premium positioning of the product. If you look at what we're trying to do globally, of course, we have a fantastic business in Korea. And of course, now acquiring our distributor in China that gives us scale, gets us direct to the patient and to the provider and what we can do there. So I expect a nice growth of our business in China as we move forward. JJ can comment on the EBITDA of what we're going to -- what we're thinking about in terms of the one-timers that we had in December and January.

But I believe that with this acquisition, we can continue to see a nice business there. We have an outstanding leader in China, and he runs Greater China. So we're looking at that part of that region to continue to perform. If you look at the U.S., the U.S. is -- the growth is good.

I'm looking for hopefully getting some step change growth with the new launch of our Fraxel. That's a new product that we launched last year, which I think is, of course, is an outstanding laser and has really great treatment efficacy. And then our focus in Europe of -- historically, the European business has not been a focus prior to me becoming the CEO, but our focus now is probably on 2 or 3 core markets that can drive growth there as well. JJ might want to comment on how we see the profitability of this business going forward.

Yes. So if you think about our growth in the first quarter and particularly in China, where we said we grew on a reported basis about 190% year-over-year, you have to break it down to 3 drivers. Number one, our volume was particularly strong in the first quarter, about 50% growth year-over-year.

Number two, we had a price increase associated with the integration of our full-service distributor, which was about 70% or so. And then we had some FX tailwind as well. So we can all debate about whether the 50% is going to be sustainable for a long time.

But the 70%, it's kind of a reset of our pricing level and therefore, our margins in China. And I'm not sure the market really did the math around what that means on a dollar basis and ultimately, how could this translate into a significant increase into our enterprise value just by this transaction. We had some depressed margin in the first quarter due to the fact that the COGS of the inventory we bought back from our distributor was step up in value.

So we were going through that still in the first quarter, but we're anticipating that to be fully cleared by this quarter, by the second quarter. So that is a major change in the dynamic of the business and the trajectory that we're going to be seeing.

As we indicated on our earnings call, China has became the #1 spot in terms of the major geography in Salta. And so we're very optimistic about our ability to continue to expand coverage or to accelerate the expansion of coverage and be in charge fully of demand generation in that market. So margins are anticipated to be stable with obviously a much higher pricing level.

Got it. I would also -- when we take a look at the integration and how well it's going in China, it's -- this is a market that where we look at where the product is positioned as a premium price.

Look, it is the gold standard. I was just in China in December where we met 150 of our key customers and KOLs. And I think that when you look at our ability now to go all the way to the consumer and to the provider, I don't think the investment community is appreciating what has been accomplished on this deal. And then I mentioned at the beginning, getting the AAA trademark on Thermage.

So that's where in China, I've lived there for many years, having the consumer, the trust in the brand and having that AAA status will really help us differentiate us from the competition that is in China today, either internally or coming in externally from other markets.

Okay. So just to wrap up then, I need to spend some time on Bausch + Lomb. When you think about the value of that asset there, and it's like -- when you look at the margin profile of that company and what is expected to happen, it likely should be trading at a higher multiple, especially given the quality of the pipeline, which they just talked about at their Investor Day in Q4 last year.

What do you think is more important right now, increasing the flow to that business or seeing that margin profile increase over the next little while? And then added to that, is this something that could be sold outright to a third party? Or would you hope to do this in a more packaged way selling portions of it over time?

Yes. I'll take the first part, and I'll hand it off to JJ to talk about that. B&L had their Investor Day. We see Bausch + Lomb as a great asset for BHC. Their Investor Day was very successful in terms of not only what they have today in their commercial engine, but what they have in their pipeline in all of the segments that they compete. So we believe in Vision 2027 and what they can accomplish and also the strong management team they have to execute on it. So we believe it's a great asset for us. And I'll turn it over to JJ to just talk about how we're looking at the valuation of it.

Yes. So listen, from a process standpoint, all the options are on the table. The objective here is to maximize the net proceeds and if we decide to use that as a way of completing the separation between the 2 companies.

And I think the expectation is that the margin improvement will be gradual, but a little bit back-end loaded. And so therefore, we are patient. And this is why the refi was so important last year because it gave us the ability to really wait until the margin improvement would be realized and the market really rewards B&L for it. So we're confident about the plan. I think we're going to have to be patient and see really what happens.

Okay. Well, listen, it was great to have you here. Thank you. It's nice to have you back and good luck with your meetings.

Thank you, Doug. I appreciate it.

Thank you.

We're all fired up and ready to go. Well, good morning, and thank you for joining us for our Bausch fireside chat. My name is Scott Grabine, and I'm a high-yield healthcare analyst at Barclays. Participating from Bausch today, we have Will Woodfield and Garen Sarafian. Thanks so much, guys, for joining us, and great to see you down in Austin again.

Yes. Thanks for having us. Pleasure...

Good to be here.

Yes. So 12 consecutive quarters now with growth in revenue and EBITDA. Maybe we can start by just talking about what's worked so well for the company in general and more recently, in particular.

Yes, happy to talk about that. So we are extremely proud of our record of 12 quarters in a row of top line and bottom line growth, and we hope to continue that streak moving forward. We have been really focused on top line growth, even better bottom line growth and even better cash flow. That's the -- that's how we view the company. And so a large part of that has been to do with performance, especially in our Salix and Xifaxan business as well as our Solta business and also international.

And so we can get into all of those when we talk today. I would start with Salix, especially. Salix has been also on a streak where it's been 9 quarters now with this quarter behind us of organic revenue growth, largely driven by Xifaxan. Xifaxan itself grew 21% this past quarter, which is fantastic, and we'll unpeel that in a second. Salix as a whole grew 18% this quarter.

I thought we're sitting here this time last year, 6% Salix growth. I thought that was pretty good, 18%.

Yes. No, it's fantastic, and we should get into that a little bit because it's higher than normal, obviously. And there's a number of reasons why that should be. So Xifaxan was 21% growth. And I would ascribe that to 3 factors. First of all, the volume growth in our remaining channels that we're in, which is Medicaid -- Medicare, commercial, managed care, not Medicaid, where we grew very solidly, about 6% on a TRx basis on volume and demand, which for us is the most important thing of all. Second is the usual year-over-year list price increases that you would expect to see, of course, every quarter.

And then I mentioned that we were not in Medicaid anymore. As most of you know, we exited Medicaid and 340B in October of last year. And we expected sales to go to zero. They've actually hung around a little bit in a much lower basis. And those sales are higher quality in terms of the net realized price that is ascribed to them because we're not paying the rebates on the Medicaid anymore. So there's still a hunk of sales in Medicaid that have been hanging around for this quarter. When you combine those 3 factors, you get the 21% growth. We don't expect, again, that Medicaid piece to continue into the future.

Got it. Well, I'm sure we'll have a little bit more to say about Xifaxan later in the program. I think Solta continues to also grow rapidly, right? I mean, maybe we can unpack what's been driving that strength, particularly in Asia.

Yes, sure. Well, actually, I'd like to say a little bit more about Xifaxan because it's just worth -- it's worth exploring a little bit more why it's been growing so well for 9 quarters at this past. And so certainly, the volume and the demand is what it's all about. And why has that been doing so well? One is our consumer insights engine, which we've been talking about for a while. This has been AI generated. We've been using it since 2023. And like I said, through 2024, we've seen an unbroken streak of growth for Salix.

And that allows us to surgically target appropriate prescribers for the product. We've also been focused for a little while now on new-to-brand prescriptions, like new patients that are using Xifaxan for the first time. That's been a KPI for us that's been very important. And in fact, our sales force is compensated on the amount of take-up we get on the new-to-brand prescriptions. It was 3% this quarter when you exclude the value of Medicaid. And so we think that's great, and that's very important to us.

And in fact, since we've been focused on new-to-brand prescriptions, we've generated over 700,000 of such prescriptions. And between that and the consumer insight engine and just our continued focus on direct-to-consumer advertising and physician targeting, we think that's allowed that consistent growth in Xifaxan that we hope to continue for the rest of the years.

It's amazing that such a mature product can maintain that growth trajectory.

Yes. No, we're very proud of it.

Awesome. So pivoting on to Solta. Another pretty spectacular grower. That market is a little bit different for some folks, myself included, and it would be great to get your perspective on how that business operates and the stability and the sustainability of the Asian markets.

Yes. So absolutely. It's Solta, I would say, is one of our pillars of long-term growth for the company. It's -- unlike Salix and Xifaxan, there's no notable LOEs. We expect it to continue to grow strongly for the foreseeable future. We do think it's capable of growing double digits for a while now. And obviously, with a lot of growth in Asia, certainly, but we also have white space in North America, the U.S., EMEA that we continue to see growth in, and we want to expand that further and take more space in those areas.

So obviously, a big part of what happened this quarter was our Shibo acquisition, right? And so it's worth spending some time on that. So as you know, in Q4 of last year, we acquired our Chinese distributor of Thermage and other treatments in China, which was Shibo. We acquired it on December 1, and we've been integrating it ever since to good effect. And you saw that in Q1's numbers where I believe it was over 120% growth in China, 52% volume growth in China. APAC as a whole was 22% organic growth.

And a lot of that did have to do with the Shibo acquisition. So why did we do Shibo? There are several reasons. Number one, in acquiring our distributor, it gave us an important area of control over a part of our value chain, which is the distribution piece of it. And now we can interact directly with our customers, and it can be a 2-way street of knowledge sharing and communication promotion, things like that. That's number one.

Number two is the fact that because now we effectively eliminated the middleman, we can take the economics of that middleman and incorporate them in our pricing effectively. So we're now selling at the retail price to our consumers and keeping that margin less, of course, the cost to operate the distribution.

That makes sense. I mean we get a lot of questions on how should we value Solta? This is -- it's a device company, but it's aesthetics, has a large concentration in Asia. How should we think about valuation of that business?

Yes. And that's very important, again, considering as you think about what this company will be like when we lose Xifaxan at some point. Solta will be one of the pillars along with international, which we'll talk about later. Solta, I would say, again, it's very durable, low LOE, not a lot of investment needed. We are putting in the investment, but it's not incredibly CapEx heavy. It doesn't have a lot of investment. We're appropriately investing in sales, advertising promotion as well as R&D to keep the pipeline fresh. And we are also considering, of course, any business development that might make sense for us as well.

So when you factor those things in, let's start at the top line. Top line, we are about 80% in Asia. It's a little higher this quarter because of the onetime Shibo benefits. But strong presence in Asia. Korea has done well. It was 17% growth in Q1. China was massive. We do expect that to continue to grow for the reasons I said, beyond for Shibo. And then we expect a lot of white space, like I said, in North America and EMEA, among other areas.

And so as we continue to promote the product and invest in improved product offerings, that should continue to grow. Like I said, we're hoping for double-digit growth on the top line. And again, without the LOEs. You have the appropriate promotion, the advertising, the selling and the R&D. But -- and when you're left, you still have -- you have a very profitable business. And you find profit -- you have profitable margins, both on the capital piece of it, which are the machines that are installed at the customers.

And then those machines we used to sell through the -- or those customers, in turn, sell our consumable products to the ultimate patients as treatments, and they're highly incentivized to do that. So you have these profitable installed base of machines, and then you have the profitable tips, which are used in each of the procedures by the customers. So it's a razor-razor blade model where the actual razor is also profitable and the razor blades are very profitable. You have about 75% split on the consumables, 25% on the machines.

And once you install the machines, they're just going to have recurring revenue through each of those machines with hopefully more and more tips to more and more customers. And so that's the basis for like the recurring nature of the revenue and the profitability that drops. So we saw 40% operating income last year. Hopefully, that will stay in that ZIP code as we grow with more profitability, but at the same time, we invest appropriately.

And then I mentioned the CapEx is quite low. And so when you combine those together, you have a lot of cash flow generated from this business. And so when you take that out and you apply all of that, we think it's a good multiple you should -- people should be thinking of for this business. We've said mid-teens on an EBITDA basis could be appropriate even.

That's really helpful. I mean I know back when the company had filed an S-1 for Solta some time ago, their multiples were pretty robust. And if anything, the cash flows have been stable and growing. So the performance has certainly been impressive.

No. Thank you. And since then, I would just like to add that we -- that Thermage FLX received regulatory approval in China, which it didn't at the time of the S-1. And then we -- of course, we acquired Shibo. That's another step function of improved profitability and growth as well.

Allow you to control your own destiny in China.

Correct.

Excellent. So maybe you mentioned organic. Sales were flat there, but there's probably a little bit more to unpack than just the flat organic sales there.

Yes, for international?

For international, yes.

Yes. So international, like I said, along with Solta is one of our pillars of growth and value in a post-Xifaxan world. And so we love our international business. It's profitable. It's extremely diverse. It's diverse in terms of geographic areas, customers, brands, therapeutic areas. And they're all areas where we think we have a lot of value already. We're in highly growing areas of the world in Eastern Europe, Latin America. We have branded generics, which means there are products that are -- don't have LOE exclusivity on them. There's not the patent cliffs associated. They are available in generic versions.

But the teams in those markets have built brands around these products. They promote these products. They have sales forces. They have marketing, and they're able to price accordingly for that. So we find it's a great business for the long term. We expect it to grow mid-single digits generally as the basis. And even though we saw puts and takes this time around, we overall -- we do see lots of future in this business. I'm happy to go through the different components of it because...

Yes. If there were a couple, I think Canada was an area where there was some movement this quarter. So maybe you could -- anything you want to call out there would be helpful.

Yes. So Canada is something that we called out last year even as having a benefit that we had in Q1 of 2025 in terms of we sold more of our Wellbutrin product there, thanks to competitors having stocked out back in Q1 of 2025. We aren't able to lap that. We just didn't have the same competitor stock-out situation we had this quarter in Canada that we had last year in Canada. Our promoted portfolio did grow 18%, and we won't have those types of headwinds from prior year growth -- one-time growth in the future.

So we do expect growth to return to Canada going forward. And then just to round out the segment on the Europe side, on the EMEA side, we love the EMEA business. It's -- like I said, it's Eastern Europe. It's across multiple geographies and product areas. It grew 3% on an organic basis, and that was across our 3 largest markets, which were Poland, which were Serbia, Montenegro and which were Russia, and it did very well. It was our 13th quarter of uninterrupted growth for that business.

And we expect to see further growth the rest of this year and going forward with about 30 new products that are coming online. And again, that's another important part about this international business. It does not require a lot of R&D or a lot of BD to add incremental products into it that will grow over time when you start to stack them up the way we're starting to do so this year.

Awesome. And we'll touch on the BD in a second, but...

Can I just finish with LatAm?

Absolutely.

So LatAm is -- it was flat from an organic perspective. On the one hand, especially in Mexico, we have a very strong, I would say, commercially available suite of products that's led by -- what's the name of the product?

[indiscernible].

[indiscernible], thanks, that's done very well for the quarter. On the other hand, we did have a timing miss on the government side when the tender we had won did not -- was not realized in Q1. We expect that tender to realize itself later in the year, and we'll see a benefit from that.

And we're also rolling out cardiometabolic products this year. Started last year, we continue to roll out this year, which will be another source of growth. So we expect to see growth in LatAm for the rest of the year and going forward as well.

Okay. Maybe we could just like round out the business line with diversified. I know diversified saw some organic declines based on volumes in neuroscience. I know neuroscience is an area you recall that you've actually highlighted as a core competency for the company. So I don't know if there anything you want to call out there? And maybe as a segue, talk a little bit about some of the business development initiatives that the company has been undertaking.

Sure, absolutely. So yes, so neuroscience is a big part of our diversified portfolio. It makes up about 60% of the revenue of that segment. We do expect it to decline over time without any business development or pipeline products. And why is that? Because Wellbutrin, which is our flagship product, has been off patent for many, many years and has already significant competition. It's hung around very, very well, but it does -- it has declined every year, and it did decline in Q1, which is part of the reason why you're seeing the volume decline.

We've had Aplenzin, which is our second largest product in that space. That Aplenzin has done well. However, we do expect to lose its exclusivity in July of this year, and that's factored into our guidance, of course. But that will be another downdraft for the back half of the year and going forward. And then we have a lot of other products which have lost their exclusivity and are facing downward pressure. Again, that's driving the volume decrease.

And then I'd just be remiss not to point out that we exited, again, Medicaid last year. That means that we're not selling through that channel and that further volume decrease. So that's why you saw the results you did in neuroscience. But to go to your question about why we think that could be a good opportunity for business development, we own the Wellbutrin space. It's performed way better than it should have considering losing its exclusivity. We have been promoting very well, we think, Wellbutrin as well as Aplenzin.

So we have a sales force in place. We know the space very well. We've done the regulatory work around keeping those products online. And so that's something where we could see some good opportunities in the area of BD in terms of neurology, where it could be the right fit for a product or a business that we could take either from the near-term R&D perspective or for the commercial perspective, and that would lend itself very well to our neuroscience franchise. I think to -- the same logic could be applied to GI, again, with the knowledge that we have from -- certainly from Salix, from larsucosterol, which is now in Phase III trials.

That's a prime example of the type of BD we could certainly consider where it's a tuck-in and it's near term, and we can guide it -- we shepherd it through the remaining R&D processes and then launch it in the medium term, near to medium term. That's like a good template for the type of BD deal. We could certainly do dermatology and Solta could also be areas where we're focused on those indications. And again, we have the expertise in the R&D side and the commercialization side.

What's the market opportunity for larsucosterol?

We haven't really talked too much about that. We just think it fits in very well into the space that we know about, and we think the AH market could be good.

But I appreciate the question on 2029.

Fair enough. Well, I'm sure that people are going to be excited to talk about the next list of topics here. And a lot of these topics are somewhat intertwined. But maybe we could shift gears to BLCO, my personal favorite topic. You can imagine we get all sorts of questions about BLCO, operations, valuation, M&A, monetization.

Now I realize you're not the management team that runs that company. But as owners of that business, I would think you'd have a very good perspective that you could share with us and with me. So high-level thoughts in terms of some of these matters would be really helpful for us.

Yes, absolutely. And we love the B&L business, and we are very excited by the management team we have in place and the good work that they're doing where we fully stand behind their Investor Day projections that they made in November of last year. And we -- one of our corporate goals is to make sure that we give them every opportunity to realize those projections and to help them along any way we can. I didn't want to go through a blow-by-blow of their different segments and performance.

Yes. No, just high-level observations because there are a lot of facets of the business for sure. So I know that like, for example, your business, like you put up $1 billion of cash flow. I think -- are we at the precipice of seeing some real cash flow and some operating leverage at BLCO.

Yes. I think we are seeing definitely good progress from them, as you saw from Q1. And certainly, the goals that they put out there, we think are entirely realizable in terms of their -- certainly, the top line, they've already shown that, and we've started to see already some margin expansion, and we look forward to seeing more of that.

And I think by the time we get into '27, '28, we expect to be at those projections we put out there. And we think at that point, that's when we can start thinking about starting to monetize our investment in them. We've said all along, we expect in order to address our cap structure to get it to a somewhat more normalized level, we have to monetize assets and that the asset most likely be monetized is our 87% stake in B&L, which as of today, adds a lot of value to our balance sheet, but we're not getting necessarily the cash from it. They're keeping the cash to themselves and which is absolutely fine because they're investing in their business.

But our goal is to give ourselves the runway to monetize later rather than sooner, that B&L stake when those objectives from their Investor Day last year are more fully realized when hopefully, the market will be giving them the credit they deserve for that performance and at which point we expect them to be substantially more valued than they are today in terms of their share price.

And then the debt -- the shares that are backstopping the debt we raised last year with you guys and the uncommitted shares that we still have of theirs, that will be worth more. And so it will be a win for us and all of our debt and shareholders when we do realize it in time.

Yes. I mean, I guess, like, again, bigger picture-wise, when you think about that ultimate realization event, do you think about that in like one fell swoop? Do you think about that as like there are a number of different businesses operating, surgical, products, pharma. And each of them has their own sort of nuances and growth opportunities. And then as we think about the potential buyers of those businesses, competitors, private equity firms, I mean, how do you guys think about the ultimate monetization? Is it like one sort of target? Is it a moving -- a variety of different options? I mean any kind of high-level thoughts in that area would be helpful.

Sure. And the short answer is we are open to lots of different options here. I don't think there's one size fits all. I think we'll see how things progress over the next few years and see what makes the most sense given the situation at hand and the opportunities at hand. The good news is, thanks again to the series of refis we did last year with some folks in the room, we're able to give ourselves that operating flexibility to get through 2028, assuming a '28 LOE on Xifaxan, we can get through our '28 maturities.

We believe between the over $1 billion of cash we have on hand, the several billion dollars of cash flow we expect to generate in '26, '27 going into '28. We expect to get through our '28 maturities. And then only in '29, would we need to do something extra beyond just apply cash to our debt. But all of that will give us time to -- time for B&L to perform immediate goals and time for us to figure out what's the best way to monetize, whether it's any of those options, whether it's an option like what we looked at a couple of years ago versus selling into the market over time versus some combination thereof.

Yes. It sounds like you want to keep your options open, which makes sense. Now a good segue into Xifaxan. So in the most recent earnings call, I think the company largely maintained the party line about the LOE in January of 2028. That said, I know there are some potential wrinkles that could possibly change that timetable. And again, without going into too many nuances of the different changes that could take place, just high-level thoughts on maybe what we could expect to see reasonably unfolding in 2026 and some of the things that may give you pause in terms of possibly adjusting that timetable to some degree.

Sure. So there's many ways that this could go. And so we're going to stick to the kind of high-level facts on the ground and without going into too much speculation. But as it stands now, we have settled with 4 generic competitors, and that settlement involves the first generic of Xifaxan going out on the 1st of January 2028. So that's a fact.

Secondly, we believe, as does the FDA and as does Teva, that Teva has the first filer rights that would granted 180 days of exclusivity as the -- after launching their transaction. And that was challenged by Norwich when Norwich sued the FDA for failing to grant Teva full approval or -- yes, filing because -- to not grant Norwich full approval because Teva should have forfeited its first filer right. That case was dismissed and so Norwich appealed and now it's in appeal court, and we're waiting to see what the answer is. We check every Tuesday and Friday, nothing today.

So -- but it could happen any time. But basically, the situation is that the FDA believes that Teva has retained its first to file. Teva has and so do we. And in fact, this few months ago, Teva did receive a full approval -- final approval on its version of rifaximin, which we think further strengthens the case.

I mean, so the base case assumes that there's no changes or that -- if that, for some reason, decision perhaps was remanded back to FDA, obviously, like that time frame could effectively be like 2028 maturity. So again, I know there are different possibilities, but your base case is that.

Well, without going into cases, I would say that -- the original court found in favor of the FDA and we're waiting to see what happens here. There's also the 30-month stay component of it, which we think also should apply in this situation since Norwich did its second ANDA, its skinny ANDA, the Norwich scenario. And that would delay anything until later this year anyway. And then there's steps after that, that would have to happen as well.

And then there is the IP litigation that we expect end of summer, that's separate, that's still out there with no case date yet.

Right. Understood. So...

You're talking about the annual...

That's annual...

That's the end of the summer.

Well, there's no trial date.

We think it's going to be in the summer.

This is going to be in the summer.

Yes. Makes sense. So again, it just seems like flexibility probably around these matters makes a lot of sense. And that's exactly what I think the company said in the most recent earnings call. So I think you discussed in conjunction with some of these -- again, you can't predict the future entirely. You pointed to some aspects that were a little bit different in terms of exercising certain options of flexibility. And maybe we can talk about a couple of the things that you mentioned in your most recent earnings call.

Sure. So I mean, if things were to go against us for whatever reason, then I think it's the same strategy that we just laid out, but we would have to accelerate it just for the fact that we would lose cash flow earlier than we otherwise would have. This is the [ 1/128 ] LOE case. And so in that case, we -- it would be harder to get through our 2028 maturities. And we would have to monetize B&L and/or other assets earlier than we otherwise would need to.

All right. So in terms of like the earlier monetization of assets, I mean, we just like dig in there for just a second. Are you talking about maybe BLCO shares or would BLCO in general or any other assets? Any perspective there would be great.

Yes. I mean we're always evaluating everything and everything is for sale at the right price, of course. BLCO shares, as we've said, are not granting BHC parent cash flow or any other benefit other than just the value of those shares. So those would be the logical target for monetization. We would -- but also we also have these other valuable assets that we've talked about, whether it's Solta or International, we would certainly not want to sell those unless it's at a great price, but considering the long-term value that they would continue to accrete for the company. But we just have to make sure that whatever situation we were in, we'd find the most appropriate answer. But certainly, the BLCO shares would be the logical kind of area to approach this in those situations.

Great. No, that makes sense. Just kind of going back to the other sort of possibilities in terms of maintaining flexibility, the company mentioned potential business development initiatives, also mentioned refinancing of maturities through 2028. So we could just kind of talk about those 2 things in terms of like exercising what those options might be and how you might address those matters?

Sure. So I think that there could be a connection between those 2 issues as well, certainly. So we've got a lot of liquidity right now. We have over $1 billion of cash on hand. We're generating lots of cash flow, as you've seen and as you've seen in our guidance, we expect that to continue through the LOE of Xifaxan certainly. And that gives us firepower should we choose to pursue BD.

And we talked a little bit about BD, what that could look like, whether it's things like larsucosterol or slightly bigger or larger targets that would again fit into our wheelhouses in those areas. I think in terms of the debt refinancing side, we obviously did a lot of great work with people in this room last year. We'd like to do more.

Certainly, we can cover our '27s with cash that we have today, we can cover our '28. But if we're able to refinance some of those maturities that are coming up in the next few years, that would just give us more firepower that we could potentially use even more for business development, for example, or getting -- or not using our B&L shares as early in terms of selling them and then letting that value accrete for when we do eventually monetize them later rather than earlier, which again would be a win. So that's how we think about it.

Right. So I guess that's probably a good segue into capital structure. I know we've been sort of building towards this and touching on it a bit. But I was just looking back at my notes since the last time we were here. And in the last 12 months, you guys have generated at BLCO, $1 billion of cash flow. You pushed out $10.8 billion of maturities through 2028. Boy, what a difference a year makes. So maybe as it relates to those numbers, right, you have $700 million of debt maturing through 2027, $3 billion through 2028 and about $1.5 billion worth of liquidity today. So again, I know you kind of touched on it a bit, but let's talk about how we sort of bridge those 2 numbers.

Absolutely. So again, very, very happy with how things went last year, and we're happy with where we are today. And like I said, we can cover the '27s with cash on hand that we actually have sitting on our balance sheet today. '28, we can get through with that plus the cash on hand. And then when you're looking at the '29s and later, we do have the B&L shares that are currently uncommitted to anything.

That's about 28% of all of B&L shares, and it's about 98 million shares -- actual shares. And so in a base case scenario where we don't do a refi, we don't do business development, that can be applied to the 2029 maturities, 2030 -- early 2030 maturities. And then before you get to your term loan in October. And then, of course, you've got 60% of the BLCO shares supporting that term loan and the 2032 notes. And so on a base case scenario, we would expect to start using the uncommitted B&L shares to help address the '29s and early '30s.

Right. I mean, has the company given any thoughts at all to more of like a global refi? I mean I know you have like a lot of smaller bonds trading at discounts. And I mean, is there any type of like global refinancing that the company might be considering?

Yes. We think when the time comes, a global refi will be appropriate. And that's going to be, I think, when the confluence of several things happens. And the first would be, of course, the B&L share price being at a level that we think is appropriate to monetize. And at which point then, of course, we could then monetize the 60% of the shares that are backstopping the 2030 term loan and 2032 notes, which that will pay off a lot of debt. And at which point our leverage will drop significantly, and we think that would be a good impetus to do a global refi, hopefully, for a more normalized capital structure. That would be the target. So it would be -- the B&L shares being at a good place and/or getting to 2030, whichever happens first.

Great. So maybe with the couple of minutes that we have left, I mean, we've kind of touched on business. We touched on your big assets. We touched on the capital structure. Maybe we could just discuss recent events within the world and see how maybe those matters affect the way you're operating your business today, the way you're planning for your business tomorrow.

I know that like tariffs has been something that has driven a lot of conversation in the past, maybe not so much more recently. But any perspective in terms of some of the kind of the recent developments in the world and it's more expensive to ship products from point A to point B. Like how do these things affect the way you plan your business and your potential profitability going forward?

Sure. So when we had our earnings call a couple of weeks ago for Q1, and we reiterated our guidance, we did call out, I believe, that we were taking into account the latest tariff developments, and there were some in that in the Q1, there were some new tariff developments. We factored those in. Some of those are later in the year. And regardless, I would not call them material to our business. We are fortunate as a largely pharma company or as a medical aesthetics company with good margins that even though there are certainly costs added to our cost of goods sold and our manufacturing, our margins are such that we can absorb them without too much problem.

So it's not been, by any means, a major drawback for us as we manage our business. I would say -- so the energy crisis has largely not affected us. The tariffs have largely not affected us. I think we're seeing very good growth in China. People have been very focused on China's economy and what's going on there. It seems like we've hit the sweet spot of consumers who haven't been too affected by the property situation going on there. And we've seen robust demand from them, as you can tell from our numbers, and we hope to continue to see that going forward. So...

And you've already kind of baked in the IRA impact in Q4 to what is ultimately going to affect the price of Xifaxan going forward?

That's right. And just as a public service announcement, and we've talked about this a little bit, and I'm glad you brought that up. Yes, we've baked in the 2027 IRA impact for Xifaxan. Just again, the public safety announcement is that we expect to have a hit at the very end of Q4 as we adjust what's in the wholesaler pipeline that's going to be sold to Medicare. We have to adjust the gross to net value of what's -- of the higher rebate that's going to happen on January 1, 2027.

That's going to impact our results on the last day of 2026, and that will be a bad guy. We had kind of had a separate opposite situation when we exited Medicaid on October 1. We had to make an accrual true-up in September 30 of last year to reflect the fact that we were no longer selling into that channel with those rebates. And we got a one-time benefit. This time at the end of 2026, we're going to see a one-time detriment, but we factored that all into our guidance.

And also for 2027, we also gave implied EBITDA guidance when we said that 2026 and -- the average of 2026 and 2027 EBITDA would be approximate to 2025, so that you have guidance for '27 as well.

Correct.

That also includes a full year of IRA, obviously.

Right. Thank you very much. Well, I think that pretty much wraps it up. Thanks very much. Enjoy the rest of the conference, and we as always appreciate your participation.

Thank you for having us...

Will, thanks.

Thank you everyone.

Thanks to all of you this morning.

Greetings, and welcome to the Bausch Health's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Garen Sarafian, Vice President, Investor Relations. Garen, please go ahead.

Good afternoon, and welcome to Bausch Health's First Quarter 2026 Earnings Conference Call. My name is Garen Sarafian, Vice President of Investor Relations. Participating in today's call are Thomas Appio, Chief Executive Officer; JJ Charhon, Chief Financial Officer; and Jonathan Sadeh, Chief Medical Officer and Head of Research and Development.

Before we begin, I would like to remind you that today's presentation contains forward-looking information. Please take a moment to review the forward-looking statements disclaimer at the beginning of the slides accompanying this presentation as it contains important information. Actual results may differ materially from those expressed or implied in these forward-looking statements, and you should not place undue reliance on them. Please also refer to our SEC filings and our filings with the Canadian Securities Administrators for a discussion of certain risk factors that could cause actual results to differ materially from expectations.

We use non-GAAP financial measures to help investors better understand our operating performance. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should be considered in addition to and not as a substitute for measures calculated in accordance with GAAP. Reconciliations to our non-GAAP measures are included in the appendix of the slides accompanying this presentation, which are also available on Bausch Health's 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, Wednesday, April 29, will focus on Bausch Health, excluding Bausch & Lomb. However, we will briefly comment on Bausch & Lomb's results announced this morning. We will refer to year-over-year comparisons with the same period last year, unless otherwise noted.

With that, I will turn the call over to our CEO, Tom Appio. Tom?

Thank you, Garen. Thank you to everyone joining us today. We began 2026 with another strong performance. Our first quarter results extend our track record to 12 consecutive quarters of year-over-year growth in both revenue and adjusted EBITDA for Bausch Health, excluding Bausch & Lomb, reflecting strategic execution and disciplined accountability across our global organization. Our priorities remain, we are focused on execution within our core business, R&D innovation, business development and optimizing our capital structure.

We delivered a strong start to the year in cash flow, supported by solid operating performance. That cash generation supports continued progress on capital structure priorities, enables investments in our businesses and preserves capital allocation flexibility. It is also important to consider the composition of reported results this quarter.

Core operating performance continues to demonstrate steady growth and is tracking well with expectations. Overall, this was a solid start to the year. Let me take a moment to share a few highlights from the quarter before handing it over to JJ for a closer look at the financials.

Bausch Health, excluding Bausch & Lomb, increased revenue by 14% on a reported basis when compared to the first quarter of 2025. Results were led by Salix and Solta. Within Salix, revenue growth was driven by Xifaxan, which continues to perform well in both IBS-D and OHE.

We also benefited from residual volume in certain channels that we exited starting last quarter. Underlying prescription trends remain healthy. Solta continued its double-digit growth trajectory. Demand for systems and consumables remain robust in core markets. Adjusted EBITDA for Bausch Health, excluding Bausch & Lomb, increased by 17% on a reported basis, largely attributable to Salix and Solta performance. Salix benefited from improved margin dynamics following payer channel optimization and Solta earnings growth was particularly notable given we had a onetime acquisition-related cost. Cash flow generation in the first quarter was healthy and progressing well towards guidance expectation. This includes the remaining settlement of our U.S. opt-out litigation, which have now all concluded as well as reducing our net debt by over $100 million.

Taken together, core operational performance was solid. Turning briefly to R&D and business development. Through our acquisition of DURECT last year, we are advancing our larsucosterol Phase III program for alcohol-associated hepatitis, where there remains a significant unmet need. We believe larsucosterol has the potential to be a platform asset with applicability in multiple indications.

In recent months, we have made meaningful progress narrowing our broader list of potential indications to those with the strongest scientific and clinical rationale. Beyond larsucosterol, we continue to assess multiple business development opportunities that leverage our proven commercial execution and strengthen our R&D pipeline.

Our capital allocation strategy remains consistent and disciplined. We prioritize strengthening the balance sheet through ongoing delevering while we invest in our commercial engine and evaluate business development prospects.

Within that framework, we evaluate opportunities selectively across our portfolio, emphasizing assets aligned with our strategic model and our outstanding commercial capabilities.

Overall, we are very pleased with our start to the year and the momentum we are carrying forward.

With that, I will turn the call over to JJ to walk through the detailed financial results. JJ?

Thank you, Tom. Let's review first our non-GAAP financial results for the first quarter, which you will find starting on Page 9. Revenue was $2.524 billion, up 12% on a reported basis and 7% on an organic basis compared to the same period a year ago. Adjusted gross margin was 70.9%, 100 basis points higher year-over-year. Adjusted operating expenses were $1.023 billion, an increase of $29 million compared to the same period last year. Please note that this excludes, among other adjustments, the $1.4 billion goodwill impairment charge following the RED-C clinical trial outcome.

Adjusted EBITDA was $837 million, an increase of $176 million or a 27% increase year-over-year. Finally, adjusted operating cash flow was $374 million.

Moving now to the performance of Bausch Health, excluding Bausch & Lomb, for the first quarter, starting on Page 11.

As Tom indicated earlier, 2026 started on a very strong note. We delivered in Q1 the 12th consecutive quarter of year-over-year revenue and adjusted EBITDA growth, demonstrating once again the consistency of our operational execution.

The highlights for the quarter were as follows: Revenue was $1.280 billion, up 14% on a reported basis and 9% on an organic basis when compared to the first quarter of 2025. Adjusted EBITDA was $673 million, up 17% year-over-year, demonstrating our continued commitment to driving profitable growth and leveraging our supply chain and SG&A infrastructure.

Finally, adjusted operating cash flow was $319 million, nearly $200 million higher than in the first quarter of 2025, thanks to stronger business performance as well as the difference in timing of our interest payments.

Moving now to our first quarter performance by segment, starting with Salix on Page 12. Salix had another outstanding quarter. Revenues were $639 million, an increase of $97 million or 18% on a reported basis as compared to the same period last year. Salix strong performance in the first quarter was largely driven by higher-than-expected Xifaxan revenue, which grew 21% year-over-year. This was primarily attributable to continued volume growth in the channel we currently serve, net pricing and to a lesser extent, the residual volume we are still seeing throughout Medicaid at the state level.

Total scripts in the commercial and Medicare channels grew 6% and new-to-brand script growth was 3%.

Now moving to the International segments. Revenues for the quarter were $285 million, which was up 9% on a reported basis and was broadly flat on an organic basis compared to the first quarter of last year.

Performance by region was mixed. On an organic basis, EMEA was up 3%, LatAm was flat, while Canada contracted 7% due to its non-promoted portfolio. More specifically, here are the highlights of each geography.

EMEA achieved its 13th consecutive quarter of organic revenue growth, which is remarkable. In LatAm, there was solid growth in core commercial products such as Bedoyecta. Conversely, the softness of receive orders associated with secured government tenders continues to be a headwind.

In Canada, the performance of our promoted portfolio grew 18%, which was more than offset by the drop in volume in our branded generic portfolio. As a reminder, starting in the second half of 2024 and all the way through the first quarter of 2025, we benefited from higher-than-usual Wellbutrin volumes due to generic supply shortages.

Now moving to Page 14 for a review of our Solta Medical segment. Revenues were $171 million, an increase year-over-year of 51% on a reported basis and 19% on an organic basis. Separately, segment profit grew 42% on a reported basis.

Solta's revenue performance was driven by a 193% year-over-year revenue growth in China. This remarkable performance was partially attributed to higher pricing associated with the integration of our full-service distributor, Shibo, we acquired in December 2025 and to our impressive volume growth in the quarter, which stood at 52%. China has now reclaimed the #1 position as the largest geography of Solta.

South Korea, our second largest revenue contributor, grew 17% in the first quarter. Outside of the APAC region, the U.S., EMEA and Canada also showed positive momentum, delivering high single to low double-digit reported revenue growth in the quarter. Finally, please note Solta segment profit in Q1 was impacted by the residual impact of the higher inventory costs associated with the Shibo acquisition.

Turning now to our diversified segments, which you will find on Page 15. Revenues were $185 million, a decrease of 10% on a reported basis compared to the same period a year ago. The Diversified segment's performance is largely driven by our neuroscience business. The year-over-year revenue contraction this quarter was due to lower volume, partially offset by favorable pricing.

Finally, Bausch & Lomb revenues were $1.244 billion, up 9% on a reported basis and 6% on an organic basis compared to the same period last year.

Now turning our focus to our balance sheet. Our net debt, excluding Bausch & Lomb, decreased by approximately $150 million in the first quarter. This is after an approximately $160 million outflow due to various legacy litigations, which included the last set of payments of our U.S. opt-out settlements.

Before wrapping up with our financial priorities, let's review our full year guidance, which you will find on Page 19. We are reaffirming our full year 2026 guidance for Bausch Health, excluding Bausch & Lomb, which remains as follows: Revenue is expected to be between $5.250 billion and $5.400 billion. The midpoint of that range would translate into a 3% increase year-over-year.

Adjusted EBITDA is expected to be between $2.875 billion and $2.950 billion, representing a 4% increase year-over-year at the midpoint. The 2026 guidance for adjusted EBITDA now includes the anticipated impact of the new tariffs on pharma products expected to be effective on September 29, 2026. Finally, we expect adjusted operating cash flow to be between $1.200 billion and $1.275 billion. The midpoint of that range would translate to a 4% increase year-over-year.

Please also note that the guidance for 2026 is at current FX rates. Before I turn it over to Tom for his wrap-up, let me review our financial priorities, which remain broadly unchanged.

First, increasing the value of Bausch Health. Our management team remains committed to driving profitable growth through innovation, excellence in operational execution, effective resource investments and selective business development projects.

Second, evaluating all options for unlocking value for all stakeholders, including maximizing the value of the Bausch Health and Bausch & Lomb assets. On the B&L front, we believe in Bausch & Lomb management team and their Vision 2027 plan.

We fully expect the financial markets to reward B&L's progress in the future. This will likely guide, among other considerations, the timing of our equity stake monetization.

And third, optimizing our capital structure. While our current debt maturity profile allows us to take a more opportunistic approach to capital allocation decision, we will continue to look at all options to improve our liquidity and financial flexibility.

In summary, we had a great first quarter and remain confident in our financial outlook given the strength of our current operational momentum. I will now hand it back to Tom.

Thank you, JJ. Looking ahead, we see continued progress building our company for growth in 2026 and beyond. Throughout our markets, we are gaining share, seeing favorable prescription trends, expanding partnerships, advancing new product launches and extending the reach of our existing products to new geographies. This progress reflects strong execution within our portfolio, the integration of new businesses and disciplined investments that strengthen our competitive position.

As we have noted on prior calls, certain dynamics relating to our exit from Medicaid and 340B may impact our growth as reflected in our Salix and Diversified segments in the back half of the year. Even so, we are excited about initiatives underway across the portfolio to ensure we plant the seeds for future growth. A few examples from different segments illustrate the breadth of that progress. Within U.S. Pharma, this quarter again proves our ability to execute with precision.

By maintaining a disciplined approach to capital deployment, we are focusing our resources on high-growth opportunities that drive demand and operational efficiency. At Salix, this approach continues to translate into strong performance for Xifaxan, supported by high levels of physician engagement, improved patient access and a channel mix that reinforce both stability and scale.

We are investing thoughtfully, prioritizing returns and optimizing growth that can be realized from a highly resilient, well-established franchise.

Turning to Solta China. We are pleased with our integration of the Shibo distribution business, which is progressing as planned. By deepening our vertical integration within this core market, this acquisition secures a critical segment of our value chain. It provides unfiltered visibility into end consumer behavior, enabling more precise demand forecasting and strengthening our long-term competitive advantage.

In EMEA, 2026 is expected to be an active year for new product launches. Products launched in 2025 and those launching throughout this year are expected to contribute meaningfully to growth in 2026 and beyond. We currently have more than 30 products launching in 10 countries within EMEA, spanning gastroenterology, dermatology, joint health, neurology and hospital-based therapies. We are also targeting geographic expansion of existing portfolio of products, including Poland and Serbia, Montenegro.

In Latin America, we continue to extend our cardiometabolic franchise. In addition to the three products launched in Mexico during the back half of last year, two additional therapies are expected to launch in the second quarter. Within Solta, we launched Clear and Brilliant in Canada, expanding access to advanced aesthetics technologies in new markets.

Within dermatology, our collaboration with the FDA has successfully streamlined patient access for Salix. Patients can now begin their journey with this specialty medication sooner as pre-prescription blood tests are no longer a requirement for starting on-site sampling. More recently, in mid-April, we also launched Biafine in the United States, first developed in France. This heritage formulation is gentle for sensitive skin is scientifically proven to fortify the skin barrier and is now available without the need of a prescription.

While these investments vary in scale, each is a strategic building block in our global portfolio. They reflect our commitment to investing with purpose, ensuring we have the right mix of products to drive consistent operational excellence across the entire organization.

Beyond product innovation, we continue scaling our core capabilities. Given the frequent questions, I want to dive deeper into our AI road map and how it's delivering our growth.

We were early in recognizing the potential of AI to drive commercial performance, and that conviction has paid off. Our AI-enabled customer insights engine first developed for Xifaxan has been instrumental in the continued growth of the brand within both OHE and IBS-D indications. These insights ensure our field teams are engaging the right customers at the right frequency with the right message.

Since the 2023 launch of the customer insights engine, we have seen a 20% surge in sales productivity. More importantly, this efficiency has enabled nearly 700,000 Xifaxan new patient starts, directly advancing our mission to deliver better health outcomes for those living with OHE and IBS-D. These core capabilities are involving in a suite of digital tools that streamline the HCP experience while significantly increasing the precision and impact of our promotional efforts.

Building on that foundation, we have expanded AI-driven insights in additional U.S. pharmaceutical brands at various stages of field force deployment. For Relistor, we launched an AI-enabled program in the second half of 2025. While still early, our preliminary data suggests as much as a 20-plus percent lift in new prescriptions with certain high-priority HCP cohorts.

And with the most recent launch of the customer insights engine for neurosciences late in the first quarter, all U.S. pharmaceutical business now leverage AI and advanced analytics, driving meaningful increase in field productivity and effectiveness. On the other end of the spectrum, AI is also playing an expanded role in accelerating both the efficiency and effectiveness of our R&D organization, spanning operations, clinical development, medical affairs, pharmacovigilance and project management.

Three examples illustrate the tangible impact. In clinical operations, we leverage AI-enabled site selection and patient recruitment models to evaluate site expertise and patient population, expanding our qualified investigator network. Not only did the number of eligible sites increase by a substantial margin in less time, but we believe this has led to a significant increase in high-quality investigator sites expected to reduce recruitment time lines and study costs relative to traditional methods.

Pharmacovigilance is a second area of impact where AI-assisted workflows are eliminating months of manual effort and improving the speed and consistency of our safety monitoring. Finally, in indication selection, we applied AI-driven analysis to our full asset portfolio, integrating internal data with public domain sources to identify potential new indications as well as model probability of success and sharpen prioritization. While we are in the early stages of our AI transformation, our initial targeted applications have already delivered measurable impact. These early wins give us the confidence to invest in building a sustainable competitive advantage in how we develop and market life-changing medicines.

Lastly, I want to highlight our continued focus on business development. Our approach is disciplined and consistent with the financial priorities I outlined earlier. We are actively screening opportunities based on therapeutic fit with a focus on areas where we have established expertise, including GI, hepatology, neurosciences, dermatology and aesthetics and where we believe we can create the most value.

We are prioritizing assets that are late stage or commercial-ready, where our existing outstanding commercial capabilities allow for efficient execution from development to commercialization across the markets. This focus helps ensure that any potential investment is aligned with how we operate the business today.

We continue to screen opportunities through the lens of our capital allocation strategy by first ensuring an efficient capital structure, we can then focus on disciplined investments and business development that deliver sustainable long-term value creation.

In closing, our solid first quarter performance is a testament to our global team's relentless commitment to operational excellence. Our performance in the first quarter gives the confidence to reaffirm our full year guidance. As we strengthen our balance sheet and execute with discipline, we remain steadfast in our mission to drive long-term value for shareholders. With that, can we open the line for Q&A. Operator?

[Operator Instructions] Our first question today is coming from Leszek Sulewskifrom Truist.

This is [ Jean ] on for Les. What are your expectations for Xifaxan inventory destocking in 4Q due to IRA? Do you have any color on how you expect wholesalers to act ahead of the pricing step down in 2027?

Yes. I think, J.J., you can take that.

Yes. So in terms of volume, there's really not that much destocking. As we indicated during our fourth quarter call is that we're expecting a gross-to-net accrual adjustment as a result of that higher discount rate that will be effective January 1, 2027. So that will be an entry we will take. But in terms of volume, we're not anticipating any change versus the current volume we're seeing right now.

Operator next question.

Our next question today is coming from the line of Douglas Miehm from RBC Capital Markets.

Very strong numbers that came out of Solta, especially out of China. And of course, part of that is a function of the Shibo acquisition and seeing a full quarter of that. But even so, you did have 22% organic growth, I believe. And I'm just wondering, that seems in contrast to a couple of other companies that we've heard recently, including B&L this morning, who says that's probably the weakest market. So just wondering why you're having so much success over there and if it's sustainable?

I think the first thing, as you mentioned, the acquisition of Shibo was a -- that was a part of what we wanted to build there to be able to get closer to the providers and the customers and the consumer. What I would say is we have an outstanding team in China. We have a team that is executing to precision. The integration is going extremely well.

What we're seeing right now is there's high demand. As I mentioned during the last conference call, I was in China at the end of December. We had an event where we met the key customers in China and the product is viewed as the gold standard. So now having this integration, having direct access to the providers, the consumers and also to the field force and then developing the processes and enhancing the processes to have a better sales execution is what's driving it.

The Thermage business in China, the customer in terms of their ability to pay, it's a very -- it's a business and a customer base that is sort of a little bit insulated from the economics that are going on in the country or even globally. So we still see strong demand for the product. As you know, it's a durable business, both with capital and consumables. So the more capital we can put in with this integration of Shibo and then driving the use of those machines going forward with our consumable base.

So we see that the growth can continue, and we're expecting a very good year in 2026. And as I said, it all begins with having an outstanding team on the ground in China.

Okay. Great. And then just with respect to business development as a follow-up question. Given the success that you're seeing at Solta, but also the importance of your GI franchise, capital commitment opportunities, those sorts of things, which of those two businesses would you -- are you just going to be simply opportunistic? Like where would you expect to see some investment go?

Yes, Doug, another great question. When I look at it in terms of a business development standpoint, and I look at our U.S. Pharmaceutical business, along with our international pharmaceutical business, again, it starts with people. We have an outstanding global commercial team. So as we're looking at business development opportunities, what I see for Bausch Health, our greatest asset is our people and being able to execute globally.

So as we look at various opportunities throughout the therapeutic areas that we have expertise in, I see opportunities to be able to bring in some products that we can grow and we can develop. So as I said in my prepared remarks, looking at assets that are commercially already on the market or coming to market and at the same time, having the pipeline, we have an outstanding R&D team as well to be able to develop some of those pipeline assets.

So overall, I'm not specifically looking at areas in the therapeutic classes that we compete. But we have, if you look at even -- if you look at Xifaxan and you look at the OHE indication, that's really a specialty area. So we have expertise to be able to sell and market specialty drugs or extending off of that into the rare space. At the same time, also on the Solta side, we're also looking at other opportunities as well in terms of there's a few assets that we could look at to bring in. So overall, really robust discussions happening here to get more products into the hands of our outstanding commercial teams. Operator next question.

[Operator Instructions] Our next question is coming from Umer Raffat from Evercore ISI.

I have two here, if I may. First, your planning around separation, debt refi, et cetera. How does that change considering your current scenario January 28, how does that change if the D.C. Circuit Court reverses some of the prior findings of courts? And how does that change the level of urgency and planning? Do you have a contingency plan in place if that were to happen on Xifaxan?

Number two, JJ, you mentioned you're looking at tuck-in opportunities for assets that are either already on the market or coming to market with the pipeline. I guess my question is, do you guys have the flexibility and room to be able to raise equity to finance some of those? Because this is a strategy that's been used very successfully by a lot of SMID biotechs. But what I didn't know is do you have the visibility on being able to raise cash from the markets to finance those R&D and the trials in case you were to find a good asset, let's say, a Chinese asset or the like?

Okay. Umer, I'll take the first part of your question and hand it off to JJ for the second part. The way I'm looking at it right now, we know we will have a generic entrant 1/1/2028. But right now, today, Teva remains the first filer, has first filer status. If we look at it, as you know, recently, the one thing that has changed is that Teva has gained final approval by the FDA. So as we look at it, there's two appeal cases that are fully braced, and we are waiting on a decision.

Clearly, as I said, we remain a generic entrant of 1/1 -- of like 1, the 2028. And as I look at it and we look at what our contingency planning is, of course, we are looking at contingencies and what we would do, but we continue to remain confident in our IP and planning for 1/1/28. JJ?

Yes. Umer, let me take a step back first and probably reiterate the equation we're dealing with. As you know, our capital structure optimization really relies on three variables. The first variable is the free cash flow we'll be generating between now and the end of 2027, assuming, obviously, we retain exclusivity until the 1st of January 2028. The second variable is the EBITDA post FX and LOE. And then the third variable is the average selling price we hope to get by monetizing our equity stake in BLCO in completing the separation, if that's the path we're going to be taking.

In case we lose exclusivity before the 1st of January 2028, what it does, as you know, is that basically it curtails the free cash flow generation between now and the end of 2027. So that would translate into -- in the absence of any other levers that we would put in place, the need to monetize some of our assets earlier than originally planned. But from an operational standpoint, I think Tom covered it.

Obviously, it's an event we've been preparing for. We're trying to mitigate it as much as possible through looking at potential BD opportunities, but it's not something that would be a dramatic change of plans. There are opportunities to increase our level of financial flexibility. I think I mentioned that in my prepared remarks, the ability to potentially do some other refinancing of our debt structure so that the maturities between now and the end of 2028 could be pushed back. That would be one option. And then the other options would be to do some sort of capital reallocation within our portfolio.

Equity is not something that is high on our priority list at this stage, given where the share price is. So I certainly wouldn't consider that. It's a possibility, but it's probably -- it's not a probability at this stage.

Operator next question.

Our final question today will be coming from Mike Nedelcovych from TD Cowen.

I have three actually, if I thought all right. My first is on larsucosterol. What are the key changes that have been made to the Phase III trial to avoid the failure that was seen in Phase IIb? Is it just a larger, better powered trial? Or have there been other changes made to trial design or inclusion criteria? That's my first question.

My second question is just a simple one. I'm just curious where the internal review for amiselimod stands. It's been underway for some time. And I'm just wondering what factors are still being considered? And then my third question relates to your tariff exposure. I think since you last quantified your tariff exposure, there has been news from the White House. So I'm wondering if you might be able to characterize your current tariff exposure with a little bit more detail?

Yes, Michael, I'll take the last one, and then I'll hand it off to Jonathan for your first two. As you know, generally speaking, we have local production in many of the markets, so which naturally helps us there. And then the recently announced tariffs that probably will have an impact on Xifaxan and TRULANCE probably starting in September or the end of September of 2026. But what I would say is, as of today, that we noted in our guidance that we reaffirmed, it includes the impact of any existing tariffs or those signed to become effective in '26. So right now, that's the way we see it with what we know today. JJ, do you want to add anything else on tariffs?

No, I would just say at a high level, it's minimal impact in 2026. 2027, we'll have to wait until what mitigants we put in place to try to minimize even more, assume, obviously, those tariffs be in place for the full year of 2027. But at this stage, I think what we have provided earlier, which is that tariffs had a minimal impact on our P&L, I think, remains the same even with those latest round of tariffs.

Jonathan, do you want to take the first two parts of that question?

Yes. Okay. So first of all, [indiscernible]. Your question is what have we done to mitigate for what happened to DURECT in their Phase IIb study. So first, it's important to remember what really happened there. Remember, it was a global study, although 80% -- about 80% of the patients were in the U.S., about 20% were ex-U.S. And when we reviewed the data, it seemed like the 20% of patients who are randomized outside of the U.S. were somewhat different than the ones in the U.S.

The main issues there were that those patients seem to be randomized later on. So the earlier you're randomized after presentation to the hospital with alcohol-associated hepatitis, the sooner you're randomized, the more likely you were to respond, which, of course, makes sense ex-U.S.

There were a few sites where they really took a very long time to randomize these patients. mainly, we believe, based on different treatment algorithms in some of these countries. They took a long time to rule out any other issues, any problems they had. And so they randomized them sometimes weeks after presentation. So the ability of the drug to actually be impactful was much lower. It also seems to be like a slightly different patient population. They are heavier drinkers than they were in the U.S. So all of those together, all those issues together, when we look at the U.S. patient population was much more homogeneous patient population, all randomized early on after presentation to the drug.

And we consistently saw a very strong effect of over 50% reduction in mortality in this patient population. So we strongly believe that, that is true, and that is a real finding. It was highly statistically significant in the U.S. population. And what we've done to make sure that we don't see those same issues in the Phase III trial was, first, to focus on the U.S. population.

We want to make sure that we're taking a homogeneous patient population. So we decided to run the trial in the U.S. only. Second is we made sure that patients are randomized early on. They cannot be randomized to the drug unless they are -- unless they're randomized within 9 days of presentation, which is what we saw in the Phase IIb trial, those patients seem to have a strong response. So that was the second important adjustment.

And the third, as you're alluding to, we did power the study highly to 90% alpha, made sure that we have a very large number of patients randomized to active and placebo, and we believe that the probability of success here based on all of these is quite high. The study is now in start mode. We're opening up sites and are very optimistic about the probability of success here. So that's the larsucosterol question. The second was about the review of amiselimod.

And maybe I should take a broader view here and tell you what we've been doing is looking at our portfolio overall and looking at not just amiselimod. We have -- we got the data on UC a while back and have been reviewing it. The data we thought was very good. The indication is one of interest for us and fits well with our strategy. But what we have been doing over the past few months is looking at all possible indications with all possible drugs that we have in our hands right now. So larsucosterol is one. We have -- we've said before that, that is a platform drug that can be used for multiple indications. So -- we have been looking at possible indications to progress with that.

We've been looking at rifaximin, which is, I think, a really effective drug, and we have multiple formulation of that, and we've been looking at possibilities for new indications there as well as with amiselimod.

So we've put all those indications together, all the possibilities, and we're right now prioritizing what is the best indication for us to progress forward based on scientific evidence, developability of drugs, regulatory path and importantly, commercial opportunity.

We're looking at all of those variables for all indications and making decisions with all drugs and all indications and making decisions on which ones we will progress with.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to Tom Appio for any further or closing comments.

Thank you, operator. Thank you all for joining us today and for your questions. We had a solid first quarter performance, and I want to thank the global Bausch Health team for their relentless commitment to operational excellence and delivering results.

We are committed to our mission to drive long-term value for our shareholders. Thank you for your time today and your interest in our company. Have a good evening.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the Bausch Health Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to your host, Garen Sarafian, Vice President, Investor Relations. Garen, please go ahead.

Good afternoon, and welcome to Bausch Health's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Garen Sarafian, Vice President of Investor Relations. Participating in today's call are Thomas Appio, Chief Executive Officer; JJ Charhon, Chief Financial Officer; and Jonathan Sadeh, Chief Medical Officer and Head of Research and Development.

Before we begin, I would like to remind you that today's presentation contains forward-looking information. Please take a moment to review the forward-looking statements disclaimer at the beginning of the slides accompanying this presentation as it contains important information. Actual results may differ materially from those expressed or implied in these forward-looking statements, and you should not place undue reliance on them. Please also refer to our SEC filings and our filings with the Canadian Securities Administrators for a discussion of certain risk factors that could cause actual results to differ materially from expectations. We use non-GAAP financial measures to help investors better understand our operating performance. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should be considered in addition to and not as a substitute for measures calculated in accordance with GAAP. Reconciliations to our non-GAAP measures are included in the appendix of the slides accompanying this presentation, which are available on Bausch Health's 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, Wednesday, February 18, will focus on Bausch Health, excluding Bausch + Lomb. However, we will briefly comment on Bausch + Lomb's results announced this morning. We will refer to year-over-year comparisons with the same period last year, unless otherwise noted.

With that, I will turn the call over to our CEO, Tom Appio.

Thank you, Garen, and welcome to everyone joining our earnings call today. Our year concluded with an impressive 11th consecutive quarter of growth in both revenue and adjusted EBITDA, reflecting our organization's consistent performance. This success is powered by our global team's unwavering commercial focus and operational excellence as full year results exceeded our guidance on all key metrics. The fourth quarter gave us an opportunity to reflect on the progress we have made over the past year. Our commercial performance has remained strong across the markets we serve. Our capital structure has improved significantly. Our operating model has continued to deliver efficiencies, all of which has given us the ability to proactively pursue business development to enhance our long-term outlook. As we begin 2026, our strategic priorities remain firm and our approach consistent. We continue to prioritize initiatives that yield the highest value across our organization. Our global footprint and 2025 performance give us confidence for future growth.

While JJ will walk through the financials in more detail, I would like to take a few minutes to highlight our fourth quarter performance. In the fourth quarter, Bausch Health, excluding Bausch + Lomb, increased revenue by 9% on a reported basis and 5% on an organic basis when compared to the fourth quarter of 2024. Salix, in particular, demonstrated resilient demand, excluding Medicaid, supported by solid volume in remaining channels and continued execution across promotional, access and digital capabilities. Adjusted EBITDA for Bausch Health, excluding Bausch + Lomb, increased by approximately 9% compared to the prior year period and ahead of implied guidance for the quarter. The business continued to operate efficiently as teams manage spending thoughtfully while sustaining the investment needed to support growth.

On December 1, 2025, we acquired Shibo, full-service aesthetics distribution platform in China, strengthening our direct commercial presence in this key market. This strategic transaction provides us with the access to one of the largest global aesthetics markets and enhances our ability to serve providers directly.

Our cash generation remained healthy, allowing us to achieve another year of over $1 billion in adjusted operating cash flow while also reducing our net debt by several hundred million dollars. Lastly, we further improved our debt maturity profile by approximately $1.7 billion through a debt exchange in late December 2025. This transaction further strengthened our balance sheet and provided additional flexibility as we evaluate opportunities to unlock value across the portfolio. For the full year, Bausch Health, excluding Bausch + Lomb, delivered year-over-year growth of 7% on a reported basis and 6% on an organic basis. This reflects broad-based performance across the enterprise. We achieved double-digit adjusted EBITDA growth, excluding Bausch + Lomb for full year 2025, ahead of expectations. Excluding the third quarter charge related to acquired in-process research and development would yield an even higher adjusted EBITDA growth rate for the year. Salix and Solta delivered double-digit top line growth of 11% and 18%, respectively. Three of our four segments grew revenue this year and three improved profitability, highlighting the diversification of the portfolio and the contributions generated from multiple areas of the business.

At the product level, performance during the year remained healthy across multiple important areas. Xifaxan revenue grew 11% for the year, reflecting the continued impact of our commercial team's efforts. Thermage revenue grew a robust 19%, anchored in Asia Pacific and other products such as Ryaltris and CABTREO also grew very well. These outcomes reflect consistent demand, strong field activity and targeted investments throughout the year. Overall, 2025 represented another year of excellent execution, leading to results above guidance.

Let me take a moment to provide a brief update on RED-C. We are disappointed by the outcome we announced in January that while safe and well tolerated, neither Phase III trial met its primary endpoint. We are currently reviewing the full data set to determine potential new development opportunities. Reflecting on the overall performance, we closed 2025 with strong results. Our team advanced our strategic priorities, strengthened the company's operational position and executed with excellence. I appreciate the unwavering commitment our teams worldwide have shown over the course of the year. Together, we remain focused and committed to delivering results for shareholders.

I will now hand it over to JJ to walk you through the detailed financial results. JJ?

Thank you, Tom. Let's start with our consolidated non-GAAP financial performance for the fourth quarter, which you will find on Page 11. Revenue was $2.796 billion, up 9% on a reported basis compared to the same quarter a year ago. Adjusted gross margin was 71.6%, which was 80 basis points lower than the same period a year ago. Adjusted operating expenses were $1.33 billion, an increase of $75 million year-over-year. Adjusted R&D expenses were $161 million, which was a $2 million decrease when compared to the fourth quarter of 2024. Adjusted EBITDA was $1.52 billion in the fourth quarter, an increase of 13% year-over-year. Finally, adjusted operating cash flow was $515 million.

Moving now to the fourth quarter of Bausch Health performance, excluding Bausch + Lomb, starting on Page 15. As Tom indicated, we had another strong operational performance across all metrics in Q4. Revenue for the fourth quarter was $1.391 billion, up 9% on a reported basis. Adjusted EBITDA for the fourth quarter was $773 million, a 9% increase from the fourth quarter of 2024. Adjusted operating cash flow for the fourth quarter was $362 million, down $205 million year-over-year, primarily due to the change in timing of our cash interest payments following the refinancing we executed on April 8, 2025. Our strong cash flow generation in Q4 allowed us to reduce our net debt by approximately $320 million, which was much better than originally anticipated.

Turning now to our fourth quarter performance by segment, starting with Salix on Page 17. Salix revenues in the fourth quarter were $693 million, which was an impressive 9% increase year-over-year on a reported basis. This strong performance in Q4 was ahead of expectations. While we had anticipated the continuation of our double-digit script growth across all existing channels, we also benefited from some higher-than-planned residual volume from several state Medicaid customers. We do not expect this to be a material revenue driver moving forward.

Now moving to the International segment, which you will find on Page 18. Revenues were $306 million, an increase of 10% on a reported basis and 2% on an organic basis compared to the same period a year ago. While the performance was strong overall, the results by geography was mixed. EMEA and LatAm grew double digit on a reported basis, while Canada contracted 6%. Congratulations to the EMEA team for achieving its 12th consecutive quarter of organic revenue growth, which is very impressive. Also worth noting is our performance in LatAm, which returned to growth with a 22% increase in revenue on a reported basis and still 11% on an organic basis. What's more, growth was balanced across most of our core brands this quarter. Finally, Canada's revenue contraction was due to a reduction in Wellbutrin volume, which faced more generic competition in this quarter compared to the same quarter 1 year ago. This was partially offset by the double-digit growth of our promoted products portfolio led by CABTREO and Ryaltris.

Now let's review the performance of our Solta Medical segment, which you will find on Page 19. Revenues were $137 million, a slight decrease of 1% on a reported basis and flat on an organic basis compared to the same period last year. Solta's solid operational performance was negatively impacted by the transition of our full-service distributor in China. Excluding this onetime impact, we estimate that Solta revenues would have been up mid-single digits in the fourth quarter. Separately, special mention goes to our team in South Korea, which continues to perform exceptionally well. Reported revenue in that market was up 40% this quarter, making South Korea our largest revenue-generating geography for Solta in 2025.

Turning now our focus to the quarterly performance of our diversified segment, which you will find on Page 20. Revenues were $255 million, an increase of 12% on a reported basis, mostly due to the improved net pricing in the quarter.

Finally, let me wrap up the segment discussion for the fourth quarter by commenting briefly on Bausch + Lomb results, which you will find on Page 21. Revenues were $1.405 billion, up 10% on a reported basis compared to the same period last year. B&L's strong revenue performance in Q4 was led by its pharmaceuticals business, which had an impressive 16% growth year-over-year on a reported basis, while its other two businesses, Vision Care and Surgical, each grew 8%.

Now let's end the review of the fourth quarter by highlighting improvements we have made to our capital structure. There were three major highlights for the quarter. First, we repaid our $300 million accounts receivable facility and in the process, lowered our average cost of debt. We also completed a $1.7 billion secured debt exchange, which allowed us to push out maturities for four years and capture $80 million of debt discounts. Finally, we generated $362 million of adjusted operating cash flow and reduced our net debt by more than $300 million quarter-over-quarter. The strengthening of our balance sheet caps a great quarter performance across all metrics.

Now before I cover our guidance for 2026, let me provide a quick wrap-up of our outstanding full year performance and the progress we've made in the last 12 months. We grew revenue 7% and adjusted EBITDA 10%, demonstrating our continued commitment to driving profitable growth and increasing operating leverage. While we recognize that some of 2025 growth was a result of nonrecurring drivers, the underlying operating growth would still be high single digit year-over-year. More importantly, it is worth acknowledging that all these outstanding operational results came without the benefit of any major acquisitions and solely through the optimization of the same portfolio we've had for the last four years. Finally, we significantly improved our debt maturity profile by executing 2 large refinancing transactions, totaling together $9.6 billion and leaving now less than $700 million of maturities obligation until the end of 2027. This is an incredible turnaround when thinking about where we stood just 12 months ago. That being said, a lot more work lies ahead, but our view is that 2025 mark an inflection point in our operational and financial trajectory.

Now let me provide you with our 2026 financial guidance for Bausch Health, excluding Bausch + Lomb, which you will find on Page 25. For 2026, we expect revenues to be between $5.25 billion and $5.4 billion. The midpoint of that range would translate into a 3% increase year-over-year. Adjusted EBITDA is expected to be between $2.875 billion and $2.950 billion, representing a 4% increase year-over-year at the midpoint. Finally, we expect adjusted operating cash flow to be between $1.2 billion and $1.275 billion. The midpoint of that range would translate to a 4% increase year-over-year. Please note that the guidance for 2026 is at current FX rates.

Let me also add that from a phasing perspective, we anticipate a stronger growth rate in the first half of 2026, given the temporary nature of some of the benefits we recorded in the second half of 2025.

With that context, and before I hand it over to Tom, let me review our key financial priorities and how they will be pursued in the coming year. First, increasing the value of Bausch Health operational assets through innovation, optimizing the growth of our portfolio of brands across the globe as well as pursuing opportunities to further expand our portfolio of assets through business development. There is no major change versus what we set out last year, making 2026 an extension of what we accomplished in 2025. Second, evaluating all options for unlocking value for all stakeholders, including maximizing the value of our Bausch Health and Bausch + Lomb assets. Our improved debt maturity profile now gives us the ability to use value maximization for shareholders as our primary guide for future asset monetization decisions. And third, continue to optimize our capital structure. Now that we have completed the largest refinancing transaction in our history, the approach will be more opportunistic while maintaining maximum flexibility for funding any future investment in Bausch Health.

In short, we expect 2026 to be another opportunity to make good progress against some of our key finance priorities with a more balanced approach between tactical improvement and strategic value creation.

I will now turn it over to Tom.

Thank you, JJ. I would like to now shift from the financials to how we are positioning the company for success in 2026. I would like to highlight a few of our segments and businesses today to illustrate the breadth of our underlying portfolio and the many opportunities we see ahead. Salix is an industry leader in gastroenterology and hepatology. For over 35 years, we have built our company position by establishing long-standing relationships with health care providers, institutions and patients. Xifaxan, Relistor and Trulance are trusted set of brands that anchor our leadership position. Our focus on education, on patient access and ongoing physician engagement reinforces our standing as one of the top GI pharmaceutical companies in the United States. In 2026, we will continue our momentum with Salix in commercial and Medicare segments. We continue to leverage our customer insights platform to find new patient starts and accelerate starting treatment in all GI conditions that we treat, including OHE, IBS-D, IBS-C and OIC.

Using AI enables us to do this in a way that is faster, is smarter and is more efficient. In 2026, we will leverage our data-driven approach to reach patients through direct-to-consumer advertising and to reach health care providers through improved targeting. This is a franchise we expect will continue to perform.

Innovation remains central to the Salix segment. Larsucosterol, our Phase III program for alcohol-associated hepatitis or AH represents an important potential advancement. AH remains an area of substantial unmet need, and we are committed to advancing this program to deliver meaningful therapeutic options for patients. Following quarter end, we began enrolling patients in the Phase III study, marking a key step forward for this program.

Turning to Solta. Solta is a leading medical aesthetics platform and offers a comprehensive set of energy-based devices within the global aesthetics market. Our technologies address a broad range of clinical applications, enabling us to serve diverse provider segments and consumer needs while strengthening our competitive position across key markets. Solta's above-market performance reflects a long history of product innovation and strong commercial platform. We continue to invest thoughtfully to drive long-term growth and capture the significant opportunities ahead by investing in our people, strengthening our management structure, developing our team members and attracting top talent to support the next phase of growth; investing in scale.

As mentioned earlier, we completed the acquisition of Shibo's aesthetics business in December, bringing distribution, sales and marketing capabilities fully in-house for Solta China. This enhances our reach, deepens provider and consumer engagement and increases utilization. We expect China to reclaim the #1 geography for Solta in 2026, investing in innovation, expanding our R&D organization and building new medical and clinical affairs capabilities to accelerate product development and generate robust clinical evidence investing in manufacturing capacity, ensuring we can meet rising global demand while maintaining quality and operational excellence. Based on the momentum we have seen to date and the opportunities we anticipate in this market, we believe that Solta is well positioned to continue delivering double-digit growth in 2026, supported by strong fundamentals.

Let me now turn to our International segment, which is often underappreciated yet continues to perform well, and we expect will remain an important contributor to the company in 2026. The segment includes several diverse markets, each with a robust commercial model and well-established brands. Within our EMEA market, we expect Central Europe to maintain its solid position, supported by established presence in Poland with an excellent team. This presence will allow us to introduce new products and product line extension. We plan to continue leveraging our position as the #1 pharmaceutical company in Serbia across multiple therapeutic areas. In Mexico, the largest component of our Latin American business, we are ranked as the #2 dermatology company. In both Mexico and Colombia, our BEDOYECTA products are ranked as the #1 complex B brand. Across Mexico and Central America, our Bausch Health branded generics hold at least 1 top 3 position across the therapeutic categories. We have now entered the cardiometabolic market in Latin America, which represents a large and growing opportunity for Bausch Health.

Our infrastructure, brand recognition and commercial reach position us well to compete effectively in the cardiometabolic category. We expect Mexico to continue to return to growth in 2026, including drivers BEDOYECTA and our newly launched cardiometabolic franchise. In Canada, we are ranked as the #1 dermatology company supported by strong brands, including CABTREO and JUBLIA that continue to perform well and solidify our presence in the market. Together with our promoted products, we expect promoted products to continue to grow in double digits in 2026. With the results we have seen and the opportunities across our global footprint, we expect our International segment to deliver growth in 2026, supported by durable underlying fundamentals.

Our five strategic pillars will continue to guide Bausch Health in 2026. These pillars, people, growth, innovation, efficiency and unlocking value provide structure and clarity to our decision-making. They drive alignment of our teams on the actions required to deliver sustainable results. These priorities shape our daily operations, reinforcing accountability, ownership, execution and a focus on progress. We remain committed to commercial, operational and R&D excellence, along with the proactive pursuit of business development initiatives that expand our portfolio and enhance our long-term outlook. We finished 2025 on a high note with exceptional full year results, reflecting significant progress across our strategic priorities. I want to extend my sincere gratitude to the Bausch Health team worldwide. These achievements are a direct result of your passion, intelligence and unwavering dedication. We are entering 2026 with confidence the company has a strong team and a diversified portfolio with multiple paths to growth and innovation.

With that, we can open the line for Q&A.

[Operator Instructions] Our first question today is coming from Umer Raffat from Evercore ISI.

This is [ JP ] in for Umer. Congrats on the quarter. I have one question. Post RED-C readout, what is your updated decision framework for the separation? How are you thinking about gating items and debt repayments? What's -- can you please illustrate?

Yes. Thanks for the question. I think that the way I would say it is there's no change. We're -- of course, we're disappointed in the results from RED-C. But we continue to focus on repaying debt and reinvesting in our business, whether promoting existing products, developing new products or engaging, as I said in my prepared remarks, engaging in business development activities, which is one of the things we are accelerating now that we have significantly changed our capital structure with the refinancing.

Following up on the BD.

Yes. Sure.

Yes. Can you please give some more color about your business development plans?

Sure. Well, firstly, as you know, the acquisition of DURECT, and Jonathan is here, and he can talk about that. And when we acquired DURECT, we acquired it not just for alcohol-associated hepatitis, but also as a platform. So we have been -- and Jonathan can speak to that. The other thing also from business development is looking at the therapeutic areas that we compete in. We have screened a lot of assets, looking at where we can bring in acquisitions that we can leverage with our outstanding commercial team. That's one of the greatest assets of this company is the commercial excellence, both from a selling and marketing perspective.

So we're looking for different assets that we can put and slot into those teams. Also looking, as I talked about in my prepared remarks, on Solta, where Solta is a great brand for us. We have great innovation there, and there is opportunities to continue to look at acquisition possibilities to slot into the portfolio as well.

I'll hand it to Jonathan, you might want to talk about the direct acquisition and why we see it as a platform.

Yes, of course. So Larsucosterol was really a great acquisition for us. To remind you, it's an epigenetic modulator. So prevents cell death and response to acute cell injury. DURECT did a great job of proving that this drug is very efficacious in one setting of acute cell injury and alcohol-associated hepatitis. And that's the first -- the lead indication that we have started Phase III with and strongly believe in the data that we saw in Phase II.

But we -- as Tom was saying, we believe this is a platform because if we do see an effect -- such a strong effect in one form of acute cell injury like alcohol-associated hepatitis, we believe and we actually DURECT has some preclinical and clinical data to suggest that in other settings of acute cell injury, we would also see efficacy. So we're now actually going over all these other potential indication and hope to prioritize some of those in the very near future.

Next question today is coming from Les Sulewski from Truist Securities.

I have two and then a follow-up maybe to Jonathan. So, first on Solta, can you just share some puts and takes around the Shibo integration? Specifically, how much of the guided revenue and EBITDA growth is driven by the accounting step-up versus the volume growth of Thermage? And could you provide the expected margin accretion from the shift once the channel is fully operational?

Second, on the diversified segment, should we expect generics of Aplenzin and BRYHALI launching this year? And if so, what's a fair erosion step down to model? And how are you thinking about plugging these revenue gaps?

Okay. Les, I'll take the first part of the question regarding Solta. So we closed the acquisition on December 1, 2025, and things are going very well with a very smooth transition. The teams in China, both from the Solta side and the Shibo side have done a wonderful job working to integrate the two companies. I was there in the middle of December, spoke to the entire team. the Shibo team is extremely excited to be part of Solta. It has been a long-standing relationship that we've had with Shibo. So it is going very well.

In terms of your question regarding the accounting, I will pass that to JJ.

Les, there are two major impacts in the quarter. The first one is we purposely decided not to sell additional volume in November. So November, obviously, was kind of a blank for Solta in China. Conversely, we start selling directly to the market in December. So that provided kind of a partial offset. And then on top of that, due to purchasing accounting, we basically had to step up on some of the volume that was sold to our customers in December. Net-net, it's about a $10 million to $15 million hit from an EBITDA perspective in the quarter.

Do you want to take the revenue gap on the Aplenzin LOE?

Yes. Aplenzin, the way I would model it is kind of a standard erosion curve, we are expecting a number of competitors to come immediately after we lose exclusivity on Aplenzin, which is in June of this year. And so I would not expect any unusual behavior there.

Les, you had a follow-up?

Yes. For Jonathan, perhaps on Larsucosterol, can you share some color around the Phase III study design? What effect size are you powering for? And what control mortality rate would you assume? And I guess, what's the delta in survival do you think that's sufficient for filing?

Yes, it's a great question. So, first of all, in terms of the design of the study, we've started the study now in record time, three months after we acquired the drug from DURECT. It will be a U.S.-only study. It will include about 350 patients randomized between drug and placebo, and the primary endpoint is 90-day transplant-free survival. We've had discussions with regulators, with the FDA about this and feel very confident about it. It's somewhat fairly similar to the design of the Phase II trial that DURECT ran. We've just made some design improvements, and we think the trial will be a bit more efficient than was run in Phase II.

Now to your question about the effect size, I think we've followed the Phase II results, and we're data-driven and following what was seen in Phase II. We designed the trial to reflect that. DURECT saw over 50% reduction in 90-day mortality. We believe that if we can replicate that, that would be an amazing result. To remind you, there's actually no therapies approved right now, no therapies available really for this patient population. So we think this would be a huge advancement in the management of these patients and will be really very important for us and for patients out there. Does that answer your question?

Yes, very helpful.

Next question today is coming from Michael Freeman from Raymond James.

My first is on Xifaxan. I wonder if -- it is fair to think that 2026 will be a peak year for Xifaxan sales given we have some renegotiated rates under Medicare for 2027. And if that holds true, what are your plans to accelerate sales during 2026 and mitigate the impact of the renegotiated rates under Medicare in '27?

Yes, Michael, thanks for the question. As you know, since I became the CEO, my focus has been on Xifaxan and driving growth. And that was the one thing that drove the decision to have our AI engine and build it. We think we have a best-in-class engine here, which has really helped our field forces be very efficient in terms of who they're speaking to and how frequently they're speaking and what they're actually delivering in the message of what the HCP wants.

So the focus here has been continuing to accelerate. As you saw, we continue to grow Xifaxan already on the market over 20 years. We still delivered a 10% net sales growth in Q4. So, as we look to '26, we will continue to stay focused on driving execution in the channels where we compete. So we feel confident in being able to continue to grow in those channels. There's still a lot of unmet need for patients to be treated with OHE. As I've said on previous calls, right now, we're probably still only treating. Of course, this is patients that are diagnosed, probably 40% to 50%. So there's still a good amount of space there to continue to grow before the product goes LOE.

I want to -- maybe JJ wants to add something to that?

Yes. Michael, a couple of things just to highlight. While we'll continue to grow the business in the channels we're currently selling Xifaxan, which exclude the Medicaid and to a certain extent, the 340B channel. On a reported basis, 2025 might be the peak year for Xifaxan just because we had some onetime benefits in the year. that will not repeat in 2026. I think we've clarified that in the prepared remarks.

So I'll mention a couple of elements. First, at the end of the third quarter, we had to adjust our gross to net percentage to reflect the fact that we had exited Medicaid. So that was kind of a good guy in the third quarter. In the fourth quarter, we still had some residual volume from Medicaid states that were not discounted by definition because we had exited programs. So that provided also another benefit.

And then conversely, if you look at 2026, there will need to be an adjustment of our gross to net accrual in the fourth quarter of 2026 to reflect the fact that the new CMS rebate will become effective on the 1st of January 2027. So a lot of accounting pluses and minuses, but I think you're thinking about the right way, which is operationally in the channels we currently serve, we'll continue to grow our Xifaxan revenue in '26.

Okay. Okay. And now a follow-up. I guess, thinking another way about, I guess, the timing and your framework for thinking about the full separation of Bausch + Lomb. What are you hoping to see develop within that business before it's appropriate to pursue the full separation?

Yes, Michael, I think when we look at it, right, as we talked about in the prepared remarks, the refinancing provided great flexibility for us. So it was a significant achievement this year. And I don't know if you had a chance to listen to Bausch + Lomb's call this morning.

So, I think, I look at it this way. We believe in the Bausch + Lomb plan, the growth story, the margin expansion story and the selling and operational excellence. They have a robust pipeline. They have a robust product portfolio today. And then if you had listened to Investor Day, where their pipeline is going. So we really believe in that pipeline.

And then lastly, they have a great team, and they had a great quarter, and we are really excited about the future of Bausch + Lomb and given the fact that we own 88% of it. So we're just looking now to the market to reflect the value in Bausch + Lomb.

JJ, do you have any further comments?

No, the only thing I would just clarify or add is that the refinancing basically based on our projections allow us to pretty much deal with the maturities until the end of 2028, assuming we maintain exclusivity on Xifaxan until the 1st of January 2028. So that flexibility allows us to really be patient and to wait for really the share price of B&L to reflect the improved execution and the financials that have been shared with investors late last year during Investor Day. So that's point number one. Point number two is in light of what I think we've discussed last year, the separation per se will have to be in the form of really selling our B&L equity stake. There's been, I think, in the past, some chatter around some distribution of B&L shares, but I think the highest probability outcome will be in the form of selling down our equity stake.

Next question is coming from Glen Santangelo from Barclays.

Tom, I think everybody just generally accepts the fact that the near-term results, they continue to look fantastic. But sort of based on our incoming call volume, it seems like everybody just wants to talk about the EBITDA impact in '27 coming from the IRA and the pricing changes and then again, in sort of 2028 with the LOE. And I seem to remember, I thought you gave us some guidance in the past about how '27 EBITDA may shape up relative to '25. And I couldn't remember specifically, but I don't know if there's anything you can give us to give us a better sense of the EBITDA trajectory just sort of given those two events that are kind of coming up.

Glen, thanks for the question. And yes, the results, we're really pleased with the 2025 results. I'm going to hand it over to JJ because on previous calls, he's discussed this.

Glen, what we've said in prior calls, actually more specifically in Q3 is that the average of 2026 and 2027 would be fairly similar to the EBITDA that we deliver in 2025. And despite the overperformance that we've had in 2025 and the very strong fourth quarter, I can reiterate that guidance. Now obviously, given that we've provided guidance for 2026, you can figure it out exactly how we're thinking about 2027 in light of that guidance.

But yes, there are obviously partial offset to that higher CMS discount that provide us to soften, I would say, the relative drop that you can see, but we've got other growth platforms that we continue to work on, starting with Solta and some of the other segments. So I think that will help you rationalize the implied number for 2027.

All right. Maybe if I could just ask one quick follow-up on the cap structure. Obviously, you made a lot of good progress here. And Tom, I don't want to put words in your mouth, but it sounds like you believe that you're at a place where you can start doing business development currently, and you've done that this quarter. But just to sort of follow up on JJ's comments, you now believe the plan will ultimately be to sell Bausch + Lomb as opposed to do the spin, does this -- would the sale have to be an all-in one shot? Or could it theoretically you sell different pieces of the company or different percentages of the company down as need be to handle the upcoming maturities, which seemingly are not until 2028 anyway. So it seems like you have some time. So I just wanted to really try to understand the strategy of how you may approach Bausch + Lomb just sort of given you have a little bit of time on your side versus maybe near-term business development priorities. I'll stop there.

Thanks, Glenn. So when it comes to business development, of course, doing the refinancing, the finance team and the legal team did an outstanding job. This is just incredible what we've been able to do and to give us runway. And so with that runway, and we're able to now really do focusing on BD, as you saw with the direct acquisition that we did in the third quarter, the Shibo acquisition in the fourth quarter and looking at our capital allocation and where we can create the best value. And there is a lot of assets out there that we continue to screen and looking for the right fit for Bausch Health.

As I said in a previous question, one of the greatest assets we have is our commercial team and our commercial capabilities in worldwide. So that is going to be the focus going forward, of course, all driven by being able to do the refinancing.

I'll hand it off to JJ to add more to your question.

Yes. So when it comes to the monetization of our B&L equity stake, really all options are on the table. I think what will guide really our monetization decisions, as we said in our prepared remarks, is really shareholder value creation. The flexibility that we've got and the extended runway that we've created through the refinancing of $9.6 billion of our debt last year now allows us to be more patient and to evaluate all possible options to monetize our equity stake while at the same time, creating shareholder value. So that's the way we think about it.

And I think, Glen, as we look at the performance for 2025, the focus is going to be getting more products into the hands of our commercial team. So it's going to be a focus now continuing to look for assets to bring into the portfolio, not only that are possibly already on the market, but the fact of what we can do from a development perspective in R&D.

Next question today is coming from Jason Gerberry from Bank of America.

This is Chi on for Jason. One and another follow-up. So the first one is, you mentioned there were some higher-than-planned residual volume from several state Medicaid. Can you quantify the impact to 4Q? And was that impact segment across portfolio? If not, which product benefit the most from this onetime dynamic? And my follow-up is on the scope of BD. How large of a BD are you willing to consider based on your current capital structure?

Yes, Chi, thanks for the question. I'll take your second question first, and then I'll hand it off to JJ. We're looking at all types. As you know, we are constrained in terms of the capital structure that we have. and what we can -- how much we can spend. But there is -- as we look at it, we look at our portfolio and how do we -- are we able to maximize it? And is there assets that we could bring in at a certain value? Are there other assets that some others could be interested in. So we look at it -- we keep a very open approach to type of deals we can do and the size of the deal we can do. And so that's the framework that we're using today.

I'll hand it over to JJ on your question on the residual volume on Xifaxan.

Yes. Most of that volume is really associated with Xifaxan in the fourth quarter and that really happened in October, November. It was less than $50 million in terms of revenue.

Our next question is coming from Michael Nedelcovych from TD Cowen.

I have two. My first is on the outlook for Xifaxan generics. What are the key events that we should be watching that could decide if a Xifaxan generic becomes available before 2028. We're less than two years away now. So I'm curious what would you say is your level of confidence that Xifaxan will retain exclusivity through to the settlements with generics companies in 2028? That's my first question.

And then my second question is more of a follow-up. It relates to the medium-term outlook. JJ, you hinted at this in a previous response, but I think you said on the last call that EBITDA averaged across 2026 and 2027 would be roughly flat versus 2025. So we now know that you're looking for low to mid-single-digit EBITDA growth this year. Should we then assume a step down in 2027 of a similar magnitude?

Yes, Mike, I'll take the first question, and I'll let JJ take the second. As you know, we know we will have a generic in January 1, 2028. So as we look at it, we're trying to maximize the value of Xifaxan today. As you also know from the public records, Teva continues to be the first filer as first filer status. There's two cases right now in the D.C. District Court on appeal. And that's taking its course.

And then lastly, we have our other patent case in the New Jersey District Court on the new patents at issue with Amneal and Norwich, of which we're still waiting to see, but is there -- the 30-month stay applies to Norwich second ANDA and still needs to be determined, which we believe the 30-month stay applies. Basically, the way we look at it is we'll continue to provide updates on these matters as it moves through the court system. JJ?

Yes. So you're correct. There will be a dip in 2027. I think the math basically suggests that 2027 would be around $2.7 billion, if you follow the math and the logic that I just outlined.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over to Tom Appio, CEO, for closing remarks.

Well, thank you all for joining us today for your questions. We closed out another solid quarter and a year of meaningful growth, supported by results across a broad portfolio. Our progress in 2025 reinforces the foundation we are carrying into 2026 and positions us to deliver another year of strong execution and continued progress. I thank you again for the time and the interest you have in our company, and enjoy the rest of your evening.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Hi all, and welcome to the session. My name is Arvind and I'm an associate with JPMorgan, and I'm excited today to welcome Bausch Health. With us today, we have Thomas Appio, CEO, and JJ Charhon, CFO; and Jonathan Sadeh, CMO. As a reminder on format, this will be a 20-minute presentation followed by 20 minutes of Q&A. So please hold any questions until the end queue.

Thank you, and welcome this afternoon to the session to talk about Bausch Health. So since becoming the -- I saw an opportunity to redefine bout Health future. So with the focus of the first thing I wanted to focus on was profitable growth both on the top line and the bottom line. The second thing was to improve the capital structure. So reduce debt and look at our maturity profile and give us some runway. Of course, as you all know, we refinanced $9.5 billion of debt in 2025. And lastly was to invest in our people, in our products and our processes. And as I take you through this presentation, you'll see what we've been able to accomplish in terms of building a team in terms of beginning to develop our portfolio of products for the future and clearly, our processes.

But before I begin I'd like to note that today's presentation includes forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially. Please refer to our SEC filings for additional information.

With that, let me get started with an overview of our business. Firstly, as you can see on this slide, on the left-hand side of the slide, these are all of our businesses that we operate in. We delivered $4.8 billion in revenue in 2024, $2.5 billion in adjusted EBITDA, and $1.3 million adjusted cash flow from operations. As you can see, a strong performance in 2024. And as we disclosed earlier this week, we're reiterating guidance that we provided in the third quarter of this year.

If we take a look at our broad portfolio of products and geographies, we have strategic offices around the world that enable us to respond to market needs and to customer needs and they're strategically placed. We have 12 manufacturing sites given us robust production capacity and supply chain resilience. We have, as you can see, direct presence in 50 countries around the world. We have over 600 products globally and 7,000 dedicated employees.

When we look at the history of Bausch Health, it goes back 65 years, as you can see from the founding of ICN. It's an ambitious wave of acquisitions over a decade, a year ago, expanded its reach and capabilities in terms of geographies and products. As we look to the future and we look to the end of this slide, we see the acquisitions of Direct, which Jonathan can talk about later during the Q&A, but we believe that this is going to be a valuable asset in our pipeline.

We just acquired our distributor in China, which gives us direct reach into the China market and to the Chinese consumer. This is a major acquisition for us for our Solta franchise. With this, we will continue to look for business development opportunities that meet the needs of patients and fit within our therapeutic areas or adjacencies.

As we look to our segments, we have 4 segments that we operate in. Salix is focused in GI and hepatology. We have deep expertise in this area. International, which we don't talk about that much, and I think is underappreciated, it's a diverse portfolio of branded generic products that continues to deliver and grow. Solta Medical is our global aesthetics franchise and diversified other -- the diversified segment includes neuroscience, which is a very interesting area, dermatology and dentistry.

If you look to the segments, how they deliver meaningful value, Salix, our largest segment continues growing. Revenue grew 12% on a reported basis in the third quarter of 2025. Solta continues its strong growth throughout the world, especially in Asia Pacific. As you can see, all segments maintaining attractive profit margins. This highlights the company's balanced performance across its segments and the potential for continued success.

We operate in a wide range of attractive markets. As you can see here on this slide, the GI hepatology franchise in the U.S. alone, there are over 4.5 million people diagnosed with liver disease. In neuroscience, makes up the largest therapeutic area within diversified, which competes in a $20 billion market in the United States and continuing to grow. Global Aesthetics over $20 billion market within which Solta competes in significant subcategories. International, Central Europe and Mexico are 2 of our strongest drivers. And we believe in the business development that we've done in those regions will continue to power our growth.

Now as we turn towards looking at Salix, our leader in GI and hepatology. We are an established leader being the top 2 leading pharmaceutical company across the GI indications we address. Within hepatic encephalopathy, we are a clear leader with over 40% of current patients being treated with Xifaxan. We continue strong script growth in Q3, we grew Xifaxan total scripts 9%. And -- this is a testament to the deep expertise and the innovative mindset we are applying with our AI-driven engine to support our sales teams and drive growth in our mature franchise of 15 years.

We continue to further innovate organically and through business development with 2 late-stage programs, which I will touch upon later in my presentation.

Turning now to Solta. Solta is a leading medical aesthetics platform anchored by strength in the Asia Pacific region. We have a comprehensive set of offerings of energy-based devices, Thermage FLX, our largest generation radio frequency device for skin tightening. Fracs, FTX, our fractional laser used for skin resurfacing. Clear and brilliant toucher -- clear and brilliant touch that focuses on laser aesthetics for healthy skin and a care regime. And VAS, which is focused on body contouring. This is a portfolio of products that is globally based. South Korea is a sophisticated aesthetics market. Solta Medical in South Korea grew revenues at 30% CAGR from 2017 to 2024, and more than doubled its revenue in '23 to 24. In the same period, Solta grew at 40% CAGR in China, another large opportunity to grow, as I mentioned earlier with the Shibo acquisition.

If we look here to Solta's above-market growth is due to innovation and execution, our premier competitive positioning reflects our long history of product innovation and continues to drive sales growth. Using our most recently reported trailing 12 months results versus 2020, we have doubled the Solta business with a 28% trailing 12-month growth rate, a remarkable achievement by the Solta team.

Solta's innovation has yielded an award-winning portfolio that is positioned for growth. You see here on the slide, five -- we surpassed 5 million treatments in 2025. That is a monumental achievement. And you can clearly see this brand is loved around the world. Thermage FLX was formally designated as a medical device in China clearly, another showing -- of getting a product registered in this space was very difficult. Clearly, a great achievement, with Thermage recognized as device of the year as established Beauty organization in China. Other offerings include FTX and clear and Brillion has received similar accolades and that all go towards Solta's premier product positioning and underpins potential future growth.

Now let's turn to our International business, a business that continues to perform. We have strength in Central Europe. We have a strong presence in Poland and an exceptional team. It has allowed us to introduce new products, product line extensions as a 17% market share in the dermatology segment. We are the #1 pharmaceutical company in Serbia across multiple therapeutic areas. In Mexico, which makes up the majority of Latin America business, we are #2 in dermatology.

In Mexico and Colombia, our Beto Yeta products are in the #1 category of complex B brand. In fact, in Mexico and across Central America markets, Bausch Health, branded generic hold at least 1 top 3 positions across all therapeutic categories.

We are now entering the cardiometabolic franchise. We believe this is a large market opportunity, 1 of the largest markets in Mexico that will power our growth for the future. And in Canada, we are the #1 dermatology company with strong brands, including Ryaltris, Cabrio and Jublia.

Turning now to neuroscience. Bausch Health capabilities in neuroscience is often overlooked. Our neuroscience business within U.S. Pharma is the second largest contributor to Bausch Health sales in the United States. We have broad coverage, reaching 12,000 psychiatrists and PCPs in the U.S., representing 80% of the neuroscience business. We continue to build out our neuro structure now with dedicated service support teams for co-pay support, patient hub and field support teams. We have invested in our leadership team to drive business forward organically and through business development.

We have a proven track record. The strength of our business has helped us achieve a track record of consistent quarterly revenue growth. As we reported in the third quarter, we have 10 consecutive quarters of growth on the top line and the bottom line. Important to note that the sales growth did not come at the expense of profit, and this was profitable growth.

Earnings growth rates are consistently higher than sales growth. We focus on gaining operating leverage. So how is all this possible? It's possible by our team and our people. Our consistent execution is the result of an experienced management team with deep pharma and medical aesthetics experience. We are driven by the relentless drive to create better health outcomes for patients.

Managed -- so as I said at the beginning, we disclosed earlier this week. We are reiterating guidance for our most recent earnings call now leaning towards the higher end of the range. Guidance reflects our strong operating momentum, disciplined execution and confidence in promising and delivering.

There are several inflection points that are in the future. First is the readout of our 2 global Phase III trials for the Red Sea program, which I will touch upon in a moment. 2027 is when we expect the enhanced FLX offering which is internally developed and called 1x. And then later, in 2028, we anticipate readout of larsucastrol Phase III program that we are very excited about.

To briefly touch upon our Red Sea program, Jonathan is here and can answer more questions on this. However, our Red Sea program is targeted for the prevention of empatic encephalopathy, OH. The program is centered on solid, soluble dispersion rifaximin complex, unique patented non-crystalline water-soluble form that enables delivery through the entire GI tract. This is a different product than our current XYfaximin. It is being studied in patients with cirrhosis prior to their first decompensation event from any form of liver disease.

In the U.S., SSD patient population are at least 3x larger than the current OAG population. If successful, a very meaningful global opportunity to address an unmet need with this novel therapy for chronic patients today. What I would say is Xifaxan today is only a U.S. opportunity for us. This is a global opportunity for us. Phase III readouts from this global trial are expected early this year.

Turning now to our recent acquisition of Lar Sucat. This is a late-stage modulator with FDA breakthrough therapy designation for severe alcohol-associated hepatitis, addresses a high unmet medical need in AH with no approved therapies and approximately 30% to 90-day mortality despite supportive care. Global opportunity with initial focus on the U.S. building on positive Phase II experience. This leverages Bausch Health existing hepatology frame trials, including development and commercialization capabilities. The Phase III program is advancing with protocol target initiated early this year.

In conclusion, Bausch Health has a strong foundation. We operate in attractive segments. We have strong growth potential across multiple fronts. We have a strong and dedicated management team and have a clear focus to grow through excellence in execution and innovation.

Thank you for your time today, and we'll now open it up for Q&A.

Thanks, Tom. As a first question, the continued growth of XIFAXAN is impressive. How are you thinking of XIFAXAN dynamics over the next couple of years?

Yes. As I said in my presentation, the team has done an outstanding job to grow this product in after 15 years and at the end of its life cycle. There is clearly still many patients that are suffering from OHA who are diagnosed, who are receiving treatment, but not the best treatment XIFAXAN. So as we continue to look at it until the product goes LOE, we will continue to invest behind it in terms of our AI engine, which we invested behind probably 2 years ago, we still believe there is continued growth in this franchise and that we can help patients.

Thank you. You also highlighted your international segment in the presentation. Could you talk about what the core growth drivers are for each of the businesses within that segment?

Yes. Our international business is a branded generic business and the teams that we have in these geographies of the world have focused on building these portfolios for the products that we have, looking at line extensions and of course, licensing in opportunities. But in these markets, once you build the brand and you continue to have a portfolio that meets the needs of the physician, they can continue to grow at mid- to single-digit growth rates. I think, as I said in my presentation, it's an underappreciated business. We don't talk about it that much, but it continues to deliver growth. We think as we invest behind our people, and our products and our processes, we can continue to grow this business in addition to really doing some successful business development, we have a blue ocean project that looks between Europe and Latin America for looking the products to bring into the portfolio that we can sell and promote.

And we have been successful, as I mentioned, the cardiometabolic franchise. We are very excited about this as we move forward to the launch of these products. In Europe, in Central Europe, we have a probiotic franchise that we have just launched, which is very interesting as well. We continue to do extensive BD to bring products in. But this is a business that continue to generate mid-single-digit growth for us for the future.

Thank you. Your presentation also indicated double-digit growth in Solta going forward. Your biggest growth has come from China and South Korea so far. How do you expect that to change going forward?

Yes. So the Solta business, as you've heard me say on earnings calls, I love this business. It's a durable business. We have wonderful innovation. Jonathan actually can speak later or even after this to what we're working on, on innovation, a few things that what I think we can do is continue as we continue to grow. So number one, the franchise is built on a capital and a consumable basis. So we have -- as we look at it, we're able to place equipment and then we also have the consumable, which is really what drives a lot of the growth, getting more use of those machines and therefore, a very durable business for us as we move forward. When we look at Asia Pacific, we've had wonderful growth. The Korea team has done a wonderful job. If we look at China, the acquisition of our of our distributor is going to be really important to us as we leverage and be able to go to those customers directly and continue to drive more use of our equipment.

The focus is our U.S. business, it is growing very nicely. As we reported in the third quarter, our European business is growing very nicely as well. One of the things we're focusing on, and Jonathan can talk to this is what we're doing from a medical perspective and having data to support claims. And this is a positive about Solta being part of a pharmaceutical health care company because we have the expertise to run trials. So between medical affairs and the development program and Jonathan wants to talk about that in more detail.

Sure. Yes. As JJ was saying, I think we see an unmet -- an area that we haven't tapped in terms of Solta in data generation. Other companies have not done a lot of work there and generate really weak data. We think that if we actually invest in generating really strong data about the efficacy, safety, tolerability of the products, we can actually really prove to the clinicians and patients how effective, safe and tolerable these devices are, which can drive acceptance of these drugs and our reputation, which is really, really important here and something that other companies don't have.

Great. We'll open it up to the audience to see if there are any questions. Please raise your hand. It's like no questions for now. It's a little bright. I'll continue with my questions then.

Congrats on successfully executing your exchange offering late last month. As we understand it, the cash flow will take you in -- through 2027 and into early 2020 -- how are you thinking -- how are you thinking about changes to the capital structure moving forward?

Yes. I think J.J. can take that question. But I would say that before he speaks, is that the finance and legal team have done an outstanding job of refinancing $9.5 billion of debt this year, which has now given us a runway to continue to execute on our commercial strategy. So J.J.?

Yes. The refinancing really now provides the ability with the cash flow expected to be generated over the next couple of years, assuming we maintain exclusivity on XIFAXAN until the January 1, 2028, until the end of 2028, not early 2028. As we think about the capital structure, ultimately, the debt load has to come down. The capital structure needs to be fit for purpose for our portfolio post FX and LOE. And this is why expanded optionalities in terms of process and timing for getting to the final sale of the capital structure was really important. The way you should think about it is -- there's clearly, contribution of free cash flow between now and then to further reduce debt. But when you think about the impact of XIFAXAN coming off patent, there will need to be an influx of fund coming from either 1 of 3 sources, could be at or a new equity raise, which is unlikely to be the preferred scenario given where the share price is. It could be capturing some of the discount, although that has pretty much evaporated over the last 12 months or so.

So the last really source that's most realistic is proceeds from asset sales. And -- we have a number of attractive assets, as Tom presented earlier today. But the most obvious candidate for monetization is our equity stake in B&L. So having basically 3 years to think about how to monetize that asset really has been strategic for us and really a key area of focus. And that's ultimately what will allow us to get the capital structure to where it needs to be given the portfolio we'll have starting in 2028.

Thank you. And how are you thinking about the kinds of deals you want to do going forward given your area of focus and the capital structure?

Yes. I think that when we look at the therapeutic areas that we compete in, they're very interesting. GI, hepatology, neuroscience, dermatology and aesthetics. So as we've been looking at, of course, the direct acquisition fit right into our strategy, and we think that is going to be a nice product that will bring into our portfolio. But when we look at BD, we're looking at those categories that we compete in, but we'll also look at adjacencies to see where we can leverage. One of the greatest assets that Bausch Health has today is our commercial engine. What -- our talented teams in all these therapeutic areas, you see the results that have been generated, so that -- the talented team that we have and then we need to get more assets into their hands. So as we look at it, our BD team continues to screen for assets. As you know what our capital structure looks like. So we have to be very selective in the products that we go after. But clearly, we need to bring more products in. And with JJ's refinancing of $9.5 billion of debt, that has given us the ability to have a runway.

With owning 88% of B&L and probably a lot of you attended their Investor Day, we have a great asset there, and they have great assets and a really great management team. So we're really excited about what we can do going forward and how we can allocate capital accordingly in the future.

Great. Could you speak a little bit more about the core products that you're focused on that are driving growth that are beyond XIFAXAN?

Yes. So beyond XIFAXAN, of course, that is our largest product. But clearly, when we look at our neuroscience business, we have invested behind that. As I said in my presentation, still -- that is an area where we think is very interesting to continue to grow. We've built a team there. As we look at BD, this is 1 of our focuses. If you look at our dermatology business, although it has come down from what it used to be, given market conditions. However, if you look at the launch of Cabtrio, it's been very successful, that has helped -- have the diversified segment. We've returned continuing to focus on the dentistry business. We still think we are -- we have a product there that has no competition. So we'll continue to look at that. The international business continues to perform. And then lastly, our Solta franchise. It's been a wonderful performer for us, and we continue to believe that this is a very profitable area for us to continue to grow.

You spoke a bit about an AI-driven customer insights engine and its impact on XIFAXAN. Could you walk us through a little bit more of the detail there?

Yes. This was something we decided on just soon after I became the CEO really trying to look at -- again, where this product was in its life cycle and then seeing how many patients were still -- we're still not getting treatment with XIFAXAN, although have had an OHE event. So we -- again, when we looked at the data, we started to say what could we do differently to put this product back on growth. And 1 of the things was to look at our AI-driven engine and really making sure that we were going out to the right target with the right message and with the right frequency. And so when we looked at it, we built this engine that found a lot of areas where we could expand in and we could reach to. So it's been very successful. As you can see from the results, we are expanding that into other products within the portfolio of Bausch Health.

You spoke about the Red Sea program as a focus area. Could you talk a little bit more about how you see it as differentiated versus the competition and the upcoming -- and a little bit about the trial design for the upcoming readout?

Of course, I've spoken about the Red Sea program on many conference calls. Jonathan is here, and he can talk about the differences and why we see this as an opportunity. Of course, we need to have the positive data, but -- do you want to think?

Yes. So first of all, important to highlight that this is a very different drug from XIFAXAN, right? They have the same active ingredient in refraction but act as a very different drug. And so we see them as very different drugs. One works only XIFAXAN only the small intestines and is not soluble at all versus SSD, which is very water soluble and works throughout the GI tract and provides a very high concentration of the drug there. So we believe that it works that it would be much more effective and therefore, can prevent what is a much harder event to prevent primary prevention of the first OEG events. XIFAXAN prevents only the secondary events, SSD will prevent the first event. Now that's what we hope to show in this Red Sea trial that's about to read out. We completed the trial on time as expected. We're now cleaning the data to 2 global trials that are reading out and we look forward to seeing the data in the next few weeks.

Thank you very much. We'll see you again if there are any questions from the audience. If not, maybe I'll conclude with 1 additional question. What are your key focus areas going into the new year?

So the key focus areas continue to grow and continue to focus growth and execution with the portfolio that we have. So that's number one. Number two, as JJ and I speak about the capital allocation, is to looking with JJ and the business development team of what are the assets, along with Jonathan and the commercial team that we can bring in to Bausch Health to continue to fuel the growth for the future. I think, thirdly, looking at our development programs that we have in place, and I really -- I like Jonathan to just talk a little bit about Lorsucostrol because that's going to be a major program for us and along with some of our thoughts as being a platform for us. But clearly, we have to get these development programs through. And if you look between our pharmaceutical business and our aesthetics business, there's a lot of innovation going on there on the Solta side. So maybe Jonathan can touch upon that as well.

So those will be the focuses and our strategic priorities will be still the same is focusing on growth and execution, delivering on our commitments you're looking at ways to unlock value and of course, develop our pipeline. Jonathan?

Yes. So you asked about what we're looking forward to this year. I think first on the innovation side, I think we talked about Red Sea that will be a really important readout for us in the next few weeks. But then Lauksterile is the asset we acquired a few months ago from direct. And that's going to really exciting drug. We're starting a Phase III trial now. We've got this trial up and running in record time within 3 months of signing the deal and Phase II is starting now and is going show an effect in patients with alcohol associated hepatitis. But as Tom was alluding to, we think this is actually a platform drug. It's an epigenetic modulator so it has an effect of reducing our preventing acute cell injury or 2 cell death in the setting of acute cell injury. So there's multiple other indications we think we can take this drug into and we plan to actually progress several of those this year, both alone and in combination. So there's a lot that we can do here on the innovation side and also lastly on execution.

I think we have upgraded our game, and we're delivering more effective way as I was describing, we started a program in record time in 3 months from getting the drug to starting the Phase III program. We completed the Phase III program for Red Sea and ahead of schedule. So we want to just continue to do that, deliver on time with high quality.

That's great. If there are no other questions, I think that concludes the session. Thank you very much.

Thank you.

Looking forward to this conversation. Really excited to have Bausch management join us at this venue after a while. I think last time we did it was with Paul Herendeen. And Paul used to say this is his favorite conference of the year. Now I want to give it a caveat. Paul loves Boston, and this conference used to be in Boston. So excited to have you guys join us. And I'll let you kick things off. Maybe I think in this case, some prepared remarks might be very helpful.

Yes. We haven't been, I think, visible to equity investors. The focus has been a lot on lenders. So I thought it might be helpful to just reintroduce the company a little bit. We're a global diversified pharmaceutical and medical devices company. We serve over 70-plus markets. Technically, we were founded in 1959, but the current configuration really has been in its existence since 2015, mostly as a result of some very large acquisition, Salix Pharmaceutical, Bausch + Lomb, Solta Medical to name a few, that have been mostly or primarily financed through debt. And you'll hear in a little bit why this is relevant to the story.

We operate in 5 different segments, if you include Bausch + Lomb. Excluding Bausch + Lomb, we are really present in U.S. pharmaceutical through the Salix business and our diversified portfolio, which is another segment. We have also an International segment, which is made of platforms in Europe, Latin America and Canada. In Europe, it's mostly Eastern European markets. In Latin America, it's a strong presence in Mexico and Colombia.

And then last but not least, we have our Solta Medical business, which is a cosmetic device company, very successful, has been a huge pillar of our growth over the last couple of years, and we'll talk a little bit more about that, I hope. We recently acquired a distributor in China, which just illustrates the commitment to that platform.

And really, our strategy is broken out into 3 main pillars. The first one is to continue to grow our 4 operating segments with really a lot of focus on our GI franchise, our International segment and our Solta Medical business. The second pillar is maximize really the value of our equity stake in B&L for BHC shareholders. And then the last one is make our capital structure fit for purpose for having maximum operational and financial flexibility in the future, which means having the right quantum of debt, of course, that is consistent with our portfolio moving forward, but also have the adequate maturity profile so that we've got the appropriate flexibility for investing behind our growth platforms and also maximize the value of our B&L equity stake.

A couple of notes of our recent investments and area of focus. First of all, on the pipeline. We have in our GI franchise, 2 major assets, RED-C, which is targeted at the prevention of OHE events. And then we have larsucosterol, which came with the direct acquisition we announced earlier this year, which is targeted at alcohol-associated hepatitis. It's a really severe condition that currently doesn't have any treatment. We are excited about that asset we just acquired. So that's been an area of focus. I know we'll talk a little bit more around RED-C, and then we'll continue to perform really well across all of our franchises. We've just delivered 11 consecutive quarter of top line and bottom line growth across our portfolio, which speaks to the consistency and I think the operational focus, both on top and bottom line and cash flow generation that the management team has been displaying.

And so with that, let's just open it for questions.

Okay. Great. Well, thank you for that. Maybe just before we get into product-specific questions, I think there was an announcement yesterday, which market was very focused on, which was your Solta business.

Yes.

This was a business I recall, at one point, you guys were looking to split out. At another point, it was looking like China was going through a tough time. But now with you guys doubling down, it looks like it's reinforcing confidence. So could you remind us what's going on there? And maybe just lay that out for us.

So China, first of all, about our Solta Medical business is heavily indexed to the Asian markets. About 80% of their revenue is really in the Asia Pac region. The 2 main contributors are China and South Korea, which really have been the primary contributor to our growth over the last few quarters.

China, well, like South Korea, like many of the Asian markets continue to be perceived by us as really underpenetrated compared to Western market standards. So one key aspects of being able to take advantage of that underpenetration is having better direct control of the channel, the coverage, the ability to gather additional consumer insights and, of course, execute our own demand generation. So that is why having a more direct control of our commercial infrastructure in China was really a strategic imperative for us.

Excellent. Okay. So I'm going to turn quickly to Xifaxan, if that's okay, JP?

Yes. Of course.

So on Xifaxan, obviously, a very important driver of your sort of profitability, but also there's a follow-on formulation with a new indication, an important Phase III trial that's due. Can we maybe start there? What is your expectation? Do you have to hit both the trials on the SSD or even one trial could form the basis of an FDA approval?

So the 2 trials really are combined in terms of the results. And the readout will happen...

So the p-value is calculated off of 2 trials combined?

Yes. They will be combined. They will be considered as one.

Isn't that unusual?

Well, it's -- I think the discussion we had with the FDA is that we should consider the results of 2 together.

Okay. Okay. But I want to be clear. And I think Garen and I had an e-mail exchange on this as well. There was one trial that had a primary completion earlier, but that's not read out yet. Correct?

None of it -- none of the database have been formally locked. And so the data will be unblinded formally early next year.

So you're unblinding both at the same time?

Yes.

Okay.

Data unblinding next year. So this is not a December event. This is certainly a January...

Well, it's early next year. We haven't provided any update.

Got it. Okay. So then as it relates to...

Just to clarify. So we decide to lock the databases together and release the data from each study together, but we want both results in hand to better form the full picture of the program. So that's why I said basically the 2 programs were looked at...

Okay. So it's 2 trials separately, but the...

Yes, the data is looked at together.

The data will be out. Okay. Okay. Okay. That makes a lot more sense. Okay. That's very helpful. And then as it relates to sort of the endpoint, time to first hepatic encephalopathy, which could be medical intervention, hospitalization or ER or clinic or death. Is that considered very clinically meaningful by the commercial team?

Yes, yes. Not only for the clinical team, but the commercial team, as you know, those events are very expensive and to be able to prevent or delay those events is having a meaningful on the health care cost. So we believe that if we hit the primary endpoint, this will facilitate a really conservative conversation with the payers.

Right. JJ, and I'm sure you've seen various international jurisdictions. If the end point is on hospitalizations, could the criteria for hospitalization look different in the European side versus a U.S. site? And could that introduce variability? Or does that get balanced because you have placebo on both sides, too?

I know there's been -- there will be some follow-up conversations around what we mean by hospitalization with the FDA. So I think while we submit or prepare for the NDA submission, there will be a clarification around how we define those events and then interpret the data accordingly.

Got it. JP, any other questions?

Yes. In practice, when people -- for patient selection, when the doctor has to say, "Hey, you should be on this preventive." On the clinical trials, you're doing after an ascite event that is control. So is that the criteria like you already have ascites and then, therefore, you're going to be on this preventive or doctors see any mild HE and then they start the preventive?

No, it's a medical intervention, which, again, around hospitalization, ER visit and so on or death. That would be another variation of the endpoint that would be looked at between the control arm and the ones that are on the drug.

Fantastic. Okay. And I guess one last thing. From a physician perspective, is there a pent-up interest in using Xifaxan a new formulation earlier in line, treatment line?

The only indication that Xifaxan is approved for or actually 2 indications besides IBS-D is really once the patient has had an OHE event. So it's hard for us to comment on any other off-table use that could or would not happen in the marketplace. I think the focus of the commercial organization has been to really speak to the label.

Speak to the label. Okay. Got it. Excellent. Maybe let's transition then to the base business. Obviously, Xifaxan is an important driver of the base business. Can you speak to sort of the -- where we are from a genericization perspective? And what's the timing of that looking like?

Yes. So let me try to clarify a little bit the whole landscape and how we think about the various, I would say, arm of the decision tree. I'll start with the answer, which is that management believe that the base case is loss of exclusivity on the 1st of January 2028.

The linchpin of that whole assumption is Teva's ability to retain first filer status until that date, which is currently being challenged by Norwich. Norwich, as you know, has sued the FDA arguing that Teva basically surrendered their first filer status. That lawsuit was ruled in our favor in the First DC District Court on April 17 earlier this year and which appealed, which with all arguments to be heard on December 11. So that's the linchpin, which means that if the first filer status is maintained for Teva, the other litigation that might be pending on the second wave of ANDA really are subordinated to that decision. Should the appeals court decide in the favor of Norwich, the -- then we would need to seek clarification from the FDA as to whether Norwich still needs to comply through their second ANDA on the 30-month stay. That hasn't been clarified. We believe that it applies, but that's something would have to be clarified for Norwich to then decide what's their appropriate course of action. Norwich was not the first filer. Amneal was on the second wave of the so-called skinny ANDAs, and that litigation is pending.

And remind us again, what's the difference in filing between the first versus second wave?

So the first wave had both set of indications, OHE and IBS-D and the skinny ANDAs really have only IBS-D.

Got it. But the formulations are identical or so you think?

Yes, but there are a different set of patterns. It's important to note also that since the second wave started, we've asserted a different patents for IBS-D than the one that were ruled on during the first Norwich litigation. And as I said, that litigation...

So if Teva remains first to file on sort of broader Xifaxan, does that prevent Amneal from launching as a first of file on an [ HD ] as well?

Yes, it does.

Got it. JP, any questions on those...

Another aspect in this litigation is a new set of patents, right? The new patents you file, is that a factor in this defense?

As I said, I think it comes only into play when the first filer status has been removed from Teva. Then you have to go to the second wave of litigation associated with the skinny ANDAs, and that's where we're asserting different patents than the one asserted during the first wave of litigation.

So as I said, for investors, equity and lenders, really, it all comes down to first filer status. We had talked about this quite a bit in the past and really had encouraged investors to look at the arguments that were made by the FDA, by Teva and ourselves as part of the first trial with the D.C. District Court to make their own opinion about the strength of the FDA's position and implicitly of our position accordingly.

Got it. But on the hearing coming up, if the first wave and the second wave arguments are both done on the same day, I guess, how do the -- how does that -- what's the judge doing on the second wave?

They are -- that's my understanding is that they are linking the way of only the event, the first filer status is...

Oh, I see. So they'll rule on the first to file. If not, then they can look at the other stuff. And is there -- like from your perspective, is there anything Bausch could do to preserve Teva's first-to-file status for sure? Like, for example, could Bausch make Teva into an authorized generic to effectively lock in Teva's first to file?

Yes. We haven't commented on that. Obviously, for Teva to launch, they would either have to enter into an agreement with us on authorized generics or they would have to launch their own drug and they have an ANDA in process that's currently been reviewed by the FDA.

Okay. Okay. Maybe -- and there are certain topics we're going to steer clear from for this conversation. So I'm not going down those. But I guess, from your perspective, beyond Xifaxan, what are some of the key products you are very focused on and you're seeing early -- good early feedback on as well?

We have a very diversified set of products across our business. So I'll go franchise by franchise. So in Salix beyond Xiifaxans, we have Trulance and Relistor. Trulance is addressing IBS-C and Relistor is addressing opioid-induced constipation, or OIC. Those are strong performance we have continued to invest in and, obviously, not at the same size of Xifaxan, but just illustrates the strength of our GI franchise that we want to continue to leverage through our existing portfolio, but also through the pipeline we're developing.

In urology, Wellbutrin continues to perform very well for us, quite incredible. The resilience of that franchise despite the fact that the product lost exclusivity a long time ago, but it's an area -- it's a product that continues to be valued by our practitioners quite a bit.

And then in dermatology, we launched CABTREO in the U.S., which was held as the second most successful launch in the U.S. in 2024, continues to perform ahead of expectations. Obviously, much lower level of sales, but we believe that the product has got a lot of runway.

Internationally, we are continuing to drive our portfolio of mostly branded generics. We're launching a cardiometabolic franchise in Mexico that will be another pillar to our portfolio there and our strong presence, particularly in the private channel in Mexico.

And then Solta is an area of focus. We continue to increase the ability of our Thermage FLX franchise across many markets. And then there's a whole pipeline of innovation we aimed at continuing to be at the leading edge in that space. We are extremely proud of our performance over the last couple of years, particularly inroads in China and South Korea.

Excellent. So maybe in the last minute or so, JJ, from your perspective, what are your top 3 priorities over the next 12 months?

So as I said before, along the 3 strategic imperatives or pillars that I mentioned, for our core business, it continued to execute and maximize the value of our current portfolio that includes, obviously, Xifaxan. We pride ourselves on really what I would call ambidextrous management where we drive the top line, but we drive disproportionately the bottom line in our free cash flow generation. Free cash flow generation is really the lifeblood of this company, and it's an important areas of focus in the short term, but also in the medium term.

The second piece is continue to look at opportunities to beef up our pipeline. I think innovation has to be an area of focus, I think, as evidenced by the acquisition of Direct. And we continue to look at ways to leverage our commercial capabilities, particularly in GI, neurology and any other franchise where we believe there would be some synergies.

And then the capital structure is really important for us. We closed the $7.9 billion refinancing in April and maintaining a capital structure with a maturity profile that really is conducive to full optionality operationally and financially in the way we are thinking about maximizing value for shareholders and will continue to be an area of focus.

Outstanding. JP, did we miss anything on your end? Anything on the audience? All right. Fantastic. Well, good luck into the readouts. I think you really care. And good luck into the court trial as well. Thank you so much.

Thank you, Umer.

Thank you.

Thank you.

Greetings, and welcome to the Bausch Health Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Garen Sarafian, Vice President, Investor Relations. Garen, please go ahead.

Good afternoon, and welcome to Bausch Health's Third Quarter 2025 Earnings Conference Call. Participating in today's call are Thomas Appio, Chief Executive Officer of Bausch Health; and JJ Charhon, Chief Financial Officer.

Before we begin, I would like to remind you that our presentation today contains forward-looking information. We ask you to take a moment to read the forward-looking statements disclaimer at the beginning of the pages 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 our 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. Those documents, including the full cautionary statements are also available on Bausch Health's Investor Relations website.

We use non-GAAP financial measures to help investors understand our operating 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. You will find reconciliations of our historic non-GAAP measures in the appendix of the pages that accompany this presentation, which are available on Bausch Health's 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, Wednesday, October 29, will focus on Bausch Health excluding Bausch + Lomb. However, we will briefly comment on Bausch + Lomb's results announced this morning. We will refer to year-over-year comparisons with the same period last year, unless otherwise noted. With that, I would like to turn the call over to our CEO, Tom Appio. Tom?

Thank you, Garen, and welcome to everyone joining our earnings call today. In the third quarter, Bausch Health, excluding Bausch + Lomb, delivered our 10th consecutive quarter of revenue and adjusted EBITDA growth, consistent with our strong performance this year.

Our teams continue to execute with discipline and focus, driving operational and financial momentum across the business. I will start by providing some highlights from our third quarter results.

In the third quarter, Bausch Health, excluding Bausch + Lomb delivered year-over-year revenue growth of 7% on a reported basis and 5% on an organic basis. We achieved 7% adjusted EBITDA growth for Bausch Health, excluding Bausch + Lomb, which included an $81 million charge to acquire R&D. Excluding this charge, our adjusted EBITDA grew 18%. We reduced our debt by approximately $600 million using cash on hand and as a result of our strong performance in the first 9 months of the year, we are raising full year guidance for revenue, adjusted EBITDA and adjusted cash flow from operations for Bausch Health, excluding Bausch + Lomb.

I am pleased with how our teams have navigated through a dynamic macro backdrop embodying the culture of accountability, urgency that defines Bausch Health. Across our global platform, we saw traction in many areas. Consolidated Bausch Health as well as Bausch Health, excluding Bausch + Lomb, both achieved year-over-year revenue growth of 7% on a reported basis and 5% on an organic basis during the quarter, showcasing the consistent strong performance across the enterprise.

Focusing on Bausch Health, excluding Bausch + Lomb at a segment level, we saw excellent double-digit growth in our Solta and Salix businesses. Solta saw a 25% growth on a reported basis and 24% on an organic basis while Salix delivered 12% growth on a reported basis and 11% growth on an organic basis, 2 key growth areas that continue to deliver outstanding results.

At the product level, we continue to see healthy performance across our diverse portfolio with notable results in our hepatology, dermatology and neurology offerings. We saw triple-digit growth for Cabtreo and Ryaltris as well as double-digit growth for Xifaxan and Thermage.

Overall, we continue to demonstrate strong operational performance in the third quarter, and we are well positioned to execute on our strategic priorities as we close out this year and move forward to 2026. With that, I will pass it over to JJ to discuss our financial results in more detail before I conclude our call with BHC's progress against our key strategic priorities. JJ?

Thank you, Tom. Let's first turn to our consolidated performance, starting with our non-GAAP financial results for the third quarter, which you will find starting on Page 9.

Revenue was $2.681 billion, up 7% on a reported basis and 5% on an organic basis compared to the same period a year ago. Adjusted gross margin was 72.7%, 40 basis points lower year-over-year. Adjusted operating expenses were $1.024 billion, an increase of $41 million compared to the same period last year. Adjusted EBITDA was $986 million, an increase of $77 million or 8% year-over-year. Finally, adjusted operating cash flow was $508 million.

Moving now to the performance of Bausch Health, excluding Bausch + Lomb for the third quarter starting on Page 11. The third quarter marked another period of strong performance. As Tom mentioned, Bausch Health, excluding Bausch + Lomb, achieved its 10th quarter of consecutive year-over-year revenue and adjusted EBITDA growth. Revenue was $1.4 billion, up 7% on a reported basis and 5% on an organic basis when compared to the third quarter of 2024.

Adjusted EBITDA was $773 million, up 7% versus the prior year and included a charge of in-process R&D of $81 million related to our acquisition of DURECT. Excluding that, our adjusted EBITDA increased operationally 18% year-over-year, which was outstanding. Finally, adjusted operating cash flow of $347 million was only 1% up versus the third quarter of 2024 due to timing in working capital.

Moving now to our third quarter performance by segment, starting with Salix on Page 12. Revenues were $716 million, an increase of $74 million, up 12% on a reported basis and 11% on an organic basis compared to the same period last year. Salix strong performance in Q3 was primarily driven by 2 factors. First, our continued Xifaxan volume growth. And second, some onetime net pricing favorability associated with our Medicaid and 340B channel exits.

More specifically, Xifaxan revenue grew 16% in the third quarter, with volume up 9%. The AI-driven customer insights engine has been a significant contributor to the overall and new patient script growth, which were, respectively, 9% and 11%, a remarkable accomplishment for a drug, which has been on the market for its OHE indication for the last 15 years.

Separately, Trulance volume grew 5% in Q3, which was more than offset by unfavorable net pricing headwinds in the quarter. Finally, Relistor continues to face a challenging payer coverage environment, yet we remain optimistic that the brand will soon return to growth.

Now moving to the International segment. Revenues were $286 million, a decrease of 2% on a reported basis and 4% on an organic basis compared to the third quarter of last year. Performance by geography was mixed. EMEA led the segment with a 12% increase on a reported basis. Canada and Lat Am, on the other hand, contracted respectively 8% and 17%. In Canada, the performance of our promoted portfolio grew 21%, which was more than offset by the reduction of our LOE portfolio, which benefited in Q3 of 2024 from the nonrecurrence of Wellbutrin orders due to generic stock outs. Lat Am's performance, on the other hand, was primarily due to continued market softness in Mexico.

Now moving to Page 14 for a review of our Solta Medical segments. Revenues were $140 million, an increase of 25% on a reported basis and 24% on an organic basis compared to the same period last year. Solta's performance was primarily driven by the Asia Pacific region, which continues to contribute approximately 80% of global Solta revenue.

Within the APAC region, South Korea, again outperformed all other markets with an impressive 96% growth year-over-year. China, on the other hand, grew only 3% in Q3. This was primarily attributable to aesthetics consumers adopting a cautious behavior given the uncertainty surrounding the macroeconomic environment. Outside of Asia, on another positive note, we are encouraged by our double-digit growth in the U.S., EMEA and Canada following our commercial investments in these geographies.

Turning now to our diversified segments, which you will find on Page 15. Revenues were $258 million, a decrease of 4% on a reported basis and 6% on an organic basis compared to the same period a year ago. The diversified segment's performance was largely driven by our neurology business. This quarter, year-over-year growth in neurology was impacted by the expected nonrecurrence of prior year orders from temporary generic supplier shortages for Cardizem in Q3 of last year. Separately, the performance of our dermatology segment was driven by Cabtreo and Jublia, which grew revenue, respectively, 186% and 11%.

Finally, Bausch + Lomb revenues were $1.3 billion, up 7% on a reported basis and 6% on an organic basis compared to the same period last year. Before wrapping up with our financial priorities, let's review our full year guidance, which you will find on Page 19.

Our outstanding performance for the first 9 months with revenue and adjusted EBITDA, excluding acquired IP R&D growing respectively, 6% and 14% and has put us in a position where we will raise guidance across all our 3 metrics: revenue, adjusted EBITDA and adjusted operating cash flow.

The new guidance for the full year is now as follows: Revenue is now expected to be between $5 billion and $5.1 billion. The midpoint of that range has been increased by $25 million and translate to a 4% increase year-over-year. Our adjusted EBITDA outlook is now expected to be between $2.7 billion and $2.75 billion, excluding the impact of a core IP R&D. The midpoint of that range is now increased by $50 million and represents a 7% increase versus 2024. Adjusted operating cash flow is now expected to be between $975 million and $1.025 billion bringing up the midpoint of that range by $150 million.

Before I turn it over to Tom for his wrap up, let me review our financial priorities, which remain unchanged. First, increasing the value of Bausch Health operational assets, whether it is our acquisition of DURECT or the operational performance during the first months of the year, continuing to execute our innovation and profitable growth agenda remains top of mind for all leaders of Bausch Health.

Second, evaluating all options for unlocking value for all stakeholders. The $7.9 billion refinancing transaction we closed earlier this year has provided us with expanded optionalities for maximizing the value of our Bausch Health and Bausch + Lomb assets. We're now assessing all initiatives for driving shareholder value creation.

And third, continuing to optimize our capital structure. As we indicated earlier, we retired over $600 million in senior unsecured notes and have eliminated in October our high-cost accounts receivables facility. Moving forward, we will continue to look at all options to improve our maturity profile, provided, of course, it is in the best long-term interest of the company. In short, we are proud of the progress we have made in the last 9 months and look forward to close out 2025 on a strong note, as evidenced by our improved full year guidance. I will now hand it back to Tom.

Thank you, JJ. We made progress in the third quarter on multiple fronts in support of our 5 strategic priorities: people, growth, efficiency, innovation and unlocking value. These remain central to our culture, lay the foundation for our strategy and guide our vision for the future. Additionally, we are growing the business with the discipline required to achieve our financial targets, taking all capital allocation priorities into account, including deleveraging.

With that in mind, I'd like to take a few minutes to highlight the progress we are seeing against these priorities. Xifaxan growth continued to accelerate through 2025. In Q3, the growth was broad-based, driven by both volume and price and across all indications. Our largest indication for Xifaxan, overt hepatic encephalopathy, OHA had an 8.2% increase in total prescription volume in Q3 over prior years. IBS-D increased 15.4% over prior year. This growth was driven by innovation in marketing and operational excellence that is core within our U.S. pharmaceutical commercial engine.

Starting with marketing. In Q3, we doubled our media investment in high-return addressable and connected TV launching a new I Wish I Knew campaign for OHA. Providing important educational information directly to patients and caregivers on the impact that cirrhosis can have on the brain, which is an important driver of patient action often resulting in prescription given that Xifaxan is the only product approved to reduce the recurrence of OHA and prevent rehospitalization.

Direct-to-consumer advertising combined with continuous improvement and enhanced capabilities in our AI customer insight engine enabled us to directly target and activate patients, caregivers and health care professionals in Q3. Our laser focus on driving new patient starts resulted in 71,000 new patients being started on Xifaxan in Q3, an increase of 14% in Q3 over the prior year. Year-to-date, 196,000 new patients have been prescribed Xifaxan. This quarter marks the seventh consecutive quarter of top line organic revenue growth in our Salix business, and we will continue to maximize its growth.

Turning to our dermatology business. In January 2024, we launched Cabtreo, the first and only triple combination in 1 topical application for acne. The launch has progressed well. Earlier this year, Cabtreo became the #1 prescribed topical branded acne product in new brand patient starts. 10,000 HCPs have prescribed Cabtreo from launch to date with 105,000 new patients prescribed Cabtreo year-to-date, up 69% over the prior year.

Turning to our aesthetics business. Solta, we have made excellent progress driving new opportunities for growth in this business. Solta is a global leader in medical aesthetics that operates a portfolio of trusted brands with a leading presence in South Korea and China. While each market is unique, we see significant white space across the region and expect to further strengthen our reach across our footprint.

During the third quarter, Solta delivered exceptional results with another quarter of double-digit growth in our leading aesthetics portfolio. Revenue grew by 25% on a reported basis across multiple regions, led by South Korea, which nearly doubled year-over-year. This growth was supported by a robust domestic demand complemented by high levels of medical aesthetics related tourism to the region in recent years.

Beyond the strength in the Asia Pacific region, we achieved double-digit growth in the U.S. and European markets. We remain optimistic about Solta's premium positioning as a driver of future growth and are encouraged by another quarter of solid growth outside the Asia Pacific region.

Building on this momentum, earlier this year, we received medical device licensing clearance for Thermage in Canada as the fourth generation of radio frequency technology. The Thermage platform has been relied upon for over 20 years by providers and patients. We also reached a key milestone. Our Thermage nonsurgical treatment technology has now been used to perform more than 5 million skin tightening and smoothing treatments worldwide.

Additionally, in Korea, Thermage has now surpassed the 1,000 unit installed base milestone, which is a significant achievement. These successes underscore our belief in Solta's growth potential and may position us to capitalize on the opportunities ahead.

We launched Fraxel FTX this past April, beginning the rollout of our leading skin rejuvenation treatment for dermatologists, plastic surgeons and other licensed aesthetics professionals across the United States with global expansion planned in the pipeline. While it is still early days, we are pleased with Fraxel momentum in the U.S. This expands our Solta portfolio and presence in key growth geographies and that we anticipate will contribute to the strength and breadth of our aesthetics business.

In summary, Solta had a terrific quarter, and we continue to invest in our clinical programs and R&D innovation to deliver long-term growth. Underscoring our commitment to innovation, we closed our acquisition of DURECT Corporation on September 11, 2025, and the addition of DURECT complements our existing portfolio enhances our R&D pipeline and is consistent with Bausch's efforts to focus on areas of strength for innovation to drive future growth. Since then, we have been working seamlessly integrating DURECT into the Bausch team.

Our portfolio now includes DURECT lead asset larsucosterol, a novel epigenetic modulator with FDA breakthrough therapy designation for treatment of alcohol-associated hepatitis or AH in Bausch Health hepatology pipeline. Currently, there are no approved therapies indicated to treat AH and patients must rely on supportive care such as corticosteroids which are often inadequate for long-term treatment and result in about 30% mortality within 90 days of hospitalization.

Our registrational Phase III program is currently planned to evaluate the safety and efficacy of larsucosterol for the treatment of patients with severe AH. It is important to recognize that this is a global opportunity, and we are initially pursuing the U.S. market to replicate the region's success in Phase II.

Our team is working diligently to finalize the Phase III protocol with a goal to initiate the study by early 2026. We are excited about the addition of larsucaosterol to our R&D portfolio and look forward to updating you through the development and commercialization process.

DURECT is an important addition to our hepatology portfolio that supports our innovation and growth priorities while also leveraging Bausch Health's existing expertise in development and commercialization of assets.

Now turning to RED-C which we believe could be a next-generation treatment to delay and prevent the occurrence of overt hepatic encephalopathy. We remain on track with our 2 global Phase III studies, and we expect to see initial data readouts by early 2026. Our hope is that RED-C may offer this patient population a therapy to slow disease progression and provide a meaningful clinical benefit addressing a significant unmet need and bringing a novel therapy to cirrhotic patients on a global scale.

Bausch has a history treating liver disease and providing patients with innovative treatment solutions, which we hope to continue and expand upon with DURECT and RED-C.

In summary, we had another standout quarter. I want to thank our teams around the world for their dedication and hard work in driving these results. Our focus on disciplined execution against our strategic priorities and operational excellence will enable us to continue to deliver tangible results and long-term value for shareholders.

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

[Operator Instructions]. First question today is coming from Leszek Sulewski from Truist Securities.

First one, it appears the revenue growth for Xifaxan is outpacing the script growth. So first, can you touch on the disconnect there? Is it backed by a greater focus on commercial plans and direct-to-consumer initiatives?

And then second, can you talk to which channel is mostly driving the overall script growth? Is it the primary care side? And how durable is this growth profile as we kind of look out for the end of the life cycle management for the asset? And then I have a follow-up.

Les, this is JJ. I'm going to take up, first of all, your pricing question. As I indicated in my prepared remarks, Xifaxan benefit from a onetime benefit associated with the gross to net accrual that's typically whole on the balance sheet based on the inventory that is held by our distributors given our exit of 340B and Medicaid that gross to net weighted average, if you want, has changed.

And so therefore, there was a benefit that really increase or inflated, if you want, what is referred to as pricing. Typically, pricing for Xifaxan year-over-year is in the mid-single digits. So that's what you should assume year-over-year.

On the volume side, we have, I think, a fairly balanced growth across all channels. As you can see, the new patient starts have been -- continue to be very strong, which we're very happy about. And the AI-driven engine that allows us to optimize our call points really continues to drive benefits as we continue to develop scripts growth across the board.

Yes. Les, let me just add to that in terms of when you take a look from the channel perspective. So the TRx -- total TRx growth was 9% in the quarter. Non-retail extended units was 20%. So when we take a look at it from a total extended unit perspective, it's 11%. On the new to brand, which is the one we're really looking at a lot is 14%.

So there's a lot of new to brand on Xifaxan in the third quarter and which has been historically for this year, the focus is to drive new to brand, and that's where clearly, our investments in DTC, along with the artificial intelligence engine that we're having is focusing there. You had a follow-up?

Yes. That is helpful. Okay. So as we're getting ready for CMS to disclose the final pricing from IRA price negotiations. Perhaps maybe give us a little bit of a sense of where Xifaxan land and the script trends for tied to Medicare Part D. And any sort of commentary that you could provide, how receptive has CMS been to your challenges, specifically given OHEs and orphan indication and the LOE component to the assets?

Yes, Les. So what I'll say is that the negotiations, as I've said on previous calls were ongoing. The discussions have been fruitful and good exchange of information between the company and CMS. As I said on previous calls, we did not think that we should have been on the CMS list, but we were and the team, our market access team has worked really hard working with CMS. So negotiations have concluded. We are expecting that CMS will publish their agreed pricing on November 30, 2025. In terms of the overall impact, I'll pass that to JJ.

So as you -- as we mentioned during our previous call, the CMS impact was combined with a number of mitigation strategy across all of our portfolio to reduce the impact that this would have on our financials. And while the impact obviously on Xifaxan is significant, 30% of our volume goes through Medicare Part D. The only indication I would provide at this stage is we still are assessing the final impact on our business moving forward is that when you look at our business across all segments, including the CMS impact, it's probably fair to assume that the average EBITDA over the next 2 years will not be materially different than what we're providing in the outlook and the revised guidance.

And I just want to clarify what I mean by that. If you take EBITDA in '26, '27, you take the average of those 2 numbers. You shouldn't have a materially different number than what we have for the outlook of '25.

Your next question today is coming from Umer Raffat from Evercore ISI.

Congrats on the quarter. This is [ JP ] for Umer Raffat. First question, on MFN, are you guys planning or negotiating anything regarding manufacturing in the U.S.? What's your exposure there?

Yes, I can take that question. As you know, we have our footprint around the world when it comes to manufacturing is regional based. So where we produce our products is where we sell in the U.S., of course, Xifaxan comes out of Canada. Right now, the way our manufacturing footprint plays out. There is no plan at this time. However, we are open to continuing to take a look at it as new products come into the portfolio.

Let me just add a couple of elements to that for Xifaxan specifically, it's a single active ingredient product. And so therefore, country of origin is considered to be Italy. For all the other products is typically in U.S. pharma coming mostly from Canada. Both EU trade agreements currently and obviously, the EUMCA excludes former products from those tariffs. So at this point in time, there is no material tariff that are imposed on our fund flow or the flow of our products. Obviously, that could change in the future, but that's where we are right now.

Operator, any more questions?

The next question is coming from Jason Gerberry from Bank of America.

This is Chi on for Jason. I have a couple. Maybe the first one is on the revised guidance. So you saw strength across multiple pharma sets this quarter, but yet you're only taking up the lower bound of the top line guidance by 1% and 50 bps at the midpoint. Can you just talk about that?

Are you seeing onetimers in 3Q that you want to expect to carry forward in 4Q. I know you've just talked about the gross to net dynamic with Xifaxan. But are you seeing onetime elsewhere? What about Jublia and some of the other legacy brands in neuro and dermatology? And I have a couple of follow-ups after that.

Yes. So just to reiterate, we got some onetimers in Q3 in the form of an adjustment of our gross-to-net rebates associated with our inventory in the channel. And we had anticipated, I would say, a good proportion of that. And the fourth quarter is roughly in line with our prior expectations.

I think on the size of our business is not a material change, but still reflects, I think, the positive trend that we're seeing across the portfolio. As you can see, our increase in guidance is greater for EBITDA and cash flow, which reflects really a change in assumption is how we're thinking about our free cash flow conversion.

And my second question is on the P&L. The SG&A spend this quarter is below the [indiscernible] fun rate for the past 5 quarters. Is there any seasonality with the SG&A spend this quarter? How should we think about the SG&A run rate going forward? Should we look at 2Q balance or the 3Q balance as a better indicator for future run rate?

Yes. 3Q is unusually low. There's been some changes to accruals that we process in the quarter that are nonrecurring. So I would certainly look at the first couple of quarters and a better indicator of our SG&A spending.

And then just another one for me on the pipeline. You mentioned you're going to have Phase III results for RED-C early next year. Are you planning a concurrent readout for both Phase II and early 2026?

And I think I heard the commentary framing that the data will be early initial. I just want to confirm this is the final Phase III top line that will have the final results in early 2026, and once you have the results, do you expect you need more data before you can go to regulate this potential filing should the study be positive?

Yes, Chi, I can answer those for you. So as you know, we have 2 global Phase III studies. They're fully enrolled. We decided to have the readout of both trials together. As these were -- these 2 global trials as we look at the patient populations that are in each and the geographies we thought it best to combine them and read it out in the first quarter. And clearly, this will be our final readout of this very important program.

Do you have any expectation or how would you frame what would be a successful outcome of the trial? Is it just needing the primary endpoint? Or is there more to it?

When I look at RED-C, it's a prevention trial, as I've said on previous calls, there's a lot of important information there. The primary endpoints, there's also very important secondary endpoints as well. So too early to comment there. But as I've said in the past, this program and the amount of patients or U.S. adults with cirrhosis who've never had OHA is large. So the opportunity for us is -- could be very large. And as we wait for the data, we'll see what it looks like.

Next question is coming from Dennis Ding from Jefferies.

Congrats on the quarter. The I follow up with IRA that what would you think about the dynamics for the commercial spillover, and by the way, I'm Liwen Wang for Dennis Ding.

Just could you be more specific of what your -- what the question is?

The IRA. The Xifaxan, like the commercial spillover.

Yes. The only thing I would say, Denise (sic) [ Liwen ] is that this impact really -- or this renegotiation really impacts only 2027. It really doesn't change the commercial dynamics per se just changes the discount that will be provided to the volume of drug going to CMS for the Medicare Part D program.

Got you. And can I follow up with what do you think about the erosion curve with the generic for 2028 plus?

Go ahead. What we have guided in the past is that you should assume a typical erosion curve for multiple generic entry in 2028. So nothing unusual, I would expect. But obviously, it's all speculate it at this stage.

Next question today is coming from Mike Nedelcovych from TD Cowen.

I have a couple actually. The first one just a couple of points of clarification. In response to an earlier question, did I hear correctly that you suggested 2026 and 2027 EBITDA is expected to be flattish versus 2025?

No. What I said is that if you combine '26 and '27 together, the average of those 2 years would be similar to 2025.

Okay. Okay. And that's across the business. That's not specific to the IRA impact?

Correct.

Got it. Okay. And then my next question is on Xifaxan and it's a follow-on. Do you know what -- or maybe you've told this before, but roughly what proportion of prescribers of Xifaxan that use it to treat hepatic encephalopathy or hepatologists versus gastroenterologists? And how do you think that split might change for rifaximin SSD if RED-C is successful and that product is launched for AG prevention?

Yes, Mike, I don't have the specific split. We look at in terms of gastroenterology together with hepatology. That's why we always say the franchise is gastroenterology. So I don't -- I can get you that after the call of what the actual split is. But when we take a look just -- in terms of the opportunity between -- of course, this is a different product in terms of the program we're running with RED-C.

We call it SSD. If you just take a look at just the patient population and how it splits out, it's like 650,000 patients in the U.S. adults with cirrhosis with OHA and 1.9 million with cirrhosis who have never had OHA. So that's how it kind of splits out as we look at the opportunity that is in front of us.

Got it. And if I may, one more question on RED-C. When we get the initial top line data, what is the likelihood that we also see the all-cause mortality data? Would that be mature as well? Or might we at least expect an initial data cut?

Yes. When we look at the initial data, as I said on the previous question, the primary endpoint and then there's a very important secondary endpoints. So we'll be looking once we get the data, providing it in totality, both from primary and secondary.

Our next question today is coming from Doug Miehm from RBC Capital Markets.

Yes. Just with respect to those accruals, would you be able to expand on those that impacted this quarter? I know you indicated that we should use Q1 and Q2 is guideline for SG&A. But how did they specifically arise?

It's just estimates of liability that we were thinking of incurring associated to prior fiscal that we had to adjust in the third quarter. They kind of roughly offset with the IP R&D that were recorded, obviously, as a result of the DURECT acquisition. So that's why I think Q1 and Q2 is a little bit cleaner from a run rate perspective.

Okay. And then with respect to capital allocation, as you think about the next couple of years, you've given helpful guidance with respect to, I believe, that the EBITDA, '26, '27, the average versus this year, et cetera, et cetera. But can you speak to cash flow in those 2 years as well and how that cash flow is going to be apportioned or used to pay down debt? And I'll leave it there.

Yes, we'll provide some more specific guidance around cash flow associated with '26 when we report our fourth quarter results. We were trying to provide a little bit some directional view on how 2026 and 2027 taken together really is going to behave as a result of CMS and other dynamics in our portfolio.

Our capital allocation remains the same, which is, first and foremost, to service our debt, including deleveraging the business. Second is reinvest in the business whenever -- obviously, it makes sense in light of our strategy. And then third and last, only if there is some excess potentially return capital to shareholders. But we obviously -- the focus is on #1 and #2.

Next question is coming from Michael Freeman from Raymond James.

JJ, I wonder if you could guess through the thought process that led to Bausch Health's decision to see participation in the 340B program in the Medicaid drug remake program.

Yes, Mike, I can take that question. So as we looked at it, we're continually evaluating ways to optimize our sales channel in all the markets we operate in, including the U.S. So when we did the evaluation, we determined that it was in the company's and the patient's best interest to exit Medicaid and the 340B channel for all products marketed in the U.S. as of October 1.

What I would say is that as we looked at it, made the decision, the key was to enhance our patient assistance program to really make sure that the care was there and the patient assistance program was robust to be able to offer eligible Medicaid patients access to a broad range of Bausch Health medicines at no cost, consistent with the program terms.

The patient benefit when we look at it compared to Medicaid, it's an enhanced PAP program with 0 out-of-pocket costs. And then the patient also is able to get 90 days treatment where if you're in Medicaid, it would only be 30 days for each script. So we -- as we looked at it, we thought we could really have an opportunity to enhance the patient experience and also have a good situation for the company.

And just following on that. I wonder if you describe the patient benefits. Well, I wonder if you could describe benefits of the company and any benefits beyond that sort of onetime we saw with accruals.

As I said, we're always looking at different sales channels and how to optimize them. And there are benefits as we've looked at. I'm not going to get into the specifics. It's early days since October 1 and how each of these benefits flow through and what it will look like.

All right. I wonder maybe a question for JJ now. I wonder if you can give us the lay of the land on your debt refinancing programs and further steps you envision taking in the future 2D lever?

Well, the -- we've repeatedly said that there are really 2 main sources for deleveraging the company. The first one is free cash flow generated by operations that will continue certainly at a fairly similar level than what we've incurred for the next couple of years. until we lose exclusivity on Xifaxan. And that needs to be supplemented by one of 3 sources, either new equity raise, which obviously would be very dilutive at our current share price.

So very unlikely that we would do that would be certainly a last resort option. The second possibility would be to capture some of that discount. As you know, our debt has traded back up and therefore, the discount that is left is fairly minimal. So the last source of extra funding would be proceeds from asset sales, either at BHC or B+L. The B+L equity stake is the more logical candidate given that it's the only one that is not associated with some EBITDA generation for BHC. So that becomes, I would say, the most probable outcome for completing the leveraging or the deleveraging solve for us between now and sometime in the future.

We reached of our question-and-answer session and our earnings call. I'd like to turn the floor over back to our CEO, Tom Appio, for closing remarks.

Okay. Well, thank you all for joining the call today. and for your continued interest and support of the company. We remain committed to executing against our strategic priorities and focus on unlocking value. We appreciate your ongoing engagement and look forward to sharing further updates with you on the progress to close the year. Thank you, and have a good evening.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Welcome to the Bausch Health First Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to our host, Garen Sarafian, Investor Relations at Bausch. You may begin.

Good afternoon, and welcome to Bausch Health's Second Quarter 2025 Earnings Conference Call. Participating in today's call are Thomas Appio, Chief Executive Officer of Bausch Health; and JJ Charhon, Chief Financial Officer.

Before we begin, I would like to remind you that our presentation today contains forward-looking information. We ask you to take a moment to read the forward-looking statements disclaimer at the beginning of the pages 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 our 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 operating 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. You will find reconciliations of our historic non-GAAP measures in the appendix of the pages that accompany this presentation, which are available on Bausch Health's 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, Wednesday, July 30, will focus on Bausch Health, excluding Bausch + Lomb. However, we will briefly comment on Bausch + Lomb's results announced this morning. We will refer to year-over-year comparisons with the same period last year, unless otherwise noted.

With that, I would like to turn the call over to our CEO, Tom Appio. Tom?

Thank you, Garen, and welcome to everyone joining our earnings call today. In the second quarter, Bausch Health, excluding Bausch + Lomb, continued to perform strongly, delivering our ninth consecutive quarter of revenue and adjusted EBITDA growth. I am proud of the great work by our team, especially as we navigate a more uncertain macro environment. Let me take a moment to share a few highlights from the quarter.

We delivered year-over-year revenue growth of 5% on both a reported and organic basis, leading to 10% adjusted EBITDA growth for Bausch Health, excluding Bausch + Lomb, driven by double-digit revenue growth in Salix, Solta, EMEA and Canada. We continued to resolve legacy matters in the quarter. We announced after the quarter that we entered into an agreement to acquire DURECT Corporation, which, if all closing conditions are satisfied and the acquisition closes, will enable Bausch Health to use its hepatology expertise to develop DURECT's main treatment for alcohol hepatitis. Therefore, we are reaffirming our full year 2025 guidance for revenue, adjusted EBITDA and adjusted cash flow from operations.

The second quarter was another strong quarter of performance where we made progress against our strategic priorities. First is unlocking value. As a reminder, we completed a $7.9 billion debt refinancing on April 8, which extends our maturities with the options for additional proceeds in the future. We remain active in our efforts to improve our capital structure and are currently evaluating opportunities to take advantage of strong market conditions to address selected upcoming maturities. Just this past week, we announced actions to reduce debt maturing in 2026 and pay down our accounts receivable facility to reduce high interest debt and improve our capital structure.

Unlocking value is a key focus, and we are evaluating every option to maximize returns for our stakeholders.

Next is growth. The second quarter was an excellent quarter of growth for Bausch Health. We achieved 5% top line revenue growth, then leveraged it to 10% bottom line adjusted EBITDA growth with 9 consecutive quarters of year-over-year top line and adjusted EBITDA growth for Bausch Health, excluding Bausch + Lomb. The diversity of our core businesses across segments and geographies demonstrate both our resilience and momentum. Revenue for our Salix and Solta segments as well as EMEA and Canada regions within International grew double digit. Segment profits for Solta and Salix also grew double digits.

The second quarter was our sixth consecutive quarter of top line organic growth in our Salix business, where our segment profit increased 21%. Salix grew by 12% on both a reported and organic basis versus the prior year period, driven by Xifaxan's 10% growth in the quarter. Growth came across both indications, overt hepatic encephalopathy, OHE and IBS-D and multiple channel segments, retail and non-retail. 67,000 new patient starts were initiated in the second quarter, up 8% versus the prior year. Growth was driven by increased OHE media investment as well as sales force focusing on driving new patient starts as we continue to innovate using our customer insight engine.

Given the incredibly high success rate and adherence that we have seen with this AI-based platform, we are beginning to leverage these capabilities for Relistor to further support sales initiatives. Solta's strong double-digit growth driven by South Korea repeated this quarter. And while growth in China temporarily softened due to tariff-related headwinds in April and May, we remain confident in our ability to grow in these core markets. We also had another quarter of growth in Canada, the United States and EMEA. In June 2025, we started shipments of our Next Generation Fraxel after U.S. launch in this past April. These are positive indicators that point to Solta's growth opportunities beyond the Asia Pacific region, and we continue to invest behind additional growth opportunities in this business.

Within the International segment, our EMEA business sustained its ongoing trend of organic growth with 6% in the second quarter, marking the region's 10th consecutive quarter of organic growth. It is a broad footprint and diversified portfolio with no single drug accounting for double-digit share of net revenue, minimizing the concentration risk and reinforcing the appeal of this business. In Canada, our team is executing against our plans for each promoted product offering alongside the many growth initiatives we have in place across the portfolio, yielding solid results. CABTREO's launch in Canada has been successful as we continue to broaden patient access with the goal to position CABTREO as a leading acne treatment in Canada. Ryaltris, another promoted product, has gained steady traction since its 2023 launch in the Canadian market.

Now turning to innovation. We continue to focus on advancing opportunities for pipeline expansion. We are making progress internally as we assess partnerships and licensing opportunities that can offer a reasonable probability of success on multiple fronts. In EMEA, we announced a strategic partnership this June with YUN NV, a recognized leader in microbiome skin care solution. This collaboration has the potential to reshape the skin care landscape, starting with the expected launch of YUN's probiotic-based products for acne-prone skin to the Polish market later this year.

Leveraging our broad footprint and seasoned sales force, this partnership will focus on bringing new probiotherapy solutions utilizing good bacteria for a variety of indications, including acne, fungus, atopic, eczema and baby skin care. These microbiome skin care solutions use live probiotics to help restore the skin's natural microbiome balance offering a modern, science-driven approach to managing acne-prone skin.

As we shared last quarter, we launched our cardiometabolic brands in Latin America in June, which, in addition to our current portfolio line now includes 2 new brands. As a reminder, the cardiometabolic market is one of the fastest-growing therapy areas in the Mexican pharmaceutical market, and we are excited to be able to participate in such a high-growth area.

Now turning to our internal product pipeline. We remain on track with our 2 global Phase III studies for RED-C, our amorphous solid soluble dispersion, SSD rifaximin complex, and we expect to see initial data readouts by early 2026. As a reminder, this program is centered on a solid soluble dispersion rifaximin complex in unique, patented non-crystalline water-soluble form that enables delivery throughout the entire gastrointestinal tract. Amorphous SSD rifaximin is being studied in patients with cirrhosis prior to their first decompensation event from any form of liver disease.

This product, if approved, has the potential to offer this patient population a therapy to slow disease progression and provide a meaningful clinical benefit. We look forward to sharing further updates in early 2026. A successful outcome may position us to address a significant unmet need in hepatology and to bring a novel therapy to cirrhotic patients on a global scale.

I want to touch on our recently announced definitive agreement to acquire DURECT Corporation. The agreement remains subject to the satisfaction of certain conditions, including a majority of the outstanding shares of DURECT being tendered in the tender offer that we intend to commence shortly. Through this proposed acquisition, we intend to advance the development and commercialization of DURECT's lead pipeline candidate, larsucosterol, an FDA breakthrough therapy designation asset targeting alcohol hepatitis, AH. There is currently no Food and Drug Administration or European Medicine Agency approval treatment for AH and novel therapeutic strategies are needed to improve patient survival. Assuming all conditions are met, including the successful completion of the tender offer, we anticipate closing the deal in the third quarter of 2025. As such, we are limited in what we can share at this time. I look forward to sharing more information regarding this transaction following the closing.

I want to thank our business development team who has worked incredibly hard on this transaction. We are committed to intensifying our focus and rigor behind R&D and business development. This announcement demonstrates our commitment to hepatology and finding new ways to address unmet medical needs.

Lastly, turning to legal matters. Year-to-date, we have settled 9 more opt-out cases. Of the 37 cases, there are now 11 remaining. We continue to vigorously defend the remaining claims. Regarding the Granite Trust matter, I am very pleased to announce that near the end of the second quarter, we received communication from the Internal Revenue Service that the case has officially concluded. Consistent with the view we have communicated on prior calls, there will not be any negative cash flow as a result.

In summary, it was another strong quarter. I remain confident in our ability to execute on our strategic priorities focused on delivering tangible results. We strive for operational excellence throughout our company, which will maximize long-term shareholder value. With that, I will pass it over to JJ to discuss the financial results in more detail. JJ?

Thank you, Tom. Let's first review quickly our consolidated performance in more detail, starting with our non-GAAP financial results for the second quarter, which you will find starting on Page 13. Revenue was $2.53 billion, up 5% on a reported basis and 4% on an organic basis compared to the same period a year ago. Adjusted gross margin was 70.6%, 30 basis points lower year-over-year. Adjusted operating expenses were $1.16 billion, an increase of $61 million compared to the same period last year. Adjusted EBITDA was $871 million, an increase of $45 million or 5% year-over-year. Finally, adjusted operating cash flow was $442 million.

Moving now to the performance of Bausch Health, excluding Bausch + Lomb for the second quarter, starting on Page 15. Q2 was undoubtedly another quarter of strong performance. Nine quarters in a row of growth for revenue and adjusted EBITDA is outstanding, particularly when acknowledging that this was realized on an organic basis without any material business development or acquisition in the last 3 years. Revenue was $1.252 billion, up 5% when compared to the second quarter of 2024. Adjusted EBITDA was $676 million, up 10%, demonstrating the continued commitment to driving operating leverage through positive segment mix and tight cost management.

Adjusted operating cash flow of $355 million was up 34% versus the second quarter of 2024 due to our double-digit adjusted EBITDA growth, combined with the favorable timing of cash interest payments. On cash taxes, as we stated repeatedly during our prior quarter earnings calls, the conclusion of the Granite Trust matter would not be associated with any negative outflow in the future. I am happy to confirm that there were none in the first half of 2025.

Moving now to our second quarter performance by segment, starting with Salix on Page 16. Salix revenues were $627 million, an increase of $69 million or 12% compared to the same period last year. Our strong performance was primarily due to favorable net pricing across our 3 major brands, namely Xifaxan, Relistor and Trulance. Separately, Xifaxan had another strong volume performance with retail scripts up 6% and new scripts up 7%. Extended units also grew 7% and includes non-retail settings such as hospitals and outpatient clinics, which grew double digits.

Revenues for the International segments were $278 million, an increase of 1% compared to the second quarter of last year. The revenue in the second quarter was driven by double-digit growth in Canada and EMEA, partially offset by softness in LATAM. Canada top line growth was once again driven by our promoted products portfolio, which grew 12%. EMEA achieved an impressive milestone of 10 consecutive quarters of organic growth across the region, led by its top 3 markets: Poland, Serbia and Russia. Finally, LATAM's softer performance was a result of the ongoing macroeconomic challenges in the region as well as some partial channel destocking.

Now moving to Page 18 for a review of our Solta Medical segment. Revenues were $128 million, an increase of 25% on a reported basis and 26% on an organic basis compared to the same period last year. Solta's performance continues to be fueled primarily by South Korea and to a lesser extent, this quarter, China. South Korea once again outperformed expectations, resulting in 115% organic revenue growth year-over-year. China grew more moderately at 4% this quarter, mostly due to channel inventory reduction. The timing of our shipments from our plant in Bothell, Washington to China was managed to minimize the impact of tariffs on U.S. imports in April and May. Finally, special mention goes to our double-digit growth of Solta in the U.S. and Canada following our increased promotional efforts in these 2 regions.

Turn now our focus to our diversified segment, which you will find on Page 19. Revenues were $219 million, a decrease of 13% compared to the same period a year ago. The decrease of our revenue was driven by both the neurology and dermatology businesses, which had benefit in 2024 from onetime pricing adjustments and unexpected demand for Cardizem from the Department of Defense due to generic supplier stockouts. After adjusting for these nonrecurring elements, our diversified segment was ahead of expectation, thanks to strong Wellbutrin performance and outstanding Rx growth for CABTREO.

Finally, Bausch + Lomb's revenue were $1.3 billion, up 5% on a reported basis and 3% on an organic basis compared to the same period last year.

Now turning our focus to our balance sheet, starting on Page 22. Our strong operational cash flow generation was largely offset by outflows associated with the $7.9 billion refinancing we closed on April 8. This resulted to our net debt remaining flat during the quarter. While gross debt stands approximately at $16.1 billion, our cash on hand at the end of Q2 has now increased to almost $1.5 billion. This is allowing us to actively reduce the negative carry associated with our cash on hand without jeopardizing our financial flexibility for the future.

As we announced earlier this week, about $900 million of available liquidity will be used in the coming weeks to repay some of our most expensive debt, namely our 9.25% 2026 notes and our accounts receivables facility. This will still leave us with almost $600 million of cash on hand for general business purposes, including reinvestment in the business, business development-related payments and working capital needs. Separately, given the current strength of the financial markets, we will be exploring options to push out some of our 2028 maturities either through our April 2025 financing agreements or other means.

Let me now move to our full year guidance before wrapping up with our strategic priorities for the back half of the year, which you will find on Page 24. We are reaffirming our full year 2025 guidance for Bausch Health, excluding Bausch + Lomb, which remains as follows: Revenue is expected to be between $4.95 billion and $5.1 billion. The midpoint of that range translates to a 4% increase year-over-year. Our adjusted EBITDA outlook is also unchanged and is still expected to be between $2.625 billion and $2.725 billion. The midpoint of that range would represent a 5% increase versus 2024. Adjusted operating cash flow is still expected to be between $825 million and $875 million.

In summary, we had an outstanding first 6 months and remain on track for achieving our full year objectives. Our strategic priorities remain the same. First, increasing the value of Bausch Health operational assets through innovation, optimizing the growth of our portfolio of brands across the globe as well as pursuing opportunities to build further our portfolio of assets through business development.

Second, evaluating all options for unlocking value for all stakeholders, including maximizing the value of our Bausch Health and Bausch + Lomb assets. And third, continuing to optimize our capital structure. As we indicated earlier, we have already identified specific opportunities to reduce the net cost of capital of our debt over the next couple of months.

I will now hand the call back to Tom for the wrap-up.

Thank you, JJ. Before we turn it over for questions, I want to thank the entire Bausch Health Global team for their hard work and dedication, helping us to deliver another strong quarter, building our momentum through the first half of 2025 and positioning us well to continue executing against our strategic priorities for the remainder of the year. We remain confident in the growth opportunities ahead of us and our ability to deliver value for our stakeholders.

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

[Operator Instructions] Our first question comes from Jason Gerberry with Bank of America.

Just wanted to follow up. So I think some of the commentary on capital deployment, I didn't hear buybacks, although I think you guys did mention share buybacks is something of potential interest in 1Q. So I'm just kind of curious that's still something possibly being contemplated?

And then on the DTC efforts with Xifaxan, is this -- can you just confirm, is this mainly on the IBS side, my recollection is the growth outlook was perhaps more robust on the IBS side whereas HE market share has kind of hit a ceiling. So maybe if you could just kind of confirm sort of the outlook there on the DTC side?

Sure. Okay. So I think we'll take the question on the share repurchase first. I'll hand that to JJ.

Yes. So our capital allocation strategy remains the same. The first is to really delever the business. Second is to reinvest in the business. And then if there's any surplus return capital to shareholders in different forms and the share buyback could be one of those forms. We did mention that as a possibility last quarter just because the stock price was so depressed. And so therefore, when there are exceptional circumstances, there's always I think the obligation to review the priority list and see if there's any opportunity to do a program limited in size.

Since then, a number of things have changed. We've decided to reinvest in the business as evidenced by the DURECT deal that we've just announced. And so therefore, while we continue to evaluate the possibility it has gone back to the back burner.

Yes. Jason, I'll take the second part of your question regarding Salix and Xifaxan. So the investment that we're making is in OHE, DTC. In the past, we have had DTC campaigns for IBS-D. But right now, our focus is growing OHE, and that's -- we have had broad growth on both indications, but we are focusing our OHE indication and investing heavily behind it. I think that when we look at the quarter, and the 10% growth, we're getting a really nice growth in the volume side at 6% and a little bit on the price side at 3%. So again, driving volume. If you look at the TRx growth in the quarter is 6%. You look at the nonretail is 18% and total extended units is 7% with a total new to brand, as I said in my prepared remarks, 8% growth and 67,000 new patient starts. So our OHE business is growing very nicely.

And clearly, as I've talked about in prior conference calls, our engine that we are using to drive our customers' insight engine now is reaching heights of 90% adherence. So our focus continues to be investment in our field force in the tools that they have and of course, the DTC investments as well.

[Operator Instructions] Your next question comes from Umer Raffat with Evercore ISI.

A couple of questions on the rifaximin franchise, if I may. First, the SSD trials, I wanted to confirm that lactulose background therapy is in fact allowed? And secondly, I also wanted to confirm the population you're using is, in fact, inadequate responders to lactulose in the primary prevention setting. And then finally, have you guys considered or debated internally the possibility of a Xifaxan OTC?

Thanks, Umer for the question regarding rifaximin. So I think that when we -- again, when we look at what we're trying to achieve here, this is a prevention trial. And what I have to -- when we look at it and the population that we can treat -- Umer, I just want to just level set the size of the opportunity? And then I can talk specifically about what your question was, 4.5 million patients in the U.S. suffer from chronic liver disease and/or cirrhosis. 2.5 million are adults with cirrhosis. So if we take a look and then split it out, when we look at Xifaxan today, where we are, we're looking at a patient population of about 650,000 patients. On the SSD side, we're looking at 1.9 million patients. So we see this as a great opportunity to expand our franchise.

I'll take the second part of your question, have we considered the possibility of Xifaxan OTC. It's a good question, have not really considered at this time. When we look specifically to your question of wanting to know the combination of lactulose, I'll have to get back to you on specifically how that was run in the trial with lactulose. But that would be something the team can follow up with after this call.

[Operator Instructions] Your next question comes from Doug Miehm with RBC Capital Markets.

My question just -- first one just has to do with Xifaxan, maybe you could provide any details as you think about them about potential IRA headwinds in 2027? And then the second one just has to do with -- and maybe you touched on this a little bit. The discrepancy between revenue growth and prescription growth, both for Relistor and Trulance?

Thanks, Doug, for the question. Yes, we can -- I'll touch upon the first one in terms of the facts and details and the IRA. As you know, Xifaxan was selected for the negotiation and those negotiations are ongoing. Right now, it's scheduled to conclude in October of 2025. And CMS is expected to announce the final price by November of 2025. As we -- we're going through the process, multiple meetings. We have an outstanding market access team monitoring the situation. Right now, we have the next meeting set for the coming months, and we'll see how the negotiation goes. But clearly, as we look at it, we're working hard on it and presenting our case.

As we always said, Xifaxan today has a huge savings in the burden of the government payers, especially in a hospital setting. So we think that it continues to reduce hospitalization costs and creates a large savings to the health care system today. the discrepancy between revenue and the prescription growth for Relistor and Trulance. We -- on the Relistor side, we now have a new leader in place, and we're continuing to look for ways to grow that franchise. We have grown in the second quarter, and we're really seeing some really nice trends there. And then on the Trulance side, the product continues to perform. As we look at it, the challenge on Trulance side is always from a gross-to-net standpoint. JJ, do you want to add anything to that?

Yes, for the 3 brands, we've got some favorability on gross to net with some accruals that were released in the quarter. So that really explains the large discrepancy between the revenue performance of Trulance and Relistor and the script or the volume behavior in the quarter.

Well, yes, I did want to just ask on DURECT. Is there any additional information you can provide on that? It looks like an interesting acquisition, given that you may be the only approved product if the results work out and you get approval, of course. Is there anything you want to add to the opportunity there?

Yes. So -- as you said, it's a very interesting opportunity. We're very pleased. As you know, with our announcement, we intend to commence the tender offer shortly. So I'm limited as what I can say. But assuming we successfully closed the acquisition, I'm really looking forward to providing further detail on the thinking and the underlying science behind this acquisition. As we've talked about already on the call in terms of Xifaxan and hepatology and OHE and the opportunities to address this patient population. We are a hepatology company. We have really strong expertise in this area from the R&D side and also from the commercial side. So I'm really looking forward to providing more on the science after the deal closes.

Your next question comes from Mike Nedelcovych with TD Cowen.

I have two. My first is on the DURECT asset. It looks like larsucosterol all missed its primary survival endpoint in Phase IIb. So there was a positive trend. So what gives you the confidence that data will improve rather than worsen in a larger Phase III trial. And on a related note, the press release suggests that only 1 Phase III trial will be required. Am I understanding that correctly?

And then my second question relates to rifaximin SSD. Although not approved for primary prevention, there are some studies that suggest Xifaxan could be effective in that setting. And so far, it's not totally clear that rifaximin SSD offers any differentiation. So it would seem the risk of off-label generic rifaximin use for primary prevention might be relatively high. So my question, given this possibility is whether you've considered running a head-to-head trial between the 2 formulations?

Yes, Mike, thanks for the question. On the DURECT, there's -- as I said on the previous question, I'm limited to what I can speak about at this time. Yes, you are correct in terms of the trial that they ran, but it was a very slight miss on the primary end point. As I said previously, our R&D team has -- we are an expert in hepatology and we believe that this is a very interesting asset for us. So I'm looking forward in the future to be providing the science behind it. And yes, confidence in running 1, III phase trial at the present time. .

On the second question, we are -- the SSD formula is quite different. The dosage is quite different, and the way it acts in the gut is quite different. So with this new formula, we believe this is the product to use for prevention. And we are not, at this time, running -- plans to run any head-to-head trials.

And the last question will come from Umer Raffat with Evercore ISI.

I just wanted to touch base again on some of the IRA points you made. I know your negotiations are ongoing, but just to level set and prepare the Street, would you agree that some of the price points we saw for the 2026 drugs, which were anywhere between 40% and 80% and generally about a 60% cut median is probably the ZIP code we're talking as Xifaxan makes progress through this or would you rather point us to some of the emerging feedback that the ongoing negotiations are more and HHS as being much more aggressive than previously. I just want to make sure we're all prepared for this.

Yes, Umer. Thanks for the follow-up question. I'll just touch on it briefly in terms of the negotiation, and then I'll hand it over to JJ. As we look at this and in these negotiations, we did not believe we should have been on the list to begin with. So if you look at some of the criteria, but we were. And so as we go through this negotiation and speaking to CMS and what our points would be and with the savings already to the health care system. What I would say is we -- our team is evaluating multiple levers here as we look to see what we can do as we get to the end and get to a price that wouldn't be the discount that we have to give. So looking at our various options and many levers and turning over every stone to make sure that we to try to minimize the impact. JJ?

Umer, this is JJ. So the way you're looking at it is accurate, but relies on a big assumption as to how the drug is classified, whether it's a long-term monopoly or a short-term monopoly, then the regulations will drive a certain level of percentage, minimum and maximum that will be applied to really the gross revenue. So you have to look at the size of the business that goes through basically Medicare Part D, how the drug is going to be classified. As we said repeatedly, those discussions are ongoing.

And then as Tom alluded to, once you have an understanding of the baseline, then there are a number of strategies we can deploy to offset the potential impact associated with the increase in the rebate level. So once all those variables settle, we'll be in a better position to really communicate to the market what's going to be the onetime impact in 2027.

And we have reached the end of the question-and-answer session. I will now turn the call over to Tom Appio for closing remarks.

Thank you for all joining the call today and for your continued interest and support of the company. We remain committed to executing against our strategic priorities and focused on unlocking value, driving sustainable growth and advancing innovation across our portfolio. We appreciate your ongoing engagement and look forward to sharing further updates on the progress in the quarters ahead. Thank you, and have a good evening.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.