On November 3, 2020 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we") reported its third-quarter 2020 financial results (Press release, Bausch Health, NOV 3, 2020, View Source [SID1234569748]).

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"Bausch Health’s third-quarter 2020 results clearly demonstrate our recovery from the COVID-19 pandemic is in progress. In the third quarter, total company reported revenue grew 28% sequentially from the second quarter. Many of our durable brands are well-positioned to grow market share and return to growth, however, some of our prescription products are taking longer to return to pre-pandemic levels," said Joseph C. Papa, chairman and CEO, Bausch Health. "Throughout the pandemic, we have carefully managed our expenses, have prioritized our resources strategically, such as enhancing our e-commerce capabilities, and have maintained ample supply of our health care products for our customers and patients, and we will continue to do what’s right for all our stakeholders."

"We are also making good progress on our intention to separate our eye health business into an independent public company. As we look toward the future, we are excited about several new pipeline opportunities we are pursuing in areas of critical unmet medical need within eye health, including myopia, dry eye disease and age-related macular degeneration," continued Mr. Papa.

Executing on Core Businesses and Advancing Pipeline
•The Bausch + Lomb/International segment comprised approximately 55% of the Company’s reported revenue in the third quarter of 2020
◦Reported revenue in the Bausch + Lomb/International segment decreased 1% compared to the third quarter of 2019; revenue in this segment was flat organically1,2 compared to the third quarter of 2019
◦Launched Bausch + Lomb INFUSE silicone hydrogel (SiHy) daily disposable contact lenses in the United States

◦Received approvals from Health Canada and the Australian Therapeutic Goods Administration for BAUSCH + LOMB ULTRA ONE DAY silicone hydrogel (SiHy) daily disposable contact lenses
◦Received approval from the U.S. Food and Drug Administration (FDA) for Alaway Preservative Free (ketotifen fumarate) ophthalmic solution, 0.035%, antihistamine eye drops (EM-100)
◦Entered into an agreement to acquire an option to purchase all ophthalmology assets of Allegro Ophthalmics, LLC, including global rights for risuteganib (Luminate)3
◦Acquired an exclusive license from Eyenovia, Inc. in the United States and Canada for the development and commercialization of an investigational microdose formulation of atropine ophthalmic solution, which is being investigated for the reduction of pediatric myopia progression in children ages 3-12
◦Acquired an exclusive global license from BHVI for a myopia control contact lens design
•The Salix segment comprised approximately 23% of the Company’s reported revenue in the third quarter of 2020
◦Reported and organic1,2 revenue in the Salix segment decreased by 10% compared to the third quarter of 2019
◦Reported revenue for TRULANCE (plecanatide) increased by 57% compared to the third quarter of 2019
◦The FDA granted Orphan Drug Designation to rifaximin for the treatment of sickle cell disease
•The Ortho Dermatologics segment comprised approximately 7% of the Company’s reported revenue in the third quarter of 2020
◦Reported revenue in the Ortho Dermatologics segment decreased by 2% compared to the third quarter of 2019; revenue in this segment decreased organically1,2 by 3% compared to the third quarter of 2019
◦Reported revenue for the Thermage franchise increased by 77% compared to the third quarter of 2019
•Released both Bausch Foundation Inaugural Activity Report and the Company’s annual Corporate Social Responsibility report in September 2020

Debt Management
•Repaid debt by approximately $100 million in the third quarter of 2020 for a total of approximately $420 million to date in 2020 with cash generated from operations
•Bausch Health has no debt maturities or mandatory amortization payments until 2023

Resolving Legal Matters
•Resolved outstanding intellectual property disputes with Sun Pharmaceutical Industries Ltd. regarding XIFAXAN (rifaximin) 200 mg and 550 mg tablets. Salix will maintain market exclusivity for XIFAXAN until 20284

Third-Quarter 2020 Revenue Performance
Total reported revenues were $2.138 billion for the third quarter of 2020, as compared to $2.209 billion in the third quarter of 2019, a decrease of $71 million, or 3%. Revenue was negatively impacted by approximately $150 million in the third quarter of 2020 due to the impact of the COVID-19 pandemic.
Excluding the unfavorable impact of foreign exchange of $6 million and the impact of divestitures and discontinuations of $4 million, revenue declined 3% organically1,2 compared to the third quarter of 2019.
Bausch + Lomb/International Segment
Bausch + Lomb/International segment revenues were $1.169 billion for the third quarter of 2020, as compared to $1.175 billion for the third quarter of 2019, a decrease of $6 million, or 1%. Excluding the unfavorable impact of foreign exchange of $7 million and the impact of divestitures and discontinuations of $3 million, the Bausch + Lomb/International segment was flat organically1,2 compared to the third quarter of 2019 primarily due to the impact of the COVID-19 pandemic.

Salix Segment
Salix segment revenues were $496 million for the third quarter of 2020, as compared to $551 million for the third quarter of 2019, a decrease of $55 million, or 10%. The decrease was primarily driven by the loss of exclusivity of products in the segment, primarily APRISO (mesalamine), which negatively impacted revenues by approximately $25 million; by an expected decline for GLUMETZA (metformin hydrochloride), whose revenue declined by $21 million due to reduced net selling prices; and by the impact of the COVID-19 pandemic, including the impact to sales of XIFAXAN, which declined by 3% compared to the third quarter of 2019.

Ortho Dermatologics Segment
Ortho Dermatologics segment revenues were $144 million for the third quarter of 2020, as compared to $147 million for the third quarter of 2019, a decrease of $3 million, or 2%. Excluding the favorable impact of foreign exchange of $1 million, the Ortho Dermatologics segment declined organically1,2 by approximately 3% compared to the third quarter of 2019 primarily driven by the loss of exclusivity of products in the segment, primarily ELIDEL (pimecroliumus) Cream, 1%, which negatively impacted revenues by approximately $15 million.

Diversified Products Segment
Diversified Products segment revenues were $329 million for the third quarter of 2020, as compared to $336 million for the third quarter of 2019, a decrease of $7 million, or 2%. The decrease was primarily attributable to the previously reported loss of exclusivity for a basket of products and the impact of the COVID-19 pandemic.
Operating Results
Operating income was $460 million for the third quarter of 2020, as compared to operating income of $329 million for the third quarter of 2019, an increase of $131 million. The increase in operating results was primarily due to decreases in amortization of intangible assets, selling, general and administrative expenses, asset impairments and R&D expenses partially offset by decreases in revenues and gross margins primarily due to the impact of the COVID-19 pandemic, as discussed above.

Net Income
Net income was $71 million for the third quarter of 2020, as compared to net loss of $49 million for the third quarter of 2019, a favorable change of $120 million. The change was primarily driven by the increase in operating results discussed above and lower interest expense partially offset by an increase in our provision for income taxes.

Adjusted net income (non-GAAP)1 for the third quarter of 2020 was $469 million, as compared to $425 million for the third quarter of 2019, an increase of $44 million, or 10%.

Cash Generated from Operations
The Company generated $256 million of cash from operations in the third quarter of 2020, as compared to $515 million in the third quarter of 2019, a decrease of $259 million. The decrease in cash from operations was primarily attributed to lower volumes and the timing of cash receipts as a result of the COVID-19 pandemic and also includes a payment of $45 million for the resolution of the legacy investigation by the U.S. Securities and Exchange Commission.

EPS
GAAP Earnings Per Share (EPS) Diluted for the third quarter of 2020 was $0.20, as compared to ($0.14) for the third quarter of 2019.

Adjusted EBITDA (non-GAAP)1
Adjusted EBITDA (non-GAAP)1 was $948 million for the third quarter of 2020, as compared to $942 million for the third quarter of 2019, an increase of $6 million, or 1%. The increase was primarily due to decreases in selling, general and administrative expenses partially offset by decreases in revenues and gross margins primarily due to the impact of the COVID-19 pandemic, as discussed above.

2020 Financial Outlook
Bausch Health reaffirmed its revenue and Adjusted EBITDA (non-GAAP) guidance ranges for the full year of 2020, reflecting management’s current expectations. This assumes there are no material restrictions on access to health care products and services resulting from a possible resurgence of the virus on a global basis in the fourth quarter of 2020; the strict social restrictions seen earlier this year will not be materially re-enacted in the event of a material resurgence of the virus; rates of recovery will vary by geography and business unit; and an ongoing gradual global recovery as the macroeconomic and health care impacts of the COVID-19 pandemic run their course. Bausch Health’s guidance ranges are as follows:
•Full-year revenue range of $7.80 – $8.00 billion
•Full-year Adjusted EBITDA (non-GAAP) range of $3.15 – $3.30 billion

Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are
not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, which would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP). The full-year guidance ranges have been lowered primarily due to the actual and anticipated impacts of the COVID-19 pandemic. These impacts have affected the Company’s assumptions regarding base performance and growth rates. These statements represent forward-looking information and may represent a financial outlook, and actual results may vary. Please see the risks and assumptions referred to in the Forward-looking Statements section of this news release.

Additional Highlights
•Bausch Health’s cash, cash equivalents and restricted cash were $1.988 billion6 at Sept. 30, 2020
•The Company’s availability under the Revolving Credit Facility was $1.118 billion at Sept. 30, 2020
•Basic weighted average shares outstanding for the quarter were 355.6 million shares. Diluted weighted average shares outstanding for the quarter were 357.8 million shares