On August 3, 2023 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we" or "our") reported its second-quarter 2023 financial results and various other key updates from the quarter (Press release, Bausch Health, AUG 3, 2023, View Source [SID1234633737]).

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"We are encouraged by our strong performance in the second quarter as we continue to see the results from our focus on commercial excellence and investments in key businesses with growth opportunities, such as Salix" said Thomas J. Appio, Chief Executive Officer, Bausch Health. "We are also encouraged by various other key positive developments for our business during the quarter, including the favorable motion ruling in respect of Xifaxan and the continued success our initiatives to proactively manage our balance sheet. We also continue to advance our R&D pipeline as we look forward to bringing new products to the patients who can benefit from them," concluded Appio.

Favorable Motion Ruling in Xifaxan Litigation Reinforces Continuing Salix Growth Strategy
In May 2023, the U.S. District Court of Delaware denied Norwich Pharmaceuticals Inc.’s motion for reconsideration in the matter of Salix Pharmaceuticals, LTD et al v. Norwich Pharmaceuticals, Inc., which therefore prevents the U.S. Food and Drug Administration ("FDA") from approving Norwich’s abbreviated new drug application ("ANDA") for Xifaxan (rifaximin) 550 mg before October 2029. Norwich has appealed the denial of its motion for reconsideration. In June 2023, the FDA granted tentative approval for the ANDA, but confirmed that it is enjoined from granting final approval until October 2029. This favorable ruling reinforces Salix’s continuing growth strategy.

1 This is a non-GAAP measure or a non-GAAP ratio. For further information on non-GAAP measures and non-GAAP ratios, please refer to the "Non-GAAP Information" section of this news release. Please also refer to tables at the end of this news release for a reconciliation of this and other non-GAAP measures to the most directly comparable GAAP measure.

On June 5, 2023, Norwich sued the FDA in the United States District Court for the District of Columbia challenging the FDA’s decision to follow the August 10, 2022 final judgment and withhold final approval for the Norwich ANDA until October 2029. The FDA opposed Norwich’s action and the Company intervened in the lawsuit. A decision in the District Court for the District of Columbia is expected by the end of 2023.

Norwich’s appeal of the U.S. District Court of Delaware’s denial of its motion for reconsideration and Bausch Health’s appeal of the IBS-D and polymorph patent rulings from the August 10, 2022 final judgment have been consolidated, and are pending at the Court of Appeals for the Federal Circuit. A decision is expected on the appeals as early as Q1 2024.

The Company remains confident in the strength of the Xifaxan patents and intends to vigorously defend its intellectual property.

Proactive Balance Sheet Initiatives, Including New Accounts Receivable Credit Facility, Further Enhance Liquidity of Bausch Health (excl. Bausch + Lomb) to Greater than $1 Billion
In June 2023, the Company entered into a non-recourse receivables financing facility for up to $600 million with KKR and its credit funds and accounts. Following the closing of the receivables facility Bausch Health (excl. Bausch + Lomb) has liquidity in excess of $1 billion, inclusive of cash and cash equivalents, availability under the Company’s existing revolving credit facility and availability under the receivables facility. The strength of our current liquidity profile, coupled with our continued generation of cash flow from operations, provides the Company with flexibility to assess strategic opportunities to further improve our balance sheet and pursue key growth opportunities.

Update on Potential Bausch + Lomb Distribution
The Company continues to believe that completing a separation of Bausch + Lomb Corporation ("Bausch + Lomb") makes strategic sense and is committed to creating two strong companies following any potential distribution.
As the Company continues to evaluate all relevant factors and circumstances related to any Bausch + Lomb distribution, it is exploring options for optimizing the structure of any Bausch + Lomb distribution, if and when such a distribution is completed. The Company’s initial intent was to effectuate any potential distribution by way of plan of arrangement. The Company has since determined that the optimal way to implement the distribution may instead be through a tax-free reduction of capital, which also provides additional flexibility to the Company and Bausch + Lomb with respect to strategic alternatives after any distribution has occurred. The Company continues to evaluate the structure of any distribution and its other related details. Any distribution of Bausch + Lomb continues to be subject to receipt of applicable shareholder and other required approvals.

Bausch Health (excl. B+L) R&D Update
•RED-C: global program for Reduction of Early Decompensation in Cirrhosis
◦Expect to complete enrollment of two global Phase 3 trials in Q1 2024
◦Received feedback on the program from the National Medical Products Administration in China and we are currently planning to meet with authorities in Japan later this year
•Amiselimod (S1P modulator): treatment of mild to moderate Ulcerative Colitis
◦Phase 2 study completed enrollment in July 2023 and the study is expected to be completed in Q4 2023
•IDP-126: first triple combination product for the treatment of acne vulgaris
◦PDUFA date set for October 2023

◦New Drug Submission was submitted to Health Canada on May 30, 2023
•Clear and Brilliant Touch: fractionated laser device for skin rejuvenation
◦Regulatory submissions on-track in Europe and Canada in 2024 and Asia Pacific in 2025
•Next Generation Fraxel: fractionated laser device for skin resurfacing
◦FDA submission is expected in Q4 2023

Second Quarter 2023 Revenue Performance
Total reported revenues were $2.17 billion for the second quarter of 2023, compared with $1.97 billion in the second quarter of 2022, an increase of $200 million, or 10%. Excluding the unfavorable impact of foreign exchange of $17 million and the favorable impact of acquisitions, divestitures, and discontinuations of $4 million, revenue increased by 11% organically1 compared with the second quarter of 2022.

Reported revenues by segment were as follows:

Three Months Ended June 30, Reported Change
Change at Constant Currency1
(Non-GAAP)
Change in Organic Revenue1
(Non-GAAP)
(in millions) 2023 2022 Amount Pct.
Total Bausch Health Revenues $2,167 $1,967 $200 10 % 11 % 11 %
Bausch Health (excl. B+L) $1,132 $1,026 $106 10 % 10 % 11 %
Salix segment $557 $501 $56 11 % 11 % 11 %
International segment $259 $233 $26 11 % 9 % 11 %
Solta Medical segment $88 $57 $31 54 % 60 % 60 %
Diversified segment $228 $235 ($7) (3 %) (3 %) (3 %)
Bausch + Lomb segment $1,035 $941 $94 10 % 12 % 12 %

Salix Segment
Salix segment reported and organic1 revenues were $557 million for the second quarter of 2023, compared with $501 million for the second quarter of 2022, an increase of $56 million, or 11%. Sales growth was driven by Xifaxan, Relistor, and Trulance.

International Segment
International segment reported revenues were $259 million for the second quarter of 2023, compared with $233 million for the second quarter of 2022, an increase of $26 million, or 11%. Excluding the favorable impact of foreign exchange of $4 million and the favorable impact of divestitures and discontinuations of $4 million, segment revenues increased organically by 11% compared with the second quarter of 2022, led by organic1 growth in Canada and EMEA.

Solta Medical Segment
Solta Medical segment reported revenues were $88 million for the second quarter of 2023, compared with $57 million in the second quarter of 2022, an increase of $31 million, or 54%, which was favorably impacted by COVID-related lockdowns in China in the prior year quarter. Excluding the unfavorable impact of foreign exchange of $3 million, segment revenues increased organically1 by 60% compared with the second quarter of 2022.

Diversified Segment
Diversified segment reported revenues were $228 million for the second quarter of 2023, compared with $235 million for the second quarter of 2022, a decrease of $7 million, or 3% on both a reported and organic basis, primarily attributable to decreases in sales across Neurology and Generics, partially offset by growth in sales in Dermatology and Dentistry.

Bausch + Lomb Segment
Bausch + Lomb segment reported revenues were $1,035 million for the second quarter of 2023, compared with $941 million for the second quarter of 2022, an increase of $94 million, or 10%. Excluding the unfavorable impact of foreign exchange of $18 million, the favorable impact of acquisitions of $2 million and the favorable impact of divestitures and discontinuations of $2 million, the Bausch + Lomb segment revenue increased organically1 by 12%, compared with the second quarter of 2022, driven by increases across all business units.

Consolidated Operating Income
Consolidated operating income was $412 million for the second quarter of 2023, compared with operating income of $161 million for the second quarter of 2022, an increase of $251 million. The change is primarily due to higher revenues and associated gross profit, the benefit of insurance recoveries relating to certain litigation matters, lower amortization of intangible assets, and lower restructuring, integration, separation and IPO costs, partially offset by higher selling, general and administrative expenses and investments in research and development.

Net Income (Loss) Attributable to Bausch Health
Net income attributable to Bausch Health for the second quarter of 2023 was $26 million, compared with a net loss of $145 million for the second quarter of 2022, a favorable change of $171 million. This was primarily due to the increase in income before income taxes of $208 million.

Adjusted net income attributable to Bausch Health (non-GAAP)1 for the second quarter of 2023 was $300 million, compared with $201 million for the second quarter of 2022, an increase of $99 million primarily due to growth in consolidated operating income.

Earnings (Loss) Per Share Attributable to Bausch Health
GAAP earnings per share attributable to Bausch Health for the second quarter of 2023 was $0.07, compared with a loss of $0.40 for the second quarter of 2022.

Adjusted EBITDA Attributable to Bausch Health (non-GAAP)1
Adjusted EBITDA attributable to Bausch Health (non-GAAP)1 was $727 million for the second quarter of 2023, as compared to $701 million for the second quarter of 2022, an increase of $26 million.

Cash Provided by (Used in) Operating Activities
The Company generated $206 million of cash from operating activities in the second quarter of 2023 compared with $123 million in the second quarter of 2022. The increase in cash flow from operations is primarily attributable to (i) a decrease in legal settlements compared to the prior year when payments were made related to the Glumetza Antitrust Litigation in second quarter 2022, (ii) proceeds from insurance recoveries regarding certain legacy litigation matters, (iii) changes in business performance and (iv) a portion of cash interest payments being classified as Cash Flows from Financing activities as a result of the accounting treatment required for the Company’s New Secured Notes issued in September 2022.

Balance Sheet Highlights as of June 30, 2023:
•Cash and cash equivalents of $588 million.
•Bausch Health (excl. B+L) had availability under its 2027 revolving credit facility of $707 million and Bausch + Lomb had availability of approximately $275 million under its revolving credit facility.
•Accounts Receivable Credit Facility provides for an up to $600 million facility for approximately five years. No amounts were drawn as of June 30, 2023.