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.
Oh, I see.
Excited to have you guys join us. I'll let you kick things off. Maybe, I think in this case, some prepared remarks might be very helpful.
Yeah. We have not been, I think, visible to equity investors. The focus has been a lot on lenders. I thought it might be helpful to just reintroduce the company a little bit. We are a global diversified pharmaceutical and medical devices company. We serve over 70+ markets. Technically, we were founded in 1959, but the current configuration really has been in existence since 2015, mostly as a result of some very large acquisitions: Salix Pharmaceuticals, Bausch + Lomb, Solta Medical, to name a few, that have been mostly or primarily financed through debt. You will hear in a little bit why this is relevant to the story. We operate in five different segments, if you include Bausch + Lomb. Excluding Bausch + Lomb, we are really present in U.S. pharmaceuticals 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. 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. 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. Really, our strategy is broken down into three main pillars. The first one is to continue to grow our four operating segments with really a lot of focus on our GI franchise, our international segment, and our Solta Medical business.
The second pillar is to maximize really the value of our equity stake in B&L for Bausch shareholders. The last one is to 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 their focus, first of all, on the pipeline. We have in our GI franchise two major assets: RED-C, which is targeted at the prevention of OHE events. We have larsucosterol, which came with the DURECT 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. That's been in our focus. I know we'll talk a little bit more around RED-C, and we continue to perform really well across all of our franchises. We've just delivered 11 consecutive quarters 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 in cash flow generation that the management team has been displaying. With that, let's just open it for questions.
OK, great. 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.
Yeah.
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. Now with you guys doubling down, it looks like it is reinforcing confidence. Could you remind us what is going on there and maybe just lay that out for us?
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 two main contributors are China and South Korea, which really have been the primary contributor to our growth over the last few quarters. China, like South Korea, like many of the Asian markets, continue to be perceived by us as really underpenetrated compared to Western market standards. One key aspect 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 insight, and of course, execute our own demand generation. That is why having a more direct control of our commercial infrastructure in China was really a strategic imperative for us.
Excellent. OK, so I'm going to turn quickly to XIFAXAN, if that's OK, JP?
Yeah, of course.
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?
The two trials really are combined in terms of the results. The readout will happen.
Oh, so the p-value is calculated off of two trials combined?
Yes. They will be combined. They will be considered as one.
Isn't that unusual?
I think the discussion we had with the FDA is that we should consider the results of two together.
OK. OK, but I want to be clear, and I think Garen and I had an email 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 the databases have been formally locked.
Got it.
The data will be unblinded formally early next year.
You're unblinding both at the same time?
Yes.
OK.
Data unblinding next year. This is not a December event. This is certainly a January.
It is early next year. We have not provided any update.
Got it. OK, so then as it relates to sort of the.
Just to clarify, 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 programs. That's why I said basically the two programs were looked at.
OK, so it's two trials separately, but the data is looked at together.
The data will be that.
OK, OK, OK. That makes a lot more sense. OK, that's very helpful. As it relates to sort of the endpoint, time to first hepatic encephalopathy, which could be medical intervention, hospitalization, or clinic, or death, is that considered very clinically meaningful by the commercial team?
Yeah, yeah, not only for the clinical team, but the commercial team, as you know, those events are very expensive. To be able to prevent or delay those events is having a meaningful impact on the health care cost. We believe that if we hit the primary endpoint, this will facilitate a really constructive conversation with the payers.
Right. JJ, and I'm sure you've seen various international jurisdictions. If the endpoint is on hospitalizations, could the criteria for hospitalization look different in a European site versus a U.S. site? Could that introduce variability, or does that get balanced because you have placebo on both sides too?
You know, I know there will be some follow-up conversations around what we mean by hospitalization with the FDA. I think while we submit or prepare for the NDA submission, there will be clarification around how we define those events and then interpret the data accordingly.
Got it. JP, any other questions?
Yes. In practice, for patient selection, when a doctor has to say, hey, you should be on this preventive, on the clinical trials, you're doing after an outside event that is controlled. Is that the criteria? Like you already have outsides, 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 the medical intervention, which, again, around hospitalization, 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 on the drug.
Fantastic. OK, and I guess one last thing from a physician perspective, is there pent-up interest in using XIFAXAN, a new formulation, earlier in line, treatment line?
You know, the only indication that XIFAXAN is approved for, actually two indications besides IBSD, is really once the patient has had an OHE event. It is hard for us to comment on any other off-label 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. OK, got it. Excellent. Maybe let's transition then to the base business.
Yeah.
Obviously, XIFAXAN is an important driver of the base business.
Yep.
Can you speak to sort of where we are from a genericization perspective, and what's the timing of that looking like?
Yeah, 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 believes 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, 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 D.C. District Court on April 17 earlier this year, and Norwich appealed, with all arguments to be heard on December 11th.
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 Vanda really are subordinated to that decision. Should the appeals court decide in favor of Norwich, then we would need to seek clarification from the FDA as to whether Norwich still needs to comply through their second NDA on the 30-month stay. That has not been clarified. We believe that it applies, but that's something that would have to be clarified for Norwich to then decide what's their appropriate course of action.
Got it.
Norwich was not the first filer. Amneal was on the second wave of the so-called skinny NDAs, and that litigation is pending.
Remind us again, what's the difference in filing between the first versus second wave?
The first wave had both sets of indication, OHE and IBSD, and the skinny NDAs really have only IBSD.
Got it. The formulations are identical, or so you think?
Yeah, but they're a different set of patents. It's important to note also that since the second wave started, we've asserted a different set of patents for IBSD than the ones that were ruled on during the first Norwich litigation. As I said, that litigation.
If Teva remains first of file on sort of broader XIFAXAN, does that prevent Amneal from launching as a first of file on an HE as well?
Yes, it does.
Got it. JP, any questions on the XIFAXAN?
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. You have to go to the second wave of litigation associated with the skinny NDAs, and that is where we are asserting different patents than the one asserted during the first wave of litigation. 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 I 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. On the hearing coming up, if the first wave and the second wave arguments are both done on the same day, I guess how does the judge do on the second wave?
That's my understanding, is that they are linking the way of only the event the first filer status is.
Oh, I see. They'll rule on the first filer. If not, then they can look at the other stuff.
Yeah.
From your perspective, is there anything Bausch could do to preserve Teva's first of file status for sure? Like, for example, could Bausch make Teva into an authorized generic to effectively lock in Teva's first of file?
Yeah, we have in common 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. They have an NDA in process that's currently being reviewed by the FDA.
OK, OK. Maybe, and there are certain topics we're going to steer clear from for this conversation, so I'm not going down those. I guess from your perspective, beyond XIFAXAN, what are some of the key products you are very focused on and you're seeing good early feedback on as well?
We have a very diversified set of products across our business. I'll go franchise by franchise. In Salix, beyond XIFAXAN, 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 as 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 neurology, Wellbutrin continues to perform very well for us. It's quite incredible the resilience of that franchise despite the fact that the product lost exclusivity a long time ago. It is an area that a product continues to be valued by our practitioners quite a bit.
In dermatology, we launched Cabtreo in the U.S., which was hailed as the second most successful launch in the U.S. in 2024. It continues to perform ahead of expectations, obviously at a much lower level of sales, but we believe that the product has got a lot of runway. Internationally, we continue to drive our portfolio of mostly branded generics. We are 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. Solta is another focus. We continue to increase the availability of our Thermage FLX franchise across many markets. There is a whole pipeline of innovation really 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. Maybe in the last minute or so, JJ, from your perspective, what are your top three priorities over the next 12 months?
As I said before, along the three 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 area 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 DURECT Corporation.
We continue to look at ways to leverage our commercial capabilities, particularly in GI and urology and any other franchise, where we believe there would be some synergies. The capital structure is really important for us. We closed $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 will continue to be an area of focus.
Outstanding. JP, did we miss anything on your end? Anything on the audience? All right, fantastic. Good luck into the readouts. I think people really care.
Thank you.
Good luck into the court trial as well.
Thank you.
Thank you so much.
Thank you, Mark.
Thank you.
Thank you.