Bausch Health Third-Quarter 2026 Earnings Conference Call - VALEANT PHARMACEUTICALS INTERNATIONAL

Financial Performance:

• Consolidated revenue reached $2.941 billion (10% reported, 8% organic growth YoY); Adjusted gross margin expanded 230 bps YoY to 75%.
• Adjusted EBITDA totaled $1.305 billion (32% YoY increase); Adjusted cash flow from operations was $782 million (54% YoY increase).
• Bausch Health (excl. Bausch & Lomb) generated $1.566 billion in revenue (12% YoY growth) and $1.022 billion in Adjusted EBITDA, marking the highest quarterly EBITDA since the B&L IPO.
• Net debt reduced by $521 million during Q3 and over $1 billion YTD; cash on hand stands at $2 billion.
• Salix revenue grew 16% to $831 million driven by Zafzaxan (16% growth, 1.8% Rx volume growth); International revenue grew 4% organically to $299 million; Solta reported 18% growth to $165 million.

Guidance and Future Outlook:

• Raised full-year 2026 guidance for the second time: Revenue to $5.525–$5.625 billion (+8% YoY); Adjusted EBITDA to $3.225–$3.275 billion (+13% YoY); Adjusted Cash Flow to $1.600–$1.675 billion (+29% YoY).
• Q4 headwinds expected: Gross-to-net accruals for Zyfexan (Zafazox) Medicare price change effective Jan 2027 will reduce revenue growth by 800 bps and EBITDA growth by 1,400 bps.
• Additional Q4 normalization of Zyfexan inventory is expected to reduce revenue growth by 300 bps and EBITDA by 500 bps.
• Interim CEO Thomas Appio confirmed commitment to Bausch Health while leading Bausch & Lomb; full-year revenue and EBITDA grew 14% and 26% respectively in the first nine months.

Business Segments and Product Lines:

• Salix: Achieved 17th consecutive quarter of growth; Zafazaxan drove growth via favorable pricing and volume; new-to-brand patients increased 1,800 sequentially.
• International: EMEA recorded 15th consecutive quarter of organic growth (Poland +7%, Hungary +32%); Latin America grew organically due to Bede Ecta (+28%); Canada grew 7% organically led by Realtris and Captrio.
• Solta: Delivered double-digit growth (21% for Thermage FLX; 52% for Fraxel FTX; 49% for Clear + Brilliant Touch); China distributor integration boosted APAC growth (China +66%, Taiwan +23%).
• Diversified: Revenue grew 5% driven by double-digit growth in dermatology via favorable net realized pricing.
• Pipeline: Phase III program for low-dose naltrexone in alcohol-associated hepatitis on track for 2029 approval; R&D focused on hepatology, gastroenterology, dermatology, and neuroscience.

Market and Competitive Landscape:

• Global portfolio demonstrated broad-based growth across all segments and geographies, a rare feat for the quarter.
• Solta faces increased competition in China from local and Korean brands in skin tightening, though long-term outlook remains positive.
• Korea market remains saturated regarding equipment placements but shows growth in consumables and procedures.
• North America Solta volume was up despite flat revenue, attributed to competitor pricing and deal term adjustments.

Risks and Challenges:

• Q4 revenue and EBITDA growth constrained by anticipated regulatory pricing changes for Zafazaxan (IRA impact) and inventory normalization.
• Consumer confidence and spending softness in China affecting Solta's organic demand trajectory.
• Market saturation in Korea for medical aesthetics equipment requiring reliance on consumable recurring revenue.
• Litigation risks: Timeline pending for D.C. District Court directing FDA framework; summary judgment motion heard but no ruling expected immediately; NORCH2 remand pending FDA but-for causation analysis timeline.

Management Commentary and Tone:

• Management tone remains highly confident, citing 14 consecutive quarters of revenue and adjusted EBITDA growth and the achievement of over $1 billion quarterly Adjusted EBITDA.
• CEO Thomas Appio emphasized operational discipline, accountability, and three core principles: profitable revenue growth, disciplined resource allocation, and cash generation.
• CFO J.J. Chiron highlighted capital allocation strategy, including plans for early redemption of 2027 notes and up to $100M in open market debt repurchases, alongside a new $50M share repurchase program.
• Management expressed strong conviction in the portfolio's commercial infrastructure and ability to drive future organic and inorganic growth.

Analyst Questions and Answers:

• Interim CEO Structure: Addressed potential formal unification of Bausch Health and Bausch & Lomb; management affirmed BHC remains the foundation, with no specific structural changes announced beyond current interim arrangements.
• Zafazoxan (Zyfaxan) IRA Impact: Estimated net impact of price reduction and CMS rebates to be $400–$500 million year-over-year in 2027; Q4 accruals for anticipated 2027 price change represent >$100 million.
• Clinical Trial Timing: CMO Jonathan Sade indicated no interim analysis for the Phase III alcohol-associated hepatitis trial is planned, as the 6-month study is properly powered and on track for 2029 submission.
• Solta Organic Growth: Management attributed organic revenue decline to tariff-driven timing differences in 2025; Q4 expected to return to mid-cycle digit organic growth as distributor integration benefits materialize.

Other Key Points:

• Bausch Health operates excluding Bausch & Lomb for primary segment reporting, though B&L reported 7% organic revenue growth to $1.375 billion.
• Management highlighted the "Customer Insights Engine" and strong commercial capabilities as key drivers for product lifecycle optimization within Salix.
• The company continues to prioritize business development to add assets to established platforms in EMEA, LATAM, and Canada.
• All financial guidance is effective as of October 28, 2026, with no obligation to update.