Bausch Health Companies Inc. Q1 FY2025 Earnings Call

Greetings. Welcome to the Bausch Health First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Garen Sarafian, Investor Relations at Bausch. You may begin.

Good afternoon and welcome to Bausch Health first 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, April 30th, 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, Thomas Appio. Tom?

Thank you, Garen. And welcome to everyone joining our earnings call today. In the first quarter for Bausch Health, excluding Bausch + Lomb, we continued the momentum we had in 2024 and used it strategically to drive further progress. We delivered year-over-year revenue and adjusted EBITDA growth of 6% and 14% versus the prior year respectively. We successfully completed a $7.9 billion refinancing effort in early April to extend near and medium-term maturities. We received a favorable ruling from the D.C. District Court in the Norwich case against the FDA after the quarter closed. And finally, we are maintaining full-year 2025 revenue and adjusted EBITDA guidance, while updating guidance for adjusted cash flow from operations to reflect higher interest rate expense. JJ will discuss our financial results in more detail shortly. I will start by touching on several financial performance and key business highlights from the first quarter. We started the year off strong with Bausch Health, excluding Bausch + Lomb, achieving an eighth consecutive quarter of year-over-year revenue and adjusted EBITDA growth. I'm incredibly thankful and grateful to our global team for their hard work and dedication in the current macroeconomic environment. Revenues for Bausch Health, excluding Bausch + Lomb, increased 6% on a reported basis and 7% on an organic basis when compared to the first quarter of 2024. Adjusted EBITDA for Bausch Health, excluding Bausch + Lomb, increased by approximately 14% compared to the prior year period. As such, we are maintaining our full-year 2025 guidance for revenue and adjusted EBITDA while updating guidance for adjusted operating cash flows to reflect our successful refinancing transaction. And as JJ will touch on in his prepared remarks, we continue to assess the impacts on our business of evolving tariff and trade measures. We also made progress on our objective of optimizing our capital structure. On April 8th, we closed a private offering of senior secured notes due in 2032 and also entered into a new term loan and revolving credit facility maturing in 2030. The proceeds of which we used in large part to retire approximately $6.9 billion of maturities ranging from 2025 into 2028. This transaction extends our maturity runway and provides the company with additional financial flexibility allowing us to focus on growing our business and maximizing the value creation for our shareholders. Furthermore, we believe that the tremendous demand we saw in the credit markets underscores investors' confidence in both our future performance as well as the long-term value of our assets. Turning to litigation in Norwich, as many of you are aware, the FDA denied final approval of Norwich's Second ANDA for generic rifaximin 550 MG tablets. Following this decision, Norwich sued the FDA in the D.C. District Court, alleging that the FDA acted improperly by only granting tentative approval to their Second-ANDA rather than final approval. Norwich asked the D.C. District Court to find that Teva had forfeited its first filer status for Rifaximin 550 and forced the FDA to grant final approval to their Second-ANDA. We, along with Teva, intervened as defendants in the FDA lawsuit. We are pleased that on April 17th, the D.C. District Court granted summary judgment in favor of the FDA, Teva, and the company. The D.C. District Court confirmed that the FDA's decision denying final approval of Norwich ANDA was not arbitrary, capricious, or contrary to law because Teva had not forfeited its first-filer status. We will continue to vigorously defend our intellectual property and are committed to serving our patients as every patient deserves better health outcomes and the chance to make the most of life. Moving on to Page 6, where I will touch upon segment-specific key financial and operating highlights in the first quarter. The first quarter reflected a solid performance in growth on an organic basis across many of our business segments. Salix grew 6% on an organic basis versus the prior period and continued to deliver strong Xifaxan performance of 8% growth including 1.5% total retail script growth and strong non-retail extended unit growth of approximately 6%. Solta's trend of strong double-digit growth continued in the first quarter of 2025 with 33% organic revenue growth primarily driven by strong performance in South Korea and China, with year-over-year organic growth of 136% and 30% respectively. Our international segments demonstrated continued resilience achieving organic revenue growth across Canada, Latin America, and EMEA, with EMEA marking its ninth consecutive quarter of organic revenue growth. Other highlights include Canada's 18% promoted product portfolio growth and 9% growth in EMEA's second largest market, which is comprised of Serbia and Montenegro. And lastly, the diversified segment grew revenue modestly driven by neurology and delivered growth in segment profit in part due to disciplined expense management. Now turning to our strategic priorities for 2025. Although we have achieved 8 consecutive quarters of growth, we believe the stock price does not reflect the strong performance of the business and the value of the company. Unlocking value is critical. We have continued to deliver strong financial momentum with revenue and earnings growth across multiple segments to start the year. And we successfully completed the major refinancing initiative mentioned earlier. Yet we are keenly aware that work still needs to be done to unlock shareholder value. Therefore, we remain committed to evaluating all options for unlocking the value of our shares, including maximizing the value of our Bausch Health and Bausch + Lomb assets, as well as other possible initiatives such as share buybacks. Next is growth. With eight consecutive quarters of year-over-year top line and bottom line growth, we continue to invest for sales growth and profitability as we expand across segments and geographies. Xifaxan's 8% growth this quarter was broad in terms of both price and volume. As it relates to volume, growth was generated across both indications, IBS-D and OHE. Activating new patients is core to pharmaceutical product growth, and in the first quarter, over 59,000 new patients were started on Xifaxan. This represents both year-over-year and quarter-over-quarter growth. Our sales force and our media investments drove the growth as we increased our investments in high ROI channels such as online streaming, connected and addressable TV and online video. This positioned us to better reach and activate patients, caregivers, and providers as seen with our first-quarter results, representing our fifth consecutive quarter of top-line growth in our Salix business. The Xifaxan Salesforce continues to become more productive as we fine-tune our AI engine. Our Salesforce today delivers 20% to 30% more calls than we did 18 months ago and to the right targets, a clear indicator of operational momentum. This increased efficiency has enabled us to do more and deploy resources to other strategic investments for the franchise. Solta also delivered exceptionally strong results with 33% organic revenue growth, including 136% in South Korea and 30% in China in the first quarter. Importantly, growth was further supported by positive results in the United States, Canada, and EMEA. As announced in our recent press release in April at the American Society of Laser Medicine and Surgery 2025 Annual Conference, we launched Next Generation Fraxel called Fraxel FTX. We have rollouts planned for dermatologists, plastic surgeons, and other licensed professionals over the coming months in the United States. And most recently, on April 29th, Bausch Health announced that Health Canada has granted medical device license clearance for our latest generation Thermage FLX device for non-invasive skin tightening and contouring. Canadian providers will now gain access to the same technology in use by leading aesthetics clinics elsewhere in the world. CABTREO, the first combination product for the treatment of acne vulgaris, continues to build momentum in North America. In the U.S. alone, we are seeing healthy sequential double-digit script growth with over 8,900 healthcare providers having now prescribed CABTREO. Now turning to innovation. New product flow is intrinsic to creating value with Bausch Health. We are focused on developing our pipeline internally and seeking licensing opportunities externally. We have a disciplined process for examining opportunities at a detailed level in terms of strategic, operational, and financial logic. We are focused on opportunities with a reasonable probability of technical and regulatory success and that create operating leverage, revenue, and earnings in the near term. Starting with our internal product pipeline, we are pleased with the progress of our RED-C program, where our phase 3 global studies remain on track. As we have shared previously, both studies were fully enrolled in the third quarter of last year, and we expect to see the initial data readout by early 2026. To recap, the RED-C program is studying a solid soluble dispersion rifaximin complex in a unique patented non-crystalline water-soluble form that enables delivery throughout the entire gastrointestinal tract. RED-C is also being studied in patients with cirrhosis from any form of liver disease. The patient population is innovative as these are cirrhotic patients being studied prior to their first decompensation event. In the United States, this patient population is at least three times larger than the OHE population that Xifaxan serves today. This is also a very meaningful global opportunity for Bausch Health and if successful, may enable us to address an unmet need and deliver a novel therapy to cirrhotic patients globally. We are already working cross-functionally across multiple areas to sequence global regulatory filings, U.S. NDA planning, and ensuring adequate global product supply. We are also systematically evaluating additional data generation opportunities, both to enhance our current profile in cirrhosis and to evaluate new indications that have the potential to impact the gut-liver-brain axis. On the business development front, we are expanding into the cardio-metabolic market in Latin America. We have two brands already licensed with launches planned to start at the end of May. We look forward to more progress on this front as the year progresses. As a reminder, we also signed an exclusive licensing and supply agreement with George Medicines in December. The partnership grants Bausch Health the exclusive rights to seek regulatory approval of and to commercialize GMRx2 in Canada, Mexico, Columbia, and Central America. GMRx2 is intended for the treatment of hypertension, including initial treatment. This is a proprietary single-pill combination of three classes of anti-hypertensive medicines, an Angiotensin receptor blocker, a calcium channel blocker, and a diuretic. Developed in ultra-low and standard dose options, it has the potential to be the only triple combination approved for the initial treatment of hypertension. The innovative formulation aims to optimize efficacy, safety, and adherence with a multi-mechanism approach and at lower dosing than today's therapies, GMRx2 is designed to deliver the synergistic benefit of a triple therapy while maintaining tolerability. This is a unique opportunity for advancing cardio-metabolic care in these regions that will leverage our expertise and infrastructure. To wrap up on the first quarter, I am encouraged by our strong start to the year, building on our great progress in 2024. We executed against our operational objectives while making significant strides in improving our capital structure and optimizing across our businesses. We remain critically focused on maximizing shareholder value with urgency. Despite the volatile macroeconomic environment, we remain confident in the durability and growth path of our business as we leverage our broad and diverse footprint and the results-driven mindset of our talented global team. With that, I will pass it over to JJ to discuss the financial results in more detail.

Thank you, Tom. As Tom mentioned, Bausch Health, excluding B&L, achieved its eighth consecutive quarter of year-over-year growth for revenue and adjusted EBITDA. This speaks to the resiliency of our growth strategy. Separately, our performance in Q1 was another illustration of our commitment to profitable growth and cash flow generation, which remained instrumental to our objective of deleveraging our balance sheet. Let's now review our first quarter consolidated performance in more detail, starting with our non-GAAP financial results for the first quarter, which you will find starting on page 13. Revenue was $2,259 million, up 5% on a reported basis and 6% on an organic basis compared to the same period a year ago. Adjusted gross margin was 69.9%, 130 basis points lower year-over-year. Adjusted operating expenses for the first quarter were $994 million, an increase of $78 million compared to the same period last year. Adjusted R&D expenses for the quarter were $143 million, which was a decrease of 5% compared to the first quarter of last year. Adjusted EBITDA was $661 million, a decrease of $4 million or 1% year-over-year. Finally, adjusted operating cash flow was $110 million. Moving now to the performance of Bausch Health excluding Bausch + Lomb for Q1 starting on page 15. Revenue was $1.120 billion or 6% up when compared to the first quarter of 2024. The growth was 7% on an organic basis. Adjusted EBITDA was $576 million, up 14% on a reported basis partially due to one-time benefits but also demonstrating our focus in driving efficient cost management. Lastly, our adjusted operating cash flow was down 4% versus the first quarter of 2024, but was in line with expectations given the difference in timing of our cash interest and other outflows, as we indicated during our fourth-quarter earnings call a couple of months ago. When adjusting for timing and on a comparable basis, our adjusted cash flow from operations was $130 million better than Q1 '24. Moving now to our first quarter performance by segment, starting with Salix on Page 16. Salix revenues were $542 million, an increase of $43 million or 9% on a reported basis and 6% on an organic basis compared to the same period last year. Xifaxan continues to drive most of the Salix segment revenue with 8% growth year-over-year, which was balanced across price and volume. Retail scripts grew 1.5% with new script growth at 3%. Extended units grew 1% and include non-retail settings such as hospitals and outpatient clinics, which grew mid-single digits. Now moving to the International segment on Page 17. Revenues were $262 million, a decrease of 1% on a reported basis but an increase of 5% on an organic basis compared to the first quarter of last year. The difference in growth rates between reported and organic was nearly all due to currency, primarily the Mexican peso. By geography, revenue in our International segment saw again strong double-digit growth in Canada, while EMEA and LatAm grew modestly year-over-year on an organic basis. Canada’s double-digit growth was driven by our promoted products portfolio, which grew 18%. In addition, our sales of Wellbutrin continue to benefit from the supply shortages of each generic competition. Now moving to Page 18 for a review of our Solta Medical segment. Revenues were $113 million, an increase of 28% on a reported basis and 33% on an organic basis compared to the same period last year. Solta's exceptional results were driven by continued strong performance of our markets in Asia Pacific, primarily in South Korea and China. These two markets grew revenue 136% and 30%, respectively, all through volume expansion, which was even more impressive. Turning now to our diversified segments, which you will find on Page 19. Revenues were $205 million, an increase of 1% on a reported basis and flat on an organic basis compared to the same period a year ago. The revenue performance was ahead of expectations and was primarily driven by the neurology business which achieved double-digit growth, thanks to net realized pricing favorability and the continued benefit of the value price optimization we executed last year. Finally, for the Bausch & Lomb segment, revenues were $1.1 billion, up 3% on a reported basis and 5% on an organic basis compared to the same period last year. Turning now our focus to our balance sheet, starting on Page 22. Our net debt, excluding Bausch & Lomb, decreased by approximately $85 million in the first quarter. More importantly, as we announced on April 8, we closed a $7.9 billion refinancing transaction, including a $500 million revolving credit facility which allowed us to push out most of our remaining debt maturities to 2028 and beyond. Our stated objective in late February to access the capital markets in the first half of 2025 and to significantly improve the company's debt maturity profile was fully executed in less than 2 months at a time of uncertainty and high volatility of the financial markets. While our debt post refinancing has a higher blended cost of capital by approximately 100 basis points, this new capital structure now provides significantly more operating and timing optionality for adjusting our capital structure to better fit our business profile post Xifaxan LOE. While we are encouraged by what has been executed to date, more remains to be accomplished in the next couple of years, but this is an important milestone for all Bausch Health stakeholders. I would like to take this opportunity to thank everyone involved with this last refinancing, which was the largest in the company's history. Special mentions go to the financing team at Bausch Health, as well as to our advisers, Evercore, Proskauer, and JPMorgan. What a great outcome all around, true exemplary teamwork. Before I turn it over to Tom for the wrap-up, let me conclude with an update on guidance and outline our strategic priorities for the remainder of the year. Let's start with our full-year guidance. Lots has happened over the last few weeks, particularly concerning tariffs and the impact they could have on cross-border transactions with the U.S. Based on the information available at this time, we are confirming the full-year 2025 guidance for revenue and adjusted EBITDA and updating our adjusted operating cash flow down by $150 million to reflect the impact of the refinancing transaction we executed earlier this month. Our full-year guidance for 2025 is now as follows: Revenue guidance is unchanged and is still expected to be between $4.950 billion and $5.100 billion. The midpoint of that range would translate into a 4% increase year-over-year. Adjusted EBITDA 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 now expected to be between $825 million and $875 million. Moving forward, our strategic priorities remain the same: First, increasing the value of Bausch Health operational assets, which includes innovation as well as continuing to optimize the growth of our portfolio brands across the globe. Second, evaluating all options for unlocking value for shareholders, including maximizing the value of our Bausch Health and Bausch & Lomb assets as well as other initiatives such as share buybacks. And third, continuing to optimize our capital structure. In summary, the first four months of 2025 has been a very strong start for Bausch Health on several fronts, whether it is our operating performance in Q1 or the improvements we have made to our capital structure; Bausch Health is in a stronger position now than it was just two months ago. I will now hand the call back to Tom for the wrap-up.

Thank you, J.J. We have continued to drive growth through innovation and executing with discipline across the business. As we move forward, we remain focused on advancing our strategic priorities to deliver value for all shareholders. With a strong start to the year and a number of positive developments to date, we believe we are well positioned to carry out our momentum throughout 2025 and look forward to sharing our continued progress in the quarters ahead. With that, we will now turn to questions. Operator, please open the line for Q&A.

Our first question comes from Leszek Sulewski with Truist Securities. Please proceed.

Good afternoon. Thank you for taking my questions. Last quarter, you provided some insight regarding tariffs related to the numbers you've mentioned. Are there any updates on that and any effects on transfer pricing across your organization? As a follow-up, you mentioned the $150 million in operating cash flow. It seems most of it is related to the interest expense. Are there any other components included in that figure? Additionally, how should we view the progression of EBITDA margins as we move through the rest of the year? Thank you.

Thank you for the question. I'll provide a brief overview of the tariffs, then I'll let JJ offer more details. Currently, the situation is quite dynamic, particularly affecting our Solta business in China, which we are monitoring closely. As the year goes on, we hope there will be negotiations that could lower the current tariff rates. We have inventory in the country at both our distributor and our warehouses, which allows us to reduce some immediate impacts, especially in the first and part of the second quarter. We will keep a close watch on the situation and have strategies in place to mitigate the tariffs if necessary. The team has been working diligently on this issue. It's worth noting that the existing tariffs do not currently affect pharmaceuticals. Our finance team has been monitoring the situation for several months. One advantage we have is our regional supply chain, so most of our manufacturing occurs in the areas where we operate. We will continue to evaluate what additional measures we can take if pharmaceutical tariffs were to be introduced. With that, I'll turn it over to JJ for further insights.

Hi, Les. As Tom mentioned, our setup is not significantly affected by new tariffs. This depends on the decisions of the government and other countries regarding retaliation. Previously, we noted that any potential impact would be limited to no more than $50 million, focusing on the flows between the U.S. and Canada, particularly in our pharmaceutical divisions. Currently, those tariffs are not in effect. Our limited exposure is largely due to the relatively low cost of goods sold and transfer prices as a percentage of revenue across our business. The China market, which faces potential retaliation from the Chinese government, represents about $150 million, a small portion of our total revenue profile. This is why we were able to factor the potential impact of tariffs into our guidance while maintaining our outlook for the full year. Regarding your second question about adjusted operating cash flow, it is influenced by the increased interest costs, which have risen about 100 basis points on over $15 billion of net debt, affecting only three quarters. Additionally, the transactional expenses related to refinancing are significant factors causing changes in guidance. Lastly, I believe the phasing we've observed in 2024 serves as a good indicator for what you can expect in 2025.

I'll just make one last comment on the tariffs. As we look at our guidance, the team is working hard to ensure that all our investments during this tariff situation are well-managed, focusing on our cost structure and making wise investments. This is part of our strategy to offset some of the current tariffs. The team is dedicated to maximizing our potential while minimizing our operating expenses. Operator, next question.

Next question comes from Douglas Miehm with RBC Capital Markets. Please proceed.

Thank you and good afternoon. First question just has to do with Solta. The growth there remains exceptional, especially in Korea. And I'm just curious as to how long do you think that, that type of growth rate can be sustained through the next several quarters or the next several years.

Sure, Doug. As I've mentioned multiple times, I really appreciate this business; it's very resilient. Our team has excelled at managing capital equipment alongside consumables, making it a robust operation for us. In particular, the Korean team has performed exceptionally well in 2024 by selling capital equipment, which is contributing to our ongoing strong growth from last year into this first quarter. Having a significant installed base in Korea and effectively driving both capital and consumable sales has positively impacted our growth in the first quarter. We have high expectations for our Korean business moving forward, although we may see some decrease because the consumables being utilized in the first quarter and partially into the second quarter are from the installed base set up in 2024, with impacts likely picked up in the latter half of the previous year. While we expect some decline, we still anticipate solid growth. Additionally, China continues to show strong performance with a 30% growth rate this quarter. Despite various challenges, consumer demand remains robust, showing resilience amid economic changes. We're very satisfied with the growth in China. Lastly, the U.S. growth increased by 9%, and we’ve discussed growth in both EMEA and Canada. The launch of FLX is expected to further drive growth, and I mentioned earlier that securing FLX approval in Canada is a significant achievement for us, paving the way for future growth. Overall, the Solta business is performing exceptionally well in the first quarter, and we are very pleased with these results.

Excellent. And then just as a follow-up question. I'm curious a little bit about Xifaxan. Any comment you can give us on your thoughts around the IRA impact in 2027. And then can you confirm that the IP for Xifaxan is held in Ireland or Europe? And then when you talk about regional manufacturing. I just want to know if for Xifaxan, if you're talking about North America as a region or distinctly the U.S. And I'll leave it there. Thank you very much.

Sure. Of course, we talked about Xifaxan in the prepared remarks; had another great quarter for us, 8% revenue growth, well balanced on both price and volume. In my prepared remarks, one of the things that we really are tracking is new to brand; 59,000 new to brand in the quarter. So happy with the performance that we've had. What I would say is the IRA negotiations is in the early stages. We've already had one meeting with them in person. It's too early to determine what the outcome will be, but we are working collaboratively to discuss what the impact will be with CMS. On the question on IP, JJ will take that.

Yes. The IP is only in the U.S. and licensed to our principal company in Ireland.

Yes. And then your last question on manufacturing. So when I say regional, most of our manufacturing for Latin America is done in Latin America, Mexico and Colombia. When we look at our European business, most of the manufacturing is handled by either CLOs or our manufacturing facilities in Poland. And then when we look at Canada, a good part of our manufacturing is in our Laval facility for our derm business. So when I talk regionally, I'd say in most of those places, the consumption is where those plants are in those regions.

Next question comes from Mike Nedelcovych with TD Cowen. Please proceed.

Yeah. Thank you for the question. And a quick follow-up. My first question is if we end up in a recession either in the U.S. or globally, what elements of your business do you think are most at risk? And what elements do you think are most resilient? My second question relates to RED-C. I'm curious in the current state of affairs, do you have a sense of whether and what level of off-label prescription of Xifaxan for cohort HE may already be ongoing. And how much of a risk might that be commercially if you were to launch a novel product that would otherwise occupy that niche. And then my quick follow-up is on the Xifaxan manufacturing and supply chain. You mentioned various territories, but I don't believe you mentioned in the U.S. Is U.S. Xifaxan manufactured in the U.S.? Or is it imported? Thank you.

Yes, Mike, I will address those questions and I’ll let J.J. provide additional details. Our business has shown resilience against recession pressures. While it's difficult for me to comment specifically on the U.S. market, I can say our product portfolio is essential for our patients there, which contributes to its resilience from a pharmaceutical standpoint. This holds true in markets outside the U.S. as well. A significant part of our operations involves branded generics in Eastern Europe and Latin America, which have also proven to be resilient. Our ability to provide high-quality products at reasonable costs to patients plays a role in this. Regarding the Solta business, it is well-positioned and its user base has shown economic resilience. Although I can't predict future developments, I feel confident in our situation. Regarding RED-C, I cannot discuss off-label usage, but I previously mentioned that the SSD formula is distinct from Xifaxan, functioning differently and affecting patients in unique ways. As we assess this new formula, its differences in dosing also present a promising opportunity. Looking at the global patient population, there are likely over 30 million individuals with cirrhosis today. We are collecting more data and have assembled a launch team, which has us enthusiastic about our potential impact on patients in this area. Our primary and secondary endpoints, including all-cause mortality and hospitalizations, suggest this could develop into a strong franchise for us. Lastly, on your question about Xifaxan manufacturing, I will turn this over to J.J. to provide more information, but I can confirm that Xifaxan is produced in Canada.

Yes. So the country of origin for the API is Italy, given that it's a single API product. The country of origin on the label is also Italy, but manufacturing is coming from Canada. So for U.S. customer purposes, it's really treated as an Italian import.

Operator, next question please.

Next question comes from Jason Gerberry with Bank of America. Please proceed.

Hi everyone. Thank you for my question. Regarding Solta and revenue from China, I understand that you manufacture the consumables in the U.S. How feasible is it to move the manufacturing locally in case of a prolonged tariff situation with China, given that shifting drug manufacturing is typically complex and takes years? My second question is about your EBITDA excluding BLCO, which is $576 million. You mentioned some one-time items; could you clarify what those are? Lastly, how do share buybacks compare to net debt reduction in terms of capital allocation priorities over the next few years? I believe this is the first quarter you've discussed buybacks as part of your capital allocation strategy.

Yes. Jason, I'll address a few of your questions and then pass it to J.J. I'll start with the stock buyback question. With the stock price at $5.25, we're considering all options. As I mentioned in my prepared remarks, we believe the stock is undervalued. J.J. will provide more details on this. As a management team, we are carefully exploring all options. Let’s discuss Solta in China. Currently, all our manufacturing is done in Washington for both our capital equipment and consumables. It’s challenging to relocate manufacturing in the short term, but we've been exploring various business development opportunities even before the tariff issue emerged. This is something we've always considered in efforts to expand our business in China. While it’s not容易 to implement quickly, it's something we are examining. When it comes to producing a tip and a consumable, it's quite complicated and requires precision. We have a strong manufacturing team in Balta, Washington, making it difficult to shift production. However, this aspect is on our radar. Now, I'll hand it over to J.J. to address your second question about EBITDA and provide further insights regarding the share buyback.

The one-time items are primarily linked to three key factors. First, there is the timing of expenses; some expenses that were expected to occur in the first quarter have shifted to other quarters. Additionally, we usually have certain adjustments to our gross to net that don't affect recurring results. From an EBITDA standpoint, our performance in the first quarter is quite aligned with the full-year guidance we provided when normalized. Regarding share buybacks, our capital allocation strategy remains unchanged. The first priority is to align the capital structure with our portfolio after foreign exchange adjustments, followed by considering reinvestment in the business, and finally evaluating returns to shareholders, which may include share buybacks. As Tom mentioned, when the stock price is stagnant, it compels us to reevaluate our prioritization. Under normal circumstances, we believe the stock isn't reflecting its true value potential. Thus, if we see opportunities to create value for shareholders, we will certainly explore them.

And our last question comes from Michael Freeman with Raymond James. Please proceed.

Hi Tom and JJ, thanks very much for taking my question. I wonder if you could talk about the debt refinancing broadly. And maybe go a little deeper on the additional flexibility that this offers you? And just specifically, I wonder if you could describe the quantum of your BLCO stake that today is not pledged against any debt instrument. And then I'll have a follow-up.

Yes, Michael, I'll have J.J. provide most of the details. I want to note that, as mentioned by J.J. in his remarks, the team worked very hard on this refinancing of $7.9 billion, which gives us significant runway. J.J. can elaborate on the options we have, but one is definitely reinvesting in the business. The business development team has been diligent, and we've considered many opportunities. The finance and legal teams have successfully completed this process, which has equipped us with a solid foundation for future investments or other initiatives. I’ll now turn it over to J.J. for more specifics.

Yeah. Hi, Michael, the $7.9 billion, so if you really focus on the $7.4 billion because $500 million is the revolving credit facility. We cleared out most of our maturities between now and the end of 2027. There's about $1.2 billion, $1.3 billion left. And then we have another $4.3 billion still outstanding in 2028. So if you add those two together, you come to roughly $5.6 billion of maturities between now and the end of 2028. The focus is on extending the runway to include all the maturities up to the end of 2028. A good proportion of that $5.6 billion will be handled through free cash flow being generated between now and the end of 2028. We also have about $1 billion of cash on hand which will allow us to take out some of those other maturities. So it leaves about, I would say, $1.6 billion of additional refinancing that we have to execute. As you know, the refinancing that we just closed a couple of weeks ago provides this upsizing capability either by picking the same collateral package that is associated with the $7.4 billion or a combination of the restricted group and additional BLCO shares, or to do a drop down inside of the restricted group and then really only lose those assets as collateral. The consideration is really between those two options; timing and cost of capital to really decide what's the best options for us. There are a couple of debt instruments that might be available later in the year for foreign exchange or could be subject of this refinancing. But this is clearly still on the table and an opportunity for us to continue to clear out the maturities between now and 2028. In terms of DLCO shares that are unencumbered, 35.5% or less if we were to use one of the two options to upsize the $7.4 billion transaction an additional 7.5% would have to be pledged, which would leave 28% or about 100 million shares give or take, that would be unencumbered that could be used either for monetization for raising some new debt. And obviously, the proceeds could be allocated to whatever use we see fit at that time, including reinvestment in the business.

Michael, you had a follow-up?

Yes. There was an April 22 press release regarding the filing of a proxy supplement, which is an addition to the proxy statement. Could you provide more insight into the supplement and the current status of your shareholder rights plan?

Yes, I'll start with the shareholder rights plan. We adopted a shareholder rights plan to ensure that all shareholders are treated fairly and equally in the event of any unsolicited takeover bid or acquisition of control. We believe this plan is in the best interest of the company and its shareholders. Regarding the proxy filing, I don't want to comment specifically on it, but everything was outlined in the press release. As you saw, we believe the issues mentioned in the press release and the subsequent response of the stock indicate that people see value in Bausch Health.

Okay. I think, operator, that was the last question.

I would now like to turn the call back over to Tom Appio for any closing remarks.

Thank you all for being on the call today and for your insightful questions. I really appreciate your ongoing interest and support for the company. We have achieved our eighth consecutive year of revenue and adjusted EBITDA growth, and our team is highly motivated to maintain strong performance in 2025. We are dedicated to our strategic priorities and focused on driving value growth and innovation, while also evaluating all options to maximize the value of our shares. This strong performance in the first quarter and the momentum we built in 2024 would not have been possible without the commitment and dedication of our global employees. Thank you once again for joining us, and have a good evening.

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