Earnings Call Transcript
Bausch & Lomb Corp (BLCO)
Earnings Call Transcript - BLCO Q1 2022
Operator, Operator
Good morning, and welcome to Bausch + Lomb's First Quarter 2022 Earnings Call. Please note, this event is being recorded. I would now like to turn the conference over to Allison Ryan. Please go ahead.
Allison Ryan, Chairman and Chief Executive Officer
Thank you. Good morning, everyone, and welcome to our first quarter 2022 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Joe Papa; and Chief Financial Officer, Mr. Sam Eldessouky. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section. Before we begin, we would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at the end of our presentation as it contains important information. This presentation contains non-GAAP financial measures. For more information about these measures, please refer to Slide 2 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website. Finally, the financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter and to not update or affirm guidance other than through broadly disseminated public disclosure. With that, it is my pleasure to call over to Joe.
Joe Papa, CEO
Thank you, Allison, and thank you, everyone, for joining us today in Bausch + Lomb's first earnings call as a publicly traded company. I will begin with some comments about our vision for Bausch + Lomb now that the IPO has been completed and briefly discuss the first quarter highlights. Sam Eldessouky, our CFO, will then review the first quarter financial results in detail and discuss our 2022 guidance. Finally, I will conclude by discussing our product pipeline and upcoming catalysts before opening the line for questions. Before I get started, let me answer the question. If we provided the first quarter B&L results on May 10 as part of Bausch Health, what is the objective for today's call? Simply stated, it provides greater clarity on B&L performance, our vision for B&L future growth, and provides a forum to answer your questions. So let's begin with Slide 4. With a nearly 170-year history as a leading eye health brand, Bausch + Lomb has always stood at the forefront of cutting-edge scientific and technological optical advancement, and today, we are more focused than ever on developing and offering new treatments to meet unmet eye health needs. Specifically, Bausch + Lomb is the most integrated eye care company operating today, the fastest-growing global contact suppliers in 2021, the company with the highest brand awareness in eye care, and a global leader in consumer health, outpacing U.S. market growth by approximately 1.7x since 2018. B&L also has critical mass with a commercial presence in approximately 100 countries; over 80% of the world's population has access to Bausch + Lomb products. Turning to Slide 5, we have outlined three key areas of strategic focus for this important point in Bausch + Lomb's development: One, accelerate growth in large addressable markets; two, invest in categories that are growing faster than the overall eye health market; and three, expand into new product categories. As we look to the future as a publicly traded company, we see attractive opportunities for our pure-play eye health company. We believe the company is well positioned for growth in large, durable markets driven by new products and favorable megatrends or tailwinds, such as the increasing prevalence of myopia and diabetes, an aging population, and a growing middle class that are expected to continue driving demand for eye health products. In addition, we have the potential for margin expansion over the long term based on new products and supply chain efficiencies. Finally, as a publicly traded company, we expect to have balance sheet flexibility to expand investment in the business and additional strategic bolt-on product opportunities. With respect to the spin-off process, the initial public offering was completed last month, an important first step towards the spin-off of Bausch + Lomb. The spin-off is expected to be completed following the expiry of agreed-upon lockups and the achievement of Bausch Health's target net leverage ratios, subject to shareholder and necessary approvals and other conditions. While the final date for completion of the spin-off has not yet been determined, the spin-off is expected to occur by the distribution of approximately 80% of the remaining B&L shares to Bausch Healthcare shareholders. Separate from the spin-off process, Bausch Health has the flexibility to monetize an additional approximately 8.7% of Bausch + Lomb shares, subject to market conditions and the expiry of agreed-upon lockups. Moving now to the first quarter highlights on Slide 6. First quarter organic revenue growth of 5% was driven by our two largest segments, Vision Care and Surgical, which grew organically by 4% and 13%, respectively, despite macro headwinds. Looking at the first quarter through the lens of our key areas of focus, consumer eye care had an approximately 33% U.S. market share in the first quarter, demonstrating continued momentum in eye vitamins and LUMIFY. Our daily SiHy lens market share doubled, and we expect market growth of approximately 10% in this category from 2019 to 2030. Finally, we launched eye care in the first quarter, entering into a new product category with the first and only product to use the suprachoroidal space of the eye for patients with macular edema associated with uveitis. These impressive achievements are due to the sustained effort and dedication of the approximately 12,500 Bausch + Lomb employees around the world, whose hard work and ongoing contributions enabled us to execute on our key areas of focus and navigate external headwinds in the first quarter while completing an important milestone on the road to becoming an independent publicly traded company. And with that, I will turn the call over to Sam to cover the financial results in more detail.
Sam Eldessouky, CFO
Thank you, Joe. I'm happy to be here on our first earnings call as a publicly traded company to discuss our first quarter results. Before going into the details, I will remind listeners that when we talk about the organic revenue growth, we mean on a constant currency basis and adjusted to remove the impact of divestitures and discontinuations. Also as a reminder, we now report our financial results in three segments: Vision Care, Surgical, and ophthalmic pharmaceuticals. Turning now to our results on Slide 7. Our first quarter results continue to demonstrate the durability of our business and the benefits of an integrated eye health platform. Our focus on commercial execution and investment continues to lead to strong demand across our key franchises, which is reflected in the total company revenue of $889 million for the first quarter, up 1% on a reported basis and up 5% organically. Strong momentum heading into 2022 enabled us to overcome two primary headwinds at the start of the year. First, unfavorable foreign currency exchange impact of approximately $29 million in the first quarter, and second, headwinds of roughly $10 million from COVID-related lockdowns in China. Excluding the impact of China lockdown, organic revenue grew by 6% for the quarter. Overall, we believe the business is well positioned to benefit from market dynamics. In the near term, we expect growth to be driven by the ongoing recovery in surgical, continued growth in Vision Care led by increased market penetration and launches in additional countries, and our market leadership position in consumer eye health. Over the longer term, we expect growth to benefit from favorable mega trends in the market and new product launches in the ophthalmic business. Now I'll go into more detail on each of our segments. Revenue for the Vision Care segment, which includes contact lenses and consumer products, grew by 4% in the first quarter, driven by 7% reported and 8% organic growth in eye vitamins and 35% reported and organic growth in LUMIFY. Both products are the market leaders in their categories. We also saw 41% reported and organic growth in daily silicone hydrogel lenses, which we have now launched in 24 countries, and 19% reported and 22% organic growth in the Biotrue Solutions franchise, which includes the eye hydration boost and multipurpose solutions. To leverage the brand form, the eye hydration boost was launched in 2021. Earlier this month, we launched the Biotrue Hydration Plus multipurpose solution in the U.S. Our goals for the remainder of the year are: one, to expand our market leadership position of eye vitamin products and LUMIFY; two, to continue the global rollout of the daily SiHy lenses; and three, to enter the daily SiHy multifocal lenses. Moving on to our Surgical segment. First quarter revenue grew by 13% organically. The segment has had sustained positive momentum as the market continues working through the COVID-related backlog of elective surgeries. Growth was mainly driven by increased demand for implantables, including our enVista IOL franchise, consumables in cataract and retina procedures, and by the entry of the LuxSmart IOL into the premium IOL category in international markets. Finally, the Ophthalmic Pharmaceuticals segment's first quarter revenue of $155 million reflected a decline of 3% on an organic basis. We're pleased to see the strong performance in the international offshore business, which represents approximately 43% of the segment. Organic revenue in international markets grew by 16% compared to the prior year quarter, mainly driven by strong performance in Europe and Asia. This growth was offset by a 14% organic revenue decline in the U.S. While we continue to see TRx growth in our key promoted brands, including VYZULTA, we saw TRx growth of 44% in the quarter, but the portfolio was impacted by the tail end of LOE products and higher rebates due to generic competition. We continue to transform the Ophthalmic Pharmaceuticals portfolio following the impact of the lower maximum LOE. At the end of March, we were pleased to have launched the IPO. We see this launch as a key first step on the path to transforming the portfolio, followed by future launches, which we expect to be scheduled for 2023. We believe the new product launches will provide the Ophthalmic Pharmaceuticals segment with a stronger foundation to drive growth in the quarters and years ahead and will allow us to leverage the scale and investment we have made in the commercial organization. Turning now to Slide 8. With strong business fundamentals, we continued our long-term strategy in Q1 by investing behind our product launches and supporting our R&D pipeline, notwithstanding the impact of macro market conditions. Our adjusted EBITDA in the first quarter was $170 million. Our total adjusted gross margin for the quarter was approximately 61%, which is 130 basis points lower than Q1 2021, largely driven by product mix and macro headwinds, including inflation pressure, higher commodity prices driven by external geopolitical conditions, and supply chain challenges. Higher SG&A spend in Q1 can be attributed mainly to increased investment in our product launches, including the daily SiHy lenses, and the return to a more normalized level of expenditure to continue the momentum seen during the COVID recovery, positioning us for market share gains. R&D spend in the quarter versus the first quarter 2021 increased to roughly 9% of sales. This increase is mainly due to the timing of projects to accelerate our ability to execute on our R&D pipeline. We estimate full-year R&D spending in the range of 7% of revenue. Finally, foreign exchange and COVID lockdowns in China resulted in headwinds of roughly $15 million to Q1 adjusted EBITDA. Moving on to Slide 10, cash flow from operations of $3 million in the first quarter was negatively impacted by the timing of settlement of certain intercompany balances between Bausch + Lomb and Bausch Health. We do not anticipate that these timing factors will have a significant impact on cash flows from operations in future quarters. In the quarter, CapEx was approximately $42 million, which includes investment in our lens manufacturing facilities. Subsequent to Q1 2022 and in conjunction with the IPO, we launched and closed on a credit agreement for $2.5 billion. Our goal is for the debt to be investment-grade rated at the time of the spin-off, continuing to invest in the business and further enhance our flexibility to operate going forward. Now turning to our guidance on Slides 12 and 13. Our revenue guidance for 2022 is a range of $3.75 billion to $3.8 billion, representing between 4% and 5% organic revenue growth. While absorbing the impact of China lockdown, we estimate the headwind to be approximately $160 million for the full year. We expect the headwinds from China, COVID policies, and lockdown that we saw in Q1 to continue to have an impact in Q2, and we expect that this will normalize into the second half of 2022. Our adjusted EBITDA guidance for 2022 is a range of $740 million to $780 million. This represents approximately 5% base performance growth over the full year 2021 pro forma adjusted EBITDA with the synergies excluded from the impact of currency. Our adjusted EBITDA guidance also includes approximately 100 basis points of inflation pressure. We estimate foreign currency exchange headwinds to be approximately $30 million for the full year. Interest expense is expected to be approximately $150 million on an annual basis. The adjusted tax rate is expected to be approximately 12%, and we expect full-year adjusted free cash flow to be approximately 50% of adjusted EBITDA. This guidance is consistent with the overall guidance provided by Bausch Health in their earnings call on May 10. In summary, we are pleased with our momentum in Q1 as we continue to recover from the global impact of COVID-19 and navigate various macroeconomic factors. We believe the results reflect the flexibility and resilience of our business and portfolio. Across our segments, we're in a strong financial position to execute on our current strategy and continue to find ways to enhance the integrated business. Now back to you, Joe.
Joe Papa, CEO
Thank you, Sam. I will now discuss our product pipeline and the upcoming catalysts that we expect to drive our business results. Beginning with LUMIFY on Slide 15. Here, we have illustrated an example of our fully integrated eye care platform to successfully launch, promote, and drive the performance of our products. In the case of LUMIFY, we began with a highly differentiated product; after launching it in May of 2018, LUMIFY became a $100 million brand in 2021. Today, it is the number one registered category in the U.S. with approximately 46% market share and the number one physician-recommended brand. Our team was able to drive education and awareness for the product by collaborating with eye care professionals while driving awareness with a strong television, public relations, and social media presence. These efforts, along with a 97% customer satisfaction rate, helped to drive patient demand, which we were able to meet through our ongoing partnerships with retailers like Walmart and CVS and through e-commerce channels. We expect to take a similar approach and integrate it into a similar approach to launching our next wave of new products, including NOV03, our dry eye disease product. Turning now to Slide 16 for an illustration of how we're able to fill unmet market needs with our daily disposable silicone hydrogel lenses. In response to patient concerns about contact lens dryness, in August 2020, we launched INFUSE daily SiHy lenses into the fastest-growing contact lens category. INFUSE is the first and only daily eye lens with a next-generation material infused with ProBalance technology to help minimize symptoms of contact lens dryness. The lens is doing exceptionally well with patients who experience contact lens dryness. In fact, 94% of patients surveyed agreed that INFUSE contact lenses do not feel dry and that they can comfortably wear INFUSE lenses all day long. Moving to XIPERE on Slide 17. XIPERE is the first and only therapy available that utilizes the suprachoroidal space to treat patients suffering from macular edema associated with uveitis, which is the leading cause of vision loss in people with uveitis. FDA approval of XIPERE was based on results from a pivotal Phase III trial for 160 patients with best corrected visual acuity as the primary endpoint. As from the chart on the right, the primary endpoint was the proportion of patients in whom visual acuity improved by at least 15 from baseline after 24 weeks of follow-up. We are particularly excited about the innovative microinjector, which offers unique access to the back of the eye and enables targeted delivery and compartmental utilization of the medication. Moving on to Slide 18, I want to spend a minute on the market opportunity for an investigational new class of dry eye therapy. NOV03 is a potential first-in-class treatment for dry eye disease associated with meibomian gland dysfunction. Statistically significant efficacy, safety, and tolerability have now been demonstrated in two Phase III trials. The charts on Slide 18 show the efficacy endpoints for the second Phase III trial. Importantly, all primary and secondary endpoints were achieved, including statistically significant changes from baseline as early as day 15. We are ecstatic with the results of these two Phase III studies and believe that NOV03 has the potential to be a major future growth driver for our business. We anticipate and are working towards filing an NDA for NOV03 in the coming weeks. On Slide 19, we present some of the near-term pipeline opportunities for the Surgical segment. First, our enVista premium IOL and Lux premium IOL expansions offer new opportunities in a $1.4 billion market that is growing at a 7% compound annual growth rate. We're also working on a 3D microscope that is expected to launch later this year, and it will integrate with our intelligence clinical decision support software. Finally, the Teneo Excimer Laser for refractive surgery is expected to be the first significant LASIK innovation in the U.S. in more than a decade. The Teneo laser has been well received and is widely adopted in 50 markets around the world as one of the more versatile lasers available with a compact footprint. Slide 20 captures the next generation of surgical innovation, including a new market opportunity with the Femto laser, which fully integrates into the cataract workflow for operating room efficiency. The LASIK flap laser complements the Teneo for refractive surgery, and the 22x combined cataract retina platform is redefined with fluidics and advanced lens removal technology, integrated with our eye intelligence software. To summarize, on Slide 21, we illustrate the Eye Health ecosystem in which Bausch + Lomb operates, showcasing the power of an integrated platform that uniquely positions Bausch + Lomb to serve eye care needs. Bausch + Lomb has the highest brand awareness of any eye care company. Bausch + Lomb has long-standing relationships with eye health professionals as well as key retailers and e-commerce channels that reach a broad consumer base. B&L is a fully integrated eye health company that offers a comprehensive portfolio of more than 400 products to meet significant patient and consumer needs, spanning everything from contact lenses, lens and eye care products, ophthalmic pharmaceuticals, over-the-counter products, and ophthalmic surgical devices and instruments. B&L serves our patients and consumers throughout all phases of their lives, developing and offering new treatments to meet unmet eye health needs and, importantly, help people see better to live better. With that, operator, let's open up the line for questions.
Operator, Operator
The first question comes from Ken Cacciatore with Cowen and Company.
Ken Cacciatore, Analyst
Thanks for all the fundamental discussion. I'm actually going to save my one question for not fundamental. Joe, lots of questions still coming in on the 90% holdings that BHG has in BLC. I know it's easier to understand the likely path forward as a pain patent win. It's less clear to everyone what the options are for BAC and a loss. So I'm not sure that you'll be able to discuss it, but can you talk about the potential ramifications in the event of a launch as you could best describe them for folks?
Joe Papa, CEO
Okay. Thank you, Ken, for the question. Let me just back up a little bit and address the actual question that you're getting to. Number one, as we think about this, the path forward for us is clear. We've always stated that our strategy would be to utilize 20% of the Bausch + Lomb value to pay down the debt of Bausch Health. We've done now the initial 10-plus percent for the IPO. The remaining, actually, will turn out to be 8.7%, which will be monetized by Bausch Health to reduce their debt. They have the flexibility to do that. As to the question on the XIFAXAN issue, let me state one more time that the remaining 80%, as I said, will be utilized, and will go directly to the shareholders of Bausch Health, just to clarify that. That direct spin of that 80% will go to the shareholders of Bausch Health. So that's how that will play out. On the question of XIFAXAN, I have to first and foremost say we continue to expect to win. We have intellectual property of 20-plus patents. Our legal team felt more confident at the end of the trial compared to the start of the trial, so all of that continues to be something that we have looked at and managed our way through that. One of the outside advisers that we've utilized has looked through all this, and everyone from a legal point of view has reviewed it. In fact, IPD, an independent company that was attending at the trial, looked at it and expects that we will prevail. As to your question, though, on the XIFAXAN loss, I have to say, as any company would expect, we always evaluate multiple scenarios for the business for planning purposes, and we have done that. But I have to say we continue to expect to win, and I'll probably leave it at that and not speculate any further on that comment. Obviously, that's something that Bausch Health will need to continue to look at in terms of process, but we do expect to win.
Operator, Operator
The next question is coming from Craig Bijou with Bank of America.
Craig Bijou, Analyst
Congrats on getting the IPO done. I wanted to ask about top line guidance. So obviously, 5% organic growth in Q1. Your full year guidance of 4% to 5% suggests a slight slowdown. So I just wanted to ask, is that simply conservatism? Is it China? Is there something else that we should be thinking about? How should we think about the quarterly cadence of that guidance? And from a segment perspective, should we think about growth of each of the segments similar to what we saw in Q1?
Joe Papa, CEO
Sam?
Sam Eldessouky, CFO
Craig, I'll take this question. The way I would think about it is our guidance from 4% to 5% is, I'll refer to it as balanced guidance. We factor in what we have been seeing so far in Q1 from China. We saw the lockdown in China have an impact on us of roughly about $10 million. That impact continues with us in Q2. Still early in the second quarter; we haven't yet completed second quarter. The good news is, right now, we understand that the Chinese government has opened up the market. Things are coming back to normal, still not 100%, but we'll have to see how the month of June plays out after we had the month of April and May shutdown. So our guidance of 4% to 5% anticipates what we've seen in the month of April and May from the shutdown in China. When you step back and you think about just our phasing in general, we tend to be more revenue-heavy in the second half than in the first half of the year. That's in general. So when you think about the cadence of our phasing, you would expect that we will ramp up more into Q3 and Q4 from a phasing point of view than what you've seen in Q1 and Q2 from us. That's at a normal basis. You just have to factor in the anomaly of China, which again, we've seen in Q1 and Q2.
Joe Papa, CEO
I think the thing I'd add to Sam's comment is just to put a little more perspective on that: the back-to-school contact lens business is something we see in that third quarter and fourth quarter. So that's part of what we see in some of the commentary that Sam was making on how we're looking at the seasonality of our business. There is some third quarter and fourth quarter pickup as we go back to school, and they get their contact lenses, but that's probably the only thing I'd add; I think everything else is in agreement.
Operator, Operator
The next question is from Larry Biegelsen with Wells Fargo.
Larry Biegelsen, Analyst
I'll ask just one big picture question. Just at a high level, Joe, and Sam, how are you thinking about Bausch's organic growth and margins beyond 2022? Joe, upfront, you said one of the goals of this call was to talk about long-term growth for the company. The guidance implies an EBITDA margin of about 20% this year. How are you thinking about the pathway back to, I think your EBITDA margin in 2019 was about 24%?
Joe Papa, CEO
I'll start, and Sam, you can add to it. First and foremost, I think the important point I want to make is on a strategic question of what we're planning to do. Number one, we plan to continue the momentum in our current portfolio; last 2021, Bausch + Lomb finished with the fastest-growing contact lens business, growing at about 18% in 2021 as an example. Trying to continue that momentum with all of our products in our portfolio is our first strategic direction. Number two, as we've stated publicly, we plan to invest in categories in eye health that are growing faster than the overall eye health business. The good news for us is that we have a chance to launch new products in the daily SiHy lenses. We've launched in about 24 countries, and we have more coming on board every quarter. We expect also to launch the multifocal product Daily SiHy. These daily SiHy lenses will also add to both revenue and growth on the margin, and I'll get to that in just a second. As we go into these faster-growing categories like daily SiHys, which we believe will grow certainly more than double digits. We're entering premium IOLs. We've launched our Luxmar outside the U.S. We have additional enVista IOLs coming forward, and also looking at the opportunity to enter the dry eye market. All of these new products in the faster-growing categories will help us expand our margins and growth as we plan. Finally, we're going into some brand-new categories for us. We're going to enter into the digital surgical ecosystem. We're looking at biosimilars in some new categories for us. We just launched XIPERE, the first and only product available in the U.S. that utilizes the suprachoroidal injection therapy, allowing us to help patients who have macular edema associated with uveitis. So all of those new products are going to be helping us drive overall growth. Importantly, with new products, there's an opportunity for margin enhancement. A simple example: as patients progress from the opportunity with a monthly lens to the daily lens to a daily SiHy lens, that's a higher price point for patients, which, in the long term, allows us to achieve better margins. As we gain more experience, we know that our yield on the Daily SiHy will get stronger all the time. Usually, when you first come out with a product on a facility line, you'll get about a 60% yield in the first year; that will gradually go to 70% to 80% yield and then up to 90-plus percent yield as you gain more experience with. That also helps contribute to the margin. So the margin story will be driven by these new products, and the margin story will be driven as we gain more experience with the SiHy daily lens as we're launching it. At the higher price point, that will contribute to the overall margin story and help us reach levels we were at in the past. Sam, anything you want to add specifically?
Sam Eldessouky, CFO
Yes. And Larry, if I can just add a few things to what Joe said. Again, the launches are a very critical part of how we think about where we are today and where we're heading into the future because I think there are a number of critical launches across all three segments that are going to be very important for us as we move forward. From growth on the top line as well as from a margin contribution. So you see it in the Vision Care, Surgical, and with ophthalmology with XIPERE coming out this year and NOV03 coming out next year. Also, the base business itself is doing very well. I think we have a number of our key brands performing well. We highlighted some of them in the prepared remarks. But the vitamins, the LUMIFY, we've seen strong performance in the international optical business, which has driven organic growth of roughly 16%. We have very good fundamentals in the business. How we think about the cost structure as we go forward here is that we had, in 2022, a year where we stepped up our investment to position ourselves for those launches and to support the growth we’re seeing in our existing portfolio. We also stepped it up for the standalone company to operate as a standalone company. As we go forward beyond 2022, we don’t need that step change in our cost structure. That means a trend towards leverage in the cost structure with infrastructure built to allow us to scale both on the commercial front as well as the overall company, and that will help us achieve margin expansion.
Operator, Operator
Your next question is coming from Yatin Suneja from Guggenheim Partners.
Yatin Suneja, Analyst
Can you just touch a little bit on the market opportunity for NOV03? What sort of infrastructure build will it require? How big is the market? Obviously, there is a relevant comparison there. I'm just trying to understand your strategy there. Then also, if you can provide a little bit on the Lucentis biosimilar, what's the update there?
Joe Papa, CEO
Sure. Let me start with the NOV03 dry eye market. It's a very large market. Specifically, we've estimated the gross sales numbers in order of magnitude at $3 billion. Obviously, if you go down to net sales, it's probably closer to $2 billion, but it's a very large market, first comment. Importantly, it's 17 million Americans, and it continues to grow at around double-digit levels. So it's a large market growing significantly. Number two, the opportunity we see here is that when we look at our clinical data, I am delighted to say we have statistically significant improvement in the signs and symptoms of dry eye disease associated with meibomian gland dysfunction. We've shown improvement as early as day 15. So for us, that's a significant opportunity to help a number of patients if we are approved by the FDA, and importantly, as we think about what that means is that the current products in the category can take sometimes up to 3 to 6 months to work. If you've got a product that can help patients as early as day 15, we think that makes it a very exciting opportunity to help a number of patients while also realizing the revenue opportunities from that. We're excited about the size of the market: large at $3 billion gross sales and about $2 billion net. We’re looking at what's happening with the current players and our ability to show the quick relief of the signs and symptoms of dry eye disease, and we're excited about it. Good news for us is that Bausch + Lomb has a very large capability footprint to sell this product in the United States. We've already got a team in place. Bausch Health has one of the largest portfolios around the world in this space, and that, we think, is crucial for how we will approach this category. The other thing I want to emphasize is that we think Bausch + Lomb's integrated business model is pivotal because we have capabilities across the consumer business, the contact lens business, the surgical business, as well as the pharmaceutical business. We think that integrated footprint is very important for us from a platform to help us be successful with new products; and we’ve seen real-life examples of that, as we launched our LUMIFY product as an example. On the second part of your question regarding the Lucentis biosimilar update, we are continuing to work on that. We have announced that there is a question that has come from the FDA regarding the submission. Our partner, who is working on this, has been asked for some additional information that the FDA is seeking. We are going to take the FDA comments on that, work with the FDA to revise our filing, and we'll be back with more specifics in terms of the timing of that product filing. But clearly, the biosimilar opportunity is very large in the United States, a $6 billion product category. Lucentis is roughly 1/3 of that. It's a big opportunity for us, and we look forward to bringing forward a biosimilar and will have more to comment there in the near future.
Operator, Operator
And your next question is coming from Robbie Marcus with JPMorgan.
Robbie Marcus, Analyst
Congratulations on your first quarter. I wanted to follow up on the first question about the spin from Bausch. What are the plans if the parent company or Bausch is unable to deleverage? How do you plan to address the capital structure moving forward, and what are the contingency plans?
Joe Papa, CEO
Sure. Let me take that one; Sam can add anything. Number one, we have specifically laid out the plans for how we will execute. As we've stated publicly, our plans will be that as we think through Bausch Health, and I want to keep most of our comments today to Bausch + Lomb, to be clear. But as we think about Bausch Health, they have stated and agreed that we will undertake a full separation or spin-off once Bausch Health gets to a leverage profile of 6.5 to 6.7x. And once we reach that point, we'll execute. Regarding that question, several different variables will need consideration. The first, obviously, will be the performance of Bausch Health; as they continue to improve their performance, there will be an opportunity to pay down more debt. It also will be the performance of the B&L business, of course. As B&L continues to perform, we'll enhance our capabilities, and this will also happen as Bausch Health monetizes the remaining 8.7%. That will obviously help with deleveraging. Lastly, the value of the Sulfa business will also be a consideration for Bausch Health as they evaluate their deleveraging strategy. We have plans in place to make this happen. As to what could happen if they don't deleverage, I’d prefer not to speculate on that. We believe that we have a solid plan to move forward with deleveraging, as we've publicly stated.
Operator, Operator
The next question is coming from Joanne Wuensch from Citi.
Joanne Wuensch, Analyst
Congrats on your first call. I want to spend some time on the contact lens market; we tend to divide between unit growth and reported revenue growth, or even organic revenue growth any way you want to look at it. Specifically, how much of your growth is coming from cannibalization of older lenses versus new fits? Can you pull this apart in the U.S. geography as well as abroad?
Joe Papa, CEO
Sure. Let me start on that question. First and foremost, I think what we've been looking at is in terms of our growth, looking at U.S. versus international. We've had a chance to show the U.S. share of our business growing from around 9% to the latest date of around 14.5%. So we've been able to show significant growth in the U.S., predominantly behind the growth of the newer products, both our Biotrue Ultra and importantly, our INFUSE product, the daily SiHy product. That’s probably the first thing to discuss in terms of overall growth and strong performance, especially in the U.S. where we’ve seen significant growth in our contact lens business. The second thing I would address regarding cannibalization is really related to our daily SiHy or INFUSE product. Remarkably, our rate of cannibalization of our existing products has been lower than expected. Instead, we've picked up share from our competitors, as well as new patient starts have come to our INFUSE products. We've been very content with what we've seen regarding cannibalization; it has been lower than we'd imagined. A large amount has come from other daily SiHy lenses. Importantly, we believe the issue in the current daily SiHy lenses prior to the launch of INFUSE has been that those existing products often caused issues with contact lens dryness. One of the features we were able to introduce with our product by incorporating protectants, electrolytes, and moisturizers into its formulation was the very high response we received from patients regarding the ability to wear our product all day long. We feel that’s an important aspect for our success with INFUSE, both in the U.S. and overseas. We clearly expect daily SiHy business to grow dramatically. When we launched INFUSE in the U.S., we have the best data available. Based on existing fit sets, we’ve achieved about 14% market share. This is particularly promising for us as we consider a product category in the U.S. projected to grow from about $1 billion to around $3 billion by 2030. We're enthusiastic about this growth opportunity, and while there may be some cannibalization of older brands, the majority so far has come from competitive products and new patient starts, which is probably the best response to your question.
Sam Eldessouky, CFO
And Joanna, just to add to what Joe said, we did include certain information on the products in our earnings deck, but you'll see that the buy-through grew in the quarter roughly about 8% organically, and also grew about 4% organically, notwithstanding the softness that we've seen in the Chinese lockdown.
Operator, Operator
Your next question comes from Pito Chickering from Deutsche Bank.
Pito Chickering, Analyst
Back in December and January, you were able to increase prices to help offset the inflationary pressures. Can you quantify for us what percentage of your portfolio you were able to increase those prices for and whether those increases had any negative impact on demand? If inflation continues going forward, are you still confident that you can keep on passing through these price increases to consumers without impacting demand?
Joe Papa, CEO
Great question. Let's start with the historical aspect. You're 100% correct that in January, we did take pricing. We took pricing on our prescription pharmaceutical product portfolio at mid-single digits. I want to clarify that when you raise prices, even at, say, 5%, you don't always achieve a 5% realized pricing; you’ll usually need to offset that with some additional gross to net reductions, et cetera. So, yes, we took pricing on our prescription business. Additionally, we took pricing on our consumer business, and in that case, those actions taken in January didn’t see realized pricing until March. We have to give retailers approximately 2 to 3 months of lead time to build that into their process. We observed no diminishment in demand for either of those categories. We are continually able to pass on that price increase. Regarding our vision contact lens business, we also took pricing there, in the mid-single digits, which occurred in January. Regarding the future outlook, we do recognize that inflation is genuine. We’ll look to take additional pricing as necessary. We have not observed a significant change in demand from previous pricing adjustments. We are committed to staying ahead in this regard. Beyond pricing, we are also implementing what we call Project CORE, which stands for cost optimization revenue enhancements. This initiative examines all P&L aspects to reduce obsolescence, enhance yield, and address the inflationary challenges proactively. We continuously monitor these pressures, including for resins, polymers, energy, and shipping. We believe Project CORE will help us navigate these challenges as we progress.
Sam Eldessouky, CFO
We are committed to staying ahead in this regard. Beyond pricing, we are also implementing what we call Project CORE, which stands for cost optimization revenue enhancements. This initiative examines all P&L aspects to reduce obsolescence, enhance yield, and address the inflationary challenges proactively. We continuously monitor these pressures, including for resins, polymers, energy, and shipping. We believe Project CORE will help us navigate these challenges as we progress.
Joe Papa, CEO
Next question, please.
Operator, Operator
The next question is coming from Cecilia Furlong with Morgan Stanley.
Cecilia Furlong, Analyst
I wanted to ask specifically on the capital equipment front, what you're seeing globally in terms of just demand for capital, especially in this environment, how you contemplated that in your Q2 outlook? Also, on XIPERE, I’d love to hear a bit more about the initial days of launch and how you're thinking about that product through the balance of this year in terms of growth.
Joe Papa, CEO
Sure. Let me start on the capital plan. One of the things I want to refer you to on Slide #27 of our presentation. As we did show, all of the top 10 products we have as a company, one of them is surgical equipment. That shows that, compared to a year ago, capital demand has been relatively flat. There was an increased demand for consumables, up 13%. Also, the implantable segment is up 4.5%. We did see increased demand for our overall surgical business, as we stated, but capital demand has slowed down a bit, which is not surprising to us. It's part of what we expected. We do see that improving as we navigate through some of the issues in the marketplace. But we did see growth clearly in the consumables and implantable sectors. Regarding XIPERE, we're excited about the response rate. We emphasized this very clearly in our presentation about the response rates. Based on the data, best corrected visual acuity has shown significant improvement. We had a 46.9% improvement compared to the control group, which only achieved a 15.6% improvement. That’s why we’re getting very favorable feedback from initial launches. To clarify, this is a product requiring additional training to inject into the suprachoroidal space, which could take time. However, we believe this provides an opportunity in the U.S. market, which is valued at around $400 million. The actual macular edema segment is smaller, about 1/3 of that or 25%. We genuinely believe XIPERE is positioned to aid a significant number of patients through this initial launch; we’re excited about the opportunities ahead, especially regarding reimbursement.
Operator, Operator
The next question is coming from Amit Hazan with Goldman Sachs.
Unidentified Analyst, Analyst
This is Phil on for Amit. I thought I'd ask a broader picture question as well. Balance sheet, very strong, strong free cash flow generation. Could you touch on capital allocation priorities for the company? Also, based on some prior questions, I am interested if burdening Bausch + Lomb with additional debt is a possibility in the future depending on how things play out with the parent company to help delever?
Sam Eldessouky, CFO
It's a good question. I'll start with the capital allocation. I’ll just focus on where we are and what we also have done in the last couple of years. I think in the past number of years, we invested roughly about $2 billion into the B&L business since 2018. About half of that came into R&D investments; about $700 million of that $2 billion was in CapEx investment. That was very important for us to invest in our platform to enable us to see what we’re witnessing today in terms of launches and products bringing to the market. As we progress, we’ll maintain a similar level of investment in R&D, about 7% of sales. Regarding CapEx, we're considering about $200 million to $225 million. We've built a good capacity to support launches, and we’re focused on future growth. I think that this investment will remain a key priority for us. We discussed the opportunity we now have as a standalone business to leverage cash and balance sheet towards strategic acquisitions. We aim for bolt-on type acquisitions that can enhance our marketplace presence, with the right infrastructure and our capabilities. As for the debt on B&L, we raised about $2.5 billion as part of the IPO. It’s essential to reflect on the capital structure we deployed. We devised a sufficient capital structure for B&L to ensure an investment-grade rating at the time of the spinoff. That comprehensive plan underlines my thinking about the future of our capital structure and leverage.
Joe Papa, CEO
If I can just add a little bit to what Sam said, because I agree with everything he said, it’s worth considering that we see the eye health market as a great opportunity. It's supported by strong emergence: individuals over age 65 using 10 times more eye health products than those under 65, for example. Additionally, the population is set to grow, while the prevalence of myopia is on the rise, escalating from 20% to 40% and possibly heading towards 50% of the population. Patients with diabetes also represent a significant driving force. For all these reasons, we believe now is an excellent time to invest in the eye health business, whether through organic growth opportunities we mentioned earlier or through inorganic growth strategies such as M&A. We anticipate that the market will grow at around 4% to 5%. Our aim is to match or exceed that growth rate while leveraging new products alongside pursuing inorganic growth options. Moving forward, we’re not looking at doing multibillion-dollar transactions but are keen on exploring opportunities to expand with small-bolt transactions that can complement our capabilities.
Operator, Operator
Your final question comes from Zach Weiner from Jefferies.
Zach Weiner, Analyst
I just wanted to hit on the 14% market share that you guys talked about in regions where you have fit sets. Any color on expanding that more broadly across the U.S.? Where do you think that you can get that share?
Joe Papa, CEO
Yes. That's an excellent question. I want to clarify that the data on that 14% was specific to the U.S. data in regions where we have fit sets. In the U.S., we have been able to achieve a 14% share of our INFUSE products. So, that nuance is significant. However, do we believe there’s an opportunity to continue to expand? Absolutely. Look to us as we’ve increased our capacity to make contact lenses on the SiHy daily lines. As we do that, we’ll have the opportunity to introduce additional fit sets or samples across these broad categories in the U.S., but also how we’ll view this globally. As I mentioned, by the end of 2021, we had launched in approximately 5 markets; now we're up to about 24 markets for the SiHy Daily lenses. Therefore, we consider it part of our mission to continue moving forward with INFUSE, confident that we can solidify our market position. Notably, we predict that the U.S. SiHy daily market will grow from around $1 billion to approximately $3 billion by 2030-2031. The international aspect will also expand, from an estimated $1.5 billion to around $3.7 billion. This outlook presents an extensive market opportunity, further underscoring our enthusiasm and commitment to INFUSE, as it addresses challenges faced with dryness in contact lenses and receives outstanding feedback from patients who tested it. Overall, I believe we have a great timeline ahead of us for increased market share and assurance in our growth strategy. Thank you very much for the question. That concludes our presentation and Q&A today. Thank you for joining, and we look forward to getting back and talking to you in the near future. Have a great day, everyone.
Operator, Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.