A message to shareholders from Joe Papa

A message to shareholders from Joe Papa

I continue to view Bausch Health as the turnaround opportunity of a lifetime. The Company made considerable progress in 2018, and we are still gaining momentum, which we believe will carry over into 2019 and beyond.

In the past two years, we’ve completed a number of divestitures to streamline operations, continued to pay down debt, resolved numerous key legacy issues, launched new products and realigned into four reporting segments.

We also changed our name to Bausch Health Companies Inc., which is a logical step in our transformation. We consider Bausch Health to be a new company—one that develops, manufactures and markets a wide range of pharmaceutical, medical device and over-the-counter products, primarily in the therapeutic areas of eye health, gastroenterology and dermatology. The Bausch Health name not only reflects a long-standing dedication to innovation, but also evokes our mission of improving the lives of patients with our health care products.

We see 2019 as a year of growth and a strategic pivot to offense—driven by several important new products, as well as debt paydown and bolt-on opportunities to enhance our core businesses. Looking back at 2018, there were several major factors that contributed to our transformation.

Who We Are

Our two largest reporting segments continued to drive our performance: Bausch + Lomb/International, which represented approximately 56% of the Company’s total revenues in 2018, and Salix, which represented approximately 21% of the Company’s total revenues in 2018.

Bausch + Lomb is a fully integrated eye care business, with extensive product portfolios in Vision Care, Surgical, Prescription Ophthalmology and Consumer Health Care. Bausch + Lomb maintains a large global footprint with a major presence in such rapidly growing emerging markets as China, Japan and India. In 2018, our U.S. contact lens business outpaced the industry, with greater than 13% market growth1. Additionally, PreserVision® and Ocuvite® combined are the No. 1 brands and No. 1 drivers of growth in the eye vitamin category.

Growth within our Salix gastroenterology business comes primarily from several key brands. The past year saw impressive revenue growth for XIFAXAN® (22%), RELISTOR® (37%) and APRISO® (13%). XIFAXAN® notably had a marked increase in new prescriptions written by primary care physicians as our 2017 investment into building a primary care sales team has continued to yield strong results.

In March 2019, we acquired certain assets of Synergy Pharmaceuticals Inc., a biopharmaceutical company focused on gastrointestinal therapies. Synergy’s flagship product, TRULANCE®, is approved for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation. The acquisition of the assets of Synergy will enhance our Salix business. We believe TRULANCE® is a natural complement to XIFAXAN® and, with the scale and strength of our sales footprint in GI and primary care, our Salix team will be able to offer physicians and patients multiple treatment options that span the types of irritable bowel syndrome.

The Ortho Dermatologics business continues to stabilize as we remain committed to investing in new dermatology solutions, including a continued focus on psoriasis, an area with a great unmet need. Today in the United States, there are approximately 7.5 million patients suffering from psoriasis, with as many as 260,000 new cases diagnosed each year.

We recently moved Solta Medical, our global aesthetics business, into our Ortho Dermatologics segment, a shift we believe will enable us to better serve both our physician customers and patients. During 2018, Solta delivered exceptional growth compared to 2017.

Launching new products

Innovation remains critical to our future, and we anticipate our R&D investment to grow by approximately 10% in 2019 versus 2018. Our focus on innovation has yielded a wide range of significant launches:

  • LUMIFY™ is the only over-the-counter eye drop with low-dose brimonidine for the treatment of eye redness. Since its launch in May 2018, LUMIFY™ has become the number one product in the redness reliever category with an approximately 28% market share2
  • In late 2017, we launched VYZULTA®, the first and only FDA-approved nitric oxide-releasing agent to lower intraocular pressure in patients with glaucoma or ocular hypertension. VYZULTA® is now available to a majority of commercial and Part D coverage plans and was approved in Canada in January 2019.
  • In September 2018, Bausch + Lomb launched AQUALOX® daily disposable silicone hydrogel (SiHy) contact lenses in Japan.
  • To enhance our Salix business, we have engaged in multiple strategic partnerships that we believe will help drive long-term growth, including LUCEMYRA™ (our co-promotion arrangement with US WorldMeds, LLC), the first and only non-opioid medication indicated for mitigation of opioid withdrawal symptoms; DOPTELET® (our co-promotion arrangement with Dova Pharmaceuticals), the first FDA-approved drug for thrombocytopenia in chronic liver disease patients scheduled to undergo a procedure; and PLENVU® (our license arrangement with Norgine B.V.). a next generation bowel cleansing preparation for colonoscopies.
  • In early 2018, we expanded our launch of SILIQ™, the lowest priced injectable biologic on the market for moderate-to-severe psoriasis.
  • Ortho Dermatologics launched BRYHALI™ Lotion, a potent to super-potent corticosteroid for the topical treatment of plaque psoriasis, in November 2018.
  • Ortho Dermatologics also launched two acne treatments in 2018: RETIN-A MICRO® (in a new strength) and ALTRENO™.

Additionally, Bausch + Lomb ULTRA® Multifocal for Astigmatism contact lenses are expected to launch in mid-2019, along with an expansion of our Biotrue® ONEday daily disposable lens parameter offerings.

We continue to be strategically focused on our pipeline by investing in innovation to bring new products to market, which in turn will enable us to continue to invest in our future.

Some highlights include:

  • Loteprednol etabonate ophthalmic gel, 0.38% for ocular inflammation, approved by the FDA in late February 2019;
  • DUOBRII™3, a topical lotion for the treatment of plaque psoriasis, for which we expect an FDA decision shortly.
  • Four late-stage dermatology candidates to treat acne and atopic dermatitis, including one we anticipate filing in 2019; and
  • Multiple clinical programs to expand the use of rifaximin to reach additional patient populations.

Several products I’ve already mentioned also make up our Significant Seven, which are the key products we believe will collectively achieve more than $1 billion in annualized peak sales revenue by the end of 2022. The Significant Seven are AQUALOX®, BRYHALI™, DUOBRII™3, LUMIFY™, RELISTOR® (for opioid-induced constipation), SILIQ™ and VYZULTA®. In 2019, revenue generated by the Significant Seven is expected to approximately double compared to 2018.

Resolving legacy issues and repaying our debt

By the end of 2018, we reduced our debt by more than $7.6 billion since the first quarter of 2016. We executed on repaying more than $1 billion in debt with cash generated from operations in 2018. In addition to dramatically reducing the amount of our debt, we successfully extended our maturities, which have given us more flexibility to make strategic decisions, such as the capital investment in our Rochester, New York and Waterford, Ireland manufacturing sites to support the anticipated global demand for our SiHy daily contact lenses.

Our legal team continues to make outstanding contributions, achieving dismissals or other positive outcomes in resolving litigation, disputes and investigations in some 68 matters in 2018. Some key resolutions include the XIFAXAN® intellectual property litigation, which we believe, preserves market exclusivity until 2028; the Securities and Exchange Commission’s legacy investigation of Salix4, the Allergan securities litigation; and the outstanding arbitration with Alfasigma S.p.A., which has allowed us to continue our collaboration on new formulations for rifaximin.

In 2018, we also established our Bausch Foundation, with the goal of improving the lives of patients by providing access to safe, effective medicines and financially supporting health care education and causes around the world.

In closing, we anticipate further growth and improvements in operational efficiency, none of which would be possible without the contributions of our more than 21,000 talented and dedicated employees worldwide. We are proud that every day, more than 150 million people around the world use a Bausch Health product.

While there is more work to do, we are now a very different company—a world-class organization well-positioned to return to growth.

I’d like to commend all our employees, and our management team, who are making this transformation possible. Their hard work and commitment is essential to our success.

I also want to take this opportunity to thank our shareholders, who believe in our Company, our strategy and our ability to execute. Thank you for your continued confidence and support.


Joseph C. Papa
Chairman of the Board and Chief Executive Officer

This letter to shareholders can be found in Bausch Health’s 2018 Annual Report

1 Third party data on file and internal estimates
2 Retail Dollar Share for total United States (MULO) for 4 weeks ending Feb. 10, 2019, according to IRI.
3 Provisional name
4 Subject to approval by the U.S. District Court for the Southern District of New York