Great. Thanks everyone. We'll go ahead and get started with our next panel. I am very excited to be sitting here with Bausch Health management team. We've got CFO Tom Vadaketh here to my left, and to his left, we have Will Woodfield, the treasurer of the company. Thank you guys very much for joining us today. You know, maybe just to start out, you know, there's obviously been a lot of focus and debate around the transaction and the separation of the Bausch + Lomb business from Bausch Pharma. I think, you know, to just level set folks, I'd love to hear from you know, how you're thinking about the pro forma, you know, cash flow story for Bausch Health, to start, and then maybe we can go into some of the debates around, some of the exogenous factors that could potentially impact the cash flow going forward. Yeah, sure. Nice to meet all of you and been here. My name is Tom Vadaketh. Maybe just as a backdrop, I'm sure all of you know a bout the Bausch + Lomb IPO was closed on Tuesday this week. As of Tuesday, I've taken over as the CFO of Bausch Health. In addition, Tom Appio here has taken over as the CEO of Bausch Health. On the business, the remainco business consists of the pharma business and the Solta business. Together, that's about a $4.5 billion revenue business. EBITDA margins in the mid-50s%. You're talking about $2.3billion-$2.5 billion of EBITDA. The business is highly cash generative. In any typical year, we tend to convert about 80% or so into unlevered free cash flow. You know, that's the story essentially. There is enough power there to obviously service the debt and then make some choices on capital allocation. Got it. You know, in terms of, you know, thinking about the kind of pro forma capital structure, you know, Bausch has said, from the start that, maybe not start, but more recently that the pro forma leverage ratio for Bausch Health upon spin will be 6.5x-6.7x. Going forward, as you think about that cash flow and the EBITDA trajectory, you've thought about the ability to delever, to be about 0.75 turns per year. I'd be curious, can you maybe unpack that deleveraging, you know, capability for me a little bit and help me think about, you know, how much is cash flow generation, versus, EBITDA growth, versus any other exogenous factors, whether it's M&A or things like that, which is probably tough to answer. But I'd just be curious how to think about, the actual ability to delever by three-quarters of a turn per year pro forma for the transaction and, you know, where that deleveraging, you know, will really come from. Yeah, sure. Yeah. What we've said is the company has the ability or capability to do up to 0.75x a year. Obviously, we've got to make the capital allocation decisions, but it's gonna come from two places. Obviously, the cash itself is being generated. Then as EBITDA grows, that adds, you know, a multiplier effect, obviously. The root of it is the cash generation and the actual debt pay down. That'll be the bulk of it. What was the second part of the question? Well, I guess, you know, in addition to that, actually it's more of a follow-up, but, you know, you sort of add, you know, to all of these statements the, you know, the caveat that while we have the ability, you know, to delever by three-quarters of a turn, you know, we'll ultimately. Yeah. Have to think about what the right capital allocation is. You know, as you know, you as CFO, how are you thinking about weighing these factors going forward? Yeah. The priority is debt pay down for me. It's worked for the company. The company since 2015, 2016 has had the same approach. It's, you know, worked pretty well. Paul Herendeen, as some of you all know, was the CFO, and then Sam recently. That will be the priority, and that'll be where, you know, unless there are alternative uses of the cash that are attractive from a return perspective, and obviously M&A and business development is something that we will look at. Yeah, that's the balance. Got it. You know, if you think about the business generating, you know, roughly $1 billion of free cash flow maybe on a go-forward basis, and you're looking at your cap structure, obviously there's been a lot of credit market, you know, volatility these days. The history of, you know, Bausch has really been one anchored on going after earliest maturities first. The world's changed, and the reality is, you know, your dollar goes a whole lot, you know, further to the extent that you go after the back end of the debt cap stack with bonds trading in the mid-fifties. You know, how are you thinking about that opportunity, particularly given the fact that there, you know, are still a lot of, you know, questions about how long it might take, you know, for you to actually get to the 6.5x-7x, you know, goal, and then we can talk about sort of the risks of this long term? Yeah. So it's, you know, I can't, you know, tell you what we're gonna do, but clearly, you know, we've just come out of the gate here on Tuesday. We're very aware of where some of these long bonds are trading. It's something that we're looking at. Historically, as you know, the companies tended to favor dealing with the near-term maturities first, and that has really, you know, worked for the company and for bondholders, I believe. As a result of all the transactions that we executed on Tuesday, the nearest maturity now for us is in 2025. We have about $3 billion of debt maturing then. That gives us some flexibility, for sure, but that is something that we are looking at right now, what to do and how to, you know, basically what you do. You know, do you do the near terms? Do you do a combination, et cetera? Mm-hmm. In terms of the sources of, you know, capital that you could potentially use to go after debt, you obviously have some transactions that, you know, you've looked at in the capital markets. You know, you have some cash on the balance sheet. You have revolver. Would you be open to using your revolver to buy back unsecured bonds here? Is that something that, you know, might actually be worthwhile considering given, you know, the huge disconnect? Look, we're gonna look at it. My personal bias is to use operational cash. Mm-hmm. That's what I would rather do. As I told you before, the company is naturally highly cash generative, and I expect us to perform. We've put out our cash flow forecast as part of our guidance for the year. For me, I'd rather use that. Mm-hmm. Now, we will look at, uhm you know, the revolver, et cetera, et cetera, but my personal bias is to use operational cash. Fair enough. You know, the big debate, you know, around the Bausch Health story has, you know, been focused on a couple of what I'd call, you know, exogenous factors. The first one that, you know, most investors, you know, are really trying to understand is the LOE with Xifaxan and the Norwich trial, with which we're waiting for, you know, a judge's decision in early August. You know, you have been very vocal about, you know, your position of strength, with regards to the 26 patents that cover Xifaxan. You've been very vocal about the fact that Teva, Sun, and Sandoz all settled for launch dates in 2028 and beyond. You know, the other side of the argument is this time it might be a little different because Norwich is not necessarily challenged the polymorph patents as much as there's, you know, risk that they may have success around challenging the method of use patents. Maybe you can just help us think about, you know, across these 26 patents, how to think about, first of all, when the polymorphs expire, when the method of use patents expire, and really what your view is on, you know, the strength of the method of use patents as it relates to this specific trial. Yes. I mean, we think the trial went well for us. We were confident before the trial, and coming out of the trial, we're more confident. I think you heard Joe Papa talk about that in the earnings call on Tuesday. On the polymorphs, the LOEs expire between 2024 and 2027, and the method of use patents run out in 2029. As you know, we have reached a settlement with the three companies you mentioned, where they can launch the generics on January 1st, 2028. We frankly feel confident across all of these patents. We think that the trial went well. Our evidence went in well. The judge will issue a ruling sometime in August. And you know, I'll just stop there. You know, I don't want to get into the science of it and that sort of stuff. Sure. I'm too new for that. Fair enough. At, at- Fair enough. I guess as, you know, we think about the debates in the market, there is, you know, some concern that if you do lose- Actually, I just wanna mention one more thing. This is not a comment on Norwich or Alvogen, et cetera, but in addition to that, for any of these companies that are gonna put out a generic, the FDA has put out an initial statement that they're likely to require a bioequivalence demonstration, in vivo bioequivalence. They haven't finalized the guidance, but they've indicated that they're going to require that. I do not know where either of these, you know, where any of these four companies are, whether they've conducted the trials and whether they're able to demonstrate that, but that's new guidance that's coming out. Incremental hurdle to them bringing Yeah. a viable generic to market, even if there is some type of success on their end. Right. With regard to the trial. Yeah. Fair enough. On your most recent earnings call, you know, for the first time, I heard a statement from the management team, where in this hypothetical, where Norwich does actually achieve some success, presumably on the method of use challenge, that you would rethink the timing of the spin. I'd like to maybe just unpack that concept because, you know, from my perspective, whether you spin at the end of 2022 or at the end of 2023 or whenever, it doesn't necessarily change the outcome for the RemainCo when you think about an LOE event in, say, you know, 2025, for example, or earlier than 2028. I'd be curious, you know, how, as, you know, credit investors or equity investors, how are we supposed to think about what that statement meant, as, you know, it relates to, you know, the commitment to ultimately, you know, go down this path of, you know, what you originally planned? Yeah. I think, you know, I'm new, taking over as a CFO since Tuesday. But I've been with the company since January. You know, I've had a chance to participate in management meetings and board meetings. One thing that I'll just remind everybody, the objective of this whole strategic pathway from the board's perspective as well as the management team, is to create three strong companies, three great companies. You know, the team and the board are gonna look at it from that context. It is not a spin at all costs type of strategy. If that were to happen, and again, we do not think it's gonna happen, we think we have a very strong case and we're confident, but we'll see. If that were to happen, we would have to talk about it. You know, are we gonna achieve that objective of having three strong companies out there? I think that's what I think it was Joe who made those remarks. Yep. I don't know if it was, you know, certainly from my perspective, it wasn't a change in direction or anything like that. You know, the intention all along has been to make sure that each of these three companies is strong and can be successful and for a long time to come. Got it. I guess maybe if I just think mathematically about it a little bit. Let's say that, you know, the method of use scenario does play out and say that everybody comes into the market 2025, right? You know, three years earlier than people planned. Theoretically, you know, the Xifaxan and EBITDA would be impacted. Obviously, I wanna get into the business in a little bit, but, you know, that's not the entire part of this business. You would have some years up until then to generate free cash flow and, you know, delever the balance sheet. The way I sort of look at it is, you know, it's really just accelerating the LOE theoretically by three years, right? You can start to think about, okay, maybe that's $1.5billion -$2 billion of kinda lost value relative to your prior expectations. Is that maybe sort of an easy kinda back-of-the-envelope way to think about it, potentially? I mean, numerically, you're in the right zone. You know, from my perspective, it would be a change in our expectations. Mm-hmm ... and the modeling we've done and the planning we've done. We would have to take a hard look again at what makes sense. Got it. You're right. I mean, I think the numbers are probably in the right ZIP code. Yeah. You know, as it relates to the efforts to achieve the 7.6x leverage goal to allow for you to unrestrict the future SpinCo. I think you said on the recent earnings call that you weren't you know currently at that threshold. Can you just give us an update on sort of you know maybe where you are and you know what needs to happen in order to get to that you know unrestriction level? Yeah, it's a matter of time, right? We haven't disclosed where we are. Mm-hmm. We're not at 7.6. We're higher. It's gonna be a matter of time of either reducing debt or obviously the denominator, the EBITDA increasing on an LTM basis. Got it. It's as simple as that. You know, why aren't we there? Obviously, it was a smaller IPO, right? All along, we've been thinking about a 20% IPO and, frankly, at share prices that were higher. The market hasn't cooperated, and so both the size and the pricing was much less, and that has impacted where we came out. Okay, great. Maybe just shifting over to the Granite Trust. Actually, if you don't mind, Craig- Sure. I'll just chime in to what we've been talking about. There's that 7.6x figure for unrestriction on the credit agreement side, but we also have all of our indentures on the bond side, and those require a fixed charge coverage ratio incurrence of better than 2-to-1 in order to unrestrict Bausch + Lomb. That's just something that people should keep in mind as well when they're modeling and when they're thinking about the timelines. Right. And then maybe just shifting over to the Granite Trust transaction. I believe you know a little while back you received the challenge from the IRS. I think you're sort of typically required to respond within 60 to 90 days, and then they you know ultimately determine if they agree with the response or disagree with the response and sort of take it forward from there. Maybe you can just bring folks up to speed because I think you know in November at the Credit Suisse healthcare analyst you provided a couple of you know pretty helpful slides that you know show some strong arguments for why you know case law supports you know the transaction. I know that there have also been some other arguments that have come out more recently, you know, arguing that, you know, maybe this is more of a you know, a tax-free type spin. I'd be curious just if you can kinda help us, you know, better understand the strength of your argument, where you think things go forward. Yeah. The facts haven't changed at all, you know, since we first informed everybody of the matter and then the Credit Suisse conference. You know, we continue to remain highly confident in this matter. There's something like 70 years of case law that supports this. Like you said, we shared some of the details at the Credit Suisse presentation, which I hope everyone can get access to. Procedurally, we received a notice of what's known as a notice of proposed adjustments. That's what we received in October, I think it was, of 2021. The next step is a formal notification from the IRS if they conclude as such. I think it's called a proposed tax deficiency. Mm-hmm. Some words to that effect. We're waiting for that. We have not received that yet. As soon as that comes, you know, we have our response prepared and then the process would start. It's a matter of time. The IRS has to, you know, do what they do, and then we'll go from there. We, you know, like I said, we remain, you know, very confident. At the time. This transaction that we're talking about happened in 2017. At the time, you can imagine before doing something like that we engaged with some of the top advisors in the country, top lawyers, accountants. When we received the notice in October, we did the same thing and came out even feeling even more confident, about the position. We're waiting to hear back from the IRS so that we can formally respond. Got it. Hopefully bring the matter to an end. If it doesn't go to an end, and let's say it does sort of wind its way into court, curious. My understanding is the court process can be a fairly, like, extended period. Do you have a sense for, you know, how long these things typically sort of play out? I've heard years when you start to incorporate appeal processes and things like that. Do you have a good sense if you guys can't arrive, you know, on the same page, how to think about the timing? I think that's just a hypothetical. I mean, we feel that the case law and the facts are so strongly on our side, frankly. Mm-hmm. I mean, let's see what happens, right? Yeah. I'm not expecting that outcome. Got it. Great. Maybe now just shifting over to the business a little bit. So when we think about Bausch Health, you know, obviously Xifaxan is a, you know, core, you know, driver of cash flow and growth for the business. If I think about this past quarter, we did see that, you know, growth slowed a little bit. You know, I'd love to just maybe dig into, you know, as an analyst, how should I think about modeling Xifaxan going forward? I know there have been some exogenous factors with regards to whether it's COVID or other factors. I also know that, you know, as a business you've, you know, increased some investment with regards to sales and marketing. You know, in the past I know that the growth rate of Xifaxan has typically responded very well to investment in, you know, marketing. How should we think about the growth trajectory for Xifaxan maybe over the next, you know, year, few years? Is this a, you know, 5% grower, a 10% grower, 15% grower? How's the, you know, what's the market opportunity look like from your perspective? Yeah. Maybe I'll talk near-term, and then we can talk about the medium-term as well. On the near-term basis, we announced a price increase at the end of last year, and we're getting pretty good realization this year. That should be at a minimum, say, low- to mid-single digits coming through. In Q1, just so that I can explain it for everyone, there were two factors that we saw. The Omicron virus had an impact in the U.S. healthcare. We saw our TRXs about flat, you know, up a little bit, frankly, but not the kind of growth that we were expecting to see. It was slower than we expected. The major year-on-year impact was an inventory build that had occurred in Q1 of last year, at the wholesalers, and which didn't recur this year. It just created a bit of an unfavorable compare. It wasn't a surprise to us. We knew obviously that occurred last year, and it was part of our planning. This year, I mean, hoping, you know, obviously Omicron's kind of waned off right now. We think that we should start to see, you know, we hope sort of mid-single digit type of level. We haven't guided to it, but that, you know, with the price and some modest volume, we need to see those the TRXs come through. Mm-hmm. So far, you know, there's still some weakness there. Over the medium term, you know, Tom Appio, the CEO, and I have just started. With the team we see white space in this market, both in the IBS-D, where there's a huge population with unmet needs, and we believe we have a drug that works. Then also on the HE side, a very large amount of white space. The extra investment that you talked about is in A&P, advertising and promotion for this year. We expect to start spending that from Q2 into the second half, and mainly targeted on the IBS-D side, and we will see if that works or not. We're expecting, like you said, to see similar returns from past investments. Over the medium term, you know, you would have heard Tom Appio talk about it, our strategy is to accelerate growth in this area. This is a growth engine, we believe, because of all this white space, and then also accelerate growth in the international market, which again, we think, it's had a very nice first quarter with organic growth of 8%. We can see that, you know, again, that's a business that is a very highly diversified business, branded generics. It's been a little bit under the radar screen. Mm-hmm. It's a billion-dollar business, and profitable, and has no LOE issues. We should see nice growth there. Over the medium term, acceleration of that one and Xifaxan is what we believe will carry us through. On the diversified segment, which has been the victim of LOEs the last few years, most of those LOEs are behind us at the moment, by now. We expect the sort of downward slope to flatten out over this year and next, and then the business should stabilize. We've always run those businesses to maximize cash, and that continues to be the strategy. Okay, great. Maybe, you know, just touching on Ortho Dermatologics for a minute. You know, over the past few years, you've taken some steps to stabilize that business. Maybe you can just help us kinda understand beneath that Ortho Dermatologics layer, you know, what's sort of driving stability, and how should we think about the trajectory there as well? Yeah. So we think we've, you know, addressed what we wanted to address in terms of the cost structure and all of that stuff. We wanted to basically get a fit for purpose sort of organization for that size of business. It had been declining. That sort of slowed down for the last couple of quarters, and we should see a flattening out and a slight increase going forward. It's not a large business. There's a couple of good products, but, you know, there, as you know, we've the payer side is difficult. That's been the challenge that the company's had for many years. We'll have to be choiceful about what we invest in and how we expect that business to perform going forward. Yeah, it's not the growth driver of the company, put it that way. We think that the actions we've taken have had the desired results. Maybe just, you know, stepping back and, you know, revisiting the M&A discussion a little bit. You know, obviously, whether, you know, whenever Xifaxan goes off patent, it's obviously at some point gonna go off patent, you've got to, you know, as CFO and obviously, you know, thinking sort of more long term here, you've got to set the company up, you know, for success beyond, you know, the next five or 10 years. You know, how do you think about, you know, where to deploy capital from an M&A standpoint? How do you think about the pipeline and, you know, how do you balance that against, you know, kinda, you know, where the debt cap stack is trading? Obviously, you know, you know, with where your bonds are trading, there's not a whole lot of, like, liquidity available to you in the markets today. How do you sort of balance all of these issues to ultimately prepare the company for a longer-term path? Yeah. Well, as I said earlier, you know, in terms of capital allocation, the debt paydown is a priority for me and for the company, and that it'll remain so. And to your point, doing large deals are probably not on the cards in the near future. If we can get a few more Trulances, that was an unusual opportunity. Those are perfect, particularly if they're in adjacencies where we can just leverage our platform, the very strong sales force we have in GI, to grow the businesses. Yeah. We have not contemplated nor are there any plans right now to do a very large acquisition that would require major financing. The focus is to manage what we have. As I said just a few minutes ago, I think that there is a lot of opportunity to see growth and increase the size of a company and increase revenue within Xifaxan and international. We'll go from there. I would also, you know, sort of be remiss if I didn't mention our pipeline. We do have. It's not a very, you know, not a massive pipeline, but we have some very exciting products in the GI space and then also one or two in dermatology that are showing a lot of promise. These will be, you know, new novel formulations based on rifaximin or Xifaxan and then in dermatology. Those as well, over the longer term, should give us growth. Those trials are progressing well. Mm-hmm We're excited about them. When I just going back to the M&A discussion. When I do think about, you know, access to capital, can you just remind us in terms of secured indebtedness capacity, what you do have today? Will, you wanna take that? Sure. We have a new credit agreement, as you know, but it still has the maintenance covenant there on the 4x. We have our indentures. Our indentures have those incurrence tests of 3.5x. We have a credit facility basket of $2.5 billion that we haven't used. We feel like we have a fair amount of secure capacity. Okay, great. I guess just lastly, I mean, obviously the equity and debt markets, you know, are on unique times right now, but you know, the move over the past week, you know, across both your stock and bonds was, you know, pretty sizable move. I'd be curious, you know, as you thought about, you know, the earnings print, right? Like, it wasn't, you know, massive change in terms of guidance per se, but you did cut guidance. What do you think, like, today, the market's, you know, kind of missing about the story, you know, when you look at your bonds trading in the mid-fifties or, you know, kind of the recent move seen at the equity? It's probably above my pay grade. You guys, the folks in this room are probably better positioned to answer that. I think you, in my view, you touched on the few issues, you know. There's the Norwich trial, the Granite Trust, those kinds of things. There's a little bit of noise out there that has driven a little bit of uncertainty. In both of these issues, you know, there is no new news. You know, we have, you know, and I think we've discussed this here in this call. We continue to be confident in both of these, and we just have to see them being, you know, getting resolved. Other than that, I would not dare give you an opinion on what the markets are doing. Fair enough. Great. Well, with that, we're out of time, so I wanna thank everybody for joining us today, and we'll be moving to keynote for our next session. Thanks. Thank you guys very much. Thank you.