Bausch Health Companies Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing reports annual results; standalone fourth-quarter financial values are not clearly provided. Amounts are in U.S. dollars unless stated otherwise.
Business context
Bausch Health is a global specialty pharmaceutical and medical-device company operating through Salix, International, Solta Medical, Diversified and Bausch + Lomb. It owns approximately 88% of publicly traded Bausch + Lomb, whose results are consolidated. Products are marketed in about 90 countries. The U.S. and Puerto Rico generated approximately 59% of 2023 revenue.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $8.757 billion | $8.124 billion |
| Operating income | $963 million | $454 million |
| Net loss | $611 million | $212 million |
| Net loss attributable to Bausch Health; loss per share | $592 million; $1.62 | $225 million; $0.62 |
| Cash from operating activities | $1.032 billion | Cash used: $728 million |
| Cash, cash equivalents, restricted cash and settlement deposits at year-end | $962 million | $591 million |
| Contractual principal debt | $21.006 billion | $19.110 billion |
Revenue grew 8%; organic revenue growth, a non-GAAP measure, was 7%. Operating income margin was approximately 11.0%, compared with 5.6% in 2022. Product sales were $8.663 billion; cost of goods sold excluding intangible amortization and impairments was $2.519 billion, or 29.1% of product sales. Segment profit is a management measure that excludes specified corporate and other costs; total segment profit was $3.610 billion, or 41% of revenue, versus $3.434 billion, or 42%, in 2022.
Revenue growth reflected higher volumes, improved net pricing and acquisitions, partly offset by unfavorable foreign exchange, divestitures and discontinuations. Operating income improved despite higher selling, general and administrative expense and R&D, chiefly because goodwill impairments and intangible amortization were lower. The annual net loss increased, in part because 2022 included an $875 million gain on debt extinguishment; 2023 recorded only a $1 million gain. Interest expense was $1.328 billion, and the reported expense does not represent the full contractual interest burden because some interest payments reduce the accounting premium on exchanged notes.
Operating cash flow improved substantially year over year, but the comparison was affected by $1.572 billion of legal-settlement payments in 2022, insurance recoveries in 2023, business performance and debt-interest cash-flow classification. Working capital used $582 million in 2023, including increases in inventory of $322 million and trade receivables of $195 million. Investing activities used $2.145 billion, primarily for acquisitions; financing activities provided $1.475 billion. Year-end current assets were $5.596 billion and current liabilities were $4.302 billion. The balance sheet reported a total deficit of $82 million, including a $1.022 billion deficit attributable to Bausch Health shareholders.
Long-term debt, net of premiums, discounts and issuance costs, was $22.388 billion. Scheduled contractual principal maturities and mandatory payments total $21.006 billion, including $2.790 billion in 2025 and $6.748 billion in 2027. The weighted-average stated debt rate was 8.05%. Bausch Health was in compliance with its financial maintenance covenant at year-end and expected to remain compliant and meet debt service over the next 12 months under its current forecast. Bausch + Lomb cash and borrowing capacity are generally not available to Bausch Health absent a dividend.
Segments and material changes
| Segment | FY 2023 revenue | Change from 2022 |
|---|---|---|
| Salix | $2.250 billion | +8% |
| International | $1.071 billion | +8% |
| Solta Medical | $347 million | +16% |
| Diversified | $943 million | −4% |
| Bausch + Lomb | $4.146 billion | +10% |
Xifaxan generated $1.810 billion, about 80% of Salix revenue and approximately 21% of company revenue. Bausch + Lomb’s growth included $141 million of acquisition-related sales. Its September 2023 XIIDRA acquisition involved a $1.750 billion upfront payment, financed with new Bausch + Lomb debt, and up to $750 million of potential future milestone payments. Bausch + Lomb also acquired the Blink product line and AcuFocus.
Goodwill impairment charges were $493 million in 2023, down from $824 million in 2022; 2023 charges affected Dermatology, Neurology and Generics. The company also recorded $54 million of asset impairments, including $37 million related to Uceris Foam after generic entry. R&D expense rose 14% to $604 million; management cited more than 90 pipeline projects. A voluntary recall of Emerade auto-injectors resulted in approximately $14 million of inventory, returns and other costs in 2023.
Outlook, risks and unusual items
- Outlook and liquidity: The filing provides no specific consolidated 2024 revenue or earnings guidance. Management expects available liquidity sources to meet current needs for the next 12 months and expects covenant compliance under its forecast. For 2024, it estimated approximately $1.8 billion of mandatory debt amortization and interest payments, $320 million of capital expenditures, $40 million of contingent consideration payments and $11 million of pension and postretirement payments.
- Bausch + Lomb separation: Completion of the planned full separation remains conditional on targeted debt leverage ratios, shareholder and other approvals, and other considerations. Timing and structure are uncertain; the existing arrangement may be terminated after December 31, 2024 unless extended. The company cites potential litigation, tax, transition-service, contract-replacement and separation-cost risks.
- Xifaxan litigation: A 2022 court decision found certain patents covering Xifaxan for IBS-D invalid, while finding HE-related patents valid and infringed. Bausch Health appealed; oral argument occurred in January 2024, with a decision pending as of the filing. A successful generic launch earlier than expected could materially affect revenue, cash flows and asset values.
- Other legal and contingent exposures: The company reported $344 million of accrued current loss contingencies for probable and reasonably estimable matters. It faces ongoing securities opt-out litigation, other legacy-practice investigations and litigation, generic-pricing antitrust cases, and product-related claims. Outcomes and additional losses are uncertain. A separate IRS dispute over a 2017 capital loss deduction carried a stated worst-case potential tax exposure of up to $2.1 billion excluding penalties and interest; a tentative settlement was reached but remained subject to review and approval.
- Debt and operating risks: High debt service, restrictive covenants, variable interest rates, refinancing access and limited availability of Bausch + Lomb cash are material risks. Other significant risks include Xifaxan concentration, generic competition, pricing and reimbursement pressure, goodwill impairment, reliance on single-source products or ingredients, distributor concentration, regulatory compliance and foreign-exchange and geopolitical exposure.
- Other notable items: January 2024 repurchases retired $250 million aggregate principal of senior unsecured notes for approximately $238 million. The Emerade recall and XIIDRA-related acquisition and financing costs affected 2023 results. The company reported effective disclosure controls and internal control over financial reporting; the independent auditor issued an unqualified opinion, while XIIDRA was excluded from the internal-control assessment as a recent acquisition.
Important facts for investors to verify
- Track the Xifaxan patent appeal, any generic-launch developments, and the effect on Salix revenue and impairment assumptions.
- Reconcile contractual debt maturities, interest obligations, covenant headroom and liquidity available to Bausch Health separately from Bausch + Lomb.
- Assess whether operating cash flow can support debt service and planned capital expenditure after working-capital needs and legal payments.
- Monitor the Bausch + Lomb separation conditions, timing, tax treatment, litigation and expected separation costs.
- Review the status and potential financial effects of major litigation, the IRS matter, contingent acquisition milestones and future goodwill impairment testing.