Bausch Health Companies Inc. (BHC) Earnings Call Transcript & Summary

Good morning, everybody. I'm Chris Schott at JPMorgan, and it's my pleasure to be hosting a fireside chat with Joe Papa, Chairman and CEO of Bausch Health today. Obviously, a lot going on in the story right now as the company approaches its separation into 3 public companies. And I'm very much looking forward to the conversation on that front. So Joe, Happy New Year. Great speaking with you. Thanks for joining us. I wanted to maybe just kick off with some opening remarks, so we can jump in into the conversation from there.

Certainly. Well, first and foremost, Chris, happy New Year to you as well. It's great to be here. I wish we were in person, but glad to have a chance to talk with you today. Probably the first place I'll start is yesterday, we issued a press release about our progress on the strategic update, and we posted a presentation to our website that I'd invite everyone to take a look at. What we are excited about is the progress we've made in our efforts to unlock the value across the company. We are substantially complete in our planning and preparation to launch the Bausch + Lomb and the Solta IPOs. Obviously, those will be subject to market conditions and appropriate approvals, et cetera. But we are positioned to move forward with either the Bausch + Lomb or the Solta IPO quickly when market conditions are right for each of them. If you look at the presentation that we put forth, we've got a number of things we've already checked off on this progress. I will point to you that the next step for us is to announce the public filing of the S1 of B + L. And we're excited about that. I can't say anything specifically on timing right now, I can't pre-market it. But certainly, we are excited about what we think is going to be the important next step for us.

Excellent. And on that point, I know you probably can't talk about specific timing here. One of the questions we get is, does the order of the spins matter from your perspective? I think some of the comments you made around 3Q. We're talking about Solta and maybe B + L a month or so afterwards. Maybe just update us the latest on how you're thinking about the path of how do you think of the operating, et cetera, with this?

Yes. You're absolutely correct. We, at this point, really want to make sure that both of the Solta and the B + L IPO, we're doing what's right for each of those businesses, respectively. We are looking at market conditions for both of them. They are slightly different markets, of course. The Medical Aesthetics business is different than the Eye Health business. So we're looking at both of them. We're looking at the market conditions. We can do them in either order. You're correct, we have said we -- with thinking about Solta first, but we can do them in either quarter. We do believe at this time; we're looking at the Medical Aesthetics business. We're looking at the Eye Health business. At this point, we do think the Eye Health business is very strong, and we're looking at the comp companies there. We think that certainly could go first if that turns out to give you appropriate timing from a market condition point of view.

Okay. And then on leverage targets. I think you've committed to 6.5 to 6.75x for pharma, 2.5x for B + L. Are those commitments still in place? And is there any flexibility around those? Or do you think about tweaking those any further as you look at the landscape in setting up?

Sure. The simple answer is yes. We are still committed to those leverage targets, the 6.5 to 6.75 for the Bausch Pharma remaining company, and then approximately the 2.5x for the B + L business. Those are the leverage targets that we are still committed. Obviously, we're going to continue to move forward with the ability to launch a B + L IPO and take the proceeds of that to paydown debt. We have launched a B + L debt raise and take the proceeds with that to paydown the Bausch Pharma debt. And obviously, the Solta IPO proceeds will also be used to paydown the debt of Bausch Pharma. That's how we will look to make sure that we're in the 6.5 to 6.7x rate for leverage for Bausch Pharma.

Okay. And maybe related to that, if I guess, for whatever reason the Solta IPO doesn't raise as much as you were expecting or time lines are shifted, how does that affect the broader separation plans that you've talked about?

So we're prepared to move forward with each of the items that we've talked about in terms of all the different activities as a public company, which -- it could be a lot of different things that we have in front of us, but we're going forward with the IPOs, we're going forward -- obviously, with market conditions expected. We're ready to move forward with all the activities that we believe will help us to be successful with our overall market conditions and activities that will help us to move forward. So I don’t really like have anything specific for that, but other than just ready to move forward.

Okay. And just more on the topic. I know on that point of IPOs, in past conference calls, you've acknowledged as a public company, basically everything is for sale. Is that still the case today? Or I guess the question I have is the processes that you're running change the way you're thinking about the opportunity potential sales of businesses?

I think the way I phrased it in the past, and I'll say it since I joined the company, we have looked at divestments since 2016. We looked at some divestments. We've -- I think since I've joined, it's been about $4 billion of divestments that have occurred. We reduced our debt by about $10 billion. So we're looking at all the things that public companies have to do to be successful. And we're always open to options that will drive shareholder value, create shareholder value, which may include divestitures to add an appropriate premium price. Yes, we're always going to be open to those things, as we think about how can we improve shareholder value creation. So those are all the things that have happened in the past and clearly could be the things that we'll look at for the future.

Okay. So there's nothing about the processes now that basically stop that. So if there are offers there, you can -- that's something you still consider?

No, we can absolutely -- we let ourselves certainly flexibility to make sure that we can manage all those items for us as we go forward.

Okay. And before we jump into individual businesses maybe one more bigger picture question. Obviously, a lot happening with the company this year. So how do we think about the type of guidance we're going to get from Bausch this year? I guess I want to add, do I think about a 2022 guide for the whole company? And then -- or are we going to be maybe waiting for the separations and then getting guidance by segment. I'm just -- as we think about February or March or whenever you provide normal course of events.

Yes. We expect to review guidance on our normal time line at the end of February. So that is still the plan. I will say specifically because of the desire that we're going to create 3 great companies, the Solta Medical Aesthetics business, the Bausch + Lomb Eye Health business and the Bausch + Lomb Global Pharma business. Our expectation is we'll give transparency for each of those 3 businesses as part of the overall summation of Bausch Health that we give at the end of the February time frame. So we want to make sure we give that transparency for all of our investors.

Okay. Excellent. So then jumping to the businesses. Maybe starting first here with pharma. I guess using the separation, the pharma co will be a highly levered business. It's going to have fairly high Xifaxan concentration. What will that company be focused on from a strategy and capital deployment standpoint as it kind of embarks on its own kind of path forward?

Sure. Well, clearly, the Xifaxan business will be very important to the Bausch Pharma business that plus a sale as a general comment would be very important to the business. And I'm delighted to say that during the third quarter results, I was able to highlight the fact that Xifaxan prescription growth was 6% in the third quarter versus year ago 6.2% to be exact. And overall, revenues were up, I believe the number was approximately 12%. So very strong start to turn around of that Xifaxan business. But beyond that, we have a very vibrant international business that comprises nearly about 1/3 of the revenue portfolio of Bausch Pharma. Tom Appio, who is taking over as the CEO, has done an excellent job in building that international business. And that's something that he's very well versed and he knows how to really continue to move that forward. Probably the one thing I would add to the conversation that you've asked about is if you go to our presentation, we put out yesterday, I think there's some really great statistics on there about this business that I think are really important. Starting with it's a very profitable business. It has about a 57% profit margin for the Bausch Pharma remaining companies. It has greater than 80% cash flow conversion. And importantly, one of the questions that is top of mind for everybody is can it delever? It has the ability to delever approximately 0.75 turns per year. That, we think, is an important part of how that business could be successful. But still going to invest, I think the number is approximately $1 billion we talked about in R&D investment over the next 5 years. So clearly, a lot of good levers to push and pull, to make sure that the Bausch Pharma can be a great company going forward. It will focus on leverage, but reduction, but it does have the ability to also invest in a lot of opportunities, whether they be business development or internal R&D.

Okay. And point regarding the 0.75 turns of leverage reduction. Will most of the company's cash flow go towards debt paydown is the expectation? I'm just trying to get a sense of the scope of business development that, that entity could consider.

Well, I'd say the way to answer that question, Chris, is historically, absolutely, the desire was to reduce debt in terms of leverage. But I do think that Tom Appio and his CFO, Tom Vadaketh, they're going to have to make decisions on how best to use that cash flow and how to make those capital allocation decisions. They will have a lot of cash, annual cash at 80% of plus the cash flow conversion, that'll make that judgment. Historically, we have decided to reduce debt. I expect Tom will put a focus on reducing the overall leverage of the company, but I also know he's going to make the important trade-offs on capital allocation for other business development and other activities in that he'll like investing in R&D that he will make judgments on. So I probably don't want to give a fact descriptive future comment. I'll let Tom make those comments, but I think we are clearly going to want to reduce debt, but while we still look to ways to grow the business.

Okay. And let me just place thinking around Xifaxan IP. It seems like most of the parties had settled with this kind of point was put to bed to some degree. But I think we've got a court case now approaching with Alvogen. Was curious of like, do you think this case any differently than some of the prior ones? And how should we be thinking about kind of next steps and time lines around that case?

Sure. I think I had to start always with the intellectual property and what we are thinking about our intellectual property. Xifaxan intellectual property has 26 patents. We have, as you said, settled with Teva. We've settled with Sun and we've settled with Sandoz, and we are confident in the prospects for our exclusivity until 2028. The case that is out here is something that, yes, it's out here, to be clear. But Sun, Teva, Sandoz, great pharma generic companies, they've made a judgment. They looked at intellectual property. They've made a decision to settle. I think clearly, we feel very comfortable with our intellectual property. I take the point there is a court case, but we'll continue to feel comfortable with our intellectual property.

Great. And does this Xifaxan IP debate spring up again in any way affect the separation or IPO process? I know you're obviously very comfortable and confident in the intellectual property here. But just how does that affect the broader separation?

As I said, we feel very comfortable with our intellectual property of the 26 patents. Maybe one other comment I should say, there was a recent citizen’s petition discussion as well. We think that it really points to the importance of our polymorph. So all of that, we think, gives us very strong footing for our discussions with the other company. But at this point, I don't expect this pace to impact our IPO process to be bottom line.

Okay. Great. Commenting on the pipeline within pharma for a second. You've got several pipeline assets focused on rifaximin in different formulations. Just the latest time lines where we can expect data on those? And if I think about those products, which are the ones that you're most excited about?

Sure. Well, obviously, the rifaximin concept that we have is we will look to develop novel formulations of rifaximin in new indications, which -- that's really what we think is a really exciting concept. I'll start with the sickle cell anemia one. We are in the process of opening the Phase I trial for that. We've got a pilot study to be clear. But we have seen the data that we -- with rifaximin for sickle cell patients that was very exciting in terms of the ability to reduce the circulating activated neutrophils. We think it's a really important finding. Look forward to having more comments about that as we get some additional data there. In addition, though, we have the SSD formulation of RED-C where we're looking at prevention of cirrhosis complication. That Phase III trial is now -- have sites up and running. So we've made progress getting that up and running. So -- and the fact that we've gone directly to Phase III gives you some degree of our confidence based on what we have already seen. We completed the rifaximin avert hepatic encephalopathy trial and the top line results from those Phase II study showed treatment benefit and no safety concerns. So that gives us a good running start with the RED-C reduction of cirrhosis symptoms importantly. What that does for rifaximin instead of waiting for the patient, assuming we get positive results, that are having to wait for the patient to develop hepatic encephalopathy, we have the ability to go to patients that potentially prevent that patient going to that status. Well, we think that's an important benefit for patients. And then finally, we have a rifaximin placebo trial, small test bacterial overgrowth. We are working with the FDA to develop a pro or a patient-reported outcome tool. Those are all exciting things we have available to us. I don't want to leave out though amiselimod because that's also another important comment. You've probably seen the news out there on the S1P modulators, it was the recent approval for IBD. We think that the S1P modulator is going to become more important, especially with some of the challenges that have come up with the JAK inhibitors and also the TYK2 products. We think the S1P modulator has an important position. And -- so we're going to -- we've got that trial underway. We're excited about finding out, getting the data on that Phase II trial for amiselimod as well.

Great. And how do you think about differentiating the S1P, obviously, it's like Pfizer is showing a lot of interest with the Arena deal. We've got the Bristol launch , but there seems to be a nice opportunity. So with 2 kind of bigger players there, how does Bausch separate itself from peers?

First and foremost, very large market, I think as I have to say, a very large market, number one. Number two, clearly, we believe there are some amiselimod-specific activities and features of the product relative to half-life and other considerations that could be advantageous. But probably the most important comment is we've got to get the data. We'll get the Phase II data. Once we get that data, that will be the -- probably the most important thing for us to consider. We're very pleased we've got some initial feedback on the product. We did a trial looking at any cardiovascular issues, and we feel very good about the data that came back and in terms of not seeing any cardiovascular risk factors at this point in the clinical trial. So we still need to get the data. That way, I think it's going to be the major way we differentiate, but it's a large market, it's a growing market and there's a need for helping these patients with IBD.

Great. Maybe pivoting over to Solta now. Last quarter is obviously some controversy, I think, around the growth numbers. Can you just put some context around the results that we saw there?

Yes, absolutely. So I have to be -- I can't do any pre-marketing of any of our businesses yet. But I can speak to it as a Bausch Health part of our business. Solta had a strong third quarter. It looks like fourth quarter looks also good. I'll make more comments about that when we finish the year. But what happened? I think the primary issue was, as people came out of COVID in the first half of 2020, third quarter for Solta was very strong. That led to demand that was a very strong quarter. so that comp for third quarter versus a year ago was a difficult comp. Having said that, though, despite that tough third quarter 2020 comp, if we look at Solta's performance through September year-to-date, and this is what we shared last quarter with the Bausch Health earnings report, that year-to-date organic revenue was still up 27%. So we do think that, that has very important part of the business, a very good part of the business when you could show 27% organic growth. So I do think we feel very comfortable with what we're seeing in our overall Bausch Health business, specifically as it would relate to what Solta is doing and how Solta is performing.

Okay. Is there anything -- I know with the timing, but can you talk at all about how the business has trended the last few months for Solta, just directionally?

Yes. I can't go through all the specifics. We're still assembling all the data on the fourth quarter results. I could say from a top line point of view, we're pleased with the results. It's consistent with our plans, for what we are thinking about Solta's performance. But I really can't go into it until we get everything cross for the year, and we'll obviously say more about that when we get to February.

Okay. And it seems like a business like this new product flow is very important in terms of sustaining growth. Can you just talk a little bit about where we are in, I guess the product life cycle, first Solta, and what you're most excited about in terms of new offerings for their business?

Sure. First, just to back up. So the big product Thermage FLX, was launched sometime in 2018. So we're still in the early innings, I use a baseball analogy of the Thermage FLX launch. So there's -- because the product is doing extraordinarily well, to be clear. We're still in early innings. And what do I think the opportunity for additional expansion is we'll continue to gain patient share relative to the Thermage business opportunity in the United States and Asia. Those places are doing very well, but I think there's still more opportunity there. I think the next important leg up for the Thermage business will be the international expansion. We talked about expansion into Europe. We've talked about expansion into Latin America. I think it is that global footprint expansion opportunity that we believe will be the primary near-term opportunity with Thermage. Additionally, we launched a Clear + Brilliant touch, which just launched this past year in the United States. So a lot of opportunity there for continuing to invest behind the Solta business, both investment for continued market share gains and also expanding markets, whether it be for the Clear + Brilliant or Thermage.

Okay. And again, I just have a question with a business like this. Is this a business that we should think about being run to maximize top line growth versus EBITDA growth? I mean, it seems like the business has shown very, very strong EBITDA growth for the last few years. I'm just trying to get a sense of how you can kind of balance those 2 dynamics or think about the dynamics going forward.

That's a great question. And we'll make judgments as we go forward with. But historically, we've tried to balance that. We tried to balance both the top line growth when you have a -- I can only talk about historical numbers. When you have a historical growth CAGR over the past several years of plus 30%. As I mentioned, this year, it's plus 27%. So revenue growth is very important to that business. But it's also been very successful at adding bottom line and the EBITDA CAGR was plus 80%. I don't expect it to be plus 80% going forward, to be clear. But that CAGR is really quite an amazing job done by the team, the Solta team. So they've done a great work with it. Do I think the important next step, the next leg up will be to expand the overall Solta revenue? I think that is a very important part, and that is my expectation for the near term that they will continue to look to expand revenue through investments in the global footprint expansion as well as the new product launch investment. I think that's really where it will go after revenue in the near term.

Okay. Great. A couple others here. I don't believe you've announced a CFO yet for Solta. Just talk about what -- has there been any delay there? Or just what's -- how should we think about that?

No, you're absolutely correct. We have not announced one at this time. But you know the team, we've got Scott Hirsch and Paul Herendeen, Paul as the Chairman. We've got some great financial talent there. So I'm not concerned about that at this time. But both of them are very excited that the opportunity for Solta and building up the team. That's probably all I can say specifically about it. But no, consider it's not a gating item for us. We've got great financial expertise on the team.

Okay. And then just maybe last one here, just remind us how the remaining equity stake for Solta will impact PharmaCo's leverage ratio and capital deployment opportunities. I think this is like a consistent question I get from investors is, once this is public and you're going to have a large stake in Solta, how does that affect PharmaCo?

Yes. So maybe just back up a little bit in terms of the answer. What are we trying to do? We're going to launch 3 great companies. The Bausch + Lomb IPO proceeds are going to go to paydown the Bausch Pharma remaining Co debt. Bausch + Lomb debt raise that we'll do associated with the IPO will also be used to paydown the debt. And then going to Solta, same comment. The Solta IPO proceeds will be used to paydown the debt of the Bausch Pharma remaining company. So all of that is going to be to get us started to reduce the overall leverage. But going forward, as you said, our expectation is we will IPO approximately 20% to 30% of the Solta business out into an IPO. The remaining portion that Bausch Pharma remaining company owns will be that 70% to 80% of the EBITDA of the Solta business. My expectation is that they'll obviously use that Solta EBITDA to help continue to reduce their overall debt leverage. But then they'll make judgments as to -- it's a financial asset. What's the best thing to do in the interest of the Bausch Pharma shareholders, certainly trying to maximize the value of the Solta business out in the marketplace. So I think it's going to be some trade-offs they'll make as they go forward. But it's clearly -- Solta business is a great business, and that business will help the overall delevering of Bausch Pharma.

Okay. And I think you expected those in the past, but is there an opportunity at some point that those shares can be distributed to shareholders? Or is it really the intention of the remaining stake in Solta to be used to help address the leverage position for PharmaCo?

Well, I think the right answer to that question is it's going to depend on the overall performance of the Solta business. It's going to depend on the performance of the Bausch Pharma. But I do think as we sit here today, the intent is to use that to reduce the leverage of Bausch Pharma. But I certainly want to make sure there's some opportunity to make the appropriate decision at the time the Bausch Pharma shareholders and Solta shareholders, we'll consider all the what's in that best interest through that time period. But clearly, as we sit here today, the remaining Solta value will be evaluated at a financial asset in the best interest of trying to think through the shareholders.

Okay. Okay, excellent. Now just moving over to B + L, around the divisions. Just maybe bigger picture, just give us an update in terms of how you see the positioning of this franchise and its growth drivers just to set the stage and dig into more specifics from there.

Yes. We are very excited about the opportunity to launch the Bausch + Lomb IPO and then obviously create a new pure-play Eye Health company. It's an Eye Health company that we believe have the most integrated portfolio out there in the marketplace in the sense that it's a company that has the Vision Care contact lens business, got a surgical business, got a consumer business. And as a pharmaceutical business and has a large addressable market, probably one of the largest addressable markets and had a great brand out front. What we are most excited about though, in terms of the timing for the IPO is the opportunity to launch these new products that have been part of the investment that Bausch Health has made in getting us ready for this. Everything from Infuse, to an e-microscope, the NOV03 product that we have that's for dry eye disease. All those that we've talked about as part of Bausch Health, we think are going to be the exciting opportunities to help us in the future to be a successful new company Bausch + Lomb Eye Health.

And maybe specific on those, can you just comment on INFUSE then, the launch? So kind of what type of traction you're seeing, both ex-U.S. prelaunch as well as in the U.S. and where some of that market share is coming from?

Sure. We have a very strong ramp with INFUSE consumption sales. United States is one area that we probably talked about in the past, so I can make a few comments on that. The second half of 2021 had a growth rate of approximately 70% versus the first half of 2021. So very nice acceleration. Our consumption sales both have hit records every week, new records. For the fourth quarter, the consumption appears to have grown by about 24% over the third quarter. And over 100% versus last year, same period. We are now -- where we have our fit sets with the physicians, we're now exceeding about 14% share where we have INFUSE fit sets. So it gives us a very good indication of the opportunity of where we are already. And we believe that our expectation is that the silicone hydrogel U.S. market, as an example, is $1 billion today. We think it's on its way to about $3 billion. So you can just use the math there in terms of what that means as we continue to gain share in this market. We have said publicly we expect the INFUSE product to be over a $250 million product for us. So that's the excitement we see with INFUSE. Obviously, we've already launched it in Japan as well. I think it's in Australia and Canada. So there's a number of countries that have -- are coming on now, and even more in the next 12 months as we get more approvals throughout the European Union and around the world. So we're really excited about what we see for INFUSE going forward.

And give us your thoughts, I know I think Japan is one of the first markets you launched. But just -- in some of the markets have had a bit more time. How does that share trended? Or how has the product affected Bausch's overall -- B + L's overall share in the market?

Yes. It's done well. I mean the U.S. and Japan are probably the areas that we've talked about the most. That clearly is something that we're continuing to track. And as I said, like in the U.S., where we have the fit sets, we're already at a 14% share where the fit sets are in place. So that's really what we expect to see. The other important point is that we haven't seen some -- any -- in the United States, for example, very much cannibalization of the totality of our business, most of it is coming from either new starts or from competitor products, not from our own products. So that's obviously another part of the question is how it helps us expand our overall patient care business.

Great. B + L was a business; I think you saw some impact from COVID back in 2020. I guess with this latest wave with Omicron, et cetera. How are you seeing the impact this time around? And is it different than we saw previously?

Yes, absolutely. It's a great question. We are seeing a strong recovery across all of our business units. We do see COVID impacts in certain territories or cities, particularly outside the United States. But with Omicron, it appears to be more of a temporary delay in -- like elective surgeries or it's restricted to an area of -- like a city, like a city in China may have curtailed the elective procedures for cataracts or things like that. But that's the magnitude of what we're seeing. We're not seeing the widespread country shutdowns of elective procedures; we're just not seeing that now with Omicron. So obviously, we're all hoping that this -- we get this behind us. But because we clearly still expect pent-up demand out there. The numbers of procedures that were canceled in 2020 was about 15% to 20% of cancellations in 2020. Those patients still need the cataract surgery if that's what the surgery was. We're going to see that as a tailwind for 2021 and 2022 and going forward from there.

Great. And then probably the piece here is just the pipeline within the pharma piece of B + L. This is something I think people maybe spend a little less time line. Can you talk about what your excited about there, what investors should be thinking about? I know you talked about a few asks in the past, but help us understand that piece of the equation for B + L.

Yes. So let's start first. So I'll start with what we talked about INFUSE. INFUSE is clearly a big opportunity for us. And as we launch that globally. I won't go into more of that, but that when we talked about it. Then let me bridge to the pharmaceutical business. We are very fortunate in our timing for the lines up very well with our new products. We have IPR approved. I made mention of that. It got approval in October. We are now launching XIPERE. It's the first product that uses suprachoroidal space of the eye to treat the macular edema associated with uveitis. We believe uveitis is about a $600 million U.S. opportunity. We just got the product approved. We're out there now in the launch phase right now, very exciting. Probably the biggest opportunity for us is this area of dry eye disease. Dry eye disease, as you know, affects 16 million Americans. As we look at this opportunity for us, we see that we have now completed 2 Phase III clinical trials that show statistically significant improvements in both the signs and symptoms of dry eye disease associated with meibomian gland dysfunction. So that's clearly something that we're excited about. Obviously, we have to wait for FDA approval, but we know it works. And we know we have data that shows it works as early as day 15, which in the area of dry eye disease is a nice advance versus what's currently out there, the $3 billion gross sales market in the United States. I think the market leader is over $1 billion of revenue. So we're excited about what this means for us as a company. And then let me bridge the surgical side. We just have an opportunity to launch a premium IOL, LuxSmart in our ex-U.S. opportunity. So that's clearly exciting for us. And we also are looking to launch an e-microscope, which will expand our capabilities. And then finally, it probably hasn't been said too much about now, but we think it's really important. We have a system called eyeTELLIGENCE that helps physicians to have a database in the cloud with all of their data set, whether they do a procedure in their office or they do it in the operating room, in a hospital or a medical surgical suite, we've got ability to have that data available to them. We think it's going to be a really important part of how we can help physicians to take care of their patients all across the places in which they practice. That, we think, is going to be a very important advance with both the diagnostics as well as the device itself. We're really excited about it. It's led with our [indiscernible]. It's going to go beyond that, and we're excited about what that means for physicians and our ability to help them.

Great. Maybe just a bigger picture question as I think about your 3 divisions. I mean, Bausch has obviously increased its investment levels over the past few years under your tenure, catching up maybe some of the cuts that have been done under the prior management team. But do we need to think about a further step-up in spend for your businesses? So beyond public company costs as you move to these 3 separate organizations? And maybe that answer varies by segment. But just trying to get a sense of, are we at kind of normalized spend levels now? Or is there more need to bump R&D, bump SG&A to really take advantage of some of these longer-term growth opportunities that you're talking about?

I think the proper answer on that one is that we're -- it's our goal to create 3 great companies. Each of the companies will have to make those capital allocation decisions that you're appropriately pointing out. But one of the things we've been able to do within Bausch Health is to make some investments to prepare each company to be prepared to go for an easy example. On the Bausch + Lomb side, as we were planning to go forward with the IPO and thinking about what was going to be required, we absolutely needed to make the investment in the capital expenditure for contact lenses. So we've built up capacity in our Waterford, Ireland and our Rochester, New York facilities just to get us prepared with sufficient capacity for our silicone hydrogel. Simple comment, somebody is using a daily contacts, silicone hydrogel they need 365 days a year of new product versus whether they're using a monthly product, they only need 12 months. So simple comment on how you need to have additional capacity, we've built that in. And that's importantly, expenses that we've made. I absolutely have -- we invested in the pipeline, R&D pipeline for these new products. Yes, that's exactly why we have the opportunity with the dry eye product, with the Eyenovia product that's currently under evaluation for myopia, with the XIPERE product. All those things, we've made investments in, I think that each company that was going to have to make additional investment decisions. Clearly, you asked about Solta before. It's going to be about looking at revenue opportunities in terms of growth. So there may need to be some incremental investment in the marketing and selling and advertising promotion area. That may be something that is the right answer there. But I'll let each of those individual businesses make specific comments as they go forward with the business. And the same comment for what Tom Appio is going to do on the overall Bausch Pharma business. He's looking at the things that need to get paid down from a debt reduction, but also those opportunities for business development and growth as well.

Okay. So I guess, just maybe ask differently, should we be -- it seems like each divisions got some investments than they are thinking about making or conceptually could be making. Is it fair to think about less margin expansion for these businesses in the near term as you normalize that ramp? Or do we have to kind of wait for these to be spun out to get visibility on that?

I think it's probably better that we wait for each of the businesses to put more visibility on it. But I certainly believe as we think about the opportunity to launch new products, I've been around the pharmaceutical health care business for 30-plus years. And I certainly know that one of the things that's the lifeblood of any company is new products. And I do think whether it be the Bausch + Lomb new products, the new rifaximin opportunities in the Bausch Pharma remaining company, or the opportunity with Solta, new products will help drive margin expansion. Yes, there's always going to be some investment to get the products up and running in the near term but over the long term, that's the opportunity. Launching these new products will drive the operating margin expansion for these businesses.

Okay, great. And the last couple of minutes here, just a few other ones. One question I've been getting -- I know some of the folks have been submitting questions, is just an update on the time line between, I guess, the actual, like spin of B + L versus the IPO. And I think you've commented in the past, but I guess just what's the latest thinking there of whenever you do an IPO, what's the path to -- how long do we think about to the business actually separated out and then distributed to shareholders? Is there any update on that time line or plan?

Yes, sure. So first, the B + L IPO, we're contemplating it for up to 20% of the Bausch + Lomb business would be IPO-ed. So let's say that happens. Once that -- as soon as that happens, we expect that there will be a customary lockup period from 3 to 6 months, depending on the performance. But that's just the normal customary lockup period. Beyond that, the only issue for us is, as we use the debt of, we raised for the B + L debt raise, as we used the B + L IPO proceeds, as we've raised Solta IPO proceeds, all of that we focused on using to paydown the debt of Bausch Pharma. We need to get the debt of Bausch Pharma at 6.5 to 6.7x. We have a plan to do that. And we'll do that, but that will be able to allow us to unlock the remaining Bausch + Lomb IPO shares that we can send a spinoff to our shareholders at Bausch Health. So that's a really exciting point. And we clearly believe as we separate these 3 businesses, we've got an opportunity to create real value for the Bausch Health shareholders.

Excellent. Well, I think we're just about out of time here. Joe, I appreciate all the comments and obviously a very busy year ahead for you guys. So I look forward to watching all the progress on that front. But again, thanks again for joining us today.

Thank you, Chris. Thank you very much. Pleasure to have a chance to talk to you today.