Bausch + Lomb Corp. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Execution Focus: Relentless focus on execution across sales, operations, and innovation. Product launches drive growth, with digital capabilities like Glimpse platform and Opal e-commerce marketplace enhancing sales force efficiency.
• Product Launches: FDA approval of enVista Envy in premium IOL category, strong performance of Daily SiHy lenses, Miebo's exceptional launch in Pharma, and Blink/Artelac growth in OTC dry eye products.
• Operational Optimizations: Facility upgrades in Milan and Berlin for faster product delivery, AI deployment in contact lens manufacturing for yield and cost savings, and focus on R&D collaborations for pipeline innovation.

Segment Performance

• Vision Care: Third quarter revenue of $684 million, up 6%. Consumer business grew 3%, with LUMIFY up 7%, consumer dry eye portfolio at $93 million (19% growth), Artelac up 19%, Blink up 35%, but eye vitamins down 9%. Contact lens revenue grew 12%, with Daily SiHy up 79%, Biotrue up 4%, ULTRA up 6%, U.S. up 13%, international up 11%, China up 16%.
• Surgical: Third quarter revenue $206 million, up 12%. Consumables grew 14%, equipment up 6% (driven by Stellaris system sales), implantables up 13% (standard IOLs up 7%, premium IOLs up 23%). enVista IOL platform performing well, with enVista Aspire launching early.
• Pharma: Third quarter revenue $306 million, up 76% (organic 25%). Miebo at $49 million, Xiidra at $92 million, International Pharma up 11%. Excluding Xiidra, Pharma had 25% organic revenue growth.

Guidance

• Raised full year revenue guidance to $4.725 billion to $4.825 billion (up from $4.7 billion to $4.8 billion), with constant currency growth of approximately 16% to 18%.
• Increased Miebo revenue guidance to $165 million to $170 million (previously $150 million to $160 million).
• Lowered expected currency headwinds to $75 million (down from $90 million).
• Adjusted EBITDA guidance (excluding acquired IP R&D) at $850 million to $900 million, consistent with prior guidance. Adjusted gross margin expected at 62.5%.

Risks

• Potential headwinds from the Inflation Reduction Act on Xiidra sales in 2025.
• Balancing TRx growth for Xiidra while ensuring coverage through health plans.
• Market dynamics affecting consumer business, such as retailer inventory rebalancing and drug store channel disruptions.

Question and Answer

• Q: What is the biggest factor in execution and how to balance investing in launches with margin? A: Relentless focus on execution across the world. It's a balancing act between gross margin expansion and launch investments, with products like Miebo requiring heavy early investment for long-term profitability.
• Q: Sustainability of dry eye portfolio pull-through growth and OTC product additions? A: Dry eye portfolio is strong, with OTC products like Blink and Artelac driving growth. There's potential to add incremental OTC products, with Miebo and Xiidra showing strong launch and growth trends.
• Q: Guidance deceleration and Xiidra headwinds in 2025? A: Q4 guidance midpoint is ~10% organic growth, lapping Xiidra in prior year. Xiidra faces headwinds from Inflation Reduction Act, but volume growth is still a key driver, though specific 2025 guidance not provided yet.
• Q: Timing of DTC efforts effect and clinician messaging on Miebo/Xiidra? A: Xiidra DTC campaign is early, with positive TRx trends. Clinicians are educated on Xiidra as best anti-inflammatory and Miebo as sole anti-evaporative mechanism, with synergy between the two products.
• Q: Prescription business valuation and margin outlook? A: Pharmaceuticals are ~25% of the company, with Surgical, Vision Care, and consumer being durable. Margin improvement opportunity in Surgical via new product launches and operating efficiency, with enVista Envy showing early promise.
• Q: Top line strength not flowing to P&L yet? A: Investments in launch cycles (e.g., Miebo, Xiidra, IOLs) require outsized early investment, but top line growth supports margin expansion as launches progress and operating efficiencies are realized.