Bausch + Lomb Corp

NYSE:BLCO

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, and welcome to the Bausch + Lomb's First Quarter 2022 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Allison Ryan. Please go ahead.

[Allison Ryan, Director, IR]

Thank you. Good morning, everyone, and welcome to our first quarter 2022 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Joe Papa; and Chief Financial Officer, Mr. Sam Eldessouky. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section.

Before we begin, we would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at of our presentation as it contains important information. This presentation contains non-GAAP financial measures. For more information about these measures, please refer to Slide 2 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website.

Finally, the financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter and to not update or affirm guidance other than through broadly disseminated public disclosure.

With that, it is my pleasure to call over to Joe.

[Joe Papa, Chairman, CEO]

Thank you, Allison, and thank you, everyone, for joining us today in the Bausch + Lomb's first earnings call as a publicly traded company. I will begin with some comments about our vision for Bausch + Lomb now that the IPO has been completed and briefly discuss the first quarter highlights. Sam Eldessouky, our CFO, will then review the first quarter financial results in detail and discuss our 2022 guidance. Finally, I will conclude by discussing our product pipeline and upcoming catalysts before opening the line for questions.

Before I get started, let me answer the question. If we provided the first quarter B&L results on May 10 as part of Bausch Health, what is the objective for today's call? Simply stated, and provides greater clarity on B&L performance, our vision for B&L future growth and provide a forum to answer your questions.

So let's begin with Slide 4. We with a nearly 170-year history as a leading eye health brand, Bausch + Lomb has always stood at the forefront of cutting-edge scientific and technological optical advancement and today, we are more focused than ever on developing and offering new treatments to meet unmet eye health needs. Specifically, Bausch + Lomb is the most integrated eye care company operating today, the fastest-growing global contact suppliers in 2021, the company with the highest brand awareness in eye care and a global leader in consumer health outpacing U.S. market growth by approximately 1.7x since 2018. B&L also has critical mass with a commercial presence in approximately 100 countries over 80% of the world's population has access to Bausch + Lomb products.

Turning to Slide 5. We have outlined 3 key areas of strategic focus for this important point in Bausch + Lomb development: One, accelerate growth in large addressable markets; two, invest in categories that are growing faster than the overall high health market; and three, expand into new product categories.

As we look to the future as a publicly traded company, we see attractive opportunities for our pure-play eye health company. We believe the company is well positioned for growth in large, durable markets driven by new products and favorable megatrends or tailwinds, such as the increasing prevalence of myopia and diabetes, an aging population and a growing middle class that are expected to continue driving demand for eye health products. In addition, we have the potential for margin expansion over the long term based on new product and supply chain efficiencies.

Finally, as a publicly traded company, we expect to have balance sheet flexibility to expand investment in the business and additional strategic bolt-on product opportunities.

With respect to the spin-off process, the initial public offering was completed last month, an important first step towards the spin-off of Bausch + Lomb. The spin-off is expected to be completing following the expiry of agreed-upon lockups and the achievement of Bausch Health's target net leverage ratios subject to shareholder and necessary approvals and other conditions. While the final date for completion of the spin-off has not yet been determined, the spin-off is expected to occur by the distribution of approximately 80% of the remaining B&L shares to Bausch Healthcare shareholders. Separate from the spin-off process, Bausch Health has the flexibility to monetize an additional approximately 8.7% of Bausch + Lomb shares subject to market conditions and the expiry of agreed-upon lockups.

Moving now to the first quarter highlights on Slide 6. First quarter organic revenue growth of 5% was driven by our 2 largest segments, Vision Care and Surgical, which grew organically by 4% and 13%, respectively, despite macro headwinds. Looking at the first quarter through the lens of our key areas of focus, consumer eye care had an approximately 33% U.S. market share in the first quarter demonstrating continued momentum in eye vitamins and LUMIFY. Our daily SiHy lens market share doubled and we expect market growth of approximately 10% in this category from 2019 to 2030.

Finally, we launched eye care in the first quarter, entering into a new product category with the first and only product to use the suprachoroidal space of the eye for patients macular edema associated with uveitis. These impressive achievements are due to the sustained effort and dedication of the approximately 12,500 Bausch + Lomb employees around the world whose hard work and ongoing contributions enabled us to execute on our key areas of focus and navigate external headwinds in the first quarter while completing an important milestone on the road becoming an independent publicly traded company.

And with that, I will turn the call over to Sam to cover the financial results in more detail.

[Sam Eldessouky, CFO]

Thank you, Joe. I'm happy to be here on our first earnings call as a publicly traded company to discuss our first quarter results. Before going into the details, I will remind listeners that when we talk about the organic revenue growth, we mean on a constant currency basis and adjusted to remove the impact of divestitures and discontinuations. Also as a reminder, we now report our financial results in 3 segments: Vision Care, Surgical and ophthalmic pharmaceuticals.

Turning now to our results on Slide 7. Our first quarter results continue to demonstrate the durability of our business and the benefits of an integrated eye health platform. Our focus on commercial execution and investment continues to lead to strong demand across our key franchises, which is reflected in the total company revenue of $889 million for the first quarter, up 1% on a reported basis and up 5% organically.

Strong momentum heading into 2022 enabled us to overcome 2 primary headwinds at the start of the year. First, unfavorable foreign currency exchange impact of approximately $29 million in the first quarter; and second, headwinds of roughly $10 million from COVID related lockdowns in China. Excluding the impact of China lockdown, organic revenue grew by 6% for the quarter. Overall, we believe the business is well positioned to benefit from market dynamics.

In the near term, we expect growth to be driven by the ongoing recovery in surgical, continued growth in Vision Care led by [indiscernible] market penetration and launches in additional countries, and our market leadership position in consumer eye health. And over the longer term, we expect growth to benefit from favorable mega trends in the market and new product launches in the optomic business.

Now I'll go into more detail on each of our segments. Revenue for Division Care segment, which includes contact lenses and consumer products, grew -- by 4% in the first quarter, driven by 7% reported and 8% organic growth in eye vitamines and 35% reported an organic growth in LUMIFY. Both products are the market leaders in their categories. 41% reported and organic growth in daily high eye lenses which we now launched in 24 countries and 19% reported a 22% organic growth in the Biotrue Solutions franchise, which includes the eye hydration boost and multipurpose solutions. To leverage the brand form, the eye hydration boost was launched in 2021. And earlier this month, we launched the Biotrue Hydration Plus multipurpose solution in the U.S.

Our goals for the remainder of the year are: one, to expand our market leadership position of eye vitamine products and LUMIFY; two, to continue the global rollout of the daily SiHy lenses; and three, the daily SiHy multi-focal lenses.

Moving on to our Surgical segment. First quarter revenue grew by 13% organically. The segment has had sustained positive momentum as the market continues working through the COVID-related backlog of elective surgeries. Growth was mainly driven by increased demand for implantable, including our enVista IOL franchise, consumables in the cataract and retina procedures and by the entry of the LuxSmart IOL into the premium IOL category in international markets.

Finally, the Ophthalmic Pharmaceuticals segment first quarter revenue of $155 million reflected a decline of 3% on an organic basis. We're pleased to see the strong performance in the international offshore business, which represents approximately 43% of the segment. Organic revenue in international markets grew by 16% compared to the prior year quarter, mainly driven by strong performance in Europe and Asia. This growth was offset by 14% organic revenue decline in the U.S. While we continue to see TRx growth in our key promoted brands, including VYZULTA TRx growth of 44% in the quarter, the portfolio was impacted by the tail end of LOE products and higher rebates due to generic competition.

We continue to transform the Ophthalmic Pharmaceuticals portfolio following the impact of the lower Max LOE. At the end of March, we were pleased to have launched the IPO. We see this launch as a key first step on the path to transforming the portfolio, followed by -- which we expect to launch in 2023. We believe the new product launches will provide the APA segment with a stronger foundation to drive growth in the quarters and years ahead and will allow us to leverage the scale and investment we have made in the commercial organization.

Turning now to Slide 8. With strong business fundamentals, in Q1 2020, we continued our long-term strategy by investing behind our product launches and supporting our R&D pipeline, notwithstanding the impact of macro market conditions. Our adjusted EBITDA in the first quarter was $170 million. Our total adjusted gross margin for the grows approximately 61% which is 130 basis points lower than Q1 2021, largely driven by product mix and macro headwinds, including inflation pressure, higher commodity prices driven by the Russian war in Ukraine, and supply chain challenges.

Higher SG&A spend in Q1 can be attributed mainly to increased investment in our product launches, including the daily SiHy lenses, and the return to more normalized level of spend to continue the momentum seen during the recovery from COVID position us for market share gains.

R&D spend in the quarter versus first quarter 2021 increased to roughly 9% of sales. This increase is mainly due to the timing of projects to accelerate our ability to execute on our R&D pipeline. We will expect full year R&D spending in the range of 7% of revenue. Finally, foreign exchange and COVID lockdowns in China resulted in headwinds of roughly $15 million to Q1 adjusted EBITDA.

Moving on to Slide 10. Cash flow from operations of $3 million in the first quarter was negatively impacted by the timing of settlement of certain intercompany balances between Bausch + Lomb and Bausch Health. We do not anticipate that these timing factors will have a significant impact on cash flows from operations in future quarters.

In the quarter, CapEx was approximately $42 million, which includes investment in our lens manufacturing facilities. And subsequent to Q1 2022 and in conjunction with the IPO, we launched and closed on a credit agreement for $2.5 billion. Our goal is for the debt to be investment-grade rated at the time of the spin-off, and continue to invest in the business and further enhance our flexibility to operate going forward.

Now turning to our guidance on Slides 12 and 13. Our revenue guidance for 2022 is a range of $3.75 billion to $3.8 billion, representing between 4% and 5% organic revenue growth. While absorbing the impact of China lockdown, we estimate -- range headwind to be approximately $160 million for the full year. We expect the headwinds from China, COVID policies and lockdown that we saw in Q1 to continue to have an impact in Q2, and we expect that will normalize into the second half of 2022.

Our adjusted EBITDA guidance for 2022 is a range of $740 million to $780 million. This represents approximately 5% base performance growth over full year 2021 pro forma adjusted EBITDA with the synergies and excluding the impact of currency. Our adjusted EBITDA guidance also includes approximately 100 basis points of inflation pressure. We estimate foreign currency exchange headwinds to be approximately $30 million for the full year.

Interest expense is expected to be approximately $150 million on an annual basis. Adjusted tax rate expected will be approximately 12%, and we expect full year adjusted free cash flow to be approximately 50% of adjusted EBITDA. This guidance is consistent with the overall guidance provided by the Bausch Health in their earnings call on May 10.

In summary, we are pleased with our momentum in Q1 as we continue to recover from the global impact of COVID-19 and navigate various macroeconomic factors. We believe the results reflect the flexibility and resilience of our business and portfolio. Across our segments, we're in a strong financial position to execute on our current strategy and continue to find ways to enhance the integrated Buchanan.

Now back to you, Joe.

[Joe Papa, Chairman, CEO]

Thank you, Sam. I will now discuss our product pipeline and the upcoming catalysts that we expect to drive our business results. Beginning with LUMIFY on Slide 15. Here, we have illustrated an example of dollar of our fully integrated eye care platform to successfully launch, promote and drive the performance of our products. In the case of LUMIFY, we began with a highly differentiated product after the launching it in May of 2018, LUMIFY became a $100 million brand in 2021.

Today, it is the number 1 register category in the U.S. with approximately 46% market share and the #1 physician recommended brand. Our team was able to drive education and awareness for the product by collaborating with eye care professionals while driving awareness with a strong television, public relations and social media presence. These efforts, along with a 97% customer satisfaction rate helped to drive patient demand, which we were able to meet through our ongoing partnerships with retailers like Walmart and CVS and through e-commerce channels. We expect to take a similar approach and integrated a similar approach to launching our next wave of new products, including NOV03, our dry eye disease product.

Turning now to Slide 16 for an illustration of how we're able to have an unmet market need with our daily disposable silicone hydrogel lenses. In response to patient concerns about contact lens dryness, in August 2020, we launched INFUSE daily SiHy lenses into the fastest-growing contact lens category.

INFUSE is the first and only daily eye lens with a next-generation material infused with ProBalance technology to help minimize symptoms of contact lens dryness. The lens is doing exceptionally well with patients who experience contact lens dryness. In fact, 94% of patients surveyed agreed that INFUSE contact lens do not feel dry and that they can comfortably wear INFUSE lenses all day long.

Moving to XIPERE on Slide 17. XIPERE is the first and only therapy available that utilizes the suprachoroidal space to treat patients suffering from macular edema associated with uveitis, which is the leading cause of vision loss in people with uveitis. FDA approval of XIPERE was based on results from a pivotal Phase III trial for 160 patients with a best corrected visual acuity, or BCVA, primary endpoint.

As from the chart on the right, the primary FSP endpoint was the proportion patients in whom BCVA had improved by at least 15 baseline after 24 weeks of follow-up. We are particularly excited about the innovative microinjector, which offers unique access to the back of the eye and enables target delivery in compart utilization of the medication.

Moving on to Slide 18. I want to spend a minute on the market opportunity for an investigation of new class of dry eye therapy. NOV03 is a potential first-in-class treatment for dry eye disease associated with meibomian gland dysfunction. Statistically significant efficacy, safety and tolerability has now been demonstrated in 2 Phase III trials.

The charts on Slide 18 shows the efficacy endpoints for the second Phase III trial. Importantly, all primary and secondary endpoints were achieved include statistically significant changes from baseline as early as day 15. We are ecstatic with the results of these 2 Phase III studies and believe that NOV03 has the potential to be a major future growth driver for our business. We anticipate and are working towards filing an NDA for NOV03 in the coming weeks.

On Slide 19, we present some of the near-term pipeline opportunities for the Surgical segment. First, our enVista premium IOL and Lux premium IOL expansions offer new opportunities in a $1.4 billion market that is growing at a 7% compound annual growth rate. We're also working on 3D microscope that is expected to launch later this year, and we'll integrate with our intelligence clinical decision support software.

Finally, the Teneo Excimer Laser for refractory surgery is expected to be the first significant LASIK innovation in the U.S. in more than a decade. The Teneo laser has been well received and is widely adopted in 50 markets around the world as one of the more versatile lasers available with a compact footprint.

Slide 20 captures the next generation of surgical innovation, including a new market opportunity with the Femto laser, which fully integrates into the cataract workflow for operating room efficiency. The LASIK flap laser, which complements Teneo for refractive surgery and the 22x combined cataract retina platform with redefined fluidics an efficient advanced lens removal technology and integration with our eye intelligence software.

To summarize, on Slide 21, we illustrate the Eye Health ecosystem which Bausch + Lomb operates in the power of an integrated platform that uniquely positions Bausch + Lomb to serve eye care needs. Bausch + Lomb has the highest brand awareness of any eye care company. Bausch + Lomb has long-standing relationship with eye-health professionals as well as key retailers and e-commerce channels that reach a broad consumer

B&L is a fully integrated eye health company that offers a comprehensive portfolio of more than 400 products to meet significant patient and consumer needs spanning everything from contact lenses, lens and eye care products, Ophthalmic Pharmaceuticals over-the-counter product and ophthalmic surgical devices and instruments. B&L serves our patients and consumers throughout all phases of their lives, developing and offering new treatments to meet unmet eye health needs and importantly, help people see better to live better.

With that, operator, let's open up the line for questions.

[Operator]

[Operator Instructions] The first question comes from Ken Cacciatore with Cowen and Company.

[Ken Cacciatore, Cowen]

Thanks for all the fundamental discussion. I'm actually going to save my one question for not fundamental. Joe, lots of questions still coming in on the 90% holdings that BHG has a BLC. And I know it's easier to understand the likely path forward and as a pain patent win. It's less clear to everyone what the options are for BAC and a loss. So I'm not sure that you'll be able to discuss it, but can you talk about that -- there's some in the near term and the 80% still remaining. Can you talk about the potential ramifications in the event of a launch as you could best describe them for folks?

[Joe Papa, Chairman, CEO]

Okay. Thank you, Ken, for the question. Let me just maybe back up a little bit and get towards the actual question that you're getting to. Number one, as we think about this, the path forward for us is clear. We've always stated that we would -- our strategy would we utilize 20% of the Bausch + Lomb value to pay down the debt of Bausch Health. We've done now the initial 10-plus percent for the IPO. The remaining actually will turn out to be 8.7% will be monetized by Bausch Health to reduce their debt. They have the flexibility to do that.

As to the question on the XIFAXAN issue, let me say one more the remaining 80%, as I said, will be utilized and will go directly to the shareholders of Bausch Health, just to be clear on the remaining 80%. That will be -- that direct spin of that 80% will go to the shareholders of Bausch Health. So that's how that will play out.

On the question of XIFAXAN, I have to first and foremost say, we continue to expect to win. We have intellectual property of 20-plus patents. Our legal team felt more confident at the end of the trial versus at the start of the trial. So all of that continues to be something that we have looked at and managed our way through that. One of the outside advisers that we've utilized have looked through all this and everyone from a legal point of view, has reviewed it. In fact, IPD, an independent company that was attending at the trial looked at it and expect that we will prevail. As to your question though on the XIFAXAN to loss, let me get to that. As any company would -- you'd expect, we always evaluate multiple scenarios for the business, for planning purposes, and we have done that. But I have to say we continue to expect to win, and I'll probably leave it at that and not speculate any further on that comment. Obviously, that's something that Bausch Health will need to continue to look at in terms of process, but we do expect to win.

[Operator]

The next question is coming from Craig Bijou with Bank of America.

[Craig Bijou, Bank of America]

Congrats on getting the IPO done. I wanted to ask about top line guidance. So obviously, 5% organic growth in the Q1. Your full year guidance of 4% to 5% suggests a slight slowdown. So I just wanted to ask, is that simply conservatism? Is it China, is there something else that we should be thinking about? And then how should we think about the quarterly cadence of that guidance? And from a segment perspective, should we think about growth of each of the segments similar to what we saw in Q1?

[Joe Papa, Chairman, CEO]

Sam?

[Sam Eldessouky, CFO]

Craig, I'll take this question. So the way I would think about it is our guidance from 4% to 5% is -- I'll refer to as a balanced guidance, we factor in what we have been seeing so far in Q1 from China. We saw the lockdown in China did have an impact on us of roughly about $10 million. That impact continues with us in Q2. Still early in the second quarter, we didn't yet completed second quarter. The good news is right now, we understand that the Chinese government have opened up the market. Things are coming back to normal, still 100%, but we'll have to see how the month of June plays out that we had the month of April and May shutdown. So our guidance of 4% to 5% anticipate what we've seen in the month of April and May as well from shutdown in China.

When you step back and you think about just our phasing in general, we tend to be more revenue on the second half than the first half of the year. That's in general. So when you think about the cadence of our phasing, you would expect that we will ramp up with more into Q3, Q4 from a phasing point of view than what you've seen in Q1 and Q2 from us. That's at a normal basis. You just have to factor in the anomaly of China, which again, we've seen in Q1 and Q2.

[Joe Papa, Chairman, CEO]

I think the thing I'd add to Sam's comment is just to put a little bit more perspective on that back-to-school contact lens business is something that we see in that third quarter, fourth quarter. So that's part of what we see in some of the commentary that Sam was making on how we're looking at the seasonality of our business. There is some third quarter, fourth quarter pickup as go back to school and they get their contact lenses, but that's probably the only thing I'd add, I think everything else is agreement.

[Operator]

The next question is from Larry Biegelsen with Wells Fargo.

[Larry Biegelsen, Wells Fargo]

I'll ask just one big picture question. Just at a high level, Joe, and Sam, how are you thinking about Bausch's organic growth and margins beyond 2022? Joe, upfront, you said 1 of the goals of this call was to talk about growth -- long-term growth for the company. The guidance implies an EBITDA margin of about 20% this year. How are you thinking about the pathway back to I think your EBITDA margin in 2019 was about 24%?

[Joe Papa, Chairman, CEO]

I'll start, and Sam, you can add to it. First and foremost, I think the important point I want to make is on a strategic question of what we're planning to do. Number one, we plan to continue the momentum in our current portfolio, less 2021, Bausch + Lomb finished with the fastest-growing contact lens business, we grew at about 18% in 2021 as an example. Try to continue that momentum with all of our products in our portfolio is our first strategic direction. Number two, as we've said publicly, we plan to invest in categories in eye health, and they're growing faster than the overall eye health business.

The good news for us is that we're going to have a chance to launch new products in the daily SiHy lenses. We've now launched in about 24 countries. We have more coming on board every quarter. And then we expect also to launch the multi-focal product Daily SiHy. And these daily SiHy will also add to both on the revenue side and the growth side on the margin, and I'll get to that in just a second. But as we go into these faster-growing categories like daily SiHys, which we believe will grow certainly more than double digit. We're going into the premium IOLs.

We've launched our Luxmar outside the U.S. We have some additional enVista IOL -- premium IOs coming forward and also looking at the opportunity to enter the dry eye market. All of these new products in the faster-growing categories will help us to expand on these margins and the growth as what we are planning. And then finally, we're going into some brand-new categories for us. We're going to enter into the digital surgical ecosystem. We're looking at biosimilar some new categories for us. We just launched XIPERE, the first and only product available in the U.S. that utilizes the suprachoroidal injection therapy, allowing us to help patients who have macular edema associated with uveitis. So all of those new products are going to be helping us to drive overall growth. And then importantly, with new products opportunity for margin enhancement, a simple example, as patients progress from the opportunity with a -- going from the monthly lens to the daily lens to a daily SiHy lens, that's a higher price point for patients, which, in the long term, allow us to achieve better margins.

And then also on that margin question, as we get more experienced, we know that our yield on the Daily SiHy will get stronger all the time. Usually, when you first come out with a product on a -- at a facility on a line, you'll get about a 60% yield in the first year, that will gradually go to 70% to 80% yield and then up to 90-plus percent yield as you get more experience with. That also helps to contribute to the margin. So the margin story will be driven by these new products, margin story will be driven as we get more experience with the SiHy daily lens as we're launching it. And at the higher price point, that will all help to contribute to the overall margin story and help us to get to levels that we were in the past.

Sam, anything you want to add specifically?

[Sam Eldessouky, CFO]

Yes. And Larry, if I can just add a few things to what Joe said and -- again, the launches is a very critical part in terms of how we think about where we are today and where we're heading into the future because I think there's a number of critical launches across all 3 segments that are going to be -- very important for us as we move forward from growth on the top line as well as from a margin contribution. So you see it in the Vision Care, Surgical and with the ophthalmology, having XIPERE coming out this year and NOV03 coming out next year. Also, the base business in itself is in a very durable outstanding right now. I think we have a couple of -- a number of our key brands are doing -- performing very well.

We highlight some of them in the prepared remarks. But the vitamins, the LUMIFY, we've seen also the international Opto business, which has driven growth -- organic growth of roughly 16%. So we have very good fundamental elements of the business. How we think about the cost structure as we go forward here is, we had -- in 2022, it's a year where we stepped up our investment to position ourselves for those launches and to support the growth that we're seeing in our existing portfolio. And also stepped it up for the stand-alone company to operate -- to allow us to operate as a stand-alone company.

As we go forward beyond 2022, we don't need that step change in our cost structure as we move forward. So what that means is that, that trend leads to a leverage from a cost structure that we have the infrastructure that's built right now that we'll be able to be scaled both on the commercial front as well as the overall company, and that will help us in terms of achieving our margin expansion as we go forward.

[Operator]

Your next question is coming from Yatin Suneja from Guggenheim Partners.

[Yatin Suneja, Guggenheim Partners]

Can you just touch a little bit on the market opportunity for NOV03? What sort of infrastructure build will it require? How big is the market? Obviously, there is a relevant comp there as -- just trying to understand your strategy there. And then also if you can provide a little bit on Lucentis biosimilar, what's the update there?

[Joe Papa, Chairman, CEO]

Sure. So let me start in the NOV03 dry eye market. It's a very large market. Specifically, we've -- the gross sales numbers are in order of magnitude $3 billion. Obviously, if you go down to net somewhere probably closer to $2 billion, but a very large market, first comment. Importantly, it's 17 million Americans, and it continues to grow at around the double-digit level. So large market growing rather significantly.

Number two, the opportunity we see here is that we look at our clinical data, and I'm delighted to say that we have statistically significant improvement in the signs and symptoms of dry eye disease associated with meibomian gland dysfunction. And we've shown that as early of day 15. So for us, that's a significant, we think, opportunity to help a number of patients if we are approved by the FDA, help a significant number of patients with their dry eye disease. And importantly, as we think about what that means is -- the current products out in the category can take sometimes up to 3 months to 6 months to work. So if you've got a product that can help patients as early as day 15, we think that makes it a very exciting opportunity to help give a number of patients and realize the revenue opportunities from that.

So we're excited about the size of the market, large $3 billion gross sales, $2 billion approximately on a net basis. We look at what's happening with the current players out there and our ability to show the quick relief of the signs and symptoms of dry eye disease, we're excited about it. Good news for us is that Bausch + Lomb has a very large capabilities of footprint to sell this product in the United States. We've got capabilities already a team in place. Bausch Health has one of the largest portfolio around the world of this -- the capabilities in the pharmaceutical business, and that, we think, is what's important for how we will approach this category.

The other thing that I think I have to say that we think differentiates Bausch + Lomb is by us having an integrated footprint in all of the businesses so that we have a capability in consumer business, a capability in the contact lens business, the capability in the surgical business as well as pharma business. We think that integrated footprint is very important for us from a platform to help us to be successful with new products, and we've seen it. We've seen real life examples of that as we launched our LUMIFY product as an example.

On the second part of your question was Lucentis biosimilar update, we are continuing to work on that. We have announced that there is a question that is -- the FDA has asked us about the submission. Our partner, who's working on this has been asked a question relative to some of the information that the FDA is seeking. We are going to take the FDA comments on that, work with the FDA to revise our filing, and we'll be back with more specifics in terms of filing on that product exactly when we'll get that product filed and move forward with the opportunity. But clearly, the biosimilar opportunity is very large in the United States. It's a $6-plus billion product category in the United States. Lucentis is not -- Lucentis is about 1/3 of that. But it's a big opportunity for us, and we look forward to bringing forward a biosimilar and have more to comment about that in the near future.

[Operator]

[Operator Instructions] And your next question is coming from Robbie Marcus with JPMorgan.

[Robbie Marcus, JP Morgan]

Congrats on your first quarter. Wanted to just follow up on -- I think it was the first question about the spin from Bausch. What are the plans if the parent company is able -- or the Bausch company isn't able to deleverage? How do you plan to address the capital structure going forward and where are the contingency plans?

[Joe Papa, Chairman, CEO]

Sure. Let me take that one, Sam can add anything. Number one, we have specifically laid out the plans for how we will do this. As we've stated publicly, our plans will be that as we think through the Bausch Health, and I want to keep most of our comments today to Bausch + Lomb to be clear. But as we think about Bausch Health, Bausch Health has stated and agreed that we will do a full separation or spin time that Bausch Health gets to a leverage profile of 6.5 to 6.7x. And once we get to that point, we'll do that. As we think about that question, there's going to be a couple of different variables that we have to consider in that question. The first, obviously, is the performance of Bausch Health, as Bausch Health continues to improve their performance, that will be an opportunity to pay down more debt. It also will be the performance of the B&L business, of course, as B&L continues to perform, we'll have an opportunity to improve our capabilities, and that will also when Bausch Health monetizes the remaining 8.7%. That obviously will be another way to delever.

And then finally, there's the value of the [Sulfa] business that also will be a consideration for Bausch Health as they think about this delevering. So clearly, we have all the plans in place to make that happen. As to what could happen there, I really don't want to speculate on what would happen if they don't delever. We do think that we have a plan in place to do that. Of course, as all companies do, we have multiple different scenarios that we'll look at from a business planning point of view, but we absolutely expect that we're going to be able to move forward to delever the Bausch business, as we've stated publicly.

[Operator]

The next question is coming from Joanne Wuensch from Citi.

[Joanne Wuensch, Citi]

And also congrats on your first call. I want to spend a little bit of time on the contact lens market, we tend to divide between unit growth as well as reported revenue growth or even organic revenue growth any way you want to look at it. But specifically, how much of your growth is coming from sort of the cannibalization of older lenses versus new fits? And can you just pull this apart in the U.S. geography as well as anything outside the United States you can point to?

[Joe Papa, Chairman, CEO]

Sure. Let me start on that question. First and foremost, I think what we've been looking at is in terms of our growth, looking at U.S. versus OUS. We've been -- we've had a chance to show the U.S. share of our business growing from somewhere, let's call it, 9% up to the latest date was somewhere 14.5%. So we've been able to show some very significant growth in our U.S. predominantly behind the growth of the newer products, both our Biotrue Ultra and then now importantly, our infused product, the daily SiHy product. So that's probably the -- I think, the first thing I talk about in terms of the overall growth is our performance, especially in the U.S. where we've seen some very significant growth in our contact lens business.

Probably the second thing I would talk about in terms of cannibalization. This really comes into the question of what we're looking at from the -- on to our daily SiHy or INFUSE product. Remarkably, our cannibalization of our existing products has been lower than we've expected. What we've actually picked up on the INFUSE product as we pick up share from our competitors, as well as brand new patient starts have come to our INFUSE products. So we've been very happy with what we've seen from a cannibalization. It's been lower than we've expected. A large and as you would imagine, has come from the other daily SiHy lenses.

Importantly, what we believe the problem out there on the current daily SiHys prior to the launch of our infused or Ultra One day, we call it outside the U.S. The issue has been the existing products still have a problem causing contact lens dryness. One of the things that we were able to do with our product by putting protectant and electrolytes and moisturizers into the formulation is we get very high response from patients in terms of the ability to wear their products all day long. We think that's an important part of how we will be successful with the launch of our INFUSE or Ultra 1 day we cold outside the United States. So I think I've got most of the questions there in terms of contact lens market growth. We clearly see daily SiHy business growing dramatically.

When we launched INFUSE in the United States, for example, we have the best data in the U.S. We know that where we have the fit sets we have about 14% market share. So obviously, that's very positive for us as we think about a product category in the United States, it's going from like $1 billion up to about a $3 billion category by 2030. So we're excited about what it means and where we'll pick up business. There will be some cannibalization for our older brands, but the majority of it so far has come from competitive products and new patient starts is probably the best answer to your question.

[Sam Eldessouky, CFO]

And Joanna, just to add to what Joe said, we did include certain information on the products in our earnings deck, but you'll see this the buy-through grew in the quarter roughly about 8% organically and also grew about 4% organically, notwithstanding the softness that we've seen in the China lockdown.

[Operator]

Your next question is coming from Pito Chickering from Deutsche Bank.

[Pito Chickering, Deutsche Bank]

Back in December and January to see you were able to increase prices to help offset the inflationary pressures. Can you quantify for us what percentage of your portfolio you were able to increase those prices for those increases had any negative impact on demand? And also, if inflation continues going forward, are you still confident that you can keep on passing through these price increases to consumers is that impacting demand?

[Joe Papa, Chairman, CEO]

Great question. Let's start with historical. You're 100% correct in that January time frame, we did take pricing. We took pricing on our prescription pharmaceutical product portfolio. That was in the ballpark mid-single digits. Now I want to be clear that when you take pricing even at -- let's just use 5% as an example, if you take a 5% pricing, you're not going to realize a 5% pricing, you're going to have to offset that with some additional gross to net reductions, et cetera. So we did take pricing on our prescription business, yes.

In addition, we took pricing on our consumer business. And in that case, we took on the consumer business, the action in January, but we did not see the actual realized pricing there until really in the March timing. We have to give retailers, approximately 2 to 3 months of time to build that into their process. So that did not really occur until March, but we have seen that in both the pricing aspects of what we saw both the consumer as well as on the prescription side, we did not see any diminution of the demand for either of those categories. So we are continuing to be able to pass on that price.

On the other area on the vision contact lens business, we did also take pricing there ballpark in that mid-singles areas where we took pricing and that did occur in that January time frame. Now as to the question on go forward, we do think that inflation is real. It's something we are going to look to take additional pricing. We have not seen a really different demand from the prices we've taken in the past. We will continue to look at this. It's something that we do believe is part of our need to look at this from an inflationary part that we're facing. Beyond the pricing aspect, though, I want to be very clear and as we're thinking about the future, we're thinking about it not just simply on a price as the actual selling price, we're all looking at other things like discounts and other rebates in terms of how take a look at the challenge we face from an inflationary pressure. We've also, as a go-forward instituted what we refer to as Project CORE.

Project CORE stands for cost optimization revenue enhancement. That's a program that we're looking at through our entire all the different P&L aspects like manufacturing everywhere we can do to reduce obsolescence, to improve yield, to try to move forward with additional response, to the inflationary now to get ahead of this rather than to be responding to it. We want to continue to get ahead of this because we do see inflationary pressures and everything from the resins we purchase for the polymers, energy, obviously, and shipping. So we're trying to get ahead of that. And we think Project CORE is going to help us get ahead of that as we think through this going forward.

Sam, anything you want to add to what I said?

[Sam Eldessouky, CFO]

[indiscernible]

[Joe Papa, Chairman, CEO]

Next question, please.

[Operator]

The next question is coming from Cecilia Furlong with Morgan Stanley.

[Cecilia Furlong, Morgan Stanley]

I wanted to ask specifically on the capital equipment front, what you're seeing globally in terms of just demand for capital, especially in this environment, how you contemplated that in your Q2 outlook? And then also on XIPERE, I just would love to hear a bit more about the initial days of launch as well as how you're thinking about that product through the balance of this year in terms of growth?

[Joe Papa, Chairman, CEO]

Sure. Let me start on the capital plan. One of the things I want to refer you to on Slide #27 of our presentation. As we did show all of the top 10 products we have as a company, and one of them specifically was the surgical equipment. And that shows that versus a year ago, the capital demand has been -- flat. There absolutely was increased demand for consumables. It was up 13%. And also the implant was up 4.5%. So we did see increased demand for our overall surgical business, as we stated, but the actual capital demand has slowed down a little bit. It's not surprising to us. It's part of what we had expected we do see that, that will improve as we work our way through some of the issues that we're currently seeing in the marketplace. But we did see the growth clearly in the consumables and the implantable side of the business.

As it would relate to XIPERE, what we're really excited about is the response rate. We showed the response rate in our information very, very clear response rate for patients when you use XIPERE. The specific data is on page our presentation. But the best corrected visual acuity has increased dramatically. You can see that we had 46.9% improvement versus the control group only had a 15.6%. So that is the reason why we're getting very favorable feedback from the initial launch of the product. Now to be clear, I want to be really clear that this is a product that requires additional training to how to inject into the suprachoroidal space.

So that's going to take some time. But that's clearly one of the things that we're thinking about in terms of this overall uveitis U.S. market being bought a $400 million opportunity. The actual macular edema is almost less than that, about 1/3 of that or 25% of that. But we clearly think that this is an opportunity because of our response that we've gotten from training of the physicians who've seen a very good reception as they've used this product. So more to stay tuned for that, more to happen, especially as we get additional reimbursement with the product. But we're excited about the initial launch. And most importantly, we're excited about how this is really helping patients by utilizing the suprachoroidal space. And we think the suprachoroidal space may be a platform for additional products in the future that we hope to have more to say about that in the future.

[Operator]

The next question is coming from Amit Hazan with Goldman Sachs.

[Unidentified Analyst]

This is Phil on for Amit. I thought I'd ask a broader picture question as well. Balance sheet, very strong, strong free cash flow generation. I think maybe just touch on capital allocation priorities for the company and then to some of the prior questions. I'm interested if burdening Bausch + Lomb with additional debt is a potentiality in the future depending on how things play out with the parent company to help delever?

[Sam Eldessouky, CFO]

It's a good question. I'll start with the capital allocation. I will just focus on sort of where we are and what we also have done in the last couple of years. I think in the past number of years, we invested roughly about $2 billion in the B&L business since 2018. About half of that came into R&D investments, about $700 million of that $2 billion was about in CapEx investment. And that was very important for us to invest in our platform to be able to enable us to see what we are seeing today in terms of launches and products that we're able to bring to the market. And as we go forth, we'll continue to have the same level of investment in our business between the R&D about 7% of sales when we think about CapEx, we were thinking about it about $200 million to $225 million. We've built pretty good capacity to allow us to support our launches and what we need for the next number of years.

And right now, we're turning our attention to ensure that we are building for the future for additional growth as we go forward with the spend that we're doing. So I think that you'll find that investment in our plasma be a key priority for us. We also did talk about the opportunity for us as we now on a stand-alone basis, we'll be able to deploy some of our cash and our balance sheet towards acquisitions, mainly on the bulk side of bolt-on type of acquisitions, and they're going to be very strategic as we think about where we are within the marketplace where we can leverage our infrastructure, commercial infrastructure, and we can scale it even further, than what we have now by putting in some of those products or acquisitions into our portfolio.

From a debt on B&L, we raised about $2.5 billion as part of the IPO. It's important to step back and just reflect in terms of the capital structure that we deployed within B&L. I think we focused on what we wanted and how we wanted B&L to be structured from a sufficient capital structure going forward, ensure that we will be able to get to an investment-grade rating as we do the spin-off. So that all plays in our thinking in terms of how we thought about the capital structure and how we thought about where we are from a -- to sort of the leverage and where we are from a balance sheet. And I think we're going to be able to continue to focus on the investment grade as we move forward for B&L's an important factor for us.

[Joe Papa, Chairman, CEO]

If I can just add a little bit to what Sam said, because I agree with everything you said is that is worth thinking about this, we see the eye health in an excellent market opportunity. It's got strong tailwinds, whether you're thinking about patients over the age of 65 using 10x more eye health than people under the age of 65, as an example. And we know that the population is going to increase. We know that there's a myopia epidemic out there that it's moved from 20% of the population with myopia to 40% on its way to 50% of the population. So we know about diabetes. All those reasons we think are suggesting it's a good time to invest in a business in eye health, whether it's the organic side that we've referenced in the prior part of the conversation or to the inorganic side, we think the markets are going to grow 4% to 5%. We think we can grow at or above market growth.

And then on top of that, have this opportunity now with these new products as well as investing in business development, M&A opportunities to bolt on additional assets on this capital allocation question. So we think that's a chance to grow organically, at or above market growth rate. And then bolt-on inorganic growth opportunities. We have not had the chance to do that in the past because of some of the debt issues that Bausch + Lomb total parent company had, we think this is a great opportunity for the future. Order of magnitude, I don't want you to think we're doing 1 billion transactions, but multibillion-dollar transactions. But we do think there are opportunities there to do some additional bolt-ons for us. Specifically in the areas of we do you think are 2 areas we're interested to bolt on some additional assets in the surgical space and also in the ophthalmology prescription spaces from a capital allocation point of view, those would be the areas that we are interested in thinking about going forward.

[Operator]

Your final question is come from Zach Weiner from Jefferies.

[Zach Weiner, Jefferies]

I just wanted to hit on the 14% market share that you guys talked about in regions that you have. Just any color on expanding that it set more broadly across the U.S.? And where ultimately do you think that you can get that share?

[Joe Papa, Chairman, CEO]

Yes. It's an absolutely great question. I want to be specific that the data on that 14% was specific to the U.S. data in terms of where we have fit sets. In the U.S., we have been able to get a 14% share of our INFUSE products. So that just may be one clarity. But do we believe there's an opportunity to continue to expand and answer -- absolutely yes. Look to us as we've now increased our capacity for making contact lenses on the SiHy daily lines as we do that, we'll have opportunities to introduce additional fit sets or samples across the broad categories in the United States, but also how we're looking at this market opportunity globally. As I said, at the end of 2021, we had launched in approximately 5 markets. Now we're up to about 24 markets in terms of the launch of our SiHy Daily lens. So move to us to continue to move forward with the opportunities to grow market share of INFUSE.

Importantly, though, maybe just make one important comment. We think in the United States, the SiHy daily market is going to grow from about $1 billion, $1.1 billion last year to somewhere closer to $3 billion by 2030-2031. We also think the international portion of it is going to grow from about $1.5 billion to about $3.7 billion. So you're looking at a market on the Daily SiHy lenses growing from call it, $2.5 billion to something close to $6 billion globally.

So that's why we're excited about this ability to come forward with a contact lens are infused that we believe delivers on some of the challenges in the current SiHy daily portfolio of products that are available, predominantly for addressing this area of contact lens dryness because of our formulation. And certainly, the patient feedback has been outstanding based on the patients that we've had a chance to show it, too. So clearly, taking a look at -- as we expand our capacity, we absolutely go out with more fit sets and more opportunity for the future with our INFUSE products. So -- thank you very much for the question.

That concludes our presentation and Q&A today. Thank you very much for joining. We look forward to getting back and talking to you in the near future. Have a great day, everyone.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.