Bausch Health Companies Inc

TSX:BHC

Earnings Call Analysis

Bausch Health Q3 Performance & 2023 Outlook

Bausch Health Companies Inc. reported a strong third quarter with $2.2 billion in consolidated revenues, marking a 9% increase year-over-year, contributed by growth across all segments, including a 13% rise in Salix revenues to $614 million and a notable performance from the brand Xifaxan. International revenues grew by 10% to $275 million, boosted by Latin America and Poland, while Solta Medical saw a revenue increase of 15% to $83 million, primarily driven by demand in the Asia Pacific. The company also revealed that total net debt, excluding Bausch + Lomb, reduced by $420 million in nine months. Looking ahead, 2023 revenue guidance for Bausch Health, excluding B&L, is set between $4.55 billion and $4.625 billion, with a raised organic growth forecast of 4% to 6%. Adjusted EBITDA is expected to be within $2.30 billion to $2.35 billion.

Revenue Growth and Organizational Commitment

Bausch Health Companies Inc. demonstrated solid performance in the third quarter with revenues reaching $1.23 billion for Bausch Health, excluding B&L, marking a 12% reported and 10% organic year-over-year increase. This growth reflects the company's commitment to improving health outcomes and advancing strategic objectives. Encouraging revenue trends in key segments such as Salix International and Solta Medical, which experienced double-digit growth on a reported basis, contributed largely to the overall success of the quarter.

Pipeline Progress and Legal Victories Strengthening Market Position

The company has made strides in its pipeline development, with the FDA's approval of CABTREO, an acne treatment, hinting at the potential to begin addressing patient needs in 2024. Furthermore, Bausch Health defended its competitive edge by succeeding in a lawsuit against Norwich, affirming its intellectual property rights for Xifaxan and setting a strong precedent for future intellectual property challenges.

Guidance Update and Business Segment Growth

An update on guidance narrows expected financial performance within previously disclosed ranges. Each of Bausch Health's segments delivered growth with highlights in Salix, international revenue, Solta Medical, and diversified revenue segments. Notably, the diversified segment faces long-term challenges in neurology and dermatology, despite being highly profitable and cash-generative.

Long-term Strategy on Company Separation and Balance Sheet Management

The planned separation of B&L remains integral to the company's long-term strategy and will depend on various factors and necessary approvals. With over $1 billion in liquidity after the third quarter, Bausch Health is on firm footing to pursue its strategic goals, including advancing its pipeline, particularly for rifaximin, an investigational treatment for liver cirrhosis, expected to complete phase III trial enrollment in early 2024.

Advancements in Innovative Treatments and Global Studies

Investments in potential blockbuster treatments like amiselimod for ulcerative colitis and CABTREO for acne suggest a forward-thinking approach in addressing significant patient needs. The Phase II study for amiselimod is anticipated to end the induction phase by the fourth quarter, while CABTREO is slated for a U.S. launch in early 2024 and Canadian launch in the latter half of the same year.

Solid Financial Performance and Investment in Growth

Consolidated revenues of $2.2 billion, a 9% increase on both reported and organic basis, with growth across all segments illustrate a strong third quarter performance. The growth was led by Salix revenue, increasing 13% to $614 million, and strong international performances. Solta Medical showed a robust 17% organic revenue increase. Investments have increased in areas essential for future growth, such as sales and marketing, and R&D, representing 6.9% of product sales, a slight increase from the previous year. Adjusted EBITDA reached $830 million, reflecting sound profitability and cash flow generation.

Financial Prudence with Deleveraging Focus

Bausch Health reduced its debt by approximately $150 million and fully repaid its revolving credit facility, demonstrating a prudent approach to balance sheet management and a clear focus on deleveraging.

Earnings Call Transcript 2023-Q3

[Operator]

Greetings. Welcome to the Bausch Health Third Quarter 2023 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now like to turn the conference over to your host, Lisa Wilson. You may begin.

[Lisa Wilson, executive]

Good morning, and welcome to Bausch Health's Third Quarter 2023 Earnings Conference Call. This is Lisa Wilson, Investor Relations for Bausch Health. Participating in today's call are Thomas Appio, Chief Executive Officer of Bausch Health and John Barresi, Interim Chief Financial Officer.

Before we begin, I'd like to remind you that our presentation today contains forward-looking information. We ask you to take a moment to read the forward-looking statements disclaimer at the beginning of the slides that accompanied this presentation as it contains important information.

Our actual results may vary materially from those expressed or implied in our forward-looking statements, and you should not place undue reliance on any forward-looking statements. Please refer to our SEC filings and filings with the Canadian securities administrators for a list of some of the factors that could cause our actual results to differ materially from our expectations.

We use non-GAAP financial measures to help investors understand our ongoing business performance. Non-GAAP financial measures may not be comparable but similarly titled measures used by other companies and should be considered along with, but not as an alternative to, measures calculated in accordance with GAAP. You will find reconciliations to our non-GAAP measures in the appendix of the slides that accompanied this presentation, which are available on Bausch Health's Investor Relations website.

Finally, the financial guidance in this presentation is effective as of today only. We do not undertake any obligation to update guidance. Our discussion today will focus on Bausch Health excluding Bausch & Lomb.

However, we will briefly comment on Bausch & Lomb's results announced yesterday. We will refer to year-over-year comparisons with the same period last year unless otherwise noted. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on November 2, 2023. With that, it's my pleasure to turn the call over to our CEO, Thomas Appio. Tom?

[Thomas Appio, executive]

Thank you, Lisa, and welcome to those of you joining the call this morning. At Bausch Health, our team is focused on enriching lives through our relentless drive to create better health outcomes for our patients and the physicians who treat them.

The BHC team is tirelessly dedicated to business performance driving results and progressing our key strategic objectives. We continue to demonstrate this commitment in the third quarter. Let me share some highlights.

Turning to Slide 6. From a performance standpoint, we had another solid quarter with revenues for Bausch Health, excluding B&L of $1.23 billion, up $127 million or 12% on a reported basis and 10% on an organic basis. I am pleased to share that each of our 4 segments posted revenue growth in the quarter which we will discuss in more detail later.

We continue to progress our R&D pipeline. On October 20, we received FDA approval for IDP-126, now branded as CABTREO. We continue to defend our intellectual property rights for Xifaxan. The consolidated appeals of the Delaware Court ruling are ongoing at the Court of Appeals for the Federal District circuit. Briefing is now complete, and we are awaiting a date for oral argument. We expect the decision by the end of Q1 2024 and remain confident in our position.

With regard to Norwich's lawsuit against the FDA in the D.C. District Court, where Norwich was seeking immediate approval of their ANDA, oral argument was held on October 6, 2023. On November 1, the court denied Norwich's motion and granted summary judgment in favor of the FDA and Salix.

We are fully committed to vigorously defend our intellectual property and providing healthcare providers and patients with safe and effective treatment options. We also continue to evaluate strategies regarding the potential full separation of Bausch + Lomb, which I will discuss later. And in the meantime, we remain focused on managing our balance sheet. We reduced our debt net of cash by approximately $150 million in the quarter.

And lastly, now that we are 3 quarters of the way through 2023, we are updating our guidance for BHC, excluding B&L to a narrower band within our previously disclosed ranges. Let me now start by sharing some of our business performance highlights, as shown on Slide 7.

This quarter, all of our Bausch Health segment delivered revenue growth year-over-year with Salix International and Solta Medical, growing by double digits on a reported basis. Let us take each segment in turn. Salix, Q3 net sales for Salix grew 13% on both a reported and organic basis. While about half of the growth in the quarter was a result of wholesaler stocking patterns we are encouraged by continued underlying growth in this segment, including for Trulance and Relistor.

And building on the plan we laid out last year, we are continuing to focus our commercial investments in sales and marketing to spread awareness of the underlying medical conditions and the options that are available to treat these conditions.

You may have seen our recent press release announcing our partnership with Bellamy Young, who is speaking out to help educate patients, families and caregivers impacted by hepatic encephalopathy, also known as HE. These efforts reflect our commitment to driving long-term profitable growth in this important franchise.

Turning to international. Revenues grew by 10% on a reported basis in the third quarter and 4% on an organic basis, lead by strong performances in Latin America and Poland. In Solta Medical, revenues increased by 15% on a reported basis and 17% on an organic basis, reflecting strong growth in the Asia Pacific region, including China, and low single-digit growth in the U.S. market.

Notably, more than 70% of Solta revenues are generated from consumable sales, representing an attractive and very durable business profile where we see significant opportunity for long-term growth.

Efforts are underway to accelerate growth in our largest markets, expand our sales teams in the U.S. and Europe and advance our pipeline of new market authorizations and next-generation products. Our Solta team is focused on continuing to build a world-class aesthetics business.

Turning to diversified. Revenues increased by 9% on both a reported and organic basis in the quarter. Our neurology and generics units reported growth in Q3 as both businesses benefited from their ability to address short-term supply disruptions that arose in the market. While we are obviously pleased with this performance, the continuation of these tailwinds is uncertain.

In particular, the neurology and dermatology businesses continue to face long-term challenges. Nonetheless, these businesses are highly profitable and cash generative, and we continue to look for opportunities to make targeted investments where appropriate.

In neurology, we are excited about our recently launched marketing campaign for Aplenzin focused on seasonal affective disorder, also known as SAD. In dermatology, we continue to focus on building consumer awareness for Jublia.

And as I mentioned earlier, on October 20, we received FDA approval of CABTREO. We are looking forward to providing patients with this innovative product beginning in 2024. In the third quarter, dentistry revenues declined slightly, ending down 4% year-over-year after posting solid growth in the first 2 quarters of the year.

We expect dentistry to return to growth as we begin to benefit from the investments we have made, increasing consumer awareness efforts for Arestin, including our cover your basis campaign in collaboration with Alex Rodriguez to raise awareness about the prevalence and the impact of gum disease.

We have also strategically deployed our sales team with greater focus on each of the 2 customer segments. The dental support organizations and private practice dentists. We are pleased with the strong performance of our business in the third quarter.

We have also continued to focus on the other areas of strategic importance since our last call. You will recall that in January of this year, we had reached a tentative settlement with the IRS to resolve the Granite Trust matter.

We expect the settlement to be finalized in the coming months. As we have previously said, the anticipated outcome of the settlement does not have a material impact on the company's results or cash flows.

We continue to believe that the separation of B&L makes strategic sense. Any decision regarding if and when a distribution occurs or its structure will be based on and subject to any assessment of all the relevant factors and circumstances.

Any potential distribution will also be subject to shareholder and other applicable approvals. In the meantime, we continue our focus on managing our balance sheet and growing our business for the long term.

To that end, we finished the quarter with more than $1 billion of liquidity. Let me now briefly cover the recent progress we have made advancing our pipeline as shown on Slide 8. Starting with our Salix pipeline, our RED-C program for rifaximin for reduction of early decompensation in cirrhosis continues to advance.

This global program is focused on developing novel formulations and assessing the efficacy of rifaximin SSD formulation versus placebo to delay the occurrence of HE related hospitalizations. We expect a complete enrollment of 2 global Phase III trials with approximately 1,000 patients across the major markets of North America, Europe and Asia Pacific in the first quarter of 2024.

For amiselimod a new oral selective S1P receptor modulator that targets the treatment of mild to moderate ulcerative colitis. The Phase II study completed enrollment in July of this year. This is a large Phase II study with over 300 patients in 19 countries, and the induction phase of this study is expected to be completed in the fourth quarter.

In dermatology, we are pleased that the FDA approved CABTREO, the brand name for IDP-126, indicated for the treatment of acne vulgaris in patients 12 years of age and older. CABTREO is the first and only FDA-approved fixed-dose triple combination topical medication for acne.

We are excited to bring this product to the millions of patients who suffer from acne each year. CABTREO has the potential not only to simplify dosing with a once daily topical regime, but also to improve patient outcomes.

CABTREO utilizes 3 mechanisms of action to treat acne combining an antibiotic, antibacterial and retinoid to provide a novel, effective and tolerable treatment that addresses 3 of the 4 pathogenic factors that cause acne. We expect to launch CABTREO in the United States in the first quarter of 2024.

We have also submitted CABTREO for approval with Health Canada and expect to be poised for launch of CABTREO in Canada in the second half of 2024. Our Solta pipeline is very active as well. Our FDA submission for our next-generation Fraxel, a fractionated laser device for skin resurfacing is planned for the first quarter of 2024 with approval expected sometime in the first half of next year.

Our program for Clear and Brilliant Touch a fractionated laser device for skin rejuvenation is also advancing with regulatory submissions planned in 2024 for Europe, Canada and Asia Pacific markets.

As a leadership team, we remain committed to driving growth through commercial excellence, intensifying our focus on business development and expanding and progressing our pipeline, all with a patient-centered mentality.

With that, I would like to turn the call over to John Barresi, who will provide further details on our third quarter performance. John?

[John Barresi, executive]

Thanks, Tom. Hello, everyone, and thanks for joining us. We closed the third quarter with consolidated revenues for Bausch Health of $2.2 billion, up 9% on both a reported and organic basis over the same quarter last year. Third quarter revenues for Bausch Health, excluding B&L, were $1.23 billion, up 12% on a reported basis and up 10% on an organic basis year-over-year, with growth in all of our segments.

Let's dive into the revenue performance for each segment in more detail, starting on Slide 11 with Salix. Third quarter Salix revenues increased 13% on both an organic and reported basis to $614 million driven by growth in our core products, including Xifaxan 550, Relistor and Trulance. Year-over-year growth in Salix was led by Xifaxan, which grew 13% in the third quarter compared to the same quarter last year.

Revenue growth benefited from a year-over-year increase in wholesale channel inventory. We are continuing to observe a shift in demand from the retail to the nonretail channel, particularly in hospital and clinic generated demand which is not necessarily fully captured in the TRx data.

Extended unit demand growth was approximately 1% year-over-year, while retail prescriptions were flat. We are also pleased with the third quarter sales performance of Relistor and Trulance which posted year-over-year increases of 28% and 10%, with total script growth of 10% and 15%, respectively.

International revenues were $275 million during the quarter, an increase of 10% on a reported basis and 4% on an organic basis compared to the prior year period, led by strong performances in Latin America and Poland.

Solta Medical revenues were $83 million during the third quarter, an increase of 15% on a reported basis and 17% on an organic basis over the prior year period. Revenue growth was driven by strong demand in the Asia Pacific region, including China, as well as modest growth in the U.S. where we are investing in marketing and in expanding our sales force.

With more than 70% of the revenue for this business coming from consumables and with the focus on the pipeline that Tom discussed earlier, we believe Solta Medical is primed for continued near- and long-term growth globally.

Diversified revenues were $259 million, an increase of 9% on both a reported and organic basis in the third quarter. Both neurology and generics delivered year-over-year growth as they benefited from what we believe to be product availability constraints among competing products in the quarter. Dentistry experienced low single-digit declines. For dentistry, this decline came after 2 quarters of solid growth, and we continue to invest in this business for the long term.

The neurology and dermatology businesses continue to operate in challenging environments facing long-term headwinds with roughly 70% of the Diversified segment's revenues coming from products that are past their LOE dates. In neurology, we continue to see volume erosion for Wellbutrin and are moderating our expectations for Aplenzin in a difficult commercial coverage environment.

In dermatology, we expect positive demand growth for Jublia to continue to be offset by net pricing pressure as well as continued pressure on our nonpromoted products. Based on these factors, in the third quarter, we revised our long-term outlook for these businesses and reported goodwill impairments of approximately $250 million for neurology and $150 million for dermatology.

We are managing the portfolio of products for these businesses, which remain highly profitable and cash generative to balance the revenue trajectory and overall profitability. As shown on Slide 12, Bausch + Lomb revenues were $1 billion during the third quarter, up 7% on a reported basis and organic basis compared to the prior year, with growth across all B&L segments.

Turning to the third quarter P&L on Slide 15. Third quarter consolidated adjusted gross margin was 72.3%, 80 basis points higher compared with the prior year. For Bausch Health, excluding B&L, adjusted gross margin for the third quarter was 81.3%, an increase of 50 basis points from last year. At B&L, adjusted gross margin was 80 basis points higher compared with Q3 of 2022.

Consolidated adjusted operating expenses for the third quarter were $833 million, an increase of $75 million or 9% on a constant currency basis driven by higher SG&A expenses, reflecting investments in sales and marketing and higher R&D.

For Bausch Health, excluding B&L, adjusted operating expenses increased by approximately $36 million while B&L reported an increase of $39 million in operating expenses. The increase in operating expenses for Bausch Health, excluding B&L was driven by selling and marketing expenses as well as R&D investment.

Selling and A&P increased largely due to the investments we are making in the sales, sales force, including our go-to-market channels and advertising and promotional activity. Adjusted G&A for Bausch Health, excluding B&L was slightly favorable compared to the prior year.

Consolidated R&D expense for the quarter was $153 million, an increase of 15% compared to the prior year and represented 6.9% of product sales compared with 6.6% for the prior year period.

For Bausch Health, excluding B&L, R&D expenses of $71 million increased by approximately $15 million due primarily to the focus on our clinical programs and regulatory activities to support our mid- and late-stage product development in the Salix segment.

Third quarter consolidated adjusted EBITDA was $830 million an increase of $64 million or 80% on a reported basis and 10% on a constant currency basis. For Bausch Health, excluding B&L, adjusted EBITDA was $664 million, an increase of approximately 10% from last year reflecting the factors previously described.

On a consolidated basis, third quarter adjusted EBITDA margin was 37%, which was flat compared to last year. Adjusted EBITDA margin for Bausch Health, excluding B&L was 53.9% and for Bausch alone was 18.6%.

Turning to cash flow. On a consolidated basis, Bausch Health generated $642 million in operating cash flow in the first 9 months. As with recent quarters, we have also reclassified a portion of our cash interest payments to financing cash flows as a result of the accounting treatment for the bonds issued as part of our 2022 debt exchange.

Adjusted cash flow from operations on a consolidated basis in the first 9 months was $458 million. For Bausch Health, excluding B&L, year-to-date adjusted cash flow from operations was $430 million which was in line with our expectations.

Adjusted cash flow includes adjustments for the payment of separation costs, business transformation costs and insurance settlement proceeds and also includes payment of the full contractual interest.

Now let's turn to our balance sheet on Slide 16. We continue to prioritize liquidity management and the delevering of our balance sheet. And in the third quarter of 2023, we reduced our debt net of cash for Bausch Health, excluding B&L, by approximately $150 million, including fully repaying our revolver and considering our borrowings under the AR facility that we closed in the second quarter.

At the end of the third quarter, we had $350 million outstanding under the accounts receivable facility and had no outstanding borrowings and approximately $950 million of availability under our revolving credit facility.

As shown on Slide 17 and 18, total debt for Bausch Health, excluding Bausch + Lomb at the end of the quarter was $16.4 billion, which consisted of $15.1 billion of restricted debt issued by Bausch Health, excluding B&L and $1.3 billion of unrestricted debt, which includes the $1 billion of senior secured notes issued by the unrestricted subsidiary created in the third quarter of last year and the $350 million drawn under our AR facility.

Excluding B&L debt, approximately 85% of our debt is fixed and approximately 70% of the company's debt on a consolidated basis is fixed. Net debt for Bausch Health, excluding B&L is down approximately $420 million in the 9 months since the beginning of this fiscal year.

With 3 quarters of the year behind us, we have updated our 2023 guidance within our previously disclosed ranges for Bausch Health, excluding B&L, which can be viewed on Slide 21.

For Bausch Health, excluding B&L, we expect revenues in the range of $4.55 billion to $4.625 billion, in line with our previous outlook, although with one quarter to go, we have narrowed the range.

We are raising our organic growth guidance to 4% to 6% up from 2% to 5%. Our revenue and organic growth guidance reflects the business performance trends we have discussed and for reported revenue reflects the impact of FX, which has been a headwind since our last guidance update in August.

For Salix, we typically see a seasonal step-up in sales in the second half, particularly in Xifaxan, primarily due to wholesaler inventory dynamics, a part of which we saw late in the third quarter of this year as well as patient level patterns related to insurance deductible activity.

As we continue to realize benefits from our commercial investments, we expect full year growth for Salix in the mid- to high single-digit range and in line with our expectations going into the year.

For International, we expect overall full year growth to be in line with the first 3 quarters of the year. We have a balanced portfolio from both a product and geography perspective, which helps this segment deliver consistent performance.

For Solta, we anticipate continued strong reported and organic growth for the full year. For Diversified, we expect full year sales to decline in line with the segment's year-to-date performance due largely to the pressures I referred to earlier on the neurology and dermatology businesses.

We continue to expect gross margin to be in the 80% range, in line with prior guidance. We also continue to expect our full year adjusted EBITDA to be in line with our previous guidance, but what one quarter to go are also narrowing the range here with adjusted EBITDA for Bausch Health, excluding B&L, expected to be in the range of $2.30 billion to $2.35 billion within the range we had previously provided.

As we've discussed in prior quarters, our adjusted EBITDA guidance reflects the acceleration of approximately $50 million in R&D spend from 2024 for critical programs, which is higher R&D investment in 2023 than contemplated when we initially provided guidance for the year.

Adjusted EBITDA guidance also includes the impact of charges for the Emerade recall that primarily occurred in Q2. On the expense side, we will continue to invest in sales and marketing activities to drive growth in our key brands in our sales, International and Solta Medical segments.

These expenditures include sales force expansion, DTC advertising and investments in sales force tools. As Tom mentioned, we expect to see the effects from these initiatives on revenues continue through the remainder of this year.

Moving below adjusted EBITDA, we are reaffirming our full year effective non-GAAP tax rate of approximately 15% as well as holding our expected contractual interest costs unchanged at approximately $1.3 billion.

Lastly, we are reaffirming our guidance for adjusted operating cash flow for Bausch Health, excluding B&L, of approximately $625 million. As I said earlier, adjusted cash flow includes adjustments for the payment of separation costs, the payment of the full contractual interest and also includes the estimated impact of cash tax payments, inclusive of the tentative Granite Trust settlement, which we expect to be finalized with the IRS in the coming months. I'll now hand the call back to Tom.

[Thomas Appio, executive]

Thank you, John. In summary, as you have heard today, we continue to make solid progress against the strategic priorities we set out at the beginning of the year. We recognize that there is more to do and that some of our businesses face challenges. With one quarter to go in 2023, we are focused on closing the year strong and carrying that momentum into 2024.

I want to reinforce our entire team's commitment to driving business performance and delivering against our strategic priorities, which remain intact and are outlined on Slide 23.

We have a clear purpose of enriching lives through a relentless drive to create better health outcomes for patients and healthcare providers who treat them. We have made key focused investments in our sales teams, marketing programs and R&D pipeline to drive performance for the long term.

Finally, and importantly, we have an all-in team that is principled, creative, are problem solvers and results focused. On behalf of our entire Bausch Health team, I thank you for your interest in and support of our company. With that, we will now take questions. Operator, please open the line for Q&A.

[Operator]

[Operator Instructions] Your first question for today is coming from Jason Gerberry with Bank of America Securities.

[Jason Gerberry, analyst]

I guess, firstly, I'm just wondering where you are with the status of the new CFO hire. I didn't see that listed on the priority list, but if you can have any commentary there. And then on the prior quarter update, you talked about exploring different strategic options for separation. Are there any kind of specific options that are emerging there? And as you talk about different factors. Is Canadian approval and/or a solvency opinion options that are going to be factors in the separation?

[Thomas Appio, executive]

Thanks, Jason. Yes, Jason, I'll take the first question regarding the CFO hire. Yes, as you know, Tom Vadaketh left and John has taken over as the interim head, a search is underway. And what I would say is, in the meantime, we have a really strong finance team focused on maintaining the momentum within our business.

So we're in good shape there and really working to continue to drive performance in the fourth quarter. With regard to the changes that we've talked about in the second quarter, nothing has changed there in terms of what we want to do.

We had time in the second quarter to consider going through a reduction of capital, we believe that completing any eventual distribution by way of return of capital basically simplifies the process and helps to manage through some of the risks that have been identified.

We believe also it creates additional strategic flexibility for both companies. And when we look at it in terms of solvency, there's many factors that go into that, John, maybe you want to take that.

[John Barresi, executive]

Yes, I don't think anything has fundamentally changed in terms of how we're thinking about the steps to get or how we're thinking about solvency beyond what we previously disclosed. The solvency requirements haven't changed and we continue to evaluate them.

[Thomas Appio, executive]

Go ahead, Jason, you have a follow-up?

[Jason Gerberry, analyst]

Well, yes, I guess I'm just not too really clear. I think in the past, it was framed as sort of something that you are self-imposed consideration, but that perhaps under the reduction of capital, it may not -- it wouldn't be needed because the Canadian approval dynamics change. So I guess, does that how you'd frame it as sort of it's still a self-imposed option, and you're not saying whether you will or won't do it.

[Thomas Appio, executive]

So I think fundamentally, Jason, we need to ensure that if and when we do a distribution, we have 2 appropriately capitalized companies that we're leaving behind, right? And so the specific legal procedural steps to solvency, I don't think our something that's necessarily germane to that discussion. We have to have 2 companies that are appropriately capitalized.

[Operator]

Next question is coming from Umer Raffat with Evercore.

[Umer Raffat, analyst]

I have 3 today, if I may. First, Tom, on this point on appropriately capitalizing both companies, is that feedback you're getting from a regulator, perhaps Canada or somewhere in the U.S.?

Secondly, on Xifaxan. I know there's 2 road issues. There's the patent issue which is being appealed from the district court. And then there's this issue around how the district court prevented FDA approval until 2029.

Can you clarify if both these issues will be part of the appeals court ruling in first half? And finally, have you guys taken any blinded look at cardiac safety in the MSL mods ongoing trial?

[Thomas Appio, executive]

Yes. So well, I'll take the first one, Umer. In terms of appropriately capitalized, no, the answer is that -- we just -- when we talk about it, that's when we look at the spin, that's what we look at as 2 appropriately capitalized companies.

Regarding the second question you had on the appeal of the District Court. What I would say is, again, yesterday's decision, okay, was the District Court denied Norwich's motion and granted summary judgment in favor of the FDA and the company.

We are really happy with this outcome. This is a separate -- of course, a separate matter to our appeal which is ongoing. And of course, we're waiting for an outcome in the first quarter of next year. On the last one on amiselimod, yes, we did run -- we did take a look at the cardio safety of amiselimod and a study -- a large study was run.

[Operator]

Your next question for today is coming from David Amsellem with Piper Sandler.

[Unknown Analyst]

This is Carol on for David. First, what are your overarching thoughts on solvency in the context of the 2027 and 2028 maturities? Do you have any long-term plans you can speak to, to attain a more secure capital structure and then also, how are you thinking about the divestitures as a means of addressing the debt burden?

[John Barresi, executive]

Yes. I'll take the first part of that, and then Tom can talk about the divestiture side of it. We're not going to share long-term projections. You'll see our 2024 guidance when we get to February. What I will say is a couple of things as we think through, obviously, debt reduction continues to be a priority for us.

We have businesses that generate significant cash flow. You saw earlier, we're guiding to $625 million for this year. As the business grows on the top line, that should flow pretty well down to cash and bottom line going forward as well. And we continue to focus on our pipeline, as Tom spoke about, right, because that's important when we do get to places where we need to refinance, obviously, the forward-looking leverage is going to be critical there.

And so continuing to grow the business we have, generate cash and focus on developing our pipeline are the keys there.

[Thomas Appio, executive]

Yes, I'll take the second point of that question, of course, divestitures as a publicly held company, we're always considering all options. We have a lot of great assets in this company. So if someone comes forward, and is interested in looking at our assets. We're always entertain that. Clearly, the assets we have today, as we saw in terms of the results of the third quarter, we're performing well. However, clearly, if there is any interest, we would entertain it.

[Operator]

The next question is coming from Douglas Miehm with RBC Capital Markets.

[Douglas Miehm, analyst]

Just a couple of questions on Xifaxan. Number one, with respect to the growth at around 13% relative to the flat in prescription. So is it fair to say then a small part price increase and the bulk of it was stocking and maybe you could actually delineate what that number was.

And then the second question has to do with Aplenzin and Wellbutrin. We saw actually a fairly strong growth relative to the weakness in prescriptions. Can you walk us through what's going on there as well? I know that you indicated that into Q4, things are going to reverse themselves. But just curious as to what happened there.

[Thomas Appio, executive]

Yes, Doug, I'll take some of those questions, and then John might add a few things. When we take a look at Xifaxan clearly, in the quarter, it was a good quarter. I did mention in my prepared remarks, there was some changes on inventory. And our pricing, we did have a good opportunity to get some price with a higher net price got a $17 million.

Overall, when we take a look at the extended units, they were up 0.5% in the third quarter. The nonretail extended units grew by 4% when we take a look from an outpatient perspective, there are things happening and shifting of patients and especially on the HE side.

As we look at it -- if I take a look at the TRx growth, it was -- for IBS-D, it was 0.5% in line with the trend. When I look at on the HE side, it did decline slightly from a total TRx standpoint. But the NRx trend is good.

So one of the things we're going to be focusing on is refill rates as we into the fourth quarter. As you know, also, I've talked about in previous calls, our AI project that now has been rolled out to our large field force, both on the primary care side and the specialty side. And that, as we look at what our messaging is, what our targets are is going to help improve the volume performance going forward.

When I take a look at the volume, the volume and also then what the wholesalers bought and I don't -- the data that they're looking at and the trends that they see. But there's a lot of things that we're doing there from a direct-to-consumer advertising, I mentioned the development opportunity speaking about the need to address HE.

There's a lot of things happening there that will help our Salix business going forward. When we take a look at Aplenzin and Wellbutrin clearly, in the quarter, we had opportunities there from looking at our other competitors had in terms of inventory movements.

We did launch the Aplenzin SAD campaign, which we're really excited about. That is the only product approved for SAD and we think that we have a really good opportunity to drive growth not only in the fourth quarter but good momentum going into next year.

[Operator]

Your next question is coming from Les Sulewski with Truist Securities.

[Leszek Sulewski, analyst]

So first, on the EBITDA guidance for BHC, excluding Bausch + Lomb. Can you just talk about some of the puts and takes on the narrowing down of the guidance there?

And then second, on the RED-C program, how is this enrollment trending and any agency feedback from specifically from Asia specific region?

[Thomas Appio, executive]

Yes. So why don't I take the first question on the RED-C and then John will take the question on guidance. Really excited about the RED-C program. Again, this is a global program. As today, we only have approval to market Xifaxan in the United States.

This would be an opportunity globally. The enrollment of 2 global Phase III trials is on track. One of the reasons why you see the increase in spend in R&D. We put more investment behind this program to accelerate the program.

So we have an earlier approval. So we expect these 3 Phase III trials to be completed in 2025. And to file in 2026 and to launch a commercial product in the first half of 2027. When I look at the opportunity here, of course, we need the data. But we look at the opportunity for RED-C globally, it's a really great opportunity for our company.

And the R&D team has been doing a real good job on the recruitment and have many investigator meetings both in Europe and also in Asia Pacific and trying to get as many sites up and running as possible and making sure that even looking at our opportunities to run a trial in China, which would be, again, an area of focus for us. John, do you want to take the other question on guidance?

[John Barresi, executive]

Sure. In terms of the puts and takes on guidance last year, I think there are a few things in there. One, you start with -- we're going to talk about adjusted EBITDA, but it starts with top line, right?

And as you can see, we've increased our organic growth guidance a point on the top end, 2 points on the bottom end. But FX has really shifted since the last time we provided guidance in August and has become much more of a headwind, which carries through down to the bottom line to a degree.

And then when we look at some of the other factors, we talked about the R&D spend that we've accelerated into 2023. The Emerade recall that happened in Q2 and trailed a little bit into Q3.

We've continued to try to be really thoughtful about cost and expense. But when we look at how all of that rolls together, I think we thought it was prudent to narrow our range to the 2.3 to 2.35 range. So hopefully, that helps answer your question.

[Leszek Sulewski, analyst]

That's helpful. And if I may squeeze one more on the recent approval of CABTREO. What's the market opportunity here? Just talk about sales force adds for 1Q launch, pricing reimbursement strategy and then essentially a duration of the compliance rate that you expect from the product?

[Thomas Appio, executive]

Yes. What I would say, CABTREO, we're really, of course, excited that we gained FDA approval, the team, the R&D team, the regulatory team have worked really hard to bring this product to fruition. What I would say is the acne is clearly a focus for us, and we see it as a good opportunity.

Of course, as you know, the medical space in terms of the payer perspective is a challenge. And therefore, we're looking at what our pricing will be looking at various ways to maximize the molecule in -- whether it be from a payer -- of course, from a payer perspective, but also from a cash pay perspective, we think that this product is the best-in-class for the treatment of acne.

So the team is still working on finalizing the launch plans as we work, as we're going to launch this in the first quarter of 2024. But clearly, we're excited about it. We think it's a good opportunity to put this product in the bag to drive growth and stabilization of our medical derm business.

[Operator]

We have reached the end of the question-and-answer session, and I will now turn the call over to Tom Appio for closing remarks.

[Thomas Appio, executive]

Since there are no further questions, I would just say thank you for joining today. In summary, we had a solid Q3 and made good progress on our strategic objectives. We look forward to finishing the year strong with a focus on profitable growth, driving performance, advancing the R&D that we discussed on this call and also advancing business development as well and building on our overall momentum from the third quarter into the fourth and then continuing that on in 2024. I would really like to thank everybody for joining our call today.

[Operator]

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.