BAUSCH HEALTH : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

INTRODUCTION

Unless the context otherwise indicates, as used in this "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the terms "we,"
"us," "our," "the Company," and similar terms refer to Bausch Health Companies
Inc. and its subsidiaries. This "Management's Discussion and Analysis of
Financial Condition and Results of Operations" has been updated through May 7,
2020 and should be read in conjunction with the unaudited interim Consolidated
Financial Statements and the related notes included elsewhere in this Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2020 (this "Form
10-Q"). The matters discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contain certain forward-looking
statements within the meaning of Section 27A of The Securities Act of 1993, as
amended, and Section 21E of The Securities Exchange Act of 1934, as amended, and
that may be forward-looking information within the meaning defined under
applicable Canadian securities laws (collectively, "Forward-Looking
Statements"). See "Forward-Looking Statements" at the end of this discussion.
Our accompanying unaudited interim Consolidated Financial Statements as of March
31, 2020 and for the three months ended March 31, 2020 and 2019 have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") and the rules and regulations of the
United States Securities and Exchange Commission (the "SEC") for interim
financial statements, and should be read in conjunction with our Consolidated
Financial Statements for the year ended December 31, 2019, which were included
in our Annual Report on Form 10-K filed on February 19, 2020. In our opinion,
the unaudited interim Consolidated Financial Statements reflect all adjustments,
consisting of normal and recurring adjustments, necessary for a fair statement
of the financial condition, results of operations and cash flows for the periods
indicated. Additional company information is available on SEDAR at www.sedar.com
and on the SEC website at www.sec.gov. All currency amounts are expressed in
U.S. dollars, unless otherwise noted.
OVERVIEW
We are a global company whose mission is to improve people's lives with our
health care products. We develop, manufacture and market, primarily in the
therapeutic areas of eye-health, gastroenterology ("GI") and dermatology, a
broad range of: (i) branded pharmaceuticals, (ii) generic and branded generic
pharmaceuticals, (iii) over-the-counter ("OTC") products and (iv) medical
devices (contact lenses, intraocular lenses, ophthalmic surgical equipment and
aesthetics devices), which are marketed directly or indirectly in approximately
100 countries.
Core Businesses
Our strategy is to focus our business on core therapeutic classes that offer
attractive growth opportunities. Within our chosen therapeutic classes, we
prioritize durable products which we believe have the potential for strong
operating margins and evidence of growth opportunities. We believe this strategy
has reduced complexity in our operations and maximizes the value of our: (i)
eye-health, (ii) GI and (iii) dermatology businesses which collectively now
represent a substantial portion of our revenues. We have found and continue to
believe there is significant opportunity in these businesses and we believe our
existing portfolio, commercial footprint and pipeline of product development
projects position us to successfully compete in these markets and provide us
with the greatest opportunity to build value for our shareholders. We identify
these businesses as "core", meaning that we believe we are best positioned to
grow and develop them.
Reportable Segments and Strategies
Our portfolio of products falls into four operating and reportable segments: (i)
Bausch + Lomb/International, (ii) Salix, (iii) Ortho Dermatologics and (iv)
Diversified Products.
The Bausch + Lomb/International segment - consists of our Global Bausch + Lomb
eye-health business and our International Rx business. Our Global Bausch + Lomb
eye-health business includes our Global Vision Care, Global Surgical, Global
Consumer and Global Ophthalmology Rx products, which in aggregate accounted for
approximately 41%, 42% and 43% of our Company's revenues for the three months
ended March 31, 2020 and the years 2019 and 2018, respectively. Our
International Rx business, with the exception of our Solta products, includes
sales in Canada, Europe, Asia, Australia, Latin America, Africa and the Middle
East of branded pharmaceutical products, branded generic pharmaceutical products
and OTC products, which in aggregate accounted for approximately 14%, 13% and
13% of our Company's revenues for the three months ended March 31, 2020 and the
years 2019 and 2018, respectively.
Our Bausch + Lomb business is a fully-integrated eye-health business, which we
believe is critical to maintaining and developing our position in the global
eye-health market. As a fully integrated eye-health business with a 165-year
legacy, Bausch + Lomb has an established line of contact lenses, intraocular
lenses and other medical devices, surgical systems and devices,

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vitamin and mineral supplements, lens care products, prescription
eye-medications and other consumer products that positions us to compete in all
areas of the eye-health market.
As part of our Global Bausch + Lomb business strategy, we continually look for
key trends in the eye-health market to meet changing consumer/patient needs and
identify areas for investment and growth. For instance, one of these trends is
the increasing rate of myopia, and importantly, myopia as a potential risk
factor for glaucoma, macular degeneration and retinal detachment. We continue to
see increased demand for new eye-health products that address conditions brought
on by factors, such as increased screen time, lack of outdoor activities and
academic pressures, as well as conditions brought on by an aging population for
example, as more and more baby-boomers in the U.S. are reaching the age of 65.
To supplement our well-established Bausch + Lomb product lines, we continue to
identify new products tailored to address these key trends, which we develop
internally with our own research and development ("R&D") team to generate
organic growth. We also license selective molecules or technology in leveraging
our own R&D expertise through development, as well as seek out external product
development opportunities. Recent product launches include Biotrue® ONEday daily
disposable contact lenses, the next generation of Bausch + Lomb ULTRA® contact
lenses, SiHy Daily contact lenses, Lumify® (an eye redness treatment), Vyzulta®
(a pressure lowering eye drop for patients with angle glaucoma or ocular
hypertension) and Ocuvite® Eye Performance (vitamins to protect the eye from
stressors such as sunlight and blue light emitted from digital devices).
The Salix segment - consists of sales in the U.S. of GI products and includes
our Xifaxan® product. Our Xifaxan® product accounted for revenues of $375
million, $1,452 million and $1,195 million for the three months ended March 31,
2020 and the years 2019 and 2018, respectively.
As part of our acquisition of Salix Pharmaceuticals, Ltd. in April 2015 (the
"Salix Acquisition"), we acquired the intellectual property to a number of
products that have provided us with year-over-year revenue growth, particularly
the intellectual property behind Xifaxan® for, amongst other indications,
irritable bowel syndrome with diarrhea ("IBS-D"), and Relistor® for opioid
induced constipation. Revenues from our Xifaxan® product increased approximately
23%, 22% and 22% during the three months ended March 31, 2020 and in the years
2019 and 2018, respectively.
We attribute the growth in our Salix revenues to the investments we have been
making since 2017, including: (i) hiring 200 trained and experienced sales force
representatives to expand the commercial field force for Xifaxan®, (ii)
increasing the focus on the development of next generation formulations of our
Salix intellectual property to address new indications, (iii) completing the
strategic acquisition of certain assets of Synergy Pharmaceuticals Inc.
("Synergy"), which included the Trulance® product, (iv) increasing the number of
sales force representatives for Trulance® and (v) entering into licensing
agreements for investigational products, which, once developed and if approved
by the U.S. Food and Drug Administration ("FDA"), will be new treatments for
certain GI and liver diseases. Each of these opportunities potentially provides
us with the ability to expand our GI portfolio and allows us to leverage our
existing GI sales force, supply channel and distribution channel.
The Ortho Dermatologics segment - consists of: (i) sales in the U.S. of Ortho
Dermatologics (dermatological products) and (ii) global sales of Solta
dermatological devices.
The Ortho Dermatologics business is our medical dermatology business dedicated
to the treatment of a range of therapeutic areas, including psoriasis, actinic
keratosis, acne, atopic dermatitis, onychomycosis and other dermatoses and
includes our Duobrii®, Bryhali®, Jublia® and Siliq® product lines. As part of
our business strategy for the Ortho Dermatologics segment, we have made
significant investments to build out our psoriasis, atopic dermatitis and acne
product portfolios, which are the markets within dermatology where we see the
greatest opportunities, with a focus on topical gel and lotion products over
injectable biologics. We continue to support and develop injectable biologics;
however, we believe some patients prefer topical products as an alternative to
injectable biologics. Further, as topical products can, in many cases, defer the
use of injectable biologics that often come with associated risk/benefit
profiles, a topical product is usually readily adopted by payors, is less
expensive and can be more cost-effective than injectable biologics. Therefore,
we believe topical products represent alternative treatments for physicians,
payors and patients, and as the preferred choice of treatment, have the
potential to drive greater volumes, generate better margins and will ultimately
be a key contributing factor of our Ortho Dermatologics business.
During 2017 through the date of this filing, we have made significant
investments to build out our aesthetics, psoriasis and acne product portfolios,
which we believe, coupled with our experienced dermatology sales leadership team
and our recently expanded Ortho Dermatologics sales force, will position our
Ortho Dermatologics business for growth.
Our Solta business is dedicated to the development of innovative treatment
technologies that provide proven and effective medical aesthetic and therapeutic
benefits to consumers. Global Solta revenues were $51 million and $38 million
for the three months ended March 31, 2020 and 2019 and $194 million and $135
million the years 2019 and 2018, respectively. The increase in revenue is
primarily attributable to Next Generation Thermage FLX®, a fourth-generation
non-invasive treatment option using a radiofrequency platform designed to
optimize key functional characteristics and improve patient outcomes. During
2018 and 2019, Next Generation Thermage FLX® was launched in Hong Kong, Japan,
Korea, Taiwan, Philippines, Singapore, Indonesia,

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Malaysia, China, Thailand, Vietnam, and Australia as part of our Solta medical
aesthetic devices portfolio. These launches have been successful as Next
Generation Thermage FLX® revenues for three months ended March 31, 2020 and 2019
were $26 million and $12 million, respectively and in full-year 2019 were $77
million.
The Diversified Products segment - consists of sales in the U.S. of: (i)
pharmaceutical products in the areas of neurology and certain other therapeutic
classes, such as Wellbutrin®, Aplenzin®, Cuprimine®, Ativan® and Migranal®, (ii)
generic products, such as Uceris® authorized generic ("AG"), Elidel® AG and
Diastat® AG and (iii) dentistry products, such as Arestin® and NeutraSal®. The
Company utilizes the Diversified Products segment to extend the long-term cash
flows from a number of assets that are expected to decline over time due to the
loss of exclusivity, by launching and selling authorized generic versions of
certain branded assets.
For a comprehensive discussion of our business, business strategy, products and
other business matters, see Item 1. "Business" included in our Annual Report on
Form 10-K for the year ended December 31, 2019, filed with the SEC and the
Canadian Securities Administrators ("CSA") on SEDAR on February 19, 2020.
Impact of COVID-19 Pandemic
In December 2019, a novel strain of the coronavirus disease, COVID-19, was
identified in Wuhan, China. Since then, COVID-19 has spread to other parts of
the world, including the United States, Canada and Europe, and was declared a
global pandemic by the World Health Organization (the "WHO") on March 11, 2020.
As a global health care company, now more than ever, we remain focused on our
mission of helping to improve people's lives with our health care products.
The unprecedented nature of the COVID-19 pandemic has adversely impacted the
global economy. The COVID-19 pandemic and the rapidly evolving reactions of
governments, private sector participants and the public in an effort to contain
the spread of the COVID-19 virus and/or address its impacts have intensified and
have had significant direct and indirect effects on businesses and commerce.
This includes but is not limited to, disruption to supply chains, employee base
and transactional activity, facilities closures and production suspensions, and
significantly increased demand for certain goods and services, such as
pandemic-related medical services and supplies, alongside decreased demand for
others, such as retail, hospitality, elective medical procedures and travel.
As the global economic landscape changes, there is a wide range of possible
outcomes regarding the nature and timing of events and reactions relating to the
COVID-19 pandemic, each of which are highly dependent on variables that are
difficult to predict at this time. The extent and duration of the pandemic, the
rapidly evolving reactions of governments, private sector participants and the
public to the COVID-19 pandemic and the associated disruption to business and
commerce generally, and the extent to which these may impact the Company's
business, financial condition, cash flows, development programs and results of
operations in particular, will depend on future developments which are highly
uncertain and many of which are outside the Company's control. Such developments
include the ultimate geographic spread and duration of the pandemic, new
information which may emerge concerning the severity of the COVID-19 pandemic,
the effectiveness and intensity of measures to contain COVID-19 and/or address
its impacts, and the ultimate economic impact of the pandemic. Such
developments, among others, depending on their nature, duration and intensity,
could have a significant adverse effect on our business, financial condition,
cash flows and results of operations.
To date, the Company has been able to continue its operations with limited
disruptions in supply and manufacturing. Although, it is difficult to predict
the broad macroeconomic effects that the COVID-19 virus will have on industries
or individual companies, the Company has assessed the possible effects and
outcomes of the pandemic on, among other things, its supply chain, customers and
distributors, discounts and rebates, employee base, product sustainability,
research and development efforts, product pipeline and consumer demand.
Primarily due to this assessment, we have taken actions to manage the level of
our investment in support of certain existing products, anticipated launches and
the expansion of our sales footprint in Europe. Postponing these investments may
impact the extent and timing in achieving our longer-term forecasts for certain
business units, however we believe these actions will not have a material impact
on the underlying value of the related businesses or their associated assets.
We are and will continue to closely monitor the impacts of the COVID-19 pandemic
and related responses from governments and private sector participants on the
Company, our customers, supply chain, third-party suppliers, project development
timelines, costs, revenue, margins, liquidity and financial condition and our
planned actions and responses to this pandemic.
We believe we have responded quickly to the human and commercial challenges
brought on by COVID-19 and that our early actions have, so far, enabled us to
keep our employees safe and our supply lines largely intact and we believe these
actions have laid the foundation for us to work our way through the
uncertainties to come. Importantly, we believe that the steps we took over the
last several years to manage our capital structure place us in a strong position
to maintain sufficient liquidity to continue operations through an extended
pandemic and we believe that our businesses will not see their long-term value
diminished by this unprecedented situation.

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Our Employees
The health and safety of our employees is paramount. Our senior management team
meets regularly to assess this ongoing situation and has implemented multiple
actions to protect our employees. In most locations, employees not directly
involved in production, including our sales forces, are working remotely. For
essential personnel in our manufacturing and distribution centers, we are taking
every precaution to ensure that these employees are working in an environment
that is as safe as possible, including following procedures as prescribed by
global public health organizations, such as the WHO and U.S. Centers for Disease
Control and Prevention.
Our Supply Chain and Manufacturing Facilities
Our objective is to maintain the uninterrupted availability of our products to
meet the needs of patients, consumers and our customers, and in fact, we have
stepped up production to meet increased demand for certain of our consumer
products. Business continuity plans and site-level biosecurity procedures are in
place to ensure the well-being of our employees while we work to maintain the
integrity of our supply chain. As of the date of this filing, we have not
experienced any disruption in our supply chain that would have a material impact
on our results of operations.
Our global supply chain team worked diligently to stay ahead of this challenge
once it appeared in Asia and has used that experience to put in place procedures
to mitigate the risks of closures and disruptions at our manufacturing
facilities in other regions. We have multiple sources of active pharmaceutical
ingredients ("API") and intermediates for many of our products, the availability
of which has not had, and at this time we do not expect will have, a material
impact on our supply chain. We have been largely successful in keeping our
manufacturing facilities operational, although our facilities in Milan, Laval
and China were closed for short periods of time but have since resumed
operations. With respect to our largest product, Xifaxan®, as of April 30, 2020,
we have over five months' supply of Xifaxan® on hand and enough API to
manufacture another five months' supply of Xifaxan® finished goods. We also have
open orders for API that we currently expect will arrive on schedule. However,
if we were to experience a lack of availability of API for Xifaxan®, such
disruption to our supply chain could have a significant adverse effect on our
business, financial condition and results of operations.
Our Product Pipeline
Our leadership team actively manages the Company's product pipeline to identify
what we believe are innovative and realizable projects aligned with our core
businesses that are expected to provide incremental and sustainable revenues and
growth. During the COVID-19 pandemic, our R&D team remains focused on meeting
these objectives in a timely manner; however, there are significant events and
circumstances regarding the COVID-19 pandemic that may materially affect our R&D
team's ability to do so, many of which are beyond the Company's control. As a
result of these events and circumstances, we have had to pause certain early
stage clinical trial and research efforts, which in turn is expected to lead to
delays in the development and the anticipated launch of certain projects.
Due to the challenges of the COVID-19 pandemic, most notably those attributable
to "stay at home" and travel restrictions, we have been forced to pause certain
R&D activities. Clinical trials that started prior to governmental shutdowns
remain enrolled and existing patients are progressing, while new patient
enrollments in clinical trials have been temporarily paused as most trial sites
are not able to accept new patients. While we anticipate resuming these projects
as soon as possible, the ultimate impact on the timing and completion of the
affected clinical trial programs, and the expected approval and launch of the
product candidates to which these development programs relate, is dependent upon
when many COVID-19 pandemic uncertainties are resolved and we may resume new
patient enrollments and other impacted development activities. As of the date of
this filing, the delays in our clinical trials have not had a material impact on
our operating results. However, continued delays in our ability to resume new
patient enrollments along with other possible COVID-19 pandemic related
challenges impacting our R&D projects, which are beyond the Company's control,
could lead to additional disruptions. Other possible COVID-19 pandemic related
challenges include, but are not limited to, facility closures, delays by
third-party service providers, deferrals of doctor visits, postponement of
elective medical procedures and surgeries and changes in prioritization by the
FDA and other regulatory authorities. Delays caused by COVID-19 pandemic
challenges such as these and others, will likely adversely affect the timely
approval, launch, commercialization and the commercial success of our products,
which could have a significant adverse effect on our future operating results.
Our Liquidity
Our primary sources of liquidity are our cash and cash equivalents, cash
collected from customers, funds as available from our 2023 Revolving Credit
Facility, issuances of long-term debt and issuances of equity and equity-linked
securities. We believe these sources will be sufficient to meet our current
liquidity needs for at least twelve months from the date of issuance of this
Form 10-Q. Further, in 2019 and 2018, we generated positive cash from operations
of $1,501 million and $1,501 million, respectively. Should our operating results
during the COVID-19 pandemic materially suffer in comparison to our 2019 and
2018

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operating results, we believe we would continue to generate sufficient cash
flows from operations to meet our obligations in the ordinary course of
business.
As of the date of this filing, we have no debt maturing or mandatory
amortization of debt payments until the first quarter of 2022. Additionally, we
have no outstanding borrowings, $168 million of issued and outstanding letters
of credit and remaining availability of $1,057 million under our 2023 Revolving
Credit Facility as defined below. In the event of a future, unexpected, need for
near-term liquidity, our 2023 Revolving Credit Facility would be a source of
funding for us. After reviewing the terms of our Restated Credit Agreement as
defined below and considering a broad range of possible outcomes of the COVID-19
pandemic, we expect that we will have access to capital under our 2023 Revolving
Credit Facility across a broad range of scenarios in the event it is required.
See Note 10, "FINANCING ARRANGEMENTS" to our unaudited interim Consolidated
Financial Statements and "Management's Discussion and Analysis - Liquidity and
Capital Resources: Long-term Debt" for additional discussion of these matters.
Our Operating Results
While we are taking actions to mitigate the impact of the COVID-19 pandemic on
our daily operations, the pandemic has and is expected to impact our operating
results until the pandemic subsides. The changing dynamics of the pandemic,
related responses from governments and private sector participants and the
precautionary measures taken by our customers and the health care patients and
consumers we serve, are expected to impact the timing and amount of our revenues
in the near-term. Certain of our businesses have experienced COVID-19 pandemic
related declines in revenues during the three months ended March 31, 2020 and we
expect continued pandemic-related revenue declines in these and other businesses
in the second quarter and possibly the remainder of 2020.
During the pandemic, the public has been advised to: (i) remain at home, (ii)
limit social interaction, (iii) close non-essential businesses and (iv) postpone
certain surgical and elective medical procedures in order to prioritize/conserve
available health care resources. During the three months ended March 31, 2020,
these factors have negatively impacted, most notably, the revenues of our Global
Vision Care and Global Surgical businesses in Asia where the COVID-19 pandemic
originated. We anticipate further revenue declines in these businesses during
2020, as we saw steeper declines in these revenues in the month of March as
social restrictions, particularly in the U.S. and Europe, were put in place.
Beginning in March and into our second quarter, we also experienced and are
anticipating COVID-19 pandemic-related revenue declines in intraocular lenses,
medical devices, surgical systems and certain pre- and post-operative
eye-medications of our Ophthalmology business, in medical aesthetics and
therapeutic products of our Global Solta business, and in certain branded
pharmaceutical products of our Salix, Ortho Dermatologics and Dentistry
businesses, as the offices of many health care providers are closed and certain
surgeries and elective medical procedures are being deferred.
Based on our assessment, we believe our revenues will be most impacted by the
pandemic during our second quarter, as the infection rate of the COVID-19 virus
accelerated in March into April, the virus had spread beyond Asia into different
geographies including the U.S. and Europe, and the number of shelter-in-place
directives issued by local authorities increased. Although we expect each of the
affected businesses and geographies to recover at different rates, overall we
anticipate that the negative trend in our revenues will begin to stabilize
during our second quarter and continue into our third quarter with the revenues
of all our businesses possibly returning to pre-pandemic levels as early as late
2020, but, if not, then in 2021. This assessment assumes, among other matters,
that the precautionary measures taken by the public are successful in
decelerating the spread of the virus, there will be no resurgence of the virus
in the second half of 2020 that will lead to significant social
restrictions,there will be no significant social restrictions in place at the
end of 2020, responses from governments and private sector participants will be
successful in bringing about a quick orderly recovery of the global economy,
there will be no major interruptions in our supply, manufacturing and
distribution channels and we are able to continue to execute on our strategies
in response to the pandemic.
The changes in our segment revenues and segment profits, including the impact of
the COVID-19 virus on our revenues for the three months ended March 31, 2020,
are discussed in further detail in the subsequent section titled "Reportable
Segment Revenues and Profits".
Through the date of this filing, the impacts of the COVID-19 pandemic appears to
have only a limited impact on our Xifaxan® product revenues and the COVID-19
pandemic is not expected to have a material impact on the Company's revenues
once the pandemic subsides. As such, the impacts of the COVID-19 pandemic on the
amounts and timing of the Company's revenues are not expected to be substantial
enough to materially adversely affect the recoverability of any of the Company's
assets and are not material enough to indicate that the fair values of any
reporting unit may be below their respective carrying values.
However, if market conditions further deteriorate, if the factors and
circumstances regarding the COVID-19 pandemic escalate beyond management's
expectations, or if the Company is unable to execute its strategies, it may be
necessary to record impairment charges in the future and those charges can be
material.

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Business Strategy
Our Focus on Core Businesses
In order to continue to focus on our core businesses where we believe there is
potential for strong operating margins and evidence of growth opportunities, we
have: (i) directed capital allocation to drive growth within our core
businesses, (ii) made measurable progress in effectively managing our capital
structure, (iii) increased our efforts to improve patient access and (iv)
continued to invest in sustainable growth drivers to position us for long-term
growth.
Direct Capital Allocation to Drive Growth Within Our Core Businesses
Our capital allocation is driven by our long-term growth strategies. We have
been aggressively allocating resources to promote our core businesses globally
through: (i) strategic acquisitions, (ii) R&D investment and (iii) strategic
investments in our infrastructure. The outcome of this process allows us to
better drive value in our product portfolio and generate operational
efficiencies.
Strategic Acquisitions - We remain very selective when considering any
acquisition and pursue only those opportunities that we believe align well with
our current organization and strategic plan. We sometimes refer to these
opportunities as "bolt on" acquisitions. In being selective, we seek to enter
into only those acquisitions that provide us with significant synergies with our
existing business, thereby minimizing risks to our core businesses and providing
long-term growth opportunities. Recently, we have entered into transactions
that, although not immediately impactful to our operating results, are expected
to be accretive to our bottom line in future years and contribute to our
long-term growth strategies.
In March 2019, we completed the acquisition of certain assets of Synergy whereby
we acquired the worldwide rights to the Trulance® (plecanatide) product, a
once-daily tablet for adults with chronic idiopathic constipation, or CIC and
irritable bowel syndrome with constipation, or IBS-C. We believe that the
Trulance® product complements our existing Salix products and allows us to
effectively leverage our existing GI sales force.
On February 18, 2019, we acquired the U.S. rights to EM-100 from Eton
Pharmaceuticals, Inc. EM-100, is an investigational eye drop that, if approved
by the FDA, will be the first OTC preservative-free formulation eye drop for the
treatment of ocular itching associated with allergic conjunctivitis. A Phase 3
trial has been completed and submitted to the FDA for review and we anticipate
their response in the second half of 2020. If approved, EM-100 is expected to
complement our broad range of Bausch + Lomb integrated eye-health products.
We are considering further acquisition opportunities within our core therapeutic
areas, some of which could be material in size.
R&D Investment - We continuously search for new product opportunities through
internal development and strategic licensing agreements, that if successful,
will allow us to leverage our commercial footprint, particularly our sales
force, and supplement our existing product portfolio and address specific unmet
needs in the market.
Internal R&D Projects - Our R&D organization focuses on the development of
products through clinical trials. As of December 31, 2019, approximately 1,400
dedicated R&D and quality assurance employees in 23 R&D facilities were involved
in our R&D efforts internally.
Our R&D expenses for the three months ended March 31, 2020 and the years 2019
and 2018, were $122 million, $471 million and $413 million, respectively, and
was approximately 6% as a percentage of revenue for the three months ended March
31, 2020 and 5% as a percentage of revenue in each of the years 2019 and 2018.
Our investment in R&D reflects our commitment to drive organic growth through
internal development of new products, a pillar of our strategy.
We have over 225 projects in our global pipeline. Certain core R&D projects that
have received a significant portion of our R&D investment in current and prior
periods are listed below. However, due to the challenges of the COVID-19
pandemic, most notably those attributable to "stay at home" and travel
restrictions, we have been forced to pause certain R&D activities. Clinical
trials that started prior to governmental shutdowns remain enrolled and existing
patients are progressing, while new patient enrollments in clinical trials have
been temporarily paused as most trial sites are not able to accept new patients.
While we anticipate resuming these projects as soon as possible, the ultimate
impact on the timing and completion of the affected clinical trial programs, and
the expected approval and launch of the product candidates to which these
development programs relate, is dependent upon when many COVID-19 pandemic
uncertainties are resolved and we may resume new patient enrollments and other
impacted development activities. As of the date of this filing, the delays in
our clinical trials have not had a material impact on our operating results.
However, continued delays in our ability to resume new patient enrollments along
with other possible COVID-19 pandemic related challenges impacting our R&D
projects, which are beyond the Company's control, could lead to additional
disruptions. Other possible COVID-19 pandemic related challenges include, but
are not limited to, facility closures, delays by third-party

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service providers, deferrals of doctor visits, postponement of elective medical
procedures and surgeries and changes in prioritization by the FDA and other
regulatory authorities. Delays caused by COVID-19 pandemic challenges such as
these and others, will likely adversely affect the timely approval, launch,
commercialization and the commercial success of our products. As a result, our
estimates regarding the timing and success of our R&D efforts (some of which are
set out below), including as it relates to study initiation, enrollment and
completion, availability of study results, regulatory submissions, regulatory
approvals and commercial launches, may change.
•      Dermatology - In June 2019, we launched Duobrii®, the first and only

topical lotion that contains a unique combination of halobetasol

propionate and tazarotene for the treatment of moderate-to-severe plaque

psoriasis in adults. Halobetasol propionate and tazarotene are each

approved to treat plaque psoriasis when used separately, but the duration

of halobetasol propionate is limited by FDA labeling constraints and the

use of tazarotene can be limited due to tolerability concerns. However,

the combination of these ingredients in Duobrii®, with a dual mechanism of

       action, allows for expanded duration of use, with reduced adverse events.


•      Bausch + Lomb - SiHy Daily is a silicone hydrogel daily disposable contact

lens designed to provide clear vision throughout the day. In September

2018, we launched this product in Japan under the branded name SiHy Daily

AQUALOX™. We anticipate launching our SiHy Daily contact lens in the U.S.

during the second half of 2020 under its U.S. branded name which is yet to

be announced.

• Dermatology - Internal Development Project ("IDP") 126 is an acne product

with a fixed combination of benzoyl peroxide, clindamycin phosphate and

adapalene. Phase 3 studies initiated in December 2019 have been paused as

       a result of COVID-19 related factors and are expected to resume in the
       second half of 2020 assuming clinical sites throughout the various
       geographies re-open to allow for enrollment of new patients.

• Bausch + Lomb - Lumify® (brimonidine tartrate ophthalmic solution, 0.025%)

       is an OTC eye drop developed as an ocular redness reliever. We have
       several line extensions under development. Further clinical studies are
       planned for late 2020 and early 2021.

• Gastrointestinal - Topline data from our Phase 2 study for the treatment

of overt hepatic encephalopathy with a new formulation of rifaximin showed

a treatment benefit. Patients receiving 40 mg twice daily showed a

statistically significant separation from placebo. The topline results of

this study will help inform further research on potential new indications

for rifaximin using this formulation, including in sickle cell anemia

where we expect our clinical trials to commence late 2020 or early 2021.

• Gastrointestinal - We are preparing to initiate a Phase 2 study to

evaluate rifaximin for the treatment of small intestinal bacterial

overgrowth or SIBO. Patient enrollment remains subject to getting clinical

       sites activated post COVID-19 and we expect our clinical trials to
       commence in the second half of 2020.

• Gastrointestinal - We have entered into a collaboration with Cedars Sinai

Medical Center to evaluate a new formulation of rifaximin for the

treatment of IBS. Studies to support this research program have been

paused as a result of COVID-19 related factors and are expected to resume

       upon the re-opening of the relevant clinical sites.


•      Dermatology - IDP-120 is an acne product with a fixed combination of

mutually incompatible ingredients: benzoyl peroxide and tretinoin. Phase 3

enrollment has been completed with results expected in the second half of

2020.

• Dermatology - Arazlo™ (tazarotene) Lotion, 0.045% (formerly IDP-123) is an

acne product containing lower concentration of tazarotene in a lotion form

to help reduce irritation while maintaining efficacy. The FDA approved the

New Drug Application ("NDA") for Arazlo™ on December 18, 2019, which we

       expect to launch in the first half of 2020.


•      Gastrointestinal - Our partner Alfasigma S.p.A. ("Alfasigma") is

initiating a Phase 2/3 study for the treatment of postoperative Crohns

disease using a novel rifaximin extended release formulation in the second

       quarter of 2021; the start has been delayed due to COVID-19 related
       factors.

• Gastrointestinal - We are developing a probiotic supplement to address

gastrointestinal disturbances. Clinical trial is completed and a full data

set is available. We expect to launch this product in the second half of

       2020.


•      Dermatology - IDP-124 is a topical lotion product designed to treat
       moderate to severe atopic dermatitis, with pimecrolimus. Phase 3

enrollment has been completed with results expected in the second half of

2020.

• Bausch + Lomb - Biotrue® ONEday for Astigmatism is a daily disposable

contact lens for astigmatic patients. The Biotrue® ONEday contact lens

incorporates Surface Active Technology™ to provide a dehydration barrier.

The Biotrue® ONEday for Astigmatism also includes evolved peri-ballast

geometry to deliver stability and comfort for the astigmatic patient. We

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launched this product in December 2016 and launched an extended power range and further extended power ranges in 2017, 2018 and November 2019. • Bausch + Lomb - We are developing a new Ophthalmic Viscosurgical Device

("OVD") product, with a formulation to protect corneal endothelium during

phacoemulsification process during a cataract surgery and to help chamber

maintenance and lubrication during interocular lens delivery. The FDA

clinical study for cohesive OVD started in January 2020 and has been

paused as a result of COVID-19 related factors and is expected to resume

       as soon as possible. In April 2021, we filed a Premarket Approval
       application for the dispersive OVD with the FDA.

• Bausch + Lomb - In April 2019, we launched Lotemax® SM (loteprednol

etabonate ophthalmic gel) 0.38%, a new formulation for the treatment of

post-operative inflammation and pain following ocular surgery. Lotemax® SM

is the lowest concentrated loteprednol ophthalmic corticosteroid indicated

for the treatment of post-operative inflammation and pain following ocular

surgery in the U.S.

• Bausch + Lomb - enVista® Trifocal intraocular lens is an innovative lens

       design. We initiated an investigative device exemption study for this
       product in May 2018 and initiated a Phase 2 study in October 2019.

• Bausch + Lomb - We are developing a preloaded intraocular lens injector

platform for enVista interocular lens. We have received approvals from the

European Union and Canada and received FDA clearance for the injector. We

anticipate launching this platform in the second half of 2020.

• Bausch + Lomb - We are developing an extended depth of focus intraocular

lens which we anticipate approval in Europe in the second half of 2021 due

to COVID-19 delays.

• Bausch + Lomb - Bausch + Lomb ULTRA® Multifocal for Astigmatism contact

lens is the first and only multifocal toric lens available as a standard

offering in the eye care professional's fit set. The new monthly silicone

hydrogel lens, which was specifically designed to address the lifestyle

and vision needs of patients with both astigmatism and presbyopia,

combines the Company's unique 3-Zone Progressive™ multifocal design with

the stability of its OpticAlign® toric with MoistureSeal® technology to

provide eye care professionals and their patients an advanced contact lens

       technology that offers the convenience of same-day fitting during the
       initial lens exam. Bausch + Lomb ULTRA® Multifocal for Astigmatism was
       launched in June 2019.

• Bausch + Lomb - Renu® Advanced Multi-Purpose Solution ("MPS") contains a

triple disinfectant system that kills 99.9% of germs, and has a dual

surfactant system that provides up to 20 hours of moisture. Renu® Advanced

MPS is FDA cleared with indications for use to condition, clean, remove

protein, disinfectant, rinse and store soft contact lenses including those

composed of silicone hydrogels. Renu® Advanced MPS has gained regulatory

approvals in Korea, India, Mexico, Indonesia, Malaysia and Singapore.

• Bausch + Lomb - Custom soft contact lens (Ultra buttons) is a latheable

       silicone hydrogel button for custom soft specialty lenses including:
       Sphere, Toric, Multifocal, Toric Multifocal and irregular corneas. If
       approved by the FDA, we expect to launch in the fourth quarter of 2021;

the change in date is due to specification change activities delaying the

original launch date.

• Bausch + Lomb - In January 2019, we launched Zen™ Multifocal Scleral Lens

for presbyopia exclusively available with Zenlens™ and Zen™ RC scleral

lenses and will allow eye care professionals to fit presbyopic patients

with irregular and regular corneas and those with ocular surface disease,

such as dry eye. The Zen™ Multifocal Scleral Lens incorporates decentered

       optics, enabling the near power to be positioned over the visual axis.


•      Bausch + Lomb - In March 2019, we launched Tangible® Hydra-PEG®, a

high-water polymer coating that is bonded to the surface of a contact lens

and designed to address contact lens discomfort and dry eye. Tangible®

Hydra-PEG® coating technology in combination with our Boston® materials

and Zenlens™ family of scleral lenses will help eye care professionals

provide a better lens wearing experience for their patients with

challenging vision needs.

Strategic Licensing Agreements - To supplement our internal R&D initiatives and
to build-out and refresh our product portfolio, we also search for opportunities
to augment our pipeline through arrangements that allow us to gain access to
unique products and investigational treatments, by strategically aligning
ourselves with other innovative product solutions.
In the normal course of business, the Company will enter into select licensing
and collaborative agreements for the commercialization and/or development of
unique products primarily in the U.S. and Canada. These products are sometimes
investigational treatments in early stage development that target unique
conditions. The ultimate outcome, including whether the product will be: (i)
fully developed, (ii) approved by the FDA, (iii) covered by third-party payors
or (iv) profitable for distribution cannot be fairly predicted.

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In December 2019, we announced that we had acquired an exclusive license from
Novaliq GmbH for the commercialization and development in the U.S. and Canada of
the investigational treatment NOV03 (perfluorohexyloctane), a first-in-class
investigational drug with a novel mechanism of action to treat Dry Eye Disease
("DED") associated with Meibomian gland dysfunction ("MGD"). We expect to
initiate a Phase 3 study for this product in the second half of 2020. If
approved by the FDA, we believe the addition of this investigational treatment
for DED will help build upon our strong portfolio of integrated eye-health
products.
In October 2019, we acquired an exclusive license from Clearside Biomedical,
Inc. ("Clearside") for the commercialization and development of Xipere™
(triamcinolone acetonide suprachoroidal injectable suspension) in the U.S. and
Canada. Xipere™ is a proprietary suspension of the corticosteroid triamcinolone
acetonide formulated for suprachoroidal administration via Clearside's
proprietary SCS Microinjector™ that is being investigated as a targeted
treatment of macular edema associated with uveitis. Clearside expects to
resubmit its New Drug Application for Xipere™ to the FDA in the fourth quarter
of 2020.
In April 2019, we entered into two licensing agreements which present us with
unique developmental opportunities to address unmet needs of individuals
suffering with certain GI and liver diseases. The first of these two licensing
agreements is with the University of California for certain intellectual
property relating to an investigational compound targeting the pituitary
adenylate cyclase receptor 1 in non-alcoholic fatty liver disease ("NAFLD"),
nonalcoholic steatohepatitis ("NASH") and other GI and liver diseases. The
second is an exclusive licensing agreement with Mitsubishi Tanabe Pharma
Corporation to develop and commercialize MT-1303 (amiselimod), a late-stage oral
compound that targets the sphingosine 1-phosphate receptor that plays a role in
autoimmune diseases, such as inflammatory bowel disease and ulcerative colitis.
We have completed a thorough QTC study, which evaluated the cardiac safety
profile of the compound.  Topline results were positive and we expect to
initiate a Phase 2 study in the second half of 2020.
On February 27, 2018, we announced that we entered into an exclusive license
agreement with Kaken Pharmaceutical Co., Ltd. ("Kaken") to develop and
commercialize a new chemical entity, IDP-131 (KP-470), for the topical treatment
of psoriasis.  An early proof of concept study has been completed and the
results did not meet expectations. As a result, the Company no longer believes
that IDP-131 can be viably developed for the treatment of psoriasis. The Company
and Kaken are currently considering whether this new chemical entity can be
developed to treat other indications.
Strategic Investments in our Infrastructure - In support of our core businesses,
we have and continue to make strategic investments in our infrastructure, the
most significant of which are at our Waterford facility in Ireland and our
Rochester facility in New York.
To meet the forecasted demand for our Biotrue® ONEday lenses, in July 2017, we
placed into service a $175 million multi-year strategic expansion project of the
Waterford facility. The emphasis of the expansion project was to: (i) develop
new technology to manufacture, automatically inspect and package contact lenses,
(ii) bring that technology to full validation and (iii) increase the size of the
Waterford facility.
To address the expected global demand for our Bausch + Lomb ULTRA® contact lens,
in December 2017, we completed a multi-year, $200 million strategic upgrade to
our Rochester facility. The upgrade increased production capacity in support of
our Bausch + Lomb Ultra® and SiHy Daily AQUALOX™ product lines and better
supports the production of other well-established contact lenses, such as our
PureVision®, PureVision®2 (SVS, Toric, and Multifocal), SofLens® 38 and
SilSoft®.
To address the expected global demand for our SiHy Daily disposable contact
lenses, in November 2018, we initiated $300 million of additional expansion
projects to add multiple production lines to our Rochester and Waterford
facilities. SiHy Daily disposable contact lenses are expected to be launched in
the U.S. in the second half of 2020.
We believe the investments in our Waterford and Rochester facilities and related
expansion of labor forces further demonstrates the growth potential we see in
our Bausch + Lomb products and our eye-health business.
Effectively Managing Our Capital Structure
We continue to effectively manage our capital structure by: (i) reducing our
debt through repayments, (ii) extending the maturities of debt through
refinancing and (iii) improving our credit ratings.
Debt Repayments - Excluding the impact of the $1,210 million financing of the
U.S. Securities Litigation settlement discussed below, we have been able to
repay (net of additional borrowings) over $7,900 million of long-term debt
during the period January 1, 2016 through the date of this filing using the net
cash proceeds from divestitures of non-core assets, cash generated from
operations and cash generated from tighter working capital management.
2017 Refinancing Transactions - In March, October, November and December 2017,
we accessed the credit markets and completed a series of transactions, whereby
we extended approximately $9,500 million in aggregate maturities of certain debt

                                       47
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obligations due to mature in April 2018 through April 2022, out to March 2022
through December 2025. As part of these transactions, we also extended
commitments under our revolving credit facility, originally set to expire in
April 2018, out to April 2020.
2018 Refinancing Transactions - In March, June and November 2018, we accessed
the credit markets and completed a series of transactions, whereby we extended
approximately $8,300 million in aggregate maturities of certain debt obligations
due to mature in March 2020 through July 2022, out to June 2025 through January
2027.  As part of these transactions, we obtained less stringent loan financial
maintenance covenants under our Senior Secured Credit Facilities and extended
commitments under our revolving credit facility by more than three years by
replacing our then-existing revolving credit facility, set to expire in April
2020 with a revolving credit facility of $1,225 million due in June 2023 (the
"2023 Revolving Credit Facility").
2019 Refinancing Transactions - In March, May and December 2019, we accessed the
credit markets and completed a series of transactions, whereby, we extended
$4,240 million in aggregate maturities of certain debt obligations due to mature
in December 2021 through May 2023, out to January 2027 through January 2030.
Financing of Litigation Settlement - In December 2019, we announced that we had
agreed to resolve the putative securities class action litigation in the U.S.
(the "U.S. Securities Litigation") for $1,210 million, subject to final court
approval. As part of the settlement, the Company and the other settling
defendants admitted no liability as to the claims against it and deny all
allegations of wrongdoing. This settlement, once approved by the court, will
resolve and discharge all claims against the Company in the class action, and as
a result will resolve the most significant of the Company's remaining legacy
legal matters and eliminate a material uncertainty regarding our Company.
To finance the settlement of the U.S. Securities Litigation, on December 30,
2019, we accessed the credit markets and issued: (i) $1,250 million aggregate
principal amount of 5.00% Senior Unsecured Notes due January 2028 (the "5.00%
January 2028 Unsecured Notes") and (ii) $1,250 million aggregate principal
amount of 5.25% Senior Unsecured Notes due January 2030 (the "January 2030
Unsecured Notes") in a private placement. The proceeds and cash on hand were
used to: (i) redeem $1,240 million of 5.875% Senior Unsecured Notes due 2023
(the "May 2023 Unsecured Notes") on January 16, 2020, (ii) finance amounts owed
under the Company's recently announced $1,210 million settlement agreement
relating to the U.S. Securities Litigation (which is subject to final court
approval), of which we paid $200 million during January 2020 and $810 million
during March 2020 and (iii) pay all fees and expenses associated with these
transactions (collectively, the "December 2019 Financing and Refinancing
Transactions"). Through this financing, we have in effect extended the payment
terms of the pending settlement of $1,210 million out to 2028 and 2030, without
negatively impacting our working capital available for operations.
See Note 10, "FINANCING ARRANGEMENTS" to our unaudited interim Consolidated
Financial Statements for the details of our debt portfolio as of March 31, 2020
and December 31, 2019.
The debt repayments and refinancings outlined above have allowed us to: (i)
improve our credit ratings, (ii) finance amounts owed under the Company's
recently announced $1,210 million settlement agreement relating to the U.S.
Securities Litigation without negatively impacting our working capital available
for operations and (iii) as of the date of this filing, have no debt maturing,
or mandatory amortization of debt payments, until the first quarter of 2022.
Our prepayment and refinancings of debt over the last four years translate into
lower repayments of principal over the next four years, which, in turn, we
believe will permit more cash flows to be directed toward developing our core
assets, identifying new product opportunities and repaying additional debt
amounts. The mandatory scheduled principal repayments of our debt obligations as
of May 7, 2020, the date of this filing, were as follows and reflects
repurchases of our senior unsecured notes in the open market of $8 million, in
aggregate, in April 2020:
(in millions)
      2020            2021        2022        2023        2024         2025        2026        2027        2028        2029       2030        Total
$      -            $     -     $ 1,553     $ 2,443     $ 2,303     $ 10,632     $ 1,500     $ 2,250     $ 2,012     $  750     $ 1,250     $ 24,693


In addition, as a result of the changes in our debt portfolio, approximately 80%
of our debt is fixed rate debt as of March 31, 2020, as compared to
approximately 60% as of January 1, 2016. The weighted average stated interest
rate of the Company's outstanding debt as of March 31, 2020 and December 31,
2019 was 6.01% and 6.21%, respectively.
We continue to monitor our capital structure and to evaluate other opportunities
to simplify our business and improve our capital structure, giving us the
ability to better focus on our core businesses. While we anticipate focusing any
future divestiture activities on non-core assets, consistent with our duties to
our shareholders and other stakeholders, we will consider dispositions in core
areas that we believe represent attractive opportunities for the Company. Also,
the Company regularly evaluates market conditions, its liquidity profile and
various financing alternatives for opportunities to enhance its capital
structure. If the Company determines that conditions are favorable, the Company
may refinance or repurchase existing debt or issue additional debt, equity or
equity-linked securities.

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See Note 10, "FINANCING ARRANGEMENTS" to our unaudited interim Consolidated
Financial Statements and "Management's Discussion and Analysis - Liquidity and
Capital Resources: Long-term Debt" for additional discussion of these matters.
Cash requirements for future debt repayments including interest can be found in
"Management's Discussion and Analysis - Off-Balance Sheet Arrangements and
Contractual Obligations."
Improve Patient Access
Improving patient access to our products, as well as making them more
affordable, is a key element of our business strategy.
Patient Access and Pricing Committee - In 2016, we formed the Patient Access and
Pricing Committee which is responsible for setting, changing and monitoring the
pricing of our products and evaluating contract arrangements that determine the
placement of our products on drug formularies. The Patient Access and Pricing
Committee considers new to market product pricing, price changes and their
impact across channels on patient accessibility and affordability. The Patient
Access and Pricing Committee has been committed to limiting the average annual
price increase for our branded prescription pharmaceutical products to no
greater than single digits and has reaffirmed this commitment for 2020. These
pricing changes and programs could affect the average realized pricing for our
products and may have a significant impact on our company revenue and profit.
Cash-pay Prescription Program - In February 2019, we launched Dermatology.com, a
cash-pay product acquisition program offering certain branded Ortho
Dermatologics products directly to patients. In March 2020, the name
Dermatology.com was removed as the cash-pay product program name in order to
secure the name Dermatology.com for only online usage including future digital
teledermatology and e-commerce offerings. The cash pay program is designed to
address the affordability and availability of certain branded dermatology
products, when insurers and pharmacy benefit managers are no longer offering
those branded prescription pharmaceutical products under their designated
pharmacy benefit offerings.
Walgreens Fulfillment Arrangements - In the beginning of 2016, we launched a
brand fulfillment arrangement with Walgreen Co. ("Walgreens"). Under the terms
of the brand fulfillment arrangement, as amended in July 2019, we made certain
dermatology and ophthalmology products available to eligible patients through
patient access and co-pay assistance programs at Walgreens U.S. retail pharmacy
locations, as well as participating independent retail pharmacies. Our products
available under this fulfillment agreement include certain Ortho Dermatologics
products, including our Jublia®, Luzu®, Retin-A Micro® Gel and Onexton® and
select branded prescription pharmaceutical products included in our cash-pay
prescription program and certain ophthalmology products, including our Vyzulta®,
Besivance®, Lotemax®, Alrex®, Prolensa®, Bepreve® and Zylet® products.
Business Trends
In addition to the actions previously outlined, the events described below have
affected and may affect our business trends. The matters discussed in this
section contain Forward-Looking Statements. Please see "Forward-Looking
Statements" for additional information.
Invest in Sustainable Growth Drivers to Position us for Long-Term Growth
We are constantly challenged by the changing dynamics of our industry to
innovate and bring new products to market. We have divested certain businesses
where we saw limited growth opportunities, so that we can be more aggressive in
redirecting our R&D spend and other corporate investments to innovate within our
core businesses where we believe we can be most profitable and where we aim to
be an industry leader.
We believe that we have a well-established product portfolio that is diversified
within our core businesses and provides a sustainable revenue stream to fund our
operations. However, our future success is also dependent upon our ability to
continually refresh our pipeline, to provide a rotation of product launches that
meet new and changing demands and replace other products that have lost
momentum. We believe we have a robust pipeline that not only provides for the
next generation of our existing products, but is also poised to bring new
products to market.
Invest in our Eye-Health Business - As part of our Global Bausch + Lomb business
strategy, we continually look for key trends in the eye-health market to meet
changing consumer/patient needs and identify areas for investment to extend our
market share through new launches and effective pricing.
For instance, there is an increasing rate of myopia, and importantly, myopia as
a potential risk factor for glaucoma, macular degeneration and retinal
detachment. We continue to see increased demand for new eye-health products that
address conditions brought on by factors such as increased screen time, lack of
outdoor activities and academic pressures, as well as conditions brought on by
an aging population (for example, as more and more baby-boomers in the U.S. are
reaching the age of 65). To extend our market share in eye-health, we
continually seek to identify new products tailored to address these key trends
for development internally with our own R&D team to generate organic growth.
Recent product launches include Biotrue® ONEday

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daily disposable contact lenses, the next generation of Bausch + Lomb ULTRA®
contact lenses, SiHy Daily contact lenses, Lumify® (an eye redness treatment),
Vyzulta® (a pressure lowering eye drop for patients with angle glaucoma or
ocular hypertension) and Ocuvite® Eye Performance (vitamins to protect the eye
from stressors such as sunlight and blue light emitted from digital devices).
We also license selective molecules or technology in leveraging our own R&D
expertise through development, as well as seek out external product development
opportunities. As previously discussed, we acquired exclusive licenses for the
commercialization and development in the U.S. and Canada for Xipere™ which, if
approved by the FDA, will be the first treatment for patients suffering from
macular edema associated with uveitis, and for NOV03, an investigational drug
with a novel mechanism of action to treat DED associated with MGD. We also
acquired the U.S. rights to EM-100 an investigational eye drop that, if approved
by the FDA, will be the first OTC preservative-free formulation eye drop for the
treatment of ocular itching associated with allergic conjunctivitis. We believe
investments in these investigational treatments, if approved by the FDA, will
complement, and help build upon, our strong portfolio of integrated eye-health
products.
As previously discussed, we have also made strategic investments in our
infrastructure, the most significant of which are at our Waterford facility in
Ireland to meet the forecasted demand for our Biotrue® ONEday lenses and our
Rochester facility in New York to address the expected global demand for our
Bausch + Lomb ULTRA® contact lens. During late 2018, we began investing in
additional expansion projects at these facilities in order to address the
expected global demand for our SiHy Daily disposable contact lenses expected to
be launched in the U.S. in the second half of 2020.
We believe our recent product launches, licensing arrangements and the
investments in our Waterford and Rochester facilities demonstrate the growth
potential we see in our Bausch + Lomb products and our eye-health business and
that these investments will position us to further extend our market share in
the eye-health market.
Leveraging our Salix Infrastructure - We strongly believe in our GI product
portfolio and we have implemented initiatives, including increasing our
marketing presence and identifying additional opportunities outside our existing
GI portfolio, to further capitalize on the value of the infrastructure we built
around these products to extend our market share.
In the first quarter of 2017, we hired approximately 250 trained and experienced
sales force representatives and managers to create, bolster and sustain deep
relationships with primary care physicians ("PCP"). With approximately 70% of
IBS-D patients initially presenting symptoms to a PCP, we continue to believe
that the dedicated PCP sales force is better positioned to reach more patients
in need of IBS-D treatment.
This initiative provided us with positive results, as we experienced consistent
growth in demand for our GI products throughout 2017 and 2018, which was evident
by our growth in Salix revenues of 12% in 2018 when compared to 2017. These
results encouraged us to seek out ways to bring out further value through
leveraging our existing sales force and, in the later portion of 2018 and in
2019, we identified and executed on certain opportunities which we describe
below.
Strategic Acquisition - As previously discussed, in March 2019, we completed the
acquisition of certain assets of Synergy, whereby we acquired the worldwide
rights to the Trulance® product, a once-daily tablet for adults with chronic
idiopathic constipation, or CIC and irritable bowel syndrome with constipation,
or IBS-C. We believe that the Trulance® product complements our existing Salix
products and allows us to effectively leverage our existing GI sales force.
Licensing Arrangements - As previously discussed, in April 2019, we entered into
two licensing agreements. The first is for certain intellectual property
relating to an investigational compound targeting the pituitary adenylate
cyclase receptor 1 in NAFLD, NASH and other GI and liver diseases. The second is
to develop and commercialize MT-1303 (amiselimod), a late-stage oral compound
that targets the sphingosine 1-phosphate receptor that plays a role in
autoimmune diseases, such as inflammatory bowel disease and ulcerative colitis.
These licenses present unique developmental opportunities to address unmet needs
of individuals suffering with certain GI and liver diseases and if developed and
approved by the FDA, will allow us to further utilize our existing sales force
and infrastructure to extend our market share in the future and create value.
Investment in Next Generation Formulations - We continue to see growth in our
Xifaxan® product. Revenues from our Xifaxan® product increased approximately
22%, 22% and 11% in 2019, 2018 and 2017, respectively. In order to extend growth
in Xifaxan®, we continue to directly invest in next generation formulations of
Xifaxan® and rifaximin, the principal semi-synthetic antibiotic used in our
Xifaxan® product. In addition to one R&D program in progress, we have three
other R&D programs planned to start in 2020 for next generation formulations of
Xifaxan® (rifaximin) which address new indications.
We believe that the acquisition and licensing opportunities discussed above will
be accretive to our business by providing us access to products and
investigational compounds that are a natural pairing to our Xifaxan® business,
allowing us to effectively leverage our existing infrastructure and sales force.
We believe these opportunities, coupled with our investment in next generation
formulations, will allow our GI franchise to continue to further extend market
share.

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Position the Ortho Dermatologics Business for Growth - In support of our Ortho
Dermatologics business and the opportunities we see for growth in this business,
we continue to allocate resources and make additional investments in this
business to recruit and retain talent and focus on our core dermatology
portfolio of products.
To position the Ortho Dermatologics business for growth, we have taken and are
taking a number of actions that we believe will help our efforts to stabilize
our dermatology business. These actions include: (i) rebranding our dermatology
business, (ii) recruiting a new experienced leadership team, (iii) making
significant investment in our core dermatology portfolio, (iv) increasing and
reorganizing our dermatology sales force around roughly 195 territories, as we
work to rebuild relationships with prescribers of our products and (v) improving
patient access to our Ortho Dermatologics products through our cash-pay
prescription program previously discussed. With these actions substantially
complete, we believed that our Ortho Dermatologics business was positioned for
growth in 2020. While we continue to believe that our strategies will return our
Ortho Dermatologics business to growth sometime in the future, the impacts of
the COVID-19 pandemic has had us reassess this timing. The closure of many
health care facilities and medical offices during the pandemic has limited
patient access to new prescriptions and we now believe that we will not see the
Ortho Dermatologics business return to growth until the COVID-19 pandemic
subsides and the U.S. economy stabilizes.
Recruit and Retain Talent - In 2017, we identified and retained a proven
leadership team of experienced dermatology sales professionals and marketers. In
January 2018, the leadership team, encouraged by the success of our GI sales
force expansion program, increased our Ortho Dermatologics sales force by more
than 25% in support of our growth initiatives for our Ortho Dermatologics
business. We believe the additional sales force is vital to meet the demand we
expect from our recently launched products and those we expect to launch in the
near-term, pending FDA approval. We continue to monitor our pipeline for other
near-term launches that we believe will create opportunity needs in our other
core businesses requiring us to make additional investment to retain people for
additional leadership and sales force roles.
Investment in Our Core Dermatology Portfolio - We have made significant
investments to build out our aesthetics, psoriasis and acne product portfolios,
which are the markets within dermatology where we see the greatest opportunities
to extend our market share.
Aesthetics - In 2017, we launched our Next Generation Thermage FLX® product in
the U.S., a fourth-generation non-invasive treatment option using a
radiofrequency platform designed to optimize key functional characteristics and
improve patient outcomes. During 2018 and 2019, Next Generation Thermage FLX®
was launched in Hong Kong, Japan, Korea, Taiwan, Philippines, Singapore,
Indonesia, Malaysia, China, Thailand, Vietnam, and Australia as part of our
Solta medical aesthetic devices portfolio. These launches have been successful
as Next Generation Thermage FLX® revenues for three months ended March 31, 2020
and 2019 were $26 million and $12 million, respectively, and in full-year 2019
were $77 million.
Psoriasis - As the number of reported cases of psoriasis in the U.S. has
increased, we believe there is a need to make further investments in this market
in order to maximize our opportunity and supplement our current psoriasis
product portfolio. We have filed NDAs for several new topical psoriasis
products, launched Duobrii® in June 2019 and launched Bryhali® in November 2018.
We expect that Duobrii® and Bryhali® will align well with our existing topical
portfolio of psoriasis treatments and, supplemented by our injectable biologic
products, such as Siliq®, will provide a diverse choice of psoriasis treatments
to doctors and patients. In July 2017, we launched Siliq®, an IL-17 receptor
blocker monoclonal antibody biologic for treatment of moderate-to-severe plaque
psoriasis, which we estimate to be an over $5,000 million market in the U.S.
(Siliq® has a Black Box Warning for the risks in patients with a history of
suicidal thoughts or behavior and was approved with a Risk Evaluation and
Mitigation Strategy involving a one-time enrollment for physicians and one-time
informed consent for patients). As previously discussed, we entered into an
exclusive license agreement with Kaken to develop and commercialize products
containing a new chemical entity, IDP-131 (KP-470), for the topical treatment of
psoriasis. An early proof of concept study has now been completed and the
results did not meet expectations. As a result, the Company no longer believes
that IDP-131 can be viably developed for the treatment of psoriasis. The Company
and Kaken are currently considering whether this new chemical entity can be
developed to treat other indications.
Acne - In support of our established acne product portfolio, we have developed
several products, which include Retin-A Micro® 0.06% (launched in January 2018)
and Altreno® (launched in the U.S. October 2018), the first lotion (rather than
a gel or cream) product containing tretinoin for the treatment of acne. We also
anticipate launching ArazloTM (tazarotene) Lotion in the first half of 2020 and
we have three other unique acne projects in earlier stages of development that,
if approved by the FDA, we believe will further innovate and advance the
treatment of acne.
Bolstered by new product launches in our aesthetics, psoriasis and acne product
lines and the potential of other products under development, our experienced
dermatology sales leadership team, our sales force and our cash-pay prescription
program, we believe we have set the groundwork to position the Ortho
Dermatologics business for future growth.

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U.S. Health Care Reform
The U.S. federal and state governments continue to propose and pass legislation
designed to regulate the health care industry. In March 2010, the Patient
Protection and Affordable Care Act (the "ACA") was enacted in the U.S. The ACA
contains several provisions that impact our business, including: (i) an increase
in the minimum Medicaid rebate to states participating in the Medicaid program,
(ii) the extension of the Medicaid rebates to Managed Care Organizations that
dispense drugs to Medicaid beneficiaries, (iii) the expansion of the 340(B)
Public Health Services drug pricing program, which provides outpatient drugs at
reduced rates, to include additional hospitals, clinics and health care centers
and (iv) a fee payable to the federal government based on our
prior-calendar-year share relative to other companies of branded prescription
drug sales to specified government programs.
In addition, in 2013 federal subsidies began to be phased in for brand-name
prescription drugs filled in the Medicare Part D coverage gap. The ACA also
included provisions designed to increase the number of Americans covered by
health insurance. In 2014, the ACA's private health insurance exchanges began to
operate. The ACA also allows states to expand Medicaid coverage with most of the
expansion's cost paid for by the federal government.
For 2019 and 2018, we incurred costs of $20 million and $36 million,
respectively, related to the annual fee assessed on prescription drug
manufacturers and importers that sell branded prescription drugs to specified
U.S. government programs (e.g., Medicare and Medicaid). For 2019 and 2018, we
also incurred costs of $137 million and $90 million, respectively, on Medicare
Part D utilization incurred by beneficiaries whose prescription drug costs cause
them to be subject to the Medicare Part D coverage gap (i.e., the "donut hole").
On July 28, 2014, the U.S. Internal Revenue Service issued final regulations
related to the branded pharmaceutical drug annual fee pursuant to the ACA. Under
the final regulations, an entity's obligation to pay the annual fee is triggered
by qualifying sales in the current year, rather than the liability being
triggered upon the first qualifying sale of the following year. We adopted this
guidance in the third quarter of 2014, and it did not have a material impact on
our financial position or results of operations.
The financial impact of the ACA will be affected by certain additional
developments over the next few years, including pending implementation guidance
and certain health care reform proposals. Additionally, policy efforts designed
specifically to reduce patient out-of-pocket costs for medicines could result in
new mandatory rebates and discounts or other pricing restrictions. Also, it is
possible, as discussed further below, that under the current administration,
legislation will be passed by Congress repealing the ACA in whole or in part.
Adoption of legislation at the federal or state level could materially affect
demand for, or pricing of, our products.
In 2018, we faced uncertainties due to federal legislative and administrative
efforts to repeal, substantially modify or invalidate some or all of the
provisions of the ACA. However, we believe there is low likelihood of repeal of
the ACA, given the recent failure of the Senate's multiple attempts to repeal
various combinations of ACA provisions. There is no assurance that any
replacement or administrative modifications of the ACA will not adversely affect
our business and financial results, particularly if the replacing legislation
reduces incentives for employer-sponsored insurance coverage, and we cannot
predict how future federal or state legislative or administrative changes
relating to the reform will affect our business.
In 2019, the U.S. Health and Human Services Administration announced a
preliminary plan to allow for the importation of certain lower-cost drugs from
Canada. The preliminary plan excludes insulin, biological drugs, controlled
substances and intravenous drugs. The preliminary plan relies on individual
states to develop proposals for safe importation of those drugs from Canada and
submit those proposals to the federal government for approval. Although the
preliminary plan has some support from the current administration, at this time,
studies to evaluate the related costs and benefits, evaluate the reasonableness
of the logistics, and measure the public reaction of such a plan have not been
performed. While we do not believe this will have a significant impact on our
future cash flows, we cannot provide assurance as to the ultimate context,
timing, effect or impact of such a plan.
In 2019, the Government of Canada (Health Canada) published in the Canadian
Gazette the new pricing regulation for patented drugs. These regulations will
become effective on July 1, 2020. The draft application guidelines are available
with the final guidelines to be published in 2020. The new regulations will
change the mechanics of establishing the pricing for products submitted for
approval after August 21, 2019; they will also require full transparency of
discounts agreed with provincial bodies; and finally, will change the number and
composition of reference countries used to determine if a drug's price is
excessive. While we do not believe this will have a significant impact on our
future cash flows, as additional facts materialize, we cannot provide assurance
as to the ultimate content, timing, effect or impact of such regulations.
Other legislative efforts relating to drug pricing have been proposed and
considered at the U.S. federal and state level. We also anticipate that
Congress, state legislatures and third-party payors may continue to review and
assess alternative health care delivery and payment systems and may in the
future propose and adopt legislation or policy changes or implementations
affecting additional fundamental changes in the health care delivery system.

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Generic Competition and Loss of Exclusivity
Certain of our products face the expiration of their patent or regulatory
exclusivity in 2020 or in later years, following which we anticipate generic
competition of these products. In addition, in certain cases, as a result of
negotiated settlements of some of our patent infringement proceedings against
generic competitors, we have granted licenses to such generic companies, which
will permit them to enter the market with their generic products prior to the
expiration of our applicable patent or regulatory exclusivity. Finally, for
certain of our products that lost patent or regulatory exclusivity in prior
years, we anticipate that generic competitors may launch in 2020 or in later
years. Following a loss of exclusivity ("LOE") of and/or generic competition for
a product, we would anticipate that product sales for such product would
decrease significantly shortly following the loss of exclusivity or entry of a
generic competitor. Where we have the rights, we may elect to launch an
authorized generic of such product (either ourselves or through a third-party)
prior to, upon or following generic entry, which may mitigate the anticipated
decrease in product sales; however, even with launch of an authorized generic,
the decline in product sales of such product would still be expected to be
significant, and the effect on our future revenues could be material.
A number of our products already face generic competition. Prior to and during
2020, in the U.S., these products include, among others, Ammonul®, Apriso®,
Benzaclin®, Bupap®, Cuprimine®, Edecrin®, Elidel®, Glumetza®, Istalol®,
Isuprel®, Locoid® Lotion, Lotemax® Suspension, Mephyton®, Nitropress®, Solodyn®,
Syprine®, Uceris® Tablet, Virazole®, Wellbutrin XL®, Xenazine®, Zegerid® and
Zovirax® cream. In Canada, these products include, among others, Glumetza®,
Wellbutrin® XL and Zovirax® ointment.
2019 LOE Branded Products - Branded products that began facing generic
competition in the U.S. during 2019 include, Apriso®, Cuprimine®, Lotemax®
Suspension, Solodyn® and Zovirax® cream. In aggregate, these products accounted
for 3% of our total revenues in 2019. We believe the entry into the market of
generic competition generally would have an adverse impact on the volume and/or
pricing of the affected products, however we are unable to predict the magnitude
or timing of this impact.
2020 through 2024 LOE Branded Products - Based on current patent expiration
dates, settlement agreements and/or competitive information, we have identified
branded products that we believe could begin facing potential loss of
exclusivity and/or generic competition in the U.S. during the years 2020 through
2024. These products and year of expected loss of exclusivity include, but are
not limited to, Clindagel® (2020), Lotemax® Gel (2021), Migranal® (2020),
MoviPrep® (2020), Noritate® (2020), Targretin® Gel (2022), Xerese® (2022) and
certain other products that are subject to settlement agreements which could
impact their exclusivity during the years 2020 through 2024. In aggregate, these
products accounted for 3% of our total revenues in 2019. These dates may change
based on, among other things, successful challenge to our patents, settlement of
existing or future patent litigation and at-risk generic launches. We believe
the entry into the market of generic competition generally would have an adverse
impact on the volume and/or pricing of the affected products, however we are
unable to predict the magnitude or timing of this impact.
2021 LOE OTC Product - PreserVision® AREDS and PreserVision® AREDS 2 are OTC eye
vitamin formulas for those with moderate-to-advanced age-related macular
degeneration. PreserVision® products accounted for 2% of our total revenues in
2019. The PreserVision® formulation patent expires in 2021, and whereas the
Company cannot predict the magnitude or timing of the impact from its patent
expiry, as this is an OTC product the impact is not expected to be as
significant as the loss of exclusivity of a branded pharmaceutical product.
In addition, for a number of our products (including Uceris®, Relistor®,
Plenvu®, Xifaxan® 200mg and 550mg, Bepreve®, Bryhali® and Jublia®, in the U.S.
and Jublia® in Canada), we have commenced (or anticipate commencing) and have
(or may have) ongoing infringement proceedings against potential generic
competitors in the U.S. and Canada. If we are not successful in these
proceedings, we may face increased generic competition for these products.
Bryhali® Lotion, 0.01% (Glenmark) - In December 2019, the Company announced that
it had reached an agreement to
resolve the outstanding intellectual property litigation with Glenmark Pharmaceuticals, Ltd.
("Glenmark"). Under the terms of the agreement, the Company will grant Glenmark
a non-exclusive license to its intellectual property relating to Bryhali® in the
U.S. and, beginning in 2026 (or earlier under certain circumstances), Glenmark
will have the option to market a royalty-free generic version of Bryhali®
Lotion, should it receive approval from the FDA. The parties have agreed to
dismiss all litigation related to Bryhali® Lotion, and all intellectual property
protecting Bryhali® Lotion remains intact.
Bryhali® Lotion, 0.01% (Perrigo) - On March 20, 2020, the Company received a
Notice of Paragraph IV Certification from Perrigo Israel Pharmaceuticals, Ltd.
("Perrigo"), in which Perrigo asserted that certain U.S. patents, each of which
is listed in the FDA's Orange Book for Bryhali™ (halobetasol propionate) lotion,
0.01% are either invalid, unenforceable and/or will not be infringed by the
commercial manufacture, use or sale of Perrigo's generic halobetasol propionate
lotion, for which an Abbreviated New Drug Application ("ANDA") has been filed by
Perrigo.  The Company has forty-five (45) days from the date of receipt of this
notice to file suit against Perrigo pursuant to the Hatch-Waxman Act, alleging
infringement by Perrigo of one or more claims

                                       53
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of the Bryhali™ Patents to trigger a 30-month stay of the approval of Perrigo
ANDA for halobetasol propionate lotion.  The Company intends to file within this
time period.
Xifaxan® 550mg Patent Litigation (Sandoz Inc.) - In October 2019, the Company
announced that it and its licensor, Alfasigma had commenced litigation against
Sandoz Inc. ("Sandoz"), a Novartis division, alleging patent infringement of 14
patents by Sandoz's filing of its ANDA for Xifaxan® (rifaximin) 550 mg tablets.
On May 6, 2020, the Company announced that an agreement had been reached with
Sandoz that resolved this litigation. Under the terms of the agreement, the
parties agreed to dismiss all litigation related to Xifaxan® (rifaximin), Sandoz
acknowledged the validity of the licensed patents for Xifaxan® (rifaximin) 550
mg tablets and all intellectual property protecting Xifaxan® (rifaximin) 550 mg
tablets will remain intact and enforceable until expiry in October 2029. The
agreement also grants Sandoz a non-exclusive license to the intellectual
property relating to Xifaxan® (rifaximin) 550 mg tablets in the United States
beginning January 1, 2028 (or earlier under certain circumstances). Under the
terms of the agreement, beginning January 1, 2028 (or earlier under certain
circumstances), Sandoz will have the right to market a royalty-free generic
version of Xifaxan® (rifaximin) 550 mg tablets, should it receive approval from
the FDA on its ANDA. Sandoz will be able to commence such marketing earlier if
another generic rifaximin product is granted approval and such other generic
rifaximin product begins to be sold or distributed in the United States before
January 1, 2028. The Company will not make any financial payments or other
transfers of value as part of this agreement with Sandoz.
Xifaxan® 550mg Patent Litigation (Norwich Pharmaceuticals Inc.) - On March 26,
2020, The Company and its licensor Alfasigma filed suit against Norwich
Pharmaceuticals Inc. ("Norwich"), alleging infringement by Norwich of one or
more claims of the 23 Xifaxan® Patents by Norwich's filing of its ANDA for
Xifaxan® (rifaximin) 550 mg tablets. Xifaxan® is protected by 23 patents
covering the composition of matter and the use of Xifaxan® listed in the FDA's
Approved Drug Products with Therapeutic Equivalence Evaluations, or the
Orange Book. The Company remains confident in the strength of the Xifaxan®
patents and will continue to vigorously pursue these two matters and defend its
intellectual property.
Relistor® Tablets Patent Litigation - On December 6, 2016, the Company initiated
litigation against Actavis Laboratories FL, Inc.'s ("Actavis"), which alleged
infringement by Actavis of one or more claims of U.S. Patent No. 8,524,276 (the
"'276 Patent"), which protects the formulation of RELISTOR® tablets. Actavis had
challenged the validity of such patent and alleged non-infringement by its
generic version of such product. In July 2019, we announced that the U.S.
District Court of New Jersey had upheld the validity of and determined that
Actavis infringed the '276 Patent, expiring in March 2031.
Xifaxan® 550mg Patent Litigation (Actavis)- On March 23, 2016, the Company
initiated litigation against Actavis, which alleged infringement by Actavis of
one or more claims of each of the Xifaxan® patents. On September 12, 2018, we
announced that we had reached an agreement with Actavis that resolved the
existing litigation and eliminated the pending challenges to our intellectual
property protecting Xifaxan® (rifaximin) 550 mg tablets. As part of the
agreement, the parties agreed to dismiss all litigation related to Xifaxan®
(rifaximin), Actavis acknowledged the validity of the licensed patents for
Xifaxan® (rifaximin) 550 mg tablets and all intellectual property protecting
Xifaxan® (rifaximin) 550 mg tablets will remain intact and enforceable until
expiry in 2029. The agreement also grants Actavis a non-exclusive license to the
intellectual property relating to Xifaxan® (rifaximin) 550 mg tablets in the
United States beginning January 1, 2028 (or earlier under certain
circumstances). The Company will not make any financial payments or other
transfers of value as part of the agreement. In addition, under the terms of the
agreement, beginning January 1, 2028 (or earlier under certain circumstances),
Actavis will have the option to: (1) market a royalty-free generic version of
Xifaxan® tablets, 550 mg, should it receive approval from the FDA on its ANDA,
or (2) market an authorized generic version of Xifaxan® tablets, 550 mg, in
which case, we will receive a share of the economics from Actavis on its sales
of such an authorized generic. Actavis will be able to commence such marketing
earlier if another generic rifaximin product is granted approval and such other
generic rifaximin product begins to be sold or distributed before January 1,
2028.
Generic Competition to Uceris® - In July 2018, a generic competitor launched a
product which will directly compete with our Uceris® Tablet product. As
disclosed in our prior filings, the Company initiated various infringement
proceedings against this generic competitor. The Court construed the claims of
the asserted patents on August 2, 2019 and, on October 24, 2019, the Company
agreed to a judgment that the asserted patents did not cover the generic tablets
under the Court's claim construction, while reserving its right to appeal the
claim construction. The Company continues to believe that its Uceris®
Tablet-related patents are enforceable and is proceeding with an appeal;
however, the ultimate outcome of the matter is not predictable. The ultimate
impact of this generic competitor on our future revenues cannot be predicted;
however, Uceris® Tablet revenues for the three months ended March 31, 2020 and
2019 were approximately $3 million and $8 million, respectively, and for the
full years 2019, 2018 and 2017 were approximately $20 million, $84 million and
$134 million, respectively.
Generic Competition to Jublia® - On June 6, 2018, the U.S. Patent and Trial
Appeal Board ("PTAB") completed its inter partes review for an Orange
Book-listed patent covering Jublia® and issued a written determination
invalidating such patent.  On March 13, 2020, the Court of Appeals for the
Federal Circuit reversed this decision and remanded the matter back to the PTAB
for further proceedings. Jublia® revenues for the three months ended March 31,
2020 and 2019 were approximately $30 million and $20 million, respectively, and
for the full years 2019, 2018 and 2017 were approximately $110 million, $89
million and $96 million, respectively.  The Company continues to believe that
the Jublia® related patent is valid and enforceable, but the ultimate

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outcome of this matter is not predictable. Jublia® continues to be covered by
eleven remaining Orange Book-listed patents owned by the Company or its
licensor, which expire in the years 2028 through 2035. In August and September
2018, we received notices of the filing of a number of ANDAs with paragraph IV
certification, and have timely filed patent infringement suits against these
ANDA filers, and, in addition, we have also commenced certain patent
infringement proceedings in Canada against two separate defendants.
See Note 18, "LEGAL PROCEEDINGS" to our unaudited interim Consolidated Financial
Statements elsewhere in this Form 10-Q, as well as Note 21, "LEGAL PROCEEDINGS"
of our Annual Report on Form 10-K for the year ended December 31, 2019, filed
with the SEC and the CSA on SEDAR on February 19, 2020 for further details
regarding certain infringement proceedings.
The risks of generic competition are a fact of the health care industry and are
not specific to our operations or product portfolio. These risks are not
avoidable, but we believe they are manageable. To manage these risks, our
leadership team continually evaluates the impact that generic competition may
have on future profitability and operations. In addition to aggressively
defending the Company's patents and other intellectual property, our leadership
team makes operational and investment decisions regarding these products and
businesses at risk, not the least of which are decisions regarding our pipeline.
Our leadership team actively manages the Company's pipeline in order to identify
what we believe are the proper projects to pursue. Innovative and realizable
projects aligned with our core businesses that are expected to provide
incremental and sustainable revenues and growth into the future. We believe that
our current pipeline is strong enough to meet these objectives and provide
future sources of revenues, in our core businesses, sufficient enough to sustain
our growth and corporate health as other products in our established portfolio
face generic competition and lose momentum.
We believe that we have a well-established product portfolio that is diversified
within our core businesses. We also believe that we have a robust pipeline that
not only provides for the next generation of our existing products, but also
brings new solutions into the market.
See Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended
December 31, 2019, filed with the SEC and the CSA on SEDAR on February 19, 2020
for additional information on our competition risks.
Regulatory Matters
In the normal course of business, our products, devices and facilities are the
subject of ongoing oversight and review by regulatory and governmental agencies,
including general, for cause and pre-approval inspections by the relevant
competent authorities where we have business operations, including the FDA.
Currently, all of our global operations and facilities have the relevant
operational certificates. Through the date of this filing, the Company's
operating sites are in good compliance standing with no material noncompliance,
and all sites under FDA jurisdiction are rated as either No Action Indicated
(where there was no Form 483 observation) or Voluntary Action Indicated ("VAI")
(where there was a Form 483 with one or more observations). In the case of VAI
inspection outcomes, the FDA has accepted our responses to the issues cited in
the Form 483, which will be verified when the agency makes its next inspection
of those specific facilities. A Form 483 is issued at the end of each inspection
when FDA investigators have observed any condition that in their judgment may
constitute violations of current good manufacturing practice.
SELECTED FINANCIAL INFORMATION
The following table provides selected unaudited financial information for the
three months ended March 31, 2020 and 2019:
                                                                  Three Months Ended March 31,
(in millions, except per share data)                             2020           2019       Change
Revenues                                                     $    2,012       $ 2,016     $    (4 )
Operating income                                             $      248       $   287     $   (39 )
Loss before benefit from income taxes                        $     (178 )     $  (122 )   $   (56 )
Net loss attributable to Bausch Health Companies Inc.        $     (152 )

$ (52 ) $ (100 )

Basic and diluted loss per share attributable to Bausch
Health Companies Inc.                                        $    (0.43 )     $ (0.15 )   $ (0.28 )


Financial Performance
Summary of the Three Months Ended March 31, 2020 Compared to the Three Months
Ended March 31, 2019
Revenue for the three months ended March 31, 2020 and 2019 was $2,012 million
and $2,016 million, respectively, a decrease of $4 million, or less than 1%. The
decrease was primarily driven by: (i) higher sales deductions, (ii) the
unfavorable

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effect of foreign currencies, primarily in Europe and Latin America, (iii) the
impact of divestitures and discontinuations and (iv) the impacts of the COVID-19
pandemic. The decreases in our revenues were partially offset by: (i) higher
gross selling prices (ii) higher volumes and (iii) the incremental product sales
of our Trulance® product, which we added to our portfolio in March 2019 as part
of the acquisition of certain assets of Synergy. As discussed in the "Impact of
COVID-19 Pandemic" section above, although volumes were higher during the three
months ended March 31, 2020 as compared to the same period in 2019, we are
experiencing revenue declines in our second quarter in certain businesses in
connection with the COVID-19 pandemic.
The changes in our segment revenues and segment profits, including the impact of
the COVID-19 virus on our revenues for the three months ended March 31, 2020,
are discussed in further detail in the subsequent section titled "Reportable
Segment Revenues and Profits".
Operating income for the three months ended March 31, 2020 and 2019 was $248
million and $287 million, respectively, a decrease of $39 million and reflects,
among other factors:
•      an increase in contribution (Product sales revenue less Cost of goods

sold, excluding amortization and impairments of intangible assets) of $16

million primarily due to: (i) higher gross selling prices, (ii) the

incremental contribution of the sales of our Trulance® product, which we

added to our portfolio in March 2019 as part of the acquisition of certain

       assets of Synergy, and (iii) lower third-party royalty costs. The
       increases were partially offset by higher sales deductions;

• an increase in Selling, general and administrative expenses ("SG&A") of

$46 million primarily due to: (i) higher professional service costs, (ii)
       higher compensation expense, (iii) higher selling expenses and (iv) the

impact of the acquisition of certain assets of Synergy. The increases were

partially offset by the favorable impact of foreign currencies;

• an increase in R&D of $5 million primarily attributable to a number of

projects within our Bausch + Lomb and GI businesses;

• a decrease in Amortization of intangible assets of $53 million primarily

       attributable to fully amortized intangible assets no longer being
       amortized in 2020;


•      an increase in Asset impairments of $11 million, primarily related to
       decreases in forecasted sales of a certain product line during the three
       months ended March 31, 2020; and

• an increase in Other expense (income), net of $26 million, primarily

attributable to expenses related to Litigation and other matters during

the three months ended March 31, 2020.

Operating income for the three months ended March 31, 2020 and 2019 was $248
million and $287 million, respectively, and included non-cash charges for
Depreciation and amortization of intangible assets of $481 million and $532
million, Asset impairments of $14 million and $3 million and Share-based
compensation of $27 million and $24 million for the three months ended March 31,
2020 and 2019, respectively.
Our Loss before benefit from income taxes for the three months ended March 31,
2020 and 2019 was $178 million and $122 million, respectively, an increase of
$56 million. The increase in our Loss before benefit from income taxes is
primarily attributable to: (i) the decrease in our operating results of $39
million, as previously discussed, (ii) an increase in Loss on extinguishment of
debt of $17 million due to the December 2019 Financing and Refinancing
Transactions, which were completed in January 2020, and (iii) an unfavorable net
change in Foreign exchange and other of $13 million. The increase in our Loss
before benefit from income taxes was partially offset by a decrease in Interest
expense of $10 million.
Net loss attributable to Bausch Health Companies Inc. for the three months ended
March 31, 2020 and 2019 was $152 million and $52 million, respectively, a
decrease in our reported results of $100 million. The decrease in our results
was primarily due to: (i) the increase in our Loss before benefit from income
taxes of $56 million, as previously discussed and (ii) the unfavorable change in
Benefit from income taxes of $48 million.

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RESULTS OF OPERATIONS
Our unaudited operating results for the three months ended March 31, 2020 and
2019 were as follows:
                                                                  Three Months Ended March 31,
(in millions)                                                    2020            2019       Change
Revenues
Product sales                                                $    1,986       $  1,989     $   (3 )
Other revenues                                                       26             27         (1 )
                                                                  2,012          2,016         (4 )
Expenses
Cost of goods sold (excluding amortization and impairments
of intangible assets)                                               505            524        (19 )
Cost of other revenues                                               14             13          1
Selling, general and administrative                                 633            587         46
Research and development                                            122            117          5
Amortization of intangible assets                                   436            489        (53 )
Asset impairments                                                    14              3         11
Restructuring and integration costs                                   4             20        (16 )
Acquisition-related contingent consideration                         13            (21 )       34
Other expense (income), net                                          23             (3 )       26
                                                                  1,764          1,729         35
Operating income                                                    248            287        (39 )
Interest income                                                       7              4          3
Interest expense                                                   (396 )         (406 )       10
Loss on extinguishment of debt                                      (24 )           (7 )      (17 )
Foreign exchange and other                                          (13 )            -        (13 )
Loss before benefit from income taxes                              (178 )         (122 )      (56 )
Benefit from income taxes                                            26             74        (48 )
Net loss                                                           (152 )          (48 )     (104 )
Net income attributable to noncontrolling interest                    -             (4 )        4
Net loss attributable to Bausch Health Companies Inc.        $     (152 )     $    (52 )   $ (100 )



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Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31,
2019
Revenues
The Company's revenues are primarily generated from product sales, principally
in the therapeutic areas of eye-health, GI and dermatology, that consist of: (i)
branded pharmaceuticals, (ii) generic and branded generic pharmaceuticals, (iii)
OTC products and (iv) medical devices (contact lenses, intraocular lenses,
ophthalmic surgical equipment and aesthetics devices). Other revenues include
alliance and service revenue from the licensing and co-promotion of products and
contract service revenue primarily in the areas of dermatology and topical
medication.
Our revenues were $2,012 million and $2,016 million for the three months ended
March 31, 2020 and 2019, respectively, a decrease of $4 million, or less than
1%. The decrease was primarily driven by: (i) higher sales deductions of $67
million primarily in our Salix and Ortho Dermatologics segments, (ii) the
unfavorable effect of foreign currencies of $18 million primarily in Europe and
Latin America and (iii) the impact of divestitures and discontinuations of $7
million. The decreases in our revenues were partially offset by: (i) higher
gross selling prices of $59 million primarily in our Salix segment, (ii) higher
volumes of $15 million primarily in our Salix and Bausch + Lomb/International
segments, partially offset by lower volumes in our Diversified Products segment
and the impacts of the COVID-19 pandemic, (iii) the incremental product sales of
our Trulance® product, which we added to our portfolio in March 2019 as part of
the acquisition of certain assets of Synergy, of $13 million and (iv) an
increase in other revenues of $1 million. As discussed in the "Impact of
COVID-19 Pandemic" section above, although volumes were higher during the three
months ended March 31, 2020 as compared to the same period in 2019, we are
experiencing revenue declines in our second quarter in certain businesses in
connection with the COVID-19 pandemic.
Our segment revenues and segment profits for the three months ended March 31,
2020 and 2019, including the impact of the COVID-19 virus on our revenues for
the three months ended March 31, 2020, are discussed in further detail in the
subsequent section titled "Reportable Segment Revenues and Profits".
Cash Discounts and Allowances, Chargebacks and Distribution Fees
As is customary in the pharmaceutical industry, gross product sales are subject
to a variety of deductions in arriving at net product sales. Provisions for
these deductions are recognized concurrently with the recognition of gross
product sales. These provisions include cash discounts and allowances,
chargebacks, and distribution fees, which are paid or credited to direct
customers, as well as rebates and returns, which can be paid or credited to
direct and indirect customers.  Price appreciation credits are generated when we
increase a product's wholesaler acquisition cost ("WAC") under our contracts
with certain wholesalers. Under such contracts, we are entitled to credits from
such wholesalers for the impact of that WAC increase on inventory on hand at the
wholesalers. In wholesaler contracts such credits are offset against the total
distribution service fees we pay on all of our products to each such wholesaler.
In addition, some payor contracts require discounting if a price increase or
series of price increases in a contract period exceeds a negotiated threshold.
Provision balances relating to amounts payable to direct customers are netted
against trade receivables and balances relating to indirect customers are
included in accrued liabilities.
We actively manage these offerings, focusing on the incremental costs of our
patient assistance programs, the level of discounting to non-retail accounts and
identifying opportunities to minimize product returns. We also concentrate on
managing our relationships with our payors and wholesalers, reviewing the ranges
of our offerings and being disciplined as to the amount and type of incentives
we negotiate. Provisions recorded to reduce gross product sales to net product
sales and revenues for the three months ended March 31, 2020 and 2019 were as
follows:
                                                             Three Months Ended March 31,
                                                              2020                  2019
(in millions)                                           Amount      Pct.      Amount      Pct.
Gross product sales                                   $  3,323     100.0 %   $ 3,250     100.0 %
Provisions to reduce gross product sales to net
product sales
Discounts and allowances                                   156       4.7 %       204       6.3 %
Returns                                                     42       1.3 %        33       1.0 %
Rebates                                                    602      18.0 %       533      16.4 %
Chargebacks                                                484      14.6 %       443      13.6 %
Distribution fees                                           53       1.6 %        48       1.5 %
Total provisions                                         1,337      40.2 %     1,261      38.8 %
Net product sales                                        1,986      59.8 %     1,989      61.2 %
Other revenues                                              26                    27
Revenues                                              $  2,012               $ 2,016



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Cash discounts and allowances, returns, rebates, chargebacks and distribution
fees as a percentage of gross product sales were 40.2% and 38.8% for the three
months ended March 31, 2020 and 2019, respectively. The increase in cash
discounts and allowances, returns, rebates, chargebacks and distribution fees as
a percentage of gross product sales was primarily driven by:
•       discounts and allowances as a percentage of gross product sales was lower

primarily due to lower gross product sales and lower discount rates for

our Glumetza® AG, Syprine® AG, Migranal® AG and Benzamycin® AG. The lower

discounts and allowances as a percentage of gross product sales was

partially offset by the impact of: (i) the release of certain generics,

such as Apriso® AG (December 2019) and (ii) higher sales of Xifaxan®;

• returns as a percentage of gross product sales was higher primarily due

to higher return experience for a limited number of products, primarily

        Glumetza® SLX, partially offset by lower returns for Solodyn®,
        Nitropress® and Xifaxan®;

• rebates as a percentage of gross product sales were higher primarily due

        the impact of: (i) increases in gross product sales for products that
        carry higher contractual rebates and co-pay assistance programs,
        including the impact of incremental rebates from contractual price
        increase limitations for promoted products, such as Xifaxan® ,

Wellbutrin® and Prolensa®, (ii) sales of our Trulance® product, which we

added to our portfolio in March 2019 as part of the acquisition of

certain assets of Synergy, and (iii) rebates associated with our Duobrii®

product launched in June 2019, partially offset by decreases in gross

product sales for products which carry higher rebate rates, such as

Apriso®, Lotemax® Suspension, Lotemax® Gel, Zovirax® and Cuprimine®. The

decreases in gross product sales for these products were due in part to

        generic competition and the release of certain branded generics.

• chargebacks as a percentage of gross product sales were higher primarily

        due to the impact of: (i) higher gross product sales of Xifaxan®, (ii)
        higher chargeback rates for Xifaxan® and Glumetza® SLX and (iii) the
        release of certain generics, such as Apriso® AG (December 2019). The

higher chargebacks as a percentage of gross product sales were partially

offset by the impact of lower gross product sales of: (i) certain branded

products, such as and Nifediac® and Retin-A Micro® 0.06% and (ii) certain

        generic products, such as Glumetza® AG, Ofloxacin and Syprine® AG; and


•       distribution service fees as a percentage of gross product sales were
        higher due to the impact of: (i) higher sales of branded products, such

as Xifaxan®, (ii) sales of our Trulance® product, which we added to our

portfolio in March 2019 as part of the acquisition of certain assets of

Synergy, and (iii) sales of our Duobrii® product launched in June 2019.

The higher distribution service fees as a percentage of gross product

sales were partially offset by the impact of lower gross product sales of

certain branded products, such as Apriso® as a result of its generic

release and Cuprimine®. Price appreciation credits are offset against the

distribution service fees we pay wholesalers and were $4 million and $0

        for the three months ended March 31, 2020 and 2019, respectively.

Expenses

Cost of Goods Sold (excluding amortization and impairments of intangible assets)
Cost of goods sold primarily includes: manufacturing and packaging; the cost of
products we purchase from third parties; royalty payments we make to third
parties; depreciation of manufacturing facilities and equipment; and lower of
cost or market adjustments to inventories. Cost of goods sold excludes the
amortization and impairments of intangible assets.
Cost of goods sold was $505 million and $524 million for the three months ended
March 31, 2020 and 2019, respectively, a decrease of $19 million, or 4%. The
decrease was primarily driven by: (i) the favorable impact of foreign
currencies, (ii) lower third-party royalty costs and (iii) the impact of
divestitures and discontinuations. The decrease was partially offset by: (i)
product mix and (ii) the incremental costs of sales of our Trulance® product,
which we added to our portfolio in March 2019 as part of the acquisition of
certain assets of Synergy.
Cost of goods sold as a percentage of product sales revenue was 25.4% and 26.3%
for the three months ended March 31, 2020 and 2019, respectively, a decrease of
0.9 percentage points. Costs of goods sold as a percentage of Product sales
revenue was favorably impacted as a result of: (i) higher gross selling prices,
(ii) the favorable impact of foreign currencies on cost of goods sold and (iii)
lower third-party royalty costs. These factors were partially offset by: (i)
higher sales deductions and (ii) product mix.
Selling, General and Administrative Expenses
SG&A expenses primarily include: employee compensation associated with sales and
marketing, finance, legal, information technology, human resources and other
administrative functions; certain outside legal fees and consultancy costs;
product promotion expenses; overhead and occupancy costs; depreciation of
corporate facilities and equipment; and other general and administrative costs.

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SG&A expenses were $633 million and $587 million for the three months ended
March 31, 2020 and 2019, respectively, an increase of $46 million, or 8%. The
increase was primarily driven by: (i) higher professional service costs, (ii)
higher compensation expense, (iii) higher selling expenses and (iv) the impact
of the acquisition of certain assets of Synergy. The increases were partially
offset by the favorable impact of foreign currencies.
Research and Development Expenses
Included in Research and development are costs related to our product
development and quality assurance programs. Expenses related to product
development include: employee compensation costs; overhead and occupancy costs;
depreciation of research and development facilities and equipment; clinical
trial costs; clinical manufacturing and scale-up costs; and other third-party
development costs. Quality assurance are the costs incurred to meet evolving
customer and regulatory standards and include: employee compensation costs;
overhead and occupancy costs; amortization of software; and other third-party
costs.
R&D expenses were $122 million and $117 million for the three months ended March
31, 2020 and 2019, respectively, an increase of $5 million, or 4%, primarily
attributable to a number of projects within our Bausch + Lomb and GI businesses.
R&D expenses as a percentage of Product sales were approximately 6% for both the
three months ended March 31, 2020 and 2019.
Amortization of Intangible Assets
Intangible assets with finite lives are amortized using the straight-line method
over their estimated useful lives, generally 2 to 20 years.
Amortization of intangible assets was $436 million and $489 million for the
three months ended March 31, 2020 and 2019, respectively, a decrease of $53
million. The decrease was primarily attributable to fully amortized intangible
assets no longer being amortized in 2020. Management continually assesses the
useful lives related to the Company's long-lived assets to reflect the most
current assumptions.
See Note 8, "INTANGIBLE ASSETS AND GOODWILL" to our unaudited interim
Consolidated Financial Statements regarding further details related to the
Amortization of intangible assets.
Asset Impairments
Long-lived assets with finite lives are tested for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. Impairment charges associated with these assets are included in
Asset impairments in the Consolidated Statement of Operations. The Company
continues to monitor the recoverability of its finite-lived intangible assets
and tests the intangible assets for impairment if indicators of impairment are
present.
Asset impairments were $14 million and $3 million for the three months ended
March 31, 2020 and 2019, respectively, an increase of $11 million. Asset
impairments for the three months ended March 31, 2020 were due to decreases in
forecasted sales of a certain product line. Asset impairments for the three
months ended March 31, 2019 were due to the discontinuance of a specific product
line not aligned with the focus of the Company's core businesses.
See Note 8, "INTANGIBLE ASSETS AND GOODWILL" to our unaudited interim
Consolidated Financial Statements regarding further details related to our
intangible assets.
Restructuring and Integration Costs
The Company evaluates opportunities to improve its operating results and
implements cost savings programs to streamline its operations and
eliminate redundant processes and expenses. The expenses associated with the
implementation of these cost savings programs include expenses associated with:
(i) reducing headcount, (ii) eliminating real estate costs associated with
unused or under utilized facilities and (iii) implementing contribution margin
improvement and other cost reduction initiatives.
Restructuring and integration costs were $4 million and $20 million for the
three months ended March 31, 2020 and 2019, respectively, a decrease of $16
million. During the three months ended March 31, 2020, these costs included $3
million of facility closure costs and $1 million of severance costs. During the
three months ended March 31, 2019, these costs included: (i) $10 million of
severance costs associated with the acquisition of certain assets of Synergy,
which were not essential to complete, close and report the acquisition, (ii) $6
million of other severance costs and (iii) $4 million of facility closure costs.
The Company continues to evaluate opportunities to streamline its operations and
identify additional cost savings globally. Although a specific plan does not
exist at this time, the Company may identify and take additional exit and
cost-rationalization restructuring actions in the future, the costs of which
could be material.
See Note 5, "RESTRUCTURING AND INTEGRATION COSTS" to our unaudited interim
Consolidated Financial Statements for further details regarding these actions.

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Acquisition-Related Contingent Consideration
Acquisition-related contingent consideration primarily consists of potential
milestone payments and royalty obligations associated with businesses and assets
we acquired in the past. These obligations are recorded in the Consolidated
Balance Sheets at their estimated fair values at the acquisition date, in
accordance with the acquisition method of accounting. The fair value of the
acquisition-related contingent consideration is remeasured each reporting
period, with changes in fair value recorded in the Consolidated Statements of
Operations. The fair value measurement is based on significant inputs not
observable in the market and thus represents a Level 3 measurement as defined in
fair value measurement accounting.
Acquisition-related contingent consideration was a loss of $13 million for the
three months ended March 31, 2020, and included net fair value adjustments of $7
million and accretion for the time value of money of $6 million.
Acquisition-related contingent consideration was a gain of $21 million for the
three months ended March 31, 2019, and included net fair value adjustments of
$27 million, which included adjustments to future royalty payments, partially
offset by accretion for the time value of money of $6 million.
Other Expense (Income), Net
Other expense (income), net for the three months ended March 31, 2020 and 2019
consists of the following:
                                                        Three Months Ended
                                                             March 31,
(in millions)                                           2019          2018
Net gain on sale of assets                           $    (1 )     $     (10 )
Acquired in-process research and development costs         1               1
Acquisition-related costs                                  -               8
Litigation and other matters                              23               2
Other, net                                                 -              (4 )
                                                     $    23       $      (3 )


Non-Operating Income and Expense
Interest Expense
Interest expense primarily consists of interest payments due and amortization of
debt discounts and deferred financing costs on indebtedness under our credit
facilities and notes.
Interest expense was $396 million and $406 million, and included non-cash
amortization and write-offs of debt premiums, discounts and deferred financing
costs of $15 million and $17 million, for the three months ended March 31, 2020
and 2019, respectively. Interest expense for the three months ended March 31,
2020 decreased $10 million, or 2%, as compared to the three months ended March
31, 2019, primarily due to: (i) interest related to the Company's cross-currency
swaps and (ii) lower weighted average interest rate, partially offset by higher
outstanding principal balances. The weighted average stated rates of interest as
of March 31, 2020 and 2019 were 6.01% and 6.38%, respectively.
Loss on Extinguishment of Debt
Loss on extinguishment of debt represents the differences between the amounts
paid to settle extinguished debts and the carrying value of the related
extinguished debt. Loss on extinguishment of debt was $24 million and $7 million
for the three months ended March 31, 2020 and 2019, respectively. Loss on
extinguishment of debt for the three months ended March 31, 2020 is primarily
related to the December 2019 Financing and Refinancing Transactions, which were
completed in January 2020. Loss on extinguishment of debt for the three months
ended March 31, 2019 is related to a series of transactions which allowed us to
refinance portions of our debt arrangements.
See Note 10, "FINANCING ARRANGEMENTS" to our unaudited interim Consolidated
Financial Statements for further details.
Foreign Exchange and Other
Foreign exchange and other was a loss of $13 million and $0 for the three months
ended March 31, 2020 and 2019, respectively, an unfavorable net change of $13
million. Foreign exchange and other includes translation gains/losses on
intercompany loans and third-party liabilities and the gain/loss due to the
change in fair value of foreign currency exchange contracts.

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Income Taxes
Benefit from income taxes was $26 million and $74 million for the three months
ended March 31, 2020 and 2019, respectively, a decrease of $48 million. Our
effective income tax rate for the three months ended March 31, 2020 and 2019
differs from the statutory Canadian income tax rate primarily due to: (i) the
recording of valuation allowance on entities for which no tax benefit of losses
is expected, (ii) the tax benefit generated from our annualized mix of earnings
by jurisdiction and (iii) the discrete treatment of certain tax matters,
primarily related to: (a) the net tax benefit related to uncertain tax positions
and (b) the adjustments for book to income tax return provisions.
See Note 16, "INCOME TAXES" to our unaudited interim Consolidated Financial
Statements for further details.
Reportable Segment Revenues and Profits
Our portfolio of products falls into four operating and reportable segments: (i)
Bausch + Lomb/International, (ii) Salix, (iii) Ortho Dermatologics and (iv)
Diversified Products.
The following is a brief description of our segments:
•      The Bausch + Lomb/International segment consists of: (i) sales in the U.S.

of pharmaceutical products, OTC products and medical device products,

primarily comprised of Bausch + Lomb products, with a focus on the Vision

       Care, Surgical, Consumer and Ophthalmology Rx products and (ii) with the
       exception of sales of Solta products, sales in Canada, Europe, Asia,
       Australia, Latin America, Africa and the Middle East of branded
       pharmaceutical products, branded generic pharmaceutical products, OTC
       products, medical device products and Bausch + Lomb products.

• The Salix segment consists of sales in the U.S. of GI products.

•      The Ortho Dermatologics segment consists of: (i) sales in the U.S. of
       Ortho Dermatologics (dermatological) products and (ii) global sales of
       Solta medical aesthetic devices.


•      The Diversified Products segment consists of sales in the U.S. of: (i)
       pharmaceutical products in the areas of neurology and certain other

therapeutic classes, (ii) generic products and (iii) dentistry products.

Segment profit is based on operating income after the elimination of
intercompany transactions. Certain costs, such as Amortization of intangible
assets, Asset impairments, In-process research and development costs,
Restructuring and integration costs, Acquisition-related contingent
consideration costs and Other expense (income), net, are not included in the
measure of segment profit, as management excludes these items in assessing
segment financial performance. See Note 19, "SEGMENT INFORMATION" to our
unaudited interim Consolidated Financial Statements for a reconciliation of
segment profit to Loss before benefit from income taxes.

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The following table presents segment revenues, segment revenues as a percentage
of total revenues, and the period-over-period changes in segment revenues for
the three months ended March 31, 2020 and 2019. The following table also
presents segment profits, segment profits as a percentage of segment revenues
and the period-over-period changes in segment profits for the three months ended
March 31, 2020 and 2019.
                                                        Three Months Ended March 31,
                                                 2020               2019              Change
(in millions)                               Amount    Pct.     Amount    Pct.     Amount     Pct.
Segment Revenues
Bausch + Lomb/International                $ 1,114     55 %   $ 1,118     55 %   $   (4 )     -  %
Salix                                          477     24 %       445     22 %       32       7  %
Ortho Dermatologics                            133      7 %       138      7 %       (5 )    (4 )%
Diversified Products                           288     14 %       315     16 %      (27 )    (9 )%
Total revenues                             $ 2,012    100 %   $ 2,016    100 %   $   (4 )     -  %

Segment Profits / Segment Profit Margins
Bausch + Lomb/International                $   325     29 %   $   319     29 %   $    6       2  %
Salix                                          319     67 %       288     65 %       31      11  %
Ortho Dermatologics                             48     36 %        57     41 %       (9 )   (16 )%
Diversified Products                           202     70 %       236     75 %      (34 )   (14 )%
Total segment profits                      $   894     44 %   $   900     45 %   $   (6 )    (1 )%


Organic Revenues and Organic Growth Rates (non-GAAP)
Organic growth, a non-GAAP metric, is defined as a change on a
period-over-period basis in revenues on a constant currency basis (if
applicable) excluding the impact of recent acquisitions, divestitures and
discontinuations. Organic revenue growth (non-GAAP) is growth in GAAP Revenue
(its most directly comparable GAAP financial measure), adjusted for certain
items, of businesses that have been owned for one or more years. Organic revenue
(non-GAAP) is impacted by changes in product volumes and price. The price
component is made up of two key drivers: (i) changes in product gross selling
price and (ii) changes in sales deductions. The Company uses organic revenue
(non-GAAP) and organic revenue growth (non-GAAP) to assess performance of its
reportable segments, and the Company in total, without the impact of foreign
currency exchange fluctuations and recent acquisitions, divestitures and product
discontinuations. The Company believes that such measures are useful to
investors as they provide a supplemental period-to-period comparison.
Organic revenue growth (non-GAAP) reflects adjustments for: (i) the impact of
period-over-period changes in foreign currency exchange rates on revenues and
(ii) the revenues associated with acquisitions, divestitures and
discontinuations of businesses divested and/or discontinued. These adjustments
are determined as follows:
Foreign currency exchange rates: Although changes in foreign currency exchange
rates are part of our business, they are not within management's control.
Changes in foreign currency exchange rates, however, can mask positive or
negative trends in the underlying business performance. The impact for changes
in foreign currency exchange rates is determined as the difference in the
current period reported revenues at their current period currency exchange rates
and the current period reported revenues revalued using the monthly average
currency exchange rates during the comparable prior period.
Acquisitions, divestitures and discontinuations: In order to present
period-over-period organic revenues (non-GAAP) on a comparable basis, revenues
associated with acquisitions, divestitures and discontinuations are adjusted to
include only revenues from those businesses and assets owned during both
periods. Accordingly, organic revenue growth (non-GAAP) excludes from the
current period, all revenues attributable to each acquisition for twelve months
subsequent to the day of acquisition, as there are no revenues from those
businesses and assets included in the comparable prior period. Organic revenue
growth (non-GAAP) excludes from the prior period (but not the current period),
all revenues attributable to each divestiture and discontinuance during the
twelve months prior to the day of divestiture or discontinuance, as there are no
revenues from those businesses and assets included in the comparable current
period.

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The following table presents a reconciliation of GAAP revenues to organic revenues (non-GAAP) and the period-over-period changes in organic revenue (Non-GAAP) for the three months ended March 31, 2020 and 2019 by segment.

                                    Three Months Ended March 31, 2020                                     Three Months Ended March 31, 2019
                                                                                                                                                                       Change in
                        Revenue       Changes in                                            Revenue                                                                 Organic Revenue
                          as           Exchange                      Organic Revenue          as                 Divestitures and            Organic Revenue
(in millions)          Reported         Rates        Acquisition       (Non-GAAP)          Reported              Discontinuations              (Non-GAAP)         Amount         Pct.
Bausch +
Lomb/International   $     1,114     $       17     $         -     $         1,131     $       1,118     $                  (7 )           $         1,111     $     20           2  %
Salix                        477              -             (13 )               464               445                         -                         445           19           4  %
Ortho
Dermatologics                133              1               -                 134               138                         -                         138           (4 )        (3 )%

Diversified

Products                     288              -               -                 288               315                         -                         315          (27 )        (9 )%
Total                $     2,012     $       18     $       (13 )   $         2,017     $       2,016     $                  (7 )           $         2,009     $      8           -  %


Bausch + Lomb/International Segment:
Bausch + Lomb/International Segment Revenue
The Bausch + Lomb/International segment has a diversified product line with no
single product group representing 10% or more of its product sales. The Bausch +
Lomb/International segment revenue was $1,114 million and $1,118 million for the
three months ended March 31, 2020 and 2019, respectively, a decrease of $4
million, or less than 1%. The decrease was primarily attributable to: (i) the
unfavorable effect of foreign currencies of $17 million, primarily attributable
to our revenues in Europe and Latin America and (ii) the impact of divestitures
and discontinuations of $7 million, related to the divestiture and
discontinuance of several products. These decreases were partially offset by:
(i) an increase in volume of $10 million and (ii) an increase in average
realized pricing of $10 million, primarily driven by increases in our Global
Vision Care, International Rx and Global Consumer businesses, partially offset
by the decrease in our Global Ophtho Rx business. The increase in volume is
primarily attributable to our Global Consumer and International Rx businesses,
driven by: (i) our eye vitamin franchise, which includes LUMIFY® and (ii)
increased demand as consumers prepared for the COVID-19 pandemic by ensuring
they had access to essential products and prescriptions. The increased volumes
in our Global Consumer and International Rx businesses were partially offset by
decreased volumes in our Global Vision Care, Global Surgical and Global Ophtho
Rx businesses primarily in Asia and Europe and which we believe are in part due
to the precautionary measures in response to the COVID-19 pandemic as previously
discussed. Our Vision Care business was most impacted by declines in contact
lens use in Asia, as a result of retail store closures as well as reduced
contact lens wear due to decreased social interaction.
As discussed in the "Impact of COVID-19 Pandemic" section above, although
volumes were higher during the three months ended March 31, 2020 as compared to
the same period in 2019, we are experiencing revenue declines in our second
quarter in certain businesses in connection with the COVID-19 pandemic. In
response to the COVID-19 pandemic, many health care facilities and medical
offices are closed and certain surgeries and elective medical procedures have
been postponed, which we expect to impact the revenues of our Bausch +
Lomb/International segment during 2020.
Bausch + Lomb/International Segment Profit
The Bausch + Lomb/International segment profit for three months ended March 31,
2020 and 2019 was $325 million and $319 million, respectively, an increase of $6
million, or 2%. The increase was primarily driven by: (i) the favorable effect
of foreign currencies on our contribution and (ii) the increase in average
realized pricing, as previously discussed. The increase was partially offset by:
(i) product mix and (ii) higher selling expenses.
Salix Segment:
Salix Segment Revenue
The Salix segment includes the Xifaxan® product line, which accounted for 79%
and 69% of the Salix segment product sales and 19% and 15% of the Company's
product sales for the three months ended March 31, 2020 and 2019, respectively.
No other single product group represents 10% or more of the Salix segment
product sales. Salix segment revenue for the three months ended March 31, 2020
and 2019 was $477 million and $445 million, respectively, an increase of $32
million, or 7%. The increase includes: (i) an increase in volume of $30 million
and (ii) sales of our Trulance® product, which we added to our portfolio in
March 2019 as part of the acquisition of certain assets of Synergy, of $13
million. The increase in volumes was primarily attributable to increased demand
for Xifaxan®, Relistor® and Glumetza® SLX, partially offset by the impact of
generic competition as certain products, such as Apriso® and Uceris®, lost
exclusivity. These increases in revenue were partially offset by a decrease in
average realized pricing of $11 million primarily attributable to higher sales
deductions for Glumetza® SLX partially offset by higher gross selling prices for
Xifaxan®.

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As discussed in the "Impact of COVID-19 Pandemic" section above, although
volumes were higher during the three months ended March 31, 2020 as compared to
the same period in 2019, we are experiencing revenue declines in our second
quarter in certain businesses in connection with the COVID-19 pandemic. In
response to the COVID-19 pandemic, many health care facilities and medical
offices are closed and certain surgeries and elective medical procedures have
been postponed, which we expect to impact the revenues of our Salix segment
during 2020. However, through the date of this filing, we believe that the
COVID-19 pandemic has had only a limited impact on the demand for our Xifaxan®
products. Further, as of April 30, 2020, we have over five months' supply of
Xifaxan® on hand and enough API to manufacture another five months' supply of
Xifaxan® finished goods. We also have open orders for API that we currently
expect will arrive on schedule. However, if we were to experience a lack of
availability of API for Xifaxan®, such disruption to our supply chain could have
a significant adverse effect on our business, financial condition and results of
operations.
Salix Segment Profit
The Salix segment profit for the three months ended March 31, 2020 and 2019 was
$319 million and $288 million, respectively, an increase of $31 million, or 11%.
The increase was primarily driven by a net increase in contribution as a result
of: (i) the increase in volume, as previously discussed, (ii) lower third-party
royalty costs and (iii) gross profit from the sales of our Trulance® product,
which we added to our portfolio in March 2019 as part of the acquisition of
certain assets of Synergy. The increases in segment profit was partially offset
by: (i) a decrease in average realized pricing, as previously discussed, (ii)
higher selling, advertising and promotion expenses primarily related to our
Trulance® product, which we added to our portfolio in March 2019 as part of the
acquisition of certain assets of Synergy and (iii) higher costs related to
professional services.
Ortho Dermatologics Segment:
Ortho Dermatologics Segment Revenue
The Ortho Dermatologics segment revenue for the three months ended March 31,
2020 and 2019 was $133 million and $138 million, respectively a decrease of $5
million, or 4%. The decrease is primarily driven by: (i) a decrease in average
realized pricing of $8 million as a result of higher sales deductions in our
medical dermatology products and (ii) the unfavorable effect of foreign
currencies of $1 million. These decreases were partially offset by an increase
in volume of $4 million primarily due to: (i) increased demand of Thermage FLX®
and (ii) the launch of Duobrii® (June 2019) and partially offset by a decrease
in volumes due to the impact of generic competition as certain products, such as
Solodyn®, Zovirax® and Elidel®, lost exclusivity.
As discussed in the "Impact of COVID-19 Pandemic" section above, although
volumes were higher during the three months ended March 31, 2020 as compared to
the same period in 2019, we are experiencing revenue declines in our second
quarter in certain businesses in connection with the COVID-19 pandemic. As a
precautionary measure, many health care facilities and medical offices are
closed and many elective medical procedures and certain surgeries have been
postponed, which we expect to impact the revenues of our medical dermatology,
medical aesthetics and therapeutic products during 2020.
Ortho Dermatologics Segment Profit
The Ortho Dermatologics segment profit for the three months ended March 31, 2020
and 2019 was $48 million and $57 million, respectively, a decrease of $9
million, or 16%. The decrease was primarily driven by a decrease in contribution
as a result of the decrease in revenue, as previously discussed.

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Diversified Products Segment:
Diversified Products Segment Revenue
The following table displays the Diversified Products segment revenue by product
and product revenues as a percentage of segment revenue for the three months
ended March 31, 2020 and 2019.
                                                     Three Months Ended March 31,
                                             2020                2019               Change
(in millions)                           Amount     Pct.     Amount     Pct.     Amount     Pct.
 Wellbutrin® Franchise                 $     58     20 %   $     58     18 %   $    -       -  %
 Aplenzin®                                   26      9 %         16      5 %       10      63  %
 Arestin®                                    19      7 %         21      7 %       (2 )   (10 )%
 Diastat® Franchise                          11      4 %          6      2 %        5      83  %
 Migranal® Franchise                         10      3 %         12      4 %       (2 )   (17 )%
 Neo/Poly/HC Otic                             9      3 %          5      2 %        4      80  %
 Uceris® AG                                   9      3 %          5      2 %        4      80  %
 Apriso®                                      8      3 %          -      - %        8       -  %
 Ativan®                                      8      3 %         15      5 %       (7 )   (47 )%
 Tobramycin/Dexamethasone                     8      3 %          7      2 %        1      14  %
 Other product revenues                     119     41 %        168     52 %      (49 )   (29 )%
 Other revenues                               3      1 %          2      1 %        1      50  %

Total Diversified Products revenues $ 288 100 % $ 315 100 % $ (27 ) (9 )%

The Diversified Products segment revenue for the three months ended March 31,
2020 and 2019 was $288 million and $315 million, respectively, a decrease of $27
million, or 9%. The decrease was primarily driven by a decrease in volume of $29
million. The decrease in volume was primarily attributable to: (i) our Neurology
and Other business as certain products such as Cuprimine®, and Ativan®, lost
exclusivity and (ii) our Dentistry business related to the postponement of
certain surgeries and elective medical procedures in response to the COVID-19
pandemic. These decreases in volume were partially offset by increased demand
for Aplenzin®, a product within our Neurology and Other business. These
decreases in revenue were partially offset by increases in: (i) other revenues
of $1 million and (ii) average realized pricing of $1 million primarily
attributable to higher gross selling prices.
Diversified Products Segment Profit
The Diversified Products segment profit for three months ended March 31, 2020
and 2019 was $202 million and $236 million, respectively, a decrease of $34
million, or 14% and was primarily driven by: (i) the decrease in volume, as
previously discussed, and (ii) higher general and administrative expenses.

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LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
                                                                Three Months Ended March 31,
(in millions)                                                  2020            2019       Change
Net loss                                                   $     (152 )

$ (48 ) $ (104 ) Adjustments to reconcile net loss to net cash provided by operating activities

                                           541       

459 82 Cash provided by operating activities before changes in operating assets and liabilities

                                  389            411         (22 )
Changes in operating assets and liabilities                      (128 )            2        (130 )
Net cash provided by operating activities                         261            413        (152 )
Net cash used in investing activities                             (40 )         (203 )       163
Net cash used in financing activities                          (1,521 )         (150 )    (1,371 )
Effect of exchange rate on cash and cash equivalents              (21 )     

1 (22 ) Net increase in cash, cash equivalents and restricted cash

                                                           (1,321 )     

61 (1,382 ) Cash, cash equivalents and restricted cash, beginning of period

                                                          3,244            723       2,521
Cash, cash equivalents and restricted cash, end of
period                                                     $    1,923       $    784     $ 1,139


Operating Activities
Net cash provided by operating activities was $261 million and $413 million for
the three months ended March 31, 2020 and 2019, respectively, a decrease of $152
million. The decrease was attributable to net decreases in cash from Changes in
operating assets and liabilities and Cash provided by operating activities
before changes in operating assets and liabilities.
Cash provided by operating activities before changes in operating assets and
liabilities for the three months ended March 31, 2020 and 2019 was $389 million
and $411 million, respectively, a decrease of $22 million. The decrease is
primarily attributable to higher sales deductions and the unfavorable effect of
foreign currencies, primarily in Europe and Latin American partially offset by
higher volumes, improved gross margins and cash expense reductions in 2020 as
compared to 2019 as previously discussed.
Changes in operating assets and liabilities resulted in a net decrease in cash
of $128 million for the three months ended March 31, 2020, as compared to the
net increase in cash of $2 million for the three months ended March 31, 2019, a
decrease of $130 million. During the three months ended March 31, 2020, Changes
in operating assets and liabilities was negatively impacted by: (i) the increase
in inventories of $94 million and (ii) the timing of other payments in the
ordinary course of business of $103 million, partially offset by the collection
of trade receivables of $69 million. For the three months ended March 31, 2019,
Changes in operating assets and liabilities was positively impacted by the
collection of trade receivables of $89 million offset by the increase in
inventories of $68 million and the timing of payments in the ordinary course of
business of $19 million.
Investing Activities
Net cash used in investing activities was $40 million for the three months ended
March 31, 2020 and was driven by Purchases of property, plant and equipment of
$72 million offset by Proceeds from sale of assets and businesses, net of costs
to sell of $21 million primarily related to the receipt of a milestone payment
associated with a prior divestiture and Interest settlements from cross-currency
swaps of $11 million.
Net cash used in investing activities was $203 million for the three months
ended March 31, 2019 and was driven by the acquisition of businesses, net of
cash acquired of $180 million, related to the acquisition of certain assets of
Synergy, and purchases of property, plant and equipment of $47 million,
partially offset by proceeds from sale of assets and businesses, net of costs to
sell of $25 million, primarily related to the receipt of a milestone payment
associated with a prior divestiture.
Financing Activities
Net cash used in financing activities was $1,521 million for the three months
ended March 31, 2020 and was primarily driven by the repayments of debt of
$1,459 million which consisted of: (i) $1,240 million of May 2023 Unsecured
Notes, which was previously financed as part of the December 2019 Financing and
Refinancing Transactions, which were completed in January 2020, (ii) $100
million of 5.50% Senior Unsecured Notes due March 2023, (iii) $103 million of
our June 2025 Term Loan B Facility (as defined below) and (iv) the repurchase
and retirement of outstanding senior unsecured notes with an aggregate par value
of $17 million in the open market, for an aggregate cost of $16 million.
Issuance of long-term debt, net of discounts of $(3) million primarily
represents the payment of fees and expenses associated with the December 2019
Financing and Refinancing Transactions.

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Net cash used in financing activities was $150 million for the three months
ended March 31, 2019 and was primarily driven by the net reduction in our debt
portfolio. Repayments of debt for the three months ended March 31, 2019 were
$1,621 million and consisted of: (i) repayments of principal amounts due under
our Senior Notes of $1,318 million, (ii) repayments of term loans under our
Senior Secured Credit Facilities of $228 million and (iii) repayments of our
revolving credit facility of $75 million. Net proceeds from the issuances of
long-term debt for the three months ended March 31, 2019 was $1,514 million and
included the net proceeds of: (i) $1,021 million from the issuance of $1,000
million in principal amount of January 2027 Unsecured Notes and (ii) $494
million from the issuance of $500 million in principal amount of August 2027
Secured Notes. Net proceeds from the issuances of long-term debt is reduced by
$1 million for issuance costs paid in 2019 associated with long-term debt issued
in previous years. Debt extinguishment costs paid for the refinancing of certain
debt was $1 million.
See Note 10, "FINANCING ARRANGEMENTS" to our unaudited interim Consolidated
Financial Statements for additional information regarding the financing
activities described above.
Liquidity and Debt
Future Sources of Liquidity
Our primary sources of liquidity are our cash and cash equivalents, cash
collected from customers, funds as available from our revolving credit facility,
issuances of long-term debt and issuances of equity and equity-linked
securities. We believe these sources will be sufficient to meet our current
liquidity needs for at least the twelve months following the issuance of this
Form 10-Q.
The Company regularly evaluates market conditions, its liquidity profile, and
various financing alternatives for opportunities to enhance its capital
structure. If opportunities are favorable, the Company may refinance or
repurchase existing debt or issue equity or equity-linked securities. We believe
our existing cash and cash generated from operations will be sufficient to
service our debt obligations in the years 2020 and 2021.
Proposed Refinancing Transactions - In February 2020, we announced intentions to
opportunistically amend and refinance the Company's Restated Credit Agreement,
in order to extend and reprice our term loans and revolving credit facility and
make certain other amendments to the terms of the facilities in connection
therewith. We also announced our intention to issue $3,250 million of secured
debt securities. The proceeds of the credit agreement refinancing and the
offering of the new secured debt securities, along with cash on hand, were to be
used to redeem certain outstanding senior secured notes, refinance our
outstanding term loans under our Restated Credit Agreement (as defined below)
and to pay related fees, premiums and expenses. However, in March 2020, as a
result of challenging market conditions, we decided not to pursue these
opportunities. We will continue to monitor market conditions and consider
opportunistic refinancing transactions from time to time.
Long-term Debt
Long-term debt, net of unamortized premiums, discounts and issuance costs was
$24,428 million and $25,895 million as of March 31, 2020 and December 31, 2019,
respectively. Aggregate contractual principal amounts due under our debt
obligations were $24,701 million and $26,188 million as of March 31, 2020 and
December 31, 2019, respectively, a decrease of $1,487 million during the three
months ended March 31, 2020. The decrease was primarily driven by the debt
repayments previously discussed under "Cash Flows - Financing Activities".
Our prepayment and refinancings of debt over the last four years translate into
lower repayments of principal over the next four years, which, in turn, we
believe will permit more cash flows to be directed toward developing our core
assets, identifying new product opportunities and repaying additional debt
amounts. The mandatory scheduled principal repayments of our debt obligations as
of May 7, 2020, the date of this filing, were as follows and reflects
repurchases of our senior unsecured notes in the open market of $8 million, in
aggregate, in April 2020:
(in millions)
      2020            2021        2022        2023        2024         2025        2026        2027        2028        2029       2030        Total
$      -            $     -     $ 1,553     $ 2,443     $ 2,303     $ 10,632     $ 1,500     $ 2,250     $ 2,012     $  750     $ 1,250     $ 24,693


See Note 10, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial
Statements and "Management's Discussion and Analysis - Liquidity and Capital
Resources: Long-term Debt" for further details.
Senior Secured Credit Facilities
On June 1, 2018, the Company and certain of its subsidiaries as guarantors
entered into the "Senior Secured Credit Facilities" under the Company's Fourth
Amended and Restated Credit and Guaranty Agreement, as amended by the First
Incremental Amendment to the Restated Credit Agreement, dated as of November 27,
2018, and as further amended (the "Restated Credit

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Agreement") with a syndicate of financial institutions and investors as lenders.
The Restated Credit Agreement provides for a revolving credit facility of $1,225
million, which matures on the earlier of June 1, 2023 and the date that is 91
calendar days prior to the scheduled maturity of indebtedness for borrowed money
of the Company and Bausch Health Americas, Inc. ("BHA") in an aggregate
principal amount in excess of $1,000 million (the "2023 Revolving Credit
Facility") and term loan facilities of original principal amounts of $4,565
million and $1,500 million, maturing in June 2025 (the "June 2025 Term Loan B
Facility") and November 2025 (the "November 2025 Term Loan B Facility"),
respectively. Both the Company and BHA are borrowers under the 2023 Revolving
Credit Facility, borrowings under which may be made in U.S. dollars, Canadian
dollars or euros.
Current Description of Senior Secured Credit Facilities
Borrowings under the Senior Secured Credit Facilities in U.S. dollars bear
interest at a rate per annum equal to, at the Company's option, either: (i) a
base rate determined by reference to the highest of: (a) the prime rate (as
defined in the Restated Credit Agreement), (b) the federal funds effective rate
plus 1/2 of 1.00% or (c) the eurocurrency rate (as defined in the Restated
Credit Agreement) for a period of one month plus 1.00% (or if such eurocurrency
rate shall not be ascertainable, 1.00%) or (ii) a eurocurrency rate determined
by reference to the costs of funds for U.S. dollar deposits for the interest
period relevant to such borrowing adjusted for certain additional costs
(provided however, that the eurocurrency rate shall at no time be less than
0.00% per annum), in each case plus an applicable margin.
Borrowings under the 2023 Revolving Credit Facility in euros bear interest at a
eurocurrency rate determined by reference to the costs of funds for euro
deposits for the interest period relevant to such borrowing (provided however,
that the eurocurrency rate shall at no time be less than 0.00% per annum), plus
an applicable margin.
Borrowings under the 2023 Revolving Credit Facility in Canadian dollars bear
interest at a rate per annum equal to, at the Company's option, either: (i) a
prime rate determined by reference to the higher of: (a) the rate of interest
last quoted by The Wall Street Journal as the "Canadian Prime Rate" or, if The
Wall Street Journal ceases to quote such rate, the highest per annum interest
rate published by the Bank of Canada as its prime rate and (b) the 1 month BA
rate (as defined below) calculated daily plus 1.00% (provided however, that the
prime rate shall at no time be less than 0.00%) or (ii) the bankers' acceptance
rate for Canadian dollar deposits in the Toronto interbank market (the "BA
rate") for the interest period relevant to such borrowing (provided however,
that the BA rate shall at no time be less than 0.00% per annum), in each case
plus an applicable margin.
Subject to certain exceptions and customary baskets set forth in the Restated
Credit Agreement, the Company is required to make mandatory prepayments of the
loans under the Senior Secured Credit Facilities under certain circumstances,
including from: (i) 100% of the net cash proceeds of insurance and condemnation
proceeds for property or asset losses (subject to reinvestment rights and net
proceeds threshold), (ii) 100% of the net cash proceeds from the incurrence of
debt (other than permitted debt as described in the Restated Credit Agreement),
(iii) 50% of Excess Cash Flow (as defined in the Restated Credit Agreement)
subject to decrease based on leverage ratios and subject to a threshold amount
and (iv) 100% of net cash proceeds from asset sales (subject to reinvestment
rights). These mandatory prepayments may be used to satisfy future amortization.
The applicable interest rate margins for the June 2025 Term Loan B Facility and
the November 2025 Term Loan B Facility are 2.00% and 1.75%, respectively, with
respect to base rate and prime rate borrowings and 3.00% and 2.75%,
respectively, with respect to eurocurrency rate and BA rate borrowings.
As of March 31, 2020, the stated rates of interest on the Company's borrowings
under the June 2025 Term Loan B Facility and the November 2025 Term Loan B
Facility were 3.61% and 3.36% per annum, respectively.
The amortization rate for both the June 2025 Term Loan B Facility and the
November 2025 Term Loan B Facility is 5.00% per annum. The Company may direct
that prepayments be applied to such amortization payments in order of maturity.
As of March 31, 2020, the aggregate remaining mandatory quarterly amortization
payments for the Senior Secured Credit Facilities were $1,023 million through
November 1, 2025.
The applicable interest rate margins for borrowings under the 2023 Revolving
Credit Facility are 1.50%-2.00% with respect to base rate or prime rate
borrowings and 2.50%-3.00% with respect to eurocurrency rate or BA rate
borrowings.  As of March 31, 2020, the stated rate of interest on the 2023
Revolving Credit Facility was 3.36% per annum. As of March 31, 2020, the Company
had no outstanding borrowings, $168 million of issued and outstanding letters of
credit and remaining availability of $1,057 million under its 2023 Revolving
Credit Facility. In addition, the Company is required to pay commitment fees of
0.25%-0.50% per annum with respect to the unutilized commitments under the 2023
Revolving Credit Facility, payable quarterly in arrears. The Company also is
required to pay: (i) letter of credit fees on the maximum amount available to be
drawn under all outstanding letters of credit in an amount equal to the
applicable margin on eurocurrency rate borrowings under the 2023 Revolving
Credit Facility on a per annum basis, payable quarterly in arrears, (ii)
customary fronting fees for the issuance of letters of credit and (iii)
agency fees.

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The Restated Credit Agreement permits the incurrence of incremental credit
facility borrowings up to the greater of $1,000 million and 28.5% of
Consolidated Adjusted EBITDA (as defined in the Restated Credit Agreement),
subject to customary terms and conditions, as well as the incurrence of
additional incremental credit facility borrowings subject to a secured leverage
ratio of not greater than 3.50:1.00, and, in the case of unsecured debt, a total
leverage ratio of not greater than 6.50:1.00 or an interest coverage ratio of
not less than 2.00:1.00.
Senior Secured Notes
The Senior Secured Notes are guaranteed by each of the Company's subsidiaries
that is a guarantor under the Restated Credit Agreement and existing Senior
Unsecured Notes (together, the "Note Guarantors"). The Senior Secured Notes and
the guarantees related thereto are senior obligations and are secured, subject
to permitted liens and certain other exceptions, by the same first priority
liens that secure the Company's obligations under the Restated Credit Agreement
under the terms of the indentures governing the Senior Secured Notes.
The Senior Secured Notes and the guarantees rank equally in right of repayment
with all of the Company's and Note Guarantors' respective existing and future
unsubordinated indebtedness and senior to the Company's and Note Guarantors'
respective future subordinated indebtedness. The Senior Secured Notes and the
guarantees related thereto are effectively pari passu with the Company's and the
Note Guarantors' respective existing and future indebtedness secured by a first
priority lien on the collateral securing the Senior Secured Notes and
effectively senior to the Company's and the Note Guarantors' respective existing
and future indebtedness that is unsecured, including the existing Senior
Unsecured Notes, or that is secured by junior liens, in each case to the extent
of the value of the collateral. In addition, the Senior Secured Notes are
structurally subordinated to: (i) all liabilities of any of the Company's
subsidiaries that do not guarantee the Senior Secured Notes and (ii) any of the
Company's debt that is secured by assets that are not collateral.
Upon the occurrence of a change in control (as defined in the indentures
governing the Senior Secured Notes), unless the Company has exercised its right
to redeem all of the notes of a series, holders of the Senior Secured Notes may
require the Company to repurchase such holder's notes, in whole or in part, at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest.
Senior Unsecured Notes
The Senior Unsecured Notes issued by the Company are the Company's senior
unsecured obligations and are jointly and severally guaranteed on a senior
unsecured basis by each of its subsidiaries that is a guarantor under the Senior
Secured Credit Facilities. The Senior Unsecured Notes issued by BHA are senior
unsecured obligations of BHA and are jointly and severally guaranteed on a
senior unsecured basis by the Company and each of its subsidiaries (other than
BHA) that is a guarantor under the Senior Secured Credit Facilities. Future
subsidiaries of the Company and BHA, if any, may be required to guarantee the
Senior Unsecured Notes. On a non-consolidated basis, the non-guarantor
subsidiaries had total assets of $2,562 million and total liabilities of $1,034
million as of March 31, 2020, and revenues of $329 million and operating income
of $21 million for the three months ended March 31, 2020.
If the Company experiences a change in control, the Company may be required to
make an offer to repurchase each series of Senior Unsecured Notes, in whole or
in part, at a purchase price equal to 101% of the aggregate principal amount of
the Senior Unsecured Notes repurchased, plus accrued and unpaid interest.
Covenant Compliance
Any inability to comply with the covenants under the terms of our Restated
Credit Agreement, Senior Secured Notes indentures or Senior Unsecured Notes
indentures could lead to a default or an event of default for which we may need
to seek relief from our lenders and noteholders in order to waive the associated
default or event of default and avoid a potential acceleration of the related
indebtedness or cross-default or cross-acceleration to other debt. There can be
no assurance that we would be able to obtain such relief on commercially
reasonable terms or otherwise and we may be required to incur significant
additional costs. In addition, the lenders under our Restated Credit Agreement,
holders of our Senior Secured Notes and holders of our Senior Unsecured Notes
may impose additional operating and financial restrictions on us as a condition
to granting any such waiver.
During 2017 through the three months ended March 31, 2020, the Company completed
several actions which included using cash flows from operations to repay debt
and refinancing debt with near-term maturities. These actions have reduced the
Company's debt balance and positively affected the Company's ability to comply
with the financial maintenance covenant. As of March 31, 2020, the Company was
in compliance with its financial maintenance covenant related to its outstanding
debt. The Company, based on its current forecast as adjusted for the potential
impacts of the COVID-19 pandemic, expects to remain in compliance with the
financial maintenance covenant and meet its debt service obligations for at
least the twelve months following the date of issuance of this Form 10-Q.

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The Company continues to take steps to improve its operating results to ensure
continual compliance with its financial maintenance covenant and take other
actions to reduce its debt levels to align with the Company's long-term
strategy. The Company may consider taking other actions, including divesting
other businesses, refinancing debt and issuing equity or equity-linked
securities as deemed appropriate, to provide additional coverage in complying
with the financial maintenance covenant and meeting its debt service
obligations.
Weighted Average Interest Rate
The weighted average stated rate of interest of the Company's outstanding debt
as of March 31, 2020 and December 31, 2019 was 6.01% and 6.21%, respectively.
See Note 10, "FINANCING ARRANGEMENTS" to our unaudited interim Consolidated
Financial Statements for further details.
Credit Ratings
As of May 7, 2020, the credit ratings and outlook from Moody's, Standard &
Poor's and Fitch for certain outstanding obligations of the Company were as
follows:
                                                             Senior
                                       Senior Secured       Unsecured
  Rating Agency     Corporate Rating       Rating            Rating            Outlook
    Moody's                B2                Ba2               B3              Stable
Standard & Poor's          B+                BB                 B              Stable
      Fitch                B                 BB                 B              Stable


Any downgrade in our corporate credit ratings or other credit ratings may
increase our cost of borrowing and may negatively impact our ability to raise
additional debt capital.
Future Cash Requirements
A substantial portion of our cash requirements for the remainder of 2020 are for
debt service. Our other future cash requirements relate to working capital,
capital expenditures, business development transactions (contingent
consideration), restructuring and integration, benefit obligations and
litigation settlements. In addition, we may use cash to enter into licensing
arrangements and/or to make strategic acquisitions.
In addition to our working capital requirements, as of March 31, 2020, we expect
our primary cash requirements during the remainder of 2020 to be as follows:
•   Debt service-We expect to make principal and interest payments of

approximately $1,164 million during the remainder of 2020. As a result of

prepayments and a series of refinancing transactions we have reduced and

extended the maturities of a substantial portion of our long-term debt. As of

the date of this filing, there are no scheduled principal repayments of our

debt obligations through 2021. We may elect to make additional principal

payments under certain circumstances. Further, in the ordinary course of

business, we may borrow and repay amounts under our 2023 Revolving Credit

Facility to meet business needs;

• IT Infrastructure Investment-We expect to make payments of approximately $35

million for licensing, maintenance and other costs associated with our IT

infrastructure improvement projects during the remainder of 2020;

• Capital expenditures-We expect to make payments of approximately $200 million

for property, plant and equipment during the remainder of 2020;

• Contingent consideration payments-We expect to make contingent consideration

and other approval/sales-based milestone payments of approximately $30

million during the remainder of 2020;

• Restructuring and integration payments-We expect to make payments of

approximately $6 million during the remainder of 2020 for employee separation

costs and lease termination obligations associated with restructuring and

integration actions we have taken through March 31, 2020; and

• Benefit obligations-We expect to make payments under our pension and

postretirement obligations of approximately $13 million during the remainder

of 2020.

• U.S. Securities Litigation Settlement-As more fully discussed in Note 18,

"LEGAL PROCEEDINGS" to our unaudited interim Consolidated Financial

Statements, in December 2019, we announced that we had agreed to resolve the

U.S. Securities Litigation for $1,210 million, subject to final court

approval. Once approved by the court, the settlement will resolve and

discharge all claims against the Company in the class action. As part of the

settlement, the Company and the other settling defendants admitted no

liability as to the claims against it and deny all allegations of wrongdoing.

This settlement, once approved by the court, will resolve the most

significant of the Company's remaining legacy legal matters and eliminate a

material uncertainty regarding our Company. As of March 31, 2020, Restricted

cash includes $1,010 million of payments into an escrow fund under the terms

    of a settlement agreement regarding certain U.S. securities litigation,
    subject to final court



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approval. On January 27, 2020 the court preliminarily approved the settlement
and scheduled the final settlement approval hearing for May 27, 2020. The
balance of the settlement will be paid in accordance with the payment schedule
outlined in the settlement agreement.
We continue to evaluate opportunities to improve our operating results and may
initiate additional cost savings programs to streamline our operations and
eliminate redundant processes and expenses. These cost savings programs may
include, but are not limited to: (i) reducing headcount, (ii) eliminating real
estate costs associated with unused or under-utilized facilities and (iii)
implementing contribution margin improvement and other cost reduction
initiatives. The expenses associated with the implementation of these cost
savings programs could be material and may impact our cash flows.
In the ordinary course of business, the Company is involved in litigation,
claims, government inquiries, investigations, charges and proceedings. See Note
18, "LEGAL PROCEEDINGS" to our unaudited interim Consolidated Financial
Statements. Our ability to successfully defend the Company against pending and
future litigation may impact future cash flows.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We have no off-balance sheet arrangements that have a material current effect or
that are reasonably likely to have a material effect on our results of
operations, financial condition, capital expenditures, liquidity, or capital
resources. The following table summarizes our contractual obligations related to
our long-term debt, including interest, as of March 31, 2020:
                                            Remainder of                                      2024 and
(in millions)                   Total           2020           2021        2022 and 2023        2025         Thereafter
Long-term debt obligations,
including interest            $ 33,419     $      1,164     $  1,472     $         6,774     $  15,122     $      8,887


There have been no other material changes to the contractual obligations
disclosed in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Off-Balance Sheet Arrangements and
Contractual Obligations" included in our Annual Report on Form 10-K for the year
ended December 31, 2019, filed with the SEC on February 19, 2020.
OUTSTANDING SHARE DATA
Our common shares trade on the New York Stock Exchange and the Toronto Stock
Exchange under the symbol "BHC".
At April 30, 2020, we had 354,727,444 issued and outstanding common shares. In
addition, as of April 30, 2020, we had outstanding 9,191,569 stock options and
6,227,030 time-based restricted share units that each represent the right of a
holder to receive one of the Company's common shares, and 2,287,525
performance-based restricted share units that represent the right of a holder to
receive a number of the Company's common shares up to a specified maximum. A
maximum of 4,300,999 common shares could be issued upon vesting of the
performance-based restricted share units outstanding.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies and estimates are those policies and estimates that
are most important and material to the preparation of our Consolidated Financial
Statements, and which require management's most subjective and complex judgment
due to the need to select policies from among alternatives available, and to
make estimates about matters that are inherently uncertain. Management has
reassessed the critical accounting policies and estimates as disclosed in Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Policies and Estimates" included in our Annual
Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on
February 19, 2020, and determined that there were no significant changes in our
critical accounting policies in the three months ended March 31, 2020, except
for: (i) estimates and assumptions regarding the nature, timing and extent that
the COVID-19 pandemic will possibly have on the Company's operations and cash
flows as disclosed in Note 2, "SIGNIFICANT ACCOUNTING POLICIES" to our unaudited
interim Consolidated Financial Statements, (ii) the impact that the COVID-19
pandemic has on the Company's assessment of goodwill as disclosed in Note 8,
"INTANGIBLE ASSETS AND GOODWILL" to our unaudited interim Consolidated Financial
Statements and (iii) recently adopted accounting guidance as discussed in Note
2, "SIGNIFICANT ACCOUNTING POLICIES" to our unaudited interim Consolidated
Financial Statements.
NEW ACCOUNTING STANDARDS
Adoption of New Accounting Guidance
Information regarding recently issued accounting guidance is contained in Note
2, "SIGNIFICANT ACCOUNTING POLICIES" of notes to the unaudited interim
Consolidated Financial Statements.

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FORWARD-LOOKING STATEMENTS
Caution regarding forward-looking information and statements and "Safe-Harbor"
statements under the U.S. Private Securities Litigation Reform Act of 1995 and
applicable Canadian securities laws:
To the extent any statements made in this Form 10-Q contain information that is
not historical, these statements are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and may be
forward-looking information within the meaning defined under applicable Canadian
securities laws (collectively, "forward-looking statements").
These forward-looking statements relate to, among other things: our business
strategy, business plans and prospects and forecasts and changes thereto;
product pipeline, prospective products and product approvals, product
development and future performance and results of current and anticipated
products; anticipated revenues for our products; anticipated growth in our Ortho
Dermatologics business; expected R&D and marketing spend; our expected primary
cash and working capital requirements for 2020 and beyond; the Company's plans
for continued improvement in operational efficiency and the anticipated impact
of such plans; our liquidity and our ability to satisfy our debt maturities as
they become due; our ability to reduce debt levels; our ability to meet the
financial and other covenants contained in our Fourth Amended and Restated
Credit and Guaranty Agreement (the "Restated Credit Agreement"), and senior
notes indentures; the impact of our distribution, fulfillment and other
third-party arrangements; proposed pricing actions; exposure to foreign currency
exchange rate changes and interest rate changes; the outcome of contingencies,
such as litigation, subpoenas, investigations, reviews, audits and regulatory
proceedings; the anticipated impact of the adoption of new accounting standards;
general market conditions; our expectations regarding our financial performance,
including revenues, expenses, gross margins and income taxes; our impairment
assessments, including the assumptions used therein and the results thereof; and
the anticipated impact of the evolving COVID-19 pandemic and related responses
from governments and private sector participants on the Company, its supply
chain, third-party suppliers, project development timelines, costs, revenue,
margins, liquidity and financial condition and the Company's planned actions and
responses to this pandemic.
Forward-looking statements can generally be identified by the use of words such
as "believe", "anticipate", "expect", "intend", "estimate", "plan", "continue",
"will", "may", "could", "would", "should", "target", "potential", "opportunity",
"designed", "create", "predict", "project", "forecast", "seek", "strive",
"ongoing" or "increase" and variations or other similar expressions. In
addition, any statements that refer to expectations, intentions, projections or
other characterizations of future events or circumstances are forward-looking
statements. These forward-looking statements may not be appropriate for other
purposes. Although we have previously indicated certain of these statements set
out herein, all of the statements in this Form 10-Q that contain forward-looking
statements are qualified by these cautionary statements. These statements are
based upon the current expectations and beliefs of management. Although we
believe that the expectations reflected in such forward-looking statements are
reasonable, such statements involve risks and uncertainties, and undue reliance
should not be placed on such statements. Certain material factors or assumptions
are applied in making such forward-looking statements, including, but not
limited to, factors and assumptions regarding the items previously outlined,
those factors, risks and uncertainties outlined below and the assumption that
none of these factors, risks and uncertainties will cause actual results or
events to differ materially from those described in such forward-looking
statements. Actual results may differ materially from those expressed or implied
in such statements. Important factors, risks and uncertainties that could cause
actual results to differ materially from these expectations include, among other
things, the following:
•      the risks and uncertainties caused by or relating to the evolving COVID-19

pandemic, the fear of that pandemic, the rapidly evolving reaction of

governments, private sector participants and the public to that pandemic

       and the potential effects and economic impact of the pandemic and the
       reaction to it, the severity, duration and future impact of which are

highly uncertain and cannot be predicted, and which may have a significant

adverse impact on the Company, including but not limited to its supply

chain, third-party suppliers, project development timelines, employee

       base, liquidity, stock price, financial condition and costs (which may
       increase) and revenue and margins (both of which may decrease);

• the expense, timing and outcome of legal and governmental proceedings,

investigations and information requests relating to, among other matters,

our past distribution, marketing, pricing, disclosure and accounting

practices (including with respect to our former relationship with Philidor

Rx Services, LLC ("Philidor")), including pending investigations by the
       U.S. Attorney's Office for the District of Massachusetts and the U.S.
       Attorney's Office for the Southern District of New York, the pending

investigations by the U.S. Securities and Exchange Commission (the "SEC")

of the Company, the investigation order issued by the Company from the

Autorité des marchés financiers (the "AMF") (the Company's principal

       securities regulator in Canada), a number of pending securities
       litigations (including certain pending opt-out actions in the U.S.
       (related to the recently settled securities class action, (which is
       subject to final court approval, and remains subject to the risk and

uncertainty that the U.S. District Court for the District of New Jersey

may not approve the $1,210 million settlement agreement)) and the pending

class action litigation in Canada and related opt-out actions) and

purported class actions under the federal RICO statute and other claims,

       investigations or proceedings that may be initiated or that may be
       asserted;



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•      potential additional litigation and regulatory investigations (and any
       costs, expenses, use of resources, diversion of management time and
       efforts, liability and damages that may result therefrom), negative

publicity and reputational harm on our Company, products and business that

may result from the past and ongoing public scrutiny of our past

distribution, marketing, pricing, disclosure and accounting practices and

from our former relationship with Philidor;

• the past and ongoing scrutiny of our legacy business practices, including

with respect to pricing (including the investigations by the U.S.

Attorney's Offices for the District of Massachusetts and the Southern

District of New York), and any pricing controls or price adjustments that

may be sought or imposed on our products as a result thereof;

• pricing decisions that we have implemented, or may in the future elect to

implement, such as the Patient Access and Pricing Committee's commitment

that the average annual price increase for our branded prescription

pharmaceutical products will be set at no greater than single digits, or

any future pricing actions we may take following review by our Patient

Access and Pricing Committee (which is responsible for the pricing of our

drugs);

• legislative or policy efforts, including those that may be introduced and

passed by the U.S. Congress, designed to reduce patient out-of-pocket

       costs for medicines, which could result in new mandatory rebates and
       discounts or other pricing restrictions, controls or regulations
       (including mandatory price reductions);

• ongoing oversight and review of our products and facilities by regulatory

and governmental agencies, including periodic audits by the U.S. Food and

Drug Administration (the "FDA") and the results thereof;


•      actions by the FDA or other regulatory authorities with respect to our
       products or facilities;

• our substantial debt (and potential additional future indebtedness) and

       current and future debt service obligations, our ability to reduce our
       outstanding debt levels and the resulting impact on our financial
       condition, cash flows and results of operations;


•      our ability to meet the financial and other covenants contained in our

Restated Credit Agreement, senior notes indentures, 2023 Revolving Credit

Facility and other current or future debt agreements and the limitations,

restrictions and prohibitions such covenants impose or may impose on the

way we conduct our business, including prohibitions on incurring

additional debt if certain financial covenants are not met, limitations on

       the amount of additional obligations we are able to incur pursuant to
       other covenants, our ability to draw under our 2023 Revolving Credit
       Facility and restrictions on our ability to make certain investments and
       other restricted payments;

• any default under the terms of our senior notes indentures or Restated

       Credit Agreement and our ability, if any, to cure or obtain waivers of
       such default;


•      any delay in the filing of any future financial statements or other

filings and any default under the terms of our senior notes indentures or

Restated Credit Agreement as a result of such delays;

• any downgrade by rating agencies in our credit ratings, which may impact,

among other things, our ability to raise debt and the cost of capital for

additional debt issuances;

• any reductions in, or changes in the assumptions used in, our forecasts

       for fiscal year 2020 or beyond, including as a result of the impacts of
       COVID-19 on our business and operations, which could lead to, among other
       things: (i) a failure to meet the financial and/or other covenants

contained in our Restated Credit Agreement and/or senior notes indentures

and/or (ii) impairment in the goodwill associated with certain of our

reporting units or impairment charges related to certain of our products

or other intangible assets, which impairments could be material;

• changes in the assumptions used in connection with our impairment analyses

or assessments, which would lead to a change in such impairment analyses

and assessments and which could result in an impairment in the goodwill

associated with any of our reporting units or impairment charges related

       to certain of our products or other intangible assets;


•      the uncertainties associated with the acquisition and launch of new

products (such as our recently launched Bryhali®, Duobrii® and Ocuvite®

Eye Performance products), including, but not limited to, our ability to

       provide the time, resources, expertise and costs required for the
       commercial launch of new products, the acceptance and demand for new
       pharmaceutical products, and the impact of competitive products
       and pricing, which could lead to material impairment charges;

• our ability or inability to extend the profitable life of our products,

       including through line extensions and other life-cycle programs;


•      our ability to retain, motivate and recruit executives and other
       key employees;



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• our ability to implement effective succession planning for our executives

       and key employees;


•      factors impacting our ability to achieve anticipated growth in our Ortho
       Dermatologics business, including the success of recently launched

products (such as Bryhali® and Duobrii®), the ability to successfully

implement and operate our new cash-pay prescription program for certain of

our Ortho Dermatologics branded products, and the ability of such program

to achieve the anticipated goals respecting patient access and

fulfillment, the approval of pending and pipeline products (and the timing

of such approvals), expected geographic expansion, changes in estimates on

market potential for dermatology products and continued investment in and

       success of our sales force;


•      factors impacting our ability to achieve anticipated revenues for our
       products, including changes in anticipated marketing spend on such
       products and launch of competing products;

• the challenges and difficulties associated with managing a large complex

business, which has, in the past, grown rapidly;

• our ability to compete against companies that are larger and have greater

financial, technical and human resources than we do, as well as other

competitive factors, such as technological advances achieved, patents

obtained and new products introduced by our competitors;

• our ability to effectively operate and grow our businesses in light of the

challenges that the Company has faced and market conditions, including

with respect to its substantial debt, pending investigations and legal

proceedings, scrutiny of our past pricing and other practices, limitations

on the way we conduct business imposed by the covenants contained in our

Restated Credit Agreement, senior notes indentures and the agreements

       governing our other indebtedness, and the impacts of the COVID-19
       pandemic;

• the extent to which our products are reimbursed by government authorities,

       pharmacy benefit managers ("PBMs") and other third-party payors; the
       impact our distribution, pricing and other practices (including as it
       relates to our current relationship with Walgreen Co. ("Walgreens")) may
       have on the decisions of such government authorities, PBMs and other

third-party payors to reimburse our products; and the impact of obtaining

or maintaining such reimbursement on the price and sales of our products;

• the inclusion of our products on formularies or our ability to achieve

       favorable formulary status, as well as the impact on the price and sales
       of our products in connection therewith;

• the consolidation of wholesalers, retail drug chains and other customer

groups and the impact of such industry consolidation on our business;

•      our eligibility for benefits under tax treaties and the continued
       availability of low effective tax rates for the business profits of
       certain of our subsidiaries;

• the actions of our third-party partners or service providers of research,

development, manufacturing, marketing, distribution or other services,

including their compliance with applicable laws and contracts, which

actions may be beyond our control or influence, and the impact of such

actions on our Company, including the impact to the Company of our former

       relationship with Philidor and any alleged legal or contractual
       non-compliance by Philidor;

• the risks associated with the international scope of our operations,

including our presence in emerging markets and the challenges we face when

entering and operating in new and different geographic markets (including

the challenges created by new and different regulatory regimes in such

countries and the need to comply with applicable anti-bribery and economic

sanctions laws and regulations);

• adverse global economic conditions and credit markets and foreign currency

       exchange uncertainty and volatility in certain of the countries in which
       we do business;

• the impact of the United States-Mexico-Canada Agreement ("USMCA") and any

potential changes to other trade agreements;

• the final outcome and impact of Brexit negotiations;

• the trade conflict between the United States and China;

• our ability to obtain, maintain and license sufficient intellectual

       property rights over our products and enforce and defend against
       challenges to such intellectual property (such as in connection with the
       recent filing by Norwich Pharmaceuticals Inc. ("Norwich") of its

Abbreviated New Drug Application ("ANDA") for Xifaxan® (rifaximin) 550 mg

       tablets and the Company's related lawsuit filed against Norwich in
       connection therewith);



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•      the introduction of generic, biosimilar or other competitors of our
       branded products and other products, including the introduction of

products that compete against our products that do not have patent or data

exclusivity rights;

• our ability to identify, finance, acquire, close and integrate acquisition

targets successfully and on a timely basis and the difficulties,

challenges, time and resources associated with the integration of acquired

companies, businesses and products;

• any additional divestitures of our assets or businesses and our ability to

successfully complete any such divestitures on commercially reasonable

       terms and on a timely basis, or at all, and the impact of any such
       divestitures on our Company, including the reduction in the size or scope
       of our business or market share, loss of revenue, any loss on sale,
       including any resultant impairments of goodwill or other assets, or any

adverse tax consequences suffered as a result of any such divestitures;

• the expense, timing and outcome of pending or future legal and

governmental proceedings, arbitrations, investigations, subpoenas, tax and

other regulatory audits, examinations, reviews and regulatory proceedings

       against us or relating to us and settlements thereof;


•      our ability to negotiate the terms of or obtain court approval for the
       settlement of certain legal and regulatory proceedings;

• our ability to obtain components, raw materials or finished products

supplied by third parties (some of which may be single-sourced) and other

manufacturing and related supply difficulties, interruptions and delays;

•      the disruption of delivery of our products and the routine flow of
       manufactured goods;

• economic factors over which the Company has no control, including changes

in inflation, interest rates, foreign currency rates, and the potential

effect of such factors on revenues, expenses and resulting margins;

• interest rate risks associated with our floating rate debt borrowings;

• our ability to effectively distribute our products and the effectiveness

and success of our distribution arrangements, including the impact of our

       arrangements with Walgreens;


•      our ability to effectively promote our own products and those of our
       co-promotion partners;

• the success of our fulfillment arrangements with Walgreens, including

market acceptance of, or market reaction to, such arrangements (including

by customers, doctors, patients, PBMs, third-party payors and governmental

       agencies), and the continued compliance of such arrangements with
       applicable laws;

• the acceptance and success of our new cash-pay prescription program for

certain of our Ortho Dermatologics branded products;

• our ability to secure and maintain third-party research, development,

manufacturing, licensing, marketing or distribution arrangements;

• the risk that our products could cause, or be alleged to cause, personal

injury and adverse effects, leading to potential lawsuits, product

liability claims and damages and/or recalls or withdrawals of products

from the market;

• the mandatory or voluntary recall or withdrawal of our products from the

market and the costs associated therewith;

• the availability of, and our ability to obtain and maintain, adequate

insurance coverage and/or our ability to cover or insure against the total

amount of the claims and liabilities we face, whether through third-party

insurance or self-insurance;

• the difficulty in predicting the expense, timing and outcome within our

legal and regulatory environment, including with respect to approvals by

the FDA, Health Canada and similar agencies in other countries, legal and

regulatory proceedings and settlements thereof, the protection afforded by

our patents and other intellectual and proprietary property, successful

       generic challenges to our products and infringement or alleged
       infringement of the intellectual property of others;


•      the results of continuing safety and efficacy studies by industry and
       government agencies;

• the success of preclinical and clinical trials for our drug development

pipeline or delays in clinical trials that adversely impact the timely

       commercialization of our pipeline products, as well as other factors
       impacting the commercial success of our products, which could lead to
       material impairment charges;


•      the results of management reviews of our research and development

portfolio (including following the receipt of clinical results or feedback

from the FDA or other regulatory authorities), which could result in

       terminations of specific projects which, in turn, could lead to material
       impairment charges;



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• the seasonality of sales of certain of our products;

• declines in the pricing and sales volume of certain of our products that

       are distributed or marketed by third parties, over which we have no or
       limited control;


•      compliance by the Company or our third-party partners and service

providers (over whom we may have limited influence), or the failure of our

Company or these third parties to comply, with health care "fraud and

abuse" laws and other extensive regulation of our marketing, promotional

and business practices (including with respect to pricing), worldwide

       anti-bribery laws (including the U.S. Foreign Corrupt Practices Act and
       the Canadian Corruption of Foreign Public Officials Act), worldwide
       economic sanctions and/or export laws, worldwide environmental laws and
       regulation and privacy and security regulations;

• the impacts of the Patient Protection and Affordable Care Act, as amended

by the Health Care and Education Reconciliation Act of 2010 (the "Health

Care Reform Act") and potential amendment thereof and other legislative

and regulatory health care reforms in the countries in which we operate,

including with respect to recent government inquiries on pricing;

• the impact of any changes in or reforms to the legislation, laws, rules,

regulation and guidance that apply to the Company and its business and

products or the enactment of any new or proposed legislation, laws, rules,

       regulations or guidance that will impact or apply to the Company or its
       businesses or products;

• the impact of changes in federal laws and policy under consideration by

       the Trump administration and Congress, including the effect that such
       changes will have on fiscal and tax policies, the potential revision of
       all or portions of the Health Care Reform Act, international trade

agreements and policies and policy efforts designed to reduce patient

out-of-pocket costs for medicines (which could result in new mandatory

rebates and discounts or other pricing restrictions);

• illegal distribution or sale of counterfeit versions of our products;

• interruptions, breakdowns or breaches in our information technology

systems; and

• risks in Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the

year ended December 31, 2019, filed on February 19, 2020, risks under 1A.

"Risk Factors" of Part II of this Form 10-Q and risks detailed from time

to time in our other filings with the SEC and the Canadian Securities

Administrators (the "CSA"), as well as our ability to anticipate and

manage the risks associated with the foregoing.

Additional information about these factors and about the material factors or
assumptions underlying such forward-looking statements may be found in our
Annual Report on Form 10-K for the year ended December 31, 2019, filed on
February 19, 2020, under Item 1A. "Risk Factors", under 1A. "Risk Factors" of
Part II of this Form 10-Q and in the Company's other filings with the SEC and
CSA. When relying on our forward-looking statements to make decisions with
respect to the Company, investors and others should carefully consider the
foregoing factors and other uncertainties and potential events. These
forward-looking statements speak only as of the date made. We undertake no
obligation to update or revise any of these forward-looking statements to
reflect events or circumstances after the date of this Form 10-Q or to reflect
actual outcomes, except as required by law. We caution that, as it is not
possible to predict or identify all relevant factors that may impact
forward-looking statements, the foregoing list of important factors that may
affect future results is not exhaustive and should not be considered a complete
statement of all potential risks and uncertainties.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Other than as indicated below under "- Interest Rate Risk", and under 1A. "Risk
Factors" of Part II of this Form 10-Q, there have been no material changes to
our exposures to market risks as disclosed in Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Quantitative and
Qualitative Disclosures About Market Risks" included in our Annual Report on
Form 10-K for the year ended December 31, 2019, filed with the SEC on
February 19, 2020.
Interest Rate Risk
As of March 31, 2020, we had $18,005 million and $5,041 million principal amount
of issued fixed rate debt and variable rate debt, respectively, that requires
U.S. dollar repayment, as well as €1,500 million principal amount of issued
fixed rate debt that requires repayment in euros. The estimated fair value of
our issued fixed rate debt as of March 31, 2020, including the foreign
currency-denominated debt, was $19,654 million. If interest rates were to
increase by 100 basis-points, the fair value of our issued fixed rate debt would
decrease by approximately $755 million. If interest rates were to decrease by
100 basis-points, the fair value of our issued fixed rate debt would increase by
approximately $667 million. We are subject to interest rate risk on our variable
rate debt as changes in interest rates could adversely affect earnings and cash
flows. A 100 basis-points increase in interest rates,

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based on 3-month LIBOR, would have an annualized pre-tax effect of approximately
$50 million in our Consolidated Statements of Operations and Cash Flows, based
on current outstanding borrowings and effective interest rates on our variable
rate debt. While our variable-rate debt may impact earnings and cash flows as
interest rates change, it is not subject to changes in fair value.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer ("CEO")
and Chief Financial Officer ("CFO"), has evaluated the effectiveness of our
disclosure controls and procedures as of March 31, 2020. Based on this
evaluation, our CEO and CFO concluded that our disclosure controls and
procedures were effective as of March 31, 2020.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal controls over financial
reporting that occurred during the three months ended March 31, 2020 that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.

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