Executive Summary / Key Takeaways

• Bausch Health Companies Inc. ($BHC) is undergoing a significant transformation, strategically deleveraging its substantial debt while investing in innovation and optimizing its diversified pharmaceutical and medical device portfolio, including its 88% stake in Bausch + Lomb.
• The company reported its tenth consecutive quarter of year-over-year revenue and adjusted EBITDA growth for Bausch Health excluding Bausch + Lomb in Q3 2025, driven by strong performance in Salix (Xifaxan) and Solta Medical, leading to a raised full-year 2025 guidance across all key financial metrics.
• A major $7.9 billion debt refinancing in April 2025 and subsequent debt reductions have significantly extended maturities, providing crucial financial flexibility to manage upcoming patent expirations and strategic investments.
• Key pipeline assets like RED-C (rifaximin SSD) for hepatic encephalopathy prevention and Larsucosterol for alcohol-associated hepatitis (acquired via DURECT Corporation ) represent substantial future growth opportunities, leveraging Bausch Health's hepatology expertise.
• Despite ongoing challenges from Xifaxan's inclusion in Medicare price negotiations for 2027 and future generic competition, management anticipates that average EBITDA for 2026-2027 will not materially differ from 2025, underscoring confidence in mitigation strategies and portfolio resilience.

A New Chapter: Bausch Health's Strategic Evolution

Bausch Health Companies Inc. is a global, diversified specialty pharmaceutical and medical device company, operating primarily in gastroenterology, hepatology, neurology, and dermatology. Through its significant 88% ownership of Bausch + Lomb Corporation , it also maintains a strong presence in eye health. The company's journey has been marked by a strategic pivot from its past as Valeant Pharmaceuticals International, Inc., culminating in a name change in July 2018 and a concerted effort to reshape its business model. This transformation is centered on enhancing the value of its operational assets, unlocking the full potential of its Bausch + Lomb equity stake, and aggressively optimizing its capital structure.

A pivotal strategic shift began in August 2020 with the announcement of plans to separate the Bausch + Lomb eye health business into an independent publicly traded entity. This move, which saw an initial public offering (IPO) of Bausch + Lomb in May 2022, aims to create two distinct companies, each better positioned to focus on its core strengths, drive growth, and manage capital more effectively. The full separation, however, remains contingent on achieving targeted debt leverage ratios and securing necessary approvals, including considerations related to ongoing Xifaxan litigation.

The pharmaceutical and medical device industries are dynamic, characterized by stringent regulatory environments, high research and development (R&D) costs, and intense competition. Broad industry trends, such as the increasing adoption of artificial intelligence (AI) in drug discovery and sales optimization, and evolving healthcare reforms like the Inflation Reduction Act (IRA) in the U.S., significantly influence market dynamics. Bausch Health's strategy is to navigate these complexities through disciplined execution, targeted innovation, and a relentless focus on operational efficiency.

Technological Edge and Innovation Pipeline

Bausch Health's competitive positioning is increasingly underpinned by its differentiated technologies and a robust R&D pipeline designed to address unmet medical needs and enhance existing product performance.

In its Salix segment, the company leverages an AI-driven customer insights engine for its flagship product, Xifaxan. This technology has demonstrably improved sales force effectiveness, enabling representatives to deliver "20% to 30% more calls than we did 18 months ago and to the right targets" . This operational enhancement has directly translated into patient growth, with 71,000 new patients starting Xifaxan in Q3 2025, marking a 14% increase over the prior year, and 196,000 new patients prescribed Xifaxan year-to-date . This technological application provides a tangible competitive advantage by optimizing resource allocation and patient outreach.

The Solta Medical segment, a global leader in aesthetic medical devices, showcases advanced technologies like Thermage FLX, a radiofrequency device for non-invasive skin tightening and contouring. This technology has achieved significant milestones, including surpassing "5 million skin tightening and smoothing treatments worldwide" and reaching a "1,000 unit installed base milestone" in Korea . The Clear + Brilliant Touch laser and Fraxel FTX fractionated laser for skin resurfacing further bolster Solta's portfolio, with Fraxel FTX launching in the U.S. in April 2025 . These devices offer quantifiable benefits in aesthetic outcomes and contribute to Solta's durable business model, where consumables generate over 75% of revenue.

Bausch Health's commitment to innovation extends to its R&D pipeline, with several promising initiatives:

• RED-C Program (rifaximin SSD): This program involves two global Phase 3 studies for an amorphous solid soluble dispersion (SSD) formulation of rifaximin, known as rifaximin SSD-40IR. It is designed to "enhance gastrointestinal solubility while minimizing systemic exposure, potentially improving efficacy and safety" . The studies aim to delay the first occurrence of overt hepatic encephalopathy (OHE) in patients with early decompensated liver cirrhosis, a patient population estimated to be "at least 3 times larger than the OHE population that Xifaxan serves today" . Top-line results for both studies are expected by early 2026 .
• Larsucosterol: Acquired through the DURECT Corporation acquisition in September 2025 for $84 million, Larsucosterol is a "novel epigenetic modulator with FDA Breakthrough Therapy designation for treatment of alcohol-associated hepatitis (AH)" . This acquisition is particularly strategic as "currently, there are no approved therapies indicated to treat AH" , addressing a significant unmet medical need. A registrational Phase 3 program is planned to commence in early 2026 .
• GMRx2: Through an exclusive licensing agreement with George Medicines in December 2024, Bausch Health gained rights to GMRx2, a "proprietary single-pill combination of three classes of anti-hypertensive medicines" . This innovative formulation has the "potential to be the only triple combination approved for the initial treatment of hypertension" in Canada, Mexico, Columbia, and Central America.

These technological advancements and pipeline developments are critical to Bausch Health's long-term growth strategy. They aim to create new revenue streams, extend the lifecycle of existing franchises, and strengthen the company's competitive moat by offering differentiated products and improved patient outcomes.

Financial Performance and Liquidity Strengthening

Bausch Health has demonstrated consistent operational momentum, reporting its tenth consecutive quarter of year-over-year revenue and adjusted EBITDA growth for Bausch Health excluding Bausch + Lomb in Q3 2025 . Consolidated revenues for the three months ended September 30, 2025, reached $2.681 billion, a 7% increase on a reported basis and 5% organically compared to Q3 2024 . This growth was primarily fueled by higher volumes, improved net realized pricing, and favorable foreign currency impacts across the Bausch + Lomb (BLCO), Salix, and Solta Medical segments .

Operating income for Q3 2025 saw a substantial increase of $301 million, driven by a $122 million increase in contribution (product sales revenue less cost of goods sold, excluding amortization and impairments of intangible assets) and a $145 million decrease in "Other expense, net" due to lower legal provisions and acquisition-related contingent consideration . Adjusted EBITDA attributable to Bausch Health was $986 million, an 8% increase year-over-year, or an impressive 18% increase excluding an $81 million charge for acquired in-process R&D related to the DURECT Corporation (DRRX) acquisition .

For the nine months ended September 30, 2025, consolidated revenues grew 6% to $7.470 billion, with operating income rising by $351 million to $1.339 billion . Net income attributable to Bausch Health Companies Inc. for this period was $269 million, a significant improvement from a net loss of $139 million in the prior year . This financial uplift was achieved despite a $156 million increase in interest expense, primarily due to refinancing activities and higher effective interest rates .

The company's liquidity profile has seen substantial improvements. In April 2025, Bausch Health executed a major $7.9 billion refinancing transaction, extending approximately $6.87 billion in aggregate debt maturities from 2025-2028 to 2030-2032 . This strategic move provides critical financial flexibility, allowing the company to focus on growth initiatives rather than near-term debt obligations. Further deleveraging efforts include the repurchase and retirement of $602 million of 9.25% Senior Unsecured Notes in August 2025 and the termination of the $300 million AR Credit Facility in October 2025 .

As of September 30, 2025, the company held $1.308 billion in cash and cash equivalents .

Outlook and Strategic Trajectory

Bausch Health has raised its full-year 2025 guidance for Bausch Health excluding Bausch + Lomb, reflecting confidence in its operational performance. Revenue is now projected to be between $5.0 billion and $5.1 billion, with the midpoint representing a 4% year-over-year increase . Adjusted EBITDA is expected to range from $2.7 billion to $2.75 billion (excluding acquired IPR&D), a 7% increase at the midpoint over 2024 . Adjusted operating cash flow is anticipated to be between $975 million and $1.025 billion, with the midpoint increasing by $150 million .

Looking ahead, the company faces the impact of the Inflation Reduction Act (IRA), which selected Xifaxan for Medicare drug price negotiation, with initial price applicability in 2027. Management acknowledges that this is expected to "negatively impact sales revenues for Xifaxan in 2027" . However, Bausch Health is actively pursuing mitigation strategies and anticipates that the "average EBITDA over the next 2 years will not be materially different than what we're providing in the outlook and the revised guidance " . This suggests a robust plan to offset the IRA's effects and maintain profitability. The company also expects "typical erosion curve for multiple generic entry in 2028" for Xifaxan .

The RED-C program's Phase 3 data readout in early 2026 and the planned initiation of Larsucosterol's registrational Phase 3 program in early 2026 are critical milestones that could significantly shape Bausch Health's future revenue streams and market positioning in hepatology. The ongoing evaluation of the Bausch + Lomb equity stake for monetization is also a key strategic lever for further deleveraging.

Competitive Landscape and Positioning

Bausch Health operates in a highly competitive environment, facing direct competition from large, diversified pharmaceutical and healthcare companies such as Johnson & Johnson (JNJ), AbbVie (ABBV), Pfizer (PFE), and Novartis (NVS). These competitors possess stronger balance sheets, larger R&D budgets, and broader global market reach.

Bausch Health's competitive strength lies in its specialized focus within therapeutic areas like gastroenterology, hepatology, and dermatology, as well as its aesthetic medical device business. The company's diversified portfolio, encompassing branded, generic, and OTC products, allows for operational flexibility. For instance, its Salix segment, driven by Xifaxan, demonstrates strong operational execution and market penetration in GI. The Solta Medical segment, with its advanced aesthetic devices like Thermage FLX, maintains a leading presence in key markets like South Korea and China, leveraging a durable business model with high consumable revenue.

Compared to its larger rivals, Bausch Health's unique value proposition often involves delivering cost-effective solutions and maintaining agile market entry in emerging regions. While the company may not match the R&D depth of a Pfizer or the blockbuster biologics of an AbbVie, its targeted innovation, as seen with the RED-C program and the Larsucosterol acquisition, aims to address specific unmet needs. The company's AI-driven sales optimization for Xifaxan also highlights a technological edge in commercial execution.

However, Bausch Health's substantial debt load remains a competitive disadvantage, potentially limiting cash flow for aggressive R&D investments or large-scale acquisitions compared to its financially robust peers. The upcoming patent expirations and the IRA's impact on Xifaxan underscore the constant pressure from generic competition and pricing controls, a common challenge across the pharmaceutical industry. The company's strategy to manage these risks includes aggressive defense of intellectual property, active pipeline management, and continuous evaluation of operational efficiencies.

Conclusion

Bausch Health Companies Inc. is in a pivotal phase of its transformation, demonstrating consistent operational strength while aggressively addressing its financial architecture. The company's strategic focus on deleveraging, exemplified by the recent $7.9 billion refinancing and subsequent debt reductions, provides a critical runway to navigate upcoming patent cliffs and regulatory changes. Simultaneously, targeted investments in innovation, particularly in the hepatology pipeline with RED-C and Larsucosterol, are poised to unlock significant future growth opportunities by addressing substantial unmet medical needs.

While challenges such as Xifaxan's Medicare price negotiations and generic competition loom, Bausch Health's management has articulated a clear strategy to mitigate these impacts, projecting stable average EBITDA for the coming years. The company's diversified portfolio, technological advancements in sales optimization and aesthetic devices, and disciplined operational execution position it to sustain momentum. For discerning investors, Bausch Health represents a compelling investment thesis centered on a company actively reshaping its future, with a clear path to enhanced value creation through strategic financial management and a revitalized innovation engine.