Bausch Health Companies Inc. Annual Report - A Closer Look at 2025

Bausch Health Companies Inc. faced a pivotal year in 2025, marked by strategic shifts, significant investments in its eye health segment, and substantial financial challenges. This summary offers retail investors a clear, concise overview of the company's performance, key financial figures, and future outlook, helping you understand its current position and strategic direction.

Business Overview

Bausch Health Companies Inc. operates as a diversified healthcare company. It develops, manufactures, and markets a broad range of branded, generic, and over-the-counter pharmaceutical products, alongside medical devices. The company's core segments include eye health (through Bausch + Lomb), gastroenterology (through Salix Pharmaceuticals), and other diversified pharmaceutical products. Bausch Health serves patients and customers worldwide, aiming to address significant medical needs across its therapeutic areas. The company's overarching strategy focuses on strengthening its Bausch + Lomb eye health business and aggressively reducing its substantial debt.

Financial Performance

Financial Snapshot for 2025:

• Total Revenue: The company reported approximately $10.5 billion in total revenue, a slight decrease from the prior year. This decline primarily resulted from divestitures and competitive pressures in specific segments.
• Net Loss: Bausch Health recorded a significant net loss of $1.2 billion. Non-cash impairment charges and restructuring costs largely drove this loss.
• Adjusted EBITDA: Despite the net loss, Adjusted EBITDA—a key measure of operational profitability—reached approximately $3.5 billion, indicating underlying strength in the company's core operations.

Risk Factors

Bausch Health faces several key risks that could impact its financial condition and operational results:

• Substantial Debt Load: The company carries a substantial debt load, totaling approximately $20.1 billion in long-term debt at year-end. This debt demands significant cash flow for servicing and repayment.
• Goodwill Impairment: Increased competition and pricing pressure led the Generics business segment to record a $145 million goodwill impairment charge in 2025. Additionally, several units now have "zero headroom," meaning their carrying value equals their fair value. This makes them highly susceptible to future impairments if market conditions, competition, or regulatory changes worsen. The failure of the Salix RED-C program is also expected to result in a massive non-cash impairment charge of approximately $1.4 billion in the first quarter of 2026.
• Patent Litigation: Key branded products, such as Xifaxan, face ongoing legal challenges to their patents. Unsuccessful outcomes in these litigations could lead to generic competition and significantly impact future sales and profitability.
• Geopolitical and Economic Risks: Operating in diverse international markets, including Algeria, Argentina, Russia, Ukraine, and Venezuela, exposes the company to heightened economic instability, currency fluctuations, and geopolitical risks. These factors could impact operations and financial results.
• Customer Concentration: Its top three wholesale customers account for approximately 65% of Bausch Health's U.S. pharmaceutical sales. This concentration creates a risk, as any disruption or adverse change in relationships with these key distributors could materially affect sales and cash flow.
• Competition and Pricing Pressure: The highly competitive pharmaceutical and medical device industries lead to ongoing pricing pressure and the risk of market share loss, particularly in generic segments.
• Clinical Trial Failures: The failure of pivotal Phase 3 clinical trials for the RED-C drug candidate underscores the inherent risks in pharmaceutical development and the potential for significant financial impact from pipeline setbacks.

Management Discussion & Analysis Highlights

Management's discussion highlighted the company's strategic actions, significant financial events, and operational focus for the year.

Strategic Focus: Eye Health and Debt Reduction Bausch Health continues to prioritize strengthening its Bausch + Lomb eye health business and aggressively reducing its substantial debt. The company still holds a significant equity stake in Bausch + Lomb, meaning B+L's performance directly impacts Bausch Health's overall financial health and future prospects.

Growing the Eye Health Business (Bausch + Lomb's Strategic Acquisitions): Bausch + Lomb has actively expanded its eye health portfolio, aiming to solidify its leadership in ophthalmology and vision care. Key acquisitions from 2023 to 2025 include:

• Whitecap Biosciences (January 2025): B+L acquired Whitecap Biosciences for approximately $300 million, enhancing its pipeline in advanced ocular therapies.
• Elios Vision (December 2024) and Trukera Medical (July 2024): These acquisitions, totaling an estimated $450 million, brought innovative surgical devices and diagnostic technologies, broadening B+L's product offerings for eye care professionals.
• XIIDRA and other Ophthalmology Assets (September 2023): B+L made a significant acquisition from Novartis for $2.5 billion, adding a leading dry eye treatment and strengthening its pharmaceutical eye care segment.
• Johnson & Johnson Vision's Blink Product Line (July 2023) and AcuFocus Inc. (January 2023): These earlier strategic moves, valued at approximately $200 million combined, bolstered B+L's over-the-counter and surgical vision correction portfolios. These investments are crucial for B+L's long-term growth and are expected to contribute to increased sales and market share, ultimately benefiting Bausch Health.

Significant Financial Charges and Impairments: Bausch Health recorded several substantial non-cash charges that significantly impacted its reported net income for 2025:

• Restructuring and Integration Costs: The company incurred approximately $250 million in 2025 for ongoing organizational changes and the integration of acquired businesses. It also reported similar costs of $200 million in 2024 and $180 million in 2023.
• Separation and IPO Costs: Expenses related to the Bausch + Lomb separation and initial public offering amounted to $150 million in 2025, following $120 million in 2024 and $100 million in 2023. These one-time costs are essential for the company's strategic transformation.
• Goodwill Impairment - Generics Business: Increased competition and pricing pressure led the Generics business segment to record a $145 million goodwill impairment charge in 2025, reflecting a downward revision of its future earnings potential.
• Future Impairment - Salix RED-C Program: A major setback occurred in January 2026 (subsequent to the reporting period) when two pivotal Phase 3 clinical trials for the RED-C drug candidate (part of the Salix unit) failed to meet their primary endpoints. This failure is expected to result in a massive non-cash impairment charge of approximately $1.4 billion in the first quarter of 2026, significantly impacting future reported profits.
• Bausch + Lomb Goodwill Assessment: Despite general stock market volatility in mid-2025 that affected B+L's market valuation, Bausch Health determined that B+L's underlying business performance and fair value remained robust. Therefore, no goodwill impairment was required for the eye health segment in 2025. However, the company cautioned that several units now have "zero headroom"—meaning their carrying value equals their fair value—making them susceptible to future impairments if market conditions, competition, or regulatory changes deteriorate.

Product Portfolio and Legal Risks:

• Key Branded Products: Xifaxan remains a critical branded product within the Salix portfolio, generating approximately $1.3 billion in annual sales.
• Product Discontinuation: The company discontinued its "Uceris Foam" product in 2023 as part of its portfolio optimization efforts.

Internal Controls: Management and independent auditors confirmed the effectiveness of the company's internal controls over financial reporting as of December 31, 2025. This provides assurance regarding the reliability and accuracy of Bausch Health's financial statements.

Financial Health

Bausch Health continues to carry a substantial debt load, which stood at approximately $20.1 billion in long-term debt at year-end. The company generated $1.8 billion in cash from operations, primarily directing these funds towards debt reduction and strategic investments. Bausch Health manages its liquidity to support operations and debt reduction. Deleveraging remains a critical component of its financial strategy.

Future Outlook

Looking ahead, Bausch Health remains focused on executing its long-term strategy: deleveraging and maximizing the value of its core assets, particularly Bausch + Lomb. While the RED-C setback presents a significant challenge for the Salix segment, the company remains committed to its pipeline and operational efficiency. Investors should closely monitor the company's debt reduction progress, Bausch + Lomb's performance, and the outcomes of ongoing patent litigations. Bausch Health aims to continue strategic investments in its core segments to drive future growth.

Competitive Position

Bausch Health operates in highly competitive pharmaceutical and medical device industries. Competition arises from various sources, including other large pharmaceutical companies, biotechnology firms, generic manufacturers, and medical device companies. Key competitive factors include product efficacy, safety, price, intellectual property protection, and the ability to develop and commercialize new products. The company aims to maintain and strengthen its competitive position through innovation, strategic acquisitions (as demonstrated by Bausch + Lomb), and efficient operations. It particularly seeks to solidify its leadership in ophthalmology and vision care within its Bausch + Lomb segment. However, competitive pressures and pricing challenges, especially in its generics business, continue to impact its market position and financial results.