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Bausch Health (BHC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Jul 29, 2026

Source: earnings call transcript

Executive summary

Bausch Health Q2 FY26 — Strong Growth Across Segments and Raised Full-Year Guidance

Bausch Health delivered an exceptional second quarter, extending its streak of top-line and bottom-line growth to 13 consecutive quarters. Strong performance across Salix, International, and Solta segments, particularly driven by the successful integration of Solta's China distributor, led to significant revenue and adjusted EBITDA expansion. The company raised its full-year guidance across all key financial metrics, reflecting confidence in its strategic execution and operational excellence, despite anticipating some headwinds in the second half of the year.

Highlights

5

  • Revenue grew 16% year-over-year (11% organic) to $2.852 billion, marking the 13th consecutive quarter of top-line growth.

  • Adjusted EBITDA increased 28% year-over-year to $1.075 billion, achieving a historical high of 59% adjusted EBITDA margin.

  • Adjusted cash flow from operations rose 44% year-over-year to $637 million, leading to a $434 million net debt reduction.

  • Salix segment revenue increased 21% year-over-year to $758 million, driven by Xifaxan demand and net pricing.

  • Solta Medical revenue surged 38% year-over-year (12% organic) to $176 million, with segment profit up 69% due to China integration.

Concerns

4

  • Canada segment revenue declined 9% year-over-year due to the absence of prior one-time net pricing benefits.

  • Anticipated $150 million headwind in H2 FY26 from gross-to-net accrual changes, including a $90 million expense for increased CMS rebates.

  • Expected $50 million headwind in H2 FY26 from generic competition for Aplenzin following loss of exclusivity.

  • Projected $75 million headwind in H2 FY26 from gradual erosion of Medicaid and 340B channel revenue.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Revenue
$5.35 billion - $5.50 billion
high materiality
High
Full-year 2026 Adjusted EBITDA
$3.025 billion - $3.100 billion
high materiality
High
Full-year 2026 Adjusted Cash Flow from Operations
$1.4 billion - $1.475 billion
high materiality
High
Full-year 2027 Adjusted EBITDA
$2.7 billion
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Salix
Strong performance driven by Xifaxan demand and favorable net pricing, following optimization of volume-price trade-off after exiting Medicaid and 340B programs.
Xifaxan revenue growth: 26% YoYXifaxan total retail scripts (ex-Medicaid) growth: 4% YoYXifaxan expanded units (ex-Medicaid) decline: 2% YoY
$758 million21%——
International
Mixed performance across regions, with strong organic growth in LATAM and EMEA.
Organic growth: 5% YoY
$305 million10% reported——
International - LATAM
Revenue growth supported by volume expansion and favorable net pricing, led by Bedoyecta and the cardiometabolic franchise.
—16% organic——
International - EMEA
Achieved 14 consecutive quarters of organic revenue growth.
—9% organic——
International - Canada
Decline reflects the absence of a prior one-time net pricing benefit. Promoted brands showed strong growth.
Promoted brand portfolio growth (excl. one-time benefit): 14%Ryaltris growth: 64% YoY
—-9%——
Solta Medical
Strong revenue and profit growth, primarily driven by the successful integration of the full-service distributor in China and momentum in other APAC markets. Medical aesthetics tourism stabilized in South Korea.
Organic growth: 12% YoYSegment profit growth: 69% YoYChina revenue growth: 136% YoYSouth Korea revenue growth: 8% YoYTaiwan revenue growth: 42% YoY
$176 million38% reported—$91 million
Diversified
Growth in neuroscience (favorable net pricing) was offset by lower revenue in dermatology, generics, and dentistry.
$219 millionFlat——

Deals & partnerships

Shibo Integration of full-service distributor in China for Solta Medical

The integration has been executed exceptionally well and created significant value for Bausch Health in just 6 months.

DURECT Acquisition of an asset in the third quarter of last year

Example of a relatively small investment at the development stage that fits the company's strategy and capabilities.

Risks & headwinds

Gross-to-net accrual changes H2 FY26

$150 million headwind

Increased CMS rebates Q4 FY26 (in anticipation of Jan 1, 2027 start)

$90 million expense

Generic competition for Aplenzin H2 FY26 (starting Q3 FY26)

$50 million headwind

Erosion of Medicaid and 340B channel revenue H2 FY26

$75 million headwind

What to watch in Q3 FY26

Gross-to-net accrual impact

Q3 FY26
Current Anticipated $150M headwind in H2 FY26
Target Actual impact on revenue and profitability

Why it matters

This is a significant headwind that could impact the company's ability to meet its raised full-year guidance.

First, the change of our gross-to-net accrual associated with the channel inventory is anticipated to be a headwind of roughly $150 million.

Find out whether BHC delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the key areas of interest for business development, and what financial guidelines (e.g., leverage) would Bausch Health consider for such pursuits?

Management highlighted U.S. Pharma (GI, liver, neuroscience, derm, pain) and adjacent therapeutic areas as key interests, leveraging their commercial engine and AI capabilities. Capital allocation prioritizes debt reduction and reinvestment. BD can involve small development-stage investments or larger assets with quick payback or significant synergies, without hindering debt reduction.

“The strategy that we've set out for capital allocation remains the same. The first one is obviously to fix the capital structure and reduce our net debt leverage. Second is to reinvest in the business.”

asked by Michael Freeman · answered by Jean-Jacques Charhon

2 min read 5 chapters

Detailed narrative

Consistent Performance and Strategic Pillars

Bausch Health achieved its 13th consecutive quarter of top-line and bottom-line growth, demonstrating consistent execution of its strategy. The company's management principles focus on maximizing operating levers for profitable growth, driving operating leverage through effective resource management, and disciplined cash flow generation. These efforts have led to a 20% LTM revenue growth since year-end 2023 and a 400 basis point increase in adjusted EBITDA margin compared to 2023.

Solta Medical's Value Accretion from China Integration

Solta Medical delivered outstanding results, with revenue up 38% and segment profit up 69% year-over-year. This performance was significantly boosted by the successful integration of its full-service distributor, Shibo, in China, where revenue increased 136%. Management estimates the full-year run rate for Solta's segment profit to be approximately $330 million, a $100 million increase from 2025, implying a potential $1 billion increase in Bausch Health's enterprise value.

Business Development Focus and Capital Allocation

Business development remains a high strategic priority, particularly in the U.S. Pharma platform (GI, liver, neuroscience, derm, pain) and adjacent therapeutic areas, leveraging the company's commercial infrastructure and AI-powered customer insights. The capital allocation strategy prioritizes fixing the capital structure and reducing net debt, followed by reinvestment in the business. BD opportunities range from small development-stage investments (like DURECT) to larger assets with quick payback or significant synergies.

Second Half 2026 Headwinds and 2027 Outlook

Despite strong first-half performance, the company anticipates several headwinds in the second half of 2026. These include a $150 million impact from gross-to-net accrual changes (including a $90 million expense for increased CMS rebates starting January 2027), a $50 million headwind from Aplenzin generic competition, and a $75 million headwind from continued erosion in Medicaid and 340B channels. The 2027 adjusted EBITDA guidance of $2.7 billion remains unchanged, assuming Xifaxan exclusivity until January 2028.

Bausch + Lomb Monetization Strategy

Bausch Health continues to evaluate avenues to fully realize the value of its Bausch + Lomb asset for BHC shareholders. The 2025 refinancing extended the runway and increased flexibility regarding the timing of this process. Bausch + Lomb's aggressive Vision 2027 financial targets, including significant EBITDA and revenue increases by 2028, are important considerations in the monetization strategy.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.