What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-24 compared with 2020-02-19 · 911 added, 751 removed, 737 unchanged (69% of the section changed)

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This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been updated through February 24, 2021 and should be read in conjunction with the audited Consolidated Financial Statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.

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 1933, 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.

Additional company information, including this Form 10-K, is available on SEDAR at www.sedar.com and on the U.S.

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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).

We generated revenues for 2020, 2019 and 2018, of $8,027 million, $8,601 million and $8,380 million, respectively.

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of Ortho Dermatologics (dermatological) products and (ii) global sales of Solta medical aesthetic devices.

The Diversified Products segment consists of sales:

(i) in the U.S.

of pharmaceutical products in the areas of neurology and certain other therapeutic classes, (ii) in the U.S.

of generic products, (iii) in the U.S.

of dentistry products and (iv) of certain other businesses divested during 2017 that were not core to the Company's operations, including the Company's equity interests in Dendreon Pharmaceuticals LLC (“Dendreon”) (June 28, 2017) and Sprout Pharmaceuticals, Inc.

(“Sprout”) (December 20, 2017).

As a result of the divestitures of Dendreon and Sprout, the Company exited the oncology and women's health businesses, respectively.

For additional discussion of our reportable segments, see the discussion in Item 1 "Business - Segment Information" and Note 23, "SEGMENT INFORMATION" to our audited Consolidated Financial Statements for further details on these reportable segments.

• The Diversified Products segment consists of sales in the U.S.

(i) pharmaceutical products in the areas of neurology and certain other therapeutic classes, (ii) generic products and (iii) dentistry products.

For additional discussion of our reportable segments, see the discussion in Item 1.

"Business — Segment Information" and Note 22, "SEGMENT INFORMATION" to our audited Consolidated Financial Statements for further details on these reportable segments.

As discussed further below, on August 6, 2020, the Company announced that it intends to separate its eye-health business into an independent publicly traded entity from the remainder of Bausch Health Companies Inc.

(the “Separation”).

In connection with the Separation, the Company expects to realign and begin managing its operations in a manner consistent with the organizational structure of the two separate entities as proposed by the Separation during the first quarter of 2021.

Our Focus on Value

In 2016, we retained a new executive team which implemented a multi-year plan designed to transform and bring out value in our Company.

The multi-year plan increased our focus on, among other factors, our:

product portfolio, infrastructure, geographic footprint, capital structure and risk management.

Since that time, we have been executing and continue to execute on our commitments to transform the Company and generate value.

Under the multi-year plan, we have taken the following actions, among others:

• divested non-core assets in order to narrow the Company's activities to our core businesses where we believe we have an existing and sustainable competitive edge and the ability to generate operational efficiencies.

To date we received approximately $3,500 million in net proceeds from these divestitures;

• made strategic investments in our core businesses in order to support recent revenue growth and prepare for additional growth opportunities we plan to capitalize on for our core businesses;

• made measurable progress in improving our capital structure as we have repaid over $8,600 million in debt obligations (net of additional borrowings, amounts refinanced and excluding the $1,210 million financing of the U.S.

Securities Litigation settlement discussed below) during the period January 1, 2016 through the date of this filing using the proceeds from the divestiture of non-core assets, cash generated from our operations and improved working capital management;

• resolved many of the Company's legacy litigation matters originating back to 2015 and prior, including the most significant legacy legal matter, the U.S.

Securities Litigation settlement discussed below, significantly reducing related possible disruptions and other uncertainties to our operations.

We believe that these and other positive actions we have taken to transform our Company, have properly focused our operations and improved our capital structure, and we also believe that, as a result of such actions, we are now presented with an opportunity to unlock additional value across our portfolio of assets by creating two highly attractive but dissimilar businesses.

Separation of the Bausch + Lomb Eye-Health Business

On August 6, 2020, we announced that we intend to separate our eye-health business into an independent publicly traded entity (“Bausch + Lomb”) from the remainder of Bausch Health Companies Inc.

The Separation will establish two separate companies that include:

• a fully integrated, pure play eye-health company built on the iconic Bausch + Lomb brand and long history of innovation;

• a diversified pharmaceutical company with leading positions in gastroenterology, aesthetics/dermatology, neurology and international pharmaceuticals.

The Bausch + Lomb entity will consist of the Company's Bausch + Lomb Global Vision Care, Global Surgical, Global Consumer and Global Ophthalmology Rx businesses.

The remaining pharmaceutical entity will comprise a diversified portfolio of our leading durable brands across the Salix, International Rx, Solta, neurology and medical dermatology businesses.

We believe the Separation will unlock value across the two post-separation entities and create two highly attractive but dissimilar businesses.

As separate entities, management believes that each company will be better positioned to individually focus on its core businesses to drive additional growth, more effectively allocate capital and best manage its respective capital needs.

Further, the Separation allows us and the market to compare the operating results of each entity with other “pure play” peer companies.

Although management believes the Separation will bring out additional value, there can be no assurance that it will be successful in doing so.

In connection with the Separation, we expect to realign and begin managing our operations in a manner consistent with the organizational structure of the two separate entities as proposed by the Separation during the first quarter of 2021.

Accordingly, we expect to begin reporting our segment results to reflect the proposed realignment of our operating segments on a retrospective basis beginning with our first quarter of 2021.

We are in the process of addressing the organization, structure and pro forma capitalizations of the two entities post-separation.

Based on our assessment, we believe that, by the end of 2021, we will be able to address the organizational matters and regulatory requirements needed to operate the businesses separately and put the Bausch + Lomb entity in position to become an independent publicly traded company.

Management is also considering the form of the Separation and exploring a number of alternative capitalization structures in order to properly capitalize the entities post-separation.

Although a public offering of a portion of the Bausch + Lomb business is among the alternate capital structures being considered, this Form 10-K does not constitute an offer of any securities of Bausch + Lomb for sale.

There are considerations, approvals and conditions that will determine the ultimate timing and structure of this transaction, including regulatory approvals, final approval by our board of directors, any shareholder vote requirements that may be applicable, compliance with U.S.

and Canadian securities laws and stock exchange rules, receipt of any applicable opinions and/or rulings with respect to the Canadian and U.S.

federal income tax treatment of such transaction and determination of the pro forma capitalizations of the two entities.

The failure to satisfy all of the required conditions could delay the completion of this transaction for a significant period of time or prevent it from occurring at all.

“Risk Factors — Risk Relating to the Separation” of this Form 10-K for additional risks relating to the Separation.

Impacts 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.

The COVID-19 pandemic has also 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 related to the COVID-19 pandemic, each of which are highly dependent on variables that are difficult to predict.

Developments, including the ultimate geographic spread and duration of the pandemic, the extent and duration of a resurgence, if any, new information concerning the severity of the COVID-19 virus, the effectiveness and intensity of measures to contain the COVID-19 virus, the availability and effectiveness of vaccines for the COVID-19 virus and the economic impact of the pandemic and the reactions to it, could have a significant adverse effect on our business, development programs, financial condition, cash flows and results of operations.

The extent of these developments and the related impacts are highly uncertain and many are outside the Company's control.

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 pandemic 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.

As a result of our assessment, we immediately initiated profit protection measures to manage and reduce operating expenses and preserve cash during the COVID-19 pandemic.

We have also 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 the COVID-19 pandemic 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.

Our Employees

Our employees' health, safety, and wellness are important to us.

With the COVID-19 outbreak, a focus in 2020 was protecting the health and safety of our employees and their families.

We broadened our existing remote work policies to enable our global employees to work from home wherever possible.

In circumstances where remote work was not possible (such as at our manufacturing and distribution facilities) we implemented safety measures to ensure we prevented the spread of COVID-19 in the workplace, such as mandatory face coverings, social distancing, hand hygiene, plexiglass barriers, limited face-to-face meetings and other procedures as prescribed by global public health organizations, such as the WHO and U.S.

Centers for Disease Control and Prevention.

We also provided resources for our employees specifically in response to COVID-19, including launching a website – Collaborating in the New Normal – to help our employees encourage each other, lead with empathy and adapt as we navigate these unprecedented times.

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.

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.

We have been successful in keeping our manufacturing facilities operational, although, due to shelter-in-place orders, our facilities in Milan and China were forced to temporarily close in March and April of 2020.

These facilities were closed for only a short period of time and were immediately and continually operational once the shelter-in-place orders in the respective geographies were lifted.

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 or operations.

Our global supply chain team worked diligently to stay ahead of the challenges presented by the COVID-19 pandemic once it appeared in Asia.

Although we have put in place procedures to mitigate the risks associated with closures and disruptions at our manufacturing facilities, the COVID-19 pandemic has had an impact on our inventory levels and the manner in which we manage our inventories.

From time to time during 2020, our inventory levels were higher than usual as a result of:

(i) lower demand across multiple business units due to COVID-19 pandemic related matters, (ii) securing additional quantities of active pharmaceutical ingredients ("API") for our Xifaxan ® products from our suppliers in Italy in contemplation of potential supply disruptions in that region, (iii) securing additional quantities of API for our Trulance ® products which have longer procurement times and higher costs and (iv) the acquisition of additional quantities of certain products that were at the lower end of their optimal levels at December 31, 2019.

During our third and fourth quarters, we continued to manage our inventory levels and effectively reduced our inventory levels to be in line with our pre-pandemic inventory levels as of December 31, 2020.

We have dual sources of 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.

With respect to our largest product, Xifaxan ® , as of January 31, 2021, we have over four months’ supply of Xifaxan ® finished goods on hand and enough API to manufacture another seven months’ supply of Xifaxan ® finished goods.

We also have open orders for API for Xifaxan ® 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.

We continue to monitor the impacts of the COVID-19 pandemic and take the actions appropriate to regulate our inventories at levels in line with the current supply and demand for our products.

These actions have been effective at meeting our objectives, and presuming there continues to be increased availability of effective vaccines and any resurgence of the COVID-19 virus and variant strains thereof do not have a material adverse impact on efforts to contain the COVID-19 virus, we believe we can maintain our inventories at their pre-pandemic levels during 2021.

We will continue to monitor our inventories and continue to take the appropriate actions and make the necessary adjustments to maintain the uninterrupted availability of our products to meet the needs of patients, consumers and our customers.

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.

Due to the challenges of the COVID-19 pandemic, most notably those attributable to "stay at home" and travel restrictions, certain of our R&D activities were forced to pause.

Clinical trials that started prior to governmental shutdowns remained enrolled and existing patients have progressed, while new patient enrollments were paused as most trial sites were not able to accept new patients.

However, during our third quarter of 2020, we saw the pace of new patient enrollments increase, getting close to their pre-COVID-19 pandemic levels in the U.S., and as a result have not had to make material changes to our development timelines.

We continue to monitor the timing and completion of our ongoing and anticipated clinical trial programs.

As of the date of this filing, the delays in our clinical trials have not had a material impact on our operating results;

however, a resurgence of the virus significant enough to necessitate reenacting certain social restrictions could result in unanticipated delays in our ability to conduct new patient enrollments.

Other possible COVID-19 pandemic and resurgence 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, if any, caused by the COVID-19 pandemic and a possible resurgence of the virus such as these and others will likely adversely affect the timely approval, launch and commercialization and the commercial success of our products, particularly those in early stage clinical trials, which could have a material 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 revolving credit facility of $1,225 million due in June 2023 (the “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-K.

Further, for the years ended December 31, 2020, 2019 and 2018, we generated positive cash from operations of $ 1,111 million, $ 1,501 million and $ 1,501 million, respectively.

Should our operating results during the COVID-19 pandemic materially suffer in comparison to our 2020, 2019 and 2018 operating results, we believe we would continue to generate sufficient cash flows from operations to meet our obligations in the ordinary course of business.

We have no debt maturities or mandatory amortization payments until 2024.

Ad ditionally, we have no outstanding borrowings, $ 104 million of issued and outstanding letters of credit and remaining availability of $ 1,121 million under our 2023 Revolving Credit Facility.

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 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 this Item “— Liquidity and Capital Resources — Long-term Debt” and Note 10, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial Statements for additional discussion of these matters.

Our Operating Results

While we are taking actions to mitigate the impact of the COVID-19 pandemic on daily operations, the global response to the pandemic has and is expected to impact our operating results until the impacts of the pandemic subside, the timing of which is uncertain and may be dependent upon, among other matters, the availability and effectiveness of vaccines for the COVID-19 virus.

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.

During the pandemic, the public has been advised to engage in certain "social restrictions" such as:

(i) remaining at home or shelter-in-place, (ii) limiting social interaction, (iii) closing non-essential businesses and (iv) postponing 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 negatively impacted, most notably, the revenues of the Company's Global Vision Care and Global Surgical businesses in Asia where the COVID-19 pandemic originated.

Beginning in March 2020, and throughout most of the second quarter of 2020, the Company experienced steeper declines in these revenues and the revenues of other businesses as social restrictions expanded worldwide, particularly in the U.S.

Social restrictions negatively impacted the Company's revenues for contact lenses, intraocular lenses, medical devices, surgical systems and certain pre- and post-operative eye-medications of its Global Ophtho Rx business, medical aesthetics and therapeutic products of its Global Solta business, and certain branded pharmaceutical products of its Salix, Ortho Dermatologics and Dentistry businesses, as the offices of many health care providers were closed and certain surgeries and elective medical procedures were deferred.

Our 2020 revenues were most negatively impacted during our second quarter by the social restrictions and other precautionary measures taken in response to the COVID-19 pandemic.

However, as governments began lifting social restrictions, allowing offices of certain health care providers to reopen and certain surgeries and elective medical procedures to proceed, the negative trend in the revenues of certain businesses began to level off and stabilize prior to our third quarter of 2020.

Our revenues for the three months ended December 31, 2020 and 2019 were $2,213 million and $2,224 million, respectively, a decrease of $11 million.

This decrease of less than 1% represents a continuing improving trend over the decreases in our year-over-year revenues for the three month periods ended June 30, 2020 and September 30, 2020 of 23% and 3%, respectively, and suggests that a recovery is underway.

Presuming there continues to be increased availability of effective vaccines and any resurgence of the COVID-19 virus and variant strains thereof do not have a material adverse impact on efforts to contain the COVID-19 virus, the Company anticipates an ongoing, gradual global recovery from the significant macroeconomic and health care impacts of the pandemic that occurred during the first-half of 2020 and anticipates that its affected businesses could return to pre-pandemic levels during 2021.

However, the rates of recovery for each business will vary by geography and will be dependent upon, among other things, the availability and effectiveness of vaccines for the COVID-19 virus, government responses, rates of economic recovery, precautionary measures taken by patients and customers, the rate at which remaining social restrictions are lifted and once lifted, the presumption that social restrictions will not be materially reenacted in the event of a resurgence of the virus and other actions taken in response to the COVID-19 pandemic.

In the U.S., the recovery is progressing more quickly in our surgical, vision care and ophthalmology businesses, while our consumer business has been less impacted by the COVID-19 pandemic than any of our other businesses.

Although certain

social restrictions were lifted in Europe and Asia during the summer, recovery in these regions has been more gradual, as consumers have been slower to return to their pre-pandemic habits.

Further, various geographies are reinstituting lockdowns or partial lockdowns in response to resurgence of the original COVID-19 virus and as variant strains, possibly more contagious than the original virus, have been identified.

For instance, parts of Europe, such as England, Germany, France and Ireland, and parts of Canada have already announced returns to lockdowns of various lengths and have enacted or are considering enacting other social restrictions.

In the U.S., variant strains of the virus have been identified and there has been a rise in the number of daily average COVID-19 cases heading into 2021 which suggests a possible resurgence in the U.S.

and could lead to new lockdowns or other social restrictions.

As we monitor the direction and pace of the recovery in each business and geography, we are also continually monitoring the effectiveness of the profit protection measures we initiated to manage and reduce our operating expenses and preserve cash during the COVID-19 pandemic.

These profit protection measures have been successful in expanding the profit margins in many of our businesses as referenced in the discussion of our operating results to follow.

As the pace of recovery in each geography accelerates, we expect to allocate more resources to selling and other promotional activities to drive our return to sustainable revenue and profit growth.

Therefore, if the recovery continues, we expect our operating expenses to increase in support of our existing products, product launches and products in development and expect to see our operating expenses in 2021 exceed our operating expenses in 2020 as a result.

We believe our diverse portfolio of durable products and strong brands has served us well through the COVID-19 pandemic and we continue to be well positioned to grow market share and return to growth as the world recovers.

However, this remains a very fluid situation and we continue to monitor the availability and effectiveness of vaccines and any resurgence of the COVID-19 virus and variant strains thereof on our operations, business and primary goals.

Given these circumstances, we continue to focus on:

(i) revising our go-to-market and sales force strategies to address the changing business dynamics created by the COVID-19 pandemic, (ii) building out our e-commerce presence to enable us to reach customers in new ways, (iii) investing in our key promoted brands and product launches to increase market share, (iv) optimizing our cost structure and (v) looking for key trends in the market to meet changing consumer/patient needs and identify areas for investment and growth.

We believe focusing on these priorities will best enable us to effectively manage the changing business dynamics created by the COVID-19 pandemic, best prepare us for a possible resurgence of the virus and any variant strains thereof and return us to growth once the impacts of the COVID-19 pandemic substantially subside.

The changes in our segment revenues and segment profits, including the impacts of COVID-19 pandemic related matters for the year ended December 31, 2020, are discussed in further detail in the respective subsequent sections “ — Reportable Segment Revenues and Profits”.

The Company continually updates its near term forecasts for the changing facts and circumstances regarding the COVID-19 pandemic and believes that its long-term forecasted cash flows are not materially impacted by COVID-19 pandemic events and related factors.

As more fully discussed in Note 8, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements, as of December 31, 2020 the Company has not identified any impairments in connection with the impacts of the COVID-19 pandemic.

However, if market conditions further deteriorate, if facts 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.

For a further discussion of these and other COVID-19 related risks, see Item 1A.

"Risk Factors— Risk Relating to COVID-19" of this Form 10-K.

Focus on Core Businesses

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We have been aggressively allocating resources to promote our core businesses globally through:

(i) strategic acquisitions, (ii) research and development (“R&D”) investment and (iii) strategic investments in our infrastructure.

(i) strategic acquisitions, (ii) research and development (“R&D”) investment, (iii) strategic licensing agreements and (iv) 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.

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 September 2020, we entered into an agreement which provides the Company an option to acquire all ophthalmology assets of Allegro Ophthalmics, LLC ("Allegro") (the "Option"), a privately held biopharmaceutical company focused on the development of therapies that regulate integrin functions for the treatment of ocular diseases.

Among the assets to be acquired, if the Option is exercised, is the worldwide rights to risuteganib (Luminate ® ), Allegro's lead investigational compound in retina, which is believed to simultaneously act on the angiogenic, inflammatory and mitochondrial metabolic pathways implicated in diseases such as intermediate dry Age-related Macular Degeneration ("AMD").

Phase 2a study with risuteganib in intermediate dry AMD met its primary endpoint of vision recovery and Phase 3 testing is in the planning stages.

We believe the addition of the ophthalmic assets of Allegro would significantly enhance our comprehensive portfolio of products for AMD and if approved, risuteganib may be the first treatment indicated to help reverse vision loss due to dry AMD and address a significant unmet medical need affecting millions of people globally.

In March 2019, we completed the acquisition of certain assets of Synergy Pharmaceuticals Inc.

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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.

In October 2018, we completed the planned acquisition of Medpharma Pharmaceutical and Chemical Industries LLC ("Medpharma").

The completion of this acquisition provides us with full control over the business activities of Medpharma and allows us to wholly benefit from the allocation of additional Company resources and the growth, if any, in the Arab Emirates and the surrounding region.

We are considering further acquisition opportunities within our core therapeutic areas, some of which could be sizable.

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 2019 , 2018 and 2017 , were $471 million , $413 million and $361 million , respectively, and was approximately 5% as a percentage of revenue for 2019 and 2018 and approximately 4% for 2017 .

As part of our turnaround, we removed projects related to divested businesses and rebalanced our portfolio to better align with our long-term plans and focus on core businesses.

In February 2019, we acquired the U.S.

rights to EM-100 (an investigational preservative-free formulation eye drop) from Eton Pharmaceuticals, Inc.

On September 25, 2020, the Company announced that the FDA had approved Alaway ® Preservative Free (ketotifen fumarate) ophthalmic solution, 0.035%, antihistamine eye drops (EM-100) as the first over-the-counter (OTC) preservative-free formulation eye drop approved to temporarily relieve itchy eyes due to pollen, ragweed, grass, animal hair and dander.

Alaway ® Preservative Free was launched in February 2021 and 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

Our R&D expenses for 2020, 2019 and 2018, were $452 million, $471 million and $413 million, respectively, and was approximately 6% as a percentage of revenue for 2020 and approximately 5% for 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 and anticipate submitting approximately 100 of those projects for regulatory approval in 2020 and 2021.

Core assets that have received a significant portion of our R&D investment in current and prior periods are listed below.

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 Food and Drug Administration ("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.

Dermatology - In November 2018, we launched Bryhali ® , a novel product that contains a unique, lower concentration of halobetasol propionate for the treatment of moderate-to-severe psoriasis which is FDA approved for 8 weeks of use.

The FDA has previously approved halobetasol propionate to treat plaque psoriasis, but limited duration of use to two weeks.

Bausch + Lomb - Bausch + Lomb ULTRA ® for Astigmatism is a monthly planned replacement contact lens for astigmatic patients.

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.

Our internal R&D organization focuses on the development of products through clinical trials.

As of December 31, 2020, approximately 1,300 dedicated R&D and quality assurance employees in 23 R&D facilities were involved in our R&D efforts internally.

We have approximately 200 projects in our global pipeline.

Certain core internal 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, certain of our R&D activities were forced to pause.

However, during our third quarter of 2020, we saw the pace of new

patient enrollments increase, getting close to their pre-COVID-19 pandemic levels in the U.S., and as a result have not had to make material changes to our development timelines.

We continue to monitor the timing and completion of our ongoing and anticipated clinical trial programs.

As of the date of this filing, the delays in our clinical trials have not had a material impact on our operating results;

however, a resurgence of the virus significant enough to necessitate reenacting certain social restrictions could result in unanticipated delays in our ability to conduct new patient enrollments.

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.

Bausch + Lomb

• Bausch + Lomb ULTRA ® for Astigmatism - A monthly planned replacement contact lens for astigmatic patients.

The Bausch + Lomb ULTRA ® for Astigmatism lens was developed using the proprietary MoistureSeal ® technology.

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In 2018, we launched the Bausch + Lomb ULTRA ® for Astigmatism -2.75 cylinder expanded SKU range.

Bausch + Lomb - SiHy Daily AQUALOX ™ is a silicone hydrogel daily disposable contact lens designed to provide clear vision throughout the day.

Product validation was completed in June 2018 and SiHy Daily AQUALOX ™ was launched in Japan in September 2018.

We expect to launch our SiHy Daily disposable contact lens in the U.S.

in the second half of 2020.

Dermatology - Internal Development Project ("IDP") 126 is an acne product with a fixed combination of benzoyl peroxide, clindamycin phosphate and adapalene.

Phase 3 studies were initiated in December 2019.

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 currently under development and further clinical studies are planned to start in 2020.

Gastrointestinal - We have initiated a Phase 2 study for the treatment of overt hepatic encephalopathy with a new formulation of rifaximin, which we acquired as part of the Salix Acquisition.

We expect to complete an interim analysis in the first quarter of 2020.

Gastrointestinal - Following the read out of the overt hepatic encephalopathy study, we are planning to initiate a study potentially evaluating the new formulation of rifaximin in potential hepatic encephalopathy and gastrointestinal conditions.

The study is expected to start in the second half of 2020.

This study replaces the planned Xifaxan ® 550mg tablets Phase 2 study evaluating the prevention of complications of decompensation cirrhosis referenced in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019.

Gastrointestinal - We are initiating a Phase 2 study to evaluate rifaximin for the treatment of small intestinal bacterial overgrowth or SIBO.

Patient enrollment is expected to begin in the first half of 2020.

Dermatology - IDP-120 is an acne product with a fixed combination of mutually incompatible ingredients:

benzoyl peroxide and tretinoin.

Phase 3 clinical studies are ongoing.

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.

The study is expected to start in the first half of 2020.

Gastrointestinal - We are developing a probiotic supplement to address gastrointestinal disturbances.

Patient enrollment for clinical trial has been completed and we expect to launch this product in 2020.

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

Bausch + Lomb - Biotrue ® ONEday for Astigmatism is a daily disposable contact lens for astigmatic patients.

• SiHy Daily - A silicone hydrogel daily disposable contact lens designed to provide clear vision throughout the day.

In September 2018, we launched SiHy Daily in Japan under the branded name AQUALOX ™ ONE DAY.

In August 2020, we launched SiHy Daily in the U.S.

under the branded name Bausch + Lomb INFUSE ™ SiHy Daily Disposable contact lens.

In the fourth quarter of 2020, SiHy Daily was launched in Australia, Hong Kong and Canada under the branded name Ultra ® ONE DAY.

SiHy Daily has also received regulatory approval for New Zealand, South Korea, Singapore and Malaysia, where it will be branded as Ultra ® ONE DAY.

• Lumify ® (brimonidine tartrate ophthalmic solution, 0.025%) - An OTC eye drop developed as an ocular redness reliever.

We launched this product in May 2018.

Currently, we have several line extensions under development and expect Phase 3 clinical studies to commence in 2021.

• Biotrue ® ONEday for Astigmatism - 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 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 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.

We anticipate filing a Premarket Approval application for the dispersive Ophthalmic Viscosurgical Device with the FDA in the first quarter of 2020.

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 of 2019.

Bausch + Lomb - Enhanced enVista ® Toric intraocular lens was launched in July 2018.

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 quarter of 2020.

Bausch + Lomb - We are developing an extended depth of focus intraocular lens which we anticipate launching in 2020, excluding the U.S., starting with Europe.

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.

We launched this product in December 2016 and launched an extended power range and further extended power ranges in 2017, 2018, 2019 and July 2020.

• 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.

In January 2020, we commenced an FDA clinical study for cohesive OVD.

The clinical study has now achieved its enrollment target, despite COVID-19 slowdowns, and we expect results in the fourth quarter of 2021.

In April 2020, we filed a Premarket Approval application for the dispersive OVD with the FDA.

• 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.

We launched this product in April 2019.

• enVista ® Trifocal intraocular lens - An innovative lens design.

We initiated an investigative device exemption study for this product in May 2018 and initiated the last phase of this three phase study in the fourth quarter of 2020.

• SimplifEYE ™ 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 and launched this platform in October 2020.

• Extended depth of focus intraocular lens - Currently under development, however, the timing and completion of which has been delayed due to COVID-19 pandemic related matters.

Once developed and if approved, we anticipate that this product could be launched in the second half of 2021.

• Bausch + Lomb ULTRA ® monthly silicone hydrogel lens - Specifically designed to address the lifestyle and vision needs of patients with MoistureSeal ® technology which maintains 95% of contact lens moisture for a full 16 hours.

In the second quarter of 2020, Bausch + Lomb ULTRA ® received a seven day extended wear indication approval from the European Union and received regulatory approval from the National Medical Products Administration in China.

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

Bausch + Lomb ULTRA ® Multifocal for Astigmatism was launched in June 2019 and received European Union regulatory approval in the second quarter of 2020.

• 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;

Renu ® Advanced MPS has gained regulatory approvals in Korea, India, Mexico, Indonesia, Malaysia, Singapore and, during the second quarter of 2020, the European Union.

• Custom soft contact lens (Ultra Buttons) - 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 first quarter of 2021.

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.

This project has been placed on hold as we reprioritize other projects in our pipeline.

• Zen ™ Multifocal Scleral Lens for presbyopia - In January 2019, we launched this product 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 ® - 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.

We launched this product in March 2019.

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 reliance on our internal R&D organization 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.

Gastrointestinal

• Rifaximin - Top line results from a Phase 2 study for the treatment of overt hepatic encephalopathy with a new formulation (SSD IR) of rifaximin showed a treatment benefit.

Patients receiving 40 mg twice daily showed a statistically significant separation from placebo.

The top line results from this Phase 2 study will help inform further research on potential new indications for rifaximin;

this will include the commencement of a Phase 3 study (RED-C) in 2021 to seek an indication for the prevention of the first episode of Hepatic Encephalopathy.

A separate new formulation is planned to be studied for the treatment of sickle cell anemia which rifaximin recently received orphan drug designation for and for which clinical trials are expected to commence in 2021.

• Rifaximin - Commencement of a Phase 2 study to evaluate rifaximin for the treatment of small intestinal bacterial overgrowth or SIBO remains pending results from a new formulation study expected to be available in first half 2021.

Development of a fit for purpose Patient Reported Outcomes tool for small intestinal bacterial overgrowth (SIBO is continuing in 2021.

• Rifaximin - We have entered into an agreement with Cedars Sinai Medical Center to evaluate a new formulation of rifaximin for the treatment of IBS-D.

Two preclinical studies have been completed.

A Proof of Concept study that was paused due to COVID-19 pandemic related factors has recommenced.

• Rifaximin - Our partner Alfasigma S.p.A.

("Alfasigma") is planning a Phase 2/3 study for the treatment of postoperative Crohn's disease using a novel rifaximin extended release formulation.

• Envive ™ - We developed a probiotic supplement to address gastrointestinal disturbances.

We launched this product in October 2020.

• Amiselimod (S1P modulator) - We are preparing to initiate a Phase 2 study to evaluate Amiselimod (S1P modulator) for the treatment of mild to moderate Ulcerative Colitis.

We anticipate the clinical trial to commence in the first half of 2021.

• Duobrii ® - The first and only topical lotion that contains a unique combination of halobetasol propionate and tazarotene for the treatment of 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.

We launched this product in June 2019.

• Arazlo ® (tazarotene) Lotion, 0.045% (formerly IDP-123) - An acne product containing lower concentration of tazarotene in a lotion form to help reduce irritation while maintaining efficacy.

We launched this product in June 2020.

• Internal Development Project ("IDP") 120 - An acne product with a fixed combination of mutually incompatible ingredients:

benzoyl peroxide and tretinoin.

Phase 3 clinical studies have been completed and met the primary endpoints.

We are currently evaluating next steps for this project.

• IDP-126 - An acne product with a fixed combination of benzoyl peroxide, clindamycin phosphate and adapalene.

Phase 3 clinical studies initiated in December 2019 were paused due to COVID-19 pandemic related factors, but resumed in June 2020.

The first Phase 3 trial has been completed, and the second Phase 3 trial results are expected in 2021.

We are currently evaluating next steps for this project.

• Clear + Brilliant ® Touch - Next generation Clear + Brilliant ® laser that is designed to deliver a customized and more comprehensive treatment protocol by providing patients of all ages and skin types the benefits of two wavelengths.

We expect to launch this product during the first half of 2021.

• IDP-124 - A topical lotion product designed to treat moderate to severe atopic dermatitis, with pimecrolimus.

Phase 3 clinical studies have been completed with one of the two studies meeting the primary endpoint.

As a result, we have determined to no longer pursue this project.

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.

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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.

On February 27, 2018, we announced that we entered into an exclusive license agreement with Kaken Pharmaceutical Co., Ltd.

to develop and commercialize a new chemical entity, IDP-131 (KP-470), for the topical treatment of psoriasis.

An early proof of concept study was initiated in the first half of 2019.

If approved by the FDA, IDP-131 could represent a novel drug with an alternative mechanism of action in the topical treatment of psoriasis.

(i) fully developed, (ii) approved by the FDA, (iii) covered by third-party payors or (iv) profitable for distribution is highly uncertain.

Under certain agreements, the Company may be required to make payments contingent upon the achievement of specific developmental, regulatory, or commercial milestones.

In October 2020, we announced that we entered into two exclusive license agreements which present us with unique developmental opportunities to address the unmet need of treatment for myopia in children.

The first of these two licensing agreements is with Eyenovia, Inc.

for the development and commercialization in the United States and Canada of an investigational microdose formulation of atropine ophthalmic solution, which is being investigated for the reduction of pediatric myopia progression, also known as nearsightedness, in children ages 3-12.

We expect to complete enrollment for a Phase 3 study during the second half of 2022.

If approved by the FDA, we believe this investigational product could potentially change the treatment paradigm for the reduction of myopia progression in children.

The second is an exclusive global licensing agreement with BHVI for a myopia control contact lens design developed by BHVI.

The Company plans to pair BHVI's novel contact lens design with our leading contact lens technologies to develop potential contact lens treatments designed to slow the progression of myopia in children.

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").

A Phase 3 study is underway for NOV03, and we anticipate starting an additional Phase 3 study in 2020.

In an Open Label Safety study, NOV03 has achieved its enrollment target.

We expect the readout of topline results from the first of two Phase 3 studies during the second half of 2021 and anticipate filing an NDA in 2022.

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.

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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 NDA for Xipere ™ to the FDA in mid-year 2020.

We are working closely with Clearside on the resubmission of the NDA for Xipere ™ to the FDA.

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.

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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 plan to initiate a Phase 2 study for the development of MT-1303 in ulcerative colitis in 2020.

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.

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 first half of 2021.

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 and Kaken have terminated the license agreement.

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, our Rochester facility in New York and our Lynchburg facility in Virginia.

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.

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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.

SiHy Daily disposable contact lenses were launched in the U.S.

in September 2020.

To further help us meet the anticipated demand of our contact lenses, in 2020, we initiated an expansion of the Company's Lynchburg distribution center.

The new facility is expected to create new jobs over the next five years and expand the overall site to 190,000 square feet, which will provide distribution capabilities for medical devices, primarily contact lens products, and be the main point of distribution for these products in the U.S.

We believe the investments in our Waterford, Rochester and Lynchburg 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

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(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 $8,600 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.

This includes approximately $900 million of repayments with cash on hand and cash generated from operations during 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.

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 approximately $4,200 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.

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.

Securities Litigation") for $1,210 million.

Final court approval of this settlement was granted in January 2021.

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.

Subject to an objector's appeal of the Court's final approval order, this settlement resolves and discharges all claims against the Company in the class action, and as a result resolves the most significant of the Company's remaining legacy legal matters and eliminates 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:

Securities Litigation and extend certain debt maturities, 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 (iii) pay all fees and expenses associated with these transactions (collectively, the "December 2019 Financing and Refinancing Transactions").

On December 18, 2019, the Company issued a conditional notice of redemption for $1,240 million of May 2023 Unsecured Notes on January 16, 2020.

On December 30, 2019, the Company received the proceeds associated with the December 2019 Financing and Refinancing Transactions, satisfying the condition included in the conditional notice of redemption.

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.

Debt Repayments - Excluding the impact of the $1,210 million financing of the U.S.

Securities Litigation settlement discussed above, we have been able to repay (net of additional borrowings) over $7,700 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.

This includes $906 million of repayments with cash on hand during 2019.

2017 Refinancing Transactions - In March, October, November and December of 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 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.

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, through the date of this filing, 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.

(i) redeem $1,240 million of May 2023 Unsecured Notes on January 16, 2020, (ii) finance amounts owed under the Company's $1,210 million settlement agreement relating to the U.S.

Securities Litigation (which is subject to an objector's appeal of the final court approval), the full $1,210 million of which was paid into an escrow fund in accordance with the related settlement agreement and is included in our Restricted cash balance as of December 31, 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 payments of the pending litigation settlement of $1,210 million out to 2028 and 2030, without negatively impacting our working capital available for operations.

2020 Refinancing Transactions - In May and December 2020, we accessed the credit markets and completed a series of transactions, whereby we extended $3,250 million in aggregate maturities of certain debt obligations due to mature in 2022 and 2023 out to 2029 through 2031 and $250 million in aggregate amortization payments due in 2022 out to 2029.

In addition to extending $3,500 million in payments due in 2022 and 2023 to 2029 through 2031, the refinancing transactions replaced secured debt of $1,500 million with unsecured debt.

This provides us with more secured debt capacity under our Restated Credit Agreement and existing indentures if the market for unsecured debt in the future is less favorable.

Further, by replacing $1,500 million of secured debt with unsecured debt we now have additional room under the debt maintenance covenant of our 2023 Revolving Credit Facility that requires us to maintain a first lien net leverage ratio of not greater than 4.00 to 1.00.

The refinancing transactions also repaid in full €1,500 million of debt denominated in euros, thereby reducing our exposure to fluctuations in the value of the euro.

See Note 10, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial Statements for the details of our debt portfolio as of December 31, 2020 and 2019.

The debt repayments and refinancings outlined above have allowed us to:

(i) improve our credit ratings as discussed under “Management's Discussion and Analysis - Liquidity and Capital Resources:

Long-term Debt”, (ii) to 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, reduce our mandatory scheduled principal repayments of our debt obligations in 2020 and 2021 to $0 and $103 million , respectively.

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 December 31, 2019 and February 19, 2020 , the date of this filing, were as follows:

The debt repayments and refinancing transactions outlined above have allowed us to:

(i) improve our credit ratings, (ii) finance amounts owed under the Company's previously announced $1,210 million settlement agreement relating to the U.S.

Securities Litigation (which is subject to an objector's appeal of the final court approval) without negatively impacting our working capital available for operations, (iii) extend maturities of certain debt obligations due out to the year 2025 and beyond, (iv) satisfy all debt mandatory amortization payments and maturities until 2024 and (v) reduce our exposure to fluctuations in the value of the euro.

Our prepayment of debt and refinancing transactions 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 December 31, 2020, were as follows:

(in millions)

As of December 31, 2019

As of February 19, 2020

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Total

$ — $ — $ — $ 2,291 $ 10,632 $ 1,500 $ 2,250 $ 2,012 $ 3,250 $ 1,250 $ 1,000 $ 24,185

In addition, as a result of the changes in our debt portfolio, approximately 80% of our debt is fixed rate debt as of December 31, 2020, as compared to approximately 60% as of January 1, 2016.

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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.

See Note 11, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial Statements for further details 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.”

See Note 10, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial Statements for further details and this Item “— Liquidity and Capital Resources — Liquidity and Debt — Long-term Debt” for additional discussion of these matters.

Cash requirements for future debt repayments including interest can be found in this Item “— Off-Balance Sheet Arrangements and Contractual Obligations.”

Improve Patient Access

Improving patient access to our products, as well as making them more affordable, is at the forefront of our business strategies.

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 reaffirmed this commitment for 2020.

The Patient Access and Pricing Committee remains 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 2021.

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.

Dermatology.com 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.

This 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.

Through Dermatology.com, any patient with a valid prescription is able to purchase medicines at prices ranging from $50 to $115 per prescription.

By doing so, the program provides branded products that offer proven treatment options for certain disease states that typically encounter insurance coverage challenges and high patient out of pocket costs.

This program includes products for acne, actinic keratosis, superficial basal cell carcinoma, barrier repair (e.g.

eczema treatments), wounds and corticosteroid-responsive diseases such as rashes, psoriasis and atopic dermatitis.

All products included in the Dermatology.com program are eligible for Flexible Spending Accounts or Health Saving Accounts and continue to be supported by the Company's Patient Assistance Program, which offers free medication for patients who meet income and other eligibility criteria.

We currently have 15 Ortho Dermatologics branded prescription pharmaceutical products in the Dermatology.com program and anticipate adding additional products in the future, including some investigational therapies that will be added to the program as soon as, and if, they are approved by the FDA.

Bausch Health Assistance Program - We are committed to supporting patients who have lost employment health benefits due to the COVID-19 pandemic, and because it is important to continue prescribed treatments, we are proud to offer certain of our prescription medicines through our Bausch Health Assistance Program.

In the face of the COVID-19 pandemic, some people have financial obstacles that keep them from obtaining and continuing their prescribed treatments.

The purpose of the Bausch Health Patient Assistance Program is to provide eligible unemployed patients in the U.S., who have lost their health insurance due to the COVID-19 pandemic, with certain of our prescription products although their financial circumstances or insurance status may otherwise interfere with their ability to do so.

If approved, patients receive their Bausch Health Companies Inc.

prescription product(s) at no cost to them for up to one year, and may be able to reapply to the program annually if they continue to meet eligibility requirements and have a valid prescription.

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, with the name Dermatology.com limited to 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.

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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 Dermatology.com cash-pay prescription program and certain ophthalmology products, including our Vyzulta ® , Besivance ® , Lotemax ® , Alrex ® , Prolensa ® , Bepreve ® and Zylet ® products.

Our products available under this fulfillment agreement include certain Ortho Dermatologics products, including our Duobrii ® , Bryhali ® , Arazlo ® , 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.

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 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.

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are reaching the age of 65).

To extend our market share in eye-health, we continually identify new products tailored to address these key trends which we develop internally with our own R&D team to generate organic growth.

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 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.

As previously discussed, we acquired global exclusive licenses for a myopia control contact lens design developed by BHVI, which we plan to pair with our leading contact lens technologies to develop potential contact lens treatments designed to slow the progression of myopia in children, and for the commercialization and development in the U.S.

and Canada of:

a microdose formulation of atropine ophthalmic solution, which is being investigated for the reduction of pediatric myopia progression in children ages 3-12;

Xipere ™ which, if approved by the FDA, will be the first treatment for patients suffering from macular edema associated with uveitis;

and 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.

rights to EM-100, which was recently approved by the FDA as Alaway ® Preservative-Free and is the first OTC preservative-free formulation eye drop for the temporary relief of itchy eyes due to pollen, ragweed, grass, animal hair, and dander in adults and children 3 years of age and older.

Recently, we entered into an agreement which provides the Company an option to acquire all ophthalmology assets of Allegro, including risuteganib (Luminate ® ), an investigational compound in retina, which is believed to simultaneously act on the angiogenic, inflammatory and mitochondrial metabolic pathways implicated in diseases such as intermediate dry AMD.

Phase 2a study with risuteganib in intermediate dry AMD met its primary endpoint of vision recovery and Phase 3 testing is in the planning stages.

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 - As we strongly believe in our GI product portfolio, we have taken initiatives to further capitalize on the value of the infrastructure we built around these products to extend our market share by increasing our marketing presence and identifying additional opportunities outside our existing GI portfolio.

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, our Rochester facility in New York to address the expected global demand for our Bausch + Lomb ULTRA ® contact lens and our Lynchburg facility in Virginia to be our main point of distribution for medical devices in the U.S.

During late 2018, we began investing in additional expansion projects at the Waterford and Rochester facilities in order to address the expected global demand for our SiHy Daily disposable contact lenses, which we launched in the U.S.

in August 2020, under the branded name Bausch + Lomb INFUSE ™ SiHy Daily Disposable contact lens.

We believe our recent product launches, licensing arrangements and the investments in our Waterford, Rochester and Lynchburg 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 have identified and executed on certain opportunities which we describe below.

This initiative provided us with positive results, as we experienced consistent growth in demand for our GI products throughout 2017 through 2020, which was evident by our growth in Salix revenues of 22% when comparing 2020 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.

As we focus on reestablishing momentum in the Trulance ® product, we have reviewed certain strategies for the Salix business and as a result, we mutually agreed with US WorldMeds, LLC and Dova Pharmaceuticals to terminate our arrangements to co-promote Lucemyra ® and Doptelet ® effective September 30, 2019 and December 31, 2019, respectively.

Licensing Arrangements - As previously discussed, in April 2019, we entered into two licensing agreements.

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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.

Investment in Next Generation Formulations - Revenues from our Xifaxan ® product increased approximately 2%, 22% and 22% in 2020, 2019 and 2018, 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.

In addition to one R&D program in progress, we have three other R&D programs planned 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.

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 which we believe will help our efforts to stabilize our dermatology business.

Position the Ortho Dermatologics Business for Growth - In 2018, we realigned our Solta aesthetics business and combined it with our medical dermatology business, creating a complete dermatology portfolio.

We continue to make investments in our Solta portfolio and anticipate building out our Solta sales force, particularly in Europe to address the growing demand.

Our Ortho Dermatologics business continues to work towards improving the treatment options for medical dermatology patients.

In light of persistent insurance coverage pressures within the United States for patients needing topical acne and psoriasis products, we are exploring both strategic e-commerce and partnership expansion opportunities which can enable increased accessibility for patients.

We are continuing to invest in our on market products and are evaluating various opportunities for our key pipeline products.

In support of the complete dermatology portfolio, 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 Dermatology.com, our cash-pay prescription program previously discussed.

With these actions substantially complete, we believe our Ortho Dermatologics business is positioned for growth in 2020.

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.

(i) rebranding our dermatology business including our aesthetics business, (ii) appointing a new leader, (iii) making key investments in our core medical device and dermatological products portfolios, (iv) right sizing and reorganizing our dermatology sales force across roughly 195 sales 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.

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.

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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 2019 were in excess of $75 million.

We expect additional launches of Next Generation Thermage FLX ® in Asia and Europe in the near term, paced by country-specific regulatory registrations.

These launches have been successful as Next Generation Thermage FLX ® revenues for 2020 and 2019 were $142 million and $77 million, respectively.

We expect additional launches of Next Generation Thermage FLX ® in Europe in the near term, paced by country-specific regulatory registrations.

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 Pharmaceutical Co., Ltd.

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 was initiated in the first half of 2019.

If approved by the FDA, IDP-131 could represent a novel drug with an alternative mechanism of action in the topical treatment of psoriasis.

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 Arazlo TM (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 Dermatology.com cash-pay prescription program, we believe we have set the groundwork to position the Ortho Dermatologics business for growth.

In early 2018, we identified seven of our products, which we called the “Significant Seven”, that, at the time, we believed would be among the key drivers of our future growth and which we anticipated would have significant revenues in the future.

In 2019, the reported revenue of the Significant Seven products was approximately $268 million, an increase of 68% as compared to 2018.

Additionally, at the end of 2017, we stated that we believed that our Dermatology business, Ortho Dermatologics, had

the potential to double its revenue within five years based on new product introductions including Siliq ® , Duobrii ® , Bryhali ® , Altreno ® , and Arazlo ™ .

We expect our future company-wide revenue growth will be driven by a broader group of products that have existed or since emerged from within our product portfolio (e.g., Xifaxan ® , Thermage ® , Biotrue ® ONEday, Aplenzin ® , Bausch + Lomb Ultra ® , Jublia ® , enVista ® ), from our internal development pipeline and/or from business development efforts (e.g.

Trulance ® ).

As our portfolio evolves over time our promotional priorities shift based on where we see the greatest potential to drive profitable growth and to improve returns on invested capital.

Our company-wide prospects today are different, more wide-ranging, and we believe that they continue to be as attractive as they were at the time we communicated our views for the “Significant Seven” and the near-term prospects for Ortho Dermatologics.

While we continue to believe that the “Significant Seven” and Ortho Dermatologics will be important contributors to future growth, we are withdrawing our existing outlook with respect to the anticipated revenue for the Significant Seven group of products and the doubling in revenue of the Ortho Dermatologics business and, going forward, we do not expect to provide any specific qualitative or quantitative outlooks as to the revenue related to these groups.

We plan to continue to provide the revenues for our top products, for both the total Company as well as for our reportable segments, in the earnings material prepared by the Company.

We 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 ® (launched in July 2017), will provide a diverse choice of psoriasis treatments to doctors and patients.

Acne - In support of our established acne product portfolio, we have developed and launched several products, which includes Arazlo ® (tazarotene) Lotion (launched in June 2020), Altreno ® (launched in the U.S.

in October 2018), the first lotion (rather than a gel or cream) product containing tretinoin for the treatment of acne, and Retin-A Micro ® 0.06% (launched in January 2018).

We also have two other unique acne projects in our pipeline 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.

Business Trends

In addition to the actions previously outlined, the following events have affected and may affect our business trends:

In addition to the actions previously outlined, the events described below have affected and may affect our business trends:

Health Care Reform

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(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 cover gap.

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.

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For 2020, 2019 and 2018, we also incurred costs of $131 million, $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.

Also, it is possible, as discussed further below, that 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.

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 and the recent change in administration.

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.

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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.

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 prior 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, 2021.

The draft application guidelines are available with the final guidelines to be published in February 2020.

The new regulations will change the mechanics of establishing the pricing for products submitted for approval after August 21, 2019;

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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.

In July 2020, U.S.

President Donald Trump signed four Executive Orders related to drug pricing, including orders addressing:

(i) Part D rebate reform, (ii) the provision of deeply discounted insulin and/or an EpiPen to patients of Federally Qualified Health Centers, (iii) drug importation from Canada and (iv) most favored nation pricing for Medicare.

In November 2020, U.S.

President Donald Trump announced the Most Favored Nation Model for Medicare Part B Payment which was to be implemented by the Centers for Medicare & Medicaid Services Innovation Center on January 1, 2021;

however, it has not been implemented, as it is currently being challenged in court.

It is also uncertain whether the Biden administration intends to reverse these measures or adopt similar policy initiatives.

However, President Biden and several members of the current U.S.

Congress have indicated that lowering drug prices is a legislative and political priority, and some have introduced proposals that seek to address drug pricing.

We are currently reviewing those Executive Orders and the Most Favored Nation Model, the impact of which is uncertain at this time.

Other legislative efforts relating to drug pricing have been enacted and others have been proposed at the U.S.

federal and state levels.

For instance, certain states have enacted legislation related to prescription drug pricing transparency.

Several states have passed importation legislation and Florida is working with the U.S.

government to implement an importation program from Canada.

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.

We continually review newly enacted and proposed U.S.

federal and state legislation, as well as proposed rulemaking and guidance published by the Department of Health and Human Services and the FDA;

however, at this time, it is unclear the effect these matters may have on our businesses.

Generic Competition and Loss of Exclusivity

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Finally, for certain of our products that lost patent or regulatory exclusivity in prior years, we anticipate that generic competitors may launch in 2021 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;

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A number of our products already face generic competition.

Prior to and during 2019, 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.

Prior to and during 2020, in the U.S., these products include, among others, Ammonul ® , Apriso ® , Benzaclin ® , Bupap ® , Cuprimine ® , Demser ® , Edecrin ® , Elidel ® , Glumetza ® , Istalol ® , Isuprel ® , Locoid ® Lotion, Lotemax ® Suspension, Mephyton ® , Migranal ® , MoviPrep ® , Nitropress ® , Solodyn ® , Syprine ® , Timoptic ® in Ocudose ® , Uceris ® Tablet, Virazole ® , Wellbutrin XL ® , Xenazine ® , Zegerid ® and Zovirax ® cream.

In Canada, these products include, among others, Glumetza ® , Wellbutrin ® XL and Zovirax ® ointment.

2020 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 entrance 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 2020 include, Migranal ® and MoviPrep ® .

In aggregate, these products accounted for less than 1% of our total revenues in 2020.

While certain of these products have already begun experiencing an adverse impact on volume and/or pricing as a result of the entry into the market of generic competition, we are unable to predict the complete magnitude or timing of this impact.

2021 through 2025 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 LOE and/or generic competition in the U.S.

during the years 2021 through 2025.

These products and year of expected loss of exclusivity include, but are not limited to, Clindagel ® (2020), Lotemax ® Gel (2021), Migranal ® (2021), 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 products and year of expected LOE include, but are not limited to, Clindagel ® (2021), Lotemax ® Gel (2021), Noritate ® (2021), Targretin ® Gel (2022), Xerese ® (2022) and certain other products that are subject to settlement agreements which could impact their exclusivity during the years 2021 through 2025.

aggregate, these products accounted for 2% of our total revenues in 2020.

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.

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.

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 OTC Product Patent Expiry - 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 3% of our total revenues in 2020.

The PreserVision ® 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 product.

In addition, for a number of our products (including Uceris ® , Relistor ® , Plenvu ® , Xifaxan ® 200mg and 550mg and Jublia ® , in the U.S.

and Jublia ® in Canada), we have commenced (or anticipate commencing) and have ongoing infringement proceedings against potential generic competitors in the U.S.

The PreserVision ® U.S.

formulation patent expires in 2021, but a patent covering methods of using the formulation remains in force until 2026.

While the Company cannot predict the magnitude or timing of the impact from its patent expiry, this is an OTC product and thus, the impact is not expected to be as significant as the LOE of a branded pharmaceutical product.

In addition, for a number of our products (including Relistor ® , Plenvu ® , Xifaxan ® 550mg, Bryhali ® , Duobrii ® 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.

If we are not successful in these proceedings, we may face increased generic competition for these products.

Bryhali ® Lotion, 0/01% - In December 2019, the Company announced that it had reached an agreement to resolve the outstanding intellectual property litigation with Glenmark Pharmaceuticals, Ltd.

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").

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The parties have agreed to dismiss all litigation related to Bryhali ® Lotion, and all intellectual property protecting Bryhali ® Lotion remains intact.

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.

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.

Xifaxan ® 550mg Patent Litigation (Norwich Pharmaceuticals Inc.) - On February 17, 2020, the Company and Alfasigma received a Notice of Paragraph IV Certification from Norwich Pharmaceuticals Inc.

(“Norwich”), in which Norwich asserted that certain U.S.

patents, each of which is listed in the FDA’s Orange Book for Salix Pharmaceuticals, Inc.’s (“Salix Inc.”) Xifaxan ® tablets, 550 mg, are either invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Norwich’s generic rifaximin tablets, 550 mg, for which an ANDA has been filed by Norwich.

and its affiliates and Alfasigma (the “Plaintiffs”) have forty-five (45) days from the date of receipt of notice to file suit against Norwich pursuant to the Hatch-Waxman Act, alleging infringement by Norwich of one or more claims of each of the Xifaxan ® Patents, thereby triggering a 30-month stay of the approval of Norwich’s ANDA for rifaximin tablets, 550 mg.

The Plaintiffs intend to file suit per the regulations.

The Company remains confident in the strength of the Xifaxan ® patents and will continue to vigorously pursue this matter 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.

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.

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.

On May 1, 2020, the Company filed suit against Perrigo pursuant to the Hatch-Waxman Act, alleging infringement by Perrigo of one or more claims of the Bryhali ® Patents, thereby triggering a 30-month stay of the approval of the Perrigo ANDA for halobetasol propionate lotion.

On September 3, 2020, this action was consolidated with the action between the Company and Perrigo described below, regarding Perrigo’s ANDA for generic Duobrii ® (halobetasol propionate and tazarotine) lotion.

The Company remains confident in the strength of the Bryhali ® patents and intends to vigorously pursue this matter and defend its intellectual property.

Duobrii ® Lotion (Perrigo) - On July 23, 2020, the Company received a Notice of Paragraph IV Certification from Perrigo, in which Perrigo asserted that certain U.S.

patents, each of which is listed in the FDA's Orange Book for Duobrii ® (halobetasol propionate and tazarotine) lotion, are either invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Perrigo’s generic lotion, for which an ANDA has been filed by Perrigo.

On August 28, 2020, the Company filed suit against Perrigo pursuant to the Hatch-Waxman Act, alleging infringement by Perrigo of one or more claims of the Duobrii ® Patents, thereby triggering a 30-month stay of the approval of the Perrigo ANDA.

On September 3, 2020, this action was consolidated with the action between the Company and Perrigo described above, regarding Perrigo’s ANDA for generic Bryhali ® (halobetasol propionate) lotion.

We remain confident in the strength of the Duobrii ® patents and will vigorously defend our intellectual property.

Xifaxan ® 550mg Patent Litigation (Actavis) - On March 23, 2016, the Company initiated litigation against Actavis Laboratories FL, Inc.’s ("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.

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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.

Xifaxan ® 550mg Patent Litigation (Sandoz) - 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 U.S.

before January 1, 2028.

The Company did not make any financial payments or other transfers of value as part of this agreement with Sandoz.

Xifaxan ® 550mg Patent Litigation (Norwich) - 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.

On November 13, 2020, an additional three patents alleged to be infringed by Norwich were added to the suit.

Xifaxan ® 500mg is protected by 26 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 this matter and defend its intellectual property.

Xifaxan ® 200mg and 550mg Patent Litigation (Sun) - In April 2019, the Company and its licensor, Alfasigma, commenced litigation against Sun Pharmaceutical Industries Ltd.

(“Sun”), alleging patent infringement by Sun’s filing of its ANDA for Xifaxan ® (rifaximin) 200 mg tablets.

This suit had been filed following receipt of a Notice of Paragraph IV Certification from Sun, in which Sun asserted that the U.S.

patents listed in the FDA's Orange Book for the Company’s Xifaxan ® tablets, 200 mg, were either invalid, unenforceable and/or would not be infringed by the commercial manufacture, use or sale of Sun’s generic rifaximin tablets, 200 mg.

Subsequently, on August 10, 2020, the Company received an additional Notice of Paragraph IV Certification from Sun, in which Sun asserted that the U.S.

patents listed in the FDA's Orange Book for the Company’s Xifaxan ® tablets, 550 mg, were either invalid, unenforceable and/or would not be infringed by the commercial manufacture, use or sale of Sun’s generic rifaximin tablets, 550 mg, for which an ANDA had been filed by Sun.

On September 22, 2020, the Company announced that an agreement had been reached with Sun that resolved the outstanding intellectual property disputes with Sun regarding Xifaxan ® (rifaximin) 200 mg and 550 mg tablets.

Under the terms of the agreement, the parties agreed to dismiss all litigation related to Xifaxan ® (rifaximin) and all intellectual property protecting Xifaxan ® (rifaximin) 200 mg and 550 mg tablets will remain intact and enforceable until expiry in July and October 2029, respectively.

The agreement also grants Sun a non-exclusive license to the intellectual property relating to Xifaxan ® (rifaximin) 200 mg and 550 mg tablets in the U.S.

beginning January 1, 2028 (or earlier under certain circumstances).

Under the terms of the agreement, beginning January 1, 2028 (or earlier under certain circumstances), Sun will have the right to market royalty-free generic versions of Xifaxan ® (rifaximin) 200 mg and 550 mg tablets, should it receive approval from the FDA on its ANDAs.

Sun 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 U.S.

before January 1, 2028.

Relistor ® Tablets Patent Litigation (Actavis) - On December 6, 2016, the Company initiated litigation against Actavis, which alleged infringement by Actavis of one or more claims of U.S.

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.

Actavis has appealed this decision to the U.S.

Court of Appeals for the Federal Circuit.

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 Note 21, "LEGAL PROCEEDINGS" to our audited Consolidated Financial Statements, the Company initiated various infringement proceedings against this and other generic competitors.

The Company continues to believe that its Uceris ® Tablet-related patents are enforceable and is proceeding in the ongoing litigation between the Company and the generic competitor;

however, the ultimate outcome of the matter is not predictable.

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.

On November 22, 2019, the Company filed a Notice of Appeal with respect to the claim construction in the Court of Appeals for the Federal Circuit.

On December 18, 2020, the Court of Appeals for the Federal Circuit affirmed the District Court’s claim construction.

The ultimate impact of this generic competitor on our future revenues cannot be predicted;

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Generic Competition to Jublia ® - On June 6, 2018, the U.S.

Patent and Trial Appeal Board completed its inter partes review for an Orange Book-listed patent covering Jublia ® and issued a written determination invalidating such patent.

Although the Company is not aware of any imminent launches of a generic competitor to Jublia ® , the ultimate impact of this decision on our

future revenues cannot be predicted.

Patent and Trial Appeal Board (“PTAB”) completed its inter partes review for an Orange Book-listed patent covering Jublia ® (U.S.

Patent No 7,214,506 (the “’506 Patent”)) 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.

As a result of a settlement, a joint motion to terminate the proceedings was filed on November 12, 2020 and, on January 8, 2021, the PTAB granted this motion.

The ‘506 Patent, therefore, remains valid and enforceable and expires in 2026.

Jublia ® revenues for 2020, 2019 and 2018 were approximately $111 million, $110 million and $89 million, respectively.

The Company continues to believe that the Jublia ® related patent is valid and enforceable and, on August 7, 2018, an appeal of this decision was filed.

The ultimate outcome of this matter is not predictable.

Jublia ® continues to be covered by eight remaining Orange Book-listed patents owned by the Company, which expire in the years 2028 through 2034.

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.

Jublia ® is covered by fourteen additional 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 three separate defendants.

See Note 20, "LEGAL PROCEEDINGS" to our audited Consolidated Financial Statements for further details regarding certain infringement proceedings.

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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.

Our leadership team actively manages the Company's pipeline in order to identify 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.

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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 this Form 10-K for additional information on our competition risks.

SELECTED FINANCIAL INFORMATION

The following table provides selected financial information for each of the last three years:

Years Ended December 31,

(in millions, except per share data)

Operating (loss) income

“Risk Factors” of this Form 10-K for additional information on our competition risks.

FINANCIAL PERFORMANCE HIGHLIGHTS

The following table provides financial performance highlights for each of the last three years:

Years Ended December 31, Change

(in millions, except per share data) 2020 2019 2018 2019 to 2020 2018 to 2019

Revenues $ 8,027 $ 8,601 $ 8,380 $ (574) $ 221

Operating income (loss) $ 676 $ (203) $ (2,384) $ 879 $ 2,181

Loss before benefit from income taxes $ (934) $ (1,837) $ (4,154) $ 903 $ 2,317

Net (loss) income

Net (loss) income attributable to Bausch Health Companies Inc.

(Loss) earnings per share attributable to Bausch Health Companies Inc.

Net loss $ (559) $ (1,783) $ (4,144) $ 1,224 $ 2,361

Net loss attributable to Bausch Health Companies Inc.

$ (560) $ (1,788) $ (4,148) $ 1,228 $ 2,360

Loss per share attributable to Bausch Health Companies Inc.

Basic $ (1.58) $ (5.08) $ (11.81) $ 3.50 $ 6.73

Diluted $ (1.58) $ (5.08) $ (11.81) $ 3.50 $ 6.73

Financial Performance

Summary of 2020 Compared with 2019

Revenues for 2020 and 2019 were $8,027 million and $8,601 million, respectively, a decrease of $574 million, or 7%.

The decrease was primarily driven by:

(i) lower volumes driven by:

(a) social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed, and (b) the impact of the LOE of certain products, (ii) the unfavorable effect of foreign currencies, primarily in Latin America, and (iii) the impact of divestitures and discontinuations.

These decreases in our revenues were partially offset by the incremental sales of our Trulance ® product, which we added to our portfolio in March 2019 as part of the acquisition of certain assets of Synergy.

Net realized pricing was flat with increases in Bausch + Lomb/International and Diversified Products being offset by decreases in Salix and Ortho Dermatologics.

The changes in our segment revenues and segment profits are discussed in further detail in the subsequent section titled “Reportable Segment Revenues and Profits”.

Operating income for 2020 was $676 million compared to Operating loss for 2019 of $203 million, an increase in our operating results of $879 million which reflects, among other factors:

• a decrease in contribution (product sales revenue less cost of goods sold, exclusive of amortization and impairments of intangible assets) of $470 million.

The decrease was primarily driven by:

(i) the decrease in revenues, as previously discussed and (ii) higher manufacturing variances primarily due to the impacts of the COVID-19 pandemic.

The decrease was partially offset by lower third-party royalty costs;

• a decrease in Selling, general, and administrative (“SG&A”) expenses of $187 million, primarily attributable to profit protection measures taken to manage and reduce operating expenses during the COVID-19 pandemic;

• a decrease in R&D of $19 million primarily attributable to social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed;

• a decrease in Amortization of intangible assets of $252 million primarily attributable to fully amortized intangible assets no longer being amortized in 2020;

• an increase in Asset impairments, including loss on assets held for sale of $39 million.

Asset impairments, including loss on assets held for sale in 2020 were primarily related to:

(i) reclassifying a business within our Bausch + Lomb/International segment as held for sale and (ii) certain product lines as a result of changes to forecasted sales.

Impairments during 2019 were primarily related to:

(i) certain product lines as a result of changes to forecasted sales due to generic competition and other factors and (ii) impairments related to assets being classified as held for sale;

• a decrease in Other expense (income), net of $960 million, primarily attributable the decrease in net charges to Litigation and other matters.

The decrease in Litigation and other matters was primarily related to the settlement of a legacy U.S.

securities class action matter (which is subject to an objector's appeal of the final court approval) in 2019, to which the Company and the other settling defendants admitted no liability as to the claims against it and denied all allegations of wrongdoing.

Operating income for 2020 was $676 million compared to Operating loss for 2019 of $203 million and includes non-cash charges for Depreciation and amortization of intangible assets of $1,825 million and $2,075 million, Asset impairments,

including loss on assets held for sale of $114 million and $75 million and Share-based compensation of $105 million and $102 million for 2020 and 2019, respectively.

Our Loss before benefit from income taxes for 2020 and 2019 was $934 million and $1,837 million, respectively, an increase in our results before benefit from income taxes of $903 million.

The decrease in our Loss before benefit from income taxes is primarily attributable to:

(i) the increase in our operating results of $879 million, as previously discussed, and (ii) a decrease in Interest expense of $78 million as a result of:

(a) a lower weighted average stated rate of interest, (b) lower interest as a result of debt repayments during the year and (c) a benefit related to the Company's cross-currency swaps.

These decreases in Interest expense were partially offset by the interest associated with $1,210 million of additional financing in December 2019 relating to the U.S.

Securities Litigation.

The decrease in our Loss before benefit from income taxes was partially offset by:

(i) an unfavorable net change in Foreign exchange and other of $38 million and (ii) an increase in the Loss on extinguishment of debt of $17 million.

Net loss attributable to Bausch Health Companies Inc.

for 2020 and 2019 was $560 million and $1,788 million, respectively, an increase in our results of $1,228 million.

The increase in our results was primarily due to:

(i) the decrease in Loss before benefit from income taxes of $903 million, as previously discussed, and (ii) the favorable net change in the Benefit from income taxes of $321 million.

Summary of 2019 Compared with 2018

Revenues for 2019 and 2018 were $8,601 million and $8,380 million, respectively, an increase of $221 million, or 3%.

The increase was primarily driven by:

(i) higher gross selling prices, (ii) higher volumes and (iii) sales of our Trulance ® product, which we added to our portfolio in March 2019 as part of the acquisition of certain assets of Synergy .

(i) higher net realized pricing, (ii) higher volumes and (iii) sales of our Trulance ® product, which we added to our portfolio in March 2019 as part of the acquisition of certain assets of Synergy.

These increases in Revenues were partially offset by:

(i) the unfavorable effect of foreign currencies , primarily in Europe, Asia and Latin America, (ii) the impact of divestitures and discontinuations and (iii) higher sales deductions.

The changes in our segment revenues and segment profits are discussed in further detail in the subsequent section titled “Reportable Segment Revenues and Profits”.

(i) the unfavorable effect of foreign currencies, primarily in Europe, Asia and Latin America, and (ii) the impact of divestitures and discontinuations.

Operating loss for 2019 and 2018 was $203 million and $2,384 million, respectively, an increase in our operating results of $2,181 million which reflects, among other factors:

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(i) the unfavorable effect of foreign currencies, (ii) the impact of divestitures and discontinuations, (iii) higher sales deductions and (iv) the amortization of the inventory fair value step-up recorded in acquisition accounting related to the inventories we acquired as part of the acquisition of certain assets of Synergy;

an increase in Selling, general, and administrative expenses (“SG&A”) of $81 million , primarily attributable to:

• an increase in SG&A expenses of $81 million, primarily attributable to:

(i) higher selling, advertising and promotion expenses, (ii) the impact of the acquisition of certain assets of Synergy, (iii) costs in 2019 attributable to our IT infrastructure improvement projects and (iv) the charge associated with the termination of a co-promotional agreement with US WorldMeds, LLC.

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(i) Salix reporting unit upon adopting the new guidance for goodwill impairment accounting at January 1, 2018, (ii) Ortho Dermatologics reporting unit due to unforeseen changes in business dynamics during the three months ended March 31, 2018 and (iii) Dentistry reporting unit as a result of revised forecasts due to changing market conditions during the three months ended December 31, 2018;

a decrease in Asset impairments of $493 million , primarily related to specific impairments in 2018 as a result of:

• a decrease in Asset impairments, including loss on assets held for sale of $493 million, primarily related to specific impairments in 2018 as a result of:

(i) decreases in forecasted sales for the Uceris ® Tablet product due to generic competition and (ii) decreases in forecasted sales for the Arestin ® product due to changing market conditions;

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(i) an increase in net charges to Litigation and other matters primarily related to the settlement of a legacy U.S.

securities class action matter (which is subject to final court approval) in 2019, to which the Company and the other settling defendants admitted no liability as to the claims against it and deny all allegations of wrongdoing and (ii) Acquired in-process research and development costs (“IPR&D”) incurred during 2019 associated with the upfront payments to enter into certain exclusive licensing agreements.

securities class action matter (which is

subject to an objector's appeal of the final court approval) in 2019, to which the Company and the other settling defendants admitted no liability as to the claims against it and deny all allegations of wrongdoing and (ii) Acquired in-process research and development costs incurred during 2019 associated with the upfront payments to enter into certain exclusive licensing agreements.

These increases in other expenses were partially offset by the expected receipt for the achievement of a milestone related to a certain product.

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The increase in our results was primarily due to the decrease in Loss before benefit from income taxes of $2,317 million, as previously discussed, and the increase in the Benefit from income taxes of $44 million.

Summary of 2018 Compared with 2017

Revenues for 2018 and 2017 were $8,380 million and $8,724 million, respectively, a decrease of $344 million, or 4%.

The decrease was primarily driven by:

(i) the impact of 2017 divestitures and discontinuations and (ii) lower volumes primarily as a result of the loss of exclusivity for a number of products in our Diversified Products and Ortho Dermatologics segments which were partially offset by higher volumes in our Bausch + Lomb/International segment.

These decreases in Revenue were partially offset by:

(i) higher gross selling prices, (ii) lower sales deductions and (iii) the favorable effect of foreign currencies, primarily in Europe and Asia .

Operating loss for 2018 was $2,384 million, as compared to operating income for 2017 of $102 million, a decrease of $2,486 million.

Our operating loss for 2018 compared to our operating income for 2017 reflects, among other factors:

a decrease in contribution (product sales revenue less cost of goods sold, exclusive of amortization and impairments of intangible assets) of $127 million.

The decrease was primarily driven by the impact of 2017 divestitures and discontinuations, partially offset by:

(i) higher gross selling prices, (ii) lower sales deductions, (iii) lower third-party royalty costs and (iv) the favorable effect of foreign currencies;

a decrease in SG&A of $109 million, primarily attributable to:

(i) the impact of 2017 divestitures and discontinuations, (ii) a decrease in legal expenses as we resolved certain legacy legal issues and (iii) a decrease in bad debt expense.

The decrease was partially offset by:

(i) higher advertising and promotion expenses, (ii) higher compensation costs and (iii) the unfavorable impact of the effect of foreign currencies;

an increase in R&D of $52 million;

a decrease in Amortization of intangible assets of $46 million, primarily attributable to:

(i) the impact of the change in the estimated useful life of the Xifaxan ®- related intangible assets made in September 2018 to reflect management's changes in assumptions, (ii) lower amortization as a result of impairments to intangible assets and divestitures and (iii) discontinuances of product lines during 2017 as the Company focuses on its core assets.

These decreases were partially offset by the impact of changes in estimates made in 2017 to reduce the remaining useful lives of certain products and the Salix brand name to reflect management's changes in assumptions;

an increase in Goodwill impairments of $2,010 million.

In 2018, we recognized Goodwill impairments of $2,322 million in connection with:

(i) impairment to the goodwill of our Salix reporting unit recognized upon adopting new accounting guidance at January 1, 2018, (ii) impairment to the goodwill of the Ortho Dermatologics reporting unit due to unforeseen

changes in business dynamics and (iii) impairment to the goodwill of the Dentistry reporting unit as a result of revised forecasts due to changing market conditions during the three months ended December 31, 2018.

In 2017, we recognized Goodwill impairments of $312 million in connection with a change in reporting unit during the three months ended September 30, 2017;

a decrease in Asset impairments of $146 million, as a result of Asset impairments of $714 million, recognized in 2017, primarily related to the Sprout and Obagi businesses being classified as held for sale, compared to Asset impairments of $568 million, in 2018, that were primarily due to decreases in forecasted sales for the Uceris ® Tablet product and other product lines due to generic competition;

an increase in Acquisition-related contingent consideration of $280 million as a result of a fair value adjustments in 2017 which reflected a decrease in forecasted sales for specific products, including Addyi ® ;

a decrease in the net charges to Litigation and other matters of $253 million.

Litigation and other matters are included in Other expense (income), net, and are primarily associated with estimated settlements of certain legacy matters;

a decrease in net gains on sales of businesses and other assets of $586 million.

In order to improve our capital structure and simplify our operations, during 2017, we divested certain businesses and assets not aligned with our core business objectives.

Included in Other expense (income), net is the net loss on sales of businesses and other assets of $6 million for 2018 as compared to the net gain on sales of businesses and other assets $580 million in 2017.

Operating loss for 2018 of $2,384 million and Operating income for 2017 of $102 million includes non-cash charges for Depreciation and amortization of intangible assets of $2,819 million and $2,858 million, Goodwill impairments of $2,322 million and $312 million, Asset impairments of $568 million and $714 million and Share-based compensation of $87 million and $87 million, respectively.

Our Loss before benefit from income taxes for 2018 and 2017 was $4,154 million and $1,741 million, respectively, an increase of $2,413 million.

The increase in our Loss before benefit from income taxes is primarily attributable to:

(i) the decrease in our operating results of $2,486 million, as previously discussed and (ii) an unfavorable net change in Foreign exchange and other of $84 million.

These changes in Loss before benefit from income taxes were partially offset by:

(i) a decrease in Interest expense of $155 million as a result of lower principal amounts of outstanding debt, partially offset by the effect of higher interest rates during 2018 and (ii) the decrease in the Loss on extinguishment of debt of $3 million.

Net loss attributable to Bausch Health Companies Inc.

for 2018 was $4,148 million as compared to Net income attributable to Bausch Health Companies Inc.

for 2017 of $2,404 million, a decrease of $6,552 million.

The decrease in our results was primarily due to:

(i) the decrease in the Benefit from income taxes of $4,135 million which in 2017 included non-cash income tax benefits related to the Company’s internal corporate restructuring and the accounting for the Tax Cuts and Jobs Act (the “Tax Act”) and (ii) the increase in Loss before benefit from income taxes of $2,413 million previously described.

RESULTS OF OPERATIONS

Our results for the years 2020, 2019 and 2018 were as follows:

Years Ended December 31,

(in millions)

Years Ended December 31, Change

(in millions) 2020 2019 2018 2019 to 2020 2018 to 2019

Product sales $ 7,924 $ 8,489 $ 8,271 $ (565) $ 218

Other revenues 103 112 109 (9) 3

8,027 8,601 8,380 (574) 221

Cost of goods sold (excluding amortization and impairments of intangible assets) 2,202 2,297 2,309 (95) (12)

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Goodwill impairments — — 2,322 — (2,322)

Asset impairments

Restructuring and integration costs

Asset impairments, including loss on assets held for sale 114 75 568 39 (493)

Restructuring, integration and separation costs 22 31 22 (9) 9

Acquisition-related contingent consideration 48 12 (9) 36 21

Other expense (income), net 454 1,414 (20) (960) 1,434

Operating (loss) income

7,351 8,804 10,764 (1,453) (1,960)

Operating income (loss) 676 (203) (2,384) 879 2,181

Interest income 13 12 11 1 1

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Benefit from income taxes 375 54 10 321 44

Net (loss) income

Net loss (559) (1,783) (4,144) 1,224 2,361

Net income attributable to noncontrolling interest (1) (5) (4) 4 (1)

Net (loss) income attributable to Bausch Health Companies Inc.

Net loss attributable to Bausch Health Companies Inc.

$ (560) $ (1,788) $ (4,148) $ 1,228 $ 2,360

A detailed discussion of the year-over-year changes of the Company’s 2019 results compared with that of 2018 can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019 filed on February 19, 2020.

2020 Compared with 2019

Our revenues are primarily generated from product sales, primarily in the therapeutic areas of eye-health, GI and dermatology that consist of:

Our 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).

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Contract service revenue is derived primarily from contract manufacturing for third parties and is not material.

See Note 23, "SEGMENT INFORMATION" to our audited Consolidated Financial Statements for the disaggregation of revenue which depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by the economic factors of each category of customer contracts.

Our revenue was $8,601 million and $8,380 million for 2019 and 2018 , respectively, an increase of $221 million , or 3% .

The increase was primarily driven by:

(i) higher gross selling prices of $213 million primarily in our Salix and Bausch + Lomb/International segments, (ii) higher volumes of $130 million primarily in our Bausch + Lomb/International and Salix segments, partially offset by lower volumes in our Ortho Dermatologics and Diversified Products segments, (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 $55 million and (iv) an increase in other revenues of $3 million .

The increases in our revenues were partially offset by:

(i) the unfavorable effect of foreign currencies , primarily in Europe, Asia and Latin America, of $112 million , (ii) the impact of divestitures and discontinuations of $54 million and (iii) higher sales deductions of $14 million primarily in our Diversified Products segment.

Our segment revenues and segment profits are discussed in detail in the subsequent section titled "Reportable Segment Revenues and Profits".

See Note 22, "SEGMENT INFORMATION" to our audited Consolidated Financial Statements for the disaggregation of revenues which depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by the economic factors of each category of customer contracts.

Our revenues were $8,027 million and $8,601 million for 2020 and 2019, respectively, a decrease of $574 million, or 7%.

The decrease was primarily driven by:

(i) lower volumes of $528 million primarily in our Bausch + Lomb/International and Diversified Products segments primarily due to social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed, (ii) the unfavorable effect of foreign currencies of $39 million primarily in Latin America and (iii) the impact of divestitures and discontinuations of $20 million.

The decreases in our revenues were partially offset by 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.

Net realized pricing was flat with increases in Bausch + Lomb/International and Diversified Products being offset by decreases in Salix and Ortho Dermatologics.

Our 2020 revenues were most negatively impacted during our second quarter by the social restrictions and other precautionary measures taken in response to the COVID-19 pandemic.

Our revenues for the three months ended December 31, 2020 and 2019 were $2,213 million and $2,224 million, respectively, a decrease of $11 million.

The changes in our year over year segment revenues and segment profits, including the impacts of COVID-19 pandemic related matters for 2020, are discussed in further detail in the respective subsequent sections “ — Reportable Segment Revenues and Profits”.

Cash Discounts and Allowances, Chargebacks and Distribution Fees

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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.

As more fully discussed in Note 2, "SIGNIFICANT ACCOUNTING POLICIES" to our audited Consolidated Financial Statements, the Company continually monitors the provisions for these deductions and evaluates the estimates used as additional information becomes available.

Price appreciation credits are generated when we increase a product’s wholesaler acquisition cost (“WAC”) under our contracts with certain wholesalers.

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Years Ended December 31,

(in millions)

(in millions) Amount Pct.

Gross product sales $ 12,960 100.0 % $ 13,776 100.0 %

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Discounts and allowances 621 4.8 % 776 5.6 %

Returns 120 0.9 % 113 0.8 %

Rebates 2,174 16.8 % 2,265 16.4 %

Chargebacks 1,925 14.9 % 1,938 14.1 %

Distribution service fees 196 1.5 % 195 1.5 %

5,036 38.9 % 5,287 38.4 %

Net product sales $ 7,924 61.1 % $ 8,489 61.6 %

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Changes in cash discounts and allowances, returns, rebates, chargebacks and distribution fees as a percentage of gross product sales were primarily driven by:

discounts and allowances as a percentage of gross product sales was lower primarily due to lower gross product sales of higher discounted generics, such as Glumetza ® authorized generic ("AG"), Xenazine ® AG, Targretin ® 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 Elidel ® AG (December 2018), Uceris ® AG (July 2018) and Apriso ® AG (December 2019) and (ii) higher sales of Xifaxan ® ;

returns as a percentage of gross product sales was lower primarily due to:

(i) better inventory practices and disciplines and (ii) lower gross product sales of Isuprel ® and Mephyton ® as a result of generic competition.

Additionally, over the last several years the Company increased its focus on maximizing operational efficiencies and reducing product returns.

The Company continually takes actions to address product returns including but not limited to:

• discounts and allowances as a percentage of gross product sales was lower primarily due to lower discount rates for certain generic products, such as Glumetza ® AG, Migranal ® AG and Syprine ® AG, partially offset by the impact of higher gross product sales of Xifaxan ® and Lotemax ® AG;

• returns as a percentage of gross product sales was relatively unchanged.

Over the last several years, the Company increased its focus on maximizing operational efficiencies and continues to take actions to reduce product returns, including but not limited to:

(i) monitoring and reducing customer inventory levels, (ii) instituting disciplined pricing policies and (iii) improving contracting.

These actions resulted in improved sales return experience related to current branded products and previously genericized products.

As a result, for the year 2019 as compared to 2018, the provision for sales returns improved by a net of $180 million.

During the three months ended September 30, 2019 and 2018 we recorded a reduction in variable consideration for sales returns of approximately $80 million and $30 million , respectively, related to past sales.

The Company's actual return rate experience in the current period was lower than its historical rate experience primarily in its:

(i) GI business primarily related to Glumetza ® SLX and Xifaxan ® , (ii) neurology business, primarily related to Wellbutrin ® and Nitropress ® and (iii) generics business, primarily related to Zegerid ® AG and Glumetza ® AG.

The lower returns as a percentage of gross product sales was partially offset by the impact of higher return experience for a limited number of products, primarily Mysoline ® and Solodyn ® AG.

These actions have had the effect of improving sales return experience, primarily related to branded and generic products.

Included in the product sales return provisions for 2020 and 2019 are reductions in variable consideration for sales returns related to past sales of approximately $38 million and $80 million, respectively.

See Note 2, "SIGNIFICANT ACCOUNTING POLICIES" to our audited Consolidated Financial Statements regarding further details related to product sales provisions;

rebates as a percentage of gross product sales were lower primarily due to decreases in gross product sales of certain products which carry higher rebate rates, such as Solodyn ® , Elidel ® , Jublia ® and Retin-A Micro ® 0.06%.

The decreases in gross product sales for these products were due in part to generic competition and the release of certain branded generics.

The lower rebates as a percentage of gross product sales were partially offset by the impact of:

(i) increased gross product sales of 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 ® and Apriso ® , (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 which we launched in June 2019;

chargebacks as a percentage of gross product sales were higher primarily due to the impact of:

(i) higher gross product sales of Xifaxan ® , Glumetza ® SLX and Syprine ® AG, (ii) higher chargeback rates in 2019 as compared to 2018 for certain products such as Glumetza ® AG and (iii) the release of certain authorized generics, such as Elidel ® AG (December 2018) and Uceris ® AG (July 2018).

The higher chargebacks as a percentage of gross product sales were partially offset by the impact of lower gross product sales of certain generic products, such as Zegerid ® AG and Xenazine ® AG and certain branded products, such as Isuprel ® and Nifediac;

distribution service fees as a percentage of gross product sales were unchanged as the impact of lower gross product sales of Solodyn ® , Elidel ® , Targretin ® and Cuprimine ® were offset by the impact of:

(i) higher sales of Xifaxan ® and Apriso ® and other branded products, (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) distribution service fees associated with our Duobrii ® product launched in June 2019.

• rebates as a percentage of gross product sales was 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 ® and Jublia ® 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, partially offset by decreases in gross product sales for products which carry higher rebate rates, such as Apriso ® as a result of its generic release, Lotemax ® Suspension and Lotemax ® Gel;

• chargebacks as a percentage of gross product sales was higher primarily due to the impact of:

(i) higher chargeback rates and gross product sales for Glumetza ® SLX, Xifaxan ® and Nifedical ® and (ii) the release of the generic 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 generic products, such as Glumetza ® AG, Targretin ® AG, and Ofloxacin and (ii) the branded product Nifedical ® ;

• distribution service fees as a percentage of gross product sales was unchanged as the impact of:

(i) higher gross product sales and higher distribution service fee rates associated with our Xifaxan ® and Glumetza ® SLX products 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 were offset by the impact of lower gross product sales of certain branded products, such as Apriso ® as a result of its generic release.

Price appreciation credits are offset against the distribution service fees we pay wholesalers and were $15 million and $11 million for 2020 and 2019, respectively.

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The decrease was primarily driven by:

(i) the favorable impact of divestitures and discontinuations, (ii) better inventory management and (iii) the favorable impact of foreign currencies, partially offset by:

(i) the net increase in volumes, (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 and (iii) the amortization of the inventory fair value step-up recorded in acquisition accounting related to the inventories we acquired as part of the acquisition of certain assets of Synergy .

Cost of goods sold as a percentage of Product sales revenue was 27.1% and 27.9% for 2019 and 2018 , respectively, a decrease of 0.8 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) better inventory management and (iii) the impact of divestitures and discontinuations, which generally had lower gross margins than the balance of our product portfolio.

These factors were partially offset by:

(i) product mix within our Ortho Dermatologics and Neurology and Other business units, (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 and (iii) the amortization of acquisition accounting adjustments related to the inventories we acquired as part of the acquisition of certain assets of Synergy.

Our segment revenues and segment profits are discussed in detail in the subsequent section titled “Reportable Segment Revenues and Profits”.

(i) lower third-party royalty costs, (ii) lower volumes, as previously discussed, and (iii) the favorable impact of foreign currencies.

The decrease was partially offset by:

(i) higher manufacturing variances primarily due to the impacts of the COVID-19 pandemic and (ii) changes in product mix.

Cost of goods sold as a percentage of Product sales revenue was 27.8% and 27.1% for 2020 and 2019, respectively, an increase of 0.7 percentage points.

Costs of goods sold as a percentage of Product sales revenue was unfavorably impacted as a result of:

(i) changes in product mix and (ii) higher manufacturing variances primarily due to the impacts of the COVID-19 pandemic.

These factors were partially offset by lower third-party royalty costs.

Selling, General and Administrative Expenses

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and other general and administrative costs.

SG&A was $2,554 million and $2,473 million for 2019 and 2018 , respectively, an increase of $81 million , or 3% .

The increase was primarily driven by:

The increase was partially offset by:

(i) the favorable impact of foreign currencies, (ii) lower costs related to professional services and (iii) the impact of divestitures and discontinuations;

Also included in SG&A expenses for 2020 are separation-related costs.

The Company has incurred, and will incur, separation-related costs which are incremental costs indirectly related to the Separation.

Separation-related costs include, but are not limited to:

(i) IT infrastructure and software licensing costs, (ii) rebranding costs and (iii) costs associated with facility relocation and/or modification.

SG&A expenses were $2,367 million and $2,554 million for 2020 and 2019, respectively, a decrease of $187 million, or 7%.

The decrease was primarily attributable to:

(i) the impacts of social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed, and (ii) profit protection measures taken to manage and reduce operating expenses during the COVID-19 pandemic and resulted in decreases in:

(a) advertising and promotion expenses and (b) selling expenses.

The profit protection measures have been successful in expanding the profit margins in many of our businesses.

As the pace of recovery in each geography accelerates, we expect to allocate more resources to selling and other promotional activities to drive our return to sustainable revenue and profit growth.

Included within SG&A expenses for 2020 were $21 million of separation-related costs.

Included within SG&A expenses for 2019 was a charge associated with the termination of a certain co-promotional agreement.

Research and Development Expenses

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and other third-party costs.

R&D expenses were $471 million and $413 million for 2019 and 2018 , respectively, an increase of $58 million , or 14% , primarily attributable to a number of projects within our Bausch + Lomb and GI businesses.

R&D expenses were $452 million and $471 million for 2020 and 2019, respectively, a decrease of $19 million, or 4%.

R&D expenses as a percentage of Product sales were approximately 6% and 5% for 2020 and 2019, respectively.

As previously discussed, primarily during our second quarter of 2020, certain of our R&D activities were limited and others, including new patient enrollments in clinical trials, were temporarily paused as most trial sites were not able to accept new patients due to government mandated shutdowns.

However, during our third quarter of 2020, many of these trial sites began to reopen and we saw the pace of new patient enrollments increasing, getting close to their pre-COVID-19 levels in the U.S.

As of the date of this filing, we have not had to make material changes to our development timelines and the pause in our clinical trials have not had a material impact on our operating results;

however, a resurgence of the virus could result in unanticipated delays in our ability to conduct new patient enrollments and create other delays which could have a significant adverse effect on our future operating results.

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 $1,897 million and $2,644 million for 2019 and 2018 , respectively, a decrease of $747 million , or 28% .

The decrease was primarily due to:

(i) the impact of $420 million related to the change in the estimated useful life of the Xifaxan ® related intangible assets made in September 2018 to reflect management's changes in assumptions, (ii) fully amortized intangible assets no longer being amortized in 2019 and (iii) lower amortization as a result of impairments to intangible assets.

Management continually assesses the useful lives related to the Company's long-lived assets to reflect the most current assumptions.

See Note 9, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements for further details related to our intangible assets and the change in the estimated useful life of the Xifaxan ® related intangible assets.

Goodwill Impairments

Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level.

A reporting unit is the same as, or one level below, an operating segment.

The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants.

The Company estimates the fair values of all reporting units using a discounted cash flow model which utilizes Level 3 unobservable inputs.

Goodwill impairments were $0 and $2,322 million for 2019 and 2018 , respectively.

2019 Annual Goodwill Impairment Test

The Company conducted its annual goodwill impairment test as of October 1, 2019 by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Where the qualitative assessment suggested that it was more likely than not that the fair value of a reporting unit was less than its carrying amount, a quantitative fair value test was performed for that reporting unit.

In each quantitative fair value test performed, the fair value was greater than the carrying value of the reporting unit.

As a result, there was no impairment to the goodwill of any reporting unit.

If market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future.

Specifically, the Company continues to assess the performance of the Ortho Dermatologics reporting unit and the Neuro and Other reporting unit as compared to their respective projections and will perform qualitative interim assessments of the carrying value and fair value on a quarterly basis to determine if impairment testing of goodwill will be warranted.

The Company performed quantitative fair value tests for the Ortho Dermatologics reporting unit and the Neuro and Other reporting unit as of October 1, 2019, utilizing long-term growth rates of 2.0% and 1.5% , and discount rates of 9.8% and 9.0% , respectively, in estimation of the fair value of these reporting units.

March 31, 2018

In January 2017, the Financial Accounting Standards Board issued guidance which simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test.

Instead, goodwill impairment is measured as the amount by which a reporting unit's carrying value exceeds its fair value.

The Company elected to adopt this guidance effective January 1, 2018.

Upon adopting the new guidance, the Company tested goodwill for impairment and determined that the carrying value of the Salix reporting unit exceeded its fair value.

As a result of the adoption of new accounting guidance, the Company recognized a goodwill impairment of $1,970 million associated with the Salix reporting unit.

As of October 1, 2017, the date of the 2017 annual goodwill impairment test, the fair value of the Ortho Dermatologics reporting unit exceeded its carrying value.

However, at January 1, 2018, unforeseen changes in the business dynamics of the Ortho Dermatologics reporting unit, such as:

(i) changes in the dermatology sector, (ii) increased pricing pressures from third-party payors, (iii) additional risks to the exclusivity of certain products and (iv) an expected longer launch cycle for a new product, were factors that negatively impacted the reporting unit's operating results beyond management's expectations as of October 1, 2017, when the Company performed its 2017 annual goodwill impairment test.

In response to these adverse business indicators, as of January 1, 2018, the Company reduced its near and long term financial projections for the Ortho Dermatologics reporting unit.

As a result of the reductions in the near and long term financial projections, the carrying value of the Ortho Dermatologics reporting unit exceeded its fair value at January 1, 2018 and the Company recognized a goodwill impairment of $243 million.

2018 Annual Goodwill Impairment Test

The Company conducted its annual goodwill impairment test as of October 1, 2018 and determined that the carrying value of the Dentistry reporting unit exceeded its fair value and, as a result, the Company recognized a goodwill impairment of $109 million for the Dentistry reporting unit, representing the full amount of goodwill for the reporting unit.

Changing market conditions such as:

(i) an increasing competitive environment and (ii) increasing pricing pressures negatively impacted the reporting unit's operating results.

The Company continues to monitor these changing market and business conditions.

See Note 9, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements for further details related to our goodwill impairment analysis.

Asset Impairments

Amortization of intangible assets was $1,645 million and $1,897 million for 2020 and 2019, respectively, a decrease of $252 million, or 13%.

The decrease was primarily attributable to fully amortized intangible assets no longer being amortized in 2020.

See Note 8, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements for further details related to our intangible assets.

Asset impairments, including loss on assets held for sale

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.

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 $75 million and $568 million for 2019 and 2018 , respectively, a decrease of $493 million .

Asset impairments for 2019 included impairments of:

(i) $58 million reflecting decreases in forecasted sales of certain product lines due to generic competition and other factors, (ii) $8 million related to assets being classified as held for sale, (iii) $5 million related to certain product/patent assets associated with the discontinuance of specific product lines not aligned with the focus of the Company's core businesses and (iv) $4 million related to Acquired IPR&D not in service.

Asset impairments in 2018 included impairments of:

(i) $348 million reflecting decreases in forecasted sales for the Uceris ® Tablet product in the Company's Salix reporting unit and other product lines due to generic competition, (ii) $132 million reflecting decreases in forecasted sales for the Arestin ® product in the Company's Dentistry reporting unit and other product lines due to changing market conditions, (iii) $55 million related to certain product/patent assets associated with the discontinuance of specific

product lines not aligned with the focus of the Company's core businesses, (iv) $28 million to Acquired IPR&D not in service related to a certain product and (v) $5 million related to assets being classified as held for sale.

See Note 9, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements regarding further details related to our intangible assets.

Asset impairments, including loss on assets held for sale were $114 million and $75 million for 2020 and 2019, respectively, an increase of $39 million.

Asset impairments, including loss on assets held for sale for 2020 included impairments of:

(i) $96 million to reduce the carrying value of a business within the Bausch + Lomb/International segment to its estimated fair value less costs to sell due to classifying the business as held for sale, (ii) $16 million, in aggregate, due to decreases in forecasted sales of certain product lines, (iii) $1 million, in aggregate, related to the discontinuance of certain product lines not aligned with the focus of the Company's core businesses and (iv) $1 million related to Acquired in-process research and development not in service.

Asset impairments, including loss on assets held for sale for 2019 included impairments of:

See Note 8, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements for further details related to our intangible assets.

Restructuring, Integration and Separation Costs

Restructuring, integration and separation costs were $22 million and $31 million for 2020 and 2019, respectively, a decrease of $9 million.

Restructuring and integration costs

Restructuring and integration costs primarily consist of costs associated with the implementation of cost savings programs to streamline operations and eliminate redundant processes and expenses.

The expenses associated with the implementation of these cost savings programs include expenses associated with:

The Company evaluates opportunities to improve its operating results and implements cost savings programs to streamline its operations and eliminate redundant processes and expenses.

Restructuring and integration costs are expenses associated with the implementation of these cost savings programs and 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 $31 million and $22 million for 2019 and 2018 , respectively, an increase of $9 million .

Restructuring and integration costs were $11 million and $31 million for 2020 and 2019, respectively, a decrease of $20 million.

During 2020, these costs included:

(i) $11 million of severance costs and other costs associated with the acquisition of certain assets of Synergy, (ii) $11 million of facility closure costs and (iii) $9 million of other severance costs.

(i) $10 million of facility closure costs and (ii) $1 million of severance and other costs.

During 2019, these costs included:

(i) $11 million of severance costs, (ii) $10 million of facility closure costs and (iii) $1 million of other 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 audited Consolidated Financial Statements for further details regarding these actions.

Separation costs

The Company has incurred, and will incur, costs associated with activities to effectuate the Separation.

These activities include:

(i) separating the eye-health business from the remainder of the Company and (ii) registering the eye-health business as an independent publicly traded entity.

Separation costs are incremental costs directly related to the Separation and include, but are not limited to:

(i) legal, audit and advisory fees, (ii) employee hiring, relocation and travel costs and (iii) costs associated with establishing a new board of directors and audit committee.

Separation costs were $11 million for 2020.

The Company is in

the planning phase of the Separation and the extent and timing of future charges for these costs cannot be reasonably estimated at this time and could be material.

See Note 4, "RESTRUCTURING, INTEGRATION AND SEPARATION COSTS" to our audited Consolidated Financial Statements for further details regarding these actions.

Acquisition-Related Contingent Consideration

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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 $12 million in 2019 and included accretion for the time value of money of $22 million , partially offset by net fair value adjustments due to changes in estimates of expected future royalty payments of $10 million , which included net fair value adjustments to expected future royalty payments.

Acquisition-related contingent consideration was a net gain of $9 million in 2018 and included net fair value adjustments due to changes in estimates of expected future royalty payments of $33 million, which included net fair value adjustments to expected future royalty payments, partially offset by accretion for the time value of money of $24 million.

Acquisition-related contingent consideration was a loss of $48 million in 2020 and included:

(i) net fair value adjustments of $25 million, which included net fair value adjustments to expected future royalty payments and (ii) accretion for the time value of money of $23 million.

Acquisition-related contingent consideration was a loss of $12 million in 2019 and included accretion for the time value of money of $22 million, partially offset by net fair value adjustments of $10 million, which included net fair value adjustments to expected future royalty payments.

See Note 5, "FAIR VALUE MEASUREMENTS" to our audited Consolidated Financial Statements for further details.

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Litigation and other matters $ 422 $ 1,401

Net (gain) loss on sales of assets

Acquired in-process research and development costs 32 41

Net (gain) loss on sales of assets (1) (31)

Acquisition-related costs — 8

Other, net 1 (5)

Other expense (income), net $ 454 $ 1,414

In 2020, Litigation and other matters includes net charges related to the U.S.

Securities Litigation, the SEC Investigation and the Canadian Securities Litigation and related opt-outs.

In 2020, Litigation and other matters also includes an insurance recovery related to a certain litigation matter.

In 2019, Litigation and other matters includes the settlement of a legacy U.S.

securities class action matter (which is subject to final court approval) discussed below.

In 2018, Litigation and other matters includes a favorable adjustment of $40 million related to the Salix legacy litigation matter.

securities class action matter (which is subject to an objector's appeal of the final court approval).

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 this 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.

Securities Litigation for $1,210 million.

Final court approval of this settlement was granted in January 2021.

Subject to an objector's appeal of the Court's final approval order, the settlement resolves and discharges all claims against the Company in this class action and resolves the most significant of the Company's remaining legacy legal matters and eliminates a material uncertainty.

As part of the settlement, the Company and the other settling defendants admitted no liability as to the claims against it and denied all allegations of wrongdoing.

In addition to the anticipated resolution of the U.S.

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These matters and other significant matters are discussed in further detail in Note 20, "LEGAL PROCEEDINGS" to our audited Consolidated Financial Statements.

In 2019, Net (gain) loss on sales of assets includes $20 million related to the expected receipt for the achievement of a milestone related to a certain product.

In 2019, Acquired in-process research and development costs includes $38 million of in-process research and development costs associated with upfront payments to enter into certain licensing agreements.

In 2020 and 2019, Acquired in-process research and development costs of $32 million and $41 million, primarily consist of costs associated with the upfront payments to enter into certain exclusive licensing agreements.

In 2019, Net gain on sales of assets includes $20 million related to the achievement of a milestone related to a certain product.

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 primarily consists of interest payments due, amortization of debt premiums, discounts and deferred issuance costs on indebtedness under our credit facilities and notes and the amortization of amounts excluded from the assessment of hedge effectiveness over the term of the Company's cross-currency swaps.

Interest expense was $1,534 million and $1,612 million and included non-cash amortization and write-offs of debt discounts and deferred financing costs of $61 million and $63 million for 2020 and 2019, respectively.

The decrease in interest expense is primarily due to lower principal amounts of outstanding long-term debt throughout most of 2019, partially offset by the effect of higher interest rates throughout most of 2019.

Interest expense decreased $78 million, or 5%, primarily due to:

(i) a lower weighted average stated rate of interest, (ii) lower interest as a result of debt repayments during the year and (iii) a benefit related to the Company's cross-currency swaps.

These decreases were partially offset by the interest associated with $1,210 million of additional financing in December 2019 relating to the U.S.

Securities Litigation.

The weighted average stated rate of interest as of December 31, 2020 and 2019 was 6.02% and 6.21%, respectively.

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Foreign Exchange and Other

Foreign exchange and other was a net gain of $8 million and $23 million for 2019 and 2018 , respectively, an unfavorable net change of $15 million .

Foreign exchange gains/losses include translation gains/losses on intercompany loans and third-party liabilities, primarily denominated in euros.

Foreign exchange and other primarily includes:

(i) translation gains/losses on intercompany loans and third-party liabilities and (ii) the gain/loss due to foreign currency exchange contracts.

Foreign exchange and other was a loss of $30 million for 2020 as compared to a gain of $8 million for 2019, an unfavorable net change of $38 million.

Income taxes are accounted for under the liability method.

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Deferred tax assets for outside basis differences in investments in subsidiaries are only recognized if the difference will be realized in the foreseeable future.

Benefit from income taxes was $54 million and $10 million in 2019 and 2018, respectively, an increase in the Benefit from income taxes of $44 million .

Benefit from income taxes was $375 million and $54 million in 2020 and 2019, respectively, an increase of $321 million.

Our consolidated foreign rate differential reflects the net total tax cost or benefit on income earned or losses incurred in jurisdictions outside of Canada as compared to the net total tax cost or benefit of such income (on a jurisdictional basis) at the Canadian statutory rate of 26.9%.

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The net total foreign rate differentials generated in each jurisdiction in which we operate is not expected to bear a direct relationship to the net total amount of foreign income (or loss) earned outside of Canada.

In 2019, our effective tax rate differed from the Canadian statutory tax rate of 26.9% primarily due to:

In 2020 and 2019, our effective tax rate 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 income tax charge related to uncertain tax positions and (b) the adjustments for book to income tax return provisions.

In 2018, our effective tax rate differed from the Canadian statutory tax rate of 26.9% primarily due to:

(i) the recording of valuation allowance on entities for which no tax benefit of losses is expected, (ii) a charge related to the non-deductibility of goodwill impairments, (iii) a benefit related to internal integrations and restructurings and (iv) a benefit generated from our annualized mix of earnings by jurisdiction.

(a) the release of a valuation allowance, (b) internal restructurings, (c) changes in uncertain tax positions and (d) changes in the manner in which an outside basis difference will be recovered in future periods.

We record a valuation allowance against our deferred tax assets to reduce their net carrying value to an amount that we believe is more likely than not to be realized.

In determining our deferred tax asset valuation allowance, we estimate our ability to utilize future sources of income to realize the benefits of our temporary income tax differences including:

(i) NOL carryforwards in each jurisdiction, primarily in Canada, the U.S.

(i) net operating loss carryforwards in each jurisdiction, primarily in Canada, the U.S.

and Ireland, (ii) research and development tax credit carryforwards, (iii) scientific research and experimental development pool carryforwards and (iv) investment tax credit carryforwards.

When we establish/increase or reduce/decrease the valuation allowance, the provision for income taxes will increase or decrease, respectively, in the period such determination is made.

Our valuation allowance against deferred tax assets as of December 31, 2019 and 2018 was $2,831 million and $2,913 million , respectively, a decrease of $82 million which was primarily driven by NOLs written-off during 2019 for entities which were liquidated.

See Note 18, "INCOME TAXES" to our audited Consolidated Financial Statements for further details regarding income taxes.

Our valuation allowance against deferred tax assets as of December 31, 2020 and 2019 was $2,252 million and $2,831 million, respectively, a decrease of $579 million which was primarily driven by a release of valuation allowance for a change in judgment during 2020 related to previously established deferred tax assets.

See Note 17, "INCOME TAXES" to our audited Consolidated Financial Statements for further details.

Reportable Segment Revenues and Profits

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(i) pharmaceutical products in the areas of neurology and certain other therapeutic classes, (ii) generic products and (iii) dentistry products.

Effective in the first quarter of 2019, one product historically included in the reported results of the Ortho Dermatologics business unit in the Ortho Dermatologics segment is now included in the reported results of the Generics business unit in the Diversified Products segment and another product historically included in the reported results of the Ortho Dermatologics business unit in the Ortho Dermatologics segment is now included in the reported results of the Dentistry business unit in the Diversified Products segment as management believes the products better align with the new respective business units.

These changes in product alignment are not material.

Prior period presentations of business unit and segment revenues and profits have been conformed to current segment and business unit reporting structures.

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.

Certain costs, such as Amortization of intangible assets, Asset impairments, including loss on assets held for sale, Restructuring, integration and separation 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 22, "SEGMENT INFORMATION" to our audited Consolidated Financial Statements for a reconciliation of segment profit to Loss before benefit from income taxes.

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The following table also presents segment profits, segment profits as a percentage of segment revenues and the year over year changes in segment profits for 2020 and 2019.

Years Ended December 31,

(in millions)

Years Ended December 31, Change

2020 2019 2019 to 2020

(in millions) Amount Pct.

Segment Revenue

Bausch + Lomb/International $ 4,408 55 % $ 4,739 55 % $ (331) (7) %

Salix 1,904 24 % 2,022 23 % (118) (6) %

Ortho Dermatologics 553 7 % 565 7 % (12) (2) %

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Bausch + Lomb/International $ 1,159 26 % $ 1,332 28 % $ (173) (13) %

Salix 1,338 70 % 1,349 67 % (11) (1) %

Ortho Dermatologics 233 42 % 222 39 % 11 5 %

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(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.

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.

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The following table presents a reconciliation of GAAP revenues to organic revenues (non-GAAP) and presents organic revenue (Non-GAAP) and the year over year changes in organic revenue (Non-GAAP) for 2020 and 2019 by segment.

Year Ended December 31, 2019

Year ended December 31, 2018

Year Ended December 31, 2020 Year ended December 31, 2019 Change in

Organic Revenue

Changes in Exchange Rates

Organic Revenue (Non-GAAP)

Divestitures and Discontinuations

Organic Revenue (Non-GAAP)

(in millions)

Reported Changes in Exchange Rates Acquisition Organic Revenue (Non-GAAP) Revenue

Reported Divestitures and Discontinuations Organic Revenue (Non-GAAP)

(in millions) Amount Pct.

Bausch + Lomb/International $ 4,408 $ 42 $ — $ 4,450 $ 4,739 $ (19) $ 4,720 $ (270) (6) %

Salix 1,904 — (13) 1,891 2,022 — 2,022 (131) (6) %

Ortho Dermatologics 553 (3) — 550 565 — 565 (15) (3) %

Diversified Products 1,162 — — 1,162 1,275 (1) 1,274 (112) (9) %

Total $ 8,027 $ 39 $ (13) $ 8,053 $ 8,601 $ (20) $ 8,581 $ (528) (6) %

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 segment product sales.

The Bausch + Lomb/International segment revenue was $4,739 million and $4,664 million for 2019 and 2018 , respectively, an increase of $75 million , or 2% .

The increase was primarily attributable to:

(i) an increase in volume of $168 million , primarily in our Global Consumer and Global Vision Care businesses, (ii) an increase in average realized pricing of $52 million primarily driven by increased selling prices in our International Rx, International Consumer and Global Ophthalmology Rx businesses and (iii) an increase in other revenues of $6 million .

The increase in volume in our Global Consumer business is primarily attributable to the launch of Lumify ® (May 2018) and sales of PreserVision ® .

The increase in volume in our Global Vision Care business is primarily attributable to our Biotrue ® ONEday and Ultra ® product lines in the U.S.

and internationally.

The increase in average realized pricing in our Global Ophthalmology Rx business is primarily attributable to Lotemax ® and Vyzulta ® .

The increase was partially offset by:

(i) the unfavorable effect of foreign currencies of $110 million primarily attributable to our revenues in Europe, Asia and Latin America and (ii) the impact of divestitures and discontinuations of $41 million , primarily related to the divestiture and discontinuance of several products within our International Rx business.

The Bausch + Lomb/International segment has a diversified product line with no single product group representing 10% or more of its segment revenues.

The Bausch + Lomb/International segment revenue was $4,408 million and $4,739 million for 2020 and 2019, respectively, a decrease of $331 million, or 7%.

The decrease was primarily attributable to:

(i) a decrease in volume of $334 million, as discussed below, (ii) the unfavorable effect of foreign currencies of $42 million, primarily in Latin America and (iii) the impact of divestitures and discontinuations of $19 million.

These decreases were partially offset by an increase in net realized pricing of $64 million, primarily driven by our International Rx and Global Consumer businesses.

The volumes of our Bausch + Lomb/International segment were negatively impacted, primarily in Europe, Asia and the U.S., by social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed.

The postponement of certain surgical and elective medical procedures related to the COVID-19 pandemic, and associated declines in pre- and post-operative prescriptions, negatively impacted the volumes of our Global Ophthalmology and Global Surgical businesses.

The reduction in the consumption of contact lenses worldwide due to limited social interactions and in some regions government recommended use of frames, negatively impacted the volumes of our Global Vision Care business.

During our first quarter of 2020, certain customers engaged in "pantry-loading", which, along with stay-at-home orders, negatively impacted the volumes of our Global Consumer business for our second quarter of 2020.

However, as governments began lifting social restrictions, the negative trend in the revenues of these businesses began to level off and stabilize prior to our third quarter of 2020 and continued in the fourth quarter of 2020.

Therefore, our revenues for the year 2020 were most impacted by the COVID-19 pandemic in our second quarter of 2020.

Although we experienced additional COVID-19 pandemic related declines in year-over-year revenues in certain geographies during our third and fourth quarters of 2020, total Bausch + Lomb/International segment revenues for the three months ended December 31, 2020 and 2019 were $1,242 million and $1,238 million, respectively, an increase of $4 million.

This increase of less than 1% represents a continuing improving trend over the decreases in our year-over-year revenues for the three month periods ended June 30, 2020 and September 30, 2020 of 27% and 1%, respectively, and suggests that a recovery is underway.

Presuming the increased availability of effective vaccines,

and any resurgence of the COVID-19 virus and variant strains thereof or reenactment of social restrictions are not significant, we anticipate that our affected businesses could possibly return to pre-pandemic levels in 2021.

Bausch + Lomb/International Segment Profit

The Bausch + Lomb/International segment profit was $1,332 million and $1,330 million for 2019 and 2018 , respectively, an increase of $2 million , or less than 1%.

The increase was primarily driven by an increase in contribution as a result of:

(i) the increase in volume and average realized pricing as previously discussed and (ii) better inventory management.

The increase was partially offset by:

(i) higher selling, advertising and promotion expenses primarily due to the launch of Lumify ® , (ii) the unfavorable effect of foreign currencies, (iii) higher R&D expenses and (iv) the impact of divestitures and discontinuations.

The Bausch + Lomb/International segment profit was $1,159 million and $1,332 million for 2020 and 2019, respectively, a decrease of $173 million, or 13%.

The decrease was primarily driven by the decrease in contribution as a result of social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed, partially offset by lower SG&A expenses.

Salix Segment:

Salix Segment Revenue

The Salix segment includes the Xifaxan ® product line, which accounted for approximately 72% and 68% of the Salix segment product sales and approximately 17% and 14% of the Company's product sales for 2019 and 2018 , respectively.

No other single product group represents 10% or more of the Salix segment product sales.

The Salix segment revenue was $2,022 million and $1,749 million for 2019 and 2018 , respectively, an increase of $273 million , or 16% .

The increase includes:

(i) an increase in average realized pricing of $113 million primarily attributable to higher gross selling prices and lower sales deductions for Xifaxan ® , (ii) an increase in volume of $111 million primarily attributable to increased demand for Xifaxan ® , Glumetza ® SLX, and Plenvu ® , partially offset by decreased demand for certain products, primarily Uceris ® due to loss of exclusivity, (iii) 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 $55 million and (iv) an increase in other revenues of $3 million .

The increase in revenue was partially offset by the impact of divestitures and discontinuations of $9 million .

Although Glumetza ® SLX contributed to the increase in volumes during 2019 as discussed above, an accelerated shift in channel mix could lead to deteriorating average realized pricing for this product in future periods.

The Salix segment includes the Xifaxan ® product line, which accounted for approximately 78% and 72% of the Salix segment revenues and approximately 18% and 17% of the Company's revenues for 2020 and 2019, respectively.

No other single product group represents 10% or more of the Salix segment revenues.

The Salix segment revenue was $1,904 million and $2,022 million for 2020 and 2019, respectively, a decrease of $118 million, or 6%.

The decrease includes:

(i) a decrease in net realized pricing of $96 million, primarily attributable to higher sales deductions for Glumetza ® SLX, partially offset by higher gross selling prices for Xifaxan ® , and (ii) a decrease in volume of $35 million primarily attributable to the decrease in demand for Apriso ® due to LOE.

The decrease in revenue was partially offset by 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.

Certain branded pharmaceutical products within our Salix segment were negatively impacted by social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed.

Although we experienced COVID-19 pandemic related declines in year-over-year revenues in 2020, Salix segment revenues for the three months ended December 31, 2020 and 2019 were $527 million and $517 million, respectively, an increase of $10 million.

This increase of 2% represents a continuing improving trend over the decreases in our year-over-year revenues for the three month periods ended June 30, 2020 and September 30, 2020 of 21% and 10%, respectively, and suggests that a recovery is underway.

Presuming the increased availability of effective vaccines, and any resurgence of the COVID-19 virus and variant strains thereof or reenactment of social restrictions are not significant, we anticipate that our affected Salix businesses could possibly return to pre-pandemic levels in 2021.

Salix Segment Profit

The Salix segment profit was $1,349 million and $1,149 million for 2019 and 2018 , respectively, an increase of $200 million , or 17% .

The increase was primarily driven by a net increase in contribution as a result of the increase in average realized pricing and volume, as previously discussed.

The increase in segment profit was partially offset by:

(i) higher R&D expenses, (ii) the charge associated with the termination of a co-promotional agreement with US WorldMeds, LLC and (iii) higher selling, advertising and promotion expenses.

The Salix segment profit was $1,338 million and $1,349 million for 2020 and 2019, respectively, a decrease of $11 million, or 1%.

The decrease was primarily driven by the decrease in contribution as a result of the decrease in revenue, as previously discussed, partially offset by lower third-party royalty costs.

The decrease in segment profit was partially offset by:

(i) decreases in SG&A expenses due to:

(a) COVID-19 pandemic related matters, as previously discussed, and (b) a charge associated with the termination of a certain co-promotional agreement during 2019 and (ii) the contribution 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.

Ortho Dermatologics Segment:

Ortho Dermatologics Segment Revenue

The Ortho Dermatologics segment includes the Thermage ® and Jublia ® product lines, which accounted for approximately 38% and 12% of the Ortho Dermatologics segment revenues for 2020, respectively.

No other single product group represents 10% or more of the Ortho Dermatologics segment revenues.

The Ortho Dermatologics segment revenue was $553 million and $565 million for 2020 and 2019, respectively, a decrease of $12 million, or 2%.

The decrease includes:

(i) a decrease in volume of $93 million , (ii) a decrease in other revenues of $8 million and (iii) the unfavorable effect of foreign currencies of $2 million .

The decrease in volume is primarily due to:

(i) the impact of generic competition as certain products lost exclusivity, including Elidel ® , Solodyn ® and Zovirax ® and (ii) decreased demand for Tretinoin ® , Onexton ® , Jublia ® , Retin-A Micro ® 0.08% and Targretin ® , partially offset by the increased demand for Thermage FLX ® , Siliq ® and Clindagel ® and the launch of Duobrii ® (June 2019).

The decrease in revenue was partially offset by an increase in average realized pricing of $51 million as a result of lower sales deductions primarily attributable to Jublia ® and Retin-A Micro ® 0.06%.

The decrease was primarily attributable to a decrease in net realized pricing of $26 million partially offset by:

(i) an increase in volume of $11 million and (ii) the favorable effect of foreign currencies of $3 million.

The decrease in average realized pricing was the result of higher sales deductions in our medical dermatology products.

The increase in volume was primarily due to increased demand of Thermage FLX ® , primarily in China, and was partially offset by the impact of generic competition as certain products, such as Elidel ® , Zovirax ® and Solodyn ® , lost exclusivity.

Certain medical aesthetics, therapeutic products and branded pharmaceutical products within our Ortho Dermatologics segment were negatively impacted by social restrictions and other precautionary measures taken in response to the COVID-19 pandemic.

Although we experienced COVID-19 pandemic related declines in year-over-year revenues in 2020, Ortho Dermatologics segment revenues for the three months ended December 31, 2020 and 2019 were $160 million and $158 million, respectively, an increase of $2 million.

This increase of 1% represents a continuing improving trend over the decreases in our year-over-year revenues for the three month periods ended June 30, 2020 and September 30, 2020 of 5% and 2%, respectively, and suggests that a recovery is underway.

Presuming the increased availability of effective vaccines, and any resurgence of the

COVID-19 virus and variant strains thereof or reenactment of social restrictions are not significant, we anticipate that our affected businesses could possibly return to pre-pandemic levels in 2021.

Ortho Dermatologics Segment Profit

The Ortho Dermatologics segment profit was $222 million and $257 million for 2019 and 2018 , respectively, a decrease of $35 million , or 14% .

The decrease was primarily driven by a decrease in contribution as a result of the decrease in revenue, as previously discussed, partially offset by decreases in:

(i) selling expenses and (ii) professional fees.

The Ortho Dermatologics segment profit was $233 million and $222 million for 2020 and 2019, respectively, an increase of $11 million, or 5%.

The increase was primarily driven by decreases in:

(i) selling expenses and (ii) R&D expenses and was partially offset by the decrease in contribution as a result of the decrease in revenue, as previously discussed.

Diversified Products Segment:

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The following table displays the Diversified Products segment revenues by product and product revenues as a percentage of segment revenue for 2020 and 2019.

Years Ended December 31,

(in millions)

Years Ended December 31, Change

2020 2019 2019 to 2020

(in millions) Amount Pct.

Wellbutrin ® Franchise

Migranal ® Franchise

Xenazine ® Franchise

$ 271 23% $ 244 19% $ 27 11%

98 8% 83 6% 15 18%

63 5% 87 7% (24) (28)%

Ativan ® Franchise

50 4% 43 3% 7 16%

Neo/Poly/HC Otic 35 3% 22 2% 13 59%

Tobramycin/Dexamethasone 33 3% 31 2% 2 6%

31 3% 2 —% 29 1,450%

Diastat ® Franchise

30 3% 35 3% (5) (14)%

Librax ® Franchise

30 3% 25 2% 5 20%

Xenazine ® Franchise

29 3% 38 3% (9) (24)%

Other 492 42% 665 53% (173) (26)%

Total Diversified Products revenues $ 1,162 100% $ 1,275 100% $ (113) (9)%

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The decrease was primarily driven by:

(i) a decrease in volume of $56 million , (ii) a decrease in average realized pricing of $17 million and (iii) the impact of divestitures and discontinuations of $4 million .

The decrease was partially offset by an increase in other revenues of $2 million .

The decrease in volume was primarily attributable to our Neurology and Other business due to:

(i) the loss of exclusivity of Cuprimine ® , Isuprel ® , Mephyton ® , Syprine ® and Xenazine ® and (ii) lower demand for Wellbutrin ® XL and Ativan ® , partially offset by increased demand for Aplenzin ® .

The net decrease in volume in our Neurology and Other business was partially offset by the impact of the launches of Elidel ® AG (December 2018) and Uceris ® AG (July 2018) and other increases in product volumes in our Generics business.

The decrease in average realized pricing is primarily attributable to the impact of generic competition in our Generics business for Glumetza ® AG, Syprine ® AG, Targretin ® AG, Mephyton ® AG and Cardizem ® AG, partially offset by an increase in average realized pricing in our Neurology and Other business.

Although the launches of Elidel ® AG and Uceris ® AG positively impacted the product volumes in our Generics business in 2019, generic versions of these products launched by competitors could lead to deteriorating revenues for these and other products in our Generics business in future periods.

(i) a decrease in volume of $170 million and (ii) the impact of divestitures and discontinuations of $1 million.

The decrease was partially offset by an increase in net realized pricing of $58 million due to lower sales deductions, primarily within the Wellbutrin ® Franchise, and higher gross selling prices.

The decrease in volume was primarily attributable to:

(i) the impact of generic competition as certain products in our Neurology and Other business, such as Cuprimine ® , Migranal ® , Syprine ® , Isuprel ® and Xenazine ® , lost exclusivity and (ii) the postponement of certain surgeries and elective medical procedures in response to the COVID-19 pandemic primarily impacting our Dentistry business.

The decrease in volume was partially offset by an increase in volumes for Pepcid ® due to a competitor recall in 2020.

Diversified Products Segment Profit

The Diversified Products segment profit was $848 million and $932 million for 2020 and 2019, respectively, a decrease of $84 million, or 9%.

The decrease was primarily driven by:

(i) the decrease in volume and average realized pricing, as previously discussed and (ii) higher selling, advertising and promotion expenses, partially offset by lower third-party royalty costs.

The decrease was primarily driven by the decrease in revenue, as previously discussed.

LIQUIDITY AND CAPITAL RESOURCES

Summarized cash flow information for the years 2020, 2019 and 2018 is as follows:

Years Ended December 31,

(in millions)

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities

Years Ended December 31, Change

(in millions) 2020 2019 2018 2019 to 2020 2018 to 2019

Net loss $ (559) $ (1,783) $ (4,144) $ 1,224 $ 2,361

Adjustments to reconcile Net loss to net cash provided by operating activities 2,036 3,602 5,627 (1,566) (2,025)

Cash provided by operating activities before changes in operating assets and liabilities 1,477 1,819 1,483 (342) 336

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Net cash provided by operating activities 1,111 1,501 1,501 (390) —

Net cash (used in) provided by investing activities

Net cash provided by (used in) financing activities

Net cash used in investing activities (261) (419) (196) 158 (223)

Net cash (used in) provided by financing activities (2,294) 1,443 (1,353) (3,737) 2,796

Effect of exchange rate changes on cash and cash equivalents 16 (4) (26) 20 22

Net increase (decrease) in cash and cash equivalents and restricted cash

Net (decrease) increase in Cash and cash equivalents and Restricted cash (1,428) 2,521 (74) (3,949) 2,595

Cash and cash equivalents and Restricted cash, beginning of year 3,244 723 797 2,521 (74)

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Operating Activities

Net cash provided by operating activities was $1,501 million in each of the years 2019 and 2018 .

Cash provided by operating activities before changes in operating assets and liabilities for the years 2019 and 2018 was $1,819 million and $1,483 million , respectively, an increase of $336 million .

The increase is primarily attributable to:

(i) Payments of accrued legal settlements during 2018 not recurring in 2019 and (ii) higher revenues, improved gross margins and cash expense reductions in 2019 as compared to 2018 as previously discussed.

During 2018, Payments of accrued legal settlements were $224 million and were related to the settlements of the Solodyn ® antitrust litigations, the Allergan litigation and other matters.

Changes in operating assets and liabilities resulted in a net decrease in cash of $318 million in 2019 , as compared to the net increase in cash of $18 million in 2018 , a decrease of $336 million .

Net cash provided by operating activities was $1,111 million and $1,501 million in 2020 and 2019, respectively, a decrease of $390 million.

The decrease was attributable to net decreases in:

(i) Cash provided by operating activities before changes in operating assets and liabilities and (ii) Changes in operating assets and liabilities.

Cash provided by operating activities before changes in operating assets and liabilities for the years 2020 and 2019 was $1,477 million and $1,819 million, respectively, a decrease of $342 million.

The decrease was primarily attributable to:

(i) the negative impacts to our operating results associated with the social restrictions and other precautionary measures taken in response to the COVID-19 pandemic, as previously discussed, (ii) higher payments of legal settlements in 2020 as compared to 2019 of $153 million and (iii) the upfront payment of $10 million in 2020 with respect to the option to acquire all ophthalmology assets of Allegro, as previously discussed.

Changes in operating assets and liabilities resulted in a net decrease in cash of $366 million and $318 million in 2020 and 2019, respectively, a decrease of $48 million.

During 2020, Changes in operating assets and liabilities was negatively impacted by:

(i) the build-up of inventories of $209 million and (ii) the timing of other payments in the ordinary course of business of $148 million, partially offset by the collection of trade receivables of $39 million.

During 2018 , Changes in operating assets and liabilities was positively impacted by the collection of trade receivables of $216 million partially offset by the timing of payments in the ordinary course of business of $193 million and the buildup of inventories of $5 million.

(i) the timing of other payments in the ordinary course of business of $495 million and (ii) an increase in inventories of $77 million and was partially offset by:

(i) the collection of trade receivables of $170 million and (ii) an increase in accrued interest due to timing of payments of $36 million.

During 2019, Changes in operating assets and liabilities was negatively impacted by:

(i) the build-up of inventories of $209 million and (ii) the timing of other payments in the ordinary course of business of $180 million and was partially offset by:

(i) the collection of trade receivables of $39 million and (ii) an increase in accrued interest due to timing of payments of $32 million.

Investing Activities

Net cash used in investing activities was $261 million in 2020 and was primarily driven by Purchases of property, plant and equipment of $302 million partially offset by:

(i) Interest settlements from cross-currency swaps of $23 million and (ii) 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 year divestiture.

Net cash used in investing activities was $419 million in 2019 and was driven by:

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Net cash used in investing activities was partially offset by Proceeds from sale of assets and businesses, net of costs to sell of $45 million, primarily related to the receipt of a milestone payment associated with a prior year divestiture.

Net cash used in investing activities was $196 million in 2018 and was driven by:

(i) Purchases of property, plant and equipment of $157 million and (ii) Payments for intangible and other assets previously acquired of $78 million .

Financing Activities

Our financing activities reflect our leadership's commitment to improve the Company’s capital structure.

Through debt repayments and refinancings during 2019, we have effectively managed our capital structure which has allowed us to, among other things:

(i) improve our credit ratings as discussed under “Credit Ratings" below, (ii) access the credit markets to finance amounts owed under the Company's recently announced $1,210 million settlement agreement relating to the U.S.

Through debt repayments and refinancings during 2020 and 2019, we have effectively managed our capital structure which has allowed us to, among other things:

(i) improve our credit ratings, (ii) access the credit markets to finance amounts owed under the Company's previously announced $1,210 million settlement agreement relating to the U.S.

Securities Litigation without negatively impacting our working capital available for operations and (iii) eliminate our mandatory scheduled principal repayments of our debt obligations through 2024.

Net cash used in financing activities during 2020 was $2,294 million and was primarily driven by repayments of long-term debt, net of issuances and related discounts, of $2,187 million.

These repayments primarily include:

(i) $1,240 million of May 2023 Unsecured Notes, which was previously financed as part of the December 2019 Financing and Refinancing Transactions and (ii) debt repayments during 2020 with cash on hand of $902 million.

Net cash provided by financing activities during 2019 was $1,443 million and primarily reflects the aggregate net proceeds from the issuance of the 5.00% January 2028 Unsecured Notes and January 2030 Unsecured Notes of $2,472 million, partially offset by:

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The aggregate net proceeds from the issuance of the January 2028 Unsecured Notes and January 2030 Unsecured Notes are to be used and were used to:

(i) pay 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 (ii) redeem $1,240 million of May 2023 Unsecured Notes on January 16, 2020.

In 2019, net proceeds from the issuances of long-term debt of $5,960 million consists of:

(i) $1,236 million from the issuance of $1,250 million in principal amount of 5.00% January 2028 Unsecured Notes , (ii) $1,236 million from the issuance of $1,250 million in principal amount of January 2030 Unsecured Notes, (iii) $1,018 million from the issuance of $1,000 million in principal amount of 8.50% Senior Unsecured Notes due January 2027 (the "January 2027 Unsecured Notes"), (iv) $740 million from the issuance of $750 million in principal amount of 7.00% Senior Unsecured Notes due January 2028 (the "7.00% January 2028 Unsecured Notes"), (v) $740 million from the issuance of $750 million in principal amount of 7.25% Senior Unsecured Notes due May 2029 (the "May 2029 Unsecured Notes"), (vi) $492 million from the issuance of $500 million in principal amount of 5.75% Senior Secured Notes due August 2027 (the "August 2027 Secured Notes") and (vii) $500 million of borrowings under our revolving credit facilities.

Net proceeds from the issuances of long-term debt is net of $2 million in payments we made in 2019 for issuance costs associated with long-term debt issued in previous years.

Repayments of long-term debt during 2019 was $4,406 million consisting of:

(i) repayments of principal amounts due under our Senior Notes of $3,100 million, (ii) repayments of term loans under our Senior Secured Credit Facilities of $731 million and (iii) repayments of our revolving credit facility of $575 million.

Payments of financing costs associated with the refinancing of certain debt was $28 million .

Net cash used in financing activities during 2018 was $1,353 million and included repayments of long-term debt of $10,101 million consisting of:

(i) repayments of term loans under our Senior Secured Credit Facilities of $3,711 million, (ii) repayments of principal amounts due under our Senior Notes of $5,465 million, (iii) refinancing $500 million of outstanding amounts under our 2020 Revolving Credit Facility with our 2023 Revolving Credit Facility and (iv) repayments of our revolving credit facilities of $425 million.

Issuance of long-term debt, net of discounts for 2018 was $8,944 million and included:

(i) the net proceeds of:

(a) $4,507 million from the issuance of $4,565 million in principal amount of our seven year Tranche B Term Loan Facility maturing in June 2025 (the “June 2025 Term Loan B Facility”), (b) $1,480 million from the issuance of $1,500 million in principal amount of April 2026 Unsecured Notes, (c) $1,476 million from the issuance of $1,500 million in principal amount of our seven year Tranche B Term Loan Facility maturing in November 2025 (the "November 2025 Term Loan B Facility") and (d) $738 million from the issuance of $750 million in principal amount of January 2027 Unsecured Notes, (ii) refinancing $500 million of outstanding amounts under our 2020 Revolving Credit Facility with our 2023 Revolving Credit Facility and (iii) $250 million of borrowings under our revolving credit facilities.

The net proceeds from the Issuance of long-term debt, net of discounts in 2018 is further reduced by $7 million in payments we made in 2018 for issuance costs associated with senior notes issued during 2017.

Payments for costs associated with the refinancing of certain debt was $102 million for 2018.

(i) pay the Company's previously announced $1,210 million settlement agreement relating to the U.S.

Securities Litigation (which is subject to an objector's appeal of the final court approval), the full amount of which we paid into an escrow fund under the terms of a settlement agreement and is included within Restricted cash as of December 31, 2020, and (ii) redeem $1,240 million of May 2023 Unsecured Notes on January 16, 2020.

See Note 10, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial Statements for further details regarding the financing activities previously described.

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If opportunities are favorable, the Company may refinance or repurchase existing debt or issue equity or equity-linked securities.

As a result of prepayments and the series of refinancing transactions, we have no debt maturities or mandatory amortization payments due until 2024.

We believe our existing cash and cash generated from operations will be sufficient to service our debt obligations in the years 2021 through 2023.

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Long-term debt, net of unamortized discounts and finance costs was $23,925 million and $25,895 million as of December 31, 2020 and 2019, respectively.

Aggregate contractual principal amounts due under our debt obligations were $26,188 million and $24,632 million as of December 31, 2019 and 2018 , respectively, an increase of $1,556 million .

Financing of Litigation Settlement - 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.

To finance this settlement, on December 30, 2019 we accessed the credit markets in a private offering and issued the January 2028 Unsecured Notes (defined below) and the January 2030 Unsecured Notes (defined below), the net proceeds of which, along with cash on hand, are to be used and were used to:

(i) finance the $1,210 million pending settlement of the U.S.

Securities Litigation and (ii) replace $1,240 million of debt due May 2023 on January 16, 2020.

Debt Repayments - Excluding the impact of the financing of the litigation settlement discussed above, using the net cash proceeds from divestitures of non-core assets, cash generated from operations and cash generated from tighter working capital management, we repaid (net of additional borrowings) over $7,700 million of long-term debt during the period January 1, 2016 through the date of this filing, which includes $906 million of repayments with cash on hand during 2019.

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.

On March 8, 2019, we issued:

(i) $1,000 million aggregate principal amount of January 2027 Unsecured Notes and (ii) $500 million aggregate principal amount of August 2027 Secured Notes in a private placement.

The proceeds and cash on hand were used to:

(i) repurchase the remaining $700 million outstanding principal amount of 5.625% Senior Unsecured Notes due 2021 (the “December 2021 Unsecured Notes”), (ii) repurchase $584 million of May 2023 Unsecured Notes, (iii) repurchase $216 million of 5.50% Senior Unsecured Notes due 2023 (the "March 2023 Unsecured Notes") and (iv) pay all fees and expenses associated with these transactions (collectively, the “March 2019 Refinancing Transactions”).

On May 23, 2019, we issued:

(i) $750 million aggregate principal amount of 7.00% January 2028 Unsecured Notes and (ii) $750 million aggregate principal amount of May 2029 Unsecured Notes in a private placement.

The proceeds and cash on hand were used to:

(i) repurchase $1,118 million of May 2023 Unsecured Notes, (ii) repurchase $382 million of March 2023 Unsecured Notes and (iii) pay all fees and expenses associated with these transactions (collectively, the “May 2019 Refinancing Transactions”).

On December 30, 2019, we issued:

(i) $1,250 million aggregate principal amount of 5.00% January 2028 Unsecured Notes and (ii) $1,250 million aggregate principal amount of January 2030 Unsecured Notes in a private placement.

The proceeds and cash on hand were used to:

(i) redeem $1,240 million of 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) and (iii) pay all fees and expenses associated with these transactions.

On December 18, 2019, the Company issued a conditional notice of redemption to redeem $1,240 million of May 2023 Unsecured Notes on January 16, 2020.

The aforementioned repayments, refinancings and other changes in our debt portfolio completed during 2019 have lowered our cash requirements for principal debt repayment over the next five years.

The mandatory scheduled principal repayments of our debt obligations as of December 31, 2019 and February 19, 2020 (the date of this filing) were as follows:

Aggregate contractual principal amounts due under our debt obligations were $24,185 million and $26,188 million as of December 31, 2020 and 2019, respectively, a decrease of $2,003 million.

The decrease was primarily driven by net debt repayments previously discussed under " - Cash Flows - Financing Activities".

In addition to extending $3,500 million in payments due in 2022 and 2023 to 2029 through 2031, the refinancing transactions replaced secured debt of $1,500 million with unsecured debt.

This provides us with more secured debt capacity under our Restated Credit Agreement and existing indentures if the market for unsecured debt in the future is less favorable.

The refinancing transactions also repaid in full €1,500 million of debt denominated in euros, thereby reducing our exposure to fluctuations in the value of the euro.

Our prepayments of debt and refinancing transactions over the last four years translate into lower mandatory 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 December 31, 2020, were as follows:

(in millions)

As of December 31, 2019

As of February 19, 2020

See Note 11, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial Statements and “Management's Discussion and Analysis - Liquidity and Capital Resources:

Long-term Debt” for further details.

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Total

$ — $ — $ — $ 2,291 $ 10,632 $ 1,500 $ 2,250 $ 2,012 $ 3,250 $ 1,250 $ 1,000 $ 24,185

See Note 10, "FINANCING ARRANGEMENTS" to our audited Consolidated Financial Statements for further details.

The weighted average stated rate of interest as of December 31, 2020 and 2019 was 6.02% and 6.21%, respectively.

Senior Secured Credit Facilities

On February 13, 2012, the Company and certain of its subsidiaries as guarantors entered into the “Senior Secured Credit Facilities” under the Company’s Third Amended and Restated Credit and Guaranty Agreement, as amended (the “Third Amended Credit Agreement”) with a syndicate of financial institutions and investors.

On June 1, 2018, the Company entered into the Restated Credit Agreement, effectuating the Restated Credit Agreement which amended and restated in full the Company’s Third Amended Credit Agreement.

On November 27, 2018, the Company entered into the First Incremental Amendment to the Restated Credit Agreement which provided the November 2025 Term Loan B Facility of $1,500 million .

As of December 31, 2019 , the Company had no outstanding borrowings, $170 million of issued and outstanding letters of credit, and remaining availability of $1,055 million under its 2023 Revolving Credit Facility.

Current Description of 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 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.

Borrowings under the Senior Secured Credit Facilities in U.S.

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As of December 31, 2020, the stated rate of interest on the 2023 Revolving Credit Facility was 3.15% per annum.

As of December 31, 2020, the Company had no outstanding borrowings, $104 million of issued and outstanding letters of credit, and remaining availability of $1,121 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.

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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.

5.75% Senior Secured Notes due 2027 - March 2019 Refinancing Transactions

On March 8, 2019, Bausch Health Americas, Inc.

("BHA") and the Company issued:

(i) $1,000 million aggregate principal amount of January 2027 Unsecured Notes and (ii) $500 million aggregate principal amount of August 2027 Secured Notes, respectively, in a private placement.

A portion of the proceeds and cash on hand were used to:

(i) repurchase $584 million of May 2023 Unsecured Notes, (ii) repurchase $518 million of December 2021 Unsecured Notes, (iii) repurchase $216 million of March 2023 Unsecured Notes and (iv) pay all fees and expenses associated with these transactions (collectively, the “ March 2019 Refinancing Transactions ”).

During April 2019, the Company redeemed $182 million of the December 2021 Unsecured Notes, representing the remaining outstanding principal balance of the December 2021 Unsecured Notes and completing the refinancing of $1,500 million of debt in connection with the March 2019 Refinancing Transactions.

Interest on the August 2027 Secured Notes is payable semi-annually in arrears on each February 15 and August 15.

The August 2027 Secured Notes are redeemable at the option of the Company, in whole or in part, at any time on or after August 15, 2022, at the redemption prices set forth in the indenture.

The Company may redeem some or all of the August 2027 Secured Notes prior to August 15, 2022 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium.

Prior to August 15, 2022, the Company may redeem up to 40% of the aggregate principal amount of the August 2027 Secured Notes using the proceeds of certain equity offerings at the redemption price set forth in the indenture.

The aggregate principal amount of our Senior Secured Notes as of December 31, 2020 and 2019 was $4,250 million and $5,500 million, respectively, a decrease of $1,250 million representing the repayment of the 6.50% Senior Secured Notes due March 2022 as part of the 2020 Refinancing Transactions.

Senior Unsecured Notes

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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.

8.50% Senior Unsecured Notes due 2027 - June 2018 Refinancing Transactions and March 2019 Refinancing Transactions

As part of the March 2019 Refinancing Transactions described above, BHA issued $1,000 million aggregate principal amount of 8.50% Senior Unsecured Notes due January 2027.

These are additional notes and form part of the same series as BHA’s existing January 2027 Unsecured Notes.

7.00% Senior Unsecured Notes due 2028 and 7.25% Senior Unsecured Notes due 2029 - May 2019 Refinancing Transactions

On May 23, 2019, the Company issued:

(i) $750 million aggregate principal amount of 7.00% January 2028 Unsecured Notes and (ii) $750 million aggregate principal amount of May 2029 Unsecured Notes, respectively, in a private placement.

The proceeds and cash on hand were used to:

(i) repurchase $1,118 million of May 2023 Unsecured Notes, (ii) repurchase $382 million of March 2023 Unsecured Notes and (iii) pay all fees and expenses associated with these transactions.

Interest on the January 2028 Unsecured Notes is payable semi-annually in arrears on each January 15 and July 15.

Interest on the May 2029 Unsecured Notes is payable semi-annually in arrears on each May 30 and November 30.

The 7.00% January 2028 Unsecured Notes and the May 2029 Unsecured Notes are redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2023 and May 30, 2024, respectively, at the redemption prices set forth in the respective indenture.

The Company may redeem some or all of the 7.00% January 2028 Unsecured Notes or the May 2029 Unsecured Notes prior to January 15, 2023 and May 30, 2024, respectively, at a price equal to 100% of the principal amount thereof plus a “make-whole” premium.

Prior to July 15, 2022, and May 30, 2022, the Company may redeem up to 40% of the aggregate principal amount of the 7.00% January 2028 Unsecured Notes or the May 2029 Unsecured Notes, respectively, using the proceeds of certain equity offerings at the redemption price set forth in the respective indenture.

5.00% Senior Unsecured Notes due 2028 and 5.25% Senior Unsecured Notes due 2030 - December 2019 Financing Transactions

On December 30, 2019, we issued:

(i) $1,250 million aggregate principal amount of 5.00% January 2028 Unsecured Notes and (ii) $1,250 million aggregate principal amount of January 2030 Unsecured Notes in a private placement.

The proceeds and cash on hand were used to:

(i) redeem $1,240 million of 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) and (iii) pay all fees and expenses associated with these transactions (collectively, the "December 2019 Financing and Refinancing Transactions").

Interest on the 5.00% January 2028 Unsecured Notes is payable semi-annually in arrears on each January 30 and July 30.

Interest on the January 2030 Unsecured Notes is payable semi-annually in arrears on each January 30 and July 30.

The 5.00% January 2028 Unsecured Notes and the January 2030 Unsecured Notes are redeemable at the option of the Company, in whole or in part, at any time on or after January 30, 2023 and January 30, 2025, respectively, at the redemption prices set forth in the respective indenture.

The Company may redeem some or all of the 5.00% January 2028 Unsecured Notes or the January 2030 Unsecured Notes prior to January 30, 2023 and January 30, 2025, respectively, at a price equal to 100% of the principal amount thereof plus a “make-whole” premium.

Prior to January 30, 2023 and January 30, 2025, the Company may redeem up to 40% of the aggregate principal amount of the 5.00% January 2028 Unsecured Notes or the January 2030 Unsecured Notes , respectively, using the proceeds of certain equity offerings at the redemption price set forth in the respective indenture.

Remaining Senior Unsecured Notes

The aggregate principal amount of our other Senior Unsecured Notes as of December 31, 2019 and 2018 was $7,932 million and $7,970 million , respectively, a decrease of $38 million representing the impact of the foreign currency exchange rate on our euro denominated note.

The aggregate principal amount of our Senior Unsecured Notes as of December 31, 2020 and 2019 was $15,500 million and $15,532 million, respectively, a decrease of $32 million.

Covenant Compliance

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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.

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.

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.

The Senior Notes and Secured Notes are guaranteed by a substantial portion of the Company’s subsidiaries.

On a non-consolidated basis, the non-guarantor subsidiaries had total assets of $2,682 million and $2,954 million and total liabilities of $1,075 million and $1,264 million as of December 31, 2019 and 2018 , respectively, and revenues of $1,463 million and $1,689 million and operating income of $121 million and $174 million for years ended December 31, 2019 and 2018 , respectively.

On a non-consolidated basis, the non-guarantor subsidiaries had total assets of $2,442 million and $2,682 million and total liabilities of $1,804 million and $1,075 million as of December 31, 2020 and 2019, respectively, and revenues of $1,320 million and $1,463 million for 2020 and 2019, respectively, and operating loss of $38 million for 2020 and operating income of $121 million for 2019.

Credit Ratings

In December 2019, Standard & Poor's upgraded our credit ratings and maintained our outlook as stable.

As of February 24, 2021, the credit ratings and outlook from Moody's, Standard & Poor's and Fitch for certain outstanding obligations of the Company were as follows:

Rating Agency

Corporate Rating

Senior Secured Rating

Senior Unsecured Rating

Standard & Poor’s

Rating Agency Corporate Rating Senior Secured Rating Senior Unsecured 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.

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We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to have a material future effect on our results of operations, financial condition, capital expenditures, liquidity, or capital resources.

The following table summarizes our contractual obligations as of December 31, 2019 for the years presented:

(in millions)

2021 and 2022

2023 and 2024

Long-term debt obligations, including interest

Operating lease obligations

Purchase obligations

Total contractual obligations

Purchase obligations consist of agreements to purchase goods and services that are enforceable and legally binding and include obligations for minimum inventory and capital expenditures, and outsourced information technology, product promotion and clinical research services.

The table of contractual obligations excludes payments for:

(i) contingent milestone payments to third parties as part of certain development, collaboration and license agreements and (ii) acquisition-related contingent consideration.

See Note 22, "COMMITMENTS AND CONTINGENCIES" and Note 6, "FAIR VALUE MEASUREMENTS" to our audited Consolidated Financial Statements for further details related to these contingent payments.

The table of contractual obligations excludes payments for unrecognized tax benefits totaling $355 million as of December 31, 2019 because a reliable estimate of the period in which uncertain tax positions will be payable, if ever, cannot be made.

Other Future Cash Requirements

Our other future cash requirements relate to working capital, capital expenditures, business development transactions (contingent consideration), restructuring and integration, benefit obligations and litigation settlements.

Our other future cash requirements relate to working capital, capital expenditures, business development transactions (contingent consideration), restructuring, integration and separation costs, benefit obligations and litigation settlements.

In addition, we may use cash to enter into licensing arrangements and/or to make strategic acquisitions.

We are considering further acquisition opportunities within our core therapeutic areas, some of which could be sizable.

In addition to our working capital requirements and other amounts presented in the contractual obligations table presented above, we expect our primary cash requirements for 2020 to include:

Debt repayments —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.

Payments of Long-term debt obligations, including interest as presented in the contractual obligations table above for the year 2020 of $2,758 million , is inclusive of the payment for the redemption of $1,240 million in aggregate principal amount of May 2023 Unsecured Notes made on January 16, 2020.

As of the date of this filing, scheduled principal repayments of our debt obligations through 2021 are $103 million .

We may elect to make additional principal payments under certain circumstances.

In addition to our working capital requirements, we expect our primary cash requirements for 2021 to include:

• Debt repayments —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 and have no debt maturities or mandatory amortization payments due until 2024.

We expect to make interest payments of approximately $1,425 million during 2021.

We may also 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 $80 million, net of the amounts included in Purchase obligations in the table above, for licensing, maintenance and capitalizable costs associated with our IT infrastructure improvement projects during 2020 ;

Capital expenditures —We expect to make payments of approximately $300 million for property, plant and equipment during 2020 , of which there were $115 million in committed amounts as of December 31, 2019 ;

• IT Infrastructure Investment —We expect to make payments of approximately $60 million for licensing, maintenance and capitalizable costs associated with our IT infrastructure improvement projects during 2021;

• Capital expenditures —We expect to make payments of approximately $275 million for property, plant and equipment during 2021;

• Contingent consideration payments —We expect to make contingent consideration and other development/approval/sales-based milestone payments of $164 million during 2021;

• Restructuring and integration payments —We expect to make payments of $7 million during 2021 for employee separation costs and lease termination obligations associated with restructuring and integration actions we have taken through December 31, 2020;

Benefit obligations —We expect to make payments under our pension and postretirement obligations of $3 million , $9 million and $5 million to the U.S.

pension benefit plan, the non-U.S.

pension benefit plans and the U.S.

postretirement benefit plan, respectively during 2020 .

• Benefit obligations —We expect to make aggregate payments under our pension and postretirement obligations of $14 million during 2021.

See Note 11, "PENSION AND POSTRETIREMENT EMPLOYEE BENEFIT PLANS" to our audited Consolidated Financial Statements for further details of our benefit obligations;

Securities Litigation Settlement —As more fully discussed in Note 21, "LEGAL PROCEEDINGS" to our audited Consolidated Financial Statements, we expect to make payments of $1,210 million to resolve the U.S.

Securities Litigation during 2020, of which we paid $200 million during January 2020 .

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.

Securities Litigation Settlement —As more fully discussed in Note 20, "LEGAL PROCEEDINGS" to our audited Consolidated Financial Statements, we announced that we had agreed to resolve the U.S.

Securities Litigation for $1,210 million.

Final court approval of this settlement was granted in January 2021.

Subject to an objector's appeal of the Court's final approval order, the settlement resolves and discharges 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.

This settlement resolves the most significant of the Company's remaining legacy legal matters and eliminates a material uncertainty regarding our Company.

As of December 31, 2020, Restricted cash includes $1,210 million of payments into an escrow fund under the terms of a settlement agreement regarding the U.S.

Securities Litigation.

Costs of Separation

As previously discussed, with the goal of unlocking additional Company value, on August 6, 2020, the Company announced that it intends to separate its eye-health business into an independent publicly traded entity.

The Company has incurred, and will incur, costs associated with activities to effectuate the Separation.

These activities include:

(i) separating the eye-health business from the remainder of the Company and (ii) registering the eye-health business as an independent publicly traded entity.

Separation costs are incremental costs directly related to the Separation and include, but are not limited to:

(i) legal, audit and advisory fees, (ii) employee hiring, relocation and travel costs and (iii) costs associated with establishing a new board of directors and audit committee.

The Company has also incurred, and will incur, separation-related costs which are incremental costs indirectly related to the Separation.

Separation-related costs include, but are not limited to:

(i) IT infrastructure and software licensing costs, (ii) rebranding costs and (iii) costs associated with facility relocation and/or modification.

As of the date of this filing, we are in the planning phase of the Separation and future payments for separation costs and separation-related costs cannot be reasonably estimated at this time and could be material.

Future Cost Savings Programs

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.

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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.

Option to Acquire All Ophthalmology Assets of Allegro

As previously discussed, on September 21, 2020, we announced that we entered into an agreement which provides us an option to acquire all ophthalmology assets of Allegro.

Aggregate payments under the Option are up to $50 million and include an upfront payment of $10 million and a second payment of $40 million should Allegro raise additional funding.

During 2020, we made and expensed the upfront payment of $10 million as Acquired in-process research and development.

If the Option is exercised, additional payments to acquire all of the ophthalmology assets of Allegro will be due over time.

Future Litigation Payments

In addition to the U.S.

Securities Litigation discussed above, in the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations, charges and proceedings.

See Note 20, "LEGAL PROCEEDINGS" to our audited Consolidated Financial Statements for further details of these matters.

Our ability to successfully defend the Company against pending and future litigation may impact cash flows.

Our ability to successfully defend the Company against pending and future litigation may impact future cash flows.

Future Licensing Payments

In the ordinary course of business, the Company may enter into select licensing and collaborative agreements for the commercialization and/or development of unique products primarily in the U.S.

In connection with these agreements, the Company may pay an upfront fee to secure the agreement.

See Note 3, "ACQUISITIONS, LICENSING AGREEMENTS AND ASSETS HELD FOR SALE" to our audited Consolidated Financial Statements.

Payments associated with the upfront fee for these agreements cannot be reasonably estimated at this time and could be material .

Unrecognized Tax Benefits

As of December 31, 2020, the Company had unrecognized tax benefits totaling $414 million, of which, $145 million is expected to be realized within the next twelve months, however a reliable estimate of the period in which the remaining uncertain tax positions will be payable, if ever, cannot be made.

OUTSTANDING SHARE DATA

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Our operations are subject to risks inherent in conducting business abroad, including price and currency exchange controls and fluctuations in the relative values of currencies.

In November 2016, as a result of the Egyptian government’s decision to float the Egyptian pound and un-peg it to the U.S.

Dollar, the Egyptian pound was significantly devalued.

Our exposure to the Egyptian pound is primarily with respect to Amoun Pharmaceutical Company S.A.E., which we acquired in October 2015, and which represented approximately 3% and 2% of our total 2019 and 2018 revenues, respectively.

In addition, to the extent that we require, as a source of debt repayment, earnings and cash flows from some of our operations located in foreign countries, we are subject to risk of changes in the value of the U.S.

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As of December 31, 2020, a 1% change in foreign currency exchange rates would have impacted our shareholders’ equity by approximately $51 million, which could be partially mitigated by our cross-currency swaps discussed below.

As of December 31, 2019 , the unrealized foreign exchange loss on the translation of the remaining principal amount of U.S.

As of December 31, 2020, the unrealized foreign exchange gain on the translation of the remaining principal amount of U.S.

denominated senior secured and unsecured notes was $361 million, for Canadian income tax purposes.

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Any resulting gain will result in a corresponding reduction in our available Canadian Losses, Scientific Research and Experimental Development Pool, and/or Investment Tax Credit carryforward balances.

However, the repayment of the senior notes and the intercompany loans denominated in U.S.

However, the repayment of the senior notes and the intercompany loans

denominated in U.S.

dollars does not result in a foreign exchange gain or loss being recognized in our Consolidated Financial Statements, as these statements are prepared in U.S.

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As of December 31, 2020, we had $19,762 million and $4,423 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 December 31, 2019 , including the foreign currency denominated debt, was $22,351 million.

If interest rates were to increase by 100 basis-points, the fair value of our long-term debt would decrease by approximately $248 million.

If interest rates were to decrease by 100 basis-points, the fair value of our long-term debt would increase by approximately $441 million.

dollar repayment.

The estimated fair value of our issued fixed rate debt as of December 31, 2020 was $20,984 million.

If interest rates were to increase by 100 basis-points, the fair value of our issued fixed rate debt would decrease by approximately $430 million.

If interest rates were to decrease by 100 basis-points, the fair value of our issued fixed rate debt would increase by approximately $375 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.

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The new guidance requires entities to disclose both quantitative and qualitative information that enables users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The Company adopted this guidance effective January 1, 2018 using the modified retrospective approach, and therefore, revenue reported for the year 2017 has not been restated.

The Company adopted this guidance effective January 1, 2018 using the modified retrospective approach.

Based upon review of customer contracts, the Company concluded the implementation of the new guidance did not have a material quantitative impact on its 2018 Consolidated Financial Statements as the timing of revenue recognition for product sales did not significantly change.

The new guidance did however result in additional disclosures as to the nature, amounts, and concentrations of revenue.

Product Sales Provisions

The following table presents the activity and ending balances for our product sales provisions for each of the last three years.

(in millions)

Reserve balance, January 1, 2017

Payments or credits

Reserve balance, December 31, 2017

Payments or credits

Reserve balance, December 31, 2018

Acquisition of Synergy

Payments or credits

Reserve balance, December 31, 2019

Included in Rebates in the table above are cooperative advertising credits due to customers of approximately $29 million and $26 million as of December 31, 2019 and 2018 , respectively, which are reflected as a reduction of Trade accounts receivable, net in the Consolidated Balance Sheets.

The development and application of the critical accounting policies associated with the new revenue recognition guidance, including the policies associated with each of the above product sales provisions, are discussed in more detail in Note 2, "SIGNIFICANT ACCOUNTING POLICIES" .

The development and application of the critical accounting policies associated with the current revenue recognition guidance, including the policies associated with each of our product sales provisions and the table showing the activity and ending balances for our product sales provisions, are discussed in more detail in Note 2, "SIGNIFICANT ACCOUNTING POLICIES".

Other Revenues

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Management continually assesses the useful lives of the Company's long-lived assets.

In 2017 and 2018, management revised the estimated useful lives of certain intangible assets in connection with market events and changes in assumptions.

In 2017, the useful lives of certain product brands, with an aggregate carrying value of $7,618 million as of December 31, 2017, were revised to take into consideration, among other factors, various scenarios related to the date each product is anticipated to lose its exclusivity and the resulting potential changes in the forecasted sales.

In addition, the useful life of the Salix Brand, with a carrying value of $569 million as of December 31, 2017, was revised from seventeen years to ten years to reflect a number of possible scenarios related to forecasted sales of its product portfolio.

Effective September 12, 2018, the Company changed the estimated useful life of its Xifaxan ® -related intangible assets due to the positive impact of an agreement between the Company and Actavis Laboratories FL, Inc.

("Actavis") resolving the intellectual property litigation regarding Xifaxan ® tablets, 550 mg.

Under the agreement, the parties have agreed to dismiss all litigation related to Xifaxan ® tablets, 550 mg and all intellectual property protecting Xifaxan ® will remain intact and enforceable.

As a result, the useful life of the Xifaxan ® related intangible assets was extended from 2024 to January 1, 2028.

This change in the estimated useful life is considered a change in accounting estimate and will result in changes to the Company's amortization expense prospectively.

As of December 31, 2019, the net carrying value of the Xifaxan ® related intangible assets was $4,309 million .

Indefinite-lived intangible assets, including IPR&D and the B&L corporate trademark, are tested for impairment annually, or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired.

Indefinite-lived intangible assets, including Acquired in-process research and development and the B&L corporate trademark, are tested for impairment annually, or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired.

Impairment losses on indefinite-lived intangible assets are recognized based solely on a comparison of their fair value to carrying value, without consideration of any recoverability test.

In particular, we will continue to monitor closely the progression of our R&D programs as their likelihood of success is contingent upon the achievement of future milestones.

See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Focus on Core Business” for additional information regarding our R&D programs.

Goodwill is not amortized but is tested for impairment at least annually as of October 1st at the reporting unit level.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Focus on Core Business” for additional information regarding our R&D programs.

Goodwill is not amortized but is tested for impairment at least annually on October 1st at the reporting unit level.

A reporting unit is the same as, or one level below, an operating segment.

The Company performs its annual impairment test by

first assessing qualitative factors.

Where the qualitative assessment suggests that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed for that reporting unit (Step 1).

The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants.

The Company estimates the fair values of all reporting units using a discounted cash flow model which utilizes Level 3 unobservable inputs.

The discounted cash flow method relies on assumptions regarding revenue growth rates, gross profit, projected working capital requirements, selling, general and administrative expenses, research and development expenses, business restructuring costs, capital expenditures, income tax rates, discount rates and terminal growth rates.

The Company estimates the fair values of a reporting unit using a discounted cash flow model which utilizes Level 3 unobservable inputs.

The discounted cash flow model relies on assumptions regarding revenue growth rates, gross profit, projected working capital needs, selling, general and administrative expenses, research and development expenses, capital expenditures, income tax rates, discount rates and terminal growth rates.

To estimate fair value, the Company discounts the forecasted cash flows of each reporting unit.

The discount rate the Company uses represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn.

The quantitative fair value test is performed utilizing long-term growth rates and discount rates applied to the estimated cash flows in estimation of fair value.

To estimate cash flows beyond the final year of its model, the Company estimates a terminal value by applying an in-perpetuity growth assumption and discount factor to determine the reporting unit's terminal value.

The Company incorporates the present value of the resulting terminal value into its estimate of fair value.

The Company forecasted cash flows for each of its reporting units and took into consideration economic conditions and trends, estimated future operating results, management's and a market participant's view of growth rates and product lives, and anticipated future economic conditions.

Revenue growth rates inherent in these forecasts were based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends and product life-cycles.

Macroeconomic factors such as changes in economies, changes in the competitive landscape including the unexpected loss of exclusivity to the Company's product portfolio, changes in government legislation, product life-cycles, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets.

To forecast a reporting unit's cash flows the Company takes into consideration economic conditions and trends, estimated future operating results, management's and a market participant's view of growth rates and product lives, and anticipates future economic conditions.

Revenue growth rates inherent in these forecasts are based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends and product life-cycles.

Macroeconomic factors such as changes in economies, changes in the competitive landscape including the unexpected LOE to the Company's product portfolio, changes in government legislation, product life-cycles, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets.

Accordingly, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future.

In January 2017, the FASB issued guidance which simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test.

Instead, goodwill impairment is measured as the amount by which a reporting unit's carrying value exceeds its fair value.

The Company elected to early adopt this guidance effective January 1, 2018.

Upon adopting the new guidance, the Company tested goodwill for impairment and determined that the carrying value of the Salix reporting unit exceeded its fair value.

As a result of the adoption of new accounting guidance, the Company recognized a goodwill impairment of $1,970 million associated with the Salix reporting unit.

Adoption of New Accounting Guidance for Goodwill Impairment Testing

Effective January 1, 2018, the Company elected to early adopt a new accounting standard which simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test.

Goodwill impairment is now measured as the amount by which a reporting unit's carrying value exceeds its fair value.

Upon adopting the new standard, the Company tested goodwill for impairment and determined that the carrying value of the Salix reporting unit exceeded its fair value resulting in the Company recognizing a goodwill impairment of $1,970 million associated with the Salix reporting unit.

2018 Annual Goodwill Impairment Test

The Company conducted its 2018 annual goodwill impairment test as of October 1, 2018 and determined that the carrying value of the Dentistry reporting unit exceeded its fair value and, as a result, the Company recognized a goodwill impairment of $109 million, representing the full amount of goodwill for the Dentistry reporting unit.

Changing market conditions such as:

(i) an increasing competitive environment and (ii) increasing pricing pressures negatively impacted the reporting unit's operating results.

The Company is taking steps to address these changing market and business conditions.

The Company's remaining reporting units passed the goodwill impairment test as the estimated fair value of each reporting unit exceeded its carrying value at the date of testing and, therefore, there was no impairment to goodwill for any reporting unit other than the Dentistry reporting unit.

In order to evaluate the sensitivity of its fair value calculations on the goodwill impairment test, the Company compared the carrying value of each reporting unit to its fair value as of October 1, 2018, the date of testing.

As of October 1, 2018, the fair value of each reporting unit with associated goodwill exceeded its carrying value by more than 15%.

2019 Annual Goodwill Impairment Test

Where the qualitative assessment suggested that it was more likely than not that the fair value of a reporting unit was less than its carrying

amount, a quantitative fair value test was performed for that reporting unit.

The Company conducted its annual goodwill impairment test as of October 1, 2019 by first assessing qualitative factors.

In each quantitative fair value test performed, the fair value was greater than the carrying value of the reporting unit.

As a result, there was no impairment to the goodwill of any reporting unit.

If market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future.

As previously discussed the Company estimated the fair value of each reporting unit using an income approach which values the unit based on the future cash flows expected from that reporting unit.

Future cash flows are based on forward-looking information regarding market share and costs for each reporting unit and are discounted using an appropriate discount rate.

Future discounted cash flows can be affected by changes in industry or market conditions or the rate and extent to which anticipated synergies or cost savings are realized with newly acquired entities.

The Company performed its annual impairment test as of October 1, 2019, utilizing long-term growth rates for its reporting units ranging from 1.5% to 3.0% and discount rates applied to the estimated cash flows ranging from 8.0% to 9.8% in estimation of fair value.

See Note 9, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements for further details on the goodwill impairments recognized in 2018 and 2017.

2020 Interim Goodwill Impairment Assessments

An interim goodwill impairment test in advance of the annual impairment assessment may be required if events occur that indicate an impairment might be present.

For example, a substantial decline in the Company’s market capitalization, changes in reportable segments, unexpected adverse business conditions, economic factors and unanticipated competitive activities may signal that an interim impairment test is needed.

Accordingly, during 2020 the Company continually monitored among other matters the possible affects and outcomes of the COVID-19 pandemic on, among other things, its supply chain, customers and distributors, employee base, product sustainability, research and development activities, product pipeline and consumer demand and related rebates and discounts and has made adjustments, although not considered to be material, to its long-term forecasts as of October 1, 2019 (the date goodwill was last tested for impairment) for these and other matters.

After completing this assessment, although not completely insulated from the negative effects of the COVID-19 pandemic, the Company believed that its long-term forecasted cash flows, as adjusted for the possible outcome of the COVID-19 pandemic

and other matters, did not indicate that the fair value of any reporting unit may be below its carrying value.

On a quarterly basis, using its latest forecasts of cash flows, the Company gave consideration to the nature and timing of the expected revenue losses resulting from COVID-19 pandemic related matters.

No events occurred or circumstances changed during the period October 1, 2019 through September 30, 2020 that would indicate that the fair value of any reporting unit, with the exception of the Ortho Dermatologics reporting unit as discussed below, might be below its carrying value.

The changes in the amounts and timing of revenues as presented in the Company's forecasts during 2020 included a range of potential outcomes and, with the exception of the Ortho Dermatologics reporting unit as discussed below, were not substantial enough to materially adversely affect the recoverability of any of the associated reporting units’ assets and were not material enough to indicate that the fair values of those reporting units might be below their respective carrying values.

However, based on the results of the October 1, 2019 annual goodwill impairment test, the Company continued to assess the performance of the Ortho Dermatologics reporting unit and the Neuro and Other reporting unit on a quarterly basis 2020.

2020 Interim Goodwill Impairment Assessments - Neuro and Other

As part of its quarterly qualitative interim assessments of the Neuro and Other reporting unit, management considered the totality of all relevant events or circumstances that could have affected the carrying amount or fair value of the reporting unit, including comparing the reporting unit’s operating results to the forecast used to test the goodwill of the Neuro and Other reporting unit as of October 1, 2019.

Based on the qualitative assessments, management believed that the carrying value of Neuro and Other reporting unit did not exceed its fair value and, therefore, concluded a quantitative fair value test was not required for any quarterly period.

2020 Interim Goodwill Impairment Assessments and Testing - Ortho Dermatologics

During the three months ended March 31, 2020, the operating results for the Ortho Dermatologics reporting unit were less than those forecasted at October 1, 2019 for that period.

As part of its qualitative assessment as of March 31, 2020, the Company revised its forecasts for the year 2020, for among other matters, the lower than originally forecasted operating results for the three months ended March 31, 2020 and the range of potential impacts of the COVID-19 pandemic, including longer than expected launch cycles for certain new products.

Management believed that the revisions to its forecasts for the year 2020 were indicators that there was less headroom as of March 31, 2020 as compared to the headroom calculated on the date goodwill was last tested for impairment (October 1, 2019).

Therefore, a quantitative fair value test for the Ortho Dermatologics reporting unit was performed at March 31, 2020.

Based on the quantitative fair value test, the fair value of the Ortho Dermatologics reporting unit continued to be greater than its carrying value and as a result there was no impairment to the goodwill of the reporting unit at March 31, 2020.

During the three months ended June 30, 2020, the Company identified certain Ortho Dermatologics’ products that were experiencing longer launch cycles than originally anticipated due to the COVID-19 pandemic and, as a direct result, took actions to mitigate the impact of these matters, including right-sizing its Ortho Dermatologics’ sales force.

As part of its qualitative assessment as of June 30, 2020, the Company revised its long-term forecasts for, among other matters, the decrease in forecasted revenues of the identified products, the reduction in sales force and related costs and a range of potential impacts of COVID-19 pandemic related matters.

Management believed that these events were indicators that there was less headroom as of June 30, 2020 as compared to the headroom calculated on the date Ortho Dermatologics goodwill was last tested for impairment (March 31, 2020).

Therefore, a quantitative fair value test for impairment to the goodwill of the Ortho Dermatologics reporting unit was performed at June 30, 2020.

Management believed that based on its qualitative assessments as of September 30, 2020, it was more likely than not that the carrying amount of the Ortho Dermatologics reporting unit was less than its fair value and, therefore, concluded a quantitative fair value test was not required at September 30, 2020.

2020 Annual Goodwill Impairment Test

The Company conducted its annual goodwill impairment test as of October 1, 2020 by first assessing qualitative factors.

Based on its qualitative assessment as of October 1, 2020, management believed that, with the exception of the Ortho Dermatologics reporting unit, it was more likely than not that the carrying amounts of its reporting units were less than their respective fair values and therefore concluded a quantitative fair value test for those reporting units was not required.

The Company performed a quantitative fair value test for the Ortho Dermatologics reporting unit as of October 1, 2020, utilizing a long-term growth rate of 2.0% and a range of discount rates between 9.5% and 9.75%, in estimation of the fair value of this reporting unit.

Based on the quantitative fair value test, the fair value of the Ortho Dermatologics reporting unit was approximately 10% greater than its carrying value and as a result there was no impairment to the goodwill of the reporting unit.

If market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment

charges in the future.

Specifically, the Company continues to assess the performance of the Ortho Dermatologics reporting unit as compared to its respective projections and will perform qualitative interim assessments of the carrying value and fair value on a quarterly basis to determine if impairment testing of goodwill will be warranted.

See Note 8, "INTANGIBLE ASSETS AND GOODWILL" to our audited Consolidated Financial Statements for further details on the goodwill impairments recognized in 2018.

The Company expects to realign and begin managing its operations in a manner consistent with the organizational structure of the two separate entities as proposed by the Separation during the first quarter of 2021, and as a result the Company may need to perform an impairment test upon realignment of its operating segments.

Contingencies

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See Note 20, "LEGAL PROCEEDINGS" to our audited Consolidated Financial Statements for further details regarding our current legal proceedings.

If no accrual is made for a loss contingency because the amount of loss cannot be reasonably estimated, the Company will disclose contingent liabilities when there is at least a reasonable possibility that a loss or an additional loss may have been incurred.

We have operations in various countries that have differing tax laws and rates.

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We record liabilities for uncertain tax positions, which involve significant management judgment.

and new interpretations of laws and rulings by tax authorities may affect the liability for uncertain tax positions.

New laws and new interpretations of laws and rulings by tax authorities may affect the liability for uncertain tax positions.

Due to the subjectivity and complex nature of the underlying issues, actual payments or assessments may differ from our estimates.

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If we revise these forecasts or determine that certain planning events will not occur, an adjustment to the valuation allowance will be made to tax expense in the period such determination is made.

The Company’s Benefit from income taxes for the year 2017 included provisional net tax benefits of $975 million attributable to the Tax Act for:

(i) the re-measurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future of $774 million, (ii) the one-time transition tax on the accumulated previously untaxed earnings of foreign subsidiaries (the "Transition Toll Tax") of $88 million and (iii) the decrease in deferred tax assets attributable to certain legal accruals, the deductibility of which is uncertain for U.S.

federal income tax purposes, of $10 million.

We provisionally utilized NOLs to offset the provisionally determined $88 million Transition Toll Tax and therefore no amount was recorded as payable.

The Company has previously provided for residual U.S.

federal income tax on its outside basis differences in certain foreign subsidiaries which, due to the Tax Act, are no longer taxable.

As such, our residual U.S.

federal income tax liability of $299 million prior to the law change was reversed and we recognized a deferred tax benefit of $299 million in the fourth quarter of 2017.

The provisional amounts included in Benefit from income taxes for the year 2017, including the Transition Toll Tax, were finalized during 2018.

Differences between the provisional net income tax benefits provided for the year 2017 attributable to the Tax Act of $975 million , as previously disclosed, and the benefit for income taxes as finalized are included in the Benefit from income taxes for 2018 and were not material to the Company’s financial results for the year 2018.

Share-Based Compensation

We recognize employee share-based compensation, including grants of stock options and RSUs, at estimated fair value.

As there is no market for trading our employee stock options, we use the Black-Scholes option-pricing model to calculate stock option fair values, which requires certain assumptions related to the expected life of the stock option, future stock price volatility, risk-free interest rate and dividend yield.

The expected life of the stock option is based on historical exercise and forfeiture patterns.

The expected volatility of our common stock is estimated by using implied volatility in market traded options.

The risk-free interest rate is based on the rate at the time of grant for U.S.

Treasury bonds with a remaining term equal to the expected life of the stock option.

Dividend yield is based on the stock option’s exercise price and expected annual dividend rate at the time of grant.

Changes to any of these assumptions, or the use of a different option-pricing model, such as the lattice model, could produce a different fair value for share-based compensation expense, which could have a material impact on our results of operations.

We determine the fair value of each RSU granted based on the trading price of our common shares on the date of grant, unless the vesting of the RSU is conditional on the attainment of any applicable performance goals based on total shareholder return, in which case we use a Monte Carlo simulation model.

The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that the performance condition will be achieved.

Changes to any of these inputs could materially affect the measurement of the fair value of the performance-based RSUs.

We also have performance-based RSUs that vest upon attainment of certain performance targets.

We recognize the expense associated with these performance-based RSUs based on the number of RSUs we expect to vest, which is estimated by comparing our latest forecast to the applicable performance targets.

If RSUs do not vest as a result of a determination that the prescribed performance goals failed to be attained, then no expense would be recognized and any expense previously recognized for the RSUs would be reversed upon such determination.

NEW ACCOUNTING STANDARDS

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our expectations regarding our financial performance, including revenues, expenses, gross margins and income taxes;

and our impairment assessments, including the assumptions used therein and the results thereof.

our impairment assessments, including the assumptions used therein and the results thereof;

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, the anticipated timing, speed and magnitude of recovery from these COVID-19 pandemic related impacts and the Company’s planned actions and responses to this pandemic;

and the Company’s plan to separate its eye-health business, including the structure and timing of completing such separation transaction.

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.

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Important factors, risks and uncertainties that could cause actual results to differ materially from these expectations include, among other things, the following:

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;

• the risks and uncertainties caused by or relating to the evolving COVID-19 pandemic, the fear of that pandemic, the availability and effectiveness of vaccines for COVID-19, 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);

• with respect to the proposed separation of the Company’s eye-health business, the risks and uncertainties include, but are not limited to, the expected benefits and costs of the separation transaction, the expected timing of completion of the separation transaction and its terms, the Company’s ability to complete the separation transaction considering the

various conditions to the completion of the separation transaction (some of which are outside the Company’s control, including conditions related to regulatory matters and a possible shareholder vote, if applicable), that market or other conditions are no longer favorable to completing the transaction, that any shareholder, stock exchange, regulatory or other approval (if required) is not obtained on the terms or timelines anticipated or at all, business disruption during the pendency of or following the separation transaction, diversion of management time on separation transaction-related issues, retention of existing management team members, the reaction of customers and other parties to the separation transaction, the qualification of the separation transaction as a tax-free transaction for Canadian and/or U.S.

federal income tax purposes (including whether or not an advance ruling from either or both of the Canada Revenue Agency and the Internal Revenue Service will be sought or obtained), potential dyssynergy costs resulting from the separation transaction, the impact of the separation transaction on relationships with customers, suppliers, employees and other business counterparties, general economic conditions, conditions in the markets the Company is engaged in, behavior of customers, suppliers and competitors, technological developments, as well as legal and regulatory rules affecting the Company’s business;

• 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 a number of pending non-class securities litigations (including certain pending opt-out actions in the U.S.

related to the previously settled securities class action (which is subject to an objector's appeal of the final court approval) and certain opt-out actions in Canada relating to the recently settled class action in Canada) and purported class actions under the federal RICO statute and other claims, investigations or proceedings that may be initiated or that may be asserted;

• 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;

• the past and ongoing scrutiny of our legacy business practices, including with respect to pricing, 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);

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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;

• ongoing oversight and review of our products and facilities by regulatory and governmental agencies, including periodic audits by the FDA and equivalent agencies outside of the U.S.

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 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, and restrictions on our ability to make certain investments and other restricted payments;

• 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, which could lead to, among other things:

• any reductions in, or changes in the assumptions used in, our forecasts for fiscal year 2021 or beyond, including as a result of the impacts of the COVID-19 pandemic on our business and operations, which could lead to, among other

(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;

• the uncertainties associated with the acquisition and launch of new products, including, but not limited to, our ability to provide the time, resources, expertise and funds 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;

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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 Dermatology.com, 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 growth in our Ortho Dermatologics business, including the success of recently launched products (such as Arazlo ® ), expected geographic expansion in our Solta business (including with respect to Next Generation Thermage FLX ® ), the ability to successfully implement and operate our 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), 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;

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• 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, and 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;

• 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;

the impact our distribution, pricing and other practices 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;

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• the trade conflict between the United States and China;

the extent and impact of the coronavirus reported to have surfaced in 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 Sandoz Inc.

(“Sandoz”) and Norwich Pharmaceuticals Inc.

(“Norwich”) of their respective Abbreviated New Drug Application (“ANDA”) for Xifaxan ® (rifaximin) 550 mg tablets and the Company’s related lawsuit filed against Sandoz in connection therewith.

The Company intends to file suit against Norwich within the regulated timeframe);

• 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 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);

• 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;

• any 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;

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• 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);

• the impact of any changes in or reforms to the legislation, laws, rules, regulation and guidance that apply to the Company and its businesses 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 that may be undertaken following the change in the U.S.

administration;

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

• interruptions, breakdowns or breaches in our information technology systems;

• risks in Item 1A.

“Risk Factors” in this Form 10-K.

Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found elsewhere in this Form 10-K, under Item 1A.

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Quantitative and Qualitative Disclosures About Market Risk

Information relating to quantitative and qualitative disclosures about market risk is detailed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures About Market Risk” and is incorporated herein by reference.

Information relating to quantitative and qualitative disclosures about market risk is detailed in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures About Market Risk” and is incorporated herein by reference.

Financial Statements and Supplementary Data

The information required by this Item is contained in the financial statements set forth in Item 15 “Exhibits and Financial Statement Schedules” as part of this Form 10-K and is incorporated herein by reference.

The information required by this Item is contained in the financial statements set forth in Item 15.

“Exhibits and Financial Statement Schedules” as part of this Form 10-K and is incorporated herein by reference.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis