Bausch + Lomb Corporation (BLCO) Q2 2025 Earnings Report, Transcript and Summary

Good morning, and welcome to Bausch + Lomb's Second Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to George Gadkowski, Vice President of Investor Relations and Business Insights. Please go ahead.

Thank you. Good morning, everyone, and welcome to our second quarter 2025 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Brent Saunders; and Chief Financial Officer, Mr. Sam Eldessouky. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section. Before we begin, I would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial measures and ratios. For more information about these measures and ratios, please refer to Slide 1 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website. The financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter unless required by law and not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it's my pleasure to turn the call over to Brent.

Thank you, George, and thanks to everyone for joining us this morning. I'll start the call with an overview of our second quarter performance and how it aligns to the strategic road map we announced when I rejoined the company. Sam will unpack the financials and provide an update on 2025 guidance, and I'll close by highlighting standout products and services driving growth and future offerings with the potential to significantly improve the standard of care in eye health. Maintaining focus in the current environment is easy to talk about, but hard to do. I continue to be immensely proud of the way my colleagues have executed on our strategy despite facing unexpected challenges. Our constant currency revenue growth speaks to the breadth and depth of our portfolio and is driven by a mix of hero products and a steady stream of new introductions around the world. Our contact lens performance is worth highlighting as we've continued to outpace industry growth averages, thanks to strong execution from the entire team. There's no better example of selling excellence than the exponential growth in our comprehensive dry eye portfolio, which offers something for everyone. $1 billion is an important revenue milestone and a nice round number, but it will soon be in our rearview mirror as we continue to gain OTC and prescription market share. When it comes to operational excellence, look no further than our return to full production of our enVista intraocular lenses, which I'll speak to later. We continue to have an intense focus on innovation and our robust pipeline represents the future of the company. We're excited to showcase potential game changers at our November 13 Investor Day, where we'll cover our most promising candidates in each business from concept to commercialization. The look and feel of our road map slide has evolved since first being introduced more than 2 years ago. What hasn't changed is our commitment to methodically moving through each phase as indicated by incremental advances in our progress with each update. Parts of the first 2 phases are admittedly boring, but absolutely necessary as we stand on the precipice of Phase 3, accelerate growth. We've adopted the theme of our upcoming Investor Day for this update because the growth will largely be driven by what's next. Our commitment to stay in the course for the first 2 phases has helped fortify our base business and develop the processes, platforms and talent required to write the next chapter in Bausch + Lomb's storied history. enVista implants continue to increase as we rapidly resupply the market. Surgeons who love these lenses before the voluntary recall have jumped right back in and adoption rates among others, including new users, are very encouraging as we make a significant push to recapture our momentum. We recently hired a new Head of North American Surgical with more than 30 years of industry experience to help turbocharge that effort. Earlier this month, he attended the American-European Congress of Ophthalmic Surgery Summer session, and he was met with excitement for our return and appreciation for our ongoing focus on patient safety and customer trust. Earlier, I mentioned operational excellence, which has been a core component of our strategic road map. If based with this recall 2 years ago, our return to market would have taken much, much longer. That speaks to how far we've come and the importance of resilient, talented operators who are obsessed with getting the small things right. I'd like to draw your attention to the fine print for some of these figures. Big picture, our 3% constant currency revenue growth in the quarter would be doubled if you excluded the enVista recall. The difference becomes even more pronounced in our Surgical segment. The fact that there was constant currency growth in the quarter is impressive on its own, but it would have been 15% absent the recall. Our Pharmaceutical segment performance also has an asterisk as underperformance in our U.S. generic business brought constant currency revenue growth in the quarter from a would be 6% to minus 1%. While we're obviously disappointed with the generic results, we're confident there will be a steady improvement in the second half of the year for U.S. generics, which has a new leader as of June. When it comes to our top-performing products in the second quarter, it's once again a story of launches and reinventions driving growth, which means our strategy is working. Nearly all the high-growth products shown here, which are spread out among our businesses, make the top 10 revenue list, that's staying power. I'll now turn it over to Sam. But before I do, it's important to recognize his team's work in revamping our capital structure and securing improved credit agreements. The favorable terms allow for more flexibility going forward, and it's important to take advantage of these opportunities. Sam?

Thank you, Brent, and good morning, everyone. Before we begin, please note that all of my comments today will be focused on growth expressed on a constant currency basis unless specifically indicated otherwise. Turning now to our financial results on Slide 8. Total company revenue for the quarter was $1.278 billion, which reflects year-over-year growth of 3%. We delivered a solid quarter led by the performance in consumer, contact lenses and promoted pharma brands. Our Surgical segment grew by 1%, absorbing a $29 million impact from the enVista recall in Q2. Excluding the impact of the enVista recall, total company revenue grew by 6% in the quarter. As Brent noted, enVista implants continue to increase as we resupply the market, and we are making a significant push to recapture our momentum. For the second quarter, currency was a tailwind of approximately $21 million to revenue. As a reminder, in Q1, we experienced currency headwinds. On a year-to-date basis, currency has had a nominal impact on both revenue and adjusted EBITDA. Now let's discuss the results of each of our segments in more detail. Vision Care's second quarter revenue of $753 million increased by 6%, driven by growth in both consumer and contact lenses. The consumer business grew by 6% in Q2 as our key brands continue to perform well and consumption trends remained steady. Let me go over a few highlights. In the quarter, LUMIFY grew by 27% and generated $61 million of revenue. We continued our strong execution in the dry eye portfolio, which delivered $115 million of revenue in Q2, representing 19% growth. Our 2 key franchises, ARTELAC and Blink, once again contributed to the strong performance. ARTELAC grew by 34% and Blink grew by 13% in the quarter. As we mentioned in Q1, we anticipated retailer destocking of inventory to take place in Q2. The destocking impact mainly affect our eye vitamins, which declined by 8% in the quarter. It is important to note that consumption trends continue to remain steady and demand remains solid. Contact lenses revenue growth was 7%. Our contact lens business outpaced the market in 2024, and we continue to see strong performance in the first half of this year. In the quarter, we saw solid performance across our key brands. The Daily SiHy franchise was up 36% in Q2 and continues to be our fastest-growing brand. Our ULTRA monthly franchise grew by 8% and Biotrue was up 2% in the quarter. In Q2, our contact lens business saw broad-based growth and strong performance across our key markets. The U.S. was up 11%, EMEA was up 11%, LatAm grew by 25%, Japan grew 3% and China was up 7%. Moving now to the Surgical segment. Second quarter revenue was $216 million, an increase of 1%. As I mentioned, this absorbs the impact of the enVista recall. Excluding the recall, Surgical segment growth in Q2 was 15%. Consumables, which represents approximately 56% of surgical revenue grew by 10%. The enVista recall impacted our Implantables business and parts of the Equipment portfolio. Implantables declined by 16% in the quarter and Equipment declined by 2%. In the quarter, we made solid progress with the enVista return to market. As we progress through the year, we expect to continue to build on the performance. From a phasing perspective, we expect to continue to make progress in Q3 and further ramp up in Q4. Lastly, revenue in the Pharma segment was $309 million in Q2, which represents a decline of 1%. Our U.S. branded Rx business was up 8% in the quarter, mainly driven by the continued growth of MIEBO. MIEBO delivered $63 million of revenue in Q2. This represents sequential growth of 11% and a year-over-year growth of 50%. XIIDRA delivered $82 million of revenue in the quarter. We continue to see strong growth in XIIDRA volume with average weekly TRx up 12% on a year-over-year basis and 5% sequentially. MIEBO, XIIDRA and our consumer brands have established us as a clear leader in dry eye. We have built a robust dry eye platform to address all patient needs throughout their care journey, which gives us the confidence that we will continue to drive growth and leverage the portfolio to drive innovation. Our International Pharma business was up 2% with strong performance across our markets in Europe. Our U.S. Generics business declined 29% in the quarter. As we have previously stated, we have taken a number of actions, which we expect will improve performance in the generics business in the second half of the year. Now let me walk through some of the key non-GAAP line items on Slide 9. Adjusted gross margin for the second quarter was 60.6%, which represents a 130 basis point decrease year-over-year. This was driven by the onetime impact of the enVista recall, product mix and currency. In Q2, we invested $96 million in adjusted R&D, which represents an increase of approximately 12% over Q2 of 2024. Second quarter adjusted EBITDA, excluding acquired IPR&D was $192 million. This absorbs a one-time impact of $19 million from the enVista recall and [ $18 ] million impact from the decline in the U.S. Generics business. Adjusted cash flow from operations was $86 million in the quarter. Adjusted net interest expense for the quarter was $94 million and adjusted EPS, excluding IPR&D, was $0.07 for the quarter. Finally, as part of our efforts to continue to optimize our capital structure, in June, we successfully executed a refinancing of $3.1 billion of our debt. The refinancing extended the majority of our maturities to 2031 and is expected to have a minimal impact on our interest expense. Now turning to our 2025 guidance on Slide 12. We are raising our full year revenue guidance from a range of $5 billion to $5.1 billion to a range of $5.05 billion to $5.15 billion. The updated revenue guidance represents constant currency growth of approximately 5% to 7%, up from 4.5% to 6.5%. This new guidance range continues to absorb approximately 100 basis points from the one-time impact of the investor recall. Shifting to adjusted EBITDA. We are raising our adjusted EBITDA guidance from a range of $850 million to $900 million to a range of $860 million to $910 million. In terms of the other key assumptions underlying our guidance, we continue to expect adjusted gross margin to be approximately 61.5%. As a reminder, the adjusted gross margin absorbs an estimated onetime 50 basis points headwind from the investor recall. For the full year, we continue to expect investments in R&D to be about 7.5% of revenue and interest expense to be approximately $375 million. We will continue to monitor the Fed's actions for the rest of the year. We continue to expect our adjusted tax rate to be approximately 15% and full year CapEx to be approximately $280 million. In terms of phasing, for the remainder of the year, we expect the fourth quarter to be the highest. This is driven by the natural seasonality of our business, the ramp-up of enVista and the actions we're taking to improve performance in our U.S. Generics business as we progress through the remainder of the year. Consistent with our previous guidance, our current guidance excludes any potential one- time IPR&D charges that we may incur in 2025. Finally, let me briefly address tariffs. The tariff policy remains fluid, and we're continuing to monitor updates. Based on where the policy stands today and the actions we're taking, our updated guidance assumes we will be able to offset the impact of tariffs in 2025. Moving to Slide 13. Now let me provide some additional color on how to think about the updated revenue and adjusted EBITDA guidance in 2025. Our updated revenue guidance range of $5.05 billion to $5.15 billion reflects a $25 million raise driven by strong business performance and $25 million from currency tailwinds. The updated 2025 adjusted EBITDA guidance range of $860 million to $910 million includes approximately $10 million driven by business performance and our continued focus on disciplined cost management. To sum up, we had a solid quarter. The markets are healthy, and our business fundamentals remain strong. We are committed to our strategy to drive sustainable growth and margin expansion. And now I will turn the call back to Brent.

Thanks, Sam. Let's focus on some of the more impressive second quarter performances and reasons to be so optimistic about the future of Bausch + Lomb. At the bottom of this slide, there's a simplified view of the dry eye journey for consumers and patients. No matter where they stop, whether it's an Amazon order or a visit to the pharmacy counter, we're there to meet them with solutions that have become among the favorite of eye care professionals. There are a few consumer options worth highlighting based on second quarter performance. Momentum for Blink eye drops continues with 13% reported revenue growth. ARTELAC performance was even more impressive at 39% reported revenue growth, and it continues to be our most global dry eye option with availability in more than 40 countries and plans to expand further. Those products and others shown here drove a 16% constant currency revenue growth for the dry eye portfolio. Expansion of the dry eye market shows no sign of slowing down, but there remains a gap in education and awareness. In fact, according to our updated state of the dry eye survey, 78% of sufferers wish they had more dry eye resources. We're doing our part to help fill that gap with our latest dry eye awareness month campaign, which encourages visits to knowyourdryeye.com and reinforces that there are a range of potential relief options available that may be appropriate depending on the cause, severity and frequency of symptoms. The theme of this slide is stay in the course. When we acquired XIIDRA in 2023, we made clear our intentions to nurse the brand back to health and remind eye care professionals of its benefits. Sticking to this playbook has resulted in 12% year-over-year prescription growth and renewed excitement for a medication that produces hundreds of millions of dollars in annual revenue. Our work to improve profitability is far from done, but we're starting to see the benefits. MIEBO continues to be a juggernaut with 111% year- over-year prescription growth. The playbook hasn't changed there either. Through extensive education and best-in-class field force, we've established MIEBO as the prescription solution for evaporative dry eye. Patient feedback continues to be overwhelmingly positive as made clear in the Phase IV data published earlier this year. Study participants reported rapid relief of symptoms and most commonly chose silky, smooth and soothing to describe how the drop felt on administration. Effective direct-to-consumer campaigns continue to raise awareness of our flagship branded dry eye medications, rounding out a thoughtful all-encompassing approach that accounts for every possible touch point. The recent launches of preservative-free OTC options are a prime example of continuous brand reinvention and being responsive to evolving customer needs. LUMIFY preservative-free launched in May and brings the same fast-acting redness relief to those with sensitive eyes. While exponential growth has been a constant theme for LUMIFY, we're thinking well beyond the next few years. In fact, we recently settled patent disputes related to LUMIFY, enabling continued investment ahead of a date certain for generic launch. Introducing preservative-free options for Blink, now means there are 6 dry eye drops to choose from in addition to multiple contact lens, lubricating drops and a once-a-day nutraceutical that's quickly becoming the most trusted among eye care professionals. Optionality matters for consumers looking for OTC relief and the growing Blink family, a global brand, checks every box. While Daily SiHy was once again the clear standout with 36% constant currency revenue growth in the second quarter, it's important to note that all our key contact lens brands are growing. That includes ULTRA monthly contacts with 8% constant currency revenue growth, an impressive figure for a legacy brand bucking the trend of a gradual shift towards daily lenses. Our thoughtful approach to expanding our daily SiHy portfolio hasn't changed with plans to introduce multifocal and toric options in several markets next year and realize the expected benefits of offering a full suite of lenses. Those benefits are clear in the U.S. with 40% constant currency revenue growth in the second quarter. In May, we received European approval for LuxLife, full range of vision IOL, the latest example of our push into the high-margin premium market. The lens has an impressive clinical profile and early feedback from surgeon mirrors our excitement about the latest addition to the Lux portfolio. Our stage [ rollout ] of premium offerings continues with the anticipated soft launch of enVista MV in Europe later this year and expected early 2027 U.S. launch for enVista Beyond. Our pipeline slides should be familiar to you by now, but I won't go too deep to avoid spoiling Investor Day. I'll remind you that we have multiple shots on goal in each of our businesses and the focus is category disruption as opposed to modest improvement. Importantly, this isn't aspirational. We've initiated clinical studies for several of these products with others to follow soon. I look forward to seeing many of you in November where members of the R&D team and our commercial leaders will bring these products to life. Let's move to Q&A now. Operator?

[Operator Instructions] And the first question today is coming from Matt Miksic from Barclays.

So congrats on the strong quarter here, particularly kind of on an underlying basis, taking out some of the puts and takes as you talked about. Brent, I wanted to ask first about you've made sort of a recommitment to the company here based on your original contract, and you talk often about the bright future that you see for a lot of the product lines and product launches that you've run through. Maybe just talk about in the midst of the recent uncertainty, what are some of the key highlights that sort of inform that decision to sort of recommit for a longer period of time? And I have one follow-up on guidance, if I could.

Yes, absolutely, Matt. So let me take the first part, and thank you. Look, I'm really excited that I extended my contract to stay at Bausch + Lomb. And I'll tell you, I did it entirely because of my deep confidence in our team, our products and the strength of our R&D pipeline. I think we have an amazing opportunity as we work through our road map here to truly transform our company in the next couple of years and really focus on accelerating sales growth, importantly, expanding margins and then, of course, advancing our innovations to help us fulfill our mission to help people see better to live better. If you look at just the challenges we had in the first quarter, whether it be the recall or tariffs and the resiliency and our ability of our teams to execute and overcome those challenges that were very unexpected and quite impactful and get back on track here in the second quarter, it just underscores what I was saying about the confidence in the team and our ability to really transform our company. And I guess, net-net, if you really step back and think about it, the way I really think about it, I really see the opportunity in front of this team right now is really too important and too exciting not to be a part of it. And I'm just incredibly excited for what we can do in the future here.

That's great. Great to hear. So -- and following that line of sort of some of the challenges and initiatives that factor into guidance, there's a couple, I think, that folks have some familiarity with or understanding maybe more so around the recall and the impact that, that had and around tariffs to some degree. But if you could talk a little maybe about quantifying the tariff impact? And then also just walk us through the strategy in pharma because there's clearly strong growth in XIIDRA scripts but -- and strong growth sequentially, but down a little bit year-over-year. Maybe walk us through what's the plan behind that? And how do you expect that to play out the rest of the year, plus anything you mentioned you'd be able to share on tariff impact would be helpful to folks as they do the puts and takes.

Yes. So if you don't mind, Matt, let me take them in reverse order because then Sam can help me with the tariff impact. Look, in pharma, let's start with MIEBO, XIIDRA and gross to net. Throughout last year, I think we told you guys and at the beginning of this year as well that we had some headwinds going into 2025 that would kind of reset the base on particularly XIIDRA and those headwinds were onetime managed care payment and then the IRA, which we quantified. And so our focus this year was to drive prescription and demand, right? And so you see it, obviously, in XIIDRA, you see 12% TRx year-over-year, 5% sequentially. In MIEBO, you see 50% year-over-year and 11% sequentially. And so you see the expansion of the market. And clearly, now as a franchise, we're the market leaders in the prescription space. The goal now after '25 and beyond is to now see that pull through the P&L. And I think you'll start to see that in '26, '27 and beyond as we focus on driving not just growth, but profitability through the P&L. And so we're exactly where we thought we would be. I get why -- it can look like a step backwards given the gross to net headwinds. But I think it's very important for a long-term franchise, and we have these drugs for several years to make sure that we secured reimbursement and availability for patients and then drive through an education -- to ECPs, the importance of treating both evaporative and inflammatory dry eye. And so I think we're -- '25 is an interesting year. I think the team is executing well. That being said, I think we're exactly where we want to be. And if we could just have a little patience to see a pull-through starting in '26, I think you'll understand the power of what we can do with these franchises. I would also note the Generics, obviously, was a disappointment and something that we're working hard to reconcile. As I mentioned in the prepared remarks, we have a new leader of Generics. We saw modest improvement sequentially from first to second quarter was about 2% improvement. I would say green shoots at best, not where I would want to be. But we're working with the team, and we're starting to see more improvements in early Q3, but we have a lot of work to do there, and we expect it to resolve in the back half of the year. So that will no longer be a drag going into '26 as well. And so net-net, Matt, I think we're well positioned. I'm excited about where we are and the execution that we've seen on our prescription brands. But we have some work to do, and we're focused on getting it done. I think with respect to guidance, I'll turn it over to Sam. But look, I'm proud of our ability to get through what we saw some unexpected challenges in the first quarter and deliver a solid second quarter and be positioned to grow with momentum into the back half of the year. And I really do think we have momentum. I think you see it because the market for eye health is vibrant. You see great execution on our team, as I've said several times. And then, of course, there's seasonality where the back half of the year, particularly the fourth quarter is our is our strongest. But I'll turn it over to Sam for some more color on tariffs.

Yes. And Matt, when you think about tariffs, the policy continues to be fluid and...

Say August 1 is Friday, right?

So when you think about what we shared in our last earnings call, we estimated roughly about impact of 120 basis points. But at that point, that was based on the environment that we were reporting then back in April. So a lot has changed since then. One, the policy has changed in different directions, and that helped us in a meaningful way in terms of having favorability in terms of what we think the potential impact for '25. But also, the team, our team has done a really great job in terms of navigating around the tariffs and taking steps and mitigating the impact where we see it. And that gives us the confidence to be able to reflect in our guidance and also be able to fully offset it within our guidance.

If I could, Sam, I'd also say it's easy for us to say the team helped mitigate, but it was an immense amount of work. And I would just want to acknowledge the hard work that our team and our supply chain and commercial colleagues had to do to really be nimble and reinvent ourselves a little bit to deal with these tariffs.

So where we stand here today, we expect -- we estimate roughly about 40 basis points as an impact for us in 2025. Obviously, we'll continue to monitor what happens on end of this week and any other further developments from our policy. But that's one of the things where we're not going to sit back. We're going to continue to work around what comes our way from tariffs, and we'll continue to work to mitigate that through 2025.

But to be clear, just so there's no confusion, those 40 basis points are absorbed in the guidance. So it's not -- that's not going to get carved out of guidance. That's absorbed in the guidance Sam just provided.

The next question is coming from Xuyang Li from Jefferies.

I guess to start on the pharma side. I think previously, you talked about investing heavily in Miebo for the first couple of years, basically to prime the market and then that investment will taper off and profitability will increase. But I guess with a pretty big competitor coming into the market soon, I'm wondering if that impacts your plans on investments and profitability timing.

Yes. So great question. And while we're on the topic of TRYPTYR and Alcon, I'll ask Yehia, our Chief Medical Officer and Head of R&D that to comment as well. But look, I don't think our strategy has changed. To be fair, we knew this product was in development all along. So it's no surprise to us. And I think it's important to understand the dry eye market when you think about competitive environments. And I think two things are really important. Remember, I was running Allergan when Xiidra launched and obviously, was deeply involved in the defense of the market. And I remember analysts on calls like this, thinking it was going to be a fight to the death between Restasis and Xiidra and one was going to win and one was going to lose. And the reality is the market expanded to accommodate both. And Restasis and Xiidra grew through the launch. And that's because it's a very low penetration prescription market and a very large untreated market, as I mentioned in the prepared remarks. And so this market has plenty of room to bring more patients in for prescription treatment. And so that's a really important dynamic in this particular market. And so Alcon, which is a great company and a storied company in eye care with deep relationships, you never want to underestimate them. But I think the second point I'd make is we have a beachhead. And when you have a beachhead in dry eye, it's really hard for competitors to work around us. And I think of even when I was running Allergan and Restasis, we thought we had a beachhead. Our beachhead here is even more comprehensive and deep given that we have the only evaporative dry eye drug and a best-in-class anti- inflammatory drug, which are the two main parts of the etiology of the disease. And so I don't -- and then, of course, all the OTC options as well. And so our ability to work with ECPs and work with consumers and patients is unprecedented versus any of our competitors. And I think we just have a terrific portfolio and a lot of momentum. But maybe Yehia, talk a little bit about how you see it more clinically.

Yes. I think from a clinical perspective, we still believe Miebo is unique and it's the only approved treatment for evaporative dry eye. And let me just get a little bit back and just describe from a dry eye perspective, when we look to the etiology of dry eye, there are two main categories. One is either the eye is tear deficient. This means that doesn't secrete much tears. And for that category, you need an increased tear production, which we have multiple options in the market. TRYPTYR is not the first one. RESTASIS increases the tear production, Tyrvaya increased the tear production. So this is really now coming as a third to the market for increased tear production. But the bigger category of dry eye is really evaporative dry eye. And those are the patients who really have like meibomian gland dysfunction that no matter how you increase the tear production and you still have one of those causes, it will be like a leaking bucket syndrome. So basically, you increase the tear, but it evaporates immediately. And this is where really the only treatment for these type of patients would be Miebo. So we still believe that it is unique from an etiological perspective. Apart from that, whether it's evaporative or decreased production, if the eye remains for a long period of time with dry eye, it will get inflammatory dry eye. And again, unless you have a specific treatment for the inflammation like Xiidra to address the inflammatory cytokines, you will not be able to treat the inflammatory component of the dry eye. But the most important piece, I would like to mention related to the clinical data is what matters for the patients are the symptoms of the dry eye. And this is really where we differentiate clearly versus TRYPTYR. So according to the Phase III data from TRYPTYR actually, while 50% have an increased reproduction, is still on the symptom scale, they do not show improvement except at day 14. And in fact, one of the pivotal studies failed the statistical significance and the other one met, and they had to pool the data to amplify the effects of the product. So I think this is a clear indication where the symptom and the patient outcome plays an important role of the use of the treatment because Miebo still in each individual pivotal study have significantly and clinically meaningful effect on the symptoms reduction. In fact, the late study that we conducted as a Phase IV study show that the improvement in the symptoms happens within a few minutes of the installation at day 1, day 3, day 14 and so on. So we do believe that Miebo and Xiidra are totally differentiated. And again, needless to say, obviously, tolerability plays an important role in this market. And with a product that could have 50% of burning and stinging after installation, I think from a patient outcome perspective, it could be challenging to use it for a long period of time. So that's why I still have a lot of confidence in our dry eye portfolio, and I still believe that we have a very differentiated products existing on the market.

All right. That's a very comprehensive and helpful answer. Appreciate it. I guess switching gears a little bit to contact lens market. More than -- or almost half of the market is reported. So far, it's coming in better than expected in the second half. We definitely heard some last quarter around consumers buying less and channel inventory drawdowns. Can you maybe level set us a little bit on what you're seeing in the contact lens market from a macro and consumer and channel perspective?

Yes. We still see it as healthy. We have not seen -- obviously, we hear what some of our competitors are saying. And frankly, we just don't see it. And perhaps part of the reason why is the investments we've made over the last year in not just innovation, but also direct- to-consumer channel, whether it be in China, where we stood up a fully integrated direct-to-consumer and/or in the U.S., where we launched Opal, which is actually exceeding our expectations in terms of adoption and use and pull-through. And so I think that's a large part of it. When I look at our performance, I think it tells the story when you -- we kind of expected our Daily SiHy and INFUSE ULTRA ONEday outside the U.S. to do well, and you see that 36% growth performance in that Daily segment. But what makes me really proud of the team is the fact that Ultra monthly grew 8% and Biotrue even grew 2%. And so we're really trying to focus on that sealing the leaky bucket, right? You tend to launch the new products and the old products decline. And I think you see a really nice performance and execution from our contact lens team to drive growth. And so when you get growth from your older products and stellar growth from your new products, it puts you in a very strong position. So very -- I'm very optimistic about the contact lens market, and I think it's going to remain healthy throughout the year and for years to come.

The next question will be from Larry Biegelsen from Wells Fargo.

This is [ Lei ] calling in for Larry. Congrats, nice quarter. I guess starting off, Sam, I know you're not giving a guidance for '26 yet, but you did give a lot of color around some of the issues in '25, the enVista recall, the relaunch, U.S. generics, et cetera, and all the investment that's going behind the key portfolios. Can you just talk about for next year, as we think about it, is there any reason the business can't grow, let's say, the 6% to 8% you would be growing in '25 ex the recall, especially against the easy comps this year? And related in terms of EBITDA, do you think you can return to kind of the pre-recall margins next year, just given the ramp that we're likely to see? And I have a follow-up.

Yes. So, I'll let obviously, Sam answer. But I think one piece of color I would say is I am very optimistic about '26 and beyond. And as I mentioned in the first question from Matt, why I stated is, I think we have a massive opportunity at this company over the next couple of years. And as I said, the key opportunities are really accelerating growth, strong improvement in margins and then, of course, our pull-through of our innovation and R&D pipeline. And so in that context, let me turn it over to Sam to provide more specific answer.

Yes. And [ Lei ], I shared the exact same thoughts as Brent. And maybe just going through a little bit more stepping -- taking a step back and you think about what sort of how '25 plays for us first half versus second half. And with the raise of our guidance, that really represents sort of our confidence of the core business and what we're seeing in both the consumer business, the lens business performance that Brent just went through and also seeing the surgical outside sort of the investor recall as well as the work around sort of the pharma and even generics seeing a sequential improvement in generics, which is encouraging. More work there to be done, but it is encouraging in terms of how we think about it for the full year '25. So when you think about that momentum and what we're doing here from '25, it gives us the confidence as we think forward. And I'm not going to give exact guidance for '26 right now. We'll spend more time talking through guidance as well as long-term guidance when we see each other in November 13 on the Investor Day. But it's really going to be important to how you build on this momentum going into 2026 and really during the first quarter, both on the top line growth as well as on the margin expansion. Just also maybe double-clicking a little bit here as you think about the margins and how we think about the buildup of the growth and the margins, our second half tends to be stronger than the first half because of seasonality in general. But this year is even more pronounced because of just how the ramp-up for enVista recall is playing out as well as how the generics actions are taking place and how we're building up with the generics. So I do expect, as we think about the phasing for Q3 and Q4, I would expect Q3 probably a very similar phasing as we saw last year in '24, but that puts really a much bigger emphasis on Q4 for us, which is our exit point as we go into '26, which we'll build on from that point.

And I think, [ Lei ], it's important to recognize, I know we tend to think about quarters and we talk about quarters. But when I joined, I laid out the road map, and we spent the last 2 years really stabilizing and fortifying this company, making it more resilient, upgrading talent and building processes and customer focus. And you're starting to see that pay off in some of the resiliency we saw in the first quarter and first half of the year. But I think you're going to see the strategy is working in the second half of the year, but you're really -- I think you're going to see the fruits of all the hard work we've done over the last few years really start to pick up in '26 and '27 and beyond. And so that's what we're excited to talk to you about in November and really hope you and the team and Larry attend.

That's super helpful. And then just for my follow-up question, just a couple of things on the pipeline. On Elios, it looks like you're still looking -- the filing is pending. Would you still expect approval by the year-end? Any thoughts on adoption once you launch? And then beyond, it looks like it may have been pushed out to '27. Just see if you have any color on that.

Yes. I'll let Yehia answer. I'll just say on Elios, obviously, we're super excited about the technology. And I think the point we should just underscore here is having it approved in Europe and seeing the results clinically in Europe is quite encouraging for us. Obviously, a very different reimbursement environment than what the U.S. will be. And so adoption will look entirely different. But clinically, you're seeing really great outcomes and great adoption in Europe. So that gives us a lot of confidence. But Yehia, you want to talk about approval and the file and then, of course, enVista beyond as well?

Yes, sure. So for Elios, I think as Brent mentioned, we are very confident in the technology. The results we have seen and we are seeing from Europe is really very encouraging. With regard to the file, the strategy we took that we wanted to mitigate the risks once we submit the file, we get a lot of questions about certain areas from the FDA. So we're trying to do upfront work that can save us the number of questions and cycles that could come. And that's why we have actually put a little bit of time more in order to submit the file in the best shape. The other piece that we also decided to do it upfront is that we are actually introducing another probe which actually just from a capacity perspective, can work with the probe that we have in Europe. So as when we also launch the product, we don't have issues with regard to the supply. So that's why we have additional supplier that led also that we have to validate and verify that. So we're doing a huge progress. We do expect that we will submit this year. We do expect the approval could come early second half next year.

Yes. And look, I think it was a tough decision to rush it in or create a more robust file. And given the promise of this technology, we -- I think we made the right choice of creating a more robust file and approving a second supplier because we think demand will be high. And the last thing you want to do is launch a great product like this and not be able to supply. And so we've been in that position in the past, and I think a few months here will pay off handsomely for us in the future. You want to talk about enVista Beyond timeline?

EnVista Beyond. Yes. So enVista Beyond, obviously, we were doing very good in terms of recruitment. However, with the recall, we were affected also because some of the IOL measurements were part of the recalls batches. So we had to hold the recruitment for 2 months. But actually, we decided -- after that we came back to the market, we're also back to the recruitment. We have recruited approximately 32 patients since we are back. And we do expect still that we are trying to catch on the time lines, but we do expect maybe a couple of months of delayed launch based on the delay that we had from the recall.

Does that answer the question?

Yes, perfect.

The next question will be from Joanne Wuensch from Citibank.

I appreciate the comments on the contact lens market health, but I'm curious if you can give us an update on how you're thinking about the product pipeline and what we may be able to look forward to in the coming years?

Yes. Great question, and I'll ask Yehia again to talk a little bit about it. Obviously, this will be a key topic of the November event, Joanne. And so we don't want to front run our own Investor Day here too much. But I think the bottom line, and Yehia can provide a little more details is I think our contact lens portfolio of R&D projects is probably the best it's ever been in the history of the company. The last 30 years, our R&D has been playing catch-up to the market. And as part of our strategy, it was to now try to get into a lead the market. And I think Yehia and the R&D team in contact lenses has cracked the code, and I'm immensely proud of the challenge we gave them a couple of years ago and where they are today. But do you want to talk a little bit more about that Yehia?

Yes. So definitely, the contact lens actually, we saw the opportunity in the material innovation. And it has been for, as always Brent said, like there's no innovation happening on the material side for so many years. And this for us was really one of the areas that we wanted to tackle. However, the bigger challenge for us that we still wanted to produce it on our internal manufacturing capabilities without additional new lines of manufacturing and also to be considered one of the new segments if we can create a new segment for the contact lens area. And this is when we started the biomimetic about 2 years. We're doing a great progress on this project. In fact, our strategy, again, as I mentioned, that we are trying as much as possible to do a lot of upfront work to save time on the back end. So luckily, we have done approximately 10 internal studies on the biomimetic lens and the results are showing us great progress, giving us confidence every day. And we expect still that we will go for an external clinical study, a large one that will be starting around October time frame. And this is actually will be the first study. And you will hear more about the program and also the expected launches date at the Investor Day.

Yes. We're going to do a deep dive of this in November, Joanne.

The next question will be from Doug Miehm from RBC Capital Markets.

I think we've touched on this to a fairly significant degree, but you mentioned about the gross to net on Xiidra, and I think that's well understood. But is there anything that you're doing with respect to Miebo as well in terms of pricing to really firmly place this market -- this product in the market, especially in anticipation of the competition that you've already highlighted?

Yes. I mean -- so we have invested immensely in Miebo and coverage rates on Miebo are incredibly strong. In fact, I would say we're essentially at what would be considered full coverage. And so as you compare it last year when it was uncovered, obviously, to full coverage today, you're looking at a hit to gross to net to secure that coverage. But that is where it will be. And so when you think about 74% commercial coverage and 71% Medicare coverage, right, that's a great place. We did that regardless of the launch of a competitive product because that's how you win in this market. But it also, in some ways, creates an uphill battle for any competitor because you know how this disease state works, the patient comes in, gets a prescription, goes to fill it at the pharmacy. And if they don't have insurance coverage, they tend to abandon. And so making sure when you have a chronic medicine that they don't abandon and they stay on therapy because it's effective and tolerable and covered are really the key dynamics, and we are where we need to be. So there's really no further work to be done there. Now it's about driving more adoption and bringing more patients into the marketplace.

Okay. Perfect. And then just as a follow-up, with respect to the generics business, I know you're working on fixing this, but I imagine it does have an impact on the margins within the division. Can we think about the generics business as flat going forward? Or do you actually expect that you can gain share in that business? That would be unusual, but it would be great if you could do it.

I'm quite experienced in the generics world, having run Activist for a few years, right, and selling it to Teva. But look, I mean, there are a couple of things in the generics business that you have to be quite nimble to be able to handle, right? And what we saw over the last couple of years was a big competitor in the space, in the generic space go out Akorn. And then, of course, return. And when they're out, it's sort of a commodity-like business. So when supply is out, you have more robustness in the marketplace. And when supply is broad, you have less robustness in the marketplace. And so that's how this business works. But there's also just fundamental execution and other things. And I think we're solving those. And our secret weapon in the generics business is we make the generics in the United States for the United States in our state-of-the- art facility in Tampa, where we make most of our pharmaceutical products or we will make most of our pharmaceutical products. So we'll see what happens with tariffs from India. We'll see what happens in other places, but we are a high-quality, reliable supplier of generics, and that's an important part of the dimension there. So it's a long way of saying it's an unpredictable market. We can do better than we've done in the first half of the year. And so we need to focus on what we can control, which is execution, high quality of reliable supply, and that's exactly what we're going to do to see improvement in the second half and there on. Sam, any other color you want to add?

I think you covered it well, Brent. And when you think about the generics business, it exactly does go through those cycles. So for example, we don't talk much about it. But last year, we ended January was up about 10% and it was going to benefit from the cycle of the secret weapon that Brent talked about in terms of our manufacturing in Tampa, but also having the competitor being out of the market. So one of the things we will look for in this business is, in addition to the steps we're taking for execution is we'll continue to be standing ready for capitalizing on those opportunities when they present themselves and get that market share and turn it into the growth rate that we saw last year.

And the final question today will be from Gary Nachman from Raymond James.

So first, regarding the enVista recovery after the recall, Brent, just provide some more detail on physician adoption and confidence in the product offering at this point? How quickly you were able to recapture that with the ECPs? And I guess as far as the investor recall impact on any of your other products or franchises, you specifically mentioned equipment. So just clarify that and how you were able to resolve that and if you're anticipating any other impacts from the recall over the course of the year? And then I have a follow-up.

Yes. Sure, happy to. So look, when we voluntarily recalled the enVista product line, we did it because it was the right thing to do, and we always put patient safety first. The benefit from an unfortunate situation is also an opportunity, and that's about trust, right? And trust can be earned in every interaction with customers. It takes a long time to build a foundation of trust, and it can be destroyed very quickly. And so I think the way we handled it with the transparency and patient safety-first mentality, really gave us an opportunity to earn more trust in a marketplace like IOLs where surgeon relationships are paramount. And so when customers trust you, they give you their business. But when they really trust you, they give you their loyalty. And so we hope that our actions here will have a longer-term benefit. As surgeons know, we will always prioritize patient safety. I think when you look at where we stand in the context of the recall, I think we're in very good shape. It will take some time, right? We have shipped about 200,000 lenses, as we said in the prepared remarks. We still don't have full consignment ability in the marketplace. And that will happen over the next few weeks as we continue to ramp up production. And then when you look at adoption, as I mentioned, the loyalist KOLs came right back in and even though we don't always have every diopter or every lens, they're working with us to really drive implantation and see strong results. There are a group of surgeons that are starting to implant, but haven't fully adopted because we can't provide a full consignment yet. And then, of course, when we get to full consignment, it will be about bringing new implanters and new surgeons into the business. And so my sense of where we are today is that we will be fully back on track and recaptured our momentum by the first quarter of next year. So a work in progress throughout the year, but it will build sequentially and week-over-week, month-over-month and so we're seeing exactly what we want to see. And I think this was as well handled as can be, but we still have a lot of work to do in the second half of the year to get to where we want to be, but we're absolutely on track. Does that answer your question?

Yes, yes. Yes. No, that was perfect. And then just shifting to pharma. Just within dry eye, where we've been seeing a lot of market growth, where are you seeing most of the incremental growth in Miebo prescriptions? Is it mostly new patients or switches from other dry eye products, just given the unique evaporative nature of the product? And then just lastly, just how comfortable -- I know you'll talk more about this at the R&D Day in November, but how comfortable are you with the pharma pipeline? And do you think you need to add to that meaningfully with BD to help with the long-term growth in that business? You talked a little bit about generics, but I'm curious more on the innovative side of things?

Yes. So I think what you're seeing in dry eye, which is benefiting Miebo extensively is an expansion of new patients into the market. That's in part, it's obviously multifactorial, but it's in part based on our DTC and other efforts to expand the market, which are absolutely working. This is -- I've always said this, I know this market well. It's a very promotionally sensitive marketplace. But I think what's making it better is when you look at a medicine like Miebo and you look at the risk benefit of it, it's tremendously tilts towards the benefit. You have a drug that works almost instantly, as Yehia mentioned from our Phase IV study we just produced, works consistently and has essentially no AEs, right? It's a highly tolerable drug. And so patients, as I said, describe it as silky and smooth in the eye. And so when patients are getting that kind of relief when you have the type of managed care coverage that we had to investigate, that makes for kind of the winning formula for success in dry eye, right, a great product, instant relief, great long-term tolerability and affordability because of the coverage is really where you want to be. And so Miebo is absolutely growing the market. I think the other -- I don't have the data in front of me, we can follow up with you, but the refill rate on Miebo is higher than the rest of the category, too, which is another sign that patients really do appreciate this therapy. And so I think Miebo has a lot of growth in front of it. And obviously, we'll talk more about it in the November meeting, but very optimistic on where we can drive Miebo despite noise around competition and the likewise. I don't really think that's going to be an issue for Miebo growth. The pipeline, Yehia can weigh in here. I'm super excited about our pharma pipeline from the combination for dry eye therapy that will enter clinicals this year, our novel neuroprotective glaucoma product that will enter clinicals this year. And then, of course, our pain product, I think, has already started.

Actually, we'll be starting recruiting next week.

We'll start next week. So these programs are going to be in clinical, and we'll be able to talk about that in November. But early in the pipeline, we have a lot of other really important programs, whether it be through our collaborations with Citi or character and the like. So Yehia, anything you want to chime in there?

No, I think you addressed almost all points, Brent. But I just would like to just mention the philosophy on the pharma pipeline in particular, because I think it's one of the areas that witnessed a lot of transformation in Bausch & Lomb. And just to give you an overall perspective on the strategy. So what we are looking for is areas of high unmet medical need currently either not addressed by any treatment or addressed by treatment that could have the potential we get a better version of this treatment or best-in-class treatments. And you mentioned the innovation part. And I just would like to comment on the innovation part because for ocular pain, it's a new chemical entity. It's the first time that we use this indication is not existing before or so. And if you look at the dry eye area, it's again, we are developing the first combination therapy in the prescription dry eye market that address inflammation and evaporative dry eye. Glaucoma, we really want to change the standard of care. Glaucoma is a neuropathy disease. We have been addressing glaucoma as an IOP lowering only, but neglecting the neuropathy part that leads to vision loss. And that's why we are very much interested in these new segments. And as Brent mentioned, this is the wave going into the clinical trials this year, but we also are having a second wave coming up next year from Character Bio Collaboration and City Therapeutics that address bigger areas in the retina like geographic atrophy, precision medicine. So you will hear a lot more about this at the Investor Day, but it's one of the most innovative pipelines if we look holistically in the pharma now existing in eye care.

Anything else there Gary?

Yes, that color was really helpful.

Great. Well, let me just conclude by thanking everyone for joining. As I opened the call, I think the opportunity in front of us is extraordinary. I think you'll better understand why I have so much optimism for our future after you hear our more detailed thoughts around our strategy, our guidance and our pipeline in November, which I encourage you all to participate in. And of course, we're always available to you if you have any questions. George, Sam and I are happy to follow up as we always do with you. But thank you for joining us today, and we look forward to keeping you updated.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.