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    Viatris Inc (VTRS)

    Business Description

    Viatris is a global healthcare company that operates through a diversified portfolio of branded and generic products across various markets. The company is organized into four main business segments: Developed Markets, Greater China, JANZ (Japan, Australia, and New Zealand), and Emerging Markets, with the Developed Markets segment being the largest contributor to its revenue . Viatris offers a wide range of pharmaceuticals, including well-known branded products like Lipitor®, Norvasc®, Lyrica®, and EpiPen® Auto-Injectors, as well as a stable generics segment featuring complex generics such as Wixela and Breyna . The company emphasizes new product launches and continues to invest in its pipeline, particularly in complex injectables and eye care products, to drive future growth .

    1. Branded Pharmaceuticals - Offers a range of well-known branded medications, including Lipitor®, Norvasc®, Lyrica®, and EpiPen® Auto-Injectors, making up a significant portion of the company's portfolio.
    2. Generic Pharmaceuticals - Provides a stable selection of generic drugs, including complex generics like Wixela and Breyna, contributing significantly to the company's revenue.
    3. Developed Markets - Focuses on operations in North America and Europe, contributing the largest share to the company's overall revenue.
    4. New Product Launches - Drives growth through recent product introductions, such as Breyna™ in the U.S., and continues to expand its offerings.
    5. Pipeline Investments - Invests in future growth through the development of complex injectables and eye care products.

    Q3 2024 Summary

    Initial Price$10.66July 1, 2024
    Final Price$11.49October 1, 2024
    Price Change$0.83
    % Change+7.79%

    What went well

    • Strong pipeline of new products expected to drive future growth, including complex generics like glucagon, iron sucrose, liraglutide, and the expected launch of Sandostatin LAR generic in 2025.
    • Robust cardiovascular portfolio with significant opportunities, leveraging sotagliflozin's approval to expand into new markets, expected to contribute to revenue growth from 2027 onwards. The company has about $2.5 billion in annual cardiovascular revenues and the infrastructure to promote new assets.
    • Focused capital allocation strategy emphasizing shareholder returns, with plans to be more aggressive on share buybacks in 2025 due to current undervaluation, and returning half of their minimum $2.3 billion in free cash flow to shareholders via dividends and share repurchases.

    What went wrong

    • 1. Uncertainty in Product Approvals May Delay Growth:* Viatris acknowledged potential delays in launching key products like the generic version of Sandostatin, as they are still under FDA review and expect to provide updates only after scheduled meetings with agencies in mid-December . Such delays could impact anticipated revenue growth from new product launches.
    • 2. Limited Near-Term Revenue from New Innovative Products:* The company does not expect its newly licensed product, sotagliflozin, to contribute to revenue growth until around 2027, indicating a potential gap in near-term revenue expansion from innovative assets .
    • 3. Supply Chain Issues Affecting Key Product Segments:* Viatris is experiencing supply delays in its antiretroviral (ARV) products, leading to backlogs that are impacting their emerging markets segment . These supply chain challenges could hinder revenue in important markets.

    Q&A Summary

    1. Capital Allocation and Share Buybacks
      Q: How will you balance business development investment and share repurchases?
      A: With debt repayment nearing our target leverage ratio of approximately 3.0, we're implementing our full capital allocation strategy of allocating a minimum of $2.3 billion in free cash flow, with half returning to shareholders via dividends and share buybacks and half to business development. Given the current share price and valuation, we may be more aggressive on share buybacks than on business development in 2025, aiming to allocate approximately half to shareholders and half to business development over the next 3–5 years.

    2. 2025 EBITDA Expectations
      Q: Any initial color on 2025 expectations for EBITDA?
      A: While we're not providing forward-looking revenue and EBITDA guidance, we expect momentum from our base business to continue at the top line. For EBITDA and EPS, we're working through post-divestiture adjustments and focusing on adjusted EBITDA stability in the coming year. We're balancing business growth with necessary investments in R&D and commercial to drive future growth. We feel confident in our $2.3 billion cash flow and will provide more clarity next year.

    3. New Product Contributions
      Q: How much will products like Sandostatin LAR contribute next year?
      A: We're confident about achieving $450 million to $550 million in new product revenue next year, including carryover from 2024, generic launches in North America and Europe, and complex products such as glucagon, iron sucrose, and liraglutide. These products are clearly in the mix for next year as we continue to work on our broad portfolio.

    4. Sotagliflozin Launch Plans
      Q: What are your plans for sotagliflozin in the next 1–2 years?
      A: We plan to leverage the U.S. approval of sotagliflozin and register it in markets like Canada, Australia, and New Zealand. In Japan and China, it may require another clinical study. We expect sotagliflozin to start contributing to revenue around 2027, generating growth through the end of the decade.

    5. Symbicort Market Competition
      Q: How will potential competition affect your Symbicort generic?
      A: We're pleased with the performance of Breyna, our generic in this market, currently holding TRx market share. We expect Breyna to continue delivering growth into 2025, offering durable and sustainable value despite potential new competition.

    6. China Business Outlook
      Q: Is China's investigation impacting your business there?
      A: We have no direct comment on the investigation of another company. We recently met with our team in China and maintain the highest standards with a strong compliance organization. We've developed deep partnerships within the healthcare community and feel very strongly about our business in China.

    7. Impact of New Administration
      Q: How could the new administration affect U.S. generics?
      A: It's too early to fully understand healthcare implications, but we'll work positively with the Trump administration as we would with any administration. We're optimistic about what's ahead in 2025 and beyond.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Brands2,420.32,444.72,533.12,402.49,800.52,309.12,363.12,362.2
    Generics1,162.71,325.61,226.41,873.25,587.91,344.41,422.81,375.8
    - Developed Markets--------
    - Greater China--------
    - JANZ--------
    - Emerging Markets--------
    Complex Generics (Complex Gx)136.1139.2174.4-----
    Developed Markets2,170.42,353.82,408.52,319.29,251.92,165.42,319.22,298.7
    Greater China564.6532.1548.4515.32,160.4543.9539.0561.8
    JANZ342.2375.5334.5372.31,424.5317.8349.6344.3
    Emerging Markets641.9648.1642.5619.12,551.6626.4578.1533.2
    Total Revenue3,729.13,918.63,941.93,837.315,426.93,663.43,796.63,751.2
    Revenue by Geography - in Millions of USDFY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Developed Markets2,170.42,353.82,408.52,319.29,251.92,165.42,319.22,298.7
    Greater China564.6532.1548.4515.32,160.4543.9539.0561.8
    JANZ342.2375.5334.5372.31,424.5317.8349.6344.3
    Emerging Markets641.9648.1642.5619.12,551.6626.4578.1533.2
    - United States----3,551.8---
    - China----1,889.0---
    Total Net Sales3,719.13,909.53,933.93,825.915,388.43,653.53,785.93,738.0
    Total Revenue3,729.13,918.63,941.93,837.315,426.93,663.43,796.63,751.2

    Executive Team

    NamePositionStart DateShort Bio
    Scott A. SmithChief Executive OfficerApril 1, 2023Scott A. Smith has served as the CEO of Viatris Inc. since April 1, 2023. He was previously the President of BioAtla, Inc. and held various executive roles at Celgene Corporation .
    Theodora (Doretta) MistrasChief Financial OfficerMarch 1, 2024Theodora Mistras has served as the CFO of Viatris since March 1, 2024. She joined as CFO-elect on January 1, 2024, and was previously Managing Director of Healthcare Investment Banking at Citigroup Global Markets .
    Paul CampbellChief Accounting Officer and Corporate ControllerNovember 16, 2020Paul Campbell has served as Viatris' Chief Accounting Officer and Corporate Controller since November 16, 2020. He was previously Mylan's Chief Accounting Officer, Senior Vice President, and Controller .
    Brian RomanChief Legal OfficerApril 1, 2024Brian Roman has served as Viatris' Global General Counsel since November 16, 2020, and was named Chief Legal Officer on April 1, 2024. He oversees the company's global legal organization .
    Dr. Corinne Le GoffChief Commercial OfficerApril 15, 2024Dr. Corinne Le Goff has served as the Chief Commercial Officer of Viatris Inc. since April 15, 2024. She previously held roles at Imunon, Inc., Moderna, Inc., and Amgen Inc. .

    Questions to Ask Management

    1. You've mentioned confidence in delivering $450 million to $550 million in new product revenue next year, including key products like glucagon, iron sucrose, and liraglutide; can you provide specific guidance on the expected contributions from each of these products and any potential risks that could impact these projections?
    2. With supply chain delays affecting your ARV products in emerging markets, when do you expect to fully resolve these issues, and what measures are you implementing to prevent similar disruptions in the future?
    3. Given your leverage target is nearly achieved and the stock is trading at a low multiple, how do you plan to balance capital allocation between share repurchases and business development investments, and what factors will influence a more aggressive approach towards buybacks versus investing in pipeline assets?
    4. Regarding your recent licensing agreement for sotagliflozin, which is expected to start contributing to revenue around 2027, can you clarify how this aligns with your strategy for near-term growth and what interim milestones investors should watch for?
    5. With potential generic competition for Symbicort expected next year from competitors like Teva, how do you plan to address the anticipated market share erosion, and what strategies are in place to mitigate the impact on your revenues?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateFebruary 28, 2022 February 26, 2024
    End Date/DurationNo expiration No expiration
    Total Additional Amount$1.0 billion $1.0 billion
    Remaining Authorization$0.5 billion $1.0 billion
    DetailsPart of strategy to enhance shareholder value Increase return of capital to shareholders

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Operational Revenue Growth: Approximately 2% .
      2. Adjusted EBITDA and Adjusted EPS: Expected to be flat versus the previous year due to IP R&D impacts .
      3. Free Cash Flow: Expected to be lower in Q4 due to divestiture costs, taxes, higher CapEx, and semiannual interest payments .
      4. Gross Leverage Target: 2.8 to 3.2x .
      5. New Product Revenue: Expected to be at the higher end of $500 million to $600 million .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Operational Revenue Growth: Approximately 2% versus 2023 .
      2. Adjusted EBITDA and Adjusted EPS: Expected to be stable .
      3. New Product Revenue: $500 million to $600 million .
      4. Adjusted Gross Margin: Expected to increase due to a better segment mix .
      5. SG&A as a Percentage of Revenue: Expected to be higher .
      6. Debt Paydown: Target of approximately 3x gross leverage by year-end .
      7. Cash Available for Deployment: In excess of $3 billion .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Total Revenue: Adjustments represent approximately $270 million for the remainder of 2024 .
      2. Adjusted EBITDA: Adjustments represent approximately $86 million .
      3. Adjusted EPS: Adjustments represent approximately $0.04 .
      4. Base Business Growth: Approximately 2% operationally .
      5. New Product Revenue: $450 million to $550 million .
      6. Foreign Exchange Impact: Potential headwind of approximately 2% .
      7. Revenue Phasing: Higher in the second half due to seasonality .
      8. Adjusted Gross Margin: Higher in the first half .
      9. Operating Expenses: Evenly phased throughout the year .
      10. Adjusted EBITDA and Adjusted EPS: Slightly higher in the second half .
      11. Free Cash Flow: More weighted to the second half .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: N/A
    • Guidance: The documents do not contain information about the Q4 2023 earnings call for Viatris, so the guidance metrics and period are unavailable.