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VI

Viatris Inc (VTRS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue and adjusted EPS modestly beat Street: revenue $3.25B vs consensus $3.24B; adjusted EPS $0.50 vs $0.49. Adjusted EBITDA was $923.5M; management reaffirmed full-year guidance despite the Indore headwind and booked a non-cash goodwill impairment of $2.9B driving GAAP net loss to $(3.04)B .
  • Pipeline execution was a key upside catalyst: positive Phase 3 data for fast-acting meloxicam (acute pain) and Xulane LO (contraception), with NDA submissions targeted for late 2025/H2 2025, plus Effexor SR filings in Japan for GAD .
  • Capital return on track: >$450M returned YTD (>$300M buybacks; ~$143M dividends); full-year buybacks expected $500–$650M; FY 2025 FCF outlook $1.8–$2.2B reaffirmed .
  • Base business resilient ex-Indore; China and Europe grew. Indore impact was ~$140M revenue in Q1 (in-line with plan) and remains the main drag near term; management expects a reinspection request mid-year and second-half-weighted earnings .
  • Stock reaction catalysts: near-term pipeline readouts/NDA timelines (meloxicam, Xulane LO), continued buyback activity, and clarity on Indore remediation/tariff policy path from Washington .

What Went Well and What Went Wrong

What Went Well

  • Positive Phase 3 readouts for novel fast-acting meloxicam: met all primary/secondary endpoints, reduced opioid use, and showed superior pain control versus tramadol; NDA targeted by end of 2025 .
  • Positive Phase 3 for Xulane LO low-estrogen weekly patch: achieved efficacy and safety endpoints with best-in-class adhesion; NDA planned H2 2025 .
  • Resilient geographic performance: Greater China net sales +4% (constant currency) and Developed Markets brands growth; Europe grew ~1% operationally, with strength in Creon, thrombosis portfolio .
  • Capital returns: >$450M YTD returned, including >$300M buybacks; buyback plan of $500–$650M for 2025 reiterated .

What Went Wrong

  • Indore facility headwind: ~$140M revenue drag in Q1 and ~$(385)M adj. EBITDA impact expected for FY 2025; remediation ongoing; reinspection request planned mid-year .
  • GAAP optics sharply negative: non-cash goodwill impairment of $2.9368B drove GAAP net loss $(3.042)B and diluted GAAP EPS $(2.55) .
  • Margin compression: adjusted gross margin 55.9% vs 58.8% in Q1 2024 due to Indore, price regulations (JANZ), and higher supply costs .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$3,751.2 $3,528.1 $3,254.3
Adjusted EPS ($)$0.75 $0.54 $0.50
Adjusted EBITDA ($USD Millions)$1,284.6 $983.5 $923.5
Adjusted Gross Margin (%)58% 56.3% 55.9%
GAAP Net (Loss)/Earnings ($USD Millions)$94.8 $(516.5) $(3,042.0)
Free Cash Flow ($USD Millions)$749.5 $342.3 $492.9
Net Cash from Operating Activities ($USD Millions)$826.5 $482.7 $535.5

Segment net sales (U.S. GAAP) by period:

Segment Net Sales ($USD Millions)Q3 2024Q4 2024Q1 2025
Developed Markets$2,298.7 $2,146.1 $1,891.7
Greater China$561.8 $521.8 $555.5
JANZ$344.3 $334.5 $276.1
Emerging Markets$533.2 $513.0 $519.9
Total Net Sales$3,738.0 $3,515.4 $3,243.2

KPIs (Q1 2025):

KPIQ1 2025
New Product Revenues ($USD Millions)$67
Indore Impact on Revenues ($USD Millions)~$140
Adjusted R&D as % of Revenues7%
Adjusted SG&A as % of Revenues24%
Cash & Equivalents ($USD Millions)$755.0
Year-to-date Capital Returned ($USD Millions)>$450 (>$300 buybacks; ~$143 dividends)

Actual vs S&P Global Consensus (Q1 2025):

MetricActualConsensusSurprise
Revenue ($USD Millions)$3,254.3 $3,235.3*+$19.0M; +0.6%
Primary EPS ($)$0.50 $0.492*+$0.008; +1.6%
EBITDA ($USD Millions)$923.5 $903.0*+$20.5M; +2.3%

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (Feb 27, 2025)Current Guidance (May 8, 2025)Change
Total Revenues ($USD Billions)FY 2025$13.5 – $14.0; Midpt $13.75 $13.5 – $14.0; Midpt $13.75 Maintained
Adjusted EBITDA ($USD Billions)FY 2025$3.9 – $4.2; Midpt $4.05 $3.89 – $4.19; Midpt $4.04 Lowered $10M (IPR&D)
Adjusted EPS ($)FY 2025$2.12 – $2.26; Midpt $2.19 $2.16 – $2.30; Midpt $2.23 Raised net +$0.04 (−$0.01 IP R&D, +$0.05 buybacks)
Free Cash Flow ($USD Billions)FY 2025$1.8 – $2.2 $1.8 – $2.2 Maintained
GAAP Net Cash from Operating Activities ($USD Billions)FY 2025$2.2 – $2.5; Midpt ~$2.35 $2.2 – $2.5; Midpt ~$2.35 Maintained
Share Repurchases ($USD Millions)FY 2025$500 – $650 (policy priority) $500 – $650 (reaffirmed) Maintained
New Product Revenues ($USD Millions)FY 2025$450 – $550 $450 – $550 (reaffirmed) Maintained
Dividend PolicyFY 2025Maintained, quarterly dividend announced Capital return reaffirmed; ~$143M dividends YTD Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Indore remediation and supply continuityFDA warning letter/import alert disclosed; mitigation underway FY 2025 impact: ~$500M revenue, ~$385M adj. EBITDA; reinspection anticipated in months ~$140M Q1 impact; remediation progressing; reinspection request mid-year Improving (execution), lingering headwind
Tariffs/macro policyNot highlightedPolicy unpredictability noted Potential tariff impacts; >50% U.S. revenue sourced domestically; mitigation strategies in place Rising external risk
Capital allocationDebt paydown, target leverage ~3x $825M returned in 2024; 2025 buybacks $500–$650M planned >$450M YTD returned; buybacks >$300M; flexibility to lean in Supportive
Pipeline/R&D executionLicensing of sotagliflozin; Effexor Japan Phase 3 positive Six Phase 3 readouts expected in 2025 Meloxicam/Xulane LO Phase 3 positive; Effexor Japan filings; late-stage assets on track Strengthening
Regional trends (China/Europe)Growth in China/Europe on divestiture-adjusted basis Brands resilience; generics new products drive DM China +4%; Europe growth and brand momentum; NA pressured by Indore Mixed (ex-NA strong)
Guidance phasingSecond-half weighted expected FY 2025 guidance introduced 2H ~52% of revenue; EBITDA/EPS 2H-weighted Consistent

Management Commentary

  • “2025 is off to a good start as we continue to focus on executing our strategic priorities… our growing pipeline, capital discipline, operational execution, and significant global scope give us confidence” — CEO Scott Smith .
  • “We continue to generate strong cash flow… share repurchases of over $300 million year to date… well positioned to meet our financial guidance” — CFO Theodora Mistras .
  • “Remediation at our Indore facility… on track to request reinspection midyear” — CEO Scott Smith .
  • “Adjusted gross margin ~56% in the quarter was in line with expectations… margins declined versus prior year due to price regulations in JANZ, the impact of Indore and increase in certain product supply costs” — CFO Theodora Mistras .

Q&A Highlights

  • Meloxicam opportunity: Management highlighted a large addressable acute-pain market, efficacy superior to tramadol in trials, fast onset, and potential for both inpatient and outpatient use; peak sales not disclosed, forecast work ongoing .
  • Tariffs mitigation: >50% of U.S. revenues sourced domestically; contingency plans include increasing U.S. production, inventory adjustments, site transfers, and potential U.S. capacity expansion; price increases not committed .
  • Buyback flexibility: Target $500–$650M for 2025; willingness to “lean in” further depending on macro/tariff uncertainty and cash generation; deployable cash flow ~$1.7B cited by CFO .
  • Indore trajectory: ~40% of the $500M FY impact tied to products (e.g., lenalidomide) unlikely to return; penalties/supply disruptions ($100M) not expected in 2026; broader product restoration anticipated as remediation progresses .
  • Second-half phasing/new launches: Revenue/EPS back-weighted; iron sucrose, octreotide, liraglutide approvals/launches expected in 2H 2025; glucagon launched .

Estimates Context

  • Q1 2025 beat: Revenue $3.254B vs $3.235B consensus; adjusted EPS $0.50 vs $0.492 consensus; adjusted EBITDA above consensus ($923.5M vs $903.0M), reflecting resilient brands and China/Europe growth amid the planned Indore drag .
  • FY 2025 consensus: Revenue ~$14.10B; EPS ~$2.305; EBITDA ~$4.10B*. Company reaffirmed revenue/FCF guidance and nudged adj. EBITDA down $10M for IP R&D while lifting adj. EPS midpoint via buybacks .
  • Implications: Consensus EPS may bias modestly upward if buybacks accelerate and FX remains favorable (management noted recent FX tailwinds); risks include tariff outcomes and timing of Indore reinspection (not in guidance) .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q1 print was clean ex-Indore, with small beats on revenue/EPS and reaffirmed FY guidance; GAAP optics were noisy due to the non-cash goodwill impairment .
  • Pipeline is becoming a tangible 2025–2026 catalyst set: meloxicam and Xulane LO NDAs in 2025, Effexor SR Japan filing, and late-stage assets (selatogrel, cenerimod, sotagliflozin) tracking to 2026 readouts .
  • Capital return remains a central pillar in 2025 (buybacks $500–$650M); incremental repurchase activity is a potential driver of EPS above consensus if macro/tariff risks are manageable .
  • Second-half weighted year (≈52% of revenue) with expected ramp from new product launches and diminishing Indore drag provides near-term setup for improving quarterly cadence .
  • Watch tariff policy developments: Viatris’ diversified footprint (>50% U.S.-sourced revenue, flexible network) mitigates, but material tariffs would be a headwind to margins/access; any clarity could reduce overhang .
  • Regional mix supportive: China/Europe growth offsets North America generics pressure; brands continue to underpin margins and cash generation .
  • Monitor Indore milestones (reinspection request, network transfers) and FX tailwinds; both could improve 2H trajectory and de-risk the outlook .