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VI

Viatris Inc (VTRS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered revenue of $3.58B and adjusted EPS of $0.62, both above expectations; excluding the Indore FDA import alert impact (~$160M), divestiture-adjusted operational revenue grew ~3% YoY .
  • Management reiterated full-year 2025 guidance and expects to be in the top half of ranges for total revenues and adjusted EPS; capital returns YTD exceed $630M, including $350M in buybacks .
  • Regional mix was resilient: Greater China +9% YoY, Europe steady, while North America declined amid Indore and Wixela competition; adjusted gross margin of 56.6% reflected mix and lower penalty impacts vs Q1 .
  • Pipeline momentum continued (positive Phase 3 MR‑141/142; meloxicam NDA targeted by year-end), with MR‑139 in blepharitis failing its primary endpoint; remediation at Indore is “nearly complete,” meeting requested with FDA for reinspection timing .
  • Near-term stock drivers: revenue/EPS beat vs consensus, reiterated guidance with “top-half” bias, China strength, capital returns, and clarity on Indore reinspection path .

What Went Well and What Went Wrong

  • What Went Well

    • “We delivered a strong second quarter… and continued to make meaningful progress against our key 2025 strategic priorities,” including execution and late-stage pipeline momentum .
    • Adjusted gross margin 56.6% and revenue strength in Europe and Greater China; excluding Indore, divestiture-adjusted operational revenue grew ~3% YoY .
    • Capital returns: >$630M YTD with $350M buybacks; management expects to be in the top half for revenue and adjusted EPS in 2025 .

  • What Went Wrong

    • Indore impact weighed on generics and North America; Q2 Indore revenue headwind ~$160M .
    • MR‑139 (blepharitis) Phase 3 did not meet primary endpoint; program under review .
    • Adjusted EBITDA and adjusted EPS declined YoY due to Indore; free cash flow was impacted by transaction-related costs and the semiannual interest timing .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$3.528 $3.254 $3.582
Adjusted EPS ($)$0.54 $0.50 $0.62
Adjusted EBITDA ($USD Billions)$0.984 $0.924 $1.079
Adjusted Gross Margin (%)56.3% 55.9% 56.6%
Q2 2025 Performance vs Prior Year, Prior Quarter, and ConsensusQ2 2024Q1 2025Q2 2025 ActualConsensus (S&P Global)*Surprise
Revenue ($USD Billions)$3.797 $3.254 $3.582 $3.456*+3.7% vs consensus (Beat)
Adjusted EPS ($)$0.69 $0.50 $0.62 $0.556*+11.6% vs consensus (Beat)
Segment Net Sales ($USD Millions)Q2 2024Q2 2025YoY Change
Developed Markets$2,319.2 $2,119.3 (9)%
Greater China$539.0 $588.9 +9%
JANZ$349.6 $305.7 (13)%
Emerging Markets$578.1 $555.1 (4)%
Brands$2,363.1 $2,284.5 (3)%
Generics$1,422.8 $1,284.5 (10)%
Key Product KPIs ($USD Millions)Q2 2024Q2 2025
Lipitor$348.4 $387.9
EpiPen Auto-Injectors$115.5 $136.8
Creon$78.2 $91.4
Yupelri$54.5 $66.6
New Product Revenues—~$79

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenuesFY 2025$13.5B–$14.0B (Feb 27; reaffirmed May 8) $13.5B–$14.0B; expect top-half Maintained; top-half bias
Adjusted EBITDAFY 2025$3.90B–$4.20B (Feb 27); $3.89B–$4.19B (May 8) $3.89B–$4.19B Maintained
Adjusted EPSFY 2025$2.12–$2.26 (Feb 27); $2.16–$2.30 (May 8) $2.16–$2.30; expect top-half Maintained; top-half bias
Free Cash FlowFY 2025$1.8B–$2.2B $1.8B–$2.2B Maintained
GAAP Net Cash from OpsFY 2025$2.2B–$2.5B $2.2B–$2.5B Maintained
Share RepurchasesFY 2025$500M–$650M $500M–$650M (YTD $350M) Maintained; $350M done
DividendQ3 2025—$0.12/share declared Aug 5 Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Indore remediation and impact2025 headwind $500M revenue/$385M EBITDA; remediation more than halfway; reinspection anticipated Indore impact ~$160M in Q2; remediation “nearly complete”; meeting request to FDA for reinspection timing Improving operationally; still a headwind
China performanceGreater China strong in 2024 ; Q1’25 +2% Q2’25 +9% YoY; benefits from buying patterns; moderation expected in 2H Accelerating then normalizing
Tariffs/macroProspective tariff risks highlighted in guidance commentary No material 2025 impact anticipated; monitoring closely Neutral; monitored
Pipeline (meloxicam, eye care)Six 2025 Phase 3 readouts planned; meloxicam positive; XULANE LO positive MR‑141/142 positive; MR‑139 failed primary; meloxicam NDA targeted by YE Momentum with mixed readouts
Capital allocation$825M returned in 2024; 2025 buybacks $500–$650M >$630M returned YTD; $350M buybacks; reiteration of plan Ongoing; supportive
Strategic review/cost savingsEnterprise-wide review initiated Progressing; granularity targeted on Q3 call Ongoing; potential savings

Management Commentary

  • CEO: “We delivered a strong second quarter… our late-stage pipeline continues to advance with encouraging momentum… positioning Viatris for sustainable growth in 2026 and beyond.”
  • CFO: “Second-quarter results exceeded our expectations… reaffirming all key elements of our 2025 guidance… confident in our ability to deliver on our financial commitments.”
  • CEO on Indore/Nashik: remediation at Indore ~80% complete with FDA meeting request this month; Nashik actions complete, recent FDA product approval encouraging .
  • CFO on mix/margins/cash: gross margin stepped up vs Q1 due to lower penalty mix and improved product/segment mix; free cash flow phasing higher in 2H .

Q&A Highlights

  • Capital allocation and BD: Balanced approach—return capital (dividends/buybacks) while building a portfolio of accretive in-market growth assets; base business targeting low-single-digit revenue growth ex-Indore .
  • Tariffs: No current tariffs; ~50% of U.S. revenue sourced domestically; do not anticipate material 2025 impact; contingency modeling ongoing .
  • China/BD: +9% operational growth in Q2 driven by diversified commercial model; growth expected to moderate; active BD dialogues in China for broader reach .
  • New product revenue phasing: FY new products targeted $450–$550M; approvals/launch timing skewed to back half; delays (e.g., iron sucrose) could weigh but reflected in guidance .
  • Meloxicam commercialization: Large U.S. acute pain opportunity ($80B); launch planning underway (pricing/payer research); options include partnerships; NDA targeted by YE .

Estimates Context

Q2 2025 Consensus vs ActualConsensus (S&P Global)*ActualSurprise
Revenue ($USD Billions)$3.456*$3.582 +3.7% (Beat)
Adjusted EPS ($)$0.556*$0.62 +11.6% (Beat)

*Values retrieved from S&P Global.

Implications: Results were ahead of Street on revenue/EPS and management’s “top-half” guidance bias for FY revenue and adjusted EPS suggests upward estimate revisions are likely. Note definitional differences on EBITDA (company “Adjusted EBITDA” $1.079B vs S&P tracking) when comparing consensus vs reported .

Key Takeaways for Investors

  • Revenue and adjusted EPS beats, plus “top-half” guidance bias, are positive for near-term sentiment and could drive estimate revisions upward .
  • Greater China strength and European resilience offset North America headwinds from Indore/Wixela; mix supported margin stability at 56.6% .
  • Indore remediation nearing completion with FDA meeting requested—clear reinspection timing is a catalyst; continued monitoring needed for 2H impact cadence .
  • Pipeline momentum (meloxicam NDA by YE; MR‑141/142 positive) offers 2026+ growth optionality; MR‑139 setback contained to eye care sub-portfolio .
  • Capital return remains robust: >$630M YTD, $350M buybacks, $0.12 dividend declared; provides downside support amid remediation/tariff uncertainties .
  • Watch 2H phasing: management expects higher revenue, adjusted EBITDA/EPS, and FCF in 2H; FX could be a modest tailwind if rates hold, hedging may temper EBITDA impacts .
  • Risk checks: Indore reinspection outcome/timing, generics competition (e.g., Wixela), approvals timing for back-half new products, and tariff policy clarity remain key variables .