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    Viatris Inc (VTRS)

    Q3 2024 Earnings Summary

    Reported on Feb 7, 2025 (Before Market Open)
    Pre-Earnings Price$11.61Last close (Nov 6, 2024)
    Post-Earnings Price$11.81Open (Nov 7, 2024)
    Price Change
    $0.20(+1.72%)
    • 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.
    • 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.
    MetricYoY ChangeReason

    Total Revenue

    -5%

    The decrease was driven by divestitures (notably the biosimilars/OTC businesses) and currency headwinds, partially offset by new product sales. Base business erosion also contributed to the decline, although its impact was softened by continued uptake of newly launched products.

    Brands

    -7%

    Performance was impacted by unfavorable channel dynamics in North America (e.g., formulary changes) and government price regulations in Japan/Australia. These challenges outweighed growth in Greater China and select Emerging Markets, where new launches supported sales.

    Generics

    +12%

    Growth was driven by a focus on complex generics (e.g., Breyna, Wixela) and stable pricing in key markets. Additionally, new product introductions in the U.S. and Europe boosted volumes, helping offset the continued erosion of older generics.

    Emerging Markets

    -17%

    The decline stemmed from foreign currency translation effects and the absence of revenues from divested businesses. Despite these headwinds, remaining business sales rose on a constant currency basis, supported by higher volumes and new product launches in Latin America and Asia.

    Net Income

    -71%

    Goodwill impairment charges, losses on divestitures, and litigation settlements led to a sharp reduction in net income, overshadowing modest benefits from cost-containment initiatives and improved operational efficiencies in certain regions.

    EPS (Diluted)

    -70%

    The decrease in diluted EPS reflects the same major headwinds affecting net income—impairment charges, restructuring costs, and divestiture losses. While new product launches are expected to provide future upside, these items had a significant downward impact on per-share results.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Operational Revenue Growth

    FY 2024

    2%

    2%

    no change

    Adjusted EBITDA

    FY 2024

    Stable vs 2023

    Flat vs 2023

    no change

    Adjusted EPS

    FY 2024

    Stable vs 2023

    Flat vs 2023

    no change

    New Product Revenue

    FY 2024

    $500M - $600M

    Higher end of $500M - $600M

    raised

    Free Cash Flow

    FY 2024

    $2.3B

    $2.3B

    no change

    Gross Leverage Target

    FY 2024

    ~3x by end of 2024

    ~3x by end of 2024

    no change

    Notional Debt Outstanding

    FY 2024

    no prior guidance

    Below $14B

    no prior guidance

    MetricPeriodGuidanceActualPerformance
    Operational Revenue Growth
    Q3 2024
    Expected to grow approximately 2% year-over-year
    Decreased by about 4.8% year-over-year from 3,941.9To 3,751.2, rather than growing 2%
    Missed
    TopicPrevious MentionsCurrent PeriodTrend

    Consistent focus on new product revenue

    Q2: US$210M in new product revenue, raised full-year guidance. Q1: US$154M with strong Breyna performance.

    Reported US$133M in Q3 2024 and confidence in achieving upper-end new product guidance.

    Remains a key growth driver across all periods

    Leverage ratio target (~3.0)

    Q2: Clear line of sight to ~3.0, facilitating dividends and opportunistic share repurchases. Q1: No mention.

    On track for ~3.0 by year-end 2024, enabling at least US$2.3B in free cash flow for shareholder returns.

    Gaining prominence, no reference in Q1

    Delayed revenue contributions (sotagliflozin, GA Depot)

    Q2: No mention. Q1: GA Depot under FDA discussion, but no sotagliflozin mention.

    Sotagliflozin revenue possibly starting ~2027; GA Depot decision pending after agency meeting.

    Heightened caution on long-term pipeline timing

    Supply chain challenges (ARV products)

    Q2: No mention. Q1: No mention.

    ARV supply backlogs discussed, working to catch up on delays.

    Newly emerged issue in Q3

    Uncertainty in U.S. market strategy

    Q2: No mention. Q1: No mention.

    CEO noted policy changes are unclear but remains open to collaboration with the new administration.

    Newly mentioned in Q3

    Large and advancing pipeline

    Q2: 250+ products in pipeline; selatogrel and cenerimod in Phase III; GLP-1s in development. Q1: Focus on complex injectables; selatogrel and cenerimod advancing; GLP-1 not highlighted.

    Confident in delivering US$450–550M from new launches, including GLP-1 assets (liraglutide).

    Continues to expand, adding more complex generics and innovative therapies

    Ongoing government price regulations (Japan, Australia)

    Q2: Impact offset by volume growth in Japan. Q1: Price erosion offset by 2% operational growth in JANZ.

    No mention in Q3.

    Previously noted pressures absent in Q3

    Momentum in emerging markets

    Q2: 7% growth in Emerging Markets from LATAM, MENA, Eurasia. Q1: 9% growth in MENA/Eurasia, strong across generics and branded.

    2% net sales growth from branded CV portfolio in LATAM, strength in MENA and Asia.

    Growth persists but at a slightly slower rate compared to Q1

    Softness in North America brands

    Q2: Ongoing EpiPen volume challenges from Q1 formulary changes. Q1: Attributed softness to EpiPen formulary shifts, expecting other brands to offset.

    Lower EpiPen volumes from prior formulary changes, continued Medicaid impact on non-promoted brands.

    Remains an issue, though partially offset by other products

    Potential high impact launches (e.g., Sandostatin LAR, GLP‑1)

    Q2: GLP-1 expansions noted but no mention of Sandostatin LAR generics. Q1: No mention.

    Sandostatin LAR generics under FDA review; continued GLP-1 expansion (liraglutide) for 2025.

    Emerging revenue drivers starting in 2025

    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.