Viatris Inc (VTRS)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 total revenues were $3.53B, adjusted EBITDA $0.98B, adjusted EPS $0.54, with free cash flow of $342M (or $685M excluding transaction costs). GAAP EPS was a loss of $0.43; adjusted gross margin was 56.3% .
• Management introduced 2025 guidance: revenues $13.5–$14.0B, adjusted EBITDA $3.9–$4.2B, adjusted EPS $2.12–$2.26, free cash flow $1.8–$2.2B, including an estimated Indore facility impact of ~$500M to revenues and ~$385M to adjusted EBITDA .
• Viatris plans to prioritize capital returns in 2025, targeting $500–$650M in share repurchases and maintaining a $0.48/share annual dividend (declared $0.12/share quarterly for March) .
• Indore FDA warning letter/import alert is a key overhang; CFO quantified ~40% of the revenue impact tied to lenalidomide and ~$100M of penalties/supply disruptions, with remediation >50% complete and reinspection request anticipated after a few months .
• On the call, an analyst noted the stock was trading down “mid-teens” in premarket, and management indicated buybacks could be more aggressive depending on share price .

What Went Well and What Went Wrong

What Went Well

• Base business held up: on a divestiture-adjusted operational basis, Q4 net sales grew 1% YoY; generics net sales +2% on a divestiture-adjusted operational basis; Greater China +2% .
• Strong cash generation and deleveraging: Q4 operating cash flow $483M; year-end gross leverage at 2.9x; repaid ~$1.4B of debt in Q4 and ~$3.7B in 2024 .
• Pipeline/innovation momentum: management expects six Phase 3 readouts in 2025 and updated Idorsia terms to improve long-term economics and add APAC rights for cenerimod; CEO emphasized focus on late-stage milestones for selatogrel, cenerimod, sotagliflozin .

Quotes:

• “We will prioritize capital return to our shareholders, including a sizeable minimum commitment to share repurchases.”
• “We are more than halfway through our remediation efforts and expect to be completed in a few months…anticipates requesting FDA to conduct a reinspection.”
• “We expect six Phase 3 data readouts and achievement of important late-stage development milestones for…selatogrel, cenerimod and sotagliflozin in 2025.”

What Went Wrong

• Margin compression and earnings decline: Q4 GAAP gross margin fell to 34.4% from 41.6% YoY; adjusted EBITDA down 12% YoY; adjusted EPS down 13% YoY .
• GAAP net loss persisted: Q4 GAAP net loss of $516.5M (vs. $765.6M prior-year), driven by impairments, litigation contingencies, and divestiture-related charges .
• Indore FDA actions: 2025 revenue and EBITDA headwinds ($500M/$385M); lenalidomide exception not granted, with ~40% of revenue impact tied to lenalidomide and ~50% of EBITDA impact given margin profile; penalties/supply disruptions ~ $100M .

Financial Results

Quarterly trend (Q2–Q4 2024)

Q4 2024 vs prior year and vs prior quarter

Note: SPGI consensus estimates were unavailable at time of request due to API limits; comparisons vs Street are not provided.

Segment breakdown – Q4 2024 vs Q4 2023

KPIs

Guidance Changes

Reference (2024 execution vs guidance): FY 2024 FCF was $1.98B including transaction costs and $2.6B excluding them; management noted it exceeded guidance ex transaction costs .

Earnings Call Themes & Trends

Management Commentary

• “In 2025, we are prioritizing returning capital to shareholders…targeting at least $500 million to $650 million in share repurchases this year.” (Scott Smith)
• “We are more than halfway through our remediation efforts and expect to be completed in a few months…anticipate requesting FDA to conduct a reinspection of the facility.” (Scott Smith)
• “Lenalidomide…is the largest product impacted and represents approximately 40% of the total revenue impact and 50% of the total adjusted EBITDA impact given its margin profile.” (Theodora Mistras)
• “We expect total revenues to decline approximately 1% [in 2025]…Europe is expected to grow year-over-year…North America is expected to decline.” (Corinne Le Goff)
• “We expect six Phase 3 readouts this year…we will share more on our GLP-1 strategy at our upcoming Investor Day.” (Philippe Martin)

Q&A Highlights

• Scope of quality issues: management said only Indore received a warning/import alert; Carole Park closed out with no warning letter; Nashik classification pending; 26-facility network otherwise compliant .
• Indore timeline and 2026 implications: remediation completion in late spring/early summer with reinspection request thereafter; lenalidomide economics were expected to diminish in early 2026 regardless, bringing the impact forward ~10–12 months .
• Buyback aggressiveness: management views $500–$650M as a minimum and could increase buybacks if stock remains under pressure, balanced with accretive BD .
• Gross margin drivers: ~80% of margin step-down tied to Indore (penalties + lenalidomide), with normal price erosion and some supply cost increases partially offset by mix .
• Enterprise cost review: initiative underway in 1H25; benefits likely realized more fully in 2026 .

Estimates Context

• Street consensus via S&P Global was unavailable due to system limits at query time; as a result, estimate comparisons are not provided today. Management indicated Q4 revenues were “in line with our expectations,” but did not comment on Street consensus .
• Where consensus comparisons are required for future analyses, we will refresh S&P Global data and overlay beats/misses.

Key Takeaways for Investors

• 2025 headwind is defined and quantified: ~$500M revenue and ~$385M EBITDA impact from Indore, with a clear remediation plan and reinspection request targeted in months; lenalidomide drives a large portion of the hit .
• Cash generation and balance sheet strength provide flexibility: ~$2.0B 2025 FCF guide and gross leverage at 2.9x support buybacks and selective BD despite near-term operational headwinds .
• Capital return is the 2025 narrative: $500–$650M buybacks and $0.48 dividend policy could underpin downside support; management may scale buybacks if shares remain weak .
• Base/segment mix: expect Europe/China strength to partially offset North America declines (Indore + competition); watch JANZ pricing/regulatory pressure .
• Pipeline catalysts in 2025: six Phase 3 readouts and complex injectable launches (iron sucrose, octreotide, glucagon ramp) offer medium-term growth vectors; Idorsia terms improve economics .
• Near-term trading: sentiment likely tied to remediation milestones and Street estimate updates; monitor FDA reinspection timing and any further product exceptions (none currently expected) .
• Medium-term thesis: if remediation executes and pipeline hits, 2026 setup improves with cost actions, post-lenalidomide normalization, and capital allocation supporting EPS compounding .