- Reports Total Revenues of $3.73
billion; U.S. GAAP Net Earnings of $225 million; Adjusted EBITDA of $1.34 billion; U.S. GAAP Net Cash Provided by
Operating Activities of $971 million;
and Free Cash Flow of $923 million
for the Quarter
- Expects Full-Year Total Revenues, Adjusted EBITDA and Free
Cash Flow to be at Midpoint of 2023 Guidance Ranges[1]
- Reaffirms 2024 Phase 2 Outlook from November 7 Strategic Update
- Returns Approximately $400
million of Capital to Shareholders in First Quarter Through
Dividends and Share Repurchases
- Pays Down Debt of $546 million
in First Quarter
- Board of Directors Declares Quarterly Dividend of
$0.12 per Share
PITTSBURGH, May 8, 2023
/PRNewswire/ -- Viatris Inc. (NASDAQ: VTRS) today reported strong
results for the first quarter of 2023 reflecting another robust
operational performance and instilling further confidence in the
Company's ability to return to growth as it prepares to enter Phase
2 of its strategic plan in 2024.
Executive Commentary
Viatris CEO Scott A. Smith said:
"Since becoming CEO, I have met with colleagues all over the globe
and have had the opportunity to spend time with each business
segment. I have seen firsthand the unique combination of passion,
dedication and skills of the people of Viatris. The unwavering
commitment to our mission is not only infectious but also is
displayed by the great execution that has led to a strong start to
the year and yet another quarter of robust operational performance.
The strength of this quarter gives me further confidence in our
ability to return to growth as we enter into Phase 2 in 2024.
Smith continued: "I want to reiterate that I firmly believe in
the Company's strategic plan, including the capital allocation
priorities, laid out in November. A critical part of my job is to
enhance the already strong execution by the Company and, ideally,
accelerate our well-crafted strategy. I look forward to the
exciting path ahead."
Viatris President Rajiv Malik
said: "We believe that we are headed into the final stages of
completing all aspects of our Phase 1 commitments, which is a
critical part of our two-phased strategy, driven primarily by the
continued strength of our branded portfolio. Looking ahead, we have
tremendous confidence in our ability to deliver on our full-year
commitments based on effective management of our brands,
$500 million-plus in expected new
product launches and further progress of our pipeline, including
the NDA for GA once-monthly that we filed with the FDA."
Viatris CFO Sanjeev Narula said:
"We delivered a strong first quarter which met our expectations
across all metrics. This included free cash flow generation
of $923 million which was prioritized
for debt paydown of $546
million. Since the beginning of 2021, we have paid
down approximately $6 billion in
debt. Additionally, in the quarter we returned approximately
$400 million of capital to our
shareholders in dividends and share buybacks. Based on our first
quarter results and outlook for the rest of the year, we are
reaffirming our 2023 financial guidance and remain confident in our
Phase 2 outlook beginning in 2024."
Return of Capital to Shareholders
Viatris announced that, on May 5, 2023, its Board of
Directors declared a quarterly dividend of twelve cents ($0.12) for each issued and outstanding share of
the Company's common stock. The dividend is payable on
June 16, 2023, to shareholders of record at the close of
business on May 24, 2023.
Viatris paid a quarterly cash dividend of twelve cents ($0.12) per share on the Company's issued and
outstanding common stock on March 17,
2023. Additionally, in January and February 2023, the Company repurchased
approximately 21.2 million shares of common stock at a cost of
approximately $250 million, as part
of its previously announced $1
billion stock repurchase program authorized by Viatris'
Board of Directors.
Conference Call and Earnings Materials
Viatris Inc. will host a conference call and live webcast, today
at 8:30 a.m. ET, to review the
Company's financial results for the first quarter ended
March 31, 2023.
Investors and the general public are invited to listen to a live
webcast of the call at investor.viatris.com or by calling
800.579.2543 or 785.424.1789 for international callers (ID#:
VTRSQ123). The "Viatris Q1 Earnings Presentation," which will be
referenced during the call, can be found at investor.viatris.com. A
replay of the webcast also will be available on the website.
[1] Viatris is not providing forward-looking guidance
for U.S. GAAP net earnings (loss) or a quantitative reconciliation
of its 2023 adjusted EBITDA guidance. U.S. GAAP net cash provided
by operating activities for 2023 is estimated to be between
$2.8 billion and $3.1 billion. Please see "2023 Financial
Guidance" and "Non-GAAP Financial Measures" for additional
information.
Financial
Summary
|
|
Three Months
Ended
|
|
March
31,
|
(Unaudited; in
millions, except %s)
|
2023
|
|
2022
|
|
Reported
Change
|
|
Operational
Change(1) (3)
|
|
Divestiture
Adjusted
Operational
Change(2) (3)
|
Total Net
Sales
|
$ 3,719.1
|
|
$ 4,178.2
|
|
(11) %
|
|
(6) %
|
|
(2) %
|
Developed
Markets
|
2,170.4
|
|
2,476.1
|
|
(12) %
|
|
(9) %
|
|
(4) %
|
Emerging
Markets
|
641.9
|
|
705.2
|
|
(9) %
|
|
(1) %
|
|
1 %
|
JANZ
|
342.2
|
|
423.8
|
|
(19) %
|
|
(11) %
|
|
(10) %
|
Greater
China
|
564.6
|
|
573.1
|
|
(1) %
|
|
5 %
|
|
5 %
|
|
|
|
|
|
|
|
|
|
|
Net Sales by Product
Category
|
|
|
|
|
|
|
|
|
|
Brands
|
$ 2,420.3
|
|
$ 2,554.1
|
|
(5) %
|
|
— %
|
|
— %
|
Complex Gx
|
136.1
|
|
390.8
|
|
(65) %
|
|
(65) %
|
|
(39) %
|
Generics
|
1,162.7
|
|
1,233.3
|
|
(6) %
|
|
— %
|
|
— %
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP Gross
Profit
|
$ 1,542.2
|
|
$ 1,771.2
|
|
(13) %
|
|
|
|
|
U.S. GAAP Gross
Margin
|
41.4 %
|
|
42.3 %
|
|
|
|
|
|
|
Adjusted Gross Profit
(3)
|
$ 2,250.9
|
|
$ 2,493.4
|
|
(10) %
|
|
|
|
|
Adjusted Gross Margin
(3)
|
60.4 %
|
|
59.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP Net
Earnings
|
$
224.7
|
|
$
399.2
|
|
(44) %
|
|
|
|
|
Adjusted Net Earnings
(3)
|
$
932.9
|
|
$ 1,125.3
|
|
(17) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
(3)
|
$ 1,199.7
|
|
$ 1,409.6
|
|
(15) %
|
|
|
|
|
Adjusted EBITDA
(3)
|
$ 1,340.9
|
|
$ 1,586.3
|
|
(15) %
|
|
(11) %
|
|
(8) %
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP net cash
provided by operating activities
|
$
971.2
|
|
$ 1,138.5
|
|
(15) %
|
|
|
|
|
Capital
expenditures
|
47.8
|
|
64.5
|
|
(26) %
|
|
|
|
|
Free cash flow
(3)
|
$
923.4
|
|
$ 1,074.0
|
|
(14) %
|
|
|
|
|
___________
|
(1)
|
Represents operational
change for net sales and adjusted EBITDA which excludes the impacts
of foreign currency translation.
See "Certain Key Terms and Presentation Matters" in this release
for more information.
|
(2)
|
Represents adjustments
for impact of the biosimilars divestitures in November 2022 on an
operational basis. See "Certain Key
Terms and Presentation Matters" in this release for more
information.
|
(3)
|
Non-GAAP financial
measures. See "Non-GAAP Financial Measures" for additional
information.
|
Financial Highlights
- First quarter 2023 total net sales totaled $3.7 billion, down 2% on a divestiture adjusted
operational basis (as defined in "Certain Key Terms and
Presentation Matters" below) compared to Q1 2022 results.
- Brands performed in line with expectations, driven by products
such as Dymista®, Celebrex® and
Norvasc®.
- Complex generics performed lower than expectations on a
divestiture adjusted operational basis compared to Q1 2022 results
primarily due to the phasing of certain products.
- Generics, which include diversified product forms such as
extended-release oral solids, injectables, transdermals and
topicals, performed ahead of expectations including strong
performance across broader Developed and Emerging Markets
portfolios.
- The Company generated approximately $85
million in new product revenues (as defined in "Certain Key
Terms and Presentation Matters" below) primarily driven by
lenalidomide in the U.S. and is on track to achieve approximately
$500 million in new product revenues
in 2023.
- The Company had U.S. GAAP net cash provided by operating
activities of $971 million and
generated $923 million of free cash
flow, primarily driven by strong operating results and the timing
of planned capital expenditures. Free cash flow for the quarter
includes approximately $22 million of
transaction costs primarily related to the eye care
acquisitions.
- The Company paid down $546
million in debt. The Company remains fully committed to
maintaining its investment grade credit rating.
2023 Financial Guidance
Viatris is reaffirming its 2023 financial guidance that was
previously provided on February 27,
2023, as set forth below. The Company is not providing
forward-looking guidance for U.S. GAAP net earnings or a
quantitative reconciliation of its 2023 adjusted EBITDA guidance to
the most directly comparable U.S. GAAP measure, U.S. GAAP net
earnings, because it is unable to predict with reasonable certainty
the ultimate outcome of certain significant items, including
integration, acquisition and divestiture related expenses,
restructuring expenses, asset impairments, litigation settlements,
and other contingencies, such as changes to contingent
consideration, acquired IPR&D and certain other gains or
losses, including for the fair value accounting for the compulsory
convertible preferred shares ("CCPS") in Biocon Biologics, as well
as related income tax accounting, because certain of these items
have not occurred, are out of the Company's control and/or cannot
be reasonably predicted without unreasonable effort. These items
are uncertain, depend on various factors, and could have a material
impact on U.S. GAAP reported results for the guidance period. U.S.
GAAP net cash provided by operating activities for 2023 is
estimated to be between $2.8 billion
and $3.1 billion, with a midpoint of
approximately $2.95 billion. The
Company currently expects to be at the midpoint of the financial
guidance ranges.
(In
billions)
|
|
2023 Guidance Range
(2)
|
|
2023
Midpoint
|
Total
Revenues
|
|
$15.5 -
$16.0
|
|
$15.75
|
Adjusted EBITDA
(1)
|
|
$5.0 - $5.4
|
|
$5.2
|
Free Cash Flow
(1)
|
|
$2.3 - $2.7
|
|
$2.5
|
|
|
(1)
|
Non-GAAP financial
measures. See "Non-GAAP Financial Measures" for additional
information.
|
(2)
|
Includes the full year
expected performance for the planned divestitures and excludes any
potential related costs, such as taxes and transaction costs, as
well as any similar costs related to the eye care acquisitions.
Also excludes any future acquired IPR&D for unsigned
deals.
|
Certain Key Terms and Presentation Matters
New product sales, new product launches or new product revenues:
Refers to revenue from new products launched in 2023 and the
carryover impact of new products, including business development,
launched within the last twelve months.
Operational change: Refers to constant currency percentage
changes and is derived by translating amounts for the current
period at prior year comparative period exchange rates, and in
doing so shows the percentage change from 2023 constant currency
net sales, revenues and adjusted EBITDA to the corresponding amount
in the prior year.
Divestiture adjusted operational change: Refers to
operational changes, further adjusted for the impact of the
biosimilars divestiture in November
2022 by excluding biosimilars net sales from 2022
periods.
SG&A and R&D TSA reimbursement: Expenses related to
TSA services provided to Biocon Biologics are recorded in their
respective functional line item; however, reimbursement of those
expenses plus the mark-up is included in other (income) expense,
net. For comparability purposes, amounts related to the cost
reimbursement are reclassified to adjusted SG&A and adjusted
R&D. This reclassification has no impact on adjusted net
earnings or adjusted EBITDA.
Non-GAAP Financial Measures
This press release includes the presentation and discussion of
certain financial information that differs from what is reported
under accounting principles generally accepted in the United States ("U.S. GAAP"). These
non-GAAP financial measures, including, but not limited to,
adjusted gross profit, adjusted gross margins, adjusted net
earnings, EBITDA, adjusted EBITDA, free cash flow, adjusted R&D
and as a % of total revenues, adjusted SG&A and as a % of total
revenues, adjusted earnings from operations, adjusted interest
expense, adjusted other (income) expense, net, adjusted effective
tax rate, constant currency total revenues, constant currency net
sales, constant currency adjusted EBITDA, 2022 adjusted net sales
ex biosimilars, and divestiture adjusted operational change, are
presented in order to supplement investors' and other readers'
understanding and assessment of the financial performance of
Viatris Inc. ("Viatris" or the "Company"). Free cash flow refers to
U.S. GAAP net cash provided by operating activities less capital
expenditures. Management uses these measures internally for
forecasting, budgeting, measuring its operating performance, and
incentive-based awards. Primarily due to acquisitions and other
significant events which may impact comparability of our periodic
operating results, Viatris believes that an evaluation of its
ongoing operations (and comparisons of its current operations with
historical and future operations) would be difficult if the
disclosure of its financial results was limited to financial
measures prepared only in accordance with U.S. GAAP. We believe
that non-GAAP financial measures are useful supplemental
information for our investors and when considered together with our
U.S. GAAP financial measures and the reconciliation to the most
directly comparable U.S. GAAP financial measure, provide a more
complete understanding of the factors and trends affecting our
operations. The financial performance of the Company is measured by
senior management, in part, using adjusted metrics included herein,
along with other performance metrics. In addition, the Company
believes that including EBITDA and supplemental adjustments applied
in presenting adjusted EBITDA is appropriate to provide additional
information to investors to demonstrate the Company's ability to
comply with financial debt covenants and assess the Company's
ability to incur additional indebtedness. The Company also believes
that adjusted EBITDA better focuses management on the Company's
underlying operational results and true business performance and is
used, in part, for management's incentive compensation. We also
report sales performance using the non-GAAP financial measures of
"constant currency", also referred to herein as "operational
change", total revenues, net sales and adjusted EBITDA. These
measures provide information on the change in total revenues, net
sales and adjusted EBITDA assuming that foreign currency exchange
rates had not changed between the prior and current period. The
comparisons presented at constant currency rates reflect
comparative local currency sales at the prior year's foreign
exchange rates. We routinely evaluate our net sales, total revenues
and adjusted EBITDA performance at constant currency so that sales
results can be viewed without the impact of foreign currency
exchange rates, thereby facilitating a period-to-period comparison
of our operational activities, and believe that this presentation
also provides useful information to investors for the same reason.
Divestiture adjusted operational change refers to operational
change, further adjusted for the impact of the biosimilars
divestiture in November 2022 by
excluding biosimilars net sales from 2022 periods. The "Summary of
Total Revenues by Segment" table below compares net sales on an
actual and constant currency basis for each reportable segment for
the quarters ended March 31, 2023 and
2022 as well as for total revenues, as well as divestiture adjusted
operational change in net sales. Also, set forth below, Viatris has
provided reconciliations of such non-GAAP financial measures to the
most directly comparable U.S. GAAP financial measures. Investors
and other readers are encouraged to review the related U.S. GAAP
financial measures and the reconciliations of the non-GAAP measures
to their most directly comparable U.S. GAAP measures set forth
below, and investors and other readers should consider non-GAAP
measures only as supplements to, not as substitutes for or as
superior measures to, the measures of financial performance
prepared in accordance with U.S. GAAP. For additional information
regarding the components and uses of Non-GAAP financial measures
refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations--Use of Non-GAAP Financial
Measures section of Viatris' Quarterly Report on Form 10-Q for the
three months ended March 31,
2023.
The Company is not providing forward-looking U.S. GAAP
information for its non-GAAP 2024 Phase 2 outlooks or quantitative
reconciliations with respect to such outlooks to their most
directly comparable U.S. GAAP measures because it is unable to
predict with reasonable certainty the ultimate outcome of certain
significant items, including integration and acquisition-related
expenses, restructuring expenses, asset impairments, litigation
settlements and other contingencies, such as changes to contingent
consideration and certain other gains or losses, including for the
fair value accounting for the CCPS in Biocon Biologics, as well as
related income tax accounting, because certain of these items have
not occurred, are out of the Company's control and/or cannot be
reasonably predicted without unreasonable effort. These items are
uncertain, depend on various factors, and could have a material
impact on U.S. GAAP reported results for the relevant periods.
About Viatris
Viatris Inc. (NASDAQ: VTRS) is a global healthcare company
empowering people worldwide to live healthier at every stage of
life. We provide access to medicines, advance sustainable
operations, develop innovative solutions and leverage our
collective expertise to connect more people to more products and
services through our one-of-a-kind Global Healthcare Gateway®.
Formed in November 2020, Viatris
brings together scientific, manufacturing and distribution
expertise with proven regulatory, medical, and commercial
capabilities to deliver high-quality medicines to patients in more
than 165 countries and territories. Viatris' portfolio comprises
more than 1,400 approved molecules across a wide range of
therapeutic areas, spanning both non-communicable and infectious
diseases, including globally recognized brands, complex generic and
branded medicines and a variety of over-the-counter consumer
products. With approximately 38,000 colleagues globally, Viatris is
headquartered in the U.S., with global centers in Pittsburgh, Shanghai and Hyderabad, India. Learn more at viatris.com
and investor.viatris.com, and connect with us on Twitter, LinkedIn,
Instagram and YouTube.
Forward-Looking Statements
This release contains "forward-looking statements". These
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may include, without limitation, 2023
financial guidance; expects full year total revenues, adjusted
EBITDA and free cash flow to be at midpoint of 2023 guidance
ranges; reaffirms 2024 phase 2 outlook from November 7 strategic update; reported strong
results for the first quarter of 2023 reflecting another robust
operational performance and instilling further confidence in the
Company's ability to return to growth as it prepares to enter Phase
2 of its strategic plan in 2024; the strength of this quarter
gives me further confidence in our ability to return to growth as
we enter into Phase 2 in 2024; a critical part of my job is to
enhance the already strong execution by the Company and, ideally,
accelerate our well-crafted strategy; we believe that we are headed
into the final stages of completing all aspects of our Phase 1
commitments, which is a critical part of our two-phased strategy,
driven primarily by the continued strength of our branded
portfolio; looking ahead, we have tremendous confidence in our
ability to deliver on our full-year commitments based on effective
management of our brands, $500
million-plus in expected new product launches and further
progress of our pipeline, including the NDA filing of GA once
monthly; based on our solid first quarter results and outlook for
the rest of the year, we are reaffirming our 2023 financial
guidance and remain confident in our Phase 2 outlook beginning in
2024; Viatris' Board of Directors declared a quarterly dividend of
twelve cents ($0.12) for each issued and outstanding share of
the Company's common stock payable on June
16, 2023, to shareholders of record at the close of business
on May 24, 2023; the Company is on
track to achieve approximately $500
million in new product revenues in 2023; the Company remains
fully committed to maintaining its investment grade credit rating;
the Company currently expects to be at the mid-point of the
financial guidance ranges; the goals or outlooks with respect to
the Viatris Inc.'s ("Viatris" or the "Company") strategic
initiatives, including but not limited to the Company's two-phased
strategic vision and potential divestitures and acquisitions; the
benefits and synergies of acquisitions, divestitures or our global
restructuring program; future opportunities for the Company and its
products; and any other statements regarding the Company's future
operations, financial or operating results, capital allocation,
dividend policy and payments, stock repurchases; debt ratio and
covenants, anticipated business levels, future earnings, planned
activities, anticipated growth, market opportunities, strategies,
competitions, commitments, confidence in future results, efforts to
create, enhance or otherwise unlock the value of our unique global
platform, and other expectations and targets for future periods.
Forward-looking statements may often be identified by the use of
words such as "will", "may", "could", "should", "would", "project",
"believe", "anticipate", "expect", "plan", "estimate", "forecast",
"potential", "pipeline", "intend", "continue", "target", "seek" and
variations of these words or comparable words. Because
forward-looking statements inherently involve risks and
uncertainties, actual future results may differ materially from
those expressed or implied by such forward-looking statements.
Factors that could cause or contribute to such differences include,
but are not limited to: the possibility that the Company may be
unable to realize the intended benefits of, or achieve the intended
goals or outlooks with respect to, its strategic initiatives; the
possibility that the Company may be unable to achieve expected
benefits, synergies and operating efficiencies in connection with
acquisitions, divestitures, or its global restructuring program,
within the expected timeframe or at all; impairment charges or
other losses related to the divestiture or sale of businesses or
assets; the Company's failure to achieve expected or targeted
future financial and operating performance and results; the
potential impact of public health outbreaks, epidemics and
pandemics, including the ongoing challenges and uncertainties posed
by the COVID-19 pandemic; actions and decisions of healthcare and
pharmaceutical regulators; changes in relevant laws and
regulations, including but not limited to changes in tax,
healthcare and pharmaceutical laws and regulations globally
(including the impact of recent and potential tax reform in the
U.S.); the ability to attract and retain key personnel; the
Company's liquidity, capital resources and ability to obtain
financing; any regulatory, legal or other impediments to the
Company's ability to bring new products to market, including but
not limited to "at-risk launches"; success of clinical trials and
the Company's or its partners' ability to execute on new product
opportunities and develop, manufacture and commercialize products;
any changes in or difficulties with the Company's manufacturing
facilities, including with respect to inspections, remediation and
restructuring activities, supply chain or inventory or the ability
to meet anticipated demand; the scope, timing and outcome of any
ongoing legal proceedings, including government inquiries or
investigations, and the impact of any such proceedings on the
Company; any significant breach of data security or data privacy or
disruptions to our information technology systems; risks associated
with having significant operations globally; the ability to protect
intellectual property and preserve intellectual property rights;
changes in third-party relationships; the effect of any changes in
the Company's or its partners' customer and supplier relationships
and customer purchasing patterns, including customer loss and
business disruption being greater than expected following an
acquisition or divestiture; the impacts of competition, including
decreases in sales or revenues as a result of the loss of market
exclusivity for certain products; changes in the economic and
financial conditions of the Company or its partners; uncertainties
regarding future demand, pricing and reimbursement for the
Company's products; uncertainties and matters beyond the control of
management, including but not limited to general political and
economic conditions, inflation rates and global exchange rates; and
inherent uncertainties involved in the estimates and judgments used
in the preparation of financial statements, and the providing of
estimates of financial measures, in accordance with U.S. GAAP and
related standards or on an adjusted basis. For more detailed
information on the risks and uncertainties associated with Viatris,
see the risks described in Part I, Item 1A of the Company's Annual
Report on Form 10-K for the year ended December 31, 2022, as amended, and our other
filings with the SEC. You can access Viatris' filings with the SEC
through the SEC website at www.sec.gov or through our website, and
Viatris strongly encourages you to do so. Viatris routinely posts
information that may be important to investors on our website at
investor.viatris.com, and we use this website address as a means of
disclosing material information to the public in a broad,
non-exclusionary manner for purposes of the SEC's Regulation Fair
Disclosure (Reg FD). The contents of our website are not
incorporated into this press release or our filings with the SEC.
Viatris undertakes no obligation to update any statements herein
for revisions or changes after the date of this press release other
than as required by law.
In particular, certain statements in this release relate to
Viatris' Phase 2 strategy in 2024 and beyond and its related goals,
targets, forecasts, objectives and commitments (such statements,
the "Phase 2 Outlooks"). Viatris believes that the assumptions used
as a basis for these Phase 2 Outlooks are reasonable based on the
information available to management at this time. However, this
information is not fact, and you are cautioned not to place undue
reliance on any such information. While certain of these statements
might use language that imply a level of certainty about the
likelihood that Viatris will attain these Phase 2 Outlooks, it is
possible that Viatris will not attain them in the timeframe noted
or at all. These Phase 2 Outlooks reflect assumptions as to certain
business decisions that are subject to change. Important factors
that may affect actual results and cause these Phase 2 Outlooks not
to be achieved, or that may change the underlying variables and
assumptions on which these Phase 2 Outlooks were based and cause
these Phase 2 Outlooks to differ materially, include, but are not
limited to, risks and uncertainties relating to our planned
acquisitions and divestitures, including whether such transactions
are completed on the expected timelines or at all, failure to
achieve the anticipated benefits of any acquisitions or
divestitures, failure to receive the anticipated cash proceeds of
any divestitures, inability to manage base business erosion,
failure to bring new products to market on the expected timeframes
or at all, failure to execute stock repurchases consistent with
current expectations, stock price volatility, higher than
anticipated SG&A, gross margins and R&D spend, industry
performance, interest rate volatility, foreign exchange rates, tax
rates, the regulatory environment and general business and economic
conditions, as well as those set forth in the first paragraph of
"Forward-Looking Statements". In addition, although certain of the
outlooks are presented with numerical specificity, they are still
forward-looking statements that involve inherent risks and
uncertainties. Further, these Phase 2 Outlooks cover multiple years
and such information by its nature becomes less reliable with each
successive year. Accordingly, there can be no assurance that any
aspect of these Phase 2 Outlooks will be realized or that actual
results will not differ materially. Therefore, you should construe
these statements regarding these Phase 2 Outlooks only as goals,
targets and objectives rather than promises of future performance
or absolute statements.
Viatris Inc. and
Subsidiaries
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
(In millions,
except per share amounts)
|
2023
|
|
2022
|
Revenues:
|
|
|
|
Net sales
|
$ 3,719.1
|
|
$ 4,178.2
|
Other
revenues
|
10.0
|
|
13.5
|
Total
revenues
|
3,729.1
|
|
4,191.7
|
Cost of
sales
|
2,186.9
|
|
2,420.5
|
Gross profit
|
1,542.2
|
|
1,771.2
|
Operating
expenses:
|
|
|
|
Research and
development
|
182.9
|
|
142.3
|
Selling, general and
administrative
|
958.9
|
|
915.3
|
Litigation settlements
and other contingencies, net
|
0.6
|
|
6.2
|
Total operating
expenses
|
1,142.4
|
|
1,063.8
|
Earnings from
operations
|
399.8
|
|
707.4
|
Interest
expense
|
147.0
|
|
146.2
|
Other (income) expense,
net
|
(69.9)
|
|
33.7
|
Earnings before income
taxes
|
322.7
|
|
527.5
|
Income tax
provision
|
98.0
|
|
128.3
|
Net earnings
|
$
224.7
|
|
$
399.2
|
Earnings per share
attributable to Viatris Inc. shareholders
|
|
|
|
Basic
|
$
0.19
|
|
$
0.33
|
Diluted
|
$
0.19
|
|
$
0.33
|
Weighted average shares
outstanding:
|
|
|
|
Basic
|
1,202.5
|
|
1,210.5
|
Diluted
|
1,205.6
|
|
1,213.1
|
Viatris Inc. and
Subsidiaries
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
(In
millions)
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
506.6
|
|
$
1,259.9
|
Accounts receivable,
net
|
3,497.5
|
|
3,814.5
|
Inventories
|
3,664.3
|
|
3,519.5
|
Prepaid expenses and
other current assets
|
1,763.6
|
|
1,811.2
|
Assets held for
sale
|
198.3
|
|
230.3
|
Total current
assets
|
9,630.3
|
|
10,635.4
|
Intangible assets,
net
|
22,701.6
|
|
22,607.1
|
Goodwill
|
10,573.2
|
|
10,425.8
|
Other non-current
assets
|
6,385.1
|
|
6,353.9
|
Total assets
|
$
49,290.2
|
|
$
50,022.2
|
LIABILITIES AND
EQUITY
|
Liabilities
|
|
|
|
Current portion of
long-term debt and other long-term obligations
|
$
508.7
|
|
$
1,259.1
|
Other current
liabilities
|
5,599.4
|
|
5,487.1
|
Long-term
debt
|
18,069.4
|
|
18,015.2
|
Other non-current
liabilities
|
4,184.8
|
|
4,188.5
|
Total
liabilities
|
28,362.3
|
|
28,949.9
|
Shareholders'
equity
|
20,927.9
|
|
21,072.3
|
Total liabilities and
equity
|
$
49,290.2
|
|
$
50,022.2
|
Viatris Inc. and
Subsidiaries
|
Key Product Net
Sales, on a Consolidated Basis
|
(Unaudited)
|
|
|
Three months ended
March 31,
|
(In
millions)
|
2023
|
2022
|
Select Key Global
Products
|
|
|
Lipitor ®
|
$
417.9
|
$
440.1
|
Norvasc ®
|
202.7
|
207.8
|
Lyrica ®
|
144.3
|
171.7
|
Viagra ®
|
115.0
|
129.8
|
EpiPen®
Auto-Injectors
|
95.8
|
88.8
|
Celebrex ®
|
88.8
|
85.2
|
Creon ®
|
72.7
|
74.7
|
Effexor ®
|
64.6
|
77.5
|
Zoloft ®
|
56.5
|
73.1
|
Xalabrands
|
46.7
|
53.0
|
|
|
|
Select Key Segment
Products
|
|
|
Dymista ®
|
$
53.2
|
$
44.0
|
Yupelri ®
|
47.0
|
43.7
|
Xanax ®
|
39.7
|
40.0
|
Amitiza ®
|
36.6
|
41.8
|
____________
|
(a)
|
The Company does not
disclose net sales for any products considered competitively
sensitive.
|
(b)
|
Products disclosed may
change in future periods, including as a result of seasonality,
competition or new product launches.
|
(c)
|
Amounts for the three
months ended March 31, 2023 include the unfavorable impact of
foreign currency translations compared to the prior year
period.
|
Viatris Inc. and
Subsidiaries
Reconciliation of
Non-GAAP Financial Measures
(Unaudited)
|
|
Reconciliation of
U.S. GAAP Net Earnings to Adjusted Net Earnings
|
|
Below is a
reconciliation of U.S. GAAP net earnings to adjusted net earnings
for the three months ended March 31,
2023 compared to the prior year period:
|
|
|
Three Months Ended
March 31,
|
(In
millions)
|
2023
|
|
2022
|
U.S. GAAP net
earnings
|
$
224.7
|
|
$
399.2
|
Purchase accounting
related amortization (primarily included in cost of sales)
(a)
|
653.3
|
|
658.9
|
Litigation settlements
and other contingencies, net
|
0.6
|
|
6.2
|
Interest expense
(primarily amortization of premiums and discounts on long term
debt)
|
(10.3)
|
|
(13.7)
|
Clean energy
investments pre-tax gain
|
—
|
|
(0.1)
|
Acquisition and
divestiture related costs (primarily included in SG&A)
(b)
|
58.1
|
|
84.7
|
Restructuring related
costs (c)
|
9.7
|
|
16.8
|
Share-based
compensation expense
|
42.6
|
|
28.3
|
Other special items
included in:
|
|
|
|
Cost of sales
(d)
|
38.8
|
|
41.0
|
Research and
development expense
|
2.0
|
|
0.3
|
Selling, general and
administrative expense
|
14.9
|
|
7.4
|
Other expense, net
(e)
|
(21.8)
|
|
(1.5)
|
Tax effect of the above
items and other income tax related items (f)
|
(79.7)
|
|
(102.2)
|
Adjusted net
earnings
|
$
932.9
|
|
$
1,125.3
|
____________
|
Significant items
include the following:
|
(a)
|
For the three months
ended March 31, 2023, charges include an intangible asset
charge of approximately $32.0 million related to the potential
divestiture of the Upjohn Distributor Markets to write down the
disposal group to fair value, less cost to sell. Also includes
amortization of the step-up in the fair value of inventory related
to the Oyster Point acquisition of approximately $7.3
million.
|
(b)
|
Acquisition and
divestiture related costs consist primarily of transaction costs
including legal and consulting fees and integration
activities.
|
(c)
|
For the three months
ended March 31, 2023, charges include approximately $10.9
million in cost of sales and approximately $(1.2) million in
SG&A.
|
(d)
|
For the three months
ended March 31, 2023, charges include incremental
manufacturing variances at plants in the 2020 restructuring program
of approximately $22.7 million and inventory reserves related to
the potential divestiture of the Upjohn Distributor Markets of
approximately $9.2 million.
|
(e)
|
For the three months
ended March 31, 2023, includes a gain of approximately $18.9
million as a result of remeasuring our pre-existing 13.5% equity
interest in Famy Life Sciences to fair value.
|
(f)
|
Adjusted for changes
for uncertain tax positions.
|
Reconciliation of
U.S. GAAP Net Earnings to EBITDA and Adjusted
EBITDA
|
|
Below is a
reconciliation of U.S. GAAP net earnings to EBITDA and adjusted
EBITDA for the three months ended
March 31, 2023 compared to the prior year
period:
|
|
|
Three Months
Ended
|
|
March
31,
|
(In
millions)
|
2023
|
|
2022
|
U.S. GAAP net
earnings
|
$
224.7
|
|
$
399.2
|
Add / (deduct)
adjustments:
|
|
|
|
Net contribution
attributable to equity method investments
|
—
|
|
(0.1)
|
Income tax
provision
|
98.0
|
|
128.3
|
Interest expense
(a)
|
147.0
|
|
146.2
|
Depreciation and
amortization (b)
|
730.0
|
|
736.0
|
EBITDA
|
$ 1,199.7
|
|
$ 1,409.6
|
Add
adjustments:
|
|
|
|
Share-based
compensation expense
|
42.6
|
|
28.3
|
Litigation settlements
and other contingencies, net
|
0.6
|
|
6.2
|
Restructuring,
acquisition and divestiture related and other special items
(c)
|
98.0
|
|
142.2
|
Adjusted
EBITDA
|
$ 1,340.9
|
|
$ 1,586.3
|
___________
|
(a)
|
Includes amortization
of premiums and discounts on long-term debt.
|
(b)
|
Includes purchase
accounting related amortization.
|
(c)
|
See items detailed in
the Reconciliation of U.S. GAAP Net Earnings to Adjusted Net
Earnings.
|
Summary of Total
Revenues by Segment
|
|
|
Three Months
Ended
|
|
March
31,
|
(In millions,
except %s)
|
2023
|
|
2022
|
|
%
Change
|
|
2023
Currency
Impact (1)
|
|
2023
Constant
Currency
Revenues
|
|
Constant
Currency
%
Change (2)
|
|
2022
Biosimilars
(3)
|
|
2022
Adjusted
Ex
Biosimilars (4)
|
|
Divestiture
Adjusted
Operational
Change (5)
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed
Markets
|
$ 2,170.4
|
|
$ 2,476.1
|
|
(12) %
|
|
$ 73.2
|
|
$
2,243.6
|
|
(9) %
|
|
$
144.6
|
|
$ 2,331.5
|
|
(4) %
|
Greater
China
|
564.6
|
|
573.1
|
|
(1) %
|
|
35.0
|
|
599.6
|
|
5 %
|
|
0.1
|
|
573.0
|
|
5 %
|
JANZ
|
342.2
|
|
423.8
|
|
(19) %
|
|
33.6
|
|
375.8
|
|
(11) %
|
|
4.6
|
|
419.2
|
|
(10) %
|
Emerging
Markets
|
641.9
|
|
705.2
|
|
(9) %
|
|
55.3
|
|
697.2
|
|
(1) %
|
|
15.5
|
|
689.7
|
|
1 %
|
Total net
sales
|
$ 3,719.1
|
|
$ 4,178.2
|
|
(11) %
|
|
$ 197.1
|
|
$
3,916.2
|
|
(6) %
|
|
$
164.8
|
|
$ 4,013.4
|
|
(2) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues
(6)
|
10.0
|
|
13.5
|
|
NM
|
|
0.3
|
|
10.3
|
|
NM
|
|
|
|
|
|
|
Consolidated total
revenues (7)
|
$ 3,729.1
|
|
$ 4,191.7
|
|
(11) %
|
|
$ 197.4
|
|
$
3,926.5
|
|
(6) %
|
|
|
|
|
|
|
____________
|
(1)
|
Currency impact is
shown as unfavorable (favorable).
|
(2)
|
The constant currency
percentage change is derived by translating net sales or revenues
for the current period at prior year comparative period exchange
rates, and in doing so shows the percentage change from 2023
constant currency net sales or revenues to the corresponding amount
in the prior year.
|
(3)
|
Represents biosimilars
net sales in the relevant period.
|
(4)
|
Represents U.S. GAAP
net sales minus 2022 biosimilars net sales for the relevant
period.
|
(5)
|
See "Certain Key Terms
and Presentation Matters" in this release for more
information.
|
(6)
|
For the three months
ended March 31, 2023, other revenues in Developed Markets, JANZ,
and Emerging Markets were approximately $7.1 million,
$0.2 million, and $2.7 million, respectively.
|
(7)
|
Amounts exclude
intersegment revenue which eliminates on a consolidated
basis.
|
Reconciliation of
Income Statement Line Items
|
(Unaudited)
|
|
Three Months
Ended
|
|
March
31,
|
(In millions,
except %s)
|
2023
|
|
2022
|
U.S. GAAP cost of
sales
|
$ 2,186.9
|
|
$ 2,420.5
|
Deduct:
|
|
|
|
Purchase accounting
related amortization
|
(653.4)
|
|
(658.8)
|
Acquisition and
divestiture related items
|
(5.0)
|
|
(9.0)
|
Restructuring related
costs
|
(10.9)
|
|
(13.1)
|
Share-based
compensation expense
|
(0.6)
|
|
(0.3)
|
Other special
items
|
(38.8)
|
|
(41.0)
|
Adjusted cost of
sales
|
$ 1,478.2
|
|
$ 1,698.3
|
|
|
|
|
Adjusted gross profit
(a)
|
$ 2,250.9
|
|
$ 2,493.4
|
|
|
|
|
Adjusted gross margin
(a)
|
60 %
|
|
59 %
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
(In millions,
except %s)
|
2023
|
|
2022
|
U.S. GAAP
R&D
|
$
182.9
|
|
$
142.3
|
Deduct:
|
|
|
|
Acquisition and
divestiture related costs
|
(2.0)
|
|
(2.0)
|
Share-based
compensation expense
|
(1.6)
|
|
(1.4)
|
SG&A and R&D
TSA reimbursement (d)
|
(10.3)
|
|
—
|
Other special
items
|
(2.0)
|
|
(0.3)
|
Adjusted
R&D
|
$
167.0
|
|
$
138.6
|
|
|
|
|
Adjusted R&D as %
of total revenues
|
4 %
|
|
3 %
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
(In millions,
except %s)
|
2023
|
|
2022
|
U.S. GAAP
SG&A
|
$
958.9
|
|
$
915.3
|
Add /
(Deduct):
|
|
|
|
Acquisition and
divestiture related costs
|
(51.1)
|
|
(73.8)
|
Restructuring and
related costs
|
1.2
|
|
(3.7)
|
Purchase accounting
amortization and other related items
|
—
|
|
(0.1)
|
Share-based
compensation expense
|
(40.3)
|
|
(26.5)
|
SG&A and R&D
TSA reimbursement (d)
|
(24.4)
|
|
—
|
Other special items
and reclassifications
|
(14.9)
|
|
(7.4)
|
Adjusted
SG&A
|
$
829.4
|
|
$
803.8
|
|
|
|
|
Adjusted SG&A as %
of total revenues
|
22 %
|
|
19 %
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
(In
millions)
|
2023
|
|
2022
|
U.S. GAAP total
operating expenses
|
$ 1,142.4
|
|
$ 1,063.8
|
Deduct:
|
|
|
|
Litigation settlements
and other contingencies, net
|
(0.6)
|
|
(6.2)
|
R&D
adjustments
|
(15.9)
|
|
(3.7)
|
SG&A
adjustments
|
(129.5)
|
|
(111.5)
|
Adjusted total
operating expenses
|
$
996.4
|
|
$
942.4
|
|
|
|
|
Adjusted earnings from
operations (b)
|
$ 1,254.5
|
|
$ 1,551.0
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
(In
millions)
|
2023
|
|
2022
|
U.S. GAAP interest
expense
|
$
147.0
|
|
$
146.2
|
Add /
(Deduct):
|
|
|
|
Accretion of
contingent consideration liability
|
(2.2)
|
|
(2.0)
|
Amortization of
premiums and discounts on long-term debt
|
13.5
|
|
16.8
|
Other special
items
|
(1.0)
|
|
(1.1)
|
Adjusted interest
expense
|
$
157.3
|
|
$
159.9
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
(In
millions)
|
2023
|
|
2022
|
U.S. GAAP other
(income) expense, net
|
$
(69.9)
|
|
$
33.7
|
Add:
|
|
|
|
Clean energy
investments pre-tax gain (c)
|
—
|
|
0.1
|
Famy Life Sciences
gain (remeasurement of original investment)
|
18.9
|
|
—
|
SG&A and R&D
TSA reimbursement (d)
|
34.7
|
|
—
|
Other items
|
2.9
|
|
1.5
|
Adjusted other (income)
expense, net
|
$
(13.4)
|
|
$
35.3
|
|
|
|
|
|
Three Months
Ended
|
|
March
31,
|
(In millions,
except %s)
|
2023
|
|
2022
|
U.S. GAAP earnings
before income taxes
|
$
322.7
|
|
$
527.5
|
Total pre-tax non-GAAP
adjustments
|
787.9
|
|
828.3
|
Adjusted earnings
before income taxes
|
$ 1,110.6
|
|
$ 1,355.8
|
|
|
|
|
U.S. GAAP income tax
provision
|
$
98.0
|
|
$
128.3
|
Adjusted tax
expense
|
79.7
|
|
102.2
|
Adjusted income tax
provision
|
$
177.7
|
|
$
230.5
|
|
|
|
|
Adjusted effective tax
rate
|
16.0 %
|
|
17.0 %
|
___________
|
(a)
|
U.S. GAAP gross profit
is calculated as total revenues less U.S. GAAP cost of sales. U.S.
GAAP gross margin is calculated as U.S. GAAP gross profit divided
by total revenues. Adjusted gross profit is calculated as total
revenues less adjusted cost of sales. Adjusted gross margin is
calculated as adjusted gross profit divided by total
revenues.
|
(b)
|
U.S. GAAP earnings
from operations is calculated as U.S. GAAP gross profit less U.S.
GAAP total operating expenses. Adjusted earnings from operations is
calculated as adjusted gross profit less adjusted total operating
expenses.
|
(c)
|
Adjustment represents
exclusion of activity related to Viatris' clean energy investments,
the activities of which qualify for income tax credits under
section 45 of the U.S. Internal Revenue Code of 1986, as
amended.
|
(d)
|
Refer to "Certain Key
Terms and Presentation Matters" section in this release for more
information on reclassifications related to TSA
reimbursements.
|
Reconciliation of
Estimated 2023 U.S. GAAP Net Cash Provided by Operating Activities
to Free Cash Flow
(Unaudited)
|
|
A reconciliation of
the estimated 2023 U.S. GAAP Net Cash provided by Operating
Activities to Free Cash Flow is presented below:
|
|
(In
millions)
|
|
Estimated U.S. GAAP Net
Cash provided by Operating Activities (a)
|
$2,800 -
$3,100
|
|
|
Less: Capital
Expenditures
|
$(400) -
$(500)
|
|
|
Free Cash Flow
(a)
|
$2,300 -
$2,700
|
___________
|
(a)
|
Includes the full year
expected performance for the planned divestitures and excludes any
potential related costs, such as taxes and transaction costs, as
well as any similar costs related to the eye care acquisitions.
Also excludes any future acquired IPR&D for unsigned
deals.
|
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SOURCE Viatris Inc.