Viatris Inc. (VTRS) Earnings

Management highlights

- Capital Allocation and Balance Sheet * Through early August 2026, the firm deployed ~$1.4 billion in capital per its balanced allocation strategy, including returning ~$550 million via dividends and ~$270 million via share repurchases to shareholders * The firm repaid ~$900 million in maturing June debt while refinancing the remaining balance, ending the quarter with a gross leverage ratio of ~2.9x, below the midpoint of the 2.8-3.2x long-term target range * The firm expects ~$1.6 billion in deployable capital for the remainder of 2026, including ~$380 million in pre-tax proceeds from the sale of EquiStake and Biocon * The company reached an agreement to divest global product rights for Tier VIA, expected to close in H2 2026 with impacts fully incorporated into updated guidance - Operational Progress * The firm delivered strong first half 2026 performance driven by better-than-expected operating results and favorable working capital dynamics * An enterprise-wide strategic review focused on reallocating resources to high-priority areas is delivering cost leverage for the second consecutive quarter * Greater China delivered strong growth across all channels, with e-commerce accounting for 10%-15% of total China revenue; iconic brand demand remains strong amid favorable demographic trends (aging population, growing middle class) * Pipeline progress: The large global Phase III trial for silatogrel is on track for data readout in H1 2027, fast-acting meloxicam (FAM) is on track for FDA approval by the end of 2026, Cenarimod for lupus is on track for top-line results in early 2027 * The estradiol transdermal patch business is seeing strong demand growth driven by the FDA's removal of a boxed warning and increased use of GLP-1s; the company is ramping production capacity to meet unmet demand, currently fulfilling only ~70% of orders - General Strategic Positioning * Management noted strong execution against the company's long-term strategy, with a diversified portfolio, strong commercial execution, and solid financial flexibility to deliver sustainable growth

Guidance

- Management raised 2026 full-year financial guidance for all key metrics, based on strong first half performance and sustained business momentum * At the revised guidance midpoint, the company expects 2% year-over-year total revenue growth, 5% year-over-year adjusted EBITDA growth, and 7% year-over-year adjusted EPS growth * Revenue guidance was raised by $50 million at the midpoint, while adjusted EBITDA guidance was raised by $100 million; this larger EBITDA increase reflects better-than-expected first half cost containment that is ahead of schedule, and lower-margin products accounting for most expected H2 revenue headwinds - Full-year 2026 phasing expectations: Total revenues are expected to be 51% weighted to the second half; adjusted EBITDA and adjusted EPS are expected to be slightly lower in H2; free cash flow remains heavily weighted to the second half - The $100-$150 million expected negative revenue impact from NOSIC facility supply disruptions in H2 2026 is fully incorporated into updated guidance - The expected impact of the upcoming Tier VIA divestiture is also fully incorporated into updated 2026 guidance - Management reaffirms long-term confidence in Greater China as a durable growth engine despite expected H2 2026 policy-related moderation, and expects growth to continue at a moderated pace beyond 2026 - The NOSIC supply disruptions are expected to be concentrated in Q3 2026, moderate in Q4, and be resolved by early 2027

Segment performance

Segment revenue growth expectations for full-year 2026 are as follows: Greater China is expected to deliver low double-digit growth; emerging markets are expected to deliver low single-digit growth; developed markets overall are expected to be roughly flat, with North America declining slightly; JANs segment is expected to deliver a low single-digit decline. No absolute revenue figures for individual segments were provided in the transcript.

Risks & headwinds

- A new public hospital procurement policy change in Greater China is expected to negatively impact hospital channel volumes and moderate overall Greater China growth in H2 2026; policy implementation varies across provinces, and full impacts are still being finalized in discussions with regulators * Additional competitive pressure is expected in developed markets for high-margin products Brena and Uxella in North America in H2 2026 * Ongoing supply disruptions at the NOSIC manufacturing facility are expected to reduce H2 2026 total revenues by $100-$150 million, primarily impacting low-margin oral solid dose generics in emerging markets and select generic products in Europe; all impacted products are small, with no single product exceeding $20 million in annual revenue * Proposed new U.S. generic tariffs have not had final policy details released, creating uncertainty for imported generic products, though the company notes over half of its U.S. revenue comes from domestically manufactured products * China policy implementation is inconsistent across provinces, creating uncertainty around the medium-term magnitude of the 2026 procurement change * Pipeline clinical and regulatory outcomes carry inherent uncertainty, including approval timelines and final labeling for new products like fast-acting meloxicam

Analyst Q&A

• Q: What is the channel breakdown for Greater China revenue, and why was EBITDA guidance raised more than revenue guidance for 2026?

  A: E-commerce makes up 10-15% of China revenue, with growth across all channels. Policy changes will only moderate H2 growth, not eliminate overall growth. The larger EBITDA increase comes from first half cost containment being ahead of schedule, and most H2 revenue headwinds impact only lower-margin generic products.

• Q: What is the commercial outlook for fast-acting meloxicam, and what is the minimum required benefit for silatogrel to be commercially viable?

  A: FDA review is progressing on schedule, with labeling discussions for the opioid-sparing claim starting in Q4 2026, and approval expected by year-end. Fast-acting meloxicam targets a large acute pain market of 80 million U.S. patients annually, with peak potential annual sales of up to $500 million. Silatogrel's trial is powered for a 20% risk reduction, but a 15% risk reduction would be commercially acceptable to drive meaningful uptake.

• Q: How durable is China's recent growth strength, will NOSIC supply disruptions extend beyond 2026, and is fast-acting meloxicam expected to exceed prior pipeline growth estimates?

  A: China's growth has good long-term durability from invested commercial infrastructure and strong demand for iconic brands; policy impacts are expected to moderate growth in 2027 rather than create tough annual comparables. NOSIC disruptions will peak in Q3 2026, moderate in Q4, and be resolved by early 2027. Fast-acting meloxicam fills a large unmet need for non-opioid acute pain treatments, and management remains optimistic about its contribution following approval and label confirmation.

• Q: What is the current M&A environment, and how would potential U.S. generic tariffs impact Viatris?

  A: The M&A market remains active, with lots of inbound opportunities for in-market accretive assets, and management remains disciplined about pricing and fit. No final tariff policy details have been released, but over half of Viatris' U.S. revenue comes from domestic manufacturing, with plans to keep high-margin complex products produced in the U.S. leaving the company well positioned.