Viatris Inc Q4 FY2024 earnings call

2024 Highlights - 2024 was important across three strategic pillars, with new product revenues at $582 million, completed divestitures, returned ~$825 million to shareholders, retired ~$3.7 billion of debt, expanded innovative portfolio with three new products. - Indore Facility: FDA inspected in June, remediation plan underway, expecting re-inspection in a few months, estimated $500 million revenue impact and $385 million adjusted EBITDA impact in 2025. - 2025 Priorities: Focus on driving base business, several new product launches, 10 unique molecules in Phase 3, six Phase 3 readouts expected, updated terms with Idorsia for selatogrel and cenerimod, capital allocation balanced between capital return and business investment, targeting $500 million - $650 million in share repurchases, business development, and enterprise-wide infrastructure review. - R&D: Base business pipeline with complex injectables nearing approval, novel and life cycle management programs with Phase 3 readouts anticipated, innovative pipeline with ophthalmology programs and progress on selatogrel, cenerimod, sotagliflozin. - Commercial: Three priorities in 2025 - drive best business, execute product launches (over 150 generic launches), prepare future business by enhancing innovative product commercialization capabilities.

On a divestiture adjusted operational basis, 2024 finished with full year revenue growth of 2%. On a reported basis, total revenues were approximately $14.7 billion, adjusted EBIT was approximately $4.7 billion, and adjusted EPS was $2.65 per share. Free cash flow was approximately $2.6 billion. New product revenues reached $582 million. Geographic segments: Europe is expected to grow; North America is expected to decline due to Indore impact and competition; emerging markets are expected to grow; JANZ is expected to decline due to government price regulations, etc.; Greater China is expected to grow.

Guidance - 2025 total revenues expected to decline approximately 1% due to Indore impact. - Estimated $500 million revenue impact and $385 million adjusted EBITDA impact from Indore in 2025. - 2025 capital allocation prioritizes returning capital to shareholders, targeting at least $500 million - $650 million in share repurchases. - Gross margins impacted by Indore, base business price erosion, and some product supply costs, partially offset by segment mix. - Effective tax rate expected to increase by 150 basis points in 2025 due to Pillar 2. - Expect strong free cash flow generation of approximately $2 billion, with ~$1.7 billion available for deployment, net of taxes and transaction costs.

Risks - Indore facility received warning letter and import alert, affecting 11 products, with 4 exempt initially, expected $500 million revenue impact and $385 million adjusted EBITDA impact in 2025. Lenalidomide faces significant generic competition in early 2026. - Idorsia collaboration update results in an incremental $100 million R&D expense in 2025, but with $250 million reduction in contingent milestones and additional territory rights for cenerimod.

Q: David Amsellem asked about confidence in quality control at other facilities besides Indore, timing of cenerimod and selatogrel Phase 3 data, and long-term capital allocation direction.

A: Scott Smith said 26 facilities in network, all others in compliance except Nashik pending; selatogrel and cenerimod data expected late 2026; capital allocation over 5 years 50% to shareholders, 50% to business development, with 2025 prioritizing shareholder return.

Q: Ash Verma asked about 2026 Revlimid offsets and more aggressive buyback.

A: Scott Smith said lenalidomide expected to face significant generic competition in early 2026 with no current alternate sources; Viatris plans $1 billion - $1.2 billion to shareholders, evaluating share price for more aggressive buybacks.

Q: Chris Schott asked about enterprise review scope and timing, and Indore impact on gross margins.

A: Scott Smith said enterprise review initiated in first half of 2025, cost benefit likely realized in 2026; Doretta Mistras said Indore margin impact ~80% margin, plus base business price erosion and some product supply costs, offset by segment mix.

Q: Jason Gerberry asked about Indore impact on non-US revenues, generic Symbicort competition, and generic pipeline risk.

A: Scott Smith said Indore remediation causes some product shortages in non-US markets; Corinne Le Goff said confident in $450 million - $550 million new product revenue range; Corinne Le Goff said Breyna performance positive.

Q: Umer Raffat asked about Indore communication history and Idorsia deal's $100 million R&D expense increase.

A: Scott Smith said Indore communication was dynamic with changing product exclusion and lenalidomide alternate source exploration; Philippe Martin said Idorsia deal's $100 million R&D expense is due to program progress and enhanced data integrity, with benefits like expanded geographic footprint and reduced milestones.

Q: Balaji Prasad asked about Investor Day focus and FDA reinspection timelines.

A: Scott Smith said Investor Day focus on long-term outlook, pipeline, GLP-1 strategy, and enterprise cost initiative progress; expected remediation finish in a few months, request reinspection over summer, hoping for end of 2025 or early 2026 reinspection.