Viatris Inc Q2 FY2025 earnings call

• Delivered 3% divestiture-adjusted operational revenue growth, primarily driven by Europe and Greater China. - Pipeline progress: 5 of 6 anticipated Phase III readouts positive; fast-acting meloxicam shows potential for acute pain treatment; XULANE low dose on track for NDA submission; ophthalmology programs with positive results. - Remediation efforts at Indore facility nearly complete; FDA approved darunavir tablets at Nashik. - Monitoring U.S. tariffs but no material impact expected on 2025 financials; advocating for thoughtful policymaking to protect access to medications.

Total revenues for the second quarter were $3.58 billion, down approximately 2% versus the prior year. Excluding the Indore impact of approximately $160 million, operational revenue growth was approximately 3%. In developed markets, brands strength partially offset the Indore Impact; Europe grew ~2%, North America decreased 11% due to Indore and competition. Emerging markets saw net sales increase ~1% vs prior year, driven by Turkey, emerging Asia, and stabilized Korea. Japan's net sales decreased ~11% due to government price regulations and competition. Greater China's net sales grew 9% due to portfolio growth and customer purchasing patterns.

• Reiterating 2025 financial guidance ranges, expecting to be in the top half of revenue and adjusted EPS ranges. - Anticipating launches in 2026 from positive data readouts in 2025, including EFFEXOR GAD in Japan, XULANE LO, fast-acting meloxicam, eye care products, and sotagliflozin.

• Potential impact of U.S. tariffs on the pharmaceutical landscape. - Delays in approvals and launches of certain generic products affecting new product revenues.

Q: Congrats on the progress. Maybe just on capital allocation in the context of the current split between buybacks and BD, how much of a priority is growth at this point? And what level of growth are you now aiming for as we think about full year '26 and beyond? And then in particular, what would make you more aggressive on the BD front?

A: Thank you very much, Matt. I'm not going to talk specifically about '26 and a number for growth. But relative to capital allocation, our plan has not changed, staying the same. We're evenly -- over a period of time, over the next 3 to 5 years, we expect to both give back through dividends and share buybacks. And also -- and I think very importantly, we also need to build a portfolio of growth assets, use our capital to do business development. And what we're really looking for here in terms of business development is strategic assets that are accretive and in market, growing assets to build a growth portfolio. So we're very focused on doing both, delivering capital, right, back to shareholders and also finding ways to build a growth pipeline. And I will say business development is just part of that growth pipeline going forward. Again, we're focused on strategic accretive in-market assets to bring into the portfolio. But we also have, as we look at '26 and beyond, a lot of excitement around the launches that we have, positive data readouts that we had in '25 lead to launches, for example, EFFEXOR GAD in Japan, XULANE LO, which is a contraceptive product in the United States, fast-acting meloxicam, a couple of eye care readouts and launches in presbyopia and dim light also launching sotagliflozin in some key ex U.S. markets. So we've got a lot of launches in '26. We've got some nice inflection points in terms of data readouts in '26 as well. Nefecon Japan, progestin-only patch and really importantly, cenerimod and selatogrel. So we feel good about the growth prospects. The base of the business is very solid. We've got a number of launches going into '26, and we've got capital to deploy to build a portfolio of growth assets.

Q: This is J.P. in lieu of Umer. Congrats on a strong quarter. So going back to tariffs, you mentioned you have flexibility for next year. How are you thinking on the proportion of the risk India versus EU? It looks like we're going to have 2 different kind of tariffs for each region?

A: So yes, thank you for the question [indiscernible]. So it's not clear to us at this point in time whether tariffs will be placed on pharmaceuticals. If they are, will it be placed on generic products at this point, there are no tariffs. And so we're monitoring the situation very, very, very carefully. About half our products in the United States from a revenue perspective are manufactured in the United States. We do have some exposure in EU and India. I would say India is about 10% of our revenue, significant volume in terms of product. It tends to be low- margin OSD type products coming out of India, but it's 10%. So as the situation evolves, as we get more clarity on how tariffs may affect the overall industry, the generic industry, et cetera, we model all kinds of things. But until we have clarity on that, it's very difficult to think of an impact. And again, I think both Doretta and I in our prepared remarks mentioned that regardless of tariffs, how it evolves during the course of this year, we've put mitigations in place. We do not see any material financial impact in '25. And we'll know more about '26 and beyond once we get some specifics.