• Revenue Growth: Base business revenue grew 3% year-over-year.
• Adjusted EBITDA Growth: Increased by approximately 4%.
• Adjusted Earnings Per Share Growth: Increased by approximately 6%.
• Free Cash Flow: Generated $866 million, excluding transaction costs and taxes.
• Debt Repayment: Repaid $1.9 billion of debt, reducing notional debt below $15 billion.
• Gross Margin: Stable at approximately 58.5%.
• Net Sales Growth in Developed Markets: Increased by approximately 3%.
• Net Sales Growth in Europe: Increased by 6%.
• Net Sales Growth in Greater China: Increased by approximately 3%.
• Net Sales Growth in Emerging Markets: Increased by 2%.
• Debt Leverage Target: Expected to exit the year at approximately three times gross leverage.

• Warning! GuruFocus has detected 4 Warning Signs with VTRS.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Viatris Inc (NASDAQ:VTRS) reported a 3% year-over-year growth in its diversified base business, marking the sixth consecutive quarter of operational revenue growth.
• The company generated significant free cash flow of $866 million, excluding transaction costs and taxes, which enabled debt reduction.
• Viatris Inc (NASDAQ:VTRS) achieved growth in all segments, with brands up 2% and generics up 4%, driven by strong performance in Europe, Greater China, and Latin America.
• The company is on track to meet the higher end of its new product revenue range of $500 to $600 million for the year.
• Viatris Inc (NASDAQ:VTRS) is making progress in its innovative pipeline, with key developments in cardiovascular and ophthalmology programs, and plans to expand indications for existing assets.

Negative Points

• Net sales in the brand business declined due to the continued impact of Medicaid utilization in certain non-promoted brands.
• The company anticipates lower total revenue in the fourth quarter due to normal product seasonality and generic entrants in Japan.
• Free cash flow in the fourth quarter is expected to be lower due to divestiture costs, taxes, higher CapEx, and semi-annual interest payments.
• The ARV generics business faced supply chain impacts, affecting performance in emerging markets.
• Viatris Inc (NASDAQ:VTRS) is not providing forward-looking revenue and EBITDA guidance for 2025, creating uncertainty about future financial performance.

Q & A Highlights

Q: Can you provide guidance on new product revenue contributions for the next few years and discuss capital allocation plans? A: Scott Smith, Chief Executive Officer, stated that while they are not providing specific guidance for 2025, they expect to continue generating $450 to $550 million in new product revenue annually. Regarding capital allocation, reaching a leverage ratio of three times is crucial, allowing for $2.3 billion in free cash flow to be used for shareholder returns and business development.

Q: Are there any updates on the investigation of reimbursement practices in China and the status of Sandostatin LAR and GA depot resubmission? A: Scott Smith, CEO, mentioned that they have no direct comment on investigations involving other companies in China but emphasized their strong compliance and partnerships in the region. Philippe Martin, Chief R&D Officer, added that a meeting with the agency regarding GA depot is scheduled for mid-December, and they expect to launch Sandostatin LAR next year.

Q: What type of deals should we expect in the future, and any initial thoughts on 2025 EBITDA expectations? A: Scott Smith, CEO, indicated that future deals will focus on end-market or near-market assets, leveraging their global infrastructure. Doretta Mistras, CFO, noted that while they are not providing specific 2025 guidance, they aim for adjusted EBITDA stability, balancing business growth with necessary investments.

Q: How do you plan to balance business development investments and share repurchases given the current stock valuation? A: Scott Smith, CEO, stated that with the debt repayment target in sight, they plan to implement a balanced capital allocation strategy. Given the current stock valuation, they may be more aggressive with share buybacks in 2025 while maintaining disciplined business development.

Q: Can you provide more details on new product contributions for next year and potential competition in the Symbicort market? A: Scott Smith, CEO, expressed confidence in achieving $450 to $550 million in new product revenue, including contributions from glucagon, iron sucrose, and liraglutide. Corinne Le Goff, Chief Commercial Officer, noted that they expect continued growth from their complex generic, Breo, despite potential competition.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.