Viatris at Barclays Conference: Strategic Moves Amid Challenges

On Tuesday, 11 March 2025, Viatris Inc. (NASDAQ: VTRS) presented at the Barclays 27th Annual Global Healthcare Conference. The company addressed significant challenges, including the impact of an Indoor plant import alert, while outlining strategic initiatives for future growth. Despite the setback, Viatris remains optimistic about its financial fundamentals and long-term prospects.

Key Takeaways

• Viatris faces a $500 million revenue impact due to the Indoor plant issue, but fundamentals remain strong.
• The company plans to allocate 50% of its free cash flow to shareholders and 50% to business development.
• New product launches are expected to generate $450 million to $550 million annually.
• Viatris is optimizing its structure for cost savings, with benefits anticipated from 2025 onwards.
• The company is expanding its presence in the U.S. market, especially in cardiovascular and immunology sectors.

Financial Results

• The Indoor plant issue is projected to impact revenue by $500 million and EBITDA by $385 million.
• New product revenues exceeded expectations last year, reaching nearly $600 million.
• Viatris generates over $2 billion in free cash flow annually, with plans for strategic capital allocation.
• The company anticipates a $150 million revenue impact from the Indoor plant in Q1 2025.
• Foreign exchange rates are expected to affect revenue by 2% to 3% this year.

Operational Updates

• Viatris is conducting an enterprise-wide review to optimize its structure and reduce costs.
• Remediation of the Indoor facility is over 50% complete, with an FDA reinspection expected mid-year.
• The company is exploring alternative manufacturing options to mitigate the Indoor plant’s impact.
• Inspections at the Nashik facility revealed less significant issues compared to Indoor.

Future Outlook

• Sustainable long-term revenue growth is expected from 2026, driven by strategic acquisitions and product pipelines.
• Viatris plans to leverage its global organization through smaller, accretive deals.
• Management aims to provide comprehensive guidance on revenue, EBITDA, and EPS at a mid-year investor event.

Q&A Highlights

• Remediation efforts at the Indoor facility began immediately after FDA findings in June.
• Viatris is exploring third-party options to salvage its lenalidomide business.
• The company is preparing to build a U.S. commercial sales force for new acquisitions like SolataGrill and Cinerimod.
• Smaller M&A deals are anticipated in the near term to enhance revenue and EBITDA.

For a more detailed insight, readers are encouraged to refer to the full transcript below.

Full transcript - Barclays 27th Annual Global Healthcare Conference:

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Good afternoon, Abraham. Thank everyone. Thank you all for joining us at the Barclays Healthcare Conference. Continuing our spec pharma session for the day, I’m delighted to have the CEO of Viatoris, Scott Smith and Director Mistral, the CFO of Viatoris. Scott, I know you’re not scheduled to come here originally and really delighted that you could make it and we could have you here.

So appreciate that. And I would love to get you to get started with some opening remarks around recent Q4 results and outlook you provided and then we could jump into some Q and A.

Scott Smith, CEO, Viatoris: Sure. So first of all, thank you very much for being flexible and getting us in here at this time slot. It’s we’re very happy to be here. Thank you everybody for for attending. And Doretta and I are going to run through some questions.

And I think sort of the first thing is we had our earnings call a couple of weeks ago. We put earnings out. We had the we talked about the effect of the plant called Indoor on sales into The United States and revenues and EBITDA. And so we reset sort of the base a little bit for where we’re going in 2025 based on that. One of the things I get a lot of questions from spend a very busy period of time from an investor perspective.

And from my perspective, the questions they’re asking is, has anything changed, talked about the base business, what about new product revenue? And from my perspective, really nothing has changed. We do have a little bit of a reset here in terms of the effect of indoor in this year and some of that’s remediable going forward. But really, the fundamentals are still very strong in the company. Before the indoor situation, we had seven consecutive quarters of operational revenue growth, which was good this year.

Without the effect of that, we would have had 3% revenue growth and 1% to 2% EBITDA growth. So the fundamentals are very strong. We had new product revenues last year of almost $600,000,000 which is well above what we originally guided to. We’ve got still sector leading cash flows that we can deploy and put towards our capital allocation strategy. And we’ve got a lot of stuff sort of moving through the pipeline right now.

We have six readouts, Phase three readouts coming this year and 10 assets in Phase three in totality. So I think the company is very strong. This is not the situation with Indoor is not something that we’re running away from. We’re dealing with it head on. We’re going to remediate it.

But to me, the message that I’ve been trying to get to investors was when we really look at the fundamentals of the company, it’s very strong and the investment thesis is still very much there as it was before this.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. Understood. We’ll dig into each of these, Scott. The other major thing that you mentioned on the earnings call was also the enterprise review that you’re launching on. So could you comment on the scope, size and timing of this enterprise review?

And what are you interested with that?

Scott Smith, CEO, Viatoris: Yes. So if you take a look back, take a moment and think about the last four years for the company, There’s been a merger of two global companies coming together. We’ve divested biosimilars business. We’ve divested our OTC business, women’s healthcare business, our API business. So this is the right time to really take a look at the company.

Is it the right size? Is it fit for purpose not just for now, but for forward? Do we have the right people in the right places? And do we have the right cost basis as we’ve evolved with the company? We were going to take a look at the enterprise overall during the course of this year.

But again, the situation with Indore and the import alert there sort of really led us to think we need to move this up and be very thoughtful about taking a look at it. We’re going to work our way through it during the course of this year. We’ve already initiated this process. We’re working with some outside vendors to be able to get there. And we’ll update everybody on sort of where we’ve gotten with it and the net effect, which I think there could be some positive effect from a cost perspective in 2025, but the big effect will be 2026 and beyond.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. We’ll look forward to hearing more about it. And as we think about reattress in the last couple of years, I think capital allocation has been a big priority with you as well when every time I spoke to the team. And on the call, you we discussed the buyback too, and you said you have a minimum range of buyback of $500,000,000 to $650,000,000 which coupled with the dividend brings it to your goal of returning capital to shareholders of around 50%. It’s been a few weeks since earnings.

Are there any incremental updates that either of you would like to provide?

Scott Smith, CEO, Viatoris: No, I mean, and I’ll pass it to you read in a minute, but I don’t think there’s any update since earnings. It’s still the same strategy that we’ve had. We’ve done a lot in the last few years to pay down debt and get to a good place in terms of the company going forward from a capital perspective. Our capital allocation strategy is to we’re generating $2 plus billion in free cash flow a year and we’re going to allocate that both You take a look at a three to five year period, we’re going to allocate it to about 50% to going back to shareholders through buybacks, through dividends and another 50% into business development. And so that’s over a three to five year period.

Any one year, we may be stilted to one side or the other. We may do different things depending on opportunities. We need the freedom to manage the business, but that’s a long term goal to have about 50% back to shareholders and 50% into business development to help grow the revenue. And EBITDA, I think in the course of 2025, it’s a year where we’re leaning in a little bit more to the share buyback portion, maybe returning a little bit more shareholders this year, given where the share price is and some of the dynamics going on. But we do have significant capital both after dividend and after talking about what $500,000,000 to $650,000,000 in share buybacks.

We do have significant capital to have some flexibility in terms of share buybacks, in terms of doing business development, in terms of paying down debt or doing other things. So what we’re trying to do here is lean in a little bit to the capital allocation part of it, which is payback to shareholders, but retain some flexibility as we go through the second half of the year to do the right things for the company.

Doretta Mistral, CFO, Viatoris: I think you said it well, Scott.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. So let’s get into Indore. I think clearly top of mind for investors as your own incoming calls has been so as a bit more with us. Help us understand the requirements now from an FDA perspective, the key challenges for you as it stands and ultimately the bottom line, the impact to the business. So this resulted from an inspection which happened last June at this facility in Indoor and post the inspection, they issued

Scott Smith, CEO, Viatoris: a four eighty three report with some incidents that we needed to work on. We immediately began the remediation on all the things that the FDA said, right? Just right after June, we then got and we’re working on that remediation, then got a warning letter and import alert late December this year. So with that in place, we worked through that. There was products that were excluded from that.

So we took a little it took us a little time to figure out what’s the exact economic impact of that. And so we’re thinking it’s when we take a look in totality, what we talked about in the Q4 call was about $500,000,000 in revenue and $385,000,000 approximately in EBITDA. And so that is there’s two parts to that. The first part of that is things which sort of go away forever, right? Lenalidomide is included in there.

And I will say we were going to lose lenalidomide beginning of the year, potentially towards the end of twenty twenty five, but certainly by the beginning of twenty twenty six. Anyhow, so just move that up. There’s some one time fines and things associated with that. But once we get the plant up and running and remediated, a lot of that other business, we can start bidding on again, ARV business and other things that comes out of there. We’re also qualifying other plants within our network.

It’s one plant out of 26 in our network, and we’re looking for third party vendors as well to be able to look at the situation. I would say we have we’re past the 50% part in remediation of the facility. So we’ve been working hard on that remediation. Once that’s done, which I believe will be sometime mid year this year, then we would ask the FDA to come in and reinspect and we go from there.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Understood. So past 50% interim mediation. And I think one of the things I did discuss with the team later on was if there is any service level commitment from the FDA that once you let them know that you are ready for an inspection, would they visit you within two months, four months or is there any defined timeframe?

Scott Smith, CEO, Viatoris: So there’s no I can’t speak to what the FDA timeframes will be. I think just based on sort of historical precedent if things continue to flow that way, I would expect towards the end of the year, very early part of next year that there’ll be a revisit and go. But I will say that part’s out of my control. It’s out of the company’s control. It’s up to the FDA.

And again, we’ve got an evolving regulatory environment right now, I believe, and new commissioner for the FDA coming in. I don’t know if that was voted on today or I haven’t been in the news, but we’ll have a new commissioner coming in. There’s obviously a lot of focus on governmental departments. And so I don’t know what things are going to look like in the future, but my guess will be sometime later this year, early next year for the reinspection.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. One of the things that I’ve done a few years ago was look at twenty years of warning letter histories with the FDA. And I saw that the average time to resolution was around eighteen to twenty months. And looks like there’s a possibility that you could be ahead of that eighteen months too if take that December 24 as a

Scott Smith, CEO, Viatoris: Well, I think what we did is we started the remediation efforts immediately after getting that. So if you take a look at June, that’s when we really started. So that eighteen months would take you towards the end of this year. Think that’s the way that we look at it, right? We didn’t wait for a warning letter or further communication from the FDA to start remediating.

We started remediating it immediately.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. And I think within the $500,000,000 of revenue impacted, lenalidomide is one of the biggest components. And what are the options for you in terms of tying up with a third party provider or any other options that you have of salvaging as much of this business?

Scott Smith, CEO, Viatoris: So, I mean, the way what’s in there, I think, and Doretta can speak to it, is the full effect of lenalidomide being gone. Certainly, we’re very active looking for third parties. Others, I can’t give you an estimate of what we may be able to make up, if any of that. And certainly, we’re working very hard on it.

Doretta Mistral, CFO, Viatoris: Yes. And part of the as we thought about contextualizing that impact of indoor, there are multiple discussions, not only with the FDA, but kind of other alternatives to figure out the full kind of impact of lenalidomide. And we got to the best estimate of that view kind of leading up to earnings.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. So maybe just one final question around this, that other facility inspected was Nashik facility.

Scott Smith, CEO, Viatoris: Right.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: So could you comment around that and when you expect to hear from the FDA on potential clearance there?

Scott Smith, CEO, Viatoris: Yes. So that inspection happened actually I think just before Indoor, and there was a four eighty three associated with that. They have not closed that down or gotten back to us. I don’t know the timeframe for that. I will assume for the next in the next couple of months, we will hear back from them on any action if there is some in NASHIC.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: The findings of the four eighty three and the observations, are they comparable to Indore or?

Scott Smith, CEO, Viatoris: There’s some that are comparable. I think it’s a shorter list. And when I look at it with my eyes, I’m not being a regulator, I don’t think it’s as significant a list of remediations that needs to happen there. And I think the other thing that’s really important to know in terms of the impact on The U. S.

Business, NASHIC is much smaller in terms of revenue and in EBITDA than indoor was. And we’re also trying to qualify other plants and things to make sure that regardless of what the outcome is there, that we protect the business as much as possible.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. Maybe shifting from that towards the business itself, new product launches will be a big part of your business, at least in incremental launches. So could you discuss a bit more about the new product launches and the revenue potentially expect for 2025 and any pushes and pulls there?

Scott Smith, CEO, Viatoris: Yes. So I’ll give you a general comment and then I’ll kick it to Doretta to address individual launches within there. But we project $450,000,000 5 50 million dollars every year in new product revenue. We’ve delivered that since the company was created 2021 and beyond. Last year, we were ahead of the $450,000,000 to $550,000,000 with almost $600,000,000 in new revenues.

And I think $25,000,000 is going to be very important year for us as will $2,025,000,000 dollars will be, $2,026,000,000 dollars, 20 20 7 million dollars as well will be very important years for new product launches. But we do have some significant product launches this year.

Doretta Mistral, CFO, Viatoris: And we continue to have confidence in that four fifty to five fifty number that we’ve quoted. To Scott’s point, we have a number of complex products expected to launch this kind of we expect to launch this year. LUKAGON, we got approval late last year. We’re in the process of launching other products in kind of that in our pipeline include, accretide, iron sucrose and liraglutide. But again, we’ve always talked about this four fifty to five fifty being a combination of products and that’s how we have confidence in that number.

Scott Smith, CEO, Viatoris: And important to note, I think, even though we call it a few that are important, it’s a large series of launches that happened during the year. If one gets delayed, we can still make that $450,000,000 to $550,000,000 number. We’ve got a lot of optionality.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. And I know that kind of 2025, definitely there’s a reset happening with this facility impact. And investors we want to look at too. And as we look at 2026, how should we think about the inherent growth in the business and potential margin trends? Yes.

Scott Smith, CEO, Viatoris: So again, I’ll give sort of a general comment and Doretta can fill in the specifics. But I sort of look at, based on everything that’s happened and where we are with Indore, with the enterprise wide cost saving and structure project that we’re looking at and some other things. I look at 2025 as kind of a year where we’re doing a lot of work to get us ready for 2026 and 2027 and 2028 and beyond, right? So this is we’re here, we’re going to do hard work, we’re going to make sure the company is in the right place. We’re doing a lot of work on the pipeline, both the base pipeline and the innovative pipeline and the right kind of investments to make sure we’ve got good product flow.

Again, both base business and innovative products over the next few years. We’re doing the cost restructuring exercise. We’re doing a lot of things in 2025, which will help set us up for what we believe is going to be sustainable long term revenue growth starting in 2026 and beyond.

Doretta Mistral, CFO, Viatoris: And if you take a step back even with respect to ’25, by putting the indoor impact aside, we are demonstrating we feel good about the base business fundamentals. And if you unpack that a little bit in terms of where that growth is coming from and we continue to see that as being sustainable. Europe, for example, we’re continuing to see kind of broad based growth there really driven by not only new product launches, but also continued strength and volume growth in our generics business as well as strength in some of our key brands like our thrombosis portfolio, Creon, Brufen. So Europe, we continue to see strength. China, we also are continuing to see growth there, really driven by patient demand for some for our brands that are really iconic treating chronic diseases that is really treating a population in China that is just coming of kind of age for that type of product.

And then I would also highlight in emerging markets, we continue to see strength there due to growth not only in the expansion of our cardiovascular portfolio, but just broad based business volume growth across the region. And so we feel good about our base business fundamentals.

Scott Smith, CEO, Viatoris: In addition to that, when we’re talking about ’26 and beyond, there’s sort of the things that we know or that we can see, right, which are what’s in our pipeline, how the geographies are operating, but we also have capital to deploy to bring in assets, right, hopefully accretive assets that can help build our revenue base and our EBITDA base as we go forward here. So the combination of the things that we’re controlling internally plus our ability to take our capital and build the portfolio and the pipeline at the same time gives us good security about the growth profile that we can put on the company in the short to medium term.

Doretta Mistral, CFO, Viatoris: And the things we’re going to continue to monitor as we go through the year, obviously timing as it relates to indoor remediation activities, our product approvals and uptakes, but also we continue to look at FX. We continue to look at the macro policy environment, not only as it relates to tariffs, but kind of broader healthcare environment. And so we’ll continue to monitor that as we move towards the year.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. And it’s been a few years since you embarked on the global gateway model and an outcome of that is also that you are exposed to macro far more than before. But let’s can you comment around this impact on the business from new tariffs? And what could it mean between China, Mexico and Canada? What could the impact

Scott Smith, CEO, Viatoris: again, I’ll make a general comment here. It’s very difficult for us to be able to predict what the tariff environment is going to look like, right, a month from now, two months from now, where this is going to land, what the real strategy is behind this. We do not at this point source a lot of product for The U. S. From Mexico, Canada or China.

So we don’t see any significant impact in the short term. But I don’t know if this is where this ends, where this lands. It’s a very volatile, constantly changing environment relative to tariffs. It seems like there’s news every day. So I think what we’re trying to do is keep our ear close to the ground, try and have some people in Washington that understand policy, but also be flexible to adapt here knowing that it’s a very volatile environment.

And I don’t think there’s anybody which who knows where this is going to land. So I sort of look at it as an unknown to stay close to, but I can’t give you a projection on whether it’s a headwind or a tailwind in the near term.

Doretta Mistral, CFO, Viatoris: Yes. No, I would agree. And just to add some flavor to what Scott mentioned, we have a global network of about 26 sites, several of which are based here in The U. S. As Scott mentioned, we’re not highly dependent on either China, Mexico or Canada for our products.

And about 50% of our revenue is imported primarily from The UK, India and Ireland, but the rest of our products are local in The U. S.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Understood. And maybe just one on the outlook itself. As we look at the year, can you call out the phasing that we should expect through the year? And especially I’ve been getting questions around Q1 too. Yes,

Doretta Mistral, CFO, Viatoris: absolutely. And so as part of our recent earnings call, we did provide 2025 guidance. We provided the magnitude not only of indoor and FX, but we also talked about phasing and specifically called out an expectation of some a seasonal step down in Q1, both from a revenue and an EBITDA perspective. And just to focus on Q1 revenue, just to provide a little bit more context and really in relation to kind of what we’re seeing with respect to consensus. If you take a look at those pieces, we’ve talked about indoor about a $500,000,000 impact for the year.

We anticipate about $150,000,000 of that $1,000,000 impact occurring in the first quarter, about 60% of that in developed markets, about 40% of that in emerging markets. And the second piece is really FX. We’ve talked about a 2% to 3% headwind for the year. We expect about $100,000,000 of that if you use today’s spot rate to impact us in Q1. And then the only other thing I’d mention is there is some normal seasonality that impacts both Europe, as well as Jans in the first quarter.

Jans because of the normal kind of pricing that occurs in that region in Europe because of inflow back.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. Thank you.

Scott Smith, CEO, Viatoris: That’s

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: helpful. Maybe in the few minutes left, I do want to discuss the pipeline side of things too. I mean, as you got in Celadogrel, Cinerimod and soda in the recent past too. So help us understand how this fit within your within the global infrastructure of the company and also, of course, the plans for commercialization of it.

Scott Smith, CEO, Viatoris: Yes. So I think we’re excited about all three of those assets. Last year, we were able to do a lot of things, simplifying the company, returning paying down our debt, returning to shareholders. So one of the things I think we’re most proud of is we were able to bring in three sort of unique innovative assets in Phase three development that could have a major impact on the company long term as we get into twenty twenty seven, twenty twenty eight and beyond. So, if you take a look at the strategy for post approval, if you look for the strategy for commercialization of the products, we’ve got 13,000 people in commercial organization worldwide In countries like Japan, China, Italy, France, we’ve got very large competitive commercial structures.

We in those markets are somewhere between the first and fifteenth largest pharma company operating in those countries. So we’ve got the right kind of people. We need to repurpose some people. We’ve got a big cardiovascular business as it pertains to SolataGrill already in place. Where we’re going to have to build, I think, is in The U.

S, where we don’t have a lot of customer facing cardiovascular immunology people. Now these are specialty products. You don’t need huge sales forces, particularly in The U. S. I’ve built sales forces before.

We have lots of people in the company who have done it before. So I think we’re very able and excited to be able to get the products hopefully positive and approved and start to build in The U. S. But we do have good commercial structure in place already internationally and it’s a matter of focusing on The U. S.

To build.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Understood. Maybe some quick comments around business development. I think we have seen a whole host of divestments and some recent these deals in the recent past, but what should we think about future BDs and what would the priority and preference be for you?

Scott Smith, CEO, Viatoris: So what I’m focused on right now is sort of building that bridge between now and when we get to 27 or ’20 ’8. I’m looking for smaller, accretive things that we can leverage with the global organization that we have, looking to build up our revenue and EBITDA numbers of things which are derisked either already on the market, right on the market, ready to launch. But I think we’re going to we’re focusing more on that than big M and A or things that are early in development. Late stage commercialized accretive type of assets is really what we’re looking for to build the company. And again, that’s sort of our focus right now.

I feel really good about the developing portfolio, both in the base business and the innovative business as we get up to ’27, ’20 ’8 and beyond. But I think we’re really focused on assets which can generate revenue and EBITDA in the short to mid term.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: And reasonable to assume that especially the smaller deals that you’re looking at could be near term too?

Scott Smith, CEO, Viatoris: Yes,

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: absolutely. We’re just out of time, Scott, but maybe I’ll just invite you to make some closing remarks around how

Scott Smith, CEO, Viatoris: you think about the longer term direction for the company. No, I’m despite some obvious challenges earlier in this year that we’re taking head on, I feel I couldn’t feel better about where the company is. Again, seven consecutive quarters before this of operational revenue growth, We’ve streamlined the company. We’ve paid down debt very significantly. We put the company in a really good place to get into ’26 and beyond and really start to grow.

Again, we’ve got sort of one more year of construction before we get there. But I feel really, really good about what the future holds, sector leading cash flows, the diversity and scale of the company that we have. I think we’re in a really nice position over the next year to five years over this period to really turn to long term sustainable growth. We want to continue to update people on not only indoor, but the enterprise wide project and other things as we go through quarterly calls, but also look to have some investor events as we get to somewhere in the middle of the year this year, depending on how things go and when we feel good about doing that, talking about what the long term plan looks like, long term revenue plan, long term EBITDA and EPS, talking about the pipeline and how it’s evolving and when we’ve got significant inflection points there and also talking about our enterprise wide projects to really take a look at the cost basis of the company. So we hope to have a nice opportunity sometime in mid year this year to really dig into the company with investors and start to talk about some of those things.

Unidentified speaker, Host at Barclays Healthcare Conference, Barclays: Got it. We’ll definitely look forward to that and look forward to incremental updates on the various parts of the business too. Scott and Doretta, thank you so much for joining us. Thank you very much. And I do wish you a very productive conference.

Thank you very much.

Doretta Mistral, CFO, Viatoris: Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.