VIATRIS INC. AND SUBSIDIARIES INDEX TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

Viatris’ Financial Performance: Navigating Challenges and Seeking Sustainable Growth

Viatris, a global healthcare company, has recently reported its financial results for the first quarter of 2025. The company’s performance during this period reflects both the challenges it faces and its efforts to position itself for long-term success.

Overview of Financial Performance

For the three months ended March 31, 2025, Viatris reported total revenues of $3.25 billion, compared to $3.66 billion in the same period of the prior year. This represents a decrease of 11%, or $409.1 million. The company’s net sales, which make up the majority of its total revenues, decreased by 11% to $3.24 billion.

The decline in revenues was primarily driven by the impact of divestitures that were completed during 2024, as well as the unfavorable effect of foreign currency translation, which accounted for a 2% decrease in net sales. On a constant currency basis, net sales from the remaining business decreased by 2%.

Viatris’ gross profit for the first quarter of 2025 was $1.16 billion, with a gross margin of 36%. This compares to a gross profit of $1.50 billion and a gross margin of 41% in the same period of the prior year. The decrease in gross profit and margin was largely due to the impact of the divestitures and the Indore manufacturing facility issue, which will be discussed in more detail later.

Segment Performance

Viatris operates in four reportable segments: Developed Markets, Greater China, JANZ (Japan, Australia, and New Zealand), and Emerging Markets.

Developed Markets Net sales from the Developed Markets segment decreased by 13% to $1.89 billion. This was primarily due to the impact of divestitures and the Indore facility issue, which resulted in lower sales of certain existing products, particularly in the U.S. and Europe.

Greater China Net sales from the Greater China segment increased by 2% to $555.5 million. On a constant currency basis, net sales grew by 4%, driven by strong performance across multiple channels, including e-commerce, retail, and private hospitals.

JANZ Net sales from the JANZ segment decreased by 13% to $276.1 million. This was partly due to the unfavorable impact of foreign currency translation and the inclusion of net sales in the prior year period related to divestitures. On a constant currency basis, net sales from the remaining business decreased by 6%, primarily due to lower sales of existing products in Japan as a result of government price reductions and additional competition, as well as the Indore facility impact.

Emerging Markets Net sales from the Emerging Markets segment decreased by 17% to $519.9 million. This was largely driven by the impact of divestitures, the unfavorable effect of foreign currency translation, and lower volumes in the company’s ARV (antiretroviral) business, mainly due to the Indore facility issue.

Goodwill Impairment and Other Significant Events

During the first quarter of 2025, Viatris recorded a non-cash goodwill impairment charge of $2.9 billion. This was the result of an interim goodwill impairment test performed as of March 31, 2025, which was triggered by a sharp and sustained decline in the company’s share price and significantly increased uncertainty and volatility in the geopolitical and economic environments in which Viatris operates.

The company also faced challenges related to its Indore manufacturing facility in India. Following an inspection by the U.S. Food and Drug Administration (FDA) in 2024, the facility received a warning letter and an import alert, which affected 11 actively distributed products that can no longer be accepted into the U.S. until the warning letter is lifted. Viatris estimates the negative impact of this issue on its 2025 total revenues to be approximately $500 million and on its 2025 earnings from operations to be approximately $385 million.

In addition, Viatris acquired exclusive global development and commercialization rights to two Phase 3 assets from Idorsia in 2024, with the potential to add additional innovative assets in the future. The company has been working to ensure the continuity of these development programs, which are expected to incur costs through 2026.

Liquidity and Capital Resources

Viatris’ primary source of liquidity is net cash provided by operating activities, which was $535.5 million for the first quarter of 2025. The company believes it has sufficient liquidity, including existing borrowing capacity, to fund its foreseeable cash needs without requiring the repatriation of non-U.S. cash.

As of March 31, 2025, Viatris had $755.0 million in cash and cash equivalents. The company has access to $3.5 billion under a revolving credit facility and a $400 million receivables facility, neither of which had any outstanding borrowings as of the end of the quarter.

Viatris has also been actively repurchasing its shares, having repurchased approximately 18.6 million shares at a cost of $175.4 million during the first quarter of 2025. As of May 7, 2025, the company had repurchased a total of approximately 75.5 million shares at a cost of $814.9 million under its $2.0 billion share repurchase program.

Outlook and Challenges

Viatris faces a number of industry-specific challenges that can significantly impact its results, including the highly competitive and regulated nature of the pharmaceutical industry, the timing of new product introductions, the impact of generic competition, government-imposed price reductions, and the implementation of tender systems in certain markets.

The company’s financial performance in the first quarter of 2025 was affected by the Indore facility issue, the impact of divestitures, and the goodwill impairment charge. Going forward, Viatris expects the Indore facility issue to continue to have a negative impact on its financial results for the remainder of 2025.

Additionally, the company’s results could be affected by other risks of doing business internationally, such as the impact of inflation, geopolitical events, foreign currency exchange fluctuations, and public health epidemics.

Analysis and Outlook

Viatris’ financial performance in the first quarter of 2025 reflects the challenges the company is facing, including the impact of the Indore facility issue and the goodwill impairment charge. These factors have had a significant negative impact on the company’s revenues, profitability, and cash flow.

The Indore facility issue is a particular concern, as it has resulted in the loss of certain products in the U.S. market and is expected to continue to have a material negative impact on Viatris’ financial results for the remainder of 2025. The company’s ability to resolve this issue and regain regulatory approval for the affected products will be crucial for its future performance.

The goodwill impairment charge is also a significant event, as it reflects the company’s assessment that the value of its business has declined due to increased uncertainty and volatility in the markets in which it operates. This could indicate that Viatris is facing more structural challenges that may require a reevaluation of its strategy and operations.

On a positive note, the company’s performance in the Greater China segment was relatively strong, with constant currency net sales growth of 4%. This suggests that Viatris is able to capitalize on opportunities in certain markets, despite the broader challenges it is facing.

Looking ahead, Viatris will need to focus on addressing the Indore facility issue, managing the integration of the Idorsia assets, and continuing to optimize its global operations and portfolio. The company’s ability to navigate these challenges and deliver sustainable growth will be crucial for its long-term success.

Investors and other stakeholders will be closely watching Viatris’ progress in the coming quarters, as the company works to overcome the obstacles it currently faces and position itself for a stronger financial performance in the future.