Q4 2021 Viatris Inc Earnings Call
Investor event. This is truly an exciting day for all of US at via Trust for our 37000 colleagues around the world and for our shareholders.
Not only are you reporting strong financial results for the full year of 2021 meeting or exceeding our guidance.
Today, we'll lay out for you exactly how we expect to deliver on our vision of interest.
We will further review with you our current pipeline.
Our scientific capabilities, a proven track record and how we intend to reshape our portfolio towards higher margin more durable assets, such as NTT east and five or five <unk>.
And finally, we'll give you an update on our business performance and execution, our 2020 , one financial results and our 2022 guidance.
Next slide please.
Now what you will see is a via trusts that are simpler.
That is stronger and that is more focused.
Via trusts that we expect to deliver more access to patients and more value to shareholders with a durable higher margin portfolio.
Significant financial flexibility and shareholder friendly capital allocation and further enhanced commercial and scientific capabilities.
And we will lay out to you all very bold plan to reshape our company.
And with today's announcement.
The Biocrime Biosimilar transaction, we've already taken the first bold step to unlock value.
Accelerate our financial commitments and increase availability of capital for investing in our future or returning value to shareholders.
Next slide please.
Beatrice what's grade a little over a year ago as you know in November 2020 through the combination of Upjohn and Mylan.
Our first year was focused on our immediate priorities of integrating the two companies and Delevering our balance sheet.
And we wasted no time as you know in December 'twenty, two and every already announced is significant global restructuring plan and executed against this plan, we defined and delivered clear financial targets, including our 'twenty to 'twenty, one budget, our synergy targets our goal to pay down $6 5 billion in debt by 2023 and the initial.
Asian and growth of our quarterly dividends.
And I'm very pleased to say that we have now delivered four quarters consecutively of consistent and solid performance meeting or exceeding our guidance. Sanjeev later I will provide you more details on our full year 2020 one results.
Meanwhile, our pipeline achieved many significant milestones, including the historic approval of the first interchangeable biosimilar in the U S and the first approval of a generic to restasis.
Meanwhile, externally we were recognized as one of the top five companies. Unfortunately company that changed the work list were recognized by Forbes as one of the world's best employers and by Newsweek as one of America's most responsible company.
But most importantly, most importantly through 2020 , one we conducted a thorough strategic review of our entire business.
We determined what was core and what was non core to the future of our company.
And today I'm excited to share with you the output of that review and the actions that we're taking.
Today, we're announcing a significant global reshaping initiative.
The Baikonur Biosimilar announcement is only the first but critical step to unlock value and reshape the interest.
And combined with other initiatives, we expect to significantly enhance our financial flexibility.
Accelerate our financial commitments and enable us to invest in our future continuing to move up the value chain by expanding to more innovative areas and to return value to shareholders.
Next slide please.
We're taking immediate and concrete actions to execute on.
On that plan.
To unlock value and to simplify our business beyond the bio Con Biosimilar transaction, we've identified other select assets, which we expect will unlock additional value.
And as we continue to execute against our plan, we will become more efficient.
To reduce complexity and make via tourists simpler stronger and more focused company.
In total we expect these initiatives to generate up to $9 billion in pre tax proceeds by the end of 2023 and let me just put this in perspective. This is more than half of the current market cap.
And returned with trading up approximately 20% of our current adjusted EBITDA Sanjeev will provide you further details about our future financial profile later.
And these proceeds will immediately accelerate our financial flexibility.
Our financial commitments for phase one so thats the year 'twenty, one 'twenty, two and 'twenty three remain unchanged pay down $6 $5 billion in debt achieved 1 billion in synergies and grow our quarterly dividend to return value to shareholders.
But in addition, we expect to have significant capital available to return to shareholders through share repurchases and or investing in the growth of our business.
And for this.
The board of director has already authorized a share repurchase program of up to $1 billion.
Share buybacks will be an important benchmark for us as we make future capital allocation decisions and decide how to invest in our future.
Our goal is.
To enhance our proven scientific capabilities in power and global platform, including our global healthcare gateway to create a durable and higher margin portfolio of products and that means further expanding beyond our current scope into more innovative products, including NCS and global five or five b twos.
And for that we've identified three core global therapeutic areas ophthalmology gastrointestinal and dermatology.
And that we believe will particularly fit our capabilities and our platform and where we have a credible path to leadership.
We also further enhancing our commercial and scientific capabilities as needed for this future portfolio.
And we intend to double our R&D investment ramping up steadily to approximately 9% of revenue by 2026 to bolster our pipeline organically.
And we expect to Inorganically grow via business development through our global healthcare Gateway now explained further details on that strategy later, but for now I would like to hand, it over to Rajiv for further details on the bike on Biosimilar interaction and I'll come back later Rajiv.
Thank you Michael.
As Michael just outlined we have identified certain assets as a part of an extensive strategic review.
These assets have the potential to unlock the trapped value.
And potentially non core to the future direction of the company.
These assets.
Generate up to approximately 9 billion U S dollars a pretax total proceeds.
The plan is being executed as we speak and up to 333 $5 billion of these proceeds will come from the black on transaction, which I will walk you through now.
The transaction, we announced today is a first step towards creating a simpler stronger and more focus with us.
Under the terms of the agreement.
This will contribute its biosimilar business to create what we expect to be a unique vertically integrated global Biosimilars leader.
It's not only the right natural next step for our partnership but also a continuation of our Biosimilars journey.
And enables us to participate in this space in a more optimized way, while unlocking substantial trapped value.
We believe.
This evolution positions back on biologics.
Florida optimized.
And maximize the Biosimilars business.
The actress and Viacom started that journey together in 2009, even before the Biosimilar regulatory pathway was defined in many markets.
We had many successes together and continue to build upon our momentum by adding more products to our pipeline.
Together as partners, we have seen this landscape at wall from a science regulatory and customer perspective.
Biosimilars are heading steadily towards a phase of a mature market and as was the case of genetics, what legal integration will prove to be decisive to stay ahead.
We believe this transaction positions the company as a world class vertically integrated Biosimilars leader and will enable the new company to optimize.
And two and operational capabilities.
Serve market needs with our competitive advantages and will have staying power.
The transaction is subject to customary closing conditions, including regulatory approvals.
We address will receive total consideration of up to $3.335 billion.
3 billion of the consideration will be received immediately on closing with 2 billion in cash and 1 billion of convertible preferred shares.
We also expect to see deferred consideration upper $335 million.
Regardless, we will own a stake of at least 12.9% of the combined business on a fully diluted basis.
We currently expect the combined business operating as plaque on biologics.
Lance and IPO in India by late 'twenty three.
The deal consideration represents a transaction multiple of approximately 16 and half times based on estimated 22, adjusted EBIDTA of our Biosimilar business of approximately $200 million.
Under the terms of the agreement.
This will contribute is biosimilar business, which includes all the programs currently partnering with a black Swan.
As well as our Biosimilars program for Humira.
Ambarella and Eylea.
To facilitate a smooth commercial and operational transition.
We will provide wow, a TSA select services such as commercial.
Military and clinical.
We will receive cost plus a markup of 44 million U S dollars annually for the duration of TSA.
Now a bit on that share consideration.
Well, let's see $1 billion of the convertible preferred shares that represented stake of at least $12, 9% on a fully diluted basis.
We believe.
This will be positioned to generate additional significant value through the potential upside of our ownership stake in the combined business.
And IPO in India is targeted in late 'twenty three.
And we address has a certain priority right and then.
IPO.
Regardless, we'll also receive customary anti dilution and preemptive rights.
On guar less.
This will be granted one seat on the board of Black on biologics.
In terms of timing.
While the transaction is subject to customary regulatory closing conditions. We currently expect the transaction to close in the second half of 'twenty two.
We expect the TSA services will end by quarter four of 2024.
That transaction is an exciting evolution to our partnership with Viacom.
I look forward to sharing more with you.
Soon about how we will leverage the proceeds to reshape the way at least for the future.
Now I will turn it over to Sandeep.
Thank you Rajiv and good morning, everyone. It's been an exciting therefore readdress today, we announced strong Q4 and full year 2021 results and financial guidance for 2022.
We've entered into an agreement with Viacom biologics for a total consideration of up to 333 5 billion. We've also announced our plan to reshape the company, which we expect to unlock additional value.
The next few slides I'll walk you through the reshaping initiative underway, how it strengthens our profile accelerates financial flexibility and enhance our capital allocation framework.
Slide 15 represents an illustrative pro forma for what <unk> could look like post closing of Beichuan biologics transaction and after execution of plan for other select assets. There are a few key takeaways to highlight.
First.
As a result of the partnership structure and profit sharing arrangements of the Biosimilar business. The estimated 2022 biosimilar. The adjusted EBITA margin is relatively lower compared to our company average.
Second looking at pro forma company total revenue and adjusted EBITDA will remain largely intact after the transactions.
Next the Bakken transaction at roughly 16 times 2022 of adjusted EBITDA and estimated proceeds from other select assets are expected to unlock significant value above our company's current valuation.
Finally, we expect these transactions will significantly strengthen our financial profile unlock up to $4 billion to $5 billion of after tax proceeds that will be deployed for investing into business and returning capital to shareholders.
Turning to slide 16.
We highlight our illustrative financial profile across revenue profitability and the balance sheet.
For revenue, we plan to complement annual product revenue of approximately 500 million with business development that is targeted towards assets that fit our strategic commercial and financial criteria. These opportunities can come in form of regional tuck ins, a therapeutic focus pipeline and a broader distribution type arrangements.
While our global healthcare gateway.
For profitability, we expect gross margins to stabilize over time, given the focus on complex products that are wholly own and not subject to partnership payments.
Given our track record of success and the value upside afforded by more durable higher margin of complex product, we intend to increase our R&D investments.
We expect SG&A to continue to benefit from synergies in 2022, and 2023, averaging out at approximately 20% of total revenue.
And finally upon closing of the Biogen transaction, our balance sheet sheet will immediately strengthen with $2 billion in pretax proceeds to accelerate our phase one financial commitment.
Now turning to slide 17, we expect that the anticipated cash proceeds from <unk> transaction, along with the plan for other assets will provide additional flexibility and enhance our capital allocation framework.
Under phase one we intend to accelerated the base plan by retiring short term debt in 2022 in total we intend to pay down at least $6 $5 billion of debt between 'twenty, one and 23 in order to reduce our gross leverage to approximately three times by the end of 2023.
We intend to increase R&D and pipeline investment for future health of the business as a result, we're taking a more balanced approach to capital allocation and have revised at midpoint of long term gross leverage target from two and a half times to three times.
With the anticipated proceeds from bygone biologics and other select select asset transactions, we expect to accelerate investment into business and return more capital to potential share repurchases, we will take a measured approach and we evaluate each option against our internal hurdle rate and other criteria.
Now I'll turn it over to Michael.
Well, thank you sanjeev.
Now as we said we plan to expand our portfolio to more innovative and more durable assets, such as <unk> and <unk> and we will do that in a very focused way.
Now for this we conducted a thorough analysis of our current strengths and capabilities, especially our scientific capabilities, we looked at market sizes and growth opportunities. We looked at the degree of unmet medical needs and the opportunity for innovation have made.
Ability of phase II and phase III late stage assets.
And we looked at who our competitors would be and who are prescribers are.
And the results were clear.
Some therapeutic areas had too much competition.
We're too much certificate risk for us to see credible path to leadership in the time horizon that we're looking at.
Others were too small or didn't provide enough room for innovation.
And as I already mentioned earlier, three therapy areas, and particularly hits, a sweet spot for us is ophthalmology dermatology and gastro intestinal.
Depending on the opportunity we may not pursue all of these equally at the same time, but they represent the kind of therapeutic area, where we have the ability to leverage our existing infrastructure and maximize the opportunities next slide please.
The interest today already has a unique hybrid model with the requisite capabilities spending from what is needed to be successful in the generic space.
Strong base for what is needed in the brands and innovative space and we expect to further expand on the innovate our capabilities as we hone in on the targeted therapeutic areas.
Next slide please to built a durable portfolio of innovative assets, we already have a solid platform to build on we already have a proven track record in development and have a true development powerhouse Rajiv will talk about this a little bit later.
We already have a global commercial infrastructure, we already have a best in class global supply chain quality and operational excellence.
And the global healthcare Gateway is the heart of the company as we leverage our existing platform and expand into more innovative areas.
In fact today, we're announcing that we already have entered into our first global healthcare gateway transaction focused on ophthalmology.
Acquiring an exclusive license for Premier Korlym was ophthalmic ointment for the treatment of Blepharitis, which is a very common type of I.
Irritation, Blepharitis FX about $6 5 million patients in the U S alone.
And in the U S. There's currently no products, specifically indicated for chronic <unk>. This product will contribute to our ophthalmology franchise, while we continue to search for an anchor asset in the past to leadership for US starts with the acquisition of an anchor asset and one or more of the three therapeutic areas as well as expanded.
R&D investment in those areas.
And it's through the global healthcare Gateway and our global platform that.
We believe we can leverage the full global potential of these assets organically or inorganically adds complementary growth essence, and some of these therapeutic areas and then leverage the benefit of therapeutic area leadership and focus by leveraging the existing health care provider coverage leveraging our existing development expertise.
Leveraging our existing medical expertise leveraging the connections we have in the scientific community et cetera.
I said, we see clear paths to therapeutic area leadership in one or several of the Tas that we identified.
So let me summarize on the next slide.
The interests of the future is simpler stronger and more focused.
We have and are already executing on a clear path to reshape the entire company and build a durable higher margin portfolio consistent of generics complex products and off patent brands.
We take some strategic actions on certain assets, but adds an innovative growth engine of NCS and five of IP twos in our targeted therapeutic areas.
And with this we expect the interest to have significant financial flexibility.
In addition to debt Paydown and dividend growth. We now expect to have the opportunity for increased R&D investment for extensive BD activities as well as share buybacks.
And finally building on our current platform and capabilities, we intend to have further enhanced commercial and medical excellence with a focus on the identified therapeutic areas Bottomline is simpler stronger and more focused company delivering access to patients and value to shareholders.
<unk>.
With that I'd like to hand, it over to Rajeev now who will be giving you more details on our pipeline and how we're further enhancing that pipeline in line with our strategic vision. Thank you Rajiv.
Thanks, again, Michael I'm going to focus this next session on the role.
Our strong development platform can play to achieve the end goal of growing up the value chain.
As we have already touched on enhancing our R&D is an essential part to achieve the future direction of the company.
I am very proud of many accomplishments of our science team over the years.
As I see it we are a development house with capabilities that can be further.
Stanton and focused in coming years, as we continue to move up the value chain.
We intend to leverage our global healthcare gateway to further strengthen our R&D engine with.
With differentiated and novel products.
That target gaps in care.
We believe that we are an ideal development partner that offers strong science.
Terry and clinical skills as well as strong global commercial footprint to companies with phase two and three assets.
We will continue to invest in genetics with a focus on complexity.
And diligently pursue lifecycle management opportunities around our current therapeutic areas.
We expect to ramp up our R&D investments steadily to approximately 9% of revenue by 2026.
This slide shows our road map to execute our R&D evolution.
On the left you see.
We had our portfolio and pipeline yesterday.
Which is a diverse across a wide range of therapeutic areas across segments and markets.
We intend to continue to build a pipeline focusing on products with complexity and also investing in lifecycle amendment of certain key products.
In our current portfolio of various regions.
I'll walk you through certain examples and one off my following pipeline slides.
We will seek additional inorganic assets through our global healthcare Gateway I don't current therapeutic areas of regional focus.
More importantly.
We'll be aggressively looking into several phase II and phase III opportunities to build critical mass of new chemical entities.
And final five week two novel products in the three focus therapeutic areas of <unk>.
G I.
<unk> biology and.
And dermatology as Michael mentioned.
In order to execute our R&D strategy.
We will leverage the foundation that has been built over a number of years.
This slide highlights our extensive scientific capabilities, we have across a broad range of dosage forms and livery Mackenzie.
We also have proven expertise in all of the related areas.
Essential to develop and scale.
These types of products.
Up through and including novel products.
For example, the.
The robust API and formulation development capabilities.
The global expertise in preclinical study design and.
And execution as well as device engineering.
Strong clinical development and medical affairs.
Multiple therapeutic areas.
Strong end market regulatory legal and IP skill sets.
And broad and scalable manufacturing capabilities the.
The backbone of this platform is of course.
A strong team of 3000 scientists and medical professionals.
Talking across 12 development centers.
And having regulatory expertise in 55 markets.
We have a broad range of demonstrated clinical experience.
And I've got conducted over 80.
Clinical development and post marketing programs, including phase one.
Two phase three and phase four studies.
The bottom line is that we believe we are well positioned to support and enable the advancing of the science of the value chain.
Okay.
There is no better representation of our scientific expertise than this slide up proven results.
When we make a decision to pursue the development of a complex genetic or another product.
Our track record shows our commitment.
On an average complex products can take seven to nine years from development to approval.
And we are so proud to bring most of these products first to the market.
Recently, we added another first to her basket with the approval of genetic deafness.
Building off the momentum of our first interchangeable Biosimilar Assembly.
I would like to dive a bit deeper into our existing pipeline to help visualize this progression.
Beginning with our core genetics.
As you can see we have either lost or have a ruble are have submitted some of significant products such as genetics for Revlimid Saar Alto and illiquid.
We are targeting launching many of these core genetics and the next one to two years.
Flipping to the next slide.
As you can see we're continuing to move up the value chain with more complex products.
Projected loss timings for many of these are in the next two to four years.
What's unique about our complex generics pipeline is that it's primarily vertically integrated giving us a much better control on the execution of these programs.
And R&D flexibility you need to succeed.
And bring these products to the market.
It also improves the margin profile of these books as we will no longer be sharing the profits.
I'm very confident that like in the past.
We are well positioned to bring the first genetic of many complex products to the market such as Symbicort.
And we've got Tinder.
Tessa.
And Abilify long acting injection.
As I mentioned earlier.
In the next five years.
We also intend to invest in the lifecycle management of certain corporates in our portfolio to meet an unmet patient needs.
We are already doing this for many products such as Levothyroxine oral suspension, which we have submitted unexpected regulatory action this year.
[noise] collateral once monthly injection built upon our success with generic Copaxone.
And we are completing the clinical phase of the development and remitting and relapsing multiple sclerosis.
We have also initiated a phase four trial and are investing in the science around our you Valerie.
Floor, the impact of really finishing on a peak inspiratory flow rate.
And further expand the patient base.
We are investing in the lifecycle management of our <unk> product.
And have initiated a phase three study on a low dose option.
We have initiated a clinical study for effects are in Japan to extend the labeling for generalized anxiety disorder.
And we are developing several new fixed dose combinations in cardiovascular for Chinese market.
Finally, we are also developing meloxicam for rapid onset of post surgical pain.
We have submitted our R&D and are now entering into a phase II studies.
As we enhance our R&D investments and put our capital to US we look forward to further concentrating this pipeline around ti.
<unk> and dermatology.
Yeah.
Our pipeline, excluding biosimilars that we shared with you today is well positioned to deliver approximately 500 million plus.
And new product launches annually after 23.
Our total pipeline is valued at $183 billion in IQ via brand value.
This brought pipeline also shows that we will cover almost 80% of the current top hundred IQ via products and it's more heavily weighted on complex products.
I can hope you can feel and appreciate the excitement and the confidence we have in our platform.
Let's now pivot and discuss the business execution for the near term.
While we reshape where this in the coming years, our business execution remains a top priority.
I walked you through how we will reshape our portfolio and deliver the pipeline earlier. So now I'll provide an update on how we performed in 'twenty one.
Progress on integration and how we expect to continue to further stabilize the business in 'twenty two.
'twenty one.
We performed strongly as a team while we were creating a new company and navigating a dynamic environment.
I truly appreciate and thank all of my colleagues around the world, whose seamlessly executed a successful first year as we address.
We've made significant progress with our integration.
We executed our restructuring program and achieved our target of approximately 400 million dollar of cost synergies, while already executing the Pfizer DSA exists for several programs.
We delivered strong overall results exceeding our expectations across all segments.
In developed markets Europe benefited from our commercial portfolio as well as strong performance in key brands like influenza Lipitor and Biosimilars.
North Americas based business performed as expected despite unexpected competition and product like Mckesson.
Your battery and Epipen.
What other key contributors to the growth.
We effectively manage the dynamics of the hospital channel in China, while strongly growing the retail segment.
Emerging markets responded to the challenge of providing the COVID-19 related products like them. This way.
And then be sold in several of their markets, which help them offset the impact of changing therapy in anti there for a while.
Japan manage the Lyrica LOE exceedingly well.
Drawing amitiza and the Buck Leon.
While leveraging the portfolio of authorized generics.
On the pipeline front, we delivered on our commitment of approximately $700 million in new product revenue and significantly progress our robust pipeline of heart to make and complex products.
Our science teams once again made us proud with the FDA approval and the launch of the first interchangeable buyers Biosimilar Assembly.
Expand access for patients with diabetes.
The strong performance across the globe was well supported by our global supply chain, which enabled us to achieve record high customer service levels, while navigating COVID-19.
Let me speak on the integration path what bought forward.
We remain on track to realize an additional 500 million cost synergies over the next two years.
Belting and a billion dollar cumulative cost synergies since becoming the Atlas.
Our synergies in 'twenty, one what largely focused on actions around cost of goods SG&A.
Loss widened and restructuring.
And as planned.
The remaining focus for cost synergies in 'twenty, two and 'twenty three is on the restructuring and exiting the remaining Pfizer TSS.
We have already completed a number of TSA exists through February .
Of 22 and expect to exit the remaining TSA is by the end of the year.
Let me now talk to you about 22.
We are laser focused to continue to further stabilize the business during this transition period.
You will have this slide.
As a reference point as I would like to move to the next one to review the headwinds and tailwind in 'twenty two.
We are well positioned to build on the momentum of 'twenty one.
And we will do this by.
Delivering the approximately $600 million of new product launches, which I will talk about more on the next slide.
Driving growth in our key markets, including Europe , where we expect mid single digit growth as less China deal.
We continue to invest in the same.
Key emerging markets like Turkey, Thailand, Mexico, Brazil, and Korea are also expected to grow on the back of a more normalized market environment post COVID-19.
Growing products, such as your belly viagra, our <unk> portfolio.
On Amitiza and Dymista are also expected to grow in 'twenty, two and lance strength and stability to the business and their respective geographies.
Continued ramping up of our market share of interchangeable assembly to mid to high teens in 22 building off our successful launch.
And by maintaining our leadership and weak sellout and Julien.
The same time.
<unk> market conditions.
And and and head and part of our business.
Our job is to perform in this ever evolving environment.
So 22 is going to be no different.
We expect mid single digit base business erosion in 'twenty, two largely driven by the continuation of increased competition in certain high margin keep products like performance and Mckesson.
Continued implementation of China's health care policy.
The changes in the anti retroviral therapy guidelines, which we expect to continue to drive contraction of the market that has been stable Arctic spanning over the last 10 years.
We also expect total revenue to be negatively impacted by lower volumes for COVID-19 related products, mostly in our emerging market segment.
And 'twenty two will also face the inflationary impact on input costs on the fracking operations of our business.
Going into more detail regarding our $600 million of expected new product launches in 22 of which about a third is related to biosimilars.
First I'm excited to highlight that approximately 95% of our new product launches in 'twenty, two and quality are already scientifically executed meaning that they have been either.
Already launched accrue or are pending approval.
Interchangeable insulin gladden revlimid, the stasis insulet insulin as spot at a few key products in this bucket.
So while we have not included semi got in R 22 financial guidance.
We are happy with the progress on the product and remain ready to launch if the opportunity present itself in 'twenty two.
While I won't go into great detail on the following segment slides I'll hit on a few highlights.
In developed markets, we expect low single digit growth.
Primarily driven by strong performance of Europe .
In Europe , we expect to continue to see strong growth driven by our thrombosis portfolio Creon and <unk>, along with a robust new generic launches like the element and Zynga.
In North America, our balanced portfolio of brands complex generics Injectables and retail generics.
As well as our robust product launches will help us partially offset the inherent erosion in the market.
Less competition.
And lower Epipen volumes coming off COVID-19 demand in 'twenty one.
You probably will be the one of the key contributors.
To offset this.
In emerging markets, we expect to see a year over year decline entirely driven by impact of lower COVID-19 product related volumes.
In January we expect strong volume growth from our key brands like Amitiza, Deepak Leon and the Fracs are as well as continued success in building our authorized generics.
We also expect common price regulations to have an increased impact, resulting in a high single digit decline year over year.
Our strong and well established commercial presence in the hospital segment in China.
Will support us as we continue to navigate the evolution of the healthcare policy.
At the same time.
We are confident in the macro drivers of China supported by growth in the health care consumerism.
And therefore are focused on continuing to expand our footprint in retail segment.
To sum up it's.
All about execution of our key priorities.
We will.
Complete the integration and realize the remaining cost synergies.
We will deliver the pipeline and expand our robust development house to move up the value chain and.
And we will continue further stabilizing the business.
While we take actions to reshape the company.
We'll close the Biosimilar transaction in the second half hour 22 wells.
We will start working.
On the other identified divestment opportunities to continue to unlock value and simplify the portfolio.
And more importantly, we'll continue leveraging the global healthcare gateway to find value, creating business development opportunities.
With this clear execution plan.
We will create a simpler stronger and more focused company of the future.
Now I will turn it over to Sandeep.
Thank you Rajiv we had another excellent quarter and closed out the year on a strong note.
It's been incredibly successful first full year for retrofit I'm really pleased how two organizations have come together, our strong financial performance demonstrated the breadth of our global platform.
As I reflect on 2021.
We delivered on our integration plan.
Meta financial commitment for deleveraging and dividend and developed a plan for bold strategic action to reshape our company going forward.
Moving to slide 53, we exceeded on November mid point guidance on total revenue adjusted EBITDA and free cash flow.
Total revenue was driven by strong performance in developed market, which saw approximately 7% operational growth in Europe , which included the benefit of our thrombosis franchise.
In North America, New product revenue was offset by anticipated base business erosion and competition and complex products, taking these factors into account generic price erosion was in line with our expectation in James the impact from Celebrex analytical LOE totaled approximately $600 million and now is largely behind us.
As we move into 2022.
Greater China operational revenue was flat to the prior year as we continue to shift our business to the retail channel.
Emerging market revenue was impacted by pricing pressure on the RV business due to neutral treatment regimens, which were partially offset by the benefit of COVID-19 related products.
Our adjusted gross margin came in at 58, 7% for the year driven by strong brand performance and taking into account competition on key products in North America.
In 2021, we were able to execute on our accelerated integration timeline, which allowed us to capture approximately 500 million in synergies across cost of goods sold and SG&A.
Free cash flow benefited from underlying business performance working capital optimization initiatives and lower taxes.
I'm pleased with the free cash flow generation for the year, which has enabled us to meet our financial commitments.
Slide 54 captures our reported financial results relative to the combined adjusted estimates for the prior year.
Slide 55 identifies the driver of free cash flow for the quarter and full year.
As we mentioned late last year, we anticipated Q4, 2021 free cash flow to be impacted by several factors.
These included timing of interest payments higher Capex and anticipated phasing of one time cash cost for full year business performance working capital benefits and lower cash taxes absorbed the higher one time cash cost.
These costs are expected to step down in 2022, and 'twenty 'twenty three as we complete integration and restructuring activities.
We delivered on our financial commitment and returned approximately $400 million in dividends and paid down over $2 billion in debt.
Slide 56 captures key assumptions after 2022 financial plan.
Total revenue estimate assumes base business erosion to be in mid single digit range.
Foreign exchange had a significant impact on results given our international exposure risk.
Which comprises approximately 70% of our total revenue.
Your exposures include the euro and yen with strong appreciation in the U S dollar or second half of 2021 and more recently into 2020 to our financial guidance incorporates approximately 2% headwind on the total revenue and adjusted EBITDA.
We expect another strong year for new product revenue across broad range of genetic complex and biosimilar products.
In generics, we expect important launches, including Revlimid Restasis and Sutent in Biosimilars, we are seeing solid uptake of interchangeable version of simply.
Our guidance assume a full year of Biosimilar, which is approximately $875 million in total revenue and adjusted EBITDA of approximately $200 million new.
New product revenue includes approximately 200 million for Biosimilar.
Slide 57 captures our financial guidance ranges for total revenue adjusted EBITDA and free cash flow and corresponding detailed line item metrics.
Now turning to revenue build on slide 58. This bridges the illustrated expected major drivers for 2022 relative to 2021 actuals.
Removing the impact of foreign exchange.
Our year on year total revenue was declining by approximately 2%.
Base business erosion consists of two buckets.
The first is approximately $200 million and is related to expected continued competition on key products, including Mike Harrison and performance. The second captures the expected erosion from price deterioration in North America generics.
Annual price reset across the Japan product portfolio.
And the continuing pressure on the agribusiness due to new treatment regimens and lower COVID-19 related products.
In the base business, we expect the strength across categories in Europe and higher volumes in China.
Moving to slide 59, we're expecting inflationary pressures across third party supply chain for input cost distribution and finished goods.
We expect adjusted gross margin to be under slight pressure due to competition on key products and erosion of your RV volumes in emerging markets.
Through our planned reshaping initiatives between now and 2026, we intend to invest more in R&D to drive our strategy and pipeline towards N Cen and five of I <unk>.
On commercial side, our financial guidance reflect investment in some segments to build demand generation and in market capabilities.
Turning to slide 60, we expect another strong year for free cash flow generation lower restructuring and integration costs will be partially offset by the impact of Epipen litigation settlement with.
We expect to broaden implementation of working capital optimization initiatives in receivable and payable areas to continue to benefit us on free cash flow generation.
Before I close a few point on phasing.
We expect total revenue and adjusted EBITDA to be slightly higher in the second half due to the ramp of new products and normal product seasonality.
We estimate free cash flow will be evenly weighted between first half and second half in general the second and fourth quarter tend to be lower due to timing of semi annual interest payments.
In closing.
We're coming off a strong year and well positioned for a solid start in 2022.
The estimated proceeds from the buyer can transactions along with other reshaping initiatives are expected to strengthen the company and position us for a long term success.
Well. Thank you sanjeev. Thank you Rajeev as you can tell we're excited but bottom line from today what are we didn't want you to takeaway.
From this everything we presented today is that the entire company now that we laid out this strategy entire company diet management team is focused on the future of vehicles. We're looking forward to build a company that is simpler stronger more focused that has a portfolio consisting of generics complex generics off patent brands and increasing innovation.
<unk> growth engine of NCS in five or five theaters, a company that has significantly enhanced financial flexibility that we can put to use by the share repurchases and or BD and R&D and if you look at there is simply put the F 22, and 23 are really years of execution execution against the <unk>.
Commitments that we've made for phase one the debt pay down the dividend the cash flow the synergies, but also against the all the initiatives that we outlined to set ourselves up properly for success in 2024 and for many years beyond that's why we're excited about that division, we're laying out today and with that we're going to go through a short break and <unk>.
After the break we come back and we look forward to your questions. Thank you.