Q2 2024 Viatris Inc Earnings Call

August 8, 2024

Bill Szablewski: Good morning everyone, and welcome to the Viatris Q2 2024 Earnings Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Bill Szablewski, Head of Investor Relations and Capital Markets. Please, go ahead. Welcome to our Q2 2024 earnings call. With us today is our CEO, Scott Smith; DFO, Doretta Mistras; Chief R.D. Offster, Fleep Martin; and Chief Commercial Offster, Craying O'Gaw.

Operator: Good morning everyone, and welcome to the Viatris Q2 2024 Earnings Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Bill Szablewski, Head of Investor Relations and Capital Markets. Please, go ahead.

Bill Szablewski: Good morning, everyone. Welcome to our Q2 2024 earnings call. With us today is our CEO, Scott Smith; CFO, Doretta Mistras; Chief R&D Officer, Philippe Martin; and Chief Commercial Officer, Corinne Le Goff.

Bill Szablewski: During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2024 and various strategic initiatives. These statements are subject to risk and uncertainty. We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation in our SEC filings for more information. Including Reconciliation of those non-gap measures to the most directly comparable gap measure. When discussing 2024 results, we make concerned comparisons to 2023 results on a divestiture-adjusted operational basis, which excludes the impact of armed currency rates and also excludes the proportion of results from the period when discussing our expectations for 2024.

During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2024 and various strategic initiatives. These statements are subject to risk and uncertainties.

We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation in our SEC filings for more information, including reconciliation of those non-GAAP measures to the most directly comparable GAAP measure. When discussing 2024 results, we make concerned comparisons to 2023 results on a divestiture-adjusted operational basis, which excludes the impact of armed currency rates and also excludes the proportion of results from the period when discussing our expectations for 2024.

When discussing 2024 results, we make concerned comparisons to 2023 results on a divestiture-adjusted operational basis, which excludes the impact of armed currency rates and also excludes the proportion of results from the divestitures that closed in 2024 and 2023 from the 2023 period. When discussing our expectations for 2024. We'll be making certain comparisons to 2024 results when a divestiture adjusted operational basis, which excludes the impact of foreign currency rates, and also excludes from guidance the results from the date of closing until the end of the period of the divestitures that closed in 2024.

Bill Szablewski: We were making certain comparisons to 2024 results when a divestiture adjusted the operational basis, which excludes the impact of foreign currency rates, and also excludes from guidance the results from the date of closing until the end of the period of the divestitures that closed in 2024. With that, I'll hand the call over to our CEO Scott.

We were making certain comparisons to 2024 results when a divestiture adjusted the operational basis, which excludes the impact of foreign currency rates, and also excludes from guidance the results from the date of closing until the end of the period of the divestitures that closed in 2024.

With that, I'll hand the call over to our CEO, Scott Smith.

Scott Andrew Smith: Good morning, everyone, and welcome to our Second Quarter Earnings Call. I'm pleased to announce we have reported another strong quarter, our fifth consecutive quarter of operational revenue growth. We had a great start to 2024, and with the completion of our divestitures in July, we are now in an important inflection point for our company. Four years ago, Viatris embarked on a journey to build a new kind of healthcare company. By combining Mylan, a strong global generics company, and Upjohn, a division of Pfizer, with 20 of the most iconic off-patent brands, our goal was to build a unique global pharmaceutical company with the scale to bring patients access to high-quality medicines worldwide.

Scott Smith: The team has done an outstanding job of executing the plan that was laid out when the two companies were brought together. Among the many accomplishments we have integrated two global companies, simplified and streamlined the business by completing our divestitures, returned the base business to growth, strengthened our balance sheet through significant debt pay-down, returned capital to shareholders through dividends and share repurchases. And importantly, we've already started to build our portfolio of innovative assets.

Scott Smith: As we move forward in the second half of the year and beyond, we want to accelerate growth and shareholder return by building on the strength of our base business with an expanding portfolio of innovative, best-in-class, patent-protected assets that have the potential for meaningful revenue growth and patient impact. I believe we have all the components necessary to successfully execute our vision, including an extensive global footprint that reaches 1 billion patients annually, a globally integrated company with deep capability for manufacturing, medical and regulatory affairs, and commercialization, a robust development engine across a number of therapeutic areas, sector leading cashflow generation from our base business to fund our vision and continue returning capital to shareholders.

Scott Smith: Leading Cashflow Generation from our base business to fund our vision and continue returning capital to shareholders. And we have added new skills, new capabilities, and new areas of expertise to our already strong and talented executive leadership. Doretta Mistras, our Chief Financial Officer, Philippe Martin, our Chief R&D Officer, and Corinne Legoff, our Chief Commercial Officer, joined the team within the last year and are on today's call. All their great work over the last several years has put the company in a position to deliver on our future vision. As we move forward, we will focus on three strategic pillars. First, our diversified and growing business. As we said, our extensive global footprint already reaches more than a billion patients every year.

Leading Cashflow Generation from our base business to fund our vision and continue returning capital to shareholders.

Scott Smith: Second, our financial strength and significant cash flow. Our strong balance sheet and sector-leading cash flow generation differentiate us from our peers. We continue to deliver on our financial commitments, including debt reduction and returning capital to shareholders through dividends and share repurchases. With divestitures proceeds now in hand, we have a clear line of sight to meet our long-term leverage target. And third, our expanding innovative portfolio. This area represents an increasing focus on efforts to identify that and secure best-in-class patented assets. We are looking for assets that target significant unmet medical need in areas in which the company can be successful. By expanding our innovative portfolio, we have the potential to drive accelerated and durable revenue growth.

Scott Smith: By expanding our innovative portfolio, we have the potential to drive accelerated and durable revenue growth. As you know, we've already made disciplined investments in innovative assets and cardiovascular disease and immunology with Salatagrel and Sanjarma. We are making significant progress in accelerating the development of the. The additional leadership and scientific expertise we have brought in, along with the impressive core of competencies in key areas such as global manufacturing, medical affairs, regulatory, legal, and commercialization will all drive the success of this innovation.

By expanding our innovative portfolio, we have the potential to drive accelerated and durable revenue growth.

As you know, we've already made disciplined investments in innovative assets and cardiovascular disease and immunology with SELATOGREL and CENERIMOD. We are making significant progress in accelerating the development of these assets. The additional leadership and scientific expertise we have brought in, along with the impressive core of competencies in key areas such as global manufacturing, medical affairs, regulatory, legal, and commercialization will all drive the success of this innovative portfolio.

Scott Smith: We're already making progress on these three pillars, as evidenced by our strong results this quarter. I am pleased to report that in the second quarter, we delivered total revenues of $3.8 billion and operational revenue growth of approximately 2%. Adjusted EBITDA was $1.2 billion and growing approximately 2% from a year ago. Adjusted EPS was $0.69 per share. Second quarter free cash flow was $426 million, excluding the impact of transaction costs and taxes. It is important to note that we delivered new product revenue of $210 million in the quarter.

We're already making progress on these three pillars, as evidenced by our strong results this quarter. I am pleased to report that in the second quarter, we delivered total revenues of $3.8 billion and operational revenue growth of approximately 2%. Adjusted EBITDA was $1.2 billion and growing approximately 2% from a year ago. Adjusted EPS was $0.69 per share. Second quarter free cash flow was $426 million, excluding the impact of transaction costs and taxes.

It is important to note that we delivered new product revenue of $210 million in the quarter. With a strong second quarter results, we see momentum heading into the second half. As a result, we continue to expect 2024 year-over-year operational revenue growth of 2% and are raising our expected 2024 new product revenue range to $500 to $600 million. Now I'd like to turn the call over to Corinne to share some of our observations from her first few months at Viatris. Corinne?

Scott Smith: Dron Second quarter results, we see momentum heading into... As a result, we continue to expect 2024 year over year operational revenue growth of 2% and are raising our expected 2024 new product revenue range to $500 to $600 million. Now I'd like to turn the call over to Corinne to share some of her observations from her first few months at Viatris.

Now I'd like to turn the call over to Corinne to share some of our observations from her first few months at Viatris. Corinne?

Corinne Le Goff: Thank you Scott. I have been with the company for about four months now. And based on what I've seen, I'm very excited about the opportunity ahead of us. I would like to share a few observations, as I've gotten to know the global commercial organization. Our strong performance is a result of many puts and takes that only the diversity and the strength of our portfolio across geographies can allow.

Corinne Legoff: Our global commercial footprint is extensive. We have a presence in 165 countries and territories, which is an incredible platform to leverage as we continue to grow our base business and expand our innovative portfolio. We have a broad knowledge across many therapeutic areas, and many of our branded and generic products are today's standards of care all over the world. This is a real differentiator as it demonstrates our unique ability to continue to drive volume and expand patient access at scale.

Corinne Legoff: As we prepare for additional innovative opportunities, we have a lot to build from. For example, if I think about SELATOGREL, we are already leaders at rescue and emergency medicines in COPD, in asthma, and anaphylaxis. We have years of experience in educating patients to identify and attack and act in the moment. Plus, we have deep expertise in cardiovascular with a portfolio that treats a very large patient population for CV risk factors to see the events like thrombosis, MI, and stroke.

Corinne Legoff: Finally, I love what I'm seeing in our teams. I am impressed with the agility and efficiency of the commercial organization. And I also see incredible energy, entrepreneurial spirit, and proactivity to seize opportunities and make a difference in patients' lives. I am excited to continue to work with the entire team at Viatris on the tremendous opportunities ahead. Thank you, Corinne.

Finally, I love what I'm seeing in our teams. I am impressed with the agility and efficiency of the commercial organization. And I also see incredible energy, entrepreneurial spirit, and proactivity to seize opportunities and make a difference in patients' lives. I am excited to continue to work with the entire team at Viatris on the tremendous opportunities ahead.

Scott Andrew Smith: Thank you, Corinne. Your wealth of experience and global perspective have been invaluable as we continue to build the truly unique company we have envisioned. Now I'd like to turn the call over to Philippe to talk about our approach to R&D, both our base business and our innovative portfolios. Philippe?

Scott Smith: Karan, your wealth of experience and global perspective have been invaluable as we continue to build the truly unique company we have envisioned. Now I'd like to turn the call over to Felipe to talk about our approach to R&D, both our base business and our innovative portfolios.

Philippe Martin: Thanks, Scott. I share the team's excitement about where we are today and where we are headed. I've had the opportunity to fully evaluate our R&D organization and further define our approach to innovation and growth. Our R&D, Strategies, driven by our deep in-house development capability and two engines to fuel our growth, our base business pipeline, and our innovative pipe. A base business pipeline provides Viatris with a diverse and resilient growth engine.

Philippe Martin: We anticipate a steady flow of core generics and an ever-increasing flow of complex generics in novel 505b2-like products. The strong pipeline gives us confidence in achieving our new product revenue goals. Our focus for our innovative pipeline is on expanding our patent-protected portfolio of assets that have the potential for meaningful patient impact and the ability to address significant unmet medical needs. I'm very impressed with the core competencies and talent we have at Viatris.

Philippe Martin: In particular, our strong preclinical, clinical development, and medical affairs teams across multiple therapeutic areas, our experienced manufacturing and device teams over a wide range of dosage forms, and our proven regulatory, pharmacovigilance, legal, and IP skill. This foundation is especially critical as we expand our innovative portfolio. We are identifying assets where we can leverage our expertise and global network and assessing each opportunity based on specific criteria. We are looking for de-risk-innovative assets that address significant medical need. This includes having a validated mechanism of action, a strong clinical proof-of concept and a clear path to regulatory approval.

Philippe Martin: SELATOGREL and CENERIMOD are two great examples. SELATOGREL has the potential to relieve the high disease burden of acute MI and specifically address the dire need for early intervention at the onset of symptoms. P2Y12 inhibition is a well-established target in the treatment of MI with multiple products approved for chronic treatment. Our differentiated pharmacokinetic profile and unique mode of administration, together with our robust Phase II data gives us high confidence in SELATOGREL as a self-administrated emergency treatment for recurrent MI.

Philippe Martin: Zoladogrel has the potential to relieve the high disease burden of acute MI and specifically address the dire need for early intervention at the onset of symptoms. C2Y12 inhibition is a well-established target in the treatment of MI with multiple products approved for chronic treatment. Our differentiated pharmacokinetic profile and unique mode of administration.

Philippe Martin: Together with our robust phase two data gives us high confidence in Selatogrel as a self-administred emergency treatment for recurrent MI. Our Comprehensive, but Simple, Phase 3 Study, SLSMI, as a Special Protocol Assessment in place with the FDA, and will receive Fast Track Designation. Tenere mode also has the potential to address significant unmet medical needs. SLE is a chronic and progressive autoimmune disease with limited treatment options and significant morbidity. Sinary Mod, A novel by novelist Juan P. Antagonist, as a unique mechanism of action, targeting multiple aspects of Lupus Patrogenist.

Together with our robust phase two data gives us high confidence in Selatogrel as a self-administred emergency treatment for recurrent MI.

Our comprehensive, but simple, Phase III Study, SOS-AMI, has a special protocol assessment in place with the FDA, and received fast track designation. CENERIMOD mode also has the potential to address a significant unmet medical needs. SLE is a chronic and progressive autoimmune disease with limited treatment options and significant morbidity. CENERIMOD, a novel S1P antagonist, has a unique mechanism of action, targeting multiple aspects of lupus pathogenesis.

Philippe Martin: A robust proof-of-concept was achieved in Phase II, with data showing a highly differentiated safety and efficacy profile in a moderate to severe SLE patient population, similar to the patient population we expect to enroll in Phase III. CENERIMOD has also been granted fast-track designation by the FDA, and we have three comprehensive Phase III studies currently enrolling patients. With SELATOGREL and CENERIMOD now part of Viatris, we're able to leverage our global R&D network to accelerate clinical trial recruitment.

Philippe Martin: We've already significantly increased the number of sites we are targeting for both programs, adding approximately 250 clinical sites. We've also significantly expanded the geographic footprint, adding key countries like China, India, and Japan to ensure a steady flow of patients.

Philippe Martin: The team has been working hard to initiate these higher recruiting sites, and we anticipate that most sites should be able to recruit patients by the end of this year or early next year, which could shorten development time lines. The Medical Affairs team is also working hard to deepen relationships with KOLs and increase CENERIMOD's and SELATOGREL's presence at key medical meetings around the world, like ESC,, HACR and APLAR. And we are pleased to announce that the CENERIMOD manuscript for the Phase II Care Study has been officially accepted for publication in the Lancet Rheumatology.

Philippe Martin: And we are pleased to announce that the CENERIMOD manuscript for the Phase II Care Study has been officially accepted for publication in the Lancet Rheumatology. Another exciting, innovative opportunity is with the eye care pipe. And is the Anchorage-Dear Films in Therapy Technology, which we acquired as part of the Oyster Point Acquisition, which has the potential to treat a multitude of astounding diseases. Importantly, this technology is not genome editing, but rather it leverages normal cellular processes and proteins to deliver therapeutics to the tear field.

And we are pleased to announce that the CENERIMOD manuscript for the Phase II Care Study has been officially accepted for publication in the Lancet Rheumatology.

Another exciting, innovative opportunity is with the eye care pipe. And is the Enriched Tear Film Gene Therapy Technology, which we acquired as part of the Oyster Point acquisition, which has the potential to treat a multitude of astounding diseases. Importantly, this technology is not genome editing, but rather it leverages normal cellular processes and proteins to deliver therapeutics to the Tear Film.

Philippe Martin: Our most advanced project called MR-146 intended for the treatment of neurotrophic keratopathy or NK, is reaching the IND stage with a validated therapeutic target for this disease. There is a significant unmet medical need for patients with NK to have a treatment that restores corneal structure and neurological function with minimal treatment burden. These examples from our expanding innovators portfolio combined with our robust based-business pipeline energize me about the future and our ability to not only deliver on our vision but also to address significant medical needs. I will now turn the call to Doretta.

Our most advanced project called MR-146 intended for the treatment of neurotrophic keratopathy or NK, is reaching the IND stage with a validated therapeutic target for this disease. There is a significant unmet medical need for patients with NK to have a treatment that restores corneal structure and neurological function with minimal treatment burden. These examples from our expanding innovators portfolio combined with our robust based-business pipeline energize me about the future and our ability to not only deliver on our vision but also to address significant medical needs. I will now turn the call to Doretta.

Doretta Mistras: Thank you, Philippe, and good morning, everyone. To echo the comments from the team we reported a strong quarter. And I want to spend some time walking through the highlights. But before I dive into the details, I want to take a moment to expend on our financial strength and how we think about it in the context of our overall strategy. We've successfully stabilized the base business and expect it to be a source of growth. And today, we have a broad and diversified portfolio across markets and therapeutic areas. Second, we have a strong balance sheet. We are committed to continuing to pay down debt and maintaining our investment grade rating and have a clear line of sight to reach our long-term growth leverage target this year.

Theodora Mistras: Thank you, Philippe, and good morning, everyone. To echo the comments from the team we reported a strong quarter. And I want to spend some time walking through the highlights. But before I dive into the details, I want to take a moment to expend on our financial strength and how we think about it in the context of our overall strategy. First, we have built an extensive global footprint that already enables us to reach over 1 billion patients annually.

Theodora Mistras: First, we have built an extensive global footprint that already enables us to reach over 1 billion patients annually. We've successfully stabilized the base business and expect it to be a source of growth. And today, we have a broad and diversified portfolio across markets and therapeutic areas.

We've successfully stabilized the base business and expect it to be a source of growth. And today, we have a broad and diversified portfolio across markets and therapeutic areas. Second, we have a strong balance sheet. We are committed to continuing to pay down debt and maintaining our investment grade rating and have a clear line of sight to reach our long-term growth leverage target this year.

We've successfully stabilized the base business and expect it to be a source of growth. And today, we have a broad and diversified portfolio across markets and therapeutic areas.

Second, we have a strong balance sheet. We are committed to continuing to pay down debt and maintaining our investment grade rating and have a clear line of sight to reach our long-term growth leverage target this year. And finally, our ability to generate significant cash flow is sector-leading. This gives us the financial agility to fund our vision and continue returning capital to shareholders.

Doretta Mistras: And finally, our ability to generate significant cash flow is sector-leading. This gives us the financial agility to fund our vision and continue returning capital to shareholders. Now on to the results for the quarter.

And finally, our ability to generate significant cash flow is sector-leading. This gives us the financial agility to fund our vision and continue returning capital to shareholders.

And we have added new skills, new capabilities, and new areas of expertise to our already strong and talented executive leadership team. Doretta Mistras, our Chief Financial Officer, Philippe Martin, our Chief R&D Officer, and Corinne Le Goff, our Chief Commercial Officer, joined the team within the last year and are on today's call. All their great work over the last several years has put the company in a position to deliver on our future vision. As we move forward, we will focus on three strategic pillars. First, our diversified and growing business. As we said, our extensive global footprint already reaches more than a billion patients every year.

Now on to the results for the quarter. Our second quarter results demonstrate the power of what our portfolio can deliver. Operational revenue grew for the fifth consecutive quarter, up approximately 2%. This performance also carried through to adjusted EBITDA and adjusted EPS, growing approximately 2% and 3% respectively. We also generated significant free cash flow of $426 million in the quarter, which was in line with our expectations. This excluded transaction costs and taxes from the divestiture.

Doretta Mistras: Our second quarter results demonstrate the power of what our portfolio can deliver. Operational revenue grew for the fifth consecutive quarter, up approximately 2%. This performance also carried through to EBITDA and adjusted EPS, growing approximately 2% and 3% respectively. We also generated significant free cash flow of $426 million in the quarter, which was in line with our expectations. This excluded transaction costs and taxes from the divestiture.

Doretta Mistras: Let's move on to discuss the performance of our base business, which grew, operationally, on a year-over-year net sales basis. Boat Generics, and Brands grew this quarter, up approximately 2%. The growth of our base business included new product revenue that was exceptionally strong, with $210 million in the quarter. The year-to-date performance and outlook give us confidence to increase our expectation for the year to a range of $500 to $600 million. This quarter, all of our segments grew operationally, versus the prior year.

Doretta Mistras: In developed markets, net sales grew 1% and were driven by strong new product performance, including contributions from BREYNA, LISDEXAMFETAMINE, and other generics in North America and Europe. In Europe, we are seeing durable growth across our diversified business. This is as a result of portfolio breadth across brands and generics, well-developed market positions, and strong performance in key countries such as France. In North America, we saw continued growth in generics, which was up over 3% versus the prior year.

Doretta Mistras: The portfolio is benefiting from complex products such as WIXELA and BREYNA. And within our brand's business, net sales continued to be impacted by increased Medicaid utilization and certain non-promoted brands, as well as lower EPIPEN volumes resulting from formulary changes in the previous quarter. In Greater China, net sales growth was approximately 5% over the prior year.

The portfolio is benefiting from complex products such as WIXELA and BREYNA. And within our brand's business, net sales continued to be impacted by increased Medicaid utilization and certain non-promoted brands, as well as lower EPIPEN volumes resulting from formulary changes in the previous quarter.

In Greater China, net sales growth was approximately 5% over the prior year. This was as a result of strong demand across multiple channels in China, including e-commerce, retail, and private hospitals. In emerging markets, net sales grew 7%, driven by the expansion of our cardiovascular portfolio and certain Latin-American countries, as well as strength in our MENA and the Eurasia region. These benefits help to absorb the ongoing impact of the therapy shifts in the ARV market.

Doretta Mistras: This was as a result of strong demand across multiple channels in China, including e-commerce, retail, and private hospitals. In emerging markets, net sales grew 7%, driven by the expansion of our cardiovascular portfolio and certain Latin-American countries, as well as strength in Armenia and the Eurasia region.

Doretta Mistras: These benefits help to absorb the ongoing impact of the therapy shifts in the market. And lastly, Jans grew approximately 1% over the prior year, benefiting from new products in Australia and volume growth of our promoted brands in Japan. This served to offset the impact of government price regulations in these countries.

These benefits help to absorb the ongoing impact of the therapy shifts in the market.

And lastly, JANZ grew approximately 1% over the prior year, benefiting from new products in Australia and volume growth of our promoted brands in Japan. This served to offset the impact of government price regulations in these countries.

Doretta Mistras: Turning to the PNL and free cash flow, this quarter serves as another demonstration of our financial strength and ability to generate significant free cash flow. Our segment and product mix led to a stable adjusted growth margin. The performance was in line with our expectations of approximately 58%. With respect to operating expenses, we are continuing to invest behind the business to fund our growth, which includes investments across segments, eye care, and in R&D. Free cash flow for the quarter was primarily impacted by lower adjusted EBITDA due to the closing of divestitures.

Doretta Mistras: Our free cash flow and existing cash on hand allowed us to strengthen our balance sheet with a debt paydown of approximately $800 million in the quarter. And as we look towards the rest of the year, we expect to have an excess of $3 billion in cash available for deployment. This takes into account divestiture proceeds received in the third quarter, expected divestiture costs, and our latest outlook for free cash flow. We expect the significant financial flexibility will allow us to pay down additional debt to reach our long-term growth leverage target of approximately three times by the end of the year. We also expect to return capital in the form of dividends and will remain opportunistic with a potential share of purchases and business development activities.

Doretta Mistras: Let's move on to items related to our financial guidance and key metrics for the remainder of the year. We expect our strong momentum to continue, and as a result, we expect operational revenue growth of approximately 2% versus 2023 and stable adjusted EBITDA and adjusted EPS. Our expectation for the year is to be at the midpoint of the estimated guidance ranges. The assumptions driving total revenue growth include continued growth in developed and emerging markets and better-than-expected performance in Greater China and JANZ, and new product revenue of $500 million to $600 million as a result of the strong uptake of generic launches and additional new products.

Doretta Mistras: We are adjusting the following metrics across the P&L. Increased and adjusted growth margin range due to better segment mix, and SG&A as a percentage of revenue is expected to be higher. This reflects the reduction in total revenues from the investors and the impact of the synergies and costs of providing transition services. We expect certain costs associated with performing the transition services to be included in operating expenses. The Transition Income is expected to be recorded in non-operating other income.

Doretta Mistras: A few comments on anticipated phasing for the third and fourth quarters. Total revenue is expected to be slightly higher in the third quarter, mainly due to normal product seasonality. And adjusted growth margin is expected to moderate in the fourth quarter, given a normal product and segment mix. Taking these factors into consideration, we expect adjusted EBITDA, adjusted EPS, and free cash flow to be higher in the third quarter. To summarize, the results for the quarter demonstrate our solid fundamentals, including our diversified and growing based business and our consistent, significant free cash flow generation.

A few comments on anticipated phasing for the third and fourth quarters. Total revenue is expected to be slightly higher in the third quarter, mainly due to normal product seasonality. And adjusted growth margin is expected to moderate in the fourth quarter, given a normal product and segment mix. Taking these factors into consideration, we expect adjusted EBITDA, adjusted EPS, and free cash flow to be higher in the third quarter. To summarize, the results for the quarter demonstrate our solid fundamentals, including our diversified and growing based business and our consistent, significant free cash flow generation. We are well-positioned for a strong second half of the year, and expect to deliver on our capital allocation framework in support of the vision Scott laid out at the top of this call. And with that, I'll hand it back to the operator to begin the Q&A.

To summarize, the results for the quarter demonstrate our solid fundamentals, including our diversified and growing based business and our consistent, significant free cash flow generation.

Doretta Mistras: We are well-positioned for a strong second half of the year, and we expect to deliver on our capital allocation framework in support of the vision Scott laid out at the top of this call. And with that, I'll hand it back to the operator to begin the Q&A.

And with that, I'll hand it back to the operator to begin the Q&A.

Operator: Ladies and gentlemen, at this time, we will begin the question and answer session. To ask a question, you may press star and then 1 on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

Operator: [Operator Instructions] And our first question today comes from Ash Verma from UBS, please, go ahead with your question.

I will now turn the call to Doretta.

Ash Verma: Good morning. Thanks for taking our questions. Congratulations on all the progress. So, I wanted to talk about 2025 dynamics a little bit. So I think the $2.3 billion free cash flow guide that you provided previously, what does that translate into EBITDA? Like, if you look at the run rate that you've had, sort of in the difference between EBITDA and free cash flow, it will roughly translate to $4.5 billion, to $4.6 billion. Is that something that you would be comfortable with?

Ash Verma: So I wanted to talk about 2025 dynamics a little bit. So I think the 2.3 billion free cash flow guide that you provided previously, what does that translate into EBITDA? Like, if you look at the run rate that you've had, sort of in the difference between EBITDA and free cash flow, it will roughly translate to 4.5, 4.5 to 4.6 billion. Is that something that you would be comfortable with?

Ash Verma: And then secondly, on new product revenues, so yeah, that's good to see you raising the guide there. Just what's driving that? Is that primarily the benefit that you saw from BREYNA? Or are there more products that you think that you're benefiting from? Thanks.

Scott Andrew Smith: Thank you, Ash. And good morning. Thank you very much for the question. Sort of two parts here, right, talking about new product revenue, which is very important as we move forward here. And we're very strong, as we saw in the second quarter, and we're expecting full year very strong new product revenue. And then also some 25' dynamics. I'll turn it over to Doretta to take those two for you. I will now turn the call to Doretta.

Doretta Mistras: Thank you, Philippe, and good morning, everyone. To echo the comments from the team, we had a strong quarter, and I want to spend some time walking through the highlights. But before I dive into the details, I want to take a moment to expand on our financial strength and how we think about it in the context of our overall strategy. First, we have built an extensive global footprint that already enables us to reach over 1 billion patients annually.

Scott Smith: Thank you very much for the question. There are sort of two parts here, right, talking about new product revenue, which is very important as we move forward here. And we're very strong, as we saw in the second quarter, and we're expecting full year very strong new product revenue.

Doretta Mistras: Great, thanks. Thanks, Ash. So yes, on new products, to your point, we feel great about the momentum we've seen from the new product perspective this year. This quarter, we did 210 million, and then when you add that to the 154 million that we did in the first quarter, already year to date, we're at 354 million. And so, that in addition to the momentum that we're seeing broadly across our new product portfolio, and it really isn't dependent on one product, one region, We've seen growth. To your point in BREYNA and with LISDEXAMFETAMINE.

Theodora Mistras: Great, thanks. Thanks, Ash. So yes, on new products, to your point, we feel great about the momentum we've seen from the new product perspective this year. This quarter, we did 210 million, and then when you add that to the 154 million that we did in the first quarter, already year to date, we're at 354 million. And so, that in addition to the momentum that we're seeing broadly across our new product portfolio, and it really isn't dependent on one product, one region, we've seen growth.

To your point in BREYNA and LISDEXAMFETAMINE. We've also seen growth in other generics in North America, but we've also seen new products in Europe and some additions in emerging markets in JANZ. So, as we look for the full year, the strong performance and the continuation of that really are going to be largely driven by products that we've already launched here to date. And that's what gives us confidence in the $500 million to $600 million for the year. With respect to '25 dynamics, it's still early. We feel good about the momentum that we're seeing thus far in 2024. We see kind of the stability of our revenue growth. We are going to continue to invest in our business from our kind of R&D and investment perspective to fuel our growth, but the kind of dynamics in terms of what we've seen from our free cash flow, we kind of continue to see the $2.3 billion that you mentioned in terms of free cash flow generation. And we're going to continue to kind of focus on our EBITDA conversion going forward, but with respect to '25, I think it's still too early to get into the dynamics specific to '25.

Operator: Our next question comes from Chris Schott from JP Morgan. Please, go ahead with your question.

Doretta Mistras: So yes, on new products. To your point, we feel great about the momentum. We've seen from the new product perspective this year. This quarter, we did 210 million, and then when you add that to the 154 million that we did in the first quarter, already year to date, we're at 354 million, and so that is in addition to the momentum that we're seeing broadly across our new product portfolio, and it really isn't dependent on one product, one region. We've seen growth to your point in Braena and with Dexamphetamine.

With respect to '25 dynamics, it's still early. We feel good about the momentum that we're seeing thus far in 2024. We see kind of the stability of our revenue growth. We are going to continue to invest in our business from our kind of R&D and investment perspective to fuel our growth, but the kind of dynamics in terms of what we've seen from our free cash flow, we kind of continue to see the $2.3 billion that you mentioned in terms of free cash flow generation. And we're going to continue to kind of focus on our EBITDA conversion going forward, but with respect to '25, I think it's still too early to get into the dynamics specific to '25.

Doretta Mistras: We've also seen growth in other generics in North America, but we've also seen new products in Europe and some additions in emerging markets in Jan, so as we look for the full year, the strong performance and the continuation of that really are going to be largely driven by products that we've already launched here to date. And that's what gives us confidence in the 500 to 600 million for the year. With respect to 25 dynamics, it's still early.

Doretta Mistras: We feel good about the momentum that we're seeing so far in 2024. Kind of the stability of our revenue growth. We are going to continue to invest in our business from our kind of R&D and investment perspective to fuel our growth, but the kind of dynamics in terms of what we've seen from our free cash flow, we kind of continue to see the 2.3 billion that you mentioned in terms of free cash flow generation. And we're going to continue to kind of focus on our EBITDA conversion going forward, but with respect to 25, I think it's still too early to get into the dynamics specific to 25.

Ekaterina Knyazkova: Hey, thank you so much. This is Ekaterina on for Chris, and thank you for taking our questions. I'll start with a bigger picture one, if I may. So just given that you're now done with the divestiture process, can you maybe talk about how you think about the longer-term profile of the company, both from a margin standpoint and a top-line standpoint, and I guess where you see the most opportunity for the business from here? And then, second question, just on business development. I think you've touched upon this in your prepared remarks, but just what's your latest thinking in terms of business development and balancing development stage and commercial stage deals? And just what do you think makes the most sense for the company, and maybe where you're seeing more interesting opportunities?

And then, second question, just on business development. I think you've touched upon this in your prepared remarks, but just what's your latest thinking in terms of business development and balancing development stage and commercial stage deals? And just what do you think makes the most sense for the company, and maybe where you're seeing more interesting opportunities? Thank you.

Ekaterina Knyazkova: I'll start with a bigger picture one, if I may. So just given that you're now done with the divestiture process, can you maybe talk about how you think about the longer-term profile of the company, both from a margin standpoint and a top-line standpoint, and I guess where you see the most opportunity for the business from here? And then, second question, just on business development. I think you touched upon this in your prepared remarks, but just what's your latest thinking in terms of business development and balancing development stage and commercial stage deals? And just what do you think makes the most sense for the company, and maybe where you're seeing more interesting opportunities?

Scott Smith: Thank you.

Scott Andrew Smith: Yeah, thank you very much, Ekaterina, for the question. Again, I'll maybe address the second one first. From a BD perspective, we're engaged in a lot of different discussions, and we're going to take a disciplined approach. As we got through the divestitures, sort of the net effect of that is that we're going to get to, we've got line of sight and paid down our debt going into '25. And executing on our capital allocation plan 100%, where we're giving back to shareholders at least $2.3 billion in free cash flow through dividends and share buybacks, but also taking a disciplined approach to business development.

Scott Smith: We've got a diversified company in terms of the number of therapeutic areas that we're in, we're looking at a number of different assets, we're looking at things that can help us supercharge our growth as we get into '25 and beyond. It's very important to understand that the base business is solid. The base business we're showing operational growth. And on top of that, we want to add what I would consider significantly de-risked assets from an innovative perspective, assets that can help us drive growth in the future, that are focused on unmet medical needs, and have long runways that we can invest in. But we're also going to shore up our base business as well.

Scott Smith: But we're also going to shore up our base business as well. We're going to look for things currently marketed in different, particularly in particular geographies that we can be effective in. And so we're going to do business development to shore up the base. And we're also going to do business development to bring in new, innovative assets.

But we're also going to shore up our base business as well.

We're going to look for things currently marketed in different, particularly in particular geographies that we can be effective in. And so, we're going to do business development to shore up the base. And we're also going to do business development to bring in new innovative assets into the company.

Operator: Our next question comes from David Amsellem from Piper Sandler. Please, go ahead with your question.

David A. Amsellem: Hey, thanks. So just a couple for me, and I apologize if you addressed this since I joined late. Can you talk about overall innovative brand strategy? I mean, you did an important in licensing earlier this year. I guess my question here is how aggressive do you want to be regarding adding innovative brands in the U.S. and developed markets, broadly speaking? So that's number one. Number two, can you just talk generally about complex generics and how we should think about contribution from complex products or new launches as we move through '25? It might be a little bit early to think about that, but I wanted to get a sense of what key launches on the complex front that you're flagging or should flag. Thanks.

Scott Andrew Smith: Thanks, David. I think you used the language, how aggressive we want to be from a BD perspective. I think what we want to be is we want to be disciplined. There are--we're engaged with a lot of companies; there's a lot of inbound that we've got, both for things to help build the base business and in new, innovative assets that we can take forward. And so, we're carefully looking at them all.

Scott Smith: We're really looking forward to getting into '25, where we've got more capital to apply from a business development perspective. We want to build a pipeline of assets. You mentioned that we already did a deal in-license, SELATOGREL and CENERIMOD, two products, which can be very, very important to us. And we fully expect, either later in '24, as we get into '25, '26, to continue to add assets to the pipeline, both again, to shore up and accelerate the growth that we're seeing in the base business. And secondly, to add to the innovative portfolio. We plan on doing both. And I would say we want to do it in a smart and disciplined way. Philippe?

Philippe Martin: Yes, regarding complex generics, I think we, as you can see on this presentation that we provided, we have over 250 products in the pipeline that are either under development or under regulatory review. So, we think we'll be--we know we'll have a steady flow of complex generics coming in every year, this year and 2025 and so on. So, we feel confident about our complex generic pipeline.

Operator: [Operator Instructions] Our next question comes from Umer Raffat from Evercore. Please, go ahead with your question.

Umer Raffat: Hi guys, thanks for taking my question. I have a two-part question on just broad investments. First, perhaps on GLP-1. Scott, I'm curious, what are your GLP-1 aspirations? What's the capacity now? And what type of CAPEX investments are you or are you not looking to make? Just thinking about that out loud.

Umer Raffat: And also, part two was the investment in CENERIMOD and Lupus. I'm curious how you guys are thinking about that in light of some really groundbreaking data we're seeing with CD19 CAR-Ts and, presumably, with bi-specifics as well. And how do you put that in perspective relative to what we know about CENERIMOD? That would be very helpful. And then finally, I think the prior question was on what your complex generics in '25 are? I don't think--maybe I misheard. What are the complex generics in '25 launches?

Scott Smith: So, thanks for the rough question, and we're sort of three parts there, right, to a complex generic CENERIMOD and how that fits into the therapeutic landscape. As we move forward here in advances have been made in Lupus, but I think highly differentiated relative to the CAR-T constructs and bi-specifics and other things. And then just a little bit on the overall GLP1 strategy. So, I'll kick it over to Philippe from a pipeline and R&D perspective to address those questions. Philippe? Yes, from a GLP-1 point of view,

Scott Andrew Smith: So, thanks for the rough question, and we're sort of three parts there, right, to a complex generic CENERIMOD and how that fits into the therapeutic landscape. As we move forward here in advances have been made in Lupus, but I think highly differentiated relative to the CAR-T constructs and bi-specifics and other things. And then just a little bit on the overall GLP1 strategy. So, I'll kick it over to Philippe from a pipeline and R&D perspective to address those questions. Philippe?

Philippe Martin: Yes, from a GLP-1 point of view, we're looking at developing multiple GLP-1s, SEMAGLUTIDE as well as LIRAGLUTIDE, as well as MOUNJARO. So, we're deep into the development of these assets from a supply chain standpoint, as you know. The supply chain can be a little tight, but we've secured a supply of API for all these assets and certainly have invested in our capability to manufacture these drugs going forward. So, we anticipate we'll have a significant role going forward in the GLP-1 market.

Philippe Martin: So from a GLP-1 point of view, we are looking at developing multiple GLP-1s, semaglutide as well as liraglutide, as well as manjaro. And we're deep into the development of these assets from a supply chain standpoint, as you know. The supply chain can be a little tight, but we've secured a supply of API for all these assets and certainly have invested in our capability to manufacture these drugs going forward. So we anticipate we'll have a significant role going forward in the GLP-1 market.

Philippe Martin: Regarding CENERIMOD, I think if you were to compare CENERIMOD benefit-risk profile versus the one we anticipate from the CAR-T or the bi-specific, you'd see that we anticipate it to be in the higher end of efficacy with a safety profile that is clearly differentiated. CAR-Ts and bi-specifics typically have significant safety baggage. And so, we anticipate our benefit-risk profile will be very different, which will allow us to be placed prior to the use of either a bi-specific, biologics, or CAR-Ts going forward. And I'm not even talking about the convenience factor of having an oral drug versus these CAR-Ts, that can be quite difficult to administer.

Philippe Martin: And then on the last one, on the complex generic, I think I wouldn't highlight one specific product. I think it's the breadth of the pipeline that we have that we see will be delivered this year, for the rest of the year, '25, '26. So, we feel very confident in our new product revenue, as you can see, and we anticipate the same going forward.

Operator: Our next question comes from Balaji Prasad from Barclays. Please, go ahead with your question.

Balaji V. Prasad: Thank you. Hi, good morning, and congratulations on the quarter. I have a couple of questions from me. Could you comment on the magnitude of the expected base business erosion from government price regulations in Japan and Australia? I presume in Japan it's the annual price cuts, or are there any other dynamics at play? Second, could you comment around the split between the innovative pipeline and the non-inventive pipeline currently? And with improvement cash metrics, how do you see the spend on innovative R&D progressing into the next couple of years? Or do you intend to keep it at a similar percentage? Thanks.

Balaji Prasad: Could you comment on the magnitude of the expected base business erosion from government price regulations in Japan and Australia? I presume in Japan it's the annual price cuts, or are there any other dynamics at play? Second, could you comment on the split between the innovative pipeline and the non-inventive pipeline currently, and with implementing cash metrics, how do you see the spend on innovative R&D progressing over the next couple of years, or do you intend to keep it at a similar percentage?

Scott Andrew Smith: Thank you very much, Balaji. I'll take the first question over to Doretta to talk about the dynamics that we're seeing in Australia, Japan, etc.

Doretta Mistras: To your point, Balaji, we aren't seeing anything, it really is driven by the ongoing price, normal government price declines that we're seeing in Japan and Australia. Now the offset to that is we actually have seen better volume in Japan as well, and given that Japan and the broader JANZ region is actually performing better than our expectations for the year. Enrol too.

Theodora Mistras: To your point, Balaji, we aren't seeing anything, it really is driven by the ongoing price, normal government price declines that we're seeing in Japan and Australia. Now the offset to that is we actually have seen better volume in Japan as well, and given that Japan and the broader JANZ region is actually performing better than our expectations for the year.

And relative to your question on R&D spend and where we're going from an R&D perspective, maybe I'll make a general comment and Philippe you can comment as well here. But we're going to continue to invest in both the base business, the base genetics, complex generics and others, and in the innovative pipeline, we've already talked about here a couple of new innovative assets through our business development activities, through the global healthcare gateway and others, we're going to continue to bring in assets, continue to develop them. So, you might see some movement of distribution of that spend as we bring in more innovative assets. But we're going to continue to invest in all components of the base business and the new innovative assets as we move forward. Okay, thank you.

Scott Smith: And we're also two years of question on where we're going from an R&D perspective, maybe I'll make a general comment if you can comment as well here, but we're going to continue to invest in both the base business, the base genetics, complex generics and others, and in the innovative pipeline, we've already talked about here a couple of new innovative assets, you know, through our business development activities, through the global healthcare gateway and others, we're going to continue to bring in assets, continue to develop them so you might see some movement of distribution of that spend as we bring in more innovative assets, but, you know, we're going to continue to invest in all components of the base business and the new innovative assets. Okay, thank you.

Balaji V. Prasad: Okay, thank you.

Operator: Our next question comes from Jason Gerberry from Bank of America. Please, go ahead with your question.

Bhavna Patel: Hey guys, this is Bhavna Patel on for Jason Gerberry. My first question is, can you approximate the full year 2024 EBITDA contribution from divestitures that provided partial first half 2024 contribution? Just so that we can understand the RemainCo business profile and model appropriately headed into 2025 and onwards. And then my second question is, given all the changes in the portfolio, relative to reported financial results in 2022 and 2023, do you see low 30% EBITDA margins, similar to certain peers like Organon, as a good long-run assumption, pending any breakthroughs on the pipeline side of course. And with regard to your pipeline, is there a timeline update based on new enrollment strategies for the Phase III SELATOGREL SOS-AMI trial? Thank you.

Scott Smith: So I'll thank you very much for the question. I'll ask Doretta to address the first part of your question, and then I'll talk about the SELATOGREL and CENERIMOD later. Thanks a lot, everyone. And thank you very much. Great, thank you and on the on the divestitures I think as we've laid it out when we started the year The way we've approached it is, as we close the divestitures, we've adjusted and taken out the kind of impact from our, and provided the impact from our actuals, and then also adjusted our guidance going forward to reflect those divestitures, and we'll continue to do that, kind of, now that the divestitures are behind us, as we get through the back half of the year, and we look into 25, we will be providing that additional kind of detail as we move into the rest of the year, but as we had in our earnings presentation and our press release, we do lay out the components of both the divestitures that have closed, as well as the impact to our guidance and our results. With respect to margins, I mean, I think... As we think about the business, we have confidence in both our base business growth as well as the stability of our EBITDA margins as we continue to invest in growth.

Scott Andrew Smith: So I'll thank you very much for the question. I'll ask Doretta to address the first part of your question, and then I'll talk about the SELATOGREL and CENERIMOD later.

Theodora Mistras: Great, thank you. And on the divestitures, I think as we've laid it out when we started the year, the way we've approached it is, as we close the divestitures, we've adjusted and taken out the kind of impact from our--and provided the impact from our actuals, and then also adjusted our guidance going forward to reflect those divestitures. And we'll continue to do that, kind of, now that the divestitures are behind us, as we get through the back half of the year, and we look into '25. We will be providing that additional kind of detail as we move into the rest of the year. But as we had in our earnings presentation and our press release, we do lay out the components of both the divestitures that have closed, as well as the impact to our guidance and our results. With respect to margins, I mean, I think as we think about the business, we have confidence in both our base business growth as well as the stability of our EBITDA margins as we continue to invest in growth.

Doretta Mistras: Great, thank you and on the on the divestitures I think as we've laid it out when we started the year The way we've approached it is, as we close the divestitures, we've adjusted and taken out the kind of impact from our, and provided the impact from our actuals, and then also adjusted our guidance going forward to reflect those divestitures, and we'll continue to do that, kind of, now that the divestitures are behind us, as we get through the back half of the year, and we look into 25, we will be providing that additional kind of detail as we move into the rest of the year, but as we had in our earnings presentation and our press release, we do lay out the components of both the divestitures that have closed, as well as the impact to our guidance and our results. With respect to margins, I mean, I think... As we think about the business, we have confidence in both our base business growth as well as the stability of our EBITDA margins as we continue to invest in growth.

Doretta Mistras: But as Scott laid out, as we continue to invest in the business, and bring in more patent-protected, innovative assets, we have the opportunity to continue to expand the business. But I think we feel good about the stability of our EBITDA.

Scott Smith: And then, relative to pipeline acceleration on innovative assets, I'll say that we're very, very excited about both SELATOGREL and CENERIMOD. As I said in my prepared remarks, we're already making significant progress in doing the things we need to do to accelerate the development of these assets and move the timelines forward. I don't have a specific update for you on that date. We want to get in and do some remediation further, continue to open new sites, continue to invest in the development, and then by the time we get into the new year, we'll be able to be in a better position to give you sort of specifics on where we think those timelines are going. But we think we're going to be significantly able to help and accelerate the development timelines. And again, we'll look to update those timelines as we get into the new year.

And then, relative to pipeline acceleration on innovative assets, I'll say that we're very, very excited about both SELATOGREL and CENERIMOD. As I said in my prepared remarks, we're already making significant progress in doing the things we need to do to accelerate the development of these assets and move the timelines forward. I don't have a specific update for you on that date.

Scott Andrew Smith: And then, relative to pipeline acceleration on innovative assets, I'll say that we're very, very excited about both SELATOGREL and CENERIMOD. As I said in my prepared remarks, we're already making significant progress in doing the things we need to do to accelerate the development of these assets and move the timelines forward.

I don't have a specific update for you on that date. We want to get in and do some remediation further, continue to open new sites, continue to invest in the development, and then by the time we get into the new year, we'll be able to be in a better position to give you sort of specifics on where we think those timelines are going. But we think we're going to be significantly be able to help and accelerate the development timelines. And again, we'll look to update those timelines as we get into '25.

We want to get in and do some remediation further, continue to open new sites, continue to invest in the development, and then by the time we get into the new year, we'll be able to be in a better position to give you sort of specifics on where we think those timelines are going. But we think we're going to be significantly able to help and accelerate the development timelines. And again, we'll look to update those timelines as we get into the new year.

Operator: And Ladies and Gentlemen, with that, we'll conclude today's question and answer session. I'd like to turn the floor back over to Scott Smith, CEO, for closing.

Scott Andrew Smith: Thank you, everybody. And thank you to the operator. In closing, it's been a great year for us so far with the completion of our divestitures in July. We're the turning point for the company. We have built a strong foundation, we have a bold vision for our future, and we have the key ingredients we need to be successful to deliver on our goals. Thank you all very much for your attention.

Operator: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

As we move forward, we will focus on three strategic pillars. First, our diversified and growing based business. As we said, our extensive global footprint already reaches more than 1 billion patients every year. Our continued success in this part of our business comes from our large and diversified portfolio of generics and off-patent brands that extends across markets in therapeutic areas. Here, we have a clear legacy of deep product knowledge and extensive commercialization and development expertise.

Scott Smith: Our continued success in this part of our business comes from our large and diversified portfolio of engineers and off-batten brands that extends across markets in therapy to Gary. Here we have a clear legacy of deep product knowledge and extensive commercialization and development.

good morning everyone and welcome to the veatrice q two two thousand and twenty four earnings call all participants will be in listen only mo shouldo assistant please see conference specialist by pressing the start e followed by zo

Unknown Executive: All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Bill Szablewski, Head of Investor Relations and Capital Markets.

Speaker Change: After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star and then one. To withdraw your question, you may press star and two.

Please also note today's event is being recorded.

Bill Szablewski: At this time I'd like to turn the floor over to Bill Szablewski, Head of Investor Relations and Capital Markets.

Speaker Change: Please go ahead.

Bill Szablewski: Good morning, everyone.

Speaker Change: Welcome to our Q2 2024 Earnings Call. With us today is our CEO Scott Smith, CFO Doretta Mistras, Chief R&D Officer Philippe Martin, and Chief Commercial Officer Karine LeGoff.

Unknown Executive: During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2024 and various strategic initiatives. When discussing 2024 results, we make concerned comparisons to 2023 results on a divestiture-adjusted operational basis when discussing our expectations for 2024.

Speaker Change: During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2024 and various strategic initiatives.

Bill Szablewski: These statements are subject to risk and uncertainties.

we also referring to certain actual and projected non-gaap financial measures

Speaker Change: Please refer to today's slide presentation and our SEC filings for more information, including reconciliations of those non-GAAP measures to the most directly comparable GAAP measures.

Speaker Change: when discussing two thousand and twenty-four results we make concercertain comparison to two thousand and twentythree sults on a divestiture adjusted operational basis

Speaker Change: which excludes the impact of foreign currency rates and also excludes the proportionate results from the divestitures that closed in two thousand and twenty-four and two thousand and twenty-three from the two thousand and twenty- three period

Speaker Change: When discussing our expectations for 2024.

Speaker Change: We'll be making certain comparisons to 2024 results on a divestiture-adjusted operational basis.

Speaker Change: Which excludes the impact of foreign currency rates, and also excludes from guidance the results from the date of closing until the end of the period of the divestitures that closed in 2024. With that, I'll hand the call over to our CEO , Scott Smith.

Scott Smith: Good morning, everyone, and welcome to our second quarter earnings call.

Scott Smith: i'm pleased to announce we reported another strong quarter our fifth consecutive quarter of operational revenue growth

Scott Smith: We've had a great start to 2024, and with the completion of our divestitures in July, we are now an important inflection point for our company.

Unknown Executive: Four years ago, Viatris embarked on a journey to build a new kind of healthcare. By combining Mylan, a strong global generics company, and Upjohn, a division of Pfizer with 20 of the most iconic off-patent brands, our goal was to build a unique global pharmaceutical company with the scale to bring patients access to high-quality medicines worldwide.

viatrice: four years ago of viatrice embarked on ajourney to build a new kind of health care company

Speaker Change: by combining mlan a strong global genericss company and upjohn a division viser with twenty of the most iconic off-patent brands our goal was to build aunique global pharmaceutical company with the scale to bring patients access to high-quality medicines worldwide

Unknown Executive: The team has done an outstanding job of executing the plan that was laid out when the two companies were brought together. Among the many accomplishments we have achieved, integrated two global companies, simplified and streamlined the business by completing our divestitures, returned the base business to growth, strengthened our balance sheet through significant debt pay-down, returned capital to shareholders through dividends and share repurchases, and importantly, we've already started to build our portfolio of innovative assets.

viatrice: The team has done an outstanding job of executing the plan that was laid out when the two companies were brought together.

viatrice: among the many accomplishments we have integrated two global companies

Speaker Change: Simplified and streamlined the business by completing our divestitures, returned the base business to growth, strengthened our balance sheet through significant debt pay down, returned capital to shareholders through dividends and share repurchases, and importantly, we've already started to build our portfolio of innovative assets.

Unknown Executive: As we move forward in the second half of the year and beyond, we want to accelerate growth and shareholder return by building on the strength of our base business with an expanding portfolio of innovative, best-in-class, patent-protected assets that have the potential for meaningful revenue growth and patient outcomes. An extensive global footprint that reaches 1 billion patients annually. As we move forward, we will focus on three strategic pillars. Here we have a clear legacy of deep product knowledge and extensive commercialization and development. By expanding our innovative portfolio, we have the potential to drive accelerated and durable revenue growth. Adjusted EBITDA was $1.2 billion, and it was growing approximately 2% from a year ago.

viatrice: As we move forward in the second half of the year and beyond, we want to accelerate growth and shareholder return by building on the strength of our base business with an expanding portfolio of innovative, best-in-class, patent-protected assets that have the potential for meaningful revenue growth and patient impact.

viatrice: I believe we have all the components necessary to successfully execute our vision, including

viatrice: An extensive global footprint that reaches 1 billion patients annually.

viatrice: globally integrated company with deep capability to manufacturing medical and regulatory afirs and commercialization

viatrice: a robust development engine across a number of therapeutic areas

viatrice: Sector leading cash flow generation from our base business to fund our vision and continue returning capital to shareholders.

viatrice: and we have added new skills new capabilities in new areas of expertise to our already strong and talented excut leadership team

Speaker Change: red mistress our chief financial officer philitete martin our chief ourne officer and kla gofff chief commercial officer joined the team within the last year and are on today's call

Speaker Change: All the great work over the last several years has put the company in a position to deliver on our future vision.

viatrice: yeah

viatrice: as we move forward we will focus on three strategic pillars

viatrice: First, our diversified and growing-based business.

Speaker Change: As we've said, our extensive global footprint already reaches more than a billion patients every year. Our continued success in this part of our business comes from our large and diversified portfolio of generics and off-patent brands that extends across markets and therapeutic areas.

viatrice: Here, we have a clear legacy of deep product knowledge and extensive commercialization and development expertise.

viatrice: Second, our financial strength and significant cash flow. Our strong balance sheet and sector-leading cash flow generation differentiate us from our peers. We continue to deliver on our financial commitments, including debt reduction and returning capital to shareholders through dividends and share repurchases.

viatrice: With divestiture proceeds now in hand, we have a clear line of sight to meet our long-term leverage target.

viatrice: And third, our expanding innovative portfolio.

viatrice: This area represents an increasing focus on efforts to identify, vet, and secure best-in-class patented assets.

viatrice: We are looking for assets that target significant unmet medical need in areas in which the company can be successful.

viatrice: By expanding our innovative portfolio, we have the potential to drive accelerated and durable revenue growth.

viatrice: as you know we've already made disciplined investments in innovative assets and cardiovasa disease mmunology with satroth in scenarmont we are making significant progress and accelerating the development of these assets

viatrice: Additional leadership and scientific expertise we have brought in along with the impressive core of competencies in key areas such as global manufacturing, medical affairs, regulatory, legal, and commercialization will all drive the success of this innovative portfolio.

viatrice: we are already making progress on these three pillars as eviden by our strong results this quarter

viatrice: i am pleased to report that in the second quarter we delivered

viatrice: Total revenues of $3.8 billion dollars and operational revenue growth of approximately 2%.

viatrice: adjusted ebitda was one point two billion dollars and growing approximately two percent from a year ago

viatrice: Adjusted EPS was $0.69 per share.

viatrice: second quarter free cash flow was four hundred twenty-six million dollars excluding the impact of transaction costs

viatrice: cess

viatrice: It is important to note that we deliver new product revenue of $210 million in the quarter.

viatrice: With a strong second quarter results, we see momentum heading into the second half.

viatrice: As a result, we continue to expect 2024 year-over-year operational revenue growth of 2% and are raising our expected 2024 new product revenue range to $500 to $600 million.

grren: now i'd like to turn the call over to grren to share some of her observations from her first few months of the interest

viatrice: geran

grren: Thank you Scott. I have been with the company for about four months now and based on what I've seen, I'm very excited about the opportunity ahead of us. I would like to share a few observations as I've gotten to know the Global Commercial Organization.

Speaker Change: Our strong performance is a result of many puts and takes that only the diversity and the strength of our portfolio across geographies can allow.

viatrice: our global commercial footprint is extensive we have a presence in one hundred sixty-five countries in territories which is an incredible platform to leterage as we continue to grow our base business and expand our innovative portfolio

Unknown Executive: We have broad knowledge across many therapeutic areas, and many of our branded and generic products are today's standards of care all over the world. Finally, I love what I'm seeing in our teams. I am impressed with the agility and efficiency of the commercial organization. And I also see incredible energy, an entrepreneurial spirit, and proactivity to seize opportunities and make a difference in patients' lives.

viatrice: we have a broad knowledge across many separic areas and many of our branded and generic products are today's standards of care all over the world

viatrice: This is a real differentiator as it demonstrates our unique ability to continue to drive volume and expand patient access at scale.

As we prepare for additional innovative opportunities, we have a lot to build from.

Speaker Change: for example if i think about ceatogrgrow we already leaders at risk ue and emergency medicines in cpd in asthma in an afyileaxis we have years of experience in educating patients to identify an attack and act in the moment

viatrice: Plus, we have deep expertise in cardiovascular with a portfolio that treats a very large patient population from severe risk factors to severe events like thrombosis, MI, and stroke.

Finally, I love what I'm seeing in our teams. I am impressed with the agility and efficiency of the commercial organization.

Speaker Change: and i also see incredible energy and forporttoal spirit and producttivity to seize opportunities and make a difference in patience lives

viatrice: I am excited to continue to work with the entire team at Viatris on the tremendous opportunities ahead.

Unknown Executive: Karan, your wealth of experience and global perspective have been invaluable as we continue to build the truly unique company we have envisioned.

viatrice: Thank you, Corinne. Your wealth of experience and global perspective have been invaluable as we continue to build the truly unique company we have envisioned.

Philippe Martin: Now I'd like to turn the call over to Philippe to talk about our approach to R&D, both our base business and our innovative portfolio.

Scott Smith: Scott, I share the team's excitement about where we are today and where we are headed. We anticipate a steady flow of core generics and an ever-increasing flow of complex generics in novel 505B2-like products. This foundation is especially critical as we expand our innovative portfolio. This includes having a validated mechanism of action, strong clinical proof of concept, and a clear path to regulatory approval. Zolatogrel has the potential to relieve the high disease burden of acute MI and specifically address the dire need for early intervention at the onset of symptoms.

Philippe Martin: Thanks, Scott. I share the team's excitement about where we are today and where we are headed.

Philippe Martin: I've had the opportunity to fully evaluate our R&D organization and further define our approach to innovation and growth.

our rnd strategyies is driven by our deep in-house develouppand capabilities

Philippe Martin: and two engines to feel our growth our baseed business pipeline in our innovative pipeline

viatrice: our base business pipeline provides viaties with the diverse in resilient growth engine

Speaker Change: We anticipate a steady flow of core generics and an ever-increasing flow of complex generics in novel 505B2-like products.

viatrice: the strong pipeline gives us confidence in achieving our new product revenue goals

our focus for innovative pipeline is on expanding our patent protected portfolio of assets to have the potential for meaningful patient impact and the ability to address significant unmet medical need

Speaker Change: i'm very impressed with the core competencies and talent we have adviaddress

in particular our strong preclinical clinical development and medical affair teams across multiple tiperic areas our experienced manufacturing and device teams of our wide range of dosa forms

and our proven regulatory, pharmacovigilance, legal and IP skills.

Speaker Change: this foundation is especially critical as we expand our innovative portfolio

We are identifying assets where we can leverage our expertise and global network and are assessing each opportunity based on specific criteria.

Speaker Change: we are looking for the aris innovative assets that address significant and medical need this includes having evaluated mechanism action a strong clinical proof of concept and a clear path to regulatory approval

The Lado Graal and Sin Air mode are two great examples.

Zlatogrel has the potential to relieve the high disease burden of acute MI and specifically address the dire need for early intervention at the onset of symptoms.

B2Y12 inhibition is a well-established target in the treatment of MI with multiple products approved for chronic treatment.

Our differentiated pharmacokinetic profile and unique mode of administration, together with our robust Phase II data, gives us high confidence in Seladogrel as a self-administrated emergency treatment for recurrent MI.

Scott Smith: Our comprehensive but simple phase 3 study, SOS-MI, has a special protocol assessment in place with the FDA and will receive fast-track designation. ScenarioMod, a novel S1P antagonist, has a unique mechanism of action targeting multiple aspects of lupus pathogens.

Our comprehensive but simple phase 3 study, SOS-MI, has a special protocol assessment in place with the FDA and receives fast-track designation.

Teneri Mode also has the potential to address a significant unmet medical need. SLE is a chronic and progressive autoimmune disease with limited treatment options and significant morbidity.

Senerimod, a novel S1P antagonist, has a unique mechanism of action targeting multiple aspects of lupus pathogenesis.

a robust proof of concept was achieving phase i with data showing a highly differentiated safety and efficacy profile it a murderate to cv patient population similar to the patient population we expect to an all in phase three

Scenario mode also has been granted fast-track designation by the FDA and we have three comprehensive phase 3 studies currently enrolling patients.

Philippe Martin: With Celadogrel and ScenarioMod now part of Viatris, we're able to leverage our global R&D network to accelerate clinical trial recruitment. We've already significantly increased the number of sites we are targeting for both programs, adding approximately 250 clinical sites. We've also significantly expanded the geographic footprint, adding key countries like China, India, and Japan to ensure a steady flow of patients. And we are pleased to announce that the Scenario-Mod Manuscript for the Phase II Care Study has been officially accepted for publication in the Lancet Rheumatology.

with the latgoal and scenario modenpart of theatrists we re able to leverage our global rin network to accelerate clinical trial recruitment

We've already significantly increased the number of sites we are targeting for both programs, adding approximately 250 clinical sites.

We've also significantly expanded the geographic footprint, adding key countries like China, India and Japan to ensure a steady flow of patients.

The team has been working hard to initiate these high-recruiting sites, and we anticipate that most sites should be able to recruit patients by the end of this year, early next year, which could shorten development timelines.

The Medical Affairs team is also working hard to deepen relationships with KOLs and increase scenario mods and silatogrel's presence at key medical meetings around the world like EHC, HACR, and APLR.

and we are pleased to announce that the scenariode manuscript for the phase two careast study has been officially excepted for publication in the landset room methology

another exciting innovative opportunity is with our iyecare pipeline and is the enrich ge film gene therapy technology we acquired as part of the oyster point acquisition which has the potential totreat to multitude of stoing deases

importantly this technology is not genomeidleading but rather it leverages normal our processes and proteins to deliver therapeutics to the teerfield

Our most advanced project called MR-146, intended for the treatment of neurotrophic gynecopathy or NK, is reaching the IND stage with a validated therapeutic target for this disease.

there has a significant andunmet medical need for patients with then -k to have a treatment that restores onial structure and neuoldgical function with minimal treatment burden

These examples from our expanding innovative portfolio combined with our robust based business pipeline energized me about the future and our ability to not only deliver on our vision but also to address significant medical needs.

Unknown Executive: Thank you, Philippe, and good morning, everyone. We've successfully stabilized the base business and expect it to be a source of growth. And today, we have a broad and diversified portfolio across markets and therapeutic areas. This excludes transaction costs and taxes from the divestiture.

I will now turn the call to Doretta.

Thank you, Philippe, and good morning, everyone. To echo the comments from the team, we reported a strong quarter, and I want to spend some time walking through the highlights.

But before I dive into the details, I want to take a moment to expand on our financial strengths and how we think about it in the context of our overall strategy.

first we have built an extensive global footprint that already enables us to reach over one billion patients annually

We've successfully stabilized the base business and expect it to be a source of growth. And today we have a broad and diversified portfolio across markets and therapeutic areas.

second we have a strong balance sheet we are committed to continuing to pay down debt and maintaining our investment grade rating and have a clear line of sight to reach our long-term growth leverage target this year

And finally, our ability to generate significant cash flow is sector-leading. This gives us the financial agility to fund our vision and continue returning capital to shareholders.

now onto the results for the quarter our second quarter results demonstrate the power of what our portfolio can deliver

Operational revenue grew for the 5th consecutive quarter, up approximately 2%. This performance also carried through to adjusted EBITDA and adjusted EPS, growing approximately 2 and 3% respectively.

we also generated significant free cash flow of four hundred twenty six million in the quarter which was in line with our expectations

This excluded transaction costs and taxes from the divestitures.

let's move on to discuss the performance of our base business which grew operationally on a year-over-year net sales basis

both generics and brands grew this quarter up approximately two percent

The growth of our base business included new product revenue that was exceptionally strong, with $210 million in the quarter.

Unknown Executive: The year-to-date performance and outlook give us confidence to increase our expectation for the year to a range of $500 to $600 million. In developed markets, net sales grew 1% and were driven by strong new product performance, including contributions from Braina, Lisdexamphetamine, and other generics in North America and Europe. In Europe, we are seeing durable growth across our diversified business. In emerging markets, net sales grew 7%, driven by the expansion of our cardiovascular portfolio in certain Latin American countries, as well as strength in our MENA and Eurasia regions. Our segment and product mix led to a stable adjusted growth margin. The performance was in line with our expectations of approximately 58%.

the year-to-date performance and outlook give us confidence to increase our expectation for the year to a range of five hundred to six hundred million

this quarter all of our segments grew operationally versus the prior year

and developed markets net sales grew one percent and was driven by strong new product performance including contributions from braina list xemphetamine and other generics and north america and europe

In Europe , we are seeing durable growth across our diversified business.

this is as a result of portfolio breadth across brands and generics well developed market posititionions and strong performance in key countries such as france

In North America, we saw continued growth in generics, which was up over 3% versus prior year. The portfolio is benefiting from complex products such as Wixella and Braina.

And within our brands business, net sales continue to be impacted by increased Medicaid utilization in certain non-promoted brands, as well as lower EpiPen volumes resulting from formulary changes in the previous quarter.

in emerging markets net saled grew seven percent driven by the expansion of our cardiovascular portfolio in certain latin american countries as well as strength in armena and eurasia region

These benefits help to absorb the ongoing impact of the therapy shift in the ARB market.

And lastly, Jans grew approximately 1% over the prior year, benefiting from new products in Australia and volume growth of our promoted brands in Japan. This served to offset the impact from government price regulations in these countries.

Turning to the P&L and free cash flow, this quarter serves as another demonstration of our financial strength and ability to generate significant free cash flow.

Our segment and product mix led to stable adjusted growth margins.

The performance was in line with our expectations of approximately 58 percent.

With respect to operating expenses, we are continuing to invest behind the business to fund our growth, which includes investments across segments, eye care, and in R&D.

Free cash flow for the quarter was primarily impacted by lower adjusted EBITDA due to the closing of divestitures.

Unknown Executive: Our free cash flow and existing cash on hand allowed us to strengthen our balance sheet with a debt paydown of approximately $800 million in the quarter. And as we look towards the rest of the year, we expect to have an excess of $3 billion in cash available for deployment. This takes into account divestiture proceeds received in the third quarter, expected divestiture costs, and our latest outlook for free cash flow. We expect our strong momentum to continue.

Our free cash flow and existing cash on hand allowed us to strengthen our balance sheet with debt pay down of approximately $800 million in the quarter.

And as we look towards the rest of the year, we expect to have in excess of $3 billion in cash available for deployment. This takes into account divestiture proceeds received in the third quarter, expected divestiture costs, and our latest outlook for free cash flow.

We expect the significant financial flexibility will allow us to pay down additional debt to reach our long-term growth leverage target of approximately three times by the end of the year.

We also expect to return capital in the form of dividends and will remain opportunistic with potential share of purchases and business development activity.

Let's move on to items related to our financial guidance and key metrics for the remainder of the year.

Unknown Executive: And as a result, we expect operational revenue growth of approximately 2% versus 2023 and stable adjusted EBITDA and adjusted EPS. The assumptions driving total revenue growth include continued growth in developed and emerging markets and better than expected performance in Greater China and Jan. We are adjusting the following metrics across the P&L. An increase in the adjusted gross margin range due to better segment mix, and SG&A as a percentage of revenue is expected to be higher.

We expect our strong momentum to continue and as a result we expect operational revenue growth of approximately 2% versus 2023 and stable adjusted EBITDA and adjusted EPS.

Our expectation for the year is to be at the midpoint of the estimated guidance ranges.

The assumptions driving total revenue growth include continued growth in developed and emerging markets and better-than-expected performance in Greater China and JAN.

A new product revenue of $500 million to $600 million as a result of the strong uptake of generic launches and additional new products.

We are adjusting the following metrics across the P&L.

increase in adjusted growth margin range due to better segment mix and sgna as a percentage of revenue is expected to be higher this reflects the reduction in total revenues from the divestitures and the impact of dissynergies and cost of providing transition services

Unknown Executive: This reflects the reduction in total revenues from the divestitures and the impact of de-energizes and the costs of providing transition services. A few comments on anticipated phasing for the third and fourth quarters. Total revenue is expected to be slightly higher in the third quarter, mainly due to normal product seasonality, and adjusted growth margin is expected to moderate in the fourth quarter due to normal product and segment mix.

We expect certain costs associated with performing the transition services to be included in operating expenses. The transition income is expected to be recorded in non-operating other income.

A few comments on anticipated phasing for the 3rd and 4th quarters.

Total revenue is expected to be slightly higher in the third quarter, mainly due to normal product seasonality, and adjusted growth margin is expected to moderate in the fourth quarter due to normal product and segment mix.

taking these factors into consideration we expect adjusted ebitda adjusted eps and free cash flow to be higher in the third quarter

To summarize, the results for the quarter demonstrate our solid fundamentals, including our diversified and growing-based business, and our consistent, significant free cash flow generation.

Unknown Executive: We are well-positioned for a strong second half of the year and expect to deliver on our capital allocation framework in support of the vision Scott laid out at the top of this call. And with that, I'll hand it back to the operator to begin the Q&A. Ladies and gentlemen, thank you so much for joining us today. I'm so excited to be here with you all. I'm so excited to be here with you all.

We are well positioned for a strong second half of the year and expect to deliver on our capital allocation framework in support of the vision Scott laid out at the top of this call. And with that, I'll hand it back to the operator to begin the Q&A.

Operator: Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then 1 to ask a question. And our first question today comes from...

Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then 1 using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

To withdraw your questions, you may press star and two.

Again, that is star and then one to ask a question.

We'll pause momentarily to assemble the roster.

in our first question today comes from asverma from ebs please be i with your question

Good morning, thanks for taking our questions, congrats on all the progress. So I wanted to talk about

2025 dynamics a little bit. So I think the $2.3 billion pre-cash flow guide that you provided previously, what does that translate into EBITDA? Like if you look at the run rate that you've had sort of in the

Difference between EBITDA and free cash flow, it would roughly translate to 4.5.

4.5 to 4.6 billion. Is that something that you would be comfortable with?

And then secondly, on the new product revenue, so yeah, that's good to see you raising the guide there. Just what's driving that, is that primarily the benefit that you saw by Brena or are there more products that you think that you're benefiting from? Thanks.

thank you i thank you bas and good morning thank youverymuch for the question sort of two parts here right talgument a new product revenue which is very important as we move forward here and we're very strong we saw in the second quarter wereexpecting full year verystrong new product revenueand then also some twenty five dynamics i'll turn it over to direred a to to take those two for

Unknown Executive: Great. Thanks. Thanks, Ash. So, yes, on new products. We are going to continue to invest in our business from a R&D and investment perspective to fuel our growth, but the dynamics in terms of what we've seen from our free cash flow, we continue to see the $2.3 billion that you mentioned in terms of free cash flow generation, and we're going to continue to kind of focus on our EBITDA conversion going forward, but with respect to 25, I think it's still too early to get into the dynamics specific to

great thanks thanks ash so yes on unnew products

To your point, we feel great about the momentum we've seen from the new product perspective this year. This quarter we did $210 million, and then when you add that to the $154 million, that's

That we did in the first quarter, already, year to date, we're at $354 million. And so that, in addition to the momentum that we're seeing broadly across our new product portfolio, and it really isn't dependent on one product, one region, we've seen growth, to your point, in Braina and Lisdexamphetamine. We've also seen growth in other generics in North America, but we've also seen new products in Europe , and some additions in emerging markets in Jans. So as we look for the full year, the strong performance and the continuation of that really is going to be largely driven by products that we've...

already launched year -to date and that's what gives us confidence in the five hundred to six hundred million for for the year

With respect to 25 Dynamics, listen, it's still early. We feel good about the momentum that we're seeing thus far in 2024. We see

kind of the stability of our revenue revenue growth we are going to continue to invest in our business from kind of r nd and investment perspective to fuel our growth

But the kind of dynamics in terms of what we've seen from our free cash flow,

We're going to continue to see the $2.3 billion that you mentioned in terms of free cash flow generation, and we're going to continue to

We're going to kind of focus on our EBITDA conversion going forward, but with respect to 25, I think it's still too early to get into the dynamics specific to 25.

And our next question comes from Chris Schott from J.P. Morgan. Please go ahead with your question.

Okay, thank you so much. This is Ekaterina, on for Chris, and thank you for taking our questions.

I'll start with a bigger picture one, if I may. So just given that you're now done with the divestiture process, can you maybe talk about how you're thinking about the longer-term profile of the company, both from a margin standpoint and a top-line standpoint, and I guess where you see the most opportunity for the business from here?

and then second question just on business development i think you've touched upon this in the prepared remarks let's just looks your lest thinking in terms of business development andimbalancing development stationand commercial stage deals and just what do you think makes most sen for the company and maybe where you're seeing more interesting opportunities thank you

Unknown Executive: Yeah, thank you very much.

yes thank you very much treata for the question again maybe addressed the second one first

from a bd perspective we're engaged a lot of different discussions we're going to take at ci pointin apach

You know, as we got through the investors, sort of the net effect of that is that we're going to get to, we've got line of sight and paid down our debt going into 25. And executing on our capital allocation plan, 100%, where we're giving back to shareholders at least $2.3 billion of free cash flow through.

Dividends and share buybacks, but also taking a disciplined approach.

to business development. We've got a diversified company in terms of the number of therapeutic areas that we're in. We're looking at a number of different assets.

we're looking at things which can help out us supercharge our growth as being into the twenty five and beyond we're very it's very important to understand that the base business is all of the base business we're showing operational growth and on top of that we want to add what i would consider significantly derisk type assets from an innovative perspective

Assets that can help us drive growth, future, that are focused on unmet medical needs, that are patented, have long runways that we can invest in.

But we're also going to shore up our base business as well. We're going to look for things currently marketed in different, particularly in particular geographies that we can be effective in. And so we're going to do business development to shore up the base, and we're also going to do business development to bring in new, innovative assets into the company.

our next question comes from david amsilon from tyyper saler please go how with your question

Hey, thanks. So just a couple.

For me, and I apologize if you address this since I joined late, can you talk about...

Overall, your innovative brand strategy, I mean, you did an important in licensing earlier this year. I guess my question here is, how aggressive do you want to be regarding licensing?

Adding innovative brands in the U.S. and developed markets.

broadly speaking so so that's the number one then number two can you just talk generally about

Complex generics and how we should think about

contribution from

complex products or new launches as we didn move through twenty five and might be a little bit early going to think about that but wanted to get a sense of what key launches on the complex front of that you're flagging or shif flag thank

Unknown Executive: Thanks, David. I think you used the language, you know, how aggressive we want to be from a BC perspective. I think what we want to be is we want to be disciplined.

Thanks, David. I think you used the language, you know, how aggressive we want to be from a BC perspective. I think what we want to be is we want to be disciplined.

There are, you know, we're engaged with a lot of companies, there's a lot of inbound that we've got both for things to help build the base business and in new innovative assets.

We're carefully looking at them all. We're really looking forward to getting into 25, where we've got more capital to apply from a business development perspective. We want to build a pipeline of assets. You mentioned that we already did a deal and in-license a lot of our own ScenarioMod 2 products, which will be very, very important to us. We fully expect either as later in 24, as we get into 25, 26, to continue to add assets to the pipeline, both, again, to shore up and to accelerate the growth that we're seeing in the base business.

And secondly, to add to the innovative portfolio, we plan on doing both, and I would say we want to do it in a smart and disciplined way.

Unknown Executive: Yes, regarding complex generics, I think we, as you can see in this presentation that we provided, we have over 250 products in the pipeline that are either under development or under regulatory review. So we think we'll be, we know we'll have a steady flow of complex generics coming every year this year in 2025 and so on. So we feel confident about our complex generic pipeline.

Yes, regarding the complex generics, I think we

As you can see on this presentation that we've provided, we have over 250.

Products in the pipeline that are either under development or under regulatory review.

So we think we'll be, we know we'll have a steady flow of complex generic coming in every year, this year, in 2025, and so on. So we feel confident about our complex generic pipeline.

And once again, ladies and gentlemen, if you would like to ask a question, please press star and then one.

You may press star and 2 to remove yourself from the question queue.

Our next question comes from Umer Raffat from Evercore. Please go ahead with your question.

Hi guys, thanks for taking my question. I have a two-part question on just broad investments.

Perhaps on GLP-1, Scott, I'm curious, what are your GLP-1 aspirations? What's the capacity now? And what type of CapEx investments are you or are you not looking to make? Just thinking about that out loud.

and also part two was the investment on scenario od and lupis i'm curious how you guys are thinking about that in light some really ground breaking data we're seeing with cd nineteen cararttees and presumab would buy specifics as well and how do you put that inperspective relative to what we know ' an airmonmot

they'll be very helpful and then finally i think the prior question was on what are your complex errics and twentyfive i don't think i maybe i mis heard what are the complex err twenty five launes

So thanks for questioning our sort of three parts there, right, the complex, generics, scenario mod, and how that fits into the therapeutic landscape as we move forward here and advance as the maiden lupus, and I think highly differentiated relative to CAR-T constructs or bi-specifics and other things, and then just a little bit on the overall GLP-1 strategy. So I'll kick it over to Philippe to, from a pipeline and R&D perspective, to address those questions.

Unknown Executive: It's a foreign GLP-1.

From a GLP-1 point of view, we are looking at developing multiple GLP-1s.

Semaglutide as well as Liraglutide as well as Mangiaro so we're

We are deep into the development of these assets from a supply chain standpoint, as you know.

Supply chain can be a little tight, but we've secured supply of API for all these assets and certainly have invested in our capability to manufacture these drugs going forward.

So we anticipate we'll have a significant role going forward in that GLP-1 market.

Regarding ScenarioMod, I think if you were to compare the ScenarioMod benefit-risk profile versus the one we anticipate from the CAR-T or the BuySpecific,

You'll see that we anticipate to be in the higher end of efficacy with a safety profile that is...

Clearly differentiated.

Karchees and by specific are typically having significant safety baggage.

And so we anticipate that our benefit-risk profile will be very different, which will allow us to be placed prior.

to the use of either any bi-specific biologics or CAR-Ts going forward. And I'm not even talking about the convenience factor of having an oral drug versus...

Scorchies that can be quite difficult.

to administer.

The pipeline that we have that we see it will be delivered this year for the rest of the year of 'twenty five 'twenty six so we feel very confident in our new product revenue as you can see and we anticipate the same going forward.

Yes.

Our next question comes from <unk> Prasad from Barclays. Please go ahead with your question.

Thank you hi, good morning, and congratulations on the quarter or a couple of questions for me could you comment around the magnitude of the expected <unk> doesn't have that ocean from government price regulations in Japan, and Australia, Australia.

I presume in Japan, as the annual price cuts or are there any other dynamics at play.

Unknown Executive: Second, could you comment on the split between the innovative pipeline and the non-innovative pipeline currently, and with the improvement in cash metrics, how do you see the spend on innovative R&D progressing over the next couple of years, or do you intend to keep it at a similar percentage?

Second could you comment around the split between the new way to your pipeline and non innovating pipeline currently and with the improvement in cash metrics. How do you see the spend on innovative R&D progressing into the next couple of years or do you intend to keep it at a similar percent H. Thanks.

Yes.

Okay. Thank you very much larger I'll take the first question over to rather to talk about the dynamics that we're seeing Australia, Japan et cetera, Yeah to your point biology, we arent seeing anything kind of that.

It really is driven by the ongoing price normal government price declines that we're seeing in Japan.

And I'll throw it now the offset to that is we actually have seen.

Uh huh.

But our volume and in Japan, as well and and given that.

Japan is actually in and the broader Gen. Three that region is actually performing better than our expectations for the for the year.

Unknown Executive: And relative to your question on R&D spend and where we're going from an R&D perspective, maybe I'll make a general comment and Philippe can comment as well here, but, you know, we're going to continue to invest in both the base business, the base generics, complex generics and others, and in the innovative pipeline, you know, we've already, as Philippe talked about here, brought in a couple of new innovative assets, you know, through our business development activities, through the global healthcare gateway and others, we're going to continue to bring in assets and continue to develop them, so you might see some movement in the distribution of that spend as we bring in more innovative assets, but, you know, we're going to continue to invest in all components of the base business and in new innovative

And relative to your question on <unk>.

Spend and where we're going from an R&D perspective, maybe I'll make a general comment and Philippe comment as well, but we're going to continue to invest in both the base business the base generics complex generics and others and in the innovative.

Pipeline.

We've we've already talked.

Talks about you brought in a couple of new innovative assets.

Through our business development activities through the global healthcare Gateway and others, we're going to continue to bring in assets and continue to develop them. So you might see some movement in the distribution of that spend as we bring in more.

Innovative assets, but we're going to continue to invest in all components of the base business and a new innovative assets as we move forward.

Okay. Thank you.

Yeah.

Yes.

Operator: Our next question comes from Jason Gerberry from Bank of America. Please go ahead with your question.

Our next question comes from Jason Gere, Barry from Bank of America. Please go ahead with your question.

Hey, guys. This is bothering Patel on for Jason Grandberry. My first question is can you approximate the full year 2020 for EBIT contribution from divestitures that provided partial first half 2024 contribution.

Just so that we can understand the remain co business profile and model appropriately headed into 2025 and onwards and then my second question is given all the changes in the portfolio relative to reported financial results in 2022, and 2023 D C low 30% EBITA March.

<unk>.

Similar to certain peers like Oregon on as a good long run assumption.

Ending any breakthroughs on the pipeline side of course and with regards to your pipeline I'm is there a timeline update based on new enrollment strategies for the phase III Salada grille S. O S. A M I trial. Thank you.

Yeah.

Unknown Executive: So I'll thank you very much for the question. I'll ask Doretta to address the first part of your question, and then I'll talk about the other questions. Thanks a lot, everyone. And thank you.

So.

Thank you very much for the question as to whether to to address the.

First part of your question and then I'll talk about the Oh.

There's a lot of room and sooner or later.

Great. Thank you and on the on the divestitures I think as we've laid it out when we started the year.

The way we've approached it is as we close the divestitures, we've adjusted and taken out the kind of impact from our from our and provided the impact from our actuals and then also adjusted our guidance going forward to reflect those divestitures and we'll continue to do that.

Kind of now that the divestitures are behind us as we get through that back half of the year and we look into 'twenty five we.

We will be providing that additional kind of detail, but as we move into the rest of the year, but as we had in our earnings presentation in our press release, we do lay out the components of both the divestitures that have closed as well as the impact to our to our guidance and our AR and our resolve.

With respect to margins I mean I think.

Unknown Executive: As we think about the business, we have confidence in both our base business growth as well as the stability of our EBITDA margins as we continue to invest in growth. But, as Scott laid out, as we continue to invest in the business, bring in more patent-protected, innovative assets, we have the opportunity to continue to expand the business. But I think we feel good about the stability of our EBITDA.

As we think about the business.

We have confidence in both our base business growth as well as the stability of our EBITDA.

EBITDA margins as we continue to invest in growth, but but as Scott laid out as we continue to invest in the business bring in more patent protected innovative assets, we have the opportunity to.

<unk> continue to expand the business, but I think we feel good about the stability of our of our EBITDA.

And then relative to our two pipeline acceleration on the innovative assets I'll say that.

We're very very excited obviously about live with both a lot of ground scenario Mod as I said in my prepared remarks, we're already making significant progress in doing the things we need to do to accelerate the development of these assets and move the timeline forward I don't have a specific update for you on the date, we want to get in and do.

Suddenly remediation further continue to open new sites.

<unk> to invest in the development and then by the time, we get into the new year, we'll be able to be in a better position to give you sort of specifics on where we think.

Those timelines are going but we think we're going to significantly be able to help and accelerate the development timelines and again, we'll we'll look to update those timelines as we get into 'twenty five.

Operator: And ladies and gentlemen, with that, we'll conclude today's question and answer session. I'd like to turn the floor back over to Scott Smith, CEO, for closing remarks.

And ladies and gentlemen, with that we'll conclude today's question and answer session.

Like to turn the floor back over to Scott Smith CEO for closing remarks. Thank you everybody and thank you to the operator in closing it's been a great year for us so far with the completion of our divestitures in July we're at a turning point for the company.

Scott Smith: We have built a strong foundation, we have a bold vision for our future, and we have the key ingredients we need to be successful in delivering on our goals. Thank you all very much for your attention.

We have built a strong foundation, we have a bold vision for our future and we have the key ingredients, we need to be successful to deliver on our goals. Thank you all very much for your attention.

Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining.

May now disconnect your lines.

Doretta Mistras: And then also some 25 dynamics. I'll turn it over to Doretta to take those two for you. Great, thanks. Thanks, Ash.

Operator: Theodora Mistras, Doretta Mistras, Doretta Mistras, Doretta Mistras, Doretta Mistras, Doretta Mistras, Doretta Mistras, Doretta Mistras, Doretta Mistras, [music] Shastri, Anca Askanase, Bill Szablweski, Bill Szablweski, Anca Askanase, Bill Szablweski,

Operator: Good morning everyone, and welcome to the Viatris Q2 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star and then one. To withdraw your question, you may press the star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Bill Szablewski, Head of Investor Relations and Capital Markets.

Q2 2024 Viatris Inc Earnings Call

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