Viatris Inc. — 2024 Q1
Transcript
Each turn shows the speaker, their inferred role, the section, and that turn's net sentiment (×1000).
Good morning and welcome to the Viatris Q1 2024 Earnings Conference Call.
Good morning, everyone. Welcome to our Q1 2024 earnings call. With us today is our CEO, Scott Smith; CFO, Doretta Mistras; and Chief R&D Officer, Philippe Martin.
Good morning. Our first quarter financial results demonstrate continued execution against our business fundamentals, which includes maintaining base business stability while driving new product revenue and executing on our vision for future growth. We are making progress on all our key priorities, including completing planned divestitures, continuing to pay down debt, increasing shareholder return, fueling our base business and, importantly, making strategic investments in future growth.
Thank you, Scott. I'd also like to welcome Corinne to Viatris and I look forward to working with her.
Thank you, Philippe, and good morning, everyone. It's great to be here to discuss our Q1 performance. As Scott highlighted, we are off to a strong start to the year with our fourth consecutive quarter of top line growth. We continue to execute against our growth plan, which includes maintaining our base business stability and driving new product revenue. Our globally diverse platform is generating growth from our base business in emerging markets in Europe, and from higher-than-expected new product revenue.
[Operator Instructions]
Maybe a couple of product questions to start. First, I guess, Doretta, you mentioned the North America softness in brands. Could you elaborate on the channel and formulary dynamics that you saw? How much of that was different than your expectations? And is there anything you can do to improve access there?
So Scott Smith here. I'm going to kick it over to Doretta to answer the product-specific question, and Philippe will address the GA Depot. So Doretta?
Great. Specifically, I would say, in North America, as mentioned, as you noted, we were impacted by 2 items. The first was a formulary change and the second was channel dynamics. The formulary change really impacted EpiPen. The change in channel dynamics in Q1, we saw slightly higher-than-expected utilization in certain kind of legacy brands, and that was really due to higher utilization in those noncommercial channels.
And Nate, just a couple of comments before I turn it over to Philippe. And Q1 for brands in the U.S. is always a little bit choppy. Again, as Doretta said, we expect to have a good full year performance. And I would just like to say, overall, the business is performing as expected globally. It's a very large and diverse business, there's lots of puts and takes. But we're very happy with the overall global performance this quarter.
Thanks, Scott. And so with regard to Mapi and GA Depot, we are working with them to address comments that we received from the FDA, as I mentioned, and seeking a meeting in the next few months. Once we have that meeting, we'll have clarity on -- more clarity on the time line and what to expect. So we'll be sharing that with you once available.
And the next question comes from Jason Gerberry with Bank of America.
This is Bhavin Patel on for Jason. For us, I just want to focus on just Tyrvaya. The product appears to be about an $80 million product with moderate growth. So maybe can you just help us form the bridge to the $1 billion in ophthalmology sales that you're expecting by 2028 between Oyster and Famy Care assets. I believe the recently launched Ryzumvi was framed as a sort of commercially niche product. So is the key seeing an inflection in Tyrvaya in the remainder of 2024?
Thank you very much for the question. Tyrvaya, we're seeing positive trends. We're seeing continued uptake with Tyrvaya. It performed in line with our expectations in Q1. We're very hopeful on the trajectory of Tyrvaya. We just started the DTC in Q4, and we'll see where it goes. That $1 billion that you're talking about over the next 4, 5, 6 years is relative to the whole pipeline of products, right? Definitely, Ryzumvi is a little bit of a niche product. It's complementary to what we're doing with Tyrvaya in terms of sales call dynamics and things, but we're continuing to be very, very hopeful relative to the ophthalmology business, and we've got a number of products in the pipeline.
And specifically, the free cash flow, the short answer is yes, with respect to your question around $2.3 billion kind of -- we feel that even post the divestitures, kind of as we look into 2025 and beyond, just given the diversity of our business, the portfolio and the stability of the base business as well as some of the kind of broader objectives and cash optimization kind of initiatives we've put in place, our business should be able to generate at least $2.3 billion in free cash on an ongoing basis.
And the next question comes from Glen Santangelo with Jefferies.
Scott, in your prepared remarks, I mean, you obviously made the comment that API is expected to sort of close imminently. And I didn't hear clearly what you said on OTC. Is that still expected to close by June 30, I think, was the previous timing? Is that still fair?
Yes. I think what we talked about in the last time was closed by midyear. I'm not sure if it's going to be June or a little bit later than that, but we're expecting to close it midyear. It's obviously subject to certain regulatory approvals and consents, which are a little bit out of our control, but that continues to track very well. We're pleased with our progress there. We should be closing that transaction by midyear.
And the next question comes from Ash Verma with UBS.
I had 2. So just on JANZ, maybe, can you elaborate the business dynamics here? It seems like the business has been facing some headwinds. I mean kind of you were up 2% on an operational basis, but on a relatively easy comp. And what sort of that should be the go-forward trajectory here?
Yes. Doretta can answer the first part and then on JANZ, and I'll take the new product question afterwards.
Great. So I would say on JANZ, it is performing kind of in line with what we expected for the first quarter, we are seeing growth. We did see some FX headwind relative to last year in the region. But the growth we're seeing there, the 2% operational growth, was really driven by some expansion of business activities that we saw in Australia. And this is a business kind of that we expect on an ongoing basis there is natural price erosion just due to government price regulation, specifically in Japan and Australia. And so that will factor in as we think about the rest of the year. And we do expect this business to perform in line with our expectations.
And specific to your question, $0 of that is on Tyrvaya. That's no longer defined as a new product within our company. And again, just very pleased with $154 million in the quarter for new products and reaffirming the $450 million to $550 million despite maybe some delays in GA Depot.
And the next question comes from Chris Schott with JPMorgan.
Just 2 for me. Maybe on just some of the comments from the prepared remarks. I think on the Idorsia assets, you mentioned accelerating some site enrollment there or expanding a number of sites. Does that accelerate the time lines at all that you laid out at the Analyst Meeting or were those already reflected in those time lines?
So I'll take the first question on Idorsia, this is Philippe. So no, it's not -- the acceleration that we are currently working on by adding a significant number of sites and expanding into regions that originally were not planned by Idorsia but where Viatris has significant experience, is not included in the time line that we presented at the R&D Day. It's too early for us to see the impact that this is going to have, but we'll keep you updated as we go forward.
And relative to capital allocation, important to note already this year, we have bought back shares delivered on the dividend, done the Idorsia deal, and brought assets that could drive potential future growth. In terms of the things that we're looking at, I'll continue to say, we look at all manner of different opportunities. Certainly, I like the licensing partnership route for a lot of it given the strong global company we have and the base we have worldwide that I think we're a very favorable partner for people with good technologies and products to be able to launch their products globally. So we're looking at partnering.
And the next question comes from David Amsellem with Piper Sandler.
A couple of questions on injectables. Any color on Venofer and also glucagon. I know you'd cited those 2 in prior slides. And then also, in general, how are you thinking about the broadening of your complex injectable footprint? I know you cited some metrics in the slides. But I guess the question here is, how big of a priority is that as a percentage or as a portion of your overall generic R&D mix? And how are you thinking about new launches outside of this year in terms of how you're thinking about a number of potential complex injectable launches for '25 and '26?
So I'll kick it over to Philippe to talk specifically about some of the products and the strategy. But just overall, the complex injectable portfolio is a very important part of our base business. We're investing in it. We see important products on the market today from it. We see important products in the future from it. So it's a very sort of important part of our base business mix. And important to continue to invest in the complex generics as we move forward and add other new products, innovative products, patented products to the portfolio to accelerate that growth.
Yes. And to answer your first question, the 2 assets you mentioned are second half launches. We're working through the regulatory approval process. We remain confident in our $450 million to $550 million new product revenue guidance for the full year. And we've -- as you know, we've been very successful in bringing similar products to market in the past. So we feel good about our new product revenue going forward.
And the next question comes from Balaji Prasad with Barclays.
A couple of macro questions and a bookkeeping question from me on, firstly, emerging markets, it looks like this quarter has been largely driven by emerging markets. Can you comment around the sustainability of this? And maybe also help me understand how this translated on an FX basis through the P&L.
Thank you, Balaji. I'm going to hand it over to Doretta to answer the specific questions on the emerging market segments and the divestitures.
Yes. So on emerging markets specifically, we were very pleased with the performance that we've seen in that region. It was really -- we saw broad performance specifically both in our MENA and our Eurasia region, both across generics, and across our branded portfolio such as Lipitor, Elidel, Xalabrands. So we really saw outperformance across the board. And this was despite some FX headwinds that we saw in that region. We had multiple currencies that we saw some weakness in versus the U.S. dollar relative to last year. So we were very pleased with our performance in emerging markets.
Thank you. And this concludes our question-and-answer session. I would like to return the conference to Mr. Scott Smith, CEO, for any closing comments.
So thank you, and thank you to everybody online for your attention this morning. In closing, we're continuing our momentum for last year. We've had a great -- we've made great progress on all our key priorities and have a strong executive leadership team in place, a passionate global workforce that is dedicated to leading the company into what we believe is an exciting future ahead. Thank you again.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your phone lines.