Viatris is an international pharmaceutical company with over 45,000 colleagues in the U.S. and global centers in Shanghai, Hyderabad, and Pittsburgh. Its portfolio includes more than 1,400 molecules that cover infectious and non-communicable diseases. The company also offers over-the-counter consumer products and generics.
Viatris' biosimilars division sold to Indian Pharma Biocon in a $3.3bn deal
Viatris' biosimilars division has been sold to Indian Pharma Biocon in a deal worth $3.3 billion. The acquisition creates a fully integrated global biosimilars enterprise. Viatris shareholders will receive consideration of up to USD 3.335 billion in the form of Compulsory Convertible Preference Shares, or CCPS, in Biocon Biologics Ltd. (BBL). This transaction has been approved by both Viatris and Biocon.
The Viatris transaction is expected to close in 2H-2022, subject to regulatory approvals. The deal includes transition services and commercialization services. It also includes a USD 50 million payment to BBL for capital expenditures. The remaining $3.3 billion is expected to be funded by an equity infusion of about 800 million and additional debt and equity. In addition to the Viatris cash payment, BBL has received commitments from existing shareholders and expressions of interest from several financial institutions.
The deal is expected to boost India's healthcare industry and expand access to affordable medicines and services. The government plans to boost its supply of Amphotericin-B in the coming years by licensing five manufacturers to produce the drug. In addition, the government will start an intensified mission Indradhanush 3.0 in March 2021, which aims to reach children and pregnant women who were missed by the government's immunisation programme.
The deal comes at a time when the global healthcare sector is under unprecedented pressure to cut costs and improve quality of care. As a result, the market for biosimilar drugs has exploded. This has created a demand for affordable and effective medicines in emerging markets. By purchasing Biocon's biosimilars business, Viatris will gain access to millions of potential markets, including India.
The deal is expected to be profitable for both companies. It also involves a joint venture between the two companies in the adeno-associated virus (AAV) market. Oxford Biomedica will pay biotech Homology $130 million upfront and invest $50 million in the new entity. The new entity will be 80% owned by Oxford and 20% by Homology. リパクレオン
Viatris has $25bn of debt
Viatris's $25bn debt isn't enough to keep it from paying dividends for the foreseeable future. The company is expected to generate $2,559.7 million in free cash flow by the end of 2021, generating a 5.08% dividend yield. This yield is among the highest in the pharmaceutical industry. Viatris' management has consistently increased its dividends.
In addition, Viatris's financial ratios are below the industry average. Although management has said it is selling off part of the company, it hasn't announced a deal. This could mean that Viatris shares are ripe for another merger and acquisition (M&A). Further, Viatris's pipeline doesn't inspire confidence in the success of new drug products. Its most recent approval was a generic version of the cholesterol-lowering drug levothyroxine, which has a $4 to $5bn addressable market.
Viatris' top line revenue is shrinking. It has a narrow net margin, 18%, and is almost a closed sale store. It delivered $719m in Q222 and $1.79bn in H122, with margins below 20%. As such, investors are left wondering how management will be able to make money when revenue declines.
Viatris's sales are largely based on three core drugs. Lipitor, which has been a breakthrough statin for decades, accounted for 18.6% of the company's revenue. This drug helped Pfizer earn billions of dollars, but its exclusivity lapsed in 2011 and the company has struggled to maintain stable sales.
The discovery and development of new drugs requires multibillion dollars of investment. On average, pharmaceutical companies spend more than 25% of their revenue on research and development. However, Viatris' R&D budget has declined year after year. Its cost share of revenue is just 3.7%. This isn't encouraging, especially given the company's lack of cash and a thin pipeline.
Viatris has a pipeline
Viatris is a biopharmaceutical company with a pipeline of several promising biosimilars. Two of its products have received regulatory approval and are set to launch in Japan, Canada and the European Union in the coming years. It also has biosimilar candidates for bevacizumab and insulin aspart. Several other products are in preclinical development.
Its portfolio includes over 1,400 approved molecules and several global generic brands. Viatris operates about 50 manufacturing sites worldwide. It produces oral solid doses, injectables, APIs, and complex dosage forms. It also has a proven track record for developing complex generics. The company has nearly $20 billion in long-term debt, which it pledged to pay down by 2023.
The company's management has confirmed plans to sell a portion of its business, but the company has not divulged details of the sale. The M&A deal could have a negative impact on the company's stock price. The company's pipeline is not strong enough to make up for declining sales, and the company's growth strategy remains unclear.
In addition to its pipeline of biosimilars, Viatris has submitted a biosimilar for the blockbuster drug Eylea for treating retinal diseases. It is also developing biosimilars for the cancer drug Avastin. Regulatory pressures may negatively impact the combined business.
Viatris' financial performance is healthy, but the company is facing significant challenges. It faces low cash generation and must reduce debt to balance its cash flow. The company expects to pay down its debt by year-end 2023, but the business model remains challenging. As a result, Viatris will likely need to focus on acquisitions to offset the erosion of its base business.
Viatris has an impressive global workforce of over 45,000 people and three global centers in Pittsburgh, Shanghai, and Hyderabad. Its portfolio includes more than 1400 approved molecules, including a rapidly expanding portfolio of biosimilars. The company's biosimilars franchise is focused on the oncology, immunology, and dermatology segments. This franchise is expected to be a significant revenue generator for the company.
Viatris is expected to start trading on Nov. 17, 2020. After completing the spin-off of Upjohn Business, the company will pursue a $1 billion global restructuring plan. The plan also includes rationalizing its manufacturing footprint. The company expects to reduce its workforce by 20%.
Viatris has no growth prospects
Viatris (VTRS) has been trending lower in the last month and currently has a Zacks Rank #3 (Hold). The company reported adjusted earnings of 93 cents per share for the first quarter of 2022, which was in line with the Zacks Consensus Estimate of 79 cents. In comparison, Viatris had reported earnings of 92 cents in the same period a year ago.
A recent study by Illuminera, a healthcare analytics firm, found that Viatris' e-commerce performance was outperforming its competitors. Viatris outperformed Viagra and Pimecrolimus Cream, two other competing products in the cardio-cerebral-vascular category. Norvasc, however, had the highest conversion rate after being searched for on an e-commerce platform.
Viatris is considering selling some of its consumer-health assets for more than $2 billion, according to Bloomberg. The sale could attract strategic suitors as well as large private equity firms. This move could also raise Viatris' stock price. Its stock has a market value of $11 billion. However, the company did not respond to requests for comment. Pharmaceutical companies are increasingly looking for ways to sell off their consumer health and over-the-counter assets. Last year, rival GSK Plc carved off its consumer unit, while Sanofi has been assessing potential options for its consumer health business.
Viatris is a global pharmaceutical company with headquarters in Pittsburgh, Pennsylvania. It also has global centers in Shanghai, China, and Hyderabad, India. Its portfolio of over 1,400 approved molecules covers infectious and non-communicable diseases. The company also sells generics and biosimilars, as well as over-the-counter consumer products.
The company recently announced an agreement to sell its biosimilars portfolio to Biocon Biologics Limited in return for $2.0 billion in cash. The transaction will result in Viatris owning 12.9% of Biocon Biologics on a fully diluted basis. The deal is expected to close in the second half of 2022.
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