01—Abstract
Summary
Summary of the 10-K filed March 1, 2021. Cited figures are marked; the original filing is the authoritative source.
Viatris Inc. filed its annual report on Form 10-K for the fiscal year ended December 31, 2020, following the November 16, 2020 Reverse Morris Trust combination of Mylan N.V.
(the accounting acquirer) with Pfizer's Upjohn Business. Under the Business Combination Agreement, Pfizer stockholders owned approximately 57% of Viatris common stock and former Mylan shareholders owned approximately 43%, and Viatris made a $12 billiona cash payment to Pfizer. Results reflect Mylan's history before November 16, 2020.
For 2020, total revenues were $11.95 billionb (up 4%), but the company reported a net loss of $669.9 million, compared with net earnings of $16.8 million in 2019, driven by $1.93 billion of purchase accounting amortization and $1.74 billion of transaction-related and other special items. Adjusted EBITDA was $3.65 billion. Long-term debt rose to $24.69 billion from $12.67 billion, and total assets were $61.55 billion.
The company is executing a global restructuring program with synergies of $1 billionc, expected pre-tax charges of $1.1 billion to $1.4 billion, and annual savings of $700 million to $900 million once fully implemented. The program may affect up to 20% of the roughly 45,000-person workforce and includes closing, downsizing or divesting up to 15 manufacturing facilities.
The filing states that Viatris intends to initiate a dividend in 2021, though it cannot be guaranteed. Key risks include generic pricing pressure, China volume-based procurement, Lyrica generic erosion in Japan, legal proceedings including EpiPen and generic drug pricing investigations, and reliance on Pfizer under transition and supply agreements.
02—Key points
Key Highlights
- Combination closed November 16, 2020: Pfizer's Upjohn Business was combined with Mylan in a Reverse Morris Trust; Pfizer stockholders hold about 57% of Viatris and former Mylan shareholders about 43%, with a $12 billion cash payment to Pfizer.
- 2020 total revenues of $11.95 billion, up from $11.50 billion in 2019, while net loss attributable to Viatris was $669.9 million versus net earnings of $16.8 million in 2019.
- Adjusted EBITDA of $3.65 billion in 2020 versus $3.54 billion in 2019; reported EBITDA fell to $2.04 billion from $2.75 billion.
- Long-term debt increased to $24.69 billion at December 31, 2020, from $12.67 billion, and total assets rose to $61.55 billion from $31.26 billion.
- Global restructuring program targets $1 billion of synergies, with expected pre-tax charges of $1.1 billion to $1.4 billion, annual savings of $700 million to $900 million, and up to 15 manufacturing facilities closed, downsized or divested.
- Management intends to initiate a quarterly dividend in 2021, but the filing states that dividend payments cannot be guaranteed.
- Significant ongoing risks include VBP pricing pressure in China, generic competition from the Lyrica launch in Japan, and multiple legal and government investigations, including EpiPen and generic drug pricing matters.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Viatris lost $0.06.
- Revenue$11.82B100.0%
- Cost of revenue−$8.02B67.9%
- Gross profit$3.80B32.1%
- Operating costs−$4.01B33.9%
- Operating income−$210.8M1.8%
- Interest, other & tax−$459.1M3.9%
- Net income−$669.9M5.7%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 1, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $11.82B$11.37B | +4.0% |
| Cost of Revenue | $8.15B$7.60B | +7.2% |
| Gross Profit | $3.80B$3.90B | −2.6% |
| R&D Expenses | $555.10M$639.90M | −13.3% |
| SG&A Expenses | $3.34B$2.56B | +30.5% |
| Operating Expenses | $4.01B$3.18B | +25.9% |
| Operating Income | -$210.80M$715.50M | −129.5% |
| Interest Expense | $497.80M$517.30M | −3.8% |
| Net Income | -$669.90M$16.80M | −4087.5% |
| EPS (Basic) | $-1.11$0.03 | −3800.0% |
| EPS (Diluted) | $-1.11$0.03 | −3800.0% |
| Shares Outstanding (Basic) | 601.20M515.70M | +16.6% |
| Shares Outstanding (Diluted) | 601.20M516.50M | +16.4% |
05—Questions
Frequently Asked Questions
Why did Viatris report a net loss in 2020 after a small profit in 2019?
The filing attributes the swing mainly to Combination-related and restructuring costs. Selling, general and administrative expense rose to $3.34 billion from $2.56 billion, including approximately $587.5 million of Combination-related costs, and cost of sales included $1.93 billion of purchase accounting amortization and other related items. Earnings from operations were a loss of $210.8 million, compared with earnings of $715.5 million in 2019.
How much debt does Viatris carry and what are its main borrowing arrangements?
Long-term debt including the current portion totaled $24.69 billion at December 31, 2020. The company had $1.10 billion of short-term borrowings, including $651.3 million of commercial paper under a $1.65 billion program. It has a $4.00 billion revolving facility maturing in November 2023 and a $400 million receivables facility. The filing states the company was in compliance with its maximum leverage ratio covenant of 4.25 to 1.00.
What is the restructuring program and what will it cost?
Viatris announced a global restructuring program to achieve $1 billion of synergies. The company expects total pre-tax charges of $1.1 billion to $1.4 billion, of which $350 million to $450 million are non-cash and $750 million to $950 million are remaining cash costs. Annual savings are expected to be $700 million to $900 million once fully implemented, and up to 20% of the global workforce may be affected.
What are the main risks to revenue highlighted in the filing?
The filing highlights pricing pressure from government price controls, tender systems and customer consolidation, with China's volume-based procurement program a notable example. It also cites loss of market exclusivity, including the Lyrica generic launch in Japan in December 2020, and the top ten products representing approximately 23% of net sales in 2020 and 2019. The COVID-19 pandemic is estimated to have reduced 2020 net sales by approximately 3%.
Is Viatris dependent on Pfizer after the Combination?
Yes, in part. Viatris entered into transition services, manufacturing and supply agreements with Pfizer, and it relies on Pfizer for certain services during transitional periods. Viatris agreed to bear 50% of the first $380 million of certain Pfizer transition service costs and all costs above that amount. Viatris has also agreed to indemnify Pfizer for certain liabilities, including 57% of certain opioid-related losses, and for certain tax liabilities under the Tax Matters Agreement.
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