01—Abstract
Summary
Summary of the 10-K filed February 28, 2022. Cited figures are marked; the original filing is the authoritative source.
Viatris Inc. (VTRS) reported net sales of $17.81 billiona for 2021, up 51% from $11.82 billion in 2020, with total revenues of $17.89 billion (up 50%).
The increase was driven mainly by $5.80 billionb of incremental net sales from the Upjohn Business acquired in the November 2020 Combination, partially offset by $710.9 million of lower pricing and volumes on existing products. The Company reported a net loss of $1.27 billion for 2021 (versus a $669.9 million loss in 2020), with loss from operations of $34.0 million, including $1.19 billion of inventory step-up amortization and $2.01 billion of incremental Upjohn-related amortization. Adjusted EBITDA was $6.43 billion, compared with $3.65 billion in 2020, and net cash provided by operating activities was $3.02 billion.
On February 28, 2022, Viatris agreed to contribute its biosimilars business to Biocon Biologics for an up-front cash payment of $2.0 billionc, $1.0 billion of convertible preferred equity, and up to $335 million of additional cash payments expected in 2024; the transaction is expected to close in the second half of 2022. The same day, the Board authorized a share repurchase program of up to $1.0 billion, and a quarterly dividend of $0.12 per share was declared for March 2022. A global restructuring program under which the Company expects total pre-tax charges of up to approximately $1.4 billion, with up to approximately $900 million of annual savings once fully implemented, is ongoing.
The Company carried $19.72 billiond of long-term debt and $1.49 billion of short-term borrowings at December 31, 2021, against $701.2 million of cash and cash equivalents. Key risks disclosed include generic price erosion and tender systems (particularly China's volume-based procurement), concentration of sales among a few customers and products (top ten products were about 33% of net sales), transition-service dependence on Pfizer, legal matters including EpiPen-related settlements of $264 million, and continued COVID-19 disruption.
02—Key points
Key Highlights
- Net sales rose 51% to $17.81 billion, driven by $5.80 billion of incremental Upjohn Business net sales following the November 16, 2020 Combination.
- Net loss widened to $1.27 billion in 2021 from $669.9 million in 2020, reflecting $4.04 billion of purchase accounting amortization and other related items in cost of sales.
- Adjusted EBITDA increased to $6.43 billion from $3.65 billion, and adjusted gross margin rose to approximately 59% from 54%.
- Pending Biocon Biologics Transaction: up-front cash of $2.0 billion, $1.0 billion of convertible preferred equity, and up to $335 million of additional payments, with closing expected in the second half of 2022.
- A $1.0 billion share repurchase program was authorized on February 28, 2022, and the Board declared a quarterly dividend of $0.12 per share payable March 16, 2022.
- Global restructuring program with expected pre-tax charges of up to approximately $1.4 billion and potential annual savings of up to approximately $900 million once fully implemented.
- Top ten products represented approximately 33% of 2021 net sales, up from 23% in 2020, and McKesson, AmerisourceBergen and Cardinal Health accounted for 9%, 9% and 5% of consolidated net sales.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2021, Viatris lost $0.07.
- Revenue$17.81B100.0%
- Cost of revenue−$12.24B68.7%
- Gross profit$5.58B31.3%
- Operating costs−$5.61B31.5%
- Operating income−$34.0M0.2%
- Interest, other & tax−$1.24B6.9%
- Net income−$1.27B7.1%
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 28, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $17.81B$11.82B | +50.7% |
| Cost of Revenue | $12.31B$8.15B | +51.1% |
| Gross Profit | $5.58B$3.80B | +46.9% |
| R&D Expenses | $751.10M$555.10M | +35.3% |
| SG&A Expenses | $4.53B$3.34B | +35.4% |
| Operating Expenses | $5.61B$4.01B | +40.0% |
| Operating Income | -$34.00M-$210.80M | +83.9% |
| Interest Expense | $636.20M$497.80M | +27.8% |
| Net Income | -$1.27B-$669.90M | −89.4% |
| EPS (Basic) | $-1.05$-1.11 | +5.4% |
| EPS (Diluted) | $-1.05$-1.11 | +5.4% |
| Shares Outstanding (Basic) | 1.21B601.20M | +101.1% |
| Shares Outstanding (Diluted) | 1.21B601.20M | +101.1% |
05—Questions
Frequently Asked Questions
How did Viatris perform financially in 2021?
Total revenues were $17.89 billion, up 50% from $11.95 billion, and net sales were $17.81 billion, up 51%. The Company posted a net loss of $1.27 billion, compared with a $669.9 million loss in 2020, largely because of purchase accounting amortization and restructuring charges. Adjusted EBITDA, a non-GAAP measure, was $6.43 billion.
What is the Biocon Biologics Transaction?
On February 28, 2022, Viatris agreed to contribute its biosimilars business to Biocon Biologics in exchange for $2.0 billion of up-front cash, $1.0 billion of convertible preferred equity, and up to $335 million of additional cash payments expected in 2024. Viatris will own at least 12.9% of Biocon Biologics on a fully-diluted basis. The transaction is expected to close in the second half of 2022, subject to customary conditions including regulatory approvals.
What capital return actions did Viatris announce?
The Board declared a quarterly cash dividend of $0.12 per share payable March 16, 2022, and on February 28, 2022 authorized a share repurchase program of up to $1.0 billion. The Company had not yet repurchased any shares under the program. Cash dividends of $0.11 per share were paid in each quarter of 2021, totaling $399.0 million in cash dividends paid.
What were the main sources of risk highlighted in the filing?
The filing highlights integration and restructuring execution risk, dependence on Pfizer under transition services and manufacturing agreements, pricing pressure from government controls, tender systems and China's volume-based procurement, generic competition as products lose exclusivity, customer and product concentration, COVID-19 disruption, and ongoing litigation including EpiPen-related matters and opioid cases. It also notes $1.84 billion of floating rate debt, where a one percentage point rate increase would add about $18.4 million of annual interest expense.
What was Viatris's debt and liquidity position at year-end 2021?
At December 31, 2021, long-term debt was $19.72 billion and short-term borrowings were $1.49 billion, including $1.17 billion of commercial paper outstanding. Cash and cash equivalents totaled $701.2 million, and the Company had $4.0 billion available under its 2021 Revolving Facility, with no borrowings outstanding under that facility at year-end. The Company stated it was in compliance with its debt covenants.
06—Continue