01—Abstract
Summary
Summary of the 10-K filed February 27, 2023. Cited figures are marked; the original filing is the authoritative source.
Viatris Inc. (NASDAQ: VTRS) reported total revenues of $16.26 billiona for 2022, down from $17.89 billion in 2021, with net sales of $16.22 billion.
Net earnings were $2.08 billionb, or $1.71 per diluted share, compared with a net loss of $1.27 billion in 2021. The improvement was driven largely by a $1.75 billion gain on the sale of the biosimilars business to Biocon Biologics, which closed November 29, 2022. Adjusted EBITDA was $5.78 billion, down from $6.36 billion, and net cash provided by operating activities was $2.95 billion.
Unfavorable foreign currency translation reduced net sales by approximately $1.24 billionc, and constant-currency net sales declined about 2%. The company is in a stated "second phase" of its strategy after reducing debt and returning capital in the first phase. It intends to divest its OTC business, most of its API business, selected women's health products, and the Upjohn Distributor Markets, and it is focusing on ophthalmology, gastrointestinal and dermatology.
It acquired Oyster Point for approximately $425 milliond in cash and agreed to acquire the remaining equity of Famy Life Sciences for $281 million, both in ophthalmology, with the Famy transaction closing in the first quarter of 2023. Long-term debt was $18.02 billion at year-end, and cash was $1.26 billion.
Risks highlighted in the filing include pricing pressure from government controls and tender systems, particularly in China's volume-based procurement program, loss of exclusivity on key brands, customer concentration with the top three customers representing about 26% of sales, and the transition-services and indemnification obligations tied to the Biocon Biologics transaction. The company also disclosed significant ongoing litigation, including generic drug pricing investigations, opioid-related claims, and EpiPen-related securities matters.
02—Key points
Key Highlights
- Total revenues fell 9% to $16.26 billion in 2022 from $17.89 billion, while net earnings rose to $2.08 billion from a net loss of $1.27 billion.
- The $1.75 billion gain on the Biocon Biologics transaction, which closed November 29, 2022, was the main driver of the swing to positive net earnings.
- Adjusted EBITDA declined to $5.78 billion from $6.36 billion; the filing presents this as a non-GAAP measure.
- Diluted EPS was $1.71 versus a loss of $1.05 per share in 2021.
- Constant-currency net sales declined about 2%, with competition on key U.S. products and base business erosion offset partly by $483.1 million of new product sales.
- The company plans to divest OTC, most API operations, certain women's health products and Upjohn Distributor Markets, and recorded a $374.2 million charge when Upjohn Distributor Markets were classified as held for sale.
- Cash and cash equivalents were $1.26 billion at year-end, and the Board authorized a $1.0 billion share repurchase program and a quarterly dividend of $0.12 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Viatris kept $0.13.
- Revenue$16.22B100.0%
- Cost of revenue−$9.72B59.9%
- Gross profit$6.50B40.1%
- Operating costs−$4.88B30.1%
- Operating income$1.61B10.0%
- Interest, other & tax$463.7M2.9%
- Net income$2.08B12.8%
Where FY2022 revenue went
$16.22B- Cost of revenue: $9.77B, 60% of revenue
- SG&A: $4.18B, 26% of revenue
- Operating income: $1.61B, 10.0% of revenue
- Other operating costs: $658.4M, 4.1% of revenue
Kept 10.0% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 27, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $16.22B$17.81B | −9.0% |
| Cost of Revenue | $9.77B$12.31B | −20.7% |
| Gross Profit | $6.50B$5.58B | +16.5% |
| SG&A Expenses | $4.18B$4.53B | −7.7% |
| Operating Expenses | $4.88B$5.61B | −13.0% |
| Operating Income | $1.61B-$34.00M | +4849.7% |
| Interest Expense | $592.40M$636.20M | −6.9% |
| Net Income | $2.08B-$1.27B | +263.8% |
| EPS (Basic) | $1.71$-1.05 | +262.9% |
| EPS (Diluted) | $1.71$-1.05 | +262.9% |
| Shares Outstanding (Basic) | 1.21B1.21B | +0.3% |
| Shares Outstanding (Diluted) | 1.22B1.21B | +0.7% |
05—Questions
Frequently Asked Questions
Why did net earnings turn positive in 2022?
Net earnings were $2.08 billion in 2022 compared with a net loss of $1.27 billion in 2021. The filing attributes the change primarily to the approximately $1.75 billion gain on the sale of the biosimilars business to Biocon Biologics, recorded in other (income) expense, net, and to lower restructuring and litigation charges.
What is Viatris doing to reshape its portfolio?
The company completed the Biocon Biologics transaction and announced intent to divest OTC, most API operations, selected women's health care products and Upjohn Distributor Markets. It is also expanding into ophthalmology through the Oyster Point and Famy Life Sciences acquisitions and is focusing on ophthalmology, gastrointestinal and dermatology as core therapeutic areas.
What are the main risks to revenue?
The filing cites government and payor price controls, tender systems and China's volume-based procurement policy, loss of exclusivity on products such as Lipitor and Lyrica, and competition from generics. It also notes that the top three customers accounted for about 26% of 2022 consolidated net sales.
How much debt does Viatris carry and what are its liquidity sources?
Long-term debt was $18.02 billion at December 31, 2022, with $1.26 billion of current portion, and no short-term borrowings outstanding at year-end. The company cites access to a $4.0 billion 2021 Revolving Facility, a commercial paper program, a $400 million receivables facility and a $200 million note securitization facility. It states it was in compliance with its debt covenants at year-end.
What is the Biocon Biologics transaction worth to Viatris?
Viatris received $3 billion of consideration: a $2 billion cash payment, subject to adjustment, and about $1 billion of convertible preferred shares representing roughly a 12.9% fully diluted stake in Biocon Biologics. It is also entitled to $335 million of additional cash payments in 2024, and the agreement includes a $250 million closing working capital target.
06—Continue