The paragraph is an introduction to the Viatris Q3 2024 Earnings Call. The operator welcomes participants and introduces the event, noting it will be in a listen-only mode with a question session afterward. Bill Szablewski, Head of Capital Markets, then introduces the company's CEO, CFO, Chief R&D Officer, and Chief Commercial Officer. He mentions that the call will include forward-looking statements about financial guidance and strategic initiatives, with references to non-GAAP financial measures and comparisons to 2023 results, adjusted for divestitures and foreign exchange impacts. The CEO, Scott Smith, then expresses his satisfaction with the company's strong performance in the third quarter.

Viatris has reported its sixth consecutive quarter of operational revenue growth, with improvements in adjusted EBITDA and earnings per share. The company achieved total revenues of $3.8 billion in the third quarter, a 3% increase, and generated an adjusted EBITDA of $1.3 billion, up 4%. It also saw a rise in new product revenues and substantial free cash flow. Viatris is focused on strategic financial management, having repaid $1.9 billion in debt using proceeds from divestitures, aligning with its long-term leverage targets. The company plans to prioritize capital allocation to enhance shareholder value and anticipates being more aggressive with share buybacks in 2025.

The paragraph discusses Viatris' strategy of disciplined investments in late-stage assets and business development to drive growth, particularly in the cardiovascular disease sector. They highlight a licensing agreement with Lexicon Pharmaceuticals for sotagliflozin, enhancing their innovative portfolio outside the U.S. and Europe. The company's global infrastructure and expertise are leveraged to maximize potential in this field. The paragraph also emphasizes Viatris' strong performance and growth momentum, fueled by a robust pipeline of core generics, complex generics, and novel products. Philippe Martin attributes the confidence in future growth to focused execution on this reliable pipeline, with EFFEXOR cited as an example.

The paragraph highlights the company's recent positive top-line results for EFFEXOR in treating generalized anxiety disorder (GAD) in Japanese patients, with plans to submit an application for approval to Japanese authorities by 2025. The company emphasizes the importance of its base business for reinvesting in its pipeline and highlights its global development expertise and commercial infrastructure. It discusses leveraging FDA approval of the drug INPEFA for heart failure and type 2 diabetes to expand into ex-U.S. markets and explore further indications, such as hypertrophic cardiac myopathy, due to its differentiated mechanism of action and broader label compared to SGLT2 inhibitors.

The paragraph discusses Viatris' strong presence in cardiovascular diseases and thrombosis with well-known products and mentions the progress of their selatogrel program. It highlights ongoing SOS-AMI and OPUS clinical trials and the expansion of Cenerimod's indications in lupus nephritis. The company is advancing its ophthalmology program with major readouts expected in 2025. The speaker expresses pride in their R&D efforts, and Doretta Mistras reports financial growth, noting a 3% increase in their diversified base business year-over-year, marking their sixth consecutive quarter of operational revenue growth, with adjusted EBITDA and earnings per share growing by approximately 4% and 6%, respectively.

The company generated $866 million in free cash flow, excluding transaction costs and taxes, which helped to pay down debt and strengthen the balance sheet. The base business revenue increased by 3% year-over-year, with all segments showing growth. Brands grew by 2%, driven by cardiovascular portfolio expansion in Latin America and strong performance in Europe and Greater China. Generics grew by 4%, supported by a robust European portfolio and complex products in North America. New product revenue for the quarter was $133 million, totaling $497 million year-to-date, with expectations to reach $500 million to $600 million for the year. Developed markets experienced a 3% sales increase, fueled by generics' strength. Europe's diversified business grew by 6% due to new products and strong generics. North America's generics increased by 5%, aided by specific complex products. Declines in brand net sales were due to Medicaid impacts and lower EpiPen volumes. Greater China's net sales rose by 3% year-over-year.

The paragraph discusses the company's financial performance and strategic debt management. It highlights strong volume growth across various channels and a 2% increase in net sales in emerging markets, driven by cardiovascular products and regional strengths. Despite supply chain impacts, the ARV generics business was supported. JANZ saw an 8% growth due to new products in Australia and Japan. The company's adjusted gross margin remained stable at 58.5%, and operating expenses were consistent with the previous year. Free cash flow increased by 10%, facilitated by higher adjusted EBITDA and reduced working capital, contributing to debt repayment efforts. The company repaid $1.9 billion of debt, reducing its notional debt to below $15 billion, with plans to bring it below $14 billion by year-end. After repaying approximately EUR1 billion in November, they aim for a gross leverage ratio of about 3 times, aligning with their long-term target of 2.8 to 3.2 times. This strengthens their balance sheet and supports capital allocation plans for the future.

The company reaffirms its outlook for 2024, expecting a 2% growth in base business operational revenue and flat adjusted EBITDA and earnings per share compared to last year. Adjustments are made to account for costs associated with a licensing agreement for sotagliflozin. Fourth quarter revenue is projected to decline due to seasonal factors, product phasing, and competition in generics, affecting adjusted EBITDA and earnings per share. Free cash flow will also decrease due to divestiture costs, taxes, higher capital expenditures, and interest payments. Despite this, strong fundamentals and a solid balance sheet provide a foundation for a balanced capital allocation strategy. Additionally, a workbook for modeling specific assets is available on the investor website. The paragraph concludes with a transition to a Q&A session.

In the paragraph, Glen Santangelo from Jefferies asks Scott Smith about the future revenue contributions from new products and capital allocation plans. Scott responds by emphasizing that while they aren't providing specific guidance for 2025, they expect the base business's strong momentum to continue, with new product revenue consistently between $450 million and $550 million annually since 2020. Regarding capital allocation, Scott mentions that achieving a leverage ratio of 3 times is crucial, as it would allow the company to use at least $2.3 billion in free cash flow, with half being returned to shareholders through dividends and share buybacks.

The paragraph discusses the company's future plans and addresses questions from an analyst. The company aims to be more aggressive with share buybacks as they reach their desired leverage ratio heading into 2025, which will support their capital allocation strategy. They also plan to focus on disciplined business development, targeting in-market or near-market assets. In response to a question about a multinational company being investigated in China over reimbursement issues, the company expressed confidence in its strong compliance and partnerships in China. The paragraph concludes with a mention of Philippe Martin, who is set to answer a question regarding updates on Sandostatin LAR and GA Depot resubmission, but his response is not included.

The paragraph discusses a scheduled meeting with the FDA in December regarding the GA Depot, with more updates expected next year. The review for the Sandostatin product is still ongoing, with plans to launch it next year. Ethan Brown, standing in for Chris Schott from JPMorgan, asks about the nature of deals made this year, specifically the Idorsia and SGLT2 transactions, and future expectations for EBITDA in 2025. Scott Smith responds that the Idorsia deal was an opportunistic transaction focusing on Phase III products and potential blockbusters. Their strategy involves disciplined business development and leveraging their global infrastructure to drive revenue in upcoming years. Doretta would address further details about EBITDA expectations.

The paragraph discusses the company's strategy and outlook for the coming years. They are focusing on disciplined business development, aiming to add multiple assets to their pipeline, while prioritizing the growth of their base business. Although they are not providing specific forward-looking revenue and EBITDA guidance for 2025, they emphasize maintaining adjusted EBITDA stability and making necessary investments in R&D and commercial activities to drive future growth. There is confidence in their cash flow of $2.3 billion, and more clarity will be provided in their future guidance. Following this, Ash Verma from UBS asks about their capital allocation strategy, inquiring how they will balance business development investments and share repurchases now that most of the debt paydown efforts have concluded, and mentions an impact on the ARV supply chain in emerging markets.

The paragraph features a conversation primarily about a company's financial strategy and operational challenges. Scott Smith mentions their focus on achieving a leverage ratio target of approximately 3.0, which will then allow them to implement their full capital allocation strategy. This includes generating a minimum of $2.3 billion in free cash flow, with half allocated to shareholders via dividends and share buybacks, and the other half dedicated to business development (BD). Given the current share price and company valuation, they may prioritize share buybacks in 2025. Doretta Mistras discusses delays in the ARV product supply and efforts to address backlogs in their ARV and ARB portfolios. David Amsellem from Piper Sandler is the next speaker.

In the paragraph, David Amsellem asks about the transparency and contributions of specific new product launches for 2025, mentioning products like Sandostatin LAR, Victoza, iron sucrose (Venofer), glucagon, and potential competition with Teva in the Symbicort market. Scott Smith responds positively about the overall revenue generated from new products, citing a historical range of $450 million to $550 million annually, and expresses confidence in maintaining these figures. Philippe Martin supports this assertion, confirming the expectation for similar revenue from both 2024 carryover and generic launches in North America and Europe for the upcoming year.

The paragraph discusses the inclusion of complex products like glucagon, iron sucrose, and liraglutide in the company's plans for the next year, indicating confidence in revenue targets of $450 million to $550 million. Corinne Le Goff mentions the success of Breyna, a complex generic in competition with Symbicort, which has achieved a 15% market share and is expected to continue growing into 2025. Balaji Prasad from Barclays asks about the launch plans for sotagliflozin in various markets over the next one to two years and how potential U.S. policy shifts towards domestic production might influence the company's focus on the U.S. generics market. Scott Smith responds to these queries.

In the paragraph, a speaker addresses macroeconomic uncertainties related to healthcare, expressing a willingness to work with the Trump administration but acknowledging it's too soon to predict specific implications. Philippe Martin discusses plans for Sotagliflozin, intending to capitalize on its U.S. approval to secure registration in several large markets like Canada and Australia, and noting that Asian markets might require additional studies. They anticipate revenue contribution starting in 2027. Corinne Le Goff highlights the compatibility of Sotagliflozin with their existing cardiovascular infrastructure, emphasizing the company's $2.5 billion revenue from cardiovascular diseases and the potential for Sotagliflozin to drive growth through the decade's end. The operator concludes the session, handing over to Scott Smith for closing remarks.

In conclusion, Scott Smith expressed pride in the team's strong performance and the company's financial strength. He emphasized the focus on capital allocation, aiming to return value to shareholders through dividends and share repurchases while also investing in business development for future growth. The call ended with thanks and an invitation to disconnect.

This summary was generated with AI and may contain some inaccuracies.