The paragraph is an introduction to Viatris's Q4 and Full Year 2024 earnings call. The operator welcomes participants and introduces the event, which is in listen-only mode and being recorded. Bill Szablewski, Head of Capital Markets, introduces the company's key executives present on the call and mentions that they will discuss forward-looking statements, financial guidance for 2025, and strategic initiatives, all subject to risks and uncertainties. The discussion will include non-GAAP financial measures and comparisons of 2024 results with 2023 on a divestiture adjusted operational basis. Scott Smith, the CEO, begins his remarks by noting that 2024 was a significant year for Viatris across their strategic pillars.

In 2024, the company saw growth in its base business, increased new product revenues to $582 million, and completed divestitures to streamline operations. It returned $825 million to shareholders and retired $3.7 billion in debt, achieving its gross leverage target. The company expanded its portfolio with three new products and finished the year with 2% revenue growth on a divestiture-adjusted basis, totaling approximately $14.7 billion in revenue. The adjusted EBIT was around $4.7 billion, with an adjusted EPS of $2.65 per share, and a free cash flow of $2.6 billion, excluding divestiture-related costs. Regarding 2025 priorities, the company provided an update on remediation efforts at its facility in Indore, India, after an FDA inspection in June. A comprehensive plan to address FDA feedback is underway, with the company engaging third-party experts. The company aims to complete efforts in a few months and expects to ask the FDA for a re-inspection after receiving a warning letter and import alert in December.

The import alert affects 11 products in the U.S., including lenalidomide, with exceptions for four due to shortages. Additional exceptions are unlikely. Markets outside the U.S., including parts of the ARV business and European generics, may be impacted. The estimated revenue impact for 2025 is $500 million, with adjusted EBITDA down by $385 million. Efforts are being made to mitigate supply disruptions through site transfers and third-party arrangements. The focus for 2025 is on executing the base business and launching new products, with 10 molecules in Phase 3 trials, expecting six readouts, including meloxicam for acute pain, and advancing the development of selatogrel, cenerimod, and SOTA, with an updated collaboration with Idorsia.

The updated terms grant rights to additional territories for cenerimod, particularly in Asia, and reduce certain milestone payments, which is expected to enhance long-term asset economics. The company is assuming some of Idorsia's development costs and will take full control of asset development to ensure timelines remain on track. The capital allocation strategy over the next three to five years will balance between capital return and business investment, with a focus on returning capital to shareholders in 2025, including $500-$650 million in share repurchases and supporting dividends. With $1.5 billion in share repurchase authorization remaining, increased flexibility is anticipated. Business development will focus on creative regional opportunities leveraging their commercial and R&D strengths. An enterprise-wide initiative aims to identify additional cost savings, with expected OpEx savings from 2026 onward. An Investor Day is planned to discuss long-term goals. The company is optimistic about its 2024 accomplishments and future, particularly in addressing challenges at Indore.

In 2025, the company plans to enhance its base business, execute its pipeline, and return capital to shareholders, positioning itself for growth in the future. Philippe Martin highlights the diverse and robust pipeline, with over 100 annual submissions generating more than $450 million in new product revenues annually. The company achieved $582 million in new product revenues in 2024, aiming for $450 million to $550 million in 2025. Significant progress is expected with complex injectables like Iron Sucrose, Octreotide, and Liraglutide, while Glucagon, approved last year, is being launched. The company is developing expertise in difficult-to-manufacture medicines and is advancing novel and life cycle management programs, with several Phase 3 readouts anticipated in 2025, including Effexor for Generalized Anxiety Disorder in Japan, which has shown positive results in its Phase 3 studies.

The company is planning a series of important developments in their pharmaceutical pipeline. They aim to submit a new product for review and expect Phase 3 results for the Xulane Low Dose transdermal birth control patch in the first half of the year. They are optimistic about their Meloxicam program, with positive results from a Phase 3 bunionectomy study and another study in herniorrhaphy anticipated later. In ophthalmology, they have several programs advancing, with key Phase 3 results for Blepharitis, Presbyopia, and visual loss related to Keratorefractive Surgery expected soon. Additionally, their partner's drug for visual loss received FDA fast-track designation. They are also focused on accelerating enrollment for ongoing trials for selatogrel and cenerimod.

The paragraph discusses advancements in several medical trials and studies. Enrollment for the OPUS study is progressing with anticipated completion later in the year. Data from the Phase 2 care study is being submitted for publication, with presentations planned at major congresses. The SOS-AMI trial on selatogrel is progressing as planned, with efforts to increase recruitment and engage the cardiovascular community. Sotagliflozin has shown significant clinical benefits in reducing major adverse cardiovascular events (MACE) in high-risk patients with type 2 diabetes and CKD, as published in The Lancet. It is the first SGLT inhibitor to reduce both myocardial infarction and stroke risks. Collaborations are underway with Lexicon to expand labeling and make regulatory submissions, targeting wider global market access starting in 2025, with potential registration in 2026.

The paragraph outlines the company's R&D and commercial strategies. In R&D, the focus is on executing current programs and preparing for future innovations, with key expectations like approvals and data readouts within the year, and plans to expand the GLP-1 pipeline and supply chain. In the commercial domain, the priorities for 2025 are maintaining business momentum, successfully launching new products (including 150 global generic products and complex injectables), and preparing for future business by enhancing commercialization capabilities for innovative products. The company is confident in achieving $450 million to $550 million in new product revenues.

The paragraph provides an overview of the expected financial performance and growth strategies across different geographic segments. Overall, a $500 million revenue impact related to Indore will primarily affect the U.S. and emerging markets, leading to an anticipated 1% decline in total revenues by 2025. Despite this, Europe is projected to grow, driven by new product launches, carryover benefits from specific drugs, strong thrombosis portfolio performance, and volume growth in Italy and France. North America is expected to decline due to the Indore impact and competition on generics but will focus on leveraging its complex generics and launching new complex injectables. Emerging markets are projected to grow, with key expansions in the cardiovascular sector in Latin America and growth in markets like Turkey, India, Korea, Brazil, and Emerging Asia.

The paragraph discusses expectations for JANZ in 2025, highlighting anticipated declines due to government price regulations and changes in Japan's patent reimbursement. Despite this, there's strong volume growth from key brands and a focus on expanding the generic business. Japan is preparing for future launches of innovative products like Effexor. In Greater China, the company forecasts growth in 2025, driven by demand for their chronic disease portfolio amid an aging population, and plans new product launches like Dymista and Breyna. The company aims to maintain its commercial presence in China through various channels despite potential policy challenges and is confident in achieving its 2025 targets. The paragraph concludes by transitioning to Doretta Mistras to discuss operational performance and results.

The paragraph provides a detailed analysis of the company's financial performance for 2024, reporting total revenues of $14.7 billion, a 2% increase year-over-year, driven by growth in all segments and new products. Adjusted EBITDA was $4.7 billion with strong gross margins. In the fourth quarter, revenues were $3.5 billion, up 1%, with growth in global generics and different markets, though gross margins moderated due to product mix. The company generated $685 million in free cash flow, excluding divestiture costs and taxes, and used this along with divestiture proceeds to pay down $1.4 billion in debt, achieving a leverage target of 2.9 times. For 2024, estimates exclude $490 million in revenue and $255 million in EBITDA from divested businesses. Looking ahead to 2025, an FX headwind of 2%-3% is expected due to the strong U.S. dollar, with 75% of revenues generated outside the U.S.

The paragraph outlines the financial implications and remediation efforts related to the Indore facility's impact on the company's operations. Excluding Indore, the company expects strong operational revenues from Europe, China, and emerging markets. Remediation is a priority, with efforts to transfer product manufacturing and ongoing discussions with the FDA and customers. The financial impact is estimated at $500 million in total revenue and $385 million in adjusted EBITDA by 2025, including short-term penalties and disruptions of $100 million. Lenalidomide, a major affected product, accounts for a significant portion of this impact and is expected to face increased generic competition by early 2026. In Europe, the impact on generic products is anticipated to be minimal, and in emerging markets, the ARB business will have short-term disruptions with a $125 million revenue impact. Overall, the focus shifts to factors affecting gross margins, adjusted EBITDA, and EPS guidance.

The company anticipates that gross margins will be affected by factors such as operations in Indore, price erosion, and increased product supply costs, but expects some offset from segment mix benefits. They are managing expenses in SG&A and R&D, forecasting a reduction in operating expenditures by $150 million, mostly benefiting SG&A. An amended agreement with Idorsia adds $100 million in R&D expenses for 2025 but reduces contingent milestones by $250 million and expands territory rights for cenerimod. The company foresees a 150 basis point rise in the effective tax rate due to new regulations. Free cash flow is projected to be $2 billion, with $1.7 billion available for deployment after taxes and transaction costs. The company plans $500 million to $650 million in share repurchases and aims to return over $1 billion to shareholders, adhering to a $0.48 per share dividend policy, representing nearly 70% of available capital.

The company expects higher total revenue in the second half of the year due to new product launches and product seasonality. Operating expenses are anticipated to be evenly distributed between the first and second halves. Adjusted EBITDA and EPS are expected to be more weighted toward the second half, influenced by revenue and margin phasing. The first quarter is projected to have lower net sales due to factors like Indore-related products and seasonal impacts in Europe. Despite these factors, the company is committed to maintaining a strong financial position, benefiting from a diverse global portfolio, strong business fundamentals, and significant free cash flow generation. The management expresses confidence in their plan for the year and looks forward to providing updates. The paragraph ends with the transition to a Q&A session, where David Amsellem from Piper Sandler asks a question regarding a warning letter and concerns about quality control at other facilities.

The paragraph discusses Viatris's current status regarding inspections and compliance at its manufacturing facilities. It notes that three facilities were inspected in 2024. The Indore facility received a warning letter and import alert, whereas the facility in Carole Park, Australia, was inspected without any issues and is now closed out. The Nashik, India facility's inspection classification is still pending. The rest of Viatris's 26 facilities are in compliance with health authorities. Additionally, the paragraph touches on Viatris's strategic direction, including considerations for capital deployment, M&A activity, and the company’s future focus areas in terms of branding and returning capital to shareholders.

The paragraph discusses the company's capital allocation plan over the next five years, which involves allocating 50% to shareholders through dividends and share buybacks and 50% to business development. The focus this year is more on returning value to shareholders, with a minimum of $500 million to $650 million in share buybacks. Additionally, there is a $1 billion capital plan that maintains strategic flexibility for further share buybacks, business development, and debt reduction. Philippe Martin comments on the progress of the selatogrel and cenerimod programs, with data expected by late 2026, although it could be earlier if current enrollment trends continue. The paragraph ends with a segue to a question from Ashwani Verma of UBS.

The paragraph covers a discussion between Scott Smith and Ashwani Verma regarding the status of remediation efforts at a facility in Indore and the impact of lenalidomide's declining patent protection on their business. Smith mentions that remediation efforts are over halfway complete and they plan to request an FDA reinspection by late spring or early summer. Despite efforts to exempt lenalidomide, they were unsuccessful, leading to earlier-than-expected economic impacts as its profitability declines by January 2026. When asked about more aggressive stock buybacks given the stock's pre-market downturn, Smith acknowledges the question but doesn't provide a detailed answer.

The paragraph states that the company has strong cash flows providing flexibility for various activities, planning to return $1 billion to $1.2 billion to shareholders through dividends and share buybacks. They aim to buy back $500 million to $650 million in shares, potentially more if the stock remains undervalued. Additionally, the company is considering regional deals for increased revenue and EBITDA. Chris Schott from JPMorgan asks about the scope and significance of an enterprise review and the impact of Indore on gross margins. Scott Smith explains that the cost initiative was planned for some time, following a merger of two large companies four years ago, and defers to Doretta for details on margins.

The article discusses the company's recent divestment of four major businesses, including biosimilars, women's healthcare, OTC, and API. They believe it is an opportune time to reassess their organizational structure and resource allocation to meet future goals for 2025-2026. Doretta Mistras mentions a decline in gross margin due to high-margin issues with Indore and normal business challenges, but these are somewhat offset by segment mix benefits. Scott Smith adds that they have started internal discussions and brought in external help to optimize the cost structure, which should show positive effects by 2026. The operator then introduces the next question from Jason Gerberry from Bank of America.

The paragraph discusses two main issues. The first is about the impact of manufacturing issues at the Indore facility on revenues outside the United States. The Indore facility is undergoing an active remediation due to a warning letter, which may lead to supply shortages in certain products, even if they can be shipped to Europe. The company is seeking alternate sources during the remediation process, and it's specific to particular products and locations. Scott Smith explains the situation in terms of the manufacturing network, which includes 26 global facilities. The second issue, addressed by Doretta Mistras, involves the confidence in the company's new product revenue forecast for 2025, which ranges from $450 million to $550 million. Mistras states that the forecast is derisked and supported by historical performance, with 20% of the estimated revenue coming from already approved products.

The paragraph discusses a company's diverse product portfolio, highlighting the approval and launch of glucagon and the positive performance of the generic Symbicort, Breyna, which is expected to contribute significantly to revenues by 2025. During a Q&A session, Umer Raffat from Evercore asks about previously communicated impacts of an Indore Warning Letter related to 11 products, including generic Revlimid, questioning how this was disclosed to investors. Umer also inquires about a decision to invest an additional $100 million into an Idorsia deal, seeking clarification on the reasoning and new information influencing this decision. Scott Smith responds, indicating that the situation was dynamic at the time of disclosure.

The paragraph discusses the uncertain situation surrounding the exclusion of certain products, particularly lenalidomide, from FDA-imposed restrictions or shortages. Despite attempts to secure exclusions due to the medication's importance, clear outcomes were not apparent until recently. The impact on revenue and EBITDA, specifically from lenalidomide, was significant. The speaker highlights the importance of credibility and accuracy when communicating about these developments. Philippe Martin mentions positive progress and feedback from ongoing studies and interactions with key opinion leaders (KOLs) and principal investigators (PIs), which provides confidence to continue investing in these programs.

The paragraph discusses the progress and significance of selatogrel and cenerimod programs. Selatogrel's study shows promise with patients self-injecting at the correct time and seeking hospital care afterward, which boosts confidence in its future success. In 2024, the importance of these programs became clear, with positive feedback supporting their continued development. To enhance data integrity and leverage their infrastructure, Viatris plans to take greater control of these programs, particularly expanding into Asian markets where cenerimod has significant potential for treating systemic lupus erythematosus (SLE) due to high rates of interferon use in Japan. Overall, these programs are seen as crucial for future revenue growth and commercial prospects.

In the paragraph, Balaji Prasad from Barclays asks about the focus of their upcoming Investor Day, given tasks like getting Indore cleared and launching new complex generics, with key pipeline events expected in 2025 or 2026. Scott Smith responds, noting the uncertainty of FDA timelines for reinspection, estimating remediation completion in the next few months and hoping for reinspection by late 2025 or early 2026. For the Investor Day, the main focus will be on long-term revenue, EBITDA, and EPS outlooks, despite unexpected challenges in 2025, with an aim to set the foundation for growth in 2026 and beyond.

The paragraph discusses the company's strategy and future plans. They plan to present revenue, EBITDA, and EPS projections for the next five years, outline their innovative pipeline, base business pipeline, and complex generics, as well as the implementation of a global GLP-1 strategy. An enterprise-wide cost initiative is also being undertaken, with a progress update expected soon. Philippe Martin mentions that Phase 3 readouts for the year will occur in the first half, and data should be available by Investor Day. CEO Scott Smith acknowledges a challenging situation in Indore that impacts 2025, though the base business remains strong. Despite this, they anticipate 3% top-line growth and 2% EBITDA growth without the Indore issue. The company is focused on strong commercial execution, advancing pipelines, and prioritizing capital return, particularly through share repurchases, as they approach 2025.

The company is implementing remediation plans for Indore and launching a global review to identify further cost savings. They are committed to driving sustainable growth in 2025 for success in 2026 and beyond. They plan to provide updates on these initiatives at their upcoming Investor Day. The conference call then concludes.

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