Viatris Inc.

VTRS Details

Viatris Inc. (NASDAQ: VTRS) is a healthcare firm that provides patients in over 165 countries with access to medications and operations. Over 1,400 authorized molecules are included in the company's portfolio, divided into three segments: Brands, Complex Generics and Biosimilars, and Generics. VTRS was formed in November 2020 by combining Mylan NV and the Upjohn business (formerly part of Pfizer Inc.) and was listed on the NASDAQ on November 17, 2020.

Deal on Morgantown Workers Severance: On July 3, 2021, the United Steelworkers (USW) union struck an agreement with VTRS on severance and other benefits for union workers who would lose their employment when the company's facility in Morgantown, West Virginia, closes on July 31. VTRS announced the closure in December 2020 as part of a cost-cutting reorganization.

Favorable Rulings in EpiPen Class Action: On June 23, 2021, the US District Court for the District of Kansas issued a decision in Mayan's favor (for the most part) on the class action related to its EpiPen Auto-Injector. The court decided to dismiss all the claims of the plaintiffs under the federal RICO statute. The only remaining claim in the class action suit is related to a patent settlement between Pfizer and Teva, plus other alleged actions connected with Teva's generic epinephrine auto-injector. The trial is now scheduled to commence on September 07, 2021.

Q1FY21 Results: The company’s total revenues in Q1FY21 (ended March 31, 2021) were USD 4.43 billion, representing a decline of 6% compared to combined adjusted revenue for Q1FY20 (combined results of Mylan and Upjohn business). Revenue from the Brands product category amounted to USD 2.72 billion, representing 61.92% of the total revenue in Q1FY21. Net loss for Q1FY21 was USD 1.04 billion, and free cash flow generated during the quarter amounted to USD 799.3 million. In addition, the business paid down USD 1.06 billion in short-term debt during the quarter. VTRS stated that it made significant progress on its core programs and expects to achieve ~USD 500 million in synergies in FY21.

Q1FY21 Key Product Sales (Source: Earnings Presentation, May 10, 2021)

Key Risks: The supply of pharmaceutical drugs is susceptible to counterfeit versions being distributed illegally, particularly over the internet. Such illicit counterfeit VTRS drugs, which are often unsafe/ineffective, could negatively impact the company's brand and business. Furthermore, VTRS may be subjected to suspensions/withdrawal of prior approvals if its products fail to comply with the regulatory requirements, adversely affecting its financial condition.

Outlook: For FY21, the company expects the total revenue to be in the range of USD 17.2 billion to USD 17.8 billion, with adjusted EBITDA ranging between USD 6.0 billion and USD 6.4 billion. The estimated range for free cash flow during the year is USD 2.0 billion to USD 2.3 billion.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VTRS Daily Technical Chart (Source: REFINITV)

Stock Recommendation: VTRS stock declined 19.76% in the past six months and is currently leaning towards the lower end of the 52-week range of USD 12.94 to USD 18.86. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 43.25. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 17.02. Considering the valuation of the newly listed company, the correction in its stock price, decent fundamentals, extensive portfolio, and encouraging outlook, we recommend a “Buy” rating on the stock at the current price of USD 13.89, down 1.21% as of July 22, 2021, 1.09 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.