Viatris Inc.

VTRS Details

Viatris Inc. (NASDAQ: VTRS) is a healthcare company that specializes on providing medicines and long-term therapies to patients in over 165 countries. Its portfolio is diversified into Brands, Complex Generics and Biosimilars, and Generic divisions, contains approximately 1,400 authorized compounds across a variety of therapeutic areas that tackle both communicable and non-communicable disorders. VTRS was established in November 2020 when Mylan N.V. and the Upjohn business (formerly part of Pfizer Inc.) merged, and it went public on the NASDAQ on November 17, 2020.

Latest News:

• Received Regulatory Approval for Cyclosporine Ophthalmic Emulsion: On February 3, 2022, VTRS announced that its subsidiary, Mylan Pharmaceuticals Inc., received approval for its Abbreviated New Drug Application (ANDA) for Cyclosporine Ophthalmic Emulsion 0.05%, the first generic version of Allergan's Restasis, from the US Food and Drug Administration (FDA). There are no remaining legal or regulatory restrictions, and the company is ready to begin operations right away.
• Dividend Declared: On January 06, 2022, VTRS declared a Q1FY22 dividend of USD 0.12 per common share, payable on March 16, 2022, to shareholders of record on February 24, 2022, equating to USD 0.48 per share on an annual basis for FY22.

Q3FY21 Results:

• Surge in Topline: The company reported a YoY growth of 52.64% increase in total revenue to USD 4.54 billion during Q3FY21 (ended September 30, 2021) from USD 2.97 billion during Q3FY20, owing to an YoY growth of 22.78% in Developed Markets
• Growth in Profitability: VTRS net income increased to USD 311.5 million in Q3FY21 from USD 185.7 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 844.30 million and total debt of USD 23.44 billion.

Key Risks:

• Product Concentration Risk: In FY20, VTRS’ top ten products accounted for 23% of its total revenue. Therefore, the decline in the volume or pricing of such products could harm the company’s financial performance.
• Regulatory Risk: VTRX must conduct its business in the ambit of a strict regulatory environment, non-observance of norms could lead to recall or even suspension of the products.

 Outlook: 

• FY21 Guidance: As of Q3FY21, VTRS expects to clock total revenue in the range of USD 17.7 – 17.9 billion, along with adjusted EBITDA of USD 6.3 – 6.5 billion. It also anticipates Free Cash Flow (FCF) of USD 2.4 – 2.6 billion in FY21. 

 Valuation Methodology: EV/Sales-Based Relative Valuation

(Analysis by Kalkine Group)

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

Stock Recommendation:

VTRS' stock price has increased 3.11% in the past six months and is currently trading close to the mid-band of its 52-week range of USD 11.96 to USD 18.68. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 16.91.

Considering the slight movement in the stock price in the past six months, decent balance sheet, robust dividend yield, recent FDA approval, solid margins, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 15.25, down 0.46%, as of February 16, 2022.

Three-Year Technical Price Chart (as on February 16, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

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