Viatris(VTRS) - 2025 Q2 - Quarterly Report

General Information Filing Details Viatris Inc. filed a Quarterly Report on Form 10-Q for Q2 2025, identifying as a large accelerated filer with common stock traded on NASDAQ under VTRS - Filing Type: Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Registrant: Viatris Inc. (Commission file number 001-39695)[2] Registrant Status | Status | Indicator | | :---------------------- | :-------- | | Large accelerated filer | ☑ | Common Stock Information (as of August 4, 2025) | Metric | Value | | :-------------------------------- | :------------ | | Shares Outstanding (par value $0.01 per share) | 1,165,872,127 | Index to Form 10-Q Report Structure The Form 10-Q is structured into Part I (Financial Information) and Part II (Other Information), covering financial statements, management analysis, and legal/risk disclosures - Part I includes Condensed Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations[7] - Part II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities, Other Information, and Exhibits[7] Glossary of Defined Terms Key Definitions This section defines key financial measures, regulatory terms, business segments, and transaction-specific terms used throughout the Form 10-Q - The glossary defines key financial terms including Adjusted EBITDA and Adjusted EPS[10] - It clarifies company-specific transactions such as the Biocon Biologics Transaction and the Idorsia Transaction[10][11] - Key business segments defined include Developed Markets, Emerging Markets, Greater China, and JANZ[10][11] PART I — FINANCIAL INFORMATION ITEM 1. Condensed Consolidated Financial Statements (unaudited) This section presents Viatris Inc.'s unaudited condensed consolidated financial statements for Q2 2025 and 2024, including operations, comprehensive earnings, balance sheets, equity, cash flows, and explanatory notes Condensed Consolidated Statements of Operations Viatris Inc. reported a net loss of $4.6 million for Q2 2025, improving from the prior year, but a $3.05 billion net loss for H1 2025 due to goodwill impairment Condensed Consolidated Statements of Operations (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $3,569.0 | $3,785.9 | $6,812.2 | $7,439.4 | | Total revenues | $3,582.1 | $3,796.6 | $6,836.4 | $7,460.0 | | Gross profit | $1,332.9 | $1,445.4 | $2,494.1 | $2,949.4 | | Earnings (loss) from operations | $233.0 | $(239.9) | $(2,649.2) | $(36.0) | | Net loss | $(4.6) | $(326.4) | $(3,046.6) | $(212.5) | | Basic loss per share | $0.00 | $(0.27) | $(2.58) | $(0.18) | | Diluted loss per share | $0.00 | $(0.27) | $(2.58) | $(0.18) | Condensed Consolidated Statements of Comprehensive Earnings (Loss) Viatris reported $201.9 million comprehensive earnings for Q2 2025, a significant improvement, but a $2.50 billion comprehensive loss for H1 2025, both influenced by foreign currency Condensed Consolidated Statements of Comprehensive Earnings (Loss) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(4.6) | $(326.4) | $(3,046.6) | $(212.5) | | Foreign currency translation adjustment | $507.0 | $(89.7) | $1,005.8 | $(432.2) | | Other comprehensive earnings (loss), net of tax | $206.5 | $(34.2) | $548.5 | $(227.8) | | Comprehensive earnings (loss) | $201.9 | $(360.6) | $(2,498.1) | $(440.3) | Condensed Consolidated Balance Sheets Viatris Inc.'s total assets decreased to $38.41 billion as of June 30, 2025, primarily due to reduced goodwill, while total equity declined to $15.57 billion Condensed Consolidated Balance Sheets (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :-------------- | :---------------- | | Cash and cash equivalents | $566.4 | $734.8 | | Total current assets | $9,774.6 | $9,520.7 | | Intangible assets, net | $16,323.8 | $17,070.9 | | Goodwill | $6,748.3 | $9,133.3 | | Total assets | $38,411.5 | $41,500.9 | | Total current liabilities | $7,133.4 | $5,779.4 | | Long-term debt | $12,791.6 | $14,038.9 | | Total liabilities | $22,841.0 | $22,865.4 | | Total equity | $15,570.5 | $18,635.5 | Condensed Consolidated Statements of Equity Viatris Inc.'s total equity decreased to $15.57 billion by June 30, 2025, driven by a $3.05 billion net loss and $351.5 million in share repurchases Key Changes in Equity (Six Months Ended June 30, 2025, in millions) | Item | Amount | | :-------------------------------- | :------- | | Balance at December 31, 2024 | $18,635.5 | | Net loss | $(3,046.6) | | Other comprehensive earnings, net of tax | $548.5 | | Share-based compensation expense | $92.3 | | Common stock repurchase | $(351.5) | | Cash dividends declared | $(292.2) | | Balance at June 30, 2025 | $15,570.5 | Key Changes in Equity (Six Months Ended June 30, 2024, in millions) | Item | Amount | | :-------------------------------- | :------- | | Balance at December 31, 2023 | $20,467.4 | | Net loss | $(212.5) | | Other comprehensive loss, net of tax | $(227.8) | | Share-based compensation expense | $81.4 | | Common stock repurchase | $(252.5) | | Cash dividends declared | $(293.3) | | Balance at June 30, 2024 | $19,520.0 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $755.2 million in H1 2025, investing activities shifted to a $117.6 million net use, and financing cash use decreased to $829.4 million Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in millions) | Activity | 2025 | 2024 | | :-------------------------------------- | :------- | :------- | | Net cash provided by operating activities | $755.2 | $993.7 | | Net cash (used in) provided by investing activities | $(117.6) | $221.5 | | Net cash used in financing activities | $(829.4) | $(1,273.5) | | Net decrease in cash, cash equivalents and restricted cash | $(168.3) | $(75.1) | | Cash, cash equivalents and restricted cash — end of period | $567.8 | $918.5 | Notes to Condensed Consolidated Financial Statements These notes detail Viatris' accounting policies, revenue, acquisitions, divestitures, share-based compensation, balance sheet components, goodwill, financial instruments, debt, segment information, and litigation Note 1. General Interim financial statements adhere to U.S. GAAP and SEC rules, with reclassifications made to conform prior period presentations, including goodwill impairment charges - Interim financial statements are prepared in accordance with U.S. GAAP and SEC rules for Form 10-Q[27] - Goodwill impairment charges are now presented separately in the condensed consolidated statements of operations and cash flows[30] Note 2. Revenue Recognition and Accounts Receivable Viatris recognizes revenue net of variable consideration; Q2 2025 net sales were $3.57 billion, with Brands contributing $2.28 billion and Generics $1.28 billion - Revenue is recognized under ASC 606, net of variable consideration[31] Net Sales by Product Category and Segment (Three Months Ended June 30, 2025, in millions) | Product Category | Developed Markets | Greater China | JANZ | Emerging Markets | Total | | :--------------- | :---------------- | :------------ | :--- | :--------------- | :------ | | Brands | $1,121.4 | $586.5 | $160.5 | $416.1 | $2,284.5 | | Generics | $997.9 | $2.4 | $145.2 | $139.0 | $1,284.5 | | Total Viatris | $2,119.3 | $588.9 | $305.7 | $555.1 | $3,569.0 | Net Sales by Product Category and Segment (Six Months Ended June 30, 2025, in millions) | Product Category | Developed Markets | Greater China | JANZ | Emerging Markets | Total | | :--------------- | :---------------- | :------------ | :--- | :--------------- | :------ | | Brands | $2,141.2 | $1,139.3 | $302.3 | $818.6 | $4,401.4 | | Generics | $1,869.8 | $5.1 | $279.5 | $256.4 | $2,410.8 | | Total Viatris | $4,011.0 | $1,144.4 | $581.8 | $1,075.0 | $6,812.2 | Consolidated Net Sales for Select Key Products (Three Months Ended June 30, in millions) | Product | 2025 | 2024 | | :---------------------- | :------- | :------- | | Lipitor® | $387.9 | $348.4 | | Norvasc® | $182.7 | $161.9 | | EpiPen® Auto-Injectors | $136.8 | $115.5 | | Lyrica® | $128.1 | $124.3 | | Viagra® | $100.3 | $106.1 | | Creon® | $91.4 | $78.2 | | Celebrex® | $70.0 | $72.2 | | Effexor® | $63.1 | $62.7 | | Zoloft® | $61.1 | $58.9 | | Xalabrands | $40.7 | $45.6 | | Yupelri® | $66.6 | $54.5 | | Dymista® | $48.4 | $55.0 | | Amitiza® | $41.6 | $36.9 | | Xanax® | $33.9 | $35.4 | Reconciliation of Gross Sales to Net Sales (Six Months Ended June 30, in millions) | Category | 2025 | 2024 | | :----------------------------------------- | :--------- | :--------- | | Gross sales | $11,545.0 | $12,558.5 | | Total gross to net adjustments | $(4,732.8) | $(5,119.1) | | Net sales | $6,812.2 | $7,439.4 | - The Company derecognized $123.0 million of accounts receivable as of June 30, 2025, under factoring arrangements[40] Note 3. Recent Accounting Pronouncements The SEC's climate-related disclosure rules, though stayed, would impact fiscal year 2025; no other significant accounting standard changes were noted from the 2024 Form 10-K - The SEC's Final Rules on climate-related disclosures have been stayed pending litigation[42] - The SEC withdrew its defense of the Final Rules in pending litigation on March 27, 2025[42] - No other significant changes in new accounting standards were disclosed from Viatris' 2024 Form 10-K[43] Note 4. Acquisitions and Other Transactions Viatris acquired global rights to selatogrel and cenerimod from Idorsia for $350 million upfront, with a 2025 amendment reducing contingent milestones by $250 million in exchange for assuming $100 million in development costs - On March 15, 2024, Viatris acquired global development and commercialization rights to selatogrel and cenerimod from Idorsia for an upfront payment of $350 million[44] Idorsia Acquisition Purchase Price Allocation (in millions) | Asset/Liability | Amount | | :-------------------- | :------- | | Current assets | $2.1 | | IPR&D | $675.0 | | Goodwill | $19.5 | | Total assets acquired | $696.6 | | Current liabilities | $1.6 | | Net assets acquired | $695.0 | - An amendment on February 25, 2025, reduced contingent milestone payments by $250 million and transferred additional territory rights and personnel to Viatris, in exchange for assuming $100 million of Idorsia's development cost obligation[50] Note 5. Divestitures Viatris completed major divestitures by end of 2024, recording $80.7 million in additional pre-tax charges in H1 2025 due to increased transaction costs - Viatris substantially completed divestitures of its OTC Business, women's healthcare business, and API business by the end of 2024[51] - Additional pre-tax charges of $80.7 million were recorded in H1 2025 for divestitures, primarily due to increased transaction costs[52] TSA Income from Divestitures (in millions) | Period | 2025 | 2024 | | :---------------------- | :------- | :------- | | Three Months Ended June 30, | $12.4 | $6.0 | | Six Months Ended June 30, | $29.8 | $19.5 | Note 6. Share-Based Incentive Plan Viatris' 2020 Incentive Plan was amended to increase authorized shares by 49 million; $236.2 million in unrecognized compensation expense remains as of June 30, 2025 - The 2020 Incentive Plan was amended on December 6, 2024, to increase authorized shares by 49,000,000[55] Stock Awards Activity (December 31, 2024 to June 30, 2025) | Metric | Number of Shares Under Stock Awards | Weighted Average Exercise Price per Share | | :-------------------------- | :---------------------------------- | :-------------------------------------- | | Outstanding at Dec 31, 2024 | 3,350,786 | $35.94 | | Exercised | (12,291) | $6.51 | | Forfeited | (515,096) | $37.04 | | Outstanding at June 30, 2025 | 2,823,399 | $35.86 | - As of June 30, 2025, Viatris had $236.2 million of unrecognized compensation expense related to stock-based awards, with a weighted average vesting period of 1.7 years[58] Note 7. Pensions and Other Postretirement Benefits Viatris' global pension and postretirement plans incurred an $8.0 million net periodic benefit cost in H1 2025, with $112.2 million in benefit payments and $68.8 million in contributions expected in 2025 Net Periodic Benefit Cost (in millions) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | $7.4 | $7.8 | $14.9 | $15.7 | | Interest cost | $16.3 | $16.7 | $32.5 | $33.3 | | Expected return on plan assets | $(16.8) | $(16.9) | $(33.6) | $(33.8) | | Net periodic benefit cost | $4.0 | $4.0 | $8.0 | $7.8 | - The Company expects to make total benefit payments of approximately $112.2 million from pension and other postretirement benefit plans in 2025[61] - The Company anticipates making contributions to pension and other postretirement benefit plans of approximately $68.8 million in 2025[61] Note 8. Balance Sheet Components This note details balance sheet components, showing inventories increased to $4.26 billion by June 30, 2025, and other current liabilities rose due to financial instrument fair value Cash and Restricted Cash (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $566.4 | $734.8 | | Restricted cash | $1.4 | $1.3 | | Cash, cash equivalents and restricted cash | $567.8 | $736.1 | Inventories (in millions) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :-------------- | :---------------- | | Raw materials | $1,547.4 | $1,345.9 | | Work in process | $531.7 | $527.3 | | Finished goods | $2,185.2 | $1,980.9 | | Inventories | $4,264.3 | $3,854.1 | Other Current Liabilities (in millions) | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :-------------- | :---------------- | | Accrued sales allowances | $1,046.3 | $989.4 | | Payroll and employee benefit liabilities | $567.8 | $729.3 | | Legal and professional accruals | $540.8 | $472.8 | | Fair value of financial instruments | $377.0 | $125.8 | | Other current liabilities | $3,670.1 | $3,724.7 | Note 9. Loss per Share Viatris reported a basic and diluted loss per share of $0.00 for Q2 2025 and $(2.58) for H1 2025, while continuing its $2.0 billion share repurchase program Loss per Share Attributable to Viatris Inc. Shareholders (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to Viatris Inc. common shareholders | $(4.6) | $(326.4) | $(3,046.6) | $(212.5) | | Weighted average shares outstanding (basic) | 1,173.0 | 1,191.1 | 1,182.7 | 1,193.1 | | Basic loss per share | $0.00 | $(0.27) | $(2.58) | $(0.18) | | Diluted loss per share | $0.00 | $(0.27) | $(2.58) | $(0.18) | - The Board of Directors declared a quarterly cash dividend of $0.12 per share[72] - The Company's share repurchase program authorizes up to $2.0 billion in common stock repurchases, with $850.4 million (79.3 million shares) repurchased as of June 30, 2025[73] Note 10. Goodwill and Intangible Assets Viatris recorded a $2.94 billion goodwill impairment charge in Q1 2025, impacting several segments, while Greater China's fair value exceeded its carrying value by $322.0 million Goodwill Carrying Amount Changes (Six Months Ended June 30, 2025, in millions) | Segment | Balance at Dec 31, 2024 | Impairment | Foreign Currency Translation | Balance at June 30, 2025 | | :---------------- | :---------------------- | :----------- | :--------------------------- | :----------------------- | | Developed Markets | $6,752.9 | $(2,261.0) | $527.3 | $5,019.2 | | Greater China | $921.5 | — | $6.3 | $927.8 | | JANZ | $295.1 | $(300.8) | $5.7 | — | | Emerging Markets | $1,163.8 | $(375.0) | $12.5 | $801.3 | | Total | $9,133.3 | $(2,936.8) | $551.8 | $6,748.3 | - A $2.94 billion goodwill impairment charge was recorded in Q1 2025, triggered by a sharp decline in share price and increased geopolitical/economic uncertainty[74][77][80] - The Greater China reporting unit's estimated fair value exceeded its carrying value by approximately $322.0 million (5.8%) as of March 31, 2025[85] Intangible Assets, Net (in millions) | Category | June 30, 2025 Net Book Value | December 31, 2024 Net Book Value | | :-------------------------------- | :----------------------------- | :------------------------------- | | Product rights, licenses and other | $15,521.9 | $16,256.7 | | In-process research and development | $801.9 | $814.2 | | Total | $16,323.8 | $17,070.9 | Intangible Asset Amortization Expense (in millions) | Period | 2025 | 2024 | | :----------------------------------------------------------------- | :------- | :------- | | Three Months Ended June 30, Total intangible asset amortization expense | $585.5 | $699.2 | | Six Months Ended June 30, Total intangible asset amortization expense | $1,156.7 | $1,300.2 | Note 11. Financial Instruments and Risk Management Viatris manages foreign currency and interest rate risks with derivatives; contingent consideration liability totaled $367.2 million at June 30, 2025, with an Idorsia Transaction fair value adjustment gain - Viatris uses foreign exchange forward contracts and interest rate swaps to mitigate foreign currency and interest rate risks[92][101] - The Company designated certain Euro and Yen borrowings as a hedge of investments in Euro-functional and Yen-functional currency subsidiaries to manage foreign currency translation risk[95] Fair Value of Derivative Instruments (June 30, 2025, in millions) | Category | Asset Derivatives Fair Value | Liability Derivatives Fair Value | | :------------------------------------ | :--------------------------- | :----------------------------- | | Total derivatives designated as hedges | $4.0 | $81.9 | | Total derivatives not designated as hedges | $138.4 | $301.0 | | Total derivatives | $142.4 | $382.9 | - Contingent consideration liability totaled $367.2 million at June 30, 2025, including $288.0 million for the Idorsia Transaction and $77.5 million for the Respiratory Delivery Platform[108][110][111] - A fair value adjustment gain related to the Idorsia Transaction contingent consideration liability was recorded in H1 2025 due to amended agreement terms[110] Note 12. Debt Viatris has a $600 million Receivables Facility with no outstanding borrowings; the fair value of outstanding notes was $11.81 billion, and mandatory long-term debt repayments total $14.012 billion - The Company has a $600 million Receivables Facility expiring April 2028, with no outstanding borrowings as of June 30, 2025[115][320] Long-Term Debt Summary (June 30, 2025, in millions) | Category | Amount | | :------------------------------------------ | :----------- | | Current portion of long-term debt | $1,673.1 | | Non-current portion of long-term debt | $12,791.6 | | Total long-term debt | $14,464.7 | - The aggregate fair value of the Company's outstanding notes was approximately $11.81 billion at June 30, 2025[119] Mandatory Minimum Repayments on Long-Term Debt (as of June 30, 2025, in millions) | Year | Total | | :----- | :------ | | 2025 | $0 | | 2026 | $1,953 | | 2027 | $1,752 | | 2028 | $1,634 | | 2029 | $0 | | Thereafter | $8,673 | | Total | $14,012 | Note 13. Comprehensive Loss Viatris Inc.'s accumulated other comprehensive loss improved to $(2.66 billion) by June 30, 2025, driven by a favorable foreign currency translation adjustment Accumulated Other Comprehensive Loss (in millions) | Component | June 30, 2025 | December 31, 2024 | | :----------------------------------------------------------------- | :-------------- | :---------------- | | Net unrealized loss on available-for-sale fixed income securities, net of tax | $(0.6) | $(1.2) | | Net unrecognized gain and prior service cost related to defined benefit plans, net of tax | $253.8 | $254.2 | | Net unrecognized loss on derivatives in cash flow hedging relationships, net of tax | $(12.8) | $32.3 | | Net unrecognized gain on derivatives in net investment hedging relationships, net of tax | $80.2 | $492.6 | | Foreign currency translation adjustment | $(2,985.0) | $(3,990.8) | | Total Accumulated other comprehensive loss | $(2,664.4) | $(3,212.9) | - Other comprehensive earnings before reclassifications for H1 2025 included a $1.01 billion foreign currency translation adjustment[125] Note 14. Segment Information Viatris operates four segments; H1 2025 segment profitability was $3.02 billion, resulting in a $(2.65 billion) consolidated loss from operations after unallocated costs and impairment - Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets[130] Segment Profitability (Six Months Ended June 30, 2025, in millions) | Segment | Net Sales | Total Revenues | Segment Profit | | :---------------- | :-------- | :------------- | :------------- | | Developed Markets | $4,011.0 | $4,028.2 | $1,613.6 | | Greater China | $1,144.4 | $1,144.4 | $786.5 | | JANZ | $581.8 | $583.8 | $145.9 | | Emerging Markets | $1,075.0 | $1,080.0 | $474.1 | | Total Reportable Segments | $6,812.2 | $6,836.4 | $3,020.1 | Reconciliation of Segment Profit to Loss from Operations (Six Months Ended June 30, 2025, in millions) | Item | Amount | | :------------------------------------------------- | :----------- | | Segment profit | $3,020.1 | | Intangible asset amortization expense | $(1,154.5) | | Impairment of goodwill | $(2,936.8) | | Research and development | $(440.8) | | Acquired IPR&D | $(10.0) | | Litigation settlements and other contingencies, net | $121.1 | | Transaction related and other special items | $(469.3) | | Corporate and other unallocated | $(776.8) | | Loss from operations | $(2,649.2) | Note 15. Licensing and Other Partner Agreements Viatris has $398 million in potential unaccrued development milestones; the FDA's Q1 2024 Complete Response Letter for GA Depot led to a $184.6 million asset impairment - Potential maximum development milestones not accrued totaled approximately $398 million at June 30, 2025, with $24 million estimated payable through 2025[141] - Mapi is eligible for up to $90.0 million in regulatory approval and commercial launch milestone payments for GA Depot[142] - In Q1 2024, Mapi received a Complete Response Letter from the FDA for GA Depot 40 mg, resulting in a $184.6 million impairment of Viatris' related equity investment and prepaid assets in Q4 2024[143] Note 16. Income Taxes The U.S. enacted the OBBBA on July 4, 2025, with unknown impacts; Viatris anticipates no 15% CAMT in 2025, and Pillar Two Rules were immaterial, with a $263.6 million tax reserve - The U.S. enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, with impacts on tax rate and deferred tax assets not yet determinable[146] - Viatris does not anticipate being subject to the 15% U.S. corporate alternative minimum tax (CAMT) in 2025[147] - The impact of the Pillar Two Global Anti-Base Erosion Rules on Viatris' H1 2025 results was not material[148] - The Company has a net reserve for uncertain tax positions of $263.6 million at June 30, 2025, related to international audits[156] Note 17. Litigation Viatris faces complex litigation including EpiPen, drug pricing, opioids, and intellectual property, with accruals of $25.0 million for EpiPen and $335 million for opioid claims - Viatris has a total accrual of approximately $25.0 million related to EpiPen® Auto-Injector litigation matters at June 30, 2025[169] - The Company reached a nationwide settlement framework for opioid-related claims, agreeing to pay up to $335 million over nine years, with approximately $335 million accrued at June 30, 2025[187][189] - Viatris has accrued approximately €12.2 million as of June 30, 2025, related to the Citalopram EU competition rules violation case[192] - The Company has accrued approximately $66.8 million as of June 30, 2025, for its product liability matters[197] - Viatris has approximately $5.3 million accrued related to its intellectual property matters at June 30, 2025[210] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Viatris Inc.'s financial performance, condition, and liquidity, covering operational results, market factors, recent developments, and non-GAAP reconciliations Company Overview Viatris is a global healthcare company operating in over 165 countries with 32,000 employees, 1,400+ molecules, and 26 manufacturing sites, structured into four reportable segments - Viatris is a global healthcare company supplying high-quality medicines to approximately 1 billion patients annually[217] - The Company operates in more than 165 countries with approximately 32,000 employees, 26 manufacturing sites, and over 1,400 approved molecules[218] - Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets[219] Certain Market and Industry Factors The pharmaceutical industry faces challenges from rigorous regulatory approvals, rapid generic entry, government price reductions, and international risks including inflation and geopolitical events - Obtaining regulatory approval for new pharmaceutical products is rigorous, costly, and unpredictable, with delays impacting commercial success[221][222] - Generic products contribute significantly to revenues and gross margins at launch but face negative impacts from additional competition[223] - Branded products experience substantial and rapid sales declines upon generic entry after market exclusivity expires[224] - Government-imposed price reductions and tender systems negatively impact sales and gross profit in international markets[225][226] - International operations are exposed to risks including inflation, geopolitical events, trade controls, sanctions, supply chain disruptions, and foreign currency exchange fluctuations[227] Recent Developments Recent developments include a $2.9 billion goodwill impairment, an FDA warning for the Indore facility impacting $500 million in 2025 revenues, an Idorsia acquisition amendment, and continued share repurchases Goodwill Impairment Viatris recorded a $2.9 billion non-cash goodwill impairment charge in Q1 2025, triggered by share price decline and increased geopolitical/economic uncertainty, leading to higher discount rates - A non-cash goodwill impairment charge of $2.9 billion was recorded in Q1 2025[231] - The impairment was triggered by a sharp and sustained decline in Viatris' share price and increased geopolitical and economic uncertainty[228][230] - Increased business risks and uncertainty led to an increase in discount rate assumptions impacting all reporting units[231] Indore Manufacturing Facility The FDA issued a warning letter and import alert for Viatris' Indore facility, impacting 11 U.S. products and estimated to negatively affect 2025 revenues by $500 million and earnings by $385 million - The FDA issued a warning letter and import alert for Viatris' Indore manufacturing facility, affecting 11 U.S. products[232] - The Company has implemented a comprehensive remediation plan and is in regular communication with the FDA[233][234] - Estimated negative impact to 2025 total revenues is approximately $500 million, and to 2025 earnings from operations is approximately $385 million[236] Acquisition of Idorsia Products Viatris acquired global rights to selatogrel and cenerimod from Idorsia; a 2025 amendment reduced contingent milestone payments by $250 million in exchange for assuming $100 million in development costs - On March 15, 2024, Viatris acquired global development and commercialization rights to selatogrel and cenerimod from Idorsia for an upfront payment of $350 million[238] - An amendment on February 25, 2025, granted Viatris additional territory rights for cenerimod, a $250 million reduction in contingent milestone payments, and additional personnel[239] - In exchange for amended terms, Viatris assumed $100 million of Idorsia's development cost obligation[240] Share Repurchase Program Viatris' Board authorized a $1.0 billion increase to its share repurchase program, totaling $2.0 billion, with $850.4 million in shares repurchased as of June 30, 2025 - The share repurchase program was increased by $1.0 billion in February 2024, authorizing repurchases of up to $2.0 billion of common stock[242] - During H1 2025, Viatris repurchased approximately 38.9 million shares at a cost of $350.4 million[242] - As of June 30, 2025, the Company had repurchased a total of approximately 79.3 million shares at a cost of $850.4 million under the program[242] Financial Summary Viatris reported $3.58 billion in Q2 2025 revenues (down 6%) and a $4.6 million net loss; H1 2025 revenues were $6.84 billion (down 8%) with a $3.05 billion net loss due to goodwill impairment Financial Summary (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenues | $3,582.1 | $3,796.6 | $(214.5) | $6,836.4 | $7,460.0 | $(623.6) | | Gross profit | $1,332.9 | $1,445.4 | $(112.5) | $2,494.1 | $2,949.4 | $(455.3) | | Earnings (loss) from operations | $233.0 | $(239.9) | $472.9 | $(2,649.2) | $(36.0) | $(2,613.2) | | Net loss | $(4.6) | $(326.4) | $321.8 | $(3,046.6) | $(212.5) | $(2,834.1) | | Diluted loss per share | $0.00 | $(0.27) | $0.27 | $(2.58) | $(0.18) | $(2.40) | Results of Operations Viatris' total revenues decreased by 6% in Q2 2025 and 8% in H1 2025 due to divestitures and the Indore Impact, with a $2.94 billion goodwill impairment impacting H1 operating expenses Total Revenues Total revenues decreased by 6% to $3.58 billion in Q2 2025 and by 8% to $6.84 billion in H1 2025, primarily due to divestitures and the Indore Impact Consolidated Total Revenues (in millions, except %s) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Total net sales | $3,569.0 | $3,785.9 | (6)% | $6,812.2 | $7,439.4 | (8)% | | Consolidated total revenues | $3,582.1 | $3,796.6 | (6)% | $6,836.4 | $7,460.0 | (8)% | - Net sales decreased by approximately $212.2 million (6%) in Q2 2025 and $449.6 million (6%) in H1 2025 due to 2024 divestitures[248][273] - The Indore Impact contributed approximately $160 million to the Q2 2025 net sales decrease and $300 million to the H1 2025 net sales decrease[248][273] - On a constant currency basis, net sales from the remaining business decreased by approximately 2% for both Q2 and H1 2025[248][273] Developed Markets Segment Developed Markets net sales decreased by 9% to $2.12 billion in Q2 2025 and 11% to $4.01 billion in H1 2025, primarily due to divestitures and the Indore Impact - Developed Markets net sales decreased by $199.9 million (9%) in Q2 2025 and $473.6 million (11%) in H1 2025[252][277] - The Indore Impact contributed approximately $110 million to Q2 2025 net sales decrease and $190 million to H1 2025 net sales decrease in Developed Markets[252][277] Greater China Segment Greater China net sales increased by 9% to $588.9 million in Q2 2025 and 6% to $1.14 billion in H1 2025, driven by strong performance across multiple channels - Greater China net sales increased by $49.9 million (9%) in Q2 2025 and $61.5 million (6%) in H1 2025[253][278] - Constant currency net sales increased by approximately 9% in Q2 2025 and 7% in H1 2025, driven by strong growth across e-commerce, retail, and private hospitals[253][278] JANZ Segment JANZ net sales decreased by 13% to $305.7 million in Q2 2025 and $581.8 million in H1 2025, primarily due to government price reductions, increased competition, and the Indore Impact - JANZ net sales decreased by $43.9 million (13%) in Q2 2025 and $85.6 million (13%) in H1 2025[254][279] - The decrease was primarily driven by lower volumes in Japan and Australia due to government price reductions and additional competition[254][279] - The Indore Impact contributed approximately $3 million to Q2 2025 net sales decrease and $6 million to H1 2025 net sales decrease in JANZ[254][279] Emerging Markets Segment Emerging Markets net sales decreased by 4% to $555.1 million in Q2 2025 and 11% to $1.08 billion in H1 2025, largely due to divestitures and the Indore Impact on the ARV business - Emerging Markets net sales decreased by $23.0 million (4%) in Q2 2025 and $129.5 million (11%) in H1 2025[255][280] - The decrease was partially driven by an unfavorable foreign currency translation impact of approximately $4.3 million (1%) in Q2 and $32.0 million (3%) in H1[255][280] - Lower volumes in the ARV business, mainly due to the Indore Impact, contributed approximately $45 million to the Q2 2025 decrease and $103 million to the H1 2025 decrease[255][280] Cost of Sales and Gross Profit Cost of sales decreased in Q2 and H1 2025 due to lower net sales; gross profit for Q2 2025 was $1.33 billion (37% margin) and for H1 2025 was $2.49 billion (36% margin) - Cost of sales decreased from $2.35 billion in Q2 2024 to $2.25 billion in Q2 2025, and from $4.51 billion in H1 2024 to $4.34 billion in H1 2025[256][281] - Gross profit for Q2 2025 was $1.33 billion (37% gross margin), and for H1 2025 was $2.49 billion (36% gross margin)[257][282] - Adjusted gross margins were approximately 57% for Q2 2025 and 56% for H1 2025[257][282] Operating Expenses R&D expense increased in Q2 and H1 2025 due to development programs, SG&A decreased due to divestitures, and a $2.94 billion goodwill impairment charge was recorded in H1 2025 - R&D expense increased by $14.7 million in Q2 2025 and $37.0 million in H1 2025, primarily due to selatogrel and cenerimod development programs[259][284] - SG&A expense decreased by $108.3 million in Q2 2025 and $177.7 million in H1 2025, mainly due to divestitures and lower acquisition/divestiture-related costs[260][286] - A goodwill impairment charge of $2.94 billion was recorded in Q1 2025[287] Litigation Settlements and Other Contingencies, Net (in millions) | Period | 2025 | 2024 | | :------------------------------------------ | :------- | :------- | | Three Months Ended June 30, Net | $(47.6) | $131.0 | | Six Months Ended June 30, Net | $(121.1) | $207.8 | Interest Expense Interest expense decreased by $29.2 million to $116.6 million in Q2 2025 and by $52.1 million to $232.1 million in H1 2025, primarily due to 2024 debt repayments - Interest expense decreased by $29.2 million in Q2 2025 and $52.1 million in H1 2025, primarily due to 2024 debt repayments[265][291] Other Expense (Income), Net Other expense, net, significantly increased to $333.5 million in Q2 2025 and $432.8 million in H1 2025, driven by losses from remeasuring Biocon Biologics CCPS to fair value - Other expense, net, totaled $333.5 million in Q2 2025 and $432.8 million in H1 2025[266][292] - The increase was primarily driven by a loss of $284.0 million in Q2 2025 and $399.8 million in H1 2025 from remeasuring the CCPS in Biocon Biologics to fair value[267][293] Income Tax (Benefit) Provision Viatris recognized an income tax benefit of $212.5 million in Q2 2025 and $267.5 million in H1 2025, primarily due to the loss before income taxes, partially offset by minimal goodwill impairment tax benefit - Income tax benefit was $212.5 million for Q2 2025 and $267.5 million for H1 2025[268][294] - The benefit was primarily driven by the loss before income taxes, partially offset by minimal tax benefit from the goodwill impairment charge and a $17.7 million accrual for a Swedish tax matter[268][294] Use of Non-GAAP Financial Measures Viatris uses non-GAAP measures such as adjusted cost of sales, adjusted gross margin, adjusted net earnings, and adjusted EBITDA to provide a clearer view of operational performance - Non-GAAP measures are used internally for forecasting, budgeting, measuring operating performance, and incentive-based awards[296] - Adjusted cost of sales and adjusted gross margin exclude restructuring, acquisition/divestiture-related costs, purchase accounting amortization, and share-based compensation expense[297] - Adjusted net earnings and adjusted EPS exclude items such as purchase accounting amortization, goodwill impairment, litigation settlements, and fair value adjustments[298][301][302][306] Reconciliation of U.S. GAAP Net Loss to Adjusted Net Earnings and EPS (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | U.S. GAAP net loss | $(4.6) | $(326.4) | $(3,046.6) | $(212.5) | | Adjusted net earnings | $726.0 | $826.5 | $1,326.3 | $1,639.2 | | U.S. GAAP diluted loss per share | $0.00 | $(0.27) | $(2.58) | $(0.18) | | Adjusted EPS | $0.62 | $0.69 | $1.11 | $1.36 | Reconciliation of U.S. GAAP Net Loss to EBITDA and Adjusted EBITDA (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | U.S. GAAP net loss | $(4.6) | $(326.4) | $(3,046.6) | $(212.5) | | EBITDA | $577.8 | $540.3 | $(1,739.0) | $1,574.3 | | Adjusted EBITDA | $1,078.8 | $1,207.9 | $2,002.3 | $2,401.3 | Liquidity and Capital Resources Net cash from operations decreased to $755.2 million in H1 2025; investing activities used $117.6 million, and financing activities used $829.4 million, with $566.4 million cash and $4.1 billion in credit facilities Operating Activities Net cash from operating activities decreased by $238.5 million to $755.2 million in H1 2025, primarily due to lower operating earnings from divestitures and the Indore Impact - Net cash provided by operating activities decreased by $238.5 million to $755.2 million for H1 2025[311] - The decrease was principally due to lower operating earnings from 2024 divestitures and the timing of cash payments and collections[312] Investing Activities Net cash used in investing activities was $117.6 million in H1 2025, a $339.1 million decrease from the prior year, including $95.5 million in capital expenditures - Net cash used in investing activities was $117.6 million for H1 2025, compared to $221.5 million provided in the prior year[314] - Capital expenditures for H1 2025 totaled approximately $95.5 million, with $300 million to $400 million expected for the full 2025 calendar year[315] Financing Activities Net cash used in financing activities decreased to $829.4 million in H1 2025, including $350.4 million for share repurchases and $283.1 million for cash dividends - Net cash used in financing activities was $829.4 million for H1 2025, compared to $1.27 billion in the prior year[316] - Significant financing activities in H1 2025 included $350.4 million for share repurchases and $283.1 million for cash dividends paid[317] Capital Resources As of June 30, 2025, Viatris had $566.4 million in cash and access to $3.5 billion Revolving Facility and $600 million Receivables Facility, with no outstanding borrowings - Cash and cash equivalents totaled $566.4 million at June 30, 2025[317] - The Company has access to a $3.5 billion Revolving Facility and a $600 million Receivables Facility, with no outstanding borrowings as of June 30, 2025[318][320] - Viatris is in compliance with its debt covenants at June 30, 2025, and expects to remain in compliance for the next twelve months[327] Long-term Debt Maturity Mandatory minimum repayments on Viatris' long-term debt total $14.012 billion, with significant amounts due in 2026 ($1.953 billion), 2027 ($1.752 billion), and 2028 ($1.634 billion) Mandatory Minimum Repayments on Long-Term Debt (as of June 30, 2025, in millions) | Year | Total | | :----- | :------ | | 2025 | $0 | | 2026 | $1,953 | | 2027 | $1,752 | | 2028 | $1,634 | | 2029 | $0 | | Thereafter | $8,673 | | Total | $14,012 | Supplemental Guarantor Financial Information This section provides unaudited combined summarized financial information for Viatris Inc. and its guarantors, reporting a $(3.0466 billion) net loss for H1 2025 - Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. are issuers or guarantors of various Senior U.S. Dollar Notes[328][329] Combined Summarized Balance Sheet Information (in millions) | Category | June 30, 2025 | December 31, 2024 | | :---------------- | :-------------- | :---------------- | | Current assets | $484.9 | $786.7 | | Non-current assets | $59,025.5 | $61,424.7 | | Current liabilities | $32,812.0 | $30,796.9 | | Non-current liabilities | $11,127.9 | $12,779.0 | Combined Summarized Income Statement Information (Six Months Ended June 30, 2025, in millions) | Metric | Amount | | :---------------- | :----------- | | Revenues | $0 | | Gross profit | $0 | | Loss from operations | $(498.4) | | Net loss | $(3,046.6) | Other Commitments Viatris has accrued approximately $454.4 million for legal contingencies and has ongoing financial obligations from transition services, manufacturing, supply, and distribution agreements - Viatris has approximately $454.4 million accrued for legal contingencies at June 30, 2025[335] - The Company has ongoing financial obligations under transition services, manufacturing and supply, and distribution agreements related to its divestitures[337] Application of Critical Accounting Policies This section details the $2.94 billion goodwill impairment charge in Q1 2025, triggered by market conditions and increased business risks, leading to higher discount rates in valuation models - The Company reviews goodwill for impairment annually on April 1st or more frequently if triggering events occur[338] - A $2.94 billion goodwill impairment charge was recorded in Q1 2025, affecting North America ($707.0 million), Europe ($1.554 billion), JANZ ($300.8 million), and Emerging Markets ($375.0 million)[342] - The impairment was driven by a sharp decline in share price and increased geopolitical/economic uncertainty, leading to higher discount rate assumptions[338][341] - The Greater China reporting unit's estimated fair value exceeded its carrying value by approximately $322.0 million (5.8%) as of March 31, 2025[347] PART II — OTHER INFORMATION ITEM 3. Quantitative and Qualitative Disclosures About Market Risk For comprehensive market risk disclosures, including foreign currency and interest rate risks, refer to 'Item 7A' in Viatris' 2024 Form 10-K - For disclosures about market risk, refer to 'Item 7A. Quantitative and Qualitative Disclosures about Market Risk' in Viatris' 2024 Form 10-K[349] ITEM 4. Controls and Procedures Viatris Inc.'s disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified in Q2 2025 - The Company's disclosure controls and procedures were effective as of June 30, 2025[350] - No material changes in the Company's internal control over financial reporting (ICFR) occurred during Q2 2025[351] ITEM 1. Legal Proceedings Information regarding Viatris Inc.'s legal proceedings is detailed in Note 17, 'Litigation,' within the accompanying Notes to interim financial statements - For information regarding legal proceedings, refer to Note 17 Litigation in the accompanying Notes to interim financial statements[353] ITEM 1A. Risk Factors No material changes to Viatris Inc.'s risk factors from its 2024 Form 10-K, except for a risk factor previously disclosed in the Q1 2025 Form 10-Q - No material changes in risk factors from Viatris' 2024 Form 10-K, except for the risk factor disclosed in the Q1 2025 Form 10-Q[354] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, Viatris Inc. repurchased approximately 20.2 million shares for $175.0 million under its program, with $1.15 billion remaining available Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :---------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :--------------------------------------------------------------------------------- | | April 1 - April 30, 2025 | 6,346,050 | $8.33 | 6,346,050 | $1,271,743,899 | | May 1 - May 31, 2025 | 13,897,492 | $8.79 | 13,897,492 | $1,149,630,459 | | June 1 - June 30, 2025 | — | — | — | — | | Total | 20,243,542 | $8.64 | 20,243,542 | $1,149,630,459 | - During Q2 2025, the Company repurchased approximately 20.2 million shares of common stock at a cost of approximately $175.0 million[357] ITEM 5. Other Information Corinne Le Goff, Chief Commercial Officer, adopted a Rule 10b5-1(c) trading plan on June 12, 2025, for the sale of up to 7,032 shares of common stock - Corinne Le Goff, Chief Commercial Officer, adopted a Rule 10b5-1(c) trading plan on June 12, 2025[358] - The plan provides for the sale of up to 7,032 shares of common stock until July 31, 2026[358] ITEM 6. Exhibits This section lists Form 10-Q exhibits, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents for financial data - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer[361] - Inline XBRL documents are provided for interactive data[361] SIGNATURES The Form 10-Q is signed by Scott A. Smith, Chief Executive Officer, and Theodora Mistras, Chief Financial Officer, on August 7, 2025 - The report is signed by Scott A. Smith, Chief Executive Officer, and Theodora Mistras, Chief Financial Officer, on August 7, 2025[365]