Viatris Earnings: New Launches and Stabilized Generics Prove Enough To Offset Challenges

No-moat Viatris VTRS reported second-quarter results that were slightly ahead of our expectations. Total sales were down 4.8% year over year but up 1.5% on an operational basis (excluding foreign exchange and divestiture impacts). Our assumptions for the second half of the year remain largely the same, and we maintain our $13 fair value estimate.

Viatris’ branded drug sales were down 1.5%. The company continued to see challenges in its portfolio of legacy innovative drugs, including Lipitor, Norvasc, and Lyrica, but solid performance from some of its other key drugs, including Yupelri and Xanax, and new launches offset some headwinds. Breyna, the first approved generic version of Symbicort (an inhaler for long-term treatment of asthma and chronic obstructive pulmonary disease), was launched in July. Management expects the launch to have 180-day exclusivity—awarded to the manufacturer that first files an abbreviated new drug application—which should provide healthy tailwinds to the top line and margins, given the absence of competition from other generics manufacturers during this window. Even if Viatris is unable to benefit from the first-to-file opportunity, we still believe it can carve out its own share of the market; Symbicort U.S. sales reached over $1 billion in 2021, its peak year. Tyrvaya, the first and only nasal spray for the treatment of dry eye disease, is showing good momentum, but there are still a lot of untapped opportunities that Viatris, with the right strategy, can benefit from: Out of 16 million people diagnosed with dry eye disease, only about 2 million are currently being treated.

Viatris’s generics business showed stability as strong demand across regions and a favorable product mix offset pricing pressures; sales for the product category were up 5% year over year. The company also generated roughly $124 million from new products, primarily contributed by lenalidomide (generic Revlimid).