Viatris: Firm Announces Sale of Noncore Business Lines as Full Focus Returns to Key Drug Areas

No-moat Viatris VTRS announced yesterday that it entered into agreements with various buyers to divest an array of its noncore businesses for a total price of $3.6 billion. The firm is selling the majority of its over-the-counter pharmaceutical business to Cooper Consumer Health for up to $2.17 billion as well as an active pharmaceutical ingredient, or API, division to an India-based private pharmaceutical company. Other sales include Duphaston, a treatment for menstrual conditions, and Femoston, which treats symptoms of menopause, to Theramax; oral and injectable women’s healthcare pharmaceuticals to Insud Pharma; and divesture of certain noncore assets. Given that Viatris announced these plans last November, we don’t see this as an unexpected move, although we are pleasantly surprised at the timing of the announcement.

All of the transactions are expected to close by the second quarter of 2024 and we expect a total revenue impact of roughly $1.3 billion from the sale. We think Viatris got a fair price for these deals. The combined sales of these assets and biosimilars to Biocon Biologics last November realized a multiple above 12.0 on 2022 estimated adjusted EBITDA. We maintain our fair value estimate of $13 per share.

We expect the net proceeds to be used to deleverage the firm’s balance sheet. With over $19 billion in debt and a debt/adjusted EBITDA of over 3.3 at the end of 2022, Viatris is highly leveraged but we think the firm can accelerate its main capital allocation priority of lowering debt balance once these transactions close. We think this divestiture, which should simplify manufacturing footprint, is another step toward focusing on its key therapeutic areas of ophthalmology, gastrointestinal, and dermatology. Viatris announced just last week that that Ryzumvi, eye drops for the reversal of pharmacologically-induced mydriasis, was approved by the Food and Drug Administration and will be commercially available in the U.S. in the first half of 2024.