Viatris Inc.

VTRS Details

Viatris Inc. (NASDAQ: VTRS) is a healthcare company engaged in providing access to medicines and sustainable operations to patients in over 165 countries. Its portfolio includes over 1,400 approved molecules across a variety of therapeutic areas, divided into Brands, Complex Generics and Biosimilars, and Generic segments. VTRS was formed in November 2020 through the combination of Mylan N.V. and the Upjohn business (previously part of Pfizer Inc.) and was listed on the NASDAQ on November 17, 2020.

Favorable Rulings in EpiPen Class Action: On June 23, 2021, the U.S. 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, including those alleging that Mylan foreclosed branded competition through rebate arrangements with pharmacy benefit managers. The only remaining claim in the class action suit is related to a patent settlement between Pfizer and Teva, plus other alleged actions in connection with Teva's generic epinephrine auto-injector. The trial is now scheduled to commence on September 07, 2021.

Expanding Access to HIV Self-Tests: On April 29, 2021, VTRS and Atomo Diagnostics Limited signed a multi-year agreement with Unitaid, focused on expanding access to HIV self-testing in 135 low and middle-income countries (LMICs). The Mylan HIV Self-Test, which is designed and manufactured by Atomo and prequalified by the World Health Organisation (WHO), detects the presence/absence of HIV antibodies from a blood sample obtained from a fingertip.

Q1FY21 Results: The company’s total revenues in Q1FY21 (ending 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 Q1FY20. Net loss for Q1FY21 was USD 1.04 billion, and free cash flow generated during the quarter amounted to USD 799.3 million. The business paid down USD 1.06 billion in short-term debt in the quarter.

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

Key Risks: The supply of pharmaceutical drugs is vulnerable to illegal distributions of counterfeit versions, especially over the internet. Such illegal counterfeit versions of VTRS’ products, which are generally unsafe/ineffective, could negatively impact the company’s reputation and business. Moreover, VTRS may be subjected to suspensions/withdrawal of prior approvals if its products fail to comply with the regulatory requirements, which can adversely affect its financial condition.

Outlook: As of Q1FY21, the company is on track to repay about $6.5 billion in debt by 2023 and is dedicated to retaining its investment-grade credit rating.

FY21 Guidance (Source: Earnings Presentation, May 10, 2021)

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

Stock Recommendation: VTRS stock declined 21.72% in the past 6 months, and is currently close to the mid-point 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 48.05. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 17.05. Considering the valuation of the newly listed company, the correction in its stock price, extensive portfolio, and its efforts to reduce leverage, we recommend a “Buy” rating on the stock at the current price of USD 14.67, down 0.54% as of July 02, 2021, at 12:55 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. 

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