Viatris CEO Michael Goettler.
Courtesy Viatris
Investors have yet to warm to Viatris, created a year ago this week by the merger between a Pfizer spinoff and the generic drugmaker Mylan, but its CEO says that the company is doing well and offers investors an extraordinarily broad range of products.
“The thing that’s distinct from many companies out there is the portfolio,” said Viatris (ticker: VTRS) CEO Michael Goettler, who previously ran the Pfizer (PFE) division known as Upjohn. That business, which specialized in selling off-patent drugs in overseas markets, completed its combination with Mylan in November 2020.
Viatris has an extraordinarily broad portfolio, encompassing Mylan’s generics business, branded products from Upjohn like Xanax and Viagra, biosimilars, a number of over-the-counter products, and an active pharmaceutical ingredients business that sells chemicals used in drug manufacturing
“It makes for a much more robust business,” Goettler told Barron’s. “Any kinds of hits and headwinds we’re getting in one region or from one particular product, we have ways to compensate for that.”
“No individual product is more than 10% of revenue,” he said. “We found a business model that’s unique, it’s a new kind of healthcare company.”
Goettler pointed to the company’s performance over the past three quarters, in each of which its sales and earnings have beaten Wall Street estimates. “I think we’re performing very well,” he said.
Investors aren’t yet convinced. Viatris shares closed at $15.86 on Nov. 16 last year, the day of the launch of the combined company. The stock closed at $13.88 on Tuesday, down 12.5% over that period, while the S&P 500 was up 29.6%.
Viatris shares are down 25.8% so far this year. Analysts are lukewarm on the stock: Eight of the 17 tracked by FactSet who cover Viatris rate it a Buy or Overweight, while nine rate it at Hold. Their average target price is $19.08, implying a 38.2% return on the stock’s recent price of $13.80.
In recent notes, analysts have flagged questions about how the earnings of the combined company will shake out over the long term. “Looking ahead, we continue to struggle with longer-term EBITDA visibility (or namely lack thereof),” wrote Piper Sandler analyst David Amsellem in a note out Nov. 8. “Put another way, we question the extent to which growing contribution from complex generics/biosimilars/legacy Mylan assets across a range of geographies over time can offset pressure on legacy Upjohn brands …such that EBITDA can be sustainable.”
In other words, how the Viatris puzzle fits together is still hazy. Viatris is hoping to clear up the confusion at an investor day scheduled for Jan. 7. Management plans to lay out its financial forecasts for 2022, and set targets for 2023.
“We’re going to talk about our pipeline; I think our pipeline is going to be one of the most underappreciated assets that we have, the organic opportunities that provides,” Goettler said.
That pipeline includes biosimilars, which are the equivalent of generics for more complex biologic drugs, but also includes complex generics, and new chemical entities.
“We see a future where we move up the value chain, and go into things like 505(b)(2)’s,” Goettler said, referring to drugs given the go-ahead under a section of federal law that allow for the approval of new drugs based on studies run by other companies.
In the short term, Goettler said that the company has been focusing on paying down debt and initiating a dividend. It has paid down $1.9 billion of debt in the first three quarters, Goettler said. Viatris announced dividends of 11 cents per share in the second and third quarters.
Corrections & Amplifications: Viatris paid down $1.9 billion of debt in the first three quarters. An earlier version of this article incorrectly gave the total as $9 billion.
Write to Josh Nathan-Kazis at [email protected]
