October 26, 2021

StrategisChhr

Skillful Business Crafters

Why Is Viatris (VTRS) Down 3% Since Last Earnings Report?

A month has gone by since the last earnings report for Viatris (VTRS). Shares have lost about 3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Viatris due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Viatris Beats on Q2 Earnings & Sales, Raises View

Viatris reported adjusted earnings of 98 cents per share in the second quarter of 2021, beating the Zacks Consensus Estimate of 88 cents but decreasing from $1.11 reported in the year-ago quarter.

The company was formed in November 2020 through the combination of Mylan and Upjohn.  Total revenues came in at $4.58 billion, growing 67.6% year over year as a result of the merger. The top line beat the Zacks Consensus Estimate of $4.4 billion.

Quarter in Detail

Revenues include sales and other revenues.  Sales of $4.56 jumped 69% from the year-ago quarter. Sales were flat compared with combined adjusted results in the year-ago quarter. 

The company reports results in four segments — Developed Markets, Emerging Markets, JANZ (Japan, Australia and New Zealand) and Greater China.

Developed market sales came in at $2.6 billion, up 33% from the year-ago quarter.

Sales from Emerging Markets came in at $870 million, jumping 112% year over year.

JANZ generated sales of $501 million, surging 79%.

Sales from Greater China came in at $550.3 million. Sales recorded in the year-ago quarter were $22.7 million.

Brands performed better than expectations, driven by products such as Viagra, Dymista and the Thrombosis portfolio. Complex generics and biosimilars performed in line with expectations, with 40% growth in biosimilars offset by anticipated competition in select Complex Gx products.  Generics, which include diversified product forms such as extended-release oral solids, injectables, transdermals and topicals, performed better than management’s expectations, driven primarily by COVID-19 related products.

Viatris generated $224 million in new product revenues (revenues from products launched in 2021) and is on track to record expected figure of $690 million in consolidated new product revenues in 2021.

Adjusted gross margin increased to 58.5% from 54.3% in the year-ago quarter.

2021 Guidance Update

Revenues are now projected between $17.5 billion and $17.9 billion, up from the earlier projection of $17.2-$17.8 billion.

During the fourth quarter of 2020, Viatris announced a widespread global restructuring program in order to achieve synergies of $1 billion. The restructuring initiative incorporates and expands on the restructuring program announced by Mylan N.V. earlier in 2020, as part of its business transformation efforts. The company expects to optimize its commercial capabilities and enabling functions, and close, downsize or divest up to 13 manufacturing facilities globally. The company remains on track to realize approximately $500 million of cost synergies this year and to achieve at least $1 billion of cost synergies by 2023.

Dividend Announcement

Viatris declared a quarterly dividend of 11 cents per share payable on Sep 16, 2021. The company paid down $1.15 billion in short-term debt in the first half.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Viatris has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Viatris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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