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What changed in Viatris's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Viatris's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+597 added−548 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-27)

Top changes in Viatris's 2023 10-K

597 paragraphs added · 548 removed · 419 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

92 edited+63 added−37 removed53 unchanged
Biggest changeWe have had several accomplishments that lay the foundation for the kind of company we want to be, including: • Being recognized on the Forbes® 2022 World’s Best Employers list for the second year in a row, inclusion on lists such as Fortune's Change the World, Newsweek's America's Most Responsible Companies, Capital Magazine's Best Employers in France, a Great Place to Work® certification in India, HR Asia's Best Companies to Work for in Asia (Taiwan), and Top Employers Institute’s certification as one of the 101 top employers in China; • In 2022, we conducted our first-ever Viatris Voice Survey with approximately 89% of our employees from around the world sharing their perspectives on: Engagement; Diversity, Equity & Inclusion (“DE&I”); Health & Well-Being; and Transformation & Change.
Biggest changeThe Company has been included on Forbes’ list of World’s Best Employers 2023, Fortune’s Change the World list, Newsweek’s America’s Most Responsible Companies 2022 list, a Great Place to Work® certification in India, Capital Magazine’s Best Employers in France list, and HR Asia’s Best Companies to Work for in Asia (Taiwan), among others.
From our unique vantage point, we touch all of life’s moments, from birth to end of life, acute conditions to chronic diseases. We see across multiple therapeutic areas to the person at the center of their own unique health journey.
From our unique vantage point, we touch all of life’s moments, from birth to the end of life, acute conditions to chronic diseases. We see across multiple therapeutic areas to the person at the center of their own unique health journey.
As the Company looks to the future, its goal is to leverage its proven scientific capabilities to create a durable and higher-margin portfolio of products. Viatris intends to continue building the pipeline and focusing on products with greater complexity while also investing in the lifecycle management of certain key products in our current portfolio.
As the Company looks to the future, its goal is to leverage its proven scientific capabilities to create a durable and higher-margin portfolio of products. Viatris intends to continue building its pipeline and focusing on products with greater complexity while also investing in the lifecycle management of certain key products in our current portfolio.
INNs facilitate the identification of pharmaceutical substances or APIs. Each INN is unique and globally recognized. A nonproprietary name also is known as a generic name. Complex generic drugs are generic medicines that could have a complex active ingredient, complex formulation, complex route of delivery or complex drug device combinations.
INNs facilitate the identification of pharmaceutical substances or APIs. Each INN is unique and globally recognized. A nonproprietary name also is known as a generic name. Complex drugs are medicines that could have a complex active ingredient, complex formulation, complex route of delivery or complex drug device combinations.
Drug companies employ sales forces to educate doctors about the clinical benefits of their products. Representatives call on individual doctors or group practices; the process is known as detailing. Examples of countries served by Viatris that are mainly prescription markets are the U.S. brand business, Japan, China, Turkey, Poland and Mexico.
Drug companies employ sales forces to educate doctors about the clinical benefits of their products. Representatives call on individual doctors or group practices; the process is known as detailing. Examples of countries served by Viatris that are mainly prescription markets are the U.S. brand business, China, Turkey, Poland and Mexico.
While committed to generics and specialty products, over the last several years, a greater portion of our investments has been focused on complex or difficult-to-formulate products, such as biosimilars and modified release injectables, rather than on commodity products, such as conventional oral solid dosage forms.
While committed to generics and specialty products, over the last several years, a greater portion of our investments has been focused on complex or difficult-to-formulate products, such as modified release injectables, rather than on commodity products, such as conventional oral solid dosage forms.
We also often incur substantial litigation expense as a result of defending or challenging brand patents or exclusivities, which is described further in Note 20 included in Part II. Item 8 of this Form 10-K. Market Types Viatris focuses its sales and marketing efforts on the people who make key decisions around pharmaceutical prescribing, dispensing or buying.
We also often incur substantial litigation expense as a result of defending or challenging brand patents or exclusivities, which is described further in Note 19 Litigation included in Part II, Item 8 of this Form 10-K. Market Types Viatris focuses its sales and marketing efforts on the people who make key decisions around pharmaceutical prescribing, dispensing or buying.
We rely on cost-effective manufacturing processes to meet the rapidly changing needs of our customers around a reliable, high quality supply of generic pharmaceutical products.
We rely on cost-effective manufacturing processes to meet the rapidly changing needs of our customers around a reliable, high quality supply of pharmaceutical products.
Healthcare consumerism, increased spending power, and demand for premium medical products have generated strong growth in these new channels and partially absorbed the reductions seen in hospital channel due to VBP. Additional pricing and volume pressure for pharmaceutical products sold in the hospital channels is expected to continue during 2023 and could negatively impact our results of operations.
Healthcare consumerism, increased spending power, and demand for premium medical products have generated strong growth in these new channels and partially absorbed the reductions seen in hospital channel due to VBP. Additional pricing and volume pressure for pharmaceutical products sold in the hospital channels is expected to continue during 2024 and could negatively impact our results of operations.
With a global workforce of approximately 37,000, the Company has industry leading commercial, R&D, regulatory, manufacturing, legal and medical expertise complemented by a strong commitment to quality and an unparalleled geographic footprint to deliver high-quality medicines to patients in more than 165 countries and territories.
With a global workforce of approximately 38,000, the Company has industry leading commercial, R&D, regulatory, manufacturing, legal and medical expertise complemented by a strong commitment to quality and an unparalleled geographic footprint to deliver high-quality medicines to patients in more than 165 countries and territories.
In substitution markets, pharmacists generally are authorized (and in some cases required) by law to dispense an unbranded or branded generic, if available, in place of a brand-name medicine, or vice versa. Drug companies may use sales forces in these markets too, with representatives calling on and educating pharmacy personnel about their organization and products.
In substitution markets, pharmacists generally are authorized (and in some cases required) by law to dispense an unbranded or branded generic, if available, in place of a brand-name medicine, or vice versa. Drug companies may use sales 14 Table of Contents forces in these markets too, with representatives calling on and educating pharmacy personnel about their organization and products.
With the combination of Viatris' global commercial footprint, R&D and regulatory capabilities and supply chain, along with Oyster Point's deep knowledge of the ophthalmology space from a clinical, medical, regulatory and commercial perspective—including a commercial asset, Tyrvaya®, for the treatment of dry eye disease—and Famy Life Sciences' Phase III-ready pipeline, the Company believes it has the foundation to create a leading global ophthalmology franchise, accelerating efforts to address the unmet needs of patients with ophthalmic disease and the eye care professionals who treat them.
With the combination of Viatris' global commercial footprint, R&D and regulatory capabilities and supply chain, along with Oyster Point's deep knowledge of the ophthalmology space from a clinical, medical, regulatory and commercial perspective—including Tyrvaya®—and Famy Life Sciences' Phase III-ready pipeline, the Company believes it has the foundation to create a leading global ophthalmology franchise, accelerating efforts to address the unmet needs of patients with ophthalmic disease and the eye care professionals who treat them.
As a company, Viatris: • Covers a broad range of therapeutic areas . We produce medicines for patients across a broad range of major therapeutic areas. From cardiovascular health to oncology, Viatris offers quality treatment options across more than 10 major therapeutic areas covering a wide variety of noncommunicable and infectious diseases.
As a company, Viatris: 9 Table of Contents • Covers a broad range of therapeutic areas . We produce medicines for patients across a broad range of major therapeutic areas. From cardiovascular health to oncology, Viatris offers quality treatment options across more than 10 major therapeutic areas covering a wide variety of noncommunicable and infectious diseases.
Europe, where many governments provide healthcare at a low direct cost to consumers and regulate pharmaceutical prices or patient reimbursement levels, 16 Table of Contents continues to be a highly competitive market, especially in terms of pricing, quality standards, service levels and product portfolio.
Europe, where many governments provide healthcare at a low direct cost to consumers and regulate pharmaceutical prices or patient reimbursement levels, continues to be a highly competitive market, especially in terms of pricing, quality standards, service levels and product portfolio.
With an extensive portfolio of medicines to meet nearly every health need, a one-of-a-kind global supply chain designed to reach more people with health solutions when and where they need them, and the scientific expertise to address some of the world’s most enduring health challenges, access takes on deeper meaning at Viatris.
With what we believe is an extensive portfolio of medicines to meet nearly every health need, a one-of-a-kind global supply chain designed to reach more people with health solutions when and where they need them, and the scientific expertise to address some of the world’s most enduring health challenges, access takes on deeper meaning at Viatris.
Examples of countries served by Viatris that are mainly substitution markets are France, Italy, Spain, Portugal and Australia. 15 Table of Contents In tender markets, payers, such as governments or insurance companies, negotiate the lowest price for a drug (or group of drugs) on behalf of their constituents or members.
Examples of countries served by Viatris that are mainly substitution markets are France, Italy, Spain, Portugal, Japan and Australia. In tender markets, payers, such as governments or insurance companies, negotiate the lowest price for a drug (or group of drugs) on behalf of their constituents or members.
In addition, we are working on many other programs, including the potential to be first to market for our generics of Abilify Maintena®, Injectafer®, Invega Trinza®, Ozempic®, Sandostin® LAR Depot, Venofer® and Wegovy™.
In addition, we are working on many other programs, including the potential to be first to market for our generics of Abilify Maintena®, Injectafer®, Invega Trinza®, Ozempic®, Venofer® and Wegovy™.
For example, we are working on a number of programs including the potential to be first to market for our generics of Abilify Maintena®, Injectafer®, Invega Trinza®, Ozempic®, Sandostin® LAR Depot, Venofer® and Wegovy™.
For example, we are working on a number of programs including the potential to be first to market for our generics of Abilify Maintena®, Injectafer®, Invega Trinza®, Ozempic®, Venofer® and Wegovy™.
Many countries in this segment are brand-conscious with generic penetration rates lower than developed markets. Among our products sold in the segment are Lipitor®, Lyrica®, Norvasc®, Celebrex®, and ARVs. 17 Table of Contents Refer to Note 16 Segment Information included in Part II. Item 8 of this Form 10-K for more information about our segments.
Many countries in this segment are brand-conscious with generic penetration rates lower than developed markets. Among our products sold in the segment are Lipitor®, Lyrica®, Norvasc®, Celebrex®, and ARVs. Refer to Note 15 Segment Information included in Part II, Item 8 of this Form 10-K for more information about our segments.
Our Emerging Markets segment encompasses our presence in more than 125 countries with developing markets and emerging economies including in Asia, Africa, Eastern Europe, Latin America and the Middle East as well as the Company’s ARV franchise. Developed Markets The Developed Markets segment comprises our operations primarily in North America and Europe.
Our Emerging Markets segment encompasses our presence in more than 125 countries with developing markets and emerging economies including in Asia, Africa, Eastern Europe, Latin America and the Middle East as well as the Company’s ARV franchise. 15 Table of Contents Developed Markets The Developed Markets segment comprises our operations primarily in North America and Europe.
Significant products within the JANZ segment include AMITIZA®, Lipacreon®, Lyrica®, Norvasc®, and Effexor®. Emerging Markets The Emerging Markets segment encompasses our presence in more than 125 countries with developing markets and emerging economies including in Asia, Africa, Eastern Europe, Latin America and the Middle East as well as the Company’s ARV franchise.
Significant products within the JANZ segment include AMITIZA®, Lipacreon®, Lyrica®, Norvasc®, Effexor® and Dymista®. 16 Table of Contents Emerging Markets The Emerging Markets segment encompasses our presence in more than 125 countries with developing markets and emerging economies including in Asia, Africa, Eastern Europe, Latin America and the Middle East as well as the Company’s ARV franchise.
We believe Viatris is well positioned to serve such customers in the Developed Markets due to the scale we have built in terms of R&D, manufacturing, and portfolio breadth. Greater China The Greater China segment includes our operations in mainland China, Taiwan and Hong Kong.
We believe Viatris is well positioned to serve such customers in the Developed Markets due to the scale we have built in terms of R&D, manufacturing, and portfolio breadth. Greater China The Greater China segment includes our operations in mainland China, Taiwan, and Hong Kong. The Viatris Greater China portfolio predominantly consists of branded LOE products.
As a result of the Combination, Viatris held the combined Upjohn Business and Mylan business and Mylan ceased to exist as a separate legal entity after merging with and into Mylan II B.V., an indirect wholly owned subsidiary of Viatris.
As a result of the Combination, Mylan ceased to exist as a separate legal entity after merging with and into Mylan II B.V., an indirect wholly owned subsidiary of Viatris.
We have designed our global operations and supply chain to be a reliable and flexible partner for access across the world, constantly adapting to an ever-evolving landscape. Viatris operates approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs on five different continents.
We have designed our global operations and supply chain to be a reliable and flexible partner for access across the world, constantly adapting to an ever-evolving landscape. As of December 31, 2023, Viatris operated approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs on five different continents.
Business Segments Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets. The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded, complex generics, including biosimilars prior to the Biocon Biologics Transaction, and generic products to people in markets everywhere.
Business Segments Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets. The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded and generic products, including complex products, to people in markets everywhere.
We are committed to advancing responsible and sustainable operations and work diligently to minimize our environmental footprint across the Viatris 11 Table of Contents network while safeguarding access to medicine.
We are committed to advancing responsible and sustainable operations and work diligently to minimize our environmental footprint across the Viatris network while safeguarding access to medicine.
The result often is that medicines become available sooner and to a significantly larger group of patients. Our significant licensing and other partner agreements are primarily focused on the development, manufacturing, supply and commercialization of multiple, high-value generic compounds and respiratory products, among other complex products. Refer to Note 19 Licensing and Other Partner Agreements included in Part II.
The result often is that medicines become available sooner and to a significantly larger group of patients. Our significant licensing and other partner agreements are primarily focused on the development, manufacturing, supply and commercialization of multiple, high-value generic compounds and respiratory products, among other complex products.
Mylan’s strategy then led to many acquisitions which have played a significant role in the evolution of the company, including Matrix Laboratories Limited (2007); Merck KGaA’s generic and specialty pharmaceutical business (2007); the EPD Business (2015) and Meda AB (publ.) (2016).
Mylan became a publicly traded company in 1973. Mylan’s strategy then led to many acquisitions which played a significant role in the evolution of that company, including Matrix Laboratories Limited (2007); Merck KGaA’s generic and specialty pharmaceutical business (2007); the EPD Business (2015) and Meda AB (publ.) (2016).
We also have an extensive patent portfolio and actively file for patent protection in various countries to protect our brand-name, generic, branded generic, and OTC products, including processes for making and using them. We have more than 3,100 patents filed globally. For additional information, see Part I.
We also have an extensive patent portfolio and actively file for patent protection in various countries to protect our brand-name, generic, branded generic, and OTC products, including processes for making and using them. We have more than 3,300 patents filed globally.
The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023. Ophthalmology is one of the key therapeutic areas of focus that the Company announced in February 2022.
The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023. Ophthalmology is one of the key therapeutic areas of focus of the Company.
Viatris also is entitled to $335 million of additional cash payments in 2024. In addition, Viatris and Biocon Biologics have agreed to a closing working capital target of $250 million.
Viatris also is entitled to $335 million of additional cash payments in 2024. In addition, Viatris and Biocon Biologics have agreed to a closing working capital target of $250 million, of which $220 million was paid during 2023.
Important recent launches include SEMGLEE®, cyclosporine ophthalmic emulsion, and lenalidomide in the U.S. While our U.S. customer base is extensive, it increasingly comprises a small number of very large firms as the pharmaceutical industry has undergone and continues to undergo tremendous change and consolidation.
Important recent launches include lenalidomide and Breyna™ in the U.S. While our U.S. customer base is extensive, it comprises a small number of very large firms as the pharmaceutical industry has undergone tremendous change and consolidation.
As discussed above, our OTC business is one of the assets we intend to divest. Generic drugs are therapeutically equivalent versions of brand drugs. Generics generally become available once the patents and other exclusivities on their branded counterparts expire. The generics business is generally characterized by lower margins on higher volumes of a relatively large number of products.
Generic drugs are therapeutically equivalent versions of brand drugs. Generics generally become available once the patents and other exclusivities on their branded counterparts expire. The generics business is generally characterized by lower margins on higher volumes of a relatively large number of products.
According to the WHO, coronary heart disease is the number one cause of death globally. Viatris collaborates with many organizations to help prevent, diagnose, and treat many cardiovascular illnesses. Our deep experience in emerging and developed markets affords a tried-and-true method of achieving high impact across the patient experience, from awareness to adherence.
Viatris collaborates with many organizations to help prevent, diagnose, and treat many cardiovascular illnesses. Our deep experience in emerging and developed markets affords a tried-and-true method of achieving high impact across the patient experience, from awareness to adherence.
As discussed above, our API business (other than some selective development API capabilities) is one of the assets we intend to divest. • Robust global technical resources , including thousands of scientists, regulatory experts and medical and product safety professionals working around the world on innovative therapies and solutions for patients everywhere. • Strong global commercial team , including sales team members and marketing professionals whose goal is to ensure that products are shipped to customers around the globe. • Diverse and differentiated global portfolio includes products in more than 10 major therapeutic areas, including both infectious diseases and NCDs and medicines that treat the top 10 of the WHO’s leading causes of death globally.
As discussed above, the Company has entered into a definitive agreement to divest its API business in India. • Robust global technical resources , including thousands of scientists, regulatory experts and medical and product safety professionals working around the world on innovative therapies and solutions for patients everywhere. • Strong global commercial team , including sales team members and marketing professionals whose goal is to ensure that products are shipped to customers around the globe. • Diverse and differentiated global portfolio includes products in more than 10 major therapeutic areas, including both infectious diseases and NCDs and medicines that treat the top 10 leading causes of death globally, as determined by the WHO.
Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues. The term of the transition services agreement is generally up to two years.
At the time of closing of the Biocon Biologics Transaction, Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris was providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues.
To overcome this global public health threat, patients 10 Table of Contents worldwide need a partner they can trust – one that not only believes everyone deserves good health, but also has the portfolio, experience and expertise to make this belief a reality. • Helps hearts stay healthier.
To overcome this global public health threat, patients worldwide need a partner they can trust – one that not only believes everyone deserves good health, but also has the portfolio, experience and expertise to make this belief a reality. • Helps hearts stay healthier. According to the WHO, coronary heart disease is the number one cause of death globally.
In many high-income countries, the brand business often is characterized by higher margins on lower volumes - especially as compared with generic manufacturers. Viatris has numerous branded drugs, including iconic brands, as well as several global 14 Table of Contents key brands to help patients manage their health.
During the periods protected, developers often recoup their investments and earn a profit. In many high-income countries, the brand business often is characterized by higher margins on lower volumes - especially as compared with generic manufacturers. Viatris has numerous branded drugs, including iconic brands, as well as several global key brands to help patients manage their health.
Brand drugs typically are prescription pharmaceuticals that are sufficiently novel as to be protected by patents or other forms of exclusivity. As such, these drugs, which bear trade names, may be produced and sold only by those owning the rights, subject to certain challenges that other companies may make. Developing new medicines can take years and significant investment.
Viatris currently markets prescription brand and generic drugs, including complex drugs. Brand drugs typically are prescription pharmaceuticals that are sufficiently novel as to be protected by patents or other forms of exclusivity. As such, these drugs, which bear trade names, may be produced and sold only by those owning the rights, subject to certain challenges that other companies may make.
Viatris’ portfolio comprises more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands, generics, and complex generics, including biosimilars prior to the Biocon Biologics Transaction. The Company operates approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs.
As of December 31, 2023, Viatris’ portfolio comprised more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands and generics, including complex products, and the Company operated approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs.
Percentage of Consolidated Net Sales 2022 2021 2020 McKesson Corporation 11 % 9 % 13 % AmerisourceBergen Corporation 10 % 9 % 10 % Cardinal Health, Inc. 5 % 5 % 8 % We serve our customers through a team of highly-skilled sales and marketing professionals, all of whom are focused on establishing Viatris as our customers’ partner of choice.
The table below displays the percentage of consolidated net sales to our largest customers during the years ended December 31, 2023, 2022 and 2021: Percentage of Consolidated Net Sales 2023 2022 2021 McKesson Corporation 10 % 11 % 9 % AmerisourceBergen Corporation 10 % 10 % 9 % Cardinal Health, Inc. 5 % 5 % 5 % We serve our customers through a team of highly-skilled sales and marketing professionals, all of whom are focused on establishing Viatris as our customers’ partner of choice.
During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $425 million in cash, which includes $11 per share paid to Oyster Point stockholders through a tender offer and the repayment of the principal amount of certain debt of Oyster Point.
During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $427.4 million in cash, which included $11 per share paid to Oyster Point stockholders through a tender offer, payment for vested share-based awards, and the repayment of the Oyster Point debt.
The VBP policy for LOE molecules is now in its fourth year and includes more than 290 molecules. All major Viatris brands are included in the VBP molecule lists. We have re-balanced our business to expand our focus on the retail pharmacy and e-commerce channels while maintaining our presence in the hospital channel.
All major Viatris brands are included in the VBP molecule lists. We have re-balanced our business to expand our focus on the retail pharmacy and e-commerce channels while maintaining our presence in the hospital channel.
Other Regulatory Requirements Our business is subject to a wide range of various other federal, state, non-governmental, and local agency rules and regulations. They focus on fraud and corruption, pricing and reimbursement, data privacy, and the environment, among many other considerations. For more information about certain of these regulations and the associated risks we face, see Part I. Item 1A.
Other Regulatory Requirements Our business is subject to a wide range of various other federal, state, non-governmental, and local agency rules and regulations. They focus on fraud and corruption, pricing and reimbursement, data privacy, and the environment, among many other considerations.
As previously mentioned, while we intend to maintain our broad range of therapeutic areas, we have identified three core, global therapeutic areas – ophthalmology, gastrointestinal and dermatology – that we believe particularly fit our own internal capabilities while leveraging our global platform. LEADERSHIP Viatris is advancing sustainable operations and innovative solutions to improve patient health.
While we intend to maintain our broad range of therapeutic areas, we have, as previously announced, identified three core, global therapeutic areas – ophthalmology, gastrointestinal, and dermatology – that we believe particularly fit our own internal capabilities while leveraging our global platform.
Only a few promising therapies ever enter clinical trials. Fewer still are approved for sale by health authorities, at which point marketing to healthcare providers and consumers begins. Because patents and exclusivities last many years, they serve as an incentive to developers. During the periods protected, developers often recoup their investments and earn a profit.
Developing new medicines can take years and significant investment. Only a few promising therapies ever enter clinical trials. Fewer still are approved for sale by health authorities, at which point marketing to healthcare providers and consumers begins. Because patents and exclusivities last many years, they serve as an incentive to developers.
Together with a global, flexible and diverse supply chain, our platform strives to mitigate risks of disruption and ensure supply reliability. Our efforts to build a responsive global network have helped us maintain a reliable supply of much needed medicines during the COVID-19 pandemic.
Together with a global, flexible and diverse supply chain, our platform strives to mitigate risks of disruption and ensure supply reliability. Our responsive global network has helped us maintain a reliable supply of much needed medicines throughout times of significant volatility.
As previously mentioned, to facilitate our future growth, we expect to expand our current scope of development into more innovative products, including NCEs and global 505(b)(2) products with a particular focus on three therapeutic areas: ophthalmology, gastrointestinal and dermatology and intend to increase our R&D investment as well as inorganically grow via business development through our Global Healthcare Gateway®.
As previously mentioned, to facilitate our future growth, we expect to expand our current scope of development into more innovative products, including NCEs and 505(b)(2) products with 17 Table of Contents a particular focus on three therapeutic areas: ophthalmology, gastrointestinal, and dermatology.
On November 7, 2022, the Company entered into a definitive agreement to acquire the remaining equity shares of Famy Life Sciences, a private-owned research company with a complementary portfolio of ophthalmology therapies under development, for a consideration of $281 million.
Oyster Point is focused on the discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases. On November 7, 2022, the Company entered into a definitive agreement to acquire the remaining equity shares of Famy Life Sciences, a privately-owned research company with a complementary portfolio of ophthalmology therapies under development, for consideration of $281 million.
For additional information, see “Risk Factors - We have and may continue to experience pressure on the pricing of and reimbursements for certain of our products due to pricing controls, social or government pressure to lower the cost of drugs, and consolidation across the supply chain. ” Significant products within the Greater China segment include Lipitor®, Norvasc®, and Viagra®.
For additional information, see Part I, Item 1A “Risk Factors - We have and may continue to experience pressure on the pricing of and reimbursements for certain of our products due to pricing controls, social or government pressure to lower the cost of drugs, and consolidation across the supply chain. ” of this Form 10-K.
Viatris is committed to providing steady leadership in a world that is constantly evolving. We take that commitment seriously and know that advancing sustainable operations and innovative solutions to improve patient health requires strong global leadership.
We take that commitment seriously and know that advancing sustainable operations and innovative solutions to improve patient health requires strong global leadership.
We expect to retain some selective development API capabilities and to continue to have access to adequate API supplies through our arrangements with other manufacturers. Viatris invests significant sums in R&D and in manufacturing capacity.
We expect to retain some selective R&D capabilities in API and to continue to have access to adequate API supplies through a manufacturing and supply agreement with the API business buyer and our arrangements with other manufacturers.
Upon closing of the transaction, the Company recognized a gain on sale of approximately $1.75 billion and has not recognized the results of the business in its consolidated financial statements subsequent to November 29, 2022.
The remaining amount may become payable to Biocon Biologics in connection with certain events in the future, depending on the valuations attributable to such events. Upon closing of the transaction, the Company recognized a gain on sale of approximately $1.75 billion and has not recognized the results of the business in its consolidated financial statements subsequent to November 29, 2022.
Facilities and records related to our products are subject to periodic inspection by the FDA, the EMA and other regulatory authorities in jurisdictions where our products are marketed. In addition, authorities often conduct pre-approval plant inspections to determine whether our systems and processes comply with current GMP and other regulations, and clinical-trial reviews to evaluate regulatory compliance and data integrity.
In addition, authorities often conduct pre-approval plant inspections to determine whether our systems and processes comply with current GMP and other regulations, and clinical-trial reviews to evaluate regulatory compliance and data integrity. Our suppliers, contract manufacturers, clinical trial partners and other business partners are subject to similar regulations and periodic inspections.
“Risk Factors” of this Form 10-K. Research and Development Our R&D organization, which includes developers and regulatory and clinical experts, work collaboratively across our different R&D centers around the world, which include technology-focused development sites and global R&D centers.
For more information about certain of these regulations and the associated risks we face, see Part I, Item 1A “Risk Factors” of this Form 10-K. Research and Development Our R&D organization, which includes developers and regulatory and clinical experts, works collaboratively across our different R&D centers around the world, which include technology-focused development sites and global R&D centers.
Business Model and Operations At Viatris, we see healthcare not as it is, but as it should be. We act courageously and are uniquely positioned to be a source of stability in a world of evolving healthcare needs. Viatris empowers people worldwide to live healthier at every stage of life. We do so via Access , Leadership and Partnership .
We act courageously and believe we are uniquely positioned to be a source of stability in a world of evolving healthcare needs. Viatris empowers people worldwide to live healthier at every stage of life. We do so via Access , Leadership and Partnership . ACCESS Viatris provides high-quality, trusted medicines, regardless of geography or circumstance.
Viatris offers a number of these important medicines to patients, including our Wixela Inhub®, the first generic of ADVAIR DISKUS® and glatiramer acetate injection, a generic version of Copaxone®, for example.
Viatris offers a number of these important medicines to patients, including Breyna™ Inhalation Aerosol, the first FDA-approved generic version of Symbicort®, Wixela Inhub®, the first generic of ADVAIR DISKUS® and glatiramer acetate injection, a generic version of Copaxone®, for example. Our current complex products are considered generics and are included within our generics revenue category.
This does not include all of our women’s health care related products; as an example, our Xulane® product in the U.S. is excluded; and • Upjohn Distributor Markets.
The divestiture of the women’s healthcare business is primarily related to our oral and injectable contraceptives and does not include all of our women’s healthcare related products; as an example, our Xulane® product in the U.S. is excluded.
It begins with our efforts to sustainably deliver high-quality medicines and health solutions at scale to people, regardless of geography or circumstance. As a healthcare company born during a global pandemic, Viatris was formed to bridge the traditional divide between generics and brands, aiming to combine the best of both, to more holistically address healthcare needs globally.
It begins with our ability to sustainably deliver quality medicines to people, regardless of geography or circumstance. We believe we are a company uniquely positioned to bridge the traditional divide between generics and brands, combining the best of both to more holistically address healthcare needs globally.
Most prescription pharmaceutical products are subsidized under the pharmaceutical benefits scheme by the federal government. Pricing of reimbursed pharmaceutical products is regulated by the government and funded via the Medicare levy and through company and patient contributions. The Company sells products primarily through the wholesale system, while promoting its products to both physicians and pharmacists.
The Department of Health oversees healthcare governance, law, and policy while the various state and territory governments administer the system. Most prescription pharmaceutical products are subsidized under the pharmaceutical benefits scheme by the federal government. Pricing of reimbursed pharmaceutical products is regulated by the government and funded via the Medicare levy and through company and patient contributions.
Since the closing of the Combination, the Viatris Greater China portfolio is predominantly branded LOE products. In China, the recent healthcare reform measures are aimed at controlling the overall healthcare costs, while providing better and broader care to the population. Healthcare spending is expected to increase in-line with GDP growth.
In China, the recent healthcare reform measures are aimed at controlling the overall healthcare costs, while providing better and broader care to the population. Healthcare spending is expected to increase in-line with GDP growth. The VBP policy for LOE molecules is now in its fifth year and includes more than 330 molecules.
We make this information available on our website free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The contents of our website are not incorporated by reference in this Annual Report on Form 10-K and shall not be deemed “filed” under the Exchange Act.
We make this information available on our website free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We hold leadership roles in several industry associations and actively engage with more than 100 groups worldwide to this end. Many of our collaborations focus on access to medicine; public awareness and disease screening; and healthcare professional education and support. Our Global Healthcare Gateway® Built to Fuel Growth and Partnerships Our Global Healthcare Gateway® is open for business.
Many of our collaborations focus on access to medicine; public awareness and disease screening; and healthcare professional education and support. 11 Table of Contents Our Global Healthcare Gateway® Built to Fuel Growth and Partnerships Our Global Healthcare Gateway® is open for business.
We look for intellectual property licensing opportunities to or from third parties, related not only to our existing products, but as a means for expanding our product portfolio.
Further, we have well-established safeguards in place to protect our proprietary know-how and trade secrets, both of which we consider extremely valuable to our intellectual property portfolio. We look for intellectual property licensing opportunities to or from third parties, related not only to our existing products, but as a means for expanding our product portfolio.
Viatris product and other company data included in this Item 1 are from internal sources and are as of November 30, 2022. Organization Upjohn was incorporated in Delaware on February 14, 2019 as a wholly-owned subsidiary of Pfizer to operate the Upjohn Business.
Organization Upjohn was incorporated in Delaware on February 14, 2019 as a wholly-owned subsidiary of Pfizer to operate the Upjohn Business.
These acquisitions assisted in creating robust research, manufacturing, supply chain and commercial platforms on a global scale; substantially expanding its portfolio of medicines; diversifying by geography, product type and channel; maintaining its commitment to quality; and cultivating its global workforce. 9 Table of Contents Since the consummation of the Combination, the Viatris management team has been focused on ensuring that the Company is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers and other stakeholders.
These acquisitions assisted in creating robust research, manufacturing, supply chain and commercial platforms on a global scale; substantially expanding its portfolio of medicines; diversifying by geography, product type and channel; maintaining its commitment to quality; and cultivating its global workforce.
One that rests on visionary thinking, determination and best-in-class capabilities that were strategically built to remove barriers across the health spectrum and advance access globally. Viatris’ seasoned management team is focused on ensuring that the Company is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers and other key stakeholders.
Viatris’ executive management team is focused on ensuring that the Company is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers and other key stakeholders.
The Company is further enhancing its commercial and scientific capabilities as needed for this future portfolio and intends to increase its R&D investment as well as inorganically grow via business development through its Global Healthcare Gateway®. Viatris currently markets prescription brand drugs, generic drugs, complex generic drugs, and APIs.
The Company also expects to expand further beyond its current scope into more innovative products, including NCEs and 505(b)(2)s. The 13 Table of Contents Company is further enhancing its commercial and scientific capabilities as needed for this future portfolio and intends to increase its R&D investment as well as inorganically grow via business development through its Global Healthcare Gateway®.
Intellectual Property We consider the protection of our intellectual property rights to be extremely valuable, and we act to protect them from infringement by third parties. We have an extensive trademark portfolio totaling more than 35,000 trademarks filed globally and routinely apply to register key brand-name, generic, branded generic, and trade names in numerous countries around the world.
We have an extensive trademark portfolio totaling more than 34,000 trademarks filed globally and routinely apply to register key brand names, generic names, branded generic names, and trade names in numerous countries around the world. Our registered trademarks are renewable indefinitely, and are maintained in accordance with the laws of the countries in which they are registered.
This was evidenced by the fact the Oyster Point and Famy Life Sciences acquisitions were sourced through the Global Healthcare Gateway®. Through our Global Healthcare Gateway®—a platform that allows partners to access our many established strengths to reach patients they may not have the resources to reach on their own—we connect more people with even more products and services.
Our platform, which allows existing and new partners to access our many established strengths to reach patients they may not have the resources to reach on their own, connects more people with even more products and services.
Item 1A “Risk Factors - We rely on the effectiveness of our patents, confidentiality agreements and other measures to protect our intellectual property rights ” of this Form 10-K. Further, we have well-established safeguards in place to protect our proprietary know-how and trade secrets, both of which we consider extremely valuable to our intellectual property portfolio.
For additional information, see Part I, Item 1A “Risk Factors - We rely on the effectiveness of our patents, trademarks, confidentiality agreements and other measures to protect our intellectual property rights. ” of this Form 10-K.
Our research, development and medical platform seeks to maximize the impact of our existing portfolio by examining whether there is an opportunity for new indications, label extensions, formulations, and market registrations for our products. We also use our platform to determine whether there is an opportunity to integrate new products into our portfolio.
Operations Viatris has developed an end-to-end experience across the total product life cycle, which includes global regulatory licensing, launch, growth and post-approval lifecycle management. Our research, development and medical platform seeks to maximize the impact of our existing portfolio by examining whether there is an opportunity for new indications, label extensions, formulations, and market registrations for our products.
We expect to retain some selective development API capabilities and to continue to have access to adequate API supplies through our arrangements with other manufacturers. The Company’s significant manufacturing, warehousing and distribution activities are located primarily in the U.S., Puerto Rico, Singapore, India, Australia, China, and certain E.U. countries, including Ireland. In addition, we maintain administrative facilities around the world.
The Company’s significant manufacturing, warehousing and distribution activities are located primarily in the U.S., Puerto Rico, Singapore, India, Australia, China, and certain E.U. countries, including Ireland. In addition, we maintain administrative facilities around the world. While many of these key facilities are owned, Viatris also leases certain facilities from third parties.
ACCESS Viatris provides high-quality, trusted medicines, regardless of geography or circumstance. We are committed to improving access to high-quality medicines while working to ensure a reliable supply so patients can get the treatments they need, when and where they need them.
We believe we are a company uniquely positioned to bridge the traditional divide between generics and brands, combining the best of both to more holistically address healthcare needs globally. We are committed to improving access to high-quality medicines and working to ensure a reliable supply so patients can get the treatments they need, when and where they need them.
Our near-term science-based emissions reduction targets for scope 1, 2 and 3 have been validated and approved by the Science Based Target initiative (SBTi). The SBTi classified Viatris' scope 1 and 2 target ambition and has determined that it is in line with a 1.5°C trajectory, a worldwide goal of limiting global warming.
As part of having our Scope 1, 2 and 3 emission reduction targets validated and approved by SBTi, SBTi classified Viatris’ scope 1 and 2 target ambition and has determined that it is in line with the 1.5°C trajectory. Further, we have concluded a climate scenario analysis, a key recommendation of the Task Force on Climate-Related Financial Disclosures.
Our suppliers, contract manufacturers, clinical trial partners and other business partners are subject to similar regulations and periodic inspections. The Company remains committed to maintaining the highest quality manufacturing standards at its facilities around the world and to continuous assessment and improvement in a time of evolving industry dynamics and regulatory expectations.
The Company remains committed to maintaining the highest quality manufacturing standards at its facilities around the world and to continuous assessment and improvement in a time of evolving industry dynamics and regulatory expectations. Customers and Marketing Our customers include retail and pharmacy establishments, wholesalers and distributors, payers, insurers and governments, and institutions such as hospitals; among others.
We rely on the aforementioned types of intellectual property, as well as our copyrights, trade dress, regulatory exclusivities and contractual protections, to establish a broad scope of intellectual property rights for our product portfolio. Human Capital Our people, our culture Our approximately 37,000 diverse colleagues are fueled by a shared passion, purpose, and genuine care for the patients we serve.
We rely on the aforementioned types of intellectual property, as well as our copyrights, trade dress, regulatory exclusivities and contractual protections, to establish a broad scope of intellectual property rights for our product portfolio. Sustainability To learn about our sustainability work in depth, we encourage you to read our 2022 Sustainability Report 1 .
The Eye Care division within the company will be led by former Oyster Point CEO, Jeff Nau Ph.D. Unless otherwise indicated, industry data included in this Item 1 are sourced from IQVIA Holdings Inc. and are for the twelve months ended November 2022.
Unless otherwise indicated, industry data included in this Item 1 are sourced from IQVIA Holdings Inc. and are for the twelve months ended November 2023 and Viatris product and other company data included in this Item 1 are from internal sources and are as of November 30, 2023.
As a result, we supplement our production footprint through arrangements with other manufacturers. However, as discussed above, our API business is one of the assets we intend to divest as we continue to move up the value chain and focus on more complex and innovative products to build a more durable, higher-margin portfolio.
However, as discussed above, the Company has entered into a definitive agreement to divest its API business in India as we intend to move up the value chain during Phase 2 of our two-phased strategic vision by focusing on more complex and innovative products to build a more durable, higher-margin portfolio.
While many of these key facilities are owned, Viatris also leases certain facilities from third parties. We believe all our facilities are in good operating condition, the machinery and equipment are well-maintained, the facilities are suitable for their intended purposes and they have capacities adequate for the current operations.
We believe all our facilities are in good operating condition, the machinery and equipment are well-maintained, the facilities are suitable for their intended purposes, and they have capacities adequate for the current operations. 12 Table of Contents Facilities and records related to our products are subject to periodic inspection by the FDA, the EMA and other regulatory authorities in jurisdictions where our products are marketed.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, a significant escalation or expansion of the conflict’s current scope may have a negative impact on our operations and financial results in future periods; • changes in laws, regulations, and practices affecting the pharmaceutical industry and the healthcare system, including but not limited to imports, exports, manufacturing, quality, cost, pricing, reimbursement, approval, inspection, and delivery of healthcare; • changes in policies designed to promote foreign investment, including significant tax incentives, liberalized import and export duties, and preferential rules on foreign investment and repatriation; • increased EU and U.S. scrutiny of overseas pharmaceutical manufacturing, including executive orders, agency rule making and policy proposals related to increasing domestic production of pharmaceutical products and API; • differing local product preferences and product requirements; • adverse changes in the economies in which we or our partners and suppliers operate as a result of a slowdown in overall growth, a change in government or economic policies, or financial, political, or social change or instability in such countries that affects the markets in which we operate, particularly emerging markets; • changes in employment or labor laws, or wage increases in the countries in which we or our partners and suppliers operate; • local, regional and global restrictions on banking and commercial activities in certain markets, especially emerging markets; • longer payment cycles and increased exposure to counterparty risk; • volatility in international financial markets and increased foreign currency risk; • inflation or hyperinflation in certain markets, including Turkey; • changes resulting from the formal withdrawal of the U.K. from the EU, commonly referred to as Brexit, including those related to additional trade agreements, tariffs and customs regulations and currency fluctuations, which could materially impact the way we conduct our operations in those markets; • supply disruptions and increases in energy and transportation costs; • increased tariffs on the import or export of our products or API, including on imports from China to the U.S. as a result of the escalation of trade tensions between the countries or otherwise; • burdens to comply with multiple, changing and potentially conflicting laws, regulations and disclosure requirements, including those relating to environmental, social and governance matters, carbon emissions, health and safety, labor and human rights; • natural or man-made disasters, including droughts, floods, earthquakes, hurricanes and the impact of climate change in the countries in which we or our partners and suppliers operate; and 26 Table of Contents • local disturbances, the outbreak of highly contagious diseases or other health epidemics (such as COVID-19), terrorist attacks, riots, social disruption, wars, or regional hostilities in the countries in which we or our partners and suppliers operate and that could affect the economy, our operations and employees by disrupting operations and communications, making travel and the conduct of our business more difficult, and/or causing our customers to be concerned about our ability to meet their needs.
Biggest changeA significant escalation or expansion of the conflict’s current scope may have a negative impact on our operations and financial results in future periods; • changes in laws, regulations, and practices that impact the pharmaceutical industry and/or healthcare systems, including but not limited to imports, exports, manufacturing, quality, cost, pricing, reimbursement, approval, inspection, and delivery of healthcare; • changes in policies designed to promote foreign investment, including significant tax incentives, liberalized import and export duties, and preferential rules on foreign investment and repatriation; • differing local product preferences and product requirements; • adverse changes in the economies in which we or our partners and suppliers operate as a result of a slowdown in overall growth; • changes in government or economic policies, elections, or financial, political, or social change or instability that affects the markets or countries in which we or our partners operate; • changes in employment or labor laws, or wage increases in the countries in which we or our partners and suppliers operate; • local, regional and global restrictions on banking and commercial activities in certain markets, especially emerging markets; • longer payment cycles and increased exposure to counterparty risk; • volatility in international financial markets and increased foreign currency risk; • inflation or hyperinflation in certain markets, including Turkey; • supply disruptions and increases in energy and transportation costs; • increased tariffs on the import or export of our products or API, including on imports from China to the U.S. as a result of the escalation of trade tensions between the countries or otherwise; • burdens to comply with multiple, changing and potentially conflicting laws, regulations and disclosure requirements, including those relating to environmental, social and governance matters, carbon emissions, health and safety, labor and human rights; • natural or man-made disasters, including droughts, floods, earthquakes, hurricanes and the impact of climate change in the countries in which we or our partners and suppliers operate; and • local disturbances, the outbreak of highly contagious diseases or other health epidemics or pandemics, terrorist attacks, riots, social disruption, wars, or regional hostilities in the countries in which we or our partners and suppliers operate and that could affect the economy, our operations and employees by disrupting operations and communications, making travel and the conduct of our business more difficult, and/or causing our customers to be concerned about our ability to meet their needs.
These strategies include, but are not limited to: • entering into agreements whereby other generic companies will begin to market an authorized generic, which is the approved brand-name drug without the brand-name on its label, at the same time or after generic competition initially enters the market; • launching their own authorized generic product prior to or at the same time or after generic competition initially enters the market; • pricing a branded product at a discount equivalent to generic pricing; 31 Table of Contents • filing frivolous petitions with the FDA or other regulatory bodies seeking to prevent or delay approvals, including timing the frivolous filings so as to thwart generic competition by causing delays of our product approvals; • contracting strategies among pharmaceutical manufacturers and PBMs that could decrease generic or biosimilar utilization and negatively impact our product launches; • seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate bioequivalence or to meet other requirements for approval, and/or to prevent regulatory agency review of applications; • initiating legislative or other efforts to limit the substitution of generic versions of brand pharmaceuticals; • filing suits for patent infringement and other claims that may delay or prevent regulatory approval, manufacture, and/or sale of generic products; • introducing “next-generation” products prior to the expiration of market exclusivity for the reference product, which often materially reduces the demand for the generic or the reference product for which we seek regulatory approval; • persuading regulatory bodies to withdraw the approval of brand-name drugs for which the patents are about to expire and converting the market to another product of the brand company on which longer patent protection exists; • obtaining extensions of market exclusivity by conducting clinical trials of brand drugs in pediatric populations or by other methods; and • seeking to obtain new patents on drugs for which patent protection is about to expire.
These strategies include, but are not limited to: • entering into agreements whereby other generic companies will begin to market an authorized generic, which is the approved brand-name drug without the brand-name on its label, at the same time or after generic competition initially enters the market; • launching their own authorized generic product prior to or at the same time or after generic competition initially enters the market; • pricing a branded product at a discount equivalent to generic pricing; • filing frivolous petitions with the FDA or other regulatory bodies seeking to prevent or delay approvals, including timing the frivolous filings so as to thwart generic competition by causing delays of our product approvals; 33 Table of Contents • contracting strategies among pharmaceutical manufacturers and PBMs that could decrease generic or biosimilar utilization and negatively impact our product launches; • seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate bioequivalence or to meet other requirements for approval, and/or to prevent regulatory agency review of applications; • initiating legislative or other efforts to limit the substitution of generic versions of brand pharmaceuticals; • filing suits for patent infringement and other claims that may delay or prevent regulatory approval, manufacture, and/or sale of generic products; • introducing “next-generation” products prior to the expiration of market exclusivity for the reference product, which often materially reduces the demand for the generic or the reference product for which we seek regulatory approval; • persuading regulatory bodies to withdraw the approval of brand-name drugs for which the patents are about to expire and converting the market to another product of the brand company on which longer patent protection exists; • obtaining extensions of market exclusivity by conducting clinical trials of brand drugs in pediatric populations or by other methods; and • seeking to obtain new patents on drugs for which patent protection is about to expire.
Failure to comply with these laws and regulations could result in a range of consequences, including, but not limited to, fines, penalties, disgorgement, exclusion from U.S. federal healthcare reimbursement programs, unanticipated compliance expenditures, suspension of review of applications or other submissions, rejection or delay in approval of applications, recall or seizure of products, total or partial suspension of production and/or distribution, our inability to sell products, the return by customers of our products, injunctions, and/or criminal prosecution.
Failure to comply with these laws, regulations or expectations could result in a range of consequences, including, but not limited to, fines, penalties, disgorgement, exclusion from U.S. federal healthcare reimbursement programs, unanticipated compliance expenditures, suspension of review of applications or other submissions, rejection or delay in approval of applications, recall or seizure of products, total or partial suspension of production and/or distribution, our inability to sell products, the return by customers of our products, injunctions, and/or criminal prosecution.
In addition, a failure by us, or our third-party vendors, to comply with applicable data privacy and security laws may lead to government enforcement actions and private litigation, which could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on the way we operate our business, our financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
A failure by us, or our third-party vendors, to comply with applicable data privacy and security laws may lead to government enforcement actions and private litigation, which could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on the way we operate our business, our financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
To the extent that we expend significant resources on R&D efforts and are not able, ultimately, to introduce successful new and/or complex products as a result of those efforts, there could be a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
To the extent that we expend significant resources on R&D efforts and are not able, ultimately, to introduce successful new and/or complex or innovative products as a result of those efforts, there could be a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Any challenge to, or invalidation or circumvention of, our intellectual property (including patents or patent applications, copyrights and trademark protection) would be costly, would require significant time and attention of our management, and could cause a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Any challenge to, or invalidation, opposition or circumvention of, our intellectual property (including patents or patent applications, copyrights and trademark protection) would be costly, would require significant time and attention of our management, and could cause a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
The enforceability of similar choice of forum provisions in other companies’ charters and bylaws has been challenged in legal proceedings, and it is possible that, in connection with claims arising under federal securities laws or otherwise, a court could find the exclusive forum provision contained in the Viatris Charter to be inapplicable or unenforceable.
The enforceability of similar choice of forum provisions in other companies’ charters and bylaws has been challenged in legal proceedings, and it is possible that, in connection with claims arising under federal securities laws or otherwise, a court could find the exclusive forum provisions contained in the Viatris Charter to be inapplicable or unenforceable.
Other related factors that could affect our business include: • Competitors’ products may be safer, more effective, more effectively marketed or sold, or have lower prices or better performance features than ours; 28 Table of Contents • PBMs and other pharmaceutical manufacturers may utilize contracting strategies that could decrease utilization of or otherwise negatively impact our products; • Vertical integration of pharmacies and large purchasing organizations or consolidation among distribution outlets; and • Our sales have suffered and may suffer in the future as a result of changes in consumer demand for our products, including those related to fluctuations in consumer buying patterns tied to seasonality or other factors, willingness of customers to switch among products of different pharmaceutical manufacturers, importation by consumers or the introduction of new products by competitors.
Other related factors that could affect our business include: • Competitors’ products may be safer, more effective, more effectively marketed or sold, or have lower prices or better performance features than ours; • PBMs and other pharmaceutical manufacturers may utilize contracting strategies that could decrease utilization of or otherwise negatively impact our products; • Vertical integration of pharmacies and large purchasing organizations or consolidation among distribution outlets; and • Our sales have suffered and may suffer in the future as a result of changes in consumer demand for our products, including those related to fluctuations in consumer buying patterns tied to seasonality or other factors, willingness of 30 Table of Contents customers to switch among products of different pharmaceutical manufacturers, importation by consumers or the introduction of new products by competitors.
For the pharmaceutical industry and the healthcare systems in the markets in which we participate, regulatory restrictions and the pricing dynamics of our products generally make it difficult to pass on such costs to customers. Inflation has resulted and may continue to result in higher interest rates and increased costs of capital.
For the pharmaceutical industry and the healthcare systems in the markets in which we participate, regulatory restrictions and the pricing dynamics of our products generally make it difficult to pass on such costs to customers. Inflation has also resulted and may continue to result in higher interest rates and increased costs of capital.
In addition to the impacts of these government-sponsored healthcare systems, in the EU, U.K. and other international markets, certain governmental agencies have or are considering enacting further measures to decrease the costs of providing healthcare, including government mandated price reductions and/or other forms of price controls, including retrospective “clawback” price reductions.
In addition to the impacts of these government-sponsored healthcare systems, in the EU, U.K. and other international markets, certain governmental agencies have enacted, or are considering enacting, further measures to decrease the costs of providing healthcare, including government mandated price reductions and/or other forms of price controls, including retrospective “clawback” price reductions.
Additionally, some state legislatures have and the U.S. federal government or additional state legislatures could, enact legislation to limit patent settlements between pharmaceutical companies and deem such patent agreements as anticompetitive. These changes could impact our ability to launch generic products prior to the originator’s patent expiry.
Additionally, some state legislatures have enacted, and the U.S. federal government or additional state legislatures could enact, legislation to limit patent settlements between pharmaceutical companies and deem such patent agreements as anticompetitive. These changes could impact our ability to launch generic products prior to the originator’s patent expiry.
Some of these third parties are outside the U.S., including significant elements of our IT infrastructure, and as a result we are managing many independent vendor relationships with third parties who may or could have access to our confidential information.
Some of these third parties are outside the U.S., including significant elements of our IT and information systems infrastructure, and as a result we are managing many independent vendor relationships with third parties who may or could have access to our confidential information.
In addition to our reliance upon third parties to provide IT and information security services, the market for such services continues to contract and converge, increasing both the challenges in identifying competent providers and the impact of a breach incident with any single vendor.
In addition to our reliance upon third parties to provide IT and information system and security services, the market for such services continues to contract and converge, increasing both the challenges in identifying competent providers and the impact of a breach incident with any single vendor.
These proceedings may involve claims for, or the possibility of, fines and penalties involving substantial amounts of money or other relief, including but not limited to civil or criminal fines and penalties and exclusion from participation in various government healthcare-related programs.
These proceedings may involve claims for, or the possibility of, fines, penalties, or damages involving substantial amounts of money or other relief, including but not limited to civil or criminal fines and penalties and exclusion from participation in various government healthcare-related programs.
We face numerous cost-containment measures by governments and other payors, including certain government-imposed industry-wide price reductions, mandatory rebates or pricing, international reference pricing (i.e., the practice of a country linking its regulated medicine prices to those of other countries), VBP, tender systems, shifting of the payment burden to patients through higher co-payments, and requirements for increased transparency on pricing, all of which may have an adverse impact on the pricing of our products.
We face numerous cost-containment measures by governments and other payors, including certain government-imposed industry-wide price reductions, caps on price increases, mandatory rebates or pricing, international reference pricing (i.e., the practice of a country linking its regulated medicine prices to those of other countries), VBP, tender systems, shifting of the payment burden to patients through higher co-payments, and requirements for increased transparency on pricing, all of which may have an adverse impact on the pricing of our products.
Failure to comply with cGMP and other regulatory standards at one of our or our partners’ or suppliers’ manufacturing facilities could result in an adverse action brought by the FDA or other regulatory authorities, which could result in the receipt of an untitled or warning letter, fines, penalties, disgorgement, unanticipated compliance expenditures, rejection or delay in approval of applications, suspension of review of applications or other submissions, suspension of ongoing clinical trials, recall or seizure of products, total or partial suspension of production and/or distribution, our inability to sell products, the return by customers of our products, orders to suspend, vary, or withdraw marketing authorizations, injunctions, consent decrees, requirements to modify promotional materials or issue corrective information to healthcare practitioners, refusal to permit import or export, criminal prosecution and/or other adverse actions.
Failure to comply with cGMP and other regulatory standards at one of our or our partners’ or suppliers’ manufacturing facilities could result in an adverse action brought by the FDA or other regulatory authorities, which has resulted and could in the future result in the receipt of an untitled or warning letter, fines, penalties, disgorgement, unanticipated compliance expenditures, rejection or delay in approval of applications, suspension of review of applications or other submissions, suspension of ongoing clinical trials, recall or seizure of products, total or partial suspension of production and/or distribution, our inability to sell products, the return by customers of our products, orders to suspend, vary, or withdraw marketing authorizations, injunctions, consent decrees, requirements to modify promotional materials or issue corrective information to healthcare practitioners, refusal to permit import or export, criminal prosecution and/or other adverse actions.
If we are unsuccessful in retaining our key employees or enforcing certain post-employment contractual provisions such as confidentiality or non-competition provisions, it may have a material adverse impact on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. Compliance Risks We are subject to the U.S. Foreign Corrupt Practices Act, the U.K.
If we are unsuccessful in retaining our key employees or enforcing certain post-employment contractual provisions such as confidentiality provisions, it may have a material adverse impact on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. Compliance Risks We are subject to the U.S. Foreign Corrupt Practices Act, the U.K.
These difficulties may include: • diversion of management’s attention from the ongoing operations of Viatris to integration and restructuring matters; • the challenge of integrating the employees and business cultures; • retaining existing customers and suppliers, or obtaining new customers and suppliers; • risks associated with managing a larger and more complex company; • loss of institutional knowledge; • the challenge and cost of integrating manufacturing, logistics, information technology, communications and other systems; • the potential difficulty retaining key personnel and other employees; • challenges in reducing reliance on transition services, including difficulties in hiring employees or finding suitable replacements, prior to the expiration of any period in which such services are provided; and • reducing costs associated with transition services, including managing the amount for replacement costs.
These difficulties may include: • diversion of management’s attention from the ongoing operations of Viatris to integration and restructuring matters; • the challenge of integrating the employees and business cultures; • retaining existing customers and suppliers, or obtaining new customers and suppliers; • risks associated with managing a larger and more complex company; • loss of institutional knowledge; • the challenge and cost of integrating manufacturing, logistics, IT, communications and other systems; • the potential difficulty retaining key personnel and other employees; • challenges in reducing reliance on transition services, including difficulties in hiring employees or finding suitable replacements, prior to the expiration of any period in which such services are provided; and • reducing costs associated with transition services, including managing the amount for replacement costs.
Furthermore, a significant portion of the consideration that we received in the Biocon Biologics Transaction is in the form of equity in Biocon Biologics, which is currently a privately held Indian company.
A significant portion of the consideration that we received in the Biocon Biologics Transaction is in the form of equity in Biocon Biologics, which is currently a privately held Indian company.
In the absence of adequate intellectual property protections or other barriers to entry, competitors may adversely affect our branded products business by independently developing and/or marketing substantially equivalent products. It is also possible that we could incur substantial costs if we initiate litigation against others to protect or enforce our intellectual property rights.
In the absence of adequate intellectual property or other protections, competitors may adversely affect our branded products business by independently developing and/or marketing substantially equivalent products. It is also possible that we could incur substantial costs if we initiate litigation against others to protect or enforce our intellectual property rights.
Our level of indebtedness could have important consequences, including but not limited to: • increasing our vulnerability to general adverse economic and industry conditions; 44 Table of Contents • requiring us to dedicate a substantial portion of our cash flow from operations to make debt service payments, or repay debt as it matures, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments, dividend payments and other general corporate purposes; • limiting our flexibility in planning for, or reacting to, challenges and opportunities, and changes in our businesses and the markets in which we operate; • limiting our ability to obtain additional financing to fund our working capital, capital expenditures, acquisitions and debt service requirements and other financing needs; • increasing our vulnerability to increases in interest rates in general related to any of our indebtedness that bears interest at floating rates or when refinancing maturing debt at higher rates; • increasing our exposure to currency fluctuations, since a significant portion of our indebtedness is denominated in currencies other than the U.S. dollar, such as our Euro and Japanese yen denominated debt; and • placing us at a competitive disadvantage to our competitors that have less debt.
Our level of indebtedness could have important consequences, including but not limited to: • increasing our vulnerability to general adverse economic and industry conditions; • requiring us to dedicate a substantial portion of our cash flow from operations to make debt service payments, or repay debt as it matures, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments, dividend payments or share repurchases, and other general corporate purposes; • limiting our flexibility in planning for, or reacting to, challenges and opportunities, and changes in our businesses and the markets in which we operate; • limiting our ability to obtain additional financing to fund our working capital, capital expenditures, acquisitions and debt service requirements and other financing needs; • increasing our vulnerability to increases in interest rates in general related to any of our indebtedness that bears interest at floating rates or when refinancing maturing debt at higher rates; • increasing our exposure to currency fluctuations, since a significant portion of our indebtedness is denominated in currencies other than the U.S. dollar, such as our Euro and Japanese yen denominated debt; and • placing us at a competitive disadvantage to our competitors that have less debt.
We also cannot ensure that any limitation of liability or indemnity provisions in our contracts, including with vendors and service providers, for a security lapse or breach or other security incident would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim.
We also cannot ensure that any limitation of liability or indemnity provisions in our contracts, including with vendors and service providers, for a cybersecurity threat or incident, security lapse or breach or other security incident would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim.
Viatris tests intangible assets with indefinite lives for impairment on an annual basis and intangible assets with finite lives for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. This assessment of the recoverability of intangible assets could result in an impairment and a non-cash charge could be required.
Viatris tests intangible assets with indefinite lives for impairment on an annual basis and intangible assets and IPR&D with finite lives for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. This assessment of the recoverability of intangible assets could result in an impairment and a non-cash charge could be required.
Given our dependence on market perception and sales and marketing efforts, negative publicity associated with product or brand quality, patient illness, or other adverse effects resulting from, or perceived to be resulting from, our products or brands, or our partners’ and suppliers’ manufacturing facilities, or an inability to increase or maintain the effectiveness and efficiency of our sales and marketing activities could have a material adverse effect on our reputation, business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Given our dependence on market perception and sales and marketing efforts, negative publicity associated with product or brand quality, patient illness, or other adverse effects resulting from, or perceived to be resulting from, our products or brands, or our partners’ and suppliers’ manufacturing facilities, or an inability to increase or maintain the effectiveness and 36 Table of Contents efficiency of our sales and marketing activities could have a material adverse effect on our reputation, business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
We outsource significant elements of our operations to third parties and provide IT and security services to some partners under transition services agreements.
We outsource significant elements of our operations to third parties and provide IT, information and security services to some partners under transition services agreements.
Outside of the U.S., the EU’s and U.K.’s GDPR and local implementing regulations impose significant compliance obligations on our organization. The GDPR contains data protection requirements in the EU and U.K. and imposes a framework of obligations and restrictions governing the collection, processing, and the transmission of personal information to jurisdictions outside of the EU and U.K.
The EU’s and U.K.’s GDPR and local implementing regulations also impose significant compliance obligations on our organization. The GDPR contains data protection requirements in the EU and U.K. and imposes a framework of obligations and restrictions governing the collection, processing, and the transmission of personal information to jurisdictions outside of the EU and U.K.
We must annually apply to the DEA and similar regulatory agencies for procurement quotas in order to obtain these substances.
We must apply to the DEA and similar regulatory agencies for procurement quotas in order to obtain these substances.
While we have taken steps to identify and protect such information, and to ensure that the third-party vendors’ on which we rely have taken adequate steps to protect such information, there can be no assurance that our or our vendors’ efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential or material non-public information that could adversely affect our business operations or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information. 40 Table of Contents A breach of our or our vendors’ security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery, phishing or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business position.
While we have taken steps to identify and protect such information, and to ensure that the third-party vendors’ on which we rely have taken adequate steps to protect such information, there can be no assurance that our or our vendors’ efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential or material non-public information that could adversely affect our business operations or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information. 41 Table of Contents A breach of our or our vendors’ security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of a cybersecurity threat or incident, theft, hacking, fraud, trickery, phishing or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business position.
Levels of market acceptance for our products could be impacted by several factors, including but not limited to: 34 Table of Contents • the availability, perceived advantages, and relative safety and efficacy of alternative products from our competitors; • the degree to which the approved labeling supports promotional initiatives for commercial success; • the prices of our products relative to those of our competitors; • the timing of our market entry; • the effectiveness of our marketing, sales, and distribution strategy and operations; and • other competitor actions, including legal actions.
Levels of market acceptance for our products could be impacted by several factors, including but not limited to: • the availability, perceived advantages, and relative safety and efficacy of alternative products from our competitors; • the degree to which the approved labeling supports promotional initiatives for commercial success; • the prices of our products relative to those of our competitors; • the timing of our market entry; • the effectiveness of our marketing, sales, and distribution strategy and operations; and • other competitor actions, including legal actions.
Significant additional reforms to the U.S. healthcare system, including changes to the ACA, Medicare and Medicaid, or changes to other laws or regulatory frameworks in other markets in which we operate, 25 Table of Contents that reduce our revenues or increase our costs could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Significant additional reforms to the U.S. healthcare system, including changes to the ACA, Medicare and Medicaid, or changes to other laws or regulatory frameworks in other markets in which we operate, that reduce our revenues or increase our costs could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
These events could have a material adverse effect on the way we operate our business, including the resiliency of our supply chain, our financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. 42 Table of Contents Finance Risks There can be no guarantee that we will continue to pay dividends or repurchase shares under our stock buyback program.
These events could have a material adverse effect on the way we operate our business, including the resiliency of our supply chain, our financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. Finance Risks There can be no guarantee that we will continue to pay dividends or repurchase shares under our stock buyback program.
This summary is not exhaustive and is qualified by reference to the full set of risk factors set forth in Part I, Item 1A. • Strategic Risks ◦ We may not realize the intended benefits of, or achieve the intended goals or outlooks with respect to, our strategic initiatives, including divestitures, acquisitions or other potential transactions. ◦ The integration of acquired businesses, as well as our global restructuring program have presented and may in the future present significant challenges. ◦ There are risks and uncertainties associated with the sale of our biosimilars business, one or more of which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends or stock price. ◦ We have and may continue to experience pressure on the pricing of and reimbursements for certain of our products due to pricing controls, social or government pressure to lower the cost of drugs, and consolidation across the supply chain. ◦ We have significant operations globally, which exposes us to the risks inherent in conducting our business internationally. ◦ Charges to earnings resulting from acquisitions could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. • Operational Risks ◦ Current and changing economic conditions, including inflation, may adversely affect our industry, business, partners and suppliers. ◦ The pharmaceutical industry is heavily regulated, and we face significant costs and uncertainties associated with our efforts to comply with applicable laws and regulations. ◦ The use of legal, regulatory, and legislative strategies by both brand and generic competitors, including but not limited to “authorized generics” and regulatory petitions, may increase costs associated with the introduction or marketing of our generic products, could delay or prevent such introduction, and could significantly reduce our revenue and profit. ◦ If we are unable to successfully introduce new products in a timely manner, our future revenue and profitability may be adversely affected. ◦ We expend a significant amount of resources on R&D efforts that may not lead to successful product introductions. ◦ Even if our products in development receive regulatory approval, such products may not achieve expected levels of market acceptance. ◦ Our business is highly dependent upon market perceptions of us, our products and brands, and the safety and quality of our products and brands, as well as the effectiveness of our sales and marketing activities, and we may be adversely impacted by negative publicity or findings. ◦ We have a limited number of manufacturing facilities and certain third-party suppliers produce a substantial portion of our API and products, some of which require a highly exacting and complex manufacturing process. ◦ Our future success is highly dependent on our ability to attract, motivate and retain key personnel. • Compliance Risks ◦ We are subject to the U.S.
This summary is not exhaustive and is qualified by reference to the full set of risk factors set forth in this Part I, Item 1A. • Strategic Risks ◦ We may not realize the intended benefits of, or achieve the intended goals or outlooks with respect to, our strategic initiatives, including divestitures, acquisitions or other potential transactions. ◦ There are risks and uncertainties associated with the Announced Divestitures, including the OTC Transaction, one or more of which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends or stock price. ◦ The integration of acquired businesses as well as restructuring programs have presented and may in the future present significant challenges. ◦ There are ongoing risks and uncertainties associated with the Biocon Biologics Transaction, one or more of which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends or stock price. ◦ We have and may continue to experience pressure on the pricing of and reimbursements for certain of our products due to pricing controls, social or government pressure to lower the cost of drugs, and consolidation across the supply chain. ◦ We have significant operations globally, which exposes us to the risks inherent in conducting our business internationally. ◦ Charges to earnings resulting from acquisitions could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. • Operational Risks ◦ Current and changing economic conditions, including inflation, may adversely affect our industry, business, partners and suppliers. ◦ The pharmaceutical industry is heavily regulated, and we face significant costs and uncertainties associated with our efforts to comply with applicable laws and regulations. ◦ The use of legal, regulatory, and legislative strategies by both brand and generic competitors, including but not limited to “authorized generics” and regulatory petitions, may increase costs associated with the introduction or marketing of our generic products, could delay or prevent such introduction, and could significantly reduce our revenue and profit. ◦ If we are unable to successfully introduce new products in a timely manner, our future revenue and profitability may be adversely affected. ◦ We expend a significant amount of resources on R&D efforts that may not lead to successful product introductions. ◦ Even if our products in development receive regulatory approval, such products may not achieve expected levels of market acceptance. ◦ Our business is highly dependent upon market perceptions of us, our products and brands, and the safety and quality of our products and brands, as well as the effectiveness of our sales and marketing activities, and we may be adversely impacted by negative publicity or findings. ◦ We have a limited number of manufacturing facilities and certain third-party suppliers produce a substantial portion of our API and products, some of which require a highly exacting and complex manufacturing process. ◦ Our future success is highly dependent on our ability to attract, motivate and retain key personnel. 21 Table of Contents • Compliance Risks ◦ We are subject to the U.S.
If we or one of our suppliers experience any of the problems described above, such problems could have a material adverse effect on our reputation, business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. 36 Table of Contents Our future success is highly dependent on our ability to attract, motivate and retain key personnel.
If we or one of our suppliers experience any of the problems described above, such problems could have a material adverse effect on our reputation, business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. Our future success is highly dependent on our ability to attract, motivate and retain key personnel.
If environmental discharge occurs, or if we discover contamination caused by third parties, including by prior owners and operators of properties we acquire or lease, or by neighboring properties or other offsite sources, we could be liable for cleanup or remediation obligations, damages and fines or have relevant permits, authorizations or registrations modified or revoked, regardless of our responsibility for such contamination.
If environmental discharge 31 Table of Contents occurs, or if we discover contamination caused by third parties, including by prior owners and operators of properties we acquire or lease, or by neighboring properties or other offsite sources, we could be liable for cleanup or remediation obligations, damages and fines or have relevant permits, authorizations or registrations modified or revoked, regardless of our responsibility for such contamination.
These risk factors should be read in conjunction with the other information in this Form 10-K, as well as our other filings with the SEC. Our risk factors are organized into five categories: Strategic, Operational, Compliance, Finance and General. 20 Table of Contents Summary Below is a summary of some of the more significant risks and uncertainties we face.
These risk factors should be read in conjunction with the other information in this Form 10-K, as well as our other filings with the SEC. Our risk factors are organized into five categories: Strategic, Operational, Compliance, Finance and General. Summary Below is a summary of some of the more significant risks and uncertainties we face.
A regulatory approval 32 Table of Contents may also include post-approval study or risk management requirements that may substantially increase the resources required to market the drug. Also, for products pending approval, we may obtain raw materials or produce batches of inventory to be used in efficacy and bioequivalence testing, as well as in anticipation of the product’s launch.
A regulatory approval may also include post-approval study or risk management requirements that may substantially increase the resources required to market the drug. Also, for products pending approval, we may obtain raw materials or produce batches of inventory to be used in efficacy and bioequivalence testing, as well as in anticipation of the product’s launch.
The pharmaceutical drug supply is vulnerable to illegal counterfeiting and the presence of counterfeit or IP-infringing products in a growing number of markets, including widespread sales over the internet. 27 Table of Contents Third parties may illegally distribute and sell counterfeit or IP-infringing versions of our products that do not meet our rigorous manufacturing and testing standards.
The pharmaceutical drug supply is vulnerable to illegal counterfeiting and the presence of counterfeit or IP-infringing products in a growing number of markets, including widespread sales over the internet. Third parties may illegally distribute and sell counterfeit or IP-infringing versions of our products that do not meet our rigorous manufacturing and testing standards.
We or our partners may experience delays in our ongoing or future clinical trials, and we do not know whether planned clinical trials will begin or enroll subjects on time, need to be redesigned, or be completed on schedule, if at all. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons.
We or our partners may experience delays in our ongoing or future clinical trials, and we do not know whether planned clinical trials will begin or enroll subjects on time, need to be redesigned, or be completed on schedule, if at all. 35 Table of Contents Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons.
In addition, Viatris has agreed to pay Pfizer an amount equal to 57% of any losses actually incurred or suffered by Viatris, its predecessors or subsidiaries, since July 29, 2019, arising out of third-party actions relating to the manufacture, distribution, marketing, promotion or sale of opioids by or on behalf of Viatris, its predecessors or subsidiaries.
In addition, Viatris has agreed to pay Pfizer an amount equal to 57% of any losses actually incurred or suffered by Viatris, its predecessors or subsidiaries, since July 29, 2019, arising out of third-party actions relating to the manufacture, distribution, marketing, promotion or sale of opioids by 40 Table of Contents or on behalf of Viatris, its predecessors or subsidiaries.
Although Viatris currently intends to continue to pay quarterly dividends to its stockholders, there is no assurance that Viatris will declare and pay, or have the ability to declare and pay, any dividends on its common stock in the future.
Although Viatris currently intends to continue to pay quarterly dividends to its shareholders, there is no assurance that Viatris will declare and pay, or have the ability to declare and pay, any dividends on its common stock in the future.
If global credit markets contract, future debt financing may not be available to us when required or may not be available on acceptable terms or at all, and as a result we may be unable to grow our business, take advantage of business opportunities, respond to competitive pressures or satisfy our obligations under our indebtedness.
If global credit markets contract, future debt financing may not be available to us when required or may not be available on acceptable terms or at all, and as a result we may 46 Table of Contents be unable to grow our business, take advantage of business opportunities, respond to competitive pressures or satisfy our obligations under our indebtedness.
Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Viatris may incur additional costs associated with resolving such matters in other jurisdictions or forums, which could materially and adversely affect Viatris’ business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Alternatively, if a court were to find these exclusive forum provisions inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Viatris may incur additional costs associated with resolving such matters in other jurisdictions or forums, which could materially and adversely affect Viatris’ business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Any security breach or other disruption to our or our vendors’ IT infrastructure could also interfere with or disrupt our business operations, including our manufacturing, distribution, R&D, sales and/or marketing activities.
Any security breach or other disruption to our or our vendors’ IT or information systems infrastructure could also interfere with or disrupt our business operations, including our manufacturing, distribution, R&D, sales and/or marketing activities.
In addition, regulations intended to limit greenhouse gas emissions or water usage, such as carbon pricing, taxes on emissions, fuel and energy, or to mitigate the impacts of climate change may become more prevalent, which could increase our operating costs and the costs charged by suppliers.
In addition, regulations intended to limit greenhouse gas emissions or water usage, such as greenhouse gas emission reduction obligations, carbon pricing, and taxes on emissions, fuel and energy, or to mitigate the impacts of climate change may become more prevalent, which could increase our operating costs and the costs charged by suppliers.
For example, companies may develop medicines that treat the same indications targeted by our products, and these medicines could be more effective than our products or patients and physicians could prefer these medicines over our medicines. The introduction of these new competing products could also have a negative impact on product sales.
For example, Viatris or other companies may develop medicines that treat the same indications targeted by our current products, and these medicines could be more effective than our current products or patients and physicians could prefer these medicines over our current medicines. The introduction of these new competing products could also have a negative impact on product sales.
General Risks The market price of our common stock has been and may continue to be volatile, and the value of your investment could materially decline. 46 Table of Contents Investors who hold shares of Viatris common stock may not be able to sell their shares at or above the price at which they acquired them.
General Risks The market price of our common stock has been and may continue to be volatile, and the value of your investment could materially decline. Investors who hold shares of Viatris common stock may not be able to sell their shares at or above the price at which they acquired them.
In particular, during 2022, the global economy has been impacted by high levels of inflation and rising energy costs, which has resulted in significant economic volatility. As a result, central banks have and continue to tighten their monetary policies and increase interest rates.
In particular, the global economy has recently been impacted by high levels of inflation and rising energy costs, which has resulted in significant economic volatility. As a result, central banks have and continue to tighten their monetary policies and increase interest rates.
We have entered into and may in the future enter into agreements with our collaboration partners that provide for certain services, as well as cross manufacturing, development and licensing arrangements. We commit substantial effort, funds and other resources to these various alliances and collaborations.
We have entered into and may in the future enter into agreements with our collaboration partners that provide for certain services, as well as cross manufacturing, development and licensing arrangements. We commit substantial efforts and other resources to these various alliances and collaborations.
In 33 Table of Contents addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly.
In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly.
Other countries in which we operate have, or are developing, laws and regulations governing the collection, use, securing and transmission of personal information as well that may affect our business or require us to adapt our technologies or practices.
Other countries in which we operate have, or are developing, laws and regulations governing the collection, use, securing and transmission of personal information as well that may affect our business or require us to adapt our technologies or 42 Table of Contents practices.
The overall increase in supply chain attacks on companies generally, and our interdependency on third party suppliers increases the potential for supply disruptions and service IT outages.
The overall increase in supply chain attacks on companies generally, and our interdependency on third party suppliers increases the potential for supply disruptions and service IT and information system outages.
There has also been increasing U.S. federal and state legislative and enforcement interest with respect to drug pricing, as well as from international organizations like the United Nations, WHO and Organization for Economic Cooperation and Development, in addition to intense publicity and scrutiny regarding such matters, including publicity and pressure resulting from prices charged by competitors and peer companies for new products as well as price increases by competitors and peer companies on older products that some have deemed excessive.
There has also been increasing U.S. federal and state legislative and enforcement interest with respect to drug pricing, as well as from international organizations like the United Nations, WHO and OECD, in addition to intense publicity and scrutiny regarding such matters, including publicity and pressure resulting from prices charged by competitors and peer companies for new products as well as price increases by competitors and peer companies on older products that some have deemed excessive.
We must maintain adequate internal controls and be able to provide an assertion as to the effectiveness of such controls on an annual basis. 45 Table of Contents Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports.
We must maintain adequate internal controls and be able to provide an assertion as to the effectiveness of such controls on an annual basis. Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports.
If integration activities or our global restructuring program are unsuccessful, if the estimated costs are higher than anticipated, or if we are unable to realize the anticipated synergies and other benefits, there could be a material adverse effect on Viatris’ business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
If integration activities or restructuring programs are unsuccessful, if the estimated costs are higher than anticipated, or if we are unable to realize the anticipated synergies and other benefits, there could be a material adverse effect on Viatris’ business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Changes in a country’s political stability or the state of relations between any such countries are difficult to predict and the political or social stability in and/or diplomatic relations between any countries in which we or our partners and suppliers do business could meaningfully deteriorate.
Changes in a country’s political stability or the state of relations between any such countries are difficult to predict and the 28 Table of Contents political or social stability in and/or diplomatic relations between any countries in which we or our partners and suppliers do business could meaningfully deteriorate.
These requirements include regulation of the handling, 29 Table of Contents manufacture, transportation, storage, use and disposal of materials and wastes, including the discharge of regulated materials and emissions into the environment. We are also subject to related permitting, record-keeping, reporting and registration requirements.
These requirements include regulation of the handling, manufacture, transportation, storage, use and disposal of materials and wastes, including the discharge of regulated materials and emissions into the environment. We are also subject to related permitting, record-keeping, reporting and registration requirements.
In addition, our facilities may be required to close for periods of time, be required to staff at reduced capacity, or suffer other manufacturing delays as the result of an outbreak of disease, epidemic or pandemic, such as the COVID-19 pandemic, in or near any of our facilities.
In addition, our facilities may be required to close for periods of time, be required to staff at reduced capacity, or suffer other manufacturing delays as the result of an outbreak of disease, epidemic or pandemic, in or near any of our facilities.
New government regulations could also result in new or more stringent forms of environmental, social and governance oversight, including increased greenhouse gas limitations, and the expansion of mandatory and voluntary reporting, diligence, and disclosure regarding environmental, social and governance matters.
New government regulations, especially in the EU, could also result in new or more stringent forms of environmental, social and governance oversight, including increased greenhouse gas limitations, and the expansion of mandatory and voluntary reporting, due diligence, and disclosure regarding environmental, social and governance matters.
If a disruption in the credit markets were to occur, Viatris could be unable to refinance its outstanding indebtedness on reasonable terms or at all. Such a disruption could also pose a risk to Viatris’ business if customers or suppliers are unable to obtain financing to meet their payment or delivery obligations.
If a disruption in the credit markets were to occur, Viatris could be unable to refinance its outstanding indebtedness on reasonable terms or at all. Such a disruption could also pose a risk 47 Table of Contents to Viatris’ business if customers or suppliers are unable to obtain financing to meet their payment or delivery obligations.
Viatris’ sales and marketing efforts are anchored by promoting its products to physicians, pharmacists, eye care professionals, clinics and hospitals.
Viatris’ sales and marketing efforts are anchored by promoting its products to physicians, pharmacists, eye care and other healthcare professionals, clinics and hospitals.
Moreover, if we obtain regulatory approval for a drug, it may be limited, for example, with respect to the indicated uses and delivery methods for which the drug may be marketed, or may include warnings, precautions or contraindications in the labeling, which could restrict our potential market for the drug.
Moreover, if we obtain regulatory approval for a drug, it may be limited, for example, 34 Table of Contents with respect to the indicated uses and delivery methods for which the drug may be marketed, or may include warnings, precautions or contraindications in the labeling, which could restrict our potential market for the drug.
Sales of a limited number of our products from time to time represent a significant portion of our revenues, net sales, gross profit, and net earnings. For the years ended December 31, 2022 and 2021, Viatris’ top ten products in terms of sales, in the aggregate, represented approximately 33%, respectively, of the Company’s net sales.
Sales of a limited number of our products from time to time represent a significant portion of our revenues, net sales, gross profit, and net earnings. For each of the years ended December 31, 2023 and 2022, Viatris’ top ten products in terms of sales, in the aggregate, represented approximately 33% of the Company’s net sales.
While we continue to invest in the monitoring, protection and resilience of our data security systems, there can be no assurances that our efforts will detect, prevent, or fully recover systems or data from all breakdowns, service interruptions, attacks and/or breaches.
While we continue to invest in the monitoring, protection and resilience of our information and data security systems, there can be no assurances that our efforts will detect, prevent, or fully recover systems or data from all breakdowns, service interruptions, cybersecurity threats and incidents, attacks and/or breaches.
These provisions are intended to protect Viatris’ stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with the Viatris Board and by providing the Viatris Board with more time to assess any acquisition proposal. These provisions are not intended to make Viatris immune from takeovers.
These provisions are intended to protect Viatris’ stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with the Viatris Board and by providing the Viatris Board with more time to assess 48 Table of Contents any acquisition proposal. These provisions are not intended to make Viatris immune from takeovers.
We may not be able to maintain competitive financial flexibility and our corporate tax rate which could adversely affect us and our shareholders. We believe that our structure and operations give us the ability to achieve competitive financial flexibility and a competitive worldwide effective corporate tax rate.
We may not be able to maintain competitive financial flexibility and our corporate tax rate which could adversely affect us and our shareholders. 44 Table of Contents We believe that our structure and operations give us the ability to achieve competitive financial flexibility and a competitive worldwide effective corporate tax rate.
Dollars, a significant portion of our revenues, indebtedness and other liabilities and our costs are denominated in non-U.S. currencies, including among others the Chinese Renminbi, Euro, Swedish Krona, Indian Rupee, Korean Won, Japanese Yen, Australian Dollar, Canadian Dollar, British Pound Sterling, South African Rand and Brazilian Real.
Dollars, a significant portion of our revenues, indebtedness and other liabilities and our costs are denominated in non-U.S. currencies, including among others the Chinese Renminbi, Euro, Swedish Krona, Indian Rupee, Korean Won, Japanese Yen, Australian Dollar, Canadian Dollar, and British Pound Sterling.
This exclusive forum provision may limit the ability of Viatris’ stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Viatris or its directors or officers, which may discourage such lawsuits against Viatris or its directors or officers.
These exclusive forum provisions may limit the ability of Viatris’ stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Viatris or its directors or officers, which may discourage such lawsuits against Viatris or its directors or officers.
The Viatris Charter designates the Court of Chancery of the State of Delaware, or, if such court lacks subject matter jurisdiction, another state court of the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Viatris’ stockholders, which could discourage lawsuits against Viatris and its directors and officers. 47 Table of Contents The Viatris Charter provides that unless Viatris, through approval of the Viatris Board, otherwise consents in writing, the Court of Chancery of the State of Delaware or, if and only if the Court of Chancery of the State of Delaware dismisses such action for lack of subject matter jurisdiction, another state court sitting in the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Viatris, any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director or officer or other employees of Viatris to Viatris or its stockholders, creditors or other constituents, any action asserting a claim against Viatris or any of its directors, officers or other employees arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the DGCL or the Viatris Charter or the Viatris Bylaws, as each may be amended from time to time, any action or proceeding asserting a claim against Viatris or any of its directors, officers or other employees governed by the internal affairs doctrine or any action or proceeding as to which the DGCL (as it may be amended from time to time) confers jurisdiction on the Court of Chancery of the State of Delaware.
The Viatris Charter provides that unless Viatris, through approval of the Viatris Board, otherwise consents in writing, the Court of Chancery of the State of Delaware or, if and only if the Court of Chancery of the State of Delaware dismisses such action for lack of subject matter jurisdiction, another state court sitting in the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Viatris, any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director or officer or other employees of Viatris to Viatris or its stockholders, creditors or other constituents, any action asserting a claim against Viatris or any of its directors, officers or other employees arising pursuant to, or seeking to enforce any right, obligation or remedy under, any provision of the DGCL or the Viatris Charter or the Viatris Bylaws, as each may be amended from time to time, any action or proceeding asserting a claim against Viatris or any of its directors, officers or other employees governed by the internal affairs doctrine or any action or proceeding as to which the DGCL (as it may be amended from time to time) confers jurisdiction on the Court of Chancery of the State of Delaware.
For the years ended December 31, 2022 and 2021, Viatris’ top three customers in terms of net sales, in the aggregate, represented approximately 26% and 23%, respectively, of the Company’s consolidated total net sales.
For the years ended December 31, 2023 and 2022, Viatris’ top three customers in terms of net sales, in the aggregate, represented approximately 25% and 26%, respectively, of the Company’s consolidated total net sales.
Insurance may be insufficient or may not cover the financial, legal, business or reputational losses that may result from a breakdown, breach, cyber-attack or other compromise of or interruption to our IT systems or confidential and other sensitive information.
Insurance may be insufficient or may not cover the financial, legal, business or reputational losses that may result from a breakdown, breach, cybersecurity threat or incident or other compromise of or interruption to our IT and information systems or confidential and other sensitive information.
There are risks and uncertainties associated with the sale of our biosimilars business, one or more of which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends or stock price.
There are ongoing risks and uncertainties associated with the Biocon Biologics Transaction, one or more of which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends or stock price.
In addition, customers may decide to downsize, defer or cancel contracts which could negatively affect our revenue. Further, Viatris had approximately $305 million of floating rate debt as of December 31, 2022. A one percentage point increase in the average interest rate of this debt would increase the combined interest expense by approximately $3.1 million per year.
In addition, customers may decide to downsize, defer or cancel contracts which could negatively affect our revenue. Further, Viatris had approximately $284 million of floating rate debt as of December 31, 2023. A one percentage point increase in the average interest rate of this debt would increase the combined interest expense by approximately $2.9 million per year.
In addition, such actions, regulation and intervention may cause significant fluctuations in our share price based on temporary or speculative market perceptions, uncertainties or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business, which could cause the market value of our common stock to decline. ITEM 1B. Unresolved Staff Comments None. ITEM 2.
In addition, such actions, regulation and intervention may cause significant fluctuations in our share price based on temporary or speculative market perceptions, uncertainties or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business, which could cause the market value of our common stock to decline. 49 Table of Contents ITEM 1B.
The final determination of any tax audits or related litigation could be materially different from our income tax provisions and accruals. 43 Table of Contents Additionally, changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in our overall profitability, changes in the valuation of deferred tax assets and liabilities, changes in tax laws or in their application, the results of audits and the examination of previously filed tax returns and related challenges and assessments by taxing authorities, and continuing assessments of our tax exposures could impact our tax liabilities, income tax expense and cash taxes paid, which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Additionally, changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in our overall profitability, changes in the valuation of deferred tax assets and liabilities, changes in tax laws or in their application, the results of audits and the examination of previously filed tax returns and related challenges and assessments by taxing authorities, and continuing assessments of our tax exposures could impact our tax liabilities, income tax expense and cash taxes paid, which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Although we do not believe such incidents have had a significant impact on us to date, there is no guarantee that a future incident will be detected and remediated in a timely manner, or that it would not have a material adverse impact on our business, reputation, financial conditions, cash flows or results of operations.
Although we do not believe such cybersecurity threats or incidents have had a significant impact on us to date, there is no guarantee that a future cybersecurity threat or incident will be detected and remediated to not have a material adverse impact on our business, reputation, financial conditions, cash flows or results of operations.
Our ability to service our indebtedness will depend on our future operating performance and financial results, which will be subject, in part, to factors beyond our control, including interest rates, general economic, financial and business conditions and the impacts of the COVID-19 pandemic.
Our ability to service our indebtedness will depend on our future operating performance and financial results, which will be subject, in part, to factors beyond our control, including interest rates and general economic, financial and business conditions.
These risks include, but are not limited to: • the continued impact of the COVID-19 pandemic; • compliance with the national and local laws, regulations and customs of countries in which we do business, including, but not limited to, data privacy and protection, environmental and social regulations, import/export and enforcement of intellectual property protections; • less established legal and regulatory regimes in certain jurisdictions, including China, where the interpretation and enforcement of laws, rules and regulations may involve uncertainties and can be inconsistent; • that litigation, administrative and court proceedings may be protracted, expensive and unpredictable; • that governments in certain jurisdictions may favor local businesses and make it more difficult for foreign businesses to operate on an equal footing; • increased uncertainties related to the enforcement of contracts with certain parties; • compliance with a variety of U.S. laws including, but not limited to, trade controls or sanctions, regulations put forth by the U.S.
These risks include, but are not limited to: • compliance with the national and local laws, regulations and customs of countries in which we do business, including, but not limited to, data privacy and protection, environmental and social regulations, import/export and enforcement of intellectual property rights; 27 Table of Contents • less established legal and regulatory regimes in certain jurisdictions, including China, where the interpretation and enforcement of laws, rules and regulations may involve uncertainties and can be inconsistent; • that litigation, administrative and court proceedings may be protracted, expensive and unpredictable; • that governments in certain jurisdictions may favor local businesses and make it more difficult for foreign businesses to operate on an equal footing, including but not limited to by promoting or requiring the local manufacture of pharmaceutical products and API or the establishment of local sites and offices; • increased uncertainties related to the enforcement of contracts with certain parties; • compliance with a variety of U.S. laws including, but not limited to, trade controls or sanctions, regulations put forth by the U.S.
Alternatively, we may be ineligible to participate in bids or tenders in certain markets, which may result in lost sales and revenues or decrease patient access to medicine. In 2022, we launched Viatris’ initial sustainability goals in the areas of access; diversity, equity & inclusion; and the environment: climate change, water and waste.
Alternatively, we may be ineligible to participate in bids or tenders in certain markets, which may result in lost sales and revenues or decrease patient access to medicine. Viatris has company wide sustainability goals in the areas of access; diversity, equity & inclusion; and the environment: climate change, water and waste.
We may not be successful in separating underperforming or non-core assets, which could negatively impact our ongoing operations, future earnings and future goals and outlooks.
We may not be successful in separating divested businesses or assets, which could negatively impact our ongoing operations, future earnings and future goals and outlooks.
We may also not be able to realize the anticipated benefits from such transactions, such as realizing the anticipated proceeds, deploying the proceeds to pay down our outstanding indebtedness and/or fund other important initiatives, and maintaining employee morale and retaining key management and other employees to provide the transition services and to operate our retained business.
We may also not be able to realize the intended or anticipated benefits from such transactions, such as realizing the anticipated proceeds, deploying the proceeds to pay down our outstanding indebtedness and/or fund other important initiatives, maintaining employee morale and retaining key management and other employees to provide the transition services and to operate our retained business, or may be unable to realize the intended or expected goals, outlooks, synergies or operating efficiencies with respect to such transactions.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings 48 ITEM 4. Mine Safety Disclosures 48 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 49 ITEM 6. [Reserved] 50 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 51 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 73 ITEM 8.
Biggest changeITEM 3. Legal Proceedings 51 ITEM 4. Mine Safety Disclosures 51 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 52 ITEM 6. [Reserved] 53 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 54 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 77 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company did not pay any dividends in 2020. 49 Table of Contents STOCK PERFORMANCE GRAPH Viatris common stock has been listed on the NASDAQ under the symbol “VTRS” since November 17, 2020. Prior to that time, there was no public market for our common stock.
Biggest changeThe Company paid quarterly cash dividends of $0.11 per share on the Company’s issued and outstanding common stock on June 16, 2021, September 16, 2021 and December 16, 2021. 52 Table of Contents STOCK PERFORMANCE GRAPH Viatris common stock has been listed on the NASDAQ under the symbol “VTRS” since November 17, 2020.
The Company paid quarterly dividends of $0.12 per share on the Company’s issued and outstanding common stock on March 16, 2022, June 16, 2022, September 16, 2022 and December 16, 2022.
The Company paid quarterly cash dividends of $0.12 per share on the Company’s issued and outstanding common stock on March 16, 2022, June 16, 2022, September 16, 2022 and December 16, 2022.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Stock Market under the symbol “VTRS”. As of February 21, 2023, there were approximately 108,736 holders of record of shares of Viatris common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Stock Market under the symbol “VTRS”. As of February 22, 2024, there were approximately 103,200 holders of record of shares of Viatris common stock.
On February 24, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share on the Company’s issued and outstanding common stock, which will be payable on March 17, 2023 to shareholders of record as of the close of business on March 9, 2023.
On February 26, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share on the Company’s issued and outstanding common stock, which will be payable on March 18, 2024 to shareholders of record as of the close of business on March 11, 2024.
The Company paid quarterly cash dividends of $0.11 per share on the Company’s issued and outstanding common stock on June 16, 2021, September 16, 2021 and December 16, 2021.
The Company paid quarterly cash dividends of $0.12 per share on the Company’s issued and outstanding common stock on March 17, 2023, June 16, 2023, September 15, 2023 and December 15, 2023.
The graph below compares Viatris Inc.’s cumulative total shareholder return on common stock with the cumulative total returns of the S&P 500 index and the Dow Jones US Pharmaceuticals index.
Prior to that time, there was no public market for our common stock. The graph below compares Viatris Inc.’s cumulative total shareholder return on common stock with the cumulative total returns of the S&P 500 index and the Dow Jones US Pharmaceuticals index.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from November 16, 2020 to December 31, 2022. * $100 invested on November 16, 2020 in stock or October 31, 2020 in index, including reinvestment of dividends.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from November 16, 2020 to December 31, 2023. The historical share price data has been revised to reflect updated source information. The revisions are not significant to previously reported amounts.
November 16, 2020 December 31, 2020 December 31, 2021 December 31, 2022 Viatris Inc. 100.00 118.20 87.32 74.84 S&P 500 100.00 115.21 148.28 121.43 Dow Jones U.S. Pharmaceuticals 100.00 113.12 141.38 152.44
November 16, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Viatris Inc. 100.00 119.67 88.40 75.78 77.34 S&P 500 100.00 115.21 148.28 121.43 153.35 Dow Jones U.S. Pharmaceuticals 100.00 104.70 130.85 141.10 141.08
Removed
Upon consummation of the Combination, Pfizer stockholders received approximately 0.124079 shares of Viatris common stock for every one share of Pfizer common stock held as of the close of business on the record date (which was November 13, 2020). Former Mylan ordinary shareholders received one share of Viatris common stock for every one share of Mylan ordinary share held.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFactors that could cause or contribute to such differences include, but are not limited to: • the possibility that the Company may be unable to realize the intended benefits of, or achieve the intended goals or outlooks with respect to, its strategic initiatives; • the possibility that the Company may be unable to achieve expected benefits, synergies and operating efficiencies in connection with acquisitions, divestitures, or its global restructuring program, within the expected timeframe or at all; • impairment charges or other losses related to the divestiture or sale of businesses or assets; • the Company’s failure to achieve expected or targeted future financial and operating performance and results; • the potential impact of public health outbreaks, epidemics and pandemics, including the ongoing challenges and uncertainties posed by the COVID-19 pandemic; • actions and decisions of healthcare and pharmaceutical regulators; • changes in relevant laws and regulations, including but not limited to changes in tax, healthcare and pharmaceutical laws and regulations globally (including the impact of recent and potential tax reform in the U.S.); • the ability to attract and retain key personnel; • the Company’s liquidity, capital resources and ability to obtain financing; • any regulatory, legal or other impediments to the Company’s ability to bring new products to market, including but not limited to “at-risk launches”; • success of clinical trials and the Company’s or its partners’ ability to execute on new product opportunities and develop, manufacture and commercialize products; • any changes in or difficulties with the Company’s manufacturing facilities, including with respect to inspections, remediation and restructuring activities, supply chain or inventory or the ability to meet anticipated demand; • the scope, timing and outcome of any ongoing legal proceedings, including government inquiries or investigations, and the impact of any such proceedings on the Company; • any significant breach of data security or data privacy or disruptions to our information technology systems; • risks associated with having significant operations globally; • the ability to protect intellectual property and preserve intellectual property rights; • changes in third-party relationships; • the effect of any changes in the Company’s or its partners’ customer and supplier relationships and customer purchasing patterns, including customer loss and business disruption being greater than expected following an acquisition or divestiture; • the impacts of competition, including decreases in sales or revenues as a result of the loss of market exclusivity for certain products; • changes in the economic and financial conditions of the Company or its partners; • uncertainties regarding future demand, pricing and reimbursement for the Company’s products; • uncertainties and matters beyond the control of management, including but not limited to general political and economic conditions, inflation rates and global exchange rates; and • inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements, and the providing of estimates of financial measures, in accordance with U.S.
Biggest changeFactors that could cause or contribute to such differences include, but are not limited to: • the possibility that the Company may not realize the intended benefits of, or achieve the intended goals or outlooks with respect to, its strategic initiatives (including divestitures, acquisitions, or other potential transactions) or move up the value chain by focusing on more complex and innovative products to build a more durable higher margin portfolio; • the possibility that the Company may be unable to achieve intended or expected benefits, goals, outlooks, synergies, growth opportunities and operating efficiencies in connection with divestitures, acquisitions, other transactions, or restructuring programs, within the expected timeframes or at all; • with respect to previously announced divestitures that have not been consummated, including the divestiture of substantially all of our OTC Business, such divestitures not being completed on the expected timelines or at all and the risk that the conditions set forth in the definitive agreements with respect to such divestitures will not be satisfied or waived; • with respect to previously announced divestitures, failure to realize the total transaction values for the divestitures and/or the expected proceeds for any or all such divestitures, including as a result of any purchase price adjustment or a failure to achieve any conditions to the payment of any contingent consideration; • goodwill or impairment charges or other losses related to the divestiture or sale of businesses or assets (including but not limited to announced divestitures that have not yet been consummated); • the Company’s failure to achieve expected or targeted future financial and operating performance and results; • the potential impact of public health outbreaks, epidemics and pandemics; • actions and decisions of healthcare and pharmaceutical regulators; • changes in relevant laws, regulations and policies and/or the application or implementation thereof, including but not limited to tax, healthcare and pharmaceutical laws, regulations and policies globally (including the impact of recent and potential tax reform in the U.S. and pharmaceutical product pricing policies in China); • the ability to attract, motivate and retain key personnel; • the Company’s liquidity, capital resources and ability to obtain financing; • any regulatory, legal or other impediments to the Company’s ability to bring new products to market, including but not limited to “at-risk launches”; • success of clinical trials and the Company’s or its partners’ ability to execute on new product opportunities and develop, manufacture and commercialize products; • any changes in or difficulties with the Company’s manufacturing facilities, including with respect to inspections, remediation and restructuring activities, supply chain or inventory or the ability to meet anticipated demand; • the scope, timing and outcome of any ongoing legal proceedings, including government inquiries or investigations, and the impact of any such proceedings on the Company; • any significant breach of data security or data privacy or disruptions to our IT systems; • risks associated with having significant operations globally; • the ability to protect intellectual property and preserve intellectual property rights; • changes in third-party relationships; 54 Table of Contents • the effect of any changes in the Company’s or its partners’ customer and supplier relationships and customer purchasing patterns, including customer loss and business disruption being greater than expected following an acquisition or divestiture; • the impacts of competition, including decreases in sales or revenues as a result of the loss of market exclusivity for certain products; • changes in the economic and financial conditions of the Company or its partners; • uncertainties regarding future demand, pricing and reimbursement for the Company’s products; • uncertainties and matters beyond the control of management, including but not limited to general political and economic conditions, inflation rates and global exchange rates; and • inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements, and the providing of estimates of financial measures, in accordance with U.S.
In 2022, significant items in financing activities included the following: • repayments of Senior Notes at maturity of approximately $1.79 billion, consisting of the 0.816% Euro Senior Notes and the 1.125% Senior Notes; • borrowings and repayments under the 2021 Revolving Facility of $1.88 billion; • net repayments of short-term borrowings of $1.49 billion; • cash dividends paid of $581.6 million; and • proceeds of $19.3 million related to cash collected on behalf of Biocon Biologics.
In 2022, significant items in financing activities included the following: • repayments of Senior Notes at maturity of approximately $1.79 billion, consisting of the 0.816% Euro Senior Notes and the 1.125% Senior Notes; • borrowings and repayments under the Revolving Facility of $1.88 billion; • net repayments of short-term borrowings of $1.49 billion; • cash dividends paid of $581.6 million; and • proceeds of $19.3 million related to cash collected on behalf of Biocon Biologics.
We continually monitor our provision for chargebacks and evaluate our reserve and estimates as additional information becomes available. A change of 5% would have an effect on our reserve balance of approximately $26.2 million. • Rebates, promotional programs and other sales allowances : this category includes rebate and other programs to assist in product sales.
We continually monitor our provision for chargebacks and evaluate our reserve and estimates as additional information becomes available. A change of 5% would have an effect on our reserve balance of approximately $26.5 million. • Rebates, promotional programs and other sales allowances : this category includes rebate and other programs to assist in product sales.
The fair value of both IPR&D and finite-lived intangible assets was determined based upon detailed valuations employing the income approach which utilized Level 3 inputs, as defined in Note 10 Financial Instruments and Risk Management included in Part II. Item 8 of this Form 10-K.
The fair value of both IPR&D and finite-lived intangible assets was determined based upon detailed valuations employing the income approach which utilized Level 3 inputs, as defined in Note 9 Financial Instruments and Risk Management included in Part II, Item 8 of this Form 10-K.
As such, management believes the exclusion of such amounts on an ongoing basis is helpful to understanding the underlying operational performance of the business. Restructuring, Acquisition and Divestiture Related, and Other Special Items Costs related to restructuring, acquisition and integration activities and other actions are excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA, as applicable.
As such, management believes the exclusion of such amounts on an ongoing basis is helpful to understanding the underlying operational performance of the business. Restructuring, Acquisition and Divestiture-Related Costs, and Other Special Items Costs related to restructuring, acquisition and divestiture-related activities and other actions are excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA, as applicable.
Refer to Note 4 Acquisitions and Other Transactions and Note 9 Goodwill and Intangible Assets included in Part II. Item 8 of this Form 10-K for additional information. Purchases of developed products and licenses that are accounted for as asset acquisitions are capitalized as intangible assets and amortized over an estimated useful life.
Refer to Note 4 Acquisitions and Other Transactions and Note 8 Goodwill and Intangible Assets included in Part II, Item 8 of this Form 10-K for additional information. Purchases of developed products and licenses that are accounted for as asset acquisitions are capitalized as intangible assets and amortized over an estimated useful life.
Dollar Notes, subject to certain exceptions set forth in the applicable indenture, such guarantor ceasing to be a guarantor or obligor in respect of any Triggering Indebtedness; and (5) with respect to the outstanding Registered Upjohn Notes, (a) upon the applicable guarantor no longer being an issuer or guarantor in respect of (i) Mylan Notes (as defined in the indenture governing the outstanding Registered Upjohn Notes) that have an aggregate principal amount in excess of $500.0 million or (ii) any Triggering Indebtedness; in each case, other than in respect of indebtedness or guarantees, as applicable, that are being concurrently released; or (b) upon receipt of the consent of holders of a majority of the aggregate principal amount of the outstanding notes of such series in accordance with the indenture governing the outstanding Registered Upjohn Notes. 66 Table of Contents The guarantee obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. under the Senior U.S.
Dollar Notes, subject to certain exceptions set forth in the applicable indenture, such guarantor ceasing to be a guarantor or obligor in respect of any Triggering Indebtedness; and (5) with respect to the Registered Upjohn Notes, (a) upon the applicable guarantor no longer being an issuer or guarantor in respect of (i) Mylan Notes (as defined in the indenture governing the Registered Upjohn Notes) that have an aggregate principal amount in excess of $500.0 million or (ii) any Triggering Indebtedness; in each case, other than in respect of indebtedness or guarantees, as applicable, that are being concurrently released; or (b) upon receipt of the consent of holders of a majority of the aggregate principal amount of the outstanding notes of such series in accordance with the indenture governing the Registered Upjohn Notes. 69 Table of Contents The guarantee obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. under the Senior U.S.
In addition to the monthly service fees under the TSA, Viatris agreed to reimburse Pfizer for fifty percent of the costs, up to the first $380 million incurred, to establish and wind down the TSA services. Viatris will be required to fully reimburse Pfizer for total costs in excess of $380 million.
In addition to the monthly service fees under the TSA, Viatris has agreed to reimburse Pfizer for fifty percent of the costs, up to the first $380 million incurred, to establish and wind down the TSA services. Viatris will be required to fully reimburse Pfizer for total costs in excess of $380 million.
A change of 5% would have an effect on our reserve balance of approximately $64.2 million. • Returns : consistent with industry practice, Viatris maintains a return policy that allows customers to return a product, which varies country by country in accordance with local practices, generally within a specified period prior (six months) and subsequent (twelve months) to the expiration date.
A change of 5% would have an effect on our reserve balance of approximately $55.2 million. • Returns : consistent with industry practice, Viatris maintains a return policy that allows customers to return a product, which varies country by country in accordance with local practices, generally within a specified period prior (six months) and subsequent (twelve months) to the expiration date.
Changes in the fair value of the contingent consideration obligations can result from adjustments to the discount rates, payment periods and adjustments in the probability of achieving future development steps, regulatory approvals, market launches, sales targets and profitability. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market.
Changes in the fair value of the contingent consideration obligations can result from adjustments to the discount rates, payment periods and adjustments in the probability of achieving future development steps, regulatory approvals, market launches, operating results, sales targets and profitability. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market.
A variance of 5% between estimated reserves and valuation allowances and actual resolution and realization of these tax items would have an effect on our reserve balance and valuation allowance of approximately $34.2 million. Legal Matters Viatris is involved in various legal proceedings, some of which involve claims for substantial amounts.
A variance of 5% between estimated reserves and valuation allowances and actual resolution and realization of these tax items would have an effect on our reserve balance and valuation allowance of approximately $34.7 million. Legal Matters Viatris is involved in various legal proceedings, some of which involve claims for substantial amounts.
Such forward-looking statements may include, without limitation, statements about the goals or outlooks with respect to the Company’s strategic initiatives, including but not limited to the Company’s two-phased strategic vision and potential divestitures and acquisitions; the benefits and synergies of acquisitions, divestitures or our global restructuring program, future opportunities for the Company and its products and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods.
Such forward-looking statements may include, without limitation, statements about the goals or outlooks with respect to the Company’s strategic initiatives, including but not limited to the Company’s two-phased strategic vision and potential and announced divestitures, acquisitions or other transactions; the benefits and synergies of such divestitures, acquisitions, or other transactions, or restructuring programs; future opportunities for the Company and its products; and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods.
With a global workforce of approximately 37,000, the Company has industry leading commercial, R&D, regulatory, manufacturing, legal and medical expertise complemented by a strong commitment to quality and an unparalleled geographic footprint to deliver high-quality medicines to patients in more than 165 countries and territories.
With a global workforce of approximately 38,000, the Company has industry leading commercial, R&D, regulatory, manufacturing, legal and medical expertise complemented by a strong commitment to quality and an unparalleled geographic footprint to deliver high-quality medicines to patients in more than 165 countries and territories.
We estimate that the amounts that may be paid during the next twelve months to be approximately $38 million. Additionally, these agreements may also include potential sales-based milestones and call for us to pay a percentage of amounts earned from the sale of the product as a royalty or a profit share.
We estimate that the amounts that may be paid during the next twelve months to be approximately $89 million. Additionally, these agreements may also include potential sales-based milestones and call for us to pay a percentage of amounts earned from the sale of the product as a royalty or a profit share.
These macroeconomic pressures combined with the volatility in foreign exchange rates, including the strengthening of the U.S. dollar versus the other currencies in which we operate, negatively impacts our results of operations. We proactively look to manage such macroeconomic pressures by implementing strategies to mitigate and partially offset the impact of these factors.
These macroeconomic pressures combined with the volatility in foreign exchange rates, including the strengthening of the U.S. dollar versus certain of the other currencies in which we operate, negatively impact our results of operations. We proactively look to manage such macroeconomic pressures by implementing strategies to mitigate and partially offset the impact of these factors.
During 2022, the global economy has been impacted by high levels of inflation and rising energy costs, which has resulted in significant economic volatility. As a result, central banks have and continue to tighten their monetary policies and increase interest rates.
During 2022 and 2023, the global economy has been impacted by high levels of inflation and rising energy costs, which has resulted in significant economic volatility. As a result, central banks have and may continue to tighten their monetary policies and increase interest rates.
Refer to Note 19 Licensing and Other Partner Agreements included in Part II. Item 8 of this Form 10-K for additional information. Application of Critical Accounting Policies Our significant accounting policies are described in Note 2 Summary of Significant Accounting Policies included in Part II. Item 8 of this Form 10-K and are in accordance with U.S. GAAP.
Refer to Note 18 Licensing and Other Partner Agreements included in Part II, Item 8 of this Form 10-K for additional information. Application of Critical Accounting Policies Our significant accounting policies are described in Note 2 Summary of Significant Accounting Policies included in Part II, Item 8 of this Form 10-K and are in accordance with U.S. GAAP.
(2) The constant currency percentage change is derived by translating net sales or revenues for the current period at prior year comparative period exchange rates, and in doing so shows the percentage change from 2022 constant currency net sales or revenues to the corresponding amount in the prior year.
(2) The constant currency percentage change is derived by translating net sales or revenues for the current period at prior year comparative period exchange rates, and in doing so shows the percentage change from 2023 constant currency net sales or revenues to the corresponding amount in the prior year.
We believe that net cash provided by operating activities and available liquidity will continue to allow us to meet our needs for working capital, capital expenditures, interest and principal payments on debt obligations, and dividend payments.
We believe that net cash provided by operating activities and available liquidity will continue to allow us to meet our needs for working capital, capital expenditures, interest and principal payments on debt obligations, dividend payments, and share repurchases.
These estimates and assumptions, utilizing Level 3 inputs, primarily include, but are not limited to, market multiples, control premiums, the discount rate, terminal growth rates, operating income before depreciation and amortization, and capital expenditures forecasts.
These estimates and assumptions, utilizing Level 3 inputs, primarily include, but are not limited to, the discount rate, terminal growth rates, operating income before depreciation and amortization, capital expenditures forecasts and control premiums.
The following section briefly describes the nature of our provisions for variable consideration and how such provisions are estimated: 68 Table of Contents • Chargebacks : the Company has agreements with certain indirect customers, such as independent pharmacies, retail pharmacy chains, managed care organizations, hospitals, nursing homes, governmental agencies and pharmacy benefit managers, which establish contract prices for certain products.
The following section briefly describes the nature of our provisions for variable consideration and how such provisions are estimated: • Chargebacks : the Company has agreements with certain indirect customers, such as independent pharmacies, retail pharmacy chains, managed care organizations, hospitals, nursing homes, governmental agencies and pharmacy benefit managers, which establish contract prices for certain products.
Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition. As such, the timing of new product introductions can have a significant impact on the Company’s financial results.
Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition. As such, 55 Table of Contents the timing of new product introductions can have a significant impact on the Company’s financial results.
Following the Combination, Utah Acquisition Sub Inc. is the issuer of the Utah U.S. Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and Mylan II B.V. Mylan Inc. is the issuer of the Mylan Inc. U.S.
Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and Mylan II B.V. Mylan Inc. is the issuer of the Mylan Inc. U.S. Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan II B.V., Viatris Inc. and Utah Acquisition Sub Inc.
Because of the subjective nature inherent in assessing the outcome of litigation and because of the potential that an adverse outcome in a legal proceeding could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or ordinary share price, such estimates are considered to be critical accounting estimates.
Because of the subjective nature inherent in assessing the outcome of litigation and because of the potential that an adverse outcome in a legal proceeding could 76 Table of Contents have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or ordinary share price, such estimates are considered to be critical accounting estimates.
These amounts include items such as: • Costs related to formal restructuring programs and actions, including costs associated with facilities to be closed or divested, employee separation costs, impairment charges, accelerated depreciation, incremental manufacturing variances, equipment relocation costs, decommissioning and other restructuring related costs; • Certain acquisition and divestitures related remediation and integration and planning costs, as well as other costs associated with acquisitions and divestitures such as advisory and legal fees, certain financing related costs, certain reimbursements related to the Company’s obligation to reimburse Pfizer for certain financing and transaction related costs under the BCA and SDA, certain other TSA related set-up and exit costs, and other business transformation and/or optimization initiatives, which are not part of a formal restructuring program, including employee separation and post-employment costs; • The pre-tax loss of the Company’s clean energy investments, whose activities qualify for income tax credits under the Code; only included in adjusted net earnings is the net tax effect of the entity’s activities; • Other costs, incurred from time to time, related to certain special events or activities that lead to gains or losses, including, but not limited to, incremental manufacturing variances, asset write-downs, including other-than-temporary impairments of investments in equity or debt instruments, or liability adjustments; • Certain costs to further develop and optimize our global enterprise resource planning systems, operations and supply chain; • Gains or losses from divestitures, including impairments of held of sale assets; and • The impact of changes related to uncertain tax positions and certain impacts related to the Combination are excluded from adjusted cost of sales and adjusted net earnings.
These amounts include items such as: • Costs related to formal restructuring programs and actions, including costs associated with facilities to be closed or divested, employee separation costs, impairment charges, accelerated depreciation, incremental manufacturing variances, equipment relocation costs, decommissioning and other restructuring related costs; • Certain acquisition and divestiture costs, including costs relating to integration and planning, advisory and legal fees, certain financing related costs, certain reimbursements related to the Company’s obligation to reimburse Pfizer for certain financing and transaction related costs under the Business Combination Agreement and Separation and Distribution Agreement, certain other TSA related set-up and exit costs, and other business transformation and/or optimization initiatives, which are not part of a formal restructuring program, including employee separation and post-employment costs; • The pre-tax loss of the Company’s clean energy investments, whose activities qualify for income tax credits under the Code; only included in adjusted net earnings is the net tax effect of the entity’s activities; • Other costs, incurred from time to time, related to certain special events or activities that lead to gains or losses, including, but not limited to, incremental manufacturing variances, asset write-downs, including other-than-temporary impairments of investments in equity or debt instruments, or liability adjustments; • Certain costs to further develop and optimize our global enterprise resource planning systems, operations and supply chain; • Gains or losses from divestitures, including impairments of held for sale assets; and • The impact of changes related to uncertain tax positions are excluded from adjusted cost of sales and adjusted net earnings.
Borrowings outstanding under the Receivables Facility bear interest at the applicable base rate plus 0.775%, and under the Note Securitization Facility at the relevant base rate plus 0.85% and are included as a component of short-term borrowings, while the accounts receivable securing these obligations remain as a component of accounts receivable, net, in our consolidated balance sheets.
Borrowings outstanding under the Receivables Facility bear interest at the applicable base rate plus 0.775%, and under the Note Securitization Facility at the relevant base rate plus 1.00% and are included as a component of short-term borrowings, while the accounts receivable securing these obligations remain as a component of accounts receivable, net, in our consolidated balance sheets.
Fair Value Adjustments, Including Contingent Consideration The impact of changes to the fair value of assets and liabilities, including contingent and deferred consideration, and the related accretion income or expense are excluded from adjusted net earnings and adjusted EBITDA because they are not indicative of the Company’s ongoing operations due to the variability of the amounts and the lack of predictability as to the occurrence and/or timing and management believes their exclusion is helpful to understanding the underlying, ongoing operational performance of the business.
Fair Value Adjustments, Including Contingent Consideration The impact of changes to the fair value of assets and liabilities, including contingent and deferred consideration and non-marketable equity investments, and the related accretion income or expense are excluded from adjusted net earnings and adjusted EBITDA because they are not indicative of the Company’s ongoing operations due to the variability of the amounts and the lack of predictability as to the occurrence and/or timing and management believes their exclusion is helpful to understanding the underlying, ongoing operational performance of the business.
GAAP, and adjusted cost of sales and adjusted gross margin for the year ended December 31, 2022 compared to the year ended December 31, 2021 is as follows: Year Ended December 31, (In millions, except %s) 2022 2021 U.S.
GAAP, and adjusted cost of sales and adjusted gross margin for the year ended December 31, 2023 compared to the year ended December 31, 2022 is as follows: Year Ended December 31, (In millions, except %s) 2023 2022 U.S.
GAAP and, therefore, may not be comparable to the calculation of similar measures or measures with the same title used by other companies. 59 Table of Contents Management uses these measures internally for forecasting, budgeting, measuring its operating performance, and incentive-based awards.
GAAP and, therefore, may not be comparable to the calculation of similar measures or measures with the same title used by other companies. Management uses these measures internally for forecasting, budgeting, measuring its operating performance, and incentive-based awards.
The following table presents unaudited summarized financial information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. on a combined basis as of and for the year ended December 31, 2022 and 2021. All intercompany balances have been eliminated in consolidation. This unaudited combined summarized financial information is presented utilizing the equity method of accounting.
The following table presents unaudited summarized financial information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. on a combined basis as of and for the years ended December 31, 2023 and 2022. All intercompany balances have been eliminated in consolidation. This unaudited combined summarized financial information is presented utilizing the equity method of accounting.
The significant items excluded from adjusted cost of sales, adjusted net earnings, and adjusted EBITDA include: Purchase Accounting Amortization and Other Related Items The ongoing impact of certain amounts recorded in connection with acquisitions of both businesses and assets is excluded from adjusted cost of sales, adjusted net earnings, and adjusted EBITDA.
The significant items excluded from adjusted cost of sales, adjusted net earnings, and adjusted EBITDA include: 63 Table of Contents Purchase Accounting Amortization and Other Related Items The ongoing impact of certain amounts recorded in connection with acquisitions of both businesses and assets is excluded from adjusted cost of sales, adjusted net earnings, and adjusted EBITDA.
A variance of 5% between estimated and recorded litigation reserves and actual resolution of certain legal matters would have an effect on our litigation reserve balance of approximately $10.2 million. Refer to Note 20 Litigation included in Part II. Item 8 of this Form 10-K for further discussion of litigation matters.
A variance of 5% between estimated and recorded litigation reserves and actual resolution of certain legal matters would have an effect on our litigation reserve balance of approximately $8.6 million. Refer to Note 19 Litigation included in Part II, Item 8 of this Form 10-K for further discussion of litigation matters.
We have assessed the recoverability of certain long-lived assets, principally finite-lived intangible assets, contained within the reporting units whenever certain impairment indicators are present. Any impairment of these assets must be considered prior to our impairment review of goodwill.
We assess the recoverability of certain long-lived assets, principally finite-lived intangible assets, contained within the reporting units whenever certain impairment indicators are present. Any impairment of these assets must be considered prior to our impairment review of goodwill.
A change of 5% would have an effect on our reserve balance of approximately $25.7 million. • Governmental rebate programs : government reimbursement programs in the U.S. include Medicare, Medicaid, and State Pharmacy Assistance Programs established according to statute, regulations and policy.
A change of 5% would have an effect on our reserve balance of approximately $21.3 million. • Governmental rebate programs : government reimbursement programs in the U.S. include Medicare, Medicaid, and State Pharmacy Assistance Programs established according to statute, regulations and policy.
GAAP and related standards or on an adjusted basis. 51 Table of Contents For more detailed information on the risks and uncertainties associated with Viatris, see the risks described in Part I, Item 1A in this Form 10-K, and our other filings with the SEC.
GAAP and related standards or on an adjusted basis. For more detailed information on the risks and uncertainties associated with Viatris, see the risks described in Part I, Item 1A in this Form 10-K, and our other filings with the SEC.
Adjusted gross margins were approximately 59% for the year ended December 31, 2022, essentially flat when compared to the year ended December 31, 2021. 57 Table of Contents A reconciliation between cost of sales, as reported under U.S.
Adjusted gross margins were approximately 59% for the year ended December 31, 2023, essentially flat when compared to the year ended December 31, 2022. 60 Table of Contents A reconciliation between cost of sales, as reported under U.S.
Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).
Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net sales and as a contra asset in accounts 71 Table of Contents receivable, net (if settled via credit) and other current liabilities (if paid in cash).
We have entered into employment and other agreements with certain executives and other employees that provide for compensation and certain other benefits. These agreements provide for severance payments under certain circumstances. Licensing and Other Partner Agreements Under our licensing and other partner agreements, our potential maximum development milestones not accrued for at December 31, 2022 totaled approximately $347 million.
We have entered into employment and other agreements with certain executives and other employees that provide for compensation and certain other benefits. These agreements provide for severance payments under certain circumstances. Licensing and Other Partner Agreements Under our licensing and other partner agreements, our potential maximum development milestones not accrued for at December 31, 2023 totaled approximately $415.0 million.
Accounts receivable are presented net of allowances relating to these provisions, which were comprised of the following at December 31, 2022 and 2021, respectively: (In millions) December 31, 2022 December 31, 2021 Accounts receivable, net $ 1,798.7 $ 1,688.6 Other current liabilities 888.8 1,362.1 Total $ 2,687.5 $ 3,050.7 We have not made and do not anticipate making any significant changes to the methodologies that we use to measure provisions for variable consideration; however, the balances within these reserves can fluctuate significantly through the consistent application of our methodologies.
Accounts receivable are presented net of allowances relating to these provisions, which were comprised of the following at December 31, 2023 and 2022, respectively: (In millions) December 31, 2023 December 31, 2022 Accounts receivable, net $ 1,483.6 $ 1,798.7 Other current liabilities 996.3 888.8 Total $ 2,479.9 $ 2,687.5 We have not made and do not anticipate making any significant changes to the methodologies that we use to measure provisions for variable consideration; however, the balances within these reserves can fluctuate significantly through the consistent application of our methodologies.
Due to the inherent uncertainty involved in making these estimates, assumptions and judgments, actual results could differ materially. Any future increases to the Company’s valuation allowances could materially impact the Company’s consolidated financial condition and results of operations. At December 31, 2022 and 2021, the Company’s net deferred tax assets totaled $925.9 million and $1.33 billion, respectively.
Due to the inherent uncertainty involved in making these estimates, assumptions and judgments, actual results could differ materially. Any future increases to the Company’s valuation allowances could materially impact the Company’s consolidated financial condition and results of operations. At December 31, 2023 and 2022, the Company’s net deferred tax assets totaled $692.9 million and $925.9 million, respectively.
Gross profit for the year ended December 31, 2022 was $6.50 billion and gross margins were 40%. For the year ended December 31, 2021, gross profit was $5.58 billion and gross margins were 31%. This change is primarily related to the decrease in cost of sales.
For the year ended December 31, 2022, gross profit was $6.50 billion and gross margins were 40%. This change in gross profit is primarily related to the decrease in net sales and cost of sales.
(In millions) Year Ended December 31, 2022 Year Ended December 31, 2021 Revenues $ — $ — Gross profit — — Loss (earnings) from operations (1,132.4) (1,023.9) Net earnings (loss) 2,078.6 (1,269.1) Other Commitments The Company is involved in various disputes, governmental and/or regulatory inquiries, investigations and proceedings, tax proceedings and litigation matters, both in the U.S. and abroad, that arise from time to time, some of which could result in losses, including damages, fines and/or civil penalties, and/or criminal charges against the Company.
(In millions) Year Ended December 31, 2023 Year Ended December 31, 2022 Revenues $ — $ — Gross profit — — Loss from operations (1,243.8) (1,132.4) Net earnings 54.7 2,078.6 Other Commitments The Company is involved in various disputes, governmental and/or regulatory inquiries, investigations and proceedings, tax proceedings and litigation matters, both in the U.S. and abroad, that arise from time to time, some of which could result in losses, including damages, fines and/or civil penalties, and/or criminal charges against the Company.
The Company’s indefinite-lived intangible assets, principally IPR&D, are tested at least annually for impairment or upon the occurrence of a triggering event. The impairment test for IPR&D consists of a comparison of the asset’s fair value with its carrying value.
The Company’s indefinite-lived intangible assets, principally IPR&D acquired as part of business combinations, are tested at least annually for impairment or upon the occurrence of a triggering event. The impairment test for IPR&D consists of a comparison of the asset’s fair value with its carrying value.
Adjusted Cost of Sales and Adjusted Gross Margin We use the non-GAAP financial measure “adjusted cost of sales” and the corresponding non-GAAP financial measure “adjusted gross margin.” The principal items excluded from adjusted cost of sales include restructuring, acquisition related and other special items and purchase accounting related amortization, which are described in greater detail below.
Adjusted Cost of Sales and Adjusted Gross Margin We use the non-GAAP financial measure “adjusted cost of sales” and the corresponding non-GAAP financial measure “adjusted gross margin.” The principal items excluded from adjusted cost of sales include restructuring, acquisition and divestiture-related costs, and other special items, purchase accounting amortization and other related items, and share-based compensation expense, which are described in greater detail below.
If all other assumptions are held constant, a reduction in the terminal value growth rate by approximately 8.5% or an increase in discount rate by 3.0% would result in an impairment charge for the Emerging Markets reporting unit.
If all other assumptions are held constant, a reduction in the terminal value growth rate by 2.5% or an increase in discount rate by 1.0% would result in an impairment charge for the Emerging Markets reporting unit.
The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded, complex generics, including biosimilars prior to the Biocon Biologics Transaction, and generic products to people in markets everywhere. Our Developed Markets segment comprises our operations primarily in North America and Europe.
The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded and generic products, including complex products, to people in markets everywhere. Our Developed Markets segment comprises our operations primarily in North America and Europe.
For the years ended December 31, 2022, 2021 and 2020, the Company recorded $0.6 million, $19.4 million, and $37.4 million, respectively, of impairment charges, which were recorded as a component of amortization expense. At December 31, 2022 and 2021, the Company’s IPR&D assets totaled $40.2 million and $46.5 million, respectively.
For the years ended December 31, 2022 and 2021, the Company recorded $0.6 million, and $19.4 million, respectively, of impairment charges, which were recorded as a component of amortization expense. At December 31, 2023 and 2022, the Company’s IPR&D assets totaled $319.4 million and $40.2 million, respectively.
(b) Includes purchase accounting related amortization. (c) See items detailed and updates to the non-GAAP financial measures in the Reconciliation of U.S. GAAP Net Earnings (Loss) to Adjusted Net Earnings. Liquidity and Capital Resources Our primary source of liquidity is net cash provided by operating activities, which was $2.95 billion for the year ended December 31, 2022.
(b) Includes purchase accounting related amortization. (c) See items detailed in the Reconciliation of U.S. GAAP Net Earnings (Loss) to Adjusted Net Earnings. Liquidity and Capital Resources Our primary source of liquidity is net cash provided by operating activities, which was $2.80 billion for the year ended December 31, 2023.
These matters are often complex and have outcomes that are difficult to predict. We have approximately $203 million accrued for legal contingencies at December 31, 2022.
These matters are often complex and have outcomes that are difficult to predict. We have approximately $173 million accrued for legal contingencies at December 31, 2023.
(3) For the year ended December 31, 2022, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $21.8 million, $1.4 million, and $21.4 million, respectively. (4) Amounts exclude intersegment revenue which eliminates on a consolidated basis.
(3) For the year ended December 31, 2023, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $26.1 million, $1.1 million, and $11.3 million, respectively. (4) Amounts exclude intersegment revenue which eliminates on a consolidated basis.
At December 31, 2022, our material cash requirements from known contractual and other obligations primarily relate to repayment of outstanding borrowings and interest, open purchase orders, post-employment benefit plans, unrecognized tax benefits, capital expenditures, dividends and leases. For additional information, refer to Notes 2, 4, 7, 11, 13, 15, and 17 in Part II. Item 8 of this Form 10-K.
At December 31, 2023, our material cash requirements from known contractual and other obligations primarily relate to repayment of outstanding borrowings and interest, open purchase orders, post-employment benefit plans, unrecognized tax benefits, capital expenditures, dividends and leases. For additional information, refer to Notes 2, 7, 10, 12, 14, and 16 in Part II, Item 8 of this Form 10-K.
The Company has undertaken restructurings and other optimization initiatives of differing types, scope and amount during the covered periods and, therefore, these charges should not be considered non-recurring; however, management excludes these amounts from adjusted cost of sales, adjusted net earnings and adjusted EBITDA because it believes it is helpful to understanding the underlying, ongoing operational performance of the business. 61 Table of Contents Litigation Settlements, Net Charges and gains related to legal matters, such as those discussed in Note 20 Litigation included in Part II.
The Company has undertaken restructurings and other optimization initiatives of differing types, scope and amount during the covered periods and, therefore, these charges should not be considered non-recurring; however, management excludes these amounts from adjusted cost of sales, adjusted net earnings and adjusted EBITDA because it believes it is helpful to understanding the underlying, ongoing operational performance of the business. 64 Table of Contents Litigation Settlements, Net Charges and gains related to legal matters, such as those discussed in Note 19 Litigation included in Part II, Item 8 of this Form 10-K are generally excluded from adjusted net earnings and adjusted EBITDA.
As of December 31, 2022, the Company has exited substantially all transition services with Pfizer. 67 Table of Contents In conjunction with the Biocon Biologics Transaction, Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues.
As of December 31, 2022, the Company had exited substantially all transition services with Pfizer. 70 Table of Contents At the time of closing of the Biocon Biologics Transaction, Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris was providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues.
GAAP Net Earnings (Loss) to EBITDA and Adjusted EBITDA Below is a reconciliation of U.S. GAAP net earnings (loss) to EBITDA and adjusted EBITDA for the year ended December 31, 2022 compared to the prior year periods: Year Ended December 31, (In millions) 2022 2021 2020 U.S.
(i) Adjusted for changes for uncertain tax positions. Reconciliation of U.S. GAAP Net Earnings (Loss) to EBITDA and Adjusted EBITDA Below is a reconciliation of U.S. GAAP net earnings (loss) to EBITDA and adjusted EBITDA for the year ended December 31, 2023 compared to the prior year periods: Year Ended December 31, (In millions) 2023 2022 2021 U.S.
As part of the restructuring, the Company is optimizing its commercial capabilities and enabling functions, and closing, downsizing or divesting certain manufacturing facilities globally that are deemed to be no longer viable either due to surplus capacity, challenging market dynamics or a shift in its product portfolio toward more complex products.
As part of the restructuring, the Company optimized its commercial capabilities and enabling functions, and closed, downsized or divested certain manufacturing facilities globally that were deemed to be no longer viable either due to surplus capacity, challenging market dynamics or a shift in its product portfolio toward more complex products.
The Company anticipates having sufficient liquidity, including existing borrowing capacity under the 2021 Revolving Facility, Commercial Paper Program and the Receivables Facility and the Note Securitization Facility combined with cash to be generated from operations, to fund foreseeable cash needs without requiring the repatriation of non-U.S. cash.
The Company anticipates having sufficient liquidity, including existing borrowing capacity under the Revolving Facility, Commercial Paper Program, Receivables Facility, and Note Securitization Facility combined with cash to be generated from operations, to fund foreseeable cash needs without requiring the repatriation of non-U.S. cash. The Company has access to $4.0 billion under the Revolving Facility which matures in July 2026.
Net sales are derived from our four reporting segments: Developed Markets, Greater China, JANZ and Emerging Markets. 56 Table of Contents Developed Markets Segment Net sales from Developed Markets decreased by $659.8 million or 6% during the year ended December 31, 2022 when compared to the prior year.
Net sales are derived from our four reporting segments: Developed Markets, Greater China, JANZ and Emerging Markets. 59 Table of Contents Developed Markets Segment Net sales from Developed Markets decreased by $517.0 million or 5% during the year ended December 31, 2023 when compared to the prior year.
GAAP net earnings (loss) $ 2,078.6 $ (1,269.1) $ (669.9) Add / (deduct) adjustments: Net contribution attributable to equity method investments — 61.9 48.4 Income tax provision (benefit) 734.6 604.7 (51.3) Interest expense (a) 592.4 636.2 497.8 Depreciation and amortization (b) 3,027.6 4,506.5 2,216.1 EBITDA $ 6,433.2 $ 4,540.2 $ 2,041.1 Add / (deduct) adjustments: Share-based compensation expense 116.4 111.2 79.2 Litigation settlements and other contingencies, net 4.4 329.2 107.8 Biocon Biologics gain on divestiture (1,754.1) — — Impairment of goodwill related to assets held for sale 117.0 — — Restructuring, acquisition and divestiture related and other special items (c) 859.9 1,375.4 1,383.5 Adjusted EBITDA $ 5,776.8 $ 6,356.0 $ 3,611.6 (a) Includes amortization of premiums and discounts on long-term debt.
GAAP net earnings (loss) $ 54.7 $ 2,078.6 $ (1,269.1) Add adjustments: Net contribution attributable to equity method investments — — 61.9 Income tax provision 148.2 734.6 604.7 Interest expense (a) 573.1 592.4 636.2 Depreciation and amortization (b) 2,740.5 3,027.6 4,506.5 EBITDA $ 3,516.5 $ 6,433.2 $ 4,540.2 Add / (deduct) adjustments: Share-based compensation expense 180.7 116.4 111.2 Litigation settlements and other contingencies, net 111.6 4.4 329.2 Loss (gain) on divestitures of businesses 239.9 (1,754.1) — Impairment of goodwill related to assets held for sale 580.1 117.0 — Restructuring, acquisition and divestiture-related and other special items (c) 495.3 859.9 1,375.4 Adjusted EBITDA $ 5,124.1 $ 5,776.8 $ 6,356.0 ____________ (a) Includes amortization of premiums and discounts on long-term debt.
Use of Non-GAAP Financial Measures Whenever the Company uses non-GAAP financial measures, we provide a reconciliation of the non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure. Investors and other readers are encouraged to review the related U.S. GAAP financial measures and the reconciliation of non-GAAP measures to their most directly comparable U.S.
GAAP financial measure. Investors and other readers are encouraged to review the related U.S. GAAP financial measures and the reconciliation of non-GAAP measures to their most directly comparable U.S.
GAAP net earnings (loss) $ 2,078.6 $ (1,269.1) $ (669.9) Purchase accounting related amortization (primarily included in cost of sales) (a) 2,721.3 4,039.7 1,933.6 Impairment of goodwill related to assets held for sale (a) 117.0 — — Litigation settlements and other contingencies, net 4.4 329.2 107.8 Interest expense (primarily amortization of premiums and discounts on long term debt) (48.7) (53.8) 12.6 Clean energy investments pre-tax loss — 61.9 48.4 Acquisition and divestiture related costs (primarily included in SG&A) (b) 475.7 234.6 613.6 Biocon Biologics gain on divestiture (included in other (income) expense, net) (1,754.1) — — Restructuring related costs (c) 86.9 899.4 323.1 Share-based compensation expense 116.5 111.2 79.2 Other special items included in: Cost of sales (d) 255.2 333.0 438.1 Research and development expense (e) 1.0 13.1 4.7 Selling, general and administrative expense (f) 68.8 49.5 44.6 Other (income) expense, net (3.8) (8.0) (16.8) Tax effect of the above items and other income tax related items (g) (41.7) (330.7) (581.8) Adjusted net earnings $ 4,077.1 $ 4,410.0 $ 2,337.2 Significant items for the year ended December 31, 2022 include the following: (a) For the year ended December 31, 2022, charges include an intangible asset charge of approximately $172.9 million to write down the disposal group to fair value, less cost to sell, and a related goodwill impairment charge of $117.0 million for the potential divestiture of the Upjohn Distributor Markets.
GAAP net earnings (loss) $ 54.7 $ 2,078.6 $ (1,269.1) Purchase accounting related amortization (primarily included in cost of sales) (a) 2,421.5 2,721.3 4,039.7 Impairment of goodwill related to assets held for sale (included in SG&A) (b) 580.1 117.0 — Litigation settlements and other contingencies, net 111.6 4.4 329.2 Interest expense (primarily amortization of premiums and discounts on long term debt) (42.4) (48.7) (53.8) Clean energy investments pre-tax loss — — 61.9 Acquisition and divestiture-related costs (primarily included in SG&A) (c) 377.9 475.7 234.6 Loss (gain) on divestitures of businesses (included in other income, net) (d) 239.9 (1,754.1) — Restructuring-related costs (e) 125.2 86.9 899.4 Share-based compensation expense 180.7 116.5 111.2 Other special items included in: Cost of sales (f) 119.2 255.2 333.0 Research and development expense 2.8 1.0 13.1 Selling, general and administrative expense (g) (83.5) 68.8 49.5 Other income, net (h) (24.4) (3.8) (8.0) Tax effect of the above items and other income tax related items (i) (525.6) (41.7) (330.7) Adjusted net earnings $ 3,537.7 $ 4,077.1 $ 4,410.0 Significant items for the year ended December 31, 2023 include the following: (a) Includes an intangible asset charge related to the divestitures of the commercialization rights in the Upjohn Distributor Markets of approximately $32.0 million to write down the disposal group to fair value, less cost to sell.
These amounts include the amortization of intangible assets, inventory step-up, property, plant and equipment step-up, and intangible asset impairment charges, including for in-process research and development, and impairments of goodwill.
These amounts include the amortization of intangible assets, inventory step-up, property, plant and equipment step-up, intangible asset impairment charges, including for IPR&D, and impairment of goodwill.
If all other assumptions are held constant, a reduction in the terminal value growth rate by 3.5% or an increase in discount rate by 2.0% would result in an impairment charge for the JANZ reporting unit.
The discount rate utilized was 7.0% and the estimated tax rate was 30.6%. If all other assumptions are held constant, a reduction in the terminal value growth rate by 0.5% or an increase in discount rate by 0.5% would result in an impairment charge for the JANZ reporting unit.
The Company performed both its interim and annual goodwill impairment tests on a quantitative basis for its five reporting units, North America, Europe, Emerging Markets, JANZ, and Greater China. In estimating each reporting unit’s fair value, the Company performed an extensive valuation analysis, utilizing both income and market-based approaches.
The Company performed its annual goodwill impairment test on a quantitative basis for its five reporting units, North America, Europe, Emerging Markets, JANZ, and Greater China. In estimating each reporting unit’s fair value, the Company performed an extensive valuation analysis, utilizing a discounted cash flow approach.
During the forecast period, the revenue compound annual growth rate was approximately 0.5%. A terminal year value was calculated with a negative 1.0% revenue growth rate applied. The discount rate utilized was 9.5% and the estimated tax rate was 15.3%.
During the forecast period, the revenue compound annual growth rate was approximately 1.8%. A terminal year value was calculated with a 2.0% revenue growth rate applied. The discount rate utilized was 11.5% and the estimated tax rate was 17.4%.
GAAP cost of sales $ 9,765.7 $ 12,310.8 Deduct: Purchase accounting amortization and other related items (2,721.2) (4,039.7) Acquisition and divestiture related costs (50.0) (13.9) Restructuring and related costs (56.8) (534.7) Share-based compensation expense (1.5) (2.3) Other special items (255.2) (333.0) Adjusted cost of sales $ 6,681.0 $ 7,387.2 Adjusted gross profit (a) $ 9,581.7 $ 10,499.1 Adjusted gross margin (a) 59 % 59 % ____________ (a) Adjusted gross profit is calculated as total revenues less adjusted cost of sales.
GAAP cost of sales $ 8,988.3 $ 9,765.7 Deduct: Purchase accounting amortization and other related items (2,421.6) (2,721.2) Acquisition and divestiture-related costs (40.7) (50.0) Restructuring-related costs (101.8) (56.8) Share-based compensation expense (2.9) (1.5) Other special items (119.2) (255.2) Adjusted cost of sales $ 6,302.1 $ 6,681.0 Adjusted gross profit (a) $ 9,124.8 $ 9,581.7 Adjusted gross margin (a) 59 % 59 % ____________ (a) Adjusted gross profit is calculated as total revenues less adjusted cost of sales.
Operating Activities Net cash provided by operating activities decreased by $64.3 million to $2.95 billion for the year ended December 31, 2022, as compared to net cash provided by operating activities of $3.02 billion for the year ended December 31, 2021.
Operating Activities Net cash provided by operating activities decreased by $153.0 million to $2.80 billion for the year ended December 31, 2023, as compared to net cash provided by operating activities of $2.95 billion for the year ended December 31, 2022.
During the years ended December 31, 2022 and 2021, the Company incurred $54.5 million and $30.4 million, respectively, related to this provision of the TSA, and approximately $138.0 million during the period beginning on the closing date of the Combination and ended December 31, 2022. We expect to incur future costs related to the completion of the services.
During the years ended December 31, 2023, 2022 and 2021, the Company incurred $5.5 million, $54.5 million, and $30.4 million, respectively, related to this provision of the TSA, and approximately $143.5 million during the period beginning on the closing date of the Combination and ended December 31, 2023.
Viatris’ portfolio comprises more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands, generics, and complex generics, including biosimilars prior to the Biocon Biologics Transaction. The Company operates approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs.
As of December 31, 2023, Viatris’ portfolio comprised more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands and generics, including complex products, and the Company operated approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs.
The Company records contingent consideration resulting from business acquisitions at its estimated fair value on the acquisition date. Each reporting period thereafter, the Company revalues these obligations and records increases or decreases in their fair value as adjustments to litigation settlements and other contingencies, net within the consolidated statements of operations.
Each reporting period thereafter, the Company revalues these obligations and records increases or decreases in their fair value as adjustments to litigation settlements and other contingencies, net within the consolidated statements of operations.
Total Revenues For the year ended December 31, 2022, the Company reported total revenues of $16.26 billion, compared to $17.89 billion for the comparable prior year period, representing a decrease of $1.62 billion, or 9%. Total revenues include both net sales and other revenues from third parties.
Total Revenues For the year ended December 31, 2023, the Company reported total revenues of $15.43 billion, compared to $16.26 billion for the comparable prior year period, representing a decrease of $835.8 million, or 5%. Total revenues include both net sales and other revenues from third parties.
Emerging Markets Segment Net sales from Emerging Markets decreased by $529.1 million or 17% for the year ended December 31, 2022 when compared to the prior year. This decrease was partially driven by the unfavorable impact of foreign currency translation of approximately $264.7 million, or 8%.
Emerging Markets Segment Net sales from Emerging Markets decreased by $64.0 million or 2% for the year ended December 31, 2023 when compared to the prior year. This decrease was driven by the unfavorable impact of foreign currency translation of approximately $160.8 million, or 6%.
The YEN Term Loan Facility and the 2021 Revolving Facility contain customary affirmative covenants for facilities of this type, including among others, covenants pertaining to the delivery of financial statements, notices of default and certain material events, maintenance of corporate existence and rights, property, and insurance and compliance with laws, as well as customary negative covenants for facilities of this type, including a financial covenant, which set the Maximum Leverage Ratio as of the end of any quarter at 4.25 to 1.00 for each quarter ending after June 30, 2021 through and including June 30, 2022, 4.0 to 1.00 for each quarter ending after June 30, 2022 through and including December 31, 2022 and 3.75 to 1.00 thereafter, except in circumstances as defined in the related credit agreement, and other limitations on the incurrence of subsidiary indebtedness, liens, mergers and certain other fundamental changes, investments and loans, acquisitions, transactions with affiliates, payments of dividends and other restricted payments and changes in our lines of business.
Long-term Debt Maturity For information regarding our debt agreements and mandatory minimum repayments remaining on the outstanding notional amount of long-term debt at December 31, 2023, refer to Note 10 Debt in Part II, Item 8 of this Form 10-K. 68 Table of Contents The YEN Term Loan Facility and the Revolving Facility contain customary affirmative covenants for facilities of this type, including among others, covenants pertaining to the delivery of financial statements, notices of default and certain material events, maintenance of corporate existence and rights, property, and insurance and compliance with laws, as well as customary negative covenants for facilities of this type, including a financial covenant, which set the Maximum Leverage Ratio as of the end of any quarter at 3.75 to 1.00 for the quarter ended March 31, 2023 and each quarter ending thereafter, except in circumstances as defined in the related credit agreement, and other limitations on the incurrence of subsidiary indebtedness, liens, mergers and certain other fundamental changes, investments and loans, acquisitions, transactions with affiliates, payments of dividends and other restricted payments and changes in our lines of business.
Viatris is headquartered in the U.S., with global centers in Pittsburgh, Pennsylvania, Shanghai, China and Hyderabad, India. Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets.
As discussed below, Viatris has entered into certain transactions, including the Pending Announced Divestitures. Viatris is headquartered in the U.S., with global centers in Pittsburgh, Pennsylvania, Shanghai, China and Hyderabad, India. Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets.
Under the terms of each of the Receivables Facility and Note Securitization Facility, certain of our accounts receivable secure the amounts borrowed and cannot be used to pay our other debts or liabilities.
As of December 31, 2023, the Company did not have any borrowings outstanding under the Receivables Facility or the Note Securitization Facility. Under the terms of each of the Receivables Facility and Note Securitization Facility, certain of our accounts receivable secure the amounts borrowed and cannot be used to pay our other debts or liabilities.
The decrease was primarily due to lower net sales of existing products mainly driven by lower pricing in Japan as a result of government price reductions and additional competition, and lower volumes of existing products in Australia. These decreases were partially offset by higher volumes of existing products in Japan, including for Celebrex®.
The decrease was due to lower net sales of existing products mainly driven by lower pricing and, to a lesser extent, volumes, in Japan as a result of government price reductions and additional competition, and lower volumes of existing products in Australia.
The decrease in net sales was primarily driven by the unfavorable impact of foreign currency translation of approximately $1.24 billion, or 7%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in countries within the EU, Japan and India.
The decrease in net sales was partially driven by the unfavorable impact of foreign currency translation of approximately $258.9 million, or 2%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in Japan, China and India.
Recent Developments Ophthalmology Acquisitions During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $425 million in cash, which includes $11 per share paid to Oyster Point stockholders through a tender offer and the repayment of the principal amount of certain debt of Oyster Point.
Ophthalmology Acquisitions During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $427.4 million in cash, which included $11 per share paid to Oyster Point stockholders through a tender offer, payment for vested share-based awards, and the repayment of the Oyster Point debt.
Accordingly, changes in the assumptions described above could have a material impact on the Company’s consolidated financial condition and results of operations. 70 Table of Contents The Company reviews goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable based on management’s assessment of the fair value of the Company’s reporting units as compared to their related carrying value.
The Company reviews goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable based on management’s assessment of the fair value of the Company’s reporting units as compared to their related carrying value.
Because this process involves management making estimates with respect to future sales volumes, pricing, new product launches, government reform actions, anticipated cost environment and overall market conditions, and because these estimates form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates.
Because this process involves management making estimates with respect to future sales volumes, pricing, new product launches, government reform actions, anticipated cost environment and overall market conditions, and because these estimates form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates. 73 Table of Contents The Company records contingent consideration liabilities resulting from business acquisitions or divestitures at its estimated fair value on the acquisition or divestiture date.
For the Emerging Markets reporting unit, the estimated fair value exceeded its carrying value by approximately $816 million or 10.3% for both the interim and annual goodwill impairment tests. As it relates to the income approach for the Emerging Markets reporting unit at March 31, 2022 and April 1, 2022, the Company forecasted cash flows for the next 10 years.
For the Emerging Markets reporting unit, the estimated fair value exceeded its carrying value by approximately $513 million or 7.7% for the annual goodwill impairment test. As it relates to the discounted cash flow approach for the Emerging Markets reporting unit at April 1, 2023, the Company forecasted cash flows for the next 10 years.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe foreign exchange gains or losses on these hedges is included in the foreign currency translation component of accumulated other comprehensive income (loss). If our net investment decreases below the equivalent value of the non-U.S. debt borrowings, the change in the remeasurement basis of the debt would be subject to recognition in net income as changes occur.
Biggest changeIf our net investment decreases below the equivalent value of the non-U.S. debt borrowings, the change in the remeasurement basis of the debt would be subject to recognition in net income as changes occur. 77 Table of Contents Interest Rate and Long-Term Debt Risk Viatris’ exposure to interest rate risk arises primarily from our U.S.
We seek to manage this foreign exchange risk in part through operational means, including managing same currency revenues in relation to same currency costs and same currency assets in relation to same currency liabilities. 73 Table of Contents From time to time, foreign exchange risk is managed through the use of foreign currency forward-exchange contracts.
We seek to manage this foreign exchange risk in part through operational means, including managing same currency revenues in relation to same currency costs and same currency assets in relation to same currency liabilities. From time to time, foreign exchange risk is managed through the use of foreign currency forward-exchange contracts.
Fair Value Risk The Company’s fair value risk exposure relates primarily to our equity investments that do not have readily determinable fair values, principally the CCPS received as part of the Biocon Biologics Transaction. As of December 31, 2022 and 2021, the carrying value of these investments were approximately $1.09 billion and $81.4 million, respectively.
Fair Value Risk The Company’s fair value risk exposure relates primarily to our equity investments that do not have readily determinable fair values, principally the CCPS received as part of the Biocon Biologics Transaction. As of December 31, 2023 and 2022, the carrying value of these investments were approximately $1.14 billion and $1.09 billion, respectively.
As of December 31, 2022, Viatris’ outstanding fixed rate borrowings consist principally of $18.41 billion notional amount of senior U.S. dollar and Euro notes. Generally, the fair value of fixed interest rate debt will decrease as interest rates rise and increase as interest rates fall.
As of December 31, 2023, Viatris’ outstanding fixed rate borrowings consist principally of $17.33 billion notional amount of senior U.S. dollar and Euro notes. Generally, the fair value of fixed interest rate debt will decrease as interest rates rise and increase as interest rates fall.
As of December 31, 2022, the fair value of our outstanding fixed rate senior U.S. dollar and Euro notes was approximately $15.36 billion. As of December 31, 2022, Viatris’ outstanding variable rate borrowings consist principally of borrowings under the Yen Term Loan Facility of $305.1 million.
As of December 31, 2023, the fair value of our outstanding fixed rate senior U.S. dollar and Euro notes was approximately $15.25 billion. As of December 31, 2023, Viatris’ outstanding variable rate borrowings consist principally of borrowings under the Yen Term Loan Facility of $283.6 million.
A 100 basis point change in interest rates on Viatris’ variable rate debt, net of interest rate swaps, would result in a change in interest expense of approximately $3.1 million per year.
A 100 basis point change in interest rates on Viatris’ variable rate debt would result in a change in interest expense of approximately $2.9 million per year.
A hypothetical 20 percent decline in the fair value of these investments would have decreased the carrying value and other (income) expense, net by approximately $218.0 million at December 31, 2022. 74 Table of Contents
A hypothetical 20 percent decline in the fair value of these investments would have decreased the carrying value and other income, net by approximately $228.4 million at December 31, 2023. 78 Table of Contents
Interest Rate and Long-Term Debt Risk Viatris’ exposure to interest rate risk arises primarily from our U.S. Dollar and Euro borrowings and U.S. Dollar investments. We invest primarily on a variable-rate basis and we borrow on both a fixed and variable basis.
Dollar and Euro borrowings and U.S. Dollar investments. We invest primarily on a variable-rate basis and we borrow on both a fixed and variable basis.
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The foreign exchange gains or losses on these hedges is included in the foreign currency translation component of accumulated other comprehensive income (loss).

Other VTRS 10-K year-over-year comparisons