UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑
☐
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2022
OR
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 001-39695
VIATRIS INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
83-4364296
(I.R.S. Employer Identification No.)
1000 Mylan Boulevard, Canonsburg, Pennsylvania, 15317
(Address of principal executive offices)(Zip Code)
(724) 514-1800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
Common Stock, par value $0.01 per share
Trading Symbol(s)
VTRS
Name of Each Exchange on Which Registered:
The NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022, the last business day of the
registrant’s most recently completed second fiscal quarter, was approximately $12,662,127,991.
The number of shares of common stock outstanding, par value $0.01 per share, of the registrant as of February 21, 2023 was 1,196,813,959.
An amendment to this Form 10-K will be filed no later than 120 days after the close of registrant’s fiscal year.
Document
Part of Form 10-K into Which
Document is Incorporated
III
INCORPORATED BY REFERENCE
Table of Contents
VIATRIS INC.
INDEX TO FORM 10-K
For the Year Ended December 31, 2022
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits and Consolidated Financial Statement Schedules
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 9C.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
ITEM 15.
Signatures
Page
8
20
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50
51
73
75
144
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145
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145
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154
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Unless the context requires otherwise, references to “Viatris,” “the Company,” “we,” “us” or “our” in this 2022 Form 10-K (defined below) refer
to Viatris Inc. and its subsidiaries. We also have used several other terms in this 2022 Form 10-K, most of which are explained or defined below. Some
amounts in this Form 10-K may not add due to rounding.
Glossary of Defined Terms
2003 LTIP
2020 Incentive Plan
2020 Revolving Facility
2021 Revolving Facility
505(b)(2)
AbbVie
ACA
Adjusted EBITDA
ANDA
AOCE
API
ARV
ASC
Aspen
ASU
BEAT
Biocon
Biocon Biologics
Biocon Biologics Transaction
Biocon Agreement
Biogen
Business Combination Agreement
CARES Act
CCPS
cGMP
Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan
Viatris Inc. 2020 Stock Incentive Plan
The revolving credit facility available pursuant to the revolving credit
agreement, dated as of June 16, 2020, by and among Viatris, certain
lenders and issuing banks from time to time party thereto and Bank of
America, N.A., as administrative agent and repaid in full in July 2021
The $4.0 billion revolving facility dated as of July 1, 2021, by and among
Viatris, certain lenders and issuing banks from time to time party thereto
and Bank of America, N.A., as administrative agent
A streamlined NDA process in which the applicant relies upon one or more
investigations conducted by someone other than the applicant and for
which the applicant has not obtained right of reference.
AbbVie Inc.
Patient Protection and Affordable Care Act, as amended by the Health
Care and Education and Reconciliation Act
Non-GAAP financial measure that the Company believes is appropriate to
provide information to investors - EBITDA (defined below) is further
adjusted for share-based compensation expense, litigation settlements, and
other contingencies, net, restructuring and other special items
Abbreviated New Drug Application
Accumulated other comprehensive earnings
Active pharmaceutical ingredient
Antiretroviral medicines
Accounting Standards Codification
Aspen Global Incorporated
Accounting Standards Update
Base Erosion Anti-Abuse Tax
Biocon Limited
Biocon Biologics Limited, a majority owned subsidiary of Biocon
The transaction between Viatris and Biocon Biologics pursuant to which
Viatris contributed its biosimilars portfolio, composed of the Biocon
collaboration programs, biosimilars to Humira®, Enbrel®, and Eylea®, as
well as related assets and liabilities to Biocon Biologics
The transaction agreement between Viatris and Biocon Biologics, dated
February 27, 2022, relating to the Biocon Biologics Transaction, as
amended by that certain Amendment No. 1 to Transaction Agreement,
dated November 28, 2022
Biogen MA Inc. and Biogen International GmbH, collectively
Business Combination Agreement, dated as of July 29, 2019, as amended
from time to time, among Viatris, Mylan, Pfizer and certain of their
affiliates
Coronavirus Aid, Relief, and Economic Security Act
Compulsory convertible preferred shares
Current Good Manufacturing Practices
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clean energy investments
CMA
Code
Combination
Commercial Paper Program
COPD
COSO
COVID-19
CP Notes
DEA
Developed Markets segment
DGCL
Distribution
DOJ
DRIP
EBITDA
EDPA
EMA
Emerging Markets segment
EPD Business
ERP system
EU
Exchange Act
Famy Life Sciences
FASB
FDA
FKB
Form 10-K
FTC
GDPR
GILTI
Used to define the three equity method investments the Company has in
limited liability companies that own refined coal production plants whose
activities qualify for income tax credits under Section 45 of the Code
Competition and Markets Authority
The U.S. Internal Revenue Code of 1986, as amended
Refers to Mylan combining with Pfizer's Upjohn Business in a Reverse
Morris Trust transaction to form Viatris on November 16, 2020
The $1.65 billion unsecured commercial paper program entered into as of
November 16, 2020 by Viatris, as issuer, Mylan Inc., Utah Acquisition Sub
Inc. and Mylan II B.V., as guarantors, and certain dealers from time to time
Chronic obstructive pulmonary disease
Committee of Sponsoring Organizations of the Treadway Commission
Novel coronavirus disease of 2019
Unsecured, short-term commercial paper notes issued pursuant to the
Commercial Paper Program
U.S. Drug Enforcement Agency
Viatris’ business segment that includes our operations primarily in the
following markets: North America and Europe
Delaware General Corporation Law
Pfizer's distribution to Pfizer stockholders all the issued and outstanding
shares of Upjohn Inc.
U.S. Department of Justice
Dividend Reinvestment and Share Purchase Plan
Non-GAAP financial measure that the Company believes is appropriate to
provide information to investors - U.S. GAAP net earnings (loss) adjusted
for net contribution attributable to equity method investments, income tax
provision (benefit), interest expense and depreciation and amortization
U.S. District Court for the Eastern District of Pennsylvania
European Medicines Agency
Viatris’ business segment that includes, but is not limited to, our operations
primarily in the following markets: Parts of Asia, the Middle East, South
and Central America, Africa, and Eastern Europe
Abbott Laboratories’ non-U.S. developed markets specialty and branded
generics business, prior to its acquisition by Mylan in February 2015
Enterprise resource planning system
European Union
Securities Exchange Act of 1934, as amended
Famy Life Sciences Private Limited
Financial Accounting Standards Board
U.S. Food and Drug Administration
Fujifilm Kyowa Kirin Biologics Co. Ltd
This annual report on Form 10-K for the fiscal year ended December 31,
2022
U.S. Federal Trade Commission
The EU’s General Data Protection Regulation
Global intangible low-taxed income
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Greater China segment
Gx
Hatch-Waxman Act
HIPAA
HIV/AIDS
INN
IPR
IPR&D
IRS
IT
JANZ segment
LAMA
LIBOR
Lilly
LOE
Maximum Leverage Ratio
MDL
Momenta
MPI
Mylan
Mylan Inc. Euro Notes
Mylan Inc. U.S. Dollar Notes
Mylan Securitization
NASDAQ
NCDs
NCEs
NDA
NHI
NHS
NOLs
Note Securitization Facility
OECD
OTC
Oyster Point
Viatris’ business segment that includes our operations primarily in the
following markets: China, Taiwan and Hong Kong
Generic drugs
Drug Price Competition and Patent Term Restoration Act of 1984
Health Insurance Portability and Accountability Act of 1996 and the
Health Information Technology for Economic and Clinical Health Act
Human immunodeficiency virus infection and acquired immune deficiency
syndrome
International NonProprietary Name
Inter Partes review
In-process research and development
U.S. Internal Revenue Service
Information technology
Viatris’ business segment that includes our operations in the following
markets: Japan, Australia and New Zealand
Long-acting muscarinic antagonist
London Interbank Offered Rate
Eli Lilly and Company
Loss of exclusivity
The maximum consolidated leverage ratio financial covenant requiring
maintenance of a maximum ratio of consolidated total indebtedness as of
the end of any quarter to consolidated EBITDA for the trailing four
quarters as defined in the related credit agreements from time to time
Multidistrict litigation
Momenta Pharmaceuticals, Inc.
Mylan Pharmaceuticals Inc.
Mylan N.V. and its subsidiaries
The 2.125% Senior Notes due 2025 issued by Mylan Inc., which are fully
and unconditionally guaranteed on a senior unsecured basis by Mylan II
B.V., Viatris Inc. and Utah Acquisition Sub Inc.
The 4.200% Senior Notes due 2023, 3.125% Senior Notes due 2023,
4.550% Senior Notes due 2028, 5.400% Senior Notes due 2043 and
5.200% Senior Notes due 2048 issued by Mylan Inc., which are fully and
unconditionally guaranteed on a senior unsecured basis by Mylan II B.V.,
Viatris Inc. and Utah Acquisition Sub Inc.
Mylan Securitization LLC
The NASDAQ Stock Market
noncommunicable diseases
New Chemical Entities
New drug application
National Health Insurance of Japan
National Health Services
Net Operating Losses
The note securitization facility entered into in August 2022 for borrowings
up to $200 million and expiring in August 2023
The Organisation for Economic Co-operation and Development
Over-the-counter
Oyster Point Pharma, Inc.
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PBM
PCAOB
Pfizer
PMS
PPACA
Profit Sharing 401(k) Plan
PSUs
PTAB
QCE
R&D
Receivables Facility
Registered Upjohn Notes
Respiratory Delivery Platform
Restoration Plan
Restricted Stock Awards
Revance
RICO
ROU asset
RSUs
Sanofi
SARs
SDA
SDNY
SEC
Securities Act
Senior U.S. Dollar Notes
Separation
Separation and Distribution Agreement
SG&A
Stock awards
Tax Act
Pharmacy benefit managers
Public Company Accounting Oversight Board
Pfizer Inc.
Pharmascience Inc.
Patient Protection and Affordable Care Act
401(k) retirement plan with a profit sharing component for non-union
represented employees
Performance awards
U.S. Patent Trial and Appeal Board
Quality consistency evaluation
Research and development
The $400 million accounts receivable entered into in August 2020 and
expiring in April 2025
The 1.125% Senior Notes due 2022, 1.650% Senior Notes due 2025,
2.300% Senior Notes due 2027, 2.700% Senior Notes due 2030, 3.850%
Senior Notes due 2040 and 4.000% Senior Notes due 2050 originally
issued on October 29, 2021 registered with the SEC in exchange for the
corresponding Unregistered Upjohn U.S. Dollar Notes in a similar
aggregate principal amount and with terms substantially identical to the
corresponding Unregistered Upjohn U.S. Dollar Notes and fully and
unconditionally guaranteed by Mylan Inc., Mylan II B.V. and Utah
Acquisition Sub Inc.
Pfizer’s proprietary dry powder inhaler delivery platform
The Company’s 401(k) Restoration Plan
The Company’s nonvested restricted stock and restricted stock unit awards,
including PSUs
Revance Therapeutics, Inc.
Racketeer Influenced and Corrupt Organizations Act
Right-of-use asset
The Company's unvested restricted stock unit awards
Sanofi-Aventis U.S., LLC
Stock Appreciation Rights
Separation and Distribution Agreement between Viatris and Pfizer, dated
as of July 29, 2019, as amended from time to time
U.S. District Court for the Southern District of New York
U.S. Securities and Exchange Commission
Securities Act of 1933, as amended
The Upjohn U.S. Dollar Notes, the Utah U.S. Dollar Notes and the Mylan
Inc. U.S. Dollar Notes, collectively
Pfizer's transfer to Upjohn of substantially all the assets and liabilities
comprising the Upjohn Business
Separation and Distribution Agreement between Viatris and Pfizer, dated
as of July 29, 2019, as amended from time to time
Selling, general and administrative expenses
Stock options and SARs
December 2017 U.S. Tax Cuts and Jobs Act
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Tax Matters Agreement
Teva
Theravance Biopharma
TSA
U.K.
U.S.
U.S. GAAP
Unregistered Upjohn U.S. Dollar Notes
Upjohn
Upjohn Business
Upjohn Distributor Markets
Upjohn Euro Notes
Upjohn Senior Notes
Upjohn U.S. Dollar Notes
URP
USD Term Loan Facility
Utah Acquisition Sub
Utah Euro Notes
Utah U.S. Dollar Notes
VA
VBP
The agreement entered into by Pfizer and Viatris in connection with the
Separation and the Distribution that governs the parties’ respective rights,
responsibilities and obligations with respect to taxes, including taxes
arising in the ordinary course of business and taxes, if any, incurred as a
result of any failure of the Distribution or certain related transactions to
qualify as tax-free transactions
Teva Pharmaceutical Industries Ltd.
Theravance Biopharma, Inc.
Transition services agreement
United Kingdom
United States
Accounting principles generally accepted in the U.S.
The 1.125% Senior Notes due 2022, 1.650% Senior Notes due 2025,
2.300% Senior Notes due 2027, 2.700% Senior Notes due 2030, 3.850%
Senior Notes due 2040 and 4.000% Senior Notes due 2050 originally
issued on June 22, 2020 by Upjohn Inc. (now Viatris Inc.) in a private
offering exempt from the registration requirements of the Securities Act
and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and
Utah Acquisition Sub Inc.
Upjohn Inc., a wholly owned subsidiary of Pfizer prior to the Distribution,
that combined with Mylan and was renamed Viatris Inc.
Pfizer’s off-patent branded and generic established medicines business
that, in connection with the Combination, was separated from Pfizer and
combined with Mylan to form Viatris
Select geographic markets that were part of the Combination that are
smaller in nature and in which we had no established infrastructure prior to
or following the Combination and that the Company intends to divest
Senior unsecured notes denominated in euros and issued by Upjohn
Finance B.V. pursuant to an indenture dated June 23, 2020
The Upjohn U.S. Dollar Notes together with the Upjohn Euro Notes
Senior unsecured notes denominated in U.S. dollars and originally issued
by Upjohn Inc. or Viatris Inc. pursuant to an indenture dated June 22, 2020
and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and
Utah Acquisition Sub Inc.
Universal reimbursement pricing
The $600 million delayed draw term loan credit agreement, dated as of
June 16, 2020 by and among Viatris, Mizuho Bank, Ltd. and MUFG Bank,
Ltd., as administrative agent, and repaid in full in July 2021
Utah Acquisition Sub Inc., a Delaware corporation and an indirect wholly
owned subsidiary of Viatris
The 2.250% Senior Notes due 2024 and 3.125% Senior Notes due 2028
issued by Utah Acquisition Sub Inc., which are fully and unconditionally
guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and
Mylan II B.V.
The 3.950% Senior Notes due 2026 and 5.250% Senior Notes due 2046
issued by Utah Acquisition Sub Inc., which are fully and unconditionally
guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and
Mylan II B.V.
Department of Veterans Affairs
Volume-based procurement
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Viatris
Viatris Board
Viatris Bylaws
Viatris Charter
WHO
YEN Term Loan Facility
Viatris Inc., formerly known as Upjohn Inc. prior to the completion of the
Combination
The board of directors of Viatris Inc.
The amended and restated bylaws of Viatris Inc.
Amended and restated certificate of incorporation of Viatris Inc.
World Health Organization
The ¥40 billion term loan agreement dated as of July 1, 2021, by and
among Viatris, MUFG Bank, Ltd. and Mizuho Bank, Ltd., as
administrative agent
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ITEM 1.
Business
About Viatris
PART I
Viatris is a global healthcare company formed in November 2020 whose mission is to empower people worldwide to live healthier at every stage
of life, regardless of geography or circumstance. Improving the ability of patients to gain access to sustainable and high-quality healthcare is our relentless
pursuit. 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. 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. 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. Viatris is headquartered in the U.S., with global centers in Pittsburgh, Pennsylvania,
Shanghai, China and Hyderabad, India.
On November 16, 2020, Viatris, formerly known as Upjohn, Mylan and Pfizer consummated the combination of Mylan with the Upjohn Business
through a Reverse Morris Trust transaction. 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. In accordance with ASC
805, Business Combinations, Mylan is considered the accounting acquirer of the Upjohn Business and all historical financial information of the Company
prior to November 16, 2020 represents Mylan’s historical results and the Company’s thereafter. Refer to Note 4 Acquisitions and Other Transactions
included in Part II. Item 8 of this Form 10-K for more information.
Prior to the separation of the Upjohn Business from the remainder of Pfizer’s businesses, the legacy Upjohn Business historically received support
services from Pfizer. In connection with the Separation and Combination, Viatris entered into several agreements with Pfizer or its subsidiaries, including
among others, transition services and the manufacturing and supply agreements, which in general provide for the performance of certain services or
obligations by each of Pfizer and Viatris for the benefit of each other for initial transitional periods following the Combination. By the end of 2022, the
Company had exited substantially all transition services with Pfizer.
In February 2022, the Company announced plans for certain strategic actions, anchored by a significant global reshaping initiative designed to
unlock trapped value and provide the financial flexibility required to deliver on its vision. The Company also announced that it had entered into a strategic
transaction with Biocon Biologics to create what it expects to be a vertically integrated global biosimilars leader, as well as potential plans to divest other
select assets no longer considered core to our future strategy to help reshape the Company.
On February 27, 2022, Viatris entered into a definitive agreement with Biocon Biologics to contribute its biosimilars portfolio to Biocon
Biologics. The transaction subsequently closed on November 29, 2022. Under the terms of the Biocon Agreement, Viatris received $3 billion in
consideration in the form of a $2 billion cash payment, adjusted as set forth in the Biocon Agreement, and approximately $1 billion of CCPS representing a
stake of approximately 12.9% (on a fully diluted basis) in Biocon Biologics. 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. An amount of cash equal to all or a portion of the
closing working capital target 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.
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. Under the transition services agreement, Viatris is entitled to be
reimbursed for its costs (subject to certain caps) plus a markup.
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In November 2022, the Company provided an update on the strategic priorities announced in February 2022, including identifying the following
businesses no longer considered core to its future strategy that the Company intends to divest:
• OTC;
• API (while retaining some selective development API capabilities);
• Women’s health care, primarily related to our oral and injectable contraceptives. 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.
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. In addition
to the upfront cash consideration, each Oyster Point stockholder received one non-tradeable contingent value right representing up to an additional $2 per
share, or approximately $60 million in the aggregate, contingent upon Oyster Point achieving certain metrics based upon full year 2022 performance, which
are expected to be determined by the end of the first quarter of 2023. Oyster Point is a commercial-stage biopharmaceutical company 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 private-
owned research company with a complementary portfolio of ophthalmology therapies under development, for a consideration of $281 million. The
Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 to grant the Company rights with
respect to acquiring certain pharmaceutical products and had additionally acquired shares representing approximately 13.5% equity interest in Famy Life
Sciences for $25.0 million during the year ended December 31, 2020. 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. 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. 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. 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. Effective as
of November 16, 2020, Upjohn changed its name to “Viatris Inc.” and became the parent entity of the combined Upjohn Business and Mylan business.
The Upjohn Business was a global, primarily off-patent branded and generic established medicines business, which included 20 primarily off-
patent oral solid dose legacy brands, such as Lyrica®, Lipitor®, Celebrex® and Viagra®.
Mylan was founded in 1961 as a privately-owned company and grew over time into one of the largest manufacturers of generic drugs in the U.S.
Mylan became a publicly traded company in 1973. 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). 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.
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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.
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.
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. Our global
portfolio, supported by our science, medical and manufacturing expertise, delivers global iconic and key brands, complex generics, including biosimilars
prior to the Biocon Biologics Transaction, generics and OTC products.
We see access as fundamental to empowering people worldwide to live healthier at every stage of life—a powerful concept in challenging times.
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. 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.
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. We are focused on meeting individual needs, whether with a
generic medicine, an improved version of an existing medicine, or a truly novel therapeutic solution.
Ultimately, we know we are stronger together. Both as a company and as a global community. Our pursuit of access is relentless. Because health
matters everywhere.
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. We also offer support services such as diagnostic clinics, educational seminars and digital tools to help
patients better manage their health. While we intend to maintain our broad range of therapeutic areas, we have, as previously announced,
identified three core, global therapeutic areas – ophthalmology (as evidenced by the Oyster Point and Famy Life Sciences’ acquisitions),
gastrointestinal, and dermatology – that we believe particularly fit our own internal capabilities while leveraging our global platform.
• Helps ease the burden of noncommunicable diseases. According to the WHO, NCDs, such as ischemic heart disease, stroke, diabetes, certain
cancers and chronic obstructive pulmonary disease, are among the leading causes of death globally. NCDs affect people of every age, gender and
socioeconomic status in every corner of the world, and pose a heavy burden on individuals, families and communities. To overcome this global
public health threat, patients
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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. 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. In close collaboration with
governments, healthcare providers, technology partners and patients, we at Viatris work to nurture healthcare systems that can adapt and respond
to patients’ ever-changing needs. We continue to collaborate with medical associations, patient advocacy groups and academia to develop
innovative, integrated solutions and programs to help strengthen both the delivery and quality of healthcare.
•
Fights infectious disease. We are also a global leader in treating infectious diseases such as HIV/AIDS, hepatitis, and tuberculosis, and offer an
extensive portfolio across these disease states. While many important strides have been made to treat these illnesses, there is still more to be done
in countries where lack of access to therapeutics, preventative treatment and diagnostics often result in patients not receiving proper care, and
those where HIV transmission continues thirty years into the epidemic. From manufacturing a pediatric-friendly antiretroviral used to treat HIV-
positive infants to providing HIV self-tests in some low- and middle-income countries, we are innovating to help patients.
An Increasingly Innovative and Differentiated Pipeline
Our confidence in the future delivery of our pipeline is rooted in our strong historic development programs and list of firsts, including the first
FDA approvals of the generic version of Allergan's Restasis® and the generic version of Symbicort®, Breyna™. 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™. We are also working with our partners on novel and complex products such as our BOTOX® (onabotulinumtoxinA)
biosimilar and Glatiramer Acetate Depot, a long-acting injection version of the approved glatiramer acetate.
While we will continue to diligently pursue important generics opportunities, we will increasingly focus on limited-competition complex and
novel products targeting gaps in care, all with a first-to-market emphasis and serving our mission of patient access. Complex product categories are critical
to patient health and are growing at a rapid pace. Our goal is to enhance our proven scientific capabilities and current global platform, including our Global
Healthcare Gateway®, to create a durable and higher-margin portfolio of products. And that means further expanding beyond our current scope into more
innovative products, including NCEs and global 505(b)(2) products. 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. 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 know what it takes to reach more patients with more products, and believe that
Viatris is uniquely positioned to make a difference through our:
•
Powerful global operating platform, which combines what we believe to be best-in-class manufacturing and supply chain capabilities. 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. 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. We are committed to advancing responsible and sustainable operations and work diligently to
minimize our environmental footprint across the Viatris
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network while safeguarding access to medicine. 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. We are a leading supplier of medicines to the HIV/AIDS
community around the world, with a legacy of providing access to high-quality and affordable ARVs in more than 100 countries.
We believe that Viatris’ global leadership in all of these areas uniquely positions us to efficiently and effectively serve patients regardless of
geography or circumstance. Together, with our commitment to provide access to a sustainable, affordable, and diverse portfolio of high-quality medicines
and our goal to be a Partner of Choice® for companies big and small, Viatris works to improve access and meet evolving healthcare needs around the
world.
PARTNERSHIP
Leveraging our collective expertise to connect people to products and services. Partnerships and collaborations are critical, as are policies and
strong healthcare systems that allow for healthy competitive environments. We have a strong history of partnering with other pharmaceutical companies,
nonprofit organizations, government agencies, policymakers, trade associations and alliances, industry researchers and patient advocacy groups to promote
sustainable access to treatment, build more resilient healthcare systems and drive these issues within our industry on global, regional and local levels. 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. 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. We are actively engaging with potential partners to help them accelerate possibilities of using their own healthcare assets to reach more patients
by leveraging our unique global platform – our R&D, supply chain, manufacturing, regulatory, commercial and legal expertise. With the global platforms
and infrastructure supporting our innovative Global Healthcare Gateway®, we are enhancing our capital allocation approach to business development, and
our organic and inorganic R&D investments through a focused governance structure to ensure the highest level of strategic decision-making.
Licensing and Other Partner Agreements
We periodically enter into commercial licensing and other partner agreements with other pharmaceutical companies for the development,
manufacture, marketing and/or sale of pharmaceutical products. Doing so helps us share risks and costs, leverage strengths and scale up commercialization,
but usually requires us to also share future profits. 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. Item 8 of this Form 10-K for more information.
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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 also use our platform to
determine whether there is an opportunity to integrate new products into our portfolio.
The manufacturing of APIs and finished dosage forms is currently performed by a combination of internal and external manufacturing operations.
Internally, many of the products we produce are currently vertically integrated; meaning we manufacture both the APIs and finished dosage forms related
to those products. Occasionally, however, resources we need are available from only a single supplier. 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. 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. 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.
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. 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.
We are committed to advancing sustainable operations and innovative solutions to improve patient health. This means we focus on responsible
conduct and have global policies and procedures to support our work. Environmental and human health are interconnected, a relationship underscored by
climate change and water stress. We work systematically and diligently to minimize our environmental footprint while seeking to safeguard stable access to
medicine. In 2022, we launched Viatris’ initial sustainability goals in the areas of access to medicine and health; diversity, equity & inclusion; and the
environment: climate change, water risk assessments and waste management. 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. During 2022, we also completed a climate scenario
analysis to help us identify and manage risk and opportunities regarding climate impacts. While it is very hard to predict accurately the future costs
associated with compliance with environmental laws, this is not expected to require significant capital expenditures and has not had, and is not expected to
have, a material adverse effect on our operations or competitive position.
Customers and Marketing
Our customers include retail and pharmacy establishments, wholesalers and distributors, payers, insurers and governments, and institutions such as
hospitals; among others. See “Channel Types” below for more information about our customers.
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The table below displays the percentage of consolidated net sales to our largest customers during the years ended December 31, 2022, 2021 and
2020.
McKesson Corporation
AmerisourceBergen Corporation
Cardinal Health, Inc.
Percentage of Consolidated Net Sales
2022
2021
2020
11 %
10 %
5 %
9 %
9 %
5 %
13 %
10 %
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. To best meet customers’ needs, the Company manages its business on a geographic basis.
In addition to being dynamic, the pharmaceutical industry is complex. How it functions, how it is regulated and how it provides patients access
varies by location. Similarly, competition is affected by many factors. Examples of factors include innovation and development, timely approval of
prescription drugs by health authorities, manufacturing capabilities, product quality, marketing effectiveness, portfolio size, customer service, consumer
acceptance, product price, political stability and the availability of funding for healthcare.
Certain parts of our business also are affected by seasonality, e.g., due to the timing and severity of peak cough, cold and flu incidence, which can
cause variability in sales trends for some of our products. While seasonality may affect quarterly comparisons within a fiscal year, it generally is not
material to our annual consolidated results.
For these and other reasons, the Company’s sales and marketing efforts vary accordingly by product, market and channel type, each of which is
described below.
See the Application of Critical Accounting Policies section in Part II. Item 7 of this Form 10-K for more information related to customer
arrangements.
Products
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. We also offer support services such as diagnostic clinics, educational seminars and digital tools to
help patients better manage their health. We offer a broad and diverse range of treatment options across all our therapeutic areas, with many categories
containing several products in a range of dosage forms, formulations and delivery systems that allow physicians to tailor care for optimal treatment.
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. The Company also expects to expand further beyond its current scope into more innovative
products, including NCEs and global 505(b)(2)s. While Viatris intends to maintain its broad range of therapeutic areas, it has identified three core, global
therapeutic areas – ophthalmology, gastrointestinal, dermatology — that it believes particularly fit its internal capabilities while leveraging its global
platform. 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.
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. 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. 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
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key brands to help patients manage their health. Brand drugs include branded generics which are off-patent products that are sold under an approved
proprietary name for marketing purposes. Brand products often become branded generics once patent protections or other forms of exclusivity expire.
Branded generic products are common in many countries outside the U.S., including emerging markets. Brand and branded generic products are more
sensitive to promotion than are unbranded generic products. They therefore represent the primary focus of most of our sales representatives and product-
level marketing activity. Our OTC products, which are sold directly to consumers without a prescription and without reimbursement, are generally sold
under a brand name. 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. Our generic medicines work in the same way and provide the same clinical benefits as their as their brand-name counterparts and may cost less,
providing patients and the healthcare system important savings and medicine options which we believe are essential to making healthcare accessible. The
manufacturing of generic medicines is held to the same standards of GMP by health authorities as the manufacturing of branded medicines. National health
authorities inspect our facilities around the world to ensure that generic manufacturing, packaging and testing sites pass the same quality standards as those
of brand drugs. Gx products typically are sold under their INNs. 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. 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.
While we will continue to diligently pursue important generics opportunities, we will increasingly focus on limited-competition complex and
novel products targeting gaps in care, all with a first-to-market emphasis and serving our mission of patient access. We believe complex products categories
are critical to patient health and are growing at a rapid pace.
APIs are responsible for the therapeutic effects of medicines. We are one of the world’s largest producers of APIs, providing them to customers in
more than 100 countries. We are the leading producer of API used in generic ARVs, which treat HIV/AIDS. We also produce API for products in the
following areas: antibacterial; central nervous system agents; antihistamines/antiasthmatics; cardiovascular, antivirals; antidiabetics; antifungals; and proton
pump inhibitors. Our APIs are sold through a dedicated sales and marketing team primarily to pharmaceutical companies throughout the world. As
discussed above, our API business is one of the assets we intend to divest. 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 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.
Decision-makers vary by country or region, reflecting law and custom, giving rise to different types of pharmaceutical markets. Many countries feature a
mix of or hybrids of various market types, though the Company may focus on just one type in a particular country.
In prescription markets, physicians decide which medicines patients will take. Pharmacies then dispense the products as directed. 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.
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. Examples of countries served by Viatris that are mainly substitution markets are
France, Italy, Spain, Portugal and Australia.
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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 exchange, the chosen supplier’s product is placed on the payer’s formulary, or list of covered prescriptions. Often, a supplier’s
drug is the only one available in an entire class of drugs. Large sales forces are not needed to reach these decision-makers. Examples of generic markets
served by Viatris that are mainly tender markets are New Zealand, Sweden, South Africa, as well as Germany.
In distribution markets, retailers and wholesalers make drug-purchasing decisions. Large sales forces are not needed to reach the decision-makers
representing these organizations. Note, however, that pharmacists operating in distribution markets also may be authorized to make substitution decisions
when dispensing medicines. Examples of countries served by Viatris that are mainly distribution markets are the U.S. generics business, the U.K. and
Norway.
The allocation of our sales and marketing resources reflects the characteristics of these different market types.
In the case of OTC products, consumers are the decision-makers. OTC products are commonly sold via retail channels, such as pharmacies,
drugstores and supermarkets. This makes their sale and marketing comparable to other retail businesses, with broad advertising and trade-channel
promotion. Consumers often are loyal to well-known OTC brands. For this reason, suppliers of OTC products, Viatris included, must invest the time and
resources needed to build strong OTC brand names. As disclosed previously, the OTC business is no longer considered core to our future strategy, and we
plan to divest it.
Channel Types
Viatris’ products make their way to patients through a variety of intermediaries, or channels.
Pharmaceutical wholesalers/distributors purchase prescription medicines and other medical products directly from manufacturers for storage in
warehouses and distribution centers. The distributors then fill orders placed by healthcare providers and other authorized buyers.
Pharmaceutical retailers purchase products directly from manufacturers or wholesalers/distributors. They then sell them to consumers in
relatively small quantities for personal use.
Institutional pharmacies address the unique needs of hospitals, nursing homes and other such venues. Among the services provided are specialized
packaging, including for injectables and unit-dose products, for controlled administration.
Mail-order and e-commerce pharmacies receive prescriptions by mail, fax, phone or the internet at a central location; process them in large,
mostly automated centers; and mail the drugs to the consumer.
Specialty pharmacies focus on managing the handling and service requirements associated with high-cost and more-complex drug therapies, such
as those used to treat patients with rare or serious diseases.
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. Our Developed Markets segment
comprises our operations primarily in North America and Europe. Our Greater China segment includes our operations in China, Taiwan and Hong Kong.
Our JANZ segment reflects our operations in Japan, Australia and New Zealand. 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. The Company’s business in North America is
driven mainly by our operations in the U.S., where we are one of the largest providers of prescription medicines. The U.S. pharmaceutical industry is very
competitive, and the primary means of competition are innovation and development, timely FDA approval, manufacturing capabilities, product quality,
marketing, portfolio size, customer service, reputation and price. 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. Europe, where many governments provide healthcare at a low
direct cost to consumers and regulate pharmaceutical prices or patient reimbursement levels,
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continues to be a highly competitive market, especially in terms of pricing, quality standards, service levels and product portfolio. Our leadership position
in a number of countries provides us a platform to fulfill the needs of patients, physicians, pharmacies, customers and payors.
Significant products sold by the Developed Markets segment include Lyrica®, Lipitor®, Creon®, Influvac®, Wixela Inhub®, EpiPen® Auto-
Injector, Fraxiparine®, and Yupelri®.
New product launches are an important growth driver. 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. 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. 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. 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. 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. 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®.
JANZ
The JANZ segment consists of our operations in Japan, Australia and New Zealand. In Japan, the NHI regulates the pricing of pharmaceutical
products to healthcare providers. The Company sells products in Japan primarily through a network of wholesalers who then sell the products to doctors,
hospitals and pharmacies. In Australia, the healthcare system is a mix of public and private healthcare sectors, with Medicare, Australia’s public healthcare
system, covering most of the country’s medical costs. 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. The Company sells products primarily through the wholesale system, while promoting its products to both physicians
and pharmacists.
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. With healthcare at various stages
of development across these markets, we believe we are positioned to not only leverage our large geographical footprint to maximize the similarities
between these markets, but also tailor solutions to meet local need. There is demand in this segment for better healthcare to serve a growing population and
economic expansion. 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.
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Refer to Note 16 Segment Information included in Part II. Item 8 of this Form 10-K for more information about our segments.
Government Regulation
Regulation by governmental authorities is a significant factor in the R&D, manufacture, marketing, sales and distribution of pharmaceuticals. Our
products are subject to robust developmental studies which include analytical determinations of strength, quality, purity as well as rigorous safety and
efficacy determinations using preclinical, pharmacokinetic studies and clinical evaluations to gather data to support regulatory review and approval. This
body of work results in extensive data and scientific information that is incorporated into a given product’s regulatory dossier. Manufacturing is conducted
under exacting conditions governed by extensive regulation including strict in-process and finished pharmaceutical products specifications and controls.
Post-approval activities, such as advertising and promotion, pharmacovigilance, post-marketing regulatory commitments, and pharmacopeial monographs,
are subject to extensive regulation and controls as well.
The lengthy process of developing products and obtaining required approvals and the continuing need for post-approval compliance with
applicable statutes and regulations require the expenditure of substantial resources. Regulatory approval, if and when obtained, may be limited in scope.
Further, approved drugs, as well as their manufacturers, are subject to ongoing post-marketing review and inspection, which can lead to the discovery of
previously unknown attributes of the products or the manufacturing or quality control procedures used in their production, which may impact the marketing
of the products or result in restrictions on their manufacture, sale or use or in their withdrawal from the market.
Any failure or delay by us, our suppliers of manufactured drug product, collaborators or licensees, in obtaining and maintaining regulatory
approvals could adversely affect the marketing of our products and our ability to receive product revenue, license revenue or profit-sharing payments.
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. “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.
Our research, development and clinical platform, which includes regulatory activities, seeks to deliver new product opportunities across all of our
categories and markets and to evaluate opportunities to expand the scope of our existing product portfolio with a focus on development activities. Our
product pipeline includes a variety of dosage forms, including oral solid dosage forms, transdermals, injectables, inhalation, and other delivery systems.
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. 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™. We are also working with our partners on novel and/or
complex products such as our biosimilar to BOTOX® (onabotulinumtoxinA) and Glatiramer Acetate Depot, a long-acting injection version of the approved
glatiramer acetate. 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®.
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. Our registered
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trademarks are renewable indefinitely, and these registrations are properly maintained in accordance with the laws of the countries in which they are
registered.
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. 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.
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.
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.
To us, that means empowering patients worldwide to live healthier at every stage of life. It also means empowering our colleagues to be the best
they can be every day. This is our mindset as we build our performance-driven, highly engaging and inclusive culture: “The Viatris Way”. Since the launch
of Viatris in November 2020, the Company believes it has taken great strides to create an employee experience and culture where colleagues are
encouraged to reach their full potential. We 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. The survey also
marked a milestone in our commitment to creating our culture The Viatris Way: one that is performance-driven, highly engaging, and inclusive;
and
• Diverse perspectives drive innovation and our ability to make a difference in the world. We continue to progress on our commitment to DE&I
aiming to engage at least 90% of all colleagues globally in DE&I foundational learning in 2023, and by forming our inaugural Employee Resource
Groups (“ERGs”). We have four forming ERGs including: EmpoWer advocating for an ecosystem that empowers women to reach their full
potential; VIVID supporting LGBTQ+ employees and allies; Black colleagues; and, Caregivers.
Talent, learning and development
Supporting our colleagues in their learning and development can make a difference in the lives of our patients around the world. We provide the
tools and resources to help colleagues achieve their performance and development goals. We are committed to continuously anticipating, developing and
acquiring new capabilities. We have an extensive learning and development portfolio of resources and programs and we are introducing new focused
development programs and resources via our new Viatris Development Principles: Develop, Invest, Diversify, Innovate, Build and Achieve.
Diversity, equity and inclusion
Understanding and embracing what makes individuals unique is essential to Viatris’ mission. The diversity we foster within our teams can be one
of our greatest strengths in redefining healthcare not as it is, but as it should be. In 2022, we established initial goals in DE&I in the areas of foundational
learning, and increasing diversity in management for women,
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Black and Hispanic/LatinX employees. We look forward to reporting out on our actions and progress going forward in our annual Sustainability Report.
Viatris strives to create a positive, productive work environment where integrity, dignity and mutual respect for all are valued. We are an equal
opportunity employer and discrimination and harassment are strictly prohibited. Together, we are building a highly inclusive organization and our goal is to
provide a safe, supportive community where employees feel they belong and can use their unique experiences, perspectives and skills to make a difference
in the lives of others. Our ERGs bring colleagues together to listen and learn from each other and raise awareness to change our company and communities
for the better, and our Viatris Voice Survey demonstrates positive results in colleague sentiment for engagement and DE&I in addition to other areas of
strength.
Health and Safety
We cultivate a culture of health and safety throughout our global workforce by ensuring that our colleagues and contractors are made aware of
issues relevant to their work and providing them with the personal protective equipment and knowledge required to perform their jobs safely. Further, we
work to ensure that our systems and processes are designed to identify and reduce health and safety risks or impacts on the communities in which we
operate.
Employee well-being and safety
Viatris is also committed to providing a safe and healthy workplace for our employees, contractors and visitors. In addressing the COVID-19
pandemic and helping meet urgent global health needs, tens of thousands of dedicated Viatris employees across the world have worked to help ensure a
stable supply of much needed treatments.
Because protecting the health and safety of our workforce remains paramount, we continue to align with government directives and the advice of
relevant international, national and local health authorities at every Viatris facility around the world. Many of our colleagues are working in manufacturing
facilities, where we have continued to take extra precautions to protect our site personnel and operations. In 2021, we issued principles in support of
hybrid-remote work to guide the development of local policies where possible. We offer a wide range of benefits and programs that are locally customized
to meet the unique needs of employees, and regularly offer advice and support to our employees including providing resources that support well-being for
our colleagues around the world.
Exchange Act Reports
Viatris maintains a website at Viatris.com where you can find certain reports and associated amendments that the Company files with the SEC in
accordance with the Exchange Act. These filings will include our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-
K and any amendments to those reports.
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.
The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC.
ITEM 1A. Risk Factors
We operate in a complex and rapidly changing environment that involves risks, many of which are beyond our control. Our business, financial
condition, results of operations, cash flows, ability to pay dividends, and/or stock price could be materially affected by any of these risks, if they occur, or
by other factors not currently known to us, or not currently considered to be material. 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.
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Summary
Below is a summary of some of the more significant risks and uncertainties we face. 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
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◦
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. Foreign Corrupt Practices Act, the U.K. Bribery Act, Chinese anti-corruption laws and similar worldwide anti-
◦
corruption laws, which impose restrictions on certain conduct and may carry substantial fines and penalties.
Our competitors, including branded pharmaceutical companies, and/or other third parties, may allege that we or our suppliers are
infringing upon their intellectual property, including in an “at risk launch” situation, which could result in substantial monetary damages,
impact our ability to launch a product and/or our ability to continue marketing a product, and/or force us to expend substantial resources
in resulting litigation, the outcome of which is uncertain.
◦ We are involved in various legal proceedings and certain government inquiries and may experience unfavorable outcomes of such
proceedings or inquiries.
◦ We are increasingly dependent on IT and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
•
Finance Risks
◦
There can be no guarantee that we will continue to pay dividends or repurchase shares under our stock buyback program.
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◦ We may not be able to maintain competitive financial flexibility and our corporate tax rate which could adversely affect us and our
◦
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shareholders.
Currency fluctuations and changes in exchange rates have impacted and could continue to adversely affect our business, financial
condition, results of operations, cash flows, ability to pay dividends and/or stock price. We have significant indebtedness, which could
lead to adverse consequences or adversely affect our financial position and prevent us from fulfilling our obligations under such
indebtedness, and any refinancing of this debt could be at significantly higher interest rates.
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in
accordance with U.S. GAAP. Any future changes in estimates, judgments and assumptions used or necessary revisions to prior estimates,
judgments or assumptions or changes in accounting standards could lead to a restatement or revision to previously issued financial
statements.
◦ Viatris has suffered and in the future could suffer additional losses due to impairment charges.
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.
Viatris has announced various strategic initiatives, transactions and business arrangements, including our two-phased strategic vision. In Phase 1
of this strategy, we have been focused on reducing debt, maintaining an investment grade credit rating and returning capital to shareholders. In preparation
for the second phase, the Company has completed certain transactions, including the Biocon Biologics Transaction, and has announced plans for certain
other strategic actions, such as its intent to divest certain businesses no longer considered to be core to its future strategy, including OTC, women’s health
care (primarily related to our oral and injectable contraceptives), API (while retaining some selective API capabilities) and Upjohn Distributor Markets.
The Company anticipates a period of renewed growth and leadership in this second phase as it intends to move up the value chain by focusing on more
complex and innovative products to build a more durable higher margin portfolio.
Implementing these and other strategic initiatives has included and may in the future include divestitures, acquisitions, asset purchases,
partnerships, collaborations, joint ventures, product rationalization and other investments. These transactions and arrangements have been and may in the
future be material both from a strategic and financial perspective. These initiatives, whether we are able to complete them or not, have been and may
continue to be complex, time-consuming or expensive, may divert managements’ attention, and expose us to operational ineffectiveness. We may
miscalculate the risks associated with our strategic initiatives at the time they are made or not have the resources or ability to access all the relevant
information to evaluate them properly, including with regard to the potential of R&D pipelines, manufacturing issues, compliance issues, or the outcome of
ongoing legal and other proceedings. More complex products are more difficult, costly and time-consuming to develop, receive regulatory approval for and
bring to market. There can be no assurance that we will be able to achieve all of our intended goals or outlooks with respect to such strategies within the
anticipated timeframes or at all, fully realize the expected benefits of any such transactions or arrangements, or successfully manage base business erosion
or grow in future periods.
Divestitures, product rationalizations or asset sales have resulted and could continue to result in asset impairments or decreased revenues and cash
flows, or reduce the size or scope of our business, our market share in particular markets or our opportunities and ability to compete with respect to certain
markets, therapeutic areas or products. 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. Certain divestitures also have resulted and may in the future result in continued financial
exposure to the divested assets or businesses, such as through guarantees, or other financial arrangements, continued supply and services arrangements,
continued provision of corporate functions to the divested business, stranded costs, or potential litigation. In addition, we may not be able to obtain the
required regulatory approvals for a planned divestiture, or may be unable to dispose of businesses that we intend to divest on satisfactory or commercially
reasonable terms or within our anticipated timeline, in part because of competition from other companies in pursuing similar transactions in the
pharmaceutical industry. 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 have also entered into strategic alliances with partners, including through our Global Healthcare Gateway®, to develop, manufacture, market
and/or distribute certain products, and/or certain components of our products, in various markets. 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. There is a risk that the investments made by us in these
alliances
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and collaborative arrangements will not generate financial returns. While we believe our relationships with our partners generally are successful, disputes
or conflicting priorities and regulatory or legal intervention could be a source of delay or uncertainty as to the expected benefits of the obligations.
The overall execution of our strategic initiatives may result in material unanticipated problems, expenses, liabilities, competitive responses,
operational inefficiencies, adverse tax consequences, impairment or restructuring charges, loss of customer relationships, difficulty attracting and retaining
qualified employees, and diversion of management’s and/or employee’s attention, among other potential adverse consequences. In addition, we may have
to terminate a strategic alliance, agreement or arrangement, or our partners may be unable to fulfill their collaboration.
Any of the risks described above 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.
The integration of acquired businesses, as well as our global restructuring program, have presented and may in the future present significant
challenges.
The combination of two or more independent businesses, including, for example, the Combination and our recent acquisitions of Oyster Point and
Famy Life Sciences, is a complex, costly and time-consuming process and there is a significant degree of difficulty inherent in the integration process.
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.
Viatris has also undertaken a significant global restructuring program in order to achieve specified synergies and ensure the Company is optimally
structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders. The process of integrating
operations and implementing restructuring initiatives could cause an interruption of, or loss of momentum in, the activities of one or more of Viatris’
businesses. These integration and restructuring processes are ongoing and members of Viatris’ senior management are required to devote considerable
amounts of time to these processes, which could decrease the time they have to manage and service Viatris’ businesses, and develop new products or
strategies. Even if the integration and global restructuring program are successful, we may not achieve anticipated synergies, growth opportunities and
other financial and operating benefits within the timeline we anticipate, or at all.
Any quantification of synergies expected to result from a transaction or restructuring activities is based on significant estimates and assumptions
that are subjective in nature and inherently uncertain. Realization of any benefits and synergies from acquired businesses or our global restructuring
program could be affected by a number of factors beyond our control, including, without limitation, general economic conditions, increased operating
costs, regulatory developments, and the other risks described in these risk factors. In addition, our ability to achieve our synergy targets depends in large
part on the successful implementation of the initiatives under our global restructuring program, which may not achieve their intended goals. The amount of
synergies actually realized, if any, and the time periods in which any such synergies are realized, could differ materially from our current expectations and
estimates. In addition, if key personnel and other employees depart because of issues relating to the uncertainty and difficulty of integration or restructuring
activities, Viatris may not realize the anticipated benefits of these activities. 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.
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.
In connection with the closing of the transaction with Biocon Biologics, we entered into a transition services agreement pursuant to which we will
provide services to Biocon Biologics, including commercialization services substantially
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the same as we historically provided to our biosimilar business. Our obligations under the transition services agreement may result in additional expenses
that are borne by us during and after the exit from the transition services agreement, may create stranded costs, or may divert our focus and resources that
would otherwise be invested into maintaining or growing our retained business. If Biocon Biologics is not prepared to operate the business independently at
the end of the negotiated transition period, we may need to provide transition services for a longer than anticipated period of time, which would increase
these risks. 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. Although we have negotiated certain “downside” protection regarding the value of that
equity in the Biocon Agreement and related documents, such protection does not guarantee any particular liquidity event or our ability to monetize our
equity and, even if we are able to successfully liquidate our equity, the downside protection may be inadequate to guarantee a minimum return that we or
investors expect. In addition, we believe the success of the Biocon Biologics business will be highly dependent upon the successful transition of the
business to Biocon Biologics, including no major disruption in services provided under the transition services agreement. If this transition is not successful,
it would have a significant impact on the value of the equity we will own in Biocon Biologics and could negatively impact our business or financial
condition. Because our former biosimilars business was commingled with Viatris’ other businesses, the financial information for the biosimilars business is
being carved-out of Viatris’ financial and other systems, and will impact the reporting of our results of operations, financial condition, and cash flows. This
process increases the risk of errors in the presentation of our financial results in conformity with U.S. GAAP.
We have also agreed to indemnify Biocon Biologics and certain of its representatives against certain losses suffered as a result of certain breaches
of our representations, warranties, covenants and agreements in the Biocon Agreement and related documents. Any event that results in a right for Biocon
Biologics to seek indemnity from us could result in substantial liability to us and could adversely affect our financial position and results of operations.
Any of the risks described above could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability
to pay dividends and/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 operate in a challenging environment, with significant pressures on the pricing of our products and on our ability to obtain and maintain
satisfactory rates of reimbursement for our products by governments, insurers and other payors. 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. In addition, rising rates of inflation have increase and may continue to increase pressure on governments, insurers and other payors to
implement additional cost containment measures.
Many markets in which we operate have implemented or may implement tender systems for generic pharmaceuticals in an effort to lower prices.
Under such tender systems, manufacturers submit bids which establish prices for generic pharmaceutical products. Upon winning the tender, the winning
company will receive a preferential reimbursement for a period of time. If our bids do not win, we may not be able to participate in the given market or
may lose out on market share. In addition, if customers to whom we supply API do not win their tender bids, the amount of API that we sell to them may
be reduced. While criteria other than price can be included in tenders, tender systems often select the lowest bid, which often results in companies
underbidding one another by proposing low pricing in order to win the tender. Other markets may also consider the implementation of a tender system, and
even if a tender system or other price controls are ultimately not implemented, the anticipation of such could result in price reductions.
In the EU, U.K. and some other international markets, the government provides healthcare at low cost to consumers and regulates pharmaceutical
prices, patient eligibility and/or reimbursement levels to control costs for the government-sponsored healthcare system. These systems of price regulations
may lead to inconsistent and lower prices. The availability of our products in some markets at lower prices undermines our sales in other markets with
higher prices. Additionally, certain countries set prices by reference to the prices in other countries where our products are marketed. Thus, our inability to
secure adequate prices in a particular country may also impair our ability to obtain acceptable prices in existing and potential new markets and may create
the opportunity for third party cross-border trade. 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 China, pricing pressures have increased in recent years, and the Chinese government has also increased its focus on patient access and
reimbursement for pharmaceutical medicines. For example, in 2013, China began to implement a QCE process for post-LOE products to improve the
quality of domestically manufactured generic drugs, primarily by requiring such
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drugs to pass a test to assess their bioequivalence to a qualified reference drug (typically the originator drug).In addition, since 2018, China's National
Healthcare Security Administration, in conjunction with relevant departments, has been promoting a centralized VBP policy for drugs, which has become
standard practice and subjects many drugs to a competitive bidding process. Molecules subject to the VBP bidding process have seen significant price cuts,
with some bidders reducing the price of their products by as much as 96% as they attempt to secure volumes on the Chinese pharmaceutical market. We
expect pricing pressures on our products included in the VBP bidding process to continue to increase as a result of this policy. We have failed, and may
continue to fail, to win bids due to various factors, including uncompetitive bidding prices. In addition, the URP policy will cap reimbursement of
molecules at their VBP tender winning price. URP will create additional pricing and volume pressure for pharmaceutical products that are subject to the
program and is expected to negatively impact our results of operations.
Demand for our products also depends in part on the extent to which reimbursements are available. In the U.S., third-party payors increasingly
challenge the pricing of pharmaceutical products. These trends and other trends toward managed healthcare, the vertical consolidation among insurers,
PBMs and pharmacies, and legislative healthcare reform create significant uncertainties regarding the future levels of payment, price or reimbursement for
pharmaceutical products. Further, any payment, price or reimbursement may be reduced in the future to the point that market demand for our products
and/or our profitability declines. Changes to Medicare and/or state Medicaid programs, or changes required in the way in which Medicare payment rates
are set, the design of the Medicare Part D and Part B benefits, and/or the way Medicare or Medicaid rebates are calculated, could adversely affect the
payment we receive for our products. In order to control expenditures on pharmaceuticals, most member states in the EU regulate the pricing of products
and, in some cases, limit the range of different forms of pharmaceuticals available for prescription by national health services. These controls can result in
considerable price differences between member states.
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.
In addition, there have been executive orders, legislation, and legislative and regulatory proposals, including in connection with government
programs such as Medicare, concerning drug prices and related issues, including the perceived need to bring more transparency to drug pricing, reviewing
the relationship between pricing and manufacturer patient programs, and reforming government program reimbursement methodologies for drugs. Some
states have also signed into law programs that compel manufacturers to provide certain medicines at free or reduced costs to certain patients, and additional
states are exploring such programs. Although we expect to see continued focus in regulating pricing, we cannot predict what, if any, additional legislative
or regulatory developments may transpire at the state or country level, or what the ultimate impact may be.
In the U.S., certain of these pressures are further compounded by increasing consolidation among wholesalers, retailer drug chains, PBMs, private
insurers, managed care organizations and other private payors, which can increase their negotiating power. Please also refer to “A significant portion of our
revenues is derived from sales to a limited number of customers.”
The numerous cost-containment measures by governments and other payors, failing to win tenders, the implementation of price control systems,
adverse legislation and regulation, the consolidation of our customers, or continued social or government pressure to lower the cost of pharmaceutical
products could have a material adverse impact on our business, reputation, financial condition, results of operations, cash flows, ability to pay dividends
and/or stock price.
Healthcare reform legislation could have a material adverse effect on our business.
In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for, the
availability of and reimbursement for, healthcare services in the U.S., and it is likely that Congress and state legislatures and health agencies will continue
to focus on healthcare reform in the future.
In 2022, President Biden signed into law the Inflation Reduction Act, which includes numerous Medicare reforms that will affect reimbursement
for certain pharmaceuticals covered by Medicare and modify the Part D and Part B program structure, including shifting the liability for certain prescription
drug costs shared between Medicare, pharmaceutical manufacturers, and Part D plans. These reforms include government price negotiation for certain
high-spend, single-source Medicare drugs, out-of-pocket caps for Medicare beneficiaries using insulin products, and the application of inflation-based
rebates for certain Medicare drugs.
We are unable to predict the future course of federal or state healthcare legislation or reform or the outcome of challenges to such laws or reforms
once passed. 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,
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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.
We have significant operations globally, which exposes us to the risks inherent in conducting our business internationally.
Our operations extend to numerous countries globally and therefore are subject to the risks inherent in this geographic scope. These risks include,
but are not limited to:
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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. Treasury’s Office
of Foreign Assets Control, the Iran Threat Reduction and Syria Human Rights Act of 2012 and rules relating to the use of certain “conflict
minerals” under Section 1502 of the Dodd-Frank Wall Street Reform and the Consumer Protection Act;
sanctions and our interpretation of those sanctions, trade controls, supply chain and staffing challenges as a result of the ongoing conflict between
Russia and Ukraine that have impacted and may continue to impact our ability to market or sell pharmaceuticals in either country or subject us to
increased government scrutiny. In 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
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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.
We also face the risk that some of our competitors have more experience with operations in such countries or with international operations
generally and may be able to manage unexpected crises more easily. Moreover, the internal political stability of, or the relationship between, any country or
countries where we conduct business operations may deteriorate. 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.
The occurrence of any one or more of the above risks could have a material adverse effect on our business, financial condition, results of
operations, cash flows, ability to pay dividends and/or stock price.
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.
Under U.S. GAAP provisions relating to business acquisition accounting standards, we recognize the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interests in acquired companies generally at their acquisition date fair values and, in each case, separately from goodwill.
Goodwill as of the acquisition date is measured as the excess amount of consideration transferred, which is also generally measured at fair value, and the
net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Our estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain. After we complete an acquisition, the following factors could result in material charges and
adversely affect our operating results and may adversely affect our cash flows:
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costs incurred to combine the operations of companies we acquire, such as transitional employee expenses and employee retention, redeployment
or relocation expenses;
liabilities assumed in purchase accounting;
impairment of goodwill or intangible assets, including acquired IPR&D;
amortization of intangible assets acquired;
a reduction in the useful lives of intangible assets acquired;
identification of or changes to assumed contingent liabilities, including, but not limited to, litigation reserves, contingent purchase price
consideration including fair value adjustments, income tax contingencies and other non-income tax contingencies, after our final determination of
the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date), whichever
comes first;
significant costs to restructure our operations and to reduce our cost structure, including cost related to severance payments, plant shutdowns and
costs to achieve anticipated synergies; and
charges to our operating results resulting from expenses incurred to effect the acquisition.
A significant portion of these adjustments could be accounted for as expenses that will decrease our net income and earnings per share for the
periods in which those costs are incurred.
In particular, the amount of goodwill and identifiable intangible assets in our consolidated balance sheets is significant as a result of our
acquisitions and other transactions, and may increase further following future potential acquisitions, and we may, from time to time, sell assets that we
determine are not critical to our strategy or execution, including our OTC, women’s health care and API businesses. These and other future events or
decisions may also lead to asset impairments and/or related charges. Certain non-cash impairments may result from a change in our strategic goals,
business direction or other factors relating to the overall business environment. Any such charges 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 illegal distribution and sale by third parties of counterfeit or IP-infringing versions of our products or of diverted or stolen products could have a
negative impact on our reputation and our business.
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.
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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. Counterfeit products are frequently unsafe or ineffective and can be potentially life-threatening. Counterfeit medicines may contain
harmful substances, the wrong API, an incorrect dose of API or no API at all, depriving patients of the therapeutic benefit of such medicines. However, to
distributors and users, counterfeit products may be visually indistinguishable from the authentic version.
Reports of adverse reactions to counterfeit or IP-infringing drugs or increased levels of counterfeiting could materially affect patient confidence in
the authentic product. It is possible that adverse events caused by unsafe counterfeit products will mistakenly be attributed to the authentic product. In
addition, unauthorized diversions of products or thefts of inventory at warehouses, plants, or while in-transit could result in improper storage or
compromise product integrity and therefore adversely impact patient safety, our reputation, and our business.
Loss of sales or revenues, as well as public loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting, diversion, or
theft could have a material adverse effect on our business, reputation, financial condition, results of operations, cash flows, ability to pay dividends and/or
stock price.
We face vigorous competition that threatens the commercial acceptance and pricing of our products.
The pharmaceutical industry is highly competitive. We face competition from other pharmaceutical manufacturers globally, some of whom are
significantly larger than us and have stronger, more well-established reputations than us. Our competitors may be able to develop products and processes
competitive with or superior to our own for many reasons, including but not limited to the possibility that they may have:
proprietary processes or delivery systems;
larger or more productive R&D and marketing staff;
larger or more efficient production capabilities in a particular therapeutic area;
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• more experience in preclinical testing and human clinical trials;
• more products;
• more experience in developing new drugs; or
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greater financial resources.
We also face increasing competition from lower-cost generic products and other branded products, including our ARV products. Many of our
products are not protected by patent rights or have limited patent life and will soon lose patent protection. Loss of patent protection for a product typically
is followed promptly with the launch of generic products. As a result, sales of many of these products may decline or stop growing over time, and may
decline faster than has been projected. For example, Perforomist® lost exclusivity and experienced generic competition in June 2021, the compound patent
for Celebrex in Japan expired in November 2019 with generics entering the market in June 2020, and Lyrica’s pediatric exclusivity in the United States
expired in June 2019 and patent exclusivity expired in Japan in July 2022. In addition, several companies have filed ANDAs seeking regulatory approval in
the United States to market a generic version of our Yupelri product prior to the expiration of certain patents. We may not be successful in managing
competition from non-branded generics or other alternatives, or in generally managing revenues after loss of exclusivity, and our business may be
materially adversely affected.
Generic competitors are also becoming more aggressive in terms of pricing in many of the regions in which Viatris operates. In China, for
example, we face strong competition from certain generic manufacturers, which have resulted and may in the future result in price cuts and volume loss on
some of Viatris’ branded products. In many emerging markets, we face increased competition and contracting markets for certain of our ARV products,
primarily related to competing therapies. We also face competition in the United States, the EU and other mature markets that have a robust generics
market and favorable regulatory conditions for generics. In addition, legislative proposals emerge from time to time in various jurisdictions to further
encourage the early and rapid approval of generic drugs. Any such proposal that is enacted into law could increase competition and worsen this negative
effect on our branded sales.
In addition, certain of our products also face potential competition from products that may be developed in the future that could render our
products uncompetitive or obsolete. 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.
Other related factors that could affect our business include:
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Competitors’ products may be safer, more effective, more effectively marketed or sold, or have lower prices or better performance features than
ours;
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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.
The occurrence of any of the above risks could have an adverse effect on our business, financial condition, results of operations, cash flows, ability
to pay dividends and/or stock price.
A relatively small group of products may represent a significant portion of our revenues, net sales, gross profit, or net earnings from time to time.
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. If the volume or pricing of our largest selling products declines in the future, our business, financial condition,
results of operations, cash flows, and/or share price could be materially adversely affected.
Operational Risks
Current and changing economic conditions, including inflation, may adversely affect our industry, business, partners and suppliers.
The global economy continues to experience significant volatility, and the economic environment may become less favorable. For example, if the
U.S. government defaults on its debt, or the U.S. Treasury takes measures to avoid such a default, or if there is an assumption that such an event may occur,
this could have a negative impact on general economic conditions, including the liquidity of and access to the capital markets. A sovereign debt default,
economic volatility, governmental financial restructuring efforts and evolving deficit and spending reduction programs could negatively impact the global
economy and the pharmaceutical industry. This has led, or could lead, to reduced consumer and customer spending, reduced or eliminated governmental or
third-party payor coverage or reimbursement or reduced spending on healthcare, including but not limited to pharmaceutical products. While generic drugs
present an alternative to higher-priced branded products, our sales could be negatively impacted if patients forego obtaining healthcare, patients and
customers reduce spending or purchases, or if governments or third-party payors reduce or eliminate coverage or reimbursement amounts for
pharmaceuticals or impose price or other controls adversely impacting the price or availability of pharmaceuticals (whether for generics, branded products
or both). Reduced consumer and customer spending, reduced government or third-party payor coverage or reimbursement, or new government controls,
may drive us and our competitors to decrease prices, may reduce the ability of customers to pay, or may result in reduced demand for our products.
In addition, accelerating rates of inflation are expected to continue in the near future and have resulted, and may continue to result, in increased
costs of labor, raw materials, other supplies and freight and distribution costs, among others. 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. 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. 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 impacted our results of
operations. While inflationary and other macroeconomic pressures may ease, we continue to experience higher costs and we expect that this will likely
continue throughout 2023, thereby negatively impacting our results of operations.
The occurrence of any of the above risks could have a material adverse effect on our industry, business, financial condition, results of operations,
cash flows, ability to pay dividends and/or stock price.
Failure to comply with applicable environmental and occupational health and safety laws and regulations worldwide could adversely impact our
business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
We are subject globally to various laws and regulations concerning, among other things, the environment, climate change, water, waste, chemicals
and employee health and safety. These requirements include regulation of the handling,
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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 the normal course of our business, we
are exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or
personal injuries, and which could result in (i) our noncompliance with such environmental and occupational health and safety laws, regulations and
permits and (ii) regulatory enforcement actions or claims for personal injury and property damage against us. 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. In addition, any non-compliance with environmental and occupational health
and safety laws and regulations and permits, or emissions into the environment, whether actual or perceived, may result in significant reputational damage.
The substantial unexpected costs we may incur could have a material adverse effect on our business, financial condition, results of operations, cash flows,
ability to pay dividends and/or stock price. Environmental and occupational health and safety laws and regulations are also complex and subject to change,
and our related capital expenditures and costs for compliance may increase substantially in the future as a result of such changes, the development and
manufacturing of a new product or increased development or manufacturing activities at any of our facilities. We may be required to expend significant
funds and our manufacturing activities could be delayed or suspended or we may lose the ability to purchase or use certain materials, or face restrictions on
the amounts of materials we may use or purchase, 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.
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 pharmaceutical industry is subject to regulation by various governmental authorities in the jurisdictions in which we operate, including the
U.S., EU, China and India. For instance, we must comply with applicable laws and requirements of the FDA and other regulatory agencies, including
foreign authorities, with respect to the research, development, manufacture, quality, safety, effectiveness, approval, labeling, tracking, tracing,
authentication, storage, record-keeping, reporting, pharmacovigilance, sale, distribution, import, export, marketing, advertising, and promotion of
pharmaceutical products. We are committed to conducting our business, including the sale and marketing of our products, in compliance with all applicable
laws and regulations. These laws and regulations, however, are numerous, complex and continue to evolve, and it is possible that a governmental authority
may challenge our activities, or that an employee or agent could violate these laws and regulations without our knowledge. 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. Under certain circumstances, a regulator may also have the authority to
revoke or vary previously granted drug approvals.
The safety profile of any product will continue to be closely monitored by the FDA and comparable foreign regulatory authorities after approval.
If such regulatory authorities become aware of new safety information about any of our marketed or investigational products, those authorities may require
further inspections, enhancements to manufacturing controls, labeling changes, establishment of a risk evaluation and mitigation strategy or similar
strategy, restrictions on a product’s indicated uses or marketing, or post-approval studies or post-market surveillance. In addition, we are subject to
regulations in various jurisdictions, including the Federal Drug Supply Chain Security Act in the U.S., the Falsified Medicines Directive in the EU and
several other such regulations in other countries that require us to develop electronic systems to serialize, track, trace and authenticate units of our products
through the supply chain and distribution system. Compliance with these regulations has in the past and may in the future result in increased expenses for
us or impose greater administrative burdens on our organization, and failure to meet these requirements could result in fines or other penalties.
In recent years, the regulatory framework in China regarding the pharmaceutical industry has undergone significant changes and Chinese
authorities have become increasingly vigilant in enforcing laws in the pharmaceutical industry. We believe that Viatris’ strategies regarding pharmaceutical
research, development, manufacturing and commercialization in China are currently aligned with the Chinese government’s policies, but they may in the
future diverge, requiring a change in such strategies. For example, in order to comply with foreign ownership restrictions and meet regulatory licensing,
and cybersecurity requirements, we conduct some of our business in China through variable interest entities. Although we believe these structures and
activities related to our VIEs comply with existing laws and regulations in China, they involve unique risks and uncertainties, including that China may
from time to time consider and implement additional changes in their legislative, regulatory, licensing, or other requirements that could subject us to
penalties and impact these structures and activities. Any such change may result in increased compliance costs to us or cause delays in or prevent the
successful research, development, manufacturing or commercialization of our products in China, result in the loss of required licenses and permits or the
suspension or termination of Viatris’ activities in China.
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The FDA and comparable foreign regulatory authorities also regulate the facilities and operational procedures that we use to manufacture our
products. We must register our facilities with the FDA and similar regulators in other countries. Products must be manufactured in our facilities in
accordance with cGMP or similar standards in each territory in which we manufacture. Compliance with such regulations and with our own quality
standards requires substantial expenditures of time, money, and effort in multiple areas, including training of personnel, record-keeping, production, and
quality control and quality assurance. The FDA and other comparable regulatory authorities, including foreign authorities, periodically inspect our
manufacturing facilities for compliance with cGMP or similar standards in the applicable territory. Regulatory approval to manufacture a drug is granted on
a site-specific basis. 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.
Our business could be adversely affected if any regulatory body were to delay, withhold, or withdraw approval of an application; require a recall
or other adverse product action; require one of our manufacturing facilities to cease or limit production; or suspend, vary, or withdraw related marketing
authorization. Delay and cost in obtaining FDA or other regulatory approval to manufacture at a different facility also could have a material adverse effect
on our business.
Although we have established internal quality and regulatory compliance programs and policies, there is no guarantee that these programs and
policies, as currently designed, will meet regulatory agency standards in the future or will prevent instances of non-compliance with applicable laws and
regulations. Additionally, despite our compliance efforts, from time to time we or our partners receive notices of manufacturing and quality-related
observations following inspections by regulatory authorities around the world, as well as official agency correspondence regarding compliance. For
example, the FDA issued warning letters relating to valsartan API and nitrosamine impurities to our API manufacturer Mylan Laboratories Limited Unit 8
in 2019. We provided thorough responses to the FDA regarding the issues identified and remediation is ongoing. We and our partners have in the past and
may in the future receive similar observations and correspondence. If we are unable to resolve these observations and address regulatory concerns in a
timely fashion, our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price could be materially adversely
affected.
We utilize controlled substances in certain of our current products and products in development, and therefore must meet the requirements of the
Controlled Substances Act of 1970 and the related regulations administered by the DEA in the U.S., as well as those of similar laws in other countries
where we operate. These laws relate to the manufacture, shipment, storage, sale, and use of controlled substances. The DEA and other regulatory agencies
limit the availability of the controlled substances used in certain of our current products and products in development and, as a result, our procurement
quota of these active ingredients may not be sufficient to meet commercial demand or complete clinical trials. We must annually apply to the DEA and
similar regulatory agencies for procurement quotas in order to obtain these substances. Any delay or refusal by the DEA or such similar agencies in
establishing our procurement quota for controlled substances could delay or stop our clinical trials or product launches, or could cause trade inventory
disruptions for those products that have already been launched. In addition, some states have passed laws and regulations imposing assessments on the sale
or distribution of certain controlled substances, and other states are considering and may implement similar laws and regulations in the future.
The occurrence of any of the above risks could have a material adverse effect on our business, financial condition, results of operations, cash
flows, ability to pay dividends and/or stock price.
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.
Our competitors, both branded and generic, often pursue strategies that could prevent or delay generic alternatives to branded products. These
strategies include, but are not limited to:
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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;
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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.
In the U.S., some companies have lobbied Congress for amendments to Hatch-Waxman Act that would give them additional advantages over
generic competitors. For example, although the term of a company’s drug patent can be extended to reflect a portion of the time an NDA (which is filed in
the U.S. with the FDA when approval is sought to market a newly developed branded product and, in certain instances, for a new dosage form, a new
delivery system or a new indication for a previously approved drug) is under regulatory review, some companies have proposed extending the patent term
by a full year for each year spent in clinical trials rather than the one-half year that is currently permitted.
If proposals like these in the U.S., EU, or in other countries where we or our partners and suppliers operate were to become effective, or if any
other actions by our competitors and other third parties to prevent or delay activities necessary to the approval, manufacture, or distribution of our products
are successful, our entry into the market and our ability to generate revenues associated with new products may be delayed, reduced, or eliminated, 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.
If we are unable to successfully introduce new products in a timely manner, our future revenue and profitability may be adversely affected.
Our future revenues and profitability will depend, in part, upon our ability to successfully and timely develop, license, or otherwise acquire and
commercialize new products. Product development is inherently risky, especially for new drugs for which safety and efficacy have not been established
and/or the market is not yet fully developed as well as for complex generic drugs and biosimilars. Likewise, product licensing involves inherent risks,
including, among others, uncertainties due to matters that may affect the achievement of milestones, as well as the possibility of contractual disagreements
with regard to whether the supply of product meets certain specifications or terms such as license scope or termination rights. As Viatris focuses more on
complex products, the development and commercialization process requires substantial time, effort and financial resources. We, or a partner, may not be
successful in developing or commercializing such products on a timely basis, or at all, and such products may be less likely or take longer to receive
regulatory approval, which could adversely affect our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock
price.
Before any prescription drug product, including generic drug products, can be marketed, marketing authorization approval is required by the
relevant regulatory authorities and/or national regulatory agencies (for example, the FDA in the U.S., the EMA in the EU and other regulatory authorities).
The process of obtaining regulatory approval to manufacture and market new branded and generic pharmaceutical products is rigorous, time consuming,
costly, and inherently unpredictable. In addition, these regulatory agencies may be delayed in reviewing and approving products as a result of lapsed or
insufficient funding, insufficient staffing, travel or work restrictions (including as a result of the COVID-19 pandemic), or other factors beyond our control.
Any delay in regulatory approval could impact the commercial or financial success of a product.
Outside the U.S., the approval process may be more or less rigorous, depending on the country, and the time required for approval may be longer
or shorter than that required in the U.S. Bioequivalence, clinical, or other studies conducted in one country may not be accepted in other countries, the
requirements for approval may differ among countries, and the approval of a pharmaceutical product in one country does not necessarily mean that the
product will be approved in another country. We, or a partner or supplier, may be unable to obtain requisite approvals on a timely basis, or at all, for new
products that we may develop, license or otherwise acquire. 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. A regulatory approval
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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. In the event that regulatory approval is denied or delayed, we could be exposed to the risk of this inventory becoming
obsolete.
The approval process for generic pharmaceutical products often results in the relevant regulatory agency granting final approval to a number of
generic pharmaceutical products at the time a patent claim for a corresponding branded product or other market exclusivity expires. This often forces us to
face immediate competition when we introduce a generic product into the market. Additionally, further generic approvals often continue to be granted for a
given product subsequent to the initial launch of the generic product. These circumstances generally result in significantly lower prices, as well as reduced
margins, for generic products compared to branded products. New generic market entrants generally cause continued price, margin, and sales erosion over
the generic product life cycle.
In the U.S., the Hatch-Waxman Act provides for a period of 180 days of generic marketing exclusivity for a “first applicant,” that is the first
submitted ANDA (which is filed in the U.S. with the FDA when approval is sought to market a generic equivalent of a drug product previously approved
under an NDA and listed in the FDA publication entitled Approved Drug Products with Therapeutic Equivalence Evaluations, popularly known as the
“Orange Book” or for a new dosage strength for a drug previously approved under an ANDA) containing a certification of invalidity, non-infringement or
unenforceability related to a patent listed with the ANDA’s reference drug product, commonly referred to as a Paragraph IV certification. During this
exclusivity period, which under certain circumstances may be shared with other ANDAs filed on the same day, the FDA cannot grant final approval to
later-submitted ANDAs for the same generic equivalent. If an ANDA is awarded 180-day exclusivity, the applicant generally enjoys higher market share,
net revenues, and gross margin for that generic product. However, our ability to obtain 180 days of generic marketing exclusivity may be dependent upon
our ability to obtain FDA approval or tentative approval within an applicable time period of the FDA’s acceptance of our ANDA. If we are unable to obtain
approval or tentative approval within that time period, we may risk forfeiture of such marketing exclusivity. By contrast, if we are not a “first applicant” to
challenge a listed patent for such a product, we may lose significant advantages to a competitor with 180-day exclusivity, even if we obtain FDA approval
for our generic drug product. The same would be true in situations where we are required to share our exclusivity period with other ANDA sponsors with
Paragraph IV certifications.
In the EU and other countries and regions, there is no exclusivity period for the first generic product. The European Commission or national
regulatory agencies may grant marketing authorizations to any number of generics.
If we are unable to navigate our products through the approval process in a timely manner, there could be an adverse effect on our product
introduction plans, business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
We expend a significant amount of resources on R&D efforts that may not lead to successful product introductions.
Much of our development effort is focused on technically difficult-to-formulate products and/or products that require advanced manufacturing
technology. We conduct R&D primarily to enable us to gain approval for, manufacture, and market pharmaceuticals in accordance with applicable laws and
regulations. We also partner with third parties to develop products. Typically, expenses related to the development of innovative or complex compounds
and the filing of marketing authorization applications for innovative and complex compounds (such as NDAs in the U.S.) are significantly greater than
those expenses associated with the development of and filing of marketing authorization applications for most generic products (such as ANDAs in the
U.S. and abridged applications in Europe). As we continue to move up the value chain and develop new and/or more complex products, our related
expenses will likely increase. Because of the inherent risk associated with R&D efforts in our industry, including the high cost and uncertainty of
conducting clinical trials (where required) particularly with respect to new and/or complex drugs, our, or a partner’s, R&D and IPR&D expenditures may
not result in the successful introduction of new pharmaceutical products approved by the relevant regulatory bodies. Also, after we submit a marketing
authorization application for a new compound or generic product, the relevant regulatory authority may change standards and/or request that we conduct
additional studies or evaluations and, as a result, we may incur approval delays as well as R&D costs in excess of what we anticipated.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the
clinical trial process. 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. If we experience delays in the completion of, or the
termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate
product revenues from any of these product candidates will be delayed. In
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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, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also
ultimately lead to the denial of regulatory approval of our product candidates.
Finally, we cannot be certain that any investment made in developing products will be recovered, even if we are successful in commercialization.
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.
Public health outbreaks, epidemics and pandemics, including the COVID-19 pandemic, have had and could continue to have a material adverse effect
on our business, financial condition, results of operations, cash flows and/or stock price and may impact our ability to pay dividends.
Public health outbreaks, epidemics and pandemics, including the COVID-19 pandemic, have had and could continue to have a material adverse
effect on our business, including our workforce, suppliers, vendors, business partners, distribution channels, customers and patients. Both the outbreak, and
continued spread of COVID-19 and actions to slow its spread have created and continue to create significant uncertainty, economic volatility and
disruption, supply chain disruption, and increased unemployment, which have impacted and may continue to impact our business operations and
workforce. In addition, recovery from the pandemic may not proceed as anticipated, and may have unpredictable impacts on demand for our products, our
workforce and our business operations. All of these factors could have a material adverse impact on our workforce, business operations, financial
condition, results of operations, cash flows and/or stock price and may impact our ability to pay dividends.
COVID-19 and related responsive measures have also made, and may continue to make, it difficult for us, our partners or suppliers to source and
manufacture products in, and to export our products from, certain affected areas. If there is an increase in reported illnesses or quarantining at any of our or
our partners’ facilities, including critical manufacturing sites, it is possible that such facilities may need to close for an extended period of time. In addition,
we have faced, and may continue to face, delays or difficulty sourcing certain products or raw materials, including APIs. Even if we are able to find
alternate sources for such products or raw materials, they may cost more. In addition, we have experienced and may continue to experience increased
shipping and freight costs, as well as delays in shipping. These factors have materially adversely affected and could continue to materially adversely affect
our ability to produce, ship, and supply products, which could negatively impact our customer relationships, business, financial condition, results of
operations, cash flows, ability to pay dividends and/or stock price, or result in negative publicity and reputational harm.
Health regulatory agencies globally have in the past, with respect to the COVID-19 pandemic, and may in the future also experience disruptions in
their operations and greater regulatory uncertainty as a result of public health outbreaks. The FDA and comparable foreign regulatory agencies have
experienced and may in the future experience slower response times or reduced resources and, as a result, review of regulatory submissions, inspections,
approval of new products and other timelines important to our business may be materially impacted, which could delay our new product launches and have
a material adverse effect on our business. In addition, as a result of changes in the provision of healthcare, we have experienced, and could continue to
experience, unpredictable fluctuations in demand for certain of our products.
The continuing impact of the COVID-19 pandemic could lead to our customers or suppliers having liquidity problems that could negatively
impact our ability to collect cash on our receivables and/or negatively impact our ability to get inventory and materials. If there are further disruptions or
turmoil in the financial markets or customer or supplier liquidity issues, or if rating agencies lower our credit ratings, it could adversely affect our ability to
access the debt markets, our cost of funds, and other terms for new debt, which could negatively impact our results of operations and financial position.
The extent to which the COVID-19 pandemic or other public health outbreaks will continue to impact us depends on numerous evolving factors
and future developments that we are not currently able to predict and may also exacerbate other risks discussed in these risk factors, any of which could
have a material adverse effect on us, our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Even if our products in development receive regulatory approval, such products may not achieve expected levels of market acceptance.
Even if we are able to obtain regulatory approvals for our new products, the success of those products is dependent upon market acceptance.
Levels of market acceptance for our products could be impacted by several factors, including but not limited to:
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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.
Additionally, studies of the proper utilization, safety, and efficacy of pharmaceutical products are being conducted by the industry, government
agencies, and others. Such studies, which increasingly employ sophisticated methods and techniques, can call into question the utilization, safety, and
efficacy of previously marketed as well as future products. In some cases, such studies have resulted, and may in the future result, in the discontinuation or
variation of product marketing authorizations or requirements for risk management programs, such as a patient registry. Any of these events could
adversely affect our profitability, business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
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.
Market perceptions of us are very important to our business, especially market perceptions of our company, products, brands and the safety and
quality of our products and brands. Viatris believes that maintaining and enhancing certain of its brands is important and often provides certain competitive
advantages. If we, our partners and suppliers, or our products or brands suffer from negative publicity, are subject to market withdrawal or recall or are
proven to be, or are claimed to be, ineffective or harmful to consumers, then this could have a material adverse effect on our reputation and business.
Viatris’ sales and marketing efforts are anchored by promoting its products to physicians, pharmacists, eye care professionals, clinics and
hospitals. Therefore, Viatris’ sales and marketing force, whether in-house sales representatives or third-party commercial partners, must possess a relatively
high level of technical knowledge, up-to-date understanding of industry trends and expertise in the relevant therapeutic areas and products, as well as
promotion and communication skills. Marketing, advertising and promotions may be expensive and may not achieve their intended benefits. If Viatris is
unable to effectively train its in-house sales representatives and third-party commercial partners or monitor and evaluate their marketing performances, our
sales and marketing may be less successful than desired. In addition, fewer in-person sales and marketing efforts, or other similar limitations, may result in
less successful sales and marketing activities.
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.
A significant portion of our revenues is derived from sales to a limited number of customers.
A significant portion of our revenues is derived from sales to a limited number of customers. 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. If we were to experience a significant reduction in or loss of business with one or more such customers, or if one or more such customers
were to experience difficulty in paying us on a timely basis, our business, financial condition, results of operations, cash flows, ability to pay dividends
and/or stock price could be materially adversely affected.
In addition, a significant amount of our sales are to a relatively small number of drug wholesalers and retail drug chains. These customers
represent an essential part of the distribution chain of pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are continuing
to undergo, significant consolidation. This consolidation has resulted in these groups gaining additional purchasing leverage and, consequently, increasing
the product pricing pressures facing our business. We expect this trend of increased pricing pressures to continue. Additionally, the emergence of large
buying groups representing retail and wholesale pharmacies and the prevalence and influence of managed care organizations and similar institutions
increases the negotiating power of these groups, enabling them to attempt to extract price discounts, rebates, and other restrictive pricing terms on our
products. These factors could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends
and/or stock price.
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.
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A substantial portion of our capacity, as well as our current production, is attributable to a limited number of manufacturing facilities and certain
third-party suppliers. A significant disruption at any such facilities within our internal or third-party supply chain, even on a short-term basis, whether due
to the failure of a third-party supplier to fulfill the terms of their agreement with us, labor disruption, adverse quality or compliance observation, other
regulatory action, infringement of brand or other third-party intellectual property rights, natural disaster, civil or political unrest, export or import
restrictions, or other events could impair our ability to produce and ship products to the market on a timely basis and could, among other consequences,
subject us to exposure to claims from customers. Any of these events 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. The adverse effects of any of these events could be exacerbated as a result of
our previously announced global restructuring program, which includes the closing, downsizing or divesting of a number of facilities globally. If we or our
third-party suppliers’ face significant manufacturing issues, this could lead to shutdowns, delays or product shortages, or to our being entirely unable to
supply certain products to customers for an extended period of time. 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. Such shortages, delays or shutdowns have led and could continue to lead to significant losses of sales revenue,
third-party litigation, or negative publicity. See also “The pharmaceutical industry is heavily regulated, and we face significant costs and uncertainties
associated with our efforts to comply with applicable laws and regulations.”
We purchase certain API and other materials and supplies that we use in our manufacturing operations, as well as certain finished products, from
many different foreign and domestic suppliers. The price of API and other materials and supplies is subject to volatility, including as a result of global
supply chain disruptions and rates of inflation. In certain cases, we have listed only one supplier in our applications with regulatory agencies. There is no
guarantee that we will always have timely, sufficient or affordable access to critical raw materials or finished product supplied by third parties, even when
we have more than one supplier, which could lead to our or our partners’ and suppliers’ inability to supply sufficient quantities of our products to meet
market demand. We have announced our intention to divest our API business during 2023, which may make us more vulnerable to API supply shortages
and price volatility. In addition, quality deficiencies in the products which we or our suppliers provide, or at our or their manufacturing facilities, have in
the past and could in the future adversely impact our manufacturing and supply capabilities, cause supply interruptions, or lead to voluntary market
withdrawals or product recalls. For example, the EU has implemented particularly stringent regulations with respect to manufacturing standards for API
imported into Europe that place the certification requirement on the regulatory bodies of the exporting countries. An increase in the price, or an interruption
in the supply, of a single-sourced or any other raw material, including the relevant API, or in the supply of finished product, could have a material adverse
effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
In addition, the manufacture of some of our products is a highly exacting and complex process, due in part to strict regulatory requirements.
Problems may arise during manufacturing at our or our third-party suppliers’ facilities for a variety of reasons, including, among others, equipment
malfunction, failure to follow specific protocols and procedures, problems with raw materials, natural disasters, power outages, labor disputes or other civil
unrest, cybersecurity or compliance issues, and environmental, health and safety issues, laws, regulations and permits. If problems arise during the
production of a batch of product, that batch of product may have to be discarded. This could, among other things, lead to increased costs, contractual
penalties, lost revenue, damage to customer relations, time and expense spent investigating the cause, and, depending on the cause, similar losses with
respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also
be incurred.
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.
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Our future success is highly dependent on our ability to attract, motivate and retain key personnel.
Given the size, complexity and global reach of our business, it is important that we attract, motivate and retain qualified management and other
key employees in order to develop and commercialize new products, manage our business, and compete effectively. Our ability to do so also depends in
part on how well we maintain a strong, diverse and inclusive workplace culture that is attractive to employees. Competition for qualified personnel in the
pharmaceutical industry is intense. Current or prospective Viatris employees may have changing expectations around workplace flexibility, and a failure to
meet these evolving expectations may result in reduced ability to attract and retain talent. In addition, current or prospective Viatris employees may
experience uncertainty about their future roles at the Company as a result of our strategic initiatives, acquisitions, integration activities or restructuring
program. As a result, we may lose key personnel or may be unable to attract, retain and motivate qualified individuals, or the associated costs may increase.
If we fail to attract, develop, incentivize and retain key scientific, technical, commercial, regulatory, information security/privacy, or management
personnel, this could lead to loss of customers, business disruption, and a decline in revenues, adversely affect the progress of pipeline products, or
otherwise adversely affect our operations. Additionally, while we work to ensure that we have effective plans in place for management succession
throughout the organization, any anticipated or unanticipated management transition could create uncertainty, which could disrupt or result in changes to
our strategy and have a negative impact on our business. 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. Bribery Act, Chinese anti-corruption laws and similar worldwide anti-corruption
laws, which impose restrictions on certain conduct and may carry substantial fines and penalties.
We are subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, Chinese anti-corruption laws and similar anti-corruption laws in
other jurisdictions. These laws generally prohibit companies and their intermediaries from engaging in bribery or making other prohibited payments to
government officials for the purpose of obtaining or retaining business, and some have record keeping requirements. The failure to comply with these laws
could result in substantial criminal and/or monetary penalties, or subject us to costly and time consuming government oversight. We operate in jurisdictions
that have experienced corruption, bribery, pay-offs and other similar practices from time-to-time and, in certain circumstances, such practices may be local
custom. We have implemented and trained relevant employees and third party agents regarding internal control policies and procedures that mandate
compliance with these anti-corruption laws. However, we cannot be certain that these policies and procedures will protect us against liability. There can be
no assurance that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or agents are
found to have engaged in such practices, we could suffer severe criminal or civil penalties, reputational harm and other consequences that could have a
material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Our competitors, including branded pharmaceutical companies, and/or other third parties, may allege that we or our suppliers are infringing upon
their intellectual property, including in an “at risk launch” situation, which could result in substantial monetary damages, impact our ability to launch
a product and/or our ability to continue marketing a product, and/or force us to expend substantial resources in resulting litigation, the outcome of
which is uncertain.
Companies that produce branded pharmaceutical products and other patent holders routinely bring litigation against entities selling or seeking
regulatory approval to manufacture and market generic forms of their branded products, as well as other entities involved in the manufacture, supply, and
other aspects relating to API and finished pharmaceutical products. These companies and other patent holders may allege patent infringement or other
violations of intellectual property rights as the basis for filing suit against an applicant for a generic product as well as others who may be involved in some
aspect of research, supply, production, distribution, testing, packaging or other processes. Litigation often involves significant expense and can delay or
prevent introduction or sale of our generic products. If patents are held valid and infringed by our products in a particular jurisdiction, we and/or our
supplier(s) or partner(s) may need to cease manufacturing and other activities, including but not limited to selling in that jurisdiction. We may also need to
pay damages, surrender or withdraw the product, or destroy existing stock in that jurisdiction.
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There also may be situations where we use our business judgment and decide to market and sell products directly or through third parties,
notwithstanding the fact that allegations of patent infringement(s) and other third-party rights have not been finally resolved by the courts (i.e., an “at-risk
launch”). The risk involved in doing so can be substantial because the remedies available to the owner of a patent for infringement may include, among
other things, a reasonable royalty on sales, damages measured by the profits lost by the patent holder, or by profits earned by the infringer. If there is a
finding by a court of willful infringement, the definition of which is subjective, such damages may be increased by up to three times. An adverse decision
in a case such as this, or a judicial order preventing us or our suppliers and partners from manufacturing, marketing, selling, and/or other activities
necessary to the manufacture and distribution of our products, could result in substantial penalties, and/or have a material adverse effect on our business,
financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
We rely on the effectiveness of our patents, trademarks, confidentiality agreements and other measures to protect our intellectual property rights.
Our ability to commercialize any branded product successfully will largely depend upon our or any partner’s or supplier’s ability to obtain,
maintain and enforce patents and trademarks of sufficient scope to lawfully prevent third parties from developing and/or marketing infringing products. 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.
We may submit patent filings covering the API, formulation, methods of making, and/or methods of using for our branded products and branded
product candidates. We may not be issued patents based on patent applications already filed or that we file in the future. Further, due to other factors that
affect patentability, and if patents are issued, they may be insufficient in scope to protect our branded products from generic competition, as generics may
be able to design around our patents. Patents are national in scope and therefore the issuance of a patent in one country does not ensure the issuance of a
patent in any other country. Furthermore, the patent position of companies in the pharmaceutical industry generally involves complex legal and factual
questions and has been and remains the subject of significant litigation. Legal standards relating to scope and validity of patent claims are evolving and
may differ in various countries. Any patents we have obtained, or obtain in the future, may be challenged, invalidated or circumvented. Moreover, the U.S.
Patent and Trademark Office or any other governmental agency may commence or institute post-grant review, inter partes review, interference proceedings,
or other challenges to our patents or patent applications. Although many of our products do not have patent protection, we continue to take steps to defend
our patents for certain of our products.
In addition, branded products often have market viability based upon the goodwill of the product name, which typically is the subject of a
trademark registration or filing. Our branded products may therefore also be subject to risks related to the loss of a trademark or patent or to competition
from generic or other branded products. Challenges can come from other businesses, individuals or governments, and governments could require
compulsory licensing of our intellectual property. 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.
We also rely on trade secrets, unpatented proprietary know-how, trade dress, regulatory exclusivity and continuing technological innovation that
we seek to protect, in part by confidentiality agreements with licensees, suppliers, employees and consultants. These measures may not provide adequate
protection for our unpatented technology. If these agreements are breached, it is possible that we will not have adequate remedies. Disputes may arise
concerning the ownership of intellectual property or the applicability of confidentiality agreements. Furthermore, our trade secrets and proprietary
technology may otherwise become known or be independently developed by our competitors or we may not be able to maintain the confidentiality of
information relating to such products.
Our ability to enforce intellectual property rights also depends on the laws of individual countries, each country’s practices with respect to
enforcement of intellectual property rights, and the extent to which certain countries may seek to engage in policies or practices that may weaken its
intellectual property framework (e.g., a policy of routine compulsory licensing, or threat of compulsory licensing, of pharmaceutical intellectual property).
If we are unable to adequately protect our technology, trade secrets or proprietary know-how, or enforce our intellectual property rights, this could cause a
material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
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Our reporting and payment obligations related to our participation in U.S. federal healthcare programs, including Medicare, Medicaid and the VA, are
complex and often involve subjective decisions that could change as a result of new business circumstances, new regulations or agency guidance, or
advice of legal counsel. Any failure to comply with those obligations could subject us to investigation, penalties, and sanctions.
U.S. federal laws regarding reporting and payment obligations with respect to a pharmaceutical company’s participation in federal healthcare
programs, including Medicare, Medicaid and the VA, are complex. Because our processes for calculating applicable government prices and the judgments
involved in making these calculations involve subjective decisions and complex methodologies, these calculations are subject to risk of errors and differing
interpretations. In addition, they are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could
result in changes that may have material adverse legal, regulatory, or economic consequences.
Any governmental agencies or authorities that have commenced, or may commence, an investigation of us relating to the sales, marketing, pricing,
quality, or manufacturing of pharmaceutical products could seek to impose, based on a claim of violation of anti-fraud and false claims laws or otherwise,
civil and/or criminal sanctions, including fines, penalties, and possible exclusion from federal healthcare programs, including Medicare, Medicaid and/or
the VA. Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with
regard to how to properly calculate and report payments—and even in the absence of any such ambiguity—a governmental authority may take a position
contrary to a position we have taken, and may impose or pursue civil and/or criminal sanctions. Governmental agencies may also make changes in program
interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. There can be
no assurance that our submissions will not be found by Centers for Medicare & Medicaid Services or the VA to be incomplete or incorrect. Any failure to
comply with the above laws and regulations, and any such penalties or sanctions could have a material adverse effect on our business, financial condition,
results of operations, cash flows, ability to pay dividends and/or stock price.
We are involved in various legal proceedings and certain government inquiries and may experience unfavorable outcomes of such proceedings or
inquiries.
We are or may be involved in various legal proceedings and certain government inquiries or investigations, including, but not limited to, patent
infringement, product liability, personal injury, securities fraud, claims with respect to the manufacture, sale marketing and distribution of opioid products,
antitrust matters, breach of contract, and claims involving Medicare, Medicaid and/or VA reimbursements, or laws relating to sales, marketing, and pricing
practices. 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.
Viatris is subject to investigations and extensive regulation by government agencies in the United States, China and other developed markets and
emerging markets in which we operate. Criminal charges, substantial fines and/or civil penalties, limitations on Viatris’ ability to conduct business in
applicable jurisdictions, as well as reputational harm and increased public interest in the matter could result from government investigations. With respect
to government enforcement of state and federal laws, including antitrust laws, as well as private plaintiff litigation of so-called “pay for delay” patent
settlements, large verdicts, settlements or government fines are possible, especially in the U.S. and EU. 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.
In connection with the Combination, the Company has generally assumed liability for, and control of, pending and threatened legal matters
relating to the Upjohn Business and has agreed to indemnify Pfizer for liabilities arising out of such assumed legal matters. Pfizer, however, has agreed to
retain various matters – including certain specified competition law matters – to the extent they arise from conduct during the pre-Distribution period and
has agreed to indemnify the Company for liabilities arising out of such matters. If Pfizer were to dispute its retention of these matters, or if there is an
adverse outcome in the matters that Pfizer has agreed to retain, this could have an adverse impact on Viatris. 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. If any
of these legal proceedings or inquiries were to result in an adverse outcome, the impact could have a material adverse effect on our business, financial
condition, results of operations, cash flows, ability to pay dividends and/or stock price.
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Emerging developments in the U.S. legal landscape relative to the liability of pharmaceutical manufacturers for certain product liabilities claims
could increase our exposure to litigation costs and damages, including in connection with third party defense and indemnification demands. Moreover,
although we maintain a combination of self-insurance and commercial insurance, no reasonable amount of insurance can fully protect against all risks
because of the potential liability inherent in the business of producing pharmaceuticals for human consumption. To the extent that a loss occurs, depending
on the nature of the loss and the level of insurance coverage maintained, it could have a material adverse effect on our business, financial condition, results
of operations, cash flows, ability to pay dividends and/or stock price.
In addition, in limited circumstances, entities that we have acquired are party to litigation in matters under which we are, or may be, entitled to
indemnification by the previous owners. Even in the case of indemnification, there are risks inherent in such indemnities and, accordingly, there can be no
assurance that we will receive the full benefits of such indemnification, or that we will not experience an adverse result in a matter that is not indemnified,
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.
Refer to Note 20 Litigation included in Part II, Item 8 in this Form 10-K for further discussion of certain proceedings and litigation matters.
We are increasingly dependent on IT and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
Significant disruptions to our IT systems or breaches of information security could adversely affect our business. We are increasingly dependent
on sophisticated IT systems and infrastructure to operate our business. The number of new vulnerabilities identified to these systems combined with the
increased number of systems that reach end of life each year creates an opportunity for successful malicious attacks. Such attacks are increasingly
sophisticated and are made by groups and individuals with a wide range of motives and expertise, including state and quasi-state actors, criminal groups,
“hackers” and others. Evolving work conditions, including work from home protocols, may be less secure and have introduced operational risk, including
increased cybersecurity risk. For example, groups and individuals have sought to exploit remote working environments to initiate hacking, phishing, and
social engineering attempts and malware attacks.
We and our suppliers, partners, customers and vendors have in the past and will likely continue to experience attacks on and compromises of our
systems. 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. 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. 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.
We outsource significant elements of our operations to third parties and provide IT and security services to some partners under transition services
agreements. 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. 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. 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 the ordinary course of
business, we and our vendors collect, store and transmit large amounts of confidential information (including trade secrets or other intellectual property,
proprietary business information and personal information), and it is critical that we do so in a secure manner to maintain the confidentiality and integrity
of such confidential information. The size and complexity of our and our vendors’ systems and the large amounts of confidential information that is present
on them also makes them vulnerable to security breaches from inadvertent or intentional actions by our employees, partners or vendors, or from attacks by
malicious third parties. Maintaining the security, confidentiality and integrity of this confidential information (including trade secrets or other intellectual
property, proprietary business information and personal information) is important to our competitive business position. However, such information can be
difficult and costly to protect. 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.
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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. Further, any such interruption, security breach, or loss, misappropriation, and/or unauthorized access, use or
disclosure of confidential information, including personal information regarding our patients and employees, could result in financial, legal, business, and
reputational harm to us and could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay
dividends and/or stock price.
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. 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 are subject to data privacy and security laws and regulations in many different jurisdictions and countries where we do business, and our or our
vendors’ inability to comply could result in fines, penalties, or reputational damage, and could impact the way we operate our business.
We are subject to federal, state and international data privacy and security laws and regulations governing the collection, use, disclosure,
transmission and protection of personal information, including health-related information. As the legislative and regulatory landscape for data privacy and
security continues to evolve around the world, there has been an increasing focus on data privacy and security matters that may affect our business.
In the U.S., federal laws include HIPAA, which governs the use, disclosure, and security of protected health information by HIPAA covered
entities and business associates. Several U.S. states have enacted or proposed broad data privacy laws and regulations governing the confidentiality,
security, use and disclosure of personal information, which may impose greater restrictions than federal data privacy and security laws and regulations and
provide transparency and privacy rights for their citizens. We may also be subject to other state data privacy and security breach notification laws, state
health information privacy laws, and federal and state consumer protection laws such as the federal Controlling the Assault of Non-Solicited Pornography
and Marketing (CAN-SPAM) Act, which impose requirements for the collection, use, disclosure, transmission and protection of personal information. Each
of these laws are subject to varying interpretations by courts and regulatory or government agencies, creating complex compliance issues for us. If we, or
the third-party vendors on which we rely, fail to comply with applicable laws and regulations we could be subject to fines, penalties or sanctions, including
criminal penalties.
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 GDPR affords individuals with a series
of privacy rights related to the collection, processing, and transmission of their personal information. The GDPR imposes significant compliance
obligations, including required processes and policies governing our collection, transmission, processing and use of individuals personal information. In
addition, the GDPR includes significant penalties for non-compliance, with fines up to the higher of €20 million or 4% of total annual worldwide revenue.
In general, GDPR, and other data protection laws and regulations, could require adaptation of our technologies or practices to satisfy local country data
protection requirements and standards.
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. If we, or the third-party vendors on which we
rely, fail to comply with applicable laws and regulations we could be subject to fines, penalties or sanctions, including criminal penalties.
Similar initiatives could increase the cost of developing, implementing or maintaining our IT systems, require us to allocate more resources to
compliance initiatives or increase our costs. 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.
Increasing scrutiny and evolving expectations from customers, regulators, governments, investors, lenders, employees, and other stakeholders with
respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
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Companies are facing increasing expectations and scrutiny from customers, regulators, governments, investors, lenders, employees and other
stakeholders related to their environmental, social and governance practices and disclosure. Investor advocacy groups, investment funds and influential
investors are also increasingly focused on these practices, especially as they relate to the environment, climate change, health and safety, supply chain
management, diversity, labor conditions and human rights, both in our own operations and in our supply chain. 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. Failure to adapt to or comply with
government regulations, regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do
business with certain partners, access to investors and capital, and our stock price, and could lead to novel forms of litigation, including shareholder
litigation and governmental investigations or enforcement actions related to environmental, social and governance matters.
.
In addition, a growing number of our customers, including certain government purchasers, have adopted, or may adopt, procurement policies that
include social and environmental requirements, including, for example, requirements to monitor and conduct third party audits, or these customers may
seek to include such provisions in their procurement contract terms and conditions. These social and environmental responsibility provisions and initiatives
are subject to change, vary from jurisdiction to jurisdiction, and certain elements may be difficult and/or cost prohibitive for us to comply with given the
inherent complexity of our external supply chain and the global scope of our operations. In certain circumstances, in order to meet the requirements or
standards of our customers, we may be obligated to implement additional processes, modify our sourcing practices or make other operational choices which
may require additional investments of time and resources, increase our costs or result in inefficiencies. 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. Achievement of these goals depends on our development and execution of various operational strategies relating to each discrete target.
The development and execution of these strategies and achievements of our targets, including our near-term science based emissions reductions targets for
scope 1, 2 and 3, are subject to risk and uncertainties, many of which are outside of our control. There are no assurances that we will be able to successfully
develop or execute our environmental, social and governance strategies and achieve our environmental, social and governance targets.
Any of the factors mentioned above, or the perception that we or our suppliers or contract manufacturers have not responded appropriately to the
growing concern for such issues, regardless of whether we are legally required to do so, may damage our reputation and have a material adverse effect on
our business, employees relations, access to investors and capital, financial condition, results of operations, cash flows, ability to pay dividends and/or
stock price.
Our business and operations are subject to risks related to climate change.
The effects of global climate change present risks to our business. Extreme weather, natural disasters, power outages, or other conditions caused
by climate change could adversely impact our supply chain and the availability and cost of raw materials, water supply, and other components required for
the operation of our business, or result in the delay and/or disruption of our ability to deliver products. Such conditions could also result in physical damage
to our or our partners’ products, plants and distribution centers, our ability to operate in certain areas, as well as the infrastructure and facilities of hospitals,
medical care facilities and other customers. Our programs to plan for and mitigate risk and build resilience to the impacts of climate change may not be
successful, and the cost of implementing such programs may be significant. Current or future insurance arrangements may not provide protection for costs
that may arise from such events, particularly if such events are catastrophic in nature or occur in combination. 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. 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.
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Finance Risks
There can be no guarantee that we will continue to pay dividends or repurchase shares under our stock buyback program.
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. Whether dividends will be paid, and the amount and frequency of
any such dividend payments, will depend upon a number of factors, including Viatris’ results of operations, cash flows, financial position, competitive or
commercial developments, contractual or statutory restrictions and any other factors considered relevant by the Viatris Board. Such payments, and the
amount and frequency thereof, are also subject to the other risks set forth in these risk factors. In addition, although the Board of Directors has authorized a
stock buyback program of up to $1 billion, which the Company began executing on in 2023, there is no guarantee with respect to the timing or amount of
any future share repurchases, or that we will repurchase the full amount authorized under our current stock buyback program. Other factors, including
changes in tax or securities laws, such as the U.S. Inflation Reduction Act of 2022 which imposes a corporate excise tax of 1% on net stock repurchases
beginning in 2023, could also impact our stock repurchases. A stock buyback program could affect our stock price and increase volatility, and any
announcement of a pause in, or termination of, a stock buyback program may result in a decrease in our stock price. Payment of a cash dividend or stock
repurchases will reduce the amount of cash available to the Company for other activities, including repayment of debt, investment in the business or other
capital expenditures. If we are unable to, or choose not to, pay a quarterly dividend or repurchase shares under our stock buyback program, this may have a
negative impact on the perception of the Company as an investment opportunity by shareholders or investment analysts, which may in turn negatively
impact our stock price.
If the intercompany terms of cross border arrangements that we have among our subsidiaries are determined to be inappropriate or ineffective, our tax
liability may increase.
We have potential tax exposures resulting from the varying application of statutes, regulations, and interpretations which include exposures on
intercompany terms of cross-border arrangements among our subsidiaries (including intercompany loans, sales, and services agreements) in relation to
various aspects of our business, including manufacturing, marketing, sales, and delivery functions. Although we believe our cross-border arrangements
among our subsidiaries are based upon internationally accepted standards and applicable law, tax authorities in various jurisdictions may disagree with and
subsequently challenge the amount of profits taxed in their country, which may result in increased tax liability, including accrued interest and penalties,
which would cause our tax expense to increase and could have a material adverse effect on our business, financial condition, results of operations, cash
flows, ability to pay dividends and/or stock price.
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 must make material assumptions underlying our expected tax rates, including regarding the effect of certain internal reorganization
transactions, intercompany transactions, and divestitures. We cannot give any assurance as to what our effective tax rate will be, however, because of,
among other reasons, uncertainty regarding the tax policies of the jurisdictions where we operate, potential changes of laws and interpretations thereof, and
the potential for tax audits or challenges. Our actual effective tax rate may vary from our expectation and that variance may be material. For example, in
2022 the U.S. Inflation Reduction Act was signed into law which, among other things, provides for a corporate alternative minimum tax of 15% beginning
in 2023 on adjusted financial statement income and an excise tax of 1% on corporate stock repurchases. Moreover, the rate of tax we pay in other
jurisdictions may increase significantly should those jurisdictions follow through on statements that they will adopt the OECD Pillar Two Global Anti-Base
Erosion rules. We are continuing to evaluate the impact of these laws, and other proposed changes in corporate tax laws, which may significantly increase
our global tax liabilities. In addition, the tax laws of other jurisdictions could change in the future, and such changes could cause a material change in our
effective tax rate.
Any of the factors discussed above could materially increase our overall effective income tax rate, income tax expense and cash taxes paid and
could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Unanticipated changes in our tax provisions or exposure to additional income tax liabilities and changes in income tax laws and tax rulings may have
a significant adverse impact on our effective tax rate and income tax expense.
We are subject to income taxes in many jurisdictions. Significant analysis and judgment are required in determining our worldwide provision for
income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are
currently subject to tax audits, investigations and litigations in several jurisdictions, and may be subject to other audits, investigations or litigations in the
future. The final determination of any tax audits or related litigation could be materially different from our income tax provisions and accruals.
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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.
Viatris may be subject to significant U.S. tax liabilities or be obligated to indemnify Pfizer for any such tax liability imposed on Pfizer in connection
with the Combination.
In connection with the Combination, Pfizer received a private letter ruling and opinion of counsel, each to the effect that, for U.S. federal income
tax purposes, the Distribution, together with certain related transactions, would qualify as a tax-free “reorganization” and the Distribution would qualify as
a tax-free distribution. If the Distribution were determined not to have qualified for tax-free treatment, Pfizer would generally be subject to tax as if it sold
the Viatris common stock in a transaction taxable to Pfizer, which could result in a material tax liability that, under certain circumstances, Viatris may be
required to indemnify Pfizer against pursuant to the Tax Matters Agreement. If Viatris was required to indemnify Pfizer for taxes resulting from the
Distribution or certain aspects of the Separation, that indemnification obligation could be substantial and could have a material adverse effect on Viatris,
including with respect to our business, financial condition and results of operations.
Currency fluctuations and changes in exchange rates have impacted and could continue to adversely affect our business, financial condition, results of
operations, cash flows, ability to pay dividends and/or stock price.
Although we report our financial results in U.S. 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. Our financial condition, results of operations and cash
flows, have in the past been and may in the future be adversely affected by certain movements in currency exchange rates. Defaults or restructurings in
other countries could have a similar adverse impact on our financial condition, results of operations and cash flows. In addition, there remains significant
international pressure on the Chinese government to adopt a more flexible currency policy, including from the U.S. government, which designated China as
a “currency manipulator” in August 2019 and subsequently removed such designation in January 2020, which could result in greater fluctuation of the
Renminbi against the U.S. dollar. From time to time, we may implement currency hedges intended to reduce our exposure to changes in foreign currency
exchange rates. However, our hedging strategies may not be successful, and any of our unhedged foreign exchange exposures will continue to be subject to
market fluctuations.
In addition, Viatris also faces risks arising from currency devaluations and the imposition of cash repatriation restrictions and exchange controls.
Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation. Cash repatriation
restrictions and exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our
foreign subsidiaries or businesses located in or conducted within a country imposing restrictions or controls. For example, in China the conversion of
currency in the “capital account” (e.g., capital items such as direct investments or loans) requires the approval of, or registration or filing with, relevant
governmental authorities in China, which could materially and adversely affect the ability of our Chinese operating subsidiaries and affiliated companies to
obtain foreign currencies through equity or debt financing or for capital expenditures, therefore impeding our overall business operations in China. While
we currently have no need, and do not intend, to repatriate or convert cash held in countries that have significant restrictions or controls in place, should we
need to do so to fund our operations, we may be unable to repatriate or convert such cash, or be unable to do so without incurring substantial costs.
The occurrence of any of the above risks could cause a material adverse effect on our business, financial condition, results of operations, cash
flows, ability to pay dividends and/or stock price.
We have significant indebtedness, which could lead to adverse consequences or adversely affect our financial position and prevent us from fulfilling
our obligations under such indebtedness, and any refinancing of this debt could be at significantly higher interest rates.
Our level of indebtedness could have important consequences, including but not limited to:
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increasing our vulnerability to general adverse economic and industry conditions;
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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 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. If we
do not have sufficient cash flow to service our indebtedness, including the repayment of significant near-term indebtedness, we may need to refinance all or
part of our existing indebtedness, borrow more money or sell securities or assets, some or all of which may not be available to us at acceptable terms or at
all. In addition, we may need to incur additional indebtedness in the future in the ordinary course of business. Although the terms of our credit agreements
and our bond indentures allow us to incur additional debt, this is subject to certain limitations which may preclude us from incurring the amount of
indebtedness we otherwise desire.
Although Viatris expects to maintain an investment grade credit rating, a downgrade in the credit rating of Viatris or any indebtedness of Viatris or
its subsidiaries could increase the cost of further borrowings or refinancings of such indebtedness, limit access to sources of financing in the future or lead
to other adverse consequences.
Our credit facilities, senior unsecured notes, commercial paper program, other outstanding indebtedness and any additional indebtedness we incur
in the future impose, or may impose, significant operating and financial restrictions on us. These restrictions limit our ability to, among other things, incur
additional indebtedness, make investments, pay certain dividends, prepay other indebtedness, sell assets, incur certain liens, enter into agreements with our
affiliates, or restrict our subsidiaries’ ability to pay dividends, merge or consolidate. In addition, our credit facilities require us to maintain specified
financial ratios. A breach of any of these covenants or our inability to maintain the required financial ratios could result in a default under the related
indebtedness. If a default occurs, the relevant lenders could elect to declare our indebtedness, together with accrued interest and other fees, to be
immediately due and payable. These factors could have a material adverse effect on our business, financial condition, results of operations, cash flows,
ability to pay dividends and/or stock price.
If we incur additional debt, the risks described above could intensify. 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. Any of the foregoing could have a material
adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with
U.S. GAAP. Any future changes in estimates, judgments and assumptions used or necessary revisions to prior estimates, judgments or assumptions or
changes in accounting standards could lead to a restatement or revision to previously issued financial statements.
The consolidated and condensed consolidated financial statements included in the periodic reports we file with the SEC are prepared in
accordance with U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP involves making estimates, judgments and
assumptions that affect reported amounts of assets, liabilities, revenues, expenses and income. Estimates, judgments and assumptions are inherently subject
to change in the future and any necessary revisions to prior estimates, judgments or assumptions could lead to a restatement. Furthermore, although we
have recorded reserves for certain critical accounting estimates, including litigation related contingencies based on estimates of probable future costs, actual
costs in the future could be substantially in excess of those reserves. Also, any new or revised accounting standards may require adjustments to previously
issued financial statements. Any such changes could result in corresponding changes to the amounts of liabilities, revenues, expenses and income and could
have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
We must maintain adequate internal controls and be able to provide an assertion as to the effectiveness of such controls on an annual basis.
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Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports. We spend a substantial
amount of management and other employee time and resources to comply with laws, regulations and standards relating to corporate governance and public
disclosure. In the U.S., such regulations include the Sarbanes-Oxley Act of 2002, SEC regulations and the NASDAQ listing standards. In particular,
Section 404 of the Sarbanes-Oxley Act of 2002 requires management’s annual review and evaluation of our internal control over financial reporting and
attestation as to the effectiveness of these controls by our independent registered public accounting firm. In 2022, we completed the transition of certain
support services from Pfizer, as well as certain subsidiaries, to a new ERP system. While we believe that this new system and the related changes to internal
controls will ultimately strengthen our internal control over financial reporting, there are inherent risks in implementing any new ERP system. If we fail to
maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal
control over financial reporting. Additionally, internal control over financial reporting may not prevent or detect misstatements because of its inherent
limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can
provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of
effectiveness of internal control over financial reporting to future periods are subject to the risk that the control may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal controls,
including any failure to implement required new or improved controls, this could have a material adverse effect on our business, financial condition, results
of operations, cash flows, ability to pay dividends and/or stock price.
Viatris has suffered and in the future could suffer additional losses due to impairment charges.
Viatris has significant amounts of goodwill and intangible assets on its balance sheet. Viatris tests goodwill for impairment during the second
quarter of every fiscal year, and on an interim date should events or changes in circumstances indicate the carrying value of goodwill may not be
recoverable in accordance with ASC 350 “Goodwill and Other Intangible Assets.” If the fair value of a reporting unit is revised downward due to declines
in business performance or other factors, an impairment under ASC 350 could result and a non-cash charge could be required. 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. In addition, we have announced plans to market for sale certain businesses and assets that we no longer consider
to be core to our future business strategy. We have incurred and may in the future incur significant impairment charges or losses related to the sale of those
businesses or assets. For instance, in 2022 we recorded approximately $370 million of charges related to the Upjohn Distributor Markets classified as held
for sale. Such impairments or losses have in the past and could in the future materially affect Viatris’ reported net earnings, business, financial condition,
results of operations, cash flows, ability to pay dividends and/or stock price.
Viatris may be adversely affected by disruptions in the credit markets, including disruptions that reduce customers’ access to credit and increase the
costs to customers of obtaining credit.
The credit markets have historically been volatile and therefore it is not possible to predict the ability of Viatris’ customers to access short-term
financing and other forms of capital. 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. 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. Accordingly, a spike in interest rates could
adversely affect our results of operations and cash flows.
Viatris has certain material obligations relating to defined benefit pension and termination benefit programs.
Viatris has certain material pension and post-employment benefit obligations associated with acquired businesses in both the U.S. and foreign
countries. Our obligations under these plans are significant and future funding obligations are subject to increased interest rates on asset and liability
calculations. Each of these liabilities and the related future payment obligations could restrict cash available for Viatris’ operations, capital expenditures,
acquisitions, dividend payments and other requirements, and may materially affect Viatris’ financial condition and liquidity.
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.
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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. The
price of Viatris’ common stock has in the past and may continue to fluctuate materially from time to time, including as a result of the other risks described
herein, and we cannot predict the price of our common stock at any given time. In addition, the stock market in general, including the market for
pharmaceutical companies, has experienced significant price and volume fluctuations which may materially harm the market price of our common stock,
regardless of our operating performance. In addition, the price of our common stock may be affected by the valuations and recommendations of the
analysts who cover us, and if our results do not meet the analysts’ forecasts and expectations, the price of our common stock could decline as a result of
analysts lowering their valuations and recommendations or otherwise. Following periods of volatility in the market and/or in the price of a company’s
stock, securities class-action litigation actions have been instituted against companies (including Viatris) and may be instituted against us in the future.
Such litigation may result in substantial costs and diversion of management’s attention and resources, 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. In addition, if we or our stockholders offer or sell
shares of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, this or the possibility thereof,
may depress the future trading price of our common stock and the voting power of our then existing stockholders may be diluted if such a transaction were
to occur.
The expansion of social media platforms presents new risks and challenges.
To the extent that we seek to use social media tools as a means to communicate about our products and/or business, there are uncertainties as to
the rules that apply to such communications, or as to the interpretations that authorities will apply to the rules that exist. As a result, despite our efforts to
monitor evolving social media communication guidelines and comply with applicable rules, there is risk that our use of social media for such purposes may
cause us to be found in violation of them. Our employees may knowingly or inadvertently make use of social media tools in ways that may not be aligned
with our social media strategy, may give rise to liability, or could lead to the loss of material non-public information, trade secrets or other intellectual
property, or public exposure of personal information (including sensitive personal information) of our employees, clinical trial patients, customers, and
others. In addition, negative posts or comments about us on any social media website could damage our reputation. Any of the above risks could have a
material adverse effect on our business, reputation, financial condition, results of operations, cash flows, and/or stock price.
Provisions in the Viatris Charter and Viatris Bylaws and of applicable law may prevent or delay an acquisition of Viatris, which could decrease the
trading price of Viatris common stock.
The Viatris Charter, Viatris Bylaws and Delaware law contain provisions that may have the effect of deterring takeovers by making such takeovers
more expensive to the acquiror and by encouraging prospective acquirors to negotiate with the Viatris Board rather than to attempt a hostile takeover. These
provisions include the division of the Viatris Board into three classes of directors until the 2023 annual meeting of Viatris stockholders, which could have
the effect of making the replacement of incumbent directors more time-consuming and difficult, rules regarding how stockholders may present proposals or
nominate directors for election at stockholder meetings and the right of the Viatris Board to issue preferred stock without stockholder approval. Delaware
law also imposes some restrictions on mergers and other business combinations between Viatris and any holder of 15% or more of Viatris’ outstanding
common stock.
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. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could
delay or prevent an acquisition that the Viatris Board determines is not in the best interests of Viatris and its stockholders. Accordingly, if the Viatris Board
determines that a potential business combination transaction is not in the best interests of Viatris and its stockholders, but certain stockholders believe that
such a transaction would be beneficial to Viatris and its stockholders, such stockholders may elect to sell their shares in Viatris and the trading price of
Viatris common stock could decrease. These and other provisions of the Viatris Charter, the Viatris Bylaws and the DGCL could have the effect of
delaying, deferring or preventing a proxy contest, tender offer, merger or other change in control, which may have a material adverse effect on Viatris’
business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
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.
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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.
To the fullest extent permitted by law, this exclusive forum provision will apply to state and federal law claims, including claims under the federal
securities laws, including the Securities Act and the Exchange Act. However, Viatris stockholders will not be deemed to have waived Viatris’ compliance
with the federal securities laws and the rules and regulations thereunder. 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.
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. 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.
Our business and operations could be negatively affected by pressures from outside of the control of the company, including, but not limited to,
shareholder actions, government regulations and disclosure requirements, and other market dynamics, which could cause us to incur significant
expenses, hinder execution of our business strategy and negatively impact our share price.
In recent years, shareholder actions, government regulations and disclosure requirements, and other market dynamics, involving corporate
governance, environmental and social matters, human capital, strategic direction and operations have become increasingly prevalent. Shareholder
challenges or more extensive government regulation or intervention in these areas, may create a significant distraction or burden for our management and
employees, negatively impact our ability to execute our business plans, require our management to expend significant time and resources, create
uncertainties with respect to our financial position and operations, adversely affect our ability to attract and retain key employees or result in loss of
potential business opportunities with our current and potential customers and business partners. 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.
Properties
For information regarding properties, refer to Item 1 “Business” in Part I of this Form 10-K.
ITEM 3.
Legal Proceedings
For information regarding legal proceedings, refer to Note 20 Litigation included in Item 8 in Part II of this 10-K.
ITEM 4. Mine Safety Disclosures
Not applicable.
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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.
PART II
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. 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. The declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the
Board of Directors, and will depend upon factors, including but not limited to, the Company’s financial condition, earnings, capital requirements of its
businesses, legal requirements, regulatory constraints, industry practice, and other factors that the Board of Directors deems relevant. 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 did not pay any dividends in 2020.
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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. 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. 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.
Viatris Inc.
S&P 500
Dow Jones U.S. Pharmaceuticals
ITEM 6.
[Reserved]
November 16,
2020
December 31,
2020
December 31,
2021
December 31,
2022
100.00
100.00
100.00
118.20
115.21
113.12
87.32
148.28
141.38
74.84
121.43
152.44
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ITEM 7. Management’s Discussion and Analysis of Financial Condition And Results of Operations
The following discussion and analysis addresses material changes in the financial condition and results of operations of Viatris Inc. and
subsidiaries for the periods presented. Unless context requires otherwise, the “Company,” “Viatris,” “our” or “we” refer to Viatris Inc. and its subsidiaries.
This discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes to consolidated
financial statements included in Part II, Item 8 in this Form 10-K, and our other SEC filings and public disclosures.
This Form 10-K contains “forward-looking statements”. These statements are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. 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. Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”,
“project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “pipeline”, “intend”, “continue”, “target”, “seek” and variations of
these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially
from those expressed or implied by such forward-looking statements. Factors 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. GAAP and related standards or on an adjusted basis.
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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. You can access Viatris’ filings with the SEC through the SEC website at www.sec.gov or through our website and
Viatris strongly encourages you to do so. Viatris routinely posts information that may be important to investors on our website at investor.viatris.com, and
we use this website address as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC’s
Regulation Fair Disclosure (Reg FD). The contents of our website are not incorporated by reference in this Form 10-K and shall not be deemed “filed”
under the Securities Exchange Act of 1934, as amended. Viatris undertakes no obligation to update any statements herein for revisions or changes after the
filing date of this Form 10-K other than as required by law.
Explanatory Note
In accordance with ASC 805, Business Combinations, Mylan is considered the accounting acquirer of the Upjohn Business and all historical
financial information of the Company prior to November 16, 2020 represents Mylan’s historical results and the Company’s thereafter.
Company Overview
Viatris is a global healthcare company formed in November 2020 whose mission is to empower people worldwide to live healthier at every stage
of life, regardless of geography or circumstance. Improving the ability of patients to gain access to sustainable and high-quality healthcare is our relentless
pursuit. 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. 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. 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. 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. 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. Our Greater China segment includes our operations in China, Taiwan and Hong Kong.
Our JANZ segment reflects our operations in Japan, Australia and New Zealand. 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.
Certain Market and Industry Factors
The global pharmaceutical industry is a highly competitive and highly regulated industry. As a result, we face a number of industry-specific
factors and challenges, which can significantly impact our results. The following discussion highlights some of these key factors and market conditions.
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. The entrance into the market of additional competition generally has a negative impact on the
volume and pricing of the affected products. Additionally, pricing is often affected by factors outside of the Company’s control. Conversely, generic
products generally experience less volatility over a longer period of time in Europe as compared to the U.S., primarily due to the role of government
oversight of healthcare systems in the region.
For branded products, the majority of the product’s commercial value is usually realized during the period in which the product has market
exclusivity. In the U.S. and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there can
often be very substantial and rapid declines in the branded product’s sales.
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Certain markets in which we do business outside of the U.S. have undergone government-imposed price reductions, and further government-
imposed price reductions are expected in the future. Such measures, along with the tender systems discussed below, are likely to have a negative impact on
sales and gross profit in these markets. However, government initiatives in certain markets that appear to favor generic products could help to mitigate this
unfavorable effect by increasing rates of generic substitution and penetration.
Additionally, a number of markets in which we operate outside of the U.S. have implemented, or may implement, tender systems for generic
pharmaceuticals in an effort to lower prices. Generally speaking, tender systems can have an unfavorable impact on sales and profitability. Under such
tender systems, manufacturers submit bids that establish prices for generic pharmaceutical products. Upon winning the tender, the winning company will
receive priority placement for a period of time. The tender system often results in companies underbidding one another by proposing low pricing in order to
win the tender. The loss of a tender by a third party to whom we supply API can also have a negative impact on our sales and profitability. Sales continue to
be negatively affected by the impact of tender systems in certain countries.
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. In addition
to the upfront cash consideration, each Oyster Point stockholder received one non-tradeable contingent value right representing up to an additional $2 per
share, or approximately $60 million in the aggregate, contingent upon Oyster Point achieving certain metrics based upon full year 2022 performance, which
are expected to be determined by the end of the first quarter of 2023. Oyster Point is a commercial-stage biopharmaceutical company 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 private-
owned research company with a complementary portfolio of ophthalmology therapies under development, for a consideration of $281 million. The
Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 to grant the Company rights with
respect to acquiring certain pharmaceutical products and had additionally acquired shares representing approximately 13.5% equity interest in Famy Life
Sciences for $25.0 million during the year ended December 31, 2020. The transaction to acquire the remaining equity shares of Famy Life Sciences closed
during the first quarter of 2023.
The accounting impact of the Oyster Point and Famy Life Sciences acquisitions and the results of the operations for Oyster Point and Famy Life
Sciences will be included in our consolidated financial statements beginning in the first quarter of 2023. Refer to Note 4 Acquisitions and Other
Transactions included in Part II. Item 8 of this Form 10-K for more information.
Share Repurchase Program
On February 28, 2022, the Company announced that its Board of Directors had authorized a share repurchase program for the repurchase of up to
$1.0 billion of the Company’s shares of common stock. Such repurchases may be made from time-to-time at the Company’s discretion and effected by any
means, including but not limited to, open market repurchases, pursuant to plans in accordance with Rules 10b5-1 or 10b-18 under the Exchange Act,
privately negotiated transactions (including accelerated stock repurchase programs) or any combination of such methods as the Company deems
appropriate. The program does not have an expiration date. During 2022, the Company did not repurchase any shares of common stock under the share
repurchase program. In January and February 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of
approximately $250 million. The share repurchase program does not obligate the Company to acquire any particular amount of common stock.
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International Operations
The ongoing conflict between Russia and Ukraine did not have a material impact on our business as the combined total revenues for both
countries were approximately 1% of consolidated total revenues during the years ended December 31, 2022 and 2021. However, trade controls, sanctions,
supply chain and staffing challenges and other economic considerations related to the conflict have impacted our operations in these markets and may
negatively impact our financial results in future periods. In 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. For a further discussion of the risks we encounter in our business, including the
risks of conducting our business internationally, please refer to Risk Factors in Part I, Item 1A of this Form 10-K.
Under ASC 830, Foreign Currency Matters (“ASC 830”), a highly inflationary economy is one that has cumulative inflation of approximately
100% or more over a three-year period. Effective April 1, 2022, we classified Turkey as highly inflationary and began to utilize the U.S. dollar as our
functional currency in Turkey, which historically utilized the Turkish lira as the functional currency. Application of the guidance in ASC 830 did not have a
material impact on our consolidated financial statements for the year ended December 31, 2022. The impacted net sales for the year ended December 31,
2022 and total assets at December 31, 2022 represented less than 1% of our consolidated net sales and total assets, respectively.
Biocon Biologics Transaction
On February 27, 2022, Viatris entered into a definitive agreement with Biocon Biologics to contribute its biosimilars portfolio to Biocon
Biologics. The transaction subsequently closed on November 29, 2022, creating what Viatris expects to be a unique fully vertically integrated global
biosimilars leader. Under the terms of the Biocon Agreement, Viatris received $3 billion in consideration in the form of a $2 billion cash payment, adjusted
as set forth in the Biocon Agreement, and approximately $1 billion of CCPS representing a stake of approximately 12.9% (on a fully diluted basis) in
Biocon Biologics. 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. An amount of cash equal to all or a portion of the closing working capital target 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.
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. Under the transition services agreement, Viatris is entitled to be
reimbursed for its costs (subject to certain caps) plus a markup.
2020 Restructuring Program
During the fourth quarter of 2020, Viatris announced a significant global restructuring program in order to achieve synergies and ensure that the
organization is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders. 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.
For the committed restructuring actions, the Company expects to incur total pre-tax charges of up to approximately $1.4 billion. Such charges are
expected to include up to approximately $450 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges,
including inventory write-offs. The remaining estimated cash costs of up to approximately $950 million are expected to be primarily related to severance
and employee benefits expense, as well as other costs, including those related to contract terminations and other plant disposal costs. In addition,
management believes the potential annual savings related to these committed restructuring activities to be up to approximately $900 million once fully
implemented, with most of these savings expected to improve operating cash flow.
Impact of the Coronavirus Pandemic
As a leading global pharmaceutical company, Viatris is committed to continue doing its part in support of public health needs amid the evolving
COVID-19 pandemic. The Company’s priorities remain protecting the health and safety of our workforce, continuing to produce critically needed
medicines, deploying resources and expertise in the fight against COVID-19
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through potential prevention and treatment efforts, supporting the communities in which we operate and maintaining the health of our overall business. In
addressing the COVID-19 pandemic and helping meet urgent global health needs, tens of thousands of dedicated Viatris employees across the world have
worked to help ensure a stable supply of much needed treatments.
Because protecting the health and safety of our workforce remains paramount, we continue to align with government directives and the advice of
relevant international, national and local health authorities at every Viatris facility around the world. As a result, some of our customer facing field
personnel continue on a remote engagement model to ensure continued support for healthcare professionals, patient care and access to needed products and
we have continued to take extra precautions at our manufacturing facilities to protect our site personnel and operations. All of our manufacturing facilities,
and those of our key global partners, are currently operational and, at this time, we are not experiencing any significant disruptions.
The global spread of COVID-19 has created and continues to create volatility, uncertainty and economic disruption affecting the markets we serve,
including impacts on supply chain partners, third-party manufacturers, logistics providers and other vendors. The extent to which the COVID-19 pandemic
will impact our business, operations and financial results in future periods will depend on numerous evolving factors that are beyond our control and that
we may not be able to accurately predict, and could adversely impact our financial condition and results of operations in future periods. Due to the
Company’s ability to generate significant cash flows from operations, combined with our access to borrowing facilities and capital markets, we believe that
we currently have, and will maintain, the ability to meet foreseeable liquidity needs.
Financial Summary
The table below is a summary of the Company’s financial results for the year ended December 31, 2022 compared to the prior year period:
(In millions, except per share amounts)
Total revenues
Gross profit
Earnings (loss) from operations
Net earnings (loss)
Diluted earnings (loss) per share
Year Ended December 31,
2022
16,262.7 $
6,497.0
1,614.9
2,078.6
1.71 $
2021
17,886.3 $
5,575.5
(34.0)
(1,269.1)
(1.05) $
Change
(1,623.6)
921.5
1,648.9
3,347.7
2.76
$
$
A detailed discussion of the Company’s financial results can be found below in the section titled “Results of Operations.” As part of this
discussion, we also report sales performance using the non-GAAP financial measures of “constant currency” net sales and total revenues. These measures
provide information on the change in net sales and total revenues assuming that foreign currency exchange rates had not changed between the prior and
current period. The comparisons presented at constant currency rates reflect comparative local currency sales at the prior year’s foreign exchange rates. We
routinely evaluate our net sales and total revenues performance at constant currency so that sales results can be viewed without the impact of foreign
currency exchange rates, thereby facilitating a period-to-period comparison of our operational activities, and believe that this presentation also provides
useful information to investors for the same reason.
More information about non-GAAP measures used by the Company as part of this discussion, including adjusted cost of sales, adjusted gross
margins, adjusted net earnings, and adjusted EBITDA (all of which are defined below) are discussed further in this Part II. Item 7 under Results of
Operations and Results of Operations — Use of Non-GAAP Financial Measures.
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Results of Operations
2022 Compared to 2021
(In millions, except %s)
Net sales
Developed Markets
Greater China
JANZ
Emerging Markets
Total net sales
Other revenues
(3)
Consolidated total revenues
(4)
____________
2022
2021
% Change
2022 Currency
Impact
(1)
2022 Constant
Currency
Revenues
Constant Currency
% Change
(2)
Year Ended December 31,
$
$
9,768.9 $
2,201.2
1,632.4
2,615.6
16,218.1
10,428.7
2,212.8
2,027.4
3,144.7
17,813.6
44.6
16,262.7 $
72.7
17,886.3
(6)% $
(1)%
(19)%
(17)%
(9)%
(39)%
(9)% $
666.6 $
73.8
230.8
264.7
1,235.9
10,435.5
2,275.1
1,863.2
2,880.2
17,454.0
2.9
1,238.8 $
47.5
17,501.5
— %
3 %
(8)%
(8)%
(2)%
(35)%
(2)%
(1)
(2)
(3)
(4)
Currency impact is shown as unfavorable (favorable).
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.
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.
Amounts exclude intersegment revenue which eliminates on a consolidated basis.
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. Net sales for
the year ended December 31, 2022 were $16.22 billion, compared to $17.81 billion for the comparable prior year period, representing a decrease of $1.60
billion, or 9%. Other revenues for the year ended December 31, 2022 were $44.6 million, compared to $72.7 million for the comparable prior year period, a
decrease of $28.1 million.
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. On a constant
currency basis, the decrease in net sales was approximately $359.6 million, or 2% for the year ended December 31, 2022 compared to the prior year period.
This decrease was partially due to approximately $63.5 million related to the year over year impact of the sale of the biosimilars business on November 29,
2022. The decrease was also due to competition on certain key U.S. products representing a decline of approximately $188 million, and approximately
$591 million as a result of other base business erosion. The decrease in net sales from existing products was partially offset by approximately $483.1
million of new product sales, primarily in the U.S. New product sales include new products launched in 2022 and the carryover impact of new products,
including business development, launched within the last twelve months.
From time to time, a limited number of our products may represent a significant portion of our net sales, gross profit and net earnings. Generally,
this is due to the timing of new product introductions, seasonality, and the amount, if any, of additional competition in the market. Our top ten products in
terms of net sales, in the aggregate, represented 33% for the years ended December 31, 2022 and 2021.
Net sales are derived from our four reporting segments: Developed Markets, Greater China, JANZ and Emerging Markets.
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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.
This decrease was primarily the result of unfavorable impact of foreign currency translation of approximately $666.6 million, or 6%. Constant currency net
sales increased by approximately $6.8 million, or less than 1%, when compared to the prior year. Net sales within North America totaled approximately
$4.34 billion and net sales within Europe totaled approximately $5.43 billion. The increase in constant currency net sales was driven by new product sales,
including lenalidomide, unbranded insulin glargine and Semglee®, and cyclosporine ophthalmic emulsion in the U.S., and higher volumes of existing
products in Europe. This increase was partially offset by the year over year impact of the sale of the biosimilars business, and lower net sales of existing
products in the U.S., including Miacalcin®, Wixela Inhub® and Perforomist®, as a result of lower pricing and, to a lesser extent, volumes due to additional
competition.
Greater China Segment
Net sales from Greater China decreased by $11.6 million, or less than 1%, for the year ended December 31, 2022 when compared to the prior year.
This decrease was primarily the result of the unfavorable impact of foreign currency translation of approximately $73.8 million, or 3%. Constant currency
net sales increased by approximately $62.2 million, or 3%, when compared to the prior year, driven primarily by increased volumes of existing products.
JANZ Segment
Net sales from JANZ decreased by $395.0 million or 19% for the year ended December 31, 2022 when compared to the prior year. This decrease
was primarily the result of the unfavorable impact of foreign currency translation of approximately $230.8 million, or 11%. Constant currency net sales
decreased by approximately $164.2 million, or 8%, when compared to the prior year. 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®.
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%. Constant currency net
sales decreased by approximately $264.4 million, or 8%, when compared to the prior year. This decrease was primarily driven by lower volumes of
COVID-19 related products in India, primarily remdesivir and ambisome, and lower sales of ARV products as a result of competitive market conditions.
These decreases were partially offset by higher volumes in certain markets in Asia.
Cost of Sales and Gross Profit
Cost of sales decreased from $12.31 billion for the year ended December 31, 2021 to $9.77 billion for the year ended December 31, 2022. Cost of
sales was primarily impacted by purchase accounting related amortization of the step-up in the fair value of acquired inventory of $1.19 billion in the prior
year period, lower restructuring costs in the current year related to the 2020 restructuring program versus the prior year period, and lower costs associated
with other special items, which are described further in the section titled Use of Non-GAAP Financial Measures.
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. Adjusted gross margins were
approximately 59% for the year ended December 31, 2022, essentially flat when compared to the year ended December 31, 2021.
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A reconciliation between cost of sales, as reported under U.S. 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:
(In millions, except %s)
U.S. GAAP cost of sales
Deduct:
Purchase accounting amortization and other related items
Acquisition and divestiture related costs
Restructuring and related costs
Share-based compensation expense
Other special items
Adjusted cost of sales
Adjusted gross profit
(a)
Adjusted gross margin
(a)
____________
Year Ended December 31,
2022
$
9,765.7
$
(2,721.2)
(50.0)
(56.8)
(1.5)
(255.2)
6,681.0
9,581.7
$
$
$
$
2021
12,310.8
(4,039.7)
(13.9)
(534.7)
(2.3)
(333.0)
7,387.2
10,499.1
59 %
59 %
(a)
Adjusted gross profit is calculated as total revenues less adjusted cost of sales. Adjusted gross margin is calculated as adjusted gross profit divided by
total revenues.
Operating Expenses
Research & Development Expense
R&D expense for the year ended December 31, 2022 was $662.2 million, compared to $681.0 million for the prior year, a decrease of $18.8
million. This decrease was primarily due to the impact of synergies. Certain reclassifications were made to conform the prior period consolidated financial
statements to the current period presentation. Upfront and milestone-related charges in connection with collaboration and licensing arrangements
previously presented in R&D expense are now presented in Acquired IPR&D.
Acquired IPR&D
Acquired IPR&D expense for the year ended December 31, 2022 was $36.4 million, compared to $70.1 million for the prior year, a decrease of
$33.7 million. The decrease was primarily due to an upfront licensing payment in the prior year of $40.0 million for the development of an ophthalmic
product. This was partially offset by an upfront licensing payment of $20.0 million to Calliditas Therapeutics AB related to Nefecon® recorded during the
current year.
Selling, General & Administrative Expense
SG&A expense for the year ended December 31, 2022 was $4.18 billion, compared to $4.53 billion for the prior year, a decrease of $350.1
million. The decrease was primarily due to lower restructuring costs of approximately $322.8 million related to the 2020 restructuring program and the
impact of synergies. Partially offsetting these decreases were higher integration costs as a result of transitioning certain support services from Pfizer, costs
incurred in conjunction with the Biocon Biologics Transaction, and a goodwill impairment charge of $117.0 million related to the potential divestiture of
the Upjohn Distributor Markets.
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Litigation Settlements and Other Contingencies, Net
The following table includes the (gains) losses recognized in litigation settlements and other contingencies, net during the years ended
December 31, 2022 and 2021, respectively:
(In millions)
Contingent consideration adjustment (primarily related to Respiratory Delivery Platform)
Litigation settlements, net
Total litigation settlements and other contingencies, net
Year Ended December 31,
2022
2021
$
$
11.1 $
(6.7)
4.4 $
50.3
278.9
329.2
Litigation settlements in 2021 included a $264.0 million charge for the EpiPen® related settlement.
Interest Expense
Interest expense for the year ended December 31, 2022 totaled $592.4 million, compared to $636.2 million for the year ended December 31, 2021,
a decrease of $43.8 million. The decrease is primarily due to the impact of debt repayments.
Other (Income) Expense, Net
Other (income) expense, net includes gains and losses from divestitures, equity affiliates, foreign exchange, expense (income) related to post-
employment benefit plans, TSA income, and interest and dividend income. Other income, net for the year ended December 31, 2022 totaled $1.79 billion,
compared to $5.8 million for the year ended December 31, 2021. The increase was primarily driven by the gain from the Biocon Biologics Transaction of
$1.75 billion and income of $17.7 million related to reimbursement for transition services provided to Biocon Biologics subsequent to the closing of the
Biocon Biologics Transaction. The costs related to the transition services are included in SG&A and R&D. In addition, the prior year was negatively
impacted by losses of $61.9 million from the Company’s clean energy investments, which did not recur in 2022 as all of the clean energy investments
wound down operations at the end 2021.
Income Tax Provision
For the year ended December 31, 2022, the Company recognized an income tax provision of $734.6 million, compared to an income tax provision
of $604.7 million for the prior year, a change in the provision of $129.9 million. The income tax provision for the year ended December 31, 2022 was
negatively impacted by the gain from the Biocon Biologics Transaction. The income tax provision for the year ended December 31, 2021 was negatively
impacted by the tax rates applied to the reversal of intercompany profit in inventory reserve which was recorded on the opening balance sheet as part of the
Combination. This reserve eliminates the profit in inventory related to intercompany transactions and changes to this reserve occur as products are sold to
third parties. Also impacting the income tax provision for both periods was the changing mix of income earned in jurisdictions with differing tax rates.
2021 Compared to 2020
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form
10-K for the year ended December 31, 2021.
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 measure and should consider non-GAAP measures only as a
supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with U.S. GAAP. Additionally,
since these are not measures determined in accordance with U.S. GAAP, non-GAAP financial measures have no standardized meaning across companies,
or as prescribed by 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.
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Management uses these measures internally for forecasting, budgeting, measuring its operating performance, and incentive-based awards.
Primarily due to acquisitions, divestitures and other significant events which may impact comparability of our periodic operating results, we believe that an
evaluation of our ongoing operations (and comparisons of our current operations with historical and future operations) would be difficult if the disclosure
of our financial results was limited to financial measures prepared only in accordance with U.S. GAAP. We believe that non-GAAP financial measures are
useful supplemental information for our investors and when considered together with our U.S. GAAP financial measures and the reconciliation to the most
directly comparable U.S. GAAP financial measure, provide a more complete understanding of the factors and trends affecting our operations. The financial
performance of the Company is measured by senior management, in part, using adjusted metrics as described below, along with other performance metrics.
The Company’s use of such non-GAAP measures is governed by an adjusted reporting policy maintained by the Company and such non-GAAP measures
are reviewed in detail with the Audit Committee of the Board of Directors.
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 Net Earnings
Adjusted net earnings is a non-GAAP financial measure and provides an alternative view of performance used by management. Management
believes that, primarily due to acquisitions, divestitures and other significant events, an evaluation of the Company’s ongoing operations (and comparisons
of its current operations with historical and future operations) would be difficult if the disclosure of its financial results were limited to financial measures
prepared only in accordance with U.S. GAAP. Management believes that adjusted net earnings is an important internal financial metric related to the
ongoing operating performance of the Company, and is therefore useful to investors and that their understanding of our performance is enhanced by this
measure. Actual internal and forecasted operating results and annual budgets used by management include adjusted net earnings.
EBITDA and Adjusted EBITDA
EBITDA and adjusted EBITDA are non-GAAP financial measures that the Company believes are appropriate to provide additional information to
investors to demonstrate the Company’s ability to comply with financial debt covenants and assess the Company’s ability to incur additional indebtedness.
The Company also believes that adjusted EBITDA better focuses management on the Company’s underlying operational results and true business
performance and, is used, in part, for management’s incentive compensation. We calculate EBITDA as U.S. GAAP net earnings (loss) adjusted for net
contribution attributable to equity method investments, income tax provision (benefit), interest expense and depreciation and amortization. EBITDA is
further adjusted for share-based compensation expense, litigation settlements and other contingencies, net, and restructuring, impairment of long-lived
assets, acquisition and divestiture related and other special items to determine adjusted EBITDA. These adjustments are generally permitted under our
credit agreement in calculating adjusted EBITDA for determining compliance with our debt covenants.
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. 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. For the
acquisition of businesses accounted for under the provisions of ASC 805, Business Combinations, these purchase accounting impacts are excluded
regardless of the financing method used for the acquisitions, including the use of cash, long-term debt, the issuance of common stock, contingent
consideration or any combination thereof.
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Upfront and Milestone-Related R&D Expenses
Beginning in 2022, upfront and milestone-related R&D expenses related to collaboration and licensing arrangements made prior to regulatory
approval of a development product are no longer excluded from adjusted net earnings and adjusted EBITDA. For purposes of comparability, the prior
years’ non-GAAP financial measures have been updated to reflect this change. For the years ended December 31, 2021 and 2020, this resulted in a
decrease in adjusted EBITDA of $70.1 million and $42.5 million, respectively, and a decrease in adjusted net earnings of $57.8 million and $34.6 million,
respectively.
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.
Share-based Compensation Expense
Share-based compensation expense is excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA. Our share-based
compensation programs have become increasingly weighted toward performance-based compensation, which leads to variability and to a lack of
predictability as to the occurrence and/or timing of amounts incurred. 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. 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. In addition, tax adjustments to adjusted earnings are recorded to present items on an after-tax basis consistent
with the presentation of adjusted net earnings.
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.
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Litigation Settlements, Net
Charges and gains related to legal matters, such as those discussed in Note 20 Litigation included in Part II. Item 8 of this Form 10-K are generally
excluded from adjusted net earnings and adjusted EBITDA. Normal, ongoing defense costs of the Company made in the normal course of our business are
not excluded.
Reconciliation of U.S. GAAP Net Earnings (Loss) to Adjusted Net Earnings
A reconciliation between net earnings (loss) as reported under U.S. GAAP, and adjusted net earnings for the periods shown follows:
(In millions)
U.S. GAAP net earnings (loss)
Purchase accounting related amortization (primarily included in cost of sales)
Impairment of goodwill related to assets held for sale
Litigation settlements and other contingencies, net
Interest expense (primarily amortization of premiums and discounts on long term debt)
Clean energy investments pre-tax loss
Acquisition and divestiture related costs (primarily included in SG&A)
Biocon Biologics gain on divestiture (included in other (income) expense, net)
Restructuring related costs
Share-based compensation expense
Other special items included in:
(b)
(a)
(c)
(a)
(d)
Cost of sales
Research and development expense
Selling, general and administrative expense
Other (income) expense, net
(e)
(f)
Tax effect of the above items and other income tax related items
(g)
Adjusted net earnings
Significant items for the year ended December 31, 2022 include the following:
Year Ended December 31,
2022
2,078.6 $
2,721.3
117.0
4.4
(48.7)
—
475.7
(1,754.1)
86.9
116.5
255.2
1.0
68.8
(3.8)
(41.7)
4,077.1 $
2021
(1,269.1) $
4,039.7
—
329.2
(53.8)
61.9
234.6
—
899.4
111.2
333.0
13.1
49.5
(8.0)
(330.7)
4,410.0 $
2020
(669.9)
1,933.6
—
107.8
12.6
48.4
613.6
—
323.1
79.2
438.1
4.7
44.6
(16.8)
(581.8)
2,337.2
$
$
(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.
(b)
Acquisition and divestiture related costs consist primarily of transaction costs including legal and consulting fees and integration activities.
(c)
For the year ended December 31, 2022, charges include approximately $56.8 million in cost of sales, approximately $1.4 million in R&D, and
approximately $28.7 million in SG&A. Refer to Note 18 Restructuring included in Part II. Item 8 of this Form 10-K for additional information.
(d)
For the year ended December 31, 2022, charges include incremental manufacturing variances at plants in the 2020 restructuring program of
approximately $118.4 million and inventory reserves related to the potential divestiture of the Upjohn Distributor Markets of approximately
$44.8 million.
(e)
Beginning in 2022, upfront and milestone-related R&D expenses related to collaboration and licensing arrangements made prior to regulatory
approval of a development product are no longer excluded from adjusted net earnings and adjusted EBITDA. For purposes of comparability, the
prior years’ non-GAAP financial measures have been updated to reflect this change. For the years ended December 31, 2021 and 2020, this
resulted in a decrease in adjusted EBITDA of $70.1 million and $42.5 million, respectively, and a decrease in adjusted net earnings of $57.8
million and $34.6 million, respectively.
(f)
For the year ended December 31, 2022, charges include costs of $39.5 million related to the potential divestiture of the Upjohn Distributor Markets.
(g)
Adjusted for changes for uncertain tax positions and for certain impacts of the Combination.
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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, 2022 compared to
the prior year periods:
(In millions)
U.S. GAAP net earnings (loss)
Add / (deduct) adjustments:
Net contribution attributable to equity method investments
Income tax provision (benefit)
Interest expense
Depreciation and amortization
(b)
(a)
EBITDA
Add / (deduct) adjustments:
Share-based compensation expense
Litigation settlements and other contingencies, net
Biocon Biologics gain on divestiture
Impairment of goodwill related to assets held for sale
Restructuring, acquisition and divestiture related and other special items
(c)
Adjusted EBITDA
(a)
Includes amortization of premiums and discounts on long-term debt.
(b)
Includes purchase accounting related amortization.
Year Ended December 31,
2022
2021
2020
$
2,078.6 $
(1,269.1) $
(669.9)
—
734.6
592.4
3,027.6
6,433.2 $
116.4
4.4
(1,754.1)
117.0
859.9
5,776.8 $
$
$
61.9
604.7
636.2
4,506.5
4,540.2 $
111.2
329.2
—
—
1,375.4
6,356.0 $
48.4
(51.3)
497.8
2,216.1
2,041.1
79.2
107.8
—
—
1,383.5
3,611.6
(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. 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. Nevertheless, our ability to satisfy our working capital
requirements and debt service obligations, and fund planned capital expenditures, share repurchases, or dividend payments, will substantially depend upon
our future operating performance (which will be affected by prevailing economic conditions), and financial, business and other factors, some of which are
beyond our control.
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. Net cash provided by operating activities is derived from net
earnings (loss) adjusted for non-cash operating items, gains and losses attributed to investing and financing activities and changes in operating assets and
liabilities resulting from timing differences between the receipts and payments of cash, including changes in cash primarily reflecting the timing of cash
collections from customers, payments to vendors and employees and tax payments in the ordinary course of business.
The decrease in net cash provided by operating activities was principally due to the timing of cash payments and collections, including payments
for litigation matters, and due to deal-related expenses, primarily taxes and transaction costs, associated with the Biocon Biologics Transaction. These
increases were partially offset by lower payments for restructuring activities and other special items, and the impact of synergies.
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Investing Activities
Net cash from investing activities was $1.52 billion for the year ended December 31, 2022, as compared to net cash used in investing activities of
$117.8 million for the year ended December 31, 2021, an increase of $1.64 billion.
In 2022, significant items in investing activities included the following:
•
•
proceeds from the sale of assets of $1.95 billion related to the Biocon Biologics Transaction; and
capital expenditures, primarily for equipment and facilities, totaling approximately $406.0 million. While there can be no assurance that
current expectations will be realized, capital expenditures for the 2023 calendar year are expected to be approximately $400 million to $500
million.
In 2021, significant items in investing activities included the following:
•
•
•
cash received from acquisitions, net totaling approximately $277.0 million related to additional target cash balances received from Pfizer
subsequent to the closing of the Combination;
proceeds from the sale of assets of $96.7 million, primarily related to a group of OTC products in the U.S.; and
capital expenditures, primarily for equipment and facilities, totaling approximately $457.2 million.
Financing Activities
Net cash used in financing activities was $3.88 billion for the year ended December 31, 2022, as compared to net cash used in financing activities
of $3.01 billion for the year ended December 31, 2021, an increase of $865.9 million.
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 2021, significant items in financing activities included the following:
•
•
•
•
•
long-term debt payments of approximately $4.20 billion, consisting of the redemption of $2.25 billion of the 3.150% Senior Notes due 2021,
repayment of $1.35 billion of borrowings under the 2020 Revolving Facility and the 2021 Revolving Facility, and repayment of $600.0
million of the USD Term Loan;
long-term borrowings of $1.71 billion, consisting of borrowings of $1.35 billion under the 2020 Revolving Facility and the 2021 Revolving
Facility, and borrowings of $360.0 million under the YEN Term Loan;
net short-term borrowings of $392.1 million;
deferred non-contingent payments for product rights totaling approximately $456.0 million primarily related to the acquisition of Aspen’s
thrombosis product portfolio in Europe; and
cash dividends paid of $399.0 million.
Refer to the consolidated statements of cash flows in Part II. Item 8 of this Form 10-K for additional details on other significant sources and uses
of cash during the years ended December 31, 2022 and 2021.
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Capital Resources
Our cash and cash equivalents totaled $1.26 billion at December 31, 2022, and the majority of these funds are held by our non-U.S. subsidiaries.
In early 2023, approximately $700 million of cash was used to finance the acquisitions of Oyster Point and Famy Life Sciences. 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.
In July 2021, Viatris entered into (i) the YEN Term Loan Facility and (ii) the 2021 Revolving Facility with various syndicates of banks. The YEN
Term Loan Facility and the 2021 Revolving Facility will mature in July 2026.
The Company has access to $4.0 billion under the 2021 Revolving Facility. Up to $1.65 billion of the 2021 Revolving Facility may be used to
support borrowings under our Commercial Paper Program. As of December 31, 2022, the Company did not have any borrowings outstanding under the
Commercial Paper Program and the 2021 Revolving Facility.
In addition, MPI, a wholly owned subsidiary of the Company, has access to $400 million under the Receivables Facility, which expires in April
2025. As of December 31, 2022, the Company did not have any borrowings outstanding under the Receivables Facility.
In August 2020, the Company entered into the Note Securitization Facility for borrowings up to $200 million, which was amended to extend the
term to August 2023. As of December 31, 2022, the Company did not have any borrowings outstanding under 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 amount that we may borrow at a given point in time is determined based on the
amount of qualifying accounts receivable that are present at such point in time. 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. In addition, the agreements governing the Receivables Facility and Note Securitization Facility contain various customary affirmative and negative
covenants, and customary default and termination provisions.
We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable.
These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over and risk
related to the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest
in the underlying accounts receivable once sold. We derecognized $34.7 million and $29.6 million of accounts receivable as of December 31, 2022 and
2021 under these factoring arrangements, respectively.
We are continuously evaluating the potential acquisition of products, as well as companies, as a strategic part of our future growth. Consequently,
we may utilize current cash reserves or incur additional indebtedness to finance any such acquisitions, which could impact future liquidity. Also, on an
ongoing basis, we review our operations including the evaluation of potential divestitures of products and businesses as part of our future strategy. Any
divestitures could impact future liquidity. In addition, we plan to continue to explore various other ways to create, enhance or otherwise unlock the value of
the Company’s unique global platform in order to create shareholder value.
In November 2022, the Company provided an update on the strategic priorities announced in February 2022, including identifying the following
businesses no longer considered core to its future strategy that the Company intends to divest:
• OTC;
• API (while retaining some selective development API capabilities);
• Women’s health care, primarily related to our oral and injectable contraceptives. 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.
For information regarding our dividends paid and declared and share repurchase program, refer to Note 2 Summary of Significant Accounting
Policies in Part II. Item 8 of this Form 10-K.
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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, 2022, refer to Note 11 Debt in Part II. Item 8 of this Form 10-K.
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.
The Company is in compliance with its covenants at December 31, 2022 and expects to remain in compliance for the next twelve months.
Supplemental Guarantor Financial Information
Viatris Inc. is the issuer of the outstanding Registered Upjohn Notes, which are fully and unconditionally guaranteed on a senior unsecured basis
by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
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
II B.V., Viatris Inc. and Utah Acquisition Sub Inc.
The respective obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. as guarantors of the applicable series of Senior
U.S. Dollar Notes are senior unsecured obligations of the applicable guarantor and rank pari passu in right of payment with all of such guarantor’s existing
and future senior unsecured obligations that are not expressly subordinated to such guarantor’s guarantee of the applicable series of Senior U.S. Dollar
Notes, rank senior in right of payment to any future obligations of such guarantor that are expressly subordinated to such guarantor’s guarantee of the
applicable series of Senior U.S. Dollar Notes, and are effectively subordinated to such guarantor’s existing and future secured obligations to the extent of
the value of the collateral securing such obligations. Such obligations are structurally subordinated to all of the existing and future liabilities, including
trade payables, of the existing and future subsidiaries of such guarantor that do not guarantee the applicable series of Senior U.S. Dollar Notes.
The guarantees by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc. under the applicable series of Senior U.S. Dollar Notes will terminate
under certain customary circumstances, each as described in the applicable indenture, including: (1) a sale or disposition of the applicable guarantor in a
transaction that complies with the applicable indenture such that such guarantor ceases to be a subsidiary of the issuer of the applicable series of Senior
U.S. Dollar Notes; (2) legal defeasance or covenant defeasance or if the issuer’s obligations under the applicable indenture are discharged; (3) with respect
to the Utah U.S. Dollar Notes, the earlier to occur of (i) with respect to the guarantee provided by Mylan Inc., (x) the release of Utah Acquisition Sub Inc.’s
guarantee under all applicable Mylan Inc. Debt (as defined in the applicable indenture) and (y) Mylan Inc. no longer having any obligations in respect of
any Mylan Inc. Debt and (ii) with respect to the guarantee provided by Mylan II B.V., (x) the release of Mylan II B.V.’s guarantee under all applicable
Triggering Indebtedness (as defined in the applicable indenture) and (y) the issuer and/or borrower of the applicable Triggering Indebtedness no longer
having any obligations with respect to such Triggering Indebtedness; (4) with respect to the guarantees provided by Utah Acquisition Sub Inc. and Mylan II
B.V. of the Mylan Inc. 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 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.
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The guarantee obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. under the Senior U.S. Dollar Notes are subject
to certain limitations and terms similar to those applicable to other guarantees of similar instruments, including that (i) the guarantees are subject to
fraudulent transfer and conveyance laws and (ii) each guarantee is limited in amount to an amount not to exceed the maximum amount that can be
guaranteed by the applicable guarantor without rendering the guarantee, as it relates to such guarantor, voidable under applicable fraudulent transfer and
conveyance laws or similar laws affecting the rights of creditors generally.
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.
(In millions)
ASSETS
Current assets
Non-current assets
LIABILITIES AND EQUITY
Current liabilities
Non-current liabilities
(In millions)
Revenues
Gross profit
Loss (earnings) from operations
Net earnings (loss)
Other Commitments
Combined Summarized Balance Sheet Information of
Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and
Mylan II B.V.
December 31, 2022
December 31, 2021
$
996.3 $
61,972.6
26,631.5
15,265.2
280.2
60,298.0
23,619.9
16,465.6
Combined Summarized Income Statement Information
of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and
Mylan II B.V.
Year Ended December 31,
2022
Year Ended December 31,
2021
$
— $
—
(1,132.4)
2,078.6
—
—
(1,023.9)
(1,269.1)
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. 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.
While the Company believes that it has meritorious defenses with respect to the claims asserted against it and the assumed legal matters referenced
above, and intends to vigorously defend its position, the process of resolving these matters is inherently uncertain and may develop over a long period of
time, and so it is not possible to predict the ultimate resolution of any such matter. It is possible that an unfavorable resolution of any of the ongoing matters
could have a material effect on the Company’s business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
In conjunction with the Combination, Viatris entered into a TSA with Pfizer pursuant to which each party provides certain limited transition
services to the other party generally for an initial period of 24 months from the closing date of the Combination. 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. 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. As of December 31, 2022, the Company has exited substantially all transition services with Pfizer.
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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.
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. We anticipate our cash requirements related to ordinary
course purchases of goods and services will be consistent with our past levels.
In the normal course of business, Viatris periodically enters into employment, legal settlement and other agreements which incorporate
indemnification provisions. While the maximum amount to which Viatris may be exposed under such agreements cannot be reasonably estimated, the
Company maintains insurance coverage, which management believes will effectively mitigate the Company’s obligations under these indemnification
provisions. No amounts have been recorded in the consolidated financial statements with respect to the Company’s obligations under such agreements.
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 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. 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.
Included within these policies are certain policies which contain critical accounting estimates and, therefore, have been deemed to be “critical
accounting policies.” Critical accounting estimates are those which require management to make assumptions about matters that were uncertain at the time
the estimate was made and for which the use of different estimates, which reasonably could have been used, or changes in the accounting estimates that are
reasonably likely to occur from period to period could have a material impact on our financial condition or results of operations. We have identified the
following to be our critical accounting policies: the determination of net revenue provisions, acquisitions, intangible assets, goodwill and contingent
consideration, income taxes and the impact of existing legal matters.
Revenue Recognition
We recognize revenues in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes net
revenue for product sales when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we
expect to be entitled to in exchange for those goods or services. Revenues are recorded net of provisions for variable consideration, including discounts,
rebates, governmental rebate programs, price adjustments, returns, chargebacks, promotional programs and other sales allowances. 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). Amounts recorded for revenue deductions can result from a complex series of judgements
about future events and uncertainties and can rely heavily on estimates and assumptions. As such, they have been identified as critical accounting estimates.
The following section briefly describes the nature of our provisions for variable consideration and how such provisions are estimated:
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•
•
•
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 indirect customers then independently select a wholesaler from which to purchase the products at these contracted prices.
Alternatively, certain wholesalers may enter into agreements with indirect customers that establish contract pricing for certain products, which the
wholesalers provide. Under either arrangement, Viatris will provide credit to the wholesaler for any difference between the contracted price with
the indirect party and the wholesaler’s invoice price. Such credits are called chargebacks. The provision for chargebacks is based on expected sell-
through levels by our wholesaler customers to indirect customers, as well as estimated wholesaler inventory levels. 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. These
programs generally provide that the customer receives credit directly related to the amount of purchases or credits upon the attainment of pre-
established volumes. Also included in this category are prompt pay discounts, administrative fees and price adjustments to reflect decreases in the
selling prices of products. 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. The Company’s estimate of the provision for returns is generally based upon historical experience with actual returns. Generally, returned
products are destroyed and customers are refunded the sales price in the form of a credit. 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. Manufacturers of pharmaceutical products that are covered by the Medicaid
program are required to pay rebates to each state based on a statutory formula set forth in the Social Security Act. Medicare beneficiaries are
eligible to obtain discounted prescription drug coverage from private sector providers. In addition, certain states have also implemented
supplemental rebate programs that obligate manufacturers to pay rebates in excess of those required under federal law. Our estimate of these
rebates is based on the historical trends of rebates paid as well as on changes in wholesaler inventory levels and increases or decreases in the level
of sales. We estimate discounts on branded prescription drug sales to Medicare Part D participants in the Medicare “coverage gap” based on
historical experience of prescriptions and utilization expected to result in the discount of the “coverage gap”.
Outside the U.S., the majority of our pharmaceutical sales are contractually or legislatively governed. In certain European countries, certain
rebates are calculated on the governments total pharmaceutical spending or on specific product sale thresholds. We utilize historical data and
obtain third party information to determine the adequacy of these accruals. Also, this provision includes price reductions that are mandated by law
outside of the U.S.
A change of 5% would have an effect on our reserve balance of approximately $18.3 million.
The following is a rollforward of the categories of variable consideration during 2022:
(In millions)
Chargebacks
Rebates, promotional programs and
other sales allowances
Returns
Governmental rebate programs
Total
$
$
$
Balance at
December 31,
2021
Current Provision
Related to Sales Made
in the Current Period
Balances Divested
Checks/ Credits
Issued to Third
Parties
Effects of Foreign
Exchange
Balance at
December 31,
2022
591.7 $
6,192.2 $
(53.4) $
(6,205.6) $
(1.5) $
523.4
1,373.0
686.8
399.2
3,050.7 $
4,346.2
296.7
608.9
11,444.0 $
(215.1)
(16.0)
(34.1)
(318.6) $
(4,177.5)
(447.6)
(602.4)
(11,433.1) $
(42.4)
(6.5)
(5.1)
(55.5) $
1,284.2
513.4
366.5
2,687.5
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Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net revenues and in accounts
receivable and other current liabilities. 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)
Accounts receivable, net
Other current liabilities
Total
December 31,
2022
December 31,
2021
$
$
1,798.7 $
888.8
2,687.5 $
1,688.6
1,362.1
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. Historically,
we have not recorded in any current period any material amounts related to adjustments made to prior period reserves.
Acquisitions, Intangible Assets, Goodwill and Contingent Consideration
The Company accounts for acquired businesses using the acquisition method of accounting in accordance with the provisions of ASC 805,
Business Combinations, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated
fair values. The cost to acquire businesses is allocated to the underlying net assets of the acquired business based on estimates of their respective fair
values. Amounts allocated to acquired IPR&D are capitalized at the date of acquisition and, at that time, such IPR&D assets have indefinite lives. As
products in development are approved for sale, amounts are allocated to product rights and licenses and will be amortized over their estimated useful lives.
Finite-lived intangible assets are amortized over the expected life of the asset. Any excess of the purchase price over the estimated fair values of the net
assets acquired is recorded as goodwill. 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. IPR&D assets acquired as part of an asset acquisition are expensed immediately if they have no alternative future uses.
The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives,
can materially impact our results of operations. Fair values and useful lives are determined based on, among other factors, the expected future period of
benefit of the asset, the various characteristics of the asset and projected cash flows. 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.
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. 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.
Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period.
Accordingly, changes in the assumptions described above could have a material impact on the Company’s consolidated financial condition and results of
operations.
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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. Under the authoritative guidance issued by the FASB, we have the option to first assess the qualitative factors to determine
whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to
perform a quantitative goodwill impairment test. If we choose to use qualitative factors and determine that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount, then the goodwill impairment test would be required. The goodwill impairment test requires the Company to
estimate the fair value of the reporting unit and to compare the fair value of the reporting unit with its carrying amount. If the carrying amount is less than
its fair value, then no impairment is recognized. If the carrying amount recorded exceeds the fair value calculated, an impairment charge is recorded for the
difference. The judgments made in determining the projected cash flows used to estimate the fair value can materially impact the Company’s financial
condition and results of operations.
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 determination of the fair value of the reporting units requires the Company to make
significant estimates and assumptions that affect the reporting unit’s expected future cash flows. 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.
As of March 31, 2022 and April 1, 2022, the allocation of the Company’s total goodwill (prior to the reclassification of goodwill to assets held for
sale) was as follows: North America $3.61 billion, Europe $4.95 billion, Emerging Markets $1.64 billion, JANZ $0.78 billion and Greater China $0.97
billion.
As of March 31, 2022 and April 1, 2022, the Company determined that the fair value of the North America and Greater China reporting units was
substantially in excess of the respective unit’s carrying value.
For the Europe reporting unit, the estimated fair value exceeded its carrying value by approximately $797 million or 5.3% for both the interim and
annual goodwill impairment tests. As it relates to the income approach for the Europe reporting unit at March 31, 2022 and April 1, 2022, the Company
forecasted cash flows for the next 10 years. 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%. Under
the market-based approach, we utilized an estimated range of market multiples of 7.5 to 8.0 times EBITDA plus a control premium of 15.0%. If all other
assumptions are held constant, a reduction in the terminal value growth rate by 3.0% or an increase in discount rate by 1.5% would result in an impairment
charge for the Europe reporting unit.
For the JANZ reporting unit, the estimated fair value exceeded its carrying value by approximately $231 million or 7.4% for both the interim and
annual goodwill impairment tests. As it relates to the income approach for the JANZ reporting unit at March 31, 2022 and April 1, 2022, the Company
forecasted cash flows for the next 10 years. During the forecast period, the revenue compound annual growth rate was approximately negative 4.8%. A
terminal year value was calculated assuming no revenue growth rate. The discount rate utilized was 6.0% and the estimated tax rate was 30.4%. Under the
market-based approach, we utilized an estimated market multiple of 6.0 times EBITDA plus a control premium of 15.0%. 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.
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. During the forecast period, the revenue compound annual growth rate was approximately
1.6%. A terminal year value was calculated with a 0.8% revenue growth rate applied. The discount rate utilized was 10.5% and the estimated tax rate was
18.4%. Under the market-based approach, we utilized an estimated market multiple of 7.5 times EBITDA plus a control premium of 15.0%. 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.
In the fourth quarter of 2022, we determined that our Upjohn Distributor Markets should be classified as held for sale on the December 31, 2022
consolidated balance sheet. The Company allocated goodwill to its Upjohn Distributor Markets using a relative fair value approach and recorded a goodwill
impairment charge of $117.0 million within the Emerging Markets reporting unit, which was recorded within SG&A in the consolidated statement of
operations.
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Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. In addition, changes in
underlying assumptions, especially as they relate to the key assumptions detailed, could have a significant impact on the fair value of the reporting units.
The carrying values of long-lived assets, which include property, plant and equipment and intangible assets with finite lives, are evaluated
periodically in relation to the expected future undiscounted cash flows of the underlying assets and monitored for other potential triggering events. 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. The assessment for
impairment is based on our ability to recover the carrying value of the long-lived assets or asset grouping by analyzing the expected future undiscounted
pre-tax cash flows specific to the asset or asset grouping. If the carrying amount is greater than the undiscounted cash flows, the Company recognizes an
impairment loss for the excess of the carrying amount over the estimated fair value based on discounted cash flows.
Significant management judgment is involved in estimating the recoverability of these assets and is dependent upon the accuracy of the
assumptions used in making these estimates, as well as how the estimates compare to the eventual future operating performance of the specific asset or
asset grouping. For the years ended December 31, 2021 and 2020, the Company recorded $83.4 million (related to the sale of a group of OTC products in
the U.S.) and $45.0 million, respectively, of impairment charges for finite-lived intangible assets, which were recorded as a component of amortization
expense. At December 31, 2022 and 2021, the Company’s finite-lived intangible assets totaled $22.57 billion and $26.09 billion, respectively. Changes to
any of the Company’s assumptions related to the estimated fair value based on the discounted cash flows, including discount rates or the competitive
environment related to the assets, could lead to future material impairment charges. Any future long-lived assets impairment charges could have a material
impact on the Company’s consolidated financial condition and results of operations.
If the divestitures of the Upjohn Distributor Markets are not completed during 2023, the distribution arrangements will expire and the Company
will wind down operations in these markets, which may result in additional asset impairment and other costs being incurred. These additional charges could
be in excess of $300 million.
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. Impairment is determined to
exist when the fair value of IPR&D assets, which is based upon updated forecasts and commercial development plans, is less than the carrying value of the
assets being tested. 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.
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. Changes to
any of the Company’s assumptions including changes to or abandonment of development programs, regulatory timelines, discount rates or the competitive
environment related to the assets could lead to future material impairment charges.
Income Taxes
We compute our income taxes based on the statutory tax rates and tax reliefs available to Viatris in the various jurisdictions in which we generate
income. Significant judgment is required in determining our income taxes and in evaluating our tax positions. We establish reserves in accordance with
Viatris’ policy regarding accounting for uncertainty in income taxes. Our policy provides that the tax effects from an uncertain tax position be recognized in
Viatris’ financial statements, only if the position is more likely than not of being sustained upon audit, based on the technical merits of the position. We
adjust these reserves in light of changing facts and circumstances, such as the settlement of a tax audit. Our provision for income taxes includes the impact
of reserve provisions and changes to reserves. Favorable resolution would be recognized as a reduction to our provision for income taxes in the period of
resolution or expiration of the underlying statutes of limitation. Based on this evaluation, as of December 31, 2022, our reserve for unrecognized tax
benefits totaled $296.7 million, of which $258.1 million was recorded in connection with the Combination and is subject to Pfizer’s indemnification
obligations to Viatris under the Tax Matters Agreement.
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Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the
existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred in certain taxing jurisdictions
over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence such as our
projections for future growth.
Based on this evaluation and other factors, as of December 31, 2022, a valuation allowance of $387.0 million has been recorded in order to
measure only the portion of the deferred tax asset that more likely than not will be realized. The amount of the deferred tax asset considered realizable,
however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of
cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth. When assessing the
realizability of deferred tax assets, management considers all available evidence, including historical information, long-term forecasts of future taxable
income and possible tax planning strategies. Amounts recorded for valuation allowances can result from a complex series of estimates, assumptions and
judgments about future events. 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.
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. An estimate is made to accrue for a loss
contingency relating to any of these legal proceedings if it is probable that a liability was incurred as of the date of the financial statements and the amount
of loss can be reasonably estimated. 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.
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.
Impact of Currency Fluctuations and Inflation
Because our results are reported in U.S. Dollars, changes in the rate of exchange between the U.S. Dollar and the local currencies in the markets in
which we operate, mainly the Euro, Indian Rupee, Chinese Renminbi, Japanese Yen, Australian Dollar, Canadian Dollar, Pound Sterling and South Korean
Won affect our results as previously noted. 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.
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. While inflationary and other macroeconomic pressures may ease, we
continue to experience higher costs and we expect that this will likely continue throughout 2023.
Recent Accounting Pronouncements
Refer to Note 2 Summary of Significant Accounting Policies in Part II. Item 8 of this Form 10-K for recently adopted accounting pronouncements
and recently issued accounting pronouncements not yet adopted.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk
A significant portion of our revenues and earnings are exposed to changes in foreign currency exchange rates. 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.
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From time to time, foreign exchange risk is managed through the use of foreign currency forward-exchange contracts. These contracts are used to
offset the potential earnings effects from mostly intercompany foreign currency assets and liabilities that arise from operations and from intercompany
loans. Any unhedged foreign exchange exposures continue to be subject to market fluctuations.
Our financial instrument holdings at year end were analyzed to determine their sensitivity to foreign exchange rate changes. The fair values of
these instruments were determined as follows:
•
•
foreign currency forward-exchange contracts — net present values
foreign currency denominated receivables, payables, debt and loans — changes in exchange rates
In this sensitivity analysis, we assumed that the change in one currency’s rate relative to the U.S. Dollar would not have an effect on other
currencies’ rates relative to the U.S. Dollar. All other factors were held constant.
If there were an adverse change in foreign currency exchange rates of 10%, the expected net effect on net income related to Viatris’ foreign
currency denominated financial instruments would not be material.
The Company is also exposed to translation risk on non-U.S. dollar-denominated net assets. Non-U.S. dollar borrowings, principally our Euro and
Yen denominated long-term debt, are used to hedge the foreign currency exposures of our net investment in certain foreign affiliates and are designated as
hedges of net investments. The 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.
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. In order to maintain a certain ratio of fixed to variable rate debt, from time to
time, depending on market conditions, Viatris will use derivative financial instruments such as interest rate swaps to fix interest rates on variable-rate
borrowings or to convert fixed-rate borrowings to variable interest rates.
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,
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. 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.
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. 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.
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ITEM 8.
Financial Statements And Supplementary Data
Index to Consolidated Financial Statements and
Supplementary Financial Information
Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2021
Consolidated Statements of Comprehensive Earnings (Loss) for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Equity for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
75
Page
76
77
81
82
83
84
85
86
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Management’s Report on Internal Control over Financial Reporting
Management of Viatris Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of America. In order to evaluate the
effectiveness of internal control over financial reporting, management has conducted an assessment, including testing, using the criteria in Internal Control
- Integrated Framework (2013), issued by COSO. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
As a result of this assessment, management has concluded that the Company maintained effective internal control over financial reporting as of
December 31, 2022 based on the criteria in Internal Control - Integrated Framework (2013) issued by COSO.
Our independent registered public accounting firm, Deloitte & Touche LLP (PCAOB ID No. 34), has audited the effectiveness of the Company’s
internal control over financial reporting. Deloitte & Touche LLP’s opinion on the Company’s internal control over financial reporting appears on page 80 of
this Annual Report on Form 10-K.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Viatris Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Viatris Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the
related consolidated statements of operations, comprehensive earnings (loss), equity, and cash flows, for each of the three years in the period ended
December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2023, expressed an unqualified opinion on
the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.
Goodwill – Viatris Inc. Europe and JANZ Reporting Units – Refer to Note 9 to the financial statements.
Critical Audit Matter Description
The Company performed an interim and annual goodwill impairment test as of March 31, 2022 and April 1, 2022, respectively. As of March 31, 2022 and
April 1, 2022, the Company had $11.95 billion of consolidated goodwill, $4.95 billion and $0.78 billion of which was allocated to the Viatris Inc. Europe
and JANZ reporting units, respectively. The Company’s evaluation of goodwill for impairment involves the comparison of the estimated fair value of each
reporting unit to its carrying value. The Company performed its valuation analysis, using both income and market-based approaches, to determine the fair
value of its Europe and JANZ reporting units. The determination of the fair value requires management to make significant estimates and assumptions that
affect the reporting unit’s expected future cash flows. These estimates and assumptions, utilizing Level 3 valuation inputs, primarily include, but are not
limited to, market multiples, control premiums, discount rates, terminal growth rates, operating income before depreciation and amortization, and capital
expenditures forecasts. The fair values of the Europe and the JANZ reporting units exceeded their carrying values by approximately $0.8 billion, or 5.3%,
and $0.23 billion, or 7.4%, respectively, as of March 31, 2022 and April 1, 2022 and, therefore, no impairments were recognized.
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Given that the Europe and JANZ reporting unit’s revenues are sensitive to changes in consumer demand, the approval of new product launches, the
expansion of existing products into new jurisdictions (which have differentiated distribution and commercialization models throughout the regions), and the
impact of business development activity, auditing management’s judgments regarding forecasts of future revenues, and the selection of the discount rates
and terminal growth rates required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value
specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenues (“forecasts”), and the selection of the discount rates and terminal growth rates for the
Europe and the JANZ reporting units included the following procedures, among others:
• We tested the effectiveness of controls over the review of the goodwill impairment tests, including those over the development of the business
forecasts of future revenues and the selection of the discount rates and terminal growth rates.
• We evaluated management’s ability to accurately forecast future revenues of the Europe and JANZ reporting units by comparing actual results to
management’s historical forecasts.
• We evaluated the reasonableness of management’s revenue forecasts by comparing the projections to (1) historical results, (2) internal
communications to management and the Board of Directors, and (3) forecasted information included in Company press releases. We also
considered third party reports related to macroeconomic and industry trends and made inquiries of management, including various regional
commercial and operations leaders to assess key inputs in the forecast assumptions.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, discount rates, and terminal
growth rates, including (1) testing the source information underlying the determination of the discount rates and terminal growth rates and the
mathematical accuracy of the calculations, (2) developing a range of independent estimates and comparing those to the discount rates selected by
management, and (3) considering third party macroeconomic reports.
Net Revenue Provisions – Sales Returns Accrual at MPI – Refer to Note 3 to the financial statements.
Critical Audit Matter Description
The Company provides customers with the ability to return 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. The Company’s estimate of the provision for returns is generally
based upon historical experience with actual returns. The returns reserve at MPI represents a significant component of the global sales returns reserve as of
December 31, 2022.
Estimating the amounts to be accrued for returns requires significant estimation as management’s model utilizes historical experience with actual returns
and considers levels of inventory in the distribution channel, product dating and expiration period, size and maturity of the market prior to a product launch,
entrance into the market of additional competitors, and changes in the regulatory environment. Given the volume of sales returns and the level of estimation
uncertainty involved, auditing management’s judgments required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Net Revenue Provisions – Sales Returns accrual included the following, among others:
• We evaluated the Company’s methodology and assumptions in developing their sales returns accrual model, including assessing the completeness
and accuracy of the underlying data used by management in their estimates.
• We tested the effectiveness of controls over the calculation of the sales returns reserve at MPI.
• We compared prior period sales returns accruals to sales returns credits subsequently issued to evaluate management’s ability to accurately
forecast sales returns activity.
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• We developed independent expectations of product-level sales returns accruals and sales returns accruals in the aggregate using the following: 1)
historical sales and returns activity, 2) remaining shelf life information, 3) finished goods inventory on-hand at the end of the period, and 4)
adjustments for known or anticipated sales return activity based on market dynamics (market prior to Viatris launch, impact of competition, and
overall regulatory environment) and compared those to the recorded amounts.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
February 27, 2023
We have served as the Company's auditor since 1976.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Viatris Inc.:
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Viatris, Inc. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 27, 2023, expressed an unqualified
opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
February 27, 2023
80
VIATRIS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In millions, except share and per share amounts)
ASSETS
Table of Contents
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Assets held for sale
Total current assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Deferred income tax benefit
Other assets
Total assets
Liabilities
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Short-term borrowings
Income taxes payable
Current portion of long-term debt and other long-term obligations
Other current liabilities
Total current liabilities
Long-term debt
Deferred income tax liability
Other long-term obligations
Total liabilities
Equity
Viatris Inc. shareholders’ equity
Common stock: $0.01 par value, 3,000,000,000 shares authorized; shares issued and outstanding: 1,213,793,231
and 1,209,507,463, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements
81
December 31,
2022
December 31,
2021
$
$
$
1,259.9 $
3,814.5
3,519.5
1,811.2
230.3
10,635.4
3,024.5
22,607.1
10,425.8
925.9
2,403.5
50,022.2 $
1,766.6 $
—
279.6
1,259.1
3,440.9
6,746.2
18,015.2
2,432.0
1,756.5
28,949.9
12.1
18,645.8
5,175.6
(2,761.2)
21,072.3
701.2
4,266.4
3,977.7
1,957.6
—
10,902.9
3,188.6
26,134.2
12,113.7
1,332.7
1,170.7
54,842.8
1,657.4
1,493.0
236.9
1,877.5
4,619.6
9,884.4
19,717.1
2,815.0
1,933.6
34,350.1
12.1
18,536.1
3,688.8
(1,744.3)
20,492.7
$
50,022.2 $
54,842.8
VIATRIS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In millions, except per share amounts)
Table of Contents
Revenues:
Net sales
Other revenues
Total revenues
Cost of sales
Gross profit
Operating expenses:
Research and development
Acquired IPR&D
Selling, general and administrative
Litigation settlements and other contingencies, net
Total operating expenses
Earnings (loss) from operations
Interest expense
Other (income) expense, net
Earnings (loss) before income taxes
Income tax provision (benefit)
Net earnings (loss)
Earnings (loss) per share attributable to Viatris Inc. shareholders
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
See Notes to Consolidated Financial Statements
82
Year Ended December 31,
2022
2021
2020
$
16,218.1 $
44.6
16,262.7
9,765.7
6,497.0
17,813.6 $
72.7
17,886.3
12,310.8
5,575.5
11,819.9
126.1
11,946.0
8,149.3
3,796.7
662.2
36.4
4,179.1
4.4
4,882.1
1,614.9
592.4
(1,790.7)
2,813.2
734.6
2,078.6
681.0
70.1
4,529.2
329.2
5,609.5
(34.0)
636.2
(5.8)
(664.4)
604.7
(1,269.1)
$
$
1.71 $
1.71 $
(1.05) $
(1.05) $
1,212.1
1,217.4
1,208.8
1,208.8
512.6
42.5
3,344.6
107.8
4,007.5
(210.8)
497.8
12.6
(721.2)
(51.3)
(669.9)
(1.11)
(1.11)
601.2
601.2
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VIATRIS INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Earnings (Loss)
(In millions)
Net earnings (loss)
Other comprehensive (loss) earnings, before tax:
Foreign currency translation adjustment
Change in unrecognized gain (loss) and prior service cost related to defined benefit plans
Net unrecognized (loss) gain on derivatives in cash flow hedging relationships
Net unrecognized gain (loss) on derivatives in net investment hedging relationships
Net unrealized (loss) gain on marketable securities
Other comprehensive (loss) earnings, before tax
Income tax provision (benefit)
Other comprehensive (loss) earnings, net of tax
Comprehensive earnings (loss)
Year Ended December 31,
2022
2,078.6 $
2021
(1,269.1) $
2020
(669.9)
$
(1,583.5)
279.1
(36.9)
460.1
(2.8)
(884.0)
132.9
(1,016.9)
1,061.7 $
(1,340.9)
73.9
36.1
456.8
(1.1)
(775.2)
111.1
(886.3)
(2,155.4) $
1,213.0
(14.0)
18.2
(305.2)
0.6
912.6
(26.6)
939.2
269.3
$
See Notes to Consolidated Financial Statements
83
Table of Contents
Balance at December 31, 2019
Net loss
Other comprehensive earnings, net of tax
Share-based compensation expense
Issuance of restricted stock and stock options exercised,
net
Taxes related to the net share settlement of equity awards
Exchange of Mylan N.V. ordinary shares for Viatris Inc.
common stock
Issuance of common stock to Mylan N.V. shareholders
Issuance of common stock for the Combination
Retirement of Mylan N.V. treasury stock, net
Balance at December 31, 2020
Net loss
Other comprehensive loss, net of tax
Share-based compensation expense
Issuance of restricted stock, net
Taxes related to the net share settlement of equity awards
Cash dividends declared, $0.33 per common share
Balance at December 31, 2021
Net earnings
Other comprehensive loss, net of tax
Share-based compensation expense
Issuance of restricted stock, net
Taxes related to the net share settlement of equity awards
Issuance of common stock
Cash dividends declared, $0.48 per common share
Balance at December 31, 2022
__________________
(1)
Ordinary Shares prior to November 16, 2020.
VIATRIS INC. AND SUBSIDIARIES
Consolidated Statements of Equity
(In millions, except share amounts)
Common Stock
(1)
Additional
Paid-In
Capital
Cost
Shares
Retained
Earnings
540,746,871 $ 6.1 $ 8,643.5 $ 6,031.1
(669.9)
—
—
—
—
79.2
—
—
—
—
—
—
872,802
—
—
—
0.6
(6.3)
—
—
(541,619,673)
541,619,673
689,874,045
(24,598,074)
—
—
—
—
1,206,895,644 $ 12.1 $ 18,438.8 $ 5,361.2
6.1
(5.2)
10,720.6
(999.7)
(6.1)
5.2
6.9
—
— $ — $
—
—
2,611,819
—
—
— $ (1,269.1)
—
—
—
111.2
—
—
—
(13.9)
(403.3)
—
1,209,507,463 $ 12.1 $ 18,536.1 $ 3,688.8
—
—
—
—
—
— $ — $
—
—
3,972,427
—
313,341
—
— $ 2,078.6
—
—
—
116.4
—
1.6
—
(11.6)
—
3.3
(591.8)
—
1,213,793,231 $ 12.1 $ 18,645.8 $ 5,175.6
—
—
—
—
—
—
Treasury Stock
Shares
Cost
Accumulated
Other
Comprehensive
Loss
Total
Equity
24,598,074 $ (999.7) $
—
—
—
—
—
—
—
—
—
—
—
—
—
(24,598,074)
—
—
—
999.7
— $ — $
— $ — $
—
—
—
—
—
— $ — $
—
—
—
—
—
— $ — $
—
—
—
—
—
—
— $ — $
—
—
—
—
—
—
(1,797.2) $11,883.8
(669.9)
939.2
79.2
—
939.2
—
—
—
0.6
(6.3)
—
—
—
—
—
—
10,727.5
—
(858.0) $22,954.1
— $ (1,269.1)
(886.3)
111.2
—
(13.9)
(403.3)
(1,744.3) $20,492.7
(886.3)
—
—
—
—
(1,016.9)
—
—
—
—
—
— $ 2,078.6
(1,016.9)
116.4
1.6
(11.6)
3.3
(591.8)
(2,761.2) $21,072.3
See Notes to Consolidated Financial Statements
84
Table of Contents
VIATRIS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In millions)
Cash flows from operating activities:
Net earnings (loss)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Deferred income tax expense (benefit)
Litigation settlements and other contingencies, net
Loss from equity method investments
Gain on disposal of business
Share-based compensation expense
Other non-cash items
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Trade accounts payable
Income taxes
Other operating assets and liabilities, net
Net cash provided by operating activities
Cash flows from investing activities:
Cash received (paid) for acquisitions, net of cash acquired
Capital expenditures
Payments for product rights and other, net
Proceeds from sale of property, plant and equipment
Proceeds from sale of assets and subsidiaries
Purchase of marketable securities
Proceeds from the sale of marketable securities
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Payments of long-term debt
Payments of financing fees
Change in short-term borrowings, net
Proceeds from exercise of stock options
Taxes paid related to net share settlement of equity awards
Contingent consideration payments
Cash dividends paid
Non-contingent payments for product rights
Issuance of common stock
Other items, net
Net cash used in financing activities
Effect on cash of changes in exchange rates
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash — beginning of period
Cash, cash equivalents and restricted cash — end of period
Supplemental disclosures of cash flow information —
Non-cash transactions:
Common stock issued for the Combination
Cash paid during the period for:
Income taxes
Interest
See Notes to Consolidated Financial Statements
85
Year Ended December 31,
2022
2021
2020
$
2,078.6 $
(1,269.1) $
(669.9)
3,027.6
(25.9)
(1.7)
—
(1,754.1)
116.4
434.3
(240.3)
(259.5)
170.2
25.3
(618.3)
2,952.6
—
(406.0)
(37.0)
13.8
1,950.0
(30.2)
29.9
1,520.5
4,506.5
675.7
323.7
61.9
—
111.2
411.8
59.3
(427.6)
(70.4)
(699.6)
(666.5)
3,016.9
277.0
(457.2)
(52.2)
18.3
96.7
(30.2)
29.8
(117.8)
1,875.6
(3,662.5)
(1.9)
(1,493.2)
—
(17.3)
(18.9)
(581.6)
—
3.3
18.6
(3,877.9)
(38.9)
556.3
706.2
1,262.5 $
1,710.1
(4,201.3)
(7.0)
392.1
—
(17.4)
(28.6)
(399.0)
(456.0)
—
(4.9)
(3,012.0)
(30.9)
(143.8)
850.0
706.2 $
2,216.1
(213.2)
101.1
48.4
—
79.2
366.4
78.7
(741.9)
(82.7)
3.6
46.0
1,231.8
415.8
(243.0)
(438.2)
2.1
20.0
(104.8)
47.0
(301.1)
983.3
(2,484.2)
(2.0)
1,099.6
0.6
(7.9)
(48.5)
—
(143.3)
—
(3.3)
(605.7)
33.8
358.8
491.1
850.0
— $
— $
10,727.5
735.2 $
642.5 $
641.7 $
684.8 $
324.4
555.4
$
$
$
$
Table of Contents
Viatris Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Nature of Operations
Viatris is a global healthcare company formed in November 2020 whose mission is to empower people worldwide to live healthier at every stage
of life, regardless of geography or circumstance. Improving the ability of patients to gain access to sustainable and high-quality healthcare is our relentless
pursuit. 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’ 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. We conduct our business
through four segments: Developed Markets, Greater China, JANZ, and Emerging Markets. Viatris is headquartered in the U.S., with global centers in
Pittsburgh, Pennsylvania, Shanghai, China and Hyderabad, India.
Certain reclassifications were made to conform the prior period consolidated financial statements to the current period presentation. Upfront and
milestone-related charges in connection with collaboration and licensing arrangements made prior to regulatory approval of a development product that
were previously presented in Research and Development are now presented in Acquired IPR&D in the consolidated statements of operations.
In accordance with ASC 805, Business Combinations, Mylan is considered the accounting acquirer of the Upjohn Business and all historical
financial information of the Company prior to November 16, 2020 represents Mylan’s historical results and the Company’s thereafter.
2. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of Viatris and those of its wholly owned and majority-
owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Investments in equity method affiliates are recorded
at cost and adjusted for the Company’s share of the affiliates’ cumulative results of operations, capital contributions and distributions.
Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements, in conformity with U.S. GAAP, requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Because of the uncertainty inherent in such estimates, actual results could differ
from those estimates.
Foreign Currencies. The consolidated financial statements are presented in U.S. Dollars, the reporting currency of Viatris. Statements of
Operations and Cash Flows of all of the Company’s subsidiaries that have functional currencies other than U.S. Dollars are translated at a weighted average
exchange rate for the period for inclusion in the consolidated statements of operations and cash flows, whereas assets and liabilities are translated at the end
of the period exchange rates for inclusion in the consolidated balance sheets. Translation differences are recorded directly in shareholders’ equity as foreign
currency translation adjustments. Gains or losses on transactions denominated in a currency other than the subsidiaries’ functional currency, which arise as
a result of changes in foreign currency exchange rates, are recorded in the consolidated statements of operations.
Under ASC 830, Foreign Currency Matters (“ASC 830”), a highly inflationary economy is one that has cumulative inflation of approximately
100% or more over a three-year period. Effective April 1, 2022, we classified Turkey as highly inflationary and began to utilize the U.S. dollar as our
functional currency in Turkey, which historically utilized the Turkish lira as the functional currency. Application of the guidance in ASC 830 did not have a
material impact on our consolidated financial statements for the year ended December 31, 2022. The impacted net sales for the year ended December 31,
2022 and total assets at December 31, 2022 represented less than 1% of our consolidated net sales and total assets, respectively.
Cash and Cash Equivalents. Cash and cash equivalents are comprised of highly liquid investments with an original maturity of three months or
less at the date of purchase.
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Table of Contents
Debt and Equity Securities. Debt securities classified as available-for-sale on the date of purchase are recorded at fair value, with net unrealized
gains and losses, net of income taxes, reflected in accumulated other comprehensive loss as a component of shareholders’ equity. Net realized gains and
losses on sales of available-for-sale debt securities are computed on a specific security basis and are included in Other (income) expense, net in the
consolidated statements of operations. Debt securities classified as trading securities are valued using the quoted market price from broker or dealer
quotations or transparent pricing sources at the reporting date, with gains and losses included in Other (income) expense, net in the consolidated statements
of operations. Fair value is determined based on observable market quotes or valuation models using assessments of counterparty credit worthiness, credit
risk or underlying security and overall capital market liquidity. Debt securities are reviewed for impairment by assessing if the decline in market value of
the investment below the carrying value is other than temporary.
Investments in equity securities with readily determinable fair values are recorded at fair value with changes in fair value recorded in Other
(income) expense, net in the consolidated statements of operations. Investments in equity securities without readily determinable fair values are recorded at
cost minus any impairment, plus or minus changes in their estimated fair value resulting from observable price changes in orderly transactions for the
identical or a similar investment of the same issuer. Investments in entities are accounted for using the equity method of accounting when the ability to
exercise significant influence over the operating and financial decisions of the investee is maintained. The share of net income or losses of equity method
investments are included in Other (income) expense, net in the consolidated statements of operations. Investments in equity securities without readily
determinable fair values and investments in equity accounted for using the equity method are assessed for potential impairment on a quarterly basis based
on qualitative factors.
Concentrations of Credit Risk. Financial instruments that potentially subject the Company to credit risk consist principally of interest-bearing
investments, derivatives and accounts receivable.
Viatris invests its excess cash in high-quality, liquid money market instruments, principally overnight deposits and highly rated money market
funds. The Company maintains deposit balances at certain financial institutions in excess of federally insured amounts. Periodically, the Company reviews
the creditworthiness of its counterparties to derivative transactions, and it does not expect to incur a loss from failure of any counterparties to perform under
agreements it has with such counterparties.
Inventories. Inventories are stated at the lower of cost and net realizable value, with cost principally determined by the weighted average cost
method. Provisions for potentially obsolete or slow-moving inventory, including pre-launch inventory, are made based on our analysis of product dating,
inventory levels, historical obsolescence and future sales forecasts. Included as a component of cost of sales is expense related to the net realizable value of
inventories.
Property, Plant and Equipment. Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed and
recorded on a straight-line basis over the assets’ estimated service lives (3 to 18 years for machinery and equipment and other fixed assets and 15 to 39
years for buildings and improvements). Capitalized software is included in property, plant and equipment and is amortized over estimated useful lives
ranging from 3 to 7 years.
Intangible Assets and Goodwill. Intangible assets are stated at cost less accumulated amortization. Amortization is generally recorded on a
straight-line basis over estimated useful lives ranging from 3 to 20 years. The Company periodically reviews the estimated useful lives of intangible assets
and makes adjustments when events indicate that a shorter life is appropriate.
The Company accounts for acquired businesses using the acquisition method of accounting in accordance with the provisions of ASC 805,
Business Combinations, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated
fair values. The cost to acquire businesses is allocated to the underlying net assets of the acquired business based on estimates of their respective fair
values. Amounts allocated to acquired IPR&D are capitalized at the date of acquisition and, at that time, such IPR&D assets have indefinite lives. As
products in development are approved for sale, amounts are allocated to product rights and licenses and will be amortized over their estimated useful lives.
Finite-lived intangible assets are amortized over the expected life of the asset. Any excess of the purchase price over the estimated fair values of the net
assets acquired is recorded as goodwill.
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.
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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. Under the authoritative guidance issued by the FASB, we have the option to first assess the qualitative factors to determine
whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to
perform a quantitative goodwill impairment test. If we choose to use qualitative factors and determine that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount, then the goodwill impairment test would be required. The goodwill impairment test requires the Company to
estimate the fair value of the reporting unit and to compare the fair value of the reporting unit with its carrying amount. If the carrying amount is less than
its fair value, then no impairment is recognized. If the carrying amount recorded exceeds the fair value calculated, an impairment charge is recorded for the
difference. The judgments made in determining the projected cash flows used to estimate the fair value can materially impact the Company’s financial
condition and results of operations.
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. Impairment is
determined to exist when the fair value of IPR&D assets, which is based upon updated forecasts and commercial development plans, is less than the
carrying value of the assets being tested.
Acquired IPR&D. IPR&D assets acquired as part of an asset acquisition are expensed immediately if they have no alternative future uses and are
recorded in Acquired IPR&D in the consolidated statements of operations.
Contingent Consideration. Viatris records contingent consideration resulting from business acquisitions or divestitures 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. 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.
Significant judgment is employed in determining the assumptions utilized as of the acquisition or divestiture date and for each subsequent
measurement period. Accordingly, changes in the assumptions described above could have a material impact on the Company’s consolidated financial
condition and results of operations.
Impairment of Long-Lived Assets. The carrying values of long-lived assets, which include property, plant and equipment and intangible assets
with finite lives, are evaluated periodically in relation to the expected future undiscounted cash flows of the underlying assets and monitored for other
potential triggering events. The assessment for impairment is based on our ability to recover the carrying value of the long-lived assets or asset grouping by
analyzing the expected future undiscounted pre-tax cash flows specific to the asset or asset grouping. If the carrying amount is greater than the
undiscounted cash flows, the Company recognizes an impairment loss for the excess of the carrying amount over the estimated fair value based on
discounted cash flows.
Significant management judgment is involved in estimating the recoverability of these assets and is dependent upon the accuracy of the
assumptions used in making these estimates, as well as how the estimates compare to the eventual future operating performance of the specific asset or
asset grouping. Any future long-lived assets impairment charges could have a material impact on the Company’s consolidated financial condition and
results of operations.
Divestitures. For businesses that are divested, the Company records the net gain or loss on the sale within Other (income) expense, net. For
divestitures of businesses, including divestitures of products that qualify as a business, the Company allocates the relative fair value of goodwill associated
with the businesses in the determining the gain or loss on sale. The Company records amounts received as part of TSAs within Other (income) expense,
net.
Short-Term Borrowings. The Company’s subsidiaries in India have working capital facilities with several banks which are secured by its current
assets. The Company also has the CP Notes, Receivables Facility and 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. As
the accounts receivable do not transfer to the banks, any amounts outstanding under the facilities are recorded as borrowings and the underlying receivables
continue to be included in accounts receivable, net, in the consolidated balance sheets.
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Table of Contents
Revenue Recognition. The Company recognizes revenues in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC
606, the Company recognizes net revenue for product sales when control of the promised goods or services is transferred to our customers in an amount
that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues are recorded net of provisions for variable
consideration, including discounts, rebates, governmental rebate programs, price adjustments, returns, chargebacks, promotional programs and other sales
allowances. 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). Amounts recorded for revenue deductions can result from a
complex series of judgements about future events and uncertainties and can rely heavily on estimates and assumptions. 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. The indirect customers then independently select a wholesaler from which to purchase the products at these contracted prices.
Alternatively, certain wholesalers may enter into agreements with indirect customers that establish contract pricing for certain products, which the
wholesalers provide. Under either arrangement, Viatris will provide credit to the wholesaler for any difference between the contracted price with
the indirect party and the wholesaler’s invoice price. Such credits are called chargebacks. The provision for chargebacks is based on expected sell-
through levels by our wholesaler customers to indirect customers, as well as estimated wholesaler inventory levels.
Rebates, promotional programs and other sales allowances: this category includes rebate and other programs to assist in product sales. These
programs generally provide that the customer receives credit directly related to the amount of purchases or credits upon the attainment of pre-
established volumes. Also included in this category are prompt pay discounts, administrative fees and price adjustments to reflect decreases in the
selling prices of products.
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. The Company’s estimate of the provision for returns is generally based upon historical experience with actual returns. Generally, returned
products are destroyed and customers are refunded the sales price in the form of a credit.
• 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. Manufacturers of pharmaceutical products that are covered by the Medicaid
program are required to pay rebates to each state based on a statutory formula set forth in the Social Security Act. Medicare beneficiaries are
eligible to obtain discounted prescription drug coverage from private sector providers. In addition, certain states have also implemented
supplemental rebate programs that obligate manufacturers to pay rebates in excess of those required under federal law. Our estimate of these
rebates is based on the historical trends of rebates paid as well as on changes in wholesaler inventory levels and increases or decreases in the level
of sales. We estimate discounts on branded prescription drug sales to Medicare Part D participants in the Medicare “coverage gap” based on
historical experience of prescriptions and utilization expected to result in the discount of the “coverage gap”.
Outside the U.S., the majority of our pharmaceutical sales are contractually or legislatively governed. In certain European countries, certain
rebates are calculated on the governments total pharmaceutical spending or on specific product sale thresholds. We utilize historical data and
obtain third party information to determine the adequacy of these accruals. Also, this provision includes price reductions that are mandated by law
outside of the U.S.
Our net sales may be impacted by wholesaler and distributor inventory levels of our products, which can fluctuate throughout the year due to the
seasonality of certain products, pricing, the timing of product demand, purchasing decisions and other factors. Such fluctuations may impact the
comparability of our net sales between periods.
Consideration received from licenses of intellectual property is recorded as other revenues. Royalty or profit share amounts, which are based on
sales of licensed products or technology, are recorded when the customer’s subsequent sales or usages occur. Such consideration is included in other
revenues in the consolidated statements of operations.
Receivables, including deferred consideration, with terms in excess of one year are initially recorded at their net present value using discount rates
reflecting the relative credit risk.
Research and Development. R&D expenses are charged to operations as incurred.
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Table of Contents
Income Taxes. Income taxes have been provided for using an asset and liability approach in which deferred income taxes reflect the tax
consequences on future years of events that the Company has already recognized in the financial statements or tax returns. Changes in enacted tax rates or
laws may result in adjustments to the recorded tax assets or liabilities in the period that the new tax law is enacted.
Earnings per Share. Basic earnings per share is computed by dividing net earnings attributable to holders of Viatris Inc. common stock by the
weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings attributable to holders of
Viatris Inc. common stock by the weighted average number of shares outstanding during the period increased by the number of additional shares that would
have been outstanding related to potentially dilutive securities or instruments, if the impact is dilutive.
Basic and diluted earnings per share attributable to Viatris Inc. are calculated as follows:
(In millions, except per share amounts)
Basic earnings (loss) attributable to Viatris Inc. common shareholders (numerator):
Net earnings (loss) attributable to Viatris Inc. common shareholders
Shares (denominator):
Weighted average shares outstanding
Basic earnings (loss) per share attributable to Viatris Inc. shareholders
Diluted earnings (loss) attributable to Viatris Inc. common shareholders (numerator):
Net earnings (loss) attributable to Viatris Inc. common shareholders
Shares (denominator):
Weighted average shares outstanding
Share-based awards
Total dilutive shares outstanding
Diluted earnings (loss) per share attributable to Viatris Inc. shareholders
Year Ended December 31,
2022
2021
2020
2,078.6 $
(1,269.1) $
(669.9)
1,212.1
1,208.8
1.71 $
(1.05) $
601.2
(1.11)
2,078.6 $
(1,269.1) $
(669.9)
1,212.1
5.3
1,217.4
1,208.8
—
1,208.8
1.71 $
(1.05) $
601.2
—
601.2
(1.11)
$
$
$
$
The weighted average shares outstanding used in the computation of earnings per share for the year ended December 31, 2020 includes the effect
of the 689.9 million shares issued for the closing of the Combination.
Additional stock awards and restricted ordinary shares were outstanding during the years ended December 31, 2022, 2021 and 2020 but were not
included in the computation of diluted earnings per share for each respective period because the effect would be anti-dilutive. Excluded shares also include
certain share-based compensation awards and restricted shares whose performance conditions had not been fully met. Such excluded shares and anti-
dilutive awards represented 11.8 million, 12.7 million and 10.3 million shares for the years ended December 31, 2022, 2021 and 2020, respectively.
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 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. 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. The declaration and payment of future dividends to holders of the Company’s common
stock will be at the discretion of the Board of Directors, and will depend upon factors, including but not limited to, the Company’s financial condition,
earnings, capital requirements of its businesses, legal requirements, regulatory constraints, industry practice, and other factors that the Board of Directors
deems relevant.
On May 6, 2022, the Company announced that its Board of Directors had authorized a DRIP. The DRIP allows shareholders to automatically
reinvest all or a portion of the cash dividends paid on their shares of the Company’s common stock and to make certain additional optional cash
investments in the Company’s common stock.
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Table of Contents
On February 28, 2022, the Company announced that its Board of Directors had authorized a share repurchase program for the repurchase of up to
$1.0 billion of the Company’s shares of common stock. Such repurchases may be made from time-to-time at the Company’s discretion and effected by any
means, including but not limited to, open market repurchases, pursuant to plans in accordance with Rules 10b5-1 or 10b-18 under the Exchange Act,
privately negotiated transactions (including accelerated stock repurchase programs) or any combination of such methods as the Company deems
appropriate. The program does not have an expiration date. During 2022, the Company did not repurchase any shares of common stock under the share
repurchase program. In January and February 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of
approximately $250 million. The share repurchase program does not obligate the Company to acquire any particular amount of common stock.
Share-Based Compensation. The fair value of share-based compensation is recognized as expense in the consolidated statements of operations
over the vesting period.
Derivatives. From time to time the Company may enter into derivative financial instruments (mainly foreign currency exchange forward contracts,
interest rate swaps and purchased equity call options) designed to: 1) hedge the cash flows resulting from existing assets and liabilities and transactions
expected to be entered into over the next 24 months in currencies other than the functional currency, 2) hedge the variability in interest expense on floating
rate debt, 3) hedge the fair value of fixed-rate notes, 4) hedge against changes in interest rates that could impact future debt issuances, 5) hedge cash or
share payments required on conversion of issued convertible notes, 6) hedge a net investment in a foreign operation, or 7) economically hedge the foreign
currency exposure associated with the purchase price of non-U.S. acquisitions. Derivatives are recognized as assets or liabilities in the consolidated balance
sheets at their fair value. When the derivative instrument qualifies as a cash flow hedge, changes in the fair value are deferred through other comprehensive
earnings. If a derivative instrument qualifies as a fair value hedge, the changes in the fair value, as well as the offsetting changes in the fair value of the
hedged items, are generally included in within the same line item on the consolidated statements of operations as the hedged item. When such instruments
do not qualify for hedge accounting the changes in fair value are recorded in the consolidated statements of operations within Other (income) expense, net.
Financial Instruments. The Company’s financial instruments consist primarily of short-term and long-term debt, interest rate swaps, forward
contracts and option contracts. The Company’s financial instruments also include cash and cash equivalents as well as accounts and other receivables and
accounts payable, the fair values of which approximate their carrying values. As a policy, the Company does not engage in speculative or leveraged
transactions.
The Company carries derivative instruments in the consolidated balance sheets at fair value, determined by reference to market data such as
forward rates for currencies, implied volatility, and interest rate swap yield curves. The accounting for changes in the fair value of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. In addition, the Company has
designated certain long-term debt instruments as net investment hedges.
Recent Accounting Pronouncements.
Adoption of New Accounting Standards
In November 2021, the FASB issued Accounting Standards Update 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance (“ASU 2021-10”), which requires entities to provide annual disclosures about transactions with a government that are
accounted for by applying a grant or contribution accounting model by analogy. We adopted the ASU prospectively on January 1, 2022. The adoption of
this guidance did not have a material impact on the Company’s consolidated financial statements and disclosures.
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Accounting Standards Issued Not Yet Adopted
In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of
Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which for a limited period of time adds ASC 848 to provide optional expedients and
exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.
ASU 2020-04 applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be
discontinued because of reference rate reform. On December 21, 2022, the FASB issued ASU 2022-06 to defer the sunset date of ASC 848 until December
31, 2024. ASU 2022-06 became effective upon issuance. Entities can apply the provisions of ASU 2020-04 immediately, as applicable, and generally the
provisions of the guidance are available through December 31, 2024 as entities transition away from reference rates that are expected to be discontinued.
The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements and disclosures.
In October 2021, the FASB issued Accounting Standards Update 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires entities (acquirers) to recognize and measure contract assets and
contract liabilities acquired in a business combination in accordance with ASC Topic 606. The ASU will be effective for fiscal years, including interim
periods within those fiscal years, beginning after December 15, 2022 with early adoption permitted. The Company is currently assessing the impact of the
adoption of this guidance on its consolidated financial statements and disclosures.
In September 2022, the FASB issued Accounting Standards Update 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50), which
requires entities to provide qualitative and quantitative disclosures about their supplier finance programs, including a rollforward of related obligations. The
ASU will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the rollforward
requirement, which becomes effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently
assessing the impact of the adoption of this guidance on its consolidated financial statements and disclosures.
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3. Revenue Recognition and Accounts Receivable
The following table presents the Company’s net sales by product category for each of our reportable segments for the years ended December 31,
2022, 2021, and 2020, respectively:
(In millions)
Product Category
Brands
Complex Gx and Biosimilars
Generics
Total Viatris
(In millions)
Product Category
Brands
Complex Gx and Biosimilars
Generics
Total Viatris
(In millions)
Product Category
Brands
Complex Gx and Biosimilars
Generics
Total Viatris
____________
Developed Markets
5,160.4
1,218.0
3,390.5
9,768.9 $
$
Developed Markets
5,759.2
1,241.6
3,427.9
10,428.7 $
$
Developed Markets
3,920.7
1,202.6
3,387.6
8,510.9 $
$
Greater China
JANZ
2022 Net Sales
2,190.7
0.6
9.9
2,201.2 $
2,207.8
0.2
4.8
2,212.8 $
922.6
44.1
665.7
1,632.4 $
Emerging Markets
1,615.9
50.7
949.0
2,615.6 $
1,197.1
46.5
783.8
2,027.4 $
Emerging Markets
1,677.2
53.8
1,413.7
3,144.7 $
Greater China
JANZ
2021 Net Sales
Greater China
JANZ
2020 Net Sales
253.9
0.7
5.3
259.9 $
617.0
42.8
535.5
1,195.3 $
Emerging Markets
443.3
49.4
1,361.1
1,853.8 $
Total
9,889.6
1,313.4
5,015.1
16,218.1
Total
10,841.3
1,342.1
5,630.2
17,813.6
Total
5,234.9
1,295.5
5,289.5
11,819.9
(a)
(b)
Amounts for the year ended December 31, 2022 include the unfavorable impact of foreign currency translations compared to the prior year period.
Amounts for the year ended December 31, 2022 reflect a decrease of approximately $63.5 million related to the year over year impact of the sale
of the biosimilars business in November 2022. The Company has not recognized the results of the biosimilars business in its consolidated financial
statements subsequent to November 29, 2022.
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The following table presents net sales on a consolidated basis for select key products for the years ended December 31, 2022 and 2021,
respectively:
(In millions)
Select Key Global Products
Lipitor ®
Norvasc ®
Lyrica ®
Viagra ®
EpiPen® Auto-Injectors
Celebrex ®
Creon ®
Effexor ®
Zoloft ®
Xalabrands
Select Key Segment Products
Influvac ®
Yupelri ®
Dymista ®
Amitiza ®
Xanax ®
____________
$
$
Year Ended December 31,
2022
2021
1,635.2 $
775.1
623.8
458.9
378.0
338.1
304.0
279.6
246.2
195.1
225.5 $
202.1
179.8
167.9
156.5
1,663.2
824.7
728.5
533.8
391.7
344.4
309.8
316.8
284.3
226.0
299.3
161.9
168.0
201.5
185.9
(a)
(b)
(c)
(d)
The Company does not disclose net sales for any products considered competitively sensitive.
Products disclosed may change in future periods, including as a result of seasonality, competition or new product launches.
Amounts for the year ended December 31, 2022 include the unfavorable impact of foreign currency translations compared to the prior year period.
Amounts for the year ended December 31, 2020 are not presented due to the significance of products acquired as part of the Combination.
Variable Consideration and Accounts Receivable
The following table presents a reconciliation of gross sales to net sales by each significant category of variable consideration during the years
ended December 31, 2022, 2021 and 2020, respectively:
(In millions)
Gross sales
Gross to net adjustments:
Chargebacks
Rebates, promotional programs and other sales allowances
Returns
Governmental rebate programs
Total gross to net adjustments
Net sales
Year Ended December 31,
2022
27,662.1 $
2021
30,553.4 $
2020
19,899.1
(6,192.2)
(4,346.2)
(296.7)
(608.9)
(11,444.0) $
16,218.1 $
(5,530.1)
(6,135.6)
(384.6)
(689.5)
(12,739.8) $
17,813.6 $
(3,656.2)
(3,765.5)
(329.7)
(327.8)
(8,079.2)
11,819.9
$
$
$
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The following is a rollforward of the categories of variable consideration during 2022:
(In millions)
Chargebacks
Rebates, promotional programs and other sales
allowances
Returns
Governmental rebate programs
Total
$
$
Balance at
December 31,
2021
Current Provision
Related to Sales
Made in the Current
Period
Balances Divested
Checks/ Credits
Issued to Third
Parties
Effects of Foreign
Exchange
Balance at
December 31,
2022
591.7 $
6,192.2 $
(53.4) $
(6,205.6) $
(1.5) $
523.4
1,373.0
686.8
399.2
3,050.7 $
4,346.2
296.7
608.9
11,444.0 $
(215.1)
(16.0)
(34.1)
(318.6) $
(4,177.5)
(447.6)
(602.4)
(11,433.1) $
(42.4)
(6.5)
(5.1)
(55.5) $
1,284.2
513.4
366.5
2,687.5
Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net revenues and as a contra-asset
in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash). 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)
Accounts receivable, net
Other current liabilities
Total
December 31,
2022
December 31,
2021
$
$
1,798.7 $
888.8
2,687.5 $
1,688.6
1,362.1
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. Historically,
we have not recorded in any current period any material amounts related to adjustments made to prior period reserves.
Accounts receivable, net was comprised of the following at December 31, 2022 and 2021, respectively:
(In millions)
Trade receivables, net
Other receivables
Accounts receivable, net
December 31,
2022
December 31,
2021
$
$
3,243.8 $
570.7
3,814.5 $
3,774.4
492.0
4,266.4
Total allowances for doubtful accounts were $114.7 million and $154.5 million at December 31, 2022 and 2021, respectively. Viatris performs
ongoing credit evaluations of its customers and generally does not require collateral. Approximately 23% and 18% of the accounts receivable balances
represent amounts due from three customers at December 31, 2022 and 2021, respectively.
Accounts Receivable Factoring Arrangements
We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable.
These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over and risk
related to the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest
in the underlying accounts receivable once sold. We derecognized $34.7 million and $29.6 million of accounts receivable as of December 31, 2022 and
2021 under these factoring arrangements, respectively.
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4. Acquisitions and Other Transactions
Oyster Point Acquisition
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. In addition
to the upfront cash consideration, each Oyster Point stockholder received one non-tradeable contingent value right representing up to an additional $2 per
share, or approximately $60 million in the aggregate, contingent upon Oyster Point achieving certain metrics based upon full year 2022 performance, which
are expected to be determined by the end of the first quarter of 2023. Oyster Point is a commercial-stage biopharmaceutical company focused on the
discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases.
The Company expects to account for this transaction as a business combination. The accounting impact of this acquisition and the results of the
operations for Oyster Point will be included in our consolidated financial statements beginning in the first quarter of 2023. Due to the proximity of the
closing date of this acquisition to the date of this filing, the initial accounting for this acquisition is incomplete, pending identification and measurement of
the assets acquired and liabilities assumed.
Famy Life Sciences Acquisition
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. The
Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 to grant the Company rights with
respect to acquiring certain pharmaceutical products and had additionally acquired shares representing approximately 13.5% equity interest in Famy Life
Sciences for $25.0 million during the year ended December 31, 2020. The investment was accounted for in accordance with ASC 321, Investments - Equity
Securities.
The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023. The Company expects to
recognize a gain of $18.9 million during the first quarter of 2023 as a result of remeasuring its pre-existing 13.5% equity interest in Famy Life Sciences to
fair value, which will be recognized as a component of Other (income) expense, net in the consolidated statements of operations.
The Company expects to account for this transaction as a business combination. The accounting impact of this acquisition and the results of the
operations for Famy Life Sciences will be included in our consolidated financial statements beginning in the first quarter of 2023. Due to the proximity of
the closing date of this acquisition to the date of this filing, the initial accounting for this acquisition is incomplete, pending identification and measurement
of the assets acquired and liabilities assumed.
Upjohn Business Combination Agreement
On July 29, 2019, Mylan, Pfizer, Upjohn, a wholly-owned subsidiary of Pfizer, and certain other affiliated entities entered into a Business
Combination Agreement pursuant to which Mylan would combine with the Upjohn Business in a Reverse Morris Trust transaction. The Upjohn Business
was a global, primarily off-patent branded and generic established medicines business, which includes 20 primarily off-patent oral solid dose legacy brands,
such as Lyrica®, Lipitor®, Celebrex® and Viagra®. The Combination was completed on November 16, 2020.
Prior to the Combination and pursuant to a Separation and Distribution Agreement, Pfizer had, among other things, transferred to Viatris
substantially all of the assets and liabilities comprising the Upjohn Business (the Separation) and, thereafter, Pfizer had distributed to Pfizer stockholders all
of the issued and outstanding shares of Viatris (the Distribution). When the Distribution and Combination were complete, Pfizer stockholders as of the
record date of the Distribution owned 57% of the outstanding shares of Viatris common stock and Mylan shareholders as of immediately before the
Combination owned 43% of the outstanding shares of Viatris common stock, in each case on a fully diluted basis. Viatris also made a cash payment to
Pfizer equal to $12 billion, which was funded with the proceeds of debt incurred by Upjohn prior to the Combination.
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The transaction involved multiple legal entity restructuring transactions and a reverse merger acquisition with Viatris representing the legal
acquirer and Mylan representing the accounting acquirer of the Upjohn Business. In accordance with ASC 805, Business Combinations, Mylan is
considered the accounting acquirer of the Upjohn Business and Viatris applied purchase accounting to the acquired assets and assumed liabilities of the
Upjohn Business as of November 16, 2020. The debt incurred by Upjohn prior to the Combination was a liability assumed in purchase accounting. The fair
value of the debt as of November 16, 2020 was $13.08 billion.
The purchase price consists of the issuance of approximately 689.9 million Viatris shares of common stock at a fair value of approximately
$10.73 billion based on the closing price of Mylan’s ordinary shares on November 13, 2020, as reported by the NASDAQ. In accordance with U.S. GAAP,
the Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired
and liabilities assumed in the transaction have been recorded at their respective estimated fair values at the acquisition date. During the twelve months
ended December 31, 2021 and 2020, the Company incurred acquisition related costs of approximately $234.6 million and $602.9 million, respectively.
Acquisition related costs were recorded primarily in SG&A in the consolidated statements of operations for such periods.
During the year ended December 31, 2021, adjustments were made to the preliminary purchase price recorded at December 31, 2020, and are
reflected as “Measurement Period and Other Adjustments” in the table below. The allocation of the $10.73 billion purchase price to the assets acquired and
liabilities assumed under the Combination is as follows:
(In millions)
Current assets (excluding inventories and net of cash acquired)
Inventories
Property, plant and equipment
Identified intangible assets
Goodwill
Deferred income tax benefit
Other assets
Total assets acquired
Current liabilities
Long-term debt, including current portion
Deferred tax liabilities
Other noncurrent liabilities
Net assets acquired (net of $415.8 of cash acquired)
____________
Preliminary Purchase Price
Allocation as of December
31, 2020
(a)
Measurement Period and
Other Adjustments
(b)
Purchase Price Allocation as
of December 31, 2021 (as
adjusted)
$
$
$
2,841.9 $
2,588.9
1,394.1
18,040.0
2,107.5
1,481.9
792.1
29,246.4 $
2,760.2
13,076.2
1,656.9
1,441.5
10,311.6 $
(38.7) $
(34.2)
(5.0)
—
295.6
196.3
(7.4)
406.6 $
419.7
—
1.0
(14.1)
— $
2,803.2
2,554.7
1,389.1
18,040.0
2,403.1
1,678.2
784.7
29,653.0
3,179.9
13,076.2
1,657.9
1,427.4
10,311.6
(a)
(b)
As previously reported in Viatris’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
The measurement period adjustments are primarily for 1) certain working capital adjustments, an increase in litigation reserves to reflect facts and
circumstances that existed as of the date of the Combination, and other adjustments and 2) the tax implications of these and other adjustments.
These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and accordingly, the
Company has not retrospectively adjusted those consolidated financial statements.
The Combination enhanced each businesses’ ability to serve patients’ needs and expand their capabilities across more than 165 markets. Mylan
brought a diverse portfolio across many geographies and key therapeutic areas, such as central nervous system and anesthesia, infectious disease and
cardiovascular, as well as a robust pipeline, high-quality manufacturing and supply chain excellence. The Upjohn Business brought trusted, iconic brands,
such as Lipitor® (atorvastatin calcium), Celebrex® (celecoxib) and Viagra® (sildenafil), and proven commercialization capabilities, including leadership
positions in China and other emerging markets.
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The Company recorded a step-up in the fair value of inventory of approximately $1.43 billion at the acquisition date. During the twelve months
ended December 31, 2021 and 2020, the Company recorded amortization of the inventory step-up of approximately $1.19 billion and $238.2 million,
respectively, which was included in cost of sales in the consolidated statements of operations. The inventory step-up was fully amortized during 2021. In
addition, a step-up in the fair value of property, plant and equipment of approximately $385.0 million was recognized. The related depreciation is being
expensed over a service life of five years for machinery and equipment and between 10 and 20 years for buildings.
The identified intangible assets of $18.04 billion are comprised of product rights and are being amortized over a weighted average useful life of 15
years. Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which
are not observable in the market and are thus considered Level 3 measurements as defined by U.S. GAAP. The goodwill of $2.40 billion arising from the
Combination consisted largely of the value of the employee workforce and products to be sold in new markets leveraging the combined entity. In addition,
an allocation of the goodwill was assigned to the respective segments. None of the goodwill recognized in this transaction is expected to be deductible for
income tax purposes.
The Company recorded a fair value adjustment of approximately $759.4 million related to the long-term debt assumed as part of the acquisition.
The fair value of long-term debt as of the Combination date was determined by broker or dealer quotations, which is classified as Level 2 in the fair value
hierarchy. The total fair value adjustment is being amortized as a reduction to interest expense over the maturity dates of the related debt instruments.
The operating results of the Upjohn Business have been included in the Company’s consolidated statements of operations since the acquisition
date. The total revenues of the Upjohn Business for the period from the acquisition date to December 31, 2020, were $866.5 million and net loss, net of tax,
was approximately $360.9 million. The net loss for the period includes the effect of the purchase accounting adjustments and acquisition related costs.
Unaudited Pro Forma Financial Results
The following table presents supplemental unaudited pro forma information for the Combination, as if it had occurred on January 1, 2019. The
unaudited pro forma results reflect certain adjustments related to past operating performance and acquisition accounting adjustments, such as increased
depreciation and amortization expense based on the fair value of assets acquired, the impact of transaction costs and the related income tax effects. The
unaudited pro forma results do not include any anticipated synergies which may be achievable, or have been achieved, subsequent to the closing of the
Combination. Accordingly, the unaudited pro forma results are not necessarily indicative of the results that actually would have occurred had the
acquisitions been completed on the stated date above, nor are they indicative of the future operating results of Viatris and its subsidiaries.
(Unaudited, in millions, except per share amounts)
Total revenues
Net earnings
Earnings per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Other Transactions
Year Ended December
31,
2020
$
$
$
$
18,284.8
1,483.7
1.23
1.23
1,206.8
1,207.7
In December 2020, Viatris and Pfizer terminated their strategic collaboration for generic drugs in Japan pursuant to an amendment and termination
agreement. Under the prior collaboration agreement, both parties contributed products, which Pfizer distributed to third-parties in the Japan market. Under
the terms of the amendment and termination agreement, Viatris purchased all collaboration related inventory held by Pfizer. As a result of the termination,
and the repurchase of collaboration inventory, the Company reduced revenue by $86.5 million during the year ended December 31, 2020.
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5. Divestitures
Biocon Biologics Transaction
On February 27, 2022, Viatris entered into a definitive agreement with Biocon Biologics to contribute its biosimilars portfolio to Biocon
Biologics. The transaction subsequently closed on November 29, 2022, creating what Viatris expects to be a unique fully vertically integrated global
biosimilars leader. Under the terms of the Biocon Agreement, Viatris received $3 billion in consideration in the form of a $2 billion cash payment, adjusted
as set forth in the Biocon Agreement, and approximately $1 billion of CCPS representing a stake of approximately 12.9% (on a fully diluted basis) in
Biocon Biologics. 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. An amount of cash equal to all or a portion of the closing working capital target may become payable to
Biocon Biologics in connection with certain events in the future, depending on the valuations attributable to such events. Refer to Note 6 Balance Sheet
Components for additional information on assets and liabilities related to Biocon Biologics.
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. Under the transition services agreement, Viatris is entitled to be
reimbursed for its costs (subject to certain caps) plus a markup.
Upon closing, the Company recognized a gain on sale of approximately $1.75 billion for the difference between the consideration received,
including the fair value of the CCPS, and the carrying value of the biosimilars portfolio (including an allocation of goodwill). The gain was recognized as a
component of Other (income) expense, net in the consolidated statement of operations during the year ended December 31, 2022. The Company has not
recognized the results of the business in its consolidated financial statements subsequent to November 29, 2022. For the period from January 1, 2022 to
November 29, 2022, total revenues relating to the biosimilars portfolio which was subsequently contributed to Biocon Biologics were approximately
$611.5 million.
The Company’s CCPS in Biocon Biologics are classified as equity securities and are included in Other assets in the consolidated balance sheet as
of December 31, 2022. Refer to Note 10 Financial Instruments and Risk Management for further discussion.
The Company had previously entered into an exclusive collaboration with Biocon on the development, manufacturing, supply and
commercialization of multiple, high value biosimilar compounds and three insulin analog products for the global marketplace. The collaboration was
terminated upon closing of the Biocon Biologics Transaction.
Other Potential Divestitures
In November 2022, the Company provided an update on the strategic priorities announced in February 2022, including identifying the following
businesses no longer considered core to its future strategy that the Company intends to divest:
• OTC;
• API (while retaining some selective development API capabilities);
• Women’s health care, primarily related to our oral and injectable contraceptives. 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.
In the fourth quarter of 2022, we determined that our Upjohn Distributor Markets should be classified as held for sale in the December 31, 2022
consolidated balance sheet. Upon classification as held for sale, we recognized a total charge of $374.2 million. This was comprised of a goodwill
impairment charge of $117.0 million, other charges, principally inventory write-offs, of $84.3 million and a charge of approximately $172.9 million to
write down the disposal group to fair value, less cost to sell. Assets held for sale associated with the Upjohn Distributor Markets consisted of intangible
assets of $230.3 million as of December 31, 2022. If these transactions are not completed during 2023, the distribution arrangements will expire and the
Company will wind down operations in these markets, which may result in additional asset write-offs and other costs being incurred. These additional
charges could be in excess of $300 million.
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On April 30, 2021, the Company completed an agreement to divest a group of OTC products in the U.S. As a result of this transaction, the
Company recognized an intangible asset impairment charge of approximately $83.4 million during the year ended December 31, 2021.
6. Balance Sheet Components
Selected balance sheet components consist of the following:
Cash and restricted cash
(In millions)
Cash and cash equivalents
Restricted cash, included in other current and non-current assets
Cash, cash equivalents and restricted cash
Inventories
(In millions)
Raw materials
Work in process
Finished goods
Inventories
December 31,
2022
December 31,
2021
December 31,
2020
$
$
1,259.9 $
2.6
1,262.5 $
701.2 $
5.0
706.2 $
844.4
5.6
850.0
December 31, 2022 December 31, 2021
922.4
$
993.3
2,062.0
3,977.7
571.5 $
755.4
2,192.6
3,519.5 $
$
Inventory reserves totaled $484.8 million and $519.0 million at December 31, 2022 and 2021, respectively. Included as a component of cost of
sales is expense related to the net realizable value of inventories of $326.1 million, $474.9 million and $206.1 million for the years ended December 31,
2022, 2021 and 2020, respectively.
Prepaid expenses and other current assets
(In millions)
Prepaid expenses
Available-for-sale fixed income securities
Fair value of financial instruments
Equity securities
Other current assets
Prepaid expenses and other current assets
Prepaid expenses consist primarily of prepaid rent, insurance and other individually insignificant items.
Property, plant and equipment, net
(In millions)
Machinery and equipment
Buildings and improvements
Construction in progress
Land and improvements
Gross property, plant and equipment
Accumulated depreciation
Property, plant and equipment, net
100
December 31,
2022
December 31,
2021
194.6 $
35.3
134.7
42.6
1,404.0
1,811.2 $
256.7
38.2
144.6
51.0
1,467.1
1,957.6
December 31,
2022
December 31,
2021
2,936.7 $
1,539.7
474.0
133.4
5,083.8
2,059.3
3,024.5 $
3,054.0
1,808.5
588.7
137.9
5,589.1
2,400.5
3,188.6
$
$
$
$
Table of Contents
Capitalized software costs included in our consolidated balance sheets were $121.5 million and $62.3 million, net of accumulated depreciation, at
December 31, 2022 and 2021, respectively. The Company periodically reviews the estimated useful lives of assets and makes adjustments when
appropriate. Depreciation expense was approximately $349.5 million, $509.5 million and $289.7 million for the years ended December 31, 2022, 2021 and
2020, respectively.
Other assets
(In millions)
CCPS in Biocon Biologics
Operating lease right-of-use assets
Non-marketable equity investments
Deferred consideration due from Biocon Biologics
Other long-term assets
Other assets
Accounts payable
(In millions)
Trade accounts payable
Other payables
Accounts payable
Other current liabilities
(In millions)
Accrued sales allowances
Payroll and employee benefit liabilities
Legal and professional accruals, including litigation accruals
Contingent consideration
Accrued restructuring
Accrued interest
Fair value of financial instruments
Operating lease liability
Due to Biocon Biologics
Other
Other current liabilities
Other long-term obligations
(In millions)
Employee benefit liabilities
(1)
Contingent consideration
Tax related items, including contingencies
Operating lease liability
Accrued restructuring
Other
Other long-term obligations
101
December 31, 2022 December 31, 2021
—
$
290.8
81.4
—
798.5
1,170.7
997.4 $
259.3
94.0
299.5
753.3
2,403.5 $
$
December 31, 2022 December 31, 2021
1,056.1
$
601.3
1,657.4
1,158.0 $
608.6
1,766.6 $
$
December 31, 2022 December 31, 2021
1,362.1
$
741.9
715.6
66.7
233.5
86.6
61.0
86.7
—
1,265.5
4,619.6
888.8 $
746.8
297.2
64.4
95.3
80.2
187.0
80.6
22.5
978.1
3,440.9 $
$
December 31, 2022 December 31, 2021
876.4
$
133.0
426.1
200.9
64.3
232.9
1,933.6
544.6 $
310.6
414.6
181.4
60.4
244.9
1,756.5 $
$
Table of Contents
(1)
Includes a total of $221.2 million due to Biocon Biologics. Refer to Note 10 Financial Instruments and Risk Management for additional
information.
7. Leases
The Company has operating leases of real estate, consisting primarily of administrative offices, manufacturing and distribution facilities, and R&D
facilities. We also have operating leases of certain equipment, primarily automobiles, and certain limited supply arrangements.
We elected to apply the practical expedient to not separate lease and non-lease components for our leases except for those related to certain limited
supply arrangements. We have also elected to apply the short-term lease recognition exemption which means we will not recognize ROU assets or lease
liabilities for leases with an initial term of 12 months of less.
As of December 31, 2022, the Company recognized ROU assets of $259.3 million and total lease liabilities of $262.0 million. The Company’s
ROU assets are recorded in other assets. The related lease liability balances are recorded in other current liabilities and other long-term obligations in the
consolidated balance sheets. Refer to Note 6 Balance Sheet Components for additional information.
ROU assets and liabilities are recognized at the present value of the future minimum lease payments over the lease term at commencement date.
As most of our leases do not provide an implicit rate, we use an applicable incremental borrowing rate based on the information available at
commencement date in determining the present value of future payments. Options to extend or terminate the ROU assets are reviewed at lease inception
and these options are accounted for when they are reasonably certain of being exercised.
Other information related to leases was as follows:
Remaining lease terms
Weighted-average remaining lease term
Weighted-average discount rate
As of December 31, 2022, maturities of lease liabilities were as follows:
(In millions)
Year ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less imputed interest
Total lease liability
As of December 31, 2022
1 year to 22 years
6 years
3.0 %
$
$
$
76.4
63.4
38.6
30.2
23.1
52.3
284.0
22.0
262.0
As of December 31, 2022, the Company did not have any significant leases that have not yet commenced. For the years ended December 31,
2022, 2021 and 2020, the Company had operating lease expense of approximately $90.9 million, $97.6 million and $80.7 million, respectively. Operating
lease costs are classified primarily as SG&A and cost of sales in the consolidated statements of operations.
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Table of Contents
8. Equity Method Investments
The Company had three equity method investments in limited liability companies that owned refined coal production plants whose activities
qualified for income tax credits under Section 45 of the Code. The Company did not consolidate these entities as we had determined that we were not the
primary beneficiary of these entities and did not have the power to individually direct the activities of these entities. Accordingly, these investments were
accounted for under the equity method of accounting. For each of the clean energy investments, the Company had entered into notes payable with the
respective project sponsor, which in part were paid to the sponsor as certain production levels were met. The law that provided for IRC Section 45 tax
credits expired during the year ended December 31, 2021for all three clean energy investments and all of the clean energy investments have wound down
operations.
During the years ended December 31, 2021 and 2020, the Company reduced its long-term obligations for its three investments as a result of lower
than anticipated production levels and lower expected future variable debt payments to the respective project sponsor. The Company recognized a net gain
of approximately $5.7 million and $21.4 million, respectively, which was recognized as a component of Other (income) expense, net in the consolidated
statements of operations.
The carrying values and respective balance sheet location of the Company’s clean energy investments were as follows at December 31, 2021:
(In millions)
Other current liabilities
December 31, 2021
10.9
Summarized financial information, in the aggregate, for the Company’s three equity method, clean energy investments on a 100% basis as of
December 31, 2021 and for the years ended December 31, 2021 and 2020 are as follows:
(In millions)
Current assets
Noncurrent assets
Total assets
Current liabilities
Total liabilities
Net assets
(In millions)
Total revenues
Gross loss
Operating and non-operating expense
Net loss
December 31, 2021
4.2
$
0.5
4.7
2.8
2.8
1.9
$
Year Ended December 31,
2021
2020
$
$
326.7 $
(4.6)
16.8
(21.4) $
374.5
(4.6)
19.0
(23.6)
The Company’s net losses from its equity method investments included amortization expense related to the excess of the cost basis of the
Company’s investment over the underlying assets of each individual investee. For the years ended December 31, 2021 and 2020, the Company recognized
net losses from equity method investments of $61.9 million, and $48.4 million, respectively, which were recognized as a component of Other (income)
expense, net in the consolidated statements of operations. The Company recognized the income tax credits and benefits from the clean energy investments
as part of its provision for income taxes.
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Table of Contents
Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021 are as follows:
(In millions)
Balance at December 31, 2020:
Measurement period and other adjustments
Foreign currency translation
Balance at December 31, 2021:
(3)
Disposition
Impairment
Foreign currency translation
Balance at December 31, 2022
____________
Developed
(1)
Markets
Greater China
JANZ
Emerging Markets
(2)
$
$
$
9,184.5 $
67.7
(528.8)
8,723.4 $
(743.9)
—
(518.0)
7,461.5 $
738.3 $
220.4
10.8
969.5 $
(2.7)
—
(26.2)
940.6 $
864.0 $
(30.9)
(56.8)
776.3 $
(32.6)
—
(54.7)
689.0 $
1,560.2 $
38.4
45.9
1,644.5 $
(140.5)
(117.0)
(52.3)
1,334.7 $
Total
12,347.0
295.6
(528.9)
12,113.7
(919.7)
(117.0)
(651.2)
10,425.8
(1)
(2)
(3)
Balances as of December 31, 2022, 2021 and 2020 include accumulated impairment losses of $385.0 million.
Balance as of December 31, 2022 includes accumulated impairment loss of $117.0 million.
Reflects goodwill relating to the biosimilars portfolio. Refer to Note 5 Divestitures for additional information.
The Company reviews goodwill for impairment annually on April 1st or more frequently if events or changes in circumstances indicate that the
carrying value of goodwill may not be recoverable. As a result of the Biocon Biologics Transaction (refer to Note 5 Divestitures for additional information)
and the decline in the Company’s share price during the first quarter of 2022, the Company performed an interim goodwill impairment test as of March 31,
2022. The Company performed the annual goodwill impairment test as of April 1, 2022. There were no significant changes from the interim goodwill test
performed at March 31, 2022 and the results were consistent with the interim goodwill impairment test.
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 determination of the fair value of the reporting units requires the Company to make
significant estimates and assumptions that affect the reporting unit’s expected future cash flows. 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.
As of March 31, 2022 and April 1, 2022, the allocation of the Company’s total goodwill (prior to the reclassification of goodwill to assets held for
sale) was as follows: North America $3.61 billion, Europe $4.95 billion, Emerging Markets $1.64 billion, JANZ $0.78 billion and Greater China $0.97
billion.
As of March 31, 2022 and April 1, 2022, the Company determined that the fair value of the North America and Greater China reporting units was
substantially in excess of the respective unit’s carrying value.
For the Europe reporting unit, the estimated fair value exceeded its carrying value by approximately $797 million or 5.3% for both the interim and
annual goodwill impairment tests. As it relates to the income approach for the Europe reporting unit at March 31, 2022 and April 1, 2022, the Company
forecasted cash flows for the next 10 years. 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%. Under
the market-based approach, we utilized an estimated range of market multiples of 7.5 to 8.0 times EBITDA plus a control premium of 15.0%. If all other
assumptions are held constant, a reduction in the terminal value growth rate by 3.0% or an increase in discount rate by 1.5% would result in an impairment
charge for the Europe reporting unit.
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Table of Contents
For the JANZ reporting unit, the estimated fair value exceeded its carrying value by approximately $231 million or 7.4% for both the interim and
annual goodwill impairment tests. As it relates to the income approach for the JANZ reporting unit at March 31, 2022 and April 1, 2022, the Company
forecasted cash flows for the next 10 years. During the forecast period, the revenue compound annual growth rate was approximately negative 4.8%. A
terminal year value was calculated assuming no revenue growth rate. The discount rate utilized was 6.0% and the estimated tax rate was 30.4%. Under the
market-based approach, we utilized an estimated market multiple of 6.0 times EBITDA plus a control premium of 15.0%. 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.
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. During the forecast period, the revenue compound annual growth rate was approximately
1.6%. A terminal year value was calculated with a 0.8% revenue growth rate applied. The discount rate utilized was 10.5% and the estimated tax rate was
18.4%. Under the market-based approach, we utilized an estimated market multiple of 7.5 times EBITDA plus a control premium of 15.0%. 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.
Subsequent to the completion of the interim goodwill impairment test and in conjunction with the Biocon Biologics Transaction, the Company
allocated goodwill to its biosimilars portfolio using a relative fair value approach and reclassified the amount to assets held for sale. Upon closing of the
Biocon Biologics Transaction on November 29, 2022, we derecognized goodwill of $919.7 million allocated to the biosimilars portfolio.
In the fourth quarter of 2022, we determined that our Upjohn Distributor Markets should be classified as held for sale in the December 31, 2022
consolidated balance sheet. The Company allocated goodwill to its Upjohn Distributor Markets using a relative fair value approach and recorded a goodwill
impairment charge of $117.0 million within the Emerging Markets reporting unit, which was recorded within SG&A in the consolidated statement of
operations. The goodwill impairment charge was the result of the estimated proceeds less selling costs from the disposal of the Upjohn Distributor Markets
being below the carrying value of the net assets of the disposal group.
Refer to Note 5 Divestitures for additional information.
Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. In addition, changes in
underlying assumptions, especially as they relate to the key assumptions detailed, could have a significant impact on the fair value of the reporting units.
Intangible Assets, Net
Intangible assets consist of the following components at December 31, 2022 and 2021:
(In millions)
December 31, 2022
Product rights, licenses and other
In-process research and development
(1)
December 31, 2021
Product rights, licenses and other
In-process research and development
(1)
____________
Weighted Average
Life (Years)
Cost
Accumulated
Amortization
Net Book Value
15
15
$
$
$
$
37,490.5 $
40.2
37,530.7 $
14,923.6 $
—
14,923.6 $
39,006.2 $
46.5
39,052.7 $
12,918.5 $
—
12,918.5 $
22,566.9
40.2
22,607.1
26,087.7
46.5
26,134.2
(1)
Represents amortizable intangible assets. Other intangibles consist principally of customer lists and contractual rights.
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Table of Contents
Product rights and licenses are primarily comprised of the products marketed at the time of acquisition. These product rights and licenses relate to
numerous individual products, the net book value of which, by product category, is as follows:
(In millions)
Brands
Complex Gx and Biosimilars
Generics
Total Product Rights and Licenses
(In millions)
Brands
Complex Gx and Biosimilars
Generics
Total Product Rights and Licenses
Developed Markets
Greater China
JANZ
Emerging Markets
December 31, 2022
8,762.2 $
177.5
3,271.4
12,211.1 $
5,632.3 $
—
10.6
5,642.9 $
1,061.3 $
0.9
263.3
1,325.5 $
3,122.5 $
—
263.9
3,386.4 $
18,578.3
178.4
3,809.2
22,565.9
Developed Markets
Greater China
JANZ
Emerging Markets
December 31, 2021
10,066.6 $
226.8
4,020.2
14,313.6 $
6,102.9 $
—
12.1
6,115.0 $
1,174.8 $
1.5
319.5
1,495.8 $
3,801.7 $
—
358.4
4,160.1 $
21,146.0
228.3
4,710.2
26,084.5
$
$
$
$
Amortization expense and intangible asset disposal & impairment charges, which are included as a component of amortization expense, are
classified primarily within cost of sales in the consolidated statements of operations, and were as follows for the years ended December 31, 2022, 2021 and
2020:
(In millions)
Intangible asset amortization expense
IPR&D intangible asset impairment charges
Finite-lived intangible asset disposal & impairment charges
Total intangible asset amortization expense (including disposal & impairment charges)
Year ended December 31,
2022
2021
2020
$
$
2,504.6 $
0.6
172.9
2,678.1 $
2,702.2 $
19.4
83.4
2,805.0 $
1,605.8
37.4
45.0
1,688.2
The assessment for impairment of finite-lived intangibles is based on our ability to recover the carrying value of the long-lived assets or asset
grouping by analyzing the expected future undiscounted pre-tax cash flows specific to the asset or asset grouping. If the carrying amount is greater than the
undiscounted cash flows, the Company recognizes an impairment loss for the excess of the carrying amount over the estimated fair value based on
discounted cash flows.
Significant management judgment is involved in estimating the recoverability of these assets and is dependent upon the accuracy of the
assumptions used in making these estimates, as well as how the estimates compare to the eventual future operating performance of the specific asset or
asset grouping. The fair value of finite-lived intangible assets was calculated as the present value of the estimated future net cash flows using a market rate
of return. The assumptions inherent in the estimated future cash flows include, among other things, the impact of the current competitive environment and
future market expectations. A discount rate of 9.0% was utilized in the valuations performed during the years ended December 31, 2021 and 2020. Any
future long-lived assets impairment charges could have a material impact in the Company’s consolidated financial condition and results of operations.
In the fourth quarter of 2022, the Company recognized an intangible asset charge of approximately $172.9 million, which was recorded within
Cost of Sales in the consolidated statement of operations, to write down the disposal group to fair value, less cost to sell, related to our Upjohn Distributor
Markets, which was classified as held for sale. The Company has approximately $230.3 million of intangible assets related to the Upjohn Distributor
Markets that have been classified as held for sale in the December 31,2022 consolidated balance sheet. Refer to Note 5 Divestitures for additional
information.
On April 30, 2021, the Company completed an agreement to divest a group of OTC products in the U.S. As a result of this transaction, the
Company recognized an intangible asset impairment charge of approximately $83.4 million during the year ended December 31, 2021.
The Company’s IPR&D assets are tested at least annually for impairment or upon the occurrence of a triggering event. Impairment is determined
to exist when the fair value of IPR&D assets, which is based upon updated forecasts and commercial development plans, is less than the carrying value of
the assets being tested. The fair value of IPR&D was calculated as the present value of the estimated future net cash flows using a market rate of return.
The assumptions inherent in the estimated
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Table of Contents
future cash flows include, among other things, the impact of changes to the development programs, the projected development and regulatory time frames
and the current competitive environment. A discount rate of 10.5% was utilized in the valuations performed during the year ended December 31, 2022.
Discount rates ranging between 7.0% and 9.0%, and 9.0% and 11.0% were utilized in the valuations performed during the years ended December 31, 2021
and 2020, respectively.
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. Changes to any of the Company’s assumptions
including changes to or abandonment of development programs, regulatory timelines, discount rates or the competitive environment related to the assets
could lead to future material impairment charges.
Intangible asset amortization expense for the years ending December 31, 2023 through 2027 is estimated to be as follows:
(In millions)
2023
2024
2025
2026
2027
$
2,322
2,230
2,136
2,083
1,871
10.
Financial Instruments and Risk Management
The Company is exposed to certain financial risks relating to its ongoing business operations. The primary financial risks that are managed by
using derivative instruments are foreign currency risk and interest rate risk.
Foreign Currency Risk Management
In order to manage certain foreign currency risks, the Company enters into foreign exchange forward contracts to mitigate risk associated with
changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities. The foreign exchange forward contracts are measured at
fair value and reported as current assets or current liabilities in the consolidated balance sheets. Any gains or losses on the foreign exchange forward
contracts are recognized in earnings in the period incurred in the consolidated statements of operations.
The Company has also entered into forward contracts to hedge forecasted foreign currency denominated sales from certain international
subsidiaries and a portion of forecasted intercompany inventory sales denominated in Euro, Japanese Yen, Chinese Renminbi and Indian Rupee for up to
twenty-four months. These contracts are designated as cash flow hedges to manage foreign currency transaction risk and are measured at fair value and
reported as current assets or current liabilities in the consolidated balance sheets. Any changes in the fair value of designated cash flow hedges are deferred
in AOCE and are reclassified into earnings when the hedged item impacts earnings.
Net Investment Hedges
The Company may hedge the foreign currency risk associated with certain net investment positions in foreign subsidiaries by either borrowing
directly in foreign currencies and designating all or a portion of the foreign currency debt as a hedge of the applicable net investment position or entering
into foreign currency swaps that are designated as hedges of net investments.
The Company has designated certain Euro and Yen borrowings as a hedge of its investment in certain Euro-functional and Yen-functional
currency subsidiaries in order to manage foreign currency translation risk. Borrowings designated as net investment hedges are marked-to-market using the
current spot exchange rate as of the end of the period, with gains and losses included in the foreign currency translation component of AOCE until the sale
or substantial liquidation of the underlying net investments. In addition, the Company manages the related foreign exchange risk of the Euro and Yen
borrowings not designated as net investment hedges through certain Euro and Yen denominated financial assets and forward currency swaps.
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Table of Contents
The following table summarizes the principal amounts of the Company’s outstanding Euro and Yen borrowings and the notional amounts of the
Euro and Yen borrowings designated as net investment hedges:
(in millions)
Euro
2.250% Euro Senior Notes due 2024
3.125% Euro Senior Notes due 2028
2.125% Euro Senior Notes due 2025
0.816% Euro Senior Notes due 2022
1.023% Euro Senior Notes due 2024
1.362% Euro Senior Notes due 2027
1.908% Euro Senior Notes due 2032
(1)
Euro Total
Yen
YEN Term Loan
Yen Total
____________
Principal Amount
Notional Amount Designated as a Net
Investment Hedge
December 31,
2022
December 31,
2021
€
€
¥
¥
1,000.0 €
750.0
500.0
750.0
750.0
850.0
1,250.0
5,850.0 €
1,000.0 €
750.0
500.0
—
750.0
850.0
1,250.0
5,100.0 €
1,000.0
750.0
500.0
750.0
750.0
850.0
1,250.0
5,850.0
40,000.0 ¥
40,000.0 ¥
40,000.0 ¥
40,000.0 ¥
40,000.0
40,000.0
(1)
The Senior Notes were repaid at maturity during the second quarter of 2022.
At December 31, 2022, the principal amount of the Company’s outstanding Yen borrowings and the notional amount of the Yen borrowings
designated as net investment hedge was $305.1 million.
Interest Rate Risk Management
The Company enters into interest rate swaps from time to time in order to manage interest rate risk associated with the Company’s fixed-rate and
floating-rate debt. Interest rate swaps that meet specific accounting criteria are accounted for as fair value or cash flow hedges. All derivative instruments
used to manage interest rate risk are measured at fair value and reported as current assets or current liabilities in the consolidated balance sheets. For fair
value hedges, the changes in the fair value of both the hedging instrument and the underlying debt obligations are included in interest expense. For cash
flow hedges, the change in fair value of the hedging instrument is deferred through AOCE and is reclassified into earnings when the hedged item impacts
earnings.
Cash Flow Hedging Relationships
The Company’s interest rate swaps designated as cash flow hedges fix the interest rate on a portion of the Company’s variable-rate debt or hedge
part of the Company’s interest rate exposure associated with the variability in the future cash flows attributable to changes in interest rates. Any changes in
fair value are included in earnings or deferred through AOCE, depending on the nature and effectiveness of the offset. Any ineffectiveness in a cash flow
hedging relationship is recognized immediately in earnings in the consolidated statements of operations.
Fair Value Hedging Relationships
The Company's interest rate swaps designated as fair value hedges convert the fixed rate on a portion of the Company's fixed-rate senior notes to a
variable rate. Any changes in the fair value of these derivative instruments, as well as the offsetting change in fair value of the portion of the fixed-rate debt
being hedged, is included in interest expense. The Company’s fair value hedge was terminated during 2020.
Credit Risk Management
The Company regularly reviews the creditworthiness of its financial counterparties and does not expect to incur a significant loss from the failure
of any counterparties to perform under any agreements. The Company is not subject to any obligations to post collateral under derivative instrument
contracts. Certain derivative instrument contracts entered into by the
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Table of Contents
Company are governed by master agreements, which contain credit-risk-related contingent features that would allow the counterparties to terminate the
contracts early and request immediate payment should the Company trigger an event of default on other specified borrowings. The Company records all
derivative instruments on a gross basis in the consolidated balance sheets. Accordingly, there are no offsetting amounts that net assets against liabilities.
The following table summarizes the classification and fair values of derivative instruments in our consolidated balance sheets:
(In millions)
Derivatives designated as hedges:
Foreign currency forward contracts
Total derivatives designated as hedges
Derivatives not designated as hedges:
Foreign currency forward contracts
Total derivatives not designated as hedges
Total derivatives
Asset Derivatives
Liability Derivatives
Balance Sheet Location
Prepaid expenses &
other current assets
Prepaid expenses &
other current assets
December 31,
2022 Fair
Value
December 31,
2021 Fair Value
Balance Sheet
Location
December 31,
2022 Fair
Value
December 31,
2021 Fair Value
$
$
30.4 $
30.4
62.0
62.0
104.3
104.3
134.7 $
82.6
82.6
144.6
Other current
liabilities
Other current
liabilities
$
$
26.4 $
26.4
160.6
160.6
187.0 $
4.3
4.3
56.7
56.7
61.0
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Table of Contents
The following tables summarize information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
(In millions)
Derivative Financial Instruments in Fair Value Hedge
Relationships
:
(1)
Interest rate swaps
2023 Senior Notes (3.125% coupon)
Derivative Financial Instruments in Cash Flow Hedging
Relationships :
Foreign currency forward contracts
Derivative Financial Instruments Not Designated as
Hedging Instruments:
Foreign currency option and forward contracts
Total
(In millions)
Derivative Financial Instruments in Cash Flow Hedging
Relationships
(2)
:
Foreign currency forward contracts
Interest rate swaps
Non-derivative Financial Instruments in Net Investment
Hedging Relationships:
Foreign currency borrowings
Total
____________
Location of Gain/(Loss)
Amount of Gains/(Losses) Recognized in
Earnings
Year Ended December 31,
2021
2020
2022
Amount of Gain Excluded from the
Assessment of Hedge Effectiveness
Year Ended December 31,
2021
2020
2022
Interest expense
Interest expense
(3)
(3)
Other (income) expense,
net
(4)
Other (income) expense,
net
(3)
Location of Gain/(Loss)
(5)
Net sales
Interest expense
(5)
$
— $
—
— $
—
22.1 $
(22.1)
— $
—
— $
—
—
—
—
—
—
—
—
7.1
(82.1)
(82.1) $
$
39.3
39.3 $
(10.1)
(10.1) $
—
— $
—
— $
—
7.1
Amount of Gains/(Losses) Recognized in
AOCE (Net of Tax) on Derivatives
Year Ended December 31,
2021
2020
2022
Amount of Gains/(Losses) Reclassified
from AOCE into Earnings
Year Ended December 31,
2021
2020
2022
$
$
34.2 $
(3.5)
45.8 $
(3.4)
20.6 $
—
89.2 $
(4.5)
30.9 $
(4.3)
4.8
(4.5)
360.1
390.8 $
436.6
479.0 $
(346.4)
(325.8) $
—
84.7 $
—
26.6 $
—
0.3
(1)
(2)
(3)
(4)
(5)
In the first quarter of 2020, the Company terminated interest rate swaps designated as a fair value hedge resulting in net proceeds of approximately
$45 million. The amount included in the above tables represents the fair value adjustment recognized at the date the interest rate swaps were
settled.
At December 31, 2022, the Company expects that approximately $8.0 million of pre-tax net losses on cash flow hedges will be reclassified from
AOCE into earnings during the next twelve months.
Represents the location of the gain/(loss) recognized in earnings on derivatives.
Represents the location of the gain excluded from the assessment of hedge effectiveness.
Represents the location of the gain/(loss) reclassified from AOCE into earnings.
Fair Value Measurement
Fair value is based on the price that would be received from the sale of an identical asset or paid to transfer an identical liability in an orderly
transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair
value hierarchy has been established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are
described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair
value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3
inputs.
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In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value.
Financial assets and liabilities carried at fair value are classified in the tables below in one of the three categories described above:
(In millions)
Recurring fair value measurements
Financial Assets
Cash equivalents:
Money market funds
Total cash equivalents
Equity securities:
Exchange traded funds
Marketable securities
Total equity securities
CCPS in Biocon Biologics
Available-for-sale fixed income investments:
Corporate bonds
U.S. Treasuries
Agency mortgage-backed securities
Asset backed securities
Other
Total available-for-sale fixed income investments
Foreign exchange derivative assets
Total assets at recurring fair value measurement
Financial Liabilities
Foreign exchange derivative liabilities
Contingent consideration
Total liabilities at recurring fair value measurement
December 31, 2022
December 31, 2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$
688.8 $
688.8
— $
—
— $
—
50.9 $
50.9
— $
—
42.4
0.2
42.6
—
—
—
—
—
—
—
—
731.4 $
—
—
—
—
13.2
11.7
4.7
5.1
0.6
35.3
134.7
170.0 $
— $
—
— $
187.0 $
—
187.0 $
—
—
—
997.4
—
—
—
—
—
—
—
997.4 $
— $
375.0
375.0 $
$
$
$
50.3
0.7
51.0
—
—
—
—
—
—
—
—
101.9 $
—
—
—
—
16.6
14.6
2.0
4.6
0.4
38.2
144.6
182.8 $
— $
—
— $
61.0 $
—
61.0 $
—
199.7
199.7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including the
LIBOR yield curve, foreign exchange forward prices, and bank price quotes. For the years ended December 31, 2022 and 2021, there were no transfers
between Level 1 and 2 of the fair value hierarchy. Below is a summary of valuation techniques for Level 1 and Level 2 financial assets and liabilities:
•
•
•
•
Cash equivalents — valued at observable net asset value prices.
Equity securities, exchange traded funds — valued at the active quoted market prices from broker or dealer quotations or transparent pricing
sources at the reporting date. Unrealized gains and losses attributable to changes in fair value are included in Other (income) expense, net, in
the consolidated statements of operations.
Equity securities, marketable securities — valued using quoted stock prices from public exchanges at the reporting date. Unrealized gains and
losses attributable to changes in fair value are included in Other (income) expense, net, in the consolidated statements of operations.
CCPS in Biocon Biologics — valued using a Monte Carlo simulation model using Level 3 inputs. The fair value of the CCPS is sensitive to
changes in the forecasts of operating metrics and changes in volatility and discount rates. The Company elected the fair value option for the
CCPS under ASC 825. The fair value is reassessed quarterly and any change in the fair value estimate is recorded in Other (income) expense,
net, in the consolidated statements of operations for that period.
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•
•
Available-for-sale fixed income investments — valued at the quoted market prices from broker or dealer quotations or transparent pricing
sources at the reporting date. Unrealized gains and losses attributable to changes in fair value, net of income taxes, are included in
accumulated other comprehensive loss as a component of shareholders’ equity.
Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices and spot rates at the reporting date.
Counterparties to these contracts are highly rated financial institutions.
Contingent Consideration
In December 2011, the Company completed the acquisition of the exclusive worldwide rights to develop, manufacture and commercialize a
generic equivalent to GlaxoSmithKline’s Advair Diskus® incorporating Pfizer’s Respiratory Delivery Platform. The Company accounted for this
transaction as a purchase of a business and utilized the acquisition method of accounting. On January 30, 2019, the Company received FDA approval of
Wixela Inhub® (fluticasone propionate and salmeterol inhalation powder, USP), the first generic of GlaxoSmithKline’s Advair Diskus®. The commercial
launch of the Wixela Inhub® occurred in February 2019.
As of December 31, 2022, the Company has a contingent consideration liability of $132.0 million related to the Respiratory Delivery Platform and
$221.2 million related to the Biocon Biologics Transaction. The contingent consideration liability related to the Biocon Biologics Transaction represents
the amount of the closing working capital target to which the parties have agreed that may become payable to Biocon Biologics in connection with certain
events in the future, depending on the valuations attributable to such events. The measurement of these contingent consideration liabilities is calculated
using unobservable Level 3 inputs based on the Company’s own assumptions primarily related to the probability and timing of future events and payments
which are discounted using a market rate of return. At December 31, 2022 and 2021, discount rates ranging from 6.4% to 9.0% were utilized in the
valuations. Significant changes in unobservable inputs could result in material changes to the contingent consideration liabilities.
A rollforward of the activity in the Company’s fair value of contingent consideration from December 31, 2020 to December 31, 2022 is as
follows:
(In millions)
Balance at December 31, 2020
Payments
Reclassifications
Accretion
Fair value loss
Balance at December 31, 2021
Payments
Biocon Biologics Transaction
Reclassifications
Accretion
Fair value loss
(3)
(3)
Balance at December 31, 2022
____________
Current Portion
$
(1)
Long-Term
(2)
Portion
Total Contingent
Consideration
123.1 $
—
(49.4)
9.0
50.3
133.0 $
—
220.0
(61.8)
8.2
11.2
310.6 $
223.6
(83.2)
—
9.0
50.3
199.7
(64.1)
220.0
—
8.2
11.2
375.0
100.5 $
(83.2)
49.4
—
—
66.7 $
(64.1)
—
61.8
—
—
64.4 $
$
$
(1)
(2)
(3)
Included in other current liabilities in the consolidated balance sheets.
Included in other long-term obligations in the consolidated balance sheets.
Included in litigation settlements and other contingencies, net in the consolidated statements of operations.
Although the Company has not elected the fair value option for financial assets and liabilities other than the CCPS, any future transacted financial
asset or liability will be evaluated for the fair value election.
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Available-for-Sale Securities
The amortized cost and estimated fair value of available-for-sale securities were as follows:
35.3
35.3
38.2
38.2
1.0
18.4
15.9
35.3
Balance Sheet Location
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In millions)
December 31, 2022
Available-for-sale fixed income investments
Prepaid expenses and other current
assets
December 31, 2021
Available-for-sale fixed income investments
Prepaid expenses and other current
assets
$
$
$
$
38.0 $
38.0 $
— $
— $
(2.7) $
(2.7) $
38.1 $
38.1 $
0.1 $
0.1 $
— $
— $
Maturities of available-for-sale fixed income investments at fair value as of December 31, 2022, were as follows:
(In millions)
Mature within one year
Mature in one to five years
Mature in five years and later
11. Debt
Short-Term Borrowings
$
$
The Company did not have any short-term borrowings as of December 31, 2022 and had $1.49 billion of short-term borrowings as of
December 31, 2021.
(In millions)
Commercial paper notes
Receivables Facility
Other
Short-term borrowings
December 31, 2022 December 31, 2021
1,173.4
— $
$
318.5
—
1.1
—
1,493.0
— $
$
The following provides an overview of the Company’s short-term credit facilities.
Receivables Facility and Note Securitization Facility
The Company has a $400 million Receivables Facility which expires in April 2025 and a $200 million Note Securitization Facility which expires
in August 2023. 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 amount that we may borrow at a given point in time is determined based on the
amount of qualifying accounts receivable that are present at such point in time.
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. In addition, the agreements governing the Receivables
Facility and Note Securitization Facility contain various customary affirmative and negative covenants, and customary default and termination provisions
with which the Company was compliant as of December 31, 2022. As of December 31, 2022 and 2021, the Company had $474.9 million and $388.9
million, respectively, of accounts receivable balances sold to its subsidiary Mylan Securitization under the Receivables Facility.
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Long-Term Debt
A summary of long-term debt is as follows:
($ in millions)
Current portion of long-term debt:
(a)
****
(b)
2022 Euro Senior Notes
***
2022 Senior Notes
2023 Senior Notes
*
2023 Senior Notes *
Other
Deferred financing fees
(c)
Current portion of long-term debt
Non-current portion of long-term debt:
(c)
*
2023 Senior Notes
2023 Senior Notes *
2024 Euro Senior Notes **
2024 Euro Senior Notes ****
2025 Euro Senior Notes *
2025 Senior Notes ***
2026 Senior Notes **
2027 Euro Senior Notes ****
2027 Senior Notes ***
2028 Euro Senior Notes **
2028 Senior Notes *
2030 Senior Notes ***
2032 Euro Senior Notes ****
2040 Senior Notes ***
2043 Senior Notes *
2046 Senior Notes **
2048 Senior Notes *
2050 Senior Notes ***
YEN Term Loan Facility
Other
Deferred financing fees
Long-term debt
____________
(a)
The 2022 Euro Senior Notes were repaid at maturity in the second quarter of 2022.
Interest Rate as of
December 31, 2022
December 31,
2022
December 31,
2021
0.816 %
1.125 %
3.125 %
4.200 %
3.125 %
4.200 %
2.250 %
1.023 %
2.125 %
1.650 %
3.950 %
1.362 %
2.300 %
3.125 %
4.550 %
2.700 %
1.908 %
3.850 %
5.400 %
5.250 %
5.200 %
4.000 %
Variable
$
$
—
—
750.6
499.8
0.7
(0.6)
1,250.5 $
—
—
1,069.8
813.5
534.8
759.6
2,243.2
945.9
775.3
798.5
748.9
1,512.8
1,444.4
1,650.6
497.4
999.9
747.8
2,200.8
305.1
2.0
(35.1)
18,015.2 $
856.6
1,002.9
—
—
0.9
(0.1)
1,860.3
766.1
499.6
1,135.8
871.6
567.8
763.4
2,241.4
1,013.0
780.8
847.4
748.7
1,520.5
1,546.6
1,657.1
497.3
999.9
747.8
2,205.1
347.6
1.9
(42.3)
19,717.1
(b)
(c)
The 2022 Senior Notes were repaid at maturity in the second quarter of 2022.
In the first quarter of 2020, the Company terminated interest rate swaps designated as a fair value hedge resulting in net proceeds of approximately
$45 million. The fair value adjustment is being amortized to interest expense over the remaining term of the notes.
*
Instrument was issued by Mylan Inc.
**
Instrument was originally issued by Mylan N.V.; now held by Utah Acquisition Sub Inc.
***
Instrument was issued by Viatris Inc.
****
Instrument was issued by Upjohn Finance B.V.
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Table of Contents
Senior Notes
Upjohn Senior Notes
In connection with the Combination, in June 2020, Viatris and Upjohn Finance B.V. completed privately placed debt offerings of $7.45 billion
aggregate principal amount of the Unregistered Upjohn U.S. Dollar Notes and €3.60 billion aggregate principal amount of the Upjohn Euro Notes,
respectively.
The Unregistered Upjohn U.S. Dollar Notes were issued pursuant to an indenture dated June 22, 2020 in a private offering exempt from the
registration requirements of the Securities. In October 2021, substantially all of the then-outstanding $7.45 billion aggregate principal amount of
Unregistered Upjohn U.S. Dollar Notes were exchanged for Registered Upjohn Notes registered under the Securities Act in the same aggregate principal
amount and with terms substantially identical in all material respects with the corresponding series of Unregistered Upjohn U.S. Dollar Notes.
The Upjohn Euro Notes were issued pursuant to an indenture dated June 23, 2020 in a private offering exempt from the registration requirements
of the Securities Act. Viatris and Upjohn Finance B.V. are U.S. dollar functional entities.
The net proceeds from the offerings of the Upjohn Senior Notes, together with the proceeds from the $600 million USD Term Loan Facility, were
utilized to fund the $12 billion cash payment by Viatris to Pfizer as partial consideration for Pfizer’s contribution of the Upjohn Business to Viatris and
related transaction fees and expenses.
Assumptions and Guarantees of Senior Unsecured Notes
Viatris Inc. is the issuer of the Upjohn U.S. Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan
Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Upjohn Finance B.V. is the issuer of the Upjohn Euro Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Viatris
Inc., Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Following the Combination, Utah Acquisition Sub Inc. is the issuer of the Utah U.S. Dollar Notes and the Utah Euro Notes, which are each 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 and the Mylan Inc. Euro Notes, which are each fully and unconditionally guaranteed
on a senior unsecured basis by Mylan II B.V., Viatris Inc. and Utah Acquisition Sub Inc.
YEN Term Loan Facility and 2021 Revolving Facility
In July 2021, Viatris entered into (i) the ¥40 billion YEN Term Loan Facility and (ii) the $4.0 billion 2021 Revolving Facility with various
syndicates of banks. The YEN Term Loan Facility and the 2021 Revolving Facility will mature in July 2026 and contain customary affirmative covenants
for facilities of this type, including 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. Up to $1.65 billion of the 2021 Revolving Facility will be available to repay outstanding borrowings under
our Commercial Paper Program if necessary.
Fair Value
At December 31, 2022 and 2021, the aggregate fair value of the Company’s outstanding notes was approximately $15.36 billion and $22.01
billion, respectively. The fair values of the outstanding notes were valued at quoted market prices from broker or dealer quotations and were classified as
Level 2 in the fair value hierarchy.
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Table of Contents
Mandatory minimum repayments remaining on the notional amount of outstanding long-term debt at December 31, 2022 were as follows for each
of the periods ending December 31:
(In millions)
2023
2024
2025
2026
2027
Thereafter
Total
Total
1,250
1,873
1,285
2,555
1,660
10,091
18,714
$
$
12. Comprehensive (Loss) Earnings
Accumulated other comprehensive loss, as reflected in the consolidated balance sheets, is comprised of the following:
(In millions)
Accumulated other comprehensive loss:
Net unrealized (loss) on marketable securities, net of tax
Net unrecognized gain and prior service cost related to defined benefit plans, net of tax
Net unrecognized (loss)/gain on derivatives in cash flow hedging relationships, net of tax
Net unrecognized gain on derivatives in net investment hedging relationships, net of tax
Foreign currency translation adjustment
December 31, 2022 December 31, 2021
$
$
(2.3) $
268.5
(18.5)
377.0
(3,385.9)
(2,761.2) $
—
32.2
9.2
16.7
(1,802.4)
(1,744.3)
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Table of Contents
Components of accumulated other comprehensive (loss) earnings, before tax, consist of the following:
(In millions)
Balance at December 31, 2021, net of tax
Other comprehensive earnings (loss)
before reclassifications, before tax
Amounts reclassified from accumulated
other comprehensive earnings (loss),
before tax:
Gain on foreign exchange forward
contracts classified as cash flow
hedges, included in net sales
Loss on interest rate swaps
classified as cash flow hedges,
included in interest expense
Amortization of prior service costs
included in SG&A
Amortization of actuarial loss
included in SG&A
Net other comprehensive earnings
(loss), before tax
Income tax provision
Balance at December 31, 2022, net of tax
Year Ended December 31, 2022
Gains and Losses
on Net
Investment
Hedges
Gains and
Losses on
Marketable
Securities
Defined
Pension
Plan Items
Foreign
Currency
Translation
Adjustment
Totals
Gains and Losses on Derivatives in Cash
Flow Hedging Relationships
Foreign
Currency
Forward
Contracts
Interest
Rate
Swaps
Total
$
9.2 $
16.7 $
— $
32.2 $
(1,802.4) $
(1,744.3)
47.8
460.1
(2.8)
276.3
(1,583.5)
(802.1)
(89.2)
(89.2)
4.5
4.5
(89.2)
4.5
(0.4)
3.2
(0.4)
3.2
(36.9)
(9.2)
$ (18.5) $
460.1
99.8
377.0 $
(2.8)
(0.5)
(2.3) $
279.1
42.8
268.5 $
(1,583.5)
—
(3,385.9) $
(884.0)
132.9
(2,761.2)
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Table of Contents
(In millions)
Balance at December 31, 2020, net of tax
Other comprehensive earnings (loss)
before reclassifications, before tax
Amounts reclassified from accumulated
other comprehensive earnings (loss),
before tax:
Gain on foreign exchange forward
contracts classified as cash flow
hedges, included in net sales
Loss on interest rate swaps
classified as cash flow hedges,
included in interest expense
Amortization of prior service costs
included in SG&A
Amortization of actuarial loss
included in SG&A
Net other comprehensive earnings
(loss), before tax
Income tax provision
Balance at December 31, 2021, net of tax
Year Ended December 31, 2021
Gains and Losses
on Net
Investment
Hedges
Gains and
Losses on
Marketable
Securities
Defined
Pension
Plan Items
Foreign
Currency
Translation
Adjustment
Totals
Gains and Losses on Derivatives in Cash
Flow Hedging Relationships
Foreign
Currency
Forward
Contracts
Interest
Rate
Swaps
Total
$ (18.0) $
(353.6) $
1.2 $
(26.1) $
(461.5) $
(858.0)
62.7
456.8
(1.1)
67.0
(1,340.9)
(755.5)
(30.9)
(30.9)
4.3
4.3
(30.9)
4.3
(0.5)
7.4
(0.5)
7.4
36.1
8.9
9.2 $
$
456.8
86.5
16.7 $
(1.1)
0.1
— $
73.9
15.6
32.2 $
(1,340.9)
—
(1,802.4) $
(775.2)
111.1
(1,744.3)
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Table of Contents
(In millions)
Balance at December 31, 2019, net of tax
Other comprehensive (loss) earnings
before reclassifications, before tax
Amounts reclassified from accumulated
other comprehensive (loss) earnings,
before tax:
Gain on foreign exchange forward
contracts classified as cash flow
hedges, included in net sales
Loss on interest rate swaps
classified as cash flow hedges,
included in interest expense
Amortization of prior service costs
included in SG&A
Amortization of actuarial loss
included in SG&A
Net other comprehensive (loss)
earnings, before tax
Income tax provision (benefit)
Balance at December 31, 2020, net of tax
Year Ended December 31, 2020
Gains and Losses
on Net
Investment
Hedges
Gains and
Losses on
Marketable
Securities
Defined
Pension
Plan Items
Foreign
Currency
Translation
Adjustment
Totals
Gains and Losses on Derivatives in Cash
Flow Hedging Relationships
Foreign
Currency
Forward
Contracts
Interest
Rate
Swaps
Total
$ (31.6) $
(74.3) $
0.6 $
(17.4) $
(1,674.5) $
(1,797.2)
18.5
(305.2)
0.6
(12.1)
1,213.0
914.8
(4.8)
(4.8)
4.5
4.5
(4.8)
4.5
—
(1.9)
—
(1.9)
18.2
4.6
$ (18.0) $
(305.2)
(25.9)
(353.6) $
0.6
—
1.2 $
(14.0)
(5.3)
(26.1) $
1,213.0
—
(461.5) $
912.6
(26.6)
(858.0)
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Table of Contents
13. Income Taxes
The income tax provision (benefit) consisted of the following components:
(In millions)
U.S. Federal:
Current
Deferred
U.S. State:
Current
Deferred
Non-U.S.:
Current
Deferred
Income tax provision (benefit)
Earnings before income taxes:
United States
Foreign - Other
Total earnings (loss) before income taxes
Year Ended December 31,
2022
2021
2020
$
$
$
115.3 $
263.7
379.0
12.6 $
(182.7)
(170.1)
26.5
20.3
46.8
618.7
(309.9)
308.8
734.6 $
7.7
(10.8)
(3.1)
(91.3)
869.2
777.9
604.7 $
794.8
2,018.4
2,813.2 $
(1,982.5)
1,318.1
(664.4) $
(6.4)
(277.0)
(283.4)
(0.1)
7.7
7.6
168.7
55.8
224.5
(51.3)
(945.5)
224.3
(721.2)
For all periods presented, the allocation of earnings before income taxes between U.S. and non-U.S. operations includes intercompany interest
allocations between certain domestic and foreign subsidiaries. These amounts are eliminated on a consolidated basis.
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Temporary differences and carry-forwards that result in deferred tax assets and liabilities were as follows:
(In millions)
Deferred tax assets:
Employee benefits
Litigation reserves
Accounts receivable allowances
Inventory
Tax credit and loss carry-forwards
Operating lease assets
Interest expense
Intangible assets
Other
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Plant and equipment
Operating lease liabilities
Intangible assets and goodwill
Other
Total deferred tax liabilities
Deferred tax liabilities, net
December 31, 2022 December 31, 2021
$
$
129.6 $
20.5
446.2
159.3
760.3
56.2
94.8
149.3
209.3
2,025.5
(387.0)
1,638.5
56.6
56.2
2,880.3
151.5
3,144.6
(1,506.1) $
271.3
94.4
425.9
187.8
1,256.0
63.6
111.6
151.1
327.8
2,889.5
(780.4)
2,109.1
19.6
63.6
3,468.3
39.9
3,591.4
(1,482.3)
For those foreign subsidiaries whose investments are permanent in duration, income and foreign withholding taxes have not been provided on the
unremitted earnings of those subsidiaries. This amount may become taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the
subsidiary. The amount of such unremitted earnings is approximately $2.6 billion at December 31, 2022. Determination of the amount of any unrecognized
deferred income tax liability on these unremitted earnings is not practicable as such determination involves material uncertainties about the potential extent
and timing of any distributions, the availability and complexity of calculating foreign tax credits, and the potential indirect tax consequences of such
distributions, including withholding taxes.
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Our effective tax rate from continuing operations differs from the applicable United States statutory federal income tax rate of 21.0%, due to the
following:
Statutory tax rate
Clean energy and research credits
Foreign rate differential
Expiration of attributes
Goodwill impairment
State income taxes and credits
Tax settlements and resolution of certain tax positions
Impact of the Combination and divestitures
Incremental U.S. tax on foreign earnings
Valuation allowance
Deferred tax impact of tax law changes
Withholding taxes
Waived deductions under IRC § 59A
Other items
Effective tax rate
Year Ended December 31,
2022
2021
2020
21.0 %
21.0 %
21.0 %
— %
(3.6)%
9.8 %
6.5 %
1.3 %
1.0 %
(6.7)%
2.0 %
(13.6)%
5.4 %
1.5 %
— %
1.5 %
26.1 %
9.8 %
31.4 %
— %
— %
(0.6)%
0.9 %
(109.7)%
(36.9)%
(8.4)%
7.0 %
(1.3)%
— %
(4.2)%
(91.0)%
12.8 %
8.6 %
— %
— %
(1.6)%
(3.8)%
(35.5)%
(3.6)%
24.6 %
— %
(1.6)%
(3.3)%
(10.5)%
7.1 %
In all years, our effective tax rate is impacted by the jurisdictional location of earnings and the corresponding tax rates in those jurisdictions.
Subsequent to the Combination, the Company realizes benefits from lower tax rates in Singapore and Puerto Rico due to manufacturing and other
incentives.
Prior to the Combination, Mylan was a U.K. tax resident, with its Corporate seat in the Netherlands. As of the date of the Combination, Viatris is
domiciled in the U.S., and the applicable income tax rate to Viatris is the U.S. statutory federal income tax rate of 21.0%. The effective tax rate
reconciliations of the years ended December 31, 2021 and December 31, 2020 have been recast to reflect this change.
During the year ended December 31, 2022, a Puerto Rico net operating loss, which was recorded in conjunction with the Combination, expired
unutilized resulting in a $274.4 million write-off of deferred tax asset and corresponding valuation allowance. The expiration and valuation allowance
impacts are reflected in the above table.
Valuation Allowance
A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. At
December 31, 2022, a valuation allowance has been applied to certain deferred tax assets in the amount of $387.0 million.
When assessing the realizability of deferred tax assets, management considers all available evidence, including historical information, long-term
forecasts of future taxable income and possible tax planning strategies. Amounts recorded for valuation allowances can result from a complex series of
estimates, assumptions and judgments about future events. 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.
Net Operating Losses
As of December 31, 2022, the Company had the following carryforwards and attributes:
• U.S. federal net operating loss carryforwards of $4.6 million.
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• U.S. state income tax loss carryforwards of approximately $2.90 billion, which are largely offset by a valuation allowance.
• Non-U.S. net operating loss carryforwards of approximately $1.01 billion, of which $810.8 million can be carried forward indefinitely,
with the remaining $195.1 million expiring in years 2023 through 2042.
•
Foreign deductible attributes of $37.3 million that can be carried forward indefinitely, which are offset by a full valuation allowance.
• U.S. and foreign credit carryovers of $213.3 million, expiring in various amounts through 2042.
• Anticipatory foreign tax credits of $196.1 million which will generate from the reversal of future taxable income in certain non-U.S.
jurisdictions which are taxed both in their local jurisdictions and in the U.S.
On November 16, 2020, the Company had a change in ownership pursuant to Section 382 of the Code. Under this provision of the Code, the
utilization of any NOL or tax credit carryforwards incurred prior to the date of ownership change may be limited. Analyses of the limits for each ownership
change indicates the annual limitation would not impair the Company's ability to utilize our U.S. federal credit carryovers. While state loss carryforwards
may be limited by Section 382 of the Code, the carryforwards are largely offset by a valuation allowance.
CARES Act
On March 27, 2020, the CARES Act was enacted and signed into law. The CARES Act includes several provisions, including increasing the
amount of deductible interest, allowing companies to carryback certain NOLs, and increasing the amount of NOLs that corporations can use to offset
income. During the year ended December 31, 2020, the CARES Act reduced the Company’s 2020 income tax expense by $22.1 million resulting from
additional deductible interest.
Tax Examinations
The Company is subject to income taxes and tax audits in many jurisdictions. A certain degree of estimation is thus required in recording the
assets and liabilities related to income taxes. Tax audits and examinations can involve complex issues, interpretations, and judgments and the resolution of
matters that may span multiple years, particularly if subject to litigation or negotiation.
Although the Company believes that adequate provisions have been made for these uncertain tax positions, the Company’s assessment of
uncertain tax positions, including those arising from legal entity restructuring transactions in connection with the Combination, is based on estimates and
assumptions that the Company believes are reasonable but the estimates for unrecognized tax benefits and potential tax benefits may not be representative
of actual outcomes, and variations from such estimates could materially affect the Company’s financial condition, results of operations or cash flows in the
period of resolution, settlement or when the statutes of limitations expire.
The Company is subject to ongoing IRS examinations. The years 2015 through 2019 are open years under examination. The years 2012, 2013 and
2014 have one matter open, and a Tax Court petition was filed regarding the matter and a trial was held in December 2018 and is discussed further below.
Several international audits are currently in progress. In some cases, the tax auditors have proposed adjustments or issued assessments to our tax
positions, including with respect to intercompany transactions, and we are in ongoing discussions with some of the auditors regarding the validity of their
positions.
In instances where assessments have been issued, we disagree with these assessments and believe they are without merit and incorrect as a matter
of law. As a result, we anticipate that certain of these matters may become the subject of litigation before tax courts where we intend to vigorously defend
our position.
In Australia, the tax authorities have issued notices of assessments to the Company for the years ended December 2009 to December 2020, subject
to additional interest and penalties, concerning our tax position with respect to certain intercompany transactions. The tax authorities denied our objections
to the assessments for the years ended December 2009 to December 2020 and we have commenced litigation in the Australian Federal Court challenging
those decisions. The Company made a partial payment of $56.0 million in 2021 and $5.2 million in 2022 in order to stay potential interest and penalties
resulting from this litigation.
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In France, the tax authorities have issued notices of assessments to the Company for the years ended December 2013 to December 2015
concerning our tax position with respect to whether income earned by a Company entity not domiciled in France should be subject to French tax. We have
commenced litigation before the French tax courts where the tax authorities will seek unpaid taxes, penalties, and interest.
In India, the tax authorities have issued notices of assessments to the Company seeking unpaid taxes and interest for the financial years covering
2013 to 2018 concerning our tax position with respect to certain corporate tax deductions and certain intercompany transactions. Some of these assessments
remain in the audit phase where we are challenging them before the tax authorities while we are challenging some of the other assessments in the Indian tax
courts.
The Company has recorded a net reserve for uncertain tax positions of $298.1 million and $315.6 million, including interest and penalties, in
connection with its international audits at December 31, 2022 and 2021, respectively. In connection with our international tax audits, it is possible that we
will incur material losses above the amounts reserved.
The Company’s major U.S. state taxing jurisdictions remain open from fiscal year 2013 through 2021, with several state audits currently in
progress. The Company’s major international taxing jurisdictions remain open from 2012 through 2021.
Tax Court Proceedings
The Company's U.S. federal income tax returns for 2012 through 2014 had been subject to proceedings in U.S. Tax Court involving a dispute with
the IRS regarding whether certain costs related to ANDAs were eligible to be expensed and deducted immediately or required to be amortized over longer
periods. A trial was held in U.S. Tax Court in December 2018 and on April 27, 2021, the Court affirmed Mylan’s position and held that patent litigation
expenses related to ANDAs are immediately deductible. The IRS has appealed this decision.
Accounting for Uncertainty in Income Taxes
The impact of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be
recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has
less than a 50% likelihood of being sustained.
As of December 31, 2022 and 2021, the Company’s consolidated balance sheets reflect net liabilities for unrecognized tax benefits of $296.7
million and $322.9 million, respectively, of which $210.7 million as of December 31, 2022 would affect the Company’s effective tax rate if recognized,
with the remainder being offset by potential correlative adjustments. Related accrued interest and penalties included in the consolidated balance sheets were
$106.4 million and $96.8 million as of December 31, 2022 and 2021, respectively. For the years ended December 31, 2022, 2021 and 2020, the Company
recognized $21.1 million of tax expense, $18.5 million of tax expense, and $6.0 million of tax benefits, respectively, related to interest and penalties on
uncertain tax positions. Interest and penalties related to income taxes are included in the tax provision.
A reconciliation of the unrecognized tax benefits is as follows:
(In millions)
Unrecognized tax benefit — beginning of year
Additions for current year tax positions
Additions for prior year tax positions
Reductions for prior year tax positions
Settlements
Reductions due to expirations of statute of limitations
(Reduction) addition due to acquisition
Unrecognized tax benefit — end of year
Year Ended December 31,
2022
2021
2020
$
$
322.9 $
8.2
1.0
(5.8)
(0.4)
(1.9)
(27.3)
296.7 $
391.1 $
—
—
(9.1)
(47.3)
(7.0)
(4.8)
322.9 $
92.1
13.4
35.7
(5.2)
(8.9)
—
264.0
391.1
The Company believes that it is reasonably possible that the amount of unrecognized tax benefits will decrease in the next twelve months by
approximately $55.0 million, involving international and state audits and settlements and expiring statutes of limitations. The Company does not anticipate
significant increases to the reserve within the next twelve months.
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14. Share-Based Incentive Plan
Prior to the Distribution, Viatris adopted and Pfizer, in the capacity as Viatris’ sole stockholder at such time, approved the 2020 Incentive Plan (the
Viatris Inc. 2020 Stock Incentive Plan) which became effective as of the Distribution. In connection with the Combination, as of November 16, 2020, the
Company assumed the 2003 LTIP (Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan), which had previously been approved by Mylan
shareholders. The 2020 Incentive Plan and 2003 LTIP include (i) 72,500,000 shares of Common Stock authorized for grant pursuant to the 2020 Incentive
Plan, which may include dividend payments payable in Common Stock on unvested shares granted under awards, (ii) 6,757,640 shares of Common Stock
to be issued pursuant to the exercise of outstanding stock options granted to participants under the 2003 LTIP and assumed by Viatris in connection with the
Combination and (iii) 13,535,627 shares of Common Stock subject to outstanding equity-based awards, other than stock options, assumed by Viatris in
connection with the Combination, or that otherwise remain available for issuance under the 2003 LTIP.
Under the 2020 Incentive Plan and 2003 LTIP, shares are reserved for issuance to key employees, consultants, independent contractors and non-
employee directors of the Company through a variety of incentive awards, including: stock options, SARs, restricted stock and units, PSUs, other stock-
based awards and short-term cash awards. Stock option awards are granted with an exercise price equal to the fair market value of the shares underlying the
stock options at the date of the grant, generally become exercisable over periods ranging from three to four years, and generally expire in ten years.
The following table summarizes stock awards (stock options and SARs) activity under the 2020 Incentive Plan and 2003 LTIP:
Outstanding at December 31, 2019
Granted
Exercised
Forfeited
Outstanding at December 31, 2020
Forfeited
Outstanding at December 31, 2021
Forfeited
Outstanding at December 31, 2022
Vested and expected to vest at December 31, 2022
Exercisable at December 31, 2022
Number of Shares
Under Stock Awards
Weighted Average
Exercise Price
per Share
6,347,709 $
814,351
(27,615)
(422,714)
6,711,731 $
(1,135,241)
5,576,490 $
(1,126,848)
4,449,642 $
4,411,052 $
4,216,884 $
36.97
17.37
21.13
25.74
35.36
26.39
37.19
31.91
38.53
38.70
39.65
As of December 31, 2022, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average
remaining contractual terms of 4.1 years, 4.1 years and 3.9 years, respectively. Also, at December 31, 2022, stock awards outstanding, stock awards vested
and expected to vest and stock awards exercisable had no aggregate intrinsic value.
A rollforward of the changes in the Company’s nonvested Restricted Stock Awards (restricted stock and restricted stock unit awards, including
PSUs) from December 31, 2021 to December 31, 2022 is presented below:
Nonvested at December 31, 2021
Granted
Released
Forfeited
Nonvested at December 31, 2022
Number of Restricted
Stock Awards
Weighted Average
Grant-Date
Fair Value Per Share
16,858,128 $
16,880,145
(4,790,749)
(1,675,598)
27,271,926 $
15.12
10.20
17.53
12.30
11.81
Of the 16,880,145 Restricted Stock Awards granted during the year ended December 31, 2022, 11,471,308 vest ratably in three years or less and
are not subject to market or performance conditions. Of the remaining Restricted Stock Awards
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granted, 290,173 are not subject to market conditions and will cliff vest within a three-year period, and 5,118,664 are subject to market or performance
conditions and will cliff vest in three years or less.
As of December 31, 2022, the Company had $171.2 million of total unrecognized compensation expense, net of estimated forfeitures, related to all
of its stock-based awards, which we expect to recognize over the remaining weighted average vesting period of 1.5 years. The total intrinsic value of
Restricted Stock Awards released during the years ended December 31, 2022 and 2021 was $51.8 million and $78.1 million, respectively.
With respect to options granted under the 2020 Incentive Plan and 2003 LTIP, the fair value of each option grant was estimated at the date of grant
using the Black-Scholes option pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and
employee exercise behavior. Expected volatilities utilized in the model are based mainly on the implied volatility of the Company’s stock price and other
factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The model incorporates exercise and post-
vesting forfeiture assumptions based on an analysis of historical data. The expected lives of the grants are derived from historical and other factors.
There were no options granted during the years ended December 31, 2022 or 2021. The assumptions used for options granted under the 2020
Incentive Plan and 2003 LTIP during the year ended December 31, 2020 are as follows:
Volatility
Risk-free interest rate
Expected term (years)
Forfeiture rate
Weighted average grant date fair value per option
Dividend yield
15. Employee Benefit Plans
Defined Benefit Plans
Year Ended December 31,
2020
46.7%
1.0%
6.5
5.5%
$8.07
—%
The Company sponsors various defined benefit pension plans in several countries. Benefits provided generally depend on length of service, pay
grade and remuneration levels. Employees in the U.S., Puerto Rico and certain international locations are also provided retirement benefits through defined
contribution plans.
The Company also sponsors other postretirement benefit plans including plans that provide for postretirement supplemental medical coverage.
Benefits from these plans are provided to employees and their spouses and dependents who meet various minimum age and service requirements. In
addition, the Company sponsors other plans that provide for life insurance benefits and postretirement medical coverage for certain officers and
management employees.
Accounting for Defined Benefit Pension and Other Postretirement Plans
The Company recognizes on its balance sheet an asset or liability equal to the over- or under-funded benefit obligation of each defined benefit
pension and other postretirement plan. Actuarial gains or losses and prior service costs or credits that arise during the period are not recognized as
components of net periodic benefit cost, but are recognized, net of tax, as a component of other comprehensive (loss) earnings.
Included in accumulated other comprehensive loss as of December 31, 2022 and 2021 are:
(In millions)
Unrecognized actuarial (gain) loss
Unrecognized prior service cost (credit)
Total
Pension Benefits
December 31,
Other Postretirement Benefits
December 31,
2022
2021
2022
2021
$
$
(293.6) $
4.0
(289.6) $
(59.9) $
6.6
(53.3) $
(22.0) $
(3.7)
(25.7) $
21.7
(3.7)
18.0
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The unrecognized net actuarial (gains) losses exceeded 10% of the higher of the market value of plan assets or the projected benefit obligation at
the beginning of the year for certain of the plans, therefore, amortization of such excess has been included in net periodic benefit costs for pension and
other postretirement benefits in each of the last three years. The amortization period is the average remaining service period that active employees are
expected to receive benefits, unless a plan is mostly inactive in which case the amortization period is the average remaining life expectancy of the plan
participants. Unrecognized prior service cost is amortized over the future service periods of those employees who are active at the dates of the plan
amendments and who are expected to receive benefits. If all or almost all of a plan's participants are inactive, unrecognized prior service cost is amortized
over the remaining life expectancy of those participants.
The change in accumulated other comprehensive loss in 2022 relating to pension benefits and other postretirement benefits consists of:
(In millions)
Unrecognized actuarial (gain) loss
Amortization of actuarial gain/(loss)
Unrecognized prior service credit (cost)
Amortization of prior service costs
Impact of foreign currency translation
Net change
Pension Benefits
Other
Postretirement
Benefits
$
$
(236.9) $
3.5
(1.4)
(0.9)
(0.6)
(236.3) $
(43.4)
(0.3)
(0.5)
0.5
—
(43.7)
Components of net periodic benefit cost, change in projected benefit obligation, change in plan assets, funded status, fair value of plan assets,
assumptions used to determine net periodic benefit cost, funding policy and estimated future benefit payments are summarized below for the Company’s
pension plans and other postretirement plans.
Net Periodic Benefit Cost
Components of net periodic benefit cost for the years ended December 31, 2022, 2021 and 2020 were as follows:
(In millions)
Service cost
Interest cost
Expected return on plan assets
Plan curtailment, settlement and termination
Amortization of prior service costs
Recognized net actuarial losses (gains)
Net periodic benefit cost
$
$
Pension Benefits
December 31,
2022
2021
2020
2022
Other Postretirement Benefits
December 31,
2021
2020
32.6 $
36.8
(64.6)
2.3
0.9
(0.2)
7.8 $
38.6 $
31.6
(66.1)
(16.5)
0.9
1.3
(10.2) $
23.5 $
13.5
(19.9)
1.1
—
0.4
18.6 $
3.4 $
3.7
—
(3.9)
(0.6)
0.3
2.9 $
3.4 $
2.6
—
—
—
0.2
6.2 $
1.2
1.4
—
—
—
0.3
2.9
During the year ended December 31, 2021, the Company recognized a settlement gain as a result of cash payments from lump sum elections
related to the U.S. and Puerto Rico pension plans.
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Change in Projected Benefit Obligation, Change in Plan Assets and Funded Status
The table below presents components of the change in projected benefit obligation, change in plan assets and funded status at December 31, 2022
and 2021.
(In millions)
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year
Service cost
Interest cost
Participant contributions
Acquisitions
Plan settlements and terminations
Actuarial (gains) losses
Benefits paid
Impact of foreign currency translation
Projected benefit obligation, end of year
Change in Plan Assets
Fair value of plan assets, beginning of year
Actual return on plan assets
Company contributions
Participant contributions
Acquisitions
Plan settlements
Benefits paid
Impact of foreign currency translation
Fair value of plan assets, end of year
Funded status of plans
Pension Benefits
Other Postretirement Benefits
2022
2021
2022
2021
$
$
$
$
1,946.6 $
32.6
36.8
3.3
2.8
(82.0)
(439.4)
(54.1)
(67.6)
1,379.0 $
1,366.4 $
(138.1)
25.6
3.3
—
(85.9)
(54.1)
(50.1)
1,067.1
(311.9) $
2,145.8 $
38.6
31.6
2.0
4.0
(128.6)
(26.1)
(52.8)
(67.9)
1,946.6 $
1,354.6 $
141.7
97.0
2.0
(2.1)
(128.9)
(52.8)
(45.1)
1,366.4
(580.2) $
188.4 $
3.4
3.7
4.5
—
(4.5)
(43.3)
(14.7)
—
137.5 $
— $
—
10.2
4.5
—
—
(14.7)
—
—
(137.5) $
188.8
3.4
2.6
2.4
—
(4.3)
16.2
(20.7)
—
188.4
—
—
18.3
2.4
—
—
(20.7)
—
—
(188.4)
Net accrued benefit costs for pension plans and other postretirement benefits are reported in the following components of the Company’s
consolidated balance sheets at December 31, 2022 and 2021:
(In millions)
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net accrued benefit costs
Pension Benefits
December 31,
Other Postretirement Benefits
December 31,
2022
2021
2022
2021
$
$
118.3 $
(14.6)
(415.6)
(311.9) $
117.2 $
(14.6)
(682.8)
(580.2) $
— $
(15.4)
(122.1)
(137.5) $
—
(16.1)
(172.3)
(188.4)
The projected benefit obligation is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of
estimated future pay increases. The accumulated benefit obligation is the actuarial present value of benefits attributable to employee service rendered to
date, but does not include the effects of estimated future pay increases. The accumulated benefit obligation for the Company’s pension plans was $1.31
billion and $1.86 billion at December 31, 2022 and 2021, respectively.
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The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit
obligation in excess of the fair value of plan assets at December 31, 2022 and 2021 were as follows:
(In millions)
Plans with accumulated benefit obligation in excess of plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Fair Value of Plan Assets
December 31,
2022
2021
$
1,026.5 $
999.3
604.9
1,591.8
1,546.4
904.1
The Company measures the fair value of plan assets based on the prices that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy described in Note 10
Financial Instruments and Risk Management. The table below presents total plan assets by investment category as of December 31, 2022 and 2021 and the
classification of each investment category within the fair value hierarchy with respect to the inputs used to measure fair value:
(In millions)
Cash and cash equivalents
Equity securities
Fixed income securities
Assets held by insurance companies and other
Total
(In millions)
Cash and cash equivalents
Equity securities
Fixed income securities
Assets held by insurance companies and other
Total
Level 1
Level 2
Level 3
Total
December 31, 2022
34.2 $
42.9
181.6
76.9
335.6 $
0.9 $
353.4
271.5
97.9
723.7 $
— $
—
—
7.8
7.8 $
35.1
396.3
453.1
182.6
1,067.1
Level 1
Level 2
Level 3
Total
December 31, 2021
63.1 $
53.9
211.4
10.2
338.6 $
1.9 $
497.2
405.5
41.6
946.2 $
— $
—
—
81.6
81.6 $
65.0
551.1
616.9
133.4
1,366.4
$
$
$
$
Risk tolerance on invested pension plan assets is established through careful consideration of plan liabilities, plan funded status and corporate
financial condition. Investment risk is measured and monitored on an ongoing basis through annual liability measures, periodic asset/liability studies and
investment portfolio reviews. The Company’s investment strategy is to maintain, where possible, a diversified investment portfolio across several asset
classes that, when combined with the Company’s contributions to the plans, will ensure that required benefit obligations are met.
Assumptions
The following weighted average assumptions were used to determine the benefit obligations for the Company’s defined benefit pension and other
postretirement plans as of December 31, 2022 and 2021:
Discount rate
Expected return on plan assets
Rate of compensation increase
Pension Benefits
Other Postretirement Benefits
2022
2021
2022
2021
4.8 %
5.0 %
3.7 %
2.3 %
5.1 %
3.1 %
5.4 %
— %
— %
2.5 %
— %
— %
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The following weighted average assumptions were used to determine the net periodic benefit cost for the Company’s defined benefit pension and
other postretirement benefit plans for the three years in the period ended December 31, 2022:
Discount rate
Expected return on plan assets
Rate of compensation increase
Pension Benefits
Other Postretirement Benefits
2022
2021
2020
2022
2021
2020
2.3 %
5.0 %
3.1 %
1.9 %
5.1 %
2.9 %
1.6 %
4.3 %
2.7 %
2.5 %
— %
— %
1.9 %
— %
— %
3.3 %
— %
— %
The assumptions for each plan are reviewed on an annual basis. The discount rate reflects the current rate at which the pension and other benefit
liabilities could be effectively settled at the measurement date. In setting the discount rates, we utilize comparable corporate bond indices as an indication
of interest rate movements and levels. Corporate bond indices were selected based on individual plan census data and duration. The expected return on plan
assets was determined using historical market returns and long-term historical relationships between equities and fixed income securities. The Company
compares the expected return on plan assets assumption to actual historic returns to ensure reasonableness. Current market factors such as inflation and
interest rates are also evaluated.
The weighted-average healthcare cost trend rate used for 2022 was 6.3% declining to a projected 4.0% in the year 2045. For 2023, the assumed
weighted-average healthcare cost trend rate used will be 6.9% declining to a projected 4.0% in the year 2046. In selecting rates for current and long-term
healthcare cost assumptions, the Company takes into consideration a number of factors including the Company’s actual healthcare cost increases, the
design of the Company’s benefit programs, the demographics of the Company’s active and retiree populations and external expectations of future medical
cost inflation rates.
Estimated Future Benefit Payments
The Company’s funding policy for its funded pension plans is based upon local statutory requirements. The Company’s funding policy is subject
to certain statutory regulations with respect to annual minimum and maximum company contributions. Plan benefits for the non-qualified plans are paid as
they come due.
Estimated benefit payments over the next ten years for the Company’s pension plans and retiree health plan are as follows:
(In millions)
2023
2024
2025
2026
2027
Thereafter
Total
Defined Contribution Plans
Pension Benefits
Other
Postretirement
Benefits
$
$
93.1 $
96.1
97.9
98.3
102.0
518.1
1,005.5 $
15.4
15.8
15.8
15.7
15.1
64.5
142.3
The Company sponsors defined contribution plans covering its employees in the U.S. and Puerto Rico, as well as certain employees in a number
of countries outside the U.S. The Company’s domestic defined contribution plans consist primarily of a Profit Sharing 401(k) Plan and a 401(k) retirement
plan for union-represented employees. Profit sharing contributions are made at the discretion of the Board of Directors. The Company’s non-domestic plans
vary in form depending on local legal requirements. The Company’s contributions are based upon employee contributions, service hours, or pre-determined
amounts depending upon the plan. Obligations for contributions to defined contribution plans are recognized as expense in the consolidated statements of
operations when they are earned.
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The Company maintains a Restoration Plan, which permits employees who earn compensation in excess of the limits imposed by Section 401(a)
(17) of the Code to (i) defer a portion of base salary and bonus compensation, (ii) be credited with a Company matching contribution in respect of deferrals
under the Restoration Plan, and (iii) be credited with Company non-elective contributions (to the extent so made by the Company), in each case, to the
extent that participants otherwise would be able to defer or be credited with such amounts, as applicable, under the Profit Sharing 401(k) Plan if not for the
limits on contributions and deferrals imposed by the Code.
The Company maintains an Income Deferral Plan, which permits certain management or highly compensated employees who are designated by
the plan administrator to participate in the Income Deferral Plan to elect to defer up to 50% of base salary and up to 100% of bonus compensation, in each
case, in addition to any amounts that may be deferred by such participants under the Profit Sharing 401(k) Plan and the Restoration Plan. In addition, under
the Income Deferral Plan, eligible participants may be granted employee deferral awards, which awards will be subject to the terms and conditions
(including vesting) as determined by the plan administrator at the time such awards are granted.
Total employer contributions to defined contribution plans were approximately $111.5 million, $107.4 million and $115.5 million for the years
ended December 31, 2022, 2021 and 2020, respectively.
16. Segment Information
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. Our Developed Markets segment
comprises our operations primarily in North America and Europe. Our Greater China segment includes our operations in China, Taiwan and Hong Kong.
Our JANZ segment reflects our operations in Japan, Australia and New Zealand. 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.
The Company’s chief operating decision maker is the Chief Executive Officer, who evaluates the performance of its segments based on total
revenues and segment profitability.
Certain costs are not included in the measurement of segment profitability, such as costs, if any, associated with the following:
◦
◦
Intangible asset amortization expense and impairments of goodwill and long-lived assets;
R&D expense;
◦ Net charges or net gains for litigation settlements and other contingencies;
◦
Certain costs related to transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the
amortization of fair value adjustments to inventory and property, plant and equipment; (ii) acquisition-related costs, where we incur costs for
executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) other significant items, which are
substantive and/or unusual, and in some cases recurring, items (such as restructuring) that are evaluated on an individual basis by management and
that either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such special items
can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for asset impairments and disposals of
assets or businesses, including costs related to our planned divestitures and the Biocon Biologics Transaction, and, as applicable, any associated
transition activities.
◦
Corporate and other unallocated costs associated with platform functions (such as digital, facilities, legal, finance, human resources,
insurance, public affairs and procurement), patient advocacy activities and certain compensation and other corporate costs (such as interest income
and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing, which include manufacturing
variances associated with production) and operations that are not directly assessed to an operating segment as business unit (segment)
management does not manage these costs.
The Company does not report depreciation expense, total assets and capital expenditures by segment, as such information is not used by the chief
operating decision maker.
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The accounting policies of the segments are the same as those described in Note 2 Summary of Significant Accounting Policies.
Presented in the table below is segment information for the periods identified and a reconciliation of segment information to total consolidated
information.
(in millions)
Reportable Segments:
Developed Markets
Greater China
JANZ
Emerging Markets
Total reportable segments
Reconciling items:
Intangible asset amortization expense
Intangible asset disposal & impairment charges
Impairment of goodwill
Globally managed research and development costs
Acquired IPR&D
Litigation settlements & other contingencies
Transaction related and other special items
Corporate and other unallocated
Earnings (loss) from operations
Net Sales
Years Ended December 31,
Segment Profitability
Years Ended December 31,
2022
2021
2020
2022
2021
2020
$
$
9,768.9 $
2,201.2
1,632.4
2,615.6
16,218.1 $
10,428.7 $
2,212.8
2,027.4
3,144.7
17,813.6 $
8,510.9 $
259.9
1,195.3
1,853.8
11,819.9 $
4,878.1 $
1,512.5
665.5
1,207.1
8,263.2 $
5,143.1 $
1,397.1
762.4
1,402.4
8,705.0 $
4,243.9
52.7
364.6
610.4
5,271.6
(2,504.6)
(173.5)
(117.0)
(662.2)
(36.4)
(4.4)
(1,026.9)
(2,123.3)
1,614.9 $
(2,702.2)
(102.8)
—
(681.0)
(70.1)
(329.2)
(2,832.2)
(2,021.5)
(34.0) $
(1,605.8)
(82.4)
—
(512.6)
(42.5)
(107.8)
(1,739.7)
(1,391.6)
(210.8)
$
The following table represents the percentage of consolidated net sales to Viatris’ major customers during the years ended December 31, 2022,
2021, and 2020:
McKesson Corporation
AmerisourceBergen Corporation
Cardinal Health, Inc.
Sales by Country Information
Net sales by country are presented on the basis of geographic location of our subsidiaries:
(In millions)
United States
China
____________
No other country’s net sales represents more than 10% of consolidated net sales.
132
Percentage of Consolidated Net Sales
2022
2021
2020
11 %
10 %
5 %
9 %
9 %
5 %
13 %
10 %
8 %
Year Ended December 31,
2022
2021
2020
$
3,946.6 $
1,951.3
4,176.4 $
1,981.5
3,746.1
216.1
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17. Commitments
The Company has entered into employment and other agreements with certain executives and other employees that provide for compensation,
retirement and certain other benefits. These agreements provide for severance payments under certain circumstances. Additionally, the Company has split-
dollar life insurance agreements with certain retired executives.
In conjunction with the Combination, Viatris entered into a TSA with Pfizer pursuant to which each party provides certain limited transition
services to the other party generally for an initial period of 24 months from the closing date of the Combination. 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. 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. As of December 31, 2022, the Company has exited substantially all transition services with Pfizer.
In conjunction with the Combination, during the year ended December 31, 2020, the Company accrued approximately $26.9 million due to change
in control clauses in employment arrangements for certain former Mylan employees, which was paid during 2021. In addition, the Company entered into
retention agreements with certain key employees, whereby they agreed to continue to provide service to the Company for a period of time after the
Combination. The Company is recording the expense for these agreements over the applicable service periods.
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.
In the normal course of business, Viatris periodically enters into employment, legal settlement and other agreements which incorporate
indemnification provisions. While the maximum amount to which Viatris may be exposed under such agreements cannot be reasonably estimated, the
Company maintains insurance coverage, which management believes will effectively mitigate the Company’s obligations under these indemnification
provisions. No amounts have been recorded in the consolidated financial statements with respect to the Company’s obligations under such agreements.
18. Restructuring
2020 Restructuring Program
During the fourth quarter of 2020, Viatris announced a significant global restructuring program in order to achieve synergies and ensure that the
organization is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders. 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.
For the committed restructuring actions, the Company expects to incur total pre-tax charges of up to approximately $1.4 billion. Such charges are
expected to include up to approximately $450 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges,
including inventory write-offs. The remaining estimated cash costs of up to approximately $950 million are expected to be primarily related to severance
and employee benefits expense, as well as other costs, including those related to contract terminations and other plant disposal costs. In addition,
management believes the potential annual savings related to these committed restructuring activities to be up to approximately $900 million once fully
implemented, with most of these savings expected to improve operating cash flow.
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The following table summarizes the restructuring charges and the reserve activity for the 2020 restructuring program:
(2)
(In millions)
(3)
Charges
Acquired in the Combination
Cash payment
Utilization
Foreign currency translation
Balance at December 31, 2020
Charges
Reimbursable restructuring charges
Cash payment
Utilization
Foreign currency translation
Balance at December 31, 2021
Charges
Cash payment
Utilization
Foreign currency translation
(1)
Balance at December 31, 2022
2016 Restructuring Program
Employee
Related Costs
Other Exit Costs
Total
$
$
$
$
195.6 $
91.7
(25.1)
—
0.4
262.6 $
396.1
26.4
(385.5)
—
(7.0)
292.6 $
38.2
(170.1)
—
(5.1)
155.6 $
75.7 $
0.3
(0.4)
(70.8)
—
4.8 $
496.1
—
(151.7)
(345.0)
(0.1)
4.1 $
48.3
(15.3)
(34.9)
(0.3)
1.9 $
271.3
92.0
(25.5)
(70.8)
0.4
267.4
892.2
26.4
(537.2)
(345.0)
(7.1)
296.7
86.5
(185.4)
(34.9)
(5.4)
157.5
Mylan previously announced a restructuring program representing a series of actions in certain locations to further streamline its operations
globally. We incurred total restructuring related costs of approximately $733.0 million through December 31, 2020. The 2016 Restructuring Program was
substantially completed at December 31, 2020.
In April 2018, the FDA completed an inspection at Mylan’s plant in Morgantown, West Virginia and made observations through a Form 483. In
the fourth quarter of 2018, Mylan received a warning letter related to the previously disclosed observations at the plant. The issues raised in the warning
letter were addressed within the context of the Mylan’s comprehensive restructuring and remediation activities. On May 11, 2020, Mylan received the
close-out of the warning letter. On December 11, 2020, the Company announced that the Morgantown plant will be closed or divested as part of the 2020
Restructuring Program. The Morgantown plant was closed during the third quarter of 2021.
The following table summarizes the restructuring charges and the reserve activity for the 2016 restructuring program from December 31, 2019 to
December 31, 2020:
(3)
(In millions)
Balance at December 31, 2019:
Charges
Cash payment
Utilization
Foreign currency translation
Balance at December 31, 2020:
Employee
Related Costs
Other Exit Costs
Total
$
$
26.4 $
9.9
(18.1)
—
1.8
20.0 $
2.8 $
40.6
(7.6)
(32.9)
(0.1)
2.8 $
29.2
50.5
(25.7)
(32.9)
1.7
22.8
(1)
For the year ended December 31, 2022, total restructuring charges for the 2020 restructuring program, in Developed Markets, Greater China,
JANZ, Emerging Markets, and Corporate/Other were approximately $74.6 million, $2.5 million, $0.9 million, $8.2 million, and $0.3 million,
respectively.
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(2)
For the year ended December 31, 2021, total restructuring charges, for the 2020 restructuring program, in Developed Markets, Greater China,
JANZ, Emerging Markets, and Corporate/Other were approximately $623.8 million, $5.8 million, $138.1 million, $94.1 million, and $30.4
million, respectively.
(3)
For the year ended December 31, 2020, total restructuring charges for both programs, in Developed Markets, Greater China, JANZ, and Emerging
Markets were approximately $292.1 million, $18.4 million, $2.9 million, and $8.4 million, respectively.
At December 31, 2022 and 2021, accrued liabilities for restructuring and other cost reduction programs were primarily included in other current
liabilities and other long-term obligations in the consolidated balance sheets.
19. Licensing and Other Partner Agreements
We periodically enter into licensing and other partner agreements with other pharmaceutical companies for the development, manufacture,
marketing and/or sale of pharmaceutical products. Our significant licensing and other partner agreements are primarily focused on the development,
manufacturing, supply and commercialization of multiple complex products. Under these agreements, we have future potential milestone payments and co-
development expenses payable to third parties as part of our licensing, development and co-development programs. Payments under these agreements
generally become due and are payable upon the satisfaction or achievement of certain developmental, regulatory or commercial milestones or as
development expenses are incurred on defined projects. Milestone payment obligations are uncertain, including the prediction of timing and the occurrence
of events triggering a future obligation and are not reflected as liabilities in the consolidated balance sheets, except for obligations reflected as acquisition
related contingent consideration. Refer to Note 10 Financial Instruments and Risk Management for further discussion of contingent consideration. Our
potential maximum development milestones not accrued for at December 31, 2022 totaled approximately $347 million. We estimate that the amounts that
may be paid during the next twelve months to be approximately $38 million. 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. The amounts disclosed do not include sales-based
milestones or royalty or profit share obligations on future sales of product as the timing and amount of future sales levels and costs to produce products
subject to these obligations is not reasonably estimable. These sales-based milestones or royalty or profit share obligations may be significant depending
upon the level of commercial sales for each product.
Revance
On February 28, 2018, the Company and Revance entered into an agreement with Revance pursuant to which the Company and Revance are
collaborating exclusively, on a world-wide basis (excluding Japan), to develop, manufacture and commercialize a biosimilar to the branded biologic
product (onabotulinumtoxinA) marketed as BOTOX®. Under the agreement, the Company is primarily responsible for (a) clinical development activities
outside of North America (excluding Japan) (b) regulatory activities, and (c) commercialization for any approved product. Revance is primarily responsible
for (a) non-clinical development activities, (b) clinical development activities in North America, and (c) manufacturing and supply of clinical drug
substance and drug product; Revance is solely responsible for an initial portion of non-clinical development costs. The remaining portion of any non-
clinical development costs and clinical development costs for obtaining approval in the U.S. and Europe is being shared equally between the parties, and
the Company is responsible for all other clinical development costs and commercialization expenses. During the year ended December 31, 2020, the
Company recorded $30 million of Acquired IPR&D expense for a milestone payment that was due upon the decision to continue the development program.
Momenta
On January 8, 2016, the Company entered into an agreement with Momenta to develop, manufacture and commercialize up to six of Momenta’s
biosimilar candidates. Under the terms of the agreement, the Company and Momenta were jointly responsible for product development and equally shared
in the costs and profits of the products with Viatris leading the worldwide commercialization efforts. In January 2019, the parties agreed to the termination
of all collaboration activities, except for the continued development of M710, a proposed biosimilar to EYLEA®. In October 2020, Momenta was acquired
by Johnson & Johnson. M710 was divested as part of the Biocon Biologics Transaction.
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Theravance Biopharma
On January 30, 2015, the Company entered into a development and commercialization collaboration with Theravance Biopharma, for revefenacin.
On November 9, 2018, the Company announced that the FDA approved the NDA for YUPELRI® (revefenacin) inhalation solution for the maintenance
treatment of patients with COPD. YUPELRI®, a LAMA, is the first and only once-daily, nebulized bronchodilator approved for the treatment of COPD in
the U.S. Viatris is responsible for commercial manufacturing and commercialization. Theravance Biopharma is co-promoting the product in the hospital
channel under a profit-sharing arrangement.
In 2019, the Company acquired exclusive development and commercialization rights to nebulized revefenacin in China and adjacent territories,
which include Hong Kong SAR, the Macau SAR and Taiwan. Theravance Biopharma received an upfront payment of $18.5 million and will be eligible to
receive additional potential development and sales milestones together with tiered royalties on net sales of nebulized revefenacin, if approved. Viatris is
responsible for all aspects of development and commercialization in the partnered regions, including pre- and post-launch activities and product registration
and all associated costs.
Under the terms of the agreements, Theravance Biopharma is eligible to receive potential development and sales milestone payments totaling
approximately $293 million in the aggregate. As of December 31, 2022, the Company has paid a total of $50.0 million in milestone payments to
Theravance Biopharma.
FKB
On February 22, 2018, the Company entered into a collaboration license and distribution agreement with FKB for the distribution of Hulio®, a
biosimilar to AbbVie's Humira® (adalimumab). Under the agreement, the Company has exclusive commercialization rights for the product in the EU and
the European Economic Area countries and FKB is responsible for development, manufacturing and supply of the product.
On February 27, 2019, the Company amended its agreements with FKB for the commercialization of Hulio®. Under the amended agreements, the
Company received the exclusive global commercialization rights for Hulio®. In addition, FKB is eligible to receive additional commercial milestones and
royalty payments under the amended agreements.
On July 9, 2020, the Company announced that the FDA approved Hulio® (adalimumab-fkjp), a biosimilar to AbbVie's Humira® (adalimumab),
for the treatment of rheumatoid arthritis, juvenile idiopathic arthritis (4 years and older), psoriatic arthritis, ankylosing spondylitis, adult Crohn's disease,
ulcerative colitis and plaque psoriasis, in both prefilled syringe and auto-injector presentations. Hulio® was divested as part of the Biocon Biologics
Transaction.
Biocon
The Company had previously entered into an exclusive collaboration with Biocon on the development, manufacturing, supply and
commercialization of multiple, high value biosimilar compounds and three insulin analog products for the global marketplace. The collaboration was
terminated upon closing of the Biocon Biologics Transaction.
Other Development Agreements
We are actively pursuing, and are currently involved in, joint projects related to the development, distribution and marketing of both generic and
branded products. Many of these arrangements provide for payments by us upon the attainment of specified milestones. While these arrangements help to
reduce the financial risk for unsuccessful projects, fulfillment of specified milestones or the occurrence of other obligations may result in fluctuations in
cash flows and Acquired IPR&D expense.
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20. Litigation
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. These matters are often complex and have outcomes that are difficult to predict.
In addition, in connection with the Combination, the Company has generally assumed liability for, and control of, pending and threatened legal
matters relating to the Upjohn Business – including certain matters initiated against Pfizer described below – and has agreed to indemnify Pfizer for
liabilities arising out of such assumed legal matters. Pfizer, however, has agreed to retain various matters – including certain specified competition law
matters – to the extent they arise from conduct during the pre-Distribution period and has agreed to indemnify the Company for liabilities arising out of
such matters.
While the Company believes that it has meritorious defenses with respect to the claims asserted against it and the assumed legal matters referenced
above, and intends to vigorously defend its position, the process of resolving these matters is inherently uncertain and may develop over a long period of
time, and so it is not possible to predict the ultimate resolution of any such matter. It is possible that an unfavorable resolution of any of the ongoing matters
could have a material effect on the Company’s business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Some of these governmental inquiries, investigations, proceedings and litigation matters with which the Company is involved are described below,
and unless otherwise disclosed, the Company is unable to predict the outcome of the matter or to provide an estimate of the range of reasonably possible
material losses. The Company records accruals for loss contingencies to the extent we conclude it is probable that a liability has been incurred and the
amount of the loss can be reasonably estimated. The Company is also involved in other pending proceedings for which, in the opinion of the Company
based upon facts and circumstances known at the time, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution
of such proceedings is not expected to be material to the Company’s business, financial position, results of operations, cash flows, ability to pay dividends
and/or stock price. If and when any reasonably possible losses associated with the resolution of such other pending proceedings, in the opinion of the
Company, become material, the Company will disclose such matters.
Legal costs are recorded as incurred and are classified in SG&A in the Company’s consolidated statements of operations.
EpiPen® Auto-Injector Litigation
The Company and a former Mylan N.V. officer (collectively the “Mylan Defendants”) were named as defendants in indirect purchaser class
actions relating to the pricing and/or marketing of the EpiPen® Auto-Injector. The plaintiffs in these cases asserted violations of various federal and state
antitrust and consumer protection laws, RICO as well as common law claims. Plaintiffs’ sought monetary damages, attorneys’ fees and costs. These
lawsuits were filed in various federal and state courts and were either dismissed or transferred into a MDL in the U.S. District Court for the District of
Kansas and were consolidated or centralized. An antitrust class consisting of certain states was ultimately certified. On June 23, 2021, the Court granted –
in substantial part – the Mylan Defendants’ motion for summary judgment by dismissing certain antitrust claims and the RICO claims, which included
RICO claims asserted against the former Mylan N.V. officer. In February 2022, the parties reached an agreement to fully resolve this matter for
$264 million, which was accrued for during the year ended December 31, 2021. During the first quarter of 2022, $5.0 million of the settlement was paid
and the remaining amount of the settlement was paid in July 2022. The settlement was approved by the Court on July 11, 2022 and contains an express
provision disclaiming and denying any wrongdoing or liability by the Mylan Defendants. This matter is resolved.
On February 14, 2020, the Company, together with other non-Viatris affiliated companies, were named as defendants in a putative direct purchaser
class action filed in the U.S. District Court for the District of Kansas relating to the pricing and/or marketing of the EpiPen® Auto-Injector. On September
21, 2021, after Plaintiffs’ then operative complaint was dismissed with an option to file a limited amended complaint, Plaintiffs filed an amended complaint
asserting federal antitrust claims which are based on allegations concerning a patent settlement between Pfizer and Teva and other alleged actions regarding
the launch of Teva’s generic epinephrine auto-injector. Plaintiffs’ seek monetary damages, declaratory relief, attorneys’ fees and costs.
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Beginning in March 2020, the Company, together with other non-Viatris affiliated companies, were named as defendants in putative direct
purchaser class actions filed in the U.S. District Court for the District of Minnesota relating to contracts with certain pharmacy benefit managers concerning
EpiPen® Auto-Injector. The plaintiffs claim that the alleged conduct resulted in the exclusion or restriction of competing products and the elimination of
pricing constraints in violation of RICO and federal antitrust law. These actions have been consolidated. Plaintiffs’ seek monetary damages, attorneys’ fees
and costs.
On April 24, 2017, Sanofi Aventis U.S., LLC (“Sanofi”) filed a lawsuit against the Company in the U.S. District Court for the District of New
Jersey. This lawsuit has been transferred into the aforementioned MDL and alleges exclusive dealing and anti-competitive marketing practices in violation
of the antitrust laws in connection with the sale and marketing of the EpiPen® Auto-Injector. Sanofi seeks monetary damages, declaratory relief, attorneys’
fees and costs. The Court granted the Company’s motion for summary judgment and dismissed Sanofi’s claims. Sanofi’s appeal was denied. Sanofi has
filed a petition seeking review by the U.S. Supreme Court.
The Company has a total accrual of approximately $5.5 million related to these matters at December 31, 2022, which is included in other current
liabilities in the consolidated balance sheets. Although it is reasonably possible that the Company may incur additional losses from these matters, any
amount cannot be reasonably estimated at this time. In addition, the Company expects to incur additional legal and other professional service expenses
associated with such matters in future periods and will recognize these expenses as services are received. The Company believes that the ultimate amount
paid for these services and claims could have a material effect on the Company's business, financial condition, results of operations, cash flows, ability to
pay dividends and/or stock price in future periods.
Drug Pricing Matters
Department of Justice
On December 3, 2015, the Company received a subpoena from the Antitrust Division of the DOJ seeking information relating to the marketing,
pricing, and sale of certain of our generic products and any communications with competitors about such products. On September 8, 2016, the Company, as
well as certain employees and a member of senior management, received subpoenas from the DOJ seeking similar information. Related search warrants
also were executed.
On May 10, 2018, the Company received a civil investigative demand from the Civil Division of the DOJ seeking information relating to the
pricing and sale of its generic drug products.
We are fully cooperating with these investigations, which we believe are related to a broader industry-wide investigation of the generic
pharmaceutical industry.
Civil Litigation
Beginning in 2016, the Company, along with other manufacturers, has been named as a defendant in lawsuits filed in the United States and Canada
generally alleging anticompetitive conduct with respect to generic drugs. The lawsuits have been filed by plaintiffs, including putative classes of direct
purchasers, indirect purchasers, and indirect resellers, as well as individual direct and indirect purchasers and certain cities and counties. The lawsuits
allege harm under federal laws and the United States lawsuits also allege harm under state laws, including antitrust laws, state consumer protection laws
and unjust enrichment claims. Some of the United States lawsuits also name as defendants the Company’s President, including allegations against him with
respect to a single drug product, and one of the Company’s sales employees, including allegations against him with respect to certain generic drugs. The
vast majority of the lawsuits have been consolidated in an MDL proceeding in the Eastern District of Pennsylvania (“EDPA”). Plaintiffs generally seek
monetary damages, restitution, declaratory and injunctive relief, attorneys’ fees and costs. The EDPA Court has ordered certain plaintiffs’ complaints
regarding two single-drug product cases to proceed as bellwethers. The Company is named in those plaintiffs’ complaints that regard one of the two
individual drug products.
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Attorneys General Litigation
On December 21, 2015, the Company received a subpoena and interrogatories from the Connecticut Office of the Attorney General seeking
information relating to the marketing, pricing and sale of certain of the Company’s generic products and communications with competitors about such
products. On December 14, 2016, attorneys general of certain states filed a complaint in the United States District Court for the District of Connecticut
against several generic pharmaceutical drug manufacturers, including the Company, alleging anticompetitive conduct with respect to, among other things, a
single drug product. The complaint has subsequently been amended, including on June 18, 2018, to add attorneys general alleging violations of federal and
state antitrust laws, as well as violations of various states’ consumer protection laws. This lawsuit has been transferred to the aforementioned MDL
proceeding in the EDPA. The operative complaint includes attorneys general of forty-six states, the District of Columbia and the Commonwealth of Puerto
Rico. The Company is alleged to have engaged in anticompetitive conduct with respect to four generic drug products. The amended complaint also includes
claims asserted by attorneys general of thirty-six states and the Commonwealth of Puerto Rico against certain individuals, including the Company’s
President, with respect to a single drug product. The amended complaint seeks declaratory and injunctive relief, disgorgement, attorneys’ fees and costs,
and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. The States’ claim for disgorgement and
restitution under federal law in this case has been dismissed.
On May 10, 2019, certain attorneys general filed a new complaint in the United States District Court for the District of Connecticut against various
drug manufacturers and individuals, including the Company and one of its sales employees, alleging anticompetitive conduct with respect to additional
generic drugs. On November 1, 2019, the complaint was amended, adding additional states as plaintiffs. The operative complaint is brought by attorneys
general of forty-seven states, certain territories and the District of Columbia. The amended complaint also includes claims asserted by attorneys general of
forty-two states and certain territories against several individuals, including a Company sales employee. The amended complaint seeks declaratory and
injunctive relief, disgorgement, attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable
monetary relief. This lawsuit has been transferred to the aforementioned MDL proceeding in the EDPA.
On June 10, 2020, certain attorneys general filed a new complaint in the United States District Court for the District of Connecticut against drug
manufacturers, including the Company, and individual defendants (none from the Company), alleging anticompetitive conduct with respect to additional
generic drugs. On September 9, 2021, the complaint was amended, adding an additional state as a plaintiff. The operative complaint is brought by attorneys
general of forty-six states, certain territories and the District of Columbia. The amended complaint seeks declaratory and injunctive relief, disgorgement,
attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. This lawsuit has been
transferred to the aforementioned MDL proceeding in the EDPA and has been ordered to proceed as a bellwether.
Securities Related Litigation
Purported class action complaints were filed in October 2016 against Mylan N.V. and Mylan Inc. (collectively “Mylan”), certain of Mylan’s
former directors and officers, and certain of the Company’s current directors and officers (collectively, for purposes of this paragraph, the “defendants”) in
the United States District Court for the Southern District of New York (“SDNY”) on behalf of certain purchasers of securities of Mylan on the NASDAQ.
The complaints alleged that defendants made false or misleading statements and omissions of purportedly material fact, in violation of federal securities
laws, in connection with disclosures relating to the classification of their EpiPen® Auto-Injector as a non-innovator drug for purposes of the Medicaid
Drug Rebate Program. On March 20, 2017, a consolidated amended complaint was filed alleging substantially similar claims, but adding allegations that
defendants made false or misleading statements and omissions of purportedly material fact in connection with allegedly anticompetitive conduct with
respect to EpiPen® Auto-Injector and certain generic drugs.
The operative complaint is the third amended consolidated complaint, which was filed on June 17, 2019, and contains the allegations as described
above against Mylan, certain of Mylan’s former directors and officers, and certain of the Company’s current directors, officers, and employees (collectively,
for purposes of this paragraph, the “defendants”). A class has been certified covering all persons or entities that purchased Mylan common stock between
February 21, 2012 and May 24, 2019 excluding defendants, certain of the Company’s current directors and officers, former directors and officers of Mylan,
members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which defendants have or had a
controlling interest. Plaintiffs seek damages and costs and expenses, including attorneys’ fees and expert costs. A decision on Defendants’ motion for
summary judgment seeking to dismiss the case in its entirety and Plaintiffs’ cross-motion for partial summary judgment as to portions of certain claims is
pending.
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On April 30, 2017, a similar lawsuit was filed in the Tel Aviv District Court (Economic Division) in Israel, which has been stayed pending a
decision in the SDNY class action litigation.
On February 14, 2020, the Abu Dhabi Investment Authority filed a complaint against Mylan in the SDNY asserting allegations pertaining to
EpiPen® Auto-Injector and certain generic drugs under the federal securities laws that overlap with those asserted in the third amended complaint
identified above. The Abu Dhabi Investment Authority’s complaint seeks monetary damages as well as the plaintiff’s fees and costs.
On June 26, 2020, a putative class action complaint was filed by the Public Employees Retirement System of Mississippi, which was subsequently
amended on November 13, 2020, against Mylan N.V., certain of Mylan N.V.’s former directors and officers, and an officer and director of the Company
(collectively for the purposes of this paragraph, the “defendants”) in the U.S. District Court for the Western District of Pennsylvania on behalf of certain
purchasers of securities of Mylan N.V. The amended complaint alleges that defendants made false or misleading statements and omissions of purportedly
material fact, in violation of federal securities laws, in connection with disclosures relating to the Morgantown manufacturing plant and inspections at the
plant by the FDA. Plaintiff seeks certification of a class of purchasers of Mylan N.V. securities between February 16, 2016 and May 7, 2019. The complaint
seeks monetary damages, as well as the plaintiff’s fees and costs.
On February 15, 2021, a complaint was filed by Skandia Mutual Life Ins. Co., Lansforsakringar AB, KBC Asset Management N.V., and GIC
Private Limited, against the Company, certain of Mylan N.V.’s former directors and officers, a current director and officer of the Company, and current
employees of the Company. The Complaint asserts claims which are based on allegations that are similar to those in the SDNY and the Western District of
Pennsylvania complaints identified above. Plaintiffs seek compensatory damages, costs and expenses and attorneys’ fees.
On October 28, 2021, the Company and certain of its then officers and directors were named as defendants in a putative class action lawsuit filed
in the Court of Common Pleas of Allegheny County, Pennsylvania on behalf of former Mylan shareholders who received Company common stock in
connection with the Combination. A non-Viatris affiliated company and persons were also named as defendants. The complaint alleges violations of
Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 for purportedly failing to disclose or misrepresenting material information in the registration
statement and related prospectus issued in connection with the Combination. On January 3, 2023, an amended complaint was filed naming the same
defendants and alleging the same violations as the original complaint. Plaintiffs seek monetary damages, reasonable costs and expenses, and certain other
equitable and injunctive relief.
Opioids
The Company, along with other manufacturers, distributors, pharmacies, pharmacy benefit managers, and individual healthcare providers is a
defendant in more than 1,000 cases in the United States and Canada filed by various plaintiffs, including counties, cities and other local governmental
entities, asserting civil claims related to sales, marketing and/or distribution practices with respect to prescription opioid products. In addition, lawsuits
have been filed as putative class actions including on behalf of children with Neonatal Abstinence Syndrome due to alleged exposure to opioids.
The lawsuits generally seek equitable relief and monetary damages (including punitive and/or exemplary damages) based on a variety of legal
theories, including various statutory and/or common law claims, such as negligence, public nuisance and unjust enrichment. The vast majority of these
lawsuits have been consolidated in an MDL in the U.S. District Court for the Northern District Court of Ohio.
On January 13, 2023, the Company received a civil subpoena from the Attorney General of the State of New York seeking information relating to
opioids manufactured, marketed, or sold by the Company and related subject matter. The Company is fully cooperating with this subpoena request.
Meda Sweden Commercial Dispute
On August 30, 2021, Ocular AS and other related entities (“Claimants”) initiated an arbitration in Sweden against Meda OTC AB and Meda AB
(collectively, “Meda” or the “Company”) alleging breach of a 2013 sale and purchase agreement between Claimants and Meda concerning
commercialization of a dental hygiene product. Claimants are seeking approximately $155 million in purported damages, plus interest and costs. The
Company believes that it acted lawfully and vigorously contested all aspects of Claimants’ case – including their asserted damages – at an arbitration
hearing that took place in February 2023.
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Product Liability
Like other pharmaceutical companies, the Company is involved in a number of product liability lawsuits related to alleged personal injuries
arising out of certain products manufactured/or distributed by the Company, including but not limited to those discussed below. Plaintiffs in these cases
generally seek damages and other relief on various grounds for alleged personal injury and economic loss.
The Company has accrued approximately $65.3 million as of December 31, 2022 for its product liability matters. It is reasonably possible that we
will incur additional losses and fees above the amount accrued but we cannot estimate a range of such reasonably possible losses or legal fees related to
these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts
accrued.
Nitrosamines
The Company, along with numerous other manufacturers, retailers, and others, are parties to litigation relating to alleged trace amounts of
nitrosamine impurities in certain products, including valsartan and ranitidine. The vast majority of these lawsuits naming the Company in the United States
are pending in two MDLs, namely an MDL pending in the United States District Court for the District of New Jersey concerning valsartan and an MDL
pending in the United States District Court for the Southern District of Florida concerning ranitidine. The lawsuits against the Company in the MDLs
include putative and certified classes seeking the refund of the purchase price and other economic and punitive damages allegedly sustained by consumers
and end payors as well as individuals seeking compensatory and punitive damages for personal injuries allegedly caused by ingestion of the medications.
Similar lawsuits pertaining to valsartan have been filed in other countries. Third party payor, consumer and medical monitoring classes were certified in the
valsartan MDL and a Rule 23(f) petition to appeal the certification decision is pending. The Company has also received claims and inquiries related to
these products, as well as requests to indemnify purchasers of the Company’s API and/ or finished dose forms of these products. The original master
complaints concerning ranitidine were dismissed on December 31, 2020. The end-payor plaintiff immediately appealed to the U.S. Court of Appeals for the
Eleventh Circuit, which affirmed the dismissal. The personal injury and consumer putative class plaintiffs filed amended master complaints. The Company
was not named as a defendant in the amended master complaints, though it was still named in certain short form complaints filed by personal injury
plaintiffs. The trial court has dismissed all remaining claims against the generic defendants. Certain of the personal injury plaintiffs appealed this dismissal,
which remains pending.
Lipitor
A number of individual and multi-plaintiff lawsuits have been filed against Pfizer in various federal and state courts alleging that the plaintiffs
developed type 2 diabetes purportedly as a result of the ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages. In February 2014, the
federal actions were transferred for consolidated pre-trial proceedings to an MDL in the U.S. District Court for the District of South Carolina. Since 2016,
certain cases in the MDL were remanded to certain state courts. In 2017, the District Court granted Pfizer’s motion for summary judgment, dismissing all
of the cases pending in the MDL. In June 2018, this dismissal was affirmed by the U.S. Court of Appeals for the Fourth Circuit. The state court proceedings
remain pending in various jurisdictions, including in California, Missouri, and New York. On January 27, 2021, the California Court granted Pfizer’s
motion to exclude the opinions of plaintiffs’ only general causation expert in connection with his opinions involving the three lowest doses of Lipitor (10,
20 and 40 mg). The Company’s motion for summary judgment in connection with the 10, 20, and 40 mg plaintiffs was granted, resulting in their dismissal.
On November 3, 2021, the Court granted the Company’s motion seeking the dismissal of the remaining cases involving the highest dose of Lipitor (80 mg).
Viagra
Since April 2016, an MDL has been pending in the U.S. District Court for the Northern District of California, in which plaintiffs allege that they
developed melanoma and/or the exacerbation of melanoma purportedly as a result of the ingestion of Viagra. Additional cases filed against Eli Lilly and
Company (“Lilly”) with respect to Cialis have also been consolidated in the MDL. Plaintiffs seek compensatory and punitive damages. In January 2020,
the District Court granted Pfizer’s and Lilly’s motion to exclude all of plaintiffs’ general causation opinions. As a result, in April 2020, the District Court
entered summary judgment in favor of defendants and dismissed all of plaintiffs’ claims. The parties have settled this matter.
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Intellectual Property
The Company is involved in a number of patent litigation lawsuits involving the validity and/or infringement of patents held by branded
pharmaceutical manufacturers including but not limited to the matters described below. The Company uses its business judgment to decide to market and
sell certain products, in each case based on its belief that the applicable patents are invalid and/or that its products do not infringe, notwithstanding the fact
that allegations of patent infringement(s) or other potential third party rights have not been finally resolved by the courts. The risk involved in doing so can
be substantial because the remedies available to the owner of a patent for infringement may include, a reasonable royalty on sales or damages measured by
the profits lost by the patent owner. If there is a finding of willful infringement, damages may be increased up to three times. Moreover, because of the
discount pricing typically involved with bioequivalent products, patented branded products generally realize a substantially higher profit margin than
generic and biosimilar products. The Company also faces challenges to its patents, including suits in various jurisdictions pursuant to which generic drug
manufacturers, payers, governments, or other parties are seeking damages for allegedly causing delay of generic entry. An adverse decision in any of these
matters could have an adverse effect that is material to our business, financial condition, results of operations, cash flows, ability to pay dividends and/or
stock price.
The Company has accrued approximately $107.9 million as of December 31, 2022 for its intellectual property matters. It is reasonably possible
that we will incur additional losses and fees above the amount accrued but we cannot estimate a range of such reasonably possible losses or legal fees
related to these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed
amounts accrued.
Dimethyl Fumarate
On June 30, 2017, Biogen MA Inc. and Biogen International GmbH (collectively, “Biogen”) sued MPI in the U.S. District Court for the Northern
District of West Virginia asserting that MPI’s abbreviated new drug application for dimethyl fumarate delayed-release capsules containing 120 mg and 240
mg of dimethyl fumarate (generic for Tecfidera®) infringed six U.S. patents that Biogen had listed in the Orange Book: 6,509,376, 7,320,999, 7,619,001,
7,803,840, 8,759,393, and 8,399,514. All patents except for the ‘514 expired during the litigation and were dismissed from the case.
After a trial involving only the ’514 patent on June 18, 2020, the District Court issued a judgment finding all claims of the ’514 patent invalid for
lack of adequate written description. On appeal, the Federal Circuit affirmed the District Court’s judgment. Biogen’s petition for rehearing was denied.
Biogen’s petition seeking review by the U.S. Supreme Court was also denied.
On July 13, 2018, MPI filed an IPR petition challenging the ’514 patent based only on obviousness. On February 5, 2020, the PTAB issued a final
written decision finding the claims not obvious. MPI’s appeal of the PTAB decision is moot in light of the U.S. Supreme Court denying review of the
Federal Circuit’s affirmance of the District Court’s invalidity judgment.
These matters are resolved.
On August 17, 2020, the FDA approved MPI’s dimethyl fumarate delayed-release capsules, which MPI began selling on August 18, 2020.
Lyrica - United Kingdom
Beginning in 2014, Pfizer was involved in patent litigation in the English courts concerning the validity of its Lyrica pain use patent. In 2015, the
High Court of Justice in London ordered that the NHS England issue guidance for prescribers and pharmacists directing the prescription and dispensing of
Lyrica by brand when pregabalin was prescribed for the treatment of neuropathic pain and entered a preliminary injunction against certain Sandoz group
companies preventing the sale of Sandoz’s full label pregabalin product. Pfizer undertook to compensate certain generic companies and NHS entities for
losses caused by these orders, which remained in effect until patent expiration in July 2017. In November 2018, the U.K. Supreme Court ruled that all the
relevant claims directed to neuropathic pain were invalid.
Dr. Reddy’s Laboratories filed a claim for monetary damages, interest, and costs in May 2020, followed by the Scottish Ministers and fourteen
Scottish Health Boards (together, NHS Scotland) in July 2020. In September 2020, Teva, Sandoz, Ranbaxy, Actavis, and the Secretary of State for Health
and Social Care, together with 32 other NHS entities (together, NHS England, Wales, and Northern Ireland) filed their claims. All of the claims except for
those filed by Dr. Reddy’s Laboratories and NHS Scotland have been resolved. A trial on the remaining claims has been set for November 2023.
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Yupelri
Beginning in January 2023, certain generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic
versions of Yupelri® with associated Paragraph IV certifications. The companies assert the invalidity and/or non-infringement of polymorph patents
expiring in 2030 and 2031, and a method of use patent expiring in 2039. The companies have not filed Paragraph IV certifications to our compound
patents, which currently expire in December 2025, with one compound patent subject to a patent term extension to October 2028. In February 2023, we
brought patent infringement actions against the generic filers in federal district courts, including the U.S. District Court for the District of New Jersey, the
U.S. District Court for the District of Delaware, and the U.S. District Court for the Middle District of North Carolina, asserting infringement of the patents
by the generic companies.
Other Litigation
The Company is involved in various other legal proceedings including commercial, contractual, employment, or other similar matters that are
considered normal to its business. The Company has approximately $24.5 million accrued related to these various other legal proceedings at December 31,
2022.
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ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
ITEM 9A. Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Principal Executive
Officer and the Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of
December 31, 2022. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that the Company’s
disclosure controls and procedures were effective.
Management identified the following change in the Company’s internal control over financial reporting (“ICFR”) that occurred during the quarter
that has materially affected, or is reasonably likely to materially affect, the Company’s ICFR. During the quarter ended December 31, 2022, the Company
substantially completed its transition of certain support services from Pfizer, as well as certain subsidiaries, to a new ERP system. The Company has
modified and implemented new controls and procedures relating to its business and financial processes throughout the transition period. While the
Company believes that this new system and the related changes to internal controls will ultimately strengthen its ICFR, there are inherent risks in
implementing any new ERP system and the Company will continue to evaluate and monitor the effectiveness of the related controls in subsequent periods.
Management’s Report on Internal Control over Financial Reporting is on page 76, which is incorporated herein by reference. The effectiveness of
the Company’s internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Touche LLP (PCAOB ID No. 34), an
independent registered public accounting firm, as stated in their report on page 80, which is incorporated herein by reference.
ITEM 9B. Other Information
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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ITEM 10. Directors, Executive Officers and Corporate Governance
PART III
Certain information required by this Item will be provided in an amendment to this Annual Report on Form 10-K in accordance with General
Instruction G(3) to Form 10-K.
Code of Ethics
The Viatris board of directors has adopted a Code of Ethics for the Company’s Chief Executive Officer, Chief Financial Officer and Controller.
The Viatris board of directors also has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees. The Code of
Ethics for our Chief Executive Officer, Chief Financial Officer and Controller and the Code of Business Conduct and Ethics are posted on Viatris’ website
at http://www.viatris.com/en/About-Us/Corporate-Governance, and Viatris intends to post any amendments to and waivers from each of the Code of Ethics
for the Company’s Chief Executive Officer, Chief Financial Officer and Controller and the Code of Business Conduct and Ethics that are required to be
disclosed on that website.
ITEM 11. Executive Compensation
The information required by this Item will be provided in an amendment to this Annual Report on Form 10-K in accordance with General
Instruction G(3) to Form 10-K.
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The additional information required by this Item will be provided in an amendment to this Form 10-K in accordance with General Instruction G(3)
to Form 10-K.
Equity Compensation Plan Information
The following table shows information about the securities authorized for issuance under Viatris’ equity compensation plans as of December 31,
2022:
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by security
holders
Total
Number of Securities to be
Issued upon Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted-Average Exercise
Price of Outstanding
Options, Warrants and
Rights
(b)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities reflected
in column (a))
(c)
31,721,568 $
—
31,721,568 $
15.56
—
15.56
43,297,637
—
43,297,637
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be provided in an amendment to this Annual Report on Form 10-K in accordance with General
Instruction G(3) to Form 10-K.
ITEM 14. Principal Accounting Fees and Services
The information required by this Item will be provided in an amendment to this Annual Report on Form 10-K in accordance with General
Instruction G(3) to Form 10-K.
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ITEM 15. Exhibits, Consolidated Financial Statement Schedules
1. Consolidated Financial Statements
PART IV
The Consolidated Financial Statements listed in the Index to Consolidated Financial Statements are filed as part of this Form.
2. Consolidated Financial Statement Schedules
VIATRIS INC. AND SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(In millions)
Description
Allowance for doubtful accounts:
Year ended December 31, 2022
Year ended December 31, 2021
Year ended December 31, 2020
Valuation allowance for deferred tax assets:
Year ended December 31, 2022
Year ended December 31, 2021
Year ended December 31, 2020
____________
Beginning
Balance
Additions Charged to
Costs and Expenses
Additions Charged to
Other
Accounts
(1)
Deductions
Ending
Balance
$
$
$
$
$
$
154.5
159.9
72.8
780.4
443.6
603.5
21.5
16.0
16.9
42.7
82.2
39.0
—
—
77.3
—
260.8
—
(61.3) $
(21.4) $
(7.1) $
(436.1) $
(6.2) $
(198.9) $
114.7
154.5
159.9
387.0
780.4
443.6
(1)
These amounts include opening balances of the Upjohn Business acquired in the Combination.
3. Exhibits
2.1(a)
2.1(b)
2.2(a)
2.2(b)
2.2(c)
2.2(d)
Business Combination Agreement, dated as of July 29, 2019, by and among Pfizer Inc., Upjohn Inc., Utah Acquisition Sub Inc.,
Mylan N.V., Mylan I B.V. and Mylan II B.V., included as Annex A to the Information Statement included as Exhibit 99.1 to the
Report on Form 8-K filed by Upjohn Inc. with the SEC on August 6, 2020, and incorporated herein by reference.^
Amendment No. 1, dated as of May 29, 2020, to the Business Combination Agreement, dated as of July 29, 2019, by and among
Pfizer Inc., Upjohn Inc., Utah Acquisition Sub Inc., Mylan N.V., Mylan I B.V. and Mylan II B.V., included as Annex B to the
Information Statement included as Exhibit 99.1 to the Report on Form 8-K filed by Upjohn Inc. with the SEC on August 6, 2020,
and incorporated herein by reference.^
Separation and Distribution Agreement, dated as of July 29, 2019, by and between Pfizer Inc. and Upjohn Inc., filed as Exhibit 2.2 to
the Report on Form 8-K filed by Mylan N.V. with the SEC on July 29, 2019, and incorporated herein by reference.^
Amendment No. 1, dated as of February 18, 2020, to the Separation and Distribution Agreement, dated as of July 29, 2019, by and
between Pfizer Inc. and Upjohn Inc., filed by Mylan N.V. as Exhibit 2.1 to the Form 10-Q for the quarter ended March 31, 2020, and
incorporated herein by reference.
Amendment No. 2, dated as of May 29, 2020, to the Separation and Distribution Agreement, dated as of July 29, 2019, by and
between Pfizer Inc. and Upjohn Inc., filed as Exhibit 2.2 to the Report on Form 8-K filed by Mylan N.V. with the SEC on June 1,
2020, and incorporated herein by reference. ^
Amendment No. 3, dated as of September 18, 2020, to the Separation and Distribution Agreement, dated as of July 29, 2019, by and
between Pfizer Inc. and Upjohn Inc., filed as Exhibit 2.6 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November
19, 2020, and incorporated herein by reference. ^
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2.2(e)
2.3(a)
2.3(b)
3.1(a)
3.1(b)
3.2
4.1(a)
4.1(b)
4.1(c)
4.1(d)
4.2(a)
4.2(b)
4.2(c)
4.2(d)
4.2(e)
4.3(a)
Amendment No. 4, dated as of November 15, 2020, to the Separation and Distribution Agreement, dated as of July 29, 2019, by and
between Pfizer Inc. and Upjohn Inc., filed as Exhibit 2.7 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November
19, 2020, and incorporated herein by reference. ^
Transaction Agreement, dated as of February 27, 2022, by and among Biocon Biologics Limited and Viatris Inc., filed as Exhibit 2.1
to the Report on Form 8-K filed by Viatris Inc. with the SEC on February 28, 2022, and incorporated herein by reference.^
Amendment No. 1 to Transaction Agreement, dated as of November 28, 2022, by and between Biocon Biologics Limited and Viatris
Inc., filed as Exhibit 2.1 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November 29, 2022, and incorporated
herein by reference.^
Amended and Restated Certificate of Incorporation of Upjohn Inc., effective as of November 13, 2020, filed as Exhibit 3.1 to the
Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated herein by reference.
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Upjohn Inc., effective as of November 16,
2020, filed as Exhibit 3.3 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated
herein by reference.
Amended and Restated Bylaws of Viatris Inc., effective as of November 16, 2020, filed as Exhibit 3.2 to Form 10-K for the fiscal
year ended December 31, 2020, and incorporated herein by reference.
Indenture, dated December 21, 2012, between and among Mylan Inc., as issuer, the guarantors named therein, and The Bank of New
York Mellon, as trustee, filed as Exhibit 4.1 to the Report on Form 8-K filed by Mylan Inc. with the SEC on December 24, 2012, and
incorporated herein by reference.
First Supplemental Indenture, dated February 27, 2015, between and among Mylan Inc., as issuer, Mylan N.V., as guarantor, and The
Bank of New York Mellon, as trustee, to the Indenture, dated December 21, 2012, filed as Exhibit 4.4 to the Report on Form 8-K
filed by Mylan N.V. with the SEC on February 27, 2015, and incorporated herein by reference.
Second Supplemental Indenture, dated March 12, 2015, between and among Mylan Inc., as issuer, Mylan N.V., as parent, and The
Bank of New York Mellon, as trustee, to the Indenture, dated December 21, 2012, filed by Mylan N.V. as Exhibit 4.3(b) to Form 10-
Q for the quarter ended March 31, 2015, and incorporated herein by reference.
Third Supplemental Indenture dated November 16, 2020, by and among Mylan Inc., Viatris Inc., Utah Acquisition Sub Inc., Mylan II
B.V. and the Bank of New York Mellon, as trustee, to the Indenture dated December 21, 2012, by and between Mylan Inc. and the
Bank of New York Mellon, as trustee, filed as Exhibit 4.6 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on
November 19, 2020, and incorporated herein by reference.
Indenture, dated November 29, 2013, between Mylan Inc. and The Bank of New York Mellon, as trustee, filed as Exhibit 4.1 to the
Report on Form 8-K filed by Mylan Inc. with the SEC on November 29, 2013, and incorporated herein by reference.
First Supplemental Indenture, dated November 29, 2013, between Mylan Inc. and The Bank of New York Mellon, as trustee, filed as
Exhibit 4.2 to the Report on Form 8-K filed by Mylan Inc. with the SEC on November 29, 2013, and incorporated herein by
reference.
Second Supplemental Indenture, dated February 27, 2015, among Mylan Inc., as issuer, Mylan N.V., as guarantor, and The Bank of
New York Mellon, as trustee, to the Indenture, dated November 29, 2013, filed as Exhibit 4.6 to the Report on Form 8-K filed by
Mylan N.V. with the SEC on February 27, 2015, and incorporated herein by reference.
Third Supplemental Indenture, dated March 12, 2015, between and among Mylan Inc., as issuer, Mylan N.V., as parent, and The
Bank of New York Mellon, as trustee, to the Indenture, dated November 29, 2013, filed by Mylan N.V. as Exhibit 4.5(b) to Form 10-
Q for the quarter ended March 31, 2015, and incorporated herein by reference.
Fourth Supplemental Indenture dated November 16, 2020, by and among Mylan Inc., Viatris Inc., Utah Acquisition Sub Inc., Mylan
II B.V. and the Bank of New York Mellon, as trustee, to the Indenture dated November 29, 2013, by and between Mylan Inc. and the
Bank of New York Mellon, as trustee, filed as Exhibit 4.7 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on
November 19, 2020, and incorporated herein by reference.
Indenture, dated as of June 9, 2016, among Mylan N.V., as issuer, Mylan Inc., as guarantor, and The Bank of New York Mellon, as
trustee, filed as Exhibit 4.1 to the Report on Form 8-K filed by Mylan N.V. with the SEC on June 15, 2016, and incorporated herein
by reference.
147
Table of Contents
4.3(b)
4.4(a)
4.4(b)
4.5(a)
4.5(b)
4.6(a)
4.6(b)
4.7(a)
4.7(b)
4.8(a)
4.8(b)
4.9
First Supplemental Indenture dated November 16, 2020, by and among Viatris Inc., Utah Acquisition Sub Inc., Mylan II B.V., Mylan
Inc. and the Bank of New York Mellon, as trustee, to the Indenture dated June 9, 2016, by and among Mylan N.V., Mylan Inc. and
the Bank of New York Mellon, as trustee, filed as Exhibit 4.4 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on
November 19, 2020, and incorporated herein by reference.
Indenture, dated November 22, 2016, among Mylan N.V., as issuer, Mylan, Inc., as guarantor and Citibank, N.A., London Branch, as
trustee, paying agent, transfer agent, registrar and calculation agent, filed by Mylan N.V. as Exhibit 4.9 to Form 10-K for the fiscal
year ended December 31, 2016, and incorporated herein by reference.
First Supplemental Indenture dated November 16, 2020, by and among Viatris Inc., Utah Acquisition Sub Inc., Mylan II B.V., Mylan
Inc. and Citibank, N.A., London Branch, as trustee, paying agent, transfer agent, and registrar, to the Indenture dated November 22,
2016, by and among Mylan N.V., Mylan Inc. and Citibank, N.A., London Branch, as trustee, paying agent, transfer agent, registrar
and calculation agent, filed as Exhibit 4.5 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on November 19, 2020,
and incorporated herein by reference.
Indenture, dated as of April 9, 2018, among Mylan Inc., as issuer, Mylan N.V., as guarantor, and the Bank of New York Mellon, as
trustee, filed as Exhibit 4.1 to the Report on Form 8-K filed by Mylan N.V. with the SEC on April 9, 2018, and incorporated herein
by reference.
First Supplemental Indenture dated November 16, 2020, by and among Mylan Inc., Viatris Inc., Utah Acquisition Sub Inc., Mylan II
B.V. and the Bank of New York Mellon, as trustee, to the Indenture dated April 9, 2018, by and among Mylan Inc., Mylan N.V. and
the Bank of New York Mellon, as trustee, filed as Exhibit 4.8 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on
November 19, 2020, and incorporated herein by reference.
Indenture, dated as of May 23, 2018, among Mylan Inc., as issuer, Mylan N.V., as guarantor, and Citibank, N.A., London Branch, as
trustee, paying agent, transfer agent and registrar, filed as Exhibit 4.1 to the Report on Form 8-K filed by Mylan N.V. with the SEC
on May 23, 2018, and incorporated herein by reference.
First Supplemental Indenture dated November 16, 2020, by and among Mylan Inc., Viatris Inc., Utah Acquisition Sub Inc., Mylan II
B.V. and Citibank, N.A., London Branch, as trustee, paying agent, transfer agent, and registrar, to the Indenture dated May 23, 2018,
by and among Mylan Inc., Mylan N.V. and Citibank, N.A., London Branch, as trustee, paying agent, transfer agent, and registrar,
filed as Exhibit 4.9 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated herein
by reference.
Indenture, dated as of June 22, 2020, between Upjohn Inc., as issuer, and The Bank of New York Mellon, as trustee, filed as Exhibit
4.1 to the Report on Form 8-K filed by Upjohn Inc. with the SEC on June 26, 2020, and incorporated herein by reference.
First Supplemental Indenture dated November 16, 2020, by and among Viatris Inc., Utah Acquisition Sub Inc., Mylan II B.V., Mylan
Inc. and the Bank of New York Mellon, as trustee, to the Indenture dated June 22, 2020, by and among Viatris Inc. and the Bank of
New York Mellon, as trustee, filed as Exhibit 4.1 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on November 19,
2020, and incorporated herein by reference.
Indenture, dated as of June 23, 2020, among Upjohn Finance B.V., as issuer, Upjohn Inc., as guarantor, and Citibank, N.A., London
Branch, as trustee, transfer agent, paying agent and registrar, filed as Exhibit 4.9 to the Report on Form 8-K filed by Upjohn Inc. with
the SEC on June 26, 2020, and incorporated herein by reference.
First Supplemental Indenture dated November 16, 2020, by and among Upjohn Finance B.V., Viatris Inc., Utah Acquisition Sub Inc.,
Mylan II B.V., Mylan Inc. and Citibank, N.A., London Branch, as trustee, paying agent, transfer agent, and registrar, to the Indenture
dated June 23, 2020, by and among Upjohn Finance B.V., Viatris Inc. and Citibank, N.A., London Branch, as trustee, paying agent,
transfer agent, and registrar, filed as Exhibit 4.2 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on November 19,
2020, and incorporated herein by reference.
Description of Viatris Inc. Securities Registered Under Section 12 of the Exchange Act, filed as Exhibit 4.10 to Form 10-K for the
fiscal year ended December 31, 2020, and incorporated herein by reference.
148
Table of Contents
10.1(a)
10.1(b)
10.1(c)
10.1(d)
10.1(e)
10.1(f)
10.1(g)
10.1(h)
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10(a)
Viatris Inc. 2020 Stock Incentive Plan, included as Exhibit 10.1 to Amendment No. 1 to Form 10 filed by Upjohn Inc. with the SEC
on February 6, 2020, and incorporated herein by reference.*
Form of Make-Whole Restricted Stock Unit Award Agreement under the Viatris 2020 Stock Incentive Plan, filed as Exhibit 10.1(b)
to Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Form of Retention Restricted Stock Unit Award Agreement under the Viatris 2020 Stock Incentive Plan, filed as Exhibit 10.1(c) to
Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Form of Restricted Stock Unit Award Agreement under the Viatris 2020 Stock Incentive Plan for Michael Goettler and Sanjeev
Narula, filed as Exhibit 10.1(d) to Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Value Creation Incentive Award Performance-Based Restricted Stock Unit Award Agreement for Robert J. Coury under the Viatris
Inc. 2020 Stock Incentive Plan, effective as of November 23, 2020, filed as Exhibit 10.1(e) to Form 10-K for the fiscal year ended
December 31, 2020, and incorporated herein by reference.*
Form of Restricted Stock Unit Award Agreement under the Viatris Inc. 2020 Stock Incentive Plan for awards granted on or after
March 2, 2021, included as Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2021 and incorporated by reference herein.*
Form of Performance-Based Restricted Stock Unit Award Agreement under the Viatris Inc. 2020 Stock Incentive Plan for awards
granted on or after March 2, 2021, included as Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2021 and incorporated by
reference herein.*
Form of Director Restricted Stock Unit Award Agreement under the Viatris Inc. 2020 Stock Incentive Plan for non-employee
directors for awards granted on or after March 2, 2021, included as Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2021
and incorporated by reference herein.*
Letter Agreement entered into on February 6, 2020 by and between Pfizer Inc. and Sanjeev Narula, filed as Exhibit 10.2 to Form 10-
K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Letter Agreement entered into on June 25, 2019 by and between Pfizer Inc. and Sanjeev Narula, filed as Exhibit 10.3 to Form 10-K
for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Letter Agreement entered into on June 26, 2019 by and between Pfizer Inc. and Michael Goettler, filed as Exhibit 10.4 to Form 10-K
for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Letter Agreement entered into on July 29, 2019 by and between Pfizer Inc. and Michael Goettler, filed as Exhibit 10.5 to Form 10-K
for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Severance Agreement entered into on December 3, 2020 by and between Viatris Inc. and Michael Goettler, filed as Exhibit 10.6 to
Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Retention Agreement entered into on December 3, 2020, by and between Viatris Inc. and Rajiv Malik, filed as Exhibit 10.7 to Form
10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Retention Agreement entered into on December 3, 2020, by and between Viatris Inc. and Anthony Mauro, filed as Exhibit 10.1 to
Amendment No. 1 to Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Executive Employment Agreement, entered into on November 20, 2020, by and between Viatris Inc. and Robert J. Coury, filed as
Exhibit 10.9 to Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan, filed as Appendix B to Mylan N.V.’s Definitive Proxy
Statement on Schedule 14A filed by Mylan N.V. with the SEC on May 25, 2016, and incorporated herein by reference.*
149
Table of Contents
10.10(b)
10.10(c)
10.10(d)
10.10(e)
10.10(f)
10.10(g)
10.10(h)
10.10(i)
10.10(j)
10.10(k)
10.11
10.12
10.13(a)
10.13(b)
10.14(a)
10.14(b)
10.14(c)
Amendment to Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan, filed as Appendix B to Mylan N.V.’s Definitive
Proxy Statement on Schedule 14A filed by Mylan N.V. on May 25, 2016, and incorporated herein by reference.*
Amendment to the Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan, adopted as of February 23, 2017, filed by
Mylan N.V. as Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2017, and incorporated herein by reference.*
Amended and Restated Form of Stock Option Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for Robert J. Coury
and Rajiv Malik, filed by Mylan Inc. as Exhibit 10.2 to Form 10-Q for the quarter ended September 30, 2013, and incorporated
herein by reference.*
Amended and Restated Form of Stock Option Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for awards granted
following fiscal year 2012, filed by Mylan Inc. as Exhibit 10.4(i) to Form 10-K for the fiscal year ended December 31, 2013, and
incorporated herein by reference.*
Form of Stock Option Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for Robert J. Coury and Rajiv Malik for
awards granted after February 27, 2015, filed by Mylan N.V. as Exhibit 10.1(i) to Form 10-K for the fiscal year ended December 31,
2015, and incorporated herein by reference.*
Form of Stock Option Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for awards granted after February 27, 2015,
filed by Mylan N.V. as Exhibit 10.1(l) to Form 10-K for the fiscal year ended December 31, 2015, and incorporated herein by
reference.*
Form of Stock Option Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for Rajiv Malik for awards granted on or
after February 19, 2019, filed by Mylan N.V. as Exhibit 10.7 to Form 10-Q for the quarter ended March 31, 2019, and incorporated
herein by reference.*
Form of Restricted Stock Unit Award Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for Rajiv Malik for awards
granted on or after February 19, 2019, filed by Mylan N.V. as Exhibit 10.8 to Form 10-Q for the quarter ended March 31, 2019, and
incorporated herein by reference.*
Form of Performance-Based Restricted Stock Unit Award Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for
Rajiv Malik for awards granted on or after February 19, 2019, filed by Mylan N.V. as Exhibit 10.6 to Form 10-Q for the quarter
ended March 31, 2019, and incorporated herein by reference.*
Form of Stock Option Agreement under the Mylan N.V. 2003 Long-Term Incentive Plan for independent directors for awards
granted on or after March 2, 2020, filed by Mylan N.V. as Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2020, and
incorporated herein by reference.*
Mylan N.V. Severance Plan and Global Guidelines, filed by Mylan N.V. as Exhibit 10.1 to Form 10-Q for the quarter ended
September 30, 2019, and incorporated herein by reference.*
Retirement Benefit Agreement, dated August 31, 2009, by and between Mylan Inc. and Rajiv Malik, filed by Mylan Inc. as Exhibit
10.4 to Form 10-Q for the quarter ended September 30, 2009, and incorporated herein by reference.*
Transition and Succession Agreement, dated January 31, 2007, between Mylan Inc. and Rajiv Malik, filed by Mylan Inc. as Exhibit
10.5 to Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by reference.*
Amendment No. 1 to Transition and Succession Agreement, dated December 22, 2008, between Mylan Inc. and Rajiv Malik, filed by
Mylan Inc. as Exhibit 10.28(b) to Form 10-K for the fiscal year ended December 31, 2008, and incorporated herein by reference.*
Transition and Succession Agreement, dated February 25, 2008, by and between Mylan Inc. and Anthony Mauro, filed by Mylan Inc.
as Exhibit 10.5(a) to Form 10-Q for the quarter ended March 31, 2012, and incorporated herein by reference.*
Amendment No. 1 to Transition and Succession Agreement, dated December 15, 2008, by and between Mylan Inc. and Anthony
Mauro, filed by Mylan Inc. as Exhibit 10.5(b) to Form 10-Q for the quarter ended March 31, 2012, and incorporated herein by
reference.*
Amendment No. 2 to Transition and Succession Agreement, dated October 15, 2009, by and between Mylan Inc. and Anthony
Mauro, filed by Mylan Inc. as Exhibit 10.5(c) to Form 10-Q for the quarter ended March 31, 2012, and incorporated herein by
reference.*
150
Table of Contents
10.15(a)
10.15(b)
10.16(a)
10.16(b)
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25(a)
10.25(b)
10.26
10.27
Mylan 401(k) Restoration Plan, dated January 1, 2010, filed by Mylan Inc. as Exhibit 10.1 to the Report on Form 8-K filed by Mylan
Inc. with the SEC on December 14, 2009, and incorporated herein by reference.*
Amendment to Mylan 401(k) Restoration Plan, dated November 4, 2014, filed by Mylan Inc. as Exhibit 10.41(b) to Form 10-K for
the fiscal year ended December 31, 2014, and incorporated herein by reference.*
Mylan Executive Income Deferral Plan, filed by Mylan Inc. as Exhibit 10.2 to the Report on Form 8-K filed by Mylan Inc. with the
SEC on December 14, 2009, and incorporated herein by reference.*
Amendment to Mylan Executive Income Deferral Plan, dated November 4, 2014, filed by Mylan Inc. as Exhibit 10.42(b) to Form
10-K for the fiscal year ended December 31, 2014, and incorporated herein by reference.*
The Executive Nonqualified Excess Plan Adoption Agreement, effective as of December 28, 2007, between Mylan International
Holdings, Inc. and Rajiv Malik, filed by Mylan Inc. as Exhibit 10.27(b) to Form 10-K for the fiscal year ended December 31, 2013,
and incorporated herein by reference.*
The Executive Nonqualified Excess Plan, effective as of December 28, 2007, between Mylan International Holdings, Inc. and Rajiv
Malik, filed by Mylan Inc. as Exhibit 10.57 to Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by
reference.*
Third Amended and Restated Executive Employment Agreement, entered into on February 25, 2019, and effective as of April 1,
2019, by and between Mylan Inc. and Rajiv Malik, filed by Mylan N.V. as Exhibit 10.20(c) to Form 10-K for the fiscal year ended
December 31, 2018, and incorporated herein by reference.*
Executive Employment Agreement, dated as of February 25, 2019, and effective as of April 1, 2019, by and between Mylan Inc. and
Anthony Mauro, filed as Exhibit 10.21(b) to Form 10-K for the fiscal year ended December 31, 2018, and incorporated herein by
reference.*
2007 Supplemental Health Insurance Plan for Certain Key Employees of Mylan Laboratories Inc., adopted as of January 29, 2007,
filed by Mylan N.V. as Exhibit 10.29 to the Form 10-K for the fiscal year ended December 31, 2019 and incorporated herein by
reference.*
Form of Indemnification Agreement between Viatris Inc. and each of its directors and its executive officers, filed as Exhibit 10.25 to
Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.*
Amended and Restated Form of Indemnification Agreement between Mylan Inc. and each Director, filed by Mylan Inc. as Exhibit
10.38 to Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference.*
Form of Indemnification Agreement between Mylan N.V. and directors, filed as Exhibit 10.1 to the Report on Form 8-K filed by
Mylan N.V. with the SEC on February 27, 2015, and incorporated herein by reference.*
Revolving Credit Agreement, dated as of June 16, 2020, among Upjohn Inc., the guarantors from time to time party thereto, the
lenders and issuing banks from time to time party thereto and Bank of America, N.A., as administrative agent, filed as Exhibit 10.1
to the Report on Form 8-K filed by Upjohn Inc. with the SEC on June 17, 2020, and incorporated herein by reference.
Amended and Restated Revolving Credit Agreement, dated as of July 1, 2021, among Viatris, the guarantors from time to time party
thereto, the lenders and issuing banks from time to time party thereto and Bank of America, N.A., as administrative agent, filed as
Exhibit 10.1 to the Report on Form 8-K filed by Viatris Inc. with the SEC on July 1, 2021, and incorporated herein by reference. ^
Delayed Draw Term Loan Credit Agreement, dated as of June 16, 2020, among Upjohn Inc., the guarantors from time to time party
thereto, the lenders from time to time party thereto and MUFG Bank, Ltd., as administrative agent, filed as Exhibit 10.2 to the Report
on Form 8-K filed by Upjohn Inc. with the SEC on June 17, 2020, and incorporated herein by reference.
Term Loan Credit Agreement, dated as of July 1, 2021, among Viatris, the guarantors from time to time party thereto, the lenders
from time to time party thereto and Mizuho Bank, Ltd., as administrative agent, filed as Exhibit 10.2 to the Report on Form 8-K filed
by Viatris Inc. with the SEC on July 1, 2021, and incorporated herein by reference. ^
151
Table of Contents
10.28
10.29
10.30
10.31
10.32(a)
10.32(b)
10.33
10.34
10.35
10.36
10.37
10.38
10.39
Form of Dealer Agreement among Viatris Inc., Utah Acquisition Sub Inc., Mylan II B.V., Mylan Inc. and the dealer thereto, filed as
Exhibit 10.1 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated herein by
reference.
Settlement Agreement with the U.S. Department of Justice and two relators finalizing the Medicaid drug rebate settlement, dated
August 16, 2017, filed as Exhibit 10.1 to the Report on Form 8-K filed by Mylan N.V. with the SEC on August 21, 2017, and
incorporated herein by reference.
Corporate Integrity Agreement between the Office of Inspector General of the Department of Health and Human Services and Mylan
Inc. and Mylan Specialty L.P., dated August 16, 2017, filed as Exhibit 10.2 to the Report on Form 8-K filed by Mylan N.V. with the
SEC on August 21, 2017, and incorporated herein by reference.
Registration Rights Agreement, dated as of June 22, 2020, by and between Upjohn Inc. and Goldman Sachs & Co. LLC, BofA
Securities, Inc., Citigroup Global Markets Inc., Morgan Stanley and Co. LLC, and Mizuho Securities USA LLC, as representatives
of the several initial purchasers of the U.S. Dollar Notes, filed as Exhibit 4.8 to the Report on Form 8-K filed by Upjohn Inc. with the
SEC on June 26, 2020, and incorporated herein by reference.
Asset Purchase Agreement, dated as of September 7, 2020, between Aspen Global Incorporated and Mylan Ireland Limited, filed by
Mylan N.V. as Exhibit 10.2 to the Form 10-Q for the quarter ended September 30, 2020, and incorporated herein by reference.^
Amendment No. 1, dated as of November 5, 2020, to the Asset Purchase Agreement dated as of September 7, 2020, between Aspen
Global Incorporated and Mylan Ireland Limited, filed as Exhibit 10.34(b) to Form 10-K for the fiscal year ended December 31, 2020,
and incorporated herein by reference. ^
Transition Services Agreement, dated as of November 16, 2020, by and between Pfizer Inc. (as Service Provider) and Upjohn Inc.
(as Service Recipient), filed as Exhibit 10.1 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and
incorporated herein by reference. ^
Transition Services Agreement, dated as of November 16, 2020, by and between Upjohn Inc. (as Service Provider) and Pfizer Inc.
(as Service Recipient), filed as Exhibit 10.2 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and
incorporated herein by reference. ^
Tax Matters Agreement, dated as of November 16, 2020, by and between Pfizer Inc. and Upjohn Inc., filed as Exhibit 10.3 to the
Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated herein by reference. ^
Employee Matters Agreement, dated as of November 16, 2020, by and between Pfizer Inc. and Viatris Inc., filed as Exhibit 10.4 to
the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated herein by reference.^
Manufacturing and Supply Agreement, dated as of November 16, 2020, by and between Pfizer Inc. (as Manufacturer) and Viatris
Inc. (as Customer), filed as Exhibit 10.5 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and
incorporated herein by reference.^
Manufacturing and Supply Agreement, dated as of November 16, 2020, by and between Viatris Inc. (as Manufacturer) and Pfizer
Inc. (as Customer), filed as Exhibit 10.6 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and
incorporated herein by reference. ^
Intellectual Property Matters Agreement, dated as of November 16, 2020, by and between Pfizer Inc. and Viatris Inc., filed as Exhibit
10.7 to the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated herein by reference. ^
152
Table of Contents
10.40
21
22
23
31.1
31.2
32
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
104
Trademark License Agreement, dated as of November 16, 2020, by and between Pfizer Inc. and Viatris Inc., filed as Exhibit 10.8 to
the Report on Form 8-K filed by Viatris Inc. with the SEC on November 19, 2020, and incorporated herein by reference. ^
Subsidiaries of the registrant.
List of subsidiary guarantors and issuers of guaranteed securities.
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema
Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document (included in Exhibit 101).
*
^
Denotes management contract or compensatory plan or arrangement.
Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Viatris agrees to furnish supplementally a
copy of any omitted attachment to the SEC on a confidential basis upon request.
153
Table of Contents
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form to be signed
on its behalf by the undersigned, thereunto duly authorized on February 27, 2023.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of February 27, 2023.
Viatris Inc.
by
/s/ MICHAEL GOETTLER
Michael Goettler
Chief Executive Officer
Signature
/s/ ROBERT J. COURY
Robert J. Coury
/s/ MICHAEL GOETTLER
Michael Goettler
/s/ SANJEEV NARULA
Sanjeev Narula
/s/ PAUL B. CAMPBELL
Paul B. Campbell
/s/ W. DON CORNWELL
W. Don Cornwell
/s/ JOELLEN LYONS DILLON
JoEllen Lyons Dillon
/s/ ELISHA FINNEY
Elisha Finney
/s/ MELINA HIGGINS
Melina Higgins
/s/ JAMES M. KILTS
James M. Kilts
/s/ HARRY A. KORMAN
Harry A. Korman
/s/ RAJIV MALIK
Rajiv Malik
/s/ RICHARD A. MARK
Richard A. Mark
/s/ MARK W. PARRISH
Mark W. Parrish
/s/ SCOTT SMITH
Scott Smith
/s/ PAULINE VAN DER MEER MOHR
Pauline van der Meer Mohr
Title
Executive Chairman and Director
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer and Corporate Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
President and Director
Director
Director
Director
Director
154
Exhibit 21
Subsidiaries as of December 31, 2022
Name
Upjohn Saidal Pharma
Agila Australasia Pty Ltd
Alphapharm Pty. Ltd.
Mylan Australia Holding Pty Ltd
Mylan Australia Pty Limited
Upjohn Australia Pty Ltd
Viatris Pty. Ltd.
Arcana Arzneimittel GmbH
Mylan Österreich GmbH
Viatris LLC
Mylan BV
Mylan EPD BVBA
Pfizer Innovative Supply Point International BVBA
Upjohn SRL
Viatris Healthcare NV
Mylan Bermuda Ltd.
Viatris BH, drustvo sa ogranicenom odgovornoscu za trgovinu i usluge
Mylan Brasil Distribuidora de Medicamentos Ltda
Mylan Laboratórios Ltda
Upjohn Brasil Importadora e Distribuidora de Medicamentos Ltda
Mylan EOOD
BGP Pharma ULC
Meda Pharmaceuticals Ltd
Mylan Pharmaceuticals ULC
Upjohn Canada ULC
Gezhi (Hainan) Health Investment Co., Ltd.
Gezhi (Hainan) Medical Technology Co
Gezhi Health Management Co., Ltd.
Medicine Meda Pharmaceutical Information Consultancy (Beijing) Co., Ltd.
Mylan Pharmaceutical Science and Technology (Shanghai) Co., Ltd.
Pfizer Pharmaceuticals Ltd.
Pfizer Upjohn Management Co., Ltd
Viatris (Hainan) Investment Co., Ltd.
Viatris Pharmaceutical Co., Ltd.
State or Country of
Organization
Algeria
Australia
Australia
Australia
Australia
Australia
Australia
Austria
Austria
Belarus
Belgium
Belgium
Belgium
Belgium
Belgium
Bermuda
Bosnia and Herzegovina
Brazil
Brazil
Brazil
Bulgaria
Canada
Canada
Canada
Canada
China
China
China
China
China
China
China
China
China
Mylan Hrvatska d.o.o.
Onco Laboratories Limited
MEDA Pharma s.r.o.
Mylan Pharmaceuticals s.r.o.
Viatris CZ s.r.o.
Acton Pharmaceuticals, Inc.
Alaven Pharmaceutical LLC
ALVP Holdings, LLC
Delcor Asset Corporation
Denco Asset, LLC
Deogun Manufacturing, LLC
Dey Limited Partner LLC
Dey, Inc.
EMD, Inc.
Ezio Pharma, Inc.
Franklin Pharmaceutical LLC
G.D. Searle LLC
Greenstone LLC
Iris Purchaser Inc.
Lotic.ai, Inc.
Madaus Inc.
Marquis Industrial Company, LLC
Meda Pharmaceuticals Inc.
Mylan API Inc.
Mylan Consumer Healthcare, Inc.
Mylan D.T. (U.S.) Holdings, Inc.
Mylan D.T. DPT Partner Sub, LLC
Mylan D.T., Inc.
Mylan Holdings Inc.
Mylan Holdings I LLC
Mylan Holdings II LLC
Mylan Institutional LLC
Mylan Investment Holdings 4 LLC
Mylan Investment Holdings 5 LLC
Mylan Investment Holdings 6 LLC
Mylan Securitization LLC
Mylan Special Investments LLC
Mylan Special Investments II, LLC
Mylan Special Investments III, LLC
Mylan Special Investments IV, LLC
Mylan Special Investments V, LLC
Croatia
Cyprus
Czech Republic
Czech Republic
Czech Republic
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Mylan Special Investments VI, LLC
Mylan Specialty L.P.
Nimes Inc.
PFE Wyeth Holdings LLC
Pfizer PFE US Holdings 4 LLC
Pfizer Pharmaceuticals LLC
Powder Street, LLC
Prestium Pharma, Inc.
Somerset Pharmaceuticals, Inc.
Upjohn US 2 LLC
Upjohn US Employment Inc.
Upjohn US Holdings Inc.
Upjohn Worldwide Holdings Inc.
Utah Acquisition Holdco Inc.
Utah Acquisition Sub Inc.
Viatris Enterprises LLC
Viatris Specialty LLC
Viatris US Holdings 5 LLC
Wallace Pharmaceuticals Inc.
Mylan ApS
Viatris ApS
Pfizer Africa & Middle East for Pharmaceuticals, Veterinarian Products &
Chemicals S.A.E.
Viatris Egypt S.A.E.
Viatris Health Care
Agila Specialties Investments Limited
Generics (U.K.) Limited
Mylan Holdings Acquisition Limited
Mylan Holdings Acquisition 2 Limited
Mylan Holdings Ltd.
Mylan Pharma UK Limited
Mylan Products Limited
Upjohn UK 2 Ltd.
Upjohn UK Limited
Viatris UK Healthcare Limited
Viatris Oy
Laboratoires Madaus S.A.S.
Meda Holding S.A.S.
Meda Manufacturing S.A.S.
Meda Pharma S.A.S.
Mylan Generics France Holding S.A.S.
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Denmark
Denmark
Egypt
Egypt
Egypt
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Finland
France
France
France
France
France
Mylan Laboratories S.A.S.
Rottapharm S.A.S.
Viatris Healthcare
Viatris Medical
Viatris Sante
Viatris Up
Erste Madaus Beteiligungs GmbH
Madaus GmbH
MEDA Germany Holding GmbH
MEDA Manufacturing GmbH
MEDA Pharma GmbH & Co. KG
MWB Pharma GmbH
Mylan dura GmbH
Mylan Germany GmbH
Pharmazeutische Union GmbH
PharmLog Pharma Logistik GmbH
ROTTAPHARM | MADAUS GmbH
VIATRIS GmbH
Viatris Healthcare GmbH
Viatris Pharma GmbH
Zweite Madaus Beteiligungs GmbH
Mylan (Gibraltar) 4 Limited
Mylan (Gibraltar) 5 Limited
Mylan (Gibraltar) 6 Limited
Mylan (Gibraltar) 7 Limited
Mylan (Gibraltar) 8 Limited
Mylan (Gibraltar) 9 Limited
BGP Pharmaceutical Products Ltd.
Generics Pharma Hellas Ltd.
Meda Pharmaceuticals S.A.
Upjohn Hellas Pharmaceutical Limited Liability Company
Mylan Pharmaceutical Hong Kong Limited
Viatris Healthcare Hong Kong Limited
MEDA PHARMA HUNGARY KERESKEDELMI Kft.
Mylan EPD Kft.
Mylan Hungary Kft.
Mylan Kft.
Mylan Institutional Inc.
Mylan Laboratories Limited
Mylan Pharmaceuticals Private Limited
McDermott Laboratories Limited
France
France
France
France
France
France
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Greece
Greece
Greece
Greece
Hong Kong
Hong Kong
Hungary
Hungary
Hungary
Hungary
Illinois
India
India
Ireland
Meda Health Sales Ireland Limited
Mylan Investments Limited
Mylan IRE Healthcare Limited
Mylan Ireland Investment Designated Activity Company
Mylan Ireland Limited
Mylan Pharma Acquisition Limited
Mylan Pharma Group Limited
Mylan Pharma Holdings Limited
Mylan Pharmaceuticals Limited
Mylan Teoranta
Rottapharm Limited
Upjohn Manufacturing Ireland Unlimited
Viatris Healthcare Limited
Viatris Limited
DERMOGROUP S.r.l.
Meda Pharma S.p.A.
Mylan Italia S.r.l.
Mylan S.p.A.
Rottapharm S.p.A.
Viatris Pharma S.r.l.
Mylan EPD G.K.
Mylan Seiyaku Ltd.
Pfizer UPJ G.K.
Viatris Pharmaceuticals Japan Inc.
Viatris Limited Liability Partnership
SIA “Meda Pharma”
SIA “Mylan Healthcare”
Mylan Healthcare UAB
BGP Products S.à r.l.
Integral S.A.
Meda Pharma S.à r.l.
Mylan Luxembourg 1 S.à r.l.
Mylan Luxembourg 2 S.à r.l.
Mylan Luxembourg 3 S.à r.l.
Mylan Luxembourg 6 S.à r.l.
Mylan Luxembourg 7 S.à r.l.
Mylan Luxembourg S.à r.l.
SIM S.A.
VI Lux Newco S.à r.l.
Mylan Healthcare Sdn. Bhd.
Mylan Malaysia SDN. BHD.
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Italy
Italy
Italy
Italy
Italy
Italy
Japan
Japan
Japan
Japan
Kazakhstan
Latvia
Latvia
Lithuania
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Malaysia
Malaysia
Pfizer Parke Davis Sdn. Bhd.
Viatris Sdn. Bhd.
MP Laboratories (Mauritius) Ltd.
Meda Phama, S. de R.L. de C.V.
Meda Pharma Servicios, S. de R.L. de C.V.
Viatris Healthcare Mexico S. de R.L. de C.V.
Viatris Pharmaceuticals S.A.S.
Meda Pharma B.V.
Mylan B.V.
Mylan Group B.V.
Mylan Healthcare B.V.
Mylan II B.V.
Viatris Manufacturing B.V.
Viatris Ireland Holding B.V.
Viatris Mexico Holding B.V.
Viatris Philippines Holding B.V.
Viatris Spain Holding B.V.
Viatris Enterprise Holding B.V.
Viatris Pharmaceuticals Holding B.V.
Viatris Turkey Holding B.V.
Upjohn Belgium B.V.
Upjohn EESV
Upjohn Europe Holdings B.V.
Upjohn Export B.V.
Upjohn Finance B.V.
Upjohn Global Holdings B.V.
Upjohn Group Holdings B.V.
Upjohn Intermediate Holdings B.V.
Upjohn International Holdings B.V.
Upjohn Vietnam Dutch B.V.
Viatris Netherlands B.V.
Agila Specialties Inc.
BGP Products
Upjohn New Zealand ULC
Viatris Limited
Viatris Pharmaceuticals Pty Ltd
Mylan Health Management LLC
Meda AS
Viatris AS
ZpearPoint AS
MLRE LLC
Malaysia
Malaysia
Mauritius
Mexico
Mexico
Mexico
Morocco
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
New Jersey
New Zealand
New Zealand
New Zealand
Nigeria
North Carolina
Norway
Norway
Norway
Pennsylvania
Mylan Holdings Sub Inc.
Mylan Inc.
Synerx Pharma, LLC
Viatris Pharmaceuticals, Inc.
Viatris, Inc.
Mylan EPD Sp. Z o.o.
Mylan Healthcare Sp. Z o.o.
BGP Products, Unipessoal, LDA
Laboratorios Anova - Produtos Farmaceuticos, LDA
Laboratorios Delta, S.A.
Viatris Healthcare, Lda.
Mylan, Lda
BGP Products S.r.l.
Mylan Pharma LLC
Viatris LLC
Viatris Healthcare Drustvo SA Ogranicenom Odgovornoscu Beograd
Mylan Pharmaceuticals Pte. Ltd.
Pfizer Asia Pacific Pte Ltd.
Viatris Private Limited
Viatris Singapore Pte Ltd.
Meda Pharma spol. s.r.o.
Mylan s.r.o.
Viatris Slovakia s.r.o.
Viatris, farmacevtsko podjetje, d.o.o.
Meda Pharma South Africa (Pty) Limited
Mylan Pharmaceuticals (Pty) Ltd.
SCP Pharmaceuticals (Proprietary) Limited
Upjohn South Africa Proprietary Limited
Viatris Healthcare (Pty) Ltd
Viatris South Africa (Proprietary) Limited
Viatris Korea
Fundacion Viatris para la Salud
Laboratorios Parke Davis, S.L.U.
Meda Pharma, S.L.
PEMB OFG Spain Holding, S.L.
Pfizer PFE Spain Holding, S.L.
Viatris Healthcare S.L.
Viatris Pharmaceuticals, S.L.
Abbex AB
BGP Products AB
Pennsylvania
Pennsylvania
Pennsylvania
Philippines
Philippines
Poland
Poland
Portugal
Portugal
Portugal
Portugal
Portugal
Romania
Russian Federation
Russian Federation
Serbia
Singapore
Singapore
Singapore
Singapore
Slovakia
Slovakia
Slovakia
Slovenia
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Korea
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Sweden
Sweden
Ipex AB
Ipex Medical AB
Meda AB
Meda OTC AB
Mylan AB
Mylan Sweden Holdings AB
Recip AB
Scandinavian Pharmaceuticals-Generics AB
Viatris AB
BGP Products Operations GmbH
BGP Products Switzerland GmbH
MEDA Pharma GmbH
MEDA Pharmaceuticals Switzerland GmbH
Mylan Holdings GmbH
Mylan Pharma GmbH
Viatris Pharma GmbH
Mylan (Taiwan) Limited
Viatris Pharmaceutical Company Limited
DPT Laboratories, Ltd.
Mylan Bertek Pharmaceuticals Inc.
Meda Pharma (Thailand) Co., Ltd.
Viatris Healthcare (Thailand) Limited
Viatris (Thailand) Limited
Meda Pharma Ilaç Sanayi ve Ticaret Limited Sirketi
Pfizer Ilaclari Limited Sirketi
Meda Pharmaceuticals MEA FZ-LLC
Mylan FZ-LLC
Upjohn Middle East FZ-LLC
American Triumvirate Insurance Company
Mylan International Holdings, Inc.
Viatris Vietnam Limited Company
MP AIR, Inc.
Mylan Pharmaceuticals Inc.
Mylan Technologies, Inc.
Mylan ASI LLC
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Taiwan
Taiwan
Texas
Texas
Thailand
Thailand
Thailand
Turkey
Turkey
United Arab Emirates
United Arab Emirates
United Arab Emirates
Vermont
Vermont
Vietnam
West Virginia
West Virginia
West Virginia
Wyoming
Exhibit 22
List of Subsidiary Guarantors and Issuers of Guaranteed Securities
As of December 31, 2022, Viatris Inc., a Delaware corporation (“Viatris”), Mylan Inc., a Pennsylvania corporation
(“Mylan Inc.”), and Mylan II B.V., a company incorporated under the laws of the Netherlands (“Mylan II”), were the guarantors
of the 3.950% Senior Notes due 2026 and 5.250% Senior Notes due 2046 issued by Utah Acquisition Sub Inc., a Delaware
corporation (“Utah”).
As of December 31, 2022, Viatris, Utah and Mylan II were the guarantors of the 4.200% Senior Notes due 2023, 3.125%
Senior Notes due 2023, 4.550% Senior Notes due 2028, 5.400% Senior Notes due 2043 and 5.200% Senior Notes due 2048
issued by Mylan Inc.
As of December 31, 2022, Utah, Mylan Inc. and Mylan II were the guarantors of the 1.650% Senior Notes due 2025,
2.300% Senior Notes due 2027, 2.700% Senior Notes due 2030, 3.850% Senior Notes due 2040 and 4.000% Senior Notes due
2050 issued by Viatris.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-250845 on Form S-8, Registration Statement No. 333-
264760 on Form S-3ASR and Registration Statement No. 333-264762 on Form S-3 of our reports dated February 27, 2023, relating to the
consolidated financial statements of Viatris Inc. (the “Company”) and the effectiveness of the Company's internal control over financial
reporting appearing in this Annual Report on Form 10-K for the year ended December 31, 2022.
Exhibit 23
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 27, 2023
Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.1
I, Michael Goettler, certify that:
1.
I have reviewed this Form 10-K of Viatris Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 27, 2023
/s/ Michael Goettler
Michael Goettler
Chief Executive Officer
(Principal Executive Officer)
Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.2
I, Sanjeev Narula, certify that:
1.
I have reviewed this Form 10-K of Viatris Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 27, 2023
/s/ SANJEEV NARULA
Sanjeev Narula
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32
In connection with the Form 10-K of Viatris Inc. (the “Company”) for the year ended December 31, 2022 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: February 27, 2023
/s/ MICHAEL GOETTLER
Michael Goettler
Chief Executive Officer
(Principal Executive Officer)
/s/ SANJEEV NARULA
Sanjeev Narula
Chief Financial Officer
(Principal Financial Officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished in accordance with Securities and Exchange Commission Release No. 34-47551 and shall not be
considered filed as part of the Form 10-K.