Viatris: Focusing on Complex Injectables and Specialty Therapeutic Areas for Future Growth

We are establishing a fair value estimate of $13 per share for Viatris VTRS we don’t believe Viatris has created an economic moat. Our forecast lies on a low-single-digit top-line growth and a slight improvement in operating margin over our model period from new branded drugs and complex generics launches offsetting pressures found in its core portfolio.

Viatris’ generics business makes up roughly 40% of company’s sales and it continues to suffer low- to mid-single-digit erosion year over year in developed markets like North America and majority of Europe. Because price and margin headwinds exist predominantly in small-molecule oral tablets that are easy to produce, we expect Viatris’s future pipeline to focus more on complex generics—drugs that have complex formulations, dosage forms, or are injected or have more complex administration. But other players in the industry are employing a similar strategy so success in this area relies on the company’s ability to seek out profitable drugs and efficiently launching them to market.

Furthermore, Viatris has identified ophthalmology, dermatology, and gastroenterology as three key therapeutic areas of focus for future innovations. In 2023, it acquired Oyster Point and Famy Life Sciences, two pharmaceutical companies that focus on ophthalmology, and we expect additional small tuck-in acquisitions in the three therapeutic areas to fuel its pipeline. With these purchases, Viatris created an eye care division with an aim to be one of the global pharmaceutical leaders in ophthalmology. Oyster Point added Tryvaya, the first and only nasal spray for the treatment of dry eye disease at the time of launch, to Viatris’s portfolio and the drug recorded roughly $6 million in sales during the first quarter as part of Viatris. While this is not a meaningful contribution to the top line, we believe this paves way for Viatris to gain experience in the space and build a reputation among ophthalmologists and the industry.