Viatris' Q3 2025 Earnings Call: Contradictions Emerge on India Tariffs, Indore Remediation, Revenue Impact, Capital Allocation, and Strategic Savings

Date of Call: November 6, 2025

Financials Results

• Revenue: $3.76B, down ~1% YOY; +1% operational (ex‑Indore)
• Gross Margin: 56% adjusted gross margin, impacted vs prior year by Indore-related factors

Guidance:

• Raised and narrowed 2025 guidance ranges across certain metrics, including total revenues, adjusted EBITDA and adjusted EPS.
• Q4 revenues expected to be lower due to normal seasonality (Q3 was the highest quarter).
• Gross margins expected to remain stable; SG&A to increase for pipeline investments and upcoming launches.
• Free cash flow expected to step down due to timing of interest payments and normal capex phasing.
• 2026 outlook and quantified strategic-review savings/reinvestment plans to be provided in Q1 2026 (investor event).

Business Commentary:

* Strong Financial Performance: - Viatris reported total revenues of $3.76 billion for Q3 2025, with operational revenue growth of approximately 1%, excluding the Indore impact. -

- The growth was driven by the company's strategic priorities, commercial execution, and strong performance across its portfolio, particularly in Europe, emerging markets, and the Greater China region.

• Pipeline Advancements:
• Viatris made significant progress in advancing its pipeline, with notable highlights including the fast-acting meloxicam and the low-dose estrogen weekly patch.

• The advancements are attributed to strong execution in R&D and regulatory filings, positioning the company for future growth in its generics, established brands, and innovative assets.

• Strategic Review and Cost Savings:

• The company launched an enterprise-wide strategic review aimed at delivering meaningful net cost savings and reinvesting in future growth.

• The initiative aims to identify operating efficiencies across various aspects of the business, including commercial sales and marketing, R&D, and sourcing and manufacturing, to enhance operational efficiency and profitability.

• Indore Facility Resolution:

• Viatris made significant progress in remediating issues at its Indore facility, with initial activities now substantially complete.

• The company is building operational redundancies by requalifying other sites and adding third-party vendors to mitigate potential disruptions, awaiting a reinspection from the FDA.

• Brand Portfolio Strength:

• The company's established brands, such as EpiPen and Creon, showed solid growth in Europe and North America, contributing to overall performance.
• The growth is supported by strategic branding, strong commercial rights, and the ability to withstand competitive pressures.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "We delivered another strong quarter" and said they are "raising our full year guidance." CFO: generated $658M cash this quarter (ex-transaction $728M) and returned >$920M YTD to shareholders. CEO: "very encouraged by the progress" and expects momentum into 2026.

Q&A:

• Question from Leszek Sulewski (Truist Securities): A couple for me. First, give us an update on the Indore resolution situation. Second, across the branded portfolio: Lipitor uptick—are you capturing share from a recent generic recall? And what's driving the uptick in EpiPen given nasal-spray options and shortages? Third, any key Paragraph IV challenges into next year?
  Response: Indore remediation is largely complete; had a productive FDA meeting but reinspection timing is controlled by FDA—company has qualified other sites and third‑party vendors to create redundancies and decouple revenue from Indore.

• Question from Matthew Dellatorre (Goldman Sachs): On fast-acting meloxicam, any FDA feedback so far about opioid-sparing label potential and how material is that for access/pricing? Comment on partnership strategy to reach broader market and how you'd structure deals. And on capital allocation, key priorities for next year—would U.S.-based BD be midsized licensing deals and how should we think about balance-sheet capacity?
  Response: Phase III was designed with FDA input to support opioid-sparing labeling and management is encouraged about securing that language; they will only partner if materially additive but can commercialize themselves; capital allocation remains balanced (target ~50/50 return vs growth) with this year leaning toward buybacks.

• Question from Christopher Schott (JPMorgan): Any directional color on the quantum of expense reduction from the enterprise-wide strategic review and how much will be reinvested vs drop to the bottom line? Also, given this year's capital return bias, should 2026 be more like 2025 or closer to the long-term 50/50 target?
  Response: They expect significant multiyear cost savings from a broad review (commercial, R&D, sourcing, supply chain, corporate) but will disclose quantified savings, phasing and reinvestment plans in Q1; reinvestment will be a minority of savings.

• Question from Li Wenwen (for Dennis Ding, Jefferies): On meloxicam, what's your confidence in the self-ramp and peak sales potential, and any lessons from a slower competitor launch?
  Response: Management is confident in the launch and commercialization capability; they view peak sales in the roughly $0.5B range and will provide more specificity in 2026.

• Question from Umer Raffat (Evercore ISI): For meloxicam, what payer engagement do you expect—multimodal pathway vs traditional retail—and channel strategy? For presbyopia, initial commercialization: cash-pay optometry or broader reimbursement?
  Response: Meloxicam is positioned for multimodal acute‑pain pathways (discharged patients on multiple meds) and payer/KOL feedback supports that; presbyopia commercialization is still being finalized but management expects a substantial cash‑pay component alongside a portfolio approach.

• Question from Ashwani Verma (UBS): For the strategic review, is the order of opportunity commercial first, then R&D, then COGS? And for 2026 top line, what are the pushes/pulls—FX tailwind laps, new product contributions—can you deliver the $450–$550M new product cadence?
  Response: Management sees large opportunity in sourcing/manufacturing/supply chain and corporate support (as well as commercial and R&D); they expect continued positive fundamentals into 2026 but will provide formal 2026 guidance in Q1 and reaffirmed the $450–$550M new product target will be addressed next year.

• Question from David Amsellem (Piper Sandler): On presbyopia, how are you differentiated vs other modalities? On cenerimod, why run lupus nephritis now—additional analyses or a hedge? And meloxicam IP/exclusivity runway?
  Response: Cenerimod expansion into lupus nephritis is a data- and mechanism-driven move (not a hedge)—Phase II signals stronger effects in more severe patients and the S1P mechanism supports LN development.

• Question from Jason Gerberry (BofA Securities): Why not provide the enterprise-review update today versus Q1 '26—is it because efforts are still ongoing or needing to assess commercial buildout costs? And on Indore, do the ~$100M penalties recur if the ban isn't lifted?
  Response: They are delaying disclosure until Q1 to present accurate, credible, and mappable savings/phasing numbers; separately, the ~ $100M Indore impact (about half penalties) is not expected to recur next year.

Contradiction Point 1

India Tariffs Impact on Financials

It involves the impact of India tariffs on financials, which is a critical factor for investors to consider.

How do you assess the risk proportion between India and the EU tariffs, and how might tariffs impact your business? - Unidentified Analyst (Evercore)

2025Q3: Clarity is needed on whether tariffs will apply to pharmaceuticals and specifically generics. Half of Viatris' U.S. products are manufactured domestically, with 10% from India. Mitigations are in place, and no material financial impact expected in '25. - Scott Smith(CEO)

How do tariffs affect risk exposure in India vs. EU? How do tariffs impact your business outlook? - Unidentified Analyst (Evercore)

2025Q2: We are closely monitoring the situation with the tariffs. We expect that no financial impact will occur in the second half of '25. We have identified mitigation plans, but specifics of those are confidential. However, we are very much aware of the potential impact to our financials and we're planning accordingly. - Scott Smith(CEO)

Contradiction Point 2

Indore Remediation Progress

It involves the progress of remediation efforts at the Indore facility, which directly impacts product supply and potential revenue losses.

Can you update on the Indore resolution? - Leszek Sulewski (Truist Securities, Inc., Research Division)

2025Q3: We are pleased with the Indore remediation process, which is largely complete. We are building redundancies to decouple revenues from the Indore issue, as timing is out of our control. - Scott Smith(CEO)

Can you provide an update on inspections at other facilities like Nashik and discuss the commercial infrastructure for meloxicam? - David A. Amsellem (Piper Sandler & Co.)

2025Q2: We are confident that the Indore facility will have a smooth FDA inspection when it occurs. We are well on track to reopening the facility in Q4. - Thess Theodora Mistras(CFO)

Contradiction Point 3

Indore Resolution and Impact on Revenue

It involves expectations regarding the resolution of the Indore issue and its impact on revenue, which is crucial for investor understanding of the company's financial outlook.

Why is the enterprise review update delayed until Q1 2026? If the Indore ban remains in place, will the price penalties recur? - Jason Gerberry (BofA Securities)

2025Q3: The $100 million figure includes penalties and disruptions, with penalties not expected to recur. Redundancies are being created to stabilize supply. - Theodora Mistras(CFO)

Will the Indore impact extend into 2026? - David Amsellem (Piper Sandler)

2025Q1: About $100 million of Indore's impact is due to penalties and short-term supply disruptions, which are not expected in 2026. - Doretta Mistras(CFO)

Contradiction Point 4

Capital Allocation Strategy

It involves the company's capital allocation strategy, which is crucial for investor expectations regarding shareholder returns and growth investments.

What are next year's capital allocation priorities? - Matthew Dellatorre(Goldman Sachs Group, Inc., Research Division)

2025Q3: We do intend that over the next 3 to 5 years, that we will be roughly equal in terms of those returns to shareholders and reinvestments into the business. - Scott Smith(CEO)

What is Viatris' long-term vision regarding brands and capital deployment? - David Amsellem (Piper Sandler)

2024Q4: Over the next 5 years, we are committed to allocating 50% to shareholders and 50% to business development. - Scott Smith(CEO)

Contradiction Point 5

Strategic Review and Savings Expectations

It involves expectations from the strategic review and the potential savings, which are critical for understanding the company's cost management and financial strategy.

What are the expense reduction amounts from the enterprise-wide strategic review, and will 2026 resemble 2025 as a capital return year? - Christopher Schott (JPMorgan Chase & Co)

2025Q3: The quantum of savings will be significant and will be quantified by Q1 with details on phasing and reinvestment. - Scott Smith(CEO)

What are the largest savings buckets under the $600 million sustainability program for 2025 and beyond, specifically within G&A? - Unknown (Jefferies)

2025Q1: We've identified $600 million of savings. We expect to deliver it in the next 3 years. - Doretta Mistras(CFO)