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vtrs-20230331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			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						83-4364296
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1000 Mylan Boulevard, Canonsburg, Pennsylvania 15317

(Address of principal executive offices)

(724) 514-1800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:

Trading Symbol(s)

Name of Each Exchange on Which Registered:

Common Stock, par value $0.01 per share

VTRS

The NASDAQ Stock Market

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

☑

Accelerated filer

☐

Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of common stock outstanding, par value $0.01 per share, of the registrant as of May 3, 2023 was 1,199,029,984.

Table of Contents

VIATRIS INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended

March 31, 2023


		Page
	PART I — FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations — Three Months Ended March 31, 202 3 and 20 2 2	7
	Condensed Consolidated Statements of Comprehensive Earnings — Three Months Ended March 31, 202 3 and 20 2 2	8
	Condensed Consolidated Balance Sheets — March 31, 202 3 and December 31, 20 2 2	9
	Condensed Consolidated Statements of Equity — Three Months Ended March 31, 202 3 and 20 2 2	10
	Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 202 3 and 20 2 2	11

	Notes to Condensed Consolidated Financial Statements	12

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	60

ITEM 4.	Controls and Procedures	61

	PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings	62

ITEM 1A.	Risk Factors	62

ITEM 2.	U nregistered S ales of E quity S ecurities and U se of Proceeds	62



ITEM 6.	Exhibits	63

SIGNATURES		64

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Glossary of Defined Terms

Unless the context requires otherwise, references to “Viatris,” “the Company,” “we,” “us” or “our” in this Form 10-Q (defined below) refer to Viatris Inc. and its subsidiaries. We also have used several other terms in this Form 10-Q, most of which are explained or defined below. Some amounts in this Form 10-Q may not add due to rounding.


2003 LTIP			Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan
2020 Incentive Plan			Viatris Inc. 2020 Stock Incentive Plan
2022 Form 10-K			Viatris’ annual report on Form 10-K for the fiscal year ended December 31, 2022, as amended
Adjusted EBITDA			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
ANDA			Abbreviated New Drug Application
AOCE			Accumulated other comprehensive earnings
API			Active pharmaceutical ingredient
ARV			Antiretroviral medicines
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Biocon			Biocon Limited
Biocon Biologics			Biocon Biologics Limited, a majority owned subsidiary of Biocon
Biocon Biologics Transaction			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
Biocon Agreement			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			Biogen MA Inc. and Biogen International GmbH, collectively
Business Combination Agreement			Business Combination Agreement, dated as of July 29, 2019, as amended from time to time, among Viatris, Mylan, Pfizer and certain of their affiliates
CCPS			Compulsory convertible preferred shares
CMA			Competition and Markets Authority
Code			The U.S. Internal Revenue Code of 1986, as amended
Combination			Refers to Mylan combining with Pfizer's Upjohn Business in a Reverse Morris Trust transaction to form Viatris on November 16, 2020
Commercial Paper Program			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
COVID-19			Novel coronavirus disease of 2019
CP Notes			Unsecured, short-term commercial paper notes issued pursuant to the Commercial Paper Program
Developed Markets segment			Viatris’ business segment that includes our operations primarily in the following markets: North America and Europe

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Distribution			Pfizer's distribution to Pfizer stockholders all the issued and outstanding shares of Upjohn Inc.
DOJ			U.S. Department of Justice
EBITDA			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
EDPA			U.S. District Court for the Eastern District of Pennsylvania
Emerging Markets segment			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
ERP system			Enterprise resource planning system
EU			European Union
Exchange Act			Securities Exchange Act of 1934, as amended
Famy Life Sciences			Famy Life Sciences Private Limited
FASB			Financial Accounting Standards Board
FDA			U.S. Food and Drug Administration
Form 10-Q			This quarterly report on Form 10-Q for the quarterly period ended March 31, 2023
Global Systemically Important Banks			Financial institutions that are considered systemically important by the Financial Stability Board.
Greater China segment			Viatris’ business segment that includes our operations primarily in the following markets: China, Taiwan and Hong Kong
Gx			Generic drugs
IPR			Inter Partes review
IPR&D			In-process research and development
IRS			U.S. Internal Revenue Service
IT			Information technology
JANZ segment			Viatris’ business segment that includes our operations in the following markets: Japan, Australia and New Zealand
LIBOR			London Interbank Offered Rate
Lilly			Eli Lilly and Company
Maximum Leverage Ratio			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
MDL			Multidistrict litigation
MPI			Mylan Pharmaceuticals Inc.
Mylan			Mylan N.V. and its subsidiaries
Mylan Inc. U.S. Dollar Notes			The 4.200% 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			Mylan Securitization LLC
NASDAQ			The NASDAQ Stock Market
NDA			New drug application
NHS			National Health Services

Table of Contents


Note Securitization Facility			The note securitization facility entered into in August 2022 for borrowings up to $200 million and expiring in August 2023
OTC			Over-the-counter
Oyster Point			Oyster Point Pharma, Inc.
Pfizer			Pfizer Inc.
PMS			Pharmascience Inc.
PSUs			Performance awards
PTAB			U.S. Patent Trial and Appeal Board
R&D			Research and development
Receivables Facility			The $400 million accounts receivable entered into in August 2020 and expiring in April 2025
Registered Upjohn Notes			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 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.
Respiratory Delivery Platform			Pfizer’s proprietary dry powder inhaler delivery platform
Restricted Stock Awards			The Company’s nonvested restricted stock and restricted stock unit awards, including PSUs
Revolving Facility			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
RICO			Racketeer Influenced and Corrupt Organizations Act
RSUs			The Company's unvested restricted stock unit awards
Sanofi			Sanofi-Aventis U.S., LLC
SARs			Stock Appreciation Rights
SDNY			U.S. District Court for the Southern District of New York
SEC			U.S. Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
Senior U.S. Dollar Notes			The Upjohn U.S. Dollar Notes, the Utah U.S. Dollar Notes and the Mylan Inc. U.S. Dollar Notes, collectively
Separation and Distribution Agreement			Separation and Distribution Agreement between Viatris and Pfizer, dated as of July 29, 2019, as amended from time to time
SG&A			Selling, general and administrative expenses
SOFR			Secured overnight financial rate
Stock awards			Stock options and SARs
Teva			Teva Pharmaceutical Industries Ltd.
TSA			Transition services agreement
U.K.			United Kingdom
U.S.			United States
U.S. GAAP			Accounting principles generally accepted in the U.S.

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Unregistered Upjohn U.S. Dollar Notes			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 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			Upjohn Inc., a wholly owned subsidiary of Pfizer prior to the Distribution, that combined with Mylan and was renamed Viatris Inc.
Upjohn Business			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
Upjohn Distributor Markets			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
Upjohn U.S. Dollar 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.
Utah Acquisition Sub			Utah Acquisition Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Viatris
Utah U.S. Dollar Notes			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.
Viatris			Viatris Inc., formerly known as Upjohn Inc. prior to the completion of the Combination
YEN Term Loan Facility			The ¥40 billion term loan 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

Table of Contents

PART I — FINANCIAL INFORMATION

VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited; in millions, except per share amounts)


	Three Months Ended
	March 31,
		2023		2022
Revenues:
Net sales		$	3,719.1	$	4,178.2
Other revenues		10.0		13.5
Total revenues		3,729.1		4,191.7
Cost of sales		2,186.9		2,420.5
Gross profit		1,542.2		1,771.2
Operating expenses:
Research and development		182.9		142.3

Selling, general and administrative		958.9		915.3
Litigation settlements and other contingencies, net		0.6		6.2
Total operating expenses		1,142.4		1,063.8
Earnings from operations		399.8		707.4
Interest expense		147.0		146.2
Other (income) expense, net		(69.9)		33.7
Earnings before income taxes		322.7		527.5
Income tax provision		98.0		128.3
Net earnings		$	224.7	$	399.2
Earnings per share attributable to Viatris Inc. shareholders
Basic		$	0.19	$	0.33
Diluted		$	0.19	$	0.33
Weighted average shares outstanding:
Basic		1,202.5		1,210.5
Diluted		1,205.6		1,213.1

See Notes to Condensed Consolidated Financial Statements

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VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings

(Unaudited; in millions)


	Three Months Ended
	March 31,
		2023		2022
Net earnings		$	224.7	$	399.2
Other comprehensive loss, before tax:
Foreign currency translation adjustment		45.3		(469.2)
Change in unrecognized gain (loss) and prior service cost related to defined benefit plans		1.3		(2.6)
Net unrecognized gain on derivatives in cash flow hedging relationships		2.8		0.2
Net unrecognized (loss) gain on derivatives in net investment hedging relationships		(66.2)		201.3
Net unrealized gain (loss) on marketable securities		0.9		(1.7)
Other comprehensive loss, before tax		(15.9)		(272.0)
Income tax (benefit) provision		(12.5)		44.7
Other comprehensive loss, net of tax		(3.4)		(316.7)
Comprehensive earnings		$	221.3	$	82.5

See Notes to Condensed Consolidated Financial Statements

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VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited in millions, except share and per share amounts)


	March 31, 2023		December 31, 2022
ASSETS
Assets
Current assets:
Cash and cash equivalents	$	506.6	$	1,259.9
Accounts receivable, net	3,497.5		3,814.5
Inventories	3,664.3		3,519.5
Prepaid expenses and other current assets	1,763.6		1,811.2
Assets held for sale	198.3		230.3
Total current assets	9,630.3		10,635.4
Property, plant and equipment, net	3,007.8		3,024.5
Intangible assets, net	22,701.6		22,607.1
Goodwill	10,573.2		10,425.8
Deferred income tax benefit	959.1		925.9
Other assets	2,418.2		2,403.5
Total assets	$	49,290.2	$	50,022.2

LIABILITIES AND EQUITY
Liabilities
Current liabilities:
Accounts payable	$	1,957.5	$	1,766.6
Short-term borrowings	204.6		—
Income taxes payable	244.5		279.6
Current portion of long-term debt and other long-term obligations	508.7		1,259.1

Other current liabilities	3,192.8		3,440.9
Total current liabilities	6,108.1		6,746.2
Long-term debt	18,069.4		18,015.2
Deferred income tax liability	2,465.0		2,432.0
Other long-term obligations	1,719.8		1,756.5
Total liabilities	28,362.3		28,949.9
Equity
Viatris Inc. shareholders’ equity
Common stock: $0.01 par value, 3,000,000,000 shares authorized; shares issued: 1,220,224,204 and 1,213,793,231, respectively	12.2		12.1
Additional paid-in capital	18,679.6		18,645.8
Retained earnings	5,252.5		5,175.6
Accumulated other comprehensive loss	(2,764.6)		(2,761.2)
	21,179.7		21,072.3

Less: Treasury stock — at cost
Common stock shares: 21,239,521 as of March 31, 2023	251.8		—
Total equity	20,927.9		21,072.3

Total liabilities and equity	$	49,290.2	$	50,022.2

See Notes to Condensed Consolidated Financial Statements

Table of Contents

VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(Unaudited; in millions, except share and per share amounts)


















				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Common Stock							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at December 31, 2022	1,213,793,231	$	12.1	$	18,645.8	$	5,175.6	—	$	—	$	(2,761.2)	$	21,072.3
Net earnings	—	—		—		224.7		—	—		—		224.7
Other comprehensive loss, net of tax	—	—		—		—		—	—		(3.4)		(3.4)
Issuance of restricted stock and stock options exercised, net	6,350,585	0.1		3.6		—		—	—		—		3.7
Taxes related to the net share settlement of equity awards	—	—		(19.4)		—		—	—		—		(19.4)
Share-based compensation expense	—	—		42.6		—		—	—		—		42.6

Common stock repurchase	—	—		—		—		21,239,521	(251.8)		—		(251.8)

Issuance of common stock	80,388	—		0.9		—		—	—		—		0.9
Cash dividends declared, $0.12 per common share	—	—		—		(147.8)		—	—		—		(147.8)
Other	—	—		6.1		—		—	—		—		6.1
Balance at March 31, 2023	1,220,224,204	$	12.2	$	18,679.6	$	5,252.5	21,239,521	$	(251.8)	$	(2,764.6)	$	20,927.9

















				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Common Stock							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at December 31, 2021	1,209,507,463	$	12.1	$	18,536.1	$	3,688.8	—	$	—	$	(1,744.3)	$	20,492.7
Net earnings	—	—		—		399.2		—	—		—		399.2
Other comprehensive loss, net of tax	—	—		—		—		—	—		(316.7)		(316.7)
Issuance of restricted stock, net	2,816,020	—		—		—		—	—		—		—
Taxes related to the net share settlement of equity awards	—	—		(9.3)		—		—	—		—		(9.3)
Share-based compensation expense	—	—		28.3		—		—	—		—		28.3


Cash dividends declared, $0.12 per common share	—	—		—		(146.5)		—	—		—		(146.5)

Balance at March 31, 2022	1,212,323,483	$	12.1	$	18,555.1	$	3,941.5	—	$	—	$	(2,061.0)	$	20,447.7

See Notes to Condensed Consolidated Financial Statements

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VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited; in millions)


	Three Months Ended
	March 31,
	2023		2022
Cash flows from operating activities:
Net earnings	$	224.7	$	399.2
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	730.0		736.0
Share-based compensation expense	42.6		28.3
Deferred income tax benefit	(26.7)		(52.8)
Gain from equity method investments	—		(0.1)
Other non-cash items	29.6		37.8
Litigation settlements and other contingencies, net	2.4		5.2
Changes in operating assets and liabilities:
Accounts receivable	215.0		(115.5)
Inventories	(151.1)		(69.1)
Accounts payable	183.4		(30.2)
Income taxes	(53.9)		67.0
Other operating assets and liabilities, net	(224.8)		132.7
Net cash provided by operating activities	971.2		1,138.5
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired	(667.7)		—
Capital expenditures	(47.8)		(64.5)
Purchase of marketable securities	(9.0)		(8.6)
Proceeds from the sale of marketable securities	9.0		8.5
Payments for product rights and other, net	(34.7)		(7.4)
Proceeds from the sale of assets	0.7		5.1
Net cash used in investing activities	(749.5)		(66.9)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	—		0.1
Payments of long-term debt	(750.1)		(0.1)
Purchase of common stock	(250.0)		—
Change in short-term borrowings, net	204.6		(837.9)
Taxes paid related to net share settlement of equity awards	(30.0)		(9.9)
Contingent consideration payments	(8.4)		(15.5)
Payments of financing fees	—		(0.4)
Cash dividends paid	(143.8)		(145.1)
Non-contingent payments for product rights	(9.7)		—
Issuance of common stock	0.9		—
Other items, net	11.8		(0.2)
Net cash used in financing activities	(974.7)		(1,009.0)
Effect on cash of changes in exchange rates	1.2		(11.4)
Net (decrease) increase in cash, cash equivalents and restricted cash	(751.8)		51.2
Cash, cash equivalents and restricted cash — beginning of period	1,262.5		706.2
Cash, cash equivalents and restricted cash — end of period	$	510.7	$	757.4

See Notes to Condensed Consolidated Financial Statements

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.General

The accompanying unaudited condensed consolidated financial statements (“interim financial statements”) of Viatris Inc. and subsidiaries were prepared in accordance with U.S. GAAP and the rules and regulations of the SEC for reporting on Form 10-Q; therefore, as permitted under these rules, certain footnotes and other financial information included in audited financial statements were condensed or omitted. The interim financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the interim results of operations, comprehensive earnings, financial position, equity and cash flows for the periods presented.

These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Viatris’ 2022 Form 10-K. The December 31, 2022 condensed consolidated balance sheet was derived from audited financial statements.

The interim results of operations, comprehensive earnings and cash flows for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.

2.Revenue Recognition and Accounts Receivable

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 condensed 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).

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 condensed consolidated statements of operations.

The following table presents the Company’s net sales by product category for each of our reportable segments for the three months ended March 31, 2023 and 2022, respectively:


(In millions)	Three Months Ended March 31, 2023
Product Category	Developed Markets		Greater China		JANZ		Emerging Markets		Total
Brands	$	1,232.0	$	562.4	$	190.3	$	435.6	$	2,420.3
Complex Gx	129.9		—		6.1		0.1		136.1
Generics	808.5		2.2		145.8		206.2		1,162.7
Total	$	2,170.4	$	564.6	$	342.2	$	641.9	$	3,719.1

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


(In millions)	Three Months Ended March 31, 2022
Product Category	Developed Markets		Greater China		JANZ		Emerging Markets		Total
Brands	$	1,298.7	$	569.7	$	249.0	$	436.7	$	2,554.1
Complex Gx and Biosimilars	364.1		—		10.3		16.4		390.8
Generics	813.3		3.4		164.5		252.1		1,233.3
Total	$	2,476.1	$	573.1	$	423.8	$	705.2	$	4,178.2

____________

(a)Amounts for the three months ended March 31, 2023 include the unfavorable impact of foreign currency translations compared to the prior year period.

(b)Amounts for the three months ended March 31, 2022 include $164.8 million related to the biosimilars business which was subsequently contributed to Biocon Biologics in November 2022. The Company has not recognized the results of the biosimilars business in its consolidated financial statements subsequent to November 29, 2022.

The following table presents net sales on a consolidated basis for select key products for the three months ended March 31, 2023 and 2022:


	Three months ended March 31,
(In millions)	2023		2022

Select Key Global Products
Lipitor ®	$	417.9	$	440.1
Norvasc ®	202.7		207.8
Lyrica ®	144.3		171.7
Viagra ®	115.0		129.8
EpiPen® Auto-Injectors	95.8		88.8
Celebrex ®	88.8		85.2
Creon ®	72.7		74.7
Effexor ®	64.6		77.5
Zoloft ®	56.5		73.1
Xalabrands	46.7		53.0

Select Key Segment Products

Dymista ®	$	53.2	$	44.0
Yupelri ®	47.0		43.7
Xanax ®	39.7		40.0
Amitiza ®	36.6		41.8

____________

(a)The Company does not disclose net sales for any products considered competitively sensitive.

(b)Products disclosed may change in future periods, including as a result of seasonality, competition or new product launches.

(c)Amounts for the three months ended March 31, 2023 include the unfavorable impact of foreign currency translations compared to the prior year period.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

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 three months ended March 31, 2023 and 2022, respectively:


	Three Months Ended
	March 31,
(In millions)		2023		2022
Gross sales		$	6,273.0	$	7,198.3
Gross to net adjustments:
Chargebacks		(1,350.7)		(1,584.2)
Rebates, promotional programs and other sales allowances		(992.2)		(1,205.9)
Returns		(50.4)		(82.6)
Governmental rebate programs		(160.6)		(147.4)
Total gross to net adjustments		$	(2,553.9)	$	(3,020.1)
Net sales		$	3,719.1	$	4,178.2

No significant revisions were made to the methodology used in determining these provisions or the nature of the provisions during the three months ended March 31, 2023. Such allowances were comprised of the following at March 31, 2023 and December 31, 2022, respectively:


(In millions)	March 31, 2023		December 31, 2022
Accounts receivable, net	$	1,739.9	$	1,798.7
Other current liabilities	851.5		888.8
Total	$	2,591.4	$	2,687.5

Accounts receivable, net was comprised of the following at March 31, 2023 and December 31, 2022, respectively:


(In millions)	March 31, 2023		December 31, 2022
Trade receivables, net	$	3,021.9	$	3,243.8
Other receivables	475.6		570.7
Accounts receivable, net	$	3,497.5	$	3,814.5

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 $76.3 million and $34.7 million of accounts receivable as of March 31, 2023 and December 31, 2022, respectively, under these factoring arrangements.

3.Recent Accounting Pronouncements

Adoption of New Accounting Standards

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 adoption of ASU 2022-04 did not affect the Company’s financial condition, results of operations or cash flows as the guidance only requires additional disclosures. We adopted this ASU effective January 1, 2023.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

The Company has certain voluntary supply chain finance programs with financial intermediaries which provide participating suppliers the option to be paid by the intermediary earlier than the original invoice due date. The Company’s responsibility is limited to making payments on the terms originally negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date. The range of payment terms the Company negotiates with suppliers are consistent, regardless of whether a supplier participates in a supply chain finance program. The total amounts due to financial intermediaries to settle supplier invoices under supply chain finance programs as of March 31, 2023 and December 31, 2022 were $55.5 million and $33.4 million, respectively. These amounts are included within Accounts payable in the condensed consolidated balance sheets.

There were no other significant changes in new accounting standards from those disclosed in Viatris’ 2022 Form 10-K. Refer to Viatris’ 2022 Form 10-K for additional information.

4.Acquisitions and Other Transactions

Oyster Point Acquisition

During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $427.4 million in cash, which included $11 per share paid to Oyster Point stockholders through a tender offer, payment for vested share-based awards, and the repayment of 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. Oyster Point did not achieve the metrics that would have triggered a contingent payment and the contingent value rights have expired. Oyster Point is focused on the discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases.

Vested share-based awards to acquire Oyster Point common stock that were outstanding immediately prior to the closing of the acquisition were cancelled in exchange for the right to receive an amount in cash based upon a formula contained within the merger agreement. The unvested share-based awards were converted into Viatris share-based awards based upon a formula contained within the merger agreement.

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 were recorded at their respective estimated fair values at the acquisition date. During the three months ended March 31, 2023, the Company incurred acquisition related costs of approximately $18.3 million, which were recorded primarily in SG&A in the condensed consolidated statement of operations.

The U.S. GAAP purchase price was $392.7 million, net of cash acquired. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed for Oyster Point is as follows:


(In millions)
Current assets (excluding inventories and net of cash acquired)	$	26.9
Inventories	37.8
Property, plant and equipment	1.4
Identified intangible assets	334.0
Goodwill	5.9
Deferred income tax benefit	17.7
Other assets	7.7
Total assets acquired	$	431.4
Current liabilities	37.0

Other noncurrent liabilities	1.7
Net assets acquired (net of $34.7 of cash acquired)	$	392.7

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary areas subject to change relate to the finalization of the valuation of intangible assets and income taxes.

The Company recorded a step-up in the fair value of inventory of approximately $29.3 million. During the three months ended March 31, 2023, the Company recorded amortization of the inventory step-up of approximately $7.3 million, which is included in Cost of sales in the condensed consolidated statement of operations.

The identified intangible assets of $334.0 million are comprised of product rights and licenses related to a commercial asset, Tyrvaya®, for the treatment of dry eye disease, that have an estimated useful life of 10 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 $5.9 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products to be developed in the future. All of the goodwill was assigned to the Developed Markets segment. None of the goodwill recognized in this transaction is currently expected to be deductible for income tax purposes. The operating results of Oyster Point have been included in the Company’s condensed consolidated statements of operations since the acquisition date. The total revenues of Oyster Point for the period from the acquisition date to March 31, 2023, were $6.3 million and net loss, net of tax, was approximately $49.3 million. The net loss for the period includes the effect of the purchase accounting adjustments and acquisition related costs.

The following table presents supplemental unaudited pro forma information for the acquisition, as if it had occurred on January 1, 2022. The unaudited pro forma results reflect certain adjustments related to past operating performance and acquisition accounting adjustments, such as increased 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 acquisition. 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.


	Three Months Ended		Three Months Ended
(Unaudited, in millions, except per share amounts)	March 31, 2023		March 31, 2022
Total revenues	$	3,729.1	$	4,194.4
Net earnings	$	260.5	$	337.0
Earnings per share:
Basic	$	0.22	$	0.28
Diluted	$	0.22	$	0.28
Weighted average shares outstanding:
Basic	1,202.5		1,210.5
Diluted	1,205.6		1,213.1

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 privately-owned research company with a complementary portfolio of ophthalmology therapies under development, for consideration of $281 million. The Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 under which the Company obtained rights with respect to acquiring certain pharmaceutical products and had also acquired shares representing approximately 13.5% equity interest in Famy Life Sciences for $25.0 million at December 31, 2020. The investment was accounted for in accordance with ASC 321, Investments - Equity Securities.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023. The Company recognized 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 was recorded as a component of Other (income) expense, net in the condensed consolidated statement of operations.

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 were recorded at their respective estimated fair values at the acquisition date. The U.S. GAAP purchase price allocated to the transaction was $325.0 million, which consisted of $281 million of cash consideration paid for the remaining equity shares and $43.9 million for the fair value of the pre-existing 13.5% equity interest. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed for Famy Life Sciences is as follows:


(In millions)

IPR&D	$	290.0
Goodwill	89.3

Total assets acquired	$	379.3
Current liabilities	2.2
Deferred tax liabilities	52.1
Net assets acquired (net of $0.2 of cash acquired)	$	325.0

The amount allocated to IPR&D represents an estimate of the fair value of purchased in-process technology for research projects that, as of the closing date of the acquisition, had not reached technological feasibility and had no alternative future use. The fair value of IPR&D of $290.0 million was based on the excess earnings method, which utilizes forecasts of expected cash inflows (including estimates for ongoing costs) and other contributory charges. A discount rate of 23.9% was utilized to discount net cash inflows to present values. IPR&D is accounted for as an indefinite-lived intangible asset and will be subject to impairment testing until completion or abandonment of the projects. Upon successful completion and launch of each product, the Company will make a determination of the estimated useful life of the individual asset. The acquired IPR&D projects are in various stages of completion and the estimated costs to complete these projects total approximately $120 million, which are expected to be incurred through 2024. There are risks and uncertainties associated with the timely and successful completion of the projects included in IPR&D, and no assurances can be given that the underlying assumptions used to estimate the fair value of IPR&D will not change or the timely completion of each project to commercial success will occur.

The goodwill of $89.3 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products to be developed in the future. All of the goodwill was assigned to the Developed Markets segment. None of the goodwill recognized in this transaction is currently expected to be deductible for income tax purposes. The acquisition did not have a material impact on the Company’s results of operations since the acquisition date or on a pro forma basis for the three months ended March 31, 2023 and 2022.

Ophthalmology is one of the key therapeutic areas of focus that the Company announced in February 2022 when it announced plans for certain strategic actions. With the combination of Viatris' global commercial footprint, R&D and regulatory capabilities and supply chain, along with Oyster Point's deep knowledge of the ophthalmology space from a clinical, medical, regulatory and commercial perspective—including Tyrvaya®—and Famy Life Sciences' Phase III-ready pipeline, the Company believes it has the foundation to create a leading global ophthalmology franchise, accelerating efforts to address the unmet needs of patients with ophthalmic disease and the eye care professionals who treat them.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

5.Divestitures

Biocon Biologics Transaction

On November 29, 2022, Viatris completed a transaction to contribute its biosimilars portfolio to Biocon Biologics. 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 8 Balance Sheet Components for additional information on assets and liabilities related to Biocon Biologics. The Company’s CCPS in Biocon Biologics are classified as equity securities, refer to Note 11 Financial Instruments and Risk Management for further discussion.

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. During the three months ended March 31, 2023, the Company recognized TSA income of approximately $45.7 million as a component of Other (Income) Expense, net.

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. Upon classification as held for sale, we recognized a total charge of $374.2 million during the three months ended December 31, 2022. 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. During the three months ended March 31, 2023, the Company recorded additional inventory reserves of $9.2 million and an intangible asset charge of $32.0 million to write down the disposal group to fair value, less cost to sell. As of March 31, 2023 and December 31, 2022, assets held for sale associated with the Upjohn Distributor Markets consisted of intangible assets of $198.3 million and $230.3 million, respectively. If these transactions are not completed, the distribution arrangements will expire in accordance with our agreement with Pfizer 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 $250 million.

6.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.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

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:


	Number of Shares Under Stock Awards	Weighted Average Exercise Price per Share
Outstanding at December 31, 2022	4,449,642	$	38.53
Granted	283,361	7.68
Exercised	(5,225)	5.27
Forfeited	(242,165)	$	31.30
Outstanding at March 31, 2023	4,485,613	$	37.01
Vested and expected to vest at March 31, 2023	4,452,279	$	37.20
Exercisable at March 31, 2023	4,185,316	$	38.98

As of March 31, 2023, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 4.4 years, 4.4 years and 4.0 years, respectively. Also, at March 31, 2023, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $0.6 million, $0.5 million, and $0.1 million, respectively.

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, 2022 to March 31, 2023 is presented below:


	Number of Restricted Stock Awards	Weighted Average Grant-Date Fair Value Per Share
Nonvested at December 31, 2022	27,271,926	$	11.81
Granted	19,043,465	11.17
Released	(7,743,490)