Even in case you do not acknowledge the title Viatris (VTRS 0.10%), you might have are available in very shut contact with this pharma firm. It sells all kinds of generic medication — resembling generic Zyrtec allergy tablets — in addition to branded medicines like ldl cholesterol drug Lipitor. The corporate fashioned just a few years in the past when Pfizer mixed its Upjohn enterprise with generic drug big Mylan.
With a stable portfolio of well-liked merchandise, we would count on earnings and the inventory value to climb. Nicely, earnings have superior. However the inventory has misplaced about 38% because it began buying and selling in November 2020.
Is Viatris a purchase now? Idiot.com contributors Adria Cimino and Keith Speights focus on the bull and bear instances.
The bull case
Adria Cimino: Generic drugmakers typically do not have the facility to drive great income development. Affected person populations are already established and have been taking the particular drug for years. And these firms do not wow the gang with innovation.
However this kind of firm can achieve by turning into extra environment friendly and by increasing its portfolio. And that is precisely what Viatris is doing.
The pharma firm is on the best way to reaching $1 billion in price synergies by the top of this 12 months. Viatris additionally has made tackling debt a giant precedence — and has paid down $6 billion because the begin of 2021. In the meantime, the corporate has a plan to spice up development, and issues are wanting shiny right here too. That is by means of supercharging its pipeline.
Viatris expects greater than $1 billion in annual peak gross sales from its advanced injectables pipeline by 2027. Potential merchandise embrace generic variations of well-liked medication resembling diabetes drug Ozempic and weight reduction drug Wegovy. The corporate additionally predicts greater than $1 billion in annual peak gross sales by 2028 from sure novel and complicated merchandise — one among these candidates features a potential biosimilar of wrinkle remedy, Botox.
And Viatris is also relying on its new eye care line to pump up income. It launched Tyrvaya for dry eye illness in 2021 — and this pipeline contains seven different candidates, with two in section 3 trials. This enterprise additionally has the potential so as to add greater than $1 billion in annual peak gross sales to Viatris’ prime line by 2028.
Lastly, it is essential to keep in mind that Viatris is also a dividend inventory. The corporate returned about $400 million to shareholders within the first quarter by means of dividends and share buybacks. This presents us two issues: first, revenue for merely holding the shares, and second, the share repurchases present Viatris is assured about its future — so we is likely to be too.
The bear case
Keith Speights: Viatris inventory is affordable. It presents a juicy dividend yield. What’s to not like? For one factor, the corporate’s lack of something resembling development.
Within the first quarter of 2023, Viatris reported that its complete web gross sales declined by almost 11%. No product class delivered larger gross sales. And but the corporate’s press launch known as these outcomes “sturdy” and mentioned they mirrored “sturdy operational efficiency.” That is a superb try at spinning, nevertheless it’s nonetheless akin to placing lipstick on a pig.
The fact is that the generic drug enterprise has been mediocre for a very long time. Certain, Viatris additionally markets branded medication. Nevertheless, these manufacturers are long-in-the-tooth merchandise resembling Lipitor and Lyrica that the corporate sells in creating markets, together with South Korea and Malaysia.
I am going to admit that Viatris might have some development alternatives on the best way. It hopes to be first to market with generics to blockbuster medication, together with Ozempic and Wegovy. Viatris additionally expects to launch a number of new medication over the subsequent few years.
The principle downside, although, is that it’s going to take some time for these merchandise to succeed in peak gross sales. Within the meantime, there are just too many different shares that might and will ship a lot stronger complete returns than Viatris will.
Bull or bear?
Each instances current good factors. Viatris makes an fascinating wager for its dividend, its rising portfolio, and low valuation. However there are various shares on the market that may give you stronger development prospects — and sure higher share efficiency down the street.
All of this implies buyers on the lookout for development could favor the bear case — and keep away from Viatris shares. However in case you’re a cautious investor procuring round for a brand new dividend inventory so as to add to your portfolio, chances are you’ll wish to contemplate this generic drug chief.
