Viatris Inc. (VTRS) Earnings Call Transcript & Summary

Great. Thanks, everybody, for joining. We are happy to kick off our RBC Capital Markets Healthcare Conference with, I guess, what is an extended fireside chat and really a long way in the making with Mylan. Today, we've got Executive Chairman, Robert Coury; and President, Rajiv Malik, both on the Board of Mylan and both really, I would say, set to take key roles at Viatris when the Upjohn deal closes, and that actually includes being on the Board of the new company as well. So I want to jump into things. But before I do, I'm going to pass it to Melissa for quick comments.

Great. Thanks, Randall, and good morning, everyone. Just wanted to remind you that during today's session, we'll be making forward-looking statements on a number of matters, including our financial guidance for 2020 and the proposed transaction pursuant to which Mylan will combine with Pfizer's Upjohn business in a reverse Morris trust transaction to create a new company that will be named Viatris. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. Please refer to our SEC filings for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. Thank you, Randall.

Okay. Robert, you and I have known each other a long time, more than 15 years, I think. And I mean, look, I've been critical at times of the stock and pretty vocal, but also vocal when I think the business is being underappreciated, and I think that now. So you announced this deal with Pfizer to combine with the Upjohn business last year. You had a long strategic review that preceded that. This is transformational market reaction. I would say it's been largely mixed based on the stock. Can you start by talking about what strategic options you guys looked at? And why in this environment this deal is the right one?

Well, thank you, Randall, and it certainly has been a long time. And I think the company has maturated tremendously from the first time I've met you to where we are today. And look, I think we -- when we launched a strategic review, there were a voluminous amount of options that we looked at. When we came across this particular opportunity, honestly, it was a no-brainer. And it was a no-brainer because we knew that this was the finale of the completion of what we set out to do strategically quite some time ago. And that is to build a one of a kind -- true one of a kind global platform. And I would say that the China component in creating and having critical mass in China. We had a presence in China, but it was nowhere near the kind of platform you would need in China in order to be successful. Upjohn gave us that opportunity. In addition to that, if you take a look at the Mylan stand-alone strategy, Randall, this really was an acceleration of everything we were already doing. And as I said on the conference call, this probably accelerated our own strategy by at least 3 to 5 years. And on top of that, it not only accelerated our strategy, but it really allowed us to answer a lot of the questions that shareholders and investors have had for us over the years, including the opportunity of a change in governance, a change in our complete business model, an opportunity to create -- I mean, we already had probably 1 of the strongest profiles in the specialty pharmaceutical sector. We now have even a stronger financial profile, I think, in a league that is, I think, a brand-new league that's being created right now between what we're doing, what Merck's doing by its spin-off. I do think we're creating a little bit of a new play here. So not only did we strengthen our balance sheet, not only did we double our EBITDA and cash flows, but it really allowed us to, once and for all, change the business model to a much more shareholder-friendly capital allocation and beginning with reinstituting the dividend. As you know, Mylan's pay dividends in its 60-year history for a long, long time. And it's when we started on the process that when we bought Merck that we discontinued the dividend. So we are extremely excited to reinstitute the dividend, committing at least 25% of our free cash flows. And we think that there's enough excess cash flows for us to continue to execute with a tremendous amount of opportunity. And so we're really excited to be able to deliver to our shareholders once and for all the value proposition, not just the creation of a true global platform that I think is set up for success for decades to come, on a more sustainable basis, but a real opportunity to really create total shareholder return through multiple expansion and return of capital to shareholders.

Rob, is there any way this deal doesn't close?

I don't see it. I just don't see it. I -- look, you have 2 equal organizations that are motivated for very different reasons to want to get this deal done. I really want to commend Albert and Frank for their direct involvement. I'm working very, very closely with them. And I -- look, when you got 2 parties that are really driven to get a deal done for -- again, for their own best interest reasons, then there's no reason why it's not going to get done. I even think that -- I think once we get through the shareholder vote, all we'll have left is the remaining regulatory approvals. And we are working diligently to be able to get that done. I think that the COVID situation was unfortunate. But I'll be honest with you, Randall. There are some silver linings in it. We certainly -- I mean, the regulatory agencies themselves, because people had to leave Washington, D.C., asked for extensions. Obviously, we cooperated with their extensions, but we also benefited from the extensions. I think we benefited in many ways. I think it allowed us to -- certainly allowed Rajiv, Michael and Sanjeev to continue to coalesce, develop a strong alliance and allegiance with 1 another as they get ready for day 1. And I do think even for people underneath them from an integration perspective. I do think I'm seeing and feeling a much higher quality integration as a result of the extra time.

So look, I like the deal. And I think it positions you guys well. There's 2 issues, I think, that the stock is struggling with, and both are shorter-term in nature. Number one is that roughly 57% of the interest is going to go to Pfizer shareholders and some or many of those could sell the stock. And number two, the 2021 outlook, there's still some debate. Just hitting on those, on the first point. Pfizer has indicated that it's likely to do a straight distribution. Is that your understanding at this point? And is there any other way to think about getting share -- those shares into the hands of investors who want to be long-term Mylan holders?

So I guess the way I would respond to that, I mean, obviously, you, I believe, are probably making reference to the distinction between a split-off and a spin-off. As you know, Pfizer did a split-off with Zoetis and a spin-off with Mylan. And if you really focus on both, what is split-off and when to use that appropriately versus a spin-off, I think the split-off with Zoetis from a Pfizer perspective, and again, I'm not running Pfizer, I certainly see the logic. I absolutely see the logic for a spin-off in the reverse Morris trust that we're doing here with Mylan. First of all, a couple of distinctions. One, Zoetis was purely in animal health. It's a little bit different kind of a business. And to give the shareholders the option on a split-off and to take a small portion of the company public first, let it trade for a year, and then, again, give the Pfizer shareholders when they did the option at a discount, whether they want to stay with Pfizer or go with Zoetis, again, I understand the logic. In our situation, the 2 businesses, although they're different from a risk profile, one doing research and development with novel drugs, the other one not -- from an R&D perspective, it's just a different risk profile in terms of what we're going after and what Pfizer will be concentrating on. But it's not that different when you look at the marketplace that we're all playing in and selling into. So I do think if you took a look at the shareholder overlap between a Pfizer shareholder and a Mylan shareholder, you'll be surprised. There are very few shareholders in Pfizer that don't own Mylan, already. So I don't -- it's hard for a person in my position to speak about a security or speak about a stock, our stock, especially. But I do think -- I'm not really shocked other than the overall general multiple that our profile should be given credence to. But let's put that aside. I think there are technical reasons why our stock is trading where our stock is trading. And I don't believe that they're fundamental. I do believe that from now to close, I think -- as I think about the various catalysts that have to happen, here's the way I compartmentalize it. First, we got to get to the close. That's the first thing. And you have to ask yourself if The Street believes that there's going to be a lot of overhang, and you can rest assure there's not as much as I think The Street thinks because you got to look at the shareholder base. There's probably 1 or 2 of Pfizer shareholders, 1 in particularly that we will absolutely be in front of. And I know that they've done work on our company, and I do think that we need to do a fantastic job to -- when they do receive the shares in Viatris, that I do think it can present a real opportunity for them. So all the other shareholders know our story. So I -- unless they're limited by a particular percentage of their portfolio, and they can't own anymore. I don't believe we're going to have that overhang. But nonetheless, if The Street feels like there's going to be that downward pressure then from a technical perspective, from an entry point, point of view, unless there's a huge upside catalyst from now to closing getting to closing is probably the next biggest catalyst. So our concentration is getting this transaction closed. Once the transaction closes -- I'm sorry?

No. I was just going to say I can fully agree with that. And then to your point, post acquisition, there's -- it's all about P&L.

Well, yes, I think once we close, I think it's all about management, Rajiv, Michael and Sanjeev coming forth and putting out what is that starting guidance. Directionally I've tried to help you guys as much as I possibly could. I'm not giving the official guidance, but that doesn't mean I can't share directionally where I think I'm seeing things. And I've tried to guide from that perspective without giving the official guidance. But what my concentration is going to be is that absolutely, the 2021 is a trough year, period. So I think once management comes out, Randall, and gives the investors a walk around the world, gives the investors an opportunity to see how they're thinking about the business, how they intend on reporting on the business and then also work with people like yourself and other investors in terms of modeling so that everyone is modeling the business the same way and tracking things the same way as we promised. And I think once then shareholders, the second catalyst is -- and once the Board of Directors immediately after the first full quarter of close, once we announce the reinstitution or the initiation of our dividend policy, I think, it's going to be another catalyst as people really appreciate the stable cash flows, the substantial stable cash flows that this new financial profile is going to bring to investors. And then I think the very last -- and by the way, Randall, after they give -- after they lay it out, I think that what people need to understand, and I just -- I think they really need to focus on, we have a very clear pathway on the first 3 to 4 years where there is a tremendous value in the assets that we're bringing together that we can create and drive value just out of the transformation work, just out of the $1 billion of synergies that we see that we can garner in the first 3 to 4 years. So I think there's -- it's a -- we put out a road map. So not only are we going to start with a strong financial profile and stable cash flows, but we have a very short-term -- near-term pathway to garner a tremendous amount of value out of the existing assets that we have, at least for the first 3 to 4 years. Then I think the very last responsibility that we have to The Street and with investors is to put out, as you always have asked the question, how -- where do we go from here? Okay, we got the first 3 to 4 years. What's going to be the next -- and what we intend on doing is giving you a 3 to 5 year CAGR, both revenue and EBITDA, and then talk to you a little bit about how we intend on returning back to growth. So I don't think the story is as difficult as you may think. And yes. So what's your next question?

Yes, look, I think you did a good job. Look, the biggest thing people want to know is what 2021 looks like and what you can grow off of that. And on the Q1 call, it seemed like you wanted to give color to take some of that concern out of the way. I mean we've been on 2021 pro forma from a revenue perspective, just over $18 billion and just over 7 -- around $7 billion in EBITDA. Those numbers have in our model changed. I know you're not giving official guidance until we get there. But it feels to me that there's more of a consensus building around those numbers, which should be taking some of the uncertainty or fear of that guide out of the stock. And it feels like we're getting closer to that point. But that would be #1, what are your thoughts there? And #2, in terms of the growth off of this business, is 2021 a trough year under every scenario that you see at this point? Because it feels to me there's still some debate, whether it's Japan, Lyrica, this or that, there could be some moving parts, but it sounds like you're saying under every scenario you see right now, 2021 is the trough.

Well, there is nothing more important from my perspective, nothing more important then to take the extreme variability that we've been suffering over, especially in the generic side of the business in North America over the last few years. I think that volatility that we experienced with the structural changes in North America and I think that a lot of the delays and other type of issues that we dealt with, I think, took a lot of the air out of the momentum that we had going for us. I think the last couple of -- they were very painful. I don't know what more to tell you. I listened and studied very, very carefully. Not often, do you have an opportunity to reset. And I know exactly what investors and shareholders want. They want stability. They want to know that, that what you put forth and what you say and what you do are aligned. Now it's -- we're going to have to demonstrate that through our execution. I think the very most important thing we need to focus on, what is that starting point? And can we get investors comfortable when we walk to them around the globe, that we do a SWOT analysis. And we identify for them all the things that they can't see. We need to look around corners for them. We need to bring forth very quickly, transparently, very directly all the risk profile that we could at least see that's in front of us, identify it. And even if we have to say, look, in 2021 -- if we get the benefit of Lyrica in 2021, how much is that benefit? Is it really going to last forever? Is it really appropriate to include that in the trough year? Just by way of an example, Randall, I think we need to be very transparent what the definition of that trough means. And my expectation is trough means we have taken everything into consideration that we can identify, that we can point shareholders to, and that will be our starting point, and that's where the growth has to come from. Now remember, Randall, I do see this in 2 steps. I don't believe, if our shareholders had the confidence -- forget about growth for just 1 second, just a second. If our shareholders, once we close this transaction, and we let the first 2 or 3 days settle out on whatever trades are going to happen at that moment, I think the real opportunity for shareholder -- and once we reinstitute that dividend and have -- demonstrate a much more friendly -- shareholder-friendly capital allocation policy, and we are committed to that. We are absolutely committed to that. And I say starting off with at least 25%. I hope over time, obviously, we have -- we would very, very much want to enhance that as we go along. Because that return of capital is going to be a big part of our total shareholder return as we think about the company medium and longer term. But I think if shareholders can really get comfortable, forget about growth for just a second, of the very strong, stable cash flows that we can generate and the -- and not have the type of variability that they had to experience in the past. And if we take all that noise out and get them comfortable where that stable cash flow is with the return, with the friendly shareholder capital allocation, I think that in itself will deserve its own relook. And then once they get stable there, once we then put on the table, and let me just tell you, this -- I can't wait until Michael, Sanjeev and Rajiv speak to you about Viatris' new global health care gateway. So in the short run, in the first 3 to 4 years, while we extract the significant value within the assets that we've accumulated alone, you can fully expect that we're going to continue to load up that global health care gateway, first, being powered by Viatris and the $3 billion of opportunity in our own pipeline and execute -- and a lot of that has to do with some of the partner-of-choice opportunities that we've had to secure along the way. But we haven't even scratched the surface. And what that opportunity can mean that I think is going to play a huge part in our growth going forward. And that's because what Mylan has done, it's been a lot less in the business development side and a lot more in the major M&A side. Now that the major M&A transactional type of work is complete, and we will take our successes in the partnerships that we've developed with other biotech and pharma companies, and we're going to put that on steroids. Because we are developing a sweet spot, an unmet need that exist in the global market today, totally an unmet need, and there's not many companies who can do this. One, they don't have the capacity. Two, they just -- their organizations aren't built to deal with this. But if you think about these mid- to small biotech, regional and local companies who don't really have a lot of options, their opportunities are not large enough for big pharma, and it's too difficult from a local and a regional executional point of view to optimize their value. But by partnering with Viatris and have an access to power up their own assets through our global health care gateway, it's a win-win for everybody. Because what you'll find that we have in place that these regional and local companies need our extraordinary strong global regulatory capabilities, strong global legal capabilities, strong global compliance capabilities and strong global commercial capabilities and strong, strong global supply channels capabilities, and we have it all. And again, that's why I believe, first things first, let's get the transaction close. Let's demonstrate the strong -- the new profile that we have. We already had a strong 1 before. This would -- this is really going to demonstrate how really strong our financial profile is. Secondly, let's reinstitute the friendly shareholder capital policies, get that dividend going. And then management will come out and do its things by telling you where the trough is. We already put out a road map for them to execute. There's enough value for us over the next 3 to 4 years to excrete out of the assets we already have. We launched a global health care gateway, and we power it up with our own assets first. And we begin to add to that global health care gateway for us to return to growth by the partnerships and joint ventures we intend on dealing with other biotech companies.

I want to spend some time on business development and M&A. But before that, I want to jump to Rajiv, just on the post-closed outlook to chime in on some of Robert's comments. Rajiv, I mean, you've had more time, I think, perhaps just to coalesce, right? But you have. You had more time to plan this integration. You've had more time to think about the deals closing later. You're calling for $1 billion in cost savings over 4 years, so roughly $250 million a year. That's about 3.5% growth just from cost savings alone. Why couldn't we see more of that upfront, given that you've had more time to prepare?

Look, Randall, thank you, first of all, for this opportunity to respond. And I'll give you some context first just to build upon also what Robert said, the growth from the trough year and then also address your -- this question. And you would agree that, Randall, that we are not doing anything new over here. Over the last few years, as you would agree that we have created a strong, diversified and a derisked platform where no one has gotten an appreciation of a number of opportunities in front of us, including what you just mentioned, the cost synergies that can help us withstand anything and everything that this industry is going through and can go through. Meaning there are a number of levers we can use. And this model -- our business model doesn't rely on 1 market or 1 product. And when we bring in Upjohn, and if you ask me, where we have been spending time, we have been spending time to understand and appreciate these 2 businesses on the post side, that what we can even do more as I work with Michael and the team, and we take all into this consideration when we plan for '21 and beyond. The good news is that Upjohn portfolio is something we are familiar with and it would be a different story if it was a new type of the business, and we needed to learn. So let's just start from a little bit more granularity to what Robert said, the growth over the next 4 years. I think the 1 bucket is going to be the global key brands. And I just want to give you a little appreciation of the business transformation work which we have been doing, which should not be confused with the cost optimization. Actually, it's basically getting you ready to do your business more effectively, even if you are focusing on certain brands. It identifies the potential for you to grow in certain channels in the market and helps you focus on that. It helps you manage the erosion of your business. So that's where the negative contribution margin products, which basically dilutes your margins. We are trying to address through rationalizing those products at an appropriate time. And then, more importantly, focusing on some of the tail end brands because that's the one part of our business, which is a cash flow machine, and we need to manage it more effectively. And then executing on -- the second bucket is executing the pipeline, which is more about biosimilars over the next few years, the complex products, the complex injectables, certain transdermal products, drug device, 505(b)(2)s, and this is what our immediate pipeline is working up. Now we have thoroughly studied and appreciated the cost structure of these 2 companies. And if you -- let's just go back. Upjohn was in the process of being stood up. So there's a bucket of standing up a company which is more of a cash wider. We are working today very closely with Pfizer to understand what sort of TSA would be required for what period of time. Once we have a better appreciation of that and how to get off the TSA, that will be a second contributor to the synergies. And the dollars are definite. It's the timing we are trying to put our arms around, that how much will be the year 1 and year 2 and where it's going to come from. We don't want cost. You can say our first and foremost target is $1 billion. We want to put our arms around that. And if there is more, you can rest assured we will be going after that. But we just don't want to do that -- the cost of the growth with this platform has because the emerging markets clusters, whether it's Brazil and Mexico, which is about $20 billion, $30 billion market, whether it's the Asian countries, which is another cluster of $20 billion market and whether it's Middle East, which is another cluster of $20 billion pharma market, I think we are now well set with the critical mass from the retail point of view, from the institutional business point of view, dropping our very rich portfolio into this market and then thinking about going beyond the pill as we get -- put our heads together.

And I guess, Rajiv, the only thing, Randall, I would add to that. Although we have more time and time, time by itself, that doesn't change the legal or regulatory limitations that we have between signing and closing. So even though we have more time to assess, we still can't get exactly inside there because of the legal and regulatory requirements and the limitations that still surround that. Now once we close, and then Michael, Rajiv and Sanjeev will have a little bit more time to affirm and shore up and really lay out the math, which I'm sure they're going to come forth with as part of their guidance on the synergies. And like Rajiv said, there could be more opportunity. And I'm -- look, in our prior transactions, I will tell you this. We've met or exceeded, at least on the synergy side, almost every transaction that we've done. So it's not -- we have quite a bit of experience, I will tell you that, in terms of identifying what potential synergies there might be and then executing and delivering on those synergies. I don't see this really any different. I do agree with Rajiv. The big distinction here is because Pfizer was standing up Upjohn first, and that's still needed to get done. Once it stood up, then we need to look at what does that stand up look like when you integrate it with Mylan to really fine-tune where that value proposition. And that's like -- as Rajiv mentioned, this is what we're working very closely with Pfizer on so that we are appropriately accounting for everything, Randall.

That's fair enough. And look, the pipeline -- there's a lot of pipeline coming from the Mylan side. And you guys have spent years working on it, and you're starting to see it deliver to be fair. Now the question is how much ROI can you get from these products launching into markets where there's a lot of kind of retail rebating and so on and so forth that's pushing down some of the -- I guess, the penetration rate you would have originally thought. But I guess the question is this. Biosimilars are going to be a big part of that $3 billion -- Rajiv, 2-part question. What are the big drivers of that $3 billion overall? And then from a biosimilar perspective, as you think about -- and I'll point to Lantus, right? As you -- you're looking for an interchangeable launch in the back half, and that would be a big deal. How are you thinking about the launch curves for interchangeable biosimilars versus what we've seen so far?

So let me give you first question about the components of this $3 billion launches. And as you recall, Randall, as you acknowledge, we started moving up the value chain from science, from the commodity generics to the complex, hard to make products like Copaxone or like generic Advair and many more of those sort of in the pipeline. And now this pipeline is delivering. So over the -- as you would expect, over this period, there are 3 buckets of the growth drivers. One continues to be the biosimilar. And when we talk about the biosimilar, we talk from the global franchise point of view. That's one. Second bucket is the -- some other hard to make products, and that category is heavily loaded towards complex injectables, which are really now, as a scientist, I can tell you, we've been working it for years. It involve clinical trials, a lot more specialty techniques to manufacture those. So that's another area. But that will be, again, a sticky business. And the third is the drug device, the combos, the 505(b)(2) opportunities and continue to find the ones we have disclosed like Copaxone once a month and adding on those. And then the last bucket is going up the value chain, like NCEs. Like we recently launched Yupelri. I cannot be more pleased with the performance Yupelri has shown in the first year of the launch, and it's very well on the trajectory of becoming and exceeding our expectations with the peak in the third or fourth year. So that's the bucket of the growth drivers. And on the biosimilars, I would say, look, Randall, we have always viewed this as an investment for the long-term and 1 made globally across many territories. As we invested first in our pipeline and successfully demonstrated the science behind these products, we know the next important step is to now expand and focus on commercialization strategy. And this Upjohn -- coming together Upjohn business could not have happened at a more appropriate time because it's going to further shore our strength in that area. We are in the beginning stages of this journey in most of the developed markets around the world. But you could believe like we have delivered on the science coming from the back of the past, we have delivered on it. You would expect us to -- and you should not have any lesser expectation from us to deliver on this portfolio. Now third -- on the interchangeable. First of all, I think we are pleased that the science, which we had put forward with FDA over the review process over the last 2 years to put a stake for interchangeability, although we didn't get that 505(b)(2) to 505(j) status because FDA never wanted to have a biosimilar like product into 505(j). But they adopted our science to put a guidance out there. So all the science to support interchangeability is in the docket. Now it's a time whether we administratively will get it along with the approval or maybe a couple of months within the approval. So as you already know, the market on insulin is more being managed by the peers. At the moment, there is no interchangeable insulin. We believe this will be definitely a unique selling point. We will have -- we will be the first company to bring in both vials as well as the pen. So we are pretty optimistic about this launch. But I'm not saying this is not going to be a 90%, 60% conversion overnight like you have seen. It's going to be a slower ramp. It's going to be sticky, and it's going to be -- it's what -- how we have modeled around it, Randall.

That's helpful. A couple of product questions. And I want to go back to growth strategy and business development. Number one, on your glatiramer acetate once-monthly, this is the once-monthly Copaxone that you -- I think you entered Phase III last October. Where are you on timing? And Rajiv, how do you think about this product as it was to come to market? Because obviously, Copaxone is a huge global product. You got to have a lot of familiarity with it.

So first of all, from a science perspective, I would say, very happy with the execution. We are well on our way on -- of the Phase III clinical trials. We have enrolled 156 patients across maybe 54 different locations. And where we see ourselves as we go on, I think this will be a more of 23 product -- 23 launch because this is a long clinical trial, and it's going to take us that much time to just bring it to the market. But from the potential point of view, actually, Randall, I'm very excited about this product. The initial review with the HCPs, the KOLs, this product has been getting is very exciting in the terms that imagine these multi -- the MS patients. There's not even a product today, which is once a month across the whole therapy area. So I'm not even seeing that this is going to target that of just Copaxone as a molecule, that market. I think it can go beyond that. And that's where we are working with this partner company, Mapi, very actively now with the medical professionals, with all the professionals to see how can we get the maximum out of this very nicely teed up opportunity.

And then you had a deadline of April 30 to decide whether or not you want to move forward on your partnership with Revance on a BOTOX biosimilar. That was extended to May 31. Why wouldn't you pursue that if the FDA has offered a path forward? I guess my question is why do you need the extension to think about this? Isn't it fairly clear if there's a path forward it could make economic sense?

So I think that first time, this question came that why -- when we signed the deal, why don't we just get into this development. And Randall, nobody will better appreciate the complexity of this molecule being the first. We have always been sometimes being the first, and you have to go through the hoops, which many other companies don't have to go through. But we have to go through this with the FDA to get clarity on the pathway. That took us some time. Once we got the clarity on the path, FDA was very clear. You have a path but they wanted to -- they laid out 7 or 8 expectations. We are pretty good on 5. We wanted to get clarity on another 3. And the structure of the deal sometimes, Randall, you would appreciate, will come in the way when it's milestone-based, that we wanted to get it behind us, and we didn't want to go too far and then realize we don't have a piece of the science which FDA is looking for. This last 6, 8 months had given us that period. Now this was supposed to end on March 30, and we were supposed to have a month to review. Unfortunately, it just came on April 29 or something like that. And both the companies found it was fair for us to give 1 month of time, sit together, revisit the whole business case and the science case and then make that option. And that's what we had given ourselves, just 4 weeks, Randall.

Got it. My last product question is, is Restasis a 2020 opportunity? I feel like every year, we ask if it's an opportunity for this year. But I'm still getting questions on where the FDA is on this. I think you've previously said, you've done everything you think you need to do and are waiting. What's the latest on Restasis?

Restasis is next name is the waiting maybe because we have been -- it's in standstill. We have been waiting. Our action date was last February. We got some additional inquiries in July, which we immediately responded. After that, we have been having biweekly one-to-one call with FDA. I haven't been the direct interaction with -- at the director's level. But unfortunately, we have not heard anything, and we don't know what is the FDA looking for. We continue to explore the science but we just cannot move further until we hear what are the FDA's concerns still, if any.

Got it. Robert, if we think back to 2011, 2012, and I remember this period quite well because there's a lot of austerity measures coming out of Europe that were impacting the generic industry. And this question is a broader pharma industry. It's not a Mylan question. I think you guys had some headwinds from France and some other regions. As we think about the next couple of years, have you guys put thought into government pay markets outside the U.S.? And what type of impact that you might see and how to get in front of some of that?

I'm not sure I quite understand, Randall. If you could help me a little bit. I don't see -- yes, sure.

Yes. Let me be more specific. As we think about coming out of the pandemic with fiscal pressures globally, on the one hand, your generic business is a solution, and we've seen that argument for in the past, right, increased market share in Europe don't push down pricing. But as you think about the overall portfolio, the new Viatris portfolio, how do you think about pricing for the next couple of years? I mean, what we've seen historically coming out of the financial crisis is and we saw this on the brand side, right, is that there's a lag. It takes time for foreign governments to get measures through. And we saw -- so in 1, 2, 3 years, and we saw some pricing pressures. Your portfolio seems a little bit more to me better positioned than others. But how do you think about the pricing outlook for the next couple of years?

Specifically in Europe?

Yes, Europe and elsewhere. I mean, do you guys see much change coming from the pricing front?

Look, I think there are different -- I have different answers, I think, for different regions. But let's just say that the 2 bookends, especially now in today's environment. The 1 bookend is our business is struck with a continuation of downward pressure on pricing just as a whole. But then, two, I do think, as you mentioned, we've already gone through that cycle in Europe, where how much low can you go to go before you start not really getting the medicines and start creating shortages? And then when you put the pandemic scenario on top of it, in my opinion, I think the other bookend is a renewed appreciation of the ability to have access to medications and have access on a timely basis. So I actually think that this pandemic has bought -- actually brought a new appreciation for what is it that we do. And we could not -- as you mentioned, we could not be more better situated by having 1 of the broadest product portfolios to serve these governments, these countries and the patient population. So it really is a balance. And I just want to say this that what we're trying to do to balance out the natural inherited efforts of constantly around the globe for reduction of prices is a lot of the work that we're doing and the transformational work that we keep talking about, I don't want people to mix up transformational work as cost-cutting because it's just not. It really is about looking at every single SKU, looking at economic profit, making sure that every aspect of our business is a contributor to some degree. I think it's a completely different exercise than, for example, the synergies that we're going to be going after. Some are direct cost savings. Some will come with a more efficient cost of goods just because of the volume and the buying power. But this transformation work, I think that we set underway long before we did the Upjohn, is really the very next natural step that certainly our company needed to go through in order to balance out the pricing versus the importance of our volumes and the quality of the medications that we need to have within the portfolio to serve in all these markets.

If we jump to business development, we have 10 minutes left, we probably could have 2 hours on this topic. But 1 of the things that I think has been seen in the last couple of years in the specialty pharma space is that it's getting harder to sell single product -- harder for single product companies to survive. Cost structures are going up. And there's pressure -- there needs to be therapeutic consolidation. To me, it's clear, and we've been highlighting this focusing on this. And the opportunity for a Viatris to me is to come along and say, "Hey, look, we're going to target a couple of these therapeutic areas. We're going to consolidate and drive significant returns for not a lot of money." And you've talked about looking to focus on 1 or 2 therapeutic categories coming out of this. What do you mean by that? And is that the strategy, focus on a couple of areas and then look to drive partnerships and acquisitions and build out traditional therapeutic footprints that we've seen historically?

So let me -- I mean, that's -- again, that's a mouthful, but you know I've shared your view on this for quite some time. And I think right now is the prime time to once again address this. You've been saying this for quite some time. And directionally, the market continues to move exactly to what you've envisioned. So let me -- because I'm living it on the other side. Let me tell you exactly. I want you to separate the work that I'm extremely excited for Michael to lead, with Rajiv when it comes to determining what Viatris' focus is going to be, at what therapeutic categories that we're going to concentrate on. I want to separate that because that is going to be the internal focus by looking at the core competencies of the both assets that we're bringing together, where our strengths, where our weakness is, where we think we have efficiencies, where do we think we have a good cost structure, where we don't and then determine our scientific capabilities, where we were strong, where we're not. They will do this analysis. It's a very important project. And I think Michael and his background is perfect to lead us with Rajiv and Rajiv's scientific capabilities and now market knowledge around the globe. There's no 2 better people that are going to lead this effort to present to our Board what they feel that Viatris is -- I'll say it 2, maybe 3 therapeutic categories that we will focus on internally when it comes to our own capital allocation for investments, okay? You can't be everything to everybody. But that is only a small part of the opportunity that Viatris has because of what we put in place globally. So that's separate. That's separate. And we'll come forth with what that is. The bigger one, I think, even what I'm most excited about is your claim. And by the way, what we've seen over the years, the number of small biotech companies that have started up, the number and a great deal of them have come from big pharma, their R&D, a lot of venture money, a lot of private equity money. Capital has absolutely fallen because the IRR thresholds that investors have been receiving by investing in these small start-ups that concentrate on these certain molecules have been -- have proven themselves out. So I don't see this going away. I see more of it because there's a lot of opportunity for everybody. But what you hit the nail on the head is and where I see the opportunity for efficiencies for a win-win for everybody is that, okay, that's great. You demonstrated your science. That's great. You've anticipated, say, a peak market of -- you thought you had a $1 billion opportunity. It turns out that your peak sales, when you do the research, at best is going to be about $500 million, not the $1 billion. That may be too small for big pharma. Now what do I do? Do I go to specialty or smaller type of local companies? I'll never be able to yield what I think I deserve out of this by -- I mean, my only other option is to build my own infrastructure. Well, that could just put me out of business. There is another option, and that's Viatris. If you take a look at our global health care gateway, we are set up not just to concentrate on our own therapeutic areas because of our own in-house capabilities, but we are set up to partner up and to receive many other opportunities to add to our portfolio that may even be outside of the therapeutic categories we internally focus on because we have a global health care gateway and a throughput to offer other companies an opportunity to leverage our existing infrastructure. I also agree with you on companies that already have existing infrastructures that just can't and they won't make it longer term. So rather than fold up, here's an opportunity to synergize the infrastructure. Why do you need all these infrastructures and all these areas when you can leverage 1 another? If you can create the right partnerships, if you take a look at the -- if we can demonstrate the people that we could increase their top line by geographical expansion and increase their bottom line by cost avoidance by them not happen to carry the infrastructure because they can leverage ours. And they can make not just to say, but even more on the bottom line, while we are benefiting as well, it's a win, win, win for everybody. The market is dying. This market is thirsty, and we've seen this a long time ago, Randall. We've seen this opportunity. That's why we've created the infrastructure that we created because you have to keep feeding this beast, and we are now set up to really take on and really go out there. When we put in place this Viatris' global health care gateway, we will have teams all over the world that would be offering those to jump on this gateway to do exactly what you said. So I'm totally in line with you, and it will be a big part of Mylan's growth story as we go forward.

No. I think executing on those deals will go a long way to helping investors understand the strategy. I mean the challenge for some of those is convincing the management teams and Boards that they have -- there's a better opportunity with the product or products in a bigger platform. Let me, Rob, ask you this. So a lot of investors ask me, look, I hear them talking about this bolt-on strategy, this therapeutic footprint build. It's interesting. Obviously, we need to see it. But what if -- are they going to go and do a big transaction? And if something came available, would they potentially kind of pivot and after -- maybe after they got down to 2.5x levered by the end of 2021, could we see another big deal? For example, if a big consumer unit became available, what's your response to that question? Because I'm getting it a lot from investors.

Well, I'm kind of glad you asked that question because you can't change a business model and say that you've changed your business model, and then go do something that's completely diametrically opposed to what that change of business model is. I got to tell you. What has now taken precedence as we become Viatris is literally the -- it's all about the shareholder at this juncture. It's all about the investors. It's all about the return of capital. It's all about financial discipline. It's all about -- it's not -- just because you want something unless it can demonstrate true financial benefit for our shareholders immediately, not wait, not trust me, not a show me. I will tell you that our entire focus will be on this total shareholder return, our entire focus is going to be on shareholder-friendly capital allocation and our entire focus on all disciplines around the competition of our capital is to maximize return to our investors and shareholders. I am extraordinarily graciously thankful for all those shareholders who stuck by us long-term, while we were building this global infrastructure. Yes, it was painful at times. But what we now have in place, when you talk about ESG and you talk about sustainability, Mylan has -- we have been talking about sustainability before ESG was even known to be around. We have built -- we truly are the preemptive example -- we are truly the example of what sustainability is because we truly built a platform that will now deliver to our investors and shareholders, substantial value, not just over the short-term, but over the medium and long-term. We are not a company that ever was into the fat or the financial engineering or some of the other things. That just wasn't the company that we were. We had a mission. I believe this transaction completes the mission. It's now time to change the business model and to focus, focus, focus on optimizing the return to all the shareholders who stuck with us, and it's now time to return the benefit to them by optimizing the value. And I don't know how to be any more crystal clear than that. And I'm prepared to be held accountable to what I'm telling you because I don't -- as I often say, I don't just say things. It's -- we are committed. And I want you to know this, by the way. From a management point of view and from a Board of Directors, we are committed and aligned. There is no -- when I say there's a unanimous commitment to what I just told you, it's unanimous. That's our focus. And I think shareholders will see that as we come in the coming months.

Okay, Robert, we're 3 minutes over. So maybe in the last 1 minute, I just want to finish with this question. So you just walked through what your existing holders, the patients and what they're going to get. What about new shareholders? If we look at Viatris, right, it's roughly 55% global brand, about 10% biologic and OTC and 35% global generics. So a question just to close with. What does that platform look like in 3 years? What are people who buy the stock today getting 3 years from now?

Well, first of all, let's distinguish between shareholders. I recently, not too long ago, bought new shares. Our big institutional accounts continue to monetize and then rebuy shares. And I think that every time that we step up and step in and buy shares, I like to think that we're a new shareholder, okay? I don't want to look at the fact that I have shares that I've held long, long, long term. Every time I step in and every time I think 1 of our institutions step in and buy shares, I call that a new shareholder, even though they might have owned the stock before and owned -- every time they added a position, it's new. I think for those that have never been in the story, I'm a little bit jealous because they have a real entry point now that I think is pretty envious. Ours might be blended. Theirs is pretty envious because of just where we are and what this entry point represents. I think in terms of the percentage, I don't want to lock down to any percentage, except directionally give you this. We fully, fully intend, fully intend on moving up the value chain. That should tell you directionally how the portfolio mix might be as we look out 2, 3, 4, 5 years out. I think OTCs are -- I agree with Rajiv. I think they are up. I think there's opportunistic things for OTC but we're not going to sit and build out the type of specialty sales force to really drive OTC as a major driver for us. We use our OTC platform more opportunistically than anything else. I think that the generics, you better -- you should expect that we're not going to put our attention into the more commoditized generics. We will continue to do what we specialize in best and that is to bring the high-value generic opportunities, the difficult to formulate, the difficult to manufacture where you have limited -- more limited competition. There are certainly more today than there was. But still, you only have a certain amount of people who can do certain things scientifically. Most importantly, I do believe that moving up the value chain from there, whether it's in our NCE portfolio, our biosimilars and other partnering type of opportunities, you should expect that what we'll be partnering with will not be so much on the generics or the OTC, but much more on the brand and the -- and much more, again, moving up that value chain. I hope that was helpful, Randall.

Yes. No, that was helpful and the whole discussion was. So it's probably a good place to stop. We're 5 minutes over. And look, I just want to say, Robert, Rajiv and Melissa, thanks very much for doing this. It was a great discussion. And for those on the line, thank you for joining us. Thanks, everyone.

Thank you.

Thank you.

Thank you, Randall. Thanks.

Thank you.