Viatris Inc. ($VTRS)

business, particularly North America, North America being up 3%, driven by the portfolio. Kudos to the team for continuing to get our complex portfolio approved and also launched. Last year, we launched two complex injectables, which is helping drive that growth. But also, we're seeing continued strong trends with our generic Symbicort in the market. So North America positioned in a very favorable manner. And so overall, I think when you look at this business, we're on a trend line right now of 2-plus percent operational growth. You mentioned the enterprise-wide strategic review. We're beginning to implement that cost savings program this year. We expect to deliver $120 million of net savings. So that's certainly helping with the operating leverage we're seeing in the business. So overall, I think the business is in a really good spot as we look out to the rest of the year.

I guess for some of us who followed you guys for 10-plus years, the company has gone through a lot of permutations between Mylan, the Upjohn deal, some divestitures. When we look ahead to the $11 billion of capital return that you talked about, maybe half of which could be used for BD. Is that a firm number? Are there some variables that could enable you to push greater on the BD toggle for the business, depending upon the accretion profile of the target and/or other facets of a target asset that's out there.

Yes. So coming off of our investor event earlier this year, one of the, I would say, key areas of where we can create value as a company is certainly capital allocation but it really all starts with the strength and durability of the free cash flow of the company. I think that's been a hallmark of Viatris for some time. And so when you look at the cash that we have on the balance sheet exiting Q1 free cash flow generation of over $2 billion and thinking about the growth profile of the business, we expect free cash flow to accelerate between now and 2030. So that sets us up from a strategic flexibility point of view, where we have a lot of optionality. When we look at the balance of capital allocation, it's going to be that. It's going to be a balanced approach. First and foremost, we're going to continue to return capital to shareholders, our commitment to the dividend will be a part of that. We'll continue to look at share repurchases in an opportunistic fashion. Last year, we leaned in a little bit more to share repo. And then so the remainder really 50% thinking about how we can use that capital to accelerate the underlying growth of our business. And so thinking about BD in terms of really two priorities. One is how do we continue to strengthen or regional segments, where can we find assets that we can plug into that existing infrastructure, but also a strategic priority for us is to expand our innovative business in the U.S. So as we think about the continuum of BD, it's not necessarily a sizing perspective. It's where can we find assets where we can be -- they have a good strategic fit we can build a cornerstone franchise around and really we can be good owners of those assets. So I don't want to kind of anchor us to a size, but as you think about how we're dimensionalizing it over the next 3 to 4 years, we've talked about bringing in $1 billion to $1.5 billion of revenue from BD and about $0.5 billion of adjusted EBITDA. But really, the goal is to take BD and use it to accelerate the underlying growth of the company.

And then maybe talk about the cadence of the launches that you have coming up, how that can accelerate that growth, which I think you said was 2%, 2.5% now. But like as you layer in those launches, some of which, like meloxicam rare a little chunkier and bigger than some of the other ones that you've outlined on the come like the [ Tolasite ] I imagine. So just any framing that you can in terms of the cadence of launches and how that gets you to that 3% to 4% growth target by 2030?

Yes. Sure. So the company, as you look at, kind of, our evolution, from being predominantly a generics and an established brands company. We set a strategy out to really expand our value-added medicines and also our innovative bucket. And so when you look at what those can do for the company, this year, we have a number of upcoming launches. One of our prioritized markets is Japan. That's where strategically we've looked to strengthen that market with more branded innovative medicines. Recently, we launched our Effexor for Generalized Anxiety Disorder. It's early days, but we're seeing some promising signs for that launch upcoming this year, we'll be launching Pitolisant in Japan. When you think about the Sleep and Wake category, it's a very underdiagnosed, undertreated market in Japan. So we see a lot of opportunity there. And then next year, we also expect to launch our Nefecon product. So those launches when you look at our Japan segment, really have the potential to return Japan growth by 2028. And then as you think about opportunities for our North America business, you mentioned two, first one with our [ Gwinlow ] dose weekly estrogen patch. We have a PDUFA for the end of July. That is the first of two products when we think about the contraceptive patch portfolio that Philippe and his team are developing. Collectively, we think that portfolio could generate peak sales over $300 million between those two products. And then the big one that we're really excited about in the portfolio is our fast-acting meloxicam. This is an opportunity in a market where you've got a very sizable broad market in acute pain. And we have a non-opioid option with a really attractive profile. So we think that, that product over its lifespan could be up to 500 million. So collectively, when you look at the base trend line, you add in the new launches, it's the collective basket that we believe accelerates the growth to that 3% to 4% top line expectation between now and the next few years.

Okay. And maybe shifting gears to the meloxicam opportunity. And as we think about the importance of labeling and product labeling, how important is getting that opioid, kind of, sparing attribute in the product labeling when you do your market research and test what resonates with health care providers in terms of addressing unmet need. If maybe you can speak to, I guess, some of the important label -- product label outcomes that are on the [ come ]?

Yes. So I think, as you know, we are very proud of the data we've generated, in particular, the profile that emerged from the Phase III program, rapid onset strong efficacy in line, if not better, than opioid and then that capacity to spare opioid use, right? And when we look at the way we've set up the data and we have a lot of back and forth with the agency during Phase II when we designed the study -- the Phase III studies. There -- our first two secondary endpoints are two endpoints that look at opioid sparing, reducing the number of doses and the number of patients that are opioid free. So highly statistically significant and clinically meaningful results for these two endpoints. So we feel good about our opportunity to include that data as part of the label. Where exactly in the label is going to be, whether it's going to be in the indication section or in the clinical section of the label, it doesn't matter as long as this data is in the label. Now in terms of importance to -- going back to your question, I think it's good to have it. It would simplify things for us, but the data is out there, right? I think when we went through a number of congresses, medical congresses this year. The onset and the opioid-sparing data is what really resonated with doctors and this ability that they can now go ahead and reduce the opioid use, which they've been trying to do for many years now. So they have an option that they are very comfortable with. They know the mechanism of action. They have a good understanding of the safety profile. So we expect the uptake to be pretty significant, pretty early.

Okay. So I'll preface my next question just by -- I imagine a lot of investors are going to benchmark your launch to Vertex' JOURNAVX. And I think part of the answer is what you define as success 500 million peak is probably not what Vertex' investors would define as success for JOURNAVX. So with that said, what do you learn from their launch? How you're approaching the market maybe differently? I know you focused a lot of folks, investors on the outpatient opportunity where you think access could be more favorable? So just kind of curious what you've learned from the Vertex JOURNAVX launch and why you're optimistic about how the rollout of meloxicam will play?

Yes. So I think what -- I'll start and then maybe I can give it to Bill. I think what we are seeing is that -- that I'll comment an angle from a data angle. I think our data is really resonating with prescribers. I would say that the JOURNAVX data less so. And so I think that creates a need. Now what -- as you point out, what is important for us, because we have a shorter exclusivity window than a typical new molecule, we have to go after uptake much more than they do. They have more time to build. We got to build faster. And I think that's the strategy that the commercial team is putting in place going after ability to go after a post-surgical patient out of the hospital. Patients and then start narrow with the specialty sales force and then expand to a broader group of patients potentially with partner if that makes sense for us at that point. But I think that strategy is different because of that shorter exclusivity that you see with us versus the typical molecule.

And you said '26 is unlikely material contribution from meloxicam is '27 a material contribution from that product that should investors expect?

Yes. I think '26 is we would -- we anticipate to get approval towards the end of the year. And therefore, you would see -- start seeing a meaningful contribution towards 2027.

Okay. You mentioned IP and the IP runway. Pretty much all the CNS companies that I cover, there's serendipitous discovery of older molecules, right? And so then there's a build-out of IP to protect that when the clinical trial was run, and we did an analysis. I think for a bunch of companies that had old or repurposed molecules, they ended up getting 16-year product life cycles with a lot of the IP generation that followed. And you guys have alluded to working on other IP. So could you open the curtain a little bit? Can you talk a little bit about that dynamic and what you guys are doing?

Well, I can only tell you so much. But I think the -- what you are -- I mean Viatris is usually on the other side, right, of the equation. So we know what needs to be done for us to maximize our exclusivity. And that's what we are working on. We have a number of patents. We filed that we believe will extend our exclusivity around a number of things like formulation like other method of use type of thing. And we also have the opportunity to extend with pediatric exclusivity and other things that we're also looking at with the FDA currently, right? So that's the strategy. I think -- you've heard Scott say that we anticipate this. That we'll be able to go well into the 30s with this asset, and that's our expectations, right?

Okay. Maybe shifting gears to selatogrel. I think this is the largest commercial opportunity that you guys have explicitly flagged in your pipeline. So with data sometime, I believe, in first half '27. So I know that a lot of people focus on the uniqueness of the trial, right, and trying to understand the different risk factors in conducting a trial like that. Can you rank order when you did the deal, what you saw is like the key risks in running this sort of novel trial approach? Be it patient who's on control arm, getting maybe faster access to IV Cangrelor or false injections. I know there's a lot of discussions around these different points. So how did you guys look at risk with this asset?

The Phase III clinical trial, SOS MI, that we are currently running is a pretty simple study, right? Patients have to have a qualifying MI. Once they do, they are randomized to either selatogrel or placebo. And they are trained to recognize the symptom of an MI. I remember, they just had one. So they kind of know what to look for, but we still train them again. And they're trying to use the auto-injector. And then they go home and wait for an event to happen, event meaning is an injection, right? So that's -- and then we keep track with the patient. Will be a phone calls on a regular basis. So very easy study to conduct. Now the challenge comes with the size of the study. And I think we've kept on updating you guys that we are enrolling over -- we have 1,300 patients a month currently, and we anticipate we'll have all the patients we need by the end of the year. Now where I think to your very question, where with the assumption -- the key assumptions that needs to occur for this study to be positive is that patient needs to self-inject early. By early, we mean within the first hour, right? Of symptoms onset, because that's the concept of early platelet inhibition leads to better outcome for the MI. This has been proven, this has been shown. The earlier you treat, the better the outcome. So what we're seeing in the study, and I think we've kept on updating folks about this is that we're seeing patients are self-injecting in less than 30 minutes from symptom onset. So that part of the equation was critical is going well. It's happening. Patients are self-injecting, self-injecting for the right reason and self-injecting in the right time frame. The other part that was also an equation that I wasn't sure was going to necessarily play out was patients self-inject, do they think they are cured and not take themselves to the hospital to get a proper diagnosis, which is important for the purpose of the primary endpoint. And what we're seeing is that patients are taking themselves to the hospital post injection, and they typically get there within 2 hours, which is more than enough for selatogrel. Selatogrel will continue to work for approximately 8 hours. So patients have enough time, not too much time because we need also those platelets to go back to normal, should they need surgery and so on. But we are seeing patient self-injecting, self-injecting for the right reason, in the right time frame and then going to the hospital for diagnosis.

Can you talk about, this is effectively narrowing the treatment gap, right? Like so if you can get medication on board faster because there's proven data that if you get IV Cangrelor, you can reduce some of these more negative downstream outcomes that are part of your primary endpoints. So if you can tie that to, if you narrow the treatment gap, I'm lowering the mortality rate by X or other components within the endpoint? And can you just talk a little bit about the endpoint design and just how narrowing the treatment gap, what your understanding is what that will reduce those rates by in?

IV Cangrelor is you mentioned a couple of times, is not used for what we are doing. It's used for PRECTI, so patients that already know they're going to have PCI. And typically only reserve for patients that are at very high risk, right? So placebo patients will not be getting IV cangrelor, neither will selatogrel patients. Remember, selatogrel is first, right? So however, will be given by the patients, then the patient goes to the hospital if they need PCI, then can be given IV Cangrelor should they need that. Our data shows that when you combine -- in vitro data shows that when you combine selatogrel and IV Cangrelor, you still see a synergistic effect. You still see an increase in inhibition of platelet aggregation. So they can be given together, you still see a benefit. Now I would assume that in practice, if you will get either -- you will get selatogrel first and then either continue to get selatogral or switch to IV Cangrelor should you need that for the purpose of surgery, right? But I think that will not interfere with the primary endpoint. The primary endpoint is the Hierarchical Composite Endpoint. So it ranks the severity of the MI starting with the most severe, which is death down to less severe types of acute MIs. So it's ranking that and what we expect to see shift from severity of the MI from less severe on the placebo arm, I need to stop in my hands. So that's what the outcome of the study will be the risk reduction for more severe MI on selatogrel versus placebo. We estimate that reduction to be around 20%. That's how we've sized the study. And we're obviously powered for a lot less. But the risk reduction we anticipate to see will be around 20%.

Just to clarify on the hierarchy, which what are the tests for primary endpoint versus are there components of the hierarchy that are secondary analysis or secondary endpoint?

So it's not a -- we're not looking at your standard event rate, right, or rate? It's a win ratio. So you are for each patient on selatogrel, you're comparing it against each patient on placebo. And each time you win, we anticipate that selatogrel will win 1.25x more than placebo, that's your 20% risk reduction. So it's a win ratio that we're using as a method to analyze the primary endpoint.

Okay. And if successful with that sort of treatment effect size, I know you guys have experienced historically with rescue treatment markets with EpiPen. Can you talk a little bit about how you see the market opportunity, challenges and opportunities that went into the company kind of target of $1 billion plus in revenue for that?

Yes. Let me start. Yes. So we've mentioned previously, all the epidemiology data that we have that lead to certainly the case that is above that $1 billion. So it's a $1 billion-plus opportunity, right? So I think you see about 24 million patients have already have in MI, and that excludes China, where the numbers are not necessarily clear. They are, I think, way understated. So significant opportunity for -- in terms of epidemiology, but what is I think the most important is that you are -- we will be the first treatment to be able to prevent MI from leading to significant [ siphily ], right? We're looking at a reduction of the severity of the MI, which will lead patients to have less equally on their muscle, on their heart and will then spend less time in the hospital and that will help the overall health care system. These are patients that are probably the most expensive patients for the health care system. What we've also seen is that just carrying the pen itself makes the quality of life of the patients a lot better. Just knowing that they have this rescue medication help them from a quality of life. So we're seeing a significant opportunity for this asset to change the treatment paradigm in acute MI. We'll start with patients that already had an MI and then over time, should the safety profile continue to hold, we'll be able to expand into more patients that are at risk of getting I never had one before, but are more at risk of it, further expanding the opportunity.

And I think maybe just one point, Philippe, to your point on the potential product profile and you mentioned it being a global opportunity for us, where we have the global infrastructure to commercialize a product like this, we'd have to certainly make investments in the U.S. But I think the other piece too is, given it's a pen, you can envision a model similar to other rescue medications. There's also going to be a refill component to this market, right? So based on the product life, right, you can imagine a patient that's had rescue medications for a number of years, right? So that refill piece, when you kind of do the math across the epidemiology, you think about a refill assumption, you'll have to really stretch to believe that this could be over a $1 billion opportunity for the company.

Is there a low-hanging fruit embedded in there? And what I mean by that is like I imagine the patient who's had an MI within the last year, is going to be more motivated to keep that in their pocket at the ready, right? Versus somebody that maybe 5 years removed or high risk, where perhaps keeping a pen at your side all the time will be kind of difficult, I imagine. And so I'm just trying to think through how you think about that as a market segmentation factor?

I think you'll have -- patients will have multiple pens to begin with, right, not just one, it's important also that the caregiver, typically their family members have access to a pen as well, should they not be able to self-inject. So I think you have that component also that is important. But look, look at the EpiPen, right? I have three kids. They all have to have an EpiPen. they've never used it. But every year, we'll renew the prescription, and it's been years, right? Just because you know that if you need it, you have the upturn to get the pen.

Okay. So we've got about 3.5 minutes, maybe some quick hitters here. So cenerimod. There's -- can you talk about your trial enrichment strategy with how interferon? And are you prespecifying that as like a subgroup and then looking at all comer as well in that trial and how that may differentiate the SLE space is very competitive. So I'm wondering how your trial design, at least compares to some of the other approaches out there in Phase III?

Yes. So in Phase II, we had patients with high interferon signature, had a much better response than patients with low signature. So we enriched the Phase III trial. We set a bar at 70%. Trials are fully enrolled. So now we know that we are above that 70% threshold. If you compare, for instance, [ Safnelo ] at 83%, I believe, on average of patients with high interferon signature. Regardless of that, they got a broad label. That's our assumption that we will go for a broad label. That said, we have two large studies that are identical. We can pull those studies together. And target that interferon went high expression should we want to do that? Should we see a much, much better response rate. But I think the the base assumption is that we'll have a label similar to Safnelo broadly.

Okay. And by our count, I think there's 5 or 6 competitor programs in Phase III. How do you foresee your product stacking up competitively versus landscape. Obviously, a difficult question to answer before you see all the data cards turned. But based on the support of Phase II data, how comfortable are you in a competitive profile?

So I mean our interferon high signature results is probably one of the best efficacy data. Our safety profile is typically more favorable than what you see with this other product because we're not an immunosuppressant or an immunomodulator and the S1Ps have had a history of being more on the safe side than those more aggressive treatment. That said, I think SLE, we have now a much better understanding of what SLE is and the pathogenesis of the disease. And we know it's a heterogeneous disease with multiple pathways involved. Cenerimod the only drug that targets all these pathways. The other drug that you see in Phase II go after one specific pathway. At the end of the day, it's a heterogeneous disease, there will be room for multimodal administration. I believe that this is how drugs will continue to be used in this disease because of the heterogenicity of the disease. And therefore, having other assets coming in is not necessarily detrimental to scenario. Cenerimod has the opportunity to be the first treatment prior to biologic treatment based on the benefit risk that we've observed in Phase I.

And lastly, Bill, we've gotten through the whole conversation without talking about generics. Generics has been a key part of the business historically. So how should investors think about the strategic value of generics to the company longer term. If some of the branded pipeline pivot is ultimately successful. Do you still see the business? Is it a priority to remain a hybrid business that leverages the cash flows from generics with select targeted investment with shifting focus to brands?

Yes, I think it's a good question. It's certainly one where the company really has a dual category approach. If you think about the value of generics access to medicines -- you think about what we've done to move the portfolio up the value chain into more complex products. We laid out a bunch of those at the investor event, not only injectables, but other technologies. It's also as we start to pivot into the 2030s thinking about what role we can play in the GLP-1 space. So I think when you look at generics always having a role, but think about it as a selective role in terms of where we can win. And I think you've seen that now with our complex strategy on the generic side, but also in other areas of the world, particularly Europe, we have a very healthy generics business. Sometimes, it doesn't probably get the attention it deserves. But I think you should continue to think about us from a branded and a generics perspective going forward.

All right. Great. Thank you, gentlemen.

Thank you. Appreciate question.

Thank you.