Medication company Viatris (NASDAQ: VTRS) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 11.2% year on year to $3.25 billion. Its non-GAAP EPS of $0.50 per share was 2.3% above analysts’ consensus estimates.

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StockStory’s Take

Viatris’ first quarter performance was shaped by ongoing challenges at its Indore manufacturing facility, competitive pressures in the generics business, and continued momentum in its branded product portfolio, especially in Europe and China. Management cited operational revenue trends as largely in line with internal expectations, noting that the Indore remediation efforts remained on track and accounted for a significant portion of year-on-year declines. CEO Scott Smith acknowledged the company’s cautious stance in the face of external policy risks and highlighted pipeline progress, including positive Phase 3 data in pain management and women’s health. CFO Doretta Mistras pointed to cost containment measures and steady execution in global segments, but also flagged a $2.9 billion non-cash goodwill impairment linked to increased discount rate assumptions amid market volatility.

Looking ahead, Viatris’ guidance for the remainder of the year centers on the timing of key product launches, mitigation strategies for potential pharmaceutical tariffs, and execution of a company-wide strategic review to streamline costs. Management emphasized the importance of returning capital to shareholders and progressing the pipeline, with CEO Scott Smith stating, “We are reaffirming our commitment to prioritize return of capital to shareholders in 2025.” The company sees its diversified global supply chain as a buffer against policy-driven disruptions, but noted that tariffs could impact both financial performance and patient access to medicines. The anticipated regulatory submissions for new products, as well as the outcome of the Indore facility remediation, are expected to influence results in the second half of the year.

Key Insights from Management’s Remarks

Management attributed first quarter results to the Indore facility’s ongoing remediation, resilient branded drug sales in select regions, and progress in its late-stage pipeline. Strategic capital allocation and updated manufacturing approaches also featured prominently.

• Indore facility impact: The ongoing remediation at Indore weighed on generics revenue, especially in North America and emerging markets. Management detailed efforts to qualify alternative sites and expects product restoration in 2026, with about $100 million in short-term supply disruption not anticipated to recur next year.

• Branded portfolio resilience: Growth in branded drugs was driven by cardiovascular products in emerging markets and strong contributions from brands like Creon, Brufen, and the Thrombosis portfolio in Europe and China. These gains offset some generics declines linked to manufacturing disruptions and competitive pressures.

• Pipeline momentum: Three positive Phase 3 data readouts were achieved in Q1, including fast-acting meloxicam for acute pain, XULANE LO for low-dose birth control, and EFFEXOR in Japan for generalized anxiety disorder. Management highlighted plans for regulatory submissions in the U.S., Europe, and Asia in the coming quarters.

• Capital return emphasis: Over $450 million was returned to shareholders in Q1, with $300 million through share repurchases and $143 million in dividends. Management reiterated flexibility to increase repurchases depending on market dynamics and ongoing free cash flow generation.

• Tariff risk management: Leadership described active scenario planning for potential pharmaceutical tariffs, including inventory adjustments, capacity expansion in the U.S., and leveraging third-party manufacturers. The company emphasized that more than 50% of U.S. revenues are already manufactured domestically and stressed the broader implications of tariffs for patient access.

Drivers of Future Performance

Viatris expects future performance to hinge on new product launches, regulatory outcomes, and the company’s ability to adapt to external policy risks while executing on cost efficiencies and capital allocation priorities.

• Product launch timing: The majority of new product revenue is expected in the second half of the year, particularly from launches like Iron Sucrose, Octreotide, and Liraglutide. Management noted these products are scheduled for approval and rollout later in 2025, supporting a stronger back half.

• Tariff and supply chain adaptation: The company continues to monitor potential U.S. pharmaceutical tariffs, preparing short- and long-term mitigation strategies including shifting production, expanding domestic capacity, and leveraging third-party partners to maintain supply continuity and manage costs.

• Strategic cost review: The ongoing enterprise-wide review targets cost streamlining to match the company’s post-divestiture footprint. Management sees this as essential for positioning Viatris for sustainable revenue and earnings growth into 2026 and beyond, while continuing to invest in late-stage pipeline assets.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will monitor (1) the pace of regulatory submissions and approvals for late-stage pipeline assets, (2) the resolution of the Indore remediation and restoration of related product revenues, and (3) developments concerning pharmaceutical tariffs and their impact on supply chains and cost structure. Execution on cost review initiatives and growth in emerging markets will also be critical signposts for sustained earnings improvement.

Viatris currently trades at a forward P/E ratio of 3.8×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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