All right, good morning, everybody. Thanks. Why don't we get started? For those of you who don't know me, I'm Glenn Santangelo. I'm the analyst at Jefferies t hat covers Viatris. We're very excited to be hosting the company here today. And representing the company to my right is Scott Smith, who's the CEO. To his right, Doretta Mistras, who's the CFO. And then we have Corinne Le Goff, who's the Chief Commercial Officer. And then Philippe all the way on the end there. Philippe Martin is the Chief R&D Officer of the company.
So we have 25 minutes. We're just going to rifle through our question and answer, our fireside chat. So thank you all for joining us today. All right, so why don't we start? And Scott, I want to start with an interesting question, you know, because I think it's been 18 months you've been the CEO now. The company's been through a whirlwind of change in the last sort of 18 months, and so at a very high level, why don't you sort of give us a state of things in terms of all you've sort of accomplished and what's, and I ask this question very specifically because you just came off of a great 3Q.
A nd we had put out a preview and tried to make this call, and I'll talk my book up front. We're recommending Viatris. I had a couple of people come back to me and say, "Hey, Glenn, good call on Mylan," and that happened more than once, and so it's still interesting to me that people haven't made the leap forward and look at all the change, so why don't you just give us a quick 18 month perspective, and then we'll dive right into the Q&A?
Yeah, so thank you very much, Glenn, for the question. And you said all that I've accomplished. I think it's the team, right? I mean, we've got 32,000 employees. It's a big company. There's been a lot accomplished. When I reflect on the 18 months, I could not be happier for where we are today. The base business is very, very solid. It's in great shape. We've now had six consecutive quarters of operational revenue growth, which has been really outstanding. We've completed the divestitures that we had set out to do, which allowed us to really strengthen and streamline the company. And maybe just as importantly, we've been able to get our leverage target down to where we wanted it to be at three times. Since the company, since Viatris was incepted, what, four years ago, we've paid down over $10 billion in debt.
And so we've got the company in a great place. We've also added some new skill sets and new people, like you see at the podium here, to add to the strong existing management team that was in place. This year, we've added some assets, growth assets for the future in selatogrel and cenerimod and sotagliflozin internationally. And so I think we've really put the company in a great position going forward. When I think about when we get to 2025, that was sort of phase I or part A of the company.
And as we move into phase II, we're going to have a minimum of $2.3 billion a year in free cash flow to apply. And that's the capital allocation story going forward, which is roughly half of that on paying back to shareholders in terms of dividend and share buybacks, and the other half on business development. So I think the company's in really, really solid shape. We're looking forward to getting to the next step as we move forward.
Yeah, thanks for that. And Doretta, one of the things that Scott just touched on is sort of the recapitalization of the company, right? So when you think about all those divestitures, maybe you can just quickly review for everybody here roughly how much cash you took in from those divestitures with another $2 point whatever, billion in free cash flow last year, another $2+ billion in free cash flow this year. The company's talked about that line of sight to 3x leverage. Maybe if you could just sort of reiterate that for folks in terms of all that cash that came in and how the balance sheet or this company's been basically recapitalized pretty significantly.
Yes, I think Scott mentioned it at the beginning, but since Viatris's inception, including the November maturities that are due in the next couple of weeks, we will have paid down over $10 billion of debt this year alone. That will have comprised of our June maturity, which was a little over $900 million we paid. We recently completed our tender where we bought back about $1.9 billion, and then we have our November maturities of an additional $1 billion. So this year alone, we will have paid down $4 billion of debt. But importantly, to Scott's point, we have line of sight into our leverage target. And so going forward, the financial flexibility that we have to really allocate that capital in a balanced way, both towards capital return as well as continuing to invest in innovative assets to accelerate our growth, the flexibility we have is significant.
Well, Scott, thank you for that, Doretta. So Scott, why don't we just touch on that right now? And you just mentioned it a little bit right now that we're sort of going to be at that target leverage. How do you think about business development versus portfolio strategy and capital return to shareholders as we move into phase II, as you sort of call it, into 2025 now that the company has achieved its leverage target?
Yeah, I think we really move the story becomes a capital allocation, right? Given how well the base business is performing and given that we're growing and we paid down our debt. And we view over the next four or five years that we're going to be using that cash roughly half for giving back to shareholders, again, dividend, share buybacks. I think we want to be more aggressive in terms of share buybacks, particularly in these early years, given where the company is trading at and giving the valuation that we have. And then the other half for building the pipeline, doing business development, doing licensing deals.
I think it's very, very important that we pivot from, and again, we've got good organic growth right now, operational revenue growth, 2%, 3%, but then adding to that by bringing things into the pipeline and doing business development and licensing and leveraging what we call the Global Healthcare Gateway, which is this very, very strong fundamental company that we have that sells in 165 countries in the world, 4,400 products. Importantly, we reach a billion patients a year with our medication. So we've got this very strong global infrastructure, and we want to continue to add products to it.
In terms of what that business development looks like, which is a question that I get often, I think we want to be very disciplined in the kind of business development that we're doing. Going forward, we want to invest in in-market or near-market products. We want to make sure that we're adding to our revenue streams in 2025, 2026, 2027. So we're going to have a very, I think, smart, disciplined approach to business development and licensing as we move forward.
And maybe this year is that a good example, right? For example, you did the Idorsia deal. You brought in selatogrel, cenerimod, those phase III assets, but also sotagliflozin, right, was a licensing deal that you just did a month or two months ago. I mean, when you talk about those, how do they sort of fit within the global infrastructure within the company and what are the plans for commercialization? And is that kind of a good blueprint for how we should think about business development over the next couple of few years?
Yeah, I think it's a good footprint over the next couple of years in that I think we want to in-license assets. I don't think we're looking at a lot of binary M&A, some of that. I think we want to find good products, bring them into the pipeline, the portfolio. I would say selatogrel and cenerimod that are sort of mid-phase III, that's probably the earliest we would ever do a deal. I think we're looking for things either approved or with data to get approved, in-market or close to market assets. So I think our focus is going to be on a little later assets. And again, I think given the strength of the infrastructure of the company, the commercial distribution research group that we have globally, in-licensing is a great way for us to be able to build the pipeline, I think.
And so we want to, in a disciplined way, bring multiple assets in over a period of time. Again, relative to capital allocation, I think we're going to maybe in the early years be a little more focused towards share buybacks and things given the share price. But we definitely want to continue to add assets to the pipeline in a disciplined and smart way and assets, hopefully, that can contribute to our revenue growth in 2025, 2026, 2027.
Just given that we're on the heels of 3Q, obviously it was a pretty strong quarter. I mean, the market sort of reacted that way. You mentioned that with six consecutive quarters now of growth. And so maybe, I don't know, at a very high level, I don't know who wants to walk us, maybe you or Philippe wants to walk us through what are some of those drivers of that growth. And as we sit here with almost two months of 4Q down, not that you want to guide 4Q here, but can we expect those trends to sort of continue here in the current quarter?
Yeah, I would say the trends and momentum continue as we go through the year. This year, since the inception of Viatris, we've delivered $450 million-$550 million in new product growth every year. This year, we're going to be a little bit ahead of that. We're going to be close to $600 million. So there's been really nice new product growth of the company and a real stability of the overall base. I don't know, Philippe, if you want to add anything else you want to add to that.
Just, I mean, looking toward 2025, we're continuing to develop that base business pipeline, looking at core generics, complex generics, and 505(b)(2)-like products. We have a number of launches coming up in 2025 that are of interest: liraglutide, octreotide, iron sucrose, glucagon, all scheduled for 2025, and I think what makes us comfortable saying that we'll be in excess of $450 million, $100 million in new product revenue every year is really the breadth of that pipeline, right? These are just some of the opportunities we have, but we feel very confident about.
Hey, Philippe, though, this is not new news, right? I mean, the company's been sort of generating this level of growth for the past sort of several years, right? And I guess the obvious question is, how do we think about the next several, right? And then how do you think about the sustainability or durability of that trend? And I know you and I have had this discussion before. Maybe you can share with people just an example on how many drugs you file on a year and how you support that pipeline looking out over the next sort of two to three years.
Yeah, we have about 130-140 submissions every year. I think that's a typical year for Viatris. We have a strong record in new product revenue since the inceptions of Viatris. Every year, we've been in excess of $450 million. And we have the line of sight to see that this should continue in the future. We have an exciting pipeline coming up, such as the GLP-1s and the oligonucleotides and our respiratory franchise. So again, the breadth of that pipeline is what makes us very confident about our ability to bring that 4 50+.
Glenn, if I may comment, I think this is really the crux, the promise of what we're doing at Viatris right now is we see real sustainability in this model that we have today, right? So we see every year being able to deliver $450 million-$550 million in new products, relatively stable base. We lose a couple percent on price every year from the rest of the portfolio given the age. But that stable base with this 1%, 2%, 3% organic growth that we have, together with the products that we can already see, the selatogrel, cenerimod, sotagliflozin, plus the ability of having that free cash flow to continue to add to the pipeline.
And it's not that we're replacing the base business with pipeline. It's we're adding on to the base business with pipeline. And that's the real promise. Having sector-leading free cash flows to be able to invest in our pipeline and growth on top of a company that's already growing organically, I think, is what the real promise is of the company. Turning this from sort of a 1%-2% growth to a 5%, 6%, 7%, 8% growth story over the next couple of years, I think, would be important.
Is there any geographical story to tell here? I mean, there's been a lot of focus on all the restructuring. And now that that's kind of all complete, when you think about this sort of durable growth model, could you maybe break down the different geographies? Are you seeing similar performance across the portfolio, or is there real differentiation in the different regions?
Yeah, so I think we've been growing across all our geographic segments. So the business is very healthy. We see a lot of stability and growth in Europe, notably. We see China doing extremely well. We have a very strong presence in China and good infrastructure. And we also see durable growth in this region. And if I go around the globe, I can talk about emerging markets also growing consistently. In the U.S. specifically, we are seeing good stabilization and growth of our generic business. And actually, it's a question that we get a lot. How do you see the price of generics going forward in the U.S.? And we actually see that it is actually quite stable. So at least in the short term, we're quite positive about this. So overall, I would say very good growth around all the segments for Viatris.
So Corinne, maybe just two quick follow-ups. So you said the European business continues to be strong. And maybe what sort of underpins that strength? I don't know if you can give us any more clarity. And then you also said China continues to be a little bit of a bright spot. And I think if my numbers are correct, I mean, it was a clean sort of 3% growth this quarter, if I'm not mistaken. Scott, the change in administration is sort of fresh on everyone's mind. Everyone's always asking questions about China. So Corinne, I don't know who wants to focus on the European question.
I'll start with Europe. Yeah, so I'll start with Europe. Maybe I'll give you the context of Europe. So Europe is about $5 billion for us. We've been growing like 6% last quarter, so net of all divestitures. And if you look at the European market, it's mostly a branded business. So we really rely on our iconic brands. Of course, we participate in tenders, but it's mostly like 65%, 70% is brands. And we have large infrastructures. We have sales and marketing operations, great relationships in key countries, notably in France and Italy, a large thrombosis and cardiovascular portfolio. We have products like Creon. So it's really a very well-rounded operation that provides us with sustainable growth. And we see that continuing in the future.
Corinne, China? Maybe I take that.
That's everyone's mind.
We as a group spent some considerable time in China over the last few weeks. And we've got a very strong sustainable business in China. There's a lot of, of course, policy challenges in China. And sometimes they're implemented in an inconsistent way across different states and provinces in China. But overall, I think we feel very good about our business in China where it's at. It's been through a lot of sort of the policy implementation to date. And we've got a very good, strong group of people there. We've got a good business there. We feel good about not only continuing the business there, but making further investments in China. And just on this geographic part, just one other final comment, if that's okay with you, Glenn.
I mean, maybe one of the strategic challenges for me as CEO, about 70%, 75% of our business is ex-U.S., which adds a lot of diversity and stability to the business. But I think it's a nice opportunity for us as we're looking at assets and things. We want to be able to leverage this global infrastructure we have in a nice way. But I also want to be able to add assets and revenue in the near term in the U.S. market specifically.
Well, Scott, I mean, I'm glad you brought that up. This diversification issue, I think, remains underappreciated, right? Given that you're running that branded and that generics portfolio, no one product accounts for any meaningful share of your revenue. And you're in 100-and-something countries. And so no one country really represents, well, outside the U.S. or, I mean, you're very diverse from a product and geographic perspective. So you don't really, I guess, worry too much about any one specific issue, or maybe that's not the right characterization.
No, I think that's a good characterization, right? That 165 countries, 4,400 different products in different areas. It provides an incredible base of stability for the company. On the other side of that, also, we need to do things from a BD perspective, which moves the needle, right? When you have $15 billion of diversified sales, there's some comfort and stability there. And as you said, not one product in any one geography really changes the needle. So we do have incredible stability. It's our ability then to add to that stability with new products and new revenue that's going to really create a growth profile for the future.
Yeah. And just one more question, Philippe, back to sort of those new products, right? I mean, the company's focusing on that $450 million-$550 million number. And like we said, this year will be a little bit better. But that's not just straight small molecule generics, right? There's complex generics in there, other novel products. Could you maybe just give us 30 seconds sort of on that pipeline in a little bit more detail? Because I think people, we get that question a lot about what's going to drive that growth. And you touched on it a little bit, but I think it's worth sort of reiterating that point.
Yeah, I think so in 2025, as I said, we have a number of launches that are coming up. The liraglutide, octreotide, iron sucrose, glucagon are some of those. So we have a good line of sight on our ability to hit that 4 50+. After that, we have a number of significant groups of products coming up in our pipeline. GLP-1 is one of those. We're also working on a group of oligonucleotides. We have our respiratory franchise where we have a number of assets that are also very interesting and could lead to significant growth over time. So it's really, it's just, and we have dermatology. And so it's really a large pipeline where we see an ability to deliver that 4 50+ every year going forward, and maybe even more with product like GLP-1 going forward.
Perfect. All right, Doretta, given that role of analyst, why don't we talk about some numbers here, right, and when you reported 3Q, you basically reaffirmed the fiscal 2024 outlook, basically implying whatever for the fourth quarter. Now, the companies, could you give me a sense for maybe what you think some of the pushes and pulls might be relative to that guidance that could drive 4Q to be at the high end of the range or the low end of the range? Any sort of high-level thoughts, I think, would be appreciated by this group.
Yes. And that's right, Glenn. As part of our Q3 call, not only did we feel good about the quarter, but we reaffirmed our approximate 2% growth for the year. As we kind of thought about that, we did evaluate all the pushes and pulls and took that all into account. And we kind of currently do expect to be in and around the midpoint of our guidance on our metrics. And there's a couple of factors that have gone into it. I think it is important to note that Q4, we do have some kind of expected seasonality, especially in our developed markets and greater China region. We do expect some kind of phasing in North America. And the fourth quarter is expected also to be impacted by some generic entrants in our JANZ region.
Depending on kind of how those factors play out, but all of that has been incorporated into kind of how we think about Q4. From an adjusted EBITDA and EPS perspective, we do expect kind of that to be slightly lower just due to normal kind of seasonality and phasing that we see in normal product and segment mix that we see in certain segments as well. Overall, we feel good about the momentum that we're seeing in the business and the outlook that we have for the rest of the year.
Doretta, I know you're not going to give me any 2025 guidance here today, but I'm going to push a little bit, right? So the obvious question would be, as we segue the conversation to 2025, based on all the previous answers, it feels like a lot of the trends that we've seen year to date continue to be in place. It sounds like Philippe continues to be confident in the new product contribution next year. I think Corinne mentioned that the generic pricing is sort of stable. So when we think about what we've seen in 2024, is that a reasonable baseline for us to start to think about 2025? Or is there anything else that you'd call out specifically that we should have on our radar screen?
No, I think it is. We've mentioned this is the sixth consecutive quarter that we've seen of operational revenue growth. And we expect to see that momentum to continue into next year. And it's really two factors that give us that confidence. Number one, it's what we've talked about, the kind of stability that we've kind of seen in the base business, and then compounded by the 450-550 of new product revenue that we kind of anticipate to be able to deliver on. So the combination of those factors is what continues to give us the momentum that we expect to see as we go into next year.
I'd give one caveat there that 2024 had a quarter of women's healthcare and API business in it and two quarters of OTC. So when you clean that out on a pro forma basis, we see continued momentum, absolutely. But this will be a clean year 2025 for us where 2024 had some bits and pieces of revenue from the divestitures in it.
The divestiture adjusted stuff you give us, is actually , is very helpful. We appreciate you doing that. Doretta, can we just talk about margins just sort of given that the mix of the assets is sort of changing around here, given the divestitures that Scott was just sort of mentioning? When we think about sort of the new product introductions, should we expect just overall EBITDA growth to be at or around the same as revenue growth, slightly above or below? How should we think about the margin trends in the business?
Yeah, I think on an EBITDA basis, it is a little early at this point to talk about EBITDA. We will provide more kind of clarity of that when we give our guidance at the beginning of next year. But some of the pushes and pulls to just give some flavor on kind of we are working through all the adjustments as it relates to the stranded costs and the TSA income on the divestiture. But we are really prioritizing EBITDA stability, balancing some of the growth, some of the divestiture adjustments, as well as some of the kind of investments that are needed to maintain growth. But we'll provide kind of more clarity on that as we move into next year.
All right. Scott, we got about 30, 40 seconds left. So this is going to be my last question. And it's kind of maybe more of an observation or a question. And I'm going to give you the mic to sort of bring it all home and sort of close. But as we talked in the beginning, it's been an interesting sort of 18 months. The company has massively delivered through all these restructuring efforts. You have a $1.5 billion, I think, remaining on the repurchase authorization. You have this new product pipeline that's sort of driving the sustained growth. You pay a 4% dividend, which in my research, I made the case I don't think you get credit for, which is a little bit frustrating.
But looking at the stock over the last 12 months, I mean, it's returned 40%, but it feels like a very silent 40%. Like still a lot of people, in my mind, are probably not really paying attention. And the valuation, I think, is just barely 6x EBITDA at this point. And so what do you think the market may be missing? Or what would you like to stress to this audience here about what they should be paying more attention to? Or any final thoughts you want to leave the crowd with?
Yeah, even though, as you say, the return to shareholders has been satisfactory over the last few months, last year, I think we got a long way to go. I think the company is significantly undervalued at where we sit today. I think what's underappreciated is the stability of the base business and the fact that the base business has actually returned to growth, the fact that we are completely delivered or will be by the end of the year, and the fact that we generate sector-leading free cash flows that we can then apply share buybacks. We still have a significant authorization at $1.5 billion left. And I think we'll be more aggressive than that as we get into 2025.
And then the ability of a stable-to-growing base business to be able to add assets there and move to real growth, I think, is what's underappreciated. So we have a ways to go for sure. But I think we've got great stability, a very, very strong company. And I could not be more excited about the next few years.
Okay, excellent. Well, Scott, Doretta, Corinne, Philippe, thank you guys very much. And Bill Szablewski sitting in the front row, who heads the investor relations function. I think most of you may know him. Any questions, just let us know. But thank you all for taking the time.