Good. Great. Thank you, everyone, for joining us. We're very pleased to have Viatris today. With us, we have Scott Smith, CEO; Doretta Mistras, Chief Financial Officer; Corinne Le Goff, Chief Commercial Officer; and Philippe Martin, Head of R&D. Maybe, Scott, before I jump into questions, I'll just hand it over to you to kind of make some opening remarks and kind of frame the current year.
First of all, thank you for having us. We brought a full team with us here, I think, showing the importance of where we are as a company right now. Just a few themes that I want to run through for where we are this year. First of all, we talk a lot about the base business. We've got the base business is very strong. Aside from some manufacturing issues that we had at a plant called Indore, we've had eight or nine consecutive quarters of operational revenue growth. We've really been executing on our new product revenue. Last year, we were well above the initial guidance in terms of total new product revenue. The base business is strong and thriving.
We have some issues in terms of managing the operations part of it, which we will talk about and how we are remediating that and getting through that. The base business is running very, very strong. We have been delivering on our capital allocation strategy. We have been paying the dividend. We have been buying back shares. We have bought back just a little bit over $300 million at this point in time in share buybacks. We are also looking at business development. We are looking at immediately accretive business development, very importantly. We want to be able to help build the revenue and even an EBITDA picture for the company. We have also had a very strong focus on our pipeline. Philippe will talk a little bit about that as we go through this. When we started the year, we had 11 different programs in phase III.
Four of those have read out so far, all four positive, including EFFEXOR for generalized anxiety disorder in Japan, XULANE low dose, meloxicam, and acute pain, and a product for dim light vision for an asset in our eye care division. Very, very strong focus this year on the pipeline. Things have been going very, very well. The execution has been very strong. We have also initiated what we call an enterprise-wide strategic review. We are taking a look at the cost, where do we have people in the right places, what are the processes that we are using. It sort of feels to us like the right time to be doing this. We merged four and a half years ago. We have divested four separate businesses. Now it is time to really take a look.
Do we have the right people in the right places to be able to deliver in 2025 and 2026 and beyond? That is really important as well. Also, as I mentioned, we are working hard to do the remediations in Indore. That is coming along at or ahead of schedule. We will look to ask the FDA to reinspect mid-year this year. Everything is coming along there.
If you think about those things, building the base business, looking for accretive business development, delivering on the pipeline, making sure that we're doing what we need to do from a deficiency standpoint in terms of the operations and manufacturing, and really looking at the company enterprise-wide and seeing where do we have the right people and the right cost, all those things, those are the hard work in 2025 that goes into what we expect to be sustainable revenue and even a growth in 2026 and beyond. I think a little bit, 2024 was a year where we did a lot of debt paydown, closing our divestitures, those sorts of things, getting strengthening the balance sheet. 2025 is about executing on the pipeline and understanding the organization. We've got new leadership in place.
We really need to take a look at the company fulsomely to make sure that we've got the right people in the right places. Then 2026 and beyond should be about revenue growth, sustainable revenue, and even a growth going forward.
Great. Great. Maybe kind of digging a little bit further into the kind of the longer-term perspective, where do you see Viatris heading in 2030? What are you guys most focused on from an execution perspective over the next 12 months- 18 months kind of to power that growth?
Yeah. Two things that really we're starting this year, right, the pipeline and taking a look at the company from an enterprise-wide strategic review perspective. One of the company is about 60% branded products, about 40% generic products. Of those branded products, most of them are past LOE. Only 1% of our current portfolio is patent- protected. What we want to do is we want to continue to sustain that base that feels, right, we see a path to 1%-3% revenue growth, some EBITDA leverage off the existing base. We want to add to that with the capital that we're generating, patented innovative products, as well as products that add to the base business. We want to be able to do both.
As we evolve towards 2030, I would see us having a larger portion of the pipeline in innovative products, which have a more predictable, longer revenue stream than what we're doing currently. I think we would see a company that maybe looks a little bit different geographically. We may put different people in different places depending on where our opportunities are. You would see a portfolio that would have more innovative products. We're not walking away from the base at all. We want to keep that base, but a portfolio that has more innovative products in one in which we will, again, be focused on capital allocation, giving back to shareholders, and also looking to build the portfolio and the pipeline through business development.
Great. You've touched on this enterprise-wide strategic review. You have noted plans of hosting a potential investor event in the second half to kind of frame the long-term strategy. Could you maybe touch a little further on what are the key aspects of this review? What would you give us at the event? Could we see long-term guidance of some sort?
Just on the strategic review first, as I mentioned, the company is about four and a half years old. We did all these divestitures. When you do a divestiture, often the people who are directly associated with that business go to the other company. Still, you're left with the company that we need to make sure is fit for purpose going forward, right? We're looking at all aspects of what we're doing. We're looking at our manufacturing network. We're looking at our commercial structure. We're looking at how we purchase things. We're looking at everything that the company does and trying to make sure that it's the most efficient, effective, cost-effective setup that we have. Again, to me, it's not just about a cost-cutting exercise.
It's about making sure we've got the company that's fit for purpose for business today and also is able to execute on the business going forward. I think that's really important. I'm assuming there's going to be some cost benefits that come out of this, but that's not the main focus. The main focus is to make us a really more effective company going forward. In terms of having an investor day, one of the bits of feedback that I've received from a lot of investors and a lot of people is, "Don't get out ahead of yourself. Make sure that you understand the environment, where you're going, what you're doing." It is a little bit of a volatile environment from a policy and a tariff perspective right now. If things settle down, we would look to initiate that investor event second half of the year.
We'd want to give investors a view of what the long-term health of the company looks like, what our strategies are, a bit of a deeper dive into the pipeline, and certainly a deeper dive into this enterprise-wide review, what does it mean and what's the new cost structure of the company look like?
Great. That's a great segue to my next question on tariffs, which is, what is your guys' base case right now in terms of likelihood, timing, and scope of potential pharma tariffs?
That's a great question. Maybe you can tell me. I've spent some time over the past month or so in Washington. We've got connections to both the administration and to Congress. I've had direct communication with both. It's very uncertain as to exactly where this is going to land. Certainly, one of the key talking points that I've had when I've been talking to members of Congress is this idea of tariffs, particularly on generic products, right, could lead to major supply issues going forward. Although we produce 50% of our products for the U.S. in the U.S., 50% we don't, I would say approximately 50% of our portfolio in the U.S. operates at 20% margin or less. Tariffs could lead to major supplies. It's not just us. It's the generic industry in general.
One of the real points of discussion is this idea that 90% of the products of the pharmaceuticals that are in the U.S. market, right, that are dispensed in the U.S. marketplace, 90% are generics. Yet generics account for about 1% of the total healthcare cost in the U.S. It is not a place where you're going to get, depending on what they want to solve for for tariffs, it is not an area where you're going to get particular cost savings. I think the congressmen I've talked to are very, very wary around the idea of supply shortages for patients and things like that. We're very committed to making sure that patients have access to our medications. Yeah, I don't know where it's all going to land. I don't know if there's going to be an exemption for pharmaceuticals.
Certainly, there's an understanding both, I think, at the administration level and in Congress, that tariffs on generics could be very detrimental to U.S. healthcare.
Just a refresher, Scott mentioned about 50% of the products that we manufacture in the U.S. are made in the U.S. The key countries that we import from are Ireland and India, but also about 25% of our business is in the U.S. 75% of our business is outside of the U.S. In addition, we have about eight facilities in the U.S. between manufacturing, R&D, and packaging in totality that kind of sums up to about 8.5 billion doses annually that we manufacture here in the U.S.
We do have a manufacturing network, 25, 26 active plants. We are able, depending on if there is a tariff structure, to move things around a little bit to try and minimize the impact. We are in a place where we are trying to think deeply around what the tariffs could look like, how they would impact us, how we can find ways to make sure patients get access to our medication even in a tariff environment. There is only so much work you can do until you know exactly what the tariff situation is going to be.
Great. Great. Maybe just sticking on policy for a second. Obviously, Trump's MFN executive order a few weeks ago was a big focus for the industry and has been kind of an overhang on the sector. Do you guys have any thoughts on kind of how or if that will get implemented? Then in terms of Viatris's specific exposures, it seems fair to say that you guys probably have somewhat limited exposure to something like that.
Yeah. So I don't know exactly how the legislature is going to get implemented. It's vague at this point in time in terms of what the details look like. There was an attempt in the first Trump administration to go this direction. It was held up in the courts. I don't know the viability of this particular policy and whether or not it'll actually be enacted in the U.S. In terms of the effect, the Viatris would be, I think, very minimal. As I said, 99% of our portfolio has been through LOE. Only 1% is patented. I see very little impact on the current business. I think we may have to do some thinking.
If it is enacted, we may have to do some thinking around new products, patented products that come in, launch sequence, pricing, global consequences of pricing and launch sequencing and some of those things. Current impact, not very much. Future impact, potential. We are trying to think through all that. Again, you need the details of the legislation before you can go too far, right?
Right. Right. Maybe just one last one before shifting to the pipeline. The Indore facility, I think you said it's on track for the mid-year kind of resubmission to the FDA. Could you just walk us through kind of what are the next steps there once you guys do that? How should we think about modeling? Obviously, generic revenue will be off in 2026, but how should we think of kind of like a kind of boost in terms of revenue and even in next year?
Yeah. We are on track. We're going through the remediations of the whole plant. Most of us here have been there, or at least a couple of us have been there personally and checking out, making sure the remediation is going according to plan, making sure people are getting the right messages around it. The impact is in, I'd sort of look at it around three separate buckets, as you said, generic revenue likely gone, right? There are some fines and things associated that are one-time that won't be recurring. The rest of it, once Indore's up and we're also qualifying other plants to be able to produce those products and things, we'll be able to recoup some of that. It takes time. You don't recoup it immediately. There's competition out there supplying that drug. You have to come in.
You have to gain back the market share. Certainly, some of that will be part of our going forward enterprise.
Yeah. We've talked about an approximately $500 million impact from Indore this year. It is expected to be slightly more first- half weighted than second- half weighted. We saw about $140 million in the 1st quarter. We would expect the 2nd quarter to be in and around that same amount. To Scott's point, as we look into 2026, [rev on end] is about 40% of that $500 million that was anticipated to kind of go away anyways. About $100 million is due to the penalties and the short-term supply disruptions that we anticipate to be resolved. The remainder is what we'd be looking to kind of recapture over time.
Got it. Great. Great. Maybe with that, kind of shifting to the pipeline, you guys recently had several kind of positive phase III data sets. One of those was, or two of those were in pain, which created some buzz in terms of just kind of other competitive assets that are on or reaching the market. Obviously, this is a huge market, but there are nuances just given opioids, generics, etc. Maybe just give us a brief background on kind of what this asset is and how it's potentially differentiated versus the other assets that are out there. Then what is the kind of forward commercial strategy and maybe potential opportunity?
Thank you. Yeah, I'll start and then I'll pass it over to Corinne. Clearly, in acute pain, there's a significant unmet need for treatment that is at least as effective or more than the current opioids, but has a safety profile that does not have the well-known side effects of the opioids. I think that's really what the profile that we've demonstrated in phase III across two different models of pain. We've been able to show a significant and statistically meaningful reduction in acute pain versus placebo. As part of the study design, we also had an opioid arm, tramadol given 50 mg given every six hours to make sure that we could test the sensitivity of the model. We've also done a post-hoc analysis where we looked at the effect of fast-acting meloxicam versus tramadol.
Across both studies, we were consistently superior in terms of pain reduction, which is something that other treatments, including the most recent ones, have not been able to demonstrate as part of their phase III trial. I think this is very strong data that shows that not only do we have an efficacy superior to tramadol, 50 mg every six hours, but if you look at the dosage of opioids that we use, the equivalent is about 40 mg or more morphine equivalents, which is about 2x higher than hydrocodone 20 mg, which can be sometimes the other opioid that's used. A very important opioid dose was used there, which shows that really, truly, the efficacy demonstrated in this two phase III study was very strong.
On top of it, and importantly, after a lot of discussion with the agency, we added endpoints around reducing the use of opioids, right? Were we able to reduce the use of opioids when patients are on meloxicam? We show clinically meaningful, statistically significant effect across both studies, across both pain models. The profile came as strong as one would have liked as part of these two phase III studies. The safety profile was also very favorable. We saw an incidence rate of adverse events that was comparable to placebo. Benefit-risk for this acute pain with meloxicam fast-acting is very strong. We plan on using this data and filing by the end of the year. We will have conversations with the agency around fast track and to get the drug approved faster based on the unmet need. We will go from there.
We're going to commercialize this, as I said, as a branded product. Based on those very positive results, I think we feel that the product can compete very effectively in the acute pain moderate to severe market. Just to give you an idea of the sizing of this market, you have in the U.S. every year between 70 million-80 million cases of acute pain. Half of those patients still rely on opioids despite the fact that it is very well known that the use of opioid has abuse potential. We feel that with a profile like fast-acting meloxicam, we can offer what the market demands, which is a non-opioid, as effective therapy with a very well-characterized and established safety profile. The way we're going to commercialize this, of course, we're going to look at the post-operative segment, both inpatient and outpatient.
Potentially, we can go broader than this, depending on the label we're going to get. Because you can think of the treatment of acute pain in many settings, including dental pain, labor pain, post-operative pain, as already mentioned. Potentially, a large market that we can address. We will build a specialty sales force team to address this market, but we will also be able to leverage the current infrastructure that we have in institutions and notably in terms of contracting.
Corinne talked a little bit about the patient numbers. 80 million-90 million, you said?
Yes. 70 million-80 million.
70 million-80 million . The last I saw valuation of the marketplace was 2022 data, which suggested the acute pain market in the United States was $44 billion. It is a very large market. In clinical development, and Philippe knows this better than I do, sometimes you get surprised, right? You have the study that does not work, or sometimes you get data that is better than expected. I think we were very, very pleased at the quality of the study and the quality of the data that came out. It gives us a very, very nice platform to be able to launch this product given the strength of the data.
Great. Great. Maybe just kind of lastly on meloxicam, given this is a fast-acting formulation, how should we think about IP and your guys' patent protection?
Yeah. We're going to file using a 505(b)(2) pathway. We also are in the process of, we have patent pendings. Once the patent situation is resolved, we have more visibility there. We'll put it on the agency. Yeah.
Great. Great. Maybe shifting to Selatogrel. This represents a really interesting kind of emergency therapeutic option for heart attack that clearly addresses a major unmet need. Obviously, there are questions around patients' ability to administer it in an emergency situation. Could you just maybe comment on what you've seen so far? I think you've commented on this on the last earnings call, but the patients are doing this correctly. What other kind of data have you seen so far? When will we get an update there?
Yeah. We're getting often a question around this aspect. I think the so just started the studies going very well. We get good momentum. We've expanded the study globally. We are reaching 800 sites around the world. That part is going well. In terms of what we are seeing with the data, I think what we're seeing is that patients are self-injecting on time, which is it is important that the patient is self-inject as soon as they start getting symptoms of acute MI or heart attack. What we see is that patients typically self-inject within a half hour to an hour, which is extremely important in the sense that P2Y12 inhibitors, which Selatogrel is one of, have been shown to be particularly efficacious very early on in the acute MI process when the thrombus is still made of platelets, right?
The evolution of the thrombus then moves away from platelets, and that makes the P2Y12 less effective. So we're seeing that. What we're also seeing is that patients are able to recognize the symptoms of heart attack or acute MI properly, typically just chest pain, but they're self-injecting based on those symptoms. What we are also seeing is that these patients are able to take themselves to typically, the worry is that they self-inject and don't call to get proper diagnosis. We're not seeing that. We're seeing patients are well-trained and are able to take themselves to the hospital and get proper diagnosis. In terms of the type of acute MI we're seeing, I think there was also another assumption.
What we're seeing is that the type of acute MIs observed in the studies are on par with the assumptions that we had at the beginning of the study. That is particularly important for the primary endpoint. Talking about the primary endpoint, we wanted to see a 20% reduction in risk, 20% risk reduction. We have sized the study that way. We think that is somewhat conservative and that there is room for us. Finally, on the safety profile, we have had over 10 independent DMCs at this point. They have always told us to continue unchanged. They are unblinded to the data. We are not seeing an increased risk of bleeding at this point or severe bleeding at this point. The study is still ongoing, obviously.
All the assumptions that we had put together at the beginning of the study are playing out in a way that gives us confidence about what's about to happen.
Very, very interesting asset, I think. We need to wait on the data and see if the data, but if the data is positive and we get to registration, I do not think there is any better home for this asset than any company that is better than us, given our history with injectable self-administered rescue medicine, the fact that we have commercialized assets like that globally. We are currently in 165 countries, and we have tremendous experience with self-administered medication. I think I am very excited about the data. If the data looks good and positive and leads to registration, I think this could be a very, very important product for us.
Great. And then late 2026, is that still kind of the base case?
Yeah, that's still the base assumption.
It is an event-driven study. It could be before or after because it is not a standard in terms of number of patients enrolled and then going to the endpoint. Because it is event-driven, the timing could vary a little bit, but the assumption is still end of 2026.
Great. Great.
As Scott said, we will be ready to commercialize this asset. It's a market that we will be developing. There are like about, if you look at just U.S. and Europe, you have about 2 million acute MI every year, right? And maybe 9 million-10 million patients living with who had an MI previously. We will be targeting those patients, identifying those patients early on, educating patients and the medical community as well on how to recognize the symptoms. We will be deploying a specialty sales force visiting cardiologists, both in the hospital setting and in office. In terms of access, I think it's a question we get. If you look at this population of patients who have acute MI, about half of them are Medicare patients, and the second half commercial in the U.S.
We expect that we'll get relatively fast access considering the need. If you think in terms of the value proposition of the asset, the type of risk reduction, relative risk reduction we're going to see added to the reduction of negative outcomes post-MI will be very important in defining the value of this asset. We are pretty bullish about this.
Great. Great. Maybe switching over to the capital allocation strategy. I mean, we know Viatris was formed with kind of a stated goal to transition the company's business model to a capital return-focused company through dividends and repurchases. Clearly, this is obviously a really important aspect for you guys. Maybe kind of just frame for us how you think about the balance of capital return versus investing more in the company, business development.
Yeah. We have talked generally going forward, getting the debt paid down, and then having sort of a 50/50 capital allocation, 50% back to shareholders in dividend and share buybacks, and the other 50% to business development. That may be different any one year. This is a year where there is a lot of volatility, external volatility, macro volatility. We are leaning in, and certainly the first half of the year, we have leaned into share buybacks a little bit. Other years, there may be more business development opportunities. I think we are looking for things I am very excited about, sort of the midterm pipeline that we have, the selatogrel, the cenerimod, sotagliflozin, and other things. I think from a business development perspective, we want to look for more near-term assets, either sort of in market or very proximal to being in market.
We want to try and do accretive deals that are going to add both to our revenue and our EBITDA going forward.
Great. You mentioned cenerimod. We saw really interesting, mixed but interesting phase II data there. How are you guys thinking about the development of that asset? I mean, obviously, you're in lupus now. We know that's historically a tricky space. Maybe how do you kind of think about POS for that phase III?
Yeah. So I think to your point, the development of cenerimod, we've done three phase II studies. And I think what we've seen across these three phase II studies is a consistent profile for the 4 mg dose, which is the dose we're taking to phase III. The lower dose did not work as well as the 4 mg dose, which is what you do dose range finding for. So I think the profile that is emerging, both from a benefit risk profile, looks particularly attractive for an oral drug that can be given in combination on top of standard of care and prior to more aggressive biologic therapy, right? What we've seen in the phase II also is that the drug seems to work better in a more severe population, in a patient population with an interferon-1 high signature.
That's the type of patients we are recruiting or enriching the phase III program for. We're targeting about 80% of those patients, which is typically what has been seen, 80%-85% with the most recent phase III trial in this indication. We've also learned quite a bit from phase II and will be implementing a number of changes. For instance, the primary endpoint is no longer at six months. It's at one year, which is in favor of the drug, in favor of the treatment effect versus placebo. We also have to implement a steroid tapering mandatory, which will reduce the global placebo response rate for the studies. We have two large studies and one is going well. One is anticipated to be finalized around the end of the year. It takes about a year to read out, right?
You mentioned probability of success, right? When asking that question to Philippe. One of the things I think that's always important when you're developing assets and plays into the probability of success is, do you have experience developing these types of assets before? Philippe was a lead developer on S1P molecule, which is in the market for multiple indications now. I think that helps give us a good chance to pull this over the line, necessarily.
Are you guys thinking about broader indication expansion for this asset?
Yes. I mean, one natural evolution is lupus nephritis from SLE. I think that's one particular area that we are embarking on. The probability of success there is pretty high based on the mechanism of action and what we know so far, so.
These S1P molecules have broad immunomodulatory activity. We've seen them work in IBD. We've seen them work in MS. You see them work in a lot of different places. There are a lot of different indications that we can take this in. We can follow up lupus nephritis. Depending on once you see the initial data, it may take us down some other routes as well.
Great. Late 2026 also for that is okay. Maybe kind of lastly on the pipeline, you guys have an ocular portfolio, and we just saw recent positive phase III data. Maybe just kind of briefly touch on what we recently saw. What would you highlight from this portfolio in terms of kind of next steps and where the major opportunities are?
Yeah. We are in the process of building a pretty broad portfolio in ophthalmology or eye care. We just had our first readout this year in patients that have dim light vision disturbances after keratorefractive surgery. These are patients that typically cannot drive or cannot function under low or dim lights. What we have shown in our phase III study is that we saw a significant functional improvement in these patients, in their ability to drive, in their ability to function under these low lights. We think there is nothing approved for these types of treatment. We have had long conversation with the agency on how to design this and what is relevant and what kind of questions we should be asking these patients in the patient-reported outcome. We feel that this data can make a difference for these patients.
I don't know if you want to add to the.
Yeah. So I mean, if you just look at the number of keratorefractive surgeries every year, it is about 800,000 in the U.S. So potentially a large market. Now, I would say post-surgery, most of these patients will have visual aberrations in dim light conditions. And sometimes it will resolve by itself. In 25% of the patients, one month after the surgery, they still have those disturbances. This is a chronic condition. This would be the first FDA-approved product to address this issue. I think potentially it could be a very interesting market to address.
I'm sure the eye care division itself has gotten off commercially to a little bit slower start than we had initially anticipated. I think Corinne's done a lot of work to reform that group. We've got new leadership there from an overall perspective, from a commercial perspective, from a sales perspective. We're taking a look at that group, seeing how we can be more effective. We just had a positive readout. We've got two more phase III readouts for eye care coming this year. I feel very, very hopeful that the eye care group will be a major contributor to the company going forward over the next five years, 10 years. We just have some work to get it going in the right direction, but I think we've done some of that work, and I'm excited about the future.
Great. With that, we are out of time. Thank you guys very much for joining us.
Thank you very much.
Thank you for having us.