Keep going here at the VMA Annual Healthcare Conference. Our last company presenter of the day, Viatris, joining us is Doretta Mistras, Chief Financial Officer, and Philippe Martin, Chief R&D Officer. Martin or Martin?
Whatever you want. Martin is good.
Thank you. My name is Jason Gerber. I cover Smithcap Biotech and specialty pharma at VMA. Maybe just for starters, since the Upjohn-Mylan merger and then subsequent some divestitures within the portfolio, if you could just kind of level set in terms of where you are, in terms of setting the strategic compass for the company, what Viatris wants to become as we think to the next three to five years for the business. I know you guys have been vocal about moving up the value chain in terms of more durable, high-growth brands and where you feel like you're at in terms of that trajectory.
Thank you. Thank you for having us. We're happy to be here. As you mentioned, I mean, since the inception of Viatris as we know it today, we've integrated two very large organizations between Mylan and Upjohn. We've also been focused on really streamlining the enterprise. Over the past couple of years, we've made several large divestments, including biosimilars, OTC, women's health, and NAPI. Kind of today, as we look at the portfolio of kind of assets that we have today, we're really focused on executing on our strategy. That includes delivering on kind of our diverse base business of assets and really delivering on the 450-550 of new product revenues.
We have very strong cash flow generation where we leverage those cash flows to really invest not only to return capital to shareholders, but really invest in adding assets, more innovative, branded, durable assets to our portfolio in order to build upon kind of our base business revenue to accelerate revenue over time and kind of continuing to advance our innovative pipeline. Over the past 12 to 18 months, we've added Selatogrel, Cenerimod, Sotagliflozin. We just had positive data on meloxicam, Xulane low dose. Really advancing a growing pipeline of innovative assets going forward.
Okay. Maybe capital deployment's a key part of the story. And investors are, I would say, hypersensitive to this. There is a peer company that lost a fair amount of value in the last couple of weeks. They announced the cutting of a dividend. I don't think that that's in the offering for you guys. But as you think about the guardrails for shareholder return versus M&A, and I got the sense that from the earnings call, M&A's still part of the focus. Maybe it's a little bit more shifted to near-to-market or on-market types of structures. But how would you orient investors to think about how you'll be deploying capital?
Yeah. Business development is still a strategic priority for the company. We've talked about generally deploying 50% of our cash flows to capital, returning it to shareholders, 50% to business development. That's more over a longer-term average. We may lean in a little bit more towards one area or another at any specific time. This year, we've talked about allocating a little bit more towards capital deployment. It is important to continue to add to the portfolio. We're really focused on those durable, innovative, near-market market opportunities that really can provide durability and accelerate our long-term growth. We're also going to be looking at regional deals where we can kind of leverage our base infrastructure, especially outside of the U.S., and have more of a kind of tuck-in, immediately accretive nature.
I would say this year, we're really focused on kind of the latter, the immediately accretive types of transactions. It is important to take a portfolio approach as we think about the growth of the company and really accelerating our revenue growth over time.
The importance of remaining investment-grade with entities like Moody's, is that still a top priority for you guys? In the aftermath of the divestitures, it seems like that was important to get the leverage to a level that investors are maybe more comfortable with.
Yeah. Investment-grade is still important to us. We haven't changed our financial policy. Over the past four years, we've actually paid down over $10 billion of debt to get to our kind of three-times leverage target. We've always talked about operating within a 2.8-3.2 kind of window as we've kind of talked about it.
Yeah. Okay. Maybe shift to just portfolio and portfolio-related topics. I mean, tariffs have been topical. I think we've heard from a lot of our companies that nothing to see here so far, right, on what we know today. Maybe just how you guys are thinking about your manufacturing supply chain and flexibility to maneuver around any potential policy shifts as the administration has the ongoing 232 investigation?
Yeah. There is still a lot of unknowns in terms of kind of where, what types of tariffs will be implemented. To start, our big focus, and we are engaged with members of the administration, with Congress, to really kind of articulate and explain the impact of tariffs to patient access because at the end of the day, that is the most important to us. Number one, I think it is helpful just to contextualize a little bit about our footprint. About 25% of our business is in the U.S. Of that 25%, about 50% of our revenues, a little over 50%, is actually manufactured within the U.S. About 50% comes from outside of the U.S. and primarily in Ireland, India, and the U.K. We have eight facilities in the U.S. between our manufacturing, R&D, and packaging sites. We actually manufacture about 8.5 billion doses annually here in the U.S.
The U.S. is an important piece of our manufacturing and will remain. We are actively looking at ways to not only mitigate but look at ways on how we can continue to leverage our U.S. manufacturing footprint. That includes seeing where we can increase existing capacity. That includes opportunities to leverage third-party suppliers. That also includes areas where we can potentially invest as well. We are looking at all those opportunities as we move forward.
I guess the spirit of the 232 investigation had to do with critical medicines. Does Viatris play a role at all in supplying some of these critical medicines where maybe there's a perceived over-indexing or over-reliance to countries that maybe there's concern about having excessive reliance like China? As you think about sort of the supply chain continuum, is there an opportunity to play a role in that to address those concerns that the administration has raised? It's an unfair question. I'm just kind of curious if you have a thought on that.
Yeah. No. We did actually participate in the 232 process. Really, our focus was, number one, articulating the value that generics play in providing important and critical medicines to the U.S. Generics provide about 90% of the volume in the U.S. but account for a little over 1% of the total costs. It is important to kind of not only articulate the value that generic medicines play but the potential risks to supply shortages and patient access in the instance. We did participate, but it's hard to know the exact impacts until we have more clarity.
Okay. Maybe five or six more minutes just on some portfolio-related topics. I want to get to the pipeline. As we think about the kinetics of growth this year, stronger growth in the second half, what are some of the drivers for that second half growth and what underpins it? You'll get to that. I know you've kind of left some upside drivers out of the guide, including resolution of the import ban with India. I think FX tailwinds were not factored into your guidance as well. Is it more just capturing more of a second half-weighted new product introduction into the guide that drives that swing?
Yeah. Just to start, from a Q1 perspective, Q1 operationally performed in line with what we expected across all regions, excluding the impact of indoor. We saw growth in the business of approximately 2%. Kind of in line with what we expected. In light of that, to your point, we have maintained our outlook for the year. As we think about phasing, number one, we've talked about indoor, still unchanged in terms of our expectation of total year impact of indoor of about $500 million of revenue, $385 million of EBITDA. We do expect that to be more kind of first half-weighted versus second half-weighted. That is a factor. The other two factors that impact our phasing, number one, our new product launches are expected to be more second half-weighted versus first half-weighted.
We do have some normal product seasonality that kind of factors into the second half. When you take that in aggregate, as I talked about on our call last week, we do expect the second half to be slightly more weighted. As we think about revenue contribution, about 52% of our revenue we expect to come in the second half. In terms of some of the factors that we kind of have not incorporated, FX we do see as a tailwind. If we think if spot rates continue at the current rates that we have seen the past little while, we do expect that to offset the 2-3% headwind that we had projected at the time of guidance.
At the same time, we're also not factoring in any of the unknowns as it relates to tariffs or other macro policies that are unknown at this time.
Okay. From a manufacturing quality perspective, your kind of overarching commentary in terms of level of confidence that you feel like you have a good handle on this, that it won't spread to other facilities or anything along those lines?
Yeah. Indoor remediation is on track. The anticipated impact, as I mentioned, for the first quarter was in line with our expectations and continue to see that for the full year. We are on track to submit or go back to the FDA mid-year and request reinspection. We are on track there. As we've talked about, we have one other facility in Nashik that is pending classification. We've been working with the FDA. We've actually completed all the kind of steps that were kind of requested at the time of inspection, but that is still outstanding.
Okay. Do you feel like your level set in terms of divestitures, that you've got the businesses in-house now that you plan to kind of move forward with for the next three to five years and the geographical footprint? I guess for companies that pivot to specialty brands, it tends to be a US focus. I'm just kind of curious, the broad-based global approach, how that fits within the longer-term plans.
Yeah. As mentioned, we did go through a series of divestitures in light of kind of in order to streamline the business. I would say we're always going to be looking at how do we optimize our footprint. I would say we feel good about the portfolio of assets that we have today. We are embarking and in the process of undergoing an enterprise-wide review in light of the investments that were made to just make sure that we're fit for purpose. We're optimizing our current structure not only to support the base business but to make sure we're really set up for the future. That process is ongoing. We feel good about the portfolio that we have today, but we'll continue to evaluate it.
You have a planned investor day at some point this year. I don't think you've come up with a specific date. Is the agenda for something like that more about the enterprise review and decisions and more about the fundamentals of the business, or you did an R&D day a year ago and that was more education on the pipeline, or is it some combination of both?
I think it's the way we view it, and we're targeting the second half of the year. We will be forthcoming with more details as we get closer. It's really to be able to tell a full picture. We have a number of pipeline readouts expected in the first half of the year. We already had three positive readouts already. We're anticipating three more readouts in the first half. It's to be able to talk a little more in depth around R&D. It is the kind of first year as a post-divestiture kind of enterprise, and it is the opportunity for us to provide additional context around the enterprise-wide review that we're undergoing. It enables us to tell a full picture of where Viatris is going going forward.
Okay. Maybe, Philippe, maybe we can jump to some pipeline topics. You had some interesting data at the most recent quarterly update, maybe starting with the fast-acting meloxicam phase three data for acute pain. I don't know. How would you sort of contextualize, I think, the clinical benefit that you're seeing with this product relative to existing acute pain treatment options and how you see that as a value add for patients?
Yeah. As we just released during the quarterly call, the top-line results of two phase three studies for fast-acting meloxicam. We designed this asset specifically for the treatment of acute pain. I think we could not be more pleased with the data we got. We hit on our primary and all secondary endpoints. Importantly, we saw a significant and clinically meaningful improvement in pain versus placebo. As part of the study, we had on purpose added an opioid arm so that we could ensure that we have the proper sensitivity for those models. Postdoc analysis have shown that meloxicam has consistently a superior profile to tramadol from an efficacy standpoint. That was extremely important for us to have a drug that is at least as efficacious as opioids. At the same time, we looked at the ability of the drug to reduce the usage of opioids.
We saw a statistically significant difference where patients on meloxicam had fewer doses of opioid overall, and significantly more patients had left steroid-free by the end of the study. Fast-acting meloxicam, fast onset was also very important. Our data shows that we are very fast, faster than other treatments currently available. Obviously, the safety profile is well known for meloxicam, but the phase three study showed again that this drug, in terms of incidence rates of TEAs, was very similar to placebo. We believe that we have data from this two-phase three study and from the phase 2 study in dental pain as well that position this drug optimally for first-line treatment. Importantly, it is able to show that it can significantly reduce the usage and dependence on opioids for the treatment of acute pain.
Would you anticipate, at least when the NDA is submitted, sort of a broad indication like Vertex's Jornevax, which is, I think, just for acute pain? I don't think that it's specific to post-surgical or.
No. It is moderate to severe acute pain. We believe that we will get a similar label. Our patient population in the phase three study had a mean pain score at baseline of 7.8 and 7.3 in the two studies. A population representative of moderate to severe patients.
How would you break down? I think there's something like 70 million cases, right? That's such a vast market, but I imagine there's a lot of segmentation. Maybe this is a subject for future investor data to get investors on how to drill down into that moderate to severe. I imagine that a lot of these patients maybe get a five-day script for an opioid or acetaminophen or some high-dose acetaminophen.
Yeah. We decided to study, we had an inpatient phase and an outpatient phase as part of the study, outpatient phase worth of five days' duration total. As to what the script duration of the scripts, I think to your point, we'll go into that level of detail during the investor day. I think what is particularly important, you said 70-80 million patients are treated in the US for acute pain every year. Out of those, approximately 40 million are given an opioid, right? I think there's a clear push for this to stop and for this opioid treatment to be replaced by other non-opioid, non-addictive treatments such as fast-acting meloxicam.
It sounds like perhaps this can be both an institutionally used medicine as well as an outpatient-used medicine based on some of the clinical data that you've generated and the value that you feel like this can bring to patients in both of those settings. Is that a fair supposition?
That's exactly how we see it, yeah.
Okay. Any observations at all in terms of the monitoring, the Vertex launch? I imagine that's been controversial, how big can acute pain as a category be? They bring a novel non-opioid mechanism to the table, right? I guess the million-dollar question a lot of folks are wondering is sort of price and access because it is such a big market.
Yeah. It is a bit early for us to start talking about pricing and access. I mean, we got the data four days ago, I think, something like that. That will be certainly a significant focus of ours going forward is to look into this. As I said, we will certainly go into more details during the investor day. I think to me, the commercial need, the unmet need is very clear. There is a need for a drug that is at least as efficacious as the opioid but does not have the issues that are known with the opioids and that can replace this treatment. We have shown as part of our two phase three study that the drug can do that.
Okay. You also have a phase three program, pimecrolimus, for blepharitis, which is a large market by epidemiology. We actually cover a company called Tarsus who has Extembi for, I guess, blepharitis where you have a Demodex infestation, a mite infestation. Their view of things is that pimecrolimus therapy would address more of the inflammation, whereas they get to the root cause with the mites. These are potentially complementary therapies. Do you see the world that way in terms of sort of the therapeutic benefit of what a pimecrolimus-based therapy might offer to a patient with blepharitis?
Yeah. You're completely right in the sense that we are an anti-inflammatory. Pimacrolimus is an anti-inflammatory agent. Extembi is an anti-infective. Extembi is approved for the treatment of blepharitis, Demodex blepharitis, which is a subtype of blepharitis. We intend to, at least our studies are designed for any etiology of blepharitis, including Demodex blepharitis. You could very well see a higher need for a drug that treats blepharitis outside of Demodex blepharitis. That being said, the treatment with Extembi is not 100% cure, right? There are a lot of patients that will need other treatments. You could see these Demodex patients certainly be treated with Pimacrolimus as well.
What are you hoping to see from the data in terms of, I guess, a benefit? Maybe what are patients using for the inflammation now? Is there any anti-inflammatory agents that they've got available?
No. Typically, right now, they use the antibiotics and just compresses that they put on it until they resolve. It takes a very long time for it to resolve. What we expect from the phase three study is clinically meaningful changes in both the debris that you see in those patients and then also the ocular pain that is seen in those patients. We want a label for signs and symptoms of blepharitis. We believe that's what we're treating with pimecrolimus, which is not the case with Extembi.
Okay. Maybe with Selatogrel, it sounds like enrollment is progressing in line with targets. I guess with this study, the things that you're hyper-focused on are ventricle and are patients properly using the therapy when it's appropriate to use it? I know historically you've tracked that and commented on that. Any updates that you would just kind of provide to investors just as they think about the integrity of the trial and the ability to read out a hopefully successful result there?
Yeah. I think I can make a couple of comments. We certainly are on schedule to get the study enrolled in 2026 with over 800 active sites around the world. This is a pretty large study. To your point, I think the event rate is particularly important. What I've said previously is still very valid, which is that what we're observing is patients are self-injecting. They're self-injecting at the right time, which is the earlier they inject, the better. Certainly within that first golden hour is extremely important. We see them do that. Importantly, once they've self-injected, they have to self-inject for the right reasons. We certainly see that they're injecting when they have symptoms of acute MI, which typically is just chest pain, right? Lastly, it's important that they seek medical support once they've self-injected, just at the minimum to get proper diagnosis.
We see them do that very quickly after they're injected. The study from that point of view is happening as we had planned. What's also important is that we're now having enough data to start seeing how the distribution of the acute MI for the purpose of the primary endpoint are looking like because it's a ranked endpoint with different types of acute MI. What I can say is that the assumptions we had originally are spot on. We're seeing that distribution to date. Talking about the primary endpoint, we always say that we are looking for a 20% risk reduction. We believe that is somewhat conservative in that we should be able to see a higher risk reduction than the 20% based on.
The basis of that was what was seen with IV Cangrelor if you get that in the proper window to treat how you help patients.
Yes. With the other P2Y12 inhibitors, there are a number of studies. None of them are perfect, but they are looking at the timeframe of when those patients are injected. Depending on how quickly the drug is acting, you're able to determine the risk reduction that you see with the treatment. It should be well above 20% if the drug is given at the right time, which is what we're seeing right now.
Do you have an estimate at this point in terms of once enrollment's complete, how long until you'd be at a potential or a range of time when you'd be able to have top-line data?
Again, it's an event-driven study. So there's a little bit of uncertainty around once you're done enrolling, when you get enough of all the events you need. That said, we're planning on enrolling right through to the time we get the number of events we need, which we anticipate is in 2026.
Okay. Let's see. For selatogrel, I think you talked about 2 million patients, maybe U.S., Europe combined, that maybe fit the profile of a prior MI event as sort of your addressable market. These are more of a recent incidence-based pool of patients who had a recent MI event versus someone who maybe had an MI event like 10 years ago. My understanding is trying to get a sense of commercially, if this ends up looking like EpiPen, right, where patients are going to want to have that coverage and carry that with them. And what that patient profile and that experience that they have is going to motivate them to want to ensure that this does not happen or they can achieve the best outcome if it does happen.
Yeah. I think at the time of initial launch, what we are looking to have is targeting patients that had prior acute MI, okay? Now, for the purpose of the conduct of this study, in order to get a faster event rate, we are looking at factors that can increase that event rate. We did a recent real-world evidence study that we will publish soon that looks at these factors that are increasing the risk of recurrence of an acute MI. We are including those as part of our study, which gives you an example. Comorbidities such as type 2 diabetes are typically a significant risk factor for recurrence of acute MI. Multivessel disease is another one, so as part of the study, we are enriching the study to get higher event rate.
We believe that that will cover that the data is applicable to the entire recurrent acute MI population.
Which is $25 million.
Which is $25 million.
The annual incidence, that's 2 million.
Right. And it's about 10 million in the U.S. is the number of patients we're talking about. That said, there's also a risk for an opportunity for expansion over time, again, looking at these risk factors for patients that are at risk of an acute MI. But that's for the future of this drug.
Yeah. Okay. We're out of time. Thank you so much for joining us at the conference.