It seems strange that a Fortune 500 company with a declining revenue base would be worth placing on the investment watch list.
Yet that’s the case with pharmaceutical manufacturer Viatris Inc.
Viatris was formed in 2020 with the merger of Mylan and the Upjohn Division of Pfizer. The company lost $1 billion plus in the first year as integration of the two units was being achieved.
Mylan brought a strong position in lower priced generic drugs with a large market share in emerging markets to the marriage. A growing middle class in these markets can better afford medications, especially lower cost of generic meds.
Mylan also brought a suite of biosimilar meds in use and in development. Biosimilar drugs are like a generic version of biologic meds.
Biologics are expensive complex drugs made of living organisms and are injected. Biosimilars are also injected.
But prices are quite different. The biosimilar Ereizi for rheumatoid arthritis costs $305 per injection versus $416 for the biologic Enbrel.
Upjohn brought a suite of older established drugs into the marriage — Lipitor for cholesterol, Norvasc for high blood pressure, Lyrica for nervous disorders, and Viagra for erectile dysfunction.
These four and the Epipen patent amount to about one-quarter of revenues for Viatris.
Company literature shows a past and future erosion of revenues at a three to four per cent annual pace as older meds are replaced by competition or generic versions.
Debt is around $23 billion, about two billion more than shareholders’ equity in the business.
So what makes Viatris even remotely interesting to an investor?
The company plans to pay down $6.5 billion debt by 2023 with $2 billion last year.
Another $2 billion in cost savings is expected by 2023 as duplicate manufacturing and research facilities are integrated.
Biosimilar and generic sales are expected to grow much faster than the three to six per cent by global meds in general.
Revenues are broadly diversified with about 60 per cent from North America and Europe, 13 per cent from China, 11 per cent from Australasia and 16 per cent from the rest of the world.
The most compelling argument to keep a close eye on Viatris comes from the price to earnings ratio. The recent price of $14.98 US is only four times the expected earnings in 2022.
Normally one would expect a stable company like Viatris to trade at eight times earnings on just under $40.
Fourteen analysts on Yahoo.com have an average consensus of $19.95 US, varying from $15 to $35.
Investors receive a 3.2 dividend yield while waiting.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
