Emerging Markets And Global Aging Will Elevate Biosimilars

Key Takeaways

• Rapid advancement of innovative products and biosimilars, coupled with unrivaled emerging-market presence, is set to boost growth and diversify earnings streams.
  
• Deep integration, cost-saving initiatives, and strategic asset moves could unlock greater structural efficiencies, supporting sustained high profitability and cash flow.
  
• Pressure from global drug pricing reforms, operational and regulatory risks, and high leverage threaten Viatris' growth prospects, profitability, and long-term earnings stability.

Catalysts

Operates as a healthcare company in North America, Europe, China, Taiwan, Hong Kong, Japan, Australia, New Zealand, rest of Asia, Africa, Latin America, and the Middle East.

• While analyst consensus anticipates new revenue and margin gains from innovative products like selatogrel, cenerimod, and meloxicam, the scale and speed of positive Phase III readouts across multiple blockbuster candidates could significantly outpace expectations, accelerating a large step-change in both top-line growth and high-margin contributions by 2026.
  
• Analysts broadly agree that upcoming cost-saving initiatives will improve future margins, but the ongoing enterprise-wide strategic review-combined with further asset divestitures and deep integration post-merger-could unlock far greater operational efficiencies than modeled, resulting in structural margin expansion and sustained high free cash flow.
  
• Viatris is now emerging as a dominant platform in the global biosimilar market, well-positioned to rapidly capture share as governments and health systems worldwide accelerate adoption of biosimilars for cost containment, significantly lifting revenues and pushing long-term margin trajectories higher.
  
• The company's unparalleled commercial scale in emerging markets, combined with expanding access to healthcare and robust brand presence in regions like Greater China and emerging Asia, is set to drive sustained double-digit revenue growth and further diversify earnings streams.
  
• Viatris' resilient global manufacturing footprint-including strategic U.S.-based production and a shift toward complex generics-uniquely positions the company to capitalize on industry disruptions from regulatory or trade policy changes, minimizing risk and maximizing profitability in the face of potential headwinds affecting less-diversified peers.

Viatris Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Viatris compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Viatris's revenue will grow by 1.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -24.6% today to 6.8% in 3 years time.
• The bullish analysts expect earnings to reach $993.2 million (and earnings per share of $0.9) by about August 2028, up from $-3.5 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.8x on those 2028 earnings, up from -3.6x today. This future PE is lower than the current PE for the US Pharmaceuticals industry at 19.1x.
• Analysts expect the number of shares outstanding to decline by 2.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.12%, as per the Simply Wall St company report.

Viatris Future Earnings Per Share Growth

Risks

• Persistent global regulatory efforts to reform drug pricing, especially targeting generic products, could sustain downward pressure on Viatris' core generics business, leading to constrained revenue growth and reduced net margins over time.
  
• Viatris' heavy reliance on new pipeline launches for mid
• and long-term growth carries execution and timing risks, as delays or setbacks in product approvals or launches could undercut future revenue streams and stall earnings growth.
  
• Ongoing remediation requirements and unresolved FDA classifications at key manufacturing sites, such as Indore and Nashik, highlight operational risk and regulatory scrutiny, which may result in increased costs, supply constraints, and weaker profitability in coming years.
  
• The company's high leverage resulting from the Mylan-Upjohn merger limits its financial flexibility, increases interest expenses, and restricts strategic investment in R&D or business development, threatening future net margins and long-term earnings sustainability.
  
• Increasing competition from biosimilars, global moves towards healthcare digitization, and consolidation among pharmacy benefit managers and large customers amplify pricing and market share pressures, posing long-term headwinds to Viatris' revenue and earnings stability.

Valuation

• The assumed bullish price target for Viatris is $14.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Viatris's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $14.0, and the most bearish reporting a price target of just $8.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $14.7 billion, earnings will come to $993.2 million, and it would be trading on a PE ratio of 18.8x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of $10.68, the bullish analyst price target of $14.0 is 23.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.