Stable First Quarter for Viatris Propped Up by Biosimilars

Viatris posted first-quarter results on track with our forecasts, and we maintain our $25 fair value estimate and no-moat rating. First-quarter revenue was $4.4 billion with a 25% adjusted net margin. Compared with a premerger-adjusted first quarter of 2020, global generics revenue declined 4% due a tough comparison period in Europe. Branded generics' revenue declined by the same amount due to a moderate slowdown in emerging markets. In contrast, complex generics and biosimilars grew 30%, driven by biosimilars including pegfilgrastim (for febrile neutropenia), trastuzumab (for cancer) and adalimumab (for immunology). We anticipate a degree of bumpiness in earnings over the next few quarters and beyond as management proceeds with its restructuring plan, but we expect that the gross margins of the component businesses will remain solid. Management reduced long-term debt by $300 million this quarter to $22.1 billion and reaffirmed last quarter’s guidance for 2021.