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S&P 500   4,967.23
DOW   37,986.40
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How major US stock indexes fared Friday, 4/19/2024
Stock market today: Tumbling tech stocks drag Wall Street to the finish line of another losing week
American Express profits jump 34%, helped by jump in new customers, higher spending
American Express, Fifth Third rise; Netflix, PPG Industries fall, Friday, 4/19/2024
Intuitive Surgical Stock Can Trend Much Higher This Year 
3 Magnificent Seven Stocks Outperforming the Rest
Bargain Hunting: 3 Stocks With RSIs That Scream Oversold
S&P 500   4,967.23
DOW   37,986.40
QQQ   414.65
How major US stock indexes fared Friday, 4/19/2024
Stock market today: Tumbling tech stocks drag Wall Street to the finish line of another losing week
American Express profits jump 34%, helped by jump in new customers, higher spending
American Express, Fifth Third rise; Netflix, PPG Industries fall, Friday, 4/19/2024
Intuitive Surgical Stock Can Trend Much Higher This Year 
3 Magnificent Seven Stocks Outperforming the Rest
Bargain Hunting: 3 Stocks With RSIs That Scream Oversold
S&P 500   4,967.23
DOW   37,986.40
QQQ   414.65
How major US stock indexes fared Friday, 4/19/2024
Stock market today: Tumbling tech stocks drag Wall Street to the finish line of another losing week
American Express profits jump 34%, helped by jump in new customers, higher spending
American Express, Fifth Third rise; Netflix, PPG Industries fall, Friday, 4/19/2024
Intuitive Surgical Stock Can Trend Much Higher This Year 
3 Magnificent Seven Stocks Outperforming the Rest
Bargain Hunting: 3 Stocks With RSIs That Scream Oversold

Viatris Q1 2022 Earnings Call Transcript


Listen to Conference Call

Participants

Corporate Executives

  • William Szablewski
    Head of Global Capital Markets
  • Michael Goettler
    Chief Executive Officer and Executive Director
  • Rajiv Malik
    President and Executive Director
  • Sanjeev Narula
    Chief Financial Officer

Analysts

Presentation

Operator

Good morning, my name is Britney and I will be your conference operator today. At this time, I would like to welcome everyone to the Viatris 2022 First Quarter Earnings Call and Webcast. All participant lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. [Operator Instructions] I would now like to turn the call over to William Szablewski, Head of Global Capital Markets. Please go ahead.

William Szablewski
Head of Global Capital Markets at Viatris

Thank you and good morning, everyone. Welcome to our first quarter 2022 earnings call. Joining me today is Michael Goettler, Chief Executive Officer; Rajiv Malik our President; and Sanjeev Narula, our Chief Financial Officer.

During today's discussion, we will be making forward-looking statements on a number of matters, including our financial guidance for 2022 and various strategic initiatives. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. Please refer to the press release that we furnished to the SEC on Form 8-K earlier today for an explanation of those risks and uncertainties and the limits applicable to forward-looking statements. We will be referring to the actual and projected financial metrics of Viatris on an adjusted basis. Which are non-GAAP financial measures. We will refer to these measures as adjusted and present them to supplement your understanding and assessment of our financial performance.

Non-GAAP measures should not be considered as a substitute for or superior to financial measures calculated in accordance with GAAP. The most direct comparable GAAP measures as well as reconciliations of non-GAAP measures to those GAAP measures are available on our website at investor.viatris.com and in the appendix of today's slide presentation. The information discussed during the presentation, except for the participant questions is the property of Viatris and cannot be recorded or rebroadcasted without Viatris' expressed written consent and permission. A copy of today's presentation is available on our website at investor.viatris.com. An archived replay of the webcast will be available on our website following the conclusion of today's event.

With that now, I'd like to hand the call over to Michael Goettler, our Chief Executive Officer.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Thank you, Bill, and good morning. Thank you all for joining us for our first quarter 2022 earnings. I'm pleased to say that we are off to a good start to the year with strong first-quarter results in line with our expectations across all key financial metrics, delivering on our financial commitments, and making good progress on the reshaping initiatives we announced in February.

For the full year, we remain confident in our 2022 financial guidance on operational basis and we are continuing to monitor the current headwinds brought on by foreign exchange rates. Now, here are some highlights from the quarter. In the first quarter, we reported total revenue of $4.9 billion adjusted EBITDA of $1.59 billion, and free cash flow of $1.07 billion at 34% increase over last year. This strong performance has enabled us to continue to deliver on our financial commitments for debt repayment while continuing to return capital to shareholders through the payment of the dividend. We're continuing our successful integration capturing synergies and simplifying our processes and organization. Our development engine continues to deliver key pipeline milestones and highlights for this quarter include the launch of generic Restasis and generic Revlimid and the full FDA approval of generic Symbicort. Overall, we generated approximately $120 million a new product revenue in the first quarter and we on track for $600 million in new product revenues for the full year.

Now, allow me to switch gears to our future. In February, we announced a significant global reshaping initiative to unlock trapped value and build a simpler stronger, and more focused company, which is well-positioned to deliver more access to patients and more value to shareholders. Since February, we've engaged in conversations and meeting with numerous shareholders. We've listened carefully to your feedback and we recognize there is a desire for more clarity and more certainty about our strategic plans and the steps we're taking to get there. We fully understand the importance of remaining engaged with you and we'll update you on our progress as we go along.

So let me give you an update on what was achieved in the first quarter. I'm pleased to say we made good progress during the quarter on the biosimilar transaction with our parking a Biocon Biologics and we believe we are on track to close the transaction in the second half of 2022. Rajiv later will give you more details on our activities to date, we are also making good progress on the previously announced divestiture of the portfolio as of other select non-core assets, which we identified. We remain confident that we will execute against all of these plans by the end of 2023. We strongly believe that our company's, equity securities continue to be significantly undervalued, and as we continued to generate strong operating cash flows from our business and realize the proceeds for more efforts to unlock value, we're focused on maintaining our quarterly dividend paying down, debt future share buybacks and other actions, all of which will enhance shareholder value over the short, medium and long-term. And with regard to timing for share buybacks, we hope to consider repurchases under the program already approved by the Board of Directors as soon after the close of Biocon Biologics as possible.

In summary, we had a very strong core and we are excited about the future that we're building for Viatris. I can assure you that the entire company is focused on executing on these initiatives that we set forth for our business. Meeting or exceeding the operational goals that we set generating significant free cash flow, which remains our financial North Star, and unlocking value while reshaping our company for stronger future. With that let me turn it over to Rajiv. Rajiv?

Rajiv Malik
President and Executive Director at Viatris

Thank you, Michael, and good morning. I'm excited by our strong results this quarter that reflect on focus business execution on all fronts. We manage the base business, maximize new launches, delivered on our pipeline and continue to execute our integration and TSA exits all while advancing our reshaping initiatives.

Let me start with an update on transactions with Biocon Biologics. We are progressing with all regulatory approvals and importantly have clearance from the U.S. antitrust perspective. The remaining regulatory approvals are expected in the coming months. Biocon is also on track with securing its financial commitments. With this positive momentum, we are well-positioned to close this transaction in the second half of '22.

Now moving to our quarterly segment results which begin on Slide 7 of our earnings slides posted on our website. As I walk you through the performance in each of our segments and product categories, I will be making certain comparisons on an operational basis versus our plan that supported our guidance, we communicated back in late February. Our developed market segment continues to be a strong and resilient commercial business built on a foundation of a very diversified portfolio of brand generics and complex products, which has allowed us to improve the predictability and sustainability in what continues to be a dynamic and challenging environment. In North America, we continue to demonstrate our focus and dedication to patients through [Technical Issues] based on the strength of our proven development capabilities. Our interchangeable biosimilar Semglee is off to a great start as the total prescription share approaches 10% which is in line with our expectations. Generic Restasis is another example of a first-to-market complex product and is also off to a strong stock.

Moving to our generic Symbicort named Breyna, we are very excited to receive FDA's final approval in March. This milestone furthers our track record of successful for us [Phonetic] in developing complex generic medicines to help increase patient access. It is a trial scheduled for May 19th in the West Virginia federal court, and we continue to have the opportunity to launch this product in 2022 as upcoming proceedings develop. Other key products like Yupelri and Wixela performed in line with our expectations, while showing year-over-year double-digit volume growth. Our European business is also off to a solid start and remains on track to grow mid single-digit for the full-year '22. Italy, France, Spain, and Portugal performed strongly to further enhance our retail channel leadership in these countries. We also saw stronger than expected performance across brands such as Creon, Lipitor, Dymista, Lyrica, and ibuprofen.

Our thrombosis portfolio continues to grow in line with our expectations. Hulio our biosimilar to Humira, which adds roughly 20% plus market share of the biosimilar market is another key contributor to our German and France businesses. Our recently launched generic Revlimid is the first in CDs of key launches planned for Europe this year.

Our emerging market segment showed a strong quarterly performance. Our ARV franchise performed slightly better versus our expectations this quarter. Key geographies such as South Korea, Southeast Asia, and Turkey drove higher volumes, while Brazil realize better pricing. Lipitor and Lyrica led to strong growth in this segment and helped the brand category perform better than expectations.

Moving to Jan [Phonetic], the headwinds on account of annual government NHI price reductions in Japan, are being partially offset by strong year-over-year volume growth of our authorized generics and brands like celecoxib, Amitiza, and Effexor. In addition, we saw strength in Creon and EpiPen in Australia versus last year. On biosimilars, we are pleased that Hulio has achieved more than 50% market share in Japan however, we continue to believe that there is plenty of room for the overall Humira biosimilars market to grow as it only stands at 10% today.

Lastly, an update on Greater China. Our strong and brought Marshall infrastructure has helped us to deliver a strong performance despite COVID and COVID-related lockdowns our retail channel performance especially Viagra was slightly impacted by COVID which was more than offset by better than expected performance of the hospital channel primarily led by Lipitor. Our manufacturing operations in China continue to perform well and at this time, we do not foresee any potential disruption to our China supply chain. Given our solid start to the year and a strong customer service performance across all segments delivered by our global supply chain, we remain confident to deliver on our full year expectations across all segments on an operational basis.

Switching now to our pipeline. For your benefit we have included current snapshots in our earnings materials, beginning on Slide 13. There are a few noteworthy pipeline updates. Our Eylea biosimilar review is progressing well and we can confirm that we have no outstanding science issues. We are currently waiting for the facility approval by FDA. As a reminder, this program is a part of Biocon transaction. Our biosimilar to BOTOX filing for USA, FDA will be delayed. We remain committed to the successful development of this complex biosimilar with Revance and to the earliest possible launch in the United States. Our clinical trial for GA once-monthly has a number of patients who are located in Ukraine and are being impacted by ongoing situation there. As a result, we are pushing back or FDA filing by one quarter it is now scheduled for the first quarter of '23. We recently received FDA approval of our Levothyroxine Oral Solution named [Indecipherable] and are looking forward to launching later this year. Also, we received a GDUFA goal date of October '22 for our potentially first to file generic Pentasa. Lastly, we believe that we achieved first to file status Abilify Maintena further enriching our first to market opportunities of complex injectables which now include Paliperidone 3-month, Octreotide LAR, ferric carboxymaltose, iron sucrose and semaglutide.

And finally, an update on integration as you can see on Slide 17, we remain on track to realize $500 million of COGS synergies over the next two years resulting in at least $1 billion cumulative COGS synergies since becoming Viatris. Our objective throughout this year is to complete our TSA exits from Pfizer, making Viatris self-allign [Phonetic] in terms of systems and processes and positioning the company to further accelerate the optimization of our infrastructure. Before I conclude, I would like to thank our colleagues for their hard work to deliver yet another excellent quarter and lay a solid foundation for the year. With that, let me now turn the call over to Sanjeev.

Sanjeev Narula
Chief Financial Officer at Viatris

Thank you and good morning, everyone. Please turn to Slide 18. As we discussed, our first quarter 2022 financial highlights. We are off to a good start and saw strength across the business. Operational revenue was stable relative to prior year, gross margin was strong SG&A benefited from realization of synergies and free cash flow improved significantly. This performance in total was solid and in line with our expectations. Let me walk you through the key drivers that contributed to first-quarter performance.

On Slide 19, we have summarized, our results versus the prior year on a reported basis. Moving to Slide 20, sales benefited from performance across our segments and several new product launches. As a result, sales were in line with expectations, on an operational basis, down marginally versus prior year by approximately 1%. Our global business is approximately 70% non-US dollar-denominated. As a result of dollar strengthening against major currencies foreign exchange had an unfavorable impact of approximately 4% versus first quarter 2021. Sales in developed markets were flat, as a result of stability across brands and genetics along with the contribution of new product sales.

In North America, sales of 1.1 billion were in line with expectations. We saw growth across products like Yupelri and the benefit of new product sales including interchangeable insulin glargine and Generic Restasis. In the quarter, these trends contributed to overall performance and offset the expected impact of competition on key products and generic price erosion. In Europe, we are off to a strong start in sales grew by 5% on an operational basis. This is a result of category diversity which stands genetic brand products such as Dymista and Creon in our thrombosis business. We're seeing encouraging trends, with recently launched generic Revlimid.

Moving on to emerging markets, overall operation sales were flat and benefited from growth in brands including Lipitor and Lyrica. This offset pressure in genetics. As a result of lower ERV volumes. Our gen segment was down 4% driven by government price reduction, which we had anticipated in Japan and lower volume in Australia. Partially offsetting these trends is a continued uptake of authorized generic products.

Lastly, the Greater China segment was impacted by the carryover of policy changes in China that were implemented in 2021. Overall, trends are stable across key brands such as Lipitor in the hospital setting. Retail selling continues to be a priority area of growth given our focus on broadening the patient population. On Slide 21, let me walk you through the P&L elements that led to EBITDA being essentially flat versus prior year. Adjusted gross margin of 59% came in slightly ahead of expectation and were driven by favorable mix associated with brand performance and new product launches. SG&A was down approximately 14% and benefited from synergies realized over the last year associated with integration and restructuring activities.

Turning to Slide 22, we had an excellent quarter free cash flow of more than $1 billion, up 34% versus the prior year. This improvement in our cash flow conversion was driven by lower one-time cash cost positive change in net working capital, which total approximately 300 million in the quarter. Improvement in flat-free cash flow generation continues to be an organizational priority. We're confident that the cash optimization efforts will benefit cash flow throughout the rest of 2022. In the quarter, we delivered our capital allocation commitment, which included approximately $840 million of short-term debt payment and increase our quarterly dividend by 9%. Moving to Slide 24, We are off to a strong start in Q2 and solid quarter supports the operational strength of business across total revenue, adjusted EBITDA and free cash flow. You will recall that the guidance we provided in February assumed a full year of biosimilar business and FX impact of approximately 2% on total revenue and adjusted EBITDA was in the prior year. Given the dollar has strengthened against major currency, if the mid April spot rates hold throughout the rest of the year. There could be an additional impact on total revenue, adjusted EBITDA and to a lesser extent, free cash flow. FX aside the momentum seen first quarter gives us confidence in the outlook for rest of the year.

Now let me cover the estimated phasing of our financial performance for the full year. With respect to revenue phasing, we estimate 48% of revenue will come in the first half and 52% in the second half. This is driven by the ramp of new products, the U.S. launch of generic Revlimid, in the third quarter and seasonality of Influvac in developed markets. We expect a sequential increase in SG&A and R&D throughout the year with approximately 52% of spend occurring in the second half. For the full year, we expect gross margin, SG&A and R&D to be within the guidance metrics we provided earlier this year. As a result of previously announced, legal settlement, which will occur in third quarter, free cash flow will be more heavily weighted in the first half. Also we expect one-time cash cost and capital expenditure to be more significant in third and fourth quarters. We are firmly on track with our 2022 debt pay target of approximately $2 billion and are committed to maintaining an investment grade rating.

Before I conclude, I want to. I want to make a few comments on our reshaping initiatives. We checked [Phonetic] the Biocon transaction would generate $2 billion in gross proceeds or approximately $1.6 billion after tax. The proceeds will be used for debt pay-down and potentially for share buyback. As Michael and Rajiv both mentioned, we are making good progress and expect other assets to be divested by the end of 2023 this will bring in significant capital for further share buyback at potential tuck-in BD opportunities. We are obviously pleased with the strong start in the first quarter. The momentum we see in the operations of the business, positioned us well for the remainder of the year. Now I would like to turn the call back to the operator to open the call for Q&As.

Questions and Answers

Operator

[Operator Instructions]

William Szablewski
Head of Global Capital Markets at Viatris

Thank you, operator, let's go to the first question to Jason Gerberry, please.

Operator

[Operator Instructions]

Bhavin Patel
Analyst at Bank of America Merrill Lynch

Hey guys, thanks for taking my question. This is Bhavin Patel on for Jason Gerberry. My first question is on [Technical Issues], can you talk about your supply capacity for this product and your guidance assumption for this product to remain semi-exclusive and then second, can you speak to your second half '22 capital deployment priorities. How will you balance buybacks at the current price versus acquiring new assets?

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Yeah, [Indecipherable]. Good morning, everybody. I guess the first question, to Rajiv and Sanjeev if you can comment on the second half capital deployment.

Rajiv Malik
President and Executive Director at Viatris

Thanks a lot. Michael, I would start by saying that very pleased to have again received the first FDA approval for Generic Restasis which reinforces our ongoing commitment to this market and the complex products. I would say that supply is not a constraint. The market continues to evolve. It's a three-player plus brand market at this point of time and we have been very happy. We have been very happy with the performance -- how we have performed so far and remain confident about the rest of the year's forecast.

Sanjeev Narula
Chief Financial Officer at Viatris

Yeah, end up on the capital allocation, as Michael said, then I have been my opening comments, we are pretty clear about our priorities. Our priority is to continue to de-lever as we demonstrate that last year but being down $2 billion and then on plan to pay down another $2 billion this year, and overall pay down $6.5 billion in three years and and maintain our investment-grade rating. So that's on the debt side. And we've also been clear about paying and maintaining and growing dividend which we demonstrated by increasing our dividend by 9%. So our priorities are pretty clear and we have sufficient cash flow from the organic business to be able to support our capital allocation priorities.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

And then as the proceeds coming from the Biocon transaction, I think we, we said very clearly before that obviously the tax implications of that. Their applications on maintaining leverage neutral or paying down some additional debt but then there will be additional funds available and clearly we hope to consider buybacks at the time, share buybacks, especially at the current share price. We are still undervalued that clearly share buybacks on the case to be to us for the additional capital that's coming. Next question please.

William Szablewski
Head of Global Capital Markets at Viatris

Thank you, Michael, Operator, we go to Elliot Wilbur, please.

Elliot Wilbur
Analyst at Raymond James and Associates

Thanks, good morning. Okay, thanks. Good morning, everyone. Just wanted to ask about the EBITDA impact of competitive product advance, in the first quarter referring specifically to the bridging slides on page -- page 20 and 21 of the deck. So just looking at the EBITDA impact of keep or -- on key products, I mean it looks like it was effectively 100% margin, and I think that's relatively consistent with what you outlined at year-end, but the EBITDA impact on other base business assets at least in terms of the margin profile of those products was quite a bit higher. I think it's around 85% in the quarter if you look at the EBITDA impact of negative revenue trends on other based products base generics. So I just wanted to get some insight in terms of what particular products may have been impacted within that bucket in the first quarter? Why was the impact, quite a bit higher than what you're expecting for the full year, and is in fact your guidance still relatively consistent with what you would expect in terms of the EBITDA impact on base business products for the balance of the year? Thanks.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Thanks, Elliot. Sanjeev can you start?

Sanjeev Narula
Chief Financial Officer at Viatris

Yeah, I can. So, Elliot, you're absolutely right. So if you look at the kind of like two pieces. If I could step back, first is the competition on key U.S. products. The revenue and EBITDA impacts are consistent with what we've been outlining. These two products, which is Miacalcin and Perforomist are a very high gross margin above 90% as was evident as you can see the year-on-year revenue impact and the flow through to EBITDA. So that's consistent. That's -- those are the two products.

On the other base business erosion, as you saw, we talked about in the quarter. That's again in line with what we have seen, quarter-to-quarter there is a variation. This quarter particularly we had the pricing impact whereas [Phonetic] Rajiv pointed out in his opening comment from NHAI in Japan. This is the annual price reduction that we experienced and that's all scheduled and anticipated. That flows to the bottom line. There are other, a couple of brands in the U.S. that have a pricing impact -- competitive price of impact that again has a higher impact on the EBITDA. So, overall, I'd say the impact on both the competition and on the base business erosion is in line. Now the other important thing to note as again Rajiv pointed out is the offset. If you look at the new product sales, they were, they were impressive for the quarter and the gross margin on those was also fairly significant, that we were able to offset part of the impact on the base business erosion.

William Szablewski
Head of Global Capital Markets at Viatris

Next question, please. Thank you. Operator, go to Chris Schott, please.

Operator

Your line is open.

Christopher Schott
Analyst at Viatris

Great, thanks so much. So just a couple of questions from me, I just coming back to this issue of capital redeployment, I guess, once you address the debt reduction and kind of the targets you've put out there, should we think about most of the capital that you're going to be getting from whether it's the Biocon deal or additional asset divestitures going to repo assuming your stock prices in the [Indecipherable] like $10 level. And that the deals are considering will be more smaller in size. I'm sure you [Indecipherable] I think that's been one of the debates is just how do we think about what Viatris looks like going forward and it's coming from the messaging here is that you have a pretty the high hurdle to overcome as we think about that versus deal. So that's kind of the first question is, to clarify a bit more there.

The second one for me is and which we've touched on a little bit, but just on gross margin progression and trends for the year, it seems like the 1Q, results were well ahead of your annual targets. And you said there is slightly ahead of your own internal targets. Help me understand a little bit of how we kind of bridge from the 1Q results to the rest of the year like what drives that step down in gross margins going forward as we think about the implications for that in the kind of the go-forward business into '23? Thanks so much.

Rajiv Malik
President and Executive Director at Viatris

Thank you, Chris. Look on capital allocation and the trade-off between share repurchases and BD, I think we've been very, very consistent. We got our Phase 1 commitments that we are committed to, that's the $6.5 billion pay down targeting the leverage target that we put out there, paying the dividend and as Sanjeev mentioned earlier, all of that is supported by our strong organic free cash flow. Right. We don't need the cash from divestitures to achieve those targets. Our commitment is unchanged, that's what we're aiming for. Then with the divestitures, we have additional capital coming in, right. And starting with the $2 billion from Biocon again taking tax [Phonetic] to account, that look [Phonetic] the net proceeds, we are planning to use some of that to be leverage neutral, but then the remaining clearly especially with the share price that we have right now, as we said, share buybacks are the case to be. It doesn't mean we're come out be completely inactive on the BD side. We're very active looking at opportunities there. We have our target areas that we laid out, but clearly share buybacks are the case to be, and we hope to consider starting that as soon as after the close of the Biocon [Indecipherable].

And on the gross margin, Sanjeev if you want...

Sanjeev Narula
Chief Financial Officer at Viatris

Yeah, sure. So, sure, Chris. You're right, we came in slightly ahead of our internal expectation. The gross margin of 59.5% for the quarter. But I think there are a couple of things going on just kind of put this in context with what's happening, so we had a strong brand performance as Rajiv pointed out. That obviously has an impact on the gross margin. We also had new product launches, generic rest cases clearly high gross margin product has an impact on that. And then we also had some timing of emerging market tenders, in case of acceleration in first quarter that has an impact on the gross margin, so we came in ahead, I expect the gross margin to step down a little bit in the second -- second quarter because of the product mix and then what we talked about, but on a full-year basis, we are still on track with the metrics that we provided on 57.5 to 58.5.

William Szablewski
Head of Global Capital Markets at Viatris

Thanks for the question. Next, we'll go to [Indecipherable] please.

Unidentified Participant
at Viatris

[Speech Overlap] Thanks for taking my question. So I guess, maybe more specifically, is it reasonable to assume on capital allocation that perhaps the magnitude of up the couple of billion dollars worth of repurchase as possible and also on full-year guidance, can you clarify if there is an impact of excess purchases in China, Head of lockdowns that was helping the first quarter and if that's appropriately baked into the back half of the year. I know you guys did mention a 2% impact to EBITDA from FX. Just wanted to go through that as well.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Yeah, Rajeev, you start with the China question, and then Sanjeev if you can talk about the potential of share [Indecipherable].

Rajiv Malik
President and Executive Director at Viatris

I think more China gain is a form of long and expensive commercial [Phonetic] infrastructure but importantly how the team has adapted to the new environment and that has helped us to lower a strong performance despite COVID and COVID-related lockdowns. We continue to see all the sentiment around [Indecipherable] not being at its peak, due to the lockdowns, at this point in time, we believe we can meet our finance [Technical Issues] year. We remain confident about that. So I don't see any doubts about our China business and -- because of the COVID.

Sanjeev Narula
Chief Financial Officer at Viatris

And [Phonetic] a few points about the share buyback for [Phonetic] the one that you mentioned. So you can step back as Michael pointed out in his opening comments if you look at the total net will proceeds of Biocon and other assets that we talked about that and I just said, for the potential tax impact and pay down debt to keep us leverage neutral. We are talking about approximately $4 billion [Phonetic] of net proceeds that we could generate. Now conceptually or hypothetically if you think about where our security prices that we could be deploying all of that for share buyback. That clearly is possible, but obviously, that decision will be taken as we start closing the Biocon transaction and getting proceeds from the other perspective, but clearly, the reshaping and unlocking the trapped value gives us a lot more flexibility in terms of accelerating and expanding our capital allocation priorities.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

And I think just as an overlay obviously a Sanjeev said we'll make a decision at the time when it comes, but we believe the company is significantly undervalued at the current levels. I think there's no doubt about that. We're confident in the strategy that we have to unlock trapped value. Our decision will be guided and are always guided by our TSR model and our commitment to return value to shareholders, and very importantly, we are confident in the outlook of our core business and continue to be highly diversified, and that that gives us that confidence. So I think that background should help you this question.

William Szablewski
Head of Global Capital Markets at Viatris

Yes, thanks. Thanks, Michael. Operator. If we could go to Greg Fraser please.

Operator

Your line is open.

Gregory Fraser
Analyst at Truist Securities

Thanks for taking the questions. Were there any notable drivers behind the stronger than expected brand performance in the quarter that could prove durable? And just following up on the guidance approach in light of FX trends, why not update the ranges based on the current exchange rates? I guess what's the bar trigger to update the guidance based on FX? Thank you.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Rajiv, do you want to take the brand question...

Rajiv Malik
President and Executive Director at Viatris

Yeah, I think that it is, it's nothing is a surprise we exactly planned the business and this is how we have executed China Lipitor and Norvasc drove [Phonetic] the brand performance. In Japan, strong performance for Amitiza, Effexor, [Indecipherable] and U.S. was Yupelri and again even performance, although we have a competition, I think we did better than expected in the U.S. and Europe has been a steady, steady for last couple of years where there is Creon, our promoters portfolio ibuprofen. So I think everything, which we have planned, has been executed, and we remain confident for the year.

Sanjeev Narula
Chief Financial Officer at Viatris

Yeah, on the -- on the guidance question, but just want to start with. First of all, I think is you can see we had a very strong quarter, operationally and the momentum we see the end of where we are today and the outlook for the rest of the year, we feel very confident on the, on the. The outlook for the year in terms of operationally, how we going to be performing. Now clearly FX is a headwind, as I mentioned that in my opening remarks. And if you take the, the mid-April FX it if they were to hold there is going to be a headwind on the overall on the, on the revenue and adjusted EBITDA, and to a lesser extent on the free cash flow. Now, we're not in the business of predicting foreign exchange. Foreign exchange has been changing every day. What we are expecting to do is at the second-quarter call, we will take into consideration the prevailing FX rate at that time and update guidance as necessary. And by the way, keep in mind that we also have, we are expecting the Biocon transaction to close in the second half and depending upon the timing of the close of there would be an impact on our full-year guidance, which then we will take into account and reflect that in the guidance.

The last point I want to say, irrespective of the FX rate, we feel very good about the cash flow generation in the company and are on track to pay down $2 billion of debt and then, and then continue to maintain and grow the dividend, as we talked about.

William Szablewski
Head of Global Capital Markets at Viatris

Thanks, Sanjeev. Operator, can we go to Nate Rich from Goldman.

Nathan Rich
Analyst at The Goldman Sachs Group

Good morning, thanks for the questions, maybe two quick clarifications on guidance and then a higher-level question, just following up on the last question actually, was first quarter ahead of your expectations, and should we think of that outperformance being offset a little bit by FX or has the expectations for the year, not really changed on a core basis you're just highlighting this additional FX risk if current exchange rates hold and then are you able to give us the contribution from biosimilars in the quarter two overall growth, so just so we can get a better view of sort of underlying performance once that divestiture takes place.

And then at a higher level and then I'll stop there, but at a higher level, when could we hear more progress on additional divestitures, and has your view or scope of the potential assets to be divested changed at all just given the volatility we've seen in the markets and how some of the public assets are being valued? Thank you.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Sanjeev you want to start with Q1?

Sanjeev Narula
Chief Financial Officer at Viatris

Yeah, Nathan. So, Q1, we had a slight FX headwind, because if you go back and saw the dollar started strengthening in the month of March, we had a slight headwind, but we were able to absorb within our operational results and that impact obviously gets bigger because dollar has continued to strengthen. So that's kind of why I'm highlighting, but on a full-year basis, the expected headwind, so Q1 did come up slightly ahead of the expectation. But we were able to offset that to be able to offset by the, as we were able to offset the FX impact because of that.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

On the biosimilar question for this shortage.

Rajiv Malik
President and Executive Director at Viatris

Yeah. Biosimilars, for the full year, as we said, it's about $850 million is the total revenue for the full year [Indecipherable] and for quarter two, it's about $175...

Sanjeev Narula
Chief Financial Officer at Viatris

Quarter one $170 million approximately.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Yeah. And on the last question you had, Nate, on the other [Indecipherable] look nothing really has changed, we identified these other select assets that we consider non-core to the future of Viatris and as we continue to move up the value chain, looking for more durable complex product. But you know that these are quality assets, these are quality assets that we think are attractive. Maybe more attractive to somebody outside of Viatris than inside of Viatris and helps us to unlock value and to simplify our business, we're not disclosing the assets at this point, we need to maintain the integrity of the process, but as we said, we're making good progress on them. We are confident in the timeline that we laid out to have all of those wrapped up by the end of '23 and obviously, we keep the Street and the shareholders updated as we go along.

William Szablewski
Head of Global Capital Markets at Viatris

Next question. Thank you, Michael. Operator, next question from David Amsellem, please.

David Amsellem
Analyst at Piper Sandler & Co.

Thanks. Just, just a couple of quick ones. So first just remind us, and I apologize if I missed this, what you are assuming for pricing erosion for both your generics business particularly developed markets broadly speaking, and also just how you're thinking about pricing erosion broadly ex-China because I know that's the of a different case but how you're thinking that pricing erosion for established brands, less about the guide this year and more just longer-term and how you're thinking about overall trajectory there?

And then in terms of just the repositioning of the business, you've talked about that you believe that the shares are undervalued and that there is value to be unlocked. And you mentioned on a number of times in this call. So with all respect, I'm just trying to understand what do you think the market isn't getting or what do you think could be, or should be unlocked in your view? Thank you.

William Szablewski
Head of Global Capital Markets at Viatris

You want to start with the price erosion, Rajiv.

Rajiv Malik
President and Executive Director at Viatris

Yeah. I think the diversity of our business, whether it's within the product portfolio, or commercial infrastructure, or footprint has given us -- has provided us predictability and sustainability. And I believe pricing, yes, it's used broadly at the industry level, but it's very specific when it comes to generics is to your own sort of portfolio of which by design, if you recall, we have been moving slowly and steadily from commodities to the high-value complex niche hard-to-make products. So, we are moving to make -- we have been making a diligent move from the volume play to the value play. And as I've always said that generic pricing environment has been for stable as I see, given the specifics [Indecipherable] this quarter it was Miacalcin, Perforomist, Wixela these were the three key drivers. If I take it off, core business in the generic for us was pretty stable. It's a stable pricing environment. Now from globally, if I have to say we had always forecasted about mid-single-digit somewhere around that person as a price erosion. And if you look into this quarter with overall -- overall, for example, take just North America, flat, brands were down 3%, complex and biosimilars made up from 18% positive over there, and [Indecipherable] was minus. Overall, net net, it was flat. So that's what I was talking about. This diversified portfolio has given us that sort of drop deep sort of portfolio now, which can withstand this volatility and give us more predictability and sustainability.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Yeah David, on the repositioning of the company and what the market is, we believe, not getting them and you need to look no further than the biosimilar business and I look at it is actually [Indecipherable] the value that had and how it was publicity [Phonetic] valued inside of the interest. And then the value, we're getting by unlocking it off an implied multiple of 16.5, which applies to other assets as well. So at the end, after we are done with all the reshaping what you're going to be left with is a company that's very well positioned to has a broad portfolio of generic medicines that reaches across our global commercial network, addresses patient's need for high quality of affordable medicines that will always be a core of us complex products, injectables off-patent LOE [Phonetic] brands including some of the iconic brands that came in from legacy Upjohn and then we want to add to that, moving further up the value chain, some additional products. That product -- that portfolios is what we believe will be very, very strong. It's going to be a high-value -- high value oriented global diversified business and diversity will stay with us. And I believe in time the Street [Phonetic] will come to appreciate that both our financial profile that we have as well as the strategic profile that we have...

Sanjeev Narula
Chief Financial Officer at Viatris

And Michael, if I could just add to that is that -- that profile that Michael talked about will continue to generate sustainable cash flow and that we believe is our strength as we demonstrated and then we'll continue to be a positive momentum as you go forward for the company.

William Szablewski
Head of Global Capital Markets at Viatris

Thanks for the question. Operator, can we go to Gary, please.

Operator

Your line is open.

Gary Nachman
Analyst at BMO Capital Markets

Yes, good morning. All right, great. So the SG&A was much lighter than we expected in 1Q. Is that a timing issue or a quicker realization of synergies just talk through the run rate on that through the rest of the year. And then, much of the $600 million of new product revenue is from current on market products versus new launches and how much biosimilars that will be divested to Biocon and then just lastly, just you mentioned the Botox biosimilar filing delays. So can you just explain that a little bit more, what's causing that and -- and how long of a delay you think that'll be? Thanks.

William Szablewski
Head of Global Capital Markets at Viatris

These will [Phonetic] be taken the same sequence may be SG&A timing first, Sanjeev?

Sanjeev Narula
Chief Financial Officer at Viatris

So sure. So first quarter SG&A came in lower than our internal tracking, it's, that essentially timing and we expect to catch that up and I said that in my opening comments. We expect SG&A and R&D to ramp up 52% of our yearly spend is going to happen in the second half of the year, but it's important to note again that our guidance is built into these synergies realization that Rajiv mentioned that in his comments. And that's why we see year-on-year first quarter SG&A is down double-digits and on a full-year basis our SG&A is down as well. Again from the new launch perspective, I think the important fact is that almost 95% of the products, which we are supposed to launch in this year have either have been approved already launched. So other than a couple of products, which we had factored in our plan, which is [Indecipherable] most of those approvals out in the back and we continue, we are on very much track to deliver $600 million as we have planned and on biosimilars, I will give you on an annual basis, almost 1/3 of this new launch revenue is coming this year -- this year from the biosimilars.

Gary Nachman
Analyst at BMO Capital Markets

Okay, the Botox biosimilar also where the filing [Indecipherable]

Sanjeev Narula
Chief Financial Officer at Viatris

Yeah, on the Botox, look -- we have -- let me start with this, that we remain committed to the program, and we are making some good headway with the science along with FDA. We are still targeting, I would say, and FDA approval in '26 and launch thereafter. There are several moving pieces with our program with revised including their -- their plan to qualify and corporate and new working setback. So this is going to, that's one reason along with various other pieces, that's one reason for us pushing back this filing.

William Szablewski
Head of Global Capital Markets at Viatris

Thank you guys for the questions. We're going to -- I don't see any other folks in the queue. So we're going to hand it over to Michael to close the call.

Michael Goettler
Chief Executive Officer and Executive Director at Viatris

Yeah, thank you everybody for joining us this morning. Look in summary, let me just say we obviously had a strong quarter on track operationally to meet our full-year 2022 guidance. We made good progress on executing and our reshaping initiatives that we laid out in February, and we're going to continue to engage with you and engage with investors as we go along. So thank you for joining us this morning. And that concludes the call. Thank you.

Operator

[Operator Closing Remarks]

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