Chief Financial Officer at Viatris
Thanks, Rajiv, and good morning, everyone. Slides 16 and 17 show second quarter financial highlights as well as results for the first half of this year. For the quarter and first half of 2022, the operations of the business were in line or slightly ahead of our expectation. This performance is across our global diversified portfolio of brands, generics and complex products.
As anticipated, operation revenue was solidly in line with our expectation, but slightly down compared to prior year. Adjusted EBITDA and free cash flow were ahead of expectation and we were able to offset foreign exchange headwinds. The business benefited from strong adjusted gross margin, lower adjusted SG&A due to the realization of synergy and disciplined spend management. Cash flow benefited from our cash optimization initiative and reduction in one-time cash costs.
Moving to Slide 18. For the quarter, we have seen dollar strengthening significantly against major currencies, including the euro. As a result, net of hedging activities, foreign exchange had an impact of approximately 7% on net sales versus the second quarter 2021. Net sales were in line with our expectation on an operational basis, down versus prior year by approximately 3% due to anticipated drivers. Our developed market business has a strong quarter and were operationally flat versus prior year. This performance was driven by strong growth in Europe due to category diversity, partially offset by anticipated competition on key products in North America.
As anticipated, other base business erosion was primarily driven by lower ARV volumes due to the anticipated change in therapy landscape and lower sales of certain COVID-related product. New product revenue was driven by interchangeable insulin glargine in North America. Despite foreign exchange headwinds, we had another solid quarter of adjusted EBITDA that were ahead of our expectations. Adjusted gross margin was driven by strong brand performance and favorable segment and product mix. SG&A continues to benefit from our synergies, integration activities and disciplined spend management.
Turning to Slide 19. We had another excellent quarter with better-than-expected free cash flow of more than $700 million, up significantly versus the prior year. This improvement in our cash flow conversion was driven by positive changes in the operational working capital and lower one-time cash cost. Free cash flow through the first half of the year was strong at $1.8 billion, an increase of approximately 40% or $500 million compared to same period last year.
Slide 20 illustrates our capital allocation framework and the strong and consistent history of free cash flow generation since the formation of Viatris. I'm proud to say that over the last six quarters, the company had generated more than $4.3 billion of free cash flow. We are well over the halfway mark of our goal of generating more than $8 billion in free cash flow by the end of 2023. This has allowed us to deliver on our capital allocation commitment. For the year so far, we have repaid approximately $1.5 billion of debt and more than $3.5 billion since the beginning of 2021.
Additionally, we have paid approximately $219 million in dividend this year and approximately $690 million in dividend since the beginning of 2021. We remain committed to our 2022 debt repayment target of approximately $2 billion. This will strengthen our balance sheet and support our commitment to maintain an investment-grade rating. We expect to accelerate financial flexibility through the anticipated closing of biosimilar transaction in the second half of 2020, which we expect to net approximately $1.6 billion after-tax proceeds.
As we look ahead, we expect our capital allocation framework will broaden with potential share repurchases in tuck-in or bolt-on business development opportunities. Before I discuss our revised 2022 financial guidance, if you recall, our commentary may mention we would reassess the foreign exchange impact on total revenue, adjusted EBITDA and free cash flow. The dollar has strengthened significantly across major currencies and approximately 70% of our business is non-dollar-denominated.
Moving to Slide 23. The business is in a strong position through first six months of the year and we expect full year revenue to be inline, if not slightly ahead of our expectation on an operational basis. With respect to our revenue guidance, we now estimate an approximately 7% foreign exchange headwind on a full year basis, assuming July rate hold for the remainder of the year. As a result, we're revising our revenue guidance range by $800 million to $16.2 billion to $16.7 billion [Phonetic]. Our revised revenue guidance takes into account foreign exchange impact through the first half of the year and approximately $600 million, split evenly between third quarter and fourth quarter of 2022.
Operationally, we expect revenue will be driven by continued ramp-up of new products, including the U.S. launch of lenalidomide in the second half and the seasonality of Influvac in developed markets. Because of our continuing strong execution and operational performance, we currently expect to be able to absorb the foreign exchange headwind within our free cash flow range and also our adjusted EBITDA range. As it relates to adjusted EBITDA, we may end up towards the lower end of the range. Our expectation to absorb foreign exchange headwind is due to several factors, including positive product mix benefiting gross margin, favorable SG&A due to synergy and expense management, as well as increased cash optimization initiatives and lower capex.
Now let me cover some of the expected drivers for financial performance for the second half.
We expect sequential increase in SG&A and R&D in the second half of the year. We expect cash flow will be heavily weighted to the first half of the year, mainly due to the timing of one-time cash costs, of which we expect approximately two-third to come in the second half of the year. This includes the previously announced EpiPen litigation settlement, which was paid in July. In addition, we expect capital expenditure to ramp up in the second half of the year.
We're pleased with the strong first half performance. The momentum we see in the operations of the business position us well for the remainder of the year. Our capital allocation framework, including debt paydown goals, commitment to dividend and the value we see in maintaining an investment grade, will continue to be important drivers in creating long-term value.
Now I'd like to turn the call back to the operator to open the call for Q&As.