Bill Szablewski:

Good morning, everyone. Welcome to our Q2 2024 earnings call. With us today is our CEO, Scott Smith; CFO, Doretta Mistras; Chief R&D Officer, Philippe Martin; and Chief Commercial Officer, Corinne Le Goff During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2024 and various strategic initiatives. These statements are subject to risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation and our SEC filings for more information, including reconciliations of those non-GAAP measures to the most directly comparable GAAP measures. When discussing 2024 results, we will be making certain comparisons to 2023 results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes the proportionate results from the divestitures that closed in 2024 and 2023 from the 2023 period. When discussing our expectations for 2024, we will be making certain comparisons to 2024 results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes from guidance the results from the date of closing until the end of the period of the divestitures that closed in 2024. With that, I'll hand the call over to our CEO, Scott Smith.

Corinne Le Goff:

Thank you, Scott. I have been with the company for about four months now. And based on what I've seen, I'm very excited about the opportunity ahead of us. I would like to share a few observations as I've gotten to know the global commercial organization. Our strong performance is a result of many puts and takes that only the diversity and the strength of our portfolio across geographies can allow. Our global commercial footprint is extensive. We have a presence in 165 countries and territories, which is an incredible platform to leverage as we continue to grow our base business and expand our innovative portfolio. We have a broad knowledge across many therapeutic areas and many of our branded and generic products are today's standards of care all over the world. This is a real differentiator as it demonstrates our unique ability to continue to drive volume and expand patient access at scale. As we prepare for additional innovative opportunities, we have a lot to build from. For example, if I think about selatogrel, we are already leaders at rescue and emergency medicines in COPD, in asthma, in anaphylaxis. We have years of experience in educating patients to identify an attack and act in the moment. Plus, we have deep expertise in cardiovascular, with a portfolio that treats a very large patient population from CV risk factors to CV events like thrombosis, MI and stroke. Finally, I love what I'm seeing in our teams. I am impressed with the agility and efficiency of the commercial organization. And I also see incredible energy, entrepreneurial spirit and proactivity to seize opportunities and make a difference in patients' lives. I am excited to continue to work with the entire team at Viatris on the tremendous opportunities ahead.

Philippe Martin:

Thanks, Scott. I share the team's excitement about where we are today and where we are headed. I've had the opportunity to fully evaluate our R&D organization and further define our approach to innovation and growth. Our R&D strategy is driven by our deep in-house development capabilities and two engines to fuel our growth, our base business pipeline and our innovative pipeline. Our base business pipeline provides Viatris with a diverse and resilient growth engine. We anticipate a steady flow of core generics and an ever-increasing flow of complex generics and novel 505(b)(2)-like product. The strong pipeline gives us confidence in achieving our new product revenue goals. Our focus for our innovative pipeline is on expanding our patent-protected portfolio of assets that have the potential for meaningful patient impact and the ability to address significant unmet medical need. I'm very impressed with the core competencies and talent we have at Viatris, in particular, our strong preclinical, clinical development and medical affairs teams across multiple therapeutic areas. Our experienced manufacturing and device teams of a wide range of dosage forms and our proven regulatory pharmacovigilance, legal and IP skills. This foundation is especially critical as we expand our innovative portfolio. We are identifying assets where we can leverage our expertise and global network and are assessing each opportunities based on specific criteria. We are looking for derisked innovative assets that address significant unmet medical need. This includes having a validated mechanism of action, a strong clinical proof-of-concept and a clear path to regulatory approval. Selatogrel and cenerimod are two great examples. Selatogrel has the potential to relieve the high disease burden of acute MI and specifically address the dire need for early intervention at the onset of symptoms. P2Y12 inhibition is a well-established target in the treatment of MI, with multiple products approved for chronic treatment. Our differentiated pharmacokinetic profile and unique mode of administration, together with our robust Phase II data, gives us high confidence in selatogrel as a self-administrated emergency treatment for recurrent MI. Our comprehensive but simple Phase III study, SOS-AMI, has a special protocol assessment in placed with the FDA and received Fast Track designation. Cenerimod also has the potential to address a significant unmet medical need. SLE is a chronic and progressive autoimmune disease with limited treatment option and significant morbidity. Cenerimod, a novel S1P antagonist, has a unique mechanism of action, targeting multiple aspects of lupus pathogenesis. A robust proof-of-concept was achieved in Phase II, with data showing a highly differentiated safety and efficacy profile in a moderate to severe SLE patient population, similar to the patient population we expect to enroll in Phase III. Cenerimod also has been granted Fast Track designation by the FDA and we have three comprehensive Phase III studies currently enrolling patients. With selatogrel and cenerimod now part of Viatris, we're able to leverage our global R&D network to accelerate clinical trial recruitment. We've already significantly increased the number of sites we are targeting for both programs, adding approximately 250 clinical sites. We've also significantly expanded the geographic footprint, adding key countries like China, India and Japan to ensure a steady flow of patients. The team has been working hard to initiate these high recruiting sites and we anticipate that most sites should be able to recruit patients by the end of this year, early next year, which could shorten development time lines. The medical affairs team is also working hard to deepen relationship with KOLs and increase cenerimod's and selatogrel's presence at key medical meetings around the world like EHC, ACR and APLAR. And we are pleased to announce that the cenerimod manuscript for the Phase II case study has been officially accepted for publication in the Lancet Rheumatology. Another exciting innovative opportunity is with our eye care pipeline and is the Enriched Tear Film Gene Therapy technology we acquired as part of the Oyster Point acquisition, which has the potential to treat a multitude of ophthalmic diseases. Importantly, this technology is not genome editing, but rather, it leverages normal cellular processes and proteins to deliver therapeutics to the Tear Film. Our most advanced project called MR-146 intended for the treatment of neurotrophic keratopathy or NK is reaching the IND stage with a value-added therapeutic target for this disease. There is a significant unmet medical need for patients with NK to have a treatment that restores corneal structure and neurological function with minimal treatment burden. These examples from our expanding innovative portfolio, combined with our robust base business pipeline, energize me about the future and our ability to not only deliver on our vision, but also to address significant medical need. I will now turn the call to Doretta.

Operator:

Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] And our first question today comes from Ash Verma from UBS. Please go ahead with your question.

Scott Smith:

Thank you, Ash, and good morning. Thank you very much for the question. Sort of two parts here, right, talking about new product revenue, which is very important as we move forward here. And we're very strong. We saw in the second quarter and we're expecting full year very strong new product revenue. And then also some '25 dynamics. I'll turn it over to Doretta to take those two for you.

Operator:

And our next question comes from Chris Schott from JPMorgan. Please go ahead with your question.

Scott Smith:

Yes. Thank you very much, Ekaterina, for the question. Again, I'll maybe address the second one first. From a BD perspective, we're engaged in a lot of different discussions. We're going to take a disciplined approach. As we go through the divestitures sort of the net effect of that is that we're going to get to -- we've got line of sight and pay down our debt going into '25. And executing on our capital allocation plan of 100%, where we're giving back to shareholders at least $2.3 billion of free cash flow through dividends and share buybacks, but also taking a disciplined approach to business development. We've got a diversified company in terms of the number of therapeutic areas that we're in. We're looking at a number of different assets. We're looking at things which can help us supercharge our growth as we get into '25 and beyond. We're very -- it's very important to understand that the base business is solid. The base business, we're showing operational growth. And then on top of that, we want to add what I would consider a significantly derisked type assets from an innovative perspective assets that can help us drive growth in the future that are focused on unmet medical need that are patented, have long runways that we can invest in, but we're also going to shore up our base business as well. We're going to look for things currently marketed and different particularly -- in particular geographies that we can be effective in. And so we're going to do business development to shore up the base and we're also going to be business development to bring in new innovative assets into the company.

David Amsellem:

Hey, thanks. So just a couple for me and I apologize if you addressed this since I joined late. Can you talk about overall your innovative brand strategy? I mean you did an important in licensing earlier this year. I guess my question here is, how aggressive do you want to be regarding adding innovative brands in the US and developed markets broadly speaking? So that's number one. Then number two, can you just talk generally about complex generics and how we should think about contribution from complex products or new launches as we move through '25? I mean it might be a little bit early to think about that, but I wanted to get a sense of what key launches, on the complex front, that you're flagging or should flag? Thanks.

Philippe Martin:

Yes, regarding the complex generic, I think, we -- as you can see on this presentation that we've provided, we have over 250 products in the pipeline that are either under development or under regulatory review. So we think we'll be -- we know we'll have a steady flow of complex generic coming in every year, this year, and 2025 and so on. So we feel confident about our complex generic pipeline.

Umer Raffat:

Hi, guys. Thanks for taking my question. I have a two-part question on just broad investments. First, perhaps on GLP-1. Scott, I'm curious, what are your GLP-1 aspirations? What's the capacity now? And what type of CapEx investments are you or are you not looking to make? Just thinking about that out loud. And also, part two was, the investment on cenerimod in lupus. I'm curious how you guys are thinking about that in light of some really groundbreaking data we're seeing with CD19 CAR-Ts and presumably with bispecifics as well? And how do you put that in perspective relative to what we know on cenerimod? That will be very helpful. And then finally, I think, the prior question was on, what are your complex generics in '25? I don't think maybe I misheard. What are the complex generics on '25 launches?

Philippe Martin:

Yes. So from a GLP-1 point of view, we are looking at developing multiple GLP-1s, semaglutide as well as liraglutide as well as mounjaro. So we are deep into the development of these assets. From a supply chain standpoint, as you know, supply chain can be a little tight, but we've secured supply of API for all these assets and certainly have invested in our capability to manufacture these drugs going forward. So we anticipate we'll have a significant role going forward in that GLP-1 market. Regarding cenerimod, I think, if you were to compare the cenerimod benefit risk profile versus the one we anticipate from the CAR-T or the bispecific, you'll see that we anticipate to be in the higher end of efficacy, with a safety profile that is clearly differentiated. CAR-Ts and bispecific typically having significant safety baggage. And so we anticipate that our benefit profile will be very different, which will allow us to be placed prior to the use of either any bispecific, biologics or CAR-Ts going forward. I'm not even talking about the convenience factor of having an oral drug versus these CAR-Ts that can be quite difficult to administer. And then on the last one on the complex generic, I think, I wouldn't highlight one specific product. I think it's the breadth of the pipeline that we have that we see will be delivered this year for the rest of the year, '25, '26. So we feel very confident in our new product revenue, as you can see, and we anticipate the same going forward.

Balaji Prasad:

Thank you. Hi. Good morning and congratulations on the quarter. A couple of questions from me. Could you comment around the magnitude of the expected base business erosion from government price regulations in Japan and Australia? I presume in Japan is the annual price cuts or are there any other dynamics at play? Second, could you comment around the split between the innovative pipeline and non-innovative pipeline currently? And with the improvement in cash metrics, how do you see the spend on innovative R&D progressing into the next couple of years or do you intend to keep it at a similar percentage? Thanks.

Doretta Mistras:

Yes. To your point, Balaji, we aren't seeing anything kind of that -- it really is driven by the ongoing price normal government price declines that we're seeing in Japan and Australia. Now the offset to that is we actually have seen better volume in Japan as well. And given that Japan is actually and the broader JANZ region is actually performing better than our expectations for the year.

Operator:

Our next question comes from Jason Gerberry from Bank of America. Please go ahead with your question.

Scott Smith:

So thank you very much for the question. I'll ask Doretta to address the first part of your question and then I'll talk about the [indiscernible] timelines for selatogrel and cenerimod later.

Scott Smith:

And then relative to pipeline acceleration on the innovative assets, I'll say that we're very, very excited, obviously, about with both selatogrel and cenerimod. As I said in my prepared remarks, we're already making significant progress in doing the things we need to do to accelerate the development of these assets and move the timelines forward. I don't have a specific update for you on the date we want to get in and do some remediation further, continue to open new sites continue to invest in the development. And then by the time we get into the new year, we'll be able to be in a better position to give you sort of specifics on where we think those timelines are going, but we think we're going to significantly be able to help and accelerate the development timelines. And again, we'll look to update those timelines as we get into '25.

Scott Smith:

Thank you, everybody, and thank you to the operator. In closing, it's been a great year for us so far with the completion of our divestitures in July were the turning point for the company. We have built a strong foundation. We have a bold vision for our future and we have the key ingredients we need to be successful to deliver on our goals. Thank you all very much for your attention.

Scott Smith:

Good morning. Our first quarter financial results demonstrate continued execution against our business fundamentals, which includes maintaining base business stability while driving new product revenue and executing on our vision for future growth. We are making progress on all our key priorities, including completing planned divestitures, continuing to pay down debt, increasing shareholder return, fueling our base business and, importantly, making strategic investments in future growth.

Philippe Martin:

Thank you, Scott. I'd also like to welcome Corinne to Viatris and I look forward to working with her.

Theodora Mistras:

Thank you, Philippe, and good morning, everyone. It's great to be here to discuss our Q1 performance. As Scott highlighted, we are off to a strong start to the year with our fourth consecutive quarter of top line growth. We continue to execute against our growth plan, which includes maintaining our base business stability and driving new product revenue. Our globally diverse platform is generating growth from our base business in emerging markets in Europe, and from higher-than-expected new product revenue.

Operator:

[Operator Instructions]

Nathan Rich:

Maybe a couple of product questions to start. First, I guess, Doretta, you mentioned the North America softness in brands. Could you elaborate on the channel and formulary dynamics that you saw? How much of that was different than your expectations? And is there anything you can do to improve access there?

Scott Smith:

So Scott Smith here. I'm going to kick it over to Doretta to answer the product-specific question, and Philippe will address the GA Depot. So Doretta?

Philippe Martin:

Thanks, Scott. And so with regard to Mapi and GA Depot, we are working with them to address comments that we received from the FDA, as I mentioned, and seeking a meeting in the next few months. Once we have that meeting, we'll have clarity on -- more clarity on the time line and what to expect. So we'll be sharing that with you once available.

Bhavin Patel:

This is Bhavin Patel on for Jason. For us, I just want to focus on just Tyrvaya. The product appears to be about an $80 million product with moderate growth. So maybe can you just help us form the bridge to the $1 billion in ophthalmology sales that you're expecting by 2028 between Oyster and Famy Care assets. I believe the recently launched Ryzumvi was framed as a sort of commercially niche product. So is the key seeing an inflection in Tyrvaya in the remainder of 2024?

Scott Smith:

Thank you very much for the question. Tyrvaya, we're seeing positive trends. We're seeing continued uptake with Tyrvaya. It performed in line with our expectations in Q1. We're very hopeful on the trajectory of Tyrvaya. We just started the DTC in Q4, and we'll see where it goes. That $1 billion that you're talking about over the next 4, 5, 6 years is relative to the whole pipeline of products, right? Definitely, Ryzumvi is a little bit of a niche product. It's complementary to what we're doing with Tyrvaya in terms of sales call dynamics and things, but we're continuing to be very, very hopeful relative to the ophthalmology business, and we've got a number of products in the pipeline.

Operator:

And the next question comes from Glen Santangelo with Jefferies.

Scott Smith:

Yes. I think what we talked about in the last time was closed by midyear. I'm not sure if it's going to be June or a little bit later than that, but we're expecting to close it midyear. It's obviously subject to certain regulatory approvals and consents, which are a little bit out of our control, but that continues to track very well. We're pleased with our progress there. We should be closing that transaction by midyear.

Ashwani Verma:

I had 2. So just on JANZ, maybe, can you elaborate the business dynamics here? It seems like the business has been facing some headwinds. I mean kind of you were up 2% on an operational basis, but on a relatively easy comp. And what sort of that should be the go-forward trajectory here?

Scott Smith:

Yes. Doretta can answer the first part and then on JANZ, and I'll take the new product question afterwards.

Operator:

And the next question comes from Chris Schott with JPMorgan.

Scott Smith:

And relative to capital allocation, important to note already this year, we have bought back shares delivered on the dividend, done the Idorsia deal, and brought assets that could drive potential future growth. In terms of the things that we're looking at, I'll continue to say, we look at all manner of different opportunities. Certainly, I like the licensing partnership route for a lot of it given the strong global company we have and the base we have worldwide that I think we're a very favorable partner for people with good technologies and products to be able to launch their products globally. So we're looking at partnering.

Operator:

And the next question comes from David Amsellem with Piper Sandler.

Scott Smith:

So I'll kick it over to Philippe to talk specifically about some of the products and the strategy. But just overall, the complex injectable portfolio is a very important part of our base business. We're investing in it. We see important products on the market today from it. We see important products in the future from it. So it's a very sort of important part of our base business mix. And important to continue to invest in the complex generics as we move forward and add other new products, innovative products, patented products to the portfolio to accelerate that growth.

Balaji Prasad:

A couple of macro questions and a bookkeeping question from me on, firstly, emerging markets, it looks like this quarter has been largely driven by emerging markets. Can you comment around the sustainability of this? And maybe also help me understand how this translated on an FX basis through the P&L.

Scott Smith:

Thank you, Balaji. I'm going to hand it over to Doretta to answer the specific questions on the emerging market segments and the divestitures.

Scott Smith:

So thank you, and thank you to everybody online for your attention this morning. In closing, we're continuing our momentum for last year. We've had a great -- we've made great progress on all our key priorities and have a strong executive leadership team in place, a passionate global workforce that is dedicated to leading the company into what we believe is an exciting future ahead. Thank you again.

Bill Szablewski:

Good morning, everyone. Welcome to our Q4 2023 earnings call. With us today is our CEO, Scott Smith; President, Rajiv Malik; CFO, Sanjeev Narula; and CFO Elect, Doretta Mistras. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2024 and various strategic initiatives. These statements are subject to risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation and our SEC filings for more information, including reconciliations of those non-GAAP measures to the most directly comparable GAAP measures. When discussing 2023 actual results, we will be making certain comparisons to 2022 results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes the results from the divested biosimilars business and proportionate results from the divestitures that closed in 2023 from the 2022 period. When discussing our expectations for 2024, we will be making certain comparisons to 2023 results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes the results of the divestitures that closed in 2023 from the 2023 period. With that, I'll hand the call over to our CEO, Scott Smith.

Rajiv Malik:

Thanks, Scott, and good morning, everyone. As we close Phase 1 of our strategy, I'm incredibly proud of all that we have accomplished. We simplified but more importantly, stabilize the base business. We continue to deliver on our strong pipeline and are in the final stages of reshaping the company with remaining divestitures being on track. We believe that the stability of our core business and our deep pipeline positions the company very well for continued growth into '24 and beyond. Let me talk to you a bit more about what we believe makes our core business stable. It is driven by the consistent and steady performance of our brand business, the sustainability of our generics portfolio and our ability to continue to bring to market our organic pipeline consisting of high-margin, durable and complex products. Let me further expand this into three elements. First, our Brand business, which makes up about two-thirds of our portfolio, grew 1% in '23, supported by brands like Yupelri and Effexor. We expect our branded portfolio to continue to build upon the success of 2023 and show a moderate growth. Next, is our Generics business, which now also includes our complex generics and makes up the remaining one-third of our revenue. This business was flat in 2023, and is expected to show a slight growth in 2024. The geographic and portfolio diversity, which includes a number of high-value complex products such as Wixela, Breyna and Xulane, rendered this portfolio inherent stability. The third driver of our stable base is our ability to execute on our pipeline. This is the third consecutive year that Viatris has delivered at least $450 million in new product launches. In 2023, we made significant progress across our complex injectables, select novel and complex products and eye care pipelines. We launched Breyna, the first generic Symbicort and Lisdexamfetamine and several others. FDA accepted our NDA filing application for glatiramer acetate depot injection. We received FDA approval of Ryzumvi, an eye drop for the treatment of pharmacologically-induced mydriasis. And we received positive top line results for our Phase 3 trials of Yupelri in China. We also received positive top line results for our Phase 3 trial of Tyrvaya in China and subsequent NMPA acceptance of our NDA. For 2024, we are excited to continue to deliver on our deep pipeline and execute on several key launches that will expand access to patients. For example, from our complex injectables portfolio, we expect to be an early entrant with our Sandostatin LAR product, liraglutide, a generic for Victoza as well as iron sucrose, a generic for Venofer. From our eye care pipeline, we expect to launch Ryzumvi. And from our novel and 505(b)(2) pipeline, we are excited to bring to market our once-monthly, glatiramer acetate depot for patients with multiple sclerosis, and we are pleased to present our latest data this week at [indiscernible], a key medical conference. We also continue to be laser focused on progressing our other pipeline assets, many of which are in Phase 3 stages such as Xulane low dose, Meloxicam and Effexor GAD. We are especially excited about advancing our eye care pipeline that has several programs in a Phase 3 aimed at addressing vision-related disorders such as Presbyopia, Night Vision disturbances and Blepharitis. Let me now turn to the commercial segments and our expectations for 2024. In '24, we expect total revenues to grow approximately 2%, which includes approximately $450 million to $550 million in new product revenue. Starting with Developed Markets. In '23, Developed Markets declined by 1%. Our European business for the third consecutive year demonstrated operational net sales growth led by Italy and Spain, as well as contributions from new product launches. This helped us offset the decline in North America due to the expected impact of increased generic entrance to performance and higher competitive pressures on certain complex products, including Wixela and Xulane in the first half of the year. For 2024, we expect this segment to grow with both Europe and North America expected to grow 3%. Europe's growth is expected to be led by our strong brand portfolio including Brufen, EpiPen and products from our Thrombosis portfolio. In addition, we anticipate further growth in key markets, including Italy and France, and strong Generics performance aided by new product launches. North America is expected to grow by 3%, driven by the exciting new launches of GA Depot, Liraglutide and Sandostatin LAR. In addition, we expect to further strengthen our position of respiratory products like Wixela and Breyna. Yupelri is expected to continue its growth trajectory and grow by double digits. For the Eye Care portfolio, we expect further gains in 2024, resulting from the continued prescription growth in Tyrvaya as we expand access through patient fulfillment, coupled with the launch of new product, Ryzumvi. The Tyrvaya TTC campaign launched in October has shown early indications of both increased patient responsiveness and performance as quarter four non-bridge prescriptions were up 18% quarter-over-quarter. Emerging Markets had another strong year, delivering 7% year-over-year operational growth in '23. These better-than-expected results benefited from strength across our broader generics portfolio and stronger-than-expected performance from brands like Dymista and Viagra, led by markets such as Turkey, South Korea and Southeast Asia. Going into 2024, we are projecting this segment to grow by 6% year-over-year, primarily driven by our branded business. Moving to JANZ. Full-year '23 came in below our expectations due to the continued impacts from the government-driven price regulations in this region, which we expect to continue into 2024. We anticipate to partially offset the pricing dynamics with the ongoing strong volume growth from our three brands, including Amitiza, Creon and Effexor, as well as optimizing our Generics business. This segment is expected to decline by 8% in 2024. Greater China performed ahead of our expectations for the full-year 2023, delivering 2% growth, driven by strong performance of our retail channel in China. This is a result of our ability to adapt our business model to the evolving market dynamics. Going forward, we will leverage our investments to further expand the self-pay patient market and our brand equity in this channel which we expect will help to absorb some of the impacts from the government-implemented health care policy regulations. With these dynamics in mind, we have modeled a 2% year-over-year decline for 2024. Before I conclude, I want to take the opportunity to thank the management team for their partnership over the years and all our employees who have helped us build a strong global platform. I'm very pleased with where we are today in Viatris' journey, and the strength as well as stability of our core business, which is now nicely set up for continued growth from here onwards. With that, I'll hand the call over to Sanjeev.

Doretta Mistras:

Thank you, Sanjeev. It's an honor to be here, and I look forward to working with Scott and the rest of the management team to execute on the company's growth strategy and capital allocation priorities. Prior to joining Viatris, I had the benefit of working with the team as an adviser. I have helped companies across the health care industry drive shareholder returns for the past 20 years. This gives me a strong appreciation for the unique position that Viatris is in today, to create significant value for our shareholders, given the diversity of the business and the stability of the cash flow. With our gross leverage target in sight, I believe the company is striking the right balance with respect to business investment and capital returns. I expect that with the strong foundation we have coupled with thoughtful capital allocation, we will be a strong adjusted EPS growth story in the future. As Scott mentioned, the Idorsia collaboration is a great example of the kinds of deals we'll continue to evaluate. This collaboration has the potential to enhance our growth profile by delivering a strong portfolio of branded, patent-protected assets targeting significant unmet patient needs, while leveraging our capabilities in therapeutic areas where we have differentiated insights. Additionally, the transaction was structured in a way that deploys capital judiciously and creates the potential for asymmetric returns for our shareholders relative to the quantum of capital deployed. Now, I'd like to turn it back over to the operator for Q&A.

Christopher Schott:

Just had a question on business development, just building on some of the comments from the prepared remarks. Just as you think about business development opportunities, how do you think about balancing I guess, kind of R&D deals that may be come with a bit more risk like we saw today. It could be a nice opportunity upside, but have some risk with them versus maybe more in-market transactions or in-licensing of already approved drugs that maybe have potentially lower returns, but a bit more certainty. I'm just trying to sense, is there a bias one way or the other? Are you seeing more opportunities in one bucket versus the other?

Operator:

Our next question comes from Glen Santangelo from Jefferies.

Scott Smith:

So I think, first of all, thank you for the question, Glen. Our capital allocation plan is not changing. Going forward, we plan to deliver return to shareholders through share buybacks, which we've initiated in '24, and done $250 million of dividends and then also looking for business development opportunities. As I've said many times before, we're going to look at the core therapeutic areas, dermatology, GI, ophthalmology, but we're also going to be opportunistic outside of those areas to find assets that fit what we do best. And in terms of these two assets, I think they fit what we do very, very well. We have $2.5 billion in cardiovascular revenue. globally. And so we take a look at that. I think Selatogrel fits very well into the pre-existing expertise and drug, can play across multiple different therapeutic areas, including dermatology, GI, neurology, rheumatology. And so I think these two assets fit our portfolio very, very well. And again, we're going to look at our three core areas, but we're also going to try and be opportunistic to look for opportunities outside of that. In terms of what we're going to cover in the R&D Day, we're going to do -- we're going to cover the -- we're going to do a deep dive into the two assets that we're talking about here, Selatogrel and Cenerimod. We're going to also talk about other opportunities in the pipeline that we have that we're developing, Eye Care, as well as some other things in the pipeline. So it will be a full pipeline review, but a main focus will be on Selatogrel and Cenerimod, including having some KOL thoughts and expertise.

Sanjeev Narula:

Right. Thank you, Glen, for the question. So you're right. So the revenue for the businesses. So first of all, this guidance includes the businesses that has not been divested as yet, and I had given the full year impact of that in my prepared remarks. So you can actually see and get to kind of like a pro forma number, what that would look like for 2025, if you're looking at modeling. So during this year, on the total business, before any divestment, the second half is going to be higher on revenue, and that's just a function of how the business is. New product revenue that Rajiv talked about $450 million to $550 million, a lot of that new launches are happening in the second half of the year, right? That's one. Second is the product seasonality, some of that we have in Europe, that happens in the second half of the year. So that's just a function of some of that happening. In terms of gross margin, you will expect a little bit of a moderation in the second half. Again, that's again, a segment and the product mix, a lot of the pricing impact happens in the later part of the year that will impact the gross margin from there. And then typically, the expenses pick up in the second half of the year, and that kind of -- that impacts. When you put all those things together, the EBITDA and cash flow is going to be evenly phased. The other thing to keep in mind, Glen, is if you're looking at cash flow on a quarter-to-quarter basis, quarter two and quarter four tend to be lower for us because of our semi-annual interest payments that we have. And that kind of drives that and that's why you will see quarter four of this year and quarter two last year, both were lower than quarter one and quarter three. So that's the overall kind of trending on the cash flow. The other point that I would talk about it is, as and when these divestitures close, and we've given kind of in our slides, Women's Health and the API business will close kind of in the first half of the year and the OTC business probably in the middle of the year. We will provide the guidance update as and when those close, so that you can have a sense on what the impact of that. And then we will provide the revised guidance so that kind of secondary, you have a transparency of that.

Balaji Prasad:

So while I don't want to front run your R&D Day, clearly, I want to understand the deal announced today. Firstly, with both Selatogrel and Cenerimod, I'd love to understand the differentiation. While you look at the acute MI landscape, a couple of approved drugs, including Activase. So help us understand the gap in the current treatment and how much more rapid or short-acting Selatogrel is versus current treatment. Also same question on Cenerimod, too. Just following up on this, I see that Idorsia will contribute around $200 million in the next three years. Is it fair to assume that Viatris will also be contributing an equal amount?

Philippe Martin:

Thank you so much, Scott. Yes, just to target Selatogrel, I think at a high level, Selatogrel targets the crucial time between the symptom onset and the first medical attention. That's a time where currently, there is really no treatment for these patients, and that's a critical time when the heart muscle can be impacted. So that's clearly a different positioning in the treatment paradigm for Selatogrel. I think for -- you didn't ask for Cenerimod really, but I think Cenerimod in terms of differentiation, clearly, we've seen a very strong Phase 2 data that supports a differentiated and highly-competitive benefit risk profile. We have fast track designation for this asset. And together with Selatogrel, I would say that the strength of the regulatory interactions bodes well for the future of the two assets. We have a spine in place for Selatogrel. And that gives you a good view on the agency support for the critical elements of our pivotal protocol design. So really a benefit risk differentiation that comes through for these two assets, and we really think they have the potential to shift the treatment paradigm in these two areas of high-unmet medical need.

Operator:

Our next question comes from Nathan Rich from Goldman Sachs. Once again, the next question comes from Nathan Rich. [Operator Instructions].

Operator:

I can hear you now. Yes.

Scott Smith:

So thank you for the question. Let me hand it over to Rajiv to talk specifically about the eye care division and Tyrvaya, and I'll comment afterwards.

Sanjeev Narula:

In terms of, Sarah, the ramp for Tyrvaya. So clearly, the expenses we are incurring. So you'll see an evenly phased expenses because DTC is happening as we speak for the year. And revenue as these prescriptions pick up, we'll obviously -- each quarter is going to be better than previous quarter for modeling purposes.

Operator:

And our next question comes from Ash Verma from UBS.

Scott Smith:

Thanks, Ash. So in terms of Selatogrel, I believe there's approximately 6,000 patients already enrolled in the Phase 3 program. When we take a look at it from the Phase 2 data and what's going on in Phase 3, we think it's relatively derisked as an asset. In terms of the detailed question you asked on patient self-diagnosis and self-injection and identification of patient subsets, that's kind of thing that we're going to get into, again, in R&D Day on March 27. We'll do a deep dive not only on the development programs, the regulatory strategies, but also sort of our commercial strategies as well.

Operator:

And our next question comes from David Amsellem from Piper Sandler.

Scott Smith:

Thank you, David, for the question there. So when I look back at the deals that I've been involved with and over my career, probably by well over 100 deals that I've worked on and been involved with. I would say the majority of them we're partnering, licensing of some sort. We have an extraordinarily strong base and global reach from a commercial perspective in this company. So I think the idea of in-licensing partnering assets is one that works very well for us. But we're going to throw a wide net. We're going to look at all manners to build the portfolio, use our capital correctly. We'll look at M&A, but we'll also look at licensing and partnerships. At the end of the day, they'll probably be a little bit more of the latter, given that they're a little bit less initially capital-intensive and also sort of risk sharing to some extent. But again, what we're looking to do, we've got a very strong global commercial network out there, and we're looking to utilize that the best we can, bring in assets that fit what we do best, and we'll do a combination of partnering licensing acquisition with all the things that we need to do to build the portfolio.

Operator:

Ladies and gentlemen, our final question today comes from Jason Gerberry from Bank of America.

Scott Smith:

So I think, first of all, from my perspective, the most difficult thing in this business is to find impactful assets that you can develop to become blockbusters that are patented with long-term revenue streams. That's what's hard. I think building the commercial structure around that is relatively easy if you have an asset that can really play and be impactful. We're going to be opportunistic. We're going to look at our core therapeutic areas. We're going to look outside. We're going to find things that fit. We're going to find things that fit with the appropriate investment that we can make as a company. And so we're dedicated to, again, finding the kind of assets that can really, really drive business. Certainly, we've got a very solid base business that we see growing at a couple of percent a year as we move forward. and looking for things that can provide durable, sticky, long-term revenue stream for us, is what we're really after here. And we're going to do it in a smart and disciplined way. And we're going to find areas that we can be competitive and leverage off the existing infrastructure as much as we can.

Scott Smith:

Thank you very much. In closing, 2023 was an outstanding year for Viatris that has continued our momentum as we enter the next phase of our strategic plan. I expect 2024 will be a transformational year for our company, as we continue to deliver on our base business while building on our current strengths and adding new capabilities that will enable us to deliver on our future. With our ability, beginning in 2024, to use our substantial free cash flow to both return capital to shareholders and to make strategic investments to grow our business, we are truly evolving into the strong and unique company that we have envisioned. Before we close the call, I want to take one final moment to personally thank both Rajiv and Sanjeev for whom today is their last earnings call with Viatris. Rajiv has been with the company since 2007, and has been integral in building the company that we have today. He will remain as a member of the Board of Directors. Sanjeev has helped the company to successfully execute our Phase 1 strategy since 2020. Thank you both for your tremendous leadership and dedication and service to our company. Thank you.

William Szablewski:

Good evening, everyone. Welcome to our third quarter 2023 earnings call. With us today is our CEO, Scott Smith; President, Rajiv Malik; and CFO, Sanjeev Narula. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2023 and various strategic initiatives. These statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. Please refer to today's slide presentation and our SEC filings for a fuller explanation of those risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures to supplement investors' understanding and assessment of our financial performance. Reconciliations of those non-GAAP measures to the most directly comparable GAAP measures, are available on our website and in the appendix of today's [Technical difficulty]. discussion, we will be making certain comparisons of results on an operational basis, which excludes the impact of foreign currency rates versus the plan that supports our [Technical difficulty] prior period results, which also exclude the results from the divested bio-similar business. An archived copy of today's presentation and other earnings materials will be available on our website at investor.viatris.com following the conclusion of today's call. With that, I'll hand the call over to our CEO, Scott Smith.

Rajiv Malik:

Thanks Scott. I appreciate it and look forward to working with you to ensure a smooth transition while continuing to support you as we look out into the future, but in a different capacity. I also want to take the opportunity to thank all of our employees who have helped us build this strong global platform. I'm very pleased with where we are today in Viatris journey and the strength as well as stability of our core business, which is now nicely set up for the continued growth from here onwards. Moving to our Commercial segment results. We have delivered a second consecutive quarter of year-over-year operational top line growth as we predicted, which further reaffirms that we are standing strong and set up for the future. This quarter, we recorded 1% year-over-year operational growth and are well positioned to end the full year in line with our expectations. Our well-balanced business of developed markets delivered another strong quarter growing 2% year-over-year operationally. Europe grew 1% versus the prior year on an operational basis, making it the seventh consecutive quarter of year-over-year growth. France and Italy led the growth in the region. A solid performance of generics in the Europe was another contributing factor. Our North America business was up 4% year-over-year on an operational basis, in line with our expectations. Our generics portfolio performed better than expected, driven by new launches such as Breyna, the generic for Symbicort, Lisdexamfetamine and the continued contribution of lenalidomide. Also some other key products, including glatiramer acetate, vancomycin and Xulane performed better than expectations. Our brand business was supported by strong demand in YUPELRI, which grew 9% this quarter over the last year and in the epinephrine market. Overall, we remain confident that the developed market segment will meet our full year expectations. Emerging markets had another strong quarter and delivered 2% year-over-year operational growth led by strength across our broader generics portfolio and stronger-than-expected performance from brands like Lyrica, Zoloft and Effexor. Emerging Asia and Turkey were solid performing geographies. This segment is well positioned to deliver mid-single-digit year-over-year growth. Moving to JANZ, where brands performed in line with our expectations, while generics were slightly below expectations primarily due to customer buying patterns. We continue to be on track to deliver full year expectations. Greater China experienced another solid quarter, primarily driven by strong performance of retail channel in China. Greater China was flat to the prior year, in line with our expectations. We believe that this segment will perform slightly better than our expectations for the full year. I'm also happy to report steady progress we made on our pipeline in this region. We recently received positive top line results for our Phase III clinical trials of YUPELRI in China, which is consistent with our U.S. clinical data, and we look forward to submitting our NDA mid-'24. We currently have 10 other products under health authority review in China. Moving to the Eye Care division. As a bridge program sunset, we saw almost 9% non-bridge prescription growth in this quarter. We'll continue to focus on prescription growth in quarter 4 and into the future, supported by our first direct-to-consumer marketing campaign for Tyrvaya, which we launched in early October. We have recorded $345 million in new product revenue year-to-date and are on track to deliver more than $450 million of revenue from new product launches for the full year. Let me now discuss some key updates for our R&D pipeline. We are excited by the continued progress of our eye care pipeline, which is aimed at addressing a range of vision-related disorders. All the Eye Care development programs remain on track, and we are pleased that we received FDA approval for Ryzumvi, for the reversal of pharmacologically induced mydriasis and are looking forward to a commercial launch in the U.S. in the first half of '24. Switching to other pipeline updates, beginning with Glatiramer Acetate people. As you recall, the FDA had accepted for review our NDA and it assigned a PDUFA date of March 8, 2024. While we continue to make steady progress regarding the FDA review of our NDA, we are saddened by the tragic situation in Israel. And we are working very closely with our partner, Mapi, who remains fully operational. We have recently submitted our registration in Europe and are excited about the potential opportunity to bring this product to patients in Europe. Our Botox biosimilar program is progressing well from the development, characterization, validation of drug substance and drug product prospective. We recently completed the manufacturing of our IND-enabling drug substance batches and are well on our way to complete the drug product contracting. We remain on track to file our IND by the end of this year. We expect to initiate the pivotal clinical studies for this program in the first half of 2024. Our Phase III study for our Xulane Low Dose program in U.S. remains on track, and we have benefited from an acceleration in the enrollment rate for this study. We now expect to enroll our last patient this December. Also, we are closely interacting with FDA to initiate the Phase III program for our Opioid Sparing Meloxicom novel product in late December. Our Phase III study for Effexor generalized anxiety disorder in Japan continues to progress according to our schedule. And we remain on target to submit the NDA filing in the first half of 2025. Finally, all of our complex injectable programs are moving ahead as planned, and we continue to be very excited about the potential of this important potential $1 billion franchise. With that, I will hand the call over to Sanjeev.

Operator:

[Operator Instructions] Our first question comes from Chris Schott, JPMorgan.

Scott Smith:

Thank you, Chris. Thank you very much for the question. Yes, we're looking for innovative high-growth assets that bring in predictable, durable revenue streams, good fit for our business that we can leverage strong global infrastructure we have. You asked about the verticals, we're definitely looking at things in the verticals. We're also going to be a little bit agnostic. And if there's a good opportunity that lies outside of those verticals we will look at that very, very closely as well. The important thing for me is whatever we do, we want to leverage the global strength that we have as a company. And in terms of business development, I look at it in sort of in 3 buckets. M&A, of course, but also licensing is very, very important and partnership is very, very important. Some of them are more capital-intensive than others. And in terms of speculating on timing, I don't think -- again, I won't speculate on timing at this point. I think we're looking at things very actively right now, and we'll see where we get. But we're excited about the opportunities that are out there. I think there's a lot of opportunities where we're going and what we're doing. So I appreciate the question.

Nathan Rich:

Great. Good afternoon, and thanks for the question. I wanted to ask on the kind of transition to Phase II. And you gave some details around the 2022 EBITDA of the announced divestitures. Now I know you don't want to give EBITDA guidance for 2024. But any color you can provide on how those businesses have trended over the past year? And any other considerations from a cost standpoint that we should think about? And then as we think about the transformation of the business and the acceleration of top line growth, can you maybe think about help us walk through what the building blocks are to eventually getting the business to that kind of 3% revenue CAGR that you're targeting in Phase II?

Rajiv Malik:

Yes. No, that was a specific question, Dave, can you speak on divestiture?

David Bayles :

First of all, from the overall business point of view as well as between 2 divestitures, all our businesses are performing as we anticipated or better than we had anticipated, including whether it's geography or whether it's the brands, generics and those categories. And that holds basically true for also the businesses which we have identified and which are going through the divestiture. But also, Scott, to your point, the 3%, which we have growth, which we have indicated, just to add on to that, that included our base business, what we have in pipeline for today, that didn't include any more deployment of the capital deployment, which may come from '24 onwards, that will be on top of that. So I just wanted to also build upon that.

Scott Smith:

I also want to piggyback off what Rajiv said. And as we start to really pivot to real growth from a revenue perspective and given our capital allocation plan and our desire to buy back shares. We can move the story to a long-term adjusted EPS growth story, which we're very excited to move into that early part.

Umer Raffat:

Hi, guys. Thanks for taking my question. I wanted to focus on China business for a second. And it looks like your China business is holding in broadly fairly stable, except for FX. And it appears to be quite different in performance versus what some of your peer companies also with meaningful China businesses have reported. And I kind of see that not just on the emerging markets sales reported -- sorry, Greater China sales reported but also in the product level breakout. So I'm just curious, what do you think is tracking different and or is there some timing of revenue recognition that is playing out and maybe we do see some weakness in 4Q? Because it does seem like it's a little more industry-wide? Thank you.

Operator:

Our next question comes from Glen Santangelo, Jefferies.

Rajiv Malik:

Glen, after several quarters, I can say that we have seen -- I'm not -- we have seen perhaps a longer stretch of stability after so many years, I would say. And I don't see any trend at the moment because it's a generic business that plan. It's both demand and supply. And at this point of time, is that we see some still supply disruptions going on, on some key molecules and key products. And it's about your own portfolio, your own ability to supply and basically the flexibility in the supply to sometimes respond to the market needs. And that's what I think we have set for ourselves, and that's got giving us a stability. And I don't see at the moment in the environment, some more trends which we should be concerned about.

Jason Gerberry :

Thanks for taking my question. Just wanted to inquire about the inflationary pressures on cost of goods that was flagged last quarter. It appears like either that was maybe not realized this quarter because of mix or perhaps there were some other offsets. Really curious more so just to think about how those inflationary pressures, do you feel like you may see those manifest in 4Q or into next year? That would be helpful. Just some of your peers have flagged inflationary pressures as well in cost of goods. So just wondering if you can level set? Thanks.

Operator:

Our next question comes from Ash Verma, UBS.

Rajiv Malik:

I think on emerging market, some of our key brands, Lyrica, Zoloft, Effexor region, some of the brands have been performing pretty well. Turkey -- and also emerging Asia, we call it, this is geographies like Thailand and [indiscernible] and all those countries put together. They have performed above expectations. And I see this trend continue. I mean I see emerging markets well under track for mid-single-digit growth, year-over-year growth, driven on the strength of their portfolio, diversity and markets where we are seeing that confidence. Sanjeev?

Operator:

Our next question comes from Balaji Prasad, Barclays.

Brian Roman:

So this is Brian Roman, the General Counsel. Thanks for the question. Our company has been an industry leader in challenging and proper Orange Book listings for many years. So this is an issue that we understand well, take seriously, and frankly, I'd like to see the issue getting some attention. That QC hasn't shared with us what concern they have about these particular patents. But I'd add that there already has been for years’ significant generic competition for our epinephrine auto-injectors.

David Amsellem :

So just a couple of product-specific questions. Can you talk about how you're thinking about the generic Symbicort contribution next year? I know you talked about revenue being a below expectations and developed markets because of phasing of that product. So just talk about where that product is heading. Then any update on iron sucrose that would be helpful. And then on business [Technical difficulty]. What's your willingness to move away from that or look at other therapeutic silos? Thanks.

Sanjeev Narula:

And David on launch of Breyna generic with the Symbicort. We couldn't be more pleased to launch another complex part to make products as affordable alternative to [Technical difficulty] we are looking at the pickup of market share. Now isn't kept for customers, for example, we can be in some comment -- selling to some common entities, veterans or issues like [indiscernible]. So it doesn't capture -- we are -- it's exactly how we are model. It's going to be a significant contributor because we don't see a competition on horizon at this point of time for the next year, it's going to be a meaningful contributor to that. And the miss -- and I won't call -- first of all, we are very happy to have more than $450 million. We have already captured $345 million on new launches, and we are well on track to do more than $450. [Technical difficulty] Most likely the launch being early the first quarter early in the first quarter of the next year. And nothing has changed otherwise, we are exactly on track. We delivered exactly how we planned.

Operator:

No sir. I would now like to turn the call back over to Scott Smith, CEO, to make a few closing remarks.

Operator:

This does conclude today's Viatris 2023 third quarter earnings call and webcast. Please disconnect your line at this time, and have a wonderful day.

William Szablewski:

Good morning, everyone. It is my pleasure to welcome you to our second-quarter 2023 earnings call. With us today is our CEO, Scott Smith; President, Rajiv Malik; CFO, Sanjeev Narula; and Jeff Nau from our Eye Care division. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2023, 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 today's slide presentation and our SEC filings for a full explanation of those risks and uncertainties and the limits applicable to forward-looking statements. We will be referring to certain actual and projected non-GAAP financial measures to supplement investors' understanding and assessment of our financial performance. Reconciliations of those non-GAAP measures to the most directly comparable GAAP measures are available on our website and in the appendix of today's slide presentation. An archived copy of today's presentation and other earnings materials will be available on our website at investor.viatris.com following the conclusion of today's call. With that, I will now hand the call over to our CEO, Scott Smith.

Rajiv Malik:

Thanks, Scott, and good morning, everyone. Our strong performance this quarter highlights the momentum of our business like never before and further reinforces the predictability of our base business, which is well-diversified from a geography, as well as portfolio point-of-view. The performance of the last 10 quarters demonstrates that our business model of bringing access has never relied on any one product or any one market. That strength of our underlying business is enabling us to position the company well for Phase 2 growth. Our continued new product revenue performance is another key feature of our plan and for this year, again, we remain on track to deliver on our expectation of approximately $500 million of new product revenue. As I provide the commercial segment highlights for the quarter, I will be making certain comparisons on an operational basis, which excludes the negative impact of foreign currency rates versus the plan that supports our financial guidance. In addition, I will be making certain comparisons to our Q2 2022 results on a divestiture-adjusted operational basis as defined in our earnings lease. This quarter total net sales grew 1.5% on an operational basis due to a strong performance across various geographies and product portfolios. We believe achieving this top-line growth for the first time as Viatris to flex the power of our platform, well-thought-out strategy, and our consistent execution. Let me get into our commercial segment highlights. Our well-balanced business of developed markets where brands makeup approximately 55% of our net sales in quarter two delivered another strong quarter. Europe performed ahead of our expectations, delivering 2% year-over-year growth on an operational basis. Italy, Spain, and UK, as well as several other markets, drove the strong momentum for the quarter. As solid performance of generics in Europe was another contributing factor. Our North America business was flat year-over-year on an operational basis and also performed ahead of expectations. Generics delivered a better than expected performance, led by lenalidomide, Wixela, and Xulane. Our brand business was supported by strong demand in epinephrine market, and Yupelri, which grew 12% this year over the last year. Yupelri, which is the only nebulized long-acting muscarinic agent available in the market continues to show significant growth and enjoys about a 30% market share in the broader long-acting nebulized COPD market, and is well on its way to become the number-one product in this space. Our new launches in North America are on track, and we are very excited about our recent introduction of Breyna, our generic Symbicort. We expect that this launch will be 180 days first-to-file generic exclusivity which is subject to FDA's future determination of the issue, if and when another ANDA filer becomes eligible for final approval. For the second half of the year, we believe the developed market segment is poised for year-over-year growth and we remain confident to meet or exceed our full-year expectations of both North America and Europe. Emerging markets had another strong quarter and delivered 10% year-over-year operational growth, led by the stronger than expected performance of genetics and brands like Lipitor, Lyrica, and Celebrex. Emerging Asia and Middle East were strong-performing geographies. We remain confident for this segment to deliver better than expected for the full year and grow versus the prior year. JANZ performed in line with our expectations and we anticipate continuing to meet our expectations for the full year. In Greater China, we delivered 1% operational growth in this quarter, primarily due to Viagra and other retail-driven products in China. We remain on track to meet our planned expectations for the year. Our team in China has been focused on continuing to expand our presence in the private channel while navigating and managing the evolving policy dynamics on the ground. We have also been very focused on building and expanding our pipeline of new products in China. To that end, our NDAs for Dymista and for Formed received approval from SFDA in this quarter. In addition to this, our partner's NDA for Tyrvaya was also accepted, while eight other products are under active review. Moving to Eye Care. Tyrvaya’s launched continued to progress as planned in its second quarter as part of Viatris. During the quarter, Tyrvaya's bridge program was optimized to drive increased value per script and achieved the highest quarterly TRX launched to date. Furthermore, we remain focused on maximizing its potential, including increasing share of Medicare prescriptions, driving continued growth in total prescriptions, and launching the brand's first direct-to-consumer campaign in the fourth quarter, which together, we believe provides support for our near and longer-term expectations for the brand. We are also excited by the continued progress of our eye care pipeline, which is aimed at addressing a range of vision-related disorders. Our NDA review of MR-140 for the reversal of mydriasis program is under active review with a PDUFA date of September 28 of this year. We have completed patient enrollment in the first pivotal Phase 3 trial of MR-141 for the treatment of presbyopia and expect top-line data in Q3 of this year. And we remain on track to initiate the second Phase 3 trial later this year. We have initiated patient enrollment in the first Phase 3 study, MR-148 for the treatment of Dry Eye Disease and expect top-line data in 2024. We are initiating a Phase 3 program of MR-139 for the treatment of blepharitis later this year. MR-142 for Night Vision Disturbances and MR-146 for Neurotrophic Keratopathy also remain on track. Switching to other pipeline updates, and beginning with the news we announced today around GA Depot. The FDA has accepted for review our recently submitted NDA and assigned a PDUFA date of March 8, 2024. Our application is backed by Phase 3 efficacy and safety data, and we believe GA Depot could improve patient experience through fewer injections, greater tolerability, and increased compliance. We are feeling very confident in the strength of our GA Depot clinical program and continue to believe that we remain on track to launch in the second half of 2024. We are equally excited about the potential opportunity to also bring this for our -- to patients in Europe, which we expect to file later this year. Our Botox biosimilar program is progressing well from the development, characterization, as well as validation of drug substance and drug product perspective. We remain on track to file our IND by the end of this year. Our Phase 3 study forward Xulane Low Dose program in the USA remains on track with nearly 800 of the planned 12,000 women enrolled. We are targeting completion of enrollment by March 2024. And our Phase 3 study for Effexor Generalized Anxiety Disorder in Japan is well on-schedule, and we are targeting an NDA filing in the first half of 2025. Lastly, all our complex injectable programs are moving ahead as planned. Before I turn the call to Sanjeev, I want to thank our colleagues for another strong quarter and consistent performance. With that, Sanjeev?

Operator:

Thanks you. [Operator Instructions] We'll take our first question from Glenn Santangelo with Jefferies. Please go ahead.

Scott Smith:

Thank you very much, Glenn, for the question. Yes. I would say, I'm very happy with what I've seen. These are very well-performing businesses. There's been lots of demand, there's been lots of interest in these assets. We're very excited on where we are in the process. I would say that we're in discussions with multiple potential buyers on multiple assets and we're looking forward to giving people the details on the time and the place where we can. Just one other comment that I think is really important and it's important to remember that these divestitures represent a [cash flow] (ph) that will be coming to us to help us accelerate towards our desired leverage ratios. What they do is, they really set us up well going into 2024 and beyond. And the critical thing for the future is our ability to deliver on our capital allocation plans in 2024 and beyond, which include capital return to investors through divestitures and particularly share buybacks and also business development and M&A, licensing, and partnership. So, very happy with the process and very happy to be accelerating into 2024 and beyond.

Jason Gerberry:

Hey guys, thank you for taking my question. Curious, are there any alternative structures that you guys would consider with these divestitures to minimize the tax consequences? And then with Tyrvaya, just wondering, what's going to drive a growth inflection here, do you really think that the DTC could be needle-moving for this product?

Jeff Nau:

Yes. Hi, this is Jeff Nau. Yes. And I think it's a great question. We look at the marketplace for dry eye disease there's about 2 million patients currently being treated, but about 16 million that have been diagnosed. So, I think, among other things that we talked about on the prepared remarks, including an increase in Medicare, and many of the other tactics that we're taking into account, that 14 million patients that are sort of sitting on the couch, waiting for a new therapy, it's not something that's really unlocked to us today. And that's really I think the benefit that the DTC campaign brings forward.

Operator:

We'll take our next question from Ash Verma with UBS.

Scott Smith:

Thank you, Ash. And I'd ask Rajiv to address your questions.

Operator:

Thank you. We'll take our next question from David Amsellem with Piper Sandler.

Scott Smith:

Yes. Thank you, David, for the question. I'll answer the first one, and then I'll kick it over to Rajeev. We're focused on looking for strategically significant transactions. Our initial focus on the three therapeutic areas that you called out

Operator:

Thank you. We'll take our next question from Umer Raffat with Evercore.

Scott Smith:

So, thank you, Umer. Second question first. I think we expect to announce all three divestitures in 2023, and we expect to announce a significant one -- at least one in the third quarter, you know it's complex transactions, sometimes to make sure you're doing the right thing, getting the right partnerships and I don't think where delays on very, very happy with the progress that we're making on all these divestitures and very excited that we'll be getting these done and announced or at least announced in 2023. And again for me, the important thing here is, these divestitures represent an ability of cash bonus and the ability for us to be able to get to our desired leverage ratios and then move into Phase 2 of the strategy and beyond in 2024 look for execution of our capital allocation strategies. In terms of MF, I will say, yes, it is the -- a lot of commercial planning for ozanimod and I've been involved in the MS Market. In other ways before, and I will just say without getting into specific -- guiding to any specific number, I think this is a great asset, it's going to have the very significant potential, not only for its ability to reduce injections, but also because of the clinical data that's being generated here and maybe I'd ask Rajiv to dig in a little bit more on the launch.

Sanjeev Narula:

And Omer, one other point I would just go back to the divestiture -- this is Sanjeev, go back to the divestiture point and we've said that it's a matter of strategic choice. These are well-performing assets and we want to make sure we do it in the right way and to get the best value for the company, because we're able to meet our financial commitments we've laid it out without these divestitures. What the divestitures do as Scott pointed out, accelerate what we're trying to do, but we are well-positioned as a company even without the divestitures with everything that is going in the financial outlook of the company.

Unidentified Participant:

Good morning. This is Sean on for Balaji. Thanks for taking our question. On a recent tornado damage to the Pfizers Rocky Mount facility, what level of impact do you see this event could potentially have on the sterile injectable market? And as we think about pushing potential shortages here, do you see any specific opportunities in a sterile injectable market from this incident for Viatris. Thank you.

Operator:

Thank you. We'll take our next question from Nathan Rich with Goldman Sachs.

Rajiv Malik:

So, Nate, let me take the first part and second I’ll have Sanjeev respond to that. The first, overall, from our -- just let me talk first globally. First, the base business. We have -- as I said in my prepared remarks, we have -- we see the momentum we have seen never before and our base business, whether it's in emerging markets or China or Europe or North America, yes, it's hitting on all cylinders. So, the stability and predictability of seeing we have never seen before. So, it's setting up the company exactly how we have planned it and how we've seen it, the execution is just bringing this to the whole another level now. So, having said that from the generics point-of-view, generics across, not only just US, see I'll come to the US specifically because I know your question was about the USA. But even in emerging markets in Europe, generics you had a very solid performance. In fact, 11% or 10% growth in emerging markets was largely also driven by the generic performance. In the US, we always knew that the pricing is a factor of -- two factors. It's one either, demand and supply, and the second is your portfolio mix. Now on portfolio mix, we have diligently worked, moved away from commodities, more diversified complex products, and that's given up that's part of the underlying stability of the mix in the USA. Demand and Supply, yes, the market is seeing some disruption, the market is seeing some hiccups and it may go a little bit further in that direction. We may see more supply disruptions before it comes better and because of the slight disruptions, because of the diversity we have seen price stabilization over the last several quarters in the North America, which we have not seen for a few years back. So, yes, we see the market conditions improving as well as -- [indiscernible] as well as generics are concerned.

Operator:

I will now turn the call back over to Scott Smith, CEO, to make a few closing remarks.

Operator:

This does conclude today's Viatris 2023 Second Quarter Earnings Call and Webcast. Please disconnect your line at this time and have a wonderful day.

Bill Szablewski:

Good morning, everyone. It is my pleasure to welcome you to our first quarter 2023 earnings call. With us today is our CEO, Scott Smith, President, Rajiv Malik; CFO, Sanjeev Narula; and Jeff Nau from our Eye Care Division. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2023 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 today's slide presentation and our SEC filings for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. We will be referring to certain actual and projected non-GAAP financial measures to supplement investors' understanding and assessment of our financial performance. Reconciliations of those non-GAAP measures to the most directly comparable GAAP measures are available on our website and in the appendix of today's slide presentation. An archived copy of today's presentation and other earnings materials will be available on our website at investor.viatris.com following the conclusion of today's call. With that, it is my pleasure to welcome our CEO, Scott Smith.

Rajiv Malik:

Thanks, Scott, and good morning, everyone. As Scott mentioned, we had another strong start to the year and a strong quarter of operational performance across various segments as well as product categories. Let me now begin by sharing our commercial segment highlights from the quarter. As I do, I will be making certain comparisons on an operational basis, which excludes the negative impact of foreign currency rates versus the plan that supports our financial guidance as well as to Q1 '22 results which also excludes the results from the divested biosimilars business from Q1 '22. Our well-balanced business of developed markets where gross margin close to 60% of our net sales delivered another strong quarter. Europe performed ahead of our expectations, with France and Italy driving the strong performance. The region grew low single digits in Q1 compared to the prior year on an operational basis, making it our fifth consecutive quarter of year-over-year growth. Our key brands like Dymista, Creon and Yupelri as well as our generics portfolio continued to perform strongly in Q1. Our North America business also performed ahead of expectations driven by better-than-expected performance in our generics portfolio, including generic Symbicort [ph], and our injectables portfolio. Our brand business was led by stronger performance of Yupelri. We look forward to launching several new products in North America this year, including Breyna, our generic to Symbicort. We and our partner can develop Drug Delivery, have settled the patent litigation with AstraZeneca and expect to launch the product after the expiration of regulatory exclusivity. We anticipate launching Breyna with 180 days first-to-file generic exclusivity subject to FDA's future determination of the issue if and when another NDA filer becomes eligible for final approval. For the remainder of the year, in developed markets, we expect to meet or exceed our expectations of both North America and Europe. Moving to emerging markets. Korea, Malaysia, Thailand, as well as the Middle East, delivered strong performance. Lipitor, Norvasc, and Viagra performed better than expected. Generics also performed ahead of expectations driven by solid ARV performance. We remain confident for this segment to deliver mid-single-digit growth for the full year, primarily driven by our brand category of this region. In JANZ, the brand category fell slightly behind expectations primarily due to customer buying patterns in Japan. We remain confident in our broad outlook for the year due to the projected strong performance of our generics, including authorized generics as well as our brands like Creon, Amitiza, and Effexor. Greater China performed better than expected with 5% year-over-year growth on an operational basis. We expect another strong year of operational performance, in line with our expectations, as we continue to focus on the retail segment and growing the self-pay patient base while navigating the evolving policy environment. I'm also pleased to confirm that we have 10 regulatory submissions under review with the SFDA in China. Moving to Eye Care. Tyrvaya launch continue to progress as planned in its first quarter as a part of Viatris. March delivered Tyrvaya as the highest launch-to-date monthly prescriber count and total prescriptions. Furthermore, we remain excited about Tyrvaya's opportunities ahead, including driving prescriptions from the recent Medicare party coverage wins, leveraging Viatri's commercial infrastructure, and launching its first direct-to-consumer marketing campaign in Q4, which together provides confidence in our current full-year outlook for Tyrvaya as well as beyond that. We have made significant progress in stabilizing our base business, which we believe is one of the key elements to the successful execution of our phase II strategy in '24 and beyond. One of the primary drivers to our expected stabilization is the effective management of our brand portfolio, which forms approximately 2/3 of our overall base. I'm pleased to report that for the last several quarters, our branded business has consistently performed at or above our expectations across the various geographies. This continued strong performance of our branded category has led generics across the segments, combined with our anticipated $500 million plus of new product launches in '23, gives us tremendous confidence that our base business, excluding the positive impact of our Eye Care Division, will return to growth in the second half of the year versus the prior year. We believe we are headed into the final stages of completing all aspects our phase I commitment and will deliver another strong year that we expect will put the company in a very solid position to execute phase II. Let me now switch to provide noteworthy updates on our pipeline with a focus on the three key buckets we highlighted at the beginning of the year. I will begin with our portfolio of complex injectable products. We secured the sole first-to-file position for Wegovy, a weight loss treatment. In addition, we can also confirm that we have achieved the sole first-to-file status for Ozempic 8-milligram strength. As we have previously disclosed, we have a shared first-to-file position on the other strengths of Ozempic. In addition, we have strengthened this portfolio and submitted our NDA for Abraxane used in the treatment of Breast Cancer as well as advanced our MR-151 product, an Anticoagulant, into its clinical phase of development. Finally, we have also submitted another first-to-market ANDA to FDA for MR-204, which is indicated for Chronic Dry Eye disease. Within our select novel and complex products pipeline, I'm really excited to announce that we filed our NDA for Glatiramer Acetate once monthly to FDA. As we have previously noted, our GA one monthly product has met its primary endpoint of reduction in annual relapse rate in a placebo-controlled Phase III study. GA monthly demonstrated a 30% reduction in ARR compared to placebo. In addition to this, GA once monthly, when compared to placebo, demonstrated clinically relevant priority on the expanded disability status scale score that was statistically significant. For Meloxicam, we have completed our end of Phase II meeting with FDA on May 1 with positive outcomes, and we look forward to initiating our Phase III clinical trial in the second half of this year. Finally, we are progressing our IND and enabling study for our Botox program and remain on track to making our IND filing this year. Our Eye Care pipeline is also advancing as planned. We are pleased that we have received positive top-end results for Tyrvaya in China. We, along with our partner, are now checking our submission in China to August of this year. Our clinical program for MR-142 for Night Vision Disturbances is progressing well. We also submitted our IND and are Phase III-ready for our MR-148 for Dry Eye Disease. In addition, we aligned with FDA on the Phase III study design for our Blepharitis program, which will get initiated later this year. Finally, we are executing an IND-enabling study for our nerve growth factor product, MR-146, which we hope to progress to treat all stages of Neurotrophic Keratopathy. Before I hand it over to Sandeep, I want to recognize that our execution has been and continues to be a team effort, and I would like to thank our colleagues around the globe for delivering another strong quarter. With that, I will now hand the call over to Sanjeev.

Operator:

[Operator Instructions] We'll take our first question from Glen Santangelo from Jefferies.

Scott Smith:

Good morning, Glen, thank you very much for the question. So, you said comfortable with the strategic plan. I think I'm more than comfortable. I'm very, very supportive of the strategic plan. As I came in on the Board at the end of the year, one of the things that I was most impressed with was the plan and the way forward. I think it's a very, very strong plan, I'm very, very much supportive of it. You asked a question about divestitures as well. And I think it's really important to note that we expect to be -- as I said in my prepared remarks, we expect to be in the previously announced ranges for both value and for timing. And it's really important to note that we don't need to do these divestitures, we have strong financial performance. These are a matter of strategic choice and not a necessity. So, these are strongly performing assets. There's a lot of interested parties who are on track to announce all of them, hopefully, by -- in 2023. And we hope to be able to announce one or more early in the second half. So, we're very, very pleased where we are from that perspective. But again, it's really important to note that we don't have to do these divestitures in order to execute on our plan. Our plan is strong, and due to the strong operational and financial performance of the company. Sanjeev, do you want to talk little bit?

Operator:

Our next question comes from Chris Schott from JPMorgan.

Scott Smith:

Thank you very much for the question, Chris. I think it's very important to note that due to the strong operational and financial performance of the company, we can execute our financial commitment and on the plan without the divestitures. So, these are really good, well-performing assets. Yes, there's been some deterioration, I believe, in interest rates in the macroeconomic environment. And we don't go in to any sale that we don't think mimics the value that we see in these important assets. Again, having said that, there's a lot of interest in these assets, and we believe they're going to move forward. And I believe they're going to be, by the time we get to the end of this process, I believe they're going to be in the previously announced range, both for value and for timing. But no, they're not necessary for us to be able to execute on the plan.

Unidentified Analyst:

Thanks for taking my question. This is Robin [indiscernible] for Jason. So, first is on your monthly GA for multiple sclerosis. How do you see the market opportunity there given the decreased use of GA overall? And do you believe you can increase the use of GA with a monthly Depot? And then on Tyrvaya, just early impressions. What do you think is needed to drive the launch curve to look like more successful dry-eye launch analogs? Thank you.

Scott Smith:

Yes, sorry. Yes. On the Tyrvaya side, if we look at Tyrvaya performance in 2022, predominantly driven by commercial coverage. And as we enter into 2023, we have increased Medicare Part D coverage from single digits now to leaving the quarter about 54% Medicare Part D cover -- lives being covered. So, if you think about the marketplace, approximately half of all dry eye disease prescriptions come from Medicare Part D. So, we expect that to be a significant tailwind. As we exited the quarter in March, we had the strongest launch today for prescribers and prescriptions. We expect this to continue as digital advertising ramps and we initiate the DTC campaign in the end of the year. And Furthermore, when we leverage Viatris' commercial infrastructure, we feel that's going to drive an additional intermediate and long-term tailwind for Tyrvaya in the overall portfolio.

Operator:

Our next question comes from Balaji Prasad from Barclays.

Scott Smith:

And, I did confirm $2.3 billion going forward. But let me take it to Sanjeev to give you some more context around your EBITDA question.

Operator:

Our next question comes from David Amsellem from Piper Stanley.

Rajiv Malik:

I can start with the -- from the second part. I think we never want deemphasizing the oral solid business. All we did was diligently looked into our portfolio, looked into there are multiple options products are commoditized. There are more than 10, 15 suppliers out there. excess is not an issue. And we pruned that portfolio and focused on going up the value chain, focused on excess of the more complex, hard-to-make products, because somebody is going to take the lead to bring those products, too. so, I would say that generics are still a very important part. Our excess -- basically, it's all about excess, and that's where we have been focusing on. Bringing excess to this hard-to-make, difficult products in this segment across the globe. So, we're not walking away from that segment. That's the first thing. Second, from the brands point of view, established brands point of view, not just Lipitor and this, these brands, we have been -- these brands -- some of these brands were before Upjohn or even the average experience. We were never declining at an accelerated rate. And we while because there was perhaps not enough focus over the last two years, we have -- I know what we have to work with, and we are focused on these products. Over the last several quarters, six to eight quarters, we have been able to stabilize this bucket very successfully from a decline of -- initial decline of 4%, 5% to about now 1%. And in fact, this quarter, it was flat. And next quarter, you will see this segment coming to a little bit of growth. So, it's all about stabilization of this bucket, which is leading to the further robustness of this platform. So, we are very excited with the work which we have done around this and our ability to manage this portfolio.

Ash Verma :

So, I have two on pipeline. On Botox, have you received clarity from the FDA? And can you share with us like what's going to be the trial design, biosimilarity endpoint, et cetera, for this program? And are you pursuing just the therapeutic indications here, not aesthetic? And then separately, for July nowadays, can you elaborate a little bit like what is the value proposition? Does this in any way, expand the market opportunity? Or is it going to cannibalize the high-dose product that you have? Thanks.

Operator:

Our next question comes from Umer Raffat from Evercore.

Rajiv Malik:

Wixela is and Wixela always has been ever since launch a very meaningful contributor. Even this quarter, it has been a very decent contributor to our projection or to our numbers and all that. And it's a very important product. We have met and exceeded every expectation we had around Wixela. And we expect to leverage what have we learned in the market to further leverage the same expertise to leverage in this product. We are very much looking forward to bring this product once the regulatory exclusivity expires. Everything is lined up. And we anticipate launching this with 180-day first-to-file generic exclusivity unless, as we mentioned, subject to FDA's future determination of this issue when another ANDA filer becomes eligible for final approval. Now let me switch back to China. Four years of successful implementation of VPP, China has significantly improved the cost efficiency. And first, I will tell you, we don't have any more products to go through the VPP rounds at this point of time. We have gone multiple rounds. The market has evolved towards segmentation of privately paid and government reimbursement paid. And what have we done at our end? Commercially, we have aligned -- we have continued to make a lot of progress effectively to compete in, especially in the private paid channel, leverage the brand equity of the products in the private pay channel, and reorient ourselves over there. Operationally, what we have done is loaded up the pipeline. We have already 10 products under active review with FDA. And sooner than later, this pipeline will start coming up and add to the growth. And over last one, I was just there with our management team and Scott in China to review. And I'll tell you, we had a great team, they have been performingly wonderful well during the COVID even through the integration, we have -- this was the first time we ended up there after integration. I have nothing to say but great things, and our confidence in that business has been reconfirmed. Scott, do you want to like to add something?

Operator:

And our last question comes from Nathan Rich from Goldman Sachs.

Scott Smith:

So, thank you for the questions. And just relative to the BD strategy going forward, what was laid out in November, the areas we were going to focus on were GI, dermatology, and, of course, eye care. And I am very, very comfortable in all those areas. I've had a very significant experience, both development experience and commercialization experience, in GI and dermatology. And again, very comfortable moving forward in those areas. I will say, however, though, we will also be opportunistic. If there's something, and we're very open to something outside of these areas, if it fits our business dynamic and it's right and will bring the right kind of value to the company. So, I'm very excited about the strategy going forward. Again, focus, eye care, derm, GI, but opportunistic and open to other opportunities as they come in. And I think if you take a look at the model of the type of acquisitions that we would like to make, take a look at the Oyster Point and Famy Life Sciences that was completed earlier in the year. Those are an excellent example of the execution of that strategy. We acquired a company with an approved asset, customer-facing organization, and we were able to marry it with the Famy development assets. So, I think that's a really good example of the type of deals that we'd like to do going forward.

Scott Smith:

I believe that was the last question, the end of the questions. And if so, I'd just like to take a moment to say thank you to everybody on the call here for time, and attention today. So, want to say, really, really proud of the strong operational and financial quarter we had in Q1, a great start to the year. and I really look forward to meeting and spending more time with all of you as we move forward in the future here. So, thank you very much.

Robert Coury:

Good morning. When I spoke with you on November 7th, I shared my excitement for all that I saw ahead for Viatris as we begin to approach the end of Phase I of our strategic plan, which, as you know, has been our setup phase. And now as we prepare to enter Phase II beginning in 2024, I am pleased to report with our eighth consecutive successful quarter of execution behind us, the rebasing of our business model is well-underway. And though we are not giving guidance for 2024, I am even more confident today that we will not only generate a minimum of $2.3 billion of free cash flows, excluding transaction costs and taxes, but now also see the potential for accelerated top line growth from 2023 to 2024 as well. This is on top of the expected top-line growth you saw in this morning's press release between 2022 and 2023 after excluding the full year impact of the biosimilars business in 2022. Now turning to the other press release you saw this morning. The Board of Directors has appointed Scott Smith as Viatris' new Chief Executive Officer, effective April 1st. Scott will lead the company and the execution of our previously and now Phase II strategy. Scott has been a member of the Viatris' Board since December of 2022 and is a deeply knowledgeable senior global biotechnology pharmaceutical executive with over 35 years of experience, including as a former President and Chief Operating Officer of Celgene Corporation, where he built and oversaw the clinical development, registration, launch and global commercial success of the blockbuster drug, Otezla. Most recently, Scott has served as the President of BioAtla, a publicly traded global biotechnology company focused on the development of Conditionally Active Biologic antibody therapeutics. The Board view Scott as a seasoned builder who possesses vast global commercial and pharmaceutical expertise and a proven ability to build, grow and manage large complex organizations. We see his strong commercial and strategic expertise being complemented by his experience in organically building product franchises and executing business development and partnering activities. He also has substantial experience in the development of regulatory and clinical strategies that bring products to market. I personally have been very impressed with Scott's overall approach to leadership, his deep industry knowledge and forward-looking business mindset. With our foundation now firmly in place and as we enter into Phase II of our strategic plan, the Board truly believes that Scott is well-positioned for success as he leads the growth of Viatris in the years ahead. We are excited to welcome Scott and believe that he is absolutely the right choice to lead the company into the next phase of our journey. I'd now like to turn the call over to Scott to say a few words himself. Scott?

Robert Coury:

Thank you, Scott. The Board and I very much look forward to supporting Scott during the execution of our Phase II strategy, while continuing to remain focused on identifying additional opportunities to further unlock value for our shareholders. Also, as Scott mentioned, Michael will be working closely with him to support a smooth transition and will then step down as CEO and as a member of the Board of Directors on April 1 of this year. I and the Board would like to personally thank Michael for his service and his dedication during this critical time of the creation of Viatris and the establishment of the ongoing execution of our Phase I strategy. We wish him nothing but the best as he moves forward. With that said, I do look forward to answering your questions in the Q&A session. But for now, I'd like to turn the call over to Michael, so he can add a few comments and then also lead the walk-through of our 2022 fourth quarter and full year earnings. Michael?

Rajiv Malik:

Thanks, Michael, and good morning, everyone. 2022 was another solid year of business execution and performance. We met our stated commitments, including delivering the pipeline, integrating and capturing synergies and most importantly, stabilizing the base business. We are really excited with how we see 2023 shaping up, and nothing has changed from what we shared with you on November 7 as we prepare for 2024. Our path to return to growth in Phase 2 is clear and now it’s about continued execution, which is what we do best. One of the key drivers behind the stability of our business is the understanding and effective management of our established brands. This was further evidenced by the better than expected performance of this category in 2022, driven by year-over-year growth from brands like Creon, Lipitor, Celebrex, Dymista and Yupelri while Norvasc and Amitiza and Effexor held JANZ ground. We expect this stabilization to continue into 2023 and beyond. Let me now turn to the commercial segments and our expectations for this year. I will be making certain comparisons to 2022 results on a constant currency basis, which excludes the negative impact of foreign exchange, as well as excluding the biosimilars business from 2022. Our 2023 business is on a growth path. We expect to deliver approximately $500 million in new launches, plus $56 million in revenue from Tyrvaya, which more than offsets 2.9% erosion of our base business. As Robert mentioned in his prepared remarks, while we are not giving guidance beyond 2023, we see the potential for accelerated top line growth as we go into 2024 and beyond. Developed Markets grew by 1% in 2022 on the strength of European growth, offsetting the decline in North America. For 2023, we expect this segment to remain flattish. Europe grew by 4%, primarily driven by the stability of our branded business, new launches and a strong performance from countries like France and Italy. In 2023, we believe we are well positioned to further grow this region by 3%, led by brands like Creon, Influvac, Lipitor and our thrombosis portfolio. In North America, despite the solid performance of Yupelri, the business declined by 4% as we navigated the competitive headwinds on key products like Wixela and loss of exclusivity on Miacalcin and Perforomist. We project Yupelri to continue to have strong double-digit growth in 2023, which will help offset the continued competitive pressures on certain key products. These market dynamics will be the primary reasons for our expectation of an approximate 3% decline in 2023. That said, we are excited and look forward to bringing several new products, including generic Symbicort to market this year. Greater China again performed strongly and grew by 3% year-over-year, despite COVID lockdowns in this region. Our hospital business performed relatively better than retail. We believe China has significantly improved the cost efficiency of the medical reimbursement funds, while achieving their goals of providing the broader coverage of health care to its population through the successful implementation of VBP and other policies. At the same time, market has evolved towards publicly reimbursed channel and private paid channels. We have made significant progress in adapting our business model to the evolving market dynamics, while focusing on value-added activities to help patients manage their chronic disease states more effectively. These investments are helping us expand the private pay market and also leverage our brand equity in this channel. Keeping in mind the evolving policy framework, we have modeled a small year-over-year decline for 2023. Emerging markets performed in line with expectations and benefited from a solid performance of the overall branded business, led by markets such as Middle East, Turkey and Korea. Going into 2023, we are projecting this segment to grow by 4% year-over-year, primarily driven by our branded business. Our Gen segment performed in line with our expectations, while continuing to be impacted by the comment driven price regulations in this region. While our brand Creon grew both in volume and value, our other two key brands, Amitiza and Effexor showed solid volume growth in 2022. We anticipate strong volume growth to continue for our key brands for 2023. This segment is expected to decline by 4% in 2023. Now let me turn to our newly formed Eye Care division. We are pleased with the tailwinds that we expect with Tyrvaya in 2023. Since the beginning of this year, Medicare Part D coverage has grown from 2% to 32.5% of covered lives. We also launched a 90-day script program, and we are already seeing an uptick in the total prescriptions midway through this high deductible period of the year. We are significantly investing in the business and intend to launch a direct-to-consumer campaign in the fourth quarter of this year that is anticipated to start delivering results in early 2024. Switching to our deep eye care pipeline. Our NDA review for reversal of mydriasis program was accepted and has been granted a PDUFA date of September 28 of this year. We have made the decision to terminate our Stage 1 Neurotrophic Keratopathy program because it failed to meet the primary endpoint in the Phase II OLYMPIA study. We have started enrollment in the first pivotal Phase III trial for presbyopia and are also on track to initiate the first Phase III study for the treatment of blepharitis in 2023. With the positive momentum of Tyrvaya and continued progress in our pipeline, we remain confident that our Eye care division will deliver $1 billion in net sales by 2028. 2022 was a very productive year from a science perspective. We are very pleased with the progress of our Complex injectable pipeline. Currently, we have 10 ANDAs under review with FDA and have secured several first-to-market generic product opportunities such as Sandostatin LAR, Ozempic, Wegovy and Abilify Maintena. We expect to file a number of complex injectables in 2023, including MR-117 for the treatment of breast cancer, MR-150 indicated for use in the iron deficient anemia and MR-151 for the use in the treatment of certain bleeding disorders. Our novel and complex product programs have also progressed well in 2022. As you are aware, our partner, Mapi, has successfully completed the Phase III trial for our Glatiramer Once Monthly, and we are on track to submit this NDA to FDA by this April. We have also initiated a Phase III trial for expanding the indication of Effexor ER in Japan and have also made good progress on the recruitment of subjects into our Xulane Low Dose clinical program. Looking ahead into 2023, we believe we are well positioned to initiate Phase III trial for our meloxicam rapid onset of action dosage form, which we believe has opioid sparing attributes. We also remain on track to initiate our clinical program for our biosimilar to Botox later this year. For our core and complex generics, we made over 100 additional submissions globally in 2022, and we expect to see this trend continue through 2023. Our program for complex generic MR-153 indicated for treatment of type 2 diabetes and MR-154 indicated for the treatment of SMA are well on track. For China, products were filed with FDA in 2022, including generic Symbicort. And we plan to submit additional 10 products this year in China. Our operations had yet another year of solid performance, delivering high customer service levels, and we see this strength continuing throughout 2023. From an integration point of view, we were able to exit substantially all the transition services with Pfizer in 2022 and are well on our path to achieve $1 billion in cost synergies by end of this year. Before I conclude, I would like to thank our colleagues for their hard work and commitment that delivered another year of strong performance. With that, I will now hand the call over to Sanjeev.

Operator:

Thank you. At this time, we will open the floor for questions. [Operator Instructions] We'll take our first question from Chris Schott with JPMorgan.

Robert Coury:

First, I would not say that we're repositioning the company at all. I would say the news today is all about preparation, not change. I think -- as you look from day one, we laid out a two-phase process. Phase 1, which had to do all about integration, synergizing and really execution in bringing the two organizations together. We believe that Michael leading the Upjohn division at that time, Sanjeev's role at that time, we felt that those two leaders coming together with our leadership was the absolute right leadership for Phase 1. And it's really demonstrated and proved out to be actually the perfect right decision because the company has been stabilized, the organization has been integrated, our synergies are well on target, so this is -- and then, of course, in November 7, we -- the Board of Directors and management, we laid out a very clear strategy for Phase 2. So once you lay out that vision, once you understand what the strategy is, and then you put together an execution plan, the simple last step is who is the right leader with the right background to support that strategy going forward. So really, this is a very natural, authentic handoff from Michael to Scott, when you look at the both backgrounds but you should expect that this is not a repositioning or a change or a change in strategy. In fact, I think, Scott in his prepared remarks has said so. But Scott, let you say a few words about your view of this.

Robert Coury:

Sanjeev, do you want to hit this?

Robert Coury:

Yes. And I guess the only thing I would add, Chris, we said the word at least $2.3 billion for 2024, taken into consideration everything that Sanjeev said. And so I believe even the onetime cost, I think we are extremely confident that we're going to be able to, hopefully -- again, we're not giving guidance. I don't want people to think we're giving guidance, but we thought that, that metric was very critical. So look, hopefully, we'll even be able to absorb even the one-time costs. I think the new piece of information that we telegraph today, even though we're not giving guidance for 2024 and the fact that we're showing growth now in 2023 top line over 2022, when you take out the biosimilars business, is the accelerated growth we see in top line from 2023 to 2024 now. And I do think in the last call, we were asked in terms of, again, I think maybe with Umer’s question, is it fair to say if we look at the EBITDA conversion for cash flow how you back into EBITDA, I think the range of the 4.6 to 5 was what my answer was on November 7, and that hasn't changed at all.

Glenn Santangelo:

Hi, guys. Good morning. Thanks for taking my question. Hey, Robert, I just wanted to follow up on these non-core divestitures. I mean you all said a number of times that everything sort of remains on track. I was just wondering if you could sort of comment on the tone of those negotiations? And are you still comfortable with the level of proceeds from these transactions that you discussed historically, because you threw out some pretty high valuation multiples on those sales? And then, I guess, just a follow-up to that would be assuming you are, I mean, that's a lot of cash coming in the door. I was wondering if you could just sort of revisit some of your capital allocation priorities. I mean you gave in the slide deck, your capital allocation framework for the free cash flow, but that's a lot more money, and I'm trying to think about how you may want to deploy that vis-à-vis business development versus pay down versus repo?

Operator:

Thank you. Our next question will come from Balaji Prasad with Barclays.

Robert Coury:

So I think Balaji on due time, you will get confirmation from us about the trajectory and the patients and all that. But I think, it's going to be a very meaningful product from 2024, 2025 onwards for us. But I'll tell you more excited, I am is about the science behind it, the data we have seen, analyzed because perception is maybe it's a just a convenient place, not even if a conveniently – it's one injection against 12 injections, which is the current therapy, 40-milligram against 480. But more importantly, I think we have seen the insights – insights and the data that the statistical significance we are seeing in the standard disability score, the EDSS, which basically connects directly to the quality of life – that's where I think we're excitement is that we'll be able to build it in the label and that will drive that. So more – and more over that this platform, you should be tuning to see that this platform can be the platform which we may potentially use for many extendedly steeper form for 505(b) (2) opportunities like the Glatiramer Acetate. So, [indiscernible] provide.

Sanjeev Narula:

And Balaji, regarding the point about the investment, we saw that in the bridge that we provided on the IT division, SG&A investment, that's a function of investment in our field force, investment in the marketing program and the investment in direct to consumer that we'll be implementing later in this year.

Sanjeev Narula:

And investment in science, in the R&D, yeah absolutely.

Jason Gerberry:

Hey, guys. Thanks for taking my questions. Just looking at the product level disclosure. So LIPITOR and NORVASC has held up pretty nicely. I think it was about $2.4 billion in revenue. So looks like those products have weathered the VBP process. And I'm just trying to get a sense, if you can speak to the extent to which sales of these products are still concentrated in China. And really trying to just frame product concentration risk, it would seem like these two products probably contribute a pretty substantial amount of EBITDA by our estimate, maybe even close to $2 billion. So just wanted to get any framing that you can offer there? And then just on sort of the 2028 outlook for the $1 billion in additional revenue, is there any specific Famy product that you'd say is the biggest contributor to that? Thanks.

Michael Goettler:

And then I'll touch base on the eye care portfolio and pipeline. I think what's important here is these numbers that we've shared are really risk adjusted. And when you look at the entire portfolio, we see that of that $1 billion target, about 60% will come globally from dry eye disease assets, about two-thirds of those from the US and about one-third of those from the rest of the world. Approximately 20% will come from Blepharitis globally and approximately 20% will come from all other assets in the pipeline. But as you can see, we have a robust pipeline with a number of different indications with significant unmet need.

Operator:

Thank you. Our next question comes from Elliot Wilbur with Raymond James.

Rajiv Malik:

Yeah, let me first answer your 2022 question. And it was not underperforming of the approved asset. It was more from some delay. And if you recall, Elliot, 2022 included a couple of biosimilars where we were getting -- waiting for the first approval of Aspart, biosimilar to Aspart and biosimilar to Avastin. And that didn't happen because of the issues with the Biocon facility. So that was primary reason behind that miss. But going into 2023, as we have always said to you, we're not dependent upon one product over here. Every product is risk-adjusted, products like Symbicort and we still have the tailing effect of the products like lenalidomide this year. But yes, iron sucrose, it is a complex product you will appreciate. And when you are trying to bring a first to the market, there can be sometimes more iterations. But we are at a point with a science where we see it happening. And all those factors have been considered to build this 2023 number. And I feel very confident at the beginning of the year that this number, as I said, put out 98% of these products are either approved or already launched or a couple of products are pending approval, that's where the iron sucrose comes in.

Ash Verma:

Hi. Thanks for taking my question. So I have two on capital allocation real quick. So what drove the decision to keep the dividend per share flat this year? I know, last year, we saw a 9% growth. And then on share repurchases, any change in thinking on the timing here in the light of President Biden calling for a quadrupling of tax and buybacks? Thanks.

Sanjeev Narula :

40% -- at minimum 40%.

Operator:

Thank you. Our next question will come from Gary Nachman with BMO.

Robert Coury:

Why don't you take this backwards? Why don't you go first and then let's Scott close.

Scott Smith:

So Gary, thank you very much for the question. I think a very important part of the strategy is moving up the value chain as we move into part two and beyond. I think the eye care transactions that happened recently are a very good model for the way that we're going to want to do BD going forward. You mentioned the therapeutic areas of interest, obviously, through my branded experience with Otezla and others, I'm very familiar with the GI space and with, of course, the derm space. These are two areas that I think fit our strategy very, very well. But I will say, I think I want to a little bit opportunistic as well. If there are opportunities outside of these tidy eyes that fit our model going forward, we should be very open-minded to engage in those as well. So this, to me, is a very, very important and exciting part of the strategy, moving up the value chain, and I'm really excited to be leading that effort.

David Amsellem:

Hey, thanks. So I wanted to drill down more on your longer term expectations on complex products and also brands. You talked about novel and complex products about $1 billion of peak sales by 2028. I know you addressed glatiramer once monthly. But just wondering what are the other products that you think stand out here, like, for instance, the meloxicam product post-surgery, there was one that was recently discontinued. So I'm just wondering what makes you think that's a great opportunity for instance. And then regarding the brand side on eye care, you said it's mostly dry eye. Just to be clear, is that Tyrvaya? Is that -- are there other products? I mean, can you just help me better understand the mix there? Thank you.

Rajiv Malik:

Yeah. We talked about extensively about three buckets of billion-dollar franchises. One was the eye care -- sorry, one was eye care, of course, which is the latest one. But then complex injectables, and the third was the complex products. And given complex injectables, almost already 10 products are already under review with FDA with seven first market position secured over there and many more, like I said, three to four products are category into the filing in 2023. And we have about 33 products in the pipeline. Now they're all -- you can follow Effexor like model, but then we go to the complex 505(b)(2) whether it's Botox, whether it's Xulane Low Dose, GA and we didn't discontinue meloxicam. Meloxicam, in fact, is advancing very nicely. We just concluded Phase IIb. We have end of the Phase II study with the meeting with FDA scheduled in the next few weeks, in fact, a couple of months. And that product will be heading into the clinical phase -- Phase III clinical studies later this year. So there's a lot going on in that bucket because both Botox, Xulane Low Dose, Effexor, meloxicam enter Phase III later this year.

Rajiv Malik:

And also, let's not underestimate the pipeline, which is markets like China, Japan and Europe separately because to offset their basic erosion. That pipeline never existed. That pipeline has been created. So that pipeline will be also coming into the play.

Michael Goettler:

And so when we talk about the eye care franchise and dry eye, in particular, I think one of the things that's really important to appreciate what the pipeline is Tyrvaya really has a very unique mechanism of action. It's the only product out there that stimulates the production of natural tear film. When you think about dry eye disease, it's a multifactorial disease. So we won't stop understanding how to treat this disease just because we're launched Tyrvaya and we're selling Tyrvaya. There may be other mechanisms that can be added in there. And that's the nice part about Tyrvaya’s. It really is a product that stands by itself and is able to be used with any other dry eye product that's out there in the market. The other thing that I think is really important is we haven't really scratched the surface outside of the US, and that's really important market to go into and with the power of Viatris and all the supply chain and the ability to grow outside the US, I think that's something that we look forward to as well. Operator

Robert Coury:

Well, Umer, you can look at the glass half empty or you can look at the glass half full. So you're looking at it from that perspective, thank you for the question and the opportunity. Quite frankly, the glass is only half full and just half full and still filling. This is a very natural -- let's start with Ian Read, okay? You should probably know that Ian was on the Board and could not have gotten more support from Ian when it came to Scott Smith, okay? Ian was absolutely a part of the vote to bring them on. Ian actually, quite frankly, given his deep industry knowledge. Ian actually gave us quite a bit of strong advice and support for Scott. And I can tell you that he's fully supportive of Scott, understands the strategy. Ian brought a lot of value to us on that Board. And quite frankly, I'm sorry, he wanted to move on. He's got a lot of other things going on. But I think Ian hit departure was all again for all the right reasons. So, I'm very thankful for Ian, and I'm very thankful he was here to give the advice to us about Scott. Ian's obviously had a long history with Scott's former boss and having that insight was really invaluable to us from the Board. Let me just say this when you say about where we are in our business life cycle? Look, most companies make transitions when there's a problem. Most companies make transitions when something is going on in the company or there's an event. Why is it -- why should it be viewed any -- why should be viewed as the glass half empty versus half full when we were highly articulated about what we wanted to get done in Phase I, I articulated why Michael was absolutely the right one to bring the organizations together, given him and Sanjeev actually ran the Upjohn division, we're integration, managing that product portfolio. And now that we're here and looking forward, we laid out Phase II. And I think I've been crystal clear. And the vision that we laid out on November 7, I think the strategy behind the vision, the execution plan that we put in place, and now to try to find the best right leader. And if you look at Scott's background, his background, this is right in his sweet spot. The level of experience he brings, the builder that is, all the things that you've heard me say, I think that this is much more of a natural transgression and companies should not be viewed as making changes for -- because anything is negative. I think you can hear it in Michael's voice, I think, yes, I think that there should be nothing looked upon other than preparation. We are only months away from entering Phase II. I think Michael's transition with Scott and Scott's ability to get his feet on the ground as we get ready, these next few months before we enter our Phase II in 2024 and beyond is, honestly, it's a real advantage for any new leader coming in to have that runway before we hit 2024 in Phase II and beyond. There's really nothing more than that, Umer. And I'll be glad to answer any follow-up that you have on that as well.

Greg Fraser:

Good morning, folks. Thanks for taking the questions. For the $500 million of new product revenue that you expect this year, what are the most important two to three contributors to that number? And just a quick follow-up on Glatiramer, the once monthly program, how much sales do you generate with your generic Copaxone? And how are you thinking about the potential impact of the once monthly product on your generic sales? Thanks so much.

Operator:

Thank you. At this time, I have no further questions in queue. I will turn the call back over to Michael Goettler, CEO, to make a few closing remarks.

Operator:

Thank you. This does conclude today's Viatris 2022 fourth quarter and 2023 guidance call and webcast. Please disconnect your line at this time, and have a wonderful day.

Bill Szablewski:

Good morning, everyone. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2022, various strategic initiatives in our Phase I and Phase II outlooks. These forward-looking statements are subject to risks and uncertainties and that could cause future results or events to differ materially from today's projections. Please refer to today's presentation and our SEC filings for a full explanation of these risks and uncertainties and the limits applicable to forward-looking statements, including certain assumptions and risks related to the Phase I and Phase II outlooks. We will be referring to certain actual and projected non-GAAP financial metrics to supplement investors' understanding and assessment of our financial performance. Reconciliations of those non-GAAP measures to the most directly comparable GAAP measures can be found on our website and in the appendix of today's slide presentation. A copy of today's presentation and other earnings materials will be available on our website at investor.viatris.com following this call. Now I'd like to turn it over to our Executive Chairman, Robert Coury.

Michael Goettler:

Thank you, Robert. Now following your detailed outline, let me go directly to today's acquisition announcement and a high-level overview of our Q3 results. In February, we announced three therapeutic areas of focus for moving up the value chain with NCEs and 505(b)(2)s and that included ophthalmology. We believe that the two ophthalmology acquisitions which we're announcing today, Oyster Point Pharma and Famy Life Sciences, give us a significant head start in creating an ophthalmology franchise within the Company that will set a strong foundation for what we expect to be a future ophthalmology leader and in accelerating our strategy to move up the value chain. The total cash consideration for both acquisitions, including equity and debt, will be between $700 million and $750 million. I'm excited about the assets, the talent the expertise and the capabilities which we're bringing into the Company with these acquisitions. Oyster Point will provide us with an exciting commercial stage growth asset, Tyrvaya, the first and only FDA-approved nasal spray for sinus symptoms of dry eye disease with a unique and novel mechanism of action, activating the trigeminal parasympathetic pathway to increase the production of the patient's own natural tear film. Tyrvaya was launched in November 2021 and patients and physician feedback is very encouraging. Dry eye disease is an area of major unmet medical needs affecting approximately 17 million patients in the U.S. alone, and we're excited to bring an important innovation like Tyrvaya to more patients and more countries consistent with our mission to empower patients worldwide to live healthy at every stage of life regardless of geography or circumstances. Clinical development is also ongoing to expand Tyrvaya into further indications, such as neurotrophic caratopathy. In addition to that, the Famy Life Science's acquisition will add five additional Phase III or Phase III-ready front-of-the-eye programs in various indications. We believe Tyrvaya and these front of the eye ophthalmology assets could potentially have combined annual revenue of at least $1 billion by 2028. Together with our own capabilities, we believe we'll have everything we need to set the foundation to become the next global ophthalmology leader. The entire management team and I look forward to working with Dr. Jeffrey Nau, who will be leading this effort, and his talented team as we build a leadership position in ophthalmology and as we execute to make this area one of several billion-dollar growth drivers for Viatris. As you can see, and consistent with our strategy which we announced in February, we continue to make important strides to reshape Viatris, and we believe we have a clear, defined path to return our company to top and bottom line growth from 2024 and beyond and to have the necessary financial flexibility to return significant capital to our shareholders as well as to continued business development. And this all would not be possible without the solid performance in our current business and focused execution of our integration and reshaping plans. We now have a track record of seven quarters of consistent and strong business performance. And for the third quarter of 2022, we delivered total revenue of $4.08 billion, adjusted EBITDA of $1.5 billion and free cash flow of $765 million. Our teams across the world are highly engaged and are performing at peak levels. Our pipeline continues to deliver, especially in the area of complex generics and injectables. We added $144 million in new product revenue in the quarter three. The year-to-date performance is operationally in line or better than our own expectations and we believe enables us to continue to deliver on our Phase 1 financial commitments. Notably, we have paid down approximately $2.1 billion in debt year-to-date in 2022 and approximately $4.2 billion since the beginning of 2021, putting us squarely on track for our target to pay down $6.5 billion by the end of 2023. Our Board of Directors has declared another quarterly dividend of $0.12 per share. Cumulatively, since the formation of Viatris, we've already returned to more than $800 million to shareholders through dividend payments. We are reaffirming, again, our most recent 2022 full year guidance ranges for total revenue, adjusted EBITDA and free cash flow, driven by solid operating momentum and in spite of further increased foreign exchange headwinds. As Robert has already clearly indicated, we are confident in the outlook and future growth potential of Viatris. The key tenets for the confidence are

Dr. Jeff Nau:

Thank you, Rajiv, and thank you to Viatris for allowing me the opportunity to speak today. Good morning. My name is Jeff Nau, and I am the President and CEO of Oyster Point Pharma, a public biopharmaceutical company focused on the discovery, development and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases. Our mission at Oyster Point is to advance truly breakthrough science to deliver therapies that patients and eye care professionals need. I was the first employee at Oyster Point in 2017. And since then, we have grown the Company to more than 250 employees, including launching one of the most exciting commercial products in dry eye disease with a leading sales team in ophthalmology. By educational training, I hold a Masters in Medical Science and a PhD in Public Health and Epidemiology. And for over 20 years, I have dedicated my career exclusively to drug and device development in the field of ophthalmology. Prior to joining Oyster Point Pharma, I was involved in the development of a number of promising therapies in the retina space, including while at Genentech, where I was part of the FDA approval and commercialization of numerous indications for the anti-VEGF therapy Lucentis, a medical breakthrough for treating blindness which generated multibillion-dollar peak annual sales. The Oyster Point team brings decades of experience in the eye care space, with most of the leadership team dedicating their entire careers to eye care. Currently, we are one year into the successful launch of our first FDA-approved product. Tyrvaya is the first and only nasal spray for the treatment of the signs and symptoms of dry eye disease. Dry eye disease is a large market affecting an estimated 38 million Americans and over 700 million people worldwide. It's a chronic multi-factorial disease, which is characterized by the imbalance to the nutrient-rich layers of the ocular surface, known as the tear film. Increasing the production of natural tear firm is believed to reduce the signs and symptoms of dry eye disease. Prior to Tyrvaya's entry into the market, many patients reported being dissatisfied with older treatments in the class due to lack of efficacy, slow onset of action and the stinging and burning associated with prescription eye drops. The team at Oyster Point broke new ground with Tyrvaya. Tyrvaya's differentiated clinical profile, rapidly bio-activate tear film production to help the body create more natural tears and can be easily administered. It's a preservative-free nasal spray that's convenient with a twice-a-day dosing regimen with no contraindications. Tyrvaya's unique mode of action involves activating the trigeminal parasympathetic pathway in the nose, which is believed to trigger tear film production. Tyrvaya was studied in a broad population of adults with mild, moderate and severe dry eye disease. In clinical trials, patients achieved statistically significant improvement in tear film production and other key dry eye measurements. In addition to this exciting product, let me share details on what Oyster Point will add from a pipeline perspective. In our development pipeline, we have several programs aimed at treating other ophthalmic disease with unmet needs, including Stage 1 neurotrophic keratopathy, a severe degenerative condition affecting the nerves of the cornea. Separately, our proprietary transformational gene therapy program is currently progressing towards IND-enabling studies in 2023 for Stages 2 and 3 neurotrophic keratopathy and we have begun early development for a therapy to treat vernal and atopic keratoconjunctivitis, severe allergic conditions of the eye. Oyster Point originally engaged with Viatris on ex-U.S. licensing and partnering opportunities for our products. As discussions progressed, we quickly realized that the global health care gateway that Viatris has built provides a unique partnership opportunity to accelerate and amplify Viatris' and Oyster Point's growth strategies and would enable increased access to ophthalmic therapies for patients worldwide. Just as Oyster Point could propel Viatris' expertise in ophthalmology through its infrastructure and deep knowledge of the space from a clinical, medical, regulatory and commercial perspective, Tyrvaya and pipeline assets, Viatris could propel Oyster Point with its global commercial footprint, R&D and regulatory capabilities, supply chain as well as the multiple additional ophthalmic assets. Conceptually, this is not a one plus one equals two addition of companies, but potentially more like a one plus one equals four addition. The sum of the merger amplifies itself based on the synergy that both companies would provide to each other. Oyster Point as the foundation of the ophthalmology franchise of Viatris will bring a team with deep expertise in ophthalmology to advance research and drug development as well as an experienced U.S. commercial sales and medical affairs infrastructure that I am confident will lead to a future innovation at Viatris. The ophthalmology and optometry communities deserve partners who are committed to investing in and bringing new therapies to market for patients and eye care professionals. I'm joining Viatris as its new ophthalmology franchise, we'll be committed to being that market leader in addressing the industry's unmet needs. As Rajiv previously stated, the ophthalmology portfolio that has been created to date is expected to have significant peak potential by 2030. What we have outlined here today is simply the foundation of what is expected over the next few years. Our focus will be to invest in the resources behind the continued launch and international expansion of Tyrvaya as well as the clinical development of multiple key assets ranging across a full spectrum of eye care disease areas, including dry eye disease and potentially glaucoma, neurotrophic keratopathy, blepharitis, presbyopia and a number of other vision-related disorders. In closing and on a personal note, I would like to thank the Oyster Point team for building such a strong organization over the last five years. We have built capabilities in R&D, clinical development and commercial within the eye care space in such a short period of time. It is the value of our people, our lead asset Tyrvaya and our pipeline that compelled Viatris to decide to bring our company into their organization. I would like to thank Robert, Michael, Rajiv and our future colleagues at Viatris for the opportunity to join the Viatris family and to say that I also share in the excitement surrounding the future of Viatris.

Operator:

[Operator Instructions] We'll take our first question from Elliot Wilbur from Raymond James.

Rajiv Malik:

Elliot, I will take. And maybe later on, Jeff can add. So first of all, let me just break it. One is that, yes, Tyrvaya U.S. expectations and we are talking about the global expectations. We have take this $1 billion, divide almost 2/3 is U.S. and 1/3 is the rest of the world for us. That's the first one. The second one is most and maybe every -- all of these products will hit the market within this period of time. Because as you see, there are some Phase III assets and well advanced. And it's not going to be a long clinical study over there. So, we see more products launched around '26, '27 to add on along with Tyrvaya. So and if I have to do it by portfolio, I think our dry eye will be almost 2/3 again and 1/3 will be -- maybe, Jeff, do you want to add something to that?

Operator:

Your Next question comes from Umer Raffat from Evercore.

Robert Coury:

So let me go first. Obviously, I want to thank the entire investment community and really all of you for your input since the management team came forth in February because today, we're able to deliver in much more detail just on the basis of answering all of your questions, quite frankly. And so the clarity that we gave you, and obviously I want to be clear, we're not giving the kind of the detailed '24 actual financial guidance right now. But we've given you enough directionally a guide where I will not dispute, let's just say, some of the things that you're throwing out because I think, once again, given your numbers, you can get to -- people can see you can get to where you are. I think the most important, Umer, is in my prepared remarks, I also try to be clear that we've taken into consideration living out 2023 with the rest of the initiatives that -- and the actions that were going to be taken as well as the pushes and pulls that we can see today in order to build that bridge for you to get to '24 to where you're at. So Jeff, do you want to take his next question?

Operator:

Next question is from Balaji Prasad from Barclays.

Robert Coury:

So, I think as I mentioned in my prepared remarks, yes, we think that this is an excellent example of a very attractive -- the type of targets that we can be highly sensitive, while maintaining our investment grade, while being sensitive to the increase in R&D and while we continue to be real sensitive to adding to the growth to the top line. But I think most importantly, in terms of an earnings per share accretion, I also try to stress, given now the clarity that we've now delivered to the Street our capital allocation, we cannot ignore the 50% commitment once we're done with Phase 1 and hit our gross leverage target of 3x. There is a tremendous amount of more capital we intend to return to shareholders and especially through share buybacks. So, I think that the earnings accretion, the adjusted earnings per share growth is really going to be what this story is all about on a going-forward basis.

Chris Schott:

You've laid out today why ophthalmology is the right vertical for Viatris. But I'm just interested in how you compared, I guess, this vertical versus some of the franchises like OTC and biosimilars where the Company also had an established footprint but where the Company is exiting. So, I guess what led you to kind of build up this direction and exit the others? I'm just trying to understand a little bit of kind of the thought process of kind of what's staying and what's going as you're thinking about the portfolio build?

Operator:

Your next question comes from Gary Nachman from BMO Capital Markets.

Robert Coury:

I mean just in terms of the -- and let me take the second one, Rajiv. But in terms of the -- we actually did really have a head start. We've been working on this project for quite some time in terms of identifying these particular assets. We have all the right advisers on board for each one of these. So, we are well into the process. And we see no issue at all by striking and executing on each one of these in '23 and actually expect to even have the proceeds, certainly and if not, by the end of '23, the proceeds from these initiatives, but very, very shortly thereafter. Rajiv?

Operator:

Your next question comes from Ash Verma from UBS.

Robert Coury:

Ash, obviously, we would have taken all that into consideration to be able to come here and to deliver to you our outlook. So the answer is yes, we've taken all that into consideration.

Jason Gerberry:

Just on Famy care, it looks like that's probably about half the value that's kind of -- of the $700 million to $750 million. So is there a specific asset that sort of drives the valuation? Or is it just kind of more broadly dispersed across all the late-stage-ready assets? And then as you lay out what looks like a leverage for what will be effectively remain quo, just wondering, is that sort of what you think is the right amount of leverage for this business to carry longer term? And how ambitious should be sort of once the dust settles on all these transactions in terms of either more aggressively or more ambitiously building out some of these specialty brand verticals?

Michael Goettler:

Sure. So Jason, for the Famy life sciences portfolio, it's really portfolio is not one single asset that kind of drives the fair value. Just to give you a little bit more color, the blepharitis asset is the asset that we talked about a few months ago already, which just basically at time Cromologous. We now got the full right to that. Then there is the dry eye product that we're quite excited about, that's very complementary to mechanism of action to Tyrvaya. And the other three indications, the presbyopia, the mydriasis and the night vision, that's actually the same molecule, maybe combined with another one, for all these three indications. So it's a very balanced portfolio.

Sanjeev Narula:

I think Robert you covered that. You covered very well that we will have -- that we've not had in Phase 1 additional cash to invest organically, inorganically, and that will support that. That's why we are comfortable with the range that we talked about.

Glen Santangelo:

I just want to follow up on some of the pro forma numbers you gave regarding 2024 and the Phase 2 part of the plan. I mean it seems like you're assuming that once you get out to 2024 that the erosion on the base business on the revenue line will be about minus 3%. And now with the benefit of some of these announcements today that the new growth CAGR is going to be plus three -- 6% swing or almost close to $1 billion a year. And so, I just want to make sure I understand in terms of what you're seeing and where that's coming from. It sounds like you -- in the past, you've been talking about $500 million a year from new product introductions, maybe with the balance coming from the acquisitions? And then my follow-up to that would be, does that 3% CAGR in '24 to '28 include any incremental contribution from GI and Derm? Or could those opportunities augment those growth rates from here?

Rajiv Malik:

And Robert, just to further clarify, you talk about 2% to 3% base erosion, which is being more than offset by $450 million to $550 million of launches to bring what Robert said, a stable base. And then overlay on that, that ophthalmology assets, which will bring it back from flat to 1% to 3% growth.

Operator:

Our next question comes from Greg Fraser, Truist Securities.

Robert Coury:

I guess I think the most important thing today, right now, today, and to be very honest with you, I don't know what '24, I'm not going to try to predict what '24 would look like. I think the most important commitment today is the commitment of 50% of our free cash flows to return to shareholders. That is a -- that's our commitment, period. Now if it were today, I have to tell you with our -- as I mentioned, I really think with our current PE multiple and where we are, it's very difficult, very difficult to find a better investment than to buy our own shares back. I just have to be very honest with you. So I think we want to focus on total shareholder return, dividend combined with share buyback. But if it were today, I would probably strike much more on reinvesting in our own business through the purchase of our own shares. Because I think what is going to quickly become the investment -- I think that what Viatris is going to become is very quickly an extraordinarily strong adjusted earnings per share growth story once we begin to execute. And especially the repurchase of our shares is going to go a long way, I think, in that story.

Nathan Rich:

I wanted to ask you on free cash flow. I guess how should we be thinking about the baseline for free cash flow? Kind of understand you're not planning to give guidance, but should we think about sort of the step down in EBITDA similar to what would happen to free cash flow? Or are there other factors to consider as we think about free cash flow in 2023 and beyond? And then just a couple of clarification questions, as we think about the target for EPS accretion next year from the deals as well as share repurchases, any more detail on how much EBITDA dilution you're expecting from the acquisitions? And was the R&D expense step-up of $300 million, was that inclusive of the two acquisitions as well?

Sanjeev Narula:

Yes. So Nathan, so as Robert pointed out in the opening remarks, so you start from where we are this year, which is -- it takes the midpoint. We're about $2.7 billion. There are two adjustments that we are making from there. One is the EBITDA loss that is from the divested businesses and the R&D increase. So that both have an impact on cash flow. A high percentage of that goes into the cash flow. On the positive side, you will see our onetime cash cost is coming down. And then there's going to be a reduction in the interest cost as we pay down significant amount of debt next year. So put all those things together and you get our number, which is close to what Robert talked about. Again, we're not giving the guidance. I think the important thing to think about this is once that 2024 is achieved, our focus that we have -- you have seen in t he last seven quarters in terms of continually growing the cash flow conversion in the Company will continue and we continue to add in the growth from cash optimization effort and then obviously focusing on our onetime cash costs. Now 2023 is going to be a little bit choppy, if I kind of use the term, in terms of the cash flow because of all the transactions that are going to be happening during the year. The base cash flow is going to be very, very strong. But as I pointed out, as we divest these assets, the taxes of these assets that only proceeds and some of the onetime cash costs gets recorded in the free cash flow line. So we'll provide you all the transparency so you understand that the cash flow is very strong, but the outlook that I gave you for 2024 is a good starting point from that perspective.

Sanjeev Narula:

Yes, the R&D question, so the increased $300 million, that includes the investment from the two assets that we did, the R&D investment of those pipelines.

David Amsellem:

So just going back to Tyrvaya. Can you talk about the challenges associated with the payer landscape, bearing in mind that with Stasis is available as a generic? And I know there's some differentiation that you cited, but I just wanted to get your thoughts on what you have to do to improve access. And then related to that, as you're thinking broadly about your acquisition strategy, are you also willing to look at clinical-stage assets in more rare diseases where payer challenges ostensibly would not be as much as an issue? How do you think about that in your overall strategy in terms of taking on significant R&D risk?

Robert Coury:

Well, I mean I would just say that in terms of the R&D, David, I would guide you more towards the D and not the R. We will not be a company to be taking the type of binary risk that, say, big pharma takes. We're going to be very careful and selective. And we've also given you targets what we'll be looking for next in the GI side as well as dermatology from mature emphasis because if you now look at our business model, we're crystal clear about being therapeutic agnostic. Our product portfolio with having products from first to every stage of life around the globe is very critical going forward in our portfolio. It's just that the cash flows that we generate off of that portfolio is exactly what is going to be funding the very marketed opportunities that we highlighted, that we've emphasized, ophthalmology, GI and dermatology. So I think you can expect that directionally going forward. But yes, thank you for your question. Was there any other questions?

Operator:

We have reached our allotted time for question-and-answer session. I will now turn the call back over to Michael Goettler, CEO, to make a few quarterly remarks.

Operator:

This does conclude today's Viatris 2022 third quarter earnings call and webcast. Please disconnect your line at this time, and have a wonderful day.

Bill Szablewski:

Thank you, and good morning, everyone. Welcome to our second quarter 2022 earnings call. Joining me today is Michael Goettler, our Chief Executive Officer; Rajiv Malik, our President; and Sanjeev Narula, our Chief Financial Officer. A copy of today's presentation and other earnings materials are available on our website at investor.viatris.com. 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 slide two of the presentation in our SEC filings for a full explanation of these risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures to supplement investors' understanding of our financial performance. Non-GAAP financial measures are reconciled to comparable GAAP measures on our website and in today's presentation. With that, now I'd like to hand the call over to Michael.

Rajiv Malik:

Thanks Michael, and good morning, everyone. For six consecutive quarters, we have consistently executed against our overall operational priorities. Our strong operational performance this quarter reflects the resilience of the diversified business we have deliberately built. As shared before, we are not dependent on any one market or any one product. And we remain agile and opportunist in how we manage the business with the goal of maximizing the strength of each market and address unforeseen challenges. Our execution has been and continues to be a team effort. And I would like to thank our colleagues for delivering another solid quarter and continuing to meet our customer commitments. The strong business performance and the execution of our underlying plan in the first half of the year, supported by consistent supply, gives us the confidence that the momentum will continue for the second half and deliver our operational commitments for the year. We also continue to expect to achieve our approximately $600 million new loss revenue target for 2022. Moving to our quarterly segment results. I will be making certain comparisons to second quarter 2021 results on a constant currency basis as well as comparisons on an operational basis versus our plan that supports our guidance. These comparisons exclude the impact of foreign currency exchange. Our North America business represents a balanced portfolio consisting of several brands, complex drug devices and many other generic products. We believe this mix provides the business enhanced stability and predictability. Yupelri continues to grow and delivered high teens, and EpiPen performed better than we expected. We experienced healthy demand for our generics portfolio, while [Canada] (ph) once again delivered a better-than-expected performance. We look forward to the expected launch of lenalidomide in the second half of the year. Regarding Breyna, our FDA approved generic to Symbicort, we anticipate a ruling from the district court in the coming months on the trial that was held in May. We also have a separate case, brought on a newly issued patent that is in front of a different judge in the same court. We remain prepared operationally and continue to look forward to bringing the product to market at the earliest possible date as these court cases develop. Our European business had another strong quarter, delivering 8% year-over-year growth. Creon, Dymista, BRUFEN and our Thrombosis portfolio showed solid performance. France, Germany, Italy and Spain led the growth. The region also benefited from certain customer purchasing patternss in the quarter. We expect that the new launches across Europe will be another key driver for 2022 performance. The Emerging Markets segment delivered another quarter of consistent performance and was in line with our expectations. We delivered strong performance in key markets like South Korea, Brazil and Malaysia and in key brands like Lyrica and Norvasc. The year-over-year change was driven by previously disclosed anticipated ARV therapy landscape changes and sales of a certain COVID-related products in 2021. Excluding these two items, total net sales were flat to the prior year. Our JANZ segment performance this quarter was driven by better-than-expected performance of our generics business, as well as our off-patent branded portfolio. Lyrica and Celebrex in Japan came in better than expected. Additionally, the generics portfolio in Japan benefited from favorable market dynamics. The generics portfolio in Australia also performed better than our expectations, which will be further supported by the addition of a key wholesale and pharmacy customer. Greater China continued its strong performance and exceeded our expectations this quarter with 1% year-over-year operational growth. Our ability to manage the business and supply chain effectively through the COVID lockdown period is a testament to our commercial strength in this market. Our hospital channel again demonstrated a strong performance, led by Lipitor and Norvasc. We are on track to meet our full year expectations as we continue to navigate the evolving health care policy. We also continue to make steady progress in building up our R&D portfolio for China. I will now share an update on our pipeline, which builds upon our strong legacy in the development of value-added complex products and our extensive scientific capabilities. I'm pleased to report that we have been able to successfully manage the trial of glatiramer acetate once monthly and remain on schedule despite the unfortunate situation in Ukraine. We expect to read out our Phase 3 clinical trial by the end of this September, and we remain on track to make our US submission in quarter one 2023. We received FDA approval of fingolimod, which is a generic to Gilenya and are on track to launch in the US in 2024, timed with our settlement date. We filed our submission to oculotideMR in US in this May, which keeps us on track to launch in 2024. Our new in-license ophthalmic program, MR139, for the treatment of moderate-to-severe chronic blepharitis is making steady progress. And we intend to submit the IND for this program at the end of the year in order to initiate the Phase 3 clinical trial in quarter one 2023. We are making steady progress on our biosimilar to Botox program with Revance. We are targeting a BLA submission in 2025. And we remain committed to the launch of this complex biosimilar at the earliest possible launch in the United States. And finally, Biocon expects FDA site inspection of two of its sites to be collected in the next few weeks, which hopefully will pave the way for biosimilar bevacizumab and insulin as part approvals later this year. We believe we are well-positioned to add more complex products and pursue additional opportunities to further move up the value chain by leveraging our global health care gateway and strengthen our pipeline in the previously stated therapeutic areas of GI, ophthalmology and dermatology. And lastly, an update on integration, I'm pleased to report that we continue to make significant progress. As you may recall, the legacy Upjohn business was heavily dependent on Pfizer systems and infrastructure, which was supported by a significant transition services agreement. We are currently on track to exit the remaining Pfizer TSAs by end of this year. And I would like to thank our colleagues from Viatris and Pfizer around the world supporting this important initiative. We are also on track to achieve at least $1 billion in cumulative cost synergies by the end of 2023. With that, let me now turn the call over to Sanjeev.

Operator:

[Operator Instructions] We'll take your first question from Jason Gerberry of Bank of America. Your line is open.

Michael Goettler:

Okay. Good morning. Thank you for the question. Rajiv, do you want to talk about VBP in China?

Michael Goettler:

Okay. Next question please.

Elliot Wilbur:

Thanks. Good morning. Just one question for Sanjeev. I just wanted to get a little bit more detail in terms of the change in outlook with respect to FX and then the anticipated impact on the EBITDA and free cash flow line. So I think at the beginning of the year, when you first provided initial outlook, you talked about an FX impact roughly $350 million, then there was an anticipated negative impact of about 35% of that to the EBITDA line. Now, obviously, you have a much bigger potential headwind coming from FX, but not really any impact to the EBITDA or free cash flow line. So maybe you could just go into a little bit more detail in terms of what's offsetting that, whether it may be just effectiveness of your hedging programs and some hedging gains. Or if it's really just more about the natural mix of the business and then just having the appropriate natural offsets or hedges to that? Thanks.

Michael Goettler:

Next question please.

Chris Schott:

Great. Thanks so much for the questions. I just want a little bit more color on additional divestitures in terms of just how far along are these discussions? And maybe kind of more broadly, does the rising rate environment that we're currently in, is that impacting how prospective bidders are thinking about valuation or even just the sort of assets that you may be looking to sell? So just any more color on that would be much appreciated. Thank you.

Operator:

Our next question is from Umer Raffat of Evercore.

Michael Goettler:

Very good. So I'll take the first question, and Rajiv, maybe you can address the second one. So Umer, on capital allocation, look, we're very consistent. Our strategy is very clear. First of all, the basis, we're confident to meet our 2022 and 2023 financial commitments, which includes dividends. You saw our Board has, yet again, declared $0.12 per share dividend. Debt paydown, Sanjeev gave you an update on about the progress, the good progress we’re making there and then maintaining investment grade. That's the baseline. As we look ahead, we expect to close the Biocon transaction in the second half of 2022, which will provide us optionality and flexibility with disciplined capital allocation. And then the other non-core asset divestiture also remain on track for 2023. So with regard to share buybacks, other capital allocation decisions, we'll make those decisions with value for shareholders in mind at the right time and for the right reasons, considering all the circumstance and effect. And Rajiv, you want to talk about--

Michael Goettler:

Okay. Next question please.

Gary Nachman:

Hi. Thanks. Good morning. On your scaling back efforts on spending in order to manage the EBITDA you face these FX headwinds, how much of that will come back? And how much of these costs are permanent? So, how much was, I guess, from original cost synergies? And how much of that might be new? And then just talk about some of the other levers that you have to improve cash flow, like the working capital and the reduction in CapEx. How should we think about those trends going forward? And then also the improvements in gross margin, how that should trend for rest of the year and into next year? And how durable those improvements are? Thank you.

Sanjeev Narula:

Okay. Sure. So, Gary, let me take all three items one by one. So, clearly, as you heard in our remarks, we are managing our synergies and integration very well and expect to achieve our synergy target that we laid out. And then we're doing exceedingly well on managing the expenses. So, clearly, all those items are going to stick. And there is clearly obviously some benefit that we're getting because of the FX, as you see. But all the items that we are seeing, in terms of our SG&A line, are sticky and sustainable over a period of time. Clearly, as we look for the second half of the year, there is going to be a little bit of a ramp-up because of the timing of the spend. But overall, we feel good about the trajectory of our SG&A line. With regard to, again, on the free cash flow, the improvement that we're doing are of permanent nature. These are fundamental drivers of working capital, whether you're looking at how we pay, how we receive, those are fundamental drivers of the changes that we're doing and how we operate, and they're going to stay with us. And clearly, there is some benefit that we're getting this year a little bit on the lower CapEx. But essentially the broader point about improvement in cash flow will sustain and help us on the coming years and then lowering one-time cash costs, which is again is a permanent benefit that we see as we go forward. The last item is on the gross margin. Clearly, as we see in the first two quarters, we have a better product mix. We're getting better products, the higher gross margin and from geographies, which have a higher gross margin, and that our cost controls are doing very well on the cost lines. So, again, those benefits are going to stick with us for the remaining of the year. And then as we come out with the next year's guidance, we'll provide more details on that.

Operator:

Our next question is from Greg Fraser of Truist Securities.

Michael Goettler:

Sorry, just for clarification, you're a little bit unclear. Which study are you asking about?

Michael Goettler:

And what was your question, sorry?

Rajiv Malik:

Yes, it's on the RRMS. And very clearly, we are looking into the improvements around that. It's not the progressive study, a relapsing one. And that -- it's very much at the moment with the indication of the Copaxone is. What we are looking forward is the effectiveness once-monthly.

Rajiv Malik:

Yes. [indiscernible]

Operator:

Our next question is from Ash Verma of UBS.

Rajiv Malik:

Thanks. Yes.

Rajiv Malik:

No. I mean, the only thing I will add, we are not cutting the cost to manage it. It's exactly -- we are running and driving the business as we had planned. And we are hitting on all cylinders to -- whether it's by segment or by operations or it's for the cost of goods.

Michael Goettler:

Okay. Final question, please.

David Amsellem:

Thanks. So just had a couple of high-level questions, just on capital deployment. And certainly, you've talked about this in the past. But as you start looking at assets to buy, do you start to look at prioritizing share buybacks differently, or not prioritizing them at all? And then, also, as you're looking at assets to buy a larger transaction down the road, how do you think about the dividend? Just help us understand your latest thought process. Thank you.

Rajiv Malik:

And David, to your point about dividend, just kind of want to reiterate. Commitment to dividend continues to be a priority in returning capital to shareholders, that's very important for us, and that will be a priority as we go forward.

Operator:

We'll take that question from Nathan Rich of Goldman Sachs.

Michael Goettler:

So let me take the second question first, because only out to that is, we're on track for end of '23. And we're going to give you updates as we go along as it happens. On the pricing dynamics, I think, very important you understand the difference in the portfolios between different companies that make comments on it. And Rajiv, maybe you can comment.

Michael Goettler:

Okay. I think that concludes our quarterly earnings call from Viatris. Hope you got the message. We’re hitting on all cylinders operationally. We now demonstrate – which we’re proud of six quarters of strong consecutive operational performance was taken to our -- and delivering on our financial commitments. And we're also making great progress on our reshaping initiatives. And we look forward to updating you more as we go along. Thank you very much.

Arty Ahmed:

Thank you, and good evening, everyone. And welcome to Oyster Point Pharma’s first quarter 2022 earnings conference call. This evening, we issued a press release containing our financial results and recent business highlights for the first quarter ended March 31, 2022. In addition, our news press release and Form 10-Q, which were filed with the SEC after the close of market today are available on our website under the Investors and Media section at www.oysterpointrx.com. Joining us on our call today are Dr. Jeffrey Nau, President and Chief Executive Officer of Oyster Point Pharma; Dan Lochner, our Chief Financial Officer; and John Snisarenko, our Chief Commercial Officer. Following our prepared remarks, we will open up the line for questions. Please note that during the call today, we will be making forward-looking statements regarding potential future events, including statements on Oyster Point Pharma’s potential future financial status and results of operations and our plans and potential for success relating to commercializing TYRVAYA Nasal Spray. These forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. For a description of these factors, please see our quarterly report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC after the close of the market today. I will now turn the call over to Dr. Jeffrey Nau, our President and Chief Executive Officer.

John Snisarenko:

Thank you, Jeff, and good evening, everyone. We are very excited about the progress we have made during the quarter. I am happy to report continued strong uptake of TYRVAYA nasal spray six months post launch. Our vision for TYRVAYA has always been to transform and improve the lives of the estimated 38 million people in the U.S. alone who experience dry eye. As Jeff highlighted previously, we are very pleased with the first quarter net product revenue of $2.7 million. Sales force have been meeting with and educating eye care professionals or ECPs, including both optometrists and ophthalmologists. In the first quarter of 2022, approximately 19,000 prescriptions have been filled and were written by over 4,500 unique ECPs. This reflects the enthusiasm for TYRVAYA from ECPs and patients alike. TYRVAYA’s market position continues to strengthen as it increasingly considered an exciting and effective new treatment for the signs and symptoms of dry eye disease. Additionally, our market access team has had continued success in securing coverage for TYRVAYA with top payer organizations. As mentioned during our last earnings call, effective February 19, 2022, TYRVAYA was placed on Express Scripts National Preferred basic and high performance formularies, which collectively make up around 26 million lives. Since then, we have successfully obtained coverage with additional payers. According to a third-party syndicated source, TYRVAYA now has commercial coverage for up to approximately 95 million lives, which represents 52% of all U.S. commercial lives. As we continue to gain commercial leverage, we expect an increase in the propensity of physicians to write prescriptions for TYRVAYA. We are pleased with the progress in commercial coverage of TYRVAYA since launch and anticipate receiving coverage determinations for all major commercial payers in the U.S. by mid-2022. In addition to commercial coverage, we expect Medicare coverage determinations in time for 2023. During the first quarter, we continued to offer patient support program known as Team TYRVAYA. By leveraging technology and experience, this program has helped patients get access to TYRVAYA with multiple benefits, including assistance in ensuring home delivery and support in the insurance process. For more information on Team TYRVAYA, please visit the website www.tyrvaya-pro.com. In addition, we continue to observe strong refill rates for TYRVAYA. Since launch, approximately 65% of prescriptions have been refilled within 60 days, which is an indicator of a positive response for patients and confidence from ECP. As expected, a few months post launch, there are ebbs and flows in the progression of new and total prescriptions written. Given TYRVAYA’s novel mechanism and route of action, many prescribers want to see the patients back four-week to eight-week after starting treatment to evaluate response to TYRVAYA. Despite strong progress in establishing commercial coverage and offering a best-in-class patient support program, we are consistently optimizing our approach to drive growth in prescriptions. For example, we are continually refining our sales rep direction and incentive comp to drive new prescribers and depth of prescriptions per prescriber. Additionally, we are continuing to explore ways to maximize fill rates across our distribution network. Also, to further promote TYRVAYA, we just launched peer-to-peer speaker programs in April. So with six months of launch learnings, we continue to fine-tune our tactics and optimize our approach to drive TRx and NRx. Our multifaceted marketing approach continues to be led by education and promotional efforts directed toward eye care professionals and patients. This is supported by direct-to-patient digital campaigns that emphasize TYRVAYA’s unique benefits, including the simpler nasal spray administration and unique mechanism of action. Direct marketing efforts have been bolstered by leveraging the latest technology, including virtual detailing, digital and social media activities and partnerships, as well as best-in-class analytics. Additionally, our use of digital pharmacy system has made the process of procuring TYRVAYA even simpler for patients. We intend to continue using the latest technologies and most effective strategies to drive adoption and market share of TYRVAYA. I remain very proud of our commercial team’s continued efforts and success during the quarter. I will now turn the call over to Dan Lochner, Oyster Point’s Chief Financial Officer to discuss our first quarter financial results.

Operator:

Thank you. [Operator instructions] Our first question comes from Ken Cacciatore with Cowen and Company. Your line is open.

Dr. Jeffrey Nau:

Yeah. Thanks, Ken. I will jump in. As we progressed through Q1, we clearly have a little bit more clarity on various gross to net items related to folks on bridge or on commercial based product. So we are happy where we came in, in Q1. We would expect Q2 to be more or less around where Q1 is and then an improvement in the second half versus the first half. And then related to the revenue outlook for 2022, while we haven’t at this point provided that guidance, of course, we have seen continual growth in prescriptions and TRx, which John will get a little bit more into, we are comfortable with where our consensus is that.

Ken Cacciatore:

Okay. And then, John, maybe I will sneak one more in. In terms of the prescribers, can you talk about repeat prescribers, kind of what percent you are seeing, obviously, you are nicely expanding the clinician base, but if you have that data point.

Ken Cacciatore:

Okay. Thanks so much. I appreciate it and keep up the good work.

Operator:

Our next question comes from Chris Neyor with JPMorgan. Your line is open.

Operator:

Chris, your line is open.

Dr. Jeffrey Nau:

Yeah. Thanks, Chris. Yeah. We did have some downstream plans from ESI that continue to be added to the original national formularies. I think there’s another big group, the UnitedHealth Group that was added during the period, Kaiser, Tricare and we are very pleased that we are now able to be providing covered drug to the VA as well. Those are kind of the top six plans and payers that make up the majority of those 95 million lives that we currently cover.

John Snisarenko:

Yeah. Let me comment first on the -- our progress with commercial payer listing. So we do expect coverage determinations by midyear this year with the other two large PBMs that control the majority of commercial lives. So while we are awaiting that coverage, we do encourage our physicians to enroll the patients into our Team TYRVAYA program. If they are deemed insured, but not covered at automatically get enrolled into our Bridge program. And we have seen very, very good kind of fulfillment rates through our partner, 90% of those scripts that do get processed and get shipped to the patients, so very, very pleased with that partnership with our third-party hub provider. And as we do get additional commercial listings on board, we expect to start to convert these patients to revenue patients over time. And we will keep that Bridge program going while there’s still a need for the patients. So we want to make sure that if an appropriate patient deemed to be prescribed TYRVAYA and the physician feels that the patient is appropriate that we want to make sure that, that script gets to that patient.

Operator:

Thank you. [Operator instructions] Our next question comes from Patrick Dolezal with LifeSci Capital. Your line is open.

Dr. Jeffrey Nau:

Yeah. So I will talk a little bit around the DTC efforts. Right out of the gate, we launched a lot of digital efforts targeting both the patients, as well as our physicians. So a lot of focus on social media, on search, on digital efforts and then very, very targeted. We don’t plan to really go broad on DTC until we get good coverage, not just commercially, but in 2023, we do want to -- we do expect to get Medicare coverage only then we will start to consider kind of a broader DTC effort. We feel that we -- more targeted digital efforts that we have started since launch have been working quite well for us.

Dan Lochner:

Yeah. So, at the moment, I would say that our OpEx as reported in Q1 would likely remain pretty consistent on a quarterly basis going forward throughout 2022. We have really built out all the internal infrastructure to effectively market TYRVAYA, whether it’s on the SG&A side, as well as everything that we need provision on the R&D side. So stopping short provided quarterly consensus, I would say that, we feel comfortable with the current OpEx run rate and then we will look at that as we enter into 2023, of course, adding an additional buckets of capital, as John alluded to, on the DTC spend. To-date, we have been pretty adamant on taking a direct to patient perspective with digital and we have been spending a decent amount of capital on social media, that John can kind of speak a little bit closer to. But at the current cash runway, we are still seeing about 12 months forward on our current budget.

Operator:

Thank you. I will now turn the call back to Dr. Nau for closing comments.

Operator:

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Michael Goettler:

Thank you, Bill, and good morning, and welcome to Viatris 2022 Investor Event. This is truly an exciting day for all of us at Viatris; for our 37,000 colleagues around the world; and for our shareholders. Not only are we reporting strong financial results for the full year of 2021 meeting or exceeding our guidance. Today, we'll lay out for you exactly how we expect to deliver on our vision for Viatris. We'll further review with you our current pipeline, our scientific capabilities, our proven track record and how we intend to reshape our portfolio towards higher margin, more durable assets such as NCEs and 505(b)(2)s. And finally, we'll give you an update on our business performance and execution, our 2021 financial results and our 2022 guidance. Next slide, please. Now what you will see is a Viatris that is simpler, that is stronger and that is more focused. At Viatris we expect to deliver more access to patients and more value to shareholders with a durable higher-margin portfolio, significant financial flexibility and shareholder-friendly capital allocation and further enhanced commercial and scientific capabilities. And we'll lay out to you our very bold plan to reshape our company. And with today's announcement of the Biocon biosimilar transaction, we've already taken the first bold step to unlock value, accelerate our financial commitments and increase availability of capital for investing in our future or returning value to shareholders. Next slide, please. Viatris was created a little over a year ago, as you know, in November 2020, through the combination of Upjohn and Mylan. Our first year was focused in our immediate priorities of integrating the two companies and delevering our balance sheet, and we wasted no time. As you know, in December 2020, we already announced a significant global restructuring plan and executed against this plan. We defined and delivered clear financial targets, including our 2021 budget, our synergy targets, our goal to pay down $6.5 billion in debt by 2023 and the initiation and growth of a quarterly dividend. And I'm very pleased to say that we have now delivered four quarters consecutively of consistent and solid performance, meeting or exceeding our guidance. Sanjeev later will provide you more details on our full year 2021 results. Meanwhile, our pipeline achieved many significant milestones, including the historic approval of the first interchangeable biosimilar in the U.S. and the first approval of a generic to Restasis. Meanwhile, externally, we're recognized as one of the top five companies on Fortune's company that Changed the World list. We're recognized by Forbes as one of the World's Best Employers, and by Newsweek as one of America's Most Responsible Company. But most importantly, most importantly, through 2021, we conducted a thorough strategic review of our entire business. We determined what was core and what was noncore to the future of our company. And today, I'm excited to share with you the output of that review and the actions that we're taking. Today, we're announcing a significant global reshaping initiative. The Biocon biosimilar announcement is only the first-but-critical step to unlock value and reshape Viatris. And combined with other initiatives, we expect to significantly enhance our financial flexibility, accelerate our financial commitments and enable us to invest in our future, continuing to move up the value chain by expanding to more innovative areas and to return value to shareholders. Next slide, please. We're taking immediate and concrete actions to execute on that plan. To unlock value and to simplify our business beyond the Biocon biosimilar transaction, we've identified other select assets, which we expect will unlock additional value. And as we continue to execute against our plan, we will become more efficient, reduce complexity and make Viatris a simpler, stronger and more focused company. In total, we expect these initiatives to generate up to $9 billion in pretax proceeds by the end of 2023. And let me just put this in perspective. This is more than half of Viatris current market cap. In return, we're trading off approximately 20% of our current adjusted EBITDA. Sanjeev will provide you further details about our future financial profile later. And these proceeds will immediately accelerate our financial flexibility. Our financial commitments for Phase I, so that's the year '21, '22 and '23, remain unchanged

Sanjeev Narula:

Thank you, Rajiv, and good morning, everyone. It's been an exciting day for Viatris. Today, we announced strong Q4 and full year 2021 results and financial guidance for 2022. We've entered into an agreement with Biocon Biologics for a total consideration of up to $3.335 billion. We've also announced a plan to reshape the company, which we expect to unlock additional value. In the next few slides, I'll walk you through the reshaping initiatives underway, how it strengthens our profile, accelerates financial flexibility and enhance our capital allocation framework. Slide 15 represents an illustrative pro forma for what Viatris could look like post closing of Biocon Biologics transaction and after execution of plan for other select assets. There are a few key takeaways to highlight. First, as a result of the partnership structure and profit-sharing arrangements of the biosimilar business, the estimated 2022 biosimilar adjusted EBITDA margin is relatively lower compared to our company average. Second, looking at pro forma company, total revenue and adjusted EBITDA will remain largely intact after the transactions. Next, the Biocon transaction at roughly 16x 2022 adjusted EBITDA and estimated proceeds from other select assets are expected to unlock significant value above our company's current valuation. Finally, we expect these transactions will significantly strengthen our financial profile, unlock up to $4 billion to $5 billion of after-tax proceeds that will be deployed for investing into business and returning capital to shareholders. Turning to Slide 16. We highlight our illustrative financial profile across revenue, profitability and the balance sheet. For revenue, we plan to complement annual product revenue of approximately $500 million with business development that is targeted towards assets that fit our strategic, commercial and financial criteria. These opportunities can come in from of regional tuck-ins, a therapeutic focused pipeline and a broader distribution type arrangements via our Global Health Care Gateway. For profitability, we expect gross margins to stabilize over time given the focus on complex products that are wholly owned and not subject to partnership payments. Given our track record of success and the value upside afforded by more durable, higher margin of complex products, we intend to increase our R&D investments. We expect SG&A to continue to benefit from synergies in 2022 and 2023, averaging out at approximately 20% of total revenue. And finally, upon closing of the Biocon transaction, our balance sheet will be immediately strengthened with $2 billion in pretax proceeds to accelerate our Phase I financial commitment. Now turning to Slide 17. We expect that the anticipated cash proceeds from Biocon transaction, along with the plan for other assets, will provide additional flexibility and enhance our capital allocation framework. Under Phase I, we intend to accelerate the base plan by retiring short-term debt in 2022. In total, we intend to pay down at least $6.5 billion of debt between '21 and '23 in order to reduce our gross leverage to approximately 3x by the end of 2023. We intend to increase R&D and pipeline investment for future health of the business. As a result, we're taking a more balanced approach to capital allocation and have revised our midpoint of long-term gross leverage target from 2.5x to 3x. With the anticipated proceeds from Biocon Biologics and other select asset transactions, we expect to accelerate investment into business and return more capital through potential share repurchases. We will take a measured approach and evaluate each option against our internal hurdle rate and other criteria. Now I'll turn it over to Michael.

Rajiv Malik:

Thanks, again, Michael. I'm going to focus this next session on the role our strong development platform can play to achieve the end goal of going up the value chain. As we have already touched on, enhancing our R&D is an essential part to achieve the future direction of the company. I am very proud of many accomplishments of our science team over the years. As I see it, we are a development house with capabilities that can be further strengthened and focused in coming years as we continue to move up the value chain. We intend to leverage our Global Healthcare Gateway to further strengthen our R&D engine with differentiated and novel products that target gaps in care. We believe that we are an ideal development partner that offers strong science, regulatory and clinical skills as well as strong global commercial footprint to companies with Phase II and III assets. We'll continue to invest in generics with a focus on complexity and diligently pursue life-cycle management opportunities around our current therapeutic areas. We expect to ramp up our R&D investments steadily to approximately 9% of revenue by 2026. This slide shows our road map to execute our R&D evolution. On the left, you see where our portfolio and pipeline is today, which is a diverse across a wide range of therapeutic areas across segments and markets. We intend to continue to build the pipeline focusing on products with complexity and also investing in life-cycle management of certain key products in our current portfolio of various regions. I'll walk you through certain examples in one of my following pipeline slides. We will seek additional inorganic assets through our Global Healthcare Gateway around current therapeutic areas of regional focus. More importantly, we'll be aggressively looking into several Phase II and Phase III opportunities to build critical mass of new chemical entities and 505(b)(2)s novel products in the 3 focused therapeutic areas of GI, ophthalmology and dermatology, as Michael mentioned. In order to execute our R&D strategy, we will leverage the foundation that has been built over a number of years. This slide highlights our extensive scientific capabilities we have across a broad range of dosage forms and delivery mechanisms. We also have proven expertise in all of the related areas that are essential to develop and scale these types of products up through and including novel products. For example, the robust API and formulation development capabilities; the global expertise in preclinical study design and execution as well as device engineering, strong clinical development and medical affairs across multiple therapeutic areas; strong in-market regulatory, legal and IP skill sets; and broad and scalable manufacturing capabilities. The backbone of this platform is, of course, a strong team of 3,000 scientists and medical professionals working across 12 development centers and having regulatory expertise in 55 markets. We have a broad range of demonstrated clinical experience and have conducted over 80 clinical development and post-marketing programs, including Phase I, Phase II, Phase III and Phase IV studies. The bottom line is that we believe we are well positioned to support and enable the advancing of the science of the value chain. There is no better representation of our scientific expertise than this slide are proven results. When we make a decision to pursue the development of a complex generic or a novel product, our track record shows our commitment. On an average, complex products can take 7 to 9 years from development to approval. And we are so proud to bring most of these products first to the market. Recently, we added another first to our basket with the approval of generic Restasis, building off the momentum of our first interchangeable biosimilar assembly. I would like to dive a bit deeper into our existing pipeline to help visualize this progression. Beginning with our core generics. As you can see, we have either launched or have approval or have submitted some of significant products such as generics for Revlimid, Xarelto and Eliquis. We are targeting launching many of these core generics in the next 1 to 2 years. Flipping to the next slide. As you can see, we are continuing to move up the value chain with more complex products. Projected launch timings for many of these are in the next 2 to 4 years. What's unique about our complex generics pipeline is that it's primarily vertically integrated, giving us a much better control on the execution of these programs and R&D flexibility. You need to succeed and bring these products to the market. It also improves the margin profile of these products as we will no longer be sharing the profits. I'm very confident that like in the past, we are well-positioned to bring the first generic of many complex products to the market such as Symbicort, INVEGA TRINZA, Pentasa and Abilify long-acting injection. As I mentioned earlier, in the next 5 years, we also intend to invest in the life-cycle management of certain core products in our portfolio to meet unmet patient needs. We are already doing this for many products such as levothyroxine oral suspension, which we have submitted and expected regulatory action this year; glatiramer once monthly injection, builds upon our success with generic Copaxone. And we are completing the clinical phase of the development in remitting and relapsing multiple sclerosis. We have also initiated a Phase IV trial and are investing in the science around our Yupelri to explore the impact of revefenacin on a peak inspiratory flow rate and further expand the patient base. We are investing in the life-cycle management of our XULANE product and have initiated a Phase III study on a low-dose option. We have initiated a clinical study for EFFEXOR in Japan to extend the labeling for generalized anxiety disorder. And we are developing several new fixed dose combinations in cardiovascular for Chinese market. Finally, we are also developing meloxicam for rapid onset of postsurgical pain. We have submitted our IND and are now entering into our Phase II studies. As we enhance our R&D investments and put our capital to use, we look forward to further concentrating this pipeline around GI, ophthalmology and dermatology. Our pipeline, excluding biosimilars, that we shared with you today is well-positioned to deliver approximately $500 million plus in new product launches annually after '23. Our total pipeline is valued at $183 billion in IQVIA brand value. This broad pipeline also shows that we will cover almost 80% of the current top 100 IQVIA products, and it's more heavily weighted on complex products. I can hope, you can feel and appreciate the excitement and the confidence we have in our platform. Let's now pivot and discuss the business execution for the near term. While we reshape Viatris in the coming years, our business execution remains a top priority. I walked you through how we will reshape our portfolio and deliver the pipeline earlier. So now I'll provide an update on how we performed in '21, the progress on integration and how we expect to continue to further stabilize the business in '22. '21, we performed strongly as a team while we were creating a new company and navigating a dynamic environment. I truly appreciate and thank all of my colleagues around the world, who seamlessly executed a successful first year as Viatris. We made significant progress with our integration. We executed our restructuring program and achieved our target of approximately $500 million of cost synergies while already executing the Pfizer TSA exits for several programs. We delivered strong overall results, exceeding our expectations across all segments. In developed markets, Europe benefited from our thrombosis portfolio, as well as strong performance in key brands like Influvac, Lipitor and biosimilars. North America's base business performed as expected, despite unexpected competition in products like Miacalcin. Yupelri and EpiPen were other key contributors to the growth. We effectively manage the dynamics of the hospital channel in China while strongly growing the retail segment. Emerging markets responded to the challenge of providing the COVID-19-related products like remdesivir and AmBisome in several of their markets, which helped them offset the impact of changing therapy in antiretrovirals. Japan managed the Lyrica LOE exceedingly well, growing Amitiza and Lipacreon while leveraging the portfolio of authorized generics. On the pipeline front, we delivered on our commitment of approximately $700 million in new product revenue and significantly progress our robust pipeline of hard-to-make and complex products. Our science teams once again made us proud with the FDA approval and the launch of the first interchangeable biosimilar assembly to expand access for patients with diabetes. The strong performance across the globe was well supported by our global supply chain, which enabled us to achieve a record high customer service levels while navigating COVID-19. Let me speak on the integration path forward. We remain on track to realize an additional $500 million cost synergies over the next 2 years, resulting in $1 billion cumulative cost synergies since becoming Viatris. Our synergies in '21 were largely focused on actions around cost of goods, SG&A, cost widens and restructuring. And as planned, the remaining focus for our cost synergies in '22 and '23 is on the restructuring and exiting the remaining Pfizer TSAs. We have already completed a number of TSA exits through February of '22 and expect to exit the remaining TSAs by the end of the year. Let me now talk to you about '22. We are laser-focused to continue to further stabilize the business during this transition period. You will have this slide as a reference point, as I would like to move to the next one to review the headwinds and tailwinds in '22. We are well-positioned to build on the momentum of '21. And we will do this by delivering the approximately $600 million of new product launches, which I will talk about more on the next slide; driving growth in our key markets, including Europe, where we expect mid-single-digit growth; as well as China retail, where we continue to invest in the same. The key emerging markets like Turkey, Thailand, Mexico, Brazil and Korea are also expected to grow on the back of a more normalized market environment post COVID-19. Growing products such as Yupelri, Viagra, our Thrombosis portfolio, Creon, Amitiza and Dymista are also expected to grow in '22 and lend strength and stability to the business in the respective geographies; continued ramping up of our market share of interchangeable assembly to mid- to high teens in '22, and building off our successful launch; and by maintaining our leadership in Wixela and XULANE. At the same time, dynamic market conditions are an inherent part of our business. And our job is to perform in this ever-evolving environment. So '22 is going to be no different. We expect mid-single-digit pace business erosion in '22, largely driven by the continuation of increased competition in certain high-margin key products, like Perforomist and Miacalcin; continued implementation of China's health care policy; the changes in the anti-retroviral therapy guidelines, which we expect to continue to drive contraction of the market that has been stable or expanding over the last 10 years. We also expect total revenue to be negatively impacted by lower volumes for COVID-19-related products, mostly in our Emerging Markets segment. In '22, we'll also face the inflationary impact on input costs on manufacturing operations of our business. Going into more detail regarding our $600 million of expected new product launches in '22, of which about 1/3 is related to biosimilars. First, I'm excited to highlight that approximately 95% of our new product launches in '22 and '23 are already scientifically executed, meaning that they have been either already launched, approved or are pending approval. Interchangeable insulin glargine, Revlimid, Restasis, insulin aspart are a few key products in this bucket. So while we have not included Symbicort in our '22 financial guidance, we are happy with the progress on the product and remain ready to launch if the opportunity present itself in '22. While I won't go into great detail on the following segment slides, I'll hit on a few highlights. In developed markets, we expect low single-digit growth, primarily driven by strong performance of Europe. In Europe, we expect to continue to see strong growth, driven by our Thrombosis portfolio, Creon and Influvac, along with the robust new generic launches like Revlimid and Zytiga. In North America, our balanced portfolio of brands, complex generics, injectables and retail generics as well as our robust product launches will help us partially offset the inherent erosion in the market, as well as competition and lower EpiPen volumes coming off COVID-19 demand in '21. Yupelri will be the one of the key contributors to offset this. In emerging markets, we expect to see a year-over-year decline entirely driven by impact of lower COVID-19 product-related volumes. In JANZ, we expect strong volume growth from our key brands like Amitiza, Lipacreon and EFFEXOR, as well as continued success in building our authorized generics. We also expect common price regulations to have an increased impact, resulting in a high single-digit decline year-over-year. Our strong and well-established commercial presence in the hospital segment in China will support us as we continue to navigate the evolution of the health care policy. At the same time, we are confident in the macro drivers of China, supported by growth in the health care consumerism, and therefore are focused on continuing to expand our footprint in retail segment. To sum up, it's all about execution of our key priorities. We will complete the integration and realize remaining cost synergies. We will deliver the pipeline and expand our robust development house to move up the value chain, and we will continue further stabilizing the business. While we take actions to reshape the company, we'll close the biosimilar transaction in the second half of '22. We'll start working on the other identified divestment opportunities to continue to unlock value and simplify the portfolio. And more importantly, we'll continue leveraging the Global Healthcare Gateway to find value-creating business development opportunities. With this clear execution plan, we will create a simpler, stronger and more focused company of the future. Now I will turn it over to Sanjeev.

Michael Goettler:

Thank you, Sanjeev. Thank you, Rajiv. As you can say, we're excited. Look, bottom line from today, what I really want you to take away from this, everything we presented today, is that the entire company, now that we laid out the strategy, the entire company, entire management team is focused on the future of Viatris. We're looking forward to build a company that's simpler, stronger, more focused, that has a portfolio consisting of generics, complex generics, off-patent brands and an increasing innovative growth engine of NCEs and 505(b)2s; a company that has significantly enhanced financial flexibility that we can put to use for either share repurchases and/or BD and R&D. And if you look at this, simply put, the years '22 and '23 are really years of execution, execution against the commitments that we've made for Phase I, the debt pay down, the dividend, the cash flow, the synergies, but also against now all the initiatives that we outlined to set ourselves up properly for success in 2024 and for many years beyond. That's what we're excited about. That's the vision we're laying out today. And with that, we're going to go to a short break. And after the break, we come back, and we look forward to your questions. Thank you.

Christopher Schott:

I just wanted to clarify the strategy a little bit in terms of what triggered this. Because it does seem like a bit of a departure from the broader portfolio you are creating with Upjohn. So can you talk a little bit about -- was this a financial decision? So when you look at where your stock is trading today, where valuations for some of these assets are, it just makes financial sense to do this? Or was this driven more about something you've seen from the company's performance or changes in the portfolio that you've experienced over the last year or two? I'm trying to get a sense of a little bit more color on kind of what triggered this whole process. And the second one was more of a clarification on the valuation you're considering for the incremental $4 billion to $6 billion in asset divestitures. I think if I go back to Slide 15, it looks like there's $300 million to $500 million of EBITDA tied to these assets. I think that implies then a low double-digit EBITDA multiple on those products? Am I thinking about that valuation range properly? Is that the kind of the right ZIP code to think about for valuation there? So any color would be appreciated.

Christopher Schott:

Let me repeat that then, if that works. Sorry.

Christopher Schott:

So I was there I just wanting to clarify what triggered, I think, this departure -- this divestiture strategy. It seems like it's a bit of a departure from kind of the broader portfolio that was created with the original Upjohn-Mylan transaction. So I was just trying to figure out, is this a valuation-driven decision as you consider what some of these assets could be worth relative to where Viatris' stock is trading today? Or is this something that, as you look to the performance of the business and as you just had about a chance to understand some of these assets, that it's, I guess, more of a -- you see more of a need to focus in the portfolio? I'm just trying a little bit about how much of this is strategic versus how much of this is kind of opportunistic in terms of where valuations are.

Rajiv Malik:

Yes. No, I would say, Chris, anything I would characterize it, it's a continuation of the vision we had or the direction we had because long back we have said going up the value chain. So it's continuing on that path, number one. Number two, when you take a hard look, like let's say a couple of years back, when you start putting the assets together, you bring in organically, inorganically several assets. We took a hard look on some products. What products make sense? What products don't make sense? Now we took a hard look on our businesses. We are taking a hard look on the businesses. We are evaluating what are the must-haves as we go along, what fit in with the long-term strategy and maybe some other focus player has a more -- can put a more value to that. They are much better than somebody's else had. So I think this is how you're going to look into this, that we took time to look into each and every aspect of our business and said, okay, how can we unlock the value? And how can we reshape the company for future and set it up where it needs to go?

Michael Goettler:

Right. And Chris, the second part of your question was on the additional assets. So obviously, we're not, at this point, disclosing what they are for reasons, for integrity of the process, for competitive reasons, et cetera. We'll disclose that as we come closer to it. But again, it's driven by the same motivation. It's either unlocking of value. It's a question of is it core and noncore for the future of our business going forward? And does it help us to simplify the business and reduce execution risk and complexity of the business that we have. That's the main motivation behind those assets as well. So I think with that, we'll take the next question, Bill.

Balaji Prasad:

A couple of questions for me. Firstly, on the guidance, as we look at 2022 guidance, I remember Rajiv, you had called out $6.2 billion as the floor in the last call? And that seems to be the higher end of the range now. So what's changed to have this delta and believe that this includes the biosimilars business as part of 2022. Second, as you look at the therapeutic areas that you've targeted for growth, can you give the current revenue and EBITDA size of these three therapeutic areas today? And what would you consider a successful build out by 2025 for these three therapeutic areas? Thank you.

Rajiv Malik:

Yes, not just -- I would say, to your question, for example, GI, we have a pretty good franchises with Europe and some other markets, like Japan, Australia and all that. And Amitiza for Japan fits in, in the GI. And I think it's not about just how much size they have, it's the presence we have with those in that space. So I think that's been one of the considerations, as Michael very well pointed out. And same is the case of ophthalmology with the Xalatan knowledge we got from Upjohn. I think we have a pretty good understanding of that space commercially. So these are some of the factors, which we have taken into consideration while picking up these areas.

Rajiv Malik:

Yes.

Sanjeev Narula:

Should I take the EBITDA?

Sanjeev Narula:

Right. So Balaji, on the EBITDA, I tried to explain that on Chart 59. So what's going on? There are 2 important factors that are not unique to Viatris, but that's the industry-wide. First is obviously foreign exchange. Our business is 70% international business. As you know, as seen second half of last year and beginning of this year, dollar has strengthened. Key currency that we have is euro and yen. So that all is causing at about a 2% headwind on our EBITDA and I showed that in the chart, that's about $120 million. So that's one factor. The second factor is the inflation on the input cost. This is on the third-party supply, whether it's the solvents, the -- all the third-party procured APIs, distribution cost, all that is causing an increase in the cost, which is again an industry-wide, and I tried to clarify that on the chart. That's about $196 million. So these factors, again, put together, is causing the -- have been considered in coming out of the guidance, where you see the midpoint is at $6 billion.

Elliot Wilbur:

Just a first question for, Sanjeev, a point of clarification. Just wanted to confirm, in fact, that the contribution from the Biocon biosimilars business is, in fact, included for the full year of 2022 in terms of your EBITDA guidance. And then can you just give us a little bit of perspective in terms of sort of how to think about the evolution of all these onetime costs over the next couple of years? I guess that I would have expected more of a step down in 2022 than the roughly, I think, $1.4 billion that you talked about. Obviously, there's some legal settlements in there, but just wondering how to think about sort of the core of that and all these restructuring integration costs and how those may progress sort of beyond 2022? And then just lastly for Michael. I mean, certainly, the market, I think, is going to endorse your strategy of evolution to more of an NCE, 505(b)(2)-based strategy, while not necessarily maybe fully understanding sort of why you chose the therapeutic categories you did. But I guess the increasingly difficult part is to try and figure out sort of what kind of the new baseline is for the company in revenue and EBITDA. We've got all these moving parts now in terms of potential asset divestitures and the like. And if we want to and need to think about 2023 and beyond, I guess, it's just sort of difficult for us to think about like, okay, what is the year in which the company begins to grow? And what is that number from which the company can grow from? So anything you can say to help clarify that, I think, would be appreciated.

Sanjeev Narula:

Yes, sure. So Elliot, so first, for clarification, yes, the biosimilar EBITDA and revenues included in the guidance that we gave out today. And then as we pointed out, Rajiv pointed out, the transaction is expected to close in the fourth quarter towards the end part. So we're not expecting a big change in the numbers this year, but that is included in the guidance that we came out today. The second point that you talked about on the onetime costs, so we -- you do see a reduction in the onetime cost in 2022 as we issued on the guidance. So I think the way to think about, Elliot, in the guidance is we're now looking at onetime cost in actually 2 buckets. One is cost to achieve with all the restructuring and integration work that is going on. So that cost has actually come down in '22 and will come down -- will go down in '23 as we close out these initiatives. That cost is coming down, and that's part of the guidance. The other part of the cost, which is what we call it is cost in normal course of business, like the litigation settlements, profit shares, those kind of costs. Those will probably remain, move up and down, depending upon the situation of the year. And that's what you see because of the legal settlement, the cost is a little bit higher than reflected in 2022. So the big part, the cost to achieve, that has come down in '22, will continue to come down as we finish the restructuring initiative. The other cost, which is the -- all the other costs, which are required to run our business, would probably stabilize to the level that we have in this year's guidance.

William Szablewski:

Our next question, could we go to Jason from BOA?

Michael Goettler:

Okay. But Jason, on EBITDA guidance, as always, we take a balanced view of all the upsides and downside. We give you kind of realistic to where we think we're going to end. Maybe Sanjeev can give, talk a little bit more about the puts and takes. But Rajiv, do you want to talk about the divestitures a little bit more and the process we went through?

Michael Goettler:

And just to add, we added -- we also include external advisers to help us validate some of the numbers.

Michael Goettler:

And make sure we got realistic multiples.

Sanjeev Narula:

And Jason, on the EBITDA, I think there's not much to add, except that I talked about those 2 factors, inflation and FX, that's industry-wide. I think the other thing, Jason, to keep in mind is the EBITDA guidance is the EBITDA guidance, and we -- Michael said that is very balanced in our view with the -- with our point to be meeting and exceeding that. I think the other factor that I want to highlight is the cash flow. We said we've been saying all along, the Phase I commitment is dependent on the cash flow, which is the North Star. We are still on track at these EBITDA levels, still planning to generate over $8 billion on the base business without any of the divestments you talked about that, which will be -- which is sufficient for us to meet our commitment for debt paydown and the dividend and dividend growth.

Aaron Gal:

So I want to touch on 2 or 3 things. First of all, the baseline business. I'm aware that the generic business typically has its kind of a 5% erosion rate, but I was thinking that your international off-brand business is a lot more stable than that. Is the 5% you're giving us just a result to your projection for 2022? Or should we just think long term about that international business on existing products as facing a 5% erosion over time? And then second, you're kind of doing a kind of a big shuffle here, I was kind of under the impression that your strategy was. We have this global presence. We're just going to license products from [indiscernible] companies and put that on that basis and that will be our strategy. And now you seem to be kind of shifting this to focus on specific 3 areas, one of which you would probably pick. Is that false strategy is simply not viable? Can we simply not take therapeutic-agnostic products and launch them globally using your infrastructure? And following up on that, you begin to talk about it why you're picking the products, the strategy, the area you're picking. Just for us who follow big pharma, those are hypercompetitive areas. Can you just tell us a little bit more granularity why -- where in those areas you're going to compete just because otherwise, you look like you're just competing with much larger companies with much bigger R&D budgets.

Rajiv Malik:

Yes. Ronny, the blended -- if I say that if you put all the businesses together, that's where we are saying that blended erosion is around 4%, 5%. That's the 5% you are talking. And you're right, generics can have a component of 5%, 6%, and the LOEs have maybe 3% to 4%, not exactly at that level. And I'll tell you, I mean I'm pleasantly surprised by how much we have been able to hold it. And 1 year, because of the -- and I'm not looking at this as an excuse. I think this is going to be a year when we are going to be out there in a normalized way when our people can get out and all that. So there has been some movements over there. But I would say roughly, you should look into the brands at about 2%, 3%, 4%. Japan is a one key one where the price erosion on these brands is a significant one, and we have that. So if you come out of the Japan and go to emerging markets and all that, it's not that much. So once we, I think, bottom out that, that's one piece.

Michael Goettler:

Yes, the second was the Global Healthcare Gateway question.

Michael Goettler:

No, I just echo what you said. I mean, Ronny, we're not walking away from anything here. There's absolutely -- we're going to be a company that's balanced, right? That has a balance of generics, complex generics, off-patent brands. And what we're into at now is this innovative, higher-margin, more durable portfolio. That's an add, that's an end, right? And if you do that, if you go into that innovative space, you have to do it in a focused way. You cannot build therapeutic area leadership by having -- being in 7 different therapeutic areas. You get benefits from having commonality of customers, connection with scientific community, development expertise. That's the fly we were trying to build here. But as you saw in our slides, we also have still the opportunity for regional deals, strengthening our portfolio, as Rajiv said, on the R&D side with, for example, the trial we're doing for generalized anxieties, EFFEXOR in Japan, et cetera. So that opportunity still exists, the opportunity for smaller licensing deals, complementary to the portfolio that we have in the regions or even distribution deals, that opportunity still exists. But what we're adding today is that focus towards the higher-margin products and the balancing that mix going forward for the future and for the long term, after 24 and many years.

Eric Musonza:

This is Eric speaking. Just the first one on EBITDA. I know we're talking about this a lot. But previously, you guys just mentioned a $6.2 billion EBITDA floor. After this transaction for RemainCo, will that EBITDA be flat or growing over time? And then my second question. You mentioned at least 12.9% equity stake, which implies about a $7.7 billion valuation for biologics -- Biocon Biologics. That's compared to like a $4.9 million valuation from the stake sold to Serum Institute. So since it's at least 12.9%, does that mean there's room to renegotiate the size of that stake?

Rajiv Malik:

Yes. Eric, actually, let me just start by saying we are flattered by the value, which has been assigned or which has been put on our biosimilar business by this partner or by this third-party outside. Every deal -- everybody has a different deal, and we have our business. We know the value of our business. We know what we are walking into it. We are -- first of all, let's start with what's right for the business. We are setting up this company for success for a long time as a vertically integrated company. And we're going to be equity holder in that company so that we can ride that upside, and we can be with them to make them successful and then ride with them. It's value accretive at approximately triple of our current stand-alone multiples, nearly 2/3 of our consideration in immediate cash proceeds. So I can go on. I can go on, like it frees up our R&D and capital deployment priorities. It frees up. We now can -- we are now free to go and deploy where we are going and where we need to invest on. So immediate capital availability again, from the cash perspective, again, if we need to invest back in the business or share buybacks and all that. So I would tell you, it's a great deal for us, and we really feel that it's a right logical step. We had set up the company in a right way. I know the space. I've been there now with the last -- ever since the journey started in 2009, we have several learnings and we know what it would take to be successful in this space. So I think this is the right call, and I'm very happy that I was a part of this journey, and I am part of this team to make this call.

Nathan Rich:

I guess, I was -- just wanted to ask around the growth outlook from new products. I guess, you said a $600 million this year, I guess, $200 million of that is biosimilars. I think some of the key launches this year are also in the biosimilar space. So I guess, moving forward, how do we think about like the cadence of revenue from new products? I think you had previously targeted kind of $600 million to $700 million. How does that change as we think about the growth algorithm going forward, given the biosimilar divestiture that you announced yesterday as well as the new kind of NCE strategy going forward.

Rajiv Malik:

So Nate, the cadence should be, we -- in one of my slides, last slide, you said mentioned $500-plus million, excluding biosimilar is this sort of cadence based on what do we have in the pipeline today. It doesn't take into consideration us ramping up the R&D and us having the flexibility to add more into the R&D, investing more in the R&D, investing more into the business development and doing those deals. So that's how you should see that.

David Amsellem:

Okay. So I wanted to get some more granularity regarding your thought process on R&D. I think the target is 9% by 2026. So how do you think about that target, I mean? And can you talk about how your thought process evolved here? In other words, what are some of the assumptions here? And I guess, going forward, with this sort of focus or leaning into brand assets, whether they're NMEs or 505(b)(2) assets, do you have a target in mind in terms of portion of the mix, the product mix, the revenue mix then our brands, say, by 2025 or 2026? And how do you think about that? And then I guess the last piece is with this brand focus, how much internal R&D capabilities can you bring to bear in terms of these therapeutic verticals that you're focusing on?

Rajiv Malik:

Yes. I would say -- I will take a step back. Look, we have been investing $600 million, $700 million on R&D circa for last few years. And every year, we have been launching the products worth $600 million, $700 million. So it's a pretty productive R&D machine, if I have to start from that. And as you see, 9%, it means we are doubling the R&D. We are going from about $600 million to $700 million to about $1.3 billion, $1.4 billion towards '26. We are doubling the R&D. And you should see as a development house, where we have all the dosage form capabilities, clinical capabilities, regulatory capabilities. And we are already executing on many 505(b)(2) opportunities. So that's not an issue. We partner with Theravance to execute Yupelri, and we know that that's where the clinical capabilities we have and try to highlight on that, that how many Phase II, Phase III, Phase IV studies we have been part of. So I feel very confident that as we step up R&D, as we bring in the assets now with the late-stage Phase II, Phase III asset, this machine is set up to execute and take us and help, as Michael laid out, the future direction and help us go towards the higher value, higher gross margin, higher science products. So that's how I will see this transition in R&D.

Gregory Fraser:

On the China business, what percentage of that business is retail? And how much of the China sales do you expect the retail channel to account for over time? And you mentioned intensifying competition in the retail channel. Is that being driven by other multinationals or Chinese companies? And then just a follow-up on the additional asset sales that you're considering, are those sales likely to come in 1 or 2 larger deals or a series of smaller deals? Any color on that would be helpful.

Rajiv Malik:

You go to the second first?

Rajiv Malik:

You want to go for a second or you want to -- so on China, Greg, you should see a -- there are 3 segments. There is a public hospital segment. That's where the impact of this health care policy is going to be fed. That's about 40%, that's going to be about 40% for us. Then there's a 45% sort of retail, and then rest of it is some private hospitals. And that's where we are investing, that's where we are spending time. That's where we are expanding the footprint to, so that we can offset what we basically going to face in the public hospitals. So that's how you should -- these are the 3 levers you should see and -- from China perspective. And yes, as you can anticipate, as focus has been on retail, health care consumerism. We are seeing both multinational as well as local Chinese companies stepping up the competition. But we have a -- there is still much quite a bit of appreciation for a global brand and the quality. And that's where we distinguish ourselves with many of those local companies.

William Szablewski:

Yes, thanks for the question. We're going to go to Gary from BMO.

Michael Goettler:

Look, we continue to be committed to growing the dividend. We continue to be committed to returning value to shareholders. The Board has already authorized a $1 billion share repurchase program. And we continue to also be committed to investing in this company and growing it appropriately. And the trade-off between all of these is a bit of a case-by-case thing, like as the opportunities come in, right? I mean you see if you look at the Pimecrolimus deal that we just announced, it's a very creative structure. We committed $40 million upfront and have no scientific risk really and have an option at the back end. So continue to expect us to be creative here and be committed to returning value to shareholders. And obviously, the dividend, as we said, always for our Phase I commitment, we're committed to growing that and delivering that. Rajiv, if you want to comment on the other questions, please?

Michael Goettler:

And that's how we were so excited about creating this vertically integrated biosimilar champion and staying involved in it with at least 12.9% stake and being able to participate in the upside on that as well when the IPO happens. So we're thrilled about participating in the business, in a better setup and in a different and more optimized way.

Michael Goettler:

Yes.

William Szablewski:

Thanks for the question. I think we have time for one more last question. We'll go to Navann from Citi.

Michael Goettler:

Okay. Sanjeev, if you want to take the question on that, yes?

Rajiv Malik:

And let's just say, it's a very complementary deal. We have a huge responsibility for the next 2 years. We're going to help -- my role will be to help it, integrate it in a seamless way, bring these businesses execute for next 2 years. Nothing should come in the way. And then when you're getting into '24, '25, make sure how seamlessly we can transfer these capabilities and resources, set up the new company for success, help them in every possible way as you'd expect us to be doing it for the long-term perspective as we are a meaningful stakeholder in that company. So I'll do everything in my -- everything possible in my way to help that.

Daniel Lochner :

Good evening, everyone. And welcome to the Oyster Point Pharma third quarter earnings conference call for the 3 months ending September 30, 2021. This evening, we issued a press release containing our third quarter financial results and recent business highlights. In addition, our press release and our Form 10-Q that was filed with the SEC after the close of market today are available on our website under the Investors & News section at www.oysterpointrx.com. Joining us on our call today are Dr. Jeffrey Nau, President and Chief Executive Officer of Oyster Point Pharma; and John Snisarenko, Chief Commercial Officer. Following Dr. Nau, Mr. Snisarenko, and my prepared remarks, we will open the line for questions. During the call today, we will be making forward-looking statements regarding potential future events, including statements regarding Oyster Point Pharma's potential future financial status and results of operations and our plans and potential for success relating to commercializing TYRVAYA. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from our future results, performance and achievements expressed or implied by such statements. For a description of these factors, please see our quarterly report on Form 10-Q for the quarters ended September 30, June 30 and March 31, 2021, and our annual report on Form 10-K for the year ended December 31, 2020, as filed with the SEC. I will now turn the call over to Dr. Jeffrey Nau, President and Chief Executive Officer of Oyster Point Pharma.

John Snisarenko :

Thank you, Jeff. As we have previously communicated, the dry eye disease segment is a large market with over 17 million people diagnosed in the United States alone. Only a small proportion of these patients approximately 2 million, are currently being treated with a branded therapeutic. Over 7 million people diagnosed with dry eye disease have tried and abandoned the currently available option. We purposefully designed our trials to target a broad subject population to achieve clinical study results in subjects reflective of dry eye disease patients visiting an eye care practitioner. We also allowed trial subjects to utilize artificial tears as we believe this would occur once TYRVAYA nasal spray entered the commercial marketplace. As a result, we believe our trial designs should allow the clinical trial experience of TYRVAYA nasal spray to translate into clinical practice and enable access to a potentially larger addressable patient population. TYRVAYA nasal spray will be a new treatment option for the large refractory patient population that exists in the dry eye disease marketplace as well as those patients who are newly diagnosed. As Jeff highlighted previously, we are incredibly excited to have initiated the U.S. launch of TYRVAYA nasal spray on November 1. Last week, we hosted our national sales meeting, where our sales representatives received the last phase of their extensive training and are now fully prepared to call on the eye care practitioner and pharmacy communities. They are currently detailing TYRVAYA to customers. We have previously highlighted our commercial strategy that includes promoting accelerated payer adoption through the early introduction of Oyster Point and TYRVAYA to the top payer organizations. We recognize the importance of developing strong market access in the dry eye marketplace. We have continued our dialogue with payers throughout Q3 via the process of pre-approval information exchange. To date, Oyster Point has had preapproval interactions with 16 payers, representing approximately 77% of commercial lives. And we will continue to meet with many of the key payers in the upcoming quarters, now that TYRVAYA nasal spray is approved. We remain extremely focused on obtaining the best possible positioning for TYRVAYA nasal spray. Our pricing strategy has been to reflect the value of the product and to be competitively priced with the existing chronic dry eye disease therapeutic leaders. TYRVAYA has been launched with a list price of $592.29 per package, which reflects the value it brings to patients, including the demonstrated reduction in the signs and symptoms of dry eye disease. Oyster Point is very committed to supporting the dry eye disease community by supporting access to medication for appropriate patients. We have launched a comprehensive set of patient services offerings to ensure patients can successfully navigate the patient journey and procure TYRVAYA upon a prescription being written by their eye care practitioner. Our patient support program is called Team TYRVAYA. And for more information on this program and how to enroll, please visit the website www.tyrvaya-pro.com. Our drug distribution strategy includes both wholesalers distributing to retail pharmacies broadly across the United States and a digital pharmacy partner which provides electronic prescribing and automatic enrollment in the patient savings program for eligible commercially insured patients without the need of a patient assistance offering. Patients with commercial insurance who have enrolled in our savings program can receive TYRVAYA for as little as zero dollar out-of-pocket. I would like to emphasize that as of November 3, TYRVAYA is available in the wholesaler distribution channel for distribution to pharmacies. TYRVAYA nasal spray is available in a carton containing 2 nasal spray bottles. Each bottle consists of a white nasal pump and a blue dust cover, delivering 0.03 milligrams varenicline per spray, which equals 0.05 ml. Each bottle delivers 1 spray in each nostril twice daily for 15 days. 2 nasal spray bottles will be supplied in each carton containing 60 sprays per bottle, equivalent to 30 days' supply with 1 spray in each nostril twice daily. TYRVAYA nasal spray samples are also now available as a single multidose nasal spray bottle. Each bottle delivers 1 spray in each nostril twice daily for 15 days. This sample is a critical part of our patient and eye care provider experience and will allow appropriate patients to start treatment immediately. We've been quite diligent with the sizing of our field force. With our field force, we're able to target 20,750 eye care practitioners covering both optometrists and ophthalmologists, which represent approximately 94% of dry eye disease prescriptions in the market today helping us in our efforts to achieve the full commercial potential of TYRVAYA. The sizing of the field force was informed by our collective experience with how to most efficiently cover the territorial map of the United States, while providing our representatives with well-constructed territories to drive motivation so we can achieve success together. To put this into perspective, Oyster Point Pharma now has a leading front-of-the-eye commercial operation. With our launch now underway, our focus is on broad eye care professional and patient education and marketing with targeted direct-to-patient digital campaigns leveraging TYRVAYA's new MOA and nasal spray route of administration. During the initial phase of launch, we are leveraging digital, social media and search. And once we have good payer coverage, we will broaden our reach with more extensive DTP and DTC efforts. As Jeff mentioned, there are a number of major eye care meetings that are important for Oyster Point to attend for the remainder of 2021. This week, we are attending the American Academy of Optometry Meeting, which is being held in Boston. And with our first commercial exhibit, we have had many interactions with attending optometrists to introduce TYRVAYA. Next week, at the American Academy of Ophthalmology Meeting in New Orleans Oyster Point plans to have substantial commercial presence including a TYRVAYA symposium. We believe that with our label, our clinical data and the new approach to treating dry eye disease, TYRVAYA nasal spray has a very compelling therapeutic profile including the following

Operator:

Thank you. [Operator Instructions] And our first question comes from Ken Cacciatore from Cowen and Company. Your line is now open.

John Snisarenko :

Great, Ken. Thank you so much for your question. I'll address the first and third one, the 2 commercial questions. And then I'll hand it over to you. In regards to our representatives that we've hired and trained and are now in the field, we were trying to find the right mindset. These are reps that have been working in competitive environments in their past. And I would say, close to 40%-45% of our rep population has had previous eye care experience, both front of the eye as well as back of the eye and medical device as well as pharmaceutical. So we feel we have quite a tenured field force and quite a motivated field force based on our national sales meeting last year -- last week, I'm sorry. In regards to the patient support program, so we did announce literally a couple days ago that how it will work is that for eligible patients that are commercially insured. If they are insured but the product is not covered, they will go into our bridge program. So they will pay as low as $10 for that prescription. And we will be making sure that that prescription is filled for that patient until they get -- until TYRVAYA gets insured in their plan. For patients that are insured and covered, the co-pay will be as little as $0 out-of-pocket for those eligible patients. So how it works is that if they go into our Team TYRVAYA site or if the practitioner actually enrolls them on the spot they will receive a text right away that they are enrolled and they are in that savings program. And then our patient services hub does behind the scenes all the work to make sure that, that script is filled with the appropriate co-pay out-of-pocket for the patient. I think you mentioned best practice from our previous experiences. We did look at the landscape, both in ophthalmology as well as outside of ophthalmology to see what really works well. And we took some of the best aspects of what we've seen. So it's really -- automation is a key thing. Technology so that patients and physicians there's not a lot of faxing and paperwork. It actually is more electronic. It's more streamlined and hopefully an easier experience for the patients as well. So we've taken examples from the migraine space. We've also looked at what worked well with Xiidra and other ophthalmic products from that perspective. And we feel we've packaged kind of one of the most comprehensive patient services programs that we hope will support TYRVAYA for our launch.

John Snisarenko :

It is very important. We've mentioned before that almost -- if you look at the patient population 40% are commercially insured, 40% are Medicare Part D, and then the remainder are cash and cadence, so on and so forth. So it is important for us to eventually get Medicare D listings. We've already started dialogue with payers. We know the contracting cycle for the following year is always closing in mid-June time period. So we missed the MedD contracting for 2022, but we are starting the dialogue and we'll start that contracting cycle to be listed hopefully in 2023. From a commercial insurance perspective, we've had many interactions with payers in a pre-approval setting to date. And now that we're approved, we're meeting with them again and expanding that. To date, we've had very good interactions and a lot of interest in specifically the differentiation, the different MOA and route of administration, which payers have been very excited about and interested in. So now we're meeting with them over the next couple of quarters to try to get TYRVAYA listed really as quickly as we can. We're hoping 12 months post launch, we have approximately 80% of commercial lives covered.

Ken Cacciatore :

Thanks so much. Excited to watch launch. Thanks.

Joe Catanzaro :

Great. Thanks so much. Thanks for taking my questions. Maybe just 2 couple of quick ones from me. So you guys have emphasized sort of the prevalent pool of patients who have tried other options and failed. And I'm wondering if there's any way to have a lead on those patients who have tried and abandoned other options like Restasis and Xiidra. And if those patients believe they've exhausted all options, how frequently are they returning to their physician? How easy is it to get them back into the office? And just a quick follow-up. I know it's early days, but wondering if you have a sense around the level of in-person engagement that your sales force is having with physicians. Thanks.

Joe Catanzaro :

Okay, perfect. That’s helpful. Congrats again. Thanks for taking my questions.

Anupam Rama :

Hey guys. Thanks for taking my question. I think if I heard correctly in your payer discussions, you've talked -- gotten some pre-approvals from 15 payers which covers 75% of commercial lives. In those discussions, have there been any indications that there may be step edits or anything like that before you get reimbursed for the product? Thanks so much.

Anupam Rama :

Thanks so much for taking our question.

Cory Jubinville :

Hi. This is Cory on for Patrick. Thanks for taking our calls. So to start, how broadly are you able to market some of the symptomatic improvements you observed in ONSET-1 and 2? Is this exclusive to physician materials, DTC materials both? And on that note is there any desire to eventually attain that symptomatic data on the clinical study section of the label? And also, how relevant are that symptomatic data on label given the historical precedent of therapeutics without that on the label? And I have a follow-up, if you don't mind.

Jeffrey Nau :

Sure. This is Jeff. I'll take the second part of the question just around the plan to bolster the label. And I think this is something that we've talked about since the start of these programs, is we do think that there is broad utility for the nasal delivery of TYRVAYA. We are continuing to do development. So as you know, we continue to work on neurotrophic keratopathy in Stage 1 patients. We've also engaged with a partner in China, where we'll continue to do some clinical development to attain approval in China. So there's always the possibility that we will continue to expand the label and add additional clinical data to the label. What I would say is that we think that it's incredibly important that we were able to obtain that signs and symptoms indication statement. And so that's important for us. As we stated before, the FDA has consistently landed on primary or co-primary endpoints in the efficacy section. And although we would have liked that in there, we do think that we will be able to use that information from our clinical trials when we are talking to clinicians. And I'll let John talk a little bit more about that. But I would just stress that we are continuing to develop this product. This is the first indication. We look to bring on additional indications and expand the label to other patient populations. And there will be additional dry eye disease data that we will be developing as we move into other parts of the world. As many of you know, dry eye disease is handled differently in other parts of the world with different endpoints and different requirements. And so we expect, as we move into those other areas, including China being the first one that we will continue to expand our data set and the amount of clinical information that we're able to then bring back to the agency. John will talk a little bit about how that data will be able to be used in the marketplace.

Cory Jubinville :

Got it. Thanks. And just one follow up. So we've seen some really great dry eye launches as well as some more lackluster ones in recent times. So in a general sense, what do you think really moves the needle in a dry eye drug launch? Is it labeling? Is it marketing? The patient experience on drugs? A differentiated mechanism? Just curious to hear your thoughts here as you move on to commercialization mode and how you plan to best address these key aspects of adoption?

Cory Jubinville :

Excellent. Congrats. And thanks for taking our questions.

Jeffrey Nau :

Thank you, operator. And thanks to all of you for joining the call today. As I mentioned in my opening remarks, we are extremely pleased to announce that TYRVAYA nasal spray indicated for the treatment of the signs and symptoms of dry eye disease is now available to eye care providers in the U.S. Our vision and focus on bringing innovative and transformative ophthalmic disease treatments to patients and building Oyster Point Pharma into a best-in-class ophthalmology company remains our primary goal. We look forward to seeing everyone next week in New Orleans at the American Academy of Ophthalmology Meeting, where we will continue to interface with the eye care community regarding TYRVAYA nasal spray. In closing, I want to thank everybody for joining us tonight and to have a great evening.

Daniel Lochner:

Good evening, everyone, and welcome to the Oyster Point Pharma Second Quarter Earnings Conference Call for the 3 Months Ending June 30, 2021. This evening, we issued a press release containing our second quarter financial results and recent business highlights. In addition, our earnings press release and our Form 10-Q that was filed with the SEC after the close of market today are available on our website under the Investor and News section at www.oysterpointrx.com. Joining us on our call today are Dr. Jeffrey Nau, President and Chief Executive Officer of Oyster Point Pharma; and John Snisarenko, Chief Commercial Officer. Following Dr. Nau, Mr. Snisarenko and my prepared remarks, we will open up the line for questions. During our call today, we will be making forward-looking statements regarding future events and the future performance of Oyster Point Pharma. Forward-looking statements include statements regarding Oyster Point's possible or assumed future results of operations; expenses and financial position; business strategies and plans; research, development and commercial plans or expectations; trends; market sizing; competitive position; our belief regarding our clinical trial outcome, including secondary endpoint analysis; predictions regarding product approvals or FDA decision-making; the impact of COVID-19; and the industry environment and potential growth opportunities, among other things. These statements are based upon the information available to the company today, and Oyster Point assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from those projected in the company's forward-looking statements. Additional information concerning these factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the company's filings with the SEC, including our quarterly report on Form 10-Q for the quarters ended June 30, 2021 and March 31, 2021, and our annual report on Form 10-K for the year ended December 31, 2020. I will now turn the call over to Dr. Jeffrey Nau, President and Chief Executive Officer of Oyster Point Pharma.

John Snisarenko:

Thank you, Jeff. The dry eye disease segment is a large market with over 17 million people diagnosed in the United States alone. Only a small proportion of these patients, approximately 2 million, are currently being treated with a branded therapeutic. Over 7 million people diagnosed with dry eye disease have tried and abandoned the currently available options. We believe that OC-01 nasal spray has a compelling therapeutic profile. That, if approved, may address the unmet needs of patients with mild, moderate and severe disease in dry eye disease and the eye care practitioners who provide for these patients. This product has been developed with the patient in mind, and it has the potential to provide a preservative-free nasal spray that naturally spares the ocular surface from harmful preservatives and common ocular side effects associated with topical eye drops. From a commercial perspective, launch preparations are underway, and we are progressing on 3 key prelaunch initiatives that we outlined last quarter. In early 2021, we introduced our dry eye disease awareness campaign. The website for this program can be found at www.dryeyeland.com, and that's spelled D-R-Y-E-Y-E-L-A-N-D dot com. The goal of the disease state awareness campaign is to reframe the narrative around dry eye disease and to educate practitioners on the importance of tear film homeostasis and how tear film instability impacts dry eye disease. Historically, education has been primarily focused on later-stage disease and the inflammatory component of that disease which, in our opinion, is a long-term sequelae of a disruption in tear film homeostasis. Interest and traffic to dryeyeland.com has been high as we continued our efforts to educate the eye care community in quarter 2 of 2021. The second phase in our launch preparation is in the area of market access and reimbursement. Our preapproval product dossier has been completed, and we have started the dialogue with payers about OC-01's therapeutic profile and value proposition. We will continue to meet with many of the key players in the upcoming quarter. We've also done quite a lot of research with payers, including a number of advisory boards, and we remain extremely focused on obtaining the best possible positioning of OC-01 post approval. The third stage is continuing to build out our sales team throughout the upcoming year. As we previously mentioned, we plan on hiring between 150 to 200 representatives, which would target greater than 90% of the current prescriber base of therapeutic dry eye disease products. As of the end of Q2 '21, our regional sales directors as well as all the district managers have been hired. In addition, the hiring of sales representatives was initiated in July, and this group of teammates has already been onboarded, trained and are currently calling on eye care specialists with our disease state awareness education efforts. The remaining sales positions have been posted, and our goal is to have them hired, onboarded, trained and certified prior to our PDUFA date. As Jeff stated previously, interest in Oyster Point sales positions have been very high with over 6,000 applicants to date. This has allowed our sales leadership to attract some great talent. Upon our planned launch post-FDA approval, our focus will be on broad eye care professional and patient education and marketing with a plan for targeted direct-to-patient campaign leveraging OC-01's novel MOA and nasal spray route of administration. Our sales and marketing efforts will be supported with a comprehensive patient support program. As a potential first-in-class nasal spray to treat the signs and symptoms of dry eye disease, OC-01's product profile may be compelling to both prescribers as well as patients. I will now turn the call back over to Dan Lochner, Oyster Point's Chief Financial Officer, to discuss our second quarter financial results.

Jeffrey Nau:

Thank you, Dan. Before taking questions, we are also excited to announce, and this is hot off the presses, the signing of 2 agreements earlier today. First, as announced in our earnings release, we have entered into a credit agreement with OrbiMed Royalty & Credit Opportunities to provide us $125 million in aggregate funding which will enable us to continue executing on our business plan and our go-to-market strategy. In addition, we also announced and issued a press release that Oyster Point has entered into an exclusive license agreement with Ji Xing Pharmaceuticals to develop and commercialize OC-01 and OC-02 nasal spray for patients with dry eye disease in Greater China. Oyster Point looks forward to collaborating with both partners as we continue to execute on our preparation for commercialization. With that additional update, I'll now turn the call over to the operator to open up the line for questions.

Stacy Ku:

Congratulations on the progress. So first, given your very recent exciting licensing agreement with Ji Xing for OC-01 and OC-02, maybe just your thoughts on the European opportunity and potentially a starting point on the magnitude for EU partnership based on this last agreement or maybe, if you are interested in partnering, what kind of partner you might be looking for. And getting back into some of these ophthalmology conferences, what has been the feedback from clinicians? Maybe talk about some of the buzz before the potential approval. Or what kind of education is needed?

John Snisarenko:

Yes. Thanks, Jeff. And thanks, Stacy, for your question. One of the things that really was great to hear at these conferences is the awareness of the company, the awareness of Oyster Point. A lot of these physicians have seen the presentations on the clinical trial results. They're aware of Oyster Point building this world-class eye care company. And specifically, what they really mentioned was they're quite excited about the ability to have patients kind of treat dry eye with their own natural tears. A lot of these physicians prescribe a lot of different eye drops for different conditions. And the fact that we are taking an approach that we're sparing the ocular surface from additional chemicals, and we're actually using the ability of the body to produce natural tears, was something that they keep reiterating over and over. So the excitement is there, and it's building. And I think the fact that we have the ability to work upstream in the dry eye disease cycle is something that they're excited about.

Anupam Rama:

I was reading my colleague, Chris Neyor's note from earlier today related to Kala. And it just seems like that launch is disappointing here in dry eye. And what are you learning from that launch you think that you can apply or do differently for OC-01?

John Snisarenko:

Yes. Thanks, Anupam, for the question. One thing I wanted to reiterate is that we have such a different mechanism of action that's very novel. From a steroid perspective, loteprednol has been prescribed for many different things, including dry eye in the past. And this is a -- Kala's product is loteprednol. So there are some limitations with the uptake that we've seen so far. We feel with a very novel molecule, a very novel approach, and even with our initial discussions with the payers, they feel that we have quite a lot of differentiation. They're very excited to have something new to add to the armamentarium and to offer something that is different from the anti-inflammatories that are out there. So our positioning will be very different. With the potential approval, we'd treat mild, moderate and severe patients right through the spectrum to the chronic patients. So I think we have quite a bit of differentiation, and we'll also be investing quite a bit in the launch, in regards to field force as well as marketing and around our patient services offerings.

Operator:

And our next question comes from Joe Catanzaro from Piper Sandler.

Jeffrey Nau:

Thanks for the question, Joe. So we continue to engage with the agency as the review process goes along. We continue to remain on track. Again, our PDUFA action date is October 17. Our expectation would be sometime 30 days before, if not sooner, we would start into having those labeling negotiations. And so things are moving ahead as planned with no additional surprises. And so we continue to be available to engage or answer any questions and on track according to that PDUFA action date in October currently.

Jeffrey Nau:

Yes. So great question. So at the moment, at least the feedback that we've received from the agency has been that their focus has been primarily catching up with facilities, especially those facilities where they've not been out to inspect them. And so there are, as you can imagine, a number of facilities with new products coming to market that have never been visited by the agency. We are fortunate enough that our facility has been visited by the agency within the last few years. So it will be at the discretion of the agency as to whether they come out before the PDUFA date or after the PDUFA date, but we are manufacturing currently on the line and in a facility that is producing products that have entered the market. So we feel comfortable with that particular position, although the FDA is not committing to whether they would be out preapproval or post approval.

Patrick Dolezal:

It sounds like you're not quite yet in labeling discussions so this might be a bit preemptive. But to the extent possible, could you just provide any further guidance related to the potential for signs and symptoms label versus increased tear production? And perhaps comment on how much one label versus another might ultimately matter in the real-world setting.

Patrick Dolezal:

Super helpful. And one more, if I may, just pertaining to the Ji Xing agreement. Just to the extent that you could provide further details on the potential timing and size of these development and sales-based milestones, it would be helpful as to whether there's a line of sight in the relative near term.

Daniel Lochner:

Absolutely. And then I would say, in addition to that, with FDA approval of OC-01 in the United States, we would receive an additional $5 million. And that would be what we intend to receive in the current calendar year. And then, of course, additional payments would be potentially occurring as development move forward in the China theater. But we're still working on the development plan with Ji Xing. So we're not at the point of providing that guidance. But of course, those additional payments would be incorporated into the numbers that you saw in the release today.

Jeffrey Nau:

Thank you, operator, and thanks to everybody who's on the call for joining today. As we look forward to everything that's happening at Oyster Point Pharma, not only with the OC-01 varenicline nasal spray launch this year in the fourth quarter, if approved, but also building out our pipeline, expanding and extending our reach with our first collaboration in China with Ji Xing Pharmaceuticals, we continue to execute on creating Oyster Point into a world-class ophthalmology company. We're really excited about being in Boston and New Orleans this fall with the American Academy of Optometry and the American Academy of Ophthalmology meetings as we potentially launch our first product into the U.S. marketplace. So in closing, I want to thank everybody for joining us tonight and for having a great evening.

Melissa Trombetta:

Thank you, Laurie. Good morning, everyone. Welcome to Viatris’ first quarter 2021 earnings conference call. Joining me on this call are Viatris’ Chief Executive Officer, Michael Goettler; President, Rajiv Malik; Chief Financial Officer, Sanjeev Narula; Chief Accounting Officer and Controller, Paul Campbell; and Bill Szablewski, Head of Capital Markets. Well, some of us are in remote locations I would ask for your patience should we encounter any technical difficulties. During today’s call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2021. 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 earnings release that we furnished to the SEC on Form 8-K earlier today, for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements. We also posted supplemental slides on our website at investor.viatris.com. Viatris routinely post information that maybe important to investors on this website, and we use this website address as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of SEC’s regulation fair disclosure. We also will be referring to certain non-GAAP financial measures including free cash flow and adjusted EBITDA. We will reference such measures in order to supplement your understanding and assessment of our first quarter 2021 financial results and financial guidance for 2021. Non-GAAP measures should not be considered a substitute for or superior to, financial measures calculated in accordance with GAAP. The most directly comparable GAAP measures as well as reconciliations of the non-GAAP measures to those GAAP measures are available in our first quarter 2021 earnings release and supplemental earnings slides as well as in the Investors section of our website. In addition solely to supplement your understanding and assessment of our first quarter 2021 financial performance, we have provided in our earnings release and supplemental slides, and we’ll discuss during today’s call certain financial measures relating for the first quarter of 2020, including combined results of legacy Mylan and the Upjohn business with indicated adjustments, which do not reflect pro forma results in accordance with ASC 805 or Article 11 of Regulation S-X. Such measures do not reflect the effect of any purchase accounting adjustments. Let me also remind you that the information discussed during this call, except for the participant questions, is the property of Viatris and cannot be recorded or rebroadcast without Viatris’ express written permission. An archived copy of today’s call will be available on our website and will remain available for a limited time. With that, I’d like to turn the call over to Michael.

Rajiv Malik:

Thank you, Michael, and good morning everyone. I would like to say hello to our employees around the world and thank them for all of their hard work and commitment to Viatris. I would especially like to recognize my colleagues and friends in India, and express my deepest sympathies to everyone who is enduring a very difficult situation as the pandemic resurges in the parts of the world. Earlier this year, we shared with you our approach to execute our ‘21 plan. Minimizing the base business erosion, executing the new launches, and to integrate and synergize. I’m very pleased to inform you that we are off to a great start. I’ll be making certain comparisons to combined LOE adjusted quarter one 2020 results on a constant currency basis, as well as comparison versus our expectations as included in our full year guidance. Beginning on Slide 10, our business performed better than expectations, but was down 2% in this quarter as compared to combined LOE adjusted quarter one 2020 results. Our brand business performed better than our expectations, driven by products such as EpiPen, Amitiza, Lipitor and Viagra. Our Complex Generics and Biosimilars business grew by 27%, largely driven by biosimilars. And our global generics business performed in line with our expectations. We delivered $163 million for the new launches and remain on track to meet our $690 million targets for the year. We continue to expect normalized based business erosion of 3% to 4% for the year. Our Developed Markets segment performed better than our expectations this quarter. Our brand portfolio performance was driven by higher EpiPen in the U.S. largely due to vaccination related buying. Yupelri our first nebulised LAMA performed in line with our expectations, and we are well positioned to expand this market. Our European brand business was helped by Creon, Dymista as well as our Thrombosis portfolio, acquired from Aspen, highlighting our ability to effectively manage our portfolio of established brands. Our Complex Generics and Biosimilars portfolio grew by 27% in developed markets, largely driven by pegfilgrastim, trastuzumab and adalimumab biosimilars. Our generics portfolio perform in line with our expectations once adjusted for COVID surge buying in the first quarter of 2020, which accounts for half of the year-over-year decline. I would like to provide a bit more color around our U.S. generics business, which is approximately 11% of our total business now. Our current generics portfolio is now a combination of diversified product forms, including extended release oral solids, injectables, transformers, and topicals. We implemented our disciplined approach to resource allocation and portfolio management, including the rationalization of negative margin products. We believe that extending this approach to our overall business will help us manage our base business more effectively. Looking ahead, we have assumed increased competition for our complex products like Xulane, Wixela, glatiramer acetate, in addition to the loss of exclusivity of performance. Moving to the next slide. Our Emerging Markets segment performed in line with expectations. Our business was affected by the negative impact of COVID on our lifestyle brands, as well as a onetime impact of change in go to market study in Vietnam. We see our Complex Generics and Biosimilars business growing over the year, driven by a number of new launches in multiple countries. Our generic business was roughly flat and in line with expectations. Our JANZ segment grew 14% as we adjusted for one time Lyrica, Celebrex, LOEs. Our brand portfolio in Japan had a strong performance driven by Amitiza, Lipitor and Creon. Lyrica LOE is performing to our expectations. We also launched the first adalimumab biosimilar in Japan. Our generic business performed strongly. Now, to Slide 14. Our Greater China segment performed strongly and grew by 9%. This was primarily driven by 30% growth of our retail channel, better than expected hospital channel performance, as well as the benefits from the COVID recovery. Our retail channel now represents 40% of our China business. We have assumed the full impact of VBP for 2021 as well as mid-year implementation of URP in certain regions. As already mentioned, on our guidance call, the trough of our China business will be determined by the timing of the full implementation of URP. We see continued momentum, and we look forward to investing in our pipeline in this region. Out of 25 products we identified for Greater China, we are well positioned to file six regulatory submissions in 2021. Now, switching to providing more details around the impact of the COVID-19. India is currently going through its worst pandemic phase, and we are doing everything possible to protect the health and safety of our employees in India. We are also working closely with the health authorities to maintain supply of remdesivir. We have a broad, diverse and resilient global manufacturing and supply chain footprint. We are not depending on any one country or a site. Even in India, our manufacturing footprint is spread over five different states, which mitigates the risk of disruption in any given part of the country. As Viatris our reliance on India, as a supply hub has relatively come down as compared to legacy minor. The diversity of our network helped us achieve an approximately 95% customer service level across the globe last year. We are continuously monitoring our inventories and currently are in a strong position from a supply point of view to meet our customer needs across the globe. I would now like to share some key updates on our pipeline shared with you on Investor Day. I’ll start with our biosimilars franchise on Slide 17. Our 351(k) Insulin Aspart for interchangeability is on track for July FDA goal date. Our insulin as part is also tracking towards its FDA goal date in July and is expected to include interchangeability. We are making steady progress for our biosimilar to Botox, and recently submitted our briefing package to FDA for agreement on Phase 3. We have just received top-line results for our clinical Phase 3 study for our biosimilar to Eylea, and are pleased to report that we have met the primary endpoint for this study. We receive European approval for the biosimilar to Avastin and Insulin Aspart. While we no longer have any open scientific questions with FDA, our U.S. approval of biosimilar to Avastin has been impacted by the delay in a pre-approval inspection due to COVID travel restrictions. The next slide shows our complex product pipeline. For our glatiramer acetate once-monthly, we have dose more than 900 patients and are on track for our submission at the end of 2022. We also achieve positive results in Phase 2 trial for meloxicam, which was designed as a proof-of-concept study for a quicker onset of acute pain relief as an alternative to opioids. We are excited that we have advanced a new low-dose formulation of Xulane, which we formerly called MR-100. We are expecting this product to be one of the smallest low-dose patches in its class and our Phase 3 clinical trials have been initiated. The next slide shows our continued progress in our complex injectable pipeline. Our octreotide MR Injection clinical study is well underway to support our U.S. submission. Clinical study for EU Trinza are on track for quarter two 2021. We are also in the process of initiating clinical studies for amphotericin B, previously called MR-118. I’ll finish with an update on our integration and restructuring program. As you can see on Slide 21, we remain on track to realize $500 million of cost synergies this year. Our workforce actions are well underway, including a recently announced voluntary retirement program in Japan, which is on schedule. As we announced earlier this year, the rationalization of 13 manufacturing sites have been identified, and closure or divestiture activities are in process. We are working very closely with regulators and our customers to avoid any supply disruptions, and are building appropriate safety stocks. With all of these actions underway, we remain confident that we will exceed our target of $1 billion in cumulative cost savings by 2023. Let we, now turn the call over to Sanjeev. Thank you.

Operator:

Thank you. [Operator Instructions] Our first question comes from the line of Elliot Wilbur of Raymond James.

Sanjeev Narula:

Elliot, thank you for your question. So there are a couple of questions in that. So, let me take them one-by-one. So first of all very pleased with the cash flow generation in the business. Specifically talking about net working capital, there are two things going on. One is on the positive side, which is the initiative we’re taking as a company when you bring two companies together, managing our receivables, our payables and inventory. So that created an upside of roughly about $65 million in this quarter. And that going to continue to be – we’re going to build on that. So that’s clearly a positive. On the other side of the net working capital from operations we did little bit have a timing benefit. We were able to accelerate certain collections in Europe in this quarter, which actually helped us and will have an impact on the second quarter, but overall, we’re very pleased and I expect the net working capital improvement initiative to continue to help us for rest of the year. Coming to the kind of phasing as I mentioned about on the cash flow, second quarter, as I said will be significantly lower. Our net working capital requirement for second quarter will go up, Elliot, because couple of things going on, particularly about our debt pay – our interest in debt, it’s about $200 million we’ll be paying in second quarter, which is only paid in second and fourth quarter. So there is a quarter-to-quarter variation that is happening. But we are very pleased with that. With regard to your second question is about $350 million, as we have in our disclosures is combination of two items. One is the restructuring, which is related to the unabsorbed overhead of the 13 plants that we’ve gotten - announced, including Morgantown. Then the second part of that is about the severance that’s across the board based on the initiatives that we’ve taken on the synergy part. So that’s in line with our expectation. And there’s a comment that you made about $400 million that was on the one-time cost as part of the $1.5 billion. So all in line, what you see in this quarter is in line with $1.5 billion. And that is combination of two items, which is the severance costs and the restructuring costs, which is all part of $1.5 billion.

Elliot Wilbur:

Thanks.

Operator:

Your next question comes from the line of Umer Raffat of Evercore.

Michael Goettler:

Well, let me thank you for your comment on the transparency. That’s exactly what we tried to do. And we continue to take your feedback on that. And Rajiv you could also add both the China and Botox question please?

Michael Goettler:

Okay. Operator next question, please?

Nathan Rich:

Hi, good morning. Thanks for the questions. I had two on the competitive dynamics and how they’re playing out relative to your expectations. First, it looks like on the sales walk, the base business erosion of $111 million in the quarter that’s running kind of well below, I think the range that you anticipated for the year. I know that the impact may build over the course of the year but I’d be curious to get your comments on how that flows through the P&L. And then the second question was related to the Lyrica headwind, it looks like $206 million in the quarter that I think if we annualize that would be above the range that you gave at the back at the Analyst Day. I know it includes Celebrex now, so any additional color you could provide there on in terms of, what you’re seeing would be helpful? Thank you.

Rajiv Malik:

Yes. Lyrica, specifically, I think that 200 sets is a combination of Lyrica and celecoxib, Celecox, 140 of that is Lyrica and about 60 - 65 of that is the celecoxib.

Rajiv Malik:

And overall on a base business, just also there was a comment on the base business, underlying business Nate, I can tell you across the geographies whether I start with China or talk about the Developed Markets, North America, Europe, it’s strong, the underlying business is strong, the competitive dynamics are exactly what we had assumed. We see that strength. I think that approach we had adopted to manage this base is a key and – our focus will be to optimize, leverage and minimize the base [we’re in] (ph). So, as we go along, I think it’s going to further evolve and we’ll keep you posted on that.

Operator:

Your next question comes more from the line of Chris Schott of JPMorgan.

Michael Goettler:

Rajiv, you want to start with both of these.

Michael Goettler:

Yes, URP.