Viatris Inc. (NASDAQ:VTRS) BofA Securities 2024 Health Care Conference May 14, 2024 1:00 PM ET
Company Participants
Doretta Mistras – Chief Financial Officer
Philippe Martin – Chief R&D Officer
Conference Call Participants
Jason Gerber – BoA Securities
Jason Gerber
All right, everybody, we’re going to get going here with our next company presenter at the Bank Of America Annual Healthcare Conference. We got Viatris. And joined with us is CFO, Doretta Mistras, and Philippe Martin, Chief R&D Officer. So thank you both for joining us.
My name is Jason Gerber. I cover [indiscernible] Biotech and Specialty Pharma. And so, yes, let’s jump into it. I think a big part of the Viatris story, I think, of late has been solidification of the base business, some divestitures and then strategic pivoting to more long dated, durable growth, specialty brands at a high level.
Question-and-Answer Session
Q – Jason Gerber
Maybe we can start with the base business in terms of where the company is at with its key regions and where you’re seeing the most momentum, where you’ve got a little bit of work to do, perhaps markets like Jan’s, where I know you guys have flagged, looking to do some things to offset some of the kind of pressures in that segment? And maybe we’ll start there and then go into other deeper questions.
Doretta Mistras
Yes, great. First, Jason, thanks for having us. We’re incredibly excited to be here. And we’re on the back of reporting earnings last week. And I would say, in summary, we feel good about where we are both from a continued execution perspective, as well as kind of the business, continuing to deliver as we expect in terms of our key strategic priorities, you mentioned a few of them in terms of continuing to focus on closing our divestitures, repaying down our debt, continuing to deliver capital to shareholders, driving growth in the base business, and continuing to invest to drive that growth.
And so specifically, as we think about the base business, it’s a stable and steady portfolio, really, given our well diversified global platform. And we expect total revenue to grow operationally, approximately 2% for the year and that’s really driven as we think about the various components in North America, it’s because of our brands in Yupelri and Tyrvaya, its existing complex generics like Wixela, and its strong contribution from new products like Breyna and Lisdexamfetamine, as well as expected new product contributions from our complex pipeline, which we expect to come over the next couple of year’s.
Then moving to Europe, this is a business that grows. We expect to grow 3%. And it’s really driven by our kind of our broad portfolio across brands, across generics and key markets like Italy and France, as well as new product introductions like generic Aubagio in emerging markets. This is a mid to high single-digit growing market, again driven by strength in our brands, whether it’s Lipitor, Aldel, Xalabrands and our generic portfolio.
And we continue to feel good about our business in China, continued focus on execution, their focus on the retail and self pay market, and the opportunity to bring new products into the market over the next couple of years. And so as you look at our kind of portfolio, we kind of the diversification of it. We feel good about the portfolio that we have and the opportunities ahead of us.
Jason Gerber
So that’s a helpful characterization of top line as we think about these different units and how the company sort of structured and leverages the cost structure that you have. Are there certain geographical segments that are probably meaningfully better margin contributors and more important to the bottom line at the moment, versus others that might be more strategic and offer top line diversification, but are maybe less consequential to the bottom-line? I mean, most investors tend to think the US market drives most of these companies operating profits, but curious how you’d frame that?
Doretta Mistras
I think one of the uniqueness of our portfolio is that it is broad and diverse. I mean, the US market currently for us is kind of less than 20% of our revenue. And so we do benefit from having this global platform. As we think about growth, the US will continue to be a kind of key driver for us as we look to contribute.
We have a strong base there that we can leverage. And as we’ve talked about, we’re looking for branded, durable, high margin assets that we think we can be successful in continuing to add to that portfolio. But there’s opportunities to leverage that beyond that, right? There’s opportunities to add regional, country specific assets that leverage our global infrastructure. And so it’s really about kind of balancing those various components and kind of finding opportunities to drive growth.
Jason Gerber
And so maybe if we just kind of go through some of the segments, start with China. I mean, how do you feel about the geopolitical landscape, VBP exposure, and then the appetite to, as you look to acquire more innovation in the portfolio, the ability to get properly, kind of a good return on investment in that market? I mean, so how are you feeling about that as an end market that you’d want to maybe increase exposure to, or just sort of maintain kind of where you’re at?
Doretta Mistras
Yes, so China, actually about 95% of our business in China has already gone through VBP. And so given our focus on the retail channel, on the self paid channel, we’re focused on continued execution as well as bringing in new products. And we have the opportunity not only to bring additional products into the market, and leverage our existing infrastructure. But we also have the ability, for example, with Clopidogrel and [ph]Senarimad, two assets that kind of, we recently bought into our pipeline.
Those are both global opportunities, especially in solidarity and given kind of our cardio franchise globally. There’s real opportunities not only with what we are doing kind of globally in terms of our expansion, but also on regional specific opportunities to continue to invest in. It continues. You mentioned it kind of, it does continue to be a very complex dynamic, given the breadth, and we continue to kind of manage that evolving policy dynamic.
Jason Gerber
Okay. And I’m just trying to get my head around the retail model. Right. And so Lipitor, Norvasc, these sort of products where you’re leveraging an established brand equity that’s been built over years. And those seem to be disproportionate drivers of growth through this retail channel.
Will more innovative products move through retail or will have to go through like more of the traditional hospital model in the early infancy of the product lifecycle? I guess I’m trying to understand that distinction, if there’s a distinction at all to be had.
Doretta Mistras
Yes, I mean it’s evolving and we still kind of have infrastructure both in the hospital, but there’s also opportunities much broader than that, just given the kind of feet that we have on the ground, the relationships that we have. And so there’s real opportunity to kind of broaden our presence there, kind of really create a portfolio approach. But it’s not just the benefit we have is it’s not just China, it’s the other regions and kind of how that all plays together.
Jason Gerber
Okay. And then maybe in terms of North America, how that’s, that’s been evolving, it sounds like you’re getting good momentum on the brand side to whatever extent, say the US generics, which maybe was a problem child five or seven years ago as an end market, that natural erosion is more than outpaced by what you’re seeing kind of collectively on your brand growth. Is that sort of what drives the operating assumption on growth there?
Doretta Mistras
Yes, it’s a couple of factors. One, it’s we continue to evolve our portfolio towards more branded products like Yupelri. Like Yupelri and our Eyecare franchise, Tyrvaya RYZUMVI
But then there’s also the kind of our existing complex generics, products like Wixela are additional product opportunities. And so kind of at the same time we’re also trying to manage our kind of the kind of base legacy brand portfolio that we have. But on the brand side, there’s really the opportunity to continue to evolve that portfolio.
And then on the generic side, it’s the combination of existing products, new products, our pipeline, that we expect to contribute kind of over the next several years. And then the totality of that, to your point, we expect to more than offset the base business erosion.
Jason Gerber
Okay. Now there’s a lot of moving parts with divestitures, with scaling up a brand business and investing in that, and then potentially even overlay with future bd. So how do you think about the legacy margin structure of the business? And do you want to sort of accomplish all these future goals while maintaining that margin structure? Maybe if you can just sort of outline kind of how you’re thinking about the margin structure within that broader context?
Doretta Mistras
Yes, and I think it’s evolving story, but we feel really good about our base, the ability to generate kind of the 2% top line growth that we’ve talked about in the immediate term. We realize that it is going to take some investment in order to continue to migrate our portfolio towards these kind of higher, more durable, higher margin branded portfolio. But underpinning all of this is our stable, free cash flow generation.
And that allows us the ability not only to invest in growth, but also to deploy that capital to shareholders, whether it’s via share repurchases or dividend, and really also drive EPs growth over the longer, over the longer term. And so as you think about the branded portfolio coming in, driving some margin, driving some of that higher, higher margin, coupled with kind of capital allocation, you have the opportunity to really deliver on the EPs side.
Jason Gerber
Okay, maybe you pull Philippe into the conversation here. So maybe thinking about BD and therapy, areas of focus. I know that at one point, so there were sort of the three core areas, GI op, though, and derm, it’s been broadened out. Right. So should investors think more about the focus being more opportunistic and TA agnostic ultimately, and with a focus on just good drugs and, drugs that can be differentiated in large markets. Just kind of curious if you can give us a little bit of a snippet or sense of what’s going on behind the scenes in terms of the asset scans.
Philippe Martin
Yes, I mean, I think we haven’t changed our strategy. We’re still looking at the three areas we said we were going to look at, dermatology, eye care and GI. There’s a lot of good drugs there that we’re looking at and may bring in at some point, but we’re not stopping there. Right. We have a lot of inbound interest that we’re seeing a lot of assets.
And when the assets make sense, sense, and that where we can leverage our existing structure globally to commercialize those drugs, then that might make sense for us to go forward again. It’s more important, it’s often more difficult to get a good drug than to commercialize it, at least from an R&D standpoint. And so I think that’s really where we’re looking at, is trying to get the best drugs that we can possibly develop and or commercialize. So there’s a level of opportunities. We got to be a little opportunistic when it comes down to BD.
Jason Gerber
Yes. And I think maybe some of the legacy shareholder base was less accustomed to the company taking on clinical risk. Right. And so we think about the Idorsia deal and we think about future BD, how much appetite for clinical risk is there? At a minimum, the company wants to see maybe a phase two proof of concept dataset in place to feel comfortable versus maybe earlier stage deals and building out more platforms, for example?
Philippe Martin
Yes, I mean, risk is top of mind, right? Clinical regulatory risk. When we look at these assets, we screen them. So typically, the assets we’re going to be looking for are either phase three assets, either about to start phase three, or already in phase three, such as Idorsia, where the asset is considered de risked to some extent, strong proof of concept, and so good regulatory interactions that lead you to believe that the probability of getting the drug approved is very high.
So we’re looking at these assets that have, where the level of risk is lower. We’re not going to go in phase one. Two assets that don’t have a clear proof of concept.
Jason Gerber
And I imagine you’re somewhat opportunistic about the geographical availability of these assets. Oftentimes assets are encumbered, and I imagine you want assets that give you worldwide rights, given the infrastructure and the ability to kind of maximize value for those?
Philippe Martin
Yes, I mean, generally speaking, we’re looking for global rights where we can leverage Viatris current structure. Sometimes it happens, like with the scenario mode, where one of the region is already taken, such as Japan, that’s fine. If the asset still makes sense for us globally, for the rest of the markets, then we’ll certainly go forward with it.
Doretta Mistras
And the only thing I would add to that is we are looking for global opportunities. The later girl, Senarimod, fit in that camp, but we also have this global infrastructure, and there’s a lot of companies out there, especially in biopharma, that may have a great line of sight in terms of how to commercialize a drug in the US, but may lack whether it’s resources, expertise outside of the US. And so we have the opportunity to leverage that our global footprint, potentially kind of partner with some of these assets to not only potentially drive growth within the US, but globally as well. And so there’s, we have a lot of options in terms of how we think about things given the global diversification that we have.
Jason Gerber
Okay. And just coming back to the point on therapeutic area and just construction of a more of a branded longer tail durable business, I get the sense that the cost of the sales infrastructure is not rate limiting so much. Right.
So when you think about building out a solid vertical, is it more about internal know how and expertise to scale that and to get more brands? And maybe that gives you more leverage with payers versus just, it used to be in the old days, get more bang for your buck in terms of your sales infrastructure and multiple products in the bag. But that seems like the areas you’re targeting. You could probably target and say the US with 150 reps.
Philippe Martin
Yes, I mean, Doretta comment if you can add, but I think we’re looking for specialty type products, right. Where the salesforce is generally relatively small targeted, so you don’t need to build humongous salesforce. Right. It is pretty constrained, relatively easy to do. Again, getting the right drug is probably more important in long term than the commercial considerations.
Doretta Mistras
Yes, I would echo that. First and foremost, you need a kind of drug that we think is going to be successful and we are the right people to commercialize that asset, whether it’s in the US, opportunities to leverage our global capabilities. And then how do you kind of leverage that in a targeted way and have the ability to build real franchises around that asset, but it really revolves around the asset.
Jason Gerber
Okay. And as we think about the interplay with share buybacks and other capital allocation commitment, so to speak, is it fair to say that, hey, we have certain guardrails regarding cap deployment for Divi and for buybacks, and that’s just set. And so it’s not like we’re constantly every year going to be looking at sort of the best return on investment from BD decision making versus deal buybacks. I guess it matters. Like I wonder if investors should be thinking about that, the deployment for buybacks flexing up and down in future years. I mean?
Doretta Mistras
There’s a number of factors that play into how we think about specific BD opportunity. But I can say every BD opportunity we look at, we compare it against what a share buyback would look like. But part of kind of the benefit of our strong free cash flow generation is that we do have the flexibility to be able to do both. And we expect to continue to return capital to shareholders, but also invest in the business to be able to drive future growth. In the first quarter, we returned $393 million via both share buyback and dividends. But we believe kind of a balanced capital allocation strategy is important to drive both near term and longer term shareholder return.
Jason Gerber
Okay, maybe, Philippe, if we could talk about Clopidogrel, very unique and novel clinical trial for prevention of acute mi. Can you just talk about. You had an update on your 1Q about just enrollment assumptions, and there might be some. It sounds like you need to kind of monitor how these tweaks to the enrollment protocol might affect enrollment. But currently you’re talking about maybe having data in second half, ’26. But I don’t know if you can kind of elaborate a little bit more on some of those changes and when you might expect to have a better handle on the enrollment dynamics.
Philippe Martin
Yes. So what we’re doing since we started the collaboration with Idorsia is we are adding a significant number of sites to both the [ph]scenario mod and the [indiscernible] studies. We’re basically doubling the number of sites, and we’re doing that by going into regions where Viatris has a presence as a know how that Idorsia may not have had. Right. And that allows us to increase the speed of enrollment. Enrollment so far, I got to say, is doing well. It’s going according to plan, but we want to speed that up. And that’s one of the way to do that, is to add additional sites.
The other way, which we are doing also is to reengage investigators having more face to face interactions with sites and investigators. And so we’ve initiated that aspect as well. So we think that that early next year, we’ll get a good grasp on whether we’ve seen a different inflection point in terms of enrollment for both assets. But so far, it’s going well, I got to say. But we want to speed that up if we can.
Jason Gerber
Okay. And maybe just talk about the current standard of care, right. Patient has a heart attack, they get to the ER, presumably they get iv cangrelor, or you’re looking to kind of speed up the window. Right, to get this antiplatelet on board in a faster manner. And so you could just maybe talk about how you believe that Clopidogrel may represent a step change in care.
Philippe Martin
Yes. So I think there’s a current gap in the treatment of MI. That gap is between the time the patient has the MI and the time the patient gets to the hospital and can get a drug like Cangrelor, for instance. That’s when [ph] kidogyl changes everything. Right.
The patient has a pen that they carry with them. And if they feel a symptom similar to what an MI would look like, they self inject and then have to take themselves to the hospital. But they have time to do that because the drug stops the MI from progressing, stop the damages to the heart.
That can happen when the MI is happening. The other aspect that is particularly important from an efficacy standpoint is that the thrombus that is formed during the MI process is formed of platelet at the beginning of the process, but then within an hour to two hours post deformation, it now turns into a more of a fibrin type that doesn’t respond to P2Y12 as well as it would at the beginning of the treatment. So ensuring that patients get treated early is critical to the success.
There’s a lot of data supporting this out there. So the concept is to basically change the way MI is being treated by having patients self inject at the right time to save muscle.
Jason Gerber
In the way that the endpoint is tabulated. What if you just lessen the severity of the heart attack, but the patients, could they still be deemed a heart attack, and thus the differentiation may be more on whether the patient ultimately has death versus a non fatal event?
Philippe Martin
So it’s an endpoint that we’ve developed in discussion with FDA, with KOL, and was the purpose of a spa. So it’s well accepted by the regulators, but at this point, and it’s been used in other studies recently that just started, I think you got to remember what the end point is about. Right. The end point is death within seven days, and then various sorts of what you could characterize as severe-Mi. And then there’s a category that is none of the above, which is basically mild-Mi or just chest pain. Right. And so the ability of the drug, and it’s ranked by severity. So the ability of the drug to reduce the severity is one aspect of the endpoint versus placebo. Right.
And that will have an impact on how many severe events are on placebo versus how many severe events are on treatment. But it’s all about. It’s also reducing the number of deaths, it’s also reducing the number of severe-Mi. So it’s a combination of all that. At the end of that, it’s a hierarchical analysis. That’s right. It’s composite and poor hierarchical analysis. At the end of the day, the way the study is powered is really to try to show a 20% risk reduction between treatment versus placebo for all these adverse events. Right.
And it’s been documented that with P2Y12 that are not given at the right time and not, not given to the right patient necessarily that 20% is conservative. So we feel good about the assumptions we have for the study and we think that that’s an endpoint that is definitely achievable for the drug.
Jason Gerber
I know a big component and a lot of questions that you guys get is are the patients going to inject properly? Right. I know you’re monitoring this on a blinded basis. If you can just talk a little bit about how that impacts the hierarchical analysis, if at all. So in the end it’s just about events, irrespective of whether they injected properly or not. And then you’ll just tabulate that data as a separate analysis to just show to regulators and clinicians that people actually did know to properly inject.
Philippe Martin
Yes. So we are monitoring the data obviously on a blinded basis very, very closely. But we also have an unblinded safety committee that monitors that data and then a team of independent assessors that are adjudicating all the mis as well as the bleeding events. Right. So we are looking at this very, very closely. What we paying particular attention to is are the patients injecting for the right reasons? Are the patient injecting soon after the symptom of Mi? Right. And are they taking themselves to the hospital afterwards? Are they getting medical support? What we’ve said is that, that’s what we’ve observed. We’ve observed patients are injecting for the right reason.
Symptoms of chest pain is what we’re asking them to look for and they’re doing it within 30 minutes of the symptoms showing up and they’re then all taking themselves to the hospital for proper care and also for proper diagnostic of which kind of MRI are they getting? So we’ve seen that now we do expect that a number of patients will not inject for the right reasons. We have assumptions around that as part of the study. And that’s okay, right, as long as the drug doesn’t lead to severe bleeding, which is we’ve said so far we haven’t seen any signals of it.
We have over 6000 patients randomized at this point and the phase two data did not show any severe bleeding as well. And then we have a DMC that met seven times since the beginning of the study and is really has not change anything to the studies asking us to continue unchanged. So we feel good about both the efficacy and the benefit risk profile that we’re seeing today from the drug.
Jason Gerber
So the key thing in that assessment, on a blinded basis, is just the patient’s characterization of the symptom to ensure that?
Philippe Martin
Chest pain; we want to make sure they go ahead and inject themselves. If it turns out it was not an MI, that’s okay. That’s good data to have for us to show that the drug is safe and can be used in that setting. But it’s for those that have an MI making sure that they inject at the right time. They have time, but the sooner they do it, the better it is right. For the drug.
Jason Gerber
How are you think this is a very paradigm shifting type of therapeutic that you’re looking to develop in terms of actually getting patients to walk around with a device on them at all times to get the buy in for the clinician community? Are we putting the cart before the horse a little bit here? Do we just need to wait and see how solid the data is? And then you think it’ll be a lot easier to drive that paradigm shift?
Philippe Martin
I mean, that paradigm is coming from the community, right? They’ve asked us to do that. They’ve asked Idorsia at the time to do that study. They saw the opportunity. That’s the way they think the treatment of Mi should be progressing going forward. So we’re not reinventing anything here.
It’s just they are seizing an opportunity that they’re seeing with this drug based on the [indiscernible] of the drug, that’s fast testing, short duration. That’s the perfect drug for a pen that can be carried around. I mean, we have experience with pens in general. We know how to manage it. So I think if there’s one company that’s the right one to do that, that would be Viatris. Right.
Doretta Mistras
And you’re also dealing with a patient population that has already been through one Mi, and so the kind of the desire for them to prevent future Mis is significant.
Jason Gerber
All right. Well, we are up against our time. But thank you both for joining us at the conference.
Doretta Mistras
Thank you, for having us.
Philippe Martin
Thank you.
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