Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis addresses material changes in the financial condition and results of operations of Viatris Inc. and subsidiaries for the periods presented. Unless context requires otherwise, the “Company,” “Viatris,” “our” or “we” refer to Viatris Inc. and its subsidiaries.

This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, the related Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Viatris’ 2023 Form 10-K, the unaudited interim financial statements and related Notes included in Part I — Item 1 of this Form 10-Q and our other SEC filings and public disclosures. The interim results of operations and comprehensive loss for the three and six months ended June 30, 2024, and cash flows for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.

This Form 10-Q contains “forward-looking statements”. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements about the goals or outlooks with respect to the Company’s strategic initiatives, including but not limited to the Company’s two-phased strategic vision and potential, announced and completed divestitures, acquisitions or other transactions; the benefits and synergies of such divestitures, acquisitions, or other transactions, or restructuring programs; future opportunities for the Company and its products; and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods. Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “pipeline”, “intend”, “continue”, “target”, “seek” and variations of these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to:

the possibility that the Company may not realize the intended benefits of, or achieve the intended goals or outlooks with respect to, its strategic initiatives (including divestitures, acquisitions, or other potential transactions) or move up the value chain by focusing on more complex and innovative products to build a more durable higher margin portfolio;
the possibility that the Company may be unable to achieve intended or expected benefits, goals, outlooks, synergies, growth opportunities and operating efficiencies in connection with divestitures, acquisitions, other transactions, or restructuring programs, within the expected timeframes or at all;
with respect to divestitures, failure to realize the total transaction values or proceeds, including as a result of any purchase price adjustment or a failure to achieve any conditions to the payment of any contingent consideration;
goodwill or impairment charges or other losses, including but not limited to related to the divestiture or sale of businesses or assets;
the Company’s failure to achieve expected or targeted future financial and operating performance and results;
the potential impact of public health outbreaks, epidemics and pandemics;
actions and decisions of healthcare and pharmaceutical regulators;
changes in relevant laws, regulations and policies and/or the application or implementation thereof, including but not limited to tax, healthcare and pharmaceutical laws, regulations and policies globally (including the impact of recent and potential tax reform in the U.S. and pharmaceutical product pricing policies in China);
the ability to attract, motivate and retain key personnel;
the Company’s liquidity, capital resources and ability to obtain financing;
any regulatory, legal or other impediments to the Company’s ability to bring new products to market, including but not limited to “at-risk launches”;
success of clinical trials and the Company’s or its partners’ ability to execute on new product opportunities and develop, manufacture and commercialize products;
any changes in or difficulties with the Company’s manufacturing facilities, including with respect to inspections, remediation and restructuring activities, supply chain or inventory or the ability to meet anticipated demand;
the scope, timing and outcome of any ongoing legal proceedings, including government inquiries or investigations, and the impact of any such proceedings on the Company;
any significant breach of data security or data privacy or disruptions to our IT systems;
risks associated with having significant operations globally;
the ability to protect intellectual property and preserve intellectual property rights;
changes in third-party relationships;

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the effect of any changes in the Company’s or its partners’ customer and supplier relationships and customer purchasing patterns, including customer loss and business disruption being greater than expected following an acquisition or divestiture;
the impacts of competition, including decreases in sales or revenues as a result of the loss of market exclusivity for certain products;
changes in the economic and financial conditions of the Company or its partners;
uncertainties regarding future demand, pricing and reimbursement for the Company’s products;
uncertainties and matters beyond the control of management, including but not limited to general political and economic conditions, inflation rates and global exchange rates; and
inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements, and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards or on an adjusted basis.

For more detailed information on the risks and uncertainties associated with Viatris, see the risks described in Part I, Item 1A in the 2023 Form 10-K, and our other filings with the SEC. You can access Viatris’ filings with the SEC through the SEC website at www.sec.gov or through our website, and Viatris strongly encourages you to do so. Viatris routinely posts information that may be important to investors on our website at investor.viatris.com, 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 the SEC’s Regulation Fair Disclosure (Reg FD). The contents of our website are not incorporated by reference in this Form 10-Q and shall not be deemed “filed” under the Securities Exchange Act of 1934, as amended. Viatris undertakes no obligation to update any statements herein for revisions or changes after the filing date of this Form 10-Q other than as required by law.

Company Overview

Viatris is a global healthcare company which we believe is uniquely positioned to bridge the traditional divide between generics and brands, combining the best of both to more holistically address healthcare needs globally. With a mission to empower people worldwide to live healthier at every stage of life, Viatris provides access at scale, currently supplying high-quality medicines to approximately 1 billion patients around the world annually and touching all of life’s moments, from birth to the end of life, acute conditions to chronic diseases. With our exceptionally extensive and diverse portfolio of medicines, a one-of-a-kind global supply chain designed to reach more people when and where they need them, and the scientific expertise to address some of the world's most enduring health challenges, access takes on deep meaning at Viatris.

Viatris’ executive management team is focused on ensuring that the Company is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers and other key stakeholders. The Company has industry leading commercial, R&D, regulatory, manufacturing, legal and medical expertise complemented by a strong commitment to quality and an unparalleled geographic footprint to deliver high-quality medicines to patients in more than 165 countries and territories. Viatris’ portfolio is comprised of approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands and generics, including complex products. Following the completion of the previously announced divestitures, the Company operates approximately 30 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and API, with a global workforce of approximately 33,000. Viatris is headquartered in the U.S., with global centers in Pittsburgh, Pennsylvania, Shanghai, China and Hyderabad, India.

Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets. The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded and generic products, including complex products, to people in markets everywhere. Our Developed Markets segment comprises our operations primarily in North America and Europe. Our Greater China segment includes our operations in China, Taiwan and Hong Kong. Our JANZ segment reflects our operations in Japan, Australia and New Zealand. Our Emerging Markets segment encompasses our presence in more than 125 countries with developing markets and emerging economies including in Asia, Africa, Eastern Europe, Latin America and the Middle East as well as the Company’s ARV franchise.

Certain Market and Industry Factors

The global pharmaceutical industry is a highly competitive and highly regulated industry. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. The following discussion highlights some of these key factors and market conditions.

The process of obtaining regulatory approval to manufacture and market new branded and generic pharmaceutical products is rigorous, time consuming, costly, and inherently unpredictable. Complex products are more difficult, costly and

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time-consuming to receive regulatory approval for and bring to market. Any delay in regulatory approval could impact the commercial or financial success of a product. Regulatory approval, if and when obtained, may be limited in scope. Even if regulatory approvals for new products are obtained, the success of those products is dependent upon market acceptance.

Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition. As such, the timing of new product introductions can have a significant impact on the Company’s financial results. The entrance into the market of additional competition generally has a negative impact on the volume and pricing of the affected products. Additionally, pricing is often affected by factors outside of the Company’s control. Conversely, generic products generally experience less volatility over a longer period of time in Europe as compared to the U.S., primarily due to the role of government oversight of healthcare systems in the region.

For branded products, the majority of the product’s commercial value is usually realized during the period in which the product has market exclusivity. In the U.S. and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product’s sales. For example, depending on certain factors – including decisions by Japanese regulatory and/or patent authorities – generic entry may occur for Amitiza® 24 μg in Japan prior to one of the patents relevant to Amitiza® expiring in April 2025.

Certain markets in which we do business outside of the U.S. have undergone government-imposed price reductions, and further government-imposed price reductions are expected in the future. Such measures, along with the tender systems discussed below, are likely to have a negative impact on sales and gross profit in these markets. However, government initiatives in certain markets that appear to favor generic products could help to mitigate this unfavorable effect by increasing rates of generic substitution and penetration.

Additionally, a number of markets in which we operate outside of the U.S. have implemented, or may implement, tender systems for generic pharmaceuticals in an effort to lower prices. Generally speaking, tender systems can have an unfavorable impact on sales and profitability. Under such tender systems, manufacturers submit bids that establish prices for generic pharmaceutical products. Upon winning the tender, the winning company will receive priority placement for a period of time. The tender system often results in companies underbidding one another by proposing low pricing in order to win the tender. Sales continue to be negatively affected by the impact of tender systems in certain countries.

In addition to the impact of competition, government pricing actions and other measures designed to reduce healthcare costs, our results of operations, cash flows and financial condition could also be affected by other risks of doing business internationally, including the impact of inflation, elections, geopolitical events, including the ongoing conflicts in the Middle East and between Russia and Ukraine and related trade controls, sanctions, supply chain and staffing challenges and other economic considerations, supply chain disruptions, foreign currency exchange fluctuations, public health epidemics, changes in intellectual property legal protections and other regulatory changes.

Recent Developments

Idorsia Acquisition

On March 15, 2024, the Company acquired the development programs and certain personnel related to selatogrel and cenerimod from Idorsia in exchange for an upfront payment to Idorsia of $350 million, potential milestone payments (including $300 million payable upon the achievement of certain development and regulatory milestones, and $2.1 billion payable upon the achievement of certain tiered sales milestones), as well as potential contingent tiered sales royalties. Viatris and Idorsia are both contributing to the development costs for both programs. Viatris has worldwide commercialization rights for both selatogrel and cenerimod (excluding, for cenerimod only, Japan, South Korea and certain countries in the Asia-Pacific region). A joint development committee is overseeing the development of the ongoing Phase 3 programs through regulatory approval. The agreements also provide Viatris a right of first refusal and a right of first negotiation for certain other assets in Idorsia’s pipeline. The transaction expands our portfolio of innovative assets by adding two Phase 3 assets and combines our financial strength and worldwide operational infrastructure with Idorsia’s proven, highly-productive drug development team and innovation engine.

Refer to Note 4 Acquisitions and Other Transactions in Part I, Item 1 of this Form 10-Q for more information.

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Divestitures

On October 1, 2023, the Company announced it received an offer for the divestiture of its OTC Business, and entered into definitive agreements to divest its women’s healthcare business and, separately, in another transaction, its rights to two women’s healthcare products in certain countries, its API business in India and commercialization rights in the Upjohn Distributor Markets. The divestiture of the women’s healthcare business is primarily related to our oral and injectable contraceptives and does not include all of our women’s healthcare related products; as an example, our Xulane® product in the U.S. is excluded. The transaction to divest the Company’s rights to two women’s healthcare products in certain countries closed in December 2023 (other than in the U.K., which remains subject to regulatory approval), and the divestiture of the women’s healthcare business closed in March 2024. The divestitures of the commercialization rights in certain of the Upjohn Distributor Markets closed during 2023 and 2024, the divestiture of our API business in India closed in June 2024, and the OTC Transaction closed in July 2024.

Refer to Note 5 Divestitures in Part I, Item 1 of this Form 10-Q for more information.

Share Repurchase Program

On February 28, 2022, the Company announced that its Board of Directors had authorized a share repurchase program for the repurchase of up to $1.0 billion of the Company’s shares of common stock. The Company subsequently announced that on February 26, 2024, its Board of Directors authorized a $1.0 billion increase to the Company’s previously announced $1.0 billion share repurchase program. As a result, the Company’s share repurchase program now authorizes the repurchase of up to $2.0 billion of the Company’s shares of common stock. Such repurchases may be made from time-to-time at the Company’s discretion and effected by any means, including but not limited to, open market repurchases, pursuant to plans in accordance with Rules 10b5-1 or 10b-18 under the Exchange Act, privately negotiated transactions (including accelerated stock repurchase programs) or any combination of such methods as the Company deems appropriate. The program does not have an expiration date. During the six months ended June 30, 2024 and 2023, the Company repurchased approximately 19.2 million shares of common stock at a cost of approximately $250 million and approximately 21.2 million shares of common stock at a cost of approximately $250 million, respectively, under the program. As of June 30, 2024, the Company had repurchased a total of $500 million in shares under the program. The share repurchase program does not obligate the Company to acquire any particular amount of common stock.

Financial Summary

The table below is a summary of the Company’s financial results for the three and six months ended June 30, 2024 compared to the prior year period:


	Three Months Ended
	June 30,
(In millions, except per share amounts)	2024		2023		Change
Total revenues	$	3,796.6	$	3,918.6	$	(122.0)
Gross profit	1,445.4		1,608.6		(163.2)
(Loss) earnings from operations	(239.9)		369.2		(609.1)
Net (loss) earnings	(326.4)		264.0		(590.4)
Diluted (loss) earnings per share	$	(0.27)	$	0.22	$	(0.49)

	Six Months Ended
	June 30,
(In millions, except per share amounts)	2024		2023		Change
Total revenues	$	7,460.0	$	7,647.7	$	(187.7)
Gross profit	2,949.4		3,150.8		(201.4)
(Loss) earnings from operations	(36.0)		769.0		(805.0)
Net (loss) earnings	(212.5)		488.7		(701.2)
Diluted (loss) earnings per share	$	(0.18)	$	0.41	$	(0.59)

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A detailed discussion of the Company’s financial results can be found below in the section titled “Results of Operations.” As part of this discussion, we also report sales performance using the non-GAAP financial measures of “constant currency” net sales and total revenues. These measures provide information on the change in net sales and total revenues assuming that foreign currency exchange rates had not changed between the prior and current period. The comparisons presented at constant currency rates reflect comparative local currency sales at the prior year’s foreign exchange rates. We routinely evaluate our net sales and total revenues performance at constant currency so that sales results can be viewed without the impact of foreign currency exchange rates, thereby facilitating a period-to-period comparison of our operational activities, and believe that this presentation also provides useful information to investors for the same reason.

More information about non-GAAP measures used by the Company as part of this discussion, including adjusted cost of sales, adjusted gross margins, adjusted EBITDA, adjusted net earnings, and adjusted EPS (all of which are defined below) can be found in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Use of Non-GAAP Financial Measures.”

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Results of Operations

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023


	Three Months Ended
	June 30,
(In millions, except %s)	2024		2023		% Change		2024 Currency Impact (1)		2024 Constant Currency Revenues		Constant Currency % Change (2)
Net sales
Developed Markets	$	2,319.2	$	2,353.8	(1)	%	$	15.7	$	2,334.9	(1)	%
Greater China	539.0		532.1		1	%	19.0		558.0		5	%
JANZ	349.6		375.5		(7)	%	29.9		379.5		1	%
Emerging Markets	578.1		648.1		(11)	%	34.3		612.4		(6)	%
Total net sales	$	3,785.9	$	3,909.5	(3)	%	$	98.9	$	3,884.8	(1)	%

Other revenues (3)	10.7		9.1		NM		—		10.7		NM
Consolidated total revenues (4)	$	3,796.6	$	3,918.6	(3)	%	$	98.9	$	3,895.5	(1)	%

(1)Currency impact is shown as unfavorable (favorable).

(2)The constant currency percentage change is derived by translating net sales or revenues for the current period at prior year comparative period exchange rates, and in doing so shows the percentage change from 2024 constant currency net sales or revenues to the corresponding amount in the prior year.

(3)For the three months ended June 30, 2024, other revenues in Developed Markets, Greater China, JANZ, and Emerging Markets were approximately $5.9 million, $0.4 million, $0.2 million, and $4.2 million, respectively.

(4)Amounts exclude intersegment revenue which eliminates on a consolidated basis.

Total Revenues

For the three months ended June 30, 2024, Viatris reported total revenues of $3.80 billion, compared to $3.92 billion for the comparable prior year period, representing a decrease of $122.0 million, or 3%. Total revenues include both net sales and other revenues from third parties. Net sales for the current quarter were $3.79 billion, compared to $3.91 billion for the comparable prior year period, representing a decrease of $123.6 million, or 3%. Other revenues for the current quarter were $10.7 million, compared to $9.1 million for the comparable prior year period.

The decrease in net sales was partially driven by the unfavorable impact of foreign currency translation of approximately $98.9 million, or 3%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in countries within the EU, Japan, China, and countries in Emerging Markets. Additionally, net sales decreased by approximately $109.2 million or 3% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. On a constant currency basis, net sales from the remaining business increased by approximately $84.5 million, or 2%, for the three months ended June 30, 2024 compared to the prior year period. The increase was driven by new product sales, primarily in the U.S., of approximately $209.9 million. New product sales include new products launched in 2024 and the carryover impact of new products, including business development, launched within the last twelve months. This increase was partially offset by base business erosion of approximately $125.4 million.

From time to time, a limited number of our products may represent a significant portion of our net sales, gross profit and net earnings. Generally, this is due to the timing of new product introductions, seasonality, and the amount, if any, of additional competition in the market. Our top ten products in terms of net sales, in the aggregate, represented approximately 33% and 34% for the three months ended June 30, 2024 and 2023, respectively.

Net sales are derived from our four reporting segments: Developed Markets, Greater China, JANZ, and Emerging Markets.

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Developed Markets Segment

Net sales from Developed Markets decreased by $34.6 million or 1% during the three months ended June 30, 2024 when compared to the prior year period. The decrease was partially driven by the unfavorable impact of foreign currency translation of approximately $15.7 million, or 1%. Net sales also decreased by approximately $31.6 million or 1% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. Constant currency net sales from the remaining business increased by $12.7 million or less than 1% when compared to the prior year period. New product sales, including Breyna™ in the U.S., combined with the stability of our existing product portfolio, helped to offset the anticipated lower net sales of certain existing products within the U.S., including EpiPen® Auto-Injector and Perforomist®, as a result of lower pricing and volumes due to additional competition and unfavorable channel dynamics. Net sales within North America totaled approximately $986.4 million and net sales within Europe totaled approximately $1.33 billion.

Greater China Segment

Net sales from Greater China increased by $6.9 million or 1% for the three months ended June 30, 2024 when compared to the prior year period. The unfavorable impact of foreign currency translation was approximately $19.0 million, or 4%. Constant currency net sales increased by approximately $25.9 million or 5% when compared to the prior year period, driven by higher volumes of existing products. Divestitures did not have a significant impact on the net sales for the current quarter.

JANZ Segment

Net sales from JANZ decreased by $25.9 million or 7% for the three months ended June 30, 2024 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $29.9 million, or 8%. Constant currency net sales increased by approximately $4.5 million, or 1%, when compared to the prior year period, driven primarily by new product sales in Australia and volume growth of our promoted brands in Japan. This increase was partially offset by lower net sales of existing products mainly driven by lower pricing in Japan as a result of government price reductions and additional competition. Divestitures did not have a significant impact on the net sales for the current quarter.

Emerging Markets Segment

Net sales from Emerging Markets decreased by $70.0 million or 11% for the three months ended June 30, 2024 when compared to the prior year period. This decrease was partially driven by the unfavorable impact of foreign currency translation of approximately $34.3 million, or 5%. In addition, net sales also decreased by approximately $77.1 million, or 12%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. Constant currency net sales from the remaining business increased by $41.4 million, or 6% when compared to the prior year period, primarily driven by new products and higher volumes of existing products in certain Latin American, Middle Eastern and Asian countries.

Cost of Sales and Gross Profit

Cost of sales increased from $2.31 billion for the three months ended June 30, 2023 to $2.35 billion for the three months ended June 30, 2024. The increase in cost of sales was driven by an IPR&D intangible asset impairment charge of $102.0 million. Refer to Note 10 Goodwill and Intangible Assets in Part I, Item 1 of this Form 10-Q for more information. This increase was partially offset by the impact of the decrease in net sales, including as a result of the divestitures that have closed during 2023 and 2024*.*

Gross profit for the three months ended June 30, 2024 was $1.45 billion and gross margins were 38%. For the three months ended June 30, 2023, gross profit was $1.61 billion and gross margins were 41%. This change in gross profit is primarily related to the decrease in net sales and the increase in cost of sales. Adjusted gross margins were approximately 58% for the three months ended June 30, 2024, compared to approximately 60% for the three months ended June 30, 2023.

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A reconciliation between cost of sales, as reported under U.S. GAAP, and adjusted cost of sales and adjusted gross margin for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is as follows:


	Three Months Ended
	June 30,
(In millions, except %s)	2024			2023
U.S. GAAP cost of sales	$	2,351.2		$	2,310.0
Deduct:
Purchase accounting amortization and other related items	(709.9)			(609.3)
Acquisition and divestiture-related costs	(17.0)			(7.6)
Restructuring related costs	(11.6)			(68.9)
Share-based compensation expense	(0.9)			(0.9)
Other special items	(19.1)			(36.4)
Adjusted cost of sales	$	1,592.7		$	1,586.9

Adjusted gross profit (a)	$	2,203.9		$	2,331.7

Adjusted gross margin (a)	58		%	60		%

(a)Adjusted gross profit is calculated as total revenues less adjusted cost of sales. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues.

Operating Expenses

Research & Development Expense

R&D expense for the three months ended June 30, 2024 was $204.1 million, compared to $208.3 million for the comparable prior year period, a decrease of $4.2 million due to the timing of clinical development programs.

Selling, General & Administrative Expense

SG&A expense for the current quarter was $1.36 billion, compared to $1.03 billion for the comparable prior year period, an increase of $326.1 million. The increase was primarily due to a goodwill impairment charge of $321.0 million related to the JANZ reporting unit, and higher acquisition and divestiture-related costs of approximately $41.3 million. Refer to Note 10 Goodwill and Intangible Assets in Part I, Item 1 of this Form 10-Q for more information on the goodwill impairment charge.

Litigation Settlements and Other Contingencies, Net

The following table includes the (gains)/losses recognized in litigation settlements and other contingencies, net during the three months ended June 30, 2024 and 2023, respectively:


	Three Months Ended
	June 30,
(In millions)	2024		2023
Contingent consideration adjustment (related to the Respiratory Delivery Platform)	$	(3.2)	$	14.1
Litigation settlements, net	134.2		(25.1)
Total litigation settlements and other contingencies, net	$	131.0	$	(11.0)

Refer to Note 17 Litigation in Part I, Item 1 of this Form 10-Q for more information.

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Interest Expense

Interest expense for the three months ended June 30, 2024 totaled $145.8 million, compared to $143.7 million for the three months ended June 30, 2023, an increase of $2.1 million. The increase is primarily due to the non-cash accretion of the contingent consideration liability related to the Idorsia Transaction, partially offset by lower interest expense as a result of debt repayments.

Other Expense (Income), Net

Other expense (income), net includes gains and losses from divestitures of businesses, changes in the fair value of equity securities, foreign exchange, expense (income) related to post-employment benefit plans, TSA income, and interest and dividend income. Other expense (income), net for the three months ended June 30, 2024 totaled $6.1 million of expense, compared to $107.5 million of income for the three months ended June 30, 2023.

The decrease in other income, net was primarily driven by: (1) net loss on divestitures of approximately $258.8 million; and (2) lower TSA income of approximately $40.8 million as the prior year period included TSA income related to the reimbursement for transition services provided to Biocon Biologics. Biocon Biologics had substantially exited all transition services with Viatris as of December 31, 2023. The costs related to the transition services are included in SG&A and R&D. This decrease was partially offset by higher net gains of $174.2 million related to our non-marketable equity investments, including the CCPS in Biocon Biologics.

Income Tax (Benefit) Provision

For the three months ended June 30, 2024, the Company recognized an income tax benefit of $65.4 million, compared to an income tax provision of $69.0 million for the comparable prior year period, a change of $134.4 million. The current year income tax provision was negatively impacted due to the goodwill impairment charge recorded in the second quarter of 2024, for which no tax benefit was realized. This was partially offset by a benefit related to the release of reserves for uncertain tax positions as a result of the favorable court decision in the Australian tax matter, and certain statute of limitations expirations. The current year and prior year provisions were also impacted by the levels of income and the changing mix at which it is earned in jurisdictions with differing tax rates.

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Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023


	Six Months Ended
	June 30,
(In millions, except %s)	2024		2023		% Change		2024 Currency Impact (1)		2024 Constant Currency Revenues		Constant Currency % Change (2)
Net sales
Developed Markets	$	4,484.6	$	4,524.2	(1)	%	$	1.7	$	4,486.3	(1)	%
Greater China	1,082.9		1,096.7		(1)	%	40.5		1,123.4		2	%
JANZ	667.4		717.7		(7)	%	60.7		728.1		1	%
Emerging Markets	1,204.5		1,290.0		(7)	%	73.2		1,277.7		(1)	%
Total net sales	$	7,439.4	$	7,628.6	(2)	%	$	176.1	$	7,615.5	—	%

Other revenues (3)	20.6		19.1		NM		—		20.6		NM
Consolidated total revenues (4)	$	7,460.0	$	7,647.7	(2)	%	$	176.1	$	7,636.1	—	%

(1)Currency impact is shown as unfavorable (favorable).

(3)For the six months ended June 30, 2024, other revenues in Developed Markets, Greater China, JANZ, and Emerging Markets were approximately $13.1 million, $0.4 million, $0.5 million, and $6.6 million, respectively.

(4)Amounts exclude intersegment revenue which eliminates on a consolidated basis.

Total Revenues

For the six months ended June 30, 2024, Viatris reported total revenues of $7.46 billion, compared to $7.65 billion for the comparable prior year period, representing a decrease of $187.7 million, or 2%. Total revenues include both net sales and other revenues from third parties. Net sales for the six months ended June 30, 2024 were $7.44 billion, compared to $7.63 billion for the comparable prior year period, representing a decrease of $189.2 million, or 2%. Other revenues for the six months ended June 30, 2024 were $20.6 million, compared to $19.1 million for the comparable prior year period.

The decrease in net sales was driven by the unfavorable impact of foreign currency translation of approximately $176.1 million, or 2%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in Japan, China, and countries in Emerging Markets. Additionally, net sales decreased by approximately $154.8 million or 2% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. On a constant currency basis, net sales from the remaining business increased by approximately $141.7 million, or 2%, for the six months ended June 30, 2024 compared to the prior year period. The increase was driven by new product sales, primarily in the U.S., of approximately $364.2 million. New product sales include new products launched in 2024 and the carryover impact of new products, including business development, launched within the last twelve months. This increase was partially offset by base business erosion of approximately $222.5 million.

From time to time, a limited number of our products may represent a significant portion of our net sales, gross profit and net earnings. Generally, this is due to the timing of new product introductions, seasonality, and the amount, if any, of additional competition in the market. Our top ten products in terms of net sales, in the aggregate, represented approximately 33% and 35% for the six months ended June 30, 2024 and 2023, respectively.

Net sales are derived from our four reporting segments: Developed Markets, Greater China, JANZ, and Emerging Markets.

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Developed Markets Segment

Net sales from Developed Markets decreased by $39.6 million or 1% for the six months ended June 30, 2024 when compared to the prior year period. The unfavorable impact of foreign currency translation was approximately $1.7 million. Net sales decreased by approximately $46.7 million or 1% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. Constant currency net sales from the remaining business increased by approximately $8.8 million or less than 1% when compared to the prior year period. New product sales, including Breyna™ in the U.S., combined with the stability of our existing product portfolio, helped to offset the anticipated lower net sales of certain existing products within the U.S., including EpiPen® Auto-Injector and Perforomist®, as a result of lower pricing and volumes due to additional competition and unfavorable channel dynamics. Net sales within North America totaled approximately $1.88 billion and net sales within Europe totaled approximately $2.60 billion.

Greater China Segment

Net sales from Greater China decreased by $13.8 million or 1% for the six months ended June 30, 2024 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $40.5 million, or 4%. Constant currency net sales increased by approximately $26.7 million or 2% when compared to the prior year period, driven by higher volumes of existing products. Divestitures did not have a significant impact on the net sales for the current quarter.

JANZ Segment

Net sales from JANZ decreased by $50.3 million or 7% for the six months ended June 30, 2024 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $60.7 million, or 8%. Constant currency net sales increased by approximately $11.0 million, or 2%, when compared to the prior year period, driven primarily by new product sales in Australia and volume growth of our promoted brands in Japan. This increase was partially offset by lower net sales of existing products mainly driven by lower pricing in Japan as a result of government price reductions and additional competition. Divestitures did not have a significant impact on the net sales for the current quarter.

Emerging Markets Segment

Net sales from Emerging Markets decreased by $85.5 million or 7% for the six months ended June 30, 2024 when compared to the prior year period. This decrease was driven by the unfavorable impact of foreign currency translation of approximately $73.2 million, or 6%. In addition, net sales also decreased by approximately $107.5 million, or 8%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. Constant currency net sales from the remaining business increased by $95.2 million, or 7% when compared to the prior year period, primarily driven by new products and higher volumes of existing products in certain Latin American, Middle Eastern and Asian countries.

Cost of Sales and Gross Profit

Cost of sales increased from $4.50 billion for the six months ended June 30, 2023 to $4.51 billion for the six months ended June 30, 2024. The increase in cost of sales was driven by an IPR&D intangible asset impairment charge of $102.0 million. Refer to Note 10 Goodwill and Intangible Assets in Part I, Item 1 of this Form 10-Q for more information. This increase was largely offset by the impact of the decrease in net sales, including as a result of the divestitures that have closed during 2023 and 2024*.*

Gross profit for the six months ended June 30, 2024 was $2.95 billion and gross margins were 40%. For the six months ended June 30, 2023, gross profit was $3.15 billion and gross margins were 41%. This change in gross profit is primarily related to the decrease in net sales and the increase in cost of sales. Adjusted gross margins were approximately 58% for the six months ended June 30, 2024, compared to approximately 60% for the six months ended June 30, 2023.

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A reconciliation between cost of sales, as reported under U.S. GAAP, and adjusted cost of sales and adjusted gross margin for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is as follows:


	Six Months Ended
	June 30,
(In millions, except %s)	2024			2023
U.S. GAAP cost of sales	$	4,510.6		$	4,496.9
Deduct:
Purchase accounting amortization and other related items	(1,321.4)			(1,262.7)
Acquisition and divestiture-related costs	(23.3)			(12.6)
Restructuring related costs	(15.6)			(79.8)
Share-based compensation expense	(1.7)			(1.5)
Other special items	(47.3)			(75.2)
Adjusted cost of sales	$	3,101.3		$	3,065.1

Adjusted gross profit (a)	$	4,358.7		$	4,582.6

Adjusted gross margin (a)	58		%	60		%

(a)Adjusted gross profit is calculated as total revenues less adjusted cost of sales. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues.

Operating Expenses

Research & Development Expense

R&D expense for the six months ended June 30, 2024 was $403.8 million, compared to $391.2 million for the comparable prior year period, an increase of $12.6 million. This increase was primarily due to continued investment in our pipeline, including for the selatogrel and cenerimod clinical development programs.

Selling, General & Administrative Expense

SG&A expense for the six months ended June 30, 2024 was $2.38 billion, compared to $1.99 billion for the comparable prior year period, an increase of $384.7 million. The increase was primarily due to a goodwill impairment charge of $321.0 million related to the JANZ reporting unit, and higher acquisition and divestiture-related costs of approximately $66.7 million. Refer to Note 10 Goodwill and Intangible Assets in Part I, Item 1 of this Form 10-Q for more information on the goodwill impairment charge.

Litigation Settlements and Other Contingencies, Net

The following table includes the losses/(gains) recognized in litigation settlements and other contingencies, net during the six months ended June 30, 2024 and June 30, 2023, respectively:


	Six Months Ended
	June 30,
(In millions)	2024		2023
Contingent consideration adjustment (related to the Respiratory Delivery Platform)	$	1.6	$	15.5
Litigation settlements, net	206.2		(25.9)
Total litigation settlements and other contingencies, net	$	207.8	$	(10.4)

Refer to Note 17 Litigation in Part I, Item 1 of this Form 10-Q for more information.

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Interest Expense

Interest expense for the six months ended June 30, 2024 totaled $284.2 million, compared to $290.7 million for the six months ended June 30, 2023, a decrease of $6.5 million. The decrease is primarily due to the impact of debt repayments, partially offset by the non-cash accretion of the contingent consideration liability related to the Idorsia Transaction.

Other Expense (Income), Net

Other expense (income), net includes gains and losses from divestitures of businesses, changes in the fair value of equity securities, foreign exchange, expense (income) related to post-employment benefit plans, TSA income, and interest and dividend income. Other income, net for the six months ended June 30, 2024 totaled $133.0 million, compared to $177.4 million for the six months ended June 30, 2023.

The decrease in other income, net was primarily driven by a net loss on divestitures of approximately $188.4 million, and by lower TSA income of approximately $73.1 million as the prior year period included TSA income related to the reimbursement for transition services provided to Biocon Biologics. Biocon Biologics had substantially exited all transition services with Viatris as of December 31, 2023. The costs related to the transition services are included in SG&A and R&D. This was partially offset by higher net gains of $200.8 million related to our non-marketable equity investments, including the CCPS in Biocon Biologics.

Income Tax Provision

For the six months ended June 30, 2024, the Company recognized an income tax provision of $25.3 million, compared to $167.0 million for the comparable prior year period, a decrease of $141.7 million. The current year income tax provision was negatively impacted due to the goodwill impairment charge recorded in the second quarter of 2024, for which no tax benefit was realized. This was partially offset by a benefit related to the release of reserves for uncertain tax positions as a result of the favorable court decision in the Australian tax matter, and certain statute of limitations expirations. The current year and prior year provisions were also impacted by the levels of income and the changing mix at which it is earned in jurisdictions with differing tax rates. Further impacting the tax provision for the six months ended June 30, 2023 was a tax expense of $22.3 million related to an agreement with the Indian tax authorities in March 2023 in respect of the pricing of its international transactions.

Use of Non-GAAP Financial Measures

Whenever the Company uses non-GAAP financial measures, we provide a reconciliation of the non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure. Investors and other readers are encouraged to review the related U.S. GAAP financial measures and the reconciliation of non-GAAP measures to their most directly comparable U.S. GAAP measure and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with U.S. GAAP. Additionally, since these are not measures determined in accordance with U.S. GAAP, non-GAAP financial measures have no standardized meaning across companies, or as prescribed by U.S. GAAP and, therefore, may not be comparable to the calculation of similar measures or measures with the same title used by other companies.

Management uses these measures internally for forecasting, budgeting, measuring its operating performance, and incentive-based awards. Primarily due to acquisitions, divestitures and other significant events which may impact comparability of our periodic operating results, we believe that an evaluation of our ongoing operations (and comparisons of our current operations with historical and future operations) would be difficult if the disclosure of our financial results was limited to financial measures prepared only in accordance with U.S. GAAP. We believe that non-GAAP financial measures are useful supplemental information for our investors and when considered together with our U.S. GAAP financial measures and the reconciliation to the most directly comparable U.S. GAAP financial measure, provide a more complete understanding of the factors and trends affecting our operations. The financial performance of the Company is measured by senior management, in part, using adjusted metrics as described below, along with other performance metrics. The Company’s use of such non-GAAP measures is governed by an adjusted reporting policy maintained by the Company and such non-GAAP measures are reviewed in detail with the Audit Committee of the Board of Directors.

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Adjusted Cost of Sales and Adjusted Gross Margin

We use the non-GAAP financial measure “adjusted cost of sales” and the corresponding non-GAAP financial measure “adjusted gross margin.” The principal items excluded from adjusted cost of sales include restructuring, acquisition and divestiture-related costs, and other special items, purchase accounting amortization and other related items, and share-based compensation expense, which are described in greater detail below.

Adjusted Net Earnings and Adjusted EPS

Adjusted net earnings and adjusted net earnings per diluted share (“adjusted EPS”) are non-GAAP financial measures and provide an alternative view of performance used by management. Management believes that, primarily due to acquisitions, divestitures and other significant events, an evaluation of the Company’s ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results were limited to financial measures prepared only in accordance with U.S. GAAP. Management believes that adjusted net earnings and adjusted EPS are important internal financial metrics related to the ongoing operating performance of the Company, and are therefore useful to investors and that their understanding of our performance is enhanced by these measures. Actual internal and forecasted operating results and annual budgets used by management include adjusted net earnings and adjusted EPS.

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA are non-GAAP financial measures that the Company believes are appropriate to provide additional information to investors to demonstrate the Company’s ability to comply with financial debt covenants and assess the Company’s ability to incur additional indebtedness. The Company also believes that adjusted EBITDA better focuses management on the Company’s underlying operational results and true business performance and is used, in part, for management’s incentive compensation. We calculate EBITDA as U.S. GAAP net earnings (loss) adjusted for income tax provision (benefit), interest expense and depreciation and amortization. EBITDA is further adjusted for share-based compensation expense, litigation settlements and other contingencies, net, gain on divestitures of businesses, restructuring related costs, impairment of long-lived assets, acquisition and divestiture-related and other special items to determine adjusted EBITDA. These adjustments are generally permitted under our credit agreement in calculating adjusted EBITDA for determining compliance with our debt covenants.

The significant items excluded from adjusted cost of sales, adjusted EBITDA, adjusted net earnings, and adjusted EPS include:

Purchase Accounting Amortization and Other Related Items

The ongoing impact of certain amounts recorded in connection with acquisitions of both businesses and assets is excluded from adjusted cost of sales, adjusted EBITDA, adjusted net earnings, and adjusted EPS. These amounts include the amortization of intangible assets, inventory step-up, property, plant and equipment step-up, intangible asset impairment charges, including for IPR&D, and impairment of goodwill. For the acquisition of businesses accounted for under the provisions of ASC 805, Business Combinations, these purchase accounting impacts are excluded regardless of the financing method used for the acquisitions, including the use of cash, long-term debt, the issuance of common stock, contingent consideration or any combination thereof.

Fair Value Adjustments, Including Contingent Consideration

The impact of changes to the fair value of assets and liabilities, including contingent and deferred consideration and non-marketable equity investments, and the related accretion income or expense are excluded from adjusted EBITDA, adjusted net earnings, and adjusted EPS because they are not indicative of the Company’s ongoing operations due to the variability of the amounts and the lack of predictability as to the occurrence and/or timing and management believes their exclusion is helpful to understanding the underlying, ongoing operational performance of the business.

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Share-based Compensation Expense

Share-based compensation expense is excluded from adjusted cost of sales, adjusted EBITDA, adjusted net earnings, and adjusted EPS. Our share-based compensation programs have become increasingly weighted toward performance-based compensation, which leads to variability and to a lack of predictability as to the occurrence and/or timing of amounts incurred. As such, management believes the exclusion of such amounts on an ongoing basis is helpful to understanding the underlying operational performance of the business.

Restructuring, Acquisition and Divestiture-Related Costs and Other Special Items

Costs related to restructuring, acquisition and divestiture-related activities and other actions are excluded from adjusted cost of sales, adjusted EBITDA, adjusted net earnings, and adjusted EPS, as applicable. These amounts include items such as:

Costs related to formal restructuring programs and actions, including costs associated with facilities to be closed or divested, employee separation costs, impairment charges, accelerated depreciation, incremental manufacturing variances, equipment relocation costs, decommissioning and other restructuring related costs;
Certain acquisition and divestiture costs, including costs relating to integration and planning, advisory and legal fees, certain financing related costs, certain reimbursements related to the Company’s obligation to reimburse Pfizer for certain financing and transaction related costs under the Business Combination Agreement and Separation and Distribution Agreement, certain other TSA related set-up and exit costs, and other business transformation and/or optimization initiatives, which are not part of a formal restructuring program, including employee separation and post-employment costs;
Other costs, incurred from time to time, related to certain special events or activities that lead to gains or losses, including, but not limited to, incremental manufacturing variances, asset write-downs, including other-than-temporary impairments of investments in equity or debt instruments, or liability adjustments;
Certain costs to further develop and optimize our global enterprise resource planning systems, operations and supply chain;
Gains or losses from divestitures, including impairments of held for sale assets; and
The impact of changes related to uncertain tax positions are excluded from adjusted net earnings, and adjusted EPS. In addition, tax adjustments to adjusted earnings are recorded to present items on an after-tax basis consistent with the presentation of adjusted net earnings and adjusted EPS.

The Company has undertaken restructurings and other optimization initiatives of differing types, scope and amount during the covered periods and, therefore, these charges should not be considered non-recurring; however, management excludes these amounts from adjusted cost of sales, adjusted EBITDA, adjusted net earnings, and adjusted EPS because it believes it is helpful to understanding the underlying, ongoing operational performance of the business.

Litigation Settlements, Net

Charges and gains related to legal matters, such as those discussed in Note 17 Litigation included in Part I, Item 1 of this Form 10-Q are generally excluded from adjusted EBITDA, adjusted net earnings, and adjusted EPS. Normal, ongoing defense costs of the Company made in the normal course of our business are not excluded.

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Reconciliation of U.S. GAAP Net (Loss) Earnings to Adjusted Net Earnings and U.S. GAAP (Loss) Earnings Per Share to Adjusted EPS

A reconciliation between net (loss) earnings and diluted (loss) earnings per share as reported under U.S. GAAP, and adjusted net earnings and adjusted EPS for the periods shown follows:


	Three Months Ended June 30,								Six Months Ended June 30,
(In millions, except per share amounts)	2024				2023				2024				2023
U.S. GAAP net (loss) earnings and U.S. GAAP diluted (loss) earnings per share	$	(326.4)	$	(0.27)	$	264.0	$	0.22	$	(212.5)	$	(0.18)	$	488.7	$	0.41
Purchase accounting amortization (primarily included in cost of sales) (a)	709.9				609.3				1,321.6				1,262.6
Impairment of goodwill (included in SG&A) (b)	321.0				—				321.0				—
Litigation settlements and other contingencies, net	131.0				(11.0)				207.8				(10.4)
Interest expense (primarily amortization of premiums and discounts on long term debt)	(3.2)				(10.5)				(14.4)				(20.8)

Loss on divestitures of businesses (included in other income, net) (c)	258.8				—				188.4				—
Acquisition and divestiture-related costs (primarily included in SG&A) (d)	105.1				56.3				192.6				114.4

Restructuring-related costs (e)	21.1				74.1				40.7				83.8
Share-based compensation expense	34.7				39.2				81.4				81.8
Other special items included in:
Cost of sales (f)	19.1				36.4				47.3				75.2
Research and development expense	0.4				0.4				2.8				2.4
Selling, general and administrative expense	11.5				16.4				27.6				31.3
Other income, net	(233.7)				(65.8)				(278.2)				(87.6)
Tax effect of the above items and other income tax related items (g)	(222.8)				(103.4)				(286.9)				(183.1)
Adjusted net earnings and adjusted EPS	$	826.5	$	0.69	$	905.4	$	0.75	$	1,639.2	$	1.36	$	1,838.3	$	1.53
Weighted average diluted shares outstanding	1,197.7				1,203.5				1,203.6				1,204.6

Significant items include the following:

(a)For the three and six months ended June 30, 2024, includes an IPR&D intangible asset impairment charge of $102.0 million as the Company concluded that one of its IPR&D assets was fully impaired due to unfavorable clinical results and the termination of the development program.

(b)For the three and six months ended June 30, 2024, includes a goodwill impairment charge of $321.0 million related to the JANZ reporting unit.

(c)For the three and six months ended June 30, 2024, includes an additional pre-tax charge related to the divestiture of the OTC Business of approximately $247.6 million to further write down the disposal group to fair value, less cost to sell. Also includes a pre-tax charge related to the divestiture of the API business of approximately $7.0 million and $17.4 million, respectively. For the six months ended June 30, 2024, also includes a pre-tax gain on the divestiture of the women’s healthcare business of approximately $80.8 million for the difference between the consideration received and the carrying value of the assets transferred (including an allocation of goodwill).

(d)Acquisition and divestiture-related costs consist primarily of transaction costs including legal and consulting fees and integration activities.

(e)For the three and six months ended June 30, 2024, charges include approximately $11.6 million and $15.6 million, respectively, in cost of sales and approximately $8.5 million and $24.1 million, respectively, in SG&A.

(f)For the three and six months ended June 30, 2024, charges include incremental manufacturing variances at plants in the 2020 restructuring program of approximately $(1.1) million and $11.5 million, respectively.

(g)Adjusted for changes for uncertain tax positions.

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Reconciliation of U.S. GAAP Net (Loss) Earnings to EBITDA and Adjusted EBITDA

Below is a reconciliation of U.S. GAAP net (loss) earnings to EBITDA and adjusted EBITDA for the three and six months ended June 30, 2024 compared to the prior year period:


	Three Months Ended June 30,				Six months ended June 30,
(In millions)	2024		2023		2024		2023
U.S. GAAP net (loss) earnings	$	(326.4)	$	264.0	$	(212.5)	$	488.7
Add / (deduct) adjustments:

Income tax (benefit) provision	(65.4)		69.0		25.3		167.0
Interest expense (a)	145.8		143.7		284.2		290.7
Depreciation and amortization (b)	786.3		686.7		1,477.3		1,416.7
EBITDA	$	540.3	$	1,163.4	$	1,574.3	$	2,363.1
Add / (deduct) adjustments:
Share-based compensation expense	34.7		39.2		81.4		81.8
Litigation settlements and other contingencies, net	131.0		(11.0)		207.8		(10.4)
Loss on divestitures of businesses	258.8		—		188.4		—
Impairment of goodwill	321.0		—		321.0		—
Restructuring, acquisition and divestiture-related and other special items (c)	(77.9)		114.1		28.4		212.1
Adjusted EBITDA	$	1,207.9	$	1,305.7	$	2,401.3	$	2,646.6

(a) Includes amortization of premiums and discounts on long-term debt.

(b) Includes purchase accounting related amortization.

Liquidity and Capital Resources

Our primary source of liquidity is net cash provided by operating activities, which was $993.7 million for the six months ended June 30, 2024. We believe that net cash provided by operating activities and available liquidity will continue to allow us to meet our needs for working capital, capital expenditures, interest and principal payments on debt obligations, dividend payments, and share repurchases. Nevertheless, our ability to satisfy our working capital requirements and debt service obligations, and fund planned capital expenditures, share repurchases, or dividend payments, will substantially depend upon our future operating performance (which will be affected by prevailing economic conditions), and financial, business and other factors, some of which are beyond our control.

Beginning in 2024, upfront and milestone payments related to externally developed IPR&D projects acquired directly in a transaction other than a business combination, which were previously included in cash flows from operating activities in the condensed consolidated statements of cash flows, are now classified as cash flows from investing activities. Certain reclassifications were made to conform the prior period condensed consolidated financial statements to the current period presentation. The adjustments resulted in an increase to net cash provided by operating activities and an increase to net cash used in investing activities of $10.2 million for the six months ended June 30, 2023.

Operating Activities

Net cash provided by operating activities decreased by $502.6 million to $993.7 million for the six months ended June 30, 2024, as compared to net cash provided by operating activities of $1.50 billion for the six months ended June 30, 2023. Net cash provided by operating activities is derived from net (loss) earnings adjusted for non-cash operating items, gains and losses attributed to investing and financing activities and changes in operating assets and liabilities resulting from timing differences between the receipts and payments of cash, including changes in cash primarily reflecting the timing of cash collections from customers, payments to vendors and employees and tax payments in the ordinary course of business.

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The decrease in net cash provided by operating activities was principally due to lower operating earnings, including as a result of divestitures in 2023 and 2024, higher transaction costs associated with the divestitures, and the timing of cash payments and collections.

Investing Activities

Net cash from investing activities was $221.5 million for the six months ended June 30, 2024, as compared to net cash used in investing activities of $836.3 million for the six months ended June 30, 2023, an increase of $1.06 billion.

In 2024, significant items in investing activities included the following:

proceeds from the sale of assets and businesses of $677.7 million related to the divestitures of the API business in India and the women’s healthcare business;
cash paid for acquisitions, net of cash acquired, of $350.0 million; and
capital expenditures, primarily for equipment and facilities, totaling approximately $108.6 million. While there can be no assurance that current expectations will be realized, capital expenditures for the 2024 calendar year are expected to be approximately $350 million to $450 million.

In 2023, significant items in investing activities included the following:

cash paid for acquisitions, net of cash acquired, of $667.7 million; and
capital expenditures, primarily for equipment and facilities, totaling approximately $115.6 million.

Financing Activities

Net cash used in financing activities was $1.27 billion for the six months ended June 30, 2024, as compared to $1.28 billion for the six months ended June 30, 2023, a decrease of $4.7 million.

In 2024, significant items in financing activities included the following:

repayment of the 1.023% Euro Senior Notes at maturity of approximately $801.7 million;
share repurchases of $250.0 million;
cash dividends paid of $288.3 million; and
receipt of $100.0 million in deferred consideration from the Biocon Biologics Transaction, and net cash of $28.8 million collected on behalf of various partners, including Biocon Biologics, which are included in Other items, net.

In 2023, significant items in financing activities included the following:

repayment of the 3.125% Senior Notes at maturity of approximately $750.0 million;
share repurchases of $250.0 million;
net short-term borrowings of $23.1 million;
cash dividends paid of $287.7 million; and
net cash of $33.2 million collected on behalf of various partners, including Biocon Biologics, which is included in Other items, net.

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Capital Resources

Our cash and cash equivalents totaled $917.2 million at June 30, 2024. The majority of our cash is invested in U.S. government money market funds. In order to support our global operations, we maintain significant cash and cash equivalents within the banking system with the majority of this at Global Systemically Important Banks. We monitor the third-party depository institutions that hold our cash and cash equivalents on a regular basis. Our primary emphasis is on the safety of the principal. Where possible, we diversify our cash and cash equivalents among counterparties to minimize exposure to any one counterparty. The Company anticipates having sufficient liquidity, including existing borrowing capacity under the Revolving Facility, Commercial Paper Program, Receivables Facility and Note Securitization Facility combined with cash to be generated from operations, to fund foreseeable cash needs without requiring the repatriation of non-U.S. cash.

The Company has access to $4.0 billion under the Revolving Facility which matures in July 2026. Up to $1.65 billion of the Revolving Facility may be used to support borrowings under our Commercial Paper Program. As of June 30, 2024, the Company did not have any borrowings outstanding under the Commercial Paper Program or the Revolving Facility.

The Company has a $400 million Receivables Facility which expires in April 2025, and a $200 million Note Securitization Facility which expires in August 2024. As of June 30, 2024, the Company did not have any borrowings outstanding under the Receivables Facility or Note Securitization Facility.

Under the terms of each of the Receivables Facility and Note Securitization Facility, certain of our accounts receivable secure the amounts borrowed and cannot be used to pay our other debts or liabilities. The amount that we may borrow at a given point in time is determined based on the amount of qualifying accounts receivable that are present at such point in time. Borrowings outstanding under the Receivables Facility bear interest at the applicable base rate plus 0.775%, and under the Note Securitization Facility at the relevant base rate plus 1.00% and are included as a component of short-term borrowings, while the accounts receivable securing these obligations remain as a component of accounts receivable, net, in our condensed consolidated balance sheets. In addition, the agreements governing the Receivables Facility and Note Securitization Facility contain various customary affirmative and negative covenants, and customary default and termination provisions.

We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable. These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. We derecognized $59.8 million and $30.8 million of accounts receivable as of June 30, 2024 and December 31, 2023 under these factoring arrangements, respectively. Additionally, in 2023, we entered into a similar arrangement for certain European countries. As of June 30, 2024 and December 31, 2023, we have assigned and derecognized approximately $375.2 million and $415.7 million, respectively, of Trade Receivables, Net, which are now included in Other Receivables.

For information regarding our dividends paid and declared and share repurchase program, refer to Note 9 (Loss) earnings per Share in Part I, Item 1 of this Form 10-Q.

We are continuously evaluating the potential acquisition of products, as well as companies, as a strategic part of our future growth. Consequently, we may utilize current cash reserves or incur additional indebtedness to finance any such acquisitions, which could impact future liquidity. Also, on an ongoing basis, we review our operations, including the evaluation of potential divestitures of products and businesses, as part of our future strategy. Any divestitures could impact future liquidity. In addition, we plan to continue to explore various other ways to create, enhance or otherwise unlock the value of the Company’s unique global platform in order to create shareholder value.

As previously discussed, on October 1, 2023, the Company announced certain divestiture-related transactions. Refer to Note 5 Divestitures in Part I, Item 1 of this Form 10-Q for more information.

Long-term Debt Maturity

For information regarding our debt agreements and mandatory minimum repayments remaining on the outstanding notional amount of long-term debt at June 30, 2024, refer to Note 12 Debt in Part I, Item 1 of this Form 10-Q.

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The YEN Term Loan Facility and the Revolving Facility contain customary affirmative covenants for facilities of this type, including among others, covenants pertaining to the delivery of financial statements, notices of default and certain material events, maintenance of corporate existence and rights, property, and insurance and compliance with laws, as well as customary negative covenants for facilities of this type, including a financial covenant, which set the Maximum Leverage Ratio as of the end of any quarter at 3.75 to 1.00 for the quarter ended March 31, 2023 and each quarter ending thereafter, except in circumstances as defined in the related credit agreement, and other limitations on the incurrence of subsidiary indebtedness, liens, mergers and certain other fundamental changes, investments and loans, acquisitions, transactions with affiliates, payments of dividends and other restricted payments and changes in our lines of business.

The Company is in compliance with its covenants at June 30, 2024 and expects to remain in compliance for the next twelve months.

We and our subsidiaries and affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt securities (including any publicly-issued debt securities) in privately negotiated or open market transactions, by tender offer or otherwise, or extend or refinance any of our outstanding indebtedness.

Supplemental Guarantor Financial Information

Viatris Inc. is the issuer of the Registered Upjohn Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.

Following the Combination, Utah Acquisition Sub Inc. is the issuer of the Utah U.S. Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and Mylan II B.V.

Mylan Inc. is the issuer of the Mylan Inc. U.S. Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan II B.V., Viatris Inc. and Utah Acquisition Sub Inc.

The respective obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. as guarantors of the applicable series of Senior U.S. Dollar Notes are senior unsecured obligations of the applicable guarantor and rank pari passu in right of payment with all of such guarantor’s existing and future senior unsecured obligations that are not expressly subordinated to such guarantor’s guarantee of the applicable series of Senior U.S. Dollar Notes, rank senior in right of payment to any future obligations of such guarantor that are expressly subordinated to such guarantor’s guarantee of the applicable series of Senior U.S. Dollar Notes, and are effectively subordinated to such guarantor’s existing and future secured obligations to the extent of the value of the collateral securing such obligations. Such obligations are structurally subordinated to all of the existing and future liabilities, including trade payables, of the existing and future subsidiaries of such guarantor that do not guarantee the applicable series of Senior U.S. Dollar Notes.

The guarantees by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc. under the applicable series of Senior U.S. Dollar Notes will terminate under certain customary circumstances, each as described in the applicable indenture, including: (1) a sale or disposition of the applicable guarantor in a transaction that complies with the applicable indenture such that such guarantor ceases to be a subsidiary of the issuer of the applicable series of Senior U.S. Dollar Notes; (2) legal defeasance or covenant defeasance or if the issuer’s obligations under the applicable indenture are discharged; (3) with respect to the Utah U.S. Dollar Notes, the earlier to occur of (i) with respect to the guarantee provided by Mylan Inc., (x) the release of Utah Acquisition Sub Inc.’s guarantee under all applicable Mylan Inc. Debt (as defined in the applicable indenture) and (y) Mylan Inc. no longer having any obligations in respect of any Mylan Inc. Debt and (ii) with respect to the guarantee provided by Mylan II B.V., (x) the release of Mylan II B.V.’s guarantee under all applicable Triggering Indebtedness (as defined in the applicable indenture) and (y) the issuer and/or borrower of the applicable Triggering Indebtedness no longer having any obligations with respect to such Triggering Indebtedness; (4) with respect to the guarantees provided by Utah Acquisition Sub Inc. and Mylan II B.V. of the Mylan Inc. U.S. Dollar Notes, subject to certain exceptions set forth in the applicable indenture, such guarantor ceasing to be a guarantor or obligor in respect of any Triggering Indebtedness; and (5) with respect to the Registered Upjohn Notes, (a) upon the applicable guarantor no longer being an issuer or guarantor in respect of (i) Mylan Notes (as defined in the indenture governing the Registered Upjohn Notes) that have an aggregate principal amount in excess of $500.0 million or (ii) any Triggering Indebtedness; in each case, other than in respect of indebtedness or guarantees, as applicable, that are being concurrently released; or (b) upon receipt of the consent of holders of a majority of the aggregate

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principal amount of the outstanding notes of such series in accordance with the indenture governing the Registered Upjohn Notes.

The guarantee obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. under the Senior U.S. Dollar Notes are subject to certain limitations and terms similar to those applicable to other guarantees of similar instruments, including that (i) the guarantees are subject to fraudulent transfer and conveyance laws and (ii) each guarantee is limited to an amount not to exceed the maximum amount that can be guaranteed by the applicable guarantor without rendering the guarantee, as it relates to such guarantor, voidable under applicable fraudulent transfer and conveyance laws or similar laws affecting the rights of creditors generally.

The following table presents unaudited summarized financial information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. on a combined basis as of and for the six months ended June 30, 2024 and as of and for the year ended December 31, 2023. All intercompany balances have been eliminated in consolidation. This unaudited combined summarized financial information is presented utilizing the equity method of accounting.


	Combined Summarized Balance Sheet Information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V.
(In millions)	June 30, 2024		December 31, 2023
ASSETS
Current assets	$	891.7	$	1,013.1
Non-current assets	63,014.5		63,212.6

LIABILITIES AND EQUITY
Current liabilities	31,738.0		29,824.8
Non-current liabilities	12,648.2		13,933.6


	Combined Summarized Income Statement Information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V.
(In millions)	Six Months Ended June 30, 2024		Year Ended December 31, 2023
Revenues	$	—	$	—
Gross profit	—		—
Loss from operations	(661.4)		(1,243.8)
Net (loss) earnings	(212.5)		54.7

Other Commitments

The Company is involved in various disputes, governmental and/or regulatory inquiries, investigations and proceedings, tax proceedings and litigation matters, both in the U.S. and abroad, that arise from time to time, some of which could result in losses, including damages, fines and/or civil penalties, and/or criminal charges against the Company. These matters are often complex and have outcomes that are difficult to predict. We have approximately $382.0 million accrued for legal contingencies at June 30, 2024.

While the Company believes that it has meritorious defenses with respect to the claims asserted against it and the assumed legal matters referenced above, and intends to vigorously defend its position, the process of resolving these matters is inherently uncertain and may develop over a long period of time, and so it is not possible to predict the ultimate resolution of any such matter. It is possible that an unfavorable resolution of any of the ongoing matters could have a material effect on the Company’s business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.

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In connection with the Announced Divestitures, Viatris and the respective buyers have entered into transition services and manufacturing and supply agreements pursuant to which the Company is providing services to the respective purchasers, substantially the same as we previously provided to the related businesses, generally for a period of up to 12 months, subject to potential extensions in certain circumstances. In addition, in connection with the OTC Transaction and the divestiture of our women’s healthcare business, we have entered into distribution agreements for certain markets for a limited period of time. In connection with the closing of the API business divestiture, we have entered into a manufacturing and supply agreement pursuant to which we will purchase a significant amount of API from the purchaser in that transaction.

Application of Critical Accounting Policies

The Company reviews goodwill for impairment annually on April 1st or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. The Company performed the annual goodwill impairment test as of April 1, 2024.

The Company performed its annual goodwill impairment test on a quantitative basis for its five reporting units, North America, Europe, Emerging Markets, JANZ, and Greater China. In estimating each reporting unit’s fair value, the Company performed an extensive valuation analysis, utilizing a discounted cash flow approach. The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions that affect the reporting unit’s expected future cash flows. These estimates and assumptions, utilizing Level 3 inputs, primarily include, but are not limited to, the discount rate, terminal growth rates, operating income before depreciation and amortization, capital expenditures forecasts and control premiums.

When compared to the prior year’s annual goodwill impairment test completed on April 1, 2023, due to certain macroeconomic conditions, the Company has experienced fluctuations in foreign exchange rates in certain international markets, combined with an increase in market interest rates. These conditions impacted all reporting units, with the most significant impact in JANZ and Emerging Markets. The impact in the other reporting units was offset by changes in other discount rate assumptions.

As of April 1, 2024, the allocation of the Company’s total goodwill was as follows: North America $3.12 billion, Europe $3.86 billion, Emerging Markets $1.17 billion, JANZ $0.62 billion and Greater China $0.93 billion.

In conjunction with its annual goodwill impairment test, the Company recorded a goodwill impairment charge of $321.0 million during the second quarter of 2024 related to its JANZ reporting unit, which was recorded within SG&A in the condensed consolidated statement of operations. The impairment charge was primarily the result of a 1.0% increase in the discount rate and a 0.5% reduction in the terminal growth rate assumption for the reporting unit.

For the JANZ reporting unit at April 1, 2024, the Company forecasted cash flows for the next 10 years. During the forecast period, the revenue compound annual growth rate was approximately negative 0.3%. A terminal year value was calculated with a 1.0% revenue growth rate applied. The discount rate utilized was 8.0% and the estimated tax rate was 30.3%.

Following the goodwill impairment charge recorded in the JANZ reporting unit, the carrying value of the reporting unit was equal to its estimated fair value as of April 1, 2024. If market conditions or the projected results were to change materially, it may be necessary to record further impairment charges to the JANZ reporting unit in future periods.

As of April 1, 2024, the Company determined that the fair values of the North America, Greater China, and Emerging Markets reporting units were substantially in excess of the respective unit’s carrying value.

For the Europe reporting unit, the estimated fair value exceeded its carrying value by approximately $882 million or 7.9% for the annual goodwill impairment test. As it relates to the discounted cash flow approach for the Europe reporting unit at April 1, 2024, the Company forecasted cash flows for the next 10 years. During the forecast period, the revenue compound annual growth rate was approximately 2.5%. A terminal year value was calculated with a 2.0% revenue growth rate applied. The discount rate utilized was 10.0% and the estimated tax rate was 15.7%. If all other assumptions are held constant, a reduction in the terminal value growth rate by 1.5% or an increase in discount rate by 1.0% would result in an impairment charge for the Europe reporting unit.

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Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. In addition, changes in underlying assumptions, especially as they relate to the key assumptions detailed, could have a significant impact on the fair value of the reporting units.

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