Viatris (NASDAQ: VTRS) has been actively expanding its current drug portfolio to increase growth and rely less on manufacturing generic drugs.
The generic drug market is challenging since pricing usually declines annually in markets such as North America and the majority of Europe, leaving a smaller profit margin for Viatris, one of the largest global off-patent pharmaceutical companies that manufactures drugs such as Lipitor, Lyrica, and Norvasc, wrote Keonhee Kim, an equity analyst for Morningstar. Generic drugs consist of about 35% of the revenue produced by Viatris.
Broadens drug portfolio
Viatris has been changing the type of medications in its portfolio of drugs and moving on from its original goal of focusing on providing medications to treat patients in the dermatology, ophthalmology and gastroenterology therapeutic areas. For the past two years Viatris has been an active acquirer, buying up neuroscience assets and drugs to treat patients with lupus and acute myocardial infarction.
The company recently expanded into providing drugs for cardiology and immunology diseases through the purchases of cenerimod for immunology and selatogrel for cardiology.
In October, Viatris announced it would expand into providing pain killers through the purchase of Pacira BioSciences for $1.65 billion. Pacira produced $746 million in revenue and $177 million in adjusted EBITDA in the last 12 months. The deal is scheduled to close by the end of 2026 and has an enterprise value of $1.8 billion.
Pacira’s drugs Exparel, a long-acting analgesic for postsurgical pain management and Zilretta for the management of osteoarthritis, will be added to Viatris’ proposed meloxicam treatment for moderate-to-severe acute pain.
The approval of meloxicam is being reviewed by the U.S. Food and Drug Administration with a target action date of Dec. 27.
One strategy deployed by Viatris is to divest drugs from its portfolio that have a higher level of competition.
“The company chose to exit spaces where it had too many existing players and discontinue small-molecule drugs that are fairly simple to be FDA-approved and replicated,” he wrote. “We think Viatris is indication-agnostic and expect the firm to target low-risk assets that have durable growth opportunities across geographies.”
Instead the company is focusing on investing money in branded drugs, “aiming to launch sizable novel drugs that can have a meaningful impact on the top and bottom lines,” Kim added.
Pricing issues are often a headwind for pharmaceutical companies as drugs lose their patent protection.
Off-patent branded drugs consist of two-thirds of Viatris’ business and are “also prone to pricing and volume headwinds from generics’ presence and other players in the pharmaceutical supply chain,” he said.
“By our estimate, roughly 40% and 50% of Viatris’ total sales are derived from generics and off-patent branded drugs, respectively, and both areas are highly susceptible to pricing headwinds,” Kim wrote. “Viatris has decided to combat this by rationalizing and optimizing its portfolio, carefully deciding which drugs to continue commercializing and which drugs to discontinue.”
Revenue grew by 5% to $3.8 billion during the second quarter, driven by new product sales in developed markets with 4% growth and an increase of 21% in greater China, which combined consists of 77% of the company’s sales.
Viatris generated $101 million in new product revenues during the quarter and continues anticipating to produce $450 million to $550 million in new product revenues in full-year 2026.
Shares of the company rose by 77% during the past year.
Growth in complex generics, innovative drugs
Viatris has turned to focusing its efforts on manufacturing more complex generics and new innovative drugs to offset the pricing declines that occur with traditional generics.
The number of complex generic drugs being offered to patients is growing as more injectables, inhalers and other forms of drugs are being developed, which are more challenging for competitors to produce compared with small-molecule oral tablets, but gives Viatris an advantage.
“We expect three-fourths of Viatris’ pipeline and research and development spending to be allocated to complex generics,” he wrote.
The company’s current pipeline appears to be promising since there are several drugs in phase 2 or phase 3 approval from regulators.
The expansion of Viatris’ pipeline to include more complex generic drugs and pain relief, cardiology and immunology medication will likely generate more growth as the population continues to age.
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