Viatris Inc - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________to___________

Commission file number 001-39695

VIATRIS INC.

(Exact name of registrant as specified in its charter)


Delaware						83-4364296
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1000 Mylan Boulevard, Canonsburg, Pennsylvania 15317

(Address of principal executive offices)

(724) 514-1800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:

Trading Symbol(s)

Name of Each Exchange on Which Registered:

Common Stock, par value $0.01 per share

VTRS

The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of common stock outstanding, par value $0.01 per share, of the registrant as of November 2, 2023 was 1,199,671,000.

Table of Contents

VIATRIS INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended

September 30, 2023


		Page
	PART I — FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2023 and 2022	7
	Condensed Consolidated Statements of Comprehensive Earnings (Loss) — Three and Nine Months Ended September 30, 2023 and 2022	8
	Condensed Consolidated Balance Sheets — September 30, 2023 and December 31, 2022	9
	Condensed Consolidated Statements of Equity — Three and Nine Months Ended Sept ember 30, 2023 and 2022	10
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2023 and 2022	12

	Notes to Condensed Consolidated Financial Statements	13

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	74

ITEM 4.	Controls and Procedures	74

	PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings	75

ITEM 1A.	Risk Factors	75

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

ITEM 5.	Other Information	77

ITEM 6.	Exhibits	77

SIGNATURES		78

Table of Contents

Glossary of Defined Terms

Unless the context requires otherwise, references to “Viatris,” “the Company,” “we,” “us” or “our” in this Form 10-Q (defined below) refer to Viatris Inc. and its subsidiaries. We also have used several other terms in this Form 10-Q, most of which are explained or defined below. Some amounts in this Form 10-Q may not add due to rounding.


2003 LTIP			Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan
2020 Incentive Plan			Viatris Inc. 2020 Stock Incentive Plan
2022 Form 10-K			Viatris’ annual report on Form 10-K for the fiscal year ended December 31, 2022, as amended
Adjusted EBITDA			Non-GAAP financial measure that the Company believes is appropriate to provide information to investors - EBITDA (defined below) is further adjusted for share-based compensation expense, litigation settlements, and other contingencies, net, restructuring and other special items
ANDA			Abbreviated New Drug Application
AOCE			Accumulated other comprehensive earnings
API			Active pharmaceutical ingredient
ARV			Antiretroviral medicines
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Biocon			Biocon Limited
Biocon Biologics			Biocon Biologics Limited, a majority owned subsidiary of Biocon
Biocon Biologics Transaction			The transaction between Viatris and Biocon Biologics pursuant to which Viatris contributed its biosimilars portfolio, composed of the Biocon collaboration programs, biosimilars to Humira®, Enbrel®, and Eylea®, as well as related assets and liabilities to Biocon Biologics
Biocon Agreement			The transaction agreement between Viatris and Biocon Biologics, dated February 27, 2022, relating to the Biocon Biologics Transaction, as amended from time to time by that certain Amendment No. 1 to Transaction Agreement, dated November 28, 2022 and that certain Omnibus Amendment No. 1, dated May 17, 2023
Biogen			Biogen MA Inc. and Biogen International GmbH, collectively
Business Combination Agreement			Business Combination Agreement, dated as of July 29, 2019, as amended from time to time, among Viatris, Mylan, Pfizer and certain of their affiliates
CAMT			Corporate alternative minimum tax
CCPS			Compulsory convertible preferred shares

Code			The U.S. Internal Revenue Code of 1986, as amended
Combination			Refers to Mylan combining with Pfizer's Upjohn Business in a Reverse Morris Trust transaction to form Viatris on November 16, 2020
Commercial Paper Program			The $1.65 billion unsecured commercial paper program entered into as of November 16, 2020 by Viatris, as issuer, Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V., as guarantors, and certain dealers from time to time
COVID-19			Novel coronavirus disease of 2019
CP Notes			Unsecured, short-term commercial paper notes issued pursuant to the Commercial Paper Program
Developed Markets segment			Viatris’ business segment that includes our operations primarily in the following markets: North America and Europe

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Distribution			Pfizer's distribution to Pfizer stockholders all the issued and outstanding shares of Upjohn Inc.
DOJ			U.S. Department of Justice
EBITDA			Non-GAAP financial measure that the Company believes is appropriate to provide information to investors - U.S. GAAP net earnings (loss) adjusted for net contribution attributable to equity method investments, income tax provision (benefit), interest expense and depreciation and amortization
EDPA			U.S. District Court for the Eastern District of Pennsylvania
Emerging Markets segment			Viatris’ business segment that includes, but is not limited to, our operations primarily in the following markets: Parts of Asia, the Middle East, South and Central America, Africa, and Eastern Europe

EU			European Union
Exchange Act			Securities Exchange Act of 1934, as amended
Famy Life Sciences			Famy Life Sciences Private Limited
FASB			Financial Accounting Standards Board
FDA			U.S. Food and Drug Administration
Form 10-Q			This quarterly report on Form 10-Q for the quarterly period ended September 30, 2023
GA Depot			Long-acting glatiramer acetate depot product
Global Systemically Important Banks			Financial institutions that are considered systemically important by the Financial Stability Board.
Greater China segment			Viatris’ business segment that includes our operations primarily in the following markets: China, Taiwan and Hong Kong
Gx			Generic drugs
IPR&D			In-process research and development
IRS			U.S. Internal Revenue Service
IT			Information technology
JANZ segment			Viatris’ business segment that includes our operations in the following markets: Japan, Australia and New Zealand
LIBOR			London Interbank Offered Rate
Lilly			Eli Lilly and Company
Mapi			Mapi Pharma Ltd.
Maximum Leverage Ratio			The maximum consolidated leverage ratio financial covenant requiring maintenance of a maximum ratio of consolidated total indebtedness as of the end of any quarter to consolidated EBITDA for the trailing four quarters as defined in the related credit agreements from time to time
MDL			Multidistrict litigation

Mylan			Mylan N.V. and its subsidiaries
Mylan Inc. U.S. Dollar Notes			The 4.200% Senior Notes due 2023, 4.550% Senior Notes due 2028, 5.400% Senior Notes due 2043 and 5.200% Senior Notes due 2048 issued by Mylan Inc., which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan II B.V., Viatris Inc. and Utah Acquisition Sub Inc.

NASDAQ			The NASDAQ Stock Market
NDA			New drug application
NHS			National Health Services
Note Securitization Facility			The note securitization facility entered into in August 2023 for borrowings up to $200 million and expiring in August 2024
OTC			Over-the-counter
Oyster Point			Oyster Point Pharma, Inc.

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Pfizer			Pfizer Inc.
PSUs			Performance awards
R&D			Research and development
Receivables Facility			The $400 million accounts receivable entered into in August 2020 and expiring in April 2025
Registered Upjohn Notes			The 1.650% Senior Notes due 2025, 2.300% Senior Notes due 2027, 2.700% Senior Notes due 2030, 3.850% Senior Notes due 2040 and 4.000% Senior Notes due 2050 originally issued on October 29, 2021 registered with the SEC in exchange for the corresponding Unregistered Upjohn U.S. Dollar Notes in a similar aggregate principal amount and with terms substantially identical to the corresponding Unregistered Upjohn U.S. Dollar Notes and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Respiratory Delivery Platform			Pfizer’s proprietary dry powder inhaler delivery platform
Restricted Stock Awards			The Company’s nonvested restricted stock and restricted stock unit awards, including PSUs
Revolving Facility			The $4.0 billion revolving facility dated as of July 1, 2021, by and among Viatris, certain lenders and issuing banks from time to time party thereto and Bank of America, N.A., as administrative agent
RICO			Racketeer Influenced and Corrupt Organizations Act
RSUs			The Company's unvested restricted stock unit awards
Sanofi			Sanofi-Aventis U.S., LLC
SARs			Stock Appreciation Rights
SDNY			U.S. District Court for the Southern District of New York
SEC			U.S. Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
Senior U.S. Dollar Notes			The Upjohn U.S. Dollar Notes, the Utah U.S. Dollar Notes and the Mylan Inc. U.S. Dollar Notes, collectively
Separation and Distribution Agreement			Separation and Distribution Agreement between Viatris and Pfizer, dated as of July 29, 2019, as amended from time to time
SG&A			Selling, general and administrative expenses
SOFR			Secured overnight financial rate
Stock awards			Stock options and SARs
Teva			Teva Pharmaceutical Industries Ltd.
TSA			Transition services agreement
U.K.			United Kingdom
U.S.			United States
U.S. GAAP			Accounting principles generally accepted in the U.S.
Unregistered Upjohn U.S. Dollar Notes			The 1.650% Senior Notes due 2025, 2.300% Senior Notes due 2027, 2.700% Senior Notes due 2030, 3.850% Senior Notes due 2040 and 4.000% Senior Notes due 2050 originally issued on June 22, 2020 by Upjohn Inc. (now Viatris Inc.) in a private offering exempt from the registration requirements of the Securities Act and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Upjohn			Upjohn Inc., a wholly owned subsidiary of Pfizer prior to the Distribution, that combined with Mylan and was renamed Viatris Inc.

Table of Contents


Upjohn Business			Pfizer’s off-patent branded and generic established medicines business that, in connection with the Combination, was separated from Pfizer and combined with Mylan to form Viatris
Upjohn Distributor Markets			Select geographic markets that were part of the Combination that are smaller in nature and in which we had no established infrastructure prior to or following the Combination and that the Company intends to divest
Upjohn U.S. Dollar Notes			Senior unsecured notes denominated in U.S. dollars and originally issued by Upjohn Inc. or Viatris Inc. pursuant to an indenture dated June 22, 2020 and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Utah Acquisition Sub			Utah Acquisition Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Viatris
Utah U.S. Dollar Notes			The 3.950% Senior Notes due 2026 and 5.250% Senior Notes due 2046 issued by Utah Acquisition Sub Inc., which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and Mylan II B.V.
Viatris			Viatris Inc., formerly known as Upjohn Inc. prior to the completion of the Combination
YEN Term Loan Facility			The ¥40 billion term loan agreement dated as of July 1, 2021, among Viatris, the guarantors from time to time party thereto, the lenders from time to time party thereto and Mizuho Bank, Ltd., as administrative agent

Table of Contents

PART I — FINANCIAL INFORMATION

VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited; in millions, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues:
Net sales	$	3,933.9	$	4,067.4	$	11,562.5	$	12,351.0
Other revenues	8.0		10.8		27.1		35.7
Total revenues	3,941.9		4,078.2		11,589.6		12,386.7
Cost of sales	2,250.6		2,329.8		6,747.5		7,163.8
Gross profit	1,691.3		1,748.4		4,842.1		5,222.9
Operating expenses:
Research and development	211.2		174.9		602.4		479.8
Acquired IPR&D	1.0		—		11.2		—
Selling, general and administrative	1,053.5		1,017.3		3,044.3		2,913.7
Litigation settlements and other contingencies, net	(26.1)		(3.9)		(36.5)		13.2
Total operating expenses	1,239.6		1,188.3		3,621.4		3,406.7
Earnings from operations	451.7		560.1		1,220.7		1,816.2
Interest expense	141.5		153.2		432.2		445.3
Other (income) expense, net	(92.0)		(20.6)		(269.4)		26.6
Earnings before income taxes	402.2		427.5		1,057.9		1,344.3
Income tax provision	70.6		73.2		237.6		276.9
Net earnings	$	331.6	$	354.3	$	820.3	$	1,067.4
Earnings per share attributable to Viatris Inc. shareholders
Basic	$	0.28	$	0.29	$	0.68	$	0.88
Diluted	$	0.27	$	0.29	$	0.68	$	0.88
Weighted average shares outstanding:
Basic	1,199.5		1,212.5		1,200.4		1,211.8
Diluted	1,207.6		1,218.1		1,205.6		1,216.1

See Notes to Condensed Consolidated Financial Statements

Table of Contents

VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(Unaudited; in millions)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net earnings	$	331.6	$	354.3	$	820.3	$	1,067.4
Other comprehensive loss, before tax:
Foreign currency translation adjustment	(350.8)		(1,163.0)		(559.6)		(2,782.1)
Change in unrecognized loss and prior service cost related to defined benefit plans	(4.9)		(1.2)		(10.4)		(3.3)
Net unrecognized gain on derivatives in cash flow hedging relationships	8.8		15.7		48.4		33.5
Net unrecognized gain on derivatives in net investment hedging relationships	186.8		376.7		107.8		962.4
Net unrealized loss on marketable securities	(1.3)		(0.8)		(0.2)		(3.5)
Other comprehensive loss, before tax	(161.4)		(772.6)		(414.0)		(1,793.0)
Income tax provision	41.5		87.3		33.3		221.8
Other comprehensive loss, net of tax	(202.9)		(859.9)		(447.3)		(2,014.8)
Comprehensive earnings (loss)	$	128.7	$	(505.6)	$	373.0	$	(947.4)

See Notes to Condensed Consolidated Financial Statements

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VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited in millions, except share and per share amounts)


	September 30, 2023		December 31, 2022
ASSETS
Assets
Current assets:
Cash and cash equivalents	$	1,309.6	$	1,259.9
Accounts receivable, net	3,738.5		3,814.5
Inventories	3,671.9		3,519.5
Prepaid expenses and other current assets	1,784.7		1,811.2
Assets held for sale	427.3		230.3
Total current assets	10,932.0		10,635.4
Property, plant and equipment, net	2,926.6		3,024.5
Intangible assets, net	21,280.5		22,607.1
Goodwill	10,278.1		10,425.8
Deferred income tax benefit	930.4		925.9
Other assets	2,395.0		2,403.5
Total assets	$	48,742.6	$	50,022.2

LIABILITIES AND EQUITY
Liabilities
Current liabilities:
Accounts payable	$	1,989.1	$	1,766.6
Short-term borrowings	0.1		—
Income taxes payable	206.9		279.6
Current portion of long-term debt and other long-term obligations	1,307.4		1,259.1
Liabilities held for sale	14.3		—
Other current liabilities	3,316.2		3,440.9
Total current liabilities	6,834.0		6,746.2
Long-term debt	17,076.9		18,015.2
Deferred income tax liability	2,319.0		2,432.0
Other long-term obligations	1,647.1		1,756.5
Total liabilities	27,877.0		28,949.9
Equity
Viatris Inc. shareholders’ equity
Common stock: $0.01 par value, 3,000,000,000 shares authorized; shares issued: 1,220,899,433 and 1,213,793,231, respectively	12.2		12.1
Additional paid-in capital	18,760.7		18,645.8
Retained earnings	5,553.0		5,175.6
Accumulated other comprehensive loss	(3,208.5)		(2,761.2)
	21,117.4		21,072.3

Less: Treasury stock — at cost
Common stock shares: 21,239,521 as of September 30, 2023	251.8		—
Total equity	20,865.6		21,072.3

Total liabilities and equity	$	48,742.6	$	50,022.2

See Notes to Condensed Consolidated Financial Statements

Table of Contents

VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(Unaudited; in millions, except share and per share amounts)


				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Common Stock							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at June 30, 2023	1,220,385,566	$	12.2	$	18,719.4	$	5,369.1	21,239,521	$	(251.8)	$	(3,005.6)	$	20,843.3
Net earnings	—	—		—		331.6		—	—		—		331.6
Other comprehensive loss, net of tax	—	—		—		—		—	—		(202.9)		(202.9)
Issuance of restricted stock and stock options exercised, net	441,962	—		—		—		—	—		—		—
Taxes related to the net share settlement of equity awards	—	—		(2.5)		—		—	—		—		(2.5)
Share-based compensation expense	—	—		43.1		—		—	—		—		43.1



Issuance of common stock	71,905	—		0.7		—		—	—		—		0.7
Cash dividends declared, $0.12 per common share	—	—		—		(147.7)		—	—		—		(147.7)

Balance at September 30, 2023	1,220,899,433	$	12.2	$	18,760.7	$	5,553.0	21,239,521	$	(251.8)	$	(3,208.5)	$	20,865.6

				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Common Stock							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at December 31, 2022	1,213,793,231	$	12.1	$	18,645.8	$	5,175.6	—	$	—	$	(2,761.2)	$	21,072.3
Net earnings	—	—		—		820.3		—	—		—		820.3
Other comprehensive loss, net of tax	—	—		—		—		—	—		(447.3)		(447.3)
Issuance of restricted stock and stock options exercised, net	6,864,535	0.1		3.7		—		—	—		—		3.8
Taxes related to the net share settlement of equity awards	—	—		(22.2)		—		—	—		—		(22.2)
Share-based compensation expense	—	—		124.9		—		—	—		—		124.9

Common stock repurchase	—	—		—		—		21,239,521	(251.8)		—		(251.8)

Issuance of common stock	241,667	—		2.4		—		—	—		—		2.4
Cash dividends declared, $0.36 per common share	—	—		—		(442.9)		—	—		—		(442.9)
Other	—	—		6.1		—		—	—		—		6.1
Balance at September 30, 2023	1,220,899,433	$	12.2	$	18,760.7	$	5,553.0	21,239,521	$	(251.8)	$	(3,208.5)	$	20,865.6

See Notes to Condensed Consolidated Financial Statements

Table of Contents


				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Common Stock							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at June 30, 2022	1,212,447,457	$	12.1	$	18,585.7	$	4,106.8	—	$	—	$	(2,899.2)	$	19,805.4
Net earnings	—	—		—		354.3		—	—		—		354.3
Other comprehensive loss, net of tax	—	—		—		—		—	—		(859.9)		(859.9)
Issuance of restricted stock, net	31,203	—		—		—		—	—		—		—
Taxes related to the net share settlement of equity awards	—	—		0.2		—		—	—		—		0.2
Share-based compensation expense	—	—		29.1		—		—	—		—		29.1


Issuance of common stock	174,805	—		1.8		—		—	—		—		1.8
Cash dividends declared, $0.12 per common share	—	—		—		(148.6)		—	—		—		(148.6)

Balance at September 30, 2022	1,212,653,465	$	12.1	$	18,616.8	$	4,312.5	—	$	—	$	(3,759.1)	$	19,182.3

				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Common Stock							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at December 31, 2021	1,209,507,463	$	12.1	$	18,536.1	$	3,688.8	—	$	—	$	(1,744.3)	$	20,492.7
Net earnings	—	—		—		1,067.4		—	—		—		1,067.4
Other comprehensive loss, net of tax	—	—		—		—		—	—		(2,014.8)		(2,014.8)
Issuance of restricted stock, net	2,911,515	—		—		—		—	—		—		—
Taxes related to the net share settlement of equity awards	—	—		(8.6)		—		—	—		—		(8.6)
Share-based compensation expense	—	—		86.8		—		—	—		—		86.8


Issuance of common stock	234,487	—		2.5		—		—	—		—		2.5
Cash dividends declared, $0.36 per common share	—	—		—		(443.7)		—	—		—		(443.7)

Balance at September 30, 2022	1,212,653,465	$	12.1	$	18,616.8	$	4,312.5	—	$	—	$	(3,759.1)	$	19,182.3

See Notes to Condensed Consolidated Financial Statements

Table of Contents

VIATRIS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited; in millions)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities:
Net earnings	$	820.3	$	1,067.4
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	2,096.1		2,157.8
Share-based compensation expense	124.9		86.8
Deferred income tax benefit	(179.9)		(179.5)

Other non-cash items	(52.1)		193.0
Litigation settlements and other contingencies, net	(54.6)		5.9
Changes in operating assets and liabilities:
Accounts receivable	(2.8)		98.9
Inventories	(485.7)		(439.6)
Accounts payable	236.3		(75.4)
Income taxes	(29.6)		29.5
Other operating assets and liabilities, net	(152.7)		(134.8)
Net cash provided by operating activities	2,320.2		2,810.0
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired	(667.7)		—
Capital expenditures	(211.5)		(252.3)
Purchase of marketable securities	(20.9)		(23.3)
Proceeds from the sale of marketable securities	20.9		23.0
Payments for product rights and other, net	(62.1)		(24.8)
Proceeds from the sale of assets and subsidiaries	48.0		—
Proceeds from sale of property, plant and equipment	13.4		13.4
Net cash used in investing activities	(879.9)		(264.0)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	—		1,875.5
Payments of long-term debt	(750.1)		(2,961.9)
Purchase of common stock	(250.0)		—
Change in short-term borrowings, net	0.2		(992.8)
Taxes paid related to net share settlement of equity awards	(32.6)		(13.4)
Contingent consideration payments	(8.4)		(18.9)
Payments of financing fees	(0.3)		(1.6)
Cash dividends paid	(431.6)		(436.1)
Non-contingent payments for product rights	(9.7)		—
Issuance of common stock	2.5		2.5
Other items, net	104.2		(0.6)
Net cash used in financing activities	(1,375.8)		(2,547.3)
Effect on cash of changes in exchange rates	(15.2)		(54.5)
Net increase (decrease) in cash, cash equivalents and restricted cash	49.3		(55.8)
Cash, cash equivalents and restricted cash — beginning of period	1,262.5		706.2
Cash, cash equivalents and restricted cash — end of period	$	1,311.8	$	650.4

See Notes to Condensed Consolidated Financial Statements

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.General

The accompanying unaudited condensed consolidated financial statements (“interim financial statements”) of Viatris Inc. and subsidiaries were prepared in accordance with U.S. GAAP and the rules and regulations of the SEC for reporting on Form 10-Q; therefore, as permitted under these rules, certain footnotes and other financial information included in audited financial statements were condensed or omitted. The interim financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the interim results of operations, comprehensive earnings, financial position, equity and cash flows for the periods presented.

These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Viatris’ 2022 Form 10-K. The December 31, 2022 condensed consolidated balance sheet was derived from audited financial statements.

The interim results of operations and comprehensive earnings for the three and nine months ended September 30, 2023, and cash flows for the nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.

2.Revenue Recognition and Accounts Receivable

The Company recognizes revenues in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes net revenue for product sales when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues are recorded net of provisions for variable consideration, including discounts, rebates, governmental rebate programs, price adjustments, returns, chargebacks, promotional programs and other sales allowances. Accruals for these provisions are presented in the condensed consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).

Our net sales may be impacted by wholesaler and distributor inventory levels of our products, which can fluctuate throughout the year due to the seasonality of certain products, pricing, the timing of product demand, purchasing decisions and other factors. Such fluctuations may impact the comparability of our net sales between periods.

Consideration received from licenses of intellectual property is recorded as other revenues. Royalty or profit share amounts, which are based on sales of licensed products or technology, are recorded when the customer’s subsequent sales or usages occur. Such consideration is included in other revenues in the condensed consolidated statements of operations.

The following table presents the Company’s net sales by product category for each of our reportable segments for the three and nine months ended September 30, 2023 and 2022, respectively:


(In millions)	Three Months Ended September 30, 2023
Product Category	Developed Markets		Greater China		JANZ		Emerging Markets		Total
Brands	$	1,391.3	$	546.5	$	185.7	$	409.6	$	2,533.1
Complex Gx	166.1		—		8.0		0.3		174.4
Generics	851.1		1.9		140.8		232.6		1,226.4
Total	$	2,408.5	$	548.4	$	334.5	$	642.5	$	3,933.9


(In millions)	Nine Months Ended September 30, 2023
Product Category	Developed Markets		Greater China		JANZ		Emerging Markets		Total
Brands	$	3,923.5	$	1,639.4	$	583.4	$	1,251.8	$	7,398.1
Complex Gx	428.7		—		20.6		0.4		449.7
Generics	2,580.5		5.7		448.2		680.3		3,714.7
Total	$	6,932.7	$	1,645.1	$	1,052.2	$	1,932.5	$	11,562.5

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


(In millions)	Three Months Ended September 30, 2022
Product Category	Developed Markets		Greater China		JANZ		Emerging Markets		Total
Brands	$	1,327.7	$	571.9	$	211.6	$	429.1	$	2,540.3
Complex Gx and Biosimilars	295.0		0.2		10.9		14.1		320.2
Generics	808.8		1.9		160.5		235.7		1,206.9
Total	$	2,431.5	$	574.0	$	383.0	$	678.9	$	4,067.4


(In millions)	Nine Months Ended September 30, 2022
Product Category	Developed Markets		Greater China		JANZ		Emerging Markets		Total
Brands	$	3,931.8	$	1,687.9	$	703.7	$	1,254.1	$	7,577.5
Complex Gx and Biosimilars	986.1		0.5		33.3		45.9		1,065.8
Generics	2,468.8		7.0		496.9		735.0		3,707.7
Total	$	7,386.7	$	1,695.4	$	1,233.9	$	2,035.0	$	12,351.0

____________

(a)Amounts for the three and nine months ended September 30, 2023 include the impact of foreign currency translations compared to the prior year period.

(b)Amounts for the three and nine months ended September 30, 2022 include $181.0 million and $507.5 million, respectively, related to the biosimilars business which was subsequently contributed to Biocon Biologics in November 2022. The Company has not recognized the results of the biosimilars business in its consolidated financial statements subsequent to November 29, 2022.

The following table presents net sales on a consolidated basis for select key products for the three and nine months ended September 30, 2023 and 2022:


	Three months ended September 30,				Nine months ended September 30,
(In millions)	2023		2022		2023		2022
Select Key Global Products
Lipitor ®	$	381.6	$	420.4	$	1,179.5	$	1,266.1
Norvasc ®	175.5		189.3		560.6		600.1
Lyrica ®	141.7		156.5		423.1		483.9
EpiPen® Auto-Injectors	131.9		114.4		355.2		309.7
Viagra ®	110.5		117.0		336.5		361.9
Celebrex ®	84.7		82.2		255.5		253.4
Creon ®	77.5		76.4		224.3		226.5
Effexor ®	65.5		64.2		194.9		215.4
Zoloft ®	62.7		53.1		173.7		188.7
Xalabrands	47.9		51.0		145.0		146.7

Select Key Segment Products
Influvac ®	$	137.2	$	159.3	$	137.5	$	178.3
Yupelri ®	58.3		53.4		160.3		146.1
Dymista ®	44.1		38.6		155.0		138.0
Amitiza ®	37.7		39.4		115.8		125.3
Xanax ®	28.2		38.3		119.7		115.5

____________

(a)The Company does not disclose net sales for any products considered competitively sensitive.

(b)Products disclosed may change in future periods, including as a result of seasonality, competition or new product launches.

(c)Amounts for the three and nine months ended September 30, 2023 include the impact of foreign currency translations compared to the prior year period.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(d)Refer to intellectual property matters included in Note 18 Litigation for additional information regarding Yupelri® and Amitiza®.

Variable Consideration and Accounts Receivable

The following table presents a reconciliation of gross sales to net sales by each significant category of variable consideration during the three and nine months ended September 30, 2023 and 2022, respectively:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2023		2022		2023		2022
Gross sales	$	6,497.2	$	6,862.9	$	19,289.2	$	21,069.9
Gross to net adjustments:
Chargebacks	(1,348.3)		(1,553.1)		(4,073.2)		(4,731.5)
Rebates, promotional programs and other sales allowances	(952.7)		(1,021.8)		(2,905.9)		(3,303.0)
Returns	(55.7)		(73.4)		(174.4)		(238.7)
Governmental rebate programs	(206.6)		(147.2)		(573.2)		(445.7)
Total gross to net adjustments	$	(2,563.3)	$	(2,795.5)	$	(7,726.7)	$	(8,718.9)
Net sales	$	3,933.9	$	4,067.4	$	11,562.5	$	12,351.0

____________

(a)Amounts for the three and nine months ended September 30, 2022 include the biosimilars business which was subsequently contributed to Biocon Biologics in November 2022. The Company has not recognized the results of the biosimilars business in its consolidated financial statements subsequent to November 29, 2022.

No significant revisions were made to the methodology used in determining these provisions or the nature of the provisions during the three and nine months ended September 30, 2023. Such allowances were comprised of the following at September 30, 2023 and December 31, 2022, respectively:


(In millions)	September 30, 2023		December 31, 2022
Accounts receivable, net	$	1,594.5	$	1,798.7
Other current liabilities	921.2		888.8
Total	$	2,515.7	$	2,687.5

Accounts receivable, net was comprised of the following at September 30, 2023 and December 31, 2022, respectively:


(In millions)	September 30, 2023		December 31, 2022
Trade receivables, net	$	3,231.0	$	3,243.8
Other receivables	507.5		570.7
Accounts receivable, net	$	3,738.5	$	3,814.5

Accounts Receivable Factoring Arrangements

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 $21.3 million and $34.7 million of accounts receivable as of September 30, 2023 and December 31, 2022, respectively, under these factoring arrangements.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

3.Recent Accounting Pronouncements

Adoption of New Accounting Standards

In September 2022, the FASB issued Accounting Standards Update 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50), which requires entities to provide qualitative and quantitative disclosures about their supplier finance programs, including a rollforward of related obligations. The adoption of ASU 2022-04 did not affect the Company’s financial condition, results of operations or cash flows as the guidance only requires additional disclosures. We adopted this ASU effective January 1, 2023.

The Company has certain voluntary supply chain finance programs with financial intermediaries which provide participating suppliers the option to be paid by the intermediary earlier than the original invoice due date. The Company’s responsibility is limited to making payments on the terms originally negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date. The range of payment terms the Company negotiates with suppliers are consistent, regardless of whether a supplier participates in a supply chain finance program. The total amounts due to financial intermediaries to settle supplier invoices under supply chain finance programs as of September 30, 2023 and December 31, 2022 were $59.6 million and $33.4 million, respectively. These amounts are included within Accounts payable in the condensed consolidated balance sheets.

There were no other significant changes in new accounting standards from those disclosed in Viatris’ 2022 Form 10-K. Refer to Viatris’ 2022 Form 10-K for additional information.

4.Acquisitions and Other Transactions

Oyster Point Acquisition

During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $427.4 million in cash, which included $11 per share paid to Oyster Point stockholders through a tender offer, payment for vested share-based awards, and the repayment of debt of Oyster Point. In addition to the upfront cash consideration, each Oyster Point stockholder received one non-tradeable contingent value right representing up to an additional $2 per share, or approximately $60 million in the aggregate, contingent upon Oyster Point achieving certain metrics based upon full year 2022 performance. Oyster Point did not achieve the metrics that would have triggered a contingent payment and the contingent value rights have expired. Oyster Point is focused on the discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases.

Vested share-based awards to acquire Oyster Point common stock that were outstanding immediately prior to the closing of the acquisition were cancelled in exchange for the right to receive an amount in cash based upon a formula contained within the merger agreement. The unvested share-based awards were converted into Viatris share-based awards based upon a formula contained within the merger agreement.

In accordance with U.S. GAAP, the Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated fair values at the acquisition date. During the nine months ended September 30, 2023, the Company incurred acquisition related costs of approximately $21.4 million, which were recorded primarily in SG&A in the condensed consolidated statement of operations.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

The U.S. GAAP purchase price was $392.7 million, net of cash acquired. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed for Oyster Point is as follows:


(In millions)
Current assets (excluding inventories and net of cash acquired)	$	26.9
Inventories	37.8
Property, plant and equipment	1.4
Identified intangible assets	334.0
Goodwill	5.9
Deferred income tax benefit	17.7
Other assets	7.7
Total assets acquired	$	431.4
Current liabilities	37.0

Other noncurrent liabilities	1.7
Net assets acquired (net of $34.7 of cash acquired)	$	392.7

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary areas subject to change relate to the finalization of the valuation of intangible assets and income taxes. There were no measurement period adjustments during 2023.

The Company recorded a step-up in the fair value of inventory of approximately $29.3 million. During the three and nine months ended September 30, 2023, the Company recorded amortization of the inventory step-up of approximately $7.3 million and $22.0 million, respectively, which is included in Cost of sales in the condensed consolidated statement of operations.

The identified intangible assets of $334.0 million are comprised of product rights and licenses related to a commercial asset, Tyrvaya®, for the treatment of dry eye disease, that have an estimated useful life of 10 years. Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which are not observable in the market and are thus considered Level 3 measurements as defined by U.S. GAAP.

The goodwill of $5.9 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products to be developed in the future. All of the goodwill was assigned to the Developed Markets segment. None of the goodwill recognized in this transaction is currently expected to be deductible for income tax purposes. The operating results of Oyster Point have been included in the Company’s condensed consolidated statements of operations since the acquisition date. The total revenues of Oyster Point for the period from the acquisition date to September 30, 2023, were $26.9 million and net loss, net of tax, was approximately $119.8 million. The net loss for the period includes the effect of the purchase accounting adjustments and acquisition related costs.

The following table presents supplemental unaudited pro forma information for the acquisition, as if it had occurred on January 1, 2022. The unaudited pro forma results reflect certain adjustments related to past operating performance and acquisition accounting adjustments, such as increased amortization expense based on the fair value of assets acquired, the impact of transaction costs and the related income tax effects. The unaudited pro forma results do not include any anticipated synergies which may be achievable, or have been achieved, subsequent to the closing of the acquisition. Accordingly, the unaudited pro forma results are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the stated date above, nor are they indicative of the future operating results of Viatris and its subsidiaries.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


	Three Months Ended				Nine Months Ended
(Unaudited, in millions, except per share amounts)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Total revenues	$	3,941.9	$	4,083.8	$	11,589.6	$	12,399.7
Net earnings	$	338.3	$	313.7	$	852.9	$	915.1
Earnings per share:
Basic	$	0.28	$	0.26	$	0.71	$	0.76
Diluted	$	0.28	$	0.26	$	0.71	$	0.75
Weighted average shares outstanding:
Basic	1,199.5		1,212.5		1,200.4		1,211.8
Diluted	1,207.6		1,218.1		1,205.6		1,216.1

Famy Life Sciences Acquisition

On November 7, 2022, the Company entered into a definitive agreement to acquire the remaining equity shares of Famy Life Sciences, a privately-owned research company with a complementary portfolio of ophthalmology therapies under development, for consideration of $281 million. The Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 under which the Company obtained rights with respect to acquiring certain pharmaceutical products and had also acquired shares representing approximately 13.5% equity interest in Famy Life Sciences for $25.0 million at December 31, 2020. The investment was accounted for in accordance with ASC 321, Investments - Equity Securities.

The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023. The Company recognized a gain of $18.9 million during the first quarter of 2023 as a result of remeasuring its pre-existing 13.5% equity interest in Famy Life Sciences to fair value, which was recorded as a component of Other (income) expense, net in the condensed consolidated statement of operations.

In accordance with U.S. GAAP, the Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated fair values at the acquisition date. The U.S. GAAP purchase price allocated to the transaction was $325.0 million, which consisted of $281 million of cash consideration paid for the remaining equity shares and $43.9 million for the fair value of the pre-existing 13.5% equity interest. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed for Famy Life Sciences is as follows:


(In millions)

IPR&D	$	290.0
Goodwill	89.3

Total assets acquired	$	379.3
Current liabilities	2.2
Deferred tax liabilities	52.1
Net assets acquired (net of $0.2 of cash acquired)	$	325.0

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary areas subject to change relate to the finalization of the valuation of IPR&D and income taxes. There were no measurement period adjustments during 2023.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

The amount allocated to IPR&D represents an estimate of the fair value of purchased in-process technology for research projects that, as of the closing date of the acquisition, had not reached technological feasibility and had no alternative future use. The fair value of IPR&D of $290.0 million was based on the excess earnings method, which utilizes forecasts of expected cash inflows (including estimates for ongoing costs) and other contributory charges. A discount rate of 23.9% was utilized to discount net cash inflows to present values. IPR&D is accounted for as an indefinite-lived intangible asset and will be subject to impairment testing until completion or abandonment of the projects. Upon successful completion and launch of each product, the Company will make a determination of the estimated useful life of the individual asset. The acquired IPR&D projects are in various stages of completion and the estimated costs to complete these projects total approximately $120 million, which are expected to be incurred through 2024. There are risks and uncertainties associated with the timely and successful completion of the projects included in IPR&D, and no assurances can be given that the underlying assumptions used to estimate the fair value of IPR&D will not change or the timely completion of each project to commercial success will occur.

The goodwill of $89.3 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products to be developed in the future. All of the goodwill was assigned to the Developed Markets segment. None of the goodwill recognized in this transaction is currently expected to be deductible for income tax purposes. The acquisition did not have a material impact on the Company’s results of operations since the acquisition date or on a pro forma basis for the three and nine months ended September 30, 2023 and 2022.

Ophthalmology is one of the key therapeutic areas of focus that the Company announced in February 2022 when it announced plans for certain strategic actions. With the combination of Viatris' global commercial footprint, R&D and regulatory capabilities and supply chain, along with Oyster Point's deep knowledge of the ophthalmology space from a clinical, medical, regulatory and commercial perspective—including Tyrvaya®—and Famy Life Sciences' Phase III-ready pipeline, the Company believes it has the foundation to create a leading global ophthalmology franchise, accelerating efforts to address the unmet needs of patients with ophthalmic disease and the eye care professionals who treat them.

Mapi Pharma Ltd. (“Mapi”) Equity Investment

In April 2018, the Company entered into an exclusive license and commercialization agreement with Mapi for the development and commercialization on a world-wide basis of a long-acting glatiramer acetate depot product (“GA Depot”). Under the terms of the license and commercialization agreement, as of September 30, 2023, Mapi is eligible to receive regulatory approval and commercial launch milestone payments of up to $90.0 million. Additionally, upon commercial launch of GA Depot, Mapi is eligible to receive royalties and sales-based milestones.

The Company holds investments in preferred shares of Mapi that are accounted for at cost, less impairment, if any, adjusted for observable price changes, in accordance with ASC 321, Investments – Equity Securities. During the second quarter of 2023, the Company made an additional investment of $30.0 million in preferred shares of Mapi. The preferred shares are convertible on a one-to-one basis into Mapi ordinary shares at Viatris’ option. The Company recognized a gain of $45.6 million during the second quarter of 2023 as a result of remeasuring our pre-existing equity interest in Mapi, which was recorded as a component of Other (Income) Expense, Net in the condensed consolidated statements of operations. The Company has determined that Mapi represents a variable interest entity (“VIE”), but has concluded that Viatris is not the primary beneficiary of Mapi as we do not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Accordingly, we have not consolidated Mapi’s results of operations and financial position into our condensed consolidated financial statements.

As of September 30, 2023 and December 31, 2022, our condensed consolidated balance sheets included, within Other Assets, $132.1 million and $56.4 million, respectively, related to our equity investments in Mapi, which included cumulative unrealized gains of $62.1 million and $16.5 million, respectively, and within Prepaid Expenses and Other Current Assets, $52.5 million and $42.5 million, respectively, related to advances, including for initial orders of commercial launch supply of GA Depot under our supply agreement with Mapi. Our maximum exposure to loss as a result of our involvement with Mapi is limited to the carrying value of the investments and advances.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

5.Divestitures

Biocon Biologics Transaction

On November 29, 2022, Viatris completed a transaction to contribute its biosimilars portfolio to Biocon Biologics. Under the terms of the Biocon Agreement, Viatris received $3 billion in consideration in the form of a $2 billion cash payment, adjusted as set forth in the Biocon Agreement, and approximately $1 billion of CCPS representing a stake of approximately 12.9% (on a fully diluted basis) in Biocon Biologics. During the three and nine months ended September 30, 2023, the Company recorded a gain of $19.1 million and $50.6 million, respectively, as a component of Other (Income) Expense, Net, as a result of remeasuring the CCPS in Biocon Biologics to fair value. The Company’s CCPS in Biocon Biologics are classified as equity securities and the fair value is reassessed quarterly, refer to Note 11 Financial Instruments and Risk Management for further discussion. Viatris also is entitled to $335 million of additional cash payments in 2024. In addition, Viatris and Biocon Biologics have agreed to a closing working capital target of $250 million. An amount of cash equal to all or a portion of the closing working capital target may become payable to Biocon Biologics in connection with certain events in the future, depending on the valuations attributable to such events. Refer to Note 8 Balance Sheet Components for additional information on assets and liabilities related to Biocon Biologics.

Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections, and the remittance of rebates, to ensure business continuity for patients, customers and colleagues. The original term of the TSA was generally up to two years; however, the parties agreed to reduce the term of the TSA to expire on December 31, 2023, subject to early termination of services at the discretion at Biocon Biologics and/or extensions until April 30, 2024 for certain services. In the third quarter of 2023, Biocon Biologics began to exit certain services under the TSA. Under the TSA, Viatris is entitled to be reimbursed for its costs (subject to certain caps) plus a markup of $44 million for 2023. In the event services are provided after 2023 through April 30, 2024, Viatris is entitled to be reimbursed for its costs plus service-based markups for such period. During the three and nine months ended September 30, 2023, the Company recognized TSA income of approximately $47.2 million and $139.8 million, respectively, as a component of Other (Income) Expense, Net.

Other Planned Divestitures

On October 1, 2023, the Company announced it received an offer for the divestiture of substantially all 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, its API business in India and commercialization rights in the Upjohn Distributor Markets. The transactions are expected to close by the end of the first half of 2024 and are subject to regulatory approvals, completion of any consultations with employee representatives (where applicable), receipt of required consents and other closing conditions, including, in the case of the API business divestiture, a financing condition.

Under the terms of the agreements, Viatris will receive gross proceeds of up to approximately $2.17 billion for the OTC business and up to approximately $1.4 billion for the remaining divestitures. Upon closing of the divestitures of the women’s healthcare business, the rights to two women’s healthcare products and API business, we expect to record gains for the differences between the expected consideration to be received and the carrying values of the businesses and assets to be divested. The OTC, API and women’s healthcare businesses are deemed businesses for U.S. GAAP accounting purposes. As such, the assets and liabilities will include an allocation of goodwill. The sale of the rights to two women’s healthcare products will be accounted for as an asset sale. In conjunction with these transactions, Viatris and the respective buyers will enter into various agreements to provide a framework for our relationship with the respective buyers after the closing of the divestitures, including TSAs, manufacturing and supply agreements, and distribution agreements, as necessary.

Women’s Healthcare

In the third quarter of 2023, Viatris executed an agreement to divest its women’s healthcare business, primarily related to oral and injectable contraceptives, to Insud Pharma, S. L. (“Insud”), a leading Spanish multinational pharmaceutical company. The transaction includes two manufacturing facilities in India.

In the third quarter of 2023, Viatris also entered into a separate agreement to divest its rights to women’s healthcare products Duphaston® and Femoston® to Theramex HQ UK Limited (“Theramex”), a leading global specialty pharmaceutical company dedicated to women’s health.

Assets and liabilities associated with the women’s healthcare business to be divested to Insud and assets to be divested to Theramex were reclassified as held for sale in the condensed consolidated balance sheet as of September 30, 2023.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

OTC

On October 1, 2023, Viatris received an offer from Cooper Consumer Health SAS, a leading European OTC drug manufacturer and distributor. Subject to the completion of consultations with applicable works councils, the offer grants Viatris the right to divest substantially all of its OTC business, including two manufacturing sites located in Merignac, France, and Confienza, Italy, and an R&D site in Monza, Italy. The Company will retain rights for Viagra®, Dymista® and select OTC products in certain markets. The OTC business to be divested met the criteria to be classified as held for sale on October 1, 2023. As such, the related assets and liabilities are classified as held and used at September 30, 2023 and will be classified as held for sale in the fourth quarter of 2023. Also, we expect to record a pre-tax loss ranging from $600 million to $700 million in the fourth quarter of 2023 for the difference between the estimated consideration to be received and the carrying value of the business to be divested, including an allocation of goodwill.

API

On October 1, 2023, Viatris executed an agreement to divest its API business in India to IQuest Enterprises Private Limited, a privately held pharmaceutical company based in India. The transaction includes three manufacturing sites and a R&D lab in Hyderabad, three manufacturing sites in Vizag and third-party API sales. Viatris will retain some selective R&D capabilities in API. The API business in India met the criteria to be classified as held for sale on October 1, 2023 and the related assets and liabilities are classified as held and used at September 30, 2023 and will be classified as held for sale in the fourth quarter of 2023.

Upjohn Distributor Markets

In the fourth quarter of 2022, we determined that our Upjohn Distributor Markets should be classified as held for sale. Upon classification as held for sale, we recognized a total charge of $374.2 million in that quarter, which was comprised of a goodwill impairment charge of $117.0 million, other charges, principally inventory write-offs, of $84.3 million and a charge of approximately $172.9 million to write down the disposal group to fair value, less cost to sell. During the nine months ended September 30, 2023, the Company recorded an intangible asset charge of $32.0 million to write down the disposal group to fair value, less cost to sell and additional charges of $19.2 million. During 2023, Viatris executed agreements to divest commercialization rights for the majority of the Upjohn Distributor Markets. Certain transactions have closed and the remaining transactions are expected to be completed in the fourth quarter of 2023. If these transactions are not completed, the distribution arrangements will expire in accordance with our agreement with Pfizer and the Company will wind down operations in these markets, which may result in additional asset write-offs and other costs being incurred. These additional charges could be in excess of $150 million.

Assets and Liabilities Held for Sale

Assets and liabilities held for sale associated with the women’s healthcare business, rights to two women’s healthcare products, and Upjohn Distributor Markets divestitures consisted of the following:


(In millions)	September 30, 2023		December 31, 2022
Assets held for sale
Accounts receivable, net	$	34.5	$	—
Inventories	40		—
Prepaid expenses and other current assets	0.7		—
Property, plant and equipment, net	26.3		—
Intangible assets, net	259.7		230.3
Goodwill	65.9		—
Other assets	0.2		—
Total assets held for sale	$	427.3	$	230.3

Liabilities held for sale
Accounts payable	$	8.4	$	—
Other current liabilities	5.5		—
Other long-term obligations	0.4		—
Total liabilities held for sale	$	14.3	$	—

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

6.Share-Based Incentive Plan

Prior to the Distribution, Viatris adopted and Pfizer, in the capacity as Viatris’ sole stockholder at such time, approved the 2020 Incentive Plan (the Viatris Inc. 2020 Stock Incentive Plan) which became effective as of the Distribution. In connection with the Combination, as of November 16, 2020, the Company assumed the 2003 LTIP (Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan), which had previously been approved by Mylan shareholders. The 2020 Incentive Plan and 2003 LTIP include (i) 72,500,000 shares of Viatris’ common stock authorized for grant pursuant to the 2020 Incentive Plan, which may include dividend payments payable in common stock on unvested shares granted under awards, (ii) 6,757,640 shares of common stock to be issued pursuant to the exercise of outstanding stock options granted to participants under the 2003 LTIP and assumed by Viatris in connection with the Combination and (iii) 13,535,627 shares of common stock subject to outstanding equity-based awards, other than stock options, assumed by Viatris in connection with the Combination, or that otherwise remain available for issuance under the 2003 LTIP.

Under the 2020 Incentive Plan and 2003 LTIP, shares are reserved for issuance to key employees, consultants, independent contractors and non-employee directors of the Company through a variety of incentive awards, including: stock options, SARs, restricted stock and units, PSUs, other stock-based awards and short-term cash awards. Stock option awards are granted with an exercise price equal to the fair market value of the shares underlying the stock options at the date of the grant, generally become exercisable over periods ranging from three to four years, and generally expire in ten years.

The following table summarizes stock awards (stock options and SARs) activity under the 2020 Incentive Plan and 2003 LTIP:


	Number of Shares Under Stock Awards	Weighted Average Exercise Price per Share
Outstanding at December 31, 2022	4,449,642	$	38.53
Granted	283,361	$	7.68
Exercised	(16,710)	$	5.77
Forfeited	(435,617)	$	30.53
Outstanding at September 30, 2023	4,280,676	$	37.43
Vested and expected to vest at September 30, 2023	4,261,465	$	37.55
Exercisable at September 30, 2023	4,113,738	$	38.57

As of September 30, 2023, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 3.9 years, 3.9 years and 3.7 years, respectively. Also, at September 30, 2023, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $0.5 million, $0.5 million, and $0.3 million, respectively.

A rollforward of the changes in the Company’s nonvested Restricted Stock Awards (restricted stock and restricted stock unit awards, including PSUs) from December 31, 2022 to September 30, 2023 is presented below:


	Number of Restricted Stock Awards	Weighted Average Grant-Date Fair Value Per Share
Nonvested at December 31, 2022	27,271,926	$	11.81
Granted	20,390,528	11.13
Released	(8,472,047)	12.91
Forfeited	(2,528,099)	11.57
Nonvested at September 30, 2023	36,662,308	$	11.20

As of September 30, 2023, the Company had $238.1 million of total unrecognized compensation expense, net of estimated forfeitures, related to all of its stock-based awards, which we expect to recognize over the remaining weighted average vesting period of 1.5 years. The total intrinsic value of Restricted Stock Awards released and stock options exercised during the nine months ended September 30, 2023 and 2022 was $109.5 million and $39.6 million, respectively.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

7.Pensions and Other Postretirement Benefits

Defined Benefit Plans

The Company sponsors various defined benefit pension plans in several countries. Benefits provided generally depend on length of service, pay grade and remuneration levels. Employees in the U.S., Puerto Rico and certain international locations are also provided retirement benefits through defined contribution plans.

The Company also sponsors other postretirement benefit plans including plans that provide for postretirement supplemental medical coverage. Benefits from these plans are provided to employees and their spouses and dependents who meet various minimum age and service requirements. In addition, the Company sponsors other plans that provide for life insurance benefits and postretirement medical coverage for certain officers and management employees.

Net Periodic Benefit Cost

Components of net periodic benefit cost for the three and nine months ended September 30, 2023 and 2022 were as follows:


	Pension and Other Postretirement Benefits
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2023		2022		2023		2022
Service cost	$	7.0	$	9.5	$	21.2	$	28.5
Interest cost	18.3		10.3		54.8		31.1
Expected return on plan assets	(16.4)		(16.5)		(49.2)		(49.7)
Amortization of prior service costs	0.1		0.1		0.1		0.2
Recognized net actuarial (gains)/losses	(4.9)		—		(14.9)		0.1
Other	(3.1)		—		1.3		—
Net periodic benefit cost	$	1.0	$	3.4	$	13.3	$	10.2

The Company is making the minimum mandatory contributions to its defined benefit pension plans in the U.S. and Puerto Rico for the 2023 plan year. The Company expects to make total benefit payments of approximately $108.5 million from pension and other postretirement benefit plans in 2023. The Company anticipates making contributions to pension and other postretirement benefit plans of approximately $51.3 million in 2023.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

8.Balance Sheet Components

Selected balance sheet components consist of the following:

Cash and restricted cash


(In millions)	September 30, 2023		December 31, 2022		September 30, 2022
Cash and cash equivalents	$	1,309.6	$	1,259.9	$	646.7
Restricted cash, included in prepaid expenses and other current assets	2.2		2.6		3.7
Cash, cash equivalents and restricted cash	$	1,311.8	$	1,262.5	$	650.4

Inventories


(In millions)	September 30, 2023		December 31, 2022
Raw materials	$	742.4	$	571.5
Work in process	1,030.9		755.4
Finished goods	1,898.6		2,192.6
Inventories	$	3,671.9	$	3,519.5

Prepaid expenses and other current assets


(In millions)	September 30, 2023		December 31, 2022
Prepaid expenses	$	166.9	$	194.6

Deferred consideration due from Biocon Biologics	167.5		—
Available-for-sale fixed income securities	35.1		35.3
Fair value of financial instruments	174.7		134.7
Equity securities	45.1		42.6
Other current assets	1,195.4		1,404.0
Prepaid expenses and other current assets	$	1,784.7	$	1,811.2

Prepaid expenses consist primarily of prepaid rent, insurance and other individually insignificant items.

Property, plant and equipment, net


(In millions)	September 30, 2023		December 31, 2022
Machinery and equipment	$	3,022.7	$	2,936.7
Buildings and improvements	1,501.1		1,539.7
Construction in progress	389.8		474.0
Land and improvements	123.5		133.4
Gross property, plant and equipment	5,037.1		5,083.8
Accumulated depreciation	2,110.5		2,059.3
Property, plant and equipment, net	$	2,926.6	$	3,024.5

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Other assets


(In millions)	September 30, 2023		December 31, 2022

Non-marketable equity investments	$	165.7	$	94.0
Deferred consideration due from Biocon Biologics	148.5		299.5
CCPS in Biocon Biologics	1,048.0		997.4
Operating lease right-of-use assets	247.7		259.3
Other long-term assets	785.1		753.3
Other assets	$	2,395.0	$	2,403.5

Accounts payable


(In millions)	September 30, 2023		December 31, 2022
Trade accounts payable	$	1,218.5	$	1,158.0
Other payables	770.6		608.6
Accounts payable	$	1,989.1	$	1,766.6

Other current liabilities


(In millions)	September 30, 2023		December 31, 2022
Accrued sales allowances	$	921.2	$	888.8
Legal and professional accruals, including litigation accruals	205.5		297.2
Payroll and employee benefit liabilities	771.6		746.8
Contingent consideration	59.4		64.4
Accrued restructuring	38.1		95.3
Accrued interest	206.5		80.2
Fair value of financial instruments	49.2		187.0
Due to Biocon Biologics	59.1		22.5
Operating lease liability	88.4		80.6
Other	917.2		978.1
Other current liabilities	$	3,316.2	$	3,440.9

Other long-term obligations


(In millions)	September 30, 2023		December 31, 2022
Employee benefit liabilities	$	520.5	$	544.6
Contingent consideration (1)	311.7		310.6

Tax related items, including contingencies	382.1		414.6
Operating lease liability	160.5		181.4
Accrued restructuring	60.3		60.4
Other	212.0		244.9
Other long-term obligations	$	1,647.1	$	1,756.5

(1) Balances as of September 30, 2023 and December 31, 2022 include $232.0 million and $221.2 million, respectively, due to Biocon Biologics. Refer to Note 11 Financial Instruments and Risk Management for additional information.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

9.Earnings per Share

Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding related to potentially dilutive securities or instruments, if the impact is dilutive.

Basic and diluted earnings per share attributable to Viatris Inc. are calculated as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions, except per share amounts)	2023		2022		2023		2022
Basic earnings attributable to Viatris Inc. common shareholders
Net earnings attributable to Viatris Inc. common shareholders	$	331.6	$	354.3	$	820.3	$	1,067.4
Shares (denominator):
Weighted average shares outstanding	1,199.5		1,212.5		1,200.4		1,211.8
Basic earnings per share attributable to Viatris Inc. shareholders	$	0.28	$	0.29	$	0.68	$	0.88

Diluted earnings attributable to Viatris Inc. common shareholders
Net earnings attributable to Viatris Inc. common shareholders	$	331.6	$	354.3	$	820.3	$	1,067.4
Shares (denominator):
Weighted average shares outstanding	1,199.5		1,212.5		1,200.4		1,211.8
Share-based awards	8.1		5.6		5.2		4.3
Total dilutive shares outstanding	1,207.6		1,218.1		1,205.6		1,216.1
Diluted earnings per share attributable to Viatris Inc. shareholders	$	0.27	$	0.29	$	0.68	$	0.88

Additional stock awards and Restricted Stock Awards were outstanding during the three and nine months ended September 30, 2023 and 2022, but were not included in the computation of diluted earnings per share for each respective period because the effect would be anti-dilutive. Excluded shares at September 30, 2023 include certain share-based compensation awards whose performance conditions had not been fully met. Such excluded shares and anti-dilutive awards represented 12.2 million shares and 16.8 million shares for the three and nine months ended September 30, 2023, respectively, and 14.7 million shares and 13.3 million shares for the three and nine months ended September 30, 2022, respectively.

The Company paid quarterly cash dividends of $0.12 per share on the Company’s issued and outstanding common stock on March 17, 2023, June 16, 2023, and September 15, 2023. On November 6, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share on the Company’s issued and outstanding common stock, which will be payable on December 15, 2023 to shareholders of record as of the close of business on November 24, 2023. The declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the Board of Directors, and will depend upon factors, including but not limited to, the Company’s financial condition, earnings, capital requirements of its businesses, legal requirements, regulatory constraints, industry practice, and other factors that the Board of Directors deems relevant.

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. 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 nine months ended September 30, 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of approximately $250 million. The Company did not repurchase any shares of common stock under the share repurchase program in 2022. The share repurchase program does not obligate the Company to acquire any particular amount of common stock.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

10.Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2023 are as follows:


(In millions)	Developed Markets (1)		Greater China		JANZ		Emerging Markets (2)		Total



Balance at December 31, 2022:	7,461.5		940.6		689.0		1,334.7		10,425.8
Acquisitions	95.3		—		—		—		95.3
Reclassification to assets held for sale	(49.7)		—		—		(16.2)		(65.9)
Foreign currency translation	(128.7)		(0.9)		(36.8)		(10.7)		(177.1)
Balance at September 30, 2023:	$	7,378.4	$	939.7	$	652.2	$	1,307.8	$	10,278.1

____________

(1)Balances as of September 30, 2023 and December 31, 2022 include an accumulated impairment loss of $385.0 million.

(2)Balances as of September 30, 2023 and December 31, 2022 include an accumulated impairment loss of $117.0 million.

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, 2023.

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, 2022, the Company has experienced significant fluctuations in foreign exchange rates in certain international markets, combined with a significant increase in market interest rates. These market factors have caused the discount rate utilized in all our reporting units to increase between 1.0% to 4.5%, resulting in a significant reduction in the calculated fair values at April 1, 2023 for all our reporting units. Also, in conjunction with the Company’s annual strategic planning process which included determining long-term growth rate targets for our business, operational results during the forecast period were reduced and long-term growth rates were increased. As a result of these changes, the calculated fair values of the North America, Greater China and Europe reporting units declined in excess of 10% and the JANZ and Emerging Markets reporting units declined in excess of 15% when compared to the prior year fair values.

As of April 1, 2023, the allocation of the Company’s total goodwill was as follows: North America $3.15 billion, Europe $4.47 billion, Emerging Markets $1.34 billion, JANZ $0.68 billion and Greater China $0.94 billion.

As of April 1, 2023, the Company determined that the fair value of the North America and Greater China reporting units was 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 $535 million or 3.9% for the annual goodwill impairment test. As it relates to the discounted cash flow approach for the Europe reporting unit at April 1, 2023, the Company forecasted cash flows for the next 10 years. During the forecast period, the revenue compound annual growth rate was approximately 2.4%. A terminal year value was calculated with a 2.0% revenue growth rate applied. The discount rate utilized was 11.0% and the estimated tax rate was 14.9%. If all other assumptions are held constant, a reduction in the terminal value growth rate by 1.0% or an increase in discount rate by 0.5% would result in an impairment charge for the Europe reporting unit.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

For the JANZ reporting unit, the estimated fair value exceeded its carrying value by approximately $145 million or 5.5% for the annual goodwill impairment test. As it relates to the discounted cash flow approach for the JANZ reporting unit at April 1, 2023, the Company forecasted cash flows for the next 10 years. During the forecast period, the revenue compound annual growth rate was approximately negative 2.0%. A terminal year value was calculated with a 1.5% revenue growth rate applied. The discount rate utilized was 7.0% and the estimated tax rate was 30.6%. If all other assumptions are held constant, a reduction in the terminal value growth rate by 0.5% or an increase in discount rate by 0.5% would result in an impairment charge for the JANZ reporting unit.

For the Emerging Markets reporting unit, the estimated fair value exceeded its carrying value by approximately $513 million or 7.7% for the annual goodwill impairment test. As it relates to the discounted cash flow approach for the Emerging Markets reporting unit at April 1, 2023, the Company forecasted cash flows for the next 10 years. During the forecast period, the revenue compound annual growth rate was approximately 1.8%. A terminal year value was calculated with a 2.0% revenue growth rate applied. The discount rate utilized was 11.5% and the estimated tax rate was 17.4%. If all other assumptions are held constant, a reduction in the terminal value growth rate by 2.5% or an increase in discount rate by 1.0% would result in an impairment charge for the Emerging Markets reporting unit.

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.

The Company allocated goodwill of $65.9 million to its women’s healthcare business using a relative fair value approach and reclassified the amount to Assets Held for Sale in the September 30, 2023 condensed consolidated balance sheet.

Intangible Assets, Net

Intangible assets consist of the following components at September 30, 2023 and December 31, 2022:


(In millions)	Weighted Average Life (Years)	Original Cost		Accumulated Amortization		Net Book Value
September 30, 2023
Product rights, licenses and other (1)	15	$	37,442.8	$	16,481.9	$	20,960.9
In-process research and development		319.6		—		319.6
		$	37,762.4	$	16,481.9	$	21,280.5
December 31, 2022
Product rights, licenses and other (1)	15	$	37,490.5	$	14,923.6	$	22,566.9
In-process research and development		40.2		—		40.2
		$	37,530.7	$	14,923.6	$	22,607.1

____________

(1)Represents amortizable intangible assets. Other intangible assets consists principally of customer lists and contractual rights.

During the nine months ended September 30, 2023, the Company recorded intangible assets of approximately $334.0 million as part of the Oyster Point acquisition, and IPR&D of approximately $290.0 million as part of the Famy Life Sciences acquisition. Refer to Note 4 Acquisitions and Other Transactions for additional information.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Amortization expense and intangible asset disposal & impairment charges (which are included as a component of amortization expense) are classified primarily within Cost of Sales in the condensed consolidated statements of operations and were as follows for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2023		2022		2023		2022
Intangible asset amortization expense	$	584.0	$	615.9	$	1,778.5	$	1,898.1
Intangible asset disposal & impairment charges	—		—		32.0		—

Total intangible asset amortization expense (including disposal & impairment charges)	$	584.0	$	615.9	$	1,810.5	$	1,898.1

During the nine months ended September 30, 2023, the Company recognized an intangible asset charge of approximately $32.0 million, which was recorded within Cost of Sales in the condensed consolidated statements of operations, to write down the disposal group to fair value, less cost to sell, related to our Upjohn Distributor Markets, which are classified as held for sale. Refer to Note 5 Divestitures for additional information.

Intangible asset amortization expense over the remainder of 2023 and for the years ending December 31, 2024 through 2027 is estimated to be as follows:


(In millions)
2023	$	573
2024	2,223
2025	2,149
2026	2,094
2027	1,882

11.Financial Instruments and Risk Management

The Company is exposed to certain financial risks relating to its ongoing business operations. The primary financial risks that are managed by using derivative instruments are foreign currency risk and interest rate risk.

Foreign Currency Risk Management

In order to manage certain foreign currency risks, the Company enters into foreign exchange forward contracts to mitigate risk associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities. The foreign exchange forward contracts are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. Any gains or losses on the foreign exchange forward contracts are recognized in earnings in the period incurred in the condensed consolidated statements of operations.

The Company has also entered into forward contracts to hedge forecasted foreign currency denominated sales from certain international subsidiaries and a portion of forecasted intercompany inventory sales denominated in Euro, Japanese Yen, Chinese Renminbi and Indian Rupee for up to twenty-four months. These contracts are designated as cash flow hedges to manage foreign currency transaction risk and are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. Any changes in the fair value of designated cash flow hedges are deferred in AOCE and are reclassified into earnings when the hedged item impacts earnings.

Net Investment Hedges

The Company may hedge the foreign currency risk associated with certain net investment positions in foreign subsidiaries by either borrowing directly in foreign currencies and designating all or a portion of the foreign currency debt as a hedge of the applicable net investment position or entering into foreign currency swaps that are designated as hedges of net investments.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

The Company has designated certain Euro and Yen borrowings as a hedge of its investment in certain Euro-functional and Yen-functional currency subsidiaries in order to manage foreign currency translation risk. Borrowings designated as net investment hedges are marked-to-market using the current spot exchange rate as of the end of the period, with gains and losses included in the foreign currency translation component of AOCE until the sale or substantial liquidation of the underlying net investments. In addition, the Company manages the related foreign exchange risk of the Euro and Yen borrowings not designated as net investment hedges through certain Euro and Yen denominated financial assets and forward currency swaps.

The following table summarizes the principal amounts of the Company’s outstanding Euro and Yen borrowings and the notional amounts of the Euro and Yen borrowings designated as net investment hedges:


			Notional Amount Designated as a Net Investment Hedge
(In millions)	Principal Amount		September 30, 2023		December 31, 2022
2.250% Euro Senior Notes due 2024	€	1,000.0	€	1,000.0	€	1,000.0
3.125% Euro Senior Notes due 2028	750.0		750.0		750.0
2.125% Euro Senior Notes due 2025	500.0		500.0		500.0
1.023% Euro Senior Notes due 2024	750.0		750.0		750.0
1.362% Euro Senior Notes due 2027	850.0		850.0		850.0
1.908% Euro Senior Notes due 2032	1,250.0		1,250.0		1,250.0

Total	€	5,100.0	€	5,100.0	€	5,100.0

Yen
YEN Term Loan	¥	40,000.0	¥	40,000.0	¥	40,000.0
Yen Total	¥	40,000.0	¥	40,000.0	¥	40,000.0

At September 30, 2023, the principal amount of the Company’s outstanding Yen borrowings and the notional amount of the Yen borrowings designated as net investment hedges was $267.8 million.

During the third quarter of 2023, the Company executed fixed-rate cross-currency interest rate swaps with notional amounts totaling Japanese Yen 14.6 billion with settlement dates through 2026. The transactions hedge a portion of the Company’s net investment in certain Yen-functional currency subsidiaries. All changes in the fair value of this derivative instrument, which is designated as a net investment hedge, are marked-to-market using the current spot exchange rate as of the end of the period. The portion of this change related to the excluded component will be amortized in interest expense over the life of the derivative while the remainder will be recorded in AOCE until the sale or substantial liquidation of the underlying net investments. The semiannual net interest payment received related to the fixed-rate component of the cross-currency interest rate swaps will be reflected in operating cash flows.

In October 2023, the Company executed foreign currency forward contracts with notional amounts totaling Euro 500 million with settlement dates in 2024. The transactions hedge a portion of the Company’s net investment in certain Euro functional currency subsidiaries. The contracts have been designated as a net investment hedge.

Interest Rate Risk Management

The Company enters into interest rate swaps from time to time in order to manage interest rate risk associated with the Company’s fixed-rate and floating-rate debt. Interest rate swaps that meet specific accounting criteria are accounted for as fair value or cash flow hedges. All derivative instruments used to manage interest rate risk are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. For fair value hedges, the changes in the fair value of both the hedging instrument and the underlying debt obligations are included in interest expense. For cash flow hedges, the change in fair value of the hedging instrument is deferred through AOCE and is reclassified into earnings when the hedged item impacts earnings.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Credit Risk Management

The Company regularly reviews the creditworthiness of its financial counterparties and does not expect to incur a significant loss from the failure of any counterparties to perform under any agreements. The Company is not subject to any obligations to post collateral under derivative instrument contracts. Certain derivative instrument contracts entered into by the Company are governed by master agreements, which contain credit-risk-related contingent features that would allow the counterparties to terminate the contracts early and request immediate payment should the Company trigger an event of default on other specified borrowings. The Company records all derivative instruments on a gross basis in the condensed consolidated balance sheets. Accordingly, there are no offsetting amounts that net assets against liabilities.

The following table summarizes the classification and fair values of derivative instruments in our condensed consolidated balance sheets:


	Asset Derivatives					Liability Derivatives
(In millions)	Balance Sheet Location	September 30, 2023 Fair Value		December 31, 2022 Fair Value		Balance Sheet Location	September 30, 2023 Fair Value		December 31, 2022 Fair Value
Derivatives designated as hedges:

Foreign currency forward contracts	Prepaid expenses & other current assets	$	49.7	$	30.4	Other current liabilities	$	3.4	$	26.4
Total derivatives designated as hedges		49.7		30.4			3.4		26.4
Derivatives not designated as hedges:
Foreign currency forward contracts	Prepaid expenses & other current assets	125.0		104.3		Other current liabilities	45.8		160.6
Total derivatives not designated as hedges		125.0		104.3			45.8		160.6
Total derivatives		$	174.7	$	134.7		$	49.2	$	187.0

The following table summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:


		Amount of Gains/(Losses) Recognized in Earnings				Amount of Gains/(Losses) Recognized in AOCE (Net of Tax) on Derivatives				Amount of Gains/(Losses) Reclassified from AOCE into Earnings
		Three months ended September 30,
(In millions)	Location of Gain/(Loss)	2023		2022		2023		2022		2023		2022



Derivative Financial Instruments in Cash Flow Hedging Relationships (1) :
Foreign currency forward contracts	Net sales (3)	$	—	$	—	$	17.3	$	35.3	$	15.8	$	32.2
Interest rate swaps	Interest expense (3)	—		—		(1.0)		(0.9)		(1.2)		(1.2)
Derivative Financial Instruments in Net Investment Hedging Relationships:
Cross-currency interest rate swaps	Interest expense (2)	0.5		—		1.4		—		—		—
Non-derivative Financial Instruments in Net Investment Hedging Relationships:
Foreign currency borrowings		—		—		145.1		292.9		—		—
Derivative Financial Instruments Not Designated as Hedging Instruments:
Foreign currency option and forward contracts	Other (income) expense, net (2)	122.2		(82.7)		—		—		—		—
Total		$	122.7	$	(82.7)	$	162.8	$	327.3	$	14.6	$	31.0

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


		Amount of Gains/(Losses) Recognized in Earnings				Amount of Gains/(Losses) Recognized in AOCE (Net of Tax) on Derivatives				Amount of Gains/(Losses) Reclassified from AOCE into Earnings
		Nine months ended September 30,
(In millions)	Location of Gain/(Loss)	2023		2022		2023		2022		2023		2022



Derivative Financial Instruments in Cash Flow Hedging Relationships (1) :
Foreign currency forward contracts	Net sales (3)	$	—	$	—	$	60.8	$	78.1	$	32.5	$	74.5
Interest rate swaps	Interest expense (3)	—		—		(2.8)		(2.6)		(3.5)		(3.4)
Derivative Financial Instruments in Net Investment Hedging Relationships:
Cross-currency interest rate swaps	Interest expense (2)	0.5		—		1.4		—		—		—
Non-derivative Financial Instruments in Net Investment Hedging Relationships:
Foreign currency borrowings		—		—		83.1		747.8		—		—
Derivative Financial Instruments Not Designated as Hedging Instruments:
Foreign currency option and forward contracts	Other (income) expense, net (2)	135.4		(7.9)		—		—		—		—
Total		$	135.9	$	(7.9)	$	142.5	$	823.3	$	29.0	$	71.1

____________

(1)At September 30, 2023, the Company expects that approximately $11.0 million of pre-tax net gains on cash flow hedges will be reclassified from AOCE into earnings during the next twelve months.

(2)Represents the location of the gain/(loss) recognized in earnings on derivatives.

(3)Represents the location of the gain/(loss) reclassified from AOCE into earnings.

Fair Value Measurement

Fair value is based on the price that would be received from the sale of an identical asset or paid to transfer an identical liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy has been established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

•Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•Level 2: Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.

•Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Financial assets and liabilities carried at fair value are classified in the tables below in one of the three categories described above:


	September 30, 2023						December 31, 2022
(In millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Recurring fair value measurements
Financial Assets
Cash equivalents:
Money market funds	$	1,009.6	$	—	$	—	$	688.8	$	—	$	—
Total cash equivalents	1,009.6		—		—		688.8		—		—
Equity securities:
Exchange traded funds	44.9		—		—		42.4		—		—
Marketable securities	0.2		—		—		0.2		—		—
Total equity securities	45.1		—		—		42.6		—		—
CCPS in Biocon Biologics	—		—		1,048.0		—		—		997.4
Available-for-sale fixed income investments:
Corporate bonds	—		14.7		—		—		13.2		—
U.S. Treasuries	—		10.4		—		—		11.7		—
Agency mortgage-backed securities	—		4.8		—		—		4.7		—
Asset backed securities	—		5.0		—		—		5.1		—
Other	—		0.2		—		—		0.6		—
Total available-for-sale fixed income investments	—		35.1		—		—		35.3		—
Foreign exchange derivative assets	—		174.7		—		—		134.7		—

Total assets at recurring fair value measurement	$	1,054.7	$	209.8	$	1,048.0	$	731.4	$	170.0	$	997.4
Financial Liabilities

Foreign exchange derivative liabilities	—		49.2		—		—		187.0		—
Contingent consideration	—		—		371.1		—		—		375.0
Total liabilities at recurring fair value measurement	$	—	$	49.2	$	371.1	$	—	$	187.0	$	375.0

For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including interest rate yield curves, foreign exchange forward prices and bank price quotes. Below is a summary of valuation techniques for the Company’s financial assets and liabilities:

•Cash equivalents — valued at observable net asset value prices.

•Equity securities, exchange traded funds — valued at the active quoted market prices from broker or dealer quotations or transparent pricing sources at the reporting date. Unrealized gains and losses attributable to changes in fair value are included in Other (income) expense, net in the condensed consolidated statements of operations.

•Equity securities, marketable securities — valued using quoted stock prices from public exchanges at the reporting date. Unrealized gains and losses attributable to changes in fair value are included in Other (income) expense, net in the condensed consolidated statements of operations.

•CCPS in Biocon Biologics — valued using a Monte Carlo simulation model using Level 3 inputs. The fair value of the CCPS is sensitive to changes in the forecasts of operating metrics, changes in volatility and discount rates, and share dilution. The Company elected the fair value option for the CCPS under ASC 825. The fair value is reassessed quarterly and any change in the fair value estimate is recorded in Other (income) expense, net, in the condensed consolidated statements of operations for that period. Subsequent to the September 30, 2023 valuation, changes to certain market factors would result in a decline in the fair value of the CCPS by approximately 10% assuming no recovery in these market factors.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

•Available-for-sale fixed income investments — valued at the quoted market prices from broker or dealer quotations or transparent pricing sources at the reporting date. Unrealized gains and losses attributable to changes in fair value, net of income taxes, are included in accumulated other comprehensive loss as a component of shareholders’ equity.

•Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices and spot rates at the reporting date. Counterparties to these contracts are highly rated financial institutions.

Contingent Consideration

As of September 30, 2023 and December 31, 2022, the Company had a contingent consideration liability of $232.0 million and $221.2 million, respectively, relating to the Biocon Biologics Transaction. This contingent consideration liability represents the amount of the closing working capital target to which the parties have agreed that may become payable to Biocon Biologics in connection with certain events in the future, depending on the valuations attributable to such events. The remaining contingent consideration liability represents a component of the total purchase consideration for Pfizer’s Respiratory Delivery Platform and certain other acquisitions. The measurement of these contingent consideration liabilities is calculated using unobservable Level 3 inputs based on the Company’s own assumptions primarily related to the probability and timing of future events and payments which are discounted using a market rate of return. At September 30, 2023 and December 31, 2022, discount rates ranging from 6.4% to 9.5% were utilized in the valuations. Significant changes in unobservable inputs could result in material changes to the contingent consideration liability.

A rollforward of the activity in the Company’s fair value of contingent consideration from December 31, 2022 to September 30, 2023 is as follows:


(In millions)	Current Portion (1)		Long-Term Portion (2)		Total Contingent Consideration
Balance at December 31, 2022	$	64.4	$	310.6	$	375.0
Payments	(33.6)		—		(33.6)
Reclassifications	28.6		(28.6)		—
Accretion	—		17.1		17.1
Fair value loss (3)	—		12.6		12.6
Balance at September 30, 2023	$	59.4	$	311.7	$	371.1

____________

(1)Included in other current liabilities in the condensed consolidated balance sheets.

(2)Included in other long-term obligations in the condensed consolidated balance sheets.

(3)Included in litigation settlements and other contingencies, net in the condensed consolidated statements of operations.

Although the Company has not elected the fair value option for other financial assets and liabilities other than the CCPS, any future transacted financial asset or liability will be evaluated for the fair value election.

12.Debt

For additional information, see Note 11 Debt in Viatris’ 2022 Form 10-K.

Receivables Facility and Note Securitization 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. 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. Amounts outstanding under either facility are included as a component of short-term borrowings, while the accounts receivables securing these obligations remain as a component of accounts receivable, net, in our condensed consolidated balance sheets.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Long-Term Debt

Effective April 28, 2023, we executed an amendment to the Revolving Facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins.

A summary of long-term debt is as follows:


($ in millions)	Interest Rate as of September 30, 2023		September 30, 2023		December 31, 2022
Current portion of long-term debt:


2023 Senior Notes (a) *	3.125	%	$	—	$	750.6
2023 Senior Notes *	4.200	%	500.0		499.8
2024 Euro Senior Notes ****	1.023	%	798.1		—
Other			0.7		0.7
Deferred financing fees			(0.1)		(0.6)
Current portion of long-term debt			$	1,298.7	$	1,250.5

Non-current portion of long-term debt:


2024 Euro Senior Notes **	2.250	%	1,056.9		1,069.8
2024 Euro Senior Notes ****	1.023	%	—		813.5
2025 Euro Senior Notes *	2.125	%	528.3		534.8
2025 Senior Notes ***	1.650	%	756.7		759.6
2026 Senior Notes **	3.950	%	2,244.6		2,243.2
2027 Euro Senior Notes ****	1.362	%	928.3		945.9
2027 Senior Notes ***	2.300	%	771.2		775.3
2028 Euro Senior Notes **	3.125	%	789.2		798.5
2028 Senior Notes *	4.550	%	749.1		748.9
2030 Senior Notes ***	2.700	%	1,506.9		1,512.8
2032 Euro Senior Notes ****	1.908	%	1,418.7		1,444.4
2040 Senior Notes ***	3.850	%	1,645.6		1,650.6
2043 Senior Notes *	5.400	%	497.4		497.4
2046 Senior Notes **	5.250	%	999.9		999.9
2048 Senior Notes *	5.200	%	747.8		747.8
2050 Senior Notes ***	4.000	%	2,197.4		2,200.8
YEN Term Loan Facility	Variable		267.8		305.1
Other			2.5		2.0
Deferred financing fees			(31.4)		(35.1)
Long-term debt			$	17,076.9	$	18,015.2

____________

(a) In the first quarter of 2020, the Company terminated interest rate swaps designated as a fair value hedge resulting in net proceeds of approximately $45 million. The fair value adjustment was amortized to interest expense over the remaining term of the notes, which were repaid at maturity in the first quarter of 2023.

* Instrument was issued by Mylan Inc.

** Instrument was originally issued by Mylan N.V.; now held by Utah Acquisition Sub Inc.

*** Instrument was issued by Viatris Inc.

**** Instrument was issued by Upjohn Finance B.V.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

At September 30, 2023 and December 31, 2022, the aggregate fair value of the Company’s outstanding notes was approximately $14.50 billion and $15.36 billion, respectively. The fair values of the outstanding notes were valued at quoted market prices from broker or dealer quotations and were classified as Level 2 in the fair value hierarchy.

Mandatory minimum repayments remaining on the notional amount of outstanding long-term debt at September 30, 2023 were as follows for each of the periods ending December 31:


(In millions)	Total
2023	$	500
2024	1,850
2025	1,279
2026	2,518
2027	1,649
Thereafter	10,064
Total	$	17,860

13.Comprehensive Loss

Accumulated other comprehensive loss, as reflected in the condensed consolidated balance sheets, is comprised of the following:


(In millions)	September 30, 2023		December 31, 2022
Accumulated other comprehensive loss:
Net unrealized loss on marketable securities, net of tax	$	(2.5)	$	(2.3)
Net unrecognized gain and prior service cost related to defined benefit plans, net of tax	260.5		268.5
Net unrecognized gain (loss) on derivatives in cash flow hedging relationships, net of tax	17.5		(18.5)
Net unrecognized gain on derivatives in net investment hedging relationships, net of tax	461.5		377.0
Foreign currency translation adjustment	(3,945.5)		(3,385.9)
	$	(3,208.5)	$	(2,761.2)

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Components of accumulated other comprehensive loss, before tax, consist of the following, for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30, 2023
	Gains and Losses on Derivatives in Cash Flow Hedging Relationships				Gains and Losses on Net Investment Hedges		Gains and Losses on Marketable Securities		Defined Pension Plan Items		Foreign Currency Translation Adjustment		Totals
(In millions)	Foreign Currency Forward Contracts	Interest Rate Swaps	Total
Balance at June 30, 2023, net of tax			$	10.9	$	315.0	$	(1.3)	$	264.5	$	(3,594.7)	$	(3,005.6)
Other comprehensive earnings (loss) before reclassifications, before tax			23.4		186.8		(1.3)		(2.7)		(350.8)		(144.6)
Amounts reclassified from accumulated other comprehensive (loss) earnings, before tax:
Gain on foreign exchange forward contracts classified as cash flow hedges, included in net sales	(15.8)		(15.8)										(15.8)
Loss on interest rate swaps classified as cash flow hedges, included in interest expense		1.2	1.2										1.2
Loss on divestiture of defined pension plan, included in SG&A									2.6				2.6
Amortization of prior service costs included in SG&A									0.1				0.1
Amortization of actuarial gain included in SG&A									(4.9)				(4.9)
Net other comprehensive earnings (loss), before tax			8.8		186.8		(1.3)		(4.9)		(350.8)		(161.4)
Income tax provision (benefit)			2.2		40.3		(0.1)		(0.9)		—		41.5

Balance at September 30, 2023, net of tax			$	17.5	$	461.5	$	(2.5)	$	260.5	$	(3,945.5)	$	(3,208.5)

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


	Nine Months Ended September 30, 2023
	Gains and Losses on Derivatives in Cash Flow Hedging Relationships				Gains and Losses on Net Investment Hedges		Gains and Losses on Marketable Securities		Defined Pension Plan Items		Foreign Currency Translation Adjustment		Totals
(In millions)	Foreign Currency Forward Contracts	Interest Rate Swaps	Total
Balance at December 31, 2022, net of tax			$	(18.5)	$	377.0	$	(2.3)	$	268.5	$	(3,385.9)	$	(2,761.2)
Other comprehensive earnings (loss) before reclassifications, before tax			77.4		107.8		(0.2)		7.4		(559.6)		(367.2)
Amounts reclassified from accumulated other comprehensive (loss) earnings, before tax:
Gain on foreign exchange forward contracts classified as cash flow hedges, included in net sales	(32.5)		(32.5)										(32.5)
Loss on interest rate swaps classified as cash flow hedges, included in interest expense		3.5	3.5										3.5
Gain on divestiture of defined pension plan, included in SG&A									(3.0)				(3.0)
Amortization of prior service costs included in SG&A									0.1				0.1
Amortization of actuarial gain included in SG&A									(14.9)				(14.9)
Net other comprehensive earnings (loss), before tax			48.4		107.8		(0.2)		(10.4)		(559.6)		(414.0)
Income tax provision (benefit)			12.4		23.3		—		(2.4)		—		33.3

Balance at September 30, 2023, net of tax			$	17.5	$	461.5	$	(2.5)	$	260.5	$	(3,945.5)	$	(3,208.5)

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


	Three Months Ended September 30, 2022
	Gains and Losses on Derivatives in Cash Flow Hedging Relationships				Gains and Losses on Net Investment Hedges		Gains and Losses on Marketable Securities		Defined Pension Plan Items		Foreign Currency Translation Adjustment		Totals
(In millions)	Foreign Currency Forward Contracts	Interest Rate Swaps	Total
Balance at June 30, 2022, net of tax			$	22.7	$	471.6	$	(2.1)	$	30.1	$	(3,421.5)	$	(2,899.2)
Other comprehensive earnings (loss) before reclassifications, before tax			46.7		376.7		(0.8)		(1.3)		(1,163.0)		(741.7)
Amounts reclassified from accumulated other comprehensive earnings (loss), before tax:
Gain on foreign exchange forward contracts classified as cash flow hedges, included in net sales	(32.2)		(32.2)										(32.2)
Loss on interest rate swaps classified as cash flow hedges, included in interest expense		1.2	1.2										1.2
Amortization of prior service costs included in SG&A									0.1				0.1

Net other comprehensive earnings (loss), before tax			15.7		376.7		(0.8)		(1.2)		(1,163.0)		(772.6)
Income tax provision (benefit)			3.9		83.9		(0.2)		(0.3)		—		87.3

Balance at September 30, 2022, net of tax			$	34.5	$	764.4	$	(2.7)	$	29.2	$	(4,584.5)	$	(3,759.1)

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued


	Nine Months Ended September 30, 2022
	Gains and Losses on Derivatives in Cash Flow Hedging Relationships				Gains and Losses on Net Investment Hedges		Gains and Losses on Marketable Securities		Defined Pension Plan Items		Foreign Currency Translation Adjustment		Totals
(In millions)	Foreign Currency Forward Contracts	Interest Rate Swaps	Total
Balance at December 31, 2021, net of tax			$	9.2	$	16.7	$	—	$	32.2	$	(1,802.4)	$	(1,744.3)
Other comprehensive earnings (loss) before reclassifications, before tax			104.6		962.4		(3.5)		(3.6)		(2,782.1)		(1,722.2)
Amounts reclassified from accumulated other comprehensive earnings (loss), before tax:
Gain on foreign exchange forward contracts classified as cash flow hedges, included in net sales	(74.5)		(74.5)										(74.5)
Loss on interest rate swaps classified as cash flow hedges, included in interest expense		3.4	3.4										3.4
Amortization of prior service costs included in SG&A									0.2				0.2
Amortization of actuarial loss included in SG&A									0.1				0.1
Net other comprehensive earnings (loss), before tax			33.5		962.4		(3.5)		(3.3)		(2,782.1)		(1,793.0)
Income tax provision (benefit)			8.2		214.7		(0.8)		(0.3)		—		221.8

Balance at September 30, 2022, net of tax			$	34.5	$	764.4	$	(2.7)	$	29.2	$	(4,584.5)	$	(3,759.1)

14.Segment Information

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, complex generics and generic 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.

The Company’s chief operating decision maker is the Chief Executive Officer, who evaluates the performance of its segments based on total revenues and segment profitability.

Certain costs are not included in the measurement of segment profitability, such as costs, if any, associated with the following:

◦Intangible asset amortization expense and impairments of goodwill and long-lived assets;

◦R&D and acquired IPR&D expense;

◦Net charges or net gains for litigation settlements and other contingencies;

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

◦Certain costs related to transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory and property, plant and equipment; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) other significant items, which are substantive and/or unusual, and in some cases recurring, items (such as restructuring) that are evaluated on an individual basis by management and that either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such special items can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for asset impairments and disposals of assets or businesses, including costs related to our planned divestitures and the Biocon Biologics Transaction, and, as applicable, any associated transition activities.

◦Corporate and other unallocated costs associated with platform functions (such as digital, facilities, legal, finance, human resources, insurance, public affairs and procurement), patient advocacy activities and certain compensation and other corporate costs (such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing, which include manufacturing variances associated with production) and operations that are not directly assessed to an operating segment as business unit (segment) management does not manage these costs.

The Company does not report depreciation expense, total assets and capital expenditures by segment, as such information is not used by the chief operating decision maker.

The accounting policies of the segments are the same as those described in Note 2 Summary of Significant Accounting Policies included in the 2022 Form 10-K.

Presented in the table below is segment information for the periods identified and a reconciliation of segment information to total consolidated information.


	Net Sales				Segment Profitability
	Three Months Ended September 30,				Three Months Ended September 30,

(In millions)	2023		2022		2023		2022
Reportable Segments:
Developed Markets	$	2,408.5	$	2,431.5	$	1,087.0	$	1,236.3
Greater China	548.4		574.0		354.6		403.5
JANZ	334.5		383.0		125.4		163.6
Emerging Markets	642.5		678.9		273.6		330.5
Total reportable segments	$	3,933.9	$	4,067.4	$	1,840.6	$	2,133.9

Reconciling items:
Intangible asset amortization expense					(584.0)		(615.9)

Globally managed research and development costs					(211.2)		(174.9)
Acquired IPR&D					(1.0)		—
Litigation settlements & other contingencies					26.1		3.9
Transaction related and other special items					(207.3)		(239.1)
Corporate and other unallocated					(411.5)		(547.8)
Earnings from operations					$	451.7	$	560.1

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	Net Sales				Segment Profitability
	Nine months ended September 30,				Nine months ended September 30,

(In millions)	2023		2022		2023		2022
Reportable Segments:
Developed Markets	$	6,932.7	$	7,386.7	$	3,085.4	$	3,703.1
Greater China	1,645.1		1,695.4		1,098.6		1,214.0
JANZ	1,052.2		1,233.9		387.5		496.0
Emerging Markets	1,932.5		2,035.0		863.5		976.8
Total reportable segments	$	11,562.5	$	12,351.0	$	5,435.0	$	6,389.9

Reconciling items:
Intangible asset amortization expense					(1,778.5)		(1,898.1)
Intangible asset disposal & impairment charges					(32.0)		—
Globally managed research and development costs					(602.4)		(479.8)
Acquired IPR&D					(11.2)		—
Litigation settlements & other contingencies					36.5		(13.2)
Transaction related and other special items					(620.4)		(651.8)
Corporate and other unallocated					(1,206.4)		(1,530.8)
Earnings from operations					$	1,220.7	$	1,816.2

15.Restructuring

2020 Restructuring Program

During 2020, Viatris announced a significant global restructuring program in order to achieve synergies and ensure that the organization is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders. As part of the restructuring, the Company is optimizing its commercial capabilities and enabling functions, and closing, downsizing or divesting certain manufacturing facilities globally that are deemed to be no longer viable either due to surplus capacity, challenging market dynamics or a shift in its product portfolio toward more complex products. The remaining actions under the 2020 restructuring program are expected to be substantially completed in 2023.

For the committed restructuring actions, the Company expects to incur total pre-tax charges of up to approximately $1.4 billion. Such charges are expected to include up to approximately $450 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges, including inventory write-offs. The remaining estimated cash costs of up to approximately $950 million are expected to be primarily related to severance and employee benefits expense, as well as other costs, including those related to contract terminations and other plant disposal costs.

Charges for restructuring and ongoing cost reduction initiatives are recorded in the period the Company commits to a restructuring or cost reduction plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met.

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The following table summarizes the restructuring charges and the reserve activity for the 2020 restructuring program from December 31, 2022 to September 30, 2023:


(In millions)	Employee Related Costs		Other Exit Costs		Total
Balance at December 31, 2022:	$	155.6	$	1.9	$	157.5
Charges (1)	2.8		6.9		9.7

Cash payment	(24.5)		(3.1)		(27.6)
Utilization	—		(3.8)		(3.8)
Foreign currency translation	0.3		—		0.3
Balance at March 31, 2023:	$	134.2	$	1.9	$	136.1
Charges (1)	1.4		72.6		74.0

Cash payment	(22.5)		(1.6)		(24.1)
Utilization (2)	(4.4)		(72.9)		(77.3)
Foreign currency translation	—		—		—
Balance at June 30, 2023:	$	108.7	$	—	$	108.7
Charges (1)	1.9		13.0		14.9

Cash payment	(14.8)		(3.6)		(18.4)
Utilization	3.1		(9.4)		(6.3)
Foreign currency translation	(0.6)		—		(0.6)
Balance at September 30, 2023:	$	98.3	$	—	$	98.3

____________

(1) For the three months ended September 30, 2023, total restructuring charges in Developed Markets, Emerging Markets, Greater China, JANZ, and Corporate/Other were approximately $13.0 million, $3.5 million, $0.2 million, $(2.0) million, and $0.2 million, respectively.

For the nine months ended September 30, 2023, total restructuring charges in Developed Markets, Emerging Markets, Greater China, JANZ, and Corporate/Other were approximately $62.4 million, $6.8 million, $(0.4) million, $29.3 million, and $0.5 million, respectively.

(2) During the second quarter of 2023, other exit costs included expense of $71.6 million relating to plant divestitures.

At September 30, 2023 and December 31, 2022, accrued liabilities for restructuring and other cost reduction programs were primarily included in other current liabilities and other long-term obligations in the condensed consolidated balance sheets.

16.Licensing and Other Partner Agreements

We periodically enter into licensing and other partner agreements with other pharmaceutical companies for the development, manufacture, marketing and/or sale of pharmaceutical products. Our significant licensing and other partner agreements are primarily focused on the development, manufacturing, supply and commercialization of multiple complex products. Under these agreements, we have future potential milestone payments and co-development expenses payable to third parties as part of our licensing, development and co-development programs. Payments under these agreements generally become due and are payable upon the satisfaction or achievement of certain developmental, regulatory or commercial milestones or as development expenses are incurred on defined projects. Milestone payment obligations are uncertain, including the prediction of timing and the occurrence of events triggering a future obligation and are not reflected as liabilities in the condensed consolidated balance sheets, except for obligations reflected as acquisition related contingent consideration. Refer to Note 11 Financial Instruments and Risk Management for further discussion of contingent consideration.

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Our potential maximum development milestones not accrued for at September 30, 2023 totaled approximately $407 million. These agreements may also include potential sales-based milestones and call for us to pay a percentage of amounts earned from the sale of the product as a royalty or a profit share. The amounts disclosed do not include sales-based milestones or royalty or profit share obligations on future sales of product as the timing and amount of future sales levels and costs to produce products subject to these obligations is not reasonably estimable. These sales-based milestones or royalty or profit share obligations may be significant depending upon the level of commercial sales for each product.

There have been no significant changes to our licensing and other partner agreements as disclosed in our 2022 Form 10-K.

17.Income Taxes

Legislative Updates

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law, which includes a new corporate alternative minimum tax (“CAMT”) and an excise tax of 1% on the fair market value of net stock repurchases. Both provisions are effective for years after December 31, 2022. The Company reflected the applicable estimated excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability in Other current liabilities on our condensed consolidated balance sheet as of September 30, 2023. The share repurchase and authorization amounts disclosed in this Form 10-Q exclude the excise tax. The Company does not anticipate being subject to the 15% CAMT tax in 2023 based on enacted law and regulatory guidance; however, our CAMT status for 2023 could change in the future, depending on new regulations or regulatory guidance issued by the U.S. Department of the Treasury.

Tax Examinations

The Company is subject to income taxes and tax audits in many jurisdictions. A certain degree of estimation is thus required in recording the assets and liabilities related to income taxes. Tax audits and examinations can involve complex issues, interpretations, and judgments and the resolution of matters that may span multiple years, particularly if subject to litigation or negotiation.

Although the Company believes that adequate provisions have been made for these uncertain tax positions, the Company’s assessment of uncertain tax positions, including those arising from legal entity restructuring transactions in connection with the Combination, is based on estimates and assumptions that the Company believes are reasonable but the estimates for unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variations from such estimates could materially affect the Company’s financial condition, results of operations or cash flows in the period of resolution, settlement or when the statutes of limitations expire.

The Company is subject to ongoing IRS examinations. The years 2015 through 2021 are open years under examination. The years 2012, 2013 and 2014 have one matter open, and a Tax Court petition was filed regarding the matter and a trial was held in December 2018 and is discussed further below.

Several international audits are currently in progress. In some cases, the tax auditors have proposed adjustments or issued assessments to our tax positions, including with respect to intercompany transactions, and we are in ongoing discussions with some of the auditors regarding the validity of their tax positions.

In instances where assessments have been issued, we disagree with these assessments and believe they are without merit and incorrect as a matter of law. As a result, we anticipate that certain of these matters may become the subject of litigation before tax courts where we intend to vigorously defend our position.

In Australia, the tax authorities have issued notices of assessments to the Company for the years ended December 2009 to December 2020, subject to additional interest and penalties, concerning our tax position with respect to certain intercompany transactions. The tax authorities denied our objections to the assessments for the years ended December 2009 to December 2020 and we have commenced litigation in the Australian Federal Court challenging those decisions. A trial took place in October 2023 and a decision is awaited. The Company made a partial payment of $56.0 million in 2021 and $5.2 million in 2022 in order to stay potential interest and penalties resulting from this litigation.

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In France, the tax authorities have issued notices of assessments to the Company for the years ended December 2013 to December 2015 concerning our tax position with respect to whether income earned by a Company entity not domiciled in France should be subject to French tax. We have commenced litigation before the French tax courts where the tax authorities will seek unpaid taxes, penalties, and interest.

In India, the tax authorities have issued notices of assessments to the Company seeking unpaid taxes and interest for the financial years covering 2013 to 2018 concerning our tax position with respect to certain corporate tax deductions and certain intercompany transactions. Some of these issues were resolved through the Company entering into an agreement with the tax authorities in March 2023 in respect of the pricing of its international transactions. The Company recorded tax expense of approximately $22.3 million during the nine months ended September 30, 2023, due to the terms of this agreement. The remaining issues are in the audit phase or are being challenged in the Indian tax courts.

The Company has recorded a net reserve for uncertain tax positions of $279.1 million and $298.1 million, including interest and penalties, in connection with its international audits at September 30, 2023 and December 31, 2022, respectively. In connection with our international tax audits, it is possible that we will incur material losses above the amounts reserved.

The Company’s major U.S. state taxing jurisdictions remain open from fiscal year 2013 through 2022, with several state audits currently in progress. The Company’s major international taxing jurisdictions remain open from 2012 through 2022.

Tax Court Proceedings

The Company's U.S. federal income tax returns for 2012 through 2014 had been subject to proceedings in U.S. Tax Court involving a dispute with the IRS regarding whether certain costs related to ANDAs were eligible to be expensed and deducted immediately or required to be amortized over longer periods. A trial was held in U.S. Tax Court in December 2018 and on April 27, 2021, the Court affirmed Mylan’s position and held that patent litigation expenses related to ANDAs are immediately deductible. The IRS’ appeal was denied by the U.S. Court of Appeals for the Third Circuit and this matter is now closed.

Accounting for Uncertainty in Income Taxes

The impact of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained.

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18.Litigation

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.

In addition, in connection with the Combination, the Company has generally assumed liability for, and control of, pending and threatened legal matters relating to the Upjohn Business – including certain matters initiated against Pfizer described below – and has agreed to indemnify Pfizer for liabilities arising out of such assumed legal matters. Pfizer, however, has agreed to retain various matters – including certain specified competition law matters – to the extent they arise from conduct during the pre-Distribution period and has agreed to indemnify the Company for liabilities arising out of such matters.

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.

Some of these governmental inquiries, investigations, proceedings and litigation matters with which the Company is involved are described below, and unless otherwise disclosed, the Company is unable to predict the outcome of the matter or to provide an estimate of the range of reasonably possible material losses. The Company records accruals for loss contingencies to the extent we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company is also involved in other pending proceedings for which, in the opinion of the Company based upon facts and circumstances known at the time, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s business, financial position, results of operations, cash flows, ability to pay dividends and/or stock price. If and when any reasonably possible losses associated with the resolution of such other pending proceedings, in the opinion of the Company, become material, the Company will disclose such matters.

Legal costs are recorded as incurred and are classified in SG&A in the Company’s condensed consolidated statements of operations.

EpiPen® Auto-Injector Litigation

On February 14, 2020, the Company, together with other non-Viatris affiliated companies, were named as defendants in a putative direct purchaser class action filed in the U.S. District Court for the District of Kansas relating to the pricing and/or marketing of the EpiPen® Auto-Injector. On September 21, 2021, after Plaintiffs’ then operative complaint was dismissed with an option to file a limited amended complaint, Plaintiffs filed an amended complaint asserting federal antitrust claims which are based on allegations concerning a patent settlement between Pfizer and Teva and other alleged actions regarding the launch of Teva’s generic epinephrine auto-injector. Plaintiffs’ seek monetary damages, declaratory relief, attorneys’ fees and costs.

Beginning in March 2020, the Company, together with other non-Viatris affiliated companies, were named as defendants in putative direct purchaser class actions filed in the U.S. District Court for the District of Minnesota relating to contracts with certain pharmacy benefit managers concerning EpiPen® Auto-Injector. The plaintiffs claim that the alleged conduct resulted in the exclusion or restriction of competing products and the elimination of pricing constraints in violation of RICO and federal antitrust law. These actions have been consolidated. Plaintiffs’ seek monetary damages, attorneys’ fees and costs.

On April 24, 2017, Sanofi Aventis U.S., LLC (“Sanofi”) filed a lawsuit against the Company in the U.S. District Court for the District of New Jersey. This lawsuit was transferred into a MDL in the U.S. District Court for the District of Kansas and alleged exclusive dealing and anti-competitive marketing practices in violation of the antitrust laws in connection with the sale and marketing of the EpiPen® Auto-Injector. Sanofi sought monetary damages, declaratory relief, attorneys’ fees and costs. The Court granted the Company’s motion for summary judgment and dismissed Sanofi’s claims. Sanofi’s appeal was denied. Sanofi’s petition seeking review by the U.S. Supreme Court was also denied and concludes this matter.

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The Company has a total accrual of approximately $5.5 million related to these matters at September 30, 2023, which is included in other current liabilities in the condensed consolidated balance sheets. Although it is reasonably possible that the Company may incur additional losses from these matters, any amount cannot be reasonably estimated at this time. In addition, the Company expects to incur additional legal and other professional service expenses associated with such matters in future periods and will recognize these expenses as services are received. The Company believes that the ultimate amount paid for these services and claims 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 in future periods.

Drug Pricing Matters

Department of Justice

On December 3, 2015, the Company received a subpoena from the Antitrust Division of the DOJ seeking information relating to the marketing, pricing, and sale of certain of our generic products and any communications with competitors about such products. On September 8, 2016, the Company, as well as certain employees and a member of senior management, received subpoenas from the DOJ seeking similar information. Related search warrants also were executed.

On May 10, 2018, the Company received a civil investigative demand from the Civil Division of the DOJ seeking information relating to the pricing and sale of its generic drug products.

We have fully cooperated with these investigations, which we believe are related to a broader industry-wide investigation of the generic pharmaceutical industry. We have not had contact from DOJ concerning the above-described subpoenas or civil investigative demand in several years.

Civil Litigation

Beginning in 2016, the Company, along with other manufacturers, has been named as a defendant in lawsuits filed in the United States and Canada generally alleging anticompetitive conduct with respect to generic drugs. The lawsuits have been filed by plaintiffs, including putative classes of direct purchasers, indirect purchasers, and indirect resellers, as well as individual direct and indirect purchasers and certain cities and counties. The lawsuits allege harm under federal laws and the United States lawsuits also allege harm under state laws, including antitrust laws, state consumer protection laws and unjust enrichment claims. Some of the United States lawsuits also name as defendants the Company’s President, including allegations against him with respect to a single drug product, and one of the Company’s sales employees, including allegations against him with respect to certain generic drugs. The vast majority of the lawsuits have been consolidated in an MDL proceeding in the Eastern District of Pennsylvania (“EDPA”). Plaintiffs generally seek monetary damages, restitution, declaratory and injunctive relief, attorneys’ fees and costs. The EDPA Court has ordered certain plaintiffs’ complaints regarding two single-drug product cases to proceed as bellwethers. The Company is named in those plaintiffs’ complaints that regard one of the two individual drug products.

Attorneys General Litigation

On December 21, 2015, the Company received a subpoena and interrogatories from the Connecticut Office of the Attorney General seeking information relating to the marketing, pricing and sale of certain of the Company’s generic products and communications with competitors about such products. On December 14, 2016, attorneys general of certain states filed a complaint in the United States District Court for the District of Connecticut against several generic pharmaceutical drug manufacturers, including the Company, alleging anticompetitive conduct with respect to, among other things, a single drug product. The complaint has subsequently been amended, including on June 18, 2018, to add attorneys general alleging violations of federal and state antitrust laws, as well as violations of various states’ consumer protection laws. This lawsuit has been transferred to the aforementioned MDL proceeding in the EDPA. The operative complaint includes attorneys general of forty-four states, the District of Columbia and the Commonwealth of Puerto Rico. The Company is alleged to have engaged in anticompetitive conduct with respect to four generic drug products. The amended complaint also includes claims asserted by attorneys general of thirty-four states and the Commonwealth of Puerto Rico against certain individuals, including the Company’s President, with respect to a single drug product. The amended complaint seeks declaratory and injunctive relief, disgorgement, attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. The states’ claim for disgorgement and restitution under federal law in this case has been dismissed.

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On May 10, 2019, certain attorneys general filed a new complaint in the United States District Court for the District of Connecticut against various drug manufacturers and individuals, including the Company and one of its sales employees, alleging anticompetitive conduct with respect to additional generic drugs. On November 1, 2019, the complaint was amended, adding additional states as plaintiffs. The operative complaint is brought by attorneys general of forty-five states, certain territories and the District of Columbia. The amended complaint also includes claims asserted by attorneys general of forty states and certain territories against several individuals, including a Company sales employee. The amended complaint seeks declaratory and injunctive relief, disgorgement, attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. This lawsuit has been transferred to the aforementioned MDL proceeding in the EDPA.

On June 10, 2020, certain attorneys general filed a new complaint in the United States District Court for the District of Connecticut against drug manufacturers, including the Company, and individual defendants (none from the Company), alleging anticompetitive conduct with respect to additional generic drugs. On September 9, 2021, the complaint was amended, adding an additional state as a plaintiff. The operative complaint is brought by attorneys general of forty-four states, certain territories and the District of Columbia. The amended complaint seeks declaratory and injunctive relief, disgorgement, attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. The states’ claim for disgorgement and restitution under federal law in this case has been dismissed. This lawsuit has been transferred to the aforementioned MDL proceeding in the EDPA and has been ordered to proceed as a bellwether.

Securities Related Litigation

Purported class action complaints were filed in October 2016 against Mylan N.V. and Mylan Inc. (collectively “Mylan”), certain of Mylan’s former directors and officers, and certain of the Company’s current directors and officers (collectively, for purposes of this paragraph, the “defendants”) in the United States District Court for the Southern District of New York (“SDNY”) on behalf of certain purchasers of securities of Mylan on the NASDAQ (“SDNY Class Action Litigation”). The complaints alleged that defendants made false or misleading statements and omissions of purportedly material fact, in violation of federal securities laws, in connection with disclosures relating to the classification of their EpiPen® Auto-Injector as a non-innovator drug for purposes of the Medicaid Drug Rebate Program. On March 20, 2017, a consolidated amended complaint was filed alleging substantially similar claims, but adding allegations that defendants made false or misleading statements and omissions of purportedly material fact in connection with allegedly anticompetitive conduct with respect to EpiPen® Auto-Injector and certain generic drugs.

The operative complaint is the third amended consolidated complaint, which was filed on June 17, 2019, and contains the allegations as described above against Mylan, certain of Mylan’s former directors and officers, and certain of the Company’s current directors, officers, and employees (collectively, for purposes of this paragraph, the “defendants”). A class has been certified covering all persons or entities that purchased Mylan common stock between February 21, 2012 and May 24, 2019 excluding defendants, certain of the Company’s current directors and officers, former directors and officers of Mylan, members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which defendants have or had a controlling interest. Plaintiffs seek damages and costs and expenses, including attorneys’ fees and expert costs. On March 30, 2023, the Court dismissed all of Plaintiffs’ claims by granting Defendants’ motion for summary judgment and denying Plaintiffs’ cross-motion for partial summary judgment. Plaintiffs have filed an appeal to the U.S. Court of Appeals for the Second Circuit.

On April 30, 2017, a similar lawsuit was filed in the Tel Aviv District Court (Economic Division) in Israel (“Israel Litigation”), which had been stayed pending a decision in the SDNY Class Action Litigation. The Israel Litigation was dismissed by the Court due to lack of activity and may be refiled.

On February 14, 2020, the Abu Dhabi Investment Authority filed a complaint against Mylan in the SDNY asserting allegations pertaining to EpiPen® Auto-Injector and certain generic drugs under the federal securities laws (“ADIA Litigation”) that overlap with those asserted in the SDNY Class Action Litigation. The complaint filed in the ADIA Litigation seeks monetary damages as well as the plaintiff’s fees and costs.

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On June 26, 2020, a putative class action complaint was filed by the Public Employees Retirement System of Mississippi, which was subsequently amended on November 13, 2020, against Mylan N.V., certain of Mylan N.V.’s former directors and officers, and an officer and director of the Company (collectively for the purposes of this paragraph, the “defendants”) in the U.S. District Court for the Western District of Pennsylvania (“WDPA”) on behalf of certain purchasers of securities of Mylan N.V. (“WDPA Mylan N.V. Class Action Litigation”). The amended complaint alleges that defendants made false or misleading statements and omissions of purportedly material fact, in violation of federal securities laws, in connection with disclosures relating to the Nashik and Morgantown manufacturing plants and inspections at the plants by the FDA. Plaintiff seeks certification of a class of purchasers of Mylan N.V. securities between February 16, 2016 and May 7, 2019. On May 18, 2023, the Court dismissed 45 of the 46 challenged statements. The complaint seeks monetary damages, as well as the plaintiff’s fees and costs.

On February 15, 2021, a complaint was filed in the SDNY by Skandia Mutual Life Ins. Co., Lansforsakringar AB, KBC Asset Management N.V., and GIC Private Limited, against the Company, certain of Mylan N.V.’s former directors and officers, a current director and officer of the Company, and certain current employees of the Company (“Skandia Litigation”). The Complaint filed in the Skandia Litigation asserts claims which are based on allegations that are similar to those in the SDNY Class Action Litigation and WDPA Mylan N.V. Class Action Litigation. Plaintiffs seek compensatory damages, costs and expenses and attorneys’ fees.

On October 28, 2021, the Company and certain of its then officers and directors were named as defendants in a putative class action lawsuit filed in the Court of Common Pleas of Allegheny County, Pennsylvania on behalf of former Mylan shareholders who received Company common stock in connection with the Combination. A non-Viatris affiliated company and persons were also named as defendants. The complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 for purportedly failing to disclose or misrepresenting material information in the registration statement and related prospectus issued in connection with the Combination. On January 3, 2023, an amended complaint was filed naming the same defendants and alleging the same violations as the original complaint. Plaintiffs seek monetary damages, reasonable costs and expenses, and certain other equitable and injunctive relief.

Beginning in May 2023, putative class action complaints were filed against the Company and certain of the Company’s current and former officers, directors, and employees in the WDPA on behalf of certain purchasers of securities of the Company. These actions have been consolidated and, on October 23, 2023, a consolidated amended putative class action complaint was filed in the WDPA against the Company, a current officer and director, and a former officer and director (“WDPA Viatris Class Action Litigation”). The operative complaint alleges that defendants made false or misleading statements and omissions of material fact, in violation of federal securities laws, in connection with disclosures relating to the Company’s projected financial performance and biosimilars business. Plaintiffs seek certification of a class of purchasers of Company securities between March 1, 2021 and February 25, 2022. Plaintiffs seek monetary damages, reasonable costs and expenses, and certain other relief.

Beginning in August 2023, stockholder derivative actions purportedly on behalf of Viatris were filed in the WDPA against certain of the Company’s current and former officers, directors, and employees alleging that defendants failed to ensure that the Company was making truthful and accurate statements in connection with the disclosures alleged in the WDPA Viatris Class Action Litigation. Viatris is named as a nominal defendant in these derivative actions. Certain of the complaints also assert claims for corporate waste and unjust enrichment. Plaintiffs seek various forms of relief, including damages, disgorgement, restitution, costs and fees.

Opioids

The Company, along with other manufacturers, distributors, pharmacies, pharmacy benefit managers, and individual healthcare providers is a defendant in more than 1,000 cases in the United States and Canada filed by various plaintiffs, including counties, cities and other local governmental entities, asserting civil claims related to sales, marketing and/or distribution practices with respect to prescription opioid products. In addition, lawsuits have been filed as putative class actions including on behalf of children with Neonatal Abstinence Syndrome due to alleged exposure to opioids.

The lawsuits generally seek equitable relief and monetary damages (including punitive and/or exemplary damages) based on a variety of legal theories, including various statutory and/or common law claims, such as negligence, public nuisance and unjust enrichment. The vast majority of these lawsuits have been consolidated in an MDL in the U.S. District Court for the Northern District Court of Ohio.

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

On January 13, 2023, the Company received a civil subpoena from the Attorney General of the State of New York seeking information relating to opioids manufactured, marketed, or sold by the Company and related subject matter. The Company is fully cooperating with this subpoena request.

The Company has accrued $7.9 million in connection with the possible resolution of certain of these matters at September 30, 2023, which is included in other current liabilities in the condensed consolidated balance sheets. Although it is reasonably possible that the Company may incur additional losses from these matters, any amount cannot be reasonably estimated at this time. In addition, the Company expects to incur additional legal and other professional service expenses associated with such matters in future periods and will recognize these expenses as services are received. The Company believes that the ultimate amount paid for these services and claims 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 in future periods.

Meda Sweden Commercial Dispute

On August 30, 2021, Ocular AS and other related entities (“Claimants”) initiated an arbitration in Sweden against Meda OTC AB and Meda AB (collectively, “Meda” or the “Company”) alleging breach of a 2013 sale and purchase agreement between Claimants and Meda concerning commercialization of a dental hygiene product. Claimants sought approximately $155 million in purported damages, plus interest and costs. In May 2023, the arbitration panel ruled in Claimants’ favor and the Company resolved the matter for approximately $21.8 million, which was accrued at June 30, 2023 and paid in July 2023.

Citalopram

In 2013, the European Commission issued a decision finding that Lundbeck and several generic companies, including Generics [U.K.] Limited (“GUK” or the “Company”), had violated EU competition rules relating to various settlement agreements entered into in 2002 for citalopram. After various appeals, the European Commission’s decision was upheld in March 2021. On March 28, 2023, bodies of the national health authorities in England & Wales served a claim in the U.K. Competition Appeals Tribunal against parties to the citalopram investigation, including GUK, seeking monetary damages, plus interest, purportedly arising from the settlement agreements. The Company, beginning in approximately 2018, has received notices from other health service authorities and insurers asserting an intention to file similar claims. Pursuant to an indemnification agreement, Merck KGaA and GUK have agreed to equally share any damages claimed against Merck KGaA and/or GUK alleged to have been caused by the conduct which is the subject of the European Commission decision.

The Company has accrued approximately €12.0 million as of September 30, 2023 related to this matter. It is reasonably possible that we will incur additional losses above the amount accrued but we cannot estimate a range of such reasonably possible losses at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts accrued.

Product Liability

Like other pharmaceutical companies, the Company is involved in a number of product liability lawsuits related to alleged personal injuries arising out of certain products manufactured/or distributed by the Company, including but not limited to those discussed below. Plaintiffs in these cases generally seek damages and other relief on various grounds for alleged personal injury and economic loss.

The Company has accrued approximately $66.0 million as of September 30, 2023 for its product liability matters. It is reasonably possible that we will incur additional losses and fees above the amount accrued but we cannot estimate a range of such reasonably possible losses or legal fees related to these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts accrued.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Nitrosamines

The Company, along with numerous other manufacturers, retailers, and others, are parties to litigation relating to alleged trace amounts of nitrosamine impurities in certain products, including valsartan and ranitidine. The vast majority of these lawsuits naming the Company in the United States are pending in two MDLs, namely an MDL pending in the United States District Court for the District of New Jersey concerning valsartan and an MDL pending in the United States District Court for the Southern District of Florida concerning ranitidine. The lawsuits against the Company in the MDLs include putative and certified classes seeking the refund of the purchase price and other economic and punitive damages allegedly sustained by consumers and end payors as well as individuals seeking compensatory and punitive damages for personal injuries allegedly caused by ingestion of the medications. Similar lawsuits pertaining to valsartan have been filed in other countries. Third party payor, consumer and medical monitoring classes were certified in the valsartan MDL and a Rule 23(f) petition to appeal the certification decision was denied. The Company has also received claims and inquiries related to these products, as well as requests to indemnify purchasers of the Company’s API and/ or finished dose forms of these products. The original master complaints concerning ranitidine were dismissed on December 31, 2020. The end-payor plaintiff immediately appealed to the U.S. Court of Appeals for the Eleventh Circuit, which affirmed the dismissal. The personal injury and consumer putative class plaintiffs filed amended master complaints. The Company was not named as a defendant in the amended master complaints, though it was still named in certain short form complaints filed by personal injury plaintiffs. The trial court has dismissed all remaining claims against the generic defendants. Certain of the personal injury plaintiffs appealed this dismissal, which remains pending.

Lipitor

A number of individual and multi-plaintiff lawsuits have been filed against Pfizer in various federal and state courts alleging that the plaintiffs developed type 2 diabetes purportedly as a result of the ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages. In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to an MDL in the U.S. District Court for the District of South Carolina. Since 2016, certain cases in the MDL were remanded to certain state courts. In 2017, the District Court granted Pfizer’s motion for summary judgment, dismissing all of the cases pending in the MDL. In June 2018, this dismissal was affirmed by the U.S. Court of Appeals for the Fourth Circuit. The state court proceedings remain pending in Missouri and New York. Prior state court proceedings in California have now been terminated after the California Court previously granted motions (i) to exclude the opinions of plaintiffs’ only general causation expert in connection with his opinions involving the three lowest doses of Lipitor (10, 20 and 40 mg); (ii) for summary judgment in connection with the 10, 20, and 40 mg plaintiffs; and (iii) seeking the dismissal of the remaining cases involving the highest dose of Lipitor (80 mg).

Intellectual Property

The Company is involved in a number of patent litigation lawsuits involving the validity and/or infringement of patents held by branded pharmaceutical manufacturers including but not limited to the matters described below. The Company uses its business judgment to decide to market and sell certain products, in each case based on its belief that the applicable patents are invalid and/or that its products do not infringe, notwithstanding the fact that allegations of patent infringement(s) or other potential third party rights have not been finally resolved by the courts. The risk involved in doing so can be substantial because the remedies available to the owner of a patent for infringement may include, a reasonable royalty on sales or damages measured by the profits lost by the patent owner. If there is a finding of willful infringement, damages may be increased up to three times. Moreover, because of the discount pricing typically involved with bioequivalent products, patented branded products generally realize a substantially higher profit margin than generic and biosimilar products. The Company also faces challenges to its patents, including suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments, or other parties are seeking damages for allegedly causing delay of generic entry. An adverse decision in any of these matters could have an adverse effect that is material to our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.

The Company has accrued approximately $33.7 million as of September 30, 2023 for its intellectual property matters. It is reasonably possible that we will incur additional losses and fees above the amount accrued but we cannot estimate a range of such reasonably possible losses or legal fees related to these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts accrued.

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VIATRIS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

Lyrica - United Kingdom

Beginning in 2014, Pfizer was involved in patent litigation in the English courts concerning the validity of its Lyrica pain use patent. In 2015, the High Court of Justice in London ordered that the NHS England issue guidance for prescribers and pharmacists directing the prescription and dispensing of Lyrica by brand when pregabalin was prescribed for the treatment of neuropathic pain and entered a preliminary injunction against certain Sandoz group companies preventing the sale of Sandoz’s full label pregabalin product. Pfizer undertook to compensate certain generic companies and NHS entities for losses caused by these orders, which remained in effect until patent expiration in July 2017. In November 2018, the U.K. Supreme Court ruled that all the relevant claims directed to neuropathic pain were invalid.

Dr. Reddy’s Laboratories filed a claim for monetary damages, interest, and costs in May 2020, followed by the Scottish Ministers and fourteen Scottish Health Boards (together, NHS Scotland) in July 2020. In September 2020, Teva, Sandoz, Ranbaxy, Actavis, and the Secretary of State for Health and Social Care, together with 32 other NHS entities (together, NHS England, Wales, and Northern Ireland) filed their claims. All of the claims have been resolved.

Yupelri

Beginning in January 2023, certain generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Yupelri® with associated Paragraph IV certifications. The companies assert the invalidity and/or non-infringement of polymorph patents expiring in 2030 and 2031, and a method of use patent expiring in 2039. The companies have not filed Paragraph IV certifications to our compound patents, which currently expire in December 2025, with one compound patent subject to a patent term extension to October 2028. In February 2023, we brought patent infringement actions against the generic filers in federal district courts, including the U.S. District Court for the District of New Jersey, the U.S. District Court for the District of Delaware, and the U.S. District Court for the Middle District of North Carolina, asserting infringement of the patents by the generic companies. The actions filed in Delaware and North Carolina have been dismissed and the actions will proceed in New Jersey. In October 2023, the Company entered into a settlement agreement with Teva in which Teva was granted a license to commercialize its generic version of Yupelri® in April 2039 or earlier depending on certain circumstances.

Tyrvaya

In June 2023, a generic company notified Oyster Point that it had filed an ANDA with the FDA seeking approval to market a generic version of Tyrvaya® with associated Paragraph IV certifications. The generic company asserts the invalidity and/or non-infringement of six Orange Book listed patents that all have expiration dates in October 2035. In July 2023, Oyster Point brought a patent infringement action against the generic filer in the U.S. District Court of the District of New Jersey asserting infringement by the generic company.

Amitiza

In October 2023, a Japanese generic company filed challenges with the Japanese Patent Office asserting invalidity of patent term extensions for the JPP ‘4332353 patent (the ‘353 patent) relevant to Amitiza®, which the Company commercializes in Japan as a licensee of the patent. With the granted extensions, the ‘353 patent has expiration dates for the Company’s 24µg and 12µg strengths of April 2025 and April 2027, respectively. For the 12µg strength, other licensed patents with patent term extension dates – including one with an expiration of December 2028 – have not been challenged.

Other Litigation

The Company is involved in various other legal proceedings including commercial, contractual, employment, or other similar matters that are considered normal to its business. The Company has approximately $8.8 million accrued related to these various other legal proceedings at September 30, 2023.

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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’ 2022 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 earnings (loss) for the three and nine months ended September 30, 2023, and cash flows for the nine months ended September 30, 2023 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 and announced divestitures and acquisitions; the benefits and synergies of acquisitions, divestitures or our global restructuring program; 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 be unable to realize the intended benefits of, or achieve the intended goals or outlooks with respect to, its strategic initiatives (including but not limited to announced divestitures);

•the possibility that the Company may be unable to achieve intended or expected benefits, goals, outlooks, synergies and operating efficiencies in connection with acquisitions, divestitures, or its global restructuring program within the expected timeframe or at all;

•with respect to previously announced divestitures, such divestitures not being completed on the expected timelines or at all, the risk that the conditions set forth in the definitive agreements with respect to such divestitures will not be satisfied or waived, failure to realize the total transaction values for the divestitures and/or the expected proceeds for any or all such divestitures, including as a result of any purchase price adjustment or a failure to achieve any conditions to the payment of any contingent consideration, the risk that the Company may elect not to exercise its option to accept the offer in the OTC transaction, and that the Company expects to incur a significant loss related to the OTC divestiture;

•goodwill or other impairment charges or other losses related to the divestiture or sale of businesses or assets (including but not limited to announced divestitures);

•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, including the ongoing challenges and uncertainties posed by the COVID-19 pandemic;

•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 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 information technology systems;

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•risks associated with having significant operations globally;

•the ability to protect intellectual property and preserve intellectual property rights;

•changes in third-party relationships;

•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 2022 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 formed in November 2020 whose mission is to empower people worldwide to live healthier at every stage of life, regardless of geography or circumstance. Improving the ability of patients to gain access to sustainable and high-quality healthcare is our relentless pursuit. One that rests on visionary thinking, determination and best-in-class capabilities that were strategically built to remove barriers across the health spectrum and advance access globally.

Viatris’ seasoned 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. With a global workforce of more than 38,000, 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 comprises more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands, generics, and complex generics. The Company operates approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs. 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, complex generics, and generic 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.

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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 two of the patents relevant to Amitiza® expiring in July 2024 and 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. The loss of a tender by a third party to whom we supply API can also have a negative impact on our sales and profitability. 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 public health epidemics, such as the COVID-19 pandemic, inflation, 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, changes in intellectual property legal protections and other regulatory changes.

Recent Developments

Planned Divestitures

Ophthalmology Acquisitions

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

Share Repurchase Program

2020 Restructuring Program

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Financial Summary

The table below is a summary of the Company’s financial results for the three and nine months ended September 30, 2023 compared to the prior year period:


	Three Months Ended
	September 30,
(In millions, except per share amounts)	2023		2022		Change
Total revenues	$	3,941.9	$	4,078.2	$	(136.3)
Gross profit	1,691.3		1,748.4		(57.1)
Earnings from operations	451.7		560.1		(108.4)
Net earnings	331.6		354.3		(22.7)
Diluted earnings per share	$	0.27	$	0.29	$	(0.02)

	Nine Months Ended
	September 30,
(In millions, except per share amounts)	2023		2022		Change
Total revenues	$	11,589.6	$	12,386.7	$	(797.1)
Gross profit	4,842.1		5,222.9		(380.8)
Earnings from operations	1,220.7		1,816.2		(595.5)
Net earnings	820.3		1,067.4		(247.1)
Diluted earnings per share	$	0.68	$	0.88	$	(0.20)

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 net earnings and adjusted EBITDA (all of which are defined below) can be found in “Item 2. Management’s Discussion and Analysis of Financial Condition - Results of Operations and Results of Operations - Use of Non-GAAP Financial Measures.”

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Results of Operations

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022


	Three Months Ended
	September 30,
(In millions, except %s)	2023		2022		% Change		2023 Currency Impact (1)		2023 Constant Currency Revenues		Constant Currency % Change (2)
Net sales
Developed Markets	$	2,408.5	$	2,431.5	(1)	%	$	(85.0)	$	2,323.5	(4)	%
Greater China	548.4		574.0		(4)	%	23.7		572.1		—	%
JANZ	334.5		383.0		(13)	%	18.9		353.4		(8)	%
Emerging Markets	642.5		678.9		(5)	%	35.8		678.3		—	%
Total net sales	$	3,933.9	$	4,067.4	(3)	%	$	(6.6)	$	3,927.3	(3)	%

Other revenues (3)	8.0		10.8		NM		(0.3)		7.7		NM
Consolidated total revenues (4)	$	3,941.9	$	4,078.2	(3)	%	$	(6.9)	$	3,935.0	(3)	%

____________

(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 2023 constant currency net sales or revenues to the corresponding amount in the prior year.

(3)For the three months ended September 30, 2023, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $6.4 million, $0.2 million, and $1.4 million, respectively.

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

Total Revenues

For the three months ended September 30, 2023, Viatris reported total revenues of $3.94 billion, compared to $4.08 billion for the comparable prior year period, representing a decrease of $136.3 million, or 3%. Total revenues include both net sales and other revenues from third parties. Net sales for the current quarter were $3.93 billion, compared to $4.07 billion for the comparable prior year period, representing a decrease of $133.5 million, or 3%. Other revenues for the current quarter were $8.0 million, compared to $10.8 million for the comparable prior year period.

The favorable impact of foreign currency translation on current period net sales was approximately $6.6 million, or less than 1%. Net sales decreased by approximately $181.0 million, or 5%, due to the inclusion of net sales related to the divested biosimilars business in the prior year period. On a constant currency basis, the increase in net sales from the remaining business was approximately $30.5 million, or 1%, for the three months ended September 30, 2023 compared to the prior year period. The increase in constant currency net sales from the remaining business was due to new product sales of approximately $135.1 million, primarily in the U.S. and Europe. New product sales include new products launched in 2023 and the carryover impact of new products, including business development, launched within the last twelve months. This increase was partially offset by a decrease in net sales from existing products due to base business erosion of approximately $104.6 million. Net sales from Tyrvaya® totaled $10.4 million during the current quarter.

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 35% and 36% for the three months ended September 30, 2023 and 2022.

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 $23.0 million or 1% during the three months ended September 30, 2023 when compared to the prior year period. The favorable impact of foreign currency translation on current period net sales was approximately $85.0 million, or 4%. Net sales decreased by approximately $162.9 million or 7% due to the inclusion of net sales related to the divested biosimilars business in the prior year period. Constant currency net sales from the remaining business increased by approximately $44.5 million or 2% when compared to the prior year period. The increase in constant currency net sales was driven by new product sales, including lenalidomide and Breyna™ in the U.S. This increase was partially offset by lower volumes of existing products, primarily due to the timing of launches in the third quarter of 2022, and to a lesser extent, lower pricing in the U.S. due to anticipated additional competition. Net sales within North America totaled approximately $1.02 billion and net sales within Europe totaled approximately $1.39 billion. Net sales from Tyrvaya® totaled $10.4 million during the current quarter.

Greater China Segment

Net sales from Greater China decreased by $25.6 million or 4% for the three months ended September 30, 2023 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $23.7 million, or 4%. Constant currency net sales were essentially flat when compared to the prior year period. The disposition of the biosimilars business did not have a significant impact on the net sales for the current quarter.

JANZ Segment

Net sales from JANZ decreased by $48.5 million or 13% for the three months ended September 30, 2023 when compared to the prior year period. This decrease was partially the result of the unfavorable impact of foreign currency translation of approximately $18.9 million, or 5%. The disposition of the biosimilars business had a negative impact of 1% on the net sales for the current quarter. Constant currency net sales from the remaining business decreased by approximately $24.5 million, or 6% when compared to the prior year period. The decrease was due to lower net sales of existing products mainly driven by lower pricing and, to a lesser extent, volumes, in Japan as a result of government price reductions and additional competition.

Emerging Markets Segment

Net sales from Emerging Markets decreased by $36.4 million or 5% for the three months ended September 30, 2023 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $35.8 million or 5%. In addition, net sales also decreased by approximately $12.8 million, or 2% due to the inclusion of the divested biosimilars business in the prior year period. Constant currency net sales from the remaining business increased by $12.2 million, or 2% when compared to the prior year period, driven primarily by higher volumes of existing products.

Cost of Sales and Gross Profit

Cost of sales decreased from $2.33 billion for the three months ended September 30, 2022 to $2.25 billion for the three months ended September 30, 2023. Cost of sales was primarily impacted by the decrease in net sales, including the impact of the disposition of the biosimilars business in November 2022.

Gross profit for the three months ended September 30, 2023 was $1.69 billion and gross margins were 43%. For the three months ended September 30, 2022, gross profit was $1.75 billion and gross margins were 43%. This change in gross profit is primarily related to the decrease in sales and cost of sales. Adjusted gross margins were 59% for the three months ended September 30, 2023, compared to 61% for the three months ended September 30, 2022.

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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 September 30, 2023 compared to the three months ended September 30, 2022 is as follows:


	Three Months Ended
	September 30,
(In millions, except %s)	2023			2022
U.S. GAAP cost of sales	$	2,250.6		$	2,329.8
Deduct:
Purchase accounting related amortization	(602.0)			(626.7)
Acquisition and divestiture-related items	(14.1)			(16.3)
Restructuring related costs	(9.1)			(8.6)
Share-based compensation expense	(0.7)			(0.4)
Other special items	(16.7)			(68.9)
Adjusted cost of sales	$	1,608.0		$	1,608.9

Adjusted gross profit (a)	$	2,333.9		$	2,469.3

Adjusted gross margin (a)	59		%	61		%

____________

(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 September 30, 2023 was $211.2 million, compared to $174.9 million for the comparable prior year period, an increase of $36.3 million. This increase was primarily due to continued investment in our pipeline, including approximately $10.6 million related to the ophthalmology acquisitions.

Selling, General & Administrative Expense

SG&A expense for the current quarter was $1.05 billion, compared to $1.02 billion for the comparable prior year period, an increase of $36.2 million. The increase was primarily due to expenses related to the ophthalmology acquisitions of approximately $34.6 million and increases in salary expenses. Partially offsetting these increases were lower TSA costs as a result of transitioning certain support services from Pfizer during 2022.

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 September 30, 2023 and 2022, respectively:


	Three Months Ended
	September 30,
(In millions)	2023		2022
Contingent consideration adjustment (related to the Respiratory Delivery Platform)	$	(2.9)	$	(4.5)
Litigation settlements, net	(23.2)		0.6
Total litigation settlements and other contingencies, net	$	(26.1)	$	(3.9)

Interest Expense

Interest expense for the three months ended September 30, 2023 totaled $141.5 million, compared to $153.2 million for the three months ended September 30, 2022, a decrease of $11.7 million primarily due to the impact of debt repayments.

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Other (Income) Expense, Net

Other (income) expense, net includes gains and losses from 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) expense, net for the three months ended September 30, 2023 totaled $92.0 million of income, compared to income of $20.6 million for the three months ended September 30, 2022.

The increase in income was primarily driven by the reimbursement for transition services provided to Biocon Biologics of approximately $47.2 million. In the third quarter of 2023, Biocon Biologics began to exit certain services under the TSA. See Liquidity and Capital Resources—Other Commitments below. The costs related to the transition services are included in SG&A and R&D. The increase was also driven by a gain in the current period of approximately $19.1 million as a result of remeasuring the CCPS in Biocon Biologics to fair value and higher interest income.

Income Tax Provision

For the three months ended September 30, 2023, the Company recognized an income tax provision of $70.6 million, compared to $73.2 million for the comparable prior year period, a decrease of $2.6 million. The current year and prior year provisions were impacted by the levels of income and the changing mix at which it is earned in jurisdictions with differing tax rates.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022


	Nine Months Ended
	September 30,
(In millions, except %s)	2023		2022		% Change		2023 Currency Impact (1)		2023 Constant Currency Revenues		Constant Currency % Change (2)
Net sales
Developed Markets	$	6,932.7	$	7,386.7	(6)	%	$	(23.7)	$	6,909.0	(6)	%
Greater China	1,645.1		1,695.4		(3)	%	85.1		1,730.2		2	%
JANZ	1,052.2		1,233.9		(15)	%	77.6		1,129.8		(8)	%
Emerging Markets	1,932.5		2,035.0		(5)	%	143.1		2,075.6		2	%
Total net sales	$	11,562.5	$	12,351.0	(6)	%	$	282.1	$	11,844.6	(4)	%

Other revenues (3)	27.1		35.7		NM		0.1		27.2		NM
Consolidated total revenues (4)	$	11,589.6	$	12,386.7	(6)	%	$	282.2	$	11,871.8	(4)	%

____________

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

(3)For the nine months ended September 30, 2023, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $19.5 million, $0.8 million, and $6.8 million, respectively.

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

Total Revenues

For the nine months ended September 30, 2023, Viatris reported total revenues of $11.59 billion, compared to $12.39 billion for the comparable prior year period, representing a decrease of $797.1 million, or 6%. Total revenues include both net sales and other revenues from third parties. Net sales for the nine months ended September 30, 2023 were $11.56 billion, compared to $12.35 billion for the comparable prior year period, representing a decrease of $788.5 million, or 6%. Other revenues for the nine months ended September 30, 2023 were $27.1 million, compared to $35.7 million for the comparable prior year period.

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The decrease in net sales was partially driven by the unfavorable impact of foreign currency translation of approximately $282.1 million, or 2%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in China, Japan and India. Additionally, net sales decreased by approximately $507.5 million, or 4%, due to the inclusion of net sales related to the divested biosimilars business in the prior year period. On a constant currency basis, net sales from the remaining business were essentially flat for the nine months ended September 30, 2023 compared to the prior year period as the impact of base business erosion of approximately $370.5 million was offset by approximately $344.7 million of new product sales, primarily in the U.S. and Europe. New product sales include new products launched in 2023 and the carryover impact of new products, including business development, launched within the last twelve months. Net sales from Tyrvaya® totaled $26.9 million during the nine months ended September 30, 2023.

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 34% for the nine months ended September 30, 2023 and 2022.

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

Developed Markets Segment

Net sales from Developed Markets decreased by $454.0 million or 6% during the nine months ended September 30, 2023 when compared to the prior year period. The favorable impact of foreign currency translation on current period net sales was approximately $23.7 million, or less than 1%. Net sales decreased by approximately $449.4 million or 6% due to the inclusion of net sales related to the divested biosimilars business in the prior year period. With this being the primary driver of the year over year decline, constant currency net sales from the remaining business were essentially flat when compared to the prior year period. New product sales, including lenalidomide and Breyna™ in the U.S., combined with the stability of the existing product portfolio helped to offset the anticipated lower net sales of certain existing products, including Wixela Inhub®, Xulane® and cyclosporine ophthalmic emulsion in the U.S., as a result of lower pricing and lower volumes due to additional competition. Net sales within North America totaled approximately $2.96 billion and net sales within Europe totaled approximately $3.97 billion. Net sales from Tyrvaya® totaled $26.9 million during the nine months ended September 30, 2023.

Greater China Segment

Net sales from Greater China decreased by $50.3 million or 3% for the nine months ended September 30, 2023 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $85.1 million, or 5%. Constant currency net sales increased by approximately $35.4 million, or 2% when compared to the prior year period, driven by increased volumes, partially offset by lower pricing, of existing products. The disposition of the biosimilars business did not have a significant impact on the net sales during the nine months ended September 30, 2023.

JANZ Segment

Net sales from JANZ decreased by $181.7 million or 15% for the nine months ended September 30, 2023 when compared to the prior year period. This decrease was partially the result of the unfavorable impact of foreign currency translation of approximately $77.6 million, or 6%. Net sales also decreased by approximately $14.7 million or 1% due to the inclusion of net sales related to the divested biosimilars business in the prior year period. Constant currency net sales from the remaining business decreased by approximately $89.4 million, or 7% when compared to the prior year period. The decrease was due to lower net sales of existing products mainly driven by lower pricing and, to a lesser extent, volumes, in Japan as a result of government price reductions and additional competition and lower volumes of existing products in Australia.

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Emerging Markets Segment

Net sales from Emerging Markets decreased by $102.5 million or 5% for the nine months ended September 30, 2023 when compared to the prior year period. This decrease was mainly driven by the unfavorable impact of foreign currency translation of approximately $143.1 million or 7%. In addition, net sales also decreased by approximately $42.8 million, or 2% due to the inclusion of the divested biosimilars business in the prior year period. Constant currency net sales from the remaining business increased by $83.4 million, or 4% when compared to the prior year period, driven primarily by higher volumes of existing products, including in certain Asian countries.

Cost of Sales and Gross Profit

Cost of sales decreased from $7.16 billion for the nine months ended September 30, 2022 to $6.75 billion for the nine months ended September 30, 2023. Cost of sales was primarily impacted by the decrease in net sales, including the impact of the disposition of the biosimilars business in November 2022.

Gross profit for the nine months ended September 30, 2023 was $4.84 billion and gross margins were 42%. For the nine months ended September 30, 2022, gross profit was $5.22 billion and gross margins were 42%. This change in gross profit is primarily related to the decrease in sales and cost of sales. Adjusted gross margins were 60% for the nine months ended September 30, 2023, essentially flat when compared to the nine months ended September 30, 2022.

A reconciliation between cost of sales, as reported under U.S. GAAP, and adjusted cost of sales and adjusted gross margin for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is as follows:


	Nine Months Ended
	September 30,
(In millions, except %s)	2023			2022
U.S. GAAP cost of sales	$	6,747.5		$	7,163.8
Deduct:
Purchase accounting related amortization	(1,864.7)			(1,930.4)
Acquisition and divestiture-related items	(26.7)			(41.1)
Restructuring related costs	(88.9)			(28.4)
Share-based compensation expense	(2.2)			(1.2)
Other special items	(91.9)			(150.4)
Adjusted cost of sales	$	4,673.1		$	5,012.3

Adjusted gross profit (a)	$	6,916.5		$	7,374.4

Adjusted gross margin (a)	60		%	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 nine months ended September 30, 2023 was $602.4 million, compared to $479.8 million for the comparable prior year period, an increase of $122.6 million. This increase was primarily due to continued investment in our pipeline, including approximately $32.0 million related to the ophthalmology acquisitions.

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Acquired IPR&D

Acquired IPR&D expense for the nine months ended September 30, 2023 was $11.2 million. The current year period expense was driven by an upfront licensing payment to InDex Pharmaceuticals Holding AB related to cobitolimod in Japan. There was no acquired IPR&D expense for the nine months ended September 30, 2022.

Selling, General & Administrative Expense

SG&A expense for the nine months ended September 30, 2023 was $3.04 billion, compared to $2.91 billion for the comparable prior year period, an increase of $130.6 million. The increase was primarily due to expenses related to the ophthalmology acquisitions of approximately $106.2 million, higher investment in selling and promotional activities, and increased compensation, including severance-related costs. Partially offsetting these increases were lower acquisition and divestiture related costs of approximately $64.8 million and lower TSA costs, mainly as a result of transitioning certain support services from Pfizer during 2022.

Litigation Settlements and Other Contingencies, Net

The following table includes the (gains)/losses recognized in litigation settlements and other contingencies, net during the nine months ended September 30, 2023 and 2022, respectively:


	Nine Months Ended
	September 30,
(In millions)	2023		2022
Contingent consideration adjustment (related to the Respiratory Delivery Platform)	$	12.7	$	9.1
Litigation settlements, net	(49.2)		4.1
Total litigation settlements and other contingencies, net	$	(36.5)	$	13.2

Interest Expense

Interest expense for the nine months ended September 30, 2023 totaled $432.2 million, compared to $445.3 million for the nine months ended September 30, 2022, a decrease of $13.1 million primarily due to the impact of debt repayments.

Other (Income) Expense, Net

Other (income) expense, net includes gains and losses from 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) expense, net for the nine months ended September 30, 2023 totaled $269.4 million of income, compared to expense of $26.6 million for the nine months ended September 30, 2022.

The current year period income was primarily driven by the reimbursement for transition services provided to Biocon Biologics of approximately $139.8 million. In the third quarter of 2023, Biocon Biologics began to exit certain services under the TSA. See Liquidity and Capital Resources—Other Commitments below. The costs related to the transition services are included in SG&A and R&D. The current year period income was also attributed to gains of approximately $115.1 million as a result of remeasuring our equity interests in Mapi and Famy Life Sciences and the CCPS in Biocon Biologics to fair value, and higher interest income of approximately $29.5 million. The prior year period expense was primarily driven by higher foreign exchange costs.

Income Tax Provision

For the nine months ended September 30, 2023, the Company recognized an income tax provision of $237.6 million, compared to $276.9 million for the comparable prior year period, a decrease of $39.3 million. The current year and prior year provisions were impacted by the levels of income and the changing mix at which it is earned in jurisdictions with differing tax rates. Also impacting the tax provision for the nine months ended September 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.

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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.

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 related and other special items and purchase accounting related amortization, which are described in greater detail below.

Adjusted Net Earnings

Adjusted net earnings is a non-GAAP financial measure and provides 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 is an important internal financial metric related to the ongoing operating performance of the Company, and is therefore useful to investors and that their understanding of our performance is enhanced by this measure. Actual internal and forecasted operating results and annual budgets used by management include adjusted net earnings.

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 net contribution attributable to equity method investments, 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, and restructuring, 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 net earnings, and adjusted EBITDA include:

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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 net earnings, and adjusted EBITDA. These amounts include the amortization of intangible assets, inventory step-up, property, plant and equipment step-up, intangible asset impairment charges, including for in-process research and development, 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 net earnings and adjusted EBITDA 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.

Share-based Compensation Expense

Share-based compensation expense is excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA. 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 and Other Special Items

Costs related to restructuring, acquisition and divestiture related activities and other actions are excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA, 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 cost of sales and adjusted net earnings. 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.

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 net earnings and adjusted EBITDA because it believes it is helpful to understanding the underlying, ongoing operational performance of the business.

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Litigation Settlements, Net

Charges and gains related to legal matters, such as those discussed in Note 18 Litigation included in Part I, Item 1 of this Form 10-Q are generally excluded from adjusted net earnings and adjusted EBITDA. Normal, ongoing defense costs of the Company made in the normal course of our business are not excluded.

Reconciliation of U.S. GAAP Net Earnings to Adjusted Net Earnings

A reconciliation between net earnings as reported under U.S. GAAP, and adjusted net earnings for the periods shown follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
(In millions)	2023		2022			2023	2022
U.S. GAAP net earnings	$	331.6		$	354.3			$	820.3	$	1,067.4
Purchase accounting related amortization (primarily included in cost of sales) (a)	602.0			626.7				1,864.6		1,930.5
Litigation settlements and other contingencies, net	(26.1)			(3.9)				(36.5)		13.2
Interest expense (primarily amortization of premiums and discounts on long term debt)	(10.7)			(10.0)				(31.5)		(36.8)


Acquisition and divestiture-related costs (primarily included in SG&A) (b)	115.7			99.2				230.1		306.3

Restructuring related costs (c)	14.9			15.0				98.7		42.0
Share-based compensation expense	43.1			29.1				124.9		86.8
Other special items included in:
Cost of sales (d)	16.7			68.9				91.9		150.4
Research and development expense	0.3			—				2.7		0.9
Selling, general and administrative expense	2.7			19.9				34.0		44.3
Other income, net (e)	(26.4)			(6.3)				(114.0)		(8.2)
Tax effect of the above items and other income tax related items (f)	(111.0)			(129.4)				(294.1)		(342.7)
Adjusted net earnings	$	952.8		$	1,063.5			$	2,791.1	$	3,254.1

Significant items include the following:

(a)For the nine months ended September 30, 2023, charges include an intangible asset charge of approximately $32.0 million related to the planned divestiture of the Upjohn Distributor Markets to write down the disposal group to fair value, less cost to sell. Also includes amortization of the step-up in the fair value of inventory related to the Oyster Point acquisition of approximately $7.3 million and $22.0 million, for the three and nine months ended September 30, 2023, respectively.

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

(c)For the three and nine months ended September 30, 2023, charges include approximately $9.1 million and $88.9 million, respectively, in cost of sales and approximately $5.8 million and $9.8 million, respectively, in SG&A. Refer to Note 15 Restructuring included in Part I, Item 1 of this Form 10-Q for additional information.

(d)For the three and nine months ended September 30, 2023, charges include incremental manufacturing variances at plants in the 2020 restructuring program of approximately $1.0 million and $36.6 million, respectively. For the nine months ended September 30, 2023, also includes charges related to the planned divestiture of the Upjohn Distributor Markets of approximately $19.2 million.

(e)For the three months ended September 30, 2023, includes a gain of approximately $19.1 million as a result of remeasuring the CCPS in Biocon Biologics to fair value. For the nine months ended September 30, 2023, includes gains of approximately $115.1 million as a result of remeasuring our non-marketable equity investments to fair value, including our equity interests in Mapi and Famy Life Sciences and the CCPS in Biocon Biologics.

(f)Adjusted for changes for uncertain tax positions.

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

Below is a reconciliation of U.S. GAAP net earnings to EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2023 compared to the prior year period:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2023		2022		2023		2022
U.S. GAAP net earnings	$	331.6	$	354.3	$	820.3	$	1,067.4
Add adjustments:

Income tax provision	70.6		73.2		237.6		276.9
Interest expense (a)	141.5		153.2		432.2		445.3
Depreciation and amortization (b)	679.4		699.5		2,096.1		2,157.8
EBITDA	$	1,223.1	$	1,280.2	$	3,586.2	$	3,947.4
Add / (deduct) adjustments:
Share-based compensation expense	43.1		29.1		124.9		86.8
Litigation settlements and other contingencies, net	(26.1)		(3.9)		(36.5)		13.2
Restructuring, acquisition and divestiture-related and other special items (c)	120.0		192.4		332.1		518.8
Adjusted EBITDA	$	1,360.1	$	1,497.8	$	4,006.7	$	4,566.2

____________

(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 $2.32 billion for the nine months ended September 30, 2023. 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, and dividend payments. 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.

Operating Activities

Net cash provided by operating activities decreased by $489.8 million to $2.32 billion for the nine months ended September 30, 2023, as compared to net cash provided by operating activities of $2.81 billion for the nine months ended September 30, 2022. Net cash provided by operating activities is derived from net 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.

The decrease in net cash provided by operating activities was principally due to lower operating earnings, including as a result of the disposition of the biosimilars business in November 2022, and the timing of cash payments and collections.

Investing Activities

Net cash used in investing activities was $879.9 million for the nine months ended September 30, 2023, as compared to $264.0 million for the nine months ended September 30, 2022, an increase of $615.9 million.

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

•cash paid for acquisitions, net of cash acquired, of $667.7 million; and

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•capital expenditures, primarily for equipment and facilities, totaling approximately $211.5 million. While there can be no assurance that current expectations will be realized, capital expenditures for the 2023 calendar year are expected to be approximately $400 million to $500 million.

In 2022, significant items in investing activities included the following:

•capital expenditures, primarily for equipment and facilities, totaling approximately $252.3 million.

Financing Activities

Net cash used in financing activities was $1.38 billion for the nine months ended September 30, 2023, as compared to $2.55 billion for the nine months ended September 30, 2022, a decrease of $1.17 billion.

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;

•cash dividends paid of $431.6 million; and

•net cash of $104.6 million collected on behalf of other partners, which is included in Other items, net.

In 2022, significant items in financing activities included the following:

•repayments of Senior Notes at maturity of approximately $1.79 billion, consisting of the 0.816% Euro Senior Notes and the 1.125% Senior Notes;

•net Revolving Facility borrowings of $700.0 million (borrowings of $1.875 billion net of repayments of $1.175 billion);

•net repayments of short-term borrowings of $992.8 million; and

•cash dividends paid of $436.1 million.

Capital Resources

Our cash and cash equivalents totaled $1.31 billion at September 30, 2023. 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 are held 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 and the Receivables Facility and the 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. Effective April 28, 2023, we executed an amendment to the Revolving Facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins. Up to $1.65 billion of the Revolving Facility may be used to support borrowings under our Commercial Paper Program. As of September 30, 2023, the Company did not have any borrowings outstanding under the Commercial Paper Program and 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 September 30, 2023, the Company did not have any borrowings outstanding under the Receivables Facility or the 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. Amounts outstanding under either facility 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.

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For information regarding our dividends paid and declared, refer to Note 9 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.

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 September 30, 2023, refer to Note 12 Debt in Part I, Item 1 of this Form 10-Q.

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 September 30, 2023 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.

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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 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 in amount 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 nine months ended September 30, 2023 and as of and for the year ended December 31, 2022. All intercompany balances have been eliminated in consolidation. This unaudited combined summarized financial information is presented utilizing the equity method of accounting.

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	Combined Summarized Balance Sheet Information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V.
(In millions)	September 30, 2023		December 31, 2022
ASSETS
Current assets	$	1,292.9	$	996.3
Non-current assets	62,102.0		61,972.6

LIABILITIES AND EQUITY
Current liabilities	27,366.2		26,631.5
Non-current liabilities	15,163.1		15,265.2


	Combined Summarized Income Statement Information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V.
(In millions)	Nine Months Ended September 30, 2023		Year Ended December 31, 2022
Revenues	$	—	$	—
Gross profit	—		—
Loss from operations	(797.8)		(1,132.4)
Net earnings	820.3		2,078.6

Other Commitments

In conjunction with the Combination, Viatris entered into a TSA with Pfizer pursuant to which each party provides certain limited transition services to the other party generally for an initial period of 24 months from the closing date of the Combination. In addition to the monthly service fees under the TSA, Viatris agreed to reimburse Pfizer for fifty percent of the costs, up to the first $380 million incurred, to establish and wind down the TSA services. Viatris will be required to fully reimburse Pfizer for total costs in excess of $380 million. During the three and nine months ended September 30, 2023, the Company incurred approximately $0.5 million and $5.2 million, respectively, related to this provision of the TSA and approximately $143.2 million during the period beginning on the closing date of the Combination and ended September 30, 2023. We expect to incur future costs related to the completion of the services. As of December 31, 2022, the Company has exited substantially all transition services with Pfizer.

In conjunction with the Biocon Biologics Transaction, Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections, and the remittance of rebates, to ensure business continuity for patients, customers and colleagues. The original term of the TSA was generally up to two years; however, the parties agreed to reduce the term of the TSA to expire on December 31, 2023, subject to early termination of services at the discretion at Biocon Biologics and/or extensions until April 30, 2024 for certain services. In the third quarter of 2023, Biocon Biologics began to exit certain services under the TSA. Under the TSA, Viatris is entitled to be reimbursed for its costs (subject to certain caps) plus a markup of $44 million for 2023. In the event services are provided after 2023 through April 30, 2024, Viatris is entitled to be reimbursed for its costs plus service-based markups for such period. During the three and nine months ended September 30, 2023, the

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Company recognized TSA income of approximately $47.2 million and $139.8 million, respectively, as a component of Other (Income) Expense, Net.

Application of Critical Accounting Policies

There have been no changes to the Critical Accounting Policies disclosed in Viatris’ 2022 Form 10-K. The following discussion supplements our Critical Accounting Policy for Acquisitions, Intangible Assets, Goodwill and Contingent Consideration as it relates to the annual goodwill impairment test performed as of April 1, 2023.

As of April 1, 2023, the Company determined that the fair value of the North America and Greater China reporting units was substantially in excess of the respective unit’s carrying value.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s market risk, see “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in Viatris’ 2022 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2023. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

Management has not identified any changes in the Company’s internal control over financial reporting (“ICFR”) that occurred during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding legal proceedings, refer to Note 18 Litigation, in the accompanying Notes to interim financial statements in this Form 10-Q.

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no material changes in the Company’s risk factors from those disclosed in Viatris’ 2022 Form 10-K.

There are risks and uncertainties associated with the Announced Divestitures, including the OTC Transaction, one or more of which could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends or stock price.

On October 1, 2023, we announced we had received an offer for the divestiture of substantially all of our OTC business (the “OTC Transaction”) and had entered into definitive agreements to divest our women’s healthcare business and, separately, in another transaction, our rights to two women’s healthcare products, our API business in India and commercialization rights in the Upjohn Distributor Markets (all such transactions, including the OTC Transaction, the “Announced Divestitures”). There are a number of risks and uncertainties associated with the Announced Divestitures, including, among other things:

•the Announced Divestitures not being completed on the expected timelines or at all (including that, should we elect to exercise our option to accept the offer in the OTC Transaction and enter into a transaction agreement, either party will have the right to terminate that transaction agreement if the closing has not occurred by August 1, 2024, subject to two automatic extensions to no later than October 1, 2024 if certain conditions relating to regulatory approvals have not been satisfied or waived on such date), including but not limited to the inefficiencies and lack of control that may result if the Announced Divestitures are delayed or not implemented effectively, and unforeseen difficulties and expenditures that may arise as a result;

•the risk that the conditions set forth in the definitive agreements with respect to the Announced Divestitures will not be satisfied or waived (including that, should we elect to exercise our option to accept the offer in the OTC Transaction and enter into a transaction agreement, the potential failure of the conditions in that transaction agreement related to obtaining required regulatory and other consents and approvals, which could give rise to the termination of that transaction agreement or that the financing closing condition in the case of the API business divestiture will not be met, which could give rise to the termination of that transaction agreement);

•failure to realize the total transaction values for the Announced Divestitures and/or the expected proceeds for any or all of the Announced Divestitures, including as a result of any purchase price adjustment or a failure to achieve any conditions to the payment of any contingent consideration (including, should we elect to exercise our option to accept the offer in the OTC Transaction and enter into a transaction agreement, that transaction agreement’s net indebtedness and working capital adjustments as well as the up to €100.0 million in contingent additional cash consideration);

•the possibility that the Company may be unable to realize the intended or expected benefits of, or achieve the intended or expected goals, outlooks, synergies or operating efficiencies with respect to, the Announced Divestitures, including but not limited to as a result of carrying stranded costs; the risk that the Company may elect not to exercise its option to accept the offer in the OTC Transaction;

•the risk that we will incur losses related to the Announced Divestitures, including that, with respect to the OTC Transaction, we expect to record a pre-tax loss ranging from $600 million to $700 million in the fourth quarter of 2023 for the difference between the estimated consideration to be received and the carrying value of the business to be divested, including an allocation of goodwill (see Note 5 - Divestitures in Part I, Item 1 of this Form 10-Q for more information);

•the risk that if the remaining Upjohn Distributor Market transactions are not completed, the distribution arrangements will expire in accordance with our agreement with Pfizer and the Company will wind down operations in these markets, which may result in additional asset write-offs and other costs being incurred, which could be in excess of $150 million; and

•the risk that we may incur losses related to unhedged foreign exchange exposure related to receiving proceeds from the divestiture of the OTC business in Euros.

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To the extent that the current market price of our common stock reflects an assumption that the Announced Divestitures will be consummated in the timeframe and manner currently anticipated, and that the Company will prioritize use of net proceeds from the Announced Divestitures for debt paydown, any delay in closing or failure to close the Announced Divestitures could result in a decline in the market price of our common stock. Similarly, any delay in closing or failure to close the Announced Divestitures could result in damage to our relationships with customers, suppliers and employees and have an adverse effect on our business. Pending the completion of the Announced Divestitures, the attention of our management may be directed toward such transactions and related matters, and their focus may be diverted from the day-to-day business operations of our company, including from other opportunities that might otherwise be beneficial to us. We have agreed to indemnify the respective purchasers in the Announced Divestitures and certain of their respective representatives against certain losses suffered as a result of certain breaches of our representations, warranties, covenants and agreements in the applicable transaction agreements and related documents. In particular, should we elect to exercise our option to accept the offer in the OTC Transaction and enter into a transaction agreement, and subject to certain limitations as set forth in that transaction agreement, we will indemnify the purchaser, its affiliates and certain of its and its affiliates’ representatives for certain liabilities and for certain losses arising out of breaches of certain representations, warranties, covenants and agreements in that transaction agreement. Any event that results in a right for the purchaser in the OTC Transactions or the other Announced Divestitures to seek indemnity from us could result in substantial liability to us and could adversely affect our financial position and results of operations. In addition, should we elect to exercise our option to accept the offer in the OTC Transaction and enter into a transaction agreement, at the closing of that transaction we will enter into a transition services agreement pursuant to which we will provide services to the purchaser, including manufacturing, quality, supply chain, pricing and procurement, regulatory, product safety and risk management, medical affairs, IT, finance, human resources, real estate, commercial development and local commercial operations services substantially the same as we currently provide to our OTC business, generally for a period of up to 12 months. Once in effect, our obligations under the transition services agreement may result in additional expenses that are borne by us and may divert our focus and resources that would otherwise be invested into maintaining or growing our retained business.

Whether the Announced Divestitures are ultimately consummated or not, their pendency could have a number of negative effects on our current business, including potentially disrupting our regular operations, diverting the attention of our workforce and management team, and increasing workforce turnover. It could also disrupt existing business relationships, make it harder to develop new business relationships, or otherwise negatively impact the way that we operate the business, which could negatively impact Viatris’ results of operations and cash flows during the pendency of the transactions.

If we successfully complete the Announced Divestitures, our total revenues, results of operations and cash flows from operating activities are expected to be reduced after the close of each transaction. In addition, we have expended significant time and resources, and expect to continue to expend significant time and resources, on these transactions, including management time and focus, costs and expenses related to the separation of the businesses from Viatris, the provision of the transition services and other transaction costs. Many of these expenses must be paid regardless of whether the transactions close, and even if the expected benefits are not achieved. These costs may be significant and we currently do not expect to be reimbursed for them. We may also face other challenges as a result of the announcement and completion of the Announced Divestitures, including that we may not be able to realize the anticipated benefits from such transactions, such as prioritizing use of net proceeds from these divestitures for debt paydown, maintaining employee morale and retaining key management and other employees to provide the transition services and to operate our retained business, and the inability to effectively minimize liabilities and stranded costs associated with the Announced Divestitures.

Any of the risks described above could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price. Refer to Note 5 - Divestitures in Part I, Item 1 of this Form 10-Q for more information about the Announced Divestitures.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no repurchases of the Company’s common stock during the three months ended September 30, 2023. Refer to Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations– Recent Developments of this Form 10-Q for additional information regarding the Company’s authorized share repurchase program.

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ITEM 5. OTHER INFORMATION

Trading Arrangements

During the three months ended September 30, 2023, no director or “officer” of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.


ITEM 6. EXHIBITS

2.1			Put Option Agreement, dated October 1, 2023, between Cooper Consumer Health SAS and Viatris Inc.^

22			List of subsidiary guarantors and issuers of guaranteed securities, filed by Viatris Inc. as Exhibit 22 to the Form 10-Q for the quarter ended March 31, 2023, and incorporated herein by reference.

31.1			Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32			Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			Inline XBRL Instance Document

101.SCH			Inline XBRL Taxonomy Extension Schema

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF			Inline XBRL Taxonomy Definition Linkbase

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase

104			Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101).

^			Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Viatris agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						Viatris Inc.

			By:			/s/ SCOTT A. SMITH
						Scott A. Smith
						Chief Executive Officer
						(Principal Executive Officer)

November 7, 2023


						/s/ SANJEEV NARULA
						Sanjeev Narula
						Chief Financial Officer
						(Principal Financial Officer)

November 7, 2023