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Viatris Inc - Quarter Report: 2024 March (Form 10-Q)

           )    ))  )) ) ) ) ) ) ) ) ) ) Cash dividends paid()()Non-contingent payments for product rights ()Issuance of common stock   Other items, net  Net cash used in financing activities()()Effect on cash of changes in exchange rates() Net increase (decrease) in cash, cash equivalents and restricted cash ()Cash, cash equivalents and restricted cash — beginning of period  Cash, cash equivalents and restricted cash — end of period$ $ 
See Notes to Condensed Consolidated Financial Statements
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

1.
These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Viatris’ 2023 Form 10-K. The December 31, 2023 condensed consolidated balance sheet was derived from audited financial statements.
The interim results of operations, comprehensive loss and cash flows for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.
Beginning in 2024, upfront and milestone payments related to externally developed IPR&D projects acquired directly in a transaction other than a business combination, which were previously included in cash flows from operating activities in the condensed consolidated statements of cash flows, are now classified as cash flows from investing activities. There were no upfront and milestone payments in the prior year period.

2.
 $ $ $ $ Generics     Total Viatris$ $ $ $ $ 

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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
 $ $ $ $ ))))

 ) )     $ 
Additional stock awards and Restricted Stock Awards were outstanding during the three months ended March 31, 2024 and 2023, 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 March 31, 2024 also include certain share-based compensation awards and restricted shares whose performance conditions had not been fully met. Such excluded shares and anti-dilutive awards represented million shares and million shares for the three months ended March 31, 2024 and 2023, respectively.
The Company paid a quarterly dividend of $ per share on the Company’s issued and outstanding common stock on March 18, 2024. On May 6, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $ per share on the Company’s issued and outstanding common stock, which will be payable on June 14, 2024 to shareholders of record as of the close of business on May 24, 2024. 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.
 billion of the Company’s shares of common stock. The Company subsequently announced that on February 26, 2024, its Board of Directors authorized a $ billion increase to the Company’s previously announced $ billion share repurchase program. As a result, the Company’s share repurchase program now authorizes the repurchase of up to $ 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 three months ended March 31, 2024 and 2023, the Company repurchased approximately  million shares of common stock at a cost of approximately $ million and approximately  million shares of common stock at a cost of approximately $ million, respectively, under the program. As of March 31, 2024, the Company had repurchased a total of $ million in shares under the program. 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.
     Acquisitions     Foreign currency translation()()()()()Balance at March 31, 2024:$ $ $ $ $    $ 
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
 million, which was recorded within Cost of Sales in the condensed consolidated statement of operations, to write down the disposal group to fair value, less cost to sell, related to our commercialization rights in the Upjohn Distributor Markets, which are classified as held for sale. Refer to Note 5 Divestitures for additional information. 2025 2026 2027 2028 

11.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
 € € 1.023% Euro Senior Notes due 2024   2.125% Euro Senior Notes due 2025   1.362% Euro Senior Notes due 2027   3.125% Euro Senior Notes due 2028   1.908% Euro Senior Notes due 2032   Foreign currency forward contracts   Euro Total€ € € YenYEN Term Loan¥ ¥ ¥ Yen Total¥ ¥ ¥ 
At March 31, 2024, the principal amount of the Company’s outstanding Yen borrowings and the notional amount of the Yen borrowings designated as net investment hedges was $ million.
During the third quarter of 2023, the Company executed fixed-rate cross-currency interest rate swaps with notional amounts totaling Japanese Yen  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.
During the fourth quarter of 2023, the Company executed foreign currency forward contracts with notional amounts totaling Euro  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.
During the second quarter of 2024, the Company executed fixed-rate cross-currency interest rate swaps with notional amounts totaling Euro  million with settlement dates through 2026. The transactions hedge a portion of the Company’s net investment in certain Euro-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.

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
 $ Other current liabilities$ $ Total derivatives designated as hedges    Derivatives not designated as hedges:Foreign currency forward contractsPrepaid expenses & other current assets  Other current liabilities  Total derivatives not designated as hedges    Total derivatives $ $ $ $ 

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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
 $ $ $ Interest rate swaps
Interest expense (3)
— — ()()()()Derivative Financial Instruments in Net Investment Hedging Relationships:
Cross-currency interest rate swaps
Interest expense (2)
    — — 
Foreign currency forward contracts
— —   — — Non-derivative Financial Instruments in Net Investment Hedging Relationships:Foreign currency borrowings— —  ()— — Derivative Financial Instruments Not Designated as Hedging Instruments:Foreign currency option and forward contracts
Other (income) expense, net (2)
() — — — — Total$()$ $ $()$ $ 
____________
(1)At March 31, 2024, the Company expects that approximately $ 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
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
 $— $— $ $— $— Total cash equivalents — —  — — Equity securities:Exchange traded funds — —  — — Marketable securities — —  — — Total equity securities — —  — — CCPS in Biocon Biologics— —  — —  Available-for-sale fixed income investments:Corporate bonds—  — —  — U.S. Treasuries—  — —  — Agency mortgage-backed securities—  — —  — Asset backed securities—  — —  — Other—  — —  — Total available-for-sale fixed income investments—  — —  — Foreign exchange derivative assets—  — —  — Total assets at recurring fair value measurement$ $ $ $ $ $ Financial LiabilitiesForeign exchange derivative liabilities—  — —  — Contingent consideration— —  — —  Total liabilities at recurring fair value measurement$— $ $ $— $ $ 

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, 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, 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, net in the condensed consolidated statements of operations for that period.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
 million related to the Idorsia Transaction. As of March 31, 2024 and December 31, 2023, the Company had a contingent consideration liability of $ million and $ million, respectively, related to the Respiratory Delivery Platform, and $ million and $ million, respectively, related to the Biocon Biologics Transaction. 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 March 31, 2024, a discount rate of %, and at December 31, 2023, discount rates ranging from % and %, were utilized in the valuations. Significant changes in unobservable inputs could result in material changes to the contingent consideration liabilities. $ $ 
Acquisition
   Payments() ()Reclassifications () Accretion   
Fair value loss (3)
   Balance at March 31, 2024$ $ $ 
____________
(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 financial assets and liabilities other than the CCPS, any future transacted financial asset or liability will be evaluated for the fair value election.
12.
 million Receivables Facility which expires in April 2025 and a $ 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 receivable 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
 %  
2024 Euro Senior Notes ****
 %  Other  Deferred financing fees()()Current portion of long-term debt$ $ Non-current portion of long-term debt:
2025 Euro Senior Notes *
 %  
2025 Senior Notes ***
 %  
2026 Senior Notes **
 %  
2027 Euro Senior Notes ****
 %  
2027 Senior Notes ***
 %  
2028 Euro Senior Notes **
 %  
2028 Senior Notes *
 %  
2030 Senior Notes ***
 %  
2032 Euro Senior Notes ****
 %  
2040 Senior Notes ***
 %  
2043 Senior Notes *
 %  
2046 Senior Notes **
 %  
2048 Senior Notes *
 %  
2050 Senior Notes ***
 %  YEN Term Loan FacilityVariable  Other  Deferred financing fees()()Long-term debt$ $ 
____________
*    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.

At March 31, 2024 and December 31, 2023, the aggregate fair value of the Company’s outstanding notes was approximately $ billion and $ 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.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
 2025 2026 2027 2028 Thereafter Total$ 
13.
)$()Net unrecognized gain and prior service cost related to defined benefit plans, net of tax  
Net unrecognized gain (loss) on derivatives in cash flow hedging relationships, net of tax
 ()Net unrecognized gain on derivatives in net investment hedging relationships, net of tax  Foreign currency translation adjustment()()$()$()
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
)$ $()$ $()$()Other comprehensive earnings (loss) before reclassifications, before tax  ()()()()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()()()Loss on interest rate swaps classified as cash flow hedges, included in interest expense   Amortization of prior service costs included in SG&A  Amortization of actuarial gain included in SG&A ()()Net other comprehensive earnings (loss), before tax  ()()()()Income tax provision (benefit)  ()()  Balance at March 31, 2024, net of tax$ $ $()$ $()$()
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
)$ $()$ $()$()Other comprehensive earnings (loss) before reclassifications, before tax ()   ()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()()()Loss on interest rate swaps classified as cash flow hedges, included in interest expense   Amortization of actuarial gain included in SG&A ()()Net other comprehensive earnings (loss), before tax ()   ()Income tax provision (benefit) ()   ()Balance at March 31, 2023, net of tax$()$ $()$ $()$()

14.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
or 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.
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ITEM 6. EXHIBITS
Transaction Agreement, dated as of January 29, 2024, by and among Cooper Consumer Health SAS, Cooper Consumer Health IT S.r.l., Viatris Inc., Viatris Italia S.r.l. and Ipex AB, filed as Exhibit 2.1 to the Report on Form 8-K/A filed by Viatris Inc. with the SEC on January 30, 2024, and incorporated herein by reference.^
List of subsidiary guarantors and issuers of guaranteed securities, filed by Viatris Inc. as Exhibit 22 to the Form 10-K for the fiscal year ended December 31, 2023, and incorporated herein by reference.

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Definition Linkbase
101.LABInline XBRL Taxonomy Extension Label Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104Cover 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)
May 9, 2024
/s/ THEODORA MISTRAS
 
Theodora Mistras
 Chief Financial Officer
 (Principal Financial Officer)
May 9, 2024
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