Viatris Inc

Previous wording

This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, the related Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Viatris’ 2023 Form 10-K, the unaudited interim financial statements and related Notes included in Part I — Item 1 of this Form 10-Q and our other SEC filings and public disclosures. The interim results of operations and comprehensive loss for the three months ended March 31, 2024, 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.

Current wording

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

Previous wording

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 aboutthe 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, acquisitions or other transactions; the benefits and synergies of such divestitures, acquisitions, or other transactions, or restructuring programs; future opportunities for the Company and its products; and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods. Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “pipeline”, “intend”, “continue”, “target”, “seek” and variations of these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to:

Current wording

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 aboutthe goals or outlooks with respect to the Company’s strategic initiatives, including but not limited to the Company’s two-phased strategic vision and potential, announced and completed divestitures, acquisitions or other transactions; the benefits and synergies of such divestitures, acquisitions, or other transactions, or restructuring programs; future opportunities for the Company and its products; and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods. Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “pipeline”, “intend”, “continue”, “target”, “seek” and variations of these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to:

Previous wording

•with respect to previously announced divestitures, 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;

Current wording

•with respect to divestitures, failure to realize the total transaction values or proceeds, including as a result of any purchase price adjustment or a failure to achieve any conditions to the payment of any contingent consideration;

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

On October 1, 2023, the Company announced it received an offer for the divestiture of its OTC Business, and entered into definitive agreements to divest its women’s healthcare business and, separately, in another transaction, its rights to two women’s healthcare products in certain countries, its API business in India and commercialization rights in the Upjohn Distributor Markets. The divestiture of the women’s healthcare business is primarily related to our oral and injectable contraceptives and does not include all of our women’s healthcare related products; as an example, our Xulane® product in the U.S. is excluded. The transaction to divest the Company’s rights to two women’s healthcare products in certain countries closed in December 2023 (other than in the U.K., which remains subject to regulatory approval), and the divestiture of the women’s healthcare business closed in March 2024. The divestitures of the commercialization rights in certain of the Upjohn Distributor Markets closed during 2023 and the divestiture of our API business in India is expected to close imminently. Additionally, in January 2024, we exercised our option to accept the offer in the OTC Transaction and entered into a definitive transaction agreement with respect to such OTC Transaction. The Company currently expects the OTC Transaction to close by mid-year 2024. The transactions that have not yet closed remain subject to regulatory approvals, receipt of required consents and other closing conditions.

Current wording

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

Previous wording

On February 28, 2022, the Company announced that its Board of Directors had authorized a share repurchase program for the repurchase of up to $1.0 billion of the Company’s shares of common stock. The Company subsequently announced that on February 26, 2024, its Board of Directors authorized a $1.0 billion increase to the Company’s previously announced $1.0 billion share repurchase program. As a result, the Company’s share repurchase program now authorizes the repurchase of up to $2.0 billion of the Company’s shares of common stock. Such repurchases may be made from time-to-time at the Company’s discretion and effected by any means, including but not limited to, open market repurchases, pursuant to plans in accordance with Rules 10b5-1 or 10b-18 under the Exchange Act, privately negotiated transactions (including accelerated stock repurchase programs) or any combination of such methods as the Company deems appropriate. The program does not have an expiration date. During the three months ended March 31, 2024 and 2023, the Company repurchased approximately 19.2 million shares of common stock at a cost of approximately $250 million and approximately 21.2 million shares of common stock at a cost of approximately $250 million, respectively, under the program. As of March 31, 2024, the Company had repurchased a total of $500 million in shares under the program. The share repurchase program does not obligate the Company to acquire any particular amount of common stock.

Current wording

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

Previous wording

The table below is a summary of the Company’s financial results for the three months ended March 31, 2024 compared to the prior year period:

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(3)For the three months ended March 31, 2024, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $7.2 million, $0.3 million, and $2.4 million, respectively.

Current wording

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

Previous wording

For the three months ended March 31, 2024, Viatris reported total revenues of $3.66 billion, compared to $3.73 billion for the comparable prior year period, representing a decrease of $65.7 million, or 2%. Total revenues include both net sales and other revenues from third parties. Net sales for the current quarter were $3.65 billion, compared to $3.72 billion for the comparable prior year period, representing a decrease of $65.6 million, or 2%. Other revenues for the current quarter were $9.9 million, compared to $10.0 million for the comparable prior year period.

Current wording

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

Previous wording

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% and 35% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

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

Previous wording

Net sales from JANZ decreased by $24.4 million or 7% for the three months ended March 31, 2024 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $30.8 million, or 9%. Constant currency net sales increased by approximately $6.5 million, or 2%, when compared to the prior year period, driven primarily by new product sales. This increase was partially offset by lower net sales of existing products mainly driven by lower pricing in Japan as a result of government price reductions and additional competition. Divestitures did not have a significant impact on the net sales for the current quarter.

Current wording

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

Previous wording

Net sales from Emerging Markets decreased by $15.5 million or 2% for the three months ended March 31, 2024 when compared to the prior year period. This decrease was driven by the unfavorable impact of foreign currency translation of approximately $38.9 million, or 6%. In addition, net sales also decreased by approximately $30.6 million, or 5%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. Constant currency net sales from the remaining business increased by $54.0 million, or 8% when compared to the prior year period, primarily driven by higher volumes of existing products in certain Middle Eastern and Asian countries.

Current wording

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

Previous wording

Cost of sales decreased from $2.19 billion for the three months ended March 31, 2023 to $2.16 billion for the three months ended March 31, 2024. Cost of sales was primarily impacted by the decrease in net sales, including the impact of the divestitures that have closed during 2023 and 2024.

Current wording

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

Previous wording

Gross profit for the three months ended March 31, 2024 was $1.50 billion and gross margins were 41%. For the three months ended March 31, 2023, gross profit was $1.54 billion and gross margins were 41%. This change in gross profit is primarily related to the decrease in net sales and cost of sales. Adjusted gross margins were approximately 59% for the three months ended March 31, 2024, compared to approximately 60% for the three months ended March 31, 2023.

Current wording

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

Previous wording

SG&A expense for the current quarter was $1.02 billion, compared to $958.9 million for the comparable prior year period, an increase of $58.6 million. The increase was primarily due to higher acquisition and divestiture-related costs of approximately $25.4 million.

Current wording

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

Previous wording

The following table includes the losses/(gains) recognized in litigation settlements and other contingencies, net during the three months ended March 31, 2024 and 2023, respectively:

Current wording

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

Previous wording

The decrease in net sales was the result of the unfavorable impact of foreign currency translation of approximately $77.1 million, or 2%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in Japan, China, and countries in Emerging Markets. Additionally, net sales decreased by approximately $45.7 million or 1% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. On a constant currency basis, net sales from the remaining business increased by approximately $57.2 million, or 2%, for the three months ended March 31, 2024 compared to the prior year period. The increase was driven by new product sales, primarily in the U.S., of approximately $154.5 million. New product sales include new products launched in 2024 and the carryover impact of new products, including business development, launched within the last twelve months. This increase was partially offset by base business erosion of approximately $97.3 million.

Current wording

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

Previous wording

Net sales from Developed Markets were essentially flat during the three months ended March 31, 2024 when compared to the prior year period. The favorable impact of foreign currency translation was approximately $14.1 million, or 1%. Net sales decreased by approximately $15.0 million or 1% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. Constant currency net sales from the remaining business were essentially flat when compared to the prior year period. New product sales, including Breyna™ in the U.S., combined with the stability of our existing product portfolio, helped to offset the anticipated lower net sales of certain existing products within the U.S., including EpiPen® Auto-Injector and Lyrica®, as a result of lower pricing and volumes mainly due to unfavorable channel dynamics. Net sales within North America totaled approximately $897.9 million and net sales within Europe totaled approximately $1.27 billion.

Current wording

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

Previous wording

Net sales from Greater China decreased by $20.7 million or 4% for the three months ended March 31, 2024 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $21.5 million, or 4%. Constant currency net sales were essentially flat when compared to the prior year period. Divestitures did not have a significant impact on the net sales for the current quarter.

Current wording

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

Previous wording

R&D expense for the three months ended March 31, 2024 was $199.7 million, compared to $182.9 million for the comparable prior year period, an increase of $16.8 million. This increase was primarily due to continued investment in our pipeline.

Current wording

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

Previous wording

Interest expense for the three months ended March 31, 2024 totaled $138.4 million, compared to $147.0 million for the three months ended March 31, 2023, a decrease of $8.6 million primarily due to the impact of debt repayments.

Current wording

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

Previous wording

Other income, net includes gains and losses from divestitures of businesses, changes in the fair value of equity securities, foreign exchange, expense (income) related to post-employment benefit plans, TSA income, and interest and dividend income. Other income, net for the three months ended March 31, 2024 totaled $139.1 million, compared to $69.9 million for the three months ended March 31, 2023.

Current wording

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

Previous wording

The increase in other income, net was primarily driven by: (1) the gain in the current quarter of $80.8 million from the divestiture of the women’s healthcare business, which closed in March 2024; and (2) a gain in the current quarter of $46.9 million as a result of remeasuring the CCPS in Biocon Biologics to fair value. This was partially offset by: (1) a gain in the prior year period of approximately $18.9 million as a result of remeasuring our pre-existing 13.5% equity interest in Famy Life Sciences to fair value; and (2) lower TSA income of $32.3 million. The higher prior year period TSA income was primarily driven by the reimbursement for transition services provided to Biocon Biologics. Biocon Biologics had substantially exited all transition services with Viatris as of December 31, 2023. The costs related to the transition services are included in SG&A and R&D.

Current wording

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

Previous wording

For the three months ended March 31, 2024, the Company recognized an income tax provision of $90.7 million, compared to $98.0 million for the comparable prior year period, a decrease of $7.3 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 three months ended March 31, 2023 was a tax expense of $21.6 million related to an agreement with the Indian tax authorities in March 2023 in respect of the pricing of its international transactions.

Current wording

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

Previous wording

•The impact of changes related to uncertain tax positions are excluded from adjusted cost of sales, adjusted net earnings, and adjusted EPS. In addition, tax adjustments to adjusted earnings are recorded to present items on an after-tax basis consistent with the presentation of adjusted net earnings and adjusted EPS.

Current wording

•The impact of changes related to uncertain tax positions are excluded from adjusted net earnings, and adjusted EPS. In addition, tax adjustments to adjusted earnings are recorded to present items on an after-tax basis consistent with the presentation of adjusted net earnings and adjusted EPS.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(a)For the three months ended March 31, 2024, includes a pre-tax gain on the divestiture of the women’s healthcare business of approximately $80.8 million for the difference between the consideration received and the carrying value of the assets transferred (including an allocation of goodwill). Also includes a pre-tax charge related to the planned divestiture of the API business of approximately $10.4 million to write down the disposal group to fair value, less cost to sell.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(c)For the three months ended March 31, 2024, charges include approximately $4.0 million in cost of sales and approximately $15.6 million in SG&A.

Current wording

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

Previous wording

(d)For the three months ended March 31, 2024, charges include incremental manufacturing variances at plants in the 2020 restructuring program of approximately $12.6 million.

Current wording

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

Previous wording

(e)Adjusted for changes for uncertain tax positions.

Current wording

(g)Adjusted for changes for uncertain tax positions.

Previous wording

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

Current wording

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

Previous wording

Below is a reconciliation of U.S. GAAP net earnings to EBITDA and adjusted EBITDA for the three months ended March 31, 2024 compared to the prior year period:

Current wording

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

Previous wording

(c)See items detailed in the Reconciliation of U.S. GAAP Net Earnings to Adjusted Net Earnings.

Current wording

(c)See items detailed in the Reconciliation of U.S. GAAP Net (Loss) Earnings to Adjusted Net Earnings.

Previous wording

Our primary source of liquidity is net cash provided by operating activities, which was $614.6 million for the three months ended March 31, 2024. We believe that net cash provided by operating activities and available liquidity will continue to allow us to meet our needs for working capital, capital expenditures, interest and principal payments on debt obligations, dividend payments, and share repurchases. Nevertheless, our ability to satisfy our working capital requirements and debt service obligations, and fund planned capital expenditures, share repurchases, or dividend payments, will substantially depend upon our future operating performance (which will be affected by prevailing economic conditions), and financial, business and other factors, some of which are beyond our control.

Current wording

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

Previous wording

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.

Current wording

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

Previous wording

Net cash provided by operating activities decreased by $356.6 million to $614.6 million for the three months ended March 31, 2024, as compared to net cash provided by operating activities of $971.2 million for the three months ended March 31, 2023. 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.

Current wording

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