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 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.

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 nine months ended September 30, 2024, and cash flows for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.

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 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.

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. The Company operates approximately 26 manufacturing and packaging sites worldwide that produce oral solid doses, injectables, complex dosage forms and API, with a global workforce of approximately 32,000. Viatris is headquartered in the U.S., with global centers in Pittsburgh, Pennsylvania, Shanghai, China and Hyderabad, India.

Previous wording

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

Current wording

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 in June or December 2025.

Previous wording

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

Current wording

On March 15, 2024, the Company acquired the development programs and certain personnel related to selatogrel and cenerimod from Idorsia in exchange for an upfront payment to Idorsia of $350 million, potential contingent milestone payments (including $300 million payable upon the achievement of certain development and regulatory milestones, and $2.1 billion payable upon the achievement of certain tiered sales milestones), as well as potential contingent tiered sales royalties. Viatris has worldwide commercialization rights for both selatogrel and cenerimod (excluding, for cenerimod only, Japan, South Korea and certain countries in the Asia-Pacific region). A joint development committee is overseeing the development of the ongoing Phase 3 programs through regulatory approval. The agreements also provide Viatris a right of first refusal and a right of first negotiation for certain other assets in Idorsia’s pipeline. The transaction expands our portfolio of innovative assets by adding two Phase 3 assets and combines our financial strength and worldwide operational infrastructure with Idorsia’s proven, highly-productive drug development team and innovation engine. Viatris and Idorsia are both contributing to the development costs for both programs, which are expected to be incurred through 2026. There are risks and uncertainties associated with the timely and successful completion of these programs, including but not limited to the high cost and uncertainty of conducting clinical trials (particularly with respect to new and/or complex or innovative drugs), obtaining approval by relevant regulatory bodies and our partner’s financial condition. Refer to Note 4 Acquisitions and Other Transactions in Part I, Item 1 of this Form 10-Q for more information.

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 2024, the divestiture of our API business in India closed in June 2024, and the OTC Transaction closed in July 2024.

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 was primarily related to our oral and injectable contraceptives and did not include all of our women’s healthcare related products; as an example, our Xulane® product in the U.S. was 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.), and the divestiture of the women’s healthcare business closed in March 2024. In the third quarter of 2024, the Company closed the divestiture of the product rights in the U.K. The divestitures of the commercialization rights in certain of the Upjohn Distributor Markets closed during 2023 and 2024, the divestiture of our API business in India closed in June 2024, and the OTC Transaction closed in July 2024. Refer to Note 5 Divestitures in Part I, Item 1 of this Form 10-Q for more information.

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 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.

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 nine months ended September 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 September 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 and six months ended June 30, 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 nine months ended September 30, 2024 compared to the prior year period:

Previous 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.

Current wording

(4)For the three months ended September 30, 2024, other revenues in Developed Markets, Greater China, JANZ, and Emerging Markets were approximately $9.5 million, $0.4 million, $1.2 million, and $2.1 million, respectively.

Previous wording

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

Current wording

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

Previous 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.

Current wording

For the three months ended September 30, 2024, Viatris reported total revenues of $3.75 billion, compared to $3.94 billion for the comparable prior year period, representing a decrease of $190.7 million, or 5%. Total revenues include both net sales and other revenues from third parties. Net sales for the current quarter were $3.74 billion, compared to $3.93 billion for the comparable prior year period, representing a decrease of $195.9 million, or 5%. Other revenues for the current quarter were $13.2 million, compared to $8.0 million for the comparable prior year period.

Previous wording

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

Current wording

Net sales decreased by approximately $290.7 million or 7% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. The decrease in net sales was also partially driven by the unfavorable impact of foreign currency translation of approximately $14.6 million, or less than 1%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in Japan and countries in Emerging Markets. Additionally, on a constant currency basis, net sales from the remaining business increased by approximately $109.4 million, or 3%, for the three months ended September 30, 2024 compared to the prior year period. The increase was driven by new product sales, primarily in Developed Markets, of approximately $133.1 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 $23.7 million.

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 33% and 35% for the six months ended June 30, 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 36% and 35% for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

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

Current wording

Net sales from Developed Markets decreased by $109.8 million or 5% during the three months ended September 30, 2024 when compared to the prior year period. Net sales decreased by approximately $184.7 million or 8% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. The favorable impact of foreign currency translation was approximately $15.4 million, or less than 1%. Constant currency net sales from the remaining business increased by approximately $59.5 million or 2% when compared to the prior year period. New product sales throughout Developed Markets, 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, as a result of lower pricing due to additional competition and increased utilization within government channels. Net sales within North America totaled approximately $990.6 million and net sales within Europe totaled approximately $1.31 billion.

Previous wording

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

Current wording

Net sales from Greater China increased by $13.4 million or 2% for the three months ended September 30, 2024 when compared to the prior year period. The unfavorable impact of foreign currency translation was approximately $1.9 million. Constant currency net sales increased by approximately $15.3 million or 3% 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

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

Current wording

Net sales from JANZ increased by $9.8 million or 3% for the three months ended September 30, 2024 when compared to the prior year period. The unfavorable impact of foreign currency translation was approximately $9.8 million, or 3%. In addition, net sales decreased by approximately $6.5 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. Constant currency net sales from the remaining business increased by approximately $26.1 million, or 8%, 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.

Previous wording

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

Current wording

Net sales from Emerging Markets decreased by $109.3 million or 17% for the three months ended September 30, 2024 when compared to the prior year period. Net sales decreased by approximately $99.5 million, or 15%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. The decrease in net sales was also partially driven by the unfavorable impact of foreign currency translation of approximately $18.3 million, or 3%. Constant currency net sales from the remaining business increased by $8.5 million, or 1% 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 increased from $4.50 billion for the six months ended June 30, 2023 to $4.51 billion for the six months ended June 30, 2024. The increase in cost of sales was driven by an IPR&D intangible asset impairment charge of $102.0 million. Refer to Note 10 Goodwill and Intangible Assets in Part I, Item 1 of this Form 10-Q for more information. This increase was largely offset by the impact of the decrease in net sales, including as a result of the divestitures that have closed during 2023 and 2024.

Current wording

Cost of sales increased from $2.25 billion for the three months ended September 30, 2023 to $2.29 billion for the three months ended September 30, 2024. The increase in cost of sales was primarily driven by restructuring related costs for additional anticipated plant closures. 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 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.

Current wording

Gross profit for the three months ended September 30, 2024 was $1.46 billion and gross margins were 39%. For the three months ended September 30, 2023, gross profit was $1.69 billion and gross margins were 43%. The changes in gross profit and gross margins are primarily related to the impact of the divestitures and the restructuring-related costs discussed above. Adjusted gross margins were approximately 58% for the three months ended September 30, 2024, compared to approximately 59% for the three months ended September 30, 2023.

Previous wording

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

Current wording

R&D expense for the three months ended September 30, 2024 was $198.4 million, compared to $211.2 million for the comparable prior year period, a decrease of $12.8 million due to the timing of clinical development programs.

Previous 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:

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Interest expense for the three months ended September 30, 2024 totaled $145.6 million, compared to $141.5 million for the three months ended September 30, 2023, an increase of $4.1 million. The increase is primarily due to the non-cash accretion of the contingent consideration liability related to the Idorsia Transaction, partially offset by lower interest expense as a result of debt repayments.

Previous 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 expense (income), net for the three months ended June 30, 2024 totaled $6.1 million of expense, compared to $107.5 million of income for the three months ended June 30, 2023.

Current wording

Other income, net includes gains and losses from divestitures of businesses, changes in the fair value of equity securities, extinguishment of debt, 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 September 30, 2024 totaled $10.2 million, compared to $92.0 million for the three months ended September 30, 2023.

Previous wording

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

Current wording

The decrease in other income, net was primarily driven by net loss on divestitures of approximately $107.4 million, and by lower TSA income of approximately $19.7 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. These decrease were partially offset by a higher net gain of $20.3 million related to the CCPS in Biocon Biologics, higher interest income of $17.3 million, and gain on debt extinguishments of $16.7 million.

Previous wording

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

Current wording

For the three months ended September 30, 2024, the Company recognized an income tax benefit of $4.3 million, compared to an income tax provision of $70.6 million for the comparable prior year period, a change of $74.9 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.

Previous wording

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

Current wording

(4)For the nine months ended September 30, 2024, other revenues in Developed Markets, Greater China, JANZ, and Emerging Markets were approximately $22.6 million, $0.8 million, $1.7 million, and $8.7 million, respectively.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

For the nine months ended September 30, 2024, Viatris reported total revenues of $11.21 billion, compared to $11.59 billion for the comparable prior year period, representing a decrease of $378.4 million, or 3%. Total revenues include both net sales and other revenues from third parties. Net sales for the nine months ended September 30, 2024 were $11.18 billion, compared to $11.56 billion for the comparable prior year period, representing a decrease of $385.1 million, or 3%. Other revenues for the nine months ended September 30, 2024 were $33.8 million, compared to $27.1 million for the comparable prior year period.

Previous 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.

Current wording

Net sales decreased by approximately $445.4 million or 4% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. The decrease in net sales was also partially driven by the unfavorable impact of foreign currency translation of approximately $190.9 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, on a constant currency basis, net sales from the remaining business increased by approximately $251.2 million, or 2%, for the nine months ended September 30, 2024 compared to the prior year period. The increase was driven by new product sales of approximately $497.2 million, primarily in Developed Markets. 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 $246.0 million.

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 33% and 34% for the three months ended June 30, 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 nine months ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Net sales from Developed Markets decreased by $149.4 million or 2% for the nine months ended September 30, 2024 when compared to the prior year period. Net sales decreased by approximately $231.3 million or 3% due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. The favorable impact of foreign currency translation was approximately $13.6 million or essentially flat. Constant currency net sales from the remaining business increased by approximately $68.3 million or 1% when compared to the prior year period. New product sales throughout Developed Markets, 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 increased utilization within government channels. Net sales within North America totaled approximately $2.87 billion and net sales within Europe totaled approximately $3.91 billion.

Previous 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.

Current wording

Net sales from Greater China were essentially flat for the nine months ended September 30, 2024 when compared to the prior year period. The unfavorable impact of foreign currency translation was approximately $42.4 million, or 3%. Constant currency net sales increased by approximately $42.0 million or 3% 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 year period.

Previous 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.

Current wording

Net sales from JANZ decreased by $40.5 million or 4% for the nine months ended September 30, 2024 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $70.6 million, or 7%. In addition, net sales decreased by approximately $7.1 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 $37.2 million, or 4%, 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.

Previous 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.

Current wording

Net sales from Emerging Markets decreased by $194.8 million or 10% for the nine months ended September 30, 2024 when compared to the prior year period. Net sales decreased by approximately $207.0 million, or 11%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2023 and 2024. The decrease in net sales was also partially driven by the unfavorable impact of foreign currency translation of approximately $91.5 million, or 5%. Constant currency net sales from the remaining business increased by $103.7 million, or 5% 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 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.

Current wording

Cost of sales increased from $6.75 billion for the nine months ended September 30, 2023 to $6.80 billion for the nine months ended September 30, 2024. The increase in cost of sales was largely 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 six months ended June 30, 2024 was $2.95 billion and gross margins were 40%. For the six months ended June 30, 2023, gross profit was $3.15 billion and gross margins were 41%. This change in gross profit is primarily related to the decrease in net sales and the increase in cost of sales. Adjusted gross margins were approximately 58% for the six months ended June 30, 2024, compared to approximately 60% for the six months ended June 30, 2023.

Current wording

Gross profit for the nine months ended September 30, 2024 was $4.41 billion and gross margins were 39%. For the nine months ended September 30, 2023, gross profit was $4.84 billion and gross margins were 42%. The changes in gross profit and gross margins are primarily related to the impact of the divestitures and the IPR&D intangible asset impairment charge. Adjusted gross margins were approximately 58% for the nine months ended September 30, 2024, compared to approximately 60% for the nine months ended September 30, 2023.

Previous wording

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

Current wording

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, 2024 compared to the nine months ended September 30, 2023 is as follows:

Previous wording

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

Current wording

SG&A expense for the nine months ended September 30, 2024 was $3.38 billion, compared to $3.04 billion for the comparable prior year period, an increase of $334.6 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 $45.2 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. These increases were partially offset by the impact of the divestitures.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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