Viatris VTRS Business Risk Report

I. Market Risks

A. Competition from generic drug manufacturers

Viatris faces significant competition from generic drug manufacturers, which can lead to reduced market share and revenue. The increase of competitors in the generic drug market, especially in emerging markets, has intensified pricing and availability challenges for Viatris.

B. Pricing pressures from government regulations

Governments worldwide are imposing stricter cost controls on pharmaceuticals, which impacts Viatris’s pricing strategies and profit margins. These regulations aim to make healthcare more affordable but can constrain the company’s revenue growth and operational flexibility.

II. Operational Risks

A. Supply chain disruptions

Viatris, relying on global supply chains, is susceptible to disruptions caused by geopolitical tensions, trade disputes, or public health crises like the COVID-19 pandemic. Such disruptions can impede product deliveries and affect production capabilities.

B. Regulatory compliance challenges

The pharmaceutical industry faces stringent regulatory requirements, and Viatris must comply with diverse regulations across different markets. Failure to comply can result in fines, penalties, and damage to reputation, adversely affecting the business operations and financial conditions.

III. Financial Risks

A. Fluctuations in foreign exchange rates

As a global company, Viatris is exposed to fluctuations in foreign exchange rates, which can significantly impact its earnings and financial stability. Volatile currency values can alter the cost structures and profitability of international operations.

B. Debt repayment obligations

Following various strategic acquisitions, Viatris has accumulated a substantial amount of debt. The company faces the risk of meeting its debt repayment obligations which could affect its financial health and credit ratings.

IV. Strategic Risks

A. Mergers and acquisitions integration risks

Viatris’s growth strategy includes mergers and acquisitions, which come with integration risks. The challenges include cultural misalignment, unforeseen operational issues, and difficulties in realizing synergies, all of which can diminish the anticipated benefits of such transactions.

B. Patent expirations leading to revenue loss

Patent expirations pose a significant risk to Viatris as they allow generic manufacturers to produce cheaper alternatives, substantially impacting Viatris’s revenues from patented drugs. This is particularly critical as major revenue-contributing drugs face patent cliffs.

V. Legal and Compliance Risks

A. Litigation risks related to product liability

Viatris, like other pharmaceutical companies, is exposed to litigation risks associated with product liability claims. Adverse outcomes in such litigations can result in substantial financial liabilities and negatively impact the company’s public image and stock valuation.

B. Non-compliance with healthcare regulations

Failure to adhere to healthcare regulations in various operational regions can lead to penalties, sanctions, and operational restrictions for Viatris. Maintaining compliance is essential for the company’s license to operate and its overall success.

VI. Information Security Risks

A. Data breaches impacting sensitive customer information

Data breaches are a critical risk for Viatris, which holds extensive sensitive customer data. A breach can lead to significant legal and financial repercussions, undermining customer trust and loyalty.

B. Cybersecurity threats targeting intellectual property

Cybersecurity threats are a growing concern for the pharmaceutical industry, given the high value of intellectual property in drug formulations and research data. Viatris’s heavy reliance on digital technologies makes it vulnerable to such attacks that could result in substantial intellectual and financial loss.

Mitigation Strategies:

• Diversification of product portfolio to mitigate market risks.
• Enhance supplier relationships to minimize supply chain disruptions.
• Implement robust compliance programs to address regulatory risks.
• Hedge foreign exchange exposure to mitigate financial risks.
• Conduct thorough due diligence for M&A activities.
• Invest in cybersecurity measures to protect sensitive data.