Viatris holds revenue flat in Q3, lifts guidance midpoints as Nashik halt looms over Q4

The quarter in numbers

Viatris reported third-quarter total revenues of $3,749.5 million, against $3,759.9 million a year earlier, essentially flat on both a reported and operational basis. Net sales were $3,734.7 million. Profitability measures improved: adjusted EBITDA rose 4% to $1,195.7 million (up 1% operationally), and adjusted EPS rose 6% to $0.71 (up 3% operationally). Adjusted net earnings were $821.4 million, up 5%.

On a U.S. GAAP basis the picture is weaker. The company posted a net loss of $325.3 million, or $(0.28) per share, compared with a loss of $128.2 million, or $(0.11), in the prior-year quarter. The company said the loss was primarily driven by a higher income tax provision tied to losses in jurisdictions where minimal benefit can be realized.

What drove the top line

The company said new product sales, primarily in Developed Markets, North American strength and Greater China largely offset supply constraints in Europe and Emerging Markets and added competition on certain products. Greater China was the standout at $702.6 million, up 14% reported and 10% operationally. Developed Markets slipped 2% (down 1% operationally) to $2,215.9 million, Emerging Markets fell 7% to $529.1 million (down 6% operationally), and JANZ fell 6% to $287.1 million (down 5% operationally).

By category, Brands grew 1% to $2,461.4 million, which the company attributed to Greater China and Emerging Markets. Generics declined 3% to $1,273.3 million, with new launches and growth in certain North American products more than offset by supply constraints in Europe and Emerging Markets. New products generated about $115 million in the quarter and about $287 million year to date; the company now expects roughly $450 million for full-year 2026.

Margins and cash

Margins widened. U.S. GAAP gross margin was 38.4% versus 36.5%, and adjusted gross margin was 58.0% versus 56.0%, with adjusted gross profit up 3% to $2,176.0 million. Interim CFO Paul Campbell credited operational momentum in higher-margin businesses and cost discipline. The release in the material provided does not break out operating expense lines.

Cash generation was stronger than earnings growth. Operating cash flow rose 21% to $899.4 million and free cash flow rose 24% to $813.7 million. Excluding $81 million of transaction- and restructuring-related costs, free cash flow was $895 million, versus $728 million in the year-ago quarter excluding $70 million of transaction costs. Through nine months, revenues were $11,023.3 million (up 4%, 2% operationally) and adjusted EBITDA was $3,433.5 million (up 9%). The nine-month GAAP net loss of $267.7 million compares with $3,174.8 million a year earlier, which included a $2.9 billion goodwill impairment.

Guidance: higher midpoints, a narrower range

Viatris raised the midpoint of every guided metric. Revenue guidance is now $14,700-$14,900 million (midpoint $14,800 million, from $14,750 million). Adjusted EBITDA moves to $4,450-$4,550 million (midpoint $4,500 million, from $4,400 million). Adjusted EPS is $2.56-$2.63 (midpoint $2.60, from $2.52). Free cash flow excluding transaction- and restructuring-related costs is $2,225-$2,375 million (midpoint $2,300 million, from $2,200 million). Operating cash flow is guided to $2.025-$2.1 billion, from $1.9-$2.1 billion.

Our arithmetic against nine-month results points to a softer fourth quarter. The revenue midpoint implies roughly $3.78 billion for Q4, and the adjusted EBITDA midpoint implies roughly $1.07 billion, against $1.20 billion in Q3. This is consistent with the company's estimate of about $100 million of supply-related revenue impact in Q4. Guidance excludes any contribution from Pacira and any acquired IPR&D for unsigned deals.

Nashik, launches and Pacira

The main operational risk is the Nashik, India oral solid dose facility. In September the FDA classified its inspection as Official Action Indicated after 483 observations issued in May. In October the company voluntarily suspended manufacturing there, citing an abundance of caution, and expects to resume production in the first quarter of 2027. It estimated the supply-constraint revenue impact at about $100 million in Q3 and expects about the same in Q4.

The innovative-medicines pipeline is advancing. Gwyn Lo, a contraceptive patch approved by the FDA in July, launched in the U.S. in October. The FDA approved RYZUMVI for presbyopia in October, adding to its existing mydriasis indication. Japan approved WAKIX in September for excessive daytime sleepiness in obstructive sleep apnea and for narcolepsy. CEO Scott Smith also pointed to the potential upcoming approval and launch of fast-acting meloxicam; the release gives no timing.

Viatris agreed to acquire Pacira BioSciences for $36.50 per share in cash, an aggregate equity value of $1.65 billion, with closing expected by the end of November 2026. The company said it expects minimal impact on its gross leverage ratio. It has returned about $717 million to shareholders year to date, including about $300 million of buybacks, with about $700 million remaining under its authorization.

What to watch

Watch the pace of the Nashik remediation and whether production resumes in Q1 2027 as planned, since supply constraints are the clearest drag on Generics and Europe. Also watch the Pacira close, and how the company folds it into guidance once it is included. Other markers are early uptake of Gwyn Lo and RYZUMVI, any meloxicam decision, and whether Greater China sustains double-digit growth as the offset to weakness elsewhere.