Viatris Puts OTC Business Up For Sale
Executive Summary
Viatris has decided to exit the consumer health market and has put up for sale an OTC business which is thought to generate around $1.0bn in annual sales.
Viatris has put its OTC business up for sale as part of a wider move to offload non-core assets.
The Canonsburg, PA-based company’s executive chairman, Robert Coury, said that while OTC is a “great business,” it requires a “tremendous amount of investment” each year just to maintain its current low single-digit growth rate.
By divesting OTC, along with its women’s healthcare and active pharmaceutical ingredients businesses, Viatris’ management can set the firm “on a trajectory of growth,” Coury said, “and do it in a way where we can grow that top line, grow the EBITDA, continue to generate significant cash flows while returning a substantial amount back to shareholders.”
These non-core assets – which do not align with Viatris’ strategy to “move up the value chain” – are expected to generate approximately $5-6bn in pre-tax proceeds, while reducing the company’s SG&A costs and capital expenditure. Viatris hopes to complete these planned divestitures by the end of 2023.
Sales of $1.0bn
Prospective buyers of Viatris’ OTC operation will gain a business which generates annual sales of around $1.0bn and EBITDA of $200-250m, according to JP Morgan analysts. The vast majority of sales are generated in Europe, where the portfolio includes brands such as the Brufen analgesic, CB12 mouthwash, Endwarts wart remover, and Legalon liver health supplement. Viatris also markets in Ireland, Norway and the UK an OTC version of its blockbuster erectile dysfunction treatment Viagra. (Also see "Viagra Connect To Launch In Ireland Following Rx-to-OTC Switch" - HBW Insight, 18 Jan, 2021.)
In the US, Viatris has trimmed its OTC interests, recording in 2021 around $100m of proceeds primarily from the sale of US consumer health products, including the cold remedy Cold-Eeze. (Also see "Defend-Eeze Launches In US Zinc Cold Remedy Market" - HBW Insight, 15 Sep, 2022.)
Viatris’ plan to exit OTC was tipped by Bloomberg in October when it reported the firm was looking to offload its European consumer health operation for around $3.0bn. Citing people familiar with the matter, it said the sale was expected to attract interest from private-equity firms with existing OTC businesses, as well as “strategic suitors who want to grow their business in the region.”
In a note reacting to the Bloomberg report, UBS analyst Ashwani Verma was sceptical about Viatris’ plan to exit OTC.
“While we value the outlined capital allocation priorities, we struggle to understand the strategic rationale behind the decision to sell away what we consider as growth engines of the business as part of portfolio reshaping,” Verma wrote.
Citing Euromontor data, UBS estimated Viatris EU OTC business will grow by 2% in 2022 and generate sales of around $850m. “Overall, Viatris EU OTC appears to be a relatively small player (1.5%/0.8% share in Western/Eastern Europe, with focus on small local brands,” it stated.