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Viatris: A Spinoff To Own

Aug. 01, 2022 10:40 PM ETViatris Inc. (VTRS)ABBV, GSK, MRK, NVS, NVSEF, OGN, PFE, SNY, TEVA91 Comments
Friso Alenus profile picture
Friso Alenus


  • Viatris is down 40% since the spin-off. Financial metrics are positively increasing as one-time costs of the merger are decreasing.
  • Safe and high dividend yield combined with exceptional free cash flow yield offer a great margin of safety.
  • The restructuring of the company offers a potential buyback program and more concentrated investments.

Pharmaceutical industry production line


Viatris (NASDAQ:VTRS) started trading publicly via a spinoff-merger. Ever since, the stock has been underperforming due to selling pressure. While the herd is running away, opportunities arise for value investors. In addition, the stock is tremendously undervalued compared to peers. Investors that

This article was written by

Friso Alenus profile picture
Friso Alenus is 23-year-old with a distinguished degree in electromechanics and a profound interest in the world of finance and investments. Since December 2020, Friso has actively engaged in the stock market, honing his analytical skills and astute decision-making capabilities.As a contributor on Seeking Alpha, Friso offers valuable insights into his own investment portfolio and the rigorous process he employs to evaluate potential stocks. Demonstrating a penchant for identifying value investments with an optimal risk-reward balance, Friso delivers thought-provoking analyses that resonate with seasoned investors and novices alike.Notably, he earned the prestigious 4th place in the esteemed student investing competition hosted by the renowned Belgian financial newspaper, DeTijd, a testament to his exceptional investment acumen.Presently, Friso actively seeks new opportunities in asset management, buy-side analysis, and equity research, leveraging their expertise and passion to make significant contributions in these domains. For inquiries or collaborations, he welcomes communication through Seeking Alpha.Stay updated with latest investment ideas and thought leadership by following him on Twitter. Embark on this enriching journey alongside Friso as he continue to make notable strides in the dynamic world of finance.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of VTRS either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (91)

At 8.69$/share, Price/Cash Flow Ratio of 2.65, FCF of 3.08B$, GPM of 61.84%, Debt to Capital ratio of 48.67%, Revenue growth of 9.54% and Dividend yield of 5.52% - this is a screaming value stock.

planning to buy VTRS for the dividend.
All this optimism is nothing but RIDING DOWN A SLOPE OF HOPE.. and my toboggan is now at the bottom of the hill ! I am now become a long term investor in VTRS. I hope your verdict pans out: " The risk reward balance is favorable for long-term investors."
@LPeter nobody knows anything anymore.we all thought a year ago that $20 a share was a foregone conclusion but here we are a year later .
Chris Lau profile picture
@LPeter The bags one carries is heaviest at the bottom of the slope that gets lower daily. VTRS new 52-week low today. Are you adding more?
ghrelin profile picture
@Chris Lau greatest thought process a foolish investor has is..."it's already sank xyz% how much lower can it get?" the answer is always zero. LOL
Nice to see some positives in their quarterly ER. I´m glad to receive their dividend to fund my adventures and travels to parts of the world like Macaronesia, South Africa, Switzerland, Qatar, UAE, among others.
Better Be Most astute with your investment. Coury and Malik making phony magic at the cost of investors. Did some of you not say that by December, 2022 this would be a 22-25 dollar per share stock? I've been telling you all that you're getting "duked" by Coury and Malik. Where's the stock value?
ronald61239 profile picture
Anything less than $0.80 reported for the Qt. will be a disaster.
@ronald61239 judging by the options activity expectations are high that it’ll surpass the $11 mark after the ER .I hope it follows in TEVA footsteps which has pretty much the same metrics as VTRS and trades higher although it doesn’t pay dividend.
ronald61239 profile picture
@Oracle ----I'm not into options, so will see & soon. I don't understand why people trade in options in low price shares.
@ronald61239 There are many reasons. They are simply a tool to manage risk.
Let’s see what happens on Monday.unfortunately the naysayers have been right so far ,at least about predicting underperforming SP .This stock keeps on trading like the BK is imminent.
@Oracle VTRS has investment grade ratings from the rating agencies. Bankruptcy is not imminent or even likely unless AOC somehow wins the Presidency and somehow nationalizes the entire healthcare sector.
@alexalekhine I’m aware of the strong financials that’s why it’s baffling to see it trading like let’s say drillers when the oil price crashed .
@Oracle Thanks, then we agree.

Perhaps I was channeling a few statements in the writeup such as:

" EV to EBITDA gives us a general insight of how healthy a stock is."


"The two risks that are important to keep an eye on are the high level of debt and a possible decrease in free cash flow.

Being leveraged can amplify returns on investments and increase buying power, but too much leverage can create risky environments. Currently, Viatris is highly leveraged compared to their free cash flow, nonetheless the firm is proactively decreasing debt. For 2022, Viatris is on track to pay down $2 billion of debt."

I find those statements to represent a misunderstanding of leverage.
ghrelin profile picture
If your sure that the management and the company itself is very non-competitive and most likely going to be under water, then why would you be SO sure their huge dividend would hold up? Companies like this always look like steals, when really that's hope speaking and not fundamentals. You just have to ask yourself would you rather pray for a quick "cigar-butt" play or would you rather buy some of these companies with massive moats in growing markets that have been selling off hard this year...it's pretty simple.
Friso Alenus profile picture
@Chris Forza Investing is indeed simple. Where some leave, others profit. And as a matter of fact, a bull market is ordinarily most generous towards a secondary low-priced issue than to the still fairly priced industry leader (as written in the intelligent investor).
Friso Alenus profile picture
@Chris Forza a 23% pay out ratio of free cash flow does not look very huge to me. So why would you think it could not hold up?
ghrelin profile picture
@Friso Alenus *current free cash flow. I work for the leader in the generics space (not viatris). If you understood the generics business you'd know direct to manufacturer generics in the hospital/injectable space is dying off. Everyone is going to cardinal, mckesson, and amerisource. The margins are getting squeezed, and manufacturers make more money selling to distributors. as such the manufacturers are losing market share to smaller manufacturers that can make the same products mainly in india. Increased dilution of competition and no pricing power. Viatris (pfizer injectables) will not have the same kind of FCF it had previously. That payout ratio will skyrocket and the dividends will get cut.
Under $10 this is a steal.
Garbage company with bad management and tremendous debt.

Hard pass
ndardick profile picture
@Harry Sack Garbage generic comment with bad underlying research and tremendous doubt if not fully fatuous.
@Harry Sack You could not have written a more accurate evaluation. I worked for Mylan. Coury, Bresch, Malik and McCormick stole the value of the company and their checks cashed. Now, the sale to Biocon, good luck on investor holdings while Coury and Malik play havoc with Big Pharma that they know nor knew anything about.
ndardick profile picture
@Jggouzd And yet VTRS price is so incredibly cheap at less than 3x earnings with 5% yield that it is up over 7% now on earnings reported this morning. The phenomenal cash flows justify owning VTRS.
I was under the impression VTRS was going to be
the world leader/ king of biosimilars. but I guess not.
ndardick profile picture
@1504661 If VTRS sells every asset class for the 16x EBITDA price they got from the biosimilars, the price of VTRS would more than double. In the interim, I plan to hold the company trading at less than 3x forward earnings with a dividend yield of 5% and asset sales that will reduce the debt level to less than half the equity value.
@1504661 I don;t think anybody thought that.
@1504661 Yes, the was the initial smoke screen to obtain new investment monies but....Coury and Malik had a plan to "duke" anyone with future growth hopes and sold to Biocon. Now, the investors are sitting on Oral Solid Doses and some injectables with little to no hope of any return on their investments.
ndardick profile picture
I have no inside info but actively buying August $10.50 and $11 calls as we approach the earnings report prior to the open on Monday.
@ndardick Hope you don't get burned once again. I have no respect for this management team.
@Epicontact2 I'm selling $9.5 puts.
I 9.15 entry including premium earned with a 5.25% yield seems quite attractive to me. That's the Aug 19s.
@Epicontact2 Well Noted and Well Said. Management of Viatris is toxic.
In at $9. Thanks for the article.
I may double down at $9.
eeeW profile picture
02 Aug. 2022
The picture of this article is of electrical batteries. WHY?
Friso Alenus profile picture
@eeeW The picture of my article is not of electrical batteries. The picture resembles a pharmaceutical production line...
@eeeW Not batteries. 12-gauge shotgun shells.
Price in a recession and I'll be a buyer when the dividend yield gets even higher and i can average down. Otherwise this thing has been a wet dogggg since the spinoff of the biosimilar.
Naysay Analysis profile picture
@Z Dougie Dub generic drugs seem very recession resistant.
@Z Dougie Dub recessions hurt generic drug producers?
Too much debt and they sold their growth portfolio
@jonesy78 EXACTLY !! All growth potential has been sold off.
ronald61239 profile picture
Vtrs may turn out to be a decent investment. I believe it's going to take at least a couple of years to do so. It has many large problems to deal with.
@ronald61239 I doubt you can name any.
ronald61239 profile picture
@alexalekhine ---What i can name is not important. What you think I love to know.
Smart replies are of little value.
@ronald61239 I guess I was right. You didn't name any of the "large problems."
Abullman profile picture
Without the biosimilar business Viatris is just another generic drug company dealing with razor thin margins and minimal growth prospects. The dividend is nice if it can be supported but there is little or no catalyst to achieve stock price appreciation.
The article does not reflect the core concerns of the market. Lower growth and sale of the biosimilar business to Biocon. There are questions around the overall growth, R&D pipeline and continuity of dividend. There are other concerns around underestimation of inflation and currency risk that may put pressure on the bottom line. On the overall side - management needs to establish trust, markets punished them for the sale of biosimilar business (which was their growth strategy at the time of spin off).
Friso Alenus profile picture
@jainsh I think this article does cover most of it. As a value investor I'm not really interested in the market sentiment, and as a result not covering it too much in my article. Even without revenue growth this is still a solid investment as the strong free cash flow compared to the price offer steady and safe dividend together with potential buybacks. The currency risk is for short term investors, so this not bother me. The management team is trying to put two companies together, which should not be easy. Strategies change and should be changed if it is for the better of the investor or the synergy of the two companies.
@Friso Alenus Have you bothered to look at the quality of management? They pay themselves at exorbitant rates - even when the performance of the company is way below market averages.
Until they get rid of Coury, Malik, Mauro, etc...the company will never ever even have a chance of realizing it's full potential.
BTW - The board of directors, is complicit in this mismanagement.
Friso Alenus profile picture
@wheelz so far, I like what the management team is doing. Time will tell how the management will perform.
Good article.

Congratulations for starting your investment path while still in college. Awesome and I wish the powers that be in the U.S. were as responsible with money.

Good luck to you!
Friso Alenus profile picture
@Term Limits For Parasites thank you very much for your comment!
@Term Limits For Parasites May I add on to it - great to see someone being so thoughtful so early in their investing life! Kudos!!
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