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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________to___________
Commission file number 001-39695
VIATRIS INC.
(Exact name of registrant as specified in its charter)

Delaware |  | 83-4364296
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

1000 Mylan Boulevard, Canonsburg, Pennsylvania 15317
(Address of principal executive offices)
(724) 514-1800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class: |  | Trading Symbol(s) |  | Name of Each Exchange on Which Registered:
Common Stock, par value $0.01 per share |  | VTRS |  | The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | ☑ |  | Accelerated filer |  | ☐
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐
|  |  |  | Emerging growth company |  | ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
The number of shares of common stock outstanding, par value $0.01 per share, of the registrant as of May 3, 2023 was 1,199,029,984.

Table of Contents
VIATRIS INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarterly Period Ended
March 31, 2023

|  | Page
| PART I — FINANCIAL INFORMATION |
ITEM 1. | Condensed Consolidated Financial Statements (unaudited) |
| Condensed Consolidated Statements of Operations — Three Months Ended March 31, 202 3 and 20 2 2 | 7
| Condensed Consolidated Statements of Comprehensive Earnings — Three Months Ended March 31, 202 3 and 20 2 2 | 8
| Condensed Consolidated Balance Sheets — March 31, 202 3 and December 31, 20 2 2 | 9
| Condensed Consolidated Statements of Equity — Three Months Ended March 31, 202 3 and 20 2 2 | 10
| Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 202 3 and 20 2 2 | 11
| Notes to Condensed Consolidated Financial Statements | 12
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 45
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 60
ITEM 4. | Controls and Procedures | 61
| PART II — OTHER INFORMATION |
ITEM 1. | Legal Proceedings | 62
ITEM 1A. | Risk Factors | 62
ITEM 2. | U nregistered S ales of E quity S ecurities and U se of Proceeds | 62
ITEM 6. | Exhibits | 63
SIGNATURES |  | 64

2

Table of Contents
Glossary of Defined Terms
Unless the context requires otherwise, references to “Viatris,” “the Company,” “we,” “us” or “our” in this Form 10-Q (defined below) refer to Viatris Inc. and its subsidiaries. We also have used several other terms in this Form 10-Q, most of which are explained or defined below. Some amounts in this Form 10-Q may not add due to rounding.

2003 LTIP | Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan
2020 Incentive Plan | Viatris Inc. 2020 Stock Incentive Plan
2022 Form 10-K | Viatris’ annual report on Form 10-K for the fiscal year ended December 31, 2022, as amended
Adjusted EBITDA | Non-GAAP financial measure that the Company believes is appropriate to provide information to investors - EBITDA (defined below) is further adjusted for share-based compensation expense, litigation settlements, and other contingencies, net, restructuring and other special items
ANDA | Abbreviated New Drug Application
AOCE | Accumulated other comprehensive earnings
API | Active pharmaceutical ingredient
ARV | Antiretroviral medicines
ASC | Accounting Standards Codification
ASU | Accounting Standards Update
Biocon | Biocon Limited
Biocon Biologics | Biocon Biologics Limited, a majority owned subsidiary of Biocon
Biocon Biologics Transaction | The transaction between Viatris and Biocon Biologics pursuant to which Viatris contributed its biosimilars portfolio, composed of the Biocon collaboration programs, biosimilars to Humira®, Enbrel®, and Eylea®, as well as related assets and liabilities to Biocon Biologics
Biocon Agreement | The transaction agreement between Viatris and Biocon Biologics, dated February 27, 2022, relating to the Biocon Biologics Transaction, as amended by that certain Amendment No. 1 to Transaction Agreement, dated November 28, 2022
Biogen | Biogen MA Inc. and Biogen International GmbH, collectively
Business Combination Agreement | Business Combination Agreement, dated as of July 29, 2019, as amended from time to time, among Viatris, Mylan, Pfizer and certain of their affiliates
CCPS | Compulsory convertible preferred shares
CMA | Competition and Markets Authority
Code | The U.S. Internal Revenue Code of 1986, as amended
Combination | Refers to Mylan combining with Pfizer's Upjohn Business in a Reverse Morris Trust transaction to form Viatris on November 16, 2020
Commercial Paper Program | The $1.65 billion unsecured commercial paper program entered into as of November 16, 2020 by Viatris, as issuer, Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V., as guarantors, and certain dealers from time to time
COVID-19 | Novel coronavirus disease of 2019
CP Notes | Unsecured, short-term commercial paper notes issued pursuant to the Commercial Paper Program
Developed Markets segment | Viatris’ business segment that includes our operations primarily in the following markets: North America and Europe

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Distribution | Pfizer's distribution to Pfizer stockholders all the issued and outstanding shares of Upjohn Inc.
DOJ | U.S. Department of Justice
EBITDA | Non-GAAP financial measure that the Company believes is appropriate to provide information to investors - U.S. GAAP net earnings (loss) adjusted for net contribution attributable to equity method investments, income tax provision (benefit), interest expense and depreciation and amortization
EDPA | U.S. District Court for the Eastern District of Pennsylvania
Emerging Markets segment | Viatris’ business segment that includes, but is not limited to, our operations primarily in the following markets: Parts of Asia, the Middle East, South and Central America, Africa, and Eastern Europe
ERP system | Enterprise resource planning system
EU | European Union
Exchange Act | Securities Exchange Act of 1934, as amended
Famy Life Sciences | Famy Life Sciences Private Limited
FASB | Financial Accounting Standards Board
FDA | U.S. Food and Drug Administration
Form 10-Q | This quarterly report on Form 10-Q for the quarterly period ended March 31, 2023
Global Systemically Important Banks | Financial institutions that are considered systemically important by the Financial Stability Board.
Greater China segment | Viatris’ business segment that includes our operations primarily in the following markets: China, Taiwan and Hong Kong
Gx | Generic drugs
IPR | Inter Partes review
IPR&D | In-process research and development
IRS | U.S. Internal Revenue Service
IT | Information technology
JANZ segment | Viatris’ business segment that includes our operations in the following markets: Japan, Australia and New Zealand
LIBOR | London Interbank Offered Rate
Lilly | Eli Lilly and Company
Maximum Leverage Ratio | The maximum consolidated leverage ratio financial covenant requiring maintenance of a maximum ratio of consolidated total indebtedness as of the end of any quarter to consolidated EBITDA for the trailing four quarters as defined in the related credit agreements from time to time
MDL | Multidistrict litigation
MPI | Mylan Pharmaceuticals Inc.
Mylan | Mylan N.V. and its subsidiaries
Mylan Inc. U.S. Dollar Notes | The 4.200% Senior Notes due 2023, 4.550% Senior Notes due 2028, 5.400% Senior Notes due 2043 and 5.200% Senior Notes due 2048 issued by Mylan Inc., which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan II B.V., Viatris Inc. and Utah Acquisition Sub Inc.
Mylan Securitization | Mylan Securitization LLC
NASDAQ | The NASDAQ Stock Market
NDA | New drug application
NHS | National Health Services

4

Table of Contents

Note Securitization Facility | The note securitization facility entered into in August 2022 for borrowings up to $200 million and expiring in August 2023
OTC | Over-the-counter
Oyster Point | Oyster Point Pharma, Inc.
Pfizer | Pfizer Inc.
PMS | Pharmascience Inc.
PSUs | Performance awards
PTAB | U.S. Patent Trial and Appeal Board
R&D | Research and development
Receivables Facility | The $400 million accounts receivable entered into in August 2020 and expiring in April 2025
Registered Upjohn Notes | The 1.650% Senior Notes due 2025, 2.300% Senior Notes due 2027, 2.700% Senior Notes due 2030, 3.850% Senior Notes due 2040 and 4.000% Senior Notes due 2050 originally issued on October 29, 2021 registered with the SEC in exchange for the corresponding Unregistered Upjohn U.S. Dollar Notes in a similar aggregate principal amount and with terms substantially identical to the corresponding Unregistered Upjohn U.S. Dollar Notes and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Respiratory Delivery Platform | Pfizer’s proprietary dry powder inhaler delivery platform
Restricted Stock Awards | The Company’s nonvested restricted stock and restricted stock unit awards, including PSUs
Revolving Facility | The $4.0 billion revolving facility dated as of July 1, 2021, by and among Viatris, certain lenders and issuing banks from time to time party thereto and Bank of America, N.A., as administrative agent
RICO | Racketeer Influenced and Corrupt Organizations Act
RSUs | The Company's unvested restricted stock unit awards
Sanofi | Sanofi-Aventis U.S., LLC
SARs | Stock Appreciation Rights
SDNY | U.S. District Court for the Southern District of New York
SEC | U.S. Securities and Exchange Commission
Securities Act | Securities Act of 1933, as amended
Senior U.S. Dollar Notes | The Upjohn U.S. Dollar Notes, the Utah U.S. Dollar Notes and the Mylan Inc. U.S. Dollar Notes, collectively
Separation and Distribution Agreement | Separation and Distribution Agreement between Viatris and Pfizer, dated as of July 29, 2019, as amended from time to time
SG&A | Selling, general and administrative expenses
SOFR | Secured overnight financial rate
Stock awards | Stock options and SARs
Teva | Teva Pharmaceutical Industries Ltd.
TSA | Transition services agreement
U.K. | United Kingdom
U.S. | United States
U.S. GAAP | Accounting principles generally accepted in the U.S.

5

Table of Contents

Unregistered Upjohn U.S. Dollar Notes | The 1.650% Senior Notes due 2025, 2.300% Senior Notes due 2027, 2.700% Senior Notes due 2030, 3.850% Senior Notes due 2040 and 4.000% Senior Notes due 2050 originally issued on June 22, 2020 by Upjohn Inc. (now Viatris Inc.) in a private offering exempt from the registration requirements of the Securities Act and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Upjohn | Upjohn Inc., a wholly owned subsidiary of Pfizer prior to the Distribution, that combined with Mylan and was renamed Viatris Inc.
Upjohn Business | Pfizer’s off-patent branded and generic established medicines business that, in connection with the Combination, was separated from Pfizer and combined with Mylan to form Viatris
Upjohn Distributor Markets | Select geographic markets that were part of the Combination that are smaller in nature and in which we had no established infrastructure prior to or following the Combination and that the Company intends to divest
Upjohn U.S. Dollar Notes | Senior unsecured notes denominated in U.S. dollars and originally issued by Upjohn Inc. or Viatris Inc. pursuant to an indenture dated June 22, 2020 and fully and unconditionally guaranteed by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Utah Acquisition Sub | Utah Acquisition Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Viatris
Utah U.S. Dollar Notes | The 3.950% Senior Notes due 2026 and 5.250% Senior Notes due 2046 issued by Utah Acquisition Sub Inc., which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and Mylan II B.V.
Viatris | Viatris Inc., formerly known as Upjohn Inc. prior to the completion of the Combination
YEN Term Loan Facility | The ¥40 billion term loan agreement dated as of July 1, 2021, among Viatris, the guarantors from time to time party thereto, the lenders from time to time party thereto and Mizuho Bank, Ltd., as administrative agent

6

Table of Contents
PART I — FINANCIAL INFORMATION
VIATRIS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)

|  |  | Three Months Ended
|  |  | March 31,
|  |  |  |  | 2023 |  | 2022
Revenues: |  |  |  |  |  |  |
Net sales |  |  |  |  | $ | 3,719.1 |  |  | $ | 4,178.2 |
Other revenues |  |  |  |  | 10.0 |  |  | 13.5 |
Total revenues |  |  |  |  | 3,729.1 |  |  | 4,191.7 |
Cost of sales |  |  |  |  | 2,186.9 |  |  | 2,420.5 |
Gross profit |  |  |  |  | 1,542.2 |  |  | 1,771.2 |
Operating expenses: |  |  |  |  |  |  |
Research and development |  |  |  |  | 182.9 |  |  | 142.3 |
Selling, general and administrative |  |  |  |  | 958.9 |  |  | 915.3 |
Litigation settlements and other contingencies, net |  |  |  |  | 0.6 |  |  | 6.2 |
Total operating expenses |  |  |  |  | 1,142.4 |  |  | 1,063.8 |
Earnings from operations |  |  |  |  | 399.8 |  |  | 707.4 |
Interest expense |  |  |  |  | 147.0 |  |  | 146.2 |
Other (income) expense, net |  |  |  |  | (69.9) |  |  | 33.7 |
Earnings before income taxes |  |  |  |  | 322.7 |  |  | 527.5 |
Income tax provision |  |  |  |  | 98.0 |  |  | 128.3 |
Net earnings |  |  |  |  | $ | 224.7 |  |  | $ | 399.2 |
Earnings per share attributable to Viatris Inc. shareholders |  |  |  |  |  |  |
Basic |  |  |  |  | $ | 0.19 |  |  | $ | 0.33 |
Diluted |  |  |  |  | $ | 0.19 |  |  | $ | 0.33 |
Weighted average shares outstanding: |  |  |  |  |  |  |
Basic |  |  |  |  | 1,202.5 |  |  | 1,210.5 |
Diluted |  |  |  |  | 1,205.6 |  |  | 1,213.1 |

See Notes to Condensed Consolidated Financial Statements
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Table of Contents
VIATRIS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Earnings
(Unaudited; in millions)

|  |  | Three Months Ended
|  |  | March 31,
|  |  |  |  | 2023 |  | 2022
Net earnings |  |  |  |  | $ | 224.7 |  |  | $ | 399.2 |
Other comprehensive loss, before tax: |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  |  |  | 45.3 |  |  | (469.2) |
Change in unrecognized gain (loss) and prior service cost related to defined benefit plans |  |  |  |  | 1.3 |  |  | (2.6) |
Net unrecognized gain on derivatives in cash flow hedging relationships |  |  |  |  | 2.8 |  |  | 0.2 |
Net unrecognized (loss) gain on derivatives in net investment hedging relationships |  |  |  |  | (66.2) |  |  | 201.3 |
Net unrealized gain (loss) on marketable securities |  |  |  |  | 0.9 |  |  | (1.7) |
Other comprehensive loss, before tax |  |  |  |  | (15.9) |  |  | (272.0) |
Income tax (benefit) provision |  |  |  |  | (12.5) |  |  | 44.7 |
Other comprehensive loss, net of tax |  |  |  |  | (3.4) |  |  | (316.7) |
Comprehensive earnings |  |  |  |  | $ | 221.3 |  |  | $ | 82.5 |

See Notes to Condensed Consolidated Financial Statements
8

Table of Contents
VIATRIS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited in millions, except share and per share amounts)

| March 31, 2023 |  | December 31, 2022
ASSETS
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 506.6 |  |  | $ | 1,259.9 |
Accounts receivable, net | 3,497.5 |  |  | 3,814.5 |
Inventories | 3,664.3 |  |  | 3,519.5 |
Prepaid expenses and other current assets | 1,763.6 |  |  | 1,811.2 |
Assets held for sale | 198.3 |  |  | 230.3 |
Total current assets | 9,630.3 |  |  | 10,635.4 |
Property, plant and equipment, net | 3,007.8 |  |  | 3,024.5 |
Intangible assets, net | 22,701.6 |  |  | 22,607.1 |
Goodwill | 10,573.2 |  |  | 10,425.8 |
Deferred income tax benefit | 959.1 |  |  | 925.9 |
Other assets | 2,418.2 |  |  | 2,403.5 |
Total assets | $ | 49,290.2 |  |  | $ | 50,022.2 |
LIABILITIES AND EQUITY
Liabilities |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 1,957.5 |  |  | $ | 1,766.6 |
Short-term borrowings | 204.6 |  |  | — |
Income taxes payable | 244.5 |  |  | 279.6 |
Current portion of long-term debt and other long-term obligations | 508.7 |  |  | 1,259.1 |
Other current liabilities | 3,192.8 |  |  | 3,440.9 |
Total current liabilities | 6,108.1 |  |  | 6,746.2 |
Long-term debt | 18,069.4 |  |  | 18,015.2 |
Deferred income tax liability | 2,465.0 |  |  | 2,432.0 |
Other long-term obligations | 1,719.8 |  |  | 1,756.5 |
Total liabilities | 28,362.3 |  |  | 28,949.9 |
Equity |  |  |
Viatris Inc. shareholders’ equity |  |  |
Common stock: $0.01 par value, 3,000,000,000 shares authorized; shares issued: 1,220,224,204 and 1,213,793,231, respectively | 12.2 |  |  | 12.1 |
Additional paid-in capital | 18,679.6 |  |  | 18,645.8 |
Retained earnings | 5,252.5 |  |  | 5,175.6 |
Accumulated other comprehensive loss | (2,764.6) |  |  | (2,761.2) |
| 21,179.7 |  |  | 21,072.3 |
Less: Treasury stock — at cost |  |  |
Common stock shares: 21,239,521 as of March 31, 2023 | 251.8 |  |  | — |
Total equity | 20,927.9 |  |  | 21,072.3 |
Total liabilities and equity | $ | 49,290.2 |  |  | $ | 50,022.2 |

See Notes to Condensed Consolidated Financial Statements
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Table of Contents
VIATRIS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
(Unaudited; in millions, except share and per share amounts)

|  |  |  |  | Additional Paid-In Capital |  | Retained Earnings |  |  |  |  |  | Accumulated Other Comprehensive Loss |  |  |  | Total Equity
| Common Stock |  |  |  | Treasury Stock |  |  |
| Shares |  | Cost |  |  |  | Shares |  | Cost |  |  |
Balance at December 31, 2022 | 1,213,793,231 |  |  | $ | 12.1 |  |  | $ | 18,645.8 |  |  | $ | 5,175.6 |  |  | — |  |  | $ | — |  |  | $ | (2,761.2) |  |  |  |  | $ | 21,072.3 |
Net earnings | — |  |  | — |  |  | — |  |  | 224.7 |  |  | — |  |  | — |  |  | — |  |  |  |  | 224.7 |
Other comprehensive loss, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3.4) |  |  |  |  | (3.4) |
Issuance of restricted stock and stock options exercised, net | 6,350,585 |  |  | 0.1 |  |  | 3.6 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 3.7 |
Taxes related to the net share settlement of equity awards | — |  |  | — |  |  | (19.4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | (19.4) |
Share-based compensation expense | — |  |  | — |  |  | 42.6 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 42.6 |
Common stock repurchase | — |  |  | — |  |  | — |  |  | — |  |  | 21,239,521 |  |  | (251.8) |  |  | — |  |  |  |  | (251.8) |
Issuance of common stock | 80,388 |  |  | — |  |  | 0.9 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 0.9 |
Cash dividends declared, $0.12 per common share | — |  |  | — |  |  | — |  |  | (147.8) |  |  | — |  |  | — |  |  | — |  |  |  |  | (147.8) |
Other | — |  |  | — |  |  | 6.1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 6.1 |
Balance at March 31, 2023 | 1,220,224,204 |  |  | $ | 12.2 |  |  | $ | 18,679.6 |  |  | $ | 5,252.5 |  |  | 21,239,521 |  |  | $ | (251.8) |  |  | $ | (2,764.6) |  |  |  |  | $ | 20,927.9 |

|  |  |  |  | Additional Paid-In Capital |  | Retained Earnings |  |  |  |  |  | Accumulated Other Comprehensive Loss |  |  |  | Total Equity
| Common Stock |  |  |  | Treasury Stock |  |  |
| Shares |  | Cost |  |  |  | Shares |  | Cost |  |  |
Balance at December 31, 2021 | 1,209,507,463 |  |  | $ | 12.1 |  |  | $ | 18,536.1 |  |  | $ | 3,688.8 |  |  | — |  |  | $ | — |  |  | $ | (1,744.3) |  |  |  |  | $ | 20,492.7 |
Net earnings | — |  |  | — |  |  | — |  |  | 399.2 |  |  | — |  |  | — |  |  | — |  |  |  |  | 399.2 |
Other comprehensive loss, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (316.7) |  |  |  |  | (316.7) |
Issuance of restricted stock, net | 2,816,020 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Taxes related to the net share settlement of equity awards | — |  |  | — |  |  | (9.3) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | (9.3) |
Share-based compensation expense | — |  |  | — |  |  | 28.3 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 28.3 |
Cash dividends declared, $0.12 per common share | — |  |  | — |  |  | — |  |  | (146.5) |  |  | — |  |  | — |  |  | — |  |  |  |  | (146.5) |
Balance at March 31, 2022 | 1,212,323,483 |  |  | $ | 12.1 |  |  | $ | 18,555.1 |  |  | $ | 3,941.5 |  |  | — |  |  | $ | — |  |  | $ | (2,061.0) |  |  |  |  | $ | 20,447.7 |

See Notes to Condensed Consolidated Financial Statements
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Table of Contents
VIATRIS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited; in millions)

| Three Months Ended
| March 31,
| 2023 |  | 2022
Cash flows from operating activities: |  |  |
Net earnings | $ | 224.7 |  |  | $ | 399.2 |
Adjustments to reconcile net earnings to net cash provided by operating activities: |  |  |
Depreciation and amortization | 730.0 |  |  | 736.0 |
Share-based compensation expense | 42.6 |  |  | 28.3 |
Deferred income tax benefit | (26.7) |  |  | (52.8) |
Gain from equity method investments | — |  |  | (0.1) |
Other non-cash items | 29.6 |  |  | 37.8 |
Litigation settlements and other contingencies, net | 2.4 |  |  | 5.2 |
Changes in operating assets and liabilities: |  |  |
Accounts receivable | 215.0 |  |  | (115.5) |
Inventories | (151.1) |  |  | (69.1) |
Accounts payable | 183.4 |  |  | (30.2) |
Income taxes | (53.9) |  |  | 67.0 |
Other operating assets and liabilities, net | (224.8) |  |  | 132.7 |
Net cash provided by operating activities | 971.2 |  |  | 1,138.5 |
Cash flows from investing activities: |  |  |
Cash paid for acquisitions, net of cash acquired | (667.7) |  |  | — |
Capital expenditures | (47.8) |  |  | (64.5) |
Purchase of marketable securities | (9.0) |  |  | (8.6) |
Proceeds from the sale of marketable securities | 9.0 |  |  | 8.5 |
Payments for product rights and other, net | (34.7) |  |  | (7.4) |
Proceeds from the sale of assets | 0.7 |  |  | 5.1 |
Net cash used in investing activities | (749.5) |  |  | (66.9) |
Cash flows from financing activities: |  |  |
Proceeds from issuance of long-term debt | — |  |  | 0.1 |
Payments of long-term debt | (750.1) |  |  | (0.1) |
Purchase of common stock | (250.0) |  |  | — |
Change in short-term borrowings, net | 204.6 |  |  | (837.9) |
Taxes paid related to net share settlement of equity awards | (30.0) |  |  | (9.9) |
Contingent consideration payments | (8.4) |  |  | (15.5) |
Payments of financing fees | — |  |  | (0.4) |
Cash dividends paid | (143.8) |  |  | (145.1) |
Non-contingent payments for product rights | (9.7) |  |  | — |
Issuance of common stock | 0.9 |  |  | — |
Other items, net | 11.8 |  |  | (0.2) |
Net cash used in financing activities | (974.7) |  |  | (1,009.0) |
Effect on cash of changes in exchange rates | 1.2 |  |  | (11.4) |
Net (decrease) increase in cash, cash equivalents and restricted cash | (751.8) |  |  | 51.2 |
Cash, cash equivalents and restricted cash — beginning of period | 1,262.5 |  |  | 706.2 |
Cash, cash equivalents and restricted cash — end of period | $ | 510.7 |  |  | $ | 757.4 |

See Notes to Condensed Consolidated Financial Statements
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Table of Contents
VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
1.General
The accompanying unaudited condensed consolidated financial statements (“interim financial statements”) of Viatris Inc. and subsidiaries were prepared in accordance with U.S. GAAP and the rules and regulations of the SEC for reporting on Form 10-Q; therefore, as permitted under these rules, certain footnotes and other financial information included in audited financial statements were condensed or omitted. The interim financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the interim results of operations, comprehensive earnings, financial position, equity and cash flows for the periods presented.
These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Viatris’ 2022 Form 10-K. The December 31, 2022 condensed consolidated balance sheet was derived from audited financial statements.
The interim results of operations, comprehensive earnings and cash flows for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.
2.Revenue Recognition and Accounts Receivable
The Company recognizes revenues in accordance with ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes net revenue for product sales when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues are recorded net of provisions for variable consideration, including discounts, rebates, governmental rebate programs, price adjustments, returns, chargebacks, promotional programs and other sales allowances. Accruals for these provisions are presented in the condensed consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).
Our net sales may be impacted by wholesaler and distributor inventory levels of our products, which can fluctuate throughout the year due to the seasonality of certain products, pricing, the timing of product demand, purchasing decisions and other factors. Such fluctuations may impact the comparability of our net sales between periods.
Consideration received from licenses of intellectual property is recorded as other revenues. Royalty or profit share amounts, which are based on sales of licensed products or technology, are recorded when the customer’s subsequent sales or usages occur. Such consideration is included in other revenues in the condensed consolidated statements of operations.
The following table presents the Company’s net sales by product category for each of our reportable segments for the three months ended March 31, 2023 and 2022, respectively:

(In millions) | Three Months Ended March 31, 2023
Product Category | Developed Markets |  | Greater China |  | JANZ |  | Emerging Markets |  | Total
Brands | $ | 1,232.0 |  |  | $ | 562.4 |  |  | $ | 190.3 |  |  | $ | 435.6 |  |  | $ | 2,420.3 |
Complex Gx | 129.9 |  |  | — |  |  | 6.1 |  |  | 0.1 |  |  | 136.1 |
Generics | 808.5 |  |  | 2.2 |  |  | 145.8 |  |  | 206.2 |  |  | 1,162.7 |
Total | $ | 2,170.4 |  |  | $ | 564.6 |  |  | $ | 342.2 |  |  | $ | 641.9 |  |  | $ | 3,719.1 |

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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(In millions) | Three Months Ended March 31, 2022
Product Category | Developed Markets |  | Greater China |  | JANZ |  | Emerging Markets |  | Total
Brands | $ | 1,298.7 |  |  | $ | 569.7 |  |  | $ | 249.0 |  |  | $ | 436.7 |  |  | $ | 2,554.1 |
Complex Gx and Biosimilars | 364.1 |  |  | — |  |  | 10.3 |  |  | 16.4 |  |  | 390.8 |
Generics | 813.3 |  |  | 3.4 |  |  | 164.5 |  |  | 252.1 |  |  | 1,233.3 |
Total | $ | 2,476.1 |  |  | $ | 573.1 |  |  | $ | 423.8 |  |  | $ | 705.2 |  |  | $ | 4,178.2 |

____________
(a)Amounts for the three months ended March 31, 2023 include the unfavorable impact of foreign currency translations compared to the prior year period.
(b)Amounts for the three months ended March 31, 2022 include $164.8 million related to the biosimilars business which was subsequently contributed to Biocon Biologics in November 2022. The Company has not recognized the results of the biosimilars business in its consolidated financial statements subsequent to November 29, 2022.
The following table presents net sales on a consolidated basis for select key products for the three months ended March 31, 2023 and 2022:

|  | Three months ended March 31,
(In millions) |  | 2023 |  | 2022
Select Key Global Products |  |  |  |
Lipitor ® |  | $ | 417.9 |  |  | $ | 440.1 |
Norvasc ® |  | 202.7 |  |  | 207.8 |
Lyrica ® |  | 144.3 |  |  | 171.7 |
Viagra ® |  | 115.0 |  |  | 129.8 |
EpiPen® Auto-Injectors |  | 95.8 |  |  | 88.8 |
Celebrex ® |  | 88.8 |  |  | 85.2 |
Creon ® |  | 72.7 |  |  | 74.7 |
Effexor ® |  | 64.6 |  |  | 77.5 |
Zoloft ® |  | 56.5 |  |  | 73.1 |
Xalabrands |  | 46.7 |  |  | 53.0 |
Select Key Segment Products |  |  |  |
Dymista ® |  | $ | 53.2 |  |  | $ | 44.0 |
Yupelri ® |  | 47.0 |  |  | 43.7 |
Xanax ® |  | 39.7 |  |  | 40.0 |
Amitiza ® |  | 36.6 |  |  | 41.8 |

____________
(a)The Company does not disclose net sales for any products considered competitively sensitive.
(b)Products disclosed may change in future periods, including as a result of seasonality, competition or new product launches.
(c)Amounts for the three months ended March 31, 2023 include the unfavorable impact of foreign currency translations compared to the prior year period.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Variable Consideration and Accounts Receivable
The following table presents a reconciliation of gross sales to net sales by each significant category of variable consideration during the three months ended March 31, 2023 and 2022, respectively:

|  |  | Three Months Ended
|  |  | March 31,
(In millions) |  |  |  |  | 2023 |  | 2022
Gross sales |  |  |  |  | $ | 6,273.0 |  |  | $ | 7,198.3 |
Gross to net adjustments: |  |  |  |  |  |  |
Chargebacks |  |  |  |  | (1,350.7) |  |  | (1,584.2) |
Rebates, promotional programs and other sales allowances |  |  |  |  | (992.2) |  |  | (1,205.9) |
Returns |  |  |  |  | (50.4) |  |  | (82.6) |
Governmental rebate programs |  |  |  |  | (160.6) |  |  | (147.4) |
Total gross to net adjustments |  |  |  |  | $ | (2,553.9) |  |  | $ | (3,020.1) |
Net sales |  |  |  |  | $ | 3,719.1 |  |  | $ | 4,178.2 |

No significant revisions were made to the methodology used in determining these provisions or the nature of the provisions during the three months ended March 31, 2023. Such allowances were comprised of the following at March 31, 2023 and December 31, 2022, respectively:

(In millions) | March 31, 2023 |  | December 31, 2022
Accounts receivable, net | $ | 1,739.9 |  |  | $ | 1,798.7 |
Other current liabilities | 851.5 |  |  | 888.8 |
Total | $ | 2,591.4 |  |  | $ | 2,687.5 |

Accounts receivable, net was comprised of the following at March 31, 2023 and December 31, 2022, respectively:

(In millions) | March 31, 2023 |  | December 31, 2022
Trade receivables, net | $ | 3,021.9 |  |  | $ | 3,243.8 |
Other receivables | 475.6 |  |  | 570.7 |
Accounts receivable, net | $ | 3,497.5 |  |  | $ | 3,814.5 |

Accounts Receivable Factoring Arrangements
We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable. These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. We derecognized $76.3 million and $34.7 million of accounts receivable as of March 31, 2023 and December 31, 2022, respectively, under these factoring arrangements.
3.Recent Accounting Pronouncements
Adoption of New Accounting Standards
In September 2022, the FASB issued Accounting Standards Update 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50), which requires entities to provide qualitative and quantitative disclosures about their supplier finance programs, including a rollforward of related obligations. The adoption of ASU 2022-04 did not affect the Company’s financial condition, results of operations or cash flows as the guidance only requires additional disclosures. We adopted this ASU effective January 1, 2023.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
The Company has certain voluntary supply chain finance programs with financial intermediaries which provide participating suppliers the option to be paid by the intermediary earlier than the original invoice due date. The Company’s responsibility is limited to making payments on the terms originally negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date. The range of payment terms the Company negotiates with suppliers are consistent, regardless of whether a supplier participates in a supply chain finance program. The total amounts due to financial intermediaries to settle supplier invoices under supply chain finance programs as of March 31, 2023 and December 31, 2022 were $55.5 million and $33.4 million, respectively. These amounts are included within Accounts payable in the condensed consolidated balance sheets.
There were no other significant changes in new accounting standards from those disclosed in Viatris’ 2022 Form 10-K. Refer to Viatris’ 2022 Form 10-K for additional information.
4.Acquisitions and Other Transactions
Oyster Point Acquisition
During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $427.4 million in cash, which included $11 per share paid to Oyster Point stockholders through a tender offer, payment for vested share-based awards, and the repayment of debt of Oyster Point. In addition to the upfront cash consideration, each Oyster Point stockholder received one non-tradeable contingent value right representing up to an additional $2 per share, or approximately $60 million in the aggregate, contingent upon Oyster Point achieving certain metrics based upon full year 2022 performance. Oyster Point did not achieve the metrics that would have triggered a contingent payment and the contingent value rights have expired. Oyster Point is focused on the discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases.
Vested share-based awards to acquire Oyster Point common stock that were outstanding immediately prior to the closing of the acquisition were cancelled in exchange for the right to receive an amount in cash based upon a formula contained within the merger agreement. The unvested share-based awards were converted into Viatris share-based awards based upon a formula contained within the merger agreement.
In accordance with U.S. GAAP, the Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated fair values at the acquisition date. During the three months ended March 31, 2023, the Company incurred acquisition related costs of approximately $18.3 million, which were recorded primarily in SG&A in the condensed consolidated statement of operations.
The U.S. GAAP purchase price was $392.7 million, net of cash acquired. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed for Oyster Point is as follows:

(In millions) |
Current assets (excluding inventories and net of cash acquired) | $ | 26.9 |
Inventories | 37.8 |
Property, plant and equipment | 1.4 |
Identified intangible assets | 334.0 |
Goodwill | 5.9 |
Deferred income tax benefit | 17.7 |
Other assets | 7.7 |
Total assets acquired | $ | 431.4 |
Current liabilities | 37.0 |
Other noncurrent liabilities | 1.7 |
Net assets acquired (net of $34.7 of cash acquired) | $ | 392.7 |

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary areas subject to change relate to the finalization of the valuation of intangible assets and income taxes.
The Company recorded a step-up in the fair value of inventory of approximately $29.3 million. During the three months ended March 31, 2023, the Company recorded amortization of the inventory step-up of approximately $7.3 million, which is included in Cost of sales in the condensed consolidated statement of operations.
The identified intangible assets of $334.0 million are comprised of product rights and licenses related to a commercial asset, Tyrvaya®, for the treatment of dry eye disease, that have an estimated useful life of 10 years. Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which are not observable in the market and are thus considered Level 3 measurements as defined by U.S. GAAP.
The goodwill of $5.9 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products to be developed in the future. All of the goodwill was assigned to the Developed Markets segment. None of the goodwill recognized in this transaction is currently expected to be deductible for income tax purposes. The operating results of Oyster Point have been included in the Company’s condensed consolidated statements of operations since the acquisition date. The total revenues of Oyster Point for the period from the acquisition date to March 31, 2023, were $6.3 million and net loss, net of tax, was approximately $49.3 million. The net loss for the period includes the effect of the purchase accounting adjustments and acquisition related costs.
The following table presents supplemental unaudited pro forma information for the acquisition, as if it had occurred on January 1, 2022. The unaudited pro forma results reflect certain adjustments related to past operating performance and acquisition accounting adjustments, such as increased amortization expense based on the fair value of assets acquired, the impact of transaction costs and the related income tax effects. The unaudited pro forma results do not include any anticipated synergies which may be achievable, or have been achieved, subsequent to the closing of the acquisition. Accordingly, the unaudited pro forma results are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the stated date above, nor are they indicative of the future operating results of Viatris and its subsidiaries.

| Three Months Ended |  | Three Months Ended
(Unaudited, in millions, except per share amounts) | March 31, 2023 |  | March 31, 2022
Total revenues | $ | 3,729.1 |  |  | $ | 4,194.4 |
Net earnings | $ | 260.5 |  |  | $ | 337.0 |
Earnings per share: |  |  |
Basic | $ | 0.22 |  |  | $ | 0.28 |
Diluted | $ | 0.22 |  |  | $ | 0.28 |
Weighted average shares outstanding: |  |  |
Basic | 1,202.5 |  |  | 1,210.5 |
Diluted | 1,205.6 |  |  | 1,213.1 |

Famy Life Sciences Acquisition
On November 7, 2022, the Company entered into a definitive agreement to acquire the remaining equity shares of Famy Life Sciences, a privately-owned research company with a complementary portfolio of ophthalmology therapies under development, for consideration of $281 million. The Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 under which the Company obtained rights with respect to acquiring certain pharmaceutical products and had also acquired shares representing approximately 13.5% equity interest in Famy Life Sciences for $25.0 million at December 31, 2020. The investment was accounted for in accordance with ASC 321, Investments - Equity Securities.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023. The Company recognized a gain of $18.9 million during the first quarter of 2023 as a result of remeasuring its pre-existing 13.5% equity interest in Famy Life Sciences to fair value, which was recorded as a component of Other (income) expense, net in the condensed consolidated statement of operations.
In accordance with U.S. GAAP, the Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated fair values at the acquisition date. The U.S. GAAP purchase price allocated to the transaction was $325.0 million, which consisted of $281 million of cash consideration paid for the remaining equity shares and $43.9 million for the fair value of the pre-existing 13.5% equity interest. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed for Famy Life Sciences is as follows:

(In millions) |
IPR&D | $ | 290.0 |
Goodwill | 89.3 |
Total assets acquired | $ | 379.3 |
Current liabilities | 2.2 |
Deferred tax liabilities | 52.1 |
Net assets acquired (net of $0.2 of cash acquired) | $ | 325.0 |

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary areas subject to change relate to the finalization of the valuation of IPR&D and income taxes.
The amount allocated to IPR&D represents an estimate of the fair value of purchased in-process technology for research projects that, as of the closing date of the acquisition, had not reached technological feasibility and had no alternative future use. The fair value of IPR&D of $290.0 million was based on the excess earnings method, which utilizes forecasts of expected cash inflows (including estimates for ongoing costs) and other contributory charges. A discount rate of 23.9% was utilized to discount net cash inflows to present values. IPR&D is accounted for as an indefinite-lived intangible asset and will be subject to impairment testing until completion or abandonment of the projects. Upon successful completion and launch of each product, the Company will make a determination of the estimated useful life of the individual asset. The acquired IPR&D projects are in various stages of completion and the estimated costs to complete these projects total approximately $120 million, which are expected to be incurred through 2024. There are risks and uncertainties associated with the timely and successful completion of the projects included in IPR&D, and no assurances can be given that the underlying assumptions used to estimate the fair value of IPR&D will not change or the timely completion of each project to commercial success will occur.
The goodwill of $89.3 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products to be developed in the future. All of the goodwill was assigned to the Developed Markets segment. None of the goodwill recognized in this transaction is currently expected to be deductible for income tax purposes. The acquisition did not have a material impact on the Company’s results of operations since the acquisition date or on a pro forma basis for the three months ended March 31, 2023 and 2022.
Ophthalmology is one of the key therapeutic areas of focus that the Company announced in February 2022 when it announced plans for certain strategic actions. With the combination of Viatris' global commercial footprint, R&D and regulatory capabilities and supply chain, along with Oyster Point's deep knowledge of the ophthalmology space from a clinical, medical, regulatory and commercial perspective—including Tyrvaya®—and Famy Life Sciences' Phase III-ready pipeline, the Company believes it has the foundation to create a leading global ophthalmology franchise, accelerating efforts to address the unmet needs of patients with ophthalmic disease and the eye care professionals who treat them.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
5.Divestitures
Biocon Biologics Transaction
On November 29, 2022, Viatris completed a transaction to contribute its biosimilars portfolio to Biocon Biologics. Under the terms of the Biocon Agreement, Viatris received $3 billion in consideration in the form of a $2 billion cash payment, adjusted as set forth in the Biocon Agreement, and approximately $1 billion of CCPS representing a stake of approximately 12.9% (on a fully diluted basis) in Biocon Biologics. Viatris also is entitled to $335 million of additional cash payments in 2024. In addition, Viatris and Biocon Biologics have agreed to a closing working capital target of $250 million. An amount of cash equal to all or a portion of the closing working capital target may become payable to Biocon Biologics in connection with certain events in the future, depending on the valuations attributable to such events. Refer to Note 8 Balance Sheet Components for additional information on assets and liabilities related to Biocon Biologics. The Company’s CCPS in Biocon Biologics are classified as equity securities, refer to Note 11 Financial Instruments and Risk Management for further discussion.
Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections, and the remittance of rebates, to ensure business continuity for patients, customers and colleagues. The term of the transition services agreement is generally up to two years. Under the transition services agreement, Viatris is entitled to be reimbursed for its costs (subject to certain caps) plus a markup. During the three months ended March 31, 2023, the Company recognized TSA income of approximately $45.7 million as a component of Other (Income) Expense, net.
Other Potential Divestitures
In November 2022, the Company provided an update on the strategic priorities announced in February 2022, including identifying the following businesses no longer considered core to its future strategy that the Company intends to divest:
•OTC;
•API (while retaining some selective development API capabilities);
•Women’s health care, primarily related to our oral and injectable contraceptives. This does not include all of our women’s health care related products; as an example, our Xulane® product in the U.S. is excluded; and
•Upjohn Distributor Markets.
In the fourth quarter of 2022, we determined that our Upjohn Distributor Markets should be classified as held for sale. Upon classification as held for sale, we recognized a total charge of $374.2 million during the three months ended December 31, 2022. This was comprised of a goodwill impairment charge of $117.0 million, other charges, principally inventory write-offs, of $84.3 million and a charge of approximately $172.9 million to write down the disposal group to fair value, less cost to sell. During the three months ended March 31, 2023, the Company recorded additional inventory reserves of $9.2 million and an intangible asset charge of $32.0 million to write down the disposal group to fair value, less cost to sell. As of March 31, 2023 and December 31, 2022, assets held for sale associated with the Upjohn Distributor Markets consisted of intangible assets of $198.3 million and $230.3 million, respectively. If these transactions are not completed, the distribution arrangements will expire in accordance with our agreement with Pfizer and the Company will wind down operations in these markets, which may result in additional asset write-offs and other costs being incurred. These additional charges could be in excess of $250 million.
6.Share-Based Incentive Plan
Prior to the Distribution, Viatris adopted and Pfizer, in the capacity as Viatris’ sole stockholder at such time, approved the 2020 Incentive Plan (the Viatris Inc. 2020 Stock Incentive Plan) which became effective as of the Distribution. In connection with the Combination, as of November 16, 2020, the Company assumed the 2003 LTIP (Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan), which had previously been approved by Mylan shareholders. The 2020 Incentive Plan and 2003 LTIP include (i) 72,500,000 shares of Common Stock authorized for grant pursuant to the 2020 Incentive Plan, which may include dividend payments payable in Common Stock on unvested shares granted under awards, (ii) 6,757,640 shares of Common Stock to be issued pursuant to the exercise of outstanding stock options granted to participants under the 2003 LTIP and assumed by Viatris in connection with the Combination and (iii) 13,535,627 shares of Common Stock subject to outstanding equity-based awards, other than stock options, assumed by Viatris in connection with the Combination, or that otherwise remain available for issuance under the 2003 LTIP.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Under the 2020 Incentive Plan and 2003 LTIP, shares are reserved for issuance to key employees, consultants, independent contractors and non-employee directors of the Company through a variety of incentive awards, including: stock options, SARs, restricted stock and units, PSUs, other stock-based awards and short-term cash awards. Stock option awards are granted with an exercise price equal to the fair market value of the shares underlying the stock options at the date of the grant, generally become exercisable over periods ranging from three to four years, and generally expire in ten years.
The following table summarizes stock awards (stock options and SARs) activity under the 2020 Incentive Plan and 2003 LTIP:

| Number of Shares Under Stock Awards |  | Weighted Average Exercise Price per Share
Outstanding at December 31, 2022 | 4,449,642 |  |  | $ | 38.53 |
Granted | 283,361 |  |  | 7.68 |
Exercised | (5,225) |  |  | 5.27 |
Forfeited | (242,165) |  |  | $ | 31.30 |
Outstanding at March 31, 2023 | 4,485,613 |  |  | $ | 37.01 |
Vested and expected to vest at March 31, 2023 | 4,452,279 |  |  | $ | 37.20 |
Exercisable at March 31, 2023 | 4,185,316 |  |  | $ | 38.98 |

As of March 31, 2023, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 4.4 years, 4.4 years and 4.0 years, respectively. Also, at March 31, 2023, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $0.6 million, $0.5 million, and $0.1 million, respectively.
A rollforward of the changes in the Company’s nonvested Restricted Stock Awards (restricted stock and restricted stock unit awards, including PSUs) from December 31, 2022 to March 31, 2023 is presented below:

| Number of Restricted Stock Awards |  | Weighted Average Grant-Date Fair Value Per Share
Nonvested at December 31, 2022 | 27,271,926 |  |  | $ | 11.81 |
Granted | 19,043,465 |  |  | 11.17 |
Released | (7,743,490) |  |  | 13.02 |
Forfeited | (267,038) |  |  | 11.54 |
Nonvested at March 31, 2023 | 38,304,863 |  |  | $ | 11.25 |

As of March 31, 2023, the Company had $213.8 million of total unrecognized compensation expense, net of estimated forfeitures, related to all of its stock-based awards, which we expect to recognize over the remaining weighted average vesting period of 1.7 years. The total intrinsic value of Restricted Stock Awards released during the three months ended March 31, 2023 and 2022 was $100.8 million and $63.1 million, respectively.
7.Pensions and Other Postretirement Benefits
Defined Benefit Plans
The Company sponsors various defined benefit pension plans in several countries. Benefits provided generally depend on length of service, pay grade and remuneration levels. Employees in the U.S., Puerto Rico and certain international locations are also provided retirement benefits through defined contribution plans.
The Company also sponsors other postretirement benefit plans including plans that provide for postretirement supplemental medical coverage. Benefits from these plans are provided to employees and their spouses and dependents who meet various minimum age and service requirements. In addition, the Company sponsors other plans that provide for life insurance benefits and postretirement medical coverage for certain officers and management employees.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Net Periodic Benefit Cost
Components of net periodic benefit cost for the three months ended March 31, 2023 and 2022 were as follows:

|  |  |  |  | Pension and Other Postretirement Benefits
|  |  | Three Months Ended
|  |  | March 31,
(In millions) |  |  |  |  | 2023 |  | 2022
Service cost |  |  |  |  | $ | 7.1 |  |  | $ | 9.5 |
Interest cost |  |  |  |  | 18.3 |  |  | 10.4 |
Expected return on plan assets |  |  |  |  | (16.4) |  |  | (16.6) |
Amortization of prior service costs |  |  |  |  | — |  |  | 0.1 |
Recognized net actuarial gains |  |  |  |  | (5.0) |  |  | — |
Net periodic benefit cost |  |  |  |  | $ | 4.0 |  |  | $ | 3.4 |

The Company is making the minimum mandatory contributions to its defined benefit pension plans in the U.S. and Puerto Rico for the 2023 plan year. The Company expects to make total benefit payments of approximately $108.5 million from pension and other postretirement benefit plans in 2023. The Company anticipates making contributions to pension and other postretirement benefit plans of approximately $51.3 million in 2023.
8.Balance Sheet Components
Selected balance sheet components consist of the following:
Cash and restricted cash

(In millions) | March 31, 2023 |  | December 31, 2022 |  | March 31, 2022
Cash and cash equivalents | $ | 506.6 |  |  | $ | 1,259.9 |  |  | $ | 752.4 |
Restricted cash, included in prepaid expenses and other current assets | 4.1 |  |  | 2.6 |  |  | 5.0 |
Cash, cash equivalents and restricted cash | $ | 510.7 |  |  | $ | 1,262.5 |  |  | $ | 757.4 |

Inventories

(In millions) | March 31, 2023 |  | December 31, 2022
Raw materials | $ | 667.4 |  |  | $ | 571.5 |
Work in process | 697.4 |  |  | 755.4 |
Finished goods | 2,299.5 |  |  | 2,192.6 |
Inventories | $ | 3,664.3 |  |  | $ | 3,519.5 |

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Prepaid expenses and other current assets

(In millions) | March 31, 2023 |  | December 31, 2022
Prepaid expenses | $ | 239.7 |  |  | $ | 194.6 |
Available-for-sale fixed income securities | 36.0 |  |  | 35.3 |
Fair value of financial instruments | 92.5 |  |  | 134.7 |
Equity securities | 45.0 |  |  | 42.6 |
Other current assets | 1,350.4 |  |  | 1,404.0 |
Prepaid expenses and other current assets | $ | 1,763.6 |  |  | $ | 1,811.2 |

Prepaid expenses consist primarily of prepaid rent, insurance and other individually insignificant items.
Property, plant and equipment, net

(In millions) | March 31, 2023 |  | December 31, 2022
Machinery and equipment | $ | 3,051.3 |  |  | $ | 2,936.7 |
Buildings and improvements | 1,548.0 |  |  | 1,539.7 |
Construction in progress | 410.8 |  |  | 474.0 |
Land and improvements | 135.0 |  |  | 133.4 |
Gross property, plant and equipment | 5,145.1 |  |  | 5,083.8 |
Accumulated depreciation | 2,137.3 |  |  | 2,059.3 |
Property, plant and equipment, net | $ | 3,007.8 |  |  | $ | 3,024.5 |

Other assets

(In millions) | March 31, 2023 |  | December 31, 2022
Non-marketable equity investments | $ | 78.6 |  |  | $ | 94.0 |
Deferred consideration due from Biocon Biologics | 305.9 |  |  | 299.5 |
CCPS in Biocon Biologics | 1,000.0 |  |  | 997.4 |
Operating lease right-of-use assets | 253.8 |  |  | 259.3 |
Other long-term assets | 779.9 |  |  | 753.3 |
Other assets | $ | 2,418.2 |  |  | $ | 2,403.5 |

Accounts payable

(In millions) | March 31, 2023 |  | December 31, 2022
Trade accounts payable | $ | 1,415.4 |  |  | $ | 1,158.0 |
Other payables | 542.1 |  |  | 608.6 |
Accounts payable | $ | 1,957.5 |  |  | $ | 1,766.6 |

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Other current liabilities

(In millions) | March 31, 2023 |  | December 31, 2022
Accrued sales allowances | $ | 851.5 |  |  | $ | 888.8 |
Legal and professional accruals, including litigation accruals | 288.8 |  |  | 297.2 |
Payroll and employee benefit liabilities | 617.7 |  |  | 746.8 |
Contingent consideration | 65.4 |  |  | 64.4 |
Accrued restructuring | 74.6 |  |  | 95.3 |
Accrued interest | 214.0 |  |  | 80.2 |
Fair value of financial instruments | 98.5 |  |  | 187.0 |
Due to Biocon Biologics | 32.1 |  |  | 22.5 |
Operating lease liability | 83.5 |  |  | 80.6 |
Other | 866.7 |  |  | 978.1 |
Other current liabilities | $ | 3,192.8 |  |  | $ | 3,440.9 |

Other long-term obligations

(In millions) | March 31, 2023 |  | December 31, 2022
Employee benefit liabilities | $ | 542.1 |  |  | $ | 544.6 |
Contingent consideration (1) | 307.1 |  |  | 310.6 |
Tax related items, including contingencies | 418.0 |  |  | 414.6 |
Operating lease liability | 173.2 |  |  | 181.4 |
Accrued restructuring | 58.0 |  |  | 60.4 |
Other | 221.4 |  |  | 244.9 |
Other long-term obligations | $ | 1,719.8 |  |  | $ | 1,756.5 |

(1) Balances as of March 31, 2023 and December 31, 2022 include $224.7 million and $221.2 million, respectively, due to Biocon Biologics. Refer to Note 11 Financial Instruments and Risk Management for additional information.
9.Earnings per Share
Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding related to potentially dilutive securities or instruments, if the impact is dilutive.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Basic and diluted earnings per share attributable to Viatris Inc. are calculated as follows:

|  |  | Three Months Ended
|  |  | March 31,
(In millions, except per share amounts) |  |  |  |  | 2023 |  | 2022
Basic earnings attributable to Viatris Inc. common shareholders |  |  |  |  |  |  |
Net earnings attributable to Viatris Inc. common shareholders |  |  |  |  | $ | 224.7 |  |  | $ | 399.2 |
Shares (denominator): |  |  |  |  |  |  |
Weighted average shares outstanding |  |  |  |  | 1,202.5 |  |  | 1,210.5 |
Basic earnings per share attributable to Viatris Inc. shareholders |  |  |  |  | $ | 0.19 |  |  | $ | 0.33 |
Diluted earnings attributable to Viatris Inc. common shareholders |  |  |  |  |  |  |
Net earnings attributable to Viatris Inc. common shareholders |  |  |  |  | $ | 224.7 |  |  | $ | 399.2 |
Shares (denominator): |  |  |  |  |  |  |
Weighted average shares outstanding |  |  |  |  | 1,202.5 |  |  | 1,210.5 |
Share-based awards |  |  |  |  | 3.1 |  |  | 2.6 |
Total dilutive shares outstanding |  |  |  |  | 1,205.6 |  |  | 1,213.1 |
Diluted earnings per share attributable to Viatris Inc. shareholders |  |  |  |  | $ | 0.19 |  |  | $ | 0.33 |

Additional stock awards and Restricted Stock Awards were outstanding during the three months ended March 31, 2023 and 2022, but were not included in the computation of diluted earnings per share for each respective period because the effect would be anti-dilutive. Excluded shares at March 31, 2023 include certain share-based compensation awards whose performance conditions had not been fully met. Such excluded shares and anti-dilutive awards represented 13.9 million shares and 15.5 million shares for the three months ended March 31, 2023 and 2022, respectively.
The Company paid a quarterly dividend of $0.12 per share on the Company’s issued and outstanding common stock on March 17, 2023. On May 5, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share on the Company’s issued and outstanding common stock, which will be payable on June 16, 2023 to shareholders of record as of the close of business on May 24, 2023. The declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the Board of Directors, and will depend upon factors, including but not limited to, the Company’s financial condition, earnings, capital requirements of its businesses, legal requirements, regulatory constraints, industry practice, and other factors that the Board of Directors deems relevant.
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. 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 three months ended March 31, 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of approximately $250 million. The Company did not repurchase any shares of common stock under the share repurchase program in 2022. The share repurchase program does not obligate the Company to acquire any particular amount of common stock.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
10.Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows:

(In millions) | Developed Markets (1) |  | Greater China |  | JANZ |  | Emerging Markets (2) |  | Total
Balance at December 31, 2022: | 7,461.5 |  |  | 940.6 |  |  | 689.0 |  |  | 1,334.7 |  |  | 10,425.8 |
Acquisitions | 95.3 |  |  | — |  |  | — |  |  | — |  |  | 95.3 |
Foreign currency translation | 60.0 |  |  | — |  |  | (8.6) |  |  | 0.7 |  |  | 52.1 |
Balance at March 31, 2023: | $ | 7,616.8 |  |  | $ | 940.6 |  |  | $ | 680.4 |  |  | $ | 1,335.4 |  |  | $ | 10,573.2 |

____________
(1)Balances as of March 31, 2023 and December 31, 2022 include an accumulated impairment loss of $385.0 million.
(2)Balances as of March 31, 2023 and December 31, 2022 include an accumulated impairment loss of $117.0 million.
Intangible Assets, Net
Intangible assets consist of the following components at March 31, 2023 and December 31, 2022:

(In millions) | Weighted Average Life (Years) |  | Original Cost |  | Accumulated Amortization |  | Net Book Value
March 31, 2023 |  |  |  |  |  |  |
Product rights, licenses and other (1) | 15 |  | $ | 37,975.1 |  |  | $ | 15,604.6 |  |  | $ | 22,370.5 |
In-process research and development |  |  | 331.1 |  |  | — |  |  | 331.1 |
|  |  | $ | 38,306.2 |  |  | $ | 15,604.6 |  |  | $ | 22,701.6 |
December 31, 2022 |  |  |  |  |  |  |
Product rights, licenses and other (1) | 15 |  | $ | 37,490.5 |  |  | $ | 14,923.6 |  |  | $ | 22,566.9 |
In-process research and development |  |  | 40.2 |  |  | — |  |  | 40.2 |
|  |  | $ | 37,530.7 |  |  | $ | 14,923.6 |  |  | $ | 22,607.1 |

____________
(1)Represents amortizable intangible assets. Other intangible assets consists principally of customer lists and contractual rights.
During the three months ended March 31, 2023, the Company acquired product rights and licenses from Oyster Point of approximately $334.0 million and IPR&D of approximately $290.0 million from Famy Life Sciences. Refer to Note 4 Acquisitions and Other Transactions for additional information.
Amortization expense and intangible asset disposal & impairment charges (which are included as a component of amortization expense) are classified primarily within cost of sales in the condensed consolidated statements of operations and were as follows for the three months ended March 31, 2023 and 2022:

|  |  | Three Months Ended
|  |  | March 31,
(In millions) |  |  |  |  | 2023 |  | 2022
Intangible asset amortization expense |  |  |  |  | $ | 603.3 |  |  | $ | 648.1 |
Intangible asset disposal & impairment charges |  |  |  |  | 32.0 |  |  | — |
Total intangible asset amortization expense (including disposal & impairment charges) |  |  |  |  | $ | 635.3 |  |  | $ | 648.1 |

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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
During the three months ended March 31, 2023, the Company recognized an intangible asset charge of approximately $32.0 million, which was recorded within Cost of sales in the condensed consolidated statement of operations, to write down the disposal group to fair value, less cost to sell, related to our Upjohn Distributor Markets, which are classified as held for sale. As of March 31, 2023 and December 31, 2022, the Company has approximately $198.3 million and $230.3 million, respectively, of intangible assets related to the Upjohn Distributor Markets that are classified as held for sale in the condensed consolidated balance sheets. Refer to Note 5 Divestitures for additional information.
Intangible asset amortization expense over the remainder of 2023 and for the years ending December 31, 2024 through 2027 is estimated to be as follows:

(In millions) |
2023 | $ | 1,772 |
2024 | 2,274 |
2025 | 2,179 |
2026 | 2,124 |
2027 | 1,912 |

11. Financial Instruments and Risk Management
The Company is exposed to certain financial risks relating to its ongoing business operations. The primary financial risks that are managed by using derivative instruments are foreign currency risk and interest rate risk.
Foreign Currency Risk Management
In order to manage certain foreign currency risks, the Company enters into foreign exchange forward contracts to mitigate risk associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities. The foreign exchange forward contracts are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. Any gains or losses on the foreign exchange forward contracts are recognized in earnings in the period incurred in the condensed consolidated statements of operations.
The Company has also entered into forward contracts to hedge forecasted foreign currency denominated sales from certain international subsidiaries and a portion of forecasted intercompany inventory sales denominated in Euro, Japanese Yen, Chinese Renminbi and Indian Rupee for up to twenty-four months. These contracts are designated as cash flow hedges to manage foreign currency transaction risk and are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. Any changes in the fair value of designated cash flow hedges are deferred in AOCE and are reclassified into earnings when the hedged item impacts earnings.
Net Investment Hedges
The Company may hedge the foreign currency risk associated with certain net investment positions in foreign subsidiaries by either borrowing directly in foreign currencies and designating all or a portion of the foreign currency debt as a hedge of the applicable net investment position or entering into foreign currency swaps that are designated as hedges of net investments.
The Company has designated certain Euro and Yen borrowings as a hedge of its investment in certain Euro-functional and Yen-functional currency subsidiaries in order to manage foreign currency translation risk. Borrowings designated as net investment hedges are marked-to-market using the current spot exchange rate as of the end of the period, with gains and losses included in the foreign currency translation component of AOCE until the sale or substantial liquidation of the underlying net investments. In addition, the Company manages the related foreign exchange risk of the Euro and Yen borrowings not designated as net investment hedges through certain Euro and Yen denominated financial assets and forward currency swaps.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
The following table summarizes the principal amounts of the Company’s outstanding Euro and Yen borrowings and the notional amounts of the Euro and Yen borrowings designated as net investment hedges:

|  |  |  | Notional Amount Designated as a Net Investment Hedge
(In millions) |  | Principal Amount |  | March 31, 2023 |  | December 31, 2022
2.250% Euro Senior Notes due 2024 |  | € | 1,000.0 |  |  | € | 1,000.0 |  |  | € | 1,000.0 |
3.125% Euro Senior Notes due 2028 |  | 750.0 |  |  | 750.0 |  |  | 750.0 |
2.125% Euro Senior Notes due 2025 |  | 500.0 |  |  | 500.0 |  |  | 500.0 |
1.023% Euro Senior Notes due 2024 |  | 750.0 |  |  | 750.0 |  |  | 750.0 |
1.362% Euro Senior Notes due 2027 |  | 850.0 |  |  | 850.0 |  |  | 850.0 |
1.908% Euro Senior Notes due 2032 |  | 1,250.0 |  |  | 1,250.0 |  |  | 1,250.0 |
Total |  | € | 5,100.0 |  |  | € | 5,100.0 |  |  | € | 5,100.0 |
Yen |  |  |  |  |  |
YEN Term Loan |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |
Yen Total |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |

At March 31, 2023, the principal amount of the Company’s outstanding Yen borrowings and the notional amount of the Yen borrowings designated as net investment hedge was $301.1 million.
Interest Rate Risk Management
The Company enters into interest rate swaps from time to time in order to manage interest rate risk associated with the Company’s fixed-rate and floating-rate debt. Interest rate swaps that meet specific accounting criteria are accounted for as fair value or cash flow hedges. All derivative instruments used to manage interest rate risk are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. For fair value hedges, the changes in the fair value of both the hedging instrument and the underlying debt obligations are included in interest expense. For cash flow hedges, the change in fair value of the hedging instrument is deferred through AOCE and is reclassified into earnings when the hedged item impacts earnings.
Credit Risk Management
The Company regularly reviews the creditworthiness of its financial counterparties and does not expect to incur a significant loss from the failure of any counterparties to perform under any agreements. The Company is not subject to any obligations to post collateral under derivative instrument contracts. Certain derivative instrument contracts entered into by the Company are governed by master agreements, which contain credit-risk-related contingent features that would allow the counterparties to terminate the contracts early and request immediate payment should the Company trigger an event of default on other specified borrowings. The Company records all derivative instruments on a gross basis in the condensed consolidated balance sheets. Accordingly, there are no offsetting amounts that net assets against liabilities.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
The following table summarizes the classification and fair values of derivative instruments in our condensed consolidated balance sheets:

| Asset Derivatives |  | Liability Derivatives
(In millions) | Balance Sheet Location | March 31, 2023 Fair Value | December 31, 2022 Fair Value |  | Balance Sheet Location | March 31, 2023 Fair Value | December 31, 2022 Fair Value
Derivatives designated as hedges: |  |  |  |  |  |  |
Foreign currency forward contracts | Prepaid expenses & other current assets | $ | 22.0 |  | $ | 30.4 |  |  | Other current liabilities | $ | 16.4 |  | $ | 26.4 |
Total derivatives designated as hedges |  | 22.0 |  | 30.4 |  |  |  | 16.4 |  | 26.4 |
Derivatives not designated as hedges: |  |  |  |  |  |  |
Foreign currency forward contracts | Prepaid expenses & other current assets | 70.5 |  | 104.3 |  |  | Other current liabilities | 82.1 |  | 160.6 |
Total derivatives not designated as hedges |  | 70.5 |  | 104.3 |  |  |  | 82.1 |  | 160.6 |
Total derivatives |  | $ | 92.5 |  | $ | 134.7 |  |  |  | $ | 98.5 |  | $ | 187.0 |

The following table summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:

|  | Amount of Gains/(Losses) Recognized in Earnings |  | Amount of Gains/(Losses) Recognized in AOCE (Net of Tax) on Derivatives |  | Amount of Gains/(Losses) Reclassified from AOCE into Earnings
|  | Three months ended March 31,
(In millions) | Location of Gain/(Loss) | 2023 | 2022 |  | 2023 | 2022 |  | 2023 | 2022
Derivative Financial Instruments in Cash Flow Hedging Relationships (1) : |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | Net sales (3) | $ | — |  | $ | — |  |  | $ | 11.1 |  | $ | 9.7 |  |  | $ | 8.9 |  | $ | 14.2 |
Interest rate swaps | Interest expense (3) | — |  | — |  |  | (0.9) |  | (0.9) |  |  | (1.2) |  | (1.1) |
Non-derivative Financial Instruments in Net Investment Hedging Relationships: |  |  |  |  |  |  |  |  |
Foreign currency borrowings |  | — |  | — |  |  | (51.9) |  | 156.3 |  |  | — |  | — |
Derivative Financial Instruments Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |
Foreign currency option and forward contracts | Other (income) expense, net (2) | 44.6 |  | 21.7 |  |  | — |  | — |  |  | — |  | — |
Total |  | $ | 44.6 |  | $ | 21.7 |  |  | $ | (41.7) |  | $ | 165.1 |  |  | $ | 7.7 |  | $ | 13.1 |

____________
(1)At March 31, 2023, the Company expects that approximately $14.0 million of pre-tax net losses on cash flow hedges will be reclassified from AOCE into earnings during the next twelve months.
(2)Represents the location of the gain/(loss) recognized in earnings on derivatives.
(3)Represents the location of the gain/(loss) reclassified from AOCE into earnings.
Fair Value Measurement
Fair value is based on the price that would be received from the sale of an identical asset or paid to transfer an identical liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy has been established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
•Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
•Level 2: Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
•Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value.
Financial assets and liabilities carried at fair value are classified in the tables below in one of the three categories described above:

| March 31, 2023 |  | December 31, 2022
(In millions) | Level 1 |  | Level 2 |  | Level 3 |  | Level 1 |  | Level 2 |  | Level 3
Recurring fair value measurements |  |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |  |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |
Money market funds | $ | 18.9 |  |  | $ | — |  |  | $ | — |  |  | $ | 688.8 |  |  | $ | — |  |  | $ | — |
Total cash equivalents | 18.9 |  |  | — |  |  | — |  |  | 688.8 |  |  | — |  |  | — |
Equity securities: |  |  |  |  |  |  |  |  |  |  |
Exchange traded funds | 44.8 |  |  | — |  |  | — |  |  | 42.4 |  |  | — |  |  | — |
Marketable securities | 0.2 |  |  | — |  |  | — |  |  | 0.2 |  |  | — |  |  | — |
Total equity securities | 45.0 |  |  | — |  |  | — |  |  | 42.6 |  |  | — |  |  | — |
CCPS in Biocon Biologics | — |  |  | — |  |  | 1,000.0 |  |  | — |  |  | — |  |  | 997.4 |
Available-for-sale fixed income investments: |  |  |  |  |  |  |  |  |  |  |
Corporate bonds | — |  |  | 14.9 |  |  | — |  |  | — |  |  | 13.2 |  |  | — |
U.S. Treasuries | — |  |  | 11.9 |  |  | — |  |  | — |  |  | 11.7 |  |  | — |
Agency mortgage-backed securities | — |  |  | 4.0 |  |  | — |  |  | — |  |  | 4.7 |  |  | — |
Asset backed securities | — |  |  | 5.0 |  |  | — |  |  | — |  |  | 5.1 |  |  | — |
Other | — |  |  | 0.2 |  |  | — |  |  | — |  |  | 0.6 |  |  | — |
Total available-for-sale fixed income investments | — |  |  | 36.0 |  |  | — |  |  | — |  |  | 35.3 |  |  | — |
Foreign exchange derivative assets | — |  |  | 92.5 |  |  | — |  |  | — |  |  | 134.7 |  |  | — |
Total assets at recurring fair value measurement | $ | 63.9 |  |  | $ | 128.5 |  |  | $ | 1,000.0 |  |  | $ | 731.4 |  |  | $ | 170.0 |  |  | $ | 997.4 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |
Foreign exchange derivative liabilities | — |  |  | 98.5 |  |  | — |  |  | — |  |  | 187.0 |  |  | — |
Contingent consideration | — |  |  | — |  |  | 372.5 |  |  | — |  |  | — |  |  | 375.0 |
Total liabilities at recurring fair value measurement | $ | — |  |  | $ | 98.5 |  |  | $ | 372.5 |  |  | $ | — |  |  | $ | 187.0 |  |  | $ | 375.0 |

For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including the LIBOR yield curve, foreign exchange forward prices and bank price quotes. Below is a summary of valuation techniques for the Company’s financial assets and liabilities:
•Cash equivalents — valued at observable net asset value prices.
•Equity securities, exchange traded funds — valued at the active quoted market prices from broker or dealer quotations or transparent pricing sources at the reporting date. Unrealized gains and losses attributable to changes in fair value are included in other expense, net, in the condensed consolidated statements of operations.
•Equity securities, marketable securities — valued using quoted stock prices from public exchanges at the reporting date. Unrealized gains and losses attributable to changes in fair value are included in Other (income) expense, net in the condensed consolidated statements of operations.
•CCPS in Biocon Biologics — valued using a Monte Carlo simulation model using Level 3 inputs. The fair value of the CCPS is sensitive to changes in the forecasts of operating metrics and changes in volatility and discount rates. The Company elected the fair value option for the CCPS under ASC 825. The fair value is reassessed
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
quarterly and any change in the fair value estimate is recorded in Other (income) expense, net, in the condensed consolidated statements of operations for that period.
•Available-for-sale fixed income investments — valued at the quoted market prices from broker or dealer quotations or transparent pricing sources at the reporting date. Unrealized gains and losses attributable to changes in fair value, net of income taxes, are included in accumulated other comprehensive loss as a component of shareholders’ equity.
•Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices and spot rates at the reporting date. Counterparties to these contracts are highly rated financial institutions.
Contingent Consideration
As of March 31, 2023 and December 31, 2022, the Company had a contingent consideration liability of $224.7 million and $221.2 million, respectively, relating to the Biocon Biologics Transaction. This contingent consideration liability represents the amount of the closing working capital target to which the parties have agreed that may become payable to Biocon Biologics in connection with certain events in the future, depending on the valuations attributable to such events. The remaining contingent consideration liability represents a component of the total purchase consideration for Pfizer’s Respiratory Delivery Platform and certain other acquisitions. The measurement of these contingent consideration liabilities is calculated using unobservable Level 3 inputs based on the Company’s own assumptions primarily related to the probability and timing of future events and payments which are discounted using a market rate of return. At March 31, 2023 and December 31, 2022, discount rates ranging from 6.4% to 9.0% were utilized in the valuations. Significant changes in unobservable inputs could result in material changes to the contingent consideration liability.
A rollforward of the activity in the Company’s fair value of contingent consideration from December 31, 2022 to March 31, 2023 is as follows:

(In millions) | Current Portion (1) |  | Long-Term Portion (2) |  | Total Contingent Consideration
Balance at December 31, 2022 | $ | 64.4 |  |  | $ | 310.6 |  |  | $ | 375.0 |
Payments | (9.7) |  |  | — |  |  | (9.7) |
Reclassifications | 10.7 |  |  | (10.7) |  |  | — |
Accretion | — |  |  | 5.7 |  |  | 5.7 |
Fair value loss (3) | — |  |  | 1.5 |  |  | 1.5 |
Balance at March 31, 2023 | $ | 65.4 |  |  | $ | 307.1 |  |  | $ | 372.5 |

____________
(1)Included in other current liabilities in the condensed consolidated balance sheets.
(2)Included in other long-term obligations in the condensed consolidated balance sheets.
(3)Included in litigation settlements and other contingencies, net in the condensed consolidated statements of operations.
Although the Company has not elected the fair value option for other financial assets and liabilities other than the CCPS, any future transacted financial asset or liability will be evaluated for the fair value election.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
12.Debt
For additional information, see Note 11 Debt in Viatris’ 2022 Form 10-K.
Short-Term Borrowings
The following table summarizes the Company’s short-term borrowings:

(In millions) | March 31, 2023 |  | December 31, 2022
Receivables Facility | 197.0 |  |  | — |
Other | 7.6 |  |  | — |
Short-term borrowings | $ | 204.6 |  |  | $ | — |

Receivables Facility and Note Securitization Facility
The Company has a $400 million Receivables Facility, which expires in April 2025 and a $200 million Note Securitization Facility which expires in August 2023. Under the terms of each of the Receivables Facility and Note Securitization Facility, certain of our accounts receivable secure the amounts borrowed and cannot be used to pay our other debts or liabilities. The amount that we may borrow at a given point in time is determined based on the amount of qualifying accounts receivable that are present at such point in time. Amounts outstanding under either facility are included as a component of short-term borrowings, while the accounts receivables securing these obligations remain as a component of accounts receivable, net, in our condensed consolidated balance sheets.
Long-Term Debt
Effective April 28, 2023, we executed an amendment to the Revolving Facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
A summary of long-term debt is as follows:

($ in millions) | Interest Rate as of March 31, 2023 |  | March 31, 2023 |  | December 31, 2022
Current portion of long-term debt: |  |  |  |  |
2023 Senior Notes (a) * | 3.125 | % |  | — |  |  | 750.6 |
2023 Senior Notes * | 4.200 | % |  | 499.8 |  |  | 499.8 |
Other |  |  | 0.7 |  |  | 0.7 |
Deferred financing fees |  |  | (0.4) |  |  | (0.6) |
Current portion of long-term debt |  |  | $ | 500.1 |  |  | $ | 1,250.5 |
Non-current portion of long-term debt: |  |  |  |  |
2024 Euro Senior Notes ** | 2.250 | % |  | 1,083.3 |  |  | 1,069.8 |
2024 Euro Senior Notes **** | 1.023 | % |  | 821.8 |  |  | 813.5 |
2025 Euro Senior Notes * | 2.125 | % |  | 541.5 |  |  | 534.8 |
2025 Senior Notes *** | 1.650 | % |  | 758.6 |  |  | 759.6 |
2026 Senior Notes ** | 3.950 | % |  | 2,243.7 |  |  | 2,243.2 |
2027 Euro Senior Notes **** | 1.362 | % |  | 955.7 |  |  | 945.9 |
2027 Senior Notes *** | 2.300 | % |  | 774.0 |  |  | 775.3 |
2028 Euro Senior Notes ** | 3.125 | % |  | 808.7 |  |  | 798.5 |
2028 Senior Notes * | 4.550 | % |  | 749.0 |  |  | 748.9 |
2030 Senior Notes *** | 2.700 | % |  | 1,510.9 |  |  | 1,512.8 |
2032 Euro Senior Notes **** | 1.908 | % |  | 1,459.8 |  |  | 1,444.4 |
2040 Senior Notes *** | 3.850 | % |  | 1,648.9 |  |  | 1,650.6 |
2043 Senior Notes * | 5.400 | % |  | 497.4 |  |  | 497.4 |
2046 Senior Notes ** | 5.250 | % |  | 999.9 |  |  | 999.9 |
2048 Senior Notes * | 5.200 | % |  | 747.8 |  |  | 747.8 |
2050 Senior Notes *** | 4.000 | % |  | 2,199.6 |  |  | 2,200.8 |
YEN Term Loan Facility | Variable |  | 301.1 |  |  | 305.1 |
Other |  |  | 1.6 |  |  | 2.0 |
Deferred financing fees |  |  | (33.9) |  |  | (35.1) |
Long-term debt |  |  | $ | 18,069.4 |  |  | $ | 18,015.2 |

____________
(a) In the first quarter of 2020, the Company terminated interest rate swaps designated as a fair value hedge resulting in net proceeds of approximately $45 million. The fair value adjustment was amortized to interest expense over the remaining term of the notes, which were repaid at maturity in the first quarter of 2023.
* Instrument was issued by Mylan Inc.
** Instrument was originally issued by Mylan N.V.; now held by Utah Acquisition Sub Inc.
*** Instrument was issued by Viatris Inc.
**** Instrument was issued by Upjohn Finance B.V.
At March 31, 2023 and December 31, 2022, the aggregate fair value of the Company’s outstanding notes was approximately $15.04 billion and $15.36 billion, respectively. The fair values of the outstanding notes were valued at quoted market prices from broker or dealer quotations and were classified as Level 2 in the fair value hierarchy.
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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Mandatory minimum repayments remaining on the notional amount of outstanding long-term debt at March 31, 2023 were as follows for each of the periods ending December 31:

(In millions) | Total
2023 | $ | 500 |
2024 | 1,897 |
2025 | 1,292 |
2026 | 2,551 |
2027 | 1,671 |
Thereafter | 10,118 |
Total | $ | 18,029 |

13.Comprehensive Loss
Accumulated other comprehensive loss, as reflected in the condensed consolidated balance sheets, is comprised of the following:

(In millions) | March 31, 2023 |  | December 31, 2022
Accumulated other comprehensive loss: |  |  |
Net unrealized loss on marketable securities, net of tax | $ | (1.6) |  |  | $ | (2.3) |
Net unrecognized gain and prior service cost related to defined benefit plans, net of tax | 269.3 |  |  | 268.5 |
Net unrecognized loss on derivatives in cash flow hedging relationships, net of tax | (16.8) |  |  | (18.5) |
Net unrecognized gain on derivatives in net investment hedging relationships, net of tax | 325.1 |  |  | 377.0 |
Foreign currency translation adjustment | (3,340.6) |  |  | (3,385.9) |
| $ | (2,764.6) |  |  | $ | (2,761.2) |

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
Components of accumulated other comprehensive loss, before tax, consist of the following, for the three months ended March 31, 2023 and 2022:

| Three Months Ended March 31, 2023
Gains and Losses on Derivatives in Cash Flow Hedging Relationships |  | Gains and Losses on Net Investment Hedges |  | Gains and Losses on Marketable Securities |  | Defined Pension Plan Items |  | Foreign Currency Translation Adjustment |  | Totals
(In millions) | Foreign Currency Forward Contracts |  | Interest Rate Swaps |  | Total |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2022, net of tax |  |  |  |  | $ | (18.5) |  |  | $ | 377.0 |  |  | $ | (2.3) |  |  | $ | 268.5 |  |  | $ | (3,385.9) |  |  | $ | (2,761.2) |
Other comprehensive earnings (loss) before reclassifications, before tax |  |  |  |  | 10.5 |  |  | (66.2) |  |  | 0.9 |  |  | 6.3 |  |  | 45.3 |  |  | (3.2) |
Amounts reclassified from accumulated other comprehensive (loss) earnings, before tax: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain on foreign exchange forward contracts classified as cash flow hedges, included in net sales | (8.9) |  |  |  |  | (8.9) |  |  |  |  |  |  |  |  |  |  | (8.9) |
Loss on interest rate swaps classified as cash flow hedges, included in interest expense |  |  | 1.2 |  |  | 1.2 |  |  |  |  |  |  |  |  |  |  | 1.2 |
Amortization of actuarial gain included in SG&A |  |  |  |  |  |  |  |  |  |  | (5.0) |  |  |  |  | (5.0) |
Net other comprehensive earnings (loss), before tax |  |  |  |  | 2.8 |  |  | (66.2) |  |  | 0.9 |  |  | 1.3 |  |  | 45.3 |  |  | (15.9) |
Income tax provision (benefit) |  |  |  |  | 1.1 |  |  | (14.3) |  |  | 0.2 |  |  | 0.5 |  |  | — |  |  | (12.5) |
Balance at March 31, 2023, net of tax |  |  |  |  | $ | (16.8) |  |  | $ | 325.1 |  |  | $ | (1.6) |  |  | $ | 269.3 |  |  | $ | (3,340.6) |  |  | $ | (2,764.6) |

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Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

| Three Months Ended March 31, 2022
Gains and Losses on Derivatives in Cash Flow Hedging Relationships |  | Gains and Losses on Net Investment Hedges |  | Gains and Losses on Marketable Securities |  | Defined Pension Plan Items |  | Foreign Currency Translation Adjustment |  | Totals
(In millions) | Foreign Currency Forward Contracts |  | Interest Rate Swaps |  | Total |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2021, net of tax |  |  |  |  | $ | 9.2 |  |  | $ | 16.7 |  |  | $ | — |  |  | $ | 32.2 |  |  | $ | (1,802.4) |  |  | $ | (1,744.3) |
Other comprehensive earnings (loss) before reclassifications, before tax |  |  |  |  | 13.3 |  |  | 201.3 |  |  | (1.7) |  |  | (2.7) |  |  | (469.2) |  |  | (259.0) |
Amounts reclassified from accumulated other comprehensive (loss) earnings, before tax: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain on foreign exchange forward contracts classified as cash flow hedges, included in net sales | (14.2) |  |  |  |  | (14.2) |  |  |  |  |  |  |  |  |  |  | (14.2) |
Loss on interest rate swaps classified as cash flow hedges, included in interest expense |  |  | 1.1 |  |  | 1.1 |  |  |  |  |  |  |  |  |  |  | 1.1 |
Amortization of prior service costs included in SG&A |  |  |  |  |  |  |  |  |  |  | 0.1 |  |  |  |  | 0.1 |
Net other comprehensive earnings (loss), before tax |  |  |  |  | 0.2 |  |  | 201.3 |  |  | (1.7) |  |  | (2.6) |  |  | (469.2) |  |  | (272.0) |
Income tax provision (benefit) |  |  |  |  | — |  |  | 44.9 |  |  | (0.4) |  |  | 0.2 |  |  | — |  |  | 44.7 |
Balance at March 31, 2022, net of tax |  |  |  |  | $ | 9.4 |  |  | $ | 173.1 |  |  | $ | (1.3) |  |  | $ | 29.4 |  |  | $ | (2,271.6) |  |  | $ | (2,061.0) |

14.Segment Information
Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets. The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded, complex generics and generic products to people in markets everywhere. Our Developed Markets segment comprises our operations primarily in North America and Europe. Our Greater China segment includes our operations in China, Taiwan and Hong Kong. Our JANZ segment reflects our operations in Japan, Australia and New Zealand. Our Emerging Markets segment encompasses our presence in more than 125 countries with developing markets and emerging economies including in Asia, Africa, Eastern Europe, Latin America and the Middle East as well as the Company’s ARV franchise.
The Company’s chief operating decision maker is the Chief Executive Officer, who evaluates the performance of its segments based on total revenues and segment profitability.
Certain costs are not included in the measurement of segment profitability, such as costs, if any, associated with the following:
◦Intangible asset amortization expense and impairments of goodwill and long-lived assets;
◦R&D and acquired IPR&D expense;
◦Net charges or net gains for litigation settlements and other contingencies;
◦Certain costs related to transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory and property, plant and equipment; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) other significant items, which are substantive and/or unusual, and in some cases recurring, items (such as restructuring) that are evaluated on an individual basis by management and that either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular
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basis. Such special items can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for asset impairments and disposals of assets or businesses, including costs related to our planned divestitures and the Biocon Biologics Transaction, and, as applicable, any associated transition activities.
◦Corporate and other unallocated costs associated with platform functions (such as digital, facilities, legal, finance, human resources, insurance, public affairs and procurement), patient advocacy activities and certain compensation and other corporate costs (such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing, which include manufacturing variances associated with production) and operations that are not directly assessed to an operating segment as business unit (segment) management does not manage these costs.
The Company does not report depreciation expense, total assets and capital expenditures by segment, as such information is not used by the chief operating decision maker.
The accounting policies of the segments are the same as those described in Note 2 Summary of Significant Accounting Policies included in the 2022 Form 10-K.
Presented in the table below is segment information for the periods identified and a reconciliation of segment information to total consolidated information.

|  | Net Sales |  | Segment Profitability
|  | Three Months Ended March 31, |  | Three Months Ended March 31,
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Reportable Segments: |  |  |  |  |  |  |  |
Developed Markets |  | $ | 2,170.4 |  |  | $ | 2,476.1 |  |  | $ | 938.7 |  |  | $ | 1,211.5 |
Greater China |  | 564.6 |  |  | 573.1 |  |  | 394.3 |  |  | 417.7 |
JANZ |  | 342.2 |  |  | 423.8 |  |  | 130.5 |  |  | 174.3 |
Emerging Markets |  | 641.9 |  |  | 705.2 |  |  | 313.0 |  |  | 345.3 |
Total reportable segments |  | $ | 3,719.1 |  |  | $ | 4,178.2 |  |  | $ | 1,776.5 |  |  | $ | 2,148.8 |
Reconciling items: |  |  |  |  |  |  |  |
Intangible asset amortization expense |  |  |  |  |  | (603.3) |  |  | (648.1) |
Intangible asset disposal & impairment charges |  |  |  |  |  | (32.0) |  |  | — |
Globally managed research and development costs |  |  |  |  |  | (182.9) |  |  | (142.3) |
Litigation settlements & other contingencies |  |  |  |  |  | (0.6) |  |  | (6.2) |
Transaction related and other special items |  |  |  |  |  | (178.5) |  |  | (185.6) |
Corporate and other unallocated |  |  |  |  |  | (379.4) |  |  | (459.2) |
Earnings from operations |  |  |  |  |  | $ | 399.8 |  |  | $ | 707.4 |

15.Restructuring
2020 Restructuring Program
During the fourth quarter of 2020, Viatris announced a significant global restructuring program in order to achieve synergies and ensure that the organization is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders. As part of the restructuring, the Company is optimizing its commercial capabilities and enabling functions, and closing, downsizing or divesting certain manufacturing facilities globally that are deemed to be no longer viable either due to surplus capacity, challenging market dynamics or a shift in its product portfolio toward more complex products. The remaining actions under the 2020 restructuring program include the disposal or closure of certain manufacturing facilities, which are expected to be substantially completed in 2023.
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For the committed restructuring actions, the Company expects to incur total pre-tax charges of up to approximately $1.4 billion. Such charges are expected to include up to approximately $450 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges, including inventory write-offs. The remaining estimated cash costs of up to approximately $950 million are expected to be primarily related to severance and employee benefits expense, as well as other costs, including those related to contract terminations and other plant disposal costs.
Charges for restructuring and ongoing cost reduction initiatives are recorded in the period the Company commits to a restructuring or cost reduction plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met.
The following table summarizes the restructuring charges and the reserve activity for the 2020 restructuring program from December 31, 2022 to March 31, 2023:

(In millions) | Employee Related Costs |  | Other Exit Costs |  | Total
Balance at December 31, 2022: | $ | 155.6 |  |  | $ | 1.9 |  |  | $ | 157.5 |
Charges (1) | 2.8 |  |  | 6.9 |  |  | 9.7 |
Cash payment | (24.5) |  |  | (3.1) |  |  | (27.6) |
Utilization | — |  |  | (3.8) |  |  | (3.8) |
Foreign currency translation | 0.3 |  |  | — |  |  | 0.3 |
Balance at March 31, 2023: | $ | 134.2 |  |  | $ | 1.9 |  |  | $ | 136.1 |

____________
(1) For the three months ended March 31, 2023, total restructuring charges in Developed Markets, Emerging Markets, Greater China, and JANZ were approximately $7.7 million, $1.3 million, $(0.6) million, and $1.3 million, respectively.
At March 31, 2023 and December 31, 2022, accrued liabilities for restructuring and other cost reduction programs were primarily included in other current liabilities and other long-term obligations in the condensed consolidated balance sheets.
16.Licensing and Other Partner Agreements
We periodically enter into licensing and other partner agreements with other pharmaceutical companies for the development, manufacture, marketing and/or sale of pharmaceutical products. Our significant licensing and other partner agreements are primarily focused on the development, manufacturing, supply and commercialization of multiple complex products. Under these agreements, we have future potential milestone payments and co-development expenses payable to third parties as part of our licensing, development and co-development programs. Payments under these agreements generally become due and are payable upon the satisfaction or achievement of certain developmental, regulatory or commercial milestones or as development expenses are incurred on defined projects. Milestone payment obligations are uncertain, including the prediction of timing and the occurrence of events triggering a future obligation and are not reflected as liabilities in the condensed consolidated balance sheets, except for obligations reflected as acquisition related contingent consideration. Refer to Note 11 Financial Instruments and Risk Management for further discussion of contingent consideration.
Our potential maximum development milestones not accrued for at March 31, 2023 totaled approximately $387 million. We estimate that the amounts that may be paid through the end of 2023 to be approximately $5 million. These agreements may also include potential sales-based milestones and call for us to pay a percentage of amounts earned from the sale of the product as a royalty or a profit share. The amounts disclosed do not include sales-based milestones or royalty or profit share obligations on future sales of product as the timing and amount of future sales levels and costs to produce products subject to these obligations is not reasonably estimable. These sales-based milestones or royalty or profit share obligations may be significant depending upon the level of commercial sales for each product.
There have been no significant changes to our licensing and other partner agreements as disclosed in our 2022 Form 10-K.
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17.Income Taxes
Legislative Updates
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law, which includes a new corporate alternative minimum tax (“CAMT”) and an excise tax of 1% on the fair market value of net stock repurchases. Both provisions are effective for years after December 31, 2022. The Company reflected the applicable estimated excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability in Other current liabilities in our condensed consolidated balance sheet as of March 31, 2023. The share repurchase and authorization amounts disclosed in this Form 10-Q exclude the excise tax. The Company does not anticipate being subject to the 15% CAMT tax in 2023 based on enacted law and regulatory guidance; however, our CAMT status for 2023 could change in the future, depending on new regulations or regulatory guidance issued by the U.S. Department of the Treasury.
Tax Examinations
The Company is subject to income taxes and tax audits in many jurisdictions. A certain degree of estimation is thus required in recording the assets and liabilities related to income taxes. Tax audits and examinations can involve complex issues, interpretations, and judgments and the resolution of matters that may span multiple years, particularly if subject to litigation or negotiation.
Although the Company believes that adequate provisions have been made for these uncertain tax positions, the Company’s assessment of uncertain tax positions, including those arising from legal entity restructuring transactions in connection with the Combination, is based on estimates and assumptions that the Company believes are reasonable but the estimates for unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variations from such estimates could materially affect the Company’s financial condition, results of operations or cash flows in the period of resolution, settlement or when the statutes of limitations expire.
The Company is subject to ongoing IRS examinations. The years 2015 through 2019 are open years under examination. The years 2012, 2013 and 2014 have one matter open, and a Tax Court petition was filed regarding the matter and a trial was held in December 2018 and is discussed further below.
Several international audits are currently in progress. In some cases, the tax auditors have proposed adjustments or issued assessments to our tax positions, including with respect to intercompany transactions, and we are in ongoing discussions with some of the auditors regarding the validity of their positions.
In instances where assessments have been issued, we disagree with these assessments and believe they are without merit and incorrect as a matter of law. As a result, we anticipate that certain of these matters may become the subject of litigation before tax courts where we intend to vigorously defend our position.
In Australia, the tax authorities have issued notices of assessments to the Company for the years ended December 2009 to December 2020, subject to additional interest and penalties, concerning our tax position with respect to certain intercompany transactions. The tax authorities denied our objections to the assessments for the years ended December 2009 to December 2020 and we have commenced litigation in the Australian Federal Court challenging those decisions. The Company made a partial payment of $56.0 million in 2021 and $5.2 million in 2022 in order to stay potential interest and penalties resulting from this litigation.
In France, the tax authorities have issued notices of assessments to the Company for the years ended December 2013 to December 2015 concerning our tax position with respect to whether income earned by a Company entity not domiciled in France should be subject to French tax. We have commenced litigation before the French tax courts where the tax authorities will seek unpaid taxes, penalties, and interest.
In India, the tax authorities have issued notices of assessments to the Company seeking unpaid taxes and interest for the financial years covering 2013 to 2018 concerning our tax position with respect to certain corporate tax deductions and certain intercompany transactions. Some of these issues were resolved through the Company entering into an agreement with the tax authorities in March 2023 in respect of the pricing of its international transactions. The Company recorded tax expense of approximately $21.6 million during the three months ended March 31, 2023 due to the terms of this agreement. The remaining issues are in the audit phase or are being challenged in the Indian tax courts.
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The Company has recorded a net reserve for uncertain tax positions of $299.3 million and $298.1 million, including interest and penalties, in connection with its international audits at March 31, 2023 and December 31, 2022, respectively. In connection with our international tax audits, it is possible that we will incur material losses above the amounts reserved.
The Company’s major U.S. state taxing jurisdictions remain open from fiscal year 2013 through 2021, with several state audits currently in progress. The Company’s major international taxing jurisdictions remain open from 2012 through 2021.
Tax Court Proceedings
The Company's U.S. federal income tax returns for 2012 through 2014 had been subject to proceedings in U.S. Tax Court involving a dispute with the IRS regarding whether certain costs related to ANDAs were eligible to be expensed and deducted immediately or required to be amortized over longer periods. A trial was held in U.S. Tax Court in December 2018 and on April 27, 2021, the Court affirmed Mylan’s position and held that patent litigation expenses related to ANDAs are immediately deductible. The IRS appealed, the case was heard before the Third Circuit Court of Appeals on January 12, 2023 and we are awaiting a decision.
Accounting for Uncertainty in Income Taxes
The impact of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained.
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18.Litigation
The Company is involved in various disputes, governmental and/or regulatory inquiries, investigations and proceedings, tax proceedings and litigation matters, both in the U.S. and abroad, that arise from time to time, some of which could result in losses, including damages, fines and/or civil penalties, and/or criminal charges against the Company. These matters are often complex and have outcomes that are difficult to predict.
In addition, in connection with the Combination, the Company has generally assumed liability for, and control of, pending and threatened legal matters relating to the Upjohn Business – including certain matters initiated against Pfizer described below – and has agreed to indemnify Pfizer for liabilities arising out of such assumed legal matters. Pfizer, however, has agreed to retain various matters – including certain specified competition law matters – to the extent they arise from conduct during the pre-Distribution period and has agreed to indemnify the Company for liabilities arising out of such matters.
While the Company believes that it has meritorious defenses with respect to the claims asserted against it and the assumed legal matters referenced above, and intends to vigorously defend its position, the process of resolving these matters is inherently uncertain and may develop over a long period of time, and so it is not possible to predict the ultimate resolution of any such matter. It is possible that an unfavorable resolution of any of the ongoing matters could have a material effect on the Company’s business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
Some of these governmental inquiries, investigations, proceedings and litigation matters with which the Company is involved are described below, and unless otherwise disclosed, the Company is unable to predict the outcome of the matter or to provide an estimate of the range of reasonably possible material losses. The Company records accruals for loss contingencies to the extent we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company is also involved in other pending proceedings for which, in the opinion of the Company based upon facts and circumstances known at the time, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s business, financial position, results of operations, cash flows, ability to pay dividends and/or stock price. If and when any reasonably possible losses associated with the resolution of such other pending proceedings, in the opinion of the Company, become material, the Company will disclose such matters.
Legal costs are recorded as incurred and are classified in SG&A in the Company’s condensed consolidated statements of operations.
EpiPen® Auto-Injector Litigation
On February 14, 2020, the Company, together with other non-Viatris affiliated companies, were named as defendants in a putative direct purchaser class action filed in the U.S. District Court for the District of Kansas relating to the pricing and/or marketing of the EpiPen® Auto-Injector. On September 21, 2021, after Plaintiffs’ then operative complaint was dismissed with an option to file a limited amended complaint, Plaintiffs filed an amended complaint asserting federal antitrust claims which are based on allegations concerning a patent settlement between Pfizer and Teva and other alleged actions regarding the launch of Teva’s generic epinephrine auto-injector. Plaintiffs’ seek monetary damages, declaratory relief, attorneys’ fees and costs.
Beginning in March 2020, the Company, together with other non-Viatris affiliated companies, were named as defendants in putative direct purchaser class actions filed in the U.S. District Court for the District of Minnesota relating to contracts with certain pharmacy benefit managers concerning EpiPen® Auto-Injector. The plaintiffs claim that the alleged conduct resulted in the exclusion or restriction of competing products and the elimination of pricing constraints in violation of RICO and federal antitrust law. These actions have been consolidated. Plaintiffs’ seek monetary damages, attorneys’ fees and costs.
On April 24, 2017, Sanofi Aventis U.S., LLC (“Sanofi”) filed a lawsuit against the Company in the U.S. District Court for the District of New Jersey. This lawsuit was transferred into a MDL in the U.S. District Court for the District of Kansas and alleged exclusive dealing and anti-competitive marketing practices in violation of the antitrust laws in connection with the sale and marketing of the EpiPen® Auto-Injector. Sanofi sought monetary damages, declaratory relief, attorneys’ fees and costs. The Court granted the Company’s motion for summary judgment and dismissed Sanofi’s claims. Sanofi’s appeal was denied. Sanofi’s petition seeking review by the U.S. Supreme Court was also denied and concludes this matter.
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The Company has a total accrual of approximately $5.5 million related to these matters at March 31, 2023, which is included in other current liabilities in the condensed consolidated balance sheets. Although it is reasonably possible that the Company may incur additional losses from these matters, any amount cannot be reasonably estimated at this time. In addition, the Company expects to incur additional legal and other professional service expenses associated with such matters in future periods and will recognize these expenses as services are received. The Company believes that the ultimate amount paid for these services and claims could have a material effect on the Company's business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price in future periods.
Drug Pricing Matters
Department of Justice
On December 3, 2015, the Company received a subpoena from the Antitrust Division of the DOJ seeking information relating to the marketing, pricing, and sale of certain of our generic products and any communications with competitors about such products. On September 8, 2016, the Company, as well as certain employees and a member of senior management, received subpoenas from the DOJ seeking similar information. Related search warrants also were executed.
On May 10, 2018, the Company received a civil investigative demand from the Civil Division of the DOJ seeking information relating to the pricing and sale of its generic drug products.
We have fully cooperated with these investigations, which we believe are related to a broader industry-wide investigation of the generic pharmaceutical industry. We have not had contact from DOJ concerning the above-described subpoenas or civil investigative demand in several years.
Civil Litigation
Beginning in 2016, the Company, along with other manufacturers, has been named as a defendant in lawsuits filed in the United States and Canada generally alleging anticompetitive conduct with respect to generic drugs. The lawsuits have been filed by plaintiffs, including putative classes of direct purchasers, indirect purchasers, and indirect resellers, as well as individual direct and indirect purchasers and certain cities and counties. The lawsuits allege harm under federal laws and the United States lawsuits also allege harm under state laws, including antitrust laws, state consumer protection laws and unjust enrichment claims. Some of the United States lawsuits also name as defendants the Company’s President, including allegations against him with respect to a single drug product, and one of the Company’s sales employees, including allegations against him with respect to certain generic drugs. The vast majority of the lawsuits have been consolidated in an MDL proceeding in the Eastern District of Pennsylvania (“EDPA”). Plaintiffs generally seek monetary damages, restitution, declaratory and injunctive relief, attorneys’ fees and costs. The EDPA Court has ordered certain plaintiffs’ complaints regarding two single-drug product cases to proceed as bellwethers. The Company is named in those plaintiffs’ complaints that regard one of the two individual drug products.
Attorneys General Litigation
On December 21, 2015, the Company received a subpoena and interrogatories from the Connecticut Office of the Attorney General seeking information relating to the marketing, pricing and sale of certain of the Company’s generic products and communications with competitors about such products. On December 14, 2016, attorneys general of certain states filed a complaint in the United States District Court for the District of Connecticut against several generic pharmaceutical drug manufacturers, including the Company, alleging anticompetitive conduct with respect to, among other things, a single drug product. The complaint has subsequently been amended, including on June 18, 2018, to add attorneys general alleging violations of federal and state antitrust laws, as well as violations of various states’ consumer protection laws. This lawsuit has been transferred to the aforementioned MDL proceeding in the EDPA. The operative complaint includes attorneys general of forty-six states, the District of Columbia and the Commonwealth of Puerto Rico. The Company is alleged to have engaged in anticompetitive conduct with respect to four generic drug products. The amended complaint also includes claims asserted by attorneys general of thirty-six states and the Commonwealth of Puerto Rico against certain individuals, including the Company’s President, with respect to a single drug product. The amended complaint seeks declaratory and injunctive relief, disgorgement, attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. The States’ claim for disgorgement and restitution under federal law in this case has been dismissed.
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On May 10, 2019, certain attorneys general filed a new complaint in the United States District Court for the District of Connecticut against various drug manufacturers and individuals, including the Company and one of its sales employees, alleging anticompetitive conduct with respect to additional generic drugs. On November 1, 2019, the complaint was amended, adding additional states as plaintiffs. The operative complaint is brought by attorneys general of forty-seven states, certain territories and the District of Columbia. The amended complaint also includes claims asserted by attorneys general of forty-two states and certain territories against several individuals, including a Company sales employee. The amended complaint seeks declaratory and injunctive relief, disgorgement, attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. This lawsuit has been transferred to the aforementioned MDL proceeding in the EDPA.
On June 10, 2020, certain attorneys general filed a new complaint in the United States District Court for the District of Connecticut against drug manufacturers, including the Company, and individual defendants (none from the Company), alleging anticompetitive conduct with respect to additional generic drugs. On September 9, 2021, the complaint was amended, adding an additional state as a plaintiff. The operative complaint is brought by attorneys general of forty-six states, certain territories and the District of Columbia. The amended complaint seeks declaratory and injunctive relief, disgorgement, attorneys’ fees and costs, and certain states seek monetary damages, civil penalties, restitution, and other equitable monetary relief. This lawsuit has been transferred to the aforementioned MDL proceeding in the EDPA and has been ordered to proceed as a bellwether.
Securities Related Litigation
Purported class action complaints were filed in October 2016 against Mylan N.V. and Mylan Inc. (collectively “Mylan”), certain of Mylan’s former directors and officers, and certain of the Company’s current directors and officers (collectively, for purposes of this paragraph, the “defendants”) in the United States District Court for the Southern District of New York (“SDNY”) on behalf of certain purchasers of securities of Mylan on the NASDAQ. The complaints alleged that defendants made false or misleading statements and omissions of purportedly material fact, in violation of federal securities laws, in connection with disclosures relating to the classification of their EpiPen® Auto-Injector as a non-innovator drug for purposes of the Medicaid Drug Rebate Program. On March 20, 2017, a consolidated amended complaint was filed alleging substantially similar claims, but adding allegations that defendants made false or misleading statements and omissions of purportedly material fact in connection with allegedly anticompetitive conduct with respect to EpiPen® Auto-Injector and certain generic drugs.
The operative complaint is the third amended consolidated complaint, which was filed on June 17, 2019, and contains the allegations as described above against Mylan, certain of Mylan’s former directors and officers, and certain of the Company’s current directors, officers, and employees (collectively, for purposes of this paragraph, the “defendants”). A class has been certified covering all persons or entities that purchased Mylan common stock between February 21, 2012 and May 24, 2019 excluding defendants, certain of the Company’s current directors and officers, former directors and officers of Mylan, members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which defendants have or had a controlling interest. Plaintiffs seek damages and costs and expenses, including attorneys’ fees and expert costs. On March 30, 2023, the Court dismissed all of Plaintiffs’ claims by granting Defendants’ motion for summary judgment and denying Plaintiffs’ cross-motion for partial summary judgment. Plaintiffs have filed an appeal to the U.S. Court of Appeals for the Second Circuit.
On April 30, 2017, a similar lawsuit was filed in the Tel Aviv District Court (Economic Division) in Israel, which has been stayed pending a decision in the SDNY class action litigation.
On February 14, 2020, the Abu Dhabi Investment Authority filed a complaint against Mylan in the SDNY asserting allegations pertaining to EpiPen® Auto-Injector and certain generic drugs under the federal securities laws that overlap with those asserted in the third amended complaint identified above. The Abu Dhabi Investment Authority’s complaint seeks monetary damages as well as the plaintiff’s fees and costs.
On June 26, 2020, a putative class action complaint was filed by the Public Employees Retirement System of Mississippi, which was subsequently amended on November 13, 2020, against Mylan N.V., certain of Mylan N.V.’s former directors and officers, and an officer and director of the Company (collectively for the purposes of this paragraph, the “defendants”) in the U.S. District Court for the Western District of Pennsylvania on behalf of certain purchasers of securities of Mylan N.V. The amended complaint alleges that defendants made false or misleading statements and omissions of purportedly material fact, in violation of federal securities laws, in connection with disclosures relating to the Morgantown manufacturing
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plant and inspections at the plant by the FDA. Plaintiff seeks certification of a class of purchasers of Mylan N.V. securities between February 16, 2016 and May 7, 2019. The complaint seeks monetary damages, as well as the plaintiff’s fees and costs.
On February 15, 2021, a complaint was filed by Skandia Mutual Life Ins. Co., Lansforsakringar AB, KBC Asset Management N.V., and GIC Private Limited, against the Company, certain of Mylan N.V.’s former directors and officers, a current director and officer of the Company, and current employees of the Company. The Complaint asserts claims which are based on allegations that are similar to those in the SDNY and the Western District of Pennsylvania complaints identified above. Plaintiffs seek compensatory damages, costs and expenses and attorneys’ fees.
On October 28, 2021, the Company and certain of its then officers and directors were named as defendants in a putative class action lawsuit filed in the Court of Common Pleas of Allegheny County, Pennsylvania on behalf of former Mylan shareholders who received Company common stock in connection with the Combination. A non-Viatris affiliated company and persons were also named as defendants. The complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 for purportedly failing to disclose or misrepresenting material information in the registration statement and related prospectus issued in connection with the Combination. On January 3, 2023, an amended complaint was filed naming the same defendants and alleging the same violations as the original complaint. Plaintiffs seek monetary damages, reasonable costs and expenses, and certain other equitable and injunctive relief.
Opioids
The Company, along with other manufacturers, distributors, pharmacies, pharmacy benefit managers, and individual healthcare providers is a defendant in more than 1,000 cases in the United States and Canada filed by various plaintiffs, including counties, cities and other local governmental entities, asserting civil claims related to sales, marketing and/or distribution practices with respect to prescription opioid products. In addition, lawsuits have been filed as putative class actions including on behalf of children with Neonatal Abstinence Syndrome due to alleged exposure to opioids.
The lawsuits generally seek equitable relief and monetary damages (including punitive and/or exemplary damages) based on a variety of legal theories, including various statutory and/or common law claims, such as negligence, public nuisance and unjust enrichment. The vast majority of these lawsuits have been consolidated in an MDL in the U.S. District Court for the Northern District Court of Ohio.
On January 13, 2023, the Company received a civil subpoena from the Attorney General of the State of New York seeking information relating to opioids manufactured, marketed, or sold by the Company and related subject matter. The Company is fully cooperating with this subpoena request.
Meda Sweden Commercial Dispute
On August 30, 2021, Ocular AS and other related entities (“Claimants”) initiated an arbitration in Sweden against Meda OTC AB and Meda AB (collectively, “Meda” or the “Company”) alleging breach of a 2013 sale and purchase agreement between Claimants and Meda concerning commercialization of a dental hygiene product. Claimants are seeking approximately $155 million in purported damages, plus interest and costs. The Company believes that it acted lawfully and vigorously contested all aspects of Claimants’ case – including their asserted damages – at an arbitration hearing that took place in February 2023.
Citalopram
In 2013, the European Commission issued a decision finding that Lundbeck and several generic companies, including Generics [U.K.] Limited (“GUK” or the “Company”), had violated EU competition rules relating to various settlement agreements entered into in 2002 for citalopram. After various appeals, the European Commission’s decision was upheld in March 2021. On March 28, 2023, bodies of the national health authorities in England & Wales served a claim in the U.K. Competition Appeals Tribunal against parties to the citalopram investigation, including GUK, seeking monetary damages, plus interest, purportedly arising from the settlement agreements. The Company, beginning in approximately 2018, has received notices from other health service authorities and insurers asserting an intention to file similar claims. Pursuant to an indemnification agreement, Merck KGaA and GUK have agreed to equally share any damages claimed against Merck KGaA and/or GUK alleged to have been caused by the conduct which is the subject of the European Commission decision.
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
The Company has accrued approximately €11.9 million as of March 31, 2023 related to this matter. It is reasonably possible that we will incur additional losses above the amount accrued but we cannot estimate a range of such reasonably possible losses at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts accrued.
Product Liability
Like other pharmaceutical companies, the Company is involved in a number of product liability lawsuits related to alleged personal injuries arising out of certain products manufactured/or distributed by the Company, including but not limited to those discussed below. Plaintiffs in these cases generally seek damages and other relief on various grounds for alleged personal injury and economic loss.
The Company has accrued approximately $65.1 million as of March 31, 2023 for its product liability matters. It is reasonably possible that we will incur additional losses and fees above the amount accrued but we cannot estimate a range of such reasonably possible losses or legal fees related to these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts accrued.
Nitrosamines
The Company, along with numerous other manufacturers, retailers, and others, are parties to litigation relating to alleged trace amounts of nitrosamine impurities in certain products, including valsartan and ranitidine. The vast majority of these lawsuits naming the Company in the United States are pending in two MDLs, namely an MDL pending in the United States District Court for the District of New Jersey concerning valsartan and an MDL pending in the United States District Court for the Southern District of Florida concerning ranitidine. The lawsuits against the Company in the MDLs include putative and certified classes seeking the refund of the purchase price and other economic and punitive damages allegedly sustained by consumers and end payors as well as individuals seeking compensatory and punitive damages for personal injuries allegedly caused by ingestion of the medications. Similar lawsuits pertaining to valsartan have been filed in other countries. Third party payor, consumer and medical monitoring classes were certified in the valsartan MDL and a Rule 23(f) petition to appeal the certification decision was denied. The Company has also received claims and inquiries related to these products, as well as requests to indemnify purchasers of the Company’s API and/ or finished dose forms of these products. The original master complaints concerning ranitidine were dismissed on December 31, 2020. The end-payor plaintiff immediately appealed to the U.S. Court of Appeals for the Eleventh Circuit, which affirmed the dismissal. The personal injury and consumer putative class plaintiffs filed amended master complaints. The Company was not named as a defendant in the amended master complaints, though it was still named in certain short form complaints filed by personal injury plaintiffs. The trial court has dismissed all remaining claims against the generic defendants. Certain of the personal injury plaintiffs appealed this dismissal, which remains pending.
Lipitor
A number of individual and multi-plaintiff lawsuits have been filed against Pfizer in various federal and state courts alleging that the plaintiffs developed type 2 diabetes purportedly as a result of the ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages. In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to an MDL in the U.S. District Court for the District of South Carolina. Since 2016, certain cases in the MDL were remanded to certain state courts. In 2017, the District Court granted Pfizer’s motion for summary judgment, dismissing all of the cases pending in the MDL. In June 2018, this dismissal was affirmed by the U.S. Court of Appeals for the Fourth Circuit. The state court proceedings remain pending in Missouri and New York. Prior state court proceedings in California have now been terminated after the California Court previously granted motions (i) to exclude the opinions of plaintiffs’ only general causation expert in connection with his opinions involving the three lowest doses of Lipitor (10, 20 and 40 mg); (ii) for summary judgment in connection with the 10, 20, and 40 mg plaintiffs; and (iii) seeking the dismissal of the remaining cases involving the highest dose of Lipitor (80 mg).
Intellectual Property
The Company is involved in a number of patent litigation lawsuits involving the validity and/or infringement of patents held by branded pharmaceutical manufacturers including but not limited to the matters described below. The Company uses its business judgment to decide to market and sell certain products, in each case based on its belief that the applicable patents are invalid and/or that its products do not infringe, notwithstanding the fact that allegations of patent infringement(s) or
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VIATRIS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued
other potential third party rights have not been finally resolved by the courts. The risk involved in doing so can be substantial because the remedies available to the owner of a patent for infringement may include, a reasonable royalty on sales or damages measured by the profits lost by the patent owner. If there is a finding of willful infringement, damages may be increased up to three times. Moreover, because of the discount pricing typically involved with bioequivalent products, patented branded products generally realize a substantially higher profit margin than generic and biosimilar products. The Company also faces challenges to its patents, including suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments, or other parties are seeking damages for allegedly causing delay of generic entry. An adverse decision in any of these matters could have an adverse effect that is material to our business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
The Company has accrued approximately $108.8 million as of March 31, 2023 for its intellectual property matters. It is reasonably possible that we will incur additional losses and fees above the amount accrued but we cannot estimate a range of such reasonably possible losses or legal fees related to these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts accrued.
Lyrica - United Kingdom
Beginning in 2014, Pfizer was involved in patent litigation in the English courts concerning the validity of its Lyrica pain use patent. In 2015, the High Court of Justice in London ordered that the NHS England issue guidance for prescribers and pharmacists directing the prescription and dispensing of Lyrica by brand when pregabalin was prescribed for the treatment of neuropathic pain and entered a preliminary injunction against certain Sandoz group companies preventing the sale of Sandoz’s full label pregabalin product. Pfizer undertook to compensate certain generic companies and NHS entities for losses caused by these orders, which remained in effect until patent expiration in July 2017. In November 2018, the U.K. Supreme Court ruled that all the relevant claims directed to neuropathic pain were invalid.
Dr. Reddy’s Laboratories filed a claim for monetary damages, interest, and costs in May 2020, followed by the Scottish Ministers and fourteen Scottish Health Boards (together, NHS Scotland) in July 2020. In September 2020, Teva, Sandoz, Ranbaxy, Actavis, and the Secretary of State for Health and Social Care, together with 32 other NHS entities (together, NHS England, Wales, and Northern Ireland) filed their claims. All of the claims except for those filed by Dr. Reddy’s Laboratories and NHS Scotland have been resolved. A trial on the remaining claims has been set for November 2023.
Yupelri
Beginning in January 2023, certain generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Yupelri® with associated Paragraph IV certifications. The companies assert the invalidity and/or non-infringement of polymorph patents expiring in 2030 and 2031, and a method of use patent expiring in 2039. The companies have not filed Paragraph IV certifications to our compound patents, which currently expire in December 2025, with one compound patent subject to a patent term extension to October 2028. In February 2023, we brought patent infringement actions against the generic filers in federal district courts, including the U.S. District Court for the District of New Jersey, the U.S. District Court for the District of Delaware, and the U.S. District Court for the Middle District of North Carolina, asserting infringement of the patents by the generic companies. The actions filed in Delaware and North Carolina have been dismissed and the actions will proceed in New Jersey.
Other Litigation
The Company is involved in various other legal proceedings including commercial, contractual, employment, or other similar matters that are considered normal to its business. The Company has approximately $8.6 million accrued related to these various other legal proceedings at March 31, 2023.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis addresses material changes in the financial condition and results of operations of Viatris Inc. and subsidiaries for the periods presented. Unless context requires otherwise, the “Company,” “Viatris,” “our” or “we” refer to Viatris Inc. and its subsidiaries.
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’ 2022 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 earnings (loss) for the three months ended March 31, 2023, and cash flows for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.
This Form 10-Q contains “forward-looking statements”. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements about the goals or outlooks with respect to the Company’s strategic initiatives, including but not limited to the Company’s two-phased strategic vision and potential divestitures and acquisitions; the benefits and synergies of acquisitions, divestitures or our global restructuring program; future opportunities for the Company and its products; and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods. Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “pipeline”, “intend”, “continue”, “target”, “seek” and variations of these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to:
•the possibility that the Company may be unable to realize the intended benefits of, or achieve the intended goals or outlooks with respect to, its strategic initiatives;
•the possibility that the Company may be unable to achieve expected benefits, synergies and operating efficiencies in connection with acquisitions, divestitures, or its global restructuring program within the expected timeframe or at all;
•impairment charges or other losses related to the divestiture or sale of businesses or assets;
•the Company’s failure to achieve expected or targeted future financial and operating performance and results;
•the potential impact of public health outbreaks, epidemics and pandemics, including the ongoing challenges and uncertainties posed by the COVID-19 pandemic;
•actions and decisions of healthcare and pharmaceutical regulators;
•changes in relevant laws and regulations, including but not limited to changes in tax, healthcare and pharmaceutical laws and regulations globally (including the impact of recent and potential tax reform in the U.S.);
•the ability to attract and retain key personnel;
•the Company’s liquidity, capital resources and ability to obtain financing;
•any regulatory, legal or other impediments to the Company’s ability to bring new products to market, including but not limited to “at-risk launches”;
•success of clinical trials and the Company’s or its partners’ ability to execute on new product opportunities and develop, manufacture and commercialize products;
•any changes in or difficulties with the Company’s manufacturing facilities, including with respect to inspections, remediation and restructuring activities, supply chain or inventory or the ability to meet anticipated demand;
•the scope, timing and outcome of any ongoing legal proceedings, including government inquiries or investigations, and the impact of any such proceedings on the Company;
•any significant breach of data security or data privacy or disruptions to our information technology systems;
•risks associated with having significant operations globally;
•the ability to protect intellectual property and preserve intellectual property rights;
•changes in third-party relationships;
•the effect of any changes in the Company’s or its partners’ customer and supplier relationships and customer purchasing patterns, including customer loss and business disruption being greater than expected following an acquisition or divestiture;
•the impacts of competition, including decreases in sales or revenues as a result of the loss of market exclusivity for certain products;
•changes in the economic and financial conditions of the Company or its partners;
•uncertainties regarding future demand, pricing and reimbursement for the Company’s products;
•uncertainties and matters beyond the control of management, including but not limited to general political and economic conditions, inflation rates and global exchange rates; and
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•inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements, and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards or on an adjusted basis.
For more detailed information on the risks and uncertainties associated with Viatris, see the risks described in Part I, Item 1A in the 2022 Form 10-K, and our other filings with the SEC. You can access Viatris’ filings with the SEC through the SEC website at www.sec.gov or through our website, and Viatris strongly encourages you to do so. Viatris routinely posts information that may be important to investors on our website at investor.viatris.com, and we use this website address as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (Reg FD). The contents of our website are not incorporated by reference in this Form 10-Q and shall not be deemed “filed” under the Securities Exchange Act of 1934, as amended. Viatris undertakes no obligation to update any statements herein for revisions or changes after the filing date of this Form 10-Q other than as required by law.
Company Overview
Viatris is a global healthcare company formed in November 2020 whose mission is to empower people worldwide to live healthier at every stage of life, regardless of geography or circumstance. Improving the ability of patients to gain access to sustainable and high-quality healthcare is our relentless pursuit. One that rests on visionary thinking, determination and best-in-class capabilities that were strategically built to remove barriers across the health spectrum and advance access globally.
Viatris’ seasoned 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. With a global workforce of approximately 38,000, 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 comprises more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands, generics, and complex generics. The Company operates approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs. Viatris is headquartered in the U.S., with global centers in Pittsburgh, Pennsylvania, Shanghai, China and Hyderabad, India.
Viatris has four reportable segments: Developed Markets, Greater China, JANZ, and Emerging Markets. The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded, complex generics, and generic products to people in markets everywhere. Our Developed Markets segment comprises our operations primarily in North America and Europe. Our Greater China segment includes our operations in China, Taiwan and Hong Kong. Our JANZ segment reflects our operations in Japan, Australia and New Zealand. Our Emerging Markets segment encompasses our presence in more than 125 countries with developing markets and emerging economies including in Asia, Africa, Eastern Europe, Latin America and the Middle East as well as the Company’s ARV franchise.
Certain Market and Industry Factors
The global pharmaceutical industry is a highly competitive and highly regulated industry. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. The following discussion highlights some of these key factors and market conditions.
Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition. As such, the timing of new product introductions can have a significant impact on the Company’s financial results. The entrance into the market of additional competition generally has a negative impact on the volume and pricing of the affected products. Additionally, pricing is often affected by factors outside of the Company’s control. Conversely, generic products generally experience less volatility over a longer period of time in Europe as compared to the U.S., primarily due to the role of government oversight of healthcare systems in the region.
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.
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Certain markets in which we do business outside of the U.S. have undergone government-imposed price reductions, and further government-imposed price reductions are expected in the future. Such measures, along with the tender systems discussed below, are likely to have a negative impact on sales and gross profit in these markets. However, government initiatives in certain markets that appear to favor generic products could help to mitigate this unfavorable effect by increasing rates of generic substitution and penetration.
Additionally, a number of markets in which we operate outside of the U.S. have implemented, or may implement, tender systems for generic pharmaceuticals in an effort to lower prices. Generally speaking, tender systems can have an unfavorable impact on sales and profitability. Under such tender systems, manufacturers submit bids that establish prices for generic pharmaceutical products. Upon winning the tender, the winning company will receive priority placement for a period of time. The tender system often results in companies underbidding one another by proposing low pricing in order to win the tender. The loss of a tender by a third party to whom we supply API can also have a negative impact on our sales and profitability. Sales continue to be negatively affected by the impact of tender systems in certain countries.
In addition to the impact of competition, government pricing actions and other measures designed to reduce healthcare costs, our results of operations, cash flows and financial condition could also be affected by other risks of doing business internationally, including the impact of public health epidemics, such as the COVID-19 pandemic, inflation, geopolitical events, including the ongoing conflict between Russia and Ukraine and related trade controls, sanctions, supply chain and staffing challenges and other economic considerations, supply chain disruptions, foreign currency exchange fluctuations, changes in intellectual property legal protections and other regulatory changes.
Recent Developments
Ophthalmology Acquisitions
During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $427.4 million in cash, which included $11 per share paid to Oyster Point stockholders through a tender offer, payment for vested share-based awards, and the repayment of debt of Oyster Point. In addition to the upfront cash consideration, each Oyster Point stockholder received one non-tradeable contingent value right representing up to an additional $2 per share, or approximately $60 million in the aggregate, contingent upon Oyster Point achieving certain metrics based upon full year 2022 performance. Oyster Point did not achieve the metrics that would have triggered a contingent payment and the contingent value rights have expired. Oyster Point is focused on the discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases.
On November 7, 2022, the Company entered into a definitive agreement to acquire the remaining equity shares of Famy Life Sciences, a privately-owned research company with a complementary portfolio of ophthalmology therapies under development, for consideration of $281 million. The Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 under which the Company obtained rights with respect to acquiring certain pharmaceutical products and had also acquired shares representing approximately 13.5% equity interest in Famy Life Sciences for $25.0 million at December 31, 2020. The investment was accounted for in accordance with ASC 321, Investments - Equity Securities. The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023.
Refer to Note 4 Acquisitions and Other Transactions for more information.
Share Repurchase Program
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. 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 three months ended March 31, 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of approximately $250 million. The Company did not repurchase any shares of common stock under the share repurchase program in 2022. The share repurchase program does not obligate the Company to acquire any particular amount of common stock.
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2020 Restructuring Program
During the fourth quarter of 2020, Viatris announced a significant global restructuring program in order to achieve synergies and ensure that the organization is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders. As part of the restructuring, the Company is optimizing its commercial capabilities and enabling functions, and closing, downsizing or divesting certain manufacturing facilities globally that are deemed to be no longer viable either due to surplus capacity, challenging market dynamics or a shift in its product portfolio toward more complex products. The remaining actions under the 2020 restructuring program include the disposal or closure of certain manufacturing facilities, which are expected to be substantially completed in 2023.
For the committed restructuring actions, the Company expects to incur total pre-tax charges of up to approximately $1.4 billion. Such charges are expected to include up to approximately $450 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges, including inventory write-offs. The remaining estimated cash costs of up to approximately $950 million are expected to be primarily related to severance and employee benefits expense, as well as other costs, including those related to contract terminations and other plant disposal costs. In addition, management believes the potential annual savings related to these committed restructuring activities to be up to approximately $900 million once fully implemented, with most of these savings expected to improve operating cash flow.
Financial Summary
The table below is a summary of the Company’s financial results for the three months ended March 31, 2023 compared to the prior year period:

| Three Months Ended
| March 31,
(In millions, except per share amounts) | 2023 |  | 2022 |  | Change |  |
Total revenues | $ | 3,729.1 |  |  | $ | 4,191.7 |  |  | $ | (462.6) |  |  |
Gross profit | 1,542.2 |  |  | 1,771.2 |  |  | (229.0) |  |  |
Earnings from operations | 399.8 |  |  | 707.4 |  |  | (307.6) |  |  |
Net earnings | 224.7 |  |  | 399.2 |  |  | (174.5) |  |  |
Diluted earnings per share | $ | 0.19 |  |  | $ | 0.33 |  |  | $ | (0.14) |  |  |

A detailed discussion of the Company’s financial results can be found below in the section titled “Results of Operations.” As part of this discussion, we also report sales performance using the non-GAAP financial measures of “constant currency” net sales and total revenues. These measures provide information on the change in net sales and total revenues assuming that foreign currency exchange rates had not changed between the prior and current period. The comparisons presented at constant currency rates reflect comparative local currency sales at the prior year’s foreign exchange rates. We routinely evaluate our net sales and total revenues performance at constant currency so that sales results can be viewed without the impact of foreign currency exchange rates, thereby facilitating a period-to-period comparison of our operational activities, and believe that this presentation also provides useful information to investors for the same reason.
More information about non-GAAP measures used by the Company as part of this discussion, including adjusted cost of sales, adjusted gross margins, adjusted net earnings and adjusted EBITDA (all of which are defined below) can be found in “Item 2. Management’s Discussion and Analysis of Financial Condition - Results of Operations and Results of Operations - Use of Non-GAAP Financial Measures.”
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Results of Operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

| Three Months Ended
| March 31,
(In millions, except %s) | 2023 |  | 2022 |  | % Change |  | 2023 Currency Impact (1) |  | 2023 Constant Currency Revenues |  | Constant Currency % Change (2)
Net sales |  |  |  |  |  |  |  |  |  |  |
Developed Markets | $ | 2,170.4 |  |  | $ | 2,476.1 |  |  | (12) | % |  | $ | 73.2 |  |  | $ | 2,243.6 |  |  | (9) | %
Greater China | 564.6 |  |  | 573.1 |  |  | (1) | % |  | 35.0 |  |  | 599.6 |  |  | 5 | %
JANZ | 342.2 |  |  | 423.8 |  |  | (19) | % |  | 33.6 |  |  | 375.8 |  |  | (11) | %
Emerging Markets | 641.9 |  |  | 705.2 |  |  | (9) | % |  | 55.3 |  |  | 697.2 |  |  | (1) | %
Total net sales | $ | 3,719.1 |  |  | $ | 4,178.2 |  |  | (11) | % |  | $ | 197.1 |  |  | $ | 3,916.2 |  |  | (6) | %
Other revenues (3) | 10.0 |  |  | 13.5 |  |  | NM |  | 0.3 |  |  | 10.3 |  |  | NM
Consolidated total revenues (4) | $ | 3,729.1 |  |  | $ | 4,191.7 |  |  | (11) | % |  | $ | 197.4 |  |  | $ | 3,926.5 |  |  | (6) | %

____________
(1)Currency impact is shown as unfavorable (favorable).
(2)The constant currency percentage change is derived by translating net sales or revenues for the current period at prior year comparative period exchange rates, and in doing so shows the percentage change from 2023 constant currency net sales or revenues to the corresponding amount in the prior year.
(3)For the three months ended March 31, 2023, other revenues in Developed Markets, JANZ, and Emerging Markets were approximately $7.1 million, $0.2 million, and $2.7 million, respectively.
(4)Amounts exclude intersegment revenue which eliminates on a consolidated basis.
Total Revenues
For the three months ended March 31, 2023, Viatris reported total revenues of $3.73 billion, compared to $4.19 billion for the comparable prior year period, representing a decrease of $462.6 million, or 11%. Total revenues include both net sales and other revenues from third parties. Net sales for the current quarter were $3.72 billion, compared to $4.18 billion for the comparable prior year period, representing a decrease of $459.1 million, or 11%. Other revenues for the current quarter were $10.0 million, compared to $13.5 million for the comparable prior year period.
The decrease in net sales was partially driven by the unfavorable impact of foreign currency translation of approximately $197.1 million, or 5%, primarily reflecting changes in the U.S. Dollar as compared to the currencies of subsidiaries in countries within the EU, China, Japan and India. Additionally, net sales further decreased by approximately $164.8 million or 4% due to the inclusion of net sales related to the divested biosimilars business in the prior year period. On a constant currency basis, the decrease in net sales from the remaining business was approximately $103.5 million, or 3% for the three months ended March 31, 2023 compared to the prior year period. The decrease was due to base business erosion of approximately $188 million. The decrease in net sales from existing products was partially offset by approximately $85.2 million of new product sales, primarily in the U.S. and Europe. New product sales include new products launched in 2023 and the carryover impact of new products, including business development, launched within the last twelve months. Net sales from acquisitions totaled $6.3 million during the current quarter.
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 35% for the three months ended March 31, 2023 and 2022.
Net sales are derived from our four reporting segments: Developed Markets, Greater China, JANZ, and Emerging Markets.
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Developed Markets Segment
Net sales from Developed Markets decreased by $305.7 million or 12% during the three months ended March 31, 2023 when compared to the prior year period. This decrease was partially due to the unfavorable impact of foreign currency translation of approximately $73.2 million, or 3%. Net sales also decreased by approximately $144.6 million or 6% due to the inclusion of net sales related to the divested biosimilars business in the prior year period. Constant currency net sales from the remaining business decreased by approximately $94.2 million, or 4% when compared to the prior year period. Net sales within North America totaled approximately $925.8 million and net sales within Europe totaled approximately $1.24 billion. The decrease in constant currency net sales was driven by anticipated lower net sales of existing products within the U.S., including cyclosporine ophthalmic emulsion and Wixela Inhub®, as a result of lower volumes and, to a lesser extent, lower pricing due to additional competition. These decreases were partially offset by new product sales, including lenalidomide in the U.S., and higher volumes of existing products in Europe. Net sales from Tyrvaya® totaled $6.3 million during the current quarter.
Greater China Segment
Net sales from Greater China decreased by $8.5 million or 1% for the three months ended March 31, 2023 when compared to the prior year period. This decrease was the result of the unfavorable impact of foreign currency translation of approximately $35.0 million, or 6%. Constant currency net sales increased by approximately $26.6 million, or 5% when compared to the prior year period, driven primarily by increased volumes of existing products. The disposition of the biosimilars business did not have a significant impact on the net sales for the current quarter.
JANZ Segment
Net sales from JANZ decreased by $81.6 million or 19% for the three months ended March 31, 2023 when compared to the prior year period. This decrease was partially the result of the unfavorable impact of foreign currency translation of approximately $33.6 million, or 8%. Constant currency net sales decreased by approximately $43.4 million, or 10% when compared to the prior year period. The decrease was due to lower net sales of existing products mainly driven by lower pricing and, to a lesser extent, volumes, in Japan as a result of government price reductions and additional competition. The disposition of the biosimilars business did not have a significant impact on the net sales for the current quarter.
Emerging Markets Segment
Net sales from Emerging Markets decreased by $63.3 million or 9% for the three months ended March 31, 2023 when compared to the prior year period. This decrease was mainly driven by the unfavorable impact of foreign currency translation of approximately $55.3 million or 8%. In addition, net sales also decreased by approximately $15.5 million, or 2% due to the inclusion of the divested biosimilars business in the prior year period. Constant currency net sales from the remaining business increased by $7.5 million, or 1% when compared to the prior year period.
Cost of Sales and Gross Profit
Cost of sales decreased from $2.42 billion for the three months ended March 31, 2022 to $2.19 billion for the three months ended March 31, 2023. Cost of sales was primarily impacted by the decrease in net sales, including the impact of the disposition of the biosimilars business in November 2022.
Gross profit for the three months ended March 31, 2023 was $1.54 billion and gross margins were 41%. For the three months ended March 31, 2022, gross profit was $1.77 billion and gross margins were 42%. This change is primarily related to the decrease in cost of sales. Adjusted gross margins were 60% for the three months ended March 31, 2023, compared to 59% for the three months ended March 31, 2022.
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A reconciliation between cost of sales, as reported under U.S. GAAP, and adjusted cost of sales and adjusted gross margin for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 is as follows:

| Three Months Ended
| March 31,
(In millions, except %s) | 2023 |  | 2022
U.S. GAAP cost of sales | $ | 2,186.9 |  |  | $ | 2,420.5 |
Deduct: |  |  |
Purchase accounting related amortization | (653.4) |  |  | (658.8) |
Acquisition and divestiture related items | (5.0) |  |  | (9.0) |
Restructuring related costs | (10.9) |  |  | (13.1) |
Share-based compensation expense | (0.6) |  |  | (0.3) |
Other special items | (38.8) |  |  | (41.0) |
Adjusted cost of sales | $ | 1,478.2 |  |  | $ | 1,698.3 |
Adjusted gross profit (a) | $ | 2,250.9 |  |  | $ | 2,493.4 |
Adjusted gross margin (a) | 60 | % |  | 59 | %

____________
(a)Adjusted gross profit is calculated as total revenues less adjusted cost of sales. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues.
Operating Expenses
Research & Development Expense
R&D expense for the three months ended March 31, 2023 was $182.9 million, compared to $142.3 million for the comparable prior year period, an increase of $40.6 million. This increase was primarily due to continued investment in our pipeline, including approximately $10.9 million related to the ophthalmology acquisitions.
Selling, General & Administrative Expense
SG&A expense for the current quarter was $958.9 million, compared to $915.3 million for the comparable prior year period, an increase of $43.6 million. The increase was primarily due to expenses related to the ophthalmology acquisitions of approximately $33.5 million, higher investment in selling and promotional activities, and increased payroll-related costs. Partially offsetting these increases were lower acquisition and divestiture related costs of approximately $26.6 million as a result of transitioning certain support services from Pfizer during 2022.
Litigation Settlements and Other Contingencies, Net
The following table includes the losses/(gains) recognized in litigation settlements and other contingencies, net during the three months ended March 31, 2023 and 2022, respectively:

| Three Months Ended
| March 31,
(In millions) | 2023 |  | 2022
Contingent consideration adjustment (related to the Respiratory Delivery Platform) | $ | 1.5 |  |  | $ | 12.4 |
Litigation settlements, net | (0.9) |  |  | (6.2) |
Total litigation settlements and other contingencies, net | $ | 0.6 |  |  | $ | 6.2 |

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Interest Expense
Interest expense for the three months ended March 31, 2023 totaled $147.0 million, compared to $146.2 million for the three months ended March 31, 2022, essentially flat as higher costs related to our variable rate borrowings were offset by the impact of debt repayments.
Other (Income) Expense, Net
Other (income) expense, net includes gains and losses from 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 (income) expense, net for the three months ended March 31, 2023 totaled $69.9 million of income, compared to expense of $33.7 million for the three months ended March 31, 2022. The current quarter income was primarily driven by the reimbursement for transition services provided to Biocon Biologics of approximately $45.7 million. The costs related to the transition services are included in SG&A and R&D. The current quarter income was also attributed to a gain of approximately $18.9 million as a result of remeasuring our pre-existing 13.5% equity interest in Famy Life Sciences to fair value. The prior year period expense was primarily driven by higher foreign exchange costs.
Income Tax Provision
For the three months ended March 31, 2023, the Company recognized an income tax provision of $98.0 million, compared to $128.3 million for the comparable prior year period, a decrease of $30.3 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. Also impacting the tax provision for the three months ended March 31, 2023 was a tax expense of $21.6 million related to an agreement with the Indian tax authorities in March 2023 in respect of the pricing of its international transactions.
Use of Non-GAAP Financial Measures
Whenever the Company uses non-GAAP financial measures, we provide a reconciliation of the non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure. Investors and other readers are encouraged to review the related U.S. GAAP financial measures and the reconciliation of non-GAAP measures to their most directly comparable U.S. GAAP measure and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with U.S. GAAP. Additionally, since these are not measures determined in accordance with U.S. GAAP, non-GAAP financial measures have no standardized meaning across companies, or as prescribed by U.S. GAAP and, therefore, may not be comparable to the calculation of similar measures or measures with the same title used by other companies.
Management uses these measures internally for forecasting, budgeting, measuring its operating performance, and incentive-based awards. Primarily due to acquisitions, divestitures and other significant events which may impact comparability of our periodic operating results, we believe that an evaluation of our ongoing operations (and comparisons of our current operations with historical and future operations) would be difficult if the disclosure of our financial results was limited to financial measures prepared only in accordance with U.S. GAAP. We believe that non-GAAP financial measures are useful supplemental information for our investors and when considered together with our U.S. GAAP financial measures and the reconciliation to the most directly comparable U.S. GAAP financial measure, provide a more complete understanding of the factors and trends affecting our operations. The financial performance of the Company is measured by senior management, in part, using adjusted metrics as described below, along with other performance metrics. The Company’s use of such non-GAAP measures is governed by an adjusted reporting policy maintained by the Company and such non-GAAP measures are reviewed in detail with the Audit Committee of the Board of Directors.
Adjusted Cost of Sales and Adjusted Gross Margin
We use the non-GAAP financial measure “adjusted cost of sales” and the corresponding non-GAAP financial measure “adjusted gross margin.” The principal items excluded from adjusted cost of sales include restructuring, acquisition related and other special items and purchase accounting related amortization, which are described in greater detail below.
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Adjusted Net Earnings
Adjusted net earnings is a non-GAAP financial measure and provides an alternative view of performance used by management. Management believes that, primarily due to acquisitions, divestitures and other significant events, an evaluation of the Company’s ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results were limited to financial measures prepared only in accordance with U.S. GAAP. Management believes that adjusted net earnings is an important internal financial metric related to the ongoing operating performance of the Company, and is therefore useful to investors and that their understanding of our performance is enhanced by this measure. Actual internal and forecasted operating results and annual budgets used by management include adjusted net earnings.
EBITDA and Adjusted EBITDA
EBITDA and adjusted EBITDA are non-GAAP financial measures that the Company believes are appropriate to provide additional information to investors to demonstrate the Company’s ability to comply with financial debt covenants and assess the Company’s ability to incur additional indebtedness. The Company also believes that adjusted EBITDA better focuses management on the Company’s underlying operational results and true business performance and, is used, in part, for management’s incentive compensation. We calculate EBITDA as U.S. GAAP net earnings (loss) adjusted for net contribution attributable to equity method investments, income tax provision (benefit), interest expense and depreciation and amortization. EBITDA is further adjusted for share-based compensation expense, litigation settlements and other contingencies, net, and restructuring, impairment of long-lived assets, acquisition and divestiture related and other special items to determine adjusted EBITDA. These adjustments are generally permitted under our credit agreement in calculating adjusted EBITDA for determining compliance with our debt covenants.
The significant items excluded from adjusted cost of sales, adjusted net earnings, and adjusted EBITDA include:
Purchase Accounting Amortization and Other Related Items
The ongoing impact of certain amounts recorded in connection with acquisitions of both businesses and assets is excluded from adjusted cost of sales, adjusted net earnings, and adjusted EBITDA. These amounts include the amortization of intangible assets, inventory step-up, property, plant and equipment step-up, intangible asset impairment charges, including for in-process research and development, and impairment of goodwill. For the acquisition of businesses accounted for under the provisions of ASC 805, Business Combinations, these purchase accounting impacts are excluded regardless of the financing method used for the acquisitions, including the use of cash, long-term debt, the issuance of common stock, contingent consideration or any combination thereof.
Fair Value Adjustments, Including Contingent Consideration
The impact of changes to the fair value of assets and liabilities, including contingent and deferred consideration and accounting for the CCPS in Biocon Biologics, and the related accretion income or expense are excluded from adjusted net earnings and adjusted EBITDA because they are not indicative of the Company’s ongoing operations due to the variability of the amounts and the lack of predictability as to the occurrence and/or timing and management believes their exclusion is helpful to understanding the underlying, ongoing operational performance of the business.
Share-based Compensation Expense
Share-based compensation expense is excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA. Our share-based compensation programs have become increasingly weighted toward performance-based compensation, which leads to variability and to a lack of predictability as to the occurrence and/or timing of amounts incurred. As such, management believes the exclusion of such amounts on an ongoing basis is helpful to understanding the underlying operational performance of the business.
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Restructuring, Acquisition and Divestiture Related and Other Special Items
Costs related to restructuring, acquisition and divestiture related activities and other actions are excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA, as applicable. These amounts include items such as:
•Costs related to formal restructuring programs and actions, including costs associated with facilities to be closed or divested, employee separation costs, impairment charges, accelerated depreciation, incremental manufacturing variances, equipment relocation costs, decommissioning and other restructuring related costs;
•Certain acquisition and divestiture costs, including costs relating to integration and planning, advisory and legal fees, certain financing related costs, certain reimbursements related to the Company’s obligation to reimburse Pfizer for certain financing and transaction related costs under the Business Combination Agreement and Separation and Distribution Agreement, certain other TSA related set-up and exit costs, and other business transformation and/or optimization initiatives, which are not part of a formal restructuring program, including employee separation and post-employment costs;
•The pre-tax loss of the Company’s clean energy investments, whose activities qualify for income tax credits under the Code; only included in adjusted net earnings is the net tax effect of the entity’s activities;
•Other costs, incurred from time to time, related to certain special events or activities that lead to gains or losses, including, but not limited to, incremental manufacturing variances, asset write-downs, including other-than-temporary impairments of investments in equity or debt instruments, or liability adjustments;
•Certain costs to further develop and optimize our global enterprise resource planning systems, operations and supply chain;
•Gains or losses from divestitures, including impairments of held for sale assets; and
•The impact of changes related to uncertain tax positions are excluded from adjusted cost of sales and adjusted net earnings. In addition, tax adjustments to adjusted earnings are recorded to present items on an after-tax basis consistent with the presentation of adjusted net earnings.
The Company has undertaken restructurings and other optimization initiatives of differing types, scope and amount during the covered periods and, therefore, these charges should not be considered non-recurring; however, management excludes these amounts from adjusted cost of sales, adjusted net earnings and adjusted EBITDA because it believes it is helpful to understanding the underlying, ongoing operational performance of the business.
Litigation Settlements, Net
Charges and gains related to legal matters, such as those discussed in Note 18 Litigation included in Part I, Item 1 of this Form 10-Q are generally excluded from adjusted net earnings and adjusted EBITDA. Normal, ongoing defense costs of the Company made in the normal course of our business are not excluded.
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Reconciliation of U.S. GAAP Net Earnings to Adjusted Net Earnings
A reconciliation between net earnings as reported under U.S. GAAP, and adjusted net earnings for the periods shown follows:

|  |  | Three Months Ended March 31,
(In millions) |  |  |  |  | 2023 |  | 2022
U.S. GAAP net earnings |  |  |  |  |  |  |  |  | $ | 224.7 |  |  | $ | 399.2 |
Purchase accounting related amortization (primarily included in cost of sales) (a) |  |  |  |  |  |  |  |  | 653.3 |  |  | 658.9 |
Litigation settlements and other contingencies, net |  |  |  |  |  |  |  |  | 0.6 |  |  | 6.2 |
Interest expense (primarily amortization of premiums and discounts on long term debt) |  |  |  |  |  |  |  |  | (10.3) |  |  | (13.7) |
Clean energy investments pre-tax gain |  |  |  |  |  |  |  |  | — |  |  | (0.1) |
Acquisition and divestiture related costs (primarily included in SG&A) (b) |  |  |  |  |  |  |  |  | 58.1 |  |  | 84.7 |
Restructuring related costs (c) |  |  |  |  |  |  |  |  | 9.7 |  |  | 16.8 |
Share-based compensation expense |  |  |  |  |  |  |  |  | 42.6 |  |  | 28.3 |
Other special items included in: |  |  |  |  |  |  |  |  |  |  |
Cost of sales (d) |  |  |  |  |  |  |  |  | 38.8 |  |  | 41.0 |
Research and development expense |  |  |  |  |  |  |  |  | 2.0 |  |  | 0.3 |
Selling, general and administrative expense |  |  |  |  |  |  |  |  | 14.9 |  |  | 7.4 |
Other expense, net (e) |  |  |  |  |  |  |  |  | (21.8) |  |  | (1.5) |
Tax effect of the above items and other income tax related items (f) |  |  |  |  |  |  |  |  | (79.7) |  |  | (102.2) |
Adjusted net earnings |  |  |  |  |  |  |  |  | $ | 932.9 |  |  | $ | 1,125.3 |

Significant items include the following:
(a)For the three months ended March 31, 2023, charges include an intangible asset charge of approximately $32.0 million related to the potential divestiture of the Upjohn Distributor Markets to write down the disposal group to fair value, less cost to sell. Also includes amortization of the step-up in the fair value of inventory related to the Oyster Point acquisition of approximately $7.3 million.
(b)Acquisition and divestiture related costs consist primarily of transaction costs including legal and consulting fees and integration activities.
(c)For the three months ended March 31, 2023, charges include approximately $10.9 million in cost of sales and approximately $(1.2) million in SG&A. Refer to Note 15 Restructuring included in Part I, Item 1 of this Form 10-Q for additional information.
(d)For the three months ended March 31, 2023, charges include incremental manufacturing variances at plants in the 2020 restructuring program of approximately $22.7 million and inventory reserves related to the potential divestiture of the Upjohn Distributor Markets of approximately $9.2 million.
(e)For the three months ended March 31, 2023, includes a gain of approximately $18.9 million as a result of remeasuring our pre-existing 13.5% equity interest in Famy Life Sciences to fair value.
(f)Adjusted for changes for uncertain tax positions.
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Reconciliation of U.S. GAAP Net Earnings to EBITDA and Adjusted EBITDA
Below is a reconciliation of U.S. GAAP net earnings to EBITDA and adjusted EBITDA for the three months ended March 31, 2023 compared to the prior year period:

| Three Months Ended March 31,
(In millions) | 2023 |  | 2022
U.S. GAAP net earnings | $ | 224.7 |  |  | $ | 399.2 |
Add / (deduct) adjustments: |  |  |
Net contribution attributable to equity method investments | — |  |  | (0.1) |
Income tax provision | 98.0 |  |  | 128.3 |
Interest expense (a) | 147.0 |  |  | 146.2 |
Depreciation and amortization (b) | 730.0 |  |  | 736.0 |
EBITDA | $ | 1,199.7 |  |  | $ | 1,409.6 |
Add adjustments: |  |  |
Share-based compensation expense | 42.6 |  |  | 28.3 |
Litigation settlements and other contingencies, net | 0.6 |  |  | 6.2 |
Restructuring, acquisition and divestiture related and other special items (c) | 98.0 |  |  | 142.2 |
Adjusted EBITDA | $ | 1,340.9 |  |  | $ | 1,586.3 |

____________
(a) Includes amortization of premiums and discounts on long-term debt.
(b) Includes purchase accounting related amortization.
(c) See items detailed in the Reconciliation of U.S. GAAP Net Earnings to Adjusted Net Earnings.
Liquidity and Capital Resources
Our primary source of liquidity is net cash provided by operating activities, which was $971.2 million for the three months ended March 31, 2023. We believe that net cash provided by operating activities and available liquidity will continue to allow us to meet our needs for working capital, capital expenditures, interest and principal payments on debt obligations, and dividend payments. Nevertheless, our ability to satisfy our working capital requirements and debt service obligations, and fund planned capital expenditures, share repurchases or dividend payments, will substantially depend upon our future operating performance (which will be affected by prevailing economic conditions), and financial, business and other factors, some of which are beyond our control.
Operating Activities
Net cash provided by operating activities decreased by $167.3 million to $971.2 million for the three months ended March 31, 2023, as compared to net cash provided by operating activities of $1.14 billion for the three months ended March 31, 2022. Net cash provided by operating activities is derived from net earnings adjusted for non-cash operating items, gains and losses attributed to investing and financing activities and changes in operating assets and liabilities resulting from timing differences between the receipts and payments of cash, including changes in cash primarily reflecting the timing of cash collections from customers, payments to vendors and employees and tax payments in the ordinary course of business.
The decrease in net cash provided by operating activities was principally due to lower operating earnings, including as a result of the disposition of the biosimilars business in November 2022, and the timing of cash payments and collections.
Investing Activities
Net cash used in investing activities was $749.5 million for the three months ended March 31, 2023, as compared to $66.9 million for the three months ended March 31, 2022, an increase of $682.6 million.
In 2023, significant items in investing activities included the following:
•cash paid for acquisitions, net of cash acquired, of $667.7 million.
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•capital expenditures, primarily for equipment and facilities, totaling approximately $47.8 million. While there can be no assurance that current expectations will be realized, capital expenditures for the 2023 calendar year are expected to be approximately $400 million to $500 million.
In 2022, significant items in investing activities included the following:
•capital expenditures, primarily for equipment and facilities, totaling approximately $64.5 million.
Financing Activities
Net cash used in financing activities was $974.7 million for the three months ended March 31, 2023, as compared to $1.01 billion for the three months ended March 31, 2022, a decrease of $34.3 million.
In 2023, significant items in financing activities included the following:
•repayment of the 3.125% Senior Notes at maturity of approximately $750.0 million;
•share repurchases of $250.0 million;
•net short-term borrowings of $204.6 million;
•cash dividends paid of $143.8 million; and
•net cash of $12.1 million collected on behalf of Biocon Biologics, which is included in Other items, net.
In 2022, significant items in financing activities included the following:
•net repayments of short-term borrowings of $837.9 million; and
•cash dividends paid of $145.1 million.
Capital Resources
Our cash and cash equivalents totaled $506.6 million at March 31, 2023, and the majority of these funds are held by our non-U.S. subsidiaries. In order to support our global operations, the majority of our cash and cash equivalents are held within the banking system with the majority of this at Global Systemically Important Banks. We monitor the third-party depository institutions that hold our cash and cash equivalents on a regular basis. Our primary emphasis is on the safety of the principal. Where possible, we diversify our cash and cash equivalents among counterparties to minimize exposure to any one counterparty. The Company anticipates having sufficient liquidity, including existing borrowing capacity under the Revolving Facility, Commercial Paper Program and the Receivables Facility and the Note Securitization Facility combined with cash to be generated from operations, to fund foreseeable cash needs without requiring the repatriation of non-U.S. cash.
The Company has access to $4.0 billion under the Revolving Facility which matures in July 2026. Effective April 28, 2023, we executed an amendment to the Revolving Facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins. Up to $1.65 billion of the Revolving Facility may be used to support borrowings under our Commercial Paper Program. As of March 31, 2023, the Company did not have any borrowings outstanding under the Commercial Paper Program and the Revolving Facility.
The Company has a $400 million Receivables Facility which expires in April 2025, and a $200 million Note Securitization Facility which expires in August 2023. As of March 31, 2023, the Company had $197.0 million outstanding under the Receivables Facility and did not have any borrowings outstanding under the Note Securitization Facility. Under the terms of each of the Receivables Facility and Note Securitization Facility, certain of our accounts receivable secure the amounts borrowed and cannot be used to pay our other debts or liabilities. The amount that we may borrow at a given point in time is determined based on the amount of qualifying accounts receivable that are present at such point in time. Amounts outstanding under either facility are included as a component of short-term borrowings, while the accounts receivable securing these obligations remain as a component of accounts receivable, net, in our condensed consolidated balance sheets. In addition, the agreements governing the Receivables Facility and Note Securitization Facility contain various customary affirmative and negative covenants, and customary default and termination provisions.
We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable. These transactions are accounted for as sales and result in a reduction in accounts receivable because
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the agreements transfer effective control over and risk related to the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. We derecognized $76.3 million and $34.7 million of accounts receivable as of March 31, 2023 and December 31, 2022 under these factoring arrangements, respectively.
The Company has certain voluntary supply chain finance programs with financial intermediaries which provide participating suppliers the option to be paid by the intermediary earlier than the original invoice due date. The Company’s responsibility is limited to making payments on the terms originally negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date. The range of payment terms the Company negotiates with suppliers are consistent, regardless of whether a supplier participates in a supply chain finance program. The total amounts due to financial intermediaries to settle supplier invoices under supply chain finance programs as of March 31, 2023 and December 31, 2022 were $55.5 million and $33.4 million, respectively. These amounts are included within Accounts payable in the condensed consolidated balance sheets.
For information regarding our dividends paid and declared, refer to Note 9 Earnings per Share in Part I, Item 1 of this Form 10-Q.
We are continuously evaluating the potential acquisition of products, as well as companies, as a strategic part of our future growth. Consequently, we may utilize current cash reserves or incur additional indebtedness to finance any such acquisitions, which could impact future liquidity. Also, on an ongoing basis, we review our operations, including the evaluation of potential divestitures of products and businesses, as part of our future strategy. Any divestitures could impact future liquidity. In addition, we plan to continue to explore various other ways to create, enhance or otherwise unlock the value of the Company’s unique global platform in order to create shareholder value.
In November 2022, the Company provided an update on the strategic priorities announced in February 2022, including identifying the following businesses no longer considered core to its future strategy that the Company intends to divest:
•OTC;
•API (while retaining some selective development API capabilities);
•Women’s health care, primarily related to our oral and injectable contraceptives. This does not include all of our women’s health care related products; as an example, our Xulane® product in the U.S. is excluded; and
•Upjohn Distributor Markets.
Long-term Debt Maturity
For information regarding our debt agreements and mandatory minimum repayments remaining on the outstanding notional amount of long-term debt at March 31, 2023, refer to Note 12 Debt in Part I, Item 1 of this Form 10-Q.
The YEN Term Loan Facility and the Revolving Facility contain customary affirmative covenants for facilities of this type, including among others, covenants pertaining to the delivery of financial statements, notices of default and certain material events, maintenance of corporate existence and rights, property, and insurance and compliance with laws, as well as customary negative covenants for facilities of this type, including a financial covenant, which set the Maximum Leverage Ratio as of the end of any quarter at 3.75 to 1.00 for the quarter ended March 31, 2023 and each quarter ending thereafter, except in circumstances as defined in the related credit agreement, and other limitations on the incurrence of subsidiary indebtedness, liens, mergers and certain other fundamental changes, investments and loans, acquisitions, transactions with affiliates, payments of dividends and other restricted payments and changes in our lines of business.
The Company is in compliance with its covenants at March 31, 2023 and expects to remain in compliance for the next twelve months.
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Supplemental Guarantor Financial Information
Viatris Inc. is the issuer of the Registered Upjohn Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc.
Following the Combination, Utah Acquisition Sub Inc. is the issuer of the Utah U.S. Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Viatris Inc. and Mylan II B.V.
Mylan Inc. is the issuer of the Mylan Inc. U.S. Dollar Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan II B.V., Viatris Inc. and Utah Acquisition Sub Inc.
The respective obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. as guarantors of the applicable series of Senior U.S. Dollar Notes are senior unsecured obligations of the applicable guarantor and rank pari passu in right of payment with all of such guarantor’s existing and future senior unsecured obligations that are not expressly subordinated to such guarantor’s guarantee of the applicable series of Senior U.S. Dollar Notes, rank senior in right of payment to any future obligations of such guarantor that are expressly subordinated to such guarantor’s guarantee of the applicable series of Senior U.S. Dollar Notes, and are effectively subordinated to such guarantor’s existing and future secured obligations to the extent of the value of the collateral securing such obligations. Such obligations are structurally subordinated to all of the existing and future liabilities, including trade payables, of the existing and future subsidiaries of such guarantor that do not guarantee the applicable series of Senior U.S. Dollar Notes.
The guarantees by Mylan Inc., Mylan II B.V. and Utah Acquisition Sub Inc. under the applicable series of Senior U.S. Dollar Notes will terminate under certain customary circumstances, each as described in the applicable indenture, including: (1) a sale or disposition of the applicable guarantor in a transaction that complies with the applicable indenture such that such guarantor ceases to be a subsidiary of the issuer of the applicable series of Senior U.S. Dollar Notes; (2) legal defeasance or covenant defeasance or if the issuer’s obligations under the applicable indenture are discharged; (3) with respect to the Utah U.S. Dollar Notes, the earlier to occur of (i) with respect to the guarantee provided by Mylan Inc., (x) the release of Utah Acquisition Sub Inc.’s guarantee under all applicable Mylan Inc. Debt (as defined in the applicable indenture) and (y) Mylan Inc. no longer having any obligations in respect of any Mylan Inc. Debt and (ii) with respect to the guarantee provided by Mylan II B.V., (x) the release of Mylan II B.V.’s guarantee under all applicable Triggering Indebtedness (as defined in the applicable indenture) and (y) the issuer and/or borrower of the applicable Triggering Indebtedness no longer having any obligations with respect to such Triggering Indebtedness; (4) with respect to the guarantees provided by Utah Acquisition Sub Inc. and Mylan II B.V. of the Mylan Inc. U.S. Dollar Notes, subject to certain exceptions set forth in the applicable indenture, such guarantor ceasing to be a guarantor or obligor in respect of any Triggering Indebtedness; and (5) with respect to the Registered Upjohn Notes, (a) upon the applicable guarantor no longer being an issuer or guarantor in respect of (i) Mylan Notes (as defined in the indenture governing the Registered Upjohn Notes) that have an aggregate principal amount in excess of $500.0 million or (ii) any Triggering Indebtedness; in each case, other than in respect of indebtedness or guarantees, as applicable, that are being concurrently released; or (b) upon receipt of the consent of holders of a majority of the aggregate principal amount of the outstanding notes of such series in accordance with the indenture governing the Registered Upjohn Notes.
The guarantee obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. under the Senior U.S. Dollar Notes are subject to certain limitations and terms similar to those applicable to other guarantees of similar instruments, including that (i) the guarantees are subject to fraudulent transfer and conveyance laws and (ii) each guarantee is limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the applicable guarantor without rendering the guarantee, as it relates to such guarantor, voidable under applicable fraudulent transfer and conveyance laws or similar laws affecting the rights of creditors generally.
The following table presents unaudited summarized financial information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V. on a combined basis as of and for the three months ended March 31, 2023 and as of and for the year ended December 31, 2022. All intercompany balances have been eliminated in consolidation. This unaudited combined summarized financial information is presented utilizing the equity method of accounting.
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| Combined Summarized Balance Sheet Information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V.
(In millions) | March 31, 2023 |  | December 31, 2022
ASSETS |  |  |
Current assets | $ | 389.1 |  |  | $ | 996.3 |
Non-current assets | 61,641.8 |  |  | 61,972.6 |
LIABILITIES AND EQUITY |  |  |
Current liabilities | 25,843.7 |  |  | 26,631.5 |
Non-current liabilities | 15,259.4 |  |  | 15,265.2 |

| Combined Summarized Income Statement Information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc. and Mylan II B.V.
(In millions) | Three Months Ended March 31, 2023 |  | Year Ended December 31, 2022
Revenues | $ | — |  |  | $ | — |
Gross profit | — |  |  | — |
Loss from operations | (212.9) |  |  | (1,132.4) |
Net earnings | 224.7 |  |  | 2,078.6 |

Other Commitments
The Company is involved in various disputes, governmental and/or regulatory inquiries, investigations and proceedings, tax proceedings and litigation matters, both in the U.S. and abroad, that arise from time to time, some of which could result in losses, including damages, fines and/or civil penalties, and/or criminal charges against the Company. These matters are often complex and have outcomes that are difficult to predict. We have approximately $200.9 million accrued for legal contingencies at March 31, 2023.
While the Company believes that it has meritorious defenses with respect to the claims asserted against it and the assumed legal matters referenced above, and intends to vigorously defend its position, the process of resolving these matters is inherently uncertain and may develop over a long period of time, and so it is not possible to predict the ultimate resolution of any such matter. It is possible that an unfavorable resolution of any of the ongoing matters could have a material effect on the Company’s business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.
In conjunction with the Combination, Viatris entered into a TSA with Pfizer pursuant to which each party will provide certain limited transition services to the other party generally for an initial period of 24 months from the closing date of the Combination. In addition to the monthly service fees under the TSA, Viatris agreed to reimburse Pfizer for fifty percent of the costs, up to the first $380 million incurred, to establish and wind down the TSA services. Viatris will be required to fully reimburse Pfizer for total costs in excess of $380 million. The Company incurred approximately $3.7 million related to this provision of the TSA during the three months ended March 31, 2023 and approximately $141.7 million during the period beginning on the closing date of the Combination and ended March 31, 2023. We expect to incur future costs related to the completion of the services. As of December 31, 2022, the Company has exited substantially all transition services with Pfizer.
In conjunction with the Biocon Biologics Transaction, Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the Company’s market risk, see “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in Viatris’ 2022 Form 10-K.
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ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2023. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
Management has not identified any changes in the Company’s internal control over financial reporting (“ICFR”) that occurred during the first quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding legal proceedings, refer to Note 18 Litigation, in the accompanying Notes to interim financial statements in this Form 10-Q.
ITEM 1A. RISK FACTORS
There have been no material changes in the Company’s risk factors from those disclosed in Viatris’ 2022 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Viatris Inc.
Issuer purchases of equity securities

Period |  | Total Number of Shares Purchased (a) (b) |  | Average Price Paid per Share (c) |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) (b) |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - January 31, 2023 |  | 9,509,707 |  |  | $ | 11.77 |  |  | 9,509,707 |  |  | $ | 888,085,194 |
February 1 - February 28, 2023 |  | 11,729,814 |  |  | 11.77 |  |  | 11,729,814 |  |  | 750,013,515 |
March 1 - March 31, 2023 |  | — |  |  | — |  |  | — |  |  | — |
Total |  | 21,239,521 |  |  | $ | 11.77 |  |  | 21,239,521 |  |  | $ | 750,013,515 |

____________
(a)Refer to Part I, Item 2. Management’s Discussion and Analysis of Financial Condition - Results of Operations and Results of Operations – Recent Developments” of this Form 10-Q for additional information regarding the Company’s authorized share repurchase program. During the three months ended March 31, 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of approximately $250 million under this program.
(b)The number of shares purchased is based on the purchase date and not the settlement date.
(c)Average price per share includes commissions.
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ITEM 6. EXHIBITS
10.1 | Offer Letter with Scott A. Smith, dated February 24, 2023, filed as Exhibit 10.1 to the Report on Form 8-K filed by Viatris Inc. with the SEC on February 27, 2023, and incorporated herein by reference.*
10.2 | Separation Agreement with Michael Goettler, dated February 24, 2023, filed as Exhibit 10.2 to the Report on Form 8-K filed by Viatris Inc. with the SEC on February 27, 2023, and incorporated herein by reference.*
10.3 | Form of Performance-Based Restricted Stock Unit Award Agreement under the Viatris Inc. 2020 Stock Incentive Plan for awards granted on or after March 3, 2023.*
10.4 | LIBOR Transition Amendment, dated as of April 28, 2023, to the Amended and Restated Revolving Credit Agreement, dated as of July 1, 2021, among Viatris, the guarantors from time to time party thereto, the lenders and issuing banks from time to time party thereto and Bank of America, N.A., as administrative agent.^
22 | List of subsidiary guarantors and issuers of guaranteed securities.
31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS | Inline XBRL Instance Document
101.SCH | Inline XBRL Taxonomy Extension Schema
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF | Inline XBRL Taxonomy Definition Linkbase
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase
104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101).
* | Denotes management contract or compensatory plan or arrangement.
^ | Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Viatris agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | Viatris Inc.
| By: | /s/ SCOTT A. SMITH
|  | Scott A. Smith
|  | Chief Executive Officer
|  | (Principal Executive Officer)

May 8, 2023

|  | /s/ SANJEEV NARULA
|  | Sanjeev Narula
|  | Chief Financial Officer
|  | (Principal Financial Officer)

May 8, 2023
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