Viatris stock popped Monday after the generic drugs behemoth announced it would divest most of its over-the-counter and women's health businesses.
Cooper Consumer Health, a leading European over-the-counter drugmaker and distributor, offered $2.17 billion to buy Viatris' over-the-counter business. The offer doesn't include the erectile dysfunction drug Viagra and the nasal allergy treatment Dymista in some markets.
Further, women's health company Theramex hopes to buy Viatris' Duphaston and Femoston. The former helps women whose bodies aren't making enough progesterone. Femoston helps treat the symptoms of menopause. Also, Iquest Enterprises plans to buy Viatris' active pharmaceutical ingredients business in India. Those two deals are worth up to $1.2 billion in proceeds.
Viatris has been working to divest a number of its businesses as part of a two-phase strategy unveiled last year. This brings the total gross proceeds to up to $6.94 billion.
On today's stock market, Viatris stock jumped 1.9% to 10.05.
Viatris Stock Rebounds After Sell-Off
UBS analyst Ashwani Verma says investors didn't expect Viatris to hit its goal of announcing its sell-off plans this year.
"Based on our prior discussions with Viatris investors, the bulk of the roughly 13% sell-off since the second-quarter update was because the buy-side had gradually come to the conclusion that the spinoffs proceeds/timeline may disappoint," Verma said in a report. "This, the announcement from Viatris (albeit right before the fourth quarter) comes as an unexpected positive surprise."
The news caused Viatris stock to surge within striking distance of its 200-day moving average, according to MarketSmith.com.
Viatris expects the deal for most of its over-the-counter drugs business to close in the second quarter of 2024. It expects the Duphaston/Femoston divestiture to close in the fourth quarter of this year, and for the active pharmaceutical ingredients transaction to finish up in the upcoming first quarter.
Paying Down Debt
The company noted its decision to retain the rights to Viagra, Dymista and several other over-the-counter products in certain markets is worth an estimated $1.6 billion in retained value. Now, Viatris is focused on using the proceeds to pay down debt before moving to its second phase of the strategic shift: the plan to "return to growth."
"Capital allocation focus continues to be on debt pay down, which is a slight contrast to some investors we talked to who assume Viatris may use spinoff proceeds primarily for share repurchases," Verma said.
He kept his neutral rating and 12 price target on Viatris stock.
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