Viatris Inc. announced additional details of its previously disclosed multi-year global restructuring initiative. The restructuring initiative is part of the company’s previously announced roadmap to maximize long-term value creation and is intended to ensure the new company is optimally structured to sustainably achieve its bold mission while also delivering on its financial commitments.
Viatris’ restructuring initiative incorporates and expands on the restructuring program announced by Mylan earlier this year as part of its business transformation efforts. Viatris’ initiative is intended to reduce the company’s cost base by at least $1 billion by the end of 2024 or sooner, with a significant portion of the reduction expected to be achieved within the first two years.
The company expects to optimize its commercial capabilities and enabling functions, and close, downsize or divest up to 15 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. As a result, Viatris expects that up to 20% of its global workforce of approximately 45,000 may be impacted upon completion of the restructuring initiative. The company will maintain an extensive overall employee base and global manufacturing network that aligns with its go-forward operations.
Initial Facility Impacts
Viatris is also announcing today five of the sites that will be impacted:
- Its oral solid dose manufacturing facilities in Morgantown, West Virginia; Baldoyle, Ireland and Caguas, Puerto Rico; and
- Its Unit 11 and Unit 12 active pharmaceutical ingredient (API) manufacturing facilities in India.
In addition, the divestiture of the company’s injectables manufacturing site in Poland was recently completed.
The workforce reductions at the impacted manufacturing sites announced today are expected to occur in phases over the next few years.
Wherever feasible, Viatris will seek to find potential buyers for its facilities in order to preserve as many jobs as possible and will work with impacted communities to identify appropriate potential alternatives.
Any workforce actions the company takes as part of this restructuring initiative will be implemented in a way that is consistent with its long-standing commitment to treating employees fairly and with respect. Viatris is exceptionally grateful for the consistent dedication of its employees around the globe.
The company is also committed to ensuring supply continuity so that patients’ needs for critical medicines are met. Supply continuity will be achieved, in some cases, within the company’s network.
Viatris CEO Michael Goettler said, “Viatris has a tremendous opportunity to impact healthcare in a sustainable way through a focus on access and empowering patients worldwide to live healthier at every stage of life. The actions we are announcing today are consistent with our commitment to optimally design our new company to operate efficiently. This initiative is part of Viatris’ roadmap to ensure we can maximize long-term value creation for shareholders and for all stakeholders, including the patients and customers we serve.”
Viatris president Rajiv Malik said, “After more than a decade of building a robust global platform, today we are taking the natural next step as we shape a new company that we believe can meet the needs of patients and customers in this evolving healthcare landscape. As we do so, we are intently focused on ensuring supply continuity within the markets we serve, which includes continuing our ongoing engagement with health authorities and customers to ensure patients’ needs are met.”
Viatris chief financial officer Sanjeev Narula said, “Today’s announcement is a significant next step in ensuring Viatris meets the financial commitments it has made to shareholders and other key stakeholders. The company is currently in the process of defining the remaining parameters of this global restructuring initiative. We expect to continue to provide further details as they are finalized. At our Investor Day on March 1, 2021, we will review our roadmap on how we intend to deliver on our stated commitments, maximize value creation, and generate strong and accelerating free cash flows while positioning Viatris for a sustainable future.”
For the committed restructuring actions related to the five impacted sites announced today, the company expects to incur total pre-tax charges ranging between $500 million and $600 million. Such charges are expected to include between $225 million and $275 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges, including inventory write-offs. The remaining estimated cash costs of between $275 million and $325 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 decommissioning costs. In addition, management believes the potential annual savings related to these committed restructuring activities to be between $250 million and $300 million once fully implemented, with most of these savings expected to improve operating cash flow.