Viatris' supply problems worsen. Why is its profit target rising?
Higher margins are lifting the drugmaker's earnings outlook. Its latest filing gives a less encouraging picture of the revenue lost to manufacturing disruptions.
Research by Ticker Byline shows that Viatris' estimated revenue hit from supply problems in the second half of 2026 has grown to about $200 million. In August, the company expected $100 million to $150 million.
The updated estimate combines about $100 million of disruption in the third quarter with another $100 million expected in the fourth. Yet Viatris raised the midpoint of its annual adjusted EBITDA target to $4.5 billion, from $4.4 billion.
A different mix of sales lifts profit
Third-quarter revenue was essentially flat at $3.75 billion. But the mix changed. Supply constraints reduced sales of lower-margin products in Europe and emerging markets, while higher-margin businesses in Greater China and North America strengthened.
Greater China's sales rose 14%. In North America, sales of estradiol transdermal products helped offset weakness elsewhere. Viatris attributes its margin improvement to that shift in the business.
Reported gross margin rose to 38.4%, from 36.5% a year earlier. Operating profit increased to $261.5 million, from $178.8 million.
Adjusted EBITDA also improved, to $1.20 billion from $1.15 billion. That measure removes interest, taxes, depreciation, amortization and specified items such as restructuring costs.
The company still reported a $325.3 million net loss. A larger tax provision, including the effect of losses in countries where little tax benefit could be recognized, outweighed the improvement in operating profit.
The factory recovery is still ahead
The problems include Nashik, an Indian plant where Viatris voluntarily suspended production in October to focus on remediation after an FDA inspection. A February fire and subsequent interruptions had already disrupted production earlier in the year.
Management expects production to restart in the first quarter of 2027. It also says the time needed to rebuild output means it does not expect to recover the lost 2026 revenue in 2027.
There is another weaker revenue signal: Viatris now expects about $450 million in new-product sales for 2026, at the bottom of its previous $450 million to $550 million range.
Cash generation improved in the quarter, with operating cash flow of $899.4 million, against $744.9 million a year earlier. The stronger operating profit and cash generation explain how the outlook can improve while the supply recovery remains unfinished.
Our Viatris company page tracks its results, cash flow, debt and the pending Pacira acquisition, which is excluded from the current 2026 guidance.