Don't Buy Viatris And Organon Just Because Of The Dividends

RichVintage

Introduction

As my regular readers know, I was originally very positive about the prospects of Viatris Inc. (NASDAQ:VTRS), even after the announced sale of its Biosimilars division (see my February and May 2022 articles). However, my optimism

Figure 1: Organon’s [OGN] segment revenues and year-over-year growth (own work, based on the data found in the company’s 2022 Q3 earnings presentation)

Figure 2: Organon’s [OGN] product and subsegment revenues and year-over-year growth (own work, based on the data found in the company’s 2022 Q3 earnings presentation)

Figure 3: Viatris’ [VTRS] segment revenues and year-over-year growth (own work, based on the data found in the company’s 2022 10-Q3)

Figure 4: Comparison of Organon’s [OGN] and Viatris’ [VTRS] revenue by geography, including year-over-year growth rates (own work, based on the data found in the companies’ 2022 10-Q3s)

Figure 5: Comparison of Organon’s [OGN] and Viatris’ [VTRS] R&D expenses in terms of revenue (own work, based on the data found in the companies’ 2021 10-Ks and the 2022 10-Q3s)

Figure 6: Comparison of Organon’s [OGN] and Viatris’ [VTRS] revenue growth expectations (own work, based on analyst estimates as published on www.seekingalpha.com)

Figure 7: Viatris’ [VTRS] long-term debt maturity profile; $976 million “maturing” in 2023 represent a JPY term loan facility and a USD revolving facility, estimated with a current weighted average yield of 4.4% (own work, based on the company’s 2022 10-Q3)

Figure 8: Organon’s [OGN] long-term debt maturity profile (own work, based on the company’s 2022 10-Q3)

Figure 9: Multiples-based valuation of Organon & Co. [OGN] and Viatris Inc. [VTRS], compared to peers Teva Pharmaceutical Ltd [TEVA] and Novartis AG [NVS, NVSEF] (own work, based on Novartis 2022 annual report, Teva’s, Organon’s, and Viatris’ 2022 guidance and third-quarter reports)

Figure 10: Discounted cash flow sensitivity analyses for Organon & Co. [OGN] and Viatris Inc. [VTRS] (own work, based on management’s remarks during the Q3 2022 earnings calls, data from the 2022 10-Q3s, and own estimates)