VTRS - NASDAQ

Good morning, and welcome to the Viatris Q3 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Bill Szablewski, Head of Capital Markets. Please go ahead.

Good morning, everyone. Welcome to our Q3 2025 earnings call. With us today is our CEO, Scott Smith; CFO, Doretta Mistras; Chief R&D Officer, Philippe Martin; and Chief Commercial Officer, Corinne Le Goff. During today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for 2025 and various strategic initiatives. These statements are subject to risks and uncertainties. We will also be referring to certain actual and projected non-GAAP financial measures. Please refer to today's slide presentation and our SEC filings for more information, including reconciliations of those non-GAAP measures to the most directly comparable GAAP measures. When discussing 2025 actual or reported results, we will be making certain comparisons to 2024 actual or reported results on a divestiture adjusted operational basis, which excludes the impact of foreign currency rates and also excludes the proportionate results from the divestitures that closed in 2024 from the 2024 period. We may refer to those as changes on an operational basis. When comparing our 2025 actual reported results to our expectations, we're making comparisons to our 2025 financial guidance. With that, I'll hand the call over to our CEO, Scott Smith.

Good morning, everyone. We delivered another strong quarter by focusing on our 2025 strategic priorities, driving strong commercial execution, advancing our pipeline, returning capital to shareholders through dividends and share repurchases, pursuing in-market business development opportunities and advancing our enterprise-wide strategic review to identify opportunities to deliver meaningful net cost savings, a portion of which we anticipate reinvesting in the business to fund future growth. Our fundamentals remain solid, giving us good momentum as we head into year-end, momentum we expect to carry into 2026. Before we dive into the details of the quarter, let me provide an update on our strategic review. For context, the work we've done over the past 5 years, strengthening our balance sheet, divesting noncore assets and investing in innovation has set the stage for the strategic review as a natural next step in our evolution. We've made significant progress since we announced the initiative in February. We continue to perform a detailed analysis of the totality of our business. As part of our analysis to date, we've identified areas for potential operating efficiencies, including our commercial sales and marketing model and product mix, our R&D, medical and regulatory activities, our sourcing, manufacturing and supply chain, including inventory optimization and how our corporate functions provide support. Looking to the future, we envision a company that delivers sustained profitable growth by focusing on 3 key areas: a global generics business that will continue to evolve towards more profitable, higher-margin complex products, an established brands business that will be strengthened by continuing to add brands that leverage our global capabilities, and an innovative brands business that will be expanded by building a portfolio of late-stage or in-market growth assets sourced both internally and externally. We anticipate being able to deliver meaningful net cost savings over a multiyear period while also being able to reinvest a portion of the savings back into the business to fund future growth opportunities. We look forward to sharing more details, including quantification of the net cost savings and reinvestment opportunities at our planned investor event in the first quarter of 2026. Now let me share a few highlights from the quarter. This quarter's commercial performance was strong across our portfolio, particularly in Europe, emerging markets and the Greater China region. We delivered 1% operational revenue growth, excluding Indore, in line with our expectations, reflecting continued execution across our businesses, primarily driven by the benefit from foreign exchange and supported by our strong operational performance, we are raising our full year guidance range across certain key financial metrics, including total revenues, adjusted EBITDA and adjusted EPS. At our Indore facility, our initial remediation activities are substantially complete. We recently met with the FDA to review progress and discuss potential timing for reinspection. While timing remains at the discretion of the agency, we have built and continue to build operational redundancies by requalifying other sites and adding third-party vendors for products originally manufactured at Indore. Importantly, we continue to make progress on advancing our pipeline. Here are some of the highlights. We are excited about our fast-acting meloxicam. The acute pain market in the U.S. is significant, and we believe we can offer a differentiated alternative for patients seeking non-opioid pain relief. We expect to submit our NDA by the end of the year and are already working on our go-to-market strategy. Our low-dose estrogen weekly patch is now under FDA review following the filing of our NDA late in Q3 with a decision expected in mid-2026 and a launch soon thereafter. For sotagliflozin, we've already made filings in multiple markets around the world and expect to file in more countries by the end of the year. For selatogrel and cenerimod, Phase III enrollment for both programs is progressing well. In addition, we've initiated a Phase III program investigating cenerimod for the treatment of lupus nephritis with enrollment of our first patient anticipated by the end of the year. We continue to view both selatogrel and cenerimod as transformational treatments with blockbuster potential and are beginning to plan for commercialization. We are excited about our recent acquisition of Aculys Pharma in Japan, adding 2 innovative CNS assets, pitolisant and spydia to our portfolio. This strengthens our presence in Japan, a strategically important market for us and leverages our CNS infrastructure and expertise. Business development and M&A remain key strategic levers to accelerate growth, enhance shareholder value and create meaningful impact for patients. Through regional business development, we continue to pursue opportunities to strengthen our generics and established brands portfolios while building our presence in innovative brands that can benefit from our global scale, capabilities and infrastructure. In parallel, we are evaluating targeted strategic M&A opportunities, particularly in the U.S., focused on commercial stage accretive transactions designed to expand our business and further enhance the company's long-term growth profile. We're balancing investment in growth with return of capital to shareholders through dividends and share repurchases. Year-to-date, we've returned more than $920 million to shareholders, including $500 million in share repurchases. This puts us firmly on track to return over $1 billion in capital for the year. Overall, we're very encouraged by the progress we're making, taking bold actions that are intended to strengthen our foundation, expand our capabilities and position Viatris for long-term profitable growth. We believe we're building a company that's more agile, more innovative and better aligned with the opportunities for tomorrow. Now I'll turn it over to Philippe.

Thank you, Scott. We've had another strong quarter progressing our entire R&D pipeline globally and securing product approval in key markets worldwide. Our late-stage programs are advancing at a very strong pace, beginning with our fast-acting meloxicam. Over the past 2 months, we've participated in the American Society of Anesthesiology and the PAINWeek Medical conferences, generating strong enthusiasm among the pain health care community on our Phase III data. Several important data points from our presentations and KOL discussion underscore the product's distinct clinical profile. First, its pharmacokinetic profile and the speed of onset. This is demonstrated by faster Tmax and higher Cmax compared with Mobic. Specifically, fast-acting meloxicam achieved a Tmax of approximately 45 minutes versus approximately 4 hours for Mobic. Second, its strong and sustained analgesic efficacy with statistically significant pain relief over 48 hours versus placebo, confirming durable pain control in both soft tissue and bony surgical models. In post-hoc analysis, fast-acting meloxicam showed greater overall pain relief over 48 hours and faster pain relief than its opioid comparator, tramadol, across both surgical models. And third, its opioid-sparing effect as demonstrated by a significant reduction in opioid use, and a significantly higher number of opioid-free patients compared to placebo, indicating significantly reduced reliance on opioids for pain management. Our goal, subject to FDA agreement, is to include a reduction in opioid use as part of the product label. We anticipate submitting an NDA by year-end through the 505(b)(2) pathway, bearing any unforeseen delays related to the U.S. government shutdown. Turning to MR-141 in presbyopia. We plan to submit an sNDA by year-end. For MR-142 in dim light disturbances, the second Phase III study is well on its way with full recruitment and top line results expected in the first half of 2026. Our NDA for our low-dose estrogen weekly patch for contraception was submitted in late Q3 ahead of the government shutdown. Approval is expected by mid-2026. In addition, our next-generation norelgestromin-only patch is currently in Phase III with results expected in 2027. We've also submitted additional regulatory application in recent months for sotagliflozin in Canada, Australia and New

Thank you, Philippe. Our portfolio strategy is taking shape, fueled by the positive pipeline momentum we have seen this year. Today, I'll highlight a few of the more significant near-term commercial opportunities. As we shared last quarter, we remain excited about our fast-acting meloxicam. The moderate to severe acute pain market is substantial, and there remains a clear unmet need for fast, sustained and meaningful non-opioid pain relief. Let me share more on the broad market opportunity and how it's shaping our commercial strategy. There are approximately 80 million acute pain cases per year in the U.S. And going forward, the incidence is expected to grow at a 2% CAGR due to an aging population and an increased number of surgeries and medical procedures. These patients are predominantly seen in outpatient and ambulatory surgical centers for procedures like gallbladder removal, joint replacements, hernia surgery or bunionectomy or in procedure-focused offices for cosmetic or dental surgeries. Now switching to the evolution of the treatment landscape. Opioids currently account for roughly half of all acute pain prescriptions despite the known risk of dependence and misuse. Tramadol remains one of the most prescribed opioids for acute pain. There is, therefore, a strong demand for safer alternatives, combining strong efficacy with an established safety profile. In fact, current treatment guidelines show a strong consensus to minimize opioid use and prioritize non-opioid multimodal pain management strategies that include acetaminophen and NSAIDs. NSAIDs make up a substantial proportion of the total acute pain prescription volume because of their low addiction risk, short-term tolerability and anti-inflammatory effects. We believe fast-acting oral meloxicam is well positioned as a differentiated option among currently available NSAIDs for moderate to severe acute pain. Since receiving the data in May, our teams have been working hard to further shape our go-to-market strategy. We are progressing well with launch planning, including branding, positioning, prescriber segmentation, channel strategy and pricing and payer dynamics. We are taking a targeted approach to market segmentation, focusing on settings where fast, effective alternatives to opioids are most needed. We plan to leverage our own specialty sales team and are exploring partnerships to expand reach across key prescriber segments, which will enable us to go to market more efficiently and cost effectively. We anticipate being in a ready position to launch pending the FDA review cycle. We are also very focused on launch preparations for our low-dose estrogen contraceptive patch. This weekly patch fills an important need for women seeking a lower dose estrogen option for contraception. It also offers advanced patch technology as demonstrated by potential best-in-class patch adhesion performance observed in our Phase III study. We expect this product will be another meaningful contributor and we are planning towards a launch in the U.S. in the second half of 2026. Outside the U.S., we have made major strides in building out our innovative brand portfolio in Japan with the acquisition of Aculys. The addition of Pitolisant and Spydia further expands our portfolio of innovative CNS products, which will be complemented by Effexor for generalized anxiety disorder. These innovative assets, plus the many others in our late-stage pipeline combined with the strength of our generics and established brands portfolios position us well to positively impact patients' lives and create value for the business. Now I'll turn it over to Doretta.

Thank you, Corinne, and good morning, everyone. I am pleased to report that we had another strong quarter, underscoring the continued performance of our broad global portfolio of generics and brands. My remarks this morning will focus on key highlights of our strong financial performance, significant free cash flow generation, capital allocation activities year-to-date and the outlook for the rest of this year. Focusing on our third quarter results, total revenues were $3.76 billion, which were down approximately 1% versus the prior year. Excluding the Indore impact, we delivered operational revenue growth of approximately 1% versus the prior year. In developed markets, net sales were down 5%, primarily driven by the Indore impact. Breaking the segment down further. In Europe, our business continues to deliver consistent and durable performance, growing approximately 1% this quarter. The generics business continues to perform solidly and was up 5% year-over-year. This was primarily driven by new product revenues in key markets such as France and Italy. And within our branded business, solid growth in EpiPen, Creon and our Thrombosis portfolio helped to partially absorb the anticipated competition on Dymista. As anticipated, our North America business decreased 12% versus the prior year, primarily as a result of the Indore impact and competition on certain generic products. However, we continue to see double-digit growth in certain products such as Breyna and Yupelri as well as benefits from new product revenues, such as iron sucrose. In emerging markets, net sales increased approximately 7% versus the prior year. This was primarily driven by continued strength in our established brands across key markets, including Turkey, Mexico and Emerging Asia. And the growth in our generics business was primarily driven by stabilization of supply for certain lower-margin ARV products. In Janz, net sales decreased approximately 9%. Results were primarily driven by expected impact from government price regulations as well as a change in reimbursement policy that impacted off-patent brands in Japan. We also saw competition on certain products in Australia. Lastly, we continue to see positive momentum in Greater China, where net sales exceeded expectations and grew 9%. This was primarily driven by our diversified commercial model and increased demand for our brands that are sensitive to proactive patient choice. Net sales again benefited from the timing of customer purchasing patterns, which we expect to moderate in the fourth quarter. Moving to the remainder of the P&L. Adjusted gross margin of 56% in the quarter was in line with our expectations. As anticipated, margins were impacted versus the prior year due to the Indore impact. Operating expenses were essentially flat versus prior year. This was as a result of increased R&D spending driven by accelerated enrollment in our selatogral and cenerimod clinical trial programs, which was offset by the continued benefit in SG&A from our 2025 cost savings initiatives. We continue to generate strong and durable free cash flow. This quarter, we generated $658 million of cash, which includes the impact of transaction-related costs. Excluding this impact, free cash flow would have been $728 million. Our significant free cash flow has enabled us to execute on our capital allocation plan. Since our Q2 call in August, we have repurchased an additional $150 million of shares, which brings our year-to-date total repurchases to $500 million, achieving the low end of our full year range. Including dividends paid, we have returned more than $920 million of capital this year to our shareholders, and we remain on track to deliver on our commitment of returning over $1 billion of capital this year. With regards to business development, the Aculys transaction highlights our ability to leverage our global infrastructure to strengthen our commercial portfolio in Japan through disciplined business development. The $35 million upfront payment is expected to be expensed as IP R&D in the fourth quarter. Now a few comments on our updated outlook and phasing for the remainder of the year. We are raising and narrowing our 2025 financial guidance ranges across certain metrics, primarily driven by foreign exchange as well as share repurchases completed year-to-date. Our outlook is supported by the continued strength of our underlying business performance. With respect to anticipated phasing in the fourth quarter relative to our third quarter results, total revenues are expected to be lower across all of our segments due to normal product seasonality, resulting in our third quarter revenues being the highest quarter of the year. Gross margins are expected to be stable, and SG&A is expected to increase due to investments in our pipeline and upcoming launches to drive future growth. Lastly, free cash flow is expected to step down due to the timing of interest payments and the normal phasing of capital expenditures. As we close out the year, we expect the underlying positive fundamentals of the business to continue. As normal course, we will provide our outlook for 2026 in the first quarter of next year, along with our Q4 and full year results. However, from where we sit today, there are several dynamics to consider as we think about next year. These include timing of approvals and uptake from recently launched products, competitive dynamics in North America and potential loss of exclusivity for Amitiza in Japan. Investments supporting our pipeline and launch preparedness to drive future growth and the implementation of our enterprise-wide strategic review. In summary, we remain encouraged by the underlying fundamentals of our global business and the continued execution of our disciplined and balanced capital allocation plan. As Scott mentioned, we plan on hosting an investor event during the first quarter of next year, where we expect to provide our strategic and financial outlook, an update on our pipeline and portfolio and details on our enterprise-wide strategic review. With that, I'll hand it back to the operator to begin the Q&A.

[Operator Instructions] And your first question comes from Les Sulewski with Truist.

A couple for me. So first, perhaps maybe give us an update, if you could, on the Indore resolution situation. And then Second, if you look at through the branded portfolio across the regions, specifically 2 products that stand out in 3Q, one being the uptick in Lipitor, are you able to capture some of the share from the recent generic recall? And then second, what's driving the uptick in EpiPen given the options patients now have with the nasal spray and then also some shortages across that board. And then third, are there any key Paragraph IV challenges that you're facing into next year?

Les, let me -- I'll answer the Indore question and then pass it on. So I have to say, we're very pleased with where we are from a remediation perspective. We're largely remediated at this point. We recently had a productive and open meeting with the FDA relative to not only the remediation process but reinspection. Timing of the reinspection is with the FDA. It's not under our control, likely they'll show up unannounced at some point in '26 and reinspect. But I think it's really important to know that we've built redundancies by qualifying other sites and adding third-party vendors to try and decouple revenues from products on the import alert list and the Indore reinspection because the timing is out of our control. So I think the Indore remediation is going very, very well. And we just -- as I said, just recently talked to the FDA and had a very constructive meeting. I'll pass it over to Doretta.

Great. Thanks. With respect to our branded regions. Number one, on Lipitor, that's really driven by the strength of our brand outside of the U.S., in particular, in China. We've talked about the strength of our portfolio there, especially in cardiovascular and all the work that we've done in terms of the channels that we operate, the strength of our brand has really continued to drive performance on Lipitor. With respect to EpiPen, we are, to your point, seeing solid performance in this year. I would say our share has remained relatively stable. It's around 24% to 25% in the market. But to call out a couple of areas where we're seeing some strength. Number one, we relaunched EpiPen in Canada. We -- with the shift of commercial rights from Pfizer back to us. And secondly, we're seeing strong growth in Europe, and that's really led to the strength in EpiPen.

We're going to the next question, I just wanted to reemphasize, not only do we have a stated performance Lipitor in China, but the China affiliate in general had very strong third quarter and has a very -- had strong so far year-to-date this year. So we're very pleased with our progress in China.

And your next question comes from Matt Dellatorre with Goldman Sachs.

Maybe on fast-acting meloxicam first, could you comment on any feedback thus far from the FDA regarding the potential for an opioid-sparing label. And how significant do you guys view that from an access and pricing perspective? And then could you comment on the partnership strategy to reach the broader market, including how do you guys think about the split in value between the channels that you will cover versus other segments that you might partner. And how much you structure a deal like that? And then maybe just quickly on capital allocation. Could you maybe speak to the key priorities next year? Scott, I know you mentioned U.S.-based BD. Just curious, would that be mostly midsized licensing deals? And how should we think about just kind of balance sheet capacity for those potential deals?

I'll kick it over to Philippe to talk a little bit about meloxicam and then I can finish up with not only where the partnership discussions are, but also capital allocation priorities for '26.

Thanks, Scott. Thanks, Matt, for the question. So on fast-acting meloxicam, opioid-sparing specifically to your question. We've designed the Phase III study in collaboration with the FDA and designed the study in order to be able to get opioid-sparing language in the label. As you know, the data that came out of the 2 Phase III studies in both models in terms of opioid-sparing is very strong. And so we feel very encouraged with our ability to get opioid-sparing language in the label. We have a pre-NDA meeting with the agency over the next few weeks where we'll be discussing this as part of the meeting. It's one of the topics we'll be discussing. But like I said, I think from a labeling standpoint, we've done everything that can be done with very strong data to be able to get opioid-sparing in the label.

In terms of meloxicam partner, you're a little bit ahead of me in terms of segmentation and who covers what. We're involved with some discussions with potential partners, and we're working through that and what that would look like. Those are all sort of individual discussions and the specifics would depend on what partner we land with if we do land with the partner there. So we're actively involved in exploring discussions there. We also feel completely good to take this ourselves and commercialize ourselves. We've got the right people. We've got great data, and we've got resources behind it to make a great launch. So we would only go into a partnership if we thought it was significantly additive to the overall value. And then in terms of our capital allocation priorities going to into '26, let me just -- there's a word that I try and use all the time here, and that's balanced, right? We're going to continue to be balanced in terms of our capital allocation. As I've talked about many times over a 3-, 5-year period, we're going to try and be 50-50 returning capital to shareholders, but also trying to build a portfolio of growth assets. And so we'll be involved in business development as well. I love the deal that we did with Aculys in Japan. Japan is a key strategic priority for us. We put a couple of innovative assets in there to launch in '26. And we're going to continue to look for things for assets that we could be good owners of. I would love to be able to find some in-market accretive U.S.-based innovative products to add to the portfolio. And we're working hard on it. And again, but we're -- overall, we're going to continue to be very balanced in terms of our capital allocation between return to shareholders and also doing business development. And it depends a little bit -- every year is going to be a little bit different. This is the year so far, we've leaned into share buybacks given the uncertainty in the environment, the share price and other things. And other years, we may lean into business development a little bit more, but we want to be able to do both return and also build growth assets to sit on top of the strong base business we have to really return to long-term profitable growth for the company.

And next question comes from Chris Schott with JPMorgan.

Just 2 for me. Maybe just coming back to the enterprise-wide strategic review. Just any more color you can provide on the quantum of expense reduction we should be thinking about here? And when you mentioned reinvestment, is that a majority of those savings, a small portion? Just any -- just kind of directional color of just how we should think about that flow through? I know we're going to get more color next year, but just anything you can provide today. And maybe, Scott, just building on the comments you just made about the balanced approach to capital deployment. You mentioned this year is more of a capital return year. And just when you look at kind of the range of BD opportunities out there, balancing the stock price, like should we think about '26 looking more like '25, where it is more kind of capital return? Or directionally, does '26 look more like that 50-50 balance that you're targeting over time?

Yes. Thanks, Chris. So in terms of quantum, I don't want to get into quantum of savings at this point in time. We will be very, very clear and transparent relative to the quantum of savings that we get from the enterprise-wide review when we get into Q1, either at the call or through an investor event, but we'll be very, very clear about that. We're working hard on that. We think the quantum of savings is going to be significant. We believe we're going to be able to deliver meaningful cost savings over a multiyear period. And so we expect it to be pretty significant. Right now, we're sort of focused on commercial sales, marketing model, product mix, R&D, medical and regulatory activities, sourcing, manufacturing, supply chain, inventory optimization, corporate support functions. So it's a large project. We're looking at the whole organization, and we expect to be able to deliver meaningful cost savings, and we'll get into the exact quantum of those as we as we get into Q1. And we won't only talk about the quantum, but we'll also talk about phasing. We'll also talk about the magnitude of reinvestment, et cetera, at that event, either with the call or in the investor event. I do not see reinvestment being the majority of savings. I think it will be -- certainly, the minority will be likely putting more into savings and dropping to the bottom line than reinvestment, but there will be some significant reinvestments as well. So this is not about redistributing as much, as it's about finding the savings and then making sure we're looking after the base business and looking after our future growth as well. The last question was balance. So what's '25 going to look like from -- '26, sorry, from a capital allocation perspective, we'll have to wait and see what that year looks like, what opportunities are there, where the stock is trading at. Again, I don't look at it on a yearly basis. I look at it sort of over a longer period, a 3- to 5-year period that we want to be very balanced in returning that capital allocation. As things evolve, again, as we get into guidance for '26, we may talk a little bit more about that. But again, I want to continue to be able to do both, return to shareholders, but also build a portfolio of assets that are going to fuel our growth in the future.

And your next question comes from [ Dennis Ding ] with Jefferies.

This is [ Li Wenwen ] for Dennis Ding. Our question is about meloxicam. What is your overall confidence in the self-ramp and peak sales potential? And if there's anything to be learned from competitor journavx [ slow ] launch?

Yes. So I think just let me comment and then maybe Philippe can talk a little bit about the data. But we're very excited about meloxicam. The combination of the data and the people we have on board, I think we can do a very significant launch here. Whether peak sales, $0.5 billion, I think that's in the right sort of range. But we'll be more clear about that again as we get into '26 and get ready for launch. We do not have a label on that yet. So part of that -- I think there's great potential here. We can be more specific what those peak sales look like once we understand what the label looks like once the full plans together. I will say we've got an excellent team on this right now. They've launched multiple blockbusters before. We feel very, very good not only about the data, but our ability to commercialize this asset. We're going to commercialize it as if it's a branded product, it's got -- we think there's significant exclusivity there. We're looking to expand that exclusivity. And we expect meloxicam to be a very meaningful contributor to our portfolio for the rest of this decade at a minimum and maybe longer than that. So we're very excited about it.

And your next question comes from Umer Raffat with Evercore ISI.

Congrats on the quarter. This is JP for Umer. A couple of questions on meloxicam and the presbyopia medicine. Meloxicam, as you finalize your planning, what kind of payer guidelines engagement are you thinking? Is it going to be a multimodal pain pathways? Or how does it work versus traditional retail channels. And on presbyopia, is this going to be more of a cash pay optometry play initially? Or do you see a path to broader reimbursement and physician adoption as the category matures?

Philippe. So let me start with meloxicam. I think what we've experienced both from, I think, a payer, but also from a KOL standpoint is the fact that this is the pain -- the acute pain market has moved to a multimodal approach where, generally speaking, patients are discharged with a couple of medications. And that we believe we'll be able with the data we have to leverage that trend within the market. So our data supports that positioning. And -- I'm not sure what I -- can't recall on the second question was.

Second question on presbyopia.

Prebyopia and payer channels and commercialization. So we'll hand that over to Doretta.

Yes. Thank you. And we're still working through both not only our presbyopia but also our dim light disturbance strategy as we get closer to commercialization. But taking a step back, we view this more as a portfolio approach. When you couple that with tyrvaya that's already in the market as well as ryzumvi, we have the opportunity to really create a portfolio of assets that tailor to the front of the eye. But we're ultimately still working through the commercialization strategy. Given the indication, it is natural to assume there will be a large cash pay component to it, but we'll be able to provide more details as we get closer to commercialization.

Yes. We're very pleased with the direction we're going with the Eye Care group. We've got some new leadership on that team. A couple of positive readouts, obviously, this year in presbyopia and dim light. And we'll see what those labels look like. But we're putting -- starting together a portfolio of assets in the eye care area and starting to get some critical mass in terms of that particular group.

And your next question comes from Ash Verma with UBS.

Congrats on all the progress. So maybe one for Scott. So for the strategic review, I know you don't want to comment on the quantum of savings. But just in terms of the order of priority here, is that the right way to think about how you spend it out as in thre's more potential for savings from commercial, followed by R&D and then COGS? And then secondly, for Doretta, so as we think about like the top line for 2026 versus 2025, can you talk about the pushes and pulls? I see at this guidance of '25 midpoint, you have $350 million of FX tailwind. So that laps next year? And then in terms of the new product contribution, do you think that you can deliver the sort of the [ reference ] you've been at the $450 million to $550 million.

Yes. So let me take the enterprise-wide strategic review, and then we'll pass it around the table here to answer your question. So Ash, thank you very much for the question. We're not trying to -- we're trying to be as open and honest and transparent as possible with the enterprise strategic review and where we are. We're not trying to be cute with it. The reason we're not giving a quantum is because it's a big project. It's a big company. We're looking at everything. We want to be able to not only identify it, but we want to be able to trace it back and lock it down with the individual groups that we're working with there so that we come with a number that's accurate, sustainable and durable, and we can hold on to that number over a number of years. So we're trying to make sure that not only do we identify things but we understand and map out the activities needed to be able to really realize those savings. In terms of the things that we're looking at, sales and marketing, R&D, operations, corporate support. I think probably the largest quantum can come from our sourcing, manufacturing, supply chain, inventory optimization. There's a significant amount that can come from corporate support as well. And some of the commercialization and the way that we're commercialized and the way that we need to not only sort of prepare for today and be able to continue to deliver today, but we want to be able to understand the functions that we need to be able to commercialize in the future. So we want to be fit for purpose for today and for tomorrow with this. It's not just about realizing cost savings. It's also about evolving our model to be more effective going forward as well. So we really look forward to being in a place to talk exactly about the quantum of exactly where it's coming from, what the phasing is by year, with the reinvestment opportunities on things, and we're going to be able to do that in Q1. But we're not trying to -- again, to be cute here. We're trying to be accurate. We're trying to be thoughtful, and we're trying to make sure that we give numbers that we can deliver on.

With respect to your question around 2026 revenue, without getting into specific guidance, our focus this year is really finishing the year strong. We're very happy with the momentum that we're seeing in the business. We remain on track to deliver the 2% to 3% operational revenue growth for the year, excluding Indore. And we expect the underlying positive fundamentals that we're seeing in the business to continue into 2026. And as I think about the pushes and pulls to your point, number one, continued performance in our commercial business, including Europe, China and emerging markets, it's also going to depend on the timing of approvals and uptake of recently launched products as well as the competitive dynamics in North America and the potential loss of exclusivity for amitiza in Japan. But as normal course, we will provide our outlook for 2026 in the first quarter of next year. With respect to your second question around new product revenue and how that ties into 2026. We've talked about the $450 million to $550 million without getting into specifics, we will provide that next year. We are also seeing positive momentum of our new product revenues going into 2026 just based on the number of opportunities not only that have gotten approved like iron sucrose but the ones that are currently under regulatory review, including octreotide. And so we will provide more information next year when we provide our full year.

And I feel -- personally, I feel very good about '26 and the new product revenue. A lot of the approvals this year were back ended in the back half of the year. We've got some more approvals to come. We've got a lot of launches coming in '26 as I went through earlier, that are going to be catalysts. So I feel very, very good about where our new product number is going to be for '26.

And your next question comes from David Amsellem with Piper Sandler.

So just some pipeline questions, brand pipeline questions. So just back to presbyopia, can you talk to how you see differentiation versus the other modalities that have come on the market. So that's number one. Number two, on cenerimod. Just wanted to get more insight into your thought process regarding running the study now in lupus nephritis. Is that informed by any additional analyses of earlier data? Or is it something of potentially a hedge to the extent SLE isn't successful? Just wanted to get your thought process there. And then lastly, on the rapid acting meloxicam, can you just remind us how you're thinking of your IP/exclusivity runway for that product?

So let me hand it to Philippe for presbyopia and cenerimod.

Yes. So I think for presbyopia in terms of differentiation versus other mechanism of action. I think the miotics in general, do stimulate the ciliary muscle, and that leads to a number of potential issues, including risk of retinal tear or detachment, and a reduction in vision in dim and dark environment, which we certainly don't see with our drug. We actually see the reverse. So we think that from a benefit risk profile, our drug is differentiated. It is both effective and safe. So that's, I think, where we can see the most differentiation from MR-141. The second question about cenerimod. Cenerimod, if you look at the Phase II data, you'll see that cenerimod tends to work better in more severe patients, patients that tend to look like lupus nephritis patients. And so on top of it, the mechanism of action applies to both SLE and lupus nephritis. So I think it's just a natural evolution of the asset leveraging the opportunity we have with the S1P mechanism of action that is pretty broad and can be applied to a number of autoimmune disease, lupus nephritis just makes sense based on the data we have. And like I said, the mechanism of action. So it's -- we're not hedging anything at all. We're just getting -- expanding our opportunity with cenerimod.

I just want to reemphasize the last part that Philippe said there, we are not in any way hedging the SLE trial with a lupus nephritis. We feel very, very good about SLE. We feel good about the molecule. We see an opportunity, as Philippe said, to expand. So we're going to go ahead and start that study and start dosing patients now. So in no way is that a hedge, I think more than anything shows confidence that we have in the molecule going forward. Lastly, I think your third -- your last question was IP around meloxicam. We see right now based on -- we see exclusivity in the 4- to 5-year range right now based on what we have, but we're very actively working on expanding that IP suite to be able to extend that exclusivity very significantly. Again, I sort of look at it as being a very meaningful contributor to the portfolio for this whole decade. And hopefully, we can expand beyond that. So a very important molecule for us. We're working very hard to expand our IP network there and also obviously expand the exclusivity that we have with the molecule.

And your next question comes from Jason Gerberry with Bank of America.

A couple for me. A lot of my questions have been answered. But just on the enterprise review and just why not an update today versus giving the update on 1Q '26. Is it that effectively, those efforts are still ongoing or that you need to assess maybe some of the cost of commercial buildouts that need to be offset? Or is it just wanting to have a forum next year that you could really get into the details with investors in 3Q is just not the best forum for that? So that's my first question. And then just as a follow-up on Indore next year, in a scenario where, I guess, the ban isn't lifted, do the price penalties, which I think were $100 million, did they recur in that scenario? Or are they nonrecurring? I just wanted to understand that dynamic a little bit better.

So I'll take the enterprise-wide review question and then kick the Indore over to Doretta to answer for us. She's very deep on Indore and what '26 looks like for that. It's not that we're holding things back. If we were ready to go with the enterprise-wide review, we would certainly give it to you guys right now, we'd be very clear. It's a big company. We're operating in 165 countries. We're looking at everything, commercial, marketing, product mix, R&D, medical, regulatory, sourcing, manufacturing, supply chain, we're looking at it all. It's a very large and complex project that we're engaged in. It's absolutely the right time for us to be doing this now, right? The work we've done over the last 5 years, strengthening the balance sheet, paying down debt, divesting noncore assets, investing in innovation. It's just the right time for us to be doing it. We initiated this project sort of, I would say, late in Q1 of this year. And by the end of the year, we'll have a very good handle on it. And again, to me, it's not just about identifying where the cost savings might be. It's mapping those back to the organizations that are going to give, putting the action plans in place, being credible in terms of living with the number that we give you, and we want to be able to talk not only about the effect of the strategic review in '26 but also '27 and '28. The reason we're doing it then, not now is about accuracy. It's about us having numbers that we can live with. It's about us being transparent and believable. It's got nothing to do with holding it back, so we have something to talk about next year. If it was available, we get it to you, but it's a big project. And we want to be clear, transparent and credible when we put those numbers out, and we want to make sure they're mapped back in the organization. So we're holding ourselves accountable to delivering on those numbers.

With respect to your question specifically around penalties, [ Chris. ] So the $100 million incorporates both penalties and supply disruptions a little over, I would say, 50% specifically relates to penalties. Those we do not expect to even independent of Indore, those will not materialize. We don't expect them to materialize again next year. However, I do also would comment that we've been working in the background, not only to remediate Indore, but also to create redundancies within our network and our third parties in order to reestablish supply outside of Indore. And we do expect, regardless of the impact to see some stabilization of that as we move into next year.

This concludes our question-and-answer session. I would like to turn the conference back over to Scott Smith, CEO, for any closing remarks.

So first of all, thank you, everybody, on the call for your thoughtful detailed questions. Secondly, some closing remarks here, '25 has been -- is proving to be a really pivotal year for us, one where we're delivering results today while building a stronger, leaner, more innovative Viatris for tomorrow. I'd like to send a sincere thank you to the more than 30,000 employees of Viatris. A lot of good and hard work has been done to get us to this place. We're moving forward with confidence and excitement for the future. We see sustained profitable growth ahead and are actively executing on all key strategic priorities. I believe we are very well positioned to continue to deliver strong results and significant value for our shareholders. Thank you for listening.