Is Viatris a good stock to buy for 2021?
The volatility that has rocked the markets in recent weeks has awakened some investors, pushing them to seek cheap stocks. Finding good, cheap stock can be difficult – but here are good business there.
A cheap stock to consider is the drug maker Viatris (NASDAQ: VTRS). It trades at a ridiculously low price-to-earnings ratio of 4.2 and recently announced its first quarterly results and dividend payout. Viatris looks incredibly attractive at these levels and her activity is starting to show signs of stability. Let me show you why you might want to consider buying Viatris shares this year.
Viatris was formed in November by the merger of pharmaceutical company Mylan and Pfizerthe Upjohn business unit, which manufactured non-patented generic drugs. Although Mylan has brought a catalog with some specialty drugs to the deal, the new company will largely produce generics and legacy brand drugs – those that are no longer patented, so they have generic competition, but have recognition. name sufficient for them to be able to compete well with their generic counterparts.
Viatris announced its first-ever quarter of earnings after the merger on May 10, and the report featured a number of takeaways that should be of great interest to shareholders and potential investors. Most important of these is that the company declared a quarterly dividend of $ 0.11 and set a benchmark for continuous dividend distribution in line with 25% of free cash flow. At the current share price, Viatris’ payout earns 2.87% – more than double the average return of 1.3% of the S&P 500.
Another promising sign for the future comes from the company’s debt reduction plan. Management intends to reduce its debt by $ 6.5 billion by 2023. The company currently has more than $ 24 billion in debt on the books. Viatris showed in the first quarter that he was a cash cow, generating $ 4.4 billion in revenue and nearly $ 800 million in free cash flow. If the company maintains this level of free cash flow throughout the year, bringing in around $ 3.2 billion, management can certainly meet its debt reduction targets by 2023.
Some of its most popular products include both generics and legacy brand name drugs. These include EpiPen and its generic counterpart (to treat anaphylaxis), Lyrica (for nerve pain), and Viagra (for erectile dysfunction). The demand for these incredibly popular products is not expected to decline over the next few years. The company also has a total of 30 drugs in its pipeline, of which 12 are in the process of being approved. Some notable biosimilars in this pipeline include analogues of AbbVieis Humira and AmgenEnbrel. Humira has been the world’s best-selling drug in recent years, and Viatris will likely be able to generate significant revenue by marketing its own biosimilar to treat a variety of indications.
Viatris’ new leadership includes executives from the Upjohn division of Mylan and Pfizer, which means the team has enormous experience in navigating the generic and traditional drug market. The company has a dominant market share in EpiPen and its generic counterpart, as well as Viagra – a lucrative position given that the global erectile dysfunction market is expected to reach $ 2.6 billion by 2026. Well Although it is a legacy branded drug that faces competition from generic alternatives, Viagra remains the most widely distributed drug for this disease and is expected to account for a 27% market share, bringing its projected sales to 700 million. of dollars by 2026, maintaining a greater market share of all generics that have been developed. far.
As mentioned earlier, the biosimilars for Humira and Enbrel are expected to be marketed here in the United States, and the company has in fact already launched a biosimilar for Humira in Canada. Humira generated nearly $ 1 billion in sales in Canada for the 12 months ending October 31 – a huge market in which Viatris could make sales.
One thing that tells us that the stock is cheap is its price / earnings ratio. Currently, Viatris is trading at a futures P / E of just 4.2, making it one of the cheapest stocks on the market today. The consensus among Wall Street analysts is that the stock will rise 50% over the next year. With demand for generics set to rise, investors with long-term horizons should take a close look at Viatris stock now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.