VTRS - Viatris Inc. (VTRS) Presents at J.P. Morgan 42nd Annual Healthcare Conference (Transcript)
2024-01-10 18:50:01 ET
Viatris Inc. (VTRS)
J.P. Morgan 42nd Annual Healthcare Conference
January 10, 2024 01:30 PM ET
Company Participants
Scott A. Smith - CEO
Rajiv Malik - President
Sanjeev Narula - CFO
Conference Call Participants
Chris Schott - J.P. Morgan
Presentation
Chris Schott
Good morning, everybody. I'm Chris Schott at J.P. Morgan. And it's my pleasure to be hosting a fireside chat today with Viatris. From the company, we're going to have a quick presentation from CEO, Scott Smith and we're going to open up to a Q&A session with the broader management team. So with that, Happy New Year, everybody and Scott, thanks for joining us.
Scott A. Smith
Thank you, Chris. And I’m just going to make a couple of short remarks here in a couple of quick slides, and the bulk of the presentation is going to be Q&A. I just want to show forward-looking statement. Obviously, we're going to make some forward-looking statements during the course of this presentation. And then -- so just good morning to everybody here and everybody who's joining via the webcast.
2013 was an outstanding year at Viatris. We integrated and simplified the company, we stabilize the base business, and have seen two consecutive quarters of revenue growth, organic revenue growth, we've delivered on our pipeline, and we execute it on a capital allocation framework, maintaining our investment grade rating, and returning capital by quarterly dividends and share buybacks.
And with the completion of our announced divestitures, we will have delivered on all our Phase 1 commitments. The resulting company, as we sit here today, is a large global diversified company with a broad product mix and broad geographic reach across the globe, and an ability to generate solid and sustainable cash flows.
Since the completion of the merger 3 years ago, we have generated $7.2 billion in free cash flow, we paid down $6.6 billion in debt and returned $1.8 billion in capital to shareholders. Importantly, in 2023, we supplied medicines to approximately a billion patients worldwide. And just a comment on that, just a remarkable figure, I think for me, it really is strikes me and what an opportunity for me and the 37,000 employees of Viatris to affect human health care as we move into 2024 and beyond.
Now moving into Phase 2 of our strategic plan, we're very well-positioned to unlock shareholder value. As I mentioned before, we've simplified and stabilized our base business, and we're moved to organic revenue growth. We plan to further improve on our target leverage ratio and we have in line of sight, our gross leverage target.
Our plan will return approximately 50% of our free cash flow to shareholders through quarterly dividends and share buybacks. And with the other 50% we plan on investing in assets and businesses that will drive future revenue growth. I believe this combination will position us to be a strong adjusted earnings per share growth story in the future.
In terms of business development activity, we plan to engage in all manners of developing the portfolio. Importantly, licensing, strategic arrangements, partnerships, and also M&A, licensing, strategic arrangements, partnerships, and also M&A. Focusing on the innovative products, we are going to focus our business development activities on innovative products with durable and predictable revenue streams.
There's four main areas we see for investment as we move forward relative to our business development activities. We will continue to invest in organic growth that fuels our base business. We will invest regionally or country specific opportunities to take advantage of our strong global operations. We will continue to invest to develop the three core areas that we have previously identified, ophthalmology, dermatology and GI. But we're also going to be opportunistic and seeking out assets that fit our company, and can help us significantly grow revenue in the future.
So that's just a little opening feel for the company in a few words. And I'll turn it over to Chris for Q&A for the three of us.
Question-and-Answer Session
Q - Chris Schott
Great. I guess the first question for me, Scott would be you've got the divestitures now behind you, you've had a bit more time under your belt as CEO. So what are you most focused on for Viatris as we think about 2024, and as we think about even the next few years, and I guess you may just similar with that. What do you see as the biggest opportunities for the company going forward?
Scott A. Smith
So I wouldn't say that we have the divestitures behind this. Either announced we need to work through that and close them and they'll continue to close as we get through to sort of the end of the first half this year. Once we get those divestitures we'll be focusing on paying down our debt to get to that target ratio. And after that, we're going to execute our strategic plan, right. And our capital allocation plan, approximately over the next 3 to 5 years 50% of that free cash flow, which at a minimum should be in the $2.3 billion range.
50% return to shareholders through share buybacks, which we're going to try and be increasingly aggressive around as move in '24 and '25, the dividend, of course, and then for business development. And as I mentioned, I see, business development is far more than just binary M&A. I think licensing, partnering, strategic arrangements, research agreements and things like that are very, very important to our future. So I see a fulsome approach to business development and building the portfolio long-term.
And I think, for me, the base of the company is so strong. We've integrated, we've streamlined, we're now moving and we've seen the last couple of quarters real organic revenue growth. And that solid base of the business allows us to do the other things, but we're going to execute our capital allocation plan as laid out, and we're going to build the company and the future revenue streams of the company through business development.
Chris Schott
Great. On that 50%, business development, 50% capital return algorithm, I guess what the questions we get is, should we think about that as a consistent number, year to year? Or should we think about that as kind of an average over, let's say, a 3 or 5-year period of time?
Scott A. Smith
Yes, I think it will average out over a 3 to 5 year period of time, any one here, we expect to do both, right. We expect to be returned to shareholders and we expect to be doing some business development, whether that's 50-50 in any specific year, it's hard to say, it depends on the environment, we want to be opportunistic, and pursuing assets when they're available at the right time. And we want to be, aggressive in buying back shares at times that are advantageous to us. So you don't want to be too prescriptive to do that. You need to be to be fluid to be able to take advantage of the business conditions ahead of you. But certainly over the next 3 to 5 years, I'd expect sort of half and half as we've laid out.
Chris Schott
Great. I guess the question, I get a lot and I just I think about it your stock prices? Fairly. It's an expensive multiple, why not focus a lot of the cash on repo, just given It seems like you're talking about a base business that's stable, you've got good cash flows, like why not just return that capital? And especially like, how do you feel about the returns on just your own stock versus some of these external deals
Scott A. Smith
During the course of 2023, we did purchase significant stock back $50 million worth of shares. I think we want to be more aggressive and share buybacks as we get in '24 and '25, given the cash flow that we see getting, given the fact that we see getting to the appropriate leverage ratio. And so I think we're going to be more aggressive doing that for sure.
Chris Schott
Excellent. In terms of areas for business development, I think you've mentioned ophthalmology, dermatology, GI as kind of the big three, where of those three, do you see the most opportunity for Viatris?
Scott A. Smith
So that's hard for me to answer directly, right. There's different types of opportunities in those three buckets. I wouldn't say that one has way more opportunities than the other. I think part of the reason that we were initially focused on those three areas, is we saw a lot of opportunity in each of the three areas. Again, there tends to be different types. It evolves over time, right, companies become more viable in terms of business development, or transaction over time and less. So survival in terms of business development, or transaction over time and less. So it's a very dynamic situation. But we see all three of those therapeutic areas, I think, being very viable in terms of our ability to partner, to license to acquire assets.
Chris Schott
And again, in your time as CEO, is there any interest in looking at assets outside of those verticals and expanding the lens a little bit?
Scott A. Smith
Absolutely. Right. I think, we've identified three areas that we thought fit us very well. I think we want to be a little bit agnostic. The core principle being here, can we find assets with significant revenue growth, that we can leverage this base that we build globally as a company, and really accelerator inflict revenue in a way better than the possession company could, right? So, certainly I think we're not just going to look in those areas, we're going to look for impactful assets. There are -- when I take a look at the company and what the company is, I think there are some areas which are a little too far afield to do. I don't see any real benefit. I don't see us moving into cellular immunotherapy, certainly, even though given my background, I've got significant oncology background, I don't see a lot of oncology assets coming in, but certainly going into places like neurology or immunology places, again, that I have, significant development, commercial experience, if the right assets are there, definitely would definitely be open for us.
Chris Schott
Okay, great. As I think about geographies, is there a bias of U.S versus ex U.S or anything you'd comment on that front?
Scott A. Smith
So I would say no bias. There are four kinds of opportunities that you see out there from a geographic perspective. You see some very country specific opportunities, right. There's a product available for Japan and Japan only. We want to do some of that as well. We've got some very strong operating units all around the globe. And we may want to do some of that type of business development shore up some of the individual countries.
You see sort of ex U.S deals right? Companies that have, and I know this story very well from my history and biotech. I think you see companies that can have line of sight on being able to develop, get a registration and commercialize in the U.S, but don't really understand or have the resources to be able to do it outside of the U.S. So certainly there ex U.S assets that we would pursue as well. We've got strong infrastructure, from an ex U.S perspective, about 75% of our revenues are outside of the United States. So those are assets, that I think we'd be very, very interested in to leverage the strong international base that we have. 165 countries we're operating in, we've got 4,400 products, I mean, it's a big diverse company.
You also see companies that have acquired the rights to a product for the U.S only. So you see some U.S only opportunities out there in the biotech world of people who have licensed something from Europe or somewhere else. So there's those opportunities, we'd be interested in those. And then, of course, sort of the gold standard, the best possible outcome or global opportunities, right, that you see worldwide.
And so we'd be interested in any of any or all of those given sort of the diversity, the strength of the company. And similar to therapeutic areas, I think we want to be a little bit agnostic to that, open our minds to doing any of it. It's where can we find impactful assets that can help drive revenue growth, that sort of we can leverage the strong organization that we have.
Chris Schott
Yes. There's an issue in the comments you talked about partnerships, maybe less about augmenting just the binary M&A. So I think that's one of the -- when we think about capital deployment, historically, we thought about Viatris buying assets that just outright. Just how much of an opportunity is there and how big of a piece of your BD strategy is, some of the things you just mentioned of finding somebody to get U.S rights that maybe you can't commercialized globally, things like that?
Scott A. Smith
In my personal history with Celgene, with [indiscernible], with other biotech companies and before that, I don't know the number of deals I've been involved with either essentially, or roughly maybe 100.
Chris Schott
Okay.
Scott A. Smith
I would say 90% of those would be partnerships, licenses, other things. 5% would be M&A, and 5% would be something else. And as I've made my way around this conference, and looked at other companies that are highly, highly successful, including a meeting I was at and saw [indiscernible] other day, I think that's a really, really viable strategy, right? I mean, the combination of investing in your own and organic programs, which we need to do, finding partnerships and sprinkling in occasionally some M&A, discipline M&A, I think is the way to build a portfolio. But I think if at the end of 5 years, you look at the business development we've done, I think the majority of it would be licensing partnership, that sort of thing.
Chris Schott
Can [indiscernible]. In terms of how much of that work is something Viatris has been working on for a long period of time? Or is this a newer piece of the strategy, I think the kind of broader partnership lens, I guess?
Scott A. Smith
So I'm just going to speak to my experience in that, almost year that I've been CEO. You come into an organization like this, it's a big complex organization, I wanted to learn it, I wanted to understand the geography, I want to understand the people, the business dynamic. So I spent some time doing that. We wanted to sort of get line of sight on are we going to be able to do these divestitures? And are we going to get sort of which the divestitures went by the way, [indiscernible] very well, we were very pleased with the outcome. We got what we were expecting for these assets, which are very well performing assets. But we want to have line of sight of are these going to get done? And when are they going to get done? And why don't we get the proceeds, so that we can get to our leverage ratio that we -- target leverage ratio, and then really move into BD.
So I would say, it became apparent to me, talking with these two extensively, and understanding things. It became apparent to me last summer, that we were going to be able to do all those things, that these assets were going to transact out of the company, that we were going to be able to do that at the valuations that we were looking at, and they were happened during the course of '23. So at that point, I think we became more aggressive and looking at opportunities. I will say, though, the vast majority of the business development activities coming is inbound to me …
Chris Schott
Okay.
Scott A. Smith
… based on my past -- Celgene, my past and biotech and other things. Certainly there are and it's been a little bit of a capital starved world in the biotech world. So there's been very significant outreach coming to me and based on the strength of the company that we built and the transparency that we have right now around wanting to license and partner, do real business development and develop the portfolio,
Chris Schott
Great. Great. Maybe pivoting a little bit 2024, I know you're not going to give guidance today. But just the biggest swing factors we should keep in mind for this year, there's obviously a piece of EBITDA coming out associated with the divestitures, but just other factors we should be keeping in mind for the year?
Scott A. Smith
So I think the base of this from my perspective, and maybe Rajiv and Sanjeev can comment as well, very solid year in '23, right. Obviously, we -- it's a diverse company. I don't know exactly where we finalize and land in '23, that work still being done. 4,400 products, 165 countries, right. But -- so what was clear to me, it was a very strong year. We move to organic revenue growth. We would expect that to continue in '24. If you're looking to figure out EBITDA and other things by taking a look at what happened in '23 and removing some of the things that we've divested, I think you sort of roughly getting to that point. I don't know if you want to be more specific and comment on that.
Rajiv Malik
So Chris, let me -- so Scott talked about the swing factor. So obviously, solid based business that will continue. So then you have obviously the new product launches, that we've kind of provided a range of like 450 to 550. And I'm very excited about next year, particularly in the U.S. We should expect some kind of organic growth and divestitures adjusted basis on that. So I think that will continue. I think the most important part that we're going to kind of talk about it isn't it, how do we provide guidance to that so people understand that because of the divestiture you talked about.
So the way we are thinking about right now is we'll provide guidance on an all in basis so people can do a comparison to '23. So you can have that because all these businesses are by and large still with us because they will be sold during the year, we will lose, we will also provide some kind of framework, a guidance of an post divestiture basis, what does the business look like, right? It's going to be choppy here. Because as you divest, the revenues will go away. And we will provide transparency like we did in case of biosimilar when that is happening, and what is the impact on revenue and EBITDA and free cash flow.
So I think we'll provide that so that people can see what's the base business, what happens at the divestitures both on the top line and the EBITDA and what happens after that so people can look at that. I think the other thing that is important from -- for a purpose of understanding is to what Scott talked about it, because we will be aggressively buying back shares, we will also provide guidance on the adjusted EPS basis.
Chris Schott
Okay, great.
Rajiv Malik
From next year on.
Chris Schott
So it sounds like you are giving us a framework that we can center work with.
Rajiv Malik
Yes, exactly. Right.
Chris Schott
And I guess on that maybe that before we think about the top line and EBITDA impact from the divestitures, is there a reason to think that there would be big deviations in terms of performance relative to what we're seeing in '23 or this '23 good partners for the business?
Rajiv Malik
You should not. It's very steady from what we've been talking about with that range.
Scott A. Smith
We should be delivering on what we’ve been talking.
Rajiv Malik
Yes, it should be in the range.
Scott A. Smith
Okay. I think it's important as well to remember that, we have this solid base of business, we've got revenue growth in the 1% to 2% that we can see in the future. We're putting $400 million to $600 million in new products in every year. And so, it's a very strong solid -- fundamentally solid company at this point in time.
Chris Schott
Great. When I look beyond 2024, I think one of the question -- things I'm struggling was how to think about the margin progression of the business. So can you just elaborate on, is there leverage in the P&L in this business over time? And so can you just elaborate on? Is there leverage in the P&L in this business over time? And what is it going to take to see that leverage play through?
Scott A. Smith
Yes, so Chris, starting with gross margins, you've seen like we have a very strong gross margin performance, you saw that three, three quarters this year and then last couple of years very strong gross margin. And that is obviously a function of product mix that we have and obviously, the new product launches. So I expect the gross margin to be stable as we go forward [indiscernible]. The gross margin coming from new product tend to be higher than the company average.
The other thing that is going to help us little bit is the gross margin from the divested businesses is a little bit less than the company average. That's probably going to help. As we go-forward, we obviously continue to invest in our business like we did that in [indiscernible]. This year, we'll continue with the DTC that we have, and the R&D pipeline that we expect to go there in next year onwards. So I expect our EBITDA to be stable, Chris from that perspective. But the important thing to keep in mind again, because the focuses of the company in Phase 2 is going to be on shared buyback, we expect over a period of time to be showing growth and adjusted EPS business.
Chris Schott
Yes, the EPS [indiscernible]. Excellent.
Sanjeev Narula
Just a quick comment, I think, longer term looking at margins, right, the businesses that we're looking to invest in and bringing in licensed partner, generally, specialists [indiscernible] protected, longer, pretty more predictable revenue streams, innovative products, with a different margin profile than the business currently, so that could provide some tailwind to where we're going from a margin perspective as well.
Chris Schott
Great. Maybe jumping into the business units, maybe first starting on China. I would just love to get your sense of just kind of more broadly, how do you see the China business kind of evolving over the next few years for Viatris?
Sanjeev Narula
Chris, China has been for us has been performing very well and better than our expectations. We have managed a policy framework that tightening up the VVP [ph] or 95% businesses already gone through the VVP. URP is expanding, but at the same time this is all on the reimbursement bucket, which is the hospitals. And we have been able to successfully and continue to move the business to the retail as well as the private hospitals. So we see this year, of course, [indiscernible] pretty well and we see businesses continue to perform well, while we are bringing the new product. So for us, this anticorruption campaign lived through that. We have not seen much impact on that. We feel -- we seem very confident about continuing to perform the way we have performed in the last 3 years on China.
Chris Schott
Okay. So in terms of growth profile going forward, this is -- do you view this as a growth business for the company, is that fair to say?
Sanjeev Narula
As we bring in the pipeline, and we add on to this product here, definitely, we are looking into this market becoming one of the growth market for our business. And I know there's a lot of worry about business in China and some of the macroeconomic and policy issues that are going on in China, delivering health care in China is from a government perspective is very complex, right? It's a massive undertaking. And I think for us, if we are really going to be a diverse global company with that kind of scale, and that kind of reach, China needs to be very important part of our strategy going forward. We don't want to run away from it. We want to understand the changes, we want to make sure that we operate in the environment the best way possible. But we see China being a very important part of our strategy globally going forward.
Chris Schott
Great. Just pivoting over the [indiscernible] region is one where I think we've been seeing some declines in the business. Maybe similar kind of commentary. How do we think of what's been happening in that that part of the portfolio? And what's a way to think about that going forward?
Scott A. Smith
I guess the only business in our -- only geography in our business, which because of the regulated reasons, regulatory reasons, we have that decline 4% or 5% decline, which we have taken into the computation when we calculate, okay, this business [indiscernible] set up for 2%, 3% growth. Yes, but it's a little bit we are trying to work feverishly to add more products in that pipeline to offset that erosion.
Chris Schott
Okay. So that -- for that business stabilize over time, it's more about new products coming in. Is that the way and what's a timeline to think about that as?
Scott A. Smith
I think that will be around, I would say 26, yes. And Japan is very, very important part of our future as well. And I think we've got a strong company there, strong operating company. We need assets, it's a difficult market and a lot of ways and the way that they've structured price declines and things is difficult. So we need to refresh the portfolio in Japan. That's one of the things that I'm focusing on and concentrating on is not only refreshing the portfolio, through some of the global programs, internal and external, but also maybe some Japan specific opportunities as well.
Chris Schott
Okay, great. I care. I know there was a some activity here last few years. What are you most excited about when you think about the broader eye care portfolio with the company today?
Scott A. Smith
So maybe I can comment and then Rajiv is much closer to the eye care business on a day to day basis than I am. But we're very happy that -- with that acquisition, we're excited to have an eye care business. The eye care -- we've launched [indiscernible], and you have it in the marketplace today. I think we have 678 other products in the pipeline that hopefully will come to market in the next few years. We see this as a very viable strong business for us that can move to a $1 billion business over time. We think it's a good place to play. We've got -- again, we've got one product out there, but we've got 678 products in the pipeline that hopefully majority of those will hit the market.
Rajiv Malik
Yes, Chris, it was never one product acquisition, it was a platform, if you're going to build for the future, and pipeline continues the progress. In fact, we will be launching our second product, Ryzvumi, which is the reversal of mydriasis in the next few months. So -- and also there are three products which are entering with a separate study on the Phase 3, everything is going pretty well. And the DTC which we just switched on, because this segment is very DTC segment, the dry eye segment. And we just [indiscernible] we are seeing some very positive trends in the last quarter. So we are -- as we go along, we are very confident that yes, this business will be like I said, will deliver on the $1 billion commitment which we've made.
Chris Schott
And just on to Rajiv, can you expand a little bit on that, just in terms of has the asset performed in line with your expectations so far? Or has there been any surprises with it?
Rajiv Malik
More or less, yes. There was -- because at a quarter-to-quarter at a very early stage, it's very difficult to read through because we were moving from the -- trying to stabilize gross to net, remove the bridge, which was there at early stage. So all that has been more or less expected to deliver as per our expectations.
Sanjeev Narula
And just a comment on that, it's -- I think people forget sometimes it's very early days, right? That deal was closed around this time, one year ago. And then you close the deal, you got to do integration. And not that there was tremendous integrations, it's a small company, but understanding and bringing it into the Viatris [indiscernible] and we just initiated the DTC in October. So, we're going to be anxious to see if that's -- what that's doing. It's too early for me to give you a sense of what the effect of that DTC has been, maybe by the time we get to the fourth quarter, call in February, we'll have a better look at it. For DTC, from my experience, and I initiated the [indiscernible] DTC program, which I think everyone in this room has probably seen millions about [indiscernible] ads. So I've been deeply involved with it. But my experience with it is there's usually a 2, 3, 4 month lag. So you see real demand uptake, right? If people need to be driven into the physician's office, physician needs to write the product, there's reimbursement considerations. And so there's usually a little bit of a lag. We started in October, I would say, by the time we get to the Q4 call, we'll have better visibility on how effective this DTC has been. But we're very hopeful.
Chris Schott
Okay. So it's one to watch for. And then just a bigger picture, just any learnings from that the Oyster transaction that we would think about whether it's future deals in ophthalmology or just in some of your other core areas that we're looking to build on?
Scott A. Smith
So every -- from my experience, every transaction is different. It comes with different challenges. There are good things, there were bad things, different pauses, different negatives. I think that's a good sort of framework for us. If you take a look at what we did in the eye care, we bought a company in Oyster that had a commercialized asset, had a commercial group, a small commercial group focused on the U.S. We bought that. We also bought other assets to put into the eye care group and pipeline. And then we can take not only [indiscernible], the other programs, put our development expertise and globalize them and commercialize them around the world. So I think that's a pretty good framework for the type of deals that we'd like to do sort of a lead and anchor product or anchor company and then bring other assets in.
Chris Schott
Okay, excellent. Just continuing through the [indiscernible] couple of U.S specific questions. U.S generics, and it was a smaller part of the business certainly than that in the past, but just what are you seeing on the pricing side there? I think it's a bit of a big debate of, are we finally seeing a more stable environment are just based on your perspective of the markets now?
Rajiv Malik
There are two components to that, Chris. One is the market and for 7, 8 quarters now, it's just -- [indiscernible] we have seen relatively stable pricing, relatively stable pricing than what we have seen in the previous quarter. And that I think is a little bit of realization and appreciation with our big customers. They appreciate the importance of the sustainable supply chain, as well as the quality and all this is rendering and I see this a little bit sticking around. It's not -- it's always been cyclical, but I see all the signs are pointing towards this, this stability being sticking around.
The second is your own mix. And I think as a company, we have been consistently moving little bit relatively away from commodities, of course, access is a central part, we have been focusing on certain complex and difficult to make products like launching every second year a couple of those products. And that has basically positioned us in a way that we see even U.S market coming back to the growth now, as we look forward, we are very excited by the portfolio we have in USA, the market stability, which is encouraging sign for this market. And every year when we launch 400 million to 600 million of launches, U.S is a big part of that. U.S is a big part of that and it will continue to be the focus because the size you do for USA can be taken out to the rest of the world and countries.
Chris Schott
Yes. Maybe [indiscernible] thinking on the generic [indiscernible] opportunity and it seems like one of the bigger ones for you in the U.S.
Scott A. Smith
Yes, it's exciting again another first from us we weren't raised over here and we have been able to launch and the market is shaping exactly the way we thought and especially at this point of time, there has been shifts happening in because of the AMCAP coming in and brand dropping the [indiscernible], 40%, 50%. We see us getting the generics or us getting the market share. And as this market and this market overall ICS [indiscernible] market will evolve between generic Advair, Symbicort and some of the brands which are out there, Dulera and all that and we are very excited and well-positioned to get the market share in this -- these products.
Chris Schott
And just the final one on the U.S is just the product shortages that we've seen across the industry is that changing at all -- your customer kind of discussions you're having of just maybe a better appreciation of, you can't just keep driving price to zero and have some consequences.
Scott A. Smith
That's what I meant from the realization with the customer. The importance of having a sustainable supply, a quality supply and not just being the lowest price, because they've seen the impact it had on the overall industry. And that's what led to the drug shortages because many people walked away from several products like we eliminated about 300, 400 products. So did Teva or [indiscernible] and that had impact on the drug shortages.
Chris Schott
Yes. Just finally on the European portfolio, just I'm trying -- [indiscernible] the growth of this portfolio and I guess everything about this, like how does price play into this? Is this a market where there's incremental pressure? Is -- are things more stable, just help me a little bit.
Scott A. Smith
Relatively very stable market from a price point.
Chris Schott
Okay.
Scott A. Smith
That's why we have been for several last year. So we have been growing Europe by 2%, 3%, 4% in that range, depending on a year to year. It's -- [indiscernible] price decline, it's not more than a 0.5% or 1% in Europe.
Chris Schott
Okay, so that's -- you see that that's a sustainable kind of dynamic. Excellent. Last question on the core business just on the pipeline brand and generic. What are you most excited about over the next few years that we should be watching.
Scott A. Smith
Actually many products. This year, '24 can be big for exciting, launch of Victoza, launch of [indiscernible], which was another first. We are excited to bring in this year, of course Sandostatin LAR, octreotide product and also looking forward to launch our once monthly [indiscernible] in the middle of the year. So there are several -- and then followed on like we have exciting, we’ve been talking about the complex rich portfolio, but also the 505(b)2 like Xulane Low Dose and [indiscernible] there are buckets we framed it in a $1 billion plus buckets. We should come to the light between now and the next 3 to 4 years.
Chris Schott
Great. Great. Just a couple of cash flow questions. Maybe the first one thinking about 2024, are there one-time costs we need to think about in the P&L or anything from a cash flow perspective types of divestitures that we should be keeping in mind?
Sanjeev Narula
Yes. So let me take, Chris, like, take it back and kind of raise kind of the overall what is the sources of cash flow next year and what's going to happen and then I'll talk to specifically on that. So if you think about '24, there are three sources of cash flow that we're looking at. One is obviously the organic cash flow that from the business that we talked about. Then we have the opening cash balance, that the excess cash that we have, and then the proceeds from divestiture, all of these three will be in excess of $5 billion, right. So that that's the sources. And then what we are committed, we probably be paying somewhere around $3 billion of debt to get to a leverage target that we talked about. That will leave us sufficient cash for the committed dividend that we have and for share buyback and business development that we talked about. So that's kind of the holistically [indiscernible].
For '24, we've been talking about a minimum cash flow of $2.3 billion, which is the organic cash flow before any divestiture costs and any expense around that. So the way to simple think about it is this 2.3 minimum is from the operating business. There will be some one-time cost associated with restructuring some of the closing of that work that is going on. But that's much less as you can see. Over a period of time we brought that down, our conversion is improving from EBITDA to cash flow. It has improved this year, it's going to improve that.
And then as far as the divestiture are concerned, the cost and the taxes that we had, are in line with what we committed before, roughly about a $1 billion that we've committed from for all the divestiture and that's all factored in, and they will be reflected. The important thing to keep in mind, because of the way accounting works, some of the divestiture costs [ph] will hit the operating cash flow line. But we will give transparency as they've given that so that you can see the base business operating cash flow is still strong and growing. And then you had the proceeds for the divestiture which will be funded by the divestiture proceeds.
Rajiv Malik
I just want to, if you don't mind just stepping in and sort of maybe reiterating something that Sanjeev said just because I think it's really important, and one of the reasons that I'm so excited about '24 that -- from the cash from regular operations together with divestitures in the course of '24, we're going to be able to do all the things that we need to do, right. We're going to be able to pay down the debt to the target ratio that we're looking for, we're going to be able to continue with the dividend, we're going to be able to get more aggressive in terms of share buybacks during the course of this year. And we're going to be able to do substantial business development. So we're going to be able to execute on all parts of the plan right in '24. So, I think it's largely due to the hard work that's been done by these guys and others to get '23 and get the company in such a great place. And so it gives me a very nice jumping off point for '24 and beyond.
Chris Schott
Yes, that's great. Maybe just one more on the cash flow. How do we think about normalized kind of translation of EBITDA to cash flow for Viatris? We think about maybe 2025 and beyond.
Sanjeev Narula
So, Chris, it's a great story to what Scott just talked about. So we -- if we recall, back in '21, we had because of the combination, we had a lot of significant one-time cost as you can bring companies together, whether it's the TSAs are setting up the infrastructure, irrationalizing the plans, and all that kind of stuff, that was substantial. Over a period of time we brought that down. We worked on working capital optimizations, if you look at it from where we were to this year, we probably be somewhere around 50% cash flow conversion, which is very important. I expect this to continue to grow over a period of time.
Chris Schott
Okay.
Sanjeev Narula
There are still areas we're looking at. Low hanging fruits, by and large been able to do, but I continue to expect this 50% conversion from EBITDA to free cash will continue to improve.
Chris Schott
And how high could that go over time?
Sanjeev Narula
I think we can -- a lot depends on kind of what kind of focus on this. But I wouldn't be surprised if you can hit maybe 55% to 60% over a period of time in the next 3 to 4 years.
Chris Schott
Right. Just a final question for me, for Scott, just to wrap up. Just thoughts on the stock, it seems like you're kind of making a lot of progress towards these issues. Seems like you're really excited about kind of dynamics going forward. What do you see as the primary disconnects between your view of the business and opportunities and what's reflected in valuation?
Scott A. Smith
I think the primary discount is just how solid the company is, right, and just how predictable the company is from a revenue perspective, from an EBITDA perspective, from a cash flow perspective. When you have a merger, like the one we had, which is a large global event, a big merger, lots of moving pieces, it takes a while sometimes to get to that real stable base and through the divestitures, that we're doing other things, I feel confident that there is a tremendously strong company. And we talk a lot about free cash flow, and we're talking about a minimum of $2.3 billion post divestiture, '24 and beyond and hopefully more than that as we go beyond, that is as much or more as every company in the sector, right? We've got a strong diversified company, 37,000 employees, 165 countries, and we have cash flow that will enable us to be able to be aggressive in terms of giving back to our shareholders, and developing the portfolio and moving towards real revenue growth. I don't think people fully understand just how solid the operating company is and the opportunity is in '24 and beyond to really grow the company and unlock the multiple.
Chris Schott
Great. Well, thanks so much for joining us. Really appreciate the time today.
Scott A. Smith
Thank you, Chris.
Sanjeev Narula
Thank you.
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Viatris Inc. (VTRS) Presents at J.P. Morgan 42nd Annual Healthcare Conference (Transcript)