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Viatris Inc(VTRS-Q)

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Could Viatris Stock Help You Become a Millionaire?

Motley Fool - Sat Sep 30, 2023

If you're investing $25,000 in your stock portfolio, then getting that investment to be worth $1 million over time is no simple task. Odds are, you'll have to wait decades for that investment to grow 40 times its original value, while also likely outperforming the market consistently over that timeframe. In order to build such a portfolio, you'll need to invest in businesses with strong prospects for continued growth. It's hard enough to find a stock that can do well over the next few years, but it's expressly more difficult to find a stock that will do well over the next couple of decades.

Viatris (NASDAQ: VTRS) is a relatively new healthcare company that came into existence in 2020 after biopharmaceutical company Mylan merged with Pfizer's off-patent (or generic pharma) Upjohn segment. It makes both branded and generic drugs. The company pays a dividend that yields 5%. It has been slimming down its operations to become leaner, and it has recently launched an eye care business. But does this stock have what it takes to take your investment and turn it into $1 million or more?

What are the pathways for future growth?

Let's start with the positives. First, Viatris has a diverse business. It makes products that are used by patients in 165 countries. The company makes products in many different therapeutic areas, including cardiovascular, immunology, gastroenterology, dermatology, and others. That means there are plenty of opportunities for the business to expand its product line and grow in the long run.

And growth is what it is focusing on. The company has been working on several products that it expects can generate more than $1 billion each in annual revenue by 2027. In injectables and sterile products, for example, it is planning more than a dozen product launches, including a generic version of weight-loss medication Wegovy, which by 2027 can potentially generate upwards of $1 billion mark in sales. Then there's another five products it's working on in what it categorizes as novel and complex, including treatments for birth control and multiple sclerosis, which can also bring in over $1 billion by 2028. And the eye care business Viatris launched in January can also hit over $1 billion in annual sales by 2028.

Viatris is focused on growth, and it's working on getting leaner, too. This year, it has been divesting assets that aren't key to its core operations in order to free up capital and resources. Companies normally slim down to remove debt so they can focus on higher-growth opportunities. That appears to be the path Viatris is on, and that can lead to some significant revenue growth and good returns for investors.

What could hinder its growth?

While Viatris is working on growth, that could be a tall task for the business. Generics account for one-third of its revenue, and those are products with tight margins; they aren't going to be a source of significant growth potential, even if Viatris launches new products. Pfizer spun off its Upjohn segment because it was a slow-growing part of its operations, not because it thought there was the opportunity for significant growth there. If that was the case, it would have likely kept it part of its operations. The reality is there isn't a lot of potential in the long run.

Through the first six months of the year, Viatris' revenue totaled $7.6 billion, down 8% from the same period last year. Even its top-selling products, including Lipitor, Norvasc, and Lyrica, are down from where they were a year ago. And make no mistake, management considers its results this year to be good. On its second-quarter earnings release in August, CEO Scott A. Smith called the company's recent results "one of the strongest quarters we've had to date."

Well, if this is what it looks like for the company to be performing well, growth investors could be in trouble.

Should you expect an investment in Viatris to grow to $1 million?

Viatris not only doesn't appear to be an investment that can grow $25,000 or less into $1 million, it seems to be the opposite type of investment. This is more of a dividend play. Viatris is investing in growth opportunities, but there's nothing significant on the horizon that suggests a huge transformation that will lead to life-changing or even market-beating returns for investors. If you want to collect a good dividend over the years, Viatris certainly has the potential to be a solid income-generating investment. But I wouldn't expect a whole lot more from the stock.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Viatris. The Motley Fool has a disclosure policy.

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