On Thursday, Piper Sandler, a financial services firm, increased its price target for Viatris (NASDAQ:VTRS) shares to $13.00, up from the previous $13.00, while maintaining a Neutral rating on the stock.
The adjustment follows Viatris' recent R&D day, where the company's senior management shed light on the progress of late-stage programs for two assets acquired through a collaboration with Idorsia. These assets include cenerimod, aimed at treating systemic lupus erythematosus (SLE), and selatogrel for acute myocardial infarction (AMI).
Piper Sandler appreciates the structure of the transaction with Idorsia, which involves risk-sharing, a reasonable upfront payment that does not overburden Viatris' balance sheet, and a compensation framework based on milestones and royalties. This approach is seen as an effective method for Viatris to add innovative assets without hindering its ability to reduce debt and return capital to shareholders.
The financial firm acknowledges that these developmental opportunities could enhance the visibility of Viatris' EBITDA growth over time, provided the programs are successful.
However, Piper Sandler also notes that, without these new prospects, the current commercial mix does not inspire confidence in a sustained increase in the company's market valuation. The firm points out that Viatris' current enterprise value to estimated 2024 EBITDA ratio stands at approximately 7 times.
Piper Sandler's revised price target reflects its view on the potential and risks associated with Viatris' recent in-licensed assets. The firm reiterates its Neutral stance on the stock, signaling a cautious optimism towards the company's financial prospects, pending the outcomes of the late-stage programs.
InvestingPro Insights
Piper Sandler's recent appraisal of Viatris (NASDAQ:VTRS) comes at a time when the company presents a mixed financial picture, according to the latest data from InvestingPro. With a market capitalization of $13.78 billion and a strikingly high P/E ratio of 255.87, Viatris' valuation adjusts to a more reasonable P/E of 10.0 when considering the last twelve months as of Q4 2023. This adjustment might reflect market expectations of future earnings normalization.
InvestingPro Tips suggest that Viatris is a prominent player in the Pharmaceuticals industry, with management actively buying back shares and a high shareholder yield, signaling a commitment to returning value to shareholders. Additionally, the company is expected to be profitable this year, having been profitable over the last twelve months.
These insights could be particularly relevant for investors weighing the potential of Viatris' late-stage programs against the backdrop of the company's overall financial health. The InvestingPro Tips also indicate that while three analysts have revised their earnings downwards for the upcoming period, the valuation implies a strong free cash flow yield, which could be an attractive feature for investors looking for companies with solid cash generation capabilities.
For readers interested in a deeper dive into Viatris' financials and future outlook, InvestingPro offers additional tips. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of insights available.
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