Viatris Updates $1-Bn Restructuring Plan, Including Mfg ReductionsBy
Viatris, the new company formed from the combination of Mylan and Upjohn, Pfizer’s off-patent branded and generic established medicines business, has provided additional details of its multi-year $1-billion global restructuring initiative, which involves a potential reduction of 20% of its workforce and a rationalization of its manufacturing footprint.
Viatris first announced plans for its restructuring last month (November 2020) following the closing of the deal that combined Mylan and Pfizer’s Upjohn. Viatris’ restructuring initiative is intended to reduce the company’s cost base by at least $1 billion by the end of 2024 or sooner, with a significant portion of the reduction expected to be achieved within the first two years following the close of the merger.
The company says it plans to close, downsize, or divest up to 15 manufacturing facilities globally that are deemed to be no longer viable either due to surplus capacity, challenging market dynamics, or a shift in its product portfolio toward more complex products. As a result, Viatris expects that up to 20% of its current global workforce of approximately 45,000 may be impacted upon completion of the restructuring initiative. The company says it will maintain an overall employee base and global manufacturing network that aligns with its go-forward operations.
The company has thus far identified five manufacturing facilities that will be impacted: (1) three oral solid-dose manufacturing facilities respectively in Morgantown, West Virginia, Baldoyle, Ireland, and Caguas, Puerto Rico; and (2) two active pharmaceutical ingredient (API) manufacturing facilities (Unit 11 and 12) in India. The workforce reductions at the impacted sites are expected to occur in phases over the next few years (as reported on December 11, 2020). Wherever feasible, Viatris says it will seek to find potential buyers for its facilities in order to preserve as many jobs as possible. In addition, and separately, the company recently completed the divestment of an injectables manufacturing site in Poland.
For the committed restructuring actions related to the five impacted sites, the company expects to incur total pre-tax charges ranging between $500 million and $600 million, which include between $225 million and $275 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges, including inventory write-offs. The remaining estimated cash costs of between $275 million and $325 million are expected to be primarily related to severance and employee benefits expense, as well as other costs, including those related to contract terminations and decommissioning costs. In addition, the company believes the potential annual savings related to these committed restructuring activities to be between $250 million and $300 million once fully implemented, with most of these savings expected to improve operating cash flow.