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Item 7. Management’s Discussion and Analysis

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These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements may include, without limitation, statements about the goals or outlooks with respect to the Company’s strategic initiatives, including but not limited to the Company’s two-phased strategic vision and potential divestitures and acquisitions;

the benefits and synergies of acquisitions, divestitures or our global restructuring program, future opportunities for the Company and its products and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods.

the benefits and synergies of such divestitures, acquisitions, or other transactions, or restructuring programs;

future opportunities for the Company and its products;

and any other statements regarding the Company’s future operations, financial or operating results, capital allocation, dividend policy and payments, stock repurchases, debt ratio and covenants, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, commitments, confidence in future results, efforts to create, enhance or otherwise unlock the value of our unique global platform, and other expectations and targets for future periods.

Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “pipeline”, “intend”, “continue”, “target”, “seek” and variations of these words or comparable words.

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Factors that could cause or contribute to such differences include, but are not limited to:

• the possibility that the Company may be unable to realize the intended benefits of, or achieve the intended goals or outlooks with respect to, its strategic initiatives;

• the possibility that the Company may be unable to achieve expected benefits, synergies and operating efficiencies in connection with acquisitions, divestitures, or its global restructuring program, within the expected timeframe or at all;

• impairment charges or other losses related to the divestiture or sale of businesses or assets;

• the possibility that the Company may not realize the intended benefits of, or achieve the intended goals or outlooks with respect to, its strategic initiatives (including divestitures, acquisitions, or other potential transactions) or move up the value chain by focusing on more complex and innovative products to build a more durable higher margin portfolio;

• the possibility that the Company may be unable to achieve intended or expected benefits, goals, outlooks, synergies, growth opportunities and operating efficiencies in connection with divestitures, acquisitions, other transactions, or restructuring programs, within the expected timeframes or at all;

• with respect to previously announced divestitures that have not been consummated, including the divestiture of substantially all of our OTC Business, such divestitures not being completed on the expected timelines or at all and the risk that the conditions set forth in the definitive agreements with respect to such divestitures will not be satisfied or waived;

• with respect to previously announced divestitures, failure to realize the total transaction values for the divestitures and/or the expected proceeds for any or all such divestitures, including as a result of any purchase price adjustment or a failure to achieve any conditions to the payment of any contingent consideration;

• goodwill or impairment charges or other losses related to the divestiture or sale of businesses or assets (including but not limited to announced divestitures that have not yet been consummated);

• the Company’s failure to achieve expected or targeted future financial and operating performance and results;

• the potential impact of public health outbreaks, epidemics and pandemics, including the ongoing challenges and uncertainties posed by the COVID-19 pandemic;

• the potential impact of public health outbreaks, epidemics and pandemics;

• actions and decisions of healthcare and pharmaceutical regulators;

• changes in relevant laws and regulations, including but not limited to changes in tax, healthcare and pharmaceutical laws and regulations globally (including the impact of recent and potential tax reform in the U.S.);

• the ability to attract and retain key personnel;

• changes in relevant laws, regulations and policies and/or the application or implementation thereof, including but not limited to tax, healthcare and pharmaceutical laws, regulations and policies globally (including the impact of recent and potential tax reform in the U.S.

and pharmaceutical product pricing policies in China);

• the ability to attract, motivate and retain key personnel;

• the Company’s liquidity, capital resources and ability to obtain financing;

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• the scope, timing and outcome of any ongoing legal proceedings, including government inquiries or investigations, and the impact of any such proceedings on the Company;

• any significant breach of data security or data privacy or disruptions to our information technology systems;

• any significant breach of data security or data privacy or disruptions to our IT systems;

• risks associated with having significant operations globally;

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Viatris undertakes no obligation to update any statements herein for revisions or changes after the filing date of this Form 10-K other than as required by law.

Explanatory Note

In accordance with ASC 805, Business Combinations , Mylan is considered the accounting acquirer of the Upjohn Business and all historical financial information of the Company prior to November 16, 2020 represents Mylan’s historical results and the Company’s thereafter.

Company Overview

Viatris is a global healthcare company formed in November 2020 whose mission is to empower people worldwide to live healthier at every stage of life, regardless of geography or circumstance.

Improving the ability of patients to gain access to sustainable and high-quality healthcare is our relentless pursuit.

One that rests on visionary thinking, determination and best-in-class capabilities that were strategically built to remove barriers across the health spectrum and advance access globally.

Viatris’ seasoned management team is focused on ensuring that the Company is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers and other key stakeholders.

Viatris is a global healthcare company which we believe is uniquely positioned to bridge the traditional divide between generics and brands, combining the best of both to more holistically address healthcare needs globally.

With a mission to empower people worldwide to live healthier at every stage of life, Viatris provides access at scale, currently supplying high-quality medicines to approximately 1 billion patients around the world annually and touching all of life’s moments, from birth to the end of life, acute conditions to chronic diseases.

With our exceptionally extensive and diverse portfolio of medicines, a one-of-a-kind global supply chain designed to reach more people when and where they need them, and the scientific expertise to address some of the world's most enduring health challenges, access takes on deep meaning at Viatris.

Viatris’ executive management team is focused on ensuring that the Company is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers and other key stakeholders.

With a global workforce of approximately 38,000, the Company has industry leading commercial, R&D, regulatory, manufacturing, legal and medical expertise complemented by a strong commitment to quality and an unparalleled geographic footprint to deliver high-quality medicines to patients in more than 165 countries and territories.

Viatris’ portfolio comprises more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands, generics, and complex generics, including biosimilars prior to the Biocon Biologics Transaction.

The Company operates approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs.

As of December 31, 2023, Viatris’ portfolio comprised more than 1,400 approved molecules across a wide range of key therapeutic areas, including globally recognized iconic and key brands and generics, including complex products, and the Company operated approximately 40 manufacturing sites worldwide that produce oral solid doses, injectables, complex dosage forms and APIs.

As discussed below, Viatris has entered into certain transactions, including the Pending Announced Divestitures.

Viatris is headquartered in the U.S., with global centers in Pittsburgh, Pennsylvania, Shanghai, China and Hyderabad, India.

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Developed Markets, Greater China, JANZ, and Emerging Markets.

The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded, complex generics, including biosimilars prior to the Biocon Biologics Transaction, and generic products to people in markets everywhere.

The Company reports segment information on the basis of markets and geography, which reflects its focus on bringing its broad and diversified portfolio of branded and generic products, including complex products, to people in markets everywhere.

Our Developed Markets segment comprises our operations primarily in North America and Europe.

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Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition.

As such, the timing of new product introductions can have a significant impact on the Company’s financial results.

the timing of new product introductions can have a significant impact on the Company’s financial results.

The entrance into the market of additional competition generally has a negative impact on the volume and pricing of the affected products.

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and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product’s sales.

For example, depending on certain factors – including decisions by Japanese regulatory and/or patent authorities – generic entry may occur for Amitiza® 24 μg in Japan prior to one of the patents relevant to Amitiza® expiring in April 2025.

Certain markets in which we do business outside of the U.S.

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The tender system often results in companies underbidding one another by proposing low pricing in order to win the tender.

The loss of a tender by a third party to whom we supply API can also have a negative impact on our sales and profitability.

Sales continue to be negatively affected by the impact of tender systems in certain countries.

In addition to the impact of competition, government pricing actions and other measures designed to reduce healthcare costs, our results of operations, cash flows and financial condition could also be affected by other risks of doing business internationally, including the impact of inflation, elections, geopolitical events, including the ongoing conflicts in the Middle East and between Russia and Ukraine and related trade controls, sanctions, supply chain and staffing challenges and other economic considerations, supply chain disruptions, foreign currency exchange fluctuations, public health epidemics, changes in intellectual property legal protections and other regulatory changes.

Recent Developments

Idorsia Acquisition

On February 28, 2024, the Company announced that it will acquire the development programs and certain personnel related to selatogrel and cenerimod from Idorsia in exchange for an upfront payment to Idorsia of $350 million, potential development and regulatory milestone payments, and certain contingent payments of additional sales milestone payments and tiered sales royalties.

Viatris and Idorsia will both contribute to the development costs for both programs.

Viatris will have worldwide commercialization rights for both selatogrel and cenerimod (excluding, for cenerimod only, Japan, South Korea and certain countries in the Asia-Pacific region).

The agreements also provide Viatris a right of first refusal and a right of first negotiation for certain other assets in Idorsia’s pipeline.

The closing of the transaction is subject to certain closing conditions.

On October 1, 2023, the Company announced it received an offer for the divestiture of its OTC Business, and entered into definitive agreements to divest its women’s healthcare business and, separately, in another transaction, its rights to two women’s healthcare products in certain countries, its API business in India and commercialization rights in the Upjohn Distributor Markets.

The divestiture of the women’s healthcare business is primarily related to our oral and injectable contraceptives and does not include all of our women’s healthcare related products;

as an example, our Xulane® product in the U.S.

The transaction to divest the Company’s rights to two women’s healthcare products in certain countries (other than in the U.K., which remains subject to regulatory approval) closed in December 2023.

The divestitures of the commercialization rights in certain of the Upjohn Distributor Markets closed during 2023.

Additionally, we expect to consummate the divestiture of our women’s healthcare business and our API business in India by the end of the first quarter of 2024, and in January 2024, we exercised our option to accept the offer in the OTC Transaction and entered into a definitive transaction agreement with respect to such OTC Transaction.

We currently expect the OTC Transaction to close by mid-year 2024.

The transactions that have not yet closed remain subject to regulatory approvals, receipt of required consents and other

closing conditions, including, in the case of the API business divestiture, a financing condition.

Refer to Note 5 Divestitures in Part II, Item 8 of this Form 10-K for more information.

Ophthalmology Acquisitions

During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $425 million in cash, which includes $11 per share paid to Oyster Point stockholders through a tender offer and the repayment of the principal amount of certain debt of Oyster Point.

In addition to the upfront cash consideration, each Oyster Point stockholder received one non-tradeable contingent value right representing up to an additional $2 per share, or approximately $60 million in the aggregate, contingent upon Oyster Point achieving certain metrics based upon full year 2022 performance, which are expected to be determined by the end of the first quarter of 2023.

Oyster Point is a commercial-stage biopharmaceutical company focused on the discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases.

On November 7, 2022, the Company entered into a definitive agreement to acquire the remaining equity shares of Famy Life Sciences, a private-owned research company with a complementary portfolio of ophthalmology therapies under development, for a consideration of $281 million.

The Company had previously entered into a Master Development Agreement with Famy Life Sciences on December 20, 2019 to grant the Company rights with respect to acquiring certain pharmaceutical products and had additionally acquired shares representing approximately 13.5% equity interest in Famy Life Sciences for $25.0 million during the year ended December 31, 2020.

During the first quarter of 2023, the Company completed the acquisition of Oyster Point for approximately $427.4 million in cash, which included $11 per share paid to Oyster Point stockholders through a tender offer, payment for vested share-based awards, and the repayment of the Oyster Point debt.

Oyster Point is focused on the discovery, development, and commercialization of first-in-class pharmaceutical therapies to treat ophthalmic diseases.

On November 7, 2022, the Company entered into a definitive agreement to acquire the remaining equity shares of Famy Life Sciences, a privately-owned research company with a complementary portfolio of ophthalmology therapies under development, for consideration of $281 million.

The transaction to acquire the remaining equity shares of Famy Life Sciences closed during the first quarter of 2023.

The accounting impact of the Oyster Point and Famy Life Sciences acquisitions and the results of the operations for Oyster Point and Famy Life Sciences will be included in our consolidated financial statements beginning in the first quarter of 2023.

Refer to Note 4 Acquisitions and Other Transactions included in Part II.

Item 8 of this Form 10-K for more information.

Refer to Note 4 Acquisitions and Other Transactions in Part II, Item 8 of this Form 10-K for more information.

Share Repurchase Program

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The program does not have an expiration date.

During 2022, the Company did not repurchase any shares of common stock under the share repurchase program.

In January and February 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of approximately $250 million.

During the year ended December 31, 2023, the Company repurchased approximately 21.2 million shares of common stock at a cost of approximately $250 million.

In February 2024, the Company repurchased approximately 19.2 million shares of common stock at a cost of approximately $250 million.

The Company did not repurchase any shares of common stock under the share repurchase program in 2022.

The share repurchase program does not obligate the Company to acquire any particular amount of common stock.

International Operations

The ongoing conflict between Russia and Ukraine did not have a material impact on our business as the combined total revenues for both countries were approximately 1% of consolidated total revenues during the years ended December 31, 2022 and 2021.

However, trade controls, sanctions, supply chain and staffing challenges and other economic considerations related to the conflict have impacted our operations in these markets and may negatively impact our financial results in future periods.

In addition, a significant escalation or expansion of the conflict’s current scope may have a negative impact on our operations and financial results in future periods.

For a further discussion of the risks we encounter in our business, including the risks of conducting our business internationally, please refer to Risk Factors in Part I, Item 1A of this Form 10-K.

Under ASC 830, Foreign Currency Matters (“ASC 830”), a highly inflationary economy is one that has cumulative inflation of approximately 100% or more over a three-year period.

Effective April 1, 2022, we classified Turkey as highly inflationary and began to utilize the U.S.

dollar as our functional currency in Turkey, which historically utilized the Turkish lira as the functional currency.

Application of the guidance in ASC 830 did not have a material impact on our consolidated financial statements for the year ended December 31, 2022.

The impacted net sales for the year ended December 31, 2022 and total assets at December 31, 2022 represented less than 1% of our consolidated net sales and total assets, respectively.

Biocon Biologics Transaction

On February 27, 2022, Viatris entered into a definitive agreement with Biocon Biologics to contribute its biosimilars portfolio to Biocon Biologics.

The transaction subsequently closed on November 29, 2022, creating what Viatris expects to be a unique fully vertically integrated global biosimilars leader.

Under the terms of the Biocon Agreement, Viatris received $3 billion in consideration in the form of a $2 billion cash payment, adjusted as set forth in the Biocon Agreement, and approximately $1 billion of CCPS representing a stake of approximately 12.9% (on a fully diluted basis) in Biocon Biologics.

Viatris also is entitled to $335 million of additional cash payments in 2024.

In addition, Viatris and Biocon Biologics have agreed to a closing working capital target of $250 million.

An amount of cash equal to all or a portion of the closing working capital target may become payable to Biocon Biologics in connection with certain events in the future, depending on the valuations attributable to such events.

Upon closing of the transaction, the Company recognized a gain on sale of approximately $1.75 billion and has not recognized the results of the business in its consolidated financial statements subsequent to November 29, 2022.

Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues.

The term of the transition services agreement is generally up to two years.

Under the transition services agreement, Viatris is entitled to be reimbursed for its costs (subject to certain caps) plus a markup.

The Company announced that on February 26, 2024, its Board of Directors authorized a $1.0 billion increase to the Company’s previously announced $1.0 billion share repurchase program.

As a result, the Company’s share repurchase program now authorizes the repurchase of up to $2.0 billion of the Company’s shares of common stock.

The Company had repurchased a total of $500 million in shares through February 28, 2024 under the program.

2020 Restructuring Program

During the fourth quarter of 2020, Viatris announced a significant global restructuring program in order to achieve synergies and ensure that the organization is optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders.

As part of the restructuring, the Company is optimizing its commercial capabilities and enabling functions, and closing, downsizing or divesting certain 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.

For the committed restructuring actions, the Company expects to incur total pre-tax charges of up to approximately $1.4 billion.

Such charges are expected to include up to approximately $450 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges, including inventory write-offs.

The remaining estimated cash costs of up to approximately $950 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 other plant disposal costs.

In addition, management believes the potential annual savings related to these committed restructuring activities to be up to approximately $900 million once fully implemented, with most of these savings expected to improve operating cash flow.

Impact of the Coronavirus Pandemic

As a leading global pharmaceutical company, Viatris is committed to continue doing its part in support of public health needs amid the evolving COVID-19 pandemic.

The Company’s priorities remain protecting the health and safety of our workforce, continuing to produce critically needed medicines, deploying resources and expertise in the fight against COVID-19

through potential prevention and treatment efforts, supporting the communities in which we operate and maintaining the health of our overall business.

In addressing the COVID-19 pandemic and helping meet urgent global health needs, tens of thousands of dedicated Viatris employees across the world have worked to help ensure a stable supply of much needed treatments.

Because protecting the health and safety of our workforce remains paramount, we continue to align with government directives and the advice of relevant international, national and local health authorities at every Viatris facility around the world.

As a result, some of our customer facing field personnel continue on a remote engagement model to ensure continued support for healthcare professionals, patient care and access to needed products and we have continued to take extra precautions at our manufacturing facilities to protect our site personnel and operations.

All of our manufacturing facilities, and those of our key global partners, are currently operational and, at this time, we are not experiencing any significant disruptions.

The global spread of COVID-19 has created and continues to create volatility, uncertainty and economic disruption affecting the markets we serve, including impacts on supply chain partners, third-party manufacturers, logistics providers and other vendors.

The extent to which the COVID-19 pandemic will impact our business, operations and financial results in future periods will depend on numerous evolving factors that are beyond our control and that we may not be able to accurately predict, and could adversely impact our financial condition and results of operations in future periods.

Due to the Company’s ability to generate significant cash flows from operations, combined with our access to borrowing facilities and capital markets, we believe that we currently have, and will maintain, the ability to meet foreseeable liquidity needs .

During 2020, Viatris announced a significant global restructuring program in order to achieve synergies and ensure that the organization was optimally structured and efficiently resourced to deliver sustainable value to patients, shareholders, customers, and other stakeholders.

As part of the restructuring, the Company optimized its commercial capabilities and enabling functions, and closed, downsized or divested certain manufacturing facilities globally that were 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.

The actions under the 2020 restructuring program were substantially completed during 2023.

Since the initiation of the 2020 restructuring program, the Company has incurred total pre-tax charges of approximately $1.4 billion through December 31, 2023.

Such charges included approximately $450 million of non-cash charges mainly related to accelerated depreciation and asset impairment charges, including inventory write-offs, and cash costs of approximately $950 million, primarily related to severance and employee benefits expense, as well as other costs, including those related to contract terminations and other plant disposal costs.

Financial Summary

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Gross profit 6,438.6 6,497.0 (58.4)

Earnings (loss) from operations 1,614.9 (34.0) 1,648.9

Net earnings (loss) 2,078.6 (1,269.1) 3,347.7

Diluted earnings (loss) per share $ 1.71 $ (1.05) $ 2.76

Earnings from operations 766.2 1,614.9 (848.7)

Net earnings 54.7 2,078.6 (2,023.9)

Diluted earnings per share $ 0.05 $ 1.71 $ (1.66)

A detailed discussion of the Company’s financial results can be found below in the section titled “Results of Operations.” As part of this discussion, we also report sales performance using the non-GAAP financial measures of “constant currency” net sales and total revenues.

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We routinely evaluate our net sales and total revenues performance at constant currency so that sales results can be viewed without the impact of foreign currency exchange rates, thereby facilitating a period-to-period comparison of our operational activities, and believe that this presentation also provides useful information to investors for the same reason.

More information about non-GAAP measures used by the Company as part of this discussion, including adjusted cost of sales, adjusted gross margins, adjusted net earnings, and adjusted EBITDA (all of which are defined below) are discussed further in this Part II.

Item 7 under Results of Operations and Results of Operations — Use of Non-GAAP Financial Measures .

Results of Operations

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Other revenues (3)

44.6 72.7 (39) % 2.9 47.5 (35) %

38.5 44.6 NM (0.1) 38.4 NM

Consolidated total revenues (4)

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Total Revenues

For the year ended December 31, 2022, the Company reported total revenues of $16.26 billion, compared to $17.89 billion for the comparable prior year period, representing a decrease of $1.62 billion, or 9%.

For the year ended December 31, 2023, the Company reported total revenues of $15.43 billion, compared to $16.26 billion for the comparable prior year period, representing a decrease of $835.8 million, or 5%.

Total revenues include both net sales and other revenues from third parties.

Net sales for the year ended December 31, 2022 were $16.22 billion, compared to $17.81 billion for the comparable prior year period, representing a decrease of $1.60 billion, or 9%.

Other revenues for the year ended December 31, 2022 were $44.6 million, compared to $72.7 million for the comparable prior year period, a decrease of $28.1 million.

The decrease in net sales was primarily driven by the unfavorable impact of foreign currency translation of approximately $1.24 billion, or 7%, primarily reflecting changes in the U.S.

Dollar as compared to the currencies of subsidiaries in countries within the EU, Japan and India.

On a constant currency basis, the decrease in net sales was approximately $359.6 million, or 2% for the year ended December 31, 2022 compared to the prior year period.

This decrease was partially due to approximately $63.5 million related to the year over year impact of the sale of the biosimilars business on November 29, 2022.

The decrease was also due to competition on certain key U.S.

products representing a decline of approximately $188 million, and approximately $591 million as a result of other base business erosion.

The decrease in net sales from existing products was partially offset by approximately $483.1 million of new product sales, primarily in the U.S.

Net sales for the year ended December 31, 2023 were $15.39 billion, compared to $16.22 billion for the comparable prior year period, representing a decrease of $829.7 million, or 5%.

Other revenues for the year ended December 31, 2023 were $38.5 million, compared to $44.6 million for the comparable prior year period.

The decrease in net sales was partially driven by the unfavorable impact of foreign currency translation of approximately $258.9 million, or 2%, primarily reflecting changes in the U.S.

Dollar as compared to the currencies of subsidiaries in Japan, China and India.

Additionally, net sales decreased by approximately $629.5 million, or 4%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2022 and 2023.

The most significant such impact related to the biosimilars business that was divested on November 29, 2022.

On a constant currency basis, net sales from the remaining business increased by approximately $17.0 million, or less than 1%, for the year ended December 31, 2023 compared to the prior year period as new product sales of approximately $451.3 million, primarily in the U.S.

and Europe, offset the impact of base business erosion of approximately $434.3 million.

New product sales include new products launched in 2023 and the carryover impact of new products, including business development, launched within the last twelve months.

Net sales from Tyrvaya® totaled $41.7 million during the year ended December 31, 2023.

From time to time, a limited number of our products may represent a significant portion of our net sales, gross profit and net earnings.

Generally, this is due to the timing of new product introductions, seasonality, and the amount, if any, of additional competition in the market.

Our top ten products in terms of net sales, in the aggregate, represented 33% for the years ended December 31, 2022 and 2021.

Our top ten products in terms of net sales, in the aggregate, represented approximately 33% for each of the years ended December 31, 2023 and 2022.

Net sales are derived from our four reporting segments:

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Net sales from Developed Markets decreased by $517.0 million or 5% during the year ended December 31, 2023 when compared to the prior year.

This decrease was primarily the result of unfavorable impact of foreign currency translation of approximately $666.6 million, or 6%.

Constant currency net sales increased by approximately $6.8 million, or less than 1%, when compared to the prior year.

The favorable impact of foreign currency translation was approximately $85.2 million, or 1%.

Net sales decreased by approximately $539.6 million, or 6%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2022 and 2023.

The most significant such impact related to the biosimilars business that was divested on November 29, 2022.

Constant currency net sales from the remaining business decreased by approximately $104.3 million, or 1%, when compared to the prior year.

New product sales, including lenalidomide and Breyna™ in the U.S., combined with the stability of the existing product portfolio helped to partially offset the anticipated lower net sales of certain existing products, including Wixela Inhub®, Xulane® and cyclosporine ophthalmic emulsion in the U.S., as a result of lower volumes and lower pricing due to additional competition.

Net sales within North America totaled approximately $3.91 billion and net sales within Europe totaled approximately $5.34 billion.

The increase in constant currency net sales was driven by new product sales, including lenalidomide, unbranded insulin glargine and Semglee®, and cyclosporine ophthalmic emulsion in the U.S., and higher volumes of existing products in Europe.

This increase was partially offset by the year over year impact of the sale of the biosimilars business, and lower net sales of existing products in the U.S., including Miacalcin®, Wixela Inhub® and Perforomist®, as a result of lower pricing and, to a lesser extent, volumes due to additional competition.

Net sales from Tyrvaya® totaled $41.7 million during the year ended December 31, 2023.

Greater China Segment

Net sales from Greater China decreased by $11.6 million, or less than 1%, for the year ended December 31, 2022 when compared to the prior year.

This decrease was primarily the result of the unfavorable impact of foreign currency translation of approximately $73.8 million, or 3%.

Net sales from Greater China decreased by $40.8 million, or 2%, for the year ended December 31, 2023 when compared to the prior year.

This decrease was the result of the unfavorable impact of foreign currency translation of approximately $87.1 million, or 4%.

Constant currency net sales increased by approximately $46.3 million, or 2%, when compared to the prior year, driven primarily by increased volumes of existing products.

Divestitures did not have a significant impact on the net sales during the year ended December 31, 2023.

Net sales from JANZ decreased by $207.9 million or 13% for the year ended December 31, 2023 when compared to the prior year.

This decrease was primarily the result of the unfavorable impact of foreign currency translation of approximately $230.8 million, or 11%.

Constant currency net sales decreased by approximately $164.2 million, or 8%, when compared to the prior year.

The decrease was primarily due to lower net sales of existing products mainly driven by lower pricing in Japan as a result of government price reductions and additional competition, and lower volumes of existing products in Australia.

These decreases were partially offset by higher volumes of existing products in Japan, including for Celebrex®.

This decrease was partially the result of the unfavorable impact of foreign currency translation of approximately $96.2 million, or 6%.

Net sales also decreased by approximately $18.8 million, or 1%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2022 and 2023.

Constant currency net sales from the remaining business decreased by approximately $92.9 million, or 6%, when compared to the prior year.

The decrease was due to lower net sales of existing products mainly driven by lower pricing and, to a lesser extent, volumes, in Japan as a result of government price reductions and additional competition, and lower volumes of existing products in Australia.

Emerging Markets Segment

Net sales from Emerging Markets decreased by $64.0 million or 2% for the year ended December 31, 2023 when compared to the prior year.

This decrease was partially driven by the unfavorable impact of foreign currency translation of approximately $264.7 million, or 8%.

Constant currency net sales decreased by approximately $264.4 million, or 8%, when compared to the prior year.

This decrease was primarily driven by lower volumes of COVID-19 related products in India, primarily remdesivir and ambisome, and lower sales of ARV products as a result of competitive market conditions.

These decreases were partially offset by higher volumes in certain markets in Asia.

This decrease was driven by the unfavorable impact of foreign currency translation of approximately $160.8 million, or 6%.

In addition, net sales also decreased by approximately $70.4 million, or 3%, due to the inclusion of net sales in the prior year period related to divestitures that have closed during 2022 and 2023.

Constant currency net sales from the remaining business increased by approximately $167.2 million, or 6%, when compared to the prior year, primarily driven by higher volumes of existing products in certain Asian countries.

Cost of Sales and Gross Profit

Cost of sales decreased from $9.77 billion for the year ended December 31, 2022 to $8.99 billion for the year ended December 31, 2023.

Cost of sales was primarily impacted by purchase accounting related amortization of the step-up in the fair value of acquired inventory of $1.19 billion in the prior year period, lower restructuring costs in the current year related to the 2020 restructuring program versus the prior year period, and lower costs associated with other special items, which are described further in the section titled Use of Non-GAAP Financial Measures .

Cost of sales was primarily impacted by the decrease in net sales, including the impact of the disposition of the biosimilars business in November 2022, and lower purchase accounting amortization expense.

Gross profit for the year ended December 31, 2023 was $6.44 billion and gross margins were 42%.

For the year ended December 31, 2022, gross profit was $6.50 billion and gross margins were 40%.

This change is primarily related to the decrease in cost of sales.

This change in gross profit is primarily related to the decrease in net sales and cost of sales.

Adjusted gross margins were approximately 59% for the year ended December 31, 2023, essentially flat when compared to the year ended December 31, 2022.

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Acquisition and divestiture-related costs (40.7) (50.0)

Restructuring and related costs (56.8) (534.7)

Restructuring-related costs (101.8) (56.8)

Share-based compensation expense (2.9) (1.5)

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Operating Expenses

Research & Development Expense

R&D expense for the year ended December 31, 2022 was $662.2 million, compared to $681.0 million for the prior year, a decrease of $18.8 million.

This decrease was primarily due to the impact of synergies.

Certain reclassifications were made to conform the prior period consolidated financial statements to the current period presentation.

Upfront and milestone-related charges in connection with collaboration and licensing arrangements previously presented in R&D expense are now presented in Acquired IPR&D.

Research and Development Expense

R&D expense for the year ended December 31, 2023 was $805.2 million, compared to $662.2 million for the prior year, an increase of $143.0 million.

This increase was primarily due to continued investment in our pipeline, including approximately $42.1 million related to the ophthalmology acquisitions.

Acquired IPR&D

Acquired IPR&D expense for the year ended December 31, 2022 was $36.4 million, compared to $70.1 million for the prior year, a decrease of $33.7 million.

The decrease was primarily due to an upfront licensing payment in the prior year of $40.0 million for the development of an ophthalmic product.

This was partially offset by an upfront licensing payment of $20.0 million to Calliditas Therapeutics AB related to Nefecon® recorded during the current year.

Selling, General & Administrative Expense

SG&A expense for the year ended December 31, 2022 was $4.18 billion, compared to $4.53 billion for the prior year, a decrease of $350.1 million.

The decrease was primarily due to lower restructuring costs of approximately $322.8 million related to the 2020 restructuring program and the impact of synergies.

Partially offsetting these decreases were higher integration costs as a result of transitioning certain support services from Pfizer, costs incurred in conjunction with the Biocon Biologics Transaction, and a goodwill impairment charge of $117.0 million related to the potential divestiture of the Upjohn Distributor Markets.

Acquired IPR&D expense for the year ended December 31, 2023 was $105.5 million, compared to $36.4 million for the prior year, an increase of $69.1 million.

The increase was primarily due to upfront licensing payments to Mapi of $75.0 million related to additional products under development.

This was partially offset by an upfront licensing payment of $20.0 million to Calliditas Therapeutics AB related to Nefecon® recorded during the prior year.

Selling, General and Administrative Expense

SG&A expense for the year ended December 31, 2023 was $4.65 billion, compared to $4.18 billion for the prior year, an increase of $471.0 million.

The increase was primarily due to:

(1) a goodwill impairment charge of approximately $580.1 million related to the planned divestiture of the OTC Business, (2) expenses related to the ophthalmology acquisitions of approximately $152.8 million, (3) higher investment in selling and promotional activities, and (4) increased compensation, including severance-related costs.

Partially offsetting these increases were:

(1) lower acquisition and divestiture-related costs of approximately $88.2 million, primarily as a result of costs incurred in 2022 in conjunction with the Biocon Biologics Transaction and transitioning certain support services from Pfizer, (2) charges of $156.5 million incurred in 2022 related to the divestitures of the commercialization rights in the Upjohn Distributor Markets, and (3) a gain recorded in 2023 of approximately $156.2 million on the transaction to divest the Company’s rights to two women’s healthcare products in certain countries (other than in the U.K., which remains subject to regulatory approval).

Litigation Settlements and Other Contingencies, Net

The following table includes the (gains) losses recognized in litigation settlements and other contingencies, net during the years ended December 31, 2022 and 2021, respectively:

The following table includes the losses/(gains) recognized in litigation settlements and other contingencies, net during the years ended December 31, 2023 and 2022, respectively:

Year Ended December 31,

(In millions) 2023 2022

Contingent consideration adjustment (primarily related to Respiratory Delivery Platform) $ 11.1 $ 50.3

Contingent consideration adjustment (primarily related to the Respiratory Delivery Platform)

$ 80.4 $ 11.1

Litigation settlements, net 31.2 (6.7)

Total litigation settlements and other contingencies, net $ 111.6 $ 4.4

Litigation settlements in 2021 included a $264.0 million charge for the EpiPen® related settlement.

Interest Expense

Interest expense for the year ended December 31, 2022 totaled $592.4 million, compared to $636.2 million for the year ended December 31, 2021, a decrease of $43.8 million.

The decrease is primarily due to the impact of debt repayments.

Other (Income) Expense, Net

Other (income) expense, net includes gains and losses from divestitures, equity affiliates, foreign exchange, expense (income) related to post-employment benefit plans, TSA income, and interest and dividend income.

Other income, net for the year ended December 31, 2022 totaled $1.79 billion, compared to $5.8 million for the year ended December 31, 2021.

The increase was primarily driven by the gain from the Biocon Biologics Transaction of $1.75 billion and income of $17.7 million related to reimbursement for transition services provided to Biocon Biologics subsequent to the closing of the Biocon Biologics Transaction.

Interest expense for the year ended December 31, 2023 totaled $573.1 million, compared to $592.4 million for the year ended December 31, 2022, a decrease of $19.3 million primarily due to the impact of debt repayments.

Other Income, Net

Other income, net includes gains and losses from divestitures of businesses, changes in the fair value of equity securities, foreign exchange, expense (income) related to post-employment benefit plans, TSA income, and interest and dividend income.

Other income, net for the year ended December 31, 2023 totaled $9.8 million, compared to $1.79 billion for the year ended December 31, 2022.

The decrease in other income, net was driven by:

(1) the gain from the Biocon Biologics Transaction of $1.75 billion recorded in the prior year, and (2) charges incurred during the year ended December 31, 2023 of approximately $154.7 million related to the planned divestiture of the OTC Business to write down the disposal group to fair value, less cost to sell, and approximately $85.2 million related to the divestitures of the commercialization rights in the Upjohn Distributor Markets.

This was partially offset by:

(1) net gains recorded during the year ended December 31, 2023 of approximately $43.4 million as a result of remeasuring our equity interests in Mapi and Famy Life Sciences and the CCPS in Biocon Biologics to fair value, (2) higher interest income of approximately $46.8 million, and (3) an increase in TSA income from Biocon Biologics of approximately $150.3 million.

The costs related to the transition services are included in SG&A and R&D.

In addition, the prior year was negatively impacted by losses of $61.9 million from the Company’s clean energy investments, which did not recur in 2022 as all of the clean energy investments wound down operations at the end 2021.

Income Tax Provision

For the year ended December 31, 2023, the Company recognized an income tax provision of $148.2 million, compared to an income tax provision of $734.6 million for the prior year, a change in the provision of $586.4 million.

The income tax provision for the year ended December 31, 2023 was negatively impacted by the goodwill impairment related to the planned divestiture of the OTC Business, partially offset by the deferred tax impact of the Company’s internal tax restructuring.

The income tax provision for the year ended December 31, 2022 was negatively impacted by the gain from the Biocon Biologics Transaction.

The income tax provision for the year ended December 31, 2021 was negatively impacted by the tax rates applied to the reversal of intercompany profit in inventory reserve which was recorded on the opening balance sheet as part of the Combination.

This reserve eliminates the profit in inventory related to intercompany transactions and changes to this reserve occur as products are sold to third parties.

Also impacting the income tax provision for both periods was the changing mix of income earned in jurisdictions with differing tax rates.

The current year and prior year provisions were impacted by the levels of income and the changing mix at which it is earned in jurisdictions with differing tax rates.

2022 Compared to 2021

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Adjusted Cost of Sales and Adjusted Gross Margin

We use the non-GAAP financial measure “adjusted cost of sales” and the corresponding non-GAAP financial measure “adjusted gross margin.” The principal items excluded from adjusted cost of sales include restructuring, acquisition related and other special items and purchase accounting related amortization, which are described in greater detail below.

We use the non-GAAP financial measure “adjusted cost of sales” and the corresponding non-GAAP financial measure “adjusted gross margin.” The principal items excluded from adjusted cost of sales include restructuring, acquisition and divestiture-related costs, and other special items, purchase accounting amortization and other related items, and share-based compensation expense, which are described in greater detail below.

Adjusted Net Earnings

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The ongoing impact of certain amounts recorded in connection with acquisitions of both businesses and assets is excluded from adjusted cost of sales, adjusted net earnings, and adjusted EBITDA.

These amounts include the amortization of intangible assets, inventory step-up, property, plant and equipment step-up, and intangible asset impairment charges, including for in-process research and development, and impairments of goodwill.

These amounts include the amortization of intangible assets, inventory step-up, property, plant and equipment step-up, intangible asset impairment charges, including for IPR&D, and impairment of goodwill.

For the acquisition of businesses accounted for under the provisions of ASC 805, Business Combinations , these purchase accounting impacts are excluded regardless of the financing method used for the acquisitions, including the use of cash, long-term debt, the issuance of common stock, contingent consideration or any combination thereof.

Upfront and Milestone-Related R&D Expenses

Beginning in 2022, upfront and milestone-related R&D expenses related to collaboration and licensing arrangements made prior to regulatory approval of a development product are no longer excluded from adjusted net earnings and adjusted EBITDA.

For purposes of comparability, the prior years’ non-GAAP financial measures have been updated to reflect this change.

For the years ended December 31, 2021 and 2020, this resulted in a decrease in adjusted EBITDA of $70.1 million and $42.5 million, respectively, and a decrease in adjusted net earnings of $57.8 million and $34.6 million, respectively.

Fair Value Adjustments, Including Contingent Consideration

The impact of changes to the fair value of assets and liabilities, including contingent and deferred consideration, and the related accretion income or expense are excluded from adjusted net earnings and adjusted EBITDA because they are not indicative of the Company’s ongoing operations due to the variability of the amounts and the lack of predictability as to the occurrence and/or timing and management believes their exclusion is helpful to understanding the underlying, ongoing operational performance of the business.

The impact of changes to the fair value of assets and liabilities, including contingent and deferred consideration and non-marketable equity investments, and the related accretion income or expense are excluded from adjusted net earnings and adjusted EBITDA because they are not indicative of the Company’s ongoing operations due to the variability of the amounts and the lack of predictability as to the occurrence and/or timing and management believes their exclusion is helpful to understanding the underlying, ongoing operational performance of the business.

Share-based Compensation Expense

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As such, management believes the exclusion of such amounts on an ongoing basis is helpful to understanding the underlying operational performance of the business.

Restructuring, Acquisition and Divestiture Related, and Other Special Items

Costs related to restructuring, acquisition and integration activities and other actions are excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA, as applicable.

Restructuring, Acquisition and Divestiture-Related Costs, and Other Special Items

Costs related to restructuring, acquisition and divestiture-related activities and other actions are excluded from adjusted cost of sales, adjusted net earnings and adjusted EBITDA, as applicable.

These amounts include items such as:

• Costs related to formal restructuring programs and actions, including costs associated with facilities to be closed or divested, employee separation costs, impairment charges, accelerated depreciation, incremental manufacturing variances, equipment relocation costs, decommissioning and other restructuring related costs;

• Certain acquisition and divestitures related remediation and integration and planning costs, as well as other costs associated with acquisitions and divestitures such as advisory and legal fees, certain financing related costs, certain reimbursements related to the Company’s obligation to reimburse Pfizer for certain financing and transaction related costs under the BCA and SDA, certain other TSA related set-up and exit costs, and other business transformation and/or optimization initiatives, which are not part of a formal restructuring program, including employee separation and post-employment costs;

• Certain acquisition and divestiture costs, including costs relating to integration and planning, advisory and legal fees, certain financing related costs, certain reimbursements related to the Company’s obligation to reimburse Pfizer for certain financing and transaction related costs under the Business Combination Agreement and Separation and Distribution Agreement, certain other TSA related set-up and exit costs, and other business transformation and/or optimization initiatives, which are not part of a formal restructuring program, including employee separation and post-employment costs;

• The pre-tax loss of the Company’s clean energy investments, whose activities qualify for income tax credits under the Code;

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• Certain costs to further develop and optimize our global enterprise resource planning systems, operations and supply chain;

• Gains or losses from divestitures, including impairments of held of sale assets;

• The impact of changes related to uncertain tax positions and certain impacts related to the Combination are excluded from adjusted cost of sales and adjusted net earnings.

• Gains or losses from divestitures, including impairments of held for sale assets;

• The impact of changes related to uncertain tax positions are excluded from adjusted cost of sales and adjusted net earnings.

In addition, tax adjustments to adjusted earnings are recorded to present items on an after-tax basis consistent with the presentation of adjusted net earnings.

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Litigation Settlements, Net

Charges and gains related to legal matters, such as those discussed in Note 20 Litigation included in Part II.

Item 8 of this Form 10-K are generally excluded from adjusted net earnings and adjusted EBITDA.

Charges and gains related to legal matters, such as those discussed in Note 19 Litigation included in Part II, Item 8 of this Form 10-K are generally excluded from adjusted net earnings and adjusted EBITDA.

Normal, ongoing defense costs of the Company made in the normal course of our business are not excluded.

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2,421.5 2,721.3 4,039.7

Impairment of goodwill related to assets held for sale (a)

Impairment of goodwill related to assets held for sale (included in SG&A) (b)

580.1 117.0 —

Litigation settlements and other contingencies, net 111.6 4.4 329.2

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Clean energy investments pre-tax loss — — 61.9

Acquisition and divestiture related costs (primarily included in SG&A) (b)

Acquisition and divestiture-related costs (primarily included in SG&A) (c)

377.9 475.7 234.6

Biocon Biologics gain on divestiture (included in other (income) expense, net) (1,754.1) — —

Restructuring related costs (c)

Loss (gain) on divestitures of businesses (included in other income, net) (d)

239.9 (1,754.1) —

Restructuring-related costs (e)

125.2 86.9 899.4

Share-based compensation expense 180.7 116.5 111.2

Other special items included in:

Cost of sales (d)

Cost of sales (f)

119.2 255.2 333.0

Research and development expense (e)

Selling, general and administrative expense (f)

Research and development expense 2.8 1.0 13.1

Selling, general and administrative expense (g)

(83.5) 68.8 49.5

Other (income) expense, net (3.8) (8.0) (16.8)

Tax effect of the above items and other income tax related items (g)

Other income, net (h)

(24.4) (3.8) (8.0)

Tax effect of the above items and other income tax related items (i)

(525.6) (41.7) (330.7)

Adjusted net earnings $ 3,537.7 $ 4,077.1 $ 4,410.0

Significant items for the year ended December 31, 2023 include the following:

(a) For the year ended December 31, 2022, charges include an intangible asset charge of approximately $172.9 million to write down the disposal group to fair value, less cost to sell, and a related goodwill impairment charge of $117.0 million for the potential divestiture of the Upjohn Distributor Markets.

(b) Acquisition and divestiture related costs consist primarily of transaction costs including legal and consulting fees and integration activities.

(c) For the year ended December 31, 2022, charges include approximately $56.8 million in cost of sales, approximately $1.4 million in R&D, and approximately $28.7 million in SG&A.

Refer to Note 18 Restructuring included in Part II.

Item 8 of this Form 10-K for additional information.

(d) For the year ended December 31, 2022, charges include incremental manufacturing variances at plants in the 2020 restructuring program of approximately $118.4 million and inventory reserves related to the potential divestiture of the Upjohn Distributor Markets of approximately $44.8 million.

(e) Beginning in 2022, upfront and milestone-related R&D expenses related to collaboration and licensing arrangements made prior to regulatory approval of a development product are no longer excluded from adjusted net earnings and adjusted EBITDA.

For purposes of comparability, the prior years’ non-GAAP financial measures have been updated to reflect this change.

(f) For the year ended December 31, 2022, charges include costs of $39.5 million related to the potential divestiture of the Upjohn Distributor Markets.

(g) Adjusted for changes for uncertain tax positions and for certain impacts of the Combination.

(a) Includes an intangible asset charge related to the divestitures of the commercialization rights in the Upjohn Distributor Markets of approximately $32.0 million to write down the disposal group to fair value, less cost to sell.

Also includes amortization of the step-up in the fair value of inventory related to the Oyster Point acquisition of approximately $29.3 million.

(b) A goodwill impairment charge of approximately $580.1 million related to the planned divestiture of the OTC Business.

(c) Acquisition and divestiture-related costs consist primarily of transaction costs including legal and consulting fees and integration activities.

(d) Includes a charge related to the planned divestiture of the OTC Business of approximately $154.7 million to write down the disposal group to fair value, less cost to sell, and a charge of approximately $85.2 million related to the divestitures of the commercialization rights in the Upjohn Distributor Markets.

(e) Includes approximately $101.8 million in cost of sales, approximately $0.3 million in R&D, and approximately $23.1 million in SG&A.

Refer to Note 17 Restructuring included in Part II, Item 8 of this Form 10-K for additional information.

(f) Includes incremental manufacturing variances at plants in the 2020 restructuring program of approximately $45.9 million and charges related to the divestitures of the commercialization rights in the Upjohn Distributor Markets of approximately $19.2 million.

(g) Includes a gain of approximately $156.2 million on the transaction to divest the Company’s rights to two women’s healthcare products in certain countries (other than in the U.K., which remains subject to regulatory approval), which closed in December 2023.

(h) Includes net gains of approximately $43.4 million as a result of remeasuring our non-marketable equity investments to fair value, including our equity interests in Mapi and Famy Life Sciences and the CCPS in Biocon Biologics.

(i) Adjusted for changes for uncertain tax positions.

Reconciliation of U.S.

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GAAP net earnings (loss) $ 54.7 $ 2,078.6 $ (1,269.1)

Add / (deduct) adjustments:

Add adjustments:

Net contribution attributable to equity method investments — — 61.9

Income tax provision (benefit) 734.6 604.7 (51.3)

Income tax provision

148.2 734.6 604.7

Interest expense (a)

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Litigation settlements and other contingencies, net 111.6 4.4 329.2

Biocon Biologics gain on divestiture (1,754.1) — —

Loss (gain) on divestitures of businesses 239.9 (1,754.1) —

Impairment of goodwill related to assets held for sale 580.1 117.0 —

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(b) Includes purchase accounting related amortization.

GAAP Net Earnings (Loss) to Adjusted Net Earnings.

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Our primary source of liquidity is net cash provided by operating activities, which was $2.80 billion for the year ended December 31, 2023.

We believe that net cash provided by operating activities and available liquidity will continue to allow us to meet our needs for working capital, capital expenditures, interest and principal payments on debt obligations, and dividend payments.

Nevertheless, our ability to satisfy our working capital requirements and debt service obligations, and fund planned capital expenditures, share repurchases, or dividend payments, will substantially depend upon our future operating performance (which will be affected by prevailing economic conditions), and financial, business and other factors, some of which are beyond our control.

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Net cash provided by operating activities is derived from net earnings (loss) adjusted for non-cash operating items, gains and losses attributed to investing and financing activities and changes in operating assets and liabilities resulting from timing differences between the receipts and payments of cash, including changes in cash primarily reflecting the timing of cash collections from customers, payments to vendors and employees and tax payments in the ordinary course of business.

The decrease in net cash provided by operating activities was principally due to the timing of cash payments and collections, including payments for litigation matters, and due to deal-related expenses, primarily taxes and transaction costs, associated with the Biocon Biologics Transaction.

These increases were partially offset by lower payments for restructuring activities and other special items, and the impact of synergies.

The decrease in net cash provided by operating activities was principally due to lower operating earnings, including as a result of the disposition of the biosimilars business in November 2022 and other divestitures during 2023, and the timing of cash payments and collections.

This was partially offset by higher deal-related costs in 2022, primarily taxes and transaction costs, associated with the closing of the Biocon Biologics Transaction.

Investing Activities

Net cash from investing activities was $1.52 billion for the year ended December 31, 2022, as compared to net cash used in investing activities of $117.8 million for the year ended December 31, 2021, an increase of $1.64 billion.

Net cash used in investing activities was $764.1 million for the year ended December 31, 2023, as compared to net cash from investing activities of $1.52 billion for the year ended December 31, 2022, a decrease of $2.28 billion.

In 2023, significant items in investing activities included the following:

• proceeds from the sale of assets of $1.95 billion related to the Biocon Biologics Transaction;

• cash paid for acquisitions, net of cash acquired, of $667.7 million;

• payments for product rights and other, net totaling approximately $97.5 million, related to various product-related payments;

• capital expenditures, primarily for equipment and facilities, totaling approximately $377.0 million.

While there can be no assurance that current expectations will be realized, capital expenditures for the 2024 calendar year are expected to be approximately $350 million to $450 million;

• proceeds from the sale of assets and businesses of $364.1 million, primarily related to divestitures of the Company’s rights to two women’s healthcare products in certain countries (other than in the U.K., which remains subject to regulatory approval) and commercialization rights in certain Upjohn Distributor Markets.

In 2022, significant items in investing activities included the following:

• cash received from acquisitions, net totaling approximately $277.0 million related to additional target cash balances received from Pfizer subsequent to the closing of the Combination;

• proceeds from the sale of assets of $96.7 million, primarily related to a group of OTC products in the U.S.;

• proceeds from the sale of assets of $1.95 billion related to the Biocon Biologics Transaction;

• capital expenditures, primarily for equipment and facilities, totaling approximately $406.0 million.

Financing Activities

Net cash used in financing activities was $3.88 billion for the year ended December 31, 2022, as compared to net cash used in financing activities of $3.01 billion for the year ended December 31, 2021, an increase of $865.9 million.

Net cash used in financing activities was $2.30 billion for the year ended December 31, 2023, as compared to net cash used in financing activities of $3.88 billion for the year ended December 31, 2022, a decrease of $1.58 billion.

In 2023, significant items in financing activities included the following:

• repayments of Senior Notes at maturity of approximately $1.25 billion, consisting of the 3.125% Senior Notes and the 4.200% Senior Notes;

• share repurchases of $250.0 million;

• cash dividends paid of $575.6 million;

• payment of $220.0 million to Biocon Biologics related to the closing working capital target, partially offset by net cash of $47.6 million, primarily collected on behalf of other partners, which are included in Other items, net.

In 2022, significant items in financing activities included the following:

• repayments of Senior Notes at maturity of approximately $1.79 billion, consisting of the 0.816% Euro Senior Notes and the 1.125% Senior Notes;

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• proceeds of $19.3 million related to cash collected on behalf of Biocon Biologics.

In 2021, significant items in financing activities included the following:

• long-term debt payments of approximately $4.20 billion, consisting of the redemption of $2.25 billion of the 3.150% Senior Notes due 2021, repayment of $1.35 billion of borrowings under the 2020 Revolving Facility and the 2021 Revolving Facility, and repayment of $600.0 million of the USD Term Loan;

• long-term borrowings of $1.71 billion, consisting of borrowings of $1.35 billion under the 2020 Revolving Facility and the 2021 Revolving Facility, and borrowings of $360.0 million under the YEN Term Loan;

• net short-term borrowings of $392.1 million;

• deferred non-contingent payments for product rights totaling approximately $456.0 million primarily related to the acquisition of Aspen’s thrombosis product portfolio in Europe;

• cash dividends paid of $399.0 million.

Refer to the consolidated statements of cash flows in Part II.

Item 8 of this Form 10-K for additional details on other significant sources and uses of cash during the years ended December 31, 2022 and 2021.

Refer to the consolidated statements of cash flows in Part II, Item 8 of this Form 10-K for additional details on other significant sources and uses of cash during the years ended December 31, 2023 and 2022.

Capital Resources

Our cash and cash equivalents totaled $1.26 billion at December 31, 2022, and the majority of these funds are held by our non-U.S.

subsidiaries.

In early 2023, approximately $700 million of cash was used to finance the acquisitions of Oyster Point and Famy Life Sciences.

The Company anticipates having sufficient liquidity, including existing borrowing capacity under the 2021 Revolving Facility, Commercial Paper Program and the Receivables Facility and the Note Securitization Facility combined with cash to be generated from operations, to fund foreseeable cash needs without requiring the repatriation of non-U.S.

In July 2021, Viatris entered into (i) the YEN Term Loan Facility and (ii) the 2021 Revolving Facility with various syndicates of banks.

The YEN Term Loan Facility and the 2021 Revolving Facility will mature in July 2026.

The Company has access to $4.0 billion under the 2021 Revolving Facility.

Our cash and cash equivalents totaled $991.9 million at December 31, 2023.

The majority of our cash is invested in U.S.

government money market funds.

In order to support our global operations, we maintain significant cash and cash equivalents within the banking system with the majority of this at Global Systemically Important Banks.

We monitor the third-party depository institutions that hold our cash and cash equivalents on a regular basis.

Our primary emphasis is on the safety of the principal.

Where possible, we diversify our cash and cash equivalents among counterparties to minimize exposure to any

one counterparty.

The Company anticipates having sufficient liquidity, including existing borrowing capacity under the Revolving Facility, Commercial Paper Program, Receivables Facility, and Note Securitization Facility combined with cash to be generated from operations, to fund foreseeable cash needs without requiring the repatriation of non-U.S.

The Company has access to $4.0 billion under the Revolving Facility which matures in July 2026.

Effective April 28, 2023, we executed an amendment to the Revolving Facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins.

Up to $1.65 billion of the Revolving Facility may be used to support borrowings under our Commercial Paper Program.

As of December 31, 2023, the Company did not have any borrowings outstanding under the Commercial Paper Program and the Revolving Facility.

In addition, MPI, a wholly owned subsidiary of the Company, has access to $400 million under the Receivables Facility, which expires in April 2025.

As of December 31, 2022, the Company did not have any borrowings outstanding under the Receivables Facility.

In August 2020, the Company entered into the Note Securitization Facility for borrowings up to $200 million, which was amended to extend the term to August 2023.

As of December 31, 2022, the Company did not have any borrowings outstanding under the Note Securitization Facility.

The Company has a $400 million Receivables Facility which expires in April 2025 and a $200 million Note Securitization Facility which expires in August 2024.

As of December 31, 2023, the Company did not have any borrowings outstanding under the Receivables Facility or the Note Securitization Facility.

Under the terms of each of the Receivables Facility and Note Securitization Facility, certain of our accounts receivable secure the amounts borrowed and cannot be used to pay our other debts or liabilities.

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We derecognized $30.8 million and $34.7 million of accounts receivable as of December 31, 2023 and 2022 under these factoring arrangements, respectively.

Additionally, in 2023, we entered into a similar arrangement for certain European countries.

As of December 31, 2023, we have assigned and derecognized approximately $415.7 million of Trade Receivables, Net , which are now included in Other Receivables .

The Company has certain voluntary supply chain finance programs with financial intermediaries which provide participating suppliers the option to be paid by the intermediary earlier than the original invoice due date.

The Company’s responsibility is limited to making payments on the terms originally negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date.

The range of payment terms the Company negotiates with suppliers are consistent, regardless of whether a supplier participates in a supply chain finance program.

The total amounts due to financial intermediaries to settle supplier invoices under supply chain finance programs as of December 31, 2023 and 2022 were $65.1 million and $33.4 million, respectively.

These amounts are included within Accounts payable in the consolidated balance sheets.

We are continuously evaluating the potential acquisition of products, as well as companies, as a strategic part of our future growth.

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In addition, we plan to continue to explore various other ways to create, enhance or otherwise unlock the value of the Company’s unique global platform in order to create shareholder value.

In November 2022, the Company provided an update on the strategic priorities announced in February 2022, including identifying the following businesses no longer considered core to its future strategy that the Company intends to divest:

• API (while retaining some selective development API capabilities);

• Women’s health care, primarily related to our oral and injectable contraceptives.

This does not include all of our women’s health care related products;

as an example, our Xulane® product in the U.S.

• Upjohn Distributor Markets.

For information regarding our dividends paid and declared and share repurchase program, refer to Note 2 Summary of Significant Accounting Policies in Part II.

Item 8 of this Form 10-K.

As previously discussed, on October 1, 2023, the Company announced certain divestiture related transactions.

Refer to Note 5 Divestitures in Part II, Item 8 of this Form 10-K for more information.

For information regarding our dividends paid and declared and share repurchase program, refer to Note 2 Summary of Significant Accounting Policies in Part II, Item 8 of this Form 10-K.

Long-term Debt Maturity

For information regarding our debt agreements and mandatory minimum repayments remaining on the outstanding notional amount of long-term debt at December 31, 2022, refer to Note 11 Debt in Part II.

Item 8 of this Form 10-K.

The YEN Term Loan Facility and the 2021 Revolving Facility contain customary affirmative covenants for facilities of this type, including among others, covenants pertaining to the delivery of financial statements, notices of default and certain material events, maintenance of corporate existence and rights, property, and insurance and compliance with laws, as well as customary negative covenants for facilities of this type, including a financial covenant, which set the Maximum Leverage Ratio as of the end of any quarter at 4.25 to 1.00 for each quarter ending after June 30, 2021 through and including June 30, 2022, 4.0 to 1.00 for each quarter ending after June 30, 2022 through and including December 31, 2022 and 3.75 to 1.00 thereafter, except in circumstances as defined in the related credit agreement, and other limitations on the incurrence of subsidiary indebtedness, liens, mergers and certain other fundamental changes, investments and loans, acquisitions, transactions with affiliates, payments of dividends and other restricted payments and changes in our lines of business.

For information regarding our debt agreements and mandatory minimum repayments remaining on the outstanding notional amount of long-term debt at December 31, 2023, refer to Note 10 Debt in Part II, Item 8 of this Form 10-K.

The YEN Term Loan Facility and the Revolving Facility contain customary affirmative covenants for facilities of this type, including among others, covenants pertaining to the delivery of financial statements, notices of default and certain material events, maintenance of corporate existence and rights, property, and insurance and compliance with laws, as well as customary negative covenants for facilities of this type, including a financial covenant, which set the Maximum Leverage Ratio as of the end of any quarter at 3.75 to 1.00 for the quarter ended March 31, 2023 and each quarter ending thereafter, except in circumstances as defined in the related credit agreement, and other limitations on the incurrence of subsidiary indebtedness, liens, mergers and certain other fundamental changes, investments and loans, acquisitions, transactions with affiliates, payments of dividends and other restricted payments and changes in our lines of business.

The Company is in compliance with its covenants at December 31, 2023 and expects to remain in compliance for the next twelve months.

We and our subsidiaries and affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt securities (including any publicly-issued debt securities) in privately negotiated or open market transactions, by tender offer or otherwise, or extend or refinance any of our outstanding indebtedness.

Supplemental Guarantor Financial Information

is the issuer of the outstanding Registered Upjohn Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Mylan II B.V.

is the issuer of the Registered Upjohn Notes, which are fully and unconditionally guaranteed on a senior unsecured basis by Mylan Inc., Mylan II B.V.

and Utah Acquisition Sub Inc.

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Dollar Notes, subject to certain exceptions set forth in the applicable indenture, such guarantor ceasing to be a guarantor or obligor in respect of any Triggering Indebtedness;

and (5) with respect to the outstanding Registered Upjohn Notes, (a) upon the applicable guarantor no longer being an issuer or guarantor in respect of (i) Mylan Notes (as defined in the indenture governing the outstanding Registered Upjohn Notes) that have an aggregate principal amount in excess of $500.0 million or (ii) any Triggering Indebtedness;

and (5) with respect to the Registered Upjohn Notes, (a) upon the applicable guarantor no longer being an issuer or guarantor in respect of (i) Mylan Notes (as defined in the indenture governing the Registered Upjohn Notes) that have an aggregate principal amount in excess of $500.0 million or (ii) any Triggering Indebtedness;

in each case, other than in respect of indebtedness or guarantees, as applicable, that are being concurrently released;

or (b) upon receipt of the consent of holders of a majority of the aggregate principal amount of the outstanding notes of such series in accordance with the indenture governing the outstanding Registered Upjohn Notes.

The guarantee obligations of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V.

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The following table presents unaudited summarized financial information of Viatris Inc., Mylan Inc., Utah Acquisition Sub Inc., and Mylan II B.V.

on a combined basis as of and for the year ended December 31, 2022 and 2021.

on a combined basis as of and for the years ended December 31, 2023 and 2022.

All intercompany balances have been eliminated in consolidation.

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Gross profit — —

Loss (earnings) from operations (1,132.4) (1,023.9)

Net earnings (loss) 2,078.6 (1,269.1)

Loss from operations

(1,243.8) (1,132.4)

Other Commitments

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It is possible that an unfavorable resolution of any of the ongoing matters could have a material effect on the Company’s business, financial condition, results of operations, cash flows, ability to pay dividends and/or stock price.

In conjunction with the Combination, Viatris entered into a TSA with Pfizer pursuant to which each party provides certain limited transition services to the other party generally for an initial period of 24 months from the closing date of the Combination.

In addition to the monthly service fees under the TSA, Viatris agreed to reimburse Pfizer for fifty percent of the costs, up to the first $380 million incurred, to establish and wind down the TSA services.

In conjunction with the Combination, Viatris entered into a TSA with Pfizer pursuant to which each party provided certain limited transition services to the other party.

In addition to the monthly service fees under the TSA, Viatris has agreed to reimburse Pfizer for fifty percent of the costs, up to the first $380 million incurred, to establish and wind down the TSA services.

Viatris will be required to fully reimburse Pfizer for total costs in excess of $380 million.

During the years ended December 31, 2022 and 2021, the Company incurred $54.5 million and $30.4 million, respectively, related to this provision of the TSA, and approximately $138.0 million during the period beginning on the closing date of the Combination and ended December 31, 2022.

We expect to incur future costs related to the completion of the services.

As of December 31, 2022, the Company has exited substantially all transition services with Pfizer.

In conjunction with the Biocon Biologics Transaction, Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris is providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues.

During the years ended December 31, 2023, 2022 and 2021, the Company incurred $5.5 million, $54.5 million, and $30.4 million, respectively, related to this provision of the TSA, and approximately $143.5 million during the period beginning on the closing date of the Combination and ended December 31, 2023.

As of December 31, 2022, the Company had exited substantially all transition services with Pfizer.

At the time of closing of the Biocon Biologics Transaction, Viatris and Biocon Biologics also entered an agreement pursuant to which Viatris was providing commercialization and certain other transition services on behalf of Biocon Biologics, including billings, collections and the remittance of rebates, to ensure business continuity for patients, customers and colleagues.

Biocon Biologics had substantially exited all transition services with Viatris as of December 31, 2023.

In connection with the Announced Divestitures, Viatris has agreed, at the closing of the respective transactions, to enter into transition services and manufacturing and supply agreements pursuant to which the Company will provide services to the respective purchasers, substantially the same as we currently provide to the related businesses, generally for a period of up to 12 months, subject to potential extensions in certain circumstances.

In addition, in connection with the OTC Transaction and the divestiture of our women’s healthcare business, we have agreed, at the closing of the respective transactions, to enter into distribution agreements for certain markets for a limited period of time.

In connection with our API business divestiture, we have agreed to enter into a manufacturing and supply agreement pursuant to which we will purchase a significant amount of API from the purchaser in that transaction.

At December 31, 2023, our material cash requirements from known contractual and other obligations primarily relate to repayment of outstanding borrowings and interest, open purchase orders, post-employment benefit plans, unrecognized tax benefits, capital expenditures, dividends and leases.

For additional information, refer to Notes 2, 4, 7, 11, 13, 15, and 17 in Part II.

Item 8 of this Form 10-K.

For additional information, refer to Notes 2, 7, 10, 12, 14, and 16 in Part II, Item 8 of this Form 10-K.

We anticipate our cash requirements related to ordinary course purchases of goods and services will be consistent with our past levels.

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Additionally, these agreements may also include potential sales-based milestones and call for us to pay a percentage of amounts earned from the sale of the product as a royalty or a profit share.

Refer to Note 19 Licensing and Other Partner Agreements included in Part II.

Item 8 of this Form 10-K for additional information.

Refer to Note 18 Licensing and Other Partner Agreements included in Part II, Item 8 of this Form 10-K for additional information.

Application of Critical Accounting Policies

Our significant accounting policies are described in Note 2 Summary of Significant Accounting Policies included in Part II.

Item 8 of this Form 10-K and are in accordance with U.S.

Our significant accounting policies are described in Note 2 Summary of Significant Accounting Policies included in Part II, Item 8 of this Form 10-K and are in accordance with U.S.

Included within these policies are certain policies which contain critical accounting estimates and, therefore, have been deemed to be “critical accounting policies.” Critical accounting estimates are those which require management to make assumptions about matters that were uncertain at the time the estimate was made and for which the use of different estimates, which reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur from period to period could have a material impact on our financial condition or results of operations.

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Revenues are recorded net of provisions for variable consideration, including discounts, rebates, governmental rebate programs, price adjustments, returns, chargebacks, promotional programs and other sales allowances.

Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).

Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net sales and as a contra asset in accounts

receivable, net (if settled via credit) and other current liabilities (if paid in cash).

Amounts recorded for revenue deductions can result from a complex series of judgements about future events and uncertainties and can rely heavily on estimates and assumptions.

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The following is a rollforward of the categories of variable consideration during 2023:

(In millions) Balance at December 31, 2021 Current Provision Related to Sales Made in the Current Period Balances Divested Checks/ Credits Issued to Third Parties Effects of Foreign Exchange Balance at December 31, 2022

(In millions) Balance at December 31, 2022 Current Provision Related to Sales Made in the Current Period Acquisitions, Divestitures, and Other

Checks/ Credits Issued to Third Parties Effects of Foreign Exchange Balance at December 31, 2023

Chargebacks $ 523.4 $ 5,457.9 $ (8.1) $ (5,443.6) $ 0.7 $ 530.3

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Total $ 2,687.5 $ 10,304.7 $ (5.0) $ (10,528.0) $ 20.7 $ 2,479.9

Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net revenues and in accounts receivable and other current liabilities.

Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net revenues and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).

Accounts receivable are presented net of allowances relating to these provisions, which were comprised of the following at December 31, 2023 and 2022, respectively:

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Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Refer to Note 4 Acquisitions and Other Transactions and Note 9 Goodwill and Intangible Assets included in Part II.

Item 8 of this Form 10-K for additional information.

Refer to Note 4 Acquisitions and Other Transactions and Note 8 Goodwill and Intangible Assets included in Part II, Item 8 of this Form 10-K for additional information.

Purchases of developed products and licenses that are accounted for as asset acquisitions are capitalized as intangible assets and amortized over an estimated useful life.

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Because this process involves management making estimates with respect to future sales volumes, pricing, new product launches, government reform actions, anticipated cost environment and overall market conditions, and because these estimates form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates.

The Company records contingent consideration resulting from business acquisitions at its estimated fair value on the acquisition date.

The Company records contingent consideration liabilities resulting from business acquisitions or divestitures at its estimated fair value on the acquisition or divestiture date.

Each reporting period thereafter, the Company revalues these obligations and records increases or decreases in their fair value as adjustments to litigation settlements and other contingencies, net within the consolidated statements of operations.

Changes in the fair value of the contingent consideration obligations can result from adjustments to the discount rates, payment periods and adjustments in the probability of achieving future development steps, regulatory approvals, market launches, sales targets and profitability.

These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market.

Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period.

Significant judgment is employed in determining the assumptions utilized as of the acquisition or divestiture date and for each subsequent measurement period.

Accordingly, changes in the assumptions described above could have a material impact on the Company’s consolidated financial condition and results of operations.

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The judgments made in determining the projected cash flows used to estimate the fair value can materially impact the Company’s financial condition and results of operations.

The Company performed both its interim and annual goodwill impairment tests on a quantitative basis for its five reporting units, North America, Europe, Emerging Markets, JANZ, and Greater China.

In estimating each reporting unit’s fair value, the Company performed an extensive valuation analysis, utilizing both income and market-based approaches.

The Company performed its annual goodwill impairment test on a quantitative basis for its five reporting units, North America, Europe, Emerging Markets, JANZ, and Greater China.

In estimating each reporting unit’s fair value, the Company performed an extensive valuation analysis, utilizing a discounted cash flow approach.

The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions that affect the reporting unit’s expected future cash flows.

These estimates and assumptions, utilizing Level 3 inputs, primarily include, but are not limited to, market multiples, control premiums, the discount rate, terminal growth rates, operating income before depreciation and amortization, and capital expenditures forecasts.

As of March 31, 2022 and April 1, 2022, the allocation of the Company’s total goodwill (prior to the reclassification of goodwill to assets held for sale) was as follows:

These estimates and assumptions, utilizing Level 3 inputs, primarily include, but are not limited to, the discount rate, terminal growth rates, operating income before depreciation and amortization, capital expenditures forecasts and control premiums.

When compared to the prior year’s annual goodwill impairment test completed on April 1, 2022, the Company has experienced significant fluctuations in foreign exchange rates in certain international markets, combined with a significant increase in market interest rates.

These market factors have caused the discount rate utilized in all our reporting units to increase between 1.0% to 4.5%, resulting in a significant reduction in the calculated fair values at April 1, 2023 for all our reporting units.

Also, in conjunction with the Company’s annual strategic planning process which included determining long-term growth rate targets for our business, operational results during the forecast period were reduced and long-term growth rates were increased.

As a result of these changes, the calculated fair values of the North America, Greater China and Europe reporting units declined in excess of 10% and the JANZ and Emerging Markets reporting units declined in excess of 15% when compared to the prior year fair values.

As of April 1, 2023, the allocation of the Company’s total goodwill was as follows:

North America $3.15 billion, Europe $4.47 billion, Emerging Markets $1.34 billion, JANZ $0.68 billion and Greater China $0.94 billion.

As of March 31, 2022 and April 1, 2022, the Company determined that the fair value of the North America and Greater China reporting units was substantially in excess of the respective unit’s carrying value.

For the Europe reporting unit, the estimated fair value exceeded its carrying value by approximately $797 million or 5.3% for both the interim and annual goodwill impairment tests.

As it relates to the income approach for the Europe reporting unit at March 31, 2022 and April 1, 2022, the Company forecasted cash flows for the next 10 years.

As of April 1, 2023, the Company determined that the fair value of the North America and Greater China reporting units was substantially in excess of the respective unit’s carrying value.

For the Europe reporting unit, the estimated fair value exceeded its carrying value by approximately $535 million or 3.9% for the annual goodwill impairment test.

As it relates to the discounted cash flow approach for the Europe reporting unit at April 1, 2023, the Company forecasted cash flows for the next 10 years.

During the forecast period, the revenue compound annual growth rate was approximately 2.4%.

A terminal year value was calculated with a negative 1.0% revenue growth rate applied.

A terminal year value was calculated with a 2.0% revenue growth rate applied.

The discount rate utilized was 11.0% and the estimated tax rate was 14.9%.

Under the market-based approach, we utilized an estimated range of market multiples of 7.5 to 8.0 times EBITDA plus a control premium of 15.0%.

If all other assumptions are held constant, a reduction in the terminal value growth rate by 1.0% or an increase in discount rate by 0.5% would result in an impairment charge for the Europe reporting unit.

For the JANZ reporting unit, the estimated fair value exceeded its carrying value by approximately $231 million or 7.4% for both the interim and annual goodwill impairment tests.

As it relates to the income approach for the JANZ reporting unit at March 31, 2022 and April 1, 2022, the Company forecasted cash flows for the next 10 years.

For the JANZ reporting unit, the estimated fair value exceeded its carrying value by approximately $145 million or 5.5% for the annual goodwill impairment test.

As it relates to the discounted cash flow approach for the JANZ reporting unit at April 1, 2023, the Company forecasted cash flows for the next 10 years.

During the forecast period, the revenue compound annual growth rate was approximately negative 2.0%.

A terminal year value was calculated assuming no revenue growth rate.

A terminal year value was calculated with a 1.5% revenue growth rate applied.

The discount rate utilized was 7.0% and the estimated tax rate was 30.6%.

Under the market-based approach, we utilized an estimated market multiple of 6.0 times EBITDA plus a control premium of 15.0%.

If all other assumptions are held constant, a reduction in the terminal value growth rate by 0.5% or an increase in discount rate by 0.5% would result in an impairment charge for the JANZ reporting unit.

For the Emerging Markets reporting unit, the estimated fair value exceeded its carrying value by approximately $816 million or 10.3% for both the interim and annual goodwill impairment tests.

As it relates to the income approach for the Emerging Markets reporting unit at March 31, 2022 and April 1, 2022, the Company forecasted cash flows for the next 10 years.

For the Emerging Markets reporting unit, the estimated fair value exceeded its carrying value by approximately $513 million or 7.7% for the annual goodwill impairment test.

As it relates to the discounted cash flow approach for the Emerging Markets reporting unit at April 1, 2023, the Company forecasted cash flows for the next 10 years.

During the forecast period, the revenue compound annual growth rate was approximately 1.8%.

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The discount rate utilized was 11.5% and the estimated tax rate was 17.4%.

Under the market-based approach, we utilized an estimated market multiple of 7.5 times EBITDA plus a control premium of 15.0%.

If all other assumptions are held constant, a reduction in the terminal value growth rate by approximately 8.5% or an increase in discount rate by 3.0% would result in an impairment charge for the Emerging Markets reporting unit.

In the fourth quarter of 2022, we determined that our Upjohn Distributor Markets should be classified as held for sale on the December 31, 2022 consolidated balance sheet.

The Company allocated goodwill to its Upjohn Distributor Markets using a relative fair value approach and recorded a goodwill impairment charge of $117.0 million within the Emerging Markets reporting unit, which was recorded within SG&A in the consolidated statement of operations.

If all other assumptions are held constant, a reduction in the terminal value growth rate by 2.5% or an increase in discount rate by 1.0% would result in an impairment charge for the Emerging Markets reporting unit.

In the fourth quarter of 2022, the commercialization rights in the Upjohn Distributor Markets met the criteria to be classified as held for sale.

The Company allocated goodwill to its commercialization rights in the Upjohn Distributor Markets using a relative fair value approach and recorded a goodwill impairment charge of $117.0 million in that quarter within the Emerging Markets reporting unit, which was recorded within SG&A in the consolidated statement of operations.

The goodwill impairment charge was the result of the estimated proceeds less selling costs from the disposal of the commercialization rights in the Upjohn Distributor Markets being below the carrying value of the net assets of the disposal group.

In the fourth quarter of 2023, the OTC Business met the criteria to be classified as held for sale.

The Company allocated goodwill to its OTC Business using a relative fair value approach and recorded a goodwill impairment charge of $580.1 million in that quarter within the Europe (majority of the charge), JANZ and Emerging Markets reporting units, which was recorded within SG&A in the consolidated statement of operations.

The goodwill impairment charge was the result of the estimated proceeds less selling costs from the planned divestiture of the OTC Business being below the carrying value of the net assets of the disposal group.

Refer to Note 5 Divestitures included in Part II, Item 8 of this Form 10-K for additional information on these divestitures.

Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.

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The carrying values of long-lived assets, which include property, plant and equipment and intangible assets with finite lives, are evaluated periodically in relation to the expected future undiscounted cash flows of the underlying assets and monitored for other potential triggering events.

We have assessed the recoverability of certain long-lived assets, principally finite-lived intangible assets, contained within the reporting units whenever certain impairment indicators are present.

We assess the recoverability of certain long-lived assets, principally finite-lived intangible assets, contained within the reporting units whenever certain impairment indicators are present.

Any impairment of these assets must be considered prior to our impairment review of goodwill.

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Significant management judgment is involved in estimating the recoverability of these assets and is dependent upon the accuracy of the assumptions used in making these estimates, as well as how the estimates compare to the eventual future operating performance of the specific asset or asset grouping.

For the years ended December 31, 2021 and 2020, the Company recorded $83.4 million (related to the sale of a group of OTC products in the U.S.) and $45.0 million, respectively, of impairment charges for finite-lived intangible assets, which were recorded as a component of amortization expense.

The fair value of finite-lived intangible assets was calculated as the present value of the estimated future net cash flows using a market rate of return.

For the year ended December 31, 2021, the Company recorded $83.4 million (related to the divestiture of a group of OTC products in the U.S.) of impairment charges for finite-lived intangible assets, which were recorded as a component of amortization expense.

At December 31, 2023 and 2022, the Company’s finite-lived intangible assets totaled $18.86 billion and $22.57 billion, respectively.

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Any future long-lived assets impairment charges could have a material impact on the Company’s consolidated financial condition and results of operations.

If the divestitures of the Upjohn Distributor Markets are not completed during 2023, the distribution arrangements will expire and the Company will wind down operations in these markets, which may result in additional asset impairment and other costs being incurred.

These additional charges could be in excess of $300 million.

The Company’s indefinite-lived intangible assets, principally IPR&D, are tested at least annually for impairment or upon the occurrence of a triggering event.

If the divestitures of the commercialization rights in the remaining Upjohn Distributor Markets are not completed, the distribution arrangements will expire and the Company will wind down operations in these markets, which may result in additional asset write-offs and other costs being incurred.

The Company’s indefinite-lived intangible assets, principally IPR&D acquired as part of business combinations, are tested at least annually for impairment or upon the occurrence of a triggering event.

The impairment test for IPR&D consists of a comparison of the asset’s fair value with its carrying value.

Impairment is determined to exist when the fair value of IPR&D assets, which is based upon updated forecasts and commercial development plans, is less than the carrying value of the assets being tested.

For the years ended December 31, 2022, 2021 and 2020, the Company recorded $0.6 million, $19.4 million, and $37.4 million, respectively, of impairment charges, which were recorded as a component of amortization expense.

For the years ended December 31, 2022 and 2021, the Company recorded $0.6 million, and $19.4 million, respectively, of impairment charges, which were recorded as a component of amortization expense.

At December 31, 2023 and 2022, the Company’s IPR&D assets totaled $319.4 million and $40.2 million, respectively.

The fair value of both IPR&D and finite-lived intangible assets was determined based upon detailed valuations employing the income approach which utilized Level 3 inputs, as defined in Note 10 Financial Instruments and Risk Management included in Part II.

Item 8 of this Form 10-K.

The fair value of both IPR&D and finite-lived intangible assets was determined based upon detailed valuations employing the income approach which utilized Level 3 inputs, as defined in Note 9 Financial Instruments and Risk Management included in Part II, Item 8 of this Form 10-K.

Changes to any of the Company’s assumptions including changes to or abandonment of development programs, regulatory timelines, discount rates or the competitive environment related to the assets could lead to future material impairment charges.

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Any future increases to the Company’s valuation allowances could materially impact the Company’s consolidated financial condition and results of operations.

At December 31, 2022 and 2021, the Company’s net deferred tax assets totaled $925.9 million and $1.33 billion, respectively.

At December 31, 2023 and 2022, the Company’s net deferred tax assets totaled $692.9 million and $925.9 million, respectively.

A variance of 5% between estimated reserves and valuation allowances and actual resolution and realization of these tax items would have an effect on our reserve balance and valuation allowance of approximately $34.7 million.

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An estimate is made to accrue for a loss contingency relating to any of these legal proceedings if it is probable that a liability was incurred as of the date of the financial statements and the amount of loss can be reasonably estimated.

Because of the subjective nature inherent in assessing the outcome of litigation and because of the potential that an adverse outcome in a legal proceeding could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or ordinary share price, such estimates are considered to be critical accounting estimates.

Because of the subjective nature inherent in assessing the outcome of litigation and because of the potential that an adverse outcome in a legal proceeding could

have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or ordinary share price, such estimates are considered to be critical accounting estimates.

A variance of 5% between estimated and recorded litigation reserves and actual resolution of certain legal matters would have an effect on our litigation reserve balance of approximately $8.6 million.

Refer to Note 20 Litigation included in Part II.

Item 8 of this Form 10-K for further discussion of litigation matters.

Refer to Note 19 Litigation included in Part II, Item 8 of this Form 10-K for further discussion of litigation matters.

Impact of Currency Fluctuations and Inflation

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Dollar and the local currencies in the markets in which we operate, mainly the Euro, Indian Rupee, Chinese Renminbi, Japanese Yen, Australian Dollar, Canadian Dollar, Pound Sterling and South Korean Won affect our results as previously noted.

During 2022, the global economy has been impacted by high levels of inflation and rising energy costs, which has resulted in significant economic volatility.

As a result, central banks have and continue to tighten their monetary policies and increase interest rates.

During 2022 and 2023, the global economy has been impacted by high levels of inflation and rising energy costs, which has resulted in significant economic volatility.

As a result, central banks have and may continue to tighten their monetary policies and increase interest rates.

These macroeconomic pressures combined with the volatility in foreign exchange rates, including the strengthening of the U.S.

dollar versus the other currencies in which we operate, negatively impacts our results of operations.

dollar versus certain of the other currencies in which we operate, negatively impact our results of operations.

We proactively look to manage such macroeconomic pressures by implementing strategies to mitigate and partially offset the impact of these factors.

While inflationary and other macroeconomic pressures may ease, we continue to experience higher costs and we expect that this will likely continue throughout 2023.

While inflationary and other macroeconomic pressures have somewhat eased more recently, we do not expect to see a corresponding reduction in these higher costs.

Recent Accounting Pronouncements

Refer to Note 2 Summary of Significant Accounting Policies in Part II.

Item 8 of this Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Refer to Note 2 Summary of Significant Accounting Policies in Part II, Item 8 of this Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis