Share-Based Incentive Plan

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Prior to the Distribution, Viatris adopted and Pfizer, in the capacity as Viatris’ sole stockholder at such time, approved the 2020 Incentive Plan (the Viatris Inc. 2020 Stock Incentive Plan) which became effective as of the Distribution. In connection with the Combination, as of November 16, 2020, the Company assumed the 2003 LTIP (Mylan N.V. Amended and Restated 2003 Long-Term Incentive Plan), which had previously been approved by Mylan shareholders. The 2020 Incentive Plan and 2003 LTIP include (i) 72,500,000 shares of Common Stock authorized for grant pursuant to the 2020 Incentive Plan, which may include dividend payments payable in Common Stock on unvested shares granted under awards, (ii) 6,757,640 shares of Common Stock to be issued pursuant to the exercise of outstanding stock options granted to participants under the 2003 LTIP and assumed by Viatris in connection with the Combination and (iii) 13,535,627 shares of Common Stock subject to outstanding equity-based awards, other than stock options, assumed by Viatris in connection with the Combination, or that otherwise remain available for issuance under the 2003 LTIP.

Under the 2020 Incentive Plan and 2003 LTIP, shares are reserved for issuance to key employees, consultants, independent contractors and non-employee directors of the Company through a variety of incentive awards, including: stock options, SARs, restricted stock and units, PSUs, other stock-based awards and short-term cash awards. Stock option awards are granted with an exercise price equal to the fair market value of the shares underlying the stock options at the date of the grant, generally become exercisable over periods ranging from three to four years, and generally expire in ten years.

The following table summarizes stock awards (stock options and SARs) activity under the 2020 Incentive Plan and 2003 LTIP:


	Number of Shares Under Stock Awards	Weighted Average Exercise Price per Share
Outstanding at December 31, 2019	6,347,709	$	36.97
Granted	814,351	17.37
Exercised	(27,615)	21.13
Forfeited	(422,714)	25.74

Outstanding at December 31, 2020	6,711,731	$	35.36


Forfeited	(1,135,241)	26.39
Outstanding at December 31, 2021	5,576,490	$	37.19


Forfeited	(1,126,848)	31.91
Outstanding at December 31, 2022	4,449,642	$	38.53
Vested and expected to vest at December 31, 2022	4,411,052	$	38.70
Exercisable at December 31, 2022	4,216,884	$	39.65

As of December 31, 2022, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 4.1 years, 4.1 years and 3.9 years, respectively. Also, at December 31, 2022, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had no aggregate intrinsic value.

A rollforward of the changes in the Company’s nonvested Restricted Stock Awards (restricted stock and restricted stock unit awards, including PSUs) from December 31, 2021 to December 31, 2022 is presented below:


	Number of Restricted Stock Awards	Weighted Average Grant-Date Fair Value Per Share
Nonvested at December 31, 2021	16,858,128	$	15.12
Granted	16,880,145	10.20
Released	(4,790,749)	17.53
Forfeited	(1,675,598)	12.30
Nonvested at December 31, 2022	27,271,926	$	11.81

Of the 16,880,145 Restricted Stock Awards granted during the year ended December 31, 2022, 11,471,308 vest ratably in three years or less and are not subject to market or performance conditions. Of the remaining Restricted Stock Awards

granted, 290,173 are not subject to market conditions and will cliff vest within a three-year period, and 5,118,664 are subject to market or performance conditions and will cliff vest in three years or less.

As of December 31, 2022, the Company had $171.2 million of total unrecognized compensation expense, net of estimated forfeitures, related to all of its stock-based awards, which we expect to recognize over the remaining weighted average vesting period of 1.5 years. The total intrinsic value of Restricted Stock Awards released during the years ended December 31, 2022 and 2021 was $51.8 million and $78.1 million, respectively.

With respect to options granted under the 2020 Incentive Plan and 2003 LTIP, the fair value of each option grant was estimated at the date of grant using the Black-Scholes option pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and employee exercise behavior. Expected volatilities utilized in the model are based mainly on the implied volatility of the Company’s stock price and other factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The model incorporates exercise and post-vesting forfeiture assumptions based on an analysis of historical data. The expected lives of the grants are derived from historical and other factors.

There were no options granted during the years ended December 31, 2022 or 2021. The assumptions used for options granted under the 2020 Incentive Plan and 2003 LTIP during the year ended December 31, 2020 are as follows:


															Year Ended December 31,
															2020
Volatility															46.7%
Risk-free interest rate															1.0%
Expected term (years)															6.5
Forfeiture rate															5.5%
Weighted average grant date fair value per option															$8.07
Dividend yield															—%