Organon & Co (NYSE:OGN) Q3 2023 Earnings Conference Call November 2, 2023 8:30 AM ET Company Participants Jennifer Halchak - VP, IR Kevin Ali - CEO Matthew Walsh - CFO Sandra Milligan - Head of R&D Conference Call Participants Navann Ty - Exane BNP Paribas David Amsellem - Piper Sandler Bhavin Patel - Bank of America Roger Xu - Goldman Sachs Mikaela Franceschina - Barclays Operator Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Organon Third Quarter 2 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________ Form 10-Q ________________ (Mark One) | | | For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File No. 001-40235 Organon & Co. (Exact name of registrant as specified in its charter) Delaware 46-4838035 (State or other jurisdiction of incorporation) (I. ...

Organon & Co (NYSE:OGN) Q2 2023 Earnings Conference Call August 8, 2023 8:30 AM ET Company Participants Jennifer Halchak - VP, IR Kevin Ali - CEO Matthew Walsh - CFO Sandra Milligan - Head of R&D Conference Call Participants David Amsellem - Piper Sandler Umer Raffat - Evercore Jason Gerberry - Bank of America Navann Ty - BNP Paribas Exxon Chris Shibutani - Goldman Sachs Operator Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Organon Second Quarter 202 ...

Organon Second Quarter 2023 Earnings GANON™ Cautionary Note Regarding Forward-Looking Statements Disclaimer statement, cont. See Slides 21-26 of this presentation for a reconciliation of non-GAAP measures. • Adjusted EBITDA of $530 million • Adjusted EBITDA margin guidance range raised to 31.5%-33.0% Disclaimer statement Risks and uncertainties include, but are not limited to, an inability to fully execute on our product development and commercialization plans within the United States or internationally; ch ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________ Form 10-Q ________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File No. 001-40235 Organon & Co. (Exact name of registrant as specified in its charter) Del ...

Organon & Co. (NYSE:OGN) Q1 2023 Earnings Conference Call May 4, 2023 8:30 AM ET Company Participants Jennifer Halchak - VP, IR Kevin Ali - CEO Matthew Walsh - CFO Conference Call Participants Unidentified Analyst - Evercore ISI Jason Gerberry - Bank of America Securities Navann Ty Dietschi - BNP Paribas Exane David Amsellem - Piper Sandler Gregory Fraser - Truist Securities Operator Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Organon First Quarter ...

- " ORGANON" Organon First Quarter 2023 Earnings Disclaimer statement Except for historical information, this press release includes "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about management's expectations about Organon's future financial performance and prospects. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans ...

Part I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Organon is a global healthcare company focused on women's health, biosimilars, and established brands, with a significant international presence - Organon is a global healthcare company focused on women's health, biosimilars, and established brands, with a portfolio of over 60 medicines and products[11](index=11&type=chunk) - The company operates six manufacturing facilities located in Belgium, Brazil, Indonesia, Mexico, the Netherlands, and the United Kingdom[11](index=11&type=chunk) - Approximately **77% of 2022 revenues ($4.7 billion)** were generated outside the United States, demonstrating a significant global presence[15](index=15&type=chunk) Product Group Revenues (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | | :-------------- | :--- | :--- | :--- | | Women's Health | 1,673 | 1,612 | 1,555 | | Biosimilars | 481 | 424 | 330 | | Established Brands | 3,874 | 4,068 | 4,540 | | **Total Revenues** | **6,028** | **6,104** | **6,425** | [Overview](index=3&type=section&id=Overview) The company improves women's health globally through a portfolio of over 60 therapies distributed in more than 140 countries - Organon & Co is a global health care company focused on improving women's health, offering a portfolio of over 60 prescription therapies and medical devices across women's health, biosimilars, and established brands[11](index=11&type=chunk) - The company distributes products through various channels including drug wholesalers, retailers, hospitals, government agencies, and managed health care providers in over 140 countries[11](index=11&type=chunk) [Product Portfolios](index=3&type=section&id=Product%20Portfolios) The company's three product portfolios generate strong cash flows to fund innovation and growth through strategic acquisitions - Organon's product portfolios include Women's Health, Biosimilars, and Established Brands, which collectively generate strong cash flows for innovation and growth[12](index=12&type=chunk) - The company expanded its women's health and biosimilars portfolios through recent acquisitions and licenses, including Claria Medical, Cirqle Biomedical, Henlius, and Daré Biosciences[15](index=15&type=chunk) [Women's Health Portfolio](index=5&type=section&id=Women's%20Health%20Portfolio) This portfolio focuses on contraception and fertility, with key brands like Nexplanon® and recent additions to address postpartum hemorrhage - Key brands include Nexplanon® and NuvaRing® for contraception, and Follistim® AQ and Elonva™ for fertility[18](index=18&type=chunk) - Recent additions include the Jada® System for postpartum hemorrhage and Xaciato™ for bacterial vaginosis, acquired through Alydia Health and licensed from Daré Biosciences, respectively[18](index=18&type=chunk)[26](index=26&type=chunk)[29](index=29&type=chunk) Women's Health Portfolio Revenue (2022) | Metric | Value | | :----- | :---- | | 2022 Revenue | $1.7 billion | | % of Total Revenue | 27% | | International Revenue | $774 million (46%) | [Biosimilars Portfolio](index=6&type=section&id=Biosimilars%20Portfolio) The biosimilars portfolio provides treatments in immunology and oncology, with a key product launch expected in the US in mid-2023 - The portfolio includes immunology (Hadlima™, Brenzys™¹, Renflexis®) and oncology (Ontruzant®, Aybintio™¹) treatments, with commercialization rights from Samsung Bioepis and Henlius[32](index=32&type=chunk) Biosimilars Portfolio Revenue (2022) | Metric | Value | | :----- | :---- | | 2022 Revenue | $481 million | | % of Total Revenue | 8% | | International Revenue | $237 million (49%) | Key Biosimilar Launch Dates | Organon's Biosimilar | Biologic Product | Launch of Organon's Biosimilar | | :------------------- | :--------------- | :----------------------------- | | Hadlima | Humira | United States—expected mid-2023; Australia—Feb 2021; Canada—Feb 2021 | | Brenzys¹ | Enbrel | Canada—Sep 2016; Australia—Apr 2017; Brazil—Sep 2019; Israel—Jan 2021 | | Renflexis | Remicade | United States—Jul 2017; Australia—Aug 2017; Canada—Aug 2018 | | Aybintio | Avastin | Europe—Sep 2020; Canada—Jul 2022 | | Ontruzant | Herceptin | Europe—Mar 2018; Australia—Jan 2020; United States—Apr 2020; Brazil—Aug 2020; Canada—Aug 2022 | [Established Brands Portfolio](index=8&type=section&id=Established%20Brands%20Portfolio) This portfolio of mature brands generates substantial international revenue and operating profit, funding new growth opportunities - This portfolio includes mature brands in cardiovascular (Zetia®, Vytorin®, Cozaar®), respiratory (Singulair®, Nasonex®), dermatology, bone health (Fosamax®), and non-opioid pain management (Arcoxia™¹)[39](index=39&type=chunk)[41](index=41&type=chunk)[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - Despite generic competition, these brands continue to deliver **meaningful revenue and operating profit**, which is redirected into growth opportunities[12](index=12&type=chunk) Established Brands Portfolio Revenue (2022) | Metric | Value | | :----- | :---- | | 2022 Revenue | $3.9 billion | | International Revenue | $3.6 billion (92%) | [Research and Development](index=9&type=section&id=Research%20and%20Development) The R&D strategy prioritizes business continuity for existing brands while building a leading Women's Health pipeline via collaborations - Organon's R&D strategy focuses on business continuity for existing brands and building an industry-leading pipeline in Women's Health through scientific collaborations and acquisitions[48](index=48&type=chunk) - Development-stage products include a non-hormonal contraceptive candidate (Cirqle Biomedical), biosimilars HLX14 (denosumab) and HLX11 (pertuzumab) from Henlius, and investigational agents for endometriosis (OG-6219), PCOS (OG-7191), and preterm labor (Ebopiprant)[49](index=49&type=chunk) [Sales, Marketing and Distribution Capabilities](index=10&type=section&id=Sales%2C%20Marketing%20and%20Distribution%20Capabilities) A global commercial team of approximately 3,850 employees supports a distribution network spanning over 140 countries - Organon has approximately **3,850 employees globally** dedicated to commercialization activities, including marketing, direct selling, digital engagement, and data analytics[51](index=51&type=chunk) - The company's global network enables distribution to over 140 countries, selling to drug wholesalers, retailers, hospitals, government agencies, and managed healthcare providers[54](index=54&type=chunk) [Manufacturing Capabilities and Global Supply Chain](index=10&type=section&id=Manufacturing%20Capabilities%20and%20Global%20Supply%20Chain) The company operates six global manufacturing sites and manages a centralized supply chain with reliance on some sole-sourced materials - Organon owns and operates six manufacturing sites globally, focusing on hormonal products, sterile formulations, and medical devices[57](index=57&type=chunk)[58](index=58&type=chunk) - The global supply chain is managed centrally with regional teams, utilizing third-party suppliers for raw materials and contract manufacturers for packaging and fill-and-finish, with some critical materials being sole-sourced[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) Manufacturing Site Focus Areas | Site | Predominant Area of Focus | | :---------------- | :------------------------------------ | | Campinas, Brazil | Women's health, cardiovascular and respiratory | | Cramlington, UK | Cardiovascular and respiratory | | Heist, Belgium | Respiratory, dermatology and pain | | Oss, Netherlands | Women's health | | Pandaan, Indonesia | Cardiovascular, respiratory and dermatology | | Xochimilco, Mexico | Cardiovascular and respiratory | [Quality Management](index=12&type=section&id=Quality%20Management) A globally deployed quality management system ensures product compliance and reliability across all markets served - Organon maintains a globally deployed quality management system to ensure product compliance, reliability, and adherence to regulatory requirements in all served countries[64](index=64&type=chunk) [Human Capital](index=12&type=section&id=Human%20Capital) The company employs approximately 10,000 people worldwide and emphasizes an inclusive culture with strong female representation in leadership - As of December 31, 2022, Organon had approximately **10,000 employees worldwide**, with 16.5% (1,650) in the United States[67](index=67&type=chunk) - **Over 50% of global employees are female**, and women comprise approximately 40% of senior leadership and nearly 70% of the Board of Directors[69](index=69&type=chunk) - The company focuses on building an inclusive culture, supporting its workforce through talent programs and Employee Resource Groups, and regularly assessing employee experience[68](index=68&type=chunk) [Intellectual Property](index=12&type=section&id=Intellectual%20Property) Patent protection is crucial for key products like Nexplanon, with important device patents expiring in 2027 in the US - Patent protection is crucial for marketing certain products, particularly Nexplanon, with device patents expiring in **2027 in the US and 2025 internationally**[70](index=70&type=chunk)[71](index=71&type=chunk) - The company's important products are sold under trademarks, which are considered materially important and can be renewed indefinitely in most countries[75](index=75&type=chunk) Royalty Income and Expenses (2022) | Metric | Amount (millions) | | :----- | :---------------- | | Royalty Income | $3 | | Royalty Expenses | $13 | [Privacy and Data Protection](index=13&type=section&id=Privacy%20and%20Data%20Protection) The company is subject to evolving global data privacy laws, where non-compliance could result in significant penalties - Organon is subject to evolving global privacy and data protection laws, including GDPR, China's PIPL, and US state laws, which impose restrictions on personal data transfer and use[77](index=77&type=chunk) - Non-compliance with these regulations could lead to substantial costs, changes in business practices, or significant penalties[77](index=77&type=chunk) [Competition and the Health Care Environment](index=13&type=section&id=Competition%20and%20the%20Health%20Care%20Environment) The company operates in a highly competitive and regulated industry, facing significant pricing pressure from global cost containment efforts - The pharmaceutical industry is highly competitive and regulated, with Organon facing competition from research-based companies, smaller firms, and generic drug manufacturers[78](index=78&type=chunk) - Global healthcare cost containment efforts, including the ACA and IRA in the US, exert significant pressure on product pricing and market access, potentially reducing prices and increasing rebate obligations[80](index=80&type=chunk)[81](index=81&type=chunk)[87](index=87&type=chunk) - In China, health care reforms like Volume-Based Procurement (VBP) have led to **significant price reductions (average 50%)** for mature products with generic substitutes, impacting Organon's established brands[100](index=100&type=chunk) - European Union countries use reference pricing and Health Technology Assessments (HTA) to control drug costs, which can influence pricing and reimbursement status[93](index=93&type=chunk)[94](index=94&type=chunk) [Regulation of Organon's Products](index=17&type=section&id=Regulation%20of%20Organon's%20Products) Products are subject to extensive regulation by global agencies like the FDA and EMA, covering the entire product lifecycle - Organon's products are subject to extensive regulation by agencies like the FDA in the US and EMA in the EU, covering testing, approval, safety, manufacturing, labeling, and marketing[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - The FDA employs expedited programs (Fast Track, Breakthrough Therapy, Accelerated Approval, Priority Review) and an abbreviated pathway for biosimilars to address unmet medical needs and promote competition[112](index=112&type=chunk)[113](index=113&type=chunk) - In the EU, the Clinical Trials Regulation (EU) No 536/2014 streamlines clinical trial approvals, and Marketing Authorizations (MA) can be obtained via centralized, mutual recognition, decentralized, or national procedures[128](index=128&type=chunk)[129](index=129&type=chunk)[132](index=132&type=chunk) - Medical devices in the EU are regulated by the Medical Devices Regulation (EU) 2017/745 (MDR), requiring CE Mark approval and post-market surveillance[159](index=159&type=chunk)[160](index=160&type=chunk) [Climate and Environmental Matters](index=27&type=section&id=Climate%20and%20Environmental%20Matters) The company acknowledges climate change risks but does not currently consider them material, with modest estimated remediation expenditures - Organon acknowledges climate change risks, including increased operating costs, supply chain disruptions, and physical risks to facilities, but does not believe these are currently material[168](index=168&type=chunk) Estimated Environmental Remediation Expenditures (2023-2027) | Period | Estimated Expenditure | | :----- | :-------------------- | | 2023-2027 | $16 million (aggregate) | [Third-Party Agreements](index=27&type=section&id=Third-Party%20Agreements) The company relies on key licensing agreements with partners like Samsung Bioepis and Henlius for its biosimilar portfolio - Organon holds an exclusive license from Samsung Bioepis for commercialization of pre-specified biosimilar products, with gross profits generally shared equally[170](index=170&type=chunk)[173](index=173&type=chunk) - The company also licensed global commercialization rights for biosimilar candidates HLX11 (Perjeta) and HLX14 (Prolia/Xgeva) from Henlius, with an option for HLX13 (Yervoy)[174](index=174&type=chunk) Potential Future Milestone Payments | Agreement | Remaining Potential Regulatory Milestone Payments (as of Dec 31, 2022) | | :-------- | :----------------------------------------------------------------- | | Samsung Bioepis | $25 million | [Additional Information](index=28&type=section&id=Additional%20Information) Organon & Co is a Delaware corporation that files regular reports with the SEC, which are available to the public - Organon & Co is a Delaware corporation, incorporated on March 11, 2020, with corporate offices in Jersey City, New Jersey[175](index=175&type=chunk) - The company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other information with the SEC, available on its investor relations website[176](index=176&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) Organon faces risks from its limited operating history, pricing pressures, patent expirations, and reliance on external partnerships for growth - Organon has a limited operating history as an independent company, and its historical financial results may not be indicative of future performance[179](index=179&type=chunk)[184](index=184&type=chunk) - The company faces continued pricing pressure globally, particularly in mature markets, from managed care organizations, government programs (e.g., ACA, IRA in the US, VBP in China), and generic competition[186](index=186&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) - Key products like Nexplanon, Cozaar/Hyzaar, Singulair, and the Ezetimibe family generate significant profits and cash flows, making the company vulnerable to events adversely affecting these markets, including patent expiration (e.g., **Nexplanon US exclusivity expires 2027, international 2025**)[185](index=185&type=chunk)[207](index=207&type=chunk) - Organon relies on future acquisitions, partnerships, and collaborations to expand its innovative pipeline and early research capabilities due to limited in-house discovery, which may limit its ability to replace sales from products losing patent protection[192](index=192&type=chunk) - Global operations expose Organon to risks such as foreign currency fluctuations, political instability, trade sanctions, and varying regulatory requirements, with **77% of 2022 revenues generated outside the US**[226](index=226&type=chunk)[251](index=251&type=chunk) [Summary of Risk Factors](index=28&type=section&id=Summary%20of%20Risk%20Factors) Key risks include a limited operating history, dependence on key products, pricing pressure, and reliance on external alliances - Key risks include Organon's limited operating history as an independent company, dependence on key products, intense pricing pressure, and reliance on external alliances for pipeline expansion[179](index=179&type=chunk) - Other significant risks involve potential failures in product candidate development, regulatory approval challenges, product quality issues, patent protection expiry, substantial indebtedness, and the complexities arising from the spinoff from Merck[179](index=179&type=chunk)[183](index=183&type=chunk) [Risks Related to Organon's Business](index=30&type=section&id=Risks%20Related%20to%20Organon's%20Business) The company's profitability is dependent on key products and faces significant pricing pressure, patent expirations, and global operational risks - Organon's profitability is highly dependent on key products, and adverse events affecting these products or their markets could significantly impact sales and financial results[185](index=185&type=chunk) - The company faces significant pricing pressure from managed care, government programs (e.g., IRA, VBP in China), and generic competition, which can lead to reduced sales and profit margins[186](index=186&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) - Limited in-house R&D capabilities mean Organon relies on acquisitions and partnerships for pipeline expansion, which may not always be successful or cost-effective[192](index=192&type=chunk)[195](index=195&type=chunk) - Failure to obtain or maintain regulatory approvals for pharmaceutical products and medical devices, or issues with product quality, could prevent market entry, lead to recalls, and damage customer confidence[196](index=196&type=chunk)[205](index=205&type=chunk) - The expiration of patent protection for key products, such as **Nexplanon (US exclusivity expires 2027, international 2025)**, is expected to result in a significant and rapid loss of sales due to generic competition[207](index=207&type=chunk) - Global operations expose Organon to risks including foreign currency fluctuations, political instability (e.g., Ukraine-Russia conflict), and economic conditions in emerging markets, which can impact revenues and supply chains[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[251](index=251&type=chunk) - The company's substantial indebtedness (**$8.9 billion as of December 31, 2022**) and restrictive covenants could limit its financial flexibility, ability to pay dividends, and capacity for future financing[258](index=258&type=chunk)[260](index=260&type=chunk) [Risks Related to the Spinoff](index=44&type=section&id=Risks%20Related%20to%20the%20Spinof) Risks from the spinoff include IT system transitions, reliance on Merck for services, and potential indemnification and tax liabilities - Organon's transition to an independent company involves building its own IT infrastructure and systems, which could lead to substantial costs and temporary business interruptions[264](index=264&type=chunk) - Reliance on Merck for certain services under transition agreements poses risks if Merck fails to meet its obligations or if Organon cannot establish its own systems before these agreements expire[265](index=265&type=chunk)[267](index=267&type=chunk) - Potential indemnification liabilities to Merck under the Separation and Distribution Agreement could adversely affect Organon's financial condition, particularly for litigation related to its business activities[269](index=269&type=chunk) - There is a risk of significant income tax liability if the spinoff is determined to be taxable for U.S federal income tax purposes, potentially impacting Merck's stockholders and Organon[270](index=270&type=chunk)[271](index=271&type=chunk) - Contractual restrictions from the Tax Matters Agreement limit Organon's ability to engage in certain corporate transactions (e.g., acquisitions, mergers, stock repurchases) for two years post-spinoff to preserve tax-free treatment[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk) [Risks Related to Organon's Common Stock](index=46&type=section&id=Risks%20Related%20to%20Organon's%20Common%20Stock) The company's common stock price may be volatile, future dividend payments are not guaranteed, and corporate provisions could deter acquisitions - The price and trading volume of Organon's Common Stock may be volatile due to various factors, including market assessments of strategic transactions, regulatory decisions, and competitor advancements[276](index=276&type=chunk)[277](index=277&type=chunk) - While Organon expects to pay quarterly cash dividends, the timing, amount, and payment are at the discretion of the Board of Directors and are not guaranteed[278](index=278&type=chunk) - Provisions in Organon's corporate documents and Delaware law (e.g., Section 203, classified Board, restrictions on stockholder actions) may prevent or delay an acquisition, potentially decreasing the stock's trading price[279](index=279&type=chunk)[281](index=281&type=chunk) [Item 1B. Unresolved Staff Comments](index=48&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item indicates that there are no unresolved staff comments from the SEC regarding the company's previous filings - There are no unresolved staff comments[286](index=286&type=chunk) [Item 2. Properties](index=48&type=section&id=Item%202.%20Properties) Organon's corporate headquarters are in New Jersey, and it owns six manufacturing facilities globally - Organon's corporate headquarters are in Jersey City, New Jersey, and operational headquarters in Pennsylvania[287](index=287&type=chunk) - The company owns and operates six manufacturing facilities in Campinas, Brazil; Cramlington, UK; Heist, Belgium; Oss, Netherlands; Panaan, Indonesia; and Xochimilco, Mexico[287](index=287&type=chunk) [Item 3. Legal Proceedings](index=48&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings and accrues for probable and estimable claims - Organon is subject to claims and litigation in the ordinary course of business, including intellectual property, product liability, securities law, breach of contract, tort, and allegations of competition law violations[288](index=288&type=chunk) - The company accrues liabilities for legal claims when payments are probable and costs can be reasonably estimated, with actual costs potentially differing from accruals[288](index=288&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Organon & Co - This item is not applicable[289](index=289&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=48&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Organon's common stock (OGN) trades on the NYSE, and the company has a policy of paying quarterly cash dividends - Organon's Common Stock (OGN) is listed on the New York Stock Exchange[290](index=290&type=chunk) - The declaration of future dividends is at the discretion of Organon's Board of Directors and depends on financial results, capital requirements, and other relevant factors[292](index=292&type=chunk) - A performance graph illustrates the cumulative total stockholder returns from June 2, 2021, to December 31, 2022, comparing Organon's Common Stock to the S&P 500 Index and the NYSE Arca Pharmaceutical Index[293](index=293&type=chunk) Common Stock Holders and Dividends | Metric | Value | | :-------------------------------- | :-------------------- | | Holders of record (as of Feb 22, 2023) | 74,829 | | Q4 2022 Cash Dividend per share | $0.28 | | Q1 2023 Declared Dividend per share | $0.28 (payable March 16, 2023) | [Item 6. [ Reserved ]](index=49&type=section&id=Item%206.%20%5B%20Reserved%20%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 2022 financial performance, highlighting sales trends, cost changes, and the impact of strategic investments and market pressures - Worldwide sales for 2022 were **$6.2 billion, a 2% decrease** from 2021, primarily due to a negative impact of approximately 6% ($383 million) from unfavorable foreign exchange[318](index=318&type=chunk) - Sales growth, excluding foreign exchange, was driven by strong performance of Nexplanon (US demand, Brazil/Latin America volume), established brands (Nasonex, Singulair in Japan/China), and biosimilars (Renflexis in US)[318](index=318&type=chunk) - Sales were negatively impacted by generic competition for NuvaRing in the US and Volume-Based Procurement (VBP) in China ($20 million impact in 2022)[318](index=318&type=chunk)[319](index=319&type=chunk) - Net cash provided by operating activities decreased significantly in 2022 to **$858 million from $2.2 billion in 2021**, primarily due to a decrease in trade payables[358](index=358&type=chunk) Key Financial Metrics (2022 vs. 2021) | Metric | 2022 ($M) | 2021 ($M) | % Change | | :------------------------------------------ | :-------- | :-------- | :------- | | Revenues | 6,174 | 6,304 | (2)% | | Cost of sales | 2,294 | 2,382 | (4)% | | Selling, general and administrative | 1,704 | 1,668 | 2% | | Research and development | 471 | 339 | 39% | | Acquired in-process R&D and milestones | 107 | 104 | 3% | | Interest expense | 422 | 258 | 64% | | Net Income From Continuing Operations | 917 | 1,351 | (32)% | | Net Cash Provided by Operating Activities | 858 | 2,160 | (60)% | | Net Cash Used in Investing Activities | 420 | 481 | (13)% | | Net Cash Used in Financing Activities | 433 | 977 | (56)% | [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS](index=50&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section outlines risks and uncertainties that could cause actual results to differ materially from forward-looking statements - This section contains forward-looking statements about Organon's future financial, business, and strategic matters, which are subject to risks and uncertainties that may cause actual results to differ materially[295](index=295&type=chunk) - Factors that could cause actual results to vary include competition, difficulties with third-party performance, supply chain issues, pricing pressures, regulatory changes, product safety concerns, and global economic conditions[296](index=296&type=chunk) [General](index=51&type=section&id=General) Organon is a global healthcare company that became a standalone public entity after its spinoff from Merck in June 2021 - Organon & Co is a global health care company focused on women's health, biosimilars, and established brands, with a portfolio of over 60 products[299](index=299&type=chunk) - The company completed its spinoff from Merck & Co on June 2, 2021, becoming a standalone publicly traded company (OGN on NYSE)[300](index=300&type=chunk) - Financial statements for periods after June 2, 2021, are presented on a consolidated basis, while prior periods were derived from Merck's consolidated financial statements[301](index=301&type=chunk) [Key Trends Affecting Our Results of Operations](index=52&type=section&id=Key%20Trends%20Affecting%20Our%20Results%20of%20Operations) Results are shaped by the durability of established brands, LARC market growth, increasing biosimilar adoption, and competitive pressures - Established brands, despite being beyond market exclusivity, provide valuable long-term sustainable revenue and significant operating profit[307](index=307&type=chunk) - The Long-Acting Reversible Contraceptives (LARC) market, including Nexplanon, has seen significant growth, though impacted by COVID-19, and is expected to remain important[307](index=307&type=chunk) - Growing acceptance of biosimilars and the upcoming loss of exclusivity for major biologics present a significant opportunity for more affordable alternatives[307](index=307&type=chunk) - The company faces increased competitive pressures from other research-based pharmaceutical companies, smaller firms, and generic drug manufacturers[307](index=307&type=chunk) [Recent Developments](index=52&type=section&id=Recent%20Developments) The company has recently made several strategic investments and licensing agreements to expand its pipeline and product portfolio - In January 2023, Organon made a strategic investment of **$8 million in Claria Medical, Inc.**, a privately-held company developing an investigational medical device for laparoscopic hysterectomy[304](index=304&type=chunk)[642](index=642&type=chunk) - In July 2022, Organon entered a research collaboration and license agreement with Cirqle Biomedical for a novel non-hormonal contraceptive candidate, with an upfront payment of **$10 million** and potential milestones up to **$360 million**[305](index=305&type=chunk)[306](index=306&type=chunk) - In June 2022, Organon licensed commercialization rights for biosimilar candidates HLX11 (Perjeta) and HLX14 (Prolia/Xgeva) from Henlius, involving a **$73 million upfront payment** and potential milestones up to **$468 million**[308](index=308&type=chunk)[309](index=309&type=chunk) - In March 2022, Organon licensed global commercial rights to Xaciato (for bacterial vaginosis) from Daré Bioscience, with a **$10 million upfront payment** and potential milestones up to **$182.5 million**[310](index=310&type=chunk)[311](index=311&type=chunk) - In February 2022, Organon acquired product rights and inventory for Marvelon and Mercilon (contraceptive pills) in China and Vietnam from Bayer AG for **$95 million**, recognizing a $72 million intangible asset[312](index=312&type=chunk) [COVID-19 Update](index=53&type=section&id=COVID-19%20Update) The COVID-19 pandemic negatively impacted sales in 2021 and 2022 due to reduced patient access, particularly in China - COVID-19-related disruptions, including clinic closures and reduced patient access, negatively impacted Organon's product sales in 2021 and 2022, particularly in China where sales declined by approximately **$46 million in 2022**[313](index=313&type=chunk)[239](index=239&type=chunk) - Physician-prescribed and administered products within established brands and women's health (e.g., Nexplanon, fertility brands) were affected by fewer medical visits and delays in elective procedures[239](index=239&type=chunk)[314](index=314&type=chunk) - The company anticipates potential short-term volatility in operating performance due to the ongoing uncertainty of the pandemic's duration and impact[316](index=316&type=chunk) [Operating Results](index=54&type=section&id=Operating%20Results) Total sales declined 2% in 2022, but grew 4% excluding unfavorable foreign exchange, though impacted by LOE and VBP in China - Loss of exclusivity (LOE) negatively impacted sales by approximately **$30 million in 2022**, mainly affecting NuvaRing in the United States[319](index=319&type=chunk) - Volume-based procurement (VBP) in China had a **$20 million negative impact** on sales in 2022 and is expected to continue affecting the established brands portfolio[319](index=319&type=chunk) Worldwide Sales Overview (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | % Change 2022 vs. 2021 | % Change Excluding Foreign Exchange 2022 vs. 2021 | | :-------------- | :--- | :--- | :--- | :-------------------- | :------------------------------------ | | United States | 1,437 | 1,383 | 1,408 | 4 % | 4 % | | International | 4,737 | 4,921 | 5,124 | (4)% | 4 % | | **Total** | **6,174** | **6,304** | **6,532** | **(2)%** | **4 %** | [Women's Health Sales](index=55&type=section&id=Women's%20Health%20Sales) Nexplanon sales grew 8% in 2022, while NuvaRing sales declined 9% due to ongoing generic competition in the US - Nexplanon sales **increased 8% in 2022** due to favorable pricing and demand in the US, and volume growth in Brazil, Latin America, and Africa[323](index=323&type=chunk) - NuvaRing sales **declined 9% in 2022** due to ongoing generic competition in the US, with revenue from authorized generic sales also decreasing due to new market entrants[324](index=324&type=chunk) - Marvelon and Mercilon sales **increased 12% in 2022** following Organon gaining full rights in China and Vietnam[325](index=325&type=chunk) Women's Health Product Sales (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | % Change 2022 vs. 2021 | % Change Excluding Foreign Exchange 2022 vs. 2021 | | :------------------------ | :--- | :--- | :--- | :-------------------- | :------------------------------------ | | Nexplanon/Implanon NXT | 834 | 769 | 680 | 8 % | 11 % | | NuvaRing | 173 | 191 | 236 | (9)% | (6)% | | Marvelon/Mercilon | 110 | 98 | 95 | 12 % | 20 % | | Follistim AQ | 229 | 237 | 193 | (3)% | — % | | Ganirelix Acetate Injection | 123 | 111 | 81 | 11 % | 18 % | [Biosimilars Sales](index=56&type=section&id=Biosimilars%20Sales) Renflexis sales grew 21% in 2022, driven by strong US demand, while Ontruzant sales declined due to European competition - Renflexis sales **grew 21% in 2022**, driven by continued demand, favorable channel mix, and discount rates in the United States[329](index=329&type=chunk) - Ontruzant sales **declined 4% in 2022** due to competitive pressures in Europe and unfavorable foreign exchange, partially offset by uptake in the United States[330](index=330&type=chunk) - Hadlima sales **increased 51% in 2022** from modest sales in markets outside the US, with a US launch expected in June 2023[332](index=332&type=chunk) Biosimilars Product Sales (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | % Change 2022 vs. 2021 | % Change Excluding Foreign Exchange 2022 vs. 2021 | | :-------------- | :--- | :--- | :--- | :-------------------- | :------------------------------------ | | Renflexis | 226 | 186 | 135 | 21 % | 22 % | | Ontruzant | 122 | 126 | 115 | (4)% | — % | | Brenzys | 75 | 63 | 74 | 19 % | 24 % | | Hadlima | 19 | 13 | — | 51 % | 57 % | [Established Brands Sales](index=56&type=section&id=Established%20Brands%20Sales) Sales were mixed, with Nasonex growing 16% due to competitor supply issues, while Zetia/Vytorin declined 10% from competition - Zetia/Vytorin sales **declined 10% in 2022** due to increased competition, lower performance in Europe, VBP impact in China, and unfavorable foreign exchange, partially offset by demand in Japan and China[334](index=334&type=chunk) - Nasonex sales **increased 16% in 2022**, driven by higher demand due to competitors' supply disruptions in Japan and increased demand across several markets[337](index=337&type=chunk) - Proscar sales **declined 14% in 2022** due to lower demand in China and unfavorable foreign exchange[341](index=341&type=chunk) Cardiovascular Product Sales (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | % Change 2022 vs. 2021 | % Change Excluding Foreign Exchange 2022 vs. 2021 | | :-------------- | :--- | :--- | :--- | :-------------------- | :------------------------------------ | | Zetia/Vytorin | 488 | 542 | 664 | (10)% | (3)% | | Atozet | 457 | 458 | 453 | — % | 11 % | | Rosuzet | 71 | 68 | 130 | 5 % | 23 % | | Cozaar/Hyzaar | 323 | 357 | 386 | (10)% | (3)% | Respiratory Product Sales (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | % Change 2022 vs. 2021 | % Change Excluding Foreign Exchange 2022 vs. 2021 | | :-------------- | :--- | :--- | :--- | :-------------------- | :------------------------------------ | | Singulair | 411 | 413 | 462 | (1)% | 9 % | | Nasonex | 238 | 206 | 218 | 16 % | 22 % | | Dulera | 180 | 190 | 222 | (5)% | (5)% | Other Established Brands Sales (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | % Change 2022 vs. 2021 | % Change Excluding Foreign Exchange 2022 vs. 2021 | | :-------------- | :--- | :--- | :--- | :-------------------- | :------------------------------------ | | Arcoxia | 241 | 244 | 258 | (1)% | 4 % | | Proscar | 101 | 117 | 176 | (14)% | (9)% | [Costs, Expenses and Other](index=58&type=section&id=Costs%2C%20Expenses%20and%20Other) R&D and interest expenses increased significantly in 2022, driven by acquisitions and debt incurred from the spinoff - Cost of sales **decreased 4% in 2022** due to lower supply sales, pre-spin allocated costs in the prior year, and a $24 million charge for unavoidable losses in 2021, offset by $36 million in inventory charges related to a regulatory finding[343](index=343&type=chunk) - Research and development expenses **increased 39% in 2022**, driven by higher costs from recent acquisitions of clinical-stage assets, increased clinical study activity, and employee-related costs[345](index=345&type=chunk) - Interest expense **increased 64% in 2022** due to $9.5 billion of debt incurred in Q2 2021, increased interest rates, and exchange rate impacts[349](index=349&type=chunk) Costs, Expenses and Other (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | % Change 2022 vs. 2021 | % Change 2021 vs. 2020 | | :------------------------------------------ | :--- | :--- | :--- | :-------------------- | :-------------------- | | Cost of sales | 2,294 | 2,382 | 2,119 | (4)% | 12 % | | Selling, general and administrative | 1,704 | 1,668 | 1,356 | 2 % | 23 % | | Research and development | 471 | 339 | 210 | 39 % | 61 % | | Acquired in-process R&D and milestones | 107 | 104 | — | 3 % | * | | Restructuring costs | 28 | 3 | 60 | * | (95)% | | Interest expense | 422 | 258 | — | 64 % | * | | Exchange losses | 11 | 4 | 44 | * | (91)% | | Other expense (income), net | 15 | 17 | (9) | (12)% | * | | **Total** | **5,052** | **4,775** | **3,780** | **6 %** | **26 %** | [Taxes on Income](index=59&type=section&id=Taxes%20on%20Income) The effective tax rate was 18.3% in 2022, reflecting the beneficial impact of foreign earnings offset by US GILTI inclusions - The effective tax rates reflect the beneficial impact of foreign earnings, offset by U.S inclusions under the Global Intangible Low-Taxed Income regime[352](index=352&type=chunk) - The 2021 rate also included a **$75 million tax benefit** from a non-U.S step-up of tax basis and a **$29 million net tax benefit** from the conclusion of an IRS examination of Merck's 2015-2016 returns[352](index=352&type=chunk) Effective Income Tax Rates (2020-2022) | Year | Effective Income Tax Rate | | :--- | :------------------------ | | 2022 | 18.3% | | 2021 | 11.7% | | 2020 | 18.0% | [Income/Loss from Discontinued Operations](index=59&type=section&id=Income%2FLoss%20from%20Discontinued%20Operations) The historical results of Merck Retained Products are reflected as discontinued operations for 2021 and 2020 - The historical results of Merck Retained Products business, which were part of Transferred Entities, are reflected as discontinued operations for 2021 and 2020[354](index=354&type=chunk) Net Income/Loss from Discontinued Operations (2020-2021) | Year | Net Income/Loss from Discontinued Operations | | :--- | :------------------------------------------- | | 2021 | $0 million | | 2020 | ($96) million | [Analysis of Liquidity and Capital Resources](index=60&type=section&id=Analysis%20of%20Liquidity%20and%20Capital%20Resources) Cash from operating activities decreased in 2022 primarily due to a decrease in trade payables with Merck - The decrease in cash from operating activities in 2022 was primarily due to a decrease in trade payables, including balances with Merck[358](index=358&type=chunk) - Capital expenditures were **$196 million in 2022**, reflecting investments in new capital projects to establish Organon as an independent company, particularly in information technology[362](index=362&type=chunk) - Total potential payments for contractual milestones are **$2.4 billion**, with $38 million due within the next twelve months, and total purchase obligations are **$1.2 billion**, with $343 million due within the next twelve months[366](index=366&type=chunk)[367](index=367&type=chunk) Liquidity and Capital Resources (2021-2022) | Metric | Dec 31, 2022 ($M) | Dec 31, 2021 ($M) | | :-------------------------------- | :---------------- | :---------------- | | Cash and cash equivalents | 706 | 737 | | Working capital | 1,400 | 1,200 | | Net cash provided by operating activities | 858 | 2,200 | | Net cash used in investing activities | 420 | 481 | | Net cash used in financing activities | 433 | 977 | [Critical Accounting Estimates](index=61&type=section&id=Critical%20Accounting%20Estimates) Significant estimates are used for revenue recognition, impairment of long-lived assets, deferred taxes, and acquisition accounting - Revenue recognition involves significant estimates for gross-to-net sales adjustments, including chargebacks and rebates, which are based on expected sell-through, patient usage, and historical data[372](index=372&type=chunk)[374](index=374&type=chunk) - The company assesses long-lived assets (property, plant, equipment, goodwill, intangibles) for impairment based on estimated future cash flows and market conditions, recording impairment charges of **$9 million in 2022** and **$7 million in 2021**[383](index=383&type=chunk)[386](index=386&type=chunk) - Deferred taxes are recognized for temporary differences, with valuation allowances established when future taxable income is unlikely to support their use[387](index=387&type=chunk) - Acquisitions are evaluated as asset or business acquisitions, impacting the recognition of acquired in-process R&D and contingent consideration[391](index=391&type=chunk) Aggregate Customer Discount Accrual (US Sales) (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | | :-------------- | :--- | :--- | :--- | | Balance January 1 | 329 | 343 | 365 | | Provision | 2,221 | 2,000 | 1,770 | | Payments | (2,165) | (2,014) | (1,792) | | Balance December 31 | 385 | 329 | 343 | [Recently Issued Accounting Standards](index=65&type=section&id=Recently%20Issued%20Accounting%20Standards) The company adopted new standards for business combinations and is monitoring guidance on reference rate reform - ASU 2021-08 (Business Combinations) became effective January 1, 2023, improving accounting for contract assets and liabilities from acquired revenue contracts[493](index=493&type=chunk) - ASU 2020-04 (Reference Rate Reform) provides optional guidance for accounting for the effects of LIBOR discontinuation, with the sunset date deferred to December 31, 2024; Organon does not anticipate a material impact[494](index=494&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Organon is exposed to market risks from foreign currency and interest rate fluctuations, which it manages through hedging programs - Organon is exposed to foreign currency risk from operations in multiple jurisdictions, primarily with the euro, Swiss franc, and Japanese yen[399](index=399&type=chunk) - The company uses a balance sheet risk management program and a net investment hedge to partially mitigate foreign exchange rate volatility[399](index=399&type=chunk) - For variable rate debt, a hypothetical **10% adverse movement in interest rates** is not expected to materially change annual interest expense[400](index=400&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=66&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Organon's audited consolidated financial statements and supplementary data for the fiscal years 2020 through 2022 - The financial statements include the Report of Independent Registered Public Accounting Firm, Consolidated Statements of Income, Comprehensive Income, Balance Sheets, Stockholders' Equity, and Cash Flows[402](index=402&type=chunk) - PricewaterhouseCoopers LLP issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022[406](index=406&type=chunk) Consolidated Statements of Income (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | | :------------------------------------------ | :--- | :--- | :--- | | Revenues | 6,174 | 6,304 | 6,532 | | Cost of sales | 2,294 | 2,382 | 2,119 | | Selling, general and administrative | 1,704 | 1,668 | 1,356 | | Research and development | 471 | 339 | 210 | | Acquired in-process R&D and milestones | 107 | 104 | — | | Restructuring costs | 28 | 3 | 60 | | Interest expense | 422 | 258 | — | | Exchange losses | 11 | 4 | 44 | | Other expense (income), net | 15 | 17 | (9) | | Income From Continuing Operations Before Income Taxes | 1,122 | 1,529 | 2,752 | | Taxes on Income | 205 | 178 | 496 | | Net Income From Continuing Operations | 917 | 1,351 | 2,256 | | Loss From Discontinued Operations - Net of Tax | — | — | (96) | | **Net Income** | **917** | **1,351** | **2,160** | | Net Earnings per Share - Basic | $3.61 | $5.33 | $8.52 | | Net Earnings per Share - Diluted | $3.59 | $5.31 | $8.52 | Consolidated Balance Sheets (2021-2022) | ($ in millions) | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------------ | :----------- | :----------- | | **Assets** | | | | Cash and cash equivalents | 706 | 737 | | Accounts receivable (net) | 1,475 | 1,382 | | Inventories | 1,003 | 915 | | Total current assets | 3,931 | 3,760 | | Property, plant and equipment, net | 1,018 | 973 | | Goodwill | 4,603 | 4,603 | | Intangibles, net | 649 | 651 | | Total Assets | **10,955** | **10,681** | | **Liabilities and Equity** | | | | Current portion of long-term debt | 8 | 9 | | Trade accounts payable | 1,132 | 1,382 | | Accrued and other current liabilities | 1,188 | 1,021 | | Total current liabilities | 2,512 | 2,597 | | Long-term debt | 8,905 | 9,125 | | Total Stockholders' Deficit | (892) | (1,508) | | Total Liabilities and Equity | **10,955** | **10,681** | Consolidated Statements of Cash Flows (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | | :------------------------------------------ | :--- | :--- | :--- | | Net Cash Flows Provided by Operating Activities from Continuing Operations | 858 | 2,160 | 2,284 | | Net Cash Flows Used in Investing Activities from Continuing Operations | (420) | (481) | (250) | | Net Cash Flows Used in Financing Activities from Continuing Operations | (433) | (977) | (2,022) | | Net Cash Flows Used in Discontinued Operations | — | (58) | (258) | | Net (Decrease) Increase in Cash and Cash Equivalents | (31) | 667 | (249) | | Cash and Cash Equivalents, End of Period | 706 | 737 | 12 | [Report of Independent Registered Public Accounting Firm](index=67&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion on the financial statements and internal controls, identifying US rebate accruals as a critical audit matter - PricewaterhouseCoopers LLP issued an **unqualified opinion** on Organon's consolidated financial statements for 2022 and 2021, and on the effectiveness of its internal control over financial reporting as of December 31, 2022[405](index=405&type=chunk)[406](index=406&type=chunk) - A critical audit matter identified was **U.S rebate accruals (Medicaid and Managed Care)** due to significant management judgment and measurement uncertainty in estimating these accruals[413](index=413&type=chunk)[414](index=414&type=chunk) [Consolidated Statements of Income](index=69&type=section&id=Consolidated%20Statements%20of%20Income) Net income was $917 million in 2022, a decrease from $1.35 billion in 2021, driven by lower revenues and higher operating expenses Consolidated Statements of Income (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | | :------------------------------------------ | :--- | :--- | :--- | | Revenues | 6,174 | 6,304 | 6,532 | | Cost of sales | 2,294 | 2,382 | 2,119 | | Selling, general and administrative | 1,704 | 1,668 | 1,356 | | Research and development | 471 | 339 | 210 | | Acquired in-process R&D and milestones | 107 | 104 | — | | Restructuring costs | 28 | 3 | 60 | | Interest expense | 422 | 258 | — | | Exchange losses | 11 | 4 | 44 | | Other expense (income), net | 15 | 17 | (9) | | Income From Continuing Operations Before Income Taxes | 1,122 | 1,529 | 2,752 | | Taxes on Income | 205 | 178 | 496 | | Net Income From Continuing Operations | 917 | 1,351 | 2,256 | | Loss From Discontinued Operations - Net of Tax | — | — | (96) | | **Net Income** | **917** | **1,351** | **2,160** | | Net Earnings per Share - Basic | $3.61 | $5.33 | $8.52 | | Net Earnings per Share - Diluted | $3.59 | $5.31 | $8.52 | [Consolidated Statements of Comprehensive Income](index=70&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income was $866 million in 2022, down from $1.45 billion in 2021, reflecting lower net income and translation adjustments Consolidated Statements of Comprehensive Income (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | | :------------------------------------ | :--- | :--- | :--- | | Net Income | 917 | 1,351 | 2,160 | | Other Comprehensive (Loss) Income, Net of Taxes: | | Benefit plan net gain (loss) and prior service credit, net of amortization | 23 | 8 | (143) | | Cumulative translation adjustment | (74) | 90 | (30) | | **Comprehensive Income** | **866** | **1,449** | **1,987** | [Consolidated Balance Sheets](index=71&type=section&id=Consolidated%20Balance%20Sheets) Total assets were $11.0 billion as of December 31, 2022, with long-term debt at $8.9 billion and a total stockholders' deficit of $892 million Consolidated Balance Sheets (2021-2022) | ($ in millions) | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------------ | :----------- | :----------- | | **Assets** | | | | Cash and cash equivalents | 706 | 737 | | Accounts receivable (net) | 1,475 | 1,382 | | Inventories | 1,003 | 915 | | Other current assets | 747 | 726 | | Total current assets | 3,931 | 3,760 | | Property, plant and equipment, net | 1,018 | 973 | | Goodwill | 4,603 | 4,603 | | Intangibles, net | 649 | 651 | | Other assets | 754 | 694 | | Total Assets | **10,955** | **10,681** | | **Liabilities and Equity** | | | | Current portion of long-term debt | 8 | 9 | | Trade accounts payable | 1,132 | 1,382 | | Accrued and other current liabilities | 1,188 | 1,021 | | Income taxes payable | 184 | 185 | | Total current liabilities | 2,512 | 2,597 | | Long-term debt | 8,905 | 9,125 | | Deferred income taxes | 19 | 4 | | Other noncurrent liabilities | 411 | 463 | | Common stock, $0.01 par value | 3 | 3 | | Accumulated deficit | (331) | (998) | | Accumulated other comprehensive loss | (564) | (513) | | Total Stockholders' Deficit | (892) | (1,508) | | Total Liabilities and Equity | **10,955** | **10,681** | [Consolidated Statements of Stockholders' Equity (Deficit)](index=72&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) The stockholders' deficit improved from $1.5 billion in 2021 to $892 million in 2022, primarily due to net income Consolidated Statements of Stockholders' Equity (Deficit) (2019-2022) | ($ in millions, except shares in thousands) | Common Stock Shares | Par Value | Additional Paid In Capital | Accumulated Deficit | Net Investment from Merck & Co., Inc. | Accumulated Other Comprehensive Loss | Total | | :------------------------------------------ | :------------------ | :-------- | :------------------------- | :------------------ | :------------------------------------ | :----------------------------------- | :---- | | Balance at December 31, 2019 | — | — | — | — | 7,949 | (914) | 7,035 | | Net income | — | — | — | 2,160 | — | — | 2,160 | | Other comprehensive loss, net of taxes | — | — | — | — | — | (173) | (173) | | Net transfers to Merck & Co., Inc. | — | — | — | (4,001) | 465 | — | (3,536) | | Balance at December 31, 2020 | — | — | — | 6,108 | (622) | — | 5,486 | | Net income | — | — | 1,351 | — | — | — | 1,351 | | Other comprehensive income, net of taxes | — | — | — | — | 98 | — | 98 | | Cash dividends declared on common stock ($0.56 per share) | — | — | (145) | — | — | — | (145) | | Stock-based compensation plans and other | 34 | — | 38 | — | — | — | 38 | | Net transfers from Merck & Co., Inc., including Separation Adjustments | — | — | 65 | 588 | 11 | — | 664 | | Net consideration paid to Merck & Co., Inc. in connection with Separation | — | — | (9,000) | — | — | — | (9,000) | | Issuance of common stock in connection with the Separation and reclassification of Net investment from Merck & Co., Inc. | 253,516 | 3 | (1,577) | 1,574 | — | — | — | | Balance at December 31, 2021 | 253,550 | 3 | (998) | — | (513) | — | (1,508) | | Net income | — | — | 917 | — | — | — | 917 | | Other comprehensive loss, net of taxes | — | — | — | — | (51) | — | (51) | | Cash dividends declared on common stock ($1.12 per share) | — | — | (290) | — | — | — | (290) | | Stock-based compensation plans and other | 820 | — | 64 | — | — | — | 64 | | Net transfers from Merck & Co., Inc., including Separation Adjustments | — | — | (24) | — | — | — | (24) | | Balance at December 31, 2022 | 254,370 | 3 | (331) | — | (564) | — | (892) | [Consolidated Statements of Cash Flows](index=73&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to $858 million in 2022 from $2.16 billion in 2021, mainly due to changes in working capital Consolidated Statements of Cash Flows (2020-2022) | ($ in millions) | 2022 | 2021 | 2020 | | :----------------------------------------------------------------- | :--- | :--- | :--- | | Net income from continuing operations | 917 | 1,351 | 2,256 | | Depreciation | 96 | 92 | 56 | | Amortization | 116 | 103 | 86 | | Impairment of assets | 9 | 7 | — | | Acquired in-process research and development and milestones | 107 | 104 | — | | Deferred income taxes | (18) | (288) | (32) | | Stock-based compensation | 75 | 59 | 40 | | Unrealized foreign exchange loss (gain) | (18) | 18 | (5) | | Net changes in assets and liabilities (Operating Activities) | (552) | 999 | (107) | | **Net Cash Flows Provided by Operating Activities from Continuing Operations** | **858** | **2,160** | **2,284** | | Capital expenditures | (196) | (192) | (255) | | Purchase of product rights and asset acquisition, net of cash acquired | (124) | (192) | — | | **Net Cash Flows Used in Investing Activities from Continuing Operations** | **(420)** | **(481)** | **(250)** | | Proceeds from issuance of long-term debt | — | 9,470 | — | | Repayments of debt | (108) | (112) | — | | Net consideration paid to Merck & Co. Inc. in connection with the Separation | — | (9,000) | — | | Dividend payments | (290) | (145) | — | | **Net Cash Flows Used in Financing Activities from Continuing Operations** | **(433)** | **(977)** | **(2,022)** | | Net Cash Flows Used in Discontinued Operations | — | (58) | (258) | | **Total Cash and Cash Equivalents, End of Period** | **706** | **737** | **70** | [Notes to Consolidated Financial Statements](index=74&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes that are integral to understanding the consolidated financial statements [1. Background and Nature of Operations](index=74&type=section&id=1.%20Background%20and%20Nature%20of%20Operations) Organon is a global healthcare company that spun off from Merck & Co on June 2, 2021, to operate as a standalone entity - Organon & Co is a global health care company focused on women's health, biosimilars, and established brands, with over 60 products and six manufacturing faciliti

Company and Industry Overview * **Company**: Organon & Co. (NYSE:OGN) * **Industry**: Pharmaceuticals, Biotechnology * **Focus**: Women's health, biosimilars, established brands Key Points Organon's Performance and Strategy 1. **Stabilization and Growth**: Organon's established brands business, which accounts for 60% of its revenue, has stabilized and even grown in 2022, contrary to initial assumptions of decline. 2. **Strategic Pillars Growth**: Organon has achieved double-digit growth in biosimilars and women's health, including fertility and NEXPLANON. 3. **Pipeline Expansion**: Organon has announced eight deals in 18 months, focusing on early-stage, mid-stage, and commercialized assets to expand its pipeline. 4. **Women's Health Focus**: Organon aims to become a leader in the women's health space, capitalizing on recent R&D developments and the lack of a dedicated leader in the field. 5. **Biosimilars Strategy**: Organon partners with developers to participate in the biosimilars market, focusing on early launches and strategic partnerships. Women's Health 1. **Fertility**: Organon's fertility franchise is expected to experience double-digit growth due to high demand and limited competition. 2. **NEXPLANON**: NEXPLANON is on track to become a $1 billion product by 2025, with patent protection until 2027 and potential for extension. 3. **Inorganic Acquisitions**: Organon's recent acquisitions, such as Jada System and XACIATO, will contribute to growth in the coming years. 4. **Early-Stage Assets**: Organon's acquisition of Forendo and the development of OG-6219 offer new mechanisms of action and significant growth opportunities. Biosimilars 1. **HUMIRA Biosimilar**: Organon is in the first tranche of launches for its HUMIRA biosimilar, with a launch expected in summer 2023. 2. **Market Position**: Organon believes it is well-positioned in the biosimilars market due to its partnerships, safety data, manufacturing capabilities, and device expertise. 3. **Market Development**: Organon expects the biosimilars market to grow significantly, with potential discounts of 80-90% by 2025-2026. Established Brands 1. **Stabilization**: Organon's established brands business has stabilized and is growing, providing a stable cash flow for reinvestment. 2. **China**: Organon's diversified portfolio and retail business have helped mitigate the impact of China's VBP program. 3. **Business Development**: Organon is open to acquiring single products or portfolios that can be accretive to its business. Financials and Capital Deployment 1. **Investments**: Organon plans to reinvest profits in R&D and SG&A to support growth, leading to lower margins in the short term. 2. **Free Cash Flow**: Organon expects to generate over $1 billion of free cash flow annually, supporting its dividend and reinvestment in the business. 3. **Debt and Leverage**: Organon has a strong balance sheet and flexibility to pursue larger deals if the right opportunity arises. 4. **Interest Rates**: Higher interest rates have raised the bar for M&A analysis, particularly for early-stage deals. Conclusion Organon is well-positioned for growth in the women's health, biosimilars, and established brands markets. The company's strategic focus, strong pipeline, and financial stability provide a solid foundation for future success.

Summary of Organon & Co. Conference Call Company Overview - **Company**: Organon & Co. (NYSE: OGN) - **Participants**: Kevin Ali (CEO), Matt Walsh (CFO) - **Event**: Piper Sandler 34th Annual Healthcare Conference - **Date**: November 29, 2022 Key Points Business Development and M&A Strategy - Organon is focused on a balanced approach to business development (BD) and mergers & acquisitions (M&A), targeting early-stage assets with blockbuster potential, mid-ready to launch assets, and commercialized assets [4][6] - The company has completed seven deals since its inception 18 months ago, emphasizing women's health as a core focus [4][6] Women's Health Segment - The company is expanding its focus on conditions uniquely affecting women and is also exploring biosimilar partnerships [9][10] - There is potential for acquisitions in areas disproportionately impacting women, such as migraine and osteoporosis [10] Financial Performance and EBITDA Margins - Organon raised its EBITDA margin guidance for 2022 based on favorable year-to-date performance, with a focus on revenue mix and manufacturing efficiency [12] - The company anticipates EBITDA margins to be around 31% for 2023, reflecting ongoing investments in R&D and promotional activities [18] Established Brands Business - Established brands represent about 60% of Organon's revenue, and the company is optimistic about stabilizing and potentially growing this segment [20][22] - The company has experienced growth in established brands due to favorable market conditions and strategic investments [22][23] Volume-Based Procurement in China - Organon has navigated six rounds of volume-based procurement (VBP) in China without a decline in business, thanks to a strong retail sales channel [25][26] - By the end of 2023, approximately 75% of the business will have gone through the VBP process, with expectations for low double-digit growth in the future [28] NEXPLANON and Women's Health Recovery - NEXPLANON has shown strength, but health visits for women remain below pre-pandemic levels, affecting recovery [30][31] - The company is focused on training healthcare providers to increase confidence in prescribing NEXPLANON [34][36] Biosimilars Market and HUMIRA - The biosimilar market is expected to see competition for HUMIRA starting in mid-2023, with a gradual ramp-up in market activity [40][41] - Organon has a partnership with Samsung for biosimilars, which is expected to provide a competitive edge due to product quality and patient experience [42][45] Future Outlook - Organon is positioning itself as a commercial partner of choice in the biosimilars market, with a focus on leveraging its expertise in the segment [44][45] - The company anticipates continued growth opportunities in the biosimilars market over the next five to seven years [45] Additional Insights - The company is committed to reinvesting in its business to drive long-term growth, particularly in R&D and promotional spending [17][18] - The focus on women's health and established brands is expected to provide a stable revenue base for future investments [20][22]