Summary of Organon Conference Call Company Overview - **Company**: Organon - **Event**: 37th Annual Piper Sandler Healthcare Conference - **Speakers**: Joe Morrissey (Interim CEO), Matt Walsh (CFO) Key Points Internal Investigation and Remediation - An internal investigation focused on sales practices related to Nexplanon and two wholesalers was concluded, identifying a weakness in the "tone at the top" [2][3] - A detailed remediation plan has been approved by the audit committee, emphasizing ethics training and mechanisms for employees to escalate concerns [2][3] - The investigation found that revenue management around quarter-end orders affected less than 1% of annual revenue and 2% in any quarter, confirming that revenue recognition practices were appropriate [3][5] Financial Performance and Cost Discipline - In 2025, Organon achieved a reduction of $200 million in operating expenses, with continued cost discipline expected in 2026 [11][14] - The adjusted EBITDA margin target of 31% for 2026 is considered challenging due to flattening Nexplanon sales and ongoing investments in Vtama [14][18] Research and Development (R&D) Strategy - The primary R&D focus is on maximizing the value of existing products, including Vtama, while deprioritizing larger, longer-term programs [21][28] - Organon aims to evolve into a more commercially focused organization, potentially leading to significant cuts in the R&D budget [28][30] Nexplanon Product Outlook - Nexplanon is expected to face flat to declining sales in the U.S. due to Title X funding challenges and policy changes affecting Planned Parenthood [39][44] - Internationally, Nexplanon continues to grow, with recent reimbursement wins in Brazil [53][41] - The product lost exclusivity in Europe, but generics have not yet entered the market [44][46] Vtama Sales Performance - Vtama's 2025 sales guidance was lowered due to challenges in volume growth and gross-to-net moderation, with access improving from less than 40% to around 70%-80% in preferred tiers [75][80] - The competitive landscape for topical dermatology products is challenging, but Vtama is positioned to compete based on its efficacy and safety profile [100][102] Established Brands and Market Challenges - Respiratory products, particularly Singulair and Dulera, are facing significant headwinds due to price reductions and loss of contracts [122][136] - The impact of Atozet's loss of exclusivity (LOE) is expected to be less than $75 million in 2026, compared to over $200 million in 2025 [154] Growth Opportunities - Emgality is performing well, with expansion into 22 markets, showcasing Organon's capability to leverage its global infrastructure for growth [156][161] - Organon is open to acquiring additional dermatology-focused assets to capitalize on its existing sales force and capabilities [111][112] Biosimilars and Divestitures - Biosimilars are viewed as a growth driver, with successful launches of Hadlima and plans for further expansion [168][172] - Divestitures will be approached opportunistically to improve capital structure and accelerate deleveraging [180][183] Additional Insights - The company is focused on maintaining a strong balance sheet while exploring strategic partnerships and acquisitions that align with its core capabilities [111][162] - The competitive dynamics in the dermatology space and the broader healthcare market are acknowledged as critical factors influencing future performance [100][102]

Core Insights - The biopharmaceutical license application (BLA) for Pertuzumab injection (420mg/14mL) POHERDY has been approved by the U.S. Food and Drug Administration (FDA), making it the first and only biosimilar to PERJETA (pertuzumab) in the U.S. market [1][1][1] - This approval allows for interchangeability with the original product PERJETA and covers all indications for which PERJETA has been approved in the U.S. [1][1][1] - The approval represents a significant milestone in improving access to high-quality and potentially more affordable treatment options for patients with specific HER2-positive breast cancer [1][1][1]

Core Insights - Organon and Henlius have received FDA approval for POHERDY, marking it as the first and only pertuzumab biosimilar in the US that is interchangeable with Perjeta [1] Company Summary - The approval of POHERDY represents a significant milestone for Organon and Henlius in the biosimilar market, particularly for treatments related to breast cancer [1] - This development may enhance competition in the oncology sector, potentially leading to cost savings for patients and healthcare systems [1] Industry Summary - The introduction of POHERDY as an interchangeable biosimilar could influence the dynamics of the oncology drug market in the US, promoting greater accessibility to essential treatments [1] - The approval aligns with ongoing trends in the pharmaceutical industry towards the development and acceptance of biosimilars, which are designed to provide more affordable alternatives to existing biologic therapies [1]

Group 1 - The article discusses the importance of staying updated on stocks in the biotech, pharma, and healthcare sectors, highlighting key trends and catalysts that influence market valuations [1] - Edmund Ingham, a biotech consultant with over 5 years of experience, leads the Haggerston BioHealth investing group, which caters to both novice and experienced investors [1] - The investing group provides insights on catalysts, buy and sell ratings, product sales forecasts, integrated financial statements, discounted cash flow analysis, and market-specific analyses for major pharmaceutical companies [1]

Core Insights - Organon reported third-quarter adjusted earnings of $1.01 per share, exceeding the consensus estimate of 94 cents, and quarterly sales of $1.602 billion, surpassing Wall Street's estimate of $1.56 billion [1] - The company lowered its fiscal sales guidance from a range of $6.275 billion-$6.375 billion to $6.20 billion-$6.25 billion, which is below the consensus of $6.289 billion [1] Financial Performance - The adjusted earnings per share for the third quarter were $1.01, beating expectations [1] - Quarterly sales reached $1.602 billion, exceeding the forecast [1] Management Commentary - Joe Morrissey, the Interim CEO, emphasized the company's strengths and projected over $900 million in free cash flow for the year, while also focusing on cost discipline and debt reduction [2] - The management aims to create additional balance sheet capacity to pursue growth opportunities in women's health [2] Stock Performance - Following the earnings announcement, Organon shares fell by 3.4%, trading at $7.44 [2] Analyst Ratings - Morgan Stanley's Terence Flynn maintained an Equal-Weight rating and reduced the price target from $10 to $9 [5] - JP Morgan's Chris Schott kept an Underweight rating and lowered the price target from $14 to $12 [5]

Core Insights - Organon reported $1.6 billion in revenue for Q3 2025, a year-over-year increase of 1.3% and an EPS of $1.01, up from $0.87 a year ago, exceeding Zacks Consensus Estimates for both revenue and EPS [1] Revenue Performance - Revenue from Established Brands in the U.S. for Respiratory (Clarinex) was $1 million, matching the average estimate [4] - Revenue from Established Brands in the U.S. for Non-Opioid Pain, Bone, and Dermatology (Other) was $4 million, a decrease of 20% year-over-year, below the average estimate of $4.87 million [4] - Revenue from Women's Health International (NuvaRing) was $17 million, slightly above the average estimate of $16.73 million, with no year-over-year change [4] - Revenue from Women's Health U.S. (NuvaRing) was $9 million, exceeding the average estimate of $6.48 million, representing a 28.6% increase year-over-year [4] - Revenue from Women's Health (Nexplanon/Implanon NXT) was $223 million, below the average estimate of $246.08 million, reflecting an 8.2% decrease year-over-year [4] - Total revenue from Established Brands was $956 million, slightly above the average estimate of $925.97 million, with a 0.5% year-over-year increase [4] - Total revenue from Biosimilars was $196 million, exceeding the average estimate of $167.07 million, with an 18.8% year-over-year increase [4] - Total revenue from Women's Health was $429 million, below the average estimate of $456.13 million, representing a 2.5% year-over-year decrease [4] - Total revenue from Other was $21 million, in line with the average estimate of $21.14 million, reflecting a 19.2% year-over-year decrease [4] - Revenue from Women's Health (NuvaRing) was $26 million, exceeding the average estimate of $23.21 million, with a 13% year-over-year increase [4] - Revenue from Biosimilars (Renflexis) was $70 million, slightly above the average estimate of $63.61 million, with a 2.8% year-over-year decrease [4] Stock Performance - Organon's shares have returned -29.4% over the past month, contrasting with the Zacks S&P 500 composite's +0.3% change, indicating underperformance [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Third quarter revenue was $1.6 billion, with adjusted EBITDA of $518 million, representing an adjusted EBITDA margin of 32.3% [13][30] - The company is lowering its full-year revenue guidance to $6.2 billion-$6.25 billion, reflecting a year-over-year nominal decline of 3.2%-2.4% [33] - Adjusted gross margin for the third quarter was 60.3%, down from 61.7% in the same quarter of 2024, primarily due to pricing pressure and unfavorable product mix [29][30] Business Line Data and Key Metrics Changes - Women's health franchise revenue declined 4% in the third quarter compared to the same period in 2024, with a 9% decline in Nexplanon sales [17] - Global Nexplanon sales were $223 million in the third quarter, with a 50% decline in the U.S. and a 7% growth internationally [17][18] - The fertility business was flat in the third quarter but up 13% year-to-date, with expectations of high single-digit growth for the full year [19] - Hadlima, a biosimilar, saw a 63% increase in sales year-to-date, contributing significantly to the biosimilars segment [21] Market Data and Key Metrics Changes - The U.S. market for Nexplanon faced challenges due to unfavorable policy changes impacting budget-constrained public segments [17][18] - The respiratory business is experiencing declines, particularly in Singulair and Dulera, due to competitive pressures and mandatory price reductions [24][25] Company Strategy and Development Direction - The company remains focused on deleveraging, driving cost savings, and achieving revenue growth [12][38] - A definitive agreement was made to divest the JADA system for $440 million, which will help in faster deleveraging [20] - The company is committed to enhancing operational performance and aligning resources to strategic priorities [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current headwinds and emphasized the importance of operational excellence [10][38] - The company anticipates that the discontinuation of certain sales practices will have a significant impact on future revenue [15][19] - Management expects Nexplanon sales to be down mid to high single digits for the full year in the U.S. but anticipates international growth [18][19] Other Important Information - The independent internal investigation regarding improper sales practices has concluded, and remediation efforts are underway [9][48] - The company is not planning any additional divestitures at this time but will continue to evaluate its portfolio strategically [40] Q&A Session Summary Question: Are there opportunities for additional divestitures within the portfolio? - The company is constantly evaluating its assets but has no definitive plans for further divestitures at this time [40] Question: When should growth inflection for Vtama be expected? - Significant strides have been made to improve access, and 2026 is seen as a key year for evaluating growth trajectory [41] Question: Can you elaborate on the pressure on the respiratory business? - The respiratory business is expected to continue facing challenges due to competitive pressures and mandatory price reductions [42][43] Question: What are the expectations for Denosumab and its impact on future revenue? - The company is excited about Denosumab's launch and anticipates it will contribute positively to the biosimilars segment [54] Question: How is the CEO search progressing? - The search committee is actively working to find a permanent CEO, with no strategic changes anticipated in the interim [51]

Financial Performance - Revenue for Q3 2025 was $1602 million, a 1% increase compared to Q3 2024[13] - Adjusted EBITDA for Q3 2025 was $518 million, with a 323% Adjusted EBITDA margin[13] - Adjusted diluted EPS for Q3 2025 was $101, compared to $087 in Q3 2024, a 16% increase[13] - The full-year revenue range is revised to $6200 million - $6250 million, with an Adjusted EBITDA margin guidance revised to approximately 310%[13] - Free Cash Flow before one-time costs YTD September 2025 was $813 million, compared to $693 million in 2024[32] Revenue Analysis by Segment - Total Women's Health revenue was $429 million in Q3 2025, a decrease of 3% compared to Q3 2024[17] However, year-to-date Women's Health revenue increased by 3% to $1354 million[15,17] - Nexplanon revenue was $223 million in Q3 2025, a decrease of 8% compared to Q3 2024[17] - Total Biosimilars revenue was $196 million in Q3 2025, a 19% increase compared to Q3 2024[20] Year-to-date Biosimilars revenue increased by 2% to $510 million[20] - Hadlima revenue increased by 57% to $63 million in Q3 2025[20] - Total Established Brands revenue was $956 million in Q3 2025, a 1% increase compared to Q3 2024[24] Year-to-date Established Brands revenue decreased by 5% to $2778 million[24] Geographic Performance - United States revenue increased by 2% to $406 million in Q3 2025[56] - Europe and Canada revenue decreased by 4% to $417 million in Q3 2025[56] - Latin America, Middle East, Russia and Africa revenue increased by 18% to $286 million in Q3 2025[56] Guidance - Full-year revenue guidance is revised to $6200 million - $6250 million, representing a nominal revenue growth of (32%) - (24%)[39] - Adjusted EBITDA margin guidance is revised to approximately 310%[39]

Financial Performance - Worldwide sales for the three months ended September 30, 2025, were $1.6 billion, an increase of 1% compared to 2024, positively impacted by approximately 2% or $36 million due to favorable foreign exchange rates [124]. - For the nine months ended September 30, 2025, worldwide sales were $4.7 billion, a decrease of 2% compared to 2024, with a positive impact of approximately $2 million from favorable foreign exchange rates [125]. - Sales of Nexplanon decreased 8% for the three months ended September 30, 2025, primarily due to lower demand and decreased funding of government programs in the United States [132]. - Hadlima sales increased 57% and 62% for the three and nine months ended September 30, 2025, respectively, due to sales ramp-up since its launch in July 2023 in the United States [138]. - Jada sales increased 30% and 25% for the three and nine months ended September 30, 2025, respectively, due to continued uptake in the United States following its launch in early 2022 [137]. - Renflexis sales declined 2% and 9% for the three and nine months ended September 30, 2025, respectively, primarily due to competitive pressure and unfavorable discount rates in the United States [138]. - NuvaRing sales increased 9% for the three months ended September 30, 2025, but declined 17% for the nine months ended September 30, 2025, due to the loss of a customer contract and ongoing generic competition [133]. - Atozet experienced a negative impact of approximately $47 million and $170 million in sales during the three and nine months ended September 30, 2025, respectively, due to loss of exclusivity in France, Spain, and Japan [128]. - Combined global sales of Zetia and Vytorin increased 10% and 1% for the three and nine months ended September 30, 2025, driven by increased demand in China [141]. - Combined global sales of Cozaar and Hyzaar declined 7% and 11% for the three and nine months ended September 30, 2025, due to decreased demand in Japan and Latin America [142]. - Worldwide sales of Singulair decreased 37% and 30% for the three and nine months ended September 30, 2025, due to lower demand outside the U.S. and price reductions in Japan and China [143]. - Sales of Vtama were $34 million and $89 million for the three and nine months ended September 30, 2025, following the acquisition of Dermavant [147]. Financial Position - As of September 30, 2025, the company had cash and cash equivalents of $672 million, with expectations of generating positive cash flow from operations [162]. - Working capital increased to $2.02 billion as of September 30, 2025, from $1.63 billion as of December 31, 2024, due to active cash cycle management [163]. - Accounts receivable factoring agreements resulted in $268 million of factored receivables as of September 30, 2025, compared to $186 million as of December 31, 2024 [164]. - Net cash provided by operating activities was $559 million for the nine months ended September 30, 2025, up from $549 million in the same period last year [165]. - Net cash used in investing activities increased to $325 million for the nine months ended September 30, 2025, compared to $217 million for the same period in the prior year, primarily due to increased milestone payments [165]. - Net cash used in financing activities was $374 million for the nine months ended September 30, 2025, compared to $286 million in the prior year, driven by the repurchase of $242 million of the 2031 Notes [166]. - Total potential payments for contractual milestones as of September 30, 2025, are $2.6 billion, with approximately $20 million expected to be paid through the remainder of 2025 [168]. - Cash dividends of $0.02 per share were paid during the third quarter of 2025, with a similar dividend declared for payment on December 11, 2025 [169]. Operational Insights - The company operates six manufacturing facilities located in Belgium, Brazil, Indonesia, Mexico, the Netherlands, and the United Kingdom [109]. - The company has a portfolio of more than 70 medicines and products across various therapeutic areas [109]. - The company is optimizing its manufacturing and supply network, including planned exits from supply agreements with Merck through 2031 [167]. - The company expects volume-based procurement in China to continue impacting its general medicines product portfolio for the next several quarters [128]. Internal Controls and Governance - The internal investigation revealed that the sales practices for wholesalers regarding Nexplanon represented less than 1% of consolidated revenue for the fiscal year ended December 31, 2022, and less than 2% for certain quarterly periods [111]. - The company concluded that there were material weaknesses in internal control over financial reporting as of December 31, 2024, which should no longer be relied upon [116]. - The former CEO resigned on October 26, 2025, following the findings of the Audit Committee investigation [119]. - The Audit Committee's investigation found that inappropriate pressure was applied to achieve sales targets, leading to improper inventory purchases by wholesalers [113]. - The investigation did not find that the improper sales practices extended to other company products beyond Nexplanon during the relevant periods [112]. Research and Development - Research and development expenses decreased 24% and 19% for the three and nine months ended September 30, 2025, primarily due to reduced headcount-related expenses [154]. - Restructuring costs for the nine months ended September 30, 2025, amounted to $88 million, aimed at driving operational efficiencies [156]. Market Risks - Geopolitical developments and global trade issues, including tariffs, could potentially impact the company's supply chain and operating costs [121]. - There have been no material changes to market risk during the quarter ended September 30, 2025 [173]. - The company may seek to retire or purchase outstanding debt through various means, depending on market conditions and liquidity requirements [170].

Core Insights - Organon reported Q3 CY2025 results that exceeded market revenue expectations, with sales increasing by 1.3% year-on-year to $1.60 billion, beating analyst estimates by 2% [1][7][8] - The company's full-year revenue guidance of $6.23 billion at the midpoint is 1% below analysts' estimates [1][8] - Non-GAAP profit of $1.01 per share was 8.5% above analysts' consensus estimates [1][7] Company Overview - Organon was spun off from Merck in 2021, focusing on addressing unmet needs in women's health through various healthcare solutions [4] Revenue Growth - Over the last five years, Organon's revenue declined by 1.7% per year, indicating weak demand and a lack of business quality [5] - The company has shown an annualized revenue growth of 1.2% over the last two years, which is an improvement over the five-year trend, but still disappointing [6] Financial Performance - Adjusted EBITDA was reported at $518 million, with a margin of 32.3%, exceeding analyst estimates by 7.9% [7] - Operating margin decreased to 15.2%, down from 21.4% in the same quarter last year [7] - Market capitalization stands at $1.76 billion [7] Future Outlook - Analysts expect revenue to remain flat over the next 12 months, indicating potential demand headwinds for Organon's products and services [8]