Company Performance - Organon (OGN) closed at $15.39, reflecting a -1.35% change from the previous session, underperforming the S&P 500's daily gain of 0.08% [1] - Over the last month, Organon's shares decreased by 0.57%, which is better than the Medical sector's loss of 1.03% and the S&P 500's loss of 7.33% [1] Upcoming Financial Results - Organon is expected to report an EPS of $0.92, down 24.59% from the prior-year quarter, with projected net sales of $1.54 billion, down 4.97% from the year-ago period [2] - For the full year, analysts expect earnings of $3.79 per share and revenue of $6.27 billion, marking changes of -7.79% and -2.14% respectively from last year [3] Analyst Forecasts and Valuation - Recent revisions to analyst forecasts for Organon are important as they reflect short-term business trends, with positive revisions indicating optimism about the company's outlook [4] - The Zacks Rank system, which incorporates estimate changes, currently ranks Organon at 3 (Hold), with a Forward P/E ratio of 4.12, indicating a discount compared to the industry's Forward P/E of 16.32 [6] - Organon's PEG ratio is 1.73, compared to the Medical Services industry's average PEG ratio of 1.43 [7] Industry Context - The Medical Services industry, part of the Medical sector, has a Zacks Industry Rank of 75, placing it in the top 30% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

In this article, I will look at Organon (NYSE: OGN ), a pharmaceutical company headquartered in Jersey City that occupies one of the leading positions in the biosimilars and women's health therapeutics markets.With over two decades of dedicated experience in investment, Allka Research has been a guiding force for individuals seeking lucrative opportunities. Its conservative approach sets it apart, consistently unearthing undervalued assets within the realms of ETFs, commodities, technology, and pharmaceutic ...

Company Overview - May Health is a clinical-stage medical device company based in Paris and California, focused on developing treatments for Polycystic Ovary Syndrome (PCOS) [5][6] - The company is currently investigating its proprietary Ovarian Rebalancing™ technology as a treatment for PCOS-related infertility through the REBALANCE clinical study, which is an FDA-approved investigational device exemption (IDE) trial [5][6] Leadership Transition - Colby Holtshouse has been appointed as President and CEO of May Health, bringing extensive experience in women's health and senior leadership from previous roles at Organon, Alydia Health, and Pelvalon [1][2] - The leadership change comes as the company aims to complete the REBALANCE study, which is crucial for obtaining marketing authorization for the Ovarian Rebalancing procedure [2][3] Technology and Clinical Focus - The Ovarian Rebalancing procedure is designed to restore ovulation in women with PCOS who do not respond to oral ovulation induction medications, utilizing a one-time, ultrasound-guided transvaginal ablation procedure [2][4] - The procedure aims for same-day recovery with minimal discomfort, targeting the ablation of excess androgen-producing ovarian tissue to establish regular ovulatory menstrual cycles [2][4] Market Context - PCOS affects approximately 10% of reproductive-aged women and is a leading cause of female infertility, presenting significant health challenges [4] - The condition is associated with various symptoms, including irregular menstruation, acne, and increased risks for Type 2 diabetes and heart disease [4] Financial Background - May Health completed a $25 million Series B funding round in 2024, co-led by Trill Impact and BPI France, following an earlier €10 million Series A round led by Sofinnova Partners [6]

Financial Performance - Revenues for the year ended December 31, 2024, were $6,403 million, an increase of 2.2% from $6,263 million in 2023[350]. - Gross profit for 2024 was $3,715 million, a decrease of 0.9% compared to $3,748 million in 2023[350]. - Net income for 2024 was $864 million, down 15.6% from $1,023 million in 2023[350]. - Basic earnings per share for 2024 were $3.36, compared to $4.01 in 2023, reflecting a decrease of 16.2%[350]. - Comprehensive income for 2024 was $756 million, down from $1,046 million in 2023, reflecting a decline of 27.7%[352]. - Cash flows provided by operating activities increased to $939 million in 2024, compared to $799 million in 2023 and $858 million in 2022[362]. - Total cash and cash equivalents at the end of 2024 decreased to $675 million from $693 million in 2023[362]. - The company declared cash dividends of $297 million in 2024, slightly up from $294 million in 2023 and $290 million in 2022[362]. - Research and development expenses for 2024 were $469 million, a decrease of 11.2% from $528 million in 2023[350]. - The provision for aggregate customer discounts increased to $3,024 million in 2024, up from $2,640 million in 2023 and $2,221 million in 2022[371]. Acquisitions and Partnerships - The Samsung Bioepis Agreement grants the company an exclusive license to commercialize five biosimilars products, including adalimumab (Humira) and trastuzumab (Herceptin)[103]. - Under the Samsung Bioepis Agreement, gross profits are shared equally in all markets, except in Brazil where the split is 65% to Samsung Bioepis and 35% to the company[106]. - The company plans to continue pursuing acquisitions of complementary businesses and strategic partnerships, including agreements with Centergene and Lilly to promote Emgality and Rayvow in Europe[123]. - Organon acquired Dermavant for an estimated aggregate consideration of $581 million, which includes an upfront payment of $175 million and potential future milestone payments of up to $1.025 billion[405][407][406]. - The acquisition allows Organon to expand its portfolio with Dermavant's product Vtama, which was approved for treating atopic dermatitis in December 2024, in addition to its existing indication for psoriasis[405][414]. Regulatory and Compliance Risks - The company is subject to various laws and regulations, and failure to comply could result in serious consequences for its operations[112]. - The company may incur unplanned costs and delays if additional pre-clinical studies or clinical trials are required for product candidates[132]. - Regulatory authorities have substantial discretion to require additional testing, which could delay or prevent marketing approval of products[127]. - The company is involved in patent disputes that could affect market exclusivity for its products, with challenges from third parties being costly and unpredictable[141]. - Disruptions at regulatory agencies like the FDA could hinder timely product approvals, impacting the company's operations[135]. - The evolving regulatory landscape for privacy and data protection, including GDPR compliance, poses significant operational challenges and potential penalties[160]. Market and Economic Conditions - The company faces continued pricing pressure globally, particularly in the EU, UK, China, and Japan, which could adversely affect sales and profit margins[116]. - Economic conditions, including inflation and market volatility, could adversely affect the company's ability to grow and maintain margins, potentially leading to increased costs[178][181]. - The company’s operations are significantly affected by global economic conditions, including trade tensions and sanctions, which could adversely impact results[155]. - The company’s business in China is growing, making it the second largest market, but faces challenges such as price reductions from government programs like VBP, which can exceed 50%[174][175]. Financial Position and Debt - As of December 31, 2024, the company had outstanding indebtedness of approximately $8.9 billion, which may increase the risk of insufficient cash generation to meet debt obligations[144]. - Total assets increased to $13,101 million in 2024 from $12,058 million in 2023, representing a growth of 8.7%[356]. - Total liabilities rose to $12,629 million in 2024, up from $12,128 million in 2023, indicating an increase of 4.1%[356]. - The long-term debt portfolio includes both fixed and variable-rate instruments, with potential interest rate changes impacting future interest expenses[331]. - The company is subject to restrictive covenants under its indebtedness, which may limit operational flexibility and access to financing[195]. Operational Challenges - The company relies on third parties for preclinical and clinical testing, which poses risks related to compliance and quality control[122]. - The company has limited in-house discovery capabilities and will continue to rely on acquisitions and partnerships to expand its product pipeline[120]. - The company is experiencing difficulties in manufacturing certain products, which may lead to increased costs and product shortages due to various factors including supply chain disruptions and regulatory compliance issues[170]. - Quality management is crucial for maintaining customer confidence, and any quality or safety issues could lead to recalls or loss of sales[137]. Environmental and Sustainability Concerns - Expenditures for remediation and environmental liabilities are estimated to be approximately $14 million for the years 2025 through 2029[102]. - Increased environmental regulations may lead to higher operational costs and affect business activities[189]. - The company is facing increased costs due to evolving sustainability regulations and may incur further costs related to compliance with various standards and frameworks[192]. Stock and Shareholder Matters - The company has not guaranteed the timing or amount of future dividends, which will depend on various factors including financial condition and capital requirements[204]. - The company’s stock price and trading volume may be volatile, influenced by market conditions and operational performance, potentially affecting capital raising efforts[202]. - The company’s amended bylaws may deter hostile takeover attempts, which could impact stockholder interests and market price[205].

Financial Data and Key Metrics Changes - For the full year 2024, revenue was $6.4 billion, representing a 3% growth rate at constant currency, marking the third consecutive year of constant currency revenue growth [7] - Adjusted EBITDA was $1.96 billion, with a 30.6% adjusted EBITDA margin; excluding IPR&D, the margin was 31.8%, showing a half-point margin expansion over the previous year [8][47] - The company expects 2025 revenue to be in the range of $6.125 billion to $6.325 billion, reflecting a $200 million headwind from foreign currency [9][56] Business Line Data and Key Metrics Changes - The women's health franchise grew 5% ex-exchange, driven by Nexplanon, which saw a 17% increase ex-FX, positioning it for at least $1 billion in revenue in 2025 [11] - The fertility franchise declined by 2% ex-exchange in 2024, while the biosimilars franchise grew by 12% at constant currency [15][16] - Established brands grew by 2% ex-exchange, with contributions from Emgality and Vtama offsetting losses from Atozet [18] Market Data and Key Metrics Changes - Outside the U.S., the LAMERA region showed strong growth, particularly in Brazil and the U.K. [12] - In the U.S., Nexplanon's market leadership was supported by a pricing strategy and growth in transition demand [12] Company Strategy and Development Direction - The company aims to demonstrate resiliency in its base business, capture efficiencies, consistently deploy capital, and deliver on growth products and pipeline [22][25] - The focus is on profitable growth, with a commitment to regular dividends as the top capital allocation priority [24][52] - The company plans to launch a Denosumab biosimilar in collaboration with Shanghai Henlius in late 2025, pending FDA approval [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Nexplanon's future growth, especially with the potential five-year indication submitted to the FDA [13] - The company anticipates a credible path to constant currency revenue growth in 2025 despite the loss of exclusivity of Atozet [57] - Management highlighted the importance of operational efficiency and cost savings, projecting $200 million in OpEx savings for 2025 [69] Other Important Information - The company reported a free cash flow of $967 million before one-time costs in 2024, with expectations of around $900 million for 2025 [48][75] - The adjusted gross margin for 2024 was 61.6%, down from 62.7% in 2023, reflecting pricing pressures and higher inflation impacts [45][61] Q&A Session Summary Question: What is the expected free cash flow for 2025? - The company expects free cash flow to be around $900 million before one-time items, slightly lower than 2024 due to a lower starting point on adjusted EBITDA [75] Question: What are the commercial dynamics for the Denosumab biosimilar? - The Denosumab biosimilar is expected to launch in Q4 2025, with confidence in the buy and bill process for both Prolia and Xgeva [76] Question: Is there a risk of generic Nexplanon entering the market before 2030? - Management confirmed no paragraph four filing has been received for Nexplanon, indicating low risk for generics entering the market before 2030 [80][85] Question: What is the competitive positioning of Vtama in atopic dermatitis? - Vtama has shown strong NRX growth of 51% since its approval, with a best-in-class label that positions it favorably against competitors [92] Question: What are the long-term net leverage targets? - The company aims to reduce its net leverage ratio below four times by the end of 2026, with a target in the mid-three range thereafter [106]

Organon & Co. (NYSE:OGN) Q4 2024 Earnings Conference Call February 13, 2025 8:30 AM ET Company Participants Jennifer Halchak - VP, IR Kevin Ali - CEO Juan Camilo Arjona Ferreira - Head of R&D Matt Walsh - CFO Conference Call Participants Terence Flynn - Morgan Stanley Michael Nedelcovych - TD Cowen Ethan Brown - JPMorgan David Amsellem - Piper Sandler Balaji Prasad - Barclays Jason Gerberry - Bank of America Umer Raffat - Evercore ISI Operator Thank you for standing by. My name is Celine and I will be your ...

Core Insights - Organon reported $1.59 billion in revenue for Q4 2024, a slight year-over-year decline of 0.4% but a positive surprise of +1.68% over the Zacks Consensus Estimate of $1.57 billion [1] - The earnings per share (EPS) for the quarter was $0.90, which is an increase from $0.88 a year ago, and represents a surprise of +4.65% over the consensus estimate of $0.86 [1] Revenue Performance by Segment - Revenue from Established Brands in the U.S. for Respiratory was $13 million, exceeding the estimated $9.49 million, marking a significant year-over-year increase of +62.5% [4] - Revenue from Biosimilars in the U.S. for Renflexis was $52 million, below the estimated $57.86 million, reflecting a year-over-year decline of -17.5% [4] - International revenue from Women's Health for NuvaRing was $18 million, surpassing the estimated $16.25 million, but showing a year-over-year decrease of -5.3% [4] - U.S. revenue from Women's Health for NuvaRing was $6 million, significantly lower than the estimated $8.33 million, indicating a year-over-year decline of -62.5% [4] - Revenue from Women's Health for Nexplanon/Implanon NXT was $258 million, exceeding the estimated $239.15 million, with a year-over-year increase of +11.7% [4] - Total revenue from Established Brands was $934 million, above the estimated $895.83 million, representing a year-over-year increase of +2.1% [4] - Revenue from Women's Health for NuvaRing was $24 million, slightly below the estimated $24.58 million, with a year-over-year decline of -31.4% [4] - Revenue from Women's Health for Ganirelix Acetate Injection was $28 million, exceeding the estimated $26.34 million, showing a year-over-year increase of +27.3% [4] - Revenue from Biosimilars for Renflexis was $65 million, below the estimated $73.61 million, reflecting a year-over-year decline of -15.6% [4] - Revenue from Biosimilars for Ontruzant was $34 million, slightly below the estimated $35.90 million, with a year-over-year decline of -45.2% [4] - Revenue from Biosimilars for Brenzys was $15 million, significantly lower than the estimated $22.07 million, indicating a year-over-year decline of -46.4% [4] - Revenue from Biosimilars for Aybintio was $6 million, below the estimated $10.13 million, reflecting a year-over-year decline of -33.3% [4] Stock Performance - Over the past month, Organon shares have returned -6.6%, contrasting with the Zacks S&P 500 composite's +3.9% change [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]

Company Performance - Organon reported quarterly earnings of $0.90 per share, exceeding the Zacks Consensus Estimate of $0.86 per share, and showing an increase from $0.88 per share a year ago, representing an earnings surprise of 4.65% [1] - The company posted revenues of $1.59 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.68%, and compared to year-ago revenues of $1.6 billion [2] - Over the last four quarters, Organon has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Outlook - Organon shares have declined approximately 1.5% since the beginning of the year, while the S&P 500 has gained 2.9% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.92 on revenues of $1.58 billion, and for the current fiscal year, it is $4.02 on revenues of $6.35 billion [7] Industry Context - The Medical Services industry, to which Organon belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Organon Cautionary Note Regarding Non-GAAP Financial Measures This presentation contains "non-GAAP financial measures," which are financial measures that either exclude or include amounts that are correspondingly not excluded or included in the most directly comparable measures calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Specifically, the company makes use of the non-GAAP financial measures Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross margin ...

Revenue Performance - Full year 2024 revenue was $6.4 billion, an increase of 2% as-reported and 3% at constant currency compared to 2023[18]. - Fourth quarter 2024 revenue was $1.592 billion, flat on both an as-reported and ex-FX basis compared to Q4 2023[6]. - Women's Health revenue for full year 2024 increased 4% as-reported and 5% at constant currency, driven by Nexplanon® growth of 17%[19]. - Biosimilars revenue increased 12% for full year 2024, primarily due to growth in Hadlima following its U.S. launch in July 2023[21]. - The full-year 2024 revenues reached $6,403 million, representing an increase of 2.2% from $6,263 million in 2023[49]. - Total revenues for the three months ended December 31, 2024, were $1,592 million, a slight decrease from $1,598 million in the same period of 2023[55]. - The U.S. market generated $416 million in revenues for the three months ended December 31, 2024, compared to $411 million in 2023, reflecting a growth of 1.2%[55]. - Revenues from Europe and Canada were $420 million for the three months ended December 31, 2024, compared to $414 million in 2023, indicating a growth of 1.4%[55]. - The Asia Pacific and Japan region reported revenues of $244 million for the three months ended December 31, 2024, down from $261 million in 2023, a decline of 6.5%[55]. Financial Metrics - Full year 2024 Adjusted EBITDA was $1.96 billion, representing a 30.6% Adjusted EBITDA margin[4]. - Non-GAAP Adjusted diluted earnings per share for full year 2024 was $4.11, a decrease of 1% compared to 2023[24]. - Adjusted EBITDA margin for full year 2025 is expected to range from 31.0% to 32.0%[35]. - The diluted earnings per share (EPS) for Q4 2024 was $0.42, down from $2.13 in Q4 2023, while full-year diluted EPS was $3.33, compared to $3.99 in 2023[49]. - Non-GAAP adjusted net income for the year ended December 31, 2024 was $1,065 million, slightly up from $1,061 million in 2023, indicating a growth of 0.4%[62]. - Non-GAAP diluted earnings per share for Q4 2024 was $0.90, compared to $0.88 in Q4 2023, representing an increase of 2.3%[63]. - Adjusted EBITDA for Q4 2024 was $448 million, nearly unchanged from $449 million in Q4 2023, maintaining an adjusted EBITDA margin of 28.1%[65]. Profitability - Gross profit for Q4 2024 was $896 million, down 2.1% from $915 million in Q4 2023, while full-year gross profit was $3,715 million, a decrease of 0.9% from $3,748 million[49]. - GAAP gross profit for the three months ended December 31, 2024, was $896 million, compared to $915 million in 2023, resulting in a GAAP gross margin of 56.3%[57][59]. - Adjusted non-GAAP gross profit for the same period was $965 million, with an adjusted non-GAAP gross margin of 60.6%[57][59]. - GAAP reported net income for Q4 2024 was $109 million, compared to $546 million in Q4 2023, reflecting a decrease of 80.1%[62]. - Full-year net income at $864 million compared to $1,023 million in 2023[49]. Expenses and Costs - Research and development expenses for Q4 2024 were $130 million, slightly lower than $134 million in Q4 2023, with full-year R&D expenses totaling $469 million, down from $528 million[49]. - Selling, general and administrative expenses for the three months ended December 31, 2024, were $470 million, slightly up from $469 million in 2023[59]. - Research and development adjustments for Q4 2024 amounted to $11 million, up from $7 million in Q4 2023, showing a 57.1% increase[62]. - Restructuring costs for Q4 2024 were $8 million, significantly lower than $58 million in Q4 2023, a decrease of 86.2%[65]. - Spin-related costs for the year ended December 31, 2024 totaled $121 million, down from $254 million in 2023, a reduction of 52.4%[66]. - Interest expense for the year ended December 31, 2024 was $520 million, slightly down from $527 million in 2023, a decrease of 1.3%[65]. Cash and Debt Position - As of December 31, 2024, cash and cash equivalents were $675 million, with total debt at $8.9 billion[31]. Strategic Initiatives - Organon is focusing on expanding its portfolio in women's health and biosimilars, with over 70 medicines and products currently offered[37]. - The company is pursuing collaborations with biopharmaceutical partners to leverage its scale in fast-growing international markets[37]. - Organon has recently acquired Dermavant Sciences Ltd., which is part of its strategy to enhance its product offerings[45]. - The company has provided non-GAAP financial measures to enhance understanding of its financial performance, including Adjusted EBITDA and Adjusted net income[39].