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Organon & (OGN) - 2023 Q4 - Annual Report
OGNOrganon & (OGN)2024-02-26 13:10
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Environmental Liabilities and Expenditures - Environmental remediation and liability expenditures estimated at 15millionfor2024−2028[95]−Environmentalliabilitiestotaled15 million for 2024-2028[95] - Environmental liabilities totaled 19 million at December 31, 2023, and 20millionatDecember31,2022,withpaymentsexpectedoverthenext15years[540]BiosimilarsandLicensingAgreements−Exclusivelicensetocommercializebiosimilarsincludingadalimumab,bevacizumab,infliximab,trastuzumab,andetanerceptundertheSamsungBioepisAgreement[96]−Grossprofitssharedequallyinmostmarkets,exceptBrazilwhereSamsungBioepisreceives6520 million at December 31, 2022, with payments expected over the next 15 years[540] Biosimilars and Licensing Agreements - Exclusive license to commercialize biosimilars including adalimumab, bevacizumab, infliximab, trastuzumab, and etanercept under the Samsung Bioepis Agreement[96] - Gross profits shared equally in most markets, except Brazil where Samsung Bioepis receives 65% and the company receives 35%[100] - 25 million in potential future regulatory milestone payments remaining under the Samsung Bioepis Agreement as of December 31, 2023[100] - Worldwide commercialization rights for biosimilar candidates HLX11 and HLX14 secured through an exclusive license agreement with Henlius[101] - Organon licensed commercialization rights for biosimilar candidates HLX11 and HLX14 from Henlius, paying 73millionupfrontandpotentiallyupto73 million upfront and potentially up to 468 million in milestone payments[409] Financial Performance and Tax - 863millionofnetdeferredtaxassetsasofDecember31,2023,including863 million of net deferred tax assets as of December 31, 2023, including 309 million in valuation allowances[324] - 476milliontaxbenefitrecordedin2023duetotheterminationofataxarrangementinSwitzerland[324]−Revenuesfor2023were476 million tax benefit recorded in 2023 due to the termination of a tax arrangement in Switzerland[324] - Revenues for 2023 were 6,263 million, a slight increase from 6,174millionin2022[334]−Netincomefor2023was6,174 million in 2022[334] - Net income for 2023 was 1,023 million, up from 917millionin2022[334]−Comprehensiveincomefor2023was917 million in 2022[334] - Comprehensive income for 2023 was 1,046 million, compared to 866millionin2022[337]−Netincomefromcontinuingoperationsfor2023was866 million in 2022[337] - Net income from continuing operations for 2023 was 1,023 million, compared to 917millionin2022and917 million in 2022 and 1,351 million in 2021[346] - Net income for 2023 was 1,023million,withbasicEPSof1,023 million, with basic EPS of 4.01 and diluted EPS of 3.99[415]ResearchandDevelopment−Researchanddevelopmentexpensesincreasedto3.99[415] Research and Development - Research and development expenses increased to 528 million in 2023 from 471millionin2022[334]−ThecompanymadeastrategicinvestmentinClariaMedical,Inc.,paying471 million in 2022[334] - The company made a strategic investment in Claria Medical, Inc., paying 8 million upfront with an option to acquire for an additional 47 million, recognized as acquired in-process R&D[406] - Organon entered into a research collaboration with Cirqle Biomedical, paying 10 million upfront and potentially up to 360millioninmilestonepayments,withtieredroyaltiesbasedonnetsales[407][408]AssetsandLiabilities−Totalassetsgrewto360 million in milestone payments, with tiered royalties based on net sales[407][408] Assets and Liabilities - Total assets grew to 12,058 million in 2023 from 10,955millionin2022[340]−Long−termdebtdecreasedto10,955 million in 2022[340] - Long-term debt decreased to 8,751 million in 2023 from 8,905millionin2022[340]−Cashandcashequivalentsdecreasedto8,905 million in 2022[340] - Cash and cash equivalents decreased to 693 million in 2023 from 706millionin2022[340]−Accountsreceivableincreasedto706 million in 2022[340] - Accounts receivable increased to 1,744 million in 2023 from 1,475millionin2022[340]−Inventoriesroseto1,475 million in 2022[340] - Inventories rose to 1,315 million in 2023 from 1,003millionin2022[340]−Totalstockholders′deficitimprovedto1,003 million in 2022[340] - Total stockholders' deficit improved to 70 million in 2023 from 892millionin2022[340]OperatingActivitiesandCapitalExpenditures−Netcashflowsprovidedbyoperatingactivitiesfromcontinuingoperationswere892 million in 2022[340] Operating Activities and Capital Expenditures - Net cash flows provided by operating activities from continuing operations were 799 million in 2023, down from 858millionin2022and858 million in 2022 and 2,160 million in 2021[346] - Capital expenditures in 2023 were 251million,upfrom251 million, up from 196 million in 2022 and 192millionin2021[346]−Dividendpaymentsin2023totaled192 million in 2021[346] - Dividend payments in 2023 totaled 294 million, compared to 290millionin2022and290 million in 2022 and 145 million in 2021[346] Product Portfolio and Market Launches - Organon's women's health portfolio includes Nexplanon, NuvaRing, and Follistim AQ, with Xaciato launched in the US in October 2023[351] - Organon's biosimilars portfolio includes Ontruzant, Aybintio, Brenzys, Renflexis, and Hadlima, with launches in over 20 countries for some products[351] - Organon operates six manufacturing facilities located in Belgium, Brazil, Indonesia, Mexico, the Netherlands, and the United Kingdom[348] - The company has a portfolio of more than 60 medicines and products across women's health, biosimilars, and established brands[348] - Organon's product portfolios include women's health, biosimilars, and established brands, constituting one operating segment[418] Separation from Merck and Standalone Operations - Organon became a standalone publicly traded company on June 2, 2021, following its separation from Merck[349] - The company's historical financial results prior to the separation were derived from Merck's consolidated financial statements and accounting records[349] - Net investment from Merck & Co., Inc. was reclassified to Common Stock and Accumulated Deficit as part of the Separation[360] - The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company[362] - The Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity as of June 2, 2021[363] - The Company's participation in the defined pension and postretirement benefit plans sponsored by Merck concluded upon the completion of the Separation on June 2, 2021[388] Rebates, Discounts, and Accruals - 417millionaccruedforU.S.rebateaccrualsrelatedtoMedicaidandManagedCareasofDecember31,2023[327]−TheCompany′sprovisionforaggregatecustomerdiscountswas417 million accrued for U.S. rebate accruals related to Medicaid and Managed Care as of December 31, 2023[327] - The Company's provision for aggregate customer discounts was 2,640 million in 2023, 2,221millionin2022,and2,221 million in 2022, and 2,000 million in 2021[371] - The accrued balances relative to the provisions for chargebacks and rebates in the United States were 87millionand87 million and 417 million, respectively, at December 31, 2023[371] - The accrued balances related to the provision for rebates and discounts outside the United States were approximately 126millionand126 million and 109 million at December 31, 2023 and 2022, respectively[372] Depreciation and Advertising Expenses - Depreciation expense was 120millionin2023,120 million in 2023, 96 million in 2022, and 92millionin2021[378]−Advertisingandpromotionexpenseswere92 million in 2021[378] - Advertising and promotion expenses were 209 million, 255million,and255 million, and 236 million in 2023, 2022, and 2021, respectively[379] Goodwill and Lease Expenses - The Company completed the annual qualitative goodwill impairment test as of October 1, 2023 and concluded that there was no impairment to goodwill[380] - Operating lease expenses are recognized on a straight-line basis, with assets and liabilities calculated using the incremental borrowing rate, updated quarterly based on the weighted average remaining lease term and pretax cost of debt[397] Strategic Investments and Acquisitions - Organon paid an upfront payment of 50milliontoLillyforthedistributionrightsofEmgality®andRayvow™inEurope,withadditionalsales−basedmilestonepayments[541]−Theupfrontpaymentandcertainsales−basedmilestonepaymentsarerecognizedasanintangibleassetinQ12024[541]−OrganonlicensedglobalcommercialrightstoXaciatofromDareˊBioscience,paying50 million to Lilly for the distribution rights of Emgality® and Rayvow™ in Europe, with additional sales-based milestone payments[541] - The upfront payment and certain sales-based milestone payments are recognized as an intangible asset in Q1 2024[541] - Organon licensed global commercial rights to Xaciato from Daré Bioscience, paying 10 million upfront and potentially up to 182.5millioninmilestonepayments,withtiereddouble−digitroyalties[411]−OrganonacquiredproductrightsandinventoryforMarvelon™andMercilon™inChinaandVietnamfromBayerHealthcare,paying182.5 million in milestone payments, with tiered double-digit royalties[411] - Organon acquired product rights and inventory for Marvelon™ and Mercilon™ in China and Vietnam from Bayer Healthcare, paying 95 million and recognizing $72 million as intangible assets[412][413] Share Information - The company has 255,239 thousand basic weighted average shares outstanding and 256,270 thousand diluted weighted average shares outstanding for 2023[415]