Organon & (OGN) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2022, revenue was $1.6 billion, up 5% at constant currency, and adjusted EBITDA was $512 million, which would exceed $600 million without the $97 million of acquired in-process R&D [9][30][39] - Adjusted EBITDA margins were 32.3% in Q2 2022, with a gross margin of 66.1%, up from 65.6% in the previous year [38][40] Business Line Data and Key Metrics Changes - Biosimilars grew 42% ex-FX, with all five commercialized biosimilar assets performing strongly [10] - Women's Health saw 8% growth in NEXPLANON, with a 16% increase outside the U.S. and a 4% increase in the U.S. [11][35] - Established Brands grew 4% ex-FX, with expectations for flattish revenue growth in 2022 [18][37] Market Data and Key Metrics Changes - All geographic regions reported growth at constant currency, with notable performance in the EUCAN region and strong results in the LAMERA region [34] - In China, retail growth offset declines in fertility due to COVID lockdowns, with retail now accounting for 50% of established brands business [72] Company Strategy and Development Direction - The company is focusing on expanding its Women’s Health business and biosimilars portfolio while maintaining a balanced approach to business development [26][24] - A collaboration with Cirqle Biomedical aims to develop a non-hormonal contraceptive, reflecting the company's commitment to innovation in women's health [25][67] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging global macroeconomic environment but reported growth across all geographies and franchises [8] - The company expects double-digit growth for NEXPLANON globally and a recovery in the fertility business as COVID restrictions ease [13][16] Other Important Information - The company is targeting a leverage ratio of less than 3.5x on a sustained basis, with a focus on debt reduction and capital allocation for growth [46][47] - Adjusted revenue guidance for 2022 was revised to $6.1 billion to $6.3 billion due to foreign exchange impacts [48][49] Q&A Session Summary Question: Thoughts on NEXPLANON growth trends - Management noted that NEXPLANON is expected to see double-digit growth globally, with strong demand observed in July [66] Question: Differentiation of Cirqle deal - The Cirqle product is expected to have a dual mechanism of action, enhancing efficacy compared to existing products [67][68] Question: Outlook for China post-lockdowns - Management expressed a positive outlook for China, with retail growth and recovery in the fertility business expected [72][73] Question: Potential for transformational deals - While not actively seeking large deals, management is open to assessing opportunities as the company stabilizes post-spin [74]