EU, EU Member States have transposed and applied the provisions of the Clinical Trials Directive in a manner that is not always uniform. This has led to variations in the rules governing the conduct of clinical trials in the individual EU Member States. Therefore, the EU has adopted Regulation (EU) No 536/2014 ("Clinical Trials Regulation"). The Clinical Trials Regulation will (subject to certain transition periods that allow some clinical trials to continue to be governed under the Clinical Trials Directive) repeal and replace the Clinical Trials Directive as of January 31, 2022.

Under the Clinical Trials Directive, before a clinical trial can be initiated, it must be approved in each EU Member State where there is a site at which the trial is to be conducted by two separate entities: the National Competent Authority ("NCA"), and one or more Ethics Committees. The NCA of the EU Member States in which the clinical trial will be conducted must authorize the conduct of the trial, and the independent Ethics Committee must grant a positive opinion in relation to the conduct of the clinical trial in the relevant EU Member State before the commencement of the trial. Any substantial changes to the trial protocol or to other information submitted with the clinical trial applications must be submitted to or approved by the relevant NCA and Ethics Committees. Under the Clinical Trials Directive, all "suspected unexpected serious adverse" reactions to the investigated drug that occur during the clinical trial must be reported to the NCA and to the Ethics Committees of the EU Member State where they occur.

However, under the new Clinical Trials Regulation, the approval of clinical trials in the EU will be simplified and streamlined. For example, the sponsor will submit a single application for approval of a clinical trial via the clinical trials information system. As part of the application process, the sponsor will propose a reporting EU Member State, which will coordinate the validation and evaluation of the application. The reporting EU Member State shall consult and coordinate with the other concerned EU Member States. If an application is rejected, it can be amended and resubmitted through the EU Portal. If an approval is issued, the sponsor can start the clinical trial in all concerned EU Member States. However, a concerned EU Member State can in limited circumstances declare an "opt-out" from an approval. In such a case, the clinical trial cannot be conducted in that EU Member State. The Clinical Trials Regulation also aims to streamline and simplify the rules on safety reporting, and introduces enhanced transparency requirements such as mandatory submission of a summary of the clinical trial results to the EU Database.

~~National laws, regulations, and the~~ applicable Good Clinical Practice and Good Laboratory Practice standards must also be respected during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use guidelines on Good Clinical Practice ("GCP").

During the development of a pharmaceutical product, the EMA and national regulators within the EU provide the opportunity for dialogue and guidance on the development program. At the EMA level, this is usually done in the form of scientific advice, which is given by the Committee for Medicinal Products for Human Use ("CHMP") on the recommendation of the Scientific Advice Working Party. A fee is incurred with each scientific advice procedure. Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical studies, and pharmacovigilance plans and risk-management programs. Advice is not legally binding for any future Marketing Authorization Application ("MAA") of the product concerned. In the EU, the Pediatric Regulation (EC) No 1901/2006 ("Pediatric Regulation") sets out the requirements for testing medicinal products in pediatric populations. In most EU Member States, companies are also required to have an approved Pediatric Investigation Plan before enrolling pediatric patients in a clinical trial.

~~Drug and Biologic Marketing Authorization Procedures~~

In the EU, pharmaceutical products may only be placed on the market after obtaining a Marketing Authorization ("MA"). MAs can be obtained through the centralized procedure, the mutual recognition procedure, the decentralized procedure, or a national procedure (the latter is available only for pharmaceutical products sold in a single EU Member State only). The primary method Organon uses to obtain a MA of pharmaceutical products in the EU is through the centralized procedure.

The centralized procedure provides for the grant of a single MA by the European Commission ("EC"), which is valid for all EU Member States (and, after respective national implementing decisions, in the three additional EEA Member States). The centralized procedure is compulsory for certain pharmaceutical products, including pharmaceutical products derived from biotechnological processes, orphan pharmaceutical products, advanced therapy pharmaceutical products and products with a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases.

Under the centralized procedure, the timeframe for the evaluation of an MAA by the EMA’s CHMP is, in principle, 210 days from receipt of a valid MAA. However, this timeline excludes clock stops, which occur when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP, so the overall process typically takes a year or more. Applications may be eligible for accelerated assessment if the CHMP decides the product is of major

~~-20-~~

interest for public health and therapeutic innovation. On request, the CHMP can reduce the time frame to 150 days if the applicant provides sufficient justification for an accelerated assessment. The CHMP will provide a positive opinion regarding the application only if it meets certain quality, safety and efficacy requirements. However, the EC has final authority for granting the MA, and it must issue the decision within 67 days after receipt of the CHMP opinion.

Following the UK's exit from the EU on January 1, 2021, the UK Medicines and Healthcare Products Regulatory Agency ("MHRA") converted centralized MAs into UK MAs that apply in Great Britain (as under the Northern Irish Protocol the EU centralized MAs continue to apply in Northern Ireland). MA holders of the centralized MAs had the right to opt-out of the conversion until January 21, 2021; however, this would mean that these products would not be licensed to be marketed in Great Britain. For those with converted MAs, the holder of these MAs had to submit baseline data to the MHRA and pay the national MA fee. For EU MAs that were granted after January 1, 2021, these MAs will not be automatically converted into UK MAs. However, the MHRA offer some streamlined routes for authorization. For example, for two years from January 1, 2021 the MHRA may rely on the decision of the EC on the approval of a new centralized MA when granted an MA that applies in Great Britain.

If the centralized procedure is not used, then applicants can obtain national marketing authorizations. This can be if a pharmaceutical product falls under the optional scope of the centralized procedure and the applicant opts to use a national (decentralized / mutual recognition) procedure or if the centralized procedure would not apply. The purely national marketing authorization procedure permits a company to apply to the competent authority of a single EU Member State and, if successful, to obtain a MA that is valid only in this EU Member State. However, if the applicant wants a MA in several EU Member States it must use the decentralized or mutual recognition procedure (as applicable) to obtain a suite of national MAs.

The decentralized marketing authorization procedure permits companies to file identical applications for an MA to the competent authorities in several EU Member States simultaneously for a pharmaceutical product that has not yet been authorized in any EU Member State. This procedure is available for pharmaceutical products not falling within the mandatory scope of the centralized procedure. The competent authority of a single EU Member State, the reference EU Member State, is appointed to review the application and provide an assessment report. The competent authorities of the other EU Member States, the concerned EU Member States, are subsequently required to grant MA for their territories based on this assessment. The only exception to this is where the competent authority of an EU Member State considers that there are concerns of potential serious risk to public health related to authorization of the product. In these circumstances the matter is submitted to the Coordination Group for Mutual Recognition and Decentralized Procedures - Human for review.

Where a pharmaceutical product has already been authorized for marketing in an EU Member State, this national authorization can be recognized in another EU Member State through the mutual recognition procedure. The EU Member State that has already granted a MA is the reference EU Member State. The holder of the MA then asks the reference EU Member State to either prepare or update an assessment report. As with the decentralized procedure, the assessment report is shared with the concerned EU Member States. These EU Member States must grant the MA unless the exception (on the grounds of potential serious risk to public health) applies.

Similar to accelerated approval regulations in the United States, conditional MAs can be granted in the EU by the EC in exceptional circumstances. A conditional MA can be granted for pharmaceutical products where, although comprehensive clinical data referring to the safety and efficacy of the pharmaceutical product have not been supplied, a number of criteria are fulfilled: (i) the benefit / risk balance of the product is positive, (ii) it is likely that the applicant will be in a position to provide the comprehensive clinical data post-authorization, (iii) an unmet medical need will be fulfilled by the grant of the marketing authorization and (iv) the benefit to public health of the immediate availability on the market of the pharmaceutical product concerned outweighs the risk inherent in the fact that additional data are still required. A conditional MA must be renewed annually until it is eventually converted into a standard MA when the holder fulfills any obligations imposed and the data supports that the benefits outweigh its risks.

Alternatively, where the applicant can show it is unable to provide comprehensive data on the efficacy and safety under normal conditions (because the condition is too rare, the state of scientific knowledge and/or it would be contrary to medical ethics), the EC may grant an MA in exceptional circumstances. MAs granted under exceptional circumstances will be reviewed annually to ensure the benefits continue to outweigh the risks. However, they will usually not result in a normal MA as the data to support its granting will never be generated.

All new MAAs must include a Risk Management Plan ("RMP") describing the risk management system that Organon will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the MA. RMPs and Periodic Safety Update Reports ("PSURs") are routinely available to third parties requesting access, subject to limited redactions.

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~~Normal MAs (i.e~~., not including Conditional MAs and those granted under exceptional circumstances) have an initial duration of five years. After these five years, the authorization may be renewed on the basis of a reevaluation of the risk-benefit balance. Once renewed, the MA is valid for an unlimited period unless the EC or the national competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Applications for renewal must be made to the EMA at least nine months before the five-year period expires.

~~Data and Market Exclusivity for Drugs and Biologics~~

As in the United States, it may be possible to obtain a period of market and / or data exclusivity in the EU that would have the effect of postponing the entry into the marketplace of a competitor’s generic, hybrid or biosimilar product (in the case of marketing exclusivity, even if the pharmaceutical product has already received an MA) and for data exclusivity, prohibiting another applicant from relying on the MA holder’s pharmacological, toxicological and clinical data in support of another MA for the purposes of submitting an application. New medicinal products authorized in the EU on the basis of a standalone application (i.e., on the basis of a dossier containing a complete suite of pre-clinical tests and clinical trials) qualify for eight years of data exclusivity and 10 years of marketing exclusivity. An additional noncumulative one-year period of marketing exclusivity is possible if during the data exclusivity period (the first eight years of the 10-year marketing exclusivity period), the MA holder obtains an authorization for one or more new therapeutic indications that are deemed to bring a significant clinical benefit compared to existing therapies. This product is referred to as the "reference medicinal product."

The data exclusivity period begins on the date of the reference medicinal product's first MA in the EU. After eight years, a generic product application may be submitted and generic companies may rely on the data in the reference medicinal product’s dossier. However, a generic product cannot launch until two (or three, if the reference medicinal product was authorized for an additional indication) years later (or a total of 10 or 11 years after the first MA in the EU of the reference medicinal product).

Another noncumulative one-year period of data exclusivity can be obtained where an application is made for a new indication for a well-established substance, provided that significant pre-clinical or clinical studies were carried out in relation to the new indication. One year of data exclusivity is also available for data generated where a change of classification (i.e., from prescription-only to over the counter) of a pharmaceutical product has been authorized on the basis of significant pre-trial tests or clinical trials. However, this data exclusivity only protects the new switch data (i.e., when examining an application by another applicant for or holder of market authorization for a change of classification of the same substance, a competent authority will not refer to the results of those tests or trials for one year).

However, data and market exclusivity are not monopoly rights. Therefore, another company could also market another version of the pharmaceutical product if such company can complete a full MAA with their own complete database of pharmaceutical tests, pre-clinical studies and clinical trials (without relying on the other initial applicant’s data) and obtain MA of its product.

~~Post-Approval Regulation of Drugs and Biologics~~

Similar to the United States, both MA holders and manufacturers of pharmaceutical products are subject to comprehensive regulatory oversight by the EMA, the EC and / or the national competent authorities of the EU Member States. This oversight applies both before and after grant of manufacturing licenses and marketing authorizations. It includes control of compliance with EU good manufacturing practices rules, manufacturing authorizations, pharmacovigilance rules and requirements governing advertising, promotion, sale, distribution, recordkeeping, importing and exporting of pharmaceutical products.regulator.

Failure by ~~Organon~~us or by any of ~~its~~our third-party partners, including suppliers, manufacturers and distributors, to comply with EU laws ~~and the related national laws of individual EU Member States~~ governing the conduct of clinical trials, manufacturing approval, marketing authorization of pharmaceutical products and marketing of such products, both before and after grant of marketing authorization, statutory health insurance, bribery and anti-corruption or other applicable regulatory requirements, may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.

~~The holder of an EU MA for a pharmaceutical product must also comply with EU pharmacovigilance legislation~~We and its related regulations and guidelines, which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of pharmaceutical products. These pharmacovigilance rules can impose on holders of MAs the obligation to conduct a labor intensive collection of data regarding the risks and benefits of marketed pharmaceutical products and to engage in ongoing assessments of those risks and benefits, including the possible requirement to conduct additional

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clinical studies or post-authorization safety studies to obtain further information on a medicine’s safety, or to measure the effectiveness of risk-management measures, which may be time consuming, expensive and could impact Organon's profitability. MA holders must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible for oversight of that system. EMA reviews PSURs for pharmaceutical products authorized through the centralized procedure. If the EMA has concerns that the risk benefit profile of a product has varied, it can adopt an opinion advising that the existing MA for the product be suspended, withdrawn or varied. The agency can advise that the MA holder be obliged to conduct post-authorization Phase IV safety studies. The EMA opinion is submitted to the EC for its consideration. If the European Commission agrees with the opinion, it can adopt a decision varying the existing MA. Failure by the marketing authorization holder to fulfill the obligations in the EC’s decision can undermine the on-going validity of the MA.

More generally, noncompliance with pharmacovigilance obligations can lead to the variation, suspension or withdrawal of the MA for the product or imposition of financial penalties or other enforcement measures.

The manufacturing process for pharmaceutical products in the EU is highly regulated and regulators may shut down manufacturing facilities that they believe do not comply with regulations. Manufacturing requires a manufacturing authorization, and the manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice ("GMP"). Organon and itsour third-party manufacturers are also subject to other good manufacturing practices, which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by the ~~EMA, the EC, the national competent authorities of EU Member States and other~~ regulatory authorities. Companies may be subject to civil, criminal or administrative sanctions if they fail to comply with these practices. ~~These include suspension of manufacturing authorization in case of non-compliance with the EU or EU Member States’ requirements governing the manufacturing of pharmaceutical products.~~

Compliance with EU GMP standards is required when manufacturing pharmaceutical products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside the EU with the intention to import the active pharmaceutical ingredients into the EU. The manufacturer or importer must have a qualified person who is responsible for certifying that each batch of product has been manufactured in accordance with GMP before releasing the product for commercial distribution in the EU or for use in a clinical trial. Manufacturing facilities are subject to periodic inspections by the competent authorities for compliance with GMP. Similarly, the distribution of pharmaceutical products into and within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of the EU Member States.

~~Sales and Marketing Regulation of Drugs and Biologics~~

The advertising and promotion of ~~Organon's~~our products isare also subject to EU laws, ~~national laws of individual EU Member States~~rules, regulations, and industry self-regulatory codes of conduct concerning promotion of pharmaceutical products, interactions with health care providers, misleading and comparative advertising and unfair commercial practices.

While the laws in individual EU Member States might vary somewhat, in all EU Member States these laws require that promotional materials and advertising in relation to pharmaceutical products comply with the product’s Summary of Product Characteristics ("SmPC") as approved by the competent regulatory authorities. The SmPC is the document that provides information to health care providers concerning the safe and effective use of the pharmaceutical product. It forms an intrinsic and integral part of the marketing authorization granted for the pharmaceutical product. Promotion of a pharmaceutical product that does not comply with the SmPC is considered to constitute off-label promotion. The off-label promotion of pharmaceutical products is prohibited in the European Union. The applicable laws at the EU level and in the individual EU Member States also prohibit the direct-to-consumer advertising of prescription-only pharmaceutical products. Enforcement is done on a national basis, in accordance with national rules/codes and is largely on the basis of self-regulation. Penalties for violations of the rules governing the promotion of pharmaceutical products vary between EU Member States but could include public censure, administrative measures, fines and imprisonment. These laws/codes may further limit or restrict the advertising and promotion of Organon's products to the general public and may also impose limitations on its promotional activities with health care professionals.

~~Anti-Corruption Legislation~~

In the EU, interactions between pharmaceutical companies and health care providers are also governed by strict laws, regulations, industry self-regulation codes of conduct and health care providers' codes of professional conduct both at the EU level and in the individual EU Member States. Across the EU, the provision of benefits or advantages to health care providers to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of pharmaceutical products is prohibited in the European Union. However, the provision of benefits or advantages to health care

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~~providers is also governed by the national anti-bribery laws of the EU Member States. Violation of these laws could result in substantial fines and imprisonment.~~

~~While many EU Member States permit companies to make payments to health care providers in some circumstances, e.g.~~, when they are used as consultants, certain EU Member States required that such payments must be publicly disclosed. Moreover, agreements with health care providers must often be the subject of prior notification and approval by the physician’s employer, his / her regulatory professional organization, and / or the competent authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct applicable in the individual EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

~~Medical Device Regulation~~

In the EU, medical devices are regulated by the European Union Medical Devices Regulation (EU) 2017/745 (“MDR”), which became applicable on May 26, 2021. The MDR and its associated guidance document and harmonize standards and govern, among other things, device design and development, pre-clinical and clinical or performance testing, pre-market conformity assessment, registration and listing, manufacturing, labeling, storage, claims, sales and distribution, export and import and post-market surveillance, vigilance, and market surveillance.

Before a device can be placed on the market in the EU, compliance with the MDR requirements must be demonstrated to affix the Conformité Européene mark ("CE Mark") to the product. To demonstrate compliance with these requirements, a conformity assessment procedure is required, conducted either by the manufacturer (for low risk medical devices only, which are known as Class I devices) or by an organization designated by an EU Member State to conduct conformity assessments known as a Notified Body (for higher risk medical devices, including Class I devices that are sterile and/or have a measuring function, Class IIa, Class IIb and Class III devices). The Notified Body issues a certificate of conformity, which entitles the manufacturer to affix the CE Mark to its devices after having prepared and signed a related EU Declaration of Conformity.

Clinical evidence is required for most medium and high risk devices. In some cases, a clinical study may be required to support a CE marking application. A manufacturer that wishes to conduct a clinical study involving the device is subject to the clinical investigation requirements of the MDR, EU Member State requirements, and current good clinical practices defined in harmonized standards and guidance documents.

After a device is placed on the market, it remains subject to significant regulatory requirements. For CE marked devices, certain modifications to the device or quality system depending on the conformity assessment procedure used must be submitted to and approved by the Notified Body before placing the modified device on the market.

Advertising and promotion of devices is governed by the MDR alongside national laws and guidance and is enforced on a country-by-country basis by National Competent Authorities. The MDR provides that devices may be marketed only for the uses and indications for which they are CE marked. National rules and appetites for enforcement may vary.

Economic Operators, including device manufacturers, must register their establishments and devices in the European data base on medical devices (EUDAMED) database once available. Device manufacturers are also subject to MDR vigilance requirements, which require that a manufacturer report to the relevant Competent Authorities any serious incident involving devices made available on the market and any field safety corrective action in respect of devices made available on the market or undertaken in a third country in relation to a device made available on the market.

Post-Brexit the MDR does not apply in the UK (apart from Northern Ireland, which under the Northern Irish Protocol is bound by certain EU laws). The medical device legislative framework in the UK is set out in the Medical Devices Regulations 2002. The Medical Devices Regulations 2002 replace the CE mark with a UKCA marking (although EU CE marks will be recognized until June 30, 2023), require manufacturers outside the UK to appoint a "UK Responsible Person" if they place devices on the Great British market and more wide-ranging device registration requirements.

~~Other Markets~~

Outside the United States, the EU, the EEA and other European Jurisdictions, Organon submits marketing applications to national regulatory authorities. Examples of such are the NMPA in China, the Ministry of Health, Labour and Welfare in Japan, Health Canada, Agência Nacional de Vigilância Sanitária in Brazil, Korea Food and Drug Administration in South Korea and Therapeutic Goods Administration in Australia. Each country has a separate and independent review process and timeline. In many markets, approval times can be longer as the regulatory authority requires approval in a major market,

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~~such as the United States or the EU and issuance of a Certificate of Pharmaceutical Product from that market before initiating their local review process.~~

Climate and Environmental Matters

~~Organon believes~~We believe that climate change ~~could~~will present ~~risks~~some degree of risk to ~~its~~our business. Some of the potential effects of climate change to ~~Organon's~~our business could include increased operating costs due to additional regulatory requirements, changes in supply and suppliers due to regulatory requirements, physical risks to ~~Organon's~~our facilities, water limitations and disruptions to ~~Organon's~~our supply chain. Some potential risks are integrated into ~~Organon's~~our business planning, including investment in reducing energy, water use and greenhouse gas emissions. ~~Organon does~~We do not believe these potential risks are material to ~~its~~our business at this time.

~~Organon does~~We are not ~~have knowledge~~aware of any compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on ~~Organon's~~our business. Expenditures for remediation and environmental liabilities are estimated to be approximately ~~$19~~$15 million in the aggregate for the years ~~2022~~2024 through ~~2026.~~2028. For additional information, please see ~~"Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting ~~Estimates”~~Estimates" and Note 1220 "Contingencies —Environmental Matters" to the Financial Statements included in this report. Notwithstanding the foregoing, various legislation, regulations and international accords pertaining to climate change have been implemented or are being considered for implementation, particularly as they relate to the reduction of greenhouse gas emissions, such as the EU's Corporate Sustainability Reporting Directive ("CSRD"), California's Climate Corporate Data Accountability Act and Climate Related Financial Risk Act, and similar regulations under consideration by the SEC.

Third-Party Agreements

Samsung Bioepis Development and Commercialization Agreement

~~On February 18, 2013,~~ Merck ~~entered into~~had a development and commercialization agreement with Samsung Bioepis (as subsequently amended, the "Samsung Bioepis Agreement")~~. All~~ for which all of the rights and obligations of Merck ~~under the Samsung Bioepis Agreement~~ were transferred to ~~Organon~~us in connection with the spinoff. The Samsung Bioepis Agreement grants ~~Organon~~us an exclusive license to commercialize the following pre-specified biosimilars products (with reference products in parenthesis) developed by Samsung Bioepis: ~~Adalimumab~~adalimumab ~~(Humira²)~~(Humira), ~~Bevacizumab~~bevacizumab ~~(Avastin²)~~(Avastin), ~~Infliximab~~infliximab ~~(Remicade²)~~(Remicade), ~~Trastuzumab~~trastuzumab ~~(Herceptin²)~~(Herceptin) and ~~Etanercept~~etanercept ~~(Enbrel²)~~(Enbrel). See "Business—~~Organon's~~ Biosimilars ~~Products"~~Portfolio" for a description of each product and the geographic areas in which ~~Organon has~~we have an exclusive license for ~~regulatory and~~ commercialization activities.

Under the Samsung Bioepis Agreement, Samsung Bioepis is responsible for pre-clinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates. ~~Organon's~~Our access rights to each product under the Samsung Bioepis Agreement last for ten years from each such ~~product’s~~product's launch date on a market-by-market basis. Unless the parties agree to extend the term, the agreement expires upon the expiration of the last such ten-year period. ~~Organon~~We may terminate the agreement with respect to a particular region or product if a product fails to meet certain milestones in such region. ~~Organon~~We may terminate the agreement upon 60 days' written notice to Samsung Bioepis for a particular presentation of a product in a region if Samsung ~~Bioepis’s~~Bioepis's revenue share for such product presentation in such region exceeds a certain

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contractual threshold. ~~Organon~~We may also terminate the agreement upon 60 ~~days’~~days' written notice in the event of a ~~third- party~~third-party infringement claim that Samsung Bioepis decides to litigate despite ~~Organon's~~our opposition to such litigation.

The ~~agreement~~Samsung Bioepis Agreement may be terminated by either party on 30 days' written notice for a particular product or region if the parties fail to agree upon a strategy regarding third-party patents within six months following written notice by either party of the existence of such patents. The agreement may also be terminated by either party upon written notice if the other party commits a material breach of its obligations by specified actions within its reasonable control and has not cured such breach within 90 calendar days after notice requesting cure of the breach.

The Samsung Bioepis Agreement provides that gross profits are shared equally in all markets except for certain markets in Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to ~~Organon.~~us. The Samsung Bioepis Agreement also provides for payment of certain milestone license fees associated with pre-specified clinical and regulatory milestones to Samsung Bioepis, payment of the supply price for each product to Samsung Bioepis, and an upfront payment to Samsung Bioepis that was completed by Merck at the commencement of the agreement. As of December 31, ~~2021,~~2023, there were $25 million in potential future regulatory milestone payments remaining under the agreement. For further information related to the Samsung Bioepis collaboration, see Note 418 "Samsung Collaboration" to the Consolidated Financial Statements included in this report and the Samsung Bioepis Agreement, which is filed as an exhibit to this report.

Henlius

In June 2022, we entered into an exclusive license agreement with Henlius, whereby we received worldwide commercialization rights in countries except for China (including Hong Kong, Macau and Taiwan) for biosimilar candidates (i) HLX11, referencing Perjeta, used for the treatment of certain patients with HER2+ breast cancer in combinations with trastuzumab and chemotherapy, and (ii) HLX14, referencing Prolia/Xgeva, used for the treatment of post-menopausal women with osteoporosis at high risk for fracture and for the prevention of skeletal-related events in patients with multiple myeloma and in patients with bone metastasis from solid tumors.

Additional Information

~~Organon is~~We are a Delaware corporation incorporated on March 11, ~~2020. Organon's~~2020, and was spun off from Merck in 2021. Our corporate offices are located at 30 Hudson Street, 33rd Floor, Jersey City, New Jersey 07302.

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~~Organon files~~We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports, proxy statements and other information with the SEC. ~~Organon maintains~~We maintain an investor relations page on ~~its~~our website (www.organon.com) where such filings made pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), may be accessed free of charge as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We intend to use our Investor Relations website and our corporate website located at www.organon.com as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Our website address is not intended to function as a hyperlink and the information contained on our website is not, and should not be considered part of, and is not incorporated by reference into, this Annual Report on Form 10-K.

Item 1A. Risk Factors

You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating ~~Organon~~us and deciding to invest in ~~the~~our Common Stock. Any of the following risks could materially and adversely affect ~~Organon’s~~our results of operations, financial condition and the price of ~~the~~our Common Stock.

Summary of Risk Factors

The following is a summary of the principal risks that could significantly and negatively affect ~~Organon's~~our business, prospects, financial conditions, or operating results. For a more complete discussion of the material risks facing ~~Organon's~~our business, please see below:

Risks Related to ~~Organon's~~Our Business

•Organon has a limited history of operating as an independent company, and its historical financial results included elsewhere in this report are not necessarily representative of what its actual financial position or results of operations would have been as an independent company and may not be a reliable indicator of its future results.

•Key products generate a significant amount of ~~Organon's~~our profits and cash flows, and any events that adversely affect the markets for ~~Organon's~~our leading products could adversely affect ~~its~~our results of operations and financial condition.

•~~Organon faces~~We face continued pricing pressure with respect to ~~its~~our products.

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•~~Organon faces~~We face intense competition from competitors' products.

•~~Organon has~~We have limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand ~~its~~our innovative pipeline and early discovery and research capabilities, which may limit ~~its~~our ability to discover or develop new products or expand ~~its~~our existing products into new markets to replace the sales of products that lose patent protection and therefore ~~Organon~~we may not be able to maintain ~~its~~our current levels of profitability.

•Our growth could be limited by the scope of our intellectual property licenses for certain women's health care products.

•~~Organon~~We may experience difficulties identifying acquisition opportunities or completing such transactions.

•~~Organon~~We or ~~its~~our partners may fail to demonstrate the safety and efficacy of any of ~~its~~our product candidates in pre-clinical and clinical trials, which would prevent or delay development, regulatory approval or clearance, and commercialization of ~~Organon's~~our product candidates.

•~~Organon~~We may be unable to market ~~its~~our pharmaceutical products or medical devices if ~~it does~~we do not obtain and maintain required regulatory approvals or marketing authorizations.

•Developments following regulatory approval or marketing authorization may adversely affect sales of ~~Organon's~~our pharmaceutical products or medical devices.

•Issues with product quality could have an adverse effect on our business or cause a loss of customer confidence in us or our products, among other negative consequences.

•Certain of ~~Organon's~~our products currently benefit from patent protection and market exclusivity. When the patent protection and market exclusivity periods for such products expire, a significant and rapid loss of sales from those products is generally experienced. Expiry of patent protection and market exclusivity for products that contribute significantly to ~~Organon's~~our sales will adversely affect ~~its~~our business.

•~~Organon depends~~We depend on ~~its~~our patent rights for the marketing of certain of ~~its~~our products, and invalidation or circumvention of ~~Organon's~~our patent rights would adversely affect ~~its~~our business.

•~~Organon is~~We have incurred substantial indebtedness, which could adversely affect our financial condition and results of operations.

•We are subject to minimum purchase obligations under certain supply agreements, and if ~~Organon fails~~we fail to meet those minimum purchase requirements, ~~its~~our financial results may be unfavorably impacted.

•~~Organon has incurred substantial indebtedness, which could adversely affect its financial condition and results of operations.~~

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•Organon is subject to a number of restrictive covenants under its indebtedness, including customary operating restrictions and financial covenants, which could restrict Organon's ability to pay dividends or adversely affect its financing options and liquidity position.

Risks Related to the Spinoff

•As Organon builds its information technology infrastructure and transitions its data to its own systems, Organon could incur substantial additional costs and experience temporary business interruptions.

•Merck may not satisfy its obligations under various transition agreements that have been or will be executed as part of the spinoff or ~~Organon~~we may not have necessary systems and services in place when certain of the transition agreements expire.

•Potential indemnification liabilities to Merck pursuant to the Separation and Distribution Agreement could adversely affect ~~Organon.~~

us.

•There could be significant income tax liability to us if the spinoff or certain related transactions are determined to be taxable for U.S. federal income tax purposes.

•~~Contractual restrictions limit Organon's ability to engage in certain corporate transactions.~~

Risks Related to ~~Organon's~~Our Common Stock

•The price and trading volume of ~~Organon's~~our Common Stock may be volatile, and stockholders could lose all or part of their ~~investment in Organon.~~

investment.

•~~Organon~~We cannot guarantee the timing, amount or payment of any dividends on ~~the~~our Common Stock.

•Certain provisions in ~~Organon's~~our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of Organon, which could decrease the trading price of ~~the~~our Common Stock.

•~~Certain provisions of agreements that Organon entered into with Merck may limit Organon's ability to operate its business.~~

•~~Organon's~~Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by ~~Organon's~~our stockholders, and the United States federal district courts as the exclusive forum for claims under the Securities Act of 1933, as amended (the "Securities Act"), which could limit ~~Organon's~~our stockholders' ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with ~~Organon~~us or ~~its~~our directors, officers or employees.

-17-

Risks Related to ~~Organon's~~Our Business

Organon has a limited history of operating as an independent company, and its historical financial results included elsewhere in this report are not necessarily representative of what its actual financial position or results of operations would have been as an independent company and may not be a reliable indicator of its future results.

Prior to the spinoff, Merck performed various corporate functions for Organon, including information technology services, research and development, distribution, support for operations, legal, payroll, finance, tax and accounting, general administrative services and other support services. Organon's historical financial results reflect allocations of corporate expenses from Merck for these and similar functions that may be less than the comparable expenses Organon would have incurred had it operated as a separate publicly traded company. Prior to the spinoff, Organon shared economies of scope and scale in costs, employees, vendor relationships and relationships with its partners. While Organon has entered into transition agreements that govern certain commercial and other relationships between it and Merck, those arrangements may not capture the benefits to Organon's business that resulted from being integrated with the other affiliates of Merck.

Key products generate a significant amount of ~~Organon's~~our profits and cash flows, and any events that adversely affect the markets for ~~Organon's~~our leading products could adversely affect ~~its~~our results of operations and financial condition.

~~Organon's~~Our ability to generate profits and operating cash flow depends largely upon the continued profitability of ~~its~~our key products, such as Nexplanon, ~~Cozaar®~~Cozaar/~~Hyzaar®~~Hyzaar, ~~Singulair®~~Singulair and the ~~Ezetimibe~~ezetimibe family of products. As a result of

~~-27-~~

~~Organon's~~ our dependence on key products, any event that adversely affects any of these products or the markets for any of these products could adversely affect ~~Organon's~~our sales, results of operations or cash flows. These adverse events could include increased costs associated with manufacturing, product shortages, increased generic or over-the-counter availability of ~~Organon's~~our products or competitive products, the discovery of previously unknown side effects, results of post-approval trials, increased competition from the introduction of new, more effective treatments and discontinuation or removal from the market of these products for any reason. ~~Organon~~We also ~~expects~~expect that competition will continue to adversely affect the sales of these products.

~~Organon faces~~We face continued pricing pressure with respect to ~~its~~our products.

~~Organon faces~~We face continued pricing pressure in the United States and globally and, particularly in ~~mature markets~~the EU, the UK, China and Japan, from managed care organizations, government agencies and programs that could adversely affect ~~its~~our sales and profit margins. ~~Organon expects~~We expect pricing pressure to continue in the future. For example, in the United States, Organon experiences significant pricing pressure from: managed care groups, institutional and governmental purchasers, U.S. federal laws and regulations related to Medicare and Medicaid (including the Medicare Prescription Drug Improvement and Modernization Act of 2003 and the ACA and state activities aimed at regulating prices and increasing price transparency).

Changes to the health care system enacted as part of health care reform in the United States, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, could result in further pricing pressures.

In addition, in the United States, larger customers have received higher rebates on drugs in certain highly competitive categories. ~~Organon~~We must also compete to be placed on formularies of managed care organizations and other payors. Exclusion of a product from a formulary can lead to reduced usage in the population covered by the managed care organization or other payor. Outside the United States, numerous major markets, including the EU, the UK, China and Japan, have pervasive government involvement in health care funding and, in that regard, extensive pricing and reimbursement mechanisms and processes for pharmaceutical products. Consequently, in those markets, ~~Organon is~~we are subject to government decision-making and budgetary actions with respect to ~~its~~our products. ~~In China, pricing pressure from~~Cost containment efforts by governments and private organizations are described in greater detail in the Chinese government has increased, including through a series of health care reforms to accelerate generic substitution. While pricing pressure has always existed in China, health care reforms have increased this pressure in part due to the acceleration of generic substitution through the government’s volume-based procurement ("VBP") and generic quality consistency evaluation ("GQCE") programs. In Japan, the pharmaceutical industry is subject to government-mandated biennial price reductions of pharmaceutical products. Furthermore, the government can order re-pricing for specific products if it determines that use of such product will exceed certain thresholds defined under applicable re-pricing rules.Business-Regulatory section above.

~~Organon faces~~We face intense competition from competitors' products.

~~Organon's~~Our products face intense competition from competitors' products, including lower cost generic versions of ~~its~~our products that have lost market exclusivity. Competitors' products may be equally safe and as effective as ~~Organon's~~our products but sold at a substantially lower price than ~~Organon's~~our products. Alternatively, ~~Organon's~~our competitors' products may be safer or more effective, more convenient to use, have better insurance coverage or reimbursement levels or be more effectively marketed and sold than ~~Organon's~~our products. ~~Organon's~~Our efforts to compete with other companies or ~~Organon's~~our failure to maintain ~~its~~our competitive position could adversely affect ~~its~~our business, cash flow, results of operations, financial condition or prospects.

~~Organon has~~We have limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand ~~its~~our innovative pipeline and early discovery and research capabilities, which may limit ~~its~~our ability to discover or develop new products or expand ~~its~~our existing products into new markets to replace the sales of products that lose patent protection, and therefore ~~Organon~~we may not be able to maintain ~~its~~our current levels of profitability.

~~Organon has~~We have limited in-house discovery and early research staff and facilities, and ~~does~~we do not currently intend to extensively hire or acquire such staff or facilities in the near future. Instead, ~~Organon intends~~we intend to continue to rely on future acquisitions, partnerships and collaborations with third parties to expand ~~its~~our innovative pipeline, existing portfolio and innovation and early research capabilities. ~~Organon intends~~However, we may be unable to establish any agreements with third-party developers or manufacturers or do so on favorable terms. Further, should we be able to enter into such agreements, these agreements may pose risks, including that we would be reliant on and accountable for the third-party's knowledge and capabilities, data, quality of operations and compliance to regulations, and other systems to conduct clinical trials, prepare regulatory application submissions and required post-approval reports, manufacture or distribute product, or other activities.

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Our growth could be limited by the scope of our intellectual property licenses for certain women's health care products.

We intend to grow ~~its~~our business through new indications or formulations of ~~its~~our existing products or expansion of existing products into new markets or new geographies. However, ~~Organon expects~~we expect that ~~its~~our ability to do so could be limited by the scope of ~~its~~our limited intellectual property licenses for certain women's health products. For example, a license from Merck for Nexplanon permits use of the underlying technology solely as a contraceptive implant containing only the active pharmaceutical ingredient currently used in the product. Additionally, in December 2021, ~~Organon~~we signed a supplemental license with Merck that provides a limited expansion of the fields in which ~~Organon~~we may use the underlying technology of Nexplanon beyond contraception in exchange for milestone payments. ~~Organon~~We may not be able to offset any sales losses for products that lose or do not have exclusivity by growing sales in other markets. If ~~Organon~~we cannot produce sufficient revenues from expansion into new products, new indications or formulations of ~~its~~our existing products or expansion of existing products into new markets or new geographies, then ~~Organon~~we may not be able to maintain ~~its~~our current levels of profitability, and this could adversely affect ~~Organon's~~our business, cash flow, results of operations, financial condition or prospects.

We rely on third parties for activities related to preclinical and clinical testing.

~~-28-~~We rely on third parties to manufacture and distribute and conduct certain preclinical and clinical testing activities for our products. Oversight of these third parties can require substantial resources and creates potential risks to us, including: we may be unable to establish agreements with third parties, including third party manufacturers, on acceptable terms or even at all; we may not have sufficient quantities of product; third parties may fail to perform delegated responsibilities to an acceptable level of quality, or may fail to comply with regulatory requirements; or third parties may misappropriate or disclose our proprietary information, including trade secrets and know-how. Our reliance on third parties for research and development activities will also reduce our control over these activities but does not relieve us of our responsibilities, including that we must ensure that clinical trials are conducted in accordance with the general investigational plan and protocols for the trial; ensure compliance with regulatory standards like good clinical practices; and register ongoing clinical trials and results to government-sponsored databases. Our failures, or the failure of third parties, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocations, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions. Further, issues related to manufacture of product, preclinical testing, and/or clinical testing may affect our ability to obtain or maintain marketing approval for our products in a timely manner, or at all. This may hinder or delay efforts to successfully commercialize our product candidates.

~~-44-~~

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Table of ~~Conten~~tsContents

Performance Graph

~~Performance Graph~~

The following graph compares the cumulative total stockholder returns for the period from June 2, 2021 (the effective date of ~~the registration of Organon's Common Stock)~~our Separation from Merck) to December 31, ~~2021~~2023 for (i) ~~Organon's~~our Common Stock; (ii) the S&P 500 Index; ~~and~~ (iii) the NYSE Arca ~~Phramaceutical~~Pharmaceutical Index ("DRG"); and the S&P 600 Index. The graph assumes an investment of $100 on June 2, 2021 ~~(first day of trading activity)~~ through the last trading day of ~~fiscal 2021.~~2023. The calculation of cumulative stockholder return on our Common Stock, the S&P 500 Index, DRG and the ~~NYSE Arca Phramaceutical~~S&P 600 Index include reinvestment of ~~dividend.~~dividends. The performance shown is not necessarily indicative of future performance. Effective October 18, 2023, we were deleted from the S&P 500 index and added to the S&P SmallCap 600 index.

Equity Compensation Plan Information

See Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder ~~Matters"~~Matters."

Item 6. [ Reserved ]

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Item 7. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

~~Organon makes~~We make statements in this Annual Report on Form 10-K, and ~~Organon~~we may from time to time make other written reports and oral statements, regarding ~~its~~our outlook or expectations for financial, business or strategic matters regarding or affecting ~~Organon~~us that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, all of which are based on management's current expectations and are subject to risks and uncertainties which change over time and may cause results to differ materially from those set forth in the statements. One can identify these forward-looking statements by their use of words such as "anticipates," "expects," "plans," "will," "estimates," "forecasts," ~~"projects"~~"projects," "believes," "would," "potentially," "intends," "seeks," and other words of similar meaning, or negative variations of any of the foregoing. One can also identify them by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements include, but are not limited to, statements relating to ~~Organon’s~~our growth and acquisition strategies, financial results, product development, product approvals, product potential and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ materially from ~~Organon's~~our forward-looking statements. These factors may be based on inaccurate assumptions and are subject to a broad variety of other risks and uncertainties. No forward-looking statement can be guaranteed and actual future results may vary materially. The factors described in Part I. Item 1A. Risk Factors of this report

~~-45-~~

or otherwise described in ~~Organon's~~our filings with the SEC, provide examples of risks, uncertainties and events that may cause ~~Organon's~~our actual results to differ materially from the expectations expressed in ~~its~~our forward-looking statements, including, but not limited to:

•expanded brand and class competition in the markets in which ~~Organon operates;~~

we operate;

•difficulties with performance of third parties ~~Organon relies~~we rely on for ~~its~~our business growth;

•the failure of any supplier to provide substances, materials, or services as agreed;

•the increased cost of supply, manufacturing, packaging, and operations;

•difficulties developing and sustaining relationships with commercial counterparties;

•competition from generic products as ~~Organon's~~our products lose patent protection;

•any failure by us to obtain an additional period of market exclusivity in the United States for Nexplanon subsequent to the expiration of ~~current~~certain key patents ~~or loss of patent protection for Organon's products;~~

in 2027;

•difficulties and uncertainties inherent in the implementation of ~~Organon's~~our acquisition strategy or failure to recognize the benefits of such acquisitions;

•pricing pressures globally, including rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and health care reform, pharmaceutical reimbursement and pricing in general;

•the impact of ~~the global COVID-19 pandemic~~higher selling and ~~any future pandemic, epidemic, or similar public health threat on Organon's business, operations and financial performance;~~

promotional costs;

•changes in government laws and regulations in the United States and other jurisdictions, including laws and regulations governing the research, development, approval, clearance, manufacturing, supply, distribution, and/or marketing of ~~Organon's~~our products and related intellectual property, environmental regulations, and the enforcement thereof affecting ~~Organon's~~our business;

•efficacy, safety or ~~safety~~other quality concerns with respect to our marketed products, whether or not scientifically justified, leading to product recalls, withdrawals or declining sales;

•delays or failures to demonstrate adequate efficacy and safety of ~~Organon's~~our product candidates in pre-clinical and clinical trials, which may prevent or delay the development, approval, clearance, or commercialization of ~~Organon's~~our product candidates;

•~~difficulties in operating as an independent company;~~

•~~costs and temporary business interruptions related to the separation;~~

•future actions of third-parties, including significant changes in customer relationships or changes in the behavior and spending patterns of purchasers of health care products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and forgoing health care insurance coverage;

•legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental claims and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products;

•lost market opportunity resulting from delays and uncertainties in clinical trials and the approval or clearance process of the U.S. FDA and other regulatory authorities;

•cyberattacks on, or other failures, accidents, or security breaches of, ~~Organon's~~our or third-party providers' information technology systems, which could disrupt ~~Organon's~~our operations;

•increased focus on privacy issues in countries around the world, including the United States, the ~~European Union,~~EU, and China, and a more difficult legislative and regulatory landscape for privacy and data protection that continues to evolve with the potential to directly affect ~~Organon's~~our business, including recently enacted laws in a majority of states in the United States requiring security breach notification;

~~-46-~~

•changes in tax laws including changes related to the taxation of foreign earnings;

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•the impact of any future pandemic, epidemic, or similar public health threat on our business, operations and financial performance;

•loss of key employees or inability to identify and recruit new employees;

•changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Financial Accounting Standards Board and the SEC, that are adverse to ~~Organon;~~us; and

•economic factors over which ~~Organon has~~we have no control, including changes in inflation, interest rates, recessionary pressures, and foreign currency exchange rates.

It is not possible to predict or identify all such factors. Consequently, one should not consider the above list or any other such list to be a complete statement of all potential risks or uncertainties. Further, any forward-looking statement speaks only as of the date on which it is made, and ~~Organon undertakes~~we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

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General

The following ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist the reader in understanding ~~the Company’s~~our financial condition and results of ~~operations. The following discussion~~operations for the years ended December 31, 2023 and ~~analysis~~2022 and should be read in conjunction with ~~the Company’s~~our Consolidated Financial Statements included in Part II, Item 8 of this ~~2021~~Annual Report on Form 10-K to enhance the understanding of our results of operations, financial condition and cash flows. Additionally, this section should be read in connection with Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC and available on the SEC's website at www.sec.gov, which includes a discussion regarding our financial condition and results of operations for the years ended December 31, 2022 and 2021.

~~Organon & Co. (“Organon”) is~~

We are a global ~~healthcare~~health care company ~~formed through~~with a ~~spinoff from Merck & Co., Inc. (“Merck”) to~~ focus on improving the health of women throughout their lives. ~~Organon develops~~We develop and ~~delivers~~deliver innovative health solutions through a portfolio of prescription therapies and medical devices within women's health, biosimilars and established ~~brands (the "Organon Products"). Organon has~~brands. We have a portfolio of more than 60 medicines and products across a range of therapeutic areas. ~~The Company sells~~We sell these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. ~~The Company operates~~We operate six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United ~~Kingdom ("UK").~~Kingdom. Unless otherwise indicated, trademarks appearing in italics throughout this document are trademarks of, ~~the Organon group of~~or are used under license by our companies.

~~Separation from Merck~~

On June 2, 2021, Organon and Merck entered into a Separation and Distribution Agreement (the "Separation and Distribution Agreement"). Pursuant to the Separation and Distribution Agreement, Merck agreed to spin off the Organon Products into Organon, a new, publicly traded company (the "Separation"). The Separation from Merck was completed on June 2, 2021, in which Organon's Common Stock was distributed to all holders of outstanding shares of Merck Common Stock as of the close of business on May 17, 2021 (the "Record Date"). For each share of Merck Common Stock held, such holder received one tenth of one share of Common Stock, and holders received cash in lieu of any fractional share of Common Stock they otherwise would have been entitled to receive in connection with the Distribution. Organon is now a standalone publicly traded company, and on June 3, 2021, regular-way trading of the Common Stock commenced on the New York Stock Exchange ("NYSE") under the symbol "OGN." Until the Separation on June 2, 2021, Organon’s historical combined financial statements were prepared on a standalone basis and were derived from Merck’s consolidated financial statements and accounting records.

For the period subsequent to June 2, 2021, as a standalone publicly traded company, Organon presents its financial statements on a consolidated basis. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The Separation was completed pursuant to the Separation and Distribution Agreement and other agreements with Merck related to the Separation, including, but not limited to, a tax matters agreement, an employee matters agreement and a transition services agreement (see Part II, Item 8. Note 19 for additional details).

Key Trends Affecting Our Results of Operations

•Generic Competition: The majority of our established brands products are beyond market exclusivity. However, these products continue to represent a ~~significant value~~valuable opportunity arising from long-term sustainable revenue streams and well-established supply chains that together generate significant operating profit relative to low promotional and development expenses. In addition, Nexplanon may be eligible for an additional three years of market exclusivity in the United States subsequent to the expiration of certain key patents in 2027, although there can be no assurance that such an additional term will be granted.

•~~Sustained~~Historical Shift Towards Long-Acting Reversible ~~Contraceptives~~Contraceptives: ~~: Although daily~~Daily contraceptive pills ~~remain~~are by far the largest contraception market segment, with almost half of all women choosing a hormonal contraceptive electing this particular method. However, the Long-Acting Reversible Contraceptives ("LARC") market segment, which includes Nexplanon,~~® (etonogestrel implant) (sold as~~ ~~Implanon NXT™~~ ~~in some countries outside the US),~~ has experienced significant growth in the ~~years leading up~~decade from 2010 through to 2019, ~~due to~~driven by a ~~sustained~~significant shift away from daily oral contraception to LARC. This was driven by payors, providers and patients looking for options beyond commonly used daily contraceptive pills. The COVID-19 pandemic negatively affected the LARC segment during ~~2021~~2020 and ~~2020~~2021 due to clinic closures and the postponement of non-essential medical procedures during country lockdowns. ~~However,~~The LARC segment ~~growth quickly rebounded~~began to rebound in 2021 and 2022, during months when clinic restrictions were ~~removed and the sustained shift to~~removed. The LARC market is expected to continue ~~with fundamental drivers unchanged.~~to be an important and large segment of the overall contraception market as payors, providers and patients consider the benefits of long acting and highly effective options including Nexplanon.

•Increased Access to Fertility Solutions: ~~We believe~~With the global trend toward declining birthrates, governments and payors are implementing favorable policies across major markets that, in turn, ~~drive~~improve access to care and drives growth ~~in the market~~ for ~~women’s health~~infertility therapies. ~~For example, in the United States, there has been an increase in fertility insurance mandates and employer coverage, albeit subject to certain exemptions.~~

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•~~Emergence~~Growing Acceptance of Biosimilars: Biologics continue to experience strong growth trends. ~~However, given~~Given the high cost of many of these biologics treatments, biosimilars are a more affordable alternative and represent a significant opportunity for patients, providers, and payors once a biologics product loses patent protection. Moreover, a

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significant number of biologics are expected to lose exclusivity over the next decade, representing a large opportunity for more biosimilar approvals.

•Increased Competitive Pressures: The markets in which we conduct our business and the pharmaceutical industry in general are highly competitive and highly regulated. Our competitors include other worldwide research-based pharmaceutical companies, smaller research companies with more limited therapeutic focus and generic drug manufacturers.

Recent Developments

Business Development

Eli Lilly ("Lilly")

In ~~February~~December 2023, we announced an agreement with Lilly to become the sole distributor and promoter of the migraine medicines Emgality and Rayvow in Europe. Lilly will remain the marketing authorization holder and will manufacture the products for sale. Under the terms of the agreement, we paid an upfront payment of $50 million, upon closing of the transaction in January 2024, and will pay sales-based milestone payments. The upfront payment and certain sales-based milestone payments, which were deemed probable of being achieved, are recognized as an intangible asset in the first quarter of 2024.

Claria Medical, Inc. ("Claria")

In January 2023, we made a strategic investment in Claria, a privately-held company developing an investigational medical device being studied for use during minimally invasive laparoscopic hysterectomy. Under the terms of the agreement, we paid $8 million upfront and have the option to acquire Claria for an additional $47 million, payable if and when the option is exercised. The $8 million was expensed as Acquired in-process research and development and milestones in our Condensed Consolidated Statement of Income for the year ended December 31, 2023.

COVID-19 Update

COVID-19 related disruptions, including patients' inability to access health care providers, negatively affected our results during 2022 ~~Organon acquired~~and the ~~product rights~~first half of 2023, specifically, in China. The China economy has had a slower recovery from ~~Bayer AG~~COVID-19 and this, coupled with healthcare budget deficits, has created cost containment measures post-COVID that have primarily impacted our retail business, and to a lesser extent has impacted the hospital side.

Operating Results

Sales Overview


	Year Ended December 31,					% Change		% Change Excluding Foreign Exchange		% Change		% Change Excluding Foreign Exchange
($ in millions)	2023	2022		2021		2023 vs. 2022				2022 vs. 2021
United States		$	1,478	$	1,437	$	1,383	3	%	3	%	4	%	4	%
International		4,785		4,737		4,921		1		4		(4)		4
Total		$	6,263	$	6,174	$	6,304	1	%	3	%	(2)	%	4	%

Worldwide sales were $6.3 billion for the year ended December 31, 2023, an increase of 1% compared with 2022. Worldwide sales were negatively impacted by approximately 2%, or $117 million, due to unfavorable foreign exchange. Excluding foreign exchange, sales increases primarily reflect the performance of; Atozet due to increased demand in various international markets; Renflexis driven primarily by continued patient growth in the United States and Canada; Follistim AQ due to a one-time buy-in as a result of the exit of the IOM in the United States, increased patient demand in the United States and volume recovery in China related to the COVID-19 negative impact during the first half of the year; Ontruzant driven by the timing of tenders and increased demand; Jada due to continued uptake in the United States following the launch; and Marvelon~~® (ethinylestradiol, desogestrel)~~ and Mercilon, resulting from the transaction with Bayer Healthcare where we gained rights in China during the second quarter of 2022 and in Vietnam during the third quarter of 2022. This performance was offset by: decreased sales of Zetia and Vytorin driven by the negative impact of VBP in China; the impact of the Diprospan regulatory inspection finding at the Heist manufacturing location

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that impacted the manufacturing of selected injectable steroid brands in the first quarter of 2023 (the "Market Action"); and decreased sales of Cozaar and Hyzaar (a combination of losartan potassium and hydrochlorothiazide that is marketed in Japan as Preminent™), primarily due to ongoing generic competition.

The loss of exclusivity negatively impacted sales of certain of our products by approximately $18 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, due to the decrease in volume period over period, which mainly impacted NuvaRing in the United States. VBP in China had a $95 million negative impact on our sales during the year ended December 31, 2023, compared to the year ended December 31, 2022. We expect VBP to impact our established brands product portfolio for the next several quarters.

Our operations include a portfolio of products. Highlights of the sales of our products for the year ended December 31, 2023 and 2022 are provided below. See Note 6 "Product and Geographic Information"to the Consolidated Financial Statements for further details on sales of our products.

Women's Health


	Year Ended December 31,					% Change		% Change Excluding Foreign Exchange		% Change		% Change Excluding Foreign Exchange
($ in millions)	2023	2022		2021		2023 vs. 2022				2022 vs. 2021
Nexplanon/Implanon NXT		$	830	$	834	$	769	(1)	%	1	%	8	%	11	%
NuvaRing		152		173		191		(12)		(11)		(9)		(6)
Marvelon/Mercilon		134		110		98		22		24		12		20
Follistim AQ		262		229		237		14		16		(3)		—
ganirelix acetate injection		110		123		111		(10)		(8)		11		18
Jada		43		20		3		113		113		*		*

Contraception

Worldwide sales of Nexplanon, a single-rod subdermal contraceptive implant, declined 1% for the year ended December 31, 2023, compared to 2022, primarily due to the impact of foreign exchange, unfavorable discount rates, the result of distributor purchasing patterns associated with the timing of the increase in Nexplanon list price in the United States and the impact of the limited participation of a tender in Mexico. This was partially offset by price increases.

Worldwide sales of NuvaRing, a vaginal contraceptive product, declined 12% for the year ended December 31, 2023, compared to 2022, due to ongoing generic competition in the United States. We expect a continued decline in NuvaRing sales as a result of generic competition.

Worldwide sales of Marvelon and Mercilon~~® (ethinylestradiol, desogestrel)~~, combined oral hormonal daily contraceptive pills not approved or marketed in the ~~People’s Republic of China, including Hong Kong and Macau, and has entered into an agreement to acquire~~United States but available in certain countries outside the rights to these products in Vietnam. Marvelon and Mercilon are already owned, manufactured, and marketed by Organon as prescription oral contraceptives in 20 other markets. The transaction to acquire the rights to these products in Vietnam will close in the first half of 2022 and is subject to customary closing conditions, including regulatory approval.

In December 2021, Organon completed its acquisition of Forendo Pharma, a clinical-stage drug development company focused on novel treatments in women’s health. Forendo is pioneering the science of intracrinology, addressing disease through a novel, tissue-specific approach. Its lead clinical compound is an investigational, potentially first-in-class oral 17β-hydroxysteroid dehydrogenase type 1 (HSD17B1) inhibitor in early developmentUnited States, increased 22% for endometriosis, being evaluated for its potential effect on endometriotic lesions. Total consideration includes a $75 million upfront payment, the assumption of approximately $10 million of Forendo debt, payments upon the achievement of certain development and regulatory milestones of up to $270 million and commercial milestones payments of up to $600 million, which together could amount to total consideration of $955 million. Contingent consideration will be paid by Organon upon achievement and the liability recorded once it is deemed probable of occurrence. The transaction was accounted for in 2021 as an asset acquisition, as substantially all of the value was concentrated in a single identifiable asset. During the year ended December 31, ~~2021, the Company recorded $79 million, which consisted~~2023, compared to 2022, as a result of the ~~$75 million upfront payment,~~transaction with Bayer Healthcare where we gained rights in China during the ~~assumption~~second quarter of ~~debt~~2022 and in Vietnam during the third quarter of ~~$10 million and other net assets, as~~ ~~Research and Development expense. The Company also incurred $5 million of transaction related expenses reflected in~~ ~~Selling, General and Administrative expenses~~.2022.

~~In July 2021, Organon and ObsEva entered into~~

Fertility

Worldwide sales of FollistimAQ, a ~~license agreement whereby Organon licensed~~fertility treatment, increased 14% for the ~~global development, manufacturing and commercial rights~~year ended December 31, 2023, compared to ~~ebopiprant (OBE022) from ObsEva. Ebopiprant is an investigational, orally active, selective prostaglandin F2α (PGF2α) receptor antagonist being evaluated~~2022, due to a one-time buy-in as a ~~potential treatment for preterm labor by reducing inflammation and uterine contractions. Under the terms~~result of the license agreement, Organon gained exclusive worldwide rights to develop and commercialize ebopiprant. ObsEva is entitled to receive tiered double-digit royalties on commercial sales, up to $90 million in development and regulatory milestone payments, and up to $385 million sales-based milestone payments that will be paid by Organon upon achievementexit of the ~~contractual milestone~~IOM in the United States, increased patient demand in the United States and volume recovery in China related to the ~~liability recorded once it is deemed probable of occurrence. Upon execution~~COVID-19 negative impact during the first half of the ~~agreement, Organon made a $25 million upfront payment, which~~year. This was ~~recorded as~~ ~~Research and development expense~~ ~~during 2021.~~partially offset by the negative impact of unfavorable discount rates in the United States.

~~In June 2021, Organon completed its acquisition~~

Worldwide sales of ~~Alydia~~ganirelix acetate injection, a fertility treatment, declined 10% for the year ended December 31, 2023, compared to 2022, primarily due to unfavorable discount rates in the United States and increased generic competition in Europe.

-40-

Other Women's Health ~~a commercial-stage medical device company. Alydia’s device, the~~

Worldwide sales of Jada, ~~system, is~~a device intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted. The transaction consideration included a $219 million upfront payment. Additionally, there is a $25 million sales based contingent milestone payment that will be paid by Organon upon achievement and the liability recorded once it is deemed probable of occurrence. The transaction was accounted for as an asset acquisition as substantially all of the value was concentrated in a single identifiable asset. This resulted in an intangible of $247 million attributed to the ~~Jada~~ system device. This asset is subject to amortization on a straight-line basis over its expected useful life of 11 years. In addition to the intangible asset, Organon also recorded other net liabilities of $7 million, a deferred tax liability of $44 million related to the intangible asset, and compensation expense of $23 million, which was recorded in ~~Selling General and Administrative Expenses. Of the $23 million of compensation expense, $19 million was related to accelerated vesting of Alydia stock-based compensation awards.~~

~~-49-~~

~~Debt~~

In April 2021, in connection with the Separation, Organon Finance 1 LLC (“Organon Finance 1”), a subsidiary of Merck, issued €1.25 billion aggregate principal amount of 2.875% senior secured notes due 2028, $2.1 billion aggregate principal amount of 4.125% senior secured notes due 2028 and $2.0 billion aggregate principal amount of 5.125% senior unsecured notes due 2031 (collectively, “the Notes”). Interest payments are due semiannually on October 30 and April 30. As part of the Separation, on June 2, 2021, Organon and a wholly-owned Dutch subsidiary of Organon (the “Dutch Co-Issuer”) assumed the obligations under the Notes as co-issuers, Organon Finance 1 was released as an obligor under the Notes, and certain subsidiaries of Organon agreed to guarantee the Notes. Each series of Notes was issued pursuant to an indenture dated April 22, 2021, between Organon and U.S. Bank National Association. Organon and the Dutch Co-Issuer assumed the obligations under the Notes pursuant to a first supplemental indenture to the relevant indenture, and the guarantors agreed to guarantee the Notes pursuant to a second supplemental indenture to the relevant indenture.

Also upon Separation on June 2, 2021, Organon entered into a credit agreement providing for a Term Loan B Facility, consisting of (i) a U.S. Dollar denominated senior secured “tranche B” term loan in the amount of $3.0 billion due 2028 (ii) a euro denominated senior secured “tranche B” term loan in the amount of €750 million due 2028; and a Revolving Credit Facility (“Revolving Credit Facility”), in an aggregate principal amount of up to $1 billion, with a five-year term that matures in 2026.

Borrowings made under the Revolving Credit Facility initially bear interest (i) in U.S. Dollars at 2.00% in excess of an Adjusted London Interbank Offered Rate (“Adjusted LIBOR”) (subject to a floor of 0.00%) or 1.00% in excess of an alternate base rate (“ABR”), at our option and (ii) in euros, at 2.00% in excess of an adjusted Euro Interbank Offer Rate (“Adjusted EURIBOR”). The Term Loan B Facility bears interest (i) denominated in U.S. Dollars, at 3.00% in excess of Adjusted LIBOR (subject to a floor of 0.50%) or 2.00% in excess of ABR, at our option and (ii) denominated in euros, at 3.00% in excess of Adjusted EURIBOR (subject to a floor of 0.00%). The interest rate on revolving loans under the Revolving Credit Facility is subject to a step-down based on meeting a leverage ratio target and is subject to a commitment fee which applies to the unused portion of the revolving facility, initially equal to 0.50% and subject to a step-down to 0.375% based on meeting a leverage ratio target. The Revolving Credit Facility is also subject to customary financial covenants.

Organon used the net proceeds from the Notes offering, together with available cash on its balance sheet and borrowings under senior secured credit facilities, to distribute $9.0 billion to Merck and to pay fees and expenses related to the Separation. On December 23, 2021, the Company made a discretionary prepayment of $100 million on the U.S. Dollar denominated term loan. As of December 31, 2021, Organon is in compliance with all financial covenants and no default or event of default has occurred.

~~Net Investment Hedge~~

In each quarter subsequent to the Separation, €1.75 billion in the aggregate of both the euro-denominated term loan (€750 million) and the 2.875% euro-denominated secured notes (€1.25 billion) has been designated and is effective as an economic hedge of the net investment in a foreign operation. As a result, $162 million of foreign currency gains due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustments in ~~Other Comprehensive Income~~warranted, increased 113% for the year ended December 31, ~~2021, respectively.~~

~~COVID-19 Update~~

Organon remains focused on protecting the safety of its employees and supporting Organon’s communities in response to the COVID-19 pandemic. COVID-19-related disruptions, including patients’ inability to access health care providers, prioritization of COVID-19 patients, as well as social distancing measures have negatively affected our results.

The negative impact of the COVID-19 pandemic to Organon sales was approximately $400 million in each of the years 2021 and 2020. Our product portfolio is comprised of physician prescribed products, mainly in established brands, which have been affected by social distancing measures and fewer medical visits. Additionally, our portfolio in Women's Health includes products that are physician administered, which have been affected by limited access to physicians and healthcare centers. These impacts, as well as the prioritization of COVID-19 patients at health care providers, resulted in reduced administration of many products within established brands, particularly for respiratory and cardiovascular products and women's health product ~~Nexplanon/Implanon NXT, throughout 2020 and 2021.~~

We believe that global health systems and patients continue to adapt to the evolving impacts of the COVID-19 pandemic, and although we experienced recoveries during 2021, ongoing negative impacts persisted during most of 2021 principally affecting products within established brands and women’s health, primarily ~~Nexplanon/Implanon NXT~~.

~~-50-~~

~~Operating expenses in 2021 were higher~~2023, compared to ~~2020 primarily~~2022. The sales increase is due to ~~lower promotional and selling costs incurred in 2020 attributable to the COVID-19 pandemic as well as incremental costs associated with establishing Organon as a standalone company.~~

~~-51-~~

~~Operating Results~~

~~Sales Overview~~
($ in millions) 2021 % Change % Change Excluding Foreign Exchange 2020 % Change % Change Excluding Foreign Exchange 2019
United States $ 1,383 (2) % (2) % $ 1,408 (30) % (30) % $ 2,021
International 4,921 (4) % (8) % 5,124 (11) % (10) % 5,756
Total $ 6,304 (3) % (6) % $ 6,532 (16) % (15) % $ 7,777

~~U.S. plus international may not equal total due to rounding~~.

Worldwide sales were $6.3 billion in 2021, a decrease of 3% compared with 2020. The sales decline is primarily due to ongoing generic competition for products within the established brands business, particularly for cardiovascular products ~~Zetia~~ ~~and~~ ~~Vytorin~~ ~~(ezetimibe and simvastatin), an expiration of a distribution agreement in December 2020 for~~ ~~Rosuzet~~ ~~in Korea, lower sales of respiratory products including~~ ~~Singulair~~ ~~(montelukast) and~~ ~~Dulera~~ ~~(mometasone furoate and formoterol fumarate dihydrate), generic competition for women’s health product~~ ~~NuvaRing~~ (etonogestrel/ethinyl estradiol vaginal ring) and the generic etonogestrel/ethinyl estradiol vaginal ring, as well as the negative impact of volume-based procurement ("VBP") in China. In addition, the COVID-19 pandemic continued to negatively affect sales in 2021 across several markets. The overall sales decline was offset by higher sales of women's health products ~~Nexplanon/Implanon NXT~~, ~~Follistim AQ~~ ~~(follitropin beta injection) and ganirelix acetate injection due to higher demand, and higher sales of biosimilars resulting from the~~ continued uptake of ~~Renflexis~~ ~~and~~ ~~Ontruzant~~ in the United States ~~as well as~~following the ~~favorable impact of foreign exchange.~~

~~Worldwide sales were $6.5 billion~~Jadalaunch in ~~2020, a decline of 16% compared with 2019, primarily due to generic competition for women’s health product~~ early 2022.~~NuvaRing, and ongoing generic competition for products within the established brands business, particularly for respiratory products~~ ~~Singulair~~ ~~and~~ ~~Nasonex,~~ ~~and cardiovascular products~~ ~~Zetia~~ ~~and~~ ~~Vytorin~~. As described above, the COVID-19 pandemic negatively affected sales in 2020, contributing to declines in established brands, particularly respiratory and cardiovascular products, as well as declines in women’s health products, particularly ~~Nexplanon~~, ~~Follistim AQ~~ ~~and~~ ~~Orgalutran.~~ The sales decline was partially offset by revenue resulting from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring, higher sales of biosimilars resulting from the continued uptake of ~~Renflexis~~ ~~in existing markets and the launch of~~ ~~Ontruzant~~ ~~into new markets, as well as higher sales of cardiovascular product Atozet.~~

The loss of exclusivity ("LOE") negatively impacted sales by approximately $300 million for 2021 compared to 2020 based on the decrease in volume period over period. Additionally, the VBP in China continues to unfavorably affect a number of our products with an impact to sales of approximately $170 million for 2021 compared to 2020 based on the decrease in volume period over period.

Organon’s operations include a portfolio of products. Highlights of the sales of Organon’s products for 2021, 2020 and 2019 are provided below. See Note 18 “Product and Geographic Information” to the Consolidated Financial Statements for further details on sales of our products.

~~Women’s Health~~Biosimilars
($ in millions) 2021 % Change % Change Excluding Foreign Exchange 2020 % Change % Change Excluding Foreign Exchange 2019
Nexplanon/Implanon NXT $ 769 13 % 12 % $ 680 (14) % (13) % $ 787
NuvaRing 191 (19) % (21) % 236 (73) % (73) % 879
Follistim AQ 237 23 % 19 % 193 (20) % (20) % 241
ganirelix acetate injection 111 37 % 32 % 81 (28) % (27) % 112


	Year Ended December 31,					% Change		% Change Excluding Foreign Exchange		% Change		% Change Excluding Foreign Exchange
($ in millions)	2023	2022		2021		2023 vs. 2022				2022 vs. 2021
Renflexis		$	278	$	226	$	186	23	%	24	%	21	%	22	%
Ontruzant		155		122		126		28		27		(4)		—
Brenzys		73		75		63		(2)		1		19		24
Hadlima		44		19		13		125		130		51		57

~~Contraception~~

~~Worldwide sales of~~ ~~Nexplanon/Implanon NXT~~, a single-rod subdermal contraceptive implant, increased 13% in 2021 primarily due to favorable impact from pricing and increased demand in the United States, favorable impact from the timing of tenders in Latin America, and higher demand and recovery from the COVID-19 pandemic in the international markets.

~~-52-~~

~~Worldwide sales of~~Renflexis ~~Nexplanon/Implanon NXT~~ ~~declined 14% in 2020 primarily due to lower demand in the United States and in the EU resulting from the COVID-19 pandemic.~~

~~Worldwide sales of~~ ~~NuvaRing, a vaginal contraceptive product, declined 19% in 2021 primarily due to ongoing generic competition in the United States and the EU. We expect a continued decline in~~ ~~NuvaRing~~ ~~sales as a result of generic competition. Worldwide sales of~~ ~~NuvaRing~~ ~~sales declined 73% in 2020 due to generic competition in the United States resulting from patent expiration in the United States. In addition to sales of branded~~ ~~NuvaRing~~, we have an agreement with a generic manufacturer that authorizes the sale of generic etonogestrel/ethinyl estradiol vaginal ring in the United States. Under the terms of the agreement, we are reimbursed on a cost-plus basis by the generic manufacturer for supplying finished goods and receive a share of the net profits recorded by the generic manufacturer. Under the terms of the agreement, our share in the profits declines over time as new participants enter the market. Revenues from this arrangement were $73 million, $148 million and $2 million for 2021, 2020 and 2019, respectively. Revenues for 2021 primarily reflect our share of the profits. Revenues for 2020 and 2019 reflect supply sales of the generic product to the manufacturer. The decline in revenue for 2021 is due to the entry of a new market participant. Given the nature of this arrangement, we expect revenue under this arrangement to continue to decline significantly in 2022.

~~Fertility~~

~~Worldwide sales of~~ ~~Follistim AQ~~ ~~(marketed in most countries outside the United States as~~ ~~Puregon~~), a fertility treatment, increased 23% in 2021, primarily due to continuous volume growth in the United States, as well as recovery from the COVID-19 pandemic in the United States and China. Worldwide sales of ~~Follistim AQ~~ ~~declined 20% in 2020 largely due to lower global demand resulting from the COVID-19 pandemic.~~

~~Worldwide sales of ganirelix acetate injection (marketed in certain countries outside the United States as~~ ~~Orgalutran~~), a fertility treatment, increased 37% in 2021 primarily due to favorable pricing in the United States, volume growth in Europe and Canada, and China, as well as recovery from the COVID-19 pandemic in China. Worldwide sales of ganirelix acetate injection declined 28% in 2020 primarily due to lower pricing in the United States, as well as lower demand in international markets attributable both to the COVID-19 pandemic and generic competition.

~~Biosimilars~~

($ in millions) 2021 % Change % Change Excluding Foreign Exchange 2020 % Change % Change Excluding Foreign Exchange 2019
Renflexis $ 186 37 % 36 % $ 135 40 % 40 % $ 96
Ontruzant 126 10 % 7 % 115 38 % 37 % 83
Brenzys 63 (15) % (20) % 74 3 % 4 % 72

The following biosimilar products are part of a development and commercialization agreement between Organon and Samsung Bioepis entered into in 2013. See Note 4 to the Consolidated Financial Statements. Our commercialization territories under the agreement vary by product as noted below.

~~Renflexis~~is a biosimilar to Remicade(infliximab) ~~(a trademark of Janssen Biotech, Inc.)~~ for the treatment of certain inflammatory diseases. Sales ~~growth in 2021 and 2020 was~~increased 23% for the year ended December 31, 2023, compared to 2022, driven primarily by continued demand growth in the United States ~~since launch in 2017 as well as growth in~~and Canada. We have commercialization rights to Renflexisin countries outside ~~the EU,~~Europe, Korea, China, Turkey, and Russia.

Ontruzant~~(trastuzumab-dttb)~~ is a biosimilar to Herceptin (trastuzumab) ~~(a trademark of Genentech, Inc.)~~ for the treatment of HER2-overexpressing breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma. ~~For 2021, sales reflect uptake since~~Sales for the ~~July 2020 launch~~year ended December 31, 2023, compared to 2022, increased 28% driven by the timing of tenders in ~~the United States~~Brazil and increased demand partially offset by ~~a decrease in~~ the ~~EU reflecting increasing~~ competitive pressures ~~and tenders lost.~~in Europe. We have commercialization rights to Ontruzant in countries outside of Korea and China. ~~Sales growth in 2020 was driven by the launch in Brazil.~~

Brenzys ~~(etanercept)~~ is a biosimilar to Enbrel (etanercept) ~~(a trademark of Immunex Corporation)~~ for the treatment of certain inflammatory diseases. Sales in ~~2021 decreased 15% primarily due~~the year ended December 31, 2023, compared to ~~lower demand in Brazil.~~2022, remained substantially consistent. We have commercialization rights to Brenzys in countries outside of the United States, ~~the E.U.,~~Europe, Korea, China, and Japan. ~~Sales in 2020 were relatively flat compared to 2019.~~

~~Recent Launches~~

~~Aybintio~~ is a biosimilar to Avastin (bevacizumab) (a trademark of Genentech, Inc.) for the treatment of metastatic carcinoma of the colon or rectum, metastatic non-squamous, non-small cell lung cancer, metastatic renal cell carcinoma,

~~-53-~~

metastatic cervical cancer, epithelial ovarian, fallopian tube, or primary peritoneal cancer and metastatic breast cancer. We recorded sales of $36 million during 2021, with minimal sales during 2020 due to the approval of ~~Aybintio~~ ~~in the EU in August 2020 and its launch in September 2020. We currently have no plan for the timing of any launch of~~ ~~Aybintio~~ in the United States nor do we know when such timing would be determined. We have experienced increased competition, including pricing pressure, which is expected to impact our sales in 2022 and forward. We have commercialization rights to ~~Aybintio~~ ~~in the United States, Canada, Germany, Italy, France, the UK and Spain.~~

Hadlima ~~(adalimumab-bwwd)~~ is a biosimilar to Humira (adalimumab) ~~(a trademark of AbbVie Technology Ltd.)~~ for the treatment of certain inflammatory diseases. We have ~~worldwide~~ commercialization rights to Hadlima in countries outside of the EU, Korea, China, Turkey, and Russia. ~~Samsung Bioepis reached a global settlement with AbbVie permitting us to~~We recorded sales of $44 million during the year ended December 31, 2023, reflecting an increase from modest sales during 2022 in markets outside of the United States and the launch~~Hadlima~~ in the United States in ~~June 2023 and outside of the United States starting in 2021.~~July 2023. Hadlima is currently approved in the United States, Australia, Canada, and Israel.

~~Hadlima~~ ~~was launched in Australia and Canada in February 2021. Following these launches, we recorded sales of $13 million during 2021, with no comparable sales during 2020.~~

Established Brands

Established brands represents a broad portfolio of well-known brands, which generally are beyond market exclusivity, including leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management, for which generic competition varies by market.

Cardiovascular


								Year Ended December 31,
								Year Ended December 31,
								Year Ended December 31,										% Change		% Change Excluding Foreign Exchange				% Change				% Change Excluding Foreign Exchange
($ in millions)	($ in millions)	2021		% Change		% Change Excluding Foreign Exchange		2020		% Change		% Change Excluding Foreign Exchange		2019		($ in millions)	2023		2022				2021				2023 vs. 2022					2022 vs. 2021
Zetia/Vytorin	Zetia/Vytorin	$	542	(18)	%	(22)	%	$	664	(24)	%	(24)	%	$	875	Zetia/Vytorin				$	436	$		$	488	$		$	542	(11)	(11)	%	(9)	%	(10)	%	(3)	%
Atozet	Atozet	458		1	%	(3)	%	453		16	%	16	%	391
Rosuzet		68		(48)	%	(47)	%	130		8	%	9	%	120
Cozaar/Hyzaar	Cozaar/Hyzaar	357		(7)	%	(11)	%	386		(13)	%	(11)	%	442
Zocor		65		(16)	%	(19)	%	77		(31)	%	(31)	%	112

Combined global sales of Zetia ~~(marketed in most countries outside of the United States as~~ ~~Ezetrol~~) and Vytorin~~(marketed outside of the United States as~~ ~~Inegy~~), medicines for lowering LDL cholesterol, ~~decreased 18% and 24% in 2021 and 2020, respectively,~~declined 11% for the year ended December 31, 2023, compared to 2022, primarily driven by ~~lower sales~~the negative impact of ~~Ezetrol~~VBP in ~~Japan, as well as lower sales of~~ China.

~~Ezetrol~~ ~~and~~ ~~Inegy~~ ~~in the EU. The patent that provided market exclusivity for~~ ~~Ezetrol~~ ~~in Japan expired in September 2019 and generic competition began in June 2020. The EU patents for~~ ~~Ezetrol~~ ~~and~~ ~~Inegy~~ expired in April 2018 and April 2019, respectively. Accordingly, we are experiencing sales declines in these markets as a result of generic competition and expect the declines to continue. Higher demand for ~~Ezetrol~~ ~~in China during 2021, resulting from expanded access, partially offset the sales decline.~~

Sales of Atozet~~(ezetimibe and atorvastatin calcium) (marketed outside of the United States)~~, a medicine for lowering LDL cholesterol, ~~remained relatively flat 2021,~~increased 14% for the year ended December 31, 2023, compared to 2022, primarily due to increased ~~competition in Germany, partially offset by demand increase in France and the Asia Pacific region. Sales of~~ ~~Atozet~~ ~~grew 16% in 2020 primarily due to higher~~ demand in ~~most markets, particularly in the EU, Japan and other countries in the Asia Pacific region.~~various international markets.

-41-

~~Sales of~~ ~~Rosuzet~~ (ezetimibe and rosuvastatin calcium) (marketed outside of the United States), a medicine for lowering LDL cholesterol, declined 48% in 2021 due to the expiration of a distribution agreement in Korea in December 2020, partially offset by higher demand and favorable pricing in Japan. Sales of ~~Rosuzet~~ ~~grew 8% in 2020 primarily due to higher demand in Korea and Japan.~~

~~Combined global sales of~~ ~~Cozaar~~ ~~(losartan potassium) and~~ ~~Hyzaar~~ ~~(losartan potassium and hydrochlorothiazide) (a combination of~~ ~~Cozaar~~ ~~and hydrochlorothiazide that is marketed in Japan as~~ ~~Preminent~~), a medicine for the treatment of hypertension, declined 7% in 2021 primarily due to continued generic competition in Japan and the Asia Pacific region, market decline in China, lower demand in the United States, and lower sales in Canada as sales in 2020 were higher due to competitor supply shortages. Combined global sales of Cozaar and Hyzaar, medicines for the treatment of hypertension, declined 13% ~~in 2020~~for the year ended December 31, 2023, compared to 2022, primarily due to ~~lower demand in China, Japan and the EU.~~

~~Worldwide sales of~~ ~~Zocor~~ (simvastatin), a statin for modifying cholesterol, decreased 16% in 2021, primarily due to lower volumes in China due to the VBP impact. Worldwide sales of Zocor declined 31% in 2020 primarily due to lower demand in China.

~~-54-~~

~~Table of Contents~~ongoing generic competition.

Respiratory


								Year Ended December 31,
								Year Ended December 31,
								Year Ended December 31,										% Change		% Change Excluding Foreign Exchange				% Change				% Change Excluding Foreign Exchange
($ in millions)	($ in millions)	2021		% Change		% Change Excluding Foreign Exchange		2020		% Change		% Change Excluding Foreign Exchange		2019		($ in millions)	2023		2022				2021				2023 vs. 2022					2022 vs. 2021
Singulair	Singulair	$	413	(11)	%	(13)	%	$	462	(34)	%	(34)	%	$	698	Singulair				$	404	$		$	411	$		$	413	(2)	(2)	%	3	%	(1)	%	9	%
Nasonex	Nasonex	206		(6)	%	(9)	%	218		(26)	%	(24)	%	293
Dulera	Dulera	190		(15)	%	(16)	%	222		2	%	2	%	217

Worldwide sales of Singulair, a once-a-day oral medicine for the chronic treatment of asthma and for the relief of symptoms of allergic rhinitis, ~~decreased 11% in 2021 primarily attributable~~declined2% for the year ended December 31, 2023, compared to 2022, due to the impact of ~~VBP in China, lower volume in Japan, Europe and Canada due to generic competition, and the impact of the COVID-19 pandemic in the Middle East region. The sales decline was~~foreign exchange partially offset by ~~the market recovery from the COVID-19 pandemic in China. Worldwide sales of Singulair declined 34% in 2020 primarily~~increased demand due to ~~lower demand in China and Japan attributable in part~~higher incidences of respiratory conditions across many international markets during the fourth quarter of 2023 compared to ~~the COVID-19 pandemic.~~2022.

Global sales of Nasonex, an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, ~~decreased~~increased 6% ~~in 2021 primarily driven by generic competition in Japan, lower~~for the year ended December 31, 2023, compared to 2022, due to increased demand ~~impacted by the COVID-19 pandemic~~ across several markets ~~in the United States, Latin America, and Europe,~~ partially offset by ~~higher demand in China. Global sales~~a $10 million milestone related to a regulatory approval received during the first quarter of 2022.

~~Nasonex~~ declined 26% in 2020 primarily due to continued generic competition in Japan, as well as lower demand in several other international markets resulting from the COVID-19 pandemic, partially offset by higher demand in China.

Global sales of Dulera, a combination medicine for the treatment of asthma, ~~decreased 15% in 2021, largely~~increased 8% for the year ended December 31, 2023, compared to 2022, primarily due to ~~significant buy-in during 2020 related to~~ the ~~COVID-19 pandemic. Global sales of~~ ~~Dulera~~favorable impact from price and increased ~~2% in 2020 due to higher~~ demand in ~~Canada.~~the United States.

Non-Opioid Pain, Bone and Dermatology


	Year Ended December 31,					% Change		% Change Excluding Foreign Exchange		% Change		% Change Excluding Foreign Exchange
($ in millions)	2023	2022		2021		2023 vs. 2022				2022 vs. 2021
Arcoxia		$	257	$	241	$	244	7	%	12	%	(1)	%	4	%
Diprospan		91		122		125		(25)		(22)		(3)	%	2	%

($ in millions) 2021 % Change % Change Excluding Foreign Exchange 2020 % Change % Change Excluding Foreign Exchange 2019
Arcoxia $ 244 (5) % (8) % $ 258 (11) % (8) % $ 288

Sales of Arcoxia ~~(etoricoxib) (marketed outside of the United States)~~, a medicine for the treatment of arthritis and pain, ~~decreased 5% in 2021~~increased 7% for the year ended December 31, 2023, compared to 2022, primarily due to ~~the impact of VBP in China~~customers buying patterns and ~~lower~~higher demand in ~~the Asia Pacific region attributable to the COVID-19 pandemic.~~ various international markets.

Sales of ~~Arcoxia~~Diprospan, a corticosteroid approved for treatment of a wide range of inflammatory conditions, declined ~~11% in 2020 primarily~~25% for the year ended December 31, 2023, compared to 2022, due to ~~lower demand in~~manufacturing issues resulting from the ~~Asia Pacific region related~~Market Action. In the first quarter of 2023, we resolved the regulatory inspection findings. Sales have not yet recovered. We expect the sales recovery to continue over the ~~COVID-19 pandemic, partially offset by higher demand in the EU.~~next twelve months.

Other


								Year Ended December 31,
								Year Ended December 31,
								Year Ended December 31,										% Change		% Change Excluding Foreign Exchange				% Change				% Change Excluding Foreign Exchange
($ in millions)	($ in millions)	2021		% Change		% Change Excluding Foreign Exchange		2020		% Change		% Change Excluding Foreign Exchange		2019		($ in millions)	2023		2022				2021				2023 vs. 2022					2022 vs. 2021
Proscar	Proscar	$	117	(33)	%	(37)	%	$	176	(13)	%	(12)	%	$	203	Proscar				$	97	$		$	101	$		$	117	(3)	(3)	%	1	%	(14)	%	(9)	%

Worldwide sales of Proscar, a medicine for the treatment of symptomatic benign prostate enlargement, ~~declined 33% in 2021 primarily due~~for the year ended December 31, 2023, compared to ~~lower performance reflecting the impact of VBP in China. Worldwide sales of~~ ~~Proscar~~ ~~declined 13% in 2020 primarily due to lower demand in China.~~2022 were substantially consistent.

-42-

~~-55-~~

Costs, Expenses and Other


						Year Ended December 31,
						Year Ended December 31,
						Year Ended December 31,											% Change
($ in millions)	($ in millions)	2021		% Change		2020			% Change		2019		($ in millions)	2023			2022				2021							2023 vs. 2022			2022 vs. 2021
Cost of sales	Cost of sales	$	2,382	12	%	$	2,119		(7)	%	$	2,274	Cost of sales		$	2,515		$	$	2,294		$				$	2,382					10		%		(4)	%
Selling, general and administrative	Selling, general and administrative	1,668		23	%	1,356			(6)	%	1,443
Research and development	Research and development	443		111	%	210			(5)	%	220
Acquired in-process research and development and milestones
Restructuring costs	Restructuring costs	3		*		60			*		78		Restructuring costs		62			28		28			3					3							*			*
Other (income) expense, net		279		*		35			*		66
		$	4,775	26	%	$	3,780		(7)	%	$	4,081
Interest expense
Exchange losses													Exchange losses		42				11							4						*				*
Other expense, net
								$																$	5,590				$	5,052		$	4,775						11	%	6	%

~~-56-~~Interest Expense

Interest expense increased 25% for the year ended December 31, 2023, compared to 2022, due to increased interest rates, and debt fees and discounts expensed as part of the prepayment on the U.S. Dollar-denominated term loan and the impact of exchange rates.

-43-

Exchange Losses

For the year ended December 31, 2023, the change in exchange losses was driven by foreign currency exchange translation losses and the impact of the portion of Euro-denominated debt not designated as a net investment hedge in the prior year period.

Other Expense, net

For the year ended December 31, 2023, other expense, net, remained relatively consistent with the prior year.

Taxes on Income

The effective income tax rates were (52.2)% and 18.3% for ~~2021, 2020~~the year ended December 31, 2023 and ~~2019 were 11.7%, 18.0% and 10.6%,~~2022, respectively. ~~The decrease in~~These effective ~~interest~~income tax rates ~~for 2021~~ reflect the beneficial impact of foreign earnings, offset by the ~~$75~~impact of U.S. inclusions under the Global Intangible Low-Taxed Income regime and a partial valuation allowance recorded against non-deductible U.S. interest expense. In the fourth quarter of 2023, we recorded a $476 million tax benefit ~~relating to~~comprised of a ~~portion~~gross benefit of $686 million, net of a $210 million valuation allowance, resulting from the termination of a Swiss tax arrangement. Our valuation allowance was determined based on expected future income and the terms of the ~~non-U.S. step-up~~remaining tax arrangement.

On August 16, 2022, the United States enacted the Inflation Reduction Act of ~~tax basis associated with Organon's Separation from Merck, as well as the income tax benefit recognized in connection with the conclusion~~2022. Provisions of the ~~Internal Revenue Service (IRS) examination of Merck’s 2015-2016 U.S. federal~~bill that relate to tax include the minimum tax on book income, a 1% excise tax ~~returns. As a result~~on stock buybacks and certain tax incentives to promote clean energy. There are no impacts of the ~~examination conclusion, we reflected an allocation from Merck of $18 million in the Consolidated Financial Statements representing our portion of the payment made~~legislation to the ~~IRS. Our portion~~2023 results. We will continue to assess future impacts of ~~reserves for unrecognized tax benefits for the years under examination exceeded the allocated adjustments relating to~~ this examination period and therefore for the year ended December 31, 2021, we have reflected a $29 million net tax benefit. This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.legislation.

~~Income/Loss from Discontinued Operations~~

The historical results of certain Merck non-U.S. legal entities that were contributed to Organon in connection with the Separation included operations related to other Merck products that were retained by Merck. The Merck Retained Products business of the Transferred Entities were contributed by Organon to Merck and its affiliates. Accordingly, the historical results of operations of the Merck Retained Products have been reflected as discontinued operations in the Consolidated Financial Statements for all periods presented.

~~There was no income or loss from discontinued operations, net of taxes for 2021. Loss from discontinued operations, net of taxes, for 2020 and 2019 was $96 million and $88 million, respectively.~~

~~Analysis of Liquidity and Capital Resources~~

Liquidity and Capital Resources

~~Up to the date~~

As of ~~Separation on June 2, 2021, Organon participated in Merck’s centralized treasury model, which included its~~December 31, 2023, we had cash ~~pooling~~ and ~~other intercompany financing arrangements.~~cash equivalents of $693 million. We have historically generated and expect to continue to generate positive cash flow from operations.

In April 2021, in connection with the Separation, Organon Finance 1, previously a subsidiary of Merck, issued €1.25 billion aggregate principal amount of 2.875% senior secured notes due 2028, $2.1 billion aggregate principal amount of 4.125% senior secured notes due 2028 and $2.0 billion aggregate principal amount of 5.125% senior unsecured notes due 2031. The notes were assumed by Organon and the Dutch Co-Issuer. In addition, on June 2, 2021, we entered into a credit agreement providing for a $3.0 billion U.S. dollar-denominated senior secured term loan due 2028 and a euro denominated senior secured term loan in the amount of €750 million due 2028. We also entered into a secured, unsubordinated five-year revolving credit facility that provides for the availability of $1.0 billion of borrowings. As of December 31, 2021, there are no borrowings outstanding under our Revolving Credit Facility. We distributed $9.0 billion of the $9.5 billion proceeds to Merck in accordance with the terms of the Separation.

After the distribution to Merck of $9.0 billion in net debt proceeds and settlement of certain balances with Merck and its affiliates, we began operations as an independent company with approximately $900 million of cash and cash equivalents, which included approximately $400 million of funds received from Merck for the purchase of inventory from Merck upon exit of certain Interim Operating Model agreements. This purchase was completed at the end of 2021. On December 23, 2021, the Company made a discretionary prepayment of $100 million on the U.S. dollar denominated term loan. At December 31, 2021, we had cash and cash equivalents of $737 million. We expect to continue to fund our ongoing operating, investing and financing requirements mainly through cash flows from operations, available liquidity through cash on hand, available capacity under our Revolving Credit Facility and access to capital markets.

Working capital of continuing operations was $1.2 billion at December 31, 2021 and $348 million at December 31, 2020. The increase in working capital of continuing operations was primarily driven by cash funding by Merck in connection with the Separation and an increase in accounts receivable, partially offset by increases in employee benefits and payroll accruals and interest payable.

Cash provided by operating activities was $2.2 billion in 2021, $2.3 billion in 2020 and $3.0 billion in 2019. Cash provided by operating activities in 2021 was unfavorably impacted by the decline in net income and an increase in accounts receivable and inventory partially offset by an increase in trade accounts payable, including amounts due to Merck, and accrued and other current liabilities. Cash provided by operating activities in 2020 was primarily impacted by the decline in net income.

Cash used in investing activities was $481 million in 2021, $250 million in 2020, and $88 million in 2019. Cash used in investing activities in 2021 primarily reflects the asset acquisition of Forendo and Alydia Health and the licensing agreement with ObsEva. Cash used in investing activities in 2020, reflects an increase in capital expenditures.

~~-57-~~

Cash used in financing activities was $977 million in 2021, $2.0 billion in 2020 and 2.9 billion in 2019. The change in cash used in financing activities in 2021 reflects the proceeds from the issuance of long term debt, the payment of related debt issuance costs and related principal payment, payment of dividends, and the settlement of the transactions with Merck in connection with the Separation (see Note 19 to the Consolidated Financial Statements). The change in cash used in financing activities in 2020 reflects transactions with Merck.

Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our Revolving Credit Facility. Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings, payment of dividends and strategic business development transactions.

Capital expenditures were $192 million in 2021, $255 million in 2020 and $92 million in 2019. Capital expenditures in 2021 and 2020 reflect investment in new capital projects focused primarily on establishing Organon as an independent Company. We estimate that we will continue to invest in new capital projects from 2022 to 2023, for ongoing projects to stand up Organon, principally related to investments in information technology.

In February 2022, the armed conflict between Ukraine and Russia escalated, which may adversely impact Organon’s business. Specifically, trade sanctions, travel bans and asset or financial freezes announced by the United States, European Union and other countries against Russian entities and designated individual restrictions have impacted and may continue to impact many global businesses in direct and indirect ways (including, but not limited to, product shipping delays, supply shortages, delays in regulatory approvals and audits, currency exchange rates and exchange controls). Such actions may negatively impact the financial institutions, vendors, manufacturers, suppliers, partners and other third parties with whom Organon conducts business. Organon will continue to monitor the impacts of the conflict, which may negatively impact Organon’s operations, financial position or cash flows. For the year ended December 31, 2021, Organon’s combined revenues of Ukraine and Russia were approximately 2% of total revenues.

Our contractual obligations as of December 31, 2021, which require material cash requirements in the future, consist of purchase obligations and lease obligations. Purchase obligations are enforceable and legally binding obligations for purchases of goods and services which include inventory purchase commitments. Lease obligations exclude reasonably certain lease renewals that have not yet been executed. As of December 31, 2021, total payments due for purchase obligations and lease obligations are $1.5 billion and $251 million, respectively, and extend through 2030. Contractual obligations due within the next twelve months are $349 million related to purchase commitments and $53 million related to lease obligations. In addition, Organon is responsible for settlement of certain tax matters, of which the Company expects to pay approximately $20 million within the next year.

During 2021, Organon paid cash dividends of $0.56 per share. In February 2022, the Board of Directors declared a quarterly dividend of $0.28 per share on Organon’s stock that was paid on March 17, 2022 to stockholders of record at the close of business on February 28, 2022.

We believe that our financing arrangements, future cash from operations, and access to capital markets will provide adequate resources to fund our future cash flow needs.

Working capital was $1.6 billion and $1.4 billion as of December 31, 2023 and December 31, 2022, respectively. The increase in working capital was primarily driven by an increase in inventory and the timing of collection of receivables.

Net cash provided by operating activities was $799 million for the year ended December 31, 2023 compared to $858 million for the same period in the prior year. The decrease in cash provided by operating activities was primarily attributable to the changes in working capital balances, offset by an increase in net income.

Net cash used in investing activities was $260 million for the year ended December 31, 2023 compared to $420 million for the same period in the prior year, primarily reflecting lower investment in business development transactions in the year ended December 31, 2023 compared to the prior year, partially offset by an increase in capital expenditures.

Net cash used in financing activities was $569 million for the year ended December 31, 2023 compared to $433 million for the same period in the prior year. The increase in cash used in financing activities was driven by the $250 million voluntary prepayment on the U.S. Dollar-denominated term loan in 2023 compared to the $100 million voluntary prepayment in 2022.

Capital expenditures were $251 million and $196 million for the years ended December 31, 2023 and 2022, respectively. Capital expenditures in 2023 and 2022 reflect investments in new capital projects focused primarily on establishing us as an independent Company. We estimate that we will continue to invest in new capital projects in 2024, for ongoing projects to stand up Organon, principally related to investments in information technology.

As part of our post-spinoff plan, we have approved an initiative to further optimize our manufacturing and supply network. As part of this initiative, we will continue to separate our supply chain through planned exits from supply agreements from Merck through 2031. This will enable us to redefine our appropriate sourcing strategy, and move to fit-for-purpose supply chains, while focusing on delivering efficiencies. We anticipate we will incur costs associated with this separation, including but not limited to accelerated depreciation, exit premiums and fees, technology transfer costs, stability and qualification batch costs, one-time resourcing costs, regulatory and filing costs, capital investment, and inventory stock bridges.

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For the year ended December 31, 2023 and 2022, our combined revenues from Ukraine, Russia and Israel were approximately 2% of total revenues. While we will continue to monitor the impacts of the Ukraine-Russia war and the Hamas-Israel war, as of December 31, 2023, our assets in Ukraine, Russia and Israel are not material.

Contractual Obligations

Our contractual obligations as of December 31, 2023, which require material cash requirements in the future, consist of contractual milestones, purchase obligations, lease obligations and the settlement of certain tax matters.

Contractual milestones are potential payments based upon the achievement of specified milestones associated with business development transactions. Such milestone payments will only be payable in the event that our collaborative partners achieve contractually defined success-based milestones such as the advancement of the specified research and development programs or the receipt of regulatory approval for the specified compounds or products and/or we reach a sales threshold of the specified compounds or products. The timing of the payments of the contractual milestones cannot be estimated and the likelihood of achieving the milestones cannot be determined. As of December 31, 2023, total potential payments due for contractual milestones are $1.9 billion. Potential amounts due within the next twelve months are $98 million.

Purchase obligations are enforceable and legally binding obligations for purchases of goods and services which include inventory purchase commitments. As of December 31, 2023, total payments due for purchase obligations are $1.2 billion and extend through 2031. Amounts due within the next twelve months are $376 million.

Long-term debt consists of both fixed and variable-rate instruments. As of December 31, 2023, total payments due for debt obligations are $8.8 billion and extend through 2031. Amounts due within the next twelve months are $9 million.

Lease obligations exclude reasonably certain lease renewals that have not yet been executed. As of December 31, 2023, total payments due for lease obligations are $189 million and extend through 2041. Amounts due within the next twelve months are $52 million.

During the 2024 fiscal year, we anticipate paying higher cash taxes than the 2023 fiscal year. In addition, we are responsible for settlement of certain tax matters, of which we expect to pay approximately $56 million within the next year.

During 2023, we paid cash dividends of $1.12 per share. On February 15, 2024, our Board of Directors declared a quarterly dividend of $0.28 for each issued and outstanding share of our common stock. The dividend is payable on March 14, 2024, to stockholders of record at the close of business on February 26, 2024.

Critical Accounting Estimates

The audited annual consolidated financial statements are prepared in conformity with U.S. GAAP and, accordingly, include certain amounts that are based on ~~management’s~~management's best estimates and judgments. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates are disclosed below. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates.

Revenue Recognition

Our accounting policy for revenue recognition has a substantial impact on reported results and relies on certain estimates. Revenue is recognized following a five-step model: (i) identify the customer contract; (ii) identify the ~~contract’s~~contract's performance obligation; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation; and (v) recognize revenue when or as a performance obligation is satisfied. Revenue is reduced for gross-to-net sales adjustments discussed below, all of which involve significant estimates and judgment after considering applicable laws and regulations and definitive contractual agreements with private sector and public sector benefit providers. These types of variable consideration are estimated at the time of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year. Estimates are assessed each period and adjusted as required to revise information or actual experience.

~~-58-~~

In the United States, revenue is reduced by sales discounts issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebate amounts owed based upon definitive contractual agreements or

-45-

legal requirements with private sector (Managed Care) and public sector (Medicaid and Medicare Part ~~D customers).~~D) customers. Additionally, sales are generally made with a limited right of return under certain conditions.

The provision for aggregate customer discounts in the United States covers chargebacks and rebates. We determine the provision for chargebacks based on expected sell-through levels by our wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. We use historical customer segment utilization mix, sales, ~~forecasts,~~ changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history in order to estimate the expected provision. Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued.

We continually monitor our provision for aggregate customer discounts. There were no material adjustments to estimates associated with the aggregate customer discount provision in ~~2021, 2020,~~2023, 2022, or ~~2019.~~2021.

Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows:


	Year Ended December 31,										Year Ended December 31,
($ in millions)	($ in millions)	2021		2020		2019		($ in millions)	2023	2022		2021
Balance January 1	Balance January 1	$	343	$	365	$	404
Provision	Provision	2,000		1,770		1,885
Payments(1)	Payments(1)	(2,014)		(1,792)		(1,924)
Balance December 31	Balance December 31	$	329	$	343	$	365

(1) Includes 2021 payments made by Merck on behalf of ~~Organon~~us for the period prior to the Separation date.

Accruals for chargebacks are reflected as a direct reduction to accounts receivable and accruals for rebates as current liabilities. The accrued balances relative to these provisions included in accounts receivable and accrued and other current liabilities were $87 million and $417 million, respectively, at December 31, 2023, $78 million and $307 million, respectively, at December 31, 2022 and $54 million and $275 million, respectively, at December 31, ~~2021, $41 million and $302 million, respectively, at December 31, 2020 and were $52 million and $313 million, respectively, at December 31, 2019.~~2021. The increase in accrued rebates in 2023 is attributable to a wholesaler buy-in in conjunction with the exit of the IOM with Merck for the Follistim product.

Outside of the United States, variable consideration in the form of discounts and rebates ~~are~~is a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. In certain European countries, legislatively mandated rebates are calculated based on an estimate of the ~~government’s~~government's total unbudgeted spending and our specific payback obligation. Rebates may also be required based on specific product sales thresholds. We apply an estimated factor against our actual invoiced sales to represent the expected level of future discount or rebate obligations associated with the sale.

We maintain a returns policy that allows our customers in ~~the United States~~certain countries to return product within a specified period prior to and subsequent to the expiration date (generally, three to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical experience with actual returns. Additionally, we consider factors such as levels of inventory in the distribution channel, product dating and expiration period, whether products have been discontinued, entrance in the market of generic competition, changes in formularies or launch of over-the-counter products, among others. ~~Outside of the United States, returns are only allowed in certain countries on a limited basis.~~

See Note 3 "Summary of Accounting Policies" to the Consolidated Financial Statements included in this report for additional details on our revenue recognition policy.

Contingencies and Environmental Liabilities

We are involved in various claims and legal proceedings of a nature considered normal to our business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental ~~matters (see~~matters. See Note 1220 "Contingencies" to the Consolidated Financial ~~Statements).~~Statements included in this report. We record accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated.

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Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

We believe that there are no compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on us. Expenditures for remediation and environmental liabilities were $4$2 million in ~~2021,~~2023, and are estimated at ~~$19~~$15 million in the aggregate for the years ~~2022~~2024 through ~~2026. In management’s opinion, the liabilities~~2028. Liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled ~~$24~~$19 million and $20 million at ~~both~~

~~-59-~~

December 31, ~~2021~~2023 and ~~2020.~~2022, respectively. These liabilities are undiscounted, do not consider potential recoveries from other parties and will be paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 15 years. Although it is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation, ~~management does~~we do not believe that any reasonably possible expenditures that may be incurred in excess of the liabilities accrued should exceed ~~$16~~$24 million in the aggregate. ~~Management~~We also ~~does~~do not believe that these expenditures should result in a material adverse effect on our financial condition, results of operations or liquidity for any year.

Impairments of Long-Lived Assets

We assess changes in economic, regulatory and legal conditions and make assumptions regarding estimated future cash flows in evaluating the value of our property, plant and equipment, goodwill and ~~other~~ intangible assets. The judgments made in evaluating impairment of long-lived intangibles can materially affect our results of operations.

We periodically evaluate whether current facts or circumstances indicate that the carrying values of our long-lived assets to be held and used may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the ~~asset’s~~asset's fair value and its carrying value. If quoted market prices are not available, we estimate fair value using a discounted value of estimated future cash flows approach.

Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is evaluated for impairment as of October 1 each year, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. Some of the factors considered in the assessment include general macroeconomic conditions, conditions specific to the industry and market, cost factors which could have a significant effect on earnings or cash flows, and overall financial performance. If we conclude it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). We completed the annual qualitative goodwill impairment test as of October 1, ~~2021~~2023 and concluded that there was no impairment to goodwill ~~was necessary~~ as the fair value of the reporting unit was significantly in excess of the carrying value.

~~Other acquired~~

Acquired intangible assets are initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives. When events or circumstances warrant a review, we will assess recoverability from future operations using pretax undiscounted cash flows derived from the lowest appropriate asset groupings. Potential risks leading to impairment could include loss of exclusivity occurring earlier than expected, competition, pricing reductions, and other macroeconomic changes. Impairments are recognized in operating results to the extent that the carrying value of the intangible asset exceeds its fair value, which is determined based on the net present value of estimated future cash flows. We did not have impairment charges as of December 31, 2023. We recorded impairment charges of $9 million and $7 million as of December 31, 2022 and 2021 respectively. See Note 13 "Intangibles" to the Consolidated Financial Statements included in this report for additional details on Intangibles.

Taxes on Income

Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. We establish valuation allowances for our deferred tax assets when the amount of expected future ~~taxable~~ income is not likely to support the use of the deduction or credit. We evaluate tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, we recognize the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, we do not recognize any portion of the benefit in the financial statements. We recognize interest and penalties associated with uncertain tax positions as a component of Taxes on ~~income~~Income in the ~~combined~~consolidated statement of income.

Prior to the Separation, we did not maintain an income taxes payable to or from account as it is deemed to be settled with the tax paying entities in the respective jurisdictions. These settlements are reflected as changes in accumulated deficit in the consolidated balance sheet. However, our consolidated balance sheet reflects balances with taxing authorities and the one-time transition tax resulting from the Tax Cuts and Jobs Act enacted in 2017, as well as for unrecognized income tax benefits along with related interest and penalties.

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Prior to the Separation, income tax expense and deferred tax balances in the consolidated financial statements were calculated on a separate tax return basis. We relied on certain assumptions, one of them that ason a standalone basis we would not benefit from certain tax incentives that historically benefited Merck. We believe the assumptions supporting the allocation and presentation of income taxes on a separate return basis were reasonable.

~~-60-~~

Inventory Valuation

Inventories consist of currently marketed products and are valued at the lower of cost or net realizable value. Inventories are assessed regularly for impairment and valuation reserves are established when necessary based on a number of factors including, but not limited to, product obsolescence and changes in estimates of future product demand and expiry. The determination of events and the assumptions utilized in our quantification of valuation reserves may require ~~judgement.~~judgment. No material adjustments have been required to our inventory reserve estimates for the periods presented. Adverse changes in assumptions utilized in our inventory reserve calculations could result in an increase to our inventory valuation reserves and higher cost of sales.

Acquisitions

Business combinations are evaluated in order to determine whether transactions should be accounted for as acquisitions of assets or businesses. ~~The Company makes~~We make certain judgments, which include assessment of the inputs, processes, and outputs associated with the acquired set of activities. If ~~the Company determines~~we determine that substantially all of the fair value of gross assets included in a transaction is concentrated in a single asset (or a group of similar assets), ~~the Company accounts~~we account for the transaction as an asset acquisition. In an asset acquisition, acquired IPR&D with no alternative future use is charged to expense and contingent consideration is not recognized at the acquisition date. Product development milestones are recognized upon achievement and sales-based milestones are recognized when the milestone is deemed probable of being achieved.

To be considered a business, the assets in a transaction need to include an input and a substantive process that together significantly contribute to the ability to create outputs. Businesses acquired are consolidated upon obtaining control. The fair value of assets acquired and liabilities assumed are recognized at the date of acquisition. Assets acquired and liabilities assumed in a business combination that arise from contingencies are generally recognized at fair value. If fair value cannot be determined, the asset or liability is recognized if probable and reasonably estimable; if these criteria are not met, no asset or liability is recognized. Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill. Business acquisition costs are expensed when incurred.

The fair values of intangible assets are determined utilizing information available near the acquisition date based on expectations and assumptions that ~~are deemed reasonable by management.~~we deem reasonable.

Pension

Our pension plans are calculated using actuarial assumptions including a discount rate for plan benefit obligations and an expected rate of return on plan assets. These significant assumptions are reviewed annually and are disclosed in Note ~~14 of~~15 "Pension and Other Postretirement Benefit Plans" to the Consolidated Financial Statements.

For our pension plans, the discount rate is evaluated on measurement dates ~~and modified~~ to reflect the prevailing market rate of a portfolio of high-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due.

The expected rate of return for the pension plans represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, ~~the Company considers~~we consider long-term compound annualized returns of historical market data, current market conditions and actual returns on ~~the Company’s~~our plan assets. Using this reference information, ~~the Company develops~~we develop forward-looking return expectations for each asset category and a weighted-average expected long-term rate of return for a target portfolio allocated across these investment categories. The expected portfolio performance reflects the contribution of active management as appropriate.

~~Share-Based~~

Stock-Based Compensation

We expense all ~~share-based~~stock-based payment awards to employees, including grants of stock options, over the requisite service period based on the grant date fair value of the awards. The fair value of certain ~~share-based~~stock-based awards is determined using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method

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incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 3 "Summary of Accounting Policies" to the Consolidated Financial ~~Statements.~~Statements included in this report.

~~-61-~~

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

We operate on a global basis and are exposed to the risk that our earnings, cash flows and equity could be adversely affected by fluctuations in foreign exchange rates. We ~~had historically managed our foreign currency risk through Merck foreign currency programs. We~~ are primarily exposed to foreign exchange risk with respect to forecasted transactions and net assets denominated in the euro, Swiss franc, and Japanese yen. ~~Upon Separation, we~~We established a balance sheet risk management program and a net investment hedge to mitigate against volatility of changes in foreign exchange rates. ~~Each quarter subsequent to Separation, €1.75 billion of our euro-denominated debt was designated as a hedge of the net investment of euro-denominated subsidiaries.~~ See Note 714 "Financial Instruments" to the Consolidated Financial Statements included ~~elsewhere~~ in this report for further information on ~~Organon’s~~our risk management.

Interest Rate Risk

Our long-term debt portfolio consists of both fixed and variable-rate instruments. For any variable rate debt, interest rate changes in the underlying index rates will impact future interest expense. We do not hold any derivative contracts that hedge our interest rate risk; however, we may consider entering into such contracts in the future.

We estimate a hypothetical 10% adverse movement in interest rates of our variable rate debt would not materially change annual interest expense.

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~~-62-~~

~~-65-~~

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Organon & Co.

Consolidated ~~Statement~~Statements of Income

($ in millions except ~~share~~shares in thousands and per share amounts)


		2021		2020			2019
				Year Ended December 31,
				Year Ended December 31,
				Year Ended December 31,
						2023			2023	2022	2021
Revenues	Revenues	$	6,304	$	6,532		$	7,777
Costs, Expenses and Other	Costs, Expenses and Other
Cost of sales	Cost of sales	2,382		2,119			2,274
Cost of sales
Cost of sales
Selling, general and administrative	Selling, general and administrative	1,668		1,356			1,443
Research and development	Research and development	443		210			220
Acquired in-process research and development and milestones
Restructuring costs	Restructuring costs	3		60			78
Other (income) expense, net		279		35			66
		4,775		3,780			4,081
Income From Continuing Operations Before Income Taxes		1,529		2,752			3,696
Taxes on Income		178		496			390
Interest expense
Exchange losses
Other expense, net
						5,590
Income Before Income Taxes
Taxes on income
Net Income From Continuing Operations	Net Income From Continuing Operations	1,351		2,256			3,306
Loss From Discontinued Operations - Net of Tax	Loss From Discontinued Operations - Net of Tax	—		(96)			(88)
Net Income	Net Income	$	1,351	$	2,160		$	3,218

Earnings (Loss) per Share Attributable to Organon & Co. Stockholders - Basic:
Earnings per Share - Basic:
Earnings per Share - Basic:
Earnings per Share - Basic:
Continuing operations
Continuing operations
Continuing operations	Continuing operations	$	5.33	$	8.90		$	13.04
Discontinued operations	Discontinued operations	—		(0.38)			(0.35)
Net Earnings per Share Attributable to Organon & Co. Stockholders		$	5.33	$	8.52		$	12.69
Net Earnings per Share - Basic

Earnings (Loss) per Share Attributable to Organon & Co. Stockholders - Diluted:
Earnings per Share - Diluted:
Earnings per Share - Diluted:
Earnings per Share - Diluted:
Continuing operations
Continuing operations
Continuing operations	Continuing operations	$	5.31	$	8.90		$	13.04
Discontinued operations	Discontinued operations	—		(0.38)			(0.35)
Net Earnings per Share Attributable to Organon & Co. Stockholders		$	5.31	$	8.52		$	12.69
Net Earnings per Share - Diluted

Weighted Average Shares Outstanding:	Weighted Average Shares Outstanding:
Weighted Average Shares Outstanding:
Weighted Average Shares Outstanding:
Basic
Basic
Basic	Basic	253,537,941		253,516,000			253,516,000
Diluted	Diluted	254,192,700		253,516,000			253,516,000

~~Organon & Co.~~

~~Consolidated Statement of Comprehensive Income~~

~~($ in millions)~~

2021 2020 2019
Net Income $ 1,351 $ 2,160 $ 3,218
Other Comprehensive Income (Loss), Net of Taxes:
Benefit plan net gain (loss) and prior service credit, net of amortization 8 (143) (60)
Cumulative translation adjustment 90 (30) 54
98 (173) (6)
Comprehensive Income $ 1,449 $ 1,987 $ 3,212

The accompanying notes are an integral part of these Consolidated Financial Statements.

~~-66-~~-54-

Organon & Co.

Consolidated ~~Balance Sheet~~Statements of Comprehensive Income

($ in ~~millions, except share data)~~millions)

December 31, 2021 December 31, 2020
Assets
Current Assets
Cash and cash equivalents $ 737 $ 12
Accounts receivable (net of allowance for doubtful accounts of $7 in 2021 and $18 in 2020) 1,382 1,038
Inventories (excludes inventories of $76 in 2021 and $127 in 2020 classified in Other Assets) 915 913
Other current assets 726 930
Current assets of discontinued operations — 674
Total current assets 3,760 3,567
Property, plant and equipment, net 973 984
Goodwill 4,603 4,603
Other intangibles, net 651 503
Other assets 694 361
Noncurrent assets of discontinued operations — 91
$ 10,681 $ 10,109
Liabilities and Equity
Current Liabilities
Current portion of long-term debt $ 9 $ —
Trade accounts payable 1,382 259
Accrued and other current liabilities 1,021 659
Due to related party — 1,339
Income taxes payable 185 288
Current liabilities of discontinued operations — 128
Total current liabilities 2,597 2,673
Long-term debt 9,125 —
Deferred Income Taxes 4 128
Other noncurrent liabilities 463 1,739
Noncurrent liabilities of discontinued operations — 83
Commitments and Contingencies 0 0
Organon & Co. Equity
Common Stock, $0.01 par value
Authorized - 500,000,000
Issued and outstanding - 253,550,029
3 —
Additional paid-in capital — —
Accumulated deficit (998) —
Net investment from Merck & Co., Inc. — 6,108
Accumulated other comprehensive loss (513) (622)
Total (Deficit) Equity (1,508) 5,486
$ 10,681 $ 10,109


	Year Ended December 31,
		2023		2022		2021
Net income		$	1,023	$	917	$	1,351
Other Comprehensive Income (Loss), Net of Taxes:
Benefit plan net (loss) gain and prior service (cost) credit, net of amortization		(25)		23		8
Cumulative translation adjustment		48		(74)		90
		23		(51)		98
Comprehensive income		$	1,046	$	866	$	1,449

The accompanying notes are an integral part of these Consolidated Financial Statements.

~~-67-~~-55-

Organon & Co.

Consolidated ~~Statement of Equity~~Balance Sheets

($ in millions except ~~shares)~~
Common Stock Additional Paid-In Capital Accumulated Deficit Net Investment from Merck & Co., Inc. Accumulated
Other
Comprehensive
(Loss) Income Total
Shares Par Value
Balance at January 1, 2019 — — — — 7,256 (908) $ 6,348
Net income attributable to Organon & Co. — — — — 3,218 — 3,218
Other comprehensive loss, net of taxes — — — — — (6) (6)
Net transfers to Merck & Co., Inc. — — — — (2,525) — (2,525)
Balance at December 31, 2019 — $ — $ — $ — $ 7,949 $ (914) $ 7,035
Net income attributable to Organon & Co. — — — — 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 attributable to Organon & Co. — — — 621 730 — 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 34,029 — — 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. 253,516,000 3 — (1,577) 1,574 — —
Balance at December 31, 2021 253,550,029 $ 3 $ — $ (998) $ — $ (513) $ (1,508)
shares in thousands and per share amounts)


	December 31, 2023		December 31, 2022

Assets
Current Assets:
Cash and cash equivalents	$	693	$	706
Accounts receivable (net of allowance for doubtful accounts of $9 in 2023 and $9 in 2022)	1,744		1,475
Inventories (excludes inventories of $110 in 2023 and $148 in 2022 classified in Other assets)	1,315		1,003
Other current assets	756		747
Total Current Assets	4,508		3,931
Property, plant and equipment, net	1,183		1,018
Goodwill	4,603		4,603
Intangibles, net	533		649
Other assets	1,231		754
Total Assets	$	12,058	$	10,955

Liabilities and Equity
Current Liabilities:
Current portion of long-term debt	$	9	$	8
Trade accounts payable	1,314		1,132
Accrued and other current liabilities	1,389		1,188
Income taxes payable	206		184
Total Current Liabilities	2,918		2,512
Long-term debt	8,751		8,905
Deferred income taxes	47		19
Other noncurrent liabilities	412		411
Total Liabilities	12,128		11,847
Contingencies (Note 20)

Organon & Co. Stockholders' Deficit:
Common stock, $0.01 par value Authorized - 500,000 Issued and outstanding - 255,626 in 2023 and 254,370 in 2022	3		3
Additional paid-in capital	25		—
Retained earnings and accumulated (deficit)	443		(331)
Accumulated other comprehensive loss	(541)		(564)
Total Stockholders' Deficit	(70)		(892)
Total Liabilities and Stockholders' Deficit	$	12,058	$	10,955

The accompanying notes are an integral part of these Consolidated Financial Statements.

~~-68-~~-56-

Organon & Co.

Consolidated Statements of Stockholders' Equity (Deficit)

($ in millions, except shares in thousands and per share amounts)


	Common Stock			Additional Paid-In Capital		Retained Earnings and Accumulated (Deficit)		Net Investment from Merck & Co., Inc.		Accumulated Other Comprehensive Loss		Total
	Shares	Par Value
















Balance at December 31, 2020	—	$	—	$	—	$	—	$	6,108	$	(622)	$	5,486
Net income	—	—		—		621		730		—		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 to Merck & Co., Inc. including Separation Adjustments	—	—		—		(24)		—		—		(24)
Balance at December 31, 2022	254,370	$	3	$	—	$	(331)	$	—	$	(564)	$	(892)


Net income	—	—		—		1,023		—		—		1,023
Other comprehensive income, net of taxes	—	—		—		—		—		23		23
Cash dividends declared on common stock ($1.12 per share)	—	—		—		(295)		—		—		(295)
Stock-based compensation plans and other	1,256	—		25		59		—		—		84
Net transfers to Merck & Co., Inc. including Separation Adjustments	—	—		—		(13)		—		—		(13)
Balance at December 31, 2023	255,626	$	3	$	25	$	443	$	—	$	(541)	$	(70)

The accompanying notes are an integral part of these Consolidated Financial Statements.

-57-

Organon & Co.

Consolidated ~~Statement~~Statements of Cash Flows

($ in millions)


	Year Ended December 31,									Year Ended December 31,
		2021		2020		2019		2023	2022		2021
Cash Flows from Operating Activities	Cash Flows from Operating Activities
Net income from continuing operations	Net income from continuing operations	$	1,351	$	2,256	$	3,306
Net income from continuing operations
Net income from continuing operations
Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:	Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:
Depreciation
Depreciation
Depreciation	Depreciation	92		56		49
Amortization	Amortization	103		86		284
Impairment of assets	Impairment of assets	7		—		—
Acquired in-process research & development		104		—		—
Acquired in-process research and development and milestones
Deferred income taxes	Deferred income taxes	(288)		(32)		12
Stock-based compensation	Stock-based compensation	59		40		41
Unrealized foreign exchange loss (gain)	Unrealized foreign exchange loss (gain)	18		(5)		—
Other	Other	12		—		—
Net changes in assets and liabilities	Net changes in assets and liabilities
Accounts receivable
Accounts receivable
Accounts receivable	Accounts receivable	(277)		13		200
Inventories	Inventories	(138)		34		(91)
Other current assets	Other current assets	353		80		(105)
Trade accounts payable	Trade accounts payable	663		37		(35)
Accrued and other current liabilities	Accrued and other current liabilities	329		12		(86)
Due from/due to related party	Due from/due to related party	(164)		(155)		—
Income taxes payable	Income taxes payable	(119)		(118)		(590)
Other	Other	55		(20)		35
Net Cash Flows Provided by Operating Activities from Continuing Operations	Net Cash Flows Provided by Operating Activities from Continuing Operations	2,160		2,284		3,020
Cash Flows from Investing Activities	Cash Flows from Investing Activities
Capital expenditures	Capital expenditures	(192)		(255)		(92)
Capital expenditures
Capital expenditures
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	7		5		4
Acquired in-process research & development		(104)		—		—
Purchase of intangible asset - Alydia Health, net of cash acquired		(192)		—		—
Acquired in-process research and development and milestones
Purchase of product rights and asset acquisition, net of cash acquired
Net Cash Flows Used in Investing Activities from Continuing Operations	Net Cash Flows Used in Investing Activities from Continuing Operations	(481)		(250)		(88)
Cash Flows from Financing Activities	Cash Flows from Financing Activities
Proceeds from issuance of long-term debt		9,470		—		—
Proceeds from debt
Proceeds from debt
Proceeds from debt
Repayments of debt	Repayments of debt	(112)		—		—
Payment of long-term debt issuance costs	Payment of long-term debt issuance costs	(118)		—		—
Proceeds from short-term borrowings from Merck & Co, Inc.		—		1,512		—
Repayments of short-term borrowings from Merck & Co., Inc.		(1,512)		—		—
Net consideration paid to Merck & Co., Inc., in connection with the Separation		(9,000)		—		—

Repayments of short-term borrowings from Merck & Co., Inc., net
Repayments of short-term borrowings from Merck & Co., Inc., net
Repayments of short-term borrowings from Merck & Co., Inc., net
Net consideration paid to Merck & Co. Inc. in connection with the Separation
Net transfers to Merck & Co., Inc.
Employee withholding taxes related to stock-based awards
Dividend payments	Dividend payments	(145)		—		—
Net transfers from (to) Merck & Co., Inc.		440		(3,534)		(2,932)
Net Cash Flows Used in Financing Activities from Continuing Operations	Net Cash Flows Used in Financing Activities from Continuing Operations	(977)		(2,022)		(2,932)
Discontinued Operations	Discontinued Operations
Net Cash Provided by (Used in) Operating Activities	Net Cash Provided by (Used in) Operating Activities	298		(97)		(253)
Net Cash Used in Investing Activities		—		(8)		(14)
Net Cash (Used in) Provided by Financing Activities		(356)		(153)		311
Net Cash Flows (Used in) Provided by Discontinued Operations		(58)		(258)		44
Net Cash Provided by (Used in) Operating Activities
Net Cash Provided by (Used in) Operating Activities

Net Cash Used in Financing Activities
Net Cash Used in Financing Activities
Net Cash Used in Financing Activities
Net Cash Flows Used in Discontinued Operations
Effect of Exchange Rate Changes on Cash and Cash Equivalents from Continuing Operations	Effect of Exchange Rate Changes on Cash and Cash Equivalents from Continuing Operations	23		—		—
Effect of Exchange Rate Changes on Cash and Cash Equivalents from Discontinued Operations		—		(3)		31
Net Increase in Cash and Cash Equivalents		667		(249)		75

Net (Decrease) Increase in Cash and Cash Equivalents
Net (Decrease) Increase in Cash and Cash Equivalents
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Period	Cash and Cash Equivalents, Beginning of Period	12		—		—
Cash and Cash Equivalents of Discontinued Operations, Beginning of Period	Cash and Cash Equivalents of Discontinued Operations, Beginning of Period	58		319		244
Total Cash and Cash Equivalents, End of Period	Total Cash and Cash Equivalents, End of Period	737		70		319
Less: Cash and Cash Equivalents of Discontinued Operations, End of Period	Less: Cash and Cash Equivalents of Discontinued Operations, End of Period	—		58		319
Cash and Cash Equivalents, End of Period	Cash and Cash Equivalents, End of Period	$	737	$	12	$	—

The accompanying notes are an integral part of these Consolidated Financial Statements.

~~-69-~~-58-

Notes to Consolidated Financial Statements

1. Background and Nature of Operations

Organon & Co. ~~(“Organon”~~("Organon" or the "Company") is a global health care company ~~formed through~~with a ~~spinoff from Merck & Co., Inc. (“Merck”) to~~ focus on improving the health of women throughout their lives. Organon develops and delivers innovative health solutions through a portfolio of prescription therapies and medical devices within women's health, biosimilars and established brands (the "Organon Products"). Organon has a portfolio of more than 60 medicines and products across a range of therapeutic areas. The Company sells these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. The Company operates six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United ~~Kingdom ("UK").~~Kingdom. Unless otherwise indicated, trademarks appearing in italics throughout this document are trademarks of, or are used under license by, the Organon group of companies.

The Company's operations include the following product portfolios:

•Women's Health: Organon's women's health products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon® (etonogestrel implant) (sold as Implanon NXT™ in some countries outside the United States) and NuvaRing® (etonogestrel / ethinyl estradiol vaginal ring), and fertility, with key brands such as Follistim AQ® (follitropin beta injection) (marketed in most countries outside the United States as Puregon™). Nexplanon is a long-acting reversible contraceptive, which is a class of contraceptives that is recognized as one of the most effective types of hormonal contraception available to patients with a low long-term average cost. Other women's health products include the Jada® System, which is intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted and a license from Daré Biosciences for the global commercial rights to Xaciato® (clindamycin phosphate vaginal gel, 2%), an FDA-approved medication for the treatment of bacterial vaginosis ("BV") in females 12 years of age and older. In October 2023, Xaciato was launched in the United States.

•Biosimilars: Organon's current portfolio spans across immunology and oncology treatments. Organon's oncology biosimilars; Ontruzant® (trastuzumab-dttb) and AybintioTM 1 (bevacizumab), have been launched in more than 20 countries and Organon's immunology biosimilars; BrenzysTM 1 (etarnarcept), Renflexis® (infliximab-abda) and Hadlima® (adalimumab-bwwd), have been launched in five countries. All five biosimilars in Organon's portfolio have launched in Canada, and three biosimilars; Ontruzant, Renflexis and Hadlima have been launched in the United States.

•Established Brands: Organon has a portfolio of established brands, which generally are beyond market exclusivity, including leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management. A number of Organon's established brands lost exclusivity years ago and have faced generic competition for some time.

2. Basis of Presentation

On June 2, 2021, Organon and Merck & Co.~~, Inc.~~ ("Merck") entered into a Separation and Distribution Agreement (the "Separation and Distribution Agreement"). Pursuant to the Separation and Distribution Agreement, Merck agreed to spin off the Organon Products into Organon, a new, ~~publicly traded~~publicly-traded company (the "Separation").

~~In connection with~~ On June 2, 2021, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the Separation on June 2, 2021, ~~Merck distributed (the "Distribution"),~~the Company's historical combined financial statements were prepared on a ~~pro rata~~standalone basis ~~to holders~~and were derived from Merck's consolidated financial statements and accounting records. The financial statements for all periods presented, including the historical results of the ~~outstanding shares of common stock of Merck, par value $0.50 per share (the "Merck Common Stock") on May 17,~~Company prior to June 2, 2021, ~~(the "Record Date"), all of the outstanding shares of common stock, par value $0.01 per share, of Organon (the "Common Stock"). Each Merck shareholder was entitled~~are now referred to ~~receive one-tenth of a share of the Common Stock for each share of Merck Common Stock held on the Record Date. Organon is now a standalone publicly traded company~~as "Consolidated Financial Statements," and ~~on June 3, 2021, regular-way trading of the Common Stock commenced on the New York Stock Exchange under the ticker symbol "OGN."~~

~~The Separation was completed~~have been prepared pursuant to the ~~Separation~~rules and Distribution Agreement and other agreements with Merck related to the Separation, including, but not limited to a tax matters agreement (the "Tax Matters Agreement" or "TMA"), an employee matters agreement (the "Employee Matters Agreement") and a transition services agreement (the "Transition Service Agreement" or "TSA") (see Note 19regulations for ~~additional details).~~

~~The Company’s operations include the following product portfolios:~~reporting on Form 10-K.

•~~Women’s Health: the Company has a portfolio of contraception and fertility brands, such as~~ ~~Nexplanon/Implanon NXT~~ (etonogestrel implant), a long-acting reversible contraceptive, which is a class of contraceptives that are recognized as the most effective type of hormonal contraception available to patients with a lower long-term average cost.

•~~Biosimilars:~~ the Company’s current portfolio spans across immunology and oncology treatments. All five of the biosimilars in Organon’s portfolio have launched in certain countries globally, including two biosimilars in the United States.

•~~Established Brands: the Company has a portfolio of established brands, which generally are beyond market exclusivity, including leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management.~~

The historical results prior to Separation included certain Merck non-U.S. legal entities that were conveyed to Organon in connection with the Separation (collectively, the "Transferred Entities" and each, a "Transferred Entity") and included operations related to other Merck products that were retained by Merck ("Merck Retained Products"). The Merck Retained Products business of the Transferred Entities was contributed by the Company to Merck and its affiliates and any remaining assets and liabilities were transferred as of June 2, 2021. Accordingly, the historical results of operations of the Merck Retained Products have been reflected as discontinued operations in these Consolidated Financial ~~Statements (see Note 2).~~Statements.

~~2. Basis of Presentation~~

On June 2, 2021, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the Separation on June 2, 2021, the Company’s historical combined financial statements were prepared on a standalone basis and were derived from Merck’s consolidated financial statements and accounting records. The financial statements for all periods presented, including the historical results of the Company prior to June 2, 2021, are now referred to as "Consolidated Financial Statements", and have been prepared pursuant to the rules and regulations for reporting on Form 10-K.

Periods Prior to Separation

The assets, liabilities, revenue and expenses of the Company were reflected in the Consolidated Financial Statements on a historical cost basis, as included in the consolidated financial statements of Merck, using the historical accounting policies

~~-70-~~-59-

Notes to Consolidated Financial Statements ~~(continued)~~

applied by Merck. The Consolidated Financial Statements did not purport to reflect what the ~~Company’s~~Company's results of operations, comprehensive income, financial position, equity or cash flows would have been had the Company operated as a standalone public company during the periods presented.

The Consolidated Financial Statements were prepared following a legal entity approach, which resulted in the inclusion of the following:

•Certain assets and liabilities, results of operations and cash flows attributable to the sales of Organon Products that were contributed to Organon prior to the consummation of the Separation.

•The Transferred Entities, which have historically included the results from the sales of both Organon Products and the Merck Retained Products. Each Transferred ~~Entity’s~~Entity's historical operations, including its results of operations, assets and liabilities, and cash flows have been fully reflected in the Consolidated Financial Statements.

•In contemplation of the Separation, the Merck Retained Products business of the Transferred Entities was distributed to Merck and its affiliates ("MRP Distribution") and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations.

The ~~Company’s~~Company's businesses had historically functioned together with the other businesses controlled by Merck. Accordingly, the Company relied on ~~Merck’s~~Merck's corporate and other support functions for its business. Therefore, for the period prior to the Separation, certain corporate and shared costs were allocated to the Company based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, including:

(i)expenses related to Merck support functions, including expenses for facilities, executive oversight, treasury, finance, legal, human resources, shared services, compliance, procurement, information technology and other corporate functions.

(ii)certain manufacturing and supply costs incurred by ~~Merck’s~~Merck's manufacturing division, including facility management, distribution, logistics, planning and global quality.

(iii)certain costs incurred by ~~Merck’s~~Merck's human health division in relation to selling and marketing activities, and related administrative support functions, that are not routinely allocated to therapeutic areas.

(iv)certain costs incurred by ~~Merck’s~~Merck's research laboratories for activities related to drug discovery and development, as well as medical and regulatory affairs.

(v)restructuring costs (see Note 6)8 "Restructuring") and stock-based compensation expenses (see Note ~~13)~~7 "Stock-Based Compensation Plans"); and

(vi)certain compensation expenses maintained on a centralized basis such as certain employee benefit expenses.

Management believes these cost allocations were a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the period prior to the Separation, though the allocations may not be indicative of the actual costs that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by ~~Company’s~~Company's employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure.

Merck ~~maintains~~maintained various employee benefit plans in which the ~~Company’s~~Company's employees participated during periods prior to the Separation, ~~and~~ a portion of the costs associated with these plans was included in the ~~Company’s~~Company's Consolidated Financial Statements. ~~The Consolidated Balance Sheet at December 31, 2020 only includes assets and liabilities relating to plans for which the entity being transferred was the plan sponsor.~~ Certain pension assets and obligations were transferred by Merck into legal entities established to operate the Organon Products business (the "Organon Entities") that are the plan ~~sponsor and, accordingly, the Consolidated Balance Sheet at December 31, 2021 includes assets and liabilities of the newly established plans of Organon.~~sponsor.

Merck utilized a centralized approach to cash management and the financing of its operations. Cash generated by the Company was routinely transferred into accounts managed by ~~Merck’s~~Merck's centralized treasury function and cash disbursements for the ~~Company’s~~Company's operations prior to the Separation were funded as needed by Merck. Cash and cash equivalents of the Organon Entities and the Transferred Entities were reflected in the ~~Company’s~~Company's Consolidated Balance Sheet. Balances held by the Organon Entities and the Transferred Entities with Merck for cash transfers and loans were reflected as Due to related party prior to Separation. All other cash, cash equivalents, short-term investments and related transfers between Merck and the Company were generally held centrally through accounts controlled and maintained by Merck and were not specifically identifiable to the Company. Accordingly, such balances were accounted for through Net investment from Merck & Co., Inc.

~~-71-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

~~Merck’s~~ Merck's third-party debt and related interest expense were not attributed to the Company because the Company was not the legal obligor of the debt and the borrowings were not specifically identifiable to the Company.

-60-

Notes to Consolidated Financial Statements

For the Organon Entities and the Transferred Entities, transactions with Merck affiliates that were included in the Consolidated Statement of Income and related balances were reflected as Due to related party or Due from related party in ~~the continuing operations and discontinued operations of~~ the Consolidated Balance Sheet, as applicable. Other balances between the Company and Merck were considered to be effectively settled in the Consolidated Financial Statements at the time the transactions were recorded. See Note 19 "Third-Party Arrangements and Related Party Disclosures" for additional details.

As the separate legal entities that made up the ~~Company’s~~Company's business were not historically held by a single legal entity, Net investment from Merck & Co., Inc. was shown in lieu of ~~stockholders’~~stockholders' equity in these Consolidated Financial Statements. Net investment from Merck & Co., Inc. represented ~~Merck’s~~Merck's interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results.

Income tax expense and tax balances in the Consolidated Financial Statements were calculated on a separate tax return basis. The ~~Company’s~~Company's operations are included in the tax returns of certain Organon Entities, Transferred Entities or the respective Merck entities of which the ~~Company’s~~Company's business was a part.

As of Separation Date

Certain assets and liabilities, including accounts receivables, inventories and trade payables included on the Consolidated Balance Sheet prior to the Separation, have been retained by Merck post-Separation and therefore were transferred to Merck through Net investment from Merck & Co., Inc. in the ~~Company’s~~Company's Consolidated Financial Statements. ~~Additionally, certain amounts previously included in~~ ~~Due to related party~~ or ~~Due from related party~~ ~~are reflected in accounts receivable and trade accounts payable as of December 31, 2021.~~ As part of the Separation, Net investment from Merck & Co., Inc. was reclassified to Common Stock and Accumulated Deficit.

In connection with the Separation, additional pension assets and obligations were transferred to Organon through Net investment from Merck & Co., Inc., and the Company recorded these in the Consolidated Balance Sheet. See Note 1415 "Pension and Other Postretirement Benefit Plans" for details. Additionally, stock-based awards were converted in accordance with the ~~Employee~~employee matters agreement (the "Employee Matters ~~Agreement. See Note 13 for details.~~

~~During the second quarter of 2021, an aggregate of $9.5 billion of debt was issued~~Agreement") entered into between Organon and Merck in connection with the ~~Separation. (see~~spinoff. See Note 117 "Stock-Based Compensation Plans" for ~~additional details). The Company distributed $9.0 billion of the $9.5 billion proceeds to Merck in accordance with the terms of the Separation.~~details.

Periods Post Separation

Following the Separation, certain functions continue to be provided by Merck under the Transition Services Agreement or are being performed using the ~~Company’s~~Company's own resources or third-party service providers. Additionally, under manufacturing and supply agreements, the Company manufactures certain products for Merck or its applicable affiliate, and Merck manufactures certain products for the Company or its applicable affiliate. 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.

~~Property, plant and equipment reflected in the Consolidated Balance Sheet is primarily attributable to the 6 manufacturing facilities the Company operates and certain information technology assets.~~

~~In June 2021, the Company established a balance sheet risk management and a net investment hedging program to mitigate against volatility of changes in foreign exchange rates.~~

As a standalone entity, the Company files tax returns on its own behalf, and tax balances and effective income tax rate may differ from the amounts reported in the historical periods. As of June 2, 2021 and in connection with the Separation, the Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity.

All intercompany transactions and accounts within Organon have been eliminated. ~~Certain amounts presented in the prior period have been reclassified to conform to the current period presentation.~~

~~During 2021, the Company recorded an out-of-period adjustment of approximately $145 million to establish a prepaid tax asset with an offsetting increase to~~ ~~Net Investment from Merck & Co., Inc~~. related to the period as of December 31, 2020. The adjustment did not have any impact on the Company's Consolidated Statement of Income or Consolidated Statement of Cash Flows. The Company concluded that the adjustment was not material to the Consolidated Financial Statements for either the current period or prior periods.

~~-72-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

In the periods post Separation, the Company identified and recorded out-of-period adjustments primarily related to the Separation. The adjustments impacted net assets and liabilities of the Company and its Equity (Accumulated Deficit) by approximately $65 million. These amounts were all corrected during 2021 and therefore do not have an impact on the December 31, 2021 ending Equity balance or the annual 2021 Consolidated Financial Statements.

3. Summary of Accounting Policies

Revenue Recognition — Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all performance obligations. The Company acts as the principal in its customer arrangements and therefore records revenue on a gross basis. The majority of the ~~Company’s~~Company's contracts have a single performance obligation — the promise to transfer goods. Shipping is considered immaterial in the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized performance obligation.

Revenues from sales of products, including tenders, are recognized at a point in time when control of the goods is transferred to the customer, which the Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment.

The nature of the ~~Company’s~~Company's business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts.

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Notes to Consolidated Financial Statements

In the United States, sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year.

Chargebacks are discounts that occur when a contracted customer purchases through an intermediary wholesaler. The contracted customer generally purchases product from the wholesaler at its contracted price plus a mark-up. The wholesaler, in turn, charges the Company back for the difference between the price initially paid by the wholesaler and the contract price paid to the wholesaler by the customer. The Company estimates the provision for chargebacks based on expected sell-through levels by the ~~Company’s~~Company's wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. Rebates are amounts owed based upon definitive contractual agreements or legal requirements with private sector, (Managed Care), and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. The Company uses historical customer segment utilization mix, sales, ~~forecasts,~~ changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history to estimate the expected provision.

The ~~U.S.~~Company continually monitors the provision for aggregate customer ~~discounts covering chargebacks and rebates was $2.0 billion~~discounts. There were no material adjustments to estimates associated with the aggregate customer discount provision in 2023, 2022, or 2021.

Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows:


	Year Ended December 31,
($ in millions)	2023		2022		2021
Balance January 1	$	385	$	329	$	343
Provision	2,640		2,221		2,000
Payments(1)	(2,521)		(2,165)		(2,014)
Balance December 31	$	504	$	385	$	329

(1) Includes 2021 ~~$1.8 billion in 2020, and $1.9 billion in 2019.~~payments made by Merck on behalf of Organon for the period prior to the Separation date.

Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. The accrued balances relative to the provisions for chargebacks and rebates in the United States included in Accounts receivable and Accrued and other current ~~liabilities~~liabilities were ~~$54~~$87 million and ~~$275~~$417 million, respectively, at December 31, ~~2021~~2023 and ~~$41~~$78 million and ~~$302~~$307 million, respectively, at December 31, ~~2020.~~2022.

Outside of the United States, variable consideration in the form of discounts and rebates ~~are~~is a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. The accrued balances relative to the provision for chargebacks and rebates, based on the terms and nature of the rebate, are included in Accounts receivable and Accrued and other current liabilities. Rebates may also be required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of future discount or rebate obligations associated with the sale. At December 31, ~~2021~~2023 and ~~2020,~~2022, the accrued balances related to the provision for rebates and discounts included in other current liabilities were approximately ~~$90~~$126 million and ~~$115~~$109 million, respectively.

The Company maintains a returns policy that allows ~~its U.S.~~ customers in certain countries to return product within a specified period prior to and subsequent to the expiration date (generally, three to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical experience with actual returns and consideration of other relevant factors. ~~Outside of the United States, returns are only allowed in certain countries on a limited basis.~~

The ~~Company’s payment terms for U.S. customers are typically 36 days from receipt of invoice. Outside of the United States,~~Company's payment terms are typically 30 days to 90 days, although certain markets have longer payment terms.

See Note 186 "Product and Geographic Information" for disaggregated revenue disclosures.

~~-73-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

Cash Equivalents — Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less.

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Notes to Consolidated Financial Statements

Inventories — Inventories are valued at the lower of cost or net realizable value. The cost of a substantial majority of U.S. inventories is determined using the last-in, first-out ~~(LIFO)~~("LIFO") method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-out ~~(FIFO)~~("FIFO") method.

Value Added Tax — The ~~Company’s~~Company's purchases, sales and intercompany transfers of goods are subject to value added tax (VAT) and VAT receivables are recognized for amounts that represent credits against future VAT obligations. VAT receivables included in Other current assets were ~~$115~~$113 million and ~~$315~~$110 million as of December 31, ~~2021~~2023 and ~~2020,~~2022, respectively. VAT payables included in Accrued and other current liabilities were $9$18 million and ~~$38~~$9 million as of December 31, ~~2021~~2023 and ~~2020,~~2022, respectively. The related expense is included in the Company's operating expenses.

Depreciation — Depreciation is provided over the estimated useful lives of the assets, principally using the straight-line method. The estimated useful lives primarily range from 25 to 40 years for buildings, and from 3 to 15 years for machinery, equipment and office furnishings. Depreciation expense was $120 million in 2023, $96 million in 2022, and $92 million in ~~2021, $56 million in 2020, and $49 million in 2019.~~2021. Repairs and maintenance costs are expensed as incurred as they do not extend the economic life of an asset.

Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred and included in Selling, general and administrative expenses. The Company recorded advertising and promotion expenses of $209 million, $255 million, and $236 million ~~$198 million,~~in 2023, 2022 and ~~$262 million in~~ 2021, ~~2020 and 2019,~~ respectively.

Goodwill — Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is evaluated for impairment as of October 1 each year, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). The Company completed the annual qualitative goodwill impairment test as of October 1, ~~2021~~2023 and concluded that there was no impairment to goodwill ~~was necessary~~ as the fair value of the reporting unit was significantly in excess of the carrying value.

Acquired Intangibles — Acquired intangibles include products and product rights and licenses, which are initially recorded at fair value, assigned an estimated useful life, and amortized on a straight-line basis over their estimated useful lives. The Company's intangibles also include the products and product rights intangible assets attributed to Organon from Merck. The intangible assets attributable to the ~~Company’s~~Company's operations have been reflected in the consolidated financial statements based on ~~Merck’s~~Merck's historical cost. Licenses include milestone payments made to collaborative partners upon or subsequent to regulatory approval. The estimated useful lives of acquired intangibles range from 5 to 15 ~~years (see Note 10).~~years. The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows. See Note 13 "Intangibles" for additional details.

Acquired In-Process Research and Development ("IPR&D") — IPR&D that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, Organon will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company evaluates IPR&D for impairment as of October 1 each year, or more frequently if impairment indicators exist, by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results. There were no IPR&D intangible assets as of December 31, ~~2021 or December 31, 2020.~~2023, 2022 and 2021.

Research and Development — Research and development costs associated with clinical development programs that have not yet received regulatory approval are expensed as incurred. ~~Research~~

Acquired in-process research and development ~~costs also include~~and milestones— Acquired IPR&D and milestones includes upfront and milestone payments related to asset acquisitions, licensing or collaborative arrangements ~~involving~~that are not considered an acquisition of a business and involve clinical development programs that have not yet received regulatory approval.

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Notes to Consolidated Financial Statements

Foreign Currency Translation — The net assets of international operations where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation account, which is included in Accumulated other comprehensive loss and reflected as a separate component of equity. For those operations that operate in highly inflationary economies and for those operations where the U.S. dollar has been determined to

~~-74-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

be the functional currency, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate changes included in ~~Other (income) expense, net.~~Exchange losses.

Organon calculates foreign currency translation on its consolidated assets and liabilities. For periods prior to the Separation, these consolidated financial statements include ~~Merck’s~~Merck's foreign currency translation for the Organon Entities.

Stock-Based Compensation — Prior to the Separation, certain of the ~~Company’s~~Company's employees historically participated in ~~Merck’s share-based~~Merck's stock-based compensation plans. ~~Share-based~~Stock-based compensation expense was either allocated to the Company based on a proportionate cost allocation method or recorded based on specific identification. Effective June 3, 2021, Organon established the 2021 Incentive Stock Plan (the "Plan"). A total of 35 million shares of Common Stock are authorized under the Plan. The plan provides for the grant of various types of awards, including restricted stock unit awards, stock appreciation rights, stock options, performance-based awards and cash awards. Under the Plan, the exercise price of awards, if any, is set on the grant date and may not be less than the fair market value per share on that date. The Company measures stock-based compensation for equity awards at fair value on the date of grant and records stock-based compensation as a charge to earnings net of the estimated impact of forfeited awards. Accordingly, the Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants. The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the ~~change (see~~change. See Note ~~13).~~7 "Stock-Based Compensation Plans" for additional details.

Pension and Other Postretirement Benefit Plans — Prior to the Separation, the defined benefit plans in which the Company participated related primarily to plans sponsored by Merck and for which other businesses of Merck also participate ~~(Shared Plans)~~("Shared Plans"). The Company accounted for the Shared Plans as multiemployer plans and therefore the related assets and liabilities were not reflected in the Consolidated Balance Sheet. For such periods prior to Separation, the Consolidated Statement of Income reflects a proportional allocation of net periodic benefit cost for the Shared Plans associated with the Company. For certain defined benefit plans attributable to the Organon Entities, the over funded or underfunded status of the plan was recognized as an asset or liability on the ~~combined~~consolidated balance sheet. 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. At Separation, Organon became the plan sponsor for certain non-U.S. defined benefit pension ~~plans (see~~plans. See Note ~~14).~~15 "Pension and Other Postretirement Benefit Plans" for additional details.

Restructuring Costs — Costs associated with exit or disposal activities are recognized in the period in which they are incurred. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. When accruing these costs, the Company recognizes the amount within a range of costs that is the best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company recognizes the minimum amount within the range.

Contingencies and Legal Defense Costs — The Company records accruals for contingencies and legal defense costs expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated.

Taxes on Income — Prior to the Separation, income tax expense and deferred tax balances were calculated on a separate tax return basis. The ~~Company’s~~Company's operations were included in the tax returns of certain Organon Entities, Transferring Entities or the respective Merck entities of which the ~~Company’s~~Company's business was a part.

Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. The Company establishes valuation allowances for its deferred tax assets when the amount of expected future ~~taxable~~ income is not likely to support the use of the deduction or credit. The Company assesses all available evidence to estimate whether a valuation allowance should be recorded against existing deferred tax assets. The amounts of the deferred tax asset considered realizable, however, could be adjusted in future periods if estimates of future income are reduced or increased.

The Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being

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Notes to Consolidated Financial Statements

sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements.

The Company recognizes interest and penalties associated with uncertain tax positions as a component of Taxes on Income in the Consolidated Statement of Income. The Company accounts for the tax effects of the tax on global intangible low-taxed income ~~(GILTI)~~("GILTI") of certain foreign subsidiaries in the income tax provision in the period the tax arises. The Company and Merck entered into the Tax Matters Agreement in connection with the ~~Separation (See~~Separation. See Note ~~19).~~19 "Third-Party Arrangements and Related Party Disclosures" for additional details.

Leases — The Company has operating leases primarily for real estate. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if the Company controls the use of that asset. Embedded leases are immaterial. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will

~~-75-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

exercise that option. ~~Real estate leases for facilities have a weighted average remaining lease term of 6.0 years and include 1 lease with an option to extend for 1 year.~~ The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet. Lease expense associated with short term leases ~~was~~is not material for all periods presented.

Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the ~~Company’s~~Company's leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. On a quarterly basis, an updated incremental borrowing rate is determined based on the weighted average remaining lease term of each asset class and the Company's pretax cost of debt for that same term. The updated rates for each asset class are applied prospectively to new leases. The Company does not separate lease components (e.g. payments for ~~rent, real estate taxes and insurance costs)~~rent) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. The Company includes both the lease and fixed non-lease components for purposes of calculating the ~~right-of-use asset and related~~ lease liability ~~(if~~and the ~~non-lease components are fixed) (See~~related right-of-use asset. See Note ~~11).~~16 "Long-Term Debt and Leases" for additional details.

Use of Estimates — The presentation of these Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported. Estimates are used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, amounts recorded for contingencies, environmental liabilities, pension and other postretirement benefit plan assumptions, ~~share-based~~stock-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill), investments, and taxes on income. Additionally, estimates are used in acquisitions, including initial fair value determinations of assets and liabilities (primarily IPR&D, ~~other~~ intangible assets and contingent consideration), as well as subsequent fair value measurements.

For periods prior to Separation, estimates were used in determining the allocation of costs and expenses from Merck, and were used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, valuation of goodwill and intangibles, amounts recorded for contingencies, environmental liabilities and other reserves, pension and ~~share-based~~stock-based compensation assumptions, restructuring costs, and taxes on income.

Because of the uncertainty inherent in such estimates, actual results may differ from these estimates.

The COVID-19 pandemic continued to negatively affect the Company's results during 2021. The assessment of certain accounting matters and specifically its effect on the Company's results require consideration of forecasted financial information in the context of the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic at December 31, 2021 and through the date of this report.

Net Investment from Merck & Co., Inc. —Net investment from ~~Merc~~k Merck & Co., Inc. represented ~~Merck’s~~Merck's interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results and the net effect of the transactions with and allocations from Merck. See Notes 2 "Basis of Presentation" and 19 "Third-Party Arrangements and Related Party Disclosures" for additional information.

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Notes to Consolidated Financial Statements

Recently Adopted Accounting Standards

In January 2020, the Financial Accounting Standards Board ("FASB") issued new guidance intended to clarify certain interactions between accounting standards related to equity securities, equity method investments and certain derivatives. The guidance addresses accounting for the transition into and out of the equity method of accounting and measuring certain purchased options and forward contracts to acquire investments. The Company adopted the new guidance effective January 1, 2021. There was no impact to the Company’s Consolidated Financial Statements upon adoption.

In December 2019, the FASB issued amended guidance on the accounting and reporting of income taxes. The guidance is intended to simplify the accounting for income taxes by removing exceptions related to certain intraperiod tax allocations and deferred tax liabilities, clarifying guidance primarily related to evaluating the step-up tax basis for goodwill in a business combination, and reflecting enacted changes in tax laws or rates in the annual effective tax rate. The Company adopted the new guidance effective January 1, 2021. There was no impact to the Company’s Consolidated Financial Statements upon adoption.

~~Recently Issued Accounting Standards Not Yet Adopted~~

In November 2021, the FASB issued new guidance requiring disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model. The guidance increases transparency about the types of transactions, the accounting for the transactions, and the effect of the transactions to the Company’s financial statements. The guidance is effective for the annual periods beginning in 2022 and can be applied on a prospective or retrospective basis. The Company is currently evaluating the impact of adoption on its Consolidated Financial Statements.

~~-76-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

In October 2021, the FASB issued guidance to improve the accounting for contract assets and contract liabilities from acquired revenue contracts with customers in a business combination. The guidance addresses diversity in practice and inconsistency related to the recognition of an acquired contract liability, payment terms and their effect on subsequent revenue recognized by an acquirer. The guidance is effective for the Company on January 1, 2023 and its amendments applied prospectively to business combinations occurring on or after the effective date of the guidance. Early adoption is permitted, including adoption in an interim period and subject to different transition requirements. T~~he Company is currently evaluating the impact of adoption on its Consolidated Financial Statements.~~

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 ~~through~~and December 31, ~~2022.~~2022; the sunset date was subsequently deferred to December 31, 2024 based on the amendment issued in December 2022 under ASU 2022-06, Reference Rate Reform (Topic 848). The Company applied this guidance to the Senior Credit Agreement, as amended on June 30, 2023. The impact to the Consolidated Financial Statements as a result of the application of the reference rate reform guidance is not material. See Note 16 "Long-Term Debt and Leases" for additional details.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, guidance to improve the accounting for contract assets and contract liabilities from acquired revenue contracts with customers in a business combination. The guidance addresses diversity in practice and inconsistency related to the recognition of an acquired contract liability, payment terms and their effect on subsequent revenue recognized by an acquirer. The guidance became effective for the Company on January 1, 2023 and its amendments will be applied prospectively to business combinations occurring on or after the effective date of the guidance. The adoption of this guidance did not have an impact on the Company's Consolidated Financial Statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The amendments in this ASU are effective for annual periods beginning on January 1, 2025, and should be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. This ASU will have no impact on the Company's consolidated financial condition or results of operations. The Company is currently evaluating the impact to its income tax disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of ~~adoption~~profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. The amendments in this ASU are effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025, and should be applied on a retrospective basis for all periods presented. This ASU will have no impact on the Company's consolidated financial condition or results of operations. The Company is currently evaluating the impact to its ~~Consolidated Financial Statements.~~segment disclosures.

4. ~~Samsung Collaboration~~

The Company has an agreement with Samsung Bioepis Co., Ltd. ("Samsung Bioepis") to develop and commercialize multiple pre-specified biosimilar candidates, which have since launched and are part of the Company’s product portfolio. Under the agreement, Samsung Bioepis is responsible for pre-clinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates, and the Company has an exclusive license for worldwide commercialization with certain geographic exceptions specified on a product-by-product basis. The Company’s access rights to each product under the agreement last for 10 years from each product’s launch date on a market-by-market basis. Gross profits are shared equally in all markets with the exception of Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to the Company. Since the Company is the principal on sales transactions with third parties, the Company recognizes sales, cost of sales and selling, general and administrative expenses on a gross basis. Generally, profit sharing adjustments are recorded either to ~~Cost of sales~~ ~~(after commercialization) or~~ ~~Selling, general and administrative~~ ~~expenses (prior to commercialization).~~

Samsung Bioepis is eligible for additional payments associated with pre-specified clinical and regulatory milestones. At December 31, 2021, potential future regulatory milestone payments of $25 million remain under the agreement.

~~Summarized information related to this collaboration is as follows:~~

($ in millions) 2021 2020 2019
Sales $ 424 $ 330 $ 252
Cost of sales 248 208 152
Selling, general and administrative 83 87 91

($ in millions) December 31, 2021 December 31, 2020
Receivables from Samsung included in Other current assets
$ 15 $ 52
Payables to Samsung included in Trade accounts payable
21 13

5. Acquisitions and Licensing Arrangements

2023 Transactions

Claria Medical, Inc. ("Claria")

In ~~December 2021, Organon completed its acquisition of Forendo Pharma,~~January 2023, the Company made a ~~clinical-stage drug development~~strategic investment in Claria, a privately-held company ~~focused on novel treatments in women’s health. Forendo is pioneering the science of intracrinology, addressing disease through a novel, tissue-specific approach. Its lead clinical compound is~~developing an investigational ~~potentially first-in-class oral 17β-hydroxysteroid dehydrogenase type 1 inhibitor ("HSD17B1 inhibitor") in early development~~medical device being studied for ~~endometriosis, being evaluated for its potential effect on endometriotic lesions. Total consideration includes a $75~~use during minimally invasive laparoscopic hysterectomy. Under the terms of the agreement, Organon paid $8 million upfront ~~payment,~~and has the ~~assumption of approximately $10~~option to acquire Claria for an additional $47 million, ~~of Forendo debt, payments upon~~payable if and when the ~~achievement of certain~~option is exercised. The $8 million was expensed as Acquired in-process research and development and ~~regulatory~~ milestones in the Consolidated Statement of up to $270 million and commercial milestones payments of up to $600 million, which together could amount to total consideration of $955 million. Contingent consideration will be paid by Organon upon achievement and the liability recorded once it is deemed probable of occurrence. The transaction was accountedIncome for ~~in 2021 as an asset acquisition, as substantially all of the value was concentrated in a single identifiable asset, the HSD17B1 inhibitor. During~~ the year ended December 31, ~~2021, the Company recorded $79 million, which consisted of the $75 million upfront payment, the assumption of debt of $10 million, and other net assets, as~~ ~~Research and Development expense. The Company also incurred $5.0 million of transaction related expenses reflected in~~ ~~Selling, General and Administrative expenses~~.2023.

~~-77-~~-66-

Notes to Consolidated Financial Statements ~~(continued)~~

2022 Transactions

Cirqle Biomedical ("Cirqle")

In July ~~2021, Organon and ObsEva~~2022, the Company entered into a research collaboration and license agreement with Cirqle for a novel investigational non-hormonal, on-demand contraceptive candidate. Under the terms of the agreement, Cirqle is responsible for conducting preclinical studies according to the mutually agreed research plan. Organon obtained exclusive worldwide rights to develop and commercialize the asset.

Under the terms of the research collaboration and license agreement, Organon recorded a $10 million upfront payment during 2022 as Acquired in-process research and development and milestones. Cirqle is eligible to receive potential regulatory and commercial milestone payments of up to $360 million and tiered royalties based on net sales. The remaining potential milestone payments will be recognized by Organon when achievement of the contractual milestones is probable.

Shanghai Henlius Biotech, Inc. ("Henlius")

In June 2022, Organon and Henlius, a global biopharmaceutical company, entered into a definitive agreement whereby Organon ~~licensed~~is licensing commercialization rights for biosimilar candidates HLX11, referencing Perjeta2 (pertuzumab), used for the treatment of certain patients with HER2+ breast cancer in combinations with trastuzumab and chemotherapy and HLX14, referencing Prolia2/Xgeva2 (denosumab), used for the treatment of certain patients with osteoporosis with high risk of fracture and for the prevention of skeletal-related events in patients with multiple myeloma and in patients with bone metastasis from solid tumors. Organon obtained exclusive worldwide commercialization rights, except for China (including Hong Kong, Macau and Taiwan). The agreement includes an option to negotiate an exclusive license for global ~~development, manufacturing~~commercialization rights for biosimilar candidate HLX13 referencing Yervoy2 (ipilimumab) used for the treatment of certain patients with unresectable or metastatic melanoma, as adjuvant treatment of certain patients with cutaneous melanoma, certain patients with renal cell carcinoma, colorectal cancer, hepatocellular carcinoma, non-small cell lung cancer, malignant pleural mesothelioma and commercial rights to ebopiprant (OBE022). Ebopiprant is an investigational, orally active, selective prostaglandin F2α (PGF2α) receptor antagonist being evaluated as a potential treatment for preterm labor by reducing inflammation and uterine contractions. esophageal cancer.

Under the terms of the license agreement, Organon ~~gained exclusive worldwide rights to develop~~paid a $73 million upfront payment during 2022, of which $3 million was reflected in Other current assets and ~~commercialize ebopiprant. ObsEva~~the remainder was recognized as Acquired in-process research and development and milestones. Henlius is ~~entitled~~eligible to receive ~~tiered double-digit royalties on~~potential developmental, regulatory and commercial ~~sales,~~milestone payments of up to ~~$90~~$468 million. During the year ended December 31, 2022, the Company paid an additional $27 million inrelated to certain development milestones which were recognized as Acquired in-process research and development and ~~regulatory~~milestones. The remaining potential milestone payments ~~and up to $385 million in sales-based payments that~~ will be ~~paid~~recognized by Organon ~~upon~~when achievement of the contractual milestones is probable. Henlius will be responsible for development and, if approved, will supply the products to Organon.

Daré Bioscience, Inc. ("Daré")

In March 2022, Organon and Daré, a leader in women's health innovation, entered into an agreement whereby Organon licensed the global commercial rights to Xaciato. Xaciato is an FDA-approved medication for the treatment of bacterial vaginosis ("BV") in females 12 years of age and older. Xaciato received both Qualified Infectious Disease Product ("QIDP") and Fast Track designations from the FDA for the treatment of bacterial vaginosis.

Under the terms of the license agreement, Organon paid a $10 million upfront payment during 2022. Daré is eligible to receive potential regulatory and commercial milestone payments of up to $182.5 million and tiered double-digit royalties based on net sales. During the ~~liability recorded once it is~~year ended December 31, 2022 management determined that the first commercial milestone was deemed probable of ~~occurrence. Upon execution~~occurring, and recognized an intangible asset of $12.5 million reflecting the ~~agreement, Organon made a $25~~$10 million upfront payment ~~to ObsEva, which~~and $2.5 million commercial milestone. The intangible asset will be amortized over its useful life of 12 years. The remaining potential milestone payments will be recognized by Organon when achievement of the contractual milestones is probable. In October 2023, Xaciato was ~~recorded as~~ launched in the United States.

~~Research and development expense~~

Bayer Healthcare

~~during 2021.~~

In ~~June 2021,~~February 2022, Organon acquired ~~Alydia Health ("Alydia"), a commercial-stage medical device company. Alydia’s device,~~ the product rights and related inventory from Bayer Healthcare to ~~Jada~~Marvelon™ 1 ~~system, is intended~~(ethinylestradiol, desogestrel) and Mercilon™ 1 (ethinylestradiol, desogestrel), combined oral hormonal daily contraceptive pills, in China (including Hong Kong and Macau). In August 2022, Organon acquired the rights to ~~provide control~~these products in Vietnam. Marvelon and ~~treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted. Organon’s acquisition of Alydia expanded its portfolio into the medical device category~~Mercilon are already owned, manufactured, and underscores its commitment to identify options for women’s unmet medical needs. Total consideration included a $219 million upfront payment. Additionally, there is a $25 million sales-based contingent milestone payment that will be paidmarketed by Organon ~~upon achievement and the liability recorded once it is deemed probable of occurrence.~~as prescription oral contraceptives in 20 other markets. The transaction was accounted for as an asset ~~acquisition, as substantially all of~~acquisition. In 2022, Organon paid $95 million to acquire the ~~value was concentrated in a single identifiable asset. This resulted in an intangible of $247 million attributed to the~~ ~~Jada~~ ~~system device, which was recorded to~~ ~~Other Intangibles~~. This asset is subject to amortization on a straight-line basis over its expected useful life of 11 years. In addition to the intangible asset, the Company also recorded other net liabilities of $7 million, a deferred tax liability of $44 million related to the intangible asset, and compensation expenses of $23 million, which were recorded in ~~Selling General and Administrative Expenses. Of the $23 million of compensation expense, $19 million were related to accelerated vesting of Alydia stock-based compensation awards.~~

~~6. Restructuring~~

Currently, Organon does not have an established restructuring program. Restructuring costs for 2021, 2020 and 2019 were $3 million, $60 million and $78 million, respectively, and reflect only charges allocated to Organon. The restructuring costs for 2020 were comprised of $30 million of separation costs and $30 million related to other restructuring activities. The restructuring costs for 2019 were comprised of $70 million of separation costs and $8 million related to other restructuring activities.

There were no liabilities for costs associated with restructuring activities at December 31, 2021. Liabilities for costs associated with restructuring activities were $17 million at December 31, 2020 and are included primarily in ~~Accrued and other current liabilities~~.

~~7. Financial Instruments~~

Prior to the Separation, Merck managed the impact of foreign exchange rate movements on its affiliates’ earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments. Merck established revenue hedging and balance sheet risk management programs that the Company participated in to protect against the volatility of future foreign currency cash flows and changes in fair value caused by volatility in exchange rates. Accordingly, the Consolidated Statement of Income includes the impact of Merck’s derivative financial instruments prior to the Separation that is deemed to be associated with the Company’s operations and has been allocated to the Company utilizing a proportional allocation method:

($ in millions) 2021 2020 2019
Allocated net (gains) loss in Sales
$ 56 $ 3 $ (58)
Net (gains) loss in Other (income) expense, net(1)
32 48 3
Foreign exchange (gains) loss in Other (income) expense, net(1)
(28) (4) 70

~~(1)~~Includes net gains and losses and foreign exchange gains and losses allocated for the period prior to the Separation, as well as actual net gains and losses and foreign exchange gains and losses post-Separation.

~~Foreign Currency Risk Management~~

~~Periods Post Separation~~

~~In June 2021, the Company established a balance sheet risk management and a net investment hedging program to mitigate against volatility of changes in foreign exchange rates.~~

~~-78-~~-67-

Notes to Consolidated Financial Statements

product rights and inventory in China and Vietnam. ~~(continued)~~

~~-82-~~For periods subsequent to the Separation, diluted EPS was computed using the treasury stock method for stock option awards, performance share units and restricted share units. The computation of diluted EPS excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive.

-68-

Notes to Consolidated Financial Statements ~~(continued)~~

~~Cash paid for amounts included in the measurement of operating lease liabilities was $41 million, $5 million,~~6. Product and $6 million in 2021, 2020 and 2019, respectively. Operating lease assets obtained in exchange for new operating lease liabilities were $241 million , $23 million and $4 million for 2021 and 2020 , and 2019, respectively and primarily consists of real estate operating leases entered into in connection with establishing Organon as a standalone Company.

~~Supplemental balance sheet information related to operating leases is as follows:~~

($ in millions) December 31, 2021 December 31, 2020
Assets
Other Assets $ 230 $ 31
Liabilities
Accrued and other current liabilities 46 8
Other Noncurrent Liabilities 184 23
$ 230 $ 31
Weighted-average remaining lease term (years) 5.8 4.0
Weighted-average discount rate 3.3% 1.9%
Geographic Information

~~Maturities~~The Company's operations include the following product portfolios, which constitute one operating segment engaged in developing and delivering innovative health solutions through its portfolio of ~~operating lease liabilities~~prescription therapies and medical devices within women's health, biosimilars and established brands.

Revenues of the Company's products were as follows:


	Year Ended December 31,
		2023	2022					2021
($ in millions)				U.S.		Int'l		Total		U.S.		Int'l		Total		U.S.		Int'l		Total
Women's Health
Nexplanon/Implanon NXT				$	572	$	257	$	830	$	573	$	261	$	834	$	532	$	237	$	769
Follistim AQ				125		136		262		105		124		229		110		127		237
NuvaRing				66		86		152		85		88		173		85		106		191
Ganirelix Acetate Injection				19		91		110		26		97		123		22		88		111
Marvelon/Mercilon				—		134		134		—		110		110		—		98		98
Jada				43		—		43		20		—		20		3		—		3
Other Women's Health (1)				72		101		171		90		94		184		96		111		206
Biosimilars
Renflexis				234		43		278		196		30		226		164		21		186
Ontruzant				46		109		155		48		74		122		34		92		126
Brenzys				—		73		73		—		75		75		—		63		63
Aybintio				—		43		43		—		39		39		—		36		36
Hadlima				17		26		44		—		19		19		—		13		13
Established Brands
Cardiovascular
Zetia				8		299		306		8		350		357		10		368		378
Vytorin				6		124		129		8		123		130		11		153		164
Atozet				—		519		519		—		457		457		—		458		458
Rosuzet				—		70		70		—		71		71		—		68		68
Cozaar/Hyzaar				10		272		281		13		310		323		12		345		357
Other Cardiovascular (1)				2		151		155		3		156		159		4		187		191
Respiratory
Singulair				11		393		404		11		400		411		15		398		413
Nasonex				—		252		253		10		229		238		4		201		206
Dulera				156		38		194		140		40		180		154		36		190
Clarinex				5		132		136		4		121		125		6		106		111
Other Respiratory (1)				49		28		77		46		36		83		56		33		89
Non-Opioid Pain, Bone and Dermatology
Arcoxia				—		257		257		—		241		241		—		244		244
Fosamax				3		156		159		4		148		152		4		172		175
Diprospan				—		91		91		—		122		122		—		125		125
Other Non-Opioid Pain, Bone and Dermatology (1)				14		261		275		15		257		273		16		269		286
Other
Proscar				1		96		97		1		99		101		1		116		117
Propecia				7		118		125		7		118		125		9		127		136
Other (1)				13		308		319		24		302		326		38		318		357
Other (2)				(1)		121		121		—		146		146		(3)		205		200
Revenues				$	1,478	$	4,785	$	6,263	$	1,437	$	4,737	$	6,174	$	1,383	$	4,921	$	6,304

Totals may not foot due to rounding. Trademarks appearing above in italics are trademarks of, ~~December 31, 2021~~or are used under license by, the Organon group of companies.

(1) Includes sales of products not listed separately. Revenues from Jada were previously reported as part of Other Women's Health. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health.

(2)Includes manufacturing sales to Merck & Co., Inc. ("Merck") and third parties for current and prior periods.

-69-

Notes to Consolidated Financial Statements

Revenues by geographic area where derived are as follows:

2022 $ 53
2023 52
2024 46
2025 40
2026 15
Thereafter 46
Total lease payments $ 252
Less: Imputed interest 22
$ 230


	Year Ended December 31,
($ in millions)		2023		2022		2021
Europe and Canada		$	1,673	$	1,631	$	1,741
United States		1,478		1,437		1,383
Asia Pacific and Japan		1,129		1,143		1,173
China		864		917		933
Latin America, Middle East, Russia, and Africa		965		895		841
Other (1)		154		151		233
Revenues		$	6,263	$	6,174	$	6,304

(1) Primarily reflects manufacturing sales to Merck and third parties for current and prior periods.

As of December 31, ~~2021, the Company had entered into 2 real estate operating leases that had not yet commenced. The obligation associated with these leases totals $7.4 million.~~

~~12. Contingencies~~

The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. In the opinion2023, approximately 71% of the ~~Company, it is unlikely that the resolution of these matters will be material to the~~ Company's ~~financial condition, results of operations or cash flows.~~

~~Given the nature of the litigation discussed~~long-lived fixed assets are located in ~~this note~~Europe and the complexities involved in these matters, the Company is unable to reasonably estimate a possible loss or range of possible loss for such matters until the Company knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damagesCanada, and 18% are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation, and (v) any other factors that may have a material effect on the litigation.

The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

The Company's decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. The Company has evaluated its risks and has determined that the cost

~~-83-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

~~of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities.~~

Reference is made below to certain litigation in which Merck, but not the Company, is named as a defendant. Pursuant to the Separation and Distribution Agreement, the Company is required to indemnify Merck for liabilities relating to, arising from, or resulting from such litigation.

~~Product Liability Litigation~~

~~Fosamax~~

~~Merck is a defendant in product liability lawsuits~~ in the United ~~States involving~~ ~~Fosamax~~ (alendronate sodium) (the "Fosamax Litigation"). As of December 31, 2021, approximately 3,470 cases comprising the Fosamax Litigation are pending against Merck in either federal or state court. Plaintiffs in the vast majority of these cases generally allege that they sustained femur fractures and/or other bone injuries ("Femur Fractures") in association with the use of ~~Fosamax~~.

All federal cases involving allegations of Femur Fractures have been or will be transferred to a multidistrict litigation in the District of New Jersey ("Femur Fracture MDL"). In the only bellwether case tried to date in the Femur Fracture MDL, ~~Glynn v. Merck, the jury returned a verdict in Merck’s favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck’s motion for judgment as a matter of law in the~~ ~~Glynn~~ ~~case and held that the plaintiff’s failure to warn claim was preempted by federal law.~~

~~Accordingly, as of December 31, 2021, approximately 975 cases were actively pending in the Femur Fracture MDL.~~

As of December 31, 2021, approximately 2,215 cases alleging Femur Fractures have been filed in New Jersey state court and are pending in Middlesex County. The parties selected an initial group of cases to be reviewed through fact discovery, and Merck has continued to select additional cases to be reviewed.

As of December 31, 2021, approximately 275 cases alleging Femur Fractures have been filed and are pending in California state court. All of the Femur Fracture cases filed in California state court have been coordinated before a single judge in Orange County, California.

~~Additionally, there are 4 Femur Fracture cases pending in other state courts.~~

~~Discovery is presently stayed in the Femur Fracture MDL and in the state court in California.~~

~~Nexplanon/Implanon~~

~~Merck is a defendant in lawsuits brought by individuals relating to the use of~~ ~~Implanon~~ ~~and~~ ~~Nexplanon. In the United States, as of December 31, 2021, there was one filed product liability action involving~~ ~~Nexplanon~~ ~~pending in Western District of Arkansas (in which Organon is also named as a defendant). In addition, there were 2 filed product liability actions involving~~ ~~Implanon, both of which are pending in the Northern District of Ohio as well as 56 unfiled cases involving~~ ~~Implanon~~ ~~alleging similar injuries, which have been tolled under a written tolling agreement. As of December 31, 2021, Merck had 20 cases pending outside the United States, of which 16 relate to~~ ~~Implanon~~ ~~and 4 relate to~~ ~~Nexplanon~~.

~~Propecia/Proscar~~

~~Merck is a defendant in product liability lawsuits in the United States involving~~ ~~Propecia~~ ~~(finasteride) and/or~~ ~~Proscar~~ (finasteride). The federal lawsuits were consolidated for pretrial purposes in federal multidistrict litigation in the Eastern District of New York (the "MDL"), and the matters in state court in New Jersey were consolidated in Middlesex County ("N.J. Coordinated Proceedings"). In 2018, Merck and the Plaintiffs’ Executive Committee in the MDL and the Plaintiffs’

~~-84-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

Liaison Counsel in the N.J. Coordinated Proceedings entered into an agreement to resolve the lawsuits for an aggregate amount of $4.3 million. The settlement was subject to certain contingencies, including 95% plaintiff participation and a per plaintiff clawback if the participation rate was less than 100%. The contingencies were satisfied and the settlement agreement has been finalized.

~~At December 31, 2021, only 3 cases remain pending in the United States, including a case currently pending in the MDL, a matter involving~~ ~~Propecia~~ ~~in state court in Los Angeles, California and a matter involving~~ ~~Proscar~~ ~~in the United States District Court for the Eastern District of California.~~States. The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is ~~also defending 18 product liability cases outside the United States, 2 of which are class actions and 4 of which are putative class actions.~~

~~Governmental Proceedings~~

From time to time, the Company's subsidiaries may receive inquiries and may be the subject of preliminary investigation activities from competition and other governmental authorities in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to the Company, monetary fines and/or remedial undertakings may be required. Subject to certain exceptions specified in the Separation and Distribution Agreement, the Company assumed liability for all pending and threatened legal matters related to products transferred to the Company, including competition investigations resulting from enforcement activity concerning Merck’s conduct involving the Company's products. The Company could be obligated to indemnify Merck for fines or penalties, or a portion thereof, resulting from such investigations. The Company is aware of one such enforcement activity pending in Europe.not presented.

~~Hadlima~~ ~~(adalimumab-bwwd)~~

In July 2021, the Company received a Civil Investigation Demand ("CID") from the Office of the Attorney General for the State of Washington. The CID requests answers to interrogatories, as well as various documents, regarding certain activities related to adalimumab and adalimumab biosimilars. The Company is cooperating with the government’s investigation and intends to produce information and/or documents as necessary in response to the CID.

~~Patent Litigation~~

From time to time, generic manufacturers of pharmaceutical products file Abbreviated New Drug Applications ("ANDAs") with the U.S. Food and Drug Administration ("FDA") seeking to market generic forms of the Company's products prior to the expiration of relevant patents owned by the Company. To protect its patent rights, the Company may file patent infringement lawsuits against such generic companies. Similar lawsuits defending the Company's patent rights may exist in other countries. The Company intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products, potential payment of damages and legal fees, and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges.

~~Nexplanon~~

~~In June 2017, Microspherix LLC ("Microspherix") sued the Company in the U.S. District Court for the District of New Jersey asserting that the manufacturing, use, sale and importation of~~ ~~Nexplanon~~ infringed several of Microspherix's patents that claim radio-opaque, implantable drug delivery devices. Microspherix is claiming damages from September 2014 until the patents expired in May 2021. The Company brought ~~Inter Partes~~ Review ("IPR") proceedings in the United States Patent and Trademark Office ("USPTO") and successfully stayed the district court action. The USPTO invalidated some, but not all, of the claims asserted against the Company. The Company appealed the decisions that found claims valid, and the Court of Appeals for the Federal Circuit affirmed the USPTO’s decisions. The matter is no longer stayed in the district court, and the Company is currently litigating the invalidity and non-infringement of the remaining asserted claims. A claim construction hearing was held on March 2, 2022, and any further dates in the schedule will be set based on the date the court issues a claim construction order.

~~Other Litigation~~

There are various other pending legal proceedings involving the Company, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such

~~-85-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

~~proceedings is not expected to be material to the Company's financial condition, results of operations or cash flows either individually or in the aggregate.~~

~~Legal Defense Reserves~~

Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by the Company; the development of the Company's legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against the Company; the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The amount of legal defense reserves as of December 31, 2021 and December 31, 2020 of approximately $9 million and $35 million, respectively, represents the Company's best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company. The decrease in the legal defense reserves at December 31, 2021, as compared to December 31, 2020, is primarily attributable to reserves related to certain litigation that was retained by Merck under the Separation and Distribution Agreement. Accordingly, and in connection with the Separation adjustments, the reserve was adjusted to Net Investment from Merck in the Consolidated Financial Statements to reflect the Company's best estimate of its legal defense reserves as of December 31, 2021. The Company will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so.7. Stock-Based Compensation Plans

~~Environmental Matters~~

In management's opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $24 million at both December 31, 2021 and December 31, 2020. These liabilities are undiscounted, do not consider potential recoveries from other parties and will be paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 15 years. It is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation. Management also does not believe that these expenditures should result in a material adverse effect on the Company's financial condition, results of operations or liquidity for any year.

~~13. Stock-Based Compensation Plans~~

In connection with the Separation, and in accordance with the Employee Matters Agreement, Organon's employees with outstanding former Merck stock-based awards received replacement stock-based awards under the 2021 Incentive Stock Plan at Separation. The ratio used to convert the Merck stock-based awards was designed to preserve the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value of the award immediately prior to Separation. Due to the conversion, Organon incurred $17 million of incremental stock-based compensation ~~expense.~~expense in 2021. Of this amount, $4 million was related to vested option awards and was recognized immediately into earnings in connection with the Separation, and the remainder is recognized ratably over the option awards' remaining weighted average vesting ~~period of 2.66 years. At December 31, 2021, the unrecognized portion of the incremental stock-based expense was $9.7 million.~~period.

~~In the second half of 2021, the~~

The Company ~~granted~~grants stock option awards, performance share units ("PSUs") and restricted share units ~~under the~~("RSUs") pursuant to its 2021 Incentive Stock Plan.

Employee stock options are granted to purchase shares of Company stock at the fair market value at the time of grant. Generally, stock options have a contractual term of ten years and vest one-third each year over a three-year period, subject to limited exceptions.

RSUs are stock awards that are granted to employees and entitle the holder to shares of common stock as the awards vest. RSU awards generally vest one-third each year over a three-year period. The fair value of the stock option and RSU awards is determined and fixed on the grant date based on the ~~Company’s~~Company's stock price.

The terms of the Company's PSU awards allow the recipients of such awards to earn a variable number of common shares based on the cumulative results of specified performance factors.

The PSU awards are based on the following performance factors:

•total ~~shareholder~~stockholder return of the Company relative to an index of peer companies ("relative TSR") specified in the ~~awards.~~awards; and

•the results of the cumulative free cash flow ("FCF") of the Company over a three-year period.

For FCF and relative TSR awards, the Company recognizes compensation costs ratably over the performance period. The PSU awards will generally vest at the end of the three year performance period, however, the number of shares delivered will vary based upon the attained level of performance. For PSUs with a performance-based FCF goal, stock-based compensation expense is recognized based on the probability of the achievement of the financial performance metric for the respective vesting period and is assessed at each reporting date. For PSUs with a market-based relative TSR goal, stock-based compensation expense is recognized based on the estimated fair value of the award at the grant date regardless of the actual number of shares earned. PSU awards generally vest after three years. The Company uses the Monte Carlo simulation to determine the fair value of the relative TSR awards as of the grant date.

-70-

Notes to Consolidated Financial Statements

For RSUs and PSUs, dividends declared during the vesting period are payable to the employees only upon vesting. RSU and PSU distributions will be in shares of Company stock after the end of the vesting or performance period, subject to the terms applicable to such awards.

~~-86-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

Stock-based compensation ~~expense~~expenses incurred by the Company ~~was~~were as follows:

($ in millions) 2021 2020 2019
Stock-based compensation expense recognized in:
Cost of sales $ 11 $ 17 $ 16
Selling, general and administrative 36 19 21
Research and Development 12 4 4
$ 59 $ 40 $ 41
Income tax benefits 12 8 9

~~As noted above, and in~~


	Year Ended December 31,
($ in millions)		2023		2022		2021
Stock-based compensation expense recognized in:
Cost of sales		$	17	$	13	$	11
Selling, general and administrative		68		51		36
Research and development		16		11		12
Total		$	101	$	75	$	59

Income tax benefits		$	21	$	16	$	12

In connection with the Separation, in 2021, Merck's PSUs and RSUs were converted into 3.3 million Organon RSUs at a weighted average grant date fair value of $36.77 and Merck's stock options were converted into 4.1 million Organon stock options at a weighted average grant date fair value of $8.55. Stock options at Separation were valued using a combination of option models. The Company used the Black-Scholes model as the basis for the original fair value of the options, and the Hull-White I Lattice option pricing model calculated the incremental fair value. In applying these models, the Company used both historical data and current market data to estimate the fair value of its options. The Black-Scholes model assumptions include expected dividend yield, risk-free interest rate, volatility, and term of the options. The Hull-White I Lattice model requires several assumptions including expected exercise barrier, dividend yield, risk-free interest rate, remaining vesting life and remaining contractual life. These fair value assumptions were based on the awards and terms previously granted under the Merck incentive compensation plans to Organon employees. At December 31, 2023, the unrecognized portion of the incremental stock-based expense was $1 million.

~~In connection with the stock options granted during 2021, the~~

The Company ~~used~~uses the Black-Scholes model to determine the fair value of the stock options as of the grant date. In applying this model, the Company uses both historical data and current market data to estimate the fair value of its options. The expected dividend yield is based on forecasted patterns of dividend payments. The risk-free interest rate is based on the rate at grant date of zero-coupon U.S. Treasury Notes with a term equal to the expected term of the option. Expected volatility is estimated using historical volatility. Due to the lack of trading history of Organon's stock at the time of valuation efforts, the historical component of expected volatility is based on historical monthly price changes of the peer group within the industry. In 2023, the historical component of expected volatility is based on historical monthly price changes of a combination of the peer group within the industry and Organon's historical monthly price changes. In 2022 and 2021, the historical component of expected volatility is based only on historical monthly price changes of a combination of the peer group within the industry. Merck's historical data for Organon employees was used to estimate equity award exercise and employee termination behavior within the valuation model. The expected term represents the amount of time that options granted are expected to be outstanding based on historical and forecasted exercise behavior.

The weighted average fair value of options granted was determined using the following assumptions:


	~~Year Ended December 31, 2021~~
~~Expected dividend yield~~	~~3.22~~	%
~~Risk-free interest rate~~	~~0.92~~	%
~~Expected volatility~~	~~45.80~~	%
~~Expected term (years)~~	~~5.89~~


	Year Ended December 31,
	2023		2022		2021
Expected dividend yield	4.82	%	3.12	%	3.22	%
Risk-free interest rate	3.56		2.47		0.92
Expected volatility	42.30		43.43		45.80
Expected life (years)	5.89		5.89		5.89

-71-

Notes to Consolidated Financial Statements

A summary of the equity award transactions ~~under~~for the ~~2021 Incentive Stock Plan as of~~year ended December 31, ~~2021~~2023 is as follows:

Stock Options Restricted Share Units Performance Share Units
(shares in thousands) Shares Weighted average exercise price Weighted average grant date fair value Shares Weighted average grant date fair value Shares Weighted average grant date fair value
Outstanding as of June 2, 2021 4,097 $ 34.30 $ 8.55 3,311 $ 36.77 — $ —
Granted 379 $ 35.38 $ 11.20 88 $ 34.72 120 $ 51.63
Vested/Exercised — $ — $ — (52) $ 38.46 — $ —
Forfeited/Cancelled (82) $ 36.52 $ 9.05 (67) $ 36.55 — $ —
Outstanding as of December 31, 2021 4,394 $ 34.35 $ 8.63 3,280 $ 36.69 120 $ 51.63

~~-87-~~


	Stock Options					Restricted Share Units			Performance Share Units
(shares in thousands)	Shares	Weighted average exercise price		Weighted average grant date fair value		Shares	Weighted average grant date fair value		Shares	Weighted average grant date fair value
Outstanding as of January 1, 2023	4,729	$	34.34	$	9.00	5,048	$	33.27	486	$	39.29
Granted	1,124	23.52		6.55		5,090	20.84		636	23.20
Vested/Exercised	—	—		—		(1,958)	33.83		—	—
Forfeited/Cancelled	(95)	36.12		9.71		(669)	29.40		—	—
Outstanding as of December 31, 2023	5,758	$	32.20	$	8.51	7,511	$	25.05	1,122	$	30.16

~~Notes to Consolidated Financial Statements~~
~~(continued)~~

The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable atas of December 31, ~~2021:~~2023:

Equity Awards Vested and Expected to Vest Equity Awards That are Exercisable
(shares in thousands; aggregate intrinsic value in millions) Awards Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Term Awards Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Term
Stock Options 4,134 $ 34.35 $ 2 8.02 1,454 $ 30.66 $ 2 5.65
Restricted Share Units 3,051 — 100 1.99 — — — —
Performance Share Units 102 — 4 2.63 — — — —


	Equity Awards Vested and Expected to Vest						Equity Awards That are Exercisable
(awards in thousands; aggregate intrinsic value in millions)	Awards	Weighted Average Exercise Price		Aggregate Intrinsic Value		Remaining Term (in years)	Awards	Weighted Average Exercise Price		Aggregate Intrinsic Value		Remaining Term (in years)
Stock Options	5,623	$	32.20	$	—	6.79	3,311	$	33.79	$	—	5.61
Restricted Share Units	7,023			108		1.93
Performance Share Units	610			10		1.60

The amount of unrecognized compensation costs as of December 31, ~~2021~~2023 was ~~$109~~$153 million, which will be recognized in operating expense ratably over the weighted average vesting period of ~~2.08~~1.86 years.

8. Restructuring

In 2022, Organon initiated restructuring activities to optimize its internal operations by reducing headcount through selected markets and functions. As a result of this program, the Company restructured approximately 130 positions, with the majority of the position eliminations occurring in selected markets outside of the United States in the commercial organizations.

In the fourth quarter of 2023, Organon implemented additional restructuring activities related to the ongoing optimization of its internal operations by reducing headcount in certain markets and functions. As a result of these activities, the Company's headcount will be reduced by approximately 3% over the next twelve months.

Organon expects the remaining severance payments associated with the restructuring activities to be paid by the end of 2024.

The following is a summary of changes in severance liabilities related to the restructuring activities included within Accrued and other current liabilities:


	December 31, 2023	December 31, 2022
Beginning balance	20	—
Severance & severance related costs	62	28
Cash payments and other	(21)	(8)
Ending Balance	61	20

9. Discontinued Operations

In contemplation of the Separation, the Merck Retained Products business in the Transferred Entities was distributed to Merck affiliates and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations.

-72-

Notes to Consolidated Financial Statements

The components of Loss from discontinued operations, net of tax for the Merck Retained Products business are as follows:


	Year Ended December 31,
($ in millions)		2021
Sales		$	93
Costs, Expenses and Other
Cost of Sales		65
Selling, general and administrative		15
Research and development		4
Restructuring Costs		—
Other expense, net		4
Loss from discontinued operations before taxes		$	5
Taxes on income		5
Loss from discontinued operations, net of taxes		$	—

Discontinued operations include related party sales of $12 million for the year ended December 31, 2021. Costs for inventory purchases from related parties were $53 million for the year ended December 31, 2021.

10. Taxes on Income

A reconciliation between the effective tax rate and the U.S. statutory rate is as follows:


	Year Ended December 31,
	2023				2022				2021
($ in millions)	Amount		Tax Rate		Amount		Tax Rate		Amount		Tax Rate
U.S. statutory rate applied to income before taxes	$	141	21.0	%	$	236	21.0	%	$	321	21.0	%
Differential arising from:
Foreign earnings	(91)		(13.6)		(113)		(10.1)		(39)		(2.5)
Tax settlements	(13)		(1.9)		(2)		(0.1)		(32)		(2.1)
Amortization of intangible assets	(686)		(102.0)		—		—		(75)		(4.9)
State taxes	(5)		(0.8)		(2)		(0.2)		(3)		(0.2)
Global Intangible Low-Taxed Income	54		8.0		57		5.1		17		1.1
Interest expense disallowance	46		6.8		13		1.2		—		—
Valuation allowance	208		30.9		4		0.4		(4)		(0.3)
Other	(4)		(0.6)		12		1.0		(7)		(0.4)
	$	(350)	(52.2)	%	$	205	18.3	%	$	178	11.7	%

Prior to the Separation, income taxes were calculated as if the Company filed income tax returns on a separate return basis. For those years, the Company believes the assumptions supporting its allocation and presentation of income taxes on a separate return basis are reasonable.

The Company has no remaining transition tax liability as of December 31, 2021 under the Tax Cuts and Jobs Act ("TCJA") that was enacted in 2017. As a result of the TCJA, the Company has made a determination it is no longer indefinitely reinvested with respect to a majority of its previously taxed undistributed earnings from foreign subsidiaries and provided for a deferred tax liability for withholding taxes due upon future remittances, net of certain foreign income tax credits. At December 31, 2023, the deferred income tax liabilities on undistributed earnings for certain subsidiaries that are deemed indefinitely reinvested was $4 million. At December 31, 2022 the deferred tax balance was immaterial.

-73-

Notes to Consolidated Financial Statements

The tax effects of foreign earnings in the tax rate reconciliation above primarily reflect the effects of operations in jurisdictions with different tax rates than the United States thereby yielding a favorable impact on the effective tax rate compared with the U.S. statutory rate of 21%. The favorable impact is primarily attributable to a reduced tax rate arrangement that was agreed to in Switzerland for an active legal entity.

The effective income tax rates were (52.2)%, 18.3% and 11.7% for 2023, 2022 and 2021, respectively. These effective income tax rates reflect the beneficial impact of foreign earnings, offset by the impact of U.S. inclusions under the Global Intangible Low-Taxed Income regime and a partial valuation allowance recorded against non-deductible U.S. interest expense, as well as a $476 million tax benefit comprised of a gross benefit of $686 million, net of a $210 million valuation allowance, resulting from the termination of a tax arrangement in Switzerland recorded in the fourth quarter 2023. The valuation allowance was determined based on expected future income and the terms of the remaining Swiss tax arrangement. During 2021, the Company recorded a $75 million tax benefit relating to a portion of the non-U.S. step-up of tax basis associated with the Company's Separation from Merck. The effective income tax rate for 2021 also reflects the Internal Revenue Service ("IRS") conclusion of its examinations of Merck's 2015-2016 U.S. federal income tax returns as further detailed below.

Income before taxes consisted of:


	Year Ended December 31,
($ in millions)	2023		2022		2021
Domestic	$	(554)	$	(451)	$	(96)
Foreign	1,227		1,573		1,625
	$	673	$	1,122	$	1,529

Taxes on income consisted of:


	Year Ended December 31,
($ in millions)	2023		2022		2021
Current provision
Federal	$	47	$	51	$	41
Foreign	87		172		435
State	1		—		(10)
	$	135	$	223	$	466
Deferred provision
Federal	$	(52)	$	(38)	$	(64)
Foreign	(428)		22		(220)
State	(5)		(2)		(4)
	$	(485)	$	(18)	$	(288)
	$	(350)	$	205	$	178

-74-

Notes to Consolidated Financial Statements

Deferred income taxes at December 31 consisted of:


	December 31,
	2023				2022
($ in millions)	Assets		Liabilities		Assets		Liabilities
Product intangibles and licenses	$	927	$	—	$	164	$	—
Inventory related	3		—		—		10
Reserves and allowances	38		—		51		—
Accrued expenses	5		—		22		—
Accelerated depreciation	—		18		—		11
Unremitted foreign earnings	—		5		—		3
Right of use asset	38		—		44		—
Lease liability	—		38		—		44
Interest expense limitation carryforward	72		—		37		—
Compensation related	17		—		26		—

Hedging	—		41		—		59
Net operating losses and other tax credit carryforwards	35		—		65		—
Other	37		—		18		—
Subtotal	$	1,172	$	102	$	427	$	127
Valuation allowance	(309)		—		(52)		—
Total deferred taxes	$	863	$	102	$	375	$	127
Net deferred income taxes	$	761			$	248
Recognized as:
Other Assets	$	808			$	267
Deferred Income Taxes			$	47			$	19

A reconciliation of the beginning and ending amount of the valuation allowance is as follows:


	Years Ended December 31,
	2023		2022
Beginning balance	$	(52)	$	(35)
Additions charged to expense	(257)		(17)

Ending balance	$	(309)	$	(52)

The Company has recognized $35 million and $65 million deferred taxes on net operating loss ("NOL") carryforwards in multiple jurisdictions as of December 31, 2023 and 2022, respectively. Valuation allowances of $309 million have been established on $250 million of foreign deferred tax assets and $59 million of U.S. deferred tax assets. The $257 million increase in the valuation allowance in 2023 is primarily due to a $210 million valuation allowance recorded in connection with the future benefit of a Swiss tax arrangement and $46 million of a valuation allowance recorded in connection with disallowed interest expense in the United States. The valuation allowance on the Swiss deferred tax assets was determined based on expected future income and the terms of the remaining Swiss tax arrangement. During 2022, the Company increased its valuation allowance by $17 million primarily due to disallowed interest expense in the United States.

Income taxes paid in 2023, 2022 and 2021, were $135 million, $214 million and $131 million, respectively.

As of December 31, 2023 and 2022, the Company deferred the income tax consequences resulting from intra-entity transfers of inventory totaling $396 million and $368 million, respectively. These amounts are reflected in Other current assets.

-75-

Notes to Consolidated Financial Statements

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	Year Ended December 31,
($ in millions)	2023		2022		2021
Balance January 1	$	93	$	78	$	219
Additions related to current year tax positions	32		30		23
Additions related to prior year tax positions	7		3		18
Reductions for tax positions of prior years	(8)		(3)		(49)
Spinoff related adjustments (1)	—		—		(108)
Settlements	(7)		(12)		(15)
Lapse of statute of limitations	(2)		(3)		(10)
Balance December 31	$	115	$	93	$	78

(1) Unrecognized tax benefits were reduced by $108 million in 2021 related to positions taken prior to the spinoff for which Merck, as the Company's former Parent, is the primary obligor and is responsible for settlement and payment of any resulting tax obligation.

If the Company were to recognize the unrecognized tax benefits of $115 million, at December 31, 2023, the income tax provision would reflect a favorable net impact of $115 million.

In 2023 and 2022, foreign tax authorities concluded their examinations of certain foreign income tax returns. As a result, the Company reflected a payment of $7 million and $12 million in the consolidated financial statements in 2023 and 2022, respectively. A corresponding reduction in reserves of $15 million and $11 million were also reflected in 2023 and 2022, respectively, for unrecognized tax benefits for tax positions relating to the years that were under examination.

Prior to June 2, 2021, the Company was part of Merck's consolidated U.S. federal income tax return, as well as separate and combined Merck income tax returns in numerous state and international jurisdictions. Merck was under examination by numerous tax authorities in various jurisdictions globally. During 2021, the IRS concluded its examinations of Merck's 2015-2016 U.S. federal income tax returns. As a result, the Company reflected an allocation from Merck of $18 million representing the Company's portion of the payment made to the IRS in the Consolidated Financial Statements. The Company's portion of reserves for unrecognized tax benefits for the years under examination exceeded the allocated adjustments relating to this examination period and therefore the Company included a $29 million net tax benefit for the year ended December 31, 2021. This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.

The Company is subject to income tax in the United States (federal, state and local) as well as other jurisdictions outside of the United States in which Organon operates. As part of the Separation from Merck, $79.3 million of liabilities for unrecognized tax benefits associated with uncertain tax positions for jurisdictions outside of the United States were conveyed to Organon.

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits as of December 31, 2023 could decrease by up to $27 million in the next 12 months as a result of various audit closures, settlements or the expiration of the statute of limitations. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures.

Interest and penalties associated with uncertain tax positions resulted in $3 million of expense in 2023 and were immaterial in 2022 and 2021. These amounts reflect the beneficial impacts of various tax settlements. Liabilities for accrued interest and penalties were $40 million and $35 million as of December 31, 2023 and 2022, respectively.

Various foreign tax examinations are in progress and for these jurisdictions, income tax returns are open for examination for the period 2007 through 2023.

-76-

Notes to Consolidated Financial Statements

11. Inventories

Inventories consisted of:


($ in millions)	December 31, 2023		December 31, 2022
Finished goods	$	566	$	482
Raw materials	110		44
Work in process	684		601
Supplies	65		44
Total (approximates current cost)	$	1,425	$	1,171
Decrease to LIFO costs	—		(20)
	$	1,425	$	1,151
Recognized as:
Inventories	$	1,315	$	1,003
Other assets	110		148

Inventories valued under the last in, first out ("LIFO") method	105		77

Amounts recognized as Other assets are comprised primarily of raw materials and work in process inventories and are not expected to be converted to finished goods that will be sold within one year. The Company has a long-term vendor supply contract that includes certain annual minimum purchase commitments.

During 2022 and 2021, the Company recorded $5 million and $24 million, respectively, due to estimated unavoidable losses associated with a long-term vendor supply contract. The charge was recognized as a component ofCost of sales during 2022 and 2021, respectively.

During 2022, the Company recorded $36 million relating to a regulatory inspection finding at the Heist manufacturing location which impacts selected injectable steroids brands. The charge was recognized as a component of Cost of salesand reduced the Company's Inventory balance during 2022.

As of December 31, 2023, total inventory purchase obligations are $1.0 billion and extend through 2031. Inventory purchase obligations due within the next twelve months amount to $318 million.

12. Property, Plant and Equipment


($ in millions)	December 31, 2023		December 31, 2022
Land	$	14	$	13
Buildings	721		694
Machinery, equipment and office furnishings	1,191		935
Construction in progress	274		278
Less: accumulated depreciation	(1,017)		(902)
Property, Plant and Equipment, net	$	1,183	$	1,018

-77-

Notes to Consolidated Financial Statements

13. Intangibles

Intangibles consists of:


	December 31, 2023						December 31, 2022
($ in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Products and product rights	$	24,290	$	23,845	$	445	$	24,285	$	23,746	$	539
Licenses	231		143		88		231		121		110
	$	24,521	$	23,988	$	533	$	24,516	$	23,867	$	649

Acquired intangibles include products and products rights, and licenses, which are initially recorded at fair value, assigned an estimated useful life, and amortized on a straight-line basis over their estimated useful lives.

The Company did not have impairment charges in 2023. During 2022 and 2021, due to increased competition which resulted in the loss of contract tenders in certain markets and pricing pressure, the Company recorded impairment charges of $9 million and $7 million, respectively,related to a product right for a biosimilar product within Cost of sales.

Aggregate amortization expense recorded within Cost of sales was $116 million in 2023, $116 million in 2022 and $103 million in 2021.

The estimated aggregate future amortization expense is as follows:


($ in millions)
2024	$	112
2025	111
2026	105
2027	48
2028	40
Thereafter	117

14. Financial Instruments

Foreign Currency Risk Management

The Company has a balance sheet risk management and a net investment hedging program to mitigate against volatility of changes in foreign exchange rates.

The Company uses a balance sheet risk management program to partially mitigate the exposure of net monetary assets of its subsidiaries that are denominated in a currency other than a subsidiary's functional currency from the effects of volatility in foreign exchange. In these instances, Organon principally utilizes forward exchange contracts to partially offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro, Swiss franc, and Japanese yen. For exposures in developing country currencies, the Company enters into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument.

Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Exchange losses. The forward contracts are not designated as hedges and are marked to market through Exchange losses. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year. The notional amount of forward contracts was $1.4 billion and $1.5 billion as of December 31, 2023 and December 31, 2022, respectively. The cash flows and the related gains and losses from these contracts are reported as operating activities in the Consolidated Statements of Cash Flows.

-78-

Notes to Consolidated Financial Statements

The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following financial instruments were recorded at their estimated fair value. The recurring fair value measurement of the assets and liabilities were as follows:


($ in millions)	Fair Value Measurement Level	December 31, 2023		December 31, 2022
Forward contracts in Other current assets	2	$	9	$	6
Forward contracts in Accrued and other current liabilities	2	16		24

Foreign exchange risk is also managed through the use of economic hedges on foreign currency balances. See Note 16 "Long-Term Debt and Leases" for additional details. €1.981 billion in the aggregate of both the euro-denominated term loan (€731 million) and the 2.875% euro-denominated secured notes (€1.25 billion) has been designated and is effective as an economic hedge of the net investment in euro-denominated subsidiaries.

Foreign currency (loss) gain due to spot rate fluctuations on the euro-denominated debt instruments included in foreign currency translation adjustments resulting from hedge designation were as follows:


	Year Ended December 31,
($ in millions)		2023		2022		2021
Foreign currency (loss) gain in Other comprehensive income		$	(84)	$	111	$	162

Prior to the Separation, Merck managed the impact of foreign exchange rate movements on its affiliates' earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments. Merck established revenue hedging and balance sheet risk management programs that the Company participated in to protect against the volatility of future foreign currency cash flows and changes in fair value caused by volatility in exchange rates.

The Consolidated Statements of Income include the impact of net (gains) and losses of Organon's derivative financial instruments, as well as the impact of Merck's derivative financial instruments prior to the Separation allocated to the Company utilizing a proportional allocation method:


	Year Ended December 31,
($ in millions)		2023		2022		2021
Allocated net loss in Revenues		$	—	$	—	$	56
Foreign exchange loss in Exchange losses		$	42	$	11	4

Concentrations of Credit Risk

Organon has established accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. Under these agreements, Organon factored $66 million and $43 million of accounts receivable as of December 31, 2023 and December 31, 2022, respectively, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Consolidated Statements of Cash Flows.

The Company monitors credit exposures through limits that were established to limit concentration with any single issuer or institution. The majority of the Company's accounts receivable arise from product sales in the United States, Europe and China and are primarily due from drug wholesalers and retailers, hospitals, government agencies, managed health care providers and pharmacy benefit managers. The Company's customers with the largest accounts receivable balances are McKesson Corporation, Amerisource Bergen Corporation and Curascript Specialty Distribution which represented approximately 9%, 8%

-79-

Notes to Consolidated Financial Statements

and 7%, respectively, of total gross account receivable at December 31, 2023. Bad debts have been minimal. The Company does not normally require collateral or other security to support credit sales.

15. Pension and Other Postretirement Benefit Plans

Prior to the Separation on June 2, 2021, Organon participated in Merck's U.S. and non-U.S. plans. Merck has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. Merck also provides medical benefits, principally to its eligible U.S. retirees and their dependents, through its other postretirement benefit plans. The Company participated in Merck's benefit plans as though it was a participant in a multi-employer plan with the other businesses of Merck. The retirement benefits guidance provides that liabilities beyond any contributions currently due and unpaid are not required to be reported. Accordingly, no assets or liabilities associated with plans where the Company was a participant in a multi-employer plan with the other businesses of Merck have been reflected in the Company’s Consolidated ~~Balance Sheet. The Consolidated Statement~~Statements of Income includes expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company for the years ended December 31, 2021 ~~2020 and 2019~~ was $29 ~~million, $55 million and $29 million, respectively.~~million. 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.

In accordance with the terms of the Employee Matter Agreement, prior to the Separation, Merck continued to provide service crediting to employees that transferred to Organon under Merck's U.S. defined benefit pension plan, supplemental executive retirement, and retiree medical plans for purposes of early retirement eligibility and subsidies, as well as for certain service crediting bridges. Although Merck is responsible for providing these benefits, Organon recorded the portion of the aggregate incremental cost of providing early retirement subsidies, service crediting bridges, and retiree health care benefits under these programs that is attributable to future service. Accordingly, upon Separation, the Company recorded a "grow-in" provision granted to employees transferred to Organon of $50 million, which represented the future service earned with Organon for these transferred employees for the pension and other postretirement benefits. The "grow-in" provision was recorded as an asset and will be expensed over the estimated average service period of eight years since the Separation, in operating expenses. The unamortized balance of the asset is ~~$46~~$34 million as of December 31, ~~2021,~~2023, of which ~~$40~~$28 million is reflected in Other Assets and $6 million is reflected in Other current ~~assets~~assets.

As of June 2, 2021, Organon became the plan sponsor for certain non-U.S. defined benefit pension plans. These Consolidated Financial Statements reflect the periodic benefit costs and funded status of such plans. Organon pension plans are primarily comprised of plans in Switzerland, Belgium, Korea, Germany and Italy. The Company uses December 31 as the year-end measurement date for these plans.

Net Periodic Benefit Cost

The net periodic benefit cost for pension plans consisted of the following components:


	Year Ended December 31,										Year Ended December 31,
($ in millions)	($ in millions)	2021		2020		2019		($ in millions)	2023	2022		2021
Service cost	Service cost	$	17	$	4	$	3
Interest cost	Interest cost	2		1		1
Expected return on plan assets	Expected return on plan assets	(3)		(1)		(1)
Net loss amortization	Net loss amortization	2		—		—
Net periodic benefit cost	Net periodic benefit cost	$	18	$	4	$	3

The components of net periodic benefit cost other than the service cost component are included in Other (income) expense, ~~net~~net. ~~(see Note 15).~~

~~-88-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

Obligations and Funded Status

Summarized information about changes in plan assets and benefit obligations, the funded status and the amounts recorded ~~at December 31~~ is as follows:

($ in millions) 2021 2020
Fair value of plan assets January 1 $ 40 $ 28
Actual return on plan assets 6 —
Company contributions 19 4
Effects of exchange rate changes (6) 3
Benefits paid 2 (1)
Other — 7
Net transfer of plan assets from Merck affiliates 56 (1)
Fair value of plan assets December 31 $ 117 $ 40
Benefit obligation January 1 $ 76 $ 54
Service cost 17 4
Interest cost 2 1
Actuarial losses (17) 4
Benefits paid 2 (1)
Effects of exchange rate changes (10) 6
Other — 6
Net transfer of benefit obligations from Merck affiliates 119 2
Benefit obligation December 31 $ 189 $ 76
Funded status December 31 $ (72) $ (36)
Recognized as:
Other assets $ 1 $ —
Accrued and other current liabilities (1) —
Other Noncurrent liabilities (72) (36)


($ in millions)	December 31, 2023		December 31, 2022
Fair value of plan assets January 1	$	114	$	117
Actual return on plan assets	10		(10)
Company contributions	16		14
Effects of exchange rate changes	9		(4)

-80-

Notes to Consolidated Financial Statements


Benefits paid	(5)		(7)
Other	2		3
Net transfer of plan assets from Merck affiliates	3		1
Fair value of plan assets December 31	$	149	$	114
Benefit obligation January 1	$	161	$	189
Service cost	17		22
Interest cost	5		2
Actuarial gains	31		(41)
Benefits paid	(5)		(7)
Effects of exchange rate changes	12		(7)
Other	2		1
Net transfer of benefit obligations from Merck affiliates	3		2
Benefit obligation December 31	$	226	$	161
Funded status December 31	$	(77)	$	(47)
Recognized as:
Other assets	$	—	$	1
Accrued and other current liabilities	(1)		(1)
Other Noncurrent liabilities	(76)		(47)

Information related to the funded status of materially significant pension plans ~~at December 31~~ is as follows:


($ in millions)	($ in millions)	2021		2020		($ in millions)	December 31, 2023	December 31, 2022
Pension plans with a projected benefit obligation in excess of plan assets	Pension plans with a projected benefit obligation in excess of plan assets
Projected benefit obligation	Projected benefit obligation	$	176	$	76
Projected benefit obligation
Projected benefit obligation
Fair value of plan assets	Fair value of plan assets	104		38
Pension plans with an accumulated benefit obligation in excess of plan assets	Pension plans with an accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation	Accumulated benefit obligation	$	154	$	54
Accumulated benefit obligation
Accumulated benefit obligation
Fair value of plan assets	Fair value of plan assets	97		38

~~-92-~~Long-term debt was recorded at the carrying amount. The estimated fair value of long-term debt (including current portion) is as follows:


($ in millions)	December 31, 2023		December 31, 2022
Long-term debt	$	8,253	$	8,294

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

Fair value was estimated using inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability and would be considered Level 2 in the fair value hierarchy.

~~Taxes on income consisted of:~~

($ in millions) 2021 2020 2019
Current provision
Federal $ 41 $ 91 $ (126)
Foreign 435 435 549
State (10) 2 (45)
$ 466 $ 528 $ 378
Deferred provision
Federal $ (64) $ 11 $ 3
Foreign (220) (44) (10)
State (4) 1 19
$ (288) $ (32) $ 12
$ 178 $ 496 $ 390

~~Deferred income taxes at December 31 consisted of:~~

2021 2020
($ in millions) Assets Liabilities Assets Liabilities
Product intangibles and licenses $ 105 $ — $ 24 $ —
Inventory related 15 — — 18
Reserves and allowances 40 — 39 —
Accrued expenses 23 — — —
Accelerated depreciation — 15 — —
Unremitted foreign earnings — 2 — 78
Right of use asset 51 — — —
Lease liability — 51 — —
Interest expense limitation carryforward 23 — — —
Compensation related 23 — — —
Unrecognized tax benefits — — 18 —
Hedging — 36 — —
Net operating losses and other tax credit carryforwards 103 — 70 —
Other 24 — 36 —
Subtotal $ 407 $ 104 $ 187 $ 96
Valuation allowance (35) — (69) —
Total deferred taxes $ 372 $ 104 $ 118 $ 96
Net deferred income taxes $ 268 $ 22
Recognized as:
Other Assets $ 272 $ 150
Deferred Income Taxes $ 4 $ 128

The Company has recognized $103 million and $70 million deferred taxes on net operating loss (NOL) carryforwards in multiple jurisdictions as of December 31, 2021 and 2020, respectively. Valuation allowances of $35 million have been established on certain foreign deferred tax assets. During 2021, the Company reduced valuation allowances by $42 million as a result of the Separation.

~~Income taxes paid in 2021 were $131 million. Income taxes paid by Merck with respect to Organon for 2020 and 2019 were $416 million and $1.1 billion, respectively.~~

As of December 31, 2021, and 2020, the Company deferred the income tax consequences resulting from intra-entity transfers of inventory totaling $377 million and $421 million, respectively. These amounts are reflected in ~~Other current assets.~~

~~-93-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

~~A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:~~

($ in millions) 2021 2020 2019
Balance January 1 $ 219 $ 213 $ 619
Additions related to current year tax positions 23 15 12
Additions related to prior year tax positions 18 23 4
Reductions for tax positions of prior years (1)
(49) (3) (274)
Spinoff related adjustments (2)
(108) — —
Settlements (15) (19) (140)
Lapse of statute of limitations (10) (10) (8)
Balance December 31 $ 78 $ 219 $ 213
~~(1)~~ ~~Amounts in 2019 reflect the settlement with the IRS discussed below.~~

~~(2)~~ ~~Unrecognized tax benefits were reduced by $108 million in 2021~~made interest payments related to ~~positions taken prior to the spinoff for which Merck, as the Company’s former Parent, is the primary obligor and is responsible for settlement and payment~~its debt instruments of ~~any resulting tax obligation.~~

~~If the Company were to recognize the unrecognized tax benefits of $78~~$495 million ~~at December 31, 2021, the income tax provision would reflect a favorable net impact of $78 million.~~

Prior to June 2, 2021, the Company was part of Merck’s consolidated U.S. federal income tax return, as well as separate and combined Merck income tax returns in numerous state and international jurisdictions. Merck was under examination by numerous tax authorities in various jurisdictions globally. During 2021, the IRS concluded its examinations of Merck’s 2015-2016 U.S. federal income tax returns. As a result, the Company reflected an allocation from Merck of $18 million representing the Company's portion of the payment made to the IRS in the Consolidated Financial Statements. The Company's portion of reserves for unrecognized tax benefits for the years under examination exceeded the allocated adjustments relating to this examination period and therefore the Company included a $29 million net tax benefit for the year ended December 31, ~~2021. This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.~~

2023. The ~~Company is subject to income tax in the United States (federal, state and local) as well as other jurisdictions outside~~average maturity of the United States in which we operate. As part of the Separation from Merck, $79.3 million of liabilities for unrecognized tax benefits associated with uncertain tax positions for jurisdictions outside of the United States were conveyed to Organon.

~~The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits~~Company's long-term debt as of December 31, ~~2021 could decrease by up to $11 million in~~2023 is approximately 5.0 years and the next 12 months as a result of various audit closures, settlements or the expiration of the statute of limitations. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures.

Interest and penalties associated with uncertain tax positions were immaterial in 2021 and resulted in an expense (benefit) of $11 million in 2020 and $(48) million in 2019, respectively. These amounts reflect the beneficial impacts of various tax settlements, including those discussed below. Liabilities for accruedweighted-average interest ~~and penalties were $39 million and $68 million~~rate on total borrowings as of December 31, ~~2021 and 2020, respectively.~~2023 is 5.7%.

In 2019, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2012-2014 U.S. federal income tax returns. As a result, the Company reflected a payment of $142 million in the consolidated financial statements. The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and therefore the Company recorded a net tax benefit of $258 million in 2019. This net benefit reflects reductions in reserves for unrecognized tax benefits for tax positions relating to the years that were under examination, partially offset by additional reserves for tax positions not previously reserved for.

~~Various state and foreign tax examinations are in progress and for these jurisdictions, income tax returns are open for examination for the period 2006 through 2021.~~

~~-94-~~

On March 30, 2023, the Company made a discretionary prepayment of $250 million on the U.S. Dollar-denominated term loan.

On June 21, 2023, the Company borrowed $80 million on the Revolving Credit Facility and subsequently repaid the amount on June 30, 2023.

In both the second quarter of 2022 and the fourth quarter of 2021, the Company made a discretionary prepayment of $100 million on the U.S. Dollar-denominated term loan.

The schedule of principal payments required on long-term debt for the next five years and thereafter is as follows:


($ in millions)
2024	$	9
2025	10
2026	10
2027	9
2028	6,803
Thereafter	2,003

Leases

-85-

Notes to Consolidated Financial Statements

For periods prior to the Separation, lease costs were allocated to the Company based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method. Actual operating lease costs and allocated operating lease costs for periods prior to Separation were $67 million, $61 million and $66 million for the year ended December 31, 2023, 2022, and 2021, respectively.

None of the Company's lease agreements contain variable lease payments. Sublease income is immaterial and there are no sale-leaseback transactions. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Cash paid for amounts included in the measurement of operating lease liabilities was $56 million, $55 million and $41 million for the year ended December 31, 2023, 2022 and 2021, respectively. Operating lease assets obtained in exchange for new operating lease liabilities were $25 million, $28 million and $241 million for the year ended December 31, 2023, 2022 and 2021, respectively, and primarily consists of real estate operating leases entered into in connection with establishing Organon as a standalone Company.

Supplemental balance sheet information related to operating leases is as follows:


($ in millions)	December 31, 2023		December 31, 2022
Assets
Other Assets	$	173	$	215
Liabilities
Accrued and other current liabilities	46		49
Other Noncurrent Liabilities	125		150
	$	171	$	199
Weighted-average remaining lease term (years)	5.0		5.3
Weighted-average discount rate	4.8%		4.0%

Maturities of operating lease liabilities as of December 31, 2023 are as follows ($ in millions):


2024	$	52
2025	48
2026	29
2027	14
2028	13
Thereafter	33
Total lease payments	$	189
Less: Imputed interest	18
	$	171

-86-

Notes to Consolidated Financial Statements ~~(continued)~~

17. Accumulated Other Comprehensive Income (Loss)

Changes in Accumulated other comprehensive ~~loss~~income (loss) by component are as follows:


($ in millions)	($ in millions)	Employee Benefit Plans		Cumulative Translation Adjustment		Accumulated Other Comprehensive Income (Loss)		($ in millions)	Employee Benefit Plans	Cumulative Translation Adjustment	Accumulated Other Comprehensive Loss
Balance at January 1, 2019, net of taxes		$	(294)	$	(614)	$	(908)

Balance at January 1, 2021, net of taxes

Balance at January 1, 2021, net of taxes

Balance at January 1, 2021, net of taxes
Other comprehensive income, pretax
Tax
Other comprehensive income, net of taxes
Net Transfer of benefit plans to Merck affiliates
Balance at December 31, 2021, net of taxes

Other comprehensive income (loss), pretax

Other comprehensive income (loss), pretax

Other comprehensive income (loss), pretax	Other comprehensive income (loss), pretax	(68)		54		(14)
Tax	Tax	8		—		8
Other comprehensive income (loss), net of taxes	Other comprehensive income (loss), net of taxes	(60)		54		(6)
Balance at December 31, 2019, net of taxes		$	(354)	$	(560)	$	(914)
Other comprehensive income (loss), pretax		(172)		(30)		(202)

Balance at December 31, 2022, net of taxes
Balance at December 31, 2022, net of taxes
Balance at December 31, 2022, net of taxes

Other comprehensive (loss) income, pretax

Other comprehensive (loss) income, pretax

Other comprehensive (loss) income, pretax
Tax	Tax	29		—		29
Other comprehensive income (loss), net of taxes		(143)		(30)		(173)
Net Transfer of benefit plans to Merck affiliates		$	465	$	—	$	465
Balance at December 31, 2020, net of taxes		$	(32)	$	(590)	$	(622)
Other comprehensive income (loss), pretax		21		90		111
Tax		(13)		—		(13)
Other comprehensive income (loss), net of taxes		8		90		98
Net transfer of benefit plans to Merck affiliates		11		—		11
Balance at December 31, 2021, net of taxes		$	(13)	$	(500)	$	(513)
Other comprehensive (loss) income, net of taxes

Balance at December 31, 2023, net of taxes
Balance at December 31, 2023, net of taxes
Balance at December 31, 2023, net of taxes

18. ~~Product~~Samsung Collaboration

The Company has an agreement with Samsung Bioepis Co., Ltd. ("Samsung Bioepis") to develop and ~~Geographic Information~~commercialize multiple pre-specified biosimilar candidates, which have since launched and are part of the Company's product portfolio. Under the agreement, Samsung Bioepis is responsible for preclinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates, and the Company has an exclusive license for worldwide commercialization with certain geographic exceptions specified on a product-by-product basis. The Company's access rights to each product under the agreement last for 10 years from each product's launch date on a market-by-market basis. Gross profits are shared equally in all markets with the exception of certain markets in Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to the Company. Since the Company is the principal on sales transactions with third parties, the Company recognizes sales, cost of sales and selling, general and administrative expenses on a gross basis. Generally, profit sharing adjustments are recorded either to Cost of sales (after commercialization) or Selling, general and administrative expenses (prior to commercialization).

~~The Company’s operations include~~

Samsung Bioepis is eligible for additional payments associated with pre-specified clinical and regulatory milestones. As of December 31, 2023, potential future regulatory milestone payments of $25 million remain under the ~~following product portfolios,~~agreement.

In November 2023, the U.S. Food and Drug Administration accepted for review the Supplemental Biologics License Application (sBLA) for the interchangeability designation for Hadlima.

In July 2023, the Company began selling Hadlima, a biosimilar referencing Humira2 (adalimumab), in the United States.

In August 2022, the U.S. Food and Drug Administration ("FDA") approved the citrate-free, high-concentration (100 mg/mL) formulation of Hadlima, a biosimilar referencing Humira. During the third quarter of 2022, Organon paid Samsung Bioepis $18 million. This amount was recognized as an intangible asset which ~~constitute 1 operating segment engaged in developing and delivering innovative health solutions through its portfolio~~will be amortized over the estimated useful life of ~~prescription therapies within women’s health, biosimilars and established brands.~~approximately 10 years.

~~-95-~~-87-

Notes to Consolidated Financial Statements ~~(continued)~~

~~Revenue of the Company’s products were~~Summarized information related to this collaboration is as follows:

2021 2020 2019
($ in millions) U.S. Int’l Total U.S. Int’l Total U.S. Int’l Total
Women’s Health
Nexplanon/Implanon NXT $ 532 $ 237 $ 769 $ 488 $ 192 $ 680 $ 568 $ 219 $ 787
Follistim AQ 110 127 237 84 108 193 103 138 241
NuvaRing 85 106 191 111 126 236 744 134 879
ganirelix acetate injection 22 88 111 11 69 81 25 86 112
Cerazette — 70 70 — 67 67 — 71 71
Other Women's Health (1)
96 139 234 165 133 298 18 156 173
Biosimilars
Renflexis 164 21 186 123 12 135 95 1 96
Ontruzant 34 92 126 3 113 115 — 83 83
Brenzys — 63 63 — 74 74 — 72 72
Other Biosimilars (1)
— 49 49 — 6 6 — — —
Established Brands
Cardiovascular
Zetia 10 368 378 (1) 483 482 14 575 590
Vytorin 11 153 164 12 170 182 16 268 285
Atozet — 458 458 — 453 453 — 391 391
Rosuzet — 68 68 — 130 130 — 120 120
Cozaar/Hyzaar 12 345 357 21 365 386 25 417 442
Zocor 4 61 65 3 75 77 6 107 112
Other Cardiovascular (1)
— 126 126 — 162 162 — 134 134
Respiratory
Singulair 15 398 413 18 444 462 30 669 698
Nasonex 4 201 206 12 206 218 9 284 293
Dulera 154 36 190 188 34 222 189 29 217
Clarinex 6 106 111 7 123 130 8 133 142
Asmanex 57 7 63 76 8 83 84 9 94
Other Respiratory (1)
— 26 26 3 32 35 1 25 25
Non-Opioid Pain, Bone and Dermatology
Arcoxia — 244 244 — 258 258 — 288 288
Fosamax 4 172 175 4 176 180 9 188 197
Diprospan — 125 125 — 118 118 — 102 102
Diprosone 1 86 87 1 82 83 1 83 84
Other Non-Opioid Pain, Bone and Dermatology (1)
15 183 199 9 186 195 14 199 214
Other
Proscar 1 116 117 2 174 176 2 202 203
Propecia 9 127 136 10 119 129 11 120 131
Sinemet — 71 71 (1) 78 77 1 78 79
Remeron 3 62 66 2 61 64 3 79 82
Other (1)
37 185 223 53 185 238 62 176 238
Other (2)
(3) 205 200 4 102 107 (17) 120 102
Total Revenue $ 1,383 $ 4,921 $ 6,304 $ 1,408 $ 5,124 $ 6,532 $ 2,021 $ 5,756 $ 7,777


	Year Ended December 31,
($ in millions)		2023		2022		2021
Sales		$	593	$	481	$	424
Cost of sales		406		315		248
Selling, general and administrative		72		86		83

~~U.S. plus international may not equal total due to rounding~~.

~~(1)~~ ~~Includes sales of products not listed separately. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health.~~

~~(2)Includes manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.~~

~~-96-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

~~Combined sales by geographic area where derived are as follows:~~

($ in millions) 2021 2020 2019
Europe and Canada $ 1,741 $ 1,726 $ 1,893
United States 1,383 1,408 2,021
Asia Pacific and Japan 1,173 1,535 1,789
China 933 873 1,027
Latin America, Middle East, Russia and Africa 841 857 923
Other(1)
233 133 124
$ 6,304 $ 6,532 $ 7,777


($ in millions)	December 31, 2023		December 31, 2022
Receivables from Samsung included in Other current assets	$	—	$	21
Payables to Samsung included in Trade accounts payable	104		72

~~(1)~~
~~Primarily reflects manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.~~

During 2021, the Company realigned its geographic presentation of sales to reflect the internal management view of Organon as a standalone entity. Accordingly, prior period sales by geographic area have been recast to reflect these changes.

Approximately 80% of the Company's long-lived assets is located in Europe and Canada, and 10% in the United States. The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.

19. Third-Party Arrangements and Related Party Disclosures

Pursuant to the Separation, Merck ceased to be a related party to Organon and accordingly, no related party transactions or balances ~~are~~have been reported since June 2, 2021.

In connection with the Separation, the Company entered into the Separation and Distribution Agreement, which contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of Organon and Merck as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of the Organon business with Organon and financial responsibility for the obligations and liabilities of ~~Merck’s~~Merck's remaining business with Merck, (iii) procedures with respect to claims subject to indemnification and related matters, (iv) the allocation ~~among~~between Organon and Merck of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the Distribution, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures governing ~~Organon’s~~Organon's and ~~Merck’s~~Merck's obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of ~~Merck’s~~Merck's business and ~~Organon’s~~Organon's business.

Agreements that Organon entered into with Merck that govern aspects of ~~Organon’s~~Organon's relationship with Merck following the Separation include:

•Transition Services Agreements - Under the TSA, (i) Merck and certain of its affiliates provide Organon and certain of its affiliates, on an interim, transitional basis, various services, and (ii) Organon and certain of its affiliates provide Merck and certain of its affiliates, on an interim, transitional basis, various services. The services provided by Merck ~~will include,~~includes, among others, information technology, human resources, finance, quality, regulatory, supply chain management, promotional services, distribution services and certain other services, and ~~will provide~~provides on a cost or, where applicable, a cost-plus basis. The Merck services generally commenced on the date of the Separation and ~~generally terminate~~the majority of the services terminated within 25 months following the date of Separation. Organon generally has the right to request the early termination of any or all services with advance notice. The services provided by Organon include quality, regulatory, supply chain management, promotional services, distribution services and certain other services and is provided on a cost or, where applicable, a cost-plus basis. The ~~provisions~~provision of ~~Organon~~certain services under the TSA ~~generally commenced on the date~~expired as of ~~Separation and terminate within 25 months following the Separation.~~July 2, 2023, however, certain services have been extended to at least 35 months. Merck will generally have the right to request the early termination of any or all services with advance notice.

•Interim Operating Agreements - Merck and Organon entered into a series of interim operating model ("IOM") ~~agreements~~ pursuant to which Merck and certain of its affiliates that held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products in various jurisdictions prior to the Separation, ~~will~~ continue to market, import and distribute such products until such time as the relevant licenses and permits are transferred to Organon or its affiliates, while permitting Organon (or Merck, as applicable) to recognize revenue relating to the sale of its respective products, to the extent practicable. Under such ~~interim operating~~IOM agreements and in accordance with the Separation and Distribution Agreement, the relevant Merck entity will continue operations in the affected market on behalf of Organon, with Organon receiving all of the economic benefits and

~~-97-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

burdens of such activities. Organon began receiving these economic benefits as of June 2, 2021. Based on the terms of the IOM ~~agreement,~~agreements, the Company determined it is the Principal under ~~this arrangement.~~these arrangements. Organon holds all risks and rewards of ownership inclusive of risk of loss, market risk and benefits related to the inventory. Additionally, Organon has ~~latitude~~control in pricing, has the ability to direct Merck regarding decisions over inventory, and is responsible for all credit and collections risks and losses associated with the related receivables. As such, Organon recognizes these sales on a gross basis. ~~Certain amounts are estimates and subject~~As of December 31, 2023, only one jurisdiction remains under an IOM.

-88-

Notes to ~~possible adjustment in future periods.~~Consolidated Financial Statements

•Manufacturing and Supply Agreements - Merck and Organon and/or their applicable affiliates entered into a number of manufacturing and supply agreements pursuant to which the relevant Merck entity ~~will~~ (a) ~~manufacture~~manufactures and ~~supply~~supplies certain active pharmaceutical ingredients for the relevant Organon entity, (b) toll ~~manufacture~~manufactures and ~~supply~~supplies certain formulated pharmaceutical products for such Organon entity, and (c) ~~package~~packages and ~~label~~labels certain finished pharmaceutical products for such Organon entity. Similarly, the relevant Organon entity ~~will~~ (a) ~~manufacture~~manufactures and ~~supply~~supplies certain formulated pharmaceutical products for the relevant Merck entity, and (b) ~~package~~packages and ~~label~~labels certain finished pharmaceutical products for such Merck entity.

•Tax Matters Agreement - The TMA allocates responsibility for all U.S. federal income, state and foreign income, franchise, capital gain, withholding and similar taxes, as well as all non-income taxes. The TMA also provides for cooperation between Merck and Organon with respect to tax matters, the exchange of information and the retention of records that may affect the tax liabilities of the parties to the TMA. Merck generally is responsible for any income taxes reportable on an originally filed consolidated, combined or unitary return that includes Merck or any of its subsidiaries (and Organon and/or any of its subsidiaries) for any periods or portions thereof ending on or prior to the Distribution. Organon generally is responsible for any income taxes that are reportable on originally filed returns that include only Organon and/or any of its subsidiaries, for all tax periods. Additionally, as a general matter, Merck is responsible for certain income and non-income taxes imposed as the direct result of the Separation or of an internal separation transaction. Organon is responsible for certain taxes that exclusively relate to ~~Organon’s~~Organon's business and for taxes resulting from any breach of certain representations or covenants that Organon made in the TMA. The TMA imposes restrictions on Organon and its subsidiaries during the two-year period following the Distribution. The restrictions are intended to prevent the Distribution and certain related transactions from failing to qualify as tax-free for U.S. federal income tax purposes. During such period, Organon and its subsidiaries generally are prohibited from, among other things, entering into transactions in which all or a portion of the shares of the Common Stock would be acquired or all or a portion of certain assets of Organon and its subsidiaries would be acquired. Organon and its subsidiaries also are prohibited, during such period, from merging or consolidating with any other person, issuing equity securities beyond certain thresholds, and repurchasing Common Stock other than in certain open-market transactions. Certain amounts are estimates and subject to possible adjustment in future periods.

•Employee Matters Agreement - The agreement allocated assets, liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Separation.

•Other agreements that Organon entered into with Merck include the Intellectual Property License Agreements and Regulatory Agreements.

The amount due from Merck under the above agreements was $403 million at December 31, 2021 and is reflected in accounts receivable. The amount due to Merck under these agreements was $928 million at December 31, 2021 and is included in accounts payable.

For the ~~period post-Separation through~~year ended December 31, ~~2021, sales~~2023, material transactions occurred in connection with the IOM Agreements.

The amounts due under such agreements were:


($ in millions)	December 31, 2023		December 31, 2022
Due from Merck in Accounts receivable	$	583	$	374
Due to Merck in Accounts payable	619		543

Sales and cost of sales resulting from the manufacturing and supply agreements with Merck ~~were $90 million and $85 million, respectively.~~were:

Following the distribution to Merck of $9.0 billion in net debt proceeds (see Note 11) and settlement of certain balances with Merck and its affiliates, the balance in cash and cash equivalents included approximately $400 million of funds received from Merck for the purchase of inventory from Merck upon exit of certain IOMs. The purchase was complete by the end of 2021.


	Year Ended December 31,
($ in millions)		2023		2022		2021
Sales		$	122	$	127	$	90
Cost of sales		114		116		85

Prior to the Separation, the Company did not operate as a standalone business and the Consolidated Financial Statements were derived from the consolidated financial statements and accounting records of Merck. The following disclosure summarizes activity between the Company and Merck up to the Separation, including the affiliates of Merck that were not part of the Separation.

-89-

Notes to Consolidated Financial Statements

Cost allocations from Merck

Merck provided significant corporate, manufacturing, selling, marketing, administrative, research services and resources to the Company. The Consolidated Financial Statements reflect an allocation of these costs. Some of these services continue to be provided by Merck to the Company on a temporary basis under the Transition Services Agreement. The ~~Consolidated Financial Statements reflect an allocation of these costs. See Note 2 for a discussion of these costs and the methodology used to allocate them.~~

~~-98-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

~~The~~ allocations reflected in the Consolidated ~~Statement~~Statements of Income for continuing operations are as follows:

($ in millions)
2021(1)
2020 2019
Cost of sales $ 69 $ 452 $ 520
Selling, general and administrative 134 658 725
Research and development 35 152 190
$ 238 $ 1,262 $ 1,435


	Year Ended December 31,
($ in millions)		2021 (1)
Cost of sales		$	69
Selling, general and administrative		134
Research and development		35
		$	238

(1) Includes costs through the Separation Date.

Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company at the time. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by ~~Company’s~~the Company's employees and strategic decisions made in areas such as manufacturing, selling, information technology and infrastructure.

Related party transactions

The following transactions represent activity between Organon Entities and Transferred Entities with other Merck affiliates prior to the Separation:

($ in millions) 2021 2020 2019
Included in continuing operations
Supply sales to Merck affiliates $ 143 $ 57 $ —
Purchases from Merck affiliates 65 657 —
Cost reimbursements and fees from Merck affiliates 1 — —
Included in discontinued operations
Supply sales to Merck affiliates $ 12 $ 542 $ 501
Purchases from Merck affiliates 53 382 1,087
Cost reimbursements and fees (to) from Merck affiliates $ — $ 22 $ 19
Interest expense, net on loans and advances with Merck affiliates $ — $ 2 $ 3

~~The Company had the following balances with Merck affiliates:~~

Year Ended
December 31,

($ in millions)

~~December 31, 2020~~2021

Included in continuing operations

~~Short term borrowings, net~~Supply sales to Merck affiliates

~~1,512~~143

~~Trade payables (receivables), net~~Purchases from Merck affiliates

~~(173)~~65

~~Due to related party~~Cost reimbursements and fees from Merck affiliates

~~1,339~~

Included in discontinued operations

~~Short term loans receivables, net~~Supply sales to Merck affiliates

~~247~~12

~~Short term notes payable, net~~Purchases from Merck affiliates

~~(25)~~53

~~Trade payables, net~~

~~(33)~~

~~Due from related party~~

~~189~~

~~-99-~~

-90-

Notes to Consolidated Financial Statements ~~(continued)~~

Net transfers to Merck & Co., Inc.

Prior to the Separation, net transfers to Merck were included within Net investment from Merck & Co., Inc. on the Consolidated Statement of Equity and represent the net effect of transactions between the Company and Merck. The components of Net transfers to Merck & Co., Inc. were as follows:

($ in millions)
2021(1)
2020 2019
Cash pooling and general financing activities $ 168 $ 5,216 $ 5,310
Cost allocations, excluding non-cash stock-based compensation (209) (1,222) (1,394)
Taxes deemed settled with Merck (259) (409) (1,039)
Allocated derivative and hedging (losses) gains (88) (51) 55
Net transfers (from) to Merck & Co., Inc. as reflected in the Consolidated Statement of Cash Flows for Continuing Operations(2)
$ (388) $ 3,534 $ 2,932
Net transfers to (from) Merck included in Net Cash Provided by (Used in) Discontinued Operations 597 (194) (355)
Total net transfers to Merck as included in the Consolidated Statement of Cash Flows $ 209 $ 3,340 $ 2,577
Stock-based compensation expense (includes $3 and $7 of discontinued operations for 2021 and 2020, respectively)
(32) (54) (52)
Net assets (distributed to) contributed by Merck affiliates (778) 250 —
Recognition of amounts in Accumulated other comprehensive loss related to employee benefit plan transfers to Merck affiliates
13 465 —
Net transfers (from) to Merck & Co., Inc. as reflected in the Consolidated Statement of Equity
$ (588) $ 4,001 $ 2,525


	Year Ended December 31,
($ in millions)	2021 (1)
Cash pooling and general financing activities	$	168
Cost allocations, excluding non-cash stock-based compensation	(209)
Taxes deemed settled with Merck	(259)
Allocated derivative and hedging (losses) gains	(88)
Net transfers (from) to Merck & Co., Inc. as reflected in the Consolidated Statement of Cash Flows for Continuing Operations (2)	$	(388)
Net transfers to Merck included in Net Cash Used in Discontinued Operations	597
Total net transfers to Merck as included in the Consolidated Statement of Cash Flows	$	209
Stock-based compensation expense (includes $3 of discontinued operations)	(32)
Net assets contributed by Merck affiliates	(778)
Derecognition of amounts in Accumulated other comprehensive loss related to employee benefit plan transfers to Merck affiliates	13
Net transfers (from) to Merck & Co., Inc. as reflected in the Consolidated Statement of Equity	$	(588)

(1)~~The amounts for the year ended December 31, 2021~~Amounts represent activity through the date of the Separation.

(2)Net transfers (from) to Merck & Co., Inc. as reflected in the Consolidated Statement of Cash Flows for Continuing Operations for the year ended December 31, 2021 include Separation adjustments of $52 million, identified after the date of the Separation. ~~Refer to Note~~ 2 ~~for further details.~~

Prior to the Separation, transfers between the Organon Entities, the ~~Transferring~~Transferred Entities and Merck affiliates were recognized in Net transfers to Merck & Co., ~~Inc~~.Inc. in the Consolidated Statement of Equity at ~~Merck’s~~Merck's historical ~~cost (see Note 2).~~cost. Additionally, in connection with the Separation, certain assets and liabilities included in the pre-Separation balance sheet were retained by Merck and certain assets and liabilities not included in the pre-Separation balance sheet were transferred to Organon.

Separation-related adjustments were also recognized in Net transfers to Merck & Co., Inc. Adjustments for transfers and separations are reflected in the Company's Consolidated Financial Statements for the year ended December 31, 2021 and were comprised of (i) the retention of assets and liabilities by Merck affiliates including accounts receivable, net of $751 million, inventories of $265 million, transition tax liabilities of $1.4 billion and certain liabilities net of other assets of $210 million, partially offset by (ii) the contribution of assets and liabilities to Organon Entities from Merck affiliates, including assets of $59 million and liabilities of $35 million.

Merck conveyed to Organon $79.3 million of reserves for unrecognized tax benefits associated with uncertain tax positions for jurisdictions outside of the United States. See Note 1610 "Taxes on Income" for further details. The Company also incurred costs related to employee matters in connection with the Separation, primarily related to stock-based and pension related compensation costs. See Notes 137 "Stock-Based Compensation Plans" and 1415 "Pension and Other Postretirement Benefit Plans" for further details.

20. ~~Discontinued Operations~~Contingencies

~~-100-~~Organon is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters.

Organon records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

-91-

Notes to Consolidated Financial Statements ~~(continued)~~

~~The components~~

Given the nature of the litigation discussed in this note and the complexities involved in these matters, Organon is unable to reasonably estimate a possible loss or range of possible loss for such matters until Organon knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation, and (v) any other factors that may have a material effect on the litigation.

Organon's decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. Organon has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities.

Reference is made below to certain litigation in which Merck, but not Organon, is named as a defendant. Pursuant to the Separation and Distribution Agreement, Organon is required to indemnify Merck for liabilities relating to, arising from, or resulting from such litigation.

Product Liability Litigation

Fosamax

Merck is a defendant in product liability lawsuits in the United States involving Fosamax® (alendronate sodium) (the "Fosamax Litigation"). As of December 31, 2023, approximately 3,125 cases comprising the Fosamax Litigation are pending against Merck in either federal or state court. Plaintiffs in the vast majority of these cases generally allege that they sustained femur fractures and/or other bone injuries ("Femur Fractures") in association with the use of ~~Income (loss) from discontinued operations, net~~Fosamax.

All federal cases involving allegations of ~~tax~~Femur Fractures have been or will be transferred to a multidistrict litigation in the District of New Jersey ("Femur Fracture MDL"). In the only bellwether case tried to date in the Femur Fracture MDL, Glynn v. Merck, the jury returned a verdict in Merck's favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck's motion for judgment as a matter of law in the Glynn case and held that the plaintiff's failure to warn claim was preempted by federal law.

In August 2013, the Femur Fracture MDL court entered an order requiring plaintiffs in the Femur Fracture MDL to show cause why those cases asserting claims for a femur fracture injury that took place prior to September 14, 2010, should not be dismissed based on the court's preemption decision in the Glynn case. Pursuant to the show cause order, in March 2014, the Femur Fracture MDL court dismissed with prejudice approximately 650 cases on preemption grounds. Plaintiffs in approximately 515 of those cases appealed that decision to the U.S. Court of Appeals for the Third Circuit ("Third Circuit"). In March 2017, the Third Circuit issued a decision reversing the Femur Fracture MDL court's preemption ruling and remanding the appealed cases back to the Femur Fracture MDL court. In May 2019, the U.S. Supreme Court decided that the Third Circuit had incorrectly concluded that the issue of preemption should be resolved by a jury, and accordingly vacated the judgment of the Third Circuit and remanded the proceedings back to the Third Circuit to address the issue in a manner consistent with the Supreme Court's opinion. In November 2019, the Third Circuit remanded the cases back to the District Court in order to allow that court to determine in the first instance whether the plaintiffs' state law claims are preempted by federal law under the standards described by the Supreme Court in its opinion. On March 23, 2022, the District Court granted Merck's motion and ruled that plaintiffs' failure to warn claims are preempted as a matter of law to the extent they assert that Merck ~~Retained Products business~~should have added a Warning or Precaution regarding atypical femur fractures prior to October 2010. On July 11, 2022, the District Court entered an Order to Show Cause as to why the Court should not dismiss either with prejudice or conditionally all of plaintiffs' claims that are not dependent on the preempted failure to warn claims. On November 18, 2022, as ~~follows:~~a result of the Order to Show Cause, the District Court entered a Final Judgment resulting in the dismissal with prejudice of all plaintiffs in the MDL. On December 16, 2022, those plaintiffs filed their Notice of Appeal to the Third Circuit challenging the District Court's preemption ruling. 974 of the 975 cases previously pending in the Femur Fracture MDL have either been dismissed or are on appeal to the Third Circuit. Plaintiff's motion to remand one case back to its transferor court is pending. The Third Circuit has scheduled oral arguments for March 5, 2024.

($ in millions) 2021 2020 2019
Sales $ 93 $ 1,564 $ 1,753
Costs, Expenses and Other
Cost of Sales 65 1,228 1,347
Selling, general and administrative 15 310 479
Research and development 4 94 112
Restructuring costs — 10 23
Other (income) expense, net 4 (6) (67)
Income (loss) from discontinued operations before taxes $ 5 $ (72) $ (141)
Taxes on income 5 24 (53)
Loss from discontinued operations, net of taxes $ — $ (96) $ (88)

~~Discontinued operations includes~~As of December 31, 2023, approximately 1,870 cases alleging Femur Fractures have been filed in New Jersey state court and are pending in Middlesex County. The parties selected an initial group of cases to be reviewed through fact discovery, and Merck continued to select additional cases to be reviewed.

-92-

Notes to Consolidated Financial Statements

As of December 31, 2023, approximately 275 cases alleging Femur Fractures have been filed and are pending in California state court. All of the Femur Fracture cases filed in California state court have been consolidated before a single judge in Orange County, California.

Additionally, there are four Femur Fracture cases pending in other state courts.

Discovery is presently stayed in the Femur Fracture MDL and in the state court in California.

Nexplanon/Implanon

Merck is a defendant in lawsuits brought by individuals relating to the use of Nexplanon and Implanon™ (etonogestrel implant). There are two filed product liability actions involving Implanon, both of which are pending in the Northern District of Ohio as well as 56 unfiled cases involving Implanon alleging similar injuries, all of which have been tolled under a written tolling agreement. As of December 31, 2023, Merck had 20 cases pending outside the United States, of which 13 relate to Implanon and seven relate to Nexplanon.

Propecia/Proscar

As of December 31, 2023, one case involving Proscar® (finasteride) remains pending in the United States in the United States District Court for the Eastern District of California in which Merck's motion to dismiss was granted by the District Court, but the plaintiff can appeal the decision. The Company is also defending 12 product liability cases involving Propecia® (finasteride) outside the United States, two of which are class actions and three of which are putative class actions.

Governmental Proceedings

From time to time, Organon's subsidiaries may receive inquiries and may be the subject of preliminary investigation activities from competition and/or other governmental authorities, including in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to Organon, monetary fines and/or remedial undertakings may be required. Subject to certain exceptions specified in the Separation and Distribution Agreement, Organon assumed liability for all pending and threatened legal matters related ~~party sales~~to products transferred from Merck to Organon in connection with the spinoff, including competition investigations resulting from enforcement activity concerning Merck's conduct involving Organon's products. Organon could be obligated to indemnify Merck for fines or penalties, or a portion thereof, resulting from such investigations. In one such enforcement matter in Spain concerning NuvaRing, in October 2022, the National Commission on Markets and Competition ("CNMC") imposed a fine on Merck in the amount of ~~$12 million, $542 million and $501~~€39 million for abuse of a dominant position in the ~~year ended December 31,~~market for contraceptive vaginal rings from June 2017 to April 2018. The CNMC decision to impose the fine has been appealed to the National High Court in Spain. If the fine ultimately stands, Organon could be obligated to indemnify Merck for a portion thereof.

Hadlima

In July 2021, ~~2020 and 2019, respectively. Costs for inventory purchases~~Organon received a Civil Investigation Demand ("CID") from ~~related parties was $53 million, $382 million, and $1.1 billion~~the Office of the Attorney General for the ~~year ended~~State of Washington. The CID requests answers to interrogatories, as well as various documents, regarding certain activities related to adalimumab and adalimumab biosimilars. Organon is cooperating with the government's investigation and has produced information in response to the CID.

Patent Litigation

From time to time, generic manufacturers of pharmaceutical products file Abbreviated New Drug Applications with the FDA seeking to market generic forms of Organon's products prior to the expiration of relevant patents owned by Organon. To protect its patent rights, Organon may file patent infringement lawsuits against such generic companies. Similar lawsuits defending Organon's patent rights may exist in other countries. Organon intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products, potential payment of damages and legal fees, and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges.

-93-

Notes to Consolidated Financial Statements

Nexplanon

In June 2017, Microspherix LLC ("Microspherix") sued Organon in the U.S. District Court for the District of New Jersey asserting that the manufacturing, use, sale and importation of Nexplanon infringed several of Microspherix's patents that claim radio-opaque, implantable drug delivery devices. Microspherix claimed damages from September 2014 until the patents expired in May 2021. Organon brought Inter Partes Review proceedings in the United States Patent and Trademark Office ("USPTO") and successfully stayed the district court action. The USPTO invalidated some, but not all, of the claims asserted against Organon. Organon appealed the decisions that found claims valid, and the Court of Appeals for the Federal Circuit affirmed the USPTO's decisions. A claim construction hearing was held on March 2, 2022, and a claim construction order issued on February 27, 2023. This case was scheduled for trial before a jury in Camden, New Jersey starting on October 16, 2023. On October 13, 2023, the parties informed the district court that an agreement in principle of the key terms of a settlement was reached. In December ~~31, 2021, 2020~~2023, the parties executed the settlement agreement and ~~2019, respectively.~~the district court dismissed the case. Organon reserved $80 million to cover the settlement in 2023.

~~The components~~

Other Litigation

In addition to the matters described above, there are various other pending legal proceedings involving Organon, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of ~~assets and liabilities~~such proceedings, in the opinion of ~~discontinued operations that are stated separately~~Organon as of December 31, ~~2020~~2023, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to Organon's financial condition, results of operations or cash flows either individually or in the ~~Consolidated Balance Sheets are comprised of the following items:~~


~~($ in millions)~~	~~December 31, 2020~~
~~Assets~~
~~Cash and cash equivalents~~	$	58
~~Accounts receivable~~	~~322~~
~~Inventories~~	58
~~Due from related party~~	~~189~~
~~Other current assets~~	47
~~Total current assets of discontinued operations~~	~~674~~
~~Property, Plant and Equipment, net~~	14
~~Other Noncurrent Assets~~	77
~~Total Noncurrent Assets of Discontinued Operations~~	91
~~Total Assets of Discontinued Operations~~	$	~~765~~

~~Liabilities~~
~~Trade accounts payable~~	$	35
~~Accrued and other current liabilities~~	93
~~Total current liabilities of discontinued operations~~	~~128~~
~~Deferred Income Taxes~~	—
~~Other Noncurrent Liabilities~~	83
~~Total Noncurrent Liabilities of Discontinued Operations~~	83
~~Total Liabilities of Discontinued Operations~~	$	~~211~~

~~21. Earnings per Share~~

On June 2, 2021, the date of the Separation, 253,516,000 shares of the Common Stock were distributed to Merck stockholders of record as of the Record Date. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation. For the 2020 and 2019 calculations, these shares are treated as issued and outstanding at January 1, 2020 and 2019 for purposes of calculating historical basic and diluted earnings per share.

~~-101-~~

~~Notes to Consolidated Financial Statements~~ ~~(continued)~~

Prior to the Separation, certain of the Company's employees participated in stock-based compensation plans sponsored by Merck. Under these plans employees were granted stock options, performance share units ("PSUs"), and restricted stock units ("RSUs"). On June 2, 2021, and in accordance with the Employee Matters Agreement, all Merck stock options, PSUs and RSUs were converted using the conversion ratios set forth in the Employee Matters Agreement. Merck stock options, PSUs and RSUs were converted into Organon RSUs and option awards. Awards were equitably adjusted to reflect the spinoff and to preserve the same intrinsic value and general terms and conditions (including vesting) as were in place immediately prior to the adjustments (see Note 13 for additional details).

~~The calculation of basic and diluted earnings per common share for the year ended December 31, 2021, 2020 and 2019 was as follows:~~

($ in millions and shares in thousands, except per share amounts) 2021 2020 2019
Net income attributable to Organon:
Income from continuing operations $ 1,351 $ 2,256 $ 3,306
Income from discontinued operations — (96) (88)
Net income attributable to Organon $ 1,351 $ 2,160 $ 3,218
Basic weighted average number of shares outstanding 253,538 253,516 253,516
Stock awards and equity units (share equivalent) 655 — —
Diluted weighted average common shares outstanding 254,193 253,516 253,516
Earnings (Loss) Per Share Attributable to Organon common stockholders - Basic
Income from continuing operations $ 5.33 $ 8.90 $ 13.04
Loss from discontinued operations — (0.38) (0.35)
Basic earnings per common share attributable to Organon common stockholders $ 5.33 $ 8.52 $ 12.69
Earnings (Loss) Per Share Attributable to Organon common stockholders - Diluted
Income from continuing operations 5.31 8.90 13.04
Loss from discontinued operations — (0.38) (0.35)
Diluted earnings per common share attributable to Organon common stockholders $ 5.31 $ 8.52 $ 12.69

~~For periods prior to the Separation, it is assumed that there were no dilutive equity instruments as there were no equity awards of Organon outstanding prior to the Separation.~~

For periods subsequent to the Separation and the Distribution, diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards, when the effect of the potential exercise would be anti-dilutive. The weighted-average number of common shares outstanding for basic and diluted earnings per share for the year ended December 31, 2021 was based on the weighted-average number of common shares outstanding for the period beginning after the Distribution date.

For 2021, 4.9 million of common shares issuable under stock-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.

~~Dividend Program~~

During the second and third quarters of 2021, the Company's Board of Directors declared a quarterly cash dividend $0.28 per share on Organon's Common Stock that was paid on September 13 and December 16, 2021, respectively, to stockholders of record at the close of business on August 23, and November 22, 2021, respectively.

~~22. Subsequent Events~~

In February 2022, Organon acquired the product rights from Bayer AG to Marvelon® and Mercilon®, combined oral hormonal daily contraceptive pills, in the People’s Republic of China, including Hong Kong and Macau, and has entered into an agreement to acquire the rights to these products in Vietnam. Marvelon and Mercilon are already owned, manufactured, and marketed by Organon as prescription oral contraceptives in 20 other markets. The transaction to acquire the rights to these products in Vietnam will close in the first half of 2022 and is subject to customary closing conditions, including regulatory approval.aggregate.

Legal Defense Reserves

~~-102-~~Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by Organon; the development of Organon's legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against Organon; and the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The legal defense reserve as of December 31, 2023 and December 31, 2022 was $20 million and $17 million, respectively, and represented Organon's best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by Organon. Organon will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so.

Environmental Matters

In management's opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $19 million and $20 million at December 31, 2023 and 2022, respectively. These liabilities are undiscounted, do not consider potential recoveries from other parties and will be paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 15 years. It is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation. Management also does not believe that these expenditures should result in a material adverse effect on the Company's financial condition, results of operations or liquidity for any period presented.

21. Subsequent Events

In December 2023, Organon announced an agreement with Lilly to become the sole distributor and promoter of the migraine medicines Emgality® (galcanezumab) and Rayvow™ (lasmiditan) in Europe. Lilly will remain the marketing authorization holder and will manufacture the products for sale. Under the terms of the agreement, Organon paid an upfront payment of $50 million, upon closing of the transaction in January 2024, and will pay sales-based milestone payments. The upfront payment and certain sales-based milestone payments, which were deemed probable, are recognized as an intangible asset in the first quarter of 2024.

-94-

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

None.

Item 9A. Controls and Procedures

~~Management~~

Evaluation of ~~the Company,~~Disclosure Controls and Procedures

Our management with the participation of ~~its~~our Chief Executive Officer ~~("CEO")~~ and Chief Financial Officer, ~~("CFO"),~~has evaluated the effectiveness of ~~the design~~our disclosure controls and ~~operation~~procedures. Based on their evaluation, as of the ~~Company’s~~end of the period covered by this Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) ~~and~~or 15d-15(e) promulgated under the Exchange Act) asare effective.

Changes in Internal Control Over Financial Reporting

We began an implementation of an enterprise resource planning, ("ERP") system, which will replace the existing core financial system. The ERP system is designed to accurately maintain our financial records used to report operating results. The implementation of the ~~period ending December 31, 2021. Based upon that evaluation, our CEO and our CFO concluded that, as~~consolidated financial reporting module was completed during the 2023 fiscal year. The implementation of the ~~period ending December 31, 2021, the Company's disclosure controls~~general ledger module is in progress and ~~procedures were effective~~occurring in phases and ~~provide reasonable assurance that information required~~is expected to be ~~disclosed~~completed by the first half of 2024. The changes in ~~the reports that we file or submit~~process under the ~~Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated~~new ERP will continue to be subject to our ~~management, including~~evaluation of the operating effectiveness of internal control over financial reporting.

Except for the implementation of an ERP system, there was no change in our ~~CEO and our CFO, as appropriate, to allow timely decisions regarding required disclosure.~~

~~Our 2021 Annual Report does not include a report of management's assessment regarding~~ internal control over financial reporting ~~or an attestation of the Company's independent registered public accounting firm due to the transition period established by the rules of the SEC for newly created public companies.~~

~~No changes in our internal controls over financial reporting~~that occurred during the fourth quarter ~~ended December 31, 2021 have~~of 2023, that has materially affected, or ~~are~~is reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Management conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2023 based on the framework in Internal Control — Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that internal control over financial reporting was effective as of December 31, 2023.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Item 9B. Other Information

~~None.~~

During the three months ended December 31, 2023, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections

None.

-95-

Part III

Item 10. Directors, Executive Officers and Corporate Governance

~~Organon has~~

We have a Code of Conduct applicable to all of our employees, including ~~the~~our principal executive officer, principal financial officer, principal accounting officer, and controller, and all directors. ~~The~~Our Code of Conduct is available at organon.com/about-organon/mission-vision-and-values/code-of-conduct. To the extent required by the rules of the ~~U.S. Securities and Exchange Commission (the “SEC”)~~SEC or the New York Stock Exchange, ~~(the “NYSE”), Organon intends~~we intend to disclose amendments to and waivers of the Code of Conduct applicable to our executive officers and directors, if any, on that website within four business days following the date of any such amendment or waiver.

Additional information required by this item will be included in the ~~2022~~2024 Proxy Statement and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item will be included in the ~~2022~~2024 Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The ~~other~~ information required by this item will be included in the ~~2022~~2024 Proxy Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item will be included in the ~~2022~~2024 Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The information required by this item will be included in the ~~2022~~2024 Proxy Statement and is incorporated herein by reference.

~~-103-~~

Part IV

Items 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial Statements: The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K.

•Report of Independent Registered Public Accounting Firm

•Consolidated Statement of Income and Consolidated Statement of Comprehensive Income

•Consolidated Balance Sheet

•Consolidated Statement of Equity

•Consolidated Statement of Cash Flows

•Notes to the Consolidated Financial Statements

2. Exhibits: See Item 15(b) below.

(b) Exhibits

The exhibits listed on the Exhibit Index beginning on page ~~100,~~96, which is incorporated herein by reference, are filed or furnished as part of this report or are incorporated into this report by reference.

-96-


Number			Description


	2.1	—	Separation and Distribution Agreement, dated as of June 2, 2021, by and between Merck & Co., Inc. and Organon & Co. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021
	3.1	—	Amended and Restated Certificate of Incorporation of Organon & Co. (incorporated by reference to Exhibit 3.1 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
	3.2	—	Amended and Restated Bylaws of Organon & Co. (incorporated by reference to Exhibit 3.1 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on ~~June 3, 2021)~~December 9, 2022)
	*4.1	—	Form of Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K (File No. 001-40235) filed on March 21, 2022)
	*4.2	—	Description of Registrant's Securities (incorporated herein by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K (File No. 001-40235) filed on March 21, 2022)
	†10.1	—	Tax Matters Agreement, dated as of June 2, 2021, by and between Merck & Co., Inc. and Organon & Co. (incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
	10.2	—	Employee Matters Agreement, dated as of June 2, 2021, by and between Merck & Co., Inc. and Organon & Co. (incorporated by reference to Exhibit 10.2 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
	†10.3	—	Transition Services Agreement, dated as of June 2, 2021, by and between Merck & Co., Inc. and Organon & Co. (incorporated by reference to Exhibit 10.3 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
	†10.4	—	Transition Services Agreement, dated as of June 2, 2021, by and between Merck & Co., Inc. and Organon & Co. (incorporated by reference to Exhibit 10.4 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
	10.5	—	Indenture, dated as of April 22, 2021, among Organon Finance 1 LLC, Organon Foreign Debt Co-Issuer B.V., U.S. Bank National Association, as trustee and collateral agent, and Elavon Financial Services DAC, UK Branch, as principal paying agent, transfer agent and registrar, with respect to 2.875% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 10.5 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)

~~-104-~~


10.6	—	Indenture, dated as of April 22, 2021, among Organon Finance 1 LLC, Organon Foreign Debt Co-Issuer B.V. and U.S. Bank National Association, as trustee and collateral agent, with respect to 4.125% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 10.6 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.7	—	Indenture, dated as of April 22, 2021, among Organon Finance 1 LLC, Organon Foreign Debt Co-Issuer B.V. and U.S. Bank National Association, as trustee, with respect to 5.125% Senior Notes due 2031 (incorporated by reference to Exhibit 10.7 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.8	—	First Supplemental Indenture, dated as of June 2, 2021, among Organon & Co., Organon Foreign Debt Co-Issuer B.V., Organon Finance 1 LLC and U.S. Bank National Association, as trustee and collateral agent, with respect to 2.875% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 10.8 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.9	—	First Supplemental Indenture, dated as of June 2, 2021, among Organon & Co., Organon Foreign Debt Co-Issuer B.V., Organon Finance 1 LLC and U.S. Bank National Association, as trustee and collateral agent, with respect to 4.125% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 10.9 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.10	—	First Supplemental Indenture, dated as of June 2, 2021, among Organon & Co., Organon Foreign Debt Co-Issuer B.V., Organon Finance 1 LLC and U.S. Bank National Association, as trustee, with respect to 5.125% Senior Notes due 2031 (incorporated by reference to Exhibit 10.10 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)

-97-

Form of Global Terms for 2021 Restricted Stock Unit Grants Under the Organon & Co. 2021 Incentive Stock Plan (incorporated by reference to Exhibit 10.21 to Organon's Quarterly Report on Form 10-Q (File No. 001-40235) filed November 12, 2021)


10.11	—	Second Supplemental Indenture, dated as of June 2, 2021, among Organon LLC, Organon Global Inc., Organon Trade LLC, Organon Pharma Holdings LLC, Organon USA LLC, Organon Canada Holdings LLC, Organon & Co., Organon Foreign Debt Co-Issuer B.V. and U.S. Bank National Association, as trustee and collateral agent, with respect to 2.875% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 10.11 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.12	—	Second Supplemental Indenture, dated as of June 2, 2021, among Organon LLC, Organon Global Inc., Organon Trade LLC, Organon Pharma Holdings LLC, Organon USA LLC, Organon Canada Holdings LLC, Organon & Co., Organon Foreign Debt Co-Issuer B.V. and U.S. Bank National Association, as trustee and collateral agent, with respect to 4.125% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 10.12 to the ~~Company’s~~Company 's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.13	—	Second Supplemental Indenture, dated as of June 2, 2021, among Organon LLC, Organon Global Inc., Organon Trade LLC, Organon Pharma Holdings LLC, Organon USA LLC, Organon Canada Holdings LLC, Organon & Co., Organon Foreign Debt Co-Issuer B.V. and U.S. Bank National Association, as trustee, with respect to 5.125% Senior Notes due 2031 (incorporated by reference to Exhibit 10.13 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.14	—	Senior Secured Credit Agreement, dated as of June 2, 2021, by and among Organon & Co., Organon Foreign Debt Co-Issuer B.V., JPMorgan Chase Bank, N.A., as Administrative Agent, Collateral Agent, and the L/C Issuers and Lenders party thereto (incorporated by reference to Exhibit 10.14 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
10.15	—	Amendment No. 1 to Senior Secured Credit Agreement, dated as of June 30,2023, to the Credit Agreement by and among Organon & Co., Organon Foreign Debt Co-Issuer B.V.,JPMorgan Chase Bank, N.A., as Administrative Agent, Collateral Agent, and the L/C Issuers and Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company 's Current Report on Form 8-K (File No. 001-40235) filed on July 7, 2023).
+~~10.15~~10.16	—	Form of I ~~ndemnification~~ A ~~greement~~Indemnification Agreement (incorporated by reference to Exhibit 10.15 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
+~~10.16~~10.17	—	Organon & Co. 2021 Incentive Stock Plan (incorporated by reference to Exhibit 10.16 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
+~~10.17~~10.18	—	Organon & Co. Annual Incentive Plan (incorporated by reference to Exhibit 10.17 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
+~~10.18~~10.19	—	Organon & Co. Executive Change in Control Severance Program (incorporated by reference to Exhibit 10.18 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
+~~10.19~~10.20	—	Organon & Co. Executive Severance Program (incorporated by reference to Exhibit 10.19 to the ~~Company’s~~Company's Current Report on Form 8-K (File No. 001-40235) filed on June 3, 2021)
*10.21		Organon & Co. Executive Severance Program, as amended and restated on February 8, 2024.
+~~10.20~~10.22	—	Organon Non-Employee Director Savings Plan (incorporated by reference to Exhibit 10.20 to Organon's Quarterly Report on Form 10-Q (File No. 001-40235) filed on November 12, 2021)

~~-105-~~

+~~10.21~~10.23

—

+~~10.22~~10.24

—

Form of Global Terms for 2021 Performance Share Unit Award Under the Organon & Co. 2021 Incentive Stock Plan (incorporated by reference to Exhibit 10.22 to Organon's Quarterly Report on Form 10-Q (File No. 001-40235) filed November 12, 2021)

~~+10.23~~†10.25

—

Form of Global Terms for 2021 Non-qualified Stock Option Grants Under the Organon & Co. 2021 Incentive Stock Plan (incorporated by reference to Exhibit 10.23 to Organon's Quarterly Report on Form 10-Q (File No. 001-40235) filed on November 12, 2021

†~~10.24~~10.26

—

Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated February 18, 2013 (incorporated by reference to Exhibit 10.4 to Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

†~~10.25~~10.27

—

Amendment No. 1 to Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated July 21, 2014 (incorporated by reference to Exhibit 10.5 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

-98-

Amendment No. 2 to Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated August 2, 2017 2014 (incorporated by reference to Exhibit 10.6 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

†~~10.26~~10.28

—

~~10.27~~10.29

—

Amendment No. 3 to Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated October 1, 2017 (incorporated by reference to Exhibit 10.7 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

~~10.28~~10.30

—

Amendment No. 4 to Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated September 1, 2018 (incorporated by reference to Exhibit 10.8 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

~~10.29~~10.31

—

Amendment No. 5 to Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated October 15, 2018 (incorporated by reference to Exhibit 10.9 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

†~~10.30~~10.32

—

Amendment No. 6 to Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated December 19, 2018 (incorporated by reference to Exhibit 10.10 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

†~~10.31~~10.33

—

Amendment No. 7 to Development and Commercialization Agreement by and between Samsung Bioepis Co., Ltd., and Merck Sharp & Dohme Corp., dated May 15, 2020 (incorporated by reference to Exhibit 10.11 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 14, 2021)

~~†10.32~~+10.34

—

Specified Technology License Agreement (Nexplanon Rod Technology) by and between Merck Sharp & Dohme B.V. and Merck Sharp & Dohme RT B.V., dated October 28, 2020 (incorporated by reference to Exhibit 10.12 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on March 17, 2021)

+~~10.33~~10.35

—

Letter Agreement between Kevin Ali and Merck & Co., Inc. dated October 14, 2020 (incorporated by reference to Exhibit 10.15 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 29, 2021)

~~+10.34~~10.36

—

Letter Agreement between Matthew M. Walsh and Merck Sharp & Dohme Corp. dated March 24, 2020 (incorporated by reference to Exhibit 10.16 to ~~Organon’s~~Organon's Registration Statement on Form 10 (File No. 001-40235) filed on April 29, 2021)

10.37

*10.35

—

Supplemental License Agreement (Nexplanon Rod Technology) by and between Merck Sharp & Dohme B.V. and Merck Sharp & Dohme RT B.V., dated December 13, 2021 (filed on March 21, 2022)

*10.38

Form of Executive Separation Agreement

*21.1

—

List of Subsidiaries

*23.1

—

Consent of PricewaterhouseCoopers LLP

~~-106-~~

*24.1

—

Power of Attorney (included on signature page)

*31.1

—

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

*31.2

—

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

**32.1

—

Section 1350 Certification of Chief Executive Officer

**32.2

—

Section 1350 Certification of Chief Financial Officer

*97.1

—

Organon & Co. Dodd-Frank Policy On Recoupment Of Incentive Compensation

101.INS

—

XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

—

XBRL Taxonomy Extension Schema Document.

101.CAL

—

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

—

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

—

XBRL Taxonomy Extension Label Linkbase Document.

-99-


101.PRE		—	XBRL Taxonomy Extension Presentation Linkbase Document.

	104	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

		+	Management contract or compensatory plan or arrangement.
		*	Filed herewith.
		**	Furnished herewith.
		†	Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

¹ Indicates, in this ~~2021~~2023 Form 10-K, brand names of products, which are not available in the United States.

² Indicates, in this ~~2021~~2023 Form 10-K, brand names of products, which are registered trademarks not owned by the Company or its subsidiaries. Prolia and Xgeva are trademarks registered in the U.S. in the name of Amgen Inc.; Humira is a trademark registered in the U.S. in the name of ~~Abbvie~~AbbVie Biotechnology Ltd.; Enbrel is a trademark registered in the U.S. in the name of Immunex Corporation; Remicade is a trademark registered in the U.S. in the name of Janssen Biotech, Inc.; Avastin,~~is a trademark~~Perjeta and Herceptin are trademarks registered in the U.S. in the name of Genentech, Inc.; ~~Herceptin~~Yervoy is a trademark registered in the U.S. in the name of ~~Genentech, Inc.;~~Bristol-Myers Squibb Company; Clarinex is a trademark registered in the U.S. in the name of Bayer Healthcare LLC (used under license); ~~and~~ ~~Viox~~Vioxx is a trademark registered in the name of Merck in several ~~countries.~~countries: Emgality is a trademark registered in the U.S. in the name of Eli Lilly and Company (used under license); and Rayvow is a registered trademark of Eli Lilly in the European Union and other countries (used under license). Brand names of products that are in all italicized ~~letter,~~letters, without the footnote, are registered trademarks of Organon and/or one of its subsidiaries.

~~-107-~~

Item 16. Form 10-K Summary

None.

~~-108-~~-100-