OGN - Earnings call 3 2023

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Operator

Ladies and gentlemen, thank you for standing by. At this time, I'd like to welcome everyone to the Organon Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Thank you.

I would now like to turn the call over to Jennifer Halchak, Vice President, Investor Relations. conference. your begin Please

Jennifer Halchak

Chief Matt cover Head and will Quarter everyone. me Organon's XXXX review Organon's who Officer, Kevin operator, joining and today you Q&A call. will R&D also Organon's guidance. Ali, highlights; will Officer, Executive Third us Financial Earnings Sandra portion for this and the Dr. who Chief and good our Walsh, you, Milligan, of operational Thank morning, for performance are strategy be Thank joining Call. of With

Today, be website during and presentation Events this will www.organon.com. at our of referencing we following will a the Relations The be this you Presentations presentation section visible will webcast. those available on that also of be call our for call Investor on Organon

remind business, those with include due Actual forward-looking or statements and during certain to like forward-looking begin, discussed company's information would from management and statements. the including with will company's Before we Exchange by discussed materially subsequent uncertainties this stated I Commission, Securities call our risks differ listeners associated in that filings. filings conference implied XX-K the the which periodic could to results and are by

is measures we these non-GAAP a supplement measures to on In non-GAAP in GAAP. presentation. comparable considered of press reconciliation included measures measures with the conference A for call call, certain will prepared be addition, financial to which should discuss substitute release this not financial a and in and GAAP accordance the

would our over CEO, to like Kevin the turn call I Ali. now to

Kevin Ali

third where Jen. quarter today's our we'll about and everyone, Good thank call you, to morning, XXXX results. talk Welcome

impacting we The navigated business. U.S. of In the dollar strength the persists. quarter, external the some factors third

that -- formation, than challenging be expected environment We slow we a to the economic but the it beginning very and and slower we has policy are have thought. market biosimilars HUMIRA said navigating for from we China in a been

constant at grew consecutive our delivered currency. quarter, growth. eighth product third X% the sales quarter we in of That Still that product represents

was Total lower-margin year. at revenue, FX, includes constant currency which product In ] X%. with our quarter, women's prior down to compared the third ex [ down X% Merck was health sales the

Our biosimilars stability. X/X demonstrating represents franchise which our branch nearly Again, of established X%. and its franchise, business grew XX% grew the continued

Adjusted a EBITDA million, $XXX margin EPS representing adjusted $X.XX. was and diluted XX.X% was

in million rates million With in guided to $XXX August. at $XXX are a to these revenue of billion by results worsened from is $X.XX mind, our that the last this we guidance midpoint, we billion, range FX $X.XX since have lowering about of

reflects we just operational primarily The our plus I remaining factors described, to changes go-to-market the for impact are model making NEXPLANON.

mix are of product to our XX.X% our the to unfavorable margin range foreign stemming reflect from exchange on of manufacturing lower on margin EBITDA revenue, revising adjusted costs. the gross also impacts XX.X% to the timing We and

Now let's driven now basis in down reviewing was beginning market. X% women's primarily on NuvaRing, LOE by quarter, currency in women's had with franchise constant the XXXX generics the start third revenue health went in X and health. a which by The

but in quarter year-to-date, growth will the in business customer strong driven Strong market fourth well currency that on full identifiable by deliver a in constant China U.S. we the flat business year The revenue finish new win tailwinds fertility our onboarding high anticipate the is fertility basis. the a large a as fourth the for expectation very of as quarter, underpins single-digit

the ongoing from entire practices cycles a seeing a industry. health we pick Chinese transient quarter In significant commanded attention. This care third issue of government's China, review the physician slower are up is after which IVF stemming impacting

up China easier the has impacted by XX% fertility was XXXX engine, benefit COVID. the from FX. will fourth year-over-year quarter also in an growth Year-to-date, of XXXX compare, The of business as fourth been a quarter

doing We market, very important well in share gaining in China. we have been are and market that

are Strategically, is the strong. rapidly fertility an is is growing. working demand our into which U.S., the and very growing market In evolution on reimbursed segment strategy of the we market go-to-market

the from XX% increased the have compete past of fertility years, the in employers percentage benefits price market, X for providing Over traded To to has volume. XX%. reimbursed we

and We the are that having near benefit significant about accounts the start success, business recently we're some excited have term. in to will secured of we the

an fact, independent of this fourth quarter will drive the recent we in business what build largest from for win since a book in the represents reimbursed customer help company. a to win fertility In to our customer U.S. strong Inventory expect be becoming

as is the will that in U.S. of be in we the a brands preferred products into expect percentage XXXX, head covered lives we we, encouraging Particularly Organon fertility significant

Let's now constant X% on basis. quarter up declined FX and year-to-date the NEXPLANON, ex in X% currency turn which is to a

position resulting We expect low decisions that some NEXPLANON to U.S. the quarter with year-to-date. line single-digit made globally. accelerate a performance, robust in full better key strategic fourth NEXPLANON, in in growth year and We've to growth

undertaken XXXX. initiatives and rate for growth The we billion NEXPLANON in to position expect will $X run in strong XXXX, reach

some our go-to-market model. made U.S. we First, changes have to

the We price in will take not effective in U.S. NEXPLANON in XXXX.

meaningful pricing will when physicians see be and schedules. difference carrying to implanting now U.S. aligned reimbursement increases and health This timing will with pricing update their make from the future plans Our update NEXPLANON. a value

new a in see effect. when of customer goes ahead a increase into uptick healthy price Additionally, purchases we

XXXX. channels. price of quarters, NEXPLANON higher until mix of we our skewing the have million next in couple buying the into postponing shift signaled in customer by year, heavily we been U.S. anticipate our towards last So Also, discounted $XX will as has increase more about

industry-wide We discounts the fourth are programs, benefit by federal will believe dynamic quarter and which in these we to forward. going removing voluntary this adapting

our basis to XXXX. impact will next the annual of be Mexico on a Lapping price. $XX represents in million impact limited results the in tailwind That about participation this to we tender year. Secondly, revenue NEXPLANON's negative NEXPLANON of

And U.S. been has in thirdly, overall demand outside and Africa. Asia the strong,

our expanding international invested NEXPLANON in that satisfy supply In we've capacity fact, these fast-growing to so strong markets.

that throughput demand be in of that approximately to realized We $XX we visibility have XXXX. expect to related to million

about I've talked points X NEXPLANON about factors growth we will growth high million year. So that which into $XX of drive next X year, visibility or together next for that have represents

women's other to health Turning products.

about postpartum we're the talk This Let's for time revenue our hemorrhage. Jada. first breaking publicly is Jada, device for out

mothers Jada XX% the $XX with see And year-to-date, than million, is that been has double largest Jada more more now for the last so U.S. since Jada than generated period over launch. year. you'll the hospitals treated same birthing available revenue in the and XX,XXX have in of

incorporation the their and standard Jada Given shift focus response supporting in Jada PPH will our making our to now and users of available protocols. into in readiness progress majority in in hospitals the of U.S., the the hospitals

when are Jada in global less to U.S. a than those the the in the annually, million there sales outside for X $XXX a believe over U.S. potential great peak achieve We and than can of more U.S. million are XXX births is of Jada peak and in $XXX Globally, footprint. up million our the layering million fit

our Bioscience. October, our medication the XACIATO, by Dare of shipments in in an developed treatment years and of made finally, of U.S. for FDA-approved first age older [ And we vaginosis ] collaborator, patients bacterial XX

of go-to-market commercial Our experience NEXPLANON leverages and the the strategy knowledge team.

care status meet to with managed marketplace. access customers bacterial vaginosis competitive the to and in skilled market team Our formulary review obtain XACIATO continues

the of get in Let's third the in ex launch the year-to-date. discussion move to questions biosimilars there. the we on investor quarter our which Understandably, let's and so most recent U.S., now business, grew FX focus HADLIMA XX% the XX%

patients. that's We've At HADLIMA directly emphasized of benefits an to XX% priced the bring patient. to biosimilars and we discount, to the we expanded offer believe access where enable to can the value economic highest we

focused commercial U.S. efforts plans in want have XX% to bring net estimate patients. lower the about covered of to together, those the We payers our We costs who on lives that represent

factor rapidly have the we of the managed prescribing of closest having X-month competitive both space success. competitor hoped next Medicaid and as entrants, in as despite by we're market. gap and the not may lead over X their times. While in the on we're our July winning We're cohorts out for, Amgen's closing across we're commercial rapidly AMJEVITA Among in on the set, a

around high studies key comments and XX uptake. for well simple, product positioned we there citrate-free that HADLIMA's market formulation, a as launch, with with Foundation, a formulation, a pen as by Arthritis price well single is to from we made believe We're attributes a low Consistent be expected strategy, and by evidence a concentration need concentration backed the that over the real-world interchangeability user-friendly has a product mid-XXXX. wealth will of

form. of than on now, pass $X,XXX market missed out We to to without is is pay as of Right about HUMIRA when it this patients patients. insurance a meaningfully at starts least view on That savings We believe coverage. not opportunity the they of pocket more a HADLIMA to market matter for slower formation month. if, but of a would pay biosimilars clear X/X

Our very well market focus market segment could of together help our the profile on faster. the very convert intentional much low-cost the product with

Rounding out grown brands. top the franchise to ex discussion, the move has Year-to-date, line X% let's brands established established FX.

brand past of external why the the ahead Over which fundamentals established been we've strategy, of our then. has some performing since quarters, explains franchise highlighted expectations

through work. promotional increasing we quarter, pressure resulting first heightened NASONEX model in to compensate our adapting activity. for payer from and and Last our we [ the pricing ] to ATOZET mitigate commercial markets quarter, In about about talked to declines demand, meet select talked policy manufacturing for optimization

the and the we geographic diversity is been way assets What led managing bears product repeating has have stable quarter to the portfolio, this these of results. very and

team. competitive we of During solid been have products. then, diversity by our to the on portfolio delivered X vary and widely and well brands results any the geographic and given established complexities we capitalizing regions the in navigating geographic as XX across can a The testament as stable are execution quarter, that the since have

let's at X. geography. revenue a by take Now look where Slide We turn we to can

because region Let's dynamically that is quarter. currently most focus the this on moving that's China

had operating the a and had understand, recovery retail dynamic us has general probably We've Chinese the impacting consumers, read you economy history consumer is China, reach this Chinese post for in that which economic initiatives business, directly. experience had our The more to the As help COVID. implemented business. slowdown slower-than-expected long in market. our We've through a navigating

For example, e-commerce. through

addition, business our started traditional improve. that recent in also pharmacies retail through weeks, to In is has

authorities China investigations this are play The level. time the prescribing the enforcement of first that into recent The in procurement stricter health in the other issue and a includes for the to China is at volume-based in decline, in seeking macro at offset patterns care options which rules deficit. hospital budget is history,

has portfolio particular a these muted impact Our seen from very initiatives.

to resources VBP XX% We because impacted long of team already have more areas been weathered has have operating has our revenue our than other China. of And portfolio has a China our in is through we in represents this business. China, campaign. and history No those reallocated strong product experienced and Also, less diversity by most impacts. in

we next the more Overall, to see we of the hospital return believe beginning will engagement channels year. that and of a in a normal by retail level

in we're already fact, fourth seeing growth in China the quarter. In

Since then, our expanded and given life we establish women's have health. to brands in biosimilars both and new have pipeline

maximize to As working be into of XXXX, reduce will leverage existing we move portfolio. we and power our the

look assets enhance will in We profile. to that growth also bring our

We are own our opportunities. creating currently

we term. turning are every will stone value. headwinds medium positioned to year. are we over tailwinds XXXX saw in as over mid-single-digit serve unlock revenue the here from We to build us and We next deliver believe The for well growth transient

to Now into go results let's over detail. turn in who more the our will financial Matt, call

Matthew Walsh

X% constant we our with and competition small exclusivity, impact the loss the on for of Beginning about at in related XX, have quarter. Starting of for has to walk revenue year-to-date been generic third LOE in NuvaRing that Kevin. through the in amount Slide Thanks, million $XX the decline drivers currency of realized U.S. quarter, was let's the third the

been the markets impact Zedan million the had [ of year to experienced about is end first outside erosion brands HYZAAR. We was $XX in contributing well established stem a cardiovascular as Consistent the be some implementation China continues our quarters, In expectations. volume the this X established price X the sold But from most as included third in erosion quarters to the X and just included Kevin the VBP related Round quarter, of to that to a product, we've at quarter. as area. impact prior implementation million last with year's China. ] that of $XX our of we Round and of franchise the which significantly as In to referenced, EZETROL, July brands low able price REMERON

pressure driven in we What other franchises. within saw QX was being price

broadly nature we're pricing the biosimilar Given of franchise. competition, seeing across pressure that

X women's Additionally, the issues in U.S. within health

services. we're seeing XXXB grow fertility [ for attractive NEXPLANON market And second, within towards position the pressure as First, Customer to in mix competitively price reimbursed in been ourselves ] skewing has fertility, channel. the volume we

We in and third particularly established quarter, China. had in LAMERA the products of from million about primarily volume in growth region brands, non-VBP $XX our

U.S., to volumes as the aside in well biosimilars was formation slow covered biosimilars up HUMIRA depth U.S., Canada for volume market the our existing Brazil due in detail, which purchasing nicely Setting from in greater of the as customers. new customers and from Kevin

sales Other the The represents compared million primarily to prior bar for year. for Supply quarter to off Merck, $XX

past, As we've discussed decline essentially lower-margin continue declining a will of to this in contract stream and going manufacturing since the revenue forward. that have series arrangements is the spin-off been

about quarter. foreign can And had the we finally, for see exchange basis in translation, financial you headwind third the reporting XX points

rates at spot updated when we raised we last where August, our In guidance on time. that revenue guidance, were based

early favorable be late in U.S. the to August in terms versus the happens point spot the of With rates dollar. year July, of most hindsight, the benefit FX

dollar the has on then, X% give the strengthened as across spot our some. rates has second August then were currencies, some much up us and we caused significant Since most to as anticipating based half of favorability which

more foreign sensitivity function I'll and reporting a generated being outside of of our to the United revenue financial XX% exchange than remind everyone States. our is

performance to Now let's turn by franchise.

As has the year. we comments X areas slides to most next modeling, those relevant I the we will think will target been convention, where my end as about to our your over

Let's start on Slide women's XX. health with

year. in The single is in headwinds, high don't the XXXX doesn't to on that next the the covered second hard will math it's those next especially strong some scenario experiencing at a in NEXPLANON digits expect those Kevin recur outset, As half, to year. indicate we envision growth that detail headwinds in NEXPLANON return where

in share. for to tailwinds, that continue have structural even to third to fertility to Demand if gain price solid, order some is did quarter therapy up as we and market in the have strong area give continues we greater

now device of is month, forward of XXXX. for that we're part products, new is a post its in Jada the as and now channel in the area launch, launch and last the what steeper will In to yield postpartum revenue of curve hitting looking XACIATO hemorrhage

for has Biosimilars XX% ex to RENFLEXIS on in and the of ex in revenue its sixth Turning a Slide year-to-date. grew and both and track year the the U.S. to annual in biosimilars XX% U.S. XX. FX environment on grew consecutive growth the XX% operate in grown FX quarter continues quarter competitive it's in ONTRUZANT Europe.

LAMERA strong offsetting However, dynamics. this volume is remains in and the region, mainly in pricing Brazil, competitive

our it HADLIMA, year sales under X.X% With full of to regard revenue. XXXX that for expectation global was in just XXXX represent HADLIMA original would

Kevin in our be market will the Given significantly in formation global revision. than HUMIRA biosimilars less one HUMIRA discussed, is U.S. this the the revenue and that XXXX guidance for revenue mix fact, in driving factors that slower key of XXXX

the positive case pretty Established X% This XX. quarter Slide territory FX despite to delivered significant grew in talked is third brands. Turning in for growth still year-to-date. of We've ex it's year about FX durability ex That at brands established year was a point. the in and headwinds. X% growth the X X%

VBP product, in China, X currently in largest our First, and EZETROL we is have capturing Round which X now underway. Round

year the Second, beginning at market slowdown economic in we occurred grew products. the very China. And steroid that for of challenging environment the the action policy despite third, and injectable

quarter, expect least currency. year-to-date and year-on-year for outlook Given fourth to constant deliver performance we the performance the at level at brands established

the year-to-date items, Now metrics third Slide where performance. quarter XX, we line non-GAAP let's turn key P&L and show to for

our included slides in of press the GAAP measures reference, the and release presentation. For reconciliations to financials this financial in appendix non-GAAP are and

from and accounting cost are excluding our seen amortization we onetime which can purchase the related profit, goods slides. items sold, of to gross be spin-off, For in appendix

pricing period. margin compared lesser costs. foreign mix with gross translation due gross this extent year to in factors, also was and and were erosion margin adjusted a Product XX.X% in year-over-year inflationary in is distribution XX.X% Non-GAAP but prior quarter. the to exchange primarily and decline The manufacturing

the to FX unfavorably adjusted this of related the quarter. year, purchases, and cost third margin impacted quarter prior impact which timing has reflects into to fourth versus gross respect recognition of the will profit the With foreign on us exchange continue sales, inventory

million down the [ terms we Moving reach ] able million In to resolve agreement principle settlement of P&L. the million $XX main GAAP X year-over-year. years. to the October, will micros in for the in $XX The to That on amount over settlement. SG&A out were million $XX reserved reserves a of infringement claims total predated with settlement key that XXXX, patent $XX cover spin-off. We XXXX in NEXPLANON in of an was in fiscal $XX the be and driver million legal in increase XXXX. paid

had see, excluding our basis, increased you due increase as IP million the the non-GAAP to X%, development in costs. XXXX, expense an in was year-on-year. increased last higher of higher non-GAAP of third the R&D, X% and in of adjusted in of factors into a of such expenses On culminate XX.X% R&D, the mainly actually pipeline XXXX compared the down The these quarter $XX no to IP R&D R&D Including Total R&D costs expense employee-related primarily quarter to year. in in IP third this X% EBITDA quarter with We quarter. SG&A XX.X% associated investments continued expense third against of assets. can margin These due quarter. is

with was Non-GAAP year-over-year in was or EBITDA interest share adjusted net lower per expense. as of million per The net XXXX. income a million result $XXX as higher diluted income $X.XX $XXX or well share compared adjusted diluted $X.XX in decrease

to Turning XX. our on Slide ratio leverage net

year, has pressure quarter, third expected ratio upward and to peak be expected played on with we this net As the the this our we've previously in out. discussed, leverage

year year's injectable leverage last lapping to decline equal. be quarter EBITDA ratio the action low QX, last net all we quarter, that should market adjusted will drive a due steroids, and Next a in on else in

closer at XX, a our Slide provide cash to look we Turning flow.

For between is cash to $XXX full expected before working EBITDA the earlier in At difference year, to below attributable as the and year expected XXXX, we to capital generate of million is range, as the this onetime charges. well in $XXX about free flow expect we million use. million the $XXX midpoint what lower

to cash On deep that normal of tied the up in and ERP has new now accounts implementation operations. the global latter, potential temporarily we're current disruptions our and system, to mitigate

we a and our over this second cash annual expect the generated in XX% follow flow As to reminder, just similar in year of XXXX, half, we pattern. a

related the spin-off $XXX implementation trending Onetime costs second XXXX. that line million of for system on The of cash costs just are in our to the relates year and global the I the of transaction of expectation the to XXXX. component full referenced, track single we're that biggest with about to quarter in ERP separation complete

associated costs agreements onetime these next services manufacturing with result, year. the services the that especially should as opposed spin, agreements are meaningfully decline a As related transition to to tail those longer

X% that a deploy CapEx, infrastructure of drive purposes, productivity. help of into capital range cost continue X% well to and to as we efficiency as manufacturing remains technology PP&E our forecasting good For capabilities, and packaging for revenue our internal as to

XX. change guidance to Turning Slide our revenue We revenue on expected year-on-year. bridge

of based on We these the year. have revised expect we how to finish the ranges number

far LOE XXXX. impact minimal has in been so

generic And generic has that million, this not in million The to $XX for lower NuvaRing. impact addition, $XX impact on the year. for range lowered competition to ATOZET million from year to of than to amount LOE the of Japan $XX anticipate entrant down million expect related this was in U.S. small a DULERA to for generics anticipated year. We do finish similarly. We $XX realized the been as the in event we our

was well We the July to slightly of quarter as included implementation year, annual of we VBP. lower which as guided HYZAAR with this products. last as to now recent our impact in November EZETROL, REMERON and of Turning Round expect in which in X be tracking than better X what the to the year, we're implementation in Round second the both

from potential improvement the an $XXX from showed of million to estimate to to erosion million, you $XXX we our price $XX $XXX million lowering million quarter. that bridge We're last down

the erosion several seeing we're being Here, portfolio, manage momentum markets. than price able across better our to of expected brands established

million for for and revision We've forecasting midpoint, outlook HADLIMA at volume the uptake to to or were that down to of and about year, and NEXPLANON, guidance. slower-than-expected we've from model our million quarter policy last we to as changes year-on-year X% the result $XXX headwinds lowered lowered our made the We X% for a our China. the in macroeconomic a our underpins go-to-market growth revenue of range growth $XXX

then simply been When and forecast and August. the and raising where had now XXX were we at reported a over August, we full the gains early FX first of XXXX, to the basis we those then, for some. weakening in dollar our of with our million XX second the August. months point to of We're quarter held has steadily X saw Since compared year in back in gave in the points all our FX results favorability X headwind about representing spot $XXX that XXXX rates million, U.S. basis full back year $XXX to retraced, headwind we expected exposure rates for

$X.XX to constant of represents growth billion on revising result factors billion, Together, growth top guidance a X.X% which these $X.XX to currency line in basis. X.X% to

of impacts revenue, Slide in the to XX. the gross planning unfavorable of other guidance which of on to exchange XX% and manufacturing We're on product margin costs. budget revising from the our XXXX. our components We're foreign on low process expected reflects timing mix range Moving for midst range,

especially XXXX, guidance in aren't us will factors the we gross gross for we margin be today, directionally margin So that factors have XXXX as providing XXXX can half say back well. in that impacted the in while

inflationary COGS the pressures at example, For persist will line. likely

ex exposure. to that higher longer influence rates around interest its suggest be over the our for U.S. as dialogue the to given short-term U.S., continue dollar likely strong revenue a Fed in regards significant the Also, headwind is

percentage growth. consistent ranges SG&A it a and for we making to for sales last business the future our out in we're and are expectations the for what for R&D laid our with expenses, the as quarter year, reflect of investments operating For position

spots quarter XACIATO. closing, And the our In and within performance established the of revenue performance the Jada performance in continued largest of bright included women's the steady of health, third brands, segment. launch strong

revision economic macro in and guidance policy slow in issues of XXXX light the necessary HUMIRA around FX and well the biosimilars. was The as conditions formation China as market for translation

this, Even post exceeds for on growth will Organon single with the we revenue And reported currency growth low a believe year. in digits. growth the constant revenue of that post to last basis, we're revenue rate likely XXXX

With call over now that, to we can the turn Q&A.

Operator

[Operator Instructions] BNP Our question Paribas. Ty the comes first from of Navann line with

Navann Ty Dietschi

please. X me Can hear you have I okay? questions,

Kevin Ali

Yes, we can.

Matthew Walsh

Yes.

Navann Ty Dietschi

you the NEXPLANON on Yes, change go-to-market move model and it extent the revenues? in And a change? Great. quarterly the will what Okay. the drove of -- cadence could clarify

QX? then curious accounts And seen level when in of onboarding pressure competition biosimilar have fertility, on did you provide Organon about intensifying? discount And also what

with do current expect And growth if then health you still portfolio? long-term high one low overall, a just women's single-digit, the double-digit

Kevin Ali

Thanks, and I'll Navann. address Good the voice, to X you try to had. hear questions your

NEXPLANON. First question on

historical the years for sometime many in that it in prespend we've always quarter. NEXPLANON the So was price happened fourth that increase

the this the see lumpy taking buy-in fourth third increase, eventual you'd and price quarter, very protection. price advantage in So of

of difficult quarter having thing sawing And so end type very in year. of up every first this the sea you'd

updating of to the new and year. of given in of physicians first that, online their addition schedules just in systems reimbursement In every usually quarter terms kind get

price where call was physicians actually [ us, stressed, in were -- it there schedule. there in terms so time point it's in versus difference let's the ] of the a reimbursement And challenged

physicians So in terms [ point some with price We by industry a to with you with level. things. when predictable we able forecasting be to first away taking price, and of of up lumpiness more state take schedules trends well for changing X the rest we finally, in smoother quarter, this get more all at align of ] we us the of And the as to. for into actually and end do being align able take hit the of reimbursement Lark they when to

That's to So this of just take to away I opportunities the in think to. terms believe that wanted to essentially the buy-in we that will unpredictability us. able given We go-to-market for phenomenon and model buyout look which it it volatility more at least be want in exist year. for at any smoothen impact of and the talk will things very why the NEXPLANON, speak have of the we took out the of change to and some we we an

of in haven't the terms In around biosimilar your additional biosimilar second really U.S., penetration. any seen we penetration the question

a sector. what do uptake more company-sponsored As reimbursed essentially we see terms segment, fertility of of just clearly fact, patients a matter is of of benefits the are over of because movement moving in to the that

ultimately, what been do -- And it announce right volume. next but trading in that, in we've it, obviously, our really be call. kind so we with able to a about that reimbursement talking large you're sector. of off -- we're not now, more very is probably price win for And secure we've can't We'll just earnings

some quarter see for buy-in you'll so the And inventory purposes. in fourth

more essentially essentially But the with more plans these on getting be to what's PBM-driven opportunities regards and of in to some we're market kind is that the really reimbursed is process segment. happening of

year next good in beginning kind to goal is same portfolio. trends will month. assume -- It And fertility go-to-market course with next model health finally, -- the likely see correct yes, following the of of in high ability our of terms year NEXPLANON long-term be in growth regards next year. year to year. be see next we the our very it this And We will take and kind a be for single-digit growth of that have will in next really of to price the year to continued very, able to women's

opening the very in has the so of the and demand regarding more demand business, U.S., the of up that finally, meet robust. been U.S. outside kind can and regions, supply got of especially the And because Pacific supply we actually issue African America ex we've Latin Asia

for opportunities us of gives that women's future so lot growth our confidence a And the health business. in

out, And speak we'll to as now doing right well. be we're extremely it mention, And we reporting launching now. XACIATO Jada, not it's

be So that continue to future. will a in the contributor

Operator

the question from next of Our with Evercore. comes Umer line Raffat

Unknown Analyst

Umer. Chengshang is for on [ This ]

Just VBP your through about XX% gone China business it to of estimated want to will this by ask of that year. business. was Previously, the have end XX%

into the the about dynamics of think half first the new just going in year? some described, with especially China we of the you should how So business XXXX,

sector how the in you have care happened seen from also, campaign review And this health impact the much year government China? in

Kevin Ali

Thanks for the question.

largest a obviously history is Organon, market important a very long It be market. We've China us very continues in second in to on. focus had market important a our . So for to China.

The strategy VBP various of pharmacies our sector to and folks have sector, procurement established now, impact. business which end have the to into into really focus business of to the retail the going in actually hold. brands gone will question to forms over starting the the it's move whether sector all the our retail is it's retail take gone through process, the volume-based our e-commerce, of probably will regards the the through X/X, business in first By basically the XX% year, -- this means whether

e-commerce, the and the as to it's opportunity ongoing And programs pharmacy well. our all sectors different China, good with chains And with we're retail we dispensing. grow see whether whether an pharmacy going in it's business to many working in got continue that in top we've sector,

yes, in public much that risk, regards what too a I the if believe has procurement consider concentration that In second talked we've company process I business, single would business sector question, control retail you you But XX% is policy the framework your that about volume-based our most and the in are of so shifted of product of we exposed, essentially the of and no actually more the to business overall problems. will you have that. sector, that out more represents of ours to -- than

in we overcoming position. it saw good about in will this as the disruptive. the of of There's And now. We has year feel a out year, year next in feel very So doubt strongly fourth coming sector. We've that I We're seeing quarter. very for and access retail increased for of period feel time. been China, a We're be definitely we in that the us right issues we're that. some growth we healthy no the speak summer that

Operator

of next line Our the Piper David question with Sandler. from Amsellem comes

David Amsellem

you're Broadly That's EBITDA given think me. there initiatives X as and any to for that margins considering the try Just boost just 'XX you you are longer about one. term? headwinds speaking, to cited, number

debt thinking way organization? acquisition do two And brand the address balance? is is you about to monetize Number as way, broadly in either that in to biosimilars, How what's you role that look to of segment the of might to a something that? think about or assets some pivot the

Matthew Walsh

for question, the David. Thanks

that one. On part, the first take I'll

line, we and in pretty R&D the been most long-term So seen so our perspective, reported growth in have sustain are managing it's our future From results, increases or line that you've can business cost SG&A revenue whether revenue-producing tightly. the for have of the been that in the a the we activities rate.

as after going costs, to those those, cetera. we said, as et to might as can. hard you costs, tightly That administrative regards We're what infrastructure as refer manage

And we from we're so costs running examining an perspective, sure that any revenue-producing on structure assured those. really down rest in and related to represent we're that from just administrative differentiating we're the make to the investments are business that clamping the costs hard future, cost

Kevin Ali

maintained an the a in to to IO guess, there. opportunistic I've is robust us the question biosimilars I when David, opportunity off for very the decade, ] And medium short coming [ you regards be -- going market your have, regarding there's patent, look second I term. is example, say, still in biosimilars, always through, end that a of for to really

slower HUMIRA in share total Xx our that of when kind nearest prescriptions, think greater we're than biosimilar about our definitely competitor to than But of our is had launched the anticipated. frame. you we time HADLIMA, start July

So this to market will me, it more is not when, question a up. -- if to start question open a of

that day, this after patients living of the it's You're their that for to fact coming to $X,XXX I we down. peak that about of up side be linearity every LOE. X/X And truly that it when and cost spending the straight are forward start to X/X are for on estimated talking talking fact opposed a co-pay HADLIMA more going the market to today even -- about where of HUMIRA, are today the our about then X/X Americans quick will own, on other currently out believe something its that still pocket of kind open of as business will that consider check-to-check. you over month of time, and

is So Because on spend good. something return money invested to resources. we'll in for us, to we biosimilar ground believe don't regards We other any capital very that it is type boots to the continue remember, of franchise lot it treat a the in or our so in opportunistic as biosimilar the on very and franchise is regards that's of

very So it's on very return a it is that. healthy --

about being. good feel it the we time So for

Operator

with line next Gerberry Bank question America. of Jason of Our from the comes

Unknown Analyst

This for us. Bhavin questions ] on Two [ Jason from Patel Gerberry. is

$X well It is outlook. use The to cash free $XXX like as first target is to seems on working million billion cash free capital lower due flow. $XXX flow previously mainly the from EBITDA as million net lower

into net annually impact million over Do start likely flow you see how to $XXX do $X of annual $XXX that back cash use about this So million possibly to carry Or getting thinking should as it is benchmark? an to we capital free billion next you next year? year? working think

the And for allocation. is then on plans second XXXX. debt in these further capital Notice paydown

may you paydown or So development ratio can dividend? and of debt any leverage business frame target paying sort the balance how least at with you

Matthew Walsh

Okay.

cash numbers, free We question flow an cash of flow. anticipation billion first. about free the year take round the in we'll So $X started with of

to EBITDA in the as We investment that to noted, take related given working have net as had well developments capital. lower as back year, this we

That the is out temporary, latter okay? the come will Now business. of back

global of ERP next second will We our fully system quarter through in be of the implementation year. the

capital its of cash, back frame. working accounts into more ratably as sort bank that time our work over So should less way or

the quite combine to we the next And to so that free the higher when cash level expect actually and that flow onetime flow separation when should a we costs February. year, guide see from And generation business in next of lower return we're that with see will optimistic fact about to free what look like we number year's you next cash do year. that

of since near a between In debt attractive. where interest allocation, look capital and investments balance spin-off, future, tilted term and more, been been, has rates that benefits capital of the of we've benefits the allocation leverage the more and growth achieve a equation terms to trying the against That have near-term reduction. certain for of given balancing reduction gone, little bit

of and it bar the in the the said reasons development M&A in times, a we've seen, XXXX saw as BD of XXXX. transactions we raises would you've speaking, the type activity level on in you that that's in So past of business And than few execute. relatively why lower one a

the There's cash change believe supports to that term. continue the to at dividend, no that business in flow the profile certainly We the a we that level the exhibits plans -- near business that have.

Operator

Our from Shibutani Chris next question the of with comes Sachs. Goldman line

Unknown Analyst

is on Roger This Chris. for

Just end. question our from one quick

whether tailwind uptake this the and So HADLIMA? just how you view biosimilarity given or this as statement, recommending include statement. of comment the one biosimilars on for the all updated statements the change labeling you FDA from that for Can headwind a act

Kevin Ali

but draft interchangeability. It's has the listen, we've do Look, in It's the a made hold. What going that's terms I partners our I the right second second It necessarily at probably of sometime us to third in to out is do I -- people it's take in draft that of help we'll quarter, next quarter beginning to with launch quarter a our be Samsung strong of the terms able believe not end of the definitely, Yes. already interchangeability tailwind. We -- in year. very believe think being will now, on need Bioepis think, what indication, come we of data now. going form. right statement eventually in already investment

fact want the they have at What $XXX do or do want in today they'll plan. month get a to, be for co-pay the the whatever pay out it's an easier be to market for when that going -- understand especially to for able interchangeability, in is that they patients as switch particular the that will we're a seeing level, to or pharmacy they pharmacy, example, it pay is, $X,XXX to playing

a designation, to I get switch of to the that they if market terms interchangeability guide of prescriptions, from ability the commanding having think, lot be we'll right specifically. share pharmacists help switch, share to will HUMIRA in a have more we of obviously, so total to And actively biosimilar now have be to And able that. to able

interchangeability us interchangeability haven't for only that And the handful, maybe to is X as it a the opposed has have initiated that designation studies. think So about believe, actually X others whoever for a I the designation. there's or will tailwind, I

-- actually to because are and form next think I is QX, that in that's people want it, So beginning I draft of see end think it we'll it, and where going QX it's now, of that's and right have have you to it see year.

Operator

Our next line comes with Barclays. the Balaji from question of Prasad

Unknown Analyst

Balaji. ] Mikayla for is [ This on

the weakness guess, you will And health, can ramp the just here. about a comments able I And further seen? will on elaborate you some women's be guess, talk into guess, of XXXX? needed I any what to key the Just us. And on more HADLIMA reverse X on factors bit from I impacting it. be

Kevin Ali

Yes.

fact see the lives exclude mean, business with of on the kind to opening a There's a sensitive, ramp-up lose we is able the those get essentially the be compared For discounts sensitive of especially low -- to just XXXX from that would the be use to been you now call essentially get AbbVie has to we right net do to between start or going discounts remember, until XX% plants of we're up. HADLIMA, benefit lag that I we ] what you power right cost [ as call the you the what time as time well But what biosimilar. PBM able is now AbbVie of the going in -- it's their to covered world. about kind will what WAC bundling or some gain

of when in then at better in kind the open the will XXXX, come We'll we -- next same do an will year, to business time believe, market definitely the slowly floodgates another opportunity. And that is up see give but XXXX. the same I breakthrough, token, formation start see us this at and year

about of longer-tail years. it. outer the will us kind see growth, why business a doubt year-over-year, double-digit as That's which and HADLIMA no continued more help There's in

to overall to of yes, we it the doesn't women trajectory our regards issues particular -- health Health change this women's business. question, quarter, In but Women's found some

remember QX issues. XX% was XXXX, year, previous for in the the some because COVID there NEXPLANON. Let's was of were U.S. that That there growth in

strong this start go-to-market quarter of really very, people has quarter terms what in change. things. in changed build year. inventories would now, order XXXX price take model their last function of So price. few the to taking the of to advantage of kind a of very fact a in is Lapping upcoming Right a second, that And the

Now that's not happening.

where that's So come at quarter And will of see that take year, what to next of the to kind you'll you're ultimately, people of fruition time. in start inventory first that lapping. then point

Operator

closing remarks. the at call time. further over questions no like Kevin now turn to are this to Ali would There for I .

Kevin Ali

We're opportunity It's talented just period bit X.X to been dedicated stand-alone a Organon's years a for as got been very time continuing over kind a short of us very a And we've you. an accomplish a to show the growth team little of Thank what of able old. to in lot business. we've company.

in headwinds to look starting overhang for to is grow China's year. see to we as this see lift, that but starting QX, as China some again forward been We them more transient. next has in is the opportunities There future. so and we growth quarter, solid

incremental some more well. a a it's up And question open company. not it changes model our continue next as starts drive we HADLIMA. go-to-market for in if, us will year as show progress opportunities when taken and for of We've to for to and NEXPLANON, to a question it's ultimately growth that of regards see And on

our the call. forward look to opportunity to So we we and feel a you we're and focus, continue good the take you speaking on our to earnings in Thank to position much. next work very continue

Operator

like concludes now thank you today's our joining would thank This for us. today's for to all I and call. presentation, speakers

now disconnect. may You

Organon & Co. (OGN) 2 Nov 232023 Q3 Earnings call transcript