No bad stock

Organon & Co.
CEO : Mr. Kevin Ali

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2023 Q2	1.5% YoY	-99.9%	3.3%	2023-08-08

Matthew Walsh says,

Revenue Growth

• 4% constant currency revenue growth in Q2 2023
• Negligible impact from loss of exclusivity (LOE)
• $25 million impact from VBP in China
• $30 million price erosion in the quarter
• $115 million volume growth in Q2, with 60% from growth pillars

Geographical Performance

• U.K. region grew 6%, driven by Atozet and biosimilars
• U.S. grew 6%, strong performance in key growth platforms
• Asia Pacific Japan declined 5% due to unfavorable comparison
• China grew 2% driven by COVID recovery in fertility and retail channel
• LAMIRA region grew 11% due to solid women’s health performance

Key Franchise Performance

• Strong performance in women’s health, driven by expanded access and competitive pricing
• 15% growth in biosimilars, RENFLEXIS grew 20% in the quarter
• Established brands demonstrated durability despite market action on injectable steroids

Financial Performance

• Non-GAAP adjusted gross margin was 62.9%, down from 66.1% in the prior year
• Adjusted EBITDA margin was 33%, up from 32.3% in the prior year
• Non-GAAP adjusted net income was $336 million or $1.31 per diluted share
• Net leverage ratio expected to end 2023 close to where it was at the start of the year

Cash Flow and Guidance

• Working capital absorbed cash in the first half, expected to release in the second half
• Approximately $1 billion of free cash flow before one-time costs expected for 2023
• One-time cash costs related to spinoff transaction estimated to be about $350 million for the full year
• Revenue guidance adjusted to $6.25 billion to $6.45 billion due to improving FX translation impact

Kevin Ali says,

Revenue

• Second quarter revenue was $1.6 billion, up 4% at constant currency compared to the previous year.
• The women’s health and biosimilars franchise experienced double-digit growth, while the Established Brands franchise showed stable performance.

Guidance

• The revenue guidance range for the full year has been narrowed from $6.15 billion to $6.45 billion to $6.25 billion to $6.45 billion, with the midpoint of the range raised by $50 million.
• The adjusted EBITDA guidance range for the full year has been raised, with the new range at 31.5% to 33%.

Women’s Health

• Women’s health grew 10% on a constant currency basis, driven by 12% growth in Nexplanon.
• Nexplanon’s revenue in the US grew by 19% due to increased physician demand and distributor inventory, as well as pricing actions taken in the previous quarter.
• Expectations for continued demand growth in the US and other regions, such as Latin America and Asia.
• Fertility business in China rebounded in the second quarter, with a positive outlook for the remainder of the year.

Biosimilars

• HADLIMA, the biosimilar for Humira, has received positive traction since its launch in the US, with major wholesalers placing orders.
• Organon has secured access within major PBMs, such as Optum RX and Express Scripts, outside of their national formulary listings.
• Focus on customers not dependent on rebates and providing product attributes that differentiate HADLIMA, such as pen design, patient support programs, and real-world evidence.
• Expectations for further access and success as the biosimilars market continues to develop.

Established Brands

• Established Brands franchise grew 1% year-to-date, with volume growth offsetting a decline in price across the portfolio.
• Strategic approach to pricing, including selective price increases in certain markets and channel optimization for commercial and trade discounts.
• Confidence in achieving relatively flat five-year CAGR for this franchise on a constant currency basis.

Pipeline and Future Outlook

• Organon has added eight assets to its pipeline since launch and aims to evolve into a pharma company with a regular cadence of catalysts for accelerating growth.
• Continued focus on operational results and building a successful future.

Q & A sessions,

Interchangeability Study and Indication

• The company’s Phase IV trial with Samsung showed positive results and met all the endpoints for the interchangeability study.
• They expect the interchangeability indication to be received by next summer.
• The interchangeability designation is important for differentiation in the market and provides an extra boost, but the company believes other attributes such as reliability in manufacturing, pen design, and real-world evidence are also crucial.

Market Formation and Uptake

• The company expects 2023 and 2024 to be the market forming years for biosimilars.
• They anticipate the real revenue generation and market formation to occur in the late 2024 and 2025 timeframe.
• About 40% of the lives covered in the PBM world are in the low WACC, low rebate segment, which aligns with the company’s focus on providing savings to the system and patients.
• The company has seen good pull-through and early successes in formulary access, with partnerships with Prime, UnitedHealthcare, and Centene.

Biosimilar Portfolio and Opportunities

• The company has a portfolio of biosimilar assets through partnerships with Samsung and Henlius.
• They are being opportunistic in identifying opportunities in the biosimilar space.
• In the future, they see opportunities in the IOs (immuno-oncology) space, expected in the 2028 timeframe.
• They are also exploring opportunities in women’s health, both in exclusive women-focused indications and conditions that can include various therapeutic areas.

Debt Repayment and Capital Deployment

• The company made a $250 million voluntary debt paydown in the first quarter and will consider future voluntary debt repayments, particularly for variable rate debt.
• The company has balanced capital deployment between growth through business development and M&A, and debt reduction.
• The change in the interest rate environment has raised the bar for capital deployment through business development, leading to a focus on opportunities with more near-term revenue and EBITDA accretion.