Organon & Co. · NYSE:OGN
Organon & — Q2 2023 Earnings Presentation
31 slides from Organon &'s earnings presentation, Aug 8, 2023
Slide 1: Organon Second Quarter 2023 Earnings
Organon Second Quarter 2023 Earnings
Slide 2: Disclaimer statement
Disclaimer statement Cautionary Note Regarding Forward-Looking Statements Except for historical information, this presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including, but not limit
Slide 3: Disclaimer statement, cont.
Disclaimer statement, cont. Cautionary Note Regarding Non-GAAP Financial Measures This presentation and our press release regarding second quarter 2023 earnings contain “non-GAAP financial measures,” which are financial measures that either exclude or include amounts that are correspondingly not exc
Slide 4: Second quarter 2023 highlights
Second quarter 2023 highlights • Revenue of $1.6 billion, up 4% ex-FX • Adjusted EBITDA of $530 million • Diluted EPS of $0.95; Adjusted Diluted EPS of $1.31 • Revenue guidance range raised to $6.25 billion to $6.45 billion • Adjusted EBITDA margin guidance range raised to 31.5%-33.0% See Slides 21-
Slide 5: Growth pillars delivering, Established Brands remains durable
Growth pillars delivering, Established Brands remains durable • Growth of 10% ex-FX, driven by 12% growth in Nexplanon Women's Women'sHealth Health • Double-digit growth in Fertility portfolio driven by COVID-recovery in China and volume growth in LAMERA and U.S. • Growth of 15% ex-FX • Strong deman
Slide 6: U.S. access environment is broader than PBM national formularies
U.S. access environment is broader than PBM national formularies Optum/Emisar Express Scripts/Ascent Optum NPF Prime ESI NPF Therapeutics, United Cigna Healthcare Source: MMIT Data, includes Commercial, Health Exchange, and Managed Medicaid. Last updated July 10, 2023 | NPF = National Preferred Form
Slide 7: Growth pillars delivering, Established Brands remains durable
Growth pillars delivering, Established Brands remains durable • Growth of 10% ex-FX, driven by 12% growth in Nexplanon Women's Women'sHealth Health • Double-digit growth in Fertility portfolio driven by COVID-recovery in China and volume growth in LAMERA and U.S. • Growth of 15% ex-FX • Strong deman
Slide 8: Durability of Established Brands
Durability of Established Brands Expanding Staying power manufacturing of the brands Stemming LCM/ price erosion entrepreneurial focus Established Brands 8
Slide 9: Volume growth across all three franchises drove sales performance
Volume growth across all three franchises drove sales performance +1% $ mil reported +4% ex-FX ~115 ~5 ~0 $1,608 $1,585 ~(40) ~(25) ~(30) FX ~250 bps headwind to growth in Q2 (1) (2) (3) (1) LOE = Loss of Exclusivity (2) VBP = Volume Based Procurement (3) Other includes manufacturing sales to Merck
Slide 10: China performing well despite VBP; APJ lapping tough comp
China performing well despite VBP; APJ lapping tough comp Actual Ex-FX $ mil Q2-23 Q2-22 VPY VPY Europe and Canada 467 443 5% 6% United States 371 351 6% 6% ~80% of Asia Pacific and Japan 261 291 (10)% (5)% Q2 sales generated China 234 244 (4)% 2% ex-US Latin America, Middle 234 216 8% 11% East, Rus
Slide 11: Women's Health
Women’s Health • Women's Health franchise grew 10% ex-FX • Strong demand in the U.S. for Nexplanon • Fertility growth driven by COVID-19 recovery in China Act Ex-FX 2023 2022 Act Ex-FX Revenues $ mil Q2-23 Q2-22 VPY VPY YTD YTD VPY VPY Women’s Top Contraception Products Health Nexplanon ® 214 195 10
Slide 12: Biosimilars
Biosimilars • Renflexis grew 20% ex-FX, on track for 6 years revenue growth in the U.S. • Strong volume growth for Ontruzant in U.S. offset by competitive pricing environment Ex-FX 2023 2022 Ex-FX Revenues $ mil Q2-23 Q2-22 Act VPY Act VPY VPY YTD YTD VPY Biosimilars Renflexis ® 70 59 19% 20% 132 10
Slide 13: Established Brands
Established Brands • Portfolio achieved flat performance ex- FX despite VBP and impact from market action on injectable steroids • YTD volume growth of 2% offset by 1% price erosion Act Ex-FX 2023 2022 Act Ex-FX Revenues $ mil Q2-23 Q2-22 VPY VPY YTD YTD VPY VPY Established Cardiovascular 401 412 (3
Slide 14: P&L reflects continued investment in business
P&L reflects continued investment in business $ mil Q2-23 Q2-22 Actual VPY 2023 YTD 2022 YTD Actual VPY Revenue 1,608 1,585 1% 3,146 3,152 —% Cost of sales 640 588 9% 1,220 1,149 6% Gross profit 968 997 (3) % 1,926 2,003 (4) % Non-GAAP Adjusted Gross profit (1) 1,012 1,047 (3) % 2,015 2,089 (4) % Se
Slide 15: Net Debt as of June 30, 2023
Net Debt as of June 30, 2023 Bank covenant (*) net leverage ratio ~4.2x; Upward pressure on leverage expected to continue through Q3 2023 $ mil Dec 2021 Dec 2022 Mar 2023 Jun 2023 Cash and cash 737 706 459 326 equivalents Gross Debt (1) 9,134 8,913 8,711 8,730 Net Debt (1) 8,397 8,207 8,252 8,404 (*
Slide 16: On target to generate ~$1B of free cash flow before one-time charges in 2023
On target to generate ~ $1B of free cash flow before one-time charges in 2023 Expect ~75% of FY cash generation in second half, consistent with prior-year period Primarily driven by: Inventory: ~$130M planned builds and higher costs Gross trade account receivables: ~$120M due to timing of Q2 sales A
Slide 17: Continued solid volume growth, partly offset by VBP, LOE and price
Continued solid volume growth, partly offset by VBP, LOE and price; limited FX headwinds $ mil 1.2% to +4.5% reported 500-600 $6,250-$6,450 $6,174 (25)-(50) 0-(50) (50)-(75) (100)-(125) (100)-(150) FX ~0-80 bps headwind to growth in 2023 (1) (2) (3) (1) LOE = Loss of Exclusivity (2) VBP = Volume Bas
Slide 18: Full Year 2023 guidance ranges
Full Year 2023 guidance ranges Provided on a Non- GAAP basis, Guidance provided Guidance provided as of except revenue May 4, 2023 August 8, 2023 Revenue $6.150B - $6.450B $6.250B - $6.450B Adjusted gross margin Low - mid 60% range Unchanged SG&A (as % of revenues) Mid 20% range Unchanged R&D (as %
Slide 19: Q&A
Q&A O “i ORGANON’
Slide 20: Appendix
Appendix “iis ORGANON”
Slide 21: Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Three Months Ended June 30, 2023 Spin related Stock-based Non-GAAP Unaudited, $ in millions except per share amounts GAAP Costs(1) Restructuring Compensation Amortization Other(1) Adjusted Revenues $ 1,608 $ 1,608 Cost of sales 640 (10
Slide 22: Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Three Months Ended June 30, 2022 Spin related Stock-based Non-GAAP Unaudited, $ in millions except per share amounts GAAP Costs(1) Restructuring Compensation Amortization Other(1) Adjusted Revenues $ 1,585 $ 1,585 Cost of sales 588 (6)
Slide 23: Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Six Months Ended June 30, 2023 Spin related Stock-based Non-GAAP Unaudited, $ in millions except per share amounts GAAP Costs(1) Restructuring Compensation Amortization Other(1) Adjusted Revenues $ 3,146 $ 3,146 Cost of sales 1,220 (20
Slide 24: Reconciliation of GAAP Reported to Non-GAAP Adjusted Information
Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Six Months Ended June 30, 2022 Spin related Stock-based Non-GAAP Unaudited, $ in millions except per share amounts GAAP Costs(1) Restructuring Compensation Amortization Other(1) Adjusted Revenues $ 3,152 $ 3,152 Cost of sales 1,149 (10
Slide 25: Income before income taxes to Adjusted EBITDA
Income before income taxes to Adjusted EBITDA Unaudited, $ in millions Q2-2023 Q2-2022 Income before income taxes 254 287 Depreciation 28 22 Amortization 30 28 Interest expense 132 98 EBITDA 444 435 Restructuring costs — — One-time costs (1) 61 58 Stock-based compensation 25 19 Adjusted EBITDA 530 5
Slide 26: Income before income taxes to Adjusted EBITDA
Income before income taxes to Adjusted EBITDA Unaudited, $ in millions YTD June 2023 YTD June 2022 Income before income taxes 489 729 Depreciation 56 47 Amortization 59 56 Interest expense 264 195 EBITDA 868 1,027 Restructuring costs 4 — One-time costs (1) 129 98 Stock-based compensation 47 34 Adjus
Slide 27: Franchise performance
Franchise performance Ex-FX Ex-FX $ mil Q2-2023 Q2-2022 Actual VPY 2023 YTD 2022 YTD Actual VPY VPY VPY Women’s Health 438 408 8% 10% 819 786 4% 6% Biosimilars 135 119 14% 15% 251 217 16% 18% Est. Brands 995 1,018 (2)% —% 1,997 2,072 (4)% 1% Other (1) 40 40 (2)% (1)% 79 76 —% —% Total Revenues 1,608
Slide 28: Nexplanon % Product Sales Growth LTM
Nexplanon LTM view normalizes for tender phasing and buy-in / buy-out in the U.S. $ mil Pre-spin % Product Sales Growth *LTM * LTM: “Last 12 Months” | % Growth expressed at constant currency 28
Slide 29: Established Brands demonstrating stability
Established Brands demonstrating stability $ mil Pre- spin % Product Sales Growth *LTM 29 * LTM: “Last 12 Months” | % Growth expressed at constant currency
Slide 30: Broad and diverse portfolio
Broad and diverse portfolio Women’s Health Biosimilars Established Brands TM TM Number of 5 49 13 products 30
Slide 31: Reinvesting in the business to create a pipeline of future revenue opportunities
Reinvesting in the business to create a pipeline of future revenue opportunities Commercialized/soon to be commercialized asset Building a pipeline Bacterial Vaginosis Gel Medical Device Licensing Agreement for Being studied for use during minimally FDA-approved for BV in females 12 and Claria Medic