Thank you for standing by. My name is Celine and I will be your conference operator today. At this time, I would like to welcome everyone to the Organon’s Fourth Quarter and Full Year 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Jen. Please go ahead.

Thank you, operator. Good morning, everyone. Thank you for joining Organon's Fourth Quarter and Full Year 2024 Earnings Call. With me today are Kevin Ali, Organon's Chief Executive Officer; Matt Walsh, our Chief Financial Officer; and Juan Camilo Arjona Ferreira, Organon's Head of R&D. Today we'll be referencing a presentation that will be visible during this call for those of you on our webcast. The presentation will also be available following this call on the Events and Presentation section of our Organon Investor Relations website. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our 10-K and subsequent periodic filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentations. I would now like to turn the call over to our CEO, Kevin Ali.

Good morning, everyone, and thank you, Jen. Welcome to today's call, where we'll talk about our fourth quarter and full year 2024 results. For the full year 2024, revenue was $6.4 billion, representing a 3% growth rate at constant currency. This is the third consecutive year that Organon has delivered constant currency revenue growth. In fact, all three of our franchises have delivered three years of constant currency revenue growth. Adjusted EBITDA was $1.96 billion, inclusive of $81 million of IPR&D, representing a 30.6% adjusted EBITDA margin. Ex-IPR&D, our adjusted EBITDA margin was 31.8%, about a half a point of margin expansion over last year on the same basis. Today we are also providing guidance for the full year 2025. For this year, we expect revenue to be in the range of $6.125 billion to $6.325 billion, inclusive of an approximate $200 million headwind from foreign currency. On a constant currency basis, the midpoint of this range would represent flat revenue performance in 2025. That is reflective of an approximate $200 million headwind from Atozet loss of exclusivity in Europe, which we will look to offset with growth in products like Vtama, Emgality, Fertility, and of course Nexplanon. Our adjusted EBITDA range for 2025 is 31% to 32%, consistent with prior commentary that we intend to manage to hold a 31% adjusted EBITDA margin floor ex-IPR&D. This applies even in 2025, as we manage through the LOE of our second-largest product. Let's move now to discuss the growth drivers within the franchises in 2024. The women's health franchise grew 5%, ex-exchange led by performance of Nexplanon, which was up 17% ex-FX for the full year of 2024. This was Nexplanon's best annual performance ever and positions the product to achieve at least $1 billion of revenue in 2025. In 2024, Nexplanon grew double digits both in the U.S. and in international markets. Outside the U.S., growth in the LAMERA region was particularly strong, driven by increased demand, tender expansions, as well as strong performance in Brazil. We also had strong growth in the U.K. where Nexplanon is a market leader. In the U.S., we benefited from Nexplanon's market leadership coupled with our pricing strategy, which includes management of the 340B discount program, as well as continued growth in transition demand. We remain very optimistic about the future of Nexplanon, especially with the potential of a five-year indication to sustain long-term Nexplanon growth. In 2024, we submitted our 5-year study package to the FDA, which had strong results, including zero pregnancies and no new safety signals. We also have collected data from the same study on women with a high BMI where there is a significant unmet need for a new highly effective option with an adequate safety profile. Late in 2024, we made our submission to the FDA, putting us in a position to be ready for a late 2025 launch pending FDA approval. Also in women's health, Jada grew to $61 million in 2024 and celebrated 100,000 unit shipments since launch. Over 90% of the largest birthing hospitals in the U.S. now stock Jada. We expect continued growth of Jada in 2025 as we drive depth in our existing base and advocate for Jada's continued incorporation into hospital protocols. Rounding out women's health, our fertility franchise was down 2% ex-exchange in 2024. In the U.S., we worked through a late 2023 buy-in for a product due to the exit of a spin-related interim operating model. This offset growth we saw from new launches in Latin America, Japan, and Turkey, and strong performance in the Asia-Pacific region. Our fertility products in China are performing better than the market, and we are well positioned to capture growth when that market accelerates. In 2024, our biosimilars franchise grew 12% of constant currency, in part because of our ability to capture more than our contractual share of the Brazil tender for Ontruzant. With Renflexis and Ontruzant, at the mature point in their longer than projected life cycle, we'll likely see a decline in biosimilars in the mid-single-digit range in 2025. We expect continued strong growth in Hadlima following our U.S. Launch in July of 2023. And late in 2025, pending FDA approval, we expect to launch a Denosumab biosimilar in collaboration with Shanghai Henlius. We also plan to launch a biosimilar Perjeta in the EU and in Latin America in 2026, with the U.S. following those launches. Lastly, we continue to see further business development opportunities to build out our pipeline for biosimilars. Wrapping up the revenue discussion with established brands. Established brands grew 2% ex-exchange for the full year of 2024. Contributions from Emgality and Vtama, along with recovery and injectable steroids, more than offset the impacts from the LOE of Atozet and an unfavorable pricing dynamic in Japan. Before turning to our R&D pipeline, let's spend a few minutes discussing our strategy and where we are at this point in time. Even before the spin, we knew that we had substantial work to do in order to stand up this new company and build out the capabilities required for success. During this period, we established Organon as a leader in women's health, completed 11 business development transactions, achieved a double-digit revenue CAGR with Nexplanon, and drove growth in our base business. We also began to streamline our operating expenses with the goal of expanding profitability. You see the results of those actions in our full year 2024 results with non-GAAP operating expenses at IPR&D down 2%. For the last two years, we've also tailored our business development approach to focus on transactions like Emgality and Dermavant that drive earnings accretion and enhance our revenue growth profile. We are driving a lean culture focused on profitable growth, where we see our CAGR on both revenue and adjusted EBITDA accelerating through the end of the decade. That will be powered by the portfolio we have in hand, as well as future business development activities. Let's talk about our specific plans in 2025 and focus on four specific strategic pillars. One, continued demonstration of resiliency in our base business. Our base business represents a material driver of value for our company. We've aggressively managed this portfolio since the spin, driving cash flow for reinvestment and growth. Two, capturing efficiencies. When we look at our operations, we are already in the process of implementing multiple initiatives that will drive significant operating savings during the calendar year of 2025. Those savings will more than offset the $180 million of expenses of Dermavant post synergies. We are reframing the way the company operates to be more nimble, eliminating reporting layers and increasing spans of control, all to position the company for profitable growth. Three, consistent deployment of capital. We're committed to our regular dividend as our number one capital allocation priority. And four, delivering on the promise of our growth products and pipeline. This includes eclipsing the $1 billion mark for Nexplanon for the calendar year of 2025. We also have a line of sight to deliver more than $300 million of revenue from our recent business development transactions. Specifically, Emgality and Dermavant acquisition with $150 million of that coming from Vtama. We're off to a strong start with Vtama. Taking recent data ending January 31st, Vtama saw strong new prescription growth of 51% over the pre-AD approval 13-week average. For comparison, our direct competitors were up only 5%. Vtama TRx also outperformed competitors by 10 points on that same basis. We remain comfortable with our revenue estimate for Vtama in 2025, especially following the broad favorable and differentiating label we received in December in atopic dermatitis. Vtama is the only non-steroidal topical approved for mild, moderate, and severe atopic dermatitis, providing access to all segments of the market in patients as young as two years of age. Vtama delivers systemic-like efficacy, has no black box warning, no contraindications, and no duration or body surface area limitations allowing for treatment across varying levels of disease severity. Early reception of Vtama has been very positive. From the field, healthcare professionals are telling us they have been waiting for this approval, that they have felt an obligation to expand the use of non-steroidals, especially for children, and that there has yet to be a product that could treat the entire family. Overall feedback has confirmed that there is a significant unmet need in atopic dermatitis. And finally, in 2025, we also will be approaching stage gates in our R&D pipeline. Some of them like OG-6219 have the potential to be game-changing programs. With that, I'll turn it over to Juan Camilo to speak more about our R&D priorities.

Thank you, Kevin. Our research and development organization plays a pivotal role in shaping Organon's long-term growth and fulfilling our mission. We strive to address long-standing unmet needs and realize our vision of a better and healthier every day for every woman. To accomplish this, we work to maximize the potential of our existing assets through life cycle management, advance novel therapeutics through the clinical development process, and explore innovative modalities to improve health. Starting with exciting regulatory milestones, in December, we received approval for Vtama for the treatment of atopic dermatitis in adults and children down to two years of age. Despite an extended review period through collaborative engagement with the FDA, we achieved approval on our original timeline, reflecting our proactive approach. The approved label outlines a compelling benefit and risk profile differentiated from the labels of the other available treatment options for atopic dermatitis. With Dermavant, we also acquired DMVT-506, a preclinical aryl-hydrocarbon receptor agonist with potential applications in immunological inflammatory diseases and multiple routes of administration. Our collaboration with Shanghai Henlius has advanced two biosimilars: HLX-14, a biosimilar candidate for Denosumab, Prolia Xgeva for the treatment of osteoporosis and cancer-related skeletal events, and HLX-11, a candidate for Pertuzumab, Perjeta for the treatment of breast cancer. Both biosimilar labeling applications have been accepted by the FDA, with HLX-14 being potentially available in the U.S. later in 2025, pending FDA review and approval. As Kevin mentioned, we submitted robust data from our five-year Nexplanon study to the FDA, and if approved, we expect to be able to launch this five-year indication by the end of this year. Additionally, the study included data in women with a body mass index above 30, with the potential to address significant need for contraceptive options in this population. Our long-acting recombinant human follicle-stimulating hormone, SJ02, is under review by the Chinese regulatory agency. If approved, it will be the first of its kind in China for control of ovarian stimulation. Organon acquired the exclusive commercialization rights for SJ02 in Mainland China from Suzhou Centergene Pharmaceuticals. On the clinical development side, early in 2023, Organon made a strategic investment in Claria Medical, Inc., a privately held company developing an investigational medical device for use during minimally invasive laparoscopic hysterectomy. Claria is responsible for clinical development and the clinical trials to support registration are underway. Perhaps the biggest potential opportunity we have is OG-6219, which was acquired as part of the Forendo transaction. OG-6219 is a potential novel therapy for endometriosis and is currently in Phase II. Endometriosis is a chronic disease affecting up to one in ten women of reproductive age, associated with abdominal pain among many other debilitating symptoms and is a common cause of infertility. Currently available treatments only address pain, have limited efficacy, a limited duration of use, or have significant side effects including decreases in bone mineral density and menopausal symptoms. Results from the Phase II study are expected in mid-2025 with potential to initiate Phase III studies in 2026. If successful, OG-6219 has the potential to be a new non-hormonal treatment option for endometriosis by the end of the decade. We also have a backup program, which supports our goal to deliver a product based on this novel mechanism. And finally, OG-8276A is being developed for the potential treatment of dysmenorrhea in Japan. We have positive top-line results from the Phase III study and expect to complete the study extension and regulatory submission in Japan later this year. We are excited by the potential of our development assets to address significant medical needs. If successful, these innovations could contribute substantial revenue over the next 5 to 10 years. With that, I will pass it to Matt for additional details about our performance.

Thank you, Juan Camilo. Beginning on Slide 11, here we bridge the 3% constant currency full-year revenue growth year-over-year. Starting on the left, LOE was about $55 million for the year, which reflects the full-year impact of the loss of exclusivity of Atozet in Japan and the impact of the LOE in Europe, which occurred in September. There was an approximate $15 million impact from VBP that was really contained to the first half of the year and related to round eight that began in the third quarter of 2023 and included Remeron and Cozaar, Hyzaar. There was an approximate $115 million impact from price for the full year or about 1.8%. Pricing headwinds came primarily from the September LOE of Atozet in Spain and France, as well as from certain mature products in the U.S. like NuvaRing, DULERA, and Renflexis, as well as some expected mandatory pricing revisions in Japan. Volume growth for the year was $415 million representing almost 7% growth across multiple drivers. Hadlima and Emgality were the largest contributors to volume growth, followed by Nexplanon and the recovery of injectable steroids following a market action in 2023. In supply other, here we capture the lower margin contract manufacturing arrangements that we have with Merck, which have been declining since the spin-off as expected. Lastly, foreign exchange translation had an approximate $80 million impact in the year or about 130 basis points of headwind to revenue, which reflects a strengthening U.S. Dollar versus most foreign currencies during the year. Now let's turn to Slide 12, where we show key non-GAAP P&L line items and metrics for the full year. For reference, GAAP financials and reconciliations to the non-GAAP financial measures are included in our press release and the slides in the appendix of this presentation. For gross profit, we are excluding from cost of goods sold, purchase accounting amortization and one-time items, which can be seen in our appendix slides. Adjusted gross margin was 61.6% for the full year 2024 compared with 62.7% in the full year 2023. The year-over-year decrease in adjusted gross margin reflects the impacts of unfavorable price as I discussed, as well as higher inflation impacts to material and distribution costs. Excluding $81 million of IPR&D expense incurred during the year, non-GAAP operating expenses were down 2% year-over-year, reflective of our cost containment efforts. Of the $81 million of IPR&D expense in the year, $70 million of it related to our collaboration with Shanghai Henlius for further advancement of the Denosumab and Pertuzumab biosimilar candidates and $10 million related to a preclinical milestone for Cirqle, a non-hormonal investigational contraceptive candidate. For the full year, embedded in the adjusted EBITDA figure is a $26 million transaction loss from foreign exchange. More than half of that or $15 million was in the latter part of the fourth quarter after our last update to earnings guidance and related to significant devaluation in unhedgable currencies, about half of that impact coming from the ruble. This compares favorably to full year 2023, where we realized $43 million of losses on foreign exchange. These factors culminated in an adjusted EBITDA margin of 30.6% for full year 2024 or 31.8% ex-IPR&D. As Kevin mentioned, that's a little more than 0.5 of margin expansion over full year 2023 adjusted EBITDA margin of 31.2%, once again ex-IPR&D. Non-GAAP adjusted net income was $1,065 million for full year 2024, consistent with $1,061 million in full year 2023, which is logical given that both gross profit and operating expense were essentially flat. Reported net income for full year 2024 was $864 million or $3.33 per diluted share compared with $1,023 million or $3.99 per diluted share in 2023. The net difference is due to a prior-year one-time benefit from the termination of a Swiss tax arrangement. Turning to Slide 13, we delivered $967 million of free cash flow before one-time costs in 2024, which met our expectation from the start of the year. In the top half of the table, the number that stands out in free cash flow before one-time items is cash taxes, which were higher in 2024 as we expected due to the payment of certain non-U.S. taxes as well as settlements in various jurisdictions that triggered higher cash taxes relative to 2023, which happened to be an unusually low year for cash taxes. Looking ahead to 2025, we would expect cash taxes to be similar to those of 2024. Working down this table, we had expected about $100 million of working capital use in 2024. We ended the year a bit better, attributable to active cash cycle working capital management. For the full year, one-time spin-related costs were $160 million which is better than the $200 million we were originally forecasting for 2024. In 2025, we expect these spin-related costs to be essentially zero. In the $190 million of other one-time costs, about $90 million relate to the ongoing restructuring initiatives that Kevin discussed aimed at leaning out our operating expense. Another $60 million relates to the planned exits from supply arrangements with Merck, that we have discussed in past quarters would be ramping up. These are activities that will enable Organon to redefine our appropriate sourcing strategy and move to fit-for-purpose supply chains while focusing on delivering efficiencies in terms of gross margin expansion, which we expect to begin realizing starting in 2027. So while the spin-related TSA costs are going to be effectively zero in 2025, we will continue to see other one-time costs in both restructuring and manufacturing separation from Merck that together could be $325 million to $375 million in 2025. Once again, these one-time costs drive value that investors will be able to see in 2025 in the form of improved operating expense efficiency and in later years related to more cost-efficient manufacturing that is expected to drive meaningful margin expansion. As we think about capital allocation, the priority as Kevin mentioned is our dividend. And in the past two years, the highest and best use of the remaining cash flow has been opportunistic business development. In 2024, we made upfront and milestone payments totaling about $350 million. In 2025, we expect to pay a little over $200 million in commercial milestones. We've already paid about $130 million between Vtama's AD approval and Emgality commercial milestones. An additional $30 million to $70 million would be due if milestones for Henlius and SJ02 are met. The achievement of these milestones means that we're realizing value for business development already signed and validates the path to low to mid-single digit revenue growth post 2025 that we've been saying Organon should be able to deliver. Moving to Slide 14, we ended the year at 4.2 times net leverage ratio, up from four times at the end of September, primarily due to the Dermavant transaction. We assumed about $280 million of Dermavant debt-like instruments, which are recorded on our balance sheet at fair value. As we digest this acquisition, leverage could float up to the mid-four times area at the halfway point this year before coming down closer to four times by year-end when we'll be capturing more benefit from the Vtama launch. That's a strong statement about the business given that Dermavant was the biggest deployment of capital that we've done as a company. We're in the middle of a launch year with Vtama and we're also working our way to the Atozet LOE. Now turning to 2024 guidance on Slide 15. Here we highlight the items driving our 2025 revenue guidance range. Our revenue range for full year 2025 is $6.125 billion to $6.325 billion. While we believe revenue could ultimately land anywhere in this range, if we look for a moment at the midpoint of the range, the midpoint is down just under 3% compared to 2024 which is essentially our estimate of the year-over-year impact of foreign exchange translation. Overall, we expect the uptake of Vtama, continued solid performance Emgality and organic growth in Nexplanon and other products in our portfolio will help to offset the loss of Atozet in Europe. Even in this LOE year, there is a credible path to another year of constant currency revenue growth and that is reflected at the high end of our full-year revenue guidance. For LOE, we expect an impact of $160 million to $180 million which is primarily driven by the LOE of Atozet in the EU. In this column, we're showing volume associated with LOE. There's also a price down component for Atozet for volume that we retain for a total of about $200 million of total revenue headwind related to the LOE of Atozet in 2025. Moving to the right, we expect the impact from VBP to be approximately $20 million to $40 million and that relates to round 11 for FOSAMAX, which we expect to be implemented late in 2025. Our range on pricing impact for 2025 is $155 million to $185 million or approximately 2.7 percentage point headwind versus prior year, which is in line with our longer-term expectations from price impact across our entire business, but higher than last year. That is driven by price declines associated with the Atozet LOE, as well as continuing competitive pressures in The U.S. Within mature products such as DULERA, Renflexis and NuvaRing. For the year, we expect volume growth in the range of $380 million to $500 million reflecting growth in the range of 6% to almost 8% over last year. Volume growth will be driven pretty equally by our strategic growth pillars Nexplanon, Fertility, Hadlima and new products such as Emgality and Vtama. And finally, based on our current view of FX, we expect about a $200 million impact from FX in 2025 or a 300 basis point headwind as I said earlier. And this is a function of about 75% of our revenue coming from outside the U.S. As you think about quarterly revenue cadence in 2025, we believe this will be a story of bookends. We expect the first quarter of 2025 will be our lowest revenue quarter and we expect the fourth quarter of 2025 will be the highest as we ramp through the year and the additive LOE will have its greatest impacts in the first three quarters of the year. By order of magnitude, we could see more than $100 million swing between the first and fourth quarter of 2025. Turning to Slide 16, where we show all components of our earnings guidance. For full year 2025, we expect adjusted gross margin to be in the range of 60% to 61%, about a point lower at the midpoint compared with last year and that's a continuation of the pressure on gross margin that we saw in 2024, especially in the back half due to price and higher manufacturing and distribution costs. On SG&A expense, we ended 2024 at 25% of revenue. That's a good barometer for 2025. On R&D, we ended 2024 at about 7% of revenue ex-IPR&D. For R&D expense in 2025, upper single digits as a percentage of revenue is probably a good place to get your model for 2025. Given where our revenue guide is landing, that would imply essentially flat operating expense dollars year-over-year, which is consistent with Kevin's commentary that we are continuing to improve our operating cost efficiency. Those pieces culminate in an adjusted EBITDA guidance range of 31% to 32%. This aligns with prior commentary and remarks made today that we intend to hold a floor on adjusted EBITDA margin of 31% ex-IPR&D. As you think about quarterly phasing of profitability, we won't be getting the full run rate benefit of the cost savings actions until later in the year. So timing of the implementation of those savings along with the uptake of Vtama could drive 200 basis points delta in adjusted EBITDA margins between the first and fourth quarters of the year. For below-the-line items, our estimate for full year 2025 interest expense is about $510 million, which includes about $25 million related to the debt-like instruments assumed in the Dermavant acquisition. Payments on a portion of those instruments are tied to Vtama sales. Exclusive of the Dermavant transaction, interest expense is down approximately $30 million in 2025 as a result of the two refinancing events completed in 2024 and lower borrowing rates on our variable rate debt instruments. For 2025, we estimate our non-GAAP tax rate to be in the range of 22.5% to 24.5%. The uptick from 2024 is largely due to the impact of the 15% global minimum tax rate required under the OECD's Pillar II. Depreciation is a touch higher than last year at $135 million, driven by the completion of our new ERP system in 2024. To wrap up, 2024 was a solid year for three reasons. First, we delivered revenue and EBITDA growth both as reported and at constant currency. Second, excluding IPR&D, we improved EBITDA margins year-over-year. And third, we improved the leverage ratio of the base business below four times going into the fourth quarter, and that gave us the balance sheet capacity to acquire Dermavant. And we now have immediate U.S. revenue and commercial capability in dermatology with the prospect for solid growth in 2025 on the heels of the launch of Vtama in atopic dermatitis as we have discussed. We are going into 2025 with financial guidance that reflects the potential for a fourth year of constant currency revenue growth and stable EBITDA margins despite Vtama launch expenses and an LOE of our second-largest product. To temper the impact of this LOE, we've identified at least $200 million of operating expense savings in 2025 that have a very high probability of being achieved. If we are successful here, we are likely to record our best operating expense efficiency metrics since the spin-off. We expect these operating expense savings to benefit not only 2025 but annualized to roughly $275 million which we will realize in 2026 and thereafter. As the quarters roll out in 2025, we expect our sequential P&L performance to improve throughout the year, which should provide a window into the strength of the underlying business beyond the LOE impact, which we expect to see in the near-term here in 2025.

Thank you. We will now begin the question-and-answer session. Your first question comes from the line of Terence Flynn with Morgan Stanley. Please go ahead.

Great. Thanks for the questions. Two for me. I guess the first one I had is just on, Matt, I know you talked about some of the one-time items in 2025. Can you just provide an estimate for where you think free cash flow will likely land for the year? And then on the biosimilar opportunity for Denosumab, Amgen's talked about, there will be different erosion curves for Prolia versus Xgeva, given kind of different indications in the installed base. And it sounds like they feel more confident in protecting Prolia. Just as you guys think about the commercial dynamics there for that franchise, any color on how to think about that at end of this year into 2026? Thank you.

Okay. So I'll take the free cash flow part of the question first. So, we were successful in 2024 getting close to that $1 billion of free cash flow before one-time items. That was a major goal for us at the beginning of 2024. As we look forward to 2025, we are going to see more of a continuation of that, but our starting point on adjusted EBITDA is going to be about $100 million lower and so that rolls right through. So our expectation is right around $900 million of free cash flow before one-time items. And then as we think about the drivers, as you go down the free cash flow, they will be somewhat similar to 2024.

Yes, Terrence, I can address the question on the denosumab biosimilar launch. Right now, we are going to be launching probably later on in the Q4 timeframe. So it will be probably negligible in terms of what we can expect for 2025 from the denosumab biosimilar. But going forward, look, we've got a lot of comfort in the buy and bill process. And I can tell you right now that we've had years of experience when you start to think about the last six, seven years of Renflexis, Remicade biosimilar and Nexplanon and so on and so forth. So we feel very comfortable with regards to having a solid biosimilar for denosumab in both Prolia and Xgeva and being able to get some penetration out of that product in the coming years.

Next question?

Thank you for the questions. I have two as well. The first is on Nexplanon. At least as of November 2025, it looks like there has still not been a paragraph four filing for Nexplanon. Can you confirm that you have not received one since then? And more broadly, when you survey the landscape, what would you say is the probability that no generic Nexplanon comes to the U.S. market before 2030? And then question relates to your ambition to accelerate top-line and EBITDA growth rates beyond 2026. Do you feel you already have the portfolio necessary to do that? Or is that goal predicated on the idea that you would do additional accretive deals in the future? Thank you.

Michael, it is Kevin. So thanks for the questions. I'll start with the last one first and then go backwards. So we do feel very comfortable that when we get past the LOE of Atozet in this year, which is our second-largest product, we feel very good about the fact that we have a line of sight to be able to still deliver some constant currency growth this year even in spite of the loss of exclusivity of our second-largest product. But going forward in 2026 to 2030, there's every intention and confidence that we could accelerate growth both on the top line and bottom line, leverage growth that is. And of course, we'll continue to do business development. But right now, we feel comfortable with the portfolio that we have in hand with Vtama and Nexplanon and other assets that we can see to accelerate growth top-line and bottom-line in the second half of the decade without any doubt. But of course, we will continue to do business development. And then in terms of your first question around Nexplanon, no paragraph four right now that we've received. And right now I've been saying for, I don't know for the last two years, I don't see really any risk to a large degree of a Nexplanon, three or five year for that matter, introduction in terms of a generic or biosimilar between now and the end of the decade. After the end of the decade, I mean, then we'll determine what happens then. But right now when I start to see the fact that our applicator device has got patent protection through 2030, when I start to see that our five-year indication, which we will hopefully launch by the end of this year, will have exclusivity through 2029. If I start to look at all the various issues around an implant that has a product in it that there is no precedent there. When I start to think about the benchmarks of either Mirena, a medicated IUD, no generic so far. So I don't feel we will see any generics to challenge Nexplanon through 2030. And so as a result of that, when you start to see that we've got a $1 billion expectation in this year, and you put down essentially the growth expected to the end of the decade, you see how big a product can be and it's our most profitable product. Operator: Your next question comes from the line of Chris Schott with JPMorgan. Please go ahead.

Hi, this is Ethan on for Chris Schott. Thanks for taking our questions. Just two for me. First off, on Vtama, you've had the asset for several months now. Any surprises as you think about the competitive or commercial landscape and just would be interested in your latest thinking on the competitive positioning of Vtama in atopic dermatitis versus the initial psoriasis indication? And then second off, on margins and the manufacturing separation from Merck that you are doing, you talked about beginning to see that in 2027, but just any color on the magnitude of benefit we might see and how that might flow in over 2027 and looking past that year? Thank you.

Thanks for the questions, Ethan. I'll take the first and then hand it over to Matt to take your second question. Look, every week that goes by, I'm more and more confident, I was already confident on the acquisition of Vtama and what we could do with that product globally and The U.S., of course. But when you look at new prescriptions in terms of the week ending January 31, we've got a 51% growth versus the pre-AD approval 13-week average baseline. So really solid new prescription growth, solid growth in terms of new prescribers to the product. I mean, the label that we received from the FDA is outstanding. I mean, we are the only non-steroidal topical approved for mild, moderate, and severe atopic dermatitis for patients as young as two years of age. So when you think about the competitive landscape, there's no other non-steroidal topical that actually has approval down to two years of age. The closest is a competitor that starts from six and older. You're talking about efficacy that's systemic-like efficacy in terms of critical area percentages up to 59%. And that really beats everything in the market. And of course, you've got no black box warnings, no safety precautions or drug-drug interactions, minimal essentially systemic absorption. So we're talking about really a phenomenal product, all in one solution once a day and no duration or body surface area limitation. So when I think about the potential of Vtama for what we can do with that product both in the U.S. and we'll be launching in Canada later this year, it is going to be a very big contributor to growth for us not only in 2025 but also going through the end of the decade and beyond. It's a fantastic product. I'll hand it over to Matt now to talk about the other question.

Yes. So on the subject of gross margin improvement, so at the time of the spin, essentially all of our API and a good deal of our manufacturing services were provided by Merck, the regulated products. So it takes time to move these things. We are in the process of doing it now. The margin expansion that we expect to see would be on the order of 250 basis points to 300 basis points starting in 2027. It would roll in over a few years starting at that point. But that's significant improvement in our supply chain manufacturing efficiency that we look forward to realizing.

Thank you. Next question comes from the line of David Amsellem with Piper Sandler. Please go ahead.

Thanks. Two quick ones for me. One is regarding your dermatology business that you now have. What are you hoping to accomplish beyond Vtama in terms of leveraging your infrastructure and adding other assets down the road? That's number one. And then number two, can you talk about your net leverage targets over the long-term? Of 4 times around, that's been stubbornly high? Can you talk about the extent to which you want to get it down a turn or potentially more over the long-term? Thanks.

Good to hear, David. I can address the first question on Vtama. Look, we are concentrated in this year, 2025, our launch year most important year to really get out of the gates and not only achieve but hopefully even surpass the numbers that we gave out in terms of what we expect to drive this year from that product. I talked a little bit earlier about the best-in-class label that we received from the FDA. I think that was the one single risk that we were taking when we did the acquisition is what would the AD label look like, given the fact that the AD market is significantly bigger in terms of number of patients versus psoriasis and the opportunities really existed there. And what came through from the FDA is the label is just best-in-class. And so, let's see how we do this year. I'm very confident that we'll do very well and we'll be on the right trajectory going forward to be able to achieve peak revenues that I think will surprise a lot of folks in the market. But nevertheless, we've got a great vertical that we are building here. The team that came over from Dermavant is our fantastic sales force, really fantastic. And we've got medical affairs groups and DTC groups that are really outstanding. And so as a result of that, I have every intention. We have every intention of being able to continue to build out our portfolio in dermatology and first and foremost to do well with Vtama, globalize the product because we're going to be launching in Canada and thereafter we'll start to think about other regions like the EU and others to really kind of penetrate into those segments. But after that, we've got a tremendous opportunity across a variety of different therapeutic areas within the dermatology area that we can add to our group in the U.S.

Yes. So on leverage ratio, David, we had said at the start of 2024 that we thought the business would de-lever below four times by the end of the year. Pro forma for the Dermavant transaction, that number would have been about 3.8 times. So we were going into the end of the year with the confidence that we could onboard a deal like Dermavant, which is sort of a manifestation of the idea that we'll de-lever faster through EBITDA growth than through some great debt reduction. And okay, 2025 is a launch year for Vtama. But when you think about what the business can do in 2026, we should be cleanly below four times by the end of 2026. And then that so we are getting closer by the end of 2026 to the point where we're in that mid-three range, which we had been saying since the spin is a sensible soft target for a business like this with the kind of cash flow that it generates. So we are still very much on that line of reasoning and I think we've set up the business to get there once we work our way through 2025 and the near-term issues that we're facing, which are really restricted to 2025.

Your next question comes from the line of Balaji Prasad with Barclays. Please go ahead.

Sorry about that, guys. Yeah, two questions from me. Comparing on a component-wise basis, the variations between my estimates and the delivery, the biosimilar pricing decline seems to be higher than what I factor. I understand that the products are in the mature phase of the product life cycles, and I would have expected the pricing impact to have been felt already. So if you can throw some color on what the pricing impact was and what led to this and which competitive dynamics led to this, that will be very helpful. Secondly, could you help us understand the quarterly cadence on the back of the multiple moving pieces that you have this year, pricing Hadlima, Vtama, Atozet? So how should we factor the quarterly cadence for the year? Thank you.

Thanks, Balaji for the question. I'll address the first. In regards to pricing with biosimilars, I think the issue really is probably centered around the 340B pricing with Renflexis, which is our largest biosimilar Remicade biosimilar in the U.S. But as you said, I mean, we're essentially hitting that curve where we talk about more and more pricing pressures as we start to get more and more biosimilars of Renflexis in the marketplace. So we're proud. We've had six years of significant growth for Renflexis, which is indicative, I think, of our ability to commercialize biosimilars and we are really looking forward for our denosumab launch later on in this year and then thereafter our Perjeta launch in Europe and in Latin America in 2026 followed thereafter by the U.S. And of course, as I mentioned in my opening comments, we're also doing a lot of due diligence on a variety of different things we can do in business development with regards to accretive business development deals that we can do in 2025 to offset some of the issues that we are looking at price in regards to Renflexis and Ontruzant. Thanks for the question.

Yes. So, I'll take the second part. So, your question is very important because, as you correctly point out, we've got trending during the year that has some pretty significant movements. Let's just review what that is. We've got the LOE of Atozet, which the impacts of that are more front-loaded in 2025. By the time you get to the fourth quarter, we lap it. We've got the ramp up of the Vtama sales, approximately two-thirds of our annual projection there realized in the back half of the year. And then we've got the cost savings as a result of the restructuring, which is also back-half weighted. So when you blend all that together, I'll revisit the points that we made in the prepared comments. From a revenue perspective, it could be between Q1 and Q4 and the story of the bookends of the year, as I said. There's about a $100 million revenue difference, we think, between where Q1 will land and where Q4 will land. So there is that delta. You can figure out the pieces in between. And then from an EBITDA margin perspective, it could be as much as 200 basis points difference between our first quarter, which will probably be our lowest quarter of the year, and the fourth quarter, which should be our best quarter of the year, as we're laying out our planning for the year. And I'll leave it at that.

Thanks, Balaji.

Your next question comes from the line of Jason Gerberry with BofA Securities. Please go ahead.

Hey, guys. Good morning. Thank you for taking my questions. Just firstly for me, the $200 million of operating expense savings, that seems like that's primarily in SG&A from the guide. It's just about a reduction of 10% to 15% of your legacy cost base. Just wondering, it seems like a pretty significant number. Wondering where those cuts are actually coming from and any commentary you can provide on opportunities beyond 2025 for further restructuring opportunities. And then just on Nexplanon, Kevin, you've been more vocal about this potentially reaching $1.5 billion in revenues in the out years and having a very long tail. I would think that that implies more of like an out-year growth CAGR of at least double digits. And the Street obviously has it more flatlining probably on differing LOE assumptions. But just kind of curious, your guidance for '25 is greater than $1 billion but that's pretty much where you are this year. So just wondering if we should be thinking about growth in Nexplanon as more in the double-digit plus territory in 2025?

So I'll start out with the restructuring piece. So we've been a public company now since 2001. We undertook some restructuring in 2023 and 2024, I would call that belt tightening. This round of restructuring, as you point out, Jason, is more significant. We did look at our organization more holistically and really did some pretty significant streamlining of our spans and layers and the way that our various functions work together. We've really tightened things up. So, the 2025 impact, $200 million run rate of that, about 75% of that $200 million in our operating expenses will be spread over the SG&A and R&D lines, and about 25% would be in COGS.

Yes, Jason, regarding your question about Nexplanon, I have mentioned multiple times the reasons to have confidence, and I strongly believe we won't see a competitor for Nexplanon until at least the end of the decade. In 2024, as you rightly noted, we achieved our best results with 17% growth both domestically and internationally. We are on track to exceed $1 billion in 2025. Historically, this product has grown at a high single-digit rate, and I don't anticipate that changing, although certain years may show variations. For instance, we expect to benefit from the five-year indication, potentially with some added language regarding BMI, which should unlock new and appealing segments for Nexplanon's growth. This could result in low double-digit growth in some years and high single-digit in others. A conservative estimate would be to anticipate high-single-digit growth through the end of the decade, bringing us to around $1 billion to $1.5 billion, which differs from some existing models. Over time, this will be a story that reveals itself, with opportunities for Nexplanon becoming more apparent as we approach the end of the decade. I envision a longer timeframe; if we consider the precedent set by Mirena, it could extend significantly, but I prefer to commit to a forecast that extends only to the end of the decade.

Your next question comes from the line of Umer Raffat with Evercore ISI. Please go ahead.

Hi guys. Thanks for squeezing me in. I wanted to focus on Vtama on a two-part question. First, I saw you reported $10 million for the U.S. in Q4 for Vtama. Previously, I know the run rate was around $20 million or so on the prior quarters that Dermavant was reporting. But I do acknowledge you have a partial quarter. There is only two months, but still, I wouldn't have thought it would be $10 million to be closer to perhaps $15 million or so. So I wanted to understand better the $10 million number knowing that it was two out of three months. Secondly, I was very intrigued by a comment made today. So specifically, I know you previously said you expect $150 million in sales for Vtama in 2025. Today, you said two-thirds will be back-half weighted. So 100 million will be in second half of the year presumably, which would imply a $50 million to $60 million quarter in Q4. So is it reasonable to think that your expectation is that Vtama's Q4 run rate will be $200 million to $250 million?

Good to hear from you, Umer. Regarding your first question about the Q4 numbers, Dermavant typically has a practice of pulling sales forward at the end of the quarter. We chose not to do that this time to have a solid start in 2025. This decision allowed us to present a clear picture of our overall performance in Q4, setting us up well for Q1 and the rest of the year. As I consider the opportunities for this product, we are focusing on improving our gross to net figures. We are also working on various fronts, especially with our managed care team, which is highly regarded in the market and currently achieving successes in securing better formulary status for Vtama concerning atopic dermatitis. This development is crucial for reducing reliance on coupons and similar efforts. Therefore, by the end of the year, as we see quarterly progress, we expect to experience greater strength in the product due to our managed care initiatives and formulary efforts, alongside ongoing growth in new prescriptions. We had a strong start to the year with new prescription growth, and we believe this momentum will carry forward.

Okay. I think that was our last question.

Thank you, operator, and thanks everybody for your questions. Once again, we're really very proud of our 2024 performance. In 2024, we achieved our third year of constant currency revenue growth and delivered adjusted EBITDA margin expansion ex-IPR&D. Our 2025 financial guidance reflects the potential for a fourth year of constant currency revenue growth despite the loss of exclusivity of our second-largest product. As we think about 2026 and beyond, we will have that LOE behind us and we will be leveraging the cost savings we're taking out this year. Longer-term, we will continue to source accretive business development deals that will drive an acceleration in our revenue growth profile, all while aggressively managing our cost structure. So thank you for your questions, and we look forward to reporting on our continued progress as a company. Thanks everyone.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.