8-K
Organon & Co. (OGN)
UNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934
Date of Report (Date
of earliest event reported): May 5, 2022
Organon &Co.
(Exact name of registrant as specified in its charter)
| Delaware | 001-40235 | 46-4838035 |
|---|---|---|
| (State or other jurisdiction | (Commission | (I.R.S. Employer |
| of incorporation) | File Number) | Identification No.) |
| 30 Hudson Street, Floor 33, Jersey City, NJ | 07302 | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: (551) 430-6900 | ||
| --- |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities<br>Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange<br>Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under<br>the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under<br>the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | OGN | NYSE |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On May 5, 2022, Organon & Co. (the “Company”) issued a press release (the “Earnings Release”) regarding its results for the quarter ended March 31, 2022. The Earnings Release is included as Exhibit 99.1 to this report.
The information contained in this Item 2.02, including Exhibit 99.1 attached hereto, is considered to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that Section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document. The release contains forward-looking statements regarding the Company and includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.
| Item 7.01 | Regulation FD Disclosure. |
|---|
In connection with the conference call announced in the Earnings Release, on May 5, 2022, the Company made available the Company Information Presentation relating to its financial results for the quarter ended March 31, 2022. The Company Information Presentation may be accessed within the investor relations section of the Company’s website, http://www.organon.com. A copy of the Company Information Presentation is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.2 attached hereto, is considered to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that Section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document. The Company Information Presentation contains forward-looking statements regarding the Company and includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits. |
| --- | --- |
| Exhibit No. | Description |
| --- | --- |
| 99.1 | Press<br> Release, dated May 5, 2022, relating to results of operations and financial condition. |
| 99.2 | Company<br> Information Presentation. |
| 104 | The cover page of this Current Report on Form 8-K, formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| Organon & Co. | ||
|---|---|---|
| By: | /s/ Matthew Walsh | |
| Name: | Matthew Walsh | |
| Title: | Chief Financial Officer |
Dated: May 5, 2022
Exhibit 99.1
| Media Contacts: | Karissa Peer | Investor Contacts: | Jennifer Halchak |
|---|---|---|---|
| (614) 314-8094<br><br> <br><br><br> <br>Kate Vossen<br><br> <br>(732) 675-8448 | (201) 275-2711<br><br> <br><br><br> <br>Edward Barger<br><br> <br>(267) 614-4669 |
Organon reports results for the first quarterended March 31, 2022
| · | First quarter 2022<br> revenue of $1,567 million |
|---|---|
| · | Net income from continuing<br> operations of $348 million, or $1.36 per diluted share; Adjusted net income from continuing<br> operations of $420 million, or $1.65 per diluted share |
| --- | --- |
| · | Adjusted EBITDA of<br> $647 million |
| --- | --- |
| · | Board of Directors<br> declares quarterly dividend of $0.28 per share |
| --- | --- |
| · | Full year 2022 financial<br> guidance ranges affirmed |
| --- | --- |
Jersey City, N.J., May 5, 2022 – Organon (NYSE: OGN) (the “company”), today announced its results for the first quarter ended March 31, 2022.
"The first quarter marked a solid start to the year. We continued to expand our Women's Health offerings by acquiring the rights to Marvelon™ (ethinylestradiol, desogestrel) and Mercilon™(ethinylestradiol, desogestrel) in certain markets, as well as by entering into a licensing agreement to commercialize Xaciato^TM^(clindamycin phosphate) vaginal gel," said Kevin Ali, Organon's CEO. "Additionally, with LOE risk in the Established Brands business largely behind us, together with continued focus on maximizing the potential of these well-known brands, we are starting to see the stability we knew was possible in that franchise."
First quarter 2022 revenue
| in $ millions | Q1 2022 | Q1 2021 | VPY | VPY ex-FX | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Women’s Health | $ | 378 | $ | 399 | (5 | )% | (3 | )% | ||
| Biosimilars | 99 | 81 | 22 | % | 25 | % | ||||
| Established Brands | 1,053 | 957 | 10 | % | 15 | % | ||||
| Other ^(1)^ | 37 | 69 | (45 | )% | (46 | )% | ||||
| Revenue | $ | 1,567 | $ | 1,506 | 4 | % | 8 | % |
^^
^(1)^Other includes manufacturing sales to Merck &Co., Inc., Rahway, NJ, USA and other third parties, and allocated amounts from pre-spin revenue hedging activities.
1
^^
Total net revenue was $1,567 million for the first quarter of 2022, an increase of 4% as-reported and an increase of 8% excluding the impacts of foreign currency (ex-FX), compared with the first quarter of 2021.
^^
Women’s Health declined 5% as-reported and declined 3% ex-FX in the first quarter 2022 compared with the first quarter of 2021, driven by Nuvaring® (etonogestrel/ethinyl estradiol vaginal ring) which declined 6% ex-FX in the first quarter of 2022 compared with the first quarter of 2021, and the Authorized Generic of Nuvaring(AG), both of which continue to be impacted by generic competition. The decline in the Women's Health portfolio was also due to a 5% ex-FX decline in Nexplanon® (etonogestrel implant) which was driven by distributors' buying patterns in the United States in prior periods, partially offset by strong performance in Latin America and volume growth in Europe. The decline in the company's contraception portfolio was partially offset by double digit growth in the fertility franchise, led by Follistim AQ® (follitropin beta injection), which grew 20% ex-FX, primarily due to higher demand in China and volume growth in the United States.
Biosimilars revenue grew 22% as-reported and grew 25% ex-FX in the first quarter 2022 compared with first quarter 2021. Organon's current portfolio includes certain immunology and oncology treatments. All five of the biosimilars in Organon’s portfolio have launched in certain countries globally, including two biosimilars, Renflexis® (infliximab-abda) and Ontruzant® (trastuzumab-dttb), in the United States. Renflexis grew 21% ex-FX in the first quarter of 2022 compared with the first quarter of 2021 primarily due to continued demand growth in the United States since its launch in 2017. Ontruzant grew 5% ex-FX driven by continued uptake in the United States since its launch in July 2020, partially offset by competitive pressures in Europe.
^^
Established Brands represents a broad portfolio of well-known medicines, which are generally beyond market exclusivity, including leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management, and for which generic competition varies by market. The portfolio's exposure to loss of exclusivity (LOE) risk peaked in 2021 and no longer represents a significant impediment to stable performance in the Established Brands franchise. Revenue for Established Brands increased 10% as-reported and increased 15% ex-FX in the first quarter of 2022 compared with the first quarter of 2021. The first quarter of 2022 benefited from fluctuations in demand in certain markets, including a temporary supply issue currently impacting several competitors in the Japanese market. This compares to weaker performance in Japan in the first quarter of 2021 due to anticipated government-led price actions in that market and lingering effects from the LOE of Zetia® (ezetimibe). Additionally, the first quarter of last year was negatively impacted by the implementation of the third round of Volume Based Procurement (VBP) initiatives in China, as well as by LOE exposure. There was minimal impact from these factors in the first quarter of 2022. Volume growth in products in China, Europe and the LAMERA region also contributed to the favorable performance of Established Brands in the first quarter of 2022.
^^
2
^^
First quarter 2022 profitability
Organon was spun-off from Merck & Co., Inc., Rahway, NJ, USA on June 2, 2021. Financial results during the pre-spin period were presented on the carve-out basis of accounting and do not purport to reflect what Organon’s financial results would have been had Organon operated as a standalone public company. Therefore, with the exception of Revenue, financial results for the periods ending March 31, 2021 and March 31, 2022 are not meaningfully comparable.
| in $ millions, except per share amounts | Q1 2022 | Q1 2021<br><br> pre-spin | VPY | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenue | $ | 1,567 | $ | 1,506 | 4 | % | |||
| Cost of sales | 561 | 591 | (5 | )% | |||||
| Gross profit | 1,006 | 915 | 10 | % | |||||
| Non-GAAP Adjusted gross profit ^(*)^ | 1,042 | 937 | 11 | % | |||||
| Adjusted EBITDA ^(*)^ | 647 | 566 | 14 | % | |||||
| Net Income, continuing operations ^(*)^ | 348 | 395 | (12 | )% | |||||
| Non-GAAP Adjusted net income, continuing operations ^(*)^ | 420 | 451 | (7 | )% | |||||
| Diluted Earnings per Share, continuing operations | 1.36 | 1.56 | (13 | )% | |||||
| Non-GAAP Adjusted Diluted Earnings per Share, continuing operations ^(*)^ | 1.65 | 1.78 | (7 | )% | |||||
| Gross margin | 64.2 | % | 60.8 | % | |||||
| Non-GAAP adjusted gross margin ^(*)^ | 66.5 | % | 62.2 | % | |||||
| Adjusted EBITDA margin ^(*)^ | 41.3 | % | 37.6 | % |
^(*)^See Tables 4,5 and 6 for reconciliationsof GAAP to non-GAAP financial measures
^^
Gross margin was 64.2% as-reported and 66.5% on an adjusted basis in the first quarter of 2022 compared with 60.8% as-reported and 62.2% on an adjusted basis in the first quarter of 2021. The year-over-year improvement in gross margin primarily reflects reduced lower margin supply sales in the first quarter of this year.
Adjusted EBITDA margin was 41.3% in the first quarter of 2022 compared with 37.6% in the first quarter of 2021. The improvement in Adjusted EBITDA margin is largely driven by higher Adjusted gross profit in the period, and also reflects lower SG&A costs compared with the prior year, pre-spin period, partially offset by increased research and development costs in the first quarter of 2022 associated with the company's recent acquisitions of clinical stage assets. Adjusted EBITDA margin in the first quarter of 2022 incorporates SG&A costs that are expected to be at the lowest point for full year 2022.
3
Net income from continuing operations for the first quarter of 2022 was $348 million, or $1.36 per diluted share, compared with $395 million, or $1.56 per diluted share, in the first quarter of 2021. Non-GAAP Adjusted net income from continuing operations was $420 million, or $1.65 per diluted share, compared with $451 million, or $1.78 per diluted share, in 2021.
Capital allocation
Today, Organon’s Board of Directors declared a quarterly dividend of $0.28 for each issued and outstanding share of the company's common stock. The dividend is payable on June 16, 2022 to stockholders of record at the close of business on May 16, 2022.
As of March 31, 2022, cash and cash equivalents were $694 million, and debt was $9,094 million, resulting in net debt of $8,400 million.
Full year guidance
Organon does not provide GAAP financial measures on a forward-looking basis because the company cannot predict with reasonable certainty and without unreasonable effort, the ultimate outcome of legal proceedings, unusual gains and losses, the occurrence of matters creating GAAP tax impacts, and acquisition-related expenses. These items are uncertain, depend on various factors, and could be material to Organon’s results computed in accordance with GAAP.
Beginning in 2022, Organon will no longer exclude expenses for upfront and milestone payments related to collaborations and licensing agreements, or charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions from its non-GAAP results. These changes are being made to align with views expressed by the U.S. Securities and Exchange Commission. There are no such expenses or charges for in-process research and development for the periods ended March 31, 2022 or March 31, 2021. Relevant prior periods have been recast to reflect these changes and can be found in Tables 7 and 8 of this press release.
4
Organon's financial guidance does not assume an estimate for future in-process research and development for business development transactions not yet executed.
The company affirmed the full year 2022 financial guidance previously provided on February 17, 2022, which is presented on a non-GAAP basis.
| Previous guidance | Current guidance | |
|---|---|---|
| Revenue | $6.1B - $6.4B | Unchanged |
| Adjusted gross margin | Mid 60% | Unchanged |
| SG&A (as % of revenue) | Mid 20% | Unchanged |
| R&D (as % of revenue) | Mid to upper single digit | Unchanged |
| Adjusted EBITDA margin | 34%-36% | Unchanged |
| Interest | ~$400 million | Unchanged |
| Depreciation | $100-$115 million | Unchanged |
| Effective Non-GAAP tax rate | 17.5%-19.5% | Unchanged |
| Fully diluted weighted avg. shares outstanding | ~255 million | Unchanged |
^^
Webcast Information
Organon will host a conference call at 8:30 a.m. Eastern Time today to discuss its first quarter 2022 financial results. To listen to the event and view the presentation slides via webcast, join from the Organon Investor Relations website at https://www.organon.com/investor-relations/. A replay of the webcast will be available approximately two hours after the conclusion of the live event on the company’s website. Institutional investors and analysts interested in participating in the call must register in advance using conference ID# 6895016 and by clicking on this link: http://www.directeventreg.com/registration/event/6895016. Following registration, participants will receive a confirmation email containing details on how to join the conference call, including dial-in information and a unique passcode and registrant ID. Pre-registration will allow participants to bypass an operator and be placed directly into the call.
5
About Organon
Organon is a global healthcare company, formed through a spin-off from Merck & Co., Inc., Rahway, NJ, USA (NYSE: MRK), to focus on improving the health of women throughout their lives. Organon has a portfolio of more than 60 medicines and products across a range of therapeutic areas. Led by the women’s health portfolio coupled with an expanding biosimilars business and stable franchise of established medicines, Organon’s products produce strong cash flows that will support investments in innovation and future growth opportunities in women’s health. In addition, Organon is pursuing opportunities to collaborate with biopharmaceutical innovators looking to commercialize their products by leveraging its scale and presence in fast growing international markets.
Organon has a global footprint with significant scale and geographic reach, world-class commercial capabilities, and approximately 9,300 employees with headquarters located in Jersey City, New Jersey.
For more information, visit http://www.organon.com and connect with us on LinkedIn and Instagram.
Non-GAAP financial measures
This press release contains “non-GAAP financial measures,” which are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Specifically, the company makes use of the non-GAAP financial measures Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS, which are not recognized terms under GAAP and are presented only as a supplement to the company’s GAAP financial statements. The company believes that these non-GAAP financial measures help to enhance an understanding of the company’s financial performance. However, the presentation of these measures has limitations as an analytical tool and should not be considered in isolation, or as a substitute for the company’s results as reported under GAAP. Because not all companies use identical calculations, the presentations of these non-GAAP measures may not be comparable to other similarly titled measures of other companies. You should refer to the appendix of this press release for relevant definitions and reconciliations of non-GAAP financial measures contained herein to the most directly comparable GAAP measures.
In addition, the company’s full-year 2022 guidance measures (other than revenue) are provided on a non-GAAP basis because the company is unable to reasonably predict certain items contained in the GAAP measures. Such items include, but are not limited to, acquisition related expenses, restructuring and related expenses, stock-based compensation and other items not reflective of the company's ongoing operations.
6
The company uses non-GAAP financial measures in its operational and financial decision making, and believes that it is useful to exclude certain items in order to focus on what it regards to be a more meaningful representation of the underlying operating performance of the business.
Forward-Looking Statement
Except for historical information herein, this press release 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 limited to, statements about management’s expectations about Organon’s future financial performance and prospects. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.
Risks and uncertainties include, but are not limited to, an inability to execute on our business development strategy or realize the benefits of our planned acquisitions; general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the ongoing COVID-19 pandemic and emergence of variant strains; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances; new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict its future financial results and performance; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; difficulties developing and sustaining relationships with commercial counterparties; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s filings with the Securities and Exchange Commission ("SEC"), including the company’s Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent SEC filings, available at the SEC’s Internet site (www.sec.gov).
7
TABLE 1
Organon & Co.
Condensed Consolidated Statement of Income
(Unaudited, $ in millions except share and per share amounts)
| Three Months Ended March 31, | |||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| Revenues | $ | 1,567 | $ | 1,506 | |
| Costs, Expenses and Other | |||||
| Cost of sales | 561 | 591 | |||
| Selling, general and administrative | 371 | 382 | |||
| Research and development | 96 | 67 | |||
| Restructuring costs | — | 1 | |||
| Other (income) expense, net | 97 | (2 | ) | ||
| 1,125 | 1,039 | ||||
| Income From Continuing Operations Before Income Taxes | 442 | 467 | |||
| Taxes on Income | 94 | 72 | |||
| Net Income From Continuing Operations | 348 | 395 | |||
| Income From Discontinued Operations - Net of Tax | — | 4 | |||
| Net Income | 348 | 399 | |||
| Earnings per Share Attributable to Organon & Co. Stockholders - Basic: | |||||
| Continuing operations | $ | 1.37 | $ | 1.56 | |
| Discontinued operations | — | 0.02 | |||
| Net Earnings per Share Attributable to Organon & Co. Stockholders | $ | 1.37 | $ | 1.58 | |
| Earnings per Share Attributable to Organon & Co. Stockholders - Diluted: | |||||
| Continuing operations | $ | 1.36 | $ | 1.56 | |
| Discontinued operations | — | 0.02 | |||
| Net Earnings per Share Attributable to Organon & Co. Stockholders | $ | 1.36 | $ | 1.58 | |
| Weighted Average Shares Outstanding: | |||||
| Basic | 253,583,000 | 253,516,000 | |||
| Diluted | 255,052,000 | 253,516,000 |
TABLE 2
Organon & Co.
Sales by top products
| Three Months Ended March 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | ||||||||||||
| ($ in millions) | U.S. | Int’l | Total | U.S. | Int’l | Total | |||||||
| Women’s Health | |||||||||||||
| Nexplanon/Implanon NXT | $ | 116 | $ | 55 | $ | 171 | $ | 141 | $ | 42 | $ | 183 | |
| Follistim AQ | 30 | 31 | 61 | 25 | 27 | 52 | |||||||
| NuvaRing | 16 | 24 | 41 | 21 | 24 | 45 | |||||||
| Ganirelix Acetate Injection | 8 | 22 | 30 | 8 | 21 | 29 | |||||||
| Cerazette | — | 18 | 18 | — | 17 | 17 | |||||||
| Other Women's Health ^(1)^ | 27 | 31 | 57 | 40 | 33 | 73 | |||||||
| Biosimilars | |||||||||||||
| Renflexis | 42 | 4 | 46 | 35 | 4 | 38 | |||||||
| Ontruzant | 7 | 15 | 22 | 4 | 19 | 22 | |||||||
| Brenzys | — | 14 | 14 | — | 10 | 10 | |||||||
| Aybintio | — | 10 | 10 | — | 8 | 8 | |||||||
| Hadlima | — | 6 | 6 | — | 2 | 2 | |||||||
| Established Brands | |||||||||||||
| Cardiovascular | |||||||||||||
| Zetia | 3 | 96 | 99 | 2 | 89 | 92 | |||||||
| Vytorin | 2 | 36 | 38 | 3 | 38 | 41 | |||||||
| Atozet | — | 119 | 119 | — | 112 | 112 | |||||||
| Rosuzet | — | 22 | 22 | — | 15 | 15 | |||||||
| Cozaar/Hyzaar | 8 | 86 | 93 | 3 | 87 | 90 | |||||||
| Other Cardiovascular ^(1)^ | 1 | 38 | 39 | 1 | 38 | 39 | |||||||
| Respiratory | |||||||||||||
| Singulair | 3 | 127 | 130 | 5 | 102 | 107 | |||||||
| Nasonex | 9 | 65 | 75 | 2 | 41 | 43 | |||||||
| Dulera | 31 | 9 | 40 | 31 | 8 | 38 | |||||||
| Clarinex | 1 | 37 | 38 | 1 | 23 | 25 | |||||||
| Other Respiratory ^(1)^ | 12 | 11 | 22 | 16 | 6 | 23 | |||||||
| Non-Opioid Pain, Bone and Dermatology | |||||||||||||
| Arcoxia | — | 60 | 60 | — | 56 | 56 | |||||||
| Fosamax | 1 | 40 | 41 | 1 | 37 | 38 | |||||||
| Diprospan | — | 31 | 31 | — | 26 | 26 | |||||||
| Other Non-Opioid Pain, Bone and Dermatology ^(1)^ | 3 | 66 | 69 | (1 | ) | 62 | 61 | ||||||
| Other | |||||||||||||
| Proscar | — | 24 | 24 | — | 32 | 32 | |||||||
| Propecia | 1 | 29 | 30 | 2 | 29 | 31 | |||||||
| Other ^(1)^ | 8 | 74 | 83 | 11 | 78 | 89 | |||||||
| Other ^(2)^ | — | 37 | 37 | — | 69 | 69 | |||||||
| Total Revenue | $ | 329 | $ | 1,238 | $ | 1,567 | $ | 351 | $ | 1,155 | $ | 1,506 |
Totals may not foot due to rounding. Trademarksappearing above in italics are trademarks of, or are used under license by, the Organon group of companies.
^(^**^1)^Includes sales of products not listed separately. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiolvaginal ring is included in Other Women's Health.
^(2)^Other includes manufacturingsales to Merck & Co., Inc., Rahway, NJ, USA and other third parties, and allocated amounts from pre-spin revenue hedging activities.
TABLE 3
Organon & Co.
Sales by geographic area
(Unaudited, $ in millions)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| ($ in millions) | 2022 | 2021 | ||
| Europe and Canada | $ | 436 | $ | 434 |
| United States | 329 | 351 | ||
| Asia Pacific and Japan | 314 | 278 | ||
| China | 236 | 206 | ||
| Latin America, Middle East, Russia and Africa | 209 | 167 | ||
| Other ^(1)^ | 43 | 70 | ||
| Revenue | $ | 1,567 | $ | 1,506 |
^(1)^Otherincludes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties, and allocated amounts from pre-spin revenuehedging activities.
TABLE 4
Reconciliation of GAAP Gross Margin to Non-GAAPAdjusted Gross Profit and Adjusted Gross Margin
($ in millions)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Revenue | $ | 1,567 | $ | 1,506 | ||
| Cost of sales | 561 | 591 | ||||
| Gross Profit | 1,006 | 915 | ||||
| Gross Margin | 64.2 | % | 60.8 | % | ||
| Amortization | 28 | 20 | ||||
| One-time costs ^(1)^ | 5 | — | ||||
| Stock-based compensation | 3 | 2 | ||||
| Non-GAAP Adjusted Gross Profit ^(2)^ | $ | 1,042 | $ | 937 | ||
| Non-GAAP Adjusted Gross Margin | 66.5 | % | 62.2 | % |
^(1)^ One-time costs for the three months ended March 31,2022 primarily include costs to stand up the Company.
^^
^(2)^ Non-GAAP Adjusted Gross Profit is calculatedby excluding amortization, one-time costs, and the portion of stock-based compensation expense allocated to Cost of sales.
TABLE 5
Organon & Co.
Reconciliation of GAAP Income from ContinuingOperations Before Income Taxes to Adjusted EBITDA
($ in millions)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Income from continuing operations before income taxes | $ | 442 | $ | 467 | ||
| Depreciation | 25 | 18 | ||||
| Amortization ^(1)^ | 28 | 20 | ||||
| Interest expense | 97 | — | ||||
| EBITDA | 592 | 505 | ||||
| Restructuring costs | — | 1 | ||||
| One-time costs ^(2)^ | 40 | 49 | ||||
| Acquired in-process research and development | — | — | ||||
| Stock-based compensation | 15 | 11 | ||||
| Adjusted EBITDA | $ | 647 | $ | 566 | ||
| Adjusted EBITDA margin | 41.3 | % | 37.6 | % |
^(1)^Amortization in all periods is includedin Cost of sales.
^(2)^One-time costs primarily include costsincurred in connection with the spin-off of Organon. For the three months ended March 31, 2022, approximately $25 million of the one-timecosts are recorded in Selling, general and administrative expenses, $6 million are recorded in Other (income) expense, $5 million arerecorded in Cost of sales, and $4 million are recorded in Research and development. For the three months ended March 31, 2021, $49 millionof the one-time costs are classified in Selling, general and administrative expenses.
^^
TABLE 6
Organon & Co.
Reconciliation of GAAP Income from ContinuingOperations Before Income Taxes to Non-GAAP Adjusted Net Income
($ in millions, except per share amounts)
| Three Months Ended March 31, | |||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| Income from continuing operations before income taxes | $ | 442 | $ | 467 | |
| Adjustments: | |||||
| Amortization ^(1)^ | 28 | 20 | |||
| Restructuring costs | — | 1 | |||
| One-time costs ^(2)^ | 40 | 49 | |||
| Acquired in-process research and development | — | — | |||
| Stock-based compensation | 15 | 11 | |||
| Total Adjustments | 83 | 81 | |||
| Non-GAAP pre-tax income from continuing operations | 525 | 548 | |||
| Taxes on income as reported in accordance with GAAP | 94 | 72 | |||
| Tax benefit on adjustments | 14 | 15 | |||
| Tax (deduction)/benefit on GAAP-only discrete items | (3 | ) | 10 | ||
| Non-GAAP adjusted taxes on income | 105 | 97 | |||
| Non-GAAP adjusted net income, continuing operations | 420 | 451 | |||
| Non-GAAP adjusted net income, continuing operations per diluted share | $ | 1.65 | $ | 1.78 |
^(1)^Amortization in all periods is included in Cost ofsales.
^(2)^One-time costs primarily include costs incurred inconnection with the spin-off of Organon. For the three months ended March 31, 2022, approximately $25 million of the one-time costs arerecorded in Selling, general and administrative expenses, $6 million are recorded in Other (income) expense, $5 million are recorded inCost of sales, and $4 million are recorded in Research and development. For the three months ended March 31, 2021, $49 million of theone-time costs are classified in Selling, general and administrative expenses.
TABLE 7
Organon & Co.
Reconciliation of GAAP Income from Continuing Operations Before Income Taxes to Adjusted EBITDA
($ in millions)
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As<br><br> Reported<br> and<br> Recast^(4)^ | As<br><br> Reported<br> and<br> Recast^(4)^ | As<br><br> Reported | Impact<br> of<br> Non-<br><br> GAAP<br> Reporting<br> Changes | Recast | As<br><br> Reported | Impact<br> of<br> Non-<br><br> GAAP<br> Reporting<br> Changes | Recast | As<br><br> Reported | Impact<br> of<br> Non-<br> GAAP<br> Reporting<br> Changes | Recast | |||||||||||||||
| Income from continuing operations before income taxes | $ | 467 | $ | 437 | $ | 389 | $ | — | $ | 389 | $ | 236 | $ | — | $ | 236 | $ | 1,529 | $ | — | $ | 1,529 | |||
| Depreciation | 18 | 21 | 25 | — | 25 | 28 | — | 28 | 92 | — | 92 | ||||||||||||||
| Amortization ^(1)^ | 20 | 22 | 27 | — | 27 | 34 | — | 34 | 103 | — | 103 | ||||||||||||||
| Interest expense | — | 62 | 98 | — | 98 | 98 | — | 98 | 258 | — | 258 | ||||||||||||||
| EBITDA | $ | 505 | $ | 542 | $ | 539 | $ | — | $ | 539 | $ | 396 | $ | — | $ | 396 | $ | 1,982 | $ | — | $ | 1,982 | |||
| Restructuring costs | 1 | 1 | 1 | — | 1 | — | — | — | 3 | — | 3 | ||||||||||||||
| One-time costs ^(2)^ | 49 | 66 | 56 | — | 56 | 59 | — | 59 | 231 | — | 231 | ||||||||||||||
| Acquired in-process research and development ^(3)^ | — | — | 25 | (25 | ) | — | 79 | (79 | ) | — | 104 | (104 | ) | — | |||||||||||
| Stock-based compensation | 11 | 18 | 15 | — | 15 | 15 | — | 15 | 59 | — | 59 | ||||||||||||||
| Adjusted EBITDA | $ | 566 | $ | 627 | $ | 636 | $ | (25 | ) | $ | 611 | $ | 549 | $ | (79 | ) | $ | 470 | $ | 2,379 | $ | (104 | ) | $ | 2,275 |
| ^(1)^Amortization in all periods is included in Cost of sales. | |||||||||||||||||||||||||
| --- | |||||||||||||||||||||||||
| ^(2)^ One-time costs primarily include costs incurred in connection with the spin-off of Organon as well as acquisition related costs. Refer to the Company's previously filed Current Reports on Form 8-Ks for a further description of these costs for each reported period. | |||||||||||||||||||||||||
| ^(3)^ Costs represent upfront licensing payment associated with ObsEva of $25 million during the third quarter of 2021 and Forendo of $79 million in the fourth quarter of 2021, which were recorded in Research and development expense. | |||||||||||||||||||||||||
| ^(4)^ The change does not affect the previously reported Adjusted EBITDA results for the first and second quarter of 2021 as there were no adjustments which affected either of the periods. |
TABLE 8
Organon & Co.
Reconciliation of GAAP Income from Continuing Operations Before Income Taxes to Non-GAAP Adjusted Net Income
($ in millions, except per share amounts)
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As <br><br>Reported<br> and <br><br>Recast^(5)^ | As <br><br>Reported<br><br><br> and<br><br> Recast^(5)^ | As<br><br> Reported | Impact of<br><br><br> Non-<br><br>GAAP Reporting<br><br> Changes | Recast | As <br><br>Reported | Impact of<br><br><br> Non-<br><br>GAAP<br><br> Reporting<br><br> Changes | Recast | As <br><br>Reported | Impact of<br><br><br> Non-<br><br>GAAP<br><br> Reporting<br><br> Changes | Recast | |||||||||||||||
| Income from continuing operations before income taxes | $ | 467 | $ | 437 | $ | 389 | $ | — | $ | 389 | $ | 236 | $ | — | $ | 236 | $ | 1,529 | $ | — | $ | 1,529 | |||
| Adjustments: | |||||||||||||||||||||||||
| Amortization ^(1)^ | 20 | 22 | 27 | — | 27 | 34 | — | 34 | 103 | — | 103 | ||||||||||||||
| Restructuring costs | 1 | 1 | 1 | — | 1 | — | — | — | 3 | — | 3 | ||||||||||||||
| One-time costs ^(2)^ | 49 | 66 | 56 | — | 56 | 59 | — | 59 | 231 | — | 231 | ||||||||||||||
| Acquired in-process research and development ^(3)^ | — | — | 25 | (25 | ) | — | 79 | (79 | ) | — | 104 | (104 | ) | — | |||||||||||
| Stock-based compensation | 11 | 18 | 15 | — | 15 | 15 | — | 15 | 59 | — | 59 | ||||||||||||||
| Total Adjustments | 81 | 107 | 124 | (25 | ) | 99 | 187 | (79 | ) | 108 | 500 | (104 | ) | 396 | |||||||||||
| Non-GAAP pre-tax income from continuing<br> operations | $ | 548 | $ | 544 | $ | 513 | $ | (25 | ) | $ | 488 | $ | 423 | $ | (79 | ) | $ | 344 | $ | 2,029 | $ | (104 | ) | $ | 1,925 |
| Taxes on income as reported in accordance with GAAP | 72 | 6 | 66 | — | 66 | 34 | — | 34 | 178 | — | 178 | ||||||||||||||
| Tax benefit on adjustments | 15 | 20 | 23 | (2 | ) | 21 | 35 | (17 | ) | 18 | 93 | (19 | ) | 74 | |||||||||||
| Tax benefit on GAAP-only discrete<br> items ^(4)^ | 10 | 81 | — | — | — | 5 | — | 5 | 96 | — | 96 | ||||||||||||||
| Non-GAAP adjusted taxes on income | $ | 97 | $ | 107 | $ | 89 | $ | (2 | ) | $ | 87 | $ | 74 | $ | (17 | ) | $ | 57 | $ | 367 | $ | (19 | ) | $ | 348 |
| Non-GAAP adjusted net income, continuing operations | $ | 451 | $ | 437 | $ | 424 | $ | (23 | ) | $ | 401 | $ | 349 | $ | (62 | ) | $ | 287 | $ | 1,662 | $ | (85 | ) | $ | 1,577 |
| Non-GAAP adjusted net income from<br> continuing operations per diluted share | $ | 1.78 | $ | 1.72 | $ | 1.67 | $ | (0.09 | ) | $ | 1.58 | $ | 1.37 | $ | (0.24 | ) | $ | 1.13 | $ | 6.54 | $ | (0.33 | ) | $ | 6.20 |
| ^(1)^Amortization in all periods is included in Cost of sales. | |||||||||||||||||||||||||
| --- | |||||||||||||||||||||||||
| ^(2)^ One-time costs primarily include costs incurred in connection with the spin-off of Organon as well as acquisition related costs. Refer to the Company's previously filed Current Reports on Form 8-Ks for a further description of these costs for each reported period. | |||||||||||||||||||||||||
| ^(3)^ Costs represent upfront licensing payment associated with ObsEva of $25 million during the third quarter of 2021 and Forendo of $79 million in the fourth quarter of 2021, which were recorded in Research and development expense. | |||||||||||||||||||||||||
| ^(4)^ Amounts include a tax benefit of approximately $70 million recorded in the second quarter of 2021 and a tax benefit of $5 million recorded in the fourth quarter of 2021 related to a portion of non-US step up in tax basis as a result of its separation from Merck & Co., Inc., Rahway, NJ, USA. | |||||||||||||||||||||||||
| ^(5)^The change does not affect the previously reported Non-GAAP results for the first and second quarter of 2021 as there were no adjustments which affected either of the periods. |
Exhibit 99.2
Q1 2022 Earnings Organon
Disclaimer statement Safe Harbor for Forward - Looking Statements Except for historical information herein, 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 limited to, statements about management’s expectati ons about Organon’s future financial performance and prospects. Forward - looking statements may be identified by words such as “expects,” “intends,” “antici pates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning. These statements are based upon the current beliefs and ex pectations of the company’s management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or ri sks or uncertainties materialize, actual results may differ materially from those set forth in the forward - looking statements. Risks and uncertaintie s include, but are not limited to, an inability to execute on our business development strategy or realize the benefits of our planned acquisitions; general in dustry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the ong oin g COVID - 19 pandemic and emergence of variant strains; the impact of pharmaceutical industry regulation and health care legislation in the United Sta tes and internationally; global trends toward health care cost containment; technological advances; new products and patents attained by competitors; cha llenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict its future fina nci al results and performance; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instabi lit y of international economies and sovereign risk; difficulties developing and sustaining relationships with commercial counterparties; dependence on the effect ive ness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or re gul atory actions. The company undertakes no obligation to publicly update any forward - looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward - looking statements can be found in the company’s filings with the Securities and Exchange Commission (SEC), including the company's Annual Report on Form 10 - K for the year ended December 31, 202 1 and subsequent periodic filings, available at the SEC’s Internet site (www.sec.gov). This text should be viewed in conjunction with Organon’s Q1 2022 earnings call 2
Disclaimer statement, cont. Non - GAAP Information This presentation contains “non - GAAP financial measures,” which are financial measures that either exclude or include amounts th at are not excluded or included in the most directly comparable measures calculated and presented in accordance with U.S. generally acce pte d accounting principles (“GAAP”). Specifically, the company makes use of the non - GAAP financial measures Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS, which are not recognized terms under GAAP and are presented only as a supplement to the com pan y’s GAAP financial statements. The company believes that these non - GAAP financial measures help to enhance an understanding of the company’s financial performance. However, the presentation of these measures has limitations as an analytical tool and should no t be considered in isolation, or as a substitute for the company’s results as reported under GAAP. Because not all companies use i den tical calculations, the presentations of these non - GAAP measures may not be comparable to other similarly titled measures of other com panies. You should refer to the appendix of this presentation relevant definitions and reconciliations of non - GAAP financial measures contai ned herein to the most directly comparable GAAP measures. In addition, the company’s full - year 2022 guidance measures (other than revenue) are provided on a non - GAAP basis because the company is unable to reasonably predict certain items contained in the GAAP measures. Such items include, but are not limited to, acquisition related expenses, restructuring and related expenses, stock - based compensation and other items not reflective of the company's ongoing operations. The company uses non - GAAP financial measures in its operational and financial de cision making, and believes that it is useful to exclude certain items in order to focus on what it regards to be a more meaningful rep resentation of the underlying operating performance of the business. 3
First quarter 2022 highlights 4 • Double digit growth in Biosimilars and Fertility • Capitalizing on opportunities in Established Brands • Continued business development with license for Xaciato TM • $1,567 million Revenue • $647 million Adjusted EBITDA • $1.65 Adjusted EPS from continuing operations
Established Brands sizeable and stable base of revenue $ mil 5
Building a Women’s Health portfolio Entered into licensing agreement for Xaciato Œ March 2022 Bacterial Vaginosis FDA - approved for BV in females 12 and over, the most common cause of vaginitis worldwide estimated to affect approximately 21 million women in the U.S. (1) Marvelon Œ and Mercilon Œ February 2022 Contraception Expanding contraception portfolio by recapturing commercial rights to certain currently marketed products in Asia Acquisition of Forendo Pharma December 2021 Endometriosis Affects up to 170 million patients , or up to 10% of women of reproductive age Licensing of investigational ebopiprant, being studied in pre - term labor July 2021 Pre - term labor 15 million babies (11.1% of all live births) born pre - term every year (2) Acquisition of Alydia Health/JADA® System June 2021 Postpartum hemorrhage One of the most common complications of birth, requiring pharmacologic treatment in up to 10% of mothers (3) (1) Centers for Disease Control and Prevention Bacterial Vaginosis CDC Fact Sheet; https://www.cdc.gov/std/bv/stdfact - bacterial - vaginosis.htm (2) WHO Key Facts, 2018: https://www.who.int/news - room/fact - sheets/detail/preterm - birth (3) Widmer M et al. "Heat - Stable Carbetocin versus Oxytocin to Prevent Hemorrhage after Vaginal Birth." N Engl J Med 2018; 379:743 - 7 52 . 6
+4% reported +8% ex - FX $ mil 1,567 1,506 7 Q1 revenue: volume growth more than offset LOE, price (1) LOE = Loss of Exclusivity (2) VBP = Volume - Based Procurement (3) Other includes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties, and allocated amounts from pre - spin revenue hedging activities. ~30 ~30 ~210 ~60 ~30 ~0 (3) (1) (2)
Strong ex - US performance $ mil Q1 - 22 Q1 - 21 (pre - spin) Actual VPY Ex FX VPY Europe and Canada 436 434 — 8% United States 329 351 (6)% (6)% Asia Pacific and Japan 314 278 13% 22% China 236 206 15% 13% Latin America, Middle East, Russia and Africa 209 167 25% 34% Other (1) 43 70 (39)% (39)% Total Revenue 1,567 1,506 4% 8% 8 ~80% of sales generated ex - US (1) Other includes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties, and allocated amounts from pre - spin revenue hedging activities.
Women’s Health Women’s Health Revenues $ mil Q1 - 2022 Q1 - 2021 Act VPY Ex FX VPY Top Contraception Products Nexplanon ® 171 183 (7)% (5)% NuvaRing ® 41 45 (10)% (6)% Cerazette Œ 18 17 5% 11% Top Fertility Products Follistim ® 61 52 17% 20% Ganirelix Acetate Injection 30 29 2% 6% Other Women's Health products 57 73 (21)% (18)% Total Women's Health 378 399 (5)% (3)% 9 • Double digit fertility growth in Q1 • Q1 Nexplanon sales were impacted by customer buying patterns • Positive demand trends for Nexplanon ; expect double digit growth for full year 2022 Totals may not foot due to rounding . Trademarks appearing above in italics are trademarks of, or are used under license by, the Organon group of companies .
Biosimilars Biosimilars Revenues $ mil Q1 - 2022 Q1 - 2021 Act VPY Ex FX VPY Renflexis ® 46 38 21% 21% Ontruzant ® 22 22 — 5% Brenzys Œ 14 10 40% 44% Aybintio Œ 10 8 26% 37% Hadlima Œ 6 2 NM NM Biosimilars 99 81 22% 25% 10 • Double digit growth for Renflexis • Ontruzant growth in US tempered by EU competition; approved in Canada • US demand for biosimilars continues to grow Totals may not foot due to rounding . Trademarks appearing above in italics are trademarks of, or are used under license by, the Organon group of companies .
Established Brands Revenue up/down Established brands Revenues $ mil Q1 - 2022 Q1 - 2021 Act VPY Ex FX VPY Cardiovascular 410 389 5% 11% Respiratory 305 236 29% 35% Non - Opioid Pain, Bone & Dermatology 201 181 11% 18% Other 136 152 (10)% (6)% Total Est. Brands 1,053 957 10% 15% 11 • Limited LOE impact in Q1; no VBP impact • Benefits from one - time items • Improved outlook for 2022 Totals may not foot due to rounding .
Timing of spend benefits Q1 Adj. EBITDA margin $ mil Q1 - 22 Q1 - 21 (pre - spin) Actual VPY Revenue 1,567 1,506 4% Cost of sales 561 591 (5)% Gross profit 1,006 915 10% Non - GAAP Adjusted Gross profit (1) 1,042 937 11% Selling, general, and administrative 371 382 (3)% Research and development 96 67 43% Adjusted EBITDA (2) 647 566 14% Net income, continuing operations (3) 348 395 (12)% Diluted EPS 1.36 1.56 (13)% Non - GAAP Adjusted net income, continuing operations (3) 420 451 (7)% Non - GAAP Adjusted diluted EPS 1.65 1.78 (7)% 12 (1) See Slide 19 of this presentation for a reconciliation of Gross Profit to Adjusted Gross Profit. (2) See Slides 20 of this presentation for a reconciliation of EBITDA and Adjusted EBITDA measures. (3) See Slides 21 of this presentation for a reconciliation of Net Income from continuing operations to Adjusted net income from c ontinuing operations. Gross margin 64.2% 60.8% Non - GAAP Adjusted Gross margin (1) 66.5% 62.2% Adjusted EBITDA margin (2) 41.3% 37.6%
13 $ mil Net leverage ratio ~3.6x Debt capitalization as of March 31, 2022 June 30, 2021 September 30, 2021 December 31,2021 March 31, 2022 Reported cash and cash equivalents 730 1,008 737 694 Cash for IOM - exit inventory (1) (400) (320) (0) (0) Cash available to Organon 330 688 737 694 Gross Debt (2) 9,348 9,298 9,134 9,094 Net Debt (2) 9,018 8,610 8,397 8,400 (1) Organon’s starting cash balance at spin included $400 million from Merck & Co., Inc., Rahway, NJ, USA which was used for the pur chase of inventory upon exit of certain Interim Operating Model arrangements. (2) Debt figures are net of discounts and unamortized fees of $135 million, $130 million, $124 million, and $119 million as of Ju ne 30, 2021, September 30, 2021, December 31, 2021, and March 31, 2022, respectively.
$ mil 14 Revenue drivers consistent with previous guidance (1) (2) $6,304 $6,100 – $6,400 ~(100) ~(100) ~(200) +600 − +700 (50 − 100) (200 − 300 ) FX ~300 - 475 bps headwind to growth in 2022 (1) Other includes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties, and allocated amounts from pre - spin revenue hedging activities. (2) Based on 2021 performance and April month end spot rates for 2022.
Affirming full year 2022 financial guidance 15 $M, provided on a Non - GAAP basis, except Revenue Guidance provided February 17, 2022 Guidance provided as of May 5, 2022 Revenue $6,100 - $6,400 Unchanged Adjusted gross margin Mid - 60% range Unchanged SG&A (as % of revenue) Mid - 20% range Unchanged R&D (as % of revenue) Mid - upper single - digit Unchanged Adjusted EBITDA margin 34% - 36% Unchanged Interest expense ~$400 Unchanged Depreciation $100 - $115 Unchanged Effective non - GAAP tax rate 17.5% - 19.5% Unchanged Fully diluted weighted avg. shares outstanding ~255M Unchanged
Q&A
Appendix
Established Brands exceptional Q1 performance $ mil Q1 - 2022 Q1 - 2021 (pre - spin) Actual VPY Ex FX VPY Women’s Health 378 399 (5)% (3)% Biosimilars 99 81 22% 25% Est. Brands 1,053 957 10% 15% Other (1) 37 69 (45)% (46)% Total Revenue 1,567 1,506 4% 8% 18 (1) Other includes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties, and allocated amounts from pre - spin revenue hedging activities.
Gross margin reconciliation $ mil Q1 - 2022 Q1 - 2021 (pre - spin) Revenue 1,567 1,506 Cost of sales 561 591 Gross Profit 1,006 915 Gross Margin 64.2% 60.8% Amortization 28 20 One - time costs (1) 5 — Stock - based compensation 3 2 Non - GAAP Adjusted Gross Profit (2) 1,042 937 Non - GAAP Adjusted Gross Margin 66.5% 62.2% 19 (1) One - time costs for the three months ended March 31, 2022 primarily include costs to stand up the Company. (2) Non - GAAP Adjusted Gross Profit is calculated by excluding amortization, one - time costs, and the portion of stock - based compensa tion expense allocated to Cost of sales.
Income from continuing operations before tax to Adjusted EBITDA $ mil Q1 - 2022 Q1 - 2021 (pre - spin) Income from continuing operations before income taxes 442 467 Depreciation 25 18 Amortization (1) 28 20 Interest expense 97 — EBITDA 592 505 Restructuring costs — 1 One - time costs (2) 40 49 Acquired in - process research and development — — Stock - based compensation 15 11 Adjusted EBITDA 647 566 Adjusted EBITDA margin 41.3% 37.6% 20 (1) Amortization in all periods is included in Cost of sales. (2) One - time costs primarily include costs incurred in connection with the spin - off of Organon. For the three months ended March 31, 2022, approximately $25 million of the one - time costs are recorded in Selling, general and administrative expenses, $6 million are recorded in Other (income) expense, $5 mil lio n are recorded in Cost of sales, and $4 million are recorded in Research and development. For the three months ended March 31, 2021, $49 million of the one - time costs are classifie d in Selling, general and administrative expenses.
Income from continuing operations before tax to Adjusted Net Income $ mil (except EPS) Q1 - 2022 Q1 - 2021 (pre - spin) Income from continuing operations before income taxes 442 467 Amortization (1) 28 20 Restructuring costs — 1 One - time costs (2) 40 49 Acquired in - process research and development — — Stock - based compensation 15 11 Total Adjustments 83 81 Non - GAAP pre - tax income from continuing operations 525 548 Taxes on income as reported in accordance with GAAP 94 72 Tax benefit on adjustments 14 15 Tax (deduction)/benefit on GAAP - only discrete items (3) 10 Non - GAAP adjusted taxes on income 105 97 Non - GAAP adjusted net income, continuing operations 420 451 Non - GAAP adjusted net income, continuing operations per diluted share 1.65 1.78 21 (1) Amortization in all periods is included in Cost of sales. (2) One - time costs primarily include costs incurred in connection with the spin - off of Organon. For the three months ended March 31, 2022, approximately $25 million of the one - time costs are recorded in Selling, general and administrative expenses, $6 million are recorded in Other (income) expense, $ 5 m illion are recorded in Cost of sales, and $4 million are recorded in Research and development. For the three months ended March 31, 2021, $49 million of the one - time costs a re classified in Selling, general and administrative expenses.
22 $ mil In - process R&D recast – Income from continuing operations before tax to Adjusted EBITDA (1) Amortization in all periods is included in Cost of sales. (2) One - time costs primarily include costs incurred in connection with the spin - off of Organon as well as acquisition related costs . Refer to the Company's previously filed Current Reports on Form 8 - Ks for a further description of these costs for each reported period. (3) Costs represent upfront licensing payment associated with ObsEva of $25 million during the third quarter of 2021 and Forendo of $79 million in the fourth quarter of 2021, which were recorded in Research and development expense. (4) The change does not affect the previously reported Adjusted EBITDA results for the first and second quarter of 2021 as there wer e no adjustments which affected either of the periods. Organon & Co. Reconciliation of GAAP Income from Continuing Operations Before Income Taxes to Adjusted EBITDA ($ in millions) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 As Reported and Recast (4) As Reported and Recast (4) As Reported Impact of Non - GAAP Reporting Changes Recast As Reported Impact of Non - GAAP Reporting Changes Recast As Reported Impact of Non - GAAP Reporting Changes Recast Income from continuing operations before income taxes $ 467 $ 437 $ 389 $ — $ 389 $ 236 $ — $ 236 $ 1,529 $ — $ 1,529 Depreciation 18 21 25 — 25 28 — 28 92 — 92 Amortization (1) 20 22 27 — 27 34 — 34 103 — 103 Interest expense — 62 98 — 98 98 — 98 258 — 258 EBITDA $ 505 $ 542 $ 539 $ — $ 539 $ 396 $ — $ 396 $ 1,982 $ — $ 1,982 Restructuring costs 1 1 1 — 1 — — — 3 — 3 One - time costs (2) 49 66 56 — 56 59 — 59 231 — 231 Acquired in - process research and development (3) — — 25 (25) — 79 (79) — 104 (104) — Stock - based compensation 11 18 15 — 15 15 — 15 59 — 59 Adjusted EBITDA $ 566 $ 627 $ 636 $ (25) $ 611 $ 549 $ (79) $ 470 $ 2,379 $ (104) $ 2,275
$ mil In - process R&D recast – Income from continuing operations before income tax to Non - GAAP Adjusted net income Organon & Co. Reconciliation of GAAP Income from Continuing Operations Before Income Taxes to Non - GAAP Adjusted Net Income ($ in millions, except per share amounts) Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 As Reported and Recast (5) As Reported and Recast (5) As Reported Impact of Non - GAAP Reporting Changes Recast As Reported Impact of Non - GAAP Reporting Changes Recast As Reported Impact of Non - GAAP Reporting Changes Recast Income from continuing operations before income taxes $ 467 $ 437 $ 389 $ — $ 389 $ 236 $ — $ 236 $ 1,529 $ — $ 1,529 Adjustments: Amortization (1) 20 22 27 — 27 34 — 34 103 — 103 Restructuring costs 1 1 1 — 1 — — — 3 — 3 One - time costs (2) 49 66 56 — 56 59 — 59 231 — 231 Acquired in - process research and development (3) — — 25 (25) — 79 (79) — 104 (104) — Stock - based compensation 11 18 15 — 15 15 — 15 59 — 59 Total Adjustments 81 107 124 (25) 99 187 (79) 108 500 (104) 396 Non - GAAP pre - tax income from continuing operations $ 548 $ 544 $ 513 $ (25) $ 488 $ 423 $ (79) $ 344 $ 2,029 $ (104) $ 1,925 Taxes on income as reported in accordance with GAAP 72 6 66 — 66 34 — 34 178 — 178 Tax benefit on adjustments 15 20 23 (2) 21 35 (17) 18 93 (19) 74 Tax benefit on GAAP - only discrete items (4) 10 81 — — — 5 — 5 96 — 96 Non - GAAP adjusted taxes on income $ 97 $ 107 $ 89 $ (2) $ 87 $ 74 $ (17) $ 57 $ 367 $ (19) $ 348 Non - GAAP adjusted net income, continuing operations $ 451 $ 437 $ 424 $ (23) $ 401 $ 349 $ (62) $ 287 $ 1,662 $ (85) $ 1,577 Non - GAAP adjusted net income from continuing operations per diluted share $ 1.78 $ 1.72 $ 1.67 $ (0.09) $ 1.58 $ 1.37 $ (0.24) $ 1.13 $ 6.54 $ (0.33) $ 6.20 (1) Amortization in all periods is included in Cost of sales. (2) One - time costs primarily include costs incurred in connection with the spin - off of Organon as well as acquisition related costs . Refer to the Company's previously filed Current Reports on Form 8 - Ks for a further description of these costs for each reported period. (3) Costs represent upfront licensing payment associated with ObsEva of $25 million during the third quarter of 2021 and Forendo of $79 million in the fourth quarter of 2021, which were recorded in Research and development expense. (4) Amounts include a tax benefit of approximately $70 million recorded in the second quarter of 2021 and a tax benefit of $5 mil lio n recorded in the fourth quarter of 2021 related to a portion of non - US step up in tax basis as a result of its separation from Merck & Co., Inc., Rahway, NJ, USA. (5) The change does not affect the previously reported Non - GAAP results for the first and second quarter of 2021 as there were no ad justments which affected either of the periods.
Number of products 11 5 49 Women’s Health Biosimilars Established Brands Broad and diverse portfolio 24