Organon & Co. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Revenue for Q2 was $1.6B, down 1% at constant currency. Adjusted EBITDA was $522M (32.7% margin) in Q2, with year-to-date adjusted EBITDA at $1B (32.4% margin).
• Raised revenue guidance range by $100M at the midpoint. Affirmed adjusted EBITDA margin guidance of 31% to 32%.
• Focus on reducing debt: Repaid approximately $350M of principal on long-term debt in Q2, on track to achieve net leverage below 4x by year-end, with midterm aim to get net leverage to 3.5x or below by 2026.
• Operational efficiencies: Strength year-to-date due to favorable adjusted gross margin, investment in growth pillars, and savings from restructuring programs. Vtama made significant progress on access objectives, aiming to cover 80% of the addressable population in health care plans by early 2026.

Segment Performance

• Women's Health:
  • Fertility business grew 15% at constant currency in Q2 2025, driven by Follistim due to late 2023 exit of a spin-related interim operating model with Merck and increased demand. Jada grew double-digit in the quarter and year-to-date. Nexplanon declined 1% in constant currency in Q2, down 5% in the U.S. but up 10% outside the U.S. Globally, Nexplanon grew 6% at constant currency in the first 6 months of the year.
• General Medicines:
  • Biosimilars performing better than expected, with Hadlima generating almost $100M as of June, up 68% Y/Y. Vtama had strong Q2 performance, with revenue of $31M, up 35% sequentially and 70% Y/Y, and over 20,000 new prescribers added since launch.

Guidance

• Raised full-year revenue guidance range by $100M at the midpoint due to favorable foreign exchange translation.
• Affirm adjusted EBITDA margin guidance of 31% to 32% for full year.
• Aim to generate more than $900M of free cash flow before one-time costs in 2025.
• On track to achieve net leverage below 4x by year-end, with midterm goal of net leverage of 3.5x or below by end of 2026.

Risks

• Loss of exclusivity of Atozet in the EU impacted revenue.
• Pricing pressure in certain markets, including from LOE of Atozet and mature products in the U.S.
• Federal and state subsidized funding constraints affecting Nexplanon U.S. sales.
• Uncertainty around tariffs, particularly EU impact on margins, though 15% EU tariff on pharmaceuticals would not impact 2025 adjusted gross margin guidance.

Question and Answer

• Q: On Vtama, incremental sales and marketing investment, including DTC or sales force expansion. A: Started new telehealth and DTC campaigns in July, added more sales reps, with over 125 reps in the field currently.
• Q: Nexplanon federal funding headwinds in the U.S. A: Combination of purchase timing and underlying pressures, but confident in reaching the $1B franchise threshold, and launching the 5-year indication by end of 2025.
• Q: Tariff impact on 2026 margins. A: Too soon to speculate on 2026 tariff impacts, with largest import exposure to U.S. from EU.
• Q: Vtama volume data and growth drivers. A: Investments in DTC, telehealth, and sales force expansion driving growth, with gross to net improving as PBM additions and coupon card reliance decrease.
• Q: Vtama ramp in H2 and Nexplanon 5-year indication impact. A: H2 Vtama ramp driven by DTC, telehealth, and sales force expansion; Nexplanon's 5-year indication will expand the market, with ex-U.S. growing robustly.
• Q: 6219 endometriosis program and generic Nexplanon. A: Discontinued 6219 program as no efficacy signal; working with FDA on 5-year Nexplanon labeling, FDA will determine generic guidance based on citizen's petition and assessment.