Organon & Co. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Carrie Cox mentioned assuming new role as Executive Chair, support for interim CEO Joe Morrissey, and completion of independent internal investigation on Nexplanon sales practices with remediation efforts underway.
• Joe Morrissey emphasized strategic priorities of deleveraging, cost savings, and revenue growth, with a resilient global team.
• Matthew Walsh discussed Q3 revenue of $1.6 billion and adjusted EBITDA of $518 million. Explained revenue impact from Nexplanon sales practices, breakdown by franchise (Women's Health, Biosimilars, Established brands), revenue drivers including loss of exclusivity, price, volumes, and foreign exchange. Also discussed free cash flow, leverage, and full-year guidance.

Segment Performance

• Women's Health franchise: Declined 4% at constant currency in Q3 2025 compared to Q3 2024. Contraceptives Marvelon, Mercilon and NuvaRing grew, but Nexplanon declined 9% at constant currency. Global Nexplanon sales in Q3 were $223 million. U.S. Nexplanon declined 50%, while international grew 7% ex-exchange.
• Biosimilars: Year-to-date performance largely driven by Hadlima, up 63% ex-FX globally through September.
• Established brands: Vtama revenue in Q3 was $34 million and $89 million year-to-date. Respiratory business showed softening with declines in Singulair and Dulera due to various factors.

Guidance

• Lowered full-year revenue range to $6.2 billion to $6.25 billion from $6.275 billion to $6.375 billion, reflecting year-over-year nominal decline of 3.2% to 2.4% negative.
• Adjusted gross margin expected to be in range of 60% to 61%.
• SG&A spend as percentage of revenue expected to be about 0.5 point higher than year-to-date figure, putting it in the 26% area for full year.
• Adjusted EBITDA margin revised to approximately 31% for full year 2025.
• Interest expense estimate remains at $510 million for 2025, with expectation of lower run rate in 2026 due to debt repayments.

Risks

• Unfavorable U.S. policy impacting Nexplanon sales in public segments like Planned Parenthood.
• Softness in respiratory business due to various factors including loss of share to newer products and price reductions.
• Competition in the atopic dermatitis space for Vtama with nonsteroidal offerings.

Question and Answer

Q: Given the Jada divestiture, are there opportunities within the portfolio for additional divestitures as you look across? And on Vtama, when should we start thinking about a growth inflection?

A: Matthew Walsh stated there are no definitively planned asset divestitures, but they constantly assess portfolio strategically. For Vtama, 2026 will be a key year to judge growth trajectory towards long-term peak revenue of ~$0.5 billion.

Q: Can you talk more about the pressure on respiratory? And how are you thinking about other potential trouble spots regarding Established brands? And on Vtama's competitive dynamics?

A: Matthew Walsh said respiratory pressure was due to slow allergy season in Asia Pacific, competitive product age, and price downs. No other major trouble spots in Established brands. Vtama is differentiated by nonsteroidal nature, no drug-to-drug interactions, and no restrictions on use in atopic dermatitis.