Organon & Co.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Oregonon third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. I would like to remind everyone in order to ask a question, press star and then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. As a reminder, this call is being recorded. Thank you. I would like now to turn the call over to Jennifer Halchak, Vice President, Investor Relations. Please begin your conference.

Thank you, Michelle. Good morning, everyone, and thanks for joining Organon's Third Quarter 2022 Earnings Call. With me today are Kevin Ali, Organon's Chief Executive Officer, and Matt Walsh, our Chief Financial Officer. Dr. Sandra Milligan, Organon's head of R&D, will also be joining us for the Q&A portion of this call. Today we'll be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the events and presentation section of our Organon Investor Relations website at www.organon.com. 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 presentation. I'd now like to turn the call over to Kevin Ali.

Good morning, everyone, and thank you, Jen. Welcome to today's call, where we will talk about our third quarter 2022 results. Beginning on slide four, Organon continues to perform very well. For the third quarter of 2022, revenue was $1.5 billion, up 3% at constant currency. This marks our third consecutive quarter of revenue growth at constant currency rates. And if we exclude supply sales and just look at product sales, it is the fourth consecutive quarter of product growth on a constant currency basis. We also demonstrated strong profitability. Organon generated adjusted EBITDA of $546 million in the third quarter, representing a 35.5% margin. Turning to slide five, we're building a company that we believe can deliver sustainable growth driven by the contributions of each of our three key franchises. During the third quarter, the women's health franchise delivered 23% growth on a constant currency basis. This includes $229 million of revenue in Nexplanon, which beat the record we set in the fourth quarter of 2021. This was also the first quarter during which we delivered more than $150 million of Nexplanon in the U.S., where the product grew 26%, and that is driven primarily by increased physician demand. Execution of the promotional strategy continues to support the Nexplanon growth trajectory this year. This includes training. We continue to train more physicians across the U.S. and year-to-date, we have trained over 16,000 providers. It also includes educational and direct-to-consumer campaigns, which are reaching millions of women and driving more patients to the product. The steady penetration of this product is evident when you look at Nexplanon's global performance on a trailing 12-month basis, which takes out the noise of the timing of tenders and pricing actions. We've added a slide in the appendix to illustrate the steady pickup and growth we have seen in this product since it has been in our hands. We should see a continuation of that trend into the fourth quarter. Fertility also grew double digits during the quarter as well as year to date. We expect double digit performance for this portfolio for the full year 2022. The US and China are large and important fertility markets and together represent over half of our current fertility business. Revenue increased in both of those markets during the third quarter. And that was despite slower than expected recovery from the COVID lockdowns in China. China is a particularly important fertility market with over a million IVF cycles a year. That is five times the number of cycles in the US. As you've heard us discuss many times before, fertility is a therapy area with strong demographic tailwinds. Women are waiting longer to start a family, resulting in higher infertility prevalence, and more governments are realizing that they need to take action to address the associated low birth rates. Globally, the top five markets with the highest infertility rates are in the Asia-Pacific region, where the fertility rate, or the number of births per woman, is significantly below the replacement rate required to sustain a population and a GDP growth. Countries like Korea are offering cash incentives for households to expand their families, and Japan, Australia, Thailand, and Singapore are expanding fertility access and or their benefits. These dynamics represent an attractive opportunity for Organon, given our already significant presence in that region. The women's health franchise is also benefiting from our business development activities. We've added three commercialized assets to our women's health portfolio since spin that are already contributing or will soon be contributing to revenue growth. You will recall that earlier this year, we reacquired the rights to Marvalon and Mersalon in selective territories in Asia, including China and Vietnam. Both Marvalon and Mersalon are combined oral hormonal daily contraceptive pills. These contraceptives were already owned, manufactured, and marketed by Organon in 20 other markets. Since we have taken ownership of Marvalon, growth has outpaced the market, and we increased market share of the product by two points in China. We also made our first shipments to Vietnam. The success from the repatriation of these assets is but one additional example of how Organon is applying its own methodologies to maximize the performance of assets that may have been under-prioritized in the past. The third quarter also includes a contribution from the JADA system, which is a device intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage. Our goal in acquiring JADA included the opportunity to speed up access to innovation in the U.S. and to leverage our global capabilities to bring JADA to markets around the world. We continue to add accounts and are now in about 800 hospitals in the U.S. where more than 10,000 mothers have been treated with Jada. Additionally, we recently made our first ex-U.S. shipment for the Jada system and have also submitted to the EU for approval, with that review process set to begin in December. And finally, together with our partner, DARE Bioscience, we look forward to a first-half 2023 launch of Zosciato, an FDA-approved medication for the treatment of bacterial vaginosis in females 12 years of age and older. We continue to balance our business development activity between commercial stage assets and pipeline stage assets, particularly with regards to potential opportunities in the U.S. market as we seek to further enhance the growth profile of Organon. With respect to the clinical assets we have added to our portfolio, we took an important step forward last week. when we enrolled the first patient in the Phase II Elena study to evaluate the safety and efficacy of OG6219, a candidate for endometriosis. We are proud to have achieved this milestone, as it is Organon's first molecular entity to enter this phase and signifies our dedication to developing novel alternative therapies for patients suffering from endometriosis. Endometriosis is among our highest priority areas of focus. It's a common and chronic condition that affects up to 1 in 10 women of reproductive age, and yet despite increasing awareness of this condition, there are currently no long-term approved treatment options. The compound we are studying is different than currently available treatments because of its potential ability to act locally in the target tissues without impacting systemic hormone levels. This potentially selective activity allows for its evaluation as a long-term treatment option for endometriosis. We are proud to be moving forward with this research in the hopes of addressing this significant unmet need. Turning to biosimilars, we continue to have solid uptake of Entrazont and Remflexis in the U.S., while the phasing of tenders will show up in quarterly results year-to-date This business is developing or delivering double-digit growth, and we expect results for the full year to demonstrate double-digit growth as well. Our next biosimilar launch will be mid-next year with our launch of Hadlema in the U.S. There are other biosimilars launching along with us in July, but here's why we think we will be successful. We believe that biosimilars that will be best positioned to succeed are those that share the same attributes as the originator, Humira. That includes the option for a high-concentration citrate-free formulation and a low-concentration formulation, and we expect to have both at launch. We also believe that real-world evidence and experience in other markets is important for provider uptake and product confidence. Our collaborator, Samsung Bioepis, has data from their launch of Hadlema in the EU, and we have data from our own launches in Canada and Australia. And finally, our pen designs. Samsung is an expert in device design and manufacturing. We believe our pen design can deliver a frictionless experience for patients transitioning from Humira, and we think will be a true differentiator among our other offerings. And before I turn the discussion over to Matt, which should not go underappreciated, on slide six is our established brands business. That franchise currently represents about two-thirds of our overall business. The portfolio continues to demonstrate the sustainability and untapped potential of these brands and generate significant free cash flow. Year-to-date, Established Brands has delivered 6% growth on a constant currency basis. Given its strong year-to-day performance, we expect the Established Brands franchise to deliver modest revenue growth for the full year 2022. even with some expected impact from volume-based procurement in China in the fourth quarter. As strategic owners of this business, we are staying nimble so that we can capitalize on dislocations in local markets, like competitor stockouts. Our policy and market access teams have worked to minimize price erosions where possible, and we have been strategic about extracting value from long-standing brands with planned lifecycle management activities. With these initiatives and programs, we believe we can manage this franchise to a very low single-digit rate of erosion over the longer term. And this, in our opinion, is a significant early win for a business that was experiencing double-digit decline prior to the spin. With that, now I'd like to turn over the discussion to Matt. Matt? Thank you, Kevin.