Organon & Co.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Organon second quarter 2023 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. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. As a reminder, this call is being recorded. I would now like to turn the call over to Jennifer Halchak, Vice President, Investor Relations. Please begin your conference.

Thank you, Audra. Good morning, everyone. Thank you for joining Organon's second quarter 2023 earnings call. With me today are Kevin Ali, Organon's Chief Executive Officer, who will cover strategy and operational highlights, and Matt Walsh, our Chief Financial Officer, who will review performance and guidance. 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. The 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 today during this conference 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 our CEO, Kevin Ali.

Good morning, everyone, and thank you, Jen. Welcome to today's call, where we'll talk about our second quarter 2023 results. Our revenue for the second quarter was $1.6 billion, up 4% at constant currency compared with the prior year period. In the second quarter, our women's health and biosimilars franchises grew double digits, while our established branch franchise achieved flat performance, again demonstrating its continued stability. Adjusted EBITDA was $530 million, representing a 33% margin. Turning to the full year. Given our current view of foreign currency exchange rates, we narrowed our guidance range on revenue from 6.15% to $6.45 billion to now $6.25 to $6.45 billion, which raises the midpoint of the revenue range by $50 million. We also raised the lower end of our adjusted EBITDA guidance based on our latest visibility into potential milestone payments. The new range of the full year is 31.5% to 33%, a quarter of a percentage point higher at the midpoint compared with prior guidance. Now, let's review the quarter in greater detail, beginning with women's health. Women's health grew 10% on a constant currency basis, primarily driven by 12% growth in Nexplanon. Performance of Nexplanon in the U.S. was particularly strong this quarter, with revenue growth of 19%. This reflects a 5% increase in U.S. position demand an increase in distributor inventory, as well as the benefit of our pricing action in the third quarter of 2022. Year-to-date, Nexplanon is up 6%, outpacing the LARC market, which grew 3% over the same period. We expect continued demand growth in the United States, especially with the more than 35,000 healthcare professionals currently prescribing Nexplanon. We also expect increasing demand outside the U.S., especially in Latin America and countries like Brazil and Argentina, as well as in Asia in countries like Thailand and the Philippines. We continue to believe that Nexplanon will achieve $1 billion in revenue by 2025, and we expect Nexplanon to be a significant contributor to growth for the coming years. Continuing our discussion on women's health, fertility was up 17% at constant currencies. As we have discussed, China and the U.S. are large fertility markets and together represent more than half of our current fertility business. During the second quarter, we saw significant growth in China, where there was a post-COVID rebound as patients returned to clinics for treatment. We have a very positive outlook for the fertility business in China for the remainder of the year. In the U.S., the fertility market is growing and remains an attractive business for Organon. We're seeing increasing demand from our existing customer base, but also since spin, we've worked to improve the consistency and reliability of our supply chain, which has allowed us to win incremental business from existing customers and to expand into new accounts in the reimbursed market. Demand is very strong in the U.S. market, and we believe volume will continue to offset a competitive pricing environment. Over the intermediate term, we believe our global fertility business can grow in the high single digit to low double digit range in line with our expectation for 2023. Wrapping up on women's health is the Jada system, our device for postpartum hemorrhage. Year to date, revenue from Jada has more than doubled, albeit off a small base, and is fast approaching a threshold where it will start to disclose its revenue in our product table. During the second quarter, We added more than 300 new accounts. We are now in over 100 of the 150 largest birthing hospitals in the U.S. and more than 28,000 mothers have been treated with Jada since launch. The enthusiasm around Jada is palpable and ranges from a rising profile in scientific journals like the Ruby Studies upcoming publication to healthcare professionals taking to social media to talk about the product. Overall, we are feeling very good about the future prospect for Jada. Moving now to our biosimilars business, where today I'll focus my discussion around the U.S. launch of Hadlima, our biosimilar for Humira. Since launch, all major wholesalers have placed orders for Hadlima. We're encouraged by our early traction as Organon is emerging as one of the few players earning spots on formularies and winning orders. In approaching the launch of Hadlima, we were very intentional in our market positioning and segmentation. Our pricing strategy focuses on simplicity. It was a deliberate choice and designed so that the savings to the healthcare system would be more transparent. We've priced Hadlema to enable access and to bring the economic benefits of biosimilars directly to the patient. We believe this is where we can offer the highest utility to patients. For example, here we're showing the two PBMs who have so far announced their formulary listings, OptumRx and Express Scripts. You can see where Organon has already been able to secure access within both PBMs outside of their national formulary listings. In the case of OptumRx, we have secured more than half of the lives through United Healthcare. In the case of Express Scripts between Cigna and Prime Therapeutics, we've secured about a third of the lives. Prime Therapeutics is the fourth largest PBM. Health plans at Prime include some of the largest Blue Cross Blue Shield plans in the nation. Many of these health plans are the dominant player in their respective states. And for both OptumRx and Express Scripts, we remain active in discussions for the custom health plan business. While we're very encouraged by the access we've secured so far, access alone does not guarantee success. And access doesn't necessarily mean the patients will get the product. This is why our strategy is expressly focused on customers that are not dependent on rebates. but rather the providers in the market who are focused on bringing the savings of biosimilars to the patients. And we're not done. The market is still evolving. Decisions from PBMs and insurers are still forthcoming. Product attributes will be a key in continuing to unlock opportunities. We continue to believe HEDLIMA is positively positioned when it comes to its product attributes. For example, our pen design received an Arthritis Foundation designation which recognizes products that make life easier for those living with arthritis and other functional limitations. We also developed the Hadlema for You patient support program that features comprehensive resources including a copay program and dedicated nurse coaches who engage with patients throughout their treatment journey. One of the most important differentiators for Hadlema is the five years of real-world evidence covering tens of thousands of patients that we have collected from Samsung's launch in Europe and from our own launches in Canada and Australia. This data should give great confidence and comfort to prescribers and patients alike. And we continue to move forward with our collaborator, Samsung, on the interchangeability designation. We recently announced that the phase four study had reached its primary endpoint, which puts us on the track for summer of 2024 approval. And finally, our product formulation is high concentration Citrate-free aligned with the most prescribed formulation of the originator. A product that can create a frictionless experience for a patient is the best way to drive pull-through. That is what gives patients a better comfort level and will influence physician prescriptions. The U.S. healthcare system needs biosimilars to be successful. They fill a significant gap in more affordable options for some of the most chronic diseases people face. We're proud of our market positioning and pricing. We're very pleased and encouraged by the signals we are getting so far, and we believe we'll be able to secure further access as this market continues to develop. Rounding out the top-line discussion, let's move on to established brands. Year-to-date, the established brands franchise has grown 1% exchange as 2% volume growth has offset a 1% decline in price across the portfolio. Since launch, we've encountered skepticism around how a portfolio of all patent brands can demonstrate that kind of continued stability. There are several reasons, and over the next few quarters, we will highlight a few of them in detail. Last quarter, we talked about manufacturing optimization for Nasen X and Adazet to meet increasing demand resulting from heightened promotional activity. Today, I'll focus on our strategic approach to pricing. In some lower-priced markets, lawmakers are backing policies that propose to raise originator and generic prices hoping to draw manufacturers back into the market and cure ongoing supply issues. This is true in select EU markets such as Germany, France and Sweden, as well as some APAC markets like India and Australia. Where this isn't the case, we have worked with policymakers to demonstrate how investments are important to ensure access to reliable and high-quality manufactured products. Further, we've been able to selectively increase our list price in many markets, subject to meeting certain conditions. An example is our Limeria region, where currency devaluation and inflation provided a basis for allowed price increases in a number of countries. Beyond increasing list price, we've also scrubbed the channel for commercial and trade discount improvements. As we continue to look at this portfolio, we're identifying opportunities that gives us greater confidence that the five-year CAGR for this franchise will be relatively flat on a constant currency basis. This June, we entered into our third year as a standalone company. Thanks to the hard work of our people around the world and their commitment to our vision and business, each of our franchises are performing as good as or better than we thought they would. Importantly, we have grown our pipeline since launch and have added eight assets to our portfolio, which includes some very interesting molecules in the early stages of development. This investment is key so that over time, Organon evolves into a pharma company with a regular cadence of catalysts and an accelerating growth rate. In our first two years as a company, we continue to build a track record of good operational results while also laying the groundwork for a successful future. I'll turn it over to Matt now to talk more about the solid results in the second quarter in more detail.