Organon & Co.

There will be a question and answer session. If you'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Jennifer Holchak, Vice President of Investor Relations. You may begin.

Thank you, Operator. Good morning, everyone. Thank you for joining Organon's first quarter 2024 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. Also joining us for the Q&A portion of this call is Organon's Head of R&D, Juan Camilo Arjona Ferreira. Today, we will 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 the GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would 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 2024 first quarter results. We entered this year with a clear focus to deliver our 2024 financial targets, improving our financial position, and positioning ourselves for future growth. And to that end, the first quarter was a very solid start. For the first quarter of 2024, revenue was $1.6 billion, with all three franchises contributing to a 7% growth rate at constant currency. I'm pleased to report that the women's health franchise grew 12%, our biosimilars franchise grew 46%, and our established brands business continued its stable performance with growth of 2%. In the first quarter, adjusted EBITDA was $538 million, representing a 33.2% adjusted EBITDA margin, and adjusted diluted EPS was $1.22. The strong performance in the first quarter strengthens our conviction and our financial guidance for the full year 2024, and we are affirming those ranges. We remain confident in our ability to deliver our third year of revenue growth on a constant currency basis, And we remain committed to delivering full-year adjusted EBITDA margins that are in line with last year or better. From a capital allocation standpoint, we continue to believe this business can generate a billion dollars of free cash flow before one-time costs, and we will be driving towards that number in 2024. That strong cash flow will provide financial flexibility to comfortably service our dividend make progress on achieving a leverage ratio below four times by the end of 2024, and to continue to do business development in line with the types of transactions we have completed in the last couple of years. This includes transactions in biosimilars and the recent commercial agreement with Eli Lilly to license two migraine assets. These transactions have solid returns, but importantly, they're also aligned with our mission of offering solutions in women's health beyond the narrow definition of reproductive health. Moving on to discuss our franchise performance. The first quarter, growth in women's health franchise was led by Nexplanon. The last year, we took the appropriate actions to position Nexplanon for successful 2024 and the long-term growth opportunity we see for the product. We remain confident that the product can achieve robust revenue growth in 2024. Next Monon's first quarter, constant currency growth was 34%. The U.S. was up 35%, and the rest of the world was up 34%. Year-over-year growth in the U.S. reflected a shift in timing of our list price increase, which brought stability to distributor buying patterns. As a result of this shift, going forward, we expect less volatility quarter to quarter in Next Monon results. For the full year, we expect growth to be driven by Nexplanon's leadership in contraception, the benefits of our pricing strategy, including list price in the U.S., and management of the 340B channel, as well as physician demand growth. Outside the U.S., Nexplanon grew 34% XFX in the first quarter, driven by increased demand in the Lemera region and in larger markets in the UCAN region, like France, the UK, and Canada. Outside the US for the full year of 2024, growth will be driven by continued strong performance in those markets, as well as our ability to better meet increased demand in our access markets, which we cited as a priority for us in 2024. As I mentioned nearly every quarter, we believe Nexplanon will be on a billion dollar annual run rate in 2025. And beyond 2025, we believe there is still significant runway for growth up until the loss of exclusivity for Nexplanon in the U.S., which in our view will not occur until 2030 for three specific reasons. First, our five-year study is on track to close this year, and pending FDA review and approval, our planning assumption is that we will be able to market with a five-year label in 2026. A differentiated label will give us three years of data exclusivity, on that five-year duration of use claim, which we know from our market research is preferred by women and providers. Second, we have IP protection on aspects of the applicator device until 2030. We believe that any generic coming to market before then would have to develop their own device and training programs to go along with it. So, it's not until 2030 when IP protection on both implant and device would have expired. that we might see the market start to alter with a similar five-year product and applicator. And third, complex drug device combinations have demonstrated strong post-LOE performance, which could be due to the fact that complex drug device development can pose significant challenges in terms of showing therapeutic equivalence. So overall, we're confident in the sales longevity of Nexplanon and further when competition does come We do not expect a traditional generics erosion curve. Moving on to our fertility franchise. As expected, our global fertility business was essentially flat this quarter, down about $2 million, or about 2% XFX. You'll recall that in the fourth quarter of 2023, in the U.S., we exited a spin-related commercial arrangement, and we onboarded a significant customer, resulting in a very strong buy-in of Follistim at the end of last year, that we have largely worked through in the first quarter, offsetting US performance with strong growth in fertility in China, which grew double digits, benefiting from strong demand. We expect continued momentum in our fertility business in China in 2024, with growth supported by solid demand, especially in key provinces like Beijing, where reimbursement for assisted reproductive technologies has been implemented. Together, the US and China make up north of 50% of our fertility business, Strong demand in those markets coupled with new launches and footprint expansion in other markets are supportive of the high single-digit revenue growth we expect to see in fertility on a global basis for the full year of 2024. Let's move now to our biosimilar business, which grew 46% in the first quarter and continues to be a solid growth pillar for Organon. We expect 2024 should be another year of double-digit growth on a global basis. for our biosimilars franchise. In the US, the growth driver in 2024 for biosimilars will primarily be the uptake of Hedlima. We are getting very good traction with Hedlima with Veterans Affairs, who within 60 days of exclusively carrying Hedlima, managed to convert more than 50% of the patients from Humira to Hedlima. This is a strong indicator of payer's ability to rapidly convert utilization, which is a critical factor for accelerating conversion two biosimilars in this market. Behind the U.S., two other key markets in our biosimilar business are Brazil and Canada. In Brazil, we're seeing strong performance from Entrezant in particular. The fourth quarter of 2023 was very strong for Entrezant, driven by favorable timing of a tender in Brazil, but in Q1, we saw incremental volumes come through that we would characterize as opportunistic upside. In Canada, we continue to see strong performance, especially in Hadlema, and RENFLEXIS as the government-mandated province-by-province transition to biosimilar progresses. As we have previously talked about, our aim in biosimilars is to launch a new asset every couple of years. We are well-positioned to execute on that beyond 2024. A great example of this is our collaboration with Shanghai Henleus Biotech, where we license commercialization rights for two investigational products, Progetta, or Protuzumab, and Prolia and XGiva, or denosumab biosimilar candidates. Organon will have exclusive global commercialization rights to these assets outside of mainland China, Hong Kong, Macau, and Taiwan. Clinical trials on both molecules have been progressing. In fact, we just recently announced that the phase three comparative clinical trial for the denosumab biosimilar met primary endpoints. We expect regulatory filings for our two denosumab biosimilar candidates to occur during 2024 in certain markets, including the U.S. and EU, followed by filings for the pertuzumab biosimilar candidate in the U.S. in late 2024 or early 2025. And then rounding out the discussion with established brands, which grew 2% XFX in the first quarter, demonstrating the resilience of this business. Impact from VBP in China was more than offset by the initial contribution from the recent commercial agreement for the two migraine drugs, Imgality and Rayval. We also saw a recovery in our injectable steroid products following last year's market action. For full year 2024, we expect established brands to achieve flat performance on an XXX basis, and Matt will go into more detail about the pushes and pulls on the established brands portfolio for 2024. Moving now to slide six, where we take a look at revenue by geography. UCAN grew 10% XFX in the quarter, driven by the addition of the two migraine assets and the recovery of injectable steroids, both of which I just mentioned. We're still having solid growth in Adizet in Europe, which should be the trend for the nine months of the year until it loses exclusivity in late third quarter of this year. U.S. was up 14% in the quarter, driven by performance in Nexplanon as well as uptake of both Hadlema and Jada post-launch. These factors offset rate pressure and the channel dynamics and fertility, which benefited the fourth quarter of last year, as well as U.S. performance of Entrezon. The Lemera region has been a significant contributor to Organon's growth since spin, the 36% XFX growth in the first quarter was primarily driven by opportunistic volume associated with the entrezant tender in Brazil, as well as strong growth in Nexplanon across the access markets and Mexico. The APJ region was down 7% XFX this quarter. We expect it to be a challenging year in Japan as we face some national pricing revisions, lap favorability from last year when some competitors were out of stock, and work through the LOEs of Adazet and Rosazet. China was down 5% XFX in the quarter, but for the full year 2024, we expect China to grow, particularly as we lap the economy-related challenges in China as we saw in the back half of last year. Overall, we are very pleased with the results through the first quarter of the year. Operational execution is progressing very nicely. We also have our eye on smart deals that fit within our desired financial profile while moving us forward as a company. And finally, there is potential value yet to be unlocked in our clinical portfolio. In life cycle management, in addition to the next one on five-year study and the two biosimilar assets with Shanghai Henleus that I spoke about earlier, we're making progress in the development of Mersalon for primary dysmenorrhea in Japan. On the innovative side, both assets we acquired through Forendo are progressing well, and our OG6219 study investigating a novel approach for treating endometriosis is progressing towards a phase two readout next year. We're also awaiting first in human dosing for our OG719 program, targeting the symptoms related to PCOS later this year, for which there is no current treatment. Additionally, we are anticipating preclinical data related to our collaboration with CERCLA, which is a novel method for non-hormonal contraception. It's great to see progress not only happening on the commercial execution side of things, but also in positioning Organon for future growth through our innovative therapies. Now, let's turn the call over to Matt, who will go into our financial results in more detail.