Organon & Co.

Thank you for standing by. My name is Celine and I will be your conference operator today. At this time, I would like to welcome everyone to the Argonauts fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Jen. Please go ahead.

Thank you, Operator. Good morning, everyone. Thank you for joining Organon's fourth quarter and full year 2024 earnings call. With me today are Kevin Ali, Organon's Chief Executive Officer, Matt Walsh, our Chief Financial Officer, and Juan Camilo Arjona-Ferreira, Organon's Head of R&D. 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 Presentations section of our Organon Investor Relations website. 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 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 fourth quarter and full year 2024 results. For the full year 2024, revenue was $6.4 billion, representing a 3% growth rate at constant currency. This is the third consecutive year that Organon has delivered constant currency revenue growth. In fact, all three of our franchises have delivered three years of constant currency revenue growth. Adjusted EBITDA was $1.96 billion, inclusive of $81 million of IPR&D, representing a 30.6% adjusted EBITDA margin. Ex-IPR&D, our adjusted EBITDA margin was 31.8%, about a half a point of margin expansion over last year on that same basis. Today, we're also providing guidance for the full year 2025. For this year, we expect revenue to be in the range of $6.125 billion to $6.325 billion, inclusive of an approximate $200 million headwind from foreign currency. On a constant currency basis, the midpoint of this range would represent flat revenue performance in 2025. That is reflective of an approximate $200 million headwind from Adizet's loss of exclusivity in Europe, which we will look to offset with growth in products like Vitamma, Emgality, Fertility, and of course, Nexplanon. Our adjusted EBITDA range for 2025 is 31% to 32%, consistent with prior commentary that we intend to manage to hold a 31% adjusted EBITDA margin floor X IPR&D. This applies even in 2025 as we manage through the LOE of our second largest product. Let's move now to discuss the growth drivers within the franchises in 2024. The women's health franchise grew 5%, ex-exchange led by performance of Nexplanon, which was up 17% XFX for the full year of 2024. This was Nexplanon's best annual performance ever and positions the product to achieve at least $1 billion of revenue in 2025. In 2024, Nexplanon grew double-digit both in the U.S. and in international markets. Outside the U.S., growth in the Lemera region was particularly strong, driven by increased demand, tender expansions, as well as strong performance in Brazil. We also had a strong growth in the U.K., where Nexplanon is a market leader. In the U.S., we benefited from Nexplanon's market leadership, coupled with our pricing strategy, which includes management of the 340B discount program, as well as continued growth in physician demand. We remain very optimistic about the future of Nexplanon, especially with the potential of a five-year indication to sustain long-term Nexplanon growth. In 2024, we submitted our five-year study package to the FDA, which had strong results, including zero pregnancies and no new safety signals. We also have collected data from the same study on women with a high BMI, where there is a significant unmet need for a new, highly effective option with an adequate safety profile. Late in 2024, we made our submission to the FDA, putting us in a position to be ready for a late 2025 launch pending FDA approval. Also in women's health, JADA grew to $61 million in 2024 and celebrated 100,000 unit shifts since launch. Over 90% of the largest birthing hospitals in the U.S. now stock JADA. We expect continued growth of JADA in 2025 as we drive depth in our existing base and advocate for JADA's continued incorporation into hospital protocols. Rounding out women's health, our fertility franchise was down 2% ex-exchange in 2024. In the US, we worked through a late 2023 buy-in for Follistim due to the exit of a spin-related interim operating model. This offset growth we saw from new launches in Latin America, Japan, and Turkey, and strong performance in the Asia-Pacific region. Our fertility products in China are performing better than the market, and we are well-positioned to capture growth when that market accelerates. In 2024, our Biosimilars franchise grew 12% in constant currency, in part because of our ability to capture more than our contractual share of the Brazil tender for Entrezon. With RENFLEX as an Entrezon, at the mature point in their longer-than-projected life cycle, will likely see a decline in biosimilars in the mid-single-digit range in 2025. We expect continued strong growth in Hadlema following our U.S. launch in July of 2023, and late in 2025, pending FDA approval, we expect the launch of the Nosumab biosimilar in collaboration with Shanghai Henleus. We also plan to launch a biosimilar for Bridgetta in the EU and in Latin America in 2026 with the U.S. following those launches. Lastly, we continue to see further business development opportunities to build out our pipeline for biosimilars. Wrapping up the revenue discussion with established brands. Established brands grew 2% ex-exchange for the full year of 2024. Contributions from Ingality and Vitama, along with recovery and injectable steroids, more than offset the impacts from the LOE of ADOZ and an unfavorable pricing dynamic in Japan. Before turning to our R&D pipeline, let's spend a few minutes discussing our strategy and where we are at at this point in time. Even before SPIN, we knew that we had substantial work to do in order to stand up this new company and build out the capabilities required for success. During this period, we established Organon as a leader in women's health, completed 11 business development transactions, achieved a double-digit revenue case with Nexplanon, and drove growth in our base business. We also began to streamline our operating expenses with the goal of expanding profitability. You see the results of those actions in our full-year 2024 results, with non-GAAP operating expenses ex-IPR&D down 2%. For the last two years, we've also tailored our business development approach to focus on transactions like mGality and DermAvent that drive earnings accretion and enhance our revenue growth profile. We're driving a lean culture focused on profitable growth where we see our CAGR on both revenue and adjusted EBITDA accelerating through the end of the decade. That will be powered by the portfolio we have in hand as well as future business development activities. Let's talk about our specific plans in 2025 and focus on four specific strategic pillars. One, continued demonstration of resiliency in our base business. Our base business represents a material driver of value for our company. We've aggressively managed this portfolio since then, driving cash flow for reinvestment and growth. Two, capturing efficiencies. When we look at our operations, we are already in the process of implementing multiple initiatives that will drive significant operating savings during the calendar year of 2025. Those savings will more than offset the $180 million of expenses of DermAvent post synergies. We are reframing the way the company operates to be more nimble, eliminating reporting layers and increasing spans of control, all to position the company for profitable growth. Three, consistent deployment of capital. We're committed to our regular dividend as our number one capital allocation priority. And four, delivering on the promise of our growth products and pipeline. This includes eclipsing the $1 billion mark for Nexplanon for the calendar year of 2025. We also have a line of sight to deliver more than $300 million of revenue from our recent business development transactions. specifically Emgality and the Dermaband acquisition with 150 million of that coming from Vitamma. We're off to a strong start with Vitamma. Taking recent data ending January 31st, Vitamma saw strong NRX growth of 51% over the pre-AD approval 13-week average. For comparison, our direct competitors were up only 5%. Vitamma TRX also outperformed competitors by 10 points on that same basis. We remain comfortable with our revenue estimate for VITAMA in 2025, especially following the broad, favorable, and differentiating label we received in December in atopic dermatitis. VITAMA is the only nonsteroidal topical approved for mild, moderate, and severe atopic dermatitis, providing access to all segments of the market in patients as young as two years of age. Vitama delivers systemic-like efficacy, has no black box warning, no contraindications, and no duration or body surface area limitations, allowing for treatment across varying levels of disease severity. Early receptions of Vitama have been very positive. From the field, healthcare professionals are telling us they have been waiting for this approval, that they have felt an obligation to expand the use of non-steroidals, especially for children. and that there has yet to be a product that could treat the entire family. Overall feedback has confirmed that there is a significant unmet need in atopic dermatitis. And finally, in 2025, we also will be approaching stage gates in our R&D pipeline, some of them like OG6219 that have the potential to be game-changing programs. With that, I'll turn it over to Juan Camilo to speak more about our R&D priorities.