Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Organon & Co (OGN, Financial) reported a 5% revenue growth rate at constant currency for Q3 2024, with significant contributions from the women's health and biosimilars franchises.
- The company generated nearly $700 million of free cash flow year-to-date, on track to achieve approximately $1 billion for the full year 2024.
- Organon & Co (OGN) raised its revenue guidance midpoint by $50 million, reflecting strong year-to-date performance and improved foreign exchange outlook.
- The acquisition of Dermavant and its key asset, VTAMA, is expected to contribute significantly to Organon's dermatology portfolio, with potential sales of $150 million in 2025.
- Nexplanon, a leading product in the women's health franchise, is expected to achieve $1 billion in revenue next year, marking a major milestone for the company.
Negative Points
- The adjusted EBITDA margin for Q3 2024 was slightly lower at 29% compared to 29.4% in the same quarter last year, due to unfavorable product mix and pricing pressures.
- Organon & Co (OGN) faces pricing headwinds, particularly in Japan and Europe, impacting products like Atozet, NuvaRing, and Dulera.
- The acquisition of Dermavant is expected to be dilutive to EBITDA margin by about 50 basis points in 2025, with accretion expected in 2026.
- The fertility business is expected to be slightly down for the year due to inventory adjustments and onboarding challenges.
- Organon & Co (OGN) is experiencing competitive pressures in the US market for mature products, affecting pricing and channel mix.
Q & A Highlights
Q: Could you comment on the current profitability or the EBITDA contribution from Dermavant, and the OpEx split for atopic dermatitis versus psoriasis?
A: Matthew Walsh, CFO, explained that VTAMA's revenue run rate is approximately $6 million per month, with similar dilution expected in 2025. Kevin Ali, CEO, added that the political climate supports access to LARCs, and Nexplanon is performing well, with expectations to reach $1 billion in revenue next year.
Q: How are you thinking about leveraging the new medical derm commercial infrastructure for future acquisitions? Are you open to assets in medical aesthetics?
A: Kevin Ali, CEO, stated that the acquisition of Dermavant opens new opportunities, including international expansion of VTAMA. Organon is considering various opportunities in the derm space, including anti-infectives and aesthetics, leveraging the expertise of the Dermavant team.
Q: Can you discuss the incremental selling and marketing costs for Dermavant and the citizens petition for Nexplanon?
A: Matthew Walsh, CFO, clarified that the $180 million OpEx for Dermavant in 2025 includes onboarding sales and marketing capabilities. Kevin Ali, CEO, mentioned that the citizens petition for Nexplanon is pending, emphasizing the patent protection on the applicator device until 2030.
Q: Is the $180 million OpEx for VTAMA inclusive of ex-US spend, and how much can you pull back if VTAMA underperforms?
A: Matthew Walsh, CFO, noted that the $180 million OpEx is US-focused. While promotional spend can be cut back, the focus is on a successful VTAMA launch, with potential retrenchment considered beyond 2025.
Q: How does the acquisition of Dermavant affect your capital deployment strategy, especially in a lower interest rate environment?
A: Kevin Ali, CEO, indicated that the focus for 2025 is on integrating Dermavant and driving VTAMA's performance. Future capital allocation decisions will be made as opportunities arise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
