Organon Reports Results for the Third Quarter Ended September 30, 2023

  • Third quarter 2023 revenue of $1,519 million
  • Third quarter 2023 diluted earnings per share of $0.23 and non-GAAP Adjusted diluted earnings per share of $0.87
  • Adjusted EBITDA of $447 million
  • Board of Directors declares quarterly dividend of $0.28 per share
  • Full year 2023 financial guidance ranges updated:
    • Revenue range narrowed and lowered to $6.15 billion to $6.25 billion
    • Adjusted EBITDA margin range narrowed and lowered to 30.5% to 31.5%

JERSEY CITY, N.J.--(BUSINESS WIRE)-- Organon (NYSE: OGN) today announced its results for the third quarter ended September 30, 2023.

"Since spin, we have given new life to Established Brands and have expanded our pipeline in both Biosimilars and Women's Health," said Kevin Ali, Organon's CEO. "Year to date, all three of our franchises have delivered growth on a constant currency basis. Over the medium term, we expect to deliver mid-single digit revenue growth with the power of our existing portfolio. As we move into 2024, we will be working to reduce leverage and continue to add products that could enhance that growth profile."

Third Quarter 2023 Revenue

in $ millions

 

Q3 2023

 

Q3 2022

 

VPY

 

VPY ex-FX

Women’s Health

 

$

418

 

$

454

 

(8

)%

 

(7

)%

Biosimilars

   

142

   

129

 

10

%

 

10

%

Established Brands

   

935

   

915

 

2

%

 

3

%

Other (1)

   

24

   

39

 

(36

)%

 

(38

)%

Revenues

 

$

1,519

 

$

1,537

 

(1

)%

 

(1

)%

                         

(1) Other includes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties.

For the third quarter of 2023, total revenue was $1,519 million, a decrease of 1% on an as-reported basis as well as excluding impact of foreign currency (ex-FX), compared with the third quarter of 2022.

Women’s Health revenue decreased 8% on an as-reported basis, and decreased 7% ex-FX in the third quarter of 2023 compared with the third quarter of 2022 driven primarily by a 23% ex-FX decrease of NuvaRing® (etonogestrel/ethinyl estradiol vaginal ring) which continues to be impacted by generic competition. Together, the company's fertility products declined 10% ex-FX in the third quarter as unfavorable discount rates in the United States offset growth in demand. Nexplanon® (etonogestrel implant) decreased 3% ex-FX due unfavorable discount rates and a change in the go-to-market model for the product. These factors were partially offset by revenue from the Jada® system, which more than doubled year over year.

Biosimilars revenue increased 10% on an as-reported basis as well as ex-FX in the third quarter of 2023, compared with the third quarter of 2022. Renflexis® (infliximab-abda) grew 15% ex-FX in the third quarter due to continued demand and strong volume growth in United States and Canada. Ontruzant® (trastuzumab-dttb) grew 34% ex-FX in the third quarter compared to the prior year period driven by the phasing of a tender in Brazil.

Established Brands revenue increased 2% as-reported and increased 3% ex-FX in the third quarter of 2023, despite the impact of Volume Based Procurement (VBP) initiatives in China. Growth in the quarter was driven by Atozet™ (ezetimibe and atorvastatin calcium), particularly in France, strong demand for Nasonex® (mometasone) and favorable pricing for Dulera® (formoterol/fumarate dihydrate) in the United States. Year to date, the Established Brands franchise grew 1% ex-FX. The company expects the Established Brands franchise to achieve flat to slightly better revenue growth on a constant currency basis for the full year 2023.

Third Quarter 2023 Profitability

in $ millions, except per share amounts

 

Q3 2023

 

Q3 2022

 

VPY

Revenues

 

$

1,519

 

$

1,537

   

(1

)%

Cost of sales

   

612

   

551

   

11

%

Gross profit

   

907

   

986

   

(8

)%

Non-GAAP Adjusted gross profit (1)

   

951

   

1,032

   

(8

)%

Adjusted EBITDA (1,2)

   

447

   

546

   

(18

)%

Net income

   

58

   

227

   

(74

)%

Non-GAAP Adjusted net income (1)

   

223

   

337

   

(34

)%

Diluted Earnings per Share (EPS)

   

0.23

   

0.89

   

(74

)%

Non-GAAP Adjusted diluted EPS (1)

   

0.87

   

1.32

   

(34

)%

Acquired in-process research & development (IPR&D) and milestones

   

   

10

   

NM

Per share impact to diluted EPS from acquired IPR&D and milestones

   

   

(0.04

)

 

NM

   

Q3 2023

 

Q3 2022

   

Gross margin

 

59.7

%

 

64.2

%

   

Non-GAAP Adjusted gross margin (1)

 

62.6

%

 

67.1

%

   

Adjusted EBITDA margin (1, 2)

 

29.4

%

 

35.5

%

   

(1)

 

See Tables 4 and 5 for reconciliations of GAAP to non-GAAP financial measures

(2)

 

Adjusted EBITDA and Adjusted EBITDA margin include $10 million in the third quarter of 2022 related to acquired IPR&D and milestones, no such expense was incurred in the third quarter of 2023

Gross margin was 59.7% as-reported and 62.6% on an adjusted basis in the third quarter of 2023 compared with 64.2% as-reported and 67.1% on an adjusted basis in the third quarter of 2022. The year-over-year decline in gross margin is primarily due to foreign exchange translation and inflationary manufacturing and distribution costs. Product mix and pricing erosion were also factors, but to a lesser extent.

EBITDA margin was 29.4% in the third quarter of 2023 compared with 35.5% in the third quarter of 2022 primarily due to lower Adjusted gross profit and to a lesser extent an increase in non-GAAP SG&A expense and loss on foreign exchange translation.

Net income for the third quarter of 2023 was $58 million, or $0.23 per diluted share, compared with $227 million, or $0.89 per diluted share, in the third quarter of 2022. Non-GAAP Adjusted net income was $223 million, or $0.87 per diluted share, compared with $337 million, or $1.32 per diluted share, in 2022. The year over year decrease in net income was a result of a lower Adjusted EBITDA, as well as higher interest expense.

Capital Allocation

Today, Organon’s Board of Directors declared a quarterly dividend of $0.28 for each issued and outstanding share of the company's common stock. The dividend is payable on December 14, 2023, to stockholders of record at the close of business on November 13, 2023.

As of September 30, 2023, cash and cash equivalents were $414 million, and debt was $8.7 billion.

Full Year Guidance

Organon does not provide GAAP financial measures on a forward-looking basis because the company cannot predict with reasonable certainty and without unreasonable effort, the ultimate outcome of legal proceedings, unusual gains and losses, the occurrence of matters creating GAAP tax impacts, and acquisition-related expenses. These items are uncertain, depend on various factors, and could be material to Organon’s results computed in accordance with GAAP.

The company is updating its full year 2023 guidance ranges previously provided on August 8, 2023. The range for full year 2023 revenue is narrowed and lowered to $6.15 billion to $6.25 billion, which primarily reflects current foreign currency exchange rates, changes to the go-to-market model for Nexplanon, a slower uptake of Hadlima™ (adalimumab-bwwd) and macroeconomic factors in China.

The range for full year Adjusted EBITDA margin is now 30.5% to 31.5% to reflect a lower gross margin stemming from the impacts of foreign exchange on revenue, unfavorable product mix, and the timing of manufacturing costs. Organon's financial guidance does not assume an estimate for future IPR&D and milestone payments for business development transactions not yet executed.

Full year 2023 financial guidance is presented below on a non-GAAP basis.

 

Previous guidance as of August 8, 2023

Current guidance

Revenues

$6.250B-$6.450B

$6.150B-$6.250B

Adjusted gross margin

Low-mid 60% range

Low 60% range

SG&A (as % of revenue)

Mid 20% range

Unchanged

R&D (as % of revenue)

Upper single-digit

Unchanged

Adjusted EBITDA margin

31.5%-33.0%

30.5%-31.5%

Interest

~$525 million

Unchanged

Depreciation

~$120 million

Unchanged

Effective non-GAAP tax rate

17.5%-19.5%

Unchanged

Fully diluted weighted average shares outstanding

~257 million

Unchanged

Webcast Information

Organon will host a conference call at 8:30 a.m. Eastern Time today to discuss its third quarter 2023 financial results. To listen to the event and view the presentation slides via webcast, join from the Organon Investor Relations website at https://www.organon.com/investor-relations/events-and-presentations/. A replay of the webcast will be available approximately two hours after the conclusion of the live event on the company’s website. Institutional investors and analysts interested in participating in the call must register in advance by clicking on this link: https://conferencingportals.com/event/VfCOQYEG

Following registration, participants will receive a confirmation email containing details on how to join the conference call, including dial-in information and a unique passcode and registrant ID. Pre-registration will allow participants to bypass an operator and be placed directly into the call.

About Organon

Organon is a global healthcare company formed to focus on improving the health of women throughout their lives. Organon offers more than 60 medicines and products in women’s health in addition to a growing biosimilars business and a large franchise of established medicines across a range of therapeutic areas. Organon’s existing products produce strong cash flows that support investments in innovation and future growth opportunities in women’s health and biosimilars. In addition, Organon is pursuing opportunities to collaborate with biopharmaceutical innovators looking to commercialize their products by leveraging its scale and presence in fast growing international markets.

Organon has a global footprint with significant scale and geographic reach, world-class commercial capabilities, and approximately 10,000 employees with headquarters located in Jersey City, New Jersey.

For more information, visit http://www.organon.com and connect with us on LinkedIn, Instagram, X (formerly known as Twitter) and Facebook.

Cautionary Note Regarding Non-GAAP Financial Measures

This press release contains “non-GAAP financial measures,” which are financial measures that either exclude or include amounts that are correspondingly not excluded or included in the most directly comparable measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Specifically, the company makes use of the non-GAAP financial measures Adjusted EBITDA, Adjusted gross margin, Adjusted gross profit, Adjusted net income, and Adjusted diluted EPS, which are not recognized terms under GAAP and are presented only as a supplement to the company’s GAAP financial statements. This press release also provides certain measures that exclude the impact of foreign exchange. We calculate foreign exchange by converting our current-period local currency financial results using the prior period average currency rates and comparing these adjusted amounts to our current-period results. The company believes that these non-GAAP financial measures help to enhance an understanding of the company’s financial performance. However, the presentation of these measures has limitations as an analytical tool and should not be considered in isolation, or as a substitute for the company’s results as reported under GAAP. Because not all companies use identical calculations, the presentations of these non-GAAP measures may not be comparable to other similarly titled measures of other companies. You should refer to Table 4 and Table 5 of this press release for relevant definitions and reconciliations of non-GAAP financial measures contained herein to the most directly comparable GAAP measures.

In addition, the company’s full-year 2023 guidance measures (other than revenue) are provided on a non-GAAP basis because the company is unable to reasonably predict certain items contained in the GAAP measures. Such items include, but are not limited to, acquisition related expenses, restructuring and related expenses, stock-based compensation, the ultimate outcome of legal proceedings, unusual gains and losses, the occurrence of matters creating GAAP tax impacts and other items not reflective of the company's ongoing operations.

The company uses non-GAAP financial measures in its operational and financial decision making, and believes that it is useful to exclude certain items in order to focus on what it regards to be a more meaningful representation of the underlying operating performance of the business.

Cautionary Note Regarding Forward-Looking Statements

Except for historical information, this press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about management’s expectations about Organon’s future financial performance and prospects, including full-year 2023 guidance estimates and predictions regarding other financial information and metrics, franchise and product performance and strategy expectations for the remainder of 2023 and for future periods, expectations regarding the impact of VBP and developments in China. Forward-looking statements may be identified by words such as "foresees" “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include, but are not limited to, an inability to fully execute on our product development and commercialization plans within the United States or internationally; an inability to adapt to the industry-wide trend toward highly discounted channels; changes in tax laws or other tax guidance which could adversely affect our cash tax liability, effective tax rates, and results of operations and lead to greater audit scrutiny; an inability to execute on our business development strategy or realize the benefits of our planned acquisitions; efficacy, safety, or other quality concerns with respect to marketed products, including market actions such as recalls, withdrawals, or declining sales; political and social pressures, or regulatory developments, that adversely impact demand for, availability of, or patient access to contraception or fertility products; general economic factors, including recessionary pressures, interest rate and currency exchange rate fluctuations; general industry conditions and competition; the impact of the ongoing COVID-19 pandemic and emergence of variant strains; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances; new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict its future financial results and performance; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; difficulties developing and sustaining relationships with commercial counterparties; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s filings with the Securities and Exchange Commission ("SEC"), including the company’s Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent SEC filings, available at the SEC’s Internet site (www.sec.gov).

TABLE 1

Organon & Co.

Condensed Consolidated Statement of Income

(Unaudited, $ in millions except shares in thousands and per share amounts)

       
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2023

     

2022

     

2023

     

2022

 

Revenues

$

1,519

   

$

1,537

   

$

4,665

   

$

4,689

 

Costs, Expenses and Other

             

Cost of sales

 

612

     

551

     

1,832

     

1,700

 

Selling, general and administrative

 

538

     

440

     

1,424

     

1,234

 

Research and development

 

137

     

127

     

394

     

329

 

Acquired in-process research and development and milestones

 

     

10

     

8

     

107

 

Restructuring costs

 

     

11

     

4

     

11

 

Interest expense

 

134

     

108

     

398

     

303

 

Exchange losses (gains)

 

14

     

4

     

25

     

(21

)

Other expense, net

 

4

     

4

     

11

     

15

 
   

1,439

     

1,255

     

4,096

     

3,678

 

Income Before Income Taxes

 

80

     

282

     

569

     

1,011

 

Taxes on income

 

22

     

55

     

92

     

202

 

Net Income

 

58

     

227

     

477

     

809

 
               

Earnings per Share:

             

Basic

$

0.23

   

$

0.89

   

$

1.87

   

$

3.19

 

Diluted

$

0.23

   

$

0.89

   

$

1.86

   

$

3.17

 
               

Weighted Average Shares Outstanding:

             

Basic

 

255,588

     

254,348

     

255,112

     

253,986

 

Diluted

 

256,349

     

255,067

     

256,162

     

255,094

 

TABLE 2

Organon & Co.

Sales by top products

(Unaudited, $ in millions)

       
 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

U.S.

 

Int’l

 

Total

 

U.S.

 

Int’l

 

Total

 

U.S.

 

Int’l

 

Total

 

U.S.

 

Int’l

 

Total

Women’s Health

                                             

Nexplanon/Implanon NXT

$

146

 

$

74

 

$

220

 

$

151

 

$

78

 

$

229

 

$

418

   

$

181

 

$

599

 

$

401

 

$

194

 

$

595

Follistim AQ

 

22

   

32

   

54

   

27

   

33

   

60

   

74

     

105

   

179

   

79

   

100

   

179

NuvaRing

 

18

   

20

   

37

   

27

   

23

   

50

   

50

     

67

   

117

   

65

   

68

   

133

Ganirelix Acetate Injection

 

4

   

21

   

25

   

6

   

30

   

36

   

15

     

74

   

88

   

20

   

77

   

97

Marvelon/Mercilon

 

   

30

   

30

   

   

31

   

31

   

     

97

   

97

   

   

85

   

85

Jada

 

12

   

   

13

   

5

   

   

5

   

30

     

   

31

   

12

   

   

12

Other Women's Health (1)

 

16

   

22

   

39

   

19

   

23

   

42

   

52

     

74

   

126

   

68

   

70

   

138

Biosimilars

                                             

Renflexis

 

57

   

12

   

69

   

54

   

7

   

60

   

172

     

29

   

201

   

145

   

20

   

166

Ontruzant

 

11

   

28

   

40

   

15

   

14

   

29

   

36

     

57

   

93

   

35

   

52

   

87

Brenzys

 

   

13

   

13

   

   

24

   

24

   

     

45

   

45

   

   

52

   

52

Aybintio

 

   

12

   

12

   

   

10

   

10

   

     

34

   

34

   

   

29

   

29

Hadlima

 

2

   

6

   

8

   

   

6

   

6

   

2

     

18

   

20

   

   

14

   

14

Established Brands

                                             

Cardiovascular

                                             

Zetia

 

2

   

65

   

66

   

2

   

85

   

87

   

5

     

234

   

239

   

7

   

280

   

287

Vytorin

 

2

   

31

   

33

   

1

   

30

   

31

   

5

     

95

   

100

   

6

   

98

   

104

Atozet

 

   

126

   

126

   

   

109

   

109

   

     

397

   

397

   

   

350

   

350

Rosuzet

 

   

17

   

17

   

   

17

   

17

   

     

52

   

52

   

   

55

   

55

Cozaar/Hyzaar

 

3

   

65

   

68

   

2

   

68

   

70

   

8

     

217

   

225

   

11

   

244

   

256

Other Cardiovascular (1)

 

1

   

42

   

44

   

1

   

34

   

35

   

2

     

124

   

126

   

3

   

117

   

120

Respiratory

                                             

Singulair

 

3

   

88

   

91

   

3

   

92

   

94

   

8

     

282

   

290

   

8

   

308

   

316

Nasonex

 

   

54

   

55

   

   

49

   

49

   

     

187

   

188

   

9

   

173

   

182

Dulera

 

40

   

9

   

49

   

31

   

9

   

40

   

116

     

28

   

144

   

98

   

30

   

127

Clarinex

 

2

   

26

   

28

   

   

25

   

26

   

4

     

103

   

107

   

3

   

96

   

99

Other Respiratory (1)

 

17

   

9

   

25

   

11

   

10

   

21

   

42

     

20

   

61

   

34

   

32

   

66

Non-Opioid Pain, Bone and

                                             

Arcoxia

 

   

64

   

64

   

   

64

   

64

   

     

207

   

207

   

   

185

   

185

Fosamax

 

1

   

40

   

41

   

1

   

35

   

36

   

2

     

121

   

123

   

2

   

115

   

117

Diprospan

 

   

31

   

31

   

   

28

   

28

   

     

58

   

58

   

   

91

   

91

Other Non-Opioid Pain, Bone and Dermatology (1)

 

4

   

70

   

74

   

2

   

63

   

65

   

11

     

196

   

207

   

10

   

200

   

210

Other

                                             

Proscar

 

   

25

   

25

   

   

26

   

27

   

1

     

76

   

77

   

1

   

76

   

77

Propecia

 

2

   

21

   

22

   

2

   

28

   

30

   

5

     

86

   

92

   

5

   

90

   

95

Other (1)

 

5

   

72

   

76

   

6

   

81

   

87

   

10

     

231

   

240

   

21

   

230

   

251

Other (2)

 

   

24

   

24

   

   

39

   

39

   

(1

)

   

103

   

102

   

   

115

   

116

Revenues

$

370

 

$

1,149

 

$

1,519

 

$

366

 

$

1,171

 

$

1,537

 

$

1,067

   

$

3,598

 

$

4,665

 

$

1,043

 

$

3,646

 

$

4,689

Totals may not foot due to rounding. Trademarks appearing above in italics are trademarks of, or are used under license by, the Organon group of companies.

(1)

 

Includes sales of products not listed separately. Revenues from Marvelon and Mercilon and Jada were previously reported as part of Other Women's Health. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health.

(2)

 

Other includes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties.

TABLE 3

Organon & Co.

Sales by geographic area

(Unaudited, $ in millions)

       
 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

   

2023

     

2022

     

2023

     

2022

 

Europe and Canada

$

392

   

$

363

   

$

1,259

   

$

1,243

 

United States

 

370

     

366

     

1,067

     

1,043

 

Asia Pacific and Japan

 

284

     

283

     

869

     

888

 

China

 

202

     

241

     

661

     

721

 

Latin America, Middle East, Russia, and Africa

 

239

     

236

     

687

     

665

 

Other (1)

 

32

     

48

     

122

     

129

 

Revenues

$

1,519

   

$

1,537

   

$

4,665

   

$

4,689

 
                               

(1) Other includes manufacturing sales to Merck & Co., Inc., Rahway, NJ, USA and other third parties.

TABLE 4

Reconciliation of GAAP Reported to Non-GAAP Adjusted Information

(Unaudited, $ in millions except per share amounts)

   
 

Three Months Ended September 30, 2023

 

GAAP

 

Spin related Costs(1)

 

Restructuring

 

Stock-based Compensation

 

Amortization

 

Other(1)

 

Non-GAAP Adjusted

Revenues

$

1,519

                       

$

1,519

 

Cost of sales

 

612

   

(10

)

 

 

(5

)

 

(29

)

 

     

568

 

Gross profit

 

907

                         

951

 

Gross margin

 

59.7

%

                       

62.6

%

                           

Selling, general and administrative

 

538

   

(41

)

 

 

(18

)

 

   

(87

)

   

392

 

Research and development

 

137

   

(4

)

 

 

(4

)

 

   

     

129

 

Acquired in-process research and development and milestones

 

   

   

 

   

   

     

 

Restructuring costs

 

   

   

 

   

   

     

 

Interest expense

 

134

   

   

 

   

   

     

134

 

Exchange losses

 

14

   

   

 

   

   

     

14

 

Other expense (income), net

 

4

   

(3

)

 

 

   

   

     

1

 
   

1,439

                         

1,238

 

Income before income taxes

 

80

                         

281

 

Taxes on income

 

22

   

16

   

 

4

   

5

   

11

     

58

 

Net income

$

58

                       

$

223

 
                           

Earnings per share - Diluted

$

0.23

                       

$

0.87

 
                                   

(1) Represents one-time costs. Spin-related includes costs from the separation of Merck & Co., Inc., Rahway, NJ, US and Other primarily includes inventory step-up amortization, impairment charges and legal reserves.

 

Three Months Ended September 30, 2022

 

GAAP

 

Spin related Costs(1)

 

Restructuring

 

Stock-based Compensation

 

Amortization

 

Other(1)

 

Non-GAAP Adjusted

Revenues

$

1,537

                       

$

1,537

 

Cost of sales

 

551

   

(8

)

 

   

(3

)

 

(32

)

 

(3

)

   

505

 

Gross profit

 

986

                         

1,032

 

Gross margin

 

64.2

%

                       

67.1

%

                           

Selling, general and administrative

 

440

   

(33

)

 

   

(12

)

 

   

(17

)

   

378

 

Research and development

 

127

   

(2

)

 

   

(3

)

 

   

(1

)

   

121

 

Acquired in-process research and development and

 

10

   

   

   

   

   

     

10

 

Restructuring costs

 

11

   

   

(11

)

 

   

   

     

 

Interest expense

 

108

   

   

   

   

   

     

108

 

Exchange gains

 

4

   

   

   

   

   

     

4

 

Other expense (income), net

 

4

   

(6

)

 

   

   

   

     

(2

)

   

1,255

                         

1,124

 

Income before income taxes

 

282

                         

413

 

Taxes on income

 

55

   

10

   

2

   

2

   

6

   

1

     

76

 

Net income

$

227

                       

$

337

 
                           

Earnings per share - Diluted

$

0.89

                       

$

1.32

 
                                   

(1) Represents one-time costs. Spin-related includes costs from the separation of Merck & Co., Inc., Rahway, NJ, US and Other primarily includes inventory step-up amortization, impairment charges and legal reserves.

TABLE 4 (Continued)

Reconciliation of GAAP Reported to Non-GAAP Adjusted Information

(Unaudited, $ in millions except per share amounts)

   
 

Nine Months Ended September 30, 2023

 

GAAP

 

Spin related Costs(1)

 

Restructuring

 

Stock-based Compensation

 

Amortization

 

Other(1)

 

Non-GAAP Adjusted

Revenues

$

4,665

                       

$

4,665

 

Cost of sales

 

1,832

   

(30

)

 

   

(13

)

 

(88

)

 

(2

)

   

1,699

 

Gross profit

 

2,833

                         

2,966

 

Gross margin

 

60.7

%

                       

63.6

%

                           

Selling, general and administrative

 

1,424

   

(131

)

 

   

(50

)

 

   

(88

)

   

1,155

 

Research and development

 

394

   

(10

)

 

   

(11

)

 

   

     

373

 

Acquired in-process research and development and milestones

 

8

   

   

   

   

   

     

8

 

Restructuring costs

 

4

   

   

(4

)

 

   

   

     

 

Interest expense

 

398

   

   

   

   

   

     

398

 

Exchange losses

 

25

   

   

   

   

   

     

25

 

Other expense (income), net

 

11

   

(13

)

 

   

   

   

     

(2

)

   

4,096

                         

3,656

 

Income before income taxes

 

569

                         

1,009

 

Taxes on income

 

92

   

42

   

1

   

12

   

16

   

11

     

174

 

Net income

$

477

                       

$

835

 
                           

Earnings per share - Diluted

$

1.86

                       

$

3.26

 
                                   

(1) Represents one-time costs. Spin-related includes costs from the separation of Merck & Co., Inc., Rahway, NJ, US and Other primarily includes inventory step-up amortization, impairment charges and legal reserves.

 

Nine Months Ended September 30, 2022

 

GAAP

 

Spin related Costs(1)

 

Restructuring

 

Stock-based Compensation

 

Amortization

 

Other(1)

 

Non-GAAP Adjusted

Revenues

$

4,689

                       

$

4,689

 

Cost of sales

 

1,700

   

(18

)

 

   

(9

)

 

(88

)

 

(17

)

   

1,568

 

Gross profit

 

2,989

                         

3,121

 

Gross margin

 

63.7

%

                       

66.6

%

                           

Selling, general and administrative

 

1,234

   

(86

)

 

   

(35

)

 

   

(17

)

   

1,096

 

Research and development

 

329

   

(8

)

 

   

(8

)

 

   

(2

)

   

311

 

Acquired in-process research and development and

 

107

   

   

   

   

   

     

107

 

Restructuring costs

 

11

   

   

(11

)

 

   

   

     

 

Interest expense

 

303

   

   

   

   

   

     

303

 

Exchange gains

 

(21

)

 

   

   

   

   

     

(21

)

Other expense (income), net

 

15

   

(20

)

 

   

   

   

     

(5

)

   

3,678

                         

3,359

 

Income before income taxes

 

1,011

                         

1,330

 

Taxes on income

 

202

   

24

   

2

   

7

   

15

   

4

     

254

 

Net income

$

809

                       

$

1,076

 
                           

Earnings per share - Diluted

$

3.17

                       

$

4.22

 
                                   

(1) Represents one-time costs. Spin-related includes costs from the separation of Merck & Co., Inc., Rahway, NJ, US and Other primarily includes inventory step-up amortization, impairment charges and legal reserves.

TABLE 5

Organon & Co.

Reconciliation of GAAP Income Before Income Taxes to Adjusted EBITDA

(Unaudited, $ in millions)

       
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2023

     

2022

     

2023

     

2022

 

Income before income taxes

$

80

   

$

282

   

$

569

   

$

1,011

 

Depreciation

 

32

     

25

     

88

     

72

 

Amortization

 

29

     

32

     

88

     

88

 

Interest expense

 

134

     

108

     

398

     

303

 

EBITDA

$

275

   

$

447

   

$

1,143

   

$

1,474

 

Restructuring costs

 

     

11

     

4

     

11

 

One-time costs (1)

 

145

     

70

     

274

     

168

 

Stock-based compensation

 

27

     

18

     

74

     

52

 

Adjusted EBITDA

$

447

   

$

546

   

$

1,495

   

$

1,705

 

Adjusted EBITDA margin

 

29.4

%

   

35.5

%

   

32.0

%

   

36.4

%

                               

(1) One-time costs primarily include costs incurred in connection with the spin-off of Organon, inventory step up adjustments, impairment charges and legal reserves.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231102429565/en/

Contacts

Media Contacts:
Karissa Peer
(614) 314-8094

Kate Vossen
(732) 675-8448

Investor Contacts:
Jennifer Halchak
(201) 275-2711

Alex Arzeno
(203) 550-3972

Source: Organon & Co.

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