Le Lézard
Classified in: Health, Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Organon Reports Results for the Third Quarter Ended September 30, 2021


Organon (NYSE: OGN) (the "company"), today announced its results for the third quarter and year to date ended September 30, 2021.

Organon also announced that its 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 16, 2021 to stockholders of record at the close of business on November 22, 2021.

"Just months after becoming a standalone company, we are delivering on what we set out to do. Our year to date results are very much in line with expectations, and with good visibility into the remainder of the year, we are affirming our financial guidance," said Kevin Ali, Organon's CEO. "Importantly, we have also been disciplined in actioning business development opportunities that have been in the works well prior to spin. Including today's announcement regarding the proposed acquisition of Forendo Pharma, we have executed three transactions in the last six months, demonstrating our commitment to advance innovation in large, underserved markets, which women's health has lacked for decades."

Third quarter 2021 revenue

in $ millions

 

Q3 2021

 

Q3 2020

 

VPY

 

VPY ex-FX

Women's Health

 

381

 

424

 

(10)%

 

(11)%

Biosimilars

 

140

 

99

 

41%

 

39%

Established Brands

 

1,027

 

1,088

 

(6)%

 

(8)%

Other(1)

 

52

 

2

 

NM

 

NM

Revenue

 

1,600

 

1,613

 

(1)%

 

(3)%

(1) Other represents manufacturing sales to the company's former parent company and other third parties and pre-spin allocated revenue hedge activities

Total net revenue was $1,600 million for the third quarter of 2021, a decrease of 1% as-reported and 3% excluding the impacts of foreign currency (ex-FX), compared with the third quarter of 2020.

Women's Health declined 10% as-reported and 11% ex-FX in the third quarter 2021 compared with the third quarter of 2020, driven primarily by a 17% ex-FX decline in NUVARING® (etonogestrel/ethinyl estradiol vaginal ring) which continues to be impacted by generic competition, and also NEXPLANON® (etonogestrel implant), which declined 8% ex-FX in the third quarter 2021. In September 2020, there was short-lived resurgence in patient well visits that positively impacted third quarter 2020 NEXPLANON sales, which is a physician-administered product. Throughout the current year, well visits in the US continue to be suppressed by the COVID-19 pandemic, hampering NEXPLANON sales. The decline in the company's contraception portfolio was partially offset by the fertility franchise, led by FOLLISTIM®, AQ Cartridge (follitropin beta injection) which grew 18% ex-FX, and was positively impacted by a combination of COVID-19 recovery and increased demand.

Biosimilars revenue grew 41% as-reported and 39% ex-FX in the third quarter 2021 compared with third quarter 2020, driven by continued demand growth in the US for RENFLEXIS® (infliximab-abda), since its launch in 2017 as well as growth in Canada. The biosimilars portfolio also benefited from the continued uptake of ONTRUZANT® (trastuzumab-dttb) in the US since the July 2020 launch in the US, as well as strong performance in Brazil, partially offset by a decrease in the EU reflecting increasing competitive pressures and tenders lost.

Established Brands represents a broad portfolio of well-known medicines, which are generally beyond market exclusivity, including leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management, and for which generic competition varies by market. Revenue for Established Brands was down 6% as-reported and down 8% ex-FX in the third quarter of 2021. Excluding the impact of loss of exclusivity (LOE), Established Brands revenue was down 4% ex-FX. During the quarter, retail expansion in China grew 20% and partially offset impacts from decreases in the hospital channel due to Volume Based Procurement (VBP). The portfolio impacts from LOE as well as VBP were partially offset by a 3% ex-FX increase in respiratory medicines. SINGULAIR® (montelukast) was up 20% ex-FX due to higher volume and recovery from the COVID-19 pandemic in China, despite its exposure to VBP, and NASONEX® (mometasone) was up 13% ex-FX due to higher demand in China and favorable performance in Russia, partially offset by generic competition in Japan.

Third quarter 2021 profitability

in $ millions, except per share amounts

 

Q3 2021

 

Q3 2020

 

VPY

Revenue

 

$

1,600

 

 

$

1,613

 

 

(1)%

Cost of goods sold

 

609

 

 

535

 

 

14%

Gross profit

 

991

 

 

1,078

 

 

(8)%

Gross margin

 

61.9

%

 

66.8

%

 

 

Non-GAAP Adjusted gross profit(1)

 

1,038

 

 

1,106

 

 

(6)%

Non-GAAP Adjusted gross margin

 

64.9

%

 

68.6

%

 

 

Adjusted EBITDA, continuing operations(1,2)

 

636

 

 

751

 

 

(15)%

Adjusted EBITDA margin, continuing operations

 

39.8

%

 

46.6

%

 

 

Net Income, continuing operations(2)

 

323

 

 

560

 

 

(42)%

Non-GAAP Adjusted net income, continuing operations(1,2)

 

424

 

 

604

 

 

(30)%

Diluted Earnings per Share, continuing operations(2)

 

1.27

 

 

2.21

 

 

(43)%

Non-GAAP Adjusted Diluted Earnings per Share, continuing operations(1,2)

 

1.67

 

 

2.38

 

 

(30)%

(1) See Tables 4,5 and 6 for reconciliations of GAAP to non-GAAP measures
(2) Discontinued operations includes Merck Retained Products

Gross margin was 61.9% as-reported and 64.9% on an adjusted basis in the third quarter of 2021 compared with 66.8% as-reported and 68.6% on an adjusted basis in the third quarter of 2020. The year-over-year decrease reflects costs of standing up Organon as an independent company, including certain costs related to manufacturing agreements between the company and its former parent company, which have lower gross margin percentages compared to third party product sales and purchases. Those manufacturing agreements had an approximate 180 basis point negative impact to gross margins.

Adjusted EBITDA margin was 39.8% in the third quarter of 2021 compared with 46.6% in the third quarter of 2020, which reflects costs incurred to establish Organon as a stand alone entity.

Net income from continuing operations for the third quarter of 2021 was $323 million, or $1.27 per diluted share, compared with $560 million, or $2.21 per diluted share, in the third quarter of 2020. Non-GAAP Adjusted net income from continuing operations was $424 million, or $1.67 per diluted share, compared with $604 million, or $2.38 per diluted share, in 2020.

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 16, 2021 to stockholders of record at the close of business on November 22, 2021.

As of September 30, 2021, cash and cash equivalents were $1,008 million, and debt was $9,298 million, resulting in net debt of $8,290 million.

Full year guidance ? all guidance provided on a Non-GAAP basis

Organon does not provide GAAP financial measures on a forward-looking basis because the company is unable to predict with reasonable certainty and without unreasonable effort, the ultimate outcome of legal proceedings, unusual gains and losses, 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 affirmed all financial guidance, and narrowed the ranges for revenue and Adjusted EBITDA margin. The financial guidance is presented on a non-GAAP basis and is proforma as if Organon was a standalone company for the entire year.

Guidance on proforma non-GAAP basis

 

Previous guidance

 

Current guidance

Revenue

 

$6.1B - $6.4B

 

$6.2B - 6.3B

Gross margin(*)

 

Low to mid-60% range

 

Unchanged

SG&A as % of sales(*)

 

Mid 20% range

 

Unchanged

R&D as % of sales(*)

 

Mid single-digit

 

Unchanged

Adjusted EBITDA margin

 

36%-38%

 

36.5%-37.5%

Interest

 

~$400 million

 

Unchanged

Depreciation(*)

 

$100-$115 million

 

Unchanged

Effective Non-GAAP tax rate

 

17.5% - 19.5%

 

Unchanged

Fully diluted weighted avg. shares outstanding

 

~254 million

 

Unchanged

(*) Guidance provided in connection with the spin-off and unlikely to be a recurring component of the company's annual guidance

Webcast Information

Organon will host a conference call at 8:30 a.m. Eastern Time today to discuss its third quarter 2021 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/. 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: http://www.directeventreg.com/registration/event/2594964. 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 in June 2021 through a spin-off from Merck (NYSE: MRK) known as MSD outside of the United States and Canada, to focus on improving the health of women throughout their lives. "Here for her health", the company has a portfolio of more than 60 medicines and products across a range of therapeutic areas. Led by the reproductive health portfolio coupled with an expanding biosimilars business and stable franchise of established medicines, Organon's products produce strong cash flows that will support investments in future growth opportunities in women's health. 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 and world-class commercial capabilities. The company's approximately 9,000 employees conduct business in more than 140 countries and territories. Organon's headquarters are located in Jersey City, New Jersey.

Non-GAAP financial measures

Non-GAAP results, such as Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS, are presented only as a supplement to the company's financial statements based on GAAP. Non-GAAP financial information is provided to enhance understanding of the company's financial performance, but none of these non-GAAP financial measures are recognized terms under GAAP, and non-GAAP measures should not be considered in isolation from, or as a substitute analysis for, the company's results of operations as determined in accordance with GAAP. Definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measures are provided within the schedules attached to this release. The company uses non-GAAP 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. The company also believes that investors may find non-GAAP financial measures useful for the same reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures. The non-GAAP financial measures are not presented in accordance with GAAP. Please refer to the appendix of this press release for reconciliations of non-GAAP financial measures contained herein to the most directly comparable GAAP measures. The company's full-year 2021 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 and other items not reflective of the company's ongoing operations.

Forward-Looking Statement of Organon

Except for historical information herein, this news 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. Forward-looking statements may be identified by words such as "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 execute on our business development strategy or realize the benefits of our planned acquisitions; general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; 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; the company's ability to accurately predict future market conditions; 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 its registration statement on Form 10, available at the SEC's Internet site (www.sec.gov).

TABLE 1

Organon & Co.
Condensed Consolidated Statement of Income
(Unaudited, $ in millions except share and per share amounts)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Sales

$

1,600

 

 

$

1,613

 

 

$

4,701

 

 

$

4,919

 

Costs, Expenses and Other

 

 

 

 

 

 

 

Cost of sales

609

 

 

535

 

 

1,783

 

 

1,533

 

Selling, general and administrative

388

 

 

321

 

 

1,186

 

 

922

 

Research and development

111

 

 

54

 

 

254

 

 

150

 

Restructuring costs

1

 

 

12

 

 

3

 

 

43

 

Other (income) expense, net

102

 

 

10

 

 

182

 

 

44

 

 

1,211

 

 

932

 

 

3,408

 

 

2,692

 

Income From Continuing Operations Before Income Taxes

389

 

 

681

 

 

1,293

 

 

2,227

 

Taxes on Income

66

 

 

121

 

 

144

 

 

347

 

Net Income From Continuing Operations

323

 

 

560

 

 

1,149

 

 

1,880

 

Loss From Discontinued Operations - Net of Tax

?

 

 

(13)

 

 

?

 

 

(88)

 

Net Income

$

323

 

 

$

547

 

 

$

1,149

 

 

$

1,792

 

 

 

 

 

 

 

 

 

Earnings (Loss) per Share Attributable to Organon & Co. Stockholders - Basic:

 

 

 

 

 

 

 

Continuing operations

$

1.27

 

 

$

2.21

 

 

$

4.53

 

 

$

7.42

 

Discontinued operations

?

 

 

(0.05)

 

 

?

 

 

(0.35)

 

Net Earnings per Share Attributable to Organon & Co. Stockholders

$

1.27

 

 

$

2.16

 

 

$

4.53

 

 

$

7.07

 

 

 

 

 

 

 

 

 

Earnings (Loss) per Share Attributable to Organon & Co. Stockholders - Diluted:

 

 

 

 

 

 

 

Continuing operations

$

1.27

 

 

$

2.21

 

 

$

4.52

 

 

$

7.42

 

Discontinued operations

?

 

 

(0.05)

 

 

?

 

 

(0.35)

 

Net Earnings per Share Attributable to Organon & Co. Stockholders

$

1.27

 

 

$

2.16

 

 

$

4.52

 

 

$

7.07

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding:

 

 

 

 

 

 

 

Basic

253,534,000

 

 

253,516,000

 

 

253,530,000

 

 

253,516,000

 

Diluted

254,172,000

 

 

253,516,000

 

 

254,011,000

 

 

253,516,000

 

TABLE 2

Organon & Co.
Sales by top products

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

($ in millions)

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

$

120

 

 

$

55

 

 

$

175

 

 

$

137

 

 

$

52

 

 

$

189

 

 

$

389

 

 

$

154

 

 

$

543

 

 

$

374

 

 

$

142

 

 

$

515

 

Follistim AQ

29

 

 

32

 

 

61

 

 

20

 

 

31

 

 

50

 

 

81

 

 

97

 

 

178

 

 

60

 

 

75

 

 

135

 

NuvaRing

21

 

 

28

 

 

49

 

 

25

 

 

33

 

 

58

 

 

68

 

 

79

 

 

147

 

 

86

 

 

98

 

 

184

 

Ganirelix Acetate Injection

5

 

 

20

 

 

25

 

 

4

 

 

21

 

 

25

 

 

19

 

 

66

 

 

85

 

 

7

 

 

48

 

 

55

 

Cerazette

?

 

 

18

 

 

18

 

 

?

 

 

18

 

 

18

 

 

?

 

 

53

 

 

53

 

 

?

 

 

51

 

 

51

 

Other Women's Health (1)

18

 

 

35

 

 

53

 

 

45

 

 

39

 

 

84

 

 

80

 

 

111

 

 

191

 

 

121

 

 

103

 

 

224

 

Biosimilars

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Renflexis

48

 

 

6

 

 

54

 

 

34

 

 

4

 

 

38

 

 

119

 

 

17

 

 

136

 

 

88

 

 

8

 

 

96

 

Ontruzant

9

 

 

47

 

 

56

 

 

?

 

 

37

 

 

37

 

 

20

 

 

81

 

 

101

 

 

1

 

 

77

 

 

78

 

Brenzys

?

 

 

14

 

 

14

 

 

?

 

 

23

 

 

23

 

 

?

 

 

35

 

 

35

 

 

?

 

 

52

 

 

52

 

Other Biosimilars (1)

?

 

 

16

 

 

16

 

 

?

 

 

1

 

 

1

 

 

?

 

 

34

 

 

34

 

 

?

 

 

1

 

 

1

 

Established Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zetia

1

 

 

90

 

 

91

 

 

(1)

 

 

103

 

 

103

 

 

6

 

 

276

 

 

282

 

 

(4)

 

 

389

 

 

384

 

Vytorin

3

 

 

38

 

 

41

 

 

3

 

 

44

 

 

47

 

 

8

 

 

119

 

 

127

 

 

9

 

 

130

 

 

139

 

Atozet

?

 

 

114

 

 

114

 

 

?

 

 

111

 

 

111

 

 

?

 

 

347

 

 

347

 

 

?

 

 

348

 

 

348

 

Rosuzet

?

 

 

15

 

 

15

 

 

?

 

 

32

 

 

32

 

 

?

 

 

48

 

 

48

 

 

?

 

 

94

 

 

94

 

Cozaar/Hyzaar

3

 

 

84

 

 

87

 

 

5

 

 

86

 

 

91

 

 

9

 

 

256

 

 

265

 

 

17

 

 

274

 

 

291

 

Zocor

1

 

 

17

 

 

18

 

 

1

 

 

17

 

 

18

 

 

3

 

 

46

 

 

49

 

 

1

 

 

56

 

 

57

 

Other Cardiovascular (1)

?

 

 

31

 

 

31

 

 

?

 

 

37

 

 

37

 

 

?

 

 

99

 

 

99

 

 

?

 

 

124

 

 

124

 

Respiratory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singulair

2

 

 

98

 

 

100

 

 

4

 

 

78

 

 

82

 

 

10

 

 

289

 

 

300

 

 

14

 

 

324

 

 

338

 

Nasonex

?

 

 

49

 

 

48

 

 

?

 

 

41

 

 

41

 

 

3

 

 

141

 

 

144

 

 

9

 

 

151

 

 

160

 

Dulera

48

 

 

8

 

 

56

 

 

51

 

 

8

 

 

59

 

 

121

 

 

25

 

 

146

 

 

155

 

 

26

 

 

181

 

Clarinex

2

 

 

27

 

 

28

 

 

2

 

 

23

 

 

25

 

 

5

 

 

78

 

 

83

 

 

5

 

 

104

 

 

109

 

Asmanex

14

 

 

2

 

 

15

 

 

20

 

 

1

 

 

21

 

 

43

 

 

5

 

 

48

 

 

58

 

 

5

 

 

64

 

Other Respiratory (1)

?

 

 

3

 

 

3

 

 

?

 

 

11

 

 

11

 

 

?

 

 

15

 

 

16

 

 

1

 

 

25

 

 

26

 

Non-Opioid Pain, Bone and Dermatology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arcoxia

?

 

 

65

 

 

65

 

 

?

 

 

68

 

 

68

 

 

?

 

 

184

 

 

184

 

 

?

 

 

204

 

 

204

 

Fosamax

1

 

 

45

 

 

46

 

 

1

 

 

45

 

 

46

 

 

3

 

 

130

 

 

132

 

 

3

 

 

137

 

 

140

 

Diprospan

?

 

 

34

 

 

34

 

 

?

 

 

33

 

 

33

 

 

?

 

 

92

 

 

92

 

 

?

 

 

87

 

 

87

 

Diprosone

?

 

 

22

 

 

22

 

 

?

 

 

22

 

 

22

 

 

1

 

 

64

 

 

65

 

 

1

 

 

58

 

 

59

 

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

9

 

 

47

 

 

57

 

 

3

 

 

49

 

 

52

 

 

11

 

 

137

 

 

148

 

 

5

 

 

140

 

 

144

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proscar

?

 

 

27

 

 

27

 

 

?

 

 

59

 

 

60

 

 

1

 

 

91

 

 

92

 

 

1

 

 

152

 

 

154

 

Propecia

1

 

 

33

 

 

34

 

 

2

 

 

30

 

 

32

 

 

5

 

 

96

 

 

101

 

 

7

 

 

83

 

 

91

 

Sinemet

?

 

 

17

 

 

17

 

 

?

 

 

18

 

 

18

 

 

?

 

 

54

 

 

54

 

 

(1)

 

 

58

 

 

58

 

Remeron

1

 

 

17

 

 

19

 

 

1

 

 

16

 

 

16

 

 

3

 

 

48

 

 

51

 

 

2

 

 

46

 

 

47

 

Other (1)

9

 

 

49

 

 

59

 

 

15

 

 

48

 

 

63

 

 

29

 

 

128

 

 

157

 

 

44

 

 

135

 

 

179

 

Other (2)

1

 

 

51

 

 

52

 

 

(1)

 

 

3

 

 

2

 

 

(2)

 

 

171

 

 

168

 

 

4

 

 

46

 

 

50

 

Total sales

$

346

 

 

$

1,254

 

 

$

1,600

 

 

$

371

 

 

$

1,242

 

 

$

1,613

 

 

$

1,035

 

 

$

3,666

 

 

$

4,701

 

 

$

1,068

 

 

$

3,851

 

 

$

4,919

 

U.S. plus international may not equal total due to rounding.
(1) Includes sales of products not listed separately. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health.
(2) Includes manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.

TABLE 3

Organon & Co.
Sales by geographic area
(Unaudited, $ in millions)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

($ in millions)

2021

 

2020

 

2021

 

2020

Europe and Canada

$

410

 

 

$

426

 

 

$

1,314

 

 

$

1,286

 

United States

346

 

 

371

 

 

1,035

 

 

1,068

 

Asia Pacific and Japan

287

 

 

354

 

 

874

 

 

1,190

 

China

252

 

 

225

 

 

693

 

 

655

 

Latin America, Middle East, Russia and Africa

238

 

 

228

 

 

595

 

 

649

 

Other(1)

67

 

 

9

 

 

190

 

 

71

 

Revenue

$

1,600

 

 

$

1,613

 

 

$

4,701

 

 

$

4,919

 

(1) Primarily reflects manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.

TABLE 4

Reconciliation of GAAP Gross Margin to Non-GAAP Adjusted Gross Profit and Adjusted Gross Margin
($ in millions)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2021

 

2020

 

2021

 

2020

Revenue

$

1,600

 

 

$

1,613

 

 

$

4,701

 

 

$

4,919

 

Cost of Goods Sold

609

 

 

535

 

 

1,783

 

 

1,533

 

Gross Profit

991

 

 

1,078

 

 

2,918

 

 

3,386

 

Gross Margin

61.9

%

 

66.8

%

 

62.1

%

 

68.8

%

Amortization

27

 

 

23

 

 

69

 

 

65

 

One-time costs(1)

17

 

 

?

 

 

27

 

 

?

 

Stock-based compensation

3

 

 

5

 

 

8

 

 

14

 

Non-GAAP Adjusted Gross Profit(2)

1,038

 

 

1,106

 

 

3,022

 

 

3,465

 

Non-GAAP Adjusted Gross Margin

64.9

%

 

68.6

%

 

64.3

%

 

70.4

%

(1) One-time costs primarily include inventory discards related to separation re-labeling and other costs to stand up the Company.
(2) Non-GAAP Adjusted Gross Profit is calculated by excluding amortization, one-time costs, and the portion of stock-based compensation expense allocated to Cost of Goods Sold.

TABLE 5

Organon & Co.
Reconciliation of GAAP Net Income from Continuing Operations to Adjusted EBITDA
($ in millions)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2021

 

2020

 

2021

 

2020

Net income from continuing operations before income tax

$

389

 

 

$

681

 

 

$

1,293

 

 

$

2,227

 

Depreciation

25

 

 

17

 

 

64

 

 

42

 

Amortization(1)

27

 

 

23

 

 

69

 

 

65

 

Interest expense

98

 

 

?

 

 

160

 

 

?

 

EBITDA

539

 

 

721

 

 

1,586

 

 

2,334

 

Restructuring costs

1

 

 

12

 

 

3

 

 

43

 

One-time costs(2)

56

 

 

7

 

 

171

 

 

30

 

Acquired in-process research and development(3)

25

 

 

?

 

 

25

 

 

?

 

Stock-based compensation

15

 

 

11

 

 

44

 

 

32

 

Adjusted EBITDA

$

636

 

 

$

751

 

 

$

1,829

 

 

$

2,439

 

Adjusted EBITDA margin

39.8

%

 

46.6

%

 

38.9

%

 

49.6

%

(1) Amortization in all periods is included in Cost of goods sold.
(2)One-time costs primarily include cost incurred in connection with the spin-off of Organon as well as $23 million of costs incurred in June 2021 pertaining to the Alydia acquisition. For the three months ended September 30, 2021, approximately $35 million of the one-time costs are recorded in Selling, general and administrative expenses, and approximately $17 million are recorded in Cost of goods sold. For the three months ended September 30, 2020, $7 million of the one-time costs are classified in Selling, general and administrative expenses. For the nine months ended September 30, 2021, approximately $139 million of the one-time costs are recorded in Selling, general and administrative expenses, and approximately $27 million are recorded in Cost of goods sold. For the nine months ended September 30, 2020, $30 million of one-time costs are classified in Selling, general and administrative expenses.
(3) Costs represent upfront licensing payment associated with ObsEva of $25 million during the third quarter 2021, which was recorded in Research and Development Expense.

TABLE 6

Organon & Co.
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
($ in millions, except per share amounts)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2021

 

2020

 

2021

 

2020

Net income from continuing operations before income tax

$

389

 

 

$

681

 

 

$

1,293

 

 

$

2,227

 

Adjustments:

 

 

 

 

 

 

 

Amortization(1)

27

 

 

23

 

 

69

 

 

65

 

Restructuring costs

1

 

 

12

 

 

3

 

 

43

 

One-time costs(2)

56

 

 

7

 

 

171

 

 

30

 

Acquired in-process research and development(3)

25

 

 

?

 

 

25

 

 

?

 

Stock-based compensation

15

 

 

11

 

 

44

 

 

32

 

Total Adjustments

124

 

 

53

 

 

312

 

 

170

 

Non-GAAP pre-tax income from continuing operations

513

 

 

734

 

 

1,605

 

 

2,397

 

Taxes on income as reported in accordance with GAAP

66

 

 

121

 

 

144

 

 

347

 

Tax benefit on adjustments

23

 

 

9

 

 

58

 

 

22

 

Tax benefit on GAAP-only discrete items(4)

?

 

 

?

 

 

91

 

 

?

 

Non-GAAP adjusted taxes on income

89

 

 

130

 

 

293

 

 

369

 

Non-GAAP adjusted net income, continuing operations

424

 

 

604

 

 

1,312

 

 

2,028

 

Non-GAAP adjusted net income, continuing operations per diluted share

$

1.67

 

 

$

2.38

 

 

$

5.17

 

 

$

8.00

 

(1) Amortization in all periods is included in Cost of goods sold.
(2)One-time costs primarily include cost incurred in connection with the spin-off of Organon as well as $23 million of costs incurred in June 2021 pertaining to the Alydia acquisition. For the three months ended September 30, 2021, approximately $35 million of the one-time costs are recorded in Selling, general and administrative expenses, and approximately $17 million are recorded in Cost of goods sold. For the three months ended September 30, 2020, $7 million of the one-time costs are classified in Selling, general and administrative expenses. For the nine months ended September 30, 2021, approximately $139 million of the one-time costs are recorded in Selling, general and administrative expenses, and approximately $27 million are recorded in Cost of goods sold. For the nine months ended September 30, 2020, $30 million of one-time costs are classified in Selling, general and administrative expenses.
(3) Costs represent upfront licensing payment associated with ObsEva of $25 million during the third quarter 2021, which was recorded in Research and development expense.
(4) For the three months ended June 30, 2021, the company recorded a tax benefit of approximately $70 million related to a portion of non-US step up in tax basis as a result of its separation from Merck.


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