Organon & Co. (NYSE:OGN) is a global healthcare company with a focus on improving the health of women throughout their lives. The company has a diverse portfolio of prescription therapies and medical devices across women's health, biosimilars, and established brands. With strong execution in the first quarter of 2024 and a robust pipeline, Organon is well-positioned for sustained growth and margin expansion.

Financials

In 2023, Organon reported annual net income of $1,023 million, annual revenue of $6,263 million, annual operating cash flow of $799 million, and annual free cash flow of $538 million. The company's strong performance continued in the first quarter of 2024, with revenue reaching $1,622 million, up 5% year-over-year. This growth was driven by the company's key franchises, including Women's Health, Biosimilars, and Established Brands.

Women's Health Segment Shines

Organon's Women's Health segment, which includes products like Nexplanon, Follistim AQ, and NuvaRing, delivered impressive growth of 12% in the first quarter of 2024. Nexplanon, the company's long-acting reversible contraceptive, was a standout performer, with global sales increasing 33% year-over-year. The growth was driven by strong demand in the U.S. market, where the company took appropriate actions to position the product for success, as well as increased demand in international markets.

Biosimilars Franchise Continues to Expand

Organon's Biosimilars franchise, which includes products like Renflexis, Ontruzant, and Hadlima, grew 46% in the first quarter of 2024. The growth was primarily driven by the launch of Hadlima in the U.S. market, as well as increased demand for Ontruzant in Brazil due to a favorable tender. The company remains focused on launching a new biosimilar asset every couple of years, with two investigational products from its collaboration with Shanghai Henlius Biotech expected to file for regulatory approval in 2024 and 2025.

Established Brands Demonstrate Resilience

Organon's Established Brands segment, which includes a diverse portfolio of well-known brands in cardiovascular, respiratory, dermatology, and non-opioid pain management, grew 2% in the first quarter of 2024 on a constant currency basis. This performance was driven by the initial contribution from the company's recent commercial agreement with Eli Lilly for the migraine medicines Emgality and Rayvow, as well as a recovery in the company's injectable steroid products.

Geographic Diversification

Organon's revenue is well-diversified geographically, with 77% of sales coming from international markets in the first quarter of 2024. The company's EUCAN region grew 10% on a constant currency basis, driven by the addition of the Eli Lilly migraine assets and the recovery of injectable steroids. The LAMERA region, which includes Latin America, the Middle East, Russia, and Africa, saw a 36% constant currency growth, primarily due to opportunistic volume associated with a tender in Brazil and strong growth in Nexplanon in Mexico.

Margin Expansion and Cash Flow Generation

Organon's adjusted EBITDA margin in the first quarter of 2024 was 33.2%, demonstrating the company's ability to maintain profitability. The company expects margin accretion to come from a mix shift towards higher-margin products, productivity improvements in cost of goods sold, and operating leverage from its fixed costs.

In terms of cash flow, Organon generated $76 million in net cash from operating activities in the first quarter of 2024. The company expects to reach approximately $1 billion in free cash flow before one-time items in 2024, underpinned by its financial guidance. This strong cash flow generation will provide the company with the financial flexibility to service its dividend, reduce leverage, and pursue strategic business development opportunities.

Outlook

For the full year 2024, Organon is affirming its revenue guidance of $6.2 billion to $6.5 billion. The company expects this growth to be driven by continued strength in its Women's Health and Biosimilars franchises, as well as the contribution from the Eli Lilly migraine assets. Organon also expects to deliver full-year adjusted EBITDA margins in line with or better than 2023 levels.

Pipeline and Business Development

Organon is not only focused on executing its core business but also positioning the company for future growth. The company is making progress in its life cycle management initiatives, including the development of a 5-year label for Nexplanon and the advancement of two biosimilar candidates through its collaboration with Shanghai Henlius Biotech.

Additionally, Organon is actively pursuing strategic business development opportunities that align with its mission of offering solutions in women's health beyond reproductive health. The recent agreement with Eli Lilly for the commercialization of the migraine medicines Emgality and Rayvow in Europe is a prime example of this strategy.

Conclusion

Organon's strong performance in the first quarter of 2024, coupled with its robust pipeline and strategic focus, positions the company for continued growth and margin expansion. The company's diversified portfolio, geographic reach, and disciplined capital allocation strategy provide a solid foundation for long-term value creation. As Organon continues to execute on its strategic priorities, investors can look forward to the company's continued progress in improving the health of women worldwide.