Organon, a global healthcare company with a focus on improving the health of women throughout their lives, has steadily executed on its strategy since its spin-off from Merck in 2021. Over the past three years, the company has demonstrated resilience in its base business, captured efficiencies, deployed capital judiciously, and delivered on the promise of its growth products and pipeline - all while navigating a challenging macroeconomic environment.
Business Overview and History
Organon was established in 2021 through the spin-off of Merck's women's health, biosimilars, and established brands businesses. The company's portfolio spans three key areas - women's health, biosimilars, and established brands. In women's health, Organon's flagship product is Nexplanon, a long-acting reversible contraceptive implant. The biosimilars portfolio includes oncology and immunology treatments, while the established brands segment covers a range of cardiovascular, respiratory, dermatology, and non-opioid pain management therapies.
Organon Co. was founded in 2020 as a spin-off from Merck & Co., Inc., becoming an independent global healthcare company. At the time of the spin-off, Organon had a portfolio of more than 60 medicines and products across various therapeutic areas. Key products in the women's health portfolio included the contraceptive product NuvaRing and fertility treatments like Follistim AQ, in addition to Nexplanon. The biosimilars portfolio included products such as Renflexis, Ontruzant, and Brenzys.
In the early years following the spin-off, Organon faced several challenges, including the need to establish its own infrastructure and capabilities separate from Merck. This involved building out its commercial, manufacturing, and R&D functions. The company also had to navigate patent expirations and generic competition for some of its key established brand products.
Since its inception, Organon has executed a multi-pronged strategy to drive growth. The company has focused on maximizing the potential of its existing portfolio, particularly Nexplanon, while also pursuing targeted business development opportunities to expand its reach. In 2024, Organon acquired Dermavant Sciences, adding the innovative dermatology therapy VTAMA (tapinarof) cream to its lineup.
Financials
Organon's financial performance has been solid, with the company delivering three consecutive years of constant currency revenue growth through 2024. Full year 2024 revenue reached $6.4 billion, up 3% year-over-year on a constant currency basis. Adjusted EBITDA for 2024 was $1.96 billion, representing a 30.6% margin. The company's non-GAAP operating expenses, excluding IPR&D, declined 2% year-over-year, reflecting Organon's focus on cost containment.
For the full year 2024, Organon reported net income of $864 million, operating cash flow of $939 million, and free cash flow of $588 million. In the most recent quarter (Q4 2024), revenue was $1.592 billion, with net income of $109 million. Year-over-year revenue growth for Q4 2024 was 2%.
Organon generates approximately 75% of its revenues from international markets. In 2024, Europe and Canada contributed $1.76 billion, Asia Pacific and Japan $1.05 billion, China $847 million, and Latin America, Middle East, Russia, and Africa $1.03 billion. The United States accounted for $1.57 billion in revenues.
As of December 31, 2024, Organon's debt-to-equity ratio was 18.81. The company had $675 million in cash and cash equivalents, with a $1 billion revolving credit facility that had no outstanding borrowings. The current ratio was 1.60 and quick ratio was 1.11.
Segment Performance
Women's Health
Organon's women's health portfolio, which accounted for 28% of 2024 revenue, grew 5% year-over-year on a constant currency basis. The standout performer was Nexplanon, which delivered 17% constant currency growth in 2024, driven by double-digit increases in both the U.S. and international markets. Nexplanon generated $963 million in sales, an increase of 16% compared to 2023, driven by increased demand, favorable pricing, and discount rates in the United States as well as increased demand and favorable pricing in international markets.
NuvaRing sales declined 35% to $115 million in 2024 due to ongoing generic competition and the negative impact of increased government discount rates in the U.S. Follistim AQ sales declined 10% to $237 million, primarily due to a one-time buy-in as a result of Organon's exit from an interim operating model agreement in the U.S. with Merck, as well as unfavorable discount rates in the U.S., partially offset by increased demand in the U.S. and launches in various international markets. Ganirelix Acetate Injection sales declined 1% to $109 million, mainly due to generic competition, partially offset by increased demand in the U.S. and various international markets.
The Jada System, a device for the treatment of abnormal postpartum uterine bleeding, saw sales increase 40% to $61 million in 2024 due to continued uptake in the U.S. following its launch in early 2022.
Biosimilars
Organon's biosimilars segment, which represented 10% of 2024 revenue, grew 12% on a constant currency basis. This was driven by the company's ability to capture more than its contractual share of the Brazil tender for Ontruzant. In 2024, the biosimilars segment generated $662 million in sales, up 10% compared to 2023.
Renflexis saw sales decline 1% to $274 million in 2024, primarily due to unfavorable discount rates in the U.S., partially offset by demand growth in the U.S. and Canada. Ontruzant had sales decline 9% to $141 million in 2024, driven by lower demand in the U.S. and Europe, partially offset by increased demand from tenders in Brazil. Brenzys saw sales increase 6% to $77 million in 2024 due to increased demand in Canada. Hadlima recorded sales of $142 million in 2024, reflecting an increase due to the launch in the U.S. in July 2023 and a modest increase in international markets.
Established Brands
The established brands portfolio, which accounted for 60% of 2024 revenue, grew 2% on a constant currency basis. Contributions from Emgality and VTAMA, as well as a recovery in injectable steroids, offset the impact of Atozet's loss of exclusivity. In 2024, the established brands segment generated $3.85 billion in sales, which was flat compared to 2023.
The cardiovascular portfolio saw combined sales decline 6% to $1.05 billion in 2024. This was primarily driven by a 9% decline in Atozet sales to $473 million due to loss of exclusivity in France, Spain, and Japan, as well as the timing of tenders in Latin America, partially offset by increased demand in certain European markets.
The respiratory portfolio generated $838 million in sales in 2024, a decline of 5% compared to 2023. Singulair sales decreased 11% to $359 million due to decreased demand in China and Japan, as well as mandatory annual price reductions in Japan. Nasonex sales increased 4% to $276 million driven by increased demand across international markets, while Dulera sales grew 5% to $203 million due to favorable impact of increased demand in the U.S. and Canada.
In the non-opioid pain, bone, and dermatology portfolio, Arcoxia sales increased 5% to $270 million in 2024, primarily due to increased demand in China and favorable pricing in the Asia Pacific region, partially offset by decreased demand in various international markets. Diprospan sales increased 52% to $139 million due to recovery from manufacturing issues that impacted sales in 2023. Vtama generated $12 million in sales in 2024.
Looking Ahead to 2025
For the full year 2025, Organon expects revenue in the range of $6.125 billion to $6.325 billion, inclusive of an approximately $200 million headwind from foreign exchange. This guidance reflects the potential for a fourth consecutive year of constant currency revenue growth, despite the loss of exclusivity for Atozet, Organon's second-largest product.
The company's adjusted EBITDA margin guidance for 2025 is 31% to 32%, consistent with its commitment to maintaining a 31% adjusted EBITDA margin floor, excluding IPR&D expenses. Organon expects to achieve these targets through a combination of continued strong performance in its base business, the successful launch of VTAMA in atopic dermatitis, and the realization of over $200 million in cost savings initiatives.
The revenue guidance reflects several key factors:
1. An approximately $160 million to $180 million impact from the loss of exclusivity for Atozet, primarily driven by the LOE in the EU. 2. A $20 million to $40 million impact from volume-based procurement related to FOSAMAX. 3. A pricing impact of $155 million to $185 million (about a 2.7 percentage point headwind), driven by the Atozet LOE and continued competitive pressures in the U.S. for mature products. 4. Volume growth in the range of $380 million to $500 million (6% to 8% growth), driven by Nexplanon, Fertility, Hadlima, Emgality, and Vtama. 5. A $200 million (300 basis point) headwind from foreign exchange.
Risks and Challenges
While Organon has demonstrated resilience in its base business and executed well on its strategic priorities, the company faces several risks and challenges going forward:
1. Competitive Pressures: Organon operates in highly competitive markets, with generic and biosimilar competition posing a threat to its established products. The company's ability to maintain market share and pricing power will be crucial.
2. Regulatory Hurdles: Organon's pharmaceutical and medical device products are subject to extensive regulatory oversight. Delays or setbacks in obtaining or maintaining regulatory approvals could impact the company's growth.
3. Reliance on Key Products: Organon's financial performance is heavily dependent on the continued success of flagship products like Nexplanon. Any events that adversely affect the markets for these leading products could have a significant impact on the company's results.
4. Integration and Execution Risks: The company's growth strategy relies on successful integration of acquired assets and execution of its pipeline development efforts. Failure to achieve anticipated synergies or pipeline milestones could negatively affect Organon's prospects.
5. Macroeconomic Factors: Global economic conditions, including foreign exchange fluctuations and inflationary pressures, could impact Organon's revenue and profitability.
Despite these challenges, Organon has demonstrated its ability to navigate a complex operating environment and deliver consistent financial results. The company's focus on women's health, strategic business development, and operational excellence position it well for continued growth and value creation.
Human Capital
As of December 31, 2024, Organon had over 10,000 employees worldwide, with approximately 1,800 in the United States, including Puerto Rico. The company has a focus on building a strong, inclusive culture and has over 30% of its U.S. employees identifying as part of an underrepresented ethnic group. Globally, over half of Organon's employees are female, and women comprise nearly half of the company's senior leadership.
Conclusion
Organon has made significant strides in establishing itself as a leading global healthcare company focused on improving the health of women. Through a combination of organic growth, targeted acquisitions, and disciplined cost management, the company has delivered three consecutive years of constant currency revenue growth and margin expansion.
As Organon looks ahead to 2025 and beyond, the company's pipeline of growth drivers, including Nexplanon, VTAMA, and its biosimilars portfolio, combined with its commitment to operational efficiency, provide a solid foundation for continued success. While risks and challenges remain, Organon's strategic execution and focus on its core women's health mission position it well to create value for shareholders in the years to come.