Advertisement
Singapore markets closed

  • Straits Times Index

    3,313.48
    +8.49 (+0.26%)
     

  • Nikkei

    38,787.38
    -132.88 (-0.34%)
     

  • Hang Seng

    19,553.61
    +177.08 (+0.91%)
     

  • FTSE 100

    8,420.26
    -18.39 (-0.22%)
     

  • Bitcoin USD

    66,888.59
    +1,632.00 (+2.50%)
     

  • CMC Crypto 200

    1,365.24
    -8.60 (-0.63%)
     

  • S&P 500

    5,303.27
    +6.17 (+0.12%)
     

  • Dow

    40,003.59
    +134.21 (+0.34%)
     

  • Nasdaq

    16,685.97
    -12.35 (-0.07%)
     

  • Gold

    2,419.80
    +34.30 (+1.44%)
     

  • Crude Oil

    80.00
    +0.77 (+0.97%)
     

  • 10-Yr Bond

    4.4200
    +0.0430 (+0.98%)
     

  • FTSE Bursa Malaysia

    1,616.62
    +5.51 (+0.34%)
     

  • Jakarta Composite Index

    7,317.24
    +70.54 (+0.97%)
     

  • PSE Index

    6,618.69
    -9.51 (-0.14%)
     

Organon & Co (OGN) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...

GuruFocus Research
·4-min read

  • Revenue: $1.6 billion, 7% growth at constant currency.

  • Adjusted EBITDA: $538 million, 33.2% margin.

  • Adjusted Diluted EPS: $1.22.

  • Free Cash Flow: Targeting $1 billion before one-time costs.

  • Women's Health Franchise Growth: 12%, led by NEXPLANON with 34% growth.

  • Biosimilars Franchise Growth: 46%, significant contributions from HADLIMA and ONTRUZANT.

  • Established Brands Growth: 2%, stable performance.

  • Geographical Revenue Growth: EUCAN up 10% ex-FX, U.S. up 14%, LAMERA up 36% ex-FX, APJ down 7% ex-FX, China down 5% ex-FX.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Organon & Co (NYSE:OGN) reported a strong start to 2024 with a 7% growth rate at constant currency, achieving $1.6 billion in revenue for the first quarter.

  • The Women's Health franchise grew by 12%, driven by robust performance of NEXPLANON, which saw a 34% growth at constant currency.

  • Biosimilars franchise experienced significant growth of 46%, with positive traction in key markets like the U.S., Brazil, and Canada.

  • Adjusted EBITDA was $538 million, representing a 33.2% margin, and adjusted diluted EPS was $1.22, indicating strong profitability.

  • Organon & Co (NYSE:OGN) is on track to generate $1 billion of free cash flow before one-time costs in 2024, providing financial flexibility for dividends, debt reduction, and strategic business development.

Negative Points

  • The Fertility franchise showed a slight decline, down about $2 million or 2% ex-FX, influenced by strategic exits and transitions in the U.S. market.

  • Challenges in the APJ region, with a 7% decline ex-FX this quarter, primarily due to unfavorable national pricing revisions and competitive pressures.

  • China's performance was down 5% ex-FX in the quarter, although there is an expectation of recovery throughout 2024.

  • Established brands are expected to achieve flat performance on an ex-FX basis for the full year 2024, indicating limited growth potential in this segment.

  • Organon & Co (NYSE:OGN) faces ongoing pricing pressures across its portfolio, particularly in biosimilars and U.S. fertility, which could impact profitability and market competitiveness.

Q & A Highlights

Q: Can you comment on the free cash flow for Q1 2024, particularly regarding the working capital drag and expectations moving forward? A: (Matthew M. Walsh - Executive VP & CFO) The $300 million working capital drag in Q1 is seen as seasonal and is expected to reverse in later quarters, supporting the forecast of $1 billion free cash flow before one-time items for 2024. The reduction in one-time costs related to the spin-off, about 40% lower than last year, will also aid in achieving this target.

ADVERTISEMENT

Q: How do you view the potential impact of Nexplanon moving to a 5-year regimen from a 3-year regimen on free cash flow in the future? A: (Kevin Ali - CEO & Director) The shift to a 5-year regimen for Nexplanon, expected by 2026, is seen not as a headwind but potentially as a net gain. The company may consider pricing adjustments and anticipates new users who prefer a longer-duration product, offsetting any negative impacts.

Q: What are the underlying volume trends for U.S. Nexplanon, and what are the expectations for HADLIMA in the coming years? A: (Kevin Ali - CEO & Director) U.S. Nexplanon is expected to see double-digit growth, driven by strategic pricing changes and increasing demand. For HADLIMA, the market is evolving slowly, with expectations for significant growth as biosimilar adoption increases, particularly post-2025.

Q: Can you discuss the operating margin progression beyond 2024 and potential sources for improvement? A: (Matthew M. Walsh - Executive VP & CFO) Margin improvement is expected from a better product mix, including higher-margin products from the pipeline, cost improvements in goods sold, and operating leverage from fixed cost realignment.

Q: What are your expectations for the HUMIRA biosimilar market in the upcoming years? A: (Matthew M. Walsh - Executive VP & CFO) The market is anticipated to open up gradually, with significant shifts expected in 2025 and beyond as payer contracts evolve and biosimilars gain traction.

Q: Regarding the established brands, particularly with the addition of Emgality and REYVOW, what are the expectations for these brands moving forward? A: (Matthew M. Walsh - Executive VP & CFO) The company is optimistic about the growth potential of Emgality and REYVOW in Europe, driven by a strong market for migraine treatments and the recent start of promotional activities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.