NYSE:OGN Organon & Co. Q3 2023 Earnings Report $12.21 +0.09 (+0.74%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$12.23 +0.02 (+0.16%) As of 04/25/2025 07:44 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Organon & Co. EPS ResultsActual EPS$0.78Consensus EPS $1.04Beat/MissMissed by -$0.26One Year Ago EPSN/AOrganon & Co. Revenue ResultsActual Revenue$1.52 billionExpected Revenue$1.59 billionBeat/MissMissed by -$66.37 millionYoY Revenue GrowthN/AOrganon & Co. Announcement DetailsQuarterQ3 2023Date11/2/2023TimeN/AConference Call DateThursday, November 2, 2023Conference Call Time8:30AM ETUpcoming EarningsOrganon & Co.'s Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Organon & Co. Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by. At this time, I'd like to welcome everyone to the Organon Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer As a reminder, this call is being recorded. Thank you. Operator00:00:34I would now like to turn the call over to Jennifer Hallchak, Vice President, Investor Relations. Please begin your conference. Speaker 100:00:53Thank you, operator, and good morning, everyone. Thank you for joining Organon's Q3 2023 earnings call. With me today are Kevin Ali, Organon's Chief Executive Officer, who will cover strategy and operational highlights and Matt Walsh, our Chief Financial Officer, will review performance and guidance. Doctor. Sandra Milligan, Organon's Head of R and D will also be joining us for the Q and A portion of this call. Speaker 100:01:17Today, we will be referencing a presentation that will be visible during this call for those of you under the webcast. The presentation will also be available following this Call on the Events and Presentations section of our Organon Investor Relations website at www.organon.com. Before we begin, I would like to remind listeners that certain information discussed by management during this conference call will include forward looking statements. Actual results could differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our 10 ks and subsequent periodic filings. In addition, we will discuss certain non GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. Speaker 100:02:11A reconciliation of these non GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our CEO, Kevin Ollie. Speaker 200:02:23Good morning, everyone, and thank you, Jen. Welcome to today's call, where we'll talk about our Q3 2023 results. In the Q3, we navigated some external factors impacting the business. The strength of the U. S. Speaker 200:02:37Dollar persists. We are navigating a challenging economic and policy environment in China. And though we have said from the very beginning that we expected the biosimilars market for HUMIRA to be a slow formation, it has been slower than we thought. Still, in the Q3, we delivered product sales that grew 1% At constant currency, that represents our 8th consecutive quarter of product growth. Total revenue, which includes lower margin product sales to Merck, was down 1% at constant currency compared with the prior year. Speaker 200:03:12In the Q3, ex FX, Our women's health was down 7%, our biosimilars franchise grew 10%, and the established branch franchise, which represents nearly 2 thirds of our business, Grew 3% again demonstrating its continued stability. Adjusted EBITDA was $447,000,000 representing a 29.4% margin and adjusted diluted EPS was $0.87 With these results in mind, We are lowering our revenue guidance by $150,000,000 at the midpoint to a range of $6,150,000,000 To $6,250,000,000 about $100,000,000 of this is from FX rates that have worsened since we last guided in August. The remaining impact primarily reflects the operational factors I just described, plus changes we are making to our go to market model for Nexplanon. We are also revising our range on our adjusted EBITDA margin to 30.5 percent to 31.5 percent to reflect the lower gross margin stemming from the impacts of foreign exchange on revenue, unfavorable product mix and the timing of manufacturing costs. Now let's start by reviewing revenue beginning with Women's Health. Speaker 200:04:33The Women's Health franchise was down 7% on a constant currency basis in the 3rd quarter, primarily driven by NuvaRing, which went LOE in 2018 and now had 5 generics in the market. The fertility business is flat year to date, but we anticipate a very strong 4th quarter driven by identifiable market tailwinds in China as well as the onboarding of a large new customer win in the U. S, strong finish in the 4th quarter underpins Our expectation that the fertility business will deliver high single digit revenue growth for the full year on a constant currency basis. In China, we are seeing IVF cycles pick up after a slower third quarter stemming from the Chinese government's ongoing review of healthcare This is a transient issue impacting the entire industry. The Q4 of 2023 will also benefit from an easier year over year compare as the Q4 of 2022 was impacted by COVID. Speaker 200:05:43Year to date, the fertility business in China has been a growth engine, up 15% FX. We are doing very well in that important market and we have been gaining market In the U. S, the fertility market is growing and demand is very strong. Strategically, we are working on an evolution of our has increased from 30% to 40%. To compete in the reimbursed market, we have traded price for volume. Speaker 200:06:21We are having success And we're excited about some of the significant accounts we have recently secured that will start to benefit the business in the near term. In fact, a recent win in the reimbursed book of business represents our largest customer win since becoming an independent company. Inventory build from this customer will help to drive what we expect to be a strong Q4 for fertility in the U. S. Particularly encouraging is that we as we head into 2024, we expect Organon Fertility products will be the preferred brands And a significant percentage of covered lives in the U. Speaker 200:06:58S. Let's now turn to Nexplanon, which declined 3% ex FX In the quarter and is up 2% year to date on a constant currency basis, we expect a robust 4th quarter Strategic decisions to better position Nexplanon in the U. S. And to accelerate growth globally. The initiatives Undertaken will position Nexplanon for strong growth in 2024 and we expect to reach $1,000,000,000 run rate in 2025. Speaker 200:07:37First, we have made some changes to our U. S. Go to market model. We will not take effective price in NexVoln in the U. S. Speaker 200:07:44In 2023. Our future U. S. Pricing increases will now be aligned with when health plans update their pricing and reimbursement schedules. This timing update will make a meaningful difference to the value physicians see from carrying and implanting Nexplanon. Speaker 200:08:00Additionally, We see a healthy uptick in customer purchases ahead of when a new price increase goes into effect. So by postponing our Also as we have signaled in the last couple of quarters, our next one on mix in the U. S. Has been skewing more heavily towards higher discounted channels. We are adapting to this industry wide dynamic by removing voluntary discounts in these federal programs, which we believe will benefit the 4th quarter and going forward. Speaker 200:08:36Secondly, we limited our participation in the annual Mexico tender on the basis of price. That represents about $20,000,000 of negative impact to Nexplanon revenue in 2023. Lapping this impact will be a tailwind to Nexplanon's results next year. And thirdly, overall demand outside the U. S. Speaker 200:08:57Has been strong, Asia and in Africa. In fact, so strong that we've invested in expanding our Nexplanon supply capacity to satisfy these fast growing international markets. We have visibility to approximately $20,000,000 of throughput related to that demand that we expect to be realized in 2024. So I've talked about 3 factors that will drive Nexplanon growth next year, which together represents $60,000,000 or about 7 points of growth that we have High visibility into for next year. Turning to other women's health products, let's talk about JADA, our device for postpartum hemorrhage. Speaker 200:09:37This is the first time we're publicly breaking out revenue for JADA. And so you'll see that year to date JADA has generated $31,000,000 More than double the revenue for the same period last year, JADA is now available in over 85% of the largest birthing hospitals in the U. S. And more than 36,000 mothers have been treated with JADA since launch. Given our progress in making JADA available in the majority of Hospitals in the U. Speaker 200:10:04S, our focus will now shift to supporting hospitals and users in the incorporation of JADA into their standard PPH readiness and response protocols. We believe JADA can achieve A peak of up to $150,000,000 in the U. S. And more than $250,000,000 peak when layering in the potential sales outside the U. S. Speaker 200:10:28Globally, there are over 100,000,000 births annually and less than 4,000,000 of those are in the U. S. JADA is a great fit for our global footprint. And finally, in October, we made our first U. S. Speaker 200:10:40Shipment of Xatiatto, an FDA approved medication for the treatment of bacterial vaginosis in patients 12 years of age and older developed by our collaborator Dare Bioscience. Our go to market strategy leverages the knowledge and experience of the Nexplanon commercial team. Our skilled market access team continues to meet with customers to review Xociado and obtain competitive managed care formulary status in the bacterial vaginosis marketplace. Let's move now to our biosimilars business, which grew 10% ex FX in the 3rd quarter and 15% year to date. Understandably, we get the most investor questions on the recent launch of HADLIMA in the U. Speaker 200:11:23S, so let's focus the discussion there. At an 85% discount, we priced HADLIMA to enable expanded access and to bring The economic benefits of biosimilars directly to the patient. We've emphasized that's where we believe we can offer the highest value to patients. We have focused our commercial efforts on payers who want to bring lower net costs to patients. We estimate that together those plans represent about 40% of the covered lives in the U. Speaker 200:11:53S. While not as rapidly as we may have hoped for, we're having success. Among the July cohorts of entrants, we're out prescribing our next closest competitor by a factor of over 3 times. We're winning in both the commercial and managed Medicaid space across the competitive set and we're rapidly closing in on the gap on Amgen's AmgenVita Despite their 6 month lead in the market, consistent with comments we made around HADLIMA's launch, There is a market need for a simple single price strategy and we believe that product attributes will be a key to uptake. We're well positioned with a product that has high concentration citrate free formulation as well as the low concentration formulation, a user friendly pen Backed by the Arthritis Foundation, a wealth of real world evidence from over 20 studies and interchangeability expected by mid-twenty 24. Speaker 200:12:53We view the slower market formation for biosimilars as a clear missed opportunity to pass on savings to patients. Right now about a third of patients on Humira pay at least $1,000 a month. That is more than they would pay for HADLIMA out of pocket without insurance coverage. We believe it is not a matter of if, but when this market starts to meaningfully form. Our very intentional focus on the low cost segment of the market together with our product profile could very well help the market convert much faster. Speaker 200:13:28Rounding out the top line discussion, let's move to Established Brands. Year to date, the Established Brands franchise has grown 1% ex FX. Over the past quarters, we've highlighted some fundamentals of our established branch strategy, which explains why the franchise has been performing ahead of external expectations Since then, in the Q1, we talked about manufacturing optimization for Nasonex and Atazette to meet increasing demand, resulting from heightened promotional activity. Last quarter, we talked about adapting our commercial model to compensate for payer pressure and to mitigate pricing declines in select markets through our policy work. What bears repeating this quarter is the product and geographic diversity of the portfolio And the way we have been managing these assets has led to very stable results. Speaker 200:14:19During any given quarter, we are navigating and capitalizing on geographic competitive complexities that can vary widely across our 5 geographic regions and 49 products. The Stable results in Established Brands we have delivered since spin have been a testament to the diversity of the portfolio as well as the solid execution by the team. Now let's turn to Slide 9, where we can take a look at revenue by geography. Let's focus on China because that is the region that's currently moving most dynamically this quarter. As you probably understand, the Chinese economy has had a slower than expected recovery post COVID. Speaker 200:15:00The general economic slowdown is impacting Chinese consumers, which for our business had read through to the retail business. We've had a long operating history in China and our experience in navigating this dynamic market. We've implemented initiatives that help us reach the consumer more directly, for example, through e commerce. In addition, in recent weeks, our traditional retail business that is through pharmacies has also started to improve. The other macro issue of play in China is that for the first time in recent history, the healthcare budget in China is in a deficit. Speaker 200:15:36The authorities are seeking options to offset this decline, which includes stricter enforcement of the volume based procurement rules and investigations into prescribing patterns at the hospital level. Our portfolio has seen a very muted impact from these particular initiatives. We have strong diversity in our China business. No product represents more than 16% of revenue in China. Also, most of our Portfolio has already been through BBP and has weathered those impacts. Speaker 200:16:05And because we have a long operating history in China, Our team is experienced and has reallocated resources to other areas less impacted by this campaign. Overall, we believe that we will see a return to a more normal level of engagement in the hospital and retail channels by the beginning of next year. In fact, we're already seeing growth in China in the 4th quarter. Since then, we have given new life to establish brands and have expanded our pipeline in both biosimilars and women's health. As we move into 2024, we will be working to reduce leverage and maximize the power of our existing portfolio. Speaker 200:16:45We will also look to bring in assets and enhance our growth profile. We are currently creating our own opportunities. We are overturning every stone to unlock value. The transient headwinds we saw in 2023 will serve as tailwinds for us next year. We believe we are well positioned to build from here and deliver mid single digit revenue growth over the medium term. Speaker 300:17:09Now let's turn the call over to Matt, who will go into our financial results in more detail. Thanks, Kevin. Beginning on Slide 10, let's walk through the drivers of our 1% decline in revenue at constant currency for the 3rd quarter. Starting with the impact of loss of exclusivity, LOE was about $10,000,000 in the 3rd quarter and The small amount that we have realized year to date has been related to generic competition for NuvaRing in the U. S. Speaker 300:17:35In the Q3, we had about a $30,000,000 volume impact from VPP in China, consistent with the 1st two quarters of the year As the impact continues to be related to last year's implementation of round 7 that included our cardiovascular product, EZETROL, which is sold as ZEDIA in some markets outside of China, as well as the July implementation of round 8 that included Remeron and Hizar. We experienced a $25,000,000 price erosion in the quarter. In prior quarters, Established Brands was the What we saw in Q3 was price pressure being driven within other franchises. Given the nature of biosimilar competition, We're seeing pricing pressure broadly across that franchise. Additionally, two issues within women's health in the U. Speaker 300:18:33S. 1st, Customer mix in Nexplanon has been skewing towards the 340B channel. And second, within fertility, we're seeing price pressure as we Competitively position ourselves to grow volume in the attractive market for reimbursed fertility services. We had about $70,000,000 of volume growth in the 3rd quarter, primarily from established brands, particularly in our Lomero region and non VBP products in China. Setting aside the slow market formation for HUMIRA biosimilars in the U. Speaker 300:19:06S, which Kevin covered in detail. Our biosimilars volume was up nicely in the U. S, Canada and Brazil due to volumes from new customers as well as greater depth of purchasing from existing customers. The bar for supply other primarily represents sales to Merck off $15,000,000 for the quarter compared to prior year. As we've discussed in the past, this revenue stream is essentially a series of Lower margin contract manufacturing arrangements that have been declining since the spin off and will continue to decline going forward. Speaker 300:19:43And finally, you can see the financial reporting headwind we had in foreign exchange translation about 65 basis points for the 3rd quarter. In August, when we last updated guidance, we raised our revenue guidance based on where spot rates were at that time. With the benefit of hindsight, late July, early August happened to be the most favorable point in the year in terms of FX spot rates versus the U. S. Dollar. Speaker 300:20:09Since then, the dollar has strengthened as much as 6% across some of our most significant currencies, which has caused us to give up Now let's turn to performance by franchise. As has been our convention, I will target my comments over the next three slides to those areas most relevant to your modeling as we think about where we will end the year. Let's start with women's health on Slide 11. As Kevin covered in some detail at the outset, Nexplanon is experiencing headwinds in 2023 that we don't expect will recur next year. The math on those headwinds, especially those in the second half indicate that it's hard to envision a scenario where Nexplanon doesn't return The strong growth in the high single digits next year. Speaker 300:21:12Demand for fertility is solid and that therapy area continues to have Strong structural tailwinds even if we have to continue to give up some price as we did in the Q3 in order to gain greater market share. In the area of new products, the JADA device or postpartum hemorrhage is now hitting a steeper part of its revenue curve Post launch, Enzaciado is now in the channel as of last month and we're looking forward to what that launch will yield in 2024. Turning to biosimilars on Slide 12, biosimilars grew 10% ex FX in the quarter and has grown 15% ex FX year to date. Renflexis grew 15% in the quarter and is on track for its 6th consecutive year of annual revenue growth in the U. S. Speaker 300:22:03Entrezant continues to operate in a competitive environment in both the U. S. And Europe. However, volume remains strong in the Lomira region, mainly in Brazil, And this is offsetting competitive pricing dynamics. With regard to Headlima, our original expectation for global Headlima sales in 2023 was that it would represent just under 1.5 percent of full year 2023 revenue. Speaker 300:22:29Given the slower market formation in the U. S. For HUMIRA biosimilars As Kevin discussed, global HUMIRA revenue mix will be significantly less than that in 2023 and in fact This is one of the key factors driving our 2023 revenue guidance revision. Turning to Slide 13, Established Brands grew 3% ex FX in the 3rd quarter and it's still in positive territory for the year at 1% growth year to date. We've talked about the durability of Established Brands. Speaker 300:22:59This year is a case in point that 3% growth ex FX was delivered Despite 3 pretty significant headwinds, 1st, VBP in China, which is currently capturing our largest product, EZETROL, in round 7 and now we have round 8 underway. 2nd, the economic slowdown and challenging policy environment in China. And 3rd, we grew despite the market action that occurred at the very beginning of the year for injectable steroid products. Given year to date performance and the outlook for the Q4, we expect established brands to deliver at least level performance year on year at constant currency. Now let's turn to Slide 14, where we show key non GAAP P and L line items and metrics for the Q3 and year to date performance. Speaker 300:23:47For reference, GAAP Financials and reconciliations to the non GAAP financial measures are included in our press release and in the appendix slides of this presentation. For gross profit, we are excluding from cost of goods sold, purchase accounting amortization and one time items related to the spin off, which can be seen in our appendix slides. Non GAAP adjusted gross margin was 62.6% compared with 67.1% in the prior year period. 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 in this quarter. Speaker 300:24:32With respect to the foreign exchange impact on cost of sales, 3rd quarter adjusted gross profit margin reflects the timing of FX recognition related to inventory purchases, which has impacted us unfavorably versus the prior year and this will continue into the Q4. Moving down the P and L. In October, we were able to reach agreement in principle on the key terms of a settlement with MicroSverix to resolve patent infringement claims for Nexplanon that predated the spin off. We reserved an amount of $80,000,000 to cover the settlement. The settlement will be paid out over 3 fiscal years, dollars 35,000,000 in 2023, dollars 25,000,000 in 20.24 and $20,000,000 in 2025. Speaker 300:25:19That total of $80,000,000 in legal reserves was the main driver in GAAP SG and A increase year over year. On a non GAAP basis, as you can see, SG and A increased 4% mainly due to higher employee related costs. Total non GAAP R and D excluding IP R and D expense increased 7% in the quarter. The increase is primarily due to continued investments into our pipeline and higher costs associated with the development of these assets. Including IP R and D, R and D expense was actually down 2% year on year. Speaker 300:25:57We had $10,000,000 of IP R and D expense in the Q3 of 2022 against no such expenses in this quarter. These factors culminate in an adjusted EBITDA margin of 29.4% in the Q3 of 2023 compared to 35.5 percent in the Q3 of last year. Non GAAP adjusted net income was $223,000,000 or $0.87 per diluted share compared with $337,000,000 or $1.32 per diluted share in 2022. The year over year decrease in net income was a result of lower adjusted EBITDA as well as higher interest expense. Turning to our net leverage ratio on Slide 15. Speaker 300:26:43As we've previously discussed, we expected upward pressure on our net leverage ratio this year with the peak expected to be in the 3rd quarter and this is played out. Next quarter, we will be lapping a low adjusted EBITDA quarter last year due to last year's market action on injectable steroids and that should drive a decline in the net leverage ratio in Q4 all else equal. Turning to Slide 16, we provide a closer look at our cash flow. For full year 2023, we expect to generate between $700,000,000 to $800,000,000 in free cash flow before one time charges. At the midpoint of the range, this is about $250,000,000 below what we expected earlier in the year And the difference is attributable to lower expected EBITDA as well as working capital use. Speaker 300:27:31On the latter, we're now deep in the implementation of our new global P system that has temporarily tied up cash and current accounts to mitigate potential disruptions to normal operations. As a reminder, in 2022, we generated just over 75% of our annual cash flow in the second half and we expect this year to follow a similar pattern. One time cash costs related to the spin off transaction are trending in line with our expectation of about $350,000,000 for the full year 2023. The single biggest component of separation costs relates to the Implementation of the global ERP system that I just referenced and we're on track to complete that in the Q2 of 2024. As a result, these one time costs associated with the spin, especially those that are related to transition services agreements as opposed to the longer tail manufacturing services agreements, should decline meaningfully next year. Speaker 300:28:30For CapEx, PP and E of 3% to 4% of revenue remains a good range for forecasting purposes as we continue to deploy that capital into our internal Turning to revenue guidance on Slide 17, we bridge our expected revenue change year on year. We have revised a number of these ranges based on how we expect LOE impact has been minimal. So far in 2023, we expect the year to finish similarly. The small amount realized was related to the impact of generics for NuvaRing. We lowered our range to $10,000,000 to $20,000,000 down from $50,000,000 to $75,000,000 as we do not anticipate a generic entrant for DULARA in the U. Speaker 300:29:21S. This year. And in addition, the impact of generic competition for AdoZet in Japan on that LOE event has been lower than anticipated this year. Turning to VBP, we now expect the annual impact to be slightly lower than what we guided to in the 2nd quarter as we're tracking better with both Ezetrol, which was in the implementation of Round 7 in November of last year, as well as the recent Round 8 implementation in July of this year, which included our Remeron and Hyzaur products. We're lowering our estimate of potential price erosion to $90,000,000 to $100,000,000 down from $100,000,000 to $150,000,000 an improvement from the bridge that we showed you last quarter. Speaker 300:30:06Here we're seeing the momentum of our Brands portfolio being able to manage price erosion better than expected across several markets. We've lowered our outlook for volume growth for the year and that underpins our revision to the revenue guidance. We lowered our range to 3.70 $400,000,000 or about 6% year on year growth at the midpoint, down from the 9% we were forecasting last quarter As a result of changes we've made to our go to market model for Nexplanon, a slower than expected uptake of Hadlima and macroeconomic and policy headwinds in China. When we reported our 2nd quarter results in August, the U. S. Speaker 300:30:47Dollar had been steadily weakening over the 1st 7 months of 2023 and we saw Favorability in our forecast if rates simply held at where spot rates were in early August. Since then, FX has retraced, We gave back all of those gains and then some. We're now raising our FX exposure to $120,000,000 to $130,000,000 representing about a 200 basis point headwind for the full year 2023 compared with the 0 to 80 basis points of headwind we expected for the full year back in August. Together, these factors result in revising top line guidance to $6,150,000,000 to $6,250,000,000 which represents growth of 1.6% to 3.3% growth on a constant currency basis. Moving to the other components of guidance on slide 18. Speaker 300:31:41We're revising our range on expected gross margin to the low 60% range, which reflects impacts from foreign exchange on revenue, unfavorable product mix and timing of manufacturing costs. We're in the midst of our budget planning process for 2024. So while we aren't providing 2024 gross margin guidance today, we can say directionally That the factors that have impacted gross margin in 2023, especially in the back half, will be factors for us in 2024 as well. For example, inflationary pressures will likely persist at the COGS line. Also, the Fed dialogue around higher for longer as regards Its influence over short term interest rates in the U. Speaker 300:32:23S. Suggests that the strong dollar is likely to continue to be a headwind given our significant ex U. S. Revenue exposure. For operating expenses, our ranges for SG and A and R and D as a percentage of sales are consistent with what we laid out last quarter for our Bright spots in the 3rd quarter performance included the continued steady performance of Established Brands, our largest revenue segment Within Women's Health, the strong performance of JADA and the launch of Xatiatto. Speaker 300:33:01The 2023 guidance revision was necessary in light of the Macro issues around economic and policy conditions in China and FX translation as well as the slow market formation for Humira biosimilars. Even with this, we believe Organon will post constant currency revenue growth in the low single digits. And on a reported basis, We're likely to post revenue growth for 2023 that exceeds the revenue growth rate of last year. With that, We can now turn the call over to Q and A. Operator00:33:47We'll pause for just a moment to compile any questions. Our first question comes from the line of Navane Thi with BNP Paribas. Please go ahead. Speaker 400:34:12Hi, good morning. I have three questions. Can you hear me okay? Speaker 200:34:20Yes, we can. Speaker 400:34:21Okay, great. Yes, on the could you clarify an external Change in the go to market model and what drove the change and will it smooth the quarterly cadence of Next plan on revenues. And then on Fertility, have you seen biosimilar competition pressure intensifying? And also curious about what level of discounts did Organon provide when onboarding accounts in Q3? And then just one overall, if you do still expect a long term high single digit, low double digit growth with the current women's health portfolio. Speaker 400:35:03Thank you. Speaker 200:35:06Thanks, Navane. Good to hear your voice and I'll try to address The three questions you had. First question on Nexplanon. So we it was historical that many years pre spin that the increase in price Always happens sometime in Q4. So you'd see this very lumpy buy in in the 3rd and 4th quarter, Taking advantage of the eventual price increase, price protection. Speaker 200:35:32And so, you'd end up having this very difficult Seesawing type of thing in the Q1 of every year. In addition to that, physicians and systems usually just kind of get online in terms of updating their reimbursement schedules in the Q1 of every given New Year. And so there was a point in time there where physicians actually were Challenge, let's call it stressed in terms of the difference in price versus the reimbursement schedules. So by changing Into being able to take price in the Q1, we do two things. We align with the rest of the Lark industry in terms of when they take price. Speaker 200:36:12We align with when The schedules of reimbursement actually hit with physicians at the state level. And finally, We end up taking away some of this lumpiness and get more of a smoother, more predictable forecasting trends for you all and for us as well To be able to point to. So I think we wanted to take away some of this unpredictability and the volatility Of the buy in and buy out phenomenon that we talked to, we want to be able to speak more in terms of the opportunities that exist just to look at any given year. That's essentially why we took the change in the go to market model for Nexplanon, and we believe it will have an impact, at the very least of which it will smooth things out for us. In terms of your second question around the biosimilar penetration in the U. Speaker 200:37:04S, we really haven't seen any additional biosimilar penetration. As a matter of fact, What we do see is clearly more of a movement of patients moving over to the reimbursed segment Just because of essentially company sponsored benefits that are uptake in terms of the fertility sector. And so with that, you're really kind of trading off price for volume and we've just we're not we can't announce it right now, but ultimately what we've been able to do is secure a very large When in that reimbursement sector, we'll probably be talking more about it obviously in our next earnings call. And so you'll see some buy in In the Q4 for inventory purposes. But that is essentially what's happening is essentially we're getting more and more opportunities To really be on some of these plans in regards to kind of the PBM driven process with the reimbursed market segment. Speaker 200:37:57And finally, yes, our long term goal really is to see continued growth in our women's health portfolio. We see fertility, it will be high single digit growth this year. It will likely be kind of following the same trends of next year. And we assume that Nexmon will have a very, very good year next year in terms of the ability to kind of course correct with regards to the go to market model And to be able to take price in next year in the beginning of next year for Nexmo. And finally, the issue of Regarding the ex U. Speaker 200:38:30S. Business, we've got supply kind of opening up so that we can meet more demand outside of the U. S, especially in In America, in Asia Pacific and in the African regions, because the supply, actually demand has been very robust. And so that gives us a lot of confidence in the future growth opportunities for our Women's Health business and not to mention Jada, Now we're reporting it out. It's doing extremely well. Speaker 200:38:55And we'll be launching Xociado as we speak right now. So that will continue to be a contributor in the future. Speaker 400:39:03Thank you. Operator00:39:07Our next question comes from the line of Umer Raffat with Evercore. Please go ahead. Speaker 500:39:15Hi. This is Zheng Zheng on for Umer. Thanks for taking our questions. Just want to ask you about your China business. Previously, it was estimated that 70% to 80% of business will have gone through the VPP by end of this year. Speaker 500:39:27So with some of the new dynamics you just described, how should we think about the China business going into 2024, especially in the first half of the year? And also how much impact have you seen from the government review campaign happen in the healthcare sector this year in China? Thank you. Speaker 200:39:44Thanks for the question. So China is obviously our 2nd largest market in Organon, very important market. We've had a long history in China. It continues to be a very important market for us To focus on the first question in regards to the VBP impact, by the end of this year, probably 3 quarters, 75% Of our business, we'll have gone through the Established Brands business, we'll have gone through the volume based procurement process, which basically means now our Focus and our strategy to move the business over to the retail sector in all the various forms of the retail sector, whether it's e commerce, whether it's actually Folks going into the pharmacies, into the retail sector is really starting to take hold. And we continue to see an opportunity to grow our business in many different sectors in the retail sector, whether it's e commerce, whether it's pharmacy dispensing. Speaker 200:40:33And we're working with all the top pharmacy chains in China and we've got good ongoing programs going with that as well. In regards to the policy framework that you talk about in your second question, yes, I believe if you are a company That has what I would consider concentration risk, too much business in the public sector and the volume based procurement process that is exposed, You will have more problems, but we actually no single product of ours represent more than 16% of our overall business. And we've shifted essentially most of that business to the retail sector, so out of the control of that. So it has been disruptive, there's no doubt, For the summer period of time, we're coming out of that as we speak right now. We feel we're in a very good position. Speaker 200:41:23We're seeing growth in the 4th quarter. We've increased access in the retail sector and we feel that next year will be a healthy year for us in China, definitely overcoming some of the issues that we saw this year and I feel very strongly about that. Speaker 500:41:38Thank you. Operator00:41:41Our next question comes from the line of David Amsellem with Piper Sandler. Please go ahead. Speaker 600:41:49Thanks. Just 2 for me. Broadly speaking, just given the headwinds you cited, Are there any initiatives that you're considering to try to boost EBITDA margins as you think about 2024 And longer term, that's number 1. Number 2 is thinking broadly about Biosimilars, what's the role of that segment in the organization? And is that something you might look To monetize in some way, either as a way to pivot to acquisition of brand assets or to address The debt balance, how do you think about that? Speaker 600:42:31Thank you. Speaker 300:42:34Thanks for the question, David. On the first part, I'll take that one. So, we are and have been managing the business pretty tightly from a cost perspective. Most of the increases that you've seen in our reported results, whether it's in the SG and A line or the R and D line have been for revenue producing activities in the future so that we can sustain our long term revenue growth rate. That said, As regards what you might refer to as infrastructure costs, administrative costs, etcetera, we are going after those hard to manage those as tightly as we can. Speaker 300:43:13And so just rest assured that we're really examining the cost structure hard to make sure that we're Differentiating from revenue producing costs that represent investments in the future, and any costs related to running the business From an administrative perspective, we are clamping down on those. Speaker 200:43:34And David, in regards to your second question regarding biosimilars, I've always Maintain that biosimilars is really an opportunistic opportunity for us in the short to medium term. I look through, I guess, the end of the decade when you have, say, for example, IOs coming off a patent, there's going to be still a very robust market there. HEDLIMA, our HUMIRA biosimilar is definitely slower than we had anticipated. But when you start to think about kind of our share of total prescriptions, we're 3 times greater than our nearest competitor that launched in the July timeframe. So to me, it is a question, more a question of when, not if, This market will start to open up. Speaker 200:44:17You're talking about the fact that a third of the patients currently today are spending about $1,000 out of their pocket every month I truly believe that over time that market will start to open up on its own and it will be something where we are Talking about more of a linearity to our Headlima business going forward as opposed to that kind of quick peek and then on the other side coming straight down. So It is something that we believe in, the biosimilar franchise. It's very optimistic for us and we'll continue to treat it as so because remember the return on invested Capital is very good. We don't spend a lot of money in regards to our biosimilar franchise in regards to boots on the ground or Any other type of resources. So it is very it's a very healthy return on that. Speaker 200:45:15So we feel good about it for the time being. Speaker 600:45:20Thank you. Operator00:45:23Our next question comes from the line of Jason Gerberry with Bank of America. Please go ahead. Speaker 700:45:31Hey, guys. This is Bhavan Patel on for Jason Gerberry. Two questions from us. The first is on free cash flow. It seems like the lower $700,000,000 to $800,000,000 free cash flow target from $1,000,000,000 previously is mainly due to net working capital use as well as lower EBITDA outlook. Speaker 700:45:49So how likely is this net working capital use impact Carryover into next year, do you think that we should start thinking about $700,000,000 to $800,000,000 of free cash flow as an annual Benchmark or do you see it possibly getting back to $1,000,000,000 annually next year? And then the second is on capital allocation. I noticed these plans for further debt pay down in 2024. So can you frame any sort of leverage ratio target or at least how you may balance the debt pay down with business development and paying dividend? Thank you. Speaker 300:46:27Okay. So we'll take the free cash flow question first. We started the year With an anticipation of in round numbers about $1,000,000,000 of free cash flow, we have had to take that back Given developments this year, as we noted related to lower EBITDA as well as The investment in net working capital, now that the latter is temporary, okay, that will come back out of the business. We will be fully through the implementation of our global ERP system in the Q2 of next year. So working capital should work its way Back into our bank accounts as cash, sort of more or less ratably over that timeframe. Speaker 300:47:20And so we do see that the business should return to a higher level of free cash flow generation next year and when you combine that with the fact that we expect to see lower one time costs from the separation next year, We're actually quite optimistic about what next year's free cash flow number will look like and when we guide to that in February. In terms of capital allocation, we've been Since the spin off, trying to achieve a balance of capital allocation between investments and growth for the future and balancing that against the near term and certain benefits of leverage reduction. That equation has been tilted a little bit more, given where interest rates have gone, The near term benefits of debt reduction look more attractive. So as we've said in the past a few times, it raises the bar on the type of business development and M and A transactions that we would execute. And that's one of the reasons why you've seen a relatively speaking lower level of activity in BD in We continue to believe that the business The cash flow profile that the business exhibits supports a dividend Certainly, at the level that we have, there's no plans to change that in the near term. Speaker 500:48:50Thank you. Operator00:48:53Our next question comes from the line of Chris Shibutani with Goldman Sachs. Please go ahead. Speaker 500:49:01Hi. This is Roger on for Chris. Just one quick question from our end. So just given the updated statements Can you comment on how you view this change and whether this acts as a tailwind or headwind for the uptake of HADLIMA? Thanks. Speaker 200:49:22Yes. So that's a draft statement right now. It's in draft form. It's not necessarily going out in terms of what people need to do right now, but I think it's eventually going to take hold. What I do believe is we've already made the investment in interchangeability. Speaker 200:49:37We the data has already come out very strong with our partners at Samsung Bioepis. We believe that we'll be able to launch our interchangeability indication probably sometime in Q2, end of Q2, beginning of Q3 of next year. It will definitely, I think, help us in terms of being a tailwind. What we're seeing playing out in the market today is the fact that interchangeability, especially at At the pharmacy level, we'll be able to have an easier switch for patients when they get to the pharmacy. They'll understand that do they want to, for example, pay $1,000 A month for as a copay or do they want to pay $100 or whatever it is, it's going to be in that particular plan. Speaker 200:50:18And so having that ability to have the interchange designation, I think, will help to guide pharmacists to be able to more actively switch from Humira To the biosimilar specifically. And if they switch, obviously, we have a commanding market share right now in terms of total prescriptions. We'll be able to get a lot of share of that. So it is a tailwind. I believe for us, for whoever has The interchangeability designation, I think there's only about maybe a handful, 3 or 4 actually that will have the interchangeability designation as opposed To others that haven't initiated the studies. Speaker 200:50:55So that's I think that's where it is because it's in draft form right now and I think people are going to want to see it And see that you actually have it and we'll have it end of Q2, beginning of Q3 next year. Speaker 500:51:08Great. Thank you. Operator00:51:12Our next question comes from the line of Balaji Prasad with Barclays. Please go ahead. Speaker 800:51:18Hi, everyone. This is Mikaela on for Balaji. Thanks for taking our questions. Just 2 from us. I guess, can you talk a bit more about Haslima ramp into 2024? Speaker 800:51:28And I guess elaborate on just some of the key factors impacting it? And on women's health, will you be able to reverse the weakness seen? And I guess Any further comments on what will be needed here? Thank you. Speaker 200:51:40Yes. For Headlima, the ramp up 2024 will be I mean what we see right now is the fact that what AbbVie has been able to do is essentially use their bundling power To essentially exclude, especially in the TBM world, but remember about 40% of the lives covered right now, what we would call WACC sensitive or what we call low net cost sensitive. It's just going to be some time until we're able to get those Plans to start opening up. There's a time lag between kind of the discounts you lose on the AbbVie business as well as kind of compared to the Benefit you gain from the discounts that you get going with biosimilar, we'll definitely see better business next year. But At the same token, we do see that this is another market formation year in 2024 and then the breakthrough, I believe, will come in 2025 when The floodgates will start to open up slowly and give us an opportunity. Speaker 200:52:35That's why I see Hadlima more of a longer tail business and continued growth Double digit year over year, which will help us in the outer years, there's no doubt about it. In regards to women's health question, Yes, we found some issues this particular quarter, but it doesn't change the overall trajectory of our Women's Health business. Let's remember that In Q3 of 2022, there was 18% growth in the U. S. For Nexplanon. Speaker 200:53:05That was because The previous year there was some COVID issues. So 2023 in this quarter is really a function of a few things, Lapping a very, very strong quarter of last year. And second, the fact that the go to market model has changed in terms of taking price. Right now, people would start to kind of build their inventories in order to take advantage of what was the upcoming price change. Now that's not happening, so that's what you're lapping. Speaker 200:53:31And then ultimately, you'll see that kind of come to fruition in the Q1 of next year Where people will start to take inventory at that point of time. Speaker 400:53:43Thank you. Speaker 200:53:45Certainly. Operator00:53:47There are no further questions at this time. I would now like to turn the call over to Kevin Alley for closing remarks. Speaker 200:53:56Thank you. It's been an opportunity For us to kind of show what we've been able to accomplish a lot in a very short period of time as a standalone company, we're just a little bit over 2.5 years old and We've got a very talented team dedicated to continuing the growth of Organon's business. We look forward to the future. There has been some headwinds in this quarter, but we see them as more transient. China is starting to grow again in Q4. Speaker 200:54:25So that overhang is starting to lift and we see China's growth opportunities as solid for next year. We've taken some changes in regards to our go to market Next one on and that will continue to show progress for next year as well. And we see opportunities for Hadlima and it is not a question of if, it's a question of when It starts to open up and ultimately drive more incremental growth for us as a company. So we feel we're in a good position to continue our work and continue our focus And we take the opportunity to look forward to speaking to you on the next earnings call. Thank you very much. Operator00:55:01I would like to thank our speakers for today's presentation and thank you all for joining us. This now concludes today's call. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallOrganon & Co. Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Organon & Co. Earnings HeadlinesOrganon (OGN) Receives a Sell from Bank of America SecuritiesApril 22, 2025 | markets.businessinsider.comOrganon Appoints Ramona A. Sequeira to the Company’s Board of DirectorsApril 15, 2025 | finance.yahoo.comTrump purposefully forcing markets to crash…Whether you agree with the plan or not doesn’t matter. It’s happening. The only question is – are you ready for it?April 26, 2025 | Porter & Company (Ad)Organon Appoints Ramona A. Sequeira to the Company's Board of DirectorsApril 15, 2025 | businesswire.comOrganon To Report First Quarter 2025 Results and Host Conference Call on May 1, 2025April 15, 2025 | businesswire.comOrganon price target lowered to $15 from $16 at Morgan StanleyApril 9, 2025 | markets.businessinsider.comSee More Organon & Co. Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Organon & Co.? 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There are 9 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by. At this time, I'd like to welcome everyone to the Organon Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer As a reminder, this call is being recorded. Thank you. Operator00:00:34I would now like to turn the call over to Jennifer Hallchak, Vice President, Investor Relations. Please begin your conference. Speaker 100:00:53Thank you, operator, and good morning, everyone. Thank you for joining Organon's Q3 2023 earnings call. With me today are Kevin Ali, Organon's Chief Executive Officer, who will cover strategy and operational highlights and Matt Walsh, our Chief Financial Officer, will review performance and guidance. Doctor. Sandra Milligan, Organon's Head of R and D will also be joining us for the Q and A portion of this call. Speaker 100:01:17Today, we will be referencing a presentation that will be visible during this call for those of you under the webcast. The presentation will also be available following this Call on the Events and Presentations section of our Organon Investor Relations website at www.organon.com. Before we begin, I would like to remind listeners that certain information discussed by management during this conference call will include forward looking statements. Actual results could differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our 10 ks and subsequent periodic filings. In addition, we will discuss certain non GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. Speaker 100:02:11A reconciliation of these non GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our CEO, Kevin Ollie. Speaker 200:02:23Good morning, everyone, and thank you, Jen. Welcome to today's call, where we'll talk about our Q3 2023 results. In the Q3, we navigated some external factors impacting the business. The strength of the U. S. Speaker 200:02:37Dollar persists. We are navigating a challenging economic and policy environment in China. And though we have said from the very beginning that we expected the biosimilars market for HUMIRA to be a slow formation, it has been slower than we thought. Still, in the Q3, we delivered product sales that grew 1% At constant currency, that represents our 8th consecutive quarter of product growth. Total revenue, which includes lower margin product sales to Merck, was down 1% at constant currency compared with the prior year. Speaker 200:03:12In the Q3, ex FX, Our women's health was down 7%, our biosimilars franchise grew 10%, and the established branch franchise, which represents nearly 2 thirds of our business, Grew 3% again demonstrating its continued stability. Adjusted EBITDA was $447,000,000 representing a 29.4% margin and adjusted diluted EPS was $0.87 With these results in mind, We are lowering our revenue guidance by $150,000,000 at the midpoint to a range of $6,150,000,000 To $6,250,000,000 about $100,000,000 of this is from FX rates that have worsened since we last guided in August. The remaining impact primarily reflects the operational factors I just described, plus changes we are making to our go to market model for Nexplanon. We are also revising our range on our adjusted EBITDA margin to 30.5 percent to 31.5 percent to reflect the lower gross margin stemming from the impacts of foreign exchange on revenue, unfavorable product mix and the timing of manufacturing costs. Now let's start by reviewing revenue beginning with Women's Health. Speaker 200:04:33The Women's Health franchise was down 7% on a constant currency basis in the 3rd quarter, primarily driven by NuvaRing, which went LOE in 2018 and now had 5 generics in the market. The fertility business is flat year to date, but we anticipate a very strong 4th quarter driven by identifiable market tailwinds in China as well as the onboarding of a large new customer win in the U. S, strong finish in the 4th quarter underpins Our expectation that the fertility business will deliver high single digit revenue growth for the full year on a constant currency basis. In China, we are seeing IVF cycles pick up after a slower third quarter stemming from the Chinese government's ongoing review of healthcare This is a transient issue impacting the entire industry. The Q4 of 2023 will also benefit from an easier year over year compare as the Q4 of 2022 was impacted by COVID. Speaker 200:05:43Year to date, the fertility business in China has been a growth engine, up 15% FX. We are doing very well in that important market and we have been gaining market In the U. S, the fertility market is growing and demand is very strong. Strategically, we are working on an evolution of our has increased from 30% to 40%. To compete in the reimbursed market, we have traded price for volume. Speaker 200:06:21We are having success And we're excited about some of the significant accounts we have recently secured that will start to benefit the business in the near term. In fact, a recent win in the reimbursed book of business represents our largest customer win since becoming an independent company. Inventory build from this customer will help to drive what we expect to be a strong Q4 for fertility in the U. S. Particularly encouraging is that we as we head into 2024, we expect Organon Fertility products will be the preferred brands And a significant percentage of covered lives in the U. Speaker 200:06:58S. Let's now turn to Nexplanon, which declined 3% ex FX In the quarter and is up 2% year to date on a constant currency basis, we expect a robust 4th quarter Strategic decisions to better position Nexplanon in the U. S. And to accelerate growth globally. The initiatives Undertaken will position Nexplanon for strong growth in 2024 and we expect to reach $1,000,000,000 run rate in 2025. Speaker 200:07:37First, we have made some changes to our U. S. Go to market model. We will not take effective price in NexVoln in the U. S. Speaker 200:07:44In 2023. Our future U. S. Pricing increases will now be aligned with when health plans update their pricing and reimbursement schedules. This timing update will make a meaningful difference to the value physicians see from carrying and implanting Nexplanon. Speaker 200:08:00Additionally, We see a healthy uptick in customer purchases ahead of when a new price increase goes into effect. So by postponing our Also as we have signaled in the last couple of quarters, our next one on mix in the U. S. Has been skewing more heavily towards higher discounted channels. We are adapting to this industry wide dynamic by removing voluntary discounts in these federal programs, which we believe will benefit the 4th quarter and going forward. Speaker 200:08:36Secondly, we limited our participation in the annual Mexico tender on the basis of price. That represents about $20,000,000 of negative impact to Nexplanon revenue in 2023. Lapping this impact will be a tailwind to Nexplanon's results next year. And thirdly, overall demand outside the U. S. Speaker 200:08:57Has been strong, Asia and in Africa. In fact, so strong that we've invested in expanding our Nexplanon supply capacity to satisfy these fast growing international markets. We have visibility to approximately $20,000,000 of throughput related to that demand that we expect to be realized in 2024. So I've talked about 3 factors that will drive Nexplanon growth next year, which together represents $60,000,000 or about 7 points of growth that we have High visibility into for next year. Turning to other women's health products, let's talk about JADA, our device for postpartum hemorrhage. Speaker 200:09:37This is the first time we're publicly breaking out revenue for JADA. And so you'll see that year to date JADA has generated $31,000,000 More than double the revenue for the same period last year, JADA is now available in over 85% of the largest birthing hospitals in the U. S. And more than 36,000 mothers have been treated with JADA since launch. Given our progress in making JADA available in the majority of Hospitals in the U. Speaker 200:10:04S, our focus will now shift to supporting hospitals and users in the incorporation of JADA into their standard PPH readiness and response protocols. We believe JADA can achieve A peak of up to $150,000,000 in the U. S. And more than $250,000,000 peak when layering in the potential sales outside the U. S. Speaker 200:10:28Globally, there are over 100,000,000 births annually and less than 4,000,000 of those are in the U. S. JADA is a great fit for our global footprint. And finally, in October, we made our first U. S. Speaker 200:10:40Shipment of Xatiatto, an FDA approved medication for the treatment of bacterial vaginosis in patients 12 years of age and older developed by our collaborator Dare Bioscience. Our go to market strategy leverages the knowledge and experience of the Nexplanon commercial team. Our skilled market access team continues to meet with customers to review Xociado and obtain competitive managed care formulary status in the bacterial vaginosis marketplace. Let's move now to our biosimilars business, which grew 10% ex FX in the 3rd quarter and 15% year to date. Understandably, we get the most investor questions on the recent launch of HADLIMA in the U. Speaker 200:11:23S, so let's focus the discussion there. At an 85% discount, we priced HADLIMA to enable expanded access and to bring The economic benefits of biosimilars directly to the patient. We've emphasized that's where we believe we can offer the highest value to patients. We have focused our commercial efforts on payers who want to bring lower net costs to patients. We estimate that together those plans represent about 40% of the covered lives in the U. Speaker 200:11:53S. While not as rapidly as we may have hoped for, we're having success. Among the July cohorts of entrants, we're out prescribing our next closest competitor by a factor of over 3 times. We're winning in both the commercial and managed Medicaid space across the competitive set and we're rapidly closing in on the gap on Amgen's AmgenVita Despite their 6 month lead in the market, consistent with comments we made around HADLIMA's launch, There is a market need for a simple single price strategy and we believe that product attributes will be a key to uptake. We're well positioned with a product that has high concentration citrate free formulation as well as the low concentration formulation, a user friendly pen Backed by the Arthritis Foundation, a wealth of real world evidence from over 20 studies and interchangeability expected by mid-twenty 24. Speaker 200:12:53We view the slower market formation for biosimilars as a clear missed opportunity to pass on savings to patients. Right now about a third of patients on Humira pay at least $1,000 a month. That is more than they would pay for HADLIMA out of pocket without insurance coverage. We believe it is not a matter of if, but when this market starts to meaningfully form. Our very intentional focus on the low cost segment of the market together with our product profile could very well help the market convert much faster. Speaker 200:13:28Rounding out the top line discussion, let's move to Established Brands. Year to date, the Established Brands franchise has grown 1% ex FX. Over the past quarters, we've highlighted some fundamentals of our established branch strategy, which explains why the franchise has been performing ahead of external expectations Since then, in the Q1, we talked about manufacturing optimization for Nasonex and Atazette to meet increasing demand, resulting from heightened promotional activity. Last quarter, we talked about adapting our commercial model to compensate for payer pressure and to mitigate pricing declines in select markets through our policy work. What bears repeating this quarter is the product and geographic diversity of the portfolio And the way we have been managing these assets has led to very stable results. Speaker 200:14:19During any given quarter, we are navigating and capitalizing on geographic competitive complexities that can vary widely across our 5 geographic regions and 49 products. The Stable results in Established Brands we have delivered since spin have been a testament to the diversity of the portfolio as well as the solid execution by the team. Now let's turn to Slide 9, where we can take a look at revenue by geography. Let's focus on China because that is the region that's currently moving most dynamically this quarter. As you probably understand, the Chinese economy has had a slower than expected recovery post COVID. Speaker 200:15:00The general economic slowdown is impacting Chinese consumers, which for our business had read through to the retail business. We've had a long operating history in China and our experience in navigating this dynamic market. We've implemented initiatives that help us reach the consumer more directly, for example, through e commerce. In addition, in recent weeks, our traditional retail business that is through pharmacies has also started to improve. The other macro issue of play in China is that for the first time in recent history, the healthcare budget in China is in a deficit. Speaker 200:15:36The authorities are seeking options to offset this decline, which includes stricter enforcement of the volume based procurement rules and investigations into prescribing patterns at the hospital level. Our portfolio has seen a very muted impact from these particular initiatives. We have strong diversity in our China business. No product represents more than 16% of revenue in China. Also, most of our Portfolio has already been through BBP and has weathered those impacts. Speaker 200:16:05And because we have a long operating history in China, Our team is experienced and has reallocated resources to other areas less impacted by this campaign. Overall, we believe that we will see a return to a more normal level of engagement in the hospital and retail channels by the beginning of next year. In fact, we're already seeing growth in China in the 4th quarter. Since then, we have given new life to establish brands and have expanded our pipeline in both biosimilars and women's health. As we move into 2024, we will be working to reduce leverage and maximize the power of our existing portfolio. Speaker 200:16:45We will also look to bring in assets and enhance our growth profile. We are currently creating our own opportunities. We are overturning every stone to unlock value. The transient headwinds we saw in 2023 will serve as tailwinds for us next year. We believe we are well positioned to build from here and deliver mid single digit revenue growth over the medium term. Speaker 300:17:09Now let's turn the call over to Matt, who will go into our financial results in more detail. Thanks, Kevin. Beginning on Slide 10, let's walk through the drivers of our 1% decline in revenue at constant currency for the 3rd quarter. Starting with the impact of loss of exclusivity, LOE was about $10,000,000 in the 3rd quarter and The small amount that we have realized year to date has been related to generic competition for NuvaRing in the U. S. Speaker 300:17:35In the Q3, we had about a $30,000,000 volume impact from VPP in China, consistent with the 1st two quarters of the year As the impact continues to be related to last year's implementation of round 7 that included our cardiovascular product, EZETROL, which is sold as ZEDIA in some markets outside of China, as well as the July implementation of round 8 that included Remeron and Hizar. We experienced a $25,000,000 price erosion in the quarter. In prior quarters, Established Brands was the What we saw in Q3 was price pressure being driven within other franchises. Given the nature of biosimilar competition, We're seeing pricing pressure broadly across that franchise. Additionally, two issues within women's health in the U. Speaker 300:18:33S. 1st, Customer mix in Nexplanon has been skewing towards the 340B channel. And second, within fertility, we're seeing price pressure as we Competitively position ourselves to grow volume in the attractive market for reimbursed fertility services. We had about $70,000,000 of volume growth in the 3rd quarter, primarily from established brands, particularly in our Lomero region and non VBP products in China. Setting aside the slow market formation for HUMIRA biosimilars in the U. Speaker 300:19:06S, which Kevin covered in detail. Our biosimilars volume was up nicely in the U. S, Canada and Brazil due to volumes from new customers as well as greater depth of purchasing from existing customers. The bar for supply other primarily represents sales to Merck off $15,000,000 for the quarter compared to prior year. As we've discussed in the past, this revenue stream is essentially a series of Lower margin contract manufacturing arrangements that have been declining since the spin off and will continue to decline going forward. Speaker 300:19:43And finally, you can see the financial reporting headwind we had in foreign exchange translation about 65 basis points for the 3rd quarter. In August, when we last updated guidance, we raised our revenue guidance based on where spot rates were at that time. With the benefit of hindsight, late July, early August happened to be the most favorable point in the year in terms of FX spot rates versus the U. S. Dollar. Speaker 300:20:09Since then, the dollar has strengthened as much as 6% across some of our most significant currencies, which has caused us to give up Now let's turn to performance by franchise. As has been our convention, I will target my comments over the next three slides to those areas most relevant to your modeling as we think about where we will end the year. Let's start with women's health on Slide 11. As Kevin covered in some detail at the outset, Nexplanon is experiencing headwinds in 2023 that we don't expect will recur next year. The math on those headwinds, especially those in the second half indicate that it's hard to envision a scenario where Nexplanon doesn't return The strong growth in the high single digits next year. Speaker 300:21:12Demand for fertility is solid and that therapy area continues to have Strong structural tailwinds even if we have to continue to give up some price as we did in the Q3 in order to gain greater market share. In the area of new products, the JADA device or postpartum hemorrhage is now hitting a steeper part of its revenue curve Post launch, Enzaciado is now in the channel as of last month and we're looking forward to what that launch will yield in 2024. Turning to biosimilars on Slide 12, biosimilars grew 10% ex FX in the quarter and has grown 15% ex FX year to date. Renflexis grew 15% in the quarter and is on track for its 6th consecutive year of annual revenue growth in the U. S. Speaker 300:22:03Entrezant continues to operate in a competitive environment in both the U. S. And Europe. However, volume remains strong in the Lomira region, mainly in Brazil, And this is offsetting competitive pricing dynamics. With regard to Headlima, our original expectation for global Headlima sales in 2023 was that it would represent just under 1.5 percent of full year 2023 revenue. Speaker 300:22:29Given the slower market formation in the U. S. For HUMIRA biosimilars As Kevin discussed, global HUMIRA revenue mix will be significantly less than that in 2023 and in fact This is one of the key factors driving our 2023 revenue guidance revision. Turning to Slide 13, Established Brands grew 3% ex FX in the 3rd quarter and it's still in positive territory for the year at 1% growth year to date. We've talked about the durability of Established Brands. Speaker 300:22:59This year is a case in point that 3% growth ex FX was delivered Despite 3 pretty significant headwinds, 1st, VBP in China, which is currently capturing our largest product, EZETROL, in round 7 and now we have round 8 underway. 2nd, the economic slowdown and challenging policy environment in China. And 3rd, we grew despite the market action that occurred at the very beginning of the year for injectable steroid products. Given year to date performance and the outlook for the Q4, we expect established brands to deliver at least level performance year on year at constant currency. Now let's turn to Slide 14, where we show key non GAAP P and L line items and metrics for the Q3 and year to date performance. Speaker 300:23:47For reference, GAAP Financials and reconciliations to the non GAAP financial measures are included in our press release and in the appendix slides of this presentation. For gross profit, we are excluding from cost of goods sold, purchase accounting amortization and one time items related to the spin off, which can be seen in our appendix slides. Non GAAP adjusted gross margin was 62.6% compared with 67.1% in the prior year period. 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 in this quarter. Speaker 300:24:32With respect to the foreign exchange impact on cost of sales, 3rd quarter adjusted gross profit margin reflects the timing of FX recognition related to inventory purchases, which has impacted us unfavorably versus the prior year and this will continue into the Q4. Moving down the P and L. In October, we were able to reach agreement in principle on the key terms of a settlement with MicroSverix to resolve patent infringement claims for Nexplanon that predated the spin off. We reserved an amount of $80,000,000 to cover the settlement. The settlement will be paid out over 3 fiscal years, dollars 35,000,000 in 2023, dollars 25,000,000 in 20.24 and $20,000,000 in 2025. Speaker 300:25:19That total of $80,000,000 in legal reserves was the main driver in GAAP SG and A increase year over year. On a non GAAP basis, as you can see, SG and A increased 4% mainly due to higher employee related costs. Total non GAAP R and D excluding IP R and D expense increased 7% in the quarter. The increase is primarily due to continued investments into our pipeline and higher costs associated with the development of these assets. Including IP R and D, R and D expense was actually down 2% year on year. Speaker 300:25:57We had $10,000,000 of IP R and D expense in the Q3 of 2022 against no such expenses in this quarter. These factors culminate in an adjusted EBITDA margin of 29.4% in the Q3 of 2023 compared to 35.5 percent in the Q3 of last year. Non GAAP adjusted net income was $223,000,000 or $0.87 per diluted share compared with $337,000,000 or $1.32 per diluted share in 2022. The year over year decrease in net income was a result of lower adjusted EBITDA as well as higher interest expense. Turning to our net leverage ratio on Slide 15. Speaker 300:26:43As we've previously discussed, we expected upward pressure on our net leverage ratio this year with the peak expected to be in the 3rd quarter and this is played out. Next quarter, we will be lapping a low adjusted EBITDA quarter last year due to last year's market action on injectable steroids and that should drive a decline in the net leverage ratio in Q4 all else equal. Turning to Slide 16, we provide a closer look at our cash flow. For full year 2023, we expect to generate between $700,000,000 to $800,000,000 in free cash flow before one time charges. At the midpoint of the range, this is about $250,000,000 below what we expected earlier in the year And the difference is attributable to lower expected EBITDA as well as working capital use. Speaker 300:27:31On the latter, we're now deep in the implementation of our new global P system that has temporarily tied up cash and current accounts to mitigate potential disruptions to normal operations. As a reminder, in 2022, we generated just over 75% of our annual cash flow in the second half and we expect this year to follow a similar pattern. One time cash costs related to the spin off transaction are trending in line with our expectation of about $350,000,000 for the full year 2023. The single biggest component of separation costs relates to the Implementation of the global ERP system that I just referenced and we're on track to complete that in the Q2 of 2024. As a result, these one time costs associated with the spin, especially those that are related to transition services agreements as opposed to the longer tail manufacturing services agreements, should decline meaningfully next year. Speaker 300:28:30For CapEx, PP and E of 3% to 4% of revenue remains a good range for forecasting purposes as we continue to deploy that capital into our internal Turning to revenue guidance on Slide 17, we bridge our expected revenue change year on year. We have revised a number of these ranges based on how we expect LOE impact has been minimal. So far in 2023, we expect the year to finish similarly. The small amount realized was related to the impact of generics for NuvaRing. We lowered our range to $10,000,000 to $20,000,000 down from $50,000,000 to $75,000,000 as we do not anticipate a generic entrant for DULARA in the U. Speaker 300:29:21S. This year. And in addition, the impact of generic competition for AdoZet in Japan on that LOE event has been lower than anticipated this year. Turning to VBP, we now expect the annual impact to be slightly lower than what we guided to in the 2nd quarter as we're tracking better with both Ezetrol, which was in the implementation of Round 7 in November of last year, as well as the recent Round 8 implementation in July of this year, which included our Remeron and Hyzaur products. We're lowering our estimate of potential price erosion to $90,000,000 to $100,000,000 down from $100,000,000 to $150,000,000 an improvement from the bridge that we showed you last quarter. Speaker 300:30:06Here we're seeing the momentum of our Brands portfolio being able to manage price erosion better than expected across several markets. We've lowered our outlook for volume growth for the year and that underpins our revision to the revenue guidance. We lowered our range to 3.70 $400,000,000 or about 6% year on year growth at the midpoint, down from the 9% we were forecasting last quarter As a result of changes we've made to our go to market model for Nexplanon, a slower than expected uptake of Hadlima and macroeconomic and policy headwinds in China. When we reported our 2nd quarter results in August, the U. S. Speaker 300:30:47Dollar had been steadily weakening over the 1st 7 months of 2023 and we saw Favorability in our forecast if rates simply held at where spot rates were in early August. Since then, FX has retraced, We gave back all of those gains and then some. We're now raising our FX exposure to $120,000,000 to $130,000,000 representing about a 200 basis point headwind for the full year 2023 compared with the 0 to 80 basis points of headwind we expected for the full year back in August. Together, these factors result in revising top line guidance to $6,150,000,000 to $6,250,000,000 which represents growth of 1.6% to 3.3% growth on a constant currency basis. Moving to the other components of guidance on slide 18. Speaker 300:31:41We're revising our range on expected gross margin to the low 60% range, which reflects impacts from foreign exchange on revenue, unfavorable product mix and timing of manufacturing costs. We're in the midst of our budget planning process for 2024. So while we aren't providing 2024 gross margin guidance today, we can say directionally That the factors that have impacted gross margin in 2023, especially in the back half, will be factors for us in 2024 as well. For example, inflationary pressures will likely persist at the COGS line. Also, the Fed dialogue around higher for longer as regards Its influence over short term interest rates in the U. Speaker 300:32:23S. Suggests that the strong dollar is likely to continue to be a headwind given our significant ex U. S. Revenue exposure. For operating expenses, our ranges for SG and A and R and D as a percentage of sales are consistent with what we laid out last quarter for our Bright spots in the 3rd quarter performance included the continued steady performance of Established Brands, our largest revenue segment Within Women's Health, the strong performance of JADA and the launch of Xatiatto. Speaker 300:33:01The 2023 guidance revision was necessary in light of the Macro issues around economic and policy conditions in China and FX translation as well as the slow market formation for Humira biosimilars. Even with this, we believe Organon will post constant currency revenue growth in the low single digits. And on a reported basis, We're likely to post revenue growth for 2023 that exceeds the revenue growth rate of last year. With that, We can now turn the call over to Q and A. Operator00:33:47We'll pause for just a moment to compile any questions. Our first question comes from the line of Navane Thi with BNP Paribas. Please go ahead. Speaker 400:34:12Hi, good morning. I have three questions. Can you hear me okay? Speaker 200:34:20Yes, we can. Speaker 400:34:21Okay, great. Yes, on the could you clarify an external Change in the go to market model and what drove the change and will it smooth the quarterly cadence of Next plan on revenues. And then on Fertility, have you seen biosimilar competition pressure intensifying? And also curious about what level of discounts did Organon provide when onboarding accounts in Q3? And then just one overall, if you do still expect a long term high single digit, low double digit growth with the current women's health portfolio. Speaker 400:35:03Thank you. Speaker 200:35:06Thanks, Navane. Good to hear your voice and I'll try to address The three questions you had. First question on Nexplanon. So we it was historical that many years pre spin that the increase in price Always happens sometime in Q4. So you'd see this very lumpy buy in in the 3rd and 4th quarter, Taking advantage of the eventual price increase, price protection. Speaker 200:35:32And so, you'd end up having this very difficult Seesawing type of thing in the Q1 of every year. In addition to that, physicians and systems usually just kind of get online in terms of updating their reimbursement schedules in the Q1 of every given New Year. And so there was a point in time there where physicians actually were Challenge, let's call it stressed in terms of the difference in price versus the reimbursement schedules. So by changing Into being able to take price in the Q1, we do two things. We align with the rest of the Lark industry in terms of when they take price. Speaker 200:36:12We align with when The schedules of reimbursement actually hit with physicians at the state level. And finally, We end up taking away some of this lumpiness and get more of a smoother, more predictable forecasting trends for you all and for us as well To be able to point to. So I think we wanted to take away some of this unpredictability and the volatility Of the buy in and buy out phenomenon that we talked to, we want to be able to speak more in terms of the opportunities that exist just to look at any given year. That's essentially why we took the change in the go to market model for Nexplanon, and we believe it will have an impact, at the very least of which it will smooth things out for us. In terms of your second question around the biosimilar penetration in the U. Speaker 200:37:04S, we really haven't seen any additional biosimilar penetration. As a matter of fact, What we do see is clearly more of a movement of patients moving over to the reimbursed segment Just because of essentially company sponsored benefits that are uptake in terms of the fertility sector. And so with that, you're really kind of trading off price for volume and we've just we're not we can't announce it right now, but ultimately what we've been able to do is secure a very large When in that reimbursement sector, we'll probably be talking more about it obviously in our next earnings call. And so you'll see some buy in In the Q4 for inventory purposes. But that is essentially what's happening is essentially we're getting more and more opportunities To really be on some of these plans in regards to kind of the PBM driven process with the reimbursed market segment. Speaker 200:37:57And finally, yes, our long term goal really is to see continued growth in our women's health portfolio. We see fertility, it will be high single digit growth this year. It will likely be kind of following the same trends of next year. And we assume that Nexmon will have a very, very good year next year in terms of the ability to kind of course correct with regards to the go to market model And to be able to take price in next year in the beginning of next year for Nexmo. And finally, the issue of Regarding the ex U. Speaker 200:38:30S. Business, we've got supply kind of opening up so that we can meet more demand outside of the U. S, especially in In America, in Asia Pacific and in the African regions, because the supply, actually demand has been very robust. And so that gives us a lot of confidence in the future growth opportunities for our Women's Health business and not to mention Jada, Now we're reporting it out. It's doing extremely well. Speaker 200:38:55And we'll be launching Xociado as we speak right now. So that will continue to be a contributor in the future. Speaker 400:39:03Thank you. Operator00:39:07Our next question comes from the line of Umer Raffat with Evercore. Please go ahead. Speaker 500:39:15Hi. This is Zheng Zheng on for Umer. Thanks for taking our questions. Just want to ask you about your China business. Previously, it was estimated that 70% to 80% of business will have gone through the VPP by end of this year. Speaker 500:39:27So with some of the new dynamics you just described, how should we think about the China business going into 2024, especially in the first half of the year? And also how much impact have you seen from the government review campaign happen in the healthcare sector this year in China? Thank you. Speaker 200:39:44Thanks for the question. So China is obviously our 2nd largest market in Organon, very important market. We've had a long history in China. It continues to be a very important market for us To focus on the first question in regards to the VBP impact, by the end of this year, probably 3 quarters, 75% Of our business, we'll have gone through the Established Brands business, we'll have gone through the volume based procurement process, which basically means now our Focus and our strategy to move the business over to the retail sector in all the various forms of the retail sector, whether it's e commerce, whether it's actually Folks going into the pharmacies, into the retail sector is really starting to take hold. And we continue to see an opportunity to grow our business in many different sectors in the retail sector, whether it's e commerce, whether it's pharmacy dispensing. Speaker 200:40:33And we're working with all the top pharmacy chains in China and we've got good ongoing programs going with that as well. In regards to the policy framework that you talk about in your second question, yes, I believe if you are a company That has what I would consider concentration risk, too much business in the public sector and the volume based procurement process that is exposed, You will have more problems, but we actually no single product of ours represent more than 16% of our overall business. And we've shifted essentially most of that business to the retail sector, so out of the control of that. So it has been disruptive, there's no doubt, For the summer period of time, we're coming out of that as we speak right now. We feel we're in a very good position. Speaker 200:41:23We're seeing growth in the 4th quarter. We've increased access in the retail sector and we feel that next year will be a healthy year for us in China, definitely overcoming some of the issues that we saw this year and I feel very strongly about that. Speaker 500:41:38Thank you. Operator00:41:41Our next question comes from the line of David Amsellem with Piper Sandler. Please go ahead. Speaker 600:41:49Thanks. Just 2 for me. Broadly speaking, just given the headwinds you cited, Are there any initiatives that you're considering to try to boost EBITDA margins as you think about 2024 And longer term, that's number 1. Number 2 is thinking broadly about Biosimilars, what's the role of that segment in the organization? And is that something you might look To monetize in some way, either as a way to pivot to acquisition of brand assets or to address The debt balance, how do you think about that? Speaker 600:42:31Thank you. Speaker 300:42:34Thanks for the question, David. On the first part, I'll take that one. So, we are and have been managing the business pretty tightly from a cost perspective. Most of the increases that you've seen in our reported results, whether it's in the SG and A line or the R and D line have been for revenue producing activities in the future so that we can sustain our long term revenue growth rate. That said, As regards what you might refer to as infrastructure costs, administrative costs, etcetera, we are going after those hard to manage those as tightly as we can. Speaker 300:43:13And so just rest assured that we're really examining the cost structure hard to make sure that we're Differentiating from revenue producing costs that represent investments in the future, and any costs related to running the business From an administrative perspective, we are clamping down on those. Speaker 200:43:34And David, in regards to your second question regarding biosimilars, I've always Maintain that biosimilars is really an opportunistic opportunity for us in the short to medium term. I look through, I guess, the end of the decade when you have, say, for example, IOs coming off a patent, there's going to be still a very robust market there. HEDLIMA, our HUMIRA biosimilar is definitely slower than we had anticipated. But when you start to think about kind of our share of total prescriptions, we're 3 times greater than our nearest competitor that launched in the July timeframe. So to me, it is a question, more a question of when, not if, This market will start to open up. Speaker 200:44:17You're talking about the fact that a third of the patients currently today are spending about $1,000 out of their pocket every month I truly believe that over time that market will start to open up on its own and it will be something where we are Talking about more of a linearity to our Headlima business going forward as opposed to that kind of quick peek and then on the other side coming straight down. So It is something that we believe in, the biosimilar franchise. It's very optimistic for us and we'll continue to treat it as so because remember the return on invested Capital is very good. We don't spend a lot of money in regards to our biosimilar franchise in regards to boots on the ground or Any other type of resources. So it is very it's a very healthy return on that. Speaker 200:45:15So we feel good about it for the time being. Speaker 600:45:20Thank you. Operator00:45:23Our next question comes from the line of Jason Gerberry with Bank of America. Please go ahead. Speaker 700:45:31Hey, guys. This is Bhavan Patel on for Jason Gerberry. Two questions from us. The first is on free cash flow. It seems like the lower $700,000,000 to $800,000,000 free cash flow target from $1,000,000,000 previously is mainly due to net working capital use as well as lower EBITDA outlook. Speaker 700:45:49So how likely is this net working capital use impact Carryover into next year, do you think that we should start thinking about $700,000,000 to $800,000,000 of free cash flow as an annual Benchmark or do you see it possibly getting back to $1,000,000,000 annually next year? And then the second is on capital allocation. I noticed these plans for further debt pay down in 2024. So can you frame any sort of leverage ratio target or at least how you may balance the debt pay down with business development and paying dividend? Thank you. Speaker 300:46:27Okay. So we'll take the free cash flow question first. We started the year With an anticipation of in round numbers about $1,000,000,000 of free cash flow, we have had to take that back Given developments this year, as we noted related to lower EBITDA as well as The investment in net working capital, now that the latter is temporary, okay, that will come back out of the business. We will be fully through the implementation of our global ERP system in the Q2 of next year. So working capital should work its way Back into our bank accounts as cash, sort of more or less ratably over that timeframe. Speaker 300:47:20And so we do see that the business should return to a higher level of free cash flow generation next year and when you combine that with the fact that we expect to see lower one time costs from the separation next year, We're actually quite optimistic about what next year's free cash flow number will look like and when we guide to that in February. In terms of capital allocation, we've been Since the spin off, trying to achieve a balance of capital allocation between investments and growth for the future and balancing that against the near term and certain benefits of leverage reduction. That equation has been tilted a little bit more, given where interest rates have gone, The near term benefits of debt reduction look more attractive. So as we've said in the past a few times, it raises the bar on the type of business development and M and A transactions that we would execute. And that's one of the reasons why you've seen a relatively speaking lower level of activity in BD in We continue to believe that the business The cash flow profile that the business exhibits supports a dividend Certainly, at the level that we have, there's no plans to change that in the near term. Speaker 500:48:50Thank you. Operator00:48:53Our next question comes from the line of Chris Shibutani with Goldman Sachs. Please go ahead. Speaker 500:49:01Hi. This is Roger on for Chris. Just one quick question from our end. So just given the updated statements Can you comment on how you view this change and whether this acts as a tailwind or headwind for the uptake of HADLIMA? Thanks. Speaker 200:49:22Yes. So that's a draft statement right now. It's in draft form. It's not necessarily going out in terms of what people need to do right now, but I think it's eventually going to take hold. What I do believe is we've already made the investment in interchangeability. Speaker 200:49:37We the data has already come out very strong with our partners at Samsung Bioepis. We believe that we'll be able to launch our interchangeability indication probably sometime in Q2, end of Q2, beginning of Q3 of next year. It will definitely, I think, help us in terms of being a tailwind. What we're seeing playing out in the market today is the fact that interchangeability, especially at At the pharmacy level, we'll be able to have an easier switch for patients when they get to the pharmacy. They'll understand that do they want to, for example, pay $1,000 A month for as a copay or do they want to pay $100 or whatever it is, it's going to be in that particular plan. Speaker 200:50:18And so having that ability to have the interchange designation, I think, will help to guide pharmacists to be able to more actively switch from Humira To the biosimilar specifically. And if they switch, obviously, we have a commanding market share right now in terms of total prescriptions. We'll be able to get a lot of share of that. So it is a tailwind. I believe for us, for whoever has The interchangeability designation, I think there's only about maybe a handful, 3 or 4 actually that will have the interchangeability designation as opposed To others that haven't initiated the studies. Speaker 200:50:55So that's I think that's where it is because it's in draft form right now and I think people are going to want to see it And see that you actually have it and we'll have it end of Q2, beginning of Q3 next year. Speaker 500:51:08Great. Thank you. Operator00:51:12Our next question comes from the line of Balaji Prasad with Barclays. Please go ahead. Speaker 800:51:18Hi, everyone. This is Mikaela on for Balaji. Thanks for taking our questions. Just 2 from us. I guess, can you talk a bit more about Haslima ramp into 2024? Speaker 800:51:28And I guess elaborate on just some of the key factors impacting it? And on women's health, will you be able to reverse the weakness seen? And I guess Any further comments on what will be needed here? Thank you. Speaker 200:51:40Yes. For Headlima, the ramp up 2024 will be I mean what we see right now is the fact that what AbbVie has been able to do is essentially use their bundling power To essentially exclude, especially in the TBM world, but remember about 40% of the lives covered right now, what we would call WACC sensitive or what we call low net cost sensitive. It's just going to be some time until we're able to get those Plans to start opening up. There's a time lag between kind of the discounts you lose on the AbbVie business as well as kind of compared to the Benefit you gain from the discounts that you get going with biosimilar, we'll definitely see better business next year. But At the same token, we do see that this is another market formation year in 2024 and then the breakthrough, I believe, will come in 2025 when The floodgates will start to open up slowly and give us an opportunity. Speaker 200:52:35That's why I see Hadlima more of a longer tail business and continued growth Double digit year over year, which will help us in the outer years, there's no doubt about it. In regards to women's health question, Yes, we found some issues this particular quarter, but it doesn't change the overall trajectory of our Women's Health business. Let's remember that In Q3 of 2022, there was 18% growth in the U. S. For Nexplanon. Speaker 200:53:05That was because The previous year there was some COVID issues. So 2023 in this quarter is really a function of a few things, Lapping a very, very strong quarter of last year. And second, the fact that the go to market model has changed in terms of taking price. Right now, people would start to kind of build their inventories in order to take advantage of what was the upcoming price change. Now that's not happening, so that's what you're lapping. Speaker 200:53:31And then ultimately, you'll see that kind of come to fruition in the Q1 of next year Where people will start to take inventory at that point of time. Speaker 400:53:43Thank you. Speaker 200:53:45Certainly. Operator00:53:47There are no further questions at this time. I would now like to turn the call over to Kevin Alley for closing remarks. Speaker 200:53:56Thank you. It's been an opportunity For us to kind of show what we've been able to accomplish a lot in a very short period of time as a standalone company, we're just a little bit over 2.5 years old and We've got a very talented team dedicated to continuing the growth of Organon's business. We look forward to the future. There has been some headwinds in this quarter, but we see them as more transient. China is starting to grow again in Q4. Speaker 200:54:25So that overhang is starting to lift and we see China's growth opportunities as solid for next year. We've taken some changes in regards to our go to market Next one on and that will continue to show progress for next year as well. And we see opportunities for Hadlima and it is not a question of if, it's a question of when It starts to open up and ultimately drive more incremental growth for us as a company. So we feel we're in a good position to continue our work and continue our focus And we take the opportunity to look forward to speaking to you on the next earnings call. Thank you very much. Operator00:55:01I would like to thank our speakers for today's presentation and thank you all for joining us. This now concludes today's call. You may now disconnect.Read morePowered by