Matthew Walsh
Chief Financial Officer at Organon & Co.
Thank you, Juan Camilo. Beginning on Slide 11, here we bridge the 3% constant-currency full-year revenue growth year-over-year. Starting on the left, LOE was about $55 million for the year, which reflects the full-year impact of the loss of exclusivity of Adozed in Japan and the impact of the LOE in Europe, which occurred in September.
There was an approximate $15 million impact from VBP that was really contained to the first-half of the year and related to Round eight that began in the 3rd-quarter of 2023 and included Remaron and Cozar Hyzar. There was an approximate $115 million impact from price for the full-year or about 1.8%. Pricing headwinds came primarily from the September LOE of in Spain and France as well as from certain mature products in the US like, and Renflexis as well as from expected mandatory pricing revisions in Japan.
Volume growth for the year was $415 million, representing almost 7% growth across multiple drivers. Hadlima and Angality were the largest contributors to volume growth, followed by NEXPLANON and the recovery of injectable steroids following a market action in 2023. In Supply Other, here we capture the lower-margin contract manufacturing arrangements that we had with Merck, which have been declining since the spin-off as expected.
And lastly, foreign-exchange translation had an approximate $80 million impact in the year or about 130 basis-points of headwind to revenue, which reflects a strengthening US dollar versus most foreign currencies during the year.
Now let's turn to Slide 12, where we show key non-GAAP P&L line items and metrics for the full-year. For reference, GAAP financials and reconciliations to the non-GAAP financial measures are included in our press release and the slides in the appendix of this presentation. For gross profit, we are excluding from cost-of-goods-sold, purchase accounting amortization and onetime items, which can be seen in our appendix slides.
Adjusted gross margin was 61.6% for the full-year 2024 compared with 62.7% in the full-year 2023. The year-over-year decrease in adjusted gross margin reflects the impacts of unfavorable price as I discussed as well as higher inflation impacts to material and distribution costs. Excluding $81 million of IP R&D expense incurred during the year, non-GAAP operating expenses were down 2% year-over-year, reflective of our cost-containment efforts. Of the $81 million of IP R&D expense in the year, $70 million of it related to our collaboration with Shanghai Henlius for further advancement of the and portucimab biosimilar candidates and $10 million related to a preclinical milestone for Circle, a non-hormonal investigational contraceptive candidate.
For the full-year, embedded in the adjusted EBITDA figure is a $26 million transaction loss from foreign-exchange. More than half of that or $15 million was in the latter part of the 4th-quarter after our last update to earnings guidance and related to significant devaluation in unhedgeable currencies, about half of that impact coming from the Ruble. This compares favorably to full-year 2023, where we realized $43 million of losses on foreign-exchange. These factors culminated in an adjusted EBITDA margin of 30.6% for full-year 2024 or 31.8% ex-IP R&D. As Kevin mentioned, that's a little more than 0.5 point of margin expansion over full-year 2023 adjusted EBITDA margin of 31.2%, once again ex-IP R&D.
Non-GAAP adjusted net income was $1.65 million for full-year 2024, consistent with $1.61 million in-full year 2023, which is logical given that both gross profit and operating expense were essentially flat. Reported net income for full-year 2024 was $864 million or $3.33 per diluted share compared with $1.23 million or $3.99 per diluted share in 2023, and that difference is due to a prior year onetime benefit from the termination of a Swiss tax arrangement.
Turning to Slide 13, we delivered $967 million of free-cash flow before onetime costs in 2024, which met our expectation from the start of the year. In the top half of the table, the number that stands out in free-cash flow before onetime items is cash taxes, which were higher in 2024 as we expected due to the payment of certain non-US taxes as well as settlements in various jurisdictions that triggered higher cash taxes relative to 2023, which happened to be an unusually low year for cash taxes.
Looking ahead to 2025, we would expect cash taxes to be similar to those of 2024. Working down this table, we had expected about $100 million of working capital use in 2024. We ended the year a bit better attributable to active cash cycle working capital management. For the full-year, one-time spin-related costs were $160 million, which is better than the $200 million we were originally forecasting for 2024. And in 2025, we expect these spin-related costs to be essentially zero. In the $190 million of other one-time costs, about $90 million relates to the ongoing restructuring initiatives that Kevin discussed aimed at leaning out our operating expense. Another $60 million relates to the planned exits from supply arrangements with Merck that we have discussed in past quarters would be ramping-up.
These are activities that will enable Organon to redefine our appropriate sourcing strategy and move to fit-for-purpose supply chains while focusing on delivering efficiencies in terms of gross margin expansion which we expect to begin realizing starting in 2027. So while the spin-related TSA costs are going to be effectively zero in 2025, we will continue to see other one-time costs in both restructuring and manufacturing separation from Merck that together could be $325 million to $375 million in 2025. Once again, these one-time costs drive value that investors will be able to see in 2025 in the form of improved operating expense efficiency and in later years related to more cost-efficient manufacturing that is expected to drive meaningful margin expansion.
As we think about capital allocation, the priority, as Kevin mentioned, is our dividend. And in the past two years, the highest and best use of the remaining cash-flow has been opportunistic business development. In 2024, we made upfront and milestone payments totaling about $350 million. In 2025, we expect to pay a little over $200 million in commercial milestones. We've already paid about $130 million between Vitama's AD approval and Angality commercial milestones. An additional $30 billion to $70 billion would be due if milestones for HENLIAS and SJ02 are met. The achievement of these milestones means that we're realizing value for business development already signed and validates the path to low-to mid-single-digit revenue growth post 2025 that we've been saying Organon should be able to deliver.
Moving to Slide 14, we ended the year at 4.2 times net leverage ratio, up from 4 times at the end of September, primarily due to the transaction. We assumed about $280 million of Dermavant debt-like instruments, which are recorded on our balance sheet at fair-value. As we digest this acquisition, leverage could float up to the mid four times area at the halfway point this year before coming down closer to-4 times by year end when we'll be capturing more benefit from the Vitama launch. That's a strong statement about the business given that was the biggest deployment of capital that we've done as a company and we're in the middle of a launch year with Vitama and we're also working our way to the LOE.
Now turning to 2024 guidance on Slide 15. Here we highlight the items driving our 2025 revenue guidance range. Our revenue range for full-year 2025 is $6.1.25 billion to $6.3.25 billion. While we believe revenue could ultimately land anywhere in this range, if we look for a moment at the midpoint of the range, the midpoint is down just under 3% compared to 2024, which is essentially our estimate of the year-over-year impact of foreign-exchange translation.
Overall, we expect the uptake of Vitama, continued solid performance in Gality and organic growth in NEXPLANON and other products in our portfolio will help to offset the loss of in Europe. Even in this LOE year, there is a credible path to another year of constant-currency revenue growth and that is reflected at the high-end of our full-year revenue guidance. For LOE, we expect an impacted $160 million to $180 million, which is primarily driven by the LOE of in the EU. In this column, we're showing volume associated with LOE. There's also a price down component for for volume that we retain for total of about $200 million of total revenue headwind related to the LOE of in 2025.
Moving to the right, we expect the impact from VBP to be approximately $20 million to $40 million and that relates to round 11 for, which we expect to be implemented late in 2025. Our range on pricing impact for 2025 is $155 million to $185 million or approximately 2.7 percentage point headwind versus prior year, which is in-line with our longer-term expectations from price impact across our entire business, but higher than last year. That is driven by price declines associated with the LOE as well as continuing competitive pressures in the US within mature products such as DULERA, Renflexis and. For the year, we expect volume growth in the range of $380 million to $500 million, reflecting growth in the range of 6% to almost 8% over last year. Volume growth will be driven pretty equally by our strategic growth pillars, NEXPLANON, Fertility, and new products such as and Vitama.
And finally, based on our current view of FX, we expect about a $200 million impact from FX in 2025 or a 300 basis-point headwind, as I said earlier. And this is a function of about 75% of our revenue coming from outside the US. As you think about quarterly revenue cadence in 2025, we believe this will be a story of bookends. We expect the first-quarter of 2025 will be our lowest revenue quarter and we expect the 4th-quarter of 2025 will be the highest as VTAMA ramps through the year and the LOE will have its greatest impacts in the first 3/4 of the year. By order of magnitude, we could see more than $100 million swing between the first and 4th-quarter of 2025.
Turning to Slide 16, where we show all components of our earnings guidance. For full-year 2025, we expect adjusted gross margin to be in the range of 60% to 61%, about a point lower at the midpoint compared to last year, and that's a continuation of the pressure on gross margin that we saw in 2024, especially in the back-half due to price and higher manufacturing and distribution costs. On SG&A expense, we ended 2024 at 25% of revenue. That's a good barometer for 2025. On R&D, we ended 2024 at about 7% of revenue ex-IP R&D. For R&D expense in 2025, upper-single digit as a percentage of revenue is probably a good place to get your model for 2025.
Given where our revenue guide is landing, that would imply essentially flat OpEx dollars year-over-year, which is consistent with Kevin's commentary that we are continuing to improve our operating cost-efficiency. Those pieces culminate in an adjusted EBITDA guidance range of 31% to 32%. This aligns with prior commentary and remarks made today that we intend to hold a floor on adjusted EBITDA margin of 31% ex-IP R&D. If you think about quarterly phasing of profitability, we won't be getting the full run-rate benefit of the cost-savings actions until later in the year. So timing of the implementation of those savings along with the uptake of BTAMA could drive 200 basis-point delta in adjusted EBITDA margins between the first and fourth quarters of the year.
For below-the-line items, our estimate for full-year 2025 interest expense is about $510 million, which includes about $25 million related to the debt like instruments assumed in the Dermavan acquisition. Payments on a portion of those instruments are tied to Vitama sales. Exclusive of the Dermavan transaction, interest expense is down approximately $30 million in 2025 as a result of the two refinancing events completed in 2024 and lower borrowing rates on our variable-rate debt instruments.
For 2025, we estimate our non-GAAP tax-rate to be in the range of 22.5% to 24.5%. The uptick from 2024 is largely due to the impact of the 15% global minimum tax-rate required under the OECD's Pillar 2. Depreciation is a touch higher than last year at $135 million, driven by the completion of our new ERP system in 2024. To wrap-up, 2024 was a solid year for three reasons. First, we delivered revenue and EBITDA growth, both as-reported and at constant-currency.
Second, excluding IPR&D, we improved EBITDA margins year-over-year. And third, we improved the leverage ratio of the base business below 4 times going into the 4th-quarter and that gave us the balance sheet capacity to acquire Dermavan. And we now have immediate US revenue and commercial capability in dermatology with the prospect for solid growth in 2025 on the heels of the launch of VTAMA in atopic dermatitis as we have discussed.
We're going into 2025 with financial guidance that reflects the potential for a fourth year of constant-currency revenue growth and stable EBITDA margins despite Vitama launch expenses and an LOE of our second-largest product. To temper the impact of this LOE, we've identified at least $200 million of opex savings in 2025 that have a very-high probability of being achieved. And if we're successful here, we're likely to record our best operating expense efficiency metrics since the spin-off. We expect these opex savings to benefit not only 2025, but annualized to roughly $275 million, which we will realize in 2026 and thereafter.
As the quarters roll-out in 2025, we expect our sequential P&L performance to improve throughout the year, which should provide a window into the strength of the underlying business beyond the LOE impact, which we expect to see in the near-term here in 2025. With that, now let's turn the call over to questions-and-answers.
