Q4 2021 Organon & Co Earnings Call

Speaker 1: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Organized Fourth Quarter and Full Year 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to the Oregon on fourth quarter and full year 2021 earnings conference call.

All lines have been placed on mute to prevent any background noise.

Speaker 1: After the speaker's remarks, there will be a question and answer.

After the Speakers' remarks, there will be a question and answer session chassis question. During the session you will need to press star one on your telephone.

Speaker 1: To ask a question during the session, you will need to press star 1 on your telephone.

Speaker 1: As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Jennifer Hauschack, Vice President Investor Relations. Please begin your con-

As a reminder, this call is being recorded thank you I would now like to turn the call over to Jennifer <unk> Vice President of Investor Relations. Please begin your conference.

Speaker 2: Thank you, Mary. Good morning, everyone. And thank you for joining our fourth quarter and full year 2021 earnings call. With me today are Kevin Ali, Organon's Chief Executive Officer, and Matt Walsh, our Chief Financial Officer. Dr. Sandra Milligan, Organon's Head of R&D, will also be joining us today for the Q&A portion of the call.

Thank you Mary good morning, everyone and thank you for joining our fourth quarter and full year 2021 earnings call with me today are Kevin Ali, Oregon, Ons, Chief Executive Officer, and Matt Walsh, Our Chief Financial Officer Doctor Sandra Milligan organized head of R&D will also be joining us today for the Q&A portion of the call.

Speaker 2: Today we'll be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the events and presentation section of our Organon Investor Relations website at www.organon.com.

Today, we'll be referencing a presentation that will be visible during this call for those of you on our webcast. The presentation will also be available. Following this call on the events and presentations section of our Oregon on Investor Relations website at Www Dot Organon Dot com.

Speaker 2: Before we begin, I would like to caution 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 Form 10 Registration Statement and subsequent periodic filings.

We begin I would like to caution 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 companys filings with the securities and.

Exchange Commission, including our form 10 registration statement and subsequent periodic filings.

Speaker 2: 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. A 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

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. A 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.

Ali.

Speaker 3: Good morning, everyone, and thank you, Jen, and welcome to today's call where we will talk about our results for the fourth quarter and full year of 2021.

Good morning, everyone and thank you John and welcome to today's call, where we will talk about our results for the fourth quarter and full year of 2021.

Speaker 3: Let me start by saying that our team of 9,500 employees, our founders, did what we said we would do in 2021. We achieved all the financial objectives we laid out at the time of the spin and also began to build on our existing portfolio and to fulfill our vision of becoming a leader in women's health.

Let me start by saying that our team of 9500 employees. Our founders did what we said we would do in 2021, we achieved all the financial objectives, we laid out at the time of the spin and also began to build on our existing portfolio to fulfill our vision of becoming a leader in women's health.

Speaker 3: In 2021, we delivered on our financial commitment.

In 2021, we delivered on our financial commitment for.

Speaker 3: full-year revenue of $6.3 billion, and adjusted EBITDA of $2.4 billion, equating to just below 38% adjusted EBITDA margins, and are above the high end of the Titan guidance ranges we provided last November .

Full year revenue of $6 3 billion and adjusted EBITDA of $2 $4 billion equating to just below 38% adjusted EBITDA margins and are above the high end of the tightened guidance ranges we provided last November .

Importantly in 2021, our growth engines and external fertility and Biosimilars all grew double digits and we continue to expect double digit performance from all three again in 2022.

Speaker 3: And we continue to expect double-digit performance from all three again in 2022.

We exited 2021 on a very positive note in fact, the fourth quarter.

Marks the first time in our product portfolio as a whole has grown sales of our portfolio of products that is ex supply sales grew 1% in the quarter overcoming the headwind from loss of exclusivity and the impacts from the volume based procurement or GBP initiatives in China.

We're encouraged by the progress we see in several key areas first.

Speaker 3: Let's look at our established brands franchise. This is a portfolio of 49 products that includes brands with significant customer loyalty. We have said, once the impact of the most significant LOEs were behind us, that we can stabilize this business such that revenue would decline in the very low single digits, and that we would use its significant and durable cash flows to further invest in our growth.

Let's look at ourselves with brands franchise. This is a portfolio of 49 products and includes brands with significant customer loyalty. We have said once the impact of the most significant eloise were behind us that we can stabilize this business such that revenue would decline in the very low single digits.

And that we would use it significant and durable cash flows to further invest in our growth engines and that is exactly what is happening in 2021 declines in the established brands business moderated and the franchise ended the year down 2% on both nominal and constant currency basis in the <unk>.

Fourth quarter.

Speaker 3: In fact, all the therapy areas included in the established brand's portfolio grew in the fourth quarter, with the exception of cardiovascular, where the LOEs in the azetamide family are still washing through.

In fact, all the therapy areas, including the established brands portfolio grew in the fourth quarter with the exception of cardiovascular worthy Eloise instead of my family are still Washington.

Speaker 3: Going forward, we will have significantly less LOE exposure weighing on our established brand's business. But beyond that, there are several other reasons to believe in the durability of this portfolio. First, we have been successfully managing our business in China. China is an important market for us, representing about 20% of our established brand's revenue.

Going forward, we will have significantly less L O exposure weighing on our established brands business, but beyond that there are several of the reasons to believe in the durability of this portfolio.

We have been successfully managing our business in China, China is an important market for us representing about 20% of our established brands revenue V.

Speaker 3: VBP is a business reality in China and like other competitors, we must find ways to manage our business in China accordingly.

<unk> is a business reality in China like other competitors, we must find ways to manage our business in China Accordingly already about 50% of our established brand portfolio has been put through the process with an estimated 40% in 2022 and the remaining 10% in 2023 and 2020 for this.

Speaker 3: Already, about 50% of our established brands portfolio has been put through the process with an estimated 40% in 2022 and the remaining 10% in 2023 and 2024. Despite the impacts of BBP, the established brands revenue in China was down only 2% for the full year in 2021 and was up 7% in the fourth quarter at constant current.

The impact of GBP, the established brands revenue in China was down only 2% for the full year 2021, and was up 7% in the fourth quarter at constant currency.

Speaker 3: This performance is primarily due to our successful efforts of moving the business out of the hospital channel and into the retail channel, which started in earnest in 2017 and is paying dividends for us today as that channel has been growing double digits and now represents about half of our Established Brands business in China.

This performance is primarily due to our successful efforts of moving the business out of the hospital channel and into the retail channel, which started in earnest in 2017, and it's paying dividends for us today as that channel has been growing double digits and now represents about half of ourselves friends business in China.

Speaker 3: There's also strong demand for our products in the hospital channel that are currently not subject to BBP, and those products have been growing double digits as well. Across all...

There's also strong demand for our products in the hospital channel that are currently not subject to BBB and those products have been growing double digits as well.

Across all geographies, we operate in stabilization of the established brands is supported by the entrepreneurial attention. We have given this portfolio since the spin increased management focused often initiated at an individual country level has delivered growth through launches into new geographies and SEC.

Speaker 3: Stabilization of the established brands is supported by the entrepreneurial attention we have given this portfolio. Since the spin, increased management focused, often initiated at an individual country level, has delivered growth through launches into new geographies and secondary retail channels across our dermatology, respiratory, non-opioid pain, and cardiovascular portfolios. To date, we have implemented a dozen of these lifecycle management opportunities worldwide.

Dairy retail channels across our dermatology respiratory non opioid pain and cardiovascular portfolios to date, we have implemented a dozen of these lifecycle management opportunities worldwide.

Speaker 3: Another milestone in the fourth quarter was Nexplanon's performance. Nexplanon posted its highest sales in the history of the product with 226 million dollars in revenue. Now I want to caution everyone that this is not Nexplanon's new run rate. Nexplanon's growth can vary quarter to quarter. There are a few very important reasons driving

Another milestone in the fourth quarter was an excellent all its performance Nexplanon posted its highest sales in the history of the product with $226 million in revenue now I want to caution everyone that this is not next when all this new run rate next one odd growth can vary quarter.

<unk> to quarter. There are a few very important reasons driving this and I want to remind everyone. Nexplanon is not a product for chronic disease, which means we need to engage new customers and patients to drive sales rather than relying on regular script renewables.

Speaker 3: And I want to remind everyone Nexplanon is not a product for chronic disease, which means we need to engage new customers and patients to drive sales rather than relying on regular script renewals.

Speaker 3: Also, in our emerging markets where our business is largely tender-driven, volumes are dependent on government budget cycles. That said, we believe our efforts to modernize the brand with our go-to-market approaches while significantly ramping up the number of healthcare professionals trained in the insertion and removal of Nexplanon are having a positive and durable impact on physician and patient demand. Now let's talk about budget.

Also in our emerging markets, where our business is largely tender driven volumes are dependent on government budget cycles that said, we believe our efforts to modernize the brand with our go to market approaches while significantly ramping up the number of health care professionals trained in the insertion and removal of next one on are having a P.

Positive and durable impact on physician and patient demand.

Now, let's talk about Biosimilars another growth engine for the company with about half of the Biosimilar business outside of the U S subject to tenders, we will see growth rates vary quarter to quarter, but we expect biosimilars to continue to deliver double digit performance on an annual basis, we remain very well positioned.

Speaker 3: With about half of the biosimilar business outside of the U.S., subject to tenders, we will see growth rates vary quarter to quarter. But we expect biosimilars to continue to deliver double-digit performance on an annual basis. We remain very well positioned as a commercial collaborator with Samsung, and we are particularly encouraged by the planned U.S. launch of our Humira biosimilar in mid-2023, for which we will be undertaking interchangeability studies.

As a commercial collaborator with Samsung and we are particularly encouraged by the planned U S launch of our Humira Biosimilar in mid 2023 for which we will be undertaking interchange ability study, we remain committed to pursuing the sizeable biosimilar opportunity, which includes an estimated $100 billion of blockbuster biologic.

Speaker 3: We remain committed to pursuing the sizable biosimilar opportunity, which includes an estimated $100 billion of blockbuster biologics going off patent over the next decade.

<unk> going off patent over the next decade, we will evaluate these pipeline opportunities with Samsung as well as other biosimilar developers.

Speaker 3: we will evaluate these pipeline opportunities with Samsung, as well as other biosimilar developments.

Speaker 3: In addition to achieving our financial commitments, we have laid out a bold vision of becoming the global leader in women's health.

In addition to achieving our financial commitments, we have laid out a bold vision of.

Becoming the global leader in Women's Health, we plan to do this by building on our established and leading positions in contraception and fertility and expanding our scope to include some of the most underserved conditions in women's health, including maternal and Perry part of illnesses and other diseases impacting women and since the spin we have executed four.

Speaker 3: We plan to do this by building on our established and leading positions in contraception and fertility and expanding our scope to include some of the most underserved conditions in women's health, including maternal and peripartum illnesses and other diseases impacting women. And since the spin, we have executed four transactions in pursuit of that vision.

Transaction in pursuit of that vision.

Speaker 3: As we told you, you can expect our business development activity to include a mix of pipeline stage assets as well as those already commercialized. This week alone, we announced that we have reacquired the rights to Marvalon and Mersolon, both combined oral hormonal daily contraceptive pills, in the People's Republic of China, including Hong Kong and Macau, and we have entered into an agreement to acquire the rights to these products in Vietnam as well.

As we told you you can expect our business development activity to include a mix of pipeline stage assets as well as those already commercialized. This week alone we announced that we have reacquired the rights to Marvelon immersive on both combined oral hormonal daily contraceptive pills in the People's Republic of China, including Hong Kong, and Macau and we have.

<unk> entered into an agreement to acquire the rights to these products in Vietnam as well.

Speaker 3: From a commercial perspective, this was a very attractive transaction for us as Organon already owns, manufactures, and markets these products as prescription oral contraceptives in 20 other markets. Additionally, we were able to transact at a valuation that makes us immediately accretive to Organon's adjusted EBITDA profitability.

From a commercial perspective this was a very attractive transaction for us as Oregon on already owns manufactures and markets. These products as prescription oral contraceptive and 20 other markets. Additionally, we were able to transact at a valuation that makes it immediately accretive to organize adjusted EBITDA profitability.

Speaker 3: In December , we closed on our acquisition of Forendo, a clinical stage development company whose lead investigational asset 6219 is being studied for its ability to reduce endometriosis-related pain.

In December we closed on our acquisition of surrender, a clinical stage development company, whose lead investigational asset 6219 is being studied for its ability to reduce endometriosis related pain.

Speaker 3: Endometriosis is a high-priority unmet need for women globally. This is a large and underserved...

Endometriosis is a high priority unmet need for women globally. This is a large and underserved market endometriosis affects up to 170 million patients or up to 10% of all women of reproductive age currently approved therapies target the pain associated with endometriosis, but often lead to sit.

Speaker 3: Endometriosis affects up to 170 million patients or up to 10% of all women of reproductive age.

Speaker 3: Currently, approved therapies target the pain associated with endometriosis, but often lead to systemic estrogen depletion, which impacts bone mineral density and triggers menopausal.

Stomach estrogen depletion, which impacts bone mineral density and triggers menopausal symptoms such treatments are therefore unsuitable for long term use in patients.

Speaker 3: Such treatments are therefore unsuitable for long-term use in patients.

Speaker 3: Forendo has completed the preclinical and phase 1 study supporting the progression of 6.219 into phase 2. We expect phase 2 development work to start this year and to read out in 2024. Both phase 2 results will further determine the potential for a phase 3 program.

Horrendous has completed the preclinical and phase one studies supporting the progression of 6219 into phase II, We expect phase two develop and work to start this year and to read out in 2020 for those two phase II results will further determined the potential for a phase III program.

Speaker 3: And last July , we also announced the licensing of the global development, manufacture, and commercial rights to another investigational asset, EvoPipRint from Apsiva. EvoPipRint is currently being studied as a potential first-in-class innovation for the treatment of preterm labor, which impacts an estimated 15 million babies or about 11% of all babies born globally.

And last July we also announced the licensing of the global development manufacturing and commercial rights to another investigational asset Evo pit print from a fever IBO Pepper is currently being studied as a potential first in class innovation for the treatment of preterm labor, which impacts an estimated 15 million babies or about 11%.

Net of all babies born globally.

Speaker 3: This investigational agent has demonstrated biological activity in a small Phase IIa study performed in select European countries.

This investigational agent has demonstrated biological activity in a small phase Iia study performed in select European countries. Our aim is to study this agent more globally and to do so we will be investing in additional preclinical studies and technical work to enable our IND submission in the U S and continue phase II develop.

Speaker 3: Our aim is to study this agent more globally, and to do so, we will be investing in additional preclinical studies and technical work to enable IND submission in the U.S. and continue phase two development.

Speaker 3: Phase 2 is a critical development phase involving pregnant women and requires close collaboration with regulatory authorities to ensure that our studies meet the relevant safety criteria for both baby and mother.

Phase two is a critical development phase involving pregnant women and requires close collaboration with regulatory authorities to ensure that our studies meet the relevant safety criteria for both baby and mother.

Speaker 3: And our first acquisition, right after the spin, was Alydia Health and its Jada system, which is already commercialized in the US. The device is aimed at controlling abnormal postpartum bleeding or hemorrhage in one of the most common complications of birth.

And our first acquisition right. After the spin was the Lithia health and its Jada system, which is already commercialized in the U S. The device is aimed at controlling abnormal postpartum bleeding or hemorrhage and one of the most common complications at birth.

Speaker 3: To date, over 3,000 mothers have now been treated with our product. We anticipate continued growth of the brand into 2022, given our investment in the commercial infrastructure necessary to satisfy the significant unmet need and demand.

To date over 3000 mothers have now been treated with our product. We anticipate continued growth of the brand into 2022, given our investment in the commercial infrastructure necessary to satisfy the significant unmet need and demand.

Speaker 3: Overall, Oregon On is off to an exciting start. We are well positioned for a solid 2022, which Matt will speak more about as he discusses guidance. Over to you, Matt.

Overall, Oregon is off to an exciting start we are well positioned for a solid 2022, which Matt will speak more about as he discusses guidance or what are you Matt.

Speaker 4: Thank you, Kevin. As I've done in previous quarters, I'll remind you that our results prior to spinoff are presented on the carve-out basis of accounting, which is a GAP convention, and it's not intended to present results as if Organon were a stand-alone company.

Thank you Kevin as I've done in previous quarters, I'll remind you that our results prior to spin off are presented on the carve out basis of accounting, which is the GAAP convention and it is not intended to present results as if organon were a standalone company. So I want to be clear as we discuss results debt because our spin was June 2nd.

Speaker 4: So I want to be clear as we discuss results that because our spin was June 2nd, it won't be until the third quarter of 2022 that we can draw a true apples to apples comparisons to prior year results where all P&L line items represent post-spin standalone financials for Oregon.

Won't be until the third quarter of 2022 that we can draw a true apples to apples comparisons to prior year results were all P&L line items represent post spin standalone financials for organized.

Speaker 4: So until that time, revenue is where we'll have the best comparability to prior year periods and that's where we'll start the financial discussion.

So until that time revenue is where we will have the best comparability to prior year periods, and that's where it will start the financial discussion so turning to slide seven fourth quarter revenue of $1 $6 billion was down 1%, both as reported and at constant currency, we saw solid performance from our growth franchises.

Speaker 4: So turning to slide seven, fourth quarter revenue of $1.6 billion was down 1% both as reported and at constant current.

Speaker 4: We saw solid performance from our growth franchises in women's health and biosimilars, and it was offset by the decline in established brands as well as a decrease in supply.

In women's health and Biosimilars and it was offset by the decline in established brands as well as a decrease in supply sales.

Speaker 4: As Kevin mentioned, the underlying portfolio of marketed products performed well. It grew 1% in the fourth quarter, with volume and price contributing favorably and offsetting headwinds from LOE and VBP.

As Kevin mentioned, the underlying portfolio of marketed products performed well it grew 1% in the fourth quarter with volume and price contributing favorably and offsetting headwinds from L. O N V BP and on slide eight you can see this depicted graphically on the revenue bridge.

Speaker 4: And on slide eight, you can see this depicted graphically on the revenue.

Speaker 4: So in the fourth quarter, the year-over-year negative impact from LOE was approximately $50 million.

So in the fourth quarter the year over year negative impact from <unk> was approximately $50 million the impact from Ela, we moderated in the back half of the year as the erosion curves continue to flatten for Z, you're in Japan, and Nuvaring in the U S.

Speaker 4: The impact from LOE moderated in the back half of the year as the erosion curves continue to flatten for Zedya in Japan and NuvaRing in the U.S.

Speaker 4: And going forward, our LOE risk is very limited, with remaining total exposure of about $350 to $450 million over the next four years combined.

And going forward, our low risk is very limited with remaining total exposure of about 300 $350 million to $450 million over the next four years combined.

Speaker 4: Continuing to read across the waterfall chart, and as Kevin mentioned, the established brands portfolio has exposure to VBP in China. The impact to fourth quarter sales was approximately $35 million, compared with the fourth quarter of last year, and was associated with the third round of VBP. And that's the largest one so far. And that included four of Organon's products, Singular Pediatrics, ProScar, Propecia, and Arcoca.

Continuing to read across the waterfall chart and as Kevin mentioned, the established brands portfolio has exposure to BBB in China. The impact of fourth quarter sales was approximately $35 million compared with the fourth quarter of last year and was associated with the third round of V BP and that's the largest one so far and.

That included four of organized products singular pediatrics pro scar Propecia and our Cox here.

Speaker 4: We saw a COVID-19 impact to our business in the fourth quarter, and while that was a drag on our business relative to where we believe our run rate should have been, the impact was actually less than what we saw in the fourth quarter of 2020. So this ends up being a slight favorable comparison year on year.

We saw COVID-19 impact to our business in the fourth quarter and while that was a drag on our business relative to where we believe our run rates should have been the impact was actually less than what we saw in the fourth quarter of 2020. So this ends up being a slight favorable comparison year on year.

Speaker 4: Volume grew in the fourth quarter and that mostly offset LOE and VBP.

Volume grew in the fourth quarter and that mostly offset L. O N V BP impacts.

Speaker 4: Volume growth came from Nexplanon strong performance as well as continued growth in biosimilars and growth in established brands in China for those products not impacted by BBP.

Volume growth came from <unk> strong performance as well as continued growth in Biosimilars and growth and established brands in China for those products not impacted by BBT.

Speaker 4: The other bucket primarily represents supply sales to Merck and other third parties, which consists of lower margin sales of pharmaceutical products under contract manufacturing arrangements.

The other bucket primarily represents supply sales to Merck and other third parties, which consists of lower margin sales of pharmaceutical products under contract manufacturing arrangements.

Speaker 4: For the full year 2021, supply sales contributed about $80 million to revenue growth, but was down about $30 million in the fourth quarter.

For the full year 2021 supply sales contributed about $80 million to revenue growth, but was down about $30 million in the fourth quarter.

Speaker 4: full year 2022 supply sales will look much more like an extrapolation of the fourth quarter and will contribute an even smaller amount to total revenues than we saw in 2021, mostly because we expect volumes under these arrangements to decline.

Full year 2022 supply sales will look much more like an extrapolation of the fourth quarter and will contribute an even smaller amount to total revenues than we saw in 2021, mostly because we expect volumes under these arrangements to decline.

Speaker 4: And finally, foreign exchange translation added about half a percentage point of favorability for the.

And finally foreign exchange translation added about half a percentage point of favorability for the quarter.

Speaker 4: So now let's take a look at performance by franchise. We'll start with Women's Health on slide.

So now let's take a look at performance by franchise, we will start with women's health on slide nine.

Speaker 4: Our women's health business was up 6% both as reported and at constant currency in the fourth quarter. For the full year, the franchise was up 4% as reported and 2% at constant.

Our women's health business was up 6%, both as reported and a constant currency in the fourth quarter for the full year. The franchise was up 4% as reported and 2% at constant currency.

Speaker 4: Nexplanon had a remarkable fourth quarter, revenues of $226 million, up 37%.

<unk> had a remarkable fourth quarter revenues of $226 million up 37%.

Speaker 4: But for the reasons Kevin explained, Nexplanon's quarterly growth in 2022 will most likely vary quarter to quarter, primarily based on how the impacts of COVID and the timing of tenders influence the individual quarters of 2021. And this will be most prominent in the first quarter of 2022, which will be lapping a tough comparison to the prior year period when we saw some initial vaccination optimism driving physician demand in the beginning of last year.

But for the reasons Kevin explained next one on quarterly growth in 2022 will most likely vary quarter to quarter, primarily based on how the impacts of Covid and the timing of tenders influence the individual quarters of 2021 and this will be most prominent in the first quarter of 2022, which will be lapping a tough comparison to the pre.

Here year period, when we saw some initial vaccination optimism driving physician demand and the beginning of last year.

Speaker 4: For the year just completed, Nexplanon grew 12% at constant currency. We expect similar growth in 2022 with more than half of that growth expected to come from outside the United States.

For the year just completed next one on grew 12% at constant currency, we expect similar growth in 2022 with more than half of that growth expected to come from outside the United States.

Speaker 4: Fertility was flat in the quarter. The U.S. fertility business grew 10%, but that was offset by China and Europe , which had very strong fourth quarters in 2020, as fertility patients outside the U.S., and especially in Europe , returned to clinics relatively faster than U.S. patients.

Fertility was flat in the quarter. The U S fertility business grew 10%, but that was offset by China, and Europe , which had very strong fourth quarters in 2020 as fertility patients outside the U S and especially in Europe returned to clinics relatively faster than U S patients did.

Speaker 4: For the full year, the fertility portfolio grew double digits on a percentage basis.

For the full year, the fertility portfolio grew double digits on a percentage basis volume growth came from an increase in demand from new accounts as a result of increased selling efforts as well as from the macro trend of patients returning to fertility clinics for this time sensitive treatment overall, the global fertility market has very attractive.

Speaker 4: Volume growth came from an increase in demand from new accounts as a result of increased selling efforts, as well as from the macro trend of patients returning to fertility clinics for this time-sensitive treatment. Overall, the global fertility market has very attractive fundamentals, including global macro trends towards advanced maternal age, as well as an increasing number of government initiatives around the world to address future negative economic consequences of lower birth

Fundamentals, including global macro trends towards advanced maternal age as well as an increasing number of government initiatives around the world to address future negative economic consequences of lower birth rates.

Speaker 4: But together with our increased focus on this portfolio, these trends set us up nicely to expect another year of double-digit growth from fertility in 2022. Now turning to.

So together with our increased focus on this portfolio. These trends set us up nicely to expect another year of double digit growth from fertility in 2022.

Now turning to Biosimilars on slide 10.

Speaker 4: In the fourth quarter, biosimilars grew 14% of constant currency and grew 25% for the year.

In the fourth quarter Biosimilars grew 14% in constant currency and grew 25% for the year.

Speaker 4: Renflexus and Entrezan are our two largest offerings globally, and they're both offered in the U.S.

Run flexes in Entre is under our two largest offerings globally and Theyre both offered in the U S as well.

Speaker 4: Globally, Renflexus grew 29% XFX in the quarter and 36% for the year.

Globally run flexes grew 29% ex FX in the quarter and 36% for the year.

Speaker 4: The infliximab market in the U.S. itself is growing about 10% per year and biosimilar acceptance and unit growth within the market is also increasing, driven by some recent payer updates and increased physician comfort with transitioning stable patients.

The infliximab market in the U S itself is growing about 10% per year, and Biosimilar acceptance and unit growth within the market is also increasing driven by some recent payer updates and increased physician comfort with transitioning stable patients.

Speaker 4: Entrezant, which was launched in the U.S. in July of last year, was down 30% in the fourth quarter, but up 7% for the full year, XFX.

<unk>, which was launched in the U S. In July of last year was down 30% in the fourth quarter, but up 7% for the full year ex FX.

Speaker 4: Entrezant continues to have good uptake in the United States, but in the fourth quarter, growth in the U.S. was offset by a decrease in EU due to increasing competitive pressures in that region and Latin America's timing of tenders, and specifically in Brazil.

<unk> continues to have good uptake in the United States, but in the fourth quarter growth in the U S was offset by a decrease in EU.

Due to increasing competitive pressures in that region, and Latin Americas timing of tenders and specifically in Brazil.

Speaker 4: With about half of our biosimilars business outside the U.S., and also depending upon the timing of tenders, we expect some volatility quarter-to-quarter in the biosimilars franchise. But for the full year 2022, we expect that our portfolio of five biosimilar offerings will continue to deliver double-digit growth over the full fiscal year.

With about half of our Biosimilars business outside the U S and also depending upon the timing of tenders, we expect some volatility quarter to quarter in the Biosimilars franchise, but for the full year.

2022, we expect that our portfolio of five biosimilar offerings will continue to deliver double digit growth over the full fiscal year.

Speaker 4: On slide 11, you can find details for the Established Brands Portfolio for the quarter and the year, and Kevin largely covered the highlights for Established Brands, but two points I would add. First, Established Brands was down 13 percent for the year on a constant currency basis. Now, broken out by volume and price, 10 percent of the decline was volume and 3 percent was price. And if we exclude volume loss associated with LOE, that volume decline is cut in half to about 5 percent.

On Slide 11, you can find details for the established brands portfolio for the quarter and a year and Kevin largely covered the highlights for established brands, but two points I would add.

<unk> established brands was down 13% for the year on a constant currency basis now broken out by volume and price, 10% of the decline was volume and 3% was price and if we exclude volume loss associated with L. O.

That volume decline is cut in half to about 5%.

Speaker 4: As we move out of 2021 with significant LOE risk behind us, combined with the renewed investment management focus in the established brands portfolio, we believe we can significantly flatten established brands revenue CAGR to the point of being almost flat over the intermediate term, and our fourth quarter performance provides support for this view.

As we move out of 2021 with significant low risk behind us combined with the renewed investment management focus and the established brands portfolio. We believe we can significantly flattened established brands revenue CAGR to the point of being almost flat over the intermediate term and our fourth quarter performance provides support for this view.

Second point is on slide 12.

Speaker 4: About 75% of Organon's business is outside the United States, and within established brands, it's even higher, about 90% ex-U.A.

About 75% of our <unk>.

Organized business is outside the United States and within established brands, it's even higher about 90% ex U S.

Speaker 4: The LOE of Zedya in Japan influenced our Asia-Pacific performance, as did the termination of a contract for Rosaset in Korea. But to emphasize Kevin's earlier point, almost flat performance in China for the year is a win, given the pressures of VBP.

The <unk> in Japan influenced our Asia Pacific performance as did the termination of a contract for Rosa set in Korea, but to Kevin but to emphasize Kevin's earlier point almost flat performance in China for the year is a win given the pressures of BP.

Speaker 4: Now turning to our non-GAAP income statement on slide 13. This slide shows our summary income statement for Q4 and full year versus their respective prior year periods across a range of GAAP and non-GAAP P&L line items.

Now turning to our non-GAAP income statement on slide 13.

This slide shows our summary income statement for Q4 and full year versus the respective prior year periods across a range of GAAP and non-GAAP P&L line items.

Speaker 4: We already cautioned against the limited usefulness of comparing post-spin periods to pre-spin periods, so I would choose to focus attention on the full year 2021 column and on the key metrics circled in green.

We already cautioned against the limited usefulness of comparing post spin periods to pre spin period. So I would choose to focus attention on the full year of 2021 column and on the key metrics circled in green.

Speaker 4: Revenue of $6.3 billion, adjusted gross margin of 64.7%, and adjusted EBITDA margin of 37.7%.

Revenue of $6 $3 billion adjusted gross margin of 64, 7% and adjusted EBITDA margin of 37, 7%.

Speaker 4: For these key metrics, we completed 2021 positively, either in the middle or the high end of the guidance ranges we provided before the spin.

For these key metrics, we completed 2021 positively either in the middle or the high end of the guidance ranges, we provided before the spin.

Speaker 4: The point here is that we launched Organon with a very good sense of the business that we have and the business that we're trying to build, and we delivered on that in our first few quarters.

The point here is that we launched organized with a very good sense of the business that we have in the business that we're trying to build and we delivered on that in our first few quarters.

Few words on debt capitalization on slide 14.

Speaker 4: As a result of the spinoff in June , we separated from Merck with a pro-forma net leverage ratio of approximately 14%.

As a result of the spin off in June we separated from Merck with a pro forma net leverage ratio of approximately four times.

Speaker 4: One of our capital allocation priorities is to reduce this figure down below 3.5.

One of our capital allocation priorities is to reduce this figure down below three five times.

Speaker 4: We plan to do that through EBITDA growth combined with reduction of debt via voluntary prepayment.

We plan to do that through EBITDA growth combined with reduction of debt by a voluntary prepayments.

Speaker 4: And during the fourth quarter, we made a $100 million voluntary prepayment on our U.S. dollar term loan.

During the fourth quarter, we made a $100 million voluntary prepayment on our U S dollar term loan b.

Speaker 4: So with 2021 adjusted EBITDA of $2.4 billion, bank debt of $9.1 billion, and cash on the balance sheet of $737 million, that would put our net leverage ratio just above 3.5 times, which is a modest improvement over last quarter and overall solid progress towards our net leverage goal.

So with 2021, adjusted EBITDA of $2 $4 billion Bank.

Bank debt of $9 $1 billion and cash on the balance sheet of $737 million that would put our net leverage ratio just above three five times, which is a modest improvement over last quarter and overall solid progress towards our net leverage goal.

Speaker 4: Now having just mentioned capital allocation, let me reiterate Organon's capital allocation priorities.

Now, having just mentioned capital allocation, let me reiterate organized capital allocation priorities. Our first priority is servicing the dividend with a target of 20% of free cash flow the dividend strikes an appropriate balance between reinvesting for growth and delivering near term value to shareholders or.

Speaker 4: With a target of 20% of free cash flow, the dividend strikes an appropriate balance between reinvesting for growth and delivering near-term value to shareholders.

Speaker 4: Our second priority is organic growth, which would include life cycle management opportunities for existing products within our portfolio, supported by capital deployed in our manufacturing

Our second priority is organic growth, which would include lifecycle management opportunities for existing products within our portfolio supported by capital deployed in our manufacturing plants.

Speaker 4: On the latter, we expect to see annual CapEx in the range of 3 to 4 percent of revenue on an ongoing basis, excluding separation.

On the latter we expect to see annual Capex in the range of 3% to 4% of revenue on an ongoing basis, excluding separation costs.

Speaker 4: Now, because these first two priorities are not big absorbers of capital, that leaves significant self-generated cash flow for our third capital allocation priority, which is really a tie, and it's a tie between the execution of external growth plans to develop a pipeline of new product opportunities, and we're balancing that against discretionary debt reduction, just like we did in the fourth quarter.

Now because these first two priorities are not big absorbers of capital that leaves significant self generated cash flow for our third capital.

For our third capital allocation priority, which is really a tie and its a tie between the execution of external growth plans to develop a pipeline of new product opportunities and we're balancing that against discretionary debt reduction just like we did in the fourth quarter.

Speaker 4: We're committed to maintaining our BBBA2 parent rating when we'll continue to make progress towards a net debt-to-adjusted EBITDA ratio of below 3.5 times, once again balancing debt reduction with capital deployed prudently for growth through business development.

We're committed to maintaining our double BBA to parent rating, we will continue to make progress towards our net debt to adjusted EBITDA ratio of below three five times once again balancing debt reduction with capital deploy prudently for growth through business development.

Speaker 4: As I head into the 2022 guidance discussion, to set context for that, I think it'll be helpful to first review again how we landed full year 2021 relative to the guidance we had provided.

As I head into the 2022 guidance discussion to set context for that I think it'll be helpful to first review again, how we landed full year 2021 relative to the guidance we had provided.

Speaker 4: So, the full year 2021 revenue bridge on slide 15 illustrates what we've said since the spinoff that 2021 would be an inflection year and the last year for which our product portfolio would be subject to significant.

So the full year 2021 revenue bridge on slide 15 illustrates what we've said since the spin off that 2021 would be an inflection year in the last year for which our product portfolio would be subject to significant eloise you can see that in the first bar Louie was clearly a significant headwind to growth in 2021.

Speaker 4: You can see that in the first bar, that LOE was clearly a significant headwind to growth in 2021, with approximately $300 million of impact compared with 2020.

With approximately $300 million of impact compared with 2020.

Speaker 4: VBP was also substantial at approximately $170 million over last year.

<unk> was also substantial at approximately $170 million over last year.

Speaker 4: COVID remained a factor in 2021, with about $400 million of impact to the business during the year, higher than 2020 by about $20 million.

Covid remains a factor in 2021 with about $400 million of impact to the business during the year higher than 2020 by about $20 million.

Speaker 4: Also, as we expected, pricing erosion modestly offset volume.

Also as we expected pricing erosion modestly offset volume growth, but the key takeaway from this chart is that we had good visibility into the business and all of these bars fell squarely within the ranges that we had communicated.

Speaker 4: But the key takeaway from this chart is that we had good visibility into the business and all of these bars fell squarely within the ranges that we had communicated.

Speaker 4: On slide 16, we bridge 2021 revenue of $6.3 billion to our 2022 guidance range of $6.1 to $6.4 billion.

On slide 16, we bridged 2020, 2021 revenue of $6 $3 billion to our 2022 guidance range of six 1% to $6 4 billion.

Speaker 4: At first glance, 2022 revenue guidance looks very similar to 2021, but the underlying business is actually much better positioned than it was a year ago.

At first glance.

22 revenue guidance looks very similar to 2021, but the underlying business is actually much better position than it was a year ago and beginning with the first bar in 2022, we expect about $100 million impact from Eloise or a third of what it was in 2021 and this is related to nuvaring as well as the potential for a generic.

Speaker 4: Beginning with the first bar, in 2022, we expect about a $100 million impact from LOEs, or a third of what it was in 2021, and this is related to Nuvaring, as well as the potential for a generic competitor for Dallara in the U.S.

Competitor for <unk> in the U S.

Speaker 4: Volume-based procurement in China will continue to have an impact, about $100 million in 2022. And we're managing that by strategically moving exposed brands into the retail.

Volume based procurement in China will continue to have an impact of about $100 million in 2022, and we're managing that by strategically moving expose brands into the retail channel.

Speaker 4: And given the majority of our revenues outside the United States, we expect about $200 million of price erosion in 2022, and this level of price movement is aligned with historical pricing trends for the global markets that we've been selling into for many years.

And given the majority of our revenues outside the United States, We expect about $200 million of price erosion in 2022, and this level of price movement is aligned with historical pricing trends for the global markets that we've been selling into for many years.

Speaker 4: But if you look at the green bar, you see that we're expecting very solid growth in volume in 2022, between 600 million and 700 million dollars. That would more than offset the other business factors I just mentioned.

But if you look at the Green bar you see that we're expecting very solid growth in volume in 2020 to between $600 million and $700 million that would more than offset the other business factors I. Just mentioned so that means we expect volume growth to grow by about 10% and by the way, we estimate that less than 20% of that.

Speaker 4: So that means we expect volume growth to grow by about 10%. By the way, we estimate that less than 20% of that growth is coming from COVID recovery.

That growth is coming from Covid recovery the.

Speaker 4: The majority of the volume increase is coming from growth across multiple pillars.

The majority of the volume increase is coming from growth across multiple pillars nexplanon biosimilars fertility.

Speaker 4: China retail, and to a smaller extent, recent business development activity, which is primarily the Jada postpartum hemorrhage device acquired as part of a Lydia Health.

China retail and to a smaller extent recent business development activity, which is primarily the jada postpartum hemorrhage device acquired as part of our linear health.

Speaker 4: And as an aside, the incremental contribution from reacquiring the marketing rights to Marvellon and Mersolon in certain Asian countries that we just announced, that's really immaterial to our consolidated financial reporting, and especially so for 2022 since we'll only see a partial year impact.

And as an aside the incremental contribution from requiring the marketing rights to <unk> and <unk> and certain Asian countries that we just announced it's really immaterial to our consolidated financial reporting and especially so for 2022 since we will only see a partial year impact there.

Speaker 4: As we keep moving to the right, you'll see a fairly sizable headwind from foreign exchange translation of $100 to $200 million, which equates to a $200 to $300 basis point headwind to revenue.

As we keep moving to the right you'll see a fairly sizable headwind from foreign exchange translation of $100 million to $200 million, which equates to a two to 300 basis point headwind to revenue.

Speaker 4: This is largely a financial reporting dynamic. On an economic basis, we have natural hedges in place, including having the majority of our employees and all of our manufacturing plants outside the U.S., as well as a meaningful portion of our debt denominated in Europe .

This is largely a financial reporting dynamic on an economic basis, we have natural hedges in place.

Including having the majority of our employees and all of our manufacturing plants outside the U S as well as a meaningful portion of our debt denominated in euros.

Speaker 4: And these hedges help us manage our true economic currency.

These hedges help us manage our true economic currency exposure.

Speaker 4: Our guidance range of 6.1 to 6.4 billion dollars implies nominal growth of negative 3% to positive 1.5.

Our guidance range of six 1% to $6 4 billion.

Implies nominal growth of negative 3% to positive one 5%, but adjusting for FX translation, let's call. It 250 basis points FX translation headwind at the midpoint.

Speaker 4: But adjusting for FX translation, let's call it 250 basis points FX translation headwind at the midpoint.

Speaker 4: Revenue growth on a constant currency basis would be more in the range of down less than 1% to up 4%.

Revenue growth on a constant currency basis would be more in the range of down less than 1% to up 4%.

Speaker 4: And moving to the other components of guidance on slide 17, you can see 2021 actual performance side-by-side with what we expect in 2020.

Moving to the other components of guidance on Slide 17, you can see 2021 actual performance side by side with what we expect in 2022.

Speaker 4: As we move down the P&L, you'll notice consistency between the.

As we move down the P&L, you'll notice consistency between the years.

Speaker 4: Guidance for gross margin in the mid-60% area, and that's in line with what we said and delivered in 2021.

Guidance for gross margin in the mid 60% area and that's in line with what we said and delivered in 2021, where again guiding to mid twenties percentage of sales for SG&A in 2022, and I would point you more towards our second half of 2021, non-GAAP SG&A spend as a percentage of revenue since that's the time period for which we were off.

Speaker 4: We're again guiding to mid-twenties percentage of sales for SG&A in 2022. And I'd point you more towards our second half of 2021 non-GAAP SG&A spend as a percentage of revenue, since that's the time period for which we were operating as a standalone company. And it's more indicative of a go forward run.

<unk> as a Standalone company and it's more indicative of our go forward run rate.

Speaker 4: Where you will see an uptick is in R&D expense, where we're expecting mid to upper single digits as a percentage of revenue.

Where you will see an uptick is in R&D expense, where we're expecting mid to upper single digits as a percentage of revenue.

Speaker 4: We are building a pipeline of assets that will set up the company for future growth. And we need to invest to support those programs. And a key element of that investment shows up on the R&D expense.

We are building a pipeline of assets that will set up the company for future growth and we need to invest to support those programs and a key element of that investment shows up on the R&D expense line.

Speaker 4: That would bring us to a just an even a margin of 34 to 36 percent, and then you'll see that below the line items have remained very much in line with what we guided to in 2020.

That would bring us to adjusted EBITDA margin of 34% to 36% and then Youll see that below the line items have remained very much in line with what we guided to in 2021.

Speaker 4: So wrapping up the financial discussion, the business performed well during 2021, very much in line with how we thought it would. This is a durable, predictable product portfolio with solid cash.

So wrapping up the financial discussion the business performed well during 2021 very much in line with how we thought it would.

This is a durable predictable product portfolio with solid cash flow. We saw in 2021 growth in women's health and Biosimilars supported by the significant cash flow generated from established brands and going into 2022, we see these trends continuing in these franchises. The overall portfolio was significantly derisked with most.

Speaker 4: saw in 2021 growth in women's health and biosimilars, supported by the significant cash flow generated from established brands. And going into 2022, we see these trends continuing in these franchises.

Speaker 4: The overall portfolio is significantly de-risked with most LOE risk behind us.

<unk> risk behind us.

Speaker 4: And we're really just getting started in terms of maximizing the potential within this portfolio, whether it's through uncovering opportunities in currently marketed products through the lifecycle management programs that Kevin spoke of, or through strategic business development that leverages our therapeutic expertise.

We're really just getting started in terms of maximizing the potential within this portfolio, whether it's through uncovering opportunities and currently marketed products through the lifecycle management programs that Kevin spoke of.

Or through strategic business development that leverages, our therapeutic expertise and if for any reason the pace of acquisitions slows in 2022, we can always redirect surplus free cash free cash flow to accelerate debt reduction.

Speaker 4: And if for any reason the pace of acquisitions slows in 2022, we can always redirect surplus free cash flow to accelerate debt reduction. And with that.

And with that we'll now turn the call over to Q&A.

Thank you as a reminder to ask a question you will need to press star one on your telephone again to ask a question press star one on your telephone to withdraw.

Speaker 1: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. Again, to ask a question, press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A result.

A question peso pankey.

<unk> bio we compile the Q&A roster.

Speaker 1: Our first question comes from the line of Jason Joberry from Bank of America. Your line is open. Hey guys, good morning.

Our first question comes from the line of Jason <unk> from Bank of America. Your line is open.

Hey, guys. Good morning, Thanks for taking my questions.

Speaker 5: First, for Matt, I'm just curious, talking about EBITDA margins, I guess as we look out over the next several years, you've got some pipeline investment ongoing, and just curious if you see the next few years as a period where margins should continue to erode a little bit, or do you have more of a flattish margin outlook in that period before we'd expect the pipeline to start contributing? And then, if I heard correctly, just on the modeling side...

First one for Matt just curious talking about EBIT margins.

I guess as we look out over the next several years you have got some pipeline investment ongoing and just curious if you see kind of the next few years as a period.

Where margins should continue to erode a little bit or do you have more of a flattish.

Margin outlook.

In that period before we would expect the pipeline to start contributing and then if I heard correctly just on the modeling side I think youre expecting dulera generic.

Speaker 5: You're expecting a Dulara Generic, although I always kind of assumed this was probably too small of a brand for a generic to make the investment, so just curious, do you have a specific line of sight on a Dulara Generic?

Although I always kind of assume this was probably too small of a brand for a generic to make the investments. So just curious do you have a specific line of sight on a dulera generic and.

Speaker 5: And can you just clarify how much the China, Marvelon, and Mercelon contribute to 2022 guidance?

And can you just clarify how much the China Marvelon immersed salon contributes to 2022 guidance. Thanks.

Speaker 4: Okay, so I'll work backwards there.

Okay. So I'll work backwards there.

The.

Speaker 4: The most recent deal announced for Marvalon and Mercelon really adds a de minimis amount to 2022. It's within the error bars of the guidance that we would have.

The most recent deal announced for.

For Marvel on in MRSA line really adds a de minimis amount to.

2022, it's within the error bars are the guidance that we would have created.

Speaker 4: created Jason. So it's just not material. On a percentage basis, return on capital, valuation metrics, this was an outstanding deal for the company. It's just not that large. I think it's a great example of.

Jason So it's just it's just not material.

On a on a percentage basis right return on capital valuation metrics. This was an outstanding deal for the company. It's just it's just not that large I think it's a great example of.

Speaker 4: what justifies the spinoff in that there's lots of terrific opportunities that were just too small for Merck to focus on if the business stayed within Merck.

What what.

Just defies the spin off and that Theres lots of terrific opportunities that were just too small for Merck to focus on if the business stayed stayed within Merck.

Speaker 4: But this is just it's a very sensible deployment of capital. It's not large in terms of return on capital It's well in excess of our benchmarks when you look at the acquisition multiple in terms of

But this is just it's a very sensible deployment of capital it's not large in terms of return on capital well in excess of our benchmarks and when you look at the acquisition multiple in terms of.

Speaker 4: enterprise value to EBITDA, significantly below where the company trades. So it's just a sensible deal. Over time, we expect this.

Enterprise value to EBITDA significantly below where the company trades. So it's just a sensible deal over time, we expect this to be a solid contributor on a return on capital basis, but the absolute dollars are small like I said, Jason, especially so for 2022, because it's only a partial year impact.

Speaker 4: You know, to be a solid contributor on a return on capital basis, but the absolute dollars are small. Like I said, Jason, especially so for 2022, because it's only a partial year.

Speaker 4: As far as Zulaira goes, it's always challenging to try and time the entry of a generic competitor. So, we take just the sensible path of assuming a mid-year convention and a typical erosion curve for a product of that kind.

As far as Dulera goes it's always challenging to try and time the entry of a generic competitor. So we.

We take the just the sensible path of assuming a mid year convention.

And a typical erosion curve for a product of that.

That kind.

Speaker 4: You could be right in terms of estimating that the, you know, the product may not draw much generic interest, but it's hard for us to tell, and so we've been somewhat conservative as we think about Dulaire, and we're assuming a mid-year convention and, you know, typical generic erosion curves around that, and, you know, maybe we'll be surprised to the upside.

You could be right in terms of estimating that the product may not may not draw much generic interest, but it's hard for us to tell and so we've been somewhat conservative as we think about Dulera, we're assuming a mid year convention and typical generic erosion curves around that end.

Maybe we'll be surprised to the upside.

On EBITDA margin.

Speaker 4: So, you know, we have said that as we're, you know, looking to develop a pipeline that would include both near-term and longer-term products in terms of where they are in clinical development, that our R&D expense would be likely to grow. And you're seeing about two points of R&D growth in 2022 over 2021, and as those clinical programs progress and as we introduce new clinical.

So we have said that as we are looking to develop a pipeline that would include both.

In near term.

And longer term products in terms of where they are in clinical development that our R&D expense would be likely to grow and you're seeing about two points of R&D growth in 2022 over 2021 and as those clinical programs progressed and as we introduce new clinical programs.

Speaker 4: programs into the pipeline, that will continue to happen. Now, the benefit for shareholders is we, you know, we expect to be able to feather in revenue growth out beyond the 2025 timeframe in a way that will deliver sustained

Into the pipeline that will continue to happen now the benefit for shareholders is we we expect to be able to feather in revenue growth.

Out beyond that 2025 timeframe in a way that will deliver sustained.

Speaker 4: to sustain revenue CAGR performance well into the future.

Our sustained revenue CAGR performance well into the future.

Speaker 4: That said, let's talk about what some of the other balancing effects are on margins.

That said, let's talk about what some of the other balancing effects are on margins.

Speaker 4: Let's start with gross margins. We expect that product mix will be one of the bigger drivers of margin improvement over time. We think that the product mix will generally favor our higher margin products and higher margin geographies, so we believe that will be an area of potential margin upside.

Let's start with gross margins.

We expect that product mix will be one of the bigger drivers.

Of margin improvement over time, we think that the.

Product mix will generally favor our higher margin products and higher margin geographies. So we believe that will be an area of.

Potential margin upside.

Speaker 4: We launched with a good sense of what our operating costs needed to be, and on top of that, we shouldn't need to add much as we either commercialize products from the pipeline, or, for example, with the deal we just announced, Marvalon-Mercelon. There's very little incremental cost.

We launched with a good sense of what our operating costs needed to be.

And on top of that we shouldnt need to add much.

As we.

Neither commercialized products from the pipeline or for example, with the deal we just announced Marvelon MRSA lung, there's very little incremental cost.

Speaker 4: SG&A costs, basically fixed operating costs associated with a deal like this.

SG&A costs basically fixed operating costs associated with a deal like that so as volumes grow we will get operating leverage over those and that provides a pretty substantial opportunity to us for margin accretion over time, where we think we might see cost inflation and we believe that we will be.

Speaker 4: So as volumes grow, we'll get operating leverage over those, and that provides a pretty substantial opportunity to us for margin accretion over time.

Speaker 4: where we think we might see cost inflation.

Speaker 4: And we believe that we will be more or less countering that with operational excellence and productivity improvement programs.

More or less countering that with operational excellence and productivity improvement programs and that's one of the elements that's baked into our 2022 guidance for any one that's going to be asking the question. How well is the company positioned for inflation, where where do you where might you have risk we'd.

Speaker 4: one of the elements that's baked into our 2022 guidance for anyone that's going to be asking the question, how well is the company positioned for inflation? Where might you have risk?

Speaker 4: we've locked in a pretty substantial portion of our spend under annual purchasing arrangements, or it's under contracts. We're not expecting that we've got significant exposure there, but to the extent we do, we believe it will be offset by productivity and programs, either in our plants or just as we get more efficient in the separation from Merck.

Locked in a pretty substantial portion of our spend under annual purchasing arrangements or it's under contracts and we're not expecting.

That we've got significant exposure there, but to the extent, we do and we believe it will be offset by productivity improvement programs either in our plants are just as we get more efficient in the separation from Merck.

Okay. Thank you.

Speaker 1: Your next question comes from the line of Chris Schott from J.P. Morgan. Your line is open.

Your next question comes from the line of Chris Schott from J P. Morgan Your line is open.

Speaker 6: Great. Thanks so much for the questions. I guess my first one is kind of a two-parter, but I'm just trying to get some more color around the $600 million or $700 million year-over-year volume growth that's reflected in the guidance. I guess on the surface, it seems like a big number, and I'm just trying to get my hands

Great. Thanks, so much for the questions I guess my first one is kind of a two parter, but I'm just trying to get some more color around the six or $700 million year over year volume growth. That's reflected in the guidance I guess on the surface. It seems like a big number and I'm just trying to get my hands around you know what.

Speaker 6: What exactly is driving that? So how much is Nexplanon and Biosimilars, some of the growth drivers you talked about, versus how much of that?

What exactly is driving that so how much does nexplanon in biosimilars from the growth drivers you talked about versus how much of that is.

Speaker 6: is coming from the Established Product Division, so any color there would be appreciated. And maybe just kind of linked to that, as I think about the longer term Established Product Division, you're talking about almost flat sales over time.

It's coming from the established product divisions. So any color there would be appreciated and maybe just kind of linked to that as I think about the longer term established product Division you were talking about almost flat sales over time can you elaborate on the price versus volume dynamics that you need to assume to get there. So is the three ish percent price.

Speaker 6: Can you elaborate on the price versus volume dynamics that you need to assume to get there?

Speaker 6: Is the 3-ish percent price erosion that we saw in 2021 like a good run rate and that you're going to need to see pretty healthy volume just to get to flat? Or do you think over time we can get a more stable price dynamic as well as we think about the?

Erosion that we saw in 2021 like a good run rate and that you're going to need to see pretty healthy volume just to get to flat or do you think over time, we can get a more stable price dynamic as well as we think about the.

Speaker 6: you know, the components that go into that longer-term guidance. Thank you.

Yeah, the components that go into that longer term guidance. Thank you.

Speaker 4: Yeah, thanks Chris. So that that number that you just cited, that 3%, that has been our

Yeah. Thanks, Chris So that that number that you just cited that 3% that has been our recent history in terms of the average price decline that we've seen across the established brands portfolio and a number of.

Speaker 4: recent history in terms of the average price decline that we've seen across the established brands portfolio and a number Approximating that is what we have factored into 2022 guidance and if I was sitting down to do the 2023 budget with the company right now That's we would probably use a similar figure. So that's a that's a that's a good number. I think for for a price impact in established

Approximating that is what we have factored into 2022 guidance and if I was sitting down to do the 2023 budget with the company right now that we would probably use a similar figure. So that's that's a that's a good number I think for.

For a price impact and established brands.

Speaker 4: With respect to your first question on where the volume growth is coming from, I think one of the best things about this guidance and, you know, the company's internal budget as we've prepared it, is that growth is pretty evenly distributed among those pillars that I mentioned.

With respect to your first first question on where the volume growth is coming from I think one of the best things about this guidance and the Companys internal budget as we've prepared it is that growth is pretty evenly distributed among those pillars that I've mentioned.

Speaker 4: So, next one on double-digit growth, biosimilars double-digit growth, fertility double-digit growth. We're not overly dependent on any one of those items, and it's just one of the things that I think is confidence-inspiring in the forecast, is we've got a lot of pans in the fire this year to be able to deliver volume growth along the lines of the 10 percent that we're guiding to.

So next one on double digit growth biosimilars double digit growth fertility double digit growth, we're not overly dependent on any one of those items and it's just one of the things that I think is confidence inspiring.

In the.

In the forecast is we've got a lot of pans in the fire this year to be able to deliver.

Volume growth along the lines of the of the of the 10% that we've that we're guiding to.

And if I guess, a quick follow up on that so I'm sorry.

Speaker 3: No, Chris, one thing I wanted to just kind of articulate around established brand.

No Chris one thing I wanted to just kind of articulate around established brands is China.

Speaker 3: You know China is very important for us. It represents about 20% of our overall established brands globally.

China is very important for us it represents about 20% of our overall established brands globally.

Speaker 3: By the end of 2022, by the end of this year, 90% of the portfolio will have been through the volume-based procurement process. So we do see potentially, obviously, growth coming from China.

By the end of 2022 by the end of this year and 90% of the portfolio will have been through the volume based procurement process. So we do see potentially obviously growth coming from China with the established brands business given the success of our pivot to retail since 2017. So that's one of the areas, where we're going to be.

Speaker 3: with the established brands business, given the success of our pivot to retail since 2017. So that's one of the areas where we're going to be able to take volume, not necessarily price, but definitely volume growth will be very strong in China and other parts of the emerging markets. And when I start to turn my attention to Europe ...

We're able to take volume not necessarily price, but definitely volume growth will be very strong in China and other parts of the emerging markets and when I start to turn my attention to Europe , we've dealt with pricing erosion in Europe for years, it's been basically priced out. So now it's stabilized. So when you start to think about it in my introductory comments, what I said is all of the.

Speaker 3: We've dealt with pricing erosion in Europe for years. It's been basically priced out. So now it's stabilized.

Speaker 3: So when you start to think about it, in my introductory comments, what I said is all the therapeutic areas in the established brands business grew in 2021, in the year of the pandemic and all the volume procurement stuff, except.

Therapeutic areas and established brands business grew in 2021 in the year of the pandemic and all the volume based procurement stuff, except for cardiovascular where we're still washing out from the low effects in Japan. He is out of my franchise. So once that washes out when I say that youre talking about two thirds of our business.

Speaker 3: for cardiovascular where we're still washing out from the LOE effects in Japan for the azetamide franchise. So once that washes out, when I say that, you know, you're talking about two-thirds of our business, high-margin business that is essentially flat without really a lot of price and good volume growth, it really will give us the oxygen to reinvest in many of the other portfolios that are growing double-digit, as Matt mentioned.

High margin business that is essentially flat without really a lot of pricing and good volume growth. It really will give us the oxygen to reinvest in many of the other portfolios that are growing double digit as Matt mentioned.

Speaker 6: And just my follow-up with that was that on that number, I think you mentioned only about 20% or so is COVID recovery. If I then look at the remaining piece of growth, is that kind of like a reasonable assumption as we think about the longer-term model about how much volume could contribute in any given year? So let's take that 6 or 700 million less 20% is kind of like a, you know, is there anything I said usual about 22 versus a typical year in terms of volume growth?

Excellent and then just my follow up on that was that on that number I think you mentioned only about 20% or so as COVID-19 recovery. If I then look at the remaining piece of growth is that kind of like a reasonable assumption as we think about the longer term model about how much volume could contribute in any given year. So let's take that six or $700 million less 20% is kind of like.

Is there anything else unusual about 22 versus a typical year in terms of volume growth.

Speaker 4: When you go pillar by pillar, as I've described them, I don't think that there's anything unique about 2022. Nexplanon has a lot of runway for growth given its relatively small market share in the United States and around the world. Fertility has the favorable macro trends that we spoke of in terms of increasing maternal age as well as governments feel like they need to address low birth rates.

When you go when you go pillar by pillar as I've described them.

I don't think that there's anything unique about 2022 next one has a lot of runway for growth given its relatively small market share in the United States and around the world for.

Fertility has the favorable macro trends that we spoke of in terms of increasing maternal age as well as governments feel like they need to address low birth rates.

Speaker 4: And Biosimilar's business, as Kevin described in his prepared comments, is large and growing. So off the top, I would say, absent that small piece that we believe is assigned to COVID recovery, the volume growth we're seeing in 2022 should have legs to it out into future years. How many is hard to say, but for the near term, it does look repeatable.

And Biosimilars business as Kevin described in his prepared comments is large.

And growing so off the top I would say absent that small piece that we believe is assigned to COVID-19 recovery. The volume growth were seeing in 2022 should have legs to it out into future years, how many is hard to say.

But for the near term it does look repeatable.

Speaker 3: Yeah, and Chris, there's nothing specific about 2021. It is essentially, we expect the same type of volume growth going forward. It is a new normal.

Great.

Theres nothing Theres nothing specific about 2021.

It is essentially we expect the same type of volume growth going forward. It is a new normal for us.

Speaker 1: Your next question comes from the line of Greg Fraser from Tourist Security, your line is open.

Your next question comes from the line of Greg Fraser from tourists Securities. Your line is open.

Speaker 7: Good morning, and thanks for taking the questions. On the fertility business, how much market share do you have in China, and where do you hope to grow share to over the next few years? And will you need to bring in additional products to maximize your fertility business in China, or are you well-positioned with your current portfolio? And then just one other question on business development. Do you plan to remain focused on assets within reproductive health and conditions unique to women in the near term, or are you also looking at, you know, more broadly at the products for conditions that disproportionately impact women? Thank you.

Good morning, and thanks for taking the questions on the fertility business how much market share do you have in China, and where do you hope to grow share. It to you over the next few years and will you need to bring in additional products to maximize your fertility business in China are you well positioned with your current portfolio and then just one other question on business development do you plan to remain focused on.

Assets within reproductive health and conditions unique to women in the near term or are you also looking at more broadly at that price for conditions. It disproportionately impacts women. Thank you.

Speaker 3: Thanks for the question, Greg. So in regards to China, we saw some really good growth this year, 23% growth, actually, in 2021 versus 2020. And that's due to the fact that there was obviously some pent-up demand, but also we're seeing a lot of movement in China with regards to fertility, given the fact that there's a lot of news around the three child policy, and there are rumors out there that obviously the government is already starting to take notice about the fact that maybe they need to start to do things.

Thanks for the question Greg So in regards to China, we saw some really good growth this year, 23% growth actually in 2021 versus 2020.

And that's due to the fact that there was obviously some pent up demand, but also we're seeing a lot of movement in China with regards to fertility given the fact that there is some a lot of news around three child policy and there are rumors out there that obviously the government is already starting to take kind of notice about the fact that maybe they need to start to do things.

Speaker 3: to keep tourism in, you know, medical tourism inside the country, so there's a lot more investment in that area. So currently, our share in terms of China is very strong and it's growing actually very nicely. When I start to talk about...

To keep up.

Tourism in medical tourism inside the country. So there's a lot more investment in that area. So currently.

Our share in terms of China is very strong and is growing actually very nicely when I start to talk about.

Speaker 3: In China, I don't have the number exactly off the top of my head, but it's close to closing in on almost a third, in terms of a third of the business.

In China I don't have the number exactly off the top of my head, but it's close to closing in on almost a third a third in terms of the third of the business split between us and the other two.

Speaker 3: split between us and the other two manufacturers in the space. And we're adding more sales force as we speak.

The other two manufacturers in the space and we're adding more sales force as we speak to overall, China business. So we do see China as being a very major contributor if I start to look at the contribution of overall the business U S has about 40% of the business for fertility and China's about closing in on 18%. So it is it is a fast growing biz.

Speaker 3: to overall China business. So we do see China as being a very major contributor. If I start to look at the contribution of overall the business, US is about 40% of the business for fertility, and China is about closing in on 18%. So it is a fast-growing business. It's a business that we want to invest in. And when I think about business development there, as well as globally what we want to do in fertility, products, diagnostics, there's some really interesting things happening in the space.

It's a business that we want to invest and when I think about business development, there as well as globally. What we wanted to do in fertility products diagnostics, there's some really interesting things happening in the space.

Speaker 3: So we are we are busy right now speaking to various companies right now in terms of partnering up

So we are we are busy right now speaking to various companies right now in terms of partnering up.

Speaker 3: uh... and as i said to many of you before that you know we're gonna have a very balanced business development approach

And as I've said to many of you before that we're going to have a very balanced business development approach both.

Speaker 3: both stage assets in terms of development as well as commercialized products like the Marvlon-Mercelon example that we just did in China. And in regards to your last question in regards to where we do capital allocation, do we focus on specifically those conditions unique to women or do we start to expand disproportionately to women?

Stage assets in terms of development as well as commercialized products like the Marvel Marvelon MRSA lung.

The example that we just did in China and in regards to your last question in regards to where we do capital allocation do we focus on specifically those conditions unique to women or do we start to expand disproportionately to women. We're looking at all areas.

Speaker 3: uh... right now because of the focus of being able to uh... kind of look at those areas of significant on that need postpartum hemorrhage

Right now because of the focus of being able to kind of look at those areas of significant unmet need postpartum hemorrhage.

Speaker 3: preterm labor, endometriosis, polycystic ovary syndrome.

Preterm labor endometriosis polycystic ovary syndrome significant unmet need in this space and that's why we did those three deals we did the fourth deal as a commercialized products from Marvell and <unk>, but we're looking in the space of and there's some really interesting assets.

Speaker 3: significant unmet need in the space, and that's why we did those three deals. We did the fourth deal, the commercialized products from Marvell and Mercelon. But we're looking in the space of, and there's some really interesting assets.

Speaker 3: uh... both commercializable as well right now as well as uh... kind of late stage development product we're looking at that but we're also got our nose

Both commercialize able as well right now as well as kind of late stage development products. So we're looking at that but we're also got our nose and looking into things that disproportionately impact women of course, then the list gets much broader but imagine the kind of synergies that we have with those unique to women because thats exactly in the area. We're in now and so.

Speaker 3: uh... and looking into things that disproportionately impact women of course then the list gets

Speaker 3: much broader but imagine the kind of synergies that we have with those unique to women because that's exactly in the area we're in now and so uh... you know lot of synergies there that we're going to be looking at. So overall it looks good we're excited of the deals we've done so far and more to come look forward to that uh... in the uh... in the coming quarters.

A lot of synergies there that we're going to be looking at so overall it looks good we're excited of the deals we've done so far and more to come look forward for that.

Coming quarters.

Great. Thanks for the color.

Speaker 1: Our next question comes from the line of Omer Rafat from Evercore ISI, your line is open.

Our next question comes from the line of Omar Saad from Evercore ISI. Your line is open.

Speaker 8: Hi guys, thanks for taking my question. Kevin, I've been thinking about some of the commentary you guys have been sharing on the four growth pillars, how they're all sort of evenly driving that $600 million in volume this year. But then I'm also looking at consensus into next year, which is 2023, where there's only $100 million worth of growth being modeled in. And I'm almost wondering...

Hi, guys. Thanks for taking my question, Kevin I've been thinking about some of the commentary you guys have been sharing on the four growth pillars, how they're all sort of evenly driving that 600 million in volume. This year, but then I'm also looking at consensus into next year, which is 23, where there's only $100 million worth of growth being modeled in.

And I'm almost wondering.

Speaker 8: how do you think that you guys expect the momentum to continue i'm not necessarily after twenty three guidance i'm just saying the reason you see why some of the growth a number you talked about on the basis

How do you guys expect the momentum to continue I'm not necessarily asking for 'twenty three guidance I'm, just saying is there any reason you see why some of the growth number you've talked about on the base business should dampen and.

Speaker 8: dampened, and how do you think about the magnitude of first-year ramp on a Humayra biosimilar knowing that as much as you guys will have the high concentration, there are Amgen, Alvatex, Eltron, a few other players that will have it too.

How do you think about the magnitude of first year ramp on the Humira biosimilar knowing that as much as you guys will have the high concentration there or amgen.

Alphatec Celgene on there's a few other players that will have it too so would really help understand sort of the direction things are heading.

Speaker 3: And so, Umar, thanks for the question. Good to hear you again. Listen, in regard, let's start with the last one, and then we'll work backwards.

So <unk>. Thanks for the question good to hear you again listen and regardless, let's start with the last one and then we'll work backwards.

Speaker 3: Look, Chimera, the biosimilarity for Chimera, it's going to be an exciting period of time. We're going to be second to market. You know as well as I do that there are some conditions essentially for succeeding in that business.

Look humira biosimilars for Humira as it's going to be an exciting period of time, we're going to be second to market you know as well as I do that there are some conditions essentially for succeeding in that business.

Speaker 3: Speed to market is critical. We'll be second just after Amgen.

Speed to market is critical will be second just after amgen.

Speaker 3: We're coming in to that market with our collaborator, Samsung, really focusing scientifically what.

We're coming in to that market with our collaborator Samsung really focusing scientifically what payers need they want the high high concentration they want the citrate free they want an easy to use innovative pen mechanism. We have all that plus we have real world evidence because of the Biogen launch of Humira Biosimilars.

Speaker 3: payers need. You know, they want the high concentration, they want the citrate-free, they want an easy-to-use innovative pen mechanism. We have all that. Plus, we have real-world evidence because of the Biogen launch of Humira biosimilars in... Because that's their partner in Europe , as well as our own launches in Australia and Canada. So, we've got all of that as a package that we're bringing to market, and we've initiated the interchangeability studies so that we'll be able to report out.

Because that's our partner in Europe , as well as our own launches in Australia, and Canada. So we've got all of that as a package that were bringing to market and we've initiated the interchangeability studies, so that we'll be able to report out.

Speaker 3: and have that as well available to us in the 2024-2025 timeframe.

And have that as well available to us in the 2020 for 2025 timeframe. So we feel very very very excited about the opportunity to compete in that space. Given the fact that it's going to be a $20 billion low at the time of <unk>.

Speaker 3: So we feel very, very, very excited about the opportunity to compete in that space, given the fact that it's going to be a $20 billion LOE at the time of LOE for the Humira biosimilars. So I think it's going to be rather quick. 2023, I think at this point, PBMs are kind of doing their strategies in regards to understanding what it is that they want to do. But however, I do think that in the 2023 and 2024 time frame,

The Humira Biosimilars. So I think it's going to be rather quick 2023, I think at this point pbms are kind of doing the strategies in regards to understanding what it is that they want to do.

But however, I do think that in the 2023 and 2024 time frame.

Speaker 3: It's going to be a full out, you know, very competitive marketplace. I think you're going to see not small molecule price erosion, but also not the earlier stuff that we saw in the hospital launches like the Remicade off patent stuff. You're going to start to see more kind of movement on price pretty quickly. And we've got a really good position in that stage as well. So I think, you know, we're going to do very well. I would tell you right now with the consensus that I see out there for what we can do with Hadlema or Humira Biosimilar, we're in agreement that we'll be in that neighborhood.

It's going to be a full out very competitive marketplace, I think youre going to see not small molecule price erosion, but also not the earliest stuff that we saw in hospital launches like the Remicade all patent stuff youre going to start to see more kind of movement on price pretty quickly and we've got a really good position in that in that stages.

Well, so I think we're going to do very well.

I would tell you right now with the consensus that I see out there for what we can do with had Liam our Humira Biosimilar. We are in agreement that will be in that neighborhood and in regards to going forward, what kind of indicators in terms of for the 2023.

Speaker 3: And in regards to going forward, what kind of indicators in terms of for the 2023 time frame? Look, we've got Hadlema, Jada will start to really be a contributor to our growth.

Timeframe look we've got had Lima, jada will start to really be a contributor to our growth China retail will continue to be a contributor to our growth China Pvp will have essentially.

Speaker 3: China Retail will continue to be a contributor to our growth. China BBP will have essentially a

Speaker 3: you know, flattened out, Nexplanon will be a continued growth story for us, and Fertility will continue to be a double-digit growth story. So I think we've got a lot of good news on that front, and the Marvellon-Mercelon acquisition, you'll start to see. I mean, the whole value proposition of an organon is that we take assets that weren't necessarily important and germane to the strategy of other companies, like a Merck.

Flattened out Nexplanon will be a continued growth story for us in fertility will continue to be a double digit growth story. So I think we've got a lot of good news on that front in the Marvelon Mercil on acquisition.

You'll start to see I mean, the whole value proposition of an Oregon on is that we take assets that werent necessarily important germane to the strategy of other companies like Merck put it in our hands with our attention and our focus on our people and we can do much better and so we can we feel the same way about the marvelon worse loan business. So those are really really good drivers for us in <unk>.

Speaker 3: Put it in our hands with our attention and our focus and our people.

Speaker 3: And we can do much better. And so we can, we feel the same way about the Marvalon Mercelon business. So those are really, really good drivers for us and a stable, of course, established brands business going forward. We feel very good about 2023.

<unk> of course established brands business going forward, we feel very good about 2023.

Thank you.

Mhm.

Speaker 1: Our next question comes from the line of Avanti from CTC, line is open.

Our next question comes from the line of Ivan <unk> from Citi. Your line is open.

Speaker 1: Hi, good morning. Can I please ask about Nexplanon run rate, please? Can we assume that Nexplanon

Hi, Good morning can I. Please ask about the next planning run rate can we assume that Mexico represented most of the increase ex U S is higher demand in the U S from.

Speaker 1: represent most of the increase ex-U.S. and is higher demand in the U.S. from DTC and physician training. So overall, do you see next plan on sustainably decoupling from lower wellness visits? And then I have a quick follow-up on Dulera. Could we see upside from lupine delayed generic? Thank you.

Did you see any physician training. So overall do you see nexgen sustainably decoupling from.

Wellness visits.

And then I have a quick follow up on demand.

Could we see upside from delayed generic thank you.

Speaker 3: Yet, you know, when I look at the performance of Nexplanon in 2021, it was really an amazing year, even in spite of the pandemic.

Yeah, when I look at the performance of Nexplanon in 2021 it was really an amazing year, even in spite of the pandemic.

Speaker 3: I mean, you're talking about essentially 12% growth for the franchise in spite of, as you mentioned, wellness visits not popping back up. We're still seeing a 20% decline in wellness visits as we speak today. So there is somewhat of a decoupling, as you very rightly put it.

Talking about essentially 12% growth for the franchise in spite of as you mentioned wellness visits not popping back up we're still seeing a 20% decline in wellness visits as we speak today. So there is somewhat of a decoupling as you very rightly put it.

Speaker 3: We do see opportunities because of the fact that we're working on a new go-to market. Let's just focus on the U.S.

We do see opportunities because of the fact that we are working on a new go to market, let's just focus on the U S. For the time being then I'll expand my my my comments to being outside of the U S. We do see opportunities in the U S. Given that we're working on new go to market models.

Speaker 3: For the time being, I'll expand my comments to being outside of the U.S.

Speaker 3: We do see opportunities in the U.S. given that we're working on new go-to-market models.

Speaker 3: We're working on essentially digital processing in terms of what we're doing. We've really put a lot of efforts in terms of our clinical training programs to certify physicians, almost 20,000 physicians in a pandemic year. That's way far more than what we've ever done pre-pandemic.

We're working on on essentially digital processing in terms of what we're doing we've really put a lot of efforts in terms of our clinical training program to certify physicians almost 20000 physicians in a pandemic year, that's way far more than what we've ever done pre pandemic years, and so we've got rep visits backup to where it.

Speaker 3: And so we've got rep visits back up to where it used to be pre-pandemic. So all that put together, plus our DTC campaigns and all the things that we're doing, we've almost got 350,000 visitors to our internet site on Nexplanon.com. That's also starting to work. So we feel very bullish and very good about Nexplanon in the U.S. Now, going outside the U.S., that's the exciting part.

Used to be pre pandemic, so all that put together plus our DTC campaigns and all the things that we're doing we've almost got 350000 visitors to our <unk>.

Annette side on Nexplanon Dot Com. That's also starting to work. So we feel very bullish and very good about next law in the U S not going outside of the U S. That's the exciting part because while there was attention on nexplanon in the U S. Pre spin there was literally very little at all attention paid to next one on outside of the U.

Speaker 3: Because while there was a tension on Nexplanon in the U.S. pre-spin, there was literally very little.

Speaker 3: attention paid to Nexplanon outside of the U.S. pre-spin.

Pre spin and to that end just before spin it was 75% of our business next model is in the U S and 25% was outside of the U S. Today as I speak to you. It's changed so two thirds in the U S and one third outside of the U S. The business outside of the U S is growing faster, but it's choppy or the reason to shop.

Speaker 3: just before it's been, it was 75% of our business next month was in the US and 25% was outside of the US. Today as I speak to you.

Speaker 3: it's changed. So two-thirds in the U.S. and one-third outside of the U.S. The business outside of the U.S. is growing faster, but it's choppier. The reason it's choppier is because a lot of these markets are single-payer systems, or for that matter in the emerging markets, where you start to see very much kind of these government tender procurement processes that makes it kind of a sawtooth type of, you know, performance. So that's why we don't look at Nexplanon.

Because a lot of these markets are single payer systems or for that matter in the emerging markets, where you start to see very much kind of these government tender procurement processes that makes it kind of a saw tooth type of.

Performance. So that's why we don't look at nexon on in any single quarter defining what happens in a given year, we have to look at <unk> as a kind of a.

Speaker 3: in any single quarter defining what happens in a given year. We have to look at Nexplanon.

Speaker 3: as a kind of a longer view of a year view and I do believe strongly I know that Nexplanon will be a billion dollar business. It will be a business that will continue to grow at least of what you saw in 2021 and we're going to be doing everything in our power to continue the growth outside of the U.S. where our managing directors are focusing on it as well as in the U.S. of which I've just detailed some of the things that we've done.

On a longer view of our year view and I do believe strongly I know that next plant will be $1 billion business.

We'll be a business that will continue to grow at least of what you saw in 2021, and we're going to be doing everything in our power to continue to continue the growth outside of the U S where our managing directors are focusing on it as well as in the U S of which I have just detailed some of the things that we've done.

Speaker 9: Your next question comes from the line of CSUN scholars from Cohen. Your line is open.

Our next question comes from the line of Susan Scala from Cowen Your line is open.

Speaker 8: Thank you. Two questions. First on, next one on, was there any change in inventory levels in the fourth quarter versus the third quarter? And then secondly, I appreciate that any business development needs to make sense, but you did four deals since the IPO out of

Thank you two questions first on next one on was there any change in inventory levels in the fourth quarter versus the third quarter and then secondly, I appreciate that any business development needs to make sense, but you did four deals since the IPO out of what.

Speaker 8: what I think was 140 potential deals that Organon says are out there. So rather than four deals, it seems the number should have been 10 or more deals to build this business at a decent pace. So why haven't there been more transactions than we have seen so far? What has been the reason why transactions have not gone through that you've kicked the tires on? Thank you.

What I think was the 140 potential deals that organon says are out there so rather than four deals. It seems that number should have been 10 or more deals to build this business at a decent pace. So why haven't there been more transactions than we have seen so far what has been the reason.

Why transactions have not gone through that you've kicked the tires on thank you.

Speaker 3: So let's start with your first question. In regards to next one on an inventory management, essentially, there was a buy-in in terms of price protection by the end of the year in the US.

So let's start with your first question in regards to next one on an inventory management essentially there was a buy in in terms of price protection by the end of the year in the U S. There was so if there was a little bit of volume buildup in the U S. In the fourth quarter as well of course, we had the Mexico tender, which was nearly 40.

Speaker 3: So there was a little bit of volume buildup in the U.S. in the fourth quarter. As well, of course, we had the Mexico tender, which was nearly $40 million. So that also was coming kind of on a one-off in the fourth quarter in Mexico that was delayed from Q3 to Q4. So there was a little bit of inventory, but this is not a product.

Yeah.

So that also was coming kind of in a one off in the fourth quarter in Mexico that was delayed from Q3 to Q4. So there was a little bit of inventory, but this is not a product.

Speaker 3: You know, because a lot of the business in the U.S. is buy and build, it's a lot of clinics, and so you don't have the inventory mechanisms that you would have in other businesses. So it's not a product where we really have large inventories being developed and being in any given place.

Because a lot of the business in the U S is buy and bill there's a lot of clinics and so you don't have that inventory mechanisms that you would have in other businesses. So it's not a product, but we really have large inventories being developed and being in any given place. So we've got very healthy inventories were managing it very well in that respect now Enrico.

Speaker 3: So we've got very healthy inventories. We're managing it very well in that respect.

Speaker 3: Now, in regards to your second question, yes? Kevin may ask, can you quantify the build in the US? Was it?

As to your second question, Yes, Kevin They ask can you quantify the build in the U S with it.

Speaker 3: twenty-nine about fifty fifty million dollars that essentially with with uh... with the build-up in the u s but not not a great not a great uh...

20th Yeah, it's about 50% of $15 million that essentially was was the buildup in the U S. So not a great not a great number.

Thank you.

Speaker 3: Now, in terms of your second question regarding business development, if I told you the number of deals we looked at, I mean, we looked at a number, but we have a high bar. We looked at 60, over 60 potential deals that we looked at. We're ongoing right now. There's more than probably a dozen we're looking at and we're in deep discussions with. So we wanted to make sure that the four deals that we did, the first four, did the following. One, they either met significant unmet needs.

Now in terms of your second question regarding business development.

If I told you the number of deals we looked at I mean, we looked at a number but we know we have a high bar we looked at 60 over 60 potential deals that we looked at where ongoing right now theres a theres more than probably a dozen we're looking at and we're in deep discussions with so we wanted to make sure that the four deals that we did the first four.

Did the following one they either met significant unmet needs.

Speaker 3: And really new mechanisms of action, like the Forendo deal, as well as the Obsiva deal. Or two, they had deals that we could count on today, like a launch product like Jada, as well as the Marvel on Mercy.

And really new mechanisms of action like the Sorrento deal as well as the observer deal or two they had deals that we could count on today like a launch product like data as well as the Marvell and <unk>.

Speaker 3: As we start to build it out, sure, I mean, I definitely would have liked 10, but we're going to start to increase.

As we start to build it out sure.

Definitely would've liked 10, but we're going to start to increase the pace of business development. We've got a lot of things. We're looking at in the Biosimilar space. We've got a lot of things. We're looking at in the women's health space unique to women health to women's health as opposed to those conditions are disproportionately impacting women. So that's another level that we're going to be looking at.

Speaker 3: the pace of business development. We've got a lot of things we're looking at in the biosimilar space. We've got a lot of things we're looking at in the women's health space, unique to women's health, as opposed to those conditions that disproportionately impacted women. So that's another level that we're gonna be looking at. So look for more, because we're trying to make the best deals that both fit the unmet needs that we talk about, and that are good valuations that our shareholders and investors can look at us and say, look, that was a good deal, that was the right price.

So look for more because we're trying to make the best deals that both fit the unmet need that we talk about and that are good valuations that our shareholders and investors can look at us and say look that was a good deal that was the right price we didnt overpay for assets that we believed that we needed to get into so I think we're taking a very balanced view and I.

Speaker 3: We didn't overpay for assets that we believed that we needed to get into. So I think we're taking a very balanced view. And I would tell you, look.

I'll tell you look in a pandemic first six months of our of our life. After after after launching out than we do for deals I am very proud of the team that they were able to get that done and that type of chaotic time frame.

Speaker 3: In a pandemic, first six months of our life after launching out and we do four deals, I'm very proud of the team that they were able to get that done in that type of chaotic timeframe.

Maybe a follow up.

Speaker 8: Sure. So on the 56 deals that you didn't do, which of the three criteria most often was the reason? Was it they didn't fulfill a significant unmet need? Was it that you couldn't count on them today or was it valuation?

Sure Yes.

So on the 56 deals that you didn't do which are the three criteria. Most often was the reason was that they didn't fulfill a significant unmet need was it that you couldnt count on them today or was it valuation.

Speaker 3: I think a combination of all the three. There were some deals essentially that we didn't feel really met the unmet need. There wasn't really a unique mechanism there that we could stand behind.

I think a combination of all the three there were some deals essentially that we didn't feel really met the unmet need there wasn't really a unique mechanism there that we can stand behind.

Speaker 3: or some other deals, essentially, where the valuations were essentially, we didn't think it was worth it, and a number of other reasons. It's quite a number of reasons we were looking at in terms of what we were doing. But look, we've got a fantastic business development head in Daniel Karp, who has long years of history both at Pfizer as well as Biogen, and he's got a team of 29 people who are really focused on this and doing some outstanding work.

Or some other deals essentially where the evaluations were essentially we didn't think it was worth it.

And a number of other reasons, it's quite a number of reasons. We're looking at in terms of what we're doing but look we've got a fantastic business development head.

And Daniel Karp, who has long years of history both that.

At Pfizer as well as Biogen and he's got a team of 29 people who are really focused on this.

Doing some outstanding work.

Maybe a follow up.

Speaker 8: So there was 140 deals I think initially and you've looked at 60. Does that mean there's 80 to go?

Sure. So there was a 140 deals I think initially and you've looked at 60 does that mean Theres 80 to go.

No no. The 140 deals that we were looking at were in specifically unique to women's health.

Speaker 3: No, no, the 140 deals that we were looking at were specifically unique to women's health. Now the 60 were now outside of that where we looked at devices, we looked at Femtech, we looked at diagnostics. So we've got a lot more to go down that list and we're actually in the later stages of doing some pretty interesting deals that you'll hopefully see coming your way in the very near future. Thank you.

Now the 60, we're now outside of that where we looked at devices, we looked at fab Tech.

Looked at diagnostics. So we've got a lot more to go down that list and we are actually in the later stages of doing some pretty interesting deals that youll hopefully see coming your way in the very near future.

Thank you.

Sure.

Speaker 9: Your last question comes from the line of David Anselm from Piper Sandler, line is open.

Our next question comes from the line of Covid.

Funds from Piper Sandler Your line is open.

Speaker 10: uh... thanks so just a couple so on on next one on can you just remind us uh... you're thinking about uh... exclusivity runaway in the united states uh... that's that's number one and then number two regarding just the overall product mix

Thanks, So just a couple so on next going on could you just remind us how you're thinking about the exclusivity runway in the United States.

That's that's number one and then number two regarding just the overall product mix do you have any.

Speaker 10: Do you have a long-term target in mind in terms of the percentage?

A long term target in mind in terms of the percentage of.

Speaker 10: of established brands as a portion of the overall mix. I mean, obviously, established brands is a pretty high portion of the mix. How are you thinking about diversifying down from that, and do you have a target in mind in terms of a portion of the mix, you know, over, say, the next several years? Thank you.

The established brands.

A portion of the overall mix I mean, obviously established brands is a pretty high portion of the mix how are you.

Are you thinking about diversifying down.

From that.

And do you have a target in mind in terms of.

Portion of the mix.

Over say the next several years. Thank you.

Speaker 3: So, David, just really briefly about Nexplanon, we lose exclusivity in 2027 in the U.S., in 2025 in Europe and outside of the U.S.

So David just real briefly about Nexplanon, we lose exclusivity in 2027 in the U S. In 2025 in Europe and outside of the U S. That's one issue, but as I mentioned earlier on previous calls we have a indication we're working on essentially to get.

Speaker 3: That's one issue, but as I mentioned earlier on previous calls, we have an indication we're working on essentially to get

Speaker 3: an extension so that we have a five-year efficacy of indication, and those studies started at the end of 2020. We expect to report out by the end of 2024. So that gives us three years more of exclusivity in terms of marketing exclusivity, which essentially means if we launch...

An extension, so that where we have a five year efficacy of indication in those studies started at the end of 2020, we expect to report out by the end of 2024, so that gives us three years more of exclusivity in terms of marketing exclusivity, which essentially means if we launch in 2025 timeframe.

Speaker 3: in 2025 timeframe, we could potentially and theoretically take it to 2028.

We could potentially theoretically take into 2028, now I remember generics and come in and market for a three year indication in 2027, but they can't market for a five year indication essentially you can rest assured we will do everything in our power to move everything over to the five year indication because that's what women.

Speaker 3: But they can't market for a five-year indication. Essentially, you can rest assured we'll do everything in our power to move everything over to the five-year indication because that's what women want. They want a longer potential LARCA availability to them that can take one minute to insert in the upper arm. So we're very excited about that five-year indication. We feel very good about it. And so that's essentially the status of that. In regards to the contribution of the established brands, look, it's two-thirds of our business today somewhere in that vicinity, that range. But given the fact that it's flat...

They want a longer potential lark, our availability to them that can take one minute to uncertainty upper arm. So we're very excited about that five year indication, we feel very good about it and so that's essentially the status of that in regards to the contribution of the <unk>.

Established brands look it's up.

Speaker 3: Two-thirds of our business today is somewhere in that vicinity, that range. But given the fact that it's flattening out...

Two thirds of our business today is somewhere in that vicinity that range, but given the fact that it's flattening out and we're stabilizing that business and I mean stabilizing right it'll start to come down over time to probably half of our business, but good cash generation from there and the other products with the businesses that we have biosimilars for <unk>.

Speaker 3: and we're stabilizing that business, and I mean stabilizing, right? It'll start to come down over time to probably half of our business, but good cash generation from there. And the other products, the businesses that we have, biosimilars, fertility, contraception, Jada, all the other things that we're doing will ultimately start to contribute more and so you'll see a 50% split for everything else. And then, of course, in the later stages, if we're lucky enough to be able to turn the cards over and launch...

<unk> contraception jada all the other things that we're doing will ultimately start to contribute more and so youll see a 50% split for everything else and then of course in the later stages. If we're lucky enough to be able to turn the cards over and launch six to one nine for endometriosis, it's a whole different game, that's an exciting new future to think about.

Speaker 3: 6-2-1-9 for endometriosis. It's a whole different game. That's an exciting new future to think about.

Speaker 10: And if I may just sneak in a follow-up question, and I may have missed this, can you just talk about deal size? I know you're looking at quantity, but what's the extent to which you could do something more transformational? And I know that might have implications for the credit rating, but how are you thinking about that in terms of size and ultimately where you would go in terms of the rating?

Okay, and if I may just sneak in a follow up question.

And I may have missed this can you just talk about.

Deal size I know youre looking at quantity, but what's the extent to which you could do something more transformational.

And I know that might have implications for the credit rating.

But how are you thinking about that in terms of size and.

Ultimately, where you would go in terms of the rating.

Speaker 4: Yeah, David. So, you know, right now we're, as we screen deals, we're really not, one of our screening criteria is not the size of

Yes, David So right now we're in.

As we screen deals we're really not.

<unk>.

One of our screening criteria is not the size of the deal.

Speaker 4: My experience has been if you find a compelling target and you can make a good investment case around it, you can always find a way to finance it. We're operating under some

My experience has been if you find a compelling.

Target and you can make a good investment case around it you can always find a way to finance it and we have we're operating under some.

Some.

Speaker 4: I'll call it goalposts from the tax matters agreement with Merck as part of the separation, but those are pretty wide. And so, you know, we can use a number of finance and pockets to make attractive deals happen. So we're not looking at any significant governors. We're not turning away deals. Let me put it that way. We're not turning away opportunities because of size.

Some I'll call it goalposts from the tax matters agreement with Merck as part of the separation, but those are pretty wide and so we can.

Use a number of financing pockets to make attract.

Attractive deals happen so.

We're not looking at any significant governors.

We're not turning away deals, let me put it that way, we're not turning away opportunities because of size.

Okay. Thank you.

So if I can just.

Speaker 3: Yeah, if I can just summarize, thanks everybody for your questions, your thoughtful questions, and just, you know, a summary comment. Our separation from Merck and our launch as an independent company has really involved a great deal of effort from every one of our employees who we consider as founders.

Yeah, if I can just summarize thanks to everybody for your questions. Your thoughtful questions and just a summary comment.

Separation from Merck and our launch as an independent company is really involved a great deal of effort from every one of our employees, who we consider as founders sounded like myself had really been working on this transaction for several years to see the realization of our conviction that this portfolio in a different set of hands with management focus and attention can deliver the financial and.

Speaker 3: Some, like myself, had really been working on this transaction for several years to see the realization of our conviction that this portfolio and a different set of handles

Speaker 3: with management focus and attention can deliver the financial and operational commitments we set for 2021 is a proud moment for our

<unk> commitments, we set for 2021 is a proud moment for our team and we look back we can truly take stock of our many accomplishments we delivered double digit growth for biosimilars fertility and nexplanon.

Speaker 3: And we look back, we can truly take stock of our many accomplishments. We delivered double-digit growth for biosimilars, fertility, and Nexplanon.

Speaker 3: We stabilized our established brands business, which generates significant cash flow. We established a dividend and we have wasted no time in building out a women's health portfolio that tackles the areas of profound unmet need. All of this has been accomplished during a major pandemic, which should tell you something about how special the team we have at Oregon Health is.

We stabilized our established brands business, which generates significant cash flow, we established the dividend and we have wasted no time in building out a womens health portfolio that tackles, the areas of profound unmet need all of this has been accomplished doing a major pandemic, which should tell you something about how special the team we have in Oregon I wanted.

Speaker 3: And I want to tell you that we're equally committed and energized about doing the same in 2022. So with that, I want to thank everyone for your time and we'll speak with all of you soon. Thank you.

Tell you that we are equally committed and energized about doing the same in 2022, so with that I want to thank everyone for your time and we'll speak with all of you soon thank you.

Speaker 9: This concludes today's conference call. Thank you for participating.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

Sure.

Yes.

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Okay.

Speaker 11: ??? ???

Yeah.

Sure.

Great.

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Yes.

Yeah.

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Yes.

[music].

Okay.