Organon's Q3 2025 Earnings Call: Contradictions Emerge on Vtama Growth, Divestiture Strategy, and Nexplanon Sales Dynamics

Date of Call: November 10, 2025

Financials Results

• Revenue: $1.6B in Q3 2025, up ~1% as‑reported year‑over‑year
• Gross Margin: Adjusted gross margin 60.3% in Q3 2025, compared with 61.7% in Q3 2024
• Operating Margin: Adjusted EBITDA margin 32.3% in Q3 2025; full‑year adjusted EBITDA margin guided to ~31% (revised from 31%–32%)

Guidance:

• Full‑year 2025 revenue lowered to $6.20B–$6.25B (nominal decline ~3.2%–2.4% YoY).
• Adjusted gross margin 60%–61%; adjusted EBITDA margin ~31% (revised down).
• SG&A ~26% of sales; R&D in upper single‑digit % of sales.
• 2025 interest expense ~$510M; non‑GAAP tax rate 22.5%–24.5%; depreciation ~$135M.
• Nexplanon: global sales expected ~flat in 2026; Q4 2025 Nexplanon down mid‑teens ex‑FX vs Q4 2024.
• JADA sale expected to close ~Q1 2026; net proceeds to be applied to debt reduction.

Business Commentary:

• Revenue and Income Trends:
• Organon reported third quarter revenue of $1.6 billion, with adjusted EBITDA of $518 million, representing an adjusted EBITDA margin of 32.3%.
• The company confirmed that full-year 2025 guidance for revenue has been revised to $6.2 billion-$6.25 billion, reflecting a 3.2%-2.4% decline year-over-year.

• The revenue decline is attributed to persistent headwinds in the U.S. Nexplanon sales due to policy challenges and softness in the respiratory business.

  

• Nexplanon Market Dynamics:

• Nexplanon, a key product in the women's health franchise, saw a 50% decline in the U.S. market, with international growth of 7% ex-exchange in Q3.
• The decline in the U.S. market was driven by unfavorable policy decisions impacting Title X funding and Planned Parenthood, as well as macroeconomic factors affecting independent healthcare clinics.

• The company expects Nexplanon sales in the U.S. to be down mid to high single digits for the full year, with international sales expected to grow mid to high single digits ex-FX.

• Respiratory Business Challenges:

• Organon's respiratory business faced significant declines, particularly in Singulair and Dulera, due to increased competitive pressures and mandatory price reductions in key markets.
• The company anticipates respiratory business erosion to persist through 2026, challenging prior expectations of a seasonal rebound.

• This persistent softness is due to competitive pressures, mandatory pricing adjustments, and supply constraints.

• Biosimilars Performance:

• Biosimilars, including Hadlima, contributed significantly to year-to-date performance with a 63% growth ex-FX globally.
• Hadlima's growth is attributed to its strong clinical profile, recent interchangeability approval, and effective low-price strategy.
• The success of Hadlima is supported by the launch of new biosimilars like Denosumab and Tofidence, enhancing Organon's U.S. biosimilars presence.

Sentiment Analysis:

Overall Tone: Neutral

• Management emphasized limited financial impact from the Nexplanon wholesaler practices and stated "no financial restatement is necessary," while revising 2025 revenue guidance lower to $6.2B–$6.25B and noting persistent headwinds in U.S. Nexplanon policy and respiratory pricing; they reiterated commitment to deleveraging, targeted cost savings, and investing behind key growth drivers.

Q&A:

• Question from Jason Gerbery (Bank of America): Given the JADA divestiture, are there opportunities within the portfolio for additional divestitures; and on Vtama, when should we expect a growth inflection—could 2026 be the time to evaluate reaching the long‑term peak?
  Response: No announced/definitive additional divestitures—opportunistic approach (JADA was the right economic decision); Vtama access improvements make 2026 the key year to judge a growth inflection toward long‑term potential.

• Question from David Amsellem (Piper Sandler): Can you discuss the pressure on respiratory—should this be viewed as a long‑term declining business—and any other potential trouble spots; and thoughts on Vtama competitive dynamics (e.g., roflumilast)?
  Response: Respiratory faces structural headwinds (competition, mandatory price cuts, discount pressure) and softness is expected to continue into 2026; overall established brands are otherwise broadly stable and Vtama is positioned as a differentiated, safe nonsteroidal option.

• Question from Umer Raffat (Evercore ISI): How do we know the improper sales behavior was limited to Nexplanon; why did the CCO leave; why did discounts/rebates rise $177M in 2024 versus small pull‑forwards; Q4 2022 inventory color; and if impacts are small, why pursue divestitures now?
  Response: The independent investigation reviewed other areas and found no additional issues; remediation and enhanced controls/personnel actions are underway; higher rebates reflect competitive Nexplanon pricing dynamics; Q4 2022 impacts were disclosed in the 2022 filings; JADA was an opportunistic economic decision unrelated to the investigation.

• Question from Chris Shott (JPMorgan): What profile is the board seeking for a permanent CEO and will a strategic review occur; and can you elaborate on Nexplanon expectations and five‑year launch implications?
  Response: Board has an active search seeking global strategic and operational experience but reaffirms no immediate strategic change; Nexplanon expected about flat next year assuming current U.S. headwinds don't worsen, with the five‑year indication having offsetting volume/price effects to be clarified by February guidance.

• Question from Karen Flynn (Morgan Stanley): How long might the CEO search take and what are expectations for Denosumab near‑term and into 2026?
  Response: Timing is uncertain but interim leadership is in place to run the company; Denosumab launch expands biosimilars presence and management is constructive about biosimilars momentum into 2026 (no product‑level guidance).

• Question from Navin T. (BNP Paribas): How are you prioritizing business development in women's health versus deleveraging, and how does cost discipline affect the pipeline and R&D?
  Response: Priority is deleveraging and targeting later‑stage or marketed women's‑health assets due to balance‑sheet constraints; cost discipline has led to trimming some internal programs to preserve resources for higher‑priority investments.

• Question from Michael Nedelcovych (TD Cowen): How can Organon improve its BD track record and would you expand BD beyond women's health?
  Response: Focus remains on deals that leverage existing commercial/manufacturing strengths (late‑stage and adjacent areas like dermatology after Dermavant); expansion into new categories would be opportunistic if aligned with core capabilities.

Contradiction Point 1

Vtama Growth Expectations

It involves differing expectations for the growth trajectory of Vtama, which is a key asset for Organon, impacting investor confidence and strategic planning.

Are there opportunities for additional portfolio divestitures following the JADA sale? When should we anticipate a growth inflection for Vtama? - Jason Gerbery(Bank of America)

2025Q3: For Vtama, it's growing nicely and will again next year. 2026 will be a key year to judge growth trajectory. - Jennifer Halchak(VP, Investor Relations)

What is your confidence in achieving Vtama's sales target and the market's access and gross-to-net dynamics? How does business development M&A align with your priorities during deleveraging? - David Amsellem(Piper Sandler)

2025Q1: We expect a strong start to 2025 as this product will be available widely across the market. So our confidence is based on an expectation of strong first orders in the first part of the year, and we expect that to continue into 2025. - Kevin Ali(CEO)

Contradiction Point 2

Divestiture Strategy

It highlights a shift in Organon's strategic approach to divestitures, which can impact the company's financial health and growth prospects.

With the JADA divestiture, are there opportunities for further divestitures? When can we expect a growth inflection in Vtama? - Jason Gerbery(Bank of America)

2025Q3: We have nothing announced or planned on asset divestitures. We look opportunistically at all assets in our portfolio. For JADA, divestiture was the right economic answer. - Jennifer Halchak(VP, Investor Relations)

What are Organon's views on the Nexplanon Paragraph IV filer and potential generic competition in international markets? Can you break down the one-time costs for 2025 and discuss free cash flow outlook for 2026? - Bhavin Patel(Bank of America)

2025Q1: We have $2 billion of non-core assets, which we believe based on our evaluation and third-party evaluations, has the opportunity to be divested over the next few years to create strategic value. - Kevin Ali(CEO)

Contradiction Point 3

Nexplanon Sales and Market Dynamics

It concerns differing perspectives on the factors affecting Nexplanon sales, which directly impacts revenue projections.

What challenges are affecting respiratory products, and how competitive is Vtama in its market? - David Amsellem(Piper Sandler)

2025Q3: Slow start to allergy season and competitive pressures, and mandatory price downs globally. Expected to continue into 2026. - Jennifer Halchak(VP, Investor Relations)

How would you explain the federal funding challenges for Nexplanon in the U.S.? Was the decline in quarterly Nexplanon sales due to purchase timing or ongoing pressures? - Michael Thomas Nedelcovych(TD Cowen)

2025Q2: The decline is due to funding issues in federal programs like Planned Parenthood and Medicaid. While there are some hesitancies, we expect resolution soon. - Kevin Ali(CEO)

Contradiction Point 4

CEO Search Criteria and Strategy

It involves the criteria for the CEO search and whether a strategy review is planned, which are crucial for the company's future leadership and direction.

What qualities define the ideal candidate for the new CEO role? Should the company's strategy be reassessed during the CEO search? - Chris Shott (JPMorgan)

2025Q3: We need someone with global experience and operational depth. The board is actively searching. No strategic changes planned. - Carrie, Executive Chair

What is your 2025 free cash flow estimate? What competitive dynamics face the denosumab biosimilar franchise? - Terence Flynn (Morgan Stanley)

2024Q4: IPR&D expenses in 2025 will be lower than in 2024, impacting free cash flow. Expect around $900 million of free cash flow before onetime items. Regarding the denosumab biosimilar, 2025 will see only de minimis impact from its launch. - Matthew Walsh(CFO)

Contradiction Point 5

Denosumab Biosimilar Launch and Impact

It directly impacts expectations regarding the timing and impact of the denosumab biosimilar launch, affecting company revenue and investor expectations.

What is the pressure on respiratory products? What is the competitive landscape for Vtama? - David Amsellem (Piper Sandler)

2025Q3: We expect the denosumab biosimilar to penetrate the market due to our experience with RENFLEXIS and NEXPLANON. We feel confident in establishing penetration for Prolia and Xgeva, enhancing our biosimilar portfolio. - Kevin Ali(CEO)

What is the estimated free cash flow for 2025? What are the competitive dynamics for the denosumab biosimilar franchise? - Terence Flynn (Morgan Stanley)

2024Q4: The denosumab biosimilar launch is expected later in Q4, impacting 2025 minimally. - Matthew Walsh(CFO)