10q10k10q10k.net

What changed in Organon & Co.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Organon & Co.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+530 added−808 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-27)

Top changes in Organon & Co.'s 2023 10-K

530 paragraphs added · 808 removed · 449 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

139 edited+26 added−234 removed15 unchanged
Biggest changeOrganon's non-opioid pain management portfolio consists of three core products, including: Arcoxia™ ¹ (etoricoxib), a selective cyclooxygenase-2 inhibitor used for acute and chronic treatment of conditions such as acute pain, osteoarthritis and rheumatoid arthritis, Diprospan™ ¹ (betamethasone), an injectable glucocorticoid drug approved for treatment of conditions such as bursitis, dermatological disorders and inflammatory conditions, and Celestone® (betamethasone injectable suspension), a sterile aqueous suspension approved for treatment of inflammation and conditions such as endocrine disorders and gastrointestinal diseases.
Biggest changeWe currently own prescription rights for Clarinex in the United States and Aerius in markets around the world. -7- Table of Contents Dermatology, Bone Health and Non-Opioid Pain Management In 2023, our dermatology, bone health and non-opioid pain management portfolios accounted for $782 million, or approximately 12%, of our total revenues, nearly all of which were generated outside the United States. • Our dermatology portfolio consists of two core products, including Diprosone™ ¹ (betamethasone cream), a corticosteroid approved for treatment in relief of skin conditions, and Elocon ® (mometasone cream), a topical prescription medicine approved for treatment in relief of inflammation and other symptoms caused by certain skin conditions. • Our bone health portfolio includes Fosamax ® (alendronate sodium), a bisphosphonate medicine used for the treatment and prevention of osteoporosis in postmenopausal women and to increase bone mass in men with osteoporosis. • Our non-opioid pain management portfolio consists of three core products, including: Arcoxia™ ¹ (etoricoxib), a selective cyclooxygenase-2 inhibitor used for acute and chronic treatment of conditions such as acute pain, osteoarthritis and rheumatoid arthritis, Diprospan™ ¹ (betamethasone), an injectable glucocorticoid drug approved for treatment of conditions such as bursitis, dermatological disorders and inflammatory conditions, and Celestone® (betamethasone injectable suspension), a sterile aqueous suspension approved for treatment of inflammation and conditions such as endocrine disorders and gastrointestinal diseases.
Marvelon™ ¹ (desogestrel and ethinyl estradiol pill) and Mercilon™ ¹ (desogestrel and ethinyl estradiol pill) are both combinations of progestin and estrogen used as daily pills to prevent pregnancy. Marvelon contains a higher daily dose of estrogen than Mercilon .
Marvelon™ ¹ (desogestrel and ethinyl estradiol pill) and Mercilon™ ¹ (desogestrel and ethinyl estradiol pill) are both combinations of progestin and estrogen, and are used as daily pills to prevent pregnancy. Marvelon contains a higher daily dose of estrogen than Mercilon .
Aybintio is currently approved and commercialized in the EU for use in certain patients with metastatic carcinoma of the colon or rectum, metastatic non-squamous, non-small cell lung cancer, metastatic renal cell carcinoma, metastatic cervical cancer, epithelial ovarian, fallopian tube, or primary peritoneal cancer and metastatic breast cancer.
Aybintio is currently approved and commercialized in the EU and Canada for use in certain patients with metastatic carcinoma of the colon or rectum, metastatic non-squamous, non-small cell lung cancer, metastatic renal cell carcinoma, metastatic cervical cancer, epithelial ovarian, fallopian tube, or primary peritoneal cancer and metastatic breast cancer.
Such device patents will expire in 2027 in the United States and in 2025 in other countries around the world. There are currently no contested proceedings or third-party claims that involve these patents.
Such device patents will expire in 2027 in the United States and in 2025 in other countries around the world. There are currently no material contested proceedings or third-party claims that involve these patents.
Site Predominant Area of Focus Campinas, Brazil Women's health, cardiovascular and respiratory Cramlington, UK Cardiovascular and respiratory Heist, Belgium Respiratory, dermatology and pain Oss, Netherlands Women's health Pandaan, Indonesia Cardiovascular, respiratory and dermatology Xochimilco, Mexico Cardiovascular and respiratory A majority of Organon's internal manufacturing sites have long-standing, deep technical capabilities across the broad base of manufacturing platforms that are required to support Organon's product portfolio.
Site Predominant Area of Focus Campinas, Brazil Women's health, cardiovascular and respiratory Cramlington, UK Cardiovascular and respiratory Heist, Belgium Respiratory, dermatology and pain Oss, Netherlands Women's health Pandaan, Indonesia Cardiovascular, respiratory and dermatology Xochimilco, Mexico Cardiovascular and respiratory A majority of our internal manufacturing sites have long-standing, deep technical capabilities across the broad base of manufacturing platforms that are required to support our product portfolio.
Furthermore, the government can order re-pricings for specific products if it determines that use of such products will exceed certain thresholds defined under applicable re-pricing rules. China Organon's business in China has grown rapidly in the past few years, and the importance of China to Organon's overall pharmaceutical business has increased accordingly.
Furthermore, the government can order re-pricings for specific products if it determines that use of such products will exceed certain thresholds defined under applicable re-pricing rules. China Our business in China has grown rapidly in the past few years, and the importance of China to our overall pharmaceutical business has increased accordingly.
Organon's operations may be adversely affected by generic and biosimilar competition as Organon's products mature, as well as technological advances of competitors, industry consolidation, patents granted to competitors, competitive combination products, new products of competitors, the generic availability of competitors' branded products and new information from clinical trials of marketed products or post-marketing surveillance.
Our operations may be adversely affected by generic and biosimilar competition as our products mature, as well as technological advances of competitors, industry consolidation, patents granted to competitors, competitive combination products, new products of competitors, the generic availability of competitors' branded products and new information from clinical trials of marketed products or post-marketing surveillance.
Organon's cardiovascular portfolio consists of several cholesterol-modifying medicines, including: Zetia ® (ezetimibe), which is marketed as Ezetrol™ ¹ in most countries outside the United States; Vytorin ® (ezetimibe / simvastatin), which is marketed as Inegy™ ¹ outside the United States; Atozet™ ¹ (ezetimibe and atorvastatin), which is marketed in certain countries outside the United States; Rosuzet™ ¹ (ezetimibe and rosuvastatin), which is also marketed in certain countries outside the United States; and Zocor™ ¹ (simvastatin), which is also available in certain countries outside the United States, including China.
Our cardiovascular portfolio consists of several cholesterol-modifying medicines, including: Zetia ® (ezetimibe), which is marketed as Ezetrol™ in most countries outside the United States; Vytorin ® (ezetimibe / simvastatin), which is marketed as Inegy™ outside the United States; Atozet™ ¹ (ezetimibe and atorvastatin), which is marketed in certain countries outside the United States; Rosuzet™ ¹ (ezetimibe and rosuvastatin), which is also marketed in certain countries outside the United States; and Zocor™ ¹ (simvastatin), which is also available in certain countries outside the United States, including China.
Organon's access rights to each product under the Samsung Bioepis Agreement last for ten years from each such product's launch date on a market-by-market basis. Unless the parties agree to extend the term, the agreement expires upon the expiration of the last such ten-year period.
Our access rights to each product under the Samsung Bioepis Agreement last for ten years from each such product's launch date on a market-by-market basis. Unless the parties agree to extend the term, the agreement expires upon the expiration of the last such ten-year period.
Organon's women's health products are sold in over 90 markets worldwide, including the United States, China, Canada, Australia, Brazil, and Mexico as well as many other countries in the European Union ("EU"), South America, Asia, and Africa.
Our women's health products are sold in over 90 markets worldwide, including the United States, China, Canada, Australia, Brazil, and Mexico as well as many other countries in the European Union ("EU"), South America, Asia, and Africa.
The Samsung Bioepis Agreement grants Organon an exclusive license to commercialize the following pre-specified biosimilars products (with reference products in parenthesis) developed by Samsung Bioepis: adalimumab (Humira) , bevacizumab (Avastin) , infliximab (Remicade) , trastuzumab (Herceptin) and etanercept (Enbrel) .
The Samsung Bioepis Agreement grants us an exclusive license to commercialize the following pre-specified biosimilars products (with reference products in parenthesis) developed by Samsung Bioepis: adalimumab (Humira) , bevacizumab (Avastin) , infliximab (Remicade) , trastuzumab (Herceptin) and etanercept (Enbrel) .
The Samsung Bioepis Agreement provides that gross profits are shared equally in all markets except for certain markets in Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to Organon.
The Samsung Bioepis Agreement provides that gross profits are shared equally in all markets except for certain markets in Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to us.
Other Markets Organon's focus on other markets has continued. Governments in many other markets are also focused on constraining health care costs and have enacted price controls and measures impacting intellectual property, including in exceptional cases, threats of compulsory licenses that aim to put pressure on the price of innovative pharmaceuticals or result in constrained market access to innovative medicine.
Other Markets Governments in many other markets are also focused on constraining health care costs and have enacted price controls and measures impacting intellectual property, including in exceptional cases, threats of compulsory licenses that aim to put pressure on the price of innovative pharmaceuticals or result in constrained market access to innovative medicine.
Organon and Cirqle Biomedical have entered into a research collaboration and exclusive license agreement for this novel investigational candidate. Under the terms of the agreement, Cirqle will be responsible for conducting preclinical studies according to the mutually agreed research plan.
We have entered into a research collaboration and exclusive license agreement with Cirqle Biomedical ("Cirqle") for this novel investigational candidate. Under the terms of the agreement, Cirqle will be responsible for conducting preclinical studies according to the mutually agreed research plan.
Additionally, improvements in intellectual property laws are sought in the United States and other countries through reform of patent and other relevant laws and implementation of international treaties. For further information with respect to Organon's patents, see the sections entitled "Risk Factors" and Note 12 "Contingencies—Patent Litigation" to the Financial Statements included in this report.
Additionally, improvements in intellectual property laws are sought in the United States and other countries through reform of patent and other relevant laws and implementation of international treaties. For further information with respect to our patents, see the sections entitled "Risk Factors" and Note 20 "Contingencies—Patent Litigation" to the Financial Statements included in this report.
Organon's website address is not intended to function as a hyperlink and the information contained on its website is not, and should not be considered part of, and is not incorporated by reference into, this Annual Report on Form 10-K.
Our website address is not intended to function as a hyperlink and the information contained on our website is not, and should not be considered part of, and is not incorporated by reference into, this Annual Report on Form 10-K.
Some of the potential effects of climate change to Organon's business could include increased operating costs due to additional regulatory requirements, changes in supply due to regulatory requirements, physical risks to Organon's facilities, water limitations and disruptions to Organon's supply chain.
Some of the potential effects of climate change to our business could include increased operating costs due to additional regulatory requirements, changes in supply and suppliers due to regulatory requirements, physical risks to our facilities, water limitations and disruptions to our supply chain.
Organon may terminate the agreement with respect to a particular region or product if a product fails to meet certain milestones in such region.
We may terminate the agreement with respect to a particular region or product if a product fails to meet certain milestones in such region.
These same management tools are also used in treatment areas in which the payor has taken the position that multiple branded -15- Table of Contents products are therapeutically comparable. As the United States payor market concentrates further and as more drugs become available in generic form, pharmaceutical companies may face greater pricing pressure from private third-party payors.
These management tools are also used in treatment areas in which the payor has taken the position that multiple branded products are therapeutically comparable. As the United States payor market further concentrates, and as more drugs become available in generic form, pharmaceutical companies may face greater pricing pressure from private third-party payors.
Continued growth of Organon's business in China is dependent upon ongoing development of a favorable environment for innovative pharmaceutical products, sustained access for Organon's current in-line products, and the absence of trade impediments or adverse pricing controls. In recent years, the Chinese government has introduced and implemented several structural reforms to accelerate the shift to innovative products and reduce costs.
Continued growth of our business in China depends upon ongoing development of a favorable environment for innovative pharmaceutical products, sustained access for our current in-line products, and the absence of trade impediments or adverse pricing controls. In recent years, the Chinese government has introduced and implemented several structural reforms to accelerate the shift to innovative products and reduce costs.
Under the Controlled Substances Act (the "CSA"), manufacturers and distributors of controlled substances must maintain registration with the Drug Enforcement Agency ("DEA"), and comply with various regulatory requirements, including maintaining records and inventory, reporting to the DEA, and meeting certain security and operational safeguards. Similar requirements exist in most states.
Manufacturers and distributors of controlled substances must also maintain registration with the Drug Enforcement Agency ("DEA"), and comply with various regulatory requirements, including maintaining records and inventory, reporting to the DEA, and meeting certain security and operational safeguards. Similar requirements exist in most states.
The Company operates six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom. Unless otherwise indicated, trademarks appearing in italics throughout this document are trademarks of, or are used under license by, the Organon group of companies.
We operate six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom. Unless otherwise indicated, trademarks appearing in italics throughout this document are trademarks of, or are used under license by, the Organon group of companies.
Before a new drug may be marketed in the United States, recorded data on pre-clinical and clinical investigations are included in the NDA for a drug or the Biologics License Application ("BLA") for a biologic, and submitted to the FDA for the required approval.
Before a new drug may be marketed in the United States, recorded data on pre-clinical and clinical investigations are included in the NDA for a drug or the Biologics License Application ("BLA") for a biologic, and submitted to the FDA for the required approval, which can be a phased process.
Pertuzumab is used for the treatment of certain patients with HER2+ breast cancer in combinations with trastuzumab and chemotherapy. Organon has worldwide commercialization rights to HXL11 in countries except for China; including Hong Kong, Macau and Taiwan.
Pertuzumab, in combinations with trastuzumab and chemotherapy, is used for the treatment of certain patients with HER2+ breast cancer. We have worldwide commercialization rights to HXL11 in countries except for China (including Hong Kong, Macau and Taiwan).
Additionally, in December 2021, Organon signed a supplemental license with Merck that provides a limited expansion of the fields in which it may use the underlying technology of Nexplanon / Implanon NXT beyond contraception in exchange for milestone payments.
In December 2021, we also signed a supplemental license with Merck that provides a limited expansion of the fields in which it may use the underlying technology of Nexplanon / Implanon NXT beyond contraception in exchange for milestone payments.
To obtain reimbursement or pricing approval in some EU Member States, Organon may be required to conduct studies that compare the cost-effectiveness of Organon's product candidates to other therapies that are considered the local standard of care.
To obtain reimbursement or pricing approval in some EU Member States, we may be required to conduct studies that compare the cost-effectiveness of our product candidates to other therapies that are considered the local standard of care.
Organon has been granted a license from Merck for Nexplanon / Implanon NXT that permits use of the underlying technology solely as a contraceptive implant containing only the active pharmaceutical ingredient currently used in the product.
We have been granted a license from Merck for Nexplanon / Implanon NXT that permits use of the underlying technology solely as a contraceptive implant containing only the active pharmaceutical ingredient currently used in the product.
Organon's respiratory portfolio is comprised of several treatments used to control and prevent symptoms caused by asthma, including: Singulair ® (montelukast sodium), Dulera ® (formoterol/fumarate dihydrate), which is also marketed as Zenhale™ ¹ in certain markets outside the United States, and Asmanex ® (mometesone furoate).
Our respiratory portfolio is comprised of several treatments used to control and prevent asthma-induced symptoms including: Singulair ® (montelukast sodium), Dulera ® (formoterol/fumarate dihydrate), which is also marketed as Zenhale™ , in certain markets outside the United States, and Asmanex ® (mometesone furoate).
Organon advocates with government policymakers to encourage a long-term approach to sustainable health care financing that ensures access to innovative medicines and does not disproportionately target pharmaceuticals as a source of budget savings.
We advocate with government policymakers to encourage a long-term approach to sustainable health care financing that ensures access to innovative medicines and does not disproportionately target pharmaceuticals as a source of budget savings.
Organon may also terminate the agreement upon 60 days' written notice in the event of a third-party infringement claim that Samsung Bioepis decides to litigate despite Organon's opposition to such litigation.
We may also terminate the agreement upon 60 days' written notice in the event of a third-party infringement claim that Samsung Bioepis decides to litigate despite our opposition to such litigation.
Other Established Brands This portfolio covers Organon's other mature products, some of which remain significant to Organon's product portfolio, including products such as Proscar ® (finasteride) and Propecia ® (finasteride). Proscar , used for the treatment of symptomatic benign prostatic hyperplasia ("BPH") in men with an enlarged prostate, accounted for $101 million of revenues in 2022.
Other Established Brands This portfolio covers our other mature products, some of which remain significant to our product portfolio, including products such as Proscar ® (finasteride) and Propecia ® (finasteride). Proscar , used for the treatment of symptomatic benign prostatic hyperplasia ("BPH") in men with an enlarged prostate, accounted for $97 million of revenues in 2023.
Contraception Organon's contraception portfolio currently consists of the following products, which work to prevent pregnancy primarily by suppressing ovulation: Nexplanon is a prescription medication for the prevention of pregnancy in women lasting up to three years and is reversible upon removal.
Contraception Our contraception portfolio currently consists of the following products, which work to prevent pregnancy primarily by suppressing ovulation: Nexplanon is a prescription medication for the prevention of pregnancy in women. The product lasts up to three years and is reversible upon removal.
Elonva belongs to the group of gonadotrophic hormones used by women trying to get pregnant using IVF. Ganirelix Acetate Injection (marketed in certain countries outside the United States as Orgalutran™ ¹ ) is an injectable ("GnRH") antagonist. Ganirelix Acetate Injection is used in fertility treatments in combination with FSH.
Elonva belongs to the group of gonadotrophic hormones used by women trying to get pregnant using IVF. Ganirelix acetate injection (marketed in certain countries outside the United States as Orgalutran™ ) is an injectable ("GnRH") antagonist.
In markets with historically low rates of health care spending, Organon encourages those governments to increase their investments and adopt market reforms to improve their citizens' access to appropriate health care, including medicines.
In markets with historically low rates of health care spending, we encourage those governments to increase their investments and adopt market reforms to improve their citizens' access to appropriate health care, including medicines.
An adverse result in a patent dispute can preclude commercialization of products or negatively affect sales of existing products and could result in the payment of royalties or in the recognition of an impairment charge with respect to intangible assets associated with certain products. Competitive pressures have intensified as pressures in the industry have grown.
An adverse result in a patent dispute can preclude commercialization of products or negatively affect sales of existing products and could result in the payment of royalties or in the recognition of an impairment charge with respect to intangible assets associated with certain products. Competitive pressures continue to intensify as the industry grows.
Samsung Bioepis reached a global settlement with Roche in June 2019 allowing for Organon to launch Ontruzant worldwide. Organon has worldwide commercialization rights to Ontruzant in countries outside of Korea and China. Established Brands Portfolio Established brands represents a broad portfolio of mature brands across multiple therapeutic areas and geographies that are generally beyond market exclusivity.
Samsung Bioepis reached a global settlement with Roche in June 2019, thereby allowing us to launch Ontruzant worldwide. We have worldwide commercialization rights to Ontruzant in countries outside of Korea and China. Established Brands Portfolio Established brands represents a broad portfolio of mature brands across multiple therapeutic areas and geographies that are generally beyond market exclusivity.
Henlius will be responsible for development and, if approved, will supply the products to Organon. • OG-6219 is an investigational agent being evaluated as a potential treatment for endometriosis. Endometriosis-related pain is a common and chronic condition that affects up to one in 10 women of reproductive age, causes abdominal pain and is associated with infertility.
Henlius will be responsible for development and, if approved, will supply the products to us. • OG-6219 is an investigational agent being evaluated as a potential treatment for endometriosis. Endometriosis-related pain is a common and chronic condition that affects up to one in 10 women of reproductive age.
Organon has significant insight into the use of newer technologies and the use of valuable patient services such as patient adherence programs that can further drive value in collaboration with Organon's trade partners. Organon does not have any single customer that, if such customer were lost, would have a material adverse effect on Organon's business.
We have significant insight into the use of newer technologies and the use of valuable patient services such as patient adherence programs that can further drive value in collaboration with our trade partners. We do not have any single customer that, if such customer were lost, would have a material adverse effect on our business.
Organon may terminate the agreement upon 60 days' written notice to Samsung Bioepis for a particular presentation of a product in a region if Samsung Bioepis's revenue share for such product presentation in such region exceeds a certain contractual threshold.
We may terminate the agreement upon 60 days' written notice to Samsung Bioepis for a particular presentation of a product in a region if Samsung Bioepis's revenue share for such product presentation in such region exceeds a certain -15- Table of Contents contractual threshold.
Some potential risks are integrated into Organon's business planning, including investment in reducing energy, water use and greenhouse gas emissions. Organon does not believe these potential risks are material to its business at this time. Organon is not aware of any compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on Organon's business.
Some potential risks are integrated into our business planning, including investment in reducing energy, water use and greenhouse gas emissions. We do not believe these potential risks are material to our business at this time. We are not aware of any compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on our business.
Marvelon and Mercilon are not approved or marketed in the United States but are available in certain countries outside the United States, including now in China and Vietnam as a result of a recent transaction with Bayer Healthcare where Organon gained rights to Marvelon and Mercilon in these markets.
Marvelon and Mercilon are not approved or marketed in the United States but are available in certain countries outside the United States, including in China and Vietnam as a result of the transaction with Bayer Healthcare in which we gained rights to Marvelon and Mercilon in these markets.
Organon maintains an investor relations page on its website ( www.organon.com ) where such filings made pursuant to Section 13(a) or 15(d) of the Exchange Act may be accessed free of charge as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
We maintain an investor relations page on our website ( www.organon.com ) where such filings made pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), may be accessed free of charge as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
Organon has worldwide commercialization rights to HXL11 in countries except for China including Hong Kong, Macau and Taiwan. Henlius will be responsible for development and, if approved, will supply the products to Organon. • HLX11, a biosimilar to Roche's Perjeta² (pertuzumab) is an anti-HER2 domain II humanized monoclonal antibody biosimilar.
We have worldwide commercialization rights to HXL14 in countries except for China (including Hong Kong, Macau and Taiwan). Henlius will be responsible for development and, if approved, will supply the products to us. • HLX11, a biosimilar candidate to Roche's Perjeta² (pertuzumab) , is an anti-HER2 domain II humanized monoclonal antibody.
The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of coverage. In particular, Organon considers the patents that cover the rod technology in Nexplanon to be material to Organon's business.
The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of coverage. In particular, we consider the patents that cover the rod technology in Nexplanon to be material to our business.
Failure by Organon or by any of its third-party partners, including suppliers, manufacturers and distributors, to comply with EU laws and the related national laws of individual EU Member States governing the conduct of clinical trials, manufacturing approval, marketing authorization of pharmaceutical products and marketing of such products, both before and after grant of marketing authorization, statutory health insurance, bribery and anti-corruption or other applicable regulatory requirements, may result in administrative, civil or criminal penalties.
Failure by us or by any of our third-party partners, including suppliers, manufacturers and distributors, to comply with laws governing the conduct of clinical trials, manufacturing approval, marketing authorization of pharmaceutical products and marketing of such products, both before and after grant of marketing authorization, statutory health insurance, bribery and anti-corruption or other applicable regulatory requirements, may result in administrative, civil or criminal penalties.
Distribution Organon's global network enables it to distribute products directly and indirectly to patients in more than 140 countries and territories, including through Organon's regional distribution centers. Organon sells its pharmaceutical products primarily to drug wholesalers and retailers, hospitals, clinics, government agencies, pharmacies, and managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions.
Distribution Our global network enables us to distribute products directly and indirectly to patients in more than 140 countries and territories, including through our regional distribution centers. We sell our pharmaceutical products primarily to drug wholesalers and retailers, hospitals, clinics, government agencies, pharmacies, and managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions.
To remain competitive, the additional resources required to meet market challenges include quality control, flexibility to meet buyer specifications, an efficient distribution system and a strong technical information service. Organon plans to acquire and market products through external alliances, such as licensing arrangements and collaborations, and has designed its sales and marketing efforts to address changing industry conditions.
To remain competitive, the additional resources required to meet market challenges include quality control, flexibility to meet buyer specifications, an efficient distribution system and a strong technical information service. We plan to continue to acquire and market products through external alliances, such as licensing arrangements and collaborations, and have designed our sales and marketing efforts to address changing industry conditions.
Expenditures for remediation and environmental liabilities are estimated to be approximately $16 million in the aggregate for the years 2023 through 2027. For additional information, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates" and Note 12 "Contingencies —Environmental Matters" to the Financial Statements included in this report.
Expenditures for remediation and environmental liabilities are estimated to be approximately $15 million in the aggregate for the years 2024 through 2028. For additional information, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates" and Note 20 "Contingencies —Environmental Matters" to the Financial Statements included in this report.
See "Business—Organon's Biosimilars Products" for a description of each product and the geographic areas in which Organon has an exclusive license for commercialization activities. Under the Samsung Bioepis Agreement, Samsung Bioepis is responsible for pre-clinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates.
See "Business—Biosimilars Portfolio" for a description of each product and the geographic areas in which we have an exclusive license for commercialization activities. Under the Samsung Bioepis Agreement, Samsung Bioepis is responsible for pre-clinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates.
Organon also sells its pharmaceutical products through third-party distributors and agents for smaller markets. Organon's professional representatives communicate the effectiveness, safety and value of Organon's pharmaceutical products to health care professionals in private practice, group practices, hospitals and managed care organizations. Manufacturing Capabilities and Global Supply Chain Organon has high quality manufacturing capabilities, including development and improvement of manufacturing processes.
We also sell our pharmaceutical products through third-party distributors and agents for smaller markets. Our professional representatives communicate the effectiveness, safety and value of our pharmaceutical products to health care professionals in private practice, group practices, hospitals and managed care organizations. Manufacturing Capabilities and Global Supply Chain We have high quality manufacturing capabilities, including development and improvement of manufacturing processes.
Item 1. Business Overview Organon & Co. ("Organon" or the "Company") is a global health care company with a focus on improving the health of women throughout their lives. Organon develops and delivers innovative health solutions through a portfolio of prescription therapies and medical devices within women's health, biosimilars and established brands (the "Organon Products").
Item 1. Business Overview Organon & Co. ("Organon," the "Company," "we," "our," or "us") is a global health care company with a focus on improving the health of women throughout their lives. We develop and deliver innovative health solutions through a portfolio of prescription therapies and medical devices within women's health, biosimilars and established brands.
Organon has a portfolio of more than 60 medicines and products across a range of therapeutic areas. The Company sells these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions.
We have a portfolio of more than 60 medicines and products across a range of therapeutic areas. We sell these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions.
The Company's operations include the following product portfolios: • Women's Health : Organon's women's health products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon® (etonogestrel implant) (sold as Implanon NXT™ ¹ in some countries outside the United States) and NuvaRing® (estonogestrel/ethinyl estradiol vaginal ring), and fertility, with key brands such as Follistim® AQ (follitropin beta injection) and Elonva™ ¹ (corifollitropin alfa).
Our operations include the following product portfolios: • Women's Health : Our women's health products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon® (etonogestrel implant) (sold as Implanon NXT ™ in some countries outside the United States) and NuvaRing® (etonogestrel / ethinyl estradiol vaginal ring), and fertility, with key brands such as Follistim AQ® (follitropin beta injection) (marketed in most countries outside the United States as Puregon ™).
Fertility Organon's fertility brands include the following products, which are primarily used for in vitro fertilization ("IVF") treatment cycles: Follistim AQ, which is marketed as Puregon ™ ¹ in most countries outside the United States, contains human follicle-stimulating hormone ("FSH") and is used to promote the development of multiple ovarian follicles in assisted reproduction technology procedures, such as IVF, embryo transfer, gamete intrafallopian transfer and intracytoplasmic sperm injection.
Fertility Our fertility brands include the following products, which are primarily used for in vitro fertilization ("IVF") treatment cycles: Follistim AQ, which is marketed as Puregon in most countries outside the United States, contains human follicle-stimulating hormone ("FSH") and is used to promote the development of multiple ovarian follicles in assisted reproduction technology procedures.
Organon's research and development organization is supporting these products through global registration, pharmacovigilance, medical affairs and health economics and outcomes research activities. As of December 31, 2022, Organon has licenses to commercialize the following development stage products: • An investigational non-hormonal, on-demand contraceptive candidate.
Our research and development organization is supporting these products through global registration, pharmacovigilance, medical affairs and health economics and outcomes research activities. As of December 31, 2023, we have licenses to commercialize the following development stage products: • An investigational non-hormonal, on-demand contraceptive candidate.
Organon has a trade channel strategy that provides a robust capability framework for Organon's activities, including in the selection of channel partners, commercial terms and supportive health care services that promote the efficient, safe and cost-effective delivery of Organon's products.
We have a trade channel strategy that provides a robust capability framework for our activities, including the selection of channel partners, commercial terms and supportive health care services that promote the efficient, safe and cost-effective delivery of our products.
Hadlima (SB5) Hadlima (adalimumab-bwwd) is a tumor necrosis factor ("TNF") antagonist biosimilar to AbbVie's Humira (adalimumab) product, approved for use in certain patients for the treatment of rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, adult Crohn's disease, ulcerative colitis, and plaque psoriasis. Organon's current United States label for Hadlima does not include hidradenitis suppurativa and uveitis indications.
Hadlima (SB5) Hadlima (adalimumab-bwwd) is a tumor necrosis factor ("TNF") antagonist biosimilar to AbbVie's Humira (adalimumab) product, approved for use in certain patients for the treatment of rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, adult Crohn's disease, ulcerative colitis, plaque psoriasis, suppurativa and uveitis.
Organon's women's health products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon and NuvaRing® , and fertility, with key brands such as Follistim AQ and Elonva .
Our women's health products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon and NuvaRing , and fertility, with key brands such as Follistim AQ and Elonva TM 1 (corifolitropina alfa) .
Organon will obtain exclusive worldwide rights to develop and commercialize the product. • HLX14, a biosimilar to Amgen's Prolia²/Xgeva² (denosumab) is a recombinant anti-RANKL human monoclonal antibody Prolia is indicated for postmenopausal women with osteoporosis at high risk for fracture, and Xgeva is indicated for the prevention of fractures in patients with multiple myeloma and in patients with bone metastases from solid tumors.
We obtained exclusive worldwide rights to develop and commercialize the product. • HLX14, a biosimilar candidate to Amgen's Prolia²/Xgeva² (denosumab), is a recombinant anti-RANKL human monoclonal antibody, Prolia is indicated for the treatment of postmenopausal women with osteoporosis at high risk for fracture, and Xgeva is indicated for the prevention of skeletal-related events in patients with multiple myeloma and in patients with bone metastases from solid tumors.
Organon has worldwide commercialization rights to Hadlima in countries outside the EU, Korea, China, Turkey, and Russia. Samsung Bioepis reached a global settlement with AbbVie permitting Organon to launch Hadlima in the United States in June 2023 and outside the United States starting in 2021.
We have worldwide commercialization rights to Hadlima in countries outside the EU, Korea, China, Turkey, and Russia. Samsung Bioepis reached a global settlement with AbbVie permitting us to launch Hadlima outside of the United States starting in 2021 and in the United States in July 2023.
Global Supply Chain Organon manages its global supply chain through a centralized supply planning organization and regional demand management, distribution and logistics teams structured around North America, Europe, Middle East and Africa, Asia-Pacific and Latin America.
Global Supply Chain We manage our global supply chain through a centralized supply planning organization and regional demand management, with distribution and logistics teams structured around North America, Europe, Middle East and Africa, Asia-Pacific and Latin America.
As part of its growth strategy, Organon seeks to continue to identify scientific collaborations and acquisitions to build an industry leading pipeline across Women's Health with both early- and late-stage assets that enables scientific and commercial leadership and help solidify our position as a Women's Health partner of choice.
Research and Development As part of our growth strategy, we seek to continue to identify scientific collaborations and acquisitions to further build and maintain an industry leading pipeline across Women's Health with both early- and late-stage assets that enables scientific and commercial leadership and continue to solidify our position as a Women's Health partner of choice.
Progestin-only products like Cerazette¹ are typically used by women wanting hormonal contraception for whom estrogen-containing contraceptives may not be medically appropriate. Cerazette¹ is not approved or marketed in the United States but is available in certain countries outside the United States.
Cerazette™ ¹ (desogestrel) is a progestin-only, daily pill used to prevent pregnancy in women. Progestin-only products, like Cerazette, are typically used by women who want hormonal contraception but for whom estrogen-containing contraceptives may not be medically appropriate. Cerazette is not approved or marketed in the United States but is available in certain countries outside the United States.
Organon's principal manufacturing capabilities include formulation, fill-and-finishing of products, packaging of products, and distribution and supply to patients in more than 140 countries and territories. -10- Table of Contents Internal Manufacturing Capabilities Organon owns and operates six manufacturing sites, as shown in the table below, where it manufactures a range of pharmaceutical products, including hormonal products, sterile formulations, certain medical device combination and standalone medical device products .
Our principal manufacturing capabilities include formulation, fill-and-finishing of products, packaging of products, and distribution and supply to patients in more than 140 countries and territories. -9- Table of Contents Internal Manufacturing Capabilities We own and operate six manufacturing sites, as shown in the table below, where we manufacture a range of pharmaceutical products, including hormonal products, sterile formulations, certain medical device combination and standalone medical device products .
Follistim AQ belongs to the group of gonadotrophic hormones used by women trying to get pregnant using IVF. Elonva is an ovarian follicle stimulant with the same mechanism of action as recombinant FSH, but characterized by a prolonged duration of FSH activity.
Such procedures include IVF, embryo transfer, gamete intrafallopian transfer and intracytoplasmic sperm injection. Follistim AQ belongs to the group of gonadotrophic hormones used by women trying to get pregnant using IVF. Elonva is an ovarian follicle stimulant with the same mechanism of action as recombinant FSH, but is characterized by a prolonged duration of FSH activity.
Additionally, Organon continues to assess commercialization opportunities in conditions unique to women or disproportionally affecting women, such as Jada acquired as a part of the acquisition of Alydia Health and the licensing agreement with Daré for global commercial rights to Xaciato .
Additionally, we continue to assess commercialization opportunities in conditions that are either unique to women or disproportionally affect women, such as Jada, acquired as a part of our acquisition of Alydia Health and the licensing agreement with Daré for global commercial rights to Xaciato .
Organon's portfolio also includes Cozaar ® (losartan) and Hyzaar ® (losartan / hydrochlorothiazide), which are cardiovascular drugs for the treatment of hypertension. Respiratory In 2022, Organon's respiratory portfolio accounted for $1.0 billion, or approximately 17% of revenues, with approximately 80%, or $826 million, generated outside the United States.
Our cardiovascular portfolio also includes Cozaar ® (losartan) and Hyzaar ® (losartan / hydrochlorothiazide), which are cardiovascular drugs for the treatment of hypertension. Respiratory In 2023, our respiratory portfolio accounted for $1.1 billion, or approximately 17% of our total revenues, with approximately 79%, or $843 million, generated outside the United States.
Organon has one quality management system deployed globally that enables the development, manufacturing, packaging, labeling, handling, and distribution of Organon's products such that they conform to applicable regulatory requirements in every country it serves.
We have one quality management system deployed globally that enables the development, manufacturing, packaging, labeling, handling, and distribution of our products, such that they conform to applicable regulatory requirements in every country we serve.
While the expiration of a product patent normally results in a loss of market exclusivity for the covered pharmaceutical product, commercial benefits may continue to be derived from: (i) later-granted patents on processes and intermediates related to the -12- Table of Contents most economical method of manufacture of the active ingredient of such product; (ii) patents relating to the use or delivery of such product; (iii) patents relating to novel compositions and formulations; and (iv) in the United States and certain other countries, market or data exclusivity that may be available under relevant law.
While the expiration of a product patent normally results in a loss of market exclusivity for the covered pharmaceutical product, commercial benefits may continue to be derived from, for example: (i) later-granted patents on processes and intermediates related to the most economical method of manufacture of the active ingredient of such product; (ii) patents relating to the use or delivery of such product; and (iii) patents relating to novel compositions and formulations.
The marketed portfolio consists of three immunology products, Hadlima™ (Originator brand name: Humira ²; generic name: adalimumab), Brenzys ™ ¹ (Originator brand name: Enbre l²; generic name: etanercept), and Renflexis ® (Originator brand name: Remicade ²; generic name: infliximab) and, two oncology products, Ontruzant ® (Originator brand name: Herceptin ²; generic name: trastuzumab) and Aybintio ™ ¹ (Originator brand name: Avastin ²; generic name: bevacizumab).
The marketed portfolio consists of three immunology products, Hadlima (Originator brand name: Humira ²; generic name: adalimumab), Brenzys (Originator brand name: Enbre l²; generic name: etanercept), and Renflexis (Originator brand name: Remicade ²; generic name: infliximab).
Organon's established brands portfolio contributed approximately $3.9 billion of revenues in 2022, of which approximately 92%, or $3.6 billion, generated outside the United States. Generic competition varies significantly across geographies. Cardiovascular In 2022, Organon's cardiovascular portfolio accounted for $1.5 billion, or approximately 24%, of revenues, nearly all of which were generated outside the United States.
Our established brands portfolio contributed approximately $3.8 billion of our total revenues in 2023, with approximately 93%, or $3.6 billion, generated outside the United States. Generic competition varies significantly across geographies. Cardiovascular In 2023, our cardiovascular portfolio accounted for $1.5 billion, or approximately 23%, of our total revenues, nearly all of which were generated outside the United States.
Organon acquired OG-6219 through its acquisition of Forendo Pharma. • OG-7191 is a preclinical program targeting polycystic ovarian syndrome ("PCOS"), one of the most common women's health conditions often associated with metabolic disorders, hyperandrogenism and infertility. As there are currently no approved therapies for PCOS, this represents another priority disease area for Organon.
The condition causes abdominal pain and is associated with infertility. -8- Table of Contents • OG-7191 is a preclinical program targeting polycystic ovarian syndrome ("PCOS"), one of the most common women's health conditions often associated with metabolic disorders, hyperandrogenism and infertility. As there are currently no approved therapies for PCOS, this represents another priority disease area for us.
Worldwide, all of Organon's important products are sold under trademarks that are considered in the aggregate to be of material importance. Trademark protection continues in some countries as long as used; in other countries, as long as registered. Registration is for fixed terms and can be renewed indefinitely.
Worldwide, all of our important products are sold under trademarks that are considered in the aggregate to be of material importance. Trademark protection continues in some countries as long as used; in other countries, as long as registered.
Organon's sales for each of its product groups are as follows: Year Ended December 31, ($ in millions) 2022 2021 2020 Women's Health $ 1,673 $ 1,612 $ 1,555 Biosimilars 481 424 330 Established Brands 3,874 4,068 4,540 In 2022, Organon recorded revenues of $6.2 billion.
Our sales for each of our product groups are as follows: Year Ended December 31, ($ in millions) 2023 2022 2021 Women's Health $ 1,702 $ 1,673 $ 1,612 Biosimilars 593 481 424 Established Brands 3,847 3,874 4,068 In 2023, we recorded revenues of $6.3 billion.
Organon has established benefit and incentive compensation plans, including comprehensive medical and life insurance coverage, 401(k) matching programs and other incentive compensation programs that Organon believes align employee incentives directly with Organon's future performance. As of December 31, 2022, Organon had approximately 10,000 employees worldwide with approximately 1,650 (16.5%) employees in the United States (including Puerto Rico).
We have established benefit and incentive compensation plans, including comprehensive medical and life insurance coverage, 401(k) matching programs and other incentive compensation programs that we believe aligns employee incentives directly with our future performance. -10- Table of Contents As of December 31, 2023, we had approximately 10,000 employees worldwide with approximately 1,700 (16%) employees in the United States (including Puerto Rico).
There can be no assurance that any EU Member State will allow favorable pricing, reimbursement and market access conditions for any of Organon's products, or that it will be feasible to conduct additional cost-effectiveness studies, if required.
There can be no assurance that any EU Member State will allow favorable pricing, reimbursement and market access conditions for any of our products, or that it will be feasible to conduct additional cost-effectiveness studies, if required. Japan In Japan, the pharmaceutical industry is subject to government-mandated biennial price reductions of pharmaceutical products.
Organon also continues to manufacture a range of Merck products at each of Organon's six manufacturing sites pursuant to agreements with Merck entered into at the time of the spinoff.
We also manufacture a range of Merck & Co., Inc. ("Merck") products at each of our six manufacturing sites pursuant to agreements with Merck entered into at the time of our 2021 spinoff from Merck (the "spinoff").
Organon's portfolio also includes several products that treat seasonal allergic rhinitis, including: Singulair , Nasonex ® (mometasone), and Clarinex ® ² (desloratadine), which is marketed as Aerius™ ¹ outside of the United States. Organon currently owns prescription rights for Clarinex in the United States and Aerius in markets around the world.
Our portfolio also includes several products that treat seasonal allergic rhinitis, including: Singulair , Nasonex ® (mometasone) and Clarinex ® ² (desloratadine), which is marketed as Aerius™ outside of the United States.
Products Organon is engaged in developing and delivering innovative health solutions through a diverse portfolio of products serving patient needs across multiple therapeutic areas and product categories, consisting of women's health, biosimilars and established brands. These portfolios are further described below, together with select details for products within each group.
These products serve patient needs across multiple therapeutic areas and product categories, consisting of women's health, biosimilars and established brands. These portfolios are further described below, together with select details for products within each group.
Third-Party Agreements Samsung Bioepis Development and Commercialization Agreement On February 18, 2013, Merck entered into a development and commercialization agreement with Samsung Bioepis (as subsequently amended, the "Samsung Bioepis Agreement"). All of the rights and obligations of Merck under the Samsung Bioepis Agreement were transferred to Organon in connection with the spinoff.
Third-Party Agreements Samsung Bioepis Development and Commercialization Agreement Merck had a development and commercialization agreement with Samsung Bioepis (as subsequently amended, the "Samsung Bioepis Agreement") for which all of the rights and obligations of Merck were transferred to us in connection with the spinoff.

… 319 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

204 edited+31 added−65 removed26 unchanged
Biggest changeFor a more complete discussion of the material risks facing Organon's business, please see below: Risks Related to Organon's Business • Organon has a limited history of operating as an independent company, and its historical financial results included elsewhere in this report are not necessarily representative of what its actual financial position or results of operations would have been as an independent company and may not be a reliable indicator of its future results. • Key products generate a significant amount of Organon's profits and cash flows, and any events that adversely affect the markets for Organon's leading products could adversely affect its results of operations and financial condition. • Organon faces continued pricing pressure with respect to its products. • Organon faces intense competition from competitors' products. • Organon has limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand its innovative pipeline and early discovery and research capabilities, which may limit its ability to discover or develop new products or expand its existing products into new markets to replace the sales of products that lose patent protection and therefore Organon may not be able to maintain its current levels of profitability. • Organon may experience difficulties identifying acquisition opportunities or completing such transactions. • Organon or its partners may fail to demonstrate the safety and efficacy of any of its product candidates in pre-clinical and clinical trials, which would prevent or delay development, regulatory approval or clearance, and commercialization of Organon's product candidates. • Organon may be unable to market its pharmaceutical products or medical devices if it does not obtain and maintain required regulatory approvals or marketing authorizations. -28- Table of Contents • Developments following regulatory approval or marketing authorization may adversely affect sales of Organon's pharmaceutical products or medical devices. • Issues with product quality could have an adverse effect on our business or cause a loss of customer confidence in us or our products, among other negative consequences. • Certain of Organon's products currently benefit from patent protection and market exclusivity.
Biggest changeFor a more complete discussion of the material risks facing our business, please see below: Risks Related to Our Business • Key products generate a significant amount of our profits and cash flows, and any events that adversely affect the markets for our leading products could adversely affect our results of operations and financial condition. • We face continued pricing pressure with respect to our products. -16- Table of Contents • We face intense competition from competitors' products. • We have limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand our innovative pipeline and early discovery and research capabilities, which may limit our ability to discover or develop new products or expand our existing products into new markets to replace the sales of products that lose patent protection and therefore we may not be able to maintain our current levels of profitability. • Our growth could be limited by the scope of our intellectual property licenses for certain women's health care products. • We may experience difficulties identifying acquisition opportunities or completing such transactions. • We or our partners may fail to demonstrate the safety and efficacy of any of our product candidates in pre-clinical and clinical trials, which would prevent or delay development, regulatory approval or clearance, and commercialization of our product candidates. • We may be unable to market our pharmaceutical products or medical devices if we do not obtain and maintain required regulatory approvals or marketing authorizations. • Developments following regulatory approval or marketing authorization may adversely affect sales of our pharmaceutical products or medical devices. • Issues with product quality could have an adverse effect on our business or cause a loss of customer confidence in us or our products, among other negative consequences. • Certain of our products currently benefit from patent protection and market exclusivity.
Changes to the health care system enacted as part of health care reform in the United States, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid and private sector beneficiaries, could result in further pricing pressures.
Changes to the health care system enacted as part of health care reform in the United States, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid and private sector beneficiaries, could result in further pricing pressures.
Each of Merck and Organon generally will be responsible for any tax-related losses imposed on Merck or Organon as a result of the failure of a transaction to qualify for tax-free treatment, to the extent that the failure to so qualify is attributable to actions, events or transactions relating to Merck's or Organon's respective stock, assets or business, or a breach of the relevant covenants made by Merck or Organon in the tax matters agreement.
Each of Merck and Organon generally will be responsible for any tax-related losses imposed on Merck or Organon, respectively, as a result of the failure of a transaction to qualify for tax-free treatment, to the extent that the failure to so qualify is attributable to actions, events or transactions relating to Merck's or Organon's respective stock, assets or business, or a breach of the relevant covenants made by Merck or Organon in the tax matters agreement.
For example, Organon's amended and restated certificate of incorporation and bylaws: • permit Organon's Board of Directors to issue one or more series of preferred stock with such powers, rights and preferences as the Board of Directors shall determine; • subject to a three-year sunset starting with Organon's first annual meeting of stockholders, provide for a classified Board of Directors, with each class serving a staggered three-year term, which could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provide that as long as Organon's Board of Directors is classified, Organon's directors can be removed for cause only; • prohibit stockholder action by written consent; • provide that special meetings of stockholders can be called only by the Board of Directors; • provide that vacancies on the Board of Directors could be filled only by a majority vote of directors then in office, even if less than a quorum, or by a sole remaining director; and • establish advance notice requirements for stockholder proposals and nominations of candidates for election as directors.
For example, our amended and restated certificate of incorporation and bylaws: • permit our Board of Directors to issue one or more series of preferred stock with such powers, rights and preferences as the Board of Directors shall determine; • subject to a three-year sunset starting with our first annual meeting of stockholders, provide for a classified Board of Directors, with each class serving a staggered three-year term, which could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provide that as long as our Board of Directors is classified, our directors can be removed for cause only; • prohibit stockholder action by written consent; • provide that special meetings of stockholders can be called only by the Board of Directors; • provide that vacancies on the Board of Directors could be filled only by a majority vote of directors then in office, even if less than a quorum, or by a sole remaining director; and • establish advance notice requirements for stockholder proposals and nominations of candidates for election as directors.
Certain developments may decrease demand for Organon's products, including the following: • scrutiny of advertising and promotion; • negative results in post-approval Phase 4 trials or other studies; • review by regulatory authorities or other expert bodies of Organon's products that are already marketed based on new data or other developments in the field; • the recall, loss or modification of regulatory approval or marketing authorization of products that are already marketed; and • changing government regulations regarding safety, efficacy, quality or labeling.
Certain developments may decrease demand for our products, including the following: • scrutiny of advertising and promotion; • negative results in post-approval Phase 4 trials or other studies; • review by regulatory authorities or other expert bodies of our products that are already marketed based on new data or other developments in the field; • the recall, loss or modification of regulatory approval or marketing authorization of products that are already marketed; and • changing government regulations regarding safety, efficacy, quality or labeling.
Enforcement activities under the laws and regulations described above may subject Organon to administrative and legal proceedings and actions, which could result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, preclusion from participating in public tenders, breach of contract and fraud litigation, reputational harm, and other consequences.
Enforcement activities under the laws and regulations described above may subject us to administrative and legal proceedings and actions, which could result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, preclusion from participating in public tenders, breach of contract and fraud litigation, reputational harm, and other consequences.
In addition, in the United States, larger customers have received higher rebates on drugs in certain highly competitive categories. Organon must also compete to be placed on formularies of managed care organizations and other payors. Exclusion of a product from a formulary can lead to reduced usage in the population covered by the managed care organization or other payor.
In addition, in the United States, larger customers have received higher rebates on drugs in certain highly competitive categories. We must also compete to be placed on formularies of managed care organizations and other payors. Exclusion of a product from a formulary can lead to reduced usage in the population covered by the managed care organization or other payor.
This volatility is caused by a variety of factors, including, among the other risks described in this report: • Organon's liquidity and ability to obtain additional capital, including the market's reaction to any capital-raising transaction Organon may pursue; • declining working capital to fund operations, or other signs of financial uncertainty; • any negative decisions by the FDA or comparable regulatory bodies outside the United States regarding Organon's products and product candidates; • market assessments of any strategic transaction or collaboration arrangement Organon may pursue; • sales of substantial amounts of Organon's Common Stock, or the perception that substantial amounts of Organon's Common Stock may be sold, by stockholders in the public market; • changes in earnings estimated by securities analysts or Organon's ability to meet those estimates; • issuance of new or updated research or reports by securities analysts or changed recommendations for Organon's Common Stock; and • significant advances made by competitors that adversely affect Organon's competitive position.
This volatility is caused by a variety of factors, including, among the other risks described in this report: • our liquidity and ability to obtain additional capital, including the market's reaction to any capital-raising transaction we may pursue; • declining working capital to fund operations, or other signs of financial uncertainty; • any negative decisions by the FDA or comparable regulatory bodies outside the United States regarding our products and product candidates; • market assessments of any strategic transaction or collaboration arrangement we may pursue; • sales of substantial amounts of our Common Stock, or the perception that substantial amounts of our Common Stock may be sold, by stockholders in the public market; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • issuance of new or updated research or reports by securities analysts or changed recommendations for our Common Stock; and • significant advances made by competitors that adversely affect our competitive position.
These adverse events could include increased costs associated with manufacturing, product shortages, increased generic or over-the-counter availability of Organon's products or competitive products, the discovery of previously unknown side effects, results of post-approval trials, increased competition from the introduction of new, more effective treatments and discontinuation or removal from the market of these products for any reason.
These adverse events could include increased costs associated with manufacturing, product shortages, increased generic or over-the-counter availability of our products or competitive products, the discovery of previously unknown side effects, results of post-approval trials, increased competition from the introduction of new, more effective treatments and discontinuation or removal from the market of these products for any reason.
Organon's ability to successfully execute its growth strategy in this area is subject to numerous risks, including: • uncertainty of the development of a market for such products; • trends relating to, or the introduction or existence of, competing products, technologies or alternative treatments or therapies that may be more effective, safer or easier to use than Organon's products, technologies, treatments or therapies; • the perception of Organon's products as compared to other products; • recommendation and support for the use of Organon's products or treatments by influential customers, such as obstetricians, gynecologists, reproductive endocrinologists and treatment centers; • changes in government policy or regulations could impair or repeal contraception coverage mandates under the ACA or state laws, which may affect payments to Organon or impose additional coverage limitations or cost-sharing obligations on its patients; • the availability and extent of data demonstrating the clinical efficacy of Organon's products or treatments; • competition, including the presence of competing products sold by companies with longer operating histories, more recognizable names and more established distribution networks; and • other technological developments.
Our ability to successfully execute our growth strategy in this area is subject to numerous risks, including: • uncertainty of the development of a market for such products; • trends relating to, or the introduction or existence of, competing products, technologies or alternative treatments or therapies that may be more effective, safer or easier to use than our products, technologies, treatments or therapies; • the perception of our products as compared to other products; • recommendation and support for the use of our products or treatments by influential customers, such as obstetricians, gynecologists, reproductive endocrinologists and treatment centers; • changes in government policy or regulations could impair or repeal contraception coverage mandates under the ACA or state laws, which may affect payments to us or impose additional coverage limitations or cost-sharing obligations on our patients; • the availability and extent of data demonstrating the clinical efficacy of our products or treatments; • competition, including the presence of competing products sold by companies with longer operating histories, more recognizable names and more established distribution networks; and • other technological developments.
Likewise, if previously unknown side effects, adverse events, malfunctions or other quality or safety concerns are discovered or if there is an increase in negative publicity regarding known side effects of any of Organon's products, it could significantly reduce demand for the product or require it to take actions that could negatively affect sales, including initiating corrections of a marketed product or removing the product from the market, restricting Organon's distribution or applying for marketing authorization for labeling changes.
Likewise, if previously unknown side effects, adverse events, malfunctions or other quality or safety concerns are discovered or if there is an increase in negative publicity regarding known side effects of any of our products, it could significantly reduce demand for the product or require us to take actions that could negatively affect sales, including initiating corrections of a marketed product or removing the product from the market, restricting our distribution of the product or applying for marketing authorization for labeling changes.
Additionally, certain foreign governments have indicated that compulsory licenses to patents may be granted in the case of national emergencies or in other circumstances, which could diminish or eliminate sales and profits from those regions and negatively affect Organon's business and results of operations.
Additionally, certain foreign governments have indicated that compulsory licenses to patents may be granted in the case of national emergencies or in other circumstances, which could diminish or eliminate sales and profits from those regions and negatively affect our business and results of operations.
In addition, if products with intangible assets that were measured at fair value and capitalized in connection with acquisitions experience difficulties in the market that negatively affect product cash flows, Organon may recognize material non-cash impairment charges with respect to the value of those products.
In addition, if products with intangible assets that were measured at fair value and capitalized in connection with acquisitions experience difficulties in the market that negatively affect product cash flows, we may recognize material non-cash impairment charges with respect to the value of those products.
Such attacks are increasingly sophisticated and are made by groups and individuals with a wide range of motives and expertise, including state and quasi-state actors, criminal groups, "hackers" and others. These attacks could lead to loss of confidentiality, integrity and/or availability of Organon's data, applications or systems.
Such attacks are increasingly sophisticated and are made by groups and individuals with a wide range of motives and expertise, including state and quasi-state actors, criminal groups, "hackers" and others. These attacks could lead to loss of confidentiality, integrity and/or availability of our data, applications or systems.
Organon's indemnity obligations to Merck as set forth in the Separation and Distribution Agreement may be substantial. There could be significant income tax liability if the spinoff or certain related transactions are determined to be taxable for U.S. federal income tax purposes.
Our indemnity obligations to Merck as set forth in the Separation and Distribution Agreement may be substantial. There could be significant income tax liability if the spinoff or certain related transactions are determined to be taxable for U.S. federal income tax purposes.
Internal Revenue Code, except to the extent of any cash received in lieu of fractional shares of Organon Common Stock. The Tax Opinions are not binding on the Internal Revenue Service ("IRS"). Accordingly, the IRS may reach conclusions with respect to the spinoff that are different from the conclusions reached in the Tax Opinions.
Internal Revenue Code, except to the extent of any cash received in lieu of fractional shares of our Common Stock. The Tax Opinions are not binding on the Internal Revenue Service ("IRS"). Accordingly, the IRS may reach conclusions with respect to the spinoff that are different from the conclusions reached in the Tax Opinions.
Biosimilars carry unique regulatory risks and uncertainties, which could adversely affect Organon's results of operations and financial condition. There are unique regulatory risks and uncertainties related to biosimilars. The regulation of the testing, approval, safety, effectiveness, manufacturing, labeling and marketing of biosimilars are subject to regulation by the FDA, the EMA and other regulatory bodies.
Biosimilars carry unique regulatory risks and uncertainties, which could adversely affect our results of operations and financial condition. There are unique regulatory risks and uncertainties related to biosimilars. The regulation of the testing, approval, safety, effectiveness, manufacturing, labeling and marketing of biosimilars are subject to regulation by the FDA, the EMA and other regulatory bodies.
Maintaining the confidentiality, integrity, and availability of this confidential information (including trade secrets or other intellectual property, proprietary business information and personal information) is important to Organon's competitive business position. However, such information can be difficult to protect and could be compromised.
Maintaining the confidentiality, integrity, and availability of this confidential information (including trade secrets or other intellectual property, proprietary business information and personal information) is important to our competitive business position. However, such information can be difficult to protect and could be compromised.
Continued growth of Organon's business in China depends upon ongoing development of a favorable regulatory environment, sustained availability of Organon's currently marketed products within China, and Organon's ability to mitigate the impact of any trade impediments or adverse pricing controls.
Continued growth of our business in China depends upon ongoing development of a favorable regulatory environment, sustained availability of our currently marketed products within China, and our ability to mitigate the impact of any trade impediments or adverse pricing controls.
Any of these restrictions on Organon's ability to operate its business in its discretion could adversely affect its business by, among other things, limiting Organon's ability to adapt to changing economic, financial or industry conditions and to take advantage of corporate opportunities, including opportunities to obtain debt financing, repurchase stock, refinance or pay principal on Organon's outstanding debt, dispose of property, complete acquisitions for cash or debt, or make other investments.
Any of these restrictions on our ability to operate our business in our discretion could adversely affect our business by, among other things, limiting our ability to adapt to changing economic, financial or industry conditions and to take advantage of corporate opportunities, including opportunities to obtain debt financing, repurchase stock, refinance or pay principal on our outstanding debt, dispose of property, complete acquisitions for cash or debt, or make other investments.
Competitors' products may be equally safe and as effective as Organon's products but sold at a substantially lower price than Organon's products. Alternatively, Organon's competitors' products may be safer or more effective, more convenient to use, have better insurance coverage or reimbursement levels or be more effectively marketed and sold than Organon's products.
Competitors' products may be equally safe and as effective as our products but sold at a substantially lower price than our products. Alternatively, our competitors' products may be safer or more effective, more convenient to use, have better insurance coverage or reimbursement levels or be more effectively marketed and sold than our products.
Risks inherent in conducting a global business include: • changes in medical reimbursement policies and programs and pricing restrictions in key markets; • multiple regulatory requirements that could restrict Organon's ability to manufacture and sell its products in key markets; • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, tariffs, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • trade protection measures and import or export licensing requirements, including the imposition of trade sanctions or similar restrictions by the United States or other governments; -37- Table of Contents • financial risks, such as foreign currency exchange fluctuations, longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for Organon's products; • volatility of commodity prices, fuel, shipping rates that impact the costs and/or ability to supply Organon's products; • diminished protection of intellectual property in some countries; and • possible nationalization and expropriation.
Risks inherent in conducting a global business include: • changes in medical reimbursement policies and programs and pricing restrictions in key markets; • multiple regulatory requirements that could restrict our ability to manufacture and sell our products in key markets; • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, tariffs, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • trade protection measures and import or export licensing requirements, including the imposition of trade sanctions or similar restrictions by the United States or other governments; • financial risks, such as foreign currency exchange fluctuations, longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products; • volatility of commodity prices, fuel, shipping rates that impact the costs and/or ability to supply our products; • diminished protection of intellectual property in some countries; and • possible nationalization and expropriation.
In addition, Organon's operations and performance may be affected by political or civil unrest or military action. As a result of global economic conditions, some parties may delay or be unable to satisfy their payment or reimbursement obligations.
In addition, our operations and performance may be affected by political or civil unrest or military action. As a result of global economic conditions, some parties may delay or be unable to satisfy their payment or reimbursement obligations.
Organon's exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Our exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
In addition, Organon's amended and restated certificate of incorporation and bylaws include additional provisions that may have anti-takeover effects and may delay, deter or prevent a takeover attempt that Organon's stockholders might consider in their best interests.
In addition, our amended and restated certificate of incorporation and bylaws include additional provisions that may have anti-takeover effects and may delay, deter or prevent a takeover attempt that our stockholders might consider in their best interests.
Additionally, in December 2021, Organon signed a supplemental license with Merck that provides a limited expansion of the fields in which Organon may use the underlying technology of Nexplanon beyond contraception in exchange for milestone payments.
Additionally, in December 2021, we signed a supplemental license with Merck that provides a limited expansion of the fields in which we may use the underlying technology of Nexplanon beyond contraception in exchange for milestone payments.
In the United States, the FDA administers requirements covering the laboratory testing, clinical trials, approval, safety, effectiveness, manufacturing, labeling and marketing of prescription pharmaceuticals and medical devices. Regulation of Organon's pharmaceutical products outside the United States also is primarily focused on drug safety and effectiveness and, in many cases, reduction in the cost of drugs.
In the United States, the FDA administers requirements covering the laboratory testing, clinical trials, clearance, approval, safety, effectiveness, manufacturing, labeling and marketing of prescription pharmaceuticals and medical devices. Regulation of our pharmaceutical products outside the United States also is primarily focused on drug safety and effectiveness and, in many cases, reduction in the cost of drugs.
A breach of Organon's IT systems or its third-party providers' IT systems, such as cloud-based systems, or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use Organon's proprietary technology or information, and/or adversely affect Organon's business position.
A breach of our IT systems or our third-party providers' IT systems, such as cloud-based systems, or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery, other forms of deception, or any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business position.
In addition, Merck would recognize a taxable gain to the extent that the fair market value of Organon Common Stock exceeds Merck's tax basis in such stock on the date of the spinoff.
In addition, Merck would recognize a taxable gain to the extent that the fair market value of our Common Stock exceeds Merck's tax basis in such stock on the date of the spinoff.
Natural disasters, extreme weather and other conditions caused by or related to climate change could adversely impact our supply chain, including manufacturing and distribution networks, the availability and cost of raw materials and components, energy supply, transportation, or other inputs necessary for the operation of our business.
Natural disasters, extreme weather and other conditions caused by or related to climate change could adversely impact our supply chain, including manufacturing and distribution networks, the availability and cost of raw materials and components, energy supply, transportation, or other inputs -28- Table of Contents necessary for the operation of our business.
As a result of Organon's dependence on key products, any event that adversely affects any of these products or the markets for any of these products could adversely affect Organon's sales, results of operations or cash flows.
As a result of our dependence on key products, any event that adversely affects any of these products or the markets for any of these products could adversely affect our sales, results of operations or cash flows.
Foreign sales outside the EU (including in the UK) are subject to the foreign government regulations of the relevant jurisdiction, and Organon will need to obtain approval or marketing authorization by the appropriate regulatory authorities before it can commence clinical trials or marketing activities in those countries.
Foreign sales outside the EU (including in the UK) are subject to the foreign government regulations of the relevant jurisdiction, and we will need to obtain approval or marketing authorization by the appropriate regulatory authorities before we can commence clinical trials or marketing activities in those countries.
The regulatory approvals or marketing authorizations that Organon may receive for its pharmaceutical products and medical devices will require the submission of reports to regulatory authorities and on-going surveillance to monitor the safety and efficacy of its products, may contain significant limitations related to use restrictions for specified groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements.
The regulatory approvals or marketing authorizations that we may receive for our pharmaceutical products and medical devices will require the submission of reports to regulatory authorities and on-going surveillance to monitor the safety and efficacy of our products, may contain significant limitations related to use restrictions for specified groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements.
Summary of Risk Factors The following is a summary of the principal risks that could significantly and negatively affect Organon's business, prospects, financial conditions, or operating results.
Summary of Risk Factors The following is a summary of the principal risks that could significantly and negatively affect our business, prospects, financial conditions, or operating results.
The costs of compliance with such laws and regulations, or the negative results of non-compliance, could adversely affect Organon's business, cash flow, results of operations, financial condition or prospects.
The costs of compliance with such laws and regulations, or the negative results of non-compliance, could adversely affect our business, cash flow, results of operations, financial condition or prospects.
Organon may not be able to offset any sales losses for products that lose or do not have exclusivity by growing sales in other markets.
We may not be able to offset any sales losses for products that lose or do not have exclusivity by growing sales in other markets.
Continuing ownership of Merck Common Stock and continued participation in Merck benefit programs could create, or appear to create, potential conflicts of interest if Organon and Merck pursue the same corporate opportunities or face decisions that could have different implications for Organon and Merck.
Continuing ownership of Merck Common Stock and continued participation in Merck benefit programs could create, or appear to create, potential conflicts of interest if we and Merck pursue the same corporate opportunities or face decisions that could have different implications for us and Merck.
Organon's amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Organon's stockholders, and the United States federal district courts as the exclusive forum for claims under the Securities Act, which could limit Organon's stockholders' ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with Organon or its directors, officers or employees.
Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and the United States federal district courts as the exclusive forum for claims under the Securities Act, which could limit our stockholders' ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or employees.
When the patent protection and market exclusivity periods for such products expire, a significant and rapid loss of sales from those products is generally experienced. Expiry of patent protection and market exclusivity for products that contribute significantly to Organon's sales will adversely affect its business.
When the patent protection and market exclusivity periods for such products expire, a significant and rapid loss of sales from those products is generally experienced. Expiry of patent protection and market exclusivity for products that contribute significantly to our sales will adversely affect our business.
Organon's failures, or the failure of third parties, to comply with applicable regulations could result in sanctions being imposed on Organon, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocations, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions.
Our failures, or the failure of third parties, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocations, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions.
Even though Organon's Board of Directors consists of a majority of directors who are independent, and Organon's executive officers who were previously employees of Merck ceased to be employees of Merck in connection with the spinoff, some Organon executive officers and directors continue to have financial interests in Merck.
Even though our Board of Directors consists of a majority of directors who are independent, and our executive officers who were previously employees of Merck ceased to be employees of Merck in connection with the spinoff, some of our executive officers and directors continue to have financial interests in Merck.
Organon may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and Organon may not realize the expected benefits of any acquisition, license arrangement or strategic partnerships. Such opportunities may relate to products, technologies or operations with which Organon has limited or no historical experience.
We may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the expected benefits of any acquisition, license arrangement or strategic partnerships. Such opportunities may relate to products, technologies or operations with which we have limited or no historical experience.
Organon's ability to issue additional debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for Organon's products, if Organon's customers or suppliers are unable to pay amounts due to Organon or there are other significantly unfavorable changes in economic conditions.
Our ability to issue additional debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products, if our customers or suppliers are unable to pay amounts due to us or there are other significantly unfavorable changes in economic conditions.
It is possible that future recalls or similar developments could materially and adversely impact Organon's business, result of operations, and financial condition.
It is possible that future recalls or similar developments could materially and adversely impact our business, result of operations, and financial condition.
There are also new accountability requirements, such as maintaining a record of data processing, potentially conducting data protection impact assessments and appointing data protection officers.
There are also accountability requirements, such as maintaining a record of data processing, conducting data protection impact assessments and appointing data protection officers.
In addition, Organon may incur additional debt from time to time to finance acquisitions or for other purposes, subject to the restrictions contained in the documents that govern its indebtedness. Current or future levels of indebtedness may increase the possibility that Organon will be unable to generate cash sufficient to pay amounts due in respect of such indebtedness.
In addition, we may incur additional debt from time to time to finance acquisitions or for other purposes, subject to the restrictions contained in the documents that govern our indebtedness. Current or future levels of indebtedness may increase the possibility that we will be unable to generate cash sufficient to pay amounts due in respect of such indebtedness.
Merck may not satisfy its obligations under various transaction agreements that have been or will be executed as part of the spinoff, Organon may experience delays with approvals relating to the separation from Merck, or Organon may not have necessary systems and services in place when certain of the transition agreements expire.
Risks Related to the Spinoff Merck may not satisfy its obligations under various transaction agreements that have been or will be executed as part of the spinoff, we may experience delays with approvals relating to the separation from Merck, or we may not have necessary systems and services in place when certain of the transition agreements expire.
Item 1A. Risk Factors You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating Organon and deciding to invest in the Common Stock. Any of the following risks could materially and adversely affect Organon’s results of operations, financial condition and the price of the Common Stock.
Item 1A. Risk Factors You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating us and deciding to invest in our Common Stock. Any of the following risks could materially and adversely affect our results of operations, financial condition and the price of our Common Stock.
Further, any such interruption, security breach, or loss, misappropriation, and/or unauthorized access, use or disclosure of confidential information, including personal information regarding Organon's patients and employees, or the modification of critical data, could result in financial, legal, business, and reputational harm to Organon and could result in loss of revenue, or the loss of critical or sensitive information from Organon's or its third-party providers' databases or IT systems, or result in financial, legal, business or reputational harm to Organon and substantial remediation and recovery costs.
Further, any such interruption, security breach, or loss, misappropriation, and/or unauthorized access, use or disclosure of confidential information, including personal information regarding our patients and employees, or the modification of critical data, could result in financial, legal, business, and reputational harm to us, including loss of revenue, loss of critical or sensitive information from our or our third-party providers' databases or IT systems, and substantial remediation and recovery costs.
In the ordinary course of business, Organon and its third-party providers collect, store and transmit large amounts of confidential information (including trade secrets or other intellectual property, proprietary business information and personal information), and Organon must do so in a secure manner to maintain the confidentiality and integrity of such confidential information.
In the ordinary course of business, we and our third-party providers collect, store and transmit large amounts of confidential information (including trade secrets or other intellectual property, proprietary business information and personal information), and we must do so in a secure manner to maintain the confidentiality and integrity of such confidential information.
Organon may be unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price, or Organon may experience other supply difficulties that could adversely affect both its ability to deliver its products and its results of operations and financial condition.
We may be unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price, or we may experience other supply difficulties that could adversely affect both our ability to deliver our products and our results of operations and financial condition.
This indebtedness may adversely affect Organon's ability to operate or grow its business or could have other material adverse consequences, including by: • limiting Organon's ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions; • limiting Organon's ability to refinance its indebtedness on terms acceptable to Organon or at all; • restricting Organon's operations or development plans; • requiring Organon to dedicate a significant portion of its cash flows from operations to paying amounts due under its indebtedness, thereby reducing funds available for other corporate purposes; • impeding Organon's ability to pay dividends; • making Organon more vulnerable to economic downturns; or • limiting Organon's ability to withstand competitive pressures.
This indebtedness may adversely affect our ability to operate or grow our business or could have other material adverse consequences, including by: • limiting our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions; • limiting our ability to refinance our indebtedness on terms acceptable to us or at all; -29- Table of Contents • restricting our operations or development plans; • requiring us to dedicate a significant portion of our cash flows from operations to paying amounts due under our indebtedness, thereby reducing funds available for other corporate purposes; • impeding our ability to pay dividends; • making us more vulnerable to economic downturns; or • limiting our ability to withstand competitive pressures.
For a description of the related legal matters, see Note 12 "Contingencies" to the Financial Statements included in this report.
For a description of the related legal matters, see Note 20 "Contingencies" to the Financial Statements included in this report.
In the past, following periods of volatility in the overall market and the market price of a particular Company's securities, securities class action litigation has often been instituted against a company. This type of litigation, if instituted against Organon, could result in substantial costs and a diversion of its management's attention and resources.
In the past, following periods of volatility in the overall market and the market price of a particular Company's securities, securities class action litigation has often been instituted against a company. This type of litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.
Failure to comply with any of these requirements could subject Organon to a variety of formal or informal enforcement actions by the FDA or other regulators, result in a recall or market withdrawal of Organon's products, require Organon to cease manufacturing and distribution of the products, trigger product liability or other litigation, or otherwise impact Organon's ability to realize revenues for its products.
Failure to comply with any of these requirements could subject us to a variety of formal or informal enforcement actions by the FDA or other regulators, result in a recall or market withdrawal of our products, require us to cease manufacturing and distribution of the products, trigger product liability or other litigation, or otherwise impact our ability to realize revenues for our products.
This volatility could negatively impact Organon's ability to raise additional capital or utilize equity as consideration in any acquisition transactions Organon may seek to pursue, and could make it more difficult for existing stockholders to sell their shares of the Common Stock at a price they consider acceptable or at all.
This volatility could negatively impact our ability to raise additional capital or utilize equity as consideration in any acquisition transactions we may seek to pursue, and could make it more difficult for existing stockholders to sell their shares of our Common Stock at a price they consider acceptable or at all.
Further, issues related to manufacture of product, preclinical testing, and/or clinical testing may affect Organon's ability to obtain or maintain marketing approval for its products in a timely manner, or at all. This may hinder or delay efforts to successfully commercialize Organon's product candidates. Organon may experience difficulties identifying acquisition opportunities or completing such transactions.
Further, issues related to manufacture of product, preclinical testing, and/or clinical testing may affect our ability to obtain or maintain marketing approval for our products in a timely manner, or at all. This may hinder or delay efforts to successfully commercialize our product candidates. We may experience difficulties identifying acquisition opportunities or completing such transactions.
In addition, even after a pharmaceutical product or device has obtained marketing authorization, the manufacturing processes, labeling, packaging, distribution, adverse event and device malfunction reporting, storage, advertising, promotion, import, export, recalls and recordkeeping for Organon's products will be subject to ongoing regulatory requirements, and Organon will be subject to periodic inspections.
In addition, even after a pharmaceutical product or device has obtained marketing authorization or clearance, the manufacturing processes, labeling, packaging, distribution, adverse event and device malfunction reporting, storage, advertising, promotion, import, export, recalls and recordkeeping for our products will be subject to ongoing regulatory requirements, and we will be subject to periodic inspections.
In addition, many of these countries have currencies that fluctuate substantially and, if such currencies devalue and Organon cannot offset the devaluations, its financial performance within such countries could be adversely affected. For example, Organon's business in China is growing, and China is now Organon's second largest market, thereby increasing the importance of China to Organon's overall pharmaceutical business.
In addition, many of these countries have currencies that fluctuate substantially and, if such currencies devalue and we cannot offset the devaluations, our financial performance within such countries could be adversely affected. For example, our business in China is growing, and China is now our second largest market, thereby increasing the importance of China to our overall pharmaceutical business.
Organon's ability to generate profits and operating cash flow depends largely upon the continued profitability of its key products, such as Nexplanon , Cozaar / Hyzaar , Singulair and the Ezetimibe family of products.
Our ability to generate profits and operating cash flow depends largely upon the continued profitability of our key products, such as Nexplanon , Cozaar / Hyzaar , Singulair and the ezetimibe family of products.
These exclusive provisions may limit a stockholder's ability to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes with Organon or its directors, officers or other employees, which may discourage such lawsuits.
These exclusive provisions may limit a stockholder's ability to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits.
Organon has limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand its innovative pipeline and early discovery and research capabilities, which may limit its ability to discover or develop new products or expand its existing products into new markets to replace the sales of products that lose patent protection, and therefore Organon may not be able to maintain its current levels of profitability.
We have limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand our innovative pipeline and early discovery and research capabilities, which may limit our ability to discover or develop new products or expand our existing products into new markets to replace the sales of products that lose patent protection, and therefore we may not be able to maintain our current levels of profitability.
If Organon cannot produce sufficient revenues from expansion into new products, new indications or formulations of its existing products or expansion of existing products into new markets or new geographies, then Organon may not be able to maintain its current levels of profitability, and this could adversely affect Organon's business, cash flow, results of operations, financial condition or prospects.
If we cannot produce sufficient revenues from expansion into new products, new indications or formulations of our existing products or expansion of existing products into new markets or new geographies, then we may not be able to maintain our current levels of profitability, and this could adversely affect our business, cash flow, results of operations, financial condition or prospects.
Organon could experience difficulties in integrating geographically separated organizations, systems and facilities, and personnel with diverse backgrounds. If an acquired business fails to operate as anticipated or cannot be successfully integrated with Organon's existing business, its business, financial condition, results of operations or cash flows could be materially and adversely affected.
We could experience difficulties in integrating geographically separated organizations, systems and facilities, and personnel with diverse backgrounds. If an acquired business fails to operate as anticipated or cannot be successfully integrated with our existing business, our business, financial condition, results of operations or cash flows could be materially and adversely affected.
If the results of these studies, trials or tests are not positive (or are only modestly positive), or if there are safety concerns, Organon may incur unplanned costs, as well as delays in its efforts to obtain regulatory approval or marketing authorization.
If the results of these studies, trials or tests are not positive (or are only modestly positive), or if there are safety concerns, we may incur unplanned costs, as well as delays in our efforts to obtain regulatory approval or marketing authorization.
More specifically, Organon's obligations to indemnify Merck may in some cases include liability for antitrust litigation; provided, however, that Organon will not be liable for the results of the antitrust litigation related to Zetia or the product liability litigation in Brazil related to Vioxx² (rofecoxib).
More specifically, our obligations to indemnify Merck may in some cases include liability for antitrust litigation; provided, however, that we will not be liable for the results of the antitrust litigation related to Zetia or the product liability litigation in Brazil related to Vioxx² (rofecoxib).
However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that Organon's Board of Directors determines is not in the best interests of Organon and its stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of us and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
These liabilities, which could be material to Organon, include a general obligation to indemnify Merck for litigation or governmental proceedings relating to Organon's products, including, but not limited to, currently pending litigation relating to Fosamax , Nexplanon , and Propecia / Proscar .
These liabilities, which could be material to us, include a general obligation to indemnify Merck for litigation or governmental proceedings relating to our products, including, but not limited to, currently pending litigation relating to Fosamax , Nexplanon , and Propecia / Proscar .
Any failure to comply with the restrictions of Organon's current indebtedness, or any future financing agreements, including as a result of events beyond Organon's control, may result in an event of default under these agreements, which in turn may result -43- Table of Contents in defaults or acceleration of obligations under these agreements and other agreements, giving Organon's lenders and other debt holders the right to terminate any commitments they may have made to provide Organon with further funds and to require Organon to repay all amounts then outstanding.
Any failure to comply with the restrictions of our current indebtedness, or any future financing agreements, including as a result of events beyond our control, may result in an event of default under these agreements, which in turn may result in defaults or acceleration of obligations under these agreements and other agreements, giving our lenders and other debt holders the right to terminate any commitments they may have made to provide us with further funds and to require us to repay all amounts then outstanding.
Organon's efforts to compete with other companies or Organon's failure to maintain its competitive position could adversely affect its business, cash flow, results of operations, financial condition or prospects.
Our efforts to compete with other companies or our failure to maintain our competitive position could adversely affect our business, cash flow, results of operations, financial condition or prospects.
Our operations outside the United States could increase the risk of such violations. Organon's business is also heavily regulated and involves significant interaction with foreign officials. In many countries outside the U.S., prescribers of Organon products are employed by government entities, and purchasers are themselves government entities.
Our operations outside the United States could increase the risk of -23- Table of Contents such violations. Our business is also heavily regulated and involves significant interaction with foreign officials. In many countries outside the U.S., prescribers of our products are employed by government entities, and purchasers are themselves government entities.
Specifically, because Organon has not chosen to be exempt from Section 203 of the Delaware General Corporation Law, this provision could also delay or prevent a change of control that stockholders may favor.
Specifically, because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law, this provision could also delay or prevent a change of control that stockholders may favor.
If one or more of Organon's important products lose patent protection in profitable markets, sales of those products are likely to decline significantly as a result of generic versions of those products becoming available. Organon's results of operations may be adversely affected by the lost sales unless and until it has launched commercially successful products that replace the lost sales.
If one or more of our important products lose patent protection in profitable markets, sales of those products are likely to decline significantly as a result of generic versions of those products becoming available. Our results of operations may be adversely affected by the lost sales unless and until we have launched commercially successful products that replace the lost sales.
Although Organon does carry strategic inventory and maintain insurance to help mitigate the potential risk related to any related supply disruption, it cannot assure investors that such measures will always be sufficient or effective.
Although we carry strategic inventory and maintain insurance to help mitigate the potential risk related to any related supply disruption, we cannot assure investors that such measures will always be sufficient or effective.
Organon is a Delaware corporation, and its amended and restated certificate of incorporation, bylaws, and Delaware law each contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and encouraging prospective acquirors to negotiate with Organon's Board of Directors rather than to attempt a hostile takeover.
We are a Delaware corporation, and our amended and restated certificate of incorporation, bylaws, and Delaware law each contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and encouraging prospective acquirors to negotiate with our Board of Directors rather than to attempt a hostile takeover.
Since Organon cannot, with certainty, foresee and mitigate against such adverse fluctuations in currency exchange rates, interest rates and inflation could negatively affect Organon's business, cash flow, results of operations, financial condition or prospects. In order to mitigate the adverse impact of these market fluctuations, Organon enters into hedging agreements from time to time.
Since we cannot, with certainty, foresee and mitigate against such adverse fluctuations in currency exchange rates, interest rates and inflation could negatively affect our business, cash flow, results of operations, financial condition or prospects. In order to mitigate the adverse impact of these market fluctuations, we enter into hedging agreements from time to time.
It is possible that a court could find these exclusive forum provisions inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, and Organon may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect Organon's business, financial condition and results of operations and result in a diversion of the time and resources of its management and board of directors.
It is possible -33- Table of Contents that a court could find these exclusive forum provisions inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, and we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other third-party collaborators from authorizing, promising, offering, providing, soliciting and/or receiving, directly or indirectly, improper payments or anything else of value to or from persons in the public or private sector.
Bribery Act 2010, and other applicable anti-bribery and corruption laws. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other third-party collaborators from authorizing, promising, offering, providing, soliciting and/or receiving, directly or indirectly, improper payments or anything else of value to or from foreign officials or other persons in the public or private sector.
Organon or its partners may fail to adequately demonstrate the safety and efficacy of any of Organon's pharmaceutical product candidates or medical devices in pre-clinical studies and clinical trials, which would prevent or delay development, regulatory approval or marketing authorization and commercialization of Organon's product candidates.
We or our partners may fail to adequately demonstrate the safety and efficacy of any of our pharmaceutical product candidates or medical devices in pre-clinical studies and clinical trials, which would prevent or delay development, regulatory approval or marketing authorization and commercialization of our product candidates.
A reduction or interruption in supply and an inability to quickly develop acceptable alternative sources for such supply could adversely affect Organon's ability to manufacture and distribute its products in a timely or cost-effective manner, negatively impacting Organon's ability to sell its products. Organon may not realize benefits from its investments in emerging markets.
A reduction or interruption in supply and an inability to quickly develop acceptable alternative sources for such supply could adversely affect our ability to manufacture and distribute our products in a timely or cost-effective manner, negatively impacting our ability to sell our products. We may not realize benefits from our investments in China and emerging markets.

… 220 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties Organon's corporate headquarters is located in Jersey City, New Jersey. Organon also maintains operational headquarters in Pennsylvania. Organon owns and operates six manufacturing facilities in Campinas, Brazil, Cramlington, United Kingdom, Heist, Belgium, Oss, Netherlands, Panaan, Indonesia and Xochimilco, Mexico.
Biggest changeItem 2. Properties Our corporate headquarters is located in Jersey City, New Jersey. We also maintain operational headquarters in Pennsylvania. We own and operate six manufacturing facilities in Campinas, Brazil, Cramlington, United Kingdom, Heist, Belgium, Oss, Netherlands, Pandaan, Indonesia and Xochimilco, Mexico.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed4 unchanged
Biggest changeFor a discussion of legal matters as of December 31, 2022, please See Note 12 "Contingencies" to our financial statements included in this report, which is incorporated into this item by reference. Item 4. Mine Safety Disclosures Not applicable. PART II
Biggest changeFor a discussion of legal matters as of December 31, 2023, please See Note 20 "Contingencies" to our financial statements included in this report, which is incorporated into this item by reference. Item 4. Mine Safety Disclosures Not applicable. PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 48 Part II 48 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 48 Item 6. [ Reserved ] 49 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 35 Part II 35 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 35 Item 6. [ Reserved ] 36 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−1 removed0 unchanged
Biggest changeOn February 16, 2023, the Board of Directors declared a quarterly dividend of $0.28 for each issued and outstanding share of the Company's Common Stock. T he dividend is payable on March 16, 2023 to stockholders of record at the close of business on February 27, 2023. The declaration of dividends is subject to the discretion of Organon's Board.
Biggest changeT he dividend is payable on March 14, 2024, to stockholders of record at the close of business on February 26, 2024. The declaration of dividends is subject to the discretion of our Board. Our Board is committed to continuing to pay regular cash dividends; however, there can be no assurance as to future dividends.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Organon's Common Stock is listed on the New York Stock Exchange under the symbol "OGN." As of February 22, 2023, there were 74,829 holders of record of Organon's Common Stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock is listed on the New York Stock Exchange under the symbol "OGN." As of February 20, 2024, there were 69,973 holders of record of our Common Stock.
The graph assumes an investment of $100 on June 2, 2021 through the last trading day of 2022. The calculation of cumulative stockholder return on the S&P 500 Index and the NYSE Arca Pharmaceutical Index include reinvestment of dividend. The performance shown is not necessarily indicative of future performance.
The graph assumes an investment of $100 on June 2, 2021 through the last trading day of 2023. The calculation of cumulative stockholder return on our Common Stock, the S&P 500 Index, DRG and the S&P 600 Index include reinvestment of dividends. The performance shown is not necessarily indicative of future performance.
Performance Graph The following graph compares the cumulative total stockholder returns for the period from June 2, 2021 (the effective date of Organon's Separation from Merck) to December 31, 2022 for (i) Organon's Common Stock; (ii) the S&P 500 Index; and (iii) the NYSE Arca Pharmaceutical Index ("DRG").
For additional information, see "Risk Factors—We cannot guarantee the timing, amount or payment of any dividends on our Common Stock". -35- Table of Contents Performance Graph The following graph compares the cumulative total stockholder returns for the period from June 2, 2021 (the effective date of our Separation from Merck) to December 31, 2023 for (i) our Common Stock; (ii) the S&P 500 Index; (iii) the NYSE Arca Pharmaceutical Index ("DRG"); and the S&P 600 Index.
This number does not include persons who hold Organon's Common Stock in nominee or "street name" accounts through brokers or banks. -48- Table of Contents Dividends During the fourth quarter of 2022, Organon paid cash dividends of $0.28 per share.
This number does not include persons who hold our Common Stock in nominee or "street name" accounts through brokers or banks. Dividends During the fourth quarter of 2023, we paid cash dividends of $0.28 per share. On February 15, 2024, our Board of Directors declared a quarterly dividend of $0.28 for each issued and outstanding share of our Common Stock.
Equity Compensation Plan Information See Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."
Effective October 18, 2023, we were deleted from the S&P 500 index and added to the S&P SmallCap 600 index. Equity Compensation Plan Information See Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."
The Board is committed to continuing to pay regular cash dividends; however, there can be no assurance as to future dividends. The Board will consider factors such as financial results, capital requirements, financial condition and any other factors it deems relevant.
Our Board will consider factors such as financial results, capital requirements, financial condition and any other factors it deems relevant.
Removed
For additional information, see "Risk Factors—Organon cannot guarantee the timing, amount or payment of any dividends on the Common Stock".

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

93 edited+24 added−59 removed30 unchanged
Biggest changeCardiovascular Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Zetia/Vytorin $ 488 $ 542 $ 664 (10) % (3) % (18) % (22) % Atozet 457 458 453 — 11 1 (3) Rosuzet 71 68 130 5 23 (48) (47) Cozaar/Hyzaar 323 357 386 (10) (3) (7) (11) Combined global sales of Zetia (marketed in most countries outside of the United States as Ezetrol ) and Vytorin (marketed outside of the United States as Inegy ), medicines for lowering LDL cholesterol, declined 10% for the year ended December 31, 2022, compared to 2021, primarily driven by increased competition, lower performance in Europe, the impact of VBP in China and the unfavorable impact of foreign exchange offset by increased demand resulting from competitors' supply disruptions in Japan and growing demand in China across retail and public sectors. -56- Table of Contents Sales of Atozet , a medicine for lowering LDL cholesterol, remained consistent for the year ended December 31, 2022, compared to 2021, primarily due to increased demand in France and Spain offset by the unfavorable impact of foreign exchange.
Biggest changeCardiovascular Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Zetia/Vytorin $ 436 $ 488 $ 542 (11) % (9) % (10) % (3) % Atozet 519 457 458 14 13 — 11 Cozaar/Hyzaar 281 323 357 (13) (9) (10) (3) Combined global sales of Zetia and Vytorin , medicines for lowering LDL cholesterol, declined 11% for the year ended December 31, 2023, compared to 2022, primarily driven by the negative impact of VBP in China.
Outside of the United States, variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. In certain European countries, legislatively mandated rebates are calculated based on an estimate of the government's total unbudgeted spending and our specific payback obligation.
Outside of the United States, variable consideration in the form of discounts and rebates is a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. In certain European countries, legislatively mandated rebates are calculated based on an estimate of the government's total unbudgeted spending and our specific payback obligation.
Taxes on Income Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit.
Taxes on Income Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. We establish valuation allowances for our deferred tax assets when the amount of expected future income is not likely to support the use of the deduction or credit.
Contingencies and Environmental Liabilities We are involved in various claims and legal proceedings of a nature considered normal to our business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. See Note 12 "Contingencies" to the Consolidated Financial Statements included in this report.
Contingencies and Environmental Liabilities We are involved in various claims and legal proceedings of a nature considered normal to our business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. See Note 20 "Contingencies" to the Consolidated Financial Statements included in this report.
For our pension plans, the discount rate is evaluated on measurement dates and modified to reflect the prevailing market rate of a portfolio of high-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due.
For our pension plans, the discount rate is evaluated on measurement dates to reflect the prevailing market rate of a portfolio of high-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due.
Such forward-looking statements include, but are not limited to, statements relating to Organon's growth and acquisition strategies, financial results, product development, product approvals, product potential and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ materially from Organon's forward-looking statements.
Such forward-looking statements include, but are not limited to, statements relating to our growth and acquisition strategies, financial results, product development, product approvals, product potential and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ materially from our forward-looking statements.
Pension Our pension plans are calculated using actuarial assumptions including a discount rate for plan benefit obligations and an expected rate of return on plan assets. These significant assumptions are reviewed annually and are disclosed in Note 14 "Pension and Other Postretirement Benefit Plans" to the Consolidated Financial Statements.
Pension Our pension plans are calculated using actuarial assumptions including a discount rate for plan benefit obligations and an expected rate of return on plan assets. These significant assumptions are reviewed annually and are disclosed in Note 15 "Pension and Other Postretirement Benefit Plans" to the Consolidated Financial Statements.
Contractual Obligations Our contractual obligations as of December 31, 2022, which require material cash requirements in the future, consist of contractual milestones, purchase obligations, lease obligations and the settlement of certain tax matters. Contractual milestones are potential payments based upon the achievement of specified milestones associated with business development transactions.
Contractual Obligations Our contractual obligations as of December 31, 2023, which require material cash requirements in the future, consist of contractual milestones, purchase obligations, lease obligations and the settlement of certain tax matters. Contractual milestones are potential payments based upon the achievement of specified milestones associated with business development transactions.
In the United States, revenue is reduced by sales discounts issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebate amounts owed based upon definitive contractual agreements or legal requirements with private sector (Managed Care) and public sector (Medicaid and Medicare Part D customers).
In the United States, revenue is reduced by sales discounts issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebate amounts owed based upon definitive contractual agreements or -45- Table of Contents legal requirements with private sector (Managed Care) and public sector (Medicaid and Medicare Part D) customers.
We completed the annual qualitative goodwill impairment test as of October 1, 2022 and concluded that there was no impairment to goodwill as the fair value of the reporting unit was significantly in excess of the carrying value.
We completed the annual qualitative goodwill impairment test as of October 1, 2023 and concluded that there was no impairment to goodwill as the fair value of the reporting unit was significantly in excess of the carrying value.
Moreover, a significant number of biologics are expected to lose exclusivity over the next decade, representing a large opportunity for more biosimilar approvals. • Increased Competitive Pressures : The markets in which we conduct our business and the pharmaceutical industry in general are highly competitive and highly regulated.
Moreover, a -38- Table of Contents significant number of biologics are expected to lose exclusivity over the next decade, representing a large opportunity for more biosimilar approvals. • Increased Competitive Pressures : The markets in which we conduct our business and the pharmaceutical industry in general are highly competitive and highly regulated.
Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. -61- Table of Contents We continually monitor our provision for aggregate customer discounts.
Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. We continually monitor our provision for aggregate customer discounts.
Management's Discussion and Analysis of Financial Condition and Results of Operations CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Organon makes statements in this Annual Report on Form 10-K, and Organon may from time to time make other written reports and oral statements, regarding its outlook or expectations for financial, business or strategic matters regarding or affecting Organon that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, all of which are based on management's current expectations and are subject to risks and uncertainties which change over time and may cause results to differ materially from those set forth in the statements.
Management's Discussion and Analysis of Financial Condition and Results of Operations CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS We make statements in this Annual Report on Form 10-K, and we may from time to time make other written reports and oral statements, regarding our outlook or expectations for financial, business or strategic matters regarding or affecting us that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, all of which are based on management's current expectations and are subject to risks and uncertainties which change over time and may cause results to differ materially from those set forth in the statements.
Further, any forward-looking statement speaks only as of the date on which it is made, and Organon undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
There were no material adjustments to estimates associated with the aggregate customer discount provision in 2022, 2021, or 2020.
There were no material adjustments to estimates associated with the aggregate customer discount provision in 2023, 2022, or 2021.
One can identify these forward-looking statements by their use of words such as "anticipates," "expects," "plans," "will," "estimates," "forecasts," "projects" and other words of similar meaning, or negative variations of any of the foregoing. One can also identify them by the fact that they do not relate strictly to historical or current facts.
One can identify these forward-looking statements by their use of words such as "anticipates," "expects," "plans," "will," "estimates," "forecasts," "projects," "believes," "would," "potentially," "intends," "seeks," and other words of similar meaning, or negative variations of any of the foregoing. One can also identify them by the fact that they do not relate strictly to historical or current facts.
We record accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.
We record accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. -46- Table of Contents Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.
Acquisitions Business combinations are evaluated in order to determine whether transactions should be accounted for as acquisitions of assets or businesses. The Company makes certain judgments, which include assessment of the inputs, processes, and outputs associated with the acquired set of activities.
Acquisitions Business combinations are evaluated in order to determine whether transactions should be accounted for as acquisitions of assets or businesses. We make certain judgments, which include assessment of the inputs, processes, and outputs associated with the acquired set of activities.
The COVID-19 pandemic negatively affected the LARC segment during 2021 and 2020 due to clinic closures and the postponement of non-essential medical procedures during country lockdowns. The LARC segment growth did begin to rebound in 2022 during months when clinic restrictions were removed.
The COVID-19 pandemic negatively affected the LARC segment during 2020 and 2021 due to clinic closures and the postponement of non-essential medical procedures during country lockdowns. The LARC segment began to rebound in 2021 and 2022, during months when clinic restrictions were removed.
Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill. Business acquisition costs are expensed when incurred. The fair values of intangible assets are determined utilizing information available near the acquisition date based on expectations and assumptions that are deemed reasonable by management.
Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill. Business acquisition costs are expensed when incurred. The fair values of intangible assets are determined utilizing information available near the acquisition date based on expectations and assumptions that we deem reasonable.
The Company sells these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. The Company operates six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom.
We sell these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. We operate six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom.
Although it is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation, management does not believe that any reasonably possible expenditures that may be incurred in excess of the liabilities accrued should exceed $20 million in the aggregate.
Although it is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation, we do not believe that any reasonably possible expenditures that may be incurred in excess of the liabilities accrued should exceed $24 million in the aggregate.
Risk Factors of this report or otherwise described in Organon's filings with the SEC, provide examples of risks, uncertainties and events that may cause Organon's actual results to differ materially from the expectations expressed in its forward-looking statements, including, but not limited to: • expanded brand and class competition in the markets in which Organon operates; • difficulties with performance of third parties Organon relies on for its business growth; • the failure of any supplier to provide substances, materials, or services as agreed; • the increased cost of supply, manufacturing, packaging, and operations; • difficulties developing and sustaining relationships with commercial counterparties; • competition from generic products as Organon's products lose patent protection; • difficulties and uncertainties inherent in the implementation of Organon's acquisition strategy or failure to recognize the benefits of such acquisitions; • pricing pressures globally, including rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and health care reform, pharmaceutical reimbursement and pricing in general; • the impact of the global COVID-19 pandemic and any future pandemic, epidemic, or similar public health threat on Organon's business, operations and financial performance; • changes in government laws and regulations in the United States and other jurisdictions, including laws and regulations governing the research, development, approval, clearance, manufacturing, supply, distribution, and/or marketing of Organon's products and related intellectual property, environmental regulations, and the enforcement thereof affecting Organon's business; • efficacy, safety or other quality concerns with respect to marketed products, whether or not scientifically justified, leading to product recalls, withdrawals or declining sales; • delays or failures to demonstrate adequate efficacy and safety of Organon's product candidates in pre-clinical and clinical trials, which may prevent or delay the development, approval, clearance, or commercialization of Organon's product candidates; • future actions of third-parties, including significant changes in customer relationships or changes in the behavior and spending patterns of purchasers of health care products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and forgoing health care insurance coverage; • legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental claims and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products; • lost market opportunity resulting from delays and uncertainties in clinical trials and the approval or clearance process of the U.S.
Risk Factors of this report or otherwise described in our filings with the SEC, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations expressed in our forward-looking statements, including, but not limited to: • expanded brand and class competition in the markets in which we operate; • difficulties with performance of third parties we rely on for our business growth; • the failure of any supplier to provide substances, materials, or services as agreed; • the increased cost of supply, manufacturing, packaging, and operations; • difficulties developing and sustaining relationships with commercial counterparties; • competition from generic products as our products lose patent protection; • any failure by us to obtain an additional period of market exclusivity in the United States for Nexplanon subsequent to the expiration of certain key patents in 2027; • difficulties and uncertainties inherent in the implementation of our acquisition strategy or failure to recognize the benefits of such acquisitions; • pricing pressures globally, including rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and health care reform, pharmaceutical reimbursement and pricing in general; • the impact of higher selling and promotional costs; • changes in government laws and regulations in the United States and other jurisdictions, including laws and regulations governing the research, development, approval, clearance, manufacturing, supply, distribution, and/or marketing of our products and related intellectual property, environmental regulations, and the enforcement thereof affecting our business; • efficacy, safety or other quality concerns with respect to our marketed products, whether or not scientifically justified, leading to product recalls, withdrawals or declining sales; • delays or failures to demonstrate adequate efficacy and safety of our product candidates in pre-clinical and clinical trials, which may prevent or delay the development, approval, clearance, or commercialization of our product candidates; • future actions of third-parties, including significant changes in customer relationships or changes in the behavior and spending patterns of purchasers of health care products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and forgoing health care insurance coverage; • legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental claims and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products; • lost market opportunity resulting from delays and uncertainties in clinical trials and the approval or clearance process of the U.S.
In developing the expected rate of return, the Company considers long-term compound annualized returns of historical market data, current market conditions and actual returns on the Company's plan assets. Using this reference information, the Company develops forward-looking return expectations for each asset category and a weighted-average expected long-term rate of return for a target portfolio allocated across these investment categories.
In developing the expected rate of return, we consider long-term compound annualized returns of historical market data, current market conditions and actual returns on our plan assets. Using this reference information, we develop forward-looking return expectations for each asset category and a weighted-average expected long-term rate of return for a target portfolio allocated across these investment categories.
No material adjustments have been required to our inventory reserve estimates for the periods presented. Adverse changes in assumptions utilized in our inventory reserve calculations could result in an increase to our inventory valuation reserves and higher cost of sales.
The determination of events and the assumptions utilized in our quantification of valuation reserves may require judgment. No material adjustments have been required to our inventory reserve estimates for the periods presented. Adverse changes in assumptions utilized in our inventory reserve calculations could result in an increase to our inventory valuation reserves and higher cost of sales.
Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows: Year Ended December 31, ($ in millions) 2022 2021 2020 Balance January 1 $ 329 $ 343 $ 365 Provision 2,221 2,000 1,770 Payments (1) (2,165) (2,014) (1,792) Balance December 31 $ 385 $ 329 $ 343 (1) Includes 2021 payments made by Merck on behalf of Organon for the period prior to the Separation date.
Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows: Year Ended December 31, ($ in millions) 2023 2022 2021 Balance January 1 $ 385 $ 329 $ 343 Provision 2,640 2,221 2,000 Payments (1) (2,521) (2,165) (2,014) Balance December 31 $ 504 $ 385 $ 329 (1) Includes 2021 payments made by Merck on behalf of us for the period prior to the Separation date.
We believe that there are no compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on us. Expenditures for remediation and environmental liabilities were $4 million in 2022, and are estimated at $16 million in the aggregate for the years 2023 through 2027.
We believe that there are no compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on us. Expenditures for remediation and environmental liabilities were $2 million in 2023, and are estimated at $15 million in the aggregate for the years 2024 through 2028.
FDA and other regulatory authorities; • cyberattacks on, or other failures, accidents, or security breaches of, Organon's or third-party providers' information technology systems, which could disrupt Organon's operations; • increased focus on privacy issues in countries around the world, including the United States, the European Union, and China, and a more difficult legislative and regulatory landscape for privacy and data protection that continues to evolve with the potential to directly affect Organon's business, including recently enacted laws in a majority of states in the United States requiring security breach notification; • changes in tax laws including changes related to the taxation of foreign earnings; • loss of key employees or inability to identify and recruit new employees; -50- Table of Contents • changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Financial Accounting Standards Board and the SEC, that are adverse to Organon; and • economic factors over which Organon has no control, including changes in inflation, interest rates, recessionary pressures, and foreign currency exchange rates.
FDA and other regulatory authorities; • cyberattacks on, or other failures, accidents, or security breaches of, our or third-party providers' information technology systems, which could disrupt our operations; • increased focus on privacy issues in countries around the world, including the United States, the EU, and China, and a more difficult legislative and regulatory landscape for privacy and data protection that continues to evolve with the potential to directly affect our business, including recently enacted laws in a majority of states in the United States requiring security breach notification; • changes in tax laws including changes related to the taxation of foreign earnings; -37- Table of Contents • the impact of any future pandemic, epidemic, or similar public health threat on our business, operations and financial performance; • loss of key employees or inability to identify and recruit new employees; • changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Financial Accounting Standards Board and the SEC, that are adverse to us; and • economic factors over which we have no control, including changes in inflation, interest rates, recessionary pressures, and foreign currency exchange rates.
The accrued balances relative to these provisions included in accounts receivable and accrued and other current liabilities were $78 million and $307 million, respectively, at December 31, 2022, $54 million and $275 million, respectively, at December 31, 2021 and $41 million and $302 million, respectively, at December 31, 2020.
The accrued balances relative to these provisions included in accounts receivable and accrued and other current liabilities were $87 million and $417 million, respectively, at December 31, 2023, $78 million and $307 million, respectively, at December 31, 2022 and $54 million and $275 million, respectively, at December 31, 2021.
Other expense (income), net For the year ended December 31, 2022, other expense, net, remained relatively consistent with the prior year. Taxes on Income The effective income tax rates were 18.3% and 11.7% for the year ended December 31, 2022 and 2021, respectively.
Other Expense, net For the year ended December 31, 2023, other expense, net, remained relatively consistent with the prior year. Taxes on Income The effective income tax rates were (52.2)% and 18.3% for the year ended December 31, 2023 and 2022, respectively.
If the Company determines that substantially all of the fair value of gross assets included in a transaction is concentrated in a single asset (or a group of similar assets), the Company accounts for the transaction as an asset acquisition.
If we determine that substantially all of the fair value of gross assets included in a transaction is concentrated in a single asset (or a group of similar assets), we account for the transaction as an asset acquisition.
Such milestone payments will only be payable in the event that the Company achieves contractually defined, success-based milestones, such as the advancement of the specified research and development programs; the receipt of regulatory approval for the specified compounds or products; and/or reaching a sales threshold of the specified compounds or products.
Such milestone payments will only be payable in the event that our collaborative partners achieve contractually defined success-based milestones such as the advancement of the specified research and development programs or the receipt of regulatory approval for the specified compounds or products and/or we reach a sales threshold of the specified compounds or products.
Organon recorded impairment charges of $9 million and $7 million as of December 31, 2022 and 2021 respectively. See Note 10 "Intangibles" to the Consolidated Financial Statements included in this report for additional details on Intangibles.
We did not have impairment charges as of December 31, 2023. We recorded impairment charges of $9 million and $7 million as of December 31, 2022 and 2021 respectively. See Note 13 "Intangibles" to the Consolidated Financial Statements included in this report for additional details on Intangibles.
We have commercialization rights to Brenzys in countries outside of the United States, Europe, Korea, China and Japan. Hadlima is a biosimilar to Humira for the treatment of certain inflammatory diseases. We have worldwide commercialization rights to Hadlima in countries outside of the EU, Korea, China, Turkey and Russia.
Hadlima is a biosimilar to Humira (adalimumab) for the treatment of certain inflammatory diseases. We have commercialization rights to Hadlima in countries outside of the EU, Korea, China, Turkey, and Russia.
Worldwide sales of Marvelon and Mercilon , combined oral hormonal daily contraceptive pills not approved or marketed in the United States but available in certain countries outside the United States, increased 12% for the year ended December 31, 2022, compared to 2021 as a result of the recent transaction with Bayer Healthcare where Organon gained full rights in the China and Vietnam markets.
Worldwide sales of Marvelon and Mercilon , combined oral hormonal daily contraceptive pills not approved or marketed in the United States but available in certain countries outside the United States, increased 22% for the year ended December 31, 2023, compared to 2022, as a result of the transaction with Bayer Healthcare where we gained rights in China during the second quarter of 2022 and in Vietnam during the third quarter of 2022.
Goodwill is evaluated for impairment as of October 1 each year, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value.
Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is evaluated for impairment as of October 1 each year, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value.
Worldwide sales of NuvaRing , a vaginal contraceptive product, declined 9% for the year ended December 31, 2022, compared to 2021, due to ongoing generic competition in the United States. We expect a continued decline in NuvaRing sales as a result of generic competition.
This was partially offset by price increases. Worldwide sales of NuvaRing , a vaginal contraceptive product, declined 12% for the year ended December 31, 2023, compared to 2022, due to ongoing generic competition in the United States. We expect a continued decline in NuvaRing sales as a result of generic competition.
In management's opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $20 million and $24 million at December 31, 2022 and 2021, respectively.
Liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $19 million and $20 million at December 31, 2023 and 2022, respectively.
This section generally discusses our financial condition and results of operations for the years ended December 31, 2022 and 2021 and should be read in conjunction with the Company's Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K to enhance the understanding of our results of operations, financial condition and cash flows.
General The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist the reader in understanding our financial condition and results of operations for the years ended December 31, 2023 and 2022 and should be read in conjunction with our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K to enhance the understanding of our results of operations, financial condition and cash flows.
GAAP and, accordingly, include certain amounts that are based on management's best estimates and judgments. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates are disclosed below. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates.
Critical Accounting Estimates The audited annual consolidated financial statements are prepared in conformity with U.S. GAAP and, accordingly, include certain amounts that are based on management's best estimates and judgments. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates are disclosed below.
The timing of the payments of the contractual milestones cannot be estimated and the likelihood of achieving the -60- Table of Contents milestones cannot be determined. As of December 31, 2022, total potential payments due for contractual milestones are $2.4 billion. Amounts due within the next twelve months are $38 million.
The timing of the payments of the contractual milestones cannot be estimated and the likelihood of achieving the milestones cannot be determined. As of December 31, 2023, total potential payments due for contractual milestones are $1.9 billion. Potential amounts due within the next twelve months are $98 million.
Sales growth of 21% for the year ended December 31, 2022, was driven primarily by continued demand growth, favorable channel mix and favorable discount rates in the United States. We have commercialization rights to Renflexis in countries outside Europe, Korea, China, Turkey and Russia.
Sales increased 23% for the year ended December 31, 2023, compared to 2022, driven primarily by continued demand growth in the United States and Canada. We have commercialization rights to Renflexis in countries outside Europe, Korea, China, Turkey, and Russia.
Volume-based procurement ("VBP") in China had a $20 million negative impact on sales during the year ended December 31, 2022, compared to the year ended December 31, 2021. Organon expects VBP to impact the Company's established brands product portfolio for the next several quarters. Organon's operations include a portfolio of products.
VBP in China had a $95 million negative impact on our sales during the year ended December 31, 2023, compared to the year ended December 31, 2022. We expect VBP to impact our established brands product portfolio for the next several quarters. Our operations include a portfolio of products.
The LARC market is expected to continue to be an important and large segment of the overall contraception market as payors, providers and patients consider the benefits of long acting and highly effective options including Nexplanon. • Increased Access to Fertility Solutions : We believe governments and payors are implementing favorable policies across major markets that, in turn, drive growth in the market for women's health therapies.
The LARC market is expected to continue to be an important and large segment of the overall contraception market as payors, providers and patients consider the benefits of long acting and highly effective options including Nexplanon. • Increased Access to Fertility Solutions : With the global trend toward declining birthrates, governments and payors are implementing favorable policies across major markets that, in turn, improve access to care and drives growth for infertility therapies. • Growing Acceptance of Biosimilars : Biologics continue to experience strong growth trends.
During the year ended December 31, 2022 and 2021, the Company recorded impairment charges of $9 million and $7 million, respectively, related to a product right for a biosimilar product. Cost of sales includes amortization of intangible assets which totaled $116 million in 2022, $103 million in 2021 and $86 million in 2020.
During the year ended December 31, 2022, we recorded a $36 million inventory charge relating to the Market Action and an impairment charge of $9 million related to a product right for a biosimilar product. Cost of sales includes amortization of intangible assets which totaled $116 million in 2023, $116 million in 2022 and $103 million in 2021.
Provisions of the bill that relate to tax include the minimum tax on book income, a 1% excise tax on stock buybacks and certain tax incentives to promote clean energy. There are no impacts of the legislation to the 2022 results. The Company is currently assessing future impacts of this recently enacted legislation.
On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022. Provisions of the bill that relate to tax include the minimum tax on book income, a 1% excise tax on stock buybacks and certain tax incentives to promote clean energy. There are no impacts of the legislation to the 2023 results.
These effective income tax rates reflect the beneficial impact of foreign earnings, offset by the impact of U.S. inclusions under the Global Intangible Low-Taxed Income regime.
These effective income tax rates reflect the beneficial impact of foreign earnings, offset by the impact of U.S. inclusions under the Global Intangible Low-Taxed Income regime and a partial valuation allowance recorded against non-deductible U.S. interest expense.
The loss of exclusivity ("LOE") negatively impacted sales by approximately $30 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, based on the decrease in volume period over period, mainly impacting NuvaRing in the United States.
The loss of exclusivity negatively impacted sales of certain of our products by approximately $18 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, due to the decrease in volume period over period, which mainly impacted NuvaRing in the United States.
During 2022, Organon paid cash dividends of $1.12 per share. On February 16, 2023, the Board of Directors declared a quarterly dividend of $0.28 for each issued and outstanding share of the Company's common stock. T he dividend is payable on March 16, 2023 to stockholders of record at the close of business on February 27, 2023.
On February 15, 2024, our Board of Directors declared a quarterly dividend of $0.28 for each issued and outstanding share of our common stock. T he dividend is payable on March 14, 2024, to stockholders of record at the close of business on February 26, 2024.
For tax positions that are not more likely than not of being sustained upon audit, we do not recognize any portion of the benefit in the financial statements. We recognize interest and penalties associated with uncertain tax positions as a component of Taxes on Income in the consolidated statement of income.
For tax positions that are not more likely than not of being sustained upon audit, we do not recognize any portion of the benefit in the financial statements.
We have commercialization rights to Ontruzant in countries outside of Korea and China. Brenzys is a biosimilar to Enbrel for the treatment of certain inflammatory diseases. Sales in the year ended December 31, 2022 increased 19%, primarily driven by volume growth in Canada.
We have commercialization rights to Ontruzant in countries outside of Korea and China. Brenzys is a biosimilar to Enbrel (etanercept) for the treatment of certain inflammatory diseases. Sales in the year ended December 31, 2023, compared to 2022, remained substantially consistent. We have commercialization rights to Brenzys in countries outside of the United States, Europe, Korea, China, and Japan.
Research and Development Research and development expenses increased 39% for the year ended December 31, 2022, primarily due to higher costs associated with the Company's recent acquisitions of clinical stage assets, increased clinical study activity and higher employee-related costs.
"Contingencies" to the Consolidated Financial Statements. This was partially offset by lower promotional expenses. Research and Development Research and development expenses increased 12% for the year ended December 31, 2023, compared to 2022, primarily due to higher costs associated with our acquisitions of clinical stage assets, increased clinical study activity and higher employee-related costs.
Exchange Losses (Gains) For the year ended December 31, 2022, the change in exchanges losses (gains) was driven by the exchange rate impact on the portion of Euro-denominated debt not designated as a net investment hedge and the fluctuations in foreign exchange.
Dollar-denominated term loan and the impact of exchange rates. -43- Table of Contents Exchange Losses For the year ended December 31, 2023, the change in exchange losses was driven by foreign currency exchange translation losses and the impact of the portion of Euro-denominated debt not designated as a net investment hedge in the prior year period.
Acquired In-Process Research and Development and Milestones For the year ended December 31, 2022 acquired in-process research and development and milestones of $107 million represent the upfront and development milestones related to the Cirqle and Henlius transactions.
Acquired In-Process Research and Development and Milestones For the year ended December 31, 2023, acquired in-process research and development and milestones of $8 million related to the Claria transaction.
Net cash used in financing activities was $433 million for the year ended December 31, 2022 compared to $977 million for the same period in the prior year.
Net cash used in financing activities was $569 million for the year ended December 31, 2023 compared to $433 million for the same period in the prior year. The increase in cash used in financing activities was driven by the $250 million voluntary prepayment on the U.S.
Prior to the Separation, income tax expense and deferred tax balances in the consolidated financial statements were calculated on a separate tax return basis. We relied on certain assumptions, one of them that as a standalone basis we would not benefit from certain tax incentives that historically benefited Merck.
We relied on certain assumptions, one of them that on a standalone basis we would not benefit from certain tax incentives that historically benefited Merck. We believe the assumptions supporting the allocation and presentation of income taxes on a separate return basis were reasonable.
Inventories are assessed regularly for impairment and valuation reserves are established when necessary based on a number of factors including, but not limited to, product obsolescence and changes in estimates of future product demand and expiry. The determination of events and the assumptions utilized in our quantification of valuation reserves may require judgment.
Inventory Valuation Inventories consist of currently marketed products and are valued at the lower of cost or net realizable value. Inventories are assessed regularly for impairment and valuation reserves are established when necessary based on a number of factors including, but not limited to, product obsolescence and changes in estimates of future product demand and expiry.
Revenue Recognition Our accounting policy for revenue recognition has a substantial impact on reported results and relies on certain estimates.
Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Revenue Recognition Our accounting policy for revenue recognition has a substantial impact on reported results and relies on certain estimates.
Purchase obligations are enforceable and legally binding obligations for purchases of goods and services which include inventory purchase commitments. As of December 31, 2022, total payments due for purchase obligations are $1.2 billion and extend through 2030. Amounts due within the next twelve months are $343 million. Lease obligations exclude reasonably certain lease renewals that have not yet been executed.
As of December 31, 2023, total payments due for debt obligations are $8.8 billion and extend through 2031. Amounts due within the next twelve months are $9 million. Lease obligations exclude reasonably certain lease renewals that have not yet been executed. As of December 31, 2023, total payments due for lease obligations are $189 million and extend through 2041.
The increase in working capital of continuing operations was primarily driven by a decrease in trade accounts payable. Net cash provided by operating activities was $858 million for the year ended December 31, 2022 compared to $2.2 billion for the same period in the prior year.
Net cash provided by operating activities was $799 million for the year ended December 31, 2023 compared to $858 million for the same period in the prior year. The decrease in cash provided by operating activities was primarily attributable to the changes in working capital balances, offset by an increase in net income.
Ontruzant is a biosimilar to Herceptin for the treatment of HER2-overexpressing breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma. Sales in the year ended December 31, 2022 declined 4%, driven by the competitive pressures in Europe and the unfavorable impact of foreign exchange offset by the continued uptake in the United States since its launch in July 2020.
Ontruzant is a biosimilar to Herceptin (trastuzumab) for the treatment of HER2-overexpressing breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma. Sales for the year ended December 31, 2023, compared to 2022, increased 28% driven by the timing of tenders in Brazil and increased demand partially offset by the competitive pressures in Europe.
The fair value of certain stock-based awards is determined using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value.
The fair value of certain stock-based awards is determined using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method -48- Table of Contents incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options.
Respiratory Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Singulair $ 411 $ 413 $ 462 (1) % 9 % (11) % (13) % Nasonex 238 206 218 16 22 (6) (9) Dulera 180 190 222 (5) (5) (15) (16) Worldwide sales of Singulair , a once-a-day oral medicine for the chronic treatment of asthma and for the relief of symptoms of allergic rhinitis, declined 1% for the year ended December 31, 2022, compared to 2021, primarily attributable the unfavorable impact of foreign exchange offset by volume recovery from the COVID-19 pandemic and demand resulting from competitors' supply disruptions in Japan.
Respiratory Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Singulair $ 404 $ 411 $ 413 (2) % 3 % (1) % 9 % Nasonex 253 238 206 6 10 16 22 Dulera 194 180 190 8 9 (5) (5) Worldwide sales of Singulair , a once-a-day oral medicine for the chronic treatment of asthma and for the relief of symptoms of allergic rhinitis, declined 2% for the year ended December 31, 2023, compared to 2022, due to the impact of foreign exchange partially offset by increased demand due to higher incidences of respiratory conditions across many international markets during the fourth quarter of 2023 compared to 2022.
Costs, Expenses and Other Year Ended December 31, % Change ($ in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Cost of sales $ 2,294 $ 2,382 $ 2,119 (4) % 12 % Selling, general and administrative 1,704 1,668 1,356 2 23 Research and development 471 339 210 39 61 Acquired in-process research and development and milestones 107 104 — 3 * Restructuring costs 28 3 60 * (95) Interest expense 422 258 — 64 * Exchange losses 11 4 44 * (91) Other expense (income), net 15 17 (9) (12) * $ 5,052 $ 4,775 $ 3,780 6 % 26 % * Calculation not meaningful.
Other Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Proscar $ 97 $ 101 $ 117 (3) % 1 % (14) % (9) % Worldwide sales of Proscar , a medicine for the treatment of symptomatic benign prostate enlargement, for the year ended December 31, 2023, compared to 2022 were substantially consistent. -42- Table of Contents Costs, Expenses and Other Year Ended December 31, % Change ($ in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Cost of sales $ 2,515 $ 2,294 $ 2,382 10 % (4) % Selling, general and administrative 1,893 1,704 1,668 11 2 Research and development 528 471 339 12 39 Acquired in-process research and development and milestones 8 107 104 (93) 3 Restructuring costs 62 28 3 * * Interest expense 527 422 258 25 64 Exchange losses 42 11 4 * * Other expense, net 15 15 17 — (12) $ 5,590 $ 5,052 $ 4,775 11 % 6 % * Calculation not meaningful.
If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the asset's fair value and its carrying value.
We periodically evaluate whether current facts or circumstances indicate that the carrying values of our long-lived assets to be held and used may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists.
However, these products continue to represent a valuable opportunity arising from long-term sustainable revenue streams and well-established supply chains that together generate significant operating profit relative to low promotional and development expenses. • Historical Shift Towards Long-Acting Reversible Contraceptives: Daily contraceptive pills are by far the largest contraception market segment, with almost half of all women choosing a hormonal contraceptive choosing this particular method.
However, these products continue to represent a valuable opportunity arising from long-term sustainable revenue streams and well-established supply chains that together generate significant operating profit relative to low promotional and development expenses.
Organon develops and delivers innovative health solutions through a portfolio of prescription therapies within women's health, biosimilars and established brands (the "Organon Products"). Organon has a portfolio of more than 60 medicines and products across a range of therapeutic areas.
We are a global health care company with a focus on improving the health of women throughout their lives. We develop and deliver innovative health solutions through a portfolio of prescription therapies and medical devices within women's health, biosimilars and established brands. We have a portfolio of more than 60 medicines and products across a range of therapeutic areas.
Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings, payment of dividends and strategic business development transactions. Capital expenditures were $196 million and $192 million for the years ended December 31, 2022 and 2021, respectively.
Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings, payment of dividends and strategic business development transactions. We believe that our financing arrangements, future cash from operations, and access to capital markets will provide adequate resources to fund our future cash flow needs.
General The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist the reader in understanding the Company's financial condition and results of operations and should be read in connection with Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
Additionally, this section should be read in connection with Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC and available on the SEC's website at www.sec.gov, which includes a discussion regarding our financial condition and results of operations for the years ended December 31, 2022 and 2021.
Operating Results Sales Overview Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 United States $ 1,437 $ 1,383 $ 1,408 4 % 4 % (2) % (2) % International 4,737 4,921 5,124 (4) 4 (4) (8) Total $ 6,174 $ 6,304 $ 6,532 (2) % 4 % (3) % (6) % U.S. plus international may not equal total due to rounding .
Operating Results Sales Overview Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 United States $ 1,478 $ 1,437 $ 1,383 3 % 3 % 4 % 4 % International 4,785 4,737 4,921 1 4 (4) 4 Total $ 6,263 $ 6,174 $ 6,304 1 % 3 % (2) % 4 % Worldwide sales were $6.3 billion for the year ended December 31, 2023, an increase of 1% compared with 2022.
This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options. -64- Table of Contents Recently Issued Accounting Standards For a discussion of recently issued accounting standards, see Note 3 "Summary of Accounting Policies" to the Consolidated Financial Statements included in this report.
Recently Issued Accounting Standards For a discussion of recently issued accounting standards, see Note 3 "Summary of Accounting Policies" to the Consolidated Financial Statements included in this report.
Management also does not believe that these expenditures should result in a material adverse effect on our financial condition, results of operations or liquidity for any year. -62- Table of Contents Impairments of Long-Lived Assets We assess changes in economic, regulatory and legal conditions and make assumptions regarding estimated future cash flows in evaluating the value of our property, plant and equipment, goodwill and intangible assets.
Impairments of Long-Lived Assets We assess changes in economic, regulatory and legal conditions and make assumptions regarding estimated future cash flows in evaluating the value of our property, plant and equipment, goodwill and intangible assets. The judgments made in evaluating impairment of long-lived intangibles can materially affect our results of operations.
Capital expenditures in 2022 and 2021 reflect investments in new capital projects focused primarily on establishing Organon as an independent Company. We estimate that we will continue to invest in new capital projects in 2023, for ongoing projects to stand up Organon, principally related to investments in information technology.
We estimate that we will continue to invest in new capital projects in 2024, for ongoing projects to stand up Organon, principally related to investments in information technology. As part of our post-spinoff plan, we have approved an initiative to further optimize our manufacturing and supply network.
In addition, sales during the year ended December 31, 2022 included a $10 million milestone payment related to a regulatory approval in the United States. Global sales of Dulera , a combination medicine for the treatment of asthma, declined 5% for the year ended December 31, 2022, compared to 2021, primarily due to lower volume growth in the United States.
Global sales of Dulera , a combination medicine for the treatment of asthma, increased 8% for the year ended December 31, 2023, compared to 2022, primarily due to the favorable impact from price and increased demand in the United States.
Worldwide sales of Ganirelix Acetate Injection (marketed in certain countries outside the United States as Orgalutran ), a fertility treatment, increased 11% for the year ended December 31, 2022, compared to 2021, driven by demand uptake in the international markets. -55- Table of Contents Biosimilars Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Renflexis $ 226 $ 186 $ 135 21 % 22 % 37 % 36 % Ontruzant 122 126 115 (4) — 10 7 Brenzys 75 63 74 19 24 (15) (20) Hadlima 19 13 — 51 57 — — Renflexis is a biosimilar to Remicade for the treatment of certain inflammatory diseases.
Biosimilars Year Ended December 31, % Change % Change Excluding Foreign Exchange % Change % Change Excluding Foreign Exchange ($ in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Renflexis $ 278 $ 226 $ 186 23 % 24 % 21 % 22 % Ontruzant 155 122 126 28 27 (4) — Brenzys 73 75 63 (2) 1 19 24 Hadlima 44 19 13 125 130 51 57 Renflexis is a biosimilar to Remicade (infliximab) for the treatment of certain inflammatory diseases.
Under the terms of the agreement, Organon paid $8 million upfront and has the option to acquire Claria for pre-defined terms at a later date. The upfront payment will be expensed as Acquired in-process research and development and milestones in our statement of income in the first quarter of 2023.
Under the terms of the agreement, we paid $8 million upfront and have the option to acquire Claria for an additional $47 million, payable if and when the option is exercised. The $8 million was expensed as Acquired in-process research and development and milestones in our Condensed Consolidated Statement of Income for the year ended December 31, 2023.
Food and Drug Administration approved the citrate-free, high-concentration (100 mg/mL) formulation of Hadlima . We recorded sales of $19 million during the year ended December 31, 2022, reflecting an increase of 51% from modest sales during the year ended December 31, 2021 in markets outside of the US.
We recorded sales of $44 million during the year ended December 31, 2023, reflecting an increase from modest sales during 2022 in markets outside of the United States and the launch in the United States in July 2023. Hadlima is currently approved in the United States, Australia, Canada, and Israel.
Worldwide sales were $6.2 billion for the year ended December 31, 2022, a decrease of 2% compared with 2021. Worldwide sales were negatively impacted by approximately 6%, or $383 million, due to unfavorable foreign exchange.
Worldwide sales were negatively impacted by approximately 2%, or $117 million, due to unfavorable foreign exchange.
Highlights of the sales of Organon's products for the year ended December 31, 2022 and 2021 are provided below.
Highlights of the sales of our products for the year ended December 31, 2023 and 2022 are provided below. See Note 6 "Product and Geographic Information" to the Consolidated Financial Statements for further details on sales of our products.
Global sales of Nasonex , an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, increased 16% during the year ended December 31, 2022, primarily driven by higher demand resulting from competitors' supply disruptions in Japan and increased demand across several markets, partially offset by the unfavorable impact of foreign exchange.
Global sales of Nasonex , an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, increased 6% for the year ended December 31, 2023, compared to 2022, due to increased demand across several markets partially offset by a $10 million milestone related to a regulatory approval received during the first quarter of 2022.

… 96 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed1 unchanged
Biggest changeSee Note 7 "Financial Instruments" to the Consolidated Financial Statements included in this report for further information on Organon's risk management. Interest Rate Risk Our long-term debt portfolio consists of both fixed and variable-rate instruments. For any variable rate debt, interest rate changes in the underlying index rates will impact future interest expense.
Biggest changeSee Note 14 "Financial Instruments" to the Consolidated Financial Statements included in this report for further information on our risk management. Interest Rate Risk Our long-term debt portfolio consists of both fixed and variable-rate instruments. For any variable rate debt, interest rate changes in the underlying index rates will impact future interest expense.
We are primarily exposed to foreign exchange risk with respect to forecasted transactions and net assets denominated in the euro, Swiss franc, and Japanese yen. We established a balance sheet risk management program and a net investment hedge to partially mitigate against volatility of changes in foreign exchange rates.
We are primarily exposed to foreign exchange risk with respect to forecasted transactions and net assets denominated in the euro, Swiss franc, and Japanese yen. We established a balance sheet risk management program and a net investment hedge to mitigate against volatility of changes in foreign exchange rates.
We do not hold any derivative contracts that hedge our interest rate risk; however, we may consider entering into such contracts in the future. We estimate a hypothetical 10% adverse movement in interest rates of our variable rate debt would not materially change annual interest expense. -65- Table of Contents
We do not hold any derivative contracts that hedge our interest rate risk; however, we may consider entering into such contracts in the future. We estimate a hypothetical 10% adverse movement in interest rates of our variable rate debt would not materially change annual interest expense. -49- Table of Contents

Other OGN 10-K year-over-year comparisons