Ethan Brown

Ethan Brown asked for Organon's latest thoughts on the long-term outlook for operating costs and margins. He also inquired about the expected duration of the reinsertion headwind for Nexplanon due to the 5-year indication and any potential price offsets.

Answer

Matt Walsh, Organon's CFO, outlined the company's strategy to continuously streamline OpEx for efficiency and scale, ensuring spending aligns with revenue growth and value creation. He projected the Nexplanon reinsertion headwind to be most significant in 2026, with a substantial reduction in 2027, but did not discuss price offsets.

Ethan Brown sought Organon's latest thoughts on the long-term outlook for operating costs and margins, and inquired about the expected duration of the Nexplanon five-year indication headwind and any potential price offsets.

Answer

Matt Walsh, Organon's Chief Financial Officer, stated that the company's philosophy is to continuously streamline and improve efficiency without sacrificing OpEx that drives revenue growth. He added that the reinsertion headwind for Nexplanon would be most pronounced in 2026 and significantly lower in 2027.

Ethan Brown of JPMorgan Chase & Co. asked about the drivers for VITAMMA's expected sales ramp in the second half of the year to reach its $150 million target, questioning the split between volume and price. He also inquired about the growth impact of Nexplanon's five-year indication in 2026-2027 and the current volume from implant replacements.

Answer

Kevin Ali, CEO & Board Member of Organon, attributed the expected VITAMMA ramp to new DTC and telehealth activities, sales force expansion, and improving gross-to-net. For Nexplanon, he acknowledged the five-year indication would be a small headwind in 2026 but ultimately expands exclusivity to 2029 and opens up new patient segments. He noted strong ex-U.S. growth is helping offset current U.S. funding issues.

Ethan Brown, on for Chris Schott, asked about any surprises in the VTAMA commercial landscape and its competitive positioning in atopic dermatitis. He also requested details on the magnitude and timing of margin benefits from the manufacturing separation from Merck.

Answer

CEO Kevin Ali expressed increased confidence in VTAMA, highlighting its 51% NRx growth post-AD approval and its 'best-in-class' label. CFO Matt Walsh stated that the Merck manufacturing separation is expected to yield 250 to 300 basis points of gross margin expansion, with benefits beginning to materialize in 2027 and rolling in over a few years.

Ethan Brown from JPMorgan Chase & Co., on for Chris Schott, questioned the cause of the increased product scrap in infant formula and sought assurance that the issue was resolved. He also asked how the updated, slower infant formula ramp impacts year-end market share targets and long-term guidance.

Answer

President & CEO Patrick Taylor explained the product scrap was an "isolated production issue" identified by their quality systems, which reaffirmed the strength of their manufacturing processes. He stated the issue is resolved and not expected to recur. While the market share ramp-up will take longer than initially expected, he confirmed there is no change to the long-term outlook for the store brand infant formula business.

Ethan Brown, on behalf of Chris Schott, asked about the potential 2026 EPS impact from tariffs, the sales ramp for infant formula in 2025, and the potential impact of pharma-specific tariffs.

Answer

CFO Eduardo Bezerra stated that mitigation actions are expected to fully offset tariff impacts on 2025 and 2026 projections. CEO Patrick Lockwood-Taylor detailed the infant formula recovery, expecting Q2 sales similar to Q1's 19% growth, with a significant H2 ramp-up from new SKUs. Lockwood-Taylor also confirmed the company has a playbook involving pricing, onshoring, and alternative sourcing to mitigate potential pharma-specific tariffs, noting the European business is not impacted.

Ethan Brown, on behalf of Chris Schott, asked for feedback on demand for Perrigo's infant formula amid new competition and inquired about the key drivers and headwinds for the 2025 EPS target of $3.

Answer

CEO Patrick Lockwood-Taylor stated that store brand infant formula share recovery is in line with expectations, measured by poundage, and should accelerate. He acknowledged new foreign brand entrants are disrupting the market, impacting some contract manufacturing clients. Regarding 2025, Lockwood-Taylor affirmed focus on the $3 EPS target, while CFO Eduardo Bezerra outlined tailwinds like category growth and infant formula recovery, and headwinds including a competitive marketplace and normalizing A&P/R&D spend.