Organon & Company (OGN) — Q3 2024 Earnings Call Transcript

Thank you, operator. Good morning, everyone. Thank you for joining Organon’s third quarter 2024 earnings call. With me today are Kevin Ali, Organon’s Chief Executive Officer, and Matt Walsh, our Chief Financial Officer, as well as Juan Camilo Arjona Ferreira, Organon's Head of R&D. Today, we'll be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the events and presentation section of our Organon investor relations website at www.organon.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our 10-K and subsequent periodic filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I'd now like to turn the call over to our CEO, Kevin Ali.

Good morning, everyone, and thank you, Jen. Welcome to today's call where we'll talk about our third quarter results. For the third quarter of 2024, revenue was $1.6 billion, representing a 5% growth rate at constant currency. The women's health franchise grew 6%. Our biosimilars franchise grew 17%. And our established brands franchise was up 3%. Adjusted EBITDA was $459 million, representing a 29% adjusted EBITDA margin. Adjusted EBITDA includes $51 million of IPR&D expense booked in the third quarter, worth approximately 320 basis points of margin in the quarter. Year to date, we have generated nearly $700 million of free cash flow and are well on track to deliver our commitment of approximately $1 billion of free cash flow before one-time costs in 2024. Our significant free cash flow enables us to comfortably service the dividend and still gives us the capacity to invest in high-potential assets. Given our view into the rest of the year, we raised the midpoint of our revenue guidance by $50 million to reflect performance year to date and improved foreign exchange view. The guidance represents growth of 1.8% to 2.6% on a nominal basis and 3.1% to 3.8% ex-exchange for the full year. That would represent our third consecutive year of constant currency revenue growth, driven by strong performance in Nexplanon, biosimilars, Jada, and the addition of Emgality. Further, while it's too soon to guide to 2025 on this call, at this point in our planning cycle for next year, we believe that organic growth drivers plus contributions from recent business development will support another year of constant currency revenue growth in 2025. We're also revising our full year 2024 adjusted EBITDA margin range. The new range is 30% to 31%. Matt will walk you through that bridge, which factors in $51 million of IPR&D in the third quarter. In addition to reporting our results today, we are able to share more about our Dermavant acquisition and its key asset, VTAMA, which we closed on Monday. VTAMA is a nonsteroidal topical cream already approved for the treatment of plaque psoriasis in adult patients. VTAMA also has a Q4 PDUFA date for a potential new indication, the topical treatment of atopic dermatitis in adults and pediatric patients two years of age and older. The near-term potential for the proposed atopic dermatitis indication is the much more attractive opportunity for us for two main reasons. First, the size of the market. There are three times as many patients suffering from atopic dermatitis as compared to psoriasis. And second, for those millions of patients, if approved, we believe VTAMA can address an existing gap in the standard of care for atopic dermatitis. There is a significant unmet need in atopic dermatitis for a treatment option with the efficacy of a biologic and the safety and tolerability profile of a topical treatment that can be used long term. This point is especially important as nearly half of all atopic dermatitis sufferers are children. Because of this unique clinical profile, we believe VTAMA will be much better positioned in the atopic dermatitis market than it ever was in the psoriasis market. In fact, in our view, the opportunity for VTAMA and atopic dermatitis versus psoriasis is night and day. So what is it about the clinical profile that is so differentiating? We have with us today Juan Camilo, our head of R&D, to talk more specifically on that topic.

Thank you, Kevin. I'd like to expand on Kevin's point about how VTAMA is much better situated in the atopic dermatitis market than in psoriasis. Psoriasis is a systemic autoimmune disease that more frequently benefits from systemic therapy, and patients can be well controlled with injectable biologics. In fact, at the time of the VTAMA launch, the psoriasis market was already fairly saturated with biologics. Therefore, there wasn't a critical unmet need like there is today in atopic dermatitis. Atopic dermatitis, on the other hand, is a chronic, long-lasting disease characterized by inflammation, redness, and irritation of the skin that is best addressed with a topical solution. During a flare, atopic dermatitis can be highly symptomatic, and the itchiness associated with it can be so severe it may even affect sleep. Despite the significant disease burden associated with atopic dermatitis, there has not been a lot of innovation. The existing topical treatments are mostly steroids which were first available in the 1950s and are not intended for chronic use. Current nonsteroidal treatment options for atopic dermatitis consist of a few agents that have demonstrated different levels of efficacy, one being a highly priced injectable biologic and another a DAC inhibitor that offers a black box warning. There is a need for a solution that is efficacious, like the biologics, and has a safety and tolerability profile that is suitable for long-term use in adults and children. The results from the two Phase 3 clinical trials support our view that VTAMA has the potential to fill this gap. Pending FDA approval, our proposed label for VTAMA is broad, potentially covering mild to severe atopic dermatitis, with no restrictions for use or limitations of body surface area, with a high rate of treatment response in children greater than two years of age and adults and good tolerability. Our proposed label would be truly different from the label of other options on the market. So we are confident in the clinically different profile of VTAMA for the treatment of atopic dermatitis and we're excited to bring this novel option to patients who have been suffering from this condition and their healthcare providers who will no longer have to make trade-offs between efficacy and safety if VTAMA is approved.

Thank you, Juan Camilo. So we're talking about a treatment option that is clinically differentiated in a large market with a critical unmet need. That combination makes us very confident in the commercial positioning for VTAMA and atopic dermatitis if approved. And from a capital allocation standpoint, this transaction makes a lot of sense for Organon. The terms of the transaction are very attractive with the economics skewed disproportionately towards success-based milestones. We expect to achieve at least $150 million of sales of VTAMA in 2025 with the potential to grow to $0.5 billion over the next three to five years. In 2025, we expect the transaction to be dilutive to our EBITDA margin by about 50 basis points, and we expect the transaction to be accretive in year two with earnings accelerating from there. The acquisition also nicely leverages Organon's existing therapeutic expertise in dermatology. Our existing dermatology portfolio of seven products outside the US delivered $240 million of revenues in 2023. The addition of VTAMA allows us to create a dermatology presence in the US where we have a very experienced and scaled access team at the local, state, and national levels. We expect to be in a position to launch the atopic dermatitis indication immediately after approval, focused on expanding access, ultimately improving VTAMA’s gross to net over time. We'll also have the potential to launch internationally down the road. Overall, we believe we are the best owner of VTAMA. With solid growth prospects and healthy margins, we believe it will contribute solidly to the financial profile of Organon. So let's review the rest of the business in greater detail. Growth in women's health was driven by continued strength in Nexplanon, which was up 11% ex-FX in the third quarter. In the US, Nexplanon grew 18% in the third quarter. We've benefited from Nexplanon's leadership in the US contraception market, our pricing strategy, including management of the 340B discount program, as well as continued physician demand growth outside the US. Nexplanon was down 3% ex-FX in the third quarter primarily due to the timing of tenders in Latin America. Given strong year-to-date performance, we expect Nexplanon can achieve constant currency, full-year revenue growth in the low to mid-teens. This would be our best year yet with Nexplanon and positions us extremely well to achieve the $1 billion milestone that we had signaled for next year. We remain very optimistic about Nexplanon's future prospects and the expanding potential of the brand through the proposed five-year indication. We plan on making our submission to the FDA in the next few months, which would put us in a position to be ready for a late 2025 launch, assuming FDA approval. Moving on to other women's health. Though up 14% ex-FX in the third quarter, we expect our fertility business to be slightly down this year as we work through inventory adjustments related to exiting a spin-related interim operating model and onboarding a large PBM contract in the US in the fourth quarter of last year. We see 2025 as a rebound year with very strong growth for fertility underpinned by continuing ART expanded reimbursement in China, international expansion and performance in the US that won't have the noise of the IOM exit. Let's move now to our biosimilars franchise, which grew 17% at constant currency in the third quarter. We expect biosimilars to deliver low teens growth for the full year 2024, with Renflexis and Ontruzant at the mature point in their unusually long and impressive growth period. Biosimilars growth next year will be driven by continued uptake of Hadlima in the US, which has performed well and continues to grow sequentially. The strategy in biosimilars is to launch a new asset every couple of years. In late 2025 and beyond, additional growth contributors to the biosimilars franchise will be the Denosumab asset, then later the Pertuzumab asset. Both will be launched in collaboration with Shanghai Henlius pending FDA review and approval. Just yesterday, we announced that the FDA accepted our Biologics license application for the Denosumab asset, bringing us a step closer to potentially providing this treatment option to patients in the US in 2025. And then rounding out our discussion with established brands, which grew 3% ex-FX in the third quarter and up 1% ex-FX year-to-date. We expect the franchise to deliver flat to slightly better performance on a full-year basis as growth in Emgality and the recovery of injectable steroids are expected to offset the LOE of Atozet and mandatory pricing revisions in Japan. Overall, we are very encouraged about our performance year-to-date and remain very confident in our ability to deliver on our commitments for the full year. I'll now turn it over to Matt, who will discuss our financial performance in greater detail.

Thank you, Kevin. Beginning on Slide 9, here we bridge revenue for the third quarter year over year. As Kevin mentioned at the outset, third quarter revenue of $1.58 billion was up 4% over third quarter of last year and ahead 5% at constant currency. Impact from LOE was about $5 million in the quarter, which reflects the loss of exclusivity of Atozet in Japan and negligible impact from the beginnings of the Atozet LOE in Europe, which happened in September. We didn't have any meaningful VBP headwind in the third quarter as the effects of Round 8 that began in the third quarter of last year and included Remeron and Hyzaar are now washing out. There was an approximate $70 million impact from price in the third quarter or about 4.6%. You may recall that in our second quarter call, we said that the back half of 2024 would face steeper headwinds from price than the first half due to the timing of mandatory pricing reductions in Japan, mainly in the cardio and respiratory portfolios, which is what we are seeing. We're also seeing pricing headwinds coming from the September LOE of Atozet in Spain and France as well as from certain mature products in the US like NuvaRing, Dulera, and Renflexis. Volume growth in the quarter was $150 million or almost 10% across several drivers. Hadlima and Emgality were the largest contributors to volume growth, followed by fertility, Nexplanon, and established brands, especially in China. Timing of tenders of Ontruzant and NuvaRing in the US were the biggest offsets to volume growth. In supply/other, here we capture the lower margin contract manufacturing arrangements that we had with Merck, which had been declining since the spinoff as expected, although there was only a small change year-over-year in this bucket this quarter. Lastly, foreign exchange translation had an approximate $20 million impact or a 130 basis point headwind to revenue, which reflects the strengthening US dollar versus certain foreign currencies, which this quarter included the Mexican peso, Japanese yen, and Brazilian real. Now, let's turn to Slide 10, where we show key non-GAAP P&L line items and metrics for third quarter performance. For reference, GAAP financials and reconciliations to the non-GAAP financial measures are included in our press release and the slides in the appendix of this presentation. For gross profit, we are excluding from cost of goods sold, purchased accounting amortization, and one-time items, which can be seen in our appendix slides. Adjusted gross margin was 61.7% in the third quarter of 2024, compared with 62.6% in the third quarter of last year. In the third quarter of 2024, the lower adjusted gross margin was primarily related to unfavorable product mix and price. Excluding $51 million of IPR&D expense incurred during the period, non-GAAP operating expenses were down 5% year-over-year, reflective of our cost containment efforts. Of the $51 million of IPR&D expense in the third quarter, virtually all of it related to our collaboration with Shanghai Henlius for further advancement of the Denosumab and Pertuzumab biosimilar candidates. While we have an established practice of not guiding to IPR&D, we do have a pretty good line of sight from now until the end of 2024. We don't expect to surpass any further milestones that would trigger IPR&D payments. While the total of $81 million of IPR&D expense for the full year represents a headwind of about 170 basis points year-to-date, these payments are strong signals that our pipeline is progressing and we are building our ability to sustain revenue growth well into the future. These factors culminated in an adjusted EBITDA margin of 29% in the third quarter of 2024, compared with 29.4% in the third quarter of 2023. Non-GAAP adjusted net income was $226 million or $0.87 per diluted share, almost equal with 2023's $223 million or $0.87 per share in the same period. GAAP net income was actually higher than non-GAAP net income this quarter. GAAP net income benefited from the release of an evaluation allowance in the amount of $210 million against the tax asset of one of the company's Swiss entities. This development, while favorable, does not impact our non-GAAP effective tax rate for earnings guidance purposes, which remains in the range of 18.5% to 20.5%. Turning to Slide 11, we provide a closer look at our cash flow year to date. Despite some minor headwinds from the Dermavant acquisition, as Kevin mentioned, we're well on track to deliver approximately $1 billion of free cash flow before one-time charges. Year to date, those one-time spin-related costs were $137 million. Our global ERP implementation is now behind us, and that was the largest driver of these one-time costs. Our view into the fourth quarter is that costs in this category will be minimal, so we expect to finish the year at approximately $150 million, which is better than the $200 million of one-time spin-related costs that we were originally forecasting for 2024. Next year, in 2025, we would expect one-time spin-related costs to be negligible. The $129 million of other one-time costs capture headcount restructuring initiatives and manufacturing network optimization. The cash outlay for these network optimization costs have amounted to $44 million year-to-date 2024. They are distinct from the spin-related costs in that they're associated with actions to separate our manufacturing and supply chain activities away from Merck, which will ultimately drive cost efficiencies and eventual gross margin improvement. We expect this bucket to total about $75 million this year. Turning to Slide 12, we ended the quarter at 4.0 times on our net leverage ratio, which was 0.25 turn better than this time last year, and also slightly better than where we were year-end, 4.1 times. Year-to-date, we have had stronger EBITDA generation, which has resulted in a leverage ratio at September 30th, 2024 that is more favorable than our expectations at the start of the year. That said, it will take us several quarters to digest the Dermavant acquisition before leverage can return to the 4.0 times net leverage ratio that we've achieved as of this quarter end. Now turning to 2024 guidance on Slide 13, where we highlight the items driving our 2024 revenue guidance range. As Kevin mentioned, we've tightened our revenue range and raised the midpoint by $50 million, representing 1.8% to 2.6% nominal growth year-on-year, which equates to 3.1% to 3.8% on a constant currency basis. For loss of exclusivity, we lowered our range from $70 million to $90 million to $40 million to $50 million, which reflects slower uptake for generics for Atozet. Moving to the right, we lowered the range on VBP impact from $30 million to $50 million to $15 million to $25 million, which similarly reflects a slight delay in realizing the full revenue impact of Round 8 for Remeron and Hyzaar. We've been doing a bit better on price year-to-date, so we lowered our view of pricing impact from $180 million to $200 million to $145 million to $155 million, representing an approximate 2.5 percentage point headwind versus prior year, which aligns with our longer-term expectations from price across our entire business. Sequentially, the impact from price has been and is expected to be more acute in the back half of 2024 as the mandatory pricing revisions in Japan accelerate and reductions in price associated with the Atozet loss of exclusivity in the EU more fully materialize. Additionally, we're facing increasing competitive pressures in the US within mature products such as Dulera, Renflexis, and NuvaRing. For the year, we've narrowed and lowered the range on volume to $445 million to $465 million, down from $500 million to $600 million. The volume range reflects an approximate 7% growth rate over last year, tempering down from the 9% volume growth rate we expected, mainly attributable to a softer outlook in fertility for the year. Finally, based on our current view of foreign exchange, we lowered our view of FX impact to $75 million to $85 million, down from $110 million to $140 million, and that $50 million improvement is the principal driver for raising the midpoint of our revenue guidance by $50 million. Kevin mentioned at the outset that we were also revising our range on adjusted EBITDA from 31% to 33% to 30% to 31%. In Slide 14, we bridge the items driving the change. The largest driver is the incremental $51 million of IPR&D expense we booked in the third quarter, worth about 80 basis points of margin for the full year. Second, in our view into fourth quarter revenue, we can see that we'll likely have some unfavorable product mix worth about 50 basis points of gross margin on the full year. This is primarily related to certain products in our US portfolio that are subject to higher competitive pressure, specifically Ontruzant, NuvaRing, and Dulera, where we're seeing some pricing pressure and unfavorable channel mix from this group of products, which are at the mature part of their growth cycle. While we have seen pressure year-to-date in our US fertility business, we see a fairly strong rebound next year. When combined with the strong gross margin profile of VTAMA, these two items together should serve as an offset to the margin pressure dynamic in our mature brands. The fourth column here represents two months of onboarding of Dermavant at their current expense rate, so no synergies yet reflected in this number. The last column represents net productivity in the base business and that bridges you to the new midpoint of the adjusted EBITDA margin range. Turning now to Slide 15, where we show all components of our earnings guidance. For full year 2024 and consistent with the revenue commentary that we just discussed, we are revising our gross margin range from 61% to 63% to approximately 61.5%. On SG&A expense, we tightened our range from $1.5 billion to $1.7 billion to $1.55 billion to $1.60 billion, $25 million better at the midpoint, driven by year-to-date favorability. For R&D, we tightened our range around the midpoint on the base R&D spend and adjusted for the incremental $51 million of IPR&D that we booked in the third quarter. On a full-year basis, the year-to-date total of IPR&D expense is $81 million and that's worth about 130 basis points of adjusted EBITDA margin using the midpoint of our guide. As Kevin said, it's too soon to be guiding to 2025, but directionally, we do expect to see revenue growth year-on-year. This includes organic growth across the portfolio plus the $150 million of revenue from Dermavant that Kevin referenced. Those will be offsetting factors to the Atozet loss of exclusivity next year, as well as any other challenges we believe we might see across the portfolio. We do expect the Dermavant acquisition to be dilutive to 2025 profitability, accretive in 2026 and thereafter. In 2025, we expect operating expense for Dermavant will be about $180 million and will be focused on the successful launch of VTAMA in the atopic dermatitis indication, for which we hope to receive approval this quarter, pending FDA approval. About one-third of this operating expense is fixed and is in the form of onboarding Dermavant sales and marketing capabilities. The other two-thirds is promotional spend around the launch and other business support that will either naturally flex down after the atopic dermatitis launch or else become opportunities for further synergies. In 2025, directionally, we expect Dermavant to account for approximately half a point of EBITDA margin headwind, which of course, we will be looking to see if we can offset with further expense discipline enacted across other parts of our business, as we've been doing quite successfully this year. In 2026, we expect VTAMA margins to grow to be above Organon's company average as revenue accelerates from the atopic dermatitis launch and synergies are realized and continue to grow from there. Closing out, in 2024, we set ourselves up to deliver a trifecta of growth in revenue and EBITDA dollars, a leveraged P&L milestones, and $1 billion of free cash flow before one-time items. With three quarters of the year under our belt and two months left to go, we feel very good about our ability to deliver on that goal. With that, now let's turn the call over to the questions-and-answers.

Hi, good morning and thank you for the questions. Firstly on VTAMA, congratulations on the deal, seems to be well laid out in terms of capital allocation. Could you comment on the current profitability or the EBITDA contribution from Dermavant? And maybe getting to next year, on the OpEx of $180 million, split it up into atopic dermatitis spend versus psoriasis spend? And second question is on Nexplanon. Probably a slightly more sensitive topic, but can you comment around the current political climate vis-a-vis LARCs and maybe more specifically business growth drivers for Nexplanon? Thank you.

Matt, you want to take the first?

Yeah. So, we've got two months of VTAMA included in our rest-of-year guidance for 2024 and so it's nominal. I'm looking at a revenue run rate of approximately $6 million per month, and we're forecasting the same level of dilution in this stub period as we would be talking about for 2025. So that's the VTAMA piece.

Balaji, your question about Nexplanon is very timely. I recently returned from meetings in Washington, and I can confirm that with the new administration coming in, there is consensus from both sides of the aisle. Access to long-acting reversible contraceptives, as well as contraception related to women's health, does not seem to be under threat. In fact, there appears to be a commitment on both sides to avoid contentious discussions around fertility and access to contraception, focusing instead on addressing reproductive health issues. Our Nexplanon business is performing very well in the US, where we lead the market in contraception, especially with LARCs. We are experiencing continued demand growth, and our 340B business is also expanding with federally qualified health centers, presenting significant future opportunities. We anticipate reaching $1 billion in global sales for Nexplanon faster than expected, with the US playing a major role in that growth for Organon next year. This will mark our first major blockbuster milestone for the product, and we see a promising future ahead. Thank you for your question.

Thanks. So just a couple for me. So now that you have medical derm commercial infrastructure in place and this is a new therapeutic vertical, how are you thinking about leveraging that infrastructure over the long term by the acquisition of additional assets? How aggressive do you want to be? And is it just medical derm or are you also open to assets in medical aesthetics? And then with the acquisition of Dermavant, how does that change your thinking on capital deployment? Are you looking to get more aggressive on the M&A front, particularly in a lower rate environment? Just philosophically, how are you thinking about things in the wake of the acquisition and in the context of a lower interest rate environment? Thank you.

Thanks, David. I can address those questions. First, regarding the introduction of this new vertical in the US, we have always been fans of VTAMA and Dermavant and the opportunities they present. I outlined the prospects for atopic dermatitis in my remarks, and we remain very optimistic about this. This product stands out, as Juan Camilo highlighted, due to its positioning in the atopic dermatitis market, showing both effective biologic properties and the potential for superior tolerability over extended use. We are truly excited about this opportunity, which opens new possibilities for us over time. Additionally, we plan to internationalize VTAMA, with Canada being our first target for launch in the near future, which will complement our portfolio, and we are also exploring other international markets. Moreover, we have a royalty agreement in Japan, which will provide us with additional revenue. In the US, we see numerous opportunities, including areas like anti-infectives and aesthetics. The team we are bringing from Dermavant is exceptional, and we aim to support them with our expertise, especially in terms of access. Our team includes some of the best professionals in access from our previous backgrounds, focusing on expanding opportunities for both VTAMA and our future endeavors in dermatology. Regarding our capital allocation and business development strategy, our primary focus for 2025 will be on integrating and driving VTAMA's performance, and we will address future opportunities when the time comes.

Hey, guys. Good morning. Thanks for taking my question. Mine is, just wanted to follow up on the Dermavant accretion dilution profile, and given this is a new therapeutic vertical, just wondering if you can talk through conceptually the incremental selling and marketing cost versus what you're able to absorb with your own in-house resources. I think Dermavant talked at one point about more than $300 million or so OpEx versus your $180 million number. So just kind of wondering, are you putting less behind the product, or are there cost offsets in your infrastructure or alternatively, is the atopic dermatitis cost maybe not fully baked into the $180 million? Just wanted to get some clarity around those inputs. And then just on your Nexplanon citizens petition filed, is there any backstory to that? And what I'm getting at is, I don't know if the FDA were they unreceptive to proposed changes in product-specific guidance or is this basically your first sort of attempt to get the FDA to pay increased attention to the applicator similarity points that were raised in the citizen petition? Thanks.

I'll address the VTAMA question first, Jason. Regarding operating expenses, I'm not entirely sure what Dermavant has disclosed, but I think the approximate $300 million figure is quite broad. We anticipate onboarding operating costs around $240 million. About a third of that will be allocated to sales and marketing, which we plan to integrate fully. This expertise in U.S. derm sales and marketing is critical for our future success, and we are dedicated to onboarding it properly. The synergies we expect to realize will come from the remaining portion of the costs. A major factor in the difference between the cost you might be considering and the $180 million in operating expenses we mentioned for next year stems from R&D expenses from previous ownership that are already decreasing. This is an important distinction when comparing previous benchmarks to the operating expenses we expect to onboard for 2025. Additionally, as stated earlier, we only anticipate one year of dilution from the onboarding of the product, with it becoming accretive in 2026 and beyond based on revenue estimates we believe are quite attainable.

Jason, in regards to the question on the submission of the petition, it's still pending. So I can't speak to that until we get a response from the FDA. But the issue that I wanted to clarify is the fact that we do have patent protection on our applicator device until 2030. And I think that needs to be understood that unless you want to devise and design and submit in your own clinical studies a new completely new applicator, you can't use our applicator past until 2030. And so that is one aspect when you make mention of the applicator device in terms of the patent protection. But also, the fact of the matter is, I've always signaled the fact that it's not an easy go of it. And again, like I said, if you just want to use a proxy, just look at the IUD Mirena in terms of the fact that we're now like seven years post LOE and there's still no true generics in the market. It's not an easy thing to do and you've got to have a huge amount of infrastructure investments in terms of not only sales force to train your physicians on how to insert and remove your rod, but all of the other things that go into medical affairs and pharmacovigilance and all of that. The FDA is very sensitive to that. So I think that's my view in terms of the runway ahead for Nexplanon.

Got it. Thanks so much, guys.

Sure, Jason.

Hi guys, thanks for taking my question. I'm curious, the $180 million in OpEx you referred to, is that inclusive of the ex-US spend you intend to do as well? And in a scenario where VTAMA underperformed, how much can you pull that back? Thank you.

So I'll take the first part of that question. So in the $180 million OpEx for 2025, that's really US focused. There's really nothing of significance ex-US in that. And for the second part of the question, how much can we pull it back? Look, you can always cut back on promotional spend. We have plans in place to synergize on the G&A pieces of the cost structure. But I don't know that we would be focused on that in 2025. We will be putting all of our energies behind the successful launch of VTAMA. So the next 14 months, let's say, till the end of 2025 are really key. And so if we have to think about retrenchment, Umer, we will be looking at that beyond 2025.

Great.

Thanks, Umer.

Thank you. Just in closing, look, in 2024, our commercial execution, I believe, has been very strong. Our largest product, Nexplanon, is well positioned, as I mentioned earlier, to deliver $1 billion of revenue next year. And we've added other notable growth drivers with Emgality and most recently, what we've just discussed this morning, VTAMA. Further, we've been extremely disciplined on operating costs and driving adjusted EBITDA growth in support of achieving $1 billion of free cash flow before one-time costs for the full year 2024. So we're well on track to delivering a very solid year and we want to thank you for dialing in today and we'll talk to you soon.