OGN - Organon gains after earnings beat despite contraction in topline

Merck ( MRK ) spinoff Organon & Co. ( NYSE: OGN ) rose after its Q3 2021 financials topped Street forecasts on Thursday, even as the company reported a decline in revenue for the second consecutive quarter.

Revenue for the quarter fell ~4% YoY on a GAAP basis to $1.5B despite indicating ~3% YoY growth after accounting for forex impact.

Europe and Canada led the contraction adding $363M in sales despite a ~12% YoY drop on a reported basis, while the U.S. and China brought $366M and $241M in sales with ~6% YoY growth and ~4% decline, respectively.

The Established Brands segment, which focuses on off-patent medications sold in overseas markets, contributed $915M in revenue with a ~11% YoY decline, and Biosimilars recorded $129M revenue with a ~7% YoY drop, while Women’s Health added $454M with ~19% YoY growth.

The company expects the Established Brands to report a slight growth on a constant currency basis this year despite a potential impact in Q4 from participating in China’s bulk drug procurement program.

Meanwhile, net income from continuing operations fell ~30% YoY to $337M as SG&A expenses and R&D expenses climbed ~13% YoY and ~48% YoY to $440M and $127M, respectively, even as gross margin improved to 64.2% from 61.9% in the prior year period.

Citing ongoing currency headwinds, Organon ( OGN ) narrowed its revenue guidance to $6.1B – $6.2B from $6.1B – $6.3B, estimated three months ago. The current consensus expects the company to report ~$6.2B in revenue this year.

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