QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) (zip code) |
Not Applicable | ||||||||
(Former name, former address and former fiscal year, if changed since last report.) |
Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
☒ | Smaller reporting company | ||||||||||
Emerging growth company |
Page No. | ||||||||
PART I | ||||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 6. | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Sales | $ | $ | $ | $ | |||||||||||||||||||
Costs, Expenses and Other | |||||||||||||||||||||||
Cost of sales | |||||||||||||||||||||||
Selling, general and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Restructuring costs | |||||||||||||||||||||||
Other (income) expense, net | |||||||||||||||||||||||
Income From Continuing Operations Before Income Taxes | |||||||||||||||||||||||
Taxes on Income | |||||||||||||||||||||||
Net Income From Continuing Operations | |||||||||||||||||||||||
Loss From Discontinued Operations - Net of Tax | ( | ( | |||||||||||||||||||||
Net Income | $ | $ | $ | $ | |||||||||||||||||||
Earnings (Loss) per Share Attributable to Organon & Co. Stockholders - Basic: | |||||||||||||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
Discontinued operations | ( | ( | |||||||||||||||||||||
Net Earnings per Share Attributable to Organon & Co. Stockholders | $ | $ | $ | $ | |||||||||||||||||||
Earnings (Loss) per Share Attributable to Organon & Co. Stockholders - Diluted: | |||||||||||||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
Discontinued operations | ( | ( | |||||||||||||||||||||
Net Earnings per Share Attributable to Organon & Co. Stockholders | $ | $ | $ | $ | |||||||||||||||||||
Weighted Average Shares Outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net Income | $ | $ | $ | $ | |||||||||||||||||||
Other Comprehensive Income (Loss), Net of Taxes: | |||||||||||||||||||||||
Benefit plan net (loss) gain and prior service credit, net of amortization | ( | ( | |||||||||||||||||||||
Cumulative translation adjustment | ( | ( | |||||||||||||||||||||
( | ( | ||||||||||||||||||||||
Comprehensive Income | $ | $ | $ | $ |
September 30, 2021 | December 31, 2020 | ||||||||||
Assets | |||||||||||
Current Assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable (net of allowance for doubtful accounts of $ 2021 and $ | |||||||||||
Inventories (excludes inventories of $ | |||||||||||
Other current assets | |||||||||||
Current assets of discontinued operations | |||||||||||
Total current assets | |||||||||||
Property, plant and equipment, net | |||||||||||
Goodwill | |||||||||||
Other intangibles, net | |||||||||||
Other assets | |||||||||||
Noncurrent assets of discontinued operations | |||||||||||
$ | $ | ||||||||||
Liabilities and Equity | |||||||||||
Current Liabilities | |||||||||||
Current portion of long-term debt | $ | $ | |||||||||
Trade accounts payable | |||||||||||
Accrued and other current liabilities | |||||||||||
Due to related party | |||||||||||
Income taxes payable | |||||||||||
Current liabilities of discontinued operations | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Deferred income taxes | |||||||||||
Other noncurrent liabilities | |||||||||||
Noncurrent liabilities of discontinued operations | |||||||||||
Commitments and Contingencies | |||||||||||
Organon & Co. Equity | |||||||||||
Common stock, $ Authorized - Issued and outstanding - | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ||||||||||
Net investment from Merck & Co., Inc. | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total Equity | ( | ||||||||||
$ | $ |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Net Investment from Merck & Co., Inc. | Accumulated Other Comprehensive (Loss) Income | Total | ||||||||||||||||||||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||||||||||||||||||||
Balance at July 1, 2020 | — | $ | — | $ | — | $ | — | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Net income attributable to Organon & Co. | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net transfers to Merck & Co., Inc. | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | — | $ | — | $ | — | $ | — | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Balance at July 1, 2021 | $ | $ | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
Net income attributable to Organon | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Cash dividends declared on common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Net transfers from Merck & Co., Inc., including Separation Adjustments | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
Stock-based compensation plans and other | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | ( | $ | $ | ( | $ | ( |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Net Investment from Merck & Co., Inc. | Accumulated Other Comprehensive (Loss) Income | Total | ||||||||||||||||||||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | — | $ | — | $ | — | $ | — | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Net income attributable to Organon & Co. | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of taxes | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Net transfers to Merck & Co., Inc. | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | — | $ | — | $ | — | $ | — | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Balance at January 1, 2021 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
Net income attributable to Organon | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Cash dividends declared on common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Stock-based compensation plans and other | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Net transfers from Merck & Co., Inc., including Separation Adjustments | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net consideration paid to Merck & Co. Inc. in connection with Separation | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with the Separation and reclassification of Net investment from Merck & Co., inc. | — | ( | — | — | |||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | ( | $ | $ | ( | $ | ( |
Nine Months Ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
Cash Flows from Operating Activities | |||||||||||
Net income from continuing operations | $ | $ | |||||||||
Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities: | |||||||||||
Depreciation | |||||||||||
Amortization | |||||||||||
Acquired in-process research & development | |||||||||||
Deferred income taxes | ( | ||||||||||
Stock-based compensation | |||||||||||
Unrealized foreign exchange loss | |||||||||||
Other | |||||||||||
Net changes in assets and liabilities | |||||||||||
Accounts receivable | ( | ( | |||||||||
Inventories | ( | ||||||||||
Other current assets | |||||||||||
Trade accounts payable | |||||||||||
Accrued and other current liabilities | ( | ||||||||||
Due from/due to related party | ( | ||||||||||
Income taxes payable | ( | ||||||||||
Other | ( | ||||||||||
Net Cash Flows Provided by Operating Activities from Continuing Operations | |||||||||||
Cash Flows from Investing Activities | |||||||||||
Capital expenditures | ( | ( | |||||||||
Proceeds from sale of property, plant and equipment | |||||||||||
Acquired in-process research & development | ( | ||||||||||
Purchase of intangible asset - Alydia Health, net of cash acquired | ( | ||||||||||
Net Cash Flows Used in Investing Activities from Continuing Operations | ( | ( | |||||||||
Cash Flows from Financing Activities | |||||||||||
Proceeds from issuance of long-term debt | |||||||||||
Repayments of debt | ( | ||||||||||
Payment of long-term debt issuance costs | ( | ||||||||||
Repayments of short-term borrowings from Merck & Co., Inc., net | ( | ||||||||||
Net consideration paid to Merck & Co., Inc., in connection with the Separation | ( | ||||||||||
Net transfers from (to) Merck & Co., Inc. | ( | ||||||||||
Dividend payments | ( | ||||||||||
Net Cash Flows Used in Financing Activities from Continuing Operations | ( | ( | |||||||||
Discontinued Operations | |||||||||||
Net Cash Provided by (Used in) Operating Activities | ( | ||||||||||
Net Cash Used in Investing Activities | ( | ||||||||||
Net Cash (Used in) Provided by Financing Activities | ( | ||||||||||
Net Cash Flows (Used in) Provided by Discontinued Operations | ( | ||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents from Continuing Operations | |||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents from Discontinued Operations | ( | ||||||||||
Net Increase in Cash and Cash Equivalents | |||||||||||
Cash and Cash Equivalents, Beginning of Period | |||||||||||
Cash and Cash Equivalents of Discontinued Operations, Beginning of Period | |||||||||||
Total Cash and Cash Equivalents, End of Period | |||||||||||
Less: Cash and Cash Equivalents of Discontinued Operations, End of Period | |||||||||||
Cash and Cash Equivalents, End of Period | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Sales | $ | $ | $ | $ | |||||||||||||||||||
Cost of sales | |||||||||||||||||||||||
Selling, general and administrative |
($ in millions) | September 30, 2021 | December 31, 2020 | |||||||||
Receivables from Samsung included in Other current assets | $ | $ | |||||||||
Payables to Samsung included in Trade accounts payable |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Allocated net (gains) loss in Sales | $ | $ | $ | ( | $ | ( | |||||||||||||||||
Net (gains) loss in Other (income) expense, net(1) | ( | ||||||||||||||||||||||
Foreign exchange (gains) loss in Other (income) expense, net(1) | ( | ( | ( |
($ in millions) | September 30, 2021 | December 31, 2020 | |||||||||
Finished goods | $ | $ | |||||||||
Raw materials | |||||||||||
Work in process | |||||||||||
Supplies | |||||||||||
Total (approximates current cost) | $ | $ | |||||||||
Decrease to LIFO costs | ( | ( | |||||||||
$ | $ | ||||||||||
Recognized as: | |||||||||||
Inventories | $ | $ | |||||||||
Other assets |
($ in millions) | September 30, 2021 | December 31, 2020 | |||||||||
Land | $ | $ | |||||||||
Building | |||||||||||
Machinery, equipment and office furnishings | |||||||||||
Construction in progress | |||||||||||
Less: accumulated depreciation | ( | ( | |||||||||
Property, Plant and Equipment, net | $ | $ |
($ in millions) | September 30, 2021 | ||||
Term Loan B Facility: | |||||
LIBOR plus | $ | ||||
LIBOR plus | |||||
Other (discounts and debt issuance costs) | ( | ||||
Total principal long-term debt | $ | ||||
Less: Current portion of long-term debt | |||||
Total Long-term debt, net of current portion | $ |
($ in millions) | |||||
2021 | $ | ||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 | |||||
Thereafter |
($ in millions) | September 30, 2021 | December 31, 2020 | |||||||||
Assets | |||||||||||
Other Assets | $ | $ | |||||||||
Liabilities | |||||||||||
Accrued and other current liabilities | |||||||||||
Other Noncurrent Liabilities | |||||||||||
$ | $ | ||||||||||
Weighted-average remaining lease term (years) | |||||||||||
Weighted-average discount rate |
2021 (excluding the first nine months of 2021) | $ | ||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 | |||||
Thereafter | |||||
Total lease payments | $ | ||||
Less: Imputed interest | |||||
$ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
Income tax benefits |
Three Months Ended September 30, 2021 | |||||
Expected dividend yield | % | ||||
Risk-free interest rate | % | ||||
Expected volatility | % | ||||
Expected life (years) |
Stock Options | Restricted Share Units | Performance Share Units | |||||||||||||||||||||||||||||||||||||||
(shares in thousands) | Shares | Weighted average exercise price | Weighted average grant date fair value | Shares | Weighted average grant date fair value | Shares | Weighted average grant date fair value | ||||||||||||||||||||||||||||||||||
Outstanding as of June 2, 2021 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Granted | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Vested/Exercised | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||
Forfeited/Cancelled | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||
Outstanding as of September 30, 2021 | $ | $ | $ | $ |
Equity Awards Vested and Expected to Vest | Equity Awards That are Exercisable | ||||||||||||||||||||||||||||||||||||||||||||||
(shares in thousands; aggregate intrinsic value in millions) | Awards | Weighted Average Exercise Price | Aggregate Intrinsic Value | Remaining Term | Awards | Weighted Average Exercise Price | Aggregate Intrinsic Value | Remaining Term | |||||||||||||||||||||||||||||||||||||||
Stock Options | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
Restricted Share Units | — | ||||||||||||||||||||||||||||||||||||||||||||||
Performance Share Units | — |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Exchange (gains) losses | $ | $ | $ | $ | |||||||||||||||||||
Interest expense | |||||||||||||||||||||||
Other, net | ( | ( | |||||||||||||||||||||
$ | $ | $ | $ |
($ in millions) | Employee Benefit Plans | Cumulative Translation Adjustment | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Balance at July 1, 2020, net of taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Other comprehensive income (loss), pretax | |||||||||||||||||
Tax | — | ||||||||||||||||
Other comprehensive income (loss), net of taxes | |||||||||||||||||
Balance at September 30, 2020, net of taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Balance at July 1, 2021, net of taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Other comprehensive income (loss), pretax | ( | ( | ( | ||||||||||||||
Tax | — | ||||||||||||||||
Other comprehensive income (loss), net of taxes | ( | ( | ( | ||||||||||||||
Transfer of benefit plans from Merck affiliates | ( | — | ( | ||||||||||||||
Balance at September 30, 2021, net of taxes | $ | ( | $ | ( | $ | ( |
($ in millions) | Employee Benefit Plans | Cumulative Translation Adjustment | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Balance at January 1, 2020, net of taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Other comprehensive income (loss), pretax | ( | ( | |||||||||||||||
Tax | ( | — | ( | ||||||||||||||
Other comprehensive income (loss), net of taxes | ( | ( | |||||||||||||||
Balance at September 30, 2020, net of taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Balance at January 1, 2021, net of taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Other comprehensive income (loss), pretax | ( | ||||||||||||||||
Tax | ( | — | ( | ||||||||||||||
Other comprehensive income (loss), net of taxes | ( | ||||||||||||||||
Net transfer of benefit plans to (from) Merck affiliates | — | ||||||||||||||||
Balance at September 30, 2021, net of taxes | $ | ( | $ | ( | $ | ( |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
($ in millions) | U.S. | Int’l | Total | U.S. | Int’l | Total | U.S. | Int’l | Total | U.S. | Int’l | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Women’s Health | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nexplanon/Implanon NXT | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Follistim AQ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NuvaRing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ganirelix Acetate Injection | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerazette | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Women's Health (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Biosimilars | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Renflexis | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ontruzant | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brenzys | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Biosimilars (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Established Brands | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cardiovascular | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Zetia | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vytorin | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Atozet | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rosuzet | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cozaar/Hyzaar | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Zocor | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Cardiovascular (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Respiratory | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Singulair | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nasonex | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dulera | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clarinex | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asmanex | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Respiratory (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Opioid Pain, Bone and Dermatology | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Arcoxia | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fosamax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diprospan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diprosone | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Non-Opioid Pain, Bone and Dermatology (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proscar | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Propecia | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sinemet | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Remeron | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (2) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total sales | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Europe and Canada | $ | $ | $ | $ | |||||||||||||||||||
United States | |||||||||||||||||||||||
Asia Pacific and Japan | |||||||||||||||||||||||
China | |||||||||||||||||||||||
Latin America, Middle East, Russia and Africa | |||||||||||||||||||||||
Other(1) | |||||||||||||||||||||||
$ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Cost of sales | $ | $ | $ | $ | |||||||||||||||||||
Selling, general and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
$ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Included in continuing operations | |||||||||||||||||||||||
Supply sales to Merck affiliates | $ | $ | $ | $ | |||||||||||||||||||
Purchases from Merck affiliates | |||||||||||||||||||||||
Cost reimbursements and fees from Merck affiliates | |||||||||||||||||||||||
Included in discontinued operations | |||||||||||||||||||||||
Supply sales to Merck affiliates | $ | $ | $ | $ | |||||||||||||||||||
Purchases from Merck affiliates |
($ in millions) | December 31, 2020 | ||||
Included in continuing operations | |||||
Short term borrowings, net | $ | ||||
Short term loans and notes payable, net | |||||
Trade payables (receivables), net | ( | ||||
Due to related party | $ | ||||
Included in discontinued operations | |||||
Short term loans receivables, net | $ | ||||
Short term notes payable, net | ( | ||||
Trade payables, net | ( | ||||
Due from related party | $ |
Nine Months Ended September 30, | |||||||||||
($ in millions) | 2021(1) | 2020 | |||||||||
Cash pooling and general financing activities | $ | $ | |||||||||
Cost allocations, excluding non-cash stock-based compensation | ( | ( | |||||||||
Taxes deemed settled with Merck | ( | ( | |||||||||
Allocated derivative and hedging (losses) gains | ( | ( | |||||||||
Net transfers (from) to Merck & Co., Inc. as reflected in the Condensed Consolidated Statement of Cash Flows for Continuing Operations(2) | $ | ( | $ | ||||||||
Net transfers to (from) Merck included in Net Cash Provided by (Used in) Discontinued Operations | ( | ||||||||||
Total net transfers to Merck as included in the Condensed Consolidated Statement of Cash Flows | $ | $ | |||||||||
Stock-based compensation expense (includes $ | ( | ( | |||||||||
Net assets contributed by Merck affiliates | ( | ( | |||||||||
Recognition of amounts in Accumulated other comprehensive loss related to employee benefit plan transfers to Merck affiliates | |||||||||||
Net transfers (from) to Merck & Co., Inc. as reflected in the Condensed Consolidated Statement of Equity | $ | ( | $ |
Three Months Ended September 30, | |||||||||||
($ in millions) | 2021 | 2020 | |||||||||
Cash pooling and general financing activities | $ | $ | |||||||||
Net assets distributed to (contributed by) Merck Affiliates | |||||||||||
Cost allocations | ( | ||||||||||
Income taxes deemed settled with Parent | ( | ||||||||||
Allocated derivative and hedging gains (losses) | ( | ||||||||||
Net transfers to Parent as reflected in the Condensed Consolidated Statement of Equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Sales | $ | $ | $ | $ | |||||||||||||||||||
Costs, Expenses and Other | |||||||||||||||||||||||
Cost of Sales | |||||||||||||||||||||||
Selling, general and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Restructuring costs | |||||||||||||||||||||||
Other (income) expense, net | ( | ( | |||||||||||||||||||||
Income (loss) from discontinued operations before taxes | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Taxes on income | |||||||||||||||||||||||
Loss from discontinued operations, net of taxes | $ | $ | ( | $ | $ | ( |
($ in millions) | December 31, 2020 | ||||
Assets | |||||
Cash and cash equivalents | $ | ||||
Accounts receivable | |||||
Inventories | |||||
Due from related party | |||||
Other current assets | |||||
Total current assets of discontinued operations | |||||
Property, Plant and Equipment, net | |||||
Other Noncurrent Assets | |||||
Total Noncurrent Assets of Discontinued Operations | |||||
Total Assets of Discontinued Operations | $ | ||||
Liabilities | |||||
Trade accounts payable | $ | ||||
Accrued and other current liabilities | |||||
Total current liabilities of discontinued operations | |||||
Deferred Income Taxes | |||||
Other Noncurrent Liabilities | |||||
Total Noncurrent Liabilities of Discontinued Operations | |||||
Total Liabilities of Discontinued Operations | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
($ in millions and shares in thousands, except per share amounts) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Net income attributable to Organon: | |||||||||||||||||||||||
Income from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
Income from discontinued operations | ( | ( | |||||||||||||||||||||
Net income attributable to Organon | $ | $ | $ | $ | |||||||||||||||||||
Basic weighted average number of shares outstanding | |||||||||||||||||||||||
Stock awards and equity units (share equivalent) | |||||||||||||||||||||||
Diluted weighted average common shares outstanding | |||||||||||||||||||||||
Earnings (Loss) Per Share Attributable to Organon common stockholders - Basic | |||||||||||||||||||||||
Income from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
Loss from discontinued operations | ( | ( | |||||||||||||||||||||
Basic earnings per common share attributable to Organon common stockholders | $ | $ | $ | $ | |||||||||||||||||||
Earnings (Loss) Per Share Attributable to Organon common stockholders - Diluted | |||||||||||||||||||||||
Income from continuing operations | |||||||||||||||||||||||
Loss from discontinued operations | ( | ( | |||||||||||||||||||||
Diluted earnings per common share attributable to Organon common stockholders | $ | $ | $ | $ |
Three Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | Nine Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | ||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
United States | $ | 346 | $ | 371 | (7) | % | (7) | % | $ | 1,035 | $ | 1,068 | (3) | % | (3) | % | |||||||||||||||||||||||||||||||
International | 1,254 | 1,242 | 1 | % | (2) | % | 3,666 | 3,851 | (5) | % | (9) | % | |||||||||||||||||||||||||||||||||||
Total | $ | 1,600 | $ | 1,613 | (1) | % | (3) | % | $ | 4,701 | $ | 4,919 | (4) | % | (8) | % |
Three Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | Nine Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | ||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Nexplanon/Implanon NXT | $ | 175 | $ | 189 | (7) | % | (8) | % | $ | 543 | $ | 515 | 5 | % | 4 | % | |||||||||||||||||||||||||||||||
NuvaRing | 49 | 58 | (16) | % | (17) | % | 147 | 184 | (20) | % | (22) | % | |||||||||||||||||||||||||||||||||||
Follistim AQ | 61 | 50 | 21 | % | 18 | % | 178 | 135 | 31 | % | 26 | % | |||||||||||||||||||||||||||||||||||
Ganirelix Acetate Injection | 25 | 25 | (2) | % | (5) | % | 85 | 55 | 53 | % | 46 | % |
Three Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | Nine Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | ||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Renflexis | $ | 54 | $ | 38 | 44 | % | 43 | % | $ | 136 | $ | 96 | 41 | % | 39 | % | |||||||||||||||||||||||||||||||
Ontruzant | 56 | 37 | 48 | % | 47 | % | 101 | 78 | 29 | % | 24 | % | |||||||||||||||||||||||||||||||||||
Brenzys | 14 | 23 | (40) | % | (42) | % | 35 | 52 | (33) | % | (38) | % |
Three Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | Nine Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | ||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Zetia/Vytorin | $ | 132 | $ | 150 | (11) | % | (15) | % | $ | 409 | $ | 523 | (22) | % | (26) | % | |||||||||||||||||||||||||||||||
Atozet | 114 | 111 | 3 | % | 1 | % | 347 | 348 | — | % | (6) | % | |||||||||||||||||||||||||||||||||||
Rosuzet | 15 | 32 | (52) | % | (51) | % | 48 | 94 | (49) | % | (49) | % | |||||||||||||||||||||||||||||||||||
Cozaar/Hyzaar | 87 | 91 | (4) | % | (7) | % | 265 | 291 | (9) | % | (14) | % | |||||||||||||||||||||||||||||||||||
Zocor | 18 | 18 | (1) | % | (3) | % | 49 | 57 | (15) | % | (19) | % |
Three Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | Nine Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | ||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Singulair | $ | 100 | $ | 82 | 22 | % | 20 | % | $ | 300 | $ | 338 | (11) | % | (15) | % | |||||||||||||||||||||||||||||||
Nasonex | 48 | 41 | 18 | % | 13 | % | 144 | 160 | (11) | % | (15) | % | |||||||||||||||||||||||||||||||||||
Dulera | 56 | 59 | (5) | % | (6) | % | 146 | 181 | (19) | % | (20) | % |
Three Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | Nine Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | ||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Arcoxia | $ | 65 | $ | 68 | (5) | % | (7) | % | $ | 184 | $ | 204 | (10) | % | (13) | % |
Three Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | Nine Months Ended September 30, | % Change | % Change Excluding Foreign Exchange | ||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Proscar | $ | 27 | $ | 60 | (53) | % | (56) | % | $ | 92 | $ | 154 | (40) | % | (44) | % |
Three Months Ended September 30, | % Change | Nine Months Ended September 30, | % Change | ||||||||||||||||||||||||||||||||
($ in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||
Cost of sales | $ | 609 | $ | 535 | 14 | % | $ | 1,783 | $ | 1,533 | 16 | % | |||||||||||||||||||||||
Selling, general and administrative | 388 | 321 | 21 | % | 1,186 | 922 | 29 | % | |||||||||||||||||||||||||||
Research and development | 111 | 54 | 106 | % | 254 | 150 | 69 | % | |||||||||||||||||||||||||||
Restructuring costs | 1 | 12 | * | 3 | 43 | * | |||||||||||||||||||||||||||||
Other (income) expense, net | 102 | 10 | * | 182 | 44 | * | |||||||||||||||||||||||||||||
$ | 1,211 | $ | 932 | 30 | % | $ | 3,408 | $ | 2,692 | 27 | % |
Number | Description | ||||||||||
2.1 | — | ||||||||||
3.1 | — | ||||||||||
3.2 | — | ||||||||||
†10.1 | — | ||||||||||
10.2 | — | ||||||||||
†10.3 | — | ||||||||||
†10.4 | — | ||||||||||
10.5 | — | ||||||||||
10.6 | — | ||||||||||
10.7 | — | ||||||||||
10.8 | — | ||||||||||
10.9 | — | ||||||||||
10.10 | — | ||||||||||
10.11 | — |
10.12 | — | ||||||||||
10.13 | — | ||||||||||
10.14 | — | ||||||||||
+10.15 | — | ||||||||||
+10.16 | — | ||||||||||
+10.17 | — | ||||||||||
+10.18 | — | ||||||||||
+10.19 | — | ||||||||||
+10.20 | — | ||||||||||
+10.21 | — | ||||||||||
+10.22 | — | ||||||||||
+10.23 | — | ||||||||||
*31.1 | — | ||||||||||
*31.2 | — | ||||||||||
**32.1 | — | ||||||||||
**32.2 | — | ||||||||||
101.INS | — | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | |||||||||
101.SCH | — | XBRL Taxonomy Extension Schema Document. | |||||||||
101.CAL | — | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||||
101.DEF | — | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||||
101.LAB | — | XBRL Taxonomy Extension Label Linkbase Document. | |||||||||
101.PRE | — | XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||||
104 | — | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||||
+ | Management contract or compensatory plan or arrangement | ||||||||||
* | Filed herewith |
** | Furnished herewith | ||||||||||
† | Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished. |
ORGANON & CO. | ||||||||
Date: November 12, 2021 | /s/ Kathryn DiMarco | |||||||
Kathryn DiMarco | ||||||||
Senior Vice President Finance - Corporate Controller | ||||||||
Date: November 12, 2021 | /s/ Matthew Walsh | |||||||
Matthew Walsh | ||||||||
Chief Financial Officer |
ORGANON | ||
NON-EMPLOYEE DIRECTOR SAVINGS | ||
PLAN | ||
2 |
3 |
4 |
5 |
If primary reason your employment ends is due to: | Here’s what happens to your unvested Restricted Stock Units (RSUs): | ||||
Voluntary Termination Misconduct Termination for poor performance or for Cause | An unvested portion of the RSU Award and accrued dividend equivalents will be forfeited on the date your employment ends. | ||||
Involuntary Termination not for poor performance, or without Cause Retirement Death Disability | A pro rata portion of your unvested RSU Award and accrued dividend equivalents will be distributed to you at such time as they would have been paid if your employment had continued. The pro rata portion will equal the full amount of this RSU Award (whether or not vested) times the number of completed months during the Restricted Period and prior to the date employment terminates, divided by the total number of months during the Restricted Period of the grant1, reduced by the number of RSUs that have vested. The remainder and any accrued dividend equivalents will be forfeited on the date your employment ends. | ||||
Sale (for example, sale of your subsidiary, division or JV) | The following portion of your RSU Award and accrued dividend equivalents will be distributed to you at such time as it would have been paid if your employment had continued: •one-third if employment terminates on or after the Grant Date but before the first anniversary thereof (the remainder will be forfeited on the date your employment ends); and •all if employment terminates on or after the first anniversary of the Grant Date. | ||||
Change in Control of the Company | If this RSU Award remains outstanding following a Change in Control and is converted into a successor RSU Award, any unvested portion becomes payable on the scheduled Vesting Date(s) subject to your continuous employment. If the Employer or the Company or a parent, subsidiary, affiliate, or JV of the Company involuntarily terminates your employment during the Restricted Period without Cause before the second anniversary of the closing of any Change in Control, then this RSU Award will continue in accordance with its terms as if employment had continued and will be distributed at the time active employees receive distributions with respect to this RSU Award. If this RSU does not remain outstanding following the Change in Control and is not converted into a successor RSU, then you will be entitled to receive cash for this RSU in an amount equal to the fair market value of the consideration paid to Organon stockholders for a share of Organon common stock in the Change in Control payable within 30 days of the closing of the change in control. On the second anniversary of the closing of the Change in Control, this paragraph shall expire. |
Country | Additional Terms and Conditions, and notifications | ||||
Australia | Notifications Australia Offer Document The Company is pleased to provide you with this offer to participate in the Plan. This offer document sets out information regarding the offer to participate in the Plan for Australian resident grantees of the Company and its subsidiaries, affiliates and joint ventures. This information is provided by the Company to ensure compliance of the offer with Australian Securities and Investments Commission (“ASIC”) Class Order 14/1000, ASIC Regulatory Guide 49 and relevant provisions of the Corporations Act 2001. Additional Documents. In addition to the information set out in this supplement, you are also being provided with copies of the following documents: (a)the Plan; (b)the Plan Prospectus (which contains a summary of the Plan); (c)the Terms; (d)LTI Program Overview (available in the Company’s intranet site, Hera, under LTI page); and (e)the summary of tax consequences of participation in the Plan for Australia, which is accessible by logging into your account at Morgan Stanley (collectively, the “Additional Documents”). The Additional Documents provide further information to help you make an informed investment decision about participating in the Plan. Neither the Plan nor the Plan Prospectus is a prospectus for the purposes of the Corporations Act 2001. You should not rely upon any oral statements made in relation to this offer. You should rely only upon the statements contained in this supplement and the Additional Documents when considering participation in the Plan. General Information Only. The information herein is general information only. It is not advice or information that takes into account your objectives, financial situation and needs. You should consider obtaining your own financial product advice from a person who is licensed by ASIC to give such advice. Risk Factors. Investment in shares of common stock involves a degree of risk. If you elect to participate in the Plan, you should monitor your participation and consider all risk factors relevant to the vesting or issuance of shares of common stock under the Plan as set forth below and in the Additional Documents. You should have regard to risk factors relevant to investment in securities generally and, in particular, to holding shares of common stock of the Company. For example, the value at which an individual share of common stock is quoted on the New York Stock Exchange (“NYSE”) may increase or decrease due to a number of factors. There is no guarantee that the value of a share of common stock will increase. Factors that may affect the value of an individual share of common stock include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, the nature of the markets in which the Company operates and general operational and business risks. More information about potential factors that could affect the Company’s business and financial results will be included in the Company’s most recent Annual Report on Form 10-K and the Company’s Quarterly Report on Form 10-Q. Copies of these reports are available at http://www.sec.gov/, on the Company’s “Investor Relations” page at https://www.organon.com/investor-relations/ and upon request to the Company. In addition, you should be aware that the Australian dollar (“AUD”) value of any shares of common stock acquired under the Plan will be affected by the USD/AUD exchange rate. Participation in the Plan involves certain risks related to fluctuations in this rate of exchange. Common Stock in a U.S. Corporation. Common stock of a U.S. corporation is analogous to ordinary shares of an Australian corporation. Each holder of a share of common stock is entitled to one vote. Further, shares of common stock are not liable to any further calls for payment of capital or for other assessment by the Company and have no sinking fund provisions, pre-emptive rights, conversion rights or redemption provisions. Ascertaining the Market Value of Shares of Common Stock. You may ascertain the current market value of an individual share of common stock as traded on the NYSE under the symbol “OGN” at: |
https://www.nyse.com/quote/XNYS:OGN. The AUD equivalent of that value can be obtained at: https://www.rba.gov.au/statistics/frequency/exchange-rates.html. This will not be a prediction of the market value of an individual share of common stock when the RSU Award vests or shares of common stock are issued under the Plan or of the applicable exchange rate on the Vesting Date or the date the shares of common stock are issued. Exchange Control Notification Exchange control reporting is required for cash transactions exceeding A$10,000 and international fund transfers of any amount. The Australian bank assisting with the transaction will file the report for you. If there is no Australian bank involved in the transfer, you will have to file the report yourself. Tax Information The Plan is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the “Tax Assessment Act”) applies (subject to the conditions in the Tax Assessment Act). | |||||
Austria | Notifications Exchange Control Notification If you hold shares of common stock acquired under the Plan outside of Austria, you must submit a report to the Austrian National Bank. An exemption applies if the value of the shares of common stock as of any given quarter does not meet or exceed €30,000,000 or as of December 31 does not meet or exceed €5,000,000. If the former threshold is met or exceeded, quarterly obligations are imposed, whereas if the latter threshold is met or exceeded, annual reports must be filed with the Austrian National Bank. The deadline for filing the quarterly report is the 15th day of the month following the end of the relevant quarter. The deadline for filing the annual report is January 31st of the following year. When you sell shares of common stock issued upon expiration of the Restricted Period under the Plan, there may be exchange control obligations if the cash received is held outside Austria. If the transaction volume of all your accounts abroad meets or exceeds €10,000,000, the movements and balances of all accounts must be reported monthly, as of the last day of the month, on or before the 15th day of the following month. |
Belgium | Notifications Foreign Asset/Account Reporting Notification You are required to report any securities held (including shares of common stock) and brokerage or bank accounts (including any brokerage account held by you at Morgan Stanley Smith Barney or such other stock plan service provider as may be selected by the Company in the future) opened and maintained outside Belgium on your annual tax return. The first time you report the account(s) on your annual income tax return, you will have to provide the National Bank of Belgium Central Contact Point with certain details regarding such foreign accounts (including the account number, broker or bank name and country in which any such account was opened) in a separate form. This form, as well as information on how to complete it, can be found on the website of the National Bank of Belgium, www.nbb.be under the Kredietcentrales / Centrales des credits caption. You should consult with your personal tax advisor to determine your personal reporting obligations. Annual Securities Accounts Tax Information A new “annual securities accounts tax” has been implemented, which imposes a 0.15% annual tax on the value of the qualifying securities held in a Belgian or foreign securities account. The tax will not apply unless the total value of securities held in such account exceeds EUR 1 million on average on four reference dates within the relevant reporting period (i.e., December 31, March 31, June 30 and September 30). The tax will first be due for the period starting on the day of entry into force of the implementing law (i.e., February 26, 2021) and ending on September 30, 2021. For future, the tax will be due for periods starting October 1 and ending September 30. Different payment obligations apply depending on whether the securities account is held with a Belgian or foreign financial institution. You should consult your personal tax advisor for more information regarding your annual securities accounts tax payment obligations. For avoidance of doubt, the stock exchange tax that had applied to transactions executed by a Belgian resident through a non-Belgian financial intermediary was eliminated as the result of a ruling by the Belgian Constitutional Court on October 17, 2019. | ||||
Bosnia | There are no country-specific provisions. | ||||
Brazil | Terms and Conditions |
Compliance with Law By accepting the RSU Award, you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all applicable taxes associated with the expiration of the Restricted Period, the sale of shares obtained pursuant to the expiration of the Restricted Period, and the receipt of any dividends or dividend equivalents. Labor Law Acknowledgment By accepting the RSU Award, you agree that you are (i) making an investment decision and (ii) the value of the underlying shares of common stock is not fixed and may increase or decrease in value over the Restricted Period without compensation to you. Further, you acknowledge and agree that, for all legal purposes, (i) any benefits provided to you under the Plan are unrelated to your employment or service; (ii) the Plan is not a part of the terms and conditions of your employment or service; and (iii) the income from your participation in the Plan, if any, is not part of your remuneration from employment or service. Notifications Foreign Asset/Account Reporting Notification If you hold assets and rights outside Brazil with an aggregate value exceeding US$1,000,000, and you are a resident or domiciled in Brazil, you will be required to prepare and submit to the Central Bank of Brazil an annual declaration of such assets and rights. Assets and rights that must be reported include shares of the Company’s common stock acquired or the receipt of any dividends or dividend equivalents paid under the Plan. Please note that the US$1,000,000 threshold may be changed annually and that foreign individuals holding Brazilian visas are considered Brazilian residents for purposes of this reporting requirement. If the value of the shares of common stock you receive under the Plan exceeds BRL 5,000, you must report the shares acquired in the assets and rights section of the annual Natural Person Income Tax Return typically due by the last business day of April. Tax Notification Payments to foreign countries and repatriation of funds into Brazil (including proceeds from the sale of shares of common stock) and the conversion of USD into BRL associated with such fund transfers may be subject to the Tax on Financial Transactions. It is your responsibility to comply with any applicable Tax on Financial Transactions arising from your participation in the Plan. You should consult with your personal tax advisor for additional details. | |||||
Bulgaria | Notifications Foreign Asset/Account Reporting Notification If the total value of cash or securities (including shares obtained pursuant to the expiration of the Restricted Period) held by you, in a foreign bank or brokerage account, equals or exceeds BGN 50,000 as of December 31st, you may be required to file statistical forms with the Bulgarian National Bank. If required, the forms must be filed by March 31st of the following year. You must also report the acquisition of shares of common stock under the Plan on your annual tax return in the year of acquisition and in each subsequent annual tax return for as long as you hold the shares. If you have any questions regarding these obligations, you should contact your local bank in Bulgaria. | ||||
Canada | Terms and Conditions Termination of Employment This provision replaces paragraph (9) of the “Nature of Grant” section in Part A of this Appendix: Except to the extent explicitly required under local employment standards legislation, the RSU Award and any shares of common stock acquired under the Plan, and the income and value of same, are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments, and in no event should be considered as compensation for, or relating in any way to, past services for the Employer, the Company or any parent, subsidiary, affiliate or JV of the Company; This provision replaces paragraph (11) of the “Nature of Grant” section in Part A of this Appendix: Except to the extent explicitly required under local employment standards legislation, no claim or entitlement to compensation or damages shall arise from termination of the RSU Award resulting from termination of your |
employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any); This provision replaces paragraph (12) of the “Nature of Grant” section in Part A of this Appendix: For purposes of the RSU Award, except to the extent expressly provided in your Terms or expressly required by applicable legislation, your employment relationship will be considered terminated (regardless of the reason for such termination) and your right to vest in the RSU Award under the Plan, if any, will terminate as of the date that is the earliest of (a) the date you are no longer employed or providing services to the Company or any parent, subsidiary, affiliate or joint venture, (b) the date you receive written notice of termination of employment, or (c) the date written notice of termination is delivered to your last known address (together, the “Termination Date”). Except to the extent explicitly required by applicable legislation, the Termination Date will exclude any notice period or period of pay in lieu of such notice required under statute, contract, common/civil law or otherwise. You will not earn, or be entitled to earn, any pro-rated vesting for that portion of time before the date on which your right to vest terminates, nor will you be entitled to any compensation for lost vesting. In case of any dispute as to whether termination of employment has occurred that cannot be reasonably determined under your Terms and the Plan, the Committee shall have the sole discretion, subject to applicable legislation, to determine whether such termination of employment has occurred and the effective date of such termination. Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to vesting during a statutory notice period, your right to vest in the RSU Award under the Plan, if any, will terminate effective as of the last day of your minimum statutory notice period, but you will not earn or be entitled to pro-rated vesting if the Vesting Date falls after the end of your statutory notice period, nor will you be entitled to any compensation for lost vesting. Payment of Award Notwithstanding any discretion contained in Section 11(d) of the Plan, the grant of the RSU Award does not provide any right for you to receive a cash payment and the RSU Award is payable in shares of common stock only. The following provisions will apply to you if you are a resident of Quebec: Language Consent The parties acknowledge that it is their express wish that the Terms, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English. Les parties reconnaissent avoir exigé la rédaction en anglais de la convention, ainsi que de tous documents exécutés, avis donnés et procédures judiciaries intentées, directement ou indirectement, relativement à ou suite à la présente convention. Data Privacy This provision supplements the “Data Privacy” section in the Terms: You hereby authorize the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. You further authorize the Company, and its subsidiaries, affiliates or joint ventures and Morgan Stanley Smith Barney and any other stock plan service provider that may be selected by the Company to assist with the Plan to disclose and discuss the Plan with their respective advisors. You further authorize the Company and its subsidiaries, affiliates and joint ventures to record such information and to keep such information in your employee file. Notifications Securities Law Information You are permitted to sell shares of common stock acquired through the Plan through the broker designated by the Company under the Plan, if any, provided the resale of shares of common stock acquired under the Plan takes place outside of Canada through the facilities of a stock exchange on which the shares of common stock are listed. The shares are currently listed on the New York Stock Exchange. Foreign Asset/Account Reporting Notification Specified foreign property, including shares of common stock, Incentives and other rights to receive shares of a non-Canadian company held by a Canadian resident employee must generally be reported annually on a Form T1135 (Foreign Income Verification Statement) if the total cost of the employee’s foreign specified property exceeds C$100,000 at any time during the year. The Form T1135 must be filed by April of the following year. Thus, such Incentives must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because other |
foreign property is held by the employee. When shares of common stock are acquired, their cost generally is the adjusted cost base (“ACB”) of the shares of common stock. The ACB would ordinarily equal the fair market value of the shares of common stock at the time of acquisition, but if the employee owns other shares of common stock of the same company, this ACB may have to be averaged with the ACB of the other shares of common stock. Canadian residents should consult with their personal tax advisors to ensure compliance with their reporting requirements. | |||||
Chile | Notifications Securities Law Information THE OFFER OF THE AWARD CONSTITUTES A PRIVATE OFFERING OF SECURITIES IN CHILE EFFECTIVE AS OF THE GRANT DATE. THE OFFER OF AWARD IS MADE SUBJECT TO GENERAL RULING N° 336 OF THE CHILEAN COMMISSION OF THE FINANCIAL MARKET (“CMF”). THE OFFER REFERS TO SECURITIES NOT REGISTERED AT THE SECURITIES REGISTRY OR AT THE FOREIGN SECURITIES REGISTRY OF THE CMF, AND, THEREFORE, SUCH SECURITIES ARE NOT SUBJECT TO OVERSIGHT OF THE CMF. GIVEN THAT THE AWARD IS NOT REGISTERED IN CHILE, THE COMPANY IS NOT REQUIRED TO PROVIDE PUBLIC INFORMATION ABOUT THE AWARD OR SHARES OF COMMON STOCK IN CHILE. UNLESS THE AWARD AND/OR THE SHARES OF COMMON STOCK ARE REGISTERED WITH THE CMF, A PUBLIC OFFERING OF SUCH SECURITIES CANNOT BE MADE IN CHILE. Exchange Control and Tax Information You must comply with the exchange control and tax reporting requirements in Chile when sending funds into the country in connection with the sale of shares of common stock acquired under the Plan, and register any investments with the Chilean Internal Revenue Service (the “CIRS”). You should consult with your personal legal advisor regarding any applicable exchange control obligations prior to vesting in the RSU Award or receiving proceeds from the sale of shares acquired at vesting, dividends or dividend equivalents and how to register with the CIRS. You are not required to repatriate funds obtained from the sale of shares of common stock or the receipt of any dividends or dividend equivalents. However, if you decide to repatriate such funds, you must do so through the Formal Exchange Market (i.e., a commercial bank or registered foreign exchange office) if the funds exceed US$10,000. In such case, you must report the payment to a commercial bank or registered foreign exchange office receiving the funds. The commercial bank or registered foreign exchange office will then submit an affidavit to the Central Bank within a day of receipt of the foreign currency. If your aggregate investments held outside of Chile exceed US$5,000,000 or its equivalent in other foreign currencies (including the investments made under the Plan), you must inform the Central Bank of Chile with updated information accumulated for a three month period, within and no later than the first 45 calendar days following the closing of the months of March, June and September, and no later than 60 calendar days following the closing of the month of December, by means of providing the completed form of Annex 3.1 (and of Annex 3.2 at the closing of December if applicable) of Chapter XII of the Exchange Regulations Manual. Please note that exchange control regulations in Chile are subject to change. Foreign Asset/Account Reporting Notification The CIRS requires all taxpayers to provide information annually regarding (i) the results of investments held abroad and (ii) any taxes paid abroad which the taxpayers will use as credit against Chilean income tax. The sworn statements disclosing this information (or Formularios) must be reported on Form 1929 and submitted electronically through the CIRS website www.sii.cl before July 1 of each year, depending on the assets and/or taxes being reported. If you fail to meet the above requirements, you may be ineligible to receive certain foreign tax credits. Given these requirements are subject to change, you should consult with your personal legal advisor to ensure compliance with the applicable requirements. | ||||
The People’s Republic of China | Terms and Conditions Payment of Award Any Award granted to you will be settled in cash only. This means that upon vesting of your Award, you will receive in cash the value of the underlying shares of common stock at vesting, less any Tax-Related Items and broker’s fees or commissions, which will be remitted to you via local payroll. |
Colombia | Terms and Conditions Labor Law Acknowledgment This provision supplements the “Nature of Grant” section in Part A of this Appendix: You acknowledge that pursuant to Article 128 of the Colombian Labor Code, the Plan, the RSU Award and any income realized under the Plan do not constitute a component of your “salary”. Therefore, they will not be included and/or considered for purposes of calculating any and all labor benefits, such as legal/fringe benefits, vacations, indemnities, payroll taxes, social insurance contributions and/or any other labor-related amount which may be payable. Notifications Foreign Asset/Account Reporting Notification Colombian residents must file an annual information return with the Colombian Tax Office detailing any assets (such as shares of common stock acquired under the Plan) held abroad. If the individual value of any of these assets exceeds a certain threshold, you must describe each asset and indicate the jurisdiction in which it is located, its nature and its value. Securities Law Information. The shares of common stock are not and will not be registered with the Colombian registry of publicly traded securities (Registro Nacional de Valores y Emisores) and therefore the shares of common stock may not be offered to the public in Colombia. Nothing in this supplement should be construed as the making of a public offer of securities in Colombia. Exchange Control Notification You are responsible for complying with any and all Colombian foreign exchange restrictions, approvals and reporting requirements in connection with the RSU Award and any shares of common stock acquired or funds received under the Plan. This includes reporting obligations to the Central Bank (Banco de la Republica). You will also be required to register your investments with the Central Bank, regardless of the value of the investment by filing a Form No. 11 any time before disposing of shares of common stock. All payments for your investment originating in Colombia (and the liquidation of such investments) must be transferred through the Colombian foreign exchange market (e.g. local banks), which includes the obligation of correctly completing and filing the appropriate foreign exchange form (declaración de cambio). You should consult with your personal legal advisor regarding any your exchange control obligations. | ||||
Costa Rica | There are no country-specific provisions. | ||||
Croatia | Notifications Exchange Control Notification Croatian residents may be required to report any acquisition of foreign securities (such as shares of the Company’s common stock) to the Croatian National Bank for statistical purposes. However, because exchange control regulations may change without notice, you should consult your personal legal advisor to ensure compliance with current regulations. It is your responsibility to comply with Croatian exchange control laws. | ||||
Cyprus | There are no country-specific provisions. | ||||
Czech Republic | Notifications Exchange Control Notification You may be required to notify the Czech National Bank (“CNB”) that you acquired shares under the Plan and/or that you maintain a foreign account. Such notification will be required if the aggregate value of your foreign direct investments is CZK 2,500,000 or more, you have a certain threshold of foreign financial assets, or you are specifically requested to do so by the Czech National Bank. Exchange control regulations change frequently and without notice; therefore, you should consult with your legal advisor prior to the sale of shares of common stock to ensure compliance with current regulations. It is your responsibility to comply with Czech exchange control laws, and neither the Company nor your Employer will be liable for any resulting fines or penalties. | ||||
Denmark | Terms and Conditions |
Labor Law Acknowledgment This provision supplements the “Nature of Grant” section in Part A of this Appendix: By accepting the RSU Award, you understand and agree that this grant relates to future services to be performed and is not a bonus or compensation for past services. Stock Option Act You acknowledge that you received the Employer Statement (attached immediately below) which summarizes select terms of your RSU Award. As set forth in Section 1 of the Stock Option Act, the Stock Option Act only applies to “employees” as that term is defined in Section 2 of the Stock Option Act and to the extent you are subject to Danish law. If you are a member of the registered management of the Company's subsidiary, affiliate or joint venture in Denmark or otherwise do not satisfy the definition of employee or are not subject to Danish law, you will not be subject to the Stock Option Act and the Employer Statement will not apply to you. Notifications Exchange Control and Tax Information The Danish Tax Reporting Act that entered into force on January 1, 2019 removed the rules that previously obligated you to inform the Danish Tax Administration about shares of common stock held in foreign bank or brokerage accounts and deposit accounts with a foreign bank or broker. The use of the Forms V and K are discontinued as of January 1, 2019 and replaced by automatic exchange of information regarding bank and brokerage accounts. However, you must still report shares of common stock held in a foreign bank or brokerage account in your tax return under the section of foreign affairs and income. Denmark Employer Statement You acknowledge receipt of the Employer Statement attached as Appendix B to the Terms. | |||||
Ecuador | Notifications Foreign Asset/Account Reporting Notification You will be responsible for including any RSU Award that vested during the previous fiscal year in your annual Net Worth Declaration if your net worth exceeds the thresholds set forth in the law. | ||||
Egypt | Notifications Exchange Control Notification If you transfer funds into Egypt in connection with the sale of shares of common stock or the receipt of any dividends or dividend equivalents, you are required to transfer the funds through a registered bank in Egypt. | ||||
Estonia | Terms and Conditions Language Consent By accepting the grant of the RSU Award, you confirm having read and understood the documents related to the grant (the Terms and the Plan), which were provided in the English language, and that you do not need the translation thereof into the Estonian language. You accept the terms of those documents accordingly. Võttes vastu Award-de pakkumise kinnitad, et oled ingliskeelsena esitatud pakkumisega seotud dokumendid (Tingimused ja Plaan) läbi lugenud ja nendest aru saanud ning et ei vaja nende tõlkimist eesti keelde. Sellest tulenevalt nõustud viidatud dokumentide tingimustega. | ||||
Finland | Notifications Foreign Asset / Account Reporting Information. There are no specific reporting requirements with respect to foreign assets/accounts. However, please note that you must check your pre-completed tax return to confirm that the ownership of shares and other securities (foreign or domestic) are correctly reported. If you find any errors or omissions, you must make the necessary corrections electronically or by sending specific paper forms to the local tax authorities. |
France | Terms and Conditions Language Consent By accepting the RSU Award, you confirm having read and understood the Plan and your Terms, which were provided in the English language. You accept the terms of those documents accordingly. En acceptant l’attribution, vous confirmez avoir lu et compris le Plan de travail et vos conditions générales et dispositions, qui ont été transmis en langue anglaise. Vous acceptez les termes de ces documents en connaissance de cause. Notifications Tax Notification Your RSU Award is not intended to qualify for specific tax or social security treatment in France. Foreign Asset/Account Reporting Notification If you hold shares of common stock outside of France or maintain a foreign bank account, you are required to report same (including any accounts that were closed during the tax year) to the French tax authorities on Form No. 3916 which must be filed together with your annual tax return. Failure to comply could trigger significant penalties. You should consult with your personal tax advisor to ensure compliance with your reporting requirements. | ||||
Germany | Notifications Exchange Control Notification Cross-border payments in excess of €12,500 in connection with the sale of securities must be reported on a monthly basis. If you make or receive a payment in excess of this amount, you must report the payment to Bundesbank electronically using the “General Statistics Reporting Portal” (“Allgemeines Meldeportal Statistik”) available via Bundesbank’s website (www.bundesbank.de). Foreign Asset/Account Reporting Notification If your acquisition of shares of common stock under the Plan leads to a so-called “qualified participation” at any point during the calendar year, you will need to report the acquisition when you file your tax return for the relevant year. A “qualified participation” is attained if (i) the value of the shares acquired exceeds EUR 150,000 (if you own 1% or more of the Company’s common stock) or (ii) in the unlikely event you hold shares of common stock exceeding 10% of the Company's total common stock. | ||||
Greece | Notifications Foreign Asset / Account Reporting Information. The reporting of foreign assets (including shares and other investments) is your own obligation and should be done through your annual tax return. |
Hong Kong | Terms and Conditions Payment of Award Notwithstanding any discretion contained in Section 11(d) of the Plan, the grant of the RSU Award does not provide any right for you to receive a cash payment and the RSU Award is payable in shares of common stock only. Notifications Securities Law Information Warning: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You should exercise caution in relation to the offer. If you are in any doubt about any of the contents of the Plan and the Terms, including this supplement, you should obtain independent professional advice. The RSU Award and any shares of common stock issued pursuant to the RSU Award do not constitute a public offering of securities under Hong Kong law and are available only to Eligible Employees of the Company or its subsidiaries, affiliates and joint ventures. The Terms, including this supplement, the Plan and other incidental communication materials distributed in connection with the RSU Award (i)have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each Eligible Employee of the Employer, the Company or its subsidiaries, affiliates and joint ventures and may not be distributed to any other person. |
Sale of Shares Shares of common stock received at vesting are accepted as a personal investment. In the event the Restricted Period on your RSU Award expires within six months of the Grant Date and shares of common stock are issued to you, you agree that you will not offer to the public or otherwise dispose of the shares of common stock prior to the six-month anniversary of the Grant Date. | |||||
Hungary | Terms and Conditions Payment of Award Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive in cash the value of the underlying shares of common stock at vesting, less any Tax-Related Items and broker’s fees or commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares of common stock and to force the immediate sale of such shares of common stock depending on the development of applicable exchange control laws and regulations. |
India | Notifications Exchange Control Notification You understand that you must repatriate any proceeds from the sale of shares of common stock under the Plan and any dividends or any dividend equivalents received in relation to the shares of common stock to India and convert the proceeds into local currency within such time as prescribed under applicable Indian exchange control laws as may be amended from time to time. You must obtain a foreign inward remittance certificate (“FIRC”) from the bank where you deposit the foreign currency and maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Employer requests proof of repatriation. Foreign Asset/Account Reporting Notification You are required to declare any foreign bank accounts and any foreign financial assets (including shares of common stock held outside of India) in your annual income tax return. It is your responsibility to comply with this reporting obligation and you should consult your personal legal advisor to determine whether the obligation applies to your personal situation. | ||||
Indonesia | Notifications Language Acknowledgment A translation of the documents relating to this grant into Bahasa Indonesia can be provided to you upon request to widhi.lestari@organon.com. By accepting the RSU Award, you (i) confirm having read and understood the documents relating to this grant (i.e., your Terms, including this supplement, and the Plan) which were provided in the English language, (ii) accept the terms of these documents accordingly, and (iii) agree not to challenge the validity of this document based on Law No. 24 of 2009 on National Flag, Language, Coat of Arms and National Anthem or the implementing Presidential Regulation (when issued). Persetujuan dan Pemberitahuan Bahasa Terjemahan dari dokumen-dokumen terkait dengan pemberian inike Bahasa Indonesia dapat disediakan untuk anda berdasarkan permintaan kepada widhi.lestari@organon.com. Dengan menerima Penghargaan ini, anda (i) mengkonfirmasi bahwa telah membaca dan memahami dokumen-dokumen berkaitan dengan pemberian ini (yaitu, Syarat-syarat anda, termasuk suplemen ini dan Program) yang disediakan dalam Bahasa Inggris, (ii) menerima persyaratan di dalam dokumen-dokumen tersebut, dan (iii) setuju untuk tidak mengajukan keberatan atas keberlakuan dari dokumen ini berdasarkan Undang-Undang No. 24 Tahun 2009 tentang Bendera, Bahasa dan Lambang Negara serta Lagu Kebangsaan ataupun Peraturan Presiden sebagai pelaksanaannya (ketika diterbitkan). Foreign Asset/Account Reporting Notification You have the obligation to report your worldwide assets (including foreign accounts and shares of common stock acquired under the Plan) in your annual individual income tax return. Exchange Control Notification In general, no exchange control approvals are required in Indonesia. However, foreign exchange activity is subject to certain reporting requirements. For foreign currency transactions exceeding USD 25,000, the underlying document of that transaction will have to be submitted to the relevant local bank. If there is a change of position of any the foreign assets you hold (including shares acquired under the Plan), you must report this change in position |
(i.e., sale of shares) to the Bank of Indonesia no later than the 15th day of the month following the change in position. For transactions of USD 10,000 or more (or its equivalent in other currency), a more detailed description of the transaction must be included in the report and you may be required to provide information about the transaction to the bank in order to complete the transaction. | |||||
Ireland | There are no country-specific provisions. | ||||
Israel | Notifications Tax Notification Your RSU Award is not intended to be tax-qualified under Section 102 of the Income Tax Ordinance. Securities Law Information This offer of RSUs does not constitute a public offering under the Securities Law, 1968. | ||||
Italy | Terms and Conditions Plan Document Acknowledgment By accepting the RSU Award, you further acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Terms in their entirety and fully understand and accept all provisions of the Plan and the Terms; in particular, you acknowledge that you have read and specifically and expressly approve the following provisions in the Plan and the Terms: (a) your RSU Award cannot be transferred other than by will or the laws of descent and distribution; (b) in the event of involuntary termination of your employment, your right to receive RSUs and to receive distributions from RSUs, if any, will terminate as of the date that you are no longer actively employed by the Employer, unless otherwise expressly provided in the Terms; (c) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (d) you are responsible for all Tax-Related Items; (e) if a reorganization, recapitalization, reclassification or other corporate event that results in an adjustment of the shares of common stock described in the Plan occurs, your RSU Award may be adjusted; (f) if a Change in Control, as described in the Plan, occurs, your RSU Award may immediately vest; (g) all decisions with respect to future grants will be at the sole discretion of the Company; and (h) the “Data Privacy” section of your Terms. Notifications Foreign Asset/Account Reporting Notification If you are an Italian resident who, at any time during the fiscal year, holds foreign financial assets (including cash and shares of common stock acquired under the Plan) which may generate income taxable in Italy, you are required to report these assets on your annual tax return for the year during which the assets are held, or on a special form if no tax return is due. These reporting obligations also apply to Italian residents who are the beneficial owners of foreign financial assets under Italian money laundering provisions. Foreign Financial Asset Tax Information Italian residents may be subject to tax on the value of financial assets (including cash and shares of common stock acquired under the Plan) held outside of Italy. The taxable amount will be the fair market value of the financial assets, assessed at the end of the calendar year. No tax payment duties arise if the amount of the foreign financial assets tax calculated on all financial assets held abroad does not exceed a certain threshold. You should contact your personal tax advisor for additional information about the foreign financial assets tax. | ||||
Japan | Notifications Foreign Asset/Account Reporting Notification You are required to report the details of any assets held outside of Japan as of December 31 (including shares of common stock acquired under the Plan) to the extent such assets have a total net fair market value in excess of ¥50,000,000. Such report will be due by March 15 of the following year. You should consult your personal legal and/or tax advisor to determine whether the reporting obligation applies to your personal situation and whether you will be required to report details of any outstanding RSUs or shares of common stock held by you in the report. | ||||
Jordan | There are no country-specific provisions. | ||||
Korea | Notifications |
Foreign Asset/Account Reporting Notification Korean residents must declare all foreign financial accounts (e.g., non-Korean bank accounts, brokerage accounts, etc.) they hold in any foreign country to the Korean tax authority and file a report with respect to such accounts if the monthly balance of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date during a calendar year. The report is due in June of the following year. You should consult with your personal tax advisor to determine how to value your foreign accounts for purposes of this reporting requirement and whether you are required to file a report with respect to such accounts. | |||||
Kuwait | Notifications Securities Law Information The grant of RSUs and distribution of the Plan and the Terms, including this supplement, to Eligible Employees does not constitute the marketing or offering of securities in Kuwait pursuant to Law No. 7 of 2010 as amended (establishing the Capital Markets Authority) and its implementing regulations. Offers under the Plan are being made only to Eligible Employees of the Employer or the Company or any other subsidiary, affiliate or joint venture of the Company. | ||||
Lebanon | Notifications Securities Law Information The grant of RSUs and distribution of the Plan and the Terms, including this supplement, to Eligible Employees does not constitute the marketing or offering of securities to the public in Lebanon pursuant to Law No. 161 (2011), the Capital Markets Law. Offers under the Plan are being made only to Eligible Employees of the Employer or the Company or any other subsidiary, affiliate or joint venture of the Company. | ||||
Malaysia | Notifications Director Notification If you are a director of the Company’s Malaysian subsidiary, affiliate or joint venture, you are subject to certain notification requirements under the Malaysian Companies Act. Among these requirements is an obligation to notify the Malaysian subsidiary, affiliate or joint venture in writing when you receive or dispose of an interest (e.g., RSU Awards or shares of common stock) in the Company or any related company. Such notifications must be made within 14 days of receiving or disposing of any interest in the Company or any related company. | ||||
Mexico | Terms and Conditions Labor Law Acknowledgement These provisions supplement the “Nature of Grant” section in Part A of this Appendix: By accepting the RSU Award, you understand and agree that: (i) the RSU Award is not related to the salary and other contractual benefits granted to you by the Employer and (ii) any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of your employment. Policy Statement The invitation the Company is making under the Plan is unilateral and discretionary and, therefore, the Company reserves the absolute right to amend it and discontinue it at any time without any liability to you. The Company, with registered offices at 30 Hudson Street, Floor 33, Jersey City, NJ 07302 U.S.A., is solely responsible for the administration of the Plan and your participation in the Plan and the acquisition of shares of common stock does not, in any way, establish an employment relationship between you and the Company since you are participating in the Plan on a wholly commercial basis. Based on the foregoing, you expressly recognize that the Plan and the benefits that you may derive from participating in the Plan do not establish any rights between you and the Employer and do not form part of the employment conditions and/or benefits provided by the Employer, and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of your employment. Finally, you hereby declare that you do not reserve to yourself any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and you therefore grant a full and broad release to the Company, its subsidiaries, affiliates, joint ventures, branches, representation offices, shareholders, officers, agents or legal representatives, with respect to any claim that may arise. |
Plan Document Acknowledgment By accepting the RSU Award, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Terms, including this supplement, in their entirety and fully understand and accept all provisions of the Plan and the Terms. In addition, by accepting the benefits under this grant, you further acknowledge that you have read and specifically and expressly approve the terms and conditions in the “Nature of Grant” section of the Terms, in which the following is clearly described and established: (i) your participation in the Plan does not constitute an acquired right; (ii) the Plan and your participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) your participation in the Plan is voluntary; and (iv) the Company and its subsidiaries, affiliates and joint ventures are not responsible for any decrease in the value of the shares of common stock underlying your RSU Award. Notifications Securities Law Information Any RSUs offered under the Plan and the shares of common stock underlying the RSUs have not been registered with the National Register of Securities maintained by the Mexican National Banking and Securities Commission and cannot be offered or sold publicly in Mexico. In addition, the Plan and any other document relating to any RSU Award may not be publicly distributed in Mexico. These materials are addressed to you only because of your existing relationship with the Company and its subsidiaries, affiliates and joint ventures and these materials should not be reproduced or copied in any form. The offer contained in these materials does not constitute a public offering of securities but rather constitutes a private placement of securities addressed specifically to individuals who are present Employees of the Company or one of its subsidiaries, affiliates and joint ventures, made in accordance with the provisions of the Mexican Securities Market Law, and any rights under such offering shall not be assigned or transferred. | |||||
Netherlands | There are no country-specific provisions. | ||||
Norway | Notifications Exchange Control Information In general, you should not be subject to any foreign exchange requirements in connection with the acquisition or sale of shares of common stock under the Plan, except normal reporting requirements to the Norwegian Currency Registry. If the transfer of funds into or out of Norway is made through a Norwegian bank, the bank will make the registration. Foreign Asset / Account Reporting Information You may be subject to foreign asset reporting as part of your ordinary tax return. Norwegian banks, financial institutions, limited companies, etc. must report certain information to the Tax Administration. Such information may then be pre-completed in your tax return. However, if you have traded, or are the owner of, financial instruments (e.g., shares of common stock) not pre-completed in your tax return, you must enter this information in the Form RF-1159, which is an appendix to the tax return. | ||||
Oman | Notifications Securities Law Information Offerings under the Plan are addressed only to Eligible Employees of the Company or a subsidiary, affiliate or joint venture of the Company. The Plan, the Terms and any related documents do not constitute the marketing or offering of securities in Oman and consequently, have not been registered or approved by the Central Bank of Oman, the Omani Ministry of Commerce and Industry, the Omani Capital Market Authority or any other authority in the Sultanate of Oman. | ||||
Panama | Notifications Securities Law Information Your RSU Award is granted pursuant to the Plan and the shares of common stock which may be issued on the expiration of the Restricted Period are offered in a private transaction. This is not an offer to the public and the offer is not subject to the protections established by Panamanian securities laws, nor registration requirements. | ||||
Peru | Notifications Securities Law Notification |
The offering of the RSU Award is considered a private offering in Peru; therefore, neither the grant of the RSU Award, nor the issuance of shares at the expiration of the Restricted Period, is subject to securities registration in Peru. For more information concerning this offer, please refer to the Plan, the Terms, the Plan Prospectus and any other grant documents made available to you by the Company. For more information regarding the Company, please refer to the Company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q available at www.sec.gov, as well as the Company’s “Investor Relations” website at https://www.organon.com/investor-relations/. | |||||
Philippines | Terms and Conditions Payment of Award Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive in cash the value of the underlying shares of common stock at vesting, less any Tax-Related Items and broker’s fees or commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares of common stock and to force the immediate sale of such shares of common stock depending on the development of applicable exchange control laws and regulations. | ||||
Poland | Notifications Exchange Control Notification If you transfer funds in excess of €15,000 in a single transaction in connection with the sale of shares of common stock or the receipt of dividends or dividend equivalents under the Plan, the funds must be transferred via a Polish bank account. You are required to retain the documents connected with a foreign exchange transaction for a period of five (5) years, as measured from the end of the year in which such transaction occurred. Penalties may apply for failure to comply with exchange control requirements. Foreign Asset/Account Reporting Notification Polish residents holding foreign securities (e.g., shares of common stock) and/or maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances of the securities and cash deposited in such accounts if the value of such securities and cash (when combined with all other assets possessed abroad) exceeds PLN7,000,000. If required, the reports must be filed on a quarterly basis on special forms that are available on the website of the National Bank of Poland. You should consult with your personal legal advisor to determine your personal reporting obligations. | ||||
Portugal | Terms and Conditions Language Consent You hereby expressly declare that you have full knowledge of the English language and have read, understood and fully accept and agree with the terms and conditions established in the Plan and the Terms. Conhecimento da Lingua. O Contratado, pelo presente instrumento, declara expressamente que tem pleno conhecimento da língua inglesa e que leu, compreendeu e livremente aceitou e concordou com os termos e condições estabelecidas no Plano e no Acordo de Atribuição (Terms em inglês). | ||||
Puerto Rico | There are no country-specific provisions. | ||||
Qatar | There are no country-specific provisions. | ||||
Romania | Terms and Conditions Language Consent By accepting the RSU Award, you acknowledge that you are proficient in reading and understanding English or have consulted with an advisor who is sufficiently proficient in English as to allow you to fully understood the terms of the documents related to the grant (the Terms, including this supplement and the Plan), which were provided in the English language. You accept the terms of these documents accordingly. Consimtamant cu privire la limba Prin acceptarea de aceasta Acordare, confirmati ca aveti un nivel adecvat de cunoastere in ce priveste cititirea si intelegerea limbii engleze sau ati consultat un consultant care este suficient de competent in limba engleza pentru a va permite sa intelegeti pe deplin termenii documentelor referitoare la acordare (anuntul, Acordul si Planul), care au fost furnizate in limba engleza. Acceptati termenii acestor documente in consecinta. |
Notifications Foreign Asset / Account Reporting Notification Romanian residents generally are not required to seek authorization from the National Bank of Romania to participate in the Plan or to open or operate a foreign bank account to receive any proceeds under the Plan. However, if you acquire 10% or more of the registered capital of a non-resident company, you must file a report with the National Bank of Romania (“NBR”) within 30 days from the date such ownership threshold is reached. This is a statutory requirement, but it does not trigger the payment of fees to NBR. You may be required to provide the Romanian bank to which you transfer any proceeds under the Plan with appropriate documentation regarding the source of the income. | |||||
Russia | Notifications Securities Law Information These materials do not constitute advertising or an offering of securities in Russia nor do they constitute placement of the shares of common stock in Russia. The issuance of shares of common stock pursuant to the RSU Award described herein has not and will not be registered in Russia and hence, the shares of common stock described herein may not be admitted or used for offering, placement or public circulation in Russia. U.S. Transaction and Sale Restrictions Any shares of common stock issued pursuant to the RSU Award shall be delivered to you through a brokerage account in the U.S. You may hold shares of common stock in your brokerage account in the U.S.; however, in no event will shares of common stock be issued to you and/or share certificates or other instruments be delivered to you in Russia. You are not permitted to make any public advertising or announcements regarding the RSU Award or shares of common stock in Russia, or promote these shares of common stock to other Russian legal entities or individuals, and you are not permitted to sell or otherwise dispose of shares of common stock directly to other Russian legal entities or individuals. You are permitted to sell shares of common stock only on the New York Stock Exchange and only through a U.S. broker. Exchange Control Notification As of April 17, 2020, the requirement to repatriate cash proceeds from participation in the Plan (e.g., cash dividends, sale proceeds) back to Russia may not apply with respect to cash amounts received in an account that is considered by the Central Bank of Russia to be a foreign brokerage account opened with a financial market institution other than a bank. In other words, you should be able to receive, hold and remit dividends and proceeds from the sale of shares of common stock acquired under the Plan into and out of your brokerage account opened in the U.S. without any requirement to first repatriate such funds to an authorized bank in Russia. You should be aware that the rules related to foreign bank accounts are different and that pursuant to changes effective December 2, 2019 (with retroactive effect to January 1, 2018), certain restrictions with respect to payments by non-residents into a Russian currency resident’s foreign bank account will continue to apply where the foreign bank account is located in the U.S. You should contact your personal advisor to confirm the application of the exchange control restrictions prior to vesting in the RSU Award and selling shares of common stock as significant penalties may apply in case of non-compliance with the exchange control restrictions and because such exchange control restrictions are subject to change. Foreign Asset/Account Reporting Notification As of January 1, 2020, Russian residents are required to report the opening, closing or change of details of any foreign brokerage account to the Russian tax authorities within one month of opening, closing or change of details of such account. Russian residents also are required to submit an annual cash flow report for any such foreign brokerage account on or before June 1 of the following year (the first report is due by June 1, 2021 for the year 2020). You should consult with your personal legal advisor to determine the applicability of these reporting requirements to any brokerage account opened in connection with your participation in the Plan. Anti-Corruption Law You should be aware that certain individuals who hold public office in Russia, as well as their spouses and dependent children, are prohibited from opening or maintaining foreign brokerage or bank accounts and holding any securities, whether acquired directly or indirectly, in a foreign company (including shares of common stock acquired under the Plan). | ||||
Serbia | Notifications |
Securities Law Information The RSU Award is not subject to the regulations concerning public offers and private placements under the Law on Capital Market. As set forth in the Terms, the RSU Award is subject to the laws of the State of New Jersey, U.S.A. (without regard to its conflict of law provisions). Foreign Asset/Account Reporting Notification Residents of Serbia may hold foreign accounts to receive proceeds only upon obtaining prior permission of the National Bank of Serbia (“NBS”). Further, Serbian residents are obligated to provide the foreign account number to the NBS within 30 days of opening such account. Serbian residents must also file an update to the NBS on Form RN on a quarterly basis. Serbian residents are also obligated to transfer any funds received to their Serbian bank account within 30 days of payment. As the exchange control regulations in Serbia may change without notice, you should consult with your personal advisor with respect to all applicable reporting obligations. | |||||
Singapore | Notifications Restriction on Sale and Transferability You hereby agree that any shares of common stock acquired pursuant to the RSU Award will not be offered for sale in Singapore prior to the six-month anniversary of the Grant Date of the RSU Award, unless such sale or offer is made pursuant to one or more exemptions under Part XII Division 1 Subdivision (4) (other than section 280) of the Securities and Futures Act (Chap. 289, 2006 Ed.) (“SFA”) or pursuant to, and in accordance with, the conditions of any other applicable provision(s) of the SFA. Securities Law Information The RSU Award is being granted to you pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA, on which basis it is exempt from the prospectus and registration requirements under the SFA, and is not made to you with a view of the RSU Award being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Director Notification If you are a director (including an alternate, substitute, associate or shadow director) of a Singaporean subsidiary, affiliate or joint venture of the Company, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore subsidiary, affiliate or joint venture in writing when you receive an interest (e.g., RSU Award, shares of common stock) in the Company or any related companies. In addition, you must notify the Singaporean subsidiary, affiliate or joint venture when you sell shares of the Company’s common stock or any related company (including when you sell shares of common stock acquired upon the expiration of the Restricted Period). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must be made of your interests in the Company or any related company within two days of .either after the director becomes aware of the change in respect of the particulars of any of the aforesaid, the date on which the director becomes a holder of, or acquires an interest in, the shares, debentures, rights, contracts, participatory interests, other securities or securities-based derivatives contacts, whichever last occurs. There is no prescribed form for such disclosure, although in practice, the company secretary normally would prepare a formatted disclosure form that requests the following information: equity award granted, number of shares acquired, description of consideration, if applicable, and the date of the transaction. A director shall be deemed to have an interest in securities or securities-based derivative contracts referred to above if a family member of the director (not being him or herself a director), holds or has an interest in those securities or securities-based derivatives contract and any contract entered into by, or any grant made to, a family member of a director of a corporation (not being himself a director) shall be deemed to have been entered into by, made or exercised by or made to the director. A “family member” means a spouse, or a son, adopted son, step-son, daughter, adopted daughter or step-daughter below the age of 21 years. | ||||
Slovak Republic | There are no country-specific provisions. | ||||
Slovenia | Terms and Conditions |
Language Consent By accepting the grant of the RSU Award, you acknowledge that you are proficient in reading and understanding English and fully understand the terms of the documents related to the grant (this supplement, the Terms and the Plan), which were provided in the English language. You accept the terms of those documents accordingly. Soglasje za Uporabo Angleškega Jezika S sprejetjem dodelitve Nagrade (the RSU Award) potrjujete in priznavate, da ste sposobni brati in razumeti angleški jezik ter da v celoti razumete določila dokumentov, povezanih z dodelitvijo (ta dodatek, Določila (the Terms) in Načrt (the Plan)), ki so bili posredovani v angleškem jeziku. Skladno s tem sprejemate določila teh dokumentov. Notifications Foreign Asset / Account Reporting Notification Slovenian residents may be required to report the opening of bank and/or brokerage accounts to the tax authorities within eight days of opening such account. You should consult your personal tax advisor to determine whether this requirement will apply to any accounts opened in connection with participation in the Plan and to ensure compliance with applicable reporting requirements in Slovenia. | |||||
South Africa | Notifications Tax Notification By accepting the RSU Award, you agree to notify your Employer of the amount of any gain you realize upon the expiration of the Restricted Period. If you fail to advise your Employer of the gain realized upon expiration of the Restricted Period, you may be liable for a fine. You will be responsible for paying any difference between the actual tax liability and the amount withheld. Exchange Control Notification Because no transfer of funds from South Africa is required, no filing or reporting requirements should apply when the RSU Award is granted or when shares of common stock are issued upon vesting and expiration of the Restricted Period of the RSU Award. However, because the exchange control regulations are subject to change, you should consult your personal advisor prior to expiration of the Restricted Period of the RSU Award to ensure compliance with current regulations. You are responsible for ensuring compliance with all exchange control laws in South Africa. Securities Law Information In compliance with South African Securities Law, you acknowledge that you have been notified that the documents listed below are available for your review on the Company intranet site at the web addresses listed below: 1. the Company’s most recent Annual Report (Form 10-Q) – https://www.organon.com/investor- relations/sec-filings/ (the Company will file its first Form 10-K for the year ended December 31, 2021; in the meantime, please see the Index to Financial Statements in its Information Statement filed as Exhibit 99.1 to Amendment No. 2 to Form 10 at https://www.sec.gov/Archives/edgar/data/0001821825/000119312521140380/d56612d1012ba.htm) 2. the Company’s most recent Plan Prospectus - Organon Incentive Stock Plan Prospectus.pdf (sharepoint.com) You acknowledge that you may have copies of the above documents sent to you, at no charge, on written request being mailed to Investor Relations at Organon & Co., 30 Hudson Street, Floor 33, Jersey City, NJ 07302 U.S.A. The telephone number at the executive offices is 1-551-430-6900 and email is investor_relations@organon.com. | ||||
Spain | Terms and Conditions Labor Law Acknowledgment This provision supplements the “Nature of Grant” section in Part A of this Appendix: By accepting this RSU Award, you acknowledge that you understand and agree that you consent to participation in the Plan and that you have received a copy of the Plan. You understand that the Company, in its sole discretion, has unilaterally and gratuitously decided to distribute Incentives under the Plan to individuals who may be employees of the Company or its subsidiaries, affiliates |
or joint ventures throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Company or any of its subsidiaries, affiliates or joint ventures over and above the specific terms of the Plan on an ongoing basis. Consequently, you understand that any RSU Award is given on the assumption and condition that it shall not become a part of any employment contract (either with the Company or any of its subsidiaries, affiliates or joint ventures) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. Further, you understand and freely accept that there is no guarantee that any benefit whatsoever shall arise from any gratuitous and discretionary RSU Award since the future value of the RSU Awards and shares of common stock is unknown and unpredictable. In addition, you understand that the RSU Award would not be made to you but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any RSU Award shall be null and void. You also understand and agree that, as a condition of the grant of the RSU Award, the termination of your employment for any reason (including the reasons listed below), the RSU Award will cease vesting immediately effective on the date you are no longer providing services to the Employer or the Company or any of its subsidiaries, affiliates or joint ventures (unless otherwise specifically provided in the Terms). In particular, you understand and agree that the RSU Award will be forfeited without entitlement to the underlying shares of common stock or to any amount as indemnification in the event of a termination of your employment as described in the Terms prior to expiration of the Restricted Period by reason of, including but not limited to, resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without good cause (i.e., subject to “despido improcedente”), individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer and under Article 10.3 of the Royal Decree 1382/1985. Notifications Exchange Control Notification To participate in the Plan, residents of Spain must comply with exchange control regulations in Spain. The acquisition, ownership and disposition of shares of the Company’s common stock must be declared for statistical purposes to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”) , which is a department of the Ministry of Economy and Competitiveness. In addition, you must declare ownership of any shares of common stock to the DGCI each January while the shares of common stock are owned. The sale of shares of common stock must also be declared to the DGCI in January after the year in which the sale occurred, unless the sale proceeds exceed the applicable threshold (currently €1,502,530), in which case, the filing is due within one month after the sale. Further, you are required to electronically declare to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), as well as securities (including shares of common stock acquired under the Plan) held in such accounts, if the value of the transactions for all such accounts during the prior year or the balances in such accounts (including any payments of cash or shares of common stock made to you pursuant to the Plan) together with the value of such instruments as of December 31, or the volume of transactions with non-Spanish residents during the prior or current year, exceed €1,000,000. Generally, you will be required to report on an annual basis. Foreign Asset/Account Reporting Notification You may be subject to a tax reporting obligation if you hold assets and/or have bank accounts outside of Spain. If the value of the assets, including shares of common stock, dividends, dividend equivalents, or the bank accounts outside of Spain exceeds €50,000 (as determined separately for assets and for bank accounts) as of December 31 of the relevant tax year, you will be required to report the assets and/or bank accounts on your annual tax return for such year (or at any time during the year in which you dispose of such right or asset). After the assets and/or bank accounts are initially reported, you will be subject to the reporting obligations only if the value of any previously-reported assets or accounts increases by more than €20,000. The reporting must be completed by March 31 each year. You should consult with your personal tax and legal advisors to ensure compliance with your personal reporting obligations. Securities Law Information No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of the RSU Award. The Plan and the Terms have not been nor will |
they be registered with the Comisión Nacional del Mercado de Valores, and do not constitute a public offering prospectus. | |||||
Sweden | Terms and Conditions Authorization to Withhold The following provision supplements the “Tax Withholding” section of your Terms: Without limiting the Company’s and the Employer’s authority to satisfy their withholding obligations for Tax-Related Items as set forth in the “Tax Withholding” section of the Terms, in accepting the RSU Award, you authorize the Company and/or the Employer to withhold shares of common stock or to sell shares of common stock otherwise deliverable to you upon vesting/settlement to satisfy Tax-Related Items, regardless of whether the Company and/or the Employer have an obligation to withhold such Tax-Related Items. | ||||
Switzerland | Notifications Securities Law Information The offering of participation in the Plan is considered a private offering in Switzerland; therefore, it is not subject to registration in Switzerland. Neither this document nor any other materials relating to the Plan (i) constitute a prospectus according to articles 35 et seq. of the Swiss Federal Act on Financial Services (“FinSA”), (ii) may be publicly distributed nor otherwise made publicly available in Switzerland to any person other than an employee of the Company or Employer or (iii) has been or will be filed with, approved or supervised by any Swiss reviewing body according to article 51 FinSA or any Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority. Foreign Asset / Account Reporting Information You are required to declare all of your foreign bank and brokerage accounts in which you hold cash or securities, including the accounts that were opened and/or closed during the tax year, as well as any other assets, on an annual basis on in your tax return. This includes RSU Awards granted to you under the Plan which should not be subject to the net wealth tax, but must be reflected “pro memoria” in the statement on bank accounts and securities (Wertschriftenverzeichnis) that you are required to file with your tax return. | ||||
Taiwan | Notifications Securities Law Information The RSU Award and the shares of common stock to be issued pursuant to the Plan are available only to Eligible Employees of the Company and its subsidiaries, affiliates and joint ventures. The grant of the RSU Award and offer of participation in the Plan does not constitute a public offer of securities by a Taiwanese company. Exchange Control Notification You may acquire and remit foreign currency (including proceeds from the sale of shares of common stock or the receipt of any dividends or dividend equivalents) through an authorized foreign exchange bank, into Taiwan, up to US$5,000,000 per year without justification. Remittance of funds related to the sale of shares of common stock should be made through an authorized foreign exchange bank. If the transaction amount is TWD$500,000 or more in a single transaction, you must submit a Foreign Exchange Transaction Form. | ||||
Thailand | Notifications Exchange Control Notification In the event that the amount of the proceeds from the sale of shares of common stock or the receipt of dividends or dividend equivalents acquired under the Plan is US$1,000,000 or more in a single transaction, you will be required to repatriate such proceeds into Thailand after you receive them and to convert the funds into Thai Baht or deposit the proceeds in a foreign currency deposit account maintained by a bank in Thailand within 360 days. In this case, you will be required to provide information associated with the source of such income on the Foreign Exchange Transaction Form to the authorized agent for reporting to an exchange control officer. | ||||
Turkey | Notifications Securities Law Information |
Under Turkish law, you are not permitted to sell shares of the Company’s common stock in Turkey; instead, the sale must take place outside Turkey, which will be the case if the shares of common stock are sold on the New York Stock Exchange on which the shares are currently listed. You may be required to engage a Turkish financial intermediary to assist with the sale of shares of common stock acquired under the Plan. While you should not need to engage a Turkish financial intermediary with respect to the acquisition of such shares of common stock (as no consideration is paid for the RSU Awards or underlying shares of common stock), this is less certain. In light of this uncertainty, you should consult your personal legal advisor prior to the expiration of the Restricted Period or any sale of shares of common stock to ensure compliance with the financial intermediary requirements. | |||||
Ukraine | Terms and Conditions Payment of Award Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive in cash the value of the underlying shares of common stock at vesting, less any Tax-Related Items and broker’s fees or commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares of common stock and to force the immediate sale of such shares of common stock depending on the development of applicable exchange control laws and regulations. | ||||
United Arab Emirates | Notifications Securities Law Information The Plan is only being offered to Eligible Employees of the Company and its subsidiaries, affiliates and joint ventures and is in the nature of an “exempt personal offer” of equity incentives to Eligible Employees of the Company’s subsidiary in the United Arab Emirates. The Plan, the Terms and any other grant documents you may receive from the Company are intended for distribution only to such Eligible Employees and must not be delivered to, or relied on by, any other person. Prospective recipients of the securities offered (i.e., shares of the Company’s common stock) should conduct their own due diligence on the securities. If you do not understand the contents of the Plan and the Terms, you should consult an authorized financial adviser. The Emirates Securities and Commodities Authority and the Dubai Financial Services Authority have no responsibility for reviewing or verifying any documents in connection with the Plan. The Ministry of Economy, the Dubai Department of Economic Development, Emirates Securities and Commodities Authority, Central Bank and the Dubai Financial Services Authority, as applicable depending on your Employer’s location in the United Arab Emirates, have not approved the Plan or the Terms or taken steps to verify the information set out therein, and have no responsibility for such documents. |
United Kingdom | Terms and Conditions Tax Acknowledgment You agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items, as and when requested by the Company or, if different, your Employer or by Her Majesty’s Revenue and Customs (“HRMC”) (or any other tax authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and, if different, your Employer against any Tax-Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on your behalf. Notwithstanding the foregoing, if you are a director or executive officer of the Company (within the meaning of Section 13(k) of the U.S. Securities Exchange Act of 1934, as amended), the amount of any income tax not collected from or paid by you within ninety (90) days of the end of the U.K. tax year in which the event giving rise to the Tax-Related Items occurs may constitute a benefit to you on which additional income tax and National Insurance contributions may be payable. You understand that you will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying to the Company and/or the Employer (as appropriate) the amount of any National Insurance contributions due on this additional benefit, which may also be recovered from you through any means set forth in the “Tax Withholding” section of the Terms. | ||||
Vietnam | Terms and Conditions Payment of Award Any RSU Award granted to you will be settled in cash only. This means that upon vesting of your RSU Award, you will receive in cash the value of the underlying shares of common stock at vesting, less any Tax-Related Items and broker’s fees or commissions, which will be remitted to you via local payroll. The Company reserves the right to settle the RSU Award in shares of common stock and to force the immediate sale of such shares of common stock depending on the development of applicable exchange control laws and regulations. |
APPENDIX B ORGANON & CO. SPECIAL NOTICE FOR EMPLOYEES IN DENMARK ARBEJDSGIVERERKLÆRING/EMPLOYER STATEMENT | |||||
I henhold til § 3, stk. 1, i lov om brug af køberet eller tegningsret til aktier m.v. i ansættelsesforhold som ændret pr. 1 . januar 2019 ("Aktieoptionsloven") er du berettiget til i en særskilt skriftlig erklæring at modtage følgende oplysninger om de betingede aktieenheder ("Tildelingen"), der er tildelt dig af Organon & Co. ("Selskabet") i henhold til Selskabets 2021 Incentive Stock Plan ("Planen"). Denne erklæring indeholder kun de oplysninger, der er nævnt i Aktieoptionsloven. De fuldstændige vilkår og betingelser, der gælder for din Tildeling, fremgår af Planen og af de globale vilkår for 2021-tildelingen af betingede aktieenheder (Global Terms for 2021 Restricted Stock Unit Grants), inklusive eventuelle yderligere vilkår for dit land som fastsat i bilag A til de globale vilkår ("Vilkårene"), som er blevet udleveret til dig. I tilfælde af uoverensstemmelse mellem indholdet af denne erklæring og Planen og Vilkårene, har Planen og Vilkårene forrang. | Pursuant to Section 3(1) of the Danish Act on the Use of Rights to Purchase or Subscribe for Shares etc. in Employment Relationships as amended with effect from 1 January 2019 (the “Stock Option Act”), you are entitled to receive the following information regarding restricted stock units (the “Award”) granted to you by Organon & Co. (the “Company”) under its 2021 Incentive Stock Plan (the “Plan”) in a separate written statement. This statement contains only the information mentioned in the Stock Option Act. The terms and conditions of your Award are set forth in their entirety in the Plan and the Global Terms for 2021 Restricted Stock Unit Grants, including any additional provisions for your country set forth in Appendix A thereto (the “Terms”), which have been made available to you. In the event of any inconsistency between the contents of this statement and the Plan and the Terms, the terms and conditions of the Plan and the Terms will prevail. | ||||
1. Tidspunkt for tildeling af den vederlagsfri ret til at modtage ordinære aktier mod opfyldelse af visse betingelser Tildelingstidspunktet (som defineret i Vilkårene) er den dato, hvor Talentudvalget under Selskabets Bestyrelse eller et underudvalg under samme, eller et eventuelt andet bestyrelsesudvalg, der måtte efterfølge dette, ("Udvalget") godkendte en tildeling til dig og besluttede, at denne skulle træde i kraft. | 1. Date of grant of unfunded right to receive shares of common stock upon satisfying certain conditions The Grant Date (as defined in the Terms) of your Award is the date that the Talent Committee of the Board of Directors of the Company or subcommittee thereof, or such other successor committee of the Board of Directors (the “Committee”) approved a grant for you and determined it would be effective. | ||||
2. Vilkår for tildeling af ret til at modtage ordinære aktier mod opfyldelse af visse betingelser Tildelinger i henhold til Planen sker alene efter Udvalgets eget frie skøn. Selskabet har meget vide beføjelser til at bestemme, hvem der kan modtage Tildelinger og hvornår, og til at fastsætte betingelserne for Tildelingerne. Selskabet kan efter dets eget frie skøn vælge fremover ikke at foretage Tildelinger. I henhold til bestemmelserne i Planen og Vilkårene har du ikke nogen ret til eller noget krav på fremtidige tildelinger i henhold til Planen. | 2. Terms or conditions for grant of a right to receive shares of common stock upon satisfying certain conditions The grant of Awards under the Plan is made at the sole discretion of the Committee. The Company has very broad powers to determine who will receive Awards and when, and to set the terms of the Awards. The Company may decide, in its sole discretion, not to make any grants of Awards in the future. Under the terms of the Plan and the Terms, you have no entitlement or claim to receive future grants under the Plan. | ||||
3. Modningstidspunkt eller -periode | 3. Vesting date or period |
Din tildeling modner på de(t) tidspunkt(er), der fremgår af Morgan Stanleys aktieplanssystem (Morgan Stanley Stock Plan System), medmindre den modner eller ophører på et tidligere tidspunkt af de grunde, der er beskrevet i Vilkårene. På modningstidspunktet konverteres din Tildeling til et tilsvarende antal ordinære aktier i Selskabet. | Your Award shall vest on the date(s) reflected in the Morgan Stanley Stock Plan System, unless vested or terminated earlier for the reasons set forth in the Terms. Your Award shall be converted into an equivalent number of Company shares of common stock upon vesting of the Award. | ||||
4. Udnyttelseskurs Der skal ikke betales nogen udnyttelseskurs i forbindelse med modning af din Tildeling eller Selskabets udstedelse af ordinære aktier til dig i overensstemmelse med den ovenfor beskrevne modningstidsplan. | 4. Exercise price No exercise price is payable upon the vesting of your Award or the issuance of shares of the Company’s common stock to you in accordance with the vesting schedule described above. | ||||
5. Din retsstilling i forbindelse med fratræden Ved din fratræden vil din Tildeling blive behandlet i overensstemmelse med bestemmelsen "Ansættelsesforholdets ophør" (defineret som Termination of Employment i Vilkårene), hvilken bestemmelse er opsummeret umiddelbart nedenfor. –Frivillig fratræden, Misligholdelse eller Opsigelse af Berettiget Årsag. Hvis dit ansættelsesforhold inden for den Betingede Periode (defineret som Restricted Period i Vilkårene) ophører som følge af din egen opsigelse eller opsiges som følge af din forsætlige eller grove misligholdelse eller som følge af anden Berettiget Årsag (defineret som Cause i Vilkårene), fortaber du retten til din Tildeling (og eventuelt optjent udbyttemodværdi) på tidspunktet for ophøret af dit ansættelsesforhold. –Salg. Hvis dit ansættelsesforhold inden for den Betingede Periode ophører, og Selskabet vurderer, at ophøret skyldes et salg af dit datterselskab, afdeling eller joint venture, vil følgende del af din Tildeling og eventuelt optjent udbyttemodværdi blive udbetalt til dig på det tidspunkt, hvor sådan udbetaling ville være sket, hvis dit ansættelsesforhold ikke var ophørt: En tredjedel, hvis ansættelsesforholdet ophører på eller efter Tildelingstidspunktet, men før 1-årsdagen for Tildelingen (resten fortaber du retten til på tidspunktet for ophøret af dit ansættelsesforhold); og hele Tildelingen, hvis ansættelsesforholdet ophører på eller efter 1-årsdagen for Tildelingen. –Ufrivilligt ophør, der ikke skyldes dårlig performance, en Berettiget Årsag, pensionering, dødsfald eller invaliditet. Hvis Selskabet vurderer, at dit ansættelsesforhold er ophørt ufrivilligt inden for den Betingede Periode, uden at det skyldes dårlig performance, en Berettiget Årsag, pensionering, | 5. Your rights upon termination of employment The treatment of your Award upon termination of employment will be determined in accordance with the “Termination of Employment” section of the Terms summarized immediately below. –Voluntary Termination, Misconduct or Termination for Cause. If your employment is voluntarily terminated or your employment is terminated as a result of your deliberate, willful or gross misconduct or for Cause (as defined in the Terms) during the Restricted Period (as defined in the Terms), your Award (and any accrued dividend equivalents) will be forfeited on the date your employment ends. –Sale. If your employment is terminated during the Restricted Period and the Company determines that such termination resulted from the sale of your subsidiary, division or joint venture, the following portion of your Award and accrued dividend equivalents will be distributed to you at such time as it would have been paid if your employment had continued: one-third if employment terminates on or after the Grant Date but before the first anniversary thereof (the remainder will be forfeited on the date your employment ends); and all if employment terminates on or after the first anniversary of the Grant Date. –Involuntary Termination Not for Poor Performance, or Without Cause, Retirement, Death or Disability. If the Company determines that your employment is involuntarily terminated during the Restricted Period not for poor performance, or without Cause, retirement, death or disability but on or after the first anniversary, a pro rata portion of your unvested Award and accrued dividend equivalents will be distributed to you at such time as they would have been paid if your employment had continued. The pro |
dødsfald eller invaliditet, men på eller efter 1- årsdagen for Tildelingen, vil en forholdsmæssig andel af din umodnede Tildeling og eventuelt optjent udbyttemodværdi blive udbetalt til dig på det tidspunkt, hvor en sådan udbetaling ville være sket, hvis dit ansættelsesforhold ikke var ophørt. Denne forholdsmæssige andel vil svare til Tildelingens fulde beløb (uanset om Tildelingen er modnet eller ej) gange antallet af fulde måneder, der er forløbet inden for den Betingede Periode og forud for tidspunktet for ansættelsesforholdets ophør, divideret med det samlede antal måneder i den Betingede Periode for Tildelingen2, nedsat med antallet af modnede betingede aktieenheder. Resten samt eventuelt optjent udbyttemodværdi fortabes på tidspunktet for ansættelsesforholdets ophør. –Kontrolskifte. Hvis Selskabet eller et moderselskab, et datterselskab, en tilknyttet part eller et joint venture til Selskabet inden for den Betingede Periode uden Berettiget Årsag bringer dit ansættelsesforhold til ufrivilligt ophør før 2-årsdagen for closing af et kontrolskifte, vil denne Tildeling forblive i kraft i overensstemmelse med Vilkårene på samme måde, som hvis ansættelsesforholdet ikke var ophørt, idet udbetaling i så fald vil ske samtidig med tilsvarende udbetalinger til aktive medarbejdere. Hvis denne Tildeling efter et kontrolskifte ikke længere er udestående og heller ikke er konverteret til en anden Tildeling, vil du være berettiget til for denne Tildeling at modtage kontant betaling med et beløb svarende til fair markedsværdi af det vederlag, kapitalejerne i Selskabet modtog i forbindelse med kontrolskiftet til udbetaling senest 30 dage fra kontrolskiftets gennemførelse. Dette afsnit bortfalder, når der er gået 2 år fra kontrolskiftets gennemførelse. –Joint Venture. Ansættelse i et joint venture, herunder enhver anden enhed, som Selskabet har en betydelig forretningsinteresse eller ejerandel i, anses i forhold til din Tildeling ikke for ophør af ansættelsesforholdet. En sådan ansættelse skal godkendes af Selskabet og være i umiddelbar forlængelse af ansættelsen i Selskabet. Uagtet denne bestemmelse gælder det, at hvis du ikke er berettiget til at modtage en tildeling i henhold til Planen, efter at dit ansættelsesforhold er overført, vil dit ansættelsesforhold i forbindelse med Tildelingen blive behandlet som ophørt efter din overførsel. | rata portion will equal the full amount of the Award (whether or not vested) times the number of completed months during the Restricted Period and prior to the date employment terminates, divided by the total number of months during the Restricted Period of the Award3, reduced by the number of restricted stock units that have vested. The remainder and any accrued dividend equivalents will be forfeited on the date your employment ends. –Change in Control. If the Company or a parent, subsidiary, affiliate or joint venture of the Company involuntarily terminates your employment during the Restricted Period without Cause before the second anniversary of the closing of any change in control, then this Award will continue in accordance with its terms as if employment had continued and will be distributed at the time active employees receive distributions with respect to this Award. If this Award does not remain outstanding following the change in control and is not converted into a successor Award, then you will be entitled to receive cash for this Award in an amount equal to the fair market value of the consideration paid to Company stockholders for a share of Company common stock in the change in control payable within 30 days of the closing of the change in control. On the second anniversary of the closing of the change in control, this paragraph shall expire. –Joint Venture. Employment with a joint venture including any other entity in which the Company has a significant business or ownership interest is not considered termination of employment for purposes of your Award. Such employment must be approved by, and contiguous with employment by, the Company. Regardless of this provision, if you would not be eligible to receive a grant under the Plan after your transfer of employment, your employment will be considered terminated for the purposes of the Award upon your transfer. | ||||
6. Økonomiske aspekter ved deltagelse i Planen | 6. Financial aspects of participating in the Plan |
Tildelingen har ingen umiddelbare økonomiske konsekvenser for dig. Det er først ved modning af Tildelingen og det efterfølgende salg af de ordinære aktier, der er erhvervet ved modningen, at du vil kunne realisere nogen indtægter i henhold til Planen. Værdien af Tildelingen indgår ikke i beregningen af feriepenge, pensionsbidrag, fratrædelsesgodtgørelse, lovpligtige godtgørelser eller andre lovpligtige, vederlagsafhængige ydelser. Investering i aktier er ikke uden økonomisk risiko. Værdien af aktierne på modnings- og salgstidspunkterne afhænger ikke kun af Selskabets økonomiske udvikling, men også af den generelle udvikling på aktiemarkedet. Der kan derfor ikke gives nogen garanti for, at en investering i aktier vil være overskudsgivende. Denne erklæring berører ikke de skattemæssige konsekvenser af deltagelse i Planen, modtagelse af eventuelt udbytte eller et efterfølgende salg af de i medfør af Planen erhvervede ordinære aktier. Du anbefales at drøfte dette med din personlige økonomiske rådgiver eller skatterådgiver. | The grant of the Award has no immediate financial consequences for you. It is not until vesting of the Award and the subsequent sale of shares of common stock acquired at vesting that you may realize any income under the Plan. The value of the Award is not taken into account when calculating holiday allowances, pension contributions, severance pay, statutory allowance, compensation or other statutory remuneration calculated on the basis of salary. Investing in shares of common stock involves some financial risk. The value of the shares at the time of vesting and sale will not only be dependent on the Company's financial development, but also on the general development on the stock market. Consequently, there is no guarantee that investment in shares of common stock will yield a profit. This statement does not address the tax consequences of participating in the Plan, the receipt of any dividends or the subsequent sale of any shares of common stock acquired under the Plan. You are encouraged to discuss this matter with your personal financial or tax advisor. | ||||
ORGANON & CO. 30 Hudson Street, Floor 33 Jersey City, NJ U.S.A. 07302 | ORGANON & CO. 30 Hudson Street, Floor 33 Jersey City, NJ U.S.A. 07302 |
Performance Level | Percentile Rank | Payout % | ||||||
Maximum | 80th percentile and above | 200% | ||||||
Target | 55th percentile | 100% | ||||||
Threshold | 30th percentile | 50% | ||||||
Below Threshold | Below 30th percentile | 0% |
If primary reason your employment ends is due to: | Here’s what happens to your Performance Share Units (PSUs): | ||||
Voluntary Termination | If the Grantee’s employment ends after the Award Period has ended but prior to the payout date, the PSU Award and accrued dividend equivalents will be distributed to the Grantee at such time as they would have been paid if the Grantee’s employment had continued, based on actual performance during the Award Period as determined in accordance with Section III. For the avoidance of doubt, if the Grantee’s employment ends during the Award Period, the PSU Award and accrued dividend equivalents will be forfeited on the date the Grantee’s employment ends. | ||||
Misconduct Termination for poor performance or for Cause | Notwithstanding if the Award Period has ended, if the Grantee’s employment ends prior to the payout date, this PSU Award and accrued dividend equivalents will be forfeited on the date the Grantee’s employment ends. | ||||
Involuntary Termination (not for poor performance) Retirement Death Disability | A pro rata portion of the unvested PSU Award and accrued dividend equivalents (based on the number of completed months held during the Award Period prior to the date employment terminated) will be distributed to the Grantee at such time as they would have been paid if the Grantee’s employment had continued, based on actual performance during the Award Period as determined in accordance with Section III. The remainder will be forfeited on the date the Grantee’s employment ends. The pro rata portion shall be determined by multiplying the Final Award by a fraction, the numerator of which is the number of completed months in the Award Period during which the Grantee was employed by the Employer or the Company or any subsidiary, affiliate, or JV of the Company, and the denominator of which is the total number of months during the Award Period.1 | ||||
Sale (for example, sale of your subsidiary, division or JV) | The following portion of this PSU Award and accrued dividend equivalents will be distributed to you at such time as it would have been paid if the Grantee’s employment had continued, based on actual performance during the Award Period as determined in accordance with Section III: •one-third if employment terminates on or after the Grant Date but before the first anniversary thereof (the remainder will be forfeited on the date the Grantee’s employment ends); and •all if employment terminates on or after the first anniversary of the Grant Date. | ||||
Change in Control of the Company | If there is a Change in Control during the first year of the Award Period, the PSU Award will be converted to a Restricted Stock Unit award at 100% of target and become payable on the scheduled vesting date subject to the Grantee’s continuous employment. If there is a Change in Control after the first year of the Award Period , the PSU Award will be converted to a Restricted Stock Unit award based on actual relative TSR through the Change in Control date using the Change In Control stock price as the ending price for Organon and become payable on the scheduled vesting date subject to the Grantee’s continuous employment. |
In the event of an involuntary termination without Cause before the second anniversary after the closing of a Change in Control, the unvested Restricted Stock Unit award (which was converted from the PSU Award at the time of the Change in Control) shall become fully payable on the scheduled vesting date. If the surviving, successor or acquiring company does not assume the unvested award or substitute similar awards, the Grantee’s award will generally vest and settle prior to the effective time of such Change in Control, as provided in Section 25(b) of the Organon ISP. |
Country | Additional Terms and Conditions, and notifications | ||||
The People’s Republic of China | Terms and Conditions Payment of Award Any PSU Award granted to Grantee will be settled in cash only. This means that upon settlement of Grantee’s PSU Award, Grantee will receive in cash the value of the underlying shares of common stock at vesting, less any Tax-Related Items and broker’s fees or commissions, which will be remitted to Grantee via local payroll. | ||||
Netherlands | There are no country-specific provisions. | ||||
Singapore | Notifications Restriction on Sale and Transferability Grantee hereby agrees that any shares of common stock acquired pursuant to the Award will not be offered for sale in Singapore prior to the six-month anniversary of the Grant Date of the Award, unless such sale or offer is made pursuant to one or more exemptions under Part XII Division 1 Subdivision (4) (other than section 280) of the Securities and Futures Act (Chap. 289, 2006 Ed.) (“SFA”) or pursuant to, and in accordance with, the conditions of any other applicable provision(s) of the SFA. Securities Law Information The PSU Award is being granted to Grantee pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA, on which basis it is exempt from the prospectus and registration requirements under the SFA, and is not made to Grantee with a view of the PSU Award being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Director Notification If Grantee is a director (including an alternate, substitute, associate or shadow director) of a Singaporean subsidiary, affiliate or joint venture of the Company, Grantee is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore subsidiary, affiliate or joint venture in writing when Grantee receives an interest (e.g., PSUs, shares of common stock) in the Company or any related companies. In addition, Grantee must notify the Singaporean subsidiary, affiliate or joint venture when Grantee sells shares of the Company’s common stock or any related company (including when Grantee sells shares of common stock acquired upon the expiration of the Restricted Period). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must be made of Grantee’s interests in the Company or any related company within two days of .either after the director becomes aware of the change in respect of the particulars of any of the aforesaid, the date on which the director becomes a holder of, or acquires an interest in, the shares, debentures, rights, contracts, participatory interests, other securities or securities-based derivatives contacts, whichever last occurs. There is no prescribed form for such disclosure, although in practice, the company secretary normally would prepare a formatted disclosure form that requests the following information: equity award granted, number of shares acquired, description of consideration, if applicable, and the date of the transaction. A director shall be deemed to have an interest in securities or securities-based derivative contracts referred to above if a family member of the director (not being him or herself a director), holds or has an interest in those securities or securities-based derivatives contract and any contract entered into by, or any grant made to, a family member of a director of a corporation (not being himself a director) shall be deemed to have been entered into by, made or exercised by or made to the director. A “family member” means a spouse, or a son, adopted son, step-son, daughter, adopted daughter or step-daughter below the age of 21 years. | ||||
Switzerland | Notifications Securities Law Information The offering of participation in the Plan is considered a private offering in Switzerland; therefore, it is not subject to registration in Switzerland. Neither this document nor any other materials relating to the Plan (i) constitute a prospectus according to articles 35 et seq. of the Swiss Federal Act on Financial Services (“FinSA”), (ii) may be publicly distributed nor otherwise made publicly available in Switzerland to any person other than an employee of the Company or Employer or (iii) has been or will be filed with, approved or supervised by any Swiss reviewing |
body according to article 51 FinSA or any Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority. Foreign Asset / Account Reporting Information Grantee is required to declare all of Grantee’s foreign bank and brokerage accounts in which Grantee holds cash or securities, including the accounts that were opened and/or closed during the tax year, as well as any other assets, on an annual basis on in Grantee’s tax return. This includes Awards granted to Grantee under the Plan which should not be subject to the net wealth tax, but must be reflected “pro memoria” in the statement on bank accounts and securities (Wertschriftenverzeichnis) that Grantee is required to file with Grantee’s tax return. | |||||
United Arab Emirates | Notifications Securities Law Information The Plan is only being offered to Eligible Employees of the Company and its subsidiaries, affiliates and joint ventures and is in the nature of an “exempt personal offer” of equity incentives to Eligible Employees of the Company’s subsidiary in the United Arab Emirates. The Plan, the Terms and any other grant documents Grantee may receive from the Company are intended for distribution only to such Eligible Employees and must not be delivered to, or relied on by, any other person. Prospective recipients of the securities offered (i.e., shares of the Company’s common stock) should conduct their own due diligence on the securities. If Grantee does not understand the contents of the Plan and the Terms, Grantee should consult an authorized financial adviser. The Emirates Securities and Commodities Authority and the Dubai Financial Services Authority have no responsibility for reviewing or verifying any documents in connection with the Plan. The Ministry of Economy, the Dubai Department of Economic Development, Emirates Securities and Commodities Authority, Central Bank and the Dubai Financial Services Authority, as applicable depending on Grantee’s Employer’s location in the United Arab Emirates, have not approved the Plan or the Terms or taken steps to verify the information set out therein, and have no responsibility for such documents. |
If primary reason your employment ends is due to: | Here’s what happens to your Stock Options: | ||||
Voluntary Termination Termination for poor performance or for Cause | Any unvested stock options will be forfeited on the date your employment ends. Any stock options that are already vested will expire at the earlier of 3 months from the date your employment ends and the original Expiration Date. | ||||
Misconduct | Any stock options (unvested and vested) will be forfeited on the date your employment ends. | ||||
Involuntary Termination (not for poor performance) Retirement | A prorated portion of your unvested stock options will vest and become exercisable on the scheduled Vesting Date(s). The prorated portion will equal the full amount of this stock option award (whether vested or unvested) times the number of completed months during the Restricted Period and prior to the date employment ends, divided by the total number of months during the Restricted Period of the grant1, reduced by the number of stock options that have vested. The remaining unvested portion will be forfeited on the date your employment ends. The portion of your stock options that are already vested and/or vests in accordance with the above will expire at the earlier of the day before the one-year anniversary of the date your employment ends and the original Expiration Date. | ||||
Death Disability | A prorated portion of your unvested stock options will vest and become exercisable on the scheduled Vesting Date(s). The prorated portion will equal the full amount of this stock option award (whether vested or unvested) times the number of completed months during the Restricted Period and prior to the date employment ends, divided by the total number of months during the Restricted Period of the grant1, reduced by the number of stock options that have vested. The remaining unvested portion will be forfeited on the date your employment ends. |
The portion of your stock options that are already vested and/or vests in accordance with the above will expire at the earlier of the day before the two-year anniversary of the date your employment ends and the original Expiration Date. | |||||
Sale (for example, sale of your subsidiary, division or JV) | The following portion of your unvested stock options will vest and become exercisable immediately upon such termination: •one-third if employment terminates on or after the Grant Date but before the first anniversary thereof (the remainder will be forfeited on the date your employment ends); and •all if employment terminates on or after the first anniversary of the Grant Date. The portion of your stock options that is already vested on the date your employment ends and/or vests as a result of the sale will expire at the earlier of the day before the one-year anniversary of the date your employment ends and the original Expiration Date. | ||||
Change in Control of the Company | If your stock option remains outstanding following a Change in Control and are converted into a successor stock options, any unvested portion becomes vested and exercisable on the scheduled Vesting Date(s) subject to your continuous employment. If your employment is involuntarily terminated without Cause before the second anniversary of the closing of a Change in Control, then each unvested stock option that is outstanding immediately prior to the Change in Control will immediately become fully vested and exercisable. All stock options, including options vested prior to such time, will expire at the earlier of the day before the five-year anniversary of the termination of your employment following a Change in Control and the original Expiration Date. If your stock options do not remain outstanding following the Change in Control and are not converted into successor stock options, then you will be entitled to receive cash for your stock options in an amount at least equal to the difference between the price paid to Organon stockholders for a share of Organon common stock in the Change in Control and the Option Price of your stock options. |
Country | Additional Terms and Conditions, and notifications | ||||
Netherlands | There are no country-specific provisions. | ||||
Singapore | Notifications Restriction on Sale and Transferability You hereby agree that any shares of common stock acquired pursuant to the stock option will not be offered for sale in Singapore prior to the six-month anniversary of the Grant Date of the stock option, unless such sale or offer is made pursuant to one or more exemptions under Part XII Division 1 Subdivision (4) (other than section 280) of the Securities and Futures Act (Chap. 289, 2006 Ed.) (“SFA”) or pursuant to, and in accordance with, the conditions of any other applicable provision(s) of the SFA. Securities Law Information The stock option is being granted to you pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA, on which basis it is exempt from the prospectus and registration requirements under the SFA, and is not made to you with a view of the stock option being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Director Notification If you are a director (including an alternate, substitute, associate or shadow director) of a Singaporean subsidiary, affiliate or joint venture of the Company, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore subsidiary, affiliate or joint venture in writing when you receive an interest (e.g., stock options, shares of common stock) in the Company or any related companies. In addition, you must notify the Singaporean subsidiary, affiliate or joint venture when you sell shares of the Company’s common stock or any related company (including when you sell shares of common stock acquired upon the expiration of the Restricted Period). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any related company. In addition, a notification must be made of your interests in the Company or any related company within two days of .either after the director becomes aware of the change in respect of the particulars of any of the aforesaid, the date on which the director becomes a holder of, or acquires an interest in, the shares, debentures, rights, contracts, participatory interests, other securities or securities-based derivatives contacts, whichever last occurs. There is no prescribed form for such disclosure, although in practice, the company secretary normally would prepare a formatted disclosure form that requests the following information: equity award granted, number of shares acquired, description of consideration, if applicable, and the date of the transaction. A director shall be deemed to have an interest in securities or securities-based derivative contracts referred to above if a family member of the director (not being him or herself a director), holds or has an interest in those securities or securities-based derivatives contract and any contract entered into by, or any grant made to, a family member of a director of a corporation (not being himself a director) shall be deemed to have been entered into by, made or exercised by or made to the director. A “family member” means a spouse, or a son, adopted son, step-son, daughter, adopted daughter or step-daughter below the age of 21 years. | ||||
Switzerland | Notifications Securities Law Information The offering of participation in the Plan is considered a private offering in Switzerland; therefore, it is not subject to registration in Switzerland. Neither this document nor any other materials relating to the Plan (i) constitute a prospectus according to articles 35 et seq. of the Swiss Federal Act on Financial Services (“FinSA”), (ii) may be publicly distributed nor otherwise made publicly available in Switzerland to any person other than an employee of the Company or Employer or (iii) has been or will be filed with, approved or supervised by any Swiss reviewing body according to article 51 FinSA or any Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority. Foreign Asset / Account Reporting Information You are required to declare all of your foreign bank and brokerage accounts in which you hold cash or securities, including the accounts that were opened and/or closed during the tax year, as well as any other assets, on an annual basis on in your tax return. This includes stock options granted to you under the Plan which should not be |
subject to the net wealth tax, but must be reflected “pro memoria” in the statement on bank accounts and securities (Wertschriftenverzeichnis) that you are required to file with your tax return. | |||||
United Arab Emirates | Notifications Securities Law Information The Plan is only being offered to Eligible Employees of the Company and its subsidiaries, affiliates and joint ventures and is in the nature of an “exempt personal offer” of equity incentives to Eligible Employees of the Company’s subsidiary in the United Arab Emirates. The Plan, the Terms and any other grant documents you may receive from the Company are intended for distribution only to such Eligible Employees and must not be delivered to, or relied on by, any other person. Prospective recipients of the securities offered (i.e., shares of the Company’s common stock) should conduct their own due diligence on the securities. If you do not understand the contents of the Plan and the Terms, you should consult an authorized financial adviser. The Emirates Securities and Commodities Authority and the Dubai Financial Services Authority have no responsibility for reviewing or verifying any documents in connection with the Plan. The Ministry of Economy, the Dubai Department of Economic Development, Emirates Securities and Commodities Authority, Central Bank and the Dubai Financial Services Authority, as applicable depending on your Employer’s location in the United Arab Emirates, have not approved the Plan or the Terms or taken steps to verify the information set out therein, and have no responsibility for such documents. |
By | /s/ Kevin Ali | ||||
Kevin Ali | |||||
Chief Executive Officer |
By | /s/ Matthew Walsh | ||||
Matthew Walsh | |||||
Chief Financial Officer |
November 12, 2021 | /s/ Kevin Ali | ||||
Kevin Ali | |||||
Chief Executive Officer |
Dated: November 12, 2021 | /s/ Matthew Walsh | ||||
Matthew Walsh | |||||
Chief Financial Officer |
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Condensed Combined Statement of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
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Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 323 | $ 547 | $ 1,149 | $ 1,792 |
Other Comprehensive Income (Loss), Net of Taxes: | ||||
Benefit plan net (loss) gain and prior service credit, net of amortization | (3) | 4 | (11) | 15 |
Cumulative translation adjustment | (23) | 40 | 129 | (93) |
Other comprehensive income (loss) | (26) | 44 | 118 | (78) |
Comprehensive Income | $ 297 | $ 591 | $ 1,267 | $ 1,714 |
Condensed Combined Balance Sheet (Parenthetical) - USD ($) $ in Millions |
Sep. 30, 2021 |
Dec. 31, 2020 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 8 | $ 18 |
Inventories classified in Other Assets | $ 60 | $ 127 |
Common stock, par value (in dollars per share) | $ 0.01 | |
Common stock, shares authorized | 500,000,000 | |
Common stock, shares issued | 253,545,051 | |
Common stock, shares outstanding | 253,545,051 |
Background and Nature of Operations |
9 Months Ended |
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Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background and Nature of Operations | Background and Nature of Operations Organon & Co. ("Organon" or the "Company") is a global healthcare company that develops and delivers innovative health solutions through a portfolio of prescription therapies within women's health, biosimilars and established brands (the "Organon Products"). 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 ("UK"). On June 2, 2021, Organon and Merck & Co., Inc. ("Merck") entered into a Separation and Distribution Agreement (the "Separation and Distribution Agreement"). Pursuant to the Separation and Distribution Agreement, Merck agreed to spin off the Organon Products into Organon, a new, publicly traded company (the "Separation"). In connection with the Separation, on June 2, 2021, Merck distributed (the "Distribution"), on a pro rata basis, to holders of the outstanding shares of common stock of Merck, par value $0.50 per share (the "Merck Common Stock") on May 17, 2021 (the "Record Date"), all of the outstanding shares of common stock, par value $0.01 per share, of Organon (the "Common Stock"). Each Merck shareholder was entitled to receive one-tenth of a share of the Common Stock for each share of Merck Common Stock held on the Record Date. Organon is now a standalone publicly traded company and, on June 3, 2021, regular-way trading of the Common Stock commenced on the New York Stock Exchange under the ticker symbol "OGN." The Separation was completed pursuant to the Separation and Distribution Agreement and other agreements with Merck related to the Separation, including, but not limited to a tax matters agreement (the "Tax Matters Agreement" or "TMA"), an employee matters agreement (the "Employee Matters Agreement" or "EMA") and a transition services agreement (the "Transition Service Agreement" or "TSA") (see Note 17 for additional details). The Company’s operations include the following product portfolios: •Women’s Health: the Company has a portfolio of contraception and fertility brands, such as Nexplanon/Implanon NXT (etonogestrel implant), a long-acting reversible contraceptive, which is a class of contraceptives that are recognized as the most effective type of hormonal contraception available to patients with a lower long-term average cost. •Biosimilars: the Company’s current portfolio spans across immunology and oncology treatments. All five of the biosimilars in Organon’s portfolio have launched in certain countries globally, including two biosimilars in the United States. •Established Brands: the Company has a portfolio of established brands, which generally are beyond market exclusivity, including leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management. The historical results included certain Merck non-U.S. legal entities that were conveyed to Organon in connection with the Separation (collectively, the "Transferred Entities" and each, a "Transferred Entity") and included operations related to other Merck products that were retained by Merck ("Merck Retained Products"). The Merck Retained Products business of the Transferred Entities was contributed by the Company to Merck and its affiliates and any remaining assets and liabilities were transferred as of June 2, 2021. Accordingly, the historical results of operations of the Merck Retained Products have been reflected as discontinued operations in these Condensed Consolidated Financial Statements (see Note 2).
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Basis of Presentation |
9 Months Ended |
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Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation On June 2, 2021, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the Separation on June 2, 2021, the Company’s historical combined financial statements were prepared on a standalone basis and were derived from Merck’s consolidated financial statements and accounting records. The unaudited financial statements for all periods presented, including the historical results of the Company prior to June 2, 2021, are now referred to as "Condensed Consolidated Financial Statements", and have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by U.S. generally accepted accounting principles ("GAAP") for complete consolidated financial statements are not included herein. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Organon’s Registration Statement on Form 10, as amended, filed on April 29, 2021 (the "Form 10"). Periods Prior to Separation The assets, liabilities, revenue and expenses of the Company were reflected in the Condensed Consolidated Financial Statements on a historical cost basis, as included in the consolidated financial statements of Merck, using the historical accounting policies applied by Merck. The Condensed Consolidated Financial Statements did not purport to reflect what the Company’s results of operations, comprehensive income, financial position, equity or cash flows would have been had the Company operated as a standalone public company during the periods presented. The Condensed Consolidated Financial Statements were prepared following a legal entity approach, which resulted in the inclusion of the following: •Certain assets and liabilities, results of operations and cash flows attributable to the sales of Organon Products that have been or were contributed to Organon prior to the consummation of the Separation. •The Transferred Entities, which have historically included the results from the sales of both Organon Products and the Merck Retained Products. Each Transferred Entity’s historical operations, including its results of operations, assets and liabilities, and cash flows have been fully reflected in the Condensed Consolidated Financial Statements. •In contemplation of the Separation the Merck Retained Products business of the Transferred Entities was distributed to Merck and its affiliates ("MRP Distribution") and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations. The Company’s businesses had historically functioned together with the other businesses controlled by Merck. Accordingly, the Company relied on Merck’s corporate and other support functions for its business. Therefore, for the period prior to the Separation, certain corporate and shared costs were allocated to the Company based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, including: (i) expenses related to Merck support functions, including expenses for facilities, executive oversight, treasury, finance, legal, human resources, shared services, compliance, procurement, information technology and other corporate functions. (ii) certain manufacturing and supply costs incurred by Merck’s manufacturing division, including facility management, distribution, logistics, planning and global quality. (iii) certain costs incurred by Merck’s human health division in relation to selling and marketing activities, and related administrative support functions, that are not routinely allocated to therapeutic areas. (iv) certain costs incurred by Merck’s research laboratories for activities related to drug discovery and development, as well as medical and regulatory affairs. (v) restructuring costs (see Note 5) and stock-based compensation expenses (see Note 11); and (vi) certain compensation expenses maintained on a centralized basis such as certain employee benefit expenses. Management believes these cost allocations were a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the period prior to the Separation, though the allocations may not be indicative of the actual costs that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure. Merck maintains various employee benefit plans in which the Company’s employees participated during periods prior to the Separation, and a portion of the costs associated with these plans was included in the Company’s Condensed Consolidated Financial Statements. The Condensed Consolidated Balance Sheet at December 31, 2020 only includes assets and liabilities relating to plans for which the entity being transferred is the plan sponsor. Certain pension assets and obligations were transferred by Merck into legal entities established to operate the Organon Products business (the "Organon Entities") that are the plan sponsor and, accordingly, the Condensed Consolidated Balance Sheet at September 30, 2021 includes assets and liabilities of the newly established plans of Organon. Merck utilized a centralized approach to cash management and the financing of its operations. Cash generated by the Company was routinely transferred into accounts managed by Merck’s centralized treasury function and cash disbursements for the Company’s operations prior to the Separation were funded as needed by Merck. Cash and cash equivalents of the Organon Entities and the Transferred Entities were reflected in the Company’s Condensed Consolidated Balance Sheet. Balances held by the Organon Entities and the Transferred Entities with Merck for cash transfers and loans were reflected as Due to related party prior to Separation. All other cash, cash equivalents, short-term investments and related transfers between Merck and the Company were generally held centrally through accounts controlled and maintained by Merck and were not specifically identifiable to the Company. Accordingly, such balances were accounted for through Net investment from Merck & Co., Inc. Merck’s third-party debt and related interest expense were not attributed to the Company because the Company was not the legal obligor of the debt and the borrowings were not specifically identifiable to the Company. For the Organon Entities and the Transferred Entities, transactions with Merck affiliates were included in the Condensed Consolidated Statement of Income and related balances were reflected as Due to related party, Due from related party or Related Party Loans Payable in the continuing operations and discontinued operations, as applicable. Other balances between the Company and Merck were considered to be effectively settled in the Condensed Consolidated Financial Statements at the time the transactions were recorded. See Note 17 for additional details. As the separate legal entities that made up the Company’s business were not historically held by a single legal entity, Net investment from Merck & Co., Inc. was shown in lieu of stockholders’ equity in these Condensed Consolidated Financial Statements. Net investment from Merck & Co., Inc. represented Merck’s interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results. Income tax expense and tax balances in the Condensed Consolidated Financial Statements have been calculated on a separate tax return basis. The Company’s operations are included in the tax returns of certain Organon Entities, Transferred Entities or the respective Merck entities of which the Company’s business was a part. As of Separation Date Certain assets and liabilities, including accounts receivables, inventories and trade payables included on the Condensed Consolidated Balance Sheet prior to the Separation, have been retained by Merck post-Separation and therefore were adjusted through Net investment from Merck & Co., Inc. in the Company’s Condensed Consolidated Financial Statements. Additionally, certain amounts previously included in Due to related party or Due from related party are reflected in accounts receivable and trade accounts payable as of September 30, 2021. As part of the Separation, Net investment from Merck & Co., Inc. was reclassified to Common Stock and Accumulated Deficit. In connection with the Separation, additional pension assets and obligations were transferred to Organon, and the Company recorded these in the Condensed Consolidated Balance Sheet. See Note 12 for details. Additionally, stock-based awards were converted in accordance with the Employee Matters Agreement, ("EMA"). See Note 11 for details. During the second quarter of 2021, an aggregate of $9.5 billion of debt was issued in connection with the Separation. (see Note 9 for additional details). The Company distributed $9.0 billion of the $9.5 billion proceeds to Merck in accordance with the terms of the Separation. Periods Post Separation Following the Separation, certain functions continue to be provided by Merck under the Transition Services Agreement or are being performed using the Company’s own resources or third-party service providers. Additionally, under manufacturing and supply agreements, the Company manufactures certain products for Merck, or its applicable affiliate and Merck manufactures certain products for the Company or its applicable affiliate. The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company. Property, plant and equipment reflected in the Condensed Consolidated Balance Sheet is primarily attributable to the six manufacturing facilities the Company operates and certain information technology assets. In June 2021, the Company established a balance sheet risk management and a net investment hedging program to mitigate against volatility of changes in foreign exchange rates. As a standalone entity, the Company will file tax returns on its own behalf, and tax balances and effective income tax rate may differ from the amounts reported in the historical periods. As of June 2, 2021 and in connection with the Separation, the Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity. All intercompany transactions and accounts within Organon have been eliminated. Certain amounts presented in the prior period have been reclassified to conform to the current period presentation. During the third quarter of 2021, the Company recorded out-of-period adjustments primarily related to the Separation. During the second quarter of 2021 and the six months ended June 30, 2021, Net Income From Continuing Operations was understated by approximately $17 million and Other Comprehensive Income, net of taxes was overstated by approximately $13 million, with these adjustments resulting in an understatement of Comprehensive Income of approximately $4 million. As of June 30, 2021, net assets and liabilities were understated by approximately $86 million and Accumulated Deficit was understated by approximately $81 million. These amounts were corrected in the third quarter of 2021 and do not have an impact on the operating results for the nine months ended September 30, 2021. The Company concluded that these adjustments were not material to the Condensed Consolidated Financial Statements for either the current period or prior periods. Use of Estimates The presentation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported. Accordingly, actual results could differ materially from management's estimates and assumptions. The COVID-19 pandemic continued to negatively affect the Company's results during the third quarter of 2021, despite the Company experiencing recoveries during the second and third quarters of 2021 as compared to the comparable periods in 2020. The assessment of certain accounting matters and specifically its effect on the Company's results require consideration of forecasted financial information in the context of the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic at September 30, 2021 and through the date of this report. Recently Adopted Accounting Standards In December 2019, the Financial Accounting Standards Board ("FASB") issued amended guidance on the accounting and reporting of income taxes. The guidance is intended to simplify the accounting for income taxes by removing exceptions related to certain intraperiod tax allocations and deferred tax liabilities; clarifying guidance primarily related to evaluating the step-up tax basis for goodwill in a business combination; and reflecting enacted changes in tax laws or rates in the annual effective tax rate. The Company adopted the new guidance effective January 1, 2021. There was no impact to the Company’s Condensed Consolidated Financial Statements upon adoption. In January 2020, the FASB issued new guidance intended to clarify certain interactions between accounting standards related to equity securities, equity method investments and certain derivatives. The guidance addresses accounting for the transition into and out of the equity method of accounting and measuring certain purchased options and forward contracts to acquire investments. The Company adopted the new guidance effective January 1, 2021. There was no impact to the Company’s Condensed Consolidated Financial Statements upon adoption. Recently Issued Accounting Standards Not Yet Adopted In March 2020, the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact of adoption on its Condensed Consolidated Financial Statements. In October 2021, the FASB issued guidance to improve the accounting for contract assets and contract liabilities from acquired revenue contracts with customers in a business combination. The guidance addresses diversity in practice and inconsistency related to the recognition of an acquired contract liability, payment terms and their effect on subsequent revenue recognized by an acquirer. The guidance is effective for the Company on January 1, 2023 and its amendments applied prospectively to business combinations occurring on or after the effective date of the guidance. Early adoption is permitted, including adoption in an interim period and subject to different transition requirements. The Company is currently evaluating the impact of adoption on its Condensed Consolidated Financial Statements.
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Samsung Collaboration |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Samsung Collaboration | Samsung Collaboration The Company has an agreement with Samsung Bioepis Co., Ltd. ("Samsung Bioepis") to develop and commercialize multiple pre-specified biosimilar candidates, which have since launched and are part of the Company’s product portfolio. Under the agreement, Samsung Bioepis is responsible for preclinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates, and the Company has an exclusive license for worldwide commercialization with certain geographic exceptions specified on a product-by-product basis. The Company’s access rights to each product under the agreement last for 10 years from each product’s launch date on a market-by-market basis. Gross profits are shared equally in all markets with the exception of Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to the Company. Since the Company is the principal on sales transactions with third parties, the Company recognizes sales, cost of sales and selling, general and administrative expenses on a gross basis. Generally, profit sharing adjustments are recorded either to Cost of sales (after commercialization) or Selling, general and administrative expenses (prior to commercialization). Samsung Bioepis is eligible for additional payments associated with pre-specified clinical and regulatory milestones. At September 30, 2021, potential future regulatory milestone payments of $25 million remain under the agreement. Summarized information related to this collaboration is as follows:
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Acquisitions and Licensing Arrangements |
9 Months Ended |
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Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Acquisitions and Licensing Arrangements | Acquisitions and Licensing Arrangements In July 2021, Organon and ObsEva entered into a license agreement whereby Organon licensed the global development, manufacturing and commercial rights to ebopiprant (OBE022). Ebopiprant is an investigational, orally active, selective prostaglandin F2α (PGF2α) receptor antagonist being evaluated as a potential treatment for preterm labor by reducing inflammation and uterine contractions. Under the terms of the license agreement, Organon gained exclusive worldwide rights to develop and commercialize ebopiprant. ObsEva is entitled to receive tiered double-digit royalties on commercial sales, up to $90 million in development and regulatory milestone payments, and up to $385 million in sales-based payments that will be paid by Organon upon achievement. Upon execution of the agreement, Organon made a $25 million upfront payment to ObsEva, which was recorded as Research and development expense during the third quarter of 2021. In June 2021, Organon acquired Alydia Health ("Alydia"), a commercial-stage medical device company. Alydia’s device, the Jada System, is intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted. Organon’s acquisition of Alydia expanded its portfolio into the medical device category and underscores its commitment to identify options for women’s unmet medical needs. Total consideration included a $219 million upfront payment plus a $25 million contingent sales-based milestone payment. Of the $219 million upfront payment, $50 million was paid in April 2021 and the remaining $169 million was paid by Organon upon the close of the acquisition, on June 16, 2021. The $25 million sales-based contingent milestone payment will be paid by Organon upon achievement and the liability recorded once it is deemed probable of occurrence. The transaction was accounted for in the second quarter of 2021 as an asset acquisition, as substantially all of the value was concentrated in a single identifiable asset. This resulted in an intangible of $247 million attributed to the Jada System device, which was recorded to Other Intangibles. This asset is subject to amortization on a straight-line basis over its expected useful life of 11 years. In addition to the intangible asset, the Company also recorded other net liabilities of $7 million, a deferred tax liability of $44 million related to the intangible asset, and compensation expenses of $23 million, which were recorded in Selling General and Administrative Expenses. Of the $23 million of compensation expense, $19 million were related to accelerated vesting of Alydia stock-based compensation awards.
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Restructuring |
9 Months Ended |
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Sep. 30, 2021 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | RestructuringCurrently, Organon does not have an established restructuring program. Restructuring costs for the three and nine months ended September 30, 2020 were $12 million and $43 million, respectively, and reflect only charges allocated to Organon. The restructuring costs for the three months ended September 30, 2020 were comprised of $4 million of separation costs and $8 million related to other restructuring activities. The restructuring costs for the nine months ended September 30, 2020 were comprised of $18 million of separation costs and $25 million related to other restructuring activities.Liabilities for costs associated with restructuring activities related to the Organon Entities and the Transferred Entities included primarily in Accrued and other current liabilities were $7 million and $17 million at September 30, 2021 and December 31, 2020, respectively. |
Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Financial InstrumentsPrior to the Separation, Merck managed the impact of foreign exchange rate movements on its affiliates’ earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments. Merck established revenue hedging and balance sheet risk management programs that the Company participated in to protect against the volatility of future foreign currency cash flows and changes in fair value caused by volatility in exchange rates. Accordingly, the Condensed Consolidated Statement of Income includes the impact of Merck’s derivative financial instruments prior to the Separation that is deemed to be associated with the Company’s operations and has been allocated to the Company utilizing a proportional allocation method:
(1)Includes net gains and losses and foreign exchange gains and losses allocated for the period prior to the Separation, as well as actual net gains and losses and foreign exchange gains and losses post-Separation. Foreign Currency Risk Management Periods Post Separation In June 2021, the Company established a balance sheet risk management and a net investment hedging program to mitigate against volatility of changes in foreign exchange rates. The Company uses a balance sheet risk management program to mitigate the exposure of net monetary assets of its subsidiaries that are denominated in a currency other than a subsidiary’s functional currency from the effects of volatility in foreign exchange. In these instances, Organon principally utilizes forward exchange contracts to offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro, Swiss franc and Japanese yen. For exposures in developing country currencies, the Company enters into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument. Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other (income) expense, net. The forward contracts are not designated as hedges and are marked to market through Other (income) expense, net. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year. As of September 30, 2021, the fair value of these contracts was recorded as an asset of $7 million and a liability of $16 million. The notional amount of forward contracts was $1.7 billion as of September 30, 2021. There were no spot trades as of September 30, 2021. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows. Foreign exchange risk is also managed through the use of economic hedges on foreign currency debt (see Note 9). In June 2021, €1.75 billion in the aggregate of both the euro-denominated term loan (€750 million) and of the 2.875% euro-denominated secured notes (€1.25 billion) has been designated and is effective as an economic hedge of the net investment in euro-denominated subsidiaries. As a result, $38 million and $94 million of foreign currency gains due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustments in Other Comprehensive Income for the three and nine months ended September 30, 2021, respectively. Concentrations of Credit Risk Historically, the Company’s operations formed part of Merck’s monitoring of concentrations of credit risk associated with corporate and government issuers of securities and financial institutions with which Merck conducted business. Credit exposure limits were established to limit a concentration with any single issuer or institution. The majority of the Company’s accounts receivable arise from product sales in the United States, Europe and China and are primarily due from drug wholesalers and retailers, hospitals, government agencies, managed health care providers and pharmacy benefit managers. The Company’s customers with the largest accounts receivable balances are McKesson Corporation, Cardinal Health, Inc. and Amerisource Bergen Corporation. Bad debts have been minimal. The Company does not normally require collateral or other security to support credit sales. Merck had established accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. In connection with the Separation, Merck conveyed these agreements to Organon. Under these agreements, Organon factored $31 million and Merck factored $227 million of accounts receivable related to the Company in the third quarter of 2021 and the fourth quarter of 2020, respectively, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Condensed Consolidated Statement of Cash Flows.
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consisted of:
Inventories valued under the LIFO method comprised $81 million and $48 million at September 30, 2021 and December 31, 2020, respectively. Amounts recognized as Other assets are comprised primarily of raw materials and work in process inventories and are not expected to be converted to finished goods that will be sold within one year. The Company has a long-term vendor supply contract conveyed as part of the Separation that includes certain annual minimum purchase commitments. During the third quarter of 2021, the Company recorded $24 million within Other noncurrent liabilities due to estimated unavoidable losses associated with the supply contract. The charge was recognized as a component of Cost of Sales during the third quarter of 2021 and the nine months ended September 30, 2021.
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Property, Plant, and Equipment |
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Property, Plant and Equipment | Property, Plant and Equipment
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Long-Term Debt and Leases |
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Long-Term Debt and Leases | Long-Term Debt and Leases Long-Term Debt In April 2021, in connection with the Separation, Organon Finance 1 LLC ("Organon Finance 1"), a subsidiary of Merck, issued €1.25 billion aggregate principal amount of 2.875% senior secured notes due 2028, $2.1 billion aggregate principal amount of 4.125% senior secured notes due 2028 and $2.0 billion aggregate principal amount of 5.125% senior unsecured notes due 2031 (collectively, the “Notes”). Interest payments are due semiannually on October 30 and April 30. As part of the Separation, on June 2, 2021, Organon and a wholly-owned Dutch subsidiary of Organon, (the "Dutch Co-Issuer") assumed the obligations under the Notes as co-issuers, Organon Finance 1 was released as an obligor under the Notes, and certain subsidiaries of Organon agreed to guarantee the Notes. Each series of Notes was issued pursuant to an indenture dated April 22, 2021, between Organon and U.S. Bank National Association. Organon and the Dutch Co-Issuer assumed the obligations under the Notes pursuant to a first supplemental indenture to the relevant indenture, and the guarantors agreed to guarantee the Notes pursuant to a second supplemental indenture to the relevant indenture. On June 2, 2021, Organon entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Senior Credit Agreement”), providing for: •a Term Loan B Facility (“Term Loan B Facility”), consisting of (i) a U.S. dollar denominated senior secured “tranche B” term loan in the amount of $3.0 billion, and (ii) a euro denominated senior secured “tranche B” term loan in the amount of €750 million, in each case with a seven-year term that matures in 2028; and •a Revolving Credit Facility (“Revolving Credit Facility” and, together with the Term Loan B Facility, the “Senior Credit Facilities”), in an aggregate principal amount of up to $1 billion, with a five-year term that matures in 2026. Borrowings made under the Senior Credit Agreement initially bear interest, in the case of: •term loans under the Term Loan B Facility (i) denominated in U.S. Dollars, at 3.00% in excess of Adjusted LIBOR (subject to a floor of 0.50%) or 2.00% in excess of an alternate base rate ("ABR"), at our option and (ii) denominated in euros, at 3.00% in excess of an adjusted Euro Interbank Offer Rate (“Adjusted EURIBOR”) (subject to a floor of 0.00%); and •revolving loans under the Revolving Credit Facility (i) in U.S. Dollars, at 2.00% in excess of an Adjusted LIBOR (subject to a floor of 0.00%) or 1.00% in excess of ABR, at our option and (ii) in euros, at 2.00% in excess of an Adjusted EURIBOR. The interest rate on revolving loans under the Revolving Credit Facility is subject to a step-down based on meeting a leverage ratio target. A commitment fee applies to the unused portion of the Revolving Credit Facility, initially equal to 0.50% and subject to a step-down to 0.375% based on meeting a leverage ratio target. There were no outstanding balances under the Revolving Credit Facility as of September 30, 2021. Interest payments on the term loans are due quarterly on March, June, September and December. Principal payments on the term loans are based on 0.25% of the principal amount outstanding on the Closing Date and due on the last business day of each March, June, September and December, commencing with the last business day of September 2021. Organon used the net proceeds from the notes offering, together with available cash on its balance sheet and borrowings under senior secured credit facilities, to distribute $9.0 billion to Merck and to pay fees and expenses related to the Separation. The Senior Credit Agreement contains customary financial covenants, including a total leverage ratio covenant, which measures the ratio of (i) consolidated total debt to (ii) consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, that must meet certain defined limits which are tested on a quarterly basis beginning September 30, 2021. In addition, the Senior Credit Agreement contains covenants that limit, among other things, Organon’s ability to prepay, redeem or repurchase its subordinated and junior lien debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, redeem or repurchase equity interests, and create or become subject to liens. As of September 30, 2021, the Company is in compliance with all financial covenants and no default or event of default has occurred. The following is a summary of Organon's total debt as described above:
During the second quarter of 2021, the Company recorded approximately $118 million of debt issuance costs related to the long-term debt and $19 million of discounts on the term loans. Debt issuance costs and discounts are presented as a reduction of debt on the Condensed Consolidated Balance Sheets and are amortized as a component of interest expense over the term on the related debt using the effective interest method. The unamortized debt issuance costs related to the long-term debt and discounts on the term loans at September 30, 2021 are approximately $130 million. The estimated fair value of long-term debt (including current portion) at September 30, 2021, was $9.6 billion compared with a carrying value (which includes a reduction for amortized debt issuance costs) of $9.3 billion. Fair value was estimated using inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability and would be considered Level 2 in the fair value hierarchy. The Company made interest payments of $34 million related to its debt instruments during the quarter ended September 30, 2021. The average maturity of the Company's long-term debt at September 30, 2021 is approximately 7.3 years and the weighted-average interest rate on total borrowings for the three months ended September 30, 2021 is 3.9%. The schedule of principal payments required on long-term debt for the next five years and thereafter is as follows:
Leases The Company has operating leases primarily for real estate. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if the Company controls the use of that asset. Embedded leases are immaterial. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Real estate leases for facilities have a weighted average remaining lease term of 6.1 years and include two leases with an option to extend for 5 years and 1 year, respectively. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet. Lease expense associated with short term leases was not material for all periods presented. Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. On a quarterly basis, an updated incremental borrowing rate is determined based on the weighted average remaining lease term of each asset class and the Company's pretax cost of debt for that same term. The updated rates for each asset class are applied prospectively to new leases. The Company does not separate lease components (e.g. payments for rent, real estate taxes and insurance costs) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. The Company includes both the lease and non-lease components for purposes of calculating the right-of-use asset and related lease liability (if the non-lease components are fixed). Allocated and actual operating lease cost was $19 million and $10 million for the three months ended September 30, 2021 and 2020, respectively, and $56 million and $32 million for the nine months of September 30, 2021 and 2020, respectively. None of the Company’s lease agreements contain variable lease payments. Sublease income is immaterial and there are no sale-leaseback transactions. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Cash paid for amounts included in the measurement of operating lease liabilities was $27 million for the nine months ended September 30, 2021. Operating lease assets obtained in exchange for new operating lease liabilities were $288 million, and primarily consists of real estate operating leases entered into in connection with establishing Organon as a standalone Company. Supplemental balance sheet information related to operating leases is as follows:
Maturities of operating lease liabilities as of September 30, 2021 are as follows:
At September 30, 2021, the Company had entered into a real estate operating lease that had not yet commenced. The obligation associated with this lease totals $7 million.
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Contingencies |
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Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. In the opinion of the Company, it is unlikely that the resolution of these matters will be material to the Company’s financial condition, results of operations or cash flows. Given the nature of the litigation discussed in this note and the complexities involved in these matters, the Company is unable to reasonably estimate a possible loss or range of possible loss for such matters until the Company knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation and (v) any other factors that may have a material effect on the litigation. The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. The Company’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. The Company has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities. Reference is made below to certain litigation in which Merck, but not the Company, is named as a defendant. Pursuant to the Separation and Distribution Agreement, the Company is required to indemnify Merck for liabilities relating to, arising from, or resulting from such litigation. Product Liability Litigation Fosamax Merck is a defendant in product liability lawsuits in the United States involving Fosamax (alendronate sodium) (the "Fosamax Litigation"). As of September 30, 2021, approximately 3,470 cases comprising the Fosamax Litigation are pending against Merck in either federal or state court. Plaintiffs in the vast majority of these cases generally allege that they sustained femur fractures and/or other bone injuries ("Femur Fractures") in association with the use of Fosamax. All federal cases involving allegations of Femur Fractures have been or will be transferred to a multidistrict litigation in the District of New Jersey ("Femur Fracture MDL"). In the only bellwether case tried to date in the Femur Fracture MDL, Glynn v. Merck, the jury returned a verdict in Merck’s favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck’s motion for judgment as a matter of law in the Glynn case and held that the plaintiff’s failure to warn claim was preempted by federal law. In August 2013, the Femur Fracture MDL court entered an order requiring plaintiffs in the Femur Fracture MDL to show cause why those cases asserting claims for a femur fracture injury that took place prior to September 14, 2010, should not be dismissed based on the court’s preemption decision in the Glynn case. Pursuant to the show cause order, in March 2014, the Femur Fracture MDL court dismissed with prejudice approximately 650 cases on preemption grounds. Plaintiffs in approximately 515 of those cases appealed that decision to the U.S. Court of Appeals for the Third Circuit ("Third Circuit"). In March 2017, the Third Circuit issued a decision reversing the Femur Fracture MDL court’s preemption ruling and remanding the appealed cases back to the Femur Fracture MDL court. In May 2019, the U.S. Supreme Court decided that the Third Circuit had incorrectly concluded that the issue of preemption should be resolved by a jury, and accordingly vacated the judgment of the Third Circuit and remanded the proceedings back to the Third Circuit to address the issue in a manner consistent with the Supreme Court’s opinion. In November 2019, the Third Circuit remanded the cases back to the District Court in order to allow that court to determine in the first instance whether the plaintiffs’ state law claims are preempted by federal law under the standards described by the Supreme Court in its opinion. Briefing on the issue is closed, and the parties await the decision of the District Court. Accordingly, as of September 30, 2021, approximately 975 cases were actively pending in the Femur Fracture MDL. As of September 30, 2021, approximately 2,215 cases alleging Femur Fractures have been filed in New Jersey state court and are pending before Judge James Hyland in Middlesex County. The parties selected an initial group of cases to be reviewed through fact discovery, and Merck has continued to select additional cases to be reviewed. As of September 30, 2021, approximately 275 cases alleging Femur Fractures have been filed and are pending in California state court. All of the Femur Fracture cases filed in California state court have been coordinated before a single judge in Orange County, California. Additionally, there are five Femur Fracture cases pending in other state courts. Discovery is presently stayed in the Femur Fracture MDL and in the state court in California. Nexplanon/Implanon Merck is a defendant in lawsuits brought by individuals relating to the use of Implanon and Nexplanon. In the United States, as of September 30, 2021, there were two filed product liability actions involving Implanon, both of which are pending in the Northern District of Ohio. In addition, there are 56 unfiled cases alleging similar injuries, which have been tolled under a written tolling agreement. As of September 30, 2021, Merck had 21 cases pending outside the United States, of which 17 relate to Implanon and four relate to Nexplanon. Propecia/Proscar Merck is a defendant in product liability lawsuits in the United States involving Propecia (finasteride) and/or Proscar (finasteride). The federal lawsuits were consolidated for pretrial purposes in federal multidistrict litigation in the Eastern District of New York (the "MDL"), and the matters in state court in New Jersey were consolidated in Middlesex County ("N.J. Coordinated Proceedings"). In 2018, Merck and the Plaintiffs’ Executive Committee in the MDL and the Plaintiffs’ Liaison Counsel in the N.J. Coordinated Proceedings entered into an agreement to resolve the lawsuits for an aggregate amount of $4.3 million. The settlement was subject to certain contingencies, including 95% plaintiff participation and a per plaintiff clawback if the participation rate was less than 100%. The contingencies were satisfied and the settlement agreement has been finalized. At September 30, 2021, only three cases remain pending in the United States, including a case currently pending in the MDL, a matter involving Propecia in state court in Los Angeles, California and a matter involving Proscar in the United States District Court for the Eastern District of California. The Company is also defending 15 product liability cases outside the United States, two of which are class actions and two of which are putative class actions. Governmental Proceedings From time to time, the Company’s subsidiaries may receive inquiries and may be the subject of preliminary investigation activities from competition and other governmental authorities in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to the Company, monetary fines and/or remedial undertakings may be required. Hadlima (adalimumab-bwwd) In July 2021, the Company received a Civil Investigation Demand (“CID”) from the Office of the Attorney General for the State of Washington. The CID requests answers to interrogatories, as well as various documents, regarding certain activities related to adalimumab and adalimumab biosimilars. The Company is cooperating with the government’s investigation and intends to produce information and/or documents as necessary in response to the CID. Patent Litigation From time to time, generic manufacturers of pharmaceutical products file Abbreviated New Drug Applications ("ANDAs") with the U.S. Food and Drug Administration ("FDA") seeking to market generic forms of the Company’s products prior to the expiration of relevant patents owned by the Company. To protect its patent rights, the Company may file patent infringement lawsuits against such generic companies. Similar lawsuits defending the Company’s patent rights may exist in other countries. The Company intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products, potential payment of damages and legal fees, and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges. Nexplanon — In June 2017, Microspherix LLC ("Microspherix") sued the Company in the U.S. District Court for the District of New Jersey asserting that the manufacturing, use, sale and importation of Nexplanon infringed several of Microspherix’s patents that claim radio-opaque, implantable drug delivery devices. Microspherix is claiming damages from September 2014 until the patents expired in May 2021. The Company brought Inter Partes Review ("IPR") proceedings in the United States Patent and Trademark Office ("USPTO") and successfully stayed the district court action. The USPTO invalidated some, but not all, of the claims asserted against the Company. The Company appealed the decisions that found claims valid, and the Court of Appeals for the Federal Circuit affirmed the USPTO’s decisions. The matter is no longer stayed in the district court, and the Company is currently litigating the invalidity and non-infringement of the remaining asserted claims. Other Litigation There are various other pending legal proceedings involving the Company, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s financial condition, results of operations or cash flows either individually or in the aggregate. Legal Defense Reserves Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by the Company; the development of the Company’s legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against the Company; the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The amount of legal defense reserves as of September 30, 2021 and December 31, 2020 of approximately $8 million and $35 million, respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company. The decrease in the legal defense reserves in the third quarter of 2021, as compared to December 31, 2020, is primarily attributable to reserves related to certain litigation that was retained by Merck under the Separation and Distribution Agreement. Accordingly, and in connection with the Separation adjustments, the reserve was adjusted to Net Investment from Merck & Co., Inc. in the Condensed Consolidated Financial Statements to reflect the Company's best estimate of its legal defense reserves as of September 30, 2021. The Company will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so.
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Stock-based Compensation Plans |
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Stock-based Compensation Plans | Stock-Based Compensation Plans Periods Prior to Separation Prior to the Separation, certain of the Company's employees participated in stock-based compensation plans sponsored by Merck. Under these plans Merck granted restricted stock units ("RSUs") and performance share units ("PSUs") to certain management level employees. In addition, employees and non-employee directors of Merck were granted options to purchase shares of Merck’s common stock at the fair market value at the time of grant. Through the date of the Separation, Merck's stock-based compensation expense related to the Company’s employees was determined on a specific identification basis for employees transferred from Merck as well as on a proportional cost allocation method based on revenue. This expense has been recognized in the Condensed Consolidated Statement of Income for the nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, Merck’s corporate employee stock-based compensation expense was allocated to the Company on the proportional cost allocation method and recognized in the Condensed Consolidated Statement of Income for those respective periods. As of Separation Date and Periods Post Separation In connection with the Separation, and in accordance with the EMA, Organon's employees with outstanding former Merck stock-based awards received replacement stock-based awards under the 2021 Incentive Stock Plan at Separation. The ratio used to convert the Merck stock-based awards was designed to preserve the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value of the award immediately prior to Separation. Due to the conversion, Organon incurred $17 million of incremental stock-based compensation expense. Of this amount, $4 million was related to vested option awards and was recognized during the second quarter of 2021 and the remainder is recognized ratably over the option awards' remaining weighted average vesting period of 2.66 years. Through September 30, 2021, $1.6 million was expensed. At September 30, 2021, the unrecognized portion of the incremental stock-based expense was $11.4 million. Effective June 3, 2021, Organon established the 2021 Incentive Stock Plan (the "Plan"). A total of 35,000,000 shares of common stock are authorized under the Plan. The plan provides for the grant of various types of awards including restricted stock unit awards, stock appreciation rights, stock options, performance-based awards and cash awards. Under the Plan, the exercise price of awards, if any, is set on the grant date and may not be less than the fair market value per share on that date. Generally, stock options have a term of ten years and a three-year vesting period, subject to limited exceptions. The Company measures stock-based compensation for equity awards at fair value on the date of grant and records stock-based compensation as a charge to earnings net of the estimated impact of forfeited awards. Accordingly, the Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants. The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the change. On August 17, 2021, the Company granted 379,000 stock option awards and 120,000 performance share units under the Plan. The terms of the Company's performance share units allow the recipients of such awards to earn a variable number of shares based on total shareholder return of the Company relative to an index of peer companies ("relative TSR"), specified in the awards. For performance share units with a market-based relative TSR goal, stock-based compensation expense is recognized based on the estimated fair value of the award at the grant date regardless of the actual number of shares earned. Stock-based compensation expense incurred by the Company as a stand alone entity is reflected below for the three months ended September 30, 2021. In addition, total direct and allocated stock-based compensation expense for the nine months ended September 30, 2021, the allocated stock-based compensation expense for the three and nine months ended September 30, 2020 and the respective income tax benefits recognized by the Company in the Condensed Consolidated Statement of Income are as follows:
Of the total stock-based compensation expense for the three months ended September 30, 2021, $3 million, $10 million and $2 million was recognized in Cost of sales, Selling, general and administrative expense, and Research and development expense, respectively. For the three months ended September 30, 2020, $5 million was recorded in both Cost of sales and Selling, general and administrative and the remainder was recognized in Research and Development. Of the total stock based compensation expense for nine months ended September 30, 2021, $8 million, $26 million and $10 million was recognized in Cost of sales, Selling, general and administrative expense, and Research and development, respectively. For the nine months ended September 30, 2020, $14 million was recorded in both Cost of Sales and Selling, general and administrative expense and the remainder was recognized in Research and development expense. As noted above, and in connection with the Separation, Merck's PSUs and RSUs were converted into 3.3 million Organon RSUs at a weighted average grant date fair value of $36.77 and Merck's stock options were converted into 4.1 million Organon stock options at a weighted average grant date fair value of $8.55. Stock options at Separation were valued using a combination of option models. The Company used the Black-Scholes model as the basis for the original fair value of the options, and the Hull-White I Lattice option pricing model calculated the incremental fair value. In applying these models, the Company used both historical data and current market data to estimate the fair value of its options. The Black-Scholes model assumptions include expected dividend yield, risk-free interest rate, volatility, and term of the options. The Hull-White I Lattice model requires several assumptions including expected exercise barrier, dividend yield, risk-free interest rate, remaining vesting life and remaining contractual life. These fair value assumptions were based on the awards and terms previously granted under the Merck incentive compensation plans to Organon employees. In connection with the stock options grant during the third quarter of 2021, the Company used the Black-Scholes model to determine the fair value of the stock options as of the grant date using the following assumptions:
A summary of the transactions under the 2021 Incentive Stock Plan as of September 30, 2021 follows:
The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable at September 30, 2021:
The amount of unrecognized compensation costs as of September 30, 2021 was $125 million, which will be recognized in operating expense ratably over the weighted average vesting period of 2.27 years.
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Pension and Other Postretirement Benefit Plans |
9 Months Ended |
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Sep. 30, 2021 | |
Retirement Benefits [Abstract] | |
Pension and Other Postretirement Benefit Plans | Pension and Other Postretirement Benefit Plans Prior to the Separation on June 2, 2021, Organon participated in Merck's U.S. and non-U.S. plans. Merck has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. Merck also provides medical benefits, principally to its eligible U.S. retirees and their dependents, through its other postretirement benefit plans. The Company participated in Merck's benefit plans as though it was a participant in a multi-employer plan with the other businesses of Merck. The retirement benefits guidance provides that liabilities beyond any contributions currently due and unpaid are not required to be reported. Accordingly, no assets or liabilities associated with plans where the Company was a participant in a multi-employer plan with the other businesses of Merck, have been reflected in the Company’s Condensed Consolidated Balance Sheet. The Condensed Consolidated Statement of Income includes expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $16 million for the three months ended September 30, 2020, and $29 million and $45 million for the nine months ended September 30, 2021 and 2020, respectively. The Company's participation in the defined pension and postretirement benefit plans sponsored by Merck concluded upon the completion of the Separation on June 2, 2021. In accordance with the terms of the EMA, prior to the Separation, Merck continued to provide service crediting to employees that transferred to Organon under Merck's U.S. defined benefit pension plan, supplemental executive retirement, and retiree medical plans for purposes of early retirement eligibility and subsidies, as well as for certain service crediting bridges. Although Merck is responsible for providing these benefits, Organon recorded the portion of the aggregate incremental cost of providing early retirement subsidies, service crediting bridges, and retiree healthcare benefits under these programs that is attributable to future service. Accordingly, upon Separation, the Company recorded a "grow-in" provision granted to employees transferred to Organon of $50 million, which represented the future service earned with Organon for these transferred employees for the pension and other postretirement benefits. The "grow-in" provision was recorded as an asset and will be expensed over the estimated average service period of eight years in operating expenses. The unamortized balance of the asset is $48 million as of September 30, 2021, of which $42 million is reflected in Other Assets and $6 million is reflected in Other current assets. As of June 2, 2021, the Organon Entities and the Transferred Entities became the plan sponsors for certain non-U.S. defined benefit pension plans and these Condensed Consolidated Financial Statements reflect the periodic benefit costs and funded status of such plans. Organon pension plans are primarily comprised of plans in Switzerland, Belgium, Korea, Germany and Italy. As of September 30, 2021 the Condensed Consolidated Financial Statements include a net liability of $107 million reflecting an unfunded projected benefit obligation. This was comprised of $93 million of assets and $200 million of liabilities of certain Merck non-U.S. defined benefit pension plans attributable to Organon non-U.S. employees that were transferred to these non-U.S. Organon benefit plans. The unfunded projected benefit obligation as of September 30, 2021 did not materially change from the amounts recorded at Separation. The Company uses December 31 as the year-end measurement date for these plans. The majority of the plan assets transferred are investment funds in developed market equities, or government agency obligations. The basis for the fair value measurement of these investments was derived from quoted prices in active markets for identical assets or liabilities and as such were classified as a Level 1 in the fair value hierarchy. There are no unfunded commitments or redemption restrictions related to these investments. The Company contributed $5 million in the nine months ended September 30, 2021 and expects to contribute approximately $2 million to its pension plans in the last quarter of 2021. Net Periodic Benefit Cost The net periodic benefit cost for pension plans of the Organon Entities and the Transferred Entities, primarily consisting of service cost, was $5 million and $1 million for the three months ended September 30, 2021 and 2020, respectively, and $12 million and $3 million for the nine months ended September 30, 2021, and 2020, respectively
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Other (Income) Expense, Net |
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Other (Income) Expense, Net | Other (Income) Expense, Net Other (income) expense, net, consisted of:
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Taxes on Income |
9 Months Ended |
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Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Taxes on Income | Taxes on Income The effective income tax rates were 17.1% and 17.8% for the three months ended September 30, 2021 and 2020, respectively, and 11.2% and 15.6% for the nine months ended September 30, 2021 and 2020, respectively. These effective income tax rates reflect the beneficial impact of foreign earnings. During the second quarter of 2021 the Company recorded a $70 million tax benefit relating to a portion of the non- U.S. step-up of tax basis associated with the Company's Separation from Merck. The effective income tax rate for the nine months ended September 30, 2021, also reflects the Internal Revenue Service ("IRS") conclusion of its examinations of Merck’s 2015-2016 U.S. federal income tax returns. As a result, the Company reflected an allocation from Merck of $18 million representing the Company's portion of the payment made to the IRS in the Condensed Consolidated Financial Statements. The Company's portion of reserves for unrecognized tax benefits for the years under examination exceeded the allocated adjustments relating to this examination period and therefore the Company included a $29 million net tax benefit also included in the nine months ended September 30, 2021. This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination. The Company is subject to income tax in the United States (federal, state and local) as well as other jurisdictions outside of the United States in which we operate. As part of the Separation from Merck, $79.3 million of liabilities for unrecognized tax benefits associated with uncertain tax positions for jurisdictions outside of the United States were conveyed to Organon.
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Other Comprehensive Income (Loss) |
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Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) Changes in Accumulated other comprehensive loss by component are as follows:
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Product and Geographic Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product and Geographic Information | Product and Geographic InformationThe Company’s operations include the following product portfolios, which constitute one operating segment engaged in developing and delivering innovative health solutions through its portfolio of prescription therapies within women’s health, biosimilars and established brands. Sales of the Company’s products were as follows:
U.S. plus international may not equal total due to rounding. (1) Includes sales of products not listed separately. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health. (2) Includes manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation. Combined sales by geographic area where derived are as follows:
(1) Primarily reflects manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation. During 2021, the Company realigned its geographic presentation of sales to reflect the internal management view of Organon as a stand-alone entity. Accordingly, prior period sales by geographic area have been recast to reflect these changes.
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Third Party Arrangements Related Party Disclosures |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Third Party Arrangements Related Party Disclosures | Third Party Arrangements and Related Party Disclosures Pursuant to the Separation, Merck ceased to be a related party to Organon and accordingly, no related party transactions or balances are reported since June 2, 2021. In connection with the Separation, the Company entered into the Separation and Distribution Agreement, which contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of Organon and Merck as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of Organon business with Organon and financial responsibility for the obligations and liabilities of Merck’s remaining business with Merck, (iii) procedures with respect to claims subject to indemnification and related matters, (iv) the allocation among Organon and Merck of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the Distribution, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures governing Organon’s and Merck’s obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of Merck’s business and Organon’s business. Agreements that Organon entered into with Merck that govern aspects of Organon’s relationship with Merck following the Separation include: •Transition Services Agreements - Under the TSA, (i) Merck and certain of its affiliates will provide Organon and certain of its affiliates, on an interim, transitional basis, various services and (ii) Organon and certain of its affiliates will provide Merck and certain of its affiliates, on an interim, transitional basis, various services. The services to be provided by Merck will include, among others, information technology, human resources, finance, quality, regulatory, supply chain management, promotional services, distribution services and certain other services, and will generally be provided on a cost or, where applicable, a cost-plus basis. The Merck services generally commenced on the date of the Separation and will generally terminate within 25 months following the date of Separation. Organon generally has the right to request the early termination of any or all services with advance notice. The services to be provided by Organon include quality, regulatory, supply chain management, promotional services, distribution services and certain other services and has provided on a cost or, where applicable, a cost-plus basis. The provisions of Organon services under the TSA generally commenced on the date of Separation and terminate within 25 months following the Separation. Merck will generally have the right to request the early termination of any or all services with advance notice. •Interim Operating Agreements - Merck and Organon entered into a series of interim operating model ("IOM") agreements pursuant to which Merck and certain of its affiliates that held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products in various jurisdictions prior to the Separation will continue to market, import and distribute such products until such time as the relevant licenses and permits are transferred to Organon or its affiliates, while permitting Organon (or Merck, as applicable) to recognize revenue relating to the sale of its respective products, to the extent practicable. Under such interim operating agreements and in accordance with the Separation and Distribution Agreement, the relevant Merck entity will continue operations in the affected market on behalf of Organon, with Organon receiving all of the economic benefits and burdens of such activities. Organon began receiving these economic benefits as of June 2, 2021. Based on the terms of the IOM agreement, the Company determined it is the Principal under this arrangement. Organon holds, all risks, and rewards of ownership inclusive of risk of loss, market risk and benefits related to the inventory. Additionally, Organon has latitude in pricing, has the ability to direct Merck regarding decisions over inventory, and is responsible for all credit and collections risks and losses associated with the related receivables. As such, Organon recognizes these sales on a gross basis. •Manufacturing and Supply Agreements - Merck and Organon and/or their applicable affiliates entered into a number of manufacturing and supply agreements pursuant to which the relevant Merck entity will (a) manufacture and supply certain active pharmaceutical ingredients for the relevant Organon entity, (b) toll manufacture and supply certain formulated pharmaceutical products for such Organon entity, and (c) package and label certain finished pharmaceutical products for such Organon entity. Similarly, the relevant Organon entity will (a) manufacture and supply certain formulated pharmaceutical products for the relevant Merck entity, and (b) package and label certain finished pharmaceutical products for such Merck entity. •Tax Matters Agreement - The TMA allocates responsibility for all U.S. federal income, state and foreign income, franchise, capital gain, withholding and similar taxes, as well as all non-income taxes. The TMA also provides for cooperation between Merck and Organon with respect to tax matters, the exchange of information and the retention of records that may affect the tax liabilities of the parties to the TMA. Merck generally is responsible for any income taxes reportable on an originally filed consolidated, combined or unitary return that includes Merck or any of its subsidiaries (and Organon and/or any of its subsidiaries) for any periods or portions thereof ending on or prior to the Distribution. Organon generally is responsible for any income taxes that are reportable on originally filed returns that include only Organon and/or any of its subsidiaries, for all tax periods. Additionally, as a general matter, Merck is responsible for certain income and non-income taxes imposed as the direct result of the Separation or of an internal separation transaction. Organon is responsible for certain taxes that exclusively relate to Organon’s business and for taxes resulting from any breach of certain representations or covenants that Organon made in the TMA. The TMA imposes restrictions on Organon and its subsidiaries during the two-year period following the Distribution. The restrictions are intended to prevent the Distribution and certain related transactions from failing to qualify as tax-free for U.S. federal income tax purposes. During such period, Organon and its subsidiaries generally are prohibited from, among other things, entering into transactions in which all or a portion of the shares of the Common Stock would be acquired or all or a portion of certain assets of Organon and its subsidiaries would be acquired. Organon and its subsidiaries also are prohibited, during such period, from merging or consolidating with any other person, issuing equity securities beyond certain thresholds, and repurchasing Common Stock other than in certain open-market transactions. •Employee Matters Agreement - The EMA allocates assets, liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Separation. •Other agreements that Organon entered into with Merck include the Intellectual Property License Agreements and Regulatory Agreements. The amount due from Merck under the above agreements was $914 million at September 30, 2021 and is reflected in accounts receivable. The amount due to Merck under these agreements was $1.3 billion at September 30, 2021 and is included in accounts payable. For third quarter of 2021, sales and cost of sales resulting from the manufacturing and supply agreements with Merck were $40.6 million and $35.3 million, respectively. For the nine months ended September 30, 2021 sales and cost of sales resulting from the manufacturing and supply agreements with Merck were $54.1 million and $48.1 million, respectively. Following the distribution to Merck of $9.0 billion in net debt proceeds (See Note 9) and settlement of certain balances with Merck and its affiliates, the balance in cash and cash equivalents included approximately $400 million of funds received from Merck for the purchase of inventory from Merck upon exit of certain IOMs. This purchase is expected to be complete by the end of 2021. As of September 30, 2021, there is approximately $320 million remaining of that initial inventory funding. Prior to the Separation, the Company did not operate as a standalone business and the Condensed Consolidated Financial Statements were derived from the consolidated financial statements and accounting records of Merck. The following disclosure summarizes activity between the Company and Merck up to the Separation, including the affiliates of Merck that were not part of the Separation. Cost allocations from Merck Merck provided significant corporate, manufacturing, selling, marketing, administrative, research services and resources to the Company. Some of these services continue to be provided by Merck to the Company on a temporary basis under the Transition Services Agreement. The Condensed Consolidated Financial Statements reflect an allocation of these costs. See Note 2 for a discussion of these costs and the methodology used to allocate them. The allocations reflected in the Condensed Consolidated Statement of Income for continuing operations are as follows:
Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company at the time. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees and strategic decisions made in areas such as manufacturing, selling, information technology and infrastructure. Related party transactions The following transactions represent activity between Organon Entities and Transferred Entities with other Merck affiliates prior to the Separation:
The Company had the following balances with Merck affiliates:
Net transfers to Merck & Co., Inc. Prior to the Separation, net transfers to Merck were included within Net investment from Merck & Co., Inc. on the Condensed Consolidated Statement of Equity and represent the net effect of transactions between the Company and Merck. The components of Net transfers to Merck & Co., Inc. for the nine months ended September 30, 2021 were as follows:
(2)Net transfers (from) to Merck & Co., Inc. as reflected in the Condensed Consolidated Statement of Cash Flows for Continuing Operations for the nine months ended September 30, 2021 include Separation adjustments of $66 million, identified after the date of the Separation. Refer to Note 2 for further details. The components of Net transfers to Merck & Co., Inc. were as follows:
Prior to the Separation, transfers between the Organon Entities, the Transferring Entities and Merck affiliates were recognized in Net transfers to Merck & Co., Inc. in the Condensed Consolidated Statement of Equity at Merck’s historical cost (see Note 2). Additionally, in connection with the Separation, certain assets and liabilities included in the pre-Separation balance sheet were retained by Merck and certain assets and liabilities not included in the pre-Separation balance sheet were transferred to Organon. Separation-related adjustments were also recognized in Net transfers to Merck & Co., Inc. Adjustments for transfers and separations are reflected in the Company's Condensed Consolidated Financial Statements for the nine months ended September 30, 2021 and were comprised of (i) the retention of assets and liabilities by Merck affiliates including accounts receivable, net of $751 million, inventories of $265 million, transition tax liabilities of $1.4 billion and certain liabilities net of other assets of $210 million, partially offset by (ii) the contribution of assets and liabilities to Organon Entities from Merck affiliates, including assets of $59 million and liabilities of $35 million Additionally, during the second quarter of 2021, the Company recorded an out-of-period adjustment of approximately $145 million to establish a prepaid tax asset with an offsetting increase to Net Investment from Merck & Co., Inc. The adjustment did not have any impact on the Company's statement of income or cash flows. The Company concluded that the adjustment was not material to the Condensed Consolidated Financial Statements for either the current period or prior periods. Merck conveyed to Organon $79.3 million of reserves for unrecognized tax benefits associated with uncertain tax positions for jurisdictions outside of the United States. The Company also incurred costs related to employee matters in connection with the Separation, primarily related to stock-based and pension related compensation costs. See Notes 11 and 12 for further details.
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Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Discontinued Operations In contemplation of the Separation, the Merck Retained Products business in the Transferred Entities was distributed to Merck affiliates and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations. The components of Income (loss) from discontinued operations, net of tax for the Merck Retained Products business for the three months ended September 30, 2021 and 2020 and the first nine months of 2021 and 2020 are as follows:
Discontinued operations includes related party sales of $169 million for the three months ended September 30, 2020, and $12 million and $467 million for the nine months ended September 30, 2021 and 2020, respectively. Costs for inventory purchases from related parties was $236 million for the three months ended September 30, 2020, and $53 million and $866 million for the nine months ended September 30, 2021 and 2020, respectively. The components of assets and liabilities of discontinued operations that are stated separately as of December 31, 2020 in the Condensed Consolidated Balance Sheets are comprised of the following items:
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share On June 2, 2021, the date of the Separation, 253,516,000 shares of the Common Stock were distributed to Merck stockholders of record as of the Record Date. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation. For the second quarter and year to date calculations, these shares are treated as issued and outstanding at January 1, 2020 for purposes of calculating historical basic and diluted earnings per share. Prior to the Separation, certain of the Company's employees participated in stock-based compensation plans sponsored by Merck. Under these plans employees were granted stock options, performance share units, ("PSUs"), and restricted stock units ("RSUs"). On June 2, 2021, and in accordance with the EMA, all Merck stock options, PSUs and RSUs were converted using the conversion ratios set forth in the EMA. Merck stock options, PSUs and RSUs were converted into Organon RSUs and option awards. Awards were equitably adjusted to reflect the spin-off and to preserve the same intrinsic value and general terms and conditions (including vesting) as were in place immediately prior to the adjustments (see Note 11 for additional details). The calculation of basic and diluted earnings per common share for the three and nine months ended September 30, 2021 and 2020 was as follows:
For periods prior to the Separation, it is assumed that there were no dilutive equity instruments as there were no equity awards of Organon outstanding prior to the Separation. For periods subsequent to the Separation and the Distribution, diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards, when the effect of the potential exercise would be anti-dilutive. The weighted-average number of common shares outstanding for basic and diluted earnings per share for the three and nine months ended September 30, 2021 was based on the weighted-average number of common shares outstanding for the period beginning after the Distribution date. For the third quarter and first nine months of 2021, 4.8 million and 5.0 million, respectively, of common shares issuable under stock-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive. Dividend Program During the second quarter of 2021, the Company's Board of Directors declared a quarterly cash dividend $0.28 per share on Organon's common stock that was paid on September 13, 2021 to stockholders of record at the close of business on August 23, 2021.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In November 2021, Organon and Forendo Pharma entered into a definitive agreement, under which Organon will acquire Forendo, a clinical-stage drug development company focused on novel treatments in women’s health. Forendo is pioneering the science of intracrinology, addressing disease through a novel, tissue-specific approach. Its lead clinical compound is an investigational, potentially first-in-class oral 17β-hydroxysteroid dehydrogenase type 1 (HSD17B1) inhibitor in early development for endometriosis, being evaluated for its potential effect on endometriotic lesions. Total consideration includes a $75 million upfront payment, assumption of approximately $9 million of Forendo debt, payments upon the achievement of certain development and regulatory milestones of up to $270 million and commercial milestones payments of up to $600 million, which together could amount to total consideration of $954 million. Contingent consideration will be paid by Organon upon achievement. Completion of the transaction is subject to review under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. The transaction is expected to close in the fourth quarter of 2021.
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Basis of Presentation (Policies) |
9 Months Ended |
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Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Accounting | On June 2, 2021, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the Separation on June 2, 2021, the Company’s historical combined financial statements were prepared on a standalone basis and were derived from Merck’s consolidated financial statements and accounting records. The unaudited financial statements for all periods presented, including the historical results of the Company prior to June 2, 2021, are now referred to as "Condensed Consolidated Financial Statements", and have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by U.S. generally accepted accounting principles ("GAAP") for complete consolidated financial statements are not included herein. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Organon’s Registration Statement on Form 10, as amended, filed on April 29, 2021 (the "Form 10"). Periods Prior to Separation The assets, liabilities, revenue and expenses of the Company were reflected in the Condensed Consolidated Financial Statements on a historical cost basis, as included in the consolidated financial statements of Merck, using the historical accounting policies applied by Merck. The Condensed Consolidated Financial Statements did not purport to reflect what the Company’s results of operations, comprehensive income, financial position, equity or cash flows would have been had the Company operated as a standalone public company during the periods presented. The Condensed Consolidated Financial Statements were prepared following a legal entity approach, which resulted in the inclusion of the following: •Certain assets and liabilities, results of operations and cash flows attributable to the sales of Organon Products that have been or were contributed to Organon prior to the consummation of the Separation. •The Transferred Entities, which have historically included the results from the sales of both Organon Products and the Merck Retained Products. Each Transferred Entity’s historical operations, including its results of operations, assets and liabilities, and cash flows have been fully reflected in the Condensed Consolidated Financial Statements. •In contemplation of the Separation the Merck Retained Products business of the Transferred Entities was distributed to Merck and its affiliates ("MRP Distribution") and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations. The Company’s businesses had historically functioned together with the other businesses controlled by Merck. Accordingly, the Company relied on Merck’s corporate and other support functions for its business. Therefore, for the period prior to the Separation, certain corporate and shared costs were allocated to the Company based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, including: (i) expenses related to Merck support functions, including expenses for facilities, executive oversight, treasury, finance, legal, human resources, shared services, compliance, procurement, information technology and other corporate functions. (ii) certain manufacturing and supply costs incurred by Merck’s manufacturing division, including facility management, distribution, logistics, planning and global quality. (iii) certain costs incurred by Merck’s human health division in relation to selling and marketing activities, and related administrative support functions, that are not routinely allocated to therapeutic areas. (iv) certain costs incurred by Merck’s research laboratories for activities related to drug discovery and development, as well as medical and regulatory affairs. (v) restructuring costs (see Note 5) and stock-based compensation expenses (see Note 11); and (vi) certain compensation expenses maintained on a centralized basis such as certain employee benefit expenses. Management believes these cost allocations were a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the period prior to the Separation, though the allocations may not be indicative of the actual costs that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure. Merck maintains various employee benefit plans in which the Company’s employees participated during periods prior to the Separation, and a portion of the costs associated with these plans was included in the Company’s Condensed Consolidated Financial Statements. The Condensed Consolidated Balance Sheet at December 31, 2020 only includes assets and liabilities relating to plans for which the entity being transferred is the plan sponsor. Certain pension assets and obligations were transferred by Merck into legal entities established to operate the Organon Products business (the "Organon Entities") that are the plan sponsor and, accordingly, the Condensed Consolidated Balance Sheet at September 30, 2021 includes assets and liabilities of the newly established plans of Organon. Merck utilized a centralized approach to cash management and the financing of its operations. Cash generated by the Company was routinely transferred into accounts managed by Merck’s centralized treasury function and cash disbursements for the Company’s operations prior to the Separation were funded as needed by Merck. Cash and cash equivalents of the Organon Entities and the Transferred Entities were reflected in the Company’s Condensed Consolidated Balance Sheet. Balances held by the Organon Entities and the Transferred Entities with Merck for cash transfers and loans were reflected as Due to related party prior to Separation. All other cash, cash equivalents, short-term investments and related transfers between Merck and the Company were generally held centrally through accounts controlled and maintained by Merck and were not specifically identifiable to the Company. Accordingly, such balances were accounted for through Net investment from Merck & Co., Inc. Merck’s third-party debt and related interest expense were not attributed to the Company because the Company was not the legal obligor of the debt and the borrowings were not specifically identifiable to the Company. For the Organon Entities and the Transferred Entities, transactions with Merck affiliates were included in the Condensed Consolidated Statement of Income and related balances were reflected as Due to related party, Due from related party or Related Party Loans Payable in the continuing operations and discontinued operations, as applicable. Other balances between the Company and Merck were considered to be effectively settled in the Condensed Consolidated Financial Statements at the time the transactions were recorded. See Note 17 for additional details. As the separate legal entities that made up the Company’s business were not historically held by a single legal entity, Net investment from Merck & Co., Inc. was shown in lieu of stockholders’ equity in these Condensed Consolidated Financial Statements. Net investment from Merck & Co., Inc. represented Merck’s interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results. Income tax expense and tax balances in the Condensed Consolidated Financial Statements have been calculated on a separate tax return basis. The Company’s operations are included in the tax returns of certain Organon Entities, Transferred Entities or the respective Merck entities of which the Company’s business was a part. As of Separation Date Certain assets and liabilities, including accounts receivables, inventories and trade payables included on the Condensed Consolidated Balance Sheet prior to the Separation, have been retained by Merck post-Separation and therefore were adjusted through Net investment from Merck & Co., Inc. in the Company’s Condensed Consolidated Financial Statements. Additionally, certain amounts previously included in Due to related party or Due from related party are reflected in accounts receivable and trade accounts payable as of September 30, 2021. As part of the Separation, Net investment from Merck & Co., Inc. was reclassified to Common Stock and Accumulated Deficit. In connection with the Separation, additional pension assets and obligations were transferred to Organon, and the Company recorded these in the Condensed Consolidated Balance Sheet. See Note 12 for details. Additionally, stock-based awards were converted in accordance with the Employee Matters Agreement, ("EMA"). See Note 11 for details. During the second quarter of 2021, an aggregate of $9.5 billion of debt was issued in connection with the Separation. (see Note 9 for additional details). The Company distributed $9.0 billion of the $9.5 billion proceeds to Merck in accordance with the terms of the Separation. Periods Post Separation Following the Separation, certain functions continue to be provided by Merck under the Transition Services Agreement or are being performed using the Company’s own resources or third-party service providers. Additionally, under manufacturing and supply agreements, the Company manufactures certain products for Merck, or its applicable affiliate and Merck manufactures certain products for the Company or its applicable affiliate. The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company. Property, plant and equipment reflected in the Condensed Consolidated Balance Sheet is primarily attributable to the six manufacturing facilities the Company operates and certain information technology assets. In June 2021, the Company established a balance sheet risk management and a net investment hedging program to mitigate against volatility of changes in foreign exchange rates. As a standalone entity, the Company will file tax returns on its own behalf, and tax balances and effective income tax rate may differ from the amounts reported in the historical periods. As of June 2, 2021 and in connection with the Separation, the Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity. All intercompany transactions and accounts within Organon have been eliminated. Certain amounts presented in the prior period have been reclassified to conform to the current period presentation. During the third quarter of 2021, the Company recorded out-of-period adjustments primarily related to the Separation. During the second quarter of 2021 and the six months ended June 30, 2021, Net Income From Continuing Operations was understated by approximately $17 million and Other Comprehensive Income, net of taxes was overstated by approximately $13 million, with these adjustments resulting in an understatement of Comprehensive Income of approximately $4 million. As of June 30, 2021, net assets and liabilities were understated by approximately $86 million and Accumulated Deficit was understated by approximately $81 million. These amounts were corrected in the third quarter of 2021 and do not have an impact on the operating results for the nine months ended September 30, 2021. The Company concluded that these adjustments were not material to the Condensed Consolidated Financial Statements for either the current period or prior periods.
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Reclassifications | Certain amounts presented in the prior period have been reclassified to conform to the current period presentation.During the third quarter of 2021, the Company recorded out-of-period adjustments primarily related to the Separation. During the second quarter of 2021 and the six months ended June 30, 2021, Net Income From Continuing Operations was understated by approximately $17 million and Other Comprehensive Income, net of taxes was overstated by approximately $13 million, with these adjustments resulting in an understatement of Comprehensive Income of approximately $4 million. As of June 30, 2021, net assets and liabilities were understated by approximately $86 million and Accumulated Deficit was understated by approximately $81 million. These amounts were corrected in the third quarter of 2021 and do not have an impact on the operating results for the nine months ended September 30, 2021. The Company concluded that these adjustments were not material to the Condensed Consolidated Financial Statements for either the current period or prior periods. |
Use of Estimates | Use of Estimates The presentation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported. Accordingly, actual results could differ materially from management's estimates and assumptions. The COVID-19 pandemic continued to negatively affect the Company's results during the third quarter of 2021, despite the Company experiencing recoveries during the second and third quarters of 2021 as compared to the comparable periods in 2020. The assessment of certain accounting matters and specifically its effect on the Company's results require consideration of forecasted financial information in the context of the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic at September 30, 2021 and through the date of this report.
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Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted | Recently Adopted Accounting Standards In December 2019, the Financial Accounting Standards Board ("FASB") issued amended guidance on the accounting and reporting of income taxes. The guidance is intended to simplify the accounting for income taxes by removing exceptions related to certain intraperiod tax allocations and deferred tax liabilities; clarifying guidance primarily related to evaluating the step-up tax basis for goodwill in a business combination; and reflecting enacted changes in tax laws or rates in the annual effective tax rate. The Company adopted the new guidance effective January 1, 2021. There was no impact to the Company’s Condensed Consolidated Financial Statements upon adoption. In January 2020, the FASB issued new guidance intended to clarify certain interactions between accounting standards related to equity securities, equity method investments and certain derivatives. The guidance addresses accounting for the transition into and out of the equity method of accounting and measuring certain purchased options and forward contracts to acquire investments. The Company adopted the new guidance effective January 1, 2021. There was no impact to the Company’s Condensed Consolidated Financial Statements upon adoption. Recently Issued Accounting Standards Not Yet Adopted In March 2020, the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact of adoption on its Condensed Consolidated Financial Statements. In October 2021, the FASB issued guidance to improve the accounting for contract assets and contract liabilities from acquired revenue contracts with customers in a business combination. The guidance addresses diversity in practice and inconsistency related to the recognition of an acquired contract liability, payment terms and their effect on subsequent revenue recognized by an acquirer. The guidance is effective for the Company on January 1, 2023 and its amendments applied prospectively to business combinations occurring on or after the effective date of the guidance. Early adoption is permitted, including adoption in an interim period and subject to different transition requirements. The Company is currently evaluating the impact of adoption on its Condensed Consolidated Financial Statements.
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Share-Based Compensation Plans | The Company measures stock-based compensation for equity awards at fair value on the date of grant and records stock-based compensation as a charge to earnings net of the estimated impact of forfeited awards. Accordingly, the Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants. The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the change.On August 17, 2021, the Company granted 379,000 stock option awards and 120,000 performance share units under the Plan. The terms of the Company's performance share units allow the recipients of such awards to earn a variable number of shares based on total shareholder return of the Company relative to an index of peer companies ("relative TSR"), specified in the awards. For performance share units with a market-based relative TSR goal, stock-based compensation expense is recognized based on the estimated fair value of the award at the grant date regardless of the actual number of shares earned. |
Samsung Collaboration (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Collaborative Arrangement and Arrangement Other than Collaborative | Summarized information related to this collaboration is as follows:
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Financial Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Gain) Loss Derivative Instruments | Accordingly, the Condensed Consolidated Statement of Income includes the impact of Merck’s derivative financial instruments prior to the Separation that is deemed to be associated with the Company’s operations and has been allocated to the Company utilizing a proportional allocation method:
(1)Includes net gains and losses and foreign exchange gains and losses allocated for the period prior to the Separation, as well as actual net gains and losses and foreign exchange gains and losses post-Separation.
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Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Inventories consisted of:
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Schedule of Inventory, Noncurrent | Inventories consisted of:
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Property, Plant, and Equipment (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
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Long-Term Debt and Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following is a summary of Organon's total debt as described above:
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Schedule of Maturities of Long-term Debt | The schedule of principal payments required on long-term debt for the next five years and thereafter is as follows:
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Supplemental Balance Sheet | Supplemental balance sheet information related to operating leases is as follows:
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Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities as of September 30, 2021 are as follows:
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Stock-based Compensation Plans (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount | total direct and allocated stock-based compensation expense for the nine months ended September 30, 2021, the allocated stock-based compensation expense for the three and nine months ended September 30, 2020 and the respective income tax benefits recognized by the Company in the Condensed Consolidated Statement of Income are as follows:
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Schedule of Stock Option Valuation Assumptions | In connection with the stock options grant during the third quarter of 2021, the Company used the Black-Scholes model to determine the fair value of the stock options as of the grant date using the following assumptions:
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Share-based Payment Arrangement, Performance Shares, Activity | A summary of the transactions under the 2021 Incentive Stock Plan as of September 30, 2021 follows:
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Share-based Payment Arrangement, Activity | The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable at September 30, 2021:
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Other (Income) Expense, Net (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Operating and Nonoperating Income (Expense) | Other (income) expense, net, consisted of:
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Other Comprehensive Income (Loss) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes of AOCI by Component | Changes in Accumulated other comprehensive loss by component are as follows:
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Product and Geographic Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales of Company's products | Sales of the Company’s products were as follows:
U.S. plus international may not equal total due to rounding. (1) Includes sales of products not listed separately. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health. (2) Includes manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.
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Consolidated revenues by geographic area | Combined sales by geographic area where derived are as follows:
(1) Primarily reflects manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.
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Third Party Arrangements Related Party Disclosures (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | The allocations reflected in the Condensed Consolidated Statement of Income for continuing operations are as follows:
The following transactions represent activity between Organon Entities and Transferred Entities with other Merck affiliates prior to the Separation:
The Company had the following balances with Merck affiliates:
(2)Net transfers (from) to Merck & Co., Inc. as reflected in the Condensed Consolidated Statement of Cash Flows for Continuing Operations for the nine months ended September 30, 2021 include Separation adjustments of $66 million, identified after the date of the Separation. Refer to Note 2 for further details. The components of Net transfers to Merck & Co., Inc. were as follows:
|
Discontinued Operations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations | The components of Income (loss) from discontinued operations, net of tax for the Merck Retained Products business for the three months ended September 30, 2021 and 2020 and the first nine months of 2021 and 2020 are as follows:
|
Earnings Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The calculation of basic and diluted earnings per common share for the three and nine months ended September 30, 2021 and 2020 was as follows:
|
Background and Nature of Operations (Details) |
Sep. 30, 2021
manufacturingFacility
$ / shares
|
May 17, 2021
$ / shares
shares
|
---|---|---|
Class of Stock [Line Items] | ||
Number of manufacturing facilities | manufacturingFacility | 6 | |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Merck and Co., Inc. | ||
Class of Stock [Line Items] | ||
Common stock, par value (in dollars per share) | $ 0.50 | |
Shares distributed to each shareholder | shares | 0.1 |
Basis of Presentation (Details) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2021
USD ($)
manufacturingFacility
|
Jun. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
USD ($)
manufacturingFacility
|
Sep. 30, 2020
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Proceeds from issuance of debt | $ 9,500 | |||||
Number of manufacturing facilities | manufacturingFacility | 6 | 6 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||
Income From Continuing Operations Before Income Taxes | $ 389 | $ 681 | $ 1,293 | $ 2,227 | ||
Other comprehensive loss, net of taxes | (26) | 44 | 118 | (78) | ||
Comprehensive income (loss) | (297) | $ (591) | (1,267) | $ (1,714) | ||
Accumulated deficit | (1,128) | $ (1,128) | $ 0 | |||
Revision of Prior Period, Adjustment | ||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||
Income From Continuing Operations Before Income Taxes | 17 | |||||
Other comprehensive loss, net of taxes | 13 | |||||
Comprehensive income (loss) | $ 4 | |||||
Net Assets | 86 | |||||
Accumulated deficit | $ 81 |
Samsung Collaboration - Narrative (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2021
USD ($)
| |
Brazil | |
Disaggregation of Revenue [Line Items] | |
Gross profit sharing arrangement percentage | 35.00% |
Samsung Bioepis | |
Disaggregation of Revenue [Line Items] | |
Collaboration agreement period | 10 years |
Potential future regulatory milestone payments | $ 25 |
Samsung Bioepis | Brazil | |
Disaggregation of Revenue [Line Items] | |
Gross profit sharing arrangement percentage | 65.00% |
Samsung Collaboration - Summarization of Collaboration Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
Disaggregation of Revenue [Line Items] | |||||
Sales | $ 1,600 | $ 1,613 | $ 4,701 | $ 4,919 | |
Cost of sales | 609 | 535 | 1,783 | 1,533 | |
Selling, general and administrative | 388 | 321 | 1,186 | 922 | |
Receivables from Samsung included in Other current assets | 1,498 | 1,498 | $ 1,038 | ||
Payables to Samsung included in Trade accounts payable | 1,673 | 1,673 | 259 | ||
Samsung Bioepis | |||||
Disaggregation of Revenue [Line Items] | |||||
Sales | 139 | 99 | 305 | 227 | |
Cost of sales | 83 | 65 | 183 | 144 | |
Selling, general and administrative | 19 | $ 25 | 50 | $ 62 | |
Receivables from Samsung included in Other current assets | 12 | 12 | 52 | ||
Payables to Samsung included in Trade accounts payable | $ 36 | $ 36 | $ 13 |
Acquisitions and Licensing Arrangements (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 16, 2021 |
Jul. 31, 2021 |
Apr. 30, 2021 |
Mar. 31, 2021 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Jun. 30, 2021 |
|
Asset Acquisition [Line Items] | |||||||||
Research and development | $ 111 | $ 54 | $ 254 | $ 150 | |||||
ObsEva | Collaborative Arrangement, Transaction with Party to Collaborative Arrangement | |||||||||
Asset Acquisition [Line Items] | |||||||||
Commercial milestone payments | $ 385 | ||||||||
Maximum royalty payments | 90 | ||||||||
Research and development | $ 25 | ||||||||
Alydia Health | |||||||||
Asset Acquisition [Line Items] | |||||||||
Transaction consideration | $ 219 | ||||||||
Sales-based contingent milestone | $ 25 | ||||||||
Acquisition payment | $ 169 | $ 50 | |||||||
Intangible assets acquired | $ 247 | ||||||||
Expected useful life | 11 years | ||||||||
Other net liabilities | $ 7 | ||||||||
Deferred tax liabilities | 44 | ||||||||
Compensation expense | 23 | ||||||||
Accelerated vesting of awards | $ 19 |
Restructuring - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
Restructuring and Related Activities [Abstract] | |||||
Restructuring costs | $ 1 | $ 12 | $ 3 | $ 43 | |
Severance costs | 4 | 18 | |||
Other restructuring costs | $ 8 | $ 25 | |||
Restructuring activities | $ 7 | $ 7 | $ 17 |
Financial Instruments (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Foreign currency transaction (gain) loss | $ (37) | $ 0 | ||
Sales | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net (gains) loss on derivatives | $ 0 | $ 6 | (56) | (12) |
Other (income) expense | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net (gains) loss on derivatives | (3) | 82 | 29 | 97 |
Foreign currency transaction (gain) loss | $ (4) | $ 64 | $ 23 | $ 45 |
Inventories (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 359 | $ 351 |
Raw materials | 78 | 35 |
Work in process | 509 | 595 |
Supplies | 38 | 60 |
Total (approximates current cost) | 984 | 1,041 |
Decrease to LIFO costs | (6) | (1) |
Inventory | 978 | 1,040 |
Recognized as: | ||
Inventories | 918 | 913 |
Other assets | 60 | 127 |
Inventories valued under LIFO | 81 | $ 48 |
Vendor Supply Contract | ||
Inventory [Line Items] | ||
Inventory impairment | $ 24 |
Property, Plant, and Equipment (Details) - USD ($) $ in Millions |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Less: accumulated depreciation | $ (877) | $ (820) |
Property, plant and equipment, net | 967 | 984 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 14 | 14 |
Building | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 600 | 647 |
Machinery, equipment and office furnishings | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 913 | 787 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 317 | $ 356 |
Long-Term Debt and Leases - Schedule of Debt Principal Payments (Details) $ in Millions |
Sep. 30, 2021
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2021 | $ 10 |
2022 | 39 |
2023 | 39 |
2024 | 39 |
2025 | 39 |
Thereafter | $ 9,262 |
Long-Term Debt and Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Assets | ||
Other Assets | $ 288 | $ 31 |
Liabilities | ||
Accrued and other current liabilities | 67 | 8 |
Other Noncurrent Liabilities | 221 | 23 |
Present value of lease liabilities | $ 288 | $ 31 |
Weighted-average remaining lease term (years) | 5 years 3 months 18 days | 4 years |
Weighted-average discount rate | 3.20% | 1.90% |
Long-Term Debt and Leases - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Millions |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Debt Disclosure [Abstract] | ||
2021 (excluding the first nine months of 2021) | $ 19 | |
2022 | 75 | |
2023 | 70 | |
2024 | 53 | |
2025 | 36 | |
Thereafter | 61 | |
Total lease payments | 314 | |
Less: Imputed interest | 26 | |
Present value of lease liabilities | $ 288 | $ 31 |
Stock-based Compensation Plans - Summary of Transactions (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Share-based Payment Arrangement [Abstract] | ||||
Stock-based compensation expense | $ 15 | $ 11 | $ 44 | $ 32 |
Income tax benefits | $ 3 | $ 2 | $ 9 | $ 7 |
Stock-based Compensation Plans - Stock Option Valuation Assumptions (Details) |
3 Months Ended |
---|---|
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Expected dividend yield | 3.22% |
Risk-free interest rate | 0.92% |
Expected volatility | 45.80% |
Expected life (years) | 5 years 10 months 20 days |
Pension and Other Postretirement Benefit Plans (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2021 |
Jun. 02, 2021 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||||
Total benefit plan expense | $ 16 | $ 29 | $ 45 | |||
Increase for "grow-in" provision | $ 48 | $ 50 | ||||
Estimated average service period | 8 years | |||||
Contributions by employer | 5 | |||||
Expected future employer contributions for the remainder of year | 2 | $ 2 | 2 | |||
Defined benefit plan service cost | 5 | $ 1 | 12 | $ 3 | ||
Merck and Co., Inc. | ||||||
Defined Benefit Plan Disclosure [Line Items] | ||||||
Net liability | 107 | 107 | 107 | |||
Assets | 93 | 93 | 93 | |||
Liability | $ 200 | $ 200 | $ 200 | |||
Other Assets | ||||||
Defined Benefit Plan Disclosure [Line Items] | ||||||
Increase for "grow-in" provision | $ 42 | |||||
Other Current Assets | ||||||
Defined Benefit Plan Disclosure [Line Items] | ||||||
Increase for "grow-in" provision | $ 6 |
Other (Income) Expense, Net (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Other Income and Expenses [Abstract] | ||||
Exchange (gains) losses | $ 1 | $ 18 | $ 6 | $ 52 |
Interest expense | 98 | 0 | 160 | 0 |
Other, net | 3 | (8) | 16 | (8) |
Other (income) expense, net | $ 102 | $ 10 | $ 182 | $ 44 |
Taxes on Income (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jun. 02, 2021 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Income Tax Examination [Line Items] | |||||
Effective income tax rate | 17.10% | 17.80% | 11.20% | 15.60% | |
Income taxes paid | $ 18.0 | ||||
Tax benefits recognized related to settlement | $ 29.0 | ||||
Foreign Tax Authority | |||||
Income Tax Examination [Line Items] | |||||
Step-up in tax basis | $ 70.0 | ||||
Uncertain tax positions for jurisdictions outside the U.S. | $ 79.3 |
Product and Geographic Information - Narrative (Details) |
9 Months Ended |
---|---|
Sep. 30, 2021
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
Product and Geographic Information - Revenues by Geographic Area (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Revenue from External Customer [Line Items] | ||||
Sales | $ 1,600 | $ 1,613 | $ 4,701 | $ 4,919 |
Europe and Canada | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 410 | 426 | 1,314 | 1,286 |
United States | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 346 | 371 | 1,035 | 1,068 |
Asia Pacific and Japan | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 287 | 354 | 874 | 1,190 |
China | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 252 | 225 | 693 | 655 |
Latin America, Middle East, Russia and Africa | ||||
Revenue from External Customer [Line Items] | ||||
Sales | 238 | 228 | 595 | 649 |
Other | ||||
Revenue from External Customer [Line Items] | ||||
Sales | $ 67 | $ 9 | $ 190 | $ 71 |
Third Party Arrangements Related Party Disclosures - Allocations Included in Statement of Operations (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Related Party Transaction [Line Items] | ||||
Cost of sales | $ 609 | $ 535 | $ 1,783 | $ 1,533 |
Selling, general and administrative | 388 | 321 | 1,186 | 922 |
Research and development | 111 | 54 | 254 | 150 |
Costs, Expenses And Other | 1,211 | 932 | 3,408 | 2,692 |
Related Party | Merck and Co., Inc. | Transition Services Agreement | ||||
Related Party Transaction [Line Items] | ||||
Cost of sales | 0 | 122 | 69 | 375 |
Selling, general and administrative | 0 | 155 | 134 | 483 |
Research and development | 0 | 41 | 35 | 119 |
Costs, Expenses And Other | $ 0 | $ 318 | $ 238 | $ 977 |
Third Party Arrangements Related Party Disclosures - Transactions with Merck Affiliates (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Discontinued Operations | ||||
Related Party Transaction [Line Items] | ||||
Supply sales to Merck affiliates | $ 169 | $ 12 | $ 467 | |
Purchases from Merck affiliates | 236 | 53 | 866 | |
Other Merck Affiliates | Continuing Operations | ||||
Related Party Transaction [Line Items] | ||||
Supply sales to Merck affiliates | $ 0 | 0 | 143 | 0 |
Purchases from Merck affiliates | 0 | 0 | 65 | 0 |
Other Merck Affiliates | Continuing Operations | Cost Reimbursements and Fees | ||||
Related Party Transaction [Line Items] | ||||
Cost reimbursements and fees from Merck affiliates | 0 | 0 | 1 | 0 |
Other Merck Affiliates | Discontinued Operations | ||||
Related Party Transaction [Line Items] | ||||
Supply sales to Merck affiliates | 0 | 169 | 12 | 467 |
Purchases from Merck affiliates | $ 236 | $ 53 | $ 866 |
Third Party Arrangements Related Party Disclosures - Balances with Merck Affiliates (Details) - USD ($) $ in Millions |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Related Party Transaction [Line Items] | ||
Due to related party | $ 0 | $ 1,339 |
Related Party | Continuing Operations | Merck and Co., Inc. | ||
Related Party Transaction [Line Items] | ||
Short term borrowings, net | 1,512 | |
Short term loans and notes payable, net | 0 | |
Trade payables (receivables), net | (173) | |
Due to related party | 1,339 | |
Related Party | Discontinued Operations | Merck and Co., Inc. | ||
Related Party Transaction [Line Items] | ||
Short term loans and notes payable, net | (25) | |
Short term loans receivables, net | 247 | |
Trade payables, net | (33) | |
Due from related party | $ 189 |
Discontinued Operations - Narrative (Details) - Discontinued Operations - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Related party sales | $ 169 | $ 12 | $ 467 |
Costs for inventory purchases | $ 236 | $ 53 | $ 866 |
Discontinued Operations - Components of Income (Loss) from Discontinued Operations (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Costs, Expenses and Other | ||||
Loss from discontinued operations, net of taxes | $ 0 | $ (13) | $ 0 | $ (88) |
Discontinued Operations, Held-for-sale or Disposed of by Sale | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Sales | 0 | 433 | 93 | 1,316 |
Costs, Expenses and Other | ||||
Cost of Sales | 0 | 353 | 65 | 1,065 |
Selling, general and administrative | 0 | 80 | 15 | 248 |
Research and development | 0 | 29 | 4 | 78 |
Restructuring costs | 0 | 3 | 0 | 8 |
Other (income) expense, net | 0 | (24) | 4 | (12) |
Income (loss) from discontinued operations before taxes | 0 | (8) | 5 | (71) |
Taxes on income | 0 | 5 | 5 | 17 |
Loss from discontinued operations, net of taxes | $ 0 | $ (13) | $ 0 | $ (88) |
Earnings per Share - Narrative (Details) - $ / shares shares in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 13, 2021 |
Sep. 30, 2021 |
Sep. 30, 2021 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Cash dividends paid (in dollar per share) | $ 0.28 | ||
Share-based compensation plans | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities excluded from computation of earnings per share | 4.8 | 5.0 |
Subsequent Events - Narrative (Details) - Forendo Pharma - Forecast - Subsequent Event - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Nov. 12, 2021 |
Dec. 31, 2021 |
|
Subsequent Event [Line Items] | ||
Upfront payments | $ 75 | |
Assumptions of debt | 9 | |
Maximum royalty payments | 270 | |
Commercial milestone payments | $ 600 | |
Consideration transferred | $ 954 |
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