Organon & Co.
05/04/2026 | Press release | Distributed by Public on 05/04/2026 06:47
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Some statements and disclosures in this document are forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as "may," "believe," "will," "expect," "project," "potential," "possible," "probable," "outcome," "likely," "could," "should," "estimate," "anticipate," "plan," "intend," "would," "future," "target," "seek," "continue," and other words of similar meaning, or negative variations of any of the foregoing. These forward-looking statements are based on our current plans and expectations and are subject to a number of risks and uncertainties that could cause our plans and expectations, including actual results, to differ materially from the forward-looking statements. Risks and uncertainties that may affect our future results include, but are not limited to, uncertainties as to the timing of the completion of the pending merger (the "merger") with Sun Pharmaceutical Industries (together with its subsidiaries and/or associated companies, "Sun Pharma"); the risk that the merger may not be completed on the anticipated terms in a timely manner or at all; the failure to satisfy any of the conditions to the consummation of the merger, including receiving, on a timely basis or otherwise, the minimum vote required by our stockholders to approve the merger; the possibility that competing offers or acquisition proposals for Organon will be made; the possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive agreement, including in circumstances which would require us to pay a termination fee; the effect of the announcement or pendency of the merger on our ability to retain and hire key personnel, our ability to maintain relationships with our customers, suppliers and others with whom we do business, or our operating results and business generally; risks related to diverting management's attention from our ongoing business operations; the risk that stockholder litigation in connection with the merger may result in significant costs of defense, indemnification and liability; certain restrictions during the pendency of the merger that may impact our ability to pursue certain business opportunities or strategic transactions; the risk that any announcements relating to the merger could have adverse effects on the market price of our common stock, including if the merger is not consummated; risks that the benefits of the merger are not realized when and as expected; expanded brand and class competition in the markets in which we operate; trade protection measures and import or export licensing requirements, including the direct and indirect impacts of tariffs (including pharmaceutical sector tariffs), trade sanctions or similar restrictions by the United States or other governments; changes in U.S. and foreign federal, state and local governmental funding allocations including the timing and amounts allocated to our customers and business partners; the impact of global business, political and macroeconomic conditions, including inflation, interest rate fluctuations, recessionary pressures, foreign currency exchange rates, volatile market conditions, and instability in the global banking system; global events, such as regional conflicts in the Middle East and elsewhere; our ability to remediate the material weaknesses in internal control over financial reporting and the related costs and management resources, as well as our ability to maintain effective internal control over financial reporting and disclosure controls and procedures in the future; our ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital, and overall condition of the capital and credit markets; actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity; our ability to meet our revenue and growth expectations and outlook; our ability to hire and/or retain members of our senior management (including a permanent CEO) and other key employees; the failure of any supplier to provide substances, materials, or services as agreed, or otherwise meet their obligations to us; the increased cost of supply, manufacturing, packaging, and operations; difficulties developing and sustaining relationships with commercial counterparties; competition from generic products as our products lose patent protection; any failure by us to retain market exclusivity for Nexplanon or to obtain an additional period of exclusivity in the United States for Nexplanon subsequent to the expiration of the rod patents in 2027; the success of our efforts to adapt our business and sales strategies to address the changing market and regulatory landscape in order to achieve our business objectives and remain competitive; restructurings or other disruptions at the U.S. Food and Drug Administration ("FDA"), the SEC and other U.S. and comparable foreign government agencies; difficulties in connection with future strategic transactions, including as a result of the impact of macroeconomic or geopolitical developments; pricing pressures globally, including rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to or affecting Medicare, Medicaid and healthcare reform, pharmaceutical pricing and reimbursement, access to our products, international reference pricing, including Most-Favored-Nation drug pricing, and other pricing-related initiatives and policy efforts; the impact of higher selling and promotional costs; changes in government laws and regulations in the United States and other jurisdictions, including laws and regulations governing the research, development, approval, clearance, manufacturing, supply, distribution, and/or marketing of our products and related intellectual property, environmental regulations, and the enforcement thereof affecting our business; efficacy, safety or other quality concerns with respect to our marketed products, whether or not scientifically justified, leading to product recalls, withdrawals, labeling changes, or declining sales; delays or failures to demonstrate adequate efficacy and safety of our product candidates in pre-clinical and clinical trials, which may prevent or delay the development, approval, clearance, or commercialization of our product candidates; reduced research and development investment and increased
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reliance on fewer research and development programs for new products to generate future revenue and replace existing products that come to the end of their market life cycle; future actions of third-parties, including significant changes in customer relationships or changes in the behavior and spending patterns of purchasers of healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and forgoing healthcare insurance coverage; legal factors, such as product liability claims, stockholder litigation, governmental investigations, and patent disputes; lost market opportunity resulting from delays and uncertainties in clinical trials and the approval or clearance process of the FDA and other regulatory authorities; the failure by us or our third party collaborators and/or their suppliers to fulfill our or their regulatory or quality obligations, which could lead to a delay in regulatory approval or commercial marketing of our products; cyberattacks on, or other failures, accidents, or security breaches of, our or third-party providers' information technology systems, which could disrupt our operations and those of third parties upon which we rely; increased focus on privacy issues in countries around the world, including the United States, the European Union, and China, and a more difficult legislative and regulatory landscape for privacy and data protection that continues to evolve with the potential to directly affect our business, including recently enacted laws in a majority of states in the United States requiring security breach notification; changes in tax laws including changes related to the taxation of foreign earnings; the impact of any future pandemic, epidemic, or similar public health threat on our business, operations and financial performance; changes in accounting pronouncements promulgated by standard-setting or regulatory bodies, including the Financial Accounting Standards Board and the SEC, that are adverse to us; volatility of commodity prices, fuel, and shipping rates that impact the costs and/or ability to supply our products; and other factors discussed in our most recently filed Annual Report on Form 10-K and subsequent filings, including those discussed in the "Business," "Risk Factors," "Cautionary Statement Regarding Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports.
General
The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist the reader in understanding our financial condition and results of operations. The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and with our audited financial statements, including the accompanying notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025. Operating results discussed herein are not necessarily indicative of the results of any future period.
We are a global healthcare company with a primary focus on improving the health of women throughout their lives. We develop and deliver innovative health solutions through a portfolio of prescription therapies within our women's health and general medicines portfolios. We have a portfolio of more than 70 medicines and products across a range of therapeutic areas. We sell these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed healthcare providers such as health maintenance organizations, pharmacy benefit managers and other institutions. We own and operate six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom. Unless otherwise indicated, trademarks appearing in italics throughout this document are trademarks of, or are used under license by, our group of companies.
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Recent Developments
Other Matters
On April 26, 2026, our Board of Directors appointed Joseph Morrissey our Interim CEO, to such role on a permanent basis.
Business Development
Sebela Pharmaceuticals ("Sebela")
On February 19, 2026, we entered into an exclusive license agreement with Sebela for the global rights to Miudella, a hormone-free copper intrauterine device ("IUD") that was approved by the FDA on February 24, 2025. Under the terms of the agreement, we will pay $27.5 million at closing, with potential sales-based milestone payments of up to $505 million, as well as tiered double-digit royalties based on net sales. The transaction closing is subject to regulatory approvals and FDA approval of alternate supply chain entities for Miudella, and other customary closing conditions. There can be no assurance that such regulatory approvals and other closing conditions will be received or satisfied.
Laborie Medical Technologies Corporation ("Laborie")
In January 2026, we divested the Jada System to Laborie for an aggregate payment of up to $465 million, comprised of consideration of $440 million, subject to certain closing adjustments, plus potential contingent consideration payments of up to $25 million based on the achievement of certain 2026 net sales targets. Approximately 100 employees transferred to Laborie as part of this transaction.
Upon the closing of the divestiture, we recognized a net gain on the sale of the Jada System of $81 million recognized in Other (income) expense, net in the Condensed Consolidated Statement of Income as of March 31, 2026.
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Operating Results
Sales Overview
| Three Months Ended March 31, | % Change | % Change Excluding Foreign Exchange | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| United States | $ | 358 | $ | 412 | (13) | % | (13) | % | |||||||||||||||
| International | 1,102 | 1,101 | - | (7) | |||||||||||||||||||
| Total | $ | 1,460 | $ | 1,513 | (4) | % | (9) | % | |||||||||||||||
Worldwide sales were $1.5 billion for the three months ended March 31, 2026, a decrease of 4%, compared to 2025. Worldwide sales during the three months ended March 31, 2026 were positively impacted by approximately $76 million, or approximately 5%, due to favorable foreign exchange rates.
Excluding the impact of foreign exchange rates, sales decreases for the three months ended March 31, 2026, primarily reflect lower sales of:
•Nexplanon, primarily due to decreased physician demand in the United States following the five-year label approval as reinsertions have been delayed and there has been uncertainty around federal funding. Outside of the U.S., sales declined due to the timing of shipments in selective emerging markets, partially offset by increased demand and access in Brazil;
•Singulair® (montelukast sodium), primarily attributable to decreased demand due to less favorable medical guidelines in certain international markets, most recently in China, as well as temporary supply constraints in Japan and mandatory price reductions in China and Japan;
•Marvelon™¹ (desogestrel and ethinyl estradiol pill) and Mercilon™¹ (desogestrel and ethinyl estradiol pill), as a result of decreased demand and market contraction in China and the timing of shipments in Asia Pacific; and
•Ontruzant, due to increased competition in international markets and lower tendered volume from Brazil's Ministry of Health when compared with the same period in 2025.
The foregoing decrease was partially offset by sales increases for the three months ended March 31, 2026 in:
•Emgality, as a result of continued uptake following the acquisition of the distribution and promotion rights from Lilly in January of 2024 in certain markets outside of the United States;
•Hadlima, due to stronger demand in the United States and increased demand in Puerto Rico;
•Atozet™¹ (ezetimibe and atorvastatin), primarily due to increased demand in China, due to the product launch in 2025, and in Asia Pacific as well as volume uptake in certain countries in Europe, partially offset by unfavorable pricing in Europe; and
•Brenzys, as a result of the timing of prior year tenders in Brazil.
Loss of exclusivity ("LOE") negatively impacted sales of certain of our products by approximately $4 million during the three months ended March 31, 2026, based on the decrease in sales volume compared to 2025. Volume-based procurement ("VBP") in China negatively impacted sales by approximately $2 million during the three months ended March 31, 2026. We expect VBP to continue to negatively impact our general medicines product portfolio for the next several quarters.
Due to changing market conditions, including ongoing conflicts, new and evolving U.S. and international tariffs, U.S. tax law changes and regulatory uncertainty that impact our business, as well as the pharmaceutical industry, we have been and will continue to adapt our business and sales strategies to address this changing landscape in order to achieve our business objectives and remain competitive. Such strategies may include implementing or continuing to assess product discount programs and wholesaler inventory levels under the relevant agreements or waivers of their terms for certain key products.
Highlights of the sales of our products for the three months ended March 31, 2026 and 2025 are provided below. See Note 5 "Product and Geographic Information" to the Condensed Consolidated Financial Statements for further details on sales of our products.
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Women's Health
| Three Months Ended March 31, | % Change | % Change Excluding Foreign Exchange | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Nexplanon/Implanon NXT | $ | 201 | $ | 248 | (19) | % | (21) | % | |||||||||||||||
| NuvaRing | 24 | 22 | 10 | (1) | |||||||||||||||||||
| Marvelon/Mercilon | 26 | 39 | (34) | (36) | |||||||||||||||||||
| Follistim AQ | 61 | 69 | (12) | (15) | |||||||||||||||||||
| Jada | 5 | 15 | (66) | (66) | |||||||||||||||||||
Contraception
Worldwide sales of Nexplanon, a single-rod subdermal contraceptive implant, declined 19% for the three months ended March 31, 2026, compared to 2025, primarily due to decreased physician demand in the United States following the five-year label approval as reinsertions have been delayed and there has been uncertainty around federal funding. In 2025, we submitted a similar application for a five-year duration period of use to the EU and UK Health Authorities. The application for five-year duration was approved for UK in April, 2026. The EU application is currently under review, with potential approval in 2027, subject to health authority review and approval. Outside of the U.S., sales declined due to the timing of shipments in selective emerging markets, partially offset by increased demand and access in Brazil.
Worldwide sales of NuvaRing, a vaginal contraceptive product, increased 10% for the three months ended March 31, 2026, compared to 2025, due to the favorable impact of foreign exchange and lower discount rates in the United States.
Worldwide sales of Marvelon and Mercilon, combined oral hormonal daily contraceptive pills not approved or marketed in the United States, but available in certain countries outside the United States, declined 34% for the three months ended March 31, 2026, compared to 2025, as a result of decreased demand and market contraction in China and the timing of shipments in Asia Pacific.
Fertility
Worldwide sales of Follistim AQ, a fertility treatment, declined 12% for the three months ended March 31, 2026, compared to 2025, as a result of competitive driven price reduction in the United States partially offset by modest market growth in China. We anticipate a further decline due to the price reduction and increased competitive landscape in the U.S.
Other Women's Health
In January 2026, we completed the sale of the Jada System to Laborie. As a result, worldwide sales of Jada, a device intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted, declined 66% for the three months ended March 31, 2026, compared to 2025.
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General Medicines
Biosimilars
| Three Months Ended March 31, | % Change | % Change Excluding Foreign Exchange | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Renflexis | $ | 57 | $ | 57 | 1 | % | (1) | % | |||||||||||||||
| Hadlima | 67 | 47 | 44 | 43 | |||||||||||||||||||
| Ontruzant | 5 | 18 | (71) | (72) | |||||||||||||||||||
| Brenzys | 20 | 14 | 39 | 32 | |||||||||||||||||||
Renflexis is a biosimilar to Remicade2(infliximab) for the treatment of certain autoimmune conditions. Sales increased 1% for the three months ended March 31, 2026, compared to 2025, primarily due to favorable foreign exchange and increased demand in Canada partially offset by the competitive pressure and unfavorable discount rates in the United States.
Hadlima is a biosimilar to Humira2 (adalimumab) for the treatment of certain autoimmune and autoinflammatory conditions. Sales increased 44% for the three months ended March 31, 2026, compared to 2025, due to stronger demand in the United States and increased demand in Puerto Rico. We have commercialization rights to Hadlima in countries outside of the European Union, South Korea, China, Turkey, and Russia. Hadlima is currently approved in the United States, Australia, Canada and Israel.
Ontruzant is a biosimilar to Herceptin2 (trastuzumab) for the treatment of HER2-overexpressing breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma. Sales for the three months ended March 31, 2026, compared to 2025, declined 71%, due to increased competition in international markets and lower tendered volume from Brazil's Ministry of Health when compared with the same period in 2025. We have commercialization rights to Ontruzant in all countries except in South Korea and China.
Brenzys is a biosimilar to Enbrel2 (etanercept) for the treatment of certain inflammatory diseases. Sales for the three months ended March 31, 2026, compared to 2025, increased 39%, as a result of the timing of prior year tenders in Brazil. We have commercialization rights to Brenzys in countries outside of the United States, Europe, South Korea, China, and Japan.
Established Brands
Cardiovascular
| Three Months Ended March 31, | % Change | % Change Excluding Foreign Exchange | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Atozet | $ | 85 | $ | 77 | 11 | % | 5 | % | |||||||||||||||
| Zetia/Vytorin | 108 | 107 | 1 | (5) | |||||||||||||||||||
| Cozaar/Hyzaar | 57 | 55 | 4 | (1) | |||||||||||||||||||
Sales of Atozet, a medicine for lowering LDL cholesterol, increased 11% for the three months ended March 31, 2026, compared to 2025, primarily due to increased demand in China, due to the product launch in 2025, and in Asia Pacific as well as volume uptake in certain countries in Europe, partially offset by unfavorable pricing in Europe.
Combined global sales of Zetia® (ezetimibe), which is marketed as Ezetrol™ in most countries outside the United States; and Vytorin® (ezetimibe / simvastatin), which is marketed as Inegy™ outside the United States, medicines for lowering LDL cholesterol, increased 1% for the three months ended March 31, 2026, compared to 2025, primarily driven by favorable foreign exchange and increased demand in China, partially offset by less tender volume and the timing of shipments in the Middle East.
Combined global sales of Cozaar® (losartan) and Hyzaar® (losartan / hydrochlorothiazide), medicines for the treatment of hypertension, increased 4% for the three months ended March 31, 2026, compared to 2025, driven by favorable foreign exchange and increased demand in China, partially offset by decreased demand in various international markets.
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Respiratory
| Three Months Ended March 31, | % Change | % Change Excluding Foreign Exchange | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Singulair | $ | 40 | $ | 74 | (46) | % | (49) | % | |||||||||||||||
| Nasonex | 65 | 72 | (9) | (17) | |||||||||||||||||||
| Dulera | 35 | 43 | (20) | (21) | |||||||||||||||||||
Worldwide sales of Singulair, a once-a-day oral medicine for the chronic treatment of asthma and for the relief of symptoms of allergic rhinitis, declined 46% for the three months ended March 31, 2026, compared to 2025. This decline was primarily attributable to decreased demand due to less favorable medical guidelines in certain international markets, most recently in China, as well as temporary supply constraints in Japan and mandatory price reductions in China and Japan.
Global sales of Nasonex, an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, declined 9% for the three months ended March 31, 2026, compared to 2025, due to competitive pressure in various international markets.
Global sales of Dulera® (formoterol/fumarate dihydrate), which is also marketed as Zenhale in certain markets outside of the United States, a combination medicine for the treatment of asthma, declined 20% for the three months ended March 31, 2026, compared to 2025, primarily due to increased discount rate pressure and decreased demand in the United States.
Non-Opioid Pain, Bone and Dermatology
| Three Months Ended March 31, | % Change | % Change Excluding Foreign Exchange | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Arcoxia | $ | 59 | $ | 62 | (5) | % | (13) | % | |||||||||||||||
| Vtama | 25 | 24 | 5 | % | 5 | % | |||||||||||||||||
* Calculation not meaningful.
Sales of Arcoxia™ ¹ (etoricoxib), a medicine for the treatment of arthritis and pain, declined 5% for the three months ended March 31, 2026, compared to 2025, primarily due to the phasing of shipments in various international regions and decreased demand in China.
Sales of Vtama, a cream for the topical treatment of mild, moderate, and severe plaque psoriasis in adults and atopic dermatitis, also known as eczema, in adults and children two years of age and older, increased 5% for the three months ended March 31, 2026, compared to 2025, due to increased demand and favorable discount rates in the United States. We anticipate launching Vtama in certain international markets in 2026 and beyond, subject to health authority reviews and approvals.
Other
| Three Months Ended March 31, | % Change | % Change Excluding Foreign Exchange | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Emgality | $ | 54 | $ | 32 | 69 | % | 50 | % | |||||||||||||||
* Calculation not meaningful.
Sales of Emgality, a medicine for the preventive treatment of migraine, increased 69% for the three months ended March 31, 2026, compared to 2025, as a result of continued uptake following the acquisition of the distribution and promotion rights from Lilly in January of 2024 in certain markets outside of the United States.
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Gross Profit, Expenses and Other
| Three Months Ended March 31, | % Change | ||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||
| Cost of sales | $ | 677 | $ | 672 | 1 | % | |||||||||||
| Gross profit | 783 | 841 | (7) | ||||||||||||||
| Selling, general and administrative | 424 | 420 | 1 | ||||||||||||||
| Research and development | 93 | 96 | (3) | ||||||||||||||
| Acquired in-process research and development and milestones | - | 6 | (100) | ||||||||||||||
| Restructuring costs | 31 | 86 | (64) | ||||||||||||||
| Interest expense | 111 | 124 | (10) | ||||||||||||||
| Exchange losses (gains) | 7 | (4) | * | ||||||||||||||
| Other (income) expense, net | (96) | 12 | * | ||||||||||||||
* Calculation not meaningful.
Cost of Sales
Cost of sales increased 1% for the three months ended March 31, 2026, compared to 2025, driven by our product mix. Cost of sales for the three months ended March 31, 2026 compared to 2025, includes amortization associated with the inventory fair value adjustment related to the Dermavant acquisition of $7 million and $9 million, respectively, and amortization of intangible assets of $47 million and $50 million, respectively.
Gross Profit
Gross profit decreased 7% for the three months ended March 31, 2026, compared to 2025, due to the impact of unfavorable pricing and product mix and unfavorable foreign exchange.
Selling, General and Administrative
Selling, general and administrative expenses increased 1% for the three months ended March 31, 2026, compared to 2025, due to increased costs associated with our Jada divestiture.
Research and Development
Research and development expenses decreased 3% for the three months ended March 31, 2026, compared to 2025, primarily due to a decrease in clinical study activity. During 2025, we discontinued the clinical development programs for investigational candidates OG-6219 and OG-7191.
Acquired In-Process Research and Development and Milestones
For the three months ended March 31, 2025, we recognized $6 million in acquired in-process research and development and milestones, related to the exit of our agreement with Centergene, due to the evolving fertility landscape in China.
Restructuring Costs
For the three months ended March 31, 2026, we incurred restructuring costs of $31 million related to our 2026 restructuring initiatives to streamline and optimize our research and development and manufacturing operations, focusing on enhancing efficiency and aligning resources with strategic priorities. For the three months ended March 31, 2025, we incurred restructuring costs of $86 million, comprised primarily of headcount-related restructuring expense associated with restructuring initiatives that were aimed at driving operational efficiencies in 2025.
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Interest Expense
Interest expense decreased 10% for the three months ended March 31, 2026, compared to 2025, due to the repurchase and cancellation of approximately $419 million of the Company's 5.125% notes due in 2031 ("the 2031 Notes") during the second and fourth quarters of 2025 combined with lower reference rates on our variable rate debt.
Exchange Losses (Gains)
Exchange losses (gains) were unfavorable for the three months ended March 31, 2026, compared to 2025, primarily due to unfavorable movements in certain foreign currencies relative to the U.S. dollar.
Other (Income) Expense, net
Other (income) expense, net was impacted for the year ended March 31, 2026, by an $81 million net gain related to the divestiture of the Jada System to Laborie in the first quarter of 2026 and $7 million related to the accretion of the Dermavant acquisition contingent consideration, related to changes in the timing of expected commercial milestones based on updated sales forecasts.
Taxes on Income
The effective income tax rates were 31.4% and 13.4% for the three months ended March 31, 2026 and 2025, respectively. These effective income tax rates reflect the beneficial impact of foreign earnings, offset by the impact of U.S. inclusions under the Global Intangible Low-Taxed Income regime and a valuation allowance recorded against non-deductible U.S. interest expense. Also included in the first quarter tax rate, is the beneficial impact of the sale of the Jada System. There was a favorable impact to the 2025 year-to-date effective tax rate driven by a tax amortization benefit.
On July 4, 2025, U.S. House Resolution 1, referred to as the One Big Beautiful Bill Act ("OBBBA"), was signed into law. The OBBBA includes significant corporate tax provisions such as modifications to interest deductibility, the option to fully expense U.S.-based R&D costs, and changes to the taxation of foreign earnings. For 2026 and beyond, the impacts of the OBBBA are reflected in our U.S. cash tax liability and income tax provision primarily reflected as an increase in our interest expense limitation offset by a decrease in our foreign income inclusions.
Liquidity and Capital Resources
As of March 31, 2026, we had cash and cash equivalents of $1.12 billion. We have historically generated and expect to continue to generate positive cash flow from operations. Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facility. Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings, strategic business development transactions and the payment of dividends. We believe that our financing arrangements, future cash from operations, and access to capital markets will provide adequate resources to fund our future cash flow needs. Our ability to raise new capital or refinance our debt, will depend on the capital markets and our financial condition at such times.
Working capital is defined as current assets less current liabilities and was $2.43 billion and $1.96 billion as of March 31, 2026 and December 31, 2025, respectively. Working capital was positively impacted by our active cash cycle management, which includes the factoring of receivables and timing of vendor payments and the proceeds from the divestiture of the Jada System.
We have accounts receivable factoring agreements with financial institutions in certain countries. Under these agreements, we have factored $216 million and $217 million of our accounts receivable as of March 31, 2026 and December 31, 2025, respectively. See Note 11 "Financial Instruments" to the Condensed Consolidated Financial Statements for information on our accounts receivable factoring and related agreements.
Net cash provided by operating activities was $225 million for the three months ended March 31, 2026, compared to $75 million for the same period in the prior year due to our active cash cycle management.
Net cash provided by investing activities was $386 million for the three months ended March 31, 2026, compared to $172 million used in investing activities for the same period in the prior year, primarily due to proceeds from the divestiture of the Jada system and decreased milestone payments.
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Net cash used in financing activities was $38 million for the three months ended March 31, 2026, compared with $75 million for the same period in the prior year, primarily driven by decreased dividend payments in the current year and increased repayments of debt in the current year.
As part of our post-spinoff plan to further optimize our manufacturing and supply network, we will continue to separate our supply chain through planned exits from supply agreements with Merck through 2031. This will enable us to redefine our appropriate sourcing strategy, and move to fit-for-purpose supply chains, while focusing on delivering efficiencies. We anticipate continuing to incur costs associated with this separation, including but not limited to accelerated depreciation, exit premiums and fees, technology transfer costs, stability and qualification batch costs, one-time resourcing costs, regulatory and filing costs, capital investment, and inventory stock bridges.
Our contractual obligations as of March 31, 2026, which require material cash requirements in the future, consist of contractual milestones, purchase obligations and lease obligations. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025 for further details. As of March 31, 2026, there have been no material changes to our contractual obligations outside of the ordinary course of business.
During the first quarter of 2026, we paid cash dividends of $0.02 per share. On April 30, 2026, the Board of Directors declared a quarterly dividend of $0.02 for each issued and outstanding share of our common stock. The dividend is payable on June 11, 2026, to stockholders of record at the close of business on May 11, 2026.
We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such transactions, if any, may be material, and will depend upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Critical Accounting Estimates
Our significant accounting policies, which include management's best estimates and judgments, are included in Note 2 "Summary of Accounting Policies" to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. See Note 2 "Basis of Presentation" to the Condensed Consolidated Financial Statements for information on the adoption of new accounting standards during 2026. There have been no changes to our accounting policies as of March 31, 2026. A discussion of accounting estimates considered critical because of the potential for a significant impact on the Condensed Consolidated Financial Statements due to the inherent uncertainty in such estimates are disclosed in the Critical Accounting Estimates section of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Organon's Annual Report on Form 10-K for the year ended December 31, 2025.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards, see Note 2 "Basis of Presentation" to the Condensed Consolidated Financial Statements included in this report.
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