OGN US Equity☆

ogn-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

Form 10-K

_____________________

(Mark One)

For the fiscal year ended December 31, 2021

OR

For the transition period from ______ to ______

Commission File No. 001-40235

Organon & Co.

(Exact name of registrant as specified in its charter)

30 Hudson Street, Floor 33

Jersey City New Jersey 07302

(Address of principal executive offices) (zip code)

(Registrant’s telephone number, including area code)(551)430-6900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock ($0.01 par value) OGN New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting common equity held by non-affiliates of the registrant, computed by reference to the closing price at which the Common Stock was sold as of the end of the second fiscal quarter ended June 30, 2021, was $7,670,000,000.

The number of shares of Common Stock outstanding as of the close of business on March 14, 2022: 253,637,179

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III will be incorporated by reference from the Registrant’s definitive proxy statement for its 2022 Annual Meeting of Stockholders (the “2022 Proxy Statement”), which will be filed pursuant to Regulation 14A with the United States Securities and Exchange Commission (“SEC”) within 120 days after the end of the fiscal year to which this report relates.

Table of Contents

Page

Part I

Item 1. Business 3

Item 1A. Risk Factors 26

Item 1B. Unresolved Staff Comments 43

Item 2. Properties 43

Item 3. Legal Proceedings 43

Item 4. Mine Safety Disclosures 44

Part II

Item 6. [ Reserved ] 45

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62

Item 8. Financial Statements and Supplementary Data 63

Item 9A. Controls and Procedures 103

Item 9B. Other Information 103

Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections 103

Part III

Item 10. Directors, Executive Officers and Corporate Governance 103

Item 11. Executive Compensation 103

Item 14. Principal Accounting Fees and Services 103

Part IV

Item 15. Exhibits, Financial Statement Schedules 104

Signatures

1 Indicates, in this 2021 Form 10-K, brand names of products, which are not available in the United States.

2 Indicates brand names of products which are trademarks not owned by Organon. Specific trademark ownership information is included in the Exhibit Index at the end of this 2021 Form 10-K.

Table of Contents

PART I

Item 1. Business

Overview

Organon & Co. ("Organon") is a global health care company formed through a spinoff from Merck & Co., Inc. ("Merck") to focus on improving the health of women throughout their lives. Organon's focus is on women's health as its primary therapy area, and is the only large global pharmaceutical company currently in existence to do so.

Organon has a portfolio of more than 60 medicines and products across a range of therapeutic areas. Organon is a global health care 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"). Organon 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. Organon operates six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom ("UK").

Organon's operations include the following product portfolios, which constitute one operating segment engaged in developing innovative health solutions:

•Women's Health: Organon has a portfolio of contraception and fertility brands, including Nexplanon® (etonogestrel implant) (sold as Implanon NXTTM in some countries outside the United States), a long-acting reversible contraceptive, which is a class of contraceptives that is recognized as the most effective type of hormonal contraception available to patients with a lower long-term average cost. Organon's mission is to be the world's leading women's health company and to deliver a better and healthier every day for every woman. Organon plans to continue building on its strengths in reproductive health and fertility as it assembles a suite of health options that help address the areas of high unmet needs for women from adolescence to menopause and beyond.

•Biosimilars: Organon's current portfolio spans across immunology and oncology treatments. Organon plans to continue evaluating opportunities in other potential therapeutic areas, including ophthalmology, diabetes and neuroscience. Organon's oncology biosimilars have been launched in 20 countries and Organon's immunology biosimilars have been launched in five countries. All five biosimilars in Organon's portfolio have launched in certain countries globally, including two biosimilars in the United States. Organon expects to grow its existing portfolio through future launches in other therapeutic areas, both through Organon's partnership with its development partner, Samsung Bioepis, as well as through other potential partners. Organon's existing biosimilars portfolio positions Organon for success in this attractive and fast growing area of health care with several major biologics that will lose patent protection in the next decade.

•Established Brands: Organon has a portfolio of established brands, which generally are beyond market exclusivity, including leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management. A number of Organon's established brands lost exclusivity years ago and have faced generic competition for some time, yet still contribute meaningful profitability. Organon intends to stimulate the performance of its established brands products through renewed focus and attention on strategic marketing to create a significant source of capital to fuel its growth aspirations. Organon believes its established brands products will, over time, continue to deliver meaningful revenue and operating profit that can be redirected into organic and inorganic growth opportunities in key product areas and geographies. Organon's established brands portfolio is supported by its large commercial and manufacturing capabilities, including a global network that enables Organon to distribute products to patients in more than 140 countries and territories.

Led by the women's health portfolio coupled with an expanding biosimilars business and stable franchise of established medicines, Organon's products produce strong cash flows that will support investments in innovation and future growth opportunities in women's health. In addition, Organon is pursuing opportunities to collaborate with biopharmaceutical innovators looking to commercialize their products by leveraging its scale and presence in fast growing international markets.

Since becoming a standalone company, Organon has expanded its women's health portfolio through four acquisitions:

•Acquired Alydia Health, a commercial stage company focused on the treatment of postpartum hemorrhage.

•Entered into a licensing agreement with ObsEva for the global development, manufacturing and commercial rights to ebopiprant (OBE022), an investigational agent being evaluated as a potential treatment for preterm labor.

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•Acquired Forendo, a clinical-stage drug development company whose lead candidate, FOR-6219, is an investigational agent being evaluated as a potential treatment for endometriosis, and whose pipeline also includes a pre-clinical program targeting polycystic ovarian syndrome (PCOS).

•Entered into an agreement to acquire the rights to MarvelonTM (ethinylestradiol, desogestrel)1 and MercilonTM (ethinylestradiol, desogestrel)1 (two combined hormonal oral contraceptives) in several Asian markets, adding to the 20 markets where Organon already maintained rights to these products.

Spinoff from Merck

On June 2, 2021, Organon and 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 "spinoff"). Organon is now a standalone publicly traded company, and on June 3, 2021, regular-way trading of Organon's Common Stock (the "Common Stock") commenced on the New York Stock Exchange under the ticker symbol "OGN."

The spinoff was completed pursuant to the Separation and Distribution Agreement and other agreements with Merck related to the spinoff including, but not limited to, a tax matters agreement (the "Tax Matters Agreement" or "TMA"), an employee matters agreement the ("Employee Matters Agreement") and a transition services agreement (the "Transition Services Agreement" or "TSA") (see Note 19 "Third-Party Arrangements and Related Party Disclosures" to the Financial Statements included in this report for additional details).

Products

Organon is engaged in developing and delivering innovative health solutions through a diverse portfolio of products serving patient needs across multiple therapeutic areas and product categories, consisting of women's health, biosimilars and established brands. These portfolios are further described below, together with select details for products within each group. Organon's sales for each of its product groups are as follows:

In 2021, Organon's products recorded revenue of $6.3 billion. Organon operates on a global scale and Organon's global network enables it to distribute products to patients in more than 140 countries and territories, with approximately 80% of 2021 revenue, or $4.9 billion, generated outside the United States.

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Women's Health Biosimilars Established Brands

Women's Health Portfolio

In 2021, Organon's women's health portfolio accounted for $1.6 billion, or approximately 26%, of Organon's sales, with approximately 48%, or $767 million, generated outside the United States. Organon's women's health products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon® and NuvaRing, and fertility, with key brands such as Follistim1 and Elonva1. Additionally, Organon continues to assess commercialization opportunities in conditions unique to women or disproportionally affecting women, such as the Jada system acquired as a part of the acquisition of Alydia Health. Organon's women's health products are sold in over 90 markets worldwide, including the United States, China, Canada, Australia, Brazil, and Mexico as well as many other countries in the European Union ("EU"), South America, Asia, and Africa.

Contraception

Organon's contraception portfolio currently consists of the following products, which prevent pregnancy by suppressing ovulation:

Nexplanon is a prescription medication for the prevention of pregnancy in women lasting up to three years and is reversible upon removal. Nexplanon is a small, thin and flexible arm implant that is placed discreetly under the skin of the inner, upper arm by a health care provider. It is a progestin-only, radiopaque, removable implant, containing 68 mg of etonogestrel pre-loaded into an applicator and is typically prescribed in women who are not looking to become pregnant in the near future and do not want to take a daily contraceptive.

NuvaRing (etonogestrel / ethinyl estradiol vaginal ring) is a monthly vaginal contraceptive ring with a combination of progestin and estrogen used to prevent pregnancy in women. NuvaRing is prescribed for women that want a monthly contraceptive option.

CerazetteTM (desogestrel)is a progestin-only, daily pill used to prevent pregnancy in women. Progestin-only products like Cerazette are typically used by women wanting hormonal contraception for whom estrogen-containing contraceptives may not be medically appropriate. Cerazette is not approved or marketed in the United States but is available in certain countries outside the United States.

Marvelon1 and Mercilon1 (desogestrel and ethinyl estradiol pill) are both combinations of progestin and estrogen used as daily pills to prevent pregnancy. Marvelon1 contains a higher daily dose of estrogen than Mercilon1. Marvelon1 and Mercilon1 are not approved or marketed in the United States but are available in certain countries outside the United States.

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Fertility

Organon's fertility portfolio currently consists of three products used primarily for in vitro fertilization ("IVF") treatment cycles:

Follistim (follitropin beta injection)1 which is marketed as PuregonTM in most countries outside the United States, contains human follile-stimulating hormone (“FSH”) and is used to promote the development of multiple ovarian follicles in assisted reproduction technology procedures, such as IVF, embryo transfer, gamete intrafallopian transfer and intracytoplasmic sperm injection. Follistim1 belongs to the group of gonadotrophic hormones used by women trying to get pregnant using IVF.

ElonvaTM (corifollitropin alfa)1 is an ovarian follicle stimulant with the same mechanism of action as recombinant FSH, but characterized by a prolonged duration of FSH activity. Due to its ability to initiate and sustain growth of multiple ovarian follicles for an entire week, a single subcutaneous injection of the recommended dose of Elonva1 may replace the first seven injections of any daily recombinant FSH preparation in an ovarian stimulation treatment cycle. Elonva1 belongs to the group of gonadotrophic hormones used by women trying to get pregnant using IVF.

"Ganirelix Acetate Injection (marketed in certain countries outside the United States as Orgalutran1)." is an injectable competitive gonadotropin-releasing hormone (“GnRH”) antagonist. "Ganirelix Acetate Injection" is used in fertility treatments in combination with FSH to prevent ovulation.

Postpartum Hemorrhage

Organon's postpartum hemorrhage portfolio currently consists of the Jada system, which Organon acquired as part of Organon's acquisition of Alydia Health in June 2021. The Jada system is intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted. Its primary mechanism of action uses low-level wall suction, found in most labor and delivery rooms in the United States, to promote uterine contraction, which in turn helps control abnormal post-partum uterine bleeding or hemorrhage.

In September 2021, technological updates to the Jada system received clearance in the United States from the U.S. Food and Drug Administration (the "FDA"), and officially launched in February 2022.

The Jada system was first cleared by the FDA for use in the United States in August of 2020, and Organon is seeking marketing authorization of the Jada system outside the United States in the 2023/2024 timeframe.

Biosimilars Portfolio

In 2021, Organon's biosimilars portfolio accounted for $424 million, or approximately 7%, of sales, with approximately 53%, or $225 million, generated outside the United States. The assets in Organon's biosimilars portfolio and Organon's commercial experience in biosimilars provides an opportunity to benefit from future growth anticipated in this area.

Organon's Biosimilars Products

Organon's biosimilars portfolio consists of therapies in oncology and immunology for which it has worldwide commercialization rights with certain geographic exceptions specified on a product-by-product basis pursuant to an agreement that it entered into with Samsung Bioepis. The portfolio currently consists of three immunology products, Hadlima, Brenzys1, and Renflexis, and two oncology products, Aybintio and Ontruzant. The following table lists Organon's biosimilars with reference to the biologic product and the launch or anticipated launch date of the biosimilar:

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Organon's Biosimilar Biologic Product Launch of Organon's Biosimilar

Aybintio Avastin2 Europe—September 2020.

Hadlima (SB5)

Hadlima (adalimumab-bwwd) is a tumor necrosis factor("TNF") antagonist biosimilar to AbbVie's Humira2 (adalimumab) product, approved for use in certain patients for the treatment of rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, adult Crohn’s disease, ulcerative colitis, and plaque psoriasis. Organon's current United States Hadlima label for Hadlima does not include hidradenitis suppurativa and uveitis indications. Organon has worldwide commercialization rights to Hadlima in countries outside the EU, Korea, China, Turkey, and Russia. Samsung Bioepis reached a global settlement with AbbVie permitting Organon to launch Hadlima in the United States in June 2023 and outside the United States starting in 2021. Hadlima is currently approved in the United States, Australia, Canada, Israel, and Saudi Arabia, and was launched in Australia and Canada in 2021. Hadlima was approved by the FDA in July 2019 as a low-concentration (50mg/ml) formulation. In January 2022, the FDA accepted for review the supplemental Biologics License Application (sBLA) for a citrate-free, high concentration (100mg/ml) formulation of Hadlima, a biosimilar candidate referencing Humira2 (adalimumab).

Brenzys1 (SB4)

Brenzys1 (etanercept) is a TNF antagonist biosimilar to Amgen / Pfizer's Enbrel2 (etanercept) product, approved for use in certain patients for the treatment of rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis and plaque psoriasis. Organon has commercialization rights to Brenzys1 in countries outside the EU, Korea, China, Japan and the United States, and it is currently approved and commercialized in Australia, Canada, Brazil and Israel.

Renflexis (SB2)

RenflexisTM (infliximab-abda) is a TNF blocker biosimilar to Johnson & Johnson's Remicade2 (infliximab) product, approved for use in certain patients for the treatmentof Crohn’s disease, pediatric Crohn's disease, ulcerative colitis, pediatric ulcerative colitis, rheumatoid arthritis in combination with methotrexate, ankylosing spondylitis, psoriatic arthritis and plaque psoriasis. Organon has worldwide commercialization rights to Renflexis2 in countries outside the EU, Korea, China, Turkey and Russia, and it is currently approved and commercialized in the United States, Australia and Canada.

Aybintio (SB8)

Aybintio (bevacizumab) is a vascular endothelial growth factor inhibitor biosimilar to Roche’s Avastin2 (bevacizumab) product. Aybintio is currently approved and commercialized in the EU for use in certain patients with metastatic carcinoma of the colon or rectum, metastatic non-squamous, non-small cell lung cancer, metastatic renal cell carcinoma, metastatic cervical cancer, epithelial ovarian, fallopian tube, or primary peritoneal cancer and metastatic breast cancer. Organon has commercialization rights to Aybintio in the United States, Canada, Germany, Italy, France, the UK and Spain. Organon cannot currently predict the timing of any filing, approval or launch of Aybintio in the United States nor does it know when such timing would be determined.

Ontruzant (SB3)

Ontruzant (trastuzumab-dttb) is an HER2 / neu receptor antagonist biosimilar to Roche’s Herceptin2 (trastuzumab) product. Ontruzant was approved by the FDA in January 2019 for the treatment of HER2 overexpressing breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma consistent with Herceptin2, and by the European Medicines Agency ("EMA") in November 2017 as the first trastuzumab biosimilar approved in Europe. Samsung Bioepis reached a global settlement with Roche in June 2019 allowing for Organon to launch Ontruzant worldwide. Organon has worldwide commercialization rights to Ontruzant in countries outside of Korea and China.

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Established Brands Portfolio

Established brands represents a broad portfolio of mature brands across multiple therapeutic areas and geographies that are generally beyond market exclusivity. Organon's established brands portfolio contributed approximately $4.1 billion of product sales in 2021, of which approximately 92%, or $3.7 billion, generated outside the United States. These figures reflect the reduced administration of many products within established brands as a result of the COVID-19 pandemic. Generic competition varies significantly across geographies.

Cardiovascular

In 2021, Organon's cardiovascular portfolio accounted for $1.6 billion, or approximately 26%, of product sales, nearly all of which were generated outside the United States.

Organon's cardiovascular portfolio consists of several cholesterol-modifying medicines, including: Zetia® (ezetimibe), which is marketed as EzetrolTM in most countries outside the United States; Vytorin® (ezetimibe / simvastatin), which is marketed as InegyTM outside the United States; AtozetTM (ezetimibe and atorvastatin)1, which is marketed in certain countries outside the United States; RosuzetTM (ezetimibe and rosuvastatin), which is also marketed in certain countries outside the United States; and ZocorTM (simvastatin), which is also available in certain countries outside the United States, including China. Organon's portfolio also includes Cozaar® and Hyzaar® (losartan and losartan / hydrochlorothiazide), which are cardiovascular drugs for the treatment of hypertension.

Respiratory

In 2021, Organon's respiratory portfolio accounted for $1.0 billion, or approximately 16% of product sales, with approximately 77%, or $773 million, generated outside the United States.

Organon's respiratory portfolio is comprised of several treatments used to control and prevent symptoms caused by asthma, including: Singulair® (montelukast sodium), Dulera® (formoterol/fumarate dihydrate), which is also marketed as ZenhaleTM in certain markets outside the United States, and Asmanex® (mometesone furoate).

Organon's portfolio also includes several products that treat seasonal allergic rhinitis, including: Singulair (montelukast sodium), Nasonex® (mometasone), and Clarinex® (desloratadine)2, which is marketed as AeriusTM outside of the United States. Organon currently owns prescription rights for Clarinex2 in the United States and Aerius in markets around the world.

Dermatology, Bone Health and Non-Opioid Pain Management

In 2021, Organon's dermatology, bone health and non-opioid pain management portfolios accounted for $830 million, or approximately 13%, of product sales, nearly all of which were generated outside the United States. Organon's dermatology portfolio consists of two core products, including DiprosoneTM (betamethasone cream)1, a corticosteroid approved for treatment in relief of skin conditions, and Elocon® (mometasone cream), a topical prescription medicine approved for treatment in relief of inflammation and other symptoms caused by certain skin conditions. Organon's bone health portfolio includes Fosamax® (alendronate sodium), a bisphosphonate medicine used for the treatment and prevention of osteoporosis in postmenopausal women and to increase bone mass in men with osteoporosis. Organon's non-opioid pain management portfolio consists of three core products, including: ArcoxiaTM (etoricoxib)1, a selective cyclooxygenase-2 inhibitor used for acute and chronic treatment of conditions such as acute pain, osteoarthritis and rheumatoid arthritis, DiprospanTM (betamethasone)1, an injectable glucocorticoid drug approved for treatment of conditions such as bursitis, dermatological disorders and inflammatory conditions, and CelestoneTM (betamethasone injectable suspension)1, a sterile aqueous suspension approved for treatment of inflammation and conditions such as endocrine disorders and gastrointestinal diseases.

Other Established Brands

This portfolio covers Organon's other mature products, some of which remain significant to Organon's product portfolio, including products such as Proscar® (finasteride) and Propecia® (finasteride). Proscar, used for the treatment of symptomatic benign prostatic hyperplasia (BPH) in men with an enlarged prostate, accounted for $117 million of Organon's sales in 2021. In addition, Propecia, used for the treatment of male pattern hair loss, accounted for $136 million of Organon's sales in 2021. Nearly all sales of Proscar and Propecia were generated outside the United States.

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Research and Development

Organon's development strategy seeks to achieve business continuity with its brands and unlock value from its existing products by utilizing Organon's technical expertise to pursue new indications, new formulations and new geographies. As part of Organon's strategy for growth and improved operating leverage position, Organon expects to identify scientific collaborations and acquisitions to develop early and late-stage assets and enhance its pipeline. During the year ended December 31, 2021, Organon entered into a license agreement with ObsEva and acquired Forendo Pharma to further strengthen Organon’s pipeline assets.

Organon relies on internal scientific expertise and close collaborations with partners, and expects to advance product development opportunities, data generation, product registration, and licensing on a global scale.

Sales, Marketing and Distribution Capabilities

Sales and Marketing

Organon has approximately 4,030 employees worldwide focused on commercialization activities, such as marketing, direct selling, digital and omni-channel and insight generation, covering data stewardship, data analytics and data science. Organon has experienced marketers, pricing and access professionals, and data scientists across geographies that Organon is implementing localization and execution of its global brand and business strategies. Organon believes its commercialization capabilities allow it to execute customer engagement strategies optimized across preferred channels and aimed at health care providers, patients and payors. Organon's global and local marketing employees focus on building an integrated digital ecosystem that coordinates engagement across all channels. These engagements include direct face–to–face engagement, virtual engagement, email, social media and Organon's websites. In addition, Organon believes it has the knowledge, capabilities, and resources to achieve optimal local market access for its portfolio in a changing external environment.

Organon has a trade channel strategy that provides a robust capability framework for Organon's activities, including in the selection of channel partners, commercial terms and supportive health care services that promote the efficient, safe and cost-effective delivery of Organon's products. Organon has significant insight into the use of newer technologies such as blockchain, and the use of valuable patient services such as patient adherence programs that can further drive value in collaboration with Organon's trade partners.

Organon does not have any single customer that, if such customer were lost, would have a material adverse effect on Organon's business.

Distribution

Organon's global network enables it to distribute products directly and indirectly to patients in more than 140 countries and territories, including through Organon's regional distribution centers. Organon sells its pharmaceutical products primarily to drug wholesalers and retailers, hospitals, clinics, government agencies, pharmacies, and managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. Organon also sells its pharmaceutical products through third-party distributors and agents for smaller markets. Organon's professional representatives communicate the effectiveness, safety and value of Organon's pharmaceutical products to health care professionals in private practice, group practices, hospitals and managed care organizations.

Manufacturing Capabilities and Global Supply Chain

Organon has high quality manufacturing capabilities, including development and improvement of manufacturing processes. Organon’s principal manufacturing capabilities include formulation, fill-and-finishing of products, packaging of products, and distribution and supply to patients in more than 140 countries and territories.

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Internal Manufacturing Capabilities

Organon owns and operates six manufacturing sites, as shown in the table below, where it manufactures a range of pharmaceutical products, including hormonal products, sterile formulations, and certain medical device combination products.

Site Predominant Area of Focus

Campinas, Brazil Women’s health, cardiovascular and respiratory

Cramlington, UK Cardiovascular and respiratory

Heist, Belgium Respiratory, dermatology and pain

Oss Pharma, the Netherlands Women’s health

Pandaan, Indonesia Cardiovascular, respiratory and dermatology

Xochimilco, Mexico Cardiovascular and respiratory

A majority of Organon's internal manufacturing sites have long-standing, deep technical capabilities across the broad base of manufacturing platforms that are required to support Organon's product portfolio. Organon's specialized manufacturing capabilities include oral solid dosage manufacturing, liquids, ointments and creams manufacturing, aseptic processing of hormonal products, extrusion technology, inhaler and implant medical device combination products, and packaging to facilitate speed to market as well as more direct control of quality and compliance. Organon also continues to manufacture a range of Merck products at each of Organon's six manufacturing sites pursuant to an agreement with Merck entered into at the time of the spinoff.

Global Supply Chain

Organon manages its global supply chain through a centralized supply planning organization and regional demand management, distribution and logistics teams structured around North America, Europe, Middle East and Africa, Asia-Pacific and Latin America. Organon's global commercial and manufacturing teams collaborate on various operational efficiency initiatives, including yield improvements, procurement savings, site synergies, manufacturing support rationalization and supply chain distribution optimization, each intended to improve Organon's leverage position.

Organon purchases certain raw materials, active pharmaceutical ingredients, components, devices and other supplies necessary for the commercial production of its products from a variety of third-party suppliers. Organon utilizes third-party contract manufacturers for packaging, formulation and fill-and-finish for its products. Organon also utilizes a combination of logistics service providers as part of its global supply chain, primarily for storage and for shipping and delivering raw materials, intermediate goods and finished goods between internal sites and from production sites to customers.

In order to satisfy the manufacturing and regulatory requirements for the breadth of products in Organon's portfolio, a number of Organon's materials and components are sole-sourced. Certain of these sole-sourced materials are critical to Organon's key products, including women’s health and legacy brands. Organon sources 100% of its active pharmaceutical ingredients externally and portions of its drug product. While the majority are single sourced, they are from established pharmaceutical suppliers with whom Organon has significant experience. In particular, Organon relies heavily on one supplier for formulation and/or packaging as Organon's gateway to sales in both Japan and China.

To mitigate supply risk, Organon aims to have a conservative inventory posture and to keep an internal function focused on maintaining an external manufacturing network with operational, quality, technology and procurement capabilities. This function is responsible for identifying, developing and assessing the performance of Organon's suppliers such that they meet quality expectations and satisfy their contractual obligations to Organon. In addition, this function provides rapid response support for potential supply issues. Organon also has an established risk management framework, which is intended to assess and mitigate risk elements across Organon's supply chain.

Organon's manufacturing network and supply chains are designed to provide it with a flexible and scalable global platform for continued expansion, including in emerging markets. Organon believes its extensive manufacturing and supply chain expertise and capabilities positions it well to provide critical therapies for distribution worldwide and to meet growing demand over the long-term.

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Quality Management

Organon's facilities and supporting functions, along with its external contractors, suppliers, and partners, make up an integrated, interdependent global network that is dedicated to consistently delivering compliant, reliable product supply to health care providers and patients. Organon has one quality management system deployed globally that enables the development, manufacturing, packaging, labeling, handling, and distribution of Organon's products such that they conform to applicable regulatory requirements in every country it serves. Organon's quality management system is designed to promote and facilitate regulatory and operational excellence, anticipate risks, and prepare the network to effectively respond and adapt to emerging trends.

Human Capital

Organon's human resources organization is led by an experienced team that monitors its employee base and sets annual targets for managing its human capital, including employee retention, engagement, and training targets. The Talent Committee of Organon's Board regularly reviews and discusses with management Organon's diversity, inclusion and leadership development initiatives, objectives, and progress.

Organon has established benefit and incentive compensation plans, including comprehensive medical and life insurance coverage, 401(k) matching programs and other incentive compensation programs that Organon believes align employee incentives directly with Organon's future performance.

As of December 31, 2021, Organon had approximately 9,300 employees worldwide with approximately 1,400 (15.5%) employees in the United States (including Puerto Rico). Approximately 85% of Organon's employees work in key functional areas (Commercial, Research & Development, and Manufacturing/Supply) and 15% are in support functions. Organon has approximately 4,030 employees worldwide focused on commercialization activities, such as marketing, direct selling, digital and omni-channel and insight generation, covering data stewardship, data analytics and data science, and approximately 700 employees are focused on clinical development, safety, and medical affairs and product registration.

Organon strives to build a strong culture with inclusion and belonging at its core, believing that this is fundamental to success and future innovation. More than 30% of Organon's U.S. employees identify as part of an underrepresented ethnic group. Organon supports its workforce through innovative talent and performance programs and have additionally founded ten Employee Resource Groups. Organon also regularly assess its employees’ experience, including measures of engagement, well-being, inclusion, and core cultural values through annual surveys and regular check-ins.

Organon's employees are at the core of its mission to improve the health of women and, given Organon's global nature, it has a strong focus on female representation. Globally, over 50% of Organon's employees are female, and women comprise 50% of Organon's senior leadership (50% Board of Directors; 50% Executive Committee).

Intellectual Property

Patents, Trademarks and Licenses

Patent protection is important to the marketing of certain of Organon's products in the United States and in most major foreign markets. Patents may cover products per se, pharmaceutical formulations, processes for, or intermediates useful in, the manufacture of products, devices for delivering products, or the uses of products. Protection for individual products extends for varying periods in accordance with the legal life of patents in the various countries, and may be extended in some jurisdictions based upon the period of time a patented product is under regulatory review by the relevant health authority. The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of coverage.

In particular, Organon considers the patents that cover the rod technology in Nexplanon to be material to Organon's business. Such device patents will expire in 2027 in the United States and in 2025 in other countries around the world. There are currently no contested proceedings or third-party claims that involve these patents. Organon has been granted a license from Merck for Nexplanon / Implanon NXT that permits use of the underlying technology solely as a contraceptive implant containing only the active pharmaceutical ingredient currently used in the product.Additionally, in December 2021, Organon signed a supplemental license with Merck that provides a limited expansion of the fields in which it may use the underlying technology of Nexplanon / Implanon NXT beyond contraception in exchange for milestone payments.

While the expiration of a product patent normally results in a loss of market exclusivity for the covered pharmaceutical product, commercial benefits may continue to be derived from: (i) later-granted patents on processes and intermediates related to the most economical method of manufacture of the active ingredient of such product; (ii) patents relating to the use or delivery of such product; (iii) patents relating to novel compositions and formulations; and (iv) in the

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United States and certain other countries, market or data exclusivity that may be available under relevant law. The effect of product patent expiration on pharmaceutical products also depends upon many other factors, such as the nature of the market and the position of the product in it, the growth of the market, the complexities and economics of the process for manufacture of the active ingredient of the product and the requirements of new drug provisions of the Federal Food, Drug and Cosmetic Act or similar laws and regulations in other countries.

Additions to market or data exclusivity are sought in the United States and other countries through all relevant laws, including laws increasing patent life. Some of the benefits of increases in patent life have been partially offset by an increase in the number of incentives for and use of generic products. Additionally, improvements in intellectual property laws are sought in the United States and other countries through reform of patent and other relevant laws and implementation of international treaties.

For further information with respect to Organon's patents, see the sections entitled "Risk Factors" and Note 12 "Contingencies—Patent Litigation" to the Financial Statements included in this report.

Worldwide, all of Organon's important products are sold under trademarks that are considered in the aggregate to be of material importance. Trademark protection continues in some countries as long as used; in other countries, as long as registered. Registration is for fixed terms and can be renewed indefinitely.

Royalty income in 2021 on patent and know-how licenses and other rights amounted to $6 million. Organon also incurred royalty expenses totaling $15 million in 2021 under patent and know-how licenses Organon holds.

Privacy and Data Protection

Organon is subject to a significant number of privacy and data protection laws and regulations globally, many of which place restrictions on Organon's ability to transfer, access and use personal data across its business. The legislative and regulatory landscape for privacy and data protection continues to evolve. There are privacy and data protection frameworks in both developed and emerging markets with the potential to directly affect Organon's business. These include, for instance, the EU General Data Protection Regulation ("GDPR"), which went into effect in May 2018 and imposes penalties of up to 4% of global revenue; China's Personal Information Protection Law ("PIPL"), which came into effect November 1, 2021; and U.S. state privacy laws, such as the California Consumer Privacy Act, which became effective January 1, 2020, and has been amended and strengthened by the California Privacy Rights Act, which comes into force January 1, 2023. Additional privacy and data protection laws will come into force in upcoming years, for instance, Virginia's Consumer Data Protection Act, Colorado's Privacy Act, and United Arab Emirates' Protection of Personal Data Protection. These changing requirements could cause Organon to incur substantial costs or require it to change its business practices or compliance procedures in a manner adverse to Organon's business.

Competition and the Health Care Environment

Competition

The markets in which Organon conducts its business and the pharmaceutical industry in general are highly competitive and highly regulated. Organon's competitors include other worldwide research-based pharmaceutical companies, smaller research companies with more limited therapeutic focus and generic drug manufacturers. Organon's operations may be adversely affected by generic and biosimilar competition as Organon's products mature, as well as technological advances of competitors, industry consolidation, patents granted to competitors, competitive combination products, new products of competitors, the generic availability of competitors' branded products and new information from clinical trials of marketed products or post-marketing surveillance. In addition, patent rights are increasingly being challenged by competitors and the outcome can be highly uncertain. An adverse result in a patent dispute can preclude commercialization of products or negatively affect sales of existing products and could result in the payment of royalties or in the recognition of an impairment charge with respect to intangible assets associated with certain products. Competitive pressures have intensified as pressures in the industry have grown.

To remain competitive, the additional resources required to meet market challenges include quality control, flexibility to meet buyer specifications, an efficient distribution system and a strong technical information service. Organon plans to acquire and market products through external alliances, such as licensing arrangements and collaborations, and has designed its sales and marketing efforts to address changing industry conditions. However, the introduction of new products and processes by competitors may result in price reductions and product displacements, even for products protected by patents.

Health Care Environment

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access.

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Health Care Programs

The United States enacted major health care reform legislation in 2010 in the form of the Affordable Care Act (the "ACA"). The ACA increased the mandated Medicaid drug rebate from 15.1% to 23.1%, expanded the rebate to Medicaid-managed care utilization, and increased the types of entities eligible for the federal 340B drug discount program. The ACA, as amended, also requires pharmaceutical manufacturers to pay 70% of the negotiated price of the medicine, including biosimilar products, when Medicare Part D beneficiaries are in the Medicare Part D coverage gap (i.e., the so-called "donut hole provision"). Organon recorded approximately $17 million, $24 million and $30 million as a reduction to revenue in 2021, 2020 and 2019, respectively, related to the donut hole provision. In addition, pharmaceutical manufacturers are required to pay an annual non-tax deductible branded prescription drug fee. The total annual industry fee was $2.8 billion in the years 2019 through 2021. The fee is assessed on each company in proportion to its share of prior year branded pharmaceutical sales to certain government programs, including Medicare and Medicaid. Organon recorded approximately $10 million, $4 million and $6 million of costs within selling, general and administrative expenses in 2021, 2020 and 2019, respectively, for the annual health care reform fee. In February 2016, the CMS (Centers for Medicare & Medicaid Services) issued the Medicaid Drug Rebate Final Rule, which provided comprehensive guidance on the calculation of Average Manufacturer Price ("AMP") and Best Price—two metrics utilized to determine the rebates drug manufacturers are required to pay to state Medicaid programs. Under this Final Rule, CMS requires manufacturers to include sales to the U.S. Territories in the calculation of AMP and Best Price; however, that provision has been delayed several times and currently is scheduled to take effect on January 1, 2023.

On December 31, 2020, CMS published a Final Rule on the Medicaid Drug Rebate Program, which, among other things, introduced for the first time a regulatory definition of the terms "line extension" and "new formulation." CMS defined "line extension" as ''a new formulation of the drug, but does not include an abuse-deterrent formulation of the drug[.]" CMS adopted an expansive definition of "new formulation" to include ''a change to the drug, including, but not limited to: an extended release formulation or other change in release mechanism, a change in dosage form, strength, route of administration, or ingredients." This expanded definition may result in certain of Organon's drugs being subject to a higher Medicaid rebate liability. The new definitions of "line extension" and "new formulation" took effect on January 1, 2022. Finally, the provisions of this December 2020 Final Rule also may affect rebates owed under the Medicaid Drug Rebate Program in certain circumstances where accumulator adjustment or similar programs are applied to Organon's drugs and the value of Organon's assistance programs, which is intended for patients, is not counted towards the patient’s deductible or other out-of-pocket costs.

Other Legislative Changes

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. These changes include automatic 2% aggregate reductions in Medicare payments to providers, which results in an overall reduction in physician reimbursement from 106% of Average Sales Price ("ASP") to 104.3% of ASP. This change is part of the federal budget sequestration under the Budget Control Act of 2011, which went into effect in April 2013. The sequestration was temporarily halted from May 1, 2020 to March 31, 2022 as a result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, and the Protecting Medicare and American Farmers from Sequester Cuts Act ("PMAFSCA"). The CARES Act extended sequestration through Fiscal Year 2030, and the PMAFSCA will phase-in a 1% sequestration from April 1, 2022 to June 30, 2022. The PMAFSCA further provides that a 2.25% sequestration would apply to payments made during the first six months of fiscal year 2030, and a 3% sequestration would apply to payments made during the final six months of fiscal year 2030. Organon cannot predict how these and future adjustments to sequestration, and the way in which these laws impact physician reimbursement for Organon's products, will affect Organon's profitability.

Drug Pricing

Organon also faces increasing pricing pressure globally from managed care organizations, government agencies and programs that could negatively affect Organon's sales and profit margins, including, in the United States (i) practices of managed care organizations, federal and state exchanges and institutional and governmental purchasers, and (ii) federal laws and regulations related to Medicare and Medicaid, including the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and the ACA. For example, in November 2020, the OIG issued a Final Rule that would have, effective January 1, 2022, eliminated the Anti-Kickback Statute safe harbor for rebates paid to Medicare Part D plans or to pharmacy benefit managers ("PBMs") on behalf of such plans. The effectiveness of this Final Rule was delayed as part of the Infrastructure Investment and Jobs Act, which was signed into law on November 15, 2021 and requires the Secretary of Health and Human Services not to implement, administer, or enforce the provisions of the Final Rule prior to January 1, 2026. In addition, on November 19, 2021, the House of Representatives passed a version of the Build Back Better Act that includes a provision prohibiting the implementation, administration, or enforcement of the Final Rule beginning on January 1, 2026. As a result, it remains to be seen whether, and to what extent, the provisions of this Final Rule will take effect. While Organon cannot anticipate the effects of these changes on the way Organon currently contracts, the new framework could significantly alter the way Organon does business with Part D Plan Sponsors and PBMs on behalf of such plans.

In 2020, the FDA issued a final rule implementing provisions of Section 804 of the Federal Food, Drug, and Cosmetic Act (the "FDCA"), which allows the commercial importation of certain prescription drugs from Canada through

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FDA-authorized, time-limited programs sponsored by states or Indian tribes and, in certain future circumstances, pharmacists and wholesalers. At that time, the FDA also released a final guidance for industry detailing procedures for drug manufacturers to import FDA-approved prescription drug, biological, and combination products that were manufactured abroad and authorized and intended for sale in a foreign country. A trade organization brought suit, which remains pending in federal district court, challenging the commercial importation final rule. These changes could have a material adverse effect on Organon's business, cash flow, results of operations, financial condition, and prospects.

In the United States private sector, consolidation and integration among health care providers is a major factor in the competitive marketplace for pharmaceutical products. Health plans and PBMs have been consolidating into fewer, larger entities, thus enhancing their purchasing strength and importance. Private third-party insurers, as well as governments, employ formularies to control costs by negotiating discounted prices in exchange for formulary inclusion. Failure to obtain timely or adequate pricing or formulary placement for Organon's products or obtaining such placement at unfavorable pricing could adversely affect revenue. In addition to formulary tier co-pay differentials, private health insurance companies and self-insured employers have been raising co-payments required from beneficiaries, particularly for branded pharmaceuticals and biotechnology products. Private health insurance companies are also increasingly imposing utilization management tools, such as clinical protocols requiring prior authorization for a branded product if a generic product is available or requiring the patient to first fail on one or more generic products before permitting access to a branded medicine. These same management tools are also used in treatment areas in which the payor has taken the position that multiple branded products are therapeutically comparable. As the United States payor market concentrates further and as more drugs become available in generic form, pharmaceutical companies may face greater pricing pressure from private third-party payors.In addition, other proposals that allow international reference pricing or, under certain conditions, the importation of medicines from other countries may be considered.

European Union

Pricing and reimbursement of medicinal products is not harmonized at the EU level, but rather controlled by individual EU Member States. In addition, a majority of countries in the EU attempt to contain drug costs by engaging in reference pricing in which authorities examine pre-determined markets for published prices of drugs. Reference pricing may either compare a product’s prices in other markets (external reference pricing) or compare a product’s price with those of other products in a national class (internal reference pricing). The authorities then use the price data to set new local prices for brand-name drugs, including Organon's. Guidelines for examining reference pricing are usually set in local markets and can be changed pursuant to local regulations. Some EU Member States have established free-pricing systems, but regulate the pricing for drugs through profit control plans. Others seek to negotiate or set prices based on the cost-effectiveness of a product or an assessment of whether it offers a therapeutic benefit over other products in the relevant class. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In some EU Member States, cross-border imports from low-priced markets also exert competitive pressure that may reduce pricing within an EU Member State.

Additionally, EU Member States have the power to restrict the range of pharmaceutical products for which their national health insurance systems provide reimbursement. In the EU, reimbursement plans vary widely from EU Member State to EU Member State. Some EU Member States provide that drug products may be marketed only after agreement on a reimbursement price. Some EU Member States may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to already available therapies, or so-called health technology assessments ("HTA"), to obtain reimbursement or pricing approval. The HTA of pharmaceutical products is becoming an increasingly common part of the pricing and reimbursement procedures in most EU Member States. The HTA process, which is governed by the national laws of these countries, involves the assessment of the cost-effectiveness, public health impact, therapeutic impact and/or the economic and social impact of use of a given pharmaceutical product in the national health care system of the individual country. Ultimately, HTA measures the added value of a new health technology compared to existing ones. The outcome of HTAs regarding specific pharmaceutical products will often influence the pricing and reimbursement status granted to these pharmaceutical products by the regulatory authorities of individual EU Member States. A negative HTA of one of Organon's products may mean that the product is not reimbursable or may force Organon to reduce Organon's reimbursement price or offer discounts or rebates. A negative HTA by a leading and recognized HTA body could also undermine Organon's ability to obtain reimbursement for the relevant product outside a jurisdiction. For example, EU Member States that have not yet developed HTA mechanisms may rely to some extent on the HTA performed in other countries with a developed HTA framework to inform pricing and reimbursement decisions. HTA procedures require additional data, reviews and administrative processes, all of which increase the complexity, timing and costs of obtaining product reimbursement and exert downward pressure on available reimbursement.

To obtain reimbursement or pricing approval in some EU Member States, Organon may be required to conduct studies that compare the cost-effectiveness of Organon's product candidates to other therapies that are considered the local standard of care. There can be no assurance that any EU Member State will allow favorable pricing, reimbursement and market access conditions for any of Organon's products, or that it will be feasible to conduct additional cost-effectiveness studies, if required.

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Brexit

In 2016, the UK held a referendum in which voters approved an exit from the EU, commonly referred to as "Brexit." As a result of that referendum and subsequent negotiations, the UK left the EU on January 31, 2020. A transitional period existed until December 31, 2020, and during this period the EU and the UK operated as if the UK was an EU Member State, and the UK continued to participate in the EU Customs Union allowing for the freedom of movement for people and goods. Since January 1, 2021, the UK has been treated as a third country (i.e., not part of the EU single market or Customs Union) and is no longer bound by any EU laws (although the UK retained existing EU legislation in its national legislation). However, the Northern Irish Protocol currently provides that certain EU laws have effect in Northern Ireland and that Northern Ireland is within the EU single market.

On December 24, 2020, the EU and the UK agreed to a Trade and Cooperation Agreement ("TCA"). The TCA sets out the new arrangements for trade of goods, including medicines and vaccines, which allows goods to continue to flow between the EU and the UK. The TCA provisionally applied from January 1, 2021 and was permanently in force from May 1, 2021. As a result of the TCA, Organon's operations have not been materially adversely affected by Brexit.

Japan

In Japan, the pharmaceutical industry is subject to government-mandated biennial price reductions of pharmaceutical products. Furthermore, the government can order re-pricings for specific products if it determines that use of such products will exceed certain thresholds defined under applicable re-pricing rules.

China

Organon's business in China has grown rapidly in the past few years, and the importance of China to Organon's overall pharmaceutical business has increased accordingly. Continued growth of Organon's business in China is dependent upon ongoing development of a favorable environment for innovative pharmaceutical products, sustained access for Organon's current in-line products, and the absence of trade impediments or adverse pricing controls. In recent years, the Chinese government has introduced and implemented several structural reforms to accelerate the shift to innovative products and reduce costs. Since 2017, there have been multiple new policies introduced by the government to improve access to innovation, reduce the complexity of regulatory filings, and accelerate the review and approval process. This has led to a significant increase in the number of new products being approved each year. Additionally, in 2017, the Chinese government updated the National Reimbursement Drug List for the first time in eight years. While the mechanism for drugs being added to the list evolves, inclusion may require a price negotiation which could impact the outlook in the market for selected brands. In 2020, drugs were added to the National Reimbursement Drug List through double-digit price reductions.

While pricing pressure has always existed in China, health care reform has increased this pressure in part due to the acceleration of generic substitution through volume-based procurement ("VBP"). In 2019, the government implemented the VBP program through a tendering process for mature products which have generic substitutes with a Generic Quality Consistency Evaluation approval. Mature products that have entered into the first six rounds of VBP have had, on average, a price reduction of approximately 50%. Organon expects VBP to be a semi-annual process that will have a significant impact on mature products moving forward.

Other Markets

Organon's focus on other markets has continued. Governments in many other markets are also focused on constraining health care costs and have enacted price controls and measures impacting intellectual property, including in exceptional cases, threats of compulsory licenses that aim to put pressure on the price of innovative pharmaceuticals or result in constrained market access to innovative medicine. Organon anticipates that pricing pressures and market access challenges will continue in the future to varying degrees in such markets.

Beyond pricing and market access challenges, other conditions in certain countries outside the United States can affect Organon's efforts to continue to grow in these markets, including potential political instability, changes in trade sanctions and embargoes, significant currency fluctuation and controls, financial crises, limited or changing availability of funding for health care, credit worthiness of health care partners such as hospitals due to COVID-19, and other developments that may adversely impact the business environment for Organon. Further, Organon may engage third-party agents to assist in operating in such markets, which may affect Organon's ability to realize continued growth and may also increase Organon's risk exposure.

In addressing cost containment pressures, Organon engages in public policy advocacy with policymakers and continues to work to demonstrate that its medicines provide value to patients and to those who pay for health care. Organon advocates with government policymakers to encourage a long-term approach to sustainable health care financing that ensures

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access to innovative medicines and does not disproportionately target pharmaceuticals as a source of budget savings. In markets with historically low rates of health care spending, Organon encourages those governments to increase their investments and adopt market reforms to improve their citizens' access to appropriate health care, including medicines.

Regulation of Organon's Products

The pharmaceutical and medical device industries are also subject to regulation by regional, country, state and local agencies around the world, focused on standards and processes for determining drug and device safety and effectiveness, as well as conditions for sale or reimbursement.

Of particular importance is the FDA in the United States, which administers requirements covering the testing, approval, safety, effectiveness, manufacturing, labeling and marketing of prescription pharmaceuticals and medical devices. In some cases, the FDA requirements and practices have increased the amount of time and resources necessary to develop new products and bring them to market in the United States. At the same time, the FDA has committed to expediting the development and review of products bearing the ''breakthrough therapy" designation, and established other expedited programs to support the development, review, and approval of medicines where there is unmet medical need in serious and life-threatening conditions. The FDA has also undertaken efforts to bring generic and biosimilar competition to market more efficiently and in a timelier manner.

The EU has adopted directives and other legislation concerning the classification, approval for marketing, labeling, advertising, manufacturing, wholesale distribution, integrity of the supply chain, pharmacovigilance and safety monitoring of medicinal products for human use. These provide mandatory standards throughout the EU, which may be supplemented or implemented with additional regulations by the EU Member States. In particular, EU regulators may approve products subject to several post-authorization conditions. Examples of typical post-authorization commitments include additional pharmacovigilance, the conduct of clinical trials, the establishment of patient registries, physician or patient education and controlled distribution and prescribing arrangements. Non-compliance with post-authorization conditions, pharmacovigilance and other obligations can lead to regulatory action, including the variation, suspension or withdrawal of the marketing authorizations, or other enforcement or regulatory actions, including the imposition of financial penalties. Organon's policies and procedures are already consistent with the substance of these directives; consequently, Organon believes that they will not have any material effect on Organon's business.

Organon believes that it will continue to be able to conduct its operations, including launching new drugs and devices, in this regulatory environment.

FDA Regulation

Drugs and Biologics

Industry practice and government regulations in the United States and most foreign countries provide for the determination of effectiveness and safety of new chemical compounds suitable for pharmaceutical use through pre-clinical tests and controlled clinical evaluation. Before a new drug may be marketed in the United States, recorded data on pre-clinical and clinical investigations are included in the New Drug Application ("NDA") for a drug or the Biologics License Application ("BLA") for a biologic, and submitted to the FDA for the required approval.

Once scientists identify internal technology development opportunities or external technology licensing opportunities to enable improvement of existing products or development of new products, pre-clinical testing with that compound is commenced. Pre-clinical testing includes laboratory testing and safety studies in animals to gather data on chemistry, pharmacology, immunogenicity, and toxicology, and must be conducted in compliance with Good Laboratory Practice regulations. Pending acceptable pre-clinical data, Organon will submit an Investigational New Drug ("IND") application to the FDA through a combination of internal and external resources, which includes the results of pre-clinical testing, information about the drug composition and manufacturing, and Organon's plan for clinical testing on humans. After submission of the IND, Organon must wait 30 days before initiating clinical testing so that the FDA can review the IND and determine that clinical testing will not expose human subjects to unreasonable risk. The FDA may impose a full or partial hold on an IND before or after it goes into effect, requiring that Organon halt clinical testing in accordance with the hold. Once an IND goes into effect, Organon will then initiate clinical testing under the supervision of qualified investigators in accordance with established regulatory requirements, including Good Clinical Practice regulations. The clinical testing typically begins with Phase 1 studies, which are designed to assess safety, tolerability, pharmacokinetics and preliminary pharmacodynamic activity of the compound in humans. If favorable, additional, larger Phase 2 studies are initiated to determine evidence of the efficacy of the compound in the affected population and define appropriate dosing for the compound, as well as identify any adverse effects that could limit the compound’s usefulness. In some situations, the clinical program incorporates adaptive design methodology to use accumulating data to decide how to modify aspects of the ongoing clinical study as it continues without undermining the validity and integrity of the trial. One type of adaptive clinical trial is an adaptive Phase 2a / 2b trial design, a two-stage trial design consisting of a Phase 2a proof-of-concept stage and a Phase 2b dose-optimization finding stage.

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If data from the Phase 2 trials are satisfactory, Organon commences large-scale Phase 3 trials to confirm the compound’s efficacy and safety. Another type of adaptive clinical trial is an adaptive Phase 2 / 3 trial design, a study that can include an interim analysis and an adaptation that changes the trial from having features common in a Phase 2 study (such as multiple dose groups) to a design similar to a Phase 3 trial. An adaptive Phase 2 / 3 trial design can reduce timelines by eliminating activities which would be required to start a separate study. Upon completion of Phase 3 trials, if satisfactory, Organon submits regulatory filings with the appropriate regulatory agencies around the world to have the product candidate approved for marketing. There can be no assurance that a compound that is the result of any particular program will obtain the regulatory approvals necessary for it to be marketed. After a product receives marketing authorization, the FDA may require Organon to perform post-marketing studies, or Phase 4 studies, which may involve additional clinical trials, nonclinical testing and surveillance programs to monitor the safety of approved products or to provide additional information regarding treatment or a drug’s risks, benefits, or best use.

In the United States, upon completion of clinical testing, a complete NDA or BLA is submitted to the FDA. Within 60 days after receipt, the FDA determines if the application is sufficiently complete to permit a substantive review, or instead if the FDA will issue a refuse to file determination. The FDA also assesses, at that time, whether the application will be granted a priority review or standard review. Pursuant to the Prescription Drug User Fee Act, the FDA review period target for NDAs or original BLAs is either six months for priority review or 10 months for a standard review from the time the application is deemed sufficiently complete. An additional two months is added to these timelines for new molecular entities. Once the review timelines are determined, the FDA will generally act upon the application within those timelines, unless a major amendment has been submitted (either at Organon's own initiative or the FDA’s request) to the pending application. If this occurs, the FDA may extend the review period to allow for review of the new information, but by no more than three months. These timelines are not binding, and the FDA may not meet them in particular cases. The FDA can act on an application either by issuing an approval letter or by issuing a Complete Response Letter ("CRL") stating that the application will not be approved in its present form and describing all deficiencies that the FDA has identified. Should Organon wish to pursue an application after receiving a CRL, absent an appeal, Organon is able to resubmit the application with information that addresses the questions or issues identified by the FDA to support approval. Resubmissions are subject to review period targets, which vary depending on the underlying submission type and the content of the resubmission.

The FDA has four primary program designations—Fast Track, Breakthrough Therapy, Accelerated Approval and Priority Review—to facilitate and expedite development and review of new drugs to address unmet medical need in the treatment of serious or life-threatening conditions. The Fast Track designation provides pharmaceutical manufacturers with opportunities for frequent interactions with FDA reviewers during the product’s development and the ability for the manufacturer to do a rolling submission of the NDA/BLA. A rolling submission allows completed portions of the application to be submitted and reviewed by the FDA on an ongoing basis. The Breakthrough Therapy designation provides manufacturers with the same features of the Fast Track designation as well as intensive guidance on implementing an efficient development program for the product and a commitment by the FDA to involve senior managers and experienced staff in the review. The Accelerated Approval designation allows the FDA to approve a product based on an effect on a surrogate or intermediate endpoint that is reasonably likely to predict a product’s clinical benefit and generally requires the manufacturer to conduct required post-approval confirmatory trials to verify the clinical benefit. As a condition of approval, the FDA will require a sponsor of a drug receiving accelerated approval to perform Phase 4 or post-marketing studies to verify and describe the predicted clinical benefit, and the drug may be subject to accelerated withdrawal procedures. The Priority Review designation means that the FDA’s goal is to take action on the NDA/BLA within six months compared to 10 months under standard review, with two months added to these periods for new molecular entities.

In addition, the Biologics Price Competition and Innovation Act provides for an abbreviated pathway for obtaining FDA approval of biologic drugs that satisfy certain criteria. If a manufacturer can show that its proposed biosimilar product is highly similar to and has no clinically meaningful differences from the FDA-approved reference product, it can rely in part on the FDA’s previous determination of safety and effectiveness for the reference product for obtaining approval. This can potentially lead to a faster and less costly approval process for these products because it generally means that the biosimilar manufacturer does not need to conduct as many clinical trials.

After the NDA or BLA has been approved, a drug can be marketed in the United States and remains subject to post-marketing drug safety monitoring requirements. Any significant changes to an approved drug, such as changes in formulation, labeling, dosage strength, or certain manufacturing changes, require approval by the FDA through a supplemental application, and for certain significant categories of changes, prior approval by the FDA. Additionally, further development of an approved drug for a new use, dosage strength, or a new or different form must be conducted under a new IND. Organon's activities after approval are subject to the FDA’s requirements governing, among other things, drug establishment registration and listing, labeling and advertising, and current Good Manufacturing Practices ("cGMP") regulations, which set forth minimum requirements for the methods, facilities, and controls used in manufacturing, processing, and packing of a drug product. Post-approval reports of product quality defects and adverse events are maintained and submitted to the FDA in accordance with its

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regulations. The FDA conducts routine inspections of drug manufacturing facilities to monitor compliance with these requirements. Non-compliance with cGMP or other regulatory requirements can lead to regulatory action, including issuance of Warning Letters to Organon or issuance of safety alerts, press releases, or other communications containing warnings about the products; suspension or withdrawal of the marketing authorizations; suspension of any ongoing clinical trials; or other enforcement or regulatory actions, including seeking injunction or imposing civil or criminal penalties or monetary fines.

The FDA regulates the advertising and promotion of Organon's products to ensure that the claims Organon makes are consistent with its regulatory approvals, that there are adequate and reasonable data to substantiate the claims, and that Organon's promotional labeling and advertising are neither false nor misleading in any respect.

As a manufacturer and distributor of drug products, Organon's activities are regulated under various federal and state statutes, including the Drug Quality and Security Act of 2013 (the "DQSA") and state manufacturer and wholesaler laws.

Title II of the DQSA, known as the Drug Supply Chain Security Act, calls for the establishment of a nationwide electronic system that tracks certain prescription drugs at each point in the supply chain to prevent the introduction of counterfeit, adulterated, or mislabeled drugs into the market. Implementation began in 2015 and is scheduled to be completed by 2023. The FDA has issued regulations and guidance implementing the DQSA, which require manufacturers, distributors, and dispensers to comply with various regulatory requirements related to product identification, product tracing, product verification, detection and response, notification, and wholesaler licensing.

Under the Controlled Substances Act (the "CSA"), manufacturers and distributors of controlled substances must maintain registration with the Drug Enforcement Agency ("DEA"), and comply with various regulatory requirements, including maintaining records and inventory, reporting to the DEA, and meeting certain security and operational safeguards. Similar requirements exist in most states.

Medical Devices

The FDA's laws and regulations that govern medical devices include requirements for the design, development, testing, manufacturing, labeling, clinical trials, and pre-market clearance and approval, among other requirements. Medical devices are classified into three classes based on their risk: Class I devices present the least risk; Class II devices present moderate risk; and Class III devices are the highest risk. The regulatory controls and requirements vary by the class of device. All classes of devices are subject to "general controls," which include: establishment registration and device listing, compliance with the design controls and good manufacturing practice requirements of the Quality System Regulation, medical device reporting, reporting of recalls, corrections and removals, and labeling and promotional requirements. Most Class I devices do not require any review by the FDA prior to marketing. Most Class II devices require the submission of a pre-market notification under section 510(k) of the FDCA prior to marketing. Class II devices are also subject to "special controls," which are unique controls the FDA establishes for each device type, typically in the form of a guidance document that specifies requirements such as performance testing and labeling. Class III devices require FDA approval of a pre-market approval application ("PMA") prior to marketing and are subject to conditions of approval (which may include post-market study requirements or restrictions on the sale and distribution of the device). Devices that have not previously been classified are automatically Class III. However, if the device is low- or moderate-risk, the manufacturer can submit a de novo classification request asking the FDA to classify the device into Class I or Class II and authorize the marketing of the device.

A 510(k) pre-market notification must demonstrate that the proposed device is "substantially equivalent" to a predicate device already on the market. Substantial equivalence means that the proposed device: (1) has the same intended use as the predicate device; and (2) either (a) has the same technological characteristics as the predicate device, or (b) has different technological characteristics, but does not raise different questions of safety and effectiveness than the predicate device and data demonstrate the proposed device is as safe and effective as the predicate device. If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is not "substantially equivalent" to a previously cleared device, or if the FDA has not classified the device, the device is automatically a Class III device. The device sponsor must then fulfill more rigorous PMA requirements, or can request a classification into Class I or II via a de novo classification request. A de novo classification request must describe the risks and benefits of the device and demonstrate that general controls (for a Class I device) or general and special controls (for a Class II device) provide reasonable assurance of safety and effectiveness. In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data.

Clinical trials are almost always required to support PMAs and are sometimes required to support 510(k) pre-market notifications. Such clinical testing must be conducted in compliance with the FDA's investigational device exemption ("IDE") regulations and additional regulations pertaining to human research. If the device is a "significant risk" device, clinical trial sponsors must obtain the FDA's approval of an IDE application prior to commencing the study. IDE approval is not required for

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non-significant risk device studies. All device clinical trials are subject to additional requirements, including obtaining informed consent from study subjects and approval by institutional review boards, monitoring, record-keeping, reporting and submitting information regarding certain clinical trials to a public database maintained by the National Institutes of Health.

Once a device has obtained FDA clearance or approval, certain modifications will require further pre-market review before they can be implemented. For 510(k)-cleared devices (or Class II devices authorized through the de novo classification pathway), any change that could significantly affect the safety or effectiveness of the device or that involves a major change to the device’s intended use requires clearance of a new 510(k) pre-market notification. Manufacturers are responsible for determining whether a modification meets this standard, and for any changes the company determines do not require a 510(k), the rationale and information supporting the determination must be documented. For PMA approved devices, major changes (i.e., those affecting safety or effectiveness) require FDA approval of a PMA supplement. Certain other changes, including some labelling changes and some manufacturing changes, may be implemented with prior notice to the FDA. Other changes may be reported in periodic reports.

Marketed devices are also subject to ongoing FDA regulation. Requirements include those related to establishment registration and device listing, labeling and advertising, unique device identification, and good manufacturing practice and design controls. Device manufacturers are also subject to the FDA’s medical device reporting regulations, which require a manufacturer to report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur, and the FDA’s correction and removal reporting regulations, which require that manufacturers report to the FDA corrections or removals undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health. The FDA conducts routine inspections of device manufacturing facilities to monitor compliance with these requirements. Non-compliance can lead to informal or formal enforcement action, including Untitled Letters,Warning Letters, fines, injunctions, consent decrees, civil penalties, recalls, detention or seizure of Organon's products, import refusals, and criminal prosecution.

Although physicians are permitted to use their medical judgment to use medical devices for indications other than those cleared or approved by the FDA, Organon may not promote its products for such "off-label" uses and can only market its products for cleared or approved uses. Both the FDA and the Federal Trade Commission have authority over aspects of medical device promotion and prohibit false or misleading labeling and advertising. Other federal, state or foreign enforcement authorities can also take action under other laws and regulations, such as false claims laws, if they consider Organon's business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, and exclusion from participation in government health care programs.

The Regulatory Approval Process Outside the United States

Before Organon's pharmaceutical products can be marketed outside the United States, they may be subject to regulatory approval similar to that required in the United States. The requirements governing the conduct of clinical trials, including requirements to conduct additional clinical trials, product licensing, safety reporting, post-authorization requirements, marketing and promotion, interactions with health care professionals, pricing and reimbursement, may vary widely from country to country. No action can be taken to market any product in a country until an appropriate approval application has been approved by the regulatory authorities in that country. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In certain countries, the sales price of a product must also be approved. The pricing review period often begins after market approval is granted. Even if a product is approved by a regulatory authority, satisfactory prices may not be approved for such product, which would make launch of such products commercially unfeasible in such countries. There are also regulations setting out requirements for medical devices in jurisdictions outside the United States. These regulations set out requirements for placing devices on the market, investigations/trials, safety reporting, marketing and promotion.

The European Union

The following section sets out an overview of the regulatory framework for medicinal products and medical devices in the EU. These rules also apply in the additional Member States of the European Economic Area ("EEA"), namely Iceland, Norway and Liechtenstein.

Drug and Biologic Development Process

Like the United States, the various phases of non-clinical and clinical research in the EU are subject to significant regulatory controls. Although the EU Clinical Trials Directive 2001/20/EC ("Clinical Trials Directive") sought to harmonize the EU clinical trials regulatory framework by setting out common rules for the control and authorization of clinical trials in the

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EU, EU Member States have transposed and applied the provisions of the Clinical Trials Directive in a manner that is not always uniform. This has led to variations in the rules governing the conduct of clinical trials in the individual EU Member States. Therefore, the EU has adopted Regulation (EU) No 536/2014 ("Clinical Trials Regulation"). The Clinical Trials Regulation will (subject to certain transition periods that allow some clinical trials to continue to be governed under the Clinical Trials Directive) repeal and replace the Clinical Trials Directive as of January 31, 2022.

Under the Clinical Trials Directive, before a clinical trial can be initiated, it must be approved in each EU Member State where there is a site at which the trial is to be conducted by two separate entities: the National Competent Authority ("NCA"), and one or more Ethics Committees. The NCA of the EU Member States in which the clinical trial will be conducted must authorize the conduct of the trial, and the independent Ethics Committee must grant a positive opinion in relation to the conduct of the clinical trial in the relevant EU Member State before the commencement of the trial. Any substantial changes to the trial protocol or to other information submitted with the clinical trial applications must be submitted to or approved by the relevant NCA and Ethics Committees. Under the Clinical Trials Directive, all "suspected unexpected serious adverse" reactions to the investigated drug that occur during the clinical trial must be reported to the NCA and to the Ethics Committees of the EU Member State where they occur.

However, under the new Clinical Trials Regulation, the approval of clinical trials in the EU will be simplified and streamlined. For example, the sponsor will submit a single application for approval of a clinical trial via the clinical trials information system. As part of the application process, the sponsor will propose a reporting EU Member State, which will coordinate the validation and evaluation of the application. The reporting EU Member State shall consult and coordinate with the other concerned EU Member States. If an application is rejected, it can be amended and resubmitted through the EU Portal. If an approval is issued, the sponsor can start the clinical trial in all concerned EU Member States. However, a concerned EU Member State can in limited circumstances declare an "opt-out" from an approval. In such a case, the clinical trial cannot be conducted in that EU Member State. The Clinical Trials Regulation also aims to streamline and simplify the rules on safety reporting, and introduces enhanced transparency requirements such as mandatory submission of a summary of the clinical trial results to the EU Database.

National laws, regulations, and the applicable Good Clinical Practice and Good Laboratory Practice standards must also be respected during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use guidelines on Good Clinical Practice ("GCP").

During the development of a pharmaceutical product, the EMA and national regulators within the EU provide the opportunity for dialogue and guidance on the development program. At the EMA level, this is usually done in the form of scientific advice, which is given by the Committee for Medicinal Products for Human Use ("CHMP") on the recommendation of the Scientific Advice Working Party. A fee is incurred with each scientific advice procedure. Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical studies, and pharmacovigilance plans and risk-management programs. Advice is not legally binding for any future Marketing Authorization Application ("MAA") of the product concerned. In the EU, the Pediatric Regulation (EC) No 1901/2006 ("Pediatric Regulation") sets out the requirements for testing medicinal products in pediatric populations. In most EU Member States, companies are also required to have an approved Pediatric Investigation Plan before enrolling pediatric patients in a clinical trial.

Drug and Biologic Marketing Authorization Procedures

In the EU, pharmaceutical products may only be placed on the market after obtaining a Marketing Authorization ("MA"). MAs can be obtained through the centralized procedure, the mutual recognition procedure, the decentralized procedure, or a national procedure (the latter is available only for pharmaceutical products sold in a single EU Member State only). The primary method Organon uses to obtain a MA of pharmaceutical products in the EU is through the centralized procedure.

The centralized procedure provides for the grant of a single MA by the European Commission ("EC"), which is valid for all EU Member States (and, after respective national implementing decisions, in the three additional EEA Member States). The centralized procedure is compulsory for certain pharmaceutical products, including pharmaceutical products derived from biotechnological processes, orphan pharmaceutical products, advanced therapy pharmaceutical products and products with a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases.

Under the centralized procedure, the timeframe for the evaluation of an MAA by the EMA’s CHMP is, in principle, 210 days from receipt of a valid MAA. However, this timeline excludes clock stops, which occur when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP, so the overall process typically takes a year or more. Applications may be eligible for accelerated assessment if the CHMP decides the product is of major

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interest for public health and therapeutic innovation. On request, the CHMP can reduce the time frame to 150 days if the applicant provides sufficient justification for an accelerated assessment. The CHMP will provide a positive opinion regarding the application only if it meets certain quality, safety and efficacy requirements. However, the EC has final authority for granting the MA, and it must issue the decision within 67 days after receipt of the CHMP opinion.

Following the UK's exit from the EU on January 1, 2021, the UK Medicines and Healthcare Products Regulatory Agency ("MHRA") converted centralized MAs into UK MAs that apply in Great Britain (as under the Northern Irish Protocol the EU centralized MAs continue to apply in Northern Ireland). MA holders of the centralized MAs had the right to opt-out of the conversion until January 21, 2021; however, this would mean that these products would not be licensed to be marketed in Great Britain. For those with converted MAs, the holder of these MAs had to submit baseline data to the MHRA and pay the national MA fee. For EU MAs that were granted after January 1, 2021, these MAs will not be automatically converted into UK MAs. However, the MHRA offer some streamlined routes for authorization. For example, for two years from January 1, 2021 the MHRA may rely on the decision of the EC on the approval of a new centralized MA when granted an MA that applies in Great Britain.

If the centralized procedure is not used, then applicants can obtain national marketing authorizations. This can be if a pharmaceutical product falls under the optional scope of the centralized procedure and the applicant opts to use a national (decentralized / mutual recognition) procedure or if the centralized procedure would not apply. The purely national marketing authorization procedure permits a company to apply to the competent authority of a single EU Member State and, if successful, to obtain a MA that is valid only in this EU Member State. However, if the applicant wants a MA in several EU Member States it must use the decentralized or mutual recognition procedure (as applicable) to obtain a suite of national MAs.

The decentralized marketing authorization procedure permits companies to file identical applications for an MA to the competent authorities in several EU Member States simultaneously for a pharmaceutical product that has not yet been authorized in any EU Member State. This procedure is available for pharmaceutical products not falling within the mandatory scope of the centralized procedure. The competent authority of a single EU Member State, the reference EU Member State, is appointed to review the application and provide an assessment report. The competent authorities of the other EU Member States, the concerned EU Member States, are subsequently required to grant MA for their territories based on this assessment. The only exception to this is where the competent authority of an EU Member State considers that there are concerns of potential serious risk to public health related to authorization of the product. In these circumstances the matter is submitted to the Coordination Group for Mutual Recognition and Decentralized Procedures - Human for review.

Where a pharmaceutical product has already been authorized for marketing in an EU Member State, this national authorization can be recognized in another EU Member State through the mutual recognition procedure. The EU Member State that has already granted a MA is the reference EU Member State. The holder of the MA then asks the reference EU Member State to either prepare or update an assessment report. As with the decentralized procedure, the assessment report is shared with the concerned EU Member States. These EU Member States must grant the MA unless the exception (on the grounds of potential serious risk to public health) applies.

Similar to accelerated approval regulations in the United States, conditional MAs can be granted in the EU by the EC in exceptional circumstances. A conditional MA can be granted for pharmaceutical products where, although comprehensive clinical data referring to the safety and efficacy of the pharmaceutical product have not been supplied, a number of criteria are fulfilled: (i) the benefit / risk balance of the product is positive, (ii) it is likely that the applicant will be in a position to provide the comprehensive clinical data post-authorization, (iii) an unmet medical need will be fulfilled by the grant of the marketing authorization and (iv) the benefit to public health of the immediate availability on the market of the pharmaceutical product concerned outweighs the risk inherent in the fact that additional data are still required. A conditional MA must be renewed annually until it is eventually converted into a standard MA when the holder fulfills any obligations imposed and the data supports that the benefits outweigh its risks.

Alternatively, where the applicant can show it is unable to provide comprehensive data on the efficacy and safety under normal conditions (because the condition is too rare, the state of scientific knowledge and/or it would be contrary to medical ethics), the EC may grant an MA in exceptional circumstances. MAs granted under exceptional circumstances will be reviewed annually to ensure the benefits continue to outweigh the risks. However, they will usually not result in a normal MA as the data to support its granting will never be generated.

All new MAAs must include a Risk Management Plan ("RMP") describing the risk management system that Organon will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the MA. RMPs and Periodic Safety Update Reports ("PSURs") are routinely available to third parties requesting access, subject to limited redactions.

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Normal MAs (i.e., not including Conditional MAs and those granted under exceptional circumstances) have an initial duration of five years. After these five years, the authorization may be renewed on the basis of a reevaluation of the risk-benefit balance. Once renewed, the MA is valid for an unlimited period unless the EC or the national competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Applications for renewal must be made to the EMA at least nine months before the five-year period expires.

Data and Market Exclusivity for Drugs and Biologics

As in the United States, it may be possible to obtain a period of market and / or data exclusivity in the EU that would have the effect of postponing the entry into the marketplace of a competitor’s generic, hybrid or biosimilar product (in the case of marketing exclusivity, even if the pharmaceutical product has already received an MA) and for data exclusivity, prohibiting another applicant from relying on the MA holder’s pharmacological, toxicological and clinical data in support of another MA for the purposes of submitting an application. New medicinal products authorized in the EU on the basis of a standalone application (i.e., on the basis of a dossier containing a complete suite of pre-clinical tests and clinical trials) qualify for eight years of data exclusivity and 10 years of marketing exclusivity. An additional noncumulative one-year period of marketing exclusivity is possible if during the data exclusivity period (the first eight years of the 10-year marketing exclusivity period), the MA holder obtains an authorization for one or more new therapeutic indications that are deemed to bring a significant clinical benefit compared to existing therapies. This product is referred to as the "reference medicinal product."

The data exclusivity period begins on the date of the reference medicinal product's first MA in the EU. After eight years, a generic product application may be submitted and generic companies may rely on the data in the reference medicinal product’s dossier. However, a generic product cannot launch until two (or three, if the reference medicinal product was authorized for an additional indication) years later (or a total of 10 or 11 years after the first MA in the EU of the reference medicinal product).

Another noncumulative one-year period of data exclusivity can be obtained where an application is made for a new indication for a well-established substance, provided that significant pre-clinical or clinical studies were carried out in relation to the new indication. One year of data exclusivity is also available for data generated where a change of classification (i.e., from prescription-only to over the counter) of a pharmaceutical product has been authorized on the basis of significant pre-trial tests or clinical trials. However, this data exclusivity only protects the new switch data (i.e., when examining an application by another applicant for or holder of market authorization for a change of classification of the same substance, a competent authority will not refer to the results of those tests or trials for one year).

However, data and market exclusivity are not monopoly rights. Therefore, another company could also market another version of the pharmaceutical product if such company can complete a full MAA with their own complete database of pharmaceutical tests, pre-clinical studies and clinical trials (without relying on the other initial applicant’s data) and obtain MA of its product.

Post-Approval Regulation of Drugs and Biologics

Similar to the United States, both MA holders and manufacturers of pharmaceutical products are subject to comprehensive regulatory oversight by the EMA, the EC and / or the national competent authorities of the EU Member States. This oversight applies both before and after grant of manufacturing licenses and marketing authorizations. It includes control of compliance with EU good manufacturing practices rules, manufacturing authorizations, pharmacovigilance rules and requirements governing advertising, promotion, sale, distribution, recordkeeping, importing and exporting of pharmaceutical products.

Failure by Organon or by any of its third-party partners, including suppliers, manufacturers and distributors, to comply with EU laws and the related national laws of individual EU Member States governing the conduct of clinical trials, manufacturing approval, marketing authorization of pharmaceutical products and marketing of such products, both before and after grant of marketing authorization, statutory health insurance, bribery and anti-corruption or other applicable regulatory requirements, may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.

The holder of an EU MA for a pharmaceutical product must also comply with EU pharmacovigilance legislation and its related regulations and guidelines, which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of pharmaceutical products. These pharmacovigilance rules can impose on holders of MAs the obligation to conduct a labor intensive collection of data regarding the risks and benefits of marketed pharmaceutical products and to engage in ongoing assessments of those risks and benefits, including the possible requirement to conduct additional

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clinical studies or post-authorization safety studies to obtain further information on a medicine’s safety, or to measure the effectiveness of risk-management measures, which may be time consuming, expensive and could impact Organon's profitability. MA holders must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible for oversight of that system. EMA reviews PSURs for pharmaceutical products authorized through the centralized procedure. If the EMA has concerns that the risk benefit profile of a product has varied, it can adopt an opinion advising that the existing MA for the product be suspended, withdrawn or varied. The agency can advise that the MA holder be obliged to conduct post-authorization Phase IV safety studies. The EMA opinion is submitted to the EC for its consideration. If the European Commission agrees with the opinion, it can adopt a decision varying the existing MA. Failure by the marketing authorization holder to fulfill the obligations in the EC’s decision can undermine the on-going validity of the MA.

More generally, noncompliance with pharmacovigilance obligations can lead to the variation, suspension or withdrawal of the MA for the product or imposition of financial penalties or other enforcement measures.

The manufacturing process for pharmaceutical products in the EU is highly regulated and regulators may shut down manufacturing facilities that they believe do not comply with regulations. Manufacturing requires a manufacturing authorization, and the manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice ("GMP"). Organon and its third-party manufacturers are also subject to other good manufacturing practices, which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by the EMA, the EC, the national competent authorities of EU Member States and other regulatory authorities. Companies may be subject to civil, criminal or administrative sanctions if they fail to comply with these practices. These include suspension of manufacturing authorization in case of non-compliance with the EU or EU Member States’ requirements governing the manufacturing of pharmaceutical products.

Compliance with EU GMP standards is required when manufacturing pharmaceutical products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside the EU with the intention to import the active pharmaceutical ingredients into the EU. The manufacturer or importer must have a qualified person who is responsible for certifying that each batch of product has been manufactured in accordance with GMP before releasing the product for commercial distribution in the EU or for use in a clinical trial. Manufacturing facilities are subject to periodic inspections by the competent authorities for compliance with GMP. Similarly, the distribution of pharmaceutical products into and within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of the EU Member States.

Sales and Marketing Regulation of Drugs and Biologics

The advertising and promotion of Organon's products is also subject to EU laws, national laws of individual EU Member States and industry self-regulatory codes of conduct concerning promotion of pharmaceutical products, interactions with health care providers, misleading and comparative advertising and unfair commercial practices.

While the laws in individual EU Member States might vary somewhat, in all EU Member States these laws require that promotional materials and advertising in relation to pharmaceutical products comply with the product’s Summary of Product Characteristics ("SmPC") as approved by the competent regulatory authorities. The SmPC is the document that provides information to health care providers concerning the safe and effective use of the pharmaceutical product. It forms an intrinsic and integral part of the marketing authorization granted for the pharmaceutical product. Promotion of a pharmaceutical product that does not comply with the SmPC is considered to constitute off-label promotion. The off-label promotion of pharmaceutical products is prohibited in the European Union. The applicable laws at the EU level and in the individual EU Member States also prohibit the direct-to-consumer advertising of prescription-only pharmaceutical products. Enforcement is done on a national basis, in accordance with national rules/codes and is largely on the basis of self-regulation. Penalties for violations of the rules governing the promotion of pharmaceutical products vary between EU Member States but could include public censure, administrative measures, fines and imprisonment. These laws/codes may further limit or restrict the advertising and promotion of Organon's products to the general public and may also impose limitations on its promotional activities with health care professionals.

Anti-Corruption Legislation

In the EU, interactions between pharmaceutical companies and health care providers are also governed by strict laws, regulations, industry self-regulation codes of conduct and health care providers' codes of professional conduct both at the EU level and in the individual EU Member States. Across the EU, the provision of benefits or advantages to health care providers to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of pharmaceutical products is prohibited in the European Union. However, the provision of benefits or advantages to health care

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providers is also governed by the national anti-bribery laws of the EU Member States. Violation of these laws could result in substantial fines and imprisonment.

While many EU Member States permit companies to make payments to health care providers in some circumstances, e.g., when they are used as consultants, certain EU Member States required that such payments must be publicly disclosed. Moreover, agreements with health care providers must often be the subject of prior notification and approval by the physician’s employer, his / her regulatory professional organization, and / or the competent authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct applicable in the individual EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

Medical Device Regulation

In the EU, medical devices are regulated by the European Union Medical Devices Regulation (EU) 2017/745 (“MDR”), which became applicable on May 26, 2021. The MDR and its associated guidance document and harmonize standards and govern, among other things, device design and development, pre-clinical and clinical or performance testing, pre-market conformity assessment, registration and listing, manufacturing, labeling, storage, claims, sales and distribution, export and import and post-market surveillance, vigilance, and market surveillance.

Before a device can be placed on the market in the EU, compliance with the MDR requirements must be demonstrated to affix the Conformité Européene mark ("CE Mark") to the product. To demonstrate compliance with these requirements, a conformity assessment procedure is required, conducted either by the manufacturer (for low risk medical devices only, which are known as Class I devices) or by an organization designated by an EU Member State to conduct conformity assessments known as a Notified Body (for higher risk medical devices, including Class I devices that are sterile and/or have a measuring function, Class IIa, Class IIb and Class III devices). The Notified Body issues a certificate of conformity, which entitles the manufacturer to affix the CE Mark to its devices after having prepared and signed a related EU Declaration of Conformity.

Clinical evidence is required for most medium and high risk devices. In some cases, a clinical study may be required to support a CE marking application. A manufacturer that wishes to conduct a clinical study involving the device is subject to the clinical investigation requirements of the MDR, EU Member State requirements, and current good clinical practices defined in harmonized standards and guidance documents.

After a device is placed on the market, it remains subject to significant regulatory requirements. For CE marked devices, certain modifications to the device or quality system depending on the conformity assessment procedure used must be submitted to and approved by the Notified Body before placing the modified device on the market.

Advertising and promotion of devices is governed by the MDR alongside national laws and guidance and is enforced on a country-by-country basis by National Competent Authorities. The MDR provides that devices may be marketed only for the uses and indications for which they are CE marked. National rules and appetites for enforcement may vary.

Economic Operators, including device manufacturers, must register their establishments and devices in the European data base on medical devices (EUDAMED) database once available. Device manufacturers are also subject to MDR vigilance requirements, which require that a manufacturer report to the relevant Competent Authorities any serious incident involving devices made available on the market and any field safety corrective action in respect of devices made available on the market or undertaken in a third country in relation to a device made available on the market.

Post-Brexit the MDR does not apply in the UK (apart from Northern Ireland, which under the Northern Irish Protocol is bound by certain EU laws). The medical device legislative framework in the UK is set out in the Medical Devices Regulations 2002. The Medical Devices Regulations 2002 replace the CE mark with a UKCA marking (although EU CE marks will be recognized until June 30, 2023), require manufacturers outside the UK to appoint a "UK Responsible Person" if they place devices on the Great British market and more wide-ranging device registration requirements.

Other Markets

Outside the United States, the EU, the EEA and other European Jurisdictions, Organon submits marketing applications to national regulatory authorities. Examples of such are the NMPA in China, the Ministry of Health, Labour and Welfare in Japan, Health Canada, Agência Nacional de Vigilância Sanitária in Brazil, Korea Food and Drug Administration in South Korea and Therapeutic Goods Administration in Australia. Each country has a separate and independent review process and timeline. In many markets, approval times can be longer as the regulatory authority requires approval in a major market,

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such as the United States or the EU and issuance of a Certificate of Pharmaceutical Product from that market before initiating their local review process.

Climate and Environmental Matters

Organon believes that climate change could present risks to its business. Some of the potential effects of climate change to Organon's business could include increased operating costs due to additional regulatory requirements, changes in supply due to regulatory requirements, physical risks to Organon's facilities, water limitations and disruptions to Organon's supply chain. Some potential risks are integrated into Organon's business planning, including investment in reducing energy, water use and greenhouse gas emissions. Organon does not believe these potential risks are material to its business at this time.

Organon does not have knowledge of any compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on Organon's business. Expenditures for remediation and environmental liabilities are estimated to be approximately $19 million in the aggregate for the years 2022 through 2026. For additional information, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” and Note 12 "Contingencies —Environmental Matters" to the Financial Statements included in this report.

Third-Party Agreements

Samsung Bioepis Development and Commercialization Agreement

On February 18, 2013, Merck entered into a development and commercialization agreement with Samsung Bioepis (as subsequently amended, the "Samsung Bioepis Agreement"). All of the rights and obligations of Merck under the Samsung Bioepis Agreement were transferred to Organon in connection with the spinoff. The Samsung Bioepis Agreement grants Organon an exclusive license to commercialize the following pre-specified biosimilars products (with reference products in parenthesis) developed by Samsung Bioepis: Adalimumab (Humira2), Bevacizumab (Avastin2), Infliximab (Remicade2), Trastuzumab (Herceptin2) and Etanercept (Enbrel2). See "Business—Organon's Biosimilars Products" for a description of each product and the geographic areas in which Organon has an exclusive license for regulatory and commercialization activities.

Under the Samsung Bioepis Agreement, Samsung Bioepis is responsible for pre-clinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates. Organon's access rights to each product under the Samsung Bioepis Agreement last for ten years from each such product’s launch date on a market-by-market basis. Unless the parties agree to extend the term, the agreement expires upon the expiration of the last such ten-year period. Organon may terminate the agreement with respect to a particular region or product if a product fails to meet certain milestones in such region. Organon may terminate the agreement upon 60 days' written notice to Samsung Bioepis for a particular presentation of a product in a region if Samsung Bioepis’s revenue share for such product presentation in such region exceeds a certain contractual threshold. Organon may also terminate the agreement upon 60 days’ written notice in the event of a third- party infringement claim that Samsung Bioepis decides to litigate despite Organon's opposition to such litigation.

The agreement may be terminated by either party on 30 days' written notice for a particular product or region if the parties fail to agree upon a strategy regarding third-party patents within six months following written notice by either party of the existence of such patents. The agreement may also be terminated by either party upon written notice if the other party commits a material breach of its obligations by specified actions within its reasonable control and has not cured such breach within 90 calendar days after notice requesting cure of the breach.

The Samsung Bioepis Agreement provides that gross profits are shared equally in all markets except for Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to Organon. The Samsung Bioepis Agreement also provides for payment of certain milestone license fees associated with pre-specified clinical and regulatory milestones to Samsung Bioepis, payment of the supply price for each product to Samsung Bioepis, and an upfront payment to Samsung Bioepis that was completed by Merck at the commencement of the agreement. As of December 31, 2021, there were $25 million in potential future regulatory milestone payments remaining under the agreement. For further information related to the Samsung Bioepis collaboration, see Note 4 "Samsung Collaboration" to the Consolidated Financial Statements included in this report and the Samsung Bioepis Agreement, which is filed as an exhibit to this report.

Additional Information

Organon is a Delaware corporation incorporated on March 11, 2020. Organon's corporate offices are located at 30 Hudson Street, 33rd Floor, Jersey City, New Jersey 07302.

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Organon files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports, proxy statements and other information with the SEC. Organon maintains an investor relations page on its website (www.organon.com) where such filings made pursuant to Section 13(a) or 15(d) of the Exchange Act may be accessed free of charge as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

Item 1A. Risk Factors

You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating Organon and deciding to invest in the Common Stock. Any of the following risks could materially and adversely affect Organon’s results of operations, financial condition and the price of the Common Stock.

Summary of Risk Factors

The following is a summary of the principal risks that could significantly and negatively affect Organon's business, prospects, financial conditions, or operating results. For a more complete discussion of the material risks facing Organon's business, please see below:

Risks Related to Organon's Business

•Organon has a limited history of operating as an independent company, and its historical financial results included elsewhere in this report are not necessarily representative of what its actual financial position or results of operations would have been as an independent company and may not be a reliable indicator of its future results.

•Key products generate a significant amount of Organon's profits and cash flows, and any events that adversely affect the markets for Organon's leading products could adversely affect its results of operations and financial condition.

•Organon faces continued pricing pressure with respect to its products.

•Organon faces intense competition from competitors' products.

•Organon has limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand its innovative pipeline and early discovery and research capabilities, which may limit its ability to discover or develop new products or expand its existing products into new markets to replace the sales of products that lose patent protection and therefore Organon may not be able to maintain its current levels of profitability.

•Organon may experience difficulties identifying acquisition opportunities or completing such transactions.

•Organon or its partners may fail to demonstrate the safety and efficacy of any of its product candidates in pre-clinical and clinical trials, which would prevent or delay development, regulatory approval or clearance, and commercialization of Organon's product candidates.

•Organon may be unable to market its pharmaceutical products or medical devices if it does not obtain and maintain required regulatory approvals or marketing authorizations.

•Developments following regulatory approval or marketing authorization may adversely affect sales of Organon's pharmaceutical products or medical devices.

•Certain of Organon's products currently benefit from patent protection and market exclusivity. When the patent protection and market exclusivity periods for such products expire, a significant and rapid loss of sales from those products is generally experienced. Expiry of patent protection and market exclusivity for products that contribute significantly to Organon's sales will adversely affect its business.

•Organon depends on its patent rights for the marketing of certain of its products, and invalidation or circumvention of Organon's patent rights would adversely affect its business.

•Organon is subject to minimum purchase obligations under certain supply agreements, and if Organon fails to meet those minimum purchase requirements, its financial results may be unfavorably impacted.

•Organon has incurred substantial indebtedness, which could adversely affect its financial condition and results of operations.

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•Organon is subject to a number of restrictive covenants under its indebtedness, including customary operating restrictions and financial covenants, which could restrict Organon's ability to pay dividends or adversely affect its financing options and liquidity position.

Risks Related to the Spinoff

•As Organon builds its information technology infrastructure and transitions its data to its own systems, Organon could incur substantial additional costs and experience temporary business interruptions.

•Merck may not satisfy its obligations under various transition agreements that have been or will be executed as part of the spinoff or Organon may not have necessary systems and services in place when certain of the transition agreements expire.

•Potential indemnification liabilities to Merck pursuant to the Separation and Distribution Agreement could adversely affect Organon.

•There could be significant income tax liability if the spinoff or certain related transactions are determined to be taxable for U.S. federal income tax purposes.

•Contractual restrictions limit Organon's ability to engage in certain corporate transactions.

Risks Related to Organon's Common Stock

•The price and trading volume of Organon's Common Stock may be volatile, and stockholders could lose all or part of their investment in Organon.

•Organon cannot guarantee the timing, amount or payment of any dividends on the Common Stock.

•Certain provisions in Organon's amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of Organon, which could decrease the trading price of the Common Stock.

•Certain provisions of agreements that Organon entered into with Merck may limit Organon's ability to operate its business.

•Organon's amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Organon's stockholders, and the United States federal district courts as the exclusive forum for claims under the Securities Act, which could limit Organon's stockholders' ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with Organon or its directors, officers or employees.

Risks Related to Organon's Business

Organon has a limited history of operating as an independent company, and its historical financial results included elsewhere in this report are not necessarily representative of what its actual financial position or results of operations would have been as an independent company and may not be a reliable indicator of its future results.

Prior to the spinoff, Merck performed various corporate functions for Organon, including information technology services, research and development, distribution, support for operations, legal, payroll, finance, tax and accounting, general administrative services and other support services. Organon's historical financial results reflect allocations of corporate expenses from Merck for these and similar functions that may be less than the comparable expenses Organon would have incurred had it operated as a separate publicly traded company. Prior to the spinoff, Organon shared economies of scope and scale in costs, employees, vendor relationships and relationships with its partners. While Organon has entered into transition agreements that govern certain commercial and other relationships between it and Merck, those arrangements may not capture the benefits to Organon's business that resulted from being integrated with the other affiliates of Merck.

Key products generate a significant amount of Organon's profits and cash flows, and any events that adversely affect the markets for Organon's leading products could adversely affect its results of operations and financial condition.

Organon's ability to generate profits and operating cash flow depends largely upon the continued profitability of its key products, such as Nexplanon, Cozaar®/Hyzaar®, Singulair® and the Ezetimibe family of products. As a result of

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Organon's dependence on key products, any event that adversely affects any of these products or the markets for any of these products could adversely affect Organon's sales, results of operations or cash flows. These adverse events could include increased costs associated with manufacturing, product shortages, increased generic or over-the-counter availability of Organon's products or competitive products, the discovery of previously unknown side effects, results of post-approval trials, increased competition from the introduction of new, more effective treatments and discontinuation or removal from the market of these products for any reason. Organon also expects that competition will continue to adversely affect the sales of these products.

Organon faces continued pricing pressure with respect to its products.

Organon faces continued pricing pressure globally and, particularly in mature markets from managed care organizations, government agencies and programs that could adversely affect its sales and profit margins. Organon expects pricing pressure to continue in the future. For example, in the United States, Organon experiences significant pricing pressure from: managed care groups, institutional and governmental purchasers, U.S. federal laws and regulations related to Medicare and Medicaid (including the Medicare Prescription Drug Improvement and Modernization Act of 2003 and the ACA and state activities aimed at regulating prices and increasing price transparency). Changes to the health care system enacted as part of health care reform in the United States, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, could result in further pricing pressures. In addition, in the United States, larger customers have received higher rebates on drugs in certain highly competitive categories. Organon must also compete to be placed on formularies of managed care organizations and other payors. Exclusion of a product from a formulary can lead to reduced usage in the population covered by the managed care organization or other payor. Outside the United States, numerous major markets, including the EU, the UK, China and Japan, have pervasive government involvement in health care funding and, in that regard, extensive pricing and reimbursement mechanisms and processes for pharmaceutical products. Consequently, in those markets, Organon is subject to government decision-making and budgetary actions with respect to its products. In China, pricing pressure from the Chinese government has increased, including through a series of health care reforms to accelerate generic substitution. While pricing pressure has always existed in China, health care reforms have increased this pressure in part due to the acceleration of generic substitution through the government’s volume-based procurement ("VBP") and generic quality consistency evaluation ("GQCE") programs. In Japan, the pharmaceutical industry is subject to government-mandated biennial price reductions of pharmaceutical products. Furthermore, the government can order re-pricing for specific products if it determines that use of such product will exceed certain thresholds defined under applicable re-pricing rules.

Organon faces intense competition from competitors' products.

Organon's products face intense competition from competitors' products, including lower cost generic versions of its products that have lost market exclusivity. Competitors' products may be equally safe and as effective as Organon's products but sold at a substantially lower price than Organon's products. Alternatively, Organon's competitors' products may be safer or more effective, more convenient to use, have better insurance coverage or reimbursement levels or be more effectively marketed and sold than Organon's products. Organon's efforts to compete with other companies or Organon's failure to maintain its competitive position could adversely affect its business, cash flow, results of operations, financial condition or prospects.

Organon has limited in-house discovery and early research capabilities and will continue to rely on future acquisitions, partnerships and collaborations to expand its innovative pipeline and early discovery andresearch capabilities, which may limit its ability to discover or develop new products or expand its existing products into new markets to replace the sales of products that lose patent protection, and therefore Organon may not be able to maintain its current levels of profitability.

Organon has limited in-house discovery and early research staff and facilities, and does not currently intend to extensively hire or acquire such staff or facilities in the near future. Instead, Organon intends to continue to rely on future acquisitions, partnerships and collaborations with third parties to expand its innovative pipeline, existing portfolio and innovation and early research capabilities. Organon intends to grow its business through new indications or formulations of its existing products or expansion of existing products into new markets or new geographies. However, Organon expects that its ability to do so could be limited by the scope of its limited intellectual property licenses for certain women's health products. For example, a license from Merck for Nexplanon permits use of the underlying technology solely as a contraceptive implant containing only the active pharmaceutical ingredient currently used in the product. Additionally, in December 2021, Organon signed a supplemental license with Merck that provides a limited expansion of the fields in which Organon may use the underlying technology of Nexplanon beyond contraception in exchange for milestone payments. Organon may not be able to offset any sales losses for products that lose or do not have exclusivity by growing sales in other markets. If Organon cannot produce sufficient revenues from expansion into new products, new indications or formulations of its existing products or expansion of existing products into new markets or new geographies, then Organon may not be able to maintain its current levels of profitability, and this could adversely affect Organon's business, cash flow, results of operations, financial condition or prospects.

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Organon may experience difficulties identifying acquisition opportunities or completing such transactions.

Organon intends to continue pursuing acquisitions of complementary businesses, licensing arrangements and strategic partnerships to expand its product offerings and geographic presence as part of its business strategy. Organon may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and Organon may not realize the expected benefits of any acquisition, license arrangement or strategic partnerships. Such opportunities may relate to products, technologies or operations with which Organon has limited or no historical experience. For example, Organon has not historically engaged in the medical device business, but in June 2021, Organon completed the acquisition of Alydia Health, a commercial-stage medical device company. In identifying, evaluating and selecting acquisition targets, Organon may encounter intense competition from other companies having a business objective similar to Organon's. Many of these companies are well established and have extensive experience identifying and effecting these types of strategic acquisitions. Moreover, some of these competitors may possess greater financial, technical, human and other resources than Organon does. In addition, certain provisions of the tax matters agreement, which are intended to preserve the intended tax treatment of the spinoff and certain related transactions, may discourage, delay or prevent acquisition proposals or otherwise limit Organon's ability to pursue certain strategic transactions or engage in other transactions, including mergers or consolidations, for a period of time following the spinoff. Even if Organon is successful in making acquisitions, the products and technologies Organon acquires may not be successful or may require significantly greater resources and investments than it originally anticipated. Organon could experience negative effects on its results of operations and financial condition from acquisition-related charges, amortization of intangible assets and asset impairment charges. Organon could experience difficulties in integrating geographically separated organizations, systems and facilities, and personnel with diverse backgrounds. If an acquired business fails to operate as anticipated or cannot be successfully integrated with Organon's existing business, its business, financial condition, results of operations or cash flows could be materially and adversely affected.

Organon may be unable to market its pharmaceutical products or medical devices if it does not obtain and maintain required regulatory approvals or marketing authorizations.

Organon's activities, including the manufacturing and marketing of its pharmaceutical products and medical devices, are subject to extensive regulation by numerous federal and state governmental authorities in the United States, including the Food and Drug Administration ("FDA"), and by foreign regulatory authorities, including in the EU, the UK, China and Japan. In the United States, the FDA administers requirements covering the laboratory testing, clinical trials, approval, safety, effectiveness, manufacturing, labeling and marketing of prescription pharmaceuticals and medical devices. Regulation of Organon's pharmaceutical products outside the United States also is primarily focused on drug safety and effectiveness and, in many cases, reduction in the cost of drugs. In addition, regulatory authorities such as the FDA, the EMA, the MHRA, China's National Medical Products Administration ("NMPA") and Japan’s Ministry of Health, Labour and Welfare have increased their focus on safety when assessing the benefit/risk balance of drugs. These regulatory authorities, including in China and Japan, also have substantial discretion to require additional testing, to delay or withhold registration and marketing approval and to otherwise preclude distribution and sale of a product. Organon currently markets one product in the United States regulated as a medical device, the Jada system (acquired through Organon's acquisition of Alydia Health, as described elsewhere in this report). In the future, Organon also plans to sell its medical devices in additional major international markets and will be subject to the regulatory requirements imposed in those jurisdictions. For example, in order to sell medical devices in EU member countries, Organon will need to comply with the MDR. Foreign sales outside the EU (including in the UK) are subject to the foreign government regulations of the relevant jurisdiction, and Organon will need to obtain marketing authorization by the appropriate regulatory authorities before it can commence clinical trials or marketing activities in those countries.

Organon cannot market its pharmaceutical products or medical devices or new indications or modifications to its existing products unless and until Organon has obtained all required regulatory approvals or marketing authorizations in each relevant jurisdiction. Organon's applications or submissions for regulatory approval or marketing authorization may be rejected or otherwise delayed by the FDA or other foreign regulatory authorities. For example, the FDA may issue complete response letters indicating that Organon's applications for its pharmaceutical products are not ready for approval. Once obtained, Organon must maintain approval or marketing authorization as long as it plans to market products in each jurisdiction where approval or marketing authorization is required. The FDA or other regulators may change their policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay regulatory approval or marketing authorization of Organon's future products or impact Organon's ability to modify its currently marketed products on a timely basis. Organon's failure to obtain approval, significant delays in the approval or marketing authorization process or its failure to maintain approval or marketing authorization in any jurisdiction will prevent Organon from selling the products in that jurisdiction. Organon would not be able to realize revenues for its pharmaceutical products or medical devices in any jurisdiction where it does not have approval or marketing authorization.

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Organon or its partners may fail to adequately demonstrate the safety and efficacy of any of Organon's pharmaceutical product candidates or medical devices in pre-clinical studies and clinical trials, which would prevent or delay development, regulatory approval or marketing authorization and commercialization of Organon’s product candidates.

Before obtaining regulatory approval from the FDA or other comparable foreign regulatory authorities for the sale of Organon's pharmaceutical product candidates, Organon must demonstrate through lengthy pre-clinical studies and clinical trials that its product candidates are both safe and effective for use in each target indication. Obtaining marketing authorization for Organon's devices may also require pre-clinical and clinical trials. Pre-clinical and clinical trials are difficult to design and implement, and can take many years to complete, and their ultimate outcome is uncertain. Failure can occur at any time during the pre-clinical study and clinical trial processes. Accordingly, there is a high risk of failure and Organon may never succeed in obtaining regulatory approval or marketing authorization of its product candidates.

Organon may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent receipt of regulatory approval or marketing authorization, or Organon's ability to commercialize its product candidates, including for example, inability to recruit and enroll study subjects; failure of its product candidates in pre-clinical studies or clinical trials to demonstrate safety and efficacy; receipt of feedback from the FDA and other regulatory authorities that require Organon to modify the design of its clinical trials; and negative or inconclusive clinical trial results that may require Organon to conduct additional clinical trials or abandon certain research and/or development programs.

Organon may be required to conduct additional pre-clinical studies, clinical trials or other testing of its product candidates beyond those that it currently contemplates, or Organon may be unable to successfully complete pre-clinical studies or clinical trials of its product candidates or other testing in a timely manner. If the results of these studies, trials or tests are not positive (or are only modestly positive), or if there are safety concerns, Organon may incur unplanned costs, as well as delays in its efforts to obtain regulatory approval or marketing authorization. Even if Organon receives such approval, it may be more limited or restrictive than anticipated, or be subject to additional post-marketing testing requirements.

Developments following regulatory approval or marketing authorization may adversely affect sales of Organon's pharmaceutical products or medical devices.

Even after a pharmaceutical product or medical device reaches the market, Organon continues to be subject to significant post-marketing regulatory requirements and oversight. The regulatory approvals or marketing authorizations that Organon may receive for its pharmaceutical products and medical devices will require the submission of reports to regulatory authorities and on-going surveillance to monitor the safety and efficacy of its products, may contain significant limitations related to use restrictions for specified groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements. In addition, even after a pharmaceutical product or device has obtained marketing authorization, the manufacturing processes, labeling, packaging, distribution, adverse event and device malfunction reporting, storage, advertising, promotion, import, export, recalls and recordkeeping for Organon's products will be subject to ongoing regulatory requirements, and Organon will be subject to periodic inspections. Failure to comply with any of these requirements could subject Organon to a variety of formal or informal enforcement actions by the FDA or other regulators, result in a recall or market withdrawal of Organon's products, require Organon to cease manufacturing and distribution of the products, trigger product liability or other litigation, or otherwise impact Organon's ability to realize revenues for its products.

Likewise, if previously unknown side effects, adverse events, malfunctions or other quality or safety concerns are discovered or if there is an increase in negative publicity regarding known side effects of any of Organon's products, it could significantly reduce demand for the product or require it to take actions that could negatively affect sales, including initiating corrections of a marketed product or removing the product from the market, restricting Organon's distribution or applying for marketing authorization for labeling changes. The FDA could also require Organon to conduct postmarketing studies of its products. Further, Organon is at risk for product liability and consumer protection claims and civil and criminal governmental actions related to its products, research and marketing activities. In addition, dissemination of promotional materials through evolving digital channels serves to increase visibility and scrutiny in the marketplace.

Certain developments may decrease demand for Organon's products, including the following:

•scrutiny of advertising and promotion;

•negative results in post-approval Phase 4 trials or other studies;

•review by regulatory authorities or other expert bodies of Organon's products that are already marketed based on new data or other developments in the field;

•the recall, loss or modification of regulatory approval or marketing authorization of products that are already marketed; and

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•changing government regulations regarding safety, efficacy, quality or labeling.

Certain of Organon's products currently benefit from patent protection and market exclusivity. When the patent protection and market exclusivity periods for such products expire, a significant and rapid loss of sales from those products is generally experienced. Expiry of patent protection and market exclusivity for products that contribute significantly to Organon's sales will adversely affect its business.