Good afternoon, everybody. I'm Chris Schott from JPMorgan, and it's my pleasure to be hosting this Fireside Chat with the Organon Management Team. From the company, we have CEO Kevin Ali, as well as CFO Matt Walsh. Kevin and Matt, happy New Year. Thanks for joining us.
Happy New Year.
Yeah, and looking forward to the conversation today. So I thought, Kevin, maybe just to kick off, would be interested in just some of your bigger picture thoughts on the business as we head into 2025, and then lots of different directions we can jump into from there.
I'd be remiss not to say that we've had a really solid 2024. We were able to really kind of execute on many things that we wanted to do, namely NEXPLANON, which is our core product that we were able to grow. I think this year you saw end of Q3 was about 15% growth, both inside cumulative, both inside the U.S. as well as ex-U.S. Really strong year for NEXPLANON , our most important product. Overall, I think just a really solid year in terms of performance that I can see across the board in many different areas. BD, we did the Emgality deal with Lilly, which on a three-quarter of year basis this 2024 is probably going to deliver somewhere around $100 million.
So it's been very good, and they were so happy with it, they actually signed us up for a number of other territories, including the emerging markets. So that will also be adding in for 2025. And as we start to turn our attention towards the end of 2024, we, of course, made the biggest business development deal we've done to date, which is the acquisition of Dermavant. And we were really fortunate enough that Dermavant delivered, I think, a really nice product for us where the FDA approved just a few weeks ago the atopic dermatitis indication, and we're really happy with that label.
As we start to exit 2024 and we start to look at 2025, the most important thing to know is that as we go into 2025, we're kind of focusing on dealing with essentially a loss of exclusivity event for Atozet, which is our second largest product. And that Atozet LOE is essentially happening in many parts of Europe as well as in Japan. Our vision right now is to essentially offset, do our best to offset that LOE event in 2025 and this year through the process of continuing growth of our key product NEXPLANON , drive high single-digit growth of fertility, continue to grow, obviously, VTAMA now, where we can have a nice discussion about what the future of VTAMA looks like and the whole dermatology vertical that we're building now, as well as continued growth of HADLIMA, continued growth of Jada.
And so a lot of the new products are really growing well. So it kind of tells you that we've been, I think, very prudent and smart in the way that we've done business development in order to bring in assets that can take us through these LOE periods. And then going forward into 2026, it's going to be really a great period of time for the company because LOEs only happen once, and that is the last of the LOEs essentially for the established brands.
Okay, good.
So we're looking good.
Yeah, yeah, excellent. Maybe just jumping into VTAMA.
Sure.
Would love to just elaborate a little bit more on how you're thinking about competitive positioning here, what that looks like in atopic derm versus psoriasis and how we think about that rollout this year.
You know, I think a lot of folks were disappointed with VTAMA because there was all this estimation that it's going to be a billion-dollar business for psoriasis and a billion-dollar business for atopic dermatitis. And actually, I'm quite relieved that they are, because if it was going to look like a billion-dollar business for psoriasis, I wouldn't have gotten the deal that we got for VTAMA in terms of being able to acquire Dermavant. So look, psoriasis is a very well-saturated and satisfied market. We've got 14 biologics that are approved, very good efficacy. You've got topicals as well. And we actually had very good penetration within the topical segment within psoriasis. It's somewhere around, we'll finish the year in 2024, around between $70 million and $80 million-ish type of business. The real opportunity is atopic dermatitis, because there's only one biologic approved, which you know , DUPIXENT.
But with this new indication, the label is exceptional. And I'll tell you why. You're talking about 20 million patients in the United States alone that suffer from eczema atopic dermatitis, 10 million of them being pediatrics, 10 million being adults. There's very little in the pediatric space. And look what's come out from the new label from the FDA for atopic dermatitis. We're talking about indicated from two years of age and above. We're talking about indicated from mild, moderate, and severe. No other topical has that. We're talking about a product that has no black-box warning, no drug-drug interaction, very few in terms of safety and precaution information. You're talking about a product that has an EASI score of nearly 75, which basically says it is as effective as a systemic. And you're talking about a product that has no limitation on usage or body surface.
Perfect agent to be using for the pediatric population as well as for the adult population. So right now, what we're seeing is we're only two weeks in, but I'm looking at the TRx levels, right? With the week ending January 3rd, and usually what happens in the period of holidays is you get a drop-off with most of the TRxs, and you see for Zoryve, Eucrisa, for Opzelura, there's about an 18%-20% reduction in TRx. It's flat for us, so it kind of tells you that there's a real robust opportunity there, and feedback that we're getting from the field is that this is going to be a breakthrough product for the pediatric population because they really don't have much to use in that space.
Help us a little bit just understand how you think about the ramp. Sounds like some obviously very encouraging trends early here, but is this one that takes time to get reimbursement in place and education in place or one that can go pretty quickly?
That is the point. So for us, having taken over this, what synergies does Organon bring to this product, right? Well, Dermavant had something like four or five people in their managed care space. They don't have an access organization. If you look at surveys done, the group that we have at Organon, which obviously came over from Merck from me, they're in the top 10 across all pharma in terms of reputation they have with PBMs and a number of other payers. We have local, regional, state level, federal level, as well as national managed care group of people who are really good.
And so the opportunity now to use the atopic dermatitis indication to get further formulary acceptance, move away from, say, using coupons, getting more into essentially being able to use this product across a wide variety because the value proposition wasn't as compelling in psoriasis as it is in AD. So now I think the future is going to be looking very good for us in terms of gross net and in terms of penetration in terms of some of these payers.
I'm going to just wrap up the conversation here. Can you just remind us in terms of revenue and expense expectations around the product for this year and beyond?
So this year, I think our revenue expectation is around $150 million, $150 million, and the expense expectation is around $180 million. Now, we're being a bit conservative because that basically means around if you're saying flat on psoriasis, that's about $80 million on psoriasis so that you could see where the rest is. But the kind of expectations we have and the kind of initial indications we have, I think we feel very comfortable with the numbers.
Great. Then from there, could we expect as revenue ramps that that OpEx piece has some leverage to it?
I do think so. I think that this product is going to be a $500 million product for Organon within the next three to five years. Let's see how we do in year one, and that will kind of establish the trajectory. But our increase in OpEx won't be relevant in that respect. We're where we need to be. You know, the thing is that we've got a sales force now that came over from Dermavant with the average tenure of experience of nearly 10-15 years. So these are folks that came from other companies with the opportunity to be part of a startup, and they're really good sales organization. They just didn't have a managed care organization that we can bring to bear on this.
Great. Maybe talking more broadly about 2025, I guess when we consider the pushes and pulls in the business, will Organon be able to grow revenues in 2025 as you look at the business today?
So our biggest issue in 2025 is two things. Is the LOE of Atozet, which again is a one-time event, and we're starting to reach kind of the maturity level on a few of the biosimilars, RENFLEXIS, as well as ONTRUZANT. So those will start to migrate downward a bit, but we've got HADLIMA growing as well. But overall, those are the two headwinds. And then, of course, the final headwind is currency. So dollar has strengthened. We've got about 75% of our business that resides outside of the U.S., so a strong dollar has different issues for us to deal with in regards to that. So if we're talking about on an ex-exchange basis, okay, we believe that we might be able to offset some of these headwinds, and then in 2026, you'll see much more robust growth.
On the LOE front, could you just remind me how large of a headwind you're expecting this year?
Yeah. So that LOE event is somewhere around slightly north of $200 million.
Okay. And we should expect that to, in terms of the erosion, we'd expect.
Pretty aggressive in this year, and then ultimately it'll be pretty much going forward. We've got launches of Atozet in China, but that takes time to ramp up. But the biggest, about 85% of the business resides in those markets where we're going through the LOE.
Okay, okay. That's helpful. And then on the growth driver side, beyond VTAMA, can you just talk about kind of what do you see as the biggest growth drivers going into this year?
Yeah. So we've got growth drivers continuing in NEXPLANON . NEXPLANON , again, has had probably its strongest year it's ever had in 2024. This year, as we start to think about ex-U.S. business continuing to grow pretty robustly in the U.S., I think we really have it down now in terms of what we need to do to continue that business growing at a mid- to high-single-digit growth. We're not guiding yet, obviously, at this stage. We'll do that in February. But we feel like 2025 will be the year we cross the $1 billion threshold. We'll be in excess of $1 billion in 2025. And we see the runway on this through the end of the decade. So if you're talking about, if you're just conservative about mid-single-digit growth over the coming period of time until the end of the decade, this is a $1.5 billion-$1.6 billion business.
Yeah, yeah. Excellent. And then you mentioned the biosimilar side. We've got HADLIMA. Talk about the dynamics we should think about for that one heading into 2025. I know that market's kind of been a tough one, unpredictable one, I'll say.
It is unpredictable, but I was here talking about where that was going to go when you had.
Yeah, we'll just spot on with it.
In terms of what was going on with the discount. So I think HADLIMA is going to go to a place where we're going to generate probably $100 million in 2024, thereabouts, and continued strong growth, I think, in 2025, because there's opportunities with HADLIMA in the non-PBM sector where we're getting a lot of business. Like, for example, we won the exclusive rights of the VA. We've got a number of opportunities across the country in the Blue Cross Shields, state levels, all those what I would call non-PBM businesses that are more sticky, more fragmented, but we do well in that space. So that will do well. We're launching our denosumab biosimilar in the end of 2025, in this year. So probably fourth quarter, we'll be launching our denosumab biosimilar. And in 2026, 2027, we'll be launching our pertuzumab biosimilar as well.
So that kind of gives us a chance to say that every one or two years, we said we would be launching new biosimilar assets. We feel really good about that. We're looking at BD as well in the biosimilar space. And then, of course, in 2025, this year, by probably October timeframe, we're launching the five-year indication for NEXPLANON , which is really exciting because there's some robust data that came out of that data.
Just staying on the biosimilars, just a couple more questions. The legacy products that are kind of starting to roll over a bit, how do we think about the tail of those businesses as they mature? Are these going to be pretty severe erosions or slow?
Look, I mean, I think since we launched the company, what we've seen out of the established brands business is flat to slightly growing. Now, this LOE event takes us into a place where it won't be happening this year in 2025. But going back to 2026, we see again a flattish performance where Emgality is helping to drive that business. But at the same time, the rest of the product profile is going to be pretty constant. So it's a good stream of revenue, good stream of EBITDA over time that we continue to rely on, especially in the absence of any LOEs.
Thinking about EBITDA margins for 2025, I think the low end of the guidance range currently is 31% for this year. Is that still a good floor to think about for the business going forward?
Yeah.
Okay.
Look, we signaled some time ago that the floor that we're looking at is essentially 31% EBITDA margin. Now, you could ask yourself a question and say, "Hey, well, listen, you're losing your second largest product and you're investing in this new acquisition. So how are you going to keep the EBITDA margin where it is?" Well, we've been on this journey of restructuring and robust kind of looking at our overall OpEx exposure. And it started in mid-2023. It came into 2024. You can see that what we've done in terms of our OpEx savings and efficiency improvements. The 2025 is really the year of intense kind of restructuring efforts. And you're going to see, I think, really some restructuring costs going into our overall P&L and our balance sheet. But at the same time, we've got an opportunity now to maintain that EBITDA margin level at around 31.
That restructuring, do we see that mostly in gross margins or is it throughout the P&L?
Mostly throughout the P&L and regarding in terms of our overall looking at our efficiencies across the board.
Okay, okay. Perfect. You mentioned FX headwinds. Can you just help remind us the sensitivity and flow-through of currency to the P&L that we should be keeping in mind?
So we've got roughly 75% of our revenues ex-U.S. And if we were to lock exchange rates for guidance for 2025 today, we'd be looking at something like a year-on-year change due to just FX translation on top-line revenue, about $200 million plus or minus. We'll guide on that more precisely in February. But order of magnitude, it's about $200 million at the revenue line year-on-year.
Okay. And then the flow-through of that to EBITDA historically has up and.
is historically around half. So from a financial reporting perspective, we've got hedges, natural hedges down the P&L. From an economic perspective, it's even better. Okay. We do all of our manufacturing outside the United States. More than half of our employees are outside the United States. So we have plenty of uses for the ex-U.S. currencies that we generate.
Great. And then beyond 2025, once you get through this LOE event, what does revenue growth look like for Organon?
I can tell you that we've always kind of signaled low to mid-single-digit growth. But think about this, right? The growth drivers in 2025, NEXPLANON , VTAMA, Jada, Fertility, HADLIMA, the new launches of denosumab will be full year in 2026. 2026 will be a very good year for us, we believe. Because the OpEx savings we're doing in 2025, we'll have a run rate that will be fully embedded in 2026, where 2025, we won't get the full benefit of it, but we will in 2026. So you'll see good solid leverage growth on both EBITDA and revenue lines.
So kind of think about that as a year where we kind of re-accelerate the business.
Exactly.
Digging into some products in more detail, Women's Health first. NEXPLANON , you mentioned the five-year data. Just what should we expect? Maybe just first on the timing of that launch. How should we think about that?
So that launch should be in the October, the Q4 timeframe in terms of the indication for the five-year indication. And just to kind of give a little commentary, here's what we found. In the five-year data, zero pregnancies. So pretty effective.
Yeah. They were supposed to.
And in addition to that, there was a fairly large contingent of women with fairly high BMI. So zero pregnancies, high BMI. There are typically issues in regards to being able to get effective contraception care for patients, women with high BMI. So that is a new segment that is emerging for us. And in addition to the segment of what I would call the family complete segment, these are women who want longer than three years of efficacy because they're finished with their family. So when you think about it, right, on any given we're generating a lot of new patients every year. Why? Because a patient starting on NEXPLANON in year one, about 15% of them will be left by year three. So there's a lot of turnover.
If you're asking me a question of like, well, if you're going from three to five, will somebody just say, "Well, I'm not coming in to get it removed?" Well, there's only 15% of those patients remaining, and a percentage of them will still want to get it removed, and a percentage of them will stay. But then you offset that with essentially the additional new segments. And then, of course, you have a pricing opportunity, which we haven't decided yet in terms of kind of what I would call to be determined in terms of what we can take on that.
Okay. And is that to be determined, is that still a discussion with payers of how they're thinking?
It's a discussion with payers. It's a state-level situation sometimes in terms of how far you can go in terms of price increases, so we're looking to see where that sweet spot will be.
Okay. And when we learn about that pricing, is that probably around the launch timeline or something?
I think so. I think that's a very valid point.
It sounds like you mentioned the 15% or year three. Is there a potential that you'd have some mismatch that whatever you get for price, some of those patients who are staying on longer could result in some volatility of revenue as we look at 2026, or is that less relevant in your view?
I think 2026, you're going to see some puts and takes. You'll see some erosion due to the fact that patients who were going to get essentially a renewed script or a renewed rod will stay for another two years. You'll get the opportunity for patients with high BMI to come in. You'll get patients with those family complete folks coming in. You've got price opportunity. So as it mixes in, we'll see how it goes. But I think overall, I think it's fair to say that mid- to high single-digit growth, we've had very robust double-digit growth in 2024. But mid- to high single-digit growth going forward is something that I feel very confident about throughout the end of the decade. And so that kind of tells you how big this product is going to be.
Because I see some analyst models are showing that this is a $600 million business by 2030. I look at it more like, put a billion next to it.
Okay. Perfect, and then maybe kind of leads to the next question is just talking about some expectations of loss of exclusivity and how you're thinking about the duration of the NEXPLANON franchise.
Yeah, that's a good question. I think the only benchmark I would use is let's look at Mirena. Very similar, except it's IUD. It's a medicated IUD device. We have something that goes into the arm. Now, very similar in the sense that we still don't see a generic of Mirena, seven years post-LOE. I think you'd see something similar. It's still a billion-dollar product. They don't put much effort at all behind it. As a matter of fact, there might be a one could say that they're actually not as much interested in women's health. But nevertheless, it's a billion-dollar product. Now, if we end up at 1.6, that means essentially we'll be the biggest contraception that's ever we'll have set the record in that regard as a benchmark. So going forward, I'm feeling comfortable by 2030 saying that's what I feel comfortable saying.
Beyond that, we'll have to see. But there's a lot of potential longevity because, as I mentioned before, if you crack the code of being able to get it onto the market, you still need a salesforce, medical affairs groups to teach and train physicians on how to insert, how to remove, pharmacovigilance, all the things that one would say that you would have with a branded product. So it's quite an investment to get there.
Yeah. Are you aware of anyone working on a generic in the U.S. at this point?
No. I mean, I've heard noises, but they've kind of gone quiet.
Okay. Excellent. Maybe a similar question, ex-U.S. Is there an expectation that you could see a generic coming in ex-US this year?
In Europe, we lose patent in 2025 and we haven't seen anything. Anything at all. Now, remember, by the way, that our applicator device has patent through 2030. So if somebody wants to come onto the market, they're going to have to do clinical studies on their own proprietary applicator in order to be able to say to the FDA that we've got the applicator now, it's our own proprietary. It takes quite a bit of effort because you have to show no deep vein insertion. You've got to be able to show the efficacy and safety, and that's not an easy thing to do.
There are a couple of hurdles here, I feel like.
I would say quite a few.
Yeah. Excellent. Maybe beyond NEXPLANON , just talk about growth drivers more broadly with women's health. What should we be focused on?
With women's health, look, we're looking at mostly our R&D pipeline. This is a very important year because we made the acquisition of Forendo for a couple of assets, most importantly the asset for endometriosis. And that product in the July timeframe will be reporting out phase 2a/2b data. So hopefully, maybe in this time next year, we're talking about phase III initiations. That would be a good day. But look, there's a huge opportunity here because this is a product that has a completely new mechanism of action. It's non-hormonal. It is not systemic acting. It's locally acting in terms of the conversion between estrogen and estradiol, which is exactly what you want to do. And so far, we haven't had any safety signals. Otherwise, you'd have seen something come up. So we'll have to see whether the proof of concept is met.
But by July, we'll be able to have some information of whether we have the opportunity to go to phase III. That's exciting because now we're talking about something that is a multi-billion-dollar opportunity.
Yeah. And just tell me a little bit, once we see that phase III there, what does a phase III look like in the setting in terms of size and duration?
The duration would probably be a two-year period, I would guess, a launch of 2029 or thereabouts. Size, well, we'd have to see exactly how many patients that we would need in order to be able to size it appropriately in the clinical studies. But it will be global in nature.
Okay. Okay. Good to know. Fertility, can you talk about growth outlook for that one? Is that one we can think about kind of more normalized growth this year?
Yeah. It was a challenging year in 2024 because of 2023. We had a change in terms of some buy-ins, a very large PBM, CVS, that ultimately we won, brought in a lot of product in 2023, advanced purchase, so as a result of that, we were working through that inventory in 2024. In China, we expected a much greater penetration because reimbursement started, but it only started in a few provinces. Now that's starting to expand so this year will be a nice rebound because we've worked through the inventory issues on our PBM that we have business in the U.S., and we've got China back on track and we have countries like Turkey and Japan and others that are really kind of contributing. So you'll see high single-digit, possibly low double-digit growth for fertility this year.
Going forward, I do believe it's more like the mid to high single-digit growth rates.
That's helpful. Just coming back to biosimilars, you mentioned denosumab's upcoming launch to think about. How do you think about that market, how that evolves over time? I know the two indications have slightly different market dynamics, competitive landscape still evolving. Just elaborate a little bit more how big of a drug this could be for you.
Two reasons for me to feel really enthusiastic about this segment. First, it's a buy-and-bill on both products. Buy-and-bills are something we do much better at. You know how perverse I feel about the PBM business in terms of biosimilars, in terms of the incentives that are set up. So a non-PBM business, buy-and-bill business is far more in the thing that we know how to do. It's more fragmented. There's small clinics all over the country. And so we feel really good about that. Second, I think we had something like 10 or 12 Humira biosimilars entering the market approximately almost the same time. In this case, we're looking at probably four. It's far more manageable. So with that, I think that we feel really good about the denosumab biosimilar launch.
And then, of course, the following year or the year after that, we've got the Pertuzumab launch, which is looking very good. And at the same time, we're looking at BD opportunities that we're looking at right now that would be accretive in the short term if we are able to stay tuned if we're able to get this done.
What's kind of an ideal cadence for you in terms of kind of frequency of launches for biosimilars?
I would prefer one a year if I can, one to two every couple of years.
Is the environment for BD for those, is it just overall, is it still an attractive environment to get started?
It is. It is. I think that there are certain players who have said, "We got into this, but we didn't know what we were doing." Investments in manufacturing facilities are no cheap thing. Investments in clinical studies are very difficult. We are not there. We can pick and choose because of the fact that we're a commercial partner. And the return on capital invested is very good because we just slide it into our overall infrastructure and go. And we've got good experience on biosimilars. So the return on capital is good in terms of when you pull that down to the EBITDA line. So we feel good about it.
Excellent. Good to hear. Established brands, a few extra questions there. First of all, China, talk a little bit about the growth outlook for the business as a whole in 2025.
We're going to see low single-digit growth in 2025 because we're still working through the remaining, the remnants of the VBP programs that we've seen. But by the end of this year, 85% of our business will have gone through VBP, which is good. That's behind us. Now we're looking at China as a growth contributor going forward. We'll see low to mid-single-digit growth in China this year, growing potentially to mid to high single-digit growth over the coming two to three years. It's nice to see. We've done BD, China for China BD deals. We brought in something to help us in terms of our. We have a big Propecia business over there for hair loss, and we have a minoxidil deal we did over there. We've also done a fertility deal that we just did. We've got plenty of other deals.
There are a number of China for China deals that are interesting because we're among the top companies there. We're about $1 billion of sales, about 900 people that we employ. So we're a great company for them to look at China for China and China for the world, an opportunity. So we've got more coming down the pipe as well.
Great. Can you just remind us on VBP, what's left in the portfolio that's supposed to go through this?
Just FOSAMAX, and I believe Nasonex is what the two remaining. That will be FOSAMAX at the end of 2025 and Nasonex, I think, 2029 or so.
But you're getting pretty far along in the process.
Yeah. I mean, and it's interesting what I predicted didn't happen at all in China. But when is that going to be the case? What I predicted in China is essentially that the retail sector would just be robustly growing. And the time that we talked about it, it was growing robust double-digit growth and that the hospital sector would be declining. The opposite's happening.
Interesting. Yeah.
The hospital sector, once you get through the VBP process, is now growing again for us because we're still on formulary and patients still want those originals. Because of consumer confidence or lack thereof in China, the retail sector is starting to kind of migrate to more like mid- to high single-digit growth.
Interesting. Yeah.
So it's kind of changed just because of the economic situation, the geopolitical situation. But it's still our second largest market, and we see continued growth there.
Great. Great. Maybe just move over to cash flow and capital allocation. Just first of all, remind us on 2024 free cash flow, one-time costs. Where's the business shaking out?
Yeah. So we had originally guided in 2024 to $1 billion of free cash flow before one-time items. We're on track to deliver that. That would have brought our leverage ratio down to comfortably underneath four times by the end of the year. We actually got there by the third quarter. The Dermavant deal ticks us up on leverage about a quarter point. And so it pushes out by roughly four quarters, so about a year the next time we'll see leverage ratios sub four. But the business has historically thrown off good cash flow and should continue that pattern in 2025 to the point where we can be sub four times by the end of next year.
On the 2025 cash flows, maybe one-time costs is somewhere in the range of that $1 billion a reasonable target for this year?
Similar. The one-time costs around the business in terms of separating from Merck, we've seen the last of that in 2023. 2024, 2025 will be essentially zero for those separation costs. What we're doing now is we're separating our manufacturing network from Merck, which is a substantial undertaking. So we'll see one-time costs associated with that. We'll probably have some one-time costs associated with the restructuring work that we're doing that Kevin described. But the good news for investors in those two things is there are returns attached. As we complete the separation of the manufacturing facilities, that's a margin up opportunity, and it will be material, and the benefits of restructuring, we'll start seeing them right in 2025.
Perfect. Can you just help maybe quantify that, maybe the manufacturing piece? How big of an opportunity could that be for gross margins, and when will that be fully rolled through?
It's an excellent question. We would be counting the benefits in percentage points of margin.
Percentage points. Okay.
Two, three points of margin bleeding into the business over the 2027, 2028, 2029 timeframe. So that will be very good for investors to see in terms of margin expansion. And the benefits of the restructuring will help us deliver that 31% floor in 2025. And then that creates a platform for operating leverage in the future when we return to year-on-year growth of revenues in 2026.
So if anything, the kind of cadence of this, we get the restructuring coming. It's helping to some degree this year, annualized in 2026. Then we get another kind of tailwind in 2017.
Yeah, with manufacturing .
Yeah.
You know, I just want in terms of capital allocation, right? Look, we were on track to be sub four. We were in Q3 and Q4. And of course, there are a lot of folks who'd say, "Hey, we'd like to see you in below 3.5 in terms of leverage." So look, we have an objective in the near to medium term. This time next year, we'll be sub four because of where we're headed in terms of the VTAMA performance as well as the other levers that I've talked about. But as we go forward, I can easily see we're going to be ping-ponging back and forth between, say, 3.3- 3.9. I'd like to stay below four unless it's the deal of the century, right?
I'd like to stay sub four, but we'll be ping-ponging back and forth because we see opportunities like VTAMA. I started out the conversation today to talk about the vertical in dermatology. There's a lot in dermatology. I just want to stress again, we are focused on women's health, but we're focused on redefining the way we focus on women's health in terms of the definition. We started out this journey three and a half years ago where everybody was looking at women's health as just reproductive care. We have now kind of expanded that to say those conditions unique to women, like postpartum hemorrhage, endometriosis, polycystic ovary syndrome, those conditions that are disproportionately impacting women, like Emgality with migraines, two-thirds of patients who suffer from migraines are women, and those conditions that affect women differently, like for example, derm.
And so that's where something like, for example, VTAMA fits in. That gives us a broad base of different things that we can go after. And we're looking at near accretion. So maybe there's a little dilution in 2025, but it'll be strongly accretive in 2026. That's a pretty fast turnaround for capital allocation. And we've structured a deal so that 85% of the overall value of the deal is success-based. $175 million upfront, a little bit focused on inheriting some of the debt, but then ultimately, they make the biggest payoff when we reach $1 billion. And so we both win. So I think that kind of structured discipline use of capital is what we'll continue to do. Imagine if we didn't do all the BD deals that we've done, and what would we say about 2025 right now?
Yeah. Yeah. Tougher year and in terms of the flavor of them, I mean, I look at something like Emgality that was maybe a little bit more established versus VTAMA, where there's probably a more of a growth pathway. Is VTAMA more directionally where you'd like to head, or is it a mix of both?
I think it's a mix of both because Emgality was what was accretive almost immediately. It reached almost for three quarters of a year, almost $100 million. We're expanding now to the emerging markets, but we share with Lilly. We don't share pretty much anything with VTAMA. That's all ours. That margin for VTAMA is the second highest margin in the company behind NEXPLANON . Very, very profitable for us.
Yeah. Yeah. And in terms of the breadth of opportunity there, I mean, is there a lot of opportunity?
There is quite a bit of opportunity in the derm space, in women's health space. The issue of women's health, though, that we've come to notice is the fact that many of the really exciting, revolutionary things in women's health are in the early stage assets. So we've got to be very diligent and disciplined in what we go after. Now, if we're lucky enough to turn over the cards on 6219 in six months and say, "We potentially have a proof of concept here that we can take to phase III," then it's going to give me a bit more boldness to go after some of those really exciting things that I see out there.
Excellent. And maybe just final one. On the timing of this, should we wait? Do we have to wait until the company kind of gets into that 3.3-3.9 range you're talking about before we think about this, or if something came along sooner?
I think you can look at 2026 as a very critical year. We're going to have a great year in terms of overall performance. I think leverage will start to come down. Then I can start to look at what's out there that is worth pursuing. And I've got a head of R&D who's just itching to get his hands on some of this new innovation that's out there.
Excellent. Maybe just the last couple of minutes here. New administration coming in. As we think about Organon and potential impact from that, what are you thinking about and what are you most focused on?
Well, you know, I spend quite a bit of time on the Hill, on both sides of the aisle. And in my discussions with the Republicans in terms of where they are, two things have come out of my most recent visit. Number one, I'm just paraphrasing. They feel that the Democratic side has kind of hijacked the health of women over to the Democratic side. They want to bring it back. And so as a result of that, you hear President Trump now, President-elect Trump, saying, "I'm the father of IVF." And he said that on the stump. So when he says things like that, and they're saying, "Listen, we want to be able to expand reimbursement of fertility.
We want to be able to offer opportunities for contraception and more support in the health of women and women's health. I don't see it as a major issue that we have to deal with. We're going to have to be very cognizant and disciplined of continuing to keep in touch. But I think our relationships are really good. And we've been recognized as being one of the leaders, obviously, in the space. And so I don't see any major issues on women's health, especially when it comes to reproductive health for the administration.
Yeah. Excellent. Well, I think we're just about out of time here. Kevin, Matt, really appreciate the time. Thanks so much.
Thanks, Chris.
Thank you.
Thanks, everybody.