Audit Information |
12 Months Ended |
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Dec. 31, 2022 | |
Auditor [Abstract] | |
Auditor Name | PricewaterhouseCoopers LLP |
Auditor Location | Florham Park, New Jersey |
Auditor Firm ID | 238 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
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Statement of Comprehensive Income [Abstract] | |||
Net Income | $ 917 | $ 1,351 | $ 2,160 |
Other Comprehensive (Loss) Income, Net of Taxes: | |||
Benefit plan net gain (loss) and prior service credit, net of amortization | 23 | 8 | (143) |
Cumulative translation adjustment | (74) | 90 | (30) |
Other comprehensive income (loss) | (51) | 98 | (173) |
Comprehensive Income | $ 866 | $ 1,449 | $ 1,987 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 9 | $ 7 |
Inventories classified in Other Assets | $ 148 | $ 76 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 254,370,000 | 253,550,000 |
Common stock, shares outstanding | 254,370,000 | 253,550,000 |
Consolidated Statements of Stockholders’ Equity (Deficit) (Parentheticals) - $ / shares |
12 Months Ended | |
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Dec. 31, 2022 |
Dec. 31, 2021 |
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Statement of Stockholders' Equity [Abstract] | ||
Common stock dividends declared (in dollars per share) | $ 1.12 | $ 0.56 |
Background and Nature of Operations |
12 Months Ended |
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Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background and Nature of Operations | Background and Nature of Operations Organon & Co. ("Organon" or the "Company") is a global health care company with a focus on improving the health of women throughout their lives. Organon develops and delivers innovative health solutions through a portfolio of prescription therapies and medical devices within women's health, biosimilars and established brands (the "Organon Products"). Organon has a portfolio of more than 60 medicines and products across a range of therapeutic areas. The Company sells these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. The Company operates six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom. Unless otherwise indicated, trademarks appearing in italics throughout this document are trademarks of, or are used under license by, the Organon group of companies. The Company's operations include the following product portfolios: •Women's Health: Organon's women's health products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon® (etonogestrel implant) (sold as Implanon NXT™ ¹ in some countries outside the United States) and NuvaRing® (etonogestrel / ethinyl estradiol vaginal ring), and fertility, with key brands such as Follistim® AQ (follitropin beta injection) and Elonva™ ¹ (corifollitropin alfa). Nexplanon®, a long-acting reversible contraceptive, which is a class of contraceptives that is recognized as one of the most effective types of hormonal contraception available to patients with a low long-term average cost. The Jada® System is intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted. Organon acquired Jada through its acquisition of Alydia Health. Elonva is a sustained follicle stimulant for controlled ovarian stimulation in women participating in assisted reproductive technologies. It is marketed in certain European countries. In addition, Organon has a license from Daré Biosciences for the global commercial rights to XaciatoTM (clindamycin phosphate vaginal gel, 2%), an FDA-approved medication for the treatment of bacterial vaginosis ("BV") in females 12 years of age and older. •Biosimilars: Organon's current portfolio spans across immunology and oncology treatments. Organon's oncology biosimilars have been launched in more than 20 countries and Organon's immunology biosimilars have been launched in five countries. All five biosimilars in Organon's portfolio have launched in Canada, and two biosimilars; Ontruzant® (trastuzumab-dttb) and Renflexis® (infliximab-abda) have been launched in the United States. •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. On June 2, 2021, Organon and Merck & Co. ("Merck") entered into a Separation and Distribution Agreement (the "Separation and Distribution Agreement"). Pursuant to the Separation and Distribution Agreement, Merck agreed to spin off the Organon Products into Organon, a new, publicly-traded company (the "Separation"). In connection with the Separation, on June 2, 2021, Merck distributed (the "Distribution"), on a pro rata basis, to holders of the outstanding shares of common stock of Merck, par value $0.50 per share (the "Merck Common Stock") on May 17, 2021 (the "Record Date"), all of the outstanding shares of common stock, par value $0.01 per share, of Organon (the "Common Stock"). Each Merck stockholder was entitled to receive one-tenth of a share of the Common Stock for each share of Merck Common Stock held on the Record Date. As a result, Organon became a standalone publicly-traded company and on June 3, 2021 regular-way trading of the Common Stock commenced on the New York Stock Exchange under the ticker symbol "OGN." The Separation was completed pursuant to the Separation and Distribution Agreement and other agreements with Merck related to the Separation, including, but not limited to a tax matters agreement (the "Tax Matters Agreement" or "TMA"), an employee matters agreement (the "Employee Matters Agreement" or "EMA") and a transition services agreement (the "Transition Service Agreement" or "TSA"). Following the Separation, certain functions continue to be provided by Merck under the TSA or are being performed using the Company's own resources or third-party service providers. Under the TSA, Merck is providing Organon various services and, similarly, Organon is providing Merck various services. The provision of services under the TSA generally will terminate within 25 months following the spin-off; however, the provision of certain services has been extended to at least 35 months. Additionally, under manufacturing and supply agreements, the Company manufactures certain products for Merck, or its applicable affiliate and Merck manufactures certain products for the Company or its applicable affiliate (see Note 18 "Third-Party Arrangements and Related Party Disclosures" for additional details). The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly-traded company.
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Basis of Presentation |
12 Months Ended |
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Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation On June 2, 2021, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the Separation on June 2, 2021, the Company's historical combined financial statements were prepared on a standalone basis and were derived from Merck's consolidated financial statements and accounting records. The financial statements for all periods presented, including the historical results of the Company prior to June 2, 2021, are now referred to as "Consolidated Financial Statements," and have been prepared pursuant to the rules and regulations for reporting on Form 10-K. Periods Prior to Separation The assets, liabilities, revenue and expenses of the Company were reflected in the Consolidated Financial Statements on a historical cost basis, as included in the consolidated financial statements of Merck, using the historical accounting policies applied by Merck. The Consolidated Financial Statements did not purport to reflect what the Company's results of operations, comprehensive income, financial position, equity or cash flows would have been had the Company operated as a standalone public company during the periods presented. The Consolidated Financial Statements were prepared following a legal entity approach, which resulted in the inclusion of the following: •Certain assets and liabilities, results of operations and cash flows attributable to the sales of Organon Products that were contributed to Organon prior to the consummation of the Separation. •The Transferred Entities, which have historically included the results from the sales of both Organon Products and the Merck Retained Products. Each Transferred Entity's historical operations, including its results of operations, assets and liabilities, and cash flows have been fully reflected in the Consolidated Financial Statements. •In contemplation of the Separation, the Merck Retained Products business of the Transferred Entities was distributed to Merck and its affiliates ("MRP Distribution") and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations. The Company's businesses had historically functioned together with the other businesses controlled by Merck. Accordingly, the Company relied on Merck's corporate and other support functions for its business. Therefore, for the period prior to the Separation, certain corporate and shared costs were allocated to the Company based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, including: (i)expenses related to Merck support functions, including expenses for facilities, executive oversight, treasury, finance, legal, human resources, shared services, compliance, procurement, information technology and other corporate functions. (ii)certain manufacturing and supply costs incurred by Merck's manufacturing division, including facility management, distribution, logistics, planning and global quality. (iii)certain costs incurred by Merck's human health division in relation to selling and marketing activities, and related administrative support functions, that are not routinely allocated to therapeutic areas. (iv)certain costs incurred by Merck's research laboratories for activities related to drug discovery and development, as well as medical and regulatory affairs. (v)restructuring costs (see Note 6 "Restructuring") and stock-based compensation expenses (see Note 13 "Stock-Based Compensation Plans"); and (vi)certain compensation expenses maintained on a centralized basis such as certain employee benefit expenses. Management believes these cost allocations were a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the period prior to the Separation, though the allocations may not be indicative of the actual costs that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company's employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure. Merck maintains various employee benefit plans in which the Company's employees participated during periods prior to the Separation, and a portion of the costs associated with these plans was included in the Company's Consolidated Financial Statements. Certain pension assets and obligations were transferred by Merck into legal entities established to operate the Organon Products business (the "Organon Entities") that are the plan sponsor and, accordingly, the Consolidated Balance Sheet at December 31, 2022 and 2021 includes assets and liabilities of the newly established plans of Organon. Merck utilized a centralized approach to cash management and the financing of its operations. Cash generated by the Company was routinely transferred into accounts managed by Merck's centralized treasury function and cash disbursements for the Company's operations prior to the Separation were funded as needed by Merck. Cash and cash equivalents of the Organon Entities and the Transferred Entities were reflected in the Company's Consolidated Balance Sheet. Balances held by the Organon Entities and the Transferred Entities with Merck for cash transfers and loans were reflected as Due to related party prior to Separation. All other cash, cash equivalents, short-term investments and related transfers between Merck and the Company were generally held centrally through accounts controlled and maintained by Merck and were not specifically identifiable to the Company. Accordingly, such balances were accounted for through Net investment from Merck & Co., Inc. Merck's third-party debt and related interest expense were not attributed to the Company because the Company was not the legal obligor of the debt and the borrowings were not specifically identifiable to the Company. For the Organon Entities and the Transferred Entities, transactions with Merck affiliates were included in the Consolidated Statement of Income and related balances were reflected as Due to related party or Due from related party in the continuing operations and discontinued operations of the Consolidated Balance Sheet, as applicable. Other balances between the Company and Merck were considered to be effectively settled in the Consolidated Financial Statements at the time the transactions were recorded. See Note 18 "Third-Party Arrangements and Related Party Disclosures" for additional details. As the separate legal entities that made up the Company's business were not historically held by a single legal entity, Net investment from Merck & Co., Inc. was shown in lieu of stockholders' equity in these Consolidated Financial Statements. Net investment from Merck & Co., Inc. represented Merck's interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results. Income tax expense and tax balances in the Consolidated Financial Statements were calculated on a separate tax return basis. The Company's operations are included in the tax returns of certain Organon Entities, Transferred Entities or the respective Merck entities of which the Company's business was a part. As of Separation Date Certain assets and liabilities, including accounts receivables, inventories and trade payables included on the Consolidated Balance Sheet prior to the Separation, have been retained by Merck post-Separation and therefore were transferred to Merck through Net investment from Merck & Co., Inc. in the Company's Consolidated Financial Statements. Additionally, certain amounts previously included in Due to related party or Due from related party are reflected in accounts receivable and trade accounts payable as of December 31, 2021. As part of the Separation, Net investment from Merck & Co., Inc. was reclassified to Common Stock and Accumulated Deficit. In connection with the Separation, additional pension assets and obligations were transferred to Organon through Net investment from Merck & Co., Inc., and the Company recorded these in the Consolidated Balance Sheet. See Note 14 "Pension and Other Postretirement Benefits Plans" for details. Additionally, stock-based awards were converted in accordance with the Employee Matters Agreement. See Note 13 "Share-Based Compensation Plans" for details. During the second quarter of 2021, an aggregate of $9.5 billion of debt was issued in connection with the Separation. See Note 11 "Long-Term Debt and Leases" for additional details. The Company distributed $9.0 billion of the $9.5 billion proceeds to Merck in accordance with the terms of the Separation. Periods Post Separation Following the Separation, certain functions continue to be provided by Merck under the Transition Services Agreement or are being performed using the Company's own resources or third-party service providers. Additionally, under manufacturing and supply agreements, the Company manufactures certain products for Merck or its applicable affiliate, and Merck manufactures certain products for the Company or its applicable affiliate. The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company. Property, plant and equipment reflected in the Consolidated Balance Sheet is primarily attributable to the six manufacturing facilities the Company operates and certain information technology assets. In June 2021, the Company established a balance sheet risk management and a net investment hedging program to partially mitigate against volatility of changes in foreign exchange rates. As a standalone entity, the Company files tax returns on its own behalf, and tax balances and effective income tax rate may differ from the amounts reported in the historical periods. As of June 2, 2021 and in connection with the Separation, the Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity. All intercompany transactions and accounts within Organon have been eliminated. Certain amounts presented in the prior year Income Statement have been reclassified to conform to the current year presentation. As a result, $104 million of Acquired in-process research and development and milestones which was presented within Research and development in 2021 is now presented separately on the Income Statement. The historical results prior to Separation included certain Merck non-U.S. legal entities that were conveyed to Organon in connection with the Separation (collectively, the "Transferred Entities" and each, a "Transferred Entity") and included operations related to other Merck products that were retained by Merck ("Merck Retained Products"). The Merck Retained Products business of the Transferred Entities was contributed by the Company to Merck and its affiliates and any remaining assets and liabilities were transferred as of June 2, 2021. Accordingly, the historical results of operations of the Merck Retained Products have been reflected as discontinued operations in these Consolidated Financial Statements. See Note 2 "Basis of Presentation — Periods Prior to Separation" for additional details. During the fourth quarter of 2022, the Company recorded an out-of-period adjustment primarily related to a misstatement of employee related expenses prior to the Separation. During the year ended 2021, Net Income was understated by approximately $19 million. These amounts were corrected in 2022 and as a result 2022 Net Income is overstated by approximately $19 million. The Company concluded that these adjustments were not material to the Consolidated Financial Statements for either the current period or any of the prior periods previously reported.
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Summary of Accounting Policies |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accounting Policies | Summary of Accounting Policies Revenue Recognition — Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all performance obligations. The Company acts as the principal in its customer arrangements and therefore records revenue on a gross basis. The majority of the Company's contracts have a single performance obligation — the promise to transfer goods. Shipping is considered immaterial in the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized performance obligation. Revenues from sales of products, including tenders, are recognized at a point in time when control of the goods is transferred to the customer, which the Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment. The nature of the Company's business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts. In the United States, sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year. Chargebacks are discounts that occur when a contracted customer purchases through an intermediary wholesaler. The contracted customer generally purchases product from the wholesaler at its contracted price plus a mark-up. The wholesaler, in turn, charges the Company back for the difference between the price initially paid by the wholesaler and the contract price paid to the wholesaler by the customer. The Company estimates the provision for chargebacks based on expected sell-through levels by the Company's wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. Rebates are amounts owed based upon definitive contractual agreements or legal requirements with private sector, (Managed Care), and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. The Company uses historical customer segment utilization mix, sales, changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history to estimate the expected provision. The Company continually monitors the provision for aggregate customer discounts. There were no material adjustments to estimates associated with the aggregate customer discount provision in 2022, 2021, or 2020. Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows:
(1) Includes 2021 payments made by Merck on behalf of Organon for the period prior to the Separation date. Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. The accrued balances relative to the provisions for chargebacks and rebates in the United States included in Accounts receivable and Accrued and other current liabilities were $78 million and $307 million, respectively, at December 31, 2022 and $54 million and $275 million, respectively, at December 31, 2021. Outside of the United States, variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. Rebates may also be required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of future discount or rebate obligations associated with the sale. At December 31, 2022 and 2021, the accrued balances related to the provision for rebates and discounts included in other current liabilities were approximately $109 million and $90 million, respectively. The Company maintains a returns policy that allows customers in certain countries to return product within a specified period prior to and subsequent to the expiration date (generally, to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical experience with actual returns and consideration of other relevant factors. The Company's payment terms for U.S. customers are typically 36 days from receipt of invoice. Outside of the United States, payment terms are typically 30 days to 90 days, although certain markets have longer payment terms. See Note 17 "Product and Geographic Information" for disaggregated revenue disclosures. Cash Equivalents — Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less. Inventories — Inventories are valued at the lower of cost or net realizable value. The cost of a substantial majority of U.S. inventories is determined using the last-in, first-out ("LIFO") method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-out ("FIFO") method. Value Added Tax — The Company's purchases, sales and intercompany transfers of goods are subject to value added tax (VAT) and VAT receivables are recognized for amounts that represent credits against future VAT obligations. VAT receivables included in Other current assets were $110 million and $115 million as of December 31, 2022 and 2021, respectively. VAT payables included in Accrued and other current liabilities were $9 million and $9 million as of December 31, 2022 and 2021, respectively. The related expense is included in the Company's operating expenses. Depreciation — Depreciation is provided over the estimated useful lives of the assets, principally using the straight-line method. The estimated useful lives primarily range from 25 to 40 years for buildings, and from 3 to 15 years for machinery, equipment and office furnishings. Depreciation expense was $96 million in 2022, $92 million in 2021, and $56 million in 2020. Repairs and maintenance costs are expensed as incurred as they do not extend the economic life of an asset. Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred and included in Selling, general and administrative expenses. The Company recorded advertising and promotion expenses of $255 million, $236 million, and $198 million in 2022, 2021 and 2020, respectively. Goodwill — Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is evaluated for impairment as of October 1 each year, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). The Company completed the annual qualitative goodwill impairment test as of October 1, 2022 and concluded that there was no impairment to goodwill as the fair value of the reporting unit was significantly in excess of the carrying value. Acquired Intangibles — Acquired intangibles include products and product rights and licenses, which are initially recorded at fair value, assigned an estimated useful life, and amortized on a straight-line basis over their estimated useful lives. The Company's intangibles also include the products and product rights intangible assets attributed to Organon from Merck. The intangible assets attributable to the Company's operations have been reflected in the consolidated financial statements based on Merck's historical cost. Licenses include milestone payments made to collaborative partners upon or subsequent to regulatory approval. The estimated useful lives of acquired intangibles range from 5 to 15 years. The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows. See Note 10 "Intangibles" for additional details. Acquired In-Process Research and Development ("IPR&D") — IPR&D that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, Organon will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company evaluates IPR&D for impairment as of October 1 each year, or more frequently if impairment indicators exist, by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results. There were no IPR&D intangible assets as of December 31, 2022, 2021 and 2020. Research and Development — Research and development costs associated with clinical development programs that have not yet received regulatory approval, are expensed as incurred. Foreign Currency Translation — The net assets of international operations where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation account, which is included in Accumulated other comprehensive loss and reflected as a separate component of equity. For those operations that operate in highly inflationary economies and for those operations where the U.S. dollar has been determined to be the functional currency, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate changes included in Exchange losses. Organon calculates foreign currency translation on its consolidated assets and liabilities. For periods prior to the Separation, these consolidated financial statements include Merck's foreign currency translation for the Organon Entities. Stock-Based Compensation — Prior to the Separation, certain of the Company's employees historically participated in Merck's stock-based compensation plans. Stock-based compensation expense was either allocated to the Company based on a proportionate cost allocation method or recorded based on specific identification. Effective June 3, 2021, Organon established the 2021 Incentive Stock Plan (the "Plan"). A total of 35 million shares of Common Stock are authorized under the Plan. The plan provides for the grant of various types of awards, including restricted stock unit awards, stock appreciation rights, stock options, performance-based awards and cash awards. Under the Plan, the exercise price of awards, if any, is set on the grant date and may not be less than the fair market value per share on that date. The Company measures stock-based compensation for equity awards at fair value on the date of grant and records stock-based compensation as a charge to earnings net of the estimated impact of forfeited awards. Accordingly, the Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants. The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the change. See Note 13 "Stock-Based Compensation Plans" for additional details. Pension and Other Postretirement Benefit Plans — Prior to the Separation, the defined benefit plans in which the Company participated related primarily to plans sponsored by Merck and for which other businesses of Merck also participate ("Shared Plans"). The Company accounted for the Shared Plans as multiemployer plans and therefore the related assets and liabilities were not reflected in the Consolidated Balance Sheet. For such periods prior to Separation, the Consolidated Statement of Income reflects a proportional allocation of net periodic benefit cost for the Shared Plans associated with the Company. For certain defined benefit plans attributable to the Organon Entities, the over funded or underfunded status of the plan was recognized as an asset or liability on the consolidated balance sheet. The Company's participation in the defined pension and postretirement benefit plans sponsored by Merck concluded upon the completion of the Separation on June 2, 2021. At Separation, Organon became the plan sponsor for certain non-U.S. defined benefit pension plans. See Note 14 "Pension and Other Postretirement Benefits Plans" for additional details. Restructuring Costs — Costs associated with exit or disposal activities are recognized in the period in which they are incurred. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. Contingencies and Legal Defense Costs — The Company records accruals for contingencies and legal defense costs expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated. Taxes on Income — Prior to the Separation, income tax expense and deferred tax balances were calculated on a separate tax return basis. The Company's operations were included in the tax returns of certain Organon Entities, Transferring Entities or the respective Merck entities of which the Company's business was a part. Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. The Company establishes valuation allowances for its deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. The Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements. The Company recognizes interest and penalties associated with uncertain tax positions as a component of Taxes on Income in the Consolidated Statement of Income. The Company accounts for the tax effects of the tax on global intangible low-taxed income ("GILTI") of certain foreign subsidiaries in the income tax provision in the period the tax arises. The Company and Merck entered into the Tax Matters Agreement in connection with the Separation. See Note 18 "Third-Party Arrangements and Related Party Disclosures" for additional details. Leases — The Company has operating leases primarily for real estate. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if the Company controls the use of that asset. Embedded leases are immaterial. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet. Lease expense associated with short term leases is not material for all periods presented. Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company's leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. On a quarterly basis, an updated incremental borrowing rate is determined based on the weighted average remaining lease term of each asset class and the Company's pretax cost of debt for that same term. The updated rates for each asset class are applied prospectively to new leases. The Company does not separate lease components (e.g. payments for rent, real estate taxes and insurance costs) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. The Company includes both the lease and fixed non-lease components for purposes of calculating the lease liability and the related right-of-use asset. See Note 11 "Long-Term Debt and Leases" for additional details. Use of Estimates — The presentation of these Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported. Estimates are used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, amounts recorded for contingencies, environmental liabilities, pension and other postretirement benefit plan assumptions, stock-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill), investments, and taxes on income. Additionally estimates are used in acquisitions, including initial fair value determinations of assets and liabilities (primarily IPR&D, intangible assets and contingent consideration), as well as subsequent fair value measurements. For periods prior to Separation, estimates were used in determining the allocation of costs and expenses from Merck, and were used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, valuation of goodwill and intangibles, amounts recorded for contingencies, environmental liabilities and other reserves, pension and stock-based compensation assumptions, restructuring costs, and taxes on income. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Net Investment from Merck & Co., Inc. — Net investment from Merck & Co., Inc. represented Merck's interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results and the net effect of the transactions with and allocations from Merck. See Notes 2 "Basis of Presentation" and 18 "Third-Party Arrangements and Related Party Disclosures" for additional information. Recently Adopted Accounting Standards There were no recently issued accounting standards adopted by the Company during the year ended December 31, 2022. Recently Issued Accounting Standards Not Yet Adopted The following summarizes recent Accounting Standards Updates ("ASUs") issued by the FASB that could have a material impact on our consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, guidance to improve the accounting for contract assets and contract liabilities from acquired revenue contracts with customers in a business combination. The guidance addresses diversity in practice and inconsistency related to the recognition of an acquired contract liability, payment terms and their effect on subsequent revenue recognized by an acquirer. The guidance became effective for the Company on January 1, 2023 and its amendments will be applied prospectively to business combinations occurring on or after the effective date of the guidance. The adoption of this guidance will not have an impact on the Company's Consolidated Financial Statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 and December 31, 2022, the sunset date was subsequently deferred to December 31, 2024 based on the amendment issued in December 2022 under ASU 2022-06, Reference Rate Reform (Topic 848). The Company is still evaluating the impact to its LIBOR-based debt. Based on the evaluation thus far, the Company does not anticipate a material impact to the Consolidated Financial Statements as a result of reference rate reform.
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Samsung Collaboration |
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Samsung Collaboration | Samsung Collaboration The Company has an agreement with Samsung Bioepis Co., Ltd. ("Samsung Bioepis") to develop and commercialize multiple pre-specified biosimilar candidates, which have since launched and are part of the Company's product portfolio. Under the agreement, Samsung Bioepis is responsible for preclinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates, and the Company has an exclusive license for worldwide commercialization with certain geographic exceptions specified on a product-by-product basis. The Company's access rights to each product under the agreement last for 10 years from each product's launch date on a market-by-market basis. Gross profits are shared equally in all markets with the exception of certain markets in Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to the Company. Since the Company is the principal on sales transactions with third parties, the Company recognizes sales, cost of sales and selling, general and administrative expenses on a gross basis. Generally, profit sharing adjustments are recorded either to Cost of sales (after commercialization) or Selling, general and administrative expenses (prior to commercialization). In August 2022, the U.S. Food and Drug Administration ("FDA") approved the citrate-free, high-concentration (100 mg/mL) formulation of Hadlima™ (adalimumab-bwwd), a biosimilar referencing Humira2 (adalimumab). During the third quarter of 2022, Organon paid Samsung Bioepis $18 million. This amount was recognized as an intangible asset which will be amortized over the estimated useful life of approximately 10 years. Samsung Bioepis is eligible for additional payments associated with pre-specified clinical and regulatory milestones. As of December 31, 2022, potential future regulatory milestone payments of $25 million remain under the agreement. Summarized information related to this collaboration is as follows:
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Acquisitions and Licensing Arrangements |
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Dec. 31, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Acquisitions and Licensing Arrangements | Acquisitions and Licensing Arrangements 2022 Transactions Cirqle Biomedical ("Cirqle") In July 2022, the Company entered into a research collaboration and license agreement with Cirqle for a novel investigational non-hormonal, on-demand contraceptive candidate. Under the terms of the agreement, Cirqle is responsible for conducting preclinical studies according to the mutually agreed research plan. Organon obtained exclusive worldwide rights to develop and commercialize the asset. Under the terms of the research collaboration and license agreement, Organon recorded a $10 million upfront payment during 2022 as Acquired in-process research and development and milestones. Cirqle is eligible to receive potential regulatory and commercial milestone payments of up to $360 million and tiered royalties based on net sales. The remaining potential milestone payments will be recognized by Organon when achievement of the contractual milestones is probable. Shanghai Henlius Biotech, Inc. ("Henlius") In June 2022, Organon and Henlius, a global biopharmaceutical company, entered into a definitive agreement whereby Organon is licensing commercialization rights for biosimilar candidates HLX11, referencing Perjeta2 (pertuzumab), used for the treatment of certain patients with HER2+ breast cancer in combinations with trastuzumab and chemotherapy and HLX14, referencing Prolia2/Xgeva2 (denosumab), used for the treatment of certain patients with osteoporosis with high risk of fracture and for the prevention of skeletal-related events in patients with multiple myeloma and in patients with bone metastasis from solid tumors. Organon obtained exclusive global commercialization rights except for China; including Hong Kong, Macau and Taiwan. The agreement includes an option to negotiate an exclusive license for global commercialization rights for biosimilar candidate HLX13 referencing Yervoy2 (ipilimumab) used for the treatment of certain patients with unresectable or metastatic melanoma, as adjuvant treatment of certain patients with cutaneous melanoma, certain patients with renal cell carcinoma, colorectal cancer, hepatocellular carcinoma, non-small cell lung cancer, malignant pleural mesothelioma and esophageal cancer. Under the terms of the license agreement, Organon paid a $73 million upfront payment during 2022, of which $3 million was reflected in Other current assets and the remainder was recognized as Acquired in-process research and development and milestones. Henlius is eligible to receive potential developmental, regulatory and commercial milestone payments of up to $468 million. During the year ended December 31, 2022, the Company paid an additional $27 million related to certain development milestones which were recognized as Acquired in-process research and development and milestones. The remaining potential milestone payments will be recognized by Organon when achievement of the contractual milestones is probable. Henlius will be responsible for development and, if approved, will supply the products to Organon. Daré Bioscience, Inc. ("Daré") In March 2022, Organon and Daré, a leader in women's health innovation, entered into an agreement whereby Organon licensed the global commercial rights to Xaciato. Xaciato is an FDA-approved medication for the treatment of bacterial vaginosis ("BV") in females 12 years of age and older. Xaciato received both Qualified Infectious Disease Product ("QIDP") and Fast Track designations from the FDA for the treatment of bacterial vaginosis. Under the terms of the license agreement, Organon paid a $10 million upfront payment during 2022. Daré is eligible to receive potential regulatory and commercial milestone payments of up to $182.5 million and tiered double-digit royalties based on net sales. Xaciato is expected to be available commercially in the U.S. in the first half of 2023. During the year ended December 31, 2022 management determined that the first commercial milestone was deemed probable of occurring, and recognized an intangible asset of $12.5 million reflecting the $10 million upfront payment and $2.5 million commercial milestone. The intangible asset will be amortized over its useful life of 12 years. The remaining potential milestone payments will be recognized by Organon when achievement of the contractual milestones is probable. Bayer AG In February 2022, Organon acquired the product rights and related inventory from Bayer AG to Marvelon™ 1 (ethinylestradiol, desogestrel) and Mercilon™ 1 (ethinylestradiol, desogestrel), combined oral hormonal daily contraceptive pills, in China, including Hong Kong and Macau, and entered into an agreement to acquire the rights to these products in Vietnam. Marvelon and Mercilon are already owned, manufactured, and marketed by Organon as prescription oral contraceptives in 20 other markets. The transaction was accounted for as an asset acquisition. In 2022, Organon paid $95 million to acquire the product rights and inventory in China and Vietnam. This resulted in Organon recognizing an intangible asset of $72 million in total related to the product rights with the remainder of the consideration recorded to Inventories for the fair value of acquired inventory during 2022. The intangible assets related to currently marketed products will be amortized over their estimated useful lives of 10 years. 2021 Transactions Forendo Pharma In December 2021, Organon completed its acquisition of Forendo Pharma, a clinical-stage drug development company focused on novel treatments in women's health. Forendo is pioneering the science of intracrinology, addressing disease through a novel, tissue-specific approach. Its lead clinical compound is an investigational, potentially first-in-class oral 17β-hydroxysteroid dehydrogenase type 1 inhibitor ("HSD17B1 inhibitor") in early development for endometriosis, being evaluated for its potential effect on endometriotic lesions. Total consideration includes a $75 million upfront payment, the assumption of approximately $10 million of Forendo debt, payments upon the achievement of certain development and regulatory milestones of up to $270 million and commercial milestones payments of up to $600 million, which together could amount to total consideration of $955 million. Contingent consideration will be paid by Organon upon achievement and the liability recorded once it is deemed probable of occurrence. The transaction was accounted for in 2021 as an asset acquisition, as substantially all of the value was concentrated in a single identifiable asset, the HSD17B1 inhibitor. During the year ended December 31, 2021, the Company recorded $79 million, which consisted of the $75 million upfront payment, the assumption of debt of $10 million, and other net assets, as Acquired in-process research and development and milestones. During the year ended December 31, 2021, the Company incurred $5.0 million of transaction related expenses reflected in Selling, General and Administrative expenses. XOMA In July 2021, Organon entered into the ebopiprant license with ObsEva SA, which was subsequently assigned to XOMA Corporation ("XOMA"), whereby Organon licensed the global development, manufacturing and commercial rights to ebopiprant (OBE022). Ebopiprant is an investigational, orally active, selective prostaglandin F2α (PGF2α) receptor antagonist being evaluated as a potential treatment for preterm labor by reducing inflammation and uterine contractions. Under the terms of the license agreement, Organon gained exclusive worldwide rights to develop and commercialize ebopiprant. XOMA is entitled to receive tiered double-digit royalties on commercial sales, up to $90 million in development and regulatory milestone payments, and up to $385 million in sales-based payments that will be paid by Organon upon achievement of the contractual milestone and the liability recorded once it is deemed probable of occurrence. Upon execution of the agreement, Organon made a $25 million upfront payment pursuant to the ebopiprant license, which was recorded as Acquired in-process research and development and milestones during 2021. Alydia Health ("Alydia") In June 2021, Organon acquired Alydia, a commercial-stage medical device company. Alydia's device, Jada, is intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted. Organon's acquisition of Alydia expanded its portfolio into the medical device category and underscores its commitment to identifying innovative treatment options in the maternal health space. Total consideration included a $219 million upfront payment. Additionally, there is a $25 million sales-based contingent milestone payment that will be paid by Organon upon achievement and the liability recorded once it is deemed probable of occurrence. The transaction was accounted for as an asset acquisition, as substantially all of the value was concentrated in a single identifiable asset. This resulted in an intangible of $247 million attributed to Jada, which was recorded to Intangibles as of December 31, 2021. This asset is subject to amortization on a straight-line basis over its expected useful life of 11 years. In addition to the intangible asset, as of December 31, 2021, the Company also recorded other net liabilities of $7 million, a deferred tax liability of $44 million related to the intangible asset, and compensation expenses of $23 million, which were recorded in Selling General and Administrative Expenses. Of the $23 million of compensation expense, $19 million were related to accelerated vesting of Alydia stock-based compensation awards. During the third quarter of 2022, a cumulative sales-based contingent milestone payment, related to Jada, was determined to be probable of being achieved and the Company recognized an intangible asset and noncurrent liability of $25 million. The intangible asset is subject to amortization over its estimated useful life of 12 years.
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Restructuring |
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Dec. 31, 2022 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | Restructuring In 2022 Organon initiated restructuring activities to optimize its internal operations by reducing headcount through selected markets and functions. As a result of this program, the Company intends to restructure approximately 130 positions, with the majority of the position eliminations occurring in selected markets outside of the U.S. in our commercial organizations. The Company expects the majority of the severance payments will be paid by the end of the 2023 fiscal year. For the year ended December 31, 2022, the Company recorded restructuring charges of $28 million, which relate to severance costs for eliminated positions. Restructuring costs for 2021 and 2020 were $3 million and $60 million, respectively. The restructuring costs for 2020 were comprised of $30 million of separation costs and $30 million related to other restructuring activities. Restructuring costs for 2021 and 2020 reflect only charges allocated to Organon from Merck prior to separation. Liabilities for costs associated with restructuring activities were $20 million at December 31, 2022 and are included primarily in Accrued and other current liabilities. There were no liabilities for costs associated with restructuring activities at December 31, 2021.
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Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Financial Instruments Foreign Currency Risk Management The Company has a balance sheet risk management and a net investment hedging program to mitigate against volatility of changes in foreign exchange rates. The Company uses a balance sheet risk management program to partially mitigate the exposure of net monetary assets of its subsidiaries that are denominated in a currency other than a subsidiary's functional currency from the effects of volatility in foreign exchange. In these instances, Organon principally utilizes forward exchange contracts to partially offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro, Swiss franc and Japanese yen. For exposures in developing country currencies, the Company enters into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument. Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Exchange losses. The forward contracts are not designated as hedges and are marked to market through Exchange losses. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year. The notional amount of forward contracts was $1.5 billion as of December 31, 2022 and $2.1 billion as of December 31, 2021. The cash flows from these contracts are reported as operating activities in the Consolidated Statements of Cash Flows. The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The following financial instruments were recorded at their estimated fair value. The recurring fair value measurement of our assets and liabilities were as follows:
Foreign exchange risk is also managed through the use of economic hedges on foreign currency balances. See Note 11 "Long-Term Debt and Leases" for additional details. Subsequent to the Separation, €1.75 billion in the aggregate of both the euro- denominated term loan (€750 million) and of the 2.875% euro-denominated secured notes (€1.25 billion) was designated and was effective as an economic hedge of the net investment in euro-denominated subsidiaries. In December 2022, the Company de-designated the economic hedge of the net investment in euro denominated subsidiaries and designated €1.989 billion in the aggregate of both the euro-denominated term loan (€739 million) and the 2.875% euro-denominated secured notes (€1.25 billion) as an effective economic hedge of the net investment in euro-denominated subsidiaries. Foreign currency gains due to spot rate fluctuations on the euro-denominated debt instruments included in foreign currency translation adjustments resulting from hedge designation were as follows:
Prior to the Separation, Merck managed the impact of foreign exchange rate movements on its affiliates' earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments. Merck established revenue hedging and balance sheet risk management programs that the Company participated in to protect against the volatility of future foreign currency cash flows and changes in fair value caused by volatility in exchange rates. The Consolidated Statements of Income include the impact of actual net gains and losses of Organon's derivative financial instruments, as well as the impact of Merck's derivative financial instruments prior to the Separation allocated to the Company utilizing a proportional allocation method:
(1)Includes net gains and losses and foreign exchange gains and losses allocated for the period prior to the Separation, as well as actual net gains and losses and foreign exchange gains and losses post-Separation. Organon has established accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. Under these agreements, Organon factored $43 million and $87 million of accounts receivable as of December 31, 2022 and December 31, 2021, respectively, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Consolidated Statements of Cash Flows. Concentrations of Credit Risk The Company monitors credit exposures through limits that were established to limit a concentration with any single issuer or institution. The majority of the Company's accounts receivable arise from product sales in the United States, Europe and China and are primarily due from drug wholesalers and retailers, hospitals, government agencies, managed health care providers and pharmacy benefit managers. The Company's customers with the largest accounts receivable balances are Curascript Specialty Distribution, McKesson Corporation and Amerisource Bergen Corporation which, represented approximately 9%, 8% and 7%, respectively, of total gross account receivable at December 31, 2022. Bad debts have been minimal. The Company does not normally require collateral or other security to support credit sales.
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consisted of:
Amounts recognized as Other assets are comprised primarily of raw materials and work in process inventories and are not expected to be converted to finished goods that will be sold within one year. The Company has a long-term vendor supply contract conveyed as part of the Separation that includes certain annual minimum purchase commitments. During 2022 and 2021, the Company recorded $5 million and $24 million, respectively, due to estimated unavoidable losses associated with a long-term vendor supply contract. The charge was recognized as a component of during 2022 and 2021, respectively. During 2022, the Company recorded $36 million relating to a regulatory inspection finding at the Heist manufacturing location which impacts selected injectable steroids brands. The charge was recognized as a component of and reduced the Company's Inventory balance during 2022. As of December 31, 2022, total inventory purchase obligations are $1.2 billion and extend through 2030. Inventory purchase obligations due within the next twelve months amount to $343 million.
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Property, Plant, and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | Property, Plant and Equipment
Construction in progress includes amounts capitalized associated with the implementation of Organon's new enterprise resource planning system.
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Intangibles |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangibles | Intangibles Intangibles consists of:
Acquired intangibles include products and products rights, and licenses, which are initially recorded at fair value, assigned an estimated useful life, and amortized on a straight-line basis over their estimated useful lives. During 2022 and 2021, due to increased competition which resulted in the loss of contract tenders in certain markets and pricing pressure, the Company recorded impairment charges of $9 million and $7 million, respectively, related to a product right for a biosimilar product within Cost of sales. Aggregate amortization expense recorded within Cost of sales was $116 million in 2022, $103 million in 2021 and $86 million in 2020. The estimated aggregate future amortization expense is as follows:
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Long-Term Debt |
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Long-Term Debt and Leases | Long-Term Debt and Leases The following is a summary of Organon's total debt:
Term Loan B Facility On June 2, 2021, Organon entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the "Senior Credit Agreement"), providing for: •a Term Loan B Facility ("Term Loan B Facility"), consisting of (i) a U.S. dollar denominated senior secured "tranche B" term loan in the amount of $3.0 billion, and (ii) a euro denominated senior secured "tranche B" term loan in the amount of €750 million, in each case with a seven-year term that matures in 2028; and •a Revolving Credit Facility ("Revolving Credit Facility" and, together with the Term Loan B Facility, the "Senior Credit Facilities”), in an aggregate principal amount of up to $1 billion, with a five-year term that matures in 2026. Borrowings made under the Senior Credit Agreement initially bear interest, in the case of: •term loans under the Term Loan B Facility (i) denominated in U.S. Dollars, at 3.00% in excess of Adjusted LIBOR (subject to a floor of 0.50%) or 2.00% in excess of an alternate base rate ("ABR"), at our option and (ii) denominated in euros, at 3.00% in excess of an adjusted Euro Interbank Offer Rate ("Adjusted EURIBOR") (subject to a floor of 0.00%); and •revolving loans under the Revolving Credit Facility (i) in U.S. Dollars, at 2.00% in excess of an Adjusted LIBOR (subject to a floor of 0.00%) or 1.00% in excess of ABR, at our option and (ii) in euros, at 2.00% in excess of an Adjusted EURIBOR. Interest payments on the term loans are due quarterly in March, June, September and December. Principal payments on the term loans are based on 0.25% of the principal amount outstanding on the Closing Date and due on the last business day of each March, June, September and December, commencing with the last business day of September 2021 (the "Principal Payments"). These Principal Payments are reduced by the amount of any voluntary prepayments. Organon used the net proceeds from the notes offering, together with available cash on its balance sheet and borrowings under senior secured credit facilities, to distribute $9.0 billion to Merck and to pay fees and expenses related to the Separation. There were no outstanding balances under the Revolving Credit Facility as of December 31, 2022 or December 31, 2021. The Senior Credit Agreement contains customary financial covenants, including a total leverage ratio covenant, which measures the ratio of (i) consolidated total debt to (ii) consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, that must meet certain defined limits which are tested on a quarterly basis. In addition, the Senior Credit Agreement contains covenants that limit, among other things, Organon's ability to prepay, redeem or repurchase its subordinated and junior lien debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, redeem or repurchase equity interests, and create or become subject to liens. As of December 31, 2022, the Company is in compliance with all financial covenants and no default or event of default has occurred. Notes In April 2021, in connection with the Separation, Organon Finance 1 LLC ("Organon Finance 1"), a subsidiary of Merck, issued €1.25 billion aggregate principal amount of 2.875% senior secured notes due 2028, $2.1 billion aggregate principal amount of 4.125% senior secured notes due 2028 and $2.0 billion aggregate principal amount of 5.125% senior unsecured notes due 2031 (collectively, the "Notes"). Interest payments are due semiannually on October 30 and April 30. As part of the Separation, on June 2, 2021, Organon and a wholly-owned Dutch subsidiary of Organon, (the "Dutch Co-Issuer") assumed the obligations under the Notes as co-issuers, Organon Finance 1 was released as an obligor under the Notes, and certain subsidiaries of Organon agreed to guarantee the Notes. Each series of Notes was issued pursuant to an indenture dated April 22, 2021, between Organon and U.S. Bank National Association. Organon and the Dutch Co-Issuer assumed the obligations under the Notes pursuant to a first supplemental indenture to the relevant indenture, and the guarantors agreed to guarantee the Notes pursuant to a second supplemental indenture to the relevant indenture. Other Borrowings Other borrowings represent debt assumed in connection with the acquisition of Forendo Pharma in December 2021. In 2021 the Company recorded approximately $117 million of debt issuance costs related to the long-term debt and $19 million of discounts on the term loans. Debt issuance costs and discounts are presented as a reduction of debt on the Consolidated Balance Sheets and are amortized as a component of interest expense over the term on the related debt using the effective interest method. Long-term debt was recorded at the carrying amount. The estimated fair value of long-term debt (including current portion) is as follows:
Fair value was estimated using inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability and would be considered Level 2 in the fair value hierarchy. The Company made interest payments of $379 million for the year ended December 31, 2022 related to its debt instruments. The average maturity of the Company's long-term debt as of December 31, 2022 is approximately 6.0 years and the weighted-average interest rate on total borrowings as of December 31, 2022 is 4.9%. In both the second quarter of 2022 and the fourth quarter of 2021, the Company made a discretionary prepayment of $100 million on the U.S. Dollar-denominated term loan. As a result of these discretionary prepayments, the quarterly Principal Payments on the U.S. Dollar-denominated term loan are no longer required. The schedule of principal payments required on long-term debt for the next five years and thereafter is as follows:
Leases For periods prior to the Separation, lease costs were allocated to the Company based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method. Allocated operating lease costs for periods prior to Separation and actual operating lease costs were $61 million, $66 million and $40 million for the year ended December 31, 2022, 2021, and 2020, respectively. None of the Company's lease agreements contain variable lease payments. Sublease income is immaterial and there are no sale-leaseback transactions. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Cash paid for amounts included in the measurement of operating lease liabilities was $55 million, $41 million and $5 million for the year ended December 31, 2022, 2021 and 2020, respectively. Operating lease assets obtained in exchange for new operating lease liabilities were $28 million and $241 million and $23 million for the year ended December 31, 2022, 2021 and 2020, respectively, and primarily consists of real estate operating leases entered into in connection with establishing Organon as a standalone Company. Supplemental balance sheet information related to operating leases is as follows:
Maturities of operating lease liabilities as of December 31, 2022 are as follows ($ in millions):
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Contingencies |
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Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Organon is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. Given the nature of the litigation discussed in this note and the complexities involved in these matters, Organon is unable to reasonably estimate a possible loss or range of possible loss for such matters until Organon knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation, and (v) any other factors that may have a material effect on the litigation. Organon records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Organon's decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. Organon has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities. Reference is made below to certain litigation in which Merck, but not Organon, is named as a defendant. Pursuant to the Separation and Distribution Agreement, Organon is required to indemnify Merck for liabilities relating to, arising from, or resulting from such litigation. Product Liability Litigation Fosamax Merck is a defendant in product liability lawsuits in the United States involving Fosamax® (alendronate sodium) (the "Fosamax Litigation"). As of December 31, 2022, approximately 3,275 cases comprising the Fosamax Litigation are pending against Merck in either federal or state court. Plaintiffs in the vast majority of these cases generally allege that they sustained femur fractures and/or other bone injuries ("Femur Fractures") in association with the use of Fosamax. All federal cases involving allegations of Femur Fractures have been or will be transferred to a multidistrict litigation in the District of New Jersey ("Femur Fracture MDL"). In the only bellwether case tried to date in the Femur Fracture MDL, Glynn v. Merck, the jury returned a verdict in Merck's favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck's motion for judgment as a matter of law in the Glynn case and held that the plaintiff's failure to warn claim was preempted by federal law. In August 2013, the Femur Fracture MDL court entered an order requiring plaintiffs in the Femur Fracture MDL to show cause why those cases asserting claims for a femur fracture injury that took place prior to September 14, 2010, should not be dismissed based on the court's preemption decision in the Glynn case. Pursuant to the show cause order, in March 2014, the Femur Fracture MDL court dismissed with prejudice approximately 650 cases on preemption grounds. Plaintiffs in approximately 515 of those cases appealed that decision to the U.S. Court of Appeals for the Third Circuit ("Third Circuit"). In March 2017, the Third Circuit issued a decision reversing the Femur Fracture MDL court's preemption ruling and remanding the appealed cases back to the Femur Fracture MDL court. In May 2019, the U.S. Supreme Court decided that the Third Circuit had incorrectly concluded that the issue of preemption should be resolved by a jury, and accordingly vacated the judgment of the Third Circuit and remanded the proceedings back to the Third Circuit to address the issue in a manner consistent with the Supreme Court's opinion. In November 2019, the Third Circuit remanded the cases back to the District Court in order to allow that court to determine in the first instance whether the plaintiffs' state law claims are preempted by federal law under the standards described by the Supreme Court in its opinion. On March 23, 2022, the District Court granted Merck's motion and ruled that plaintiffs' failure to warn claims are preempted as a matter of law to the extent they assert that Merck should have added a Warning or Precaution regarding atypical femur fractures prior to October 2010. On July 11, 2022, the District Court entered an Order to Show Cause as to why the Court should not dismiss either with prejudice or conditionally all of plaintiffs' claims that are not dependent on the preempted failure to warn claims. On November 18, 2022, as a result of the Order to Show Cause, the District Court entered a Final Judgment resulting in the dismissal with prejudice of all plaintiffs in the MDL. On December 16, 2022, those plaintiffs filed their Notice of Appeal to the Third Circuit challenging the District Court's preemption ruling. 974 of the 975 cases previously pending in the Femur Fracture MDL have either been dismissed or are on appeal to the Third Circuit. Plaintiff's motion to remand one case back to its transferor court is pending. As of December 31, 2022, approximately 2,020 cases alleging Femur Fractures have been filed in New Jersey state court and are pending in Middlesex County. The parties selected an initial group of cases to be reviewed through fact discovery, and Merck has continued to select additional cases to be reviewed. As of December 31, 2022, approximately 275 cases alleging Femur Fractures have been filed and are pending in California state court. All of the Femur Fracture cases filed in California state court have been coordinated before a single judge in Orange County, California. Additionally, there are four Femur Fracture cases pending in other state courts. Discovery is presently stayed in the Femur Fracture MDL and in the state court in California. Nexplanon/Implanon Merck is a defendant in lawsuits brought by individuals relating to the use of Nexplanon and Implanon™ (etonogestrel implant). There are two filed product liability actions involving Implanon, both of which are pending in the Northern District of Ohio as well as 56 unfiled cases involving Implanon alleging similar injuries, which have been tolled under a written tolling agreement. The product liability action involving Nexplanon that had been pending in the Western District of Arkansas has been resolved. As of December 31, 2022, Merck had 18 cases pending outside the United States, of which 12 relate to Implanon and six relate to Nexplanon. Propecia/Proscar Merck is a defendant in product liability lawsuits in the United States involving Propecia® (finasteride) and/or Proscar® (finasteride). The federal lawsuits were consolidated for pretrial purposes in federal multidistrict litigation in the Eastern District of New York (the "MDL"), and the matters in state court in New Jersey were consolidated in Middlesex County ("N.J. Coordinated Proceedings"). In 2018, Merck and the plaintiffs' Executive Committee in the MDL and the plaintiffs' Liaison Counsel in the N.J. Coordinated Proceedings entered into an agreement to resolve the lawsuits for an aggregate amount of $4.3 million. The settlement was subject to certain contingencies, including 95% plaintiff participation and a per plaintiff clawback if the participation rate was less than 100%. The contingencies were satisfied and the settlement agreement has been finalized. The MDL was officially closed by court order on January 18, 2023, and the N.J. Coordinated Proceedings were previously concluded by court order in September 2021. As of December 31, 2022, one case remains pending in the United States, a matter involving Proscar in the United States District Court for the Eastern District of California in which Merck's motion to dismiss was granted by the District Court, but the plaintiff can appeal the decision. The individual cases involving Propecia that had been pending in the MDL and California state court have been resolved. The Company is also defending 15 product liability cases outside the United States, two of which are class actions and three of which are putative class actions. Governmental Proceedings From time to time, Organon's subsidiaries may receive inquiries and may be the subject of preliminary investigation activities from competition and/or other governmental authorities, including in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to Organon, monetary fines and/or remedial undertakings may be required. Subject to certain exceptions specified in the Separation and Distribution Agreement, Organon assumed liability for all pending and threatened legal matters related to products transferred to Organon, including competition investigations resulting from enforcement activity concerning Merck's conduct involving Organon's products. Organon could be obligated to indemnify Merck for fines or penalties, or a portion thereof, resulting from such investigations. In one such enforcement matter in Spain concerning NuvaRing, the National Commission on Markets and Competition ("CNMC") recently imposed a fine on Merck in the amount of €39 million for abuse of a dominant position in the market for contraceptive vaginal rings from June 2017 to April 2018. The CNMC decision to impose the fine is appealable to the National High Court in Spain. If the fine ultimately stands, Organon could be obligated to indemnify Merck for a portion thereof. Hadlima In July 2021, Organon received a Civil Investigation Demand ("CID") from the Office of the Attorney General for the State of Washington. The CID requests answers to interrogatories, as well as various documents, regarding certain activities related to adalimumab and adalimumab biosimilars. Organon is cooperating with the government's investigation and has produced information in response to the CID. Patent Litigation From time to time, generic manufacturers of pharmaceutical products file Abbreviated New Drug Applications ("ANDAs") with the FDA seeking to market generic forms of Organon's products prior to the expiration of relevant patents owned by Organon. To protect its patent rights, Organon may file patent infringement lawsuits against such generic companies. Similar lawsuits defending Organon's patent rights may exist in other countries. Organon intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products, potential payment of damages and legal fees, and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges. Nexplanon In June 2017, Microspherix LLC ("Microspherix") sued Organon in the U.S. District Court for the District of New Jersey asserting that the manufacturing, use, sale and importation of Nexplanon infringed several of Microspherix's patents that claim radio-opaque, implantable drug delivery devices. Microspherix is claiming damages from September 2014 until the patents expired in May 2021. Organon brought Inter Partes Review ("IPR") proceedings in the United States Patent and Trademark Office ("USPTO") and successfully stayed the district court action. The USPTO invalidated some, but not all, of the claims asserted against Organon. Organon appealed the decisions that found claims valid, and the Court of Appeals for the Federal Circuit affirmed the USPTO's decisions. The matter is no longer stayed in the district court, and Organon is currently litigating the invalidity and non-infringement of the remaining asserted claims. A claim construction hearing was held on March 2, 2022, and any further dates in the schedule will be set based on the date the court issues a claim construction order. Other Litigation In addition to the matters described above, there are various other pending legal proceedings involving Organon, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of Organon as of December 31, 2022, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to Organon's financial condition, results of operations or cash flows either individually or in the aggregate. Legal Defense Reserves Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by Organon; the development of Organon's legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against Organon; and the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The legal defense reserve as of December 31, 2022 and 2021 was $17 million and $9 million, respectively, and represented Organon's best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by Organon. Organon will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so. Environmental Matters In management's opinion, the liabilities for all environmental matters that are probable and reasonably estimable have been accrued and totaled $20 million and $24 million at December 31, 2022 and 2021, respectively. These liabilities are undiscounted, do not consider potential recoveries from other parties and will be paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 15 years. It is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation. Management also does not believe that these expenditures should result in a material adverse effect on the Company's financial condition, results of operations or liquidity for any period presented.
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Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation Plans | Stock-Based Compensation Plans In connection with the Separation, and in accordance with the Employee Matters Agreement, Organon's employees with outstanding former Merck stock-based awards received replacement stock-based awards under the 2021 Incentive Stock Plan at Separation. The ratio used to convert the Merck stock-based awards was designed to preserve the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value of the award immediately prior to Separation. Due to the conversion, Organon incurred $17 million of incremental stock-based compensation expense in 2021. Of this amount, $4 million was related to vested option awards and was recognized immediately into earnings in connection with the Separation, and the remainder is recognized ratably over the option awards' remaining weighted average vesting period. The Company grants stock option awards, performance share units ("PSUs") and restricted share units ("RSUs") pursuant to its 2021 Incentive Stock Plan. Employee stock options are granted to purchase shares of Company stock at the fair market value at the time of grant. Generally, stock options have a contractual term of ten years and vest one-third each year over a three-year period, subject to limited exceptions. RSUs are stock awards that are granted to employees and entitle the holder to shares of common stock as the awards vest. RSU awards generally vest one-third each year over a three-year period. The fair value of the stock option and RSU awards is determined and fixed on the grant date based on the Company's stock price. The terms of the Company's PSU awards allow the recipients of such awards to earn a variable number of common shares based on the cumulative results of specified performance factors. The Company has PSU awards based on the following performance factors: •total stockholder return of the Company relative to an index of peer companies ("relative TSR") specified in the awards •the results of the cumulative free cash flow ("FCF") of the Company over a three year period For FCF and TSR awards, the Company recognizes compensation costs ratably over the performance period. The PSU Awards will generally vest at the end of the three year performance period, however, the number of shares delivered will vary based upon the attained level of performance. For PSUs with a performance-based FCF goal, stock-based compensation expense is recognized based on the probability of the achievement of the financial performance metric for the respective vesting period and is assessed at each reporting date. For PSUs with a market-based relative TSR goal, stock-based compensation expense is recognized based on the estimated fair value of the award at the grant date regardless of the actual number of shares earned. PSU awards generally vest after three years. For RSUs and PSUs, dividends declared during the vesting period are payable to the employees only upon vesting. RSU and PSU distributions will be in shares of Company stock after the end of the vesting or performance period, subject to the terms applicable to such awards. Stock-based compensation expense incurred by the Company was as follows:
In connection with the Separation, in 2021, Merck's PSUs and RSUs were converted into 3.3 million Organon RSUs at a weighted average grant date fair value of $36.77 and Merck's stock options were converted into 4.1 million Organon stock options at a weighted average grant date fair value of $8.55. Stock options at Separation were valued using a combination of option models. The Company used the Black-Scholes model as the basis for the original fair value of the options, and the Hull-White I Lattice option pricing model calculated the incremental fair value. In applying these models, the Company used both historical data and current market data to estimate the fair value of its options. The Black-Scholes model assumptions include expected dividend yield, risk-free interest rate, volatility, and term of the options. The Hull-White I Lattice model requires several assumptions including expected exercise barrier, dividend yield, risk-free interest rate, remaining vesting life and remaining contractual life. These fair value assumptions were based on the awards and terms previously granted under the Merck incentive compensation plans to Organon employees. At December 31, 2022, the unrecognized portion of the incremental stock-based expense was $5 million. The Company uses the Black-Scholes model to determine the fair value of the stock options as of the grant date. In applying this model, the Company uses both historical data and current market data to estimate the fair value of its options. The expected dividend yield is based on forecasted patterns of dividend payments. The risk-free interest rate is based on the rate at grant date of zero-coupon U.S. Treasury Notes with a term equal to the expected term of the option. Expected volatility is estimated using historical volatility. Due to the lack of trading history of Organon's stock at the time of valuation efforts, the historical component of expected volatility is based on historical monthly price changes of the peer group within the industry. Merck's historical data for Organon employees was used to estimate equity award exercise and employee termination behavior within the valuation model. The expected term represents the amount of time that options granted are expected to be outstanding based on historical and forecasted exercise behavior. The weighted average fair value of options was determined using the following assumptions:
A summary of the equity award transactions for the year ended December 31, 2022 are as follows:
The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable as of December 31, 2022:
The amount of unrecognized compensation costs as of December 31, 2022 was $145 million, which will be recognized in operating expense ratably over the weighted average vesting period of 1.93 years.
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Pension and Other Postretirement Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Benefit Plans | Pension and Other Postretirement Benefit Plans Prior to the Separation on June 2, 2021, Organon participated in Merck's U.S. and non-U.S. plans. Merck has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. Merck also provides medical benefits, principally to its eligible U.S. retirees and their dependents, through its other postretirement benefit plans. The Company participated in Merck's benefit plans as though it was a participant in a multi-employer plan with the other businesses of Merck. The retirement benefits guidance provides that liabilities beyond any contributions currently due and unpaid are not required to be reported. Accordingly, no assets or liabilities associated with plans where the Company was a participant in a multi-employer plan with the other businesses of Merck have been reflected in the Company's Consolidated Balance Sheet. The Consolidated Statements of Income includes expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company for the years ended December 31, 2021 and 2020 was $29 million and $55 million, respectively. The Company's participation in the defined pension and postretirement benefit plans sponsored by Merck concluded upon the completion of the Separation on June 2, 2021. In accordance with the terms of the Employee Matter Agreement, prior to the Separation, Merck continued to provide service crediting to employees that transferred to Organon under Merck's U.S. defined benefit pension plan, supplemental executive retirement, and retiree medical plans for purposes of early retirement eligibility and subsidies, as well as for certain service crediting bridges. Although Merck is responsible for providing these benefits, Organon recorded the portion of the aggregate incremental cost of providing early retirement subsidies, service crediting bridges, and retiree health care benefits under these programs that is attributable to future service. Accordingly, upon Separation, the Company recorded a "grow-in" provision granted to employees transferred to Organon of $50 million, which represented the future service earned with Organon for these transferred employees for the pension and other postretirement benefits. The "grow-in" provision was recorded as an asset and will be expensed over the estimated average service period of eight years since the Separation, in operating expenses. The unamortized balance of the asset is $40 million as of December 31, 2022, of which $34 million is reflected in Other Assets and $6 million is reflected in Other current assets. As of June 2, 2021, Organon became the plan sponsor for certain non-U.S. defined benefit pension plans. These Consolidated Financial Statements reflect the periodic benefit costs and funded status of such plans. Organon pension plans are primarily comprised of plans in Switzerland, Belgium, Korea, Germany and Italy. The Company uses December 31 as the year-end measurement date for these plans. Net Periodic Benefit Cost The net periodic benefit cost for pension plans consisted of the following components:
The components of net periodic benefit cost other than the service cost component are included in Other (income) expense, net. Obligations and Funded Status Summarized information about changes in plan assets and benefit obligations, the funded status and the amounts recorded is as follows:
Information related to the funded status of materially significant pension plans is as follows:
Plan Assets The fair values of the Company's pension plan assets at December 31 by asset category are as follows:
The targeted investment portfolio for the Company's pension plans that are sponsored outside the United States varies based on the duration of pension liabilities and local government rules and regulations. There are no unfunded commitments or redemption restrictions related to these investments. Expected Contributions Expected contributions during 2023 are approximately $11 million for the Company's pension plans. Expected Benefit Payments Expected benefit payments are as follows ($ in millions):
Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service. Amounts Recognized in Other Comprehensive Income Net loss amounts reflect differences between expected and actual returns on plan assets as well as the effects of changes in actuarial assumptions. Net loss amounts in excess of certain thresholds are amortized into net periodic benefit cost over the average remaining service life of employees.
Actuarial Assumptions The Company reassesses its benefit plan assumptions on a regular basis. The weighted average assumptions used in determining pension plan information are as follows:
The discount rate is evaluated on measurement dates and modified to reflect the prevailing market rate of a portfolio of high-quality, fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due. The expected rate of return represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid and is determined on a plan basis. The expected rate of return for each plan is developed considering long-term historical returns data, current market conditions, and actual returns on the plan assets. Using this reference information, the long-term return expectations for each asset category and a weighted-average expected return for each plan's target portfolio is developed according to the allocation among those investment categories. The expected portfolio performance reflects the contribution of active management as appropriate. Savings Plan Prior to June 2, 2021, the Company participated in certain Merck defined contribution savings plans. After the Separation, Organon maintains a defined contribution savings plan in the United States. The Company matches a percentage of employees' contributions consistent with the provisions of the plan. In addition, since Separation, the Company makes retirement contributions calculated based on a predetermined formula that considers years of service and the employee's age. Total actual employer contributions to this plan in 2022 were $32 million. Total allocated and actual employer contributions to this plan in 2021 were $23 million. The amount allocated for total employer contributions in 2020 was $18 million.
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Taxes on Income |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes on Income | Taxes on Income A reconciliation between the effective tax rate and the U.S. statutory rate is as follows:
Prior to the Separation, income taxes were calculated as if the Company filed income tax returns on a standalone basis. For those years, the Company believes the assumptions supporting its allocation and presentation of income taxes on a separate return basis are reasonable. The Company has no remaining transition tax liability as of December 31, 2021 under the Tax Cuts and Jobs Act ("TCJA") that was enacted in 2017. The transition tax liability was $1.5 billion at December 31, 2020, of which $161 million was included in Income Taxes Payable and the remainder of $1.3 billion was included in Other Noncurrent Liabilities. As a result of the TCJA, the Company has made a determination it is no longer indefinitely reinvested with respect to a majority of its previously taxed undistributed earnings from foreign subsidiaries and provided for a deferred tax liability for withholding taxes due upon future remittances, net of certain foreign income tax credits. At December 31, 2022 and 2021, the deferred income tax liabilities on undistributed earnings for certain subsidiaries that are deemed indefinitely reinvested are immaterial. The tax effects of foreign earnings in the tax rate reconciliation above primarily reflect the effects of operations in jurisdictions with different tax rates than the United States thereby yielding a favorable impact on the effective tax rate compared with the U.S. statutory rate of 21%. The favorable impact is primarily attributable to a reduced tax rate arrangement that was agreed to in Switzerland for an active legal entity. The effective income tax rates were 18.3%, 11.7% and 18.0% for 2022, 2021 and 2020, respectively. These effective income tax rates reflect the beneficial impact of foreign earnings, offset by the impact of U.S. inclusions under the Global Intangible Low-Taxed Income regime. During 2021, the Company recorded a $75 million tax benefit relating to a portion of the non-U.S. step-up of tax basis associated with the Company's Separation from Merck. The effective income tax rate for 2021 also reflects the Internal Revenue Service ("IRS") conclusion of its examinations of Merck's 2015-2016 U.S. federal income tax returns as further detailed below. Income before taxes consisted of:
Taxes on income consisted of:
Deferred income taxes at December 31 consisted of:
The Company has recognized $65 million and $103 million deferred taxes on net operating loss ("NOL") carryforwards in multiple jurisdictions as of December 31, 2022 and 2021, respectively. Valuation allowances of $52 million have been established on $39 million of foreign deferred tax assets and $13 million of US deferred tax assets. The $17 million increase in the valuation allowance in 2022 is primarily due to a disallowed interest expense in the US. During 2021, the Company reduced valuation allowances by $42 million as a result of the Separation. Income taxes paid in 2022 and 2021, were $214 million and $131 million, respectively. Income taxes paid by Merck with respect to Organon for 2020 were $416 million. As of December 31, 2022 and 2021, the Company deferred the income tax consequences resulting from intra-entity transfers of inventory totaling $368 million and $377 million, respectively. These amounts are reflected in Other current assets. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
If the Company were to recognize the unrecognized tax benefits of $93 million, at December 31, 2022, the income tax provision would reflect a favorable net impact of $93 million. In 2022, foreign tax authorities concluded its examinations of certain foreign income tax returns. As a result, the Company reflected a payment of $12 million in the consolidated financial statements and a reduction of $11 million in reserves for unrecognized tax benefits for tax positions relating to the years that were under examination. Prior to June 2, 2021, the Company was part of Merck's consolidated U.S. federal income tax return, as well as separate and combined Merck income tax returns in numerous state and international jurisdictions. Merck was under examination by numerous tax authorities in various jurisdictions globally. During 2021, the IRS concluded its examinations of Merck's 2015-2016 U.S. federal income tax returns. As a result, the Company reflected an allocation from Merck of $18 million representing the Company's portion of the payment made to the IRS in the Consolidated Financial Statements. The Company's portion of reserves for unrecognized tax benefits for the years under examination exceeded the allocated adjustments relating to this examination period and therefore the Company included a $29 million net tax benefit for the year ended December 31, 2021. This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination. The Company is subject to income tax in the United States (federal, state and local) as well as other jurisdictions outside of the United States in which we operate. As part of the Separation from Merck, $79.3 million of liabilities for unrecognized tax benefits associated with uncertain tax positions for jurisdictions outside of the United States were conveyed to Organon. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits as of December 31, 2022 could decrease by up to $15 million in the next 12 months as a result of various audit closures, settlements or the expiration of the statute of limitations. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures. Interest and penalties associated with uncertain tax positions were immaterial in 2022 and 2021 and resulted in an expense of $11 million in 2020. These amounts reflect the beneficial impacts of various tax settlements. Liabilities for accrued interest and penalties were $35 million and $39 million as of December 31, 2022 and 2021, respectively. Various state and foreign tax examinations are in progress and for these jurisdictions, income tax returns are open for examination for the period 2006 through 2022.
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Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) Changes in Accumulated other comprehensive income (loss) by component are as follows:
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Product and Geographic Information |
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Product and Geographic Information | Product and Geographic Information The Company's operations include the following product portfolios, which constitute one operating segment engaged in developing and delivering innovative health solutions through its portfolio of prescription therapies within women's health, biosimilars and established brands. Revenues of the Company's products were as follows:
Totals may not foot due to rounding. Trademarks appearing above in italics are trademarks of, or are used under license by, the Organon group of companies. (1) Includes sales of products not listed separately. Revenues from Marvelon/Mercilon were previously reported as part of Other Women's Health. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health. (2) Includes manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation. Revenues by geographic area where derived are as follows:
(1) Primarily reflects manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation. As of December 31, 2022, approximately 70% of the Company's long-lived fixed assets are located in Europe and Canada, and 20% are in the United States. The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Third Party Arrangements Related Party Disclosures | Third-Party Arrangements and Related Party Disclosures Pursuant to the Separation, Merck ceased to be a related party to Organon and accordingly, no related party transactions or balances have been reported since June 2, 2021. In connection with the Separation, the Company entered into the Separation and Distribution Agreement, which contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of Organon and Merck as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of the Organon business with Organon and financial responsibility for the obligations and liabilities of Merck's remaining business with Merck, (iii) procedures with respect to claims subject to indemnification and related matters, (iv) the allocation between Organon and Merck of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the Distribution, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures governing Organon's and Merck's obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of Merck's business and Organon's business. Agreements that Organon entered into with Merck that govern aspects of Organon's relationship with Merck following the Separation include: •Transition Services Agreements - Under the TSA, (i) Merck and certain of its affiliates provide Organon and certain of its affiliates, on an interim, transitional basis, various services, and (ii) Organon and certain of its affiliates provide Merck and certain of its affiliates, on an interim, transitional basis, various services. The services provided by Merck will include, among others, information technology, human resources, finance, quality, regulatory, supply chain management, promotional services, distribution services and certain other services, and will provide on a cost or, where applicable, a cost-plus basis. The Merck services generally commenced on the date of the Separation and generally terminate within 25 months following the date of Separation. Organon generally has the right to request the early termination of any or all services with advance notice. The services provided by Organon include quality, regulatory, supply chain management, promotional services, distribution services and certain other services and is provided on a cost or, where applicable, a cost-plus basis. The provisions of Organon services under the TSA generally commenced on the date of Separation and terminate within 25 months following the Separation. Merck will generally have the right to request the early termination of any or all services with advance notice. •Interim Operating Agreements - Merck and Organon entered into a series of interim operating model ("IOM") - Merck and Organon entered into a series of IOM agreements pursuant to which Merck and certain of its affiliates that held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products in various jurisdictions prior to the Separation, will continue to market, import and distribute such products until such time as the relevant licenses and permits are transferred to Organon or its affiliates, while permitting Organon (or Merck, as applicable) to recognize revenue relating to the sale of its respective products, to the extent practicable. Under such IOM agreements and in accordance with the Separation and Distribution Agreement, the relevant Merck entity will continue operations in the affected market on behalf of Organon, with Organon receiving all of the economic benefits and burdens of such activities. Organon began receiving these economic benefits as of June 2, 2021. Based on the terms of the IOM agreements, the Company determined it is the Principal under these arrangements. Organon holds all risks and rewards of ownership inclusive of risk of loss, market risk and benefits related to the inventory. Additionally, Organon has latitude in pricing, has the ability to direct Merck regarding decisions over inventory, and is responsible for all credit and collections risks and losses associated with the related receivables. As such, Organon recognizes these sales on a gross basis. •Manufacturing and Supply Agreements - Merck and Organon and/or their applicable affiliates entered into a number of manufacturing and supply agreements pursuant to which the relevant Merck entity will (a) manufacture and supply certain active pharmaceutical ingredients for the relevant Organon entity, (b) toll manufacture and supply certain formulated pharmaceutical products for such Organon entity, and (c) package and label certain finished pharmaceutical products for such Organon entity. Similarly, the relevant Organon entity will (a) manufacture and supply certain formulated pharmaceutical products for the relevant Merck entity, and (b) package and label certain finished pharmaceutical products for such Merck entity. •Tax Matters Agreement - The TMA allocates responsibility for all U.S. federal income, state and foreign income, franchise, capital gain, withholding and similar taxes, as well as all non-income taxes. The TMA also provides for cooperation between Merck and Organon with respect to tax matters, the exchange of information and the retention of records that may affect the tax liabilities of the parties to the TMA. Merck generally is responsible for any income taxes reportable on an originally filed consolidated, combined or unitary return that includes Merck or any of its subsidiaries (and Organon and/or any of its subsidiaries) for any periods or portions thereof ending on or prior to the Distribution. Organon generally is responsible for any income taxes that are reportable on originally filed returns that include only Organon and/or any of its subsidiaries, for all tax periods. Additionally, as a general matter, Merck is responsible for certain income and non-income taxes imposed as the direct result of the Separation or of an internal separation transaction. Organon is responsible for certain taxes that exclusively relate to Organon's business and for taxes resulting from any breach of certain representations or covenants that Organon made in the TMA. The TMA imposes restrictions on Organon and its subsidiaries during the two-year period following the Distribution. The restrictions are intended to prevent the Distribution and certain related transactions from failing to qualify as tax-free for U.S. federal income tax purposes. During such period, Organon and its subsidiaries generally are prohibited from, among other things, entering into transactions in which all or a portion of the shares of the Common Stock would be acquired or all or a portion of certain assets of Organon and its subsidiaries would be acquired. Organon and its subsidiaries also are prohibited, during such period, from merging or consolidating with any other person, issuing equity securities beyond certain thresholds, and repurchasing Common Stock other than in certain open-market transactions. Certain amounts are estimates and subject to possible adjustment in future periods. •Employee Matters Agreement - The agreement allocated assets, liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Separation. •Other agreements that Organon entered into with Merck include the Intellectual Property License Agreements and Regulatory Agreements. The amounts due under such agreements were:
Sales and cost of sales resulting from the manufacturing and supply agreements with Merck were:
Prior to the Separation, the Company did not operate as a standalone business and the Consolidated Financial Statements were derived from the consolidated financial statements and accounting records of Merck. The following disclosure summarizes activity between the Company and Merck up to the Separation, including the affiliates of Merck that were not part of the Separation. Cost allocations from Merck Merck provided significant corporate, manufacturing, selling, marketing, administrative, research services and resources to the Company. The Consolidated Financial Statements reflect an allocation of these costs. Some of these services continue to be provided by Merck to the Company on a temporary basis under the Transition Services Agreement. The allocations reflected in the Consolidated Statements of Income for continuing operations are as follows:
(1) Includes costs through the Separation Date. Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company at the time. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by the Company's employees and strategic decisions made in areas such as manufacturing, selling, information technology and infrastructure. Related party transactions The following transactions represent activity between Organon Entities and Transferred Entities with other Merck affiliates prior to the Separation:
The Company had the following balances with Merck affiliates:
Net transfers to Merck & Co., Inc. Prior to the Separation, net transfers to Merck were included within Net investment from Merck & Co., Inc. on the Consolidated Statement of Equity and represent the net effect of transactions between the Company and Merck. The components of Net transfers to Merck & Co., Inc. were as follows:
(1) Amounts represent activity through the date of the Separation. (2) Net transfers (from) to Merck & Co., Inc. as reflected in the Consolidated Statement of Cash Flows for Continuing Operations for the year ended December 31, 2021 include Separation adjustments of $52 million, identified after the date of the Separation. Prior to the Separation, transfers between the Organon Entities, the Transferred Entities and Merck affiliates were recognized in Net transfers to Merck & Co., Inc. in the Consolidated Statement of Equity at Merck's historical cost. Additionally, in connection with the Separation, certain assets and liabilities included in the pre-Separation balance sheet were retained by Merck and certain assets and liabilities not included in the pre-Separation balance sheet were transferred to Organon. Separation-related adjustments were also recognized in Net transfers to Merck & Co., Inc. Adjustments for transfers and separations are reflected in the Company's Consolidated Financial Statements for the year ended December 31, 2021 and were comprised of (i) the retention of assets and liabilities by Merck affiliates including accounts receivable, net of $751 million, inventories of $265 million, transition tax liabilities of $1.4 billion and certain liabilities net of other assets of $210 million, partially offset by (ii) the contribution of assets and liabilities to Organon Entities from Merck affiliates, including assets of $59 million and liabilities of $35 million. Merck conveyed to Organon $79.3 million of reserves for unrecognized tax benefits associated with uncertain tax positions for jurisdictions outside of the United States. See Note 15 "Taxes on Income" for further details. The Company also incurred costs related to employee matters in connection with the Separation, primarily related to stock-based and pension related compensation costs. See Notes 13 "Stock-Based Compensation Plans" and 14 "Pension and Other Postretirement Benefits Plans" for further details.
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Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Discontinued Operations In contemplation of the Separation, the Merck Retained Products business in the Transferred Entities was distributed to Merck affiliates and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations. The components of Loss from discontinued operations, net of tax for the Merck Retained Products business are as follows:
Discontinued operations include related party sales of $12 million and $542 million for the year ended December 31, 2021 and 2020, respectively. Costs for inventory purchases from related parties were $53 million and $382 million for the year ended December 31, 2021 and 2020, respectively. The components of assets and liabilities of discontinued operations that are stated separately as of December 31, 2020 in the Consolidated Balance Sheets are comprised of the following items:
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Earnings per Share ("EPS") |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share ("EPS") | Earnings per Share ("EPS")On June 2, 2021, the date of the Separation, 253,516,000 shares of the Common Stock were distributed to Merck stockholders of record as of the Record Date. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation. For the year ended December 31, 2021 and 2020, these shares are treated as issued and outstanding as of January 1, 2021 and 2020, respectively, for purposes of calculating historical basic and diluted earnings per share. The calculation of basic and diluted earnings per common share for the year ended December 31, 2022 and 2021 was as follows:
For periods prior to the Separation, it is assumed that there were no dilutive equity instruments as there were no equity awards of Organon outstanding prior to the Separation. For periods subsequent to the Separation and the Distribution, diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards, when the effect of the potential exercise would be anti-dilutive.
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Subsequent Events |
12 Months Ended |
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Dec. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In January 2023, the Company made a strategic investment in Claria Medical, Inc. ("Claria"), a privately-held company developing an investigational medical device being studied for use during minimally invasive laparoscopic hysterectomy. Under the terms of the agreement, Organon paid $8 million upfront and has the option to acquire Claria for pre-defined terms at a later date. The upfront payment will be expensed as Acquired in-process research and development and milestones in our statement of income in the first quarter of 2023. |
Summary of Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Accounting | On June 2, 2021, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the Separation on June 2, 2021, the Company's historical combined financial statements were prepared on a standalone basis and were derived from Merck's consolidated financial statements and accounting records. The financial statements for all periods presented, including the historical results of the Company prior to June 2, 2021, are now referred to as "Consolidated Financial Statements," and have been prepared pursuant to the rules and regulations for reporting on Form 10-K. Periods Prior to Separation The assets, liabilities, revenue and expenses of the Company were reflected in the Consolidated Financial Statements on a historical cost basis, as included in the consolidated financial statements of Merck, using the historical accounting policies applied by Merck. The Consolidated Financial Statements did not purport to reflect what the Company's results of operations, comprehensive income, financial position, equity or cash flows would have been had the Company operated as a standalone public company during the periods presented. The Consolidated Financial Statements were prepared following a legal entity approach, which resulted in the inclusion of the following: •Certain assets and liabilities, results of operations and cash flows attributable to the sales of Organon Products that were contributed to Organon prior to the consummation of the Separation. •The Transferred Entities, which have historically included the results from the sales of both Organon Products and the Merck Retained Products. Each Transferred Entity's historical operations, including its results of operations, assets and liabilities, and cash flows have been fully reflected in the Consolidated Financial Statements. •In contemplation of the Separation, the Merck Retained Products business of the Transferred Entities was distributed to Merck and its affiliates ("MRP Distribution") and, accordingly, the historical results of operations, assets and liabilities, and the cash flows of the Merck Retained Products for such Transferred Entities are reflected as discontinued operations. The Company's businesses had historically functioned together with the other businesses controlled by Merck. Accordingly, the Company relied on Merck's corporate and other support functions for its business. Therefore, for the period prior to the Separation, certain corporate and shared costs were allocated to the Company based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, including: (i)expenses related to Merck support functions, including expenses for facilities, executive oversight, treasury, finance, legal, human resources, shared services, compliance, procurement, information technology and other corporate functions. (ii)certain manufacturing and supply costs incurred by Merck's manufacturing division, including facility management, distribution, logistics, planning and global quality. (iii)certain costs incurred by Merck's human health division in relation to selling and marketing activities, and related administrative support functions, that are not routinely allocated to therapeutic areas. (iv)certain costs incurred by Merck's research laboratories for activities related to drug discovery and development, as well as medical and regulatory affairs. (v)restructuring costs (see Note 6 "Restructuring") and stock-based compensation expenses (see Note 13 "Stock-Based Compensation Plans"); and (vi)certain compensation expenses maintained on a centralized basis such as certain employee benefit expenses. Management believes these cost allocations were a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the period prior to the Separation, though the allocations may not be indicative of the actual costs that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company's employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure. Merck maintains various employee benefit plans in which the Company's employees participated during periods prior to the Separation, and a portion of the costs associated with these plans was included in the Company's Consolidated Financial Statements. Certain pension assets and obligations were transferred by Merck into legal entities established to operate the Organon Products business (the "Organon Entities") that are the plan sponsor and, accordingly, the Consolidated Balance Sheet at December 31, 2022 and 2021 includes assets and liabilities of the newly established plans of Organon. Merck utilized a centralized approach to cash management and the financing of its operations. Cash generated by the Company was routinely transferred into accounts managed by Merck's centralized treasury function and cash disbursements for the Company's operations prior to the Separation were funded as needed by Merck. Cash and cash equivalents of the Organon Entities and the Transferred Entities were reflected in the Company's Consolidated Balance Sheet. Balances held by the Organon Entities and the Transferred Entities with Merck for cash transfers and loans were reflected as Due to related party prior to Separation. All other cash, cash equivalents, short-term investments and related transfers between Merck and the Company were generally held centrally through accounts controlled and maintained by Merck and were not specifically identifiable to the Company. Accordingly, such balances were accounted for through Net investment from Merck & Co., Inc. Merck's third-party debt and related interest expense were not attributed to the Company because the Company was not the legal obligor of the debt and the borrowings were not specifically identifiable to the Company. For the Organon Entities and the Transferred Entities, transactions with Merck affiliates were included in the Consolidated Statement of Income and related balances were reflected as Due to related party or Due from related party in the continuing operations and discontinued operations of the Consolidated Balance Sheet, as applicable. Other balances between the Company and Merck were considered to be effectively settled in the Consolidated Financial Statements at the time the transactions were recorded. See Note 18 "Third-Party Arrangements and Related Party Disclosures" for additional details. As the separate legal entities that made up the Company's business were not historically held by a single legal entity, Net investment from Merck & Co., Inc. was shown in lieu of stockholders' equity in these Consolidated Financial Statements. Net investment from Merck & Co., Inc. represented Merck's interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results. Income tax expense and tax balances in the Consolidated Financial Statements were calculated on a separate tax return basis. The Company's operations are included in the tax returns of certain Organon Entities, Transferred Entities or the respective Merck entities of which the Company's business was a part. As of Separation Date Certain assets and liabilities, including accounts receivables, inventories and trade payables included on the Consolidated Balance Sheet prior to the Separation, have been retained by Merck post-Separation and therefore were transferred to Merck through Net investment from Merck & Co., Inc. in the Company's Consolidated Financial Statements. Additionally, certain amounts previously included in Due to related party or Due from related party are reflected in accounts receivable and trade accounts payable as of December 31, 2021. As part of the Separation, Net investment from Merck & Co., Inc. was reclassified to Common Stock and Accumulated Deficit. In connection with the Separation, additional pension assets and obligations were transferred to Organon through Net investment from Merck & Co., Inc., and the Company recorded these in the Consolidated Balance Sheet. See Note 14 "Pension and Other Postretirement Benefits Plans" for details. Additionally, stock-based awards were converted in accordance with the Employee Matters Agreement. See Note 13 "Share-Based Compensation Plans" for details. During the second quarter of 2021, an aggregate of $9.5 billion of debt was issued in connection with the Separation. See Note 11 "Long-Term Debt and Leases" for additional details. The Company distributed $9.0 billion of the $9.5 billion proceeds to Merck in accordance with the terms of the Separation. Periods Post Separation Following the Separation, certain functions continue to be provided by Merck under the Transition Services Agreement or are being performed using the Company's own resources or third-party service providers. Additionally, under manufacturing and supply agreements, the Company manufactures certain products for Merck or its applicable affiliate, and Merck manufactures certain products for the Company or its applicable affiliate. The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company. Property, plant and equipment reflected in the Consolidated Balance Sheet is primarily attributable to the six manufacturing facilities the Company operates and certain information technology assets. In June 2021, the Company established a balance sheet risk management and a net investment hedging program to partially mitigate against volatility of changes in foreign exchange rates. As a standalone entity, the Company files tax returns on its own behalf, and tax balances and effective income tax rate may differ from the amounts reported in the historical periods. As of June 2, 2021 and in connection with the Separation, the Company adjusted its deferred tax balances and computed its related tax provision to reflect operations as a standalone entity. All intercompany transactions and accounts within Organon have been eliminated. Certain amounts presented in the prior year Income Statement have been reclassified to conform to the current year presentation. As a result, $104 million of Acquired in-process research and development and milestones which was presented within Research and development in 2021 is now presented separately on the Income Statement.
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Revenue | Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all performance obligations. The Company acts as the principal in its customer arrangements and therefore records revenue on a gross basis. The majority of the Company's contracts have a single performance obligation — the promise to transfer goods. Shipping is considered immaterial in the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized performance obligation. Revenues from sales of products, including tenders, are recognized at a point in time when control of the goods is transferred to the customer, which the Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment. The nature of the Company's business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts. In the United States, sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year. Chargebacks are discounts that occur when a contracted customer purchases through an intermediary wholesaler. The contracted customer generally purchases product from the wholesaler at its contracted price plus a mark-up. The wholesaler, in turn, charges the Company back for the difference between the price initially paid by the wholesaler and the contract price paid to the wholesaler by the customer. The Company estimates the provision for chargebacks based on expected sell-through levels by the Company's wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. Rebates are amounts owed based upon definitive contractual agreements or legal requirements with private sector, (Managed Care), and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. The Company uses historical customer segment utilization mix, sales, changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history to estimate the expected provision. The Company continually monitors the provision for aggregate customer discounts. There were no material adjustments to estimates associated with the aggregate customer discount provision in 2022, 2021, or 2020. Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows:
(1) Includes 2021 payments made by Merck on behalf of Organon for the period prior to the Separation date. Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. The accrued balances relative to the provisions for chargebacks and rebates in the United States included in Accounts receivable and Accrued and other current liabilities were $78 million and $307 million, respectively, at December 31, 2022 and $54 million and $275 million, respectively, at December 31, 2021. Outside of the United States, variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. Rebates may also be required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of future discount or rebate obligations associated with the sale. At December 31, 2022 and 2021, the accrued balances related to the provision for rebates and discounts included in other current liabilities were approximately $109 million and $90 million, respectively. The Company maintains a returns policy that allows customers in certain countries to return product within a specified period prior to and subsequent to the expiration date (generally, to six months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical experience with actual returns and consideration of other relevant factors. The Company's payment terms for U.S. customers are typically 36 days from receipt of invoice. Outside of the United States, payment terms are typically 30 days to 90 days, although certain markets have longer payment terms. See Note 17 "Product and Geographic Information" for disaggregated revenue disclosures.
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Cash Equivalents | Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories are valued at the lower of cost or net realizable value. The cost of a substantial majority of U.S. inventories is determined using the last-in, first-out ("LIFO") method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-out ("FIFO") method. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value Added Tax | The Company's purchases, sales and intercompany transfers of goods are subject to value added tax (VAT) and VAT receivables are recognized for amounts that represent credits against future VAT obligations. VAT receivables included in | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation | Depreciation is provided over the estimated useful lives of the assets, principally using the straight-line method. The estimated useful lives primarily range from 25 to 40 years for buildings, and from 3 to 15 years for machinery, equipment and office furnishings. Depreciation expense was $96 million in 2022, $92 million in 2021, and $56 million in 2020. Repairs and maintenance costs are expensed as incurred as they do not extend the economic life of an asset. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advertising and Promotion Cost | Advertising and promotion costs are expensed as incurred and included in Selling, general and administrative expenses. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is evaluated for impairment as of October 1 each year, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). The Company completed the annual qualitative goodwill impairment test as of October 1, 2022 and concluded that there was no impairment to goodwill as the fair value of the reporting unit was significantly in excess of the carrying value. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Intangibles | Acquired intangibles include products and product rights and licenses, which are initially recorded at fair value, assigned an estimated useful life, and amortized on a straight-line basis over their estimated useful lives. The Company's intangibles also include the products and product rights intangible assets attributed to Organon from Merck. The intangible assets attributable to the Company's operations have been reflected in the consolidated financial statements based on Merck's historical cost. Licenses include milestone payments made to collaborative partners upon or subsequent to regulatory approval. The estimated useful lives of acquired intangibles range from 5 to 15 years. The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows. See Note 10 "Intangibles" for additional details. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired In-Process Research and Development | IPR&D that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, Organon will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company evaluates IPR&D for impairment as of October 1 each year, or more frequently if impairment indicators exist, by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results. There were no IPR&D intangible assets as of December 31, 2022, 2021 and 2020. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Research and Development | Research and development costs associated with clinical development programs that have not yet received regulatory approval, are expensed as incurred | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Currency Translation | The net assets of international operations where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation account, which is included in | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Prior to the Separation, certain of the Company's employees historically participated in Merck's stock-based compensation plans. Stock-based compensation expense was either allocated to the Company based on a proportionate cost allocation method or recorded based on specific identification. Effective June 3, 2021, Organon established the 2021 Incentive Stock Plan (the "Plan"). A total of 35 million shares of Common Stock are authorized under the Plan. The plan provides for the grant of various types of awards, including restricted stock unit awards, stock appreciation rights, stock options, performance-based awards and cash awards. Under the Plan, the exercise price of awards, if any, is set on the grant date and may not be less than the fair market value per share on that date. The Company measures stock-based compensation for equity awards at fair value on the date of grant and records stock-based compensation as a charge to earnings net of the estimated impact of forfeited awards. Accordingly, the Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants. The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the change. See Note 13 "Stock-Based Compensation Plans" for additional details. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Benefit Plans | Prior to the Separation, the defined benefit plans in which the Company participated related primarily to plans sponsored by Merck and for which other businesses of Merck also participate ("Shared Plans"). The Company accounted for the Shared Plans as multiemployer plans and therefore the related assets and liabilities were not reflected in the Consolidated Balance Sheet. For such periods prior to Separation, the Consolidated Statement of Income reflects a proportional allocation of net periodic benefit cost for the Shared Plans associated with the Company. For certain defined benefit plans attributable to the Organon Entities, the over funded or underfunded status of the plan was recognized as an asset or liability on the consolidated balance sheet. The Company's participation in the defined pension and postretirement benefit plans sponsored by Merck concluded upon the completion of the Separation on June 2, 2021. At Separation, Organon became the plan sponsor for certain non-U.S. defined benefit pension plans. See Note 14 "Pension and Other Postretirement Benefits Plans" for additional details | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Costs | Costs associated with exit or disposal activities are recognized in the period in which they are incurred. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies and Legal Defense Costs | The Company records accruals for contingencies and legal defense costs expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes on Income | Prior to the Separation, income tax expense and deferred tax balances were calculated on a separate tax return basis. The Company's operations were included in the tax returns of certain Organon Entities, Transferring Entities or the respective Merck entities of which the Company's business was a part. Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. The Company establishes valuation allowances for its deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. The Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements. The Company recognizes interest and penalties associated with uncertain tax positions as a component of Taxes on Income in the Consolidated Statement of Income. The Company accounts for the tax effects of the tax on global intangible low-taxed income ("GILTI") of certain foreign subsidiaries in the income tax provision in the period the tax arises. The Company and Merck entered into the Tax Matters Agreement in connection with the Separation. See Note 18 "Third-Party Arrangements and Related Party Disclosures" for additional details.
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Leases | The Company has operating leases primarily for real estate. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if the Company controls the use of that asset. Embedded leases are immaterial. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet. Lease expense associated with short term leases is not material for all periods presented.Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company's leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. On a quarterly basis, an updated incremental borrowing rate is determined based on the weighted average remaining lease term of each asset class and the Company's pretax cost of debt for that same term. The updated rates for each asset class are applied prospectively to new leases. The Company does not separate lease components (e.g. payments for rent, real estate taxes and insurance costs) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. The Company includes both the lease and fixed non-lease components for purposes of calculating the lease liability and the related right-of-use asset. See Note 11 "Long-Term Debt and Leases" for additional details. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Use of Estimates | The presentation of these Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported. Estimates are used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, amounts recorded for contingencies, environmental liabilities, pension and other postretirement benefit plan assumptions, stock-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill), investments, and taxes on income. Additionally estimates are used in acquisitions, including initial fair value determinations of assets and liabilities (primarily IPR&D, intangible assets and contingent consideration), as well as subsequent fair value measurements. For periods prior to Separation, estimates were used in determining the allocation of costs and expenses from Merck, and were used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, valuation of goodwill and intangibles, amounts recorded for contingencies, environmental liabilities and other reserves, pension and stock-based compensation assumptions, restructuring costs, and taxes on income. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates.
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Net Investment from Merck & Co., Inc | Net investment from Merck & Co., Inc. represented Merck's interest in the recorded assets of the Company and the cumulative investment by Merck in the Company through the date of Separation, inclusive of operating results and the net effect of the transactions with and allocations from Merck. See Notes 2 "Basis of Presentation" and 18 "Third-Party Arrangements and Related Party Disclosures" for additional information. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted | Recently Adopted Accounting Standards There were no recently issued accounting standards adopted by the Company during the year ended December 31, 2022. Recently Issued Accounting Standards Not Yet Adopted The following summarizes recent Accounting Standards Updates ("ASUs") issued by the FASB that could have a material impact on our consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, guidance to improve the accounting for contract assets and contract liabilities from acquired revenue contracts with customers in a business combination. The guidance addresses diversity in practice and inconsistency related to the recognition of an acquired contract liability, payment terms and their effect on subsequent revenue recognized by an acquirer. The guidance became effective for the Company on January 1, 2023 and its amendments will be applied prospectively to business combinations occurring on or after the effective date of the guidance. The adoption of this guidance will not have an impact on the Company's Consolidated Financial Statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 and December 31, 2022, the sunset date was subsequently deferred to December 31, 2024 based on the amendment issued in December 2022 under ASU 2022-06, Reference Rate Reform (Topic 848). The Company is still evaluating the impact to its LIBOR-based debt. Based on the evaluation thus far, the Company does not anticipate a material impact to the Consolidated Financial Statements as a result of reference rate reform.
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Summary of Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Customer Discount Accrual Related To Sales | Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows:
(1) Includes 2021 payments made by Merck on behalf of Organon for the period prior to the Separation date.
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Samsung Collaboration (Tables) |
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Schedule of Collaborative Arrangement and Arrangement Other than Collaborative | Summarized information related to this collaboration is as follows:
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Financial Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Instruments Recorded at Estimated Fair Value | The following financial instruments were recorded at their estimated fair value. The recurring fair value measurement of our assets and liabilities were as follows:
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Schedule of Foreign Exchange Contracts, Statement of Financial Position | Foreign currency gains due to spot rate fluctuations on the euro-denominated debt instruments included in foreign currency translation adjustments resulting from hedge designation were as follows:
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Schedule of (Gain) Loss Derivative Instruments | The Consolidated Statements of Income include the impact of actual net gains and losses of Organon's derivative financial instruments, as well as the impact of Merck's derivative financial instruments prior to the Separation allocated to the Company utilizing a proportional allocation method:
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Inventories consisted of:
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Schedule of Inventory, Noncurrent | Inventories consisted of:
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Property, Plant, and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
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Intangibles (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | Intangibles consists of:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The estimated aggregate future amortization expense is as follows:
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Long-Term Debt (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following is a summary of Organon's total debt:
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Schedule of Carrying Values and Estimated Fair Values of Debt Instruments | Long-term debt was recorded at the carrying amount. The estimated fair value of long-term debt (including current portion) is as follows:
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Schedule of Maturities of Long-term Debt | The schedule of principal payments required on long-term debt for the next five years and thereafter is as follows:
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Schedule of Assets and Liabilities Lessee | Supplemental balance sheet information related to operating leases is as follows:
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Schedule of Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities as of December 31, 2022 are as follows ($ in millions):
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Stock-based Compensation Plans (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount | Stock-based compensation expense incurred by the Company was as follows:
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Schedule of Stock Option Valuation Assumptions | The weighted average fair value of options was determined using the following assumptions:
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Share-based Payment Arrangement, Performance Shares, Activity | A summary of the equity award transactions for the year ended December 31, 2022 are as follows:
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Share-based Payment Arrangement, Activity | The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable as of December 31, 2022:
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Pension and Other Postretirement Benefit Plans (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Benefit Costs | The net periodic benefit cost for pension plans consisted of the following components:
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Schedule of Changes in Projected Benefit Obligations, Fair Value of Plan Assets, and Funded Status of Plan | Summarized information about changes in plan assets and benefit obligations, the funded status and the amounts recorded is as follows:
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Schedule of Accumulated and Projected Benefit Obligation in Excess of Fair Value of Plan Assets | Information related to the funded status of materially significant pension plans is as follows:
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Schedule of Allocation of Plan Assets | The fair values of the Company's pension plan assets at December 31 by asset category are as follows:
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Schedule of Expected Benefit Payments | Expected benefit payments are as follows ($ in millions):
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Schedule of Defined Benefit Plan Amounts Recognized in Other Comprehensive Income (Loss) | Net loss amounts in excess of certain thresholds are amortized into net periodic benefit cost over the average remaining service life of employees.
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Schedule of Defined Benefit Plan, Assumptions | The Company reassesses its benefit plan assumptions on a regular basis. The weighted average assumptions used in determining pension plan information are as follows:
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Taxes on Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | A reconciliation between the effective tax rate and the U.S. statutory rate is as follows:
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Schedule of Income Before Income Tax, Domestic and Foreign | Income before taxes consisted of:
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Schedule of Components of Income Tax Expense (Benefit) | Taxes on income consisted of:
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Schedule of Deferred Tax Assets and Liabilities | Deferred income taxes at December 31 consisted of:
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Schedule of Unrecognized Tax Benefits Roll Forward | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
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Accumulated Other Comprehensive Income (Loss) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes of AOCI by Component | Changes in Accumulated other comprehensive income (loss) by component are as follows:
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Product and Geographic Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Sales of Company's Products | Revenues of the Company's products were as follows:
Totals may not foot due to rounding. Trademarks appearing above in italics are trademarks of, or are used under license by, the Organon group of companies. (1) Includes sales of products not listed separately. Revenues from Marvelon/Mercilon were previously reported as part of Other Women's Health. Revenue from an arrangement for the sale of generic etonogestrel/ethinyl estradiol vaginal ring is included in Other Women's Health. (2) Includes manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.
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Schedule of Consolidated Revenues by Geographic Area | Revenues by geographic area where derived are as follows:
(1) Primarily reflects manufacturing sales to Merck and third parties for current and prior periods and allocated amounts from revenue hedging activities through the date of Separation.
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Third Party Arrangements Related Party Disclosures (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | The amounts due under such agreements were:
Sales and cost of sales resulting from the manufacturing and supply agreements with Merck were:
The following transactions represent activity between Organon Entities and Transferred Entities with other Merck affiliates prior to the Separation:
The Company had the following balances with Merck affiliates:
(1) Amounts represent activity through the date of the Separation. (2) Net transfers (from) to Merck & Co., Inc. as reflected in the Consolidated Statement of Cash Flows for Continuing Operations for the year ended December 31, 2021 include Separation adjustments of $52 million, identified after the date of the Separation.
|
Discontinued Operations (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations | The components of Loss from discontinued operations, net of tax for the Merck Retained Products business are as follows:
The components of assets and liabilities of discontinued operations that are stated separately as of December 31, 2020 in the Consolidated Balance Sheets are comprised of the following items:
|
Earnings per Share ("EPS") (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The calculation of basic and diluted earnings per common share for the year ended December 31, 2022 and 2021 was as follows:
|
Background and Nature of Operations (Details) $ / shares in Units, $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2022
USD ($)
manufacturingFacility
$ / shares
|
Dec. 31, 2021
USD ($)
$ / shares
|
Dec. 31, 2020
USD ($)
|
May 17, 2021
$ / shares
shares
|
|
Class of Stock [Line Items] | ||||
Number of manufacturing facilities | manufacturingFacility | 6 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |
Net Income | $ | $ 917 | $ 1,351 | $ 2,160 | |
Revision of Prior Period, Error Correction, Adjustment | ||||
Class of Stock [Line Items] | ||||
Net Income | $ | $ 19 | $ 19 | ||
Merck and Co., Inc. | ||||
Class of Stock [Line Items] | ||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.50 | |||
Shares distributed to each shareholder | shares | 0.1 |
Basis of Presentation (Details) $ in Millions |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Apr. 30, 2021
USD ($)
|
Jun. 30, 2021
USD ($)
|
Dec. 31, 2022
USD ($)
manufacturingFacility
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Proceeds from issuance of debt | $ 9,500 | ||||
Net transfers (to) from Merck & Co., Inc. | $ 9,000 | $ 9,000 | |||
Number of manufacturing facilities | manufacturingFacility | 6 | ||||
Acquired in-process research and development and milestones | $ 107 | $ 104 | $ 0 | ||
Net Income | $ 917 | $ 1,351 | $ 2,160 |
Summary of Accounting Policies (Details) - U.S. - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Customer, Discount Accrual Activity [Roll Forward] | |||
Balance January 1 | $ 329 | $ 343 | $ 365 |
Provision | 2,221 | 2,000 | 1,770 |
Payments | (2,165) | (2,014) | (1,792) |
Balance December 31 | $ 385 | $ 329 | $ 343 |
Samsung Collaboration - Narrative (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Aug. 31, 2022 |
Sep. 30, 2022 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Disaggregation of Revenue [Line Items] | |||||
Purchase of product rights and asset acquisition | $ 124 | $ 192 | $ 0 | ||
Brazil | |||||
Disaggregation of Revenue [Line Items] | |||||
Gross profit sharing arrangement percentage | 35.00% | ||||
Samsung Bioepis | |||||
Disaggregation of Revenue [Line Items] | |||||
Collaboration agreement period | 10 years | ||||
Purchase of product rights and asset acquisition | $ 18 | ||||
Estimated useful life | 10 years | ||||
Potential future regulatory milestone payments | $ 25 | ||||
Samsung Bioepis | Brazil | |||||
Disaggregation of Revenue [Line Items] | |||||
Gross profit sharing arrangement percentage | 65.00% |
Samsung Collaboration - Summarization of Collaboration Information (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Disaggregation of Revenue [Line Items] | |||
Sales | $ 6,174 | $ 6,304 | $ 6,532 |
Cost of sales | 2,294 | 2,382 | 2,119 |
Selling, general and administrative | 1,704 | 1,668 | 1,356 |
Receivables from Samsung included in Other current assets | 1,475 | 1,382 | |
Payables to Samsung included in Trade accounts payable | 1,132 | 1,382 | |
Samsung Bioepis | |||
Disaggregation of Revenue [Line Items] | |||
Sales | 481 | 424 | 330 |
Cost of sales | 315 | 248 | 208 |
Selling, general and administrative | 86 | 83 | $ 87 |
Receivables from Samsung included in Other current assets | 21 | 15 | |
Payables to Samsung included in Trade accounts payable | $ 72 | $ 21 |
Restructuring - Narrative (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022
USD ($)
position
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
Restructuring and Related Activities [Abstract] | |||
Restructuring and Related Cost, Number of Positions Eliminated | position | 130 | ||
Restructuring costs | $ 28 | $ 3 | $ 60 |
Severance costs | 30 | ||
Other restructuring costs | $ 30 | ||
Restructuring activities | $ 20 | $ 0 |
Financial Instruments - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - Level 2 - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Derivative Instruments, Gain (Loss) [Line Items] | ||
Forward contracts in Other current assets | $ 6 | $ 19 |
Forward contracts in Accrued and other current liabilities | $ 24 | $ 5 |
Financial Instruments - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Derivative Instruments, Gain (Loss) [Line Items] | |||
DerivativeGainStatementOfIncomeOrComprehensiveIncomeExtensibleEnumerationNotDisclosedFlag | Foreign currency gains in Other comprehensive income | Foreign currency gains in Other comprehensive income | |
Euro Denominated Term Loan | Senior Notes | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain on derivative | $ 111 | $ 162 | $ 0 |
Financial Instruments - Impact of Actual Net Gains and Losses on Derivative Instruments (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Derivative Instruments, Gain (Loss) [Line Items] | |||
Allocated net loss in Revenues | $ 0 | $ 56 | $ 3 |
Exchange losses | $ (11) | $ (4) | (44) |
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Revenues | Revenues | |
Other (income) expense | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Exchange losses | $ 11 | $ 4 | $ 44 |
Inventories - Schedule of Inventory (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 482 | $ 377 |
Raw materials | 44 | 95 |
Work in process | 601 | 490 |
Supplies | 44 | 40 |
Total (approximates current cost) | 1,171 | 1,002 |
Decrease to LIFO costs | (20) | (11) |
Inventory | 1,151 | 991 |
Recognized as: | ||
Inventories | 1,003 | 915 |
Other assets | 148 | 76 |
Inventories valued under LIFO | $ 77 | $ 52 |
Inventories - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Inventory [Line Items] | ||
Impairment charges | $ 9 | $ 7 |
Purchase obligation | 1,200 | |
Purchase obligation, to be paid, year one | $ 343 | |
Impairment, Intangible Asset, Finite-Lived, Statement of Income or Comprehensive Income [Extensible Enumeration] | Cost of sales | |
Impairment, Long-Lived Asset, Held-for-Use, Statement of Income or Comprehensive Income [Extensible Enumeration] | Cost of sales | Cost of sales |
Vendor Supply Contract | ||
Inventory [Line Items] | ||
Inventory impairment | $ 5 | $ 24 |
Products and product rights | ||
Inventory [Line Items] | ||
Impairment charges | $ 36 |
Property, Plant, and Equipment (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Less: accumulated depreciation | $ (902) | $ (882) |
Property, plant and equipment, net | 1,018 | 973 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 13 | 14 |
Buildings | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 694 | 667 |
Machinery, equipment and office furnishings | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 935 | 917 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 278 | $ 257 |
Intangibles - Finite-Lived Intangible Assets (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 24,516 | $ 24,396 |
Accumulated Amortization | 23,867 | 23,745 |
Net | 649 | 651 |
Products and product rights | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 24,285 | 24,195 |
Accumulated Amortization | 23,746 | 23,654 |
Net | 539 | 541 |
Licenses | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 231 | 201 |
Accumulated Amortization | 121 | 91 |
Net | $ 110 | $ 110 |
Intangibles - Narratives (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Impairment charges | $ 9 | $ 7 | |
Aggregate amortization expense | $ 116 | $ 103 | $ 86 |
Intangibles - Finite-Lived Intangible Assets, Future Amortization Expense (Details) $ in Millions |
Dec. 31, 2022
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2023 | $ 116 |
2024 | 112 |
2025 | 111 |
2026 | 105 |
2027 | 48 |
Thereafter | $ 157 |
Long-Term Debt - Estimated Fair Value of Long-term Debt (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Debt Disclosure [Abstract] | ||
Fair value of long-term debt | $ 8,294 | $ 9,412 |
Long-Term Debt - Schedule of Debt Principal Payments (Details) $ in Millions |
Dec. 31, 2022
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2023 | $ 8 |
2024 | 9 |
2025 | 9 |
2026 | 9 |
2027 | 9 |
Thereafter | $ 8,974 |
Long-Term Debt - Leases Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Debt Disclosure [Abstract] | |||
Operating lease cost | $ 61 | $ 66 | $ 40 |
Operating lease payments | 55 | 41 | 5 |
Operating lease assets obtained in exchange for operating lease liability | $ 28 | $ 241 | $ 23 |
Long-Term Debt - Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Operating Lease, Assets [Abstract] | ||
Other Assets | $ 215 | $ 230 |
Operating Lease, Liability [Abstract] | ||
Accrued and other current liabilities | 49 | 46 |
Other Noncurrent Liabilities | 150 | 184 |
Present value of lease liabilities | $ 199 | $ 230 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Accrued and other current liabilities | Accrued and other current liabilities |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Other noncurrent liabilities | Other noncurrent liabilities |
Weighted-average remaining lease term (years) | 5 years 3 months 18 days | 5 years 9 months 18 days |
Weighted-average discount rate | 4.00% | 3.30% |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other assets | Other assets |
Long-Term Debt - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Debt Disclosure [Abstract] | ||
2023 | $ 56 | |
2024 | 49 | |
2025 | 46 | |
2026 | 18 | |
2027 | 12 | |
Thereafter | 39 | |
Total lease payments | 220 | |
Less: Imputed interest | 21 | |
Present value of lease liabilities | $ 199 | $ 230 |
Stock-based Compensation Plans - Summary of Transactions (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | $ 75 | $ 59 | $ 40 |
Income tax benefits | 16 | 12 | 8 |
Cost of sales | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | 13 | 11 | 17 |
Selling, general and administrative | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | 51 | 36 | 19 |
Research and development | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | $ 11 | $ 12 | $ 4 |
Stock-based Compensation Plans - Stock Option Valuation Assumptions (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Share-Based Payment Arrangement [Abstract] | ||
Expected dividend yield | 3.12% | 3.22% |
Risk-free interest rate | 2.47% | 0.92% |
Expected volatility | 43.43% | 45.80% |
Expected life (years) | 5 years 10 months 20 days | 5 years 10 months 20 days |
Pension and Other Postretirement Benefit Plans - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Jun. 02, 2021 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Total benefit plan expense | $ 29 | $ 55 | ||
Increase for "grow-in" provision | $ 50 | $ 40 | ||
Estimated average service period | 8 years | |||
Expected contributions during 2023 | $ 11 | |||
Contribution plan | 32 | $ 23 | $ 18 | |
Other Assets | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Increase for "grow-in" provision | 34 | |||
Other Current Assets | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Increase for "grow-in" provision | $ 6 |
Pension and Other Postretirement Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Retirement Benefits [Abstract] | |||
Service cost | $ 22 | $ 17 | $ 4 |
Interest cost | 2 | 2 | 1 |
Expected return on plan assets | (4) | (3) | (1) |
Net loss amortization | 0 | 2 | 0 |
Net periodic benefit cost | $ 20 | $ 18 | $ 4 |
Pension and Other Postretirement Benefit Plans - Obligations and Funded Status (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] | |||
Beginning Balance | $ 117 | $ 40 | |
Actual return on plan assets | (10) | 6 | |
Company contributions | 14 | 19 | |
Effects of exchange rate changes | (4) | (6) | |
Benefits paid | (7) | 2 | |
Other | 3 | 0 | |
Net transfer of plan assets from Merck affiliates | 1 | 56 | |
Ending Balance | 114 | 117 | $ 40 |
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward] | |||
Beginning Balance | 189 | 76 | |
Service cost | 22 | 17 | 4 |
Interest cost | 2 | 2 | 1 |
Actuarial gains | (41) | (17) | |
Benefits paid | (7) | 2 | |
Effects of exchange rate changes | (7) | (10) | |
Other | 1 | 0 | |
Net transfer of benefit obligations from Merck affiliates | 2 | 119 | |
Ending Balance | 161 | 189 | $ 76 |
Funded status | (47) | (72) | |
Recognized as: | |||
Other assets | 1 | 1 | |
Accrued and other current liabilities | (1) | (1) | |
Other Noncurrent liabilities | $ (47) | $ (72) |
Pension and Other Postretirement Benefit Plans - Accumulated and Projected Benefit Obligation in Excess of Fair Value of Plan Assets (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Retirement Benefits [Abstract] | ||
Projected benefit obligation | $ 150 | $ 176 |
Fair value of plan assets | 103 | 104 |
Accumulated benefit obligation | 113 | 154 |
Fair value of plan assets | $ 73 | $ 97 |
Pension and Other Postretirement Benefit Plans - Expected Benefit Payments (Details) $ in Millions |
Dec. 31, 2022
USD ($)
|
---|---|
Retirement Benefits [Abstract] | |
2023 | $ 9 |
2024 | 7 |
2025 | 6 |
2026 | 8 |
2027 | 8 |
Thereafter | $ 53 |
Pension and Other Postretirement Benefit Plans - Components of Other Comprehensive Income (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Retirement Benefits [Abstract] | |||
Net gain (loss) arising during the period | $ 28 | $ 4 | $ 6 |
Net loss amortization included in benefit cost | $ 0 | $ 2 | $ 0 |
Pension and Other Postretirement Benefit Plans - Summary of Weighted Average Assumptions Used in Determining Pension Plan (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Net periodic benefit cost | |||
Discount rate | 1.49% | 1.48% | 3.91% |
Expected rate of return on plan assets | 4.05% | 4.50% | 2.62% |
Salary growth rate | 2.75% | 3.18% | 3.63% |
Benefit obligation | |||
Discount rate | 3.82% | 1.49% | 1.52% |
Salary growth rate | 2.98% | 2.75% | 3.63% |
Taxes on Income - Income Before Taxes (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income Tax Disclosure [Abstract] | |||
Domestic | $ (451) | $ (96) | $ 532 |
Foreign | 1,573 | 1,625 | 2,220 |
Income From Continuing Operations Before Income Taxes | $ 1,122 | $ 1,529 | $ 2,752 |
Taxes on Income - Taxes on Income (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Current Income Tax Expense (Benefit), Continuing Operations [Abstract] | |||
Federal | $ 51 | $ 41 | $ 91 |
Foreign | 172 | 435 | 435 |
State | 0 | (10) | 2 |
Current Income Tax Expense (Benefit) | 223 | 466 | 528 |
Deferred provision | |||
Federal | (38) | (64) | 11 |
Foreign | 22 | (220) | (44) |
State | (2) | (4) | 1 |
Deferred income taxes | (18) | (288) | (32) |
Taxes on Income | $ 205 | $ 178 | $ 496 |
Taxes on Income - Deferred Income Taxes (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Assets | ||
Product intangibles and licenses | $ 164 | $ 105 |
Inventory related | 0 | 15 |
Reserves and allowances | 51 | 40 |
Accrued expenses | 22 | 23 |
Right of use asset | 44 | 51 |
Interest expense limitation carryforward | 37 | 23 |
Compensation related | 26 | 23 |
Net operating losses and other tax credit carryforwards | 65 | 103 |
Other | 18 | 24 |
Subtotal | 427 | 407 |
Valuation allowance | (52) | (35) |
Total deferred taxes | 375 | 372 |
Net deferred income taxes | 248 | 268 |
Liabilities | ||
Product intangibles and licenses | 0 | 0 |
Inventory related | 10 | 0 |
Accelerated depreciation | 11 | 15 |
Unremitted foreign earnings | 3 | 2 |
Lease liability | 44 | 51 |
Hedging | 59 | 36 |
Other | 0 | 0 |
Subtotal | 127 | 104 |
Deferred Income Taxes | ||
Liabilities | ||
Subtotal | 19 | 4 |
Other Assets | ||
Assets | ||
Total deferred taxes | $ 267 | $ 272 |
Taxes on Income - Unrecognized Tax Benefits (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Beginning Balance | $ 78 | $ 219 | $ 213 |
Additions related to current year tax positions | 30 | 23 | 15 |
Additions related to prior year tax positions | 3 | 18 | 23 |
Reductions for tax positions of prior years | (3) | (49) | (3) |
Spinoff related adjustments | 0 | (108) | 0 |
Settlements | (12) | (15) | (19) |
Lapse of statute of limitations | (3) | (10) | (10) |
Ending Balance | $ 93 | $ 78 | $ 219 |
Product and Geographic Information - Narrative (Details) |
12 Months Ended |
---|---|
Dec. 31, 2022
segment
| |
Revenue from External Customer [Line Items] | |
Number of operating segments | 1 |
Europe and Canada | Long Lived Assets Geographic Area | Geographic Concentration Risk | |
Revenue from External Customer [Line Items] | |
Concentration risk | 70.00% |
U.S. | Long Lived Assets Geographic Area | Geographic Concentration Risk | |
Revenue from External Customer [Line Items] | |
Concentration risk | 20.00% |
Product and Geographic Information - Revenues by Geographic Area (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Revenue from External Customer [Line Items] | |||
Revenues | $ 6,174 | $ 6,304 | $ 6,532 |
Europe and Canada | |||
Revenue from External Customer [Line Items] | |||
Revenues | 1,631 | 1,741 | 1,726 |
United States | |||
Revenue from External Customer [Line Items] | |||
Revenues | 1,437 | 1,383 | 1,408 |
Asia Pacific and Japan | |||
Revenue from External Customer [Line Items] | |||
Revenues | 1,143 | 1,173 | 1,535 |
China | |||
Revenue from External Customer [Line Items] | |||
Revenues | 917 | 933 | 873 |
Latin America, Middle East, Russia and Africa | |||
Revenue from External Customer [Line Items] | |||
Revenues | 895 | 841 | 857 |
Other | |||
Revenue from External Customer [Line Items] | |||
Revenues | $ 151 | $ 233 | $ 133 |
Third Party Arrangements Related Party Disclosures - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Jun. 02, 2021 |
Dec. 31, 2021 |
|
Related Party Transaction [Line Items] | ||
TSA termination period | 25 months | |
Breach of covenant period | 2 years | |
Foreign Tax Authority | ||
Related Party Transaction [Line Items] | ||
Uncertain tax positions for jurisdictions outside the U.S. | $ 79.3 | |
Transfers Between Organon Entities The Transferring Entities And Merck Affiliates Member | ||
Related Party Transaction [Line Items] | ||
Accounts receivables, net | 751.0 | |
Inventories | 265.0 | |
Transition tax liabilities | 1,400.0 | |
Certain liabilities | 210.0 | |
Contribution Of Assets And Liabilities | ||
Related Party Transaction [Line Items] | ||
Contribution of assets | 59.0 | |
Contribution of liabilities | $ 35.0 |
Third Party Arrangements Related Party Disclosures - Accounts Receivables (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Related Party Transactions [Abstract] | ||
Due from Merck in Accounts receivable | $ 374 | $ 403 |
Due to Merck in Accounts payable | $ 543 | $ 928 |
Third Party Arrangements Related Party Disclosures - Sales and Cost of Sales Resulting From The Manufacturing and Supply Agreements (Details) - Related Party - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Related Party Transaction [Line Items] | ||
Sales | $ 127 | $ 90 |
Cost of sales | $ 116 | $ 85 |
Third Party Arrangements Related Party Disclosures - Allocations Included in Statement of Operations (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Related Party Transaction [Line Items] | |||
Cost of sales | $ 2,294 | $ 2,382 | $ 2,119 |
Selling, general and administrative | 1,704 | 1,668 | 1,356 |
Costs, Expenses And Other | $ 5,052 | 4,775 | 3,780 |
Related Party | Merck and Co., Inc. | Transition Services Agreement | |||
Related Party Transaction [Line Items] | |||
Cost of sales | 69 | 452 | |
Selling, general and administrative | 134 | 658 | |
Research and development | 35 | 152 | |
Costs, Expenses And Other | $ 238 | $ 1,262 |
Third Party Arrangements Related Party Disclosures - Balances with Merck Affiliates (Details) - Related Party - Merck and Co., Inc. $ in Millions |
Dec. 31, 2020
USD ($)
|
---|---|
Continuing Operations | |
Related Party Transaction [Line Items] | |
Short term borrowings, net | $ 1,512 |
Trade payables (receivables), net | (173) |
Due to related party | 1,339 |
Discontinued Operations | |
Related Party Transaction [Line Items] | |
Short term loans receivables, net | 247 |
Short term notes payable, net | (25) |
Trade payables, net | (33) |
Due from related party | $ 189 |
Discontinued Operations - Components of Income (Loss) from Discontinued Operations (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Costs, Expenses and Other | |||
Loss from discontinued operations, net of taxes | $ 0 | $ 0 | $ (96) |
Discontinued Operations, Held-for-sale or Disposed of by Sale | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Sales | 93 | 1,564 | |
Costs, Expenses and Other | |||
Cost of Sales | 65 | 1,228 | |
Selling, general and administrative | 15 | 310 | |
Research and development | 4 | 94 | |
Restructuring Costs | 0 | 10 | |
Other expense (income), net | 4 | (6) | |
Loss from discontinued operations before taxes | 5 | (72) | |
Taxes on income | 5 | 24 | |
Loss from discontinued operations, net of taxes | $ 0 | $ (96) |
Discontinued Operations - Narrative (Details) - Discontinued Operations - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Sales | $ 12 | $ 542 |
Costs for inventory purchases | $ 53 | $ 382 |
Discontinued Operations - Components of Assets and Liabilities of Discontinued Operations (Details) - USD ($) $ in Millions |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|---|---|
Assets | ||||
Cash and cash equivalents | $ 0 | $ 0 | $ 58 | $ 319 |
Discontinued Operations, Held-for-sale or Disposed of by Sale | ||||
Assets | ||||
Cash and cash equivalents | 58 | |||
Accounts receivable | 322 | |||
Inventories | 58 | |||
Due from related party | 189 | |||
Other current assets | 47 | |||
Total current assets of discontinued operations | 674 | |||
Property, Plant and Equipment, net | 14 | |||
Other Noncurrent Assets | 77 | |||
Total Noncurrent Assets of Discontinued Operations | 91 | |||
Total Assets of Discontinued Operations | 765 | |||
Liabilities | ||||
Trade accounts payable | 35 | |||
Accrued and other current liabilities | 93 | |||
Total current liabilities of discontinued operations | 128 | |||
Deferred Income Taxes | 0 | |||
Other Noncurrent Liabilities | 83 | |||
Total Noncurrent Liabilities of Discontinued Operations | 83 | |||
Total Liabilities of Discontinued Operations | $ 211 |
Earnings per Share ("EPS") - Narrative (Details) - shares shares in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Jun. 02, 2021 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Earnings Per Share [Abstract] | ||||
Basic (in shares) | 253,516 | 254,082 | 253,538 | 253,516 |
Subsequent Events - Narrative (Details) $ in Millions |
Jan. 31, 2023
USD ($)
|
---|---|
Subsequent Event | Claria Medical, Inc. | |
Subsequent Event [Line Items] | |
Upfront payments | $ 8 |