Merck (MRK) Completes Spinoff of Women's Health Company Organon (OGN), Street Starts with Muted Views
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Organon is the largest company focused on women’s health, with a focus on reproductive health, health issues that are unique to women, as well as conditions that disproportionately affect women.
At launch, Organon’s portfolio will consist of more than 60 medicines and products across an international footprint that serves people in more than 140 markets, with nearly 80% of its approximately $6.5 billion in annual revenue generated outside the U.S.
“Today marks a significant milestone for both Merck and Organon. Organon is now an independent, publicly-traded company with a broad portfolio of important medicines and products, and is fully prepared to deliver sustainable growth and value,” said Rob Davis, President of Merck.
“With leadership in our growth pillars and our robust pipeline, Merck is well-positioned for strong long-term growth, with scientific innovation remaining the source of our value creation.”
The move comes as a part of Merck’s plan to create two patient-focused entities with a better strategic and operational focus, simpler operating models, improved capital structures, and enhanced financial profiles. The company believes the spin-off will yield positive results for both companies and bring value to Merck shareholders.
Earlier today, Goldman Sachs analyst Terence Flynn initiated coverage on Organon with a “Neutral” rating and a price target of $35.00. He believes the company is positioned “to become a leading Women's Health company.”
“The company has three business segments - Established Brands (i.e., branded generics), Women’s Health and Biosimilars, representing approximately 68%, 24% and 5%, respectively, of 2020 proforma revenues of $6.6bn. We project that the company's top line will remain relatively stable through 2025, which is somewhat more conservative than the company's guidance of LSD-MSD revenue growth for 2021-2025,” he said in a note.
Flynn is now joined by Cowen analyst Steve Scala, who started OGN at “Market Perform” and a price target of $40.00 per share. Scala opts to stay on the sidelines and wait for evidence of successful execution.
“OGN strengths include a differentiated strategy and an experienced management team. OGN risks include modest existing growth prospects which necessitate successful BD to deliver on aspirational goals (although its strategy limits flexibility), and prospects largely dependent on one drug (Nexplanon; US patent exp 2027),” he said in a memo.
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Create E-mail Alert Related CategoriesAnalyst Comments, Corporate News, Hot Corp. News, New Coverage, Spinoffs
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