This Organon Analyst Is Bearish On Heels Of Health Care Company's Merck Spinoff

Although management has largely delivered on the post-spin objectives, Organon & Co. OGN has no pipeline assets and its financial leverage limits potential M&A to invest in future growth drivers, according to Bank of America (BofA) Securities.

The Analyst: Jason Gerberry downgraded the rating for Organon from Neutral to Underperform, while reducing the price target from $37 to $25.

The Thesis: Management’s second-quarter commentary has raised concerns around the company’s EBITDA margins into 2023, Gerberry said in the downgrade note.

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There are other factors, like currency rate changes and inflation, that could require management to “flex the cost structure (still uncertain) to reach consensus forecasts,” he added.

“Ultimately, a broader impediment to shareholder engagement is a lack of growth with low-SD (declining) EBITDA CAGR, a 2027-28 LOE (loss of exclusivity) in Nexplanon (contraceptive) and a Ph2 pipeline that hasn’t been de-risked,” the analyst wrote.

OGN Price Action: Shares of Organon had declined by 3.79% to $23.12 at the time of publication Friday.

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