OGN - Goldman downgrades Organon following dismal Q3

2023-11-03 10:42:01 ET

Organon & Co ( NYSE: OGN ) has been downgraded by Goldman Sachs from Buy to Neutral after the Merck spinoff fell short of both top and bottom line expectations in its latest Q3 report .

Revenue in women's health, Organon's biggest unit, fell 8% Y/Y to $418M, driving the 1.3% slip in total sales. It attributed the decline to 23% lower sales of its NuvaRing pregnancy prevention device.

The company saw a slow quarter in China in terms of IVF cycles picking up, stemming from the Asian country's ongoing review of healthcare practices. The CEO called it a "transient issue".

Meanwhile, fertility products saw a revenue decline of 10% in Q3, on the back of fewer sales of birth control implant Nexplanon due to unfavorable discount rates.

Goldman noted top line misses across Organon's portfolio made worse by forex headwinds, as well as exposure to economic and policy challenges in China. It also noted modest revenue opportunities for the company's Humira biosimilar, Hadlima.

Nevertheless, the investment bank noted resilience in Organon's established brands business, which account for ~60% of revenues. It also suggested the company would have to demonstrate improved visibility on cash flows to support a more positive sentiment.

Shares are around -1.79% in the first hour of trading on Friday after dropping as much as -12.5% the previous day. SA's Quant system maintains a Hold rating on the stock.

More on Organon

• Organon & Co (OGN) Q3 2023 Earnings Call Transcript
• Organon: The Federal Reserve Black Swan (Rating Upgrade)
• 6% Yield And Significantly Undervalued: A Closer Look At Organon
• Organon stock plumbs all-time low on Q3 weakness in flagship women's health unit
• Organon Q3 2023 Earnings Preview

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