OGN - Organon: Merck Spin-Off's Shares Hard To Resist At Current Price

• Organon was formed as a result of Big Pharma Merck's decision to spin out its Established Brands, Women's Health and Biosimilars divisions into a new entity.
• Shares began trading in May, and traded at $37 in early June, before sliding in response to Q121 earnings. Current price is $29.6.
• In truth, there was not much wrong with Q121 earnings, but losses in the Established Brands division - partly due to pandemic pressures - may have spooked the market.
• Women's Health and Biosimilars is viewed as a potential >$100bn combined market opportunity by Organon mgmt, more than offsetting the declines of legacy brands.
• With a P/S ratio of ~1x, forward PE of ~4.5x, and dividend - likely paying >$1, to come, Organon may not have a flawless value proposition, but I would expect shares to be worth $45 - $60 in 12-18 months.

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