Organon (OGN), which was spun out from Merck (MRK) in 2021, describes itself as a global healthcare company with a focus on improving the health of women, explains Gordon Pape, editor of The Income Investor.

It has a portfolio of more than 60 medicines across a range of therapeutic areas, led by its established products division. Featured are such drugs as asthma medication Singulair and cholesterol drug Azotet, which accounts for two-thirds of its $6.3 billion in revenues.

This is supported by its women's health division (25% of revenues) and its biosimilars division. Its range of products produce strong cash flows that support innovation and future growth opportunities. It employs 10,000 people and is headquartered in Jersey City, NJ.

Since being spun off from Merck two years ago, the stock has declined, as its small market capitalization of $4.4 billion and relatively low revenue growth have led to its being neglected. The shares are down 28% in the last year.

Organon reported revenue of $1.61 billion in the second quarter ended June 30, up 1% year-over-year and 4% sequentially. Net income was $242 million, up 4% year-over-year and 37% sequentially. Its women's heath sales were up 8% year-over-year, to $438 million, led by a 12% gain in the sales of reversible contraceptive Nexplanon.

Its biosimilars division saw a 14% increase in sales, to $135 million, led by sales of Renflexix, a biosimilar to Remicade, from Johnson & Johnson (JNJ). Organon also raised its sales guidance to between $6.25 and $6.45 billion, up from $6.2 billion in 2022.

Organon has been neglected since its spinoff and as a result is very cheap (selling at seven times 2023's forecast earnings). It has a high and sustainable dividend yield. Its big portfolio of biosimilars includes Hadlima, a biosimilar to blockbuster Humira, made by Abbvie (ABBV).

Organon and partner Samsung Bioepis launched it in July and priced it at 85% less than Humira. Most of its pipeline is made up of early stage candidates, which means it has potential for long-term growth.

The company has paid a dividend of $0.28 a quarter since being spun off from Merck. This is equivalent to a yield of 7.2% after the stock's 28% decline over the last year. The continued small (1%-2% annual) decline in Organon's established products may accelerate, although their revenues have proven stable over the last few years.

Organon's biosimilars may not enjoy as great a success as Hadlima and growth may be lower than expected, although Organon's very low valuation provides some protection. Organon has not raised its dividend since being spun off, but the present yield is attractive even without any growth.

Organon is a well-regarded pharmaceutical company with strength in women's health and biosimilars areas that should see continued growth while providing a low valuation and a high and sustainable dividend.It is suitable for conservative investors looking for income with some growth. The stock is a buy at the current price.

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