Organon & Co. (OGN) is the June 2021 spinoff of the women's health, biosimilar and legacy drugs businesses from parent company Merck & Co. (MRK), explains Jim Osman, a leading specialist in spinoffs and the editor of The Edge Spinoff Report Lite.

Founded in 1923 in the Netherlands, OGN made insulin as its first product. It was later merged into what became the Amesterdam-based Akzo Nobel (AKZA) in 1969, later acquired by Schering-Plough in 2007, then bought and folded into Merck in 2009.

We initiated research on OGN during the process of its spinoff from Merck in June 2021. In September 2021, a new director Ma Fatima “Fama” de Vera Francisco had bought shares on the open market at around $34, indicating her confidence in the stock.

As well as serving on OGN’s board, she is also the CEO of the Baby & Feminine Care segment at Procter & Gamble (PG), further reinforcing her expertise in the space. This was on top of Congressman Michael McCaul (R-TX) buying OGN shares on June 21, 2021, and his own strong track record of previous buys.

By January 2022, we continued to see long-term value creation opportunities at the company in addition to the previously mentioned insider buying, including strong earnings performances, an ongoing dividend policy, and the acquisition of Forendo Pharma, which boosts OGN’s portfolio of products to combat endometriosis and PCOS.

We booked profits in OGN from our Model Portfolio position in February 2022 following its Q4FY21 and FY21 earnings report at the $36 level.

However, we continue to see OGN as the best women’s health play — with comfortable net debt, continued dividend payments at $0.28 a share (a 4% annual yield), and the reacquired rights to Bayer’s (BAYRY) contraceptive product rights in China.

The stock currently trades about 18% below its spinoff price, and at the current price looks to be sufficiently at value-buy levels. We recommend long-term investors "enter/hold" OGN with a base case target price of $38.70 (+40% potential upside from current market price).

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