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It may be 2021, but the issue of women’s health – especially reproductive rights, birth control and fertility issues – is one which still provokes heated debate and makes headlines around the world.

Considering the global women’s health market is predicted to be worth $50 billion by 2025, it seems somewhat ironic that one of the more silent voices tends to be that of Big Pharma.

Heavy hitters are getting out of the game and moving away from investment in the sector, with multi-national pharmaceutical company Merck
MRK
& Co., Inc. (MRK) Spinning off Organon & Co. (OGN) earlier this month. However, according to analysis from The Edge, it looks like OGN may be the big winner here.

Founded in the Netherlands in 1923, OGN became a world-leading pioneer in contraceptives, and while it’s going back to its roots post-Spin, it has clearly renewed its focus on medical breakthroughs and future-proofing its brand. Stepping into a space which is largely ignored and focusing on ground-breaking contraceptives could be the secret weapon in its armory.

The Edge says Organon will become a major player in the women’s health space (with leading contraceptive and fertility products), on top of benefiting from the highly profitable portfolio of legacy dermatology, pain, respiratory, and cardiovascular drugs. Additionally, as part of the separation OGN will take with it the fast-growing biosimilars business (generic drugs made from organic products, rather than the wider-known synthetic generic drugs found at pharmacies).

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OGN will focus on its women’s health portfolio led by the Nexplanon (etonogestrel implant) franchise and its contraceptive and fertility businesses. Nexplanon (a birth control implant and the global leader in implantable, long-acting and reversible contraceptives) showed growth of 14% in FY19 and is the global leader in implantable long-acting reversible contraceptives with U.S. patent protection through 2027. OGN CEO Kevin Ali believes Nexplanon is on the road to become their first $1 billion women’s health product. Biosimilars is another major growth area, with three of its currently marketed products gaining heavy traction in the market and garnering revenues of around $250m in FY19.

OGN has a portfolio of around 60 treatments and products, reach into approximately 140 markets, and an annual revenue of nearly $6.5 billion, and the company’s strategy is to put women’s health (contraceptives in particular) front and center among its core products.

In addition, pre-Spin MRK acquired medical device company Alydia and combined it into the Spinoff of OGN, and will provide further support OGN needs to establish its presence in the sector. Biosimilars is another major growth area, with three of its currently marketed products gaining heavy traction in the market and garnering revenues of around $250 million in FY19.

Combined, the two segments account for approximately 33% of revenues, but by 2024 the management expects them to generate more than half of the company’s revenue.

Additionally, it looks like the Spinoff will bode well for MRK, realigning its focus on innovative drugs in Oncology, Vaccines, Hospital and Animal Health. MRK may have missed the boat in the race for the Covid-19 vaccine, but its drug pipeline includes an antiviral pill currently in testing for combatting sicknesses caused by viral diseases like COVID-19. Among the 246 antivirals currently in development, MRK’s molnupiravir is ahead of the game, and if no side effects are reported, it will represent a tangible change of gear for the company.

At Merck’s investor day in May 2021, the management predicted $6.1 billion to $6.4 billion of 2021 revenue for Organon, and annual sales increases in single-digits, referred to by CEO Kevin Ali is “a stable, predictable business.”

Looking at the current landscape of the sector, Organon’s Spinoff comes hot on the heels of the newly formed Viatris, Inc. (VTRS) – the combined efforts of Mylan
MYL
and Pfizer’s
PFE
Upjohn drugs portfolio.

In fact, the similarities between Viatris and Organon’s business models are so similar that it’s been suggested by some that they should merge. Perhaps something to watch for further down the line.

In the meantime, while both Viatris and Organon have substantial off-patent drug portfolios, Ali sees “significant difference” between them. In a recent interview with an industry magazine, he emphasized the importance of women’s health to Organon.

“We feel that the world needs a company that is not watered down but focused on women’s health and solving these needs. And that vision and that passion and that purpose is what drives us.”

After watching its cautious birth into the stock market, The Edge gives this Spinoff a clean bill of health. According to the research firm’s post-Spin valuation, OGN has significant upside ahead as it benefits from the strength of its women’s health portfolio and its fast-growing biosimilars division. Some early selling by investors of this relatively unknown gem has provided a great entry point.

To request The Edge’s analysis, target prices and to schedule a call with one of the deals analysts to discuss OGN moving forward, please reach out at this link. Additionally, The Edge is hosting a webinar June 24, 2021, highlighting new high conviction ideas. Register here. The author owns shares of OGN.

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