Barclays says this women's health pharma company could rally 48%
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Organon is an undervalued global play and leader in women's specialty health, according to Barclays. The company, with a portfolio of around 60 treatments and products focused on women's health, was spun off from Merck in 2021 . The stock has suffered ever since, sliding 8% in 2022 and 33% so far in 2023, although it does pay a 5.9% dividend. Barcklays analyst Balaji Prasad initiated coverage on Organon with an overweight rating. Prasad's price target of $28 implies Organon shares could surge more than 48% from Wednesday's close. The analyst cited long-term value from Organon's expanding Biosimilars segment. Biosimilars are biologic, or natural source drugs, that have no clinically meaningful differences to brand name biologics. "Though the company is weighed by declining legacy brands, we believe that its differentiated Women's Health franchise combined with growing Biosimilars franchise, coupled with undemanding valuations and a dividend yield of 6% justifies an [overweight] stance," Prasad said in a Thursday note. The analyst forecasts Organon will grow at a 2% compound annual growth rate over the next five years. The company could also generate more than $1 billion in annual free cash flow during that span, he added. Organon's prescription birth control Nexplanon is the key driver to its women's health portfolio as the Nexplanon "pipeline continues to progress toward commercialization," he added. "OGN's Established Brands portfolio (63% of 2022 revenues), as well as Nexplanon, provide the company with strong [free cash flow] and operating profit to pursue accretive opportunities. Since its spin-off from Merck in 2021, the company has completed eight transactions (deploying ~$430M). We forecast > $1B annual FCF over the next-5 years ($5.3B of FCF over this time frame)," said Prasad. —CNBC's Michael Bloom contributed to this report.