Company Profile: Organon (OGN)

Organon is a pharmaceutical company focused on women’s health that spun off from Merck in June 2021. Since the spinoff, Organon has acquired additional reproductive treatments, including a treatment for pre-term labor, another for postpartum hemorrhaging, potential treatments for endometriosis and polycystic ovarian syndrome, and the rights to sell two hormonal birth control pills in Asia. In addition to its women’s health offerings, it also offers some cardiovascular, respiratory, non-opioid pain, bone, and dermatology therapies. While it is apparent that Organon is still in its early days (its first ESG report comes out in June 2022), the company has been clear about its mission: Organon is committed to creating a healthier world for women “because when we care for women, we care for our families and communities, too.”

The company’s ESG priorities include diversity, equity, inclusion, increasing access to medicines, and environmental stewardship. The company does not yet report on activities in these areas, but some information can be gleaned from the annual report and proxy statement. The company has one of the most diverse boards (by gender, race, and ethnicity) that Clean Yield has seen to date. The company reports that there are nine women and six people from racial or ethnic minority groups among its 13 board members. In addition, the company’s workforce and management are more than 50% female. In the company’s recent proxy statement, it provides some information about workforce diversity and its intention to report full workforce diversity in its upcoming ESG report. The company also reports that it has done a materiality assessment and evaluated the various ESG reporting standards and frameworks. This information will be incorporated in the first ESG report.

Organon has carried some legal liability from Merck – both patent disputes and patient safety matters. The company’s Fosamax product has been the target of lawsuits alleging that the treatment resulted in femur fractures. In 2013, it was determined that Merck was not liable for these claims, but the decision was later vacated, and new allegations have been made. As of year-end 2021, Organon reported nearly 1,000 allegations in the matter. However, news stories indicate that half of the lawsuits were thrown out by a judge in 2022. It is difficult to discern how much liability for this issue lies with Merck versus Organon.

All in all, Organon’s focus on women’s health care is compelling and aligned with Clean Yield’s interests in equity and inclusion. The main risks relate to the newness of Organon as an independent company – it does not yet have a track record of ESG management and transparency. Based on the company’s commitments, we are optimistic that Organon will launch a strong ESG program.

The stock was near the top of its peers in its early milestones, as it rose while most other stocks fell. As such, we have waited to make initial purchases. We do, however, expect Organon to be a substantial holding, given its admirable focus, attractive dividend yield, and reasonable valuation.