Organon shares jump as Merck's new women's health spinoff posts strong start for biosims, infertility drugs

Merck
Organon’s top brass cautioned on Thursday that pandemic turbulence could come in the back half of the year. (Merck)

It’s been a mere two months since Merck’s women’s health spinoff Organon set off to chart its own path as an independent company. That hasn’t been an easy feat amid a global pandemic, but so far the fledgling drugmaker is delivering early results that are catching Wall Street’s attention. 

In its first reported quarter as an independent company, Organon pleasantly surprised investors when it posted nearly $1.6 billion in revenue, beating expectations and sending its shares up more than 13%. 

While promising, and generally in line with the strong showing from pharma companies over the past three months, Organon’s top brass cautioned that pandemic turbulence could come in the back half of the year.

Organon’s impressive early run came thanks to its biosimilars business and notable revenue increases for contraceptive implant Nexplanon and infertility treatment Follistim. Each of those products recorded roughly 40% year-over-year gains, with Nexplanon drawing in $184 million globally and Follistim reaping $65 million. 

Organon split off from Merck in early June, so the year-over-year figures are comparisons to the drugs' sales under the Merck umbrella last year.

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The Nexplanon and Follistim pair “more than offset” the 19% decline for contraceptive NuvaRing amid growing copycat competition, Organon’s Chief Financial Officer Matt Walsh told analysts on an earnings call Thursday. Walsh pointed out that investors should take the year-over-year comparisons with a grain of salt given that the second quarter marked a “hybrid quarter” for the new company. 

The NuvaRing maker has placed high hopes in Nexplanon, the only single-rod long-acting reversible contraceptive, to reach well beyond blockbuster sales in the coming years. Although it's now at the top of the drugmaker’s women’s health portfolio, Nexplanon has had a tough mountain to climb to get out of its pandemic slump. 

While the increase in doctor visits was evident this quarter, they’re still not back to pre-pandemic levels, Walsh said. Most of Organon’s rebound has been thanks to its infertility business versus contraception, he added.

Looking forward, Organon believes there’s “more COVID recovery to be realized in the businesses," Walsh said.

The recovery will largely depend on what happens with the highly transmissible Delta variant, which now accounts for a majority of new U.S infections. Given that uncertainty, Organon thinks “the 2021 impact from COVID could be more in line with 2020, as opposed to slightly better as we previously thought,” Walsh said.

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Women’s health isn’t Organon’s only growth driver. The New Jersey-based drugmaker also has a growing portfolio of biosimilar products in oncology and immunology. 

Organon’s biosimilar business grew 35% compared with last year excluding foreign exchange rates, mostly driven by its Remicade arthritis biosimilar Renflexis and the continued growth of its Herceptin copycat Ontruzant. Its “biggest product potential,” is coming in 2023 with its Humira biosim Hadlima, CEO Kevin Ali said.

Innovator biologics are increasingly feeling the heat as biosimilars take the wind out of branded treatments, a report from the Pharmaceutical Strategies Group (PSG) found on Thursday. 

For its part, Organon also thinks that’s the case. Ali told analysts that the company is “seeing increased biosimilar utilizations” in oncology and immunology, although the uptake for cancer medicines has been faster.