Organon (OGN)

Pharmaceutical company Organon (NYSE:OGN) met Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 5.3% year on year to $1.51 billion. The company’s full-year revenue guidance of $6.2 billion at the midpoint came in 1.5% above analysts’ estimates. Its non-GAAP profit of $0.63 per share was 13.3% below analysts’ consensus estimates.

Company Overview

Spun off from Merck in 2021 to create a company dedicated to addressing unmet needs in women's health, Organon (NYSE:OGN) is a global healthcare company focused on improving women's health through prescription therapies, medical devices, biosimilars, and established medicines.

Looking ahead, the branded pharmaceutical industry is positioned for tailwinds from advancements in precision medicine, increasing adoption of AI to enhance drug development efficiency, and growing global demand for treatments addressing chronic and rare diseases. However, headwinds include heightened regulatory scrutiny, pricing pressures from governments and insurers, and the looming patent cliffs for key blockbuster drugs. Patent cliffs bring about competition from generics, forcing branded pharmaceutical companies back to the drawing board to find the next big thing.

Organon's competitors vary by business segment. In women's health, it competes with companies like Bayer, AbbVie, and CooperSurgical. In biosimilars, competitors include Amgen, Pfizer, and Novartis. For established brands, Organon faces competition from generic manufacturers and companies with similar portfolios like Viatris.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $6.22 billion in revenue over the past 12 months, Organon has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Organon struggled to consistently increase demand as its $6.22 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and suggests it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Just like its five-year trend, Organon’s revenue over the last two years was flat, suggesting it is in a slump.

This quarter, Organon reported a rather uninspiring 5.3% year-on-year revenue decline to $1.51 billion of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to decline by 3.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Organon has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average operating margin of 21.7%.

Looking at the trend in its profitability, Organon’s operating margin decreased by 16.2 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 7.5 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q4, Organon generated an operating margin profit margin of negative 9.8%, down 27.9 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Organon’s full-year EPS dropped 61.7%, or 12.8% annually, over the last four years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Organon’s low margin of safety could leave its stock price susceptible to large downswings.

In Q4, Organon reported adjusted EPS of $0.63, down from $0.90 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Organon’s full-year EPS of $3.66 to grow 3%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Organon has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.7% over the last five years, better than the broader healthcare sector.

Taking a step back, we can see that Organon’s margin dropped by 32.7 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Organon hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 17.1%, impressive for a healthcare business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Organon’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Organon reported $1.96 billion of cash and $6.04 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.91 billion of EBITDA over the last 12 months, we view Organon’s 2.1× net-debt-to-EBITDA ratio as safe. We also see its $504 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Organon provide full-year revenue guidance that slightly beat analysts’ expectations. On the other hand, its EPS missed. Overall, this quarter could have been better. The stock traded down 4.3% to $7.36 immediately after reporting.

Updated: February 12, 2026 at 11:11 PM EST

Before investing in or passing on Organon, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Organon isn’t a terrible business, but it isn’t one of our picks. For starters, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. While its impressive operating margins show it has a highly efficient business model, the downside is its declining EPS over the last four years makes it a less attractive asset to the public markets. On top of that, its cash profitability fell over the last five years.

Organon’s P/E ratio based on the next 12 months is 2.3x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $9.21 on the company (compared to the current share price of $7.10).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.