A class action lawsuit was filed against Organon & Co. (OGN) by Levi & Korsinsky on May 23, 2025. The plaintiffs (shareholders) alleged that they bought OGN stock at artificially inflated prices between October 31, 2024 and April 30, 2025 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Organon stock during that period can click here to learn about joining the lawsuit.
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Organon is a healthcare company with operations in the U.S. and internationally. The company focuses on improving women’s life by offering medicines and devices targeted at reproductive health, cardiovascular disease, neurology, dermatology, autoimmune, and respiratory conditions.
The company’s claims about its capital allocation policy and quarterly dividend payments are at the heart of the current complaint.
Organon’s Misleading Claims
According to the lawsuit, Organon and two of its senior officers and/or directors (the Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the Company’s priorities pertaining to capital allocation through quarterly dividends from SEC filings and related material.
During the Class Period, the defendants repeatedly reiterated the company’s focus on giving regular dividends. For instance, during an earnings call, the CFO noted that despite minor headwinds from the Dermavant acquisition, the company remained on track to achieve roughly $1 billion in free cash flow before one-time charges.
Additionally, the CFO stated that Organon ended the quarter with an improved net leverage ratio of 4.0x. Also, the company had generated solid EBITDA (earnings before interest, tax, depreciation, and amortization), which boosted the leverage ratio as of September 30, 2024, even more than management had expected.
Moreover, during a February 13, 2025 earnings call, the CEO stated that the company is committed to giving regular shareholder dividends as its number one capital allocation priority.
Finally, during the same call, the CFO stated that Organon has made the best use of its remaining cash flow for opportunistic business development. He added that in 2024, the company had made upfront and milestone payments totaling about $350 million, and that in 2025, it expects to pay a little over $200 million in commercial milestones.
However, subsequent events (mentioned below) reveal that the defendants failed to inform investors that, pursuant to the acquisition of Dermavant, the company’s capital allocation priority had shifted toward reducing its debt levels.
Plaintiffs’ Arguments
The plaintiffs maintain that the defendants deceived investors by lying and withholding critical information about the business and prospects during the Class Period. Importantly, the defendants are accused of misleading investors regarding the company’s changing capital allocation policy, which resulted in a 70% decline in regular dividend payments.
The information became clear on May 1, 2025, when Organon released its Q1FY25 results. During the related earnings call, the CEO mentioned that the company has reset its dividend payout and planned to redirect the funds toward debt reduction. Following the news, OGN stock plunged 26.7%.
As shown in the chart below, Organon’s quarterly dividend was reduced drastically from $0.28 per share to $0.02 per share in May 2025.
To conclude, the defendants misled investors about changes in the company’s capital allocation policy, which resulted in significantly lower quarterly dividends. Owing to these issues, OGN stock has lost 31.7% year-to-date.
