In an investor note this morning, Merrill Lynch analyst Dave Risinger writes that he upgraded Schering-Plough stock, even though he wasn’t “initially thrilled” by Hassan’s decision to pay $14 billion for Organon. Modest single-digit growth generally doesn’t thrill anyone.

Now, though, Risinger says Hassan may be able wring more out of Organon, partly by cutting $500 million in costs over the next three years, and through an improving product mix. As a result, he thinks growth may hit high single-digit rates in a few years. And so he believes Schering-Plough is undervalued, pointing to a P/E ratio through ‘08 that trails other drugmakers. Risinger also thinks the company will have much less debt in five years.

Organon still poses risks: thousands of workers in The Netherlands are unionized; a schizophrenia drug being developed is questionable; generic rivals loom, and there’s uncertainty about some niche products. Then again, Organon has the third-largest animal health biz.

Bottom line: he thinks Fred presides over a cheap stock that could hit $28 next spring. Once again, Fred manages to convince Wall Street he just may be right.
[tags]David Risinger, Fred Hassan, Organon, Schering-Plough[/tags]