Boots ready to sell off prescription drug arm

BOOTS, the stores and drugs group, is prepared to sell or shut down its prescription pharmaceuticals arm in the wake of last week's Manoplax disaster, which has cost pounds 155m in wasted research and other investment.

Senior Boots managers, advised by the US management consultancy Marikon, are putting the business under the microscope and will dispose of what is sellable, and close the rest, unless they are convinced that it will generate long- term value for shareholders.

The warts-and-all examination is expected to take months, but the deadline for a decision is thought to be in time for the interim results, due in November.

The business, Boots Pharmaceuticals, employs 7,800 people, including 2,200 in the UK. It has a large research team, two sales forces supplying GPs and hospitals, and production employees in plants at Nottingham and at Cramlington in Northumberland.

Alastair Eperon, director of corporate affairs at Boots, said: 'If the process of analysis of this business demonstrates that in the long term it's not going to be value-generating for shareholders, then we have to consider those options (disposal or closure).' His comments appear to signal a significant shift from earlier in the week when Boots said it was 'totally committed' to the business.

Sir James Blyth, chief executive, has to weigh up whether to continue to devote heavy capital expenditure to research and develop new drugs, a highly risky activity at which Boots, like Fisons, has had little recent success.

A team under David Thompson, the finance director, is putting each operating business under scrutiny. An earlier examination of Sephora, its poorly performing French health and beauty business, led to its disposal last week.

Last week Boots was forced to withdraw Manoplax, its drug for congestive heart failure, just months after launching it in the UK and US. Research showed it led to more hospital admissions, and that in larger dosages it hastened death. It was a bitter blow for Boots Pharmaceuticals, which has no other prescription drugs still under patent in the UK, and none likely to reach commercial exploitation for several more years.

Boots has already paved the way for a disposal of Boots Pharmaceuticals by separating it from its two other drug businesses, Boots Healthcare International and Boots Contract Manufacturing. BHI makes products which can be sold without prescription, such as Strepsils. BCM manufactures on behalf of third parties. It is thought that these two businesses would be retained, whatever the fate of Boots Pharmaceuticals. Together the three made operating profits of about pounds 130m last year. For the first time Boots plans to split out the profits of Boots Pharmaceuticals at its interim results.

Boots Pharmaceuticals' biggest sellers are Synthroid, a treatment for thyroid deficiency, with sales of pounds 124m, and Brufen and Froben with sales of pounds 65m and pounds 40m respectively.

These brands might attract bidders among the world's pharmaceutical companies, but the shortage of blockbuster drugs in the pipeline would depress the asking price. Prescription drug companies have plunged in value this year.

A disposal of the business would threaten jobs. Buyers would be more interested in the future income streams of existing products than the business's research and sales teams and infrastructure.

Boots is due to meet City analysts tomorrow to present details of its analysis of its 11 operating businesses. Do It All, its loss-making DIY retailing joint venture with WH Smith, has already undergone the treatment. Boots believes it can succeed in the long term, despite its horrendous losses.

Robin Gilbert, analyst with Panmure Gordon, commented: 'Boots Pharmaceuticals don't have a very strong position. It's difficult to believe they once bid for Glaxo.'

Manoplax heartache, pages 6-7

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue