Reckitt Benckiser hurt as rivals steal heroin march
Tuesday 26 February 2013
Shares in Reckitt Benckiser took a tumble yesterday on news that its competitors will be able to make heroin-dependency drugs to compete with the consumer goods group.
Reckitt had been trying to slow down competitors' plans to make rival drugs after it lost US patent protection for its heroin-dependency treatment drug Suboxone in 2009. But yesterday investors reacted to news that the US Food and Drug Administration had rejected Reckitt's petition to force rivals to take more precautions with the drugs packaging.
Reckitt's shares took a hit and ended 135p lower at 4,381p. Not only has Reckitt lost its plea, but two generic drug makers have been given the go-ahead to enter the Suboxone tablet market with drugs that contain its key buprenorphine ingredient.
The Dettol-to-Durex maker introduced a film-strip version of Suboxone that is less likely to be taken accidentally by children. It will stop producing Suboxone in tablet form next month. It had hoped packaging for the opiate substitute would become regulated to make it more expensive for rivals to produce.
But the FDA decided that data presented by Reckitt did not necessitate the regulation that the company had suggested, which had included educational campaigns and child-resistant packaging.
Reckitt had previously pointed out that there is evidence of a rise in abuse of the medicine by children, who are able to open packets of drugs in tablet form.
It said yesterday it was "disappointed" by the FDA's decision. But it added that it will "continue to work with the FDA on safety enhancements", and remains "committed to maintaining its own high level standards for safety, including the use of child resistant, unit-dose packaging". Jefferies' Alex Howson said the entry of rivals into the market has been "a well-flagged risk for Reckitt" but some investors had forgotten these risks – until yesterday.
About 90 per cent of Suboxone tablet business and 70 per cent of the film business could be lost to generics, and Jefferies estimates 2013 Suboxone profits could reduce by 17 per cent to £382m.
However, analysts think the share sell-off in the Slough-based company has been overdone.
Deutsche Bank's Harold Thompson thinks Reckitt's repeated communication to "expect the worst on generic entry" means the profit impact on the group could be more measured than the investors think. Mr Thompson points out that more than 95 per cent of Reckitt's group profits are not related to US Suboxone tablets.
Analysts expect the group's household goods division, which includes brands such as Clearasil, Cillit Bang and Strepsils, will perform well this year.
Mr Thompson said he thinks the shares are still worth buying while Mr Howson added: "There will soon be "an attractive entry point [for the shares], given that the core business has seen substantial improvement of late."
He thinks "a major positive catalyst" would be the sale of the pharmaceuticals business altogether, as the market would "reward the improved visibility".
- 1 Keira Knightley topless: Usually conservative actress does own take on #Freethenipple campaign for Interview Magazine
- 2 Oil tanker with $100 million cargo goes missing off Texas coast
- 3 George Galloway left with severe bruising after attack in Notting Hill by man 'shouting about the Holocaust'
- 4 Saudi Arabia executes 19 in one half of August in 'disturbing surge of beheadings'
- 5 Brother and sister, Christopher Buckner and Timothy Savoy, arrested for 'committing incest after watching 'The Notebook''
YouTube video posted by Isis militants shows 'execution of 250 Syrian soldiers'
Keira Knightley topless: Usually conservative actress does own take on #Freethenipple campaign for Interview Magazine
Oil tanker with $100 million cargo goes missing off Texas coast
George Galloway left with severe bruising after attack in Notting Hill by man 'shouting about the Holocaust'
Lady al-Qa’ida: On the trail of Dr Aafia Siddiqui, the world’s most wanted prisoner
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
With Douglas Carswell joining Ukip, my party has taken another giant step forward
- < Previous
- Next >
iJobs Money & Business
£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...
£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...
£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...
£50000 per annum: Harrington Starr: Financial Technical Consultant (C++, C#, F...