Reckitt to quit drugs with sale of heroin treatment
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Deputy Business Editor
Wednesday 23 October 2013
Reckitt Benckiser’s chief executive, Rakesh Kapoor, yesterday hung a “for sale” sign above the Cillit Bang and Dettol maker’s treatment for heroin addiction, with analysts predicting a potential £2bn to £5bn price tag.
The Suboxone heroin-replacement product, the sole component of the consumer goods group’s pharmaceuticals business, has for decades been the treatment of choice for US doctors trying to wean addicts off the killer drug.
But its patent has now expired and cheap generic copycats are eating into the market. Now Mr Kapoor has launched a review of the business that is likely to lead to it being sold. Reckitt will maintain its ownership of consumer medicines like Nurofen and Gaviscon.
Analysts said there would be no shortage of bidders in the global pharmaceuticals industry with the expertise to manage medicines that have come off patent. Reckitt has tried to deal with the issue by creating a new format for the medicine: an impregnated film that users put under their tongue. It claims this is safer than the previous tablet version as some addicts have been dissolving the tablets and injecting them. However, generic tablets remain popular among price-conscious US healthcare providers and the company’s share of the market has fallen to 68 per cent.
Reckitt advisers seeking bidders will promote the idea of looking for growth outside the US, where Suboxone has not made many inroads, although the company admits it continued to expect long-term erosion of market share. Shares in Reckitt leapt 5 per cent on the news, gaining 234p to 4,734p.
“Rakesh has always been clear: the focus [of the company] will be on where the positive rather than the negative news is,” Chris Wickham, an analyst at Oriel Securities, said.
Reckitt would not comment on whether the proceeds of a sale would be returned to shareholders or invested in more acquisitions.
The share price gain was also due to the company issuing a strong update on trading in the past quarter, shrugging off concerns among rival consumer goods groups, such as Unilever, about slowing growth in emerging markets.
Stripping out new product launches, revenues are growing at 5 per cent, thanks to Reckitt’s focus on health and hygiene products in those regions.
With the exception of southern Europe, all European regions are now growing, with Scholl footcare faring particularly well and only partly offset by poor sales of Air Wick air fresheners amid stiff competition.
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