Market Report: Film has bad ending for Reckitt Benckiser
A decision by America's largest pharmacy group dispensed a large dose of panic yesterday to shareholders in the consumer goods group Reckitt Benckiser.
CVS Caremark, the largest American pharmacy in terms of prescriptions filled, has removed one of Reckitt's drugs from its approved list of medications.
Reckitt has already faced issues with its heroin replacement drug, Suboxone. The drug has moved to a generic status, which means other companies can now make their own versions. Reckitt has argued that the tablet form of the treatment has presented a risk to young children, who were getting hold of the drugs and swallowing them with no knowledge of their nature. It introduced a film version of Suboxone, which it argued was less likely to be used accidentally by children.
But yesterday CVS, which manages drug plans for large corporate employers in America and is estimated to account for 10-20 per cent of the market, removed the film version of Suboxone from its list of medications that are covered by insurance.
CVS has announced that the change will take effect from January 2014, and analysts at Credit Suisse said: "The fear is that others follow suit and Suboxone profits fall sharply." CVS, Credit Suisse added, "clearly appears to have decided that film and tablet are effectively the same product and so is steering its customers to the cheaper version."
The troublesome drug accounts for a fifth of Reckitt's earnings, and its shares collapsed by 252p to 4,677p – the worst faller on the benchmark index.
At the other end of the scale was insurer Resolution. The insurance sector was in demand following news that the reinsurer Swiss Re is in talks to buy the Hugh Osmond-backed Phoenix. Nomura raised Prudential to a buy and Resolution to neutral, and predicted that dividends will grow. Prudential ticked up 8p to 1,118 p and Resolution was up 10.5p to 318.5p.
The blue-chip index clung on to its gains from earlier in the week as the markets digested Wednesday's statement from Ben Bernanke, the US Federal Reserve chief, that quantitative easing is here to stay — for now. The FTSE 100 ticked up just 1.53 points to 6,544.94.
The auto and aerospace engine-maker GKN drove up 8.2p to 334.9p after an announcement that the UK Government and the car industry will each invest £500m over the next ten years to create the "car of the future". The Business Secretary, Vince Cable, announced the investment at the Goodwood Festival of Speed. A group of 27 companies, including GKN, will invest.
On the mid-tier index, Exane BNP Paribas is worried that the shopping centre owner Intu Properties will be hit by more retailers shutting up shop. Exane said punters looking to invest in property companies should focus on residential, which "looks likely to be the strongest market over the next 18 months". It thinks this is a reason to sell Intu and buy the London-focused Capital & Counties because of improving "household finances, mortgage availability and government support".
Intu was demoted from the FTSE 100 in March's rejig, and now Exane prefers its former sister company, which owns significant property in Covent Garden and is developing a residential and mixed-use scheme in Earls Court. It rates Intu a sell at 300p and the company lost 2.9p to close at 328.4p. Capital & Counties got a buy rating with a 415p price target, but punters were yet to be convinced and it edged back 0.1p to 355.5p.
The technology specialist Oxford Instruments enjoyed a 120p rise to 1,370p following a positive update that highlighted growth in nanotechnology.
The AIM-listed payment-processing provider MoneySwap said it had hired a British sales team to sign up UK retailers to accept China UnionPay cards, China's largest bank card. MoneySwap shares put on a 0.15p to finish at 0.85p.
The property consultant Sweett Group has sold its investment in the Leeds social housing project, and it built up a 0.5p gain to 23.5p.
Solar plant investor Bluefield Solar Income Fund made its debut yesterday to raise £150m, and it added 3p to 103p.
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