Wednesday, October 23, 2013

Reckitt Benckiser reviews all options for drugs unit

Reckitt Benckiser's pay plans opposed by investor group PIRC

Reckitt Benckiser, the consumer goods giant, is reviewing all options for its pharmaceuticals unit, it said on Tuesday, effectively hoisting a for sale sign on its prescription medicine business.

Shares in the maker of Strepsils and Gaviscon rose more than 6pc in morning trading after the Bank of America Merrill Lynch has valued the pharmaceuticals unit at about $3.2 billion (£2 billion)

The business centres around the drug Suboxone, which Reckitt sells as a film that dissolves in the mouth. It is used to treat heroin addiction, but now faces increased competition from cheaper copies, or generics. In the third quarter, its revenue fell 14pc to £191m.

"Critically, the decision to conduct a ‘strategic review’ of the pharmaceuticals business signals an intent to exit, in our view, and a move to resolve a troublesome valuation hangover, once and for all," said Martin Deboo analyst at Investec.

The company, which also sells cleaning products such as Varnish and Cillit Bang had said before that the right time to consider options for the pharmaceutical business would be following the launch of cheap, generic Suboxone tablets.

In February, U.S. regulators approved two generic versions of the drug.

"We expect the review to take some time and will update shareholders during the course of 2014," said chief executive Rakesh Kapoor.

No comments: