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Reckitt Benckiser confirms pharma spin-off plans

Will separate prescription and consumer health businesses
Reckitt Benckiser

Reckitt Benckiser of the UK has followed through on plans to spin out its US-based pharmaceuticals unit and narrow its focus to health and household goods.

The company first revealed it was considering the future of RB Pharmaceuticals a few months ago, and confirmed during its second-quarter results presentation this week that it had decided to pursue "a demerger of [the business] with a separate UK listing."

News of the de-merger came shortly after GlaxoSmithKline (GSK) chief executive Sir Andrew Witty suggested the company might spin off its £6bn consumer health division.

RB's chief executive Rakesh Kapoor told investors the de-merger would take place within the next 12 months and would allow the company to focus on its core consumer health/nutrition and hygiene operations.

The company has carried out a string of acquisitions to boost its consumer health unit, including Schiff Nutrition, OTC products from Bristol-Myers Squibb and Johnson & Johnson (J&J) subsidiary K-Y, although it was unable to secure a deal for Merck & Co's OTC business.

"We believe that RB Pharmaceuticals has the potential to deliver significant long term value creation as a stand-alone business," said Kapoor.

RB Pharma saw sales shrink 8 per cent in the first half of this year to £344m, while the remainder of the group saw net revenues decline 7 per cent to £4.67bn.

The pharma unit generates nearly all its revenues from Suboxone (buprenorphine and naloxone), used for the treatment of opioid dependence, and - while prescription volumes for the product grew in the US - downward pricing pressure and a reduction in market share took their toll.

Sales were especially hit by the withdrawal of a tablet formulation of the drug earlier this year on child safety grounds - as well as the entry of a second buprenorphine/naloxone competitor in the market alongside Orexo's Zubsolv.

Last month, BioDelivery Sciences' secured US approval for its Bunavail buccal film product, while other generics are also said to be nearing the market. The FDA's Orange Book lists applications from Actavis, Amneal Pharma and Roxane for generic buprenorphine/naloxone combinations.

Outside the US market, the number of patients treated with the drug also grew, but government-imposed price reductions pegged back revenues.

RB Pharma is trying to expand its product portfolio with the development of injectable formulation of Suboxone, an intranasal naloxone product licensed from AntiOp, and an oral treatment for alcohol addiction - called arbaclofen placarbil - which was licensed in May from XenoPort.

The listing of the unit in the UK could potentially make it a takeover target for one of the tax inversion deals that seem to be in vogue in the US pharma sector at the moment.

Analysts at Deutsche Bank have provisionally valued RB Pharma at around £2.9bn.

29th July 2014

From: Research, Sales, Healthcare

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