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Reckitt Leans Toward Separate Listing for Pharmaceuticals Unit

LONDON (The Deal) -- The U.K.'s Reckitt Benckiser said Wednesday it was leaning toward a separate listing for its prescription pharmaceuticals unit, whose core Suboxone heroin-withdrawal aid is losing U.S. market share to generic competition.

The Slough, England company, which is reportedly a leading contender in the $10 billion-plus auction for Merck & Co.'s consumer healthcare unit, announced a review of the pharma division in October.

"All options are on the table but we believe a capital markets solution is emerging as a strong option," CEO Rakesh Kapoor told analysts on a conference call accompanying a first-quarter trading bulletin.

Kapoor also hinted at disposals elsewhere in the company, but declined to specify selloff candidates.

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"In the past RB has basically been talked about in the area of M&A," he said. "I think M&A should include B and the B part is to really take a look at our portfolio and think about which pieces of our portfolio perhaps need a solution that is different from being in the company."

The "capital markets solution" for the pharma business would entail a public listing, CFO Adrian Hennah clarified. A spokeswoman said both an IPO or a spinoff were under consideration.

The company began the pharma review after the Food and Drug Administration approved two generic alternatives to Suboxone. Reckitt then discontinued its Suboxone tablets and switched to a cheaper, sublingual version of the drug. That film version had a 64% market share in the U.S. in the first quarter, Reckitt said.

"We continue to be of the view that we will lose some further market share of film in the U.S. How much we will lose is a question of the battle between clinical preference for our product...but, on the other hand, there is an economic dimension to the decision making," said Hennah.

RB Pharmaceuticals had 2013 operating profit of 428 million pounds on revenue of 777 million pounds, and posted first-quarter revenue of 170 million pounds, down 15% year-on-year. (Reckitt Benckiser's total first-quarter revenue was just under 2.4 billion pounds).

JPMorgan Chase & Co. analysts earlier this month valued the pharma unit at about 1.3 billion pounds, or 185 pence per Reckitt share.

Reckitt has a market value of about 35.1 billion pounds, with its stock by late morning on Wednesday little changed at 4,887 pence.

Reckitt's over-the-counter healthcare and household cleaning brands include Durex condoms and Lysol disinfectant.

In March Reckitt acquired the global rights to the K-Y sexual lubricant brand from Johnson & Johnson Inc. Last May, it paid Bristol-Myers Squibb Co. $482 million upfront for the exclusive rights to sell, distribute and market seven over-the-counter medicines, including cold, flu and indigestion treatments, for a three-year period. The products are mainly sold in Latin America.

In January 2013 Reckitt bought Salt Lake City vitamin maker Schiff Nutrition International Inc. for $1.4 billion from Weider Health and Fitness Inc. and TPG Growth.

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