Pharma Wobbles Ahead For Reckitt – US-FOREX.US
Reckitt Benckiser has an answer for most consumers, whether it’s surface cleaners like Harpic or health products like Strepsils, but does it have an answer for its pharmaceutical division? The unit will lose exclusivity on its Suboxone heroin-addiction treatment in the United States later this year, and doesn’t seem to have a secret weapon to counter the imminent generic onslaught-which could wipe out 80% of Reckitt’s Suboxone earnings.This won’t be a total disaster: Reckitt Benckiser’s pharmaceutical revenues account for less than 10% of the company total, and the company’s strong second-quarter results on Wednesday showed the rest of its brand portfolio performing well despite the downturn. But Suboxone is a crucial driver of growth for the pharmaceutical unit, which grew recurring sales by 46% in the second quarter, streets ahead of other segments like home care, up 7%, or health and personal care, up 9%.”[The loss of Suboxone] will be a massive drag on operating performance,” said Andrew Wood, an analyst with Sanford C. Bernstein, who rates Reckitt Benckiser “market perform.” He told clients earlier in the week that Suboxone was one of the reasons he was cautious on the stock, along with slowing operating momentum.Shares of Reckitt Benckiser
fell 0.4%, or 11 pence , to 28.52 pounds , during morning trading in London. The firm reported an expectation-beating set of quarterly results on Wednesday, with sales up 20%, to 1.9 billion pounds , and profits up 31%, to 310 million pounds . Reckitt also raised its sales guidance for this year to 5%-6% growth, from 4%, and its profit expectations to 10%-11% growth, from 8%-10%, excluding currency volatility.Reckitt has benefited from price rises on its products and slowing commodity costs, while increasing operating efficiency by cutting costs elsewhere in the business. Sanford C. Bernstein’s Wood said that the company’s new targets were “reasonable” and “achievable.”But Wood also said the big “unknown” was the Suboxone exclusivity loss. He said Reckitt could only perhaps postpone the process by one quarter at most, but that it could still begin in the fourth quarter.
Reckitt said it “continues” to search for ways to offset the impact of incoming generic competition.