Shares in consumer healthcare colossus Reckitt Benckiser (RB.) rose 2.5% to £65.86 on news it will pay up to $1.4bn (£1.1bn) to fully resolve all US federal investigations into the sales and marketing of opioid addiction treatment Suboxone Film by its former subsidiary, pharma business Indivior (INDV).

Separately, Indivior’s shares shot up 37.7% to 61p after it raised full year profit and sales guidance thanks to a better than expected first half showing from Suboxone.

PAIN RELIEF

Pharmaceutical firm Indivior had been charged with fraudulently marketing its Suboxone Film opioid addiction treatment. Although the business was spun out of Reckitt Benckiser in 2014, the alleged wrongdoing largely occurred in a period when Indivior was a wholly owned subsidiary of the consumer health giant behind household name brands including Durex, Dettol, Air Wick, Cillit Bang and Strepsils.

READ MORE ABOUT RECKITT BENCKISER HERE

Slough-headquartered Reckitt has agreed with the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) to resolve the long-running investigation into Suboxone Film.

The firm has already set aside a $400m provision to cover the settlement. This will be increased to $1.5bn at the half year results.

NARASIMHAN’S FULL IN-TRAY

While Reckitt Benckiser denies all allegations that it engaged in any wrongful conduct, the board decided the agreement is in the best interests of the company and its shareholders.

Although larger than expected, the settlement should remove any lingering uncertainty around the case and give new chief executive officer (CEO), PepsiCo man Laxman Narasimhan, one less problem to worry about. For more on his bulging in-tray, read our Under The Bonnet article here.

Admittedly, the settlement will act as a drag on cash flow at a time when Reckitt Benckiser is looking to shift the debt taken on to fund its 2017, $18bn acquisition of Mead Johnson, but bulls will be hoping that its strongly cash-generative business model ensures it can still reduce leverage while raising the dividend in the years to come.

 


Issue Date: 11 Jul 2019