Reckitt to spin off pharma business

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Reckitt Benckiser is to spin off its drugs division in a move that could be worth at least £1bn.

Reckitt, which employs around 1,200 people in Hull, said its US-based RB Pharmaceuticals (RBP) division, which primarily makes the Suboxone heroin addiction treatment, would be floated on the London stock market within 12 months.

The move was announced as Reckitt, which sells Durex condoms, Lysol disinfectant and Nurofen painkilling tablets, reported better-than-expected half-year profits of £1.04bn, a rise of 16 per cent on a year earlier.

Reckitt posted a four per cent improvement in first-half like-for-like sales, excluding its RBP unit, and said that it was on track to meet its full-year sales growth target of between four per cent and five per cent.

The group said that its Dettol disinfectant Power and Pure sub-brands had successful launches across a number of markets, although this was offset by strong competition in the US and a number of western markets.

Other new product launches included Harpic Power Plus toilet bowl cleaner, Vanish Gold stain remover and Air Wick Eternal Scents.

The business said its Durex, Nurofen and Scholl footcare brands had all performed well in the second quarter of its financial year.

The demerger of the pharma business ends months of speculation about the unit, after a review was announced last October

Analysts said Reckitt’s RBP unit could be valued at between £1bn and £3bn.

Analysts have given a range of valuations for the business, due to uncertainty over the longer-term impact of competition from generic versions of Suboxone.

Reckitt chief executive Rakesh Kapoor said: “We believe that RB Pharmaceuticals has the potential to deliver significant long-term value creation as a stand-alone business.” Hargreaves Lansdown analyst Keith Bowman said: “A trade buyer looks to have remained elusive, with a stock market listing the natural, if potentially more fraught, alternative.”

Bernstein analysts have said that Suboxone – which is sold as a film that dissolves in the mouth – has 79 per cent of the large US market, down from around 85 per cent in March last year.

Last week, the company revealed it was making a £100m investment in research and development facilities in Hull.

Hull beat off rival Reckitt Benckiser sites in India, Singapore, China and the US, to become the global technical innovation hub for products like Nurofen and Strepsils.

Chancellor George Osborne described the firm, as “a great British success story”.

The project, which received £6m from the Regional Growth Fund, will see a new centre of scientific excellence, equipped with state-of-the-art laboratories and offices built at the Dansom Lane site.

Last week, Mr Kapoor said the move was a “statement of intent to change the game” in consumer health and should attract talent from the University of Hull, and around the world.

The company aims to come up with new variations and delivery methods for everyday products like Nurofen.

Mr Kapoor added: “We have had a 200-year history in Hull. This is not a completely new place to us. Hull and the UK has been so much part of our history and success.

“We have had brands like Nurofen, Strepsils and Lemsip being worked on with great innovations from Hull.”