Reckitt Benckiser says it's a go for pharma unit spinoff worth some $4.9B

Reckitt Benckiser has been dropping plenty of hints that it would eventually spin off its pharmaceuticals unit. The time is here: The company says it will break off its pharma unit via with a separate U.K. listing, becoming the latest drugmaker to join pharma's slim-down craze.

Reckitt Benckiser CEO Rakesh Kapoor

Reckitt Benckiser's pharma chief, Shaun Thaxter, will take the reins as CEO of the new company, while Howard Pien, a financial adviser handling its recent strategic review, will become its new chairman, the Financial Times reports. Reckitt hasn't yet decided whether it will hang onto a stake in the business, which reaps nearly all of its revenues from the off-patent heroin addiction drug Suboxone.

Reckitt started evaluating its pharma options back in October amid sinking sales of its flagship drug, which fell victim to a pair of generic competitors. That decline has continued: Monday, Reckitt announced an 8% revenue drop for the first half of the year, with its top-line tally sinking to £344 million.

Still, as CEO Rakesh Kapoor said in a statement, the company believes the pharma unit has what it takes to create long-term value on its own. Deutsche Bank has said the standalone pharma could have an enterprise value of £2.9 billion, the FT notes; that's 13 times its forecast earnings for 2015. Other analysts have estimated anywhere from £2 billion to £5.5 billion.

Reckitt CFO Adrian Hennah

The move would also allow Reckitt to double down on its primary aim "to be a global leader" in consumer health and hygiene. And that's a space where the company might be looking to grow via M&A, if a recent bid for Merck's ($MRK) OTC unit--which ultimately went to Bayer--is any indication.

But as plans unfold for the Richmond, VA-based pharma unit, Reckitt could still be a seller, too. CFO Adrian Hennah said the company is pursuing a demerger as its "preferred option," but it still won't "rule out a sale along the way," he noted, as quoted by the FT.

- read the release (PDF)
- get more from the FT (reg. req.)

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