Reckitt to Pay $1.4 Billion to End U.S. Opioid Treatment Probe
Reckitt Pays Up to $1.4 Billion to Solve Opioid Treatment Probe
(Bloomberg) -- Reckitt Benckiser Group Plc agreed to pay as much as $1.4 billion to settle an investigation into the sales and marketing of a treatment for opioid addiction by former unit Indivior Plc.
Shares of the maker of Durex condoms and Lysol cleaning products rose as much as 3.3% after it disclosed the deal. Indivior surged as much as 41% in London after lifting its outlook for sales and profit, fueled by resilient demand for the addiction drug Suboxone film.
The U.S. government is investigating how a deadly epidemic of opioid abuse spun out of control, killing tens of thousands of people annually, and how a product sold as a solution came to exacerbate the crisis. Prosecutors argue that the marketing of the addiction treatment deceived doctors about its dangers.
The settlement avoids “the costs, uncertainty and distraction associated with continued investigations,” Reckitt said, even though the company denies any wrongdoing. The deal also clears the slate for new Chief Executive Officer Laxman Narasimhan, who will take over from Rakesh Kapoor at the start of September.
“This draws a line under an issue that would, at best, have resulted in additional cost, distraction and uncertainty and could, at worst, have led to much more costly and protracted legal proceedings -- none of which the organization needs at a time when it is changing CEO,” Deutsche Bank analysts wrote in a note to clients.
The new chief can now devote more attention to turning around Reckitt’s non-prescription health arm after separating it from its home-care operations. Representing about two-thirds of group sales, the division consistently outpaced industry growth rates until a series of missteps that have cut the share price by about one-fifth since a 2017 peak.
“It clears the way for Reckitt to go ahead with its split of the two divisions,” said analysts at Exane BNP Paribas.
Reckitt and its former unit plunged in April when prosecutors disclosed the charges. Indivior misled health professionals and government programs into believing that Suboxone film was safer and less likely to be abused than rivals, the Justice Department said at the time.
Most of the events under investigation took place before Indivior split from its former parent at the end of 2014. The settlement’s magnitude is more than three times the $400 million Reckitt had set aside to cover any legal costs from the Suboxone fallout. The expense will be funded through existing borrowing facilities and cash generation, Reckitt said.
Indivior’s Optimism
Bernstein analyst Andrew Wood had called the previous drop in Reckitt’s share price after the April disclosure an overreaction, saying the cost of the case would have a minimal effect on the company’s financial results.
Indivior lifted its outlook as Suboxone outperformed in terms of market share in the first half, relative to expectations. Still, the shares have lost more than three-quarters of their value over the past 12 months.
Though the treatment faces competition from knockoffs, Indivior now sees full-year net revenue in the range of $670 million to $720 million, raised from $525 million to $575 million. It expects net income of $80 million to $130 million, after earlier predicting a possible loss.
To contact the reporters on this story: Marthe Fourcade in Paris at mfourcade@bloomberg.net;Thomas Buckley in London at tbuckley25@bloomberg.net
To contact the editor responsible for this story: Eric Pfanner at epfanner1@bloomberg.net
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