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Reckitt settles opioid treatment probe for US$1.4b

Company denies wrongdoing but is settling to avoid 'costs, uncertainty and distraction' linked to the probe

London

THE Reckitt Benckiser Group has agreed to pay as much as US$1.4 billion to settle an investigation into the sales and marketing of a treatment for opioid addiction by its former unit Indivior.

Shares of the maker of Durex condoms and Lysol cleaning products rose as much as 2.7 per cent after it disclosed the deal. Indivior surged as much as 39 per cent in London after it lifted its outlook for 2019 sales and profit, fuelled by stronger-than-expected demand for the addiction drug, Suboxone film.

The US government is investigating how a deadly epidemic of opioid abuse spun out of control, killing more Americans than in World War II, 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.

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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 from September.

Shares of Reckitt and its former unit had plunged in April, when prosecutors disclosed the charges.

Indivior misled doctors and government health programmes into believing that Suboxone film was safer and less likely to be abused than rivals, the Justice Department said at the time.

As the opioid crisis engulfed the US, demand for Suboxone film rose in recent years as a solution to the epidemic of abuse spawned by a new generation of painkillers.

Most of the events under investigation took place before Indivior split from its former parent at the end of 2014.

Reckitt had provisioned US$400 million for costs of investigations related to the former unit. The new settlement amount will be funded through existing borrowing facilities and cash generation, it said.

Bernstein analyst Andrew Wood had called the previous drop in Reckitt's share price after the April disclosure an over-reaction, 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.

Though the treatment faces competition from knockoff rivals, Indivior now sees full-year net revenue in the range of US$670 million to US$720 million, raised from US$525 million to $575 million. It expects net income of US$80 million to US$130 million, after earlier predicting a possible loss. BLOOMBERG