Broker snap: Investec downgrades Reckitt after SUBOXONE disappointment

25th Feb 2013 09:17

Investec has downgraded its rating for consumer products giant Reckitt Benckiser from 'hold' to 'sell' after US regulators called time on the company's exclusivity with its SUBOXONE product.Reckitt said on Monday that the US Food and Drug Administration (FDA) has denied its petition aimed at raising the barriers to generic versions of its SUBOXONE product (used in the treatment for the chronic diseases of addiction) on the grounds of child safety. The FDA has now cleared the way for two unnamed manufacturers to make generic tablets.Investec analyst Martin Deboo said that the news will likely be negative for the shares, with tablets in the US representing around 5.0% of group profits last year.He said: "Prior to Friday we were valuing RBP [Reckitt Benckiser Pharmaceuticals] at c530p per share, which implies [a price-to-earnings multiple of 18] for the core. This was already feeling full for a business giving cautious FY13 guidance and needing to invest heavily, in both M&A & opex, to fulfil its chosen destiny in OTC Healthcare and in Emerging Markets. "Crystallisation of Suboxone risks may yet prove to be a blessing in disguise. But we think the valuation needs a correction first."The target price for Reckitt has been left at 4,260p.Shares were down 4.22% at 4,325.59p by 09:56.BC