Sector News

Reckitt CEO plots exit amid consumer health split, and investors aren’t happy

January 17, 2019
Life sciences

Back in 2017, Reckitt Benckiser CEO Rakesh Kapoor touched off some big changes for the company. But he won’t be sticking around long enough to see them through.

Wednesday, the consumer giant said Kapoor, bound for retirement, would be leaving his post by the end of 2019 after more than eight years at the helm and 32 at the British company. Meanwhile, RB’s board has already taken up the search for his successor, and it’ll be looking at candidates from both inside and outside the company.

Kapoor called the last couple of years “transformational” for the company and added in a statement that, with a new decade on its way, “now is a good time for new leadership to take this great company through the next phase of outperformance.”

But as some analysts pointed out, Reckitt’s transformation is hardly complete—and investors may have preferred Kapoor finish the job he started.

In October, 2017, the company said it would split its business into two units, dubbing one of them “RB Health.” That business, which comprised the Mead Johnson nutrition unit RB acquired under Kapoor’s leadership a few months prior, would have its own management team, with Kapoor serving as its president, Reckitt said at the time.

The move was seen as a potential precursor to a buy of Pfizer’s OTC assets, though Reckitt was ultimately forced to drop its bid for the lineup. After failing to find a buyer over a monthslong sales process, Pfizer reignited talks with GlaxoSmithKline late last year and finally pulled off a joint venture agreement in December.

Now, Kapoor’s retirement announcement “compounds our sense of unease around RB,” Jefferies analysts wrote in a note seen by Reuters. “A feeling that the success model is finding its limits and that the loss of Pfizer has been a mortal blow.”

Shareholders, who sent shares south on the news, may also be worried that a new CEO could limit profit margins in favor of investing in bolstering revenue growth, Reuters pointed out.

“We think it’s likely that the threat of a margin reset could spook investors and put pressure on the share price,” RBC Capital Markets analysts wrote, as quoted by the news service.

But where pharma’s concerned, there may be some opportunity ahead. “Kapoor’s departure could signal the start of plans to formally split the businesses into two separate entities,” Liberum analysts said, according to Reuters. “This could make either or both of the two businesses more attractive to prospective third parties.”

A sale of the health business would only add to a year-plus that’s seen an abundance of M&A action in the OTC space. Most of 2018’s moves helped pharma exit the field—Novartis, Merck KGaA, Bristol-Myers Squibb, Bayer and Pfizer each sold off all or pieces of their consumer franchises last year—but in addition to GSK, companies including Johnson & Johnson and Sanofi have hung around for now.

By Carly Helfand

Source: Fierce Pharma

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