Reckitt Raises Guidance On Adams Performance, Marketing Momentum
This article was originally published in The Tan Sheet
Executive Summary
Reckitt Benckiser raises its 2008 sales targets based on the performance of brands added with its acquisition of Adams Respiratory Therapeutics early this year and heavy marketing investment in its latest quarter
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Reckitt Benckiser raises its 2008 sales targets based on the performance of brands added with its acquisition of Adams Respiratory Therapeutics early this year and heavy marketing investment in its latest quarter. The London-based company raised its full-year net revenue growth target to 13 percent from at least 11 percent to 12 percent, CEO Bart Becht said during the firm's third-quarter earnings call Oct. 27. He explained the increase reflects the company's "excellent momentum" in the July-September period as net revenue grew 10 percent on a like-for-like basis - excluding the impact of acquisitions, disposals and exchange - to 1.6 billion U.K. pounds ($2.6 billion under Oct. 27 exchange rates). Adams brands "continue to do extremely well," growing at a 17 percent rate in the quarter and adding $194 million to net revenue in the first eight months of Reckitt's ownership, Becht said. Reckitt acquired Adams for $2.3 billion in a deal that closed in January 2008 (1 'The Tan Sheet' Feb. 4, 2008, In Brief). Becht said Reckitt expects Adams brands to contribute an additional $117 million in the fourth quarter for a total of $311 million for the year. Adams product sales increased in the third quarter compared to the second quarter due to the September start to the selling season for decongestant products, including the Mucinex line, Chief Financial Officer Collin Day said. Day said he also expects stronger Mucinex sales in the fourth quarter as seasonal demand continues for decongestants and cough suppressants. "Strong media investment" - up 27 percent from the year-ago quarter - also helped sales, Becht said. According to Reckitt's same-day earnings release, marketing investment drove increased penetration of Mucinex and boosted sales of analgesic Nurofen and sore throat lozenge Strepsils . In turn, sales of Nurofen and Strepsils drove a 30 percent revenue increase to $666 million in the company's health and personal care sector, according to the release. Part of this increase is due to "successful initiatives" such as Nurofen Express and StrepsilsCool and Sore Throat & Blocked Nose variants, the company says. "We have seen good contributions on Nurofen Express as it is beginning to roll out, and Strepsils Cool the early signs are good, but ... it is a bit early" to tell, Becht said. If Reckitt's momentum continues in the October-December period, 2008 will be the second-highest growth year since the merger of Reckitt & Colman with Benckiser 1999. That would be "a pretty good achievement" in light of "the current marketing conditions," Becht said. He said he expects the underlying business to grow 6 percent to 7 percent in the fourth quarter, more than twice the current market growth rate. However, Becht cautioned that the company overall will "see a bit less growth ... in the balance of the year" because Adams launched Mucinex Extra Strength in the comparative year-ago quarter (2 (Also see "Max Strength Mucinex Sales Could Reach $70M In Debut Season – Adams" - Pink Sheet, 9 Apr, 2007.), p. 12). In addition, Adams benefited during the 2007-2008 cold season from the delayed introduction of generic competition to its Mucinex line through a patent-infringement settlement with URL/Mutual. The settlement granted Philadelphia-based URL/Mutual a non-exclusive, royalty-free license for U.S. sales of single-ingredient licensed guaifenesin products beginning in July 2012 (3 (Also see "Adams Reinforces Mucinex Patents In Settlement Agreement With Mutual" - Pink Sheet, 26 Mar, 2007.), p. 6). However, Perrigo has since filed an abbreviated new drug application seeking FDA approval to manufacture and distribute guaifenesin 600 mg single-ingredient extended-release tablets, which would invalidate the key patents related to the formulation of Mucinex (4 (Also see "Adams Faces Another Mucinex Challenge, Prepares For Product Launches" - Pink Sheet, 27 Aug, 2007.), p. 12). Adams also benefited during the previous cold season from an FDA order to remove a number of unapproved time-release guaifenesin products from the market, Becht said (5 , p. 6). - Elizabeth Crawford ([email protected]) |