Date: 12 Apr 2019

The share price of Reckitt Benckiser suffered another day of heavy losses as investors worried about fraud charges from the U.S Department of Justice on the UK based pharmaceutical company Indivior. The charges are based on allegations of fraud of the marketing of the Suboxone drug, which was marketed as a much safe alternative to opioid-based drugs.

Reket Benckiser share price tumbled well over five percent on the news, as some of the charges brought forward from the U.S Department of Justice are related to a time when Indivior was actually part of Reckitt Benckiser before the two companies parted ways in 2014.

Speculation has started to mount that a potential fine from regulators could exceed over $3 billion, which is far more than executives at Reckitt Benckiser had anticipated. At the end of last year, Reckitt Benckiser had set aside almost $400 million to cover the costs of any potential legal liabilities related to Indivior.

Shareholders of the company have also starting to worry, as Reckitt Benckiser currently only holds $500 million in net cash according to its latest financial reporting. Reckitt Benckiser has fallen out-of-favour with investors so far this year, as a number of their leading products are now facing stiff competition from cheaper brands.

With most of the charges filed by the U.S Department of Justice happening while Indivior was part of Reckitt Benckiser, the UK pharmaceutical companies stock price could come under even worse selling pressure if Indivior fails to disprove the charges of marketing fraud and misconduct.

 

R.BUK Daily Mountain Chart            Source-Activtrader Platform

R.BUK Daily Mountain Chart | Source: ActivTrader 

 

The daily time chart highlights the growing bearish pressure on Reckitt Benckiser’s share value, with price now approaching the neckline of a large head and shoulders pattern. The bearish pattern currently holds a sizeable downside projection, that could almost wipe-off twenty per cent of the companies share value.

 

Written by Nathan Batchelor, External Analyst

*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.

All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at its own risk.