P&G, Teva team up on over-the-counter drugs

AP News
Posted: Mar 24, 2011 12:38 PM
P&G, Teva team up on over-the-counter drugs

Procter & Gamble Co., the world's largest consumer products maker, said Thursday it is teaming up with the world's largest generic drug maker to expand the global reach of over-the-counter brands such as Vicks and Pepto-Bismol.

Cincinnati-based P&G and Jerusalem-based Teva Pharmaceutical Industries Ltd. said they plan to combine their over-the-counter drug businesses outside of North America, building leadership in key markets such as Germany, Russia and Brazil while positioning them for faster growth in emerging markets and with more offerings to aging populations in developed markets.

The deal could also eventually help consumers choose from more medicines without a prescription and at lower prices.

P&G's products include Vicks cold medicines, Pepto-Bismol stomach relief, Metamucil fiber supplement and Prilosec OTC heartburn medicine.

The deal will expand the companies' reach geographically and in retail outlets including drugstores and groceries, said Shlomo Yanai, Teva's CEO and president, in a conference call. It also combines Teva's drug research and development experience and global manufacturing with P&G brand-building, marketing and consumer knowledge.

P&G CEO Bob McDonald said on a call that the deal is about building "global scale and sales-leading position."

The joint venture's combined sales are worth about $1 billion a year. The companies estimate that will reach $4 billion within years.

"This deal turbocharges our health care business on Day One," P&G spokesman Tom Millikin told The Associated Press. "We will double our OTC business, and plan to accelerate growth from there."

Teva will provide manufacturing and other infrastructure to supply the joint venture markets and to P&G's North American business. The companies also said they want to add to their OTC portfolios by developing new over-the-counter brands and moving more drugs to over-the-counter status.

Erik Gordon, clinical professor at the University of Michigan Ross School of Business, noted Teva's experience at getting prescription drugs into generic availability and in navigating legal issues in the drug business.

"Here is where the benefit can be for consumers: if more drugs safely move from RX (prescription) to OTC, and that brings prices down," Gordon said.

The deal won't include Teva's prescription drug business. P&G sold its prescription drug business two years ago for $3.1 billion business to Warner Chilcott PLC.

P&G, whose other products include Tide detergent and Pampers diapers, said at the time it wanted to focus more on growth opportunities for over-the-counter health care.

Millikin said once the deal closes, some 300 P&G employees in Phoenix, Ariz., and at its Swing Road plant in Greensboro, N.C., would transfer to Teva. The large majority of P&G's OTC business is in North America, but it also has drug operations in overseas markets including South Africa, India and Indonesia.

P&G will own 51 percent of the joint venture and will supply its CEO and chief financial officer, P&G said, while the chief operating officer will come from Teva.

The companies said details of the agreement were still being worked out. Once they are made final, the companies expect the deal to close this fall if it clears regulatory hurdles.

P&G stock was down 5 cents at $60.86, while Teva rose $1.08, or more than 2 percent, to $50.20 in early afternoon trading.