P&G CEO Bob McDonald, left, and Teva CEO Shlomo Yanai.
Procter & Gamble, the world's largest consumer products maker, is teaming up with Israel's Teva Pharmaceutical Industries, 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 said yesterday they plan to combine their over-the-counter drug and consumer health care businesses outside North America, building leadership in key markets such as Germany, Russia and Brazil while positioning them for faster growth in emerging markets.
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, he said.
Sales of $4 billion within a few years
The joint venture's combined sales are worth about $1 billion a year. He estimated that this will reach $4 billion within a few years.
"This unique partnership positions P&G and Teva to be a leading player in the consumer health care industry," said Bob McDonald, chairman and CEO of P&G. "This is a remarkable opportunity to accelerate growth for both companies' OTC businesses. Together, we will serve more consumers in more parts of the world more completely by increasing access to high-quality, affordable over-the-counter medicines."
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 develop new over-the-counter brands and move more drugs to over-the-counter status.
The companies did not identify specific products that they could target for the over-the-counter market but said they might look at gastrointestinal, allergy and respiratory conditions.
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.
"We are extremely pleased to be joining forces with Procter & Gamble, the world leader in brand building and innovative go-to-market capabilities," said Yanai. "This partnership will create value by immediately expanding the number of channels and geographies in which each company's OTC products will be sold. Together, we will develop a new platform with the potential to reshape the entire global OTC market."
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.
"This deal turbocharges our health care business on Day One," said P&G spokesman Tom Millikin. "We will double our OTC business."
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.
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.
The market for over-the-counter medicines is nearly $200 billion, the companies said, and is expected to increase as the global population continues to age and emerging markets spend more on healthcare.
The deal gives P&G access to Teva's extensive product portfolio and gives Teva the benefit of P&G's marketing expertise. Teva has a strong presence sellinghttp://www.blogger.com/img/blank.gif drugs to pharmacies, while P&G has a strong presence in supermarkets and other retail outlets.
"Teva's goal is to use Procter's brand to increase Teva's revenue," said Gilad Alper, an analyst at Meitav Investment House. "Procter's interest is, they need Teva's manufacturing capabilities, Teva's products and Teva's international infrastructure. It's a smart way to use each other's strengths."
In late trade in New York yesterday, P&G stock was flat at $60.91, while Teva rose 2.6% to $50.42.
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