Teva, Procter & Gamble create OTC drug partnership

Procter & Gamble Co (PG.N) and generic drugmaker Teva Pharmaceutical Industries Ltd (TEVA.O) are joining forces to sell over-the-counter medicines as both companies try to expand their reach, particularly in developing markets. The joint venture unveiled on Thursday includes the companies' over-the-counter businesses in all markets outside North America, which combined, generated sales of more than $1 billion in 2010.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 selling 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."Teva's shares were up 2.8 percent at $50.51 on Thursday afternoon, while P&G stock was up 0.1 percent at $61.00.The joint venture, which will be 51 percent owned by P&G and 49 percent owned by Teva, is expected eventually to generate sales of up to $4 billion, the companies said.The venture's chief executive officer, Briain Debuitleir, and chief financial officer, Markus Xander, will come from P&G. Its chief operating officer, Eli Shani, will come from Teva.Tom Finn, president of P&G's health care business, will serve as chairman of the partnership and joint venture.In its first year, the joint venture should add $500 million to $600 million to P&G's sales, P&G Chief Financial Officer Jon Moeller said on a conference call.Shlomo Yanai, Teva's chief executive, said the company generated $650 million in sales from over-the-counter products in 2010 and it expects that figure to rise 50 percent. Teva will take over manufacturing of all the products.Sales generated by the venture could be further enhanced by the companies' plan to turn prescription medicines into over-the-counter products."This makes sense if governments are under pressure to reimburse drugs to shift the burden on to consumers," said Corey Davis, an analyst at Jefferies & Company.Many of the current top-selling OTC medicines were created from such "switch-overs," including P&G's version of the heartburn drug Prilosec and versions of heartburn drug Pepcid, made by a joint venture of Johnson & Johnson (JNJ.N) and Merck & Co. (MRK.N)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 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.