Procter & Gamble to Form Consumer-Health Venture With Teva

Teva Pharmaceutical Industries Ltd. (TEVA) and Procter & Gamble Co. (PG) agreed to combine their consumer-health businesses outside North America in a joint venture that aims to capture more of the $200 billion market for over-the-counter medicines.

Teva, the world’s biggest maker of generic drugs, will be responsible for manufacturing, and also will supply Procter & Gamble’s North American consumer-health operations, the companies said in a statement. Financial terms weren’t disclosed. The markets covered by the venture generated sales of more than $1 billion in 2010, the companies said.

The agreement will help Cincinnati-based Procter & Gamble expand the market for its consumer-health brands, which include Vicks cough and cold products, Metamucil fiber supplements and Pepto-Bismol upset-stomach products, the companies said. Teva will strengthen its business with pharmacies by expanding its offerings.

“It’s two companies that have strengths in different areas,” said Jack Russo, an analyst at Edward Jones & Co. in St. Louis. Teva brings international strength in over-the- counter medicines, while P&G has marketing prowess and strong brands, said Russo, who recommends buying P&G shares.

‘Outside the Box’

The category could represent a higher-growth area for P&G, with less competition from private-label products and with aging populations in the U.S., Europe and Japan likely to spur demand, Russo said. Still, he added, “it’s not something that’s really going to be meaningful for a long time” as a portion of sales.

“Clearly P&G’s thinking outside the box here a little bit, trying to be creative,” he added. “It’s been tough for them lately to grow sales.”

P&G, the world’s largest consumer-products maker with $79 billion in sales last year, has a 51 percent stake in the venture.

The agreement “makes a lot of sense” for Teva, said Gilad Alper, an analyst at Meitav Investment House Ltd. in Tel Aviv. “It looks like a good, sound, well-structured move into a new market.” Alper rates Teva shares “market perform.’’

Teva’s American depositary receipts rose $1.23, or 2.5 percent, to $50.35 at 4 p.m. New York time in Nasdaq Stock Market trading. Procter & Gamble advanced 23 cents to $61.14 in New York Stock Exchange composite trading.

Procter & Gamble, based in Cincinnati, had $11.5 billion in health-care sales in the year ended June 30.

‘Ideal Partner’

“We have found the ideal partner for this deal,” Teva Chief Executive Officer Shlomo Yanai said today during a conference call.

The joint venture is likely to exceed $1 billion in sales and has the potential to reshape the global market for over-the- counter drugs, Yanai said.

The companies will work together to switch prescription medicines to over-the-counter status, they said. The transaction is expected to close in the fall, after obtaining the required regulatory approvals, the companies said.

Teva, based in Petah Tikva, Israel, had revenue of $16.1 billion last year and doesn’t break out sales of over-the- counter products. Teva’s over-the-counter brands include the Plan B contraceptive. The company gained European consumer products in last year’s acquisition of German generic-drug maker Ratiopharm GmbH.

To contact the reporters on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net; Robin Ajello at rajello@bloomberg.net

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