Teva, P&G partner to form global OTC behemoth

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Teva is partnering with Procter & Gamble in an OTC drug marketing joint venture that will boast annual sales of more than $1 billion. Company officials say that by selling their products to each other's markets, they think they can quadruple that figure. 

The joint venture, which combines the companies' OTC businesses in all markets outside of North America, joins the consumer packaged goods giant's formidable marketing apparatus and retail access with the Israeli generics firm's global reach and pharmacy prowess. Teva president and CEO Shlomo Yanai said the joint venture will be the global leader in consumer healthcare.

“By partnering with P&G, the world leader in brand building and consumer led innovation, we will be able to surface the hidden value of our OTC business,” Yanai said in a conference call earlier today. 

Teva's OTC portfolio rings up around $650 million in sales split about evenly between Europe and international markets, with only a negligible amount coming from the US. 

The companies have complimentary strengths and weaknesses in emerging markets – Teva is strong in Russia, for example, P&G in China – and while Teva is strong in Europe, P&G dominates in North America. Teva will take over manufacturing of the P&G drugs for both global and North American markets, and the joint venture will develop branded products for North American markets. 

“We have basically excluded only two businesses,” said P&G vice chairman Rob Steele, “our current digestive wellness and our respiratory business. That leaves a big white space that we can work together in our JV to access, and with Teva's 1,600 active ingredients, we can expand our portfolio in North America as well as the balance of the world, not to mention potential Rx-to-OTC switches which will also be available in North America.”

P&G also brings media buying prowess, Steele noted.

“P&G is one of the largest advertisers in the world, so getting a marketing program up from a media standpoint is a fairly simple process, and because of the scale that we bring to the business, we tend to get those media buys at a very competitive rate.”

The new brands, a company spokesperson said, will be new products, not existing generic products dressed up in fresh branding. P&G's Steele hinted that some may be line extensions. 

"P&G has some really nice brand names right now, as does Teva,” said Steele. “It would not be smart to move away from those brands where they are really well established. There's been tremendous equity built up in the Pepto, Metamucil and Ratiopharm businesses. Going forward, together, we will create new brands as well. Those new brand names could be under Vicks, Pepto or Ratiopharm if we choose. They could also be under a new name."

Teva acquired Ratiopharm, a leading European generics brand, last year for around $5 billion.

The JV will be based in Geneva, Switzerland.
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