March 25, 2011
Teva Pharmaceuticals (Nasdaq: TEVA ) and Procter & Gamble (NYSE: PG ) are like peanut butter and chocolate -- from totally different worlds and yet look so good together.
The generic-drug maker and consumer-products company are forming a joint venture to sell over-the-counter medication, with both companies bringing their strengths to the table.
P&G gets manufacturing expertise; Teva will take over the production of the drugs. It also gets the global reach into pharmacies that P&G lost when it sold its prescription drug business to Warner Chilcott (Nasdaq: WCRX ) a couple of years ago.
For its part, Teva gets brand recognition that can only come from hooking up with a company like P&G. Vicks, Metamucil, and Pepto-Bismol? They're all P&G over-the-counter products. P&G also has better reach into supermarkets that might sell over-the-counter medications an aisle over from the Tide.
Combined sales of over-the-counter products from both companies totaled more than $1 billion last year. The joint venture should be able to build on that just by exploiting each company's reach. And the larger size will likely spur efficiencies that will improve the bottom line.
But the real key to the joint venture will come from new products that the companies might be able to bring into the fold. The switch from prescription to over-the-counter can open a whole new world for a drug. Johnson & Johnson (NYSE: JNJ ) successfully switched Zyrtec to over-the-counter status after it bought it from Pfizer (NYSE: PFE ) . And sanofi-aventis's (NYSE: SNY ) acquisition of Chattem was mainly driven by Sanofi's desire to bring its allergy medication, Allegra, from behind the pharmacists' counter.
We'll have to wait to see how this joint venture plays out, but it certainly looks like two great tastes that taste great together.