CINCINNATI, Ohio — The Procter & Gamble Company has jettisoned its powerful but burdensome global pharmaceuticals business for $3.1 billion, moving away from a sector that the drug giant struggled to manage as regulatory barriers climbed and profit margin dipped below that of its formidable consumer drug market.
Most of 2,300 pharmaceutical sector employees — including 450 in suburban Cincinnati — will be transferred to the Irish drugmaker Warner Chilcott. About 85 percent of the Ohio employees will go to Warner Chilcot, P&G told The Cincinnati Enquirer. The rest will move to P&G’s consumer division.
In exchange for an up-front cash payment of $3.1 billion, Warner also gets all of P&G’s pharmaceutical products — including the $1 billion selling osteoporosis drug Actonel; co-promotion rights to Enablex (with Novartis), an overactive bladder treatment; P&G’s prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany.
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The deal should close by year’s end.
P&G’s pharmaceutical line had revenue of $2.3 billion last year and net income of approximately $540 million for the year ended June 30. But the economic landscape was much different when the company launched a segment away from its consumer products holdings. In the 1990s, pharmaceuticals had better returns that consumer products.
But that long since changed, and in December it stopped investing in research in development in pharmaceutical drugs. In February, the company announced it was working with Goldman Sachs to investigate buyers.
P&G President Bob McDonald said the company wants to use the funds to expand its share of the consumer health market, which stands around 5 percent. The company now thinks its ability to focus on consumer products will increase its growth rate.
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“Our shareholders don’t reward us for size, they reward us for growth,” McDonald said in a morning conference call with investors and media. “We are going to do what we have to do to get the right portfolio of businesses together that will results in the kind of growth our shareholders deserve.”
The sale of P&G’s pharmaceuticals business will result in a one-time earnings increase of about $1.4 billion after-tax — about 44 cents per share. These figures assume the transaction will close on November 1, 2009. Annualized earnings per share dilution would be in the range of 16 to 18 cents.
The purchase also makes a lot of sense to Warner Chilcott, which enhances its women’s health-care line and puts them into urology ahead of its erectile dysfunction products.
