P&G Sells Pharmaceuticals Business; Focuses On Consumer Health Care

Consumer products giant simplifies product line for sustainability.

It appears that Cincinnati-based Procter & Gamble Co. is going back to its roots and simplifying its product line to ensure sustainability. The 172-year-old company recently announced plans to sell its global pharmaceuticals business to Rockaway, N.J.-based Warner Chilcott for an up-front cash payment of $3.1 billion.

"This move enables us to focus singularly on winning in consumer health care — Personal Health Care, Oral Care and Feminine Care," says Bob McDonald, president and CEO of Procter & Gamble.

Under the terms of the agreement, Warner Chilcott, a specialty pharmaceuticals company, will acquire P&G's portfolio of branded pharmaceutical products, as well as P&G's prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany. In addition, the majority of the 2,300 employees working on P&G's pharmaceuticals business are expected to transfer to Warner Chilcott. Both companies expect the transaction to close by the end of the 2009 calendar year, pending necessary regulatory approvals.

The acquisition news comes on the heels of P&G's fiscal year and fourth-quarter financial announcement that touted higher-than-expected earnings per share (EPS).

Diluted net earnings per share for the fiscal year ending June 30, 2009, were up 17% (to $4.26) — exceeding the company's guidance range of $4.20 to $4.25.

However, nearly every segment of the company's portfolio showed declining numbers. "Beauty" net sales decreased 4%, "Grooming" net sales declined 9%, "Health Care" net sales were down 7%, "Snacks and Pet Care" net sales decreased 3%, and "Fabric Care and Home Care" net sales were down 2%. Overall, net sales for the quarter decreased 11% to $18.7 billion.

"In fiscal 2009 and particularly in the fourth quarter, P&G faced one of the most difficult macroeconomic environments in decades," says Chairman of the Board A.G. Lafley. "We made choices to focus on cash and cost discipline, maintain investments in long-term growth opportunities and to protect the structural economics of our businesses around the world. We delivered strong free cash flow — the financial lifeblood of the business — while also delivering organic sales and earnings-per-share results that balanced short-term returns and long-term investments."

"In fiscal 2010, we will accelerate investments in innovation, portfolio expansion and consumer value to grow our core business and to serve more consumers in both developed and developing markets," says CEO McDonald. "We will also continue to drive simplification efforts and leverage P&G's scale to increase productivity, improve execution and lower costs. All of these investments are focused on strengthening the capabilities required to improve more lives more completely in more parts of the world and deliver sustainable long-term growth."

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