Questions abounded late last week about the future of P&G’s pharmaceuticals business after the firm said it would be buying Gillette for $57 billion dollars. The merger creates a consumer products behemoth with over $60 billion dollars in annual sales, with pharmaceuticals bringing in a minority share. Observers have been asking whether the marriage will put a brake on momentum at the pharma unit, which had $2 billion dollar revenues in the last quarter of 2004 – a rise of 7% year-on-year – on the back of another strong showing by flagship osteoporosis drug Actonel (risedronate).
Actonel, partnered with Sanofi-Aventis [[11/11/04f]], will provide one of P&G/Gillette’s 20-plus billion-dollar brands and is still in the growth phase, which might encourage the company to retain the pharma business. And P&G appears to have resisted selling pharma in the past, when it was rumoured that Bristol-Myers Squibb wanted to swap the unit for its Clairol business. However, P&G needs to bring new products out of the pipeline to support Actonel, and suffered a blow last December when it withdrew a US application to market Intrinsa, a testosterone skin patch for the treatment of a lack of sexual desire in women that had been tipped as a potential blockbuster [[23/12/04d]].
Last week P&G reported mixed fourth quarter results for its healthcare unit, which spans prescription and over-the-counter medicines as well as oral care products such as toothpaste. Apart from Actonel’s contribution, the rise in sales was driven by OTC gastrointestinal drug Prilosec (omeprazole) and growth in developing markets. On the downside, the antibiotic Macrobid (nitrofurantoin monohydrate) succumbed to generic competition, which helped hold back sales growth by 2 points.
Overall, P&G’s net sales increased 9% to $14.45 billion dollars in the last quarter of 2004, while net earnings increased 12% to $2.04 billion dollars. Health care saw a slide in net earnings, down 4% to $313 million dollars, due to a higher royalty rate on Prilosec sales and costs associated with the Intrinsa programme.