The two chief executive officers who engineered the joint venture between Teva Pharmaceuticals and Procter & Gamble are now gone, only slightly more than two years after the deal was announced.
The joint venture, called PGT Healthcare, seems to be working well enough for each company to focus on other challenges, but leadership changes can mean once-heralded plans and practices fall out of favor.
Teva said at the end of the first quarter that its revenues related to the joint venture amounted to $240 million, an increase of 47%, compared to $163 million in the first quarter of 2012.
Cincinnati-based P&G, the beleaguered household products giant, which makes Crest, Pampers and Tide, replaced its leader Thursday evening, with Bob McDonald replaced by his predecessor, A.G. Lafley, effective immediately.
McDonald took over in 2009.
On March 24, 2011, Teva and P&G announced the joint venture. Both companies were searching for ways to energize sales and its stock price.
"We are extremely pleased to be joining forces with Procter & Gamble, the world leader in brand building and innovative go-to-market capabilities," Shlomo Yanai, Teva's then-president and chief executive officer, said in a company statement when the deal was announced. "This partnership will create value by immediately expanding the number of channels and geographies in which each company's OTC [over-the-counter] products will be sold. Together, we will develop a new platform with the potential to reshape the entire global OTC market."
Nine months later, Teva announced that Yanai would retire and was replaced by Jeremy Levin.
Both companies are still struggling to adapt their businesses to current conditions.
Teva, which is based in Israel and has its Americas headquarters in North Wales, Montgomery County, has been trying to add higher-revenue branded drugs to its generic portfolio because its world-leading status in the generic market is threatened by competition. Teva has said it will cut $1.5 billion to $2 billion in costs over the next five years. That has translated into decisions to "cease" plans for a $300 million facility in Northeast Philadelphia and plans to close a manufacturing plant in Sellersville, Bucks County.
In a memo to P&G employees Thursday night, the Wall Street Journal reported, Lafley indicated he would look at paring costs.
Teva has an over-the-counter division, which the encompasses the P&G joint venture. Teva's SEC filing for the first quarter of 2013 (link here), has this passage:
"Our revenues from OTC products for the first quarter of 2013 amounted to $306 million compared to $196 million in the first quarter of 2012. Our revenues related to PGT amounted to $240 million, an increase of 47%, compared to $163 million in the comparable quarter of 2012. The increase was mainly due to a strong flu season in Europe and Eastern Europe and an overall increase in all product categories. In addition, as of December 2012, the OTC products of Cephalon (Mepha) were included in the PGT joint venture.
"PGT's in-market sales for the first quarter of 2013 amounted to $409 million. This amount represents sales of the combined OTC portfolios of Teva and P&G outside North America. Sales grew in Europe, Eastern Europe and Latin America, mainly due to the factors noted above, while sales in Asia were flat.
"Revenues from the sales of OTC products in the United States to P&G, which commenced in the fourth quarter of 2011 pursuant to a manufacturing agreement, amounted to $66 million in the first quarter of 2013, compared to $33 million in first quarter of 2012."
On Nov. 1, 2012 - the first anniversary of the official start of the joint venture - Teva CEO Jeremy Levin said in a conference call with stock market analysts, "The JV is progressing as planned, leveraging the core technology and go-to-market strength of Teva and the consumer understanding and branding strength of P&G. The combined strengths of Teva and P&G are enabling us to accelerate our rate of global expansion and category growth. The OTC business is strategically important to us. Given global trends and demographies, we think this is a growth engine for the company now and into the future and we see the PGT joint venture as a key enabler."
On Jan. 29 of this year, Teva and P&G had a groundbreaking for a new OTC plant in Sanand, India, which is in the Ahmedabad district. Teva says the new plant will be one of the largest OTC medicine manufacturing sites in the world.
"Teva is delighted to be building a state-of-the-art, multipurpose plant in India to support the growing demand for our non-prescription health care products across Asia," Eran Katz, an executive vice president with Teva's global operations division, said in a company statement. "The Sanand facility represents a critical component of PGT Healthcare, Teva's international partnership and joint venture with Proctor & Gamble."
When P&G reported earnings for the quarter ending Dec. 31, 2012, it created a slide presentation. In that presentation, P&G said, "Western Europe Personal Health Care volume grew double-digits, largely due to growth in the Teva joint venture products." The slide was No. 18 of 39 and a link to the presentation is here.
The corresponding filing in January with the Securities and Exchange Commission (link here) has two fat paragraphs that touch the Teva joint venture, each with a heading. They are below, in full:
Health Care net sales increased 3% to $3.3 billion during the second fiscal quarter on a 3% increase in unit volume. Organic sales were up 4%. Price increases contributed 2% to net sales growth. Unfavorable geographic mix decreased net sales by 1%. Unfavorable foreign exchange reduced net sales by 2%. The impact of acquisitions and divestitures increased net sales by 1%. Global market share of the Health Care segment decreased 0.3 points. Volume increased high single digits in developing regions, while developed regions decreased low single digits. Oral Care volume increased mid-single digits due to double digit growth in developing regions behind market expansion and market growth. Global market share of the oral care category was down less than half a point. Volume in Personal Health Care was in line with the prior year period, as the impacts of market growth were offset by lower shipments of Prilosec OTC in North America. Volume from the addition of the PGT Healthcare partnership and New Chapter VMS (Vitamins/Minerals/Supplements) acquisition offset the impact from the divestiture of the PuR business. Volume in Feminine Care increased low single digits due to mid-single digit growth in developing markets behind market growth and product innovation, and a low single digit increase in developed regions due to initiative activity. Global market share of the feminine care category was down more than half a point. Net earnings decreased 5% to $512 million due to a 120-basis point decrease in net earnings margin partially offset by an increase in net sales. Net earnings margin declined primarily due to reduced gross margin. Gross margin declined due to increased commodity costs and supply chain investments, partially offset by higher pricing and manufacturing cost savings.