The consumer products giant could sell off some or all of its pharma brands as it shifts its portfolio toward what P&G execs say are faster-growing and more profitable product categories,The Business Courier of Cincinnati reports.
At an analyst briefing today, ceo AG Lafley says P&G will halt research into new drugs and, instead, manage its four key pharma brands through their respective product lifecycles, and that P&G will "consider divestiture of some or all of these brands.” These include the Actonel osteoporosis med, the Intrinsa testosterone patch for female sexual dysfunction, the Enablex drug for overactive bladders and the Asacol treatment for Crohn's disease.
Lafley says the regulatory environment for pharmaceuticals has grown more difficult and that it takes much longer to get a product to market, which translates to higher investments at a time of rising competition. “There is significant downward pricing pressure,” he says that erodes margins.
When P&G was at its peak of investment in pharmaceuticals, in late 1990s and early 2000s, the margin was trading at the high multiples, while now it is at or near consumer product levels, he complains. "So, we decided to de-emphasize pharma and focus on consumer health brands."
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P&G was never very good at it. I had a colleague who worked there and told me the development teams were run by MBA's who simply looked at FDA guidances and thought they could do everything by check the box. Then when they finally got around to submitting Actonel (risedronate) even though they were the first to develop this type of compound Merck was already coming back in with once weekly dosing for alendronate compared to risedronate's daily dosing.
If they couldn't do it right in a much better financial environment then it makes sense that they'll get out of the biz now that it's tougher.