Warner Chilcott Strikes Deal for P&G Drugs

Procter & Gamble Co.'s sale of its drug business can be summed up by the old adage "It takes money to make money."

Irish drugmaker Warner Chilcott Plc. is buying Procter & Gamble's business, which makes the osteoporosis drug Actonel, for $3.1 billion in cash. Despite the company's past ambitions, the deal shows that Procter & Gamble doesn't want to spend the billions required to become a major player in the prescription-drug arena. Instead, the consumer-products giant, which makes Tide, Crest, and a number of other household names, is going to focus on what it knows best.

"It's lot easier to develop the next generation of dish soap rather than the next generation of cancer drugs," says Miller Tabak analyst Les Funtleyder.

Even for a large, well-funded company like Procter & Gamble, the amount of money required to be a major player in the industry is daunting. Pfizer Inc., the world's biggest drug company, pumps about $8 billion a year into research and development, Funtleyder says.

"If you're P&G, do you really want to invest in a pharma business?" he asks. "It doesn't make a lot of sense if you're just going to pump it for profits. It's either invest or divest."

Warner Chilcott is a fast-growing but small player in the pharmaceuticals market. The acquisition would significantly increase the sales of the company, which specializes in women's health care and acne treatment. Procter & Gamble's business had about $2.3 billion in sales in the year that ended June 30. Warner Chilcott is expected to report revenue of a little more than $1 billion this year.

Warner Chilcott CEO Roger Boissonneault called the deal a "transformational, strategic move for us."