Pfizer Is Selling OTC Unit To J&J

Pfizer has agreed to sell its consumer health care business, a marketer of personal care products and over-the-counter (OTC) drugs, to Johnson & Johnson for $16.6 billion in cash.

The consumer business had $3.9 billion in sales last year of well-known products such as Listerine, Visine, Sudafed, Benadryl, and Zantac. J&J is already a big OTC player, selling Band-Aid, Tylenol, Neutrogena, and other consumer products.

Pfizer, the world's largest prescription drug maker, put the business up for sale in February as part of a revamp it started in early 2005 when patent expirations started to take a toll on prescription drug sales. Pfizer's core drugs business saw its sales drop 4% last year to $44.3 billion, while the OTC business enjoyed a 10% sales gain.

CEO Hank A. McKinnell says the proceeds from the sale will allow Pfizer to focus on its pipeline of new drugs and to continue buying products and technology that support its core pharmaceuticals business. Simon King, a senior pharmaceutical analyst at Datamonitor, says he wouldn't rule out Pfizer's buying companies involved in monoclonal antibodies or therapeutic proteins, fields where it has a relatively limited presence.

In contrast with Pfizer, J&J calls itself the world's most broadly based manufacturer of health care products and actively embraces a strategy of balancing prescription drugs against OTC products and diagnostics/medical devices. It, too, has struggled in the prescription drug business: Sales rose less than 1% last year to $22.3 billion, while consumer product sales jumped 9% to $9.1 billion.

Noting J&J's prescription drug challenges and its failed bid to acquire medical device maker Guidant earlier this year, Datamonitor's King says he would have expected J&J to pursue a drug or medical device maker. But given that the company was prepared to pay $24 billion for Guidant, he says further deal-making is still a possibility.