Philip Morris buys asthma drugmaker Vectura
Rival Carlyle shut out, hints at takeover battle
Philip Morris International Inc. agreed to buy U.K. asthma drug maker Vectura Group Plc for US$1.2 billion, one of the biggest moves yet by a tobacco company toward treating conditions that its cigarettes can help cause.
Philip Morris is offering 150 pence in cash for every Vectura share, the companies said in a statement Friday. That’s 11 per cent higher than Thursday’s closing price, and beats an offer from Carlyle Group Inc. that management had agreed to in May. Vectura shares rose as much as 13 per cent, trading above the new bid.
Carlyle said it’s considering its options and will make a further announcement later, raising the prospect of a takeover battle with the tobacco company. The private equity company encouraged shareholders to take no action.
As an increasing number of people across the developed world quit smoking to improve their health, Philip Morris has focused its investment on IQOS heated-tobacco devices. In an attempt to establish health credentials, chief executive Jacek Olczak is also targeting at least US$1 billion in sales outside nicotine by 2025.
Philip Morris has the rights to sell Marlboro cigarettes outside the U.S., having been formed when Altria Group Inc. spun off its international business in 2008. The company has pumped more than US$8 billion into smoking alternatives such as IQOS, which has become one of the products that has been most popular among smokers. The cigarette maker has forecast that its main product will someday no longer exist.
Earlier this month, PMI announced the US$820 million acquisition of Fertin Pharma, a maker of nicotine chewing gum and oral drugs for pain. Other products in development aim to boost energy or help with sleep.
Vectura, founded in 1997, makes inhalers and nebulizers, which enable patients to breathe in medication as a mist, either through a mouthpiece or a mask. Customers included Novartis AG and Glaxosmithkline Plc, and Vectura’s 13 inhaleable medicines on the market generated more than US$11 billion in sales total since 2012.
Philip Morris wants Vectura to continue its work with its pharma clients, and also develop new products with Philip Morris, CEO Olczak said by phone.
“It’s not an acquisition I can match with anything I have at PMI,” Olczak said. “Both Fertin and Vectura offer us the capabilities to double up on products. If we were to develop our own products organically, it would be doable, but it would take time. We can’t lose focus.”
Vectura has more than 200 scientists with expertise in formulation, devices, inhalation, regulatory teams, and clinical manufacturing. In January, the company hired former Sanofi executive Jorge Insuasty as chief life sciences officer to spur the development of new products.
The takeover was condemned by anti-tobacco groups that warned strict rules must be imposed to prevent PMI from using the deal to push its own agenda.
Deborah Arnott, chief executive of anti-smoking charity Ash, said: “PMI is buying into the heart of the pharmaceutical industry: Vectura is a leading inhaled product manufacturer working in collaboration with global pharmaceutical companies like Glaxosmithkline and Novartis. There needs to be a firewall to ensure that this deal doesn’t give PMI any opportunity to influence politicians and policymakers to the benefit of Big Tobacco.”
“While the tobacco industry persists in fuelling premature death in this country and around the world by promoting and selling addictive cigarettes and tobacco products, Asthma UK and the British Lung Foundation do not and will never work with any companies with links to the tobacco industry.”
Sarah Hawkes, professor of global public health at University College, London, said: “PMI is positioning themselves now as a company that is focused on health and wellness. It’s potentially an attempt to really obscure where Philip Morris actually gets its money from which is selling products that make people sick.
“It’s absolutely part of the function of a regulatory body to look very closely at this. Because the potential consequence of this is giving access to regulatory and policy making spaces within the health sector.”
Philip Morris’s expansion into non-tobacco businesses could give some protection from regulatory threats. Juul Labs Inc. is awaiting a decision by the U.S. Food and Drug Administration on whether it can continue selling its products. Separately, British American Tobacco Plc has sued Philip Morris over patents, which could lead to an import ban of IQOS heated-tobacco sticks to the U.S.