Philip Morris International Inc. purchased Vectura Group Plc, a U.K.-based asthma drug manufacturer, for $1.2 billion. This is one of the largest moves by a tobacco company towards treating conditions its cigarettes may contribute to.
The companies announced Friday that Philip Morris will offer 150 pence cash for each Vectura share. This is 11% more than Thursday’s closing prices and beats the offer made by Carlyle Group Inc. in May. Victoria shares traded higher than the new offer by as much as 13%.
Carlyle stated that it is considering its options and will make an additional announcement later. This raises the possibility of a takeover fight with the tobacco company. The private equity firm encouraged shareholders not to take any action.
Philip Morris is focusing its investment in IQOS heated tobacco products as more people quit smoking to improve their overall health. Jacek Olczak, Chief Executive Officer, is also aiming to reach $1 billion in sales of non-nicotine products by 2025 to improve health.
Philip Morris is authorized to sell Marlboro cigarettes in the United States. The rights were granted by Altria Group Inc. when it spun off its international business. The company has invested more than $8 billion in smoking alternatives, such as IQOS. This product has become a favorite among smokers. According to the cigarette manufacturer, its main product may one day cease to exist.
PMI announced earlier this month the $820 million acquisition of Fertin Pharma. Fertin Pharma is a manufacturer of nicotine chewing gums and painkillers. Other products are in development to increase energy and help with sleeping.
Victoria was founded in 1997 and makes inhalers, nebulizers, and masks that allow patients to inhale medication in a mist. GlaxoSmithKline Plc and Novartis AG were customers. Since 2012, Vectura’s 13 inhalable medicines have generated over $11 billion in total sales.
CEO Olczak stated that Philip Morris wants Vectura’s work with its pharma clients to continue, as well as the development of new Philip Morris products.
Olczak stated that “It’s not a purchase I can match with any I have at PMI.” Both Fertin, as well as Vectura, give us the ability to double our product production. It would be possible to create our own products organically but it would take time. We cannot lose sight of the goal.
Victoria employs more than 200 scientists who are experts in clinical manufacturing, device formulation, inhalation, regulation, and regulatory teams. Jorge Insuasty, a former executive at Sanofi, was appointed chief life sciences officer in January to help with the development of new products.
Philip Morris’s expansion into other businesses may provide some protection against regulatory threats. Juul Labs Inc. awaits a decision from the U.S. Food and Drug Administration about whether it is allowed to continue selling its products. Separately, British American Tobacco Plc sued Philip Morris for patent infringement, which could result in an import ban on IQOS heated tobacco sticks to the U.S.
Vectura’s products look very much like electronic cigarettes. Vectura and Bayer AG have created the Fox nebulizer, which can deliver a Bayer drug to the lungs.
Inhalation is being explored by the company as a treatment for non-respiratory conditions such as post-partum bleeding, cancer, and pulmonary vascular diseases.
Victoria stated that the deal was valued at $1.5 Billion, including a recent dividend payment.
BofA Securities advised Philip Morris. Vectura’s advisors are JPMorgan Cazenove, Rothschild & Co. Morgan Stanley and RBC Capital Markets have been hired by Carlyle.