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2021-07-11| M&A

Philip Morris International Makes Second Acquisition in a Week to Push its “Beyond Nicotine” Strategy

by Daniel Ojeda
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On July 9th, Philip Morris International (PMI), the owners of the world’s best-selling cigarette brand Marlboro, announced a firm offer to acquire British CDMO, Vectura Group, which specializes in inhaled drug development solutions. With this potential buy and the recent acquisition of Fertin Pharma, PMI aims to move beyond nicotine.

 Vectura Group currently has 13 inhaled and 11 non-inhaled products marketed globally by its commercial partners. These include Novartis, Bayer, GSK, and other major pharmaceutical companies. Since 2012, they have generated more than £11 billion in sales, making £191 million in 2020 alone.

“PMI’s Beyond Nicotine strategy, announced in February, articulates a clear ambition to leverage our expertise in inhalation and aerosolization into adjacent areas—including respiratory drug delivery and self care wellness—with a goal to reach at least USD 1 billion in net revenues by 2025,” said Jacek Olczak, CEO of PMI.

 

PMI’s Second Acquisition in a Week

In May 2021, Carlyle Group offered £958 million to buy Vectura Group. However, PMI has now made a higher offer, a startling £1.045 billion! PMI’s offer values each share of Vectura’s stock at £150 to pay in cash and an interim dividend of £19 per share. The acquisition news sent Vectura’s stock up around 14%.

The purchase comes as part of PMI’s plan to generate more than 50% of its revenue and at least $1 billion in revenues from smoke-free products by 2025. In addition, PMI is trying to reduce its dependence on nicotine products as the regulatory outlook becomes more complicated. 

With Vectura’s acquisition, PMI will gain:

  1. Access to proprietary technology and pharmaceutical development expertise,
  2. Experienced management team in healthcare operations,
  3. Human capital and infrastructure with expertise in formulation, development, and devise design to accelerate PMI move into healthcare

The management at Vectura will continue after the acquisition. 

Earlier in the week, PMI acquired Fertin Pharma for $820 million. Both of these acquisitions can synergize to create a drug development pipeline across a broad range of sectors in the prescription drug and over-the-counter categories.

“The acquisition of Vectura, following the recently announced agreement to acquire Fertin Pharma, will position us to accelerate this journey by expanding our capabilities in innovative inhaled and oral product formulations in order to deliver long-term growth and returns,” Olczak said in a statement.

 “The market for inhaled therapeutics is large and growing rapidly, with significant potential for expansion into new application areas. PMI has the commitment to science and the financial resources to empower Vectura’s skilled team to execute on an ambitious long-term vision. Together, PMI and Vectura can lead this global category, bringing benefits to patients, to consumers, to public health, and to society-at-large,” he added.

The deal is expected to close in the second half of 2021, and it is subject to a shareholder vote and approval by regulators.

Related Article: EQT Private Equity and Goldman Sachs Spend $8.5 Billion to Acquire Parexel

 

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