Philip Morris International is buying British pharmaceutical firm Vectura in a deal that will see a company synonymous with Big Tobacco taking over a firm that makes asthma inhalers. The American Lung Association, Asthma UK and other health groups have spoken out against the takeover.
The purchase "is the latest reprehensible choice from a company that has profited from addicting users to its deadly products," the leaders of the American Lung Association and American Thoracic Society said in a joint statement.
"We are deeply concerned that PMI will use the inhalation services technologies developed by Vectura to make their tobacco products more addictive," they said. "We are also deeply troubled that this company could further profit from the disease their products have caused by now selling therapies to the same people who were sickened by smoking PMI cigarettes."
Philip Morris, whose name has long been associated with Marlboro, the world's best-selling cigarette brand, says the deal is part of its plan to diversify its portfolio beyond tobacco and nicotine, with an emphasis on "inhaled therapeutics."
Vectura currently has a market capitalization of $1.36 billion. Philip Morris says it has acquired or has agreements to own nearly 75% of Vectura's shares, making its offer "unconditional."
Vectura was pursued throughout the summer by both Philip Morris and the Carlyle Group, a major private equity firm — the latter of which boosted its cash offer on Aug. 6, to 155 pence per share. Two days later, Philip Morris raised its offer to 165 pence per share, and Carlyle then said it wouldn't raise its price.
Philip Morris says Vectura will operate as an autonomous unit — although PMI CEO Jacek Olczak also said the company looks forward to working with Vectura's scientists. The company says it has the resources to help the inhaler-maker develop its own products, along with extending its market reach and coping with regulatory issues.
Philip Morris has also repeatedly mentioned its "Beyond Nicotine" goal of bringing in at least $1 billion in annual net revenues from non-tobacco sources by 2025 — a plan that includes Vectura.
More than 25 health advocacy groups, including Asthma UK and the European Lung Foundation, recently co-signed a letter urging Vectura's board to reject the Philip Morris offer, calling the company's post-nicotine strategy "disingenuous" and saying the deal would raise ethical concerns.
"Despite articulating an ambition to move 'beyond nicotine,' PMI continues to manufacture cigarettes (more than two billion per day)," the groups stated, adding that the company markets cigarettes "in low- and middle-income countries where large youth populations and lax regulations have seen widespread smoking uptake in recent decades."
In contrast, the letter states, Vectura makes most of its hundreds of millions of dollars in annual revenue from products that treat smoking-related respiratory illnesses, such as chronic obstructive pulmonary disease.
The takeover would also endanger Vectura's history of participating in important health research and policy decisions, the signatories say.
They note that because many agencies, universities and publications have strict policies against engaging with tobacco-related companies, Vectura could now be shut out of receiving government grants, publishing in The Lancet and other journals, and conducting clinical trials alongside universities.
Vectura's directors said they recognized "the superior cash price" in the Philip Morris offer. They also said the company would benefit from the tobacco company's "significant financial resources," its promise to boost research and development, and its plans to let Vectura be an autonomous business unit.
Advocacy groups had called for Vectura's board and its shareholders to reject the purchase offer on both ethical and practical grounds. But shareholders will not get a chance to weigh in on the change.
Because of the terms of the deal, including the large number of shares now under Philip Morris' control and its declaration of the move as a takeover, Vectura directors said they "do not intend to reconvene the shareholder meetings" that would have been required under Carlyle's purchase offer.
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