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In 2025, the owner of Marlboro hopes to generate $1 billion in income from smoke-free products.
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Tobacco behemoth
Morris, Philip
International announced on Friday that it has agreed to buy Vectura, a British pharmaceutical business, for £1.05 billion ($1.44 billion), as part of its push toward a smoke-free future. Vectura, which develops inhaled treatments for respiratory illnesses, was acquired by the US-Swiss corporation, which beat out a rival proposal from private equity firm Carlyle Group.
In May, Vectura’s board of directors approved a £958 million ($1.36 billion) Carlyle bid, but the company’s directors said on Friday that they had withdrawn their recommendation. The Philip Morris offer is for 150 pence in cash for each Vectura share, representing a 10.6% premium over the British company’s closing price on Thursday. Vectura’s stock jumped 13% in early London trade, while Philip Morris’ stock crept higher in premarket trading in the United States. The Swiss-listed stock dropped by 0.6 percent. The transaction was part of the company’s goals to grow beyond traditional tobacco and nicotine products, utilizing its expertise in inhalation across new areas such as respiratory medicine delivery and wellness, according to Marlboro owner Jacek Olczak. Read more: As More Smokers Quit, Philip Morris Gets Better The tobacco company revealed its ‘Beyond Nicotine’ plan in February, with a goal of $1 billion in net revenues from smoke-free products by 2025, accounting for more than half of overall revenues. As part of it, the company’s heat-not-burn product, iQOS, was launched earlier this year and has quickly acquired market share in new areas. It comes as the world’s major tobacco businesses have shifted their focus to non-traditional cigarette alternatives like vaping and heated tobacco. The e-cigarette revolution, on the other hand, hasn’t gone quite as planned, with vaping facing regulatory challenges and potential health risks. Philip Morris has taken a different road as well, agreeing to buy Fertin Pharma, a developer of nicotine gums, earlier this month, and is now adding another pharmaceutical firm to its portfolio. “The acquisition of Vectura, which comes on the heels of our deal to buy Fertin Pharma, will enable us to expedite this journey by enhancing our capabilities in new inhaled and oral product formulations, allowing us to provide long-term growth and returns,” Olczak added. He went on to say, “The market for inhaled therapies is huge and developing quickly, with great opportunity for expansion into new application areas.” Read: Philip Morris Is Buying Back Stock, and There Are More Reasons Why the Price Could Continue to Rise Looking forward. The fact that Philip Morris has pushed into therapies for medical disorders linked to smoking will not go unnoticed by investors. However, because smoking is on the decline, the corporation is ensuring that it is well-positioned for the future. By 2025, the company intends to generate more than half of its sales from smoke-free products. “There appears to be a poacher turned gamekeeper element to this transaction for Philip Morris, as it aims to put its experience in inhalation to good use — making Vectura’s inhaled drug delivery technologies a good fit,” says a source.
AJ Bell is a writer who lives in the United States
Russ Mould, the investment director, stated. According to FactSet data, 67 percent of those covering the stock have a Buy rating, indicating that analysts believe the future is bright. The average target price is $108.44, up 10% from Thursday’s closing price./n
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