Philip Morris Vies With Carlyle to Buy Asthma Drugmaker Vectura

Philip Morris International Inc. agreed to buy U.K. asthma drug maker Vectura Group Plc for $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% 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%, 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 Officer Jacek Olczak is also targeting at least $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 $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 $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.

Breathe In

Vectura, founded in 1997, makes inhalers and nebulisers, 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 $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.

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.

Some of Vectura’s products are very similar to electronic cigarettes. Bayer AG and Vectura have introduced an inhaler called the Fox nebuliser that can deliver a Bayer drug for high blood pressure in the lungs.

The company is also exploring inhalation as a way to treat non-respiratory diseases such as pulmonary vascular illnesses, post-partum bleeding, cancer and Covid-19.

Vectura said the deal is valued at $1.5 billion including a recent dividend payment.

BofA Securities advised Philip Morris. JPMorgan Cazenove and Rothschild & Co. are Vectura’s advisers. Carlyle has hired Morgan Stanley and RBC Capital Markets.

©2021 Bloomberg L.P.

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