Vectura board defies criticism to recommend £1.1 billion Philip Morris bid for respiratory drugs company

Despite widespread outrage and numerous leading public health bodies, doctors and experts lending their weight to protest, the board of respiratory drugs company Vectura has recommended a takeover bid by tobacco giants Philip Morris.

Vectura develops drugs and treatments for respiratory conditions, including those caused by smoking, like inhalers and other inhaled medicines. Marlboro-owner Philip Morris makes tobacco products including cigarettes.

Vectura is a FTSE 250 member and employs around 400 staff. The Chippenham, Wiltshire-based company’s board, chaired by Bruno Angelici and advised by Rothschild and JP Morgan Cazenove has recommended the Philip Morris bid of 165p-a-share in favour of a 155p-a-share offer from American private equity firm Carlyle.

The offer, said the board, was superior because of both the

“superior cash price” and its analysis “wider stakeholders could benefit from Philip Morris’s significant financial resources, its intentions to increase research and development investment and to operate Vectura as an autonomous business unit that will form the backbone of its inhaled therapeutics business”.

The Vectura board reached its decision despite, presumably, considering arguments against a deal with the Big Tobacco company put forward in a letter whose signatories included the Royal College of Physicians, local authority public health directors and charities including the British Lung Foundation and the company’s former corporate charity Asthma UK.

The letter said that forecast consequences of Vectura selling itself to Philip Morris would be problems with research networks, operations, profitability and recruitment that would ultimately “seriously jeopardise future commercial viability as a company dedicated to improving respiratory health”.

The letter also asserted the deal has “the potential to significantly impact on patient outcomes”.

For its part, Philip Morris has defended its move as part of the company’s strategy to diversify away from tobacco. It says its goal is to become “a healthcare and wellness company”.

There are parallels with Big Oil and Gas companies trying to reinvent themselves as sustainable energy providers. Three quarters of Philip Morris’s 2020 revenues came from the sale of combustible tobacco products. By 2025 the company is targeting revenues of at least $1 billion from products “beyond tobacco and nicotine”.

The signatories of the letter to the Vectura board are not impressed by the the tobacco giant’s future plans, stating firmly:

“The notion that Philip Morris is transitioning towards becoming a ‘selfcare wellness’ company is a concept utterly rejected by the global health community”.

Even with the Vectura board’s recommendation, there is no guarantee Vectura’s shareholders will hold the same opinion, despite the superior financial terms on offer. There will also be hope another bidder might also come forward to match the Philip Morris offer or Carlyle will up theirs. Over 50% of shareholder votes will have to fall in favour of the board’s recommendation for it to pass.

Sarah Woolnough, chief executive of both Asthma UK and the British Lung Foundation yesterday stated:

“We will continue to oppose this dreadful proposed takeover until a final decision is made,” she said. “We appeal now to Vectura’s shareholders to make the right and ethical choice and say no to big tobacco.”