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Philip Morris (PM) Secures More than 74% Stake in Vectura

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Philip Morris International Inc. PM is focusing on plans to expand Beyond Nicotine products. Moving along these lines, the company announced that its offer to acquire Vectura Group plc has become unconditional as it has secured more than 74% of the latter’s shares. This makes Philip Morris a majority stakeholder of Vectura. The acquired shares are in excess of the 50% required as per the terms of acceptance. The company also confirmed that all other conditions of the offer have been satisfied or waived. Vectura, which reported net revenues of almost $245 million in 2020, is the provider of innovative inhaled drug delivery solutions.

With the acquisition, Philip Morris expects to accelerate Vectura’s geographical footprint, develop proprietary inhaled therapeutic products along with working on the existing contract development and manufacturing organization (CDMO) business. Management highlighted that the move bodes well amid the fast-growing inhaled therapeutics market. The company is committed toward making higher investments in R&D to support Vectura’s differentiated technologies and development expertise toward delivery of complex inhaled therapeutics. By making such investments, Philip Morris hopes to amplify growth in its Beyond Nicotine strategy.

The transaction price reflects a multiple of roughly 15 times Vectura’s 2020 EBITDA. Philip Morris does not expect to record any material impact from the buyout on its 2021 adjusted earnings per share.

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Beyond Nicotine Strategy Looks Promising

Philip Morris has been firm on its ambitious plans to expand the Beyond Nicotine products. In February 2021, the company revealed plans of generating at least $1 billion in annual net revenues from the Beyond Nicotine sources by 2025. The initiative leverages its expertise in life sciences, inhalation technology and natural ingredients among others. The strategy is based around two growth areas — inhaled therapeutics development as well as commercializing scientifically substantiated consumer health products and solutions.

In efforts to boost the Beyond Nicotine portfolio, Philip Morris recently acquired a well-known developer as well as manufacturer of pharmaceutical and well-being products — Fertin Pharma A/S ("Fertin Pharma"). With the help of Fertin Pharma’s impressive technologies, solid capabilities and efficient workforce, Philip Morris expects to make innovative oral delivery products. The acquisition will accelerate the company’s presence in the rapidly-growing modern oral category. Philip Morris can leverage Fertin Pharma’s oral delivery platforms to develop self-care wellness items like over-the-counter solutions and supplements.

In August, Philip Morris acquired OtiTopic, a respiratory drug development company based in the United States, as part of its Beyond Nicotine strategy. The acquisition of OtiTopic is expected to further strengthen the company’s ability in R&D of aerosolization and inhalable treatments.

Shares of the Zacks Rank #3 (Hold) company have gained 24.2% so far this year compared with the industry’s rise of 17%.

Top 3 Consumer Staple Picks

Vector Group Ltd. VGR, sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 73%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medifast, Inc. MED, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 16%, on average.

Sysco Corporation SYY, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 13.3%, on average.

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