Phillip Morris (PM; A2, A-/A Neg) Offloads Vectura for £150m + £148m in deferred
Phillip Morris is offloading Vectura for £150m ($200m) cash and potential £148m ($195m) in deferred payments contingent on milestones out to 2039. Close expected by end of year, it will take a $220m loss in the 3Q (negligible).
Vectura was a British Pharma that specialised in inhaled drug delivery solutions for treatment of respiratory diseases - PM took it private in 2021 for £852m ($1.2b then) and combined it with Pharama Fertin which it acquired for DKK5.1b ($820m) to form its Wellness and Healthcare division. The segment was running ~$300m/yr in revenues (group $38b) and generally ~$100m in operating losses (R&D heavy).
It uses Fertin - who specialised in oral medical products - for development of oral and other smoke-free products (like nicotine pouches). It is likely still valuable given growth we are seeing in oral while it's not hard to see why Vectura was the harder-half to integrate. It has added today; "despite the investment and commitment to developing products and therapies vital to patients, unwarranted opposition to PMI’s transformation has impacted Vectura’s scientific engagement and commercial CDMO relationships." Even at the time of the deal Activist groups, including medical bodies, were up in arms and asking the UK government to intervene - which it did not.
Not a credit mover and PM is not of concern to us; the golden child of tobacco bucked peers to report 1H growth in the HSD. Smoke-free made up a healthy 38% of revenue and it has upgraded FY guidance to +11-13% EBIT growth. Equities +33% YTD vs. tech-skewed SPX +19%.