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Tobacco giant Philip Morris International has agreed to acquire UK-based inhaled drug delivery specialist Vectura for £852m as part of an effort to broaden its business into a wider healthcare and wellness company.

PMI announced this morning it has agreed terms with UK-listed Vectura on an all-cash, recommended offer to acquire the pharma tech business for an enterprise value of £852 ($1.2bn).

Under the terms of the deal, Vectura shareholders will receive 150p per share, a 46% premium to the ex-dividend closing price of 103p per share on May 25.

Vectura is a provider of innovative inhaled drug delivery solutions that enable partners to bring their medicines to patients.

The company has thirteen key inhaled and eleven non inhaled products marketed by major global pharmaceutical partners, as well as a diverse portfolio of partnerships for drugs in clinical development.

PMI CEO Jacek Olczak commented: “PMI’s Beyond Nicotine strategy, announced in February, articulates a clear ambition to leverage our expertise in inhalation and aerosolization into adjacent areas—including respiratory drug delivery and selfcare wellness—with a goal to reach at least $1bn in net revenues by 2025.”

“The acquisition of Vectura, following the recently announced agreement to acquire Fertin Pharma, will position us to accelerate this journey by expanding our capabilities in innovative inhaled and oral product formulations in order to deliver long-term growth and returns.”

“The market for inhaled therapeutics is large and growing rapidly, with significant potential for expansion into new application areas. PMI has the commitment to science and the financial resources to empower Vectura’s skilled team to execute on an ambitious long-term vision. Together, PMI and Vectura can lead this global category, bringing benefits to patients, to consumers, to public health, and to society-at-large.”

PMI said the acquisition will enable it to gain access to differentiated proprietary technology and pharmaceutical development expertise and add highly complementary human capital, technology, high quality infrastructure, and deep know-how of inhalable formulation and device design development and analysis.

It intends to run the business as an automatous unit and will support the existing management team — supported by more than 200 scientists in formulation, devices, inhalation, regulatory teams, and clinical manufacturing — to help PMI accelerate the development of its healthcare and wellness operations.

PMI said that with the acquisition and its previously announced agreement to acquire Fertin Pharma, it will have a comprehensive portfolio of development capabilities in place — covering innovative inhaled and oral product formulations — to fulfill its “Beyond Nicotine” ambitions, in line with its key sustainability priorities.

In February of this year, PMI announced its goal to generate more than 50% of total net revenue from smoke-free products by 2025. PMI also announced its aim to generate at least USD$1bn in net revenues by 2025 from “Beyond Nicotine” products.

PMI will fund the transaction with existing cash and expects it to close in the second half of 2021, subject to a shareholder vote and approval by the appropriate regulatory authorities.

In 2020, Vectura generated net revenues of £191 million, with the transaction value representing a multiple of around 14 times Vectura’s 2020 EBITDA.

Morning update

UK GDP growth slowed in May as the economy remains 3.1% below pre-coronavirus pandemic levels seen in February 2020.

New data from the Office of National Statistics this morning indicates monthly real gross domestic product is estimated to have increased by 0.8% in May 2021 as coronavirus restrictions continued to ease.

This is the fourth consecutive month of growth, however, it is significantly slower compared with March (2.4%) and April (2.0%).

The service sector grew by 0.9% in May 2021 – accommodation and food service activities grew by 37.1% as restaurants and pubs welcomed customers back indoors following the easing of coronavirus restrictions.

Output in the production sector returned to growth in May 2021, at 0.8%, mainly because of adverse weather conditions in May boosting output in electricity, gas and air supply.

Output in the manufacture of transport equipment fell by 16.5%, its largest fall since April 2020 as microchip shortages disrupted car production.

Overall, GDP grew by 3.6% in the three months to May 2021, mainly because of strong retail sales over the three months, increased levels of attendance as schools reopened from March, and the reopening of food and beverage service activities.

On the markets this morning, the FTSE 100 has bounced back 0.5% to 7,066.3pts after yesterday’s slump.

Early risers include Ocado, up 2.4% to 1,935.5p, Bakkavor, up 2.2% to 134.9p and WH Smith, up 1.6% to 1,649p.

Fallers today include McColl’s Retail Group, down 4.3% to 36.8p, Devro, down 1.7% to 208p and SSP Group, down 1.2% to 265.4p.

Yesterday in the City

The FTSE 100 slumped 1.9% yesterday to 7,017.4pts on fears over the pace of the global economic rebound and the continued rise in UK coronavirus cases.

Deliveroo ended the day flat at 313.4p after upgraded its sales projections as a strong early rally dissipated over the course of the day.

B&M European Value Retail dropped 5% to 548.6p as it announced a marked slowdown in second quarter sales as shopping habits return to normal.

Other fallers included Associated British Foods, down 3.4% to 2,163p, Compass Group, down 3.4% to 1,501.5, Marks & Spencer, down 3.1% to 147.9p, British American Tobacco, down 2.3% to 2,758.5p and FeverTree, down 2.1% to 2,522p.

Morrisons edged down 0.7% to 265.7p after recent rises.

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