Vectura's $1.45B sale to tobacco giant Philip Morris under fire from British business secretary: report

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Earlier this year, the British government asked officials to keep tabs on Elliott Management's plans for GlaxoSmithKline, fearing a potentiall break up or sale. (MicroStockHub/iStock/Getty Images Plus/Getty Images)

Britain's business minister has tasked the government with keeping tabs on Marlboro maker Philip Morris' proposed takeover of inhalation-focused CDMO Vectura. The move echoes concerns earlier this year about a potential activist investor shakeup at British pharma major GlaxoSmithKline.  

Kwasi Kwarteng, Britain’s secretary of state for business, energy and industrial strategy, is working with officials to get a better sense of the tobacco giant's plans for Vectura, which develops therapies to treat some of the very lung diseases Philip Morris' products cause, The Times reported Wednesday. 

Vectura on Friday agreed to sell to Philip Morris for £1.05 billion ($1.45 billion). In doing so, the company turned away from another would-be buyer, The Carlyle Group, whose acquisition bid it had previously accepted in May.

For its part, Philip Morris is pursuing a so-called "Beyond Nicotine" strategy to branch out from cigarettes into fields such as respiratory drug delivery and "selfcare wellness." It's banking on that strategy to deliver at least $1 billion in net revenues by 2025, CEO Jacek Olczak said in a statement last week. 

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The government is reportedly uneasy about the crossover between Philip Morris' stable of tobacco products and Vectura's respiratory repertoire, The Times said. Over the weekend, the Labour party's shadow health secretary Jon Ashworth and its shadow business secretary Ed Miliband pushed Kwarteng and U.K. health secretary Sajid Javid to publicly review Philip Morris' plans and “work to ensure the future of this vital company is not in any way at risk," as quoted by The Times. 

Vectura is working with Inspira Pharmaceuticals on an inhalable treatment for COVID-19, and Ashworth and Miliband's letter specifically calls on the government to leverage the Enterprise Act 2002, which would allow ministers to "intervene" in M&A to curb the effects of a public health crisis. 

Medical research charities and anti-smoking groups have also flagged concerns about the deal, The Times wrote. 

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The call to action from business secretary Kwarteng marks the second time this year he's summoned officials to scrutinize British M&A. After activist investor Elliott Management took a "significant position" in GlaxoSmithKline in April, Kwarteng the following month asked officials to lend their support to GSK chief Emma Walmsley, whose CEO spot was believed to be under fire, The Times reported. 

At the same time, the news outlet said the British government was fearful Elliott might angle to sell off or break up the company, which is a "major pillar" of the U.K.'s pharma industry, former business secretary Vince Cable said.

The U.K. government has previously stepped up to protect its pharma darlings, as was the case with AstraZeneca, subject to a failed buyout attempt from Pfizer in 2014. The takeover-that-never-was triggered political and public fallout from Brits concerned about jobs and in-country R&D.