Philip Morris International (PMI) has announced the sale of Vectura Group, a British maker of asthma inhalers, at a significant loss after facing backlash from health groups opposed to its ownership. The cigarette maker had acquired Vectura three years ago with the intention of expanding into the healthcare and wellness sector. However, the move was met with criticism from various health organizations, leading to a series of challenges for PMI.
Backlash from Health Groups
Vectura, known for its treatments for respiratory illnesses caused by smoking, became a point of contention after being acquired by PMI. Health campaigners expressed outrage over a cigarette maker benefiting from the treatment of smoking-related diseases. The company faced medical boycotts and was even barred from a major medical conference following the takeover. Other speakers threatened to withdraw unless Vectura pulled out, highlighting the ethical concerns surrounding PMI’s ownership of the inhaler manufacturer.
Jacek Olczak, CEO of PMI, acknowledged the pressure faced by Vectura due to the external constraints and criticism related to the company’s ownership. He emphasized the decision to sell Vectura as a means to free the subsidiary from the burden of opposition. The sale to Molex, a division of a US oil and chemicals conglomerate, will involve an initial payment of £150m with potential additional payments of £148m. PMI is set to incur a substantial loss on the deal, having paid £1.1bn for Vectura and already taken a significant impairment against the unit.
Controversial Takeover and Public Outcry
PMI’s acquisition of Vectura stirred controversy within the healthcare community, particularly among anti-smoking activists. The move came after Vectura’s board had initially recommended a bid by private equity firm Carlyle. PMI’s long-term commitment to transforming its business was questioned in light of the sale of Vectura, as the company had previously criticized private equity owners for focusing on short-term gains. Despite PMI’s assertions of a strategic shift towards healthcare and wellness, the sale of Vectura reflects a departure from this vision.
The tobacco industry’s reputation for promoting addictive products that contribute to lung disease further fueled the backlash against PMI’s ownership of Vectura. Health charities and advocacy groups raised concerns about the implications of a tobacco company manufacturing inhalers for respiratory conditions. Patients were urged to consider alternative devices if uncomfortable with using inhalers associated with the tobacco industry. The outcry from organizations like Asthma + Lung UK and Action on Smoking and Health underscored the ethical dilemmas posed by PMI’s involvement in the healthcare sector.
Industry Response and Market Impact
Philip Morris International’s shares experienced a 2.8% decline following the announcement of the sale of Vectura. The market reaction reflects the challenges faced by PMI in navigating the intersection of the tobacco and healthcare industries. The company’s attempt to reposition itself as a broader healthcare and wellness group has encountered resistance from various stakeholders, highlighting the complexities of diversification in an industry with longstanding public health concerns.
The divestment of Vectura marks a significant shift in PMI’s strategic direction, raising questions about the company’s future trajectory. The decision to sell the inhaler business at a loss underscores the challenges of integrating a tobacco company into the healthcare sector. As PMI grapples with the aftermath of the sale, stakeholders will be closely monitoring the impact on the company’s reputation and financial performance.
In conclusion, the sale of Vectura by Philip Morris International reflects the tension between profit-driven motives and public health considerations in the healthcare industry. The backlash from health groups and the subsequent divestment highlight the ethical dilemmas faced by companies operating in sectors with conflicting interests. PMI’s experience with Vectura serves as a cautionary tale for companies seeking to expand into new markets while navigating complex regulatory and ethical landscapes.