2 September 2020
Todd C. Frankel Source: The Washington Post
World’s largest cigarette maker is making acquisitions as it pursues a ‘smoke-free’ future. Many scientists are doubtful.
“Mind-boggling,” she said.
The tobacco company’s bid to hire Tal-Singer is a piece of a much larger plan by the New York-based company to pivot away from cigarettes and develop new lines of business that go beyond just smoke-free products. Philip Morris International calls it a “Beyond Nicotine” strategy and says it wants to earn $1 billion from these new ventures by 2025.
All cigarette companies know the industry that established their fortunes is fading, as smoking rates decline worldwide. Most are invested in vaping and e-cigarettes. But no Big Tobacco firm has been as aggressive as Philip Morris International in seeking out entirely new ways of making money.
The tobacco giant’s new goal has led to a buying spree of drug-delivery firms in recent weeks — stirring up sharp criticism and skepticism from doctors, scientists and health officials who distrust the tobacco industry, which for decades denied smoking was dangerous.
The acquisitions are especially galling, scientists and doctors say, because some of the target companies make treatments for smoking-related ailments.
“It’s like someone breaking your knees and then selling you the crutches,” said Tal-Singer, who declined the offer to work with the company.
In July, Philip Morris International snapped up the Danish firm Fertin Pharma, which makes medicinal chewing gum. That was followed by U.S. drug company OtiTopic, which is developing an aerosolized drug to treat heart attacks. Philip Morris also recently unveiled plans to pay $1.4 billion for the British drug firm Vectura, a major developer of inhaled treatments for COPD and other respiratory ailments, including a potential covid-19 treatment.
Vectura’s board voted in August to recommend Philip Morris International’s bid to shareholders over a competing, slightly lower offer from U.S. private equity firm the Carlyle Group. Vectura shareholders will decide on the takeover bid by the middle of September. A Vectura spokesman declined to comment on the potential deal.
And more acquisitions are coming, Philip Morris International says. This summer, it created a new division to focus in part on identifying companies to buy in the Americas. Philip Morris International — best known for its Marlboro brand — sells cigarettes everywhere in the world except the United States. The company was created in 2008 when Altria Group spun it off as its own entity. (Philip Morris USA sells cigarettes domestically.)
The cigarette company’s attempt to buy Vectura in particular has drawn objections from groups such as the American Lung Association, American Thoracic Society and Royal College of Physicians. These groups recently joined other medical associations in a joint letter to Vectura shareholders urging them to reject Philip Morris International’s overture.
“It just screams, ‘Huge conflict of interest,’” said Michelle Eakin, an associate professor at Johns Hopkins University School of Medicine who studies lung disease prevention and heads the thoracic society’s Tobacco Action Committee. “Tobacco companies — there is no way they can be trusted.”
Philip Morris International says the newly acquired companies will help it kick its dependency on cigarette revenue — which makes up about 70 percent of its $28.6 billion in annual revenue — pointing out that this is exactly what health officials want tobacco companies to do.
Executives also say the acquisitions fit with the company’s growing interest in inhaled and oral delivery of non-nicotine pharmaceutical drugs and wellness products such as a botanicals that induce calm or sleep.
But those assurances have not dulled attacks on Philip Morris International’s new strategy.
“I’m not surprised by the skepticism that’s being pursued. I’m a little surprised by the ferocity of it,” said Moira Gilchrist, a pharmacist and Philip Morris International’s head of global scientific communications.
Gilchrist said the company’s investments come as the firm looks to identify “new avenues that go beyond being a tobacco and nicotine company.”
And companies such as Vectura mesh with the tobacco company’s existing in-house expertise in inhalation delivery of nicotine, Gilchrist said.
“We have to pick something that corresponds with our capacity to date,” she said.
Philip Morris International has slowly shifted away from cigarette sales since 2017, when it announced plans to focus on smoke-free nicotine products. It developed a vaping device called the IQOS — sold as Marlboro HeatSticks in the United States — that warms but does not burn tobacco. Today, about 30 percent of the firm’s revenue comes from noncombustible ways of delivering nicotine.
The company’s goal is to hit 50 percent in four years.
Last year, IQOS became the first vaping product authorized by the Food and Drug Administration to be marketed as reducing exposure to harmful chemicals compared to smoking. The FDA order made clear that it didn’t mean the product was safe or “FDA approved.”
“I think we understand inhalable delivery,” André Calantzopoulos, then-chief executive of Philip Morris International, told investors in February, adding that he hoped to combine that knowledge with “existing drugs, existing molecules.”
But the tobacco industry is still widely viewed with suspicion.
The major firms sometimes called Big Tobacco fought off scientific evidence about the dangers of cigarettes for decades starting in the 1950s. In 2006, a landmark federal court judgment found major U.S. tobacco companies conspired in a “massive 50-year scheme” to cover up the health effects of smoking and market cigarettes to children.
Now, with its push to move “beyond nicotine,” Philip Morris International is asking scientists and the public to trust its intentions.
Gilchrist said it was unfair for people to view modern-day Philip Morris International as the same company from the 1990s.
“People need to look at our progress, look at our science,” she said.
That’s going to be a tough sell.
“We don’t trust Philip Morris,” said Hasmeena Kathuria, a pulmonologist at the Boston University School of Medicine and director of the Tobacco Treatment Center in Boston. “We know they’ve been fraudulent in the past.”
Tobacco firms have tried for years to make inroads with the scientific research community, where many refuse to take money from cigarette companies.
That hasn’t stopped Philip Morris International from trying. In 2017, it announced the creation of the Foundation for a Smoke-Free World, pledging to fund it with nearly $1 billion over 12 years. The independent nonprofit was to make grants for scientific research on smoking and its health effects.
But the foundation has struggled to find takers. A 2019 review published in the medical journal the Lancet found most of the foundation’s grants appeared to go to public relations firms because so few scientific researchers were willing to sign on, according to the review.
Kathuria recalled a medical start-up company that asked her advice about taking a foundation grant. She urged them to reject it.
And at Johns Hopkins, a research officer this year passed along to Eakin, the associate professor, a notice about the foundation offering $1 million research grants. It was described as a great opportunity, Eakin said.
“They didn’t realize” the connection to Big Tobacco, she said. There was no way a Hopkins researcher could accept that funding.
But if Philip Morris International is successful in its bid to buy Vectura, many pulmonary doctors and scientists will face a difficult test.
Vectura is heavily involved in the development of COPD inhalers popular in the United States, including some made by GlaxoSmithKline and Novartis. It also develops asthma inhalers.
“These are common medicines that we use, that I often prescribe,” said Kathuria.
She doesn’t like the idea of treating patients suffering from cigarette-induced breathing problems with a drug from a Big Tobacco-owned company.
“It’s like they’re profiting on both ends,” she said.
Tal-Singer, who is president and chief scientific officer at the COPD Foundation, said she considers Vectura to be a well-run company. The medications work. The research is good.
So from a business perspective, she said she understands why it would be an acquisition target.
But she is unsure how to think about the firm if a tobacco company owns it.
“We usually take a hard line” against having anything to do with cigarette makers, she said.
“But now that they’re buying these companies,” she said, “what are we going to do?”