ALEX BRUMMER: Can Vectura stub out Philip Morris tobacco addiction

Former pensions minister, Lord Myners, calls Vectura’s decision to back the bid from Marlboro tobacco giant Philip Morris a ‘garage sale’ and one that stinks. 

At Asthma UK and the British Lung Foundation, chief executive, Sarah Woolnough, says it’s an outrage.

So do more than 20 other public health bodies, including the Royal College of Physicians, which have written to the board demanding it reject the deal, claiming that it is absurd that Philip Morris can make more money from providing treatments to the people they made ill in the first place. 

Kicking the habit?: Should investors believe Philip Morris’s stated ambition that it wants to buy Vectura as part of its switch away from tobacco

They also warn that Vectura’s research capabilities and recruitment would be damaged by the association with big tobacco. 

Even for the silly season of mid-August, emotional responses being provoked by Bruno Angelici’s move to back the £1.1billion bid Philip Morris International over that from Carlyle, the private equity fund, are quite something to behold. 

In the coming weeks, Vectura’s investors will have to decide whether Angelici and his fellow directors are right to be selling out at 165p a share – a 10p premium to the rival Carlyle offer – or to reject the bid. 

What should they do? Should they listen to the outraged medics who argue that handing over Vectura’s inhalers business – devices created to deliver drugs for illnesses caused by cigarettes – would constitute nothing short of blasphemy? Or should they believe Philip Morris’s stated ambition that it wants to buy Vectura as part of its switch away from tobacco, helping it with its long-term plan to be a wellness company. Is that credible? It’s certainly a contrarian view and maybe not such a foolish one. 

Randeep Somel, portfolio manager at M&G Investments, put the point well when he compared what Philip Morris aims to do by switching from tobacco to inhalers to how big oil has invested in renewables, as BP has done with solar and wind. 

Like big oil, the tobacco giants have the capital to invest in new and healthier areas. It’s also good business, as these companies know that regulations can only get stricter and they will have to find new areas of growth or wither away. 

Shareholders have an alternative: reject the bid and allow Vectura to exist as an independent company. Such a route would be in line with the pressure being placed on asset managers – most recently from the PM and the Chancellor – to back the UK’s long-term potential as part of an ‘investment big bang’ to boost growth and drive recovery. 

Vectura has all the right credentials: founded by University of Bath students, it was a spin-out which then floated on AIM, and then graduated to the FTSE 250 Index as business grew fast in the respiratory disease market. But if you dig a little deeper into Vectura’s corporate history, you will see that lately it has not had the easiest of rides. It has gone through at least three mutations of its business model as its big pharma customers have switched from respiratory diseases into more lucrative areas of healthcare such as oncology. 

Two years ago, Peel Hunt analyst Amy Walker described it as ‘a cash stream in search of growth opportunities’ and earmarked the company as a ‘strategic takeover’ with a target price of 122p on the stock. Paradoxically, investors might take the view that despite the bizarre ethical situation, Vectura will help Philip Morris withdraw from its nasty addiction.

Shire delight 

Great news for Tolkien fans. Middle-earth is moving back to the other side of the Earth, back to where Lord Of The Rings was first conceived, in rural Britain. 

It’s not yet known where in the UK the new series – which is set more than a 1,000 years before the books – is to be filmed. But wherever they are located, the sets are bound to become a massive tourist attraction as they have been in New Zealand. 

The move by Amazon to produce its next Lord Of The Rings TV series in the UK will bring a much-needed boost to the creative industries which have been so savaged by the pandemic. And it could be rather a nice boost too – Amazon is said to have spent $465m on the first series, which is due to be shown on Prime next September. 

While Amazon is too politic to say so directly, industry sources suggest that Jacinda Ardern’s tough, zero Covid policy has made filming impossible on several levels, despite the most generous grants. 

Coming home to Tolkien’s original Shire also makes sense. More than half of the cast are British. Many of the actors and filming staff have been locked down for around two years because of the quarantine and border rules. But Amazon’s decision also shows that those who claim Covid has broken global capital flows have been far too hasty. 

This post first appeared on Dailymail.co.uk