Friday, September 17, 2021

UK
City comment: ESG goes up in smoke at L&G in handling of Philip Morris’s Vectura bid

Fri, 17 September 2021

Philip Morris makes Marlboro cigarettes (Martin Rickett/PA) (PA Archive)

Look up ESG — the buzzword du jour for ethical investing — on Legal & General Investment Management’s (LGIM) website and you’ll find this bold statement: “Our very purpose at LGIM is to create a better future through responsible investing.”

You wouldn’t know it from how it has handled the Vectura takeover deal. LGIM bowed out with a whimper last night, announcing in a mealy-mouthed statement that it was agreeing to sell its 3.7% stake in the inhaler maker to Philip Morris International (PMI), the manufacturer of Marlboro cigarettes.

It’s a deal that lets PMI profit twice from smoking, as campaign group STOP (Stopping Tobacco Organizations and Products) points out: once from the sale of cigarettes and then again from the treatment of problems caused by smoking. Scientists working on health products now find themselves awkward bedfellows with executives whose main business is cancer sticks.

LGIM spent “considerable time reviewing the competing ESG factors and financials” of the “highly sensitive bid,” it says. But ultimately it concluded that accepting the offer was “the optimal result for our clients, investors and the futures of both companies”. So much for a better future.

Contrast LGIM’s response with Axa’s. The French business also owns Vectura stock and is selling out, but doesn’t mince its words. Axa “did not support” the takeover and is “uncomfortable with the ethics behind a tobacco group’s purchase of an inhaler manufacturer,” it says. The company backed a rival bid from private equity firm Carlyle, which ultimately went nowhere. It’s only selling now because it is forced to by PMI’s controlling position.


LGIM should take note. If it wants to be taken seriously as an ethical investor, it shouldn’t pull its punches in crunch moments.

More broadly, the asset management industry needs to figure out how they square the circle of ethical investing and fiduciary duty. It’s all very well to put pictures of turtles on your website and praise the ocean but when push comes to shove, a challenging - but financially attractive - bid like PMI’s can be difficult to turn down. If financial returns trump ethics, then at least be clear about it from the start.

Read More

Marlboro maker Philip Morris takes control of asthma inhaler maker Vectura

Vectura’s cancer scientists will question if they want to work for Big Tobacco

Battle for health firm Vectura cools as Carlyle pulls plug on bidding war with Marlboro maker


Vectura barred from major medical conference after Philip Morris takeover

James Warrington
Thu, 16 September 2021

Inhaler

British inhaler developer Vectura has been barred from a major medical conference amid a growing backlash over its £1bn takeover by tobacco giant Philip Morris International.

The drugmaker had been listed as a sponsor and participant at an Oxford Global event on inhaled drug delivery in London next week, but has been banned from taking part after other speakers threatened to withdraw.

Philip Morris International, which makes Marlboro cigarettes, seized control of Vectura on Thursday after securing 74.8pc of the company’s shares, fending off a rival offer from private equity firm Carlyle Group.



One of Vectura’s largest shareholders, Legal & General Investment Management (LGIM), confirmed it had accepted the offer and vowed to “exert influence from within”. It has built a reputation for speaking out on the importance of ethical investing and in 2017 launched a tobacco-free pension fund for Cancer Research UK.

Nicholas Hopkinson, professor of respiratory medicine at Imperial College London, said the decision to remove Vectura from the event was “a clear and immediate example” of the firm being excluded from scientific activities.

Scientists working for Vectura were now likely facing a moral quandary over their future at the company, he added. “If you stick with Vectura you’re stuck with the tobacco industry possibly for the rest of your career.”

Oxford Global, the life sciences conference operators behind the event, declined to comment.

The Philip Morris takeover of Vectura has faced stiff opposition from the scientific community and anti-smoking charities.

Sarah Woolnough, chief executive of Asthma UK and the British Lung Foundation, accused Vectura of having “sold out millions of people with lung disease”, adding that it had “prioritised short-term financial gain” over its long-term viability as a business.

In a letter to the public health minister, Jo Churchill, 35 charities, public health experts and clinicians renewed calls on the Government to intervene, warning the merger could lead to greater tobacco industry influence over public policy.

“We think it clear that this deal is not in the public interest and that it creates perverse incentives for PMI to increase harm through smoking so they might then profit again through treating smoking related diseases,” they said.

Legal & General, which had been a top 10 shareholder in Vectura, said it had spent “considerable time” reviewing the environmental, social and governance factors and financials of the deal before backing the bid.

“During this highly sensitive bid process, we came to the conclusion that based on the information available to us, the sale of our shares was the optimal result for our clients, investors and the futures of both companies. As a responsible investor and steward of our clients capital, our approach is to engage with companies and exert influence from within,” a spokesman said.

Several high-profile respiratory organisations are now poised to cut links with Vectura due to ethical firewalls that prohibit work with the tobacco industry.

The British Thoracic Society said the deal was “inappropriate, unethical and should have been prevented”, adding that companies and individuals who have a relationship with Vectura now fell foul of its policies.

The European Respiratory Society said the merger was “not suitable, ethical, or in the best public interest”, adding that it was also considering the implications on its partnerships.

An industry source said further distancing by the medical community was inevitable, adding that it was a case of “when it happens not if it happens”.

Vectura’s ability to win future contracts from partners such as Novartis, Bayer and Recipharm will now also be in doubt due to ethical concerns. All three companies declined to comment on their future relationships with Vectura.

The takeover also raises questions over Vectura’s tie-ups with universities due to similar rules about academic institutions accepting funding from tobacco firms.

It is understood that Imperial College London, which has previously accepted funding from Vectura for research into viral lung inflammation, will not pursue any future partnerships once the deal goes through.

In a further blow to Vectura’s standing in the medical world, critics have warned that the link to PMI could prevent it from publishing articles in top publications such as the British Medical Journal and the Lancet.

PMI has defended the deal, insisting it fits with its strategy of expanding beyond tobacco and nicotine products into a broader healthcare company.

Chief executive Jacek Olczak told The Telegraph last month that opponents of the deal were “not interested in progress, but rather in settling old scores”.

On Thursday he pledged that the takeover would provide Vectura’s scientists “with the resources and expertise to grow their business”.


Inhaler firm Vectura removed from conference over Philip Morris takeover

Julia Kollewe and Rob Davies
Thu, 16 September 2021

Photograph: Vectura/Reuters

Asthma inhaler maker Vectura has been excluded from a pharmaceutical conference after academics staged a rebellion over the company’s £1.1bn takeover by cigarette company Philip Morris International (PMI).

PMI effectively sealed the takeover on Thursday, after more than half of Vectura’s shareholders agreed to sell their stock.

But within hours the deal was overshadowed by the removal of Vectura as a sponsor of, and participant in, a conference called Formulation and Delivery UK due to take place next week.

Emails seen by the Guardian show that a group of leading clinicians who were invited to the event objected to Vectura’s involvement because of its links to PMI, which says it is aiming for a “smoke-free future” but still derives 75% of its revenue from selling cigarettes.

Peter Barnes, professor of thoracic medicine at the National Heart and Lung Institute, coordinated a letter from multiple academics to event organiser Oxford Global, describing the takeover as “extremely unwelcome news”.

“Unless the sponsorship and invitation to Vectura to participate is withdrawn, we will no longer be able to take part in the conference next week and will have to withdraw from the programme,” he said.

Further correspondence shows that Oxford Global later confirmed that Vectura “will no longer be participating in or sponsoring the event”.

Barnes said he expected other pharmaceutical industry events would follow suit because professional societies for specialist respiratory scientists and clinicians did not allow them to participate in any events with links to the tobacco industry.

Vectura’s removal from the conference appears to lend weight to warnings from academics that the company could be prevented from working with leading scientists in its field, respiratory medicine. Vectura declined to comment. The Guardian has approached PMI for comment.

PMI wrapped up the Vectura deal on Thursday morning, saying it had either bought shares, or received acceptances of its offer, reaching just under 75% of the company, well ahead of the 50% it needed.

The offer has become “unconditional”, meaning the remaining shareholders cannot prevent it and can in effect be compelled to sell.

The takeover of a respiratory disease specialist by a cigarette company has sparked outrage among health charities and public health experts around the world.

But the Marlboro maker has argued that its transition away from cigarettes requires it to move into fields such as respiratory medicine, where it already has some expertise.

Jacek Olczak, the chief executive of PMI, said on Thursday: “We are very excited about the critical role Vectura will play in our beyond nicotine strategy and look forward to working with Vectura’s scientists and providing them with the resources and expertise to grow their business to help us achieve our goal of generating at least $1bn [£725m] in net revenues from beyond nicotine products by 2025.”

Vectura investors had been given until 15 September to decide whether to sell to PMI. Under market rules governing takeovers, PMI was not allowed to build its stake by buying shares from investors within the US.

But it was able to buy stock from other international investors to move closer to its 50% target. It said in August that it had gathered 29% of the stock, as it sought to reach 50%.

At that point, which PMI has now reached, reluctant shareholders have little incentive to hold out because PMI would take control of the company anyway. PMI said on Thursday morning that investors could still sell their shares to it until 30 September.

Sarah Woolnough, the chief executive of Asthma UK and the British Lung Foundation, said: “There’s now a very real risk that Vectura’s deal with big tobacco will lead to the cigarette industry wielding undue influence on UK health policy.”


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