Tobacco Industry Maneuvers in Cannabis and Pharmaceutical Markets

While Philip Morris International is buying Vectura and Fertin Pharma laboratories, British American Tobacco has taken a stake in Trait Biosciences, a company that has developed a water-soluble CBD. As the tobacco market shrinks in Western countries, manufacturers are diversifying their investments to capture new markets.

Advances in anti-smoking legislation and the reduction in the prevalence of tobacco use in industrialized countries have led tobacco manufacturers to diversify their activities for several years. They are designing new nicotine or smokeless tobacco products and buying up companies that have developed these types of products. They are also closely monitoring the development of the cannabis market, in which they are gradually taking a place.

PMI sets foot in the medical sector

Investments are sometimes massive, reflecting the financial clout of the tobacco industry. Philip Morris International (PMI) thus outbid the Carlyle group on July 9, 2021, putting 1.3 billion euros on the table to acquire the British laboratory Vectura[1]. A specialist in inhaled products for the treatment of asthma and COPD, Vectura has recently moved into the manufacture of inhaled treatments for COVID-19. PMI has confirmed its intention to extend its scope of action to that of health by developing not only tobacco-free, but also nicotine-free products[2]. Despite the blatant contradiction of selling both a poison and its cures and PMI's declarations for a "smoke-free world", the multinational continues to market cigarettes all over the world.

PMI had already, on 1^er July, acquired Danish Fertin Pharma, a producer of nicotine-based chewing gum, for $813 million.3]. Fertin Pharma has developed numerous patents inspired by oral nicotine treatments and adapted some of them for other pathologies; this laboratory has also developed oral products based on cannabis, for uses that can be assumed to be both medical and recreational.

BAT and Altria Enter the Cannabis and CBD Market

For its part, British American Tobacco (BAT) is continuing its investments in the legal cannabis sector. In March 2021, the cigarette manufacturer had already become the majority shareholder of the Canadian Organigram, a specialist in therapeutic and recreational cannabis, by acquiring 20% shares for 147 million euros[4]. On June 16, through his company Btomorrow Ventures (BTV), he took a stake in another Canadian company, Trait Bioscience Inc., to the tune of 25 million US dollars.5]. Trait Biosciences has notably filed a patent for water-soluble CBD, in a sector that promises to be highly competitive. Other companies, such as Molson Coors and Haxo or Constellation Brands (Corona beer) and Canopy Growth, have already joined forces to market cannabidiol (CBD)-based beverages, with a view to supporting an expansion of the American market for cannabis-based products.

The Altria group, owner of the Marlboro brand in the United States, filed two patents in February 2020 for cannabis inhalers, in the form of tetrahydrocannabinol (THC, psychoactive) and CBD (non-psychoactive), after investing 1.8 billion US dollars in the Canadian company Cronos in 2019[6].

The legal cannabis sector is finally emerging as a logical career move for former tobacco industry executives. After developing PMI Canada’s “reduced-risk” products, Setti Coscarella now runs Taat International, a producer of cannabis cigarettes. Peter Diatelevi, a former Altria executive, is currently at the helm of Cannadips, which produces cannabis “pouches” similar to those developed for tobacco and nicotine.7].

Bridges between these universes

Forced to innovate to safeguard its profit margins, the tobacco industry is diversifying in all directions. While it is still too early to describe the next products it plans to launch on the market, there are many development hypotheses. It is easy to assume that some new smokeless tobacco and nicotine products will also be adapted to the uses of cannabis and CBD, as is already the case with CBD e-liquids or Cannadips "pouches". Whether THC or CBD, cannabis also offers the possibility of being available in many non-smoked forms, for example drinks, foods or sweets, but also in various pharmaceutical media (gums, lozenges, inhalers).

Although much smaller than the current tobacco market ($50 billion), the legal cannabis market in the United States is projected at $24 billion for 2021. 18 US states, as well as two territories and the District of Columbia, have legalized cannabis to date; most other states authorize either therapeutic cannabis or CBD products. An initial legislative setback suffered on July 19 by supporters of legalization at the federal level, however, cooled the ardor of many investors and caused a drop in the prices of companies specializing in cannabis. A consensus could nevertheless emerge in the medium term and authorize federal legalization.8The supposed Eldorado of the cannabis market therefore remains to be demonstrated.

Keywords: PMI, BAT, Altria, cannabis, CBD, Fertin Pharma, Vectura, Trait

©Tobacco Free Generation

M.F.

[1] Sweney M, The Guardian, Philip Morris International makes £1bn offer for UK pharma firm Vectura. Published July 9, 2021, accessed July 23, 2021.

[2] Dekonik B, Les Echos, Philip Morris enters the healthcare market with a vengeance. Published July 9, 2021, accessed July 23, 2021.

[3] Generation Without Tobacco, Philip Morris buys Fertin Pharma, a specialist in nicotine substitutes. Published July 5, 2021, accessed July 23, 2021.

[4] Generation Without Tobacco, British American Tobacco launches recreational cannabis business. Published on March 15, 2021, accessed on July 23, 2021.

[5] New Cannabis Ventures Newswire, Canadian Cannabis Biotech Company Trait Raises C$31 Million. Published July 16, 2021, accessed July 23, 2021.

[6] Generation Without Tobacco, The cannabis market in the sights of the tobacco industry. Published October 6, 2020, accessed July 23, 2021.

[7] Gretler C, Kary T, Bloomberg, Big Tobacco Flirts With Non-Smokeable Marijuana. Published July 12, 2021, accessed July 23, 2021.

[8] Kary T, Bloomberg, US Pot Legalization Bill Gets a Frosty Reception. Published July 19, 2021, accessed July 23, 2021.

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