Philip Morris Acquires Cannabis Inhaler Developer Syqe Medical for $1.65 Billion

Philip Morris, the international tobacco giant, is acquiring Israeli company Syqe Medical in a deal that could reach $650 million. Syqe's main product is a metered dose inhaler for treating pain using medical cannabis. In 2016, PMI already invested $20 million in Syqe Medical, but the manufacturer had not disclosed this investment.

Philip Morris will initially invest $120 million in an effort to obtain the required Food and Drug Administration (FDA) approval for the inhaler.[1]. If approval is granted following successful clinical trials, the tobacco maker will purchase all of the shares in the Israeli company for $650 million. If the acquisition goes through, Syqe is expected to become one of the largest cannabis companies in the world.

The transaction will be conducted through Philip Morris' inhaler subsidiary Vectura.

Tobacco Manufacturers' Investment in Cannabis Sector

To cope with the decline in tobacco consumption, tobacco manufacturers are diversifying their investments to develop new markets. In addition to designing new nicotine or smokeless tobacco products, they are expanding into other sectors of activity such as cannabis.[2]-[3]In 2018, Altria Group Inc., owner of the Marlboro brand, invested $1.8 billion in Canadian cannabis company Cronos Group.[4]. In 2020, Altria filed two patents for cannabis inhalers, in the form of tetrahydrocannabinol (THC, psychoactive) and CBD (non-psychoactive).

British American Tobacco (BAT) is also present in the legal cannabis market since it became the majority shareholder of Canadian Organigram, a specialist in therapeutic and recreational cannabis, by acquiring 20% shares for 147 million euros.[5]. He has also, through his company Btomorrow Ventures (BTV), taken stakes in another Canadian company, Trait Bioscience Inc. which has filed a patent for water-soluble CBD products.

British tobacco company Imperial Brands, meanwhile, invested $93.4 million in 2019 in Auxly Cannabis Group, another Canadian company to develop cannabis products.

Philip Morris's calculated diversification to improve its image

Philip Morris has been building a “smokeless transformation” narrative for over a decade, associated with the launch of its flagship heated tobacco product, IQOS. Since then, the manufacturer has invested heavily in various sectors, including medical and pharmaceutical.

In August 2021, Philip Morris International completed the acquisition of the pharmaceutical laboratory Vectura, a specialist in the treatment of asthma, chronic obstructive pulmonary disease (COPD), and respiratory diseases. This operation, at 1.3 billion euros, had sparked indignation in public health circles.[6]At the same time, PMI also bought a US inhaler company, Oti-Topic, and Fertin Pharma, which specializes in nicotine replacement therapy.[7]. PMI said the acquisition of Fertin would allow it to develop various "botanical and other personal wellness products."

Philip Morris Vectura and Fertin Pharma are now subsidiaries of Vectura Fertin Pharma, a company formed by PMI in 2022 to oversee the business development of its pharmaceutical acquisitions. As of June 2023, PMI/Fertin’s Ryze nicotine gum was marketed in India, with trademarks registered or pending in numerous countries, including the Philippines, Indonesia, Cambodia, Lao People’s Democratic Republic and Bhutan.[8].

These acquisitions confirm Philip Morris' diversification objectives and aim to strengthen the tobacco company's discourse on risk reduction in support of the development of its new tobacco and nicotine products. Appearing as a "health company" is likely to divide health stakeholders and reassure decision-makers. This diversification is therefore part of an image strategy intended to allow the tobacco company to return to the public decision-making table from which it was ousted.

Keywords: Philip Morris, Cannabis, inhalers, nicotine, diversification, pharmaceutical, laboratory

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[1] Sophie Shulman, Philip Morris acquiring Cannabis inhaler developer Syqe Medical for up to $650 million, Calcalist, published July 18, 2023, accessed July 20, 2023

[2] Generation without tobacco, The cannabis market in the sights of the tobacco industry, published October 6, 2020, accessed July 20, 2023

[3] Generation without tobacco, Tobacco Industry Maneuvers in Cannabis and Pharmaceutical Markets, published July 26, 2021, accessed July 20, 2023

[4] Generation without tobacco, Altria continues its takeover bid in the cannabis and CBD market, published on February 23, 2021, consulted on July 20, 2023

[5] Generation without tobacco, British American Tobacco launches recreational cannabis business, published March 15, 2021, accessed July 20, 2023

[6] Generation without tobacco, Philip Morris's Vectura Acquisition Causes Uproar, published on August 25, 2021, consulted on July 20, 2023

[7] Generation without tobacco, Philip Morris buys Fertin Pharma, a specialist in nicotine substitutes, published July 5, 2021, accessed July 20, 2023

[8] Tobacco Company Investments in Pharmaceutical & NRT Products, Tobacco Tactics, last updated June 29, 2023, accessed July 20, 2023