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Case Study: Philip Morris acquires cardiopulmonary pharmaceutical company - The healthcare hero we need, not the one we deserve

Lux Research
October 7, 2021

Philip Morris International (PMI), a wildly successful tobacco product manufacturer, has acquired inhaled therapeutics company OtiTopic. OtiTopic develops an inhaler-based therapeutic for treating heart attacks quickly. Essentially, the company aerosolizes salicylic acid (aspirin) in order to get it into the bloodstream faster, which can reduce the physical damage of a heart attack and reduce the risk of another serious event, such as a stroke. As a result of this acquisition and a slate of other reported similar acquisitions in the works, health charities and politicians are up in arms to prevent a tobacco company from pivoting into health. On the surface, it makes sense – why should a company profit from a healthcare product when it has been doing the exact opposite of providing healthcare for nearly two centuries?


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USE CASE AND BUSINESS IMPACT

PMI has to pivot to a new product because its current consumer base is disappearing. Among its assets is a wealth of healthcare data – PMI has some of the most extensive cardiopulmonary data of any private nonmedical institution. The company is extremely well-positioned to assess startups and solutions surrounding this area of study, and it has the means to acquire and fund them. In contrast to large pharmaceutical organizations, which are typically looking for investment and acquisition targets that can move their revenue needle by several hundred million, if not of billions, of dollars per year, PMI can afford to pick up smaller companies that are high-impact and low-risk in healthcare. In this case, the delivery of a reliable therapeutic in a high-need situation. This acquisition allows PMI to do two things: 1) develop healthcare products with known validity, and 2) begin the slow process of making a name for itself in healthcare.

#LUXTAKE

Fundamentally, PMI is engaging in an action that is likely to speed up market access to a healthcare solution that might otherwise languish out of reach due to a lack of funding to continue product development and regulatory approval. By doing so, it is establishing a toehold in healthcare. Despite the backlash from healthcare organizations uncomfortable with PMI's history, the reality is that traditional stakeholders in healthcare can't be relied on to bring these small players to market. Pharmaceutical companies won't muster resources for such incremental benefits, and healthcare providers and governments don't have the resources. As practically the definition of a nontraditional healthcare player, PMI is poised to support healthcare innovation in a way that helps both itself as an organization and consumers survive. Companies should expect to continue to see extreme examples of nontraditional players engage in healthcare and look for their own opportunities before they get smoked.

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