Tobacco company Philip Morris International (NYSE:PM) is mulling a stake sale in its biggest pharma unit, a Wall Street Journal report highlighted. Per the report, the company is facing challenges in its healthcare endeavors, prompting it to explore options like selling a stake in its prominent pharmaceutical unit, Vectura Group, which it acquired in 2021.
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Philip Morris embarked on a healthcare journey by acquiring three pharmaceutical companies, including Vectura Group, in 2021 at a cost of over $2 billion. These acquisitions were part of its long-term strategy to create a “Beyond Nicotine” product portfolio.
The Marlboro maker then said it expects to generate at least $1 billion in net revenues from the Beyond Nicotine products by 2025. However, its strategic shift towards wellness and healthcare encountered obstacles. During the second quarter conference call, the company said that its inhalable aspirin products’ first clinical trial results were deemed unsuccessful. Moreover, its CDMO (contract development and manufacturing organization) business faced slower-than-anticipated development and cost-related challenges.
Given these headwinds, the company postponed its aspiration of reaching $1 billion in net revenues from wellness and healthcare products. To address the ongoing concerns, Philip Morris is discussing various options with Deutsche Bank, including seeking a partner to manage and expand Vectura’s drug manufacturing outsourcing business, which may involve selling a majority or minority stake.
As Phillip Morris faces challenges in its wellness and healthcare segment, let’s look at what analysts recommend for its shares.
Is PM a Good Stock to Buy?
Analysts are bullish about the prospects of Phillip Morris. Even though the company is grappling with problems in its wellness and healthcare segment, which will likely hurt its profitability, Jefferies analyst Owen Bennett finds its valuation and long-term outlook compelling. Bennett reiterated a Buy on PM stock on August 22.
Overall, PM stock has seven unanimous Buy recommendations for a Strong Buy consensus rating. Further, analysts’ average price target of $116.71 implies 19.92% upside potential from current levels.
