Beyond Nicotine

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In addition to transformation to Reduced-Risk Products (Next Generation Products, Smokefree products), major tobacco companies are increasingly exploring growth opportunities in adjacent business areas that go beyond tobacco and nicotine. Three main areas explored are:

1. Cannabis

2. Wellness/Well-being & Stimulation

3. Healthcare (Nicotine-replacement therapies, plant-based vaccines, inhaled and oral therapeutics)

Imperial Brands

In July 2019, Imperial entered a R&D partnership with Auxly, a Canadian cannabis company. As part of the transaction Imperial invested CAD123Mn (£75Mn) by way of debt convertible into 19.9% of Auxly’s share capital at a price of CAD$0.81 per share.

In April 2024, Imperial Brands converted $123.4Mn of debt ($121.9Mn principal and $1.56Mn accrued interest) to shares. Following the debt-to-shares conversion, Imperial Brands owns a 19.8% stake in Auxly and becomes the largest shareholder. Moreover, Imperial and Auxly entered into a second agreement (dated March 28, 2024) to remove the existing requirement that Imperial will use Auxly as its exclusive cannabis partner.

The conversion improves the financial position of Auxly by eliminating $123Mn in debt and reducing the proforma 2024 annual interest expense by ~$14Mn.

British American Tobacco (BAT)

November 2023:

BAT deepens strategic partnership with Organigram1 (a Canadian licensed producer of cannabis) and will invest C$124.6Mn (£74Mn) between Jan 2024 and Jan 2025, increasing its equity position from c.19% to 45%. The private placement agreement (~38.7 million shares at C$3.22/share over three tranches; roughly double the Organigram’s last closing price on TSX) caps BAT’s equity interest at 49% and its voting interest & Board rights at 30%.

BAT and Organigram established Product Development Collaboration (PDC) in March 2021 in order to develop the next generation of non-combustible cannabis products. Further investment from BAT enhances PDC and allows Organigram to establish a strategic investment pool named “Jupiter” – which will be funded with C$83.1Mn and targets investments in emerging cannabis opportunities that enable Organigram to apply its capabilities to new markets and expand its global footprint. The remaining C$41.5Mn (from the private placement proceeds) will be used for general corporate purposes.

Organigram shares closed the day up +19% at C$1.89.

April 2023:

BAT forms JV with Charlotte’s Web and AJNA BioSciences to seek FDA-approval for a hemp extract botanical drug (to target a neurological condition)2. BAT acquires 20% stake for US$10Mn, with Charlotte’s Web and AJNA each owning 40%.

November 2022:

BAT invests in Charlotte’s Web3, a leading US producer of hemp extract wellness products

– £48.2Mn invested

– Charlotte’s Web: based in Colorado, USA and listed on the TSE

– Convertible into a non-controlling equity stake of 19.9%.

September 2022:

BAT acquires a non-controlling minority stake in Sanity Group4 – distributor of CBD brands and medical cannabis products, based in Germany. This investment follows the R&D collaboration BAT established with the Canadian company, Organigram (note: BAT has ~20% stake in Organigram).


BAT’s Beyond Nicotine strategy is largely based making direct minority investments in disruptive technologies & products – primarily in the areas of well-being and stimulation (including functional food and beverage start-ups using a range of different actives, such as caffeine to CBD). Btomorrow Ventures is established as BAT’s main investment vehicle in Beyond Nicotine.

Philip Morris International (PMI)

September 2023:

PMI is reported to be in discussions with Deutsche Bank on a range of options for its struggling Wellness & Healthcare (W&H) segment5,6 – including a licensing agreement, commercial partnership and sale of a majority/minority stake in Vectura.

July 2023:

In Q2 20223 Earnings release, PMI reported an asset impairment charge of $680Mn ($0.44/share) as the estimated fair value of the W&H segment was below its carrying value7, primarily reflecting:

(1) the unsuccessful clinical trial results for the inhalable aspirin product

(2) slower-than-anticipated development of the contract development and manufacturing organization (CDMO) business.

PMI also abolished its ambition to reach at least $1Bn net W&H revenue in 2025.


PMI’s “Beyond Nicotine (BN)” ambitions date back to 2008 – the year in which it acquired a stake in Medicago, a Canadian biotech company. Medicago successfully developed a plant-based Covid-19 vaccine (Covifenz) – which was rejected by WHO over its Tobacco ties. Eventually, in Dec 2022, PMI had to divest all of its stake (21%) in Medicago.

In 2021, PMI acquired three pharmaceutical companies and set a target of at least $1Bn in net revenues from BN products in 20258:

– Vectura: inhaled drug delivery solutions

– Fertin Pharma: oral and intra-oral delivery solutions

– OtiTopic: inhaled drug specialist with a late-stage inhalable acetylsalicylic acid (ASA) treatment for acute myocardial infarction.


In Dec 2018, Altria invested $1.8Bn in Canadian cannabis company Cronos – acquiring a 45% stake in the company, with an option to increase this stake to 55% over the next five years. In Dec 2022, Altria abandoned the Cronos warrant (“exercisable until March 2023 at a price of CAD$19/share”) while maintaining its initial investment9. As a result, Altria claimed a capital loss of ~$0.5Bn on 2022 tax return. Altria currently owns ~41% stake in Cronos.


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