Tag: Philip Morris International

  • PMI Affirms Outlook After Strong Quarter

    PMI Affirms Outlook After Strong Quarter

    Philip Morris International reported net revenues of $8.12 billion in the third quarter of 2021, up 9.1 percent over those reported in the previous year’s third quarter. Adjusted operating income grew 9.4 percent to $3.55 billion. The company’s adjusted operating income margin was 43.7 percent, compared with 43.6 percent in the third quarter of 2020.

    PMI shipped 164.84 billion cigarettes and 23.49 billion heated tobacco units in the third quarter of 2021, down 0.4 percent and up 23.8 percent, respectively, from the previous year’s quarter.

    The company estimated the total number of IQOS users at quarter-end to be approximately 20.4 million, of which approximately 14.9 million have switched to IQOS and stopped smoking.

    Combined, PMI’s shipment of cigarettes and heated tobacco units increased by 2.1 percent from the previous year’s quarter, driven by higher heated tobacco unit shipments in Eastern Europe and Japan and higher cigarette shipments in PMI Duty Free and Turkey, among other factors.

    “Our business delivered another strong quarterly performance, coming ahead of our expectations with adjusted diluted EPS [earnings per share] of $1.58, representing growth of 8.5 percent, excluding currency,” said PMI CEO Jacek Olczak in a statement

    “The continued excellent performance of IQOS drove total shipment volume and organic net revenue growth of 2.1 percent and 7.6 percent, respectively, and was complemented by further sequential share gains for our combustible products.”

    “Today, we are reaffirming our strong growth outlook for 2021, with an adjusted diluted EPS forecast toward the upper-half of our previous range and representing currency-neutral growth of 13 percent to 14 percent, despite ongoing tightness in device supplies due to the global shortage of semiconductors, which impacts our ability to fulfill consumer demand for IQOS.”

  • PMI to Acquire Turkish Tobacco Firms

    PMI to Acquire Turkish Tobacco Firms

    Photo: niyazz

    Philip Morris International will pay TRY2.88 billion ($325.9 million) to purchase the shares it did not already own in Philsa and PMSA of Turkey, reports Hurriyet Daily News.

    Philsa manufactures tobacco products and PMSA is a distribution company. Both were created in the 1990s.

    PMI already holds a 75 percent share in the firms. The current owner of the remaining shares, Sabancı Holding, has applied to Turkey’s Competition Authority to sell its stakes in the two companies.

    The sale contract is expected to be signed after necessary approvals by the authorities, and the purchase is scheduled for completion by the end of 2021.

  • PMI Closes Business Transformation Credit

    PMI Closes Business Transformation Credit

    Photo: alswart

    Philip Morris International has entered into an agreement for its first financing instrument following the issuance of its August 2021 Business Transformation-Linked Financing Framework. The new revolving credit facility provides for borrowings up to an aggregate principal amount of $2.5 billion and expires on Sept. 29, 2026, unless extended as per the terms of the credit agreement.

    “We are pleased with the broad engagement and support of lenders for our first business transformation-linked financing instrument,” said Emmanuel Babeau, chief financial officer at PMI. “This credit facility further reinforces our industry-leading transformation and our commitment to accelerate the end of smoking and to use our strong capabilities to develop products that go beyond nicotine and have a net positive impact on society.”

    Consistent with the company’s framework, the facility includes business transformation-linked pricing adjustments based on progress on two of PMI’s most ambitious and strategic business transformation metrics: PMI’s smoke-free/total net revenue percentage and the number of markets where PMI’s smoke-free products are available for sale. The adjustments may result in the reduction or increase in both the interest rate and commitment fee under the credit agreement if PMI achieves, or fails to achieve, certain specified targets.

    This credit facility further reinforces our industry-leading transformation and our commitment to accelerate the end of smoking.

    Emmanuel Babeau, chief financial officer, PMI

    “Investors, lenders and other stakeholders can play an important role in driving change by encouraging and supporting companies that are committed to transform and improve their impact on society,” said Jennifer Motles, chief sustainability officer, in a statement. “We look forward to continued engagement with our stakeholders in order to further accelerate our smoke-free transformation and set an example for other companies, both inside and outside our industry.”

    The facility replaces PMI’s existing $3.5 billion revolving credit facility, which was set to expire on Oct. 1, 2022, and was terminated effective Sept. 29, 2021.

  • U.S. IQOS Imports Halted

    U.S. IQOS Imports Halted

    Photo: theaphotography

    The International Trade Commission (ITC) has upheld an initial determination from May 2021 that Philip Morris International’s IQOS device infringes on two patents owned by BAT subsidiary Reynolds American Inc. (RAI).

    The agency has instituted an import ban and a cease-and-desist order preventing IQOS consumables and devices from being sold in the U.S. in 60 days. PMI’s U.S. partner, Altria Group, plans to continue to sell IQOS through the 60-day period in its existing markets.

    BAT welcomed the ruling. “Infringement of our intellectual property undermines our ability to invest and innovate and thereby reduce the health impact of our business,” the company wrote in a statement. “We will therefore defend our IP robustly across the globe.”

    The patents relate to an electronically powered device with a heater to generate an aerosol and expire in October 2026 and November 2031. BAT has filed similar cases globally, including in Germany, the U.K., Japan and Italy.

    Morgan Stanley said the ruling would have limited financial impact on PMI and Altria, as IQOS in the U.S. is not a meaningful contributor to the companies’ earnings. The outcome of similar cases brought by BAT against PMI internationally, however, could have a greater impact. But so far, PMI has been successful defending cases in the U.K. and Greece.

    The investment bank also noted that the IQOS ban applies to imported product, suggesting it may be overcome by shifting production to the U.S.

    The ITC decision will now be reviewed by the U.S. Trade Representative. If the decision is not vetoed within 60 days (only a handful have ever been vetoed), it can be appealed to the U.S. Court of Appeals, but the import ban would still be in effect throughout an appeals process.

  • Smokers Unaware of Better Alternatives

    Smokers Unaware of Better Alternatives

    Photo: kues1

    Misinformation threatens progress toward a smoke-free future, reveals a new international survey released by Philip Morris International.

    The survey—fielded among nearly 30,000 adults in 26 countries by independent research firm Povaddo and commissioned by PMI—reveals that many adult smokers remain unaware that better alternatives to cigarettes exist, are unable to access them or are confused by false or misleading information that prevents them from making an informed choice.

    Nearly eight in 10 respondents (79 percent) agree that adult smokers who would otherwise continue using cigarettes should have access to and accurate information about smoke-free alternatives. This view is shared by 87 percent of current adult smokers.

    “People expect public health bodies and regulators to reach a scientific consensus around innovative smoke-free alternatives and provide adults who smoke with evidence-based information about these products,” said Gregoire Verdeaux, senior vice president of external affairs at PMI, in a statement. “Misinformation about smoke-free alternatives—often based on opinion—is a persistent issue that is having real-world consequences.”

    Misinformation about smoke-free alternatives—often based on opinion—is a persistent issue that is having real-world consequences.

    Gregoire Verdeaux, senior vice president of external affairs, PMI

    The survey also shows the extent of public confusion surrounding smoke-free products. Nearly half the adults surveyed wrongly believe that e-cigarettes and heated-tobacco products are more harmful than or equally harmful as cigarettes (45 percent and 46 percent, respectively, for each product category). Asked why they have not considered switching to a better alternative, around a third of smokers surveyed cited lack of information about how these products differ from cigarettes (33 percent), uncertainty about the science (35 percent) or having easier access to cigarettes (32 percent).

    According to PMI, the survey findings also demonstrate how accurate information about better alternatives can help smokers to move away from cigarettes. The vast majority (91 percent) of adult smokers who have switched to a better alternative and stopped smoking confirmed that having accurate information about how these products differ from cigarettes was an important factor in their decision. Of adults who smoke, 63 percent would be more likely to switch to a better alternative (such as e-cigarettes or heated-tobacco products) if they had clarity on how these products differ from cigarettes and the science behind them.

    The survey also explores public attitudes toward scientific studies conducted by manufacturers of smoke-free products. A majority of adults surveyed (82 percent) believe their governments have a responsibility to objectively review and consider scientific evidence about smoke-free alternative products coming from manufacturers such as PMI. Additionally, nearly three quarters (72 percent) support tobacco companies working with governments, regulators and public health experts to ensure that smokers have access to and accurate information about smoke-free alternatives.

  • Pharma Events Ban PMI-Owned Vectura

    Pharma Events Ban PMI-Owned Vectura

    Photo: Vitezslav Vylicil

    Pharmaceutical industry conferences have started banning Vectura after Philip Morris International acquired the respiratory drug manufacturer in a contentious £1 billion ($1.37 billion) takeover, reports The Times of London.

    The Drug Delivery to the Lungs (DDL) conference, a leading event, has terminated Vectura’s sponsorship and the company’s representative has stepped down from its committee.

    “In light of the recent acquisition of Vectura by PMI, the DDL committee [has] sadly decided that they can no longer accept support from Vectura,” the organizers said in a memo seen by The Times.

  • PMI Completes Fertin Pharma Acquisition

    PMI Completes Fertin Pharma Acquisition

    Photo: Tanusha

    Philip Morris International has closed its acquisition of Fertin Pharma, a leading developer and manufacturer of innovative pharmaceutical and well-being products based on oral and intra-oral delivery systems, for an enterprise value of DKK5.1 billion ($820 million).

    “As we build our pipeline of smoke-free products with the goal of phasing out cigarettes and expand our business for the long-term toward areas outside of tobacco and nicotine, such as self-care wellness, we welcome the contributions that Fertin Pharma, its management and its employees will bring to PMI,” said PMI CEO Jacek Olczak in a statement.

    “PMI’s future is centered on health, science, technology and sustainable business practices to deliver innovative products and solutions that aim to improve people’s lives and create a net positive impact on society. The world-class expertise of Fertin aligns perfectly with this vision and will be an important part of our future.”

    “We are excited to join PMI and start this new chapter for Fertin Pharma,” said Peter Halling, the company’s CEO. “By becoming part of PMI’s transformation, Fertin will be uniquely positioned to continue to innovate, grow and serve our customers as a leading CDMO [contract development and manufacturing organization]—delivering on our vision to enable people to live healthier lives. Our shared commitment to science and consumer-centric innovations forms a strong basis for a very successful future together.”

    The addition to Fertin Pharma’s technologies, capabilities and workforce—including around 200 R&D professionals—will provide PMI with speed and scale in differentiated and innovative oral delivery products to support its 2025 goals of generating more than 50 percent of its total net revenues from smoke-free products and at least $1 billion in net revenues from products beyond nicotine.

    With Fertin Pharma’s know-how, PMI plans to accelerate its presence in the fast-growing modern oral category through a broad range of smoke-free products, such as nicotine pouches, that can help more adults who would otherwise continue to smoke switch to better alternatives and stop smoking. In addition, Fertin Pharma’s oral delivery platforms—which are complementary to PMI’s inhalation expertise—can be leveraged for the development of scientifically substantiated self-care wellness products, including over-the-counter solutions and supplements for better living in areas such as sleep, energy, calm and focus.

    By becoming part of PMI’s transformation, Fertin will be uniquely positioned to continue to innovate, grow and serve our customers as a leading CDMO [contract development and manufacturing organization]—delivering on our vision to enable people to live healthier lives.

    Peter Halling, CEO, Fertin Pharma

    Fertin Pharma has more than 850 employees and operations in Denmark, Canada and India. It is a leading CDMO, specializing in the research, development and production of gums, pouches, liquefiable tablets and other solid oral systems for the delivery of active ingredients, including nicotine, where it is a leading producer of nicotine-replacement therapy solutions. In 2020, Fertin Pharma generated net revenues of DKK1.1 billion.

  • PMI’s Vectura Offer Becomes Unconditional

    PMI’s Vectura Offer Becomes Unconditional

    Photo: danielabalan

    PMI Global Services’ offer for inhaled drug delivery solutions provider Vectura Group has become unconditional, having received valid acceptances for or acquired 74.77 percent of Vectura shares, in excess of the 50 percent required under the acceptance condition, as well as confirming that all other conditions to the offer have been satisfied or waived. PMI has extended the offer to allow for the tender of further shares.

    “We have reached an important milestone in our acquisition of Vectura and are pleased to have secured over 74 percent of the company’s shares, in excess of the 50 percent required to make our offer unconditional and PMI the majority shareholder,” said PMI CEO Jacek Olczak in a statement.

    “We are very excited about the critical role Vectura will play in our ‘beyond nicotine’ strategy and look forward to working with Vectura’s scientists and providing them with the resources and expertise to grow their business to help us achieve our goal of generating at least $1 billion in net revenues from Beyond Nicotine products by 2025.”

    PMI’s proposed acquisition of Vectura is part of its long-term strategy to move beyond nicotine and will provide support for Vectura’s continued growth. The tobacco firm intends to build on Vectura’s scientific capabilities to develop products and services that go beyond nicotine. PMI aims to achieve at least $1 billion in annual net revenues from non-nicotine sources by 2025.

    PMI’s acquisition follows a bidding war with the private equity firm Carlyle.

    PMI’s bid unleashed a storm of criticism from public health advocates who dislike the idea of a tobacco company investing in the lung health business.

  • PMI Reaffirms Full-Year Guidance

    PMI Reaffirms Full-Year Guidance

    Photo: vfhnb12

    Philip Morris International reaffirmed the company’s 2021 full-year reported diluted earnings per share forecast range of $5.76 to $5.86.

    Speaking at the Barclays Global Consumer Staples Conference, PMI CEO Jacek Olczak said the company remained on track for an excellent performance in 2021 underpinned by better combustible volumes and continued strong demand for IQOS. “We are today reaffirming our full-year EPS forecast and now expect to be toward the upper end of our 12 percent to 14 percent organic growth range,” he told investors.

    Even as the current global shortage of semiconductors limits PMI’s ability to realize the full potential of IQOS, the underlying momentum of the brand is clear, said Olczak, citing the positive early results for IQOS Iluma in Japan following the launch last month.

    At the same time, PMI cautioned that the ongoing global semiconductor shortage could reduce device assortment and availability impacting IQOS user acquisition and the timing of second-half 2021 Iluma launches in certain markets. As a result, full-year 2021 heated-tobacco unit shipment volume could be toward the lower end of the 95 billion to 100 billion unit range, if shortages persist, with third-quarter heated-tobacco unit shipment volume of 23 million to 24 billion units.

    An archived copy of the Barclay’s presentation and Q&A session will be available at http://www.pmi.com/2021barclays%20 until Oct. 7, 2021.

  • Chew on This

    Chew on This

    Photo: Swedish Match

    How sensibly will modern oral nicotine products be regulated in the future?

    By Stefanie Rossel

    Is history repeating itself? The parallels between the development of the vaping sector and that of modern oral nicotine are striking: Quick consumer adoption leads to phenomenal category growth rates. The promising, still-unregulated market lures myriad players and creates an unmanageable number of brands. Leading tobacco manufacturers seek to get their slice of the cake, often by strategic acquisitions. Despite evidence pointing at the reduced harm potential of the product compared to combustible cigarettes, tobacco control activists raise the alarm, urging regulators to crack down. The Wild West, gold-rush atmosphere is then abruptly curbed by the introduction of often-misguided restrictions and even product bans.

    It is at these crossroads where modern oral nicotine currently finds itself. The category, still a niche, has grown impressively in the five years since Swedish Match introduced Zyn, the first product of its kind. Market analysts are outdoing each other in their forecasts. 360Research Reports expects the category to increase to $32.77 billion in 2026 from $2.38 billion in 2020. Five key global players jointly hold a 77 percent share of the world market, according to Precision Reports. With 66 percent, Europe is the largest market, followed by North America and Asia-Pacific with more than 30 percent each, the company states.

    Competition in the market has rapidly heated up. Research and Markets notes the launch of 27 new brands of nicotine pouches in 2020. By now, all major tobacco companies and several smaller players are represented in the category. To cater to the increased demand, many of them had to step up production capacities, among them British American Tobacco, which in September 2020 built a new plant in Hungary that is dedicated to the production of nicotine pouches for export markets.

    The most recent company to enter the segment is Philip Morris International. In an investor presentation in February 2021, then-CEO Andre Calantzopoulos announced the development of a respective product through a “combination of partnerships and internal development.” In May, PMI acquired Danish family business AG Snus, a manufacturer of nicotine pouches. The deal was followed by PMI’s takeover of Danish firm Fertin Pharma on July 1, a company specializing in nicotine-replacement therapy (NRT) type products such as gums, pouches, liquefiable tablets and other solid oral systems for the delivery of active ingredients, including nicotine.

    Less Harmful Than Snus

    Nicotine pouches or “modern oral,” as manufacturers have termed the novel segment, are considered a subcategory of the smokeless tobacco segment. They are an evolution of traditional Swedish snus, a pasteurized oral tobacco that is available as loose products or in pouches and has been consumed in the Nordic country for 200 years. Unlike snus, however, modern oral nicotine contains no tobacco. In some brands, the nicotine used is not even derived from tobacco but produced synthetically. The nicotine pouches are white, pre-portioned little bags comprising nicotine applied to a carrier material, such as food-grade fillers. They come in a variety of flavors and nicotine strengths and even as nicotine-free variants. Like snus, they are discreet and spit-free and can be disposed of in household trash after use.

    For years, Sweden has had the lowest smoking rate in the European Union. According to Statista, the share of daily smokers in the country stood at 7 percent in 2019 (if the rate were to drop below 5 percent, Sweden would be considered “smoke-free” by some definitions). This compares to an average smoking prevalence of 23 percent throughout the EU. Sweden’s low smoking incidence is largely attributed to snus, which is used by 1 million Swedes. Decades of scientific research have confirmed the product’s efficiency as a smoking cessation tool. Snus use is estimated to be about 90 percent to 95 percent safer than smoking combustible cigarettes, which puts the product on par with e-cigarettes on the continuum of risk scale. A 2020 survey conducted by the European Tobacco Harm Reduction Advocates found that 43.3 percent of Swedish ex-smokers had used snus and/or nicotine pouches to quit smoking whereas more than 31 percent of current European smokers would be interested in trying snus if it was legalized.

    However, snus sales have been banned in the EU since 1992 except in Sweden, which negotiated an exemption from the ban when it became part of the trading bloc in 1995. The EU prohibition has survived two lawsuits, and few expect it to be lifted in the foreseeable future. Modern oral products, which offer non-Swedish EU users an alternative to snus, may rank even lower than snus on the risk continuum, according to a recent BAT study published in Drug and Chemical Toxicology. The research found that the company’s nicotine pouches had a toxicant profile comparable to that of NRTs, which are currently considered the least risky of all nicotine products.

    In a Gray Zone

    Given the EU’s attitude toward tobacco harm reduction, such an acknowledgement appears unlikely, however. Because modern oral products don’t contain tobacco, they cannot be regulated under the current EU Tobacco Products Directive (TPD); their status will be reconsidered during in the next TPD revision.

    In Germany, this has recently led to confusion over the legality of nicotine pouches. Several courts at the federal level have ruled that modern oral products are to be classified as foodstuff. As such, they would have to meet the requirements of European food legislation, which does not permit nicotine as food, food ingredient, food additive or flavor. Furthermore, food must not be hazardous to consumers’ health, according to the legislation. However, toxicological studies have shown that the nicotine dose that is taken up even by moderate users of modern oral is linked to health damage, courts argued. The rulings led to local sales bans. Due to this legal uncertainty, BAT in July 2021 suspended sales of its Velo nicotine pouches in Germany. The company called for legislation to set advertising standards for tobacco-free nicotine pouches and to limit nicotine concentration to 20 mg/mL.

    In the absence of EU legislation, several countries have tried to regulate nicotine pouches at the national level. In May, the Czech Republic amended its food and tobacco products act, obliging manufacturers, importers, retailers and distributors of nicotine pouches to ensure that these products meet the requirements for the composition, appearance, quality and characteristics stipulated by the decree of the Ministry of Health under similar conditions as those for e-cigarettes. In addition, they will have to inform the ministry, on a regular basis, on the nicotine pouches that they intend to launch on the EU/European Economic Area market. Manufacturers will also have to collect information on the suspected adverse effects of these products on human health. Tobacco-free nicotine pouches that do not comply with the amendment and that were produced or marketed before May 12, 2021, will have to come off the market in 2022.

    Italy, where nicotine pouches are considered consumer products, will reportedly consider modern oral products when it revises its anti-smoking law by the end of the year. Estonia’s parliament announced in July that it might relax its snus regulations to help reduce smoking.

    The U.K., no longer an EU member and therefore not bound to the common market’s regulation, is expected to follow Sweden’s example. To achieve its goal of a smoke-free society by 2030, the British government is presently shaping a tobacco control plan, which may very well include stronger promotion of cigarette alternatives, such as heated-tobacco products and nicotine pouches.

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.