Philip Morris International - Tobacco Reporter

MRTP Renewal Application Filed

The U.S. Food and Drug Administration on May 9 filed for scientific review modified risk tobacco product (MRTP) renewal applications submitted by Philip Morris Products for the following IQOS products:

IQOS 2.4 System Holder and Charger
IQOS 3.0 System Holder and Charger
Marlboro Amber HeatSticks (formerly named Marlboro HeatSticks)
Marlboro Green Menthol HeatSticks (formerly named Marlboro Smooth Menthol HeatSticks)
Marlboro Blue Menthol HeatSticks (formerly named Marlboro Fresh Menthol HeatSticks)

In 2020 and 2022, the FDA issued modified risk granted orders for products. These orders are valid for a fixed time period. To continue marketing the MRTPs after the authorized term, the company submitted MRTP renewal applications to FDA.

Starting May 10, 2024, people may submit public comments on these applications on regulations.gov to docket FDA-2021-N-0408 for the IQOS 3.0 device and docket FDA-2017-D-3001 for the IQOS 2.4 device and the Marlboro HeatSticks products.

The FDA will post application documents, including amendments; given that the documents will need to be redacted for any confidential information, they will be posted on the Center for Tobacco Products’ website on a rolling basis.

Once all materials for these MRTP applications, including amendments, have been made publicly available, FDA will announce a closing date for the comment period. The closing date will be no earlier than 180 days from the date of the Federal Register notice and at least 30 days from the date FDA posts the last application materials.

May 10, 2024

PMI Holds Annual Shareholders Meeting

Philip Morris International held its 2024 annual meeting of shareholders on May 8. Andre Calantzopoulos, executive chairman of the board, addressed shareholders and answered questions. CEO Jacek Olczak gave a business presentation commenting on PMI’s 2023 performance and progress in its transformation to a smoke-free business.

“Our strategy to become a smoke-free company has enabled us to build and sustain strong momentum, resulting in smoke-free products reaching nearly 40 percent of our total net revenues and over 40 percent of our gross profit in the fourth quarter of 2023,” said Olczak in a statement.

“As a global smoke-free champion with leading brands IQOS and Zyn, we are well positioned to further accelerate our transformation in the years to come, to the benefit of the company, our shareholders, other stakeholders and public health.”

Approximately 80 percent of the shares entitled to vote were represented at the meeting in person or by proxy. The shareholders elected 12 nominees for director; approved, on an advisory basis, the compensation of named executive officers; and ratified the selection of PricewaterhouseCoopers as independent auditors.

An archived copy of the webcast of the meeting is available at www.virtualshareholdermeeting.com/PM2024.

May 9, 2024

PMI Draws Fire for Supporting Doctors

Philip Morris International is drawing fire for sponsoring doctors’ education, reports The Guardian.

According to the newspaper, the multinational has been supporting medical education programs on quitting smoking and harm reduction in South Africa, the Middle East and the United States. The sponsored courses allow participants to collect credits showing they are engaging in post-qualification learning.

Nicholas Hopkinson, a professor of respiratory medicine at Imperial College London, lambasted PMI’s medical sponsorships. “Based on its market share (around 15 percent), and the global death toll from smoking (more than 8 million annually), Philip Morris kills at least a million people every year,” he was quoted as saying. “The idea that it should have any role in medical education is grotesque.”

Hopkinson called for bodies that provide or regulate medical education to “produce explicit statements and policies that tobacco industry involvement is completely forbidden.”

A PMI spokesperson said the company believes science-based education on the topic of tobacco harm reduction is vital to improve public health.

PMI provides educational grants for science-based programs that are run independently from PMI and follow accredited standards, including a further independent third-party academic review, he said.

“Funding is clearly labelled and attributes support from PMI. We do not control the content, and it is unfounded to claim the programs are to promote PMI products. Our activities comply with all applicable laws.”

May 7, 2024

PMI Boosts Investment in Ukraine

Philip Morris International will launch the latest version of its IQOS Iluma heat-not-burn device in Ukraine, reports Interfax. The debut had been delayed in the wake of Russia’s military invasion.

“It is another proof of our support to the economy of Ukraine in the difficult times alongside our investing in the factory in the Lvov region,” Philip Morris Ukraine General Director Maxim Barabash was quoted as saying.

In order to meet anticipated demand, PMI has opened 40 stores in 24 cities, launched express shipping across Ukraine and established 120 recycling stations across the country accepting used products for reprocessing or eco-disposal.

“Philip Morris launched the first IQOS tobacco-heating system in 2016. Since then, about 1.3 million of adult smokers in Ukraine abandoned cigarettes and chose our companies’ smoke-free alternatives,” said Roman Ivanov, head of PMI Ukraine’s smoke-free products department. “We will continue developing our brand retail and testing new formats of our commercial infrastructure in 2024.”

PMI says it has invested more than $700 million in Ukraine since starting operations there in 1994. In February 2022, following Russia’s attack, the company suspended the operations of its factory in Kharkov and started importing products from eight PMI factories outside Ukraine while partnering with another international manufacturer in Ukraine.

The company plans to launch a new, $30 million factory in the Lvov region in the second quarter of 2024.

PMI held a 24 percent share of the Ukrainian cigarette market in October 2024, up from 14 percent after Russia’s invasion but still short of its 28.5 percent share before the conflict.

May 6, 2024

U.S. IQOS Targets ‘Achievable’: Analysts

Philip Morris International’s goals for its heated tobacco products in the United States are realistic according to analysts cited by Reuters.

Today marks the expiration of Altria Group’s exclusive right to distribute PMI’s internationally popular IQOS tobacco-heating device and consumables in the U.S., leaving PMI free to compete in the world’s most lucrative tobacco market with its top noncigarette brand.

The multinational plans to launch IQOS in the U.S. in the second quarter. PMI wants to get a 10 percent share of total U.S. cigarette and heated tobacco volumes within around five years of it launching the latest version of its device, which is not expected until at least 2025.

It will have to develop the category almost from scratch. Unlike in other developed countries, heated tobacco products are virtually nonexistent in the U.S market, where sales of noncombustible nicotine products are dominated by e-cigarettes.

Research by Bernstein analyst Callum Elliott in other markets suggests that high vaping rates need not hurt heated tobacco take-up. “Maybe the 10 percent … target really could be achievable?” he wrote in a note to investors.

Another factor that should work in PMI’s favor is the fact that the U.S. Food and Drug Administration has authorized PMI to market IQOS as reducing exposure to harmful chemicals versus cigarettes. The FDA has not done the same for vapes.

As a result, IQOS could have lower taxes, which would help to ease its relatively high price tag.

And unlike Altria, PMI need not worry about cannibalizing sales of its traditional tobacco products, as it sells no combustible cigarettes in the U.S.

Sean King, equity analyst at top-20 PMI investor Columbia Threadneedle, believes PMI’s targets are achievable.

With an estimated $20 billion profit pool up for grabs and no cigarette revenues to worry about, PMI can put its firepower behind IQOS success, he said.

April 30, 2024

U.K. Misleading Public

Philip Morris International has accused the U.K. Department of Health of spreading misinformation about heated-tobacco products after a social media post warning that “all forms of tobacco are harmful,” reports The Grocer.

A tweet posted by the department in a thread of “myths” about vaping and tobacco contained false and misleading statements and risks driving consumers back to cigarettes or dissuading current smokers from making the switch to alternatives, according to the multinational.

“What hope do adult smokers have when seeking out accurate information on smoke-free products if it’s the government that’s spreading misinformation?” said PMI Chief Communications Officer Moira Gilchrist.

“All forms of tobacco are harmful, and there is no evidence that heated-tobacco products are effective for helping people to quit smoking,” the tweet stated.

“Laboratory studies show clear evidence of toxicity from heated-tobacco products. Unlike vapes, there is no evidence they are effective for helping people to quit smoking,” the post continues, citing a 2017 report by the Committee on Toxicity.

According to Gilchrist, such statements “distort the scientific evidence base” and “seriously misleads the public.”

While acknowledging that heated tobaccos are not risk-free, Gilchrist said it is misleading to imply that all forms of tobacco are equally harmful.

A Public Health England report in 2018 said that available evidence suggested that heated-tobacco products “may be considerably less harmful than tobacco cigarettes” but “more harmful than e-cigarettes.”

The Grocer

April 25, 2024

PMI Beats Estimates on Robust Smoke-Free Products Demand

Philip Morris International reported net revenues of $8.8 billion in the first quarter of 2024, up 9.7 percent on a reported basis over the comparable 2023 period. Gross profit grew 12.4 percent to $5.6 billion while operating income was $3 billion, reflecting an 11.5 increase over the 2023 quarter.

Growth was driven by strong demand for heated-tobacco products and Zyn nicotine pouches. Shipments of heat-not-burn products jumped 20.9 percent to 33.13 billion units from the comparable 2023 quarter.

Sales of oral smoke-free products increased 35.8 percent to 4.2 billion units. In the United States, shipments of Zyn nicotine pouches jumped nearly 80 percent versus the prior year to reach 131.6 million cans. The company now commands 74 percent of the category in the U.S.

PMI’s combustible cigarette shipments contracted by 0.4 percent from the 2023 quarter to 143.19 billion sticks.

The smoke-free business now accounts for 39 percent of PMI’s net revenues.

“The strength of our first-quarter results with excellent top-line growth and significant margin expansion gives us the confidence to raise our 2024 currency-neutral guidance,” said PMI CEO Jacek Olczak in a statement.

“Strong smoke-free momentum continues with rapid underlying volume progression and accelerating organic net revenue and gross profit growth, fueled by the operating leverage of IQOS and the best-in-class economics of Zyn.

“We are executing efficiently and effectively in a dynamic operating environment of geopolitical and economic tensions that accentuate currency volatility. We are doing our utmost to mitigate these challenges and deliver robust growth and value creation.”

April 23, 2024

U.S. Market Poised for Disruption

The American tobacco market is poised for disruption as Altria Group’s exclusive U.S. distribution rights to Philip Morris International’s IQOS heat-not-burn product expires on April 30, reports The Wall Street Journal. After this date, PMI will be free to compete in the U.S. with its top noncigarette brand.

PMI hopes IQOS can help it grab a 10 percent share of the lucrative U.S. cigarette and heated-tobacco market by roughly 2030, representing an additional $2.2 billion in annual earnings before interest, taxes, depreciation and amortization, according to Stifel analysts.

Altria, with its 50 percent share of the American cigarette market, has a lot to lose if PMI can persuade more smokers to switch to noncombustible alternatives.

In recent years, U.S. smokers have become more receptive to alternative nicotine delivery methods. Last year, 40 percent of all nicotine products sold in the U.S. were smoke-free offerings such as e-cigarettes and oral nicotine pouches. The share of traditional cigarettes, meanwhile, declined to 60 percent last year from 80 percent in 2018.

If the trend continues, Americans will be more likely to reach for a vape or nicotine pouch than a cigarette within three years.

Already earning some 40 percent of its net revenue from smoke-free products, PMI needs not worry about the dwindling number of U.S. smokers because it doesn’t sell cigarettes in America.

Altria, by contrast, still relies heavily on combustible cigarettes, which currently account for 85 percent of its sales. Its comparatively low exposure to the smokefree market includes brands such as On! oral nicotine pouches and Njoy e-cigarettes. The company also has a joint venture with Japan Tobacco to launch Ploom heated tobacco sticks in the U.S. and is working on its own heat-not-burn brand.

A badly timed bet on Juul Labs saddled the company with a $12.5 billion loss.

On the flipside, Altria has a strong U.S. distribution network, which it can leverage to promote its brands—a considerable advantage as the point of sale is one of the few places where tobacco companies are still allowed to advertise their products.

Altria can also harness data to defend its patch. The tobacco giant is integrated into many retailers’ loyalty programs, allowing it to monitor what shoppers are buying.

April 19, 2024

PMI Eyes Philippines Leaf for Smoke-Free

Philip Morris International may start using Philippine tobacco in its smoke-free products following the expansion of a factory operated by a local affiliate, reports The Philippine Star.

“We’re also thinking about starting using the Philippine tobacco in the smoke-free products,” said PMI CEO Jacek Olczak during the inauguration of Philip Morris Fortune Tobacco Co.’s (PMFTC) factory in Tanauan City, Batangas.

Olczak stated that the quality of the Philippines’ tobacco leaves is “getting better and better.”

“They require even better quality, consistency, etc. But I believe the farmers, the tobacco growers in the Philippines can deliver on that quality,” Olczak added.

PMFTC is a 50-50 partnership between PMI and Lucio Tan’s Fortune Tobacco Corp. The expanded factory will produce PMI’s heated-tobacco sticks under the Blends brand for its smoke-free Bonds product.

PMFTC mixes local tobaccos with international varieties in its products.

“You will find the Philippine tobacco in our products in every country in which we operate,” Olczak said. “So in more than 100 markets, you will find the Philippine tobaccos in the product.”

“We’re very happy with the regulatory environment and the business environment in the Philippines, and we decided to locate this manufacturing here,” he added.

April 16, 2024

Job Ads Suggest IQOS Debut in Austin

The resolution of an IP dispute with BAT has removed a major hurdle to selling the product in the U.S.

Philip Morris International is preparing to launch its IQOS heated-tobacco device in Austin, Texas, USA, reports U.S. News. The city will be a testing ground for PMI’s re-entry into the United States after the company resolved an intellectual property dispute with British American Tobacco that had prompted the International Trade Commission to ban imports of IQOS in the United States.

PMI previously announced that it planned to launch IQOS in four cities in two U.S. states beginning with one city in the second quarter before a larger rollout in 2025. The company did not, however, release details.

According to U.S. News, LinkedIn job advertisements suggest that PMI is planning to launch the product in Austin. The advertisements were posted this month and include positions such as field sales representatives, territory managers and retail sales advisors.

The U.S. would be a significant market for IQOS. Euromonitor estimates that total U.S. nicotine sales excluding nicotine-replacement therapies were $143.6 billion in 2022. Cigarettes accounted for the majority of sales, but Euromonitor predicts that their value will drop by 30 percent by 2027 and the value of smoking alternatives such as e-cigarettes and nicotine pouches, will increase by 36 percent in the same period.

Investors are waiting to see if PMI can create a heated-tobacco market in the U.S., where vaping is dominant.

According to Brett Cooper, managing partner and analyst at equity research firm Consumer Edge, Texas offers an interesting trial market due to broad demographics. He noted that diverse cities like Austin, Houston and Dallas provide access to a wide range of consumer groups.

U.S. Centers for Disease Control and Prevention data shows that tobacco taxes in Texas are relatively low, with the excise tax rate on a pack of cigarettes standing at $1.41 in September 2023.

In January, Texas introduced new e-cigarette laws, banning products that resemble food or that include symbols or celebrities targeted at minors or that depict cartoon-like fictional characters.

PMI believes IQOS can capture a 10 percent share of the U.S. tobacco and heated-tobacco unit volume by 2030.

March 29, 2024

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