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Philip Morris's (PM) IQOS 3 Receives FDA Authorization for Sale
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Philip Morris International Inc. (PM - Free Report) achieved yet another milestone in its path of delivering a smoke-free future. The company’s electrically heated tobacco system — IQOS 3 — received authorization from the U.S. Food and Drug Administration (FDA) for sale in the United States. FDA’s approval was based on a PMTA (premarket tobacco product application), which was filed in March. Let’s take a closer look at this latest development and also the company’s past efforts to boost presence in the reduced risk products (RRPs) space.
Prudent Efforts to Boost RRPs
Philip Morris is focused on expanding its RRPs category, in order to help adult smokers switch from traditional cigarettes to other low-risk options. Markedly, Philip Morris is one of the industry pioneers in driving this shift. Toward this end, the company’s IQOS, is among the leading RRPs in the industry. IQOS was launched in the United States in 2019, through a commercial deal with Altria Group, Inc. (MO - Free Report) that was approved by the FDA.
The latest IQOS 3 device incorporates a number of technological advancements as compared to the previously authorized devices. The improvements include increased battery life and quicker recharge. Management highlighted that by launching a more modernized version of IQOS in the United States, the company will be able to further accelerate the shift from harmful tobacco products to RRPs. In the past five years, nearly 11.7 million people globally have stopped smoking and have switched to IQOS.
The FDA, in its decision to approve the latest device, also stated that it has found no evidence regarding increased consumption of IQOS among the youth. In fact, Philip Morris along with its licensee Altria, have remained watchful regarding the manufacturing and marketing policies of such items to regulate usage among the youth. We note that IQOS is currently the only heat-not-burn product in the U.S. market, which has been approved by the FDA. This has been serving as a significant upside for Philip Morris and Altria.
Since the onset of the pandemic, the switch from smoking cigarettes to RRPs has been trending positively. Markedly, during the third quarter of 2020, strong growth in IQOS boosted Philip Morris's revenues in the RRPs category which increased 28.6% to $1,730 million. In the third quarter, RRPs formed a little more than 23% of the company’s total net revenues. Moreover, heated tobacco unit shipment volumes of 18.7 billion units rose 18.7% year over year. IQOS is currently available in the Atlanta, Georgia, Richmond, Virginia, Charlotte and North Carolina markets.
In other efforts to boost low-risk products, Philip Morris has started commercializing IQOS VEEV, which is its new product in the vapor category and was launched in New Zealand during the third quarter. The product is expected to be rolled out to additional markets in the fourth quarter and in 2021. Among other initiatives, Philip Morris announced a partnership with South Korea’s KT&G this January to commercialize the latter’s smoke-free products outside the country.
We note that other tobacco companies such as Turning Point Brands, Inc. (TPB - Free Report) and British American Tobacco p.l.c. (BTI - Free Report) have been expanding their offerings in the low risk tobacco space.
Wrapping Up
With cigarette sales volumes being murky, Philip Morris’s efforts to boost RRPs are likely to keep yielding. In fact, growth in RRPs and strong pricing power are acting as aces in Philip Morris’ stack. We expect the company to continue gaining on these fronts.
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Bigstock
Philip Morris's (PM) IQOS 3 Receives FDA Authorization for Sale
Philip Morris International Inc. (PM - Free Report) achieved yet another milestone in its path of delivering a smoke-free future. The company’s electrically heated tobacco system — IQOS 3 — received authorization from the U.S. Food and Drug Administration (FDA) for sale in the United States. FDA’s approval was based on a PMTA (premarket tobacco product application), which was filed in March. Let’s take a closer look at this latest development and also the company’s past efforts to boost presence in the reduced risk products (RRPs) space.
Prudent Efforts to Boost RRPs
Philip Morris is focused on expanding its RRPs category, in order to help adult smokers switch from traditional cigarettes to other low-risk options. Markedly, Philip Morris is one of the industry pioneers in driving this shift. Toward this end, the company’s IQOS, is among the leading RRPs in the industry. IQOS was launched in the United States in 2019, through a commercial deal with Altria Group, Inc. (MO - Free Report) that was approved by the FDA.
The latest IQOS 3 device incorporates a number of technological advancements as compared to the previously authorized devices. The improvements include increased battery life and quicker recharge. Management highlighted that by launching a more modernized version of IQOS in the United States, the company will be able to further accelerate the shift from harmful tobacco products to RRPs. In the past five years, nearly 11.7 million people globally have stopped smoking and have switched to IQOS.
The FDA, in its decision to approve the latest device, also stated that it has found no evidence regarding increased consumption of IQOS among the youth. In fact, Philip Morris along with its licensee Altria, have remained watchful regarding the manufacturing and marketing policies of such items to regulate usage among the youth. We note that IQOS is currently the only heat-not-burn product in the U.S. market, which has been approved by the FDA. This has been serving as a significant upside for Philip Morris and Altria.
Since the onset of the pandemic, the switch from smoking cigarettes to RRPs has been trending positively. Markedly, during the third quarter of 2020, strong growth in IQOS boosted Philip Morris's revenues in the RRPs category which increased 28.6% to $1,730 million. In the third quarter, RRPs formed a little more than 23% of the company’s total net revenues. Moreover, heated tobacco unit shipment volumes of 18.7 billion units rose 18.7% year over year. IQOS is currently available in the Atlanta, Georgia, Richmond, Virginia, Charlotte and North Carolina markets.
In other efforts to boost low-risk products, Philip Morris has started commercializing IQOS VEEV, which is its new product in the vapor category and was launched in New Zealand during the third quarter. The product is expected to be rolled out to additional markets in the fourth quarter and in 2021. Among other initiatives, Philip Morris announced a partnership with South Korea’s KT&G this January to commercialize the latter’s smoke-free products outside the country.
We note that other tobacco companies such as Turning Point Brands, Inc. (TPB - Free Report) and British American Tobacco p.l.c. (BTI - Free Report) have been expanding their offerings in the low risk tobacco space.
Wrapping Up
With cigarette sales volumes being murky, Philip Morris’s efforts to boost RRPs are likely to keep yielding. In fact, growth in RRPs and strong pricing power are acting as aces in Philip Morris’ stack. We expect the company to continue gaining on these fronts.
Markedly, this Zacks Rank #3 (Hold) stock has gained 7.9% in the past three months compared with the industry’s rise of 9.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>