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Philip Morris' IQOS Less Harmful as per Recent Research

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Tobacco giant Philip Morris International Inc. (PM - Free Report) has announced that its reduced-risk product – IQOS (Heatsticks that heat tobacco instead of burning it) has been declared as safer than conventional cigarettes by a latest research conducted by Osaki Hospital Tokyo Heart Center.

The research was conducted in Japan over a three month period in the clinical research organization which established that the Heatsticks reduced exposure to 15 harmful chemicals and also showed improvement in measured health indicators specific to smoking related diseases like those of lungs and heart diseases compared with conventional cigarettes. The research also validated that the results obtained from Heatsticks were equivalent to those who have quit smoking.

The research conducted by Philip Morris International comprised of laboratory and clinical studies as well as research on actual product use.

In an attempt to combat declining volumes Philip Morris is focusing on less harmful tobacco products in order to cater to growing demand for low-risk, smokeless tobacco products. The company has considerable presence in the unconventional tobacco products category. IQOS was first launched in Nov 2014 and is now sold in 20 countries. The products are anticipated to be available in key cities in over 30 markets in 2017.

The company is also engaged in extensive research for developing reduced risk tobacco products, which is in line with the guidelines set by the U.S. Food and Drug Association (FDA) regarding the tobacco products that can be sold in the country. Philip Morris has engaged 400 scientists for this project. In this regard, it had filed an application with the US Food and Drug Administration (FDA) for IQOS products in Dec 2016. (Read More: Philip Morris Publishes Update on Reduced Risk Tobacco)

Once the Modified Risk Tobacco Product (MRTP) claim is approved by FDA, the company will be able to enjoy a significant marketing advantage over other reduced risk tobacco products that are being sold currently.

Last week the company announced that it will invest approximately €300 million in order to convert one of its cigarette factory at Papastratos into a manufacturing plant for tobacco sticks for reduced-risk product — IQOS. (Read More: Philip Morris (PM - Free Report) Invests in Reduced Risk Tobacco Category)

The plant will have an annual capacity of about 20 billion tobacco sticks and employ a total of 1200 people (the existing plant employs approximately 800 people) when it is fully operational. The facility at Papastratos is the third facility dedicated to the manufacture of reduced risk products. The first one being that in Bologna, Italy inaugurated in Oct 2016, with an investment of €500 million and an initial production capacity of 30 billion units annually. The manufacturing hub has the capacity to employ up to 600 employees.

The strong presence of the company in the booming category of reduced risk tobacco products has buoyed investors, which is evident from its share price movement. The shares of the company have gained 22.5% in the past three months outperforming the Zacks categorized Tobacco industry’s increase of 14%.

As more and more people are shifting away from consumption of traditional tobacco products, there is rising competition among tobacco companies to capture market share by providing best quality tobacco products, which are potentially less harmful. Other tobacco companies like Altria Group Inc. (MO - Free Report) , Reynolds American Inc. and British American Tobacco (BTI - Free Report) have also come up with reduced risk tobacco products in order to tap into the growing preference for these products. Reynolds’ Vuse and Altria’s Mark Ten e-cigs are considerably popular in the market.

Philip Morris currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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