Philip Morris Looks to Transition Away From Cigarettes

Tobacco giant Philip Morris (PM)  today launched in Britain its IQOS alternative to cigarettes, which CEO Andre Calantzopoulos told BBC could ultimately replace the company's more traditional tobacco products. 

"Once we have the alternative and we have it today - and I'm very happy we do - we offer [smokers] the alternative, and we'll do everything we can to convince them to switch to this product," Calantzopoulos told BBC Radio 4.

IQOS is a cigarette alternative that heats tobacco instead of burning it, yielding on average less than 10% of the harmful elements found in cigarette smoke, Philip Morris said in a statement.

While the vapor released by electronic nicotine delivery systems such as IQOS is probably not as detrimental as the smoke emitted from burning tobacco, the products are not regulated and more research is needed to determine long-term health effects, according to the American Cancer Society's website.

For its part, Philip Morris has invested more than $3 billion in the research and development of "reduced risk" alternatives to cigarettes. 

IQOS first launched in 2014, and is available in more than 10 countries including Japan, Italy and Switzerland. Philip Morris plans to expand to cities in 20 countries by year-end and as many as 35 countries in 2017.

"As IQOS approaches 1 million converted smokers to-date, momentum continues to build and we share management's increased optimism for the product, as the company now expects that they should be able to deliver incremental EBIT at the high-end of their previously-targeted range (of $720 million - $1.2 billion)" in 2020, Cowen & Co. analysts said in a note last month following Philip Morris's investor day.

Earlier this year, Japan Tobacco  (JAPAF) launched its own tobacco vapor device called Ploom TECH, and British American Tobacco  (BTI)  has invested more than $1 billion in its tobacco heating product glo, which will be available in Japan in December.

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