Philip Morris says cigarette sales in many places could end in a decade and they’ve got a ‘safer’ product to replace them


Philip Morris International Inc. thinks the sale of cigarettes could come to an end in countries around the world in the coming years, but have no fear, because they’ve got another product ready to sell that offers a “safer” nicotine fix.

Philip Morris
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+4.02%

and the Food and Drug Administration announced this week that the company’s IQOS “electrically heated tobacco system” has been given the green light to market as a safer alternative to cigarettes.

Now designated as a “modified risk” product, the company can promote these items “as containing a reduced level of or presenting a reduced exposure to a substance,” according to the FDA statement.

Philip Morris, the company behind Marlboro cigarettes, describes these alternative products as heating rather than burning tobacco, which a cigarette does. Burning tobacco, which reaches 600 degrees Celsius, “contains high levels of harmful chemicals,” according to the company’s website. The tobacco heating system (THS) heats tobacco to 350 degrees Celsius.

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“However, THS is not risk-free and delivers nicotine which is addictive,” the site says. Philip Morris has turned its focus to the IQOS product, with Philip Morris’ Chief Operating Officer Jacek Olczak saying at the Deutsche Bank dbAccess Global Consumer Conference last month that the company is committed to “working towards realizing [the] potential of this opportunity,” according to a FactSet transcript.

The development comes at a time when Philip Morris is preparing for the end of cigarette sales.

“I am convinced that it is possible to completely end cigarette sales in many countries within 10 to 15 years, but for that to happen, manufacturers and governments need to work in the same direction,” said André Calantzopoulos, chief executive of Philip Morris, in a letter to stakeholders published with the company’s report on its environmental, social and governance (ESG) efforts.

Calantzopoulos notes the “skeptical stakeholders” like international organizations and the media that “doubt that harm reduction through smoke-free alternatives is sound public health policy or argue that our purpose-driven strategy is nothing more than window dressing.”

He highlights other areas where advice to reduce a hazardous activity is accepted, such as lowering sugar intake for better health.

“I feel strongly that people who smoke cigarettes, the most harmful nicotine-containing product, should not be denied the opportunity to switch to better alternatives,” Calantzopoulos wrote.

In 2019, Philip Morris sold 706.7 billion cigarettes, down 4.5% from 2018, according to a June CFRA report. Over the next few years, CFRA forecasts that cigarette consumption will fall 3% each year.

Shipments of heated tobacco products, on the other hand, soared 44.2% to 59.7 billion units in 2019.

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There had been discussions about merging Philip Morris and Altria Group Inc.
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, however those talks ended without a deal. This is a good thing for Philip Morris “given heightened regulatory and legal headwinds surrounding e-cigarettes in the U.S., as Philip Morris’ IQOS product underwent a lengthy FDA review process before getting the green light for sale in the U.S. in April 2019,” CFRA said.

CFRA rates Philip Morris stock buy with a 12-month price target of $95.

“Despite declining cigarette consumption in developed markets, we look for pricing gains and growth in emerging markets to support revenues,” CFRA said. “We think the launch of Philip Morris’ heated tobacco product, IQOS, will lead to market share gains and help offset cigarette volume weakness.”

The company reported earnings and revenue that beat expectations in the most recent quarter. The stock is down 15.1% for the year to date while the Dow Jones Industrial Average
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has fallen 9.3% for the period.

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While the cigarette business was hurt by restrictions imposed by coronavirus-related lockdowns and plummeting duty-free demand at global travel hubs, Olczak said on the April earnings call that device and heated tobacco sales were showing the potential to regain pre-COVID momentum.

Philip Morris’ goal now is to move into a “smoke-free future,” said Huub Savelkouls, the company’s chief sustainability officer, in a post on LinkedIn. Philip Morris has cut its cigarette portfolio by more than 700 SKUs (stock-keeping units) over the last four years and aims to move 40 million smokers of its cigarettes over to smoke-free products.

Savelkouls says engagement, including between the company and the investment community, is needed to achieve change.

“Making cigarettes obsolete can be achieved much more rapidly through inclusivity and openness,” Savelkouls wrote. “Our goals are really not that different and that is where the potential for creating impactful change lies: working together towards making the world smoke-free.”



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‘They’ve likened it to a war where the casualties just keep on coming’: Italians find solidarity, resilience and music during the coronavirus lockdown


COMO, Italy — It’s Sunday morning in Como.

It’s usually so busy on Sundays that I think twice about going downtown, but today the streets are deserted. All the bars, cafés and shops have signs on their doors saying, “Closed until further notice.” Even the cathedral in the main square is closed. There is an area accessible for prayer but, if the faithful want Mass, they have to get it online. The newsstands are selling papers, and a small supermarket is open, staggering arrivals, two to five at a time.

Two people stop to greet each other while walking their dogs, keeping the recommended distance of a meter. A voice from a window shouts: “Andate a casa!” (“Go home!”). There’s an eerie feel to the town, like you’re entering a kind of pre– or post–war zone. Police cars patrol the streets, even in the pedestrianized areas. There are checkpoints to ensure that people who are out have good reason. They are in a race against time to contain COVID-19, the disease caused by the novel coronavirus SARS-CoV-2.

They average age of those who have died from COVID-19 in Italy is 80.3 years old, and only 25.8% are women.

If you get stopped, you must prove where you’re going by having it self-declared on a designated module from the government website. Whatever you declare is subject to checks, and, if it’s found to be false, you could end up with a jail term of three months. Anyone out in a group will be fined on the spot

We’ve been mobilized into taking collective responsibility to stop the vicious cycle of contagion. While Prime Minister Giuseppe Conte hasn’t actually said how long this lockdown is going to last, the date set for a review is April 3. What might seem to some onlookers like a long and imposed siesta, which Italians in general love, is, in fact, respite from the battle against the pre-lockdown denial. Social distancing is key to reducing infections and taking the pressure off hospitals and medical staff.

The governor of Genoa, Giovanni Toti, is now planning to turn ferry boats into temporary medical facilities. This is partly because of the expected repercussions from the crowding on beaches last weekend, and also to free up hospital beds from those who are convalescing. There has even been talk of additional ferries being converted so as to provide a place for people who have contracted the virus to go into quarantine, especially if they have elderly or vulnerable people at home. The first of these structures should be ready in five working days.

Some pictures have been recently released from the local hospital here in Como. Although hospital staff are working flat-out to free up other areas of the hospital to accommodate COVID-19 patients, the numbers who are being admitted are on a dramatic increase. Beds have been set up in what appears to be the ambulance entrance area. It’s heated. They call it the “hot room,” and it’s where patients who are suspected to have contracted the virus are stopped, and where they wait. It’s also strategic, as it’s right next to the emergency room.

Nurses and doctors who are treating these patients have to wear suffocating face masks and heavy lab-coat protection for hours on end. Some have posted photos on social media to show their bruised faces from wearing the masks for so long. They’re under immense pressure, both physical and psychological, and continue their plea to the public to play their part. They’ve likened it to a war where the casualties just keep on coming.

Dispatches from the front lines of a pandemic: ‘Retired doctors have been asked to go back to work.’ Italy’s lockdown hasn’t had much impact — yet


Alison Fottrell lives and teaches in Como, Italy.

In fact, nationwide the number of confirmed contagions is going up by the thousands. As of Monday evening, there are 27,980 confirmed cases in Italy, 2,158 deaths and 2,749 people who have recovered. Two hundred and fifty people died in a single day.

It’s a little over three weeks since the initial outbreak, and so we have more data on those who have died from COVID-19. Their average age was 80.3, Silvio Brusaferro, legal representative of the Istituto Superiore di Sanità, said during a recent press conference. Only 25.8% are women. Disease specialists have also estimated that the actual number of people who have the virus is much higher than official figures, which isn’t surprising considering the virus has been circulating freely for weeks.

Research shows that, although people are more likely to spread the virus if symptomatic, they could still be contagious with light to no symptoms. And not everyone with symptoms is swabbed. When someone in the family gets the virus, the others with symptoms, however light, are all kept in isolation. When people are in isolation with a low-grade fevers, face-to-face medical attention is difficult to impossible.

Milan is now giving only five days instead of 30 for surviving relatives to organize a private burial.

When they get critical, they’re taken into hospital, and direct contact with the rest of the family is cut off. If a patient then dies, those who have been quarantined, especially those who are symptomatic, are unlikely to see them again. There is an “absolute ban” on leaving the house for those who are in quarantine.

Churches in some parts of Lombardy have been turned into morgues, while Milan is now giving only five days instead of 30 for surviving relatives to organize a private burial. Otherwise, in some cases, it’s cremation by default. That’s not how people would have expected to say goodbye to their loved ones. Funerals, like all social gatherings are forbidden. Those who pull through, the elderly in particular, are concerned that this is a threat which is going to continue.

So it feels like we’ve all been catapulted into a new normal. Many things after this lockdown will change. But until things at least stabilize, there is an element of the surreal. Although Conte has assured us that “non è necessario fare nessuna corsa per acquistare cibo” — “there’s no rush to buy food” — supermarket shopping is no longer so simple and has become more of an impresa. But once you finally get into the shop with your basket, everything you need is there on the shelves.

Coming into this past weekend of expected peaks in infections, the mayor of Rome, Virginia Raggi, launched the hashtag #AffaciamociAlle18 — #Let’sGoToTheWindowAtSix. The meet-up was scheduled for Friday the 13th, at 6 p.m. Basically, everyone was invited to go to their windows or out on their balconies, to say hello to their neighbors and sing together or play music. This was also to bring home the message of another hashtag that has taken on life: #TuttoAndràBene, or #EverythingWillBeFine.

These types of initiatives are particularly important for people who are living out this lockdown alone and no doubt feeling more isolated than most. They are also meant as a boost to those who are fighting in the hospitals to save lives. So, on Friday 13th, from Milan to Sicily, people were singing in chorus from their balconies.

There was a song for every region, from the national anthem to Pino Daniele’s “Napul’è” and the famous anti-fascist resistance song “Bella Ciao.” People in towns from Naples to Milan stood on their balconies to sing patriotic songs across the empty streets — and into the night sky: songs including “Canto della Verbena”(And While Siena Sleeps) and “Abbracciame(Hug Me).

But not only were people singing; in other regions, countless musicians joined in the initiative with improvised concerts from balconies in Rome to Siena to Florence and beyond, right up to my balcony in Como. Even the principal violinist of La Scala in Milan took up his instrument and played against the backdrop of a banner that read: “Non molliamo, ce la faremo.” That translates as: “We won’t give up, we will survive.”

Amidst the lockdown and the checkpoints, there is a sense of solidarity. People are aware that the world is watching. There’s a message of hope in this music: If we pull through, you will, too.

Alison Fottrell is a teacher and writer living in Como, Italy.

This essay is part of a MarketWatch series, ‘Dispatches from the front lines of a pandemic.’

MarketWatch photo illustration/iStockphoto





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