Philip Morris International (NYSE: PM) is undergoing a radical shift away from cigarettes toward reduced-risk products, and its iQOS heated-tobacco system has enjoyed unparalleled success in key markets like Japan. The company strongly believes that it needs to demonstrate scientifically the potential benefits that iQOS and other reduced-risk offerings have compared to traditional tobacco products. Earlier this month, the company released its latest scientific update on its efforts on the reduced-risk front.
Why Philip Morris is relying on science
More than 300 scientists at Philip Morris are working on ways to reduce the harm from smoking. As Chief Scientific Officer Manuel Peitsch admits, many of those scientists were initially skeptical about the company's true commitment to finding solutions. Yet Philip Morris has adopted the philosophy that it needs to prove scientifically that less harmful products can exist in order to convince regulators that they can work together to achieve public health goals through reduced-risk products.
Image source: Philip Morris International.
So far, those efforts have fallen into two general categories. Heated tobacco products use tobacco, but they don't burn it, instead keeping temperatures below 400 degrees Celsius. Doing so is intended to reduce levels of toxicants produced from combustion while preserving the taste and sensory satisfaction that traditional cigarette smoking gives smokers. By contrast, Philip Morris' other category of reduced-risk products don't use tobacco. Instead, they precisely control the composition of an aerosol in a way that can minimize adverse health impacts and provide a different but still satisfying experience for customers.
The results of Philip Morris International's scientific explorations have been enlightening. Studies in both the clinical and non-clinical realms point to risk reduction from electronically heated tobacco products, and early research in using carbon-tip heat sources rather than electronic heating has shown comparable results to electronic heating thus far. On the e-vapor front, products using nicotine's chemical attributes to make a breathable vapor have shown similar profiles to smoking in terms of nicotine delivery, and studies on the more common battery-powered vaporizing e-cigarettes are expected to produce a final report early next year.
How Philip Morris sees iQOS developing
For investors, the biggest question is how Philip Morris can navigate the U.S. Food and Drug Administration process for getting iQOS approved as a modified-risk tobacco product. The company's scientists see it as a step-by-step process: