Photographer: Akio Kon/Bloomberg

Philip Morris’s Cigarette Alternative Could Hit U.S. in 2017

  • CEO says plan is to release product without health claims
  • Company to submit FDA premarket tobacco application next year

Philip Morris International Inc. is set to test the market for its iQOS device -- the most advanced product to come out of its multi-billion dollar push to develop cigarette alternatives -- with a U.S. rollout as soon as next year, pushing ahead even before health regulators deem it safer than traditional smokes.

QuickTake War on Smoking

IQOS, which heats tobacco without setting it on fire, could be released as soon as the U.S. Food and Drug Administration gives approval for it to be sold, Chief Executive Officer Andre Calantzopoulos said in an interview Wednesday at the company’s offices in Lausanne, Switzerland. Philip Morris will move forward without waiting for a longer FDA vetting process that might allow it to claim the product is less harmful than traditional cigarettes. 

“That’s currently the plan,” Calantzopoulos said. “It’s good to be in the market because it’s only when you are in a specific market that you learn” about consumers and product acceptance in that particular place, he said. Gaining such insight is necessary as the company waits to see if the FDA will allow it to make any health claims, he said.

Philip Morris and its industry rivals -- British American Tobacco Plc, Reynolds American Inc. and Japan Tobacco Inc. -- are racing to develop cigarette alternatives as smoking rates decline in developed nations and regulatory burdens such as plain packaging advance. Philip Morris is ahead of the competition so far, according to Exane BNP Paribas analyst James Bushnell, who has said iQOS is “the closest yet that the industry has got to the holy grail of a commercially successful ‘safe’ cigarette.”

New York-based Philip Morris plans to file what’s known as a premarket tobacco application early next year. That’s required for any tobacco product introduced after February 2007. The FDA has said it rules on such cases within 180 days.

Longer Wait

The company is also filing a so-called modified risk application by the end of this year to be able to designate that the product is less harmful than traditional cigarettes. The FDA’s response time for that application -- which currently is between 2 million and 3 million pages -- will probably take at least twice as long as the premarket filing.

Altria Group Inc. will sell the product in the U.S., through a licensing agreement between the two companies, which used to be one entity. IQOS is currently available in 10 cities and is on track to enter 10 more in different countries by year-end.

IQOS is the first of four platforms of noncombustible products that make up what Philip Morris International calls reduced-risk products. The company has spent more than $3 billion dollars to date on developing the portfolio, not including research that was done before its split from Altria in 2008, Chief Financial Officer Jacek Olczak said in an interview.

The Marlboro maker expects the new portfolio to add $700 million to $1.2 billion to earnings by 2020.

The iQOS is a rechargeable electronic device that heats tubes of tobacco called HeatSticks, which resemble a cigarette cut in half. Philip Morris said last week that it will produce more than 32 billion HeatSticks next year and could manufacture 50 billion by 2018. HeatSticks have advantages over cigarettes as they’re new and some countries tax them at a lower rate, Calantzopolous has said.

The goal is to convert all smokers away from combustible cigarettes, the CEO said.

“We’re very committed to a smokeless society over time,” he said.

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