Over their long histories, tobacco companies have taken full advantage of the demand for traditional cigarettes and other tobacco products, even as concerns grew over their potential health impacts. More recently, though, alternatives like e-cigarettes and vaping products have become more popular, and Philip Morris International (NYSE:PM) has seen the potential growth from these cigarette alternatives. The company has homed in on the potential health benefits from promoting products other than traditional cigarettes, and at its recent investor day presentation, Philip Morris Chief Scientific Officer Manuel Peitsch went through the company's progress on producing scientific substantiation for its portfolio of reduced-risk products and what that could mean for Philip Morris going forward.
Philip Morris' primary goal with reduced-risk products
Peitsch started out by highlighting the overall strategic goal that Philip Morris International has in promoting reduced-risk products. As the CSO described it, "our aspirational goal is to demonstrate that our reduced-risk products have a risk-reduction profile that approaches that of cessation." In other words, Philip Morris wants its offerings in the reduced-risk space to be just as healthy as quitting smoking traditional cigarettes.
That aspirational goal is in line with what most research on smoking suggests is appropriate. Peitsch characterized the U.S. Institute of Medicine's references to quitting smoking as "the gold standard for assessment of reduced-risk products." Accordingly, Philip Morris believes that if it can demonstrate equivalence to quitting smoking, then it believes that it should be able to move forward with promoting and marketing its reduced-risk products across the globe.
How iQOS is doing
Philip Morris has conducted clinical studies which it intends eventually to use in support of a submission of an application for approval from the Food and Drug Administration for its iQOS heat-not-burn tobacco technology. Those studies have looked at several biomarkers of exposure to harmful and potentially harmful constituents in the aerosol produced from heating iQOS HeatSticks, and they've found that there was significant reduction in exposure that approached the reductions that people who quit smoking entirely experienced. In addition, the studies also confirmed favorable movement in measures of clinical risk markers.
Philip Morris is walking a fine line with its results, however. It doesn't want to make claims that iQOS or any other reduced-risk product is entirely safe, and Peitsch said that most consumers in the studies "expressed the correct understanding of the tested modified risk communications as well as that iQOS is not without risk and is not an alternative to quitting." Yet the company also wants to build up a set of evidence it can use with the FDA, and so it's also looking at long-term impacts on smokers of using iQOS, the impact on the public in avoiding the odor and potentially harmful effects of secondhand cigarette smoke, and even some other ancillary benefits like less staining of teeth than regular smoking.
Philip Morris' other reduced-risk products
Many investors don't realize that even with the success of iQOS, Philip Morris International has multiple platforms for reduced-risk products. Peitsch noted that progress on its Platform 2 products, which use heat-not-burn technology on actual tobacco but center the heat on a carbon tip to mimic regular cigarettes more closely, has been encouraging, with studies showing similar gains on exposure biomarkers.
The Philip Morris CSO also had positive things to say about its non-tobacco Platform 3 e-vapor products. Early studies show that nicotine concentrations are similar to those of a regular cigarette, making it a viable alternative for smokers looking to use e-vapor as a substitute for regular smoking. In studies of its current e-vapor offerings, Philip Morris has found that the aerosol has less respiratory toxicity without adversely affecting indoor air quality. With new proprietary vaporization technology becoming available in the near future, Philip Morris is happy with its prospects across the board.
Philip Morris has made plenty of money from conventional cigarettes, but it also recognizes the need to take advantage of potential growth in reduced-risk products. By moving faster than many of its peers, Philip Morris hopes to gain a first-mover advantage against rival producers and offset any decline in conventional cigarette smoking in the years to come.