31 October 2014

Philip Morris plans "safer" cigarettes

14:04, Bloomberg News

Marlboro owner Philip Morris, the world’s largest tobacco company, said it plans to sell a new type of cigarette that poses lower health risks by 2017.

The company is developing three products that would be sold under existing brands such as Marlboro.

The most advanced is a cigarette that heats tobacco rather than burning it, Chief Operating Officer Andre Calantzopoulos said in a speech prepared for a meeting today with investors in Lausanne, Switzerland.

“We are on the eve of what we all believe could be a paradigm shift for our industry,” Chief Executive Officer Louis Camilleri said. The new products have “the very real potential to not only be a game-changer, but also be the key to unlock several hitherto virgin territories, most notably the huge Chinese market.”

Tobacco companies have spent decades trying to develop a safer alternative to smoking, including a 1988 test of Premier, a heated-tobacco smokeless cigarette that its maker, now called Reynolds American, dropped in about a year.

“PMI are far more advanced than I had expected,” said Erik Bloomquist, a London-based analyst at Berenberg Bank.

The “most promising” lower-risk products would heat tobacco or generate aerosol that consumers inhale, New York- based Philip Morris said. The heated-tobacco device is ready for clinical testing, and manufacturing of lower-risk cigarettes would start in three to four years, Calantzopoulos said.

A second product being working on would be lit with a normal lighter, while a third uses a chemical reaction to make an aerosol that contains nicotine.

“We have to remain, however, alert to the fact that there may be bumps in the road, given the many complexities of this undertaking,” Calantzopoulos said.

Philip Morris said today that it’s cutting its full-year earnings forecast to $5.10 to $5.20 a share, from a prediction in April of $5.20 to $5.30, because of the strength of the dollar against other currencies.

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