Companies and Brands

FDA OKs Sales of Philip Morris IQOS Non-Burning Cigarette

Paul Ausick

Published: April 30, 2019 4:29 pm

Last Updated: January 30, 2020 9:19 pm

The U.S. Food and Drug Administration (FDA) on Tuesday announced that the agency has authorized U.S. sales of the IQOS tobacco-heating system from the U.S. arm of Philip Morris International Inc. (NYSE: PM). The FDA noted that the authorization to sell the devices and the tobacco-filled sticks that fuel them “does not mean that these products are safe or ‘FDA approved.'” The United States is the 45th country to allow IQOS devices to be sold.

The devices (IQOS is an acronym for I Quit Ordinary Smoking) heat the tobacco sticks, generating a vapor containing nicotine. In addition to the IQOS device itself, the FDA also authorized the sale of Marlboro Heatsticks, Marlboro Smooth Menthol Heatsticks, and Marlboro Fresh Menthol Heatsticks.

Again, the FDA warned that “all tobacco products are potentially harmful and addictive” and people who don’t already use combustible tobacco products should not start using these devices.

Another thing the authorization is not is an FDA decision on a separate application to classify the products as modified risk tobacco products. Philip Morris has applied to have the IQOS system classified this way so that the company may advertise the products as reducing exposure or risks compared to cigarettes and other combustible tobacco products.

The IQOS system is referred to as a “heat-not-burn” tobacco product but to the FDA it is classified as a cigarette. That means the devices cannot be advertised on television or radio and the agency has imposed “stringent restrictions” on how the products may be advertised on social media platforms where the ads must be targeted to adults.

The FDA is also requiring the company to report regularly on any consumer research studies, advertising and marketing plans, sales data, data on current and new users, manufacturing changes, and adverse experiences. Philip Morris will also not be able to make an implied or explicit claim that “a product reduces exposure to certain chemicals or that use of the product is less harmful than another tobacco product or would reduce the risk of disease.”

Philip Morris and its sister company, Altria Group Inc. (NYSE: MO), are spending big on new non-burning tobacco products at the same time that U.S. Senate Majority Leader Mitch McConnell is pushing to raise the federal legal age to purchase tobacco and e-cigarette products from 18 to 21. Eleven states have already raised the legal age to 21 and a couple of others are considering similar restrictions. Altria acquired a $12.8 billion stake in e-cigarette maker Juul last December.

The FDA maintains the right to withdraw its authorization for the IQOS system if, for example, the agency “determines that the continued marketing of a product is no longer appropriate for the protection of the public health, such as if there is an uptake of the product by youth.”

Philip Morris shares closed up 2% Tuesday at $86.62 in a 52-week range of $64.67 to $92.72. The stock’s 12-month price target is $92.59 and the dividend yield is 5.16%.