The U.S. Food and Drug Administration has now authorized the marketing of Philip Morris International’s (PM) “IQOS Tobacco Heating System” as modified risk tobacco products (MRTPs). Shares in PM rose 3.3% in Tuesday’s trading.
This marks the second set of products ever to be authorized as MRTPs and the first tobacco products to receive “exposure modification” orders- which permits the marketing of a product as containing a reduced level of or exposure to a substance or as being free of a substance when the issuance of the order is expected to benefit the health of the population.
PM will still need to conduct postmarket surveillance and studies to determine whether the MRTP orders continues to be appropriate, including assessing the potential for increased use among youth.
“Through the modified risk tobacco product application process, the FDA aims to ensure that information directed at consumers about reduced risk or reduced exposure from using a tobacco product is supported by scientific evidence and understandable,” said Mitch Zeller, director of the FDA’s Center for Tobacco Products.
“Data submitted by the company shows that marketing these particular products with the authorized information could help addicted adult smokers transition away from combusted cigarettes and reduce their exposure to harmful chemicals, but only if they completely switch.”
The IQOS Tobacco Heating System includes the electronic IQOS device that generates a nicotine-containing aerosol by heating tobacco-filled sticks wrapped in paper, specifically Marlboro Heatsticks, Marlboro Smooth Menthol Heatsticks and Marlboro Fresh Menthol Heatsticks.
The FDA previously authorized the marketing of these products without modified risk information in April 2019.
Shares in PM are currently trading down 14% year-to-date, and analysts have a cautiously optimistic Moderate Buy consensus on the stock’s outlook. This is with a $79 average analyst price target (8% upside potential). (See Philip Morris stock analysis on TipRanks).
“We view today’s ruling as an important step forward on the risk continuum that could give IQOS some advantage in aiding consumers to fully switch to IQOS from cigarettes or vapor products. Remember that today’s order will also benefit Altria (MO), which will be selling IQOS in the US. The FDA did stress however that these products are not considered safe or FDA approved” noted Bank of America following the announcement.