Tag: altria

  • Altria Reaches Deal With PMI for IQOS Transition

    Altria Reaches Deal With PMI for IQOS Transition

    Credit: Naka

    Philip Morris International will pay Altria Group approximately $2.7 billion for the exclusive U.S. commercialization rights to the IQOS tobacco heating system effective April 20, 2024.

    “We remain committed to creating long-term value through our Vision,” said Altria CEO Billy Gifford in a statement. “We believe that this agreement provides us with fair compensation and greater flexibility to allocate resources toward ‘moving beyond smoking.’”

    In 2013, Altria entered into a series of agreements with PMI related to innovative tobacco products, which included exclusive U.S. commercialization rights of Altria subsidiary Philip Morris USA to the IQOS system. PM USA’s commercialization rights were subject to an initial five-year term, which began when the system received authorization from the U.S. Food and Drug Administration in April 2019 and continued through April 2024.

    As part of the 2013 agreement, PM USA had the right to maintain exclusive U.S. commercialization rights upon achieving an initial milestone by April 2022. Upon achieving additional milestones, PM USA had the option to renew for an additional five-year term through April 2029.

    While Altria believed it has achieved the required milestones, PMI disagreed. The parties were unable to reach a long-term agreement and decided to enter into the agreement to transition and ultimately conclude their relationship.

    Altria received a $1 billion from PMI upon entry into the agreement. Under the terms of the deal, PMI is obligated to make an additional payment of $1.7 billion (plus interest) by July 2023 for a total cash payment of approximately $2.7 billion (pre-tax). Altria expects to use the cash proceeds for several items, which may include investments in pursuit of its vision, debt repayment, share repurchases and general corporate purposes. Share repurchases, Altria said, depend on marketplace conditions and other factors and remain subject to the discretion of its board of directors.

    Altria expects to record the $2.7 billion pre-tax transaction amount as a deferred gain on its consolidated balance sheet in the fourth quarter of 2022. This gain will be recognized in earnings when the company assigns its rights to the IQOS system.

    IQOS and Marlboro HeatSticks are currently unavailable for sale in the U.S. due to orders imposed by the U.S. International Trade Commission that prohibit importation of IQOS and Marlboro HeatSticks into the U.S. relating to a patent dispute. PMI remains responsible for manufacturing the IQOS system and Marlboro HeatSticks and targets resumption of product supply in the first half of 2023.

    If supply of FDA-authorized product is available to Altria before May 2024, PM USA has the option to reintroduce the IQOS system and Marlboro HeatSticks for sale in the U.S. On April 30, 2024, U.S. commercialization rights to the IQOS system will transition to PMI. PMI will not have access to the Marlboro brand name or other brand assets, as PM USA owns the Marlboro trademark in the U.S.

    In a press note announcing the IQOS transition, Altria said it remains committed to its vision to responsibly lead the transition of adult smokers to a smoke-free future. “We believe in a portfolio approach to tobacco harm reduction and expect to compete in the major smoke-free categories. We have reinvested into our internal product development system and we expect to finalize designs for two smoke-free products, including a heated tobacco product, by the end of 2022,” the company wrote.

  • Altria Stock Up 8% Since FDA Pulled Juul Denial Order

    Altria Stock Up 8% Since FDA Pulled Juul Denial Order

    Altria sign

    When the U.S. Food and Drug Administration told Juul Labs it needed to pull its e-cigarette from the market, Altria stock (MO) hit a more than 52-week low of $41.00 in early July. On Aug. 15 MO was trading up 0.2 percent at $45.35.

    Altria stock has fallen 7 percent over the past 12 months and is currently trading down 21 percent since peaking at a three-year high of $57.05 in early May, according to Schaefer’s Investment Research.

    Additionally, shares of MO have dropped 6 percent year-to-date. However, Altria stock has increased 8 percent over the past month and is up 10 percent since the July low.

    The FDA ordered Juul Labs to remove its products from the U.S. market and MO plummeted until, on July 6, the FDA said it was temporarily lifting its ban on Juul products.

    The tobacco company’s valuation metrics remain mixed, with Altria stock trading at an intriguing forward price-earnings ratio of 9.29 but also at a high price-sales ratio of 3.92.

    “Nonetheless, MO offers an incredible dividend yield of 7.97% with a forward dividend of $3.60, making it one of the highest dividend yields available on the stock market today,” the story states.

    MO has struggled to maintain consistent growth on the bottom line over multiple years as well, reporting an $8.3 billion decrease in net income for fiscal 2019 and a $2 billion decrease for fiscal 2021.

    Still, the tobacco company is expected to end fiscal 2022 with 5 percent revenue growth.

  • Altria Files 3 More Patents for Cannabis Applications

    Altria Files 3 More Patents for Cannabis Applications

    Credit: New Africa

    Altria Client Services has filed numerous patent applications with the United States Patent and Trademark Office (USPTO) related to vaporizer technology, including several that mention cannabis as well as nicotine.

    On August 4, the company had published three related applications that focus explicitly on the cannabis plant. More specifically, on its “flavor and aroma characteristics,” according to Cannabis Wire.

    One application, titled “Terpene production in plants,” filed by Altria Client Services and the University of Virginia Patent Foundation, details the “composition and methods for the modification of the secondary metabolic functions of glandular trichomes in plants, such as tobacco or cannabis, that control the formation of terpenes that impart specific flavor and aroma characteristics to the plant leaves are provided.”

    The pine or citrus smells and flavors of cannabis buds are typical terpene scents.

    “Terpenoid levels in plants such as tobacco and Cannabis can be enhanced and modified by targeted manipulation of gene expression of genes in terpene biosynthetic pathways in order to improve flavor and aroma characteristics of downstream plant-based products,” the application reads.

    A related application is titled, “Increasing trichome density and improving transport of metabolites in plant trichomes … terpenoids constitute the largest and most diverse class of plant metabolites,” the application reads.

    “The amount of secondary metabolites produced is often tightly correlated to the glandular trichome density present on the plant epidermis,” it continues. “One way to increase the amount of secondary metabolite production in plants is to increase the density of trichomes present on the plant epidermis.”

    A third related application is titled “Tissue-specific promoters in plants.”

    “Due to the important role of glandular trichomes in the biosynthesis and secretion of terpenoids, there is a need for the identification of trichome-preferred, or trichome-specific, promoters and associated cis-regulatory elements,” the application reads.

    Taken together, these patent applications provide the clearest picture yet of Altria’s interests and priorities when it comes to future cannabis products.

    Altria’s entry into cannabis made headlines in 2019 when it acquired a significant stake in Cronos, a Canadian cannabis company.

  • PMI to Bypass Import Ban by Manufacturing IQOS in U.S.

    PMI to Bypass Import Ban by Manufacturing IQOS in U.S.

    Philip Morris International plans to manufacture IQOS in the United States to get its tobacco-heating device back on that country’s store shelves, reports Bloomberg.

    The move follows an adverse ruling against the company and its U.S. partner, Altria Group, in a patent dispute with British American Tobacco.

    In September 2021, the International Trade Commission (ITC) upheld an initial determination from May 2021 that IQOS infringes on two patents owned by BAT subsidiary Reynolds American Inc. (RAI).

    The ITC instituted an import ban and issued a cease-and-desist order, barring Altria Group from importing PMI’s IQOS 2.4, IQOS 3, IQOS 3 Duo products into the U.S. By declining to intervene, the U.S. Trade Representative upheld the ITC finding in November, leaving PMI with the options to produce IQOS domestically or tweak the design.

    A design change, however, would require authorization from the U.S. Food and Drug Administration again.

    In an interview with Bloomberg, PMI CEO Jacek Olczak, said the company had planned to manufacture IQOS in the U.S. all along. “From the very beginning of us going to the FDA, we had in mind that IQOS would one day not only be sold in the U.S., but manufactured there, if you take into consideration the size of the market and the opportunity for IQOS,” he said. “It’s just happening sooner because of the ITC decision.”

    In July 2020, the FDA authorized PMI and Altria to market IQOS with certain modified-exposure claims, giving the company a leg up over its rivals.

    PMI has not specified where it will be manufacturing IQOS but said it plans to sell IQOS in the U.S. again in the first half of 2023.

  • Altria Execs Scorn Company’s Vapor Products During Trial

    Photo: Paul Brady | Dreamstime.com

    Altria Group Executives have been describing in detail their failure to come up with a marketable vapor product during an antitrust trial, reports The Wall Street Journal. Products leaked, generated high formaldehyde levels and lacked the nicotine smokers were looking for, according to their testimonies.

    In April 2020, the Federal Trade Commission (FTC) sued to unwind Altria’s 35 percent interest in Juul Labs, which the cigarette maker acquired in December 2018 for $12.8 billion.   

    A key question at trial is why Altria ended production of its own e-cigarettes in late 2018, shortly before announcing its investment in Juul.

    Altria in October 2018 announced it was halting the sale of its pod-based and fruity-flavored e-cigarettes in response to a call by the Food and Drug Administration for e-cigarette makers to help stem a surge in vaping among children and teens. Then in December of that year, two weeks before the Juul agreement was signed, Altria pulled its remaining e-cigarettes off the market.

    The FTC alleges Altria did so because of an illegal side deal in which it agreed to close its own e-cigarette business so it could take a stake in Juul. Altria and Juul both deny they had any such agreement.

    Altria says it halted its e-cigarette sales amid pressure from regulators to curb youth use and an internal reckoning about the company’s inability to develop a successful vaping product. Juul says it didn’t see Altria’s e-cigarettes as a threat, didn’t ask Altria to shelve them and was surprised when Altria did so.

    Juul and Altria argue that since the deal was struck, competition in the e-cigarette market has increased not decreased. Juul’s market share has fallen as have e-cigarette prices.

    The FTC is seeking to force Altria to divest its stake and terminate the companies’ noncompete agreement. The case is being heard by an administrative law judge, who will make an initial decision; the agency’s commissioners will then vote on the matter.

  • Academics Caution Against Big Tobacco Takeover of Cannabis

    Academics Caution Against Big Tobacco Takeover of Cannabis

    Photo: Terre Di Cannabis from Pixabay

    Big Tobacco must be prevented from utilizing “its profit-driven product engineering of addictive and deadly products, predatory marketing practices and anti-regulatory expertise” to dominate the legal cannabis industry, according to Andy Tan and Shaleen Title.

    Writing in Tobacco Control, the academics say the tobacco industry has a demonstrated history of resisting government regulation, co-opting scientific experts, engineering tobacco products to be more addictive and using substantial marketing budgets to maximize sales and profits of its products. “If tobacco companies are permitted to dominate the legal cannabis industry, this will risk exacerbating public health harms on groups that are disproportionately harmed by tobacco use,” they write.

    Driven by declining sales of tobacco products and spreading legalization of cannabis, the tobacco industry has been diversifying into cannabis in recent years.

    In January 2016, Philip Morris International invested $20 million in Syqe Medical, which developed a medical cannabis inhaler. In June 2018, Imperial Brands invested in Oxford Cannabinoid Technologies.

    In December 2018, Altria Group invested $1.8 billion in Cronos, a Canada-based multinational cannabis company. Imperial Brands in July 2019 acquired a stake in Auxly Cannabis.

    If tobacco companies are permitted to dominate the legal cannabis industry, this will risk exacerbating public health harms.

    Andy Tan and Shaleen Title

    And just last month, BAT signed a strategic collaboration agreement with Organigram, a wholly owned subsidiary of publicly traded Organigram Holdings.

    In their piece, Tan and Title urge authorities to restrict Big Tobacco’s participation in the cannabis industry, for example by placing limits on the seizes of cannabis businesses by enforcing regulations on how many stores or plants one individual can own.

    Tan is associate professor of communication at the Annenberg School for Communication, University of Pennsylvania.

    Title is a distinguished cannabis policy practitioner in residence at the Drug Enforcement and Policy Center of the Ohio State University Moritz College of Law.

  • Altria: FDA Must Clarify Nicotine Misperceptions

    Altria: FDA Must Clarify Nicotine Misperceptions

    The Altria Group Inc. asked the U.S. Food and Drug Administration (FDA) for its help in convincing Americans that nicotine isn’t linked to cancer. In a letter to the regulatory agency, the maker of IQOS and Juul products asked for the FDA to assist in combatting misperceptions about nicotine as part of a proposed $100 million advertising campaign to reduce the harm caused by tobacco.

    According to a letter seen by Bloomberg, Altria states that nearly three-fourths of U.S. adults incorrectly believe nicotine causes cancer, citing government research. Clearing up the drug’s health risks will be key to the agency reducing smoking combustible cigarettes because it will help convince cigarette users to switch to noncombustible options for nicotine, the company said.

    While there are at least 60 well-established carcinogens in cigarette smoke, it’s been known for years that nicotine isn’t the direct cause of many of smoking’s ills. The drug has even been touted as a way to ease tension and sharpen the mind. But nicotine is the ingredient that addicts people to tobacco products, and it has risks, according to the National Institute on Drug Abuse, a government agency.

    The FDA “should commit resources and expertise to correct the deeply entrenched public misperceptions regarding the health risks of nicotine,” Paige Magness, Altria’s senior vice president of regulatory affairs, said in the letter dated Feb. 25. Such a campaign would help the agency by getting more smokers to use noncombustible offerings that “may present lower health risk,” according to the letter.

    The FDA declined to comment, according to Bloomberg.

  • SwissX Warns Shops of Selling Patent Infringing Products

    SwissX Warns Shops of Selling Patent Infringing Products

    Swissx Labs sent a cease and desist letter to hundreds of companies today demanding they stop selling Juul and other companies that manufacturer patent infringing products within 30 days. The goal is to protect the public from dangerous unapproved uses of its inventor’s IP, according to a press release.

    Credit: Bill Oxford

    The cease and desist letter demands that stores and chains remove vape products made by Juul and others from their shelves or risk being included in the massive lawsuit already underway for patent infringement. SwissX says it is concerned about the integrity of its inventor’s patent, as well as the safety of the public who may be being put in danger by infringing products.

    When the suit is done it is expected the final penalty will top infamous cases on the level of the Enron scandal, the release states. Recipients of the cease and desist letter include 7-11, Speedway, Casey’s, Cumberland Farms, Quick Stop, AMPM, Wawa, ExtraMile and other roadside favorites. Also receiving the letter are major tobacco shop chains such as the 800+ store Smoker Friendly chain. They have 30 days to comply.

    “We don’t want innocent retailers to get swept up in this,” said Rudy Delarenta, senior vice president of sales and marketing for SwissX. “That’s why we’re giving them 30 days notice to pull Juul’s infringing products. But if they refuse, we’ll do what we have to do.”

  • FDA Approves PMTA for IQOS 3 Sales in U.S. Market

    FDA Approves PMTA for IQOS 3 Sales in U.S. Market

    IQOS 3
    Credit: Altria Group

    The U.S. Food and Drug Administration (FDA) has authorized the commercialization of the IQOS 3 heated tobacco product. Today, the Altria Group said the authorization follows review of the IQOS 3 premarket tobacco product application (PMTA) submitted by Philip Morris International Inc. (PMI).

    Philip Morris USA (PM USA), under an exclusive agreement with PMI, commercializes the IQOS system in the U.S. with three HeatStick variants. Unlike cigarettes, the IQOS system heats but does not burn tobacco. IQOS 3 offers several enhancements to the IQOS 2.4 currently being sold in select U.S. markets, including a longer battery life, faster re-charging time, a side opening mechanism, and magnetic closure, according to a press release.

    “Altria’s 10-year vision is to responsibly lead the transition of adult smokers to a non-combustible future. IQOS is a key part of that future and we’re excited to build on our first-mover advantage with the enhanced IQOS 3 device which has performed successfully in international markets,” said Jon Moore, president and CEO of PM USA.

    IQOS is currently available in the Atlanta, Georgia, Richmond, Virginia and Charlotte, North Carolina markets. With PMTA authorization of IQOS 3, PM USA expects to begin quickly marketing the IQOS 3 device to U.S. adult smokers once the regulatory and U.S. importation logistics have been satisfied.

    To secure market authorization under a PMTA, U.S. federal law obligates an applicant to demonstrate that marketing of a new tobacco product is appropriate for the protection of public health and requires the FDA to consider the risks and benefits to the population as a whole, including users and non-users of tobacco products.

    On March 30, 2020, PMI submitted a supplemental PMTA to the FDA for the IQOS 3 tobacco heating system device. The original IQOS 2.4 device was authorized by the FDA for commercialization in the U.S. on April 30, 2019.

  • Altria Converts Non-Vote Juul Labs Shares to Voting Shares

    Altria Converts Non-Vote Juul Labs Shares to Voting Shares

    Credit: Juul Labs

    Altria Group has announced that it has elected to convert its non-voting shares in Juul Labs to voting shares, pursuant to its December 2018 investment in the e-cigarette manufacturer.

    “Altria does not currently intend to exercise its additional governance rights obtained upon conversion, including the right to elect directors to Juul’s board, or to vote its Juul shares other than as a passive investor, pending the outcome of the U.S. Federal Trade Commission (FTC) litigation,” Altria stated in a press release.

    In April 2020, the FTC filed an administrative complaint challenging Altria’s minority investment in JUUL. Altria believes it has a strong defense and intends to vigorously defend its investment.

    “As previously disclosed, Altria expects to account for its investment in JUUL under the fair value option. Under this option, Altria’s consolidated statement of earnings will include any cash dividends received from its investment in Juul as well as any changes in the fair value of the investment, which will be calculated quarterly,” the release states. “Altria intends to treat quarterly changes in the fair value of the investment as a special item and exclude those changes from its adjusted diluted earnings per share.”

    In December 2018, Altria made a minority investment in Juul Labs. In exchange for the investment, Altria received a 35 percent economic interest in Juul Labs through non-voting shares, with their conversion to voting shares contingent on antitrust clearance (as that term is defined in the Altria/Juul purchase agreement). Under revised agreement terms announced in January 2020, Altria can designate two representatives to Juul’s board of directors.