Philip Morris Stock Wins Victory As FDA Finally Approves Vaping Device

Text size

Philip Morris International

Stock (PM) closed higher on Tuesday after its vape device finally got the go-ahead from the Food and Drug Administration after years of waiting.

The story back. Philip Morris and a tobacco company
Altria Group

(MO) had a tough time in 2018. But, although the two stocks are in the dark for 2019, Philip Morris has taken a considerable lead in the market, recording a nearly 30% increase since the beginning of the year. 39; year.

This is due in part to the gains generated, the enthusiasm of analysts and the attractiveness of investors for its generous dividends, but the hope that the FDA will finally be able to approve its iQOS device, which has had some success in markets like Japan and Russia, but spent years without permission from the United States.

While
Altria

has an investment in Juul LabsPhilip Morris had always hoped to bring his own vape machine to the US, and many investors hope that with the commissioner Scott Gottlieb's At the exit of the agency, the government could tackle less the tobacco industry as a whole.

What's up. On Tuesday, the FDA approved the application of Philip Morris' pre-commercial tobacco products for its iQOS unburned heat device in the United States. The FDA approved only its request to sell the device. Another application – market it as less harmful than traditional cigarettes – remains unresolved. And do not expect to see commercials for this product on TV because it will be subject to the same rules as traditional cigarettes – rules that do not apply to e-cigarettes like those of Juul and others.

Look to the front. Not surprisingly, Philip Morris' action is in the news, as even with allusions to the fact that the FDA was finally responding to demand, some thought it would continue to languish. And given the huge market share that the new e-cigs have managed to conquer, it will finally allow Philip Morris to retaliate and potentially recover a certain territory.

The move is also beneficial for Altria, which plans to start selling the unit this summer. (Philip Morris and Altria work closely together, as they have been split into two companies so that the first one can concentrate abroad and the second focuses on the United States.)

Bonnie Herzog from Wells Fargo, long-time tobacco stock fan, is happy about the development. "This is a big" win "for Philip Morris / Altria, as it represents the first FDA approval for a non-burning, vapor-free heat-up product and effectively sets the standard for all future pre-market applications / approvals." she said. wrote. "[The] Certification gives iQOS tremendous competitive advantage as the first FDA-approved product to be put on the market without heat to be burned. "

She argues that it will be more difficult to obtain approval of the company's health claims for iQOS, but that approval may still arrive sometime later this year. And even without that, adds Herzog, "the FDA's approval can also put doctors more at ease" by recommending it as a smoking cessation aid.

Philip Morris closed up 1.66% to $ 86.56 on Tuesday. Altria shares closed up 1.53% to $ 54.33.

Write to Teresa Rivas at [email protected]