RICHMOND, Va., and NEW YORK — Philip Morris International (PMI) and Altria are ending their agreement for Altria’s subsidiary Philip Morris USA to sell heat-not-burn system IQOS in the United States.
PMI will pay a total of $2.7 billion to Altria and have the full rights to commercialize IQOS in the United States as of April 30, 2024. The product hasn’t been sold in the country for nearly a year, due to a U.S. International Trade Commission (ITC) ruling that said the product infringes on two patents held by rival R.J. Reynolds, Winston-Salem, N.C.
“Today marks another historic milestone in our journey towards a smoke-free future,” said Jacek Olczak, PMI CEO. “This agreement gives PMI full U.S. commercialization rights to IQOS within approximately 18 months and provides a clear path to fulfilling the product’s full potential in the world’s largest smoke-free market, leveraging PMI’s full strategic and financial commitment to IQOS’s success. The agreement also avoids what could have been an uncertain and protracted legal process that would have severely hindered the fast deployment of IQOS in the U.S.”
Altria, Richmond, Va., entered into a series of agreements with PMI related to innovative tobacco products, like IQOS, in 2013. 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 (FDA) in April 2019, and was set to continue until April 24, Altria said.
As part of that agreement, PM USA had the right to maintain exclusive U.S. commercialization rights by April 2022, and upon achieving additional milestones, it had the option to renew the agreement through April 2029.
“We believe that PM USA met each of these milestones, but PMI disagreed with our position. 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 said.
Altria’s CEO Billy Gifford said the company remains committed to creating long-term value through its vision, though.
“We believe that this agreement provides us with fair compensation and greater flexibility to allocate resources toward Moving Beyond Smoking,” Gifford said.
Altria said it expects to use the cash for several other items, including debt repayment, share purchases and general corporate purposes.
Despite it being off the U.S. market, PMI said IQOS is the world’s leading smoke-free product, and it views it as still having a substantial growth opportunity in the U.S. smoke-free market. The New York-based company said it is “well advanced” in its plans for the commercialization of IQOS in the U.S.—including premarket tobacco product applications (PMTAs) for ILUMA, a new version of the heat-not-burn product with induction-heating technology, in the second half of 2023.
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