Hello and welcome to our 15th Open Science event. In 2016, Philip Morris International (PMI) publicly announced an ambitious new vision: the transition away from cigarettes to focus on the delivery of scientifically substantiated, smoke-free alternatives.
This shift has included a cultural change at every level of the business to prioritize smoke-free products in our scientific research and our product development. In this Open Science event, our expert panelists will explore the history of PMI's ambitious move away from cigarettes and the challenges faced on the road to delivering innovative, smoke-free alternatives.
They'll discuss the research and development of our leading heated tobacco product, which was released ten years ago, and the expansion of our smoke-free product portfolio. They'll also discuss the critical connection between science, product innovation, tobacco harm reduction, and product regulation.
Join us as we reflect on the milestones that have marked this journey for PMI, the achievements that have made PMI into the company that it is today, and learn how science-based regulation could accelerate our ambition of becoming substantially smoke-free by 2030.
Our expert panelists for this session include Moira Gilchrist, Chief Communications Officer; Nevena Crljenko, Vice President Public Affairs; Patrick Picavet, Chief Medical Officer; and Bin Li, Chief Product Officer.
This session will be moderated by former journalist Sukhi Hayer and will also feature messages from Christos Harpantidis, Senior Vice President External Affairs; and Tomoko Iida, Director Scientific Engagement.
During this event, you can submit your questions via the chat box on the Open Science platform or through LinkedIn®. We hope you enjoy another lively conversation. Hello and, yes, welcome to this 15th Open Science event where we're marking a significant anniversary.
It's 10 years since the birth of a category that once didn't exist: heated tobacco. I'm pleased to say I'm joined by our expert panelists from the field of science and elsewhere. But before we talk to them, let's talk about how this session will unfold.
First of all, we are split into two parts. Essentially, the first part we will hear from our panelists about the past, the present and the future of PMI transformed. In the second part, you, the audience, live here in front of us, and those watching on LinkedIn®, YouTube and the PMI Science platform can ask questions and make sure they're challenging questions as well, because I'm sure our panelists can handle it.
And before that, we are recording this conversation as well. So, if you don't get time to watch it all the way through, you can watch it back at your convenience on the PMI Science platform website. So, without further ado, and one thing I forgot to mention was the PMI Science website: if you don't get all the information you want today, you can get it at a later date as well.
But, without further ado, the formalities done, let's turn to Moira first. And Moira, you were here at the start of this particular journey 10 years ago, I believe. Just tell us, was there a Eureka moment, if you like? And forgive me, I might have watched too many films, but was there a Eureka moment when you thought, wow, we made an amazing discovery here? Yeah, well, I'm feeling very old, given that we're celebrating the 10-year anniversary.
But it's also a moment to reflect. And I think there were a few really important moments for us during the development and assessment of our lead heated tobacco product. And at the beginning, it was just a sort of an idea that was sketched out on a flip chart that we all got very excited about.
The idea that you could prevent the production of the vast majority of the harmful chemicals that end up in cigarette smoke because you burn tobacco by doing something different. And the idea was to heat it rather than burn it.
So, that was kind of one moment where we were like, aha, this could be a promising pathway because we thought, okay, if we can reduce the levels of harmful chemicals but retain the taste and flavor of tobacco that people who smoke are used to, then that might be a promising avenue.
So, we set out on the path and we created prototypes and then started testing them. So, we did all the chemistry tests and so on. We did toxicology. And then we did a couple of very exciting, but very small exploratory clinical studies.
So, they were just to see okay, does this translate into something that you can measure in an adult smoker’s body when they switch. So, we did two little studies. And when we got the results back, I can remember a feeling of absolute elation because they really exceeded our expectation.
Now, obviously, we couldn't rely completely on them. We had to do much more, but it showed us we were on the right track. And then I think the third really important moment for everybody in this building, the Cube, our R&D center, was when the product was first launched in Japan.
It was the first country, in a little pilot test market, in a city called Nagoya in Japan. And when that happened, I think we all realized this was real. We became probably more nervous then, than at any point, because the acid test was then, okay, are adults who smoke going to switch to this? So, that we didn't know at that point.
But it was an incredibly exciting moment for everybody. So, bringing it now to the present, you know, that achievement that you made in the lab has now been brought into reality. Just talk us through that, if you can.
Well, it's been basically, it sounds like it's been easy, but I know from personal experience it's been a lot of hard work by hundreds of people: scientists, engineers, behavioral researchers, people in the factories working out how to actually manufacture at scale, people on the commercialization side.
We had to completely change the way we commercialized it and be much more in touch with consumers to help them make the switch and the behavioral change that's required to abandon cigarettes. So, those were all really hard learnings.
And we made some mistakes along the way, learned from them, and quickly pivoted to the point now where we're at the stage where 38% of our net revenues are coming from smoke-free alternatives. Back then, in 2014, it was 0%.
So that's an incredible shift in our business in just 10 short years. Now, one of the early adopters, if you like, you mentioned it already was Japan, and is still going strong, I believe. It's important that we hear the story of Japan.
And we've, in the introduction, mentioned Tomoko, who unfortunately can't be with us today. So, I met her remotely to talk about its story, the impact, and what's going on today. Hi, Tomoko, how are you? Hope you're well.
For everybody out there, can you introduce yourself, please? Hi, my name is Tomoko. I'm from Japan. I've been working with the company for 14 years, of which for 12 years I've been working on scientific engagement, trying to build smoke-free future in the different countries, especially in Japan.
Now you've got an interesting story to tell about Japan. A lot of people there have stopped smoking and taken up these alternate products. Can you tell us a little bit about that? Yes. We just received really exciting news from Japan.
We are seeing a 46% decrease in smoking prevalence just in 8 years. Back in 2014, the smoking prevalence was 19.6%. And now you see that in 2022 that it went down around 10%. And people were switching to this product because of the two cultural aspects.
One is hygiene. We like to have a clean environment. So, the fact that the product has less smell and no smoke is really resonating with the Japanese smokers. And the second reason is being considerate to others.
The fact that this product has less smell and is less bothersome to people around is really being picked up by the Japanese smokers. In terms of the data and reflecting what you've just said there, what can you tell us? Yes, the National Nutrition Survey actually showed that the smoking prevalence is going down by 46%.
It's really a rapid decline that we're seeing. And we also see that the dual use is decreasing. So, dual use means the use of cigarette and heated tobacco together. In other words, 87% of the heated tobacco users have quit cigarette smoking completely and now they switched to this product.
So dual usage is only 13%. And sticking with the theme of consumers, we know that throughout the world there have been problems with people who have never smoked, getting hold of these products, and also minors and youth as well, what do you say to that? Yes, Sukhi, that's a valid question.
We often get that from different regulators. In fact, the Japanese government runs a survey on adolescents and, based on the latest Youth Survey, we know that the use of heated tobacco among minors is less than 0.1%, which sounds very encouraging.
Thank you, Tomoko. Very interesting. In fact, it'd be really interesting to see how this Japanese story unfolds, but for now, thanks for your time. Thank you, Sukhi. We're really excited with this story, and we hope we'll see similar results around the world.
Thank you. That was Tomoko Iida, the Director of Scientific [Engagement] for Philip Morris. I'm going to turn to Patrick now. This is your home, so to speak, Patrick. Just talk us again through maybe the mechanics of the discovery that we were talking about earlier and the 10-year anniversary, and just tell us how it all fits together and binds.
How much time do we have? Going back to what Moira was saying, once we got the first prototypes basically on, the first thing we did was really look at the aerosol chemistry, at the emissions. And you can see on the slide that's on the screen that we could actually demonstrate that the heat-not-burn concept works, and you have significantly reduced emissions of toxicants, in a heat-not-burn product.
So, following that was an entire battery of nonclinical testing from standard toxicology to systems toxicology. And all of the data actually, again reconfirmed to us that we are on the right track, that the toxicity was actually reduced within these tests that we did.
Then we moved into the human. We looked at, yes, if someone used the product, is the reduction in emission actually measurable in a human and how much would that be? And we got to 90 to 95% of what you would actually see when someone stops smoking.
So that was all good. That gave us very clear confidence that this was the right concept to pursue. So, then the challenging question was, given that smoking-related diseases take such a long time to develop, how can you actually demonstrate there is the potential for reduced risk and reduced harm on the population level? And so, we used an approach that the U.S. FDA calls biomarkers of potential harm, which is basically biological and functional markers that are linked to smoking-related diseases.
And we looked at what happens when people continue smoking in those, and what happens when people switch, and do they all change in the direction you would see upon smoking cessation. So, on the graph on the screen, this was a study in about 1000 healthy smokers, done in the U.S.
We measured eight biomarkers of potential harm from inflammation, oxidative stress, lung function, lipid metabolism, all of these things. And we could actually demonstrate that all of them shift in the right direction.
And five of them did so significantly. So then the question we asked ourselves after that was why did the other three not completely reach significance, if you want? And in that study, we allowed a certain percentage of dual use.
So, Tomoko was talking about it as well, and the importance that it has also for the Japanese markets, this full switching versus dual use in concept. So, just explain dual use again, sorry. So, dual use means, basically, if a cigarette smoker picks up a heat-not-burn product but still uses some numbers of cigarettes in parallel with the heat-not-burn product.
And, short of quitting, I think complete switching is what you really, actually want to achieve to completely eliminate the exposure that you get from cigarette smoke. So, then the last study, the most recent study, actually, that we did, again, studying about 1000 people, was about 37 healthcare institutions in six countries around the world.
And here, we looked, this is real-life data. Basically, it was a cross-sectional study in people, or in smokers, that had switched completely for more than 2 years to our heat-not-burn product. And we measured similar markers that we had measured in the study before.
And here we could actually demonstrate that all of them reached significance. So this kind of tells you, and again, supports this importance of fully switching, short of the best option, of course, [which] is [to] quit entirely.
And so, from there now the next challenge is going to be, for the next couple of years, is to look at how does this translate into reduction in smoking-related diseases with these type of smoke-free products? Okay. Well like you said, science is the enabler when it comes to launching products.
But there's also another piece of the puzzle, which is acceptance. And we know that governments around the world are slowly beginning to take up or accept these kind of scientific findings that you've discovered.
And I want to turn to now, somebody who can't be with us again today, unfortunately. But Christos is the [Senior Vice President] of External Affairs. And I spoke to him about how the journey has been for him in terms of getting across this kind of product that people probably didn't know about in front of people who want to know more.
Christos, thanks very much for joining us. I know you can't be with us live at the Open Science event. So, this is a good second best. For those that don't know you, can you introduce yourself, please? Thank you very much. Thank you for having me.
My name is Christos Harpantidis. I'm heading the External Affairs function for Philip Morris International, and I am 22 years in the company. I have been running the business responsible for country and set of countries for 9 years before I joined this role, having a lot to do in my previous accountabilities on how we commercialize our products and how the world is seeing us.
And I have been through the transformation journey, and I'm extremely excited and proud of where we are today. Well, we won't talk about how the world sees you, but we'll talk about how governments see you.
Some governments have decided to ban these products, heated tobacco, e-cigarettes, this prohibitionist approach, they say. What do you think about that approach? What we know, not what I just think about it, is that bans do not work.
Practically, what we see today is that the bigger problems of smoking are in the countries that follow these kind of prohibitionist policies. These are the places where cigarette consumption is not dropping.
In some cases, it is increasing. On the other hand, when we see progress, we see places where the better alternatives are offered to adult smokers. And in these cases, the cigarette consumption is dropping significantly.
So, in terms of regulation, what does good look like in your view? In terms of regulation, always balanced regulation is the best. First of all, there is no discussion, minors, underaged people, should not have access to these products.
And this is the responsibility of the policy maker and of the government to implement and control, but also responsible practices from our side. And Philip Morris International is very responsible and leading to the proper commercialization of our products.
At the same time, smokers have the right to be informed about the risks and benefits of better alternatives. Hence, the government has the responsibility of creating the environment where, based on science and facts, smokers, and society overall, should be adequately informed about the better options.
So, in your opinion, why do you think governments aren't accepting these products, aren't regulating against these products? It has to do with legacy policies, left from the past and no one bothered to change. Sometimes it's driven by ideology.
I think the essence is lack of education, a lack of interest for people, for policy makers to understand the real problem of smoking. And it's even more strange if, on the policy-making side, you take into account the impact on the society, obviously the impact on public health, but also the fact that in many cases, these policies where you ban the new categories aggravate sociodemographic inequalities.
We know that 80% of the cigarette consumption is in low- and middle-income countries. So, someone should take all these facts into account. I think it's a major opportunity for a policy maker to improve public health.
I think we will soon overcome the obstacles, and the governments will not miss this huge opportunity in improving public health. Christos, thank you very much for joining us. Thank you. I'm sure that's got a lot of you thinking.
So please get on to your pads or your computers and send in those questions. Now, Nevena, I want to come to you because I think Christos gave us a general overview of the landscape, if you like, the regulation landscape at the moment.
But you're on the ground working this. Smooth sailing, has it been so far? Smooth sailing is not the qualification I would use, but definitely a progress. And we understand why, right? Whenever there is a novelty, an innovation that comes across, generally, regulation takes a little bit of time to figure out how to properly treat it.
Hence, Christos’ mentioning [of] the legacy regulation that was applicable to cigarettes. So, what we have seen in the last 10 years is that different governments have taken different approaches: some recognizing, looking at the science, looking at the potential these products have, and regulating them in a different way than they do the product, which is the most prevalent in the world and also the most harmful, which is the cigarette.
While others have taken a different approach. Allow me just to showcase a couple of examples that Christos has mentioned. If you look at on the left-hand side, a couple of countries that either have prohibited or extremely restrictively regulated smoke-free products.
You can see that their smoking prevalence is declining. And if you wouldn’t look at the right-hand side, you would say, this is good progress, like you have declining of the prevalence. But then if you contrast it with a country, such as Japan, that Tomoko spoke about, or Sweden, or New Zealand, and Iceland, you can see that by enabling, by making these products available and making them properly understood by the smokers, that we can rapidly decline the prevalence of smoking.
And I think these contrasting figures show that there is a huge potential that governments can reap the benefit of by properly regulating them. Talking about scientific data, now, I know that a lot of work went into giving your information, the scientific data, over to the Food and Drug Administration in the U.S.
A million pages I heard? That must have been quite difficult to get all that information, to get them to absorb that. I bet it was. But I will refer this question to Moira and Patrick, who were an instrumental part of these efforts, and I think they are better fit to offer their views.
Yeah, well it was an enormous effort. Around a million pages is accurate. Patrick was involved in all the clinical studies. We packaged everything up, all the information we had across, all of the scientific and engineering disciplines that we had been working in and submitted it to the U.S. FDA in 2016 with a request for them to review it and come to a conclusion as to whether we could inform consumers that switching completely to the product reduces their exposure to harmful and potentially harmful chemicals and constituents.
And the FDA scientists reviewed every single piece of data, I think, because it took them almost 4 years to come to a conclusion, which I think it should actually be, it was frustrating at the time, but I think we should be grateful for because, I think, it shows the seriousness with which they took the responsibility to make a decision on that.
Fast forward to 2020, July, and they authorized the product as being appropriate for the promotion of public health. So why is that important? It's important because in the United States, we can now communicate that to consumers.
The message I just referred to. But it also helps to bring trust and a bit of better feeling about the veracity or the truthfulness of the science that we're communicating, because the world's leading regulatory authority has reviewed all of the science.
So very important for all of us. I think we were extremely happy when July 2020 came. It was a long wait, but definitely worth [it]. A few sleepless nights for you, was it Patrick? I think there probably were for all of us.
For all of us, exactly. Okay, well that's what again, another… Yeah. If you want to add something. I might add just one more thing, Sukhi, in terms of regulation. As I said before, the world is facing many challenges today.
So how to properly regulate nicotine product is not top of mind of many people. But we should not lose one figure from our minds which is that there is 1 billion people in the world who smoke. And I think that regulating to their benefit is something that should not be forgotten in the plethora of other priorities.
Okay. Thank you. And I want to finally come to you, Bin, because this is an interesting story that you have to tell. Now you're in charge of the technology side of things. Just tell us a little bit about your journey into this company, essentially.
Thank you, Sukhi. I joined PMI about 5 years ago. So, when I started my technical career 30 years ago as a software engineer, I would never imagine that one day I would become the product innovation leader for a tobacco company.
So, before joining PMI, I was working in the audio industry. So, product development and innovations in products like JBL speakers, AKG headphones, and, if you're a music and audio fan, and I think we all are, then we can chat.
So, a lot of cool technologies that we were working on like digital signal processing, voice recognition, you name it. But what I didn't know when I joined the company 5 years ago, was that I was actually joining the most innovative organization that I ever worked for.
So, innovation is actually very, very deep in PMI's DNA. So, imagine that, the biggest tobacco company had the ambition to stop cigarette sales and replace it by better alternative products from innovation. How big is that? And this is a heavy bet for us.
And we have invested over USD 12 billion so far. And we are sitting in the Cube in Neuchâtel City in Switzerland here. This is the heart of our research and development activities. I would say that this building probably has the highest number of PhDs per square meter in Neuchâtel City.
I don't know if I get the statistics right, but I feel it that way. And in terms of the technology that you're developing now and keeping up with, how challenging or how easy is it from where you sit? Oh, obviously it's a big transformation.
So, there are many big changes that we have made, and I would like to share a couple of them. So, one area that I'm, of course, familiar with is electronics. So, today, PMI is not only a big tobacco company, we’ve also become a very big consumer electronics company.
So, just to give you a few data points, we are procuring more than USD 1 billion of electronic components every year, shipping more than 25 million devices. As just a reference, this scale of electronic operations is similar to the scale of our Swiss neighbor, Logitech.
So, the Logitech operation scale, I studied it a little bit, it’s about a similar level. And it took Logitech 40 years to get there. And we're, what, 10 years young. So, we're moving very fast. How can we achieve progress or change so fast? Because we're doing what other technology companies are doing today, which is we embrace the external world, the global innovation, and supply chain network.
Today, for products around us, we are all consumers, we use products every day, you probably cannot find one product around you that's designed and manufactured by one company in one location, unless you are making a commodity product, like a cigarette.
So now we are operating in this way now. We fully embrace the global innovation and supply chain network and that helped us to move very fast. The other areas that I would like to share is we invest in capabilities, we embrace the global network, but the most important thing is we are changing the culture.
We're working very hard to establish the innovation culture. Innovation, by definition, is an activity with a high level of uncertainty, you just don't know what the outcome will be. So, what we encourage in the building here is not only to innovate, but also to fail, what we call fail cheap, fail fast.
We want to create a psychological safety for our scientists, for our engineers, to feel safe to innovate. We will not ask ourselves to have every single innovation program to be successful. I often say that the minute we ask for that, we literally will kill innovation because nobody will do anything.
Nobody will dare to do anything. So things like this, to establish the innovation culture, are very, very important for us. So with all these changes, I think that we have become a modern product company that's based on science and technology.
We have delivered great innovations, but I don't think we will stop. We will continue to innovate, and we will continue to focus on using innovation to deliver more products and technologies to convert more smokers.
Well, science and innovation entwined there, really. Moira, I just want to finish off this particular section before we open it up to the audience. So please get your questions in. In terms of hearing these stories that you've heard so far from those early days and where you are now as a company, how does that make you feel? I'm extremely proud, and I think everybody in this building should be extremely proud of what we've done.
If I think back to 10 years ago, as we were launching IQOS in Nagoya, Japan, we had an ambition to achieve a 1% market share for the product among the tobacco and nicotine market. And fast forward 10 years, and you heard from Tomoko, 46% [smoking prevalence decrease after the introduction of] heated tobacco products.
And that's just in 10 years. I mean, that's unheard of. That's an absolute revolution in terms of changing the way people think about the products that they're using. So, this is what we want to continue.
And we would like to see that type of progress in each and every country where there are people who smoke. And that's the goal that we're all combined in trying to achieve. Well, thank you for that. So, I'm going to leave it open to the audience now.
The questions have been coming in. So, this is your favorite part guys, where you get to answer these lovely questions that are posed of you. So, the first question I've got is, do you have an idea of how long this transition from cigarettes to smoke-free products will take? Maybe I'll take that one.
So, I wish I had a crystal ball. I don't, but we do have an ambition. So, our ambition is that by 2030, two thirds of our net revenues will be coming from smoke-free alternatives. Again, looking back to 2014, that was 0% of our net revenues.
So, it's a big ambition. But we're on track to get there. And I think we have a good track record of achieving these types of ambitions. But we can't do it alone. And that's part of the reason we do events like this, because we're calling on people to help.
And it's not about helping Philip Morris International, it's about helping this entire transformation of the whole tobacco and nicotine market, so that we can help consumers to abandon cigarettes as quickly as possible.
So, that means the scientific community, that means people in public health, it means governments and regulators, anybody who cares about men and women who smoke, we're asking them to get involved in this to really help speed up progress.
Okay. Thank you. So just a reminder, these questions are coming in from our live audience, LinkedIn®, PMI science platform, and YouTube, of course. So, I've got another one here. What will Philip Morris International's business look like once the world runs out of smokers? Okay, me again. I get this question a lot.
And I think it's a very interesting and a very good one. First of all, we have to look at the magnitude of the problem that's facing us, the challenge that's facing us. Navena mentioned, there are a billion people on the planet right now who smoke.
So, that's going to take us time. We are going as fast as we can, but you know, that's a huge challenge. So, that's going to be part of our core business for a long, long time. I think the other thing that we need to bear in mind is that people are not going to suddenly abandon wanting to use nicotine at all once we've run out of smokers, which hopefully comes as quickly as possible.
We uncovered some scientific literature that showed that nicotine had been found in the bones of bodies that were excavated during archaeological excavations. So human beings have been using nicotine for a long time, millennia potentially. So, it's not going away.
So, our goal is to provide those adults who want to, who choose to use nicotine products, to provide them in the best possible way, so that they don't have to go to cigarettes. But then we're also looking at other revenue streams for the future, and that's going to take us a long time to get there, until they’re significant.
But looking at revenue streams that are in the wellness and healthcare area, and this is something that I'm personally quite excited about because, again, it's another transformation that can take us, maybe, another 10 or 20 years into the future.
So, I can't give a precise answer on exactly what, but rest assured, core business is going to remain important. That's getting smoke-free products into the hands of people who will otherwise continue to smoke, but then looking at other fields of business for us as well for the long term.
Okay, I'm trying to find a question that isn't Moira-specific at the moment. This one for you then, Patrick. What insights have you gained from behavioral science regarding consumer use habits? And this is probably for you as well, Bin, in terms of the technology.
Yeah. I mean we can start with the example that Tomoko gave for Japan, and it's actually not unique really for Japan. Maybe the reasons why people are using the product is a bit culturally specific, but we see in many, many markets, a large proportion of smokers that actually try the product, really switching to it completely, and then actually sticking with it.
Moira has alluded to it before as well. There is a transition phase. So, again, we go back to the point of dual use is going to happen for a certain period of time. We have also seen this, by the way, in our scientific studies.
But there is a transition phase and we actually reach quite a high number of complete switchers, essentially. So, then the other question that always comes to the table is initiation at the end of the day.
And again, with heat-not-burn products, generally speaking, I would say youth initiation, all the data we have from our data, but also independent data, actually shows that it's actually quite, quite, quite small.
And by initiation you mean taking up the product? Yes. Thank you. I can probably provide some additional comment on this because we really learned from this, because the goal we have is to develop a product that would convert cigarette smokers to use the smoke-free product.
So, the usual things that we already know are things like, okay, we need to get the sensory and taste as close to cigarette smoking as possible. The closer we get, the easier or the more likely [it is] that a smoker would convert.
Now, what we didn't notice earlier is the user experience. Simplification is also a big factor, or barrier, for people to switch. So, as consumers, we like simplified products. The product cannot be difficult, it has to be simple.
So, through this journey we learned that we need to put equally emphasis to use technology to simplify the user experience so that the smokers not only like the taste, not only can switch, but also that it’s very easy for them to use.
So, I can go on and on about a long list of improvements that we can make on removing the need or cleaning, less smell, longer battery life, smaller devices. And so, simplifying the user experience is one key element to switch smokers. That's what we learned.
Can I just close that off? I'm a consumer of our smoke-free products. And the work that Bin and his team do is absolutely critical for people like me. If you think about it from a very human perspective, when you're asking somebody to change their behavior, it's a really hard thing to do.
If you think about any example that we all try and do to live a better life, it requires a lot of effort. But also as humans, we find any excuse not to change behavior as well. So, some of the early products that we had, particularly our heated tobacco product, there were plenty of excuses that we gave consumers not to try and make the switch.
And Bin and his team have been working through those and changing the product so that it is a much, much better consumer experience. So, we're removing excuses one at a time. Nevena, this is for you. How could black market products affect the transition away from cigarettes? Well, we discussed before that there is a number of countries that prohibit the products, right? It doesn't mean that people don't use them.
It's just that they cannot legally buy them. There are millions of people who live in countries where they cannot legally buy it, so they get it off the black market. I think the Prohibition story of the U.S. tells us the story, speaking of alcohol in that case, that if there is a demand, there will be a supply.
The issue with that, of course, is that the products, people don't have assurance of the quality and safety of the products they're buying. There is no control who they are sold to and who they are sold by.
So, we believe that regulated market in that respect is the best solution for any product category. Now this next question, there was a lot of controversy at the time when this happened, and this one alludes to it.
Philip Morris International has acquired pharmaceutical companies. What is the strategy behind that? I know you touched upon it earlier. So, that really was part of this adventure we're going into to look at different revenue streams outside of the space of tobacco and nicotine.
And, you know, we've built here in this building, this amazing building, we've built some incredible skills and capabilities in science and in engineering. So, our thinking was, can we apply those skills and capabilities to other product lines in the pharmaceutical sector? So, to give us a kick start on that, we went into that through a number of acquisitions.
So, that's really how that fits into the longer-term picture. I realize now that it was quite a shock for society, and I think people were a little taken aback, but it came from this understanding and learning we've had around all of these different scientific techniques and engineering capabilities that we believe can be applied to other things.
Okay. Smoke-free products still contain nicotine. Hence, you may have removed the toxicity problem, but not the addictive potential. What do you say about that, Patrick? Yeah. Look, nicotine is addictive.
I think we have discussed change of behavior, right? And what we are trying to achieve is trying to get every single smoker away from cigarettes and move them to smoke-free products. So, nicotine is a part of that, along with the sensory, the taste, the feel of the product, and you name it.
So, yes, it is addictive, but yes, it is needed actually to achieve our ultimate goal and, with that, achieve the harm reduction potential that our smoke-free products have. Okay, please keep those questions coming in.
Next one. What insights have. No, I've done that one because... we need to get some more questions in, guys. Can PMI use existing technology and understanding of nicotine delivery for medical use? So again, I think this one's for you, Patrick.
Or is it for you, Moira? Both of you, maybe? - Up to you. - For medical use. Look I mean, PMI is not a pharmaceutical company. So, our focus is really, as Moira and Bin described it very, very clearly, not on the on the medical use itself.
I think we're not set up in this way. We're not producing under Good Manufacturing Practice and other things like this. So, we are not looking really into that question and we’re focusing fully on our consumers and the journey to switch every smoker to smoke-free products.
Okay, this one's taken sort of a different turn. You are shipping millions of electronic devices. How do you address the environmental impact, and with COP29 going on right now this is probably quite salient, the environmental impact of that? I'm glad that this question finally appeared.
So, we do it in the most responsible way. So, in terms of sustainability, it's very high in our agenda. So, we just signed ourselves up for eco-certification process. And what we're trying to do is to take an end-to-end approach.
The environmental impact, we say we shouldn't take it as just the aftermath of the product [that] has been launched. We want to, from the very beginning of the product concept, already consider what are the factors that would impact our environment and consciously minimize it from the very beginning of the product design to manufacturing and going through the whole life cycle.
So, we're using, just like any other companies delivering electronics, we will use material, we will use energy. And the proper way to do that is to manage it end-to-end with a high standard of sustainability requirements.
And that's what we are doing here today. Okay. I think this one's for you, Nevena. Which stakeholders does PMI consider key to facilitating the transformation? Well, I would go back to what Moira said before.
Obviously, there is a huge role for everyone to play. Clearly, the regulators are the ones deciding how any product categories in the country will be treated. But, obviously, we have the whole ecosystem in any society that affects the change.
There is a role for civil society, for academia, for science, and after all, for consumers, the people who benefit the most in terms of switching to better products. Obviously, it works differently in different places, but optimally, there would be stakeholders from all of these categories who would thrive to allow people to make better choices.
Okay, and again, this one's on nicotine. Smoke-free products still contain nicotine. What does your current research indicate about the health effects of long-term nicotine use without combustion? Yeah. So, look, I think the most prominent question that always comes is, does it cause disease? So, let's just go on this.
Nicotine does not cause cancer. It does not cause cardiovascular disease. And this is not something that we are saying. This is something that FDA, WHO, IARC, and other agencies have been really looking into it.
Now, that said, nicotine is not risk free. We talked about the addiction also before. Nicotine has acute cardiovascular effects, which is also why we are saying if you have a disease, you shouldn't use nicotine.
I think what people have to keep in mind is that actually data on nicotine-only products is still very, very scarce out there. You would think that you have enough data from NRT use, but NRT use was for the longest time restricted to 3-month use.
And so long-term data is actually really, really missing. So, the closest you actually get to this data is to take the data from snus, which the FDA actually found that product fitting for the protection of public health and actually approved the product with a reduced risk order.
So, that is the closest what we have today. And what I just said is also based on that data set of epidemiological data that mainly comes from Sweden. If I can just add to that, I think nicotine is one of the most misunderstood chemicals on the planet.
And I think that's because it's been always mixed up with smoke. That's how we know about nicotine, from smoking. And so, there are a lot of assumptions that the impacts of smoking are actually caused by nicotine.
And that's not correct, as Patrick mentioned. So, now we need to decouple the two because nicotine and nicotine-containing products that don't produce smoke, don't burn tobacco, and don't produce smoke, they're part of the solution to smoking.
So, we have to really double down on efforts to get the science to a place where people feel very comfortable about it. We've been looking at it for a long time, and we found lots of agencies, as Patrick mentioned, that are making very bold statements about what nicotine is and what it isn't.
So, I think that's really important. Let's get the facts straight about nicotine because it's a really crucial part of accelerating the end of smoking. Okay. Bin, this one's for you. How do newer heated tobacco device versions differ from older ones? We had a major technology upgrade, a big, big, innovation milestone a couple of years ago to upgrade our last generation of heat-not-burn technology from the so-called blade heating to induction heating.
And this is a game changer for us in the sense that we, I talked about user experience simplification, So, the upgrade of the technology to induction that we did a couple of years ago removed the most frequent consumer pain points that they previously had.
And we see it from the consumer reactions that when we launched the new product, the new technologies, the user satisfaction, the EPS, go up dramatically. So, this is actually, I haven't seen many examples in my career like this, that [of] a perfect marriage of technology innovation solving consumer pain points.
So, one technology, one innovation, is solving the top four, top five, consumer pain points in one shot. So, this was really a breakthrough for us: the upgrade from blade to induction. Patrick, this one is for you.
How do you measure research across all the different products that PMI has? How do you do that? Well, I explained a little bit before what our assessment strategy is. And it always goes from aerosol chemistry, nonclinical testing to behavioral research.
And I think now moving forward, as we actually have reached the 10 years mark, we will also get more and more into the use of real-world data and real-world evidence to really look or get away from our biomarker assessment on the one hand, and really look into the disease risk reduction potential that we have for our products.
And the same approach we actually apply across all the different portfolios that we have. Okay. And this one again for you. What measures does PMI take to assess the health risks of its smoke-free products? Actually, the answer is almost the same, basically, because, I mean, when you go through this chain of what I just said. And so, assume for a second you do aerosol chemistry testing and you see that the aerosol chemistry is not what you were expecting to see and in the range, what I just said before, then you go back to the drawing board, and you see how you can fix the problem.
And then you go further from there. So, at any step of this journey on the science side, then you would get a signal that something is not right, you would just investigate, go back, fix it, and then you move basically, from there.
I think it's maybe something just to add that very often it’s actually forgotten. I mean, when you really go to scale and you bring these products to market, it is actually a huge effort and investment to test each and every one of these products and actually make sure that it's up to the standards, the scientific standards, and the rigor from Bin’s team, from Product Development, through the science, through the Behavioral Sciences team, to actually bring all of this data together to ensure that you have always the same standard and not one product is here and the other product is here.
I want to give this one to you, actually, Nevena. Are other tobacco companies following PMI's path or diverging away when it comes to, let's say, regulation? I would say that we're clearly the leader in this transformation journey among the competition.
And I think that, obviously, when someone is successful, what they do, the others generally do follow. So, that would be the brief answer to your question. We're incredibly proud that, when we came up with this vision, that Moira spoke about, I think it was seen with a huge amount of disbelief and even with questioning our sanity to some degree.
Why would a company, which is so successful in what they're doing, do something which is disruption from within? Because if we look at the disruptions that happen in other industries, they come from a challenger, not from a dominant player.
So, I think it's a fascinating story that, obviously, once you look at the results that Moira explained, it's a logical thing that the other will follow. It's typical, isn't it? Lots of questions are coming in. We're nearing the end of the session.
So, this one is for, let's see. PMI was not the first to develop heated tobacco products, but was the first to develop products that are successful in the marketplace. What are the key differences that led to THS success? So maybe I kick it off.
I don't know if my colleagues will want to add to this. I think it was all about the consumer experience, all about the taste and sensory profile of the product, which I think we cracked with IQOS. Even the early devices provided that taste and flavor that consumers were able to switch to.
So, I think that, if I were to put my finger on one factor, it would really be that user experience and the overall sensory experience for consumers. Okay, let's get as many as we can in. What is the best approach to convince governments that alternative nicotine delivery products, uh, where is it, can actually save or improve lives? Well, hopefully it’s facts, right? But just like there [are] no two people which are the same, rarely there are two governments who are the same.
What we would hope is that they look at the data. And there's plenty of it available by now, not only from here, but from many other reputable sources, both agencies who looked at the data or researchers who have conducted certain kind of studies.
And the conclusions lead to the direction that Patrick has explained before. So, we believe that policy making should be based on data, not on the other factors. And we hope this is the trajectory that the future will take us into.
Okay. This one's for you, Bin. Why did you move from blade technology to induction technology? Okay, so I kind of answered a similar question previously. But again, this is a breakthrough in our technology upgrade.
Just like any other product that consumers use, generations of generations of technology improvement would give better user experience, will improve product performance. Specifically, from the blade product introductions, we removed the need for the consumer to clean the device, which was a big pain point for them.
We made the product far more reliable than in the past, we made the delivery of the sensory performance more consistent. So I may have missed a few because this is already 2 years old, but everything summarized, this is really a breakthrough for us through product innovation.
So, I think there is plenty of IQOS or our smoke-free product users here, and everybody can say to the truth on that. So okay, last few questions. Which products in your portfolio are considered to have the lowest risk? Honestly, I think the lowest risk is the product that works for you, for the smoker.
I mean, when you think about [the] harm reduction equation, you need a product that can reduce the risk and that's accepted and be used. So long story short is whatever works for you to go completely away from cigarettes, again, short of quitting, which is always the best option, that's the product with the lowest risk.
Okay. Is there any risk associated to electronic supply in the next years, i.e., chip accessibility? So, you know, we had that big chip shortage it affected cars a lot, didn't it really? I wish I had a crystal ball.
So, the only thing I would say is what happened 2 years ago, I can tell you that, honestly, that this would not be the last shortage crisis. So, I'm in the industry for 25, 30 years. I have seen 4 or 5 cycles.
It's almost certain that the business dynamic would generate another shortage. It's just a matter of time. But what I'm very happy to see is we have developed the capabilities. We have developed the resilience to deal with a shortage crisis like this, and not only during the crisis, but also, more importantly, what we do before the crisis comes.
How do we diversify our design? How do we optimize our footprint? And how do we proactively look for different sources of designs? And I'm very confident that when the next crisis comes, we'll be stronger, we will be more reliable than the last one that we've gone through.
Okay, one final question. We mentioned Japan a lot. So, someone says here Japan is a unique situation, culture and market. Youth use is different in other markets. How do you ensure that you are only reaching legal-age users? So maybe I can take that one.
So, Japan is in fact not a unique situation. I think now. It was for a while. It was for a long while, but now we have some good data from other countries as well. So, there are government surveys that have been conducted in Germany, in Switzerland, in Italy, just as examples that are showing a very similar picture to what we've seen from the Japanese government that Tomoko mentioned. So very low levels of youth usage.
And that's, I think, something I'm very proud of. We've taken real care and attention to make sure that we're marketing and selling this product to the right people, which is adults who would otherwise continue to smoke, and taking responsibility to make sure that we don't get it into the hands of people who shouldn't, and particularly minors.
I just want to thank everyone for their questions. It's been fantastic to get all these questions and some really insightful answers here. Just to wrap up then, Bin, we always talk about technology moving at a ridiculous pace.
You talked about the 10-year journey. Where do you think we'll be in 10 years with the technology that you're developing? Well, again, we are a modern product company backed by science with a lot of innovation capabilities, now.
What I would see is the product is very successful. It's in more than 90 markets in the world. What I would see is innovation would continue to be the focus for us to generate even better products to convert more smokers.
And the next 10 years, no doubt will be more successful through many factors, especially through innovation. And the focus for you, Nevena, I suppose Bin mentioned 90 markets there. What do you think you can achieve in the next 10 years? Let's see. We of course want the number of countries that are recognizing the potential of these products to take the right step to foster this change and facilitate it to happen faster.
We always speak about the cost of inaction, right? If you see that making certain decisions would be beneficial for your society, it's better to do it sooner than later. And for you, Patrick, the research experiments continue, I presume? Yeah, definitely, I think main focus is going to be data on smoking-related diseases on the one hand, and then everything that has to do with understanding the consumer better, monitoring product use trajectories.
Behavioral sciences is going to be definitely key for us moving forward. And Moira, you were there 10 years ago. Do you think you'll still be there 10 years in the future? Well, yes, I think we have mentioned the challenges we've got.
There's still plenty work to be done. And I'm spending time enjoying reflecting on the last 10 years, but also thinking, how am I going to reflect backwards in 10 years to come? And what role have I played in accelerating progress? And I would just encourage anyone in the audience from the scientific community, public health community, any regulators or policymakers who tuned in to also think, how will they be looking back in 10 years’ time to say what have they done to help accelerate progress for a billion people who otherwise will be continuing to smoke? Look, thank you very much. It's been wonderful listening to you.
I think they all deserve a round of applause from us all. Thank you. I was going to say stand up. So in terms of...no, you can if you want, Bin. I just want to end by thanking you all in the audience, of course, those watching on LinkedIn®, YouTube, and the PMI Science platform, [and say] that you can, of course, go to the PMI Science website for more information and to the platform as well for the recorded version of this.
But for now, that's the 15th Open Science event. Thank you for your time.
