FDA’s application for HNB via iqos is expected to usher in an accelerated growth period

Event: FDA approved the PMI’s HNB product iqos through the MRTP application of PMI, which is different from traditional tobacco, causing less harm and harmful substances than traditional cigarettes. On July 7, FDA approved the mrtpa (harm reduction tobacco product application) of PMI iqos, which clearly indicated that iqos is HNB product (heating does not burn), which significantly reduces the harmful chemicals and potential hazards of traditional cigarettes. The transformation from traditional cigarettes to iqos can reduce the chance of human body contacting harmful or potentially harmful chemicals.

The mrtpa of FDA through PMI is expected to stimulate the rise of HNB products worldwide. On April 30, 2019, FDA approved PMTA of iqos to allow iqos cigarette sets and Marlboro smoke bombs produced by PMI to be sold in the United States; on July 7, 2020, it officially approved iqos to be able to reduce harm through the mrtpa of PMI. PMI has been applying for MRTP of iqos, a HNB product, for a long time. Iqos can not publicize its harm reduction characteristics before the application is approved. PMI is the largest tobacco company in the world, with a market share of 27%. In 2014, PMI launched iqos, the first HNB product in the market, and has become the first brand of HNB after rapid development. Therefore, FDA’s identification of HNB products has become a global “wind vane”. In the early years, the United Kingdom, Germany and the Netherlands have confirmed that HNB does less harm to human body than traditional cigarettes. FDA’s confirmation of HNB will boost the second explosive growth of iqos. The original intention of producing iqos by PMI is to reduce harm, and hope to publicize that it can replace traditional cigarettes, that is, old smokers do not need to quit smoking, as long as they switch to iqos, they can continue to realize the pleasure of smoking at low risk.

HNB aerosol reduces harmful substances, which further confirms that HNB is expected to replace e-cigarette as a mainstream new tobacco promotion product. The smoke emitted by the domestic 315 party exposure e-cigarette is harmful and has an impact on human health. On the one hand, it shows that the e-cigarette can not meet the needs of users to reduce the harm, on the other hand, it shows that the domestic e-cigarette manufacturing standards and regulatory policies are missing. Due to the fact that there are also harmful substances in e-cigarette emissions, Hangzhou, Beijing, Shenzhen, Hong Kong and other places in China have strengthened the control of e-cigarettes and banned smoking in public places. However, FDA approved the mrtpa application of iqos this time, and showed that iqos has the same effect as smoking traditional cigarettes, but the content of harmful substances in smoke is less than that of traditional combustible cigarettes, which further indicates that HNB products are safer than electronic cigarettes, and are expected to become the mainstream promotion products of new tobacco in the future.

Domestic new tobacco policy began to improve, HNB promotion is expected to accelerate the landing. The new type of tobacco is mainly divided into oleo type e-cigarettes and HNB, and the production and operation standards of e-cigarettes in China are constantly strengthened; in May 2017, the national tobacco monopoly administration classified HNB’s smoke bombs into tobacco products and put them under the supervision of the Monopoly Bureau. At present, the domestic sales of HNB products have not been liberalized, and the supervision of supporting cigarette sets has not been clarified. Due to the strict and scientific review of PMTA and mrtpa by FDA, FDA’s attitude towards iqos products has a demonstration effect in the world. The policy of domestic HNB products will also “focus” on the attitude of FDA. The adoption of mrtpa is expected to accelerate the implementation of domestic HNB policy.

The promotion of HNB’s global penetration rate and the implementation of domestic HNB policy in the future will benefit the leading enterprises with new tobacco layout. The harmfulness reduction of HNB products has been officially recognized, which will further accelerate the global penetration of HNB. In 2017, the global market scale was 5 billion yuan, and it is expected to accelerate the improvement in the future. At present, the domestic tobacco monopoly bureau encourages China tobacco companies to actively develop new tobacco products and put them on the market for overseas sales. The products cooperated by domestic leading enterprises and China tobacco companies are also listed and sold overseas. The global demand for HNB products is increasing, which will help the new tobacco industry to realize its revenue performance. With the implementation of domestic policies in the later stage, such enterprises will continue to enjoy the dividend of rapid growth of the industry. Jinjia shares (12.820, 0.68, 5.60%) (002191), Jiyou shares (49.150, 4.47, 10.00%) (603429), Dongfeng shares (7.670, 0.20, 2.68%) (601515) are recommended.

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