Altria has announced that a subsidiary has entered into an agreement with a subsidiary of Philip Morris International Inc. (PMI) under which Altria will receive cash payments from PMI totalling approximately USD 2.7 billion in exchange for assigning exclusive US commercialization rights to the IQOS Tobacco Heating System effective 30 April 2024.
In 2013, Altria entered into a series of agreements with PMI related to innovative tobacco products, which included exclusive US commercialization rights of PM USA, an Altria subsidiary, 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 (FDA) in April 2019 and continued through April 2024. As part of the 2013 agreement, PM USA had the right to maintain exclusive US 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. “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 in a press release.
Altria received a payment from PMI of USD 1 billion upon entry into the Agreement. Under the terms of the Agreement, PMI is obligated to make an additional payment of USD 1.7 billion (plus interest) by July 2023 for a total cash payment of approximately USD 2.7 billion (pre-tax).
“We remain committed to creating long-term value through our Vision,” said Billy Gifford, Altria’s Chief Executive Officer. “We believe that this agreement provides us with fair compensation and greater flexibility to allocate resources toward Moving Beyond Smoking.”
“Today marks another historic milestone in our journey towards a smoke-free future,” said Jacek Olczak, PMI’s Chief Executive Officer. “This agreement gives PMI full US 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.”
IQOS and Marlboro HeatSticks are currently unavailable for sale in the US due to orders imposed by the U.S. International Trade Commission that prohibit importation of IQOS and Marlboro HeatSticks into the US 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 before May 2024, PM USA has the option to reintroduce the IQOS system and Marlboro HeatSticks for sale in the US. On 30 April 2024, US 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 US.