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Investor Day – Reduced-Risk Products
Lausanne, June 26, 2014
Bertrand Bonvin
Senior Vice President, Research & Development...
Reduced-Risk Products is a Consumer Category of its Own
2
Fast-Moving Consumer
Goods for Adult Smokers
Scientific
Substant...
Leadership in Reduced-Risk Products
3
Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that ha...
Agenda
● R&D capabilities and assets
● RRPs portfolio
● Scientific substantiation
4Note: Reduced-Risk Products ("RRPs") is...
Best-In-Class R&D Capability in the Industry
● PMI’s long experience in RRP
● Since the spin, PMI has significantly enhanc...
PMI R&D Centers and Global Partnerships Network
6
Technology and Scientific Network (2014)
2 R&D Centers
Major partners an...
RRPs Development and Scale-up
● Heat-not-burn consumables:
- Internally developed and manufactured
- New factory (30 billi...
Long-Term RRPs Pipeline
● Portfolio of over 500 granted patents worldwide
● Pipeline of around 1,000 pending patent applic...
Developing Robust Evidence to Support a Claim of Reduced Risk
● Leading RRPs science
● State-of-the-art product assessment...
Agenda
● R&D capabilities and assets
● RRPs portfolio
● Scientific substantiation
10Note: Reduced-Risk Products ("RRPs") i...
RRPs: Our Product Platforms
11
Platform 2Platform 1
Heated Tobacco Products Nicotine Containing Products
Platform 3 Platfo...
Platform 1: Precisely Controlled Electrically-Heated
Tobacco System
● Heater maintains tobacco temperature below combustio...
Platform 2: Heat-Not-Burn with Combustible Cigarette Ritual
● Pressed carbon heat source
● Tobacco temperature control by ...
E-Vapor Products
● Current e-vapor product challenges:
- Satisfaction
- Consistency
- Manual manufacturing
● PMI’s approac...
Platform 4: Innovative Technology
● Novel aerosolization technology:
- Proprietary cartridge-battery combination
- Improve...
Platform 3: Effective Delivery of Nicotine Salt Aerosol
● Product development on-going
● Organic acid and nicotine contain...
Agenda
● R&D capabilities and assets
● RRPs portfolio
● Scientific substantiation
17
● Developing robust evidence packages based on state-of-the-art science and
best in class data
Post-Market Studies
& Surve...
Substantiating Reduced Risk
19
Aerosol Chemistry and
Physics
Standard Toxicology
Assessment
Clinical Trials
Systems Toxico...
Substantiating Reduced Risk
20
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Ass...
Substantiating Reduced Risk
21
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Ass...
Substantiating Reduced Risk
22
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Ass...
Substantiating Reduced Risk
23
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Ass...
Substantiating Reduced Risk
24
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Ass...
Cessation: The "Gold Standard"
● We apply the US Institute of Medicine’s "gold standard" for assessing risk
reduction: com...
Investor Day – Reduced-Risk Products
Lausanne, June 26, 2014
Manuel Peitsch
Vice President, Biological Systems Research
No...
Evidence Package
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Assessment
Clinic...
28
0
10
20
30
40
50
60
70
80
90
100
Aerosol Composition(a): Relative Amounts Reported on a Nicotine Basis Compared to a
3R...
Evidence Package
29
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Assessment
Cli...
7.4 9.612.8 11.6
0%
50%
100%
3R4F Regular Menthol
Reduction of Toxicity in Heat-Not-Burn Platforms
● Compared to combustib...
Source: PMI Research and Development
Systems Toxicology-Based Risk Assessment
● Integrated large scale molecular measureme...
Note: CC is a 3R4F reference combustible cigarette
Source: PMI Research and Development
Compare Heat-not-Burn Platforms wi...
Compare Heat-not-Burn Platforms with Continued Smoking and
Cessation in Mouse Model: Impact on Disease Mechanisms
33
Platf...
Compare Heat-not-Burn Platforms with Continued Smoking and
Cessation in Mouse Model: Impact on Disease Mechanisms
34
Platf...
Note: These data alone do not represent a claim of reduced
exposure or reduced risk. Prototype of Platform 2
Source: PMI R...
Compare Heat-not-Burn Platforms with Continued Smoking and
Cessation in Mouse Model: Impact on Disease Mechanisms
36
0
10
...
Evidence Package
37
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Assessment
Cli...
PMI’s Approach to Clinical Assessment
38
Clinical Assessment
Reduced Exposure
Pharmacokinetics /
Pharmacodynamics
Exposure...
Platform 1 Clinical Assessment: Pharmacokinetic
Preliminary Results
39
Platform 1
Combustible
Cigarette
0
2
4
6
8
10
12
14...
Platform 1 Clinical Assessment: Reduced Exposure
Preliminary Results
40
3-HPMA levels
Geometric Mean 3-HPMA (ng/mg creat, ...
● 160 adult smokers
● Confined & Ambulatory
● Exposure to harmful and potentially harmful
constituents, product use
● Mult...
Evidence Package
42
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Assessment
Cli...
Consumer Perception and Behavior Assessment
● Based on FDA guidance
● Designed to assess consumer perception and understan...
PMI’s Post-Market Assessment
● Surveys and surveillance to:
- Understand how product is used
- Monitor spontaneous health ...
Evidence Package
45
Product Design and
Control Principles
Aerosol Chemistry and
Physics
Standard Toxicology
Assessment
Cli...
Reduced-Risk Products: R&D
46
R&D and Scientific Substantiation
• Ready for RRPs era
• Strong product portfolio and innova...
Reduced-Risk Products: Regulation
47
Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that hav...
Reduced-Risk Products: Regulation
● Advocating rigorous regulatory standards, which can provide:
- Assurance to regulators...
Reduced-Risk Products: Regulation
● US FDA:
- Statute and MRTP Draft Guidance
- "Deeming Regulations"
● EU Tobacco Product...
Reduced-Risk Products: R&D
50
RRPs Regulation
• Uncharted territory
• Can provide assurance to
regulators, public and
cons...
Investor Day – Reduced-Risk Products
Lausanne, June 26, 2014
Frederic de Wilde
Senior Vice President, Marketing & Sales
No...
Reduced-Risk Products: Commercialization
52
Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products t...
Commercialization of RRPs
● Evolution of E-Vapor Product market
● PMI’s RRPs portfolio
● PMI’s Platform 1 commercializatio...
Evolution of E-Vapor Products Market
● Changing the dynamics of the industry
● Classified as medicinal or prohibited produ...
Evolution of E-Vapor Products Market
● Some markets dominated by e-liquid products – rechargeable "tanks" with
nicotine co...
Maturity Levels of E-Vapor Markets
● Mature markets:
- UK (7.8% adult smokers used an e-vapor in the past 7 days), Poland ...
5
15
3
0
16
79
96
70
100
13
39
10
40 Trial
(past 12 months)
Awareness of
e-vapor products
Italy: Adoption of E-Vapor Produ...
● E-vapor is a product category which is here to stay
● The category will continue to grow at different rates depending on...
RRPs Commercialization
● Evolution of E-Vapor Product market
● PMI’s RRPs portfolio
● PMI’s Platform 1 commercialization
●...
Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual ...
61
Importance of satisfaction
PMI’s RRPs Portfolio Addresses Adult Smokers Preferences and
Market Opportunities
Importance...
P2like
62
Importance of satisfaction
PMI’s RRPs Portfolio Addresses Adult Smokers Preferences and
Market Opportunities
P1 ...
P3 like
P2like
P1 like
63
Importance of satisfaction
P4 like
PMI’s RRPs Portfolio Addresses Adult Smokers Preferences and
...
100% 95%
36%
17%
3%
9.1
8.7
3.3
1.5
0.4(a)
Adult
Smokers
Awareness of
E-vapor Products
Trial
(past 12 months)
Purchase
(pa...
Italy: Size of the Opportunity
65
e-vapor product users
Platform 4
NoTobacco
0.4
# of Adult
Smokers
(millions)
• Current g...
Italy: Size of the Opportunity
66
Tried and rejected
e-vapor products
e-vapor product users
Platform 1
Platform 4
NoTobacc...
Aware of but did not
try e-vapor products
Italy: Size of the Opportunity
67
Tried and rejected
e-vapor products
e-vapor pr...
Aware of but did not
try e-vapor products
• Taste satisfaction
• Convenience, less smell, no ash
• Cigarette-like ritual
P...
Aware of but did not
try e-vapor products
5.4
• Taste satisfaction
• Convenience, less smell, no ash
• Cigarette-like ritu...
RRPs Commercialization
● Evolution of E-Vapor Product market
● PMI’s RRPs portfolio
● PMI’s Platform 1 commercialization
●...
(Approximately 45-second video)
Investor Day – Reduced-Risk Products
Lausanne, June 26, 2014
Note: Reduced-Risk Products (...
Introducing The System
Note: Reference images only 72
Kit Packaging
73Note: Reference images only
Note: Reference images only
Kit Packaging
74
Note: Reference images only
Kit Packaging Components
75
76
Components Line-Up
Note: Reference images only
Device Color Customization
77Note: Reference images only
Marlboro HeatStick: Tobacco Sticks Specially Designed for
78Note: Reference images only
79
Marlboro HeatStick: Tobacco Sticks Specially Designed for
Note: Reference images only
Communication and Commercialization
● campaign
● Leverage current infrastructure
● New capabilities and channels
80
Visual Not Shown
Visual Not Shown
Visual Not Shown
Visual Not Shown
Visual Not Shown
Communication and Commercialization
● campaign
● Leverage current infrastructure
● New capabilities and channels
86
Leverage Current Infrastructure
● Ensure product availability in C-stores and general trade
● Traditional media to boost a...
Visual Not Shown
Visual Not Shown
Visual Not Shown
New Capabilities and Channels
● Digital Platform:
- 24/7 online platform providing end-to-end service
• Integrated e-comme...
: Launch Plan
● shows high potential to address the emerging preferences of adult
smokers
● The system and Marlboro HeatSt...
93
Platform 4
Platform 4: Commercialization Plan
● Agreement with Altria to commercialize their products
● Invest in the development of ...
95Source: Company websites, PMI estimates and Nielsen
Nicocigs: Company Information
● Founded in 2008, based in Birmingham...
Reduced-Risk Products: Marketing and Commercialization
96
Regulation
Marketing and Commercialization
• A strong RRPs portf...
Reduced-Risk Products: Conclusions
97
RRPs
Regulation
R&D and
Scientific Substantiation
Marketing and
Commercialization
Re...
Investor Day – Reduced-Risk Products
Lausanne, June 26, 2014
Questions & Answers
Note: Reduced-Risk Products ("RRPs") is t...
Reconciliation of non-GAAP measures included in this presentation
to the most comparable GAAP measures are provided on our...
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Pmi - reduced-risk products - june 26, 2014

PMI Reduced Risk Products - Lausanne - 26th June 2014

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Pmi - reduced-risk products - june 26, 2014

  1. 1. Investor Day – Reduced-Risk Products Lausanne, June 26, 2014 Bertrand Bonvin Senior Vice President, Research & Development Manuel Peitsch Vice President, Biological Systems Research Frederic de Wilde Senior Vice President, Marketing & Sales Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  2. 2. Reduced-Risk Products is a Consumer Category of its Own 2 Fast-Moving Consumer Goods for Adult Smokers Scientific Substantiation Electronics Consumer Electronics Reduced-Risk Products ("RRPs") Platform 1 Platform 2 Platform 3 Platform 4 Heated Tobacco Products Nicotine Containing Products Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development
  3. 3. Leadership in Reduced-Risk Products 3 Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development Reduced-Risk Products ("RRPs") Platform 1 Platform 2 Platform 3 Platform 4 Heated Tobacco Products Nicotine Containing Products RRPs Regulation R&D and Scientific Substantiation Marketing and Commercialization
  4. 4. Agenda ● R&D capabilities and assets ● RRPs portfolio ● Scientific substantiation 4Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  5. 5. Best-In-Class R&D Capability in the Industry ● PMI’s long experience in RRP ● Since the spin, PMI has significantly enhanced its R&D capabilities ● Invested approximately $2 billion ● Hired over 300 scientists with deep expertise in key fields 5Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  6. 6. PMI R&D Centers and Global Partnerships Network 6 Technology and Scientific Network (2014) 2 R&D Centers Major partners and service providers
  7. 7. RRPs Development and Scale-up ● Heat-not-burn consumables: - Internally developed and manufactured - New factory (30 billion units by the end of 2016) ● Devices: - PMI’s technology developed with external partners - Scale up and manufacturing by third-party - Manufacturing for pilot launches commenced Bologna, Italy 7Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. Visual execution is for illustrative purposes only
  8. 8. Long-Term RRPs Pipeline ● Portfolio of over 500 granted patents worldwide ● Pipeline of around 1,000 pending patent applications ● Basis for long-term RRPs pipeline to address range of adult smoker preferences 8Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  9. 9. Developing Robust Evidence to Support a Claim of Reduced Risk ● Leading RRPs science ● State-of-the-art product assessment ● Sharing and collaborating with the scientific community and regulators ● 80 peer-reviewed scientific publications ● Clinical studies registered on ClinicalTrials.gov 9Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  10. 10. Agenda ● R&D capabilities and assets ● RRPs portfolio ● Scientific substantiation 10Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  11. 11. RRPs: Our Product Platforms 11 Platform 2Platform 1 Heated Tobacco Products Nicotine Containing Products Platform 3 Platform 4 Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development
  12. 12. Platform 1: Precisely Controlled Electrically-Heated Tobacco System ● Heater maintains tobacco temperature below combustion ● Custom designed HeatStick tobacco stick ● Aerosol delivers volume, flavor and satisfaction 12Source: Baker R. R., 1975, High Temp. Sci., 7, 236-247 and PMI Research & Development
  13. 13. Platform 2: Heat-Not-Burn with Combustible Cigarette Ritual ● Pressed carbon heat source ● Tobacco temperature control by design: - Physically separated to prevent tobacco combustion ● Proprietary blend & flavor system ● Plan to start clinical studies in 2014 ● Manufacturing synergies with Platform 1 ● City launch in 2016 13 Platform 2
  14. 14. E-Vapor Products ● Current e-vapor product challenges: - Satisfaction - Consistency - Manual manufacturing ● PMI’s approach: - Enter e-vapor product category in 2014 - Develop innovative NCP delivery technology addressing current challenges 14
  15. 15. Platform 4: Innovative Technology ● Novel aerosolization technology: - Proprietary cartridge-battery combination - Improved e-liquid - Automated manufacturing ● Consistency of aerosol delivery ● Nicotine delivery profile superior to existing products ● Pilot city test in H2, 2016 15
  16. 16. Platform 3: Effective Delivery of Nicotine Salt Aerosol ● Product development on-going ● Organic acid and nicotine contained in separate sections ● Nicotine salt is formed in a visible aerosol ● Provide nicotine delivery and satisfaction similar to combustible cigarettes ● Initial pre-clinical testing ongoing 16 Platform 3
  17. 17. Agenda ● R&D capabilities and assets ● RRPs portfolio ● Scientific substantiation 17
  18. 18. ● Developing robust evidence packages based on state-of-the-art science and best in class data Post-Market Studies & Surveillance Consumer Perception and Behavior Assessment Substantiating Reduced Risk 18 Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs Clinical Trials Systems Toxicology Assessment Standard Toxicology Assessment Aerosol Chemistry and Physics Product Design and Control Principles Note: HPHCs stands for Harmful or Potentially Harmful Constituents
  19. 19. Substantiating Reduced Risk 19 Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs Product Design and Control Principles
  20. 20. Substantiating Reduced Risk 20 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  21. 21. Substantiating Reduced Risk 21 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  22. 22. Substantiating Reduced Risk 22 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  23. 23. Substantiating Reduced Risk 23 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  24. 24. Substantiating Reduced Risk 24 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  25. 25. Cessation: The "Gold Standard" ● We apply the US Institute of Medicine’s "gold standard" for assessing risk reduction: comparability to cessation 25 Time DiseaseRisk Point of Intervention From Epidemiology Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The descriptions in the chart are for illustrative purposes only Source: IOM (Institute of Medicine), 2012, Scientific Standards for Studies on Modified Risk Tobacco Products. Washington, DC: The National Academies Press
  26. 26. Investor Day – Reduced-Risk Products Lausanne, June 26, 2014 Manuel Peitsch Vice President, Biological Systems Research Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  27. 27. Evidence Package Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs 27
  28. 28. 28 0 10 20 30 40 50 60 70 80 90 100 Aerosol Composition(a): Relative Amounts Reported on a Nicotine Basis Compared to a 3R4F Reference Cigarette (%) Laboratory Filter Pad Combustible Cigarette Laboratory Filter Pad Platform 1 Platform 1 Platform 2 Combustible Reference Cigarette (a) Aerosol collection with Intense Health Canada’s Smoking Regime (55 mL puff volume, 2 second puff duration, 30 second interval puff) (b) < LOQ in Platform 1 (c) < LOQ in Platform 1 and Platform 2 (d) < LOQ in Platform Note: These data alone do not represent a claim of reduced exposure or reduced risk. LOQ refers to the Limit of Quantification Source: PMI Research and Development Reduction of HPHCs in Platform 1 and Platform 2 Aerosols
  29. 29. Evidence Package 29 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  30. 30. 7.4 9.612.8 11.6 0% 50% 100% 3R4F Regular Menthol Reduction of Toxicity in Heat-Not-Burn Platforms ● Compared to combustible cigarette smoke: - reduces biological activity (in vitro / in vivo) 30 Cytotoxicity Relative to 3R4F Mean ± SE TPM GVP Platform 1 Genotoxicity Relative to 3R4F Mean ± SE 0 200 400 600 1,000 2,000 3,0000 TPM (µg/plate) Number of Revertants 3R4F Platform 1 Regular Platform 1 Menthol Note: These data alone do not represent a claim of reduced exposure or reduced risk. 3R4F reference cigarette. TPM refers to Total Particulate Matter. GVP refers to Gas Vapor Phase Source: PMI Research and Development
  31. 31. Source: PMI Research and Development Systems Toxicology-Based Risk Assessment ● Integrated large scale molecular measurements with advanced computational models of disease mechanisms ● Ability to quantify the perturbation of the core mechanisms leading to disease 31 Cigarette Smoke Inflammation Cell Proliferation Cell Stress ApoptosisDNA Damage Necroptosis SenescenseAutophagy Biological Networks Month 1 2 3 5 Month 7Start
  32. 32. Note: CC is a 3R4F reference combustible cigarette Source: PMI Research and Development Compare Heat-not-Burn Platforms with Continued Smoking and Cessation in Mouse Model: Impact on Disease Mechanisms 32 Platform 2 Prototype CC Platform 2 PrototypeCC AirCC Air Combustible Cigarette Cessation Switching Platform 2 Prototype Reference: Air Month 2 Month 7Start Group Exposure
  33. 33. Compare Heat-not-Burn Platforms with Continued Smoking and Cessation in Mouse Model: Impact on Disease Mechanisms 33 Platform 2 Use 1 Time (months) 2 3 5 7 Note: These data alone do not represent a claim of reduced exposure or reduced risk. Prototype of Platform 2 Source: PMI Research and Development Combustible Cigarette  Cessation Combustible Cigarette Use
  34. 34. Compare Heat-not-Burn Platforms with Continued Smoking and Cessation in Mouse Model: Impact on Disease Mechanisms 34 Platform 2 Use 1 Time (months) 2 3 5 7 Note: These data alone do not represent a claim of reduced exposure or reduced risk. Prototype of Platform 2 Source: PMI Research and Development Combustible Cigarette  Cessation Combustible Cigarette Use Combustible Cigarette  Platform 2 Prototype (Switching)
  35. 35. Note: These data alone do not represent a claim of reduced exposure or reduced risk. Prototype of Platform 2 Source: PMI Research and Development Compare Heat-not-Burn Platforms with Continued Smoking and Cessation in Mouse Model: Impact on Disease Mechanisms 35 Combustible Cigarette  Cessation Combustible Cigarette Use Combustible Cigarette  Platform 2 Prototype (Switching) Platform 2 Prototype Use 1 Time (months) 2 3 5 7
  36. 36. Compare Heat-not-Burn Platforms with Continued Smoking and Cessation in Mouse Model: Impact on Disease Mechanisms 36 0 10 20 30 CC Cess. Switch. Air P2 Cell Changes: Inflammation Total Cells (x105) 0 1 2 3 4 CC Cess. Switch. Air P2 Emphysema Index CC Cess. Switch. Air P2 Physiological Changes/Disease: Lung Function Relative Loss of Lung Function Tissue Changes: Lung Emphysema After 7 months After 7 months After 7 months Note: These data alone do not represent a claim of reduced exposure or reduced risk. Cess. is Cessation, Switch. is Switching and P2 is Platform 2 (Prototype) Source: PMI Research and Development
  37. 37. Evidence Package 37 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  38. 38. PMI’s Approach to Clinical Assessment 38 Clinical Assessment Reduced Exposure Pharmacokinetics / Pharmacodynamics Exposure Response Measures: Nicotine Uptake Subjective Effects Measures: Biomarkers of Exposure Clinical Risk Endpoints Measures: Clinical Risk Endpoints Product Use 1 2 3 1 week in a clinic 1 week in a clinic 3 months at home 6-12 months at home
  39. 39. Platform 1 Clinical Assessment: Pharmacokinetic Preliminary Results 39 Platform 1 Combustible Cigarette 0 2 4 6 8 10 12 14 16 18 0 10 20 30 40 50 60 70 80 90 100 110 120 Nicotine(ng/mL) Time (min) Nicotine Pharmacokinetic Profile Note: These data alone do not represent a claim of reduced exposure or reduced risk Source: PMI Research & Development
  40. 40. Platform 1 Clinical Assessment: Reduced Exposure Preliminary Results 40 3-HPMA levels Geometric Mean 3-HPMA (ng/mg creat, [95%CI) MHBMA levels Geometric Mean MHBMA (pg/mg creat, [95%CI) Acrolein 1,3-Butadiene COHb levels Geometric Mean (%; [95%CI]) Carbon Monoxide S-PMA levels Geometric Mean S-PMA (pg/mg creat, [95%CI) Benzene Monohydroxybutenylmercapturic acid(pg/mgcreat) 0 500 1000 1500 2000 2500 3000 3500 4000 Baseline Day 1 Day 2 Day 3 Day 4 Day 5 0 1 2 3 4 5 6 Baseline Day 1 Day 2 Day 3 Day 4 Day 5 0 200 400 600 800 1000 1200 Baseline Day 1 Day 2 Day 3 Day 4 Day 5 0 500 1000 1500 2000 2500 3000 3500 Baseline Day 1 Day 2 Day 3 Day 4 Day 5 Carboxyhemoglobin(%) S-phenylmercapturicacid (pg/mgcreat) 3-hydroxypropylmercapturicacid (ng/mgcreat) Switched to Platform 1 Continued smoking Quit during study Note: These data alone do not represent a claim of reduced exposure or reduced risk Source: PMI Research & Development
  41. 41. ● 160 adult smokers ● Confined & Ambulatory ● Exposure to harmful and potentially harmful constituents, product use ● Multiple countries and ethnicities Platform 1 Clinical Assessment: Reduced Exposure: Ambulatory and Exposure Response Study 41 ● Primary endpoints: 5 biomarkers of exposure ● Secondary endpoints: additional biomarkers of exposure and clinical risk endpoints Reduced Exposure Studies (3-month Ambulatory) ● Primary endpoints: 8 clinical risk endpoints ● Secondary endpoints: additional biomarkers of exposure and clinical risk endpoints ● 950 adult smokers ● Ambulatory ● Changes in clinical risk endpoints, functional health markers and blood chemistry, product use ● Multiple ethnicities Exposure Response Study Source: PMI Research & Development
  42. 42. Evidence Package 42 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  43. 43. Consumer Perception and Behavior Assessment ● Based on FDA guidance ● Designed to assess consumer perception and understanding of RRPs ● Assess label, labeling and marketing material ● Assess intent to use among adult consumer groups ● Progressing according to plan 43Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  44. 44. PMI’s Post-Market Assessment ● Surveys and surveillance to: - Understand how product is used - Monitor spontaneous health events (safety surveillance) ● Under development; to be initiated as of pilot market launch 44
  45. 45. Evidence Package 45 Product Design and Control Principles Aerosol Chemistry and Physics Standard Toxicology Assessment Clinical Trials Systems Toxicology Assessment Consumer Perception and Behavior Assessment Post-Market Studies & Surveillance Reduced Risk in Laboratory Models Reduced Exposure & Risk Reduced Population Harm Reduced Toxicity in Laboratory Models Reduced Formation of HPHCs
  46. 46. Reduced-Risk Products: R&D 46 R&D and Scientific Substantiation • Ready for RRPs era • Strong product portfolio and innovation pipeline • Industry-leading risk assessment capabilities RRPs Regulation Marketing and Commercialization Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  47. 47. Reduced-Risk Products: Regulation 47 Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development RRPs Regulation R&D and Scientific Substantiation Marketing and Commercialization Reduced-Risk Products ("RRPs") Platform 1 Platform 2 Platform 3 Platform 4 Heated Tobacco Products Nicotine Containing Products
  48. 48. Reduced-Risk Products: Regulation ● Advocating rigorous regulatory standards, which can provide: - Assurance to regulators and the public - Confidence for consumers - Clarity for the marketplace ● Momentum for evidence based RRPs regulation 48
  49. 49. Reduced-Risk Products: Regulation ● US FDA: - Statute and MRTP Draft Guidance - "Deeming Regulations" ● EU Tobacco Products Directive: - E-cigarettes regulated as tobacco-related products - "Novel Tobacco Products" 49
  50. 50. Reduced-Risk Products: R&D 50 RRPs Regulation • Uncharted territory • Can provide assurance to regulators, public and consumers • Clarity for marketplace • PMI well-positioned R&D and Scientific Substantiation Marketing and Commercialization Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  51. 51. Investor Day – Reduced-Risk Products Lausanne, June 26, 2014 Frederic de Wilde Senior Vice President, Marketing & Sales Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  52. 52. Reduced-Risk Products: Commercialization 52 Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development RRPs Regulation R&D and Scientific Substantiation Marketing and Commercialization Reduced-Risk Products ("RRPs") Platform 1 Platform 2 Platform 3 Platform 4 Heated Tobacco Products Nicotine Containing Products
  53. 53. Commercialization of RRPs ● Evolution of E-Vapor Product market ● PMI’s RRPs portfolio ● PMI’s Platform 1 commercialization ● PMI’s Platform 4 commercialization 53Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  54. 54. Evolution of E-Vapor Products Market ● Changing the dynamics of the industry ● Classified as medicinal or prohibited product in more than half of OECD markets ● Growth driven by adult smokers’ desire for Reduced-Risk Products, but also by: - Lower price particularly for e-liquid products - Convenience, less smell, no ash 54Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  55. 55. Evolution of E-Vapor Products Market ● Some markets dominated by e-liquid products – rechargeable "tanks" with nicotine containing liquids – whilst in others "cartomizer" products are leading ● Wide range of penetration levels in various markets ● High interest but potential of the category currently limited by: - Lack of taste and sensory satisfaction 55 "Cartomizer" Products "Tank" Systems / E-liquids
  56. 56. Maturity Levels of E-Vapor Markets ● Mature markets: - UK (7.8% adult smokers used an e-vapor in the past 7 days), Poland (4.9%), Italy (3.5%) ● Developing markets: - France (11.9%), Spain (2.0%), Denmark (7.6%), Netherlands (3.8%) ● Low penetration markets: - Germany (0.4%), Austria (1.2%) 56 Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm Source: PMI RRP Market Research (% of adult smokers using e-vapor products in the past 7 days)
  57. 57. 5 15 3 0 16 79 96 70 100 13 39 10 40 Trial (past 12 months) Awareness of e-vapor products Italy: Adoption of E-Vapor Products 57 (% of adult smokers) Purchase (past 12 months) Usage (past 7 days) Oct Nov Dec Jan Feb Mar Apr May Jun Sept Oct Nov Dec 20132012 Note: n ~ 2,300 for each wave Source: PMI RRP Market Research (3 months moving, no fieldwork in July and August)
  58. 58. ● E-vapor is a product category which is here to stay ● The category will continue to grow at different rates depending on the market specificities and product improvements ● Excise taxation will probably be implemented ● E-vapor products do not fully respond to evolving preferences of adult smokers ● Innovation will be a key driver for the evolution of the e-vapor products category A portfolio approach with different product options is required to address emerging preferences of adult smokers 58 E-Vapor Market: Conclusions
  59. 59. RRPs Commercialization ● Evolution of E-Vapor Product market ● PMI’s RRPs portfolio ● PMI’s Platform 1 commercialization ● PMI’s Platform 4 commercialization 59Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  60. 60. Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development Source: PMI RRP Market Research 60 Importance of satisfaction PMI’s RRPs Portfolio Addresses Adult Smokers Preferences and Market Opportunities P4 like Openness to departure from cigarette flavor and ritual
  61. 61. 61 Importance of satisfaction PMI’s RRPs Portfolio Addresses Adult Smokers Preferences and Market Opportunities Importance of satisfaction P1 like P4 like Openness to departure from cigarette flavor and ritual Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development Source: PMI RRP Market Research
  62. 62. P2like 62 Importance of satisfaction PMI’s RRPs Portfolio Addresses Adult Smokers Preferences and Market Opportunities P1 like P4 like Openness to departure from cigarette flavor and ritual Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development Source: PMI RRP Market Research
  63. 63. P3 like P2like P1 like 63 Importance of satisfaction P4 like PMI’s RRPs Portfolio Addresses Adult Smokers Preferences and Market Opportunities Openness to departure from cigarette flavor and ritual Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development Source: PMI RRP Market Research
  64. 64. 100% 95% 36% 17% 3% 9.1 8.7 3.3 1.5 0.4(a) Adult Smokers Awareness of E-vapor Products Trial (past 12 months) Purchase (past 12 months) Usage (past 7 days) Italy: Adoption of E-Vapor Products 64 (million adult smokers) (a) Includes all users of tobacco products in the past 7 days Note: Number of adult smokers: Italy n ~ 2,300 Source: PMI RRP Market Research (3 months-moving average, February 2014 – April 2014)
  65. 65. Italy: Size of the Opportunity 65 e-vapor product users Platform 4 NoTobacco 0.4 # of Adult Smokers (millions) • Current generation taste satisfaction • Electronics • Convenience, less smell, no ash • Price advantageNote: The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development. Number of adult smokers: Italy n ~ 2300 Source: PMI RRP Market Research (3 months-moving average, February 2014 – April 2014)
  66. 66. Italy: Size of the Opportunity 66 Tried and rejected e-vapor products e-vapor product users Platform 1 Platform 4 NoTobaccoTobacco 3.0 0.4 # of Adult Smokers (millions) • Taste satisfaction • Convenience, less smell, no ash • Electronics • Current generation taste satisfaction • Electronics • Convenience, less smell, no ash • Price advantageNote: The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development. Number of adult smokers: Italy n ~ 2300 Source: PMI RRP Market Research (3 months-moving average, February 2014 – April 2014)
  67. 67. Aware of but did not try e-vapor products Italy: Size of the Opportunity 67 Tried and rejected e-vapor products e-vapor product users 55.0% Platform 1 Platform 4 NoTobaccoTobacco 5.4 3.0 0.4 # of Adult Smokers (millions) • Taste satisfaction • Convenience, less smell, no ash • Electronics • Current generation taste satisfaction • Electronics • Convenience, less smell, no ash • Price advantageNote: The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development. Number of adult smokers: Italy n ~ 2300 Source: PMI RRP Market Research (3 months-moving average, February 2014 – April 2014)
  68. 68. Aware of but did not try e-vapor products • Taste satisfaction • Convenience, less smell, no ash • Cigarette-like ritual Platform 2 Italy: Size of the Opportunity 68 Tried and rejected e-vapor products • Taste satisfaction • Convenience, less smell, no ash • Electronics Platform 1 e-vapor product users • Current generation taste satisfaction • Electronics • Convenience, less smell, no ash • Price advantage Platform 4 55.0% NoTobaccoTobacco 5.4 3.0 0.4 # of Adult Smokers (millions) Note: The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development. Number of adult smokers: Italy n ~ 2300 Source: PMI RRP Market Research (3 months-moving average, February 2014 – April 2014)
  69. 69. Aware of but did not try e-vapor products 5.4 • Taste satisfaction • Convenience, less smell, no ash • Cigarette-like ritual Italy: Size of the Opportunity 69 Tried and rejected e-vapor products 3.0 • Taste satisfaction • Convenience, less smell, no ash • Electronics e-vapor product users 0.4 # of Adult Smokers (millions) 55.0% Platform 2 Platform 1 Platform 4 Platform 3 Next Gen. Platform 4 • Improved taste satisfaction • Electronics • Convenience, less smell, no ash TobaccoNoTobacco • Current generation taste satisfaction • Electronics • Convenience, less smell, no ash • Price advantageNote: The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development. Number of adult smokers: Italy n ~ 2300 Source: PMI RRP Market Research (3 months-moving average, February 2014 – April 2014)
  70. 70. RRPs Commercialization ● Evolution of E-Vapor Product market ● PMI’s RRPs portfolio ● PMI’s Platform 1 commercialization ● PMI’s Platform 4 commercialization 70Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  71. 71. (Approximately 45-second video) Investor Day – Reduced-Risk Products Lausanne, June 26, 2014 Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm Video
  72. 72. Introducing The System Note: Reference images only 72
  73. 73. Kit Packaging 73Note: Reference images only
  74. 74. Note: Reference images only Kit Packaging 74
  75. 75. Note: Reference images only Kit Packaging Components 75
  76. 76. 76 Components Line-Up Note: Reference images only
  77. 77. Device Color Customization 77Note: Reference images only
  78. 78. Marlboro HeatStick: Tobacco Sticks Specially Designed for 78Note: Reference images only
  79. 79. 79 Marlboro HeatStick: Tobacco Sticks Specially Designed for Note: Reference images only
  80. 80. Communication and Commercialization ● campaign ● Leverage current infrastructure ● New capabilities and channels 80
  81. 81. Visual Not Shown
  82. 82. Visual Not Shown
  83. 83. Visual Not Shown
  84. 84. Visual Not Shown
  85. 85. Visual Not Shown
  86. 86. Communication and Commercialization ● campaign ● Leverage current infrastructure ● New capabilities and channels 86
  87. 87. Leverage Current Infrastructure ● Ensure product availability in C-stores and general trade ● Traditional media to boost awareness ● Leverage existing touch points ● Develop engagement activities to enable longer interaction 87
  88. 88. Visual Not Shown
  89. 89. Visual Not Shown
  90. 90. Visual Not Shown
  91. 91. New Capabilities and Channels ● Digital Platform: - 24/7 online platform providing end-to-end service • Integrated e-commerce platform for adult consumers • Video tutorials, hotline, troubleshooting, FAQ • Testimonials ● Customer Care: ● Personalized, multi-channel customer support center ● Electronics: ● Logistic and distribution infrastructure 91 E-Commerce Mobile App Note: Reference images only
  92. 92. : Launch Plan ● shows high potential to address the emerging preferences of adult smokers ● The system and Marlboro HeatSticks tobacco sticks manufacturing has started ● will be introduced in two test cities in Q4 2014, one in Japan and one in Italy ● National expansion starting in 2015 and launch in other markets planned ● Commercialization toolbox developed for all relevant channels 92
  93. 93. 93 Platform 4
  94. 94. Platform 4: Commercialization Plan ● Agreement with Altria to commercialize their products ● Invest in the development of second generation products for global expansion ● Enter the category starting in the second half of 2014 ● Explore acquisition opportunities that could accelerate the achievement of significant presence in certain markets 94
  95. 95. 95Source: Company websites, PMI estimates and Nielsen Nicocigs: Company Information ● Founded in 2008, based in Birmingham ● Strong market position in the UK & Ireland ● Excellent supply chain capability ● Skilled and well trained marketing & sales teams ● Nicolites: company’s main brand: - 26% YTD April Retail SoM - Present in more than 20,000 POS
  96. 96. Reduced-Risk Products: Marketing and Commercialization 96 Regulation Marketing and Commercialization • A strong RRPs portfolio to address all adult smoker preferences • New city launches in Q4, 2014 • Entered e-vapor in 2014 / Nicocigs acquisition R&D and Scientific Substantiation Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  97. 97. Reduced-Risk Products: Conclusions 97 RRPs Regulation R&D and Scientific Substantiation Marketing and Commercialization Reduced-Risk Products ("RRPs") Platform 1 Platform 2 Platform 3 Platform 4 Heated Tobacco Products Nicotine Containing Products Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm. The RRPs depicted are subject to ongoing development and therefore the descriptions are illustrative and do not necessarily represent the latest stages of product development
  98. 98. Investor Day – Reduced-Risk Products Lausanne, June 26, 2014 Questions & Answers Note: Reduced-Risk Products ("RRPs") is the term we use to refer to products that have the potential to reduce individual risk and population harm
  99. 99. Reconciliation of non-GAAP measures included in this presentation to the most comparable GAAP measures are provided on our website at: www.pmi.com/2014InvestorDay/RecSlides Glossary of Terms: www.pmi.com/2014InvestorDay/Glossary

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  • krishnakh9

    Jan. 17, 2015

PMI Reduced Risk Products - Lausanne - 26th June 2014

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