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Altria and Philip Morris Expand E-Vapor Development Deal - Analyst Blog


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Altria Group Inc. 's MO shares gained almost 3% on Jul 16 after it extended its technology sharing agreement with Philip Morris International Inc. PM .

Per the expanded agreement, the two companies will work on a joint research, development and technology-sharing framework for developing their unconventional cigarettes.

The extended agreement also includes exclusive technology cross licenses, technical information sharing and cooperation on scientific assessment, regulatory engagement and approval related to these products.

The tobacco majors collaborated in 2013 to combine their marketing powers to ramp up the distribution of their e-vapor products. While Altria sells Marlboro exclusively in the U.S., Philip Morris sells them internationally.

To complement each other, Altria and Philip Morris entered into a distribution agreement. Under the deal, Philip Morris will market Altria's MarkTen e-cigarettes internationally and the latter will distribute two of Philip Morris' heated tobacco products in the U.S. The heated tobacco products are claimed to be less harmful than conventional tobacco products as they heat the nicotine instead of burn it.

Altria entered the popular category of e-cigarettes with the launch of MarkTen e-cigarettes in lead markets in Indiana in Aug 2013. MarkTen is different from other e-cigarettes, as it can be used both as a disposable as well as a rechargeable device. Altria is well on track for the national distribution of Mark Ten.

In Nov 2013, Philip Morris announced that it would foray into the e-cigarette business in late 2015. Moreover, the company launched a set of 'Next Generation Product' (NGP) the same year, to attract adult consumers while reducing the risks related to tobacco products.

The extended collaboration closely follows the completion of the merger between two tobacco majors - Reynolds American Inc. RAI and Lorillard Inc. last month. The Reynolds-Lorillard merger consolidated the tobacco industry and increased growth opportunities for Reynolds in the tobacco category. The merger has also brought Lorillard's leading Newport and Reynolds' Camel brands under the same banner.

Both Philip Morris and Altria carry a Zacks Rank #3 (Hold). A better ranked consumer staple stock worth considering is Tyson Foods Inc. TSN carrying a Zacks Rank #3 (Hold)

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ALTRIA GROUP (MO): Free Stock Analysis Report

PHILIP MORRIS (PM): Free Stock Analysis Report

REYNOLDS AMER (RAI): Free Stock Analysis Report

TYSON FOODS A (TSN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: MO , PM , TSN


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