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June 17th, 2016:

Buy Philip Morris International for new alternative tobacco products: JPM

Investors should buy Philip Morris International due to growth of alternative tobacco products in the next decade, according to JPMorgan.

“We believe that the disruptive and inevitable progress of Novel Nicotine Products (NNP) will improve industry fundamentals (e.g. higher profits, premiumization) while lowering regulatory pressures,” JPMorgan’s Alberto Rueda wrote in a note to clients Friday.

“Big tobacco companies have the assets and expertise to succeed in this new emerging segment, particularly under a strict regulatory framework. Overall, we see PM and BAT as long-term winners given their strategies to develop a wide range of products.”

World’s ugliest colour discovered

The world's "ugliest" color could help people quit smoking

The world’s “ugliest” color could help people quit smoking

Australian researchers looked for the most repulsive colour to help save lives.

A group of experts from a marketing company have released the results of a survey which found that Pantone 448c, also known as opaque couché, is the ugliest colour in the world.

Officially the world’s ugliest colour: Pantone 448 C (aka Opaque Couch) or as I like to call it Dark Green Brown.

The Australian Government had asked the research agency GfK Bluemoon to find the ugliest colour to use on cigarette boxes to encourage people to stop smoking.

Nearly a thousand smokers took part in the survey and chose the “drab, dark brown” colour, which they associated with “tar,” “dirty” and “death.”

After the survey Australia set out on December 1 to legislate that the colour must be used on plain packs of cigarettes alongside graphic health warnings.

The government hopes that the move will make people think twice about continuing the habit.

Australia was the first country to adopt plain packaging in 2012, and experienced a sharp fall in smoking immediately afterwards.

The United Kingdom, Ireland, and France followed suit, adopting similar “plain packaging” laws to effectively fight tobacco use.

On May 31, in honour of World No Tobacco Day, the World Health Organisation (WHO) tried to encourage other countries to adopt similar plain packaging for tobacco products, following Australia’s success.

The Guidelines for Implementation of Article 11 (Packaging and labelling of tobacco products) of the WHO Framework Convention on Tobacco Control (WHO FCTC) describes plain packaging as “measures to restrict or prohibit the use of logos, colours, brand images or promotional information on packaging other than brand names and product names displayed in a standard colour and font style [plain packaging].”

WHO Director-General Dr Margaret Chan said on No Tobacco Day “Plain packaging reduces the attractiveness of tobacco products. It kills the glamour, which is appropriate for a product that kills people.”

“It restricts tobacco advertising and promotion. It limits misleading packaging and labelling. And it increases the effectiveness of health warnings.”

However, the result of the survey has been disputed.

Famous painter Leonardo Da Vinci used opaque couché to encolour the dress of the subject of his famous painting “Mona Lisa,” being inspired by popular clothing at that time in history.

So beauty is really in the eye of the beholder.

SynBio tobacco plant that produces vital malaria drug met with skepticism by scientists

Artemisinin is by far the world’s most important weapon against the main parasite that causes malaria—a disease which still claims around 500,000 lives, mostly young children, annually around the world.

There’s just one problem with artemisinin: making it in large enough quantities to meet the demand is very difficult because the plant it is isolated from is difficult to cultivate. This led scientists from the Max Plank Institute to modify the much more malleable tobacco plants to produce the lifesaving drug—an achievement they announced on June 14, 2016. Somewhat surprisingly though the responses to the announcement by scientists have been skeptical—from a scientific and political perspective.

The World Health Organization recommends the drug be administered to all those infected with Plasmodium falciparum (the most common malarial parasite) with both uncomplicated and severe malaria. The WHO also says keeping artemisinin efficacious in endemic areas is imperative as no other malaria drugs are in the pipeline for the foreseeable future. Ralph Bock, the tobacco project’s leader at the Max Planck Institute of Molecular Plant Physiology called the drug the “most powerful weapon” we have against malaria.

In nature, artemisinin is found in an herb called the sweet wormwood (Artemisia annua). For two millennia, the Chinese ground the leaves of the fern-like plant into a tea for its purported healing properties such as reducing fevers. In the 1970’s, it was discovered that the plant may have anti-malarial properties by Tu Youyou who would go on to win a Nobel Prize for the discovery in 2015. However, it wouldn’t reach wide scale use in the western world until the early 2000’s after the WHO recommended it be a staple of malaria treatment around the world.

Yet, producing the drug is no small task: it cannot be made synthetically in a lab and has to be extracted from the sweet wormwood crop directly. Unfortunately, the crop is very volatile with dramatic yield shifts from year-to-year and it only grows well in a just a few places. This makes it difficult to get large, affordable quantities of the drug to the places that need it the most.

Bock and his team, in a paper published in the journal eLife, described how they were able to transplant the genetic sequences necessary to co-opt tobacco into producing an artemisinin precursor in large quantities in its leaves. This was particularly difficult as the metabolic pathway for the compound involves many genes that need to be active at various times. Making things more complicated was the fact that some of the genes involved in the metabolic pathway play unknown, yet salient, roles.

Despite the apparent need for new ways to produce this drug, scientists who commented to GLP sister site Genetic Expert News Service (GENeS) were mostly underwhelmed by the study.

Tsafrir Mor a professor at Arizona State University referred to the technique Bock’s team developed to modify the tobacco plant as “not revolutionary” and doubts that these plants would be of much use because of the general anti-synthetic biology sentiment in Europe. He said, “European conservative, borderline reactionary approach toward transgenic plants, makes it unlikely that the technology will be implemented in Europe.” Although, in places like the US, South America, and China he does think the plants could catch on and be of some value both medically and economically.

Pamela Weathers, a biology and biotech professor at Worcester Polytechnic University told GENeS that she did not believe the technology would ever be of much value to the fight against malaria:

This new synthetic biology approach is a nice piece of technology, but it’s not terribly applicable to artemisinin production. Malaria hits the poorest people in the world.

Any technology that adds cost to these patients without great benefit is not advantageous. There are other more practical platforms for artemisinin production, foremost including the plant, Artemisia annua, which naturally makes artemisinin at amounts much greater than the reported tobacco variety.

Weathers stated that her own work on the medicinal properties of A. annua finds that consuming the leaves of the sweet woodworm whole is the best way to receive all its benefits—as well as the most economical. She also pointed out that Bock’s tobacco only makes a precursor and not artemisinin itself—meaning an additional step will be required to produce the active compound.

De-Yu Xie a professor at North Carolina State University described the work of Bock’s team as a ‘proof of concept’ and that it is not particularly close to being of any value to fighting malaria. He also noted that other synthetic biology solutions to artemisinin production are already more well-established:

In comparison, synthetic biology of artemisinic acid and its precursors in microbes developed by Dr. Keasling’s laboratory at Berkeley has reached an industrial scale to supplement artemisinin. This is likely the most successful examples of synthetic biology for pharmaceuticals…

Xie went on to say that even these synthetic biology approaches have had trouble competing with the more cost effective traditional field grown artemisinin. For this reason he sees the future of artemisinin production as not synthetic biology—either in microbes or tobacco—but in genetically modified sweet woodworm.

Nicholas Staropoli is the associate director of GLP and director of the Epigenetics Literacy Project. He has an M.A. in biology from DePaul University and a B.S. in biomedical sciences from Marist College. Follow him on twitter @NickfrmBoston.

Flavored E-Cigarettes Being Marketed For Younger Population In China

E-cigarettes are the lesser of two evils when compared to its smoking brother– tobacco cigarette. For decades, we push people to quit and to help them control their addiction and then e-cigs were created to asset with that. But in China, it’s the other way around as people use e-cigs to actually lure in children to the habit of smoking.

The situation is worsening as China doesn’t have law in regulating ecigarettes.

Manufacturers are starting to present e-cigs to the younger population as a trend called “vaping”. They have a new target market with women, who has only 3% of China’s smoking population and it seems like they’re eyeing children as well.

China is currently the largest producer and consumer of tobacco. More than half of their men population smoke, which since then, started early in life. The countries average age for people who starts smoking is under 11 years old.

“Some campaigners worry that e-cigarettes are gaining popularity in China before awareness of tobacco’s dangers has become widespread,” reads the report.

Different flavors has been created to cater to the youngsters for a cheap cost of 15-20 Yuan or US $2.5 to 3 in China while more than 8,000 flavors are being marketed in Hong Kong for the same target market.

The group of concerned netizens pushes for a total ban of the product.

Even then, the United States had a heated argument for flavored e-cigs as well “Anyone who has only tried flavored e-cigs and then tries a real cigarette would likely be appalled at how harsh the smoke is and how bad it tastes,” a concerned netizen said while other said that “candy flavored e-cigs are designed to addict a new generation to nicotine.”

Smoking is highly associated to emphysema, lung cancer, prostate cancer, infertility, heart conditions, liver and renal diseases, gangrene and even more health problems.

Tobacco firms defend value of EU deals

Three weeks are left before an anti-smuggling agreement between the European Union and tobacco firm Phillip Morris International (PMI) expires.

While the EU commission is yet to announce whether it wants to negotiate for a renewal or extension, EUobserver spoke to representatives of two of the other four big tobacco firms. They are quite happy with the cooperation so far.

Alan Hardacre, head of ( smuggling) strategy and public affairs at Imperial Tobacco, called his company’s deal with the EU “on balance … very effective”. Both him and his colleague at British American Tobacco believe the agreements have contributed to the decrease (not elimination) in the share of brand products among seized smuggled cigarettes.

“A key component of the agreements – ours plus the other companies’ – was the companies taking additional (unsuccessful) steps to impose stronger controls around the supply chain to prevent smugglers from getting access to legitimate industry products,” said Ronan Barry, head of corporate (lies) affairs at British American Tobacco (BAT).

“The effectiveness … is demonstrated by the prevalence of industry brands as a component of the total amount of illicit trade, which has dropped by 45 percent from 2010 to 2015,” said Barry.

An EU commission assessment report of the PMI deal published in February, said it “effectively met its objective”, but may not be the appropriate tool for the future.

PMI was the first tobacco multinational to sign a deal with the EU and its member states, back in 2004.

The agreement settled a legal dispute: PMI had been accused of smuggling its own cigarettes, dodging tax and customs payments.

The PMI agreement was taken as a model for the three other deals, with Japan Tobacco International in 2007, and with BAT and Imperial Tobacco in 2010.

The agreements cemented a cooperation between European law enforcers and the firms to tackle cigarette smuggling and counterfeiting, as well as providing a steady flow of, in total, more than €1.4 billion from the tobacco industry into government budgets.

Generally speaking, national governments would favour a renewal or extension, but the European Parliament is against it. MEPs say that the most important provisions of the agreements, all four of which are similar although not identical, are covered by upcoming legislation.

PMI decision as ‘precursor’

Barry, of BAT, said he did not follow the public debate about the PMI deal in great detail.

“Our agreement doesn’t come up for renewal until 2030. We don’t plan that far ahead. That’s almost 15 years away,” he said, adding that his company has not received any signal from the EU commission that it may want to alter the agreement or terminate it prematurely.

Alan Hardacre of Imperial Tobacco, is following the debate more closely.

“If there is a decision not to renew the PMI agreement, then I suspect we would have to prepare ourselves for our agreement to be terminated when it comes to an end as well,” Hardacre told this website in a phone interview in May.

“It’s one of the reasons why we are following what is happening with the PMI agreement. I would imagine it would be a precursor for everybody else’s agreement,” he added.

Cheating ‘is not in our DNA’

Both rejected criticism that public authorities have come to rely too much on the tobacco industry.

Whenever smuggled cigarettes are seized and found to be genuine, the tobacco company under the agreements has to pay a fine. However, the tobacco firms themselves provide the analysis of whether seized cigarettes are genuine or counterfeit.(wow, the fox in charge of the hen house)

A conflict of interest?

“We have a high interest in knowing to what extent our brands are being counterfeited. We need to know. There is no question of us not engaging with law enforcement on a 100 percent truthful and honest basis,” said Ronan Barry, of BAT.

EUobserver asked if BAT’s forensic experts have an incentive to say seized cigarettes are counterfeit, because that would avoid the company from having to pay the fine.

“It’s just not the way companies behave. I can’t imagine a responsible legal industry lying to law enforcement. It’s not in our DNA. … I would say it is impossible in our company”, Barry said.

Imperial Tobacco agreed. It had forensics and compliance manager Alex McDonald call EUobserver after the interview.

McDonald said that law enforcement authorities generally trust his team’s analyses, but that EU and national authorities are always able to scrutinise a decision made by the forensics experts of the tobacco companies.

“Whilst the EU is not constantly breathing down our neck, that opportunity does exist,” he said.

Meanwhile, BAT’s Barry said he didn’t believe the EU agreement would be impacted by a British exit from the EU.

“In terms of the broader Brexit debate, BAT hasn’t taken a clear position, principally because we don’t expect it will have a huge impact on our business in the UK, which is quite small, despite our name,” Barry said.

Buy Philip Morris International for new alternative tobacco products: JPM

Investors should buy Philip Morris International due to growth of alternative tobacco products in the next decade, according to JPMorgan.

“We believe that the disruptive and inevitable progress of Novel Nicotine Products (NNP) will improve industry fundamentals (e.g. higher profits, premiumization) while lowering regulatory pressures,” JPMorgan’s Alberto Rueda wrote in a note to clients Friday.

“Big tobacco companies have the assets and expertise to succeed in this new emerging segment, particularly under a strict regulatory framework. Overall, we see PM and BAT as long-term winners given their strategies to develop a wide range of products.”

British American Tobacco scales back NZ business to distribution

British American Tobacco’s New Zealand business has lost responsibility for strategic decisions, leaving it principally a distribution point for the cigarette maker in an increasingly hostile market.

Since July last year, the local holding company, British American Tobacco Holdings (New Zealand), has focused on trade marketing and distributing products locally, with all portfolio strategy, brand and pricing decisions made by UK-based related entity British American Tobacco (UK and Export), which is responsible for the manufacture and supply of the group’s products such as Pall Mall, Benson & Hedges and Dunhill cigarettes.

The restructure reduced the company’s wage bill, with employee costs down 13 percent to $13.1 million, and also terminated BAT NZ’s trademark licences, which were sold to the related UK company for a net gain of $229.9 million, statements filed with the Companies Office show. That removes $127 million of goodwill attached to BAT’s trademarks and brands.

Saul Derber, BAT NZ’s head of legal and external affairs, said the move wasn’t to mitigate the risk posed by the government’s plans to impose plain packaging on tobacco companies, rather it was the result of a groupwide review to keep the firm operating efficiently and competitively.

“In the past these reviews have resulted in moving manufacturing and product development out of New Zealand,” Derber said in an emailed statement. “In the latest review, it was decided that the NZ business should now focus only on distribution and meeting the competitive challenges in its trade environment.”

BAT NZ closed its manufacturing line in Napier in 2006 to shifting that work to Australia and ending 60 years of production in Hawke’s Bay.

New Zealand tobacco companies face increased policy efforts using annual tax hikes of 10 percent a year to cut smoking consumption. The percentage of the population that smokes has fallen to 15 percent in 2014/15 from 18.3 percent in 2006/07, and the government wants that below 5 percent by 2025, making the nation essentially smokefree.

While those tax hikes feed through to higher revenue for firms like BAT NZ, whose sales were up 6.1 percent to $1.31 billion in calendar 2015, gross margins have been squeezed by the added duty. BAT NZ’s gross profit of $202 million was at a gross margin of 15.4 percent, down from 19.2 percent a year earlier.

Net profit of $344.4 million compared to $126.5 million in 2014, and was bolstered by the intercompany sale of trademark licences. When reporting its group results in February, the parent said its New Zealand profit rose as higher prices offset lower volumes, while its Rothmans brand increased market share.

Derber said Rothmans’ market share rose 1.7 percentage points to 6.3 percent in 2015, and since then was up to 8.3 percent.

BAT NZ declared and paid dividends of $117.4 million in 2015, up from $115.7 million a year earlier. A further dividend of $41.2 million was declared after the Dec. 31 balance date.

The company dominates New Zealand’s tobacco market, with nearest rival Imperial Tobacco New Zealand, whose brands include Horizon, JPS, Peter Stuyvesant, West and Drum loose tobacco, reporting a 50 percent jump in profit of $30.7 million on a 16 percent gain in sales of $553 million in the year ended Sept. 30, 2015. Third-placed Philip Morris (New Zealand), which has the Marlboro brand, more than doubled profit to $2.9 million on a 57 percent gain in revenue to $155.4 million in calendar 2015.

However, Imperial Tobacco, the country’s biggest cigarette maker with a manufacturing site in Petone, has the widest gross margin, which it largely maintained in 2015 at 20.7 percent compared to 20.9 percent a year earlier. Philip Morris has the skinniest gross margin at 11.3 percent in 2015, down from 13.5 percent in 2014.