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November, 2016:

Major tobacco firms are appealing a landmark $15B ruling they lost

Nov 21st, 2016
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https://www.thestar.com/business/2016/11/21/major-tobacco-firms-are-appealing-a-landmark-15b-ruling-they-lost.html

Three major tobacco firms are appealing a landmark $15 billion Superior Court ruling they lost in June 2015.

Lawyers for Imperial Tobacco, JTI-Macdonald and Rothmans-Benson & Hedges began arguments today during hearings that are expected to last until the end of the week.

The companies were targeted by two separate lawsuits heard at the same time that were filed in 1998 and only went to trial in 2012.

They were sued by people who were addicted to cigarettes and couldn’t quit as well as by those who had suffered from cancer or emphysema.

Some 76 witnesses testified and nearly 43,000 documents were deposited as evidence, including internal tobacco company documents that showed smokers didn’t know or understand the risks associated with cigarettes.

Cigarette companies argued their customers knew the risks of smoking and that their products were sold legally and were strictly regulated by the federal government.

The same cigarette companies are also being sued by the Quebec government in a $60-billion lawsuit aiming to recover health care costs related to smokers.

E-cigarette use linked to permanent lung damage in teenagers

Nov 20th, 2016
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http://www.grimsbytelegraph.co.uk/e-cigarette-use-linked-to-permanent-lung-damage-in-teenagers/story-29919152-detail/story.html

E-cigarette use has been linked to bronchitis in teenagers.

E-cigarettes have become ever-more popular in recent years with stores popping up all over North East Lincolnshire but teenagers who use them are far more likely to get bronchitis, a study has found.

Young people who vape have a 71 per cent higher risk of developing the condition than those who have never used an e-cig.

Researchers at the University Of Southern California analysed responses from more than 2,000 older teenagers asking for symptoms of chronic bronchitis, such as a regular cough for three months straight.

The study found that those who were using e-cigarettes were 85 per cent more likely to have had the lung infection. This dropped to 71 per cent when those who smoked regular cigarettes or were exposed to tobacco smoke were taken into account.

It is thought the chemical diacetyl, which is used to create e-cigarette flavourings, could be partly to blame.

Even teenagers who had used e-cigarettes but had stopped doing so were still 41 per cent more likely to report symptoms of bronchitis.

The findings are apparently similar to “popcorn lung” – a condition reported by popcorn factory workers who developed an incurable condition scarring their lungs due to exposure to diaceyl, which was used to give the snack its buttery flavour.

Dr Rob McConnell, professor of preventive medicine at the Keck School of Medicine, within the University of Southern California, said: “E-cigarettes are known to deliver chemicals toxic to the lungs, including oxidant metals, glycerol vapour, diketone flavouring compounds and nicotine.

“However, there has been little study of the chronic health effects of e-cigarettes.

“The Children’s Health Study provided an opportunity to examine bronchitic symptoms common among smokers to see if the risk was also increased in users of e-cigarettes.”

Researchers added that “additional study is needed to fully understand their long-term effects”.

Last year, Public Health England published a study saying vaping is 95 per cent less harmful than tobacco. They even went so far as to call for GPs to be able to prescribe e-cigarettes on the NHS to help people quit smoking.

BAT launches e-cigarette as alternative to tobacco

Nov 20th, 2016
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http://thestandard.com.ph/business/221917/bat-launches-e-cigarette-as-alternative-to-tobacco.html

The British American Tobacco said will launch an “alternative to tobacco” product in the Philippines, the first country in Asia-Pacific to take advantage of the growing vape market.

BAT head of government regulatory affairs Robert Eugenio told reporters in a media roundtable the Philippines would become the first country in the Asia and Pacific region to avail of Vype E-pen, BAT’s e-cigarette brand, following successful launches in Europe and South America.

“It’s just a combination of business consideration, regulatory environment. It’s a combination of many factors,” Eugenio said.

Eugenio said there were no laws in the country regulating the market of e-cigarettes or vape industry.

BAT said Vype would be available in selected convenience stores in the country.

Vype E-pen is a vapor device with easy-to-change e-liquid caps with two power settings, delivering rich vapor at the click of a button.

The design also offers one-step charging micro USB cable, a battery life indicator and auto shutdown when the device is used for 10 minutes.

Eugenio said despite offering new product, BAT would not completely shift to e-cigarette products and leave their tobacco-combustion market.

“We, of course, are still focused on trying to grow our shares in combustible business. This is an additional part of our business but i wouldn’t call that a shift. We have seen that there is a growing market for e-cigarettes here. From a commercial stand point, we are hopeful that we will be able to drive our share of that emerging market,” Eugenio said.

BAT is the maker of Pall Mall and Lucky Strike cigarettes.

CAN PHILIP MORRIS KICK THE CIGARETTE-SELLING HABIT?

Nov 20th, 2016
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http://www.newsweek.com/can-philip-morris-kick-cigarette-selling-habit-522400

Don’t expect Philip Morris International to quit smoking cold turkey, but the global tobacco giant says it’s moving toward the day when it becomes cigarette-free.

For a company that’s generated more than $26 billion in trailing revenues from cigarette sales around the world, kicking the habit sounds like a pretty tall order, particularly when global governments are throwing roadblocks in its path to do so, but it is launching new products that may help make smoking cessation possible.

It’s no secret that cigarette sales are in decline. Philip Morris said third-quarter cigarette shipment volumes fell 5.4 percent to 207.1 billion units, while they’re down 3.9 percent year to date. Volumes were down sharply in its Asia market, falling 9 percent in the quarter, as well as in Eastern Europe, Middle East and Africa, where they were off 8 percent.

Although British American Tobacco had slightly better results—quarterly volumes were flat while year-to-date volumes were up 0.9 percent—the industry remains in contraction even as legal risks remain an ever-present threat to the financial health of the cigarette companies.

Decade-old agreements with the European Union to fight cigarette smuggling have expired or are poised to, and the smoking regulators on the continent may soon pursue litigation against the tobacco companies. Although Philip Morris, British American, Imperial Tobacco and Japan Tobacco have paid out almost $2 billion since the agreements were signed and smuggling has been dramatically reduced, anti-smoking activists contend it was a low-cost way to insulate themselves from lawsuits. As the deals expire over the new few years, litigation costs could rise dramatically.

Kicking the habit

So having a goal to get out of the cigarette business isn’t such a bad idea, as far-fetched as it sounds. But to do so, Philip Morris is investing heavily in smoking alternatives such as electronic cigarettes, specifically its iQOS device that’s being sold as HeatSticks under the Marlboro brand name.

Rather than burning tobacco like regular combustible cigarettes, or even heating up a nicotine-flavored e-liquid as do traditional e-cigs, the iQOS device heats actual tobacco to produce a tobacco-flavored vapor. Since it’s the burning of the tobacco that creates all the toxic chemicals associated with smoking, e-cigs, whether old or new, are thought of as a healthier alternative, though clinical studies have yet to be conducted to prove that, and e-cig companies don’t market their products as such.

The benefit of the iQOS, as well as other similar devices such as the iFuse from British American, which heats up an e-liquid but then draws it through tobacco leaves for flavor, is that they address one of the main complaints users had about e-cigs—their taste. With these next-gen devices, users get real tobacco flavor, which may help more smokers to switch to them.

While that would seemingly be something regulators would promote, considering the societal costs associated with smoking, governments are still erecting barriers.

In the U.S., the FDA’s so-called “deeming regulations” are expected to devastate the nascent electronic cigarette and vaping markets. So onerous and costly are the regulations—Philip Morris’ application to the FDA for a reduced-risk label for the iQOS runs to 2 million pages—that only the biggest, best-financed companies will be able to comply. Smaller manufacturers will probably be wiped out, as third-party estimates put the cost of compliance somewhere between $3 million and $20 million per application.

Elsewhere, e-cig users are being treated just like regular smokers, segregated to special areas where they can use their devices, or being banned altogether from using the devices in public places, just like with cigarettes.

A brave new world

Philip Morris, of course, is big enough that it can afford complying with the new rules, but even it recognizes the changeover to a smoke-free future won’t be easy, or quick. Bloomberg News quotes CEO Andre Calantzopolous as saying the tobacco company can’t stop selling cigarettes immediately, as “decades of history are not going to be changed in one afternoon.”

And though critics might be wary of any pronouncement a tobacco company makes, any increase in the number of people quitting smoking has to be a benefit. Many people will just find it odd that it’s Philip Morris International that may be leading the way forward.

Philip Morris: 4 Headwinds To Watch Out For

Nov 20th, 2016
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Summary

Philip Morris has taken a beating in recent days, down nearly 10% after the surprise election results.

The strong dollar and rising interest rates are major headwinds for the tobacco giant.

However, the 5% yield makes Philip Morris a hold in my book.

http://seekingalpha.com/article/4024964-philip-morris-4-headwinds-watch

Philip Morris (NYSE:PM) has had an up and down year so far in 2016. The company has lagged the markets over the past few years and this year will likely be more of the same. While the dividend yield is nice at nearly 5%, long-term investors in the stock should still keep an eye on some of the headwinds facing it.

1) Strong dollar woes

You can pretty much predict most of Philip Morris’ price action by using the dollar index. If the greenback rises, then Philip Morris declines. This inverse relationship tells a painful story since 2013, i.e. basically flat. The reason for this is simple. Philip Morris makes most of its revenues overseas, and a strong dollar means these foreign currencies translated into less profits.

pm-stock

As can be seen in the chart above, the dollar went on a big rally soon after the election and the surprise victory for Trump. As a result, Philip Morris’ stock also fell around 10%.

2) Rising interest rates

On a related note, interest rates have also risen; the 10-year is up 40 basis points to over 2.2%, lessening the appeal of Philip Morris 4.7% dividend yield. This may also impact Philip Morris’ profitability down the road as it refinances its $30 billion debt load and sees higher interest expense. The company has benefited in the past from low interest rates in order to issue debt and buy back a lot of stock.

3) Volume declines in key markets

Another concern for Philip Morris is falling cigarette volumes. Q3 volumes fell 5.4% year over year, and year to date the decline has been 3.9%. This is above the 1-3% declines seen in the US. Philip Morris is seeing weakness mostly in Asian markets, specifically from Indonesia, the Philippines and Thailand, due to various factors such as excise tax increases and the illicit trade, in Argentina due to a big tax increase which has crushed demand, and in Japan due to a shrinking market.

No butts about it: the noose tightens on smoking

Nov 20th, 2016
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http://www.shanghaidaily.com/sunday/now-and-then/No-butts-about-it-the-noose-tightens-on-smoking/shdaily.shtml

CHINA, with almost as many smokers as the US has people, is stepping up its campaign to curtail tobacco use. Starting in March, Shanghai is introducing a ban on smoking in all indoor public venues, workplaces and public transport.

The restriction will cover hotels, restaurants, offices, airports, railway stations and entertainment venues. The ban was approved by the Shanghai People’s Congress Standing Committee on November 11, after months of intense debate and deliberation.

“We are delighted with the adoption of this new law,” said Dr Bernhard Schwartländer, World Health Organization representative in China. “Shanghai will be protecting non-smokers from the deadly harm of second-hand smoke.”

Under the new regulation, hotels cannot even offer rooms designated for smoking, and restaurants and entertainment venues will not be allowed to set aside smoking areas. Smoking will also be banned in government offices, public meeting rooms and canteens. Airports, railway stations, ferry ports and bus stations will have to close their smoking-designated rooms, said Ding Wei, a deputy director delegate with the Legislative Affairs Commission of the Shanghai Congress.

Indoor smoking rooms have already been closed at Shanghai’s two airports and railway stations.

The new regulation also extends the smoking ban to outdoor areas frequented by children, such as training institutes, historic sites and stadiums.

Persons violating the regulation will be subject to fines of up to 200 yuan (US$29), and companies that breach the rule are liable for fines of up to 30,000 yuan.

Stamping out cigarette smoking in China has always been a difficult task. Smoking traditionally has been considered sociable and a symbol of friendship among men. It’s not uncommon for hosts to put packs of cigarettes on a table, alongside liquor and sweets, for guests.

Compared with many Western countries, cigarettes in China are relatively cheap and widely available. Then, too, governments reap a lot of revenue from taxes on tobacco.

The Chinese Association on Tobacco Control estimates there are about 316 million smokers in this country, and about 1.5 million Chinese die every year from tobacco-related diseases.

The new crackdown on smoking has been widely lauded.

“This is a major milestone in the decades-long efforts to control smoking in public areas in Shanghai,” said Ding, who has at the forefront of anti-smoking legislation since 1994.

In that year, Shanghai was the first city in China to adopt some restrictions on smoking in public areas. Ahead of the 2010 World Expo, the restrictions were extended to ban smoking in and around primary schools, kindergartens and hospitals. Restaurants with 75 seats or more and businesses of more than 150 square meters were permitted to designate smoking and non-smoking sections.

In the past five years under the existing regulations, local authorities have collected about 1.8 million yuan in fines from 971 companies and 482 individuals.

Ding said the current regulation doesn’t completely address rising anti-smoking public sentiment. Two surveys earlier this year, by the city’s health commission and legislative body, found more than 90 percent of people support a complete ban on all smoking indoors.

Moreover, a study released by Fudan University earlier this year showed that smoking-designated rooms in airports, railway stations, hotels and other public areas don’t adequately protect non-smokers from passive exposure to smoke.

Fine particle pollution, as measured by PM2.5, was as high as 900 micrograms per cubic meter near the entrances of such rooms, said Professor Zheng Pinpin, head of the Smoking Control Research Center at Fudan. The national safety standard is 75 micrograms, and the World Health Organization considers anything higher than 25 to be unsafe for human health.

The new ban does acknowledge the existence of people who don’t want to quit the habit. It allows outdoor smoking areas to be set up near public venues, workplaces and transport hubs. However, those areas must be away from public passageways and erect signs warning that smoking is harmful to health. The areas will also need approval from the city’s fire prevention authority.

“Apart from the stricter regulations, we also have to take into account the feasibility of the rules,” Ding admitted.

Indoor smoking rooms will be allowed under “special circumstances” and with prior approval. They may include factories where outdoor smoking is hazardous or restricted places where there are security concerns.

“We hope that this clause in the law is never invoked,” said Schwartländer, adding that emphasis should be on ensuring that the new law is strictly enforced without any exceptions.

Law enforcement officers can fine individuals and companies on the spot if anyone is caught smoking in a no-smoking area. The new rule also encourages the public to send in photos of offending behavior to the 12345 hotline. Of course, cleaning up Shanghai’s often foul air is not only a matter of curbing smoking. Efforts are underway to promote the use of clean-burning vehicles, and fireworks restriction within the Outer Ring Road.

If You Think E-Cigarettes Are Harmless: Check Out Latest Academic Research

Nov 19th, 2016
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http://www.universityherald.com/articles/50608/20161119/if-you-think-e-cigarettes-are-harmless-check-out-latest-academic-research-video.htm

If you think electronic cigarettes with brands South Beach Smoke, V2, Mig Vapor, etc. are all so friendly and harmless to your oral health, you’d better think twice. In a recent research by a team of concerned health science students at the University of Rochester Medical Center, USA, e-cigarettes were proven to be as oral health-threatening as conventional cigars.

On a general note, e-cigarettes can affect the oral health in a molecular and cellular level. To start off, the researchers/medical students exposed a clean gum to e-cigar vapor.

Consequentially, the vapors induced inflammatory protein from the tissues’ cells, stressing the cells in an unprecedented degree. In short, there is burning in the gums that caused an abnormal production of protein.

If such kind of contact is frequented in the gum, worst case could lead to exposing to a lot more diseases. This kind of damage posed by e-cigars is no different from the conventional cigarettes, Times Live reported.

As a result, e-cigar industry tycoons were saddened by the news as more and more researches on vaping trend come popping up in medical and academic journals. For instance, another research from the Desert Research Institute in Nevada shook to the core the belief that e-cigarettes or vapes are safer than the usual cigarettes.

Along that line, the researchers also exposed that toxic aldehydes are actually the ultimate byproducts of constant heating of flavored liquid. And, by all means, that cannot be safer than any forms of smoking, India Times reported.

Back to the research published in the journal Oncotarget by medical students in University of Rochester- details of their experiments are making the rounds in many health domains, magazines and other journals. Their experiment involved a 3D human as main subject.

From such, they were able to discover that the rate of dead or dying cells in a normal unexposed gum rapidly increased from 2% to 53% in a span of 3-day exposure to the notorious e-cigarette.

Over 20% smokers consume smuggled cigarettes

Nov 19th, 2016
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http://tribune.com.pk/story/1235942/20-smokers-consume-smuggled-cigarettes/

Over 20% of smokers puff tax-evaded smuggled cigarettes in Pakistan as heavy taxes on locally manufactured products continue to hit the industry hard.

“These LTE (local tax-evaded) cigarettes are extremely cheap,” said the State Bank of Pakistan (SBP) in the Annual Report on the State of Economy in fiscal year 2015-16.

“Average selling price of LTE brands in Pakistan is Rs27 per pack, which is far below the minimum tax per pack of Rs33.8,” said the central bank quoting Nielsen’s report on “The challenge of illicit trade in cigarettes: impact and solutions for Pakistan-2015”.

“In 2014, 17.3 billion local tax-evaded cigarettes were sold in the country, which was 21.1% of the total cigarette market in Pakistan,” it said.

The central bank added the price of locally manufactured cigarettes had increased over the years mainly due to imposition of excise taxes. This has created a huge price gap against illicit (non-duty paid, smuggled and counterfeit) cigarettes.

The number of illicit cigarette smokers is gradually expanding with the passage of time. “Nearly one billion cigarettes are added every year to the black market,” it added.

No US-FDA certified medicine plant

Separately, the State Bank highlighted that Pakistan had not a single medicine manufacturing plant, which was working in compliance with the standards prescribed by the US Food and Drug Administration (FDA).

Pakistan does not have FDA-approved plants despite the size of the industry standing at $2 billion with a population of 200 million people.

On the contrary, Jordan and Bangladesh with an industry size of $1.5 billion each and population of 17 million and 170 million, respectively, have three and five FDA-certified plants.

“FDA approved plants allow firms to make inroads into markets of advanced economies,” the central bank said.

Pakistan’s pharmaceutical industry used to be the most modern in this region during the 1960s. However, it could not keep pace with the developments taking place in other countries.

The industry is facing “some underlying issues, such as strict regulation, unpredictable price structure, lack of patent protection, abundant supply of counterfeits and lack of US FDA approved plants,” it said.

Accordingly, the growth in the pharmaceutical industry slowed down to 6.5% in the fiscal year ended June 30, 2016 from 7.5% in the preceding year, according to the bank.

Steel production slumps

The overall steel production witnessed a contraction of 9.3% in FY16, compared to a growth of 35.4% in the previous year.

“The suspension of PSM’s (Pakistan Steel Mills) operations overshadowed the notable performance of private steel manufacturers,” the SBP said.

The steel industry mainly faced two key challenges during the year which constrained domestic private manufacturers from effectively utilising their capacity expansions.

First, the deepening liquidity crisis in PSM caused its operations to come to a complete standstill from July 2015.

Second, the unprecedented decline in international steel prices, coupled with the influx of cheap Chinese steel under the free trade agreement, squeezed the profit margins of domestic firms.

Published in The Express Tribune, November 19th, 2016.

South Australia looks to restrict e-cigarettes

Nov 19th, 2016
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http://www.sbs.com.au/news/article/2016/11/19/south-australia-looks-restrict-e-cigarettes

Electronic cigarettes will be subject to the same restrictions as tobacco products under new laws proposed by the South Australian government.

Under current laws the devices can legally be sold to children and used in places where ordinary cigarettes cannot.

But Substance Abuse Minister Leesa Vlahos says the changes will bring them into line with conventional cigarettes, banning the sale to children, their use in enclosed public spaces and preventing any advertising or promotion.

Curbing tobacco pays dividends

Nov 19th, 2016
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http://www.dispatch.com/content/stories/editorials/2016/11/19/curbing-tobacco-pays-dividends.html

Hardly anyone starts smoking after age 21, for obvious reasons: By adulthood, people can better grasp the deadly risks and expense of tobacco addiction.

That explains why tobacco companies target marketing to young adults, ages 18 to 21. “They know it is a critical time period for solidifying tobacco addiction,” according to the Campaign for Tobacco Free Kids.

This addiction is life-changing and life-ending: Smoking eventually kills a third of those who become smokers before age 18. It is the leading cause of preventable deaths in the U.S., killing more people than alcohol, AIDS, car crashes, illegal drugs, murders and suicides — combined.

This argues for legislation under consideration by Columbus City Council to ban tobacco sales, including e-cigarettes, to those younger than 21. (A public hearing will be held at 5 p.m. on Tuesday at Columbus City Hall, 90 W. Broad Street.)

While, generally, government should not be in the position of dictating personal choices to adults, who now might purchase tobacco products at 18, it has overriding reasons to intervene:

Big Tobacco spends more than $1 million a day — an estimated $425.7 million a year — marketing its product in Ohio. A government ban on sales to those most susceptible to the industry’s subliminal and overt advertising efforts evens the playing field. And it meets government’s obligation to protect citizens’ health, including efforts to reduce Ohio’s high infant-mortality rate.

Federal studies also show 95 percent of smokers begin before age 21. Delaying addiction amounts to preventing it.

Taxpayers bear an enormous expense from tobacco use. Smoking-related Medicaid costs in the state total $1.72 billion a year, Tobacco Free Kids reports. It estimates each Ohio household pays $1,047 in state and federal taxes for smoking-related government expenditures.

And since many teens in middle and high school get their smokes from high-school pals or siblings who can buy at age 18, restricting the supply line could help snuff out smoking before young people can become addicted.

“If we can prevent the addiction from the beginning, that’s the right start,” said Dr. Teresa Long, health commissioner for Columbus.

Her city would join a growing number of cities and states, including California and Hawaii, that have raised the legal age for tobacco sales to 21. In Ohio, Cleveland, Upper Arlington and Grandview Heights all have similar bans.

The Columbus proposal would not criminalize the smoker, but police could charge clerks and levy fines for underage sales. Columbus Public Health says its proposed ban would differ from many other existing ones, in that it includes compliance checks and education for merchants and the public. To do so, it will hire a dedicated sanitarian and a part-time administrator. This shows the city is serious about protecting young people.

Raising the legal smoking age works: After Needham, Massachusetts, banned cigarette sales in 2005 to those under 21, tobacco use dropped by nearly half among those younger than 18.

Ohio already bans alcohol use until age 21, a recognition that youths need to develop judgment before obtaining a product that, absent abuse and far unlike tobacco, might have heart-healthy benefits.

Retailers, who would be required to purchase a $150 annual sales license, understandably question whether cities should be able to regulate tobacco sales; the Ohio Council of Retail Merchants thinks the state should decide. We agree: The legislature should follow the bold lead of its largest cities and raise the age for tobacco purchases statewide to age 21.

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