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http://www.businessweek.com/news/2014-01-10/philip-morris-picks-italy-for-first-factory-for-new-cigarettes

Bloomberg News

Philip Morris Plans $680 Million Factory in Lower-Risk Push

January 10, 2014

Philip Morris International Inc. (PM:US), the largest publicly traded tobacco company, will spend as much as 500 million euros ($680 million) on a new factory in Italy as part of a drive to make products with lower health risks.

The plant, near Bologna, will start producing tobacco products that are heated with a special device rather than burned at the end of 2015 or early 2016, the New York-based company said in a statement today. The factory will have capacity to produce as many as 30 billion units a year, equivalent to about 6 percent of the European Union’s cigarette sales, the company said.

“This first factory investment is a milestone in our road map toward making these products available to adult smokers,” Chief Executive Officer Andre Calantzopoulos said in the statement.

Related: Anti-Smoking Work Cuts U.S. Deaths as Global Market Grows

Tobacco companies are racing to develop new products amid government clampdowns on smoking. The maker of Marlboro cigarettes sped up work on the new device as it prepares a series of products that it says may pose lower cancer risk. British American Tobacco Plc (BATS) is awaiting regulatory approval for its Voke product, which uses asthma inhaler technology to deliver a nicotine hit and could reach the market as soon as this year.

Nicotine Race

In November, Philip Morris brought the launch date of the tobacco-heating product forward to 2015 from a previous forecast of 2016 or 2017. It will test it in a few cities in the second half of this year.

Unlike e-cigarettes, the company’s new product will contain tobacco to appease smokers’ cravings for the taste of a conventional cigarette.

The device looks like a hollowed-out fountain pen. The custom-built cigarette is inserted and the tobacco is heated to generate a smoking aerosol. The temperature is “significantly below” what’s generated by a traditional cigarette, PMI has said.

PMI has spent more than a decade trying to develop lower-risk products and started eight clinical trials on them last year, the company said.

Philip Morris already has a filter factory and a pilot plant in Bologna. The new facility will employ about 600 people. The company will also enter the e-cigarette market in the second half of this year.

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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