Philip Morris International Inc. (PM) Earnings Call Transcript & Summary

Good morning, good afternoon, everyone, and I think we will begin. So, for our third session of today, we are joined by Gizelle Baker, who is VP of Global Scientific Engagement at Philip Morris. In this session, Gizelle will look at the science of smoke-free products and nicotine. Remember, there'll be time for Q&A at the end, but you can post your questions at any point during the session in the Q&A area provided. Alternatively, you can e-mail me a question, which I can put to Gizelle, and I've already had a few e-mails around that already. Before we start, I just have to read a quick disclosure. So, members of the media and the press are not authorized to be on this call. If you are from the media or the press, please disconnect from the call now. The content presented on this conference call is proprietary to and/or subject to the copyrights of Jefferies or third parties. Further, as a matter of legal compliance, we remind you that you must not attempt to elicit from any speaker at this event, any material non-public information or other confidential information. And accordingly, the speaker may decline to respond to any question in his or her sole discretion. You may not publish or otherwise publicly disclose the name of or otherwise identify the speakers unless Jefferies permitted in writing. Please note this call is being recorded. By attending this event, you agree to all of these restrictions. With that, I will hand over to Gizelle to introduce herself and get things going. So, good afternoon, Gizelle.

Thank you for having me. And welcome, everybody. I get the opportunity today to share with you some of the science. Now, I'm just going to go through it very quickly and very lightly, but if you have any questions, there's a Q&A at the end and I'd be happy to go into more detail as needed. So, today, we're going to talk about smoke-free products and nicotine and the science behind that. Now from our side at PMI, we're really looking at designing a smoke-free future. So the mission truly through everything we're doing is science-focused really on making cigarettes obsolete. It comes from our Executive Chairman, our CEO, we're really, really focused on this one sole mission. And today, we're going to go into the science about why we think this is so important. But, in order to get to where we are today, Philip Morris of today is not the Philip Morris of 20 years ago. We are really transforming. We've invested over $12.5 billion to develop, substantiate and commercialize smoke-free products. And from a science side, we've done now over 287 toxicological assessments, almost 30 clinical assessments and almost 70 perception and behavioral studies, and we'll go into some of those results today. But not only am I sharing it with you here today, but we published over 550 publications really sharing the methodology, making sure that the data is out there in the public domain, and so that it can be verified and it can be challenged by anybody who wants to look at it and understand it. But why? Why are we going down this path? When we look around, there are still over 1 billion smokers in the world today. We know that the number used to be a higher prevalence, and it's been coming down year-on-year. And I think, these are things that we need to celebrate, but we also need to look just beyond prevalence at the number of smokers. So, the prevalence can always come down 2 different ways. You can either decrease the number of people who smoke or you can increase the size of the population. And what we can see on the right-hand side is that decrease in prevalence between 1990 and 2019 isn't actually happening by decreasing the number of smokers. It's due to the increasing size of the population. Now, these are global numbers and they're not necessarily ubiquitous and evenly distributed throughout the world. But on a global scale, that means we have a lot to work to go because with 1 billion people smoking, without some level of intervention, we're not going to change the number of people who get smoking-related diseases or the number of deaths and disease that are yet to come. In order to have an impact at the population level, you need to have 2 pieces of the puzzle come true. You need to have products available that can reduce the risk or reduce the harms to the individual who uses these products. But you also have to have large numbers of the right people using these products. You need adult smokers switching to these products in high numbers to actually see the benefit at a population level. And that's why in order to have successful harm reduction, we need to be offering a wide range of products to maximize the number of adult smokers who will absolutely stop using cigarettes. And when you look at this, you saw at the beginning, we talk about smoke-free future. We're not talking about a tobacco-free future. The key is in the word smoke. By avoiding combustion, you don't form smoke. And by avoiding combustion, you decrease the level of toxicants that are formed. So, in order to have combustion, which is this exothermic, so it's generating heat, oxidating reaction, so it's using oxygen to create this reaction, and it's giving off energy and heat. You need to have the oxygen present. This is in the air around when you're -- when a smoker is smoking and is inhaled into the cigarette. You need to have a fuel or an organic source that is consumed by the reaction. This is the tobacco in the cigarette. And it's -- you need to have heat, you need to ignite the cigarette. And once that happens, you start to produce a sustained combustion reaction. And in that, you start to produce a large number and high levels of toxic chemicals. In fact, there's over 6,000 chemicals that exist in cigarette smoke that have been identified, and almost 100 of them have been identified by public health authorities as harmful or potentially harmful constituents of smoke. These are toxicants that are directly linked or potentially linked to smoking-related diseases. Now when we talk about avoiding combustion, we're not talking about avoiding nicotine. And, I think, the important part when we talk about nicotine is we know that there is a lot of confusion on nicotine. If we break it down to what we really truly know about nicotine. Nicotine, though addictive and not risk-free, it's not the primary cause of smoking-related disease. But despite this, in a Rutgers study in 2020, when they talked to doctors in the U.S., they found that over 80% of doctors thought that nicotine directly cause diseases like lung cancer and COPD. But when you look at what the FDA is saying, you realize that this is a wrong association of nicotine to smoking-related diseases. The FDA is very clear that it's more the toxic mix of chemicals from the combustion like I just showed you, not the nicotine that's causing those serious diseases. And because of this confusion, you start to see on the right-hand side that some of the public health authorities are actually having to really break this down and make it simple for doctors, for scientists, and for the public to understand this difference between nicotine and those harmful chemicals. You start to see things like the Royal College of Physicians talking about the fact that nicotine itself confers little risk to your health or the fact that you have NHS right on their website when they're debunking some of the myths associated with vaping. They're talking about, although nicotine is addictive and relatively harmless to health, it is the other chemicals that contained in tobacco smoke that are causing almost all of the harm. So, people need to understand this difference if we really are going to switch people away from cigarettes. If they think that these new products contain nicotine is the same as cigarettes and nicotine is what's causing all the harm, it's really not a motivation and encouragement to get people to switch and to switch completely. So, these types of facts need to be very much clarified for the public as well as the scientific community. And going further, we can start to look at some of these diseases. I've used cancer here and looking at the fact that nicotine is not a carcinogen. When we look at the NRT or Nicotine Replacement Therapy, which we have data from the Lung Health Study, one of the longest follow-ups of nicotine replacement therapy where people were still consuming nicotine, there is no evidence there that nicotine replacement therapy causes cancer. You can go further, and the U.S. FDA has a list of 93 harmful and potentially harmful constituents in tobacco and tobacco smoke. And there, you can see that they identify that nicotine maybe is a reproductive and developmental toxicant. It's also causing addiction. But when it comes to things like being a carcinogen, a respiratory toxicant or a cardiovascular toxicant, they considered these but did not include these because nicotine doesn't cause those diseases directly. You can go further, and you have the International Agency for the Research of Cancer, IARC, which has a monograph that came out in 2018 looking at tobacco smoke directly. And you have to imagine, in 2018, nicotine is the most famous or known compound in tobacco smoke. So, it was obviously taken into consideration. But when they broke down tobacco smoke looking at their carcinogens, they identified a whole list of carcinogens and in that list does not exist, nicotine. So, we can start to see that from a science perspective, it's clear nicotine is not a carcinogen. But despite this, many people still believe that nicotine directly causes cancer. And that's more likely related to the fact that in the past, nicotine, tobacco, smoking, and cigarettes were all inextricably linked. But now we're in a spot with these new technology with new developments and these new nicotine delivery products that we can separate nicotine from many of those other toxicants in tobacco smoke because we can get rid of the burning. And we have to reconsider what role nicotine plays in health and the risks associated with nicotine on its own. So, when we look at our totality of evidence, PMI has developed an assessment approach, and it can include these types of following elements. So you look at it and you see at the very beginning, we have to look at the product design and make sure that we design products that can do what we're looking for. If we have a heated tobacco product, the design and control principles have to ensure that no matter how a person uses it, you don't combust tobacco because that's what we're trying to avoid. Once we get the product designed, then you can start to look at the aerosol chemistry and physics. But if it was an oral product, here's where you would look at the HPHCs, exactly what are coming from these products. Then, once we understand what's in the product or what's extracted from a product, we start to look at how toxic is that combination of chemicals, and we use both standard toxicology as well as systems toxicology. But in the end, once we get past that, we need to start looking at beyond the lab, what happens when smokers start using these products in the real world? What happens biologically, but also how do they perceive these products and how do they use them once they're in the market? And these are the types of things that will help us understand exactly where our product sits in the continuum of risk. So, now, let's look at IQOS. This is one of our leading heated tobacco products. The aerosol is fundamentally different than cigarette smoke. When we look here at this filter pad, you can visibly see the difference between cigarette smoke and the aerosol. But it's not just what you can visibly see. It's what's in that trapped in those filters that is very different. Cigarette smoke generates high levels of toxicants, which get trapped in this filter pad, compared to the aerosol, which is on average, 90% to 95% lower levels of toxicants than the cigarette smoke. You don't generate solid particles when you heat something. Those are generated through the combustion process. And when we look at this for free radicals, they are not quantifiable when you look at the aerosol. In fact, the vast majority of what's in that aerosol is water and glycerin. But let's take a second to look a little closer at those solid particles. This is looking at -- under electron microscope at the differences in what is being generated. On the right-hand side, you see cigarette smoke, and that's really the hallmark of combustion. Here it's cigarette smoke, but when you're burning any organic compound, you're consuming that organic compound and it's generating solid particles, that ash. In a cigarette, a smoker actually inhales through the ash that's forming at the end of the cigarette. So that ash or soot is coming through the cigarette and being inhaled directly into the lungs. And on average, with each and every cigarette, there's almost or just over actually, 0.5 trillion solid particles that would be inhaled into a person's lung, with each and every cigarette. And if you think about it; 5, 10 cigarettes a day, 7 days a week for decades, that actually results in that hallmark picture that's used, that blackened lung. That's all those solid particles accumulating in the lung. When you don't burn the product, you no longer are consuming the tobacco. It's still there at the end of use. You're not creating and generating those solid particles. So, when you look at that under an electron microscope, the aerosol starts to look a lot more and actually very similar to air because those solid particles don't exist. And that fundamentally is different for the impacts on the lungs and the tissues of your lungs. And many times, people wonder when you heat the tobacco versus burning it, do we really know what's in there? What's in that product that isn't in a cigarette. Well we've done a very thorough and well-characterization of the aerosol. And we can see here all of the different pieces. As we said, most of it is water and glycerin. Then you have the other. This is that space where you're capturing all those harmful and potentially harmful toxicants. There's nicotine and there's very little that is left in that uncharacterized space. And then you need to understand how does this translate and start to translate to disease? And we can look at all of those different types of toxicants, the cardiovascular toxicants, respiratory toxicants, and we can compare what is in cigarette smoke compared to what is in IQOS aerosol. And what we can see here is that no matter which disease category you look at it, on average, you're going to be reducing the levels of these toxicants by greater than 90%. And that's important because when you then start to look at how toxic is that aerosol compared to cigarette smoke, you start to see that 90% to 95% reduction in toxicants being emitted starts to translate to a reduction of 90% to 95% in the toxicity. And here, we're looking at some of the basic standard tox assessments that are used in pharmaceuticals and with other products to understand the potential toxicities of your product. So that's -- like I said on the first one, when we went through the process and the assessment strategy, that's all in a lab. What's also important is what happens when people start using these products. And here, we're using carbon monoxide to look at the reduction in exposure. But what you can see here is that on the left-hand side, you have 98% reduction in carbon monoxide being generated by the product. And on the right-hand side is from a randomized clinical study done in the U.S., where you can see that the people who continue to smoke continue to expose themselves to carbon monoxide and their carbon monoxide level throughout the course of the study stayed fairly stable, elevated. But when you look at what happens when people switch -- smokers switch to IQOS, what you see is that rapid reduction within the first day that then is maintained throughout the course of the study as they continue to use IQOS instead of cigarettes. Although it's a little bit hard to see that bright blue of the IQOS line on there, because it's almost superimposed on the abstinence line. And this is important, because when the U.S. FDA authorized the sale of IQOS in the U.S., they actually required that we remove the Surgeon General's warning that says that the product exposes you to carbon monoxide, because based on data like this, they understood that that would be misleading to consumers, since what you can see here is the exposure to carbon monoxide from IQOS is very much not above background or the environment. And in that study, we had over -- we had 15 different biomarkers that we looked at. And what you see here is the difference or reduction compared to cigarettes. Now many of these are not going to go down to 0. So it's important to also understand how it looks when people abstain from smoking altogether. And what we see is that in the smokers who switched to IQOS completely, they were able to achieve almost 95% of the exposure reduction that is achieved by smoking abstinence. And this is where the science starts to come together. You see a 95% reduction in emission, translates to a 90% to 95% reduction in toxicity and a 95% reduction in exposure -- or 95% of the reduction in exposure that can be achieved with abstinence. So the consistency is quite impressive. But then we talk about the second side of that equation, understanding if people will -- smokers will switch to these products. Well, we have our smoke-free products now in 84 countries around the world and over 28 million smokers are now using IQOS. And of those 28.6 million people who are using IQOS, 20% -- or 20 million of them, almost 21 million of them have switched to IQOS and actually stopped top smoking cigarettes. And this is important because the way to maximize the harm reduction is to get people to actually not just use the product, but give up cigarettes to use the product. Now we can look at the Japanese experience. Japan is the country where we first launched IQOS in 2014. And what we can see here from looking at the total market sales of tobacco is, up until 2015, when everything was still cigarettes, we start -- we're seeing a decline in cigarette sales in Japan, about 2% -- 1% to 2% year-on-year. And if you look at that dark blue line on the other side of 2015, that's total tobacco sales. So, after the introduction of heated tobacco products in Japan, that decline in total tobacco continued at a very similar pace. But what you see that's very different than what was seen in any other year is this stark drop starting in 2016 of cigarettes because, as you can see here, the cigarettes are being replaced by heated tobacco products. But that doesn't necessarily answer the question, are there fewer smokers? And we can use the National Health Survey conducted by the Japanese government to look at what's happening with prevalence of smoking. And what you can see up until 2014, where everything is gray, the only tobacco products really being used in Japan are cigarettes. So, you get about a very flat rate of cigarette prevalence. It's staying fairly constant. And in 2015 to 2017, we do know that heated tobacco products were introduced in Japan, but the survey didn't differentiate between what a person was using. So we don't know how much of that was heated versus dual use versus using cigarettes. But what we do see is in 2018, you see this very drastic drop in prevalence 3 years later, unlike the 5 years preceding the introduction of heated tobacco products. And by 2019, the smoking prevalence reached about 13.1%. We're waiting to see the data. Our understanding is, because of the pandemic, obviously, 2020, 2021, the survey wasn't done. But at the end of last year, it was repeated and we're waiting to see the results and to see what the last couple of years have added to this. We can also look at the Swedish experience, and this one is slightly different, because here we're looking at Snus, an oral tobacco product in nicotine pouches and the uptake of these in Sweden. So, if we go back all the way back to 1916, we can see what starts happening is in 1973, Snus was introduced in portioned, so like -- kind of like a tea bag style mechanism of delivering Snus. And what you see is, starting about then is the uptick in the sales of Snus. At the same time, you start to see a decrease in the sales of cigarettes. And by 2017, Snus sales and Snus and nicotine pouches, because they were introduced more recently, actually surpassed cigarette sales in Sweden. And from the scientific literature, many of the studies, especially some of the review studies start to attribute this decrease in cigarette sales in Sweden with the availability of Snus. But it didn't happen evenly throughout the population. When we look at the male population in Sweden, you can see how the uptick in Snus starting in the 1970s, really started to pass cigarettes in 1999. This similar thing did not happen in the female population until a later date. So, we can look at it from another angle, and you can see that Snus is on the top for the male population, but it didn't really cross until you got to 2021 in the female population. And that's because the uptick didn't really start to happen and the replacement of cigarettes by nicotine pouches was the introduction of the nicotine pouch in that population. And it's important that we take a look here at the difference in the timing of when this happened, because when you start to look at the public health impacts of that, they're going to look very different. When we look at just lung cancer incidents, one of the most highly related -- smoking-related diseases with smoking, what you see is by 2020, in the male population, Sweden has the lowest rate of lung cancer because in the 1990s, you have cigarettes being surpassed by oral tobacco products that deliver a lot lower levels of harmful and potentially harmful constituents. This did not happen as we saw in the female population until very recently, and when you look at the female lung cancer incidents, it looks very similar to the EU average. And therefore, we're not going to see the benefits of this replacement and decrease in cigarette prevalence until years in the future. But the other major issue is youth. There's always concern that when you have these products out there, will youth pick them up and start using them? We have to rely on publicly done studies to understand how these products are being used in the youth population, but we are starting to see a number of these studies coming out. We have Germany here, Switzerland and the U.S., and what you see is when it comes to heat-not-burn products, the ever use and the last 30-day use is very low in the youth population for heat-not-burn. What you see the e-cigarette side is there is a lot more of this use pattern being seen. But I think we also have to take into consideration when we look at these studies, what these studies don't really break apart is in e-cigarette use, quite often the studies talk about ever use. Even 1 or 2 puffs on an e-cigarette makes a person an ever user, which is very different than how we've ever looked at cigarette smoking, where you usually use things like at least 100 cigarettes in a lifetime makes you an ever user. So, these aren't necessarily things that we can compare one-to-one, and we really have to pay attention to understand what does the data mean. But I think, here, what we can see is that the youth use of heated tobacco products in countries where they've been launched is very low. And I know I shared a lot of data from PMI on our products, but we're not the only ones studying these products. Obviously, if you go back a few years like to 2017, right around the time where these products were just being launched globally, there's very few studies independently done because the products weren't available to do the studies. So, in 2017, there was about 20 papers published total. Now as we start submitting these every year as part of our FDA annual report, we have to include all the publications in the last year. We're submitting over 100 publications every year. So, you can see that the body of evidence is growing. And as this body of evidence grows, it only further confirms the totality of evidence that these products do support harm reduction potential compared to cigarettes. And this was actually the basis of the authorization of our product in the U.S. And I think it's important when you read the language of this to understand what is it really saying? It's talking about the measurable and substantial reduction in morbidity and mortality that could be seen in individual tobacco users, so people who smoke, is reasonably likely to be seen in subsequent studies. And it's important that we communicate this with the population, and that's why they think that it's expected to benefit the health of the population as a whole. And when we do this, this accounts for both people who use tobacco products, but also those who don't currently use it. So, in other words, it's impossible to have long-term data in the short term. But despite the lack of long-term data today, the FDA authorized the product because it's important given the likelihood of reduction in morbidity and mortality that the population has access to these products today. Thank you. Now, can I open it for questions?

Thank you, Gizelle. Yes, and also joining us for questions is Mr. James Bushnell from Investor Relations. So I'll kick things off, I had a couple of questions come through. And as a reminder, again, you can enter questions onto your screen or you can e-mail me them. And first one, PM, obviously, has a presence across all 3 RRP categories. How would you summarize the body of scientific data across each category? And is there one where the evidence is more compelling than others? And to that, which categories would you say more needs to be done in terms of the scientific data?

Well, I think there's 2 pieces of that puzzle that come together, which is the length that these products are in the market will definitely have an impact on how much research can be done on them. So, e-cigarettes were available for the longest. So, they're going to have the broadest pool of scientific information that exists on them. But at the same time, an e-cigarette is a category of products. So, what we know about them is more in general. Some will be worse, some will be better. And if you look for where do you have the strongest evidence on exactly what is being delivered and how it's being delivered, I would think that, that would be sitting in the IQOS product because we have so much data on a single product that all fits into that same category. So, study after study is exactly the same product that's being studied. And, obviously, with nicotine pouches, they're the most recent into the pool of nicotine products. So, therefore, it's going to have the smallest body of evidence. But it's also in a different space because it's delivered in a very similar way to Snus, which has been available for decades. And so, there's definitely the ability to look and bridge back to that epidemiological evidence using what we do know about those products. So, I think, the biggest thing from a science point of view that we need more information on is long-term use of these products and understanding how people actually use them because that's a piece of the puzzle on risk.

Okay. And thanks, Gizelle. I'll just pick up on that last point you made, and this was a question that came in more generally for the last session. On this one, in terms of the long-term epidemiological data is -- and I guess, I'll put this in another way, is it -- I mean, when you speak to health bodies around the world, I mean, how long term are they looking for data to get more comfortable around RRP products? I mean, is it 10 years, 15 years, 20 years?

Well, I mean, I think it depends on what -- the comfort level of the regulatory bodies is going to come from a lot of the context of which the information is being put out there. So, I think, when you're looking at how long will you -- will it take before you start to get some harder disease risk endpoints. We're going to start to get some of that sooner because we have the product in the market for 10 years, and there is things where if you take a population at risk, so people who may be using the products who already have disease, we may be able to start to see on the disease side, changes in the progression of disease in the very near term 3 to 5 years. But if you're starting to look at, when are we going to have data on people who never use cigarettes before that are using these products and how long does it take to see that, we're decades away from being able to see that data. So, I think, when you look at it in the context of harm reduction, adult smokers who would otherwise continue to switch, switching to these products. That evidence is going to be coming in, in the very near future.

Very well, Gizelle. And next question, what more could be done in terms of innovation or product development that could make these products even safer and therefore, make the argument for harm reduction even more compelling?

Well, I think, when we look at it today, we could talk about what we could do to make it even better, and there are probably a lot of different things with technology where you could drive down some of the toxicant levels even further. But I think what we need to be doing and where you're going to have the biggest impact on public health, and I'm speaking as an epidemiologist, so that's what I'm more interested in, it's actually getting cigarette smokers to switch. And I think an effort there on really sharing the information, making the information available and the products available and then finding ways to encourage smokers to switch without encouraging non-smokers to start is where the effort really needs to be today, not reducing something that's small to even smaller, but taking people from cigarettes down to the less harmful products.

Thanks, Gizelle. And next one is, same question again, which kind of was put forward in this session and the prior session, and you had a number of slides on this. There seems to be a huge amount of disinformation around nicotine itself, the view that it can cause cancer, and as you pointed out, the misperceptions even amongst health practitioners. What do you think needs to happen for these views on nicotine to change and better reflect reality?

Well, I think it's difficult for people in this space, because a lot of people don't think about tobacco on a daily basis. I know that I work in a tobacco company and I work on the science behind it and it is our day-to-day job. But when you go into the broader communities, a lot of doctors don't actually think about tobacco on a day-to-day basis. So, they know that smoking causes disease. They know that smoking includes nicotine. And now that the products are -- being able to separate the nicotine, there's not a lot of thought on going back to it. Many times when we engage with doctors, what we hear is, "Yes, yes, we know, tobacco kills." And then you start to have to break down the pieces. So, I think, there needs to be a lot more communication and there needs to be a lot more active communication by public health to really get the story right, and we're not seeing that today.

A question for me linked to this and maybe not -- you may not be able to answer it, but I mean, there's increasing studies now in terms of the therapeutic benefits of nicotine and treatment in anxiety, things like Parkinson's, depression, et cetera. Do you think if we start to see work -- more work done in those areas, it will help to kind of address some of these misperceptions around nicotine?

I mean, I think, those are tough areas to go to because you're going to be -- even in the drug space, you're going to be bringing in the addiction potential of nicotine into a diseased area, which is always still going to be very difficult when you least start to balance that benefit-risk. But I do think understanding these aspects of the compound itself are going to be absolutely critical because we don't know the long-term effects and understanding both the risks and the benefits of a product are going to be important. And I think when you think about things like Parkinson's, I don't think you're looking at nicotine as a treatment. So, this is not somebody who has Parkinson's starts to use nicotine to undo that. There's something there when you look at this data that is really this long-term use that is different. And so, that's why it's so difficult to study.

Okay. And another question, which was for both sessions as well. I mean, when you're speaking to regulators globally and you're presenting this data, what is the main pushback you typically get from the science that you presented?

I think the main pushback is what we -- what we always get is, who we are. And I think, this is where the dialogue needs to change, not who we are or where the money or funding is coming from, but what are the steps that can be put in place so that the data can be understood, can be presented in a transparent way, can be -- we can look at these and understand the bias. We know that in the pharma industry, they're going to have similar financial ties and financial motivations for doing their studies. That's part of business in any industry that you go to. But how do we share it in a transparent way? How do we open the discussion, and how do we understand not just the potential for bias but actual bias, because it seems like a lot of times, it's the potential for bias is not actually assessed bias. So -- because you're the tobacco industry, it is biased. No, because with the tobacco industry, there's a potential for bias, but we can also assess that in the data and understand the impacts of it and then take decisions accordingly. And I think that's the important part of science and the scientific debate is not to throw things away because we don't like them, but to actually dive in and understand what's the value of them and what do they add to the scientific evidence.

Okay, great. Another question and slightly vague, but it's -- I think it's relating to when you're speaking to kind of regulators globally and continue to present your data now, I mean, where are you most optimistic kind of globally where regulators may start to change their approach? Obviously, the U.S. actually technically embraces harm reduction. The U.K. appears to be going that way. And I guess, comments on how you see the European Union addressing this with the new product directive. And then, probably a bigger ask, what needs to be done from a kind of World Health Organization level for them to start to embrace harm reduction going forward?

I mean, I think, the main thing is really working with governments to help them understand the impact that this can have on a population level. I understand that everybody wishes that they could make cigarettes go away and go away completely and have nothing replace it. But that's not the reality of the world we're in. So, we could always hold out for perfection. And by doing so right now, we saw the trends, there's 1 billion people smoking and there's going to continue to be 1 billion people smoking, which means the number of smoking-related diseases isn't going down. So, I think, we really do need to be a little bit more pragmatic and you start to see some of the pragmatism coming into some of the regulations. It's just not happening fast enough because we know that speed and the faster we can get people off the cigarettes, it's not like the day after people quit, their risk goes away. It takes years for the risks that's accumulated from smoking to start to diminish and to go back to a level that's lower than a continued smoker. So, we need to get people to do that as fast as possible, because when you look at health care and these types of things, these are going to be important issues for every country.

Another question which also came for the last session as well but relevant to this one. What more do you think kind of the tobacco industry as a whole can be doing in terms of [ joint-op ] efforts and kind of -- do you think more needs to be done in terms of getting together and trying to push this agenda or is that maybe happening already?

I'm certain that the more could be done. More could always be done. But I think, really moving away from just product science and really pushing the harm reduction agenda across product because I don't necessarily think for an adult smoker, it is which product from a scientific point of view that they're able to switch to. It's the fact that they're able to give up cigarettes and give up cigarettes completely. So, I think there is space there to really focus on what are the big issues that people are facing, where can we -- how can we generate this data? Because if we each look at an individual product, it will take much longer before you have a large-enough population using that one product long enough. And, I think, when you look at what's happened in the last 5 years, the speed of innovation means the product we start to study today may not be there in 10 years because we'll have evolved to much better products by then. So, finding ways to put products together and understand the category to really start to demonstrate and bring the value of harm reduction and smoke-free products to the scientific community and to regulators, I think, is something we could do more of.

Okay, great. I think we've got time for 1 more question which is related to Japan. So, you showed some slides in terms of reduction in lung cancer, smoking-related diseases in Sweden. And then, you showed, obviously, the declines in smoking we're seeing in Japan. But are we also seeing the data come through in terms of reduction in smoking-related diseases in Japan now as well?

We don't have that data today, but we are, and I think we presented at Investor Day, our portfolio of studies that we are working to implement now so we can start to look at that data. I think Japan has the largest population of people using these products long enough. But what we have to do is find a way to connect their medical information on these people back to the actual smoking. And I think one of the hold-ups there is the fact that many of these databases don't really differentiate smoking. So, you're a smoker or you're a non-smoker and then you actually have to then add the understanding of what tobacco products people are using when they switched, so that you can really create a causal style relationship between these. But that data is coming and those studies are in the works.

Okay. I think we will wrap things up. Well, that was really compelling, Gizelle. I need to show those slides around nicotine to my wife because she is expressing concerns around how much nicotine I'm consuming these days. So, it might put her at ease. But I really appreciate your time today. And if anyone's got any other questions, which we never touched on, then please e-mail me and I'll make sure they get sent on to the team. But, thank you once again, Gizelle. It was awesome. Appreciate it.

Thank you, and good luck with your conversation on nicotine.

Thank you. Good afternoon, good morning, everyone. And for our final session of today, we're joined by the very handsome Stefano Volpetti, President of Smoke-free Products at PM and also the Chief Consumer Officer. In this session, Stefano will look at leading and transforming through innovation in smoke-free. And remember, there will be time for Q&A at the end, but you can also enter your questions onto your screen or you can also e-mail me a question, I'll make sure I pass it on to Stefano. And before we start, I just have to read a quick disclosure. And so members of the media and the press are not authorized to be on this call. If you are from the media or the press, please disconnect from the call now. The content presented on this conference call is proprietary to and/or subject to the copyrights of Jefferies or third parties. Further, as a matter of legal compliance, we remind you that you must not attempt to elicit from any speaker of this event, any material non-public information or other confidential information. And accordingly, the speaker may decline to respond to any questions in his or her sole discretion. You may not publish or otherwise publicly disclose the name of or otherwise identify the speakers unless Jefferies permits it in writing. Please note this call is being recorded. By attending this event, you agree to all of these restrictions. So with that, I will hand over to Stefano to introduce himself and get things going. So good afternoon, Stefano.