Kaival Brands Innovations Group (NASDAQ:KAVL) shares jumped 15% on Monday morning after announcing the launch of Philip Morris International’s (NYSE:PM) custom-branded self-contained e-vapor product – VEEBA – in Canada.
The agreement between Kaival and PMI moves to the next phase
This follows a recently announced international licensing agreement with Philip Morris Products S.A. Kaival Brands is the U.S. distributor for all products manufactured by Bidi Vapor, LLC, which are intended for legal-age nicotine users.
The product, a self-contained electronic steamer, VEEBA, was custom developed and is now distributed in Canada under the license agreement. The agreement covers the development, licensing, and distribution of Electronic Nicotine Delivery System (ENDS) products in certain markets outside of the United States, pending further regulatory reviews.
The agreement provided PMI with the license to use Florida-based Bidi Vapor’s intellectual property, patents, and development methods to launch VEEBA.
Kaival Brands and Philip Morris International are the exclusive worldwide distributors of products manufactured by Bidi Vapor.
“The Agreement with Philip Morris Products was a remarkable accomplishment for the company and now we have advanced to the next phase of international distribution with the actual launch of their custom branded product, VEEBA. We are excited to support PMI’s efforts to provide a range of alternatives compared to cigarettes. The commercialization of VEEBA complements PMI’s already strong smoke-free portfolio, providing adult smokers with an even broader range of usage, taste, price, and technology options,” said Eric Mosser, President and Chief Operating Officer of Kaival Brands.
Leadership changes
On June 7, Kaival Brands announced that Nirajkumar Patel, the company’s CEO and founder, will become Chief Science and Regulatory Officer. He will remain on the board of Kaival Brands. The current Chief Operating Officer, Eric Mosser will become president while remaining COO. Mr. Mosser will act as the company’s senior managing director for purposes of its filings with the Securities and Exchange Commission.
With the transition, Mr. Patel will focus on new product development and expansion of the Bidi Vapor product portfolio, which is directly linked to the new agreement with PMPSA. Meanwhile, Mr. Mosser will concentrate on expanding sales distribution channels and growing the revenues and profits of Kaival Brands.
Philip Morris best estimates in Q2
On July 21, Philip Morris shares rose more than 4% after the tobacco reported its second-quarter financial results. Its revenue rose 3% year-over-year to $7.83 billion, beating analyst estimates of $1.07 billion. On a pro forma adjusted basis, which excludes Russia and Ukraine from both periods, its revenue increased by 6%.
The tobacco giant’s adjusted earnings fell 6% to $1.48 per share, primarily due to a $0.16 per share impact from currency headwinds, but still beat analysts’ expectations of $0.23. Adjusted earnings would have increased by 6% on a pro forma basis at constant exchange rates.
PMI separated from Altria (NYSE:MO) in 2008. After this separation, PMI only operated in overseas markets, while Altria remained in the United States. This split was a double-edged sword for PMI – the company could expand more freely in higher-growth overseas markets. Still, it was also exposed to unpredictable currency headwinds and changing regulations.
Like Altria, PMI is raising prices and cutting costs to compensate for falling smoking rates. PMI also resumed share buybacks last year to get higher earnings per share from its slower revenue growth.
In 2014, Philip Morris launched its IQOS heated tobacco devices to diversify its business beyond its flagship Marlboro brand and other traditional cigarettes. These electronic devices heat tobacco sticks instead of burning them, promoting them as alternatives to cigarettes and e-cigarettes. PMI now relies on IQOS for most of its growth.
For the full year, PMI expects its heated tobacco shipments to increase by 22% to 25% and its total shipments to increase by 1.5% to 2.5%. It also expects its adjusted revenue to improve organically by 6% to 8%.
Featured Image: Megapixl @Ipopba.
