Philip Morris and Altria end merger talks

PMI and Altria announced last month that they were in discussions about a potential all-stock merger of equals, more than a decade after the two companies split.

However, PMI said on Wednesday that after much deliberation, the two have agreed to focus on launching heated tobacco product IQOS in the US "as part of their mutual interest to achieve a smoke-free future".

Altria's chairman and chief executive Howard Willard said: "While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement.

"We look forward to continuing our commercialisation of IQOS in the US under our existing arrangement."

IQOS is the only heated tobacco product with premarket authorisation - including two menthol variants - from the US Food and Drug administration.

Philip Morris said that global data, based on four years of use, show that IQOS, which is not an e-vapour product, is not significantly appealing to youth or to non-smokers. As of June 30, PMI estimates that around 8 million adult smokers around the world have already stopped smoking and switched to its heated tobacco product, which available for sale in 48 markets.

"PMI is on track to meet its previously communicated international heated tobacco unit shipment volume target of 90-100 billion units by 2021," it said.

The news came as e-cigarette maker Juul Labs, in which Altria has a 35% stake, announced that chief executive Kevin Burns had decided to step down with immediate effect. He will be succeeded by K.C. Crosthwaite, who was previously chief strategy and growth officer at Altria.

At 1245 BST, PMI shares were up 5.7% in pre-market trade at $75.60, while Altria shares were up 0.6% at $40.99.