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In today’s edition:
The booming business of nicotine 💥
Job opportunities at recently funded European startups 👇
Switzerland keeps smashing the World Innovation records 🚀
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The Crux 🔴
Zynfluencers, zynaccino, zynthusiasts – the list goes on.
I’m always on the hunt for new and exciting trends sweeping the globe in the hope of uncovering underlying investable companies.
One of the largest ones right now is Zyn.
A trend which is sweeping the globe, creating a whole new mindset, memes, and lingo along the way.
What the hell is Zyn?
Let’s dig in.
🐰🕳️⌚
What 🤔
Zyn, the leading global brand of nicotine pouches, was originally produced by Swedish Match before being acquired by Philip Morris in a $16 billion deal in 2022.
These pouches contain nicotine salts blended with flavors and are designed to be placed between the gum and lip.
Leading nicotine producers
Unlike smoking, vaping, or snus, nicotine pouches provide a "less harmful" way to experience a nicotine buzz, without the tobacco and other harmful substances found in cigarettes and similar products.
While the original target audience was people trying to quit smoking, the CEO of Lucy noted in a recent Odd Lots podcast, that up to one-third of their customers now use nicotine to boost cognitive performance, especially in high-demand fields like tech and finance.
Nicotine pouches are similar to nicotine gum products such as Nicorette. However, the latter, useful in smoking cessation, had to undergo extensive FDA approval, nicotine pouches did not.
So is it any safe?
Health 👩⚕️
I was shocked when I saw a friend using one of these pouches for the first time. My initial reaction was to lump nicotine pouches in with cigarettes, leading to a mix of disgust and judgment on my face.
But in reality, they’re not the same at all.
Zyn offers a sensation more like a brain massage, helping to sharpen focus. The active ingredient, nicotine, crosses the blood-brain barrier, influencing brain systems linked to memory and attention. Research shows that nicotine can improve cognitive function, particularly in people with conditions like Alzheimer's and schizophrenia, with benefits that persist even after long-term use and withdrawal.
The effects of nicotine vary by product. The quick increase in nicotine levels allows smokers to control their intake and effects, making smoking the most addictive form of nicotine use. Chewing tobacco and snuff are made more alkaline to speed up nicotine absorption through the mouth. However, nicotine reaches the brain more slowly compared to smoking. Blood nicotine levels rise gradually with smokeless tobacco, peaking at 30 minutes and then slowly decreasing over 2 hours or more.
Additionally, nicotine increases heart rate, blood pressure, and mobilizes blood sugar. It has potential therapeutic benefits similar to morphine. While the immediate cognitive enhancements are notable, the long-term safety of nicotine use, especially through products like Zyn, remains under research.
Nicotine causes addiction by stimulating the release of dopamine, a chemical in the brain that makes you feel good. This creates a pleasurable feeling, encouraging repeated use. Over time, the brain starts to rely on nicotine to release dopamine, leading to cravings and dependency. While smokers switching to nicotine pouches are moving to a relatively ‘safer’ territory, people who have never consumed nicotine before need to consider addiction before deciding both mood and economic implications.
Investment Implications 🤑
Is it time to buy PM stock by the boatload?
PM’s stock has risen 33% over the last 6 months
Let’s look a bit deeper.
The momentum behind Zyn is undeniable—its U.S. shipment volume has grown by an impressive 119% annually over the past six years.
Source: Company presentation
The rapid growth of Zyn has led to supply shortages, though Philip Morris expects the situation to stabilize by Q4 2024.
To address the shortage, Philip Morris announced a $600m investment to build a manufacturing facility in Colorado, which is expected to create 500 jobs and begin preliminary operations by 2025.
In the meantime, Philip Morris has halted nationwide online sales of Zyn on ZYN.com after receiving a subpoena from Washington D.C. regarding the city’s 2022 flavored tobacco ban. Initial investigations revealed flavored products were being sold both online and through independent retailers in D.C. However, online sales account for only a small fraction of Zyn's overall volume.
My 2 cents?
Ethical considerations aside, Phillip Morris is a stable dividend payer (4.52%), typically sheltered from recession headwinds, with a huge upside from its ZYN brand.
Smoke-free products accounted for 36.5% of Philip Morris's revenue last year, up 4.4% from 2022. This category includes more than just Zyn; it also covers other segments like IQOS, their leading heat-not-burn tobacco product, and e-vapors. Zyn alone contributed 5.8% of net revenue, which, given PM's substantial size, isn't a major driver of overall growth (yet).
On the other hand, regulatory risks are real. The Food and Drug Administration has been targeting underage sales of Zyn. In April, the agency filed several civil complaints against sales to underage buyers over the last 2 years.
Despite, the massive growth, I will not add PM to my fun money portfolio for now.
Dig Deeper ⛏️
P.S. Liking this issue? Forward to a friend 🧑🤝🧑
Headhunted 🦅
Recently funded private companies need talent! Scout jobs at recently funded European startups, ahead of your competition. 💪
xFarm Technologies 🇨🇭 - Swiss agtech company closes a €36m Series C round. Various roles available in Milan (link)
Paebbl 🇳🇱 - Dutch startup raises €22.8m in a Series A round to capture CO2 into permanent, carbon-storing materials. Engineering roles available (link)
Basecamp Research 🇬🇧 - The biological data company has closed a $60m Series B round. Hiring a genomic bioinformatician in London (link)
Perlego 🇬🇧 - The subscription-based digital library closed a $20m funding round. Marketing, HR and engineering roles open (link)
Generare 🇫🇷 - The startup has closed a €5m seed round to uncover new antibiotics from soil. Hiring scientists (link)
Interestingness📔
One of the largest hurricanes in decades has hit Florida. WallStreet Bets was looking at stock ideas. Controversial? (link)
Switzerland keeps smashing the World Innovation records (link)
Nucleus Capital published an interesting article for biotech founders looking to raise funding (link)
The Wild Story of Mike Lynch’s Rise From Janitor to Tech Billionaire (link)
This week, I picked up a copy of Going Infinite, Michael Lewis’ recount of the FTX collapse, and Sam Bankman Fried (link)
📚 New to investing? Grab a PDF copy of my ebook here.
As always, the financial disclaimer!
This is not investment advice. I am not a financial advisor. Make sure to conduct your thorough research before purchasing or selling financial products.