Marlboro HeatSticks on sale in Milan this week

(Adds details, CEO comment, background; Changes headline)

By Martinne Geller

LONDON, Nov 19 (Reuters) - Philip Morris International Inc (Xetra: A0NDBJ - news) , the world's largest tobacco company, plans to launch its new iQOS smokeless device and Marlboro HeatSticks in Milan, Italy on Thursday following a better-than-expected launch in Nagoya, Japan earlier this month.

With a battery-operated system that heats, without burning, small tubes of tobacco called Marlboro HeatSticks, the iQOS is a hybrid between conventional cigarettes and next-generation e-cigarettes.

Such devices, including one sold by Japan Tobacco (Other OTC: JAPAF - news) , are meant to be less harmful than traditional cigarettes but more satisfying for smokers than e-cigarettes, which vaporize nicotine-laced liquid.

The burgeoning market for electronic cigarettes is a key battleground for Big Tobacco players such as Philip Morris, British American Tobacco (LSE: BATS.L - news) and Imperial Tobacco (LSE: IMT.L - news) . Cigarette sales are falling as people around the world quit the habit or cut back on their financial spending.

Speaking at a conference on Wednesday hosted by Morgan Stanley, Philip Morris Chief Executive Andre Calantzopoulos called the launch "a landmark moment" that opened a "groundbreaking new chapter in the history of our company".

"Whilst it is early days our results already surpass our expectations," Calantzopoulos said of the Nov. 4 launch in Japan, where the kit has a recommended price of 6,980 yen ($59.31) and the plug-in HeatSticks, which resemble mini cigarettes, cost 460 yen ($3.91) for a pack of 20, in line with traditional Marlboros.

In Europe, where taxes are higher, the recommended price of the kit is 70 euros ($87.87) while a pack of sticks is 5 euros ($6.28). Italy has classified HeatSticks for excise tax purposes at a rate similar to cigarettes, but Calantzopoulos hopes a law change will reduce the rate.

The company is touting product benefits including no fire, no ash and less smell, but is making no health claims.

Launches outside Italy and Japan are not expected until 2016, due to short-term constraints on manufacturing capacity.

Philip Morris sold 880.2 billion cigarettes last year, a decline of 5 percent. It says it could sell 30 to 50 billion more sticks if its "reduced risk" products were adopted by three to five percent of smokers in the markets it plans to enter in the next five years. ($1 = 117.6900 Japanese yen) ($1 = 0.7966 euro) (Reporting by Martinne Geller in London, editing by William Hardy and David Evans)