RJR Adds to Its Lines

Source from:  Winston-Salem (NC) Journal 12/08/2009

A decision to buy -- rather than research and develop -- its way into nicotine-replacement products has led Reynolds American Inc. to purchase a Swedish company. Reynolds said yesterday that it will pay $44 million for Niconovum AB, which specializes in products that help people quit smoking. The companies expect the deal to close by year's end. Reynolds' interest in the company surfaced last month. Susan Ivey, the chairwoman, president and chief executive of Reynolds, said that Niconovum would operate as a separate company under Reynolds American. Analysts said they are curious about how Reynolds would potentially use and market cigarette-replacement products in gum, pouch and spray form made by Niconovum. "Niconovum's products have great potential in meeting consumer demand and public-health objectives," Ivey said. "This acquisition extends the harm-reduction strategies Reynolds American and its operating companies have been developing over the past several years." However, consumers shouldn't expect to see Niconovum products on local shelves anytime soon. The products are sold only in Sweden and Denmark. Maura Payne, a spokeswoman for Reynolds, said that no decision has been made on expansion markets for the products, including the United States. "If they choose to pursue approval to sell their products in the United States, they would have to follow the Food and Drug Administration's well-defined methodology for evaluation of their products," Payne said. "They would have to comply with the marketing and sales requirements the FDA has in place for nicotine-replacement therapies at that time." In June, Congress granted the FDA the power to regulate tobacco products. That includes removing ingredients considered hazardous, restricting the marketing and distribution of cigarettes and smokeless tobacco, and focusing on limiting the impact of advertising on youth. Niconovum was formed in 2000 by Karl Olov Fagerstrom, who is considered a leading expert on smoking cessation and nicotine dependence. It is managed by many of the people who were pivotal in the development of Nicorette, a nicotine-replacement gum. Reynolds said it plans to retain Niconovum's management team and keep its headquarters in Helsingborg. It has 20 employees. It outsources its laboratory and manufacturing, Payne said. "We believe the technology used in our Zonnic products better meets consumer preferences than other nicotine-replacement therapies currently on the market," said Nils Siegbahn, the president and chief executive of Niconovum. "With today's announcement, Niconovum will have access to the capital it needs to expand distribution of Zonnic to additional markets, and accelerate product refinements and new product development." Stephen Pope, the chief global-market strategist with Cantor Fitzgerald Europe, said that the deal makes sense as part of tobacco manufacturers' increased reliance on smokeless products as cigarette demand declines. Government figures show that fewer than 44 million Americans smoke, down from a peak of 53.5 million in 1983. Bill Godshall, the executive director of SmokeFree Pennsylvania, said he believes that smokers and public health will benefit from the purchase. "Smoke-free tobacco products are 99 percent less hazardous alternatives to cigarettes, and Niconovum's nicotine products are even less hazardous alternatives," Godshall said. Godshall said that the purchase could lead the FDA to change some of its policies if Niconovum markets some products as modified-risk tobacco goods and others as smoking-cessation aids. Niconovum's decision to turn to Reynolds for capital is "truly unfortunate," said Dr. John Spangler, a professor of family and community medicine at Wake Forest University School of Medicine whose work includes studying tobacco use. "If their products are so innovative, why not approach pharmaceutical companies?" Spangler asked. "If they are not particularly innovative, why should they expand at all? "I am skeptical whether Reynolds -- or, more specifically, its stockholders -- in their heart of hearts really want people to quit smoking, or if this simply burnishes their image." Enditem