Lorillard Says New Product Dialogue with FDA Has Improved

Source from:  Dow Jones Newswires 11/14/2012

Lorillard Inc. (LO) said its dialogue with the U.S. Food and Drug Administration has improved recently, a shift in tone that could soon allow the maker of Newport cigarettes to bring new products to market.

The No. 3 U.S. cigarette producer by revenue in July blamed FDA inaction for stalling new product launches this year and as recently as last month, said no real progress was made. The company's main competitors were able to launch new menthol variations that were in test markets prior to the FDA being given jurisdiction for a variety of tobacco products as part of the Family Smoking Prevention and Tobacco Control Act, which was signed into law in June 2009.

Lorillard only began to ramp up product development after Chief Executive Murray Kessler joined the company in September 2010.

That put the company at a disadvantage to defend its dominant position in menthol, which is popular among younger smokers and has remained resilient amid an overall industrywide decline in cigarettes.

Lorillard had hoped new tobacco products this year would help maintain 2011's strong growth. Sales growth has been less impressive in 2012, a trend Lorillard attributes to stalled product launches.

On Tuesday, Lorillard struck a more hopeful tone about communication with the FDA. Mr. Kessler, speaking at an industry conference, said the FDA's "radio silence" has had "a slight tone change."

"Communication has opened up," Mr. Kessler said. "We are now hearing from the FDA. They are asking questions, and I still take the stance that there is no reason to believe that we are not going to work our way through this process and as an industry--not just Lorillard--be in a position to be launching new products again."

Though striking a far more bullish tone than any earlier comments he has presented to the investment community, Mr. Kessler couldn't provide a timeline as to when the FDA would approve the new products. The FDA has contended the Tobacco Control Act is important to protect the public health and has said the approval process has been delayed as the agency gets used to the new process.

Lorillard's shares closed the regular session up 1.7% to $114.51. Enditem