BAT Ending Very-low-nicotine Cigarette Partnership With 22nd Century

Source from:  Sep 25, 2017 09/29/2017

British American Tobacco Plc said Monday it is ending a low-nicotine traditional cigarette development partnership with 22nd Century Group Inc.

The decision makes the Clarence, N.Y., group a free agent in the reduced-risk industry sector — a reality it embraced. It has 70 employees at a Mocksville production plant.

“The company is free to engage in licensing agreements and strategic partnerships with any and all tobacco companies — with no restrictions, limits or caps on licensing royalties,” 22nd Century said in a statement.

22nd Century said in August it had a four-year licensing partnership worth $14 million with BAT, the world’s largest publicly traded tobacco manufacturer. That partnership was set to end in October. BAT paid $54.5 billion in July to acquire the 57.8 percent ownership stake of Reynolds American Inc. it didn’t own.

The end of the partnership comes about two months after the Food and Drug Administration emphasized July 28 that it views very-low-nicotine traditional cigarettes as a viable strategy for reducing consumption of those products.

The FDA must gain approval from other federal agencies before being able to implement any of its latest policy recommendations. That process could take at least a year.

“We have been aware of regulatory proposals to reduce nicotine content for many years, and we have a full and active research and development programme in the nicotine science space, currently working on a number of projects with a range of third parties,” BAT said in a statement.

“We have notified (22nd Century) that we will be bringing this agreement to an end as we believe we have more beneficial options available to us going forward.”

22nd Century said annual royalties from BAT were capped at $25 million.

If the FDA is successful in implementing very-low-nicotine standards in traditional cigarettes, the end result could be 22nd Century having a sharp increase in revenue and a potential buyout by a global tobacco manufacturer.

However, some anti-smoking advocates have questioned how viable very-low-nicotine cigarettes will be in the marketplace. They wonder whether smokers will just consume more cigarette sticks or go to a black market to buy cigarettes with current nicotine levels made outside the U.S.

David Sweanor, an adjunct law professor at the University of Ottawa and the author of several electronic-cigarette studies, said “the nature of the changes in this industry is that it is hard to know whether this might ultimately turn out well for 22nd Century.”

“But it looks like a company (BAT) that understands the tobacco market perhaps better than any other entity on the planet sees little likelihood of, or viability in, measures to force nicotine levels in cigarettes to a non-psychoactive level.”

22nd Century’s theory behind producing very-low-nicotine cigarettes, with up to 95 percent less nicotine than traditional cigarettes contain now, is that by making them less addictive, smokers would smoke fewer cigarettes. The company claims it is the only current manufacturer of such products.

“This is a technically achievable standard whose time has come,” said Henry Sicignano III, 22nd Century’s chief executive. “Lowering nicotine in cigarettes to non-addictive levels will save millions of lives and billions in health-care costs.”

The company met twice recently with FDA officials to discuss the potential for its products being regulated as modified-risk products compared with traditional cigarettes. Enditem