Wells Fargo Offers Predictions After FDA Webinar

ecigarette“We continue to be bullish on the long-term opportunities of e-cigs,” notes Wells Fargo Securities.

During FDA Webinar “20 Years Later—Returning to FDA to Regulate Tobacco,” featuring Mitch Zeller, director of the FDA’s Center for Tobacco Products (CTP) reminded listeners of the FDA’s 3 key priorities: menthol, substantial equivalence and deeming regulations on non-combustible tobacco products such as e-cigs.

Wells Fargo Securities noted many of the themes of Zeller’s comments were consistent with prior calls and appearances, including: (1) the FDA can only go “as far as the regulatory science takes it” as it considers and implements regulatory actions; (2) Acknowledgement of a continuum of risk; (3) the FDA must consider net population level harm in addition to individual-level harm as it regulates tobacco products; (4) the FDA must understand who is using tobacco products and how they are being used; (5) the FDA recognizes that nicotine creates and sustains addiction but doesn’t kill (“People smoke for nicotine but they die from the tar,” noted Dr. Michael Russell almost 40 years ago).

“We believe Mr. Zeller struck a somewhat more cautious tone with regards to non-combustible products such as e-cigs as he acknowledged the individual level risk reduction that may result from such products but stressed several times that net population level impact must be considered as well,” noted Bonnie Herzog
managing director, Beverage, Tobacco & Convenience Store Research, Wells Fargo Securities LLC. “The FDA is trying to understand the ways in which the availability of products such as e-cigs impact initiation, cessation and relapse of tobacco product use and ongoing studies in these areas will help shape future regulation. Bottom line: we continue to be bullish on the long-term opportunities of e-cigs and remain optimistic that the regulatory stars will ultimately align for e-cigs, continuing to propel the category. However, we do acknowledge there could be some near-term uncertainty as impact from regulation is understood and implemented.”

The big question on e-cigs is how the FDA will deal with pre-market approvals. In other words, will deeming regulations prevent, limit, or restrict rapid innovation of the category. Wells Fargo Securities noted that if e-cig innovation is stifled, it could dramatically slow down conversion from combustible cigs, which could ultimately result in net negative public health—in direct opposition of the agency’s goal.

Menthol
FDA has started reviewing comments on Menthol, and  Zeller noted that every comment submitted to the menthol docket must be reviewed. Given there nearly 200,000 comments, this review process could take up to a year. Zeller mentioned that the FDA’s ability to implement product standards is its “single most powerful tool” to manage toxicity, addiction and appeal.

“We believe the FDA could ultimately use its authority in this area to limit levels of menthol in combustible cigs over time, but we do not envision a menthol ban,” noted Herzog.

Substantial Equivalence (SE)
Acknowledging concerns around the process, FDA noted it is working to speed up SE reviews, beginning with the backlog of thousands of applications. FDA noted the quality of submissions has improved over time and it is optimistic it will finish reviewing all applications in the queue. “We were encouraged by Mr. Zeller’s positive tone and expect the SE approval process to accelerate,” noted Herzog.

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