Lowering the levels of nicotine in combustible cigarette products could adversely affect tobacco manufacturers.
In a major regulatory shift, the U.S. Food and Drug Administration (FDA) announced on Friday to its intention to reduce nicotine levels in cigarettes while exploring measures to move smokers toward e-cigarettes.
FDA Commissioner Scott Gottlieb made the announcement.
The FDA’s decision also extends the timeline for applications for new e-cigarette clearance by the FDA to Aug. 8, 2022, giving e-cigarette companies more time to keep their products on the market before the agency tackles the process of final review. It also gives the FDA more time to establish the means for regulating e-cigarettes.
The decision does take a “continuum of risk” approach that will seek to encourage industry innovation particularly in e-cigs/vapor/reduced-risk products (RRPs) and reduce onerous requirements on safer alternatives to cigarettes, according to Bonnie Herzog, managing director–beverage, household & personal care, tobacco and c-stores for Wells Fargo Securities LLC.
“Although the announcement’s timing was unexpected this morning, we’ve longed believed the FDA taking a more comprehensive approach toward nicotine was a natural next step,” Herzog said. “Overall, while viewed as a negative for cigarette manufacturers, we believe this could prove to be an opportunity over the long term for reduced-risk products and, therefore, (the Altria Group/ Phillip Morris International) as they have a unique competitive advantage with iQOS.”
The iQOS technology from Phillip Morris is a new heat-not-burn tobacco system, which is garnering much industry attention. The manufacturer had anticipated releasing the product to market before the end of 2017.
After the FDA announcement, British American Tobacco shares, trading close to all-time highs, dipped as much as 11% and were on track for their biggest one-day loss in nearly 18 years, according to a new Reuters report.