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FDA allows British American Tobacco to sell heated tobacco products in US

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Capital Markets View – January 2021


FDA allows British American Tobacco to sell heated tobacco products in US

The U.S. Food and Drug Administration has approved British American Tobacco PLCs request to start selling a smoke-free, heated tobacco device in the U.S., the agency confirmed to S&P Global Market Intelligence on July 30.

FDA spokesman Michael Felberbaum said the FDA on July 19 issued orders granting a so-called "substantial equivalence" status for the global tobacco company's next-generation Eclipse device, which has a carbon tip and heats tobacco without igniting it. The designation means that the device either has similar characteristics to tobacco products sold in the U.S. as of Feb. 15, 2007, or does not raise public health questions different from those products, according to the FDA.

The global tobacco giant will start testing the device in the U.S. within the next 12 months, British American Tobacco CEO and Executive Director Nicandro Durante said during a July 26 conference call with analysts.

Philip Morris International Inc. in 2017 applied to market its IQOS heated tobacco device as a "modified-risk" product, which means that it is sold to "reduce harm or the risk of tobacco-related disease associated with commercially marketed tobacco products," according to the FDA.

The agency has yet to grant approval to Philip Morris for IQOS, Felberbaum said.

Durante said the company is "confident" its so-called next-generation products — heated tobacco and vapor devices — will bring more than £1 billion in revenue during 2018, according to a transcript of the call compiled by S&P Capital IQ, which followed the company's earnings report for the first half of 2018. Still, the market for heated tobacco has "plateaued" in Japan and Korea during the last four months, and the size of the opportunity for heated tobacco in the U.S. is uncertain, Durante said.

"We don't know the size of this category in [the U.S.]," Durante said.

British American Tobacco is also seeking FDA approval for its Glo heated tobacco device, and that application is under scientific review, Durante said. An FDA advisory committee will meet in September to review an application for modified-risk marketing of Camel Snus, a smoke-free, packaged tobacco product placed between the gum and lip.