October 22, 2019
The FDA authorized the first MRTP for the U.S. market to Swedish Match today for eight of its snus smokeless tobacco products sold under the “General” brand name. This is a huge positive, in our opinion, since it gives Swedish Match the right to market those products with a modified risk claim, specifically, “Using General Snus instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.” We view this as very good news for the broader tobacco/nicotine industry as it demonstrates the FDA’s commitment to a “continuum of risk” strategy & provides a viable pathway/process for manufacturers. Furthermore, the FDA’s action today increases our confidence that iQOS will be granted an MRTP, potentially in the several months. Similar to the premarket authorization granted to iQOS/MO, Swedish Match will have to satisfy several stringent advertising/promo restrictions & postmarket requirements that measure the products’ longer term impact on consumer perception, behavior & health. The MRTP order is effective for five years. As we’ve written before, the ability to make a modified risk claim in tobacco/nicotine is a real game changer, in our view, not just from a consumer perception point of view, but also in terms of potential tax favorability down the line since it’s logical that a tobacco product that is less harmful to public health should be taxed less onerously than a higher risk product. We remain bullish on the broader nicotine industry.
- source Wells Fargo Securities, Equity Research