Altria Moves Toward Modified Risk Products


NEW YORK — Innovation, a long-term pillar of The Altria Group Inc.'s evolution as a company, is now also a key driving force behind its future plans.

Executive leaders at the Richmond, Va.-based tobacco company met in New York Tuesday morning for the company's annual Investor Day. CEO Marty Barrington kicked off the event by noting Altria would highlight three things: heritage, talent and innovation. 

"Great brands and great companies are built and sustained over time through vision, execution and stewardship," he said. 

According to Barrington, Altria continues to pursue three strategies to deliver against its long-term financial objectives: 

  • Maximize its core tobacco businesses for the long term;
  • Grow new income streams through innovative tobacco products; and
  • Manage its diverse income streams and strong balance sheet to deliver consistent financial performance.

While pointing out Altria's strengths in its existing cigarette, cigar and smokeless businesses, the chief executive acknowledged many adult tobacco consumers today are seeking alternatives to traditional tobacco products. 

"For many years, we have embraced the vision of developing lower-risk tobacco products that appeal to adult tobacco consumers. That's one reason we supported FDA [Food and Drug Administration] regulation of tobacco, and today real progress is being made," Barrington said.

Importantly, he noted, the FDA now provides a framework to bring lower-risk tobacco products to market. New technologies in Altria's portfolio — including Nu Mark LLC's e-vapor products and the exclusive U.S. rights to commercialize two of Philip Morris International's (PMI) heat-not-burn products — "hold the promise for harm reduction," Barrington explained.

With adult consumer interest, regulatory constructs and technology development in place, Altria is seizing the opportunity to make the vision a reality.

Products are an important first step, as well as distribution and branding. Altria's move toward new products began with Nu Mark's MarkTen e-vapor products, the acquisition of Green Smoke, and the building of a national brand and distribution platform, according to the CEO.  

Altria also has aligned with a strong partner in PMI for bringing heat-not-burn technology to the United States, Barrington explained.

"We are pleased with the progress being made in both clinical research and testing of marketing concepts, and we're working well with PMI to support an application to the FDA for a modified-risk tobacco designation during the course of 2016. I am optimistic and confident that we're going to have modified-risk tobacco products on the market in the United States," he shared.

"That's what the FDA bill [Family Smoking Prevention and Tobacco Control Act] required them to do and there are now technologies available that look like they will do it," Barrington continued. "Everybody is doing the science on it and the science is promising."

He acknowledged there is a pent-up demand to see something in the marketplace with the modified-risk claim on it; however, bringing modified-risk products to market is not going to happen overnight. 

"We're investing it because we believe in it and we believe it's going to happen. It's just going to take staying the course to do the work and prove it out," he said. "Our job is to put the products in front of the FDA and make the case for it. The FDA's job is to evaluate the science and, if the case is there, to approve those products and let adult tobacco consumers decide."

Speaking of innovation, Jim Dillard, senior vice president, regulatory affairs and chief innovation officer, added that Altria's relationship with PMI is the company's most advanced in the modified risk space, but is "by no means" the only opportunity Altria is developing.

Last week, he cited, the FDA approved 23 of Altria's substantial equivalent applications, which points to the agency making progress with that pipeline, understanding the science and understanding the process — which bodes well for modified risk.

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