Lorillard's Non-Menthol Gold Mine

"Stall in strategic plan" to end with fourth-quarter rollout of two FDA-allowed products

GREENSBORO, N.C. -- Although notice of the approval came suddenly, Lorillard Tobacco Co.'s Newport Non-Menthol Gold Box 100s and Newport Non-Menthol Gold Box--the first new tobacco products that the U.S. Food & Drug Administration (FDA) has approved since the Family Smoking Prevention & Tobacco Control Act of 2009 gave it the authority to regulate tobacco products--have been "ready to go ... for years," Murray S. Kessler, chairman, CEO and president of Lorillard Inc., said during the company's Investor Day Presentation on June 27.

The FDA issued marketing orders Tuesday for the two new cigarette lines and denied the marketing of four others through the substantial equivalence (SE) pathway. The agency concluded that, while the new products have different characteristics than the predicate products, the new products do not raise different questions of public health.

Once a company receives an SE marketing order for a product, it means only that the FDA has found that the new tobacco product is substantially equivalent to a predicate product and in compliance with the requirements of the Federal Food, Drug & Cosmetic Act. An SE marketing order is not a finding that the product it is safe or safer than its predicate product or less harmful in general. And the law makes clear that companies cannot say their products are FDA approved.

Kesseler said that he did not know what company submitted the four denied products.

"The non-full-flavor, non-menthol segment is over 30% of the entire cigarette category, and we don't sell one cigarette with Newport in that segment. This is a huge opportunity for this company. So make no mistake about it. We are so proud of what our regulatory group did to be the first to get approved. We are so proud to be able to get going again with what was a stall in our strategic plan," he said.

"This is product that has been tested, that has addressed the concerns of our less than full-flavor efforts in the past. It's got a white tip, it's got overall satisfaction ratings higher than the leading brand; packaging has all been testing. It will be line priced right along at that competitive price with Newport Red. ... You should start seeing that shelved in the fourth quarter."

Receipt of the approvals "was a great day for us," he added. "Lorillard is the first and only company to have new products deemed substantially equivalent and authorized for marketing. FDA made history with the first-ever premarket authorization for two new tobacco products, and they have stated that those are the only ones they have approved to date."

Neil L. Wilcox, chief compliance officer and senior vice president of product-related regulations, detailed the process:

"Our SE submissions went to FDA in October of 2011. And during the almost two years since then, we have been very proactive working with FDA. We've met with them several times, talked with Dr. Ashley, the director of the Office of Science. We've met with his teams. We've gone to their webinars. We've put in hundreds of hours not only on the original submissions, but in November of 2012, we received seven questions from FDA asking for additional information for our SE products.

"To show you the level of detail that FDA has gone to in making sure that our product is substantially equivalent, to answer those seven questions, we had to submit over 3,600 pages of documents. And that's amazing. It's unbelievable. We felt, at the time, they don't want the products to be substantially equivalent. They want them to be identical. So that was really hard to understand. But in the end, obviously, we submitted the right information."

Greensboro, N.C.-based Lorillard Inc., through its Lorillard Tobacco subsidiary, is the third largest manufacturer of cigarettes in the United States. Newport, Lorillard's flagship premium cigarette brand, is the top-selling menthol and second largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has four additional cigarette brand families marketed under the Kent, True, Maverick and Old Gold brand names. These five brands include 41 different product offerings which vary in price, taste, flavor, length and packaging. Lorillard also markets electronic cigarettes in the in the United States under the blu eCigs brand.

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