New York, New York (NetworkNewsWire) – The black cloud over Big
Tobacco has been swirling for decades, but few developments have
cast a bigger shadow than the U.S. Food and Drug Administration’s
recent proposal to reduce nicotine levels in cigarettes to
non-addictive levels. The new plan1, originally unveiled
on July 28, is expected to serve as a multi-year roadmap aimed at
saving lives and significantly reducing the effects of
tobacco-related diseases. The market effects of the nicotine push
have proven to be colossal, with shares of two of the largest
sellers of cigarettes in the United States suffering their largest
single-day plunge since the recession following the announcement.
Indeed, the FDA’s sweeping efforts seem to strike a distinctly
adversarial tone with the $130 billion U.S. tobacco
industry2, presenting an unprecedented opening for
companies in position to cash in on the changing market.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQB: LXRP)
(LXRP
Profile), as the only cannabis
biotech company that has exposure to nicotine, stands alongside
industry mainstays such as Altria Group, Inc. (NYSE:
MO), Philip Morris International, Inc. (NYSE:
PM) and British American Tobacco p.l.c. (NYSE:
BTI), along with upstart 22nd Century Group, Inc.
(NYSE: XXII), as the transformation of this global
industry accelerates.
The slow death of the once ubiquitous cigarette wasn’t just
uncovered with the FDA’s ruling. In fact, Big Tobacco has had its
sights set on the development of marketable alternatives to its
combustible offerings for years. A quick visit to Philip Morris’
website demonstrates these efforts, as the tagline “Designing a
Smoke-Free Future” is placed front-and-center for all to see. As a
reminder, Philip Morris is the global cigarette giant behind
Marlboro and six of the world’s top 15 international
brands, and its tobacco products are currently sold in over 180
countries outside the U.S.
Though still in their relative infancy, smoke-free cigarette
alternatives have already proven to be highly marketable as
cigarettes and similar products have faced increasing regulations
and slumping sales. Per a report3 from the Centers for
Disease Control and Prevention, roughly 9 million adult consumers,
or 3.7 percent of American adults, used tobacco-free electronic
cigarettes or vapor products on a regular basis in 2014. These
products typically serve as a delivery method for nicotine, and the
National Institute on Drug Abuse4 reports that they are
often used to lower nicotine cravings for those who are trying to
quit smoking. However, as the Institute notes, there is currently
no conclusive scientific evidence on the effectiveness of
e-cigarettes for long-term smoking cessation, and, perhaps more
importantly, the safety characteristics of these devices haven’t
been thoroughly evaluated in independent scientific studies.
A dearth of safe alternatives and an increasingly regulated
tobacco industry combine to create a large and rapidly expanding
market for smoking cessation solutions. According to a 2016
report5 by Grand View Research, Inc., the global smoking
cessation and nicotine de-addiction market is expected to reach
over $21.8 billion by 2024. As Grand View reports, “The launch of…
improved and innovative nicotine replacement therapy products is to
serve as a high impact rendering driver for the growth of the
smoking cessation and nicotine de-addiction market.” Staring at a
fertile market that’s concentrated on driving innovation, Lexaria
Bioscience Corp. (LXRP), with its patented
lipid-delivery technology, could prove to be a long-term player
offering vast positive community health benefits and considerable
upside, particularly for early investors.
Lexaria Bioscience’s intellectual property portfolio features a
collection of advancements focused on improving the delivery and
absorption of targeted molecules – such as nicotine - to the human
body. Notably, the company maintains a patented method by which it
is able to infuse a cocktail of molecules that are otherwise
difficult for the body to absorb within other ingredients at a
molecular level. As Lexaria’s website outlines, the company’s
platform allows for the infusion of beneficial hemp oil ingredients
into easily-absorbed lipids, greatly increasing the efficiency of
absorption. Currently implemented in the production of two distinct
consumer product brands including ViPova™ and Lexaria Energy, this
technology has proven to be a potential game changer in the
cannabinoid-based pharmaceuticals market, an industry that’s on
course to grow to $50 billion by 2029, per data aggregated by
Statista6.
An equally promising application of this technology relates to
the delivery of nicotine, which is also referenced in Lexaria’s
lipid-based delivery patent. The company’s proprietary platform
allows for the infusion of nicotine molecules within a wide range
of edible food ingredients or typical capsule formats, effectively
opening the door for the creation of a new product category
targeting the high-demand smoking cessation market. Edible or
encapsulated forms of nicotine delivery have traditionally failed
due to challenges that Lexaria’s new technology may overcome. As
the company notes, most of the adverse health outcomes associated
with nicotine consumption are due to problematic delivery methods,
such as cigarettes and other combustible products. As such, the
development of nicotine-infused edible products that remove those
dangerous side effects could greatly improve upon the safety
profile of most currently-marketed options.
Though promising, Lexaria’s patented molecular delivery
technology remains in its early stages. The company is currently
investigating the best methods of maximizing on the platform’s
market potential. As part of these efforts, Lexaria is also
examining the feasibility of in-vitro and in vivo laboratory tests
of its technology in order to generate real data regarding the
bioavailability of nicotine with and without its protective
technology. Combined with potential market indications in the
delivery of non-steroidal anti-inflammatories (NSAIDs) and
vitamins, markets valued at $5.4 billion and $68 billion
respectively, Lexaria’s lipid-delivery technology makes the company
an intriguing option for investors with a finger on the pulse of
the evolving tobacco industry.
While Lexaria focuses on the development of new delivery
technologies for nicotine, much of Big Tobacco has already turned
its attention toward the development of reduced-risk alternatives
to combustible products. On its website, Altria Group, Inc.
(MO), parent company of Philip Morris USA and cigar-maker
John Middleton Co., among others, notes that its goals are to
develop lower-risk tobacco products for adult consumers, support
programs that help reduce underage tobacco use and provide access
to expert quitting information for those who have decided to quit.
For Altria and many other tobacco industry leaders, much of the
focus remains on electronic cigarettes and e-vapor products.
This interest in the electronic cigarette market has seen a lot
of early success, though, as noted in an April 2016
report7 from the Royal College of Physicians, “[I]t is
not possible to estimate the long-term health risk associated with
e-cigarettes precisely.” In 2015, sales of e-cigarettes totaled
$2.88 billion, according to Statistic Brain8, up from
just $20 million in 2008.
A former operating company of Altria Group, Philip
Morris International, Inc. (PM) was spun off in 2008 in an
effort to better pursue sales growth in emerging markets. Philip
Morris’ most extensive project in the cigarette-alternative space
is iQOS (I-Quit-Ordinary-Smoking), which it originally announced in
2014 and currently markets under the Marlboro and
Parliament brands. Rather than burning tobacco, the iQOS
employs heat to generate a tobacco-based aerosol containing
nicotine. As of the end of 2016, Philip Morris’ iQOS was available
in over 20 countries, with the company teaming with Altria Group to
bring the product to the U.S. in the coming months. Although iQOS
and similar heat-not-burn tobacco products present some benefits
over cigarettes, such as leaving less smell and odor on clothing,
independent research is not currently available to support claims
of lowered risk or health benefits, according to the World Health
Organization.
British American Tobacco p.l.c. (BTI)
categorizes its efforts outside of the traditional tobacco space as
“Next Generation Products,” a classification that includes an
assortment of alternative tobacco and nicotine products aimed at
reducing the risks associated with smoking conventional cigarettes.
Per its website, British American Tobacco, over the past five
years, has invested more than $1 billion in building its Next
Generation Products business. In 2013, it became the first
international tobacco company to launch an e-cigarette product in
the UK. Since launching its Vype product line, British American
Tobacco has introduced products such as the Vype ePen, eTank and
eBox, as well as iFuse and glo, two tobacco heating products
similar to those offered by Philip Morris.
As with many of its competitors, 22nd Century Group,
Inc. (XXII) is focused on reducing the harm caused by
smoking, as is communicated through a tagline on its website.
Unlike many of its competitors, however, 22nd Century’s products
are taking direct aim at the FDA’s latest proposal. As noted in a
recent Bloomberg article9, this relatively obscure
biotechnology company in western New York grows tobacco plants with
just three percent of the nicotine found in typical tobacco plants.
Using these plants, the company creates Very Low Nicotine
cigarettes that are expected to go through the FDA-approval process
as a prescription smoking cessation aid. This innovative approach
which, like that of Lexaria Bioscience Corp., goes against the
grain in an industry filled to the brim with e-cigarettes and
vaping products, has already started to pay off for 22nd Century
investors. While Big Tobacco stocks plunged following the FDA’s
nicotine announcement, 22nd Century’s shares were up 70 percent for
the week ended August 4, including a 25 percent increase on Friday
that marked its biggest one-day spike since March 2015.
Where there’s smoke, there’s fire, and Big Tobacco’s
industry-wide commitment to developing pioneering devices in the
face of increasingly stringent FDA regulations is impossible to
overlook. Still, electronic cigarette alternatives and
heat-not-burn tobacco products could be half measures in a market
that’s primed for a major overhaul. Look for true innovators like
Lexaria Bioscience Corp., with its patented lipid-based delivery
technology, to develop a foothold as the next iteration of the
global $600 billion tobacco industry begins to take shape.
NNW Editorial Sources:
1) FDA http://nnw.fm/2SUkk
2) Bloomberg http://nnw.fm/qQZ00
3) CDC http://nnw.fm/7mXiJ
4) NIDA http://nnw.fm/bM5vN
5) Grandview Research http://nnw.fm/Ytnr1
6) Statista http://nnw.fm/D7L1i
7) Royal College of Physicians http://nnw.fm/kfD16
8) Statistic Brain http://nnw.fm/j4JD4
9) Bloomberg http://nnw.fm/bvH0s
For more information on Lexaria Bioscience please visit:
Lexaria
Bioscience Corp. (CSE: LXX) (OTCQB: LXRP)
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