Chew on This: Nicotine Gum Faces Growing E-Cig Threat

Before there was even a fancy term like "nicotine replacement therapy," the Swedish were using nicotine gum in the 1960s to help royal navy submariners manage their nicotine cravings while aboard the confines of the vessel. That gum eventually became Nicorette gum, which today is manufactured by Johnson & Johnson's  (NYSE: JNJ  )  McNeil subsidiary and is distributed in the U.S. by GlaxoSmithKline  (NYSE: GSK  ) , the industry's largest NRT manufacturer, with 50% market share.

Since then, a whole class of NRTs have been recognized by the FDA that include skin patches, lozenges, nasal sprays, and inhalers, but because their intended use is to have you quit smoking as opposed to merely get a nicotine fix through a different means -- and the fact that, when introduced, there was no data available about the health effects of long-term use -- the FDA requires manufacturers to carry warning labels to cease use after 12 weeks.

Today, however, there is a growing global body of evidence that there are no ill effects from extended usage of NRTs, and after long consideration, the FDA recently signed off on their safety and will allow manufacturers to remove the warning labels from their packaging..

That's not an insignificant development, because there are growing competitive threats to the industry. While Glaxo's dominance has long held generic NRTs largely at bay and has seen only modest competition from Novartis, with its Habitrol lozenges, and Pfizer, with prescription-grade NRTs, some studies suggest that gums, patches, and the rest have little impact on helping smokers actually quit. At the same time, the rise of cigarette alternatives such as electronic cigarettes could eat into the NRT market.

Harvard University found that NRT use was no more effective in helping smoking cessation over the long haul than people trying to quit on their own. Despite the prevalence of NRTs in the market for decades, they point to CDC data showing that previous declines in adult smoking rates and quitting rates have stalled in the past five years. 

But electronic cigarettes could be the bigger threat. Featuring no smoke, no ash, and, more importantly, no tar -- it's the tar that kills you -- electronic cigarettes are a small but growing niche for tobacco companies. From 750,000 e-cigs sold in 2010, its estimated some 3.5 million were sold in 2012.

The FDA originally sought to prevent their importation but lost several court cases and now says so long as they're not marketed as therapeutic, they're legal. Lorillard  (NYSE: LO  )  has become a big e-cig manufacturer, with more than $39 million in sales and enjoying a 30% share of the market. Goldman Sachs estimates it will be a $1 billion in industry sales in a few years, which may prove too lucrative an option for Altria (NYSE: MO  ) , the biggest tobacco company and one still on the e-cig sidelines. Reynolds American (NYSE: RAI  ) plans to play all sides, as it will soon introduce both e-cigs and NRT gum.

Although it's doubtful e-cigs will ever get the same establishment support as nicotine gum and patches -- some states are trying to regulate them and ban them out of existence -- it could mark a new period for smokers to choose an option that doesn't require them to be second-class citizens, separate and not even equal.

While warning labels on NRTs were never in the same league as the graphic images on cigarette packages that failed to muster judicial support, the new labeling rules could be an impetus for additional growth while allowing them to maintain their marketplace advantage.

Snuff it out
Involved in everything from baby powder to biotech, Johnson & Johnson has critics convinced that the company is spread way too thin. If you want to know whether J&J is nothing but a bloated corporate whale or a well-diversified giant that's perfect for your portfolio, check out the Fool's new premium report outlining the Johnson & Johnson story in terms that any investor can understand. Claim your copy by clicking here now

 


Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 07, 2013, at 1:08 AM, lounicosia wrote:

    I can tell you personally that the nicotine gum was very effective in helping me quit smoking. I was a long time smoker and I would recommend the gum to anyone who asked. I see that e-cig around and if that works for people that's fine too, but I do not believe it works better then the gum.

  • Report this Comment On April 07, 2013, at 6:41 AM, TMFCop wrote:

    lounicosia,

    I think the difference between them is an e-cig is not considered a smoking cessation product even if it's a nicotine replacement device.

    Gums, patches, lozenges, etc. are designed to help smokers quit. I think the e-cig is used more by those who want to keep smoking, to keep getting their nicotine fix, without disturbing those around them. It's likely why the cigarette companies are starting to get into them in a big way.

    I've heard from others who've said the patch was a big help for them in quitting smoking, and while I'm sure there are relapses amongst many, as the Harvard study points out, I think it's beneficial to at least try to be moving in the direction of quitting than not at all. Thanks for reading!

    Rich

  • Report this Comment On April 07, 2013, at 11:49 AM, lxanth5 wrote:

    My husband and I are both current users of the e-cig. I would say that nothing works better to get away from a regular cig than an e-cig but that would be arrogant of me. I know that what works best for someone is what works best for them...people quit/cut back/switch for many different reasons. I wanted to quit smoking and went the e-cig route...I am still using it but maybe one day I wont be...until then...we will have to wait and see. But as a supporter of the e-cig..I can say that I feel better than I did as a smoker, I no cough all morning long, things taste better, my doctor says my lungs sound great now, and the best things....my kids haven't had an ear infection or throat infection all winter. So again, we all do things for different reason with different realms of success. I just hope that we are allowed to continue to use the e-cig and not have a bunch of rules and regulations put on them to discourage people because it really is a great product for people who still need/want the nicotine but want to get rid of all the other chemicals that come with smoking. This was a great article to start the day with:)

  • Report this Comment On May 06, 2013, at 1:55 PM, ecigator wrote:

    I switched from cigarettes to ecigator about a year ago and I have gotten 4 of my smoking friends to switch also. It is a good product that does not need the government interfering with the industry. Big tobacco could have done this themselves but didn't. That's there loss.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2348597, ~/Articles/ArticleHandler.aspx, 10/2/2014 1:04:43 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement