Closings and delays

Reynolds to go national with sales of nicotine therapy gum

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The R.J. Reynolds Building has served as downtown Winston-Salem's architectural signature for 85 years.

WINSTON-SALEM, N.C. — A Reynolds American Inc. subsidiary is going national this month with its nicotine-replacement therapy gum, Zonnic, which has been approved by the Food and Drug Administration, according to the Winston-Salem Journal.

Niconovum USA Inc. was founded in 2009 after Reynolds bought Swedish company Niconovum AB for $44 million.

Since the purchase, Reynolds has kept the pharmaceutical company, based in Winston-Salem, and Zonnic mostly under wraps except for selling it in Des Moines, Iowa, and Omaha, Neb. Zonnic is made by a Denmark third-party contractor, Perrigo, that had a previous relationship with Niconovum AB. The FDA says Zonnic can be marketed as a stop-smoking aid.

Zonnic will be sold at $3.69 for a pack of 10 pieces primarily in convenience stores and gas stations, where the majority of tobacco products are bought, said Todd Holbrook, senior marketing director for Niconovum. It will be phased in first with Midwest convenience retailers and build out in North Carolina in October and November.

By comparison, most nicotine replacement therapy (NRT) products tend to be sold in large quantities in drug and big-box retail stores.

“About 2 percent of NRT products are sold in convenience stores, whereas 70 percent plus of cigarettes are sold there, so we believe that is the appropriate venue for the bulk of the product placement,” Holbrook said. “We will look at the drug store and big-box retailers down the road.”

Scott Ballin, past chairman of the Coalition on Smoking or Health, said Zonnic’s national presence “creates the first true competitive NRT market” for the pharmaceutical companies.

The dominant brand has been GlaxoSmithKline’s Nicorette brand with a 43 percent market share in 2013, according to research firm Euromonitor International. That is down from a 51 percent market share in 2009.

“We’re hoping to expand the NRT category with Zonnic even as we add competition to the existing brands,” Holbrook said.

Analysts say Reynolds is taking a bold – perhaps audacious – approach with Zonnic.

It is asking consumers, particularly smokers, to trust the company that produces top-selling cigarette brands to have the expertise to produce the right cessation product for them.

“We hope the focus of Zonnic is on the message of the product, and not the messenger, because we believe Zonnic takes the smoker’s perspective into cessation,” Tommy Payne, president of Niconovum USA, said in 2012.

A potential major differential for Zonnic with other NRT products is that Niconovum is offering it in a smaller package and at lower price point.

Zonnic is being sold in packages of 10 pieces in mint, fruit and cinnamon flavors in 2-milligram and 4-milligram nicotine strengths. The larger concentration is aimed at adults who smoke within 30 minutes of waking up. The $3.69 per pack price was a strategic decision to serve as an attraction to smokers just thinking about quitting.

According to The Associated Press, other nicotine gums are sold in packs of a minimum of 20 pieces for about $10, and are offered in packages of up to 300 pieces.

“Zonnic will help change the entire NRT dynamic, which may lead the pharmaceutical companies to change their package and pricing in response,” Ballin said.

The long-term effectiveness of NRT products was called into doubt in January 2013 by a study released by researchers at the Harvard School of Public Health and the University of Massachusetts at Boston.

The study of 787 adult smokers in Massachusetts found that the products, specifically nicotine patches and gum, “are no more effective in helping people stop smoking cigarettes in the long term than trying to quit on one’s own,” said Hillel Alpert, a research scientist with the Harvard group and the study’s lead author.

Payne said that although about 70 percent of smokers annually express a desire to quit smoking, only 10 percent are successful. Of that 10 percent, about 6 percent are successful through the use of NRT products, he said.

It is clear from recent comments by Susan Cameron, Reynolds’ chief executive and president, that Zonnic could play a key innovation role in its quest toward becoming a “total tobacco company.” Cameron also has touted electronic cigarette Vuse and Reynolds’ latest version of “heat-not-burn” cigarettes as pivotal to its future.

“I think it’s great that this product will be available nationally,” said Dr. John Spangler, a professor of family and community medicine at Wake Forest Baptist Medical Center.

“In my view, the more options smokers have to help them quit, the more likely they are to be successful.”

The FDA began regulating tobacco products and marketing in June 2009, but it does not have the authority to ban nicotine or tobacco.

In April 2013, the FDA removed NRT warnings and stopped putting limits on how long someone trying to quit smoking can use the products. It recommends that users get a physician’s approval to go beyond the typical eight- to 12-week use period.

“For years, pharmaceutical companies like Pfizer and GlaxoSmithKline have been able to sell overpriced and ineffective NRT products with very little competition,” said Gregory Conley, a research fellow at the right-leaning Heartland Institute.

“With Reynolds offering Zonnic in smaller package sizes and at a much lower price per piece of gum, there are going to be a lot of would-be Nicorette customers that will instead decide to use Zonnic.

“Moreover, with the FDA approving changes to NRT to not discourage long-term use, this lower price point may lead more smokers to be comfortable switching from cigarettes to the gum.”

Conley said another key factor in Zonnic’s national introduction is the potential impact on the smoking-cessation products supported – and often subsidized – by state and federal health agencies.

“If Reynolds can offer state health departments and quitlines its Zonnic products at a lower price than GlaxoSmithKline can with Nicorette, legislators may start inquiring about why these corporate handouts are continuing,” Conley said.