Event: on March 25, FDA released the second PMTA licensed product, allowing the listing of three series of logic brand products and their equipment under Japan Tobacco, including logic vapeleaf, logic pro and logic power.
FDA continues to release PMTA applications for atomized e-cigarettes to provide options for smokers to reduce harm. FDA said that after reviewing the relevant PMTA applications submitted, the results show that authorizing the listing of such products will be beneficial to adult traditional tobacco users. At the same time, logic brands comply with relevant marketing and publicity requirements (reducing the attraction to teenagers and limiting the purchase of minors). The three products passed this time are logic vapeleaf (atomized tobacco particles), logic pro (closed electronic cigarette - tobacco flavor) and logic power (closed electronic cigarette - tobacco flavor). FDA also issued a marketing refusal order (MDO) for some logic products, while the application for remaining logic products (including menthol flavor) is still under review.
We believe that the FDA's PMTA application for e-cigarettes once again clearly shows that on the premise of controlling the consumption of minors, FDA has recognized the harm reduction characteristics of atomized e-cigarettes, and there is a high probability that the relevant product lines of other compliant manufacturers will be approved for listing one after another in the later stage; On the other hand, as the world's largest consumer of e-cigarettes, the regulatory dynamics of FDA is also the world's mainstream regulatory vane. We believe that the successive approval of e-cigarettes will play a positive driving role in the regulation of e-cigarettes in other regions and countries. After the regulation is gradually clarified, the penetration rate is expected to increase rapidly.
As the general trend of "tobacco like supervision" of e-cigarettes, it is difficult for seasoning companies to pass the examination. As of a few days ago, FDA said that 1% of PMTA applications are still under examination, including the applications of VUSE Alto and Juul, the main products of British American tobacco, which can still be sold normally in the U.S. market. From the perspective of regulatory trend, we believe that the probability of passing the review of "seasoning products" is low. In the later stage, the American market may be dominated by the taste of tobacco and menthol, and the VUSE Alto product line is also expected to be listed in the later stage. We believe that in the short term, the product sales and orders of non-conforming small brands and supply chain manufacturers are negatively affected by the marketing rejection order issued by FDA; In the medium and long term, we believe that the "tobacco like management" of the U.S. e-cigarette market is the general trend. Under the background of stricter supervision, the resources and technical reserves of large brands and companies can cope with the rising access threshold and supervision cost, and the competitiveness and market share of leading brands are expected to continue to improve.
Overall, the application for listing of logic under Japan Tobacco shows that FDA has recognized the positive role of tobacco flavored e-cigarettes in encouraging smokers to reduce traditional cigarette consumption and reduce smoking rate. However, due to the high proportion of use by teenagers, corresponding control measures need to be taken. Therefore, we believe that under the background of tobacco control, harm reduction and technological iteration, the opportunity to upgrade the traditional tobacco consumption mode still exists. It is suggested to pay attention to relevant leading brands and supply chain manufacturers.
Investment suggestions:
1) China tobacco supply chain: key recommendation - Shenzhen Jinjia Group Co.Ltd(002191) (China Tobacco standard leader, active card layout, new tobacco); It is suggested to pay attention to: China Tobacco Hong Kong, Huabao international, China Bolton, Anhui Genuine New Materials Co.Ltd(603429) , Shanghai Shunho New Materials Technology Co.Ltd(002565) , Shantou Dongfeng Printing Co.Ltd(601515) .
2) atomization industry chain: key recommendation - smore International (leading global atomization equipment manufacturer); Suggested attention: fog core technology
Risk tip: the risk of new tobacco policy changes, the risk of sales / enterprise development falling short of expectations and intensified market competition
