KT&G Corp.’s second-quarter net profit fell 16 percent from a year earlier, primarily due to a strong won.
Net profit for the three months that ended in June was KRW246.4 billion ($215 million) compared with KRW293 billion in the comparable 2020 period, the company said in an earnings release.
“The won’s strength [against the U.S. dollar] drove down the dollar-denominated earnings [when converted into the local currency],” a company spokesman told the Yonhap News Agency.
Operating profit declined 16 percent to KRW330.14 billion in the second quarter from KRW394.12 billion a year ago. Sales rose 2.1 percent to KRW1.35 trillion from KRW1.32 trillion during the comparable 2020 quarter.
KT&G sold 10.34 billion cigarettes in South Korea in the first three months, 170 million fewer than a year earlier. It accounted for 64 percent of the domestic cigarette market.
Its overseas sales fell 14 percent to 11.9 billion cigarettes from a year earlier due to weaker demand from the Middle East.
KT&G has tobacco factories in South Korea, Russia, Turkey and Indonesia with a combined annual capacity that reached 13.6 billion cigarettes.
The common stock of 22nd Century Group has been approved for uplisting to the Nasdaq Capital Market effective as of the market open on Aug. 16, 2021. The shares will continue to trade under the ticker symbol “XXII.”
“While remaining dedicated to our primary mission to reduce the harm caused by smoking, uplisting to the Nasdaq also aligns 22nd Century with other high-achieving, innovative and growth-oriented global science and technology companies,” said James A. Mish, CEO of 22nd Century Group, in a statement.
“We believe that joining the Nasdaq will enhance our visibility to a wide audience of institutional investors and increase our exposure to hemp/cannabis investors at this important time of industry progression toward mass production.”
In this article, Broughton Nicotine Services Head of Scientific Affairs Paul Hardman outlines the factors that can lead to data gaps in premarket tobacco product applications (PMTAs), what prompts a deficiency letter and how you can respond quickly and appropriately.
What is a deficiency letter?
Deficiency letters are sent to those who have submitted a PMTA with incomplete or insufficient data for the U.S. Food and Drug Administration to make a decision on whether the product is “appropriate for the protection of the U.S. public health.”
Why have I received a deficiency letter?
There are common causes of deficiencies that prompt the arrival of a letter. These could include a PMTA that lacks information that was mistakenly considered unimportant by the electronic nicotine-delivery systems (ENDS) company but is actually required by the FDA.
Applicants may also have been rushed to meet last year’s Sept. 9 deadline, leaving the company submitting the PMTA with insufficient time to collate and provide the required data. Similarly, the timeframe required to submit the application may not have left enough time to complete stability studies of the required length to provide a range of data. The FDA is, understandably, keen to understand the stability of a product over its expected shelf life.
Other reasons include:
A lack of integration between different studies—often submissions provide extensive data for some workstreams but are light in others. It is important that appropriate data is provided for all product analysis, nonclinical and human subject studies—and that data and approaches are integrated across all areas.
Different interpretation of “scientifically justified”—many elements of the PMTA guidelines indicate that approaches applied need to be justified by scientific data. However, as all products differ, there is a level of ambiguity in terms of what this looks like and what is required.
Poor “bridging” of data—the FDA welcomes the bridging of scientific data between similar products where appropriate. However, bridging that is not, in the opinion of the FDA, sufficiently scientifically justified will be highlighted and raised as a deficiency.
What will be in a deficiency letter?
Despite the name, it won’t just be a letter. The deficiency packs issued by the FDA are very detailed, outlining positive aspects about your application and areas for improvement and attention.
There will be multiple pages covering different points, with sections covering all products or particular products in a bundled PMTA and perhaps highlighting deficiencies for particular timepoints.
What is the aim of the deficiency letter?
Once a PMTA application has been accepted for filing, the next stage is substantive scientific review, which results in either a deficiency letter, a request for environmental information, a market order granted or a market order denied. The FDA will notify the submitting company when their application enters substantive scientific review.
The FDA intention of the deficiency letter pack is to support you in providing the required information. Each will typically cover what you need to do to remedy the deficiency and what data you need to provide to allow the FDA to carry on with a substantive scientific review—and the FDA has confirmed that, for deemed products (those on sale in the U.S. on or before Aug. 8, 2016), you will only receive one deficiency letter based on the agency’s current high workload with the many applications in process. The FDA has said this may be reviewed in the future once the backlog is cleared. Generally, for deemed products, you will have only 90 days to respond to the deficiency letter with all the relevant data that has been requested.
Information could include examples of what meets the FDA’s requirements and advice on how you could better explain or justify the information provided. There is no set response to a PMTA application. The FDA has received an extensive number of applications, which are reviewed by a team of people, so inconsistencies may arise between different responses. Also, take note that answering all the queries in a deficiency letter does not necessarily guarantee that your application will eventually be granted a marketing order.
How can I prepare for a deficiency letter?
As an ENDS company, you might have a good idea of possible data gaps within your submission and understand whether you are likely to receive a deficiency letter. Or, you may believe that what you have provided is appropriate and adequate. Either way, it is best to be prepared.
Steps can be taken to ensure you are ready for any eventuality, the most important one being to ask for help. Scientific and regulatory ENDS specialists can undertake gap analysis to identify any possible deficiencies so that steps can be taken now to provide what is required.
You can also ensure you fill any missing data gaps. If there is information that is clearly missing or inadequate, put studies in place to collect the data now. Remember, there are only 90 days to respond to a deficiency letter, which may not be sufficient time to obtain the information required.
Another piece of advice would be to start stability studies now if you are in any doubt that the stability data you provided may not be sufficient in terms of duration. Putting studies in place now will help you stay ahead of the game if this aspect of your submission is questioned.
Finally, you should always cross-check requirements. It is surprising how many companies miss out key sections, such as an executive summary or environmental assessment. Although omission of key sections is likely to lead to the FDA refusing to accept or refusing to file the application prior to reaching the substantive review phase, it makes sense to compare the detail of what you have provided with the list of requirements from the FDA to check if you have overlooked anything.
Recently, the FDA confirmed that addendums of additional data can be submitted to them before the commencement of the substantive scientific review stage for the process. This is fantastic news for manufacturers who had submitted dossiers that were not as comprehensive as they would have liked; if your application has not yet entered substantive scientific review, you now have the opportunity to submit additional data at no penalty to your application. However, if you plan to do this, it is important to contact the FDA and describe the anticipated plan of data generation and submission—and be quick. If you leave this too late and your application does enter substantive scientific review, you run the risk of any addendums being detrimental to your application and a shortening of the FDA’s enforcement discretion.
How can I be prepared for, or minimize the chance of, receiving a deficiency letter?
ENDS companies most prepared to respond appropriately will be those that are expecting the letter and have the required data ready or those that avoid receiving a letter altogether by providing information upfront. Companies such as Broughton Nicotine Services can help at any stage of the process, either prior to submission or during substantive scientific review, troubleshooting when there is a refuse to file/accept decision and also helping with preparation for and response to deficiency letters.
Broughton Nicotine Services can help you undertake a gap analysis on your submission and generate the required information. Contact our regulatory consulting team to book a meeting so that we can help you advance a smoke-free future.
This article was supplied on behalf of Broughton Nicotine Services.
Universal Corp. reported sales and other operating revenue of $350 million in the three months that ended June 30, 2021, up 11 percent over that reported in the comparable 2020 quarter. Operating income was up 24 percent to $10.6 million. On an adjusted basis, operating income increased 190 percent to $12.6 million. The company’s gross profit margin was up 80 base points to 17.8 percent.
“We are off to a good start for fiscal year 2022,” said George C. Freeman, III, chairman, president and CEO of Universal, in a statement. “Results for our tobacco operations segment improved on higher African carryover tobacco shipments and a favorable tobacco product mix in the three months ended June 30, 2021, compared to the three months ended June 30, 2020. Our ingredients operations segment, which includes our October 2020 acquisition of Silva International Inc., delivered very strong performance in the three months ended June 30, 2021.
“It is exciting to begin to see the positive outcome from our capital allocation strategy, which we put in place in May 2018 with the goal of ensuring that we are well positioned for the future. Investments in our tobacco business have enabled us to expand the supply chain services we provide our customers and to create footprint rationalization efficiencies, and we are seeing the returns from those investments in our results.”
Freeman said Covid-19-related vessel and container shortages had created logistical restraints for many industries, but the company was not yet able to determine what, if any, impact those constraints would have on shipment timing or its results.
“We are continuing to monitor these and other pandemic-related conditions which affect our operations,” he said.
Schweitzer-Mauduit International reported sales of $377.8 million in the second quarter of 2021, up 48.6 percent (11 percent on organic basis) from the comparable 2020 quarter. GAAP operating profit was $15.9 million, down $18.5 million, and included $19.2 million of transaction costs and incremental purchase accounting expenses driven by the acquisition of Scapa, which closed April 15, 2021. Adjusted operating profit was $44.6 million, up 3 percent from a year ago.
Engineered Papers segment sales were $125.8 million, up 4 percent, driven by a 3 percent volume increase, unfavorable price/mix of 4 percent and a 6 percent currency benefit, primarily related to the euro. The volume performance was attributable to growth in nontobacco products, such as battery papers, furniture laminates and packaging. The negative price/mix effect was primarily a function of lower low-ignition propensity volumes as certain customers resumed more normalized order patterns versus 2020 when they built inventories. Accelerated growth in reduced-risk heat-not-burn products continued to be a positive driver within the tobacco business.
“The strength of our portfolio was again evident during the quarter as an increase in global economic activity drove very strong demand across the business,” said Jeff Kramer, CEO of SWM, in a statement.
“Excluding the benefit of the Scapa acquisition, overall sales increased double-digits, and we are confident that robust order activity will continue in the coming quarters. We also closed and began integrating the largest acquisition in our history as Scapa joined our portfolio, putting us in even better position to drive sustainable long-term profit growth. And while we were not immune to global supply chain challenges, our teams again demonstrated their flexibility and skill in delivering against these increased volumes, resulting in second-quarter adjusted EPS of $0.90.”
The study assesses the impact of wording on perceptions of nicotine use. Two versions of a questionnaire were given to 926 physicians, asking about the “extent to which they agree or disagree that ‘nicotine’ [version one] or ‘nicotine, on its own,’ [version two] directly contributes to birth defects, CVD [cardiovascular disease], cancer, depression and chronic obstructive pulmonary disease (COPD).”
For version one of the questionnaire, 85 percent and 85.2 percent of physicians “strongly agreed” that nicotine directly contributed to cancer and COPD, respectively. For version two, 69.6 percent and 67.3 percent “strongly agreed” with those statements.
The study showed a difference in perceptions between medical specializations as well—pulmonologists were the least likely to hold misperceptions about nicotine, and family medicine physicians were the most likely to hold misperceptions about nicotine.
“Even after accounting for question version, the proportion of surveyed physicians who believe that nicotine directly contributes to these health outcomes is alarmingly high,” the study authors wrote. “It is possible that participants are conflating the addictive effect of nicotine with the comparatively more harmful effects of tobacco use.”
“It is very important for physicians to understand the relative harm between nicotine and the other 7,000 toxins in tobacco smoke,” said Michelle Bover Manderski, lead researcher. “This is especially important as physicians play a key role in recommending and prescribing FDA-approved nicotine-replacement medications.”
KT&G launched lil Solid 2.0 in Armenia and Serbia in Eastern Europe and Kazakhstan and Kyrgyzstan in Central Asia in the second quarter of 2021, reports The Korea Times.
Lil Solid 2.0 is available in two colors, stone gray and cosmic blue. KT&G will introduce seven types of tobacco sticks for use with the device, including Fiit Regular, Fiit Regular Sky and Fiit Crisp. Types may vary across markets, though.
“Our product, lil, is gaining popularity in the export markets thanks to our collaboration with Philip Morris International,” said Lim Wang-seop, head of KT&G’s NGP business division, during a conference call in February. “We originally set a goal of entering a single-digit number of countries this year, but we have changed it to the double digits.”
The 2021 International Cigar Expo, which was scheduled to take place Nov. 8–10 in Chengdu, China, has been postponed because of the persisting Covid-19 pandemic.
The decision aims to protect the safety and health of exhibitors, visitors and staff.
Although by the end of July over 95 percent of booths had been booked, it is still difficult for exhibitors and visitors from overseas to attend the expo amid the current pandemic, according to the organizers.
The Polish authorities have dismantled an organized crime group involved in the production of illegal cigarettes, reports Europol.
On July 27, more than 100 officers from Poland’s border guard searched locations across the province of Warsaw. An illicit factory was dismantled, and 16 suspects were charged for their involvement in this illegal tobacco activity. The leader of the criminal organization features among those arrested.
More than 1.6 million counterfeit cigarettes were seized on site by the Polish authorities alongside 13 tons of tobacco that could have been used to produce a further 13 million cigarettes. The tax loss for the Polish treasury is estimated at about €3.8 million ($4.51 million).
The factory’s estimated production capacity was approximately 1 million cigarettes per day. The counterfeit cigarettes were destined predominantly for the U.K. and Germany, where they would have had a value of up to €9.7 million.
Philip Morris International made a “technical” offer for a new cigarette factory license in Egypt, reports Mubasher.
British American Tobacco; Al-Mansour Group, the distributor of Imperial Tobacco products; and Japan Tobacco International failed to submit their offers, asking to delay the process instead, according to Ibrahim Embaby, the head of the tobacco division at Egypt’s Industrial Development Authority.
The three companies have conservations regarding the bidding terms, which were amended earlier. Their requests will be submitted to Egypt’s prime minister, Embaby said.
One of the companies also asked for separating the new licenses for conventional cigarettes and heated-tobacco products, he added.