NetworkNewsWire Editorial Coverage: In a country where the life-threatening risks of smoking are well-known and 22 million smokers want to quit, a milestone agreement between a drug delivery platform innovator and one of the world’s largest producers and marketers of tobacco and cigarettes may offer tobacco users an alternative method of satisfying their needs along with greatly reduced risk.
- The quest for other alternatives to cigarettes has brought Big Tobacco to the door of biotech company Lexaria.
- The bioscience potential for nicotine delivery cannot be ignored and may deliver myriad benefits.
- Lexaria’s proprietary DehydraTECH technology makes the company an ideal partner.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) (LXRP Profile) has announced that its wholly owned subsidiary Lexaria Nicotine LLC and one of the world’s largest tobacco companies have executed a definitive agreement to pursue innovation in oral, reduced-risk nicotine consumer products using Lexaria’s patented DehydraTECH™ technology. Other tobacco companies are also exploring alternative options for smokers. British American Tobacco Industries (NYSE: BTI) (OTC: BTAFF) is exploring vaping and using the move away from cigarettes to bolster its public image. Philip Morris International Inc. (NYSE: PM) has been campaigning to get international support for alternatives to cigarettes as well as developing its own alternatives, including heating tobacco. And Imperial Brands PLC ADR (OTCQX: IMBBF) (OTCQX: IMBBY) has established a stake in a cannabis biotech company as it explores the options for this alternative drug.
Tobacco’s Big Challenge
Big Tobacco currently faces an uncertain future. Decades of anti-smoking campaigns have had their desired effect in improving the health of consumers, with smoking levels dropping and the habit increasingly being excluded from public spaces. Vaping has accelerated this change, providing smokers with a less damaging, more socially acceptable alternative. That’s bad news for the tobacco companies, whose traditional consumer base is fading fast.
With these trends clearly unlikely to change, tobacco companies are exploring different avenues to stay viable. Lexaria’s new partner also recently invested $12.8 billion in the country’s leading vape manufacturer, JUUL Labs Inc. Rather than fighting against the trend and, in the process, possibly endangering lives, savvy companies are investigating alternatives to keep their businesses alive. One of the best options may be an alliance with bioscience.
Holding Out Promise
The quest for other alternatives to cigarettes has brought Big Tobacco to the door of biotech company Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP), and specifically Lexaria’s DehydraTECH technology, which enhances the performance of beneficial compounds in ingestible products across four categories: taste, smell, speed of action, and bio-absorption and bioavailability. This move holds out promise to both help nicotine-addicted smokers move away from unhealthy combusted tobacco and help one of the world’s largest tobacco companies identify a new revenue source.
The investment agreement outlines a milestone-based research and development program executed by Lexaria. The program will include a comprehensive series of clinical investigations of oral forms of nicotine delivery, utilizing the company’s patented DehydraTECH technology. Lexia’s new partner is funding the program with an initial investment of $1 million and an option for additional funding of up to $12 million through several phases of private financing. In exchange for the funding, the partner will receive a minority equity interest in Lexaria Nicotine and specific DehydraTECH license rights.
“Lexaria Bioscience is proud that, after careful selection, one of the world’s largest tobacco companies has chosen to fund research into DehydraTECH technology and potentially commercialize this technology for oral nicotine,” says Lexaria Bioscience CEO Chris Bunka. “This partnership will provide significant benefits to Lexaria Bioscience and its shareholders with a world-class R&D program and regulatory compliance process. We believe this company is the best corporate partner we could work with to truly make a difference in the lives of millions of consumers.”
More than Big Money for Big Innovations
The bioscience potential for nicotine delivery cannot be ignored, but this strategic partnership is about more than big money for big innovations. Rather, the creation of alternative delivery systems for nicotine is rooted in helping people kick the smoking habit and removing the risk of lung cancer and the impact of passive smoking on those around them. The aim of the agreement is to create a more socially acceptable and less disruptive way to consume nicotine.
Through the agreement, the tobacco company has been granted an exclusive license to use DehydraTECH technology for oral nicotine delivery forms in the United States and a nonexclusive basis to use the technology in international markets. Important for stakeholders of Lexaria, the company will receive a royalty from the tobacco company based on revenue generated from the sale of nicotine products containing DehydraTECH.
The agreement between Lexaria and the tobacco company has the potential to be a longer-term relationship. Lexaria Bioscience will at first retain a majority interest in Lexaria Nicotine. But the tobacco company has the option to acquire 100 percent ownership interest in Lexaria Nicotine commensurate with then-current fair market value. And Lexaria Bioscience has not sold any of its own equity to the tobacco company, remaining fully independent. With favorable research results, such an outcome could set up the tobacco company with a new way forward in tobacco products while providing Lexaria Bioscience with significant additional financial resources to fund growth in its hemp/CBD, pharmaceutical and other divisions.
Lexaria is hardly a big player in the world of bioscience, so why has a major player in its market chosen the company as a partner?
The answer lies in Lexaria’s proprietary DehydraTECH technology. This technology has already demonstrated its ability to mask unpleasant flavors and speed up delivery of orally ingested nicotine in successful previous animal studies. Imagine the possibility of satisfying a nicotine craving in something as simple and unobtrusive as a cup of coffee.
In addition to making bioactives more pleasant to consume, DehydraTECH makes them more effective once they are in the body. The human digestive system doesn’t absorb all of these bioactives when they are consumed. Smoking tobacco gives the user a faster, stronger “hit” because of the higher absorption rate through the lungs. DehydraTECH increases and speeds up the body’s absorption of bioactives such as nicotine in edible format, allowing a healthier way to increase absorption than smoking. This approach means nicotine products using DehydraTECH no longer need to be combusted or aerosoled and completely avoid lung absorption.
“Lexaria Bioscience has repeatedly demonstrated the powerful effects of its patented DehydraTECH technology for enhancing the palatability and speed of onset of orally consumed bioactive substances such as nicotine,” said John Docherty, president of Lexaria Bioscience. “Laboratory research to date on oral nicotine formulations has been quite encouraging. We are very excited to advance the clinical phases of our comprehensive R&D program together with [a Big Tobacco company] with a view to full commercial product development.”
New Directions for an Old Industry
Lexaria’s partner isn’t the only company in the industry adjusting to a world where tobacco is socially stigmatized. British American Tobacco Industries (NYSE: BTI) (OTC: BTAFF) has had more success in the vaping game. The company recently announced a new range of e-cigarette products, under the Vype brand. By refining the evaporating technology in its devices, the company has created what it believes will be a more satisfying consumer experience. This comes as part of a broader strategy in which the company is looking to offer consumers lower-risk tobacco products, improving the health of its customer base and the company’s public reputation. BTI recently released a report on its work in this area, highlighting the lengths it has gone to in offering alternatives to conventional cigarettes.
Philip Morris International (NYSE: PM) has made much of its agenda to provide alternatives to smoking. It has been working to convince medical authorities and world leaders of the benefits of other tobacco options — alternatives the company is developing. One of its creations is the IQOS heated tobacco system, which aims to provide the absorption benefits of inhalation while reducing the harm of smoking.
Imperial Brands (OTCQX: IMBBF) (OTCQX: IMBBY), another Big Tobacco company with a significant range of vaping products, is combining its vaping interests with investment in cannabis. It recently took an equity stake in Oxford Cannabinoid Technologies, a biopharmaceutical company focused on researching, developing and licensing cannabinoid-based compounds and therapies. This puts Imperial Brands in a position to approach alternatives to cigarettes from multiple directions.
As smoking declines, these investments in pharmaceutical science could be vital for the survival of tobacco companies and could generate new revenue streams for innovative biotech players.
For more information on Lexaria, please visit Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)
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