BAT quits nicotine inhaler to focus on vaping

LONDON (Reuters) - British American Tobacco (BAT) BATS.L has quit plans to market a nicotine inhaler called Voke to focus on consumer items like e-cigarettes rather than health products.

A man walks past the British American Tobacco offices in London, Britain October 21, 2016. REUTERS/Stefan Wermuth

The move reins in BAT's earlier, very diversified approach to cigarette alternatives, which are being pursued by all big listed tobacco companies including Philip Morris International PM.N and Japan Tobacco International 2914.T as a growing health consciousness reduces smoking rates.

BAT’s decision to narrow its focus comes after manufacturing issues delayed the launch of Voke, which was the first product approved by Britain’s drug regulator to be prescribed as a medical aid to quit smoking. It will now be marketed by BAT’s partner Kind Consumer, which originally developed the product, the two companies said on Thursday.

BAT, which is in talks on a $47 billion takeover of U.S. peer Reynolds American RAI.N, said its strategy on next-generation products would now focus on its Vype e-cigarette and its glo tobacco-heating product, which both create an inhalable vapor that many scientists say is less dangerous than smoking.

E-cigarettes have ballooned into an $8 billion market, according to Euromonitor International, more than three times that of nicotine-replacement therapies such as gum and patches sold by pharmaceutical companies including GlaxoSmithKline GSK.L.

Voke, like e-cigarettes, mimics the look and feel of traditional cigarettes but uses a pressurized canister with aerosol that is breath-activated, rather than using a battery to heat nicotine liquid.

BAT’s move highlights how far e-cigarettes have come in recent years, in both sales and design.

“The first generations of these products have set a high water mark that all subsequent products must now beat,” said Morningstar analyst Philip Gorham.

BAT, the world’s second-biggest international tobacco company, said it would transfer manufacturing, intellectual property and know-how assets to Kind Consumer, in return for deferred, contingent payments. Financial details were not disclosed.

Kind said in a joint statement with BAT that it would seek a new global partner, or possibly several regional partners, to accelerate distribution of the inhaler this year.

Consort Medical CSRT.L, which was to supply the inhaler, said on Tuesday that BAT had ended its supply agreement after the product failed to launch in 2016, but said it remained in discussions with BAT and Kind about the future of the product.

Reporting by Martinne Geller in London; editing by Jason Neely and Susan Fenton