Altria Group, Inc. · NYSE:MO

Altria — TSRC 2018

14 slides from Altria's conference presentation, Sep 17, 2018

  1. Slide 1: Tobacco Industry Efforts To Reduce Nicotine

    Tobacco Industry Efforts To Reduce Nicotine Lionel DeLoach Sr. Director Smokeable Product Development Altria Client Services l Lionel DeLoach l September 17, 2018 l Final l TSRC 2018 l 1

  2. Slide 2: Background

    Background  FDA issued the ANPRM for a “Tobacco Product Standard for Nicotine Level of Combusted Cigarettes” on March 16, 2018.  FDA has expressed interest in reducing nicotine levels to 0.3, 0.4, or 0.5 mg/g in filler; about a 98% reduction from current levels.  FDA has suggested that such level

  3. Slide 3: Technical Achievability Considerations

    Technical Achievability Considerations  Commercial Feasibility  Sensorial Acceptability Altria Client Services l Lionel DeLoach l September 17, 2018 l Final l TSRC 2018 l 3

  4. Slide 4: FDA Proposed Solutions

    FDA Proposed Solutions Agronomic Practices Tobacco Blending and Curing Chemical Extraction Combining Solutions Genetic Engineering Altria Client Services l Lionel DeLoach l September 17, 2018 l Final l TSRC 2018 l 4

  5. Slide 5: Agronomic Practices

    Agronomic Practices  Seedling selection - Impractical and inaccurate  Increased plant population - Adverse effects on quality and production practices  Eliminate topping of tobacco - Adverse effects on quality and production practices  Add chemicals to influence nicotine synthesis - Requires USD

  6. Slide 6: Tobacco Blending and Curing

    Tobacco Blending and Curing  Replace “nicotine-rich” species with lower nicotine species - Nicotiana rustica vs Nicotiana tabacum  Utilize lower nicotine tobacco types - Replacing Burley and Bright with Oriental  Blend tobacco leaf from lower stalk positions - Impractical and unsustainable  Toba

  7. Slide 7: Chemical Extraction

    Chemical Extraction  Water-based extraction (1950’s) - Lab experiments reported up to 95% nicotine reduction - Abandoned due to resultant sensorial issues  Solvent-based extractions (1960’s) - Lab experiments reported up to 90% nicotine reduction - Abandoned due to resultant sensorial issues  Ste

  8. Slide 8: Chemical Extraction

    Chemical Extraction  Super Critical Fluid Extraction (SCFE) (1970’s – 1990’s) - Non-selective removal of multiple compounds (nicotine and flavor)  PM USA launched ‘Next’ and other brands using SCFE tobacco in early 1990's and discontinued marketing in 1992 - 1988-1989: Consumer studies • Feedback:

  9. Slide 9: Combining Solutions

    Combining Solutions Agronomic Tobacco Chemical Technical Practices Blending/Curing Extraction Achievability Combination is not a plausible assumption  No data currently available to prove commercial achievability  Potential complicating factors - Unknown sensory impact - Unknown HPHC profile Altri

  10. Slide 10: Genetic Engineering

    Genetic Engineering  Genetic engineering conceptually appears to be the most promising candidate among existing technologies  Currently, there are no publically available tobacco varieties that meet FDA’s suggested nicotine levels Reported Nicotine Levels for Research Tobaccos - Conventional Breed

  11. Slide 11: Genetic Engineering Concerns

    Genetic Engineering Concerns  Poor leaf quality  Intellectual property rights  Genetically modified tobacco varieties (GMO) may require USDA deregulation  Segregation of GMO tobaccos from conventional tobaccos  State Minimum Standard Programs may need to adjust requirements for commercial produ

  12. Slide 12: GMO Tobacco - Vector 21-41

    GMO Tobacco - Vector 21-41  Commercial scale production has not been validated  Vector 21-41 is believed to be a major component of SPECTRUM® cigarettes  Available research indicates poor taste negatively influences adult smoking perception and behavior (S. Dolan et.al., SRNT abstract, 2018)  Na

  13. Slide 13: Conclusion

    Conclusion  A product standard of 0.3-0.5 mg nicotine/g filler is currently not technically achievable - Commercial feasibility and sensorial acceptability  Combination of different solutions is not yet proven to meet the FDA’s suggested nicotine levels  GMO tobaccos could be a possible solution,

  14. Slide 14: Further data and details

     Further data and details: ALCS’s comments to the FDA’s ANPRM on a Tobacco Product Standard for Nicotine Level of Certain Tobacco Products. http://www.altria.com/About-Altria/Federal-Regulation-of- Tobacco/Regulatory-Filing Altria Client Services l Lionel DeLoach l September 17, 2018 l Final l TSRC

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