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TO: CHAIRMAN'S ADVISORY CONFERENCE, HOT SPRINGS. ~2th May ~976 REPORT ON THE GROUP R & D CONFERENCEI MONTREAL 5 - 9 APRIL 1976 The following points and questions were raised" for consideration at Hot Springs: Be Modification to the assumptions on which the Smoking and Health Divisional Plan is based were suggested as follows: a) Although nicotine will be considered by some doctors to be less harmful than tar, there will be increasing recognition, by some medical authorities, that smoking is a nicotine dependent activity. This will, in part, condition attitudes to nicotine. b) There will be an increasing tendency to associate specific smoke constituents with particular diseases. c) Although medical authorities will continue to advise smokersnot to inhale, they will not be inclined to press for any specific developments such as products designed to limit inhalation. d) The chemical industry in general is now expected to sit on the fence in relation to new-smoking materials, although ICI and Celanese are expected to seek avenues for a more aggressive approach. e) Although product modifications will be seen by the anti-smokers as an indication of increasing success p a body of practical doctors will recognise these as progress in the direction they desire. f) The strategy of some anti-smokers is to wean smokers from cigarettes by encouraging the development of very low nicotine cigarettes. g) We shall be able to achieve technically, with all- tobaaco cigarettes, all that can be done with substitutes in smoking and health terms. h) Although no sudden breakthrough is envisaged to solve the smoking and health problem, scientific research will give rise to products seen to be healthier by some authorities. O Contd., O0 BATCo document for PFSFC 1 March 1999

- 2 - o 3. . . i) Further work on passive smoking will provide a basis on which dangers to non-smokers from current cigarette smoking may be alleged with some credibility. j) There will be medical advances in the treatment of lung cancer. Additions to the plan were suggested as follows: I. There is a requirement for more work on the effects of smoking. This applies particularly in the social and psychological fields, where it is felt that the benefits of smoking may well be identified. II. We should study how best to make ethical health claims. III. More effort should be devoted to nicotine and its analogues. There is a good case for carrying out short-term inhalation studies on nicotine for comparison with tobacco. Contra-indications should be further explored. The development of very low nicotine cigarettes for the susceptible minority already identified should be considered. IV. An intensive study should be made of passive smoking to pre-empt further attacks in this area and products modified, if necessary. The principle of appointing one or more independent advisers requires consideration. If the principle is agreed, how best to proceed? Attention is drawn to item 16 of the Group Research Notes : ° The existence of the published Hunter Committee Guidelines in the U.K. probably affects the legal and ethical requirements which would need to be met in other countries. However, there would clearly be conflicts of medical opinion between various countries. Historically, the treatment of additives demonstrated this, but it also demonstrated that, in the long term, adoption of standards in one country does influence standards in others. The Research Conference agreed to postpone further consideration of the "cross-over" experiment until the results of a TRC cross-over using cigarette and cigar tobacco was obtained. In the event of marketing substitutes, for example, this means that we shall not/ know all we could about relative risks until this experiment is done (about three years after starting). On the other hand it may not be considered worthwhile spending K300,000 or so until it is known whether a particular substitute is acceptable. I J o C7" Contd. __3 oo o BATCo document for PFSFC 1 March 1999

a o . u 10. - 3- The items on Smoking Materials are reproduced here: (These may be discussed under Hot Springs Agenda Item 8) (a) The work in B&W on developing non-combustible cigarette fillers is now complete. However, in order to keep open the options on non-tobacco smoking materials, which are available to the B.A.T. Group, it was agreed that the biological testing of the B&W variants and the further development of non-combustible filler should continue at Southampton. The meeting would not support a case for capital investment in semi- commercial plant at this stage. (b) The view on competitive tobacco substitutes is that NSM is currently more acceptable than Cytrel in, biological terms, in spite of its high carbon monoxide delivery. One, if not both, of these materi~is are currently being consumer tested in the U.K. (c) In the PRT-7~ project, an exercise is currently being planned to design a small 500 tons per annum plant. this will not necessarily be based on the Foudrinier type machine. It could lead to better designs of a big plant but, in particular, would give more freedom to all, if successful, to consider introducing PRT-71 with the original health orientated objectives. The Research Conference raises the question: Should B.A.T. Group consider acquiring a flavour house? This is suggested because of the obviously increasing importance of flavours in cigarettes.~.- Should the acute animal inhalation tests available at Southamp~ton be used for any ad-hoc product development? Should the tests be used? Would there be any demand for tests? If so where should they be set up? A report is expected in the U.S.A. indicating allergenic properties of smoke. This could be a very serious threat and would make the case against passive smoking more credible. It is hoped to report further at Hot Springs. It is suggested that some attempt should be made to answer the question: "What duty do we owe to our consumers to inform them with respect to our produots?" At the end Of the Conference, the Aims andObjectlves of the U.K. R&D programme weme re-examined in the llght of the discussions which had taken place. A number of conclusions were drawn:- Contd. O O C9~ Co BATCo document for PFSFC 1 March 1999

a) b) c) d) - 4- The role of central R&D was seen by the meeting to be concerned both with insurance aspects (anticipating outside research results, etc.) and with its contribution in providing scientific foundations on which Company R&D would build. The Biological Research programme might now be more directed towards the development of specific / products, but POlicy guidance is needed on the directions in which we should move, for example, to lead in health orientated, biologically tested cigarettes. So far, our central research has been concerned with providing options; should these now be taken up? So long as we are concerned merely with providing options, R&D are necessarily self- starters~ but more positive product development would require guidance and commitment from No.ls. Nevertheless, the defensive role of high quality research across a wide field should not be neglected. In particularp this enables us to refute allegations made based on poor quality research. The Aim on Smoking Materials, etc. was reworded as follows: To develop the options and the technology for the production of smoking materials having desirable subjective smoking characteristics and physical properties compatible with tobacco manufacture, while possessing improved and/or controlled smoke properties with optimisation of cost. The meeting felt it would be desi~ble to give indications of the time-scales involved in different approaches. The Aim of the work on interaction of smoke and the smoker was considered and after a full discussion was changed as follows: To establish in objective terms why people smoke, how they smoke, and the effect of product characteristics on smoker response in order that preferred cigarettes may be designed. e) Product design Aims were restated as: To advance the technical knowledge necessary to combine the components of cigarettes to produce predictable effects. C:D O c~ Contd..co ~r'l r',,..) BATCo document for PFSFC 1 March 1999

12. - 5 - f) In the process and engineering development field, it was agreed that a longer range approach should be adopted and the processing side particularly emphasised, although not to the exclusion of all machinery development. The Aim was changed to~ To pursue longer range developments in tobacco and filter processing and handling techniques so as to establish both methods andguidelines whereby the quality of the product can be improved, tobacco used more efficiently, greater control exercised over the packaged product and cost reductions realised. g) The remaining Aims were endorsed without modification. There was adiscussion of the revised position for patents which would follow if Millbank recommendations under item 11 were accepted. The proposals were welcomed by all. SJG:NW O G --4 CO L,4 BATCo document for PFSFC 1 March 1999

. 0 . . . So . PAYING.FOR CENTRAL RESEARCH In the past the research carried out by B.A.T.H.Q., has been paid for by B.A.T. in the U.K. The cost has been partly offset by contributions from Associated Companies as part of advisory fees, or in the case of B&W under a "Cost and Risk Sharing Agreement". In the current year this latter Agreement has meant that B&W are contributing less than Malaya, Switzerland or Hong Kong for example. It is now proposed that all R&D done by operating companies should properly be regarded as done for the Company and paid for by the Company concerned. The product from such R&D therefore would become the property of the operating company for exploitation anywhere. Member companies however would agree certain ground rules for the exploitation of such research product and for the exchange of information and avoidance. of unwanted duplication (See Appendix I). The R&D directed from the Centre calls for special consideration. Of the kotal budget of about £4 million some £2.5 million can be identified as research in support of general Group strategy (see Appendix II) while the remainder can be related to operating company objectives or is supportive of other Millbank services (See Appendix III). It is suggested that the identified Central Group research should be financed by a levy on sales by all Companies. This levy would amount to 0.15% Net Turnover. I£ is believed this method could have advantages because it would have acceptance by Authorities to treating this charge as a deduction for tax in the paying country, there would be more chance of obtaining Exchange Control approval to remit and adjustment for inflation would be automatic. It is essential to get proper financing of our longer range research. It may be that some structural change (e.g. the creation of a Group research company) might be useful in order to facilitate further the involvement of the major companies if this were desired. However it is hoped to get agreement in principle now with the major companies and commitment both to the aims of central research and the contributions involved (See Appendix IV). Enc: SJG=NW 11.5.76 O O C~ "-4 L3n BATCo document for PFSFC 1 March 1999

APPENDIX I I. 2~ . o o o . Marketing and consumer research, manufacturing improvements and product development techniques and methodology should be exchanged freely. Although the bigger facilities in the operating companies might be expected to make bigger inputs the size of these facilities is in proportion to company sales, weighted for market sophistication, and all companies will therefore benefit appropriately. Product Developments, if successful, will be reflected" in products. Successful brands are the desired outcome and compensation willaccrue to the producer in licensing such brands to users. Product and process developments which are patentable should be protected by the inventors and such inventions become licensable to users inside and outside the Group. There should be a general agreement between all Tobacco companies in the Division to give first options, lead times and "most favoured nation" treatment to other companies in the Division with respect to product and process patents. It would also be agreed that exclusive licences will not be granted to competitors. Machinery developments which are patentable may be licensed exclusively to appropriate machinery producers but the interests of the Division would be protected in order to give all member companies preferential or 'no less favourable' terms. For all patents the inventing company would protect in such countries as it sees fit but &n" all cases Divisional H.Q. should be consulted and suitable arrangements made to assign or protect in such other countries as may be required. In order to eliminate unnecessary duplication and to make R&D as effective as possible the companies will agree to keep each other informed on programmes, to exchange methodology and to pool results subject to patent protection mentioned above. (:D C~x OO L/] BATCo document for PFSFC 1 March 1999

APPENDIX II attached. are included under Biological Reseacch and Information. these are deducted the total Group research offered for recovery is £2,444,000 under the five headings: The Research & Development Department Budget is In this Tobacco Research Council costs of £156,000 If (I) Biological Research and Information (2) Product Research (3) Smoker Research (4) Process and Engineering Research (5) New Smoking Material Research Description of the aims and scope of the work involved. The aims have all been reviewed and agreed at Montreal in 1976. (1) Biological Research and Information Ai___mm: To put the Group in a position to understand the relevance and importance of advances made any- where in this field and to establish methods whereby the biological activity of tobacco smoke from different products can be compared using tests which may be related to diseases or benefits attributed to smoking in order to guide general product development, investment or the development of specific products. This has necessitated setting up biological facilities using small animals as well as other test procedures. The in-house animal work to date has been concentrated successfully on producing measured doses of smoke which are inhaled by animals and reach" the target organs in sufficient• quantity. As a consequence, test procedures are available which may be related to specific diseases. It is believed that BAT are now as far advanced in some techniques as any others and we have sufficient basic knowledge to engage in dialogue on an equal footing with Government agencies. While the main thrust is product orientated, it is intended to continue research work into the effect of smoke on animals and biological systems in order properly to assess the value of the work of others and to further our own procedures. External contract work covers both medium and long term mouse skin painting and is designed to guide the principles upon which product design should be founded. The studies cover the various forms of reconstituted tobacco and tobacco substitutes and are also intended to counter any suggestion that nicotine " could be related to carcinogenicity. The examination of the possible health consequences arising from the use of additives on tobacco products is also an important activity and certain additives are subject to detailed study. Con td. (ZD O o~ (X) L/l BATCo document for PFSFC 1 March 1999

- 2 - Appendix II The whole programme, while directed by U.K. staff is greatly assisted by the input of the various Company R & D laboratories through the Biological Research Meeting which is particularly concerned with priorities. Work done for specific company product developments or for specific company problems has, .in the past, been charged directly, where this was possible. There is continuing support for the work of TRC; which is being directed towards the examination of cardio- vasculardisease. Finally, an important aspect of the whole work is the provision of a soun~ information service. (2) Product Research Ai___mm: The advancement of technical knowledge necessary to combine the components of cigarettes to produce predictable effects. To this end, it is necessary to understand the ways which are available for controlling the production~ composition and filtration of smoke in any required direction. It is also necessary to establish the desired directions in which these controlling influences should move. Work is, therefore, in hand with the objective of understanding and explaining the effects of tobacco blend, cigarette paper and filters, individually, and in combination, on the detailed physics and chemistry of smoke. Associated with this is the use of sophisticated techniques for identifying and quantifying tobacco and smoke constituents. It is necessary to find out what effects are important in consumer terms. One method mf approaching this for example has been to examine in great detail the products on a particular market and identify patterns which uniquely describe competitors' products. The development and advance- ment of sensory assessment techniques is fundamental to approaches in this area, including passive smoking. There is also an increasing pressure from many authorities to measure and report the delivery of increasing numbers of smoke constituents, either on the packet or in league tables. Means of dealing with this and anticipating future developments are necessary. The influence of micro- biological control, factory hygiene and pesticides on cigarettes and the study of nicotine and the search for alternatives are projects arising wholly or in part from this area. The concept of total product design is now well kRown. Contd. CD Cr~ (Do tJn "-,d BATCo document for PFSFC 1 March 1999

- 3 -- Appendix II 3. Smoker Research• Aim: To establish, in objective terms, why people smoke, how they smoke and the effect of product characteristics on smoker response, in order that preferred cigarettes may be designed. In order for any effective studies to be carried out on smokers, it has first been necessary to ensure the free and willing co-operation of a large number of people, who are prepared to act as experimental subjects. A large proportion of the staff at G.R & D.C. are taking part in the experimental programme. It has been necessary to develop reliable objective ways of observing and measuring how people smoke and to couple with this the construction of equipment for reproducing smoking patterns. This has opened the door to finding out the ways in which different smokers smoke a given cigarette and the factors which influence this behaviour, i.e. personality, sex, motivation, etc. It has also led the way to determining the manner in which smokers modify their habits when changing from one product to another of different construction and to their compensatory reactions. The rewards of ~moking which are sought by smokers range from the purely psychological to a variety of physio- logical effects, some of which may be related to personality. The use of electro-encephalography to study the effects of smoking on brain activity (particularly alpha waves) is leading to the better understanding of these effects and might point to their influence on preference. 4. Process and Engineering Research ° Ai..__mm: To pursue longer range developments in tobacco and filter processing and handling techniques, so as to establish both methods and guidelines whereby the quality of the product can be improved, tobacco used more efficiently, greater control exercised over the packaged product and cost reductions realised. The work on process and engineering which is done for the whole Group rather than any particular company, has in the past been both of a long and short term nature. On the primary processing side, there is a continuing demand for knowledge, understanding and assistancewith the imple- mentation of methods for expanding tobacco. Recent product developments have pointed to possible advantages of these materials in low delivery cigarettes, as opposed to the simple use in cost saving~ for example. The developing need for specifying cigarette deliveries, particularly the labelling of packages, has meant that work on controlling these properties through the leaf plant and primary process is of increasing importance. New equipment design has also been called for. CD CD C~ "-4 CO • Contd. tJn Cr) BATCo document for PFSFC 1 March 1999