The U.S. Food and Drug Administration on Thursday banned Juul Labs Inc. from marketing its products in the United States and ordered the company to remove all existing products from the market.
The products in question are a Juul vaping device and four types of pods; The regulator said in a statement that Virginia flavored tobacco pods with nicotine concentrations of 5.0% and 3.0%, and menthol-flavored pods with nicotine concentrations of 5.0% and 3.0%.
The action was expected following a Wall Street Journal report on Wednesday.
“Today’s action represents further progress on the FDA’s commitment to ensuring that all e-cigarettes and e-nicotine delivery system products currently marketed to consumers meet our public health standards,” FDA Commissioner Dr. Robert M. Califf said in a statement.
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Juul has been under regulatory scrutiny since fruit flavors and marketing were blamed for the high rate of teen vaping nearly four years ago. The Food and Drug Administration had already banned it from selling flavors like creme brulee, which has proven popular with underage smokers.
Marketing denial orders issued by the Food and Drug Administration (MDOs) do not restrict individual consumer possession or use of Juul vapes, but the company can no longer distribute them to retailers. The Food and Drug Administration said the company’s applications “lack sufficient evidence regarding the products’ toxicological profile to demonstrate that marketing of the products would be appropriate to protect public health.”
Some of the company’s study findings “raised concerns because insufficient and conflicting data — including genotoxicity and potentially harmful chemicals leaching from the company’s e-liquid capsules — were inadequately processed and prevented the Food and Drug Administration from completing a full toxicity study.” “Assessment of the risks of products mentioned in the company’s applications,” the agency added.
Owen Bennett, an analyst at Jefferies, said Wednesday that the news was a “significant negative reading” for Altria Group Inc. , which paid $12.8 billion in 2018 to acquire a 35% stake in Juul that valued the company at $35 billion. Since then, Altria MO,
It reduced the stake value to $1.6 billion as of March 31.
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The FDA’s move comes at a time when US cigarette volumes are under pressure from deteriorating economic conditions and a shift to low-risk products, or RRP, he wrote.
“Altria’s outlook is made more challenging due to its nearly 50% cigarette share,” Bennett wrote in a note to clients. Meanwhile, the US Food and Drug Administration is looking to introduce measures (such as banning menthol cigarettes in the US) to speed up the switch to RRP. Altria is in a very difficult position in this regard as it needs to at least take its fair share of the RRP. ”
But in a new memo published Thursday, Bennett said he expects an appeal because the ban is based on insufficient toxicological evidence and not youth use, as he had expected.
“Therefore, we believe there is a good possibility that Juul will be able to raise the suspicion in court that the FDA either did not adequately process its toxicology request, or that it should be allowed to process the perceived information “Insufficient and conflicting data,” he wrote.
“This could then mean final approval of the app, with potential modifications, or as we also suggested yesterday, giving Juul time to associate the app with a new app with Juul2.”
Bennett cited other instances of residencies granted, such as when Turning Point Brands acquired MDOs for its e-steam products in September 2021 that were canceled after a court challenge.
“Furthermore, of the 262 MDOs listed on the FDA’s website under the current process, seven have been rescinded in whole or in part, and eight have been granted residencies either by the court or by the agency itself,” he wrote.
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Altria shares trimmed its early gains by as much as 2.6% to rise only 0.1% in morning trade. The stock lost more than 7% of its value on Wednesday, and is down more than 12% in the year to date, while the S&P 500 SPX,
down 21% and the Dow Jones Industrial Average DJIA,
It lost 16%.
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