FDA proposed crackdown on flavored e-cigs puts Juul on notice

[September 13, 2018]  By Yasmeen Abutaleb and Chris Kirkham

WASHINGTON/LOS ANGELES (Reuters) - The U.S. Food and Drug Administration is considering a ban on flavored e-cigarettes from Juul Labs and other companies as it grapples with an "epidemic" of youth e-cigarette use that threatens to create a new generation of nicotine addicts, the agency's head said on Wednesday.

In a speech at FDA headquarters, Commissioner Scott Gottlieb said the agency would also revisit a policy that extended the dates for some manufacturers of flavored e-cigarettes to get FDA approval before selling their products. That could lead to removal of some major flavored e-cigarette brands, including the popular products made by Juul Labs Inc., if they do not address the issue to the agency's satisfaction.

"We see clear signs that youth use of electronic cigarettes has reached an epidemic proportion," Gottlieb said.

Manufacturers offer and market e-cigarette flavors that clearly appeal to minors, including candy and bubble gum flavors. The FDA said more than 2 million middle school and high school students used e-cigarettes in 2017.

The FDA is giving the five top-selling e-cigarette brands - Juul, Vuse, MarkTen XL, Blu and Logic - 60 days to provide plans for how they will mitigate sales to minors.

Juul owns about 72 percent of the U.S. market for e-cigarette sales, according to Wells Fargo. "Juuling," along with "vaping," has become a common term for e-cigarette use by teenagers on social media and at U.S. high schools.

Investors in Juul's competitors appeared to welcome the FDA announcement.

Shares of British American Tobacco, which owns the Vuse brand, closed up nearly 6 percent, while shares of cigarette-maker Imperial Brands PLC, which owns Blu, rose more than 3 percent. Shares of traditional cigarette maker Altria Group , which also owns the MarkTen brand, closed 6.6 percent higher, while Philip Morris International shares ended up 3.4 percent.

Wells Fargo analyst Bonnie Herzog, in a research note, said Juul appears "most at risk" from the crackdown because of its "strong appeal to youth and the FDA's comments on flavors."

She said Altria could be well positioned because it has a long history of dealing with youth access to its products and has "limited/mature flavor profiles relative to Juul."

MENTHOL VERSUS FRUIT MEDLEY AND CREME BRULEE

MarkTen's flavors, for example, include "menthol," "classic," and "summer blend," while Juul's flavors have included "fruit medley" and "creme brulee," recently shortened to "fruit" and "creme."

U.S. Food and Drug Commissioner Scott Gottlieb attends an interview at Reuters headquarters in New York City, U.S., October 10, 2017. REUTERS/Eduardo Munoz/File Photo

Gottlieb announced a number of steps the agency plans to take as part of a broader crackdown on the sale and marketing of e-cigarettes to minors. The agency issued 12 warning letters to companies that it says have deceptive marketing labels on e-liquids.

"We cannot allow a whole new generation to become addicted to nicotine," he said.

Juul Labs said it would work with the FDA and is committed to preventing underage use of its product. But spokeswoman Victoria Davis said "appropriate flavors play an important role in helping adult smokers switch."

The FDA moves come as it seeks to balance its approach on e-cigarettes, which can be used to wean lifelong smokers onto less harmful nicotine products, but also risk drawing a new generation to nicotine addiction.

"While we remain committed to advancing policies that promote the potential of e-cigarettes to help adult smokers move away from combustible cigarettes, that work can't come at the expense of kids," Gottlieb said.

The other companies also said they would work with the FDA on youth prevention efforts.

"We welcome FDA’s action today and look forward to sharing our thoughts about how to prevent and reduce youth use, an issue we have focused on for decades," Altria spokesman George Parman said in a statement.

Imperial Brands unit Fontem Ventures said it would work to further strengthen youth access prevention policies and procedures.

British American's R.J. Reynolds Vapor Company, said it will comply with the FDA request, adding that "youth tobacco prevention is a priority for our companies."

Logic Technology Development, owned by Japan Tobacco Inc, said it will demonstrate to the FDA "that Logic markets its products only to adults."

As part of its broader enforcement efforts, the FDA said it issued more than 1,300 warning letters and fines to retailers who illegally sold e-cigarette products to minors.

(Reporting By Yasmeen Abutaleb in Washington and Chris Kirkham in Los Angeles; Editing by Bill Berkrot)

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