Juul and Juul pods will now move into the substantive review phase of the premarket tobacco product application (PMTA) process. Juul Labs has received acceptance and filing letters from the U.S. Food and Drug Administration (FDA) for its battery and nicotine cartridges, the company announced Tuesday.
Juul Labs filed the applications last month and all PMTA applications are due to the FDA by Sept. 9. The company’s submission includes “comprehensive scientific evidence for the Juul Device and Juul pods in Virginia Tobacco and Menthol flavors at nicotine concentrations of 5 percent, 3 percent and information on data-driven measures to address underage use of its products.
“We will continue to follow the PMTA process and look forward to this next step as the FDA commences substantive review of the application,” said Juul Labs Chief Regulatory Officer Joe Murillo in a statement.
Juul Labs filed six trademark-infringement lawsuits in five states against shop owners it says are using the Juul name to sell products that are “fake, copied, and non-genuine versions of Juul Products and related packaging.”
The company said as many as 20 suits will be filed in the next 60 days in an effort to stop the “worst offenders” among retailers selling counterfeit e-cigarettes, part of an effort to shore up its bid with regulators to stay in the U.S. market, according to an article on Bloomberg.com.
The new legal round follow some four dozen lawsuits filed in July against companies Juul says are copying its patented designs for vaping cartridges. The U.S. International Trade Commission is considering a Juul request to block imports and sales of imported, unauthorized cartridges.
The trademark suits accuse companies of selling counterfeits and “gray market” products, meaning they were made for overseas markets but brought into the U.S. The lawsuits were filed in Alabama, New Hampshire, New York, Tennessee, and Texas, according to the article.
The suits are part of Juul’s “global enforcement program directed at disrupting the illicit trade of black-market vapor products to create a more responsible marketplace for current adult users while addressing under-age use,” the company said in a statement.
Juul is seeking orders that would halt sales, the profits from the unauthorized sales, and $2 million for each trademark violation.
Juul Labs and its Canadian affiliate, Juul Labs Canada, have filed litigation against a global network of entities and individuals that illegally sourced and resold authentic Juul pods and devices worldwide.
Among the main targets of its legal action are the purveyors of the PodVapes and PodMaster websites, entities based in Canada that acquired Juul products from the U.K., Canada and the U.S. to ship all over the world.
PodVapes, for example, acquired authentic Juul pods from Canada and the U.K. in nontobacco and nonmenthol flavors and shipped them into various states in the U.S. to be illegally resold, according to Juul Labs.
“Through investigations, we have confirmed that PodVapes actively sells diverted Juul pod packs into the U.S.,” Juul Labs wrote in a statement. “PodVapes also shipped Juul devices that were explicitly developed for non-U.S. markets into the U.S. in violation of FDA laws and regulations.”
Juul Labs says evidence of this illicit activity first started to emerge in February 2019. While sales of diverted products were first noticed in the markets of New Zealand and Australia by websites facing those countries, the sales quickly spread to websites facing the U.K. and U.S. and, most recently, Canada.
“As Juul Labs continues to reset the category, it is imperative that the company acts as a responsible partner to regulators and other stakeholders around the world, wherever our products are sold,” Juul Labs stated. “We are committed to aggressively going after bad actors in the vapor category and helping to ensure a responsible marketplace for adult smokers seeking legal alternatives to combustible cigarettes.”
Juul Labs has submitted a Premarket Tobacco Product Application (PMTA) to the U.S. Food and Drug Administration (FDA) for the company’s Juul system, an electronic nicotine delivery system (ENDS) product. The company’s submission includes comprehensive scientific evidence for the Juul device and Juul pods in Virginia Tobacco and Menthol flavors at nicotine concentrations of 5.0 percent and 3.0 percent, as well as information on its data-driven measures to address underage use of its products.
With its PMTA submission, Juul Labs has provided a scientific foundation for the FDA to evaluate whether these products are “appropriate for the protection of the public health” with respect to the risks and benefits to the population as a whole. The application includes detailed scientific data from over 110 studies totaling more than 125,000 pages evaluating the product’s impact on both current users of tobacco products and nonusers, including those who are underage.
As part of the PMTA process, Juul Labs has built a comprehensive research program focused on examining the public health impact of the Juul system. This includes research addressing the harm reduction potential of the product, including its ability to convert adult smokers from combustible cigarettes. This research is supplemented with information on the controlled design and repeatable manufacturing processes associated with the Juul system, as well as data-driven measures to limit unintended consequences to the overall population, including initiation among nonusers.
“In order to earn a license to operate in society, we need to be a science and evidence-based company, engage in open and transparent dialogue with our stakeholders, and take methodical and responsible actions to advance the potential for harm reduction for adult smokers while combating underage use. Our PMTA submission is a key part of that approach,” said Juul Labs CEO K.C. Crosthwaite.
“Juul Labs has committed all necessary resources to deliver the best possible PMTA based on rigorous scientific research and data-driven measures to address underage use,” said Joe Murillo, chief regulatory officer at Juul Labs. “We respect the PMTA process and believe it is the right forum to determine the role ENDS products can play in transitioning and completely switching adult smokers from combustible cigarettes to potentially less harmful alternative products while combating underage use.”
Late last year, the company, under Crosthwaite’s leadership, committed to resetting the vapor category and seeking to work cooperatively with regulators, legislators, attorneys general, public health officials, and other stakeholders to combat underage use and transition adult smokers from combustible cigarettes. As part of that process, the company reduced its product portfolio, halted television, print, and digital product advertising, built up its science and evidence-based capabilities, and supported the U.S. Administration’s final flavor policy for ENDS products, while taking a methodical approach to its global presence.
Juul Labs has built up its science and evidence-based capabilities and will use its research and data to explore additional pathways in other countries. The company will continue to share its research with regulators and the public health community globally through peer-reviewed journals, conferences, and one-on-one meetings.
Teresa Sebastian, an executive with financial and compliance expertise, will join the Juul Labs board. Sebastian is CEO of The Dominion Asset Group, an early-stage investment group focused on revitalizing urban areas, according to a story on Bloomberg.com.
Sebastian will serve as an independent director and head up the vapor company’s audit committee, according to Juul Labs CEO K.C. Crosthwaite, according to Bloomberg. Sebastian is the first Black member of the company’s eight-person board. Juul added former Canadian Health Minister Rona Ambrose as an independent director in May, making her its first female board member, according to the report.
Crosthwaite also said he will become chairman at the board’s request, succeeding co-founder Adam Bowen, who will head up the product committee. Bowen became the company’s first chairman when Crosthwaite joined the company last fall, according to Bloomberg.
“We are all aware that our company is entering a critical period,” Crosthwaite said. “With the support and oversight of our increasingly robust board, we will deliver our first PMTA submissions to the FDA, while continuing the work of combating underage vaping and transitioning adult smokers all around the world from combustible cigarettes.”
Crosthwaite said in the email that Sebastian will help Juul ensure it has financial discipline, according to Bloomberg. She serves on two other boards and teaches courses on corporate compliance, legal risk management and accounting at the University of Michigan and Vanderbilt University.
Juul Labs has filed its third action with the U.S. International Trade Commission (ITC), directed at all importers of unauthorized “Juul-compatible pods” that copy Juul Labs’ patented product designs without authorization.
The action seeks a general exclusion order barring the importation of any infringing, unauthorized pod-based product designed to be used with the Juul System, including compatible flavored pods and refillable pods, effectively eliminating a sector of illicit products that seek to circumvent federal policy, can present additional health and safety risks to adult consumers, and undercut underage-prevention measures.
Additionally, Juul Labs is asking the ITC to issue orders stopping the distribution, marketing, and sale of all such products already in the country.
This patent enforcement action builds off previous actions Juul Labs pursued at the ITC, targeting a broad range of importers of unauthorized Juul-compatible products, including Eonsmoke and Ziip Labs. According to Juul, past actions have successfully resulted in stopping the ongoing importation of more than 40 brands of illicit and unauthorized Juul-compatible pods and products.
With this new action, Juul Labs says it seeks an even larger impact with a remedy that will not only bar the pod products named in the complaint but will also bar all other infringing pod products that copy Juul Labs’ patented designs.
It was the American Dream come true. In 2005, two frustrated smokers who had met at Stanford University developed an e-cigarette called Ploom and, two years later, started a business by the same name. In 2015, after the sale of Ploom and a name change to Pax Labs, they designed the Juul and established Juul Labs in San Francisco.
The novel product was different from other vapor devices on the market at that time. Resembling a USB stick, the Juul looked sleek and discrete. It was made for easy, intuitive use. The cartridge-based system worked with nicotine salt instead of free-base nicotine thus providing the user with a level of satisfaction comparable to that of combustible cigarettes. It also came with one of the highest nicotine contents among vapor products. Juul was a product with disruptive potential.
What followed was a story of rapid growth, the fairytale-like rise from a small company to a major player in the world’s largest vapor market that seemed too big to fail. Launched a year before the U.S. Food and Drug Administration (FDA) finalized its policy for regulating e-cigarettes as new tobacco products in 2016, Juul could develop with virtually no federal oversight. By the end of 2017, Juul became the most popular e-cigarette in the U.S. market. It was said to have revived the stagnating U.S. vapor market and became so popular that “Juuling” became a verb.
Competitors began to mimic the product’s sleek design and nicotine salt-based pod system. According to statista.com, the brand accounted for 82.9 percent of U.S. nicotine vapor sales in 2019. The company grew from 200 employees in 2017 to 3,000 in April 2020. Privately held, it was valued at $15 billion in July 2018. A few months later, in December 2018, U.S. tobacco giant Altria bought a 35 percent stake in Juul Labs for $12.8 billion. According to Wells Fargo, the deal valued Juul Labs at $38 billion. At the time, the company had an annual revenue of approximately $2 billion.
Yet soon after Altria’s entry, the tide began to turn. The company faced intensifying scrutiny from federal regulators and was flooded with legal challenges. With the colorful product design, discrete shape and a large variety of appealing flavors of its product as well as youth-oriented imagery and themes in its marketing, Juul Labs was held responsible for the steep increase in vaping among U.S. youth, which the U.S. Surgeon General in December 2018 labeled an “epidemic.” According to the 2019 National Youth Tobacco Survey, 5.3 million high school students were e-cigarette users, up from 3 million in 2017. With a share of 59.1 percent among high school vapers, Juul was by far the most popular brand among youths in 2019, the survey said. Something had gone wrong along the way for Juul.
“I think the crucial mistake Juul made was in being too careless about its marketing and its controls over who could get hold of the product,” says consumer staples specialist Jon Fell, principal at Ash Park, a financial analysis group. “Despite supposedly closely studying the history of the tobacco industry, Juul didn’t learn the right lessons, and the consequence is that a very successful product—with the potential to create a lot of public health benefits—became mired in a ‘youth use’ controversy which now threatens to drag the whole business under.”
Under attack
Claims put forward against Juul are manifold. The company was scolded for making unsubstantiated claims that its product helps users stop smoking and is safer than cigarettes, for increasing addiction with its high dosages of nicotine salts, and for its aggressive marketing to teenagers.
By Dec. 31, 2019, Juul Labs was a defendant in an estimated 340 legal cases. Several class action suits have been filed. There are complaints for damages, and on Feb. 25, 2020, 39 U.S. states announced an investigation into the marketing and sales of Juul vapor products. More lawsuits are to be expected.
Considering this negative outlook, Altria in October 2019 announced it had written down its investment in Juul by more than a third, recording a $4.5 billion pretax charge against its third-quarter earnings. In late January 2020, the cigarette maker again slashed the value of its investment by another $4.1 billion, citing mounting lawsuits against Juul Labs. Altria also revealed that it had revised the terms of its agreement with Juul. The tobacco firm said it would continue to help Juul navigate regulatory affairs but would discontinue all other services that were part of the original investment agreement.
Instead, Altria emphasized the U.S. rollout of iQOS and how this made its reduced-risk products (RRP) platform complete. One month later, Altria’s CEO Howard Willard said that he was “highly disappointed” in the performance of the company’s Juul investment. In April, Willard stepped down after 28 years with the company.
“I don’t think Juul was ever worth $38 billion, and Altria buying a 35 percent stake in the business for that price was one of the worst blunders I’ve ever seen a company make,” says Fell. The high market share assumed for Juul, he explains, related to scanner data for pod-based systems sold in a relatively small universe of convenience outlets. “But if you include all U.S. outlets and all vaping devices, including open systems, Juul’s share is much lower: around 42 percent when Altria bought its stake, and now around 39 percent—and down from a peak of 47 percent in Q3 2019, according to Altria.”
Fell believes it is sensible for Altria to have a portfolio approach to its RRP platform, which also includes nicotine pouches and traditional moist snuff products. “But I think Altria made a colossal mistake paying what it did for its Juul stake, and now Howard Willard has paid the price by departing the company,” he says. “It will be very hard, perhaps impossible, for Altria to make a good return on its initial Juul investment, but now the best it can hope for is to help Juul navigate the regulatory challenges it faces.”
In April, the Federal Trade Commission filed a complaint to force Altria to sell its stake in Juul Labs, alleging that the two companies had entered a series of agreements that eliminated competition in violation of federal antitrust laws.
Jon Fell
A streamlining exercise
Under pressure from regulators, Juul began to make internal changes. In October 2018, it pulled all flavors deemed attractive to youths, such as mango, fruit medley and creme brulee, from U.S. retail stores, a measure that had little effect on overall sales, a study by the American Cancer Society from April 2020 showed: Sales of the remaining menthol and mint flavors doubled while tobacco-flavored products also experienced a significant rise in popularity.
In November 2019, Juul announced that it would also end sales of its mint-flavored pods. The company halted all broadcast, print and digital advertising in the U.S. and replaced its CEO, Kevin Burns, with K.C. Crosthwaite, an experienced Altria executive who had overseen the company’s expansion into cigarette alternatives, in September 2019. Several top executives left the company in October 2019 while the two co-founders stepped down from their positions of chief product officer and chief technology officer to take on advisory roles. In January 2020, the company named a “transformation officer.”
To prevent its product from being removed from the market, Juul Labs and other e-cigarette manufacturers must retrospectively submit a premarket tobacco product application (PMTA) to the FDA by Sept. 9, 2020. Industry stakeholders have raised concerns about the success of Juul’s PMTA.
While the stream of legal challenges, regulations and scandals does not yet pose an existential financial threat to Juul, it might negatively influence the surrounding social environment in the context of which regulators act, thus putting pressure on them to not approve the devices, a lawyer told Time.
Fell is more optimistic. “Juul is putting a massive amount of resource into its PMTA application, and I think they will make it in a way which seeks to address the youth-use issues,” he says. “Given the baggage they bring, it will probably be a very difficult process. But in the end, the FDA’s PMTA decisions have to be evidence-based, and if Juul files an application that includes enhanced user age verification measures and more limited flavors, it could be very difficult for the FDA to turn down. But it could be a long process, and I wouldn’t rule out legal challenges.”
Scaling back international expansion
Meanwhile, Juul Labs has embarked on a strict cost-saving and restructuring program. In recent years, the e-cigarette company had tried to expand its business overseas, entering several EU markets including the U.K., France and Germany, and Russia, Ukraine and Southeast Asian markets.
Credit: Michael Fallon
In May 2020, the company announced that it would end operations in South Korea, a year after it had entered the market with a product portfolio specifically developed for the country. There were also reports that the company would soon exit Austria, Belgium, Portugal, France and Spain. The news came shortly after Juul had announced that it would cut between 850 jobs and 900 jobs.
“I think there are a lot of reasons for Juul exiting various international markets, and the U.S. success was always going to be difficult to replicate,” Fell points out. “In the first place, I think talking up Juul’s international potential was one of the ways in which the owners of the business sought to get a higher valuation. But in many international markets, Juul faced significant competition from companies with powerful distribution. Because of its U.S. success, Juul also had to be sold at a price level which was quite high for several international markets—otherwise it ran the risk of the product being diverted back to the U.S. By the time Juul started to move more international, the U.S. youth use furor had already reached such a pitch that it also created quite a hostile public relations environment, sometimes with unhelpful regulatory consequences, such as a ban of Juul in Israel.”
Expansion into Asia was a key growth strategy for Juul. In China, Juul sales stopped shortly after the launch in September 2019, and in November the Chinese government effectively banned the online sales of e-cigarettes. “I think they will struggle [in China] unless they can find a good distribution partner, and also find a way to make a product which is affordable for the local market without running the risk of it being diverted to the U.S. I think Chinese vaping companies will provide tough competition in this region,” says Fell.
In the U.S., the company will move its headquarters from San Francisco to Washington, D.C., reportedly to be closer to regulators and to distance itself from “Silicon Valley’s growth-at-all-costs culture.”
“I think a certain arrogance in the Silicon Valley culture was responsible for a portion of Juul’s problems but also part of its success,” says Fell. “The company will probably become more conservative following the latest moves, and that might be necessary, but will it be able to maintain the spirit and culture of innovation which will be necessary if it is to succeed over the longer term? Five years from now, I expect Juul to have an important but perhaps smaller portion of a U.S. vaping market which, I hope, is itself considerably larger than it is now. I think its international business is likely to remain relatively small unless it can find a partner to help with distribution.”
Lawmakers in the U.S. House asked the U.S. Food and Drug Administration (FDA) to ban Puff Bar. The disposable device is the fastest-growing vapor product on the market and has quickly replaced Juul as the vape of choice among young people, according to a story in The New York Times.
The disposable devices come in more than 20 flavors, among them piña colada, pink lemonade, watermelon and O.M.G. Puff Bar, which launched last year, has been the key beneficiary of an FDA loophole allowing flavors in disposable devices. Based on data used only for tracked channels, which include convenience stores and some other retailers but not online sales or vape shops, Puff Bar sales have consistently been over $3 million a week since April, with volumes now over 300,000 sticks per week.
“Puff Bar is quickly becoming the new Juul,” Rep. Raja Krishnamoorthi, Democrat of Illinois, wrote in a letter to the F.D.A. on Monday. Mr. Krishnamoorthi, the chairman of the House Subcommittee on Economic and Consumer Policy, accused the e-cigarette company of exploiting the coronavirus to sell its products to schoolchildren.
To make his case, the lawmaker included a copy of a Puff Bar advertisement featuring a photograph of a bedroom, with the words: “We know that the inside-vibes have been … quite a challenge. Stay sane with Puff Bar this solo-break. We know you’ll love it. It’s the perfect escape from the back-to-back zoom calls, parental texts and WFH stress.”
Mr. Krishnamoorthi said that “this advertisement is designed to convince children home from school to vape in their rooms without their parents noticing.”
A second advertisement included in the complaint features an attractive young woman wearing a tight T-shirt and spewing big clouds of vapor. The same picture was used in a separate advertisement that suggested vaping a Puff Bar as a way to relax over spring break.
Todd Eric Gallinger, a lawyer who represented a company called Cool Clouds Distribution in a trademark application for the Puff logo, did not return a call seeking comment. The Puff Bar website does not list the names of any of the company’s executives. Indeed, since it began, the provenance of the Los Angeles-based business has been a secret. Its website states: “Who makes Puff Bar? Everyone wants to know the mastermind team behind the latest craze in the world of electronic cigarettes. Where did the Puff Bar team come from and where do they plan to go from here?”
Wherever it is, the company isn’t telling. The only details revealed indicate that the product is made in China and the flavors are developed in Malaysia.
The F.D.A. declined to discuss Puff Bar. Still, in an email, Mitchell Zeller, the director of the agency’s Center for Tobacco Products, wrote that the agency intended to take action against any electronic nicotine product “if it is targeted to youths, if its marketing is likely to promote use by minors, or if the manufacturer fails to take adequate measures to prevent minors’ access, according to the story.
In recent weeks, the agency has blocked the importing of two e-cigarette products from China: EonSmoke, which sold disposable e-cigarettes in a number of flavors before shutting down, and RELX, available in flavors including Drunk in Mexico, Naked in Iceland and Mango
Juul Labs Inc has asked a federal judge to dismiss or pause hundreds of lawsuits alleging the e-cigarette manufacturer fueled a youth vaping epidemic, saying the U.S. Food and Drug Administration’s decisions on how it markets its products deserve deference.
Juul, on May 29, asked a federal judge in San Francisco to stay hundreds of lawsuits by consumers and local governments alleging its marketing created a public health crisis while the FDA determines whether it may continue to market its products, according to Reuters.
Juul Labs said today it would end operations in South Korea, a year after it entered the market. The company states the cause was its inability to gain market share amid government health warnings.
In a statement, Juul Labs stated that since the beginning of the year it was working through a restructuring process aimed a re-establishing a viable business in South Korea by significantly reducing costs and making changes to its products.
“However, these innovations will not be available as anticipated,” the statement said. “As a result, we intend to cease our operations in South Korea.”
In October last year, South Korea’s health ministry advised people to stop vaping because of growing health concerns, especially after a case of pneumonia was reported in a 30-year-old e-cigarette user that month, according to Reuters news article.
The announcement prompted convenience store chains and duty free shops to suspend the sale of flavored liquid e-cigarettes, including those made by Juul Labs.
In December, South Korean health authorities said they had found vitamin E acetate, which may be linked to lung illnesses, in some liquid e-cigarette products made by Juul Labs, but the company denied using the material, according to Reuters.
Juul Labs launched a product portfolio that was specifically developed for the Korean market in May 2019, but “our performance has not met expectations in terms of meeting the needs of our Korean adult smokers to successfully transition from combustible cigarettes,” according to the statement. “We have learned through this process and are focused on innovating our product portfolio.”
Juul Labs is also reportedly ready to withdraw from a handful of EU markets as well, claiming the regulatory environment has become overly hostile to the device.
According to BuzzFeed News, Juul will soon remove its products from shelves in Austria, Belgium, Portugal, France, and Spain.
The news outlet reports the European Union’s strict requirement that e-cigs contain no more than 20 milligrams of nicotine makes it difficult for Juul to do business there.
Austria, Belgium, and Portugal are very small markets for Juul, but the leading e-cig manufacturer generates significant sales from France and Spain. It will exit France by the end of the year, but withdraw from the other countries in July, paring its presence in global markets to a narrow selection that includes Germany, Italy, Russia, and the U.K.
