A former Juul Labs executive has lost a case accusing the vapor company of shipping contaminated vaping pods to retailers and firing him in retaliation for complaining, reports Reuters.
Siddharth Breja, a former senior vice president of global finance, sued Juul in October 2019. He alleged that the company endangered consumers by refusing to recall mint-flavored e-cigarette nicotine pods or to issue a safety warning.
Breja said he objected to the company re-selling products that were nearly a year old without a “best by” date on their packages. He said his complaints angered his superiors and that he was fired in retaliation in March 2019.
Juul denied all claims and sought to have the case sent to arbitration. The federal court lawsuit was put on hold pending arbitration in March 2020.
In a joint filing on July 27, lawyers for both parties said an arbitrator had ruled against Breja and ordered him to pay certain of the company’s legal costs. They did not give further details about the decision, but asked that the lawsuit be dismissed once Breja had paid the award.
Juul Labs has submitted a premarket tobacco product application (PMTA) for its next-generation vapor platform to the U.S. Food and Drug Administration. The company says its submission includes comprehensive science and evidence for a new device and new tobacco-flavored pods at 18 mg/mL nicotine concentration, as well as information on novel, data-driven technologies to restrict underage access.
“Our company DNA is product innovation,” said Chief Product Officer Kirk Phelps in a statement. “With our next-generation platform, we have designed a technological solution for two public-health problems: improving adult-smoker switching from combustible cigarettes and restricting underage access to vapor products. This is only the beginning of new tech being developed and refined for the U.S. market and abroad to eliminate combustible cigarettes and combat underage use.”
Launched initially in the U.K. in 2021 as the JUUL2 System, the new vapor platform delivers an improved vapor experience for adult smokers, utilizes unique Pod ID authentication to address illicit products and incorporates age-verification technology capabilities.
Our next-generation vapor platform PMTA is built on new technology that advances public-health objectives and compelling science that demonstrates a clear public-health benefit, as required to secure a marketing authorization.
According to Juul, features of the next-generation platform include:
A more consistent vapor experience that better competes with combustible cigarettes
A Bluetooth-enabled device with a larger, long-lasting battery and a “smart light system” that communicates battery life and e-liquid level to the user
Newly designed, tamper-resistant pods that enable improved aerosol delivery
An innovative heating element that improves product performance and temperature-control precision
A unique Pod ID chip that, among other tech capabilities, prevents the use of illicit counterfeit and compatible pods with the next-generation device
A mobile and web-based app that enables age-verification technology, including device-locking, and real-time product information and usage insights for age-verified consumers with industry-leading data-privacy protections
Initial behavioral research of the new platform in the U.K. has demonstrated compelling adoption and switching among adult smokers. Over 32 percent of JUUL2 System users had switched completely from combustible cigarettes six months after purchasing the product. While the currently marketed Juul System has switched over 2 million adult smokers in the U.S., the company looks forward to bringing this new technology to over 28 million adult smokers in the country who continue to smoke combustible cigarettes.
“Our next-generation vapor platform PMTA is built on new technology that advances public-health objectives and compelling science that demonstrates a clear public-health benefit, as required to secure a marketing authorization,” said Juul Chief Regulatory Officer Joe Murillo. “We look forward to engaging with FDA throughout the review process while we pursue this important harm-reduction opportunity.”
Juul said it continues to pursue its administrative appeal of the FDA’s stayed decision for the Juul System and believes that it too will receive marketing authorization once a decision is made on science and evidence.
The U.S. Federal Trade Commission dismissed a complaint against NJOY parent Altria Group and e-cigarette maker Juul Labs that was brought after Altria bought a 35 percent stake in Juul Labs.
The agency also said on Monday it would vacate an FTC administrative law judge’s decision in favor of the companies in February 2022. Since it has been vacated, it cannot be cited as precedent, the agency said in the statement announcing it was dropping the litigation.
The FTC said in 2020 that Altria’s $12.8 billion investment violated antitrust law because the company acquired the position rather than continuing to compete against Juul in the market for closed-system e-cigarettes, according to Reuters.
Altria had exited the stake earlier this year and had asked the FTC to drop the challenge. As of December, its share of Juul was valued at $250 million, down from $12.8 billion in 2018.
Altria said on Monday it was pleased by the FTC dropping its complaint.
Juul Labs has asked the U.S. International Trade Commission (ITC) to block sales and imports of the NJOY Ace vapor device, claiming that the product infringes several Juul patents. It has also filed a complaint against NJOY with the U.S. District Court for the District of Arizona.
“Our technology, designed internally and in the U.S. and protected by our robust patent portfolio, has been the most effective product development to transition adult smokers from combustible cigarettes—switching over 2 million adult smokers in this country. Innovation is critical in this space to advance tobacco harm reduction,” said Juul Labs Chief Legal Officer Tyler Mace in a statement.
“When others infringe on our technology, we have no choice but to protect our intellectual property rights.”
This ITC complaint follows three prior successful actions from Juul Labs at the Commission, which all resulted in barring the importation and sale of infringing products, according to Juul Labs.
“Just like we have in three prior successful ITC actions that vindicated our company’s IP rights, we intend to reach the same result here,” said Mace.
The Juul Labs complaint also targets Altria Group, which agreed to acquire the NJOY in March after exchanging its minority investment in Juul for a heated tobacco product intellectual property license.
The NJOY Ace device received marketing authorization from the Food and Drug Administration in April 2022.
The government in the United Kingdom has been criticized for its “completely inappropriate” endorsement of Juul vaping products. Many organizations blame the manufacturer for fuelling an “epidemic” of underage vaping in the U.S.
Juul Labs was promoted in an official briefing circulated by the Department of Health and Social Care about the prime minister’s plan to close a loophole allowing free samples to be given to children, according to media reports.
The press release – which included quotes from Rishi Sunak, England’s chief medical officer Chris Whitty and health minister Neil O’Brien – portrayed the company as a leader in combating youth vaping, saying it “takes steps to ensure its products do not appeal to and are not used by anyone who is under age, and encourages others in the sector to do the same.”
It also included a quote from Joe Murillo, a former tobacco executive and chief regulatory officer at Juul Labs, in which he praised the UK government’s policy and called for more to be done “to combat underage use of these products”.
The briefing – which was sent to journalists before the policy was announced publicly – appears to have directly resulted in positive media coverage for Juul, with Murillo’s quote republished by four national newspapers.
Altria Group has completed its acquisition of Njoy Holdings. The tobacco giant has also updated its guidance for 2023 full-year adjusted diluted earnings per share (EPS) in connection with the transaction.
“The completion of this transaction is a transformative step in our goal of ‘Moving Beyond Smoking,’” said Billy Gifford, Altria’s CEO. “We are pleased to have received antitrust clearance, and we are now fully focused on responsibly accelerating U.S. adult smoker and adult vaper adoption of Njoy Ace, currently the only pod-based e-vapor product to receive marketing authorization from the FDA.
“Our updated 2023 full-year EPS guidance range includes planned investments behind the U.S. commercialization of Njoy Ace and reflects our goal to deliver strong shareholder returns while making progress toward our vision.”
“We are excited to combine our resources with Njoy’s talented team to benefit adult tobacco consumers across the country,” said Shannon Leistra, the new president and CEO of Njoy.
As a result of the transaction, Altria expects to deliver 2023 full-year adjusted diluted EPS in a range of $4.89 to $5.03, representing a growth rate of 1 percent to 4 percent from an adjusted diluted EPS base of $4.84 in 2022.
“Our 2023 full-year adjusted diluted EPS guidance range includes planned investments in support of the company’s vision, such as (i) continued smoke-free product research, development and regulatory preparation expenses, (ii) enhancement of the company’s digital consumer engagement system and (iii) marketplace activities in support of the company’s smoke-free products, including planned investments behind the U.S. commercialization of Ace,” Altria wrote in a press note.
Altria’s updated guidance range also includes estimated amortization charges of approximately $50 million for the remainder of 2023 related to intangible assets acquired in the transaction.
Leaders in the U.S. state of Minnesota reported a $60.5 million settlement with Juul Labs over youth vaping on Wednesday, one month after the state abruptly ended a Hennepin County jury trial before closing arguments were set to begin.
The money, which is front-loaded, according to Attorney General Keith Ellison and Gov. Tim Walz, is expected to go toward fighting tobacco use, vaping and smoking. Under the settlement, the terms weren’t public for 30 days, according to the Star Tribune.
In opening statements on March 28, Ellison made the state’s case, saying youth smoking was nearly eliminated before the e-cigarette maker lured teens with fruity flavors, fun ads and sleek, colorful designs. He portrayed the suit as a continuation of the earlier fight against Big Tobacco.
Many states sued Juul Labs in recent years over their marketing to teens, but Minnesota was the only one to take the manufacturer to trial. Before trial, Ellison said he wasn’t satisfied with the settlement offers made by the manufacturer.
Altria has reportedly struck a $235 million deal to end a lawsuit brought by the San Francisco public school system one day after the plaintiff’s lawyers ended closing arguments.
This settlement represents a positive step forward in addressing the harmful impacts of vaping on the public,” said Girard Sharp partner Dena Sharp, Co-Lead Counsel for Plaintiffs in the litigation. “The settlement funds will compensate JUUL purchasers, young people, parents, and governmental organizations across America, and avoids the delay and uncertainty of continued court proceedings. We are proud of our clients and the federal court system that made this result possible. The legal system worked in this case, and we thank the jurors who devoted their time to this trial over the past few weeks.”
The Altria settlement brings a final resolution to the personal injury, consumer class action, and government entity cases brought in the MDL and the JCCP brought on behalf of children, families, and JUUL purchasers everywhere in the U.S.
Much of the school district’s argument in its case against Altria involved the distraction which occurred when vaping became “endemic,” interfering not only with teachers’ abilities to control their classrooms but nearly all levels of student life.
The bellwether trial forced Altria to publicly defend itself solo for the first time as it faces thousands more cases that were brought against the company and Juul. In December, Juul Labs agreed to pay more than $1.2 billion to settle more than 5,000 suits blaming the company for a youth vaping epidemic across the U.S.
Juul and Altria defended the first trial that started in March over a case brought by Minnesota over deceptive marketing of e-cigarettes. The companies settled the state’s case earlier this year.
In April, Juul agreed to pay $462 million to six states and the District of Columbia to resolve lawsuits and investigations into the marketing of addictive vaping products to children.
The trial of the San Francisco Unified School District’s lawsuit against Marlboro maker Altria continues this week. At the end of the first week, jurors heard testimony that use of vape pens by students had declined before more than doubling from 2017 to 2019.
Only a little more than 7 percent of students throughout the district had reported using vape pens in 2017, former district health administrator Erica Lingell testified Friday. By 2019, she said, that figure had more than doubled to 16 percent.
Lingell said students were using Juul and the district was scrambling to build support systems and give guidance to teachers and staff about them, according to Courthouse News.
“We didn’t have anything for this new substance that the kids were using,” Lingell said in answer to questioning by the school district’s attorney Dena Sharp. “We didn’t have lessons. We didn’t have enough research except for what experts were telling us.”
The school district was building systems to combat Juul from scratch, the attorney claimed. Even after the San Francisco Board of Supervisors banned the sale of e-cigarettes in the city — the corporate home of Juul Labs — in 2019, youth use continued.
For school district officials, it was a scramble to pull together the resources needed to combat Juul’s growth among students. “It was like flying the plane while we were building it,” said Lingrell.
For other substance use issues in the district, there were materials lesson plans, and support groups in place to help teachers tackle the problem. Students leaving class to smoke would interfere with teaching time for the rest of the kids, she said. “Teachers have an incredibly hard and busy schedule already. One kid being gone affects everybody.”
Much of the school district’s argument in its case against Altria involves the distraction which occurred when vaping became “endemic,” interfering not only with teachers’ abilities to control their classrooms but nearly all levels of student life.
The bellwether trial forces Altria to publicly defend itself solo for the first time as it faces thousands more cases that were brought against the company and Juul. In December, Juul Labs agreed to pay more than $1.2 billion to settle more than 5,000 suits blaming the company for a youth vaping epidemic across the U.S.
Juul and Altria defended the first trial that started in March over a case brought by Minnesota over deceptive marketing of e-cigarettes. The companies last month settled the state’s case, though details are yet to be disclosed.
In April, Juul agreed to pay $462 million to six states and the District of Columbia to resolve lawsuits and investigations into the marketing of addictive vaping products to children.
As Altria sheds the burden of Juul, its leaders are hoping investors ‘Njoy’ the company’s new outlook.
By Timothy S. Donahue
It would have been hard to imagine less than five years ago. In September of 2018, Juul had a U.S. vapor market share of 72 percent. By mid-March of this year, Juul’s market share had plummeted to 25.6 percent and continues to drop. Meanwhile, R.J. Reynolds Vapor Co.’s Vuse products have grown from single digits to a more than 47 percent market share during the same period.
Altria, Juul Labs’ largest minority shareholder, had to do something. Juul’s baggage of lawsuits for youth marketing and ongoing battle with the U.S. Food and Drug Administration over marketing denial orders just became too much to bear. After devaluing its $13 billion investment in Juul Labs to less than $250 million earlier this year, Altria stated that it would exchange its entire minority investment in Juul Labs for a nonexclusive global license for some of Juul’s heated-tobacco intellectual property to potentially boost its IQOS heated-tobacco products. It then did something that surprised no one in the industry.
The next day, Altria Group announced it had entered into an agreement to acquire Njoy Holdings for approximately $2.75 billion in cash. Altria said it had multiple sources of funding for the deal, including cash from a $2.7 billion agreement with Philip Morris International last year for IQOS. In less than a week, Altria went from vaping product purgatory to owning the best vaping product on the market with a U.S. marketing order, the Njoy Ace. In total, Njoy Holdings has received six of the 23 marketing orders granted by the FDA as of this writing for the entire vaping product category, including pods, disposables and open systems.
The other major factor in purchasing Njoy is the product didn’t come with the stigma tied to youth vaping, according to Altria CEO Billy Gifford. Speaking during an investor call, Gifford said that his company evaluated Njoy’s marketing practices and national survey data regarding underage use of Njoy tobacco products.
“We believe Njoy has taken a responsible approach to marketing its products. According to the 2022 National Youth Tobacco Survey, Njoy-branded products are not included among the top usual brands among middle school and high school e-cigarette users. Additionally, Njoy is developing access restriction technology for its devices to further address underage use,” explains Gifford. “Our consumer research indicates that once consumers try Njoy Ace, it is a competitive product for both smokers and vapers. After trying the authorized nonmenthol Ace variant, 19 percent of surveyed smokers and 27 percent of surveyed vapers indicated that they would definitely buy the product.
“The Ace results were on par with the post-trial findings for Vuse Alto nonmenthol and better than those for Juul nonmenthol. We observed similar post-trial results for the Ace menthol variants when compared to Vuse Alto and Juul menthol products. This encouraging research supports our belief that Ace is a compelling proposition.”
The FDA said that it authorized Njoy’s products because they were found to meet the appropriate for the protection of public health standard as, among several key considerations, chemical testing was sufficient to determine that overall harmful and potentially harmful constituent (HPHC) levels in the aerosol of these products is lower than in combusted cigarette smoke.
Further, data provided by Njoy demonstrated that participants who had used only the authorized Njoy Ace products had lower levels of exposure to HPHCs compared to the dual users of the new products and combusted cigarettes. Therefore, these products have the potential to benefit adult smokers who switch completely or significantly reduce their cigarette consumption.
Additionally, the FDA considered the risks and benefits to the population as a whole, including users and nonusers of tobacco products and, importantly, youth. This included review of available data on the likelihood of use of the product by young people. For the authorized products, the FDA determined that the potential benefit to adult smokers who switch completely or significantly reduce their cigarette use would outweigh the risk to youth, provided that the company follows postmarketing requirements to reduce youth access and youth exposure to their marketing.
Open access
Altria has the ability to take Njoy products to the top. Gifford said that a large number of tobacco consumers are not currently aware of nor have access to the Ace vaping system. Njoy’s Ace, the most technologically advanced FDA-authorized vaping product, is currently available only in an estimated 33,000 stores. Altria services more than 200,000 U.S. stores. Njoy’s sales force is fewer than 50 people. Altria has 1,600.
“As a result, total U.S. retail share for Ace pods in 2022 was only 3 percent. Yet, we know that Ace has performed better in stores where it’s visibly merchandised and has consistent distribution. In the top 5 chain accounts where Ace competes with Vuse Alto and Juul, the weighted average share for Ace is approximately 11 percent,” Gifford said. “We believe we can responsibly accelerate U.S. smoker and competitive vaper adoption of Ace in ways that Njoy could not as a standalone company.”
During the session, Bonnie Herzog, managing director with Goldman Sachs, questioned whether Altria would need to reposition the Njoy brand or change its strategy considering the brand’s relatively small share of the market. After all, several devices have done very well in the market and then disappeared or lost their position. Chris Growe, with Stifel Financial Corp., wanted to know what made the Ace device so unique. Could the Ace device develop another level of brand loyalty it had yet to reach? Gifford said Altria has an extensive relationship with retailers that its “sales force has built over decades.” It’s all about consumers having better access.
“You’re going to see loyalty in these new spaces that we experience in the tobacco category. When you see the consumer, they’re trying various products. They’re looking for products that satisfy their unmet needs and desires, and once they find a satisfying product, it’s up to us to build a brand around that. I think when you look at Njoy, and I’d reference you back to the consumer research, it was both smokers looking to transition and how they rank the products in the marketplace as well as existing vapers, people that have already converted, and their preference there,” Gifford told the investment advisers.
“I think you see that we believe this is a strong asset because not only does it bring certainty around the authorization but the consumer is telling us they have preference for this product over some of the other products in the marketplace. That’s the way we think about it and are extremely excited to, again, have that base IP, have a product ready in the marketplace, but then be able to develop on it as we move forward,” Gifford said.
Gifford told Priya Ohri-Gupta, with Barclays, that prior to closing the deal, Altria would offer none of its services to Njoy but that after closing, Njoy would experience all of the assets Altria has at its disposal. “Our sales force, our regulatory team, our government affairs team, all of that would be available subsequent to close,” said Gifford.
Gifford said that in the next few years the company expects the FDA will complete marketing determinations on the remaining premarket tobacco product applications, including those filed for synthetic products. He said he also hopes the agency will implement the suggestions from the Reagan-Udall Foundation report.
Altria expects the vaping market to remain “in flux” until the FDA goes through the enforcement process and removes unauthorized products from the market. Over the next 10 years, U.S. volumes will grow at a single-digit compounded annual growth rate, Gifford predicted.
After the Njoy acquisition is finalized, Altria will have a compelling portfolio of products and technology across the three largest smoke-free categories, according to Gifford. In the vaping segment, the company will fully own the only FDA-authorized, pod-based product on the market. In oral tobacco, it owns the largest brand, Copenhagen, and holds 100 percent of the global rights to On!, one of the fastest-growing nicotine pouch brands in the U.S. last year.
“We have differentiated new products in development. And in heated tobacco, we have the majority-owned joint venture with JT Group for the U.S. commercialization of the next-generation Ploom device and Marlboro heated-tobacco sticks,” said Gifford. “We [also] have full ownership of an exciting heated-tobacco capsule technology, which we will discuss further at our Investor Day.”
Gifford also explained that the Juul IP rights deal is centered on the Ploom device and the capsule technology. He told Herzog that Altria viewed the technology as “very interesting,” and it allows Altria to put it “in the toolkit” of its product developers. That would give Altria the ability to market the new product anywhere around the world. “Our focus, of course, would be the U.S. because that’s the biggest opportunity we see in products,” said Gifford.
When asked when new heated-tobacco products using the newly acquired IP would make it to the U.S. market, Gifford’s answer became lost in translation. Deciphering the double talk quickly, Herzog ended the conversation by clarifying Gifford’s answer, saying, “OK. So, in a few years. Appreciate it. Thank you.” Gifford did not disagree with Herzog’s assessment.
