Altria Group today announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired in connection with the company’s previously announced pending acquisition of NJOY Holdings.
This confirms that no further regulatory review by the federal antitrust authorities is required in connection with the transaction. Subject to the satisfaction of other customary closing conditions.
Altria states that it expects to complete the acquisition in the second quarter of 2023.
In 2022, the U.S. vapor category comprised nearly 14 million U.S. adult tobacco consumers, including 9.5 million exclusive adult vapers, according to Altria. The segment generated approximately $7 billion in U.S. retail sales and represented approximately 15 percent of total estimated equivalized U.S. tobacco volumes and more than 50 percent of total estimated equivalized smoke-free tobacco volumes.
To date, the U.S. Food and Drug Administration has approved the marketing of 23 vapor products and devices. In 2022, NJOY received marketing granted orders for the NJOY Ace device, along with several tobacco-flavored pods. The regulatory agency is still reviewing NJOY’s premarket tobacco product applications for several NJOY menthol-flavored e-vapor products.
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 the IQOS Tobacco Heating System.
The NJOY deal followed an announcement by Altria that it would exchange its entire minority investment in embattled Juul Labs for a nonexclusive global license for certain of Juul’s heated tobacco intellectual property.
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.
A major factor in Altria purchasing Njoy is the Ace device didn’t come with the stigma tied to youth vaping, according to Altria CEO Billy Gifford.
“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.”
A slight dip in the market-share lead of R.J. Reynolds Vapor Co.’s Vuse vaping system was announced in the latest Nielsen convenience store report released last week.
Vuse’s market share declined from 42.2 percent to 41.8 percent, compared with Juul declining from 26.1 percent to 26 percent.
The latest Nielsen analysis covers the four-week period ending April 22.
According to Barclays, Nielsen largely covers the big chains. For the smaller chains, the group extrapolates trends, which is why trend changes don’t appear immediately in Nielsen. Local vape shops are not included in the data.
Consumer demand for tobacco products has ebbed and flowed over the past 12 months, mostly from the impact of inflation and recent upticks in traditional cigarette prices, according to media reports.
No. 3 NJoy was unchanged at 2.7 percent, while Fontem Ventures’ blu eCigs was unchanged at 1.4 percent.
Juul’s four-week dollar sales in the latest report have dropped from a 50.2 percent increase in the Aug. 10, 2019, report to a 22.6 percent decline in the latest report.
By comparison, Reynolds’ Vuse was up 23.1 percent in the latest report, while NJoy was down 8.1 percent, blu eCigs down 35.1 percent and Japan Tobacco’s Logic up 4.9 percent.
As recently as May 2019, Juul held a 74.6 percent U.S. e-cig market share.
A day before the Njoy announcement, Altria Group announced it had exchanged its entire investment in Juul Labs for a non-exclusive, irrevocable global license to certain of Juul’s heated tobacco intellectual property.
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.
Altria Group has entered into an agreement to acquire NJOY Holdings for approximately $2.75 billion in cash. The transaction terms include an additional $500 million in cash payments that are contingent upon regulatory outcomes with respect to certain NJOY products.
“We believe we can responsibly accelerate U.S. adult smoker and competitive adult vaper adoption of NJOY Ace in ways that NJOY could not as a standalone company,” said Altria CEO Billy Gifford in a statement. “We believe the strengths of our commercial resources can benefit adult tobacco consumers and expand competition. We are also excited to welcome NJOY’s talented employees to Altria at closing.”
“As a result of this transaction, Altria’s enhanced smoke-free portfolio will include full global ownership of products and technologies across the three largest smoke-free categories and a joint venture with JT Group for the U.S. commercialization of heated tobacco stick products.”
“We are excited to add NJOY’s e-vapor intellectual property as a new platform that we believe we can build on to help more adult smokers transition to smoke-free alternatives,” said Olivier Houpert, Altria’s new chief innovation and product officer.
Altria will hold a conference call at 9 a.m. Eastern Time on March 6, 2023. Access to the live webcast is available at. A replay of the webcast and a transcript will be available on the same website following the event.
In 2022, the U.S. vapor category comprised nearly 14 million U.S. adult tobacco consumers, including 9.5 million exclusive adult vapers, according to Altria. The segment generated approximately $7 billion in U.S. retail sales and represented approximately 15 percent of total estimated equivalized U.S. tobacco volumes and more than 50 percent of total estimated equivalized smoke-free tobacco volumes.
To date, the U.S. Food and Drug Administration has approved the marketing of 23 vapor products and devices. In 2022, NJOY received marketing granted orders for the NJOY Ace device, along with several tobacco-flavored pods. The regulatory agency is still reviewing NJOY’s premarket tobacco product applications for several NJOY menthol-flavored e-vapor products.
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 the IQOS Tobacco Heating System.
The NJOY deal follows an announcement by Altria that it would exchange its entire minority investment in embattled Juul Labs for a nonexclusive global license for certain of Juul’s heated tobacco intellectual property.
In a long suspected move, Altria Group Inc. is in advanced talks to buy e-cigarette manufacturer NJOY Holdings Inc for at least $2.75 billion, the Wall Street Journal reported on Monday, citing people familiar with the matter.
The deal for NJOY, one of the few non-tobacco-company-affiliated vapor makers whose products have received a marketing order from the U.S. Food and Drug Administration, could be announced as soon as this week, the report said, adding that the talks could still fall apart.
It’s reported that the proposed deal includes an additional $500 million earnout if regulatory milestones are met.
In October Juul was readying to file for Chapter 11 bankruptcy, while searching for an alternative – such as a sale, investment or loan,
In July, NJOY reportedly hired bankers for a possible sale of the company, adding that the privately held firm is likely to be valued at up to $5 billion.
The top-selling Vuse electronic cigarette of R.J. Reynolds Vapor Co. continued to expand the market-share gap with Juul in both monthly and yearly comparisons.
Vuse’s market share rose from 40.7 percent in the previous report to 41.1 percent, compared with Juul declining from 27 percent to 26.7 percent. For 2022 overall, Vuse’s market share was 35.7 percent, compared with 30.1 percent for Juul.
No. 3 NJoy slipped from 2.8 percent to 2.7 percent, while Fontem Ventures’ blu eCigs was unchanged at 1.4 percent.
Juul’s four-week dollar sales in the latest report have dropped from a 50.2 percent increase in the Aug. 10, 2019, report to a 23.7 percent decline in the latest report, according to media reports.
By comparison, Reynolds’ Vuse was up 32.7 percent in the latest report, while NJoy was up 0.1 percent, blu eCigs down 33.4 percent and Japan Tobacco’s Logic down 15.1 percent.
As recently as May 2019, Juul held a 74.6 percent U.S. e-cig market share.
On Sept. 30, Altria Group Inc. cleared the way to re-enter the e-cigarette marketplace after choosing to permanently end its non-compete agreement with Juul Labs.
Altria Group on Friday said it had exercised the option to be released from its non-compete deal with Juul Labs. The move comes nearly four years after the tobacco giant purchased a 35 percent stake in the e-cigarette manufacturer that at the time was dominating the market.
Altria is looking to permanently terminate its non-competition obligations to Juul Labs, give up certain rights including its board designation rights and reduce its voting power, according to a 8-K filing to the Securities and Exchange Commission.
The filing states Altria has exercised its option to permanently terminate its non-competition obligations to Juul Labs, losing the right to the board designation and significantly reducing its voting power, according to Barron’s.
“This decision … increases the financial and strategic options we can pursue to secure our business and address the impact of the (U.S. Food and Drug Administration’s) now stayed [marketing denial] order,” a Juul spokesperson said.
However, it did not seek to be released from the obligations at the time, and said it saw value in its investment rights in Juul. “The decision to terminate our non-compete maximizes our flexibility to compete in the e-vapor space while maintaining our economic interest in Juul,” Altria said on Friday.
A change in its stance means Altria could go it alone or pursue other vaping products. Privately owned Njoy, which has already survived the FDA’s controversial premarket tobacco product application (PMTA) process, could be a takeover target for Altria, according to some analysts.
“It’s more likely that Altria will seek to buy its way back into the e-cigarette category (which represents 7 percent of U.S. nicotine sales),” Cowen analyst Vivien Azer said.
E-cigarette maker NJOY Holdings Inc has hired bankers for a possible sale of the company, theWall Street Journal reported on Tuesday, citing people familiar with the matter.
The report added the privately held NJOY is likely to be valued at up to $5 billion, according to the sources who cautioned the process was still at an early stage and there was no guarantee a deal would materialize.
If NJOY does not receive a high enough valuation, the company could raise money and stay private, potentially paving the way for a future initial public offering, the Wall Street Journal said.
The e-cigarette maker is simultaneously exploring a new fundraising round and aims to raise between $300 million and $500 million, the report added.
NJOY has two devices that have received marketing approval from the U.S. Food and Drug Administration, including its Ace device and Daily disposables.
Late June, Bernstein analyst Callum Elliott wrote in a note that Altria could try to buy privately owned NJOY, which “has already succeeded with its PMTA process applications.”
Rival Juul Labs Inc said on Friday it was in the early stages of exploring several options, including financing alternatives, as the company deals with lawsuits and a probable ban on sales of its e-cigarettes by U.S. health regulators.
NJOY and Mudrick Capital Management, a majority owner of the company, did not immediately respond to a Reuters request for comment.
NJOY now has two devices that have received marketing approval from the U.S. Food and Drug Administration. The regulatory agency today issued marketing granted orders (MGOs) under the premarket tobacco product application (PMTA) process for NJOY Daily Rich Tobacco 4.5% and NJOY Daily Extra Rich Tobacco 6%.
“It should be noted that our determination that the marketing of these products is APPH [appropriate for the protection of public health] is based in part on the submitted microbial stability data,” the MGO states. “The issuance of these marketing granted orders confirms that you have met the requirements of section 910(c) of the FD&C Act and authorizes marketing of your new tobacco products.”
The designation does not mean the products are safe and they are not “FDA approved,” the agency said, but the MGOs allows the company to legally market them in the United States.
“Our finding that permitting the marketing of the new products is APPH does not mean FDA has ‘approved’ the new tobacco products specified in Appendix A,” the MGO states. “Therefore, you may not make any express or implied statement or representation in a label, labeling, or through the media or advertising, that the new tobacco products specified in Appendix A are approved by FDA.”
The FDA also issued marketing denial orders (MDOs) to NJOY for multiple other Daily e-cigarette products. These are presumed to be for flavored products other than tobacco. Any of those products that remain on the market must be removed or risk FDA enforcement, the agency said. Applications for two menthol-flavored Daily products remain under FDA review.
Additionally, this authorization imposes strict marketing restrictions on the company to greatly reduce the potential for youth exposure to tobacco advertising for these products. The FDA said it will closely monitor how these products are marketed and will act as necessary if the company fails to comply with any applicable statutory or regulatory requirements, or if there is a notable increase in the number of non-smokers—including youth—using these products.
The U.S. Food and Drug Administration has submitted a status report for products that currently have a premarket tobacco product application (PMTA) under review. The regulatory agency states that it expects to have resolved 63 percent of the applications set out in its original priority by June 30, 2022, and 72 percent of the applications in its original priority set by the end of this year. However, the agency does not expect to complete its review of timely submitted applications until June, 2023.
“The FDA’s progress largely reflects the review priorities that the agency established in 2020, when review began. Given the large influx of concurrent applications, the FDA prioritized review of applications from manufacturers with the greatest market share at the time because decisions on those applications were expected to have the greatest impact on public health,” the report states. “As a result, the FDA allocated significant resources to review applications from the five companies whose brands represented over 95 percent of the e-cigarette market at that time: Fontem (blu), JUUL, Logic, NJOY, and R.J. Reynolds (Vuse).”
During a House subcommittee meeting after the release of the report, the head of the FDA said the agency needs more resources to speed up its review of e-cigarettes and is avoiding making hasty decisions that could incite lawsuits from the industry.
“This is an industry that has amazing capabilities on the legal front,” FDA Commissioner Robert Califf said. “If we make one single error in the process, we can be set back for years in these applications.”
In the order requiring the FDA to submit status reports, the Maryland court stated that covered applications are limited to applications for products that are sold under the brand names JUUL, Vuse, NJOY, Logic, Blu, SMOK, Suorin or Puff Bar. Additionally, any product with a reach of 2 percent or more of total “Retail Dollar Sales” in Nielsen’s Total E-Cig Market & Players or Disposable E-Cig Market & Players’ reports.
To determine which applications are for products sold under the listed brand names, the FDA used its internal PMTA database, which organizes applications by manufacturer, according to the agency. The FDA searched its database for the brand names to identify the manufacturers related to each relevant brand name and then searched its database to identify applications submitted by the manufacturers.
The FDA stated that it had conferred with the plaintiffs in the case who agreed that only one brand beyond those listed meets the 2 percent threshold. That brand was not identified. Of those applications the FDA deems requiring status reports, the agency stated that it had identified 240 covered applications. The agency estimates that its best forecast, based on current information, the FDA will take action on:
51% of covered applications by June 30, 2022;
52% of covered applications by September 30, 2022;
56% of covered applications by December 31, 2022;
56% of covered applications by March 31, 2023; and
100% of covered applications by June 30, 2023.
The agency also states that not every covered application has an equal potential impact on the public health. For example, more than 25 percent of the covered applications are for products not currently on the market.
The FDA identified two applications for products sold under the relevant brand names where the applicant stated that the products were not on the market as of August 8, 2016. The FDA also identified three other applications for products sold under the relevant brand names where the applicant did not state whether the products were on the market as of August 8, 2016. The FDA has not included information about these five applications in the current status report.
“Also, some e-cigarette devices consist of a small number of components, resulting in a small number of individual product applications for the entire system. A disposable prefilled device, for example, could constitute a single product, with one application. Other e- cigarette devices, by contrast, consist of many components, with separate tanks, coils, tubes, and pods, resulting in dozens of separate product applications for a single system,” the status report states. “Of the covered applications that the FDA anticipates will remain to be resolved beyond the end of 2022, more than half are for components of a limited number of e-cigarette device systems representing under 2.5 percent of the e-cigarette market. The FDA has made and will continue to make significant progress in reviewing and resolving applications for e-cigarette products to achieve the greatest impact on public health.”
The agency stated that it will file another status report by July 29, 2022, that will include any revisions to the estimates disclosed in the first report.
If NJOY does not receive a high enough valuation, the company could raise money and stay private, potentially paving the way for a future initial public offering, the Wall Street Journal said.
