Altria stock rebounded on Thursday, after sliding Wednesday, as the FDA ordered e-cigarette maker Juul to stop selling its products in the U.S. — posing big risks for the tobacco giant's investment in the vaping startup.
The FDA, in a statement on Thursday, said Juul did not provide "sufficient evidence" for the agency to gauge the health risks of the company's products.
Juul disputed that assessment, and said it planned to seek a stay on the matter and was exploring a possible appeal and other options. But one analyst suggested it could be difficult to keep its products on the market.
The FDA said the products affected included the Juul vaping device and four types of tobacco and menthol-flavored pods. Its orders pertained to "commercial distribution, importation and retail sales of these products," but did not restrict people's possession or use of them.
The Wall Street Journal reported on Wednesday that the FDA was preparing to tell Juul to pull its products.
"We are disappointed with today's decision and continue to believe that e-vapor can play an important role in harm reduction for adult smokers," Altria said in a statement.
Altria stock was up 1% on the stock market today. The stock finished 9.2% lower on Wednesday.
'Insufficient and Conflicting Data'
The FDA's decision comes as it tries to determine whether vaping products from hundreds of companies can still be sold, after asking manufacturers of those products to submit by September 2020 applications demonstrating their products weren't as unhealthy as traditional cigarettes.
The FDA last year held off on making the call on Juul's products. But after giving the green light to products from some of Juul's rivals, the agency on Thursday said Juul's product applications "lacked sufficient evidence regarding the toxicological profile of the products to demonstrate that marketing of the products would be appropriate for the protection of the public health."
The agency on Thursday said it hadn't received information to indicate "an immediate hazard" linked to the use of the Juul products being ordered off the U.S. market. But it cited "insufficient and conflicting data" that kept the agency from completing a full accounting of the products' health risks. Some of that data pertained to chemicals leaching from Juul's e-liquid pods, the FDA said.
"As with all manufacturers, JUUL had the opportunity to provide evidence demonstrating that the marketing of their products meets these standards," Michele Mital, acting director for the FDA's Center for Tobacco Products, said in the agency's announcement.
"However," she continued, "the company did not provide that evidence and instead left us with significant questions. Without the data needed to determine relevant health risks, the FDA is issuing these marketing denial orders."
Joe Murillo, Juul's chief regulatory officer, said in a statement that it disagreed with the FDA's decision. And he said the company believed the details in its applications were sufficient.
"In our applications, which we submitted over two years ago, we believe that we appropriately characterized the toxicological profile of JUUL products, including comparisons to combustible cigarettes and other vapor products, and believe this data, along with the totality of the evidence, meets the statutory standard of being 'appropriate for the protection of the public health,'" he said.
"We intend to seek a stay and are exploring all of our options under the FDA's regulations and the law, including appealing the decision and engaging with our regulator," he continued.
Unexpected Move, Altria Stock Responds
The decision comes after the FDA on Tuesday announced plans to propose a measure that would set maximum limits on nicotine in cigarettes. The agency said it hoped the potential rule would reduce cigarette usage among youths. In 2020, the agency banned many flavored cartridge-based vapes, save for tobacco and menthol.
Altria, best known for selling Marlboro cigarettes in the U.S., in 2018 said it would take a 35% stake in Juul. But Juul has faced lawsuits alleging misleading health claims, along with allegations it was trying to draw younger consumers to vaping.
Altria has been trying to become less of a traditional-cigarette company, focusing more on devices that don't produce smoke. However, the company still gets 85% of its profit from those products, Cowen says.
The Journal report on Wednesday drove Altria stock to undercut a December low, leaving shares at their lowest level since January 2021.
Cowen analyst Vivien Azer, in a research note on Thursday, said a stay of the FDA's decision could be difficult, given the announcement's focus on product quality, toxicity concerns and what it viewed as insufficient data.
"While the company has indicated they will seek a stay of the decision (and thus keep the products commercially available), the above noted concerns may prove to be an insurmountable challenge to that aspiration," she said.
In February, a judge, in an initial decision, dismissed the Federal Trade Commission's antitrust charges against Altria's investment in Juul. The agency in 2020 sued to unwind Altria's stake.
Altria stock has a 67 Composite Rating. Its EPS Rating is 76.
Among other tobacco stocks, Philip Morris International rose 0.7%. British American Tobacco fell 1%.
