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Tobacco Stocks to Gain on FDA E-Cig Crackdown

14 September 2018

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

"I use the word epidemic with great care".

"I'll be clear. The FDA won't tolerate a whole generation of young people becoming addicted to nicotine as a tradeoff for enabling adults to have unfettered access to these same products", Gottlieb said Wednesday.

State health department officials continue to be anxious about JUUL, a device that looks like a flash drive, which they say dominates more than 70 percent of the e-cigarette market. It reserved its strongest action for the manufacturers themselves.

Dr. Scott Gottlieb, the FDA commissioner, said the agency is acting strongly to address the problem of e-cig use among underaged users by sending warning letters to five manufacturers as well as warnings and fines to 1,300 retailers.

Stressing that the FDA need to properly evaluate the public health impacts such products have before they can approve them, Gottlieb noted that the speed in which e-cigarettes have appeared and spread hasn't given them enough time to do just that.

E-cigarettes have become the most commonly used tobacco product by kids, with more than 2 million middle and high school kids using the product in 2017, the federal government says.

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The FDA plans to step up enforcement actions to monitor, penalize and prevent e-cigarette sales in convenience stores and other retail sites. So we don't want to - we don't want to extinguish this opportunity entirely, because we do see some potential benefit from having these products on the market as a way for adult smokers to get access to nicotine, without all the harmful effects of combusting tobacco. "Hindsight, and the data now available to us, reveal these trends".

Makers argue that e-cigarettes can help adult smokers transition away from burnt tobacco products. But this "fundamental turning point" will produce results only if the agency follows through by requiring all manufacturers to immediately undergo pre-market review at the FDA, he added. JUUL pods, which can be bought in fruit or candy flavors, contain the same amount of nicotine as a pack of cigarettes. However, a recent study in Pediatrics discovered that teens who smoked e-cigarettes had higher levels of cancer-causing chemicals in their bodies than non-smokers.

Jefferies is also bullish on how the FDA's actions will affect major tobacco players.

In April, the Minnesota Department of Health and the Minnesota Department of Education sent a joint letter and toolkit to school districts across the state, warning them of the dangers of e-cigarettes and vaping products and providing them with resources for addressing the issue in schools.

On the other side of the public health ledger, there is little reason to think that restricting information about ENDS, making them less cool, or banning e-liquid flavors would reduce morbidity and mortality among today's adolescents, either now or in the future.

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

As of September 1, the FDA said it has conducted 978,290 retail inspections, issued 77,180 warning letters to retailers for violating the law, and initiated 18,560 civil money penalty cases in its checks of retail establishments selling tobacco products.

Tobacco Stocks to Gain on FDA E-Cig Crackdown