Altria, producer of Marlboro cigarettes, is finalizing an agreement to purchase e-cigarette company Njoy for at least $2.75 billion. The deal gives Altria a new foothold in vaping after regulatory troubles with its Juul investment.
The vaping landscape continues to shift amid FDA regulation and legal battles. In the latest move, tobacco giant Altria is poised to acquire Njoy in a multi-billion dollar deal. Njoy offers a potential backup plan as Altria’s investment in market leader Juul falters.
This article looks at how the prospective Njoy purchase fits into Altria’s vaping strategy. We’ll also examine Juul’s declining position and the FDA’s oversight role.
Altria’s Second Bet on Vaping
Altria, maker of top cigarette brand Marlboro, spent $12.8 billion buying a 35% stake in Juul in 2018. But Juul has since faced lawsuits, restrictions, and valuation markdowns. Altria cut Juul’s book value to just $450 million after initially touting it as the dominant e-cigarette.
Now, Altria aims to acquire Njoy in a $2.75 billion+ agreement to gain a new foothold in vaping. Njoy recently secured FDA approval to sell its tobacco and menthol flavored e-cigarettes. The deal provides a regulatory compliant backup as Juul remains banned.
Njoy’s current shareholders could get an extra $500 million if menthol products also gain FDA clearance. Altria has expressed confidence in e-cigs’ harm reduction potential for adult smokers. But purchasing an authorized brand like Njoy reduces uncertainties.
Juul’s Diminished Position
Juul once held nearly 35% of the U.S. e-cigarette market. But its share slipped to 26.5% by early 2022 amidst surging competition and regulatory troubles.
In June 2021, the FDA ordered Juul products immediately pulled from the market. The agency cited insufficient evidence Juul could reduce harm, while contributing to teen vaping. A court stay paused the ban during additional FDA review.
But the reputational and financial damage took a toll. Juul cut 30% of its workforce last fall to preserve cash, as it reportedly considered Chapter 11 bankruptcy. It also sought new funding from tobacco companies, albeit with limited interest due to ongoing risks.
Juul faces thousands of lawsuits over alleged deceptive marketing to youth. States also launched investigations into its early advertising practices. While Juul aims to rebuild its image, the path forward remains challenging under intense scrutiny.
The FDA’s Oversight Role
A key factor in the vaping landscape shift has been FDA oversight through the premarket tobacco product application (PMTA) process. All deemed new tobacco products must prove benefit to public health to earn marketing authorization from the agency.
Njoy successfully navigated the arduous PMTA reviews for its tobacco and menthol e-cigarettes. This regulatory green light makes Njoy an attractive acquisition target compared to Juul’s uncertain status.
The FDA carefully weighs each vaping product’s potential to transition adult smokers versus the risk of youth adoption. Most applications faced rejection over concerns around underage usage.
Altria’s deal to buy Njoy depends on bets that FDA regulation helps reset the vaping category on sounder public health footing after years of adolescent addiction worries.
Conclusion
With Juul facing bans and lawsuits, Altria’s potential $2.75 billion purchase of Njoy signals a realignment in vaping driven by oversight. Njoy offers reduced regulatory exposure as e-cigarettes evolve into FDA-controlled products rather than a “wild west”.
The deal gives Altria a new way forward in harm reduction for adult smokers. But youth vaping risks will continue weighing on the category through intense legal and regulatory filters.
For vaping companies, earning premarket approval shapes the playing field going forward. Those clearing strict evidential hurdles like Njoy stand to gain, while non-compliant brands flounder.
Altria-Njoy Vaping Deal Highlights:
- $2.75B+ acquisition aimed at backup vaping option
- Comes amid Juul struggles with FDA and lawsuits
- Njoy secured regulatory approval Altria needs
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