On June 21, Scott Gottlieb, the former FDA commissioner, stated that Juul Labs might struggle to get governmental approval for its products.
In a Squawk Box interview on CNBC, Gottlieb said, “Juul is in a hard spot to ever get their product approved. They have so much historical youth use with their product. I don’t know how Juul gets through an application process.”
Earlier, the United States District Court for the District of Maryland ruled that the FDA had exceeded its authority by allowing e-cigarettes to be in the market until 2022 before they can get approval from regulating authorities. In response, the FDA proposed a ten-month deadline for e-cigarette manufacturers to submit the application to get government approval to continue sales. Gottlieb thinks that the reduced time might be a challenge for Juul Labs.
In December, Altria Group (MO) acquired a 35% stake in Juul Labs for $12.8 billion. Gottlieb’s comments might have led to a fall in Altria’s stock price on June 21. At the closing on June 21, the company was trading at $48.00—a fall of 4.5% from the previous day’s closing price.
YTD stock performance
Altria’s stock price has fallen 2.8% YTD (year-to-date). The stock is underperforming the broader equity market. The S&P 500 Index has returned 17.7% YTD. The Consumer Staples Select Sector SPDR Fund (XLP), which invests 7.3% of its holding in cigarette and tobacco companies, has returned 15.6%. Philip Morris International (PM) and British American Tobacco (BTI) have returned 18.7% and 10.9%, respectively.