Vape and e-cigarette companies don't have a good rapport with the FDA. In early September, the FDA required vape makers to take millions of e-cigarette products off the market and delayed action on Juul. Just over a month later, Vuse Vapor has become the first vape company to achieve FDA authorization in the U.S.
What makes Vuse special, and who's behind the vape company that's defying industry odds?
Vuse is the first FDA-authorized vape
On Oct. 12, the FDA authorized certain Vuse vape products to be sold in the U.S. Vuse is allowed to sell three tobacco-flavored vape products on shelves. The FDA denied 10 flavored products.
According to the FDA, tobacco-flavored products are more likely to be used as a smoking cessation tool by adults rather than a seemingly fun product for teens.
Vuse still isn't officially "FDA approved."
According to the FDA, the authorization "permits the tobacco products to be sold in the U.S., but it doesn't mean "these products are safe or 'FDA approved.'"
Matthew L. Myers, the president of the Campaign for Tobacco-Free Kids, said, "It is concerning that a product that has three times the nicotine concentration as legally permitted in Canada, the UK and Europe."
As Vuse moves forward with selling its products, the regulatory organization will keep tabs on its marketing. E-cigarette competitor Juul has been in deep waters with various state-prosecuted lawsuits for advertising on kid-friendly platforms like Cartoon Network and Nickelodeon.
Vuse parent company is a big tobacco industry name
Vuse is owned by R.J. Reynolds—a tobacco giant selling the likes of Newport and Camel. Founded in 1875 by a man of the same name, the publicly traded company maintains market share.
FDA authorization doesn't come without risk for Vuse. Considering that 10 percent of high school students who use e-cigarettes prefer the brand Vuse, there's definitely a risk of regulatory changes that hinder the industry. For now, the FDA said, "The agency determined that study participants who used only the authorized products were exposed to fewer harmful and potentially harmful constituents from aerosols compared to users of combusted cigarettes."
R.J. Reynolds has a long acquisition history
In the early aughts, R.J. Reynolds merged with Brown & Williamson to form a new public company called Reynolds American and traded on the NYSE under the ticker "RAI."
In 2017, British American Tobacco Plc (BAT) bought the remaining 57.8 percent of Reynolds it didn't already own. This changed the trajectory for Reynolds, which maintained corporate independence for 142 years.
Now, Reynolds stock trades under BAT (NYSE:BTI). This means that Vuse equity is also part of BTI stock, although on a smaller scale.
Vuse has a positive impact on BTI stock.
Even as a small part of BAT's value, the Vuse news has managed to send BTI stock up 2.23 percent after FDA authorization.
Still, BTI is down just over 4 percent in the last month and 5.84 percent YTD. The company is fighting the battle of an increasingly tricky nicotine market, combustible or otherwise.