Sep 12, 2019

Trump's vape ban plan may complicate megamerger

Dan Primack, author of Pro Rata

Illustration: Sarah Grillo/Axios

Yesterday's announcement of President Trump's intentions to ban all flavored e-cigarette products from U.S. markets, even if sold online or in smoke shops, creates massive complications for the proposed merger between tobacco giants Altria and Philip Morris.

Why it matters: Both companies have made major moves into e-cigarettes, which they view as the best way to remain viable in a U.S. market that has moved away from combustible products. The ban could shake the merger.

By the numbers: Both Altria and Philip Morris shares were down at the open, but only slightly. Altria late last year paid $12.8 billion for a 35% stake in Juul, which also is under new fire from the FDA for its marketing practices.

  • This isn't necessarily a death blow for Juul, which didn't have advance warning of the White House event, but it's not a flesh wound either. At the very least, it puts Altria's deal in the same valuation league as SoftBank's last round for WeWork.

What they're saying: In a statement, Juul said: "We strongly agree with the need for aggressive category-wide action on flavored products. We will fully comply with the final FDA policy when effective."

  • Trump yesterday said that "people are dying with vaping," apparently referring to a number of lung disease cases, but that's not what's driving FDA action here. Namely because the CDC reports that no e-cigarette product or compound has been formally linked yet to the illnesses, and investigators have said that the culprit may be black-market THC oil pods.

Context: The key issue here is youth vaping, which has been shown to increase the likelihood of transitioning to traditional cigarettes (among kids who never before smoked). Remember that most vape pods contain tons of nicotine.

  • Last year the FDA cited a survey on youth tobacco use when deciding to ban fruit-flavored products from retail and convenience store shelves.
  • Health officials yesterday said that data from this year's survey showed that the move didn't slow vaping adoption, thus the proposal to ban all flavors (including mint and menthol) from all channels.

Yes, but: There continues to be a massive policy disconnect here in that combustible cigarettes (including menthol ones) continue to be sold in the same stores that the FDA says can't adequately police youth purchases of e-cigarettes. It's like closing the gateway but keeping open the side path.

The bottom line: Altria and Philip Morris shareholders will be hesitant to ratify a merger agreement with so much uncertainty over what both companies have said is their product path to modernization.

Go deeper: Fear and vaping in our schools

Go deeper

Updated 1 hour ago - Health

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

The number of deaths from the novel coronavirus surpassed 400,000 worldwide on Sunday morning, per Johns Hopkins.

By the numbers: Almost 6.9 million people have tested positive for COVID-19 globally and more than 3 million have recovered from the virus. The U.S. has reported the most cases in the world with over 1.9 million.

George Floyd updates

Protesters gather north of Lafayette Square near the White House during a demonstration against racism and police brutality, in Washington, D.C. on Saturday evening. Photo: Jose Luis Magana/AFP via Getty Images

Tens of thousands of demonstrators have been rallying in cities across the U.S. and around the world to protest the killing of George Floyd. Huge crowds assembled in Washington, D.C., Philadelphia and Chicago for full-day events on Saturday.

Why it matters: Twelve days of nationwide protest in the U.S. has built pressure for states to make changes on what kind of force law enforcement can use on civilians and prompted officials to review police conduct. A memorial service was held for Floyd in Raeford, North Carolina, near where he was born. Gov. Roy Cooper ordered all flags to fly at half-staff to honor him until sunset.

Updated 3 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 a.m. ET: 6,898,613 — Total deaths: 399,832 — Total recoveries — 3,087,714Map.
  2. U.S.: Total confirmed cases as of 3 a.m. ET: 1,920,061 — Total deaths: 109,802 — Total recoveries: 500,849 — Total tested: 19,778,873Map.
  3. Public health: Why the pandemic is hitting minorities harder — Coronavirus curve rises in FloridaHow racism threatens the response to the pandemic Some people are drinking and inhaling cleaning products in attempt to fight the virus.
  4. Tech: The pandemic is accelerating next-generation disease diagnostics — Robotics looks to copy software-as-a-service model.
  5. Business: Budgets busted by coronavirus make it harder for cities to address inequality Sports, film production in California to resume June 12 after 3-month hiatus.
  6. Education: Students and teachers flunked remote learning.