The US Food and Drug Administration (FDA) orders Juul e-cigarettes from the US market

The Food and Drug Administration is preparing to order Juul Labs Inc. to take e-cigarettes off the US market, according to people familiar with the matter.

People said the Food and Drug Administration may announce its decision as early as Wednesday. The marketing refusal order will come after a nearly two-year review of data provided by the vaping company, which has sought a license for its tobacco and menthol flavored products to remain in the US market.

Uncertainty has clouded Juul ever since it landed in the sights of the FDA four years ago, when fruit flavors and hip marketing were blamed for fueling a wave of underage e-cigarette smoking. The company has since been trying to win back the trust of regulators and the public. It has limited its marketing and in 2019 stopped selling sweet and fruity flavors. Juul sales have plummeted in recent years.

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The U.S. Food and Drug Administration is conducting a review of e-cigarette products in the United States, balancing their popularity with young adults against their potential benefits as less harmful alternatives for adult cigarette smokers. All US e-cigarette manufacturers in 2020 were required to submit their products for FDA review to stay in the market.

In 2020, the US Food and Drug Administration banned the sale of all sweet and fruit e-cigarette cartridges and has yet to allow any of them to return. The agency paved the way for Juul’s biggest competitor, Reynolds American Inc. and NJOY Holdings Inc. To keep e-cigarettes flavored with tobacco in the market. Industry watchers expected Juul to receive a similar pass.

Jules had no immediate comment. The company can pursue an appeal with the Food and Drug Administration, challenge the decision in court or file a revised application for its products.

Juul climbed to the top of the US e-cigarette market in 2018, but has lost some of its gains to other brands recently. It fell to second place behind Reynolds brand Vuse in the 12 weeks ending June 4, according to an analysis of Nielsen data by Goldman Sachs analyst Bonnie Herzog.

Last year, Juul reported a net loss of $259 million and an 11% decline in sales to $1.3 billion, according to a disclosure the company released to employees. The United States accounts for nearly all of Juul’s revenue, although its products are also available in Canada, the United Kingdom, Italy, France, and the Philippines.

In 2017, Juul jumped to the top of the e-cigarette market. But the company’s valuation has fallen just as quickly, as a series of crises have led to hundreds of lawsuits alleging the company marketed its products to teens. Image caption: Jacob Reynolds/Wall Street Journal

The U.S. Food and Drug Administration is separately pushing ahead with a plan to eliminate nearly all nicotine in cigarettes, a policy that would upend the $95 billion U.S. cigarette industry and, health officials say, prompt millions of people to quit smoking or switch to alternatives like e-cigarettes. It will take years to implement this rule and tobacco companies can sue to combat it.

The US Food and Drug Administration’s order against Juul would be a blow to the Altria group that makes Marlboro a company ,

which in 2018 paid $12.8 billion for a 35% stake in Juul. The deal valued Juul at $35 billion. Since then, Juul’s value has plummeted amid regulatory crackdowns and declining sales. Altria valued its stake in Juul at $1.6 billion as of March 31.

Shares of Altria, which helped Juul with its FDA enforcement, fell about 10% early Wednesday after The Wall Street Journal reported the expected US Food and Drug Administration decision.

When Juul became a teen status icon, several agencies launched investigations into the e-cigarette startup. States, school administrators and families have filed thousands of lawsuits against the company alleging that Juul targeted teens. A criminal investigation by federal prosecutors and the Food and Drug Administration is still pending, according to a person familiar with the matter, as are most of those lawsuits.

Regulators and lawmakers have criticized Juul’s early use of models, celebrities and social media influencers in its marketing. In response, Juul voluntarily closed its US Facebook and Instagram accounts, stopped using models in its ads and suspended all of its print, broadcast and digital ads in the US In 2019, Juul halted US sales of mangoes, mints, and others. The pods are sweet-flavored, with only tobacco and menthol left on the market. The company said it never targeted children.

Underage e-cigarette smoking has declined in the United States since federal restrictions raised the legal purchase age for tobacco products to 21 and banned the sale of sweet and fruity e-cigarette refill cartridges. Juul’s popularity has also declined among young people. A federal study published in September showed that Juul was the No. 1 winner. 4 brands among high school vapers, after Puff Bar, Vuse and Smok.

In its submission to the U.S. Food and Drug Administration, Jules provided two flavors — menthol and Virginia Tobacco — in two nicotine concentrations, 3% and 5%. The company’s application pages totaled more than 125,000 pages, including scientific research, marketing materials, and updates on its efforts to curb the illegal sale of minors. Juul also showcased a new device designed to unlock users who are at least 21 years old.

write to Jennifer Maloney at jennifer.maloney@wsj.com

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