Juul Labs Inc. is a six-year-old company based out of San Francisco, and Altria Group Inc. (MO), the maker of Marlboro cigarettes, valued the maker of the e-cigarettes at $38 billion when it invested $12.8 billion for a 35% stake. But Altria's valuation of Juul has since fallen to $4.6 billion as of 2020, according to Reuters.

Altria announced it had written down its stake in Juul, first in October 2019, and then again in January 2020, bringing the value of the stake to $4.2 billion dollars as of the end of 2019. The company saw $1.3 billion in revenue in 2018 and expected to earn $3.4 billion in 2019, according to Bloomberg. But in the first half of 2020, it earned only $764 million, a net loss of $423 million. While the product’s popularity has grown considerably, so has the fear of unintended health effects.

Cigarette smoking has reached the lowest levels ever recorded among U.S. adults, but the market for e-cigarettes is just getting fired up. Over the last few years, e-cigarettes have become synonymous with the company that promises the same nicotine hit as conventional cigarettes with less harm. 3.6 million youth reported using e-cigarettes in 2020, according to the Centers for Disease Control—and government regulators pinned part of the responsibility on Juul.

In 2018, the Federal Trade Commission began investigating whether the startup used influencers and other marketing to appeal to minors. In addition, the Food and Drug Administration is investigating whether e-cigarettes can cause seizures and three reports cited allegedly involve Juul use. According to communications obtained by Bloomberg, Mitch Zeller, director of the FDA’s Center for Tobacco Products, emailed former FDA Commissioner Scott Gottlieb and wrote, “No proof of causality, but at a minimum, an association with Juul."

What Is Juul Labs Inc.?

Juul was spun out of Pax Labs, a San Francisco-based maker of vaporizers in 2017. Started in 2007 by James Monsees and Adam Bowen, Pax itself was earlier called Ploom. Monsees and Bowen are both graduates of the design program at Stanford University. Pax has raised $541.7 million in seven funding rounds from the likes of Fidelity Investment, according to Crunchbase. Inc. magazine reported Pax recorded sales growth of 200% in the two years prior to 2015 and sold 500,000 of its vaporizers.

JUUL, the product, was introduced in 2015 and uses a proprietary blend of nicotine developed by the Juul team. This is more potent than other, similar products in the market owing to the fact that it delivers eight times more nicotine than other e-cigarettes. According to Bowen, the idea behind the blend was to eliminate the need for smokers to go back to cigarettes after an unsatisfying experience with vaping. 

As sales for Juul took off, Pax Labs separated the division and incorporated it as a separate company for the products. Tyler Goldman, then CEO of Pax, ran the new company but left in 2017 for new opportunities. Kevin Burns, former head of yogurt maker Chobani, became the new CEO. Monsees is the company’s chief product officer and Bowen is the company’s chief technology officer. Though vaping instruments were designed for tobacco products and not for drugs, the devices developed by Pax have nonetheless become popular with marijuana users, because they are portable and effective in vaporizing THC from cannabis flowers.  

How Has the Government Regulated Juul?

Health experts and government officials have criticized Juul for marketing its products in social media spaces frequented by teenagers. Juul's advertising campaigns have been likened to those once used by Big Tobacco, which targeted young users in an effort to attract lifelong customers. 39 state governments have opened investigations into Juul marketing, according to CNBC.

Juul has attempted to combat those allegations by eliminating some of its Facebook and Instagram accounts in an effort to limit exposure to younger users. In 2018, an investigation by CNN found that Juul had paid social media influencers to review the product on Instagram and Youtube. Juul has since clarified that the paid influence program was "short-lived" and involved "fewer than 10 paid influencers," who were collectively paid less than $10,000. The influencer program was formally suspended ended on Oct. 31, 2018.

In 2018, Juul stopped selling its flavored pods at more than 90,000 retail stores in an effort to prevent teenage consumption. It will only sell flavors like mango, cucumber, and creme on its website, where users are required to demonstrate proof of age. These efforts came only after the FDA announced its investigation into the sales and marketing strategies of major e-cigarette makers.

The following year, Juul announced $100 million in incentives and financial support to retailers that install a new electronic age-verification system.

On Jan. 2, 2020, the FDA announced that it was banning all flavored vape cartridges, except for tobacco and menthol flavors. The ban also applies to any vape product targeted at minors or whose manufacturer fails to take "adequate measures to prevent minors' access." Technically, in 2016, all e-cigarettes fell under the FDA's tobacco regulations, so all vape products "currently on the market are considered illegally marketed." However, the FDA chose to defer enforcing this requirement for most vape products and is focusing enforcement on those that may put children at risk.

An outbreak of lung injuries associated with vaping that started in August 2019 was a major catalyst for vaping regulation. As of Jan. 21, 2020, there have been 60 confirmed deaths as a result of the outbreak. The exact cause is not known. However, the outbreak is strongly associated with THC vapes, particularly those from "informal sources," and the chemical additive vitamin E acetate.