Today head of the Federal Drug Administration (FDA) Scott Gottlieb noted in a speech at FDAs headquarters. This post a massive increase of teen usage of e-cigarettes. Dr. Gottlieb said:
“The number of teenagers we believe are now using these products…has reached an epidemic proportion. The availability of e-cigarettes cannot come at the expense of addicting a new generation of youth onto nicotine, and it won’t,
Dr. Gottlieb emphasized according to WSJ;
“I think we’re going to have to step into this market, I am willing to narrow the off-ramp for adults to close the on-ramp for kid”
Juul Labs, a private company that controls over 70% of the rapidly growth $2.3bn market for e-cigarettes, would take the biggest hit. Traditional Tobacco companies such as British American Tobacco (BTI US), Altria (MO US), Imperial Brands (IMB LN) and Japan Tobacco (2944 JP), have all very small market share of this market and this news is seen as very positive for all those tobacco giants, with all of them up 5-6% today.
Tobacco companies have recently been feeling the pressure of not only the rise of e-cigarettes but also the emergence and rapid growth of the Cannabis market.
British American Tobacco (BTI US) and Altria (MO US) are both down over 12% this year (which is a lot for defensive companies such as tobacco companies that pay steady dividends)
With the potential of increased regulation on their competitors, and tobacco companies mulling of entering (potentially through m&a) the Cannabis market, there might be interesting trading opportunities in the sector.