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The San Francisco-based e-cigarette company will lay off 150 more employees than previously announced as it faces regulatory pressure in the U.S. The company will lose about 16 per cent of its workforce with the cuts, which are intended to “right-size” the business after a pace of adding about 300 staff per month. Juul told The Logic the cuts will focus on the marketing team, which has already suspended broadcast, print and digital advertising in the U.S. (The Mercury News, The Logic)

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Talking point: The cuts follow a US$14-billion decrease in Juul’s valuation after Altria, its biggest shareholder, wrote down its US$12.8-billion investment by US$4.5 billion. Last month, Juul stopped selling most of its flavoured products in the U.S.—which account for about 80 per cent of its sales in the country—in anticipation of legislation to ban the products, which are known to be attractive to young people and non-smokers. Lisa Hutniak, Juul’s head of communications in Canada, declined to answer The Logic’s questions about whether the cuts will affect the company’s business in Canada, where there have been proportionately fewer cases of vaping-related illnesses than in the U.S., and where lawmakers are taking a less urgent approach to regulation.

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The move is part of an action plan issued Thursday by eight government bodies to quell the “distinct increase” in e-cigarette use among teens. Last week, the country also banned all online sales of vaping products. (Bloomberg)

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Talking point: China’s e-cigarette market grew from an estimated US$451 million in 2016 to US$718 million in 2018. Losing the country’s online market and limiting the convenience of vaping could stymie that growth. The announcement follows a ban on the production, import and sale of e-cigarettes in India, another significant growth market for the vaping industry. And on Wednesday, U.S. Rep. Mark DeSaulnier introduced a bill to ban e-cigarette sales nationwide until the Food and Drug Administration completes pre-market reviews of the products. The threat of sweeping new regulations has rocked industry leader Juul, which lost US$14 billion in value after tobacco giant Altria wrote down its US$12.8-billion investment in the company by US$4.5 billion. The regulatory crackdown comes amid rising youth vaping rates and more people falling sick from a mysterious lung injury linked to vaping—as of Tuesday, 2,051 cases were reported, including 39 deaths.

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Surveys of nearly 100,000 Canadians ages 11 to 25 found an overall increase in youth vaping rates between 2014 and 2017—before federal laws were enacted banning sales to minors. Provinces that prohibited e-cigarette sales to minors during the test period saw a 4.4 per cent increase in youth vaping, compared to a 9.7 per cent increase in provinces without bans. (The Logic)

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Talking point: Hai Nguyen, the study’s lead researcher, suggested that banning flavoured e-cigarette products, among other measures, would be a more effective way to reduce youth vaping than simply banning sales to minors, noting that kids find other means of accessing the products. Meanwhile, Reuters reported on Tuesday that industry leader Juul Labs—which claims its target market is adult smokers trying to quit—knew soon after launching products that kids were getting addicted to its products, but didn’t change course. The company is now facing intense pressure from regulators and investors—last week, tobacco heavyweight Altria wrote down its US$12.8-billion investment in Juul by US$4.5 billion.

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Mergers and acquisitions (M&A) activity in Canada hit a five-year low, reaching just US$157 billion, down from US$200.6 billion for the same period of 2018. (Reuters)

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Talking point: The dip coincides with economic uncertainty fuelled by  trade conflicts, which David Rawlings, CEO for Canada at JPMorgan Chase, said has made companies more apprehensive about M&A. A slowdown in cannabis deals also contributed to the overall decline. The industry saw an explosion of M&A in 2018, including Altria’s 45 per cent stake in Cronos for US$1.8 billion and Constellation Brands’ increased stake in Canopy Growth for US$4 billion. Political uncertainty around cannabis legalization in the U.S. has stymied deal activity, according to Jonathan Sherman, a lawyer with Cassels Brock’s cannabis group. Meanwhile, Constellation’s Canopy purchase has yet to pay off. On Thursday, the company reported losses of US$2.77 per share and US$484.4 million total in its latest quarter, weighed down by US$54.7 million in losses from its business with Canopy.

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The prohibition was removed from a planned 2015 rule that gave the Food and Drug Administration oversight of e-cigarettes after the Obama administration’s Office of Management and Budget (OMB)—which assesses the economic impact of new regulations—consulted with more than 100 people over 46 days. That included 44 meetings with tobacco company lobbyists. (Los Angeles Times)

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Talking point: Cecilia Muñoz, a former White House official, said that at the time, the “science wasn’t clear” on the effects of flavours on youth vaping. Since flavours made up a significant portion of vaping sales it would be unfair to stop businesses from selling them, she said. But the final rule excluded 15 pages of supporting documentation on how flavors affected youth vaping rates. The FDA is once again planning a ban on flavoured vaping liquids, but this time President Donald Trump is backing the move. And while tobacco giant Altria opposed the rule in 2015, Juul, in which it made a major investment, has promised not to lobby the government this time.

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Kevin Burns has stepped down in favour of K.C. Crosthwaite, who was chief growth officer at Altria, the tobacco giant that is one of the company’s major investors. Altria and Philip Morris ended talks of a US$187-billion merger. Juul also said it will stop advertising its products on television, in print and digitally, and will not lobby the U.S. government on the Food and Drug Administration (FDA)’s upcoming vaping regulations. “Juul Labs is a global company and this announcement impacts the U.S. only,” StrategyCorp’s Jeff Lang-Weir told The Logic on behalf of Juul Canada. (The Logic)

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Talking point: The three companies’ decisions reflect the challenges facing vape firms in the U.S., where the Trump administration is planning to ban all flavoured products. Juul is facing multiple investigations, including by the Federal Trade Commission, the FDA and criminal prosecutors. Altria is hedging its bet on Juul by proceeding with the launch of an FDA-approved heated tobacco device in partnership with Philip Morris. Health Canada has not announced any new investigations or policies in response to the U.S. government actions. The agency is currently considering new regulations to restrict vape advertising on social media and at the checkout in stores, as well as banning more flavours. Juul is also not changing its Canadian plans—it will continue to lobby and advertise in Canada.

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Imperial will take a 19.9 per cent ownership stake and one of five board seats at Auxly Cannabis. Auxly gets the rights to Imperial’s vaping technology. Auxly’s shares were up 21.92 per cent in late afternoon trading. (The Logic)

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Talking point: This is the second large tobacco company to invest in a Canadian cannabis firm following Altria’s $1.8-billion investment for a 45 per cent stake in Cronos Group, with the ability to take that stake up to 55 per cent. The focus on vaping will put Auxly in direct competition with Canopy Growth, which has made a series of acquisitions in recent months to focus on non-traditional cannabis products. Cannabis edibles, including vaping liquid, will become legal on October 17. It’s not just Cronos and Auxly looking to get in on the space, though. In October 2017, Aurora Cannabis was the first producer to launch a vape-ready CBD oil. Tilray partnered with brewing company Anheuser-Busch in December 2018. However, all these companies may see their product-rollouts delayed. Health Canada expects only a limited number of non-traditional cannabis products to be available “no earlier than mid-December.”

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The Secure and Fair Enforcement (SAFE) Banking Act would protect banks working with cannabis firms from criminal scrutiny. A U.S. House committee is debating the bill Tuesday  afternoon. (Financial Post)

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Talking point: Canadian cannabis companies have had an edge over their U.S. neighbours both because of recreational legalization, and because they have access to cheaper capital, and more of it. The SAFE banking bill will change that by freeing up banks that were previously leery of getting involved in the not-yet-legal space to lend. The change will unleash an onslaught of more moneyed competition that will eat into Canada’s first-mover advantage. It’s something the cannabis sector here has been anticipating, however, it’s not clear it’s fully braced for it. Some Canadian giants in the space have already given up significant ownership to U.S. companies: beverage company Constellation Brands invested $5 billion in Canopy in August 2018 and, that December, tobacco company Altria funneled $2.4 billion into Cronos.