A vape pen startup that’s taking over America is raising $1.2 billion — but questions remain about its safety

Pax Labs
  • A vape pen startup that’s been taking over America made a splash on Friday with news that it’s raising $US1.2 billion for an overseas expansion.
  • The financing round for Juul Labs would value the company at $US15 billion.
  • But concerns about the startup’s leading product – a trendy, high-nicotine vape pen known as a Juul – could cloud its future in the next few years.

A vape pen startup that’s been taking over America made a splash on Friday with news that it’s raising $US1.2 billion for an overseas expansion. The financing round values the company, called Juul Labs, at $US15 billion, according to Bloomberg.

In the US, Juul has had wild success disrupting the existing tobacco market by appealing to former smokers. But concerns about the startup’s leading product – a trendy, high-nicotine vape pen known as the Juul – could cloud its future in the next few years.

Chief among those concerns is emerging research on the health and safety of the Juul and its highly addictive potential. Other issues include a Food and Drug Administration query into whether the company marketed its products to teens, as well as increasing demands from Congress members for the FDA to review the product’s safety.

Local initiatives like San Francisco’s recent ban on flavored tobacco could put additional pressure on the company, which has advertised sweet and fruity flavours as a key part of its appeal.

Teen Juuling presents an ethical dilemma

JUUL In Hand Female Denim Jacket copyPax LabsA Juul ad.

Juuls are especially popular among American teens, who post viral selfies and videos showing friends pulling drags from the discreet, USB-stick-like devices in class. Scientists and public health experts have sounded the alarm on the practice, known as “Juuling,” saying the e-cigs pose a major health concern to young people.

Chief among their worries is the Juul’s uniquely high concentration of addictive nicotine, which is more than double that of other leading e-cigs and may be especially problematic for young people whose brains are particularly susceptible to addiction.

The US Food and Drug Administration is currently looking into Juul’s marketing practices to determine whether the company previously advertised to young people, who cannot legally use the devices until age 18.

The FDA could start regulating Juuls and other vapes

The FDA could also decide to review the safety of Juul vape pens and other similar brands, which could put a major hold on the devices until they are cleared as safe.

Because of an existing rule, several e-cig manufacturers are not required to apply to the FDA for review until the summer of 2022. But many members of Congress have publicly pushed the agency to change this practice and look into regulating the devices, citing their popularity among young people.

In a recent letter to the FDA, congress member Frank Pallone (D-New Jersey) wrote, “The availability of Juul and e-cigarettes to youth is extremely troubling.”

Ashley Gould, Juul’s chief administrative officer, told Business Insider in March that the soaring interest in the device among youth runs counter to Juul’s mission.

“Juul is a company that was started by smokers with an objective to switch smokers to non-combustible products,” Gould said, adding that the company is vehemently opposed to anyone under 18 using their products – and even has a number of campaigns aimed at addressing and curbing underage use.

Local governments could push for more limits on e-cigs

Juul e-cig vape pen california prop e posterCalifornia Department of Public Health

Beyond these issues, some local governments are taking it upon themselves to enact bans on some of the most enticing components of vape pens, like their sweet flavourings.

In June, the city of San Francisco – long known for its progressive ballot measures like the plastic bag ban – passed an initiative banning flavored tobacco products that includes Juul flavour packs (known as Juul Pods). The current flavour line-up includes options like “Cool Cucumber” and “Creme Brulee.”

Several big names have come out in support of the flavour ban, suggesting that it could spur similar moves in other cities. Michael Bloomberg, the former mayor of New York City and the CEO of Bloomberg Philanthropies, called the move “an important step forward for public health” in a recent statement, adding: “This vote should embolden other cities and states to act.”

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.