K.C. CROSTHWAITE DELIVERS KEYNOTE ADDRESS ON RESPONSIBLE INNOVATION IN E-VAPOR INDUSTRY

Company News

October 2, 2024

On September 26th, Juul Labs’ Chairman & Chief Executive Officer, K.C. Crosthwaite, delivered the keynote address at the 2024 Global Tobacco & Nicotine Forum, where he discussed the company’s focus on the future and the ways in which companies, regulators, and all other stakeholders  can work together to advance responsible innovation. 

You can watch K.C.’s speech here.

Read the full remarks below as prepared for delivery:

Thank you all for being here today. I want to thank Elise and the GTNF team for organizing this event and inviting me to speak. I also appreciate the participation of FDA and other public health groups.

Yesterday was my fifth anniversary as CEO of Juul Labs. Since taking the helm, our organization has been through challenging times.

Today, we’re in the process of turning the page to an exciting future for our company.

The theme of this conference, “advancing responsible innovation,” is particularly appropriate. The concept of responsible innovation is embedded in our mission: to transition the world’s billion adult smokers away from combustible cigarettes, eliminate their use, and combat underage usage of our products.

My remarks today will focus predominantly on the U.S. market. But let’s be clear: our mission is global. While our core market is in the United States, we also sell our products in the U.K. and Canada and will soon begin selling them in Kuwait. From there, we’re looking at a number of additional countries that fit our aspiration to sell in well-regulated markets.

Many actors today in the e-vapor category simply do not value responsibility. They are driven by near-term, unsustainable profits rather than long-term, durable visions.

This creates a market dynamic, particularly in the United States, that presents an existential threat to the very viability of the ENDS category.

Nevertheless, I am optimistic about the future of harm reduction, the e-vapor category, and Juul Labs.

• First, we see some positive regulatory developments in the U.S. The FDA has – after more than two years – begun to authorize more e-vapor products, including in menthol flavors.
• Second, FDA rescinded its Marketing Denial Orders for our 2020 applications covering the JUUL System. These are the products we’ve sold in the U.S. since 2015 that remain on the market today. FDA placed applications for the JUUL System back into scientific review, to complete their evaluation of the science and evidence we submitted. We remain confident in the quality and substance of these applications, and look forward to engaging with the agency to pursue marketing authorizations. Our first-generation JUUL System remains a proven competitor to the cigarette, and is the leading tobacco-flavored ENDS franchise on the market. The JUUL System has switched more than 2 million adults away from combustible cigarettes in the U.S. to date.
• Finally, switching adults who smoke cannot come at the expense of youth. We’ve made a lot of progress. The 2024 National Youth Tobacco Survey shows the lowest levels of underage ENDS use in a decade. Notably, underage use of JUUL products has now declined 98% since its peak in 2019. Fewer than 1% of youth in the U.S. report using JUUL products.

Given this backdrop, let me tell you about our future; including our product roadmap, our science, and our upcoming regulatory submissions for new products in the U.S.

To achieve our mission, we must offer a superior, satisfying product to encourage switching away from smoking. We take great pride in the durability of Juul’s first-generation product in the marketplace over the last decade. We’re putting our resources toward further enhancing the vapor experience for adults who smoke.

I am proud to lead a company that has one of the most robust in-house teams of innovators in the e-vapor field. Our Silicon Valley-based product development operation pulls from the best and brightest, with more than 40 technical disciplines represented across the team.

All of the technology we create – whether the original JUUL System, JUUL2, or products in development – all come from this team. We do not buy off-the-shelf products. We do not white-label others’ technologies. We believe that developing the best products requires sweating the details. And partnering with best-in-class suppliers.

Our product development team solves challenging problems with creative solutions to improve products for adults who smoke while limiting access to youth.

Moving millions of adults from cigarettes to our on-market JUUL System proves our capacity to create a satisfying alternative to smoking. And we are eager to continue innovating new technologies that facilitate even more switching by adult smokers away from cigarettes.

Our next generation products enhance the experience for adults who smoke while using technology to also combat underage use and other illicit activity.

We see the world differently. We invest in technology that addresses societal and public health challenges. We won’t orient our strategy around what’s become ubiquitous throughout the rest of the industry: commoditized products competing largely on price and regulatory avoidance.

Being on this different path requires continuous improvement. This includes delivering high-quality products at a consumer packaged goods price point.

This approach is reflected in our JUUL2 product, which has been on the market in the UK since 2021. In the U.S., we submitted our first set of PMTAs for this product to the FDA last year.

JUUL2 is designed to deliver a consistent experience puff-to-puff.

Our product team also focused on precise temperature control through a new, dedicated chip. Rather than using generic hardware, this custom-created technology is optimized to regulate temperature in the device, which limits toxicant production in the aerosol. 

Another world-class innovation is our Pod ID chip; a secure microchip embedded within the e-liquid pod itself. The Pod ID chip communicates directly with the device, allowing the device to verify that the pod is authentic before it will work. The JUUL2 Device will only produce aerosol if it detects an authentic pod.

I also want to highlight work that is being done on the software side.

JUUL2 is a connected device, and the JUUL app could be used for age-verification in the U.S.

FDA has indicated age-verification technology may be essential for flavored e-vapor authorizations in the U.S. We know that flavors are important in offering an appealing e-vapor option for adults, so we will submit applications for flavored products using this technology.

But we have to do everything we can to make sure that adult smokers are not left behind by this technology. Age-verification is an additional step that will be challenging to execute. Particularly because lighting a cigarette is so easy.

For this technology to work, we must minimize friction and frustration for adults who smoke.

So far, we’ve received great feedback from consumers on our Android app, and it compares favorably to competitor apps.

Meanwhile, we have a challenge when it comes to reaching all adults who smoke because Apple does not allow e-vapor in the App Store.

Three quarters of JUUL users use iPhones. So the team has developed an iOS web app, which is a passable workaround for now.

But a native app would simplify the unlocking process for adult users and increase the features available within the app. Currently, a one-time unlock system – coupled with a limited number of devices per person – is the only feasible option.

We’re paying close attention to relevant regulations in the EU and UK that may facilitate our return to the App Store. We would welcome direct engagement with Apple to address their concerns, as this is an important public health opportunity.

There’s a lot to be excited about with innovation. But product development on its own is not sufficient. We continue to prioritize investments into regulatory science as well. Juul Labs has spent hundreds of millions of dollars building up our science program.

It would take me several days to walk you through our entire science program – and I’m not the best person to do so. But I do want to highlight work that advances science at the category level.

We recently published a clinical study looking at a population of longer-term JUUL users who switched completely from smoking, and compared them to exclusive smokers.

We measured their exposure to harmful constituents and saw marked reductions for switchers compared to those who smoked.

We looked at markers to assess potential long-term health effects and found favorable differences between the groups.

And we also saw fewer reported respiratory symptoms in JUUL switchers relative to continued smokers.

We are committed to publishing our science and engaging in transparent scientific discourse.

We have a tremendous behavioral program that is on the cutting edge of this research for vapor products.

There is compelling evidence that shows switching to JUUL2 among adults who smoke. In the UK, almost 40% of JUUL2 users switched completely from combustible cigarettes 12 months after purchasing the product.

My colleague, Dr. Gem Le, who presented yesterday, is the lead on this study. If you have questions, I’m sure Gem would be happy to speak with you.

In the U.S., our behavioral scientists have continued to mine a 24-month longitudinal study we conducted.

We’ve learned so much about dual use from this study, and we see that it decreases over time as complete switching increases.

Very importantly, we also have learned that JUUL products appear to reach people who were not planning to quit smoking. Many individuals with no intention to quit ended up switching completely.

We see incremental success over time as smokers try out e-vapor products. If they like it, they begin to substitute vaping for smoking.

This is really exciting from a public health perspective, and shows that smokers have the potential to quote-unquote “accidentally switch.” For adults who smoke who will not or cannot stop using nicotine, this appears to be a promising intervention occurring in the commercial nicotine space.

For more information on this and other work, visit Juul Labs Science dot com.

So we – and many in this room – are investing for the long-term.

Meanwhile, there are many bad actors subverting regulation with no regard for their products’ integrity or effect on public health.

A robust marketplace of authorized products that’s coupled with comprehensive and effective enforcement efforts is essential to countering the illegal market. It’s great to see movement from the FDA — including authorizing a few menthol products. I appreciate FDA’s work so far, considering the millions of applications before the agency.

But, given the challenges at hand, the pace must be accelerated. In the U.S., half a million people are still dying prematurely every year because of how they consume nicotine.

Only 11 percent of the products sold in the U.S. have been authorized by FDA. Eleven percent of a roughly $7.5 billion tracked market. Meanwhile we’re seeing at least a thousand new disposables introduced a month — all of these products are illegal.

There is tremendous confusion in the marketplace about what can be sold, and we need clarity.

There is a group of manufacturers – like us – who had our products on the U.S. market in August 2016, submitted timely applications by September 2020, and are still awaiting a decision by the agency. There should be a clear policy and communication of enforcement discretion for this group of manufacturers.

It is misleading to equate products like ours with the thousands of products introduced into the U.S. each month. This has sown confusion among retailers and consumers – giving the illegal market tacit permission to flourish.

The reality is that adults are telling us the 34 authorized products are not enough to meet consumers’ demand. Roughly 18 million adults are using e-vapor products, and we know from real-world evidence that the majority of these ENDS users are former smokers. This presents a phenomenal opportunity. We’re seeing significant declines in cigarette sales volumes — which need to be accelerated. The products that displace cigarettes should be regulated. And the companies that sell them should be working to combat underage use.

As FDA has made clear, enhancing enforcement action against these products will require additional resources. Juul Labs is supportive of FDA collecting User Fees to regulate all newly deemed tobacco products.

However, all new user fees should require negotiated performance commitments as we see in other FDA Centers. This is an opportunity for Congress, the agency, and regulated industry to collaborate to establish measurable performance expectations to end smoking as quickly as possible. 

Pivoting to the UK, we welcome the examination of the vaping market by successive UK governments and the review of regulation currently in progress.

Companies don’t need bright packaging and candy-flavored vapes to switch smokers. These marketing tactics and irresponsible business practices threaten the future of the category and the harm reduction opportunity.

If industry creates problems that regulators feel compelled to solve, we know from experience that regulation will come in the form of a sledgehammer — not a scalpel. 

My fervent hope is that the companies in this room will be willing partners with policymakers and regulators to create more responsible marketplaces. No one company can combat underage use alone. We look forward to working together.

I began these remarks by mentioning our company’s mission and how committed we remain.

It hasn’t been an easy 5 years for me at Juul Labs. We’ve had to overcome enormous obstacles to continue pursuing our mission.

But now – given the opportunity our company faces today – I’m thrilled that we are in a position to focus on the future.

Currently, our company is engaged in raising institutional equity capital from a mix of existing and new investors. The capital markets are sending us a clear signal that’s validation of our mission and our strategy – founded in the historic potential for tobacco harm reduction, and the belief that manufacturers like us, who invest in a responsible approach, are poised to succeed.

As I look toward the future, I come back to our commitment to the world’s billion adults who smoke, all of whom deserve better choices in how they consume their nicotine.                

We will continue to advocate for fair, science-based, and effective regulation. And we look forward to competing in more markets where the regulatory frameworks are designed to foster responsible innovation that I truly believe will ultimately end the era of the combustible cigarette.  

Thank you.