Morgan Stanley analyst, Pamela Kaufman, published an update on the Altria Group (NYSE: MO) / Philip Morris International (NYSE: PM) transaction after the FDA announced plans to remove non-tobacco e-cig flavors from the market. The FDA issued a statement announcing its plans to “clear” the market of non-tobacco flavored e-cigs though its enforcement discretion.

The analyst stated "The inclusion of mint and menthol is an incremental negative for JUUL as these flavors represent >80% of its sales. Last year, JUUL pulled all of its flavors other than tobacco, mint, and menthol from brick-and-mortar retail distribution. However, essentially all of its flavor sales shifted to mint/menthol, which accounted for over 80% of JUUL’s sales in measured channels as of August 2019". Regarding the transaction, the analyst went on to state "this is an unfavorable development for JUUL, but cigarette volumes could improve and IQOS may be relatively better positioned. We would expect pulling flavors other than tobacco to have a negative impact on JUUL’s overall growth and financial performance, but it could be a benefit to cigarette volumes if vapers revert back to smoking cigarettes or if it slows the switch to vaping. Moreover, this could better position IQOS relative to e-cigs, given IQOS flavors are limited to tobacco and menthol. We viewed IQOS's lack of broad flavor offerings as putting it at a competitive disadvantage relative to the range of e-cig flavors on the market".