Tobacco giant Philip Morris International (NYSE:PM) spent millions of dollars on a marketing application millions of pages long to get its heated tobacco IQOS (which typically stands for "I quite ordinary smoking," though PMI claims its product name is not an acronym) device approved by the Food and Drug Administration.

Smaller electronic cigarette manufacturers without similarly deep pockets or a well-financed partner will not be able to navigate that regulatory morass, regardless of whether the deadline is six months out or 10 months as is now being contemplated. 

An image of a $100 bill burning.

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Yet Juul Labs, which does have a well-heeled backer in Altria (NYSE:MO), may not be able to make it across the finish line, either; former FDA commissioner Scott Gottlieb, before he resigned, said he doubted the e-cig leader would receive approval because of teen usage of its device.

If the former regulator's opinion still carries any weight, Altria may as well have put a match to its $13 billion investment in Juul.

Window of opportunity closing

The electronic cigarette industry as a whole has been thrown into turmoil after a judge ruled the FDA illegally allowed manufacturers to introduce their products onto the market without a safety review. He ordered the agency to enforce its mandate and regulate the devices, and gave it two weeks to come up with a plan.

The FDA recommended having companies submit their premarket tobacco product applications (PMTAs) to the FDA within 10 months, but antismoking activists want manufacturers to begin complying within six months. Although both the six-month window and the 10-month window would allow devices currently on the market to remain so for a year while the FDA considers the application, it's important to bear in mind that it took the agency over two years to make a decision about IQOS when there was no deadline staring it in the face.

The judge also didn't care if e-cig manufacturers couldn't comply with the deadline, saying it was their fault they listened to the FDA's claims that they could wait until 2022 to file their applications. Even apart from that, the manufacturers likely don't have the expertise to file a million-page document or the financial resources to shepherd an application through the regulatory labyrinth. And if the FDA fails to act within a year's time, their businesses will cease to exist.

Smells like teen spirit

Juul Labs, though, ought to have the wherewithal to see it through, and it can rely upon Altria for assistance and guidance, as the cigarette giant has decades of experience dealing with the regulatory apparatus. What Juul might not be able to overcome, however, is the animus the FDA has toward it because of its device's purported popularity with teens.

The FDA claims there is an "epidemic" of teen use of electronic cigarettes, with high schoolers and middle schoolers flocking to the devices. If we view this through an alternate lens, however, we see that teen smoking rates have also tumbled to their lowest levels ever recorded. Just as was the case with adults, e-cigs are likely having the intended effect of luring teens away from traditional cigarettes. 

No doubt there are also many teens casually using Juul because of the supposed social status that comes with it, but as the packaging on Juul and every other e-cig product notes, it's intended for smokers only, and if you don't smoke you shouldn't use one. It would seem that rather than pushing for more education around e-cig use, the FDA could risk an uptick in teen smoking to as it tries to prevent the possibility that some might use the devices casually.

Regulatory forces arrayed against it

The blame for the rise in teen use is being placed squarely at the feet of Juul Labs, and by extension Altria, as executives from both companies were summoned to Gottlieb's office before he resigned to explain how the latter's investment wasn't undermining their stated commitment to preventing teen access. Following the meeting, Gottlieb expressed disappointment in their answers, and his subsequent comment that "Juul is in a hard spot to ever get their product approved" indicates that his jaded outlook may pervade the entire agency.

The e-cig maker is already being investigated for its marketing practices, with opponents contending that fruit flavors, social media interaction, and a thumb drive-like design all entice teens to the product, though those attributes are very appealing to adults, too. Congress has also begun looking at the company, and San Francisco just banned the sale of Juuls and e-cigs in the city, even though it handed out over 5.8 million needles to hardcore drug users last year.

While Altria's investment in Juul was initially hailed as a masterstroke that would give it a piece of what could be the market's two leading devices -- Philip Morris' IQOS will be marketed under Altria's Marlboro brand -- it is looking increasingly possible that the money will soon go up in smoke.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.