Juul Shake-Up: C.E.O. Steps Down

The chief executive of Juul Labs, the dominant e-cigarette company that has been the target of public and regulatory outrage over the soaring use of teenage vaping, stepped down on Wednesday.

The executive, Kevin Burns, will be replaced by K.C. Crosthwaite, an executive from Altria, the major tobacco company that owns a 35 percent stake in Juul, which is based in San Francisco.

Juul also said it would not fight the Trump administration’s proposal to ban most flavored e-cigarettes, which would severely hurt its domestic sales. And the company said it would end one of its campaigns, “Make the Switch,” which the Food and Drug Administration had criticized as an illegal effort to portray its e-cigarettes as safer than traditional cigarettes.

In addition, Altria and Philip Morris International said on Wednesday that they had ended talks to merge, dashing the chances of reuniting the two arms of what had once been Philip Morris.

The moves were announced in rapid succession during a month of escalating tensions in the marketplace and among regulators, public officials and parents over e-cigarettes and a spate of hundreds of vaping-related illnesses that have spread across the country. Nine deaths have now been linked to the lung ailments, causing public health agencies to warn most people to refrain from vaping either nicotine or THC products. Many of the patients have said that they had been vaping THC, the high-inducing ingredient in cannabis, when they became short of breath and grew sicker, officials have reported.

Within the last week alone, Massachusetts announced a four-month ban on the sale of all vaping products; Walmart said it would stop selling all e-cigarettes and the F.D.A. announced it had opened a criminal inquiry into the supply chain of vaping products and devices.

On Sept. 10, President Trump met with top health officials, Alex M. Azar II, the health and human services secretary, and Dr. Ned Sharpless, the acting commissioner of the F.D.A. After informing him of another spike in teenage vaping, the officials said they would issue a draft ban on most flavored e-cigarettes within several weeks.

New York and Michigan also imposed bans on sales of flavored products.

While no one product or ingredient has been blamed for the cause of the illnesses, Juul, as the dominant e-cigarette maker in the United States, has faced declining sales and public backlash over whether it marketed its products to teenagers. On Tuesday, the company said it was restructuring and would consider reducing its 3,800-member work force.

If the Trump administration does go forward with a ban on most flavored e-cigarettes, Juul officials had estimated that the company’s sales would be reduced by 80 percent initially.

Juul had also planned extensive overseas expansion, but an effort in China failed almost immediately and last week India also said it would ban the sale of e-cigarettes.

Before joining Juul in late 2017, Mr. Burns had been the chief operating officer at the yogurt company Chobani. At Juul, he oversaw a period of rocket-speed growth as consumers were drawn to its sleek line of vaporizers that some referred to as the iPhone of e-cigarettes.

But that success came at a price for Juul and Mr. Burns as its products also became highly desirable among teenagers, making the company a growing target for regulators who sought to tame the surge in teenage vaping. Under pressure, Juul had removed many of its flavored pods that were highly popular among young people from retail shelves last year.

Despite the public concerns, Altria invested $12.8 billion in Juul in 2018 for a 35 percent stake, valuing Juul at about $38 billion. Mr. Croswaithe, who oversees strategic investments for Altria, became a board observer at Juul.

As for the decision to end the merger talks between Philip Morris and Altria, the companies said they would instead focus on rolling out the IQOS heated tobacco product in the United States. They emphasized that IQOS, which Philip Morris International sells abroad and which has received F.D.A. approval for sale in the United States, is not “an e-vapor product,” unlike Juul’s devices.

Investors had appeared largely skeptical of the potential deal, despite the companies arguing that reuniting could revive their fortunes amid a decline in cigarette sales.

On Wall Street, analysts said they were not that surprised by the abrupt end to the merger talks, especially given the steady drumbeat of negative headlines around vaping and Juul’s products. In early trading, the stock of Philip Morris International jumped more than 7 percent to $76.67 while Altria’s stock rose a little more than 1 percent.

Bonnie Herzog, an analyst at Wells Fargo Securities, said the stocks of both Altria and Philip Morris would trade higher on Wednesday as many investors had anxieties about the combination.

But Altria is likely to face a bumpier future amid the uncertainty around Juul.

Analysts said it was increasingly likely that Altria might have to write down the value of its $12.8 billion investment in Juul, given the recent developments and uncertainty surrounding the company.

“When the Juul transaction was done, it valued the company at around $37 billion,” said Garrett Nelson, an analyst at CFRA Research. “Juul’s valuation today is probably a fraction of that.” Meanwhile, Altria’s debt levels more than doubled as it borrowed to buy the Juul stake, he noted.

Tim Hubbard, an assistant professor of management in the University of Notre Dame’s Mendoza College of Business, said it was not surprising that Mr. Burns was stepping down from the company as it had struggled to adapt to the swift change of perceptions, from a company that was providing an alternative to smoking to one that had been vilified.

“When compared to traditional tobacco products — which have remained on the shelves for decades despite being proven dangerous — e-cigarette makers have failed spectacularly,” Mr. Hubbard said in an email. “Bringing in a traditional tobacco executive who knows how to market and manage government relationships with deadly products matches the firm’s needs.”

This is a developing story. Check back for updates.