WASHINGTON/GENEVA (Reuters) - Shares of U.S. tobacco companies fell on Tuesday after the U.S. Food and Drug Administration said it is considering tightening regulations on menthol cigarettes following a scientific review that showed the products are likely to be more addictive than regular cigarettes.
Shares of Lorillard Inc, which makes the Newport brand of menthol cigarettes, fell as much as much as 5 percent while shares of Altria Group, which makes a menthol version of its Marlboro brand, fell as much as 3 percent.
The FDA published preliminary results from a study it conducted that suggest "menthol cigarettes pose a public health risk above that seen with non-menthol cigarettes."
The report found that while menthol cigarettes are no more or less toxic than regular cigarettes, menthol's cooling and anesthetic properties can reduce the harshness of cigarette smoke, increasing their appeal to new smokers.
Still, at least some tobacco company analysts see the tone of the report as positive for the industry in so far as it did not recommend an outright ban.
"We believe it's unlikely that menthol will be banned," said Bonnie Herzog, an analyst at Wells Fargo Securities, in a research report. "We see this as a buying opportunity as we expect the stock to recover as investors digest this report," she said, referring to Lorillard shares.
The FDA's move comes during a trade dispute in which Indonesia charges that the United States illegally allowed menthol cigarettes to remain on the market while banning the import of clove-flavored cigarettes from Indonesia.
In 2012, the World Trade Organization ruled that the United States should either end its ban on Indonesia's imports or impose a ban on U.S. menthol cigarettes. So far the United States has stopped short of a ban.
"The United States has been clear that it would comply with the WTO findings in a way that is appropriate for the public health," said a statement from Andrea Mead, a spokeswoman for the Office of the United States Trade Representative, which negotiates with foreign governments to create trade agreements and resolve disputes.
The FDA is seeking public comment on whether a limit could be set on the amount of menthol in cigarettes. It is also seeking information on how menthol cigarettes are marketed to the young and minority communities.
Lorillard Chief Executive Murray Kessler said in a statement that the company is "encouraged" by the FDA's "science-based approach."
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"It is Lorillard's long-held belief that the best available science demonstrates that menthol cigarettes have the same health effects as non-menthol cigarettes and should be treated no differently," he said.
A spokesman for Altria, David Sylvia, said the company had only just received the FDA's report and was reviewing the information.
Lorillard's shares were trading down 4.2 percent at $44.23 in afternoon trading on the New York Stock Exchange. Earlier they fell as low as $43.77. Altria's shares were down 2.5 percent to $35.94, after dropping as low as $35.73.
(Reporting by Toni Clarke in Washington and Tom Miles in Geneva; Editing by Tim Dobbyn)
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