Shares in British American Tobacco and Imperial Brands suddenly fell in late trading in London after the US Food and Drug Administration (FDA) announced plans to cut nicotine in cigarettes.
FTSE 100-listed British American Tobacco, which owns Lucky Strike and recently bought US rival Reynolds for $49bn, fell 11 per cent to 4,747p, while Golden Virginia maker Imperial Brands fell 6.8 per cent to 3,214p in, after the FDA unveiled a "comprehensive plan" to cut tobacco and nicotine addition.
In the US, Philip Morris fell two per cent to $116, while Altria fell 8.8 per cent to $67.56.
The measures included finding ways to reduce nicotine in cigarettes, seeking input on flavoured tobacco and finding ways to encourage the development of "innovative tobacco products" that are less dangerous than cigarettes.
It also said it will look at ways to lower nicotine levels in traditional cigarettes to "non-addictive levels".
"A key piece of the FDA’s approach is demonstrating a greater awareness that nicotine – while highly addictive – is delivered through products that represent a continuum of risk and is most harmful when delivered through smoke particles in combustible cigarettes," it said.
Tobacco causes 480,000 deaths a year in the US, costing it $300bn a year in direct health care and lost productivity.
A spokesperson for BAT said:
“Our American subsidiary, Reynolds American Inc. and its operating companies are encouraged by FDA commissioner Scott Gottlieb’s comments today recognising tobacco harm reduction policies and the continuum of risk for tobacco products. These principles have long been the core of our efforts in leading the transformation of the tobacco industry.
“Gottlieb’s comments regarding nicotine and menthol do not come as a surprise to us. We are well prepared and look forward to participating in a thorough process to develop a comprehensive plan for tobacco and nicotine regulation.
“We believe future success will require transformative, innovative products and changing the conversation about tobacco harm reduction. Reynolds American and its operating companies have long been leading the transformation of the tobacco industry and will continue to do so.”