Altria Stocks Fall After FDA Announces Plan To Tackle Cigarette Addiction

Stocks for the tobacco production corporation Altria plummeted Friday, after the U.S. Food and Drug Administration announced it had developed a comprehensive plan to lower nicotine in cigarettes to below-addictive levels.

The move is part of a several-year road-map the FDA announced as part of an ongoing effort to reduce tobacco deaths and protect future generations from picking up the habit. The announcement also said that new specified guidelines would be rolled out “shortly.”

“The overwhelming amount of death and disease attributable to tobacco is caused by addiction to cigarettes – the only legal consumer product that, when used as intended, will kill half of all long-term users. Unless we change course, 5.6 million young people alive today will die prematurely later in life from tobacco use,” said FDA Commissioner Dr. Scott Gottlieb in a press release.

The FDA press release said the goal was to educate consumers on the dangers of nicotine and compounds commonly found with nicotine, as well as encourage and develop the use of new products that are less harmful than cigarettes.

According to the statement, the FDA plans for the multi-year road-map to develop a public dialogue on how to improve cigarettes by achievable standards.

Altria shares dropped by a total 17 percent as a result of the announcement, from $74 per share at the start of the day to $61.43 just after the announcement. It closed at the end of the day at $66.97. Altria makes Marlboro and Parliament cigarettes in the United States.

Altria stock falls after FDA warning
Altria stock falls after FDA warning [Image by Gene J. Puskar/AP Images]

British American Tobacco also saw stocks plunge by nearly 7 percent. For both companies, it was the largest single day drop since the 2008 recession, according to Bloomberg. The company just finished a $50 billion deal to acquire Reynolds American Inc., another cigarette manufacturer.

Bonnie Herzog, a Wells Fargo senior executive, said the dip in price meant it was a great time for investors to purchase the stock, according to Barron’s.

“We’ve long believed the FDA taking a more comprehensive approach toward nicotine was a natural next step. Overall, while viewed as a ‘negative’ for cigarette manufacturers, we believe this could prove to be an opportunity over the long term for reduced-risk products,” she said.

Altria FDA warning stock decline
Altria FDA warning stock decline [Image by Diane Bondareff]

Although Altria’s stock plunged following the announcement, the company released a statement Friday commending the FDA for outlining a position that allows all stakeholders the opportunity to participate in discussions about a necessary regulatory framework.

“We think today’s announcement is an important evolution in the [FDA’s] approach to regulating tobacco products and a meaningful step forward in developing a comprehensive regulatory policy that acknowledges the continuum of risk,” Altria said in a statement, according to CNBC.

Gottlieb said in a briefing Friday that menthol and other flavored products may be banned as part of the rollout, due to their role in attracting young people to cigarette and nicotine products. However, the announcement also pushed back a deadline for e-cigarette makers to submit product applications to the FDA to 2022.

Some people have suggested that the move is not aggressive enough on the part of the FDA. Sen. Richard Blumenthal, D-Conneticut, told Bloomberg in an email, “I am concerned by delay in implementing the common sense rules finalized last year. By dragging their feet, the FDA risks rolling back the incredible gains we have made to protect a new generation from a lifetime of disease – and eventual death – brought on by nicotine addiction and tobacco use.”

In 2009, Obama signed into law the Family Smoking Prevention and Tobacco Control Act that gave the FDA broad authority to regulate nicotine, tar, and other harmful compounds in cigarettes. However, that law has not been used in any significant manner since it was signed until now.

[Featured Image By Paul Sakuma/AP Images]