UPDATE 2-US advisers mixed on menthol smokes, Lorillard up
* FDA releases partial draft from menthol committee
* Lorillard shares up 1.6 pct
* Analysts: proposal may not change final view on ban
* Agency also kicks off dissolvable tobacco review (Adds more details on smokeless tobacco, reaction; updates share prices)
By Susan Heavey
WASHINGTON, March 1 (Reuters) - Some U.S. advisory panel members say there is a lack of evidence to show menthol cigarettes expose smokers to higher risk of disease, boosting shares of top-menthol maker Lorillard Inc (LO.N) on Tuesday.
"The evidence is insufficient to conclude that smokers of menthol cigarettes face a different risk of tobacco-caused diseases than smokers of non-menthol cigarettes," advisers to the Food and Drug Administration said in part of a proposed report due to the agency later this month.
However, other members of the FDA's tobacco advisory panel said the minty flavoring might make cigarettes more addictive.
Their comments, released by the FDA late on Monday, come as the agency's advisers prepare to deliver their final recommendation by March 23 on whether to ban or otherwise restrict menthol cigarettes.
An outright ban could knock the U.S. tobacco market, where menthols make up roughly 30 percent of the nation's more than $83 billion in annual cigarette sales, according to Euromonitor International.
Several analysts said the proposals' two views essentially offset each other, making it still unclear how the FDA's panel will finally come down on the issue.
Davenport & Co analysts continued to urge investors to be cautious. "We continue to expect the (tobacco) committee could recommend a ban of menthol in cigarettes," they said in a research note on Tuesday.
Overall, the initial drafts from just two chapters of an eight-chapter preliminary report are still troubling for the industry, Stifel Nicolaus analysts said. "We cannot call these chapters a net positive for the U.S. tobacco stocks."
The FDA is not bound to follow its panelists' advice and has no deadline for action. Lorillard and Reynolds American Inc's (RAI.N) R.J. Reynolds Tobacco Co have also sued to block the agency from considering the panel's recommendations.
The FDA is weighing the impact of menthol cigarettes in the wake of a 2009 law giving it regulatory power over the industry. The measure specifically bans chocolate, fruit and other flavorings that lawmakers said enticed youth to start smoking.
But the law stopped short of a ban on mint-flavored mentholated cigarettes and instead called on the FDA to seek advice from a panel of outside experts before determining whether menthol cigarettes should also be taken off the U.S. market.
A ban on menthol would hurt Lorillard, whose Newport brand is the top-selling menthol cigarette in the nation, accounting for 13 percent of all cigarettes sold and more than one-third of all menthol ones.
On Friday, Lorillard and Reynolds filed suit to block the FDA's consideration of the panel report in making the final decision, saying panelists are biased. R.J. Reynolds sells the Kool brand and a menthol version of its Camel product. [ID:nN25138916]
Altria Group Inc's (MO.N) Philip Morris also sells a menthol version of its Marlboro cigarette unit and has spoken out against a ban. It is not part of the lawsuit.
Lorillard shares rose 1.6 percent to close at $77.98 on the New York Stock Exchange after gaining more than 5 percent in premarket trading. Reynolds American fell almost 1 percent to $33.99 after gaining as much as 1.5 percent premarket.
Separately on Tuesday, the FDA said it was kicking off its review of dissolvable tobacco products, something also called for under the 2009 law. A report from the same tobacco advisory committee is due by March 22, 2012, according to the agency's notice, posted online at bit.ly/ib0InV.
Such products, made by Star Scientific Inc CIGX.O and R.J Reynolds, include tobacco powder and come as dissolvable mouthstrips, breathmint-like tablets and toothpick-like sticks.
Critics argue they are just as dangerous as cigarettes and that their smokeless form and variety of flavors also attract children and teenagers. Companies tout them as an alternative for smokers faced with a growing number of smoke-free places.
Shares of Star Scientific rose 2.2 percent to $1.84 on Nasdaq. (Additional reporting by Ben Klayman in Detroit; Editing by Lisa Von Ahn, Dave Zimmerman and Richard Chang)
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