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Shares in BAT and Imperial Brands light up as industry opponent quits the FDA

During his time at the regulator, chief commissioner Scott Gottlieb has served as a thorn in the side of big tobacco, having previously led efforts to ban menthol cigarettes and curb e-cigarette use among teenagers
Scott Gottlieb
Gottlieb said he would be leaving the role after less than two years to spend more time with his family

Shares in multiple tobacco firms lit up on Wednesday following news that the head of the US Food and Drug Administration (FDA) had unexpectedly resigned.

Scott Gottlieb, the FDA’s chief commissioner, said that he would be leaving the role after less than two years, to spend more time with his family.

READ: Tobacco stocks puff higher as vaping firm Juul gets surprise raid from FDA

During his time at the regulator, Gottlieb has served as a thorn in the side of big tobacco, having previously led efforts to ban menthol cigarettes and curb e-cigarette use among teenagers.

Investors in FTSE 100 firms British American Tobacco PLC (LON:BATS) and Imperial Brands PLC (LON:IMB) were glad to see the back of him, with shares rising 4% to 3,017p and 1.2% to 2,608.5p respectively in late-afternoon.

In a note, analysts at Deutsche Bank said Gottlieb’s departure was “rather abrupt and surprising”, given that he had denied intentions to leave the FDA two months ago. However, they said on balance, the news was “likely positive” for the sector.

Not everyone was as enthused, with broker Liberum saying that the share price swing was “not warranted”, given a lack of clarity on the direction Gottlieb’s replacement would take on tobacco controls.

“If the probability of a menthol ban and nicotine standard were say 75%, we wouldn't say this takes the probability of it going through much below 70%.”

Analysts also highlighted that the tobacco products division of the FDA was “clearly moving down a path toward greater restrictions”, particularly in regard to combustible products (i.e. normal cigarettes) and flavoured e-cigarettes.

“It will be interesting to watch if the new appointment will pursue more farmer, retailer and tobacco manufacturer friendly policies,” they said.

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