U.S. tobacco stocks are getting smoked this morning (led by a 12% crash in British American Tobacco and Philip Morris) after an FDA statement said it plans to pursue lowering nicotine in cigarettes to non-addictive levels.

Bloomberg reports,

The U.S. Food and Drug Administration will work to cut the amount of nicotine in cigarettes to nonaddictive levels, with the goal of preventing thousands of tobacco-related deaths a year. The surprise move sent shares of cigarette stocks plummeting.

While the FDA’s effort is likely to be heavily opposed by cigarette makers such as Altria Group Inc. and British American Tobacco Plc, the move by the agency is aimed at one of the U.S.’s biggest causes of preventable illness that the FDA says is responsible for 480,000 deaths a year as well as hundreds of billions of dollars in medical costs and lost productivity.

“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,” FDA Commissioner Scott Gottlieb said in a statement announcing the move. “Unless we change course, 5.6 million young people alive today will die prematurely later in life from tobacco use.”

The move threatens to deal a crushing blow to tobacco companies, which are already coping with shrinking cigarette volumes in the U.S. It also puts pressure on the industry to speed so-called reduced-risk products to market.

This is British American Tobacco's biggest drop in over 20 years!

European tobacco stocks are also tumbling: BATS LN - 8%, IMB LN -4%, SWMA SS -2%.