The proposed regulations are broadly speaking "as expected, and not as restrictive as some had feared," wrote Herzog, who has predicted that e-cigs could overtake traditional cigarettes in total sales within a decade. Tobacco cigarette sales are currently about $80 billion annually.
Herzog warned, however, that "our main concern remains around e-cig/e-vapor innovation, which, if stifled, could dramatically slow down industry growth and conversion from combustible cigs, which would ultimately result in net negative public health impact."
Rob Burton, director of corporate regulation affairs at White Cloud Electronic Cigarettes, was pleased there was no outright ban on flavoring proposed by the FDA. White Cloud sells e-cig liquid in five different strengths—including zero-percent nicotine—and in 19 different flavors.
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"We feel that just because you're an adult doesn't mean that you shouldn't have a choice of flavors," Burton said. "The wider the choice, the better the opportunity for them to switch to the alternative" from traditional cigarettes, he said.
Burton also was happy that the proposed rules open the door to the possibility that e-cig manufacturers will be able to make health-based claims. The FDA said Thursday that such "direct and implied claims of reduced risk" could be made "if the FDA confirms that scientific evidence supports the claim and that marketing the product will benefit public health as a whole."
Although e-cig companies currently do not make such health-based claims, many of their users have adopted the products in the belief that they are significantly safer than tobacco cigarettes, even as extensive studies on the new products has yet to be performed.
Smoking tobacco products leads to the deaths of an estimated 480,000 people in the U.S. each year.
That death toll was echoed in a response to the proposed regulations by Craig Weiss, president and CEO of NJOY, one of the top-selling e-cig companies.
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"By resisting calls to regulate ahead of—and indeed in opposition to—the science and the data, today the FDA has brought NJOY a giant step closer to achieving its corporate mission of obsoleting cigarettes," Weiss said. "There are encouraging signs that 10 years from now, this date will be remembered as the beginning of the end of the tobacco epidemic."
That said, the tobacco companies themselves are poised to exploit their huge piles of cash and retail-channel distribution networks as they try to gain market share in e-cigs.
Wells Fargo's Herzog, in her research note, wrote that she expects the "e-cig battleground" to get hotter this year, "especially as the 'Big 3' tobacco manufacturers push further into the category."
"We expect the 'Big 3' to ultimately have a meaningful presence and to accelerate growth in the category," Herzog wrote.
Altria, in a prepared statement, said it and its tobacco companies "have expressed support of the FDA extending appropriate regulatory authority over cigars and e-vapor products."
"With these proposed deeming regulations, we believe FDA has an unprecedented opportunity to advance public health goals by recognizing that some types of tobacco products may have significantly lower risks compared to cigarettes," Altria said. "We believe FDA should adopt a regulatory framework that recognizes the differences in tobacco products and fosters innovation that may benefit public health. The framework must be grounded in science and evidence. FDA is in the best position to assess the science and determine how best to communicate relative risk information to consumers."
"We are in the process of reviewing the proposed regulations and will provide our perspective to the FDA."
In its own statement, Reynolds American said, "We are currently reviewing the proposed deeming regulation and are not in a position to comment on anything specific at this time."
"It's important to note that the issuance of the draft deeming regulation simply begins a process that includes a 75-day public comment period. We will provide comments on the draft regulation and participate in the rulemaking process," Reynolds said. "Additionally, the issuance of the proposed deeming regulation does not affect the current marketplace for e-cigarettes."
—By CNBC's Dan Mangan.