UPDATE 1-U.S. panel rejects most of Philip Morris' iQOS tobacco device claims

(Adds details from panel vote, background on product, stock price, other details)

WASHINGTON, Jan 25 (Reuters) - Philip Morris International Inc should not be allowed to claim that its iQOS electronic tobacco device can reduce the risk of tobacco-related diseases, an advisory panel to the U.S. Food and Drug Administration concluded on Thursday.

Philip Morris shares initially fell as much as 6.8 percent on the news but pared losses to trade down 2.7 percent at $107.59 in early afternoon.

The panel concluded that Philip Morris had not proven that iQOS, which heats tobacco but does not burn it, reduces harm compared with cigarettes.

It did conclude that the product exposes users to lower levels of harmful chemicals but said the company had not shown that lower exposure is reasonably likely to translate into a measurable reduction in disease or death.

IQOS is a sleekly packaged electronic device that heats tobacco rather than burning it. The aerosol produced by iQOS contains roughly 95 percent fewer harmful chemicals than cigarettes according to data presented by the company at a two-day meeting that concluded with the vote.

The FDA is expected to decide whether Philip Morris can sell iQOS within the next few months. It will decide separately whether to authorize the modified-risk claims.

If cleared, iQOS would be sold in the United States by Philip Morris' partner Altria Group Inc. Altria shares were down 2 percent at $70.12 in early afternoon.

Last month, a Reuters investigation described irregularities in the clinical trials that supported Philip Morris' iQOS application to the FDA. (https://www.reuters.com/investigates/special-report/tobacco-iqos-science/) and (http://www.reuters.com/investigates/section/pmi (Reporting by Toni Clarke in Washington; Editing by Susan Thomas and Matthew Lewis)