(Adds details from panel discussion, updates stock prices)
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 compared with cigarettes, an advisory panel to the U.S. Food and Drug Administration said on Thursday.
The panel concluded that Philip Morris had not proven that iQOS - a sleek, penlike device that heats tobacco rather than burning it - reduces harm compared with cigarettes. The company's shares were down 2.8 percent at $107.50 on Thursday afternoon after falling as much as 6.8 percent.
IQOS is used by nearly 4 million people in 30 markets outside the United States but needs FDA authorization to be marketed in America.
The panel did conclude that the product exposes users to lower levels of harmful chemicals but said the company had not shown that lowering exposure to those chemicals is reasonably likely to translate into a measurable reduction in disease or death. Philip Morris needs to show both in order to claim the product modifies the risk of cigarettes.
Some panelists were concerned that not all the harmful or potentially harmful chemicals in cigarettes were significantly reduced in the iQOS aerosol. Philip Morris presented data showing an overall exposure reduction of about 95 percent.
The FDA is not bound to follow the recommendations of its advisory panels and may not agree with the group's logic. The agency recently proposed a broad policy shift that would reduce nicotine in cigarettes to "non-addictive" levels while increasing development of lower-risk alternatives for those unable to quit.
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 2.1 percent at $70.04 in afternoon trading.
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)