The Food and Drug Administration is considering the health impact of dissolvable tobacco, leaving investors concerned that new regulations may hurt Reynolds American (NYSE: RAI). Shares in the tobacco giant dropped nearly 2.5% in early trading on Thursday. With experts urging regulators to consider the candy-like appeal of flavored dissolvable tobacco on children, there may be good reason to worry. Dissolvable tobacco differs from ordinary chewing tobacco in that it dissolves in the mouth.

Reynolds has invested heavily in dissolvable tobacco products such as Camel Orbs, Camel Strips and Camel Sticks, as consumer demand for smokeless tobacco grows. Camel Dissolvables brands are marketed as "a convenient alternative to cigarettes, and moist snuff for adult tobacco consumers." Previously, Reynolds was able to capture 70% of the snus market with its Camel Snus product, and it hopes to repeat that success. Snus is a moist powder tobacco product which is contained in a pouch which users place under their lip. FDA scrutiny would endanger those plans and leave Reynolds in search of other engines for revenue.