(Reuters) - Altria Inc took a $4.5 billion hit from its investment in embattled electronic-cigarette maker Juul Labs Inc on Thursday, the latest setback for the startup as a regulatory crackdown on vaping threatens to upend the fast-growing industry.

The writedown highlights the spectacular reversal in Juul’s fortunes in the last few months, with its valuation shrinking by more than a third to roughly $24 billion since Altria bought a 35% stake in December.

With the deal, the U.S. maker of Marlboro had hoped to tap the market for vaping in the face of declining smoking rates and cigarette sales in the United States.

But increased political backlash and regulatory bans following a surge in teenage vaping have clouded Juul’s future and were largely responsible for the collapse of Altria’s merger talks with Philip Morris last month.

Juul appointed a longtime Altria executive as its CEO last month in a bid to rebuild its image. The company has also cut jobs, suspended advertising in the United States and revamped its management.

“While we had a range of scenarios when we made the investment, we did not anticipate this dramatic a change in the e-vapor category,” Altria Chief Executive Officer Howard Willard said on a conference call with analysts.

Willard said growth in e-cigarette volumes is likely to slow down in the United States compared with the company’s original estimates.

Altria is not the only company taking a hit from the slump in Juul’s valuation. Fidelity Investments’ $26.7 billion Blue Chip Growth Fund recently cut the value of its stake in the vaping company by nearly half.

U.S. health regulators have announced plans to pull flavored e-cigarette products from the market, and several states and cities, including Juul’s home territory San Francisco, have moved to ban them.

Antitrust enforcers are also probing Altria for potentially exerting influence over Juul Labs Inc in the resignation of former CEO Kevin Burns, who oversaw the San Francisco-based company’s meteoric growth from a 300-person startup to an international operation employing thousands.

Altria on Thursday cited a number of reasons for the writedown, including higher chances of the U.S. Food and Drug Administration removing flavored e-vapor products from the market as well as bans in the United States.

While vaping devices, which vaporize a liquid containing nicotine, have borne the brunt of the regulatory crackdown globally, the FDA has authorized tobacco heating product iQOS, a rival non-smoking technology.

Altria holds the rights to sell iQOS in the United States.

“We believe that, with current adult smoker trends and e-vapor disruption, it’s an opportune time to expand the availability of these options,” Willard said in its earnings statement.

The company swung to a net loss of $2.60 billion in the third quarter due to the charge, and cut its profit growth forecast for the next three years.

Altria’s shares were down 0.5% at $45.74.