Company Releases 2015 Annual Report Letter
to Shareholders
22nd Century Group, Inc. (NYSE MKT: XXII), a plant
biotechnology company that is a leader in tobacco harm reduction,
released today the following letter that was included the Company’s
2015 Annual Report to Shareholders:
Dear Fellow Shareholders:
The year 2015 was a transformative year for our Company and the
year 2016 will be a time of even greater opportunity for 22nd
Century.
In 2015, our Company expanded our already dominant intellectual
property portfolio and attracted the interest and attention of
public health officials around the world. We submitted a Modified
Risk Tobacco Product (“MRTP”) application to the U.S. Food and Drug
Administration (“FDA”) for our BRAND A Very Low Nicotine cigarettes
that contain approximately 95% less nicotine than conventional
cigarette brands. The New England Journal of Medicine published two
articles (N Engl J Med 2015; 373:1340-1349 and N Engl J Med 2015;
373:1289-1291) about the results of a landmark clinical trial
utilizing 22nd Century’s proprietary SPECTRUM® research cigarettes.
Funded by the FDA and the National Institute on Drug Abuse
(“NIDA”), a division of the National Institutes of Health (“NIH”),
the study found that smokers of our SPECTRUM® Very Low Nicotine
cigarettes consumed far fewer cigarettes per day and doubled their
quit attempts versus smokers of cigarettes with conventional
nicotine content.
Simultaneous to these important milestones, 22nd Century began
to actively commercialize our significant intellectual property
portfolio. Our revenues increased from less than $530,000 in 2014
to more than $8.5 million in 2015. Indeed, our revenues in 2015
exceeded prior financial projections and were the highest in our
Company’s history.
That said, we are not yet profitable and we did not expand the
sales of our commercial products as quickly or as broadly as we
would have liked. We are disappointed that logistical issues
prevented us from rolling out MAGIC Very Low Nicotine cigarettes in
Europe beyond Spain. Nevertheless, all things considered, these are
merely “bumps in the road” and 22nd Century closed 2015 with a very
strong foundation for continued success and growth.
As discussed in earnings calls over the last year, 22nd
Century’s enormous potential – in the near term and the long term –
rests with our technology that gives us the potential to disrupt at
least two major industries. With ownership or exclusive control of
more than 200 issued patents and more than 50 pending patent
applications around the world, 22nd Century has a virtual monopoly
on the genes in the tobacco plant responsible for nicotine
production.
Ours is the only company in the world capable of growing tobacco
with 95% less nicotine than conventional plants… and, at the other
end of the spectrum, no other company can grow cigarette tobacco
with nicotine content as high as our proprietary plants. These
technologies – and the incredibly important independent clinical
trials being conducted with cigarettes made from our proprietary
tobaccos – are what make 22nd Century extraordinary. And these are
the things management intends to build on, in the near term, to
increase shareholder value.
To date, there have been numerous independent, scientific
clinical studies (Phase II and Phase III) using 22nd Century’s
proprietary Very Low Nicotine cigarettes. New clinical trials using
22nd Century’s SPECTRUM® research cigarettes are already underway.
Most notably, a Phase III study featuring 1,250 participants
compares two different approaches to help smokers lose their
addiction to nicotine: (A) an immediate reduction in
nicotine content in cigarettes to non-addictive levels by using
22nd Century’s proprietary Very Low Nicotine tobacco in such
cigarettes, or (B) a gradual reduction in nicotine content
in cigarettes to non-addictive levels by using 22nd Century’s
SPECTRUM® research cigarettes. No matter which protocol ultimately
prevails, each utilizes 22nd Century’s proprietary products, so
22nd Century will be the “winner” either way.
Based on the results of these and other independent clinical
trials, we believe 22nd Century will be the first company in the
world to achieve a Modified Risk Tobacco Product designation for a
combustible cigarette.
Our Company also believes that our X-22 smoking cessation
product in development may in fact prove to be the world’s most
effective smoking cessation aid. Importantly, unlike Pfizer’s
market-leading drug Chantix®, X-22 seems to pose no new side
effects to smokers. What’s more, smokers we have surveyed
overwhelmingly prefer the idea of quitting with a combustible
cigarette rather than using a pill, nicotine patch, lozenge or gum.
To this end, our Company has continued to identify and meet with
potential strategic partners in our efforts to establish a
non-dilutive joint venture to fund Phase III clinical trials for
X-22. Announcement of such a joint venture, as one might imagine,
would be a transformative event for 22nd Century. We will continue
our efforts on this important initiative in 2016.
While the harm reduction theory behind a Very Low Nicotine
cigarette that provides nicotine to smokers at “non-addictive”
levels is easy to understand, the development of a high nicotine
cigarette may seem counter-intuitive. However, we believe that
both approaches serve to reduce the harm caused by smoking,
though for very different reasons.
It has been hypothesized for many years that a high nicotine
tobacco – when combined with a low tar yield cigarette design –
will result in smokers inhaling far less smoke and far less
“tar”. Of course, smoke and “tar” are the primary
disease-causing agents of cigarettes. In the landmark publication,
Virtually Safe Cigarettes, 2000, noted epidemiologist Dr. Gio Batta
Gori lays the groundwork for our strategies succinctly, as
follows:
With the exception of extremely low nicotine
yield cigarettes, “smokers in general manage to utilize an average
of about 1 mg of nicotine from cigarettes of any brand, regardless of…smoking machine
yields.”
This statement addresses the phenomenon now commonly referred to
as “smoker compensation.” Especially for cigarettes with slightly
lower nicotine contents, like in cigarettes formerly referred to as
“light,” smokers compensate by taking more puffs, inhaling more
deeply, covering the dilution air holes on the filter, and/or
simply smoking more cigarettes in order to consume their desired
nicotine of approximately 1 mg per cigarette. What this means is
smokers find a way to achieve about 1 mg of nicotine no matter the
type of cigarette they smoke, unless the nicotine of a cigarette is
so low as to make smoker compensation impossible (which is true
with 22nd Century’s Very Low Nicotine SPECTRUM®, MAGIC, BRAND A,
and X-22 cigarettes).
In 2003 at the TabExpo Congress in Barcelona, Spain, Dr. Gori
reached the natural conclusion of his theory when he explained:
“…the higher the smoke concentration of
nicotine, the sooner inhalation is inhibited, the lower the dose of
whole smoke to the lungs, and the lower the risk to be
expected.”
In other words, as smokers make the adjustment to a higher
nicotine cigarette, they naturally consume less “tar” and less
smoke – primarily because the nicotine their bodies crave is more
readily and more efficiently available when smoking a high nicotine
tobacco cigarette. And with less smoke consumption, the risks for
heart disease, lung disease and cancer also lessen.
Accordingly, we believe that 22nd Century’s BRAND B higher
nicotine cigarettes may in fact qualify for Modified Risk Tobacco
Product status with the FDA. Based on the work of Dr. Gori and
others, we have developed BRAND B cigarettes with relatively high
nicotine content in combination with moderate tar content. Thus,
when comparing BRAND B to conventional cigarettes, BRAND B has a
tar-to-nicotine ratio that is more than 60% lower than that found
in conventional cigarette brands.
So, for smokers who wish to reduce their exposure to nicotine
and/or to quit smoking altogether, 22nd Century has developed
naturally growing tobacco with the world’s lowest nicotine content.
At the same time, for the more than 20 million American smokers who
accept the risks associated with smoking, do not wish to quit, and
are not concerned with decreasing their exposure to nicotine, our
Company has created BRAND B not to give smokers more nicotine – but
to deliver nicotine more efficiently than conventional cigarettes
with a reduced exposure to the smoke and “tar.” It is our belief
that 22nd Century’s BRAND B cigarettes reduce smokers’ exposure to
“tar” and smoke by more than 60% as compared to conventional
cigarettes. We believe this product has truly enormous market
potential.
We expect BRAND B will be of great interest to pragmatic public
health officials. At the recent March 2016 Annual Meeting of the
Society for Research on Nicotine and Tobacco, the FDA presented a
summary of the initial results of its own recently completed
clinical study on dual users of both cigarettes and filtered cigars
in which the FDA found that such smokers inhaled less smoke when
they smoked filtered cigars than when they smoked conventional
cigarettes. This result supports the theory held by our Company
that a higher nicotine product, like a filtered cigar or a filtered
cigarette with high nicotine tobacco, will result in the intake of
less smoke and less “tar” by the user. For these reasons, in 2016
we plan to meet with the FDA to discuss conducting “proof of
concept” exposure studies for BRAND B extremely low tar-to-nicotine
ratio cigarettes. If the results of these exposure studies allow,
and provided sufficient funds are available, we will begin work on
a Modified Risk Tobacco Product application for BRAND B cigarettes
in order to request from the FDA the right to disclose to consumers
that BRAND B exposes smokers to substantially less “tar” and
substantially less smoke than the current market leading brands of
cigarettes in the United States.
In 2016, we will also continue our scientific research and
development activities relating to the cannabis plant. We currently
conduct all of our research and development on the cannabis plant
in fully licensed laboratories in Vancouver, Canada. In the
cannabis plant, the Company’s unique intellectual property allows
22nd Century to regulate the “active ingredients” in the plant,
which are known as cannabinoids. With this technology we intend to
develop cannabis plants with low levels of THC for the commercial
hemp market and plants with high levels of CBD for the legal
medical marijuana markets. These initiatives could provide
significant future revenues for our Company.
In summary, 22nd Century remains uniquely positioned as a plant
biotechnology company with the important primary mission of
reducing the harm caused by smoking; we are also very excited about
our opportunities to develop important medical marijuana plants. We
have made huge strides over the last 12 months on many scientific
initiatives and we are proud of what we have accomplished. While we
are not yet profitable, we are certainly putting “points on the
board” both in terms of the substantial increases in revenues and
in terms of our strategic accomplishments.
We also continue to see great progress with a greater number of
independent clinical trials utilizing our proprietary products. As
we continue to make our own MRTP application submissions to the
FDA, we believe 22nd Century’s technology will be widely recognized
as a true paradigm shift for at least two industries. We believe
that ultimately capturing a share of the growing smoking cessation
market and/or a mere fraction of a percent of the U.S. cigarette
market with one or more of our Modified Risk Tobacco Products in
development will transform our Company into a true industry
leader.
On behalf of the 22nd Century Group management team and our
Board of Directors, we thank you for being part of our family of
shareholders. We look forward to meeting many of you at our annual
shareholder meeting in April and we look forward to sharing
exciting Company developments with everyone in the weeks and months
to come.
Best regards,
Henry Sicignano IIIChief Executive Officer, President &
Director
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company focused on
technology which allows it to increase or decrease the level of
nicotine in tobacco plants and the level of cannabinoids in
cannabis plants through genetic engineering and plant breeding. The
Company’s primary mission is to reduce the harm caused by smoking.
22nd Century currently owns or exclusively controls more than 200
issued patents and more than 50 pending patent applications around
the world. The Company’s strong IP position led to a licensing
agreement with British American Tobacco (“BAT”), the world’s second
largest tobacco company. Visit www.xxiicentury.com,
www.magiccigarettes.com and www.redsuncigarettes.com for more
information.
Cautionary Note Regarding Forward-Looking Statements: This press
release contains forward-looking information, including all
statements that are not statements of historical fact regarding the
intent, belief or current expectations of 22nd Century Group, Inc.,
its directors or its officers with respect to the contents of this
press release, including but not limited to our future revenue
expectations. The words “may,” “would,” “will,” “expect,”
“estimate,” “anticipate,” “believe,” “intend” and similar
expressions and variations thereof are intended to identify
forward-looking statements. We cannot guarantee future results,
levels of activity or performance. You should not place undue
reliance on these forward-looking statements, which speak only as
of the date that they were made. These cautionary statements should
be considered with any written or oral forward-looking statements
that we may issue in the future. Except as required by applicable
law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform
these statements to reflect actual results, later events or
circumstances, or to reflect the occurrence of unanticipated
events. You should carefully review and consider the various
disclosures made by us in our annual report on Form 10-K for the
fiscal year ended December 31, 2015, filed on February 18, 2016,
including the section entitled “Risk Factors,” and our other
reports filed with the U.S Securities and Exchange Commission which
attempt to advise interested parties of the risks and factors that
may affect our business, financial condition, results of operation
and cash flows. If one or more of these risks or uncertainties
materialize, or if the underlying assumptions prove incorrect, our
actual results may vary materially from those expected or
projected.
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version on businesswire.com: http://www.businesswire.com/news/home/20160414006024/en/
Investor Relations:IRTH CommunicationsAndrew Haag,
866-976-4784xxii@irthcommunications.comorRedington, Inc.Tom
Redington, 203-222-7399
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