Company believes major licensing contract or
strategic partnership could generate hundreds of millions of
dollars in annual revenue
22nd Century Group, Inc. (NYSE MKT: XXII), a plant biotechnology
company that is focused on tobacco harm reduction and cannabis
research, announced today that the Company has issued the following
letter to shareholders as part of 22nd Century Group’s 2016 Annual
Report:
****************************
Dear Fellow Shareholders:
In 2016, 22nd Century’s Very Low Nicotine technology captured
the attention of scientists and public health officials around the
world. Over the course of the year, we reported to shareholders the
results of six new independent clinical studies investigating the
efficacy and comparative safety of Very Low Nicotine (VLN)
cigarettes among broad population groups, as well as among several
at-risk groups. At the same time, well-respected, independent
scientists published four compelling recommendations calling on
governments worldwide to adopt 22nd Century’s VLN cigarettes as a
central part of efforts to reduce smoking prevalence around the
world. Chief among the organizations endorsing our Company’s VLN
cigarettes was the World Health Organization (WHO) Study Group on
Tobacco Product Regulation
(www.who.int/tobacco/publications/prod_regulation/nicotine-reduction/en/).
The WHO report compiled and summarized the available science
behind VLN cigarettes and recommended “a policy of limiting the
sale of cigarettes to brands with a nicotine content that is not
sufficient to lead to the development and/or maintenance of
addiction.” The WHO report states: “No specific amount of nicotine
has yet been identified as the absolute threshold for addiction;
however, it is likely to be equal to or possibly less than 0.4 mg/g
of dry cigarette tobacco filler.” 22nd Century is the only company
in the world capable of producing combustible tobacco cigarettes at
this very low level of nicotine – without any artificial extraction
or chemical processes.
The cost of the science conducted in 2016 on our Company’s
behalf was staggering. In fact, 22nd Century was the beneficiary of
tens of millions of dollars of clinical trials that were primarily
funded by the National Institute of Health (NIH) and the U.S. Food
and Drug Administration (FDA). Based on these and previous
independent clinical trials, pragmatic countries in many parts of
the world have identified three likely paths to integrate 22nd
Century’s novel VLN tobacco products as a key ingredient in their
respective tobacco control policies: (1) approval of BRAND A for
sale as an over-the counter reduced exposure tobacco product, (2)
approval of X-22 as a prescription-based smoking cessation aid, and
(3) mandate of a maximum nicotine level for cigarettes in line with
the WHO’s recommendation of ≤ 0.4 mg per gram of tobacco (a 95%
reduction in nicotine versus conventional cigarette brands). In
2017, we stand on the precipice of the adoption of VLN tobacco as a
harm reduction strategy in one or more of the 180 WHO-member
countries.
Building on 2015’s commercial success, in 2016 we once again
reported record sales. From a revenue base of $8.5 Million in 2015,
we grew gross sales nearly 50% to over $12 Million in 2016. Though
we ultimately expect major licensing contracts or strategic
partnerships to generate hundreds of millions of dollars in
revenue, we are very proud of our organic growth and we look
forward to reporting substantially greater sales in 2017. However,
in an effort to sharpen our focus on international regulatory
approvals and on public policy initiatives in various countries in
the first half of 2017, we have made the decision to reallocate
Company resources from sales and marketing and toward regulatory
affairs.
Many shareholders have suggested we take this approach. In fact,
some shareholders have suggested that 22nd Century forego
all commercial activities until we receive regulatory
approvals to freely sell and advertise our products as “reduced
risk” or, at the very least, as “Very Low Nicotine.” We have not,
however, decided to go quite this far. We continue to believe
annual sales growth is an important metric of success and we will,
therefore, strive to achieve record annual revenues once again this
year. After a soft first quarter, revenues from already signed
contracts will produce total gross revenue for 2017 that will
greatly exceed 2016 total sales.
While our revenues have grown steadily, we recognize that the
greatest opportunity for our Company is not in the sales of
conventional commercial products, but is of course in the licensing
of our technology and in the sales of our proprietary smoking
cessation products. In recognition of this fact, and as a result of
the publication of several very positive, new clinical trial
results with VLN cigarettes, we expect that our regulatory efforts
will significantly drive the future sales of our X-22 smoking
cessation aid and our Modified Risk Tobacco Products in
development. Ultimately, we expect that regulatory and scientific
successes with these products will lead to truly explosive
commercial success – amounting to hundreds of millions of dollars
annually.
Our more pronounced attention on regulatory efforts relating to
the differentiation of our unique products is an intentional and
planned progression of our commercial strategy, especially in light
of the tightening of tobacco control laws around the world. For
example, since the spring of 2016, European Union law no longer
permits us to disclose the nicotine yield on our MAGIC cigarette
packaging. And so, rather than continuing to expand MAGIC sales
without the ability to disclose the remarkably low nicotine yield
of our Very Low Nicotine MAGIC cigarettes, we have opted to first
secure European regulatory approvals for our Very Low Nicotine
cigarettes. On a country-by-country basis, we have identified
appropriate regulatory pathways which will lead to the ability to
introduce Very Low Nicotine cigarettes together with an accurate
disclosure of their trace nicotine content.
An example of the headway we have made in our pursuit of
regulatory approval comes from the United Kingdom. In the fourth
quarter of 2016, we recognized a unique opportunity in the U.K.
after the Medicines and Healthcare Products Regulatory Agency
(MHRA) approved a vape product called E-Voke as a smoking cessation
device. (E-Voke is made by Nicovations Limited, which is a part of
British American Tobacco.)
The E-Voke device is described as an electronic inhaler.
Interestingly, the E-Voke device that was approved for smoking
cessation in the U.K. delivers with each use about 0.4 mg of
nicotine, or about 10 times the machine-generated smoke yield of
nicotine of 22nd Century’s X-22 Very Low Nicotine cigarettes.
The circumstances surrounding E-Voke’s application and approval
in the U.K. as a smoking cessation device led us to investigate
following a similar path in the U.K. for X-22. Accordingly, we
recently contacted the MHRA and submitted a preliminary information
package. Our submission referenced numerous, independent clinical
trials that used our proprietary Very Low Nicotine tobacco,
including a clinical trial that was conducted in the U.K. at the
Queen Mary University of London. Officials from MHRA have reviewed
our submission and have already offered helpful and
straight-forward advice to 22nd Century. At this point, we are
working to prepare a complete dossier on X-22 as a
prescription-based smoking cessation product for the U.K. for
review by MHRA.
While we are investigating the regulatory pathways in numerous
countries around the world – starting with the most promising
countries – we are also continuing our efforts to achieve
regulatory approval for our VLN products here in the U.S. As
recently announced, we requested and secured a meeting with FDA’s
Center for Drug Evaluation and Research (CDER). At the meeting,
which will take place in June 2017, we will seek agreement from FDA
on an appropriate path for X-22 to become a prescription-based
cessation aid for smokers in the United States – a huge step
forward for our Company!
In the meantime, following guidance provided by FDA’s Center for
Tobacco Products (CTP), we are working to resubmit our Modified
Risk Tobacco Product (MRTP) application for BRAND A Very Low
Nicotine cigarettes as an over-the-counter product with reduced
exposure to nicotine. We will separate our application to the CTP
into a Pre-Market Tobacco (PMT) application and an MRTP application
in order to take advantage of a shorter review process by the CTP
for the PMT application. We anticipate filing a more expansive and
robust PMT application and MRTP application in the first half of
2017.
2016 was also the year that 22nd Century opened and began
operating our own fully functional biotechnology laboratories in
Buffalo, New York, with our small but highly experienced team of
scientists and research associates. Although 22nd Century already
owns an impressive portfolio of tobacco technologies, our
researchers are ambitiously working to produce improved “second
generation” non-GMO plants, as well as brand new tobacco and
cannabis technology. Non-GMO varieties will open new international
markets for 22nd Century and will enable us to protect further our
technology with new patents and plant variety protection, thus
extending our competitive advantage.
At the start of 2016, our cannabis portfolio consisted only of
licensed intellectual property in the cannabinoid biosynthetic
pathway and a newly signed research agreement with Anandia
Laboratories in Vancouver, Canada.
During 2016, our sponsored research at Anandia produced several
independent lines of industrial hemp that have either zero THC or
zero total cannabinoids. This is a major breakthrough that has the
potential to transform completely the hemp industry. We are
diligently working to fine-tune these new varieties and plan to
commercialize them as soon as this year and no later than 2018.
Different hemp/cannabis plant varieties produced through our
Company’s sponsored research at Anandia also express other valuable
cannabinoid profiles and are thus good candidates for extraction of
cannabinoids for medical research purposes. To that end, we are
talking with a number of universities to develop 22nd Century’s
medical marijuana varieties as sources of cannabinoids for medical
testing and for use in new medicines.
In December 2016, we signed a new cannabis research agreement
with the University of Virginia (UVA). Professor Michael Timko and
his colleagues at UVA are starting an extensive new cannabis
biotech project aimed at developing new technologies for improving
hemp through the utilization of our proprietary intellectual
property and our unique and advanced plants that we are bringing to
UVA. Our agreement with UVA is a very exciting step forward for our
Company in the field of hemp/cannabis research; it serves as a
prototype for the types of research partnerships that 22nd Century
seeks in this emerging industry. 22nd Century co-owns with UVA all
results and intellectual property resulting from the sponsored
research; further 22nd Century has the sole and exclusive rights to
commercialize all results of our collaboration with UVA.
Looking to the future, we are extremely optimistic for 2017.
22nd Century has been granted a guidance meeting with CDER/FDA for
our X-22 smoking cessation aid. 89% of smokers that we have
surveyed report that X-22 would be their top or first choice to
help them quit smoking. We firmly believe that smoking cessation
cigarettes made from 22nd Century’s proprietary Very Low Nicotine
tobacco could save millions of lives and billions of dollars in
healthcare costs.
We are also encouraged by CTP/FDA’s feedback on our MRTP
application and we look forward to working cooperatively with the
FDA to obtain approval to market BRAND A as an over-the-counter,
modified risk tobacco product that significantly reduces smokers’
exposure to nicotine.
Our own laboratories and new research agreements with
third-parties will result in us co-owning or solely owning,
outright, all intellectual property that is developed in our
research with third parties and used in our new products. Our
researchers in Buffalo are developing a new generation of non-GMO
Very Low Nicotine tobacco. Our zero THC hemp lines are the genesis
of a whole new generation of industrial hemp products, and we stand
to be a major force in the medical marijuana industry which is
predicted to be a multi-billion dollar market by 2020.
Achieving our scientific goals – while also securing important
regulatory approvals for our novel technologies – will enable our
Company to grow by quantum leaps. We are confident that achieving
these goals will ensure that 22nd Century shareholders are
handsomely rewarded for their investments.
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.
Sincerely,
Henry Sicignano IIIPresident & Chief Executive Officer
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. Visit www.xxiicentury.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, 2016, filed on March 8, 2017,
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/20170321005533/en/
22nd Century GroupInvestor Relations:IRTH CommunicationsAndrew
Haag, 866-976-4784xxii@irthcommunications.com
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