The FDA has accepted for review the
Company’s MRTPA for VLNTM cigarettes
22nd Century Group, Inc. (NYSE American: XXII), a plant
biotechnology company that is focused on tobacco harm reduction,
Very Low Nicotine Content tobacco, and hemp/cannabis research,
announced today that the Company filed its 2018 Annual Report on
Form 10-K with the U.S. Securities and Exchange Commission. The
Company will provide a business update for investors on a
conference call to be held Thursday, March 7, 2019, at 4:00 PM
(EST).
Henry Sicignano III, President and Chief Executive Officer of
22nd Century Group, together with John T. Brodfuehrer, Chief
Financial Officer, will conduct the call. Interested parties are
invited to participate by dialing: (877) 260-1479 and using
Conference ID 8821519. The conference call will consist of an
overview of recent business highlights and a summary of the
financial information presented in the Company's 2018 Annual
Report. Immediately thereafter, there will be a question and answer
segment open to callers.
For the fourth quarter of 2018, 22nd Century’s
accomplishments and notable events include:
On October 11, 2018, Dr. Lynn Hull, Lead Pharmacologist at the
FDA’s Center for Tobacco Products, held a public webcast
summarizing the published science supporting the FDA’s proposed new
rule to require that all cigarettes sold in the United States
contain only minimally or non-addictive levels of nicotine.
Entitled “Science to Inform a Tobacco Product Standard for the
Level of Nicotine in Combusted Cigarettes,” Dr. Hull’s presentation
featured prominently many independent clinical trials conducted
with 22nd Century’s Very Low Nicotine Content (“VLNC”) SPECTRUM®
research cigarettes. Dr. Hull contrasted VLNC cigarettes with
so-called “light” cigarettes by clarifying that VLNC cigarettes
contain minimally or non-addictive levels of nicotine as compared
to traditional “light” cigarettes that contain just as much
nicotine as traditional cigarettes. In discussing “light”
cigarettes, Dr. Hull remarked: “They are designed to appear ‘light’
to the user, but can deliver as much nicotine as traditional
cigarettes. These products have no benefit to public health.” In
contrast to the highly addictive tobacco cigarettes marketed by Big
Tobacco companies, 22nd Century’s proprietary VLNC tobacco and
technology make possible tobacco cigarettes with a nicotine content
of just 0.4mg/g, which is more than 95% less nicotine than
conventional cigarettes (conventional cigarettes contain
approximately 20mg of nicotine per gram of tobacco). Dr. Hull
concluded her webcast by stating that it is FDA’s belief that
rendering cigarettes minimally addictive by reducing their nicotine
content could help current users quit and prevent future users from
becoming addicted and escalating to regular use.
On November 7, 2018, 22nd Century publicly noted that it had
received preliminary results from two of its three
Company-sponsored studies that are part of the Company’s Modified
Risk Tobacco Product application (“MRTPA”) to be submitted to the
FDA in December 2018. The two “Abuse Liability” studies (one for
regular VLNC cigarettes and one for menthol VLNC cigarettes) were
designed to measure the potential for the Company’s VLNC cigarettes
to create and sustain addiction. As expected, the Company’s VLNC
cigarettes preliminarily showed a substantially lower potential for
abuse. The third Company-sponsored clinical trial, measuring the
number of cigarettes consumed per day for participants switching to
VLNC cigarettes over the course of 6 weeks, is on schedule and
nearing completion. The Company anticipates that this third study
will show that users who switch to VLNC cigarettes smoke fewer
cigarettes per day and show reduced biomarkers of exposure to
nicotine and other smoke components.
On December 4, 2018, 22nd Century submitted a Premarket Tobacco
product application (“PMTA”) with the FDA seeking authorization to
commercialize the Company’s “BRAND A” cigarette products under the
proposed brand name “VLNTM” (the product name is subject to FDA
approval). 22nd Century’s proposed VLNTM cigarettes are made with
22nd Century’s proprietary VLNC tobacco and, as a result, contain
very low levels of nicotine. A PMTA marketing order is a
prerequisite to commercializing any new tobacco product in the
United States. 22nd Century’s proposed VLNTM cigarettes are modeled
after the Company’s VLNC SPECTRUM® research cigarettes. 22nd
Century’s PMTA references more than 50 independent studies
conducted with the Company’s proprietary VLNC SPECTRUM® research
cigarettes.
On December 20, 2018, 22nd Century publicly noted that the
Agricultural Improvement Act of 2018, which is also known as the
“2018 Farm Bill,” was enacted and, among other things, further
legalized hemp under U.S. federal law, but with compliance still
being required with all applicable state hemp laws. Hemp plants are
Cannabis Sativa L. plants with not more than 0.3% THC (the compound
in cannabis responsible for psychotropic effects). The new federal
2018 Farm Bill will allow 22nd Century to expand its hemp research
activities, to add to its hemp/cannabis intellectual property
portfolio, and to increase its hemp germplasm library through the
legal interstate commerce of proprietary hemp seeds/plants, all in
compliance with applicable state laws. Cannabis plants with higher
levels of THC (i.e. marijuana) remain illegal under U.S. federal
law.
On December 27, 2018, 22nd Century submitted to the FDA the
Company’s MRTPA for its BRAND A product under the proposed brand
name of VLNTM cigarettes. The Company’s MRTPA requests FDA
authorization for 22nd Century to state on packaging and
advertising that, among other things, the proposed VLNTM cigarettes
contain just 0.5mg of nicotine per gram of tobacco, which is at
least 95% less nicotine than each of the 100 leading cigarette
brands in the United States. In contrast, a survey of the top 100
leading cigarette brands in the United States showed that
conventional and highly addictive cigarettes currently sold in the
United States contain an average of 19.4mg of nicotine per gram of
tobacco (with an actual nicotine range of 14.7mg to 33.2mg per gram
of tobacco). The MRTPA states that 22nd Century’s proposed VLNTM
cigarettes are the same as the lowest nicotine content style of the
Company’s SPECTRUM® research cigarettes. 22nd Century’s SPECTRUM®
research cigarettes were developed in collaboration with the FDA
and other U.S. federal government agencies to provide independent
scientists with the products necessary to investigate the public
health benefits of reduced-nicotine content cigarettes. 22nd
Century’s MRTPA references more than 50 independent studies that
utilized SPECTRUM® research cigarettes. Of particular note, the
six-week 840-participant study by Dr. Eric Donny, et al. published
in the New England Journal of Medicine in October 2015 found that
VLNC cigarettes were “associated with reductions in smoking,
nicotine exposure, and nicotine dependence, with minimal evidence
of nicotine withdrawal, compensatory smoking, or serious adverse
events.” A more recent twenty-week study with 1,250 participants by
Dr. Dorothy Hatsukami, et al. published in the Journal of the
American Medical Association in September 2018 concluded that an
immediate reduction in nicotine to very low levels was associated
with (i) lower toxicant exposure across time; (ii) fewer cigarettes
smoked per day; (iii) greater reduction in nicotine dependence; and
(iv) more days in which participants smoked no cigarettes
(cigarette-free days).
Subsequent to the close of the fourth quarter of 2018, 22nd
Century’s notable events include:
In January 2019, the FDA accepted for filing 22nd Century’s PMTA
for VLNTM cigarettes. In communicating to 22nd Century the status
of the Company’s PMTA for VLNTM cigarettes, the FDA explained: “We
determined that these applications meet the filing requirements for
a PMTA seeking a marketing order under section 910(c)(1)(A)(i) of
the FD&C Act.” The Company’s PMTA is now in the Phase 3
“review” step at the FDA as part of the FDA’s 4-phase review
process.
More recently, 22nd Century learned that the FDA has accepted
for review the Company’s MRTPA for VLNTM cigarettes. The Company’s
MRTPA is now in Phase 2 of the FDA’s review process in which the
FDA is determining the suitability of the MRTPA for acceptance of
filing. After the Company’s MRTPA is subsequently accepted for
filing and thereafter moves into Phase 3 of the FDA’s review
process, then the MRTPA will be posted by the FDA for public
comment. 22nd Century is in continuous, two-way communication with
the FDA in support of the Company’s PMTA and MRTPA.
2018 Financial Summary
The Company’s financial position remains strong as of December
31, 2018; cash, cash equivalents, and short-term investment
securities totaled approximately $56.4 million. The Company
incurred expenses of approximately $9.8 million relating to its
MRTPA to the FDA for its “BRAND A” VLNTM cigarettes and received
cash from the sale of its Aurora Cannabis common stock in the
amount of approximately $13.1 million during the year ended
December 31, 2018.
Net sales revenue for the year ended December 31, 2018 was the
highest in the Company’s history at $26,426,000, an increase of
$9,826,000, or 59.2%, over net sales revenue of $16,600,000 for the
year ended December 31, 2017.
For the year ended December 31, 2018, the Company reported a net
operating loss of $24,019,000 as compared to a net operating loss
of $13,300,000 for the year ended December 31, 2017, an increase in
the net operating loss of $10,719,000, or 80.6%. The increase in
the net operating loss was primarily due to an increase in
operating expenses of $12,326,000, partially offset by $1,607,000,
representing the change in the gross loss on product sales for the
year ended December 31, 2017 to a gross profit on product sales for
the year ended December 31, 2018. The increase in the Company’s
operating expenses for the year ended December 31, 2018 were
primarily the result of expenses incurred in connection with the
Company’s MRTPA in the amount of approximately $9,800,000. In
addition, the increase in operating expenses for the year ended
December 31, 2018 included approximately $1,230,000 in equity-based
compensation recognized during the second quarter of 2018 as a
result of the vesting of certain stock options previously issued to
James E. Swauger, the Company’s former Senior Vice President of
Science and Regulatory Affairs, due to his unexpected death in
April of 2018.
The Company experienced a net loss for the year ended December
31, 2018 of $7,967,000, or ($0.06) per share, as compare to a net
loss of $13,029,000, or ($0.13) per share, for the year ended
December 31, 2017, a decrease in the net loss of $5,062,000. The
decrease in the net loss was due primarily to the realized gain on
investments in the amount of $14,493,000, and an increase in net
interest and dividend income of $1,176,000, partially offset by an
increase in the Company’s net operating loss of $10,719,000 as
discussed above. The realized gain on investments relates to the
transactions involving the purchase of the Company’s investment in
Anandia by Aurora Cannabis and the subsequent sale of the common
stock of Aurora Cannabis received when Aurora Cannabis acquired
Anandia. The net loss for the year ended December 31, 2018 also
included non-cash expenses consisting of equity-based compensation
in the amount of $3,187,000 and depreciation and amortization in
the amount of $1,342,000.
Adjusted EBITDA (as described in the table and paragraph below)
was a negative $19,489,000, or ($0.16) per share, for the year
ended December 31, 2018, as compared to a negative Adjusted EBITDA
of $11,411,000, or ($0.11) per share, for the year ended December
31, 2017, an increase in the negative Adjusted EBITDA of
$8,078,000, 70.8%. The increase in the negative Adjusted EBITDA of
$8,078,000 for the year ended December 31, 2018 was primarily the
result of costs related to the Company’s MRTPA of approximately
$9,800,000, as discussed above.
Below is a table containing information relating to the
Company’s Adjusted EBITDA for the years ended December 31, 2018 and
2017, including a reconciliation of net loss to Adjusted EBITDA for
such periods.
For the Years Ended December 31,
2018 2017 % Change
Net loss $(7,966,911) $(13,029,117) -39% Adjustments: Warrant
liability (gain) loss - net (48,711) 157,809 -131% Depreciation and
amortization 1,342,335 946,997 42% Realized gain on investments
(14,492,968) - -100% Unrealized gain on investments (284,400)
(342,562) -17% Realized loss on short-term investment securities
54,451 - 100% Interest expense 10,939 29,104 -62% Interest and
dividend income, net (1,291,027) (115,098) 1,022% Equity-based
compensation 3,187,331 941,650 238%
Adjusted EBITDA
$(19,488,961) $(11,411,217) 71%
Adjusted EBITDA, which the Company defines as earnings before
interest, taxes, depreciation and amortization, as adjusted by 22nd
Century for certain non-cash and non-operating expenses, is a
financial measure not prepared in accordance with generally
accepted accounting principles (“GAAP”). In order to calculate
Adjusted EBITDA, the Company adjusts the net loss for certain
non-cash and non-operating income and expense items listed in the
table above in order to measure the Company’s operating
performance. The Company believes that Adjusted EBITDA is an
important measure that supplements discussions and analysis of its
operations and enhances an understanding of its operating
performance. While management considers Adjusted EBITDA to be
important, it should be considered in addition to, but not as a
substitute for or superior to, other measures of financial
performance prepared in accordance with GAAP, such as operating
loss, net loss and cash flows from operations. Adjusted EBITDA is
susceptible to varying calculations and the Company’s measurement
of Adjusted EBITDA may not be comparable to those of other
companies.
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
hemp/cannabis plants through genetic engineering and plant
breeding. The Company’s primary mission in tobacco is to reduce the
harm caused by smoking. The Company’s primary mission in
hemp/cannabis is to develop proprietary hemp/cannabis strains for
important new medicines and agricultural crops. Visit
www.xxiicentury.com and www.botanicalgenetics.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, 2018, filed on March 6, 2019,
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190306005778/en/
22nd Century Group, Inc.James Vail, Director of
Communications(716) 270-1523jvail@xxiicentury.com
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