Company significantly increases spending and
strategic initiatives in support of MRTP application and FDA’s
ANPRM for reduced nicotine cigarettes.
22nd Century Group, Inc. (NYSE American: XXII), a plant
biotechnology company that is focused on tobacco harm reduction,
Very Low Nicotine tobacco, and hemp/cannabis research, announced
today the Company’s second quarter 2018 financial results. 22nd
Century will provide a business update for investors on a
conference call to be held Wednesday, August 8, 2018, at 4:00 PM
(Eastern Time).
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 7777367. The conference call will consist of an
overview of recent business highlights and a summary of the
financial information presented in the Company's second quarter
2018 Form 10-Q. Immediately thereafter, there will be a question
and answer segment open to all callers.
With net sales revenue of more than $6.9 million, 22nd Century
posted another record quarter. At the same time, 22nd Century
significantly increased spending – to more than $2.7 million this
quarter – on the Company’s Modified Risk Tobacco Product (“MRTP”)
application to the U.S. Food and Drug Administration (“FDA”) for
“BRAND A” Very Low Nicotine cigarettes. As of June 30, 2018, the
Company had more than $53 million in cash and short-term
investments, which are sufficient reserves to meet regular
operating expenses for a number of years.
For the second quarter of 2018, 22nd Century’s
accomplishments and notable events include:
On April 23, 2018, the Company announced that the Food and Drug
Law Institute (“FDLI”) published an article by Dr. James
Swauger, who was then the Senior Vice President of Science and
Regulatory Affairs at 22nd Century. In that public policy analysis,
Dr. Swauger pointed out that since it is universally accepted that
nicotine is the primary addictive component of cigarettes, the
tobacco industry and public health officials should logically
support the nicotine reduction plan proposed by the FDA. Dr.
Swauger described Very Low Nicotine Content (“VLNC”) cigarettes as
“well-studied by a diverse group of scientists” and linked these
results to the FDA’s planned mandate to require that all
combustible cigarettes sold in the United States contain only
minimally or non-addictive levels of nicotine. In establishing the
importance of the FDA’s mandate, Dr. Swauger cited an editorial in
the October 2015 edition of The New England Journal of
Medicine in which Drs. Michael Fiore and Timothy Baker wrote:
“Reducing the nicotine content of combustible tobacco to levels
that will not sustain dependence seems to us to be the most
promising regulatory policy option for preventing [at least] 20
million premature deaths.” Sadly, shortly before publication of his
article in FDLI, Dr. Swauger passed away unexpectedly on April 19,
2018.
On April 25, 2018, 22nd Century announced that the Company is
committed to working collaboratively with the FDA on the FDA’s
planned new rule to require that all cigarettes sold in the United
States contain only minimally or non-addictive levels of nicotine.
In contrast, earlier that same month, Altria Group, Inc., and
Reynolds American Inc. (a subsidiary of British American Tobacco)
petitioned the FDA for a 90-day extension beyond the original
public comment period for the FDA’s Advance Notice of Proposed
Rulemaking (“ANPRM”) that was then set to end on June 14, 2018. The
FDA subsequently extended the public comment period for the ANPRM,
but by only an additional 30 days, to July 16, 2018.
The FDA’s ANPRM is an important step in the FDA’s official
rule-making process. The ANPRM describes the independent science
that supports the FDA’s proposed nicotine reduction mandate.
Although the ANPRM indicates that the FDA desires to receive input
on a maximum allowable nicotine level, the ANPRM already references
previously completed research that found: “an absolute limit of 0.4
to 0.5 mg of nicotine per cigarette should be adequate to prevent
or limit the development of addiction in most young people. At the
same time, it may provide enough nicotine for taste and sensory
stimulation.” The ANPRM also cites the results of independent
clinical studies, including the clinical trial by Dr. Eric Donny,
et al., that was published in the October 2015 issue of The New
England Journal of Medicine, that found: “Those participants using
cigarettes with the lowest nicotine content (0.4 mg per gram
nicotine/gram of tobacco filler), demonstrated reduced dependence…
with minimal evidence of withdrawal-related discomfort or safety
concerns.” 22nd Century provided all of the proprietary VLNC
cigarettes that made this study possible. 22nd Century submitted
its public response to the FDA’s ANPRM on July 16, 2018.
On May 24, 2018, 22nd Century announced that 41 public health
and medical organizations, including the American Heart
Association, the American Cancer Association, the American Medical
Association and dozens of other public health and medical
organizations, wrote an open letter to FDA Commissioner Dr. Scott
Gottlieb urging the FDA to quickly implement its plan to reduce
nicotine in cigarettes to minimally or non-addictive levels. In
their letter, these well-known public health and medical
organizations described the “massive public health benefits” that
will result from the adoption of the FDA’s plan to reduce nicotine
in cigarettes as follows:
“Every day that passes means more kids
moving from experimentation to addiction and more adults who want
to quit and try to quit, but remain addicted to a lethal product.
We urge FDA to issue a proposed rule within six months of its ANPRM
(by September 16, 2018) and a final rule six months later (by March
16, 2019). We also urge that implementation of the rule be no later
than the one-year period provided for in Section 907 of the Family
Smoking Prevention and Tobacco Control Act, which would allow the
rule to be implemented by March of 2020.”
On June 20, 2018, 22nd Century announced that the Company had
initiated three short-term studies investigating the behavioral and
biochemical responses to 22nd Century’s proprietary VLNTM tobacco.
The Company will submit the data collected from these studies as
part of 22nd Century’s revised and enhanced MRTP application to the
FDA for “BRAND A” VLNC cigarettes.
On June 25, 2018, 22nd Century announced that it was added to
the Russell 2000, Russell 3000, and Russell Global Indexes when
FTSE Russell reconstituted its U.S. and global equity indexes on
June 22, 2018. The Russell indexes are widely used by investment
managers and institutional investors for index funds and as
benchmarks for investment strategies. In that same announcement,
22nd Century also stated that its research partner, Anandia
Laboratories in Canada, had agreed to be acquired by Aurora
Cannabis Inc. (TSX: ACB.TO) in consideration for units consisting
of one share of Aurora common stock plus a warrant to purchase
one-half of a share of Aurora common stock for each share of Aurora
that is issued to Anandia. The number and value of the shares of
Aurora common stock and warrants that will be issued to 22nd
Century in consideration for the Company’s approximately 14.8%
equity ownership of Anandia will not be known until the closing of
the transaction, which is currently scheduled to occur in August
2018.
On June 26, 2018, 22nd Century announced that it had exclusively
licensed from North Carolina State University several flue-cured
and burley tobacco plant lines that grow with very low levels of
nicotine. These new plants contain no foreign genetic material
(non-GMO) and will compliment 22nd Century’s existing VLNTM plants
and technologies. The new, non-GMO, VLNTM tobacco plant lines are
immediately commercially viable as they are the result of multiple
generations of plantings that have yielded stable, true-breeding
crop lines of flue-cured and burley tobacco plants. The addition of
these non-GMO tobacco varieties represents a significant
advancement for 22nd Century’s next generation tobacco technology.
22nd Century’s new VLNTM plant varieties will provide options for
the Company and for potential licensees to more readily comply with
the FDA’s plan to dramatically reduce the nicotine in all
combustible cigarettes sold in the United States. The non-GMO
nature of these tobacco varieties will also facilitate the sale of
22nd Century’s proprietary VLN™ tobacco in some foreign countries
where the use of genetically modified crops is restricted.
Subsequent to the close of the second quarter of 2018, 22nd
Century also announced:
On July 17, 2018, 22nd Century announced that the Company had
submitted its public comments to the FDA’s ANPRM to develop a rule
that will require that all cigarettes sold in the United States
contain only minimally or non-addictive levels of nicotine. 22nd
Century’s public comments to the FDA’s ANPRM describe how the FDA’s
proposed rule is (i) supported by rigorous independent science,
(ii) exceedingly practical and urgently needed in the interests of
public health and (iii) immediately feasible. 22nd Century cited
the facts that 22nd Century has produced and delivered tens of
millions of its proprietary VLNC SPECTRUM® research cigarettes
since the year 2011 for use in numerous completed and on-going
clinical studies funded by agencies of the United States federal
government. The results of these independent clinical studies show
that upon switching to 22nd Century’s VLNC cigarettes, smokers:
(1) reduce their cigarette consumption,(2)
experience lessened withdrawal symptoms, and(3) increase their
attempts to quit smoking.
These peer-reviewed and published studies provide a solid
scientific foundation for the FDA’s proposed nicotine reduction
rule. VLNC cigarettes are so promising that independent researchers
estimate that in the first year after implementation of the FDA’s
rule to limit cigarettes to minimally or non-addictive levels of
nicotine, approximately 5 million people would stop smoking and, in
as few as five years after implementation of the FDA’s mandate,
more than 13 million people would stop smoking. To make VLNC
cigarettes a prompt reality for all smokers, 22nd Century’s ANPRM
response announced that 22nd Century is willing to license the use
of its VLN™ technology and its VLN™ tobacco seeds/plants to all
interested companies. The availability of this licensing
opportunity negates any argument by other tobacco companies that
contend it is somehow not possible to comply with the planned FDA
nicotine reduction rule.
Second Quarter 2018 Financial Summary
Net sales revenue for the second quarter of 2018 was $6,915,000,
an increase of $3,018,000, or 77.4%, over net sales revenue of
$3,897,000 for the three months ended June 30, 2017. Net sales
revenue for the six months ended June 30, 2018 was $13,031,000, an
increase of $6,902,000, or 112.6%, over net sales revenue of
$6,129,000 for the six months ended June 30, 2017. The increase in
net sales revenue for the three and six months ended June 30, 2018
was primarily the result of continued additional net sales revenue
generated from a filtered cigar manufacturing agreement that
commenced in mid-May of 2017, as compared to net sales revenue for
the three and six months ended June 30, 2017. The second quarter of
2018 net sales revenue of $6,915,000 was the highest quarterly net
sales revenue from product sales in the Company’s history.
For the three months ended June 30, 2018, the Company reported
an operating loss of $7,041,000 as compared to an operating loss of
$3,283,000 for the three months ended June 30, 2017, an increase in
the operating loss of $3,758,000, or 114.5%. The increase in the
operating loss was primarily due to an increase in operating
expenses of $4,085,000, partially offset by $327,000, representing
the change in the gross loss on product sales in the second quarter
of 2017 to a gross profit on product sales in the second quarter of
2018. For the six months ended June 30, 2018, the Company reported
an operating loss of $12,009,000, as compared to an operating loss
of $6,252,000 for the six months ended June 30, 2017, an increase
of $5,757,000, or 92.1%. The increase in the operating loss was
primarily due to an increase in operating expenses of $6,429,000,
partially offset by $672,000, representing the change in the gross
loss on product sales in the six months ended June 30, 2017 as
compared to a gross profit on product sales in the six months ended
June 30, 2018. The increase in the Company’s operating expenses was
primarily the result of expenses incurred in connection with the
Company’s increased investment in its MRTP application to the FDA
for “BRAND A” VLNC cigarettes, and an increase in equity-based
compensation recognized during the second quarter of 2018 as the
result of the vesting of certain stock options previously granted
to Dr. James Swauger, the Company’s former Senior Vice President of
Science and Regulatory Affairs, due to his unexpected death in
April of 2018.
The Company had a net loss for the three months ended June 30,
2018 of $6,739,000, or ($0.05) per share, as compared to a net loss
of $3,356,000, or ($0.04) per share, for the three months ended
June 30, 2017. The increase in the net loss for the second quarter
of 2018 of $3,383,000, or 100.8%, was due primarily to the net
increase in the operating loss of $3,758,000 discussed above,
partially offset by an increase in net other income of $375,000.
The net loss for the three months ended June 30, 2018 included
non-cash expenses consisting of equity-based compensation totaling
approximately $1,682,000 and depreciation and amortization in the
approximate amount of $302,000.
The Company had a net loss for the six months ended June 30,
2018 of $5,352,000, or ($0.04) per share, as compared to a net loss
of $5,977,000, or ($0.07) per shares, for the six months ended June
30, 2017. The decrease in the net loss for the six months ended
June 30, 2018 of $625,000, or 10.5%, was due primarily to an
increase in net other income of approximately $6,382,000, partially
offset by the increase in the operating loss of $5,757,000
discussed above. The increase in net other income was primarily the
result of an unrealized gain during the first quarter of 2018 on
the Company’s investment in Anandia Laboratories in the approximate
amount of $6,147,000.
Adjusted EBITDA (as described in the paragraph and table below)
was approximately a negative $5,098,000, or ($0.04) per share, for
the three months ended June 30, 2018, as compared to approximately
a negative $2,897,000, or ($0.03) per share, for the three months
ended June 30, 2017. Adjusted EBITDA was approximately a negative
$9,211,000, or ($0.07) per share, for the six months ended June 30,
2018, as compared to approximately a negative $5,469,000, or
($0.06) per share, for the six months ended June 30, 2017.
Below is a table containing information relating to the
Company’s Adjusted EBITDA for the three and six months ended June
30, 2018 and 2017, including a reconciliation of net loss to
Adjusted EBITDA for such periods.
Three Months Ended June 30, 2018
2017 % Change Net loss $ (6,738,652) $
(3,355,624) 101% Adjustments: Warrant liability loss - net - 77,583
-100% Depreciation and amortization 302,219 231,474 31% Unrealized
gain on investment securities (92,574) - 100% Interest expense -
7,641 -100% Interest income, net (251,670) (12,125) 1,976%
Equity-based compensation - Officers, directors and employees
1,682,228 154,004 992%
Adjusted EBITDA
$ (5,098,449) $ (2,897,047) 76%
Six Months Ended June 30, 2018 2017
% Change Net loss $ (5,352,164) $ (5,976,901) -10%
Adjustments: Warrant liability gain (loss) - net (48,711) 82,927
-159% Depreciation and amortization 594,299 460,483 29% Unrealized
gain on investment (6,147,088) (346,180) 1,676% Interest expense -
15,560 -100% Interest income, net (503,510) (27,880) 1,706%
Equity-based compensation - Officers, directors and employees
2,246,104 322,983 595%
Adjusted EBITDA
$ (9,211,070) $ (5,469,008) 68%
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 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, 2017, filed on March 7, 2018,
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/20180807005855/en/
22nd Century GroupJames Vail, 716-270-1523Director of
Communicationsjvail@xxiicentury.com
22nd Century (AMEX:XXII)
Historical Stock Chart
From Aug 2024 to Sep 2024
22nd Century (AMEX:XXII)
Historical Stock Chart
From Sep 2023 to Sep 2024