22nd Century Group – XXII (update)

The FDA Center for Tobacco Products just did WHAT last week?!! If you haven’t heard by now, a low nicotine tobacco/cigarette policy initiative is being enacted by the FDA. The purpose, lowering nicotine in cigarettes to non-addictive levels which is the same purpose of XXII. Here’s a link. I wouldn’t be surprised if the “non-addictive” nicotine levels determined by the FDA are the same levels found in 22nd Century Group low nicotine products, such as Brand A, of less than one milligram.

If you have been following XXII, then you know how exciting this is as the company may have a monopoly on this technological ability and know the recent spike in share price is attributed to the market realizing the potential. Even Bloomberg has published an article highlighting the company. The question now is, can management turn this directive into a significant revenue generating opportunity? Of course, we will need to wait for specific details of how the FDA is to implement this initiative. In my opinion, I see a couple things that could possibly happen. One, tobacco companies will continue to sell both their regular brand and its low nicotine counterpart or two, cigarettes may be replaced altogether for electronic delivery systems. My guess is either of these transitions will happen over a long period of time. In this time, the tobacco arm of 22nd Century will continue its efforts on achieving FDA approval of their X-22 product and moving forward with clinical studies of their Brand B product.

I do not expect to see or hear much from XXII directly following this latest FDA development. Although it would be nice to hear that a partnership has been formed with another entity, for the purpose of financing the Phase 3 trial for X-22, and that just maybe the FDA announcement may have been an indirect driver. I still have some concern that currently the company may not find an agreeable partner for the phase 3 trial and may have to finance the trial with its own cash. If any developments are in the works, it should take at least a few months before a deal may be signed. Even with all that said there is still significant upside for any who may be contemplating an entry or adding more to their current position. I’m holding my price target of $3.50 until word of a possible deal becomes public. Time will tell…

A little fyi, regarding the Phase 3 “Strategies for Reducing Nicotine Content in Cigarettes” study, word is it may be a couple months (possibly October) before results are released.