22nd Century Group [NYSE:XXII] could draw greater strategic interest from Big Tobacco after its application for a low nicotine cigarette gains approval, said CEO Henry Sicignano.
The plant biotech company, based in Williamsville, New York, has developed technology to increase or decrease levels of nicotine in tobacco to reduce harm from smoking.
The company, which has a USD 253m market cap, claims its cigarettes have 95% less nicotine than the average conventional cigarette without a major loss of taste.
Last December, 22nd Century filed two applications with the Food and Drug Administration (FDA) for its very low nicotine content cigarettes: one is a Premarket Tobacco Application (PMTA) and the second is a Modified Risk Tobacco Product (MRTP) application. The PMTA is a prerequisite to being able to make specific claims about the nicotine content of its cigarettes, which is the subject of the second application.
Sicignano said he wouldn’t be surprised to receive PMTA approval this year given the FDA has already inspected its factory, but “can’t even guess” on when MRTP approval comes. Once that happens, the company will be able to market its cigarettes with the low nicotine claims. “It will put us on the map,” he said.
If successful, 22nd Century would be the first such product on the market, said Sicignano. The company hopes to license its technology to other cigarette brands.
“Big tobacco companies are very well aware of what we’re doing and they’re interested in our cigarette. We’ve had different levels of discussions” about potential alliances with big tobacco competitors, Sicignano said. Those alliances could include licensing the technology or a strategic partnership to distribute the cigarettes, although Sicignano declined to be more specific.
The FDA, noted Sicignano, is a proponent of the low nicotine cigarettes the company has developed, and has announced plans to eventually mandate the lowering of nicotine levels in combustible cigarettes to non-addictive levels.
Big Tobacco has had the chance to acquire 22nd Century in the past. In 2013, with 22nd Century running out of cash, former CEO and company founder Joseph Pandolfino signed a four-year research license and commercial option agreement with British American Tobacco [NYSE:BTI], which paid a USD 7m upfront payment that kept 22nd Century afloat.
However, Sicignano noted that Big Tobacco generally does not like to acquire small risky tobacco companies, but prefers to come back and acquire once the concept is proven.
Big Tobacco has been focused on heat-not-burn smoking devices and mega mergers, noted Sicignano. “No one was focused on the plant – just the device,” he said.
Sicignano previously helped build the American Spirit brand from USD 30m to USD 145m in sales before it sold to Reynolds for USD 356m in 2002.
22nd Century also invested in a Canada-based cannabis genome company called Anandia Laboratories that can change CBD levels in the cannabis plant, for which it has exclusive US rights and co-exclusive rights around the world outside of the US and Canada.
Foley & Lardner is company’s legal counsel and Freed Maxick is its auditor.
by Mark Andress