22nd Century Group Inc. - Strong Results in FY22, Potential for Growth in Hemp and Tobacco Markets.
Mar 9th 2023, 11:12 am
Part 1: Analysis of Company Performance 22nd Century Group Inc. had a remarkable year in Fiscal Year 2022, with strong results across its tobacco, hemp/cannabis, and corporate businesses. The company obtained the first and only FDA authorization for its reduced nicotine cigarettes, VLN King and VLN Menthol King, which helped to reduce nicotine content by 95%. Additionally, 22nd Century Group introduced VLN cigarettes in several US states, providing the company with a promising base for penetration into geographies and markets with large adult smoker populations. In May 2022, the company acquired GVB Biopharma, which is one of the largest hemp-derived active ingredients manufacturers for the pharmaceutical and consumer goods industries globally. However, in November of the same year, GVB Biopharma encountered a fire that damaged the refinement facility leading to all hemp refining operations at the site being curtailed. The Company has implemented backup sourcing and production plans to continue fulfilling customer orders and resume distillate and isolate ingredients production. The company also initiated hemp/cannabis plant transformation expansion into novel foods, genetically modified the principal genes controlling cannabinoid biosynthesis in the plant. These global opportunities should hopefully act as a catalyst for the company's revenue growth during the upcoming years. Part 2: Forward Looking Analysis Despite the company having a good year, there are possible concerns about the slow rollout of VLN cigarettes and how the FDA decision on menthol cigarettes will affect them. However, the company is likely to benefit from federal, state, and international regulatory appetite for reducing nicotine and banning menthol. VLN Menthol King might be the only combustible menthol cigarette on the market, providing an off-ramp for current menthol smokers to smoke less. The final decision on this is expected in August 2023. The acquisition of RX Pharmatech Ltd could open new opportunities for the company in multinationals and CBD/hemp-derived consumer product markets depending on novel food licenses. Also, 22nd Century Group Inc. announced its intention to supply reduced nicotine tobacco sufficient for the entire of New Zealand's cigarette marketplace. This move could curtail the production of traditional nicotine-loaded cigarette products and further cement 22nd Century Group Inc.'s footprint in the market. In conclusion, 22nd Century Group Inc. appears to have a strong base to increase revenue growth in the rapidly evolving hemp/cannabis industry, thanks to their partnerships with KeyGene, GVB, and RX Pharmatech. Additionally, the company has a promising potential to expand further into the tobacco markets with FDA authorizing reduced nicotine cigarettes, VLN King and VLN Menthol King.