22nd Century Group Files 2017 First Quarter Report and Announces Conference Call to Provide Business Update
Company now projecting substantially higher 2017 revenue
FDA will discuss three important 22nd Century proprietary products
CLARENCE, N.Y.--(BUSINESS WIRE)-- 22nd Century Group, Inc. (NYSE MKT:XXII), a plant biotechnology company that is focused on tobacco harm reduction and cannabis research, announced today the Company’s first quarter 2017 financial results and will provide a business update for investors on a conference call to be held Tuesday, May 9th, at 4:15 PM (EDT).
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 in the call by dialing: (800) 768-6490 and using Conference ID 3629103. The conference call will consist of an overview of recent business highlights and a summary of the financials presented in the Company's first quarter 2017 Form 10-Q. Immediately thereafter, there will be a question and answer segment open to all callers.
As a result of already signed manufacturing agreements, 22nd Century is raising the Company’s 2017 revenue projections. The Company previously estimated 2017 revenue to exceed $12,000,000. 22nd Century now projects 2017 revenue will be more than $16,000,000. The Company will release more details about its increasing manufacturing business in a separate news release to be issued tomorrow, May 9, 2017.
In the first months of 2017, 22nd Century also made significant progress in regulatory matters. As recently announced, this summer the Company will have three products in front of the U.S. Food and Drug Administration (“FDA”). Regulatory advancement of any one of these products will be an important milestone for the Company and could prove enormously disruptive of the broader tobacco industry. 22nd Century will present one smoking cessation aid candidate and two Modified Risk Tobacco Products (“MRTP’s”) in development to the FDA:
- This June, the Company has scheduled a guidance meeting with the FDA’s Center for Drug Evaluation and Research (“CDER”) to discuss “X-22,” the Company’s signature prescription-based smoking cessation aid in development. At the June meeting, the Company will seek guidance from CDER/FDA on an appropriate path for X-22 to become a prescription-based cessation aid for smokers in the United States. Pending FDA authorization, 22nd Century intends to conduct a Phase III clinical trial in 2018. The Company also plans to seek “fast track” designation by the FDA for X-22.
- Also this summer, 22nd Century will meet with the FDA’s Center for Tobacco Products (“CTP”) to discuss the Company’s BRAND A MRTP application. Based on this meeting, and on previous written feedback supplied by the FDA/CTP, 22nd Century will resubmit a more expansive and robust MRTP application that will include additional scientific data and information from already completed clinical studies on the Company’s Very Low Nicotine (“VLN”) tobacco cigarettes. Also in response to the CTP’s clarifying guidance, the Company intends to divide its combined MRTP application into a separate Premarket Tobacco Product (“PMT”) application and a separate MRTP application for BRAND A to enjoy the benefit of the CTP/FDA’s shorter review period for PMT applications as compared to MRTP applications.
- Also this summer, 22nd Century will conduct an FDA-authorized clinical trial to study BRAND B (low tar-to-nicotine) cigarettes. This trial is designed to confirm that as smokers make the adjustment to a higher nicotine cigarette, they take in less smoke because the nicotine is more readily available. The Company has engaged a Contract Research Organization with extensive experience in combustible cigarette exposure studies to conduct the BRAND B clinical trial this summer. The Company intends to submit an MRTP application to the FDA for BRAND B.
Separately, as a result of 22nd Century’s strategic involvement in the medical marijuana and hemp industries, the Company has expanded its scientific achievements beyond altered-nicotine tobacco and now boasts important research achievements on two fronts. In March 2017, 22nd Century announced that its research collaboration with strategic partner, Anandia Laboratories, Inc. in Vancouver, Canada, resulted in new industrial hemp plants that have zero THC – the psychotropic compound found in hemp/cannabis plants. Hemp without THC is a revolutionary plant. Zero THC hemp eliminates the risk that growers have in producing a plant that is subject to destruction if it tests above the federal limit of 0.3% THC. Zero THC hemp will also be a foundational plant for many new food and nutraceutical products. Furthermore, zero THC hemp has generated intense interest from producers of medical marijuana and pharmaceutical products.
In order to build on 22nd Century’s success with its THC-free cannabis/hemp, going forward the Company will focus on optimizing its zero THC hemp and on developing a range of next generation industrial hemp plants that contain optimized levels of other important cannabinoids, such as CBD, CBC and CBG.
First Quarter 2017 Financial Summary
Net sales revenue for the first quarter of 2017 was $2,231,517, a decrease of $787,539, or 26.1%, over net sales revenue of $3,019,056 for the three months ended March 31, 2016. The decrease in net sales revenue for the first quarter of 2017 was primarily the result of (i) decreased net sales revenue from our contract manufacturing business and (ii) a decrease in the net sales revenue from SPECTRUM research cigarettes in the amount of $329,321, when compared to the net sales revenue for the first quarter of 2016.
For the three months ended March 31, 2017, the Company reported an operating loss of $2,969,949 as compared to operating loss of $3,228,404 for the three months ended March 31, 2016, a decrease in the operating loss of approximately $258,000. The decrease in the operating loss is primarily due to a decrease in operating expenses of approximately $656,000, partially offset by an increase in the gross loss on product sales in the amount of $398,000.
The Company’s net loss for the three months ended March 31, 2017 was approximately $2,621,277, or ($0.03) per share, as compared to a net loss of approximately $3,252,452, or ($0.04) per share, for the three months ended March 31, 2016. The decrease in the net loss of $631,175, or 19.4%, was primarily the result of a decrease in operating expenses of approximately $656,000 and an increase in other income (expense) in the approximate amount of $373,000, partially offset by a decrease in gross (loss) profit of approximately $398,000. The results for the three months ended March 31, 2017 included non-cash expenses consisting of equity based compensation totaling approximately $169,000 and depreciation and amortization in the amount of $229,000.
Adjusted EBITDA (as described in the paragraph and table below) was a negative $2,571,961, or ($0.03) per share for the three months ended March 31, 2017, and it was a negative $2,740,099, or ($0.04) per share, for the three months ended March 31, 2016.
Below is a table containing information relating to the Company’s Adjusted EBITDA for the three months ended March 31, 2017 and 2016, including a reconciliation of net loss to Adjusted EBITDA for such periods.
Three Months Ended March 31,
|Warrant liability loss (gain) – net||5,344||(71,065||)||-108%|
|Depreciation and amortization||229,008||205,438||11%|
|(Gain) loss on investment||(346,180||)||87,232||-497%|
|Equity based compensation -|
|Third-party service providers||-||22,873||-100%|
|Officers, directors and employees||168,979||259,994||-35%|
Adjusted EBITDA 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 expenses 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) income, 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 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 cannabis is to develop proprietary 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, 2016, filed on March 8, 2017, 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.
22nd Century Group
Andrew Haag, 866-976-4784
Source: 22nd Century Group, Inc.
Released May 8, 2017