22nd Century Group Inc (XXII): Post Unavailable Additional Informati...

strut1702 · 2014-09-18T20:09:42.8370000Z

The Purest Play In The Cannabis Wave And It Trades On The NYSE Sep. 18, 2014 2:18 PM ET | 6 comments | About: 22nd Century Group, Inc. (XXII), Includes: GWPH Disclosure: The author is long XXII. (More...) Summary Having unique IP that lets the company regulate nicotine levels of tobacco genetically, 22nd Century Group (XXII) acquires licenses in technology that can do the same for HTC levels in hemp. In a stroke, it becomes the only NYSE listed company in the cannabis space, a fast growing market and the technology opens up several interesting revenue streams. But it's not just a commodity cannabis play, it has unique IP giving it a competitive advantage that is difficult to match, just like in the cigarette business. A small little company that we were following already because it has extremely interesting technology (with over 100 patents worldwide) enabling it to genetically regulate the levels of nicotine in cigarettes (from essentially zero to very high), strikes again. The company is 22nd Century Group (NYSEMKT:XXII), which received membership of the Master Tobacco Settlement (MSA) just a couple of weeks ago, enabling it to sell its cigarettes in the US, and last year it signed a $7M research license agreement with British American Tobacco, expandable into a full commercial license agreement. We (and others) have already explained the possibilities for the cigarette business. Modifying nicotine levels from zero to high genetically doesn't affect taste or the smoking experience, and 22nd Century is the only company that is able to pull off that feat. But in a news release this morning, they say they are now able to pull off a second, very similar feat. The company has acquired a license and a 25% stake in the company which developed very similar technology that allows genetic alteration of the level of THC in Hemp, again from zero to high. From the PR this morning: 22nd Century Group, Inc. announced today that the Company's wholly-owned subsidiary, Botanical Genetics, LLC, has entered into a worldwide license agreement with Anandia Laboratories Inc. (Anandia), a plant biotechnology company based in Vancouver, granting 22nd Century Group exclusive rights in the U.S. to four genes required for cannabinoid production in the cannabis plant. In a stroke, 22nd Century Group is now the only NYSE listed company in the cannabis space. We know that even people like Warren Buffett are starting to look at cannabis related stocks. Cannabis is a huge growth opportunity not lost on others, like Green Technology Solutions (OTCQB:GTSO) which is considering entering the cannabis market. From earlier this month: GTSO is considering the move because cannabis is one of the top growth industries in the nation. U.S. retail cannabis sales will rise more than five-fold over the next five years, from an estimated $2.2-$2.6 billion this year to as high as $8.2 billion in 2018, according to financial data released in the 2014 edition of the Marijuana Business Factbook. But apart from the obvious advantage of being the only NYSE listed cannabis company, it's not just going to be another commodity play. It has a real competitive advantage that is every bit as big as in its cigarette business. Again from the PR: The proprietary technology licensed from Anandia allows the modification of cannabinoid levels in cannabis providing 22nd Century Group an exclusive competitive advantage in the burgeoning area of cannabis biotechnology. In brief, the proprietary technology allows for the (i) increase in the production and content of all or certain subsets of cannabinoids in the cannabis plant, (ii) elimination of cannabinoids in hemp varieties, and (iii) modification of the cannabinoid profile (percentage content of each cannabinoid to the total content of all cannabinoids) for the production of unique cannabis plant varieties for the medical marijuana industry. The business implications are significant. They're granted co-exclusive worldwide rights with Anandia (the latter retains exclusive rights in Canada). Here is CEO Pandolfin: The main reason 22nd Century was attracted to Anandia' s proprietary technology is that it gives us a level of exclusivity in the cannabinoid biosynthetic pathway in cannabis similar to what we have achieved in the nicotinic biosynthetic pathway in tobacco - exclusive freedom to operate in the entire pathway. Here is an interview with Anandia CEO Dr. Jonathan Page, describing his adventure in deciphering the cannabis genome and the possible applications: Plant breeding more and more relies on genomic tools. So as plant breeders want to develop new varieties of plants - whether they work on crop plants like wheat or medicinal plants like marijuana - the genome can be used to identify variations in the plants that are desirable. For example, you could breed for specific cannabinoid profiles if you knew the combinations of genes that are involved. Another opportunity lies in hemp. Hemp was a major crop used for all sorts of things (paper, fiber, rope, hemp seed, wax, oil, etc.) but its use has fallen into decline. The main reason is that it contains low levels of THC. This wasn't a problem until governments around the world started to make it a problem. With 22nd Century's new tech, this problem can disappear where cannabis is still firmly prohibited and the hemp industry can ride a worldwide revival. Hemp, which has the longest fiber of all natural fibers, is used today even in places where you don't immediately expect it, like the car industry. But there are other possibilities. Anandia, the company founded by Jonathan Page which has developed the technology, is exploring the development of new cannabis based medicines using the genome. There is another company doing that, GW Pharmaceuticals (NASDAQ:GWPH). You might notice it has a market cap of a cool $1.6B, although it does have some $50M in revenues. Here lie the risks of investing in a company like 22nd Century Group. It's now mainly about execution. The company generates little revenue to date. They have the $7M license fee from BAT and a another $7M possible upon meeting certain milestones and (more importantly), the possibility to change it into a full commercial license. There are small sales of cigarettes to the government for research purposes and some sales abroad, but so far this doesn't amount to much revenue, as the waiting was for MSA membership. However, after a $10M private placement this morning, funds are in place to start cigarette production in their own plant and with MSA membership, there are no obstacles anymore. Of course, it remains to be seen how they can ramp up sales, but they already have a US distribution deal in place with Smoker Friendly International. There are opportunities here as cigarette distribution runs increasingly through small specialized shops. Other revenue opportunities lie abroad, in other license deals and contract manufacturing. But you'll be investing in a low revenue company that has yet to prove it can ramp that up. With access to unique IP in multi-billion dollar markets like cigarettes and cannabis and a wide variety to monetize the opportunities, we think that the shares in 22nd Century Group provide a very interesting ground floor level opportunity nevertheless. The shares have traded over $6 before the company was assured MSA membership and became the only NYSE cannabis company. While that was rather exuberant perhaps, we think we can see these prices again in the future if they execute well. Crazyaintit Comments (24)| + Follow | Send Message what do you think SA is for? if other than pumping, you are mistaken. There is a reason why the most widely used financial site, Yahoo, no longer links SA articles to stock headlines. Pot is/will be a HUGE MONSTER business ...not pot stocks...just yet. 18 Sep, 02:46 PMReply! Report AbuseLike0 ParInvestor7 Comments (35)| + Follow | Send Message Very nice update of recent events! I'm extremely bullish on this stock over the long term as revenues start coming in. Can't wait for when they ring the bell and the future news updates leading up to the bell ringing publicity event. 18 Sep, 03:04 PMReply! Report AbuseLike0 Shareholders Unite , Contributor Comments (2766)| + Follow | Send Message Author’s reply » Yes, it's now down to execution, mostly, with some interesting initiatives already having taken place in the cigarette space. No doubt they're uniquely positioned in two multi-billion markets though 18 Sep, 03:11 PMReply! Report AbuseLike1 ParInvestor7 Comments (35)| + Follow | Send Message Absolutely, but I think they showed today that they are capable of organized execution, they just need more exposure. Did you get a chance to take a look at the updated front page of their website(I think they also updated this morning to match the news release)? http://bit.ly/1qhFUuo Looks much nicer and has plenty of news regarding today :). 18 Sep, 03:35 PMReply! Report AbuseLike0 Shareholders Unite , Contributor Comments (2766)| + Follow | Send Message Author’s reply » Yes, Par: ["Additionally, Crede has been instrumental in our Asian strategic initiatives and we are hopeful these lead to attractive opportunities for 22nd Century in the coming weeks"] 18 Sep, 03:45 PMReply! Report AbuseLike1 Username (*required) Add Your Comment:Publish