from Microcap Research today:
Positive Catalysts Coming to 22nd Century Group (XXII)
Posted on September 1, 2015 by Gary Anderson
One of the best times to enter or add to a position in a stock is when there are one or more positive catalysts in the near term that are likely to drive share prices higher.
Potential returns in an individual stock can be magnified when purchased during periods of broader market instability that take place shortly before the positive catalysts…as we are now experiencing. Simply put, this is the “buy low” part of successful trading and investing.
This is the case presently with 22nd Century Group (XXII), a plant biotechnology company focused on tobacco harm reduction and smoking cessation products produced from modifying the nicotine content in tobacco plants through genetic engineering. 22nd Century Group owns or exclusively controls more than 185 issued patents and an additional 54 pending patent applications around the world. We profiled XXII here on July 14 and believe the recent historic volatility and market slide has created a buying opportunity in the stock as we expect several positive catalysts to take place in the near term.
Catalyst #1: FDA Submission
22nd Century Group aims to be the first company in the world authorized by the FDA to market a reduced exposure/modified risk tobacco product. The company plans to submit to the FDA an application for their proprietary BRAND A very low nicotine tobacco cigarettes in the coming weeks.
This is timely as the FDA has sent warning letters to Santa Fe Natural Tobacco, IGT, (owned by Reynolds Tobacco), stating “the FDA has determined that several of your cigarette products are adulterated under section 902(8) of the FD&C Act (21 U.S.C. § 387b(8)) because they are modified risk tobacco products sold or distributed without an FDA order in effect that permits such sale or distribution.” See also: “FDA warns 3 tobacco product makers over labeling.”
There are strict guidelines preventing companies from making modified/reduced risk claims without having a modified risk product approved by the FDA. There has been only one modified risk application made to the FDA by tobacco companies to date- and that application was denied.
The implications of these warning letters and the pending submission of the BRAND A application are very positive for XXII as we believe XXII could very well be the only cigarette company with the technology capable of satisfying the FDA’s guidelines for a modified risk claim.
Investors should know that XXII has worked with the U.S. government in the past in this area and was chosen by the National Institutes of Health to supply variable nicotine research cigarettes. Read more on XXII’s government research cigarettes here.
Investors should also understand that XXII has exclusive worldwide rights to all uses for certain genes that control nicotine content in tobacco plants. In our opinion, XXII’s strong patent portfolio and genetic engineering technology in the areas of smoking cessation, modified risk, and tobacco harm reduction, put the company to in good standing to become the first and only cigarette company with an FDA order in effect that permits sale and advertising of their cigarettes as a modified/reduced risk tobacco product.
Catalyst #2: Strong Revenue Growth
XXII reported revenue of just over $528,000 for all of 2014. Revenue projections for 2015 exceed $5M according to the company’s guidance. Chardan Capital Markets has estimates of revenue breaking $7.4M this year and breaking $13.6M next year. Chardan also sees bottom line improvement from a loss of .26/share last year to a loss of .13/share this year.
Even in volatile, heavily down markets, fundamentals eventually come into play and individual stocks find support. That may have happened in the last few weeks with XXII shares which closed slightly green for the month of August vs. declines of over 6 percent each in the DOW, S&P 500, and NASDAQ in their worst month in three years.
Catalyst #3: Entry into Asia
Nearly one-third of the world’s one billion smokers are Asian, and about half of all men in China smoke daily. Clearly Asia is a huge untapped market for XXI, and the company recently stated they remain optimistic about expansion into Asia and expect to announce “one or more business contracts with Asian partners” by the end of this year.
Goldman Sachs and George Soros Buying
In the most recent reports available, Goldman Sachs initiated a position in XXII, as did George Soros, (at an average cost of $1.03/share), so you’ll be in good company should you start or add to a position here:
22nd Century Group - Goldman Sachs
22nd century group - George Soros buying
The Bottom Line
While XXII has not been immune to the recent weakness in the overall market, shares appear to have bottomed and traded up slightly for the month of August. The stock is now close to breaking above the 50 day moving average of .78, which would become subsequent support.
22nd century group - chart.PNG 1
We believe the positive catalysts mentioned above will send XXII share prices higher in the near term, making this is an excellent time to initiate or add to a position in the stock with recent market instability creating an excellent “buy low” window of opportunity.
Pulmatrix sig.
See Dislaimer/Terms of Use
Disclosure: Gary Anderson owns shares of XXII purchased in the open market. Our partner, TFST Publishing LLC, received $20,000 from 22nd Century Group, Inc. as part of the company’s investor relations program.
