Bradley Woods just published a new analyst report today with a new price target for XXII shares of $7 (excerpt below). $7 seems low to me - this looks more like $20 following MRTP approval. (Note: as far as I’m aware, the company has no current plan to raise more capital).
“Raise Price Target to $7.00
We reiterate our Buy recommendation on 22nd Century and raise our price target to $7.00.
The Federal Reserve’s accommodative monetary has resulted in an increase in equity market valuations via lower implicit discount rates and created an opportunity, for small cap companies in particular, to tap the equity markets and provide long-term growth capital at attractive prices. This has lowered the risk premium of the small-cap market in general, as financing risk for many has diminished, at least for those willing to take advantage of today’s liquidity.
President Biden’s rescission of President Trump’s Executive order EO 13771 sets the framework for a more activist FDA and bodes well for the shares. Also, marijuana legalization in the U.S. is gathering momentum and this can be a source of significant value for 22nd Century via its investment in Panacea and relationship with KeyGene.
We expect approval of the MRTP to be a significant catalyst for the shares and also believe it is a precursor to the nicotine mandate the FDA explored with an Advanced Notice of Proposed Rulemaking (ANPRM) published in March 2018. The ANPRM was on the HHS Unified Regulatory Agenda in Fall 2018 and Spring 2019 but was dropped in the Fall 2019 agenda indicating the FDA was putting the process on the shelf, but the reasons were not articulated publicly. The goal is not dead, at least with FDA leadership, as indicated by Mitchell Zeller, Director of the FDA’s Center for Tobacco Products at the Tobacco and Nicotine Products Regulation and Policy Conference held in October 2020. We assume regulatory policy in a Biden Administration will be more active than it was under the Trump Administration which has required incremental regulations to be offset by the elimination of two prior regulations and sets a regulatory cost cap on each agency.
22nd Century remains committed to a commercial launch of VLN cigarettes within 90 days of MRTP approval and is in active discussion with retailers and distributors. The initial stage will be to select markets to test customer acceptance, pricing, and marketing. This will continue for a few months and recalibrated as the roll-out expands.
Rating Buy Price Target $7.00
February 22, 2021
