MOCKSVILLE – 22nd Century (NASDAQ:XXII) Group, Inc. (NASDAQ: XXII), an agricultural biotechnology company specializing in tobacco products, has announced a new commercial agreement to expand the distribution of its VLN® reduced nicotine content cigarettes in South Korea.
The agreement with Nico-Tech Korea, Inc. builds on a previous test launch in 2022, which led to product adjustments to cater to the preferences of South Korean smokers.
Larry Firestone, the Chairman and CEO of 22nd Century Group, stated that the modifications were made to better match the characteristics of traditional cigarettes favored in South Korea. The company plans to begin exporting VLN® to South Korea later this year, with a full launch event scheduled for Fall 2024.
South Korea's tobacco market is valued at approximately $1.6 billion, with one in three adult men and 6% of adult women identified as smokers. Nico-Tech Korea will handle local marketing efforts to promote VLN® cigarettes, aiming to address the high prevalence of smoking in the country despite efforts by the government to reduce tobacco use through legislation like the National Health Promotion Act of 1995.
The new partnership includes minimum order quantities to ensure adequate supply for the launch and subsequent distribution. This move marks a continued effort by 22nd Century Group to advance its mission of reducing the harms associated with nicotine through its proprietary reduced nicotine tobacco plants and cigarettes.
22nd Century Group, which holds the first and only FDA Modified Risk Tobacco Product authorization for a combustible cigarette, aims to leverage its patented technology to offer a less harmful alternative to conventional cigarettes.
The company is also a participant in the Master Settlement Agreement and operates a vertically integrated production system for both its own reduced nicotine products and contract manufacturing of other tobacco goods.
This news is based on a press release statement and reflects the company's strategic direction and expectations for the South Korean market. It should be noted that forward-looking statements involve risks and uncertainties, and actual results may differ from those projected. The company has highlighted these risks in its recent financial filings.
In other recent news, 22nd Century Group, a plant biotechnology company, has been making strategic moves to improve its financial position and maintain compliance with Nasdaq listing requirements. The company has been granted an extension by Nasdaq to regain compliance with a key listing rule, having until October 1, 2024, to meet the minimum stockholders' equity requirement.
In addition, 22nd Century Group has taken steps to reduce its debt, entering into agreements with JGB Capital and Omnia to eliminate $2.3 million and redeem $5.2 million in principal and interest, respectively.
The company has also seen changes in its leadership team, with the resignation of John Miller, President of Tobacco. Miller's resignation is set to take effect in August 2024. In addition to these developments, 22nd Century Group has streamlined its board to enhance corporate cost efficiency, with the immediate resignations of Directors Nora Sullivan and James Mish.
These recent developments are part of the company's broader strategy to strengthen its balance sheet and achieve cash flow positivity by the first quarter of 2025. Despite these efforts, the company has acknowledged the uncertainty of achieving compliance, maintaining other listing requirements, or succeeding in an appeal if delisted from the Nasdaq exchange.
InvestingPro Insights
As 22nd Century Group, Inc. (NASDAQ: XXII) gears up for the South Korean launch of its VLN® reduced nicotine content cigarettes, investors may be closely watching the company's financial health and market performance. According to InvestingPro data, 22nd Century Group operates with a significant debt burden and analysts do not anticipate the company will be profitable this year. These factors are critical as the company enters a new market and aims to scale up its operations.
The company's market capitalization stands at a modest 5.55M USD, reflecting a relatively small player within the industry. With a negative price-to-earnings ratio of -0.09 for the last twelve months as of Q1 2024, it is clear that profitability is a challenge. Moreover, the company's gross profit margin for the same period is notably weak at -50.91%, which may raise concerns about its cost structure and pricing power.
InvestingPro Tips also highlight that the company's short-term obligations exceed its liquid assets, which could present liquidity challenges, particularly as it seeks to fund international expansion efforts. Moreover, the stock price has seen a significant decline, with a 1 Year Price Total Return as of mid-April 2024 of -98.44%, underscoring investor apprehension.
For those interested in a deeper analysis, InvestingPro offers additional insights, including a total of 15 InvestingPro Tips for 22nd Century Group, which can be accessed by visiting Investing.com. Subscribers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing a valuable resource for informed investment decisions.
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