22nd Century Group Has Room to Run Even After 65% Jump in Share Price, Chardan Says


Shares of 22nd Century Group, Inc (XXII), a plant biotechnology company that produces cigarettes with lower nicotine levels than traditional products, has further room to run even as prices have jumped 65% from summer lows, according to boutique investment bank Chardan Capital Markets.

The company has almost two years of cash available to fund strategies including reduced-exposure designation for its very-low nicotine cigarettes, partnering for a Phase III trial of a smoking cessation product, additional sales of commercial products and greater use of its North Carolina factory for contract manufacturing.

“Recent news for 22nd Century has been very positive for the company,” said James McIlree, a senior analyst at Chardan, in a note to clients on Monday. “We also think the company has an interesting option on the hemp and cannabis market via its partial ownership of, and research collaboration with, Anandia Labs.”

Chardan has a price target of $3.50 a share on the company and said it believes the “ultimate potential” of any of its projects could “far exceed” that target. 22nd Century last week said it would sell 8.5 million shares worth $11.4 million, including 4.25 million shares at a strike price of $1.45.

The company had about $5 million in cash at the end of the third quarter and, after the equity offering, will have a pro-forma cash balance of more than $16 million. It will have about 91 million shares and 14 million warrants valued at about $13 million in cash, McIlree said.

“This is the largest amount of cash the company has ever had and is coincident with potential significant catalysts,” the analyst said. “The value of the company’s technology to regulate nicotine in tobacco has been highlighted recently by a study that suggests “large reductions in nicotine content could dramatically reduce reinforcement from and dependence on cigarettes.””

In addition, a study funded by the National Institutes of Health has drawn the interest of the Mayo Clinic, the MD Anderson Cancer Center, Duke University, Johns Hopkins University, the Moffitt Cancer Center, the University of California San Francisco and four other institutions that will conduct a study expected to be completed in March that follows 1,250 patients comparing 22nd Century’s very-low nicotine cigarettes versus gradually reducing nicotine levels.