22nd Century Group Inc. is making progress toward a profitable quarter as it continues to wait for a Food and Drug Administration decision on its modified-risk tobacco product application.
Based in Williamsville, N.Y., 22nd Century opened cigarette-manufacturing operations in Mocksville in 2014. Following a round of job cuts in January, the company has 51 of its 69 employees in Mocksville.
The company reported Thursday a $4.22 million loss for the third quarter, down from a $10.2 million loss a year ago.
It had a 3-cent earnings loss for the quarter, compared with an 8-cent loss a year ago.
22nd Century reported sales of $7.3 million, up 13.1% from a year ago. It drives most of its revenue from producing traditional cigarettes for third-party customers.
A modified-risk tobacco product (MRTP) application seeks authorization to advertise products as reduced harm or reduced risk compared with traditional cigarettes.
An FDA decision has been pending since Feb. 14 on 22nd Century's application for its very-low nicotine traditional cigarettes.
The agency's Tobacco Products Scientific Advisory committee conducted a hearing on the applications for 22nd Century's king and menthol king very-low-nicotine styles. A public comment period on the application ended in mid-May.
The company says its VLN cigarettes contain 0.5 milligrams of nicotine per gram of tobacco, compared with an average of 20 milligrams for many top-selling traditional cigarette brands.
James Mish took over as 22nd Century's chief executive June 22, the third top executive 22nd Century since July 2019.
During Thursday's third-quarter analyst earnings call, Mish stressed that "securing FDA marketing authorization for our MRTP reduced nicotine content cigarettes is the company's No. 1 near-term priority and obsession."
22nd Century officials said several times during the call that an FDA decision could come any day.
"We believe the FDA's authorization of (very-low nicotine cigarettes) and its commercial success will not only benefit 22nd Century and our shareholders, (but) will also help advance global tobacco and nicotine regulation, and improve public health worldwide."
"No other consumer product has the opportunity to be so impactful."
Mish said 22nd Century is preparing to roll out its very-low nicotine cigarettes by 90 days of FDA approval.
Mish said the manufacturer has made product launch plans that include "a national rollout of them with large well-recognized retail chains in the United States and a marketing campaign that has been designed to introduce adult smokers to the world's lowest nicotine content cigarette."
However, Michael Zercher, 22nd Century's president and chief operating officer, said "we're in discussions with a number of retailers, about geographies, and store counts during the test phase. ... those terms are still in negotiations."
Zercher said the Mocksville plant "is ready to manufacture VLN in commercial quantities."
"We have sufficient capacity to manufacture approximately 1% of the U.S. market. With minimal investment in additional equipment, we can easily triple our capacity."
Mish pitched his belief the FDA eventually will mandate 0.5 milligram levels of nicotine for all traditional cigarettes.
"When the FDA mandate ultimately goes into effect, we plan to make our proprietary reduced nicotine-content tobacco and related intellectual property available to every cigarette manufacturer in the United States," Mish said.
However, some industry analysts continue to question the appeal of very-low nicotine traditional cigarettes, and whether they could lead smokers to more consumption to obtain the nicotine levels to which they are accustomed.
The burning of tobacco leaves is the cause of most carcinogens associated with traditional cigarettes. Nicotine, while addictive and potentially harmful to the brain, heart and lungs, is not considered as a carcinogen.
Piper Sandler senior analyst Michael Lavery wrote in February that "we came away from this meeting with a view that a low-nicotine product standard may be less likely to have scientific support to show that it would be appropriate for the protection of public health.”
In September 2017, British American Tobacco Plc ended a low-nicotine traditional cigarette development partnership with 22nd Century, making it a free agent in the reduced-risk industry sector.
22nd Century received $14 million from BAT during a four-year licensing agreement. BAT is the parent company of Reynolds American Inc.
"The fact remains that people smoke for the nicotine and die from the smoke," David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette studies, said Friday.
"Offering consumers the toxicity without the nicotine they seek does not look like a viable business concept.
"It is hard to imagine any demand, and thus why any other companies would want to buy into such technology," Sweanor said.
Investors continue to show limited interest in 22nd Century's stock. The 52-week share price range is 55 cents to $1.79. The share price closed Friday down 3 cents to 84 cents.
"The potential success or demise of such a strategy really depends on other facts," said Scott Ballin, past chairman of the anti-smoking alliance Coalition of Science or Health.
"Most importantly is whether the FDA will move faster in making lower-risk harm reduction products available, providing a 'cleaner' consumer-acceptable source of nicotine."