22nd Century Group has secured a substantial new agreement with a prominent tobacco industry partner that specializes in exporting cigarettes to countries outside the United States. As a result, the company will make investments to optimize margins and improve efficiencies by hiring additional staff at its tobacco manufacturing facility in North Carolina and by installing new equipment at the site to increase efficiencies. 22nd Century says it will also leverage this new relationship and others through its contract manufacturing operations to establish additional distribution channels in preparation for the launch of its VLN reduced-nicotine content (RNC) cigarettes.
“Last year, we were successful in optimizing our contract manufacturing operations. Our net sales and gross profit margin increased year-over-year, and we demonstrated to the industry that we are well positioned as a tobacco manufacturer,” said James A. Mish, CEO of 22nd Century Group, in a statement. “We continue to invest in efforts to prepare for the FDA’s [U.S. Food and Drug Administration] authorization of our modified-risk tobacco product (MRTP) application for our VLN reduced-nicotine content cigarette. With these new agreements and our expanding investments, we are opportunistically using this time to ramp up our operations ahead of authorization as we prepare to make VLN available globally.”
Earlier this year, 22nd Century signed on a new cigar contract manufacturing customer, and it is currently in advanced negotiations with two other significant tobacco industry partners that could further expand 22nd Century’s sales domestically and internationally. 22nd Century will leverage these newly established trade relationships to expand distribution of VLN after the cigarettes are introduced.
In addition to the planned installation of new equipment to reduce waste at its manufacturing facility, the company recently completed an expansion of testing capabilities at the site, which will allow for rapid, in-house analysis of its tobacco. This will improve the production cost per VLN sample by more than 90 percent while significantly reducing the lead time to uncover key data, according to the company. Internal testing of the VLN leaf is scheduled to begin at the facility in August using the newly installed testing equipment.
The company is confident that it is in the final stages of the FDA’s application process to obtain MRTP designation for its VLN cigarettes. The FDA has already authorized 22nd Century’s RNC tobacco technology under the premarket tobacco product application (PMTA) pathway, saying that it is “appropriate for the protection of public health” and concluding that it offers “among several key considerations, the potential to reduce nicotine dependence in addicted adult smokers, who may also benefit from decreasing nicotine exposure and cigarette consumption.”
MRTP designation will allow 22nd Century to communicate and market the key features of its RNC cigarettes, including the headline claim of 95 percent less nicotine. Although VLN contains just 0.5 mg of nicotine per gram of tobacco, the cigarettes taste, smell and smoke like traditional cigarettes, according to 22nd Century. The company says it is prepared to launch its VLN cigarettes within 90 days of receiving authorization.
The FDA has proposed a plan to require all cigarettes sold in the U.S. to be made minimally and nonaddictive. 22nd Century says it is prepared to license its patented RNC tobacco technology to every cigarette manufacturer in the industry to enable compliance with the FDA’s plan.