22nd Century (US:XXII)2020-11-05 20:01Financial Data and Key Metrics Changes - The net sales revenue for Q3 2020 increased approximately 13% to $7.3 million, and for the first nine months of 2020, it was up 12% to $20.8 million, primarily driven by higher volume and pricing in the contract manufacturing business [60] - The operating loss improved by $3.6 million in Q3 and by $5.1 million for the first nine months of 2020, attributed to higher gross margins and lower operating expenses [59] - The net loss for Q3 improved by $6 million to $4.2 million, resulting in a net loss per share of $0.03, an improvement of $0.05 on a per share basis [66] - Adjusted EBITDA for the quarter improved by 26% and by 23% year-to-date, with liquidity remaining strong at approximately $26.8 million at the end of Q3 [68][69] Business Line Data and Key Metrics Changes - The tobacco franchise is focused on the VLN product, which is in the final stages of the MRTP review process, with plans for a national rollout and marketing campaign upon FDA authorization [11][15] - The hemp/cannabis strategy has shifted to target upstream segments of the value chain, focusing on plant biotechnology research and gene modification, moving away from CBD and hemp-based consumer products [20][21] Market Data and Key Metrics Changes - The U.S. tobacco industry is valued at $100 billion, with 34 million adult smokers in the U.S. and one billion worldwide, indicating a significant market opportunity for VLN [40][41] - Two-thirds of smokers in the U.S. want to quit smoking, with a reduced exposure claim authorized by the FDA expected to be a critical catalyst for sales growth [41] Company Strategy and Development Direction - The primary mission is to reduce the harm caused by smoking, with a focus on securing FDA marketing authorization for VLN as the number one near-term priority [12][14] - The company plans to make proprietary reduced nicotine-content tobacco available to all cigarette manufacturers in the U.S. once the FDA mandate goes into effect [18][19] - The company is also exploring longer-term opportunities in tobacco for producing medicines, vaccines, and sustainable protein sources [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a positive outcome from the FDA regarding the MRTP application, emphasizing that it is a matter of when, not if [28][36] - The FDA's commitment to tobacco harm reduction and the proposed reduced nicotine product standard is seen as a significant public health initiative [48][49] - The company is prepared to launch VLN within 90 days of MRTP authorization, with discussions ongoing with retailers for market entry [37][38] Other Important Information - The company has a healthy balance sheet and does not plan to raise additional capital at this time, indicating confidence in sustaining operations and executing strategy [69] - A new patent has been granted that allows for genetic control in various tobacco varieties, enhancing the company's competitive position [17][79] Q&A Session Summary Question: What is the marketing budget for VLN in the first 12 months? - The company is not prepared to release specific figures but will take a phased approach to the rollout [75] Question: Are there signed agreements with national retail partners? - Currently, there are no signed agreements, but discussions are ongoing [77] Question: What varieties does the new patent cover? - The technology is believed to work in any variety of tobacco, focusing on bright, burley, and oriental tobaccos [79] Question: Will more money be invested in Panacea? - No additional investment is planned; focus will shift to upstream opportunities [89] Question: What is the backup plan if MRTP is not approved? - The company believes approval is imminent and will continue to apply pressure on the FDA [104]