22nd Century Group Inc. (XXII:NYSE.MKT), developer of very low nicotine (VLN)-containing tobacco and cigarette products, should benefit from the U.S. Food and Drug Administration's (FDA's) recently released plan to ban menthol as a characterizing flavor in cigarettes and all flavors other than tobacco in cigars, reported ROTH Capital Partners analyst Brian Wright in an April 29 research note.
ROTH has a Buy rating and a $6 per share target price on 22nd Century Group.
The FDA is pursuing this initiative to help address the adverse health effects smoking has specifically on disadvantaged populations and youths. Agency statistics show menthol cigarettes to be used most commonly by African American and young smokers.
Wright highlighted that the FDA's plan "couldn't come at a better time" for 22nd Century Group's VLN products. This is particularly true, he said, for the ag biotech's VLN King cigarettes. They should qualify as tobacco products exempt from the ban, ones that pose less risk to individual users or to population health than others, according to the FDA.
The regulatory body itself classified 22nd Century's VLN as a modified risk tobacco product when approving it in December 2021. At the time, the agency said such options, which contain less nicotine and are likely to reduce nicotine dependence, may help adult smokers and their health.
Advancement of the FDA's tobacco plan coincides with the 22nd Century's in-progress VLN pilot launch it kicked off in April. As the latter continues, the FDA will hold public comment sessions from May 4 through July 5 and listening sessions on June 13 and 15.
"We expect this period to include significant press coverage of the proposed rule, which should increase awareness and interest in the VLN King product that is a natural off ramp option," Wright commented.
After receiving, reviewing and considering all comments, the FDA will decide whether or not to issue final product standards.
The federal agency indicated it will enforce the proposed rules at the manufacturing, distributing, wholesaling, importing and retail levels, not at the individual consumer level, Wright relayed.
ROTH has a Buy rating and a $6 per share target price on 22nd Century Group. This compares to its current share price of around $2.
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Important Disclaimers for ROTH Capital Partners, LLC, 22nd Century Group, Inc., April 29, 2022
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