22nd Century Soars on Biden Admin Decision, Here's All You Need to Know

© Reuters. 22nd Century (XXII) Soars on Biden Admin Decision, Here's All You Need to Know

By Vlad Schepkov

Shares of 22nd Century Group (NASDAQ:XXII) are among the most active movers in Wednesday's midday session, gaining about 25% in heavy trading, following the publication of the Biden Administration’s plans to mandate a lower maximum nicotine level in tobacco products.

According to an FDA PR, dated June 21st, 2022, “the U.S. Food and Drug Administration’s plans to develop a proposed product standard that would establish a maximum nicotine level to reduce the addictiveness of cigarettes and certain other combusted tobacco products.”

The proposal features few specific details for now and a concrete policy may still be years away, although the plan marks yet another official move in the FDA’s long struggle to reduce smoking.

The news was enough to set off a hunt for XXII’s shares and here's why:

22nd Century Group is the maker of VLN King and VLN Menthol King 95% - the first and only reduced nicotine content cigarettes to earn the FDA’s Modified Risk Tobacco Product (MRTP) designation. The agency went as far as to require the company to include “Helps You Smoke Less” on product packaging and advertising.

Although 22nd Century is currently only selling its products through a limited pilot program in the Chicago area, XXII plans a national launch following the pilot’s completion.

Dawson James Securities analyst James McIlree sees the company as possibly the biggest beneficiary of a potential low-nicotine mandate. He highlights that “complying with a non-addictive low-nicotine mandate will be expensive for the industry if it pursues nicotine extraction or plant modification on its own.”

The analyst thus sees many major players rather focusing on e-cigarette products, leaving “the combustible market wide open for 22nd Century’s VLN,” as the company already has technology “that could solve their problem.” Dawson James believes “This is bullish for 22nd Century”, as they reiterate a Buy rating and $8.50 price target on the shares.

XXII is trading holding above $2, as of midday, up nearly 25%.