22nd Century Group, a Clarence company that is developing very low nicotine cigarettes, has signed a $7 million research license agreement with a big British tobacco company.
The deal with British American Tobacco, the world’s second-biggest tobacco company, spans four years and gives the British company access to 28 of 22nd Century’s patents and patent applications involving its technology to alter the level of nicotine in tobacco plants.
The companies will work together on research to further develop the technology.
“Licensing our technology to the world’s second largest tobacco company is a huge milestone for 22nd Century Group,” said Henry Sicignano III, the company’s president.
Under the deal, British American Tobacco will pay 22nd Century $7 million upfront. The British company also could pay 22nd Century up to $7 million more during the course of the research agreement if certain milestones are met.
The agreement also gives British American Tobacco an option to terminate the research agreement at any time and convert it into a commercial license to produce products based on 22nd Century’s patents and technology. If that happened, the commercial license would run through at least 2028.
“Essentially, it’s our newer technology,” said Joseph Pandolfini, the company’s chief executive officer. “BAT is going to accelerate things with our second-generation technology.”
22nd Century makes a range of cigarettes that have varying levels of nicotine, including a very low-nicotine product that has 97 percent less nicotine than the leading “light” cigarettes sold today.
The company also makes a line of research cigarettes that have the same levels of tar as conventional cigarettes but nicotine levels that can vary from very low to very high.
22nd Century last month paid $3 million to acquire a North Carolina company, NASCO Products, and related cigarette-manufacturing machinery in a deal that gave the Clarence firm its own federally licensed tobacco manufacturer and made it a participating member of the 1998 Tobacco Master Settlement Agreement between the tobacco industry and 46 states.
If those manufacturing efforts develop as company officials hope, and the relationship with British American Tobacco goes well, Pandolfini said 22nd Century could begin to generate enough cash to fund its operations. “If we deliver ... it essentially means we won’t have to raise money again, which is good for our shareholders,” Pandolfini said.