22nd Century Group, Inc. (Nasdaq: XXII), a leading biotechnology company dedicated to improving health with reduced nicotine tobacco, hemp/cannabis and hops advanced plant technologies, today announced the acquisition of privately held RX Pharmatech Ltd (RXP), a leading United Kingdom distributor of cannabinoids with 1,276 novel food applications with the U.K. Food Standards Agency (FSA). Terms of the agreement include an up-front payment of $650,000 in cash and stock and a three-year equity earn-out based on revenue milestones.
“The acquisition of RXP establishes GVB as the leader in the U.K. Consumer Products isolate market, which is expected to reach an estimated $1.26 billion by 2025 and secures direct access to key European markets for CBD products,” stated James A. Mish, chief executive officer of 22nd Century Group. “RXP has exclusively utilized GVB’s technical data and worked closely with the FSA on developing their highly effective application and compliance programs that secured 1,276 novel food applications, the second most CBD products to pass through the first round of approval. We look forward to leveraging their leadership team’s vast cannabis industry experience and strong relationships with U.K. and EU regulatory agencies as we move forward.”
Mr. Mish continued, “We expect the addition of RXP will be immediately accretive to the company and facilitate significant operating efficiencies leading to additional revenue and gross margin improvement. In particular, the addition of RXP with our recently opened distribution facility in the Netherlands will allow us to scale our operations and capture more market share in the growing European Consumer Products market.”
RXP’s products include CBD isolate and numerous variations of finished products like gummies, oils, drops, candies, tinctures, sprays, capsules and others. The U.K. is not accepting new novel food applications for cannabinoid products at this time and denied tens of thousands of product applications earlier in 2022 during the FSA’s first round of screening. This market dynamic will allow 22nd Century to open new opportunities to land highly accretive contracts with multinationals for quality CBD and hemp-derived consumer products dependent on the novel food licenses.
Since 2019, the U.K. Government regulation of hemp ingredients, including popular cannabinoids such as cannabidiol (CBD), has been administered under a novel food scheme regulated by the FSA, making the U.K. the only market in the world with a clear regulatory regime for CBD at the federal level. Additionally, the U.S. Food and Drug Administration (FDA) is expected to establish a daily threshold safety level for CBD consumption in 2023. This threshold is also expected to be quickly adopted by the U.K. and the EU. This regulatory action will enable multinational, well-recognised brands to enter the U.S., U.K. and EU nutraceutical, food and beverage market, greatly increasing CBD demand and requiring novel food licenses.