22nd Century Group Inc (NYSEMKT:XXII) Is Finally Starting To Run

22nd Century Group Inc (NYSEMKT:XXII) is a stock we've come back to on a number of occasions here at Insider Financial, with our most recent coverage being this piece from the start of January. Our basic thesis on the company was that it's got a strong patent portfolio in an industry that's primed for regulatory change, and that its application of this portfolio to said regulatory shifts means it's not going to remain under the radar for long. At the January lows, then, which came about on the back of an update we'll touch on shortly, we argued that the dip was a nice opportunity to pick up a discounted exposure.At that time, 22nd Century went for a little over $0.86 a share. It's taken a while, but this thesis is finally starting to validate. The company closed out last week at $1.35, a close to 60% gain on its start of the year pricing.So what's next? Well, we think this is likely the start of a longer term revaluation, and here's why.The technology we've touched on above allows 22nd Century to grow tobacco plants that have basically no nicotine in them. Well, some nicotine, but as low as 0.4mg/g, which is an important number as it's the level generally regarded as being not conducive to addiction by the WHO and other global scientific institutions. There's a big push right now to get non-addictive tobacco products on the shelves, but there's no other company that can do what 22nd Century is able to do at the grow stage of production. In other words, for another tobacco company to produce cigarettes with a nicotine content below the addictive level, it's got to use post grow methods (read: chemical extraction). That's expensive and – perhaps more importantly – can alter the taste of the tobacco. 22nd Century's method has no impact on taste, and so it's cigarettes are a clear front runner in this segment of the tobacco industry.The company is pushing for approval from the FDA on a product called Brand A, with the approval rooted in 22nd's ability to market the product as what it's calling Very Low Nicotine. If it gets this approval (and there's really no reason it shouldn’t, there's precedence for this type of thing) then there's a very easy route to substantial revenues as a help-to-quit product. If regulations then shift to require low nicotine levels across the board, there's a huge market potential beyond the help-to-quit space.And that's if 22nd goes it alone. There's a real chance that this company will be on the receiving end of some substantial buyout offers in the not too distant future. It's tech is heavily patented (as mentioned) and for a big name – a Philip Morris International Inc. (NYSE:PM) or an Altria Group Inc (NYSE:MO), for example – its acquisition could be a quick and easy way to get a jump on the competition.Right now, then, we're looking at the FDA application noted above as being the primary catalyst stream. The company got a setback in January when the agency basically requested some more information, and 22nd decided to split its application into two parts to try and speed up the response (and in turn, time to market). These two parts now relate to the company's right to sell Brand A in the US market, and then its right to market as Very Low Nicotine. As the FDA delivers feedback on these applications (and it's the former that's going to hit press first), we should see some speculative loading in anticipation of Brand A's market potential, and the company as a whole's attractiveness as a buyout candidate for a big Tobacco suitor.As a note on risk, there's a good chance we're going to see a raise soon. The company is running up, and we think it might take advantage of this appreciation to pick up cash on good terms. There's dilution potential, then, but not to the point that it's prohibitive to an exposure. As they say, raise when you can, not when you need to, and right now, 22nd Century can.We will be updating our subscribers as soon as we know more. For the latest updates on XXII, sign up below!Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.