22nd Century to Emphasize Disruptive and Proprietary Smoking Harm Reduction Products

CLARENCE, N.Y.–(BUSINESS WIRE)– 22nd Century Group, Inc. (NYSE MKT: XXII),
a plant biotechnology company that is a leader in tobacco harm
reduction, released today the following letter that was included the
Company’s 2015 Annual Report to Shareholders:

Dear Fellow Shareholders:

The year 2015 was a transformative year for our Company and the year
2016 will be a time of even greater opportunity for 22nd Century.

In 2015, our Company expanded our already dominant intellectual property
portfolio and attracted the interest and attention of public health
officials around the world. We submitted a Modified Risk Tobacco Product
(“MRTP”) application to the U.S. Food and Drug Administration (“FDA”)
for our BRAND A Very Low Nicotine cigarettes that contain
approximately 95% less nicotine than conventional cigarette brands. The
New England Journal of Medicine published two articles (N
Engl J Med 2015; 373:1340-1349 and N
Engl J Med 2015; 373:1289-1291) about the results of a landmark
clinical trial utilizing 22nd Century’s proprietary SPECTRUM®
research cigarettes. Funded by the FDA and the National Institute on
Drug Abuse (“NIDA”), a division of the National Institutes of Health
(“NIH”), the study found that smokers of our SPECTRUM® Very Low
Nicotine cigarettes consumed far fewer cigarettes per day and doubled
their quit attempts versus smokers of cigarettes with conventional
nicotine content.

Simultaneous to these important milestones, 22nd Century began to
actively commercialize our significant intellectual property portfolio.
Our revenues increased from less than $530,000 in 2014 to more than $8.5
million in 2015. Indeed, our revenues in 2015 exceeded prior financial
projections and were the highest in our Company’s history.

That said, we are not yet profitable and we did not expand the sales of
our commercial products as quickly or as broadly as we would have liked.
We are disappointed that logistical issues prevented us from rolling out MAGIC
Very Low Nicotine cigarettes in Europe beyond Spain. Nevertheless, all
things considered, these are merely “bumps in the road” and 22nd Century
closed 2015 with a very strong foundation for continued success and
growth.

As discussed in earnings calls over the last year, 22nd Century’s
enormous potential – in the near term and the long term – rests with our
technology that gives us the potential to disrupt at least two major
industries. With ownership or exclusive control of more than 200 issued
patents and more than 50 pending patent applications around the world,
22nd Century has a virtual monopoly on the genes in the tobacco plant
responsible for nicotine production.

Ours is the only company in the world capable of growing tobacco with
95% less nicotine than conventional plants… and, at the other end of the
spectrum, no other company can grow cigarette tobacco with nicotine
content as high as our proprietary plants. These technologies – and the
incredibly important independent clinical trials being conducted with
cigarettes made from our proprietary tobaccos – are what make 22nd
Century extraordinary. And these are the things management intends to
build on, in the near term, to increase shareholder value.

To date, there have been numerous independent, scientific clinical
studies (Phase II and Phase III) using 22nd Century’s proprietary Very
Low Nicotine cigarettes. New clinical trials using 22nd Century’s SPECTRUM®
research cigarettes are already underway. Most notably, a Phase III
study featuring 1,250 participants compares two different approaches to
help smokers lose their addiction to nicotine: (A) an immediate
reduction in nicotine content in cigarettes to non-addictive levels by
using 22nd Century’s proprietary Very Low Nicotine tobacco in such
cigarettes, or (B) a gradual reduction in nicotine content in
cigarettes to non-addictive levels by using 22nd Century’s SPECTRUM®
research cigarettes. No matter which protocol ultimately prevails, each
utilizes 22nd Century’s proprietary products, so 22nd Century will be
the “winner” either way.

Based on the results of these and other independent clinical trials, we
believe 22nd Century will be the first company in the world to achieve a
Modified Risk Tobacco Product designation for a combustible cigarette.

Our Company also believes that our X-22 smoking cessation product
in development may in fact prove to be the world’s most effective
smoking cessation aid. Importantly, unlike Pfizer’s market-leading drug Chantix®,
X-22 seems to pose no new side effects to smokers. What’s more,
smokers we have surveyed overwhelmingly prefer the idea of quitting with
a combustible cigarette rather than using a pill, nicotine patch,
lozenge or gum. To this end, our Company has continued to identify and
meet with potential strategic partners in our efforts to establish a
non-dilutive joint venture to fund Phase III clinical trials for X-22.
Announcement of such a joint venture, as one might imagine, would be a
transformative event for 22nd Century. We will continue our efforts on
this important initiative in 2016.

While the harm reduction theory behind a Very Low Nicotine cigarette
that provides nicotine to smokers at “non-addictive” levels is easy to
understand, the development of a high nicotine cigarette may seem
counter-intuitive. However, we believe that both
approaches serve to reduce the harm caused by smoking, though for very
different reasons.

It has been hypothesized for many years that a high nicotine tobacco –
when combined with a low tar yield cigarette design – will result in
smokers inhaling far less smoke and far less “tar”. Of
course, smoke and “tar” are the primary disease-causing agents of
cigarettes. In the landmark publication, Virtually Safe Cigarettes,
2000, noted epidemiologist Dr. Gio Batta Gori lays the groundwork
for our strategies succinctly, as follows:

With the exception of extremely low nicotine yield cigarettes, “smokers
in general manage to utilize an average of about 1 mg of nicotine from
cigarettes of any brand, regardless
of…smoking machine yields.”

This statement addresses the phenomenon now commonly referred to as
“smoker compensation.” Especially for cigarettes with slightly lower
nicotine contents, like in cigarettes formerly referred to as “light,”
smokers compensate by taking more puffs, inhaling more deeply, covering
the dilution air holes on the filter, and/or simply smoking more
cigarettes in order to consume their desired nicotine of approximately 1
mg per cigarette. What this means is smokers find a way to achieve about
1 mg of nicotine no matter the type of cigarette they smoke, unless the
nicotine of a cigarette is so low as to make smoker compensation
impossible (which is true with 22nd Century’s Very Low Nicotine SPECTRUM®,
MAGIC, BRAND A, and X-22 cigarettes).

In 2003 at the TabExpo Congress in Barcelona, Spain, Dr. Gori reached
the natural conclusion of his theory when he explained:

“…the higher the smoke concentration of nicotine, the sooner
inhalation is inhibited, the lower the dose of whole smoke to the lungs,
and the lower the risk to be expected.”

In other words, as smokers make the adjustment to a higher nicotine
cigarette, they naturally consume less “tar” and less smoke – primarily
because the nicotine their bodies crave is more readily and more
efficiently available when smoking a high nicotine tobacco cigarette.
And with less smoke consumption, the risks for heart disease, lung
disease and cancer also lessen.

Accordingly, we believe that 22nd Century’s BRAND B higher
nicotine cigarettes may in fact qualify for Modified Risk Tobacco
Product status with the FDA. Based on the work of Dr. Gori and others,
we have developed BRAND B cigarettes with relatively high
nicotine content in combination with moderate tar content. Thus, when
comparing BRAND B to conventional cigarettes, BRAND B has
a tar-to-nicotine ratio that is more than 60% lower than that found in
conventional cigarette brands.

So, for smokers who wish to reduce their exposure to nicotine and/or to
quit smoking altogether, 22nd Century has developed naturally growing
tobacco with the world’s lowest nicotine content. At the same time, for
the more than 20 million American smokers who accept the risks
associated with smoking, do not wish to quit, and are not concerned with
decreasing their exposure to nicotine, our Company has created BRAND B
not to give smokers more nicotine – but to deliver nicotine more
efficiently than conventional cigarettes with a reduced exposure to the
smoke and “tar.” It is our belief that 22nd Century’s BRAND B
cigarettes reduce smokers’ exposure to “tar” and smoke by more than 60%
as compared to conventional cigarettes. We believe this product has
truly enormous market potential.

We expect BRAND B will be of great interest to pragmatic public
health officials. At the recent March 2016 Annual Meeting of the Society
for Research on Nicotine and Tobacco, the FDA presented a summary of the
initial results of its own recently completed clinical study on dual
users of both cigarettes and filtered cigars in which the FDA found that
such smokers inhaled less smoke when they smoked filtered cigars than
when they smoked conventional cigarettes. This result supports the
theory held by our Company that a higher nicotine product, like a
filtered cigar or a filtered cigarette with high nicotine tobacco, will
result in the intake of less smoke and less “tar” by the user. For these
reasons, in 2016 we plan to meet with the FDA to discuss conducting
“proof of concept” exposure studies for BRAND B extremely low
tar-to-nicotine ratio cigarettes. If the results of these exposure
studies allow, and provided sufficient funds are available, we will
begin work on a Modified Risk Tobacco Product application for BRAND B
cigarettes in order to request from the FDA the right to disclose to
consumers that BRAND B exposes smokers to substantially less
“tar” and substantially less smoke than the current market leading
brands of cigarettes in the United States.

In 2016, we will also continue our scientific research and development
activities relating to the cannabis plant. We currently conduct all of
our research and development on the cannabis plant in fully licensed
laboratories in Vancouver, Canada. In the cannabis plant, the Company’s
unique intellectual property allows 22nd Century to regulate the “active
ingredients” in the plant, which are known as cannabinoids. With this
technology we intend to develop cannabis plants with low levels of THC
for the commercial hemp market and plants with high levels of CBD for
the legal medical marijuana markets. These initiatives could provide
significant future revenues for our Company.

In summary, 22nd Century remains uniquely positioned as a plant
biotechnology company with the important primary mission of reducing the
harm caused by smoking; we are also very excited about our opportunities
to develop important medical marijuana plants. We have made huge strides
over the last 12 months on many scientific initiatives and we are proud
of what we have accomplished. While we are not yet profitable, we are
certainly putting “points on the board” both in terms of the substantial
increases in revenues and in terms of our strategic accomplishments.

We also continue to see great progress with a greater number of
independent clinical trials utilizing our proprietary products. As we
continue to make our own MRTP application submissions to the FDA, we
believe 22nd Century’s technology will be widely recognized as a true
paradigm shift for at least two industries. We believe that ultimately
capturing a share of the growing smoking cessation market and/or a mere
fraction of a percent of the U.S. cigarette market with one or more of
our Modified Risk Tobacco Products in development will transform our
Company into a true industry leader.

On behalf of the 22nd Century Group management team and our Board of
Directors, we thank you for being part of our family of shareholders. We
look forward to meeting many of you at our annual shareholder meeting in
April and we look forward to sharing exciting Company developments with
everyone in the weeks and months to come.

Best regards,

Henry Sicignano III
Chief Executive Officer, President & Director

About 22nd Century Group, Inc.

22nd Century is a plant biotechnology company focused on technology
which allows it to increase or decrease the level of nicotine in tobacco
plants and the level of cannabinoids in cannabis plants through genetic
engineering and plant breeding. The Company’s primary mission is to
reduce the harm caused by smoking. 22nd Century currently owns or
exclusively controls more than 200 issued patents and more than 50
pending patent applications around the world. The Company’s strong IP
position led to a licensing agreement with British American Tobacco
(“BAT”), the world’s second largest tobacco company. Visit www.xxiicentury.com,
www.magiccigarettes.com
and www.redsuncigarettes.com
for more information.

Cautionary Note Regarding Forward-Looking Statements: This
press release contains forward-looking information, including all
statements that are not statements of historical fact regarding the
intent, belief or current expectations of 22nd Century Group, Inc., its
directors or its officers with respect to the contents of this press
release, including but not limited to our future revenue expectations.
The words “may,” “would,” “will,” “expect,” “estimate,” “anticipate,”
“believe,” “intend” and similar expressions and variations thereof are
intended to identify forward-looking statements. We cannot guarantee
future results, levels of activity or performance. You should not place
undue reliance on these forward-looking statements, which speak only as
of the date that they were made. These cautionary statements should be
considered with any written or oral forward-looking statements that we
may issue in the future. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any
of the forward-looking statements to conform these statements to reflect
actual results, later events or circumstances, or to reflect the
occurrence of unanticipated events. You should carefully review and
consider the various disclosures made by us in our annual report on Form
10-K for the fiscal year ended December 31, 2015, filed on February 18,
2016, including the section entitled “Risk Factors,” and our other
reports filed with the U.S Securities and Exchange Commission which
attempt to advise interested parties of the risks and factors that may
affect our business, financial condition, results of operation and cash
flows. If one or more of these risks or uncertainties materialize, or if
the underlying assumptions prove incorrect, our actual results may vary
materially from those expected or projected.

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