Kaival Brands Innovations Group, Inc. (NASDAQ: KAVL) stock is higher by over 60% since the start of October. But the better news is that based on recent deals, that appreciable move could be the precursor of larger gains to come. Indeed, regulatory decisions over the past few months have positioned Kaival Brands for a transformative period of growth. In fact, recent actions have left KAVL one of the few if not only, Electronic Nicotine Delivery System (ENDS) companies left standing to take advantage of what is now a wide open multi-billion dollar market opportunity in the United States. That's a result of sector companies, large and small, being virtually eliminated from the ENDS competitive landscape almost overnight after failing to meet FDA standards for continued marketing authorizations.
While hundreds of companies and potentially thousands of ENDS brands lost marketing approval in the United States, Kaival didn't. And shareholders in KAVL now get the benefit of knowing that competing company failures coupled with KAVL successes position Kaival to accelerate growth at an exponentially fast pace. With recent deals in place and potentially more expected, Kaival has never been better positioned to accelerate its mission to better serve the world's smoke-free future through corporate responsibility and environmental sustainability within the product category.
An Excellent Start To Creating Value
They have an excellent start. In July, KAVL reported reaching an agreement with Philip Morris Products S.A. ("PMPSA"), a wholly owned affiliate of Philip Morris International Inc. (NYSE: PM) for the development and distribution of electronic nicotine delivery system ("ENDS") products in markets outside of the U.S., subject to market (or regulatory) assessment. Traction from that deal is expected to strengthen into the end of this year and all of 2023. But keep in mind, while the overseas markets target billions in potential sales, it's still just one part of the world. Kaival Brands has retained its rights as the exclusive distributor of Bidi products in the United States, which, because of recent FDA rulings, can drive extraordinary near and long-term growth.
KAVL's agreement with $PM strengthened in June after formalizing an international licensing agreement, granting them a license of certain intellectual property rights relating to Bidi Vapor's premium ENDS device, as well as potentially newly developed devices, to permit PM to manufacture, promote, sell, and distribute such ENDS device and future developed devices, in international markets. Obviously, the muscle behind PM is substantial, and with the Bidi portfolio of products getting the green light to market both in the States and overseas, the rewards from that working relationship can be significant. And there may be more to come.
That deal with PM could be just the start of a series of agreements to create what some believe can add significant shareholder value. Many investors are enthused, but some also ask why the team at Kaival is so optimistic about the future. The answer is simple: they have a best-in-class approved-to-sell product that may be unrivaled in the marketplace, and that's not unfounded optimism.
Data Supports Best-In-Class Positioning
Volumes of data assessing nicotine pharmacokinetics (PK) and subjective effects of the BIDI® Stick compared with combustible cigarettes demonstrated significant differences. Those assessments also showed that Bidi products are in a class of their own, supported by study data demonstrating that the BIDI® Stick delivered nicotine to users comparably to their usual brand cigarette and elicited similar subjective effects such as satisfaction and relief. This is one of the primary data points the FDA wants to see before granting marketing authorizations. They showed more.
Because the BIDI® Stick provides measured and consistent nicotine delivery, it meets a second FDA interest in that it can be an alternative to cigarettes among current smokers and may support their transition from cigarette smoking. And, of course, consumer taste and interest matter. Data showed that BIDI® Stick provides the satisfaction smokers want, which can aid them in quitting cigarette smoking.
All of that matters, especially for companies placed on the market sidelines. Without meeting those criteria, marketing approvals may be unrealistic. For example, the dominant product JUUL was removed from retail sales placements after failing to meet several FDA mandates. A few reasons were on the marketing side, but they also had their share of product problems. For example, as a comparison, BIDI® Stick nicotine delivery was similar to a cigarette; JUUL nicotine delivery was less than a cigarette. That's a problem that proved costly to JUUL, noting its substantial loss of market presence in the United States. And that's only a part of what's needed to meet FDA guidance. The most important thing to know is that, to date, Bidi products are checking all the right boxes.
BIDI® Stick To Phase III Scientific Review
That has led to the FDA placing the tobacco-flavored Classic BIDI® Stick into the final Phase III scientific review. Based on the thousands of documents provided and KAVL's stated unequivocal commitment to only market these products to people of legal consumption age, it's a fair bet that the FDA will ultimately grant total marketing approvals. If so, expect to see BIDI® Stick rolled out nationwide and able to leverage a potentially massive marketing position resulting from a significantly thinned-out landscape. And KAVL appears ready to pounce on that opportunity.
In July, they announced launching PMPSA's custom-branded self-contained e-vapor product, VEEBA, currently being sold in Canada, with royalties due to KBI under the international licensing agreement. That could provide a running start to market in the states after the U.S. Court of Appeals for the Eleventh (11th) Circuit ruled in favor of Bidi Vapor in its appeal of the U.S. Food and Drug Administration's ("FDA") Marketing Denial Order ("MDO") issued to the non-tobacco flavored BIDI Sticks. As noted in that August release, the court set aside or vacated the MDO and remanded the PMTAs back to FDA for further review.
If KAVL stays on course, they should have a clear path to marketing approval, which will present Kaival with many opportunities, including partnerships, licensing, and manufacturing deals. And by being one of if not the only near-term proposition to major brands getting back to the market, they can likely negotiate agreements from a position of strength.
An International Opportunity
Know this, too. Most countries aren't following the FDA's flavored-ENDS prohibition. While fully committed to the safe sale and marketing of products, markets overseas currently present a massive sales opportunity. And KAVL is focused there as well, benefiting from global marketing approvals that are increasing in number. BIDI® Stick and Vapor products has received marketing and distribution approval in 11 international markets over the past twelve months, including the United Kingdom and Russia. Given the favorable dynamics of the U.K. market, maximizing those market opportunities sooner than later with strategic efforts focused on penetrating markets overseas could be in-play. Those in the U.K. market that present a more than $2.5 billion revenue-generating opportunity today and an expected $3.9 billion one in 2023 are probably already in the KAVL crosshairs.
Heading into the tail end of 2022, investors are being greeted by a KAVL team that appears energized, focused, and determined to capitalize on and maximize unique marketing opportunities. And with the support and marketing muscle of companies like PMPSA, subsequent intererst in U.S. markets (after FDA approvals) can generate game-changing revenues for the company. Those following KAVL know this: never before have its business opportunities been so filled with blue-sky potential. More importantly, never before have the opportunities been closer to achieving.
So, investors may want to buckle up for a potentially bullish ride. Kaival Brands has momentum like never before. And better still, has the products that millions of people want and hundreds of companies need. Hence, monetizing its assets to their fullest extent is the next and most logical step. Chances are, those steps are already in motion.
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