Kaival Brands Innovations Group, the exclusive global distributor of Bidi Vapor’s Bidi Stick, released results for its fiscal year (FY) 2021 third quarter. Bidi Vapor is the a disposable electronic nicotine delivery system (ENDS) intended exclusively for adult consumers 21 and over.
Effects of FDA Review Process
Kaival said in a statement that the company believes that the Premarket Tobacco Application (PMTA) process undertaken by the U.S. Food and Drug Administration (FDA) has had a significant impact on the e-cigarette industry.
Prior to the Sept. 9, 2021, court-ordered deadline for the FDA to make PMTA determinations for pending applications, Kaival assessed that many retailers and distributors were reluctant to take on new inventory.
“We believe these retailers were concerned with the potential for being left with inventory that after Sept. 9, 2021, could be ruled adulterated or misbranded by the FDA and, thus, illegal to sell,” the company said. “Separately, we believe there were other retailers willing to purchase counterfeit or sub-optimal products from manufacturers who were selling these products at significantly reduced prices.”
Those manufacturers were willing, Kaival believes, to significantly reduce sales prices because they realized they would likely not receive the FDA’s PMTA authorization on Sept. 9, 2021, and were attempting to recognize any revenues associated with what they believe will likely be unsellable product following the deadline. “These tangential consequences of the PMTA process have resulted in the third quarter of fiscal 2021 being an extremely challenging quarter for us,” the Kaival statement read.
Multiple Factors in Bidi Pouch Delay
The COVID-19 pandemic also impacted Bidi Vapor’s ability to quality test because of supply chain disruptions and develop its new product the Bidi Pouch in line with its targeted release date, which hurt the company’s ability to begin distribution of the Bidi Pouch.
“These impacts ultimately affected our financial results for the quarter ended July 31, 2021,” Kaival said. “We reported revenues of $3.4 million for the three months ended July 31, 2021, compared to $32.4 million for the three months ended July 31, 2020. We reported revenues of $59.5 million for the nine months ended July 31, 2021, compared to $54.9 million for the nine months ended July 31, 2020.”
Bidi Vapor has also encouraged a potential FDA ban on the marketing and distribution of synthetic nicotine in the U.S., taking the firm position that synthetic nicotine should be classified as an unapproved drug and, thus, subject to the applicable FDA drug regulations.
Kaival expects the impact of continued FDA scrutiny on the ENDS industry, as well as the commencement of distribution of the Bidi Pouch, initially outside of the U.S., to have a positive impact in the longer term, but the dynamics that affected the third quarter, as well the delay in launching the Bidi Pouch in the U.S., will cause revenues for the full year ending Oct. 31, 2021, to be below previously issued guidance. The company now expects revenues for the year to be approximately $68 million, as compared to previous guidance of $400 million.
“While our third quarter revenue results did not meet our expectations, we remain steadfast in our commitment to preventing youth use of ENDS, responsibly marketing to adult tobacco users 21-and-over, working with law abiding retailers and distributors, and complying with all federal and state laws and taxes applicable to the distribution of the BIDI® Stick, including, but not limited to, the Family Smoking Prevention and Tobacco Control Act, the Food, Drug and Cosmetic Act, and the Prevent All Cigarette Trafficking Act,” said Niraj Patel, founder and CEO of Kaival Brands.
“Since inception, we, together with Bidi Vapor, have been built upon the foundations of industry-and-regulatory exceeding compliance standards. Over the past 12 months, together we have been preparing for a post-PMTA regulatory environment and have maintained our focus on providing an industry-leading premium vape experience along with establishing industry-best youth access prevention programs and protocols.”