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Dr. John Faessel
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Dr. John L. Faessel is a seasoned and respected Wall Street professional with industry-wide recognition for expertise in market strategy and analysis. He is widely recognized for his insights in public companies. For over 20-years Dr. Faessel’s ON THE MARKET reports have been widely distributed... More
  • The Last Great Buying Opportunity” For STAR SCIENTIFIC (STSI) 9 comments
    Sep 26, 2012 3:24 PM

    9/26/2012

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    STAR SCIENTIFIC (STSI) "The Last Great Buying Opportunity"*

    * Yesterday BIR Research in an update referred to the recent market selloff in Star shares as perhaps "The Last Great Buying Opportunity"― I agree...

    Here's the quick story: Because of a quirky gag order that's still in place the details of the settlement between Star and Reynolds Tobacco have yet to be released. All we know for sure is that Star now owns the subject patents as the US Supreme Court has vacated the patent case at the behest of both Reynolds Tobacco and Star. Details will be forthcoming shortly I presume...

    The old Wall Street rumination of 'no news is bad news' comes in to play here as the void of settlement details opened the door for the shorts to slug the market with a big sell order of about 300,000 shares as that market was about to close (3:54 pm). Stars shares tumbled down a chunk from $3.55 to a low of $3.21, but buyers were there and shares retraced immediately higher (in the last 30 seconds of that one minute 'bar') to close at $3.37. In the last 5 minutes of trade another 480,000 shares traded and shares closed at $3.34. Total volume for the day was 4.499 million shares. Should mention that the gag order has been in effect since February.

    Here lies the opportunity in my opinion. Before addressing the lawsuit, 'things' have never been better for Star. Operationally sales of Anatabloc™ are ramping ever higher and the product is well on the way to becoming a household word as full page newspaper spreads, radio and TV ads are becoming commonplace. The news of the wonders of Anatabloc™ are spreading. Human study results by Johns Hopkins are imminent 'within days' as are the Flint study results. With the ownership of the patents now undisputed I expect the sale or spin-off of Star's tobacco biz plus Big Pharma licensing of anatabine loom (post the Johns Hopkins results) and there's rumors of new managed care interest. The launch of Anatabloc Cream is off and running and testimonials are running extremely positive; my wife loves the stuff and she's fussy about that topic. In addition lots of research data re the cream will follow shortly from some eminent dermatological names.

    Net, net - all things legal are now going Stars way and the science builds. Management continues to execute, always from an ever more substantial and sound platform Considering that none of this existed just two years ago this progress is exceptional.

    Re the Settlement: All we absolutely know for sure is that Star now owns the subject patents as the US Supreme Court has vacated the patent case at the behest of both Reynolds Tobacco and Star. And because the gag order that's still in place details of the settlement between Star and Reynolds Tobacco have yet to be released so all we can do is muse on re the possibilities; important to first ponder is that the tobacco market is huge - over a trillion cigarettes are sold every year and the USA is only a small player of less than 25% of which Reynolds is but a small part. So the real payoff is for royalties from tobacco companies worldwide if Star (or the spun off company) is able to successfully sell-off or license their curing method / technology that removes the cancer causing elements from tobacco. Certainly the payoff could be worth $billions in licensing fees and royalties from a global industry that sells $80 billion of tobacco products in the U.S. and $250 billion world-wide. Over the last 5-years that's an industry with over a $trillion in sales and since the lawsuit was filed over 11-years ago it's twice that amount. Envision a cigarette with the cancer causing elements removed and what that would be worth to the inventor i.e. Star? Consider what a minuscule 1% or 2% royalty would mean to Star in revenue? The entire tobacco industry is now beholden to Star Scientific.

    With regard to Reynolds no one knows, but the chances that Star comes away with nothing are nil in my estimation. Let's remember that Star is lawyer'ed up to the gills and is represented in this settlement case by Mike Bettinger of K&L Gates. He's national lead trial counsel for patent cases in U.S. District Courts and the International Trade Commission and has represented Microsoft and a host of other big names. Also of note and overseeing the legal show is Stars President and Chairman of the Board Paul L. Perito who is the new president of the Harvard Law Alumni Association and he was Secretary of the Harvard Law School Association for the past 14 years. Considering that Star has been at this contentious legal trudge for eleven years I doubt that they would have acquiesced to 'the' or "any" deal if it was a only a token settlement.

    Once again, Star now indisputably owns the patents that remove the cancer causing agents from tobacco to "beyond detectable levels" [BDL] in a world where each day 13,500 people die from tobacco related illness.

    Think of it this way - What would the market cap of a new issue be if that company could claim ―and have indisputable patents set in stone by the Supreme Court of the USA that they could remove the cancer causing agents from tobacco to levels to "beyond detectable levels" [BDL] ? Certainly in my mind more than the market cap of $487 million. Worldwide this could be worth $billions in settlement fees and royalties going forward.

    Let's also note that during the time frame of (STSI)'s decline (from $5.05 to $3.34) institutional ownership has grown over 3 million shares (last quarter reporting period). Add Institutional ownership including greater that 10% holders)- see detail below - is now at a record high of greater than 41.68 million shares.

    We should also note that as of yesterday's new posting that the 'reported' short interest is up 'another'1.30 million shares. Two weeks prior it was up 1.24 million shares, (not counting the 'Naked Shorts' that could be 2 or 3 times that amount.)

    Market cap 9/26/2012 is $487 million- Market cap 7/5/2012 was $ 737 million

    In sum; Stars operations are advancing at a rate and arc as never before the shares decline 33%. - It's a 'buy' the shares if you've been waiting - or and add too - IMHO...

    * STSI - Institutional Ownership - 9/12/2012

    Ownership Analysis

    # of Holders

    Shares

    Total Shares Held:

    116

    28,840,979

    New Positions:

    22

    687,265

    Increased Positions:

    66

    5,162,978

    Decreased Positions:

    28

    1,574,582

    Holders With Activity:

    94

    6,737,560

    Sold Out Positions:

    13

    471,725

    STSI Institutional Ownership - 8/10/2012

    Ownership Analysis

    # of Holders

    Shares

    Total Shares Held:

    112

    25,745,437

    New Positions:

    23

    1,162,584

    Increased Positions:

    51

    2,331,303

    Decreased Positions:

    35

    2,444,441

    Holders With Activity:

    86

    4,775,744

    Sold Out Positions:

    10

    513,719

    Another 16,606,520 shares are owned by 10% owner

    TRADEWINDS MASTER FUND (BVI) LTD.

    Beneficial Owner)

     

    STSI - Short interest - 9/26/ 2012

    Settlement Date

    Short Interest

    Avg Daily Share Volume

    Days To Cover

    9/14/2012

    26,386,042

    1,140,436

    23.136802

    8/31/2012

    25,083,466

    1,334,802

    18.791900

    8/15/2012

    24,851,338

    1,628,612

    15.259213

    7/31/2012

    23,839,224

    1,285,669

    18.542272

    Read more here

    For more on Star's Anatabloc™ science see a recent report of mine; Hypothesis no longer - New Peer Review Credibility from Johns Hopkins Could Drive Star Scientific Shares Higher go here:

    Also NEW (8/1/2012) see a terrific 13 page research report by Gilford Securities on (STSI) / CIGX by market maven Otis Bradley:

    Disclosure: I am long (STSI) I have bought shares the open market and have no affiliation with the company.

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Comments (9)
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  • Nuke John
    , contributor
    Comments (47) | Send Message
     
    Great summary. I would add that numerous human ailments are caused by chronic low grade inflammation associated with elevated NF-kB levels in the body. From what we know thus far, Anatabloc turns off that chronic inflammation and therefore could be helpful in everything from Alzheimer's to heart disease, Parkinson's to MS, Rheumatoid Arthritis to Diabetes (and all auto-immune diseases). The list goes on and on....including many cancers. To see if NF-kB plays a role in any ailment, one only needs to google the disease and NF-kB (for example, google Melanoma NF-kB).

     

    It's hard to imagine what the potential is for a patented compound that can treat almost any illness associated with elevated NF-kB. We know there is a prescription version in the works from Star's previous press releases. From comments in a 2011 Press Release, we know that teaming arrangements with Big Pharma are being pursued.

     

    To see how patients are responding in the clinical trials, watch this piece by CBS news station WNEM. Pay particular attention to every word from Dr. Wilson.

     

    http://bit.ly/sq5V4k

     

    I have been taking Anatabloc for over a year, and I can personally attest to numerous benefits.

     

    http://bit.ly/VIWy9M

     

    If you haven't tried Anatabloc for a month....give it a try. You can buy it for $79 during the first week of the month at GNC, or you can buy it from the company's Anatabloc website.

     

    NukeJohn
    26 Sep 2012, 12:41 PM Reply Like
  • silence_twain
    , contributor
    Comments (339) | Send Message
     
    John: Actually we know a lot about the settlement from Reynolds and Star based on what the filing said and based on the actions of the companies afterwords. We know from the filing that Star can never sue Reynolds again for infringement for any year and that it was determined that Reynolds did not infringe. Also SEC law dictates that if this were a material event for Star or Reynolds, they would need to file an 8K. Given how promotional Star management has been over the years, my guess is they would have had the 8K drafted within minutes. You can still observe a gag order and file an 8K. This would have been a mutually agreed upon fact by both sides because both sides would know you would need to comply with SEC law. Given that no 8K has been produced as of yet, it is safe to assume that Star got no money from Reynolds. So while it is great that Star has valid patents, what good are the patents if no one has infringed upon them and no one is using the technology. As I have said many times before Star's patents are the equivalent to having a patent for square tires. It is great you have a patent, but it is not of any practical use. I would say that this whole case has been a major disappointment for Star. They talked up the trial, the patents, diluted shareholders with numerous equity raises, paid millions in attorney fees and walked away with what seems to be nothing. The idea that you would even type a sentence about the industry being beholden to Star is laughable at best. The only company Star ever sued resulted in Star losing in court and a settlement which seems to have resulted in no material amount of money changing hands or licensing deal taking place.

     

    As for Anatabloc, you guys still live in this fantasy world. There are numerous OTC supplements that fight inflammation. Anatabloc regardless of how you talk it up is not revolutionary in any way shape or form. This will ultimately be told by the earnings.

     

    As for your market maven Otis Bradley, guess you forgot how he used to tout Medis Technologies. I wonder what your and Otis's excuse will be when the company produces very little revenue in the future.
    26 Sep 2012, 07:29 PM Reply Like
  • thefamilyman
    , contributor
    Comments (37) | Send Message
     
    @ Silence/alias skiguy/alias ???
    I wonder why you feel the need to constantly bash this company. And I wonder what you will say when at last your lies are revealed. (BTW - I believe that day is coming soon.)

     

    Your ridiculous arguements regarding the tobacco lawsuits have been rebutted in detail numerous times by posters who are obviously more familiar than you with the case and the law. You've all but accused Johns Hopkins of helping Jonnie Williams perpetuate a fraud. You call Anatabloc "snake oil" despite the fact that Roskamp and Johns Hopkins have published peer reviewed studies proving the efficacy of anatabine. You persist in that falacy even knowing that there are multiple human studies currently underway.

     

    You apparently feel that Dr. Paul Ladenson, the Director of Johns Hopkins' Division of Endocrinology and Metabolism, is a part of Jonnie Williams' great "snake oil conspicacy". Well here's something you may not know; he was just honored last week with the very prestigious Lewis E. Braverman award at the 82nd Annual Meeting of the American Thyroid Association. His bio included this sentence, "Currently, Dr. Ladenson is investigating effects of the nutritional supplement anatabine on autoimmune thyroiditis." It almost sounds like he's proud of his work with this "snake oil"!

     

    According to you, this very accomplished medical professional is either a co-conspirator to a massive fraud, or he's an incompetent dupe. I think that neither he, nor Jonnie Williams, nor Anatabloc, nor STSI deserve your bashing. And I KNOW that Dr. Ladenson and Jonnie Williams are going to use anatabine to greatly improve the quality of life for tens of millions of suffering people. I KNOW this because I KNOW that Anatabloc works...

     

    http://bit.ly/UQtPlH
    27 Sep 2012, 11:35 PM Reply Like
  • silence_twain
    , contributor
    Comments (339) | Send Message
     
    familyman:

     

    Really my claims about the case have been rebutted? I have long held that Star will get nothing from Reynolds. If Star gets something material, they must by law file a 8K saying what they got. There is some dispute whether that is 48 hours or 4 days, but the fact remains we have yet to see an 8K. You could easily put out an 8K with a dollar figure and still abide by whatever gag order the judge put in place. In fact, both sides would know an 8K is legally required in the case of a material event. The fact that no 8K has been filed speaks volumes to the final outcome here. It was not me who talked up the value of these patents or who diluted shareholders year after year to fight a lawsuit that seems to have resulted in nothing. It was the pumpers and your leader Johnnie Williams.

     

    As for Anatabloc itself, you are correct. I do not view the product as revolutionary in any way shape or form. Based on discussions I have had with others in the medical field, it is no different than any other anti inflammatory on the market place. Come talk to me when you have an FDA approved drug, not some OTC dietary supplement.
    28 Sep 2012, 08:32 AM Reply Like
  • silence_twain
    , contributor
    Comments (339) | Send Message
     
    thefamilyman: Care to admit that I was right and people should of stayed away from STSI!
    26 Mar 2013, 03:23 PM Reply Like
  • eleany
    , contributor
    Comment (1) | Send Message
     
    DD,
    Go to GNC buy a bottle to try yourself, and while your there ask the person behind the counter how the Anatabloc is selling.
    27 Sep 2012, 03:58 PM Reply Like
  • Labman01
    , contributor
    Comments (48) | Send Message
     
    Silence_Twain , let me ask you this since your a know it all about this whole case. Why would RJ Reynolds even stay in court for 11 years if they weren't desperately trying to obtain the patient? Why would both parties just all of a suden dismiss the case and to agree to their own attorneys fees? R J Reynolds does not want another tobacco co. coming in and offering to buy out this new technology that is proven effective? Don't you see that to dismiss this case as quick as they did indicates that both parties have known for months and working on this settlement behind closed doors. The exact words from Star is We Will Be Out Of The Tobacco Business by the End Of The Year. That's indicates to me that Star has gotten what they asked for. Reynold has fought tooth and nail to obtain this patent, and they probably now have it at a very high cost. Rosekemp, John Hopkins and The Walton Foundation cannot put money that is non-profit funds that aren't showing some kind of a sure positive results. Rosekemp is non profit, the funds have to be spent in a way that can be shown to have a positive impact, John Hopkins Institute cannot put their reputation on the line for snake oil remedy, The Walton Foudation just like the Gates Foundation are going to provide funds for something that has been presented to them to have remarkable results. RJ Reynolds, I would imagine now owns the patent for the curing process, and Star is keeping the Pharma side for Anabloc. The funds awarded to Star will help them to continue with their research on Anabloc, where does Star get the highest concentration of Anabine ? From Tobbaco Leaves, who has a hell of a lot of Tobacco Leaves? RJ Reynolds. Eleven Years RJ Reynolds has fought for this patent , and they lost, not guilty of anything, but they lost the rights to the patents, and they want them. Do you think Reynolds wants Phillip Morris to sneak in and buy the tobacco side of Star ? Phillip Morris has already been questioned regarding the usage of this curing device without permission, this is why Reynolds has made the deal of being protected from any further law suits. Do you think Stars gives a damn what Reynolds does with the new technonolgy after sold ? No, they don't. The big Tobbaco Companies are already at the door step of being $Trillion Dollar companies. Do you think Reyonalds won't pay a bump of a $Billion dollars on something that's going to make them the biggest tobacco company in the world, and then have the other big tobacco pay Reynolds for the use of the curing technology. Your looking at a Win Win for both Star and RJ Reynolds.
    15 Oct 2012, 09:37 PM Reply Like
  • C. Henry
    , contributor
    Comments (2) | Send Message
     
    This company was given subpoenas by the US Attorneys Office. Their claim that their product was studied by Johns Hopkins is false. One doctor did this on his own for money.
    24 Mar 2013, 10:05 PM Reply Like
  • C. Henry
    , contributor
    Comments (2) | Send Message
     
    This company is being investigated by the US Attorney Eastern District. Their product was not studied by John Hopkins. One doctor there did that on his own and now he is in trouble.
    24 Mar 2013, 10:06 PM Reply Like
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