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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
  • Star Scientific Shares Double & The Relevance Of The JAK-STAT* Signaling Pathway To Its Ascent  3 comments
    Dec 7, 2012 7:38 AM | about stocks: RCPI

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    STAR SCIENTIFIC (STSI) nasdaq

    Star Shares Double & the Relevance of the JAK-STAT Signaling Pathway to its Ascent

    It's the Science… And it's on a Roll - An Update

    Since the 2nd anatabine peer review study was published in November the shares of Star Scientific have doubled coming off their yearly lows of $1.56 on a big volume increase.

    During this brief period of several weeks, over 50 million shares were traded representing a significant increase from prior average daily volume of less than 2 million shares. During this same period of time, the very large short position of approximately 30 million shares representing about 20% of the shares outstanding declined by only 626,000 shares, as of the last reporting period. So it doesn't appear that the non-believers, i.e. those short the shares, have covered to any great degree indicating that it's natural buyers taking down more shares.

    A sharp increase in daily trading volume during a bottoming period followed by a sharp increase in share price may represent strong institutional confidence Star's scientific thrust regarding Anatabloc as an anti-inflammatory agent and that the soon to be released John's Hopkins thyroid study results will be positive.

    Institutional Buyers at the Bid

    My thinking goes like this based on contact with numerous institutional / big players in the shares… The validating science, and the new peer review is an example, continues to develop, so far without a hitch. One major player, who knows Star Scientific well, if not better than anyone, tells the long-side story powerfully and succinctly, his quote; "Anatabine is a STAT3/NF-kb Inhibitor*. Game over!"

    And the reason the institutions continue to accumulate the shares is because of the science indicating that anatabine / Anatabloc is being corroborated in multiple testing venues. And the just published release adds to 'their' fervor.

    At last count the short position in Star Scientific was a reported at near new highs of 29,993,048 shares. Coincidently the institutional ownership in Star shares** is at a new high. It's an enigma that obviously will play out in time.

    I realize that this report is lengthy and is bit of a tome - dwells on a lot of the science and it's not for the faint of heart, but new highs in institutional ownership - and the recent $20 million of insider buying of a PPO, plus / including new buying by greater than 5% holders that carries 6-month lock up sends a powerful message. Additionally, Star Scientific / STSI is one of the most searched companies and stocks out there; a Google search yielded 220,000,000 results. Something is going on here…

    The Investment Proposition

    So, as the science becomes more and more substantiated the medical and scientific community will become more and more aware of anatabine and its benefits, and public interest will build, as will sales of Anatabloc. Let's add to the consideration that just two years ago anatabine was being used as an aid to curtail smoking. Now it's much more, even with the Walton Family Foundation funding the Johns Hopkins thyroid research. I'm struck that someone hasn't already undertaken a takeover as the market cap of $436 million is low when you consider what a private company with this science would bring - the deal would be in the billions ̶ IMHO.

    An Essential Qualification

    Certainly the just published (11/27/2012) peer review of anti-inflammatory activity of anatabine on animal and human blood studies by Roskamp doesn't carry the same gravitas as humans trials, and are not equivalent in substance whatsoever, but they are part of the necessary process on the way to scientific and market acceptance. Note though that the Authors Accepted Manuscript from Roskamp was received by the European Journal of Pharmacology for review on April 2nd 2012, eight months ago.

    Two Successful Human Trials Have Been Completed

    Note that complimentary and successful human trials have been reported by the Roskamp Institutes in October of 2012; "Star Scientific Announces Successful First Look at the "Flint" CRP Human Study and Provides Updated Report on ASAP Human Thyroid Study". The human study reported that; "11 of 18 (61%) diabetic subjects on metformin had a CRP reduction, as did 31 of 81 (38%) subjects in the general trial population not taking metformin. Overall, 42 of 99 (42%) subjects had a decrease in CRP after only one month with anatabine supplementation."

    The above study followed the previous successful study on humans reported on 1/30/2012; Rock Creek Pharmaceuticals [a Star subsidiary] Reports First Clinical Trial Showing Anatabloc™ [anatabine] Lowers Chronic Inflammation Measured by CRP Blood Levels in Human.

    * The JAK-STAT Relevance to Anatabine

    So, let's recap some of the new science by the Roskamp Institute emphasizing the JAK-STAT signaling pathway that's just been peer reviewed by the European Journal of Pharmacology titled; Anti-inflammatory activity of anatabine via inhibition of STAT3 phosphorylation that I think could be responsible for the advance in Star shares.

    With a backdrop of Pharma spending $billions feverishly working in the JAK-STAT signaling pathway and just published peer reviewed research on anatabine that acts in the same biochemical pathway, but is safer could have positive implications for Star Scientific's (STSI) compound Anatabloc™

    Important Links

    JAK-STAT signaling pathway - Go here

    Tofacitinib - Go here

    NF-kB - Go here

    Pharma is Spending $Billions in JAK/STAT Research

    It's important to also know that Pharma, Big and small is spending $billions working in the JAK/STAT area, and more $billions in sales is their target:

    Pfizer - Link here

    Lilly - Link here

    J&J - Link here

    Vertex - Link here

    YM Biosciences - Link here

    Galapagos - Link here

    The Pfizer drug Tofacitinib, referred to as "Tofa" in the scientific community, is now approved - trade name Xeljanz, formerly tasocitinib is for the treatment of rheumatoid arthritis (NYSE:RA), psoriasis, inflammatory bowel disease, and other immunological diseases, as well as for the prevention of organ transplant rejection. It's estimated by analysts that "Tofa" will be a big seller in the likely $2.5 billion range for Pfizer.

    Wiki: In November 2012 the FDA approved [Pfizer's] tofacitinib "to treat adults with moderately to severely active rheumatoid arthritis (RA) who have had an inadequate response to, or who are intolerant of, methotrexate." ["tofacitinib rapidly improved disease by inhibiting the production of inflammatory mediators and suppressing STAT1-dependent genes in joint tissue."

    But Danger Lurks

    The FDA made Pfizer put a "Black Box Warning" on the label of their just approved JAK/STAT pathway inhibitor XELJANZ (tofacitinib). Black Box warnings that go along with this approval warn patients that they are at higher risk of opportunistic infections, tuberculosis, cancers and lymphoma. I've been told by a Big Pharma researcher that there is thought to be a very untoward 3% neutropenia occurrence as a side effect from the Pfizer drug. Also of note: Tofacitinib will carry a price tag of about $25,000 a year for treatment, on par with drugs like Abbott's injectable Humira which is expected to earn $9.5 billion in this year and Amgen's Enbrel, sales of over $3 billion which also treat rheumatoid arthritis. See the Pfizer Black Box Warning here.

    The Upshot is that

    "Tofa" has very serious safety risks and a drug / compound that acted in the same or a parallel JAK/STAT biochemical pathway or mechanism, but was safer would be very important - think Anatabine / Anatabloc…

    Anatabine Prevents STAT3 and NF-kB Phosphorylation

    Now back to an excerpted key paragraph from the just peer reviewed Roskamp Institute paper:

    "Our data show that anatabine prevents STAT3 and NF-kB phosphorylation induced by lipopolysaccharide (NYSE:LPS) or TNF-alpha in SH-SY5Y, HEK293, human microglia and human blood mononuclear cells. Using human whole blood, we found that anatabine prevents IL-1_ production induced by LPS. We assessed anatabine's anti-inflammatory activity in vivo using an acute model of inflammation by challenging wild-type mice with LPS. We observed that anatabine reduces pro-inflammatory cytokine production (IL-6, IL-1_ and TNF-_) in the plasma, kidney and spleen of the animals following the injection of LPS and concomitantly opposes STAT3 phosphorylation induced by LPS in the spleen and kidney."

    Important points:

    (a) All the Pharma companies mentioned above; Pfizer, Lilly, J&J, Vertex, YM Biosciences and Galapagos (and probably others) have major clinical-stage JAK inhibitor programs.

    (b) JAK inhibitors have an intrinsic potential for toxicity, e.g. neutropenia, cancer, etc.

    (c) Inhibiting JAK prevents STAT activation (which leads to production of all those untoward inflammatory factors).

    (d) The Roskamp paper shows that anatabine also prevents STAT activation. However, anatabine is almost certainly NOT a JAK inhibitor and therefore likely modulates STAT activation through an entirely different mechanism.

    It still remains to be discovered exactly how anatabine regulates STAT, but the fact that it does so independently of JAK suggests that it may have all the beneficial effects seen with the clinical JAK inhibitors for rheumatoid arthritis and inflammatory bowel disease while circumventing the safety risks.

    The just released peer reviewed Roskamp paper about STAT modulation further supports the peer reviewed Johns Hopkins University School of Medicine orchestrated thyroid studies; "Anatabine Ameliorates Experimental Autoimmune Thyroiditis" and provides further support for anatabine as a safe and powerful agent against a wide variety of autoimmune and inflammatory diseases.

    A Johns Hopkins human study funded by a grant from the Walton Family Foundation is due sometime this month. And Roskamp is also currently doing a human clinical trial on Alzheimers. Numerous other studies from several well-known research institutions are now getting underway and in the formulation stage.

    In Conclusion

    The recent peer reviewed animal and human blood studies, in addition to the human trials are well into corroborating and validating the early reports from a multitude of anecdotal testimonials re the benefits of anatabine. The science is building, as is institutional interest and that's very likely the reason for the volume expansion and the advance of the Star shares. Inflammation is perhaps the major medical issue of our time and the ability to diminish its risk will change the way we manage health in America / the world. In addition, there is increasing evidence across the various medical disciplines that seem to indicate correlation between controlling inflammation and extending life.

    And Finally

    A quote re the peer reviewed study from Dr. Michael Mullan, the CEO and President of the Roskamp Institute, "Anatabine continues to demonstrate widespread anti-inflammatory properties in a broad array of pre-clinical models. Given the commonality of inflammatory systems in rodents and humans, there's much reason to expect that anatabine will demonstrate similar properties in humans. In fact, the team went on to demonstrate that in human blood inflamed with LPS, the presence of anatabine dramatically dampened the inflammatory response, a result also included in the paper."

    ** Institutional ownership is at a new high of 20.31%. In addition, add the 23,231,111 shares held by TradeWinds Investment, (a Beneficial Owners of MORE than 5%) (15.9% of shares) [SEC PRE14A] Link EdgarOnline here

    Disclaimer; I bought shares of Star Scientific in the open market and have no relationship with the company.

    Disclosure: I am long STSI.

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Comments (3)
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  • cigx1967
    , contributor
    Comments (8) | Send Message
     
    Great article, someone finally gets it. Hopefully the rest of the world will catch on soon
    7 Dec 2012, 08:16 AM Reply Like
  • bazooooka
    , contributor
    Comments (2353) | Send Message
     
    John, the institutions have likely bought under $2.

     

    But how does that help the legions of retail guys who bought in at $3 and $4? This stock has bounced from $5 to $1 for the past 12 years and I doubt that pattern has ended. Sure you might get to ride this thing back to $4 but there will be profits taken at some point and it will get chopped in half. A trader's dream stock but likely not fit for many.
    7 Dec 2012, 04:23 PM Reply Like
  • silence_twain
    , contributor
    Comments (330) | Send Message
     
    cigx1967: John has been a good pumper of the stock for a while. I need him to pump this stock back to a level where I will short it again. Right now no borrow exists, but hopefully that won't be the case for long. This stock makes for a great short, you just have to cover on the collapse knowing that the pumpers will get it back up.
    7 Dec 2012, 05:16 PM Reply Like
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