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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
  • (CIGX) What needs to be known is that the trudge is over. Star wins! A Buy alert 1 comment
    Mar 16, 2011 11:25 AM | about stocks: RCPI, PM, RAI


    Dr. John L. Faessel
    Commentary and Insights

    From my Best 2011 Idea List...

    A Buy alert!


    The lawsuit against Reynolds has been a long slog. What needs to be known is that the trudge is over. Star wins!

    A Stock for the Ages – Maybe!

    Star Scientific Inc. (CIGX) $2.95 Nasdaq

    Market cap $351 million

    I think the market gave us a ‘freebie’ entry point here.

    Last week (CIGX) “A 2011 Best Idea”  broke out of an 11-month based on skyscrapers or volume and by Monday’s close the shares were up from $1.89 to close at $3.48 (it reached a high of $3.84). Volume over that five day period was an astonishing 60.8 million shares. With yesterday’s market panic (CIGX) dramatically reversed to close at $2.95 after reaching a low of $2.74 mid day.


    The early part of (CIGX)’s skyrocketing ascent was without any official news, but on Friday it was announced that a U.S. government re-examination of patents central to the lawsuit against Reynolds American Inc. (NYSE:RAI) were validated, i.e. “set in stone” with no possibility of  appeal . This news added fuel to the fire on both Friday and Monday and propelled the stock to the above mentioned highs.


    Today let's talk a little bit about the crucial importance of this news to start Scientific and its share price.

    These patents cover a curing process of the tobacco leaf that results in "super" low levels of nitrosamines, thought to be the cancer-causing / lethal agent in tobacco. (CIGX)’s more recent (2008) patent application indicates in using the Star Scientific method of curing the deadly nitrosamines are “below the levels of detection”.


    I should note that the play out of the lawsuit against Reynolds has been a decade long slog. What needs to be known is that the trudge is over. Reynolds is hanging out to dry so far that they will have to settle with / pay damages / (or buy) Star Scientific to the tune of what could be $ billions. This fact is not yet understood by the markets! And then there's Philip Morris and Lorillard (plus others) for even more $$$ who have also will need to settle. The way you come to those astronomic numbers goes like this; roughly 3% of sales for a10- year period equals about $1.8 billion and because of the Reynolds’s “willfulness” * this already huge number is trebled, i.e. $1.8 X 3 = $5.4 billion. So Reynolds could be on the hook for mega bucks. It gets better; Phillip Morris (NYSE:PM) is three (3) times the size of Reynolds... so think about that. It’s only a matter of time before one of the Big Tobacco companies pays the piper with a settlement. There is also a huge benefit from being the first to settle as “they” would get the lowest deal cost. Think about it... I think it's likely that one or more of the tobacco companies already talking to Star.


    More on how Star “has” Reynolds from the civil action AW-01-1504 US District Court of Maryland Southern Division: “In August 2001 Reynolds conferred with Mr. Richard G. Lione of the law firm of Brink, Hofer, Gilson and Lione** regarding the infringement, validity and enforceability of the (CIG X) ‘649’ patent. Mr. Lione provided Reynolds with a formal opinion regarding the ‘649’ patent on December 21, 2001. According to Mr. Lione, Reynolds and / or its growers infringed claims of the’649’ patent, but the claims of the ‘649’ patent should be found to be invalid.”

    Now the patents have been validated with no possibility of appeal. Get the picture? The entire tobacco industry is now beholden to Star Scientific. And it's going to cost them a bunch.


    I expect a 28J letter to be filed momentarily indicating that a material event has occurred and “it” alerts and informs the court that a major decision was rendered by the U.S. Patent Office, i.e. the patents have been validated. Remember, no more appeal. It’s a lock. Star wins...


    * “Willful” definition in civil law: intentional, voluntary, knowing; distinguished from accidental, but not necessarily malicious.



    ** Brink, Hofer, Gilson and Lione are one of the top patent law firms in the United States and have won numerous awards for legal achievement. (If you wish copy of this Civil Action send me an e-mail: Dr.Faessel@onthemar.com)



    Regarding the “willfulness” part; the story goes that Reynolds purchased equipment for the curing process in Greece to avoid detection, but Star found out about it. That's part of the, "intentional, knowing" aspects of Stars lawsuit. And that's just part of the story. Star has lots of other "incriminating" evidence regarding the "willfulness" aspects of the case against Reynolds.


    The mega lawsuit against tobacco giant RJ Reynolds, is being orchestrated by the powerful law firm Sidley and Austin LLP (a major patent law impresario that has lost just a couple of patent suits over their long history) that alone drove the stock to just below $6 in 2009.


    I've written at length about some of these themes that are in the works for (CIGX),

    I like to say about Star that the “connect the dots” rational could make (CIGX) a stock for the ages. Here is a quick look in their quiver. The company is now marketing CigRx™, an over-the-counter (no Dr’s prescription required) Tic-Tac type non-nicotine nutraceutical made from natural ingredients that temporarily reduces the urge to smoke. Just picture the market and you can purchase it very simply online; www.cigrx.com. Tobacco use will kill 6.5 million people in 2010 from cancer, heart disease, emphysema and other diseases. Moreover, 40% of those who smoke try to quit each year. 


    That's just a part of the story; There are several other looming, potentially hugely market moving dimensions to (CIGX) that are percolating and ready to pop, like the Roskamp studies related to a potential Alzheimer cure / treatment.


    In addition to the newly announced human trials, Roskamp is working with researchers at Johns Hopkins School of Medicine for other medical applications of the compound. I believe that we will hear more on this endeavor soon. If that’s not enough to boggle your mind, there’s even more home run potential; (CIGX) has applied to the FDA for approval to advertise its proprietary BDL (Below Detectable Levels) technology that can lower the nitrosamine (the harmful part of tobacco complex) content to the zero level. Importantly, they are the one and only company that can do that. Imagine if they get FDA approval on that one?


    Now add in the possibility of a buyout. Big Pharma is always in search of significant new revenue sources and with the fact that smoking issues are so huge worldwide; wouldn't some enterprising Pharma company become involved with either a type of licensing agreement or even a buyout?  Certainly now Big Tobacco will also have an interest.


    Institutional ownership continues to grow. Currently 78 financial institutions hold about 24% of the shares. Last November insiders and 5% holders bought an "additional" $14 million worth of shares plus warrants (with a 6-month lock-up too I believe.)


    As part of the storyline, add that tobacco giant Brown & Williamson [now part of R. J. Reynolds (RAI)] paid (CIGX) $80 million some years ago for their efforts in developing (CIGX)’s dissolvable tobacco products.


    On March 4th the CEO of Star Jonnie R. Williams recently added insider buys of $9 million to the $2 million he invested in shares and warrants in 2010.

    If you missed my previous reports more specific in detail and scope to each of the above stated themes, or receive my Best Ideas for 2011 send a request to: Dr.Faessel@onthemar.com

    Disclaimer; I own shares in each of my best picks.


    Stocks: RCPI, PM, RAI
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  • ed1212
    , contributor
    Comments (4) | Send Message
    I am a medical Dr.
    I have been fallowing scientific studies of anatabine for a few month already.
    I honestly believe that this a HUGE breakthrough event that can not be ignore.
    Anatabine will have a big impact in the way treatment of chronic inflammation will be treated from now on.
    The company, Start scientific has to educate people here and all over the world what really is chronic inflammation and the tremendous damage since the existence of humane race has caused and continuous to do so.
    I urge people to get familiar with chronic inflammation and its relation to diseases like AGING, Al-Z disease, Parkinson, neuritis, endoarteritis, arthritis, coronary disease, autism, autoimmune disorders and................the list is too long to mention all.


    I hope that this medication at the correct dosage can be found and release soon.
    That you.
    Dr. Eduardo Aquino
    21 Aug 2011, 01:52 PM Reply Like
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