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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
  • TOBACCO ADDICTION CURE LOOMS > CIGX > is the Symbol 0 comments
    Jul 26, 2010 9:02 AM | about stocks: RCPI

    7-26-2010

     

    Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

    Faessel Publishing LLC

    Dr.Faessel@onthemar.com

     

    Best Idea UPDATE for 2010

     

    Star Scientific Inc. (CIGX) $1.86 Nasdaq

    Market-cap $222 million

     

    TOBACCO ADDICTION CURE LOOMS

     

    STUNNING RESULTS FROM TOBACCO STUDIES LEAD TO LAUNCH OF CigRx™

     

    (Reuters) - Tobacco could kill one billion people this century if current trends hold.

     

    We all know the terrible health implications of tobacco use. And the statistics are indeed appalling. Tobacco use will kill 6.5 million people in 2010 from cancer, heart disease, emphysema and other diseases. Amazingly, over 40% of smokers try to quit at least once a year. Gross cigarette sales are $325 billion a year.

     

    The current nicotine replacement market that encompasses patches, lozenges and gum is about $1.2 billion and has a woeful failure rate of over 95%. And they are expensive.*

     

    Just imagine the market for an inexpensive over-the-counter, product ― IF it would actually quell the urge to smoke. Just what if?

     

    Enter CigRx™ Star Scientific's new non-nicotine, nutraceutical (dietary supplement) that's set to hit store counters shortly. The launch will be undertaken and shepherded by InVentive Health Inc. (VTIV), a major drug / health product distributor with sales of $1.1 billion.

     

    From what I hear the launch will first consist of a rollout in a test city immediately followed by a national campaign. The launch would include, among other things, already completed infomercials running in that city, representatives contacting the local doctors in the area, and delivery of the CigRx™ product to pharmacies and other health-related outlets in the region. InVentive Health is chomping at the bit to aggressively market this product, having seen the huge sales of nearly $1 billion generated by Pfizer’s CHANTIX.

     

    The clientele of InVentive Health are a “who's who” in the realm of pharmaceutical and healthcare companies and the firm has marketing and sales capabilities in 40 countries around the globe. This client list includes, to name just a few, the companies Johnson & Johnson, Abbott Laboratories, Novartis, Merck, Pfizer, and Eli Lilly. So you get the picture―InVentive Health has the muscle and know-how, sees a big if not huge revenue stream, and has the money to push CigRx™ out to a nationwide public.

     

    * The costs of “quit treatments” that now rule the market are: $475 for a 12-week regimen of Nicorrete gum; $300 for 12-weeks of Commit lozenge, and $336 for the 12-week regimen of the Nicoderm patch. Crucially, the “quit rate” on all of these treatments is a paltry 5%.

     

    I believe that the cost of the non-nicotine “tick-tack like” dissolvable CigRx™ tablets will be substantially lower than cigarettes because of the tax factor (depending on where the smokers buys their cigarettes). As you may know, the state, federal and even city taxes send the costs of cigarettes thru the roof. Several states tax over $3.00 a pack, yet Missouri only taxes $0.17 per pack. Hence, without these taxes, and considering a price-point somewhat below cigarettes, the margins on CigRx™ should be terrific for (CIGX). One single carton of cigarettes in NY City now costs $150.00 in some outlets where there is also a municipal tax of $1.50 per pack plus the huge $4.35 state tax per pack. Because one cartons of CigRx™ has the equivalent in “punch” of two cartons of cigarettes, from the perspective of the smoker this represents another big savings. So for the smokers who are largely from the lower economic strata the CigRx™ product brings a great savings indeed.

     

    There are also a few doctor-prescribed drugs in the $2.5 billion "quit" market that have had some success. In studies of Pfizer’s CHANTIX, 44% of smokers who were prescribed the drug during the weeks 9 to 12 of the treatment managed to quit, but severe side-effects came to light later—such as hostile behavior, suicide thoughts, and serious skin reactions—which have dramatically curtailed sales. Over 6 million people in the USA have been prescribed CHANTIX. The first year out of the box the drug did $200 million in sales, $400 million the second year and then peaked at worldwide sales of $883 million a year.  Three years ago CHANTIX looked like Pfizer’s next big thing, but after the negative news of the side effect was released U.S. sales immediately fell 49% to $96 million, and worldwide sales fell dramatically 24% to $182 million by 2008. The importance of this data is that it paints the picture of the mega-market for a smoking cessation product, and subsequently the interest by InVentive Health in “partnering” with (CIGX).

     

    NOW HERE ARE SOME “WHAT IFS”:

     

    If CigRx ™ achieved $100 million in sales the first year, (CIGX) would earn about 0.30 a share in [EPS]; now introduce a 20 times multiple and that equates to a $6 stock.

     

    If CigRx ™ could achieve an $800 million run rate (CIGX) would earn $2 to $3 a share and have a potential $40-$60 stock.

     

    But actually there are other looming, potentially hugely market moving dimensions to the (CIGX) story that are percolating and ready to pop, like the Roskamp studies related to a potential Alzheimer cure / treatment, plus the mega lawsuit against tobacco giant RJ Reynolds, that is being orchestrated by the powerful law firm Sidley and Austin (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 last year... Add all this together and you can hear the cash register ring. It is why I have included Star Scientific (CIGX) is one of my Best Ideas for 2010.

     

    Think about this a bit: smoking is well known to be the leading cause of preventable death. So, if all the smokers who purportedly tried to quit find that this product works for them and indeed do quit, it becomes pretty clear that not only would CigRx put a substantial dent in cigarette sales, but significantly add years to the lifespan of many people. In a way CigRx could become one of the important discoveries of the century. Just imagine its life-saving potential in total… Obviously, more will be revealed, but the simple apparent fact that if smokers have CigRx in their “diet” they will no longer have the desire to smoke speaks enormously for the social good.

     

    To go further on this theme, what looks to be evolving here may well represent a potentially stunning change in the behavior of smokers. When one measures the vice and its harmful ramifications on society, family, the health industry, lost hours on the job, costs associated with prevention, ad dollars spent on education, etc.―the totality of the problem becomes palpable. With big Pharma 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? Perhaps, Big Tobacco may even have an interest. Who knows?

     

    I perceive important and wide-ranging publicity from all media sources as this story gains traction. I also believe that the immense "headline potential" of this story could bring colossal mainstream interest to Star Scientific and the (CIGX) shares.

     

    (CIGX) has a market cap of only $218 million and with about 120 million shares outstanding (of which 34% are held by insiders and 5% owners), it wouldn't take much to ignite this potential blockbuster story into an eruption on the national / world scene. One can only imagine how high shares could go if the "maybes" come to fruition.

     

    Institutional ownership continues to grow. Currently 80 institutions hold 16% of the shares. And of note, (CIGX) has $20.6 million in cash.

     

    I have purchased shares of Star Scientific in the open market.

     

    To view the (CIGX) website: http://www.starscientific.com

     

    For my list of Best Ideas for 2010 send an e-mail request to:

    Dr.Faessel@onthemar.com

     

     

    To unsubscribe – onthemar@gmail.com

     

     

    On The Market’s Safe Harbor Statement: Statements contained in this document, including those pertaining to estimates and related plans, potential mergers and acquisitions, estimates, growth, establishing new markets, expansion into new markets and related plans other than statements of historical fact, are forward-looking statements subject to a number of uncertainties that could cause actual results to differ materially from statements made.  On The Market is a wholly owned subsidiary of Faessel Publications LLC and provides no assurance as to the subject company's plans or ability to effect any planned and/or proposed actions. Faessel Publications LLC has no first-hand knowledge of management and therefore cannot comment on its capabilities, intent, resources, nor experience and makes no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources believed by Faessel Publications LLC  to be reliable, but Faessel Publications LLC  provides no assurance, and none is given, as to the accuracy and completeness of this information. Disclaimer: ON THE MARKET / Faessel Publications LLC is not a registered Investment Adviser or a Broker/Dealer. Readers are advised that the information in this report is commentary issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy. The opinions and analyses included herein are based from sources believed to be reliable and written in good faith, but no representation or warranty, expressed or implied is made as to their accuracy, completeness or correctness. Owners, employees and writers may have positions in the securities that are discussed in the newsletter. Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report should be independently verified with the companies mentioned. Readers are cautioned that small and micro-cap stocks are high-risk investments and that they may lose all or a portion of their investment if they make a purchase. Certain of the statements in this commentary may be considered forwarded looking statements. ON THE MARKET/Faessel Publications LLC makes no representation and provides no assurance or guaranty that such forward looking statements will prove to be accurate. Statements of opinion and belief are those of the authors and/or editors of this report, and are based solely upon the information possessed by such authors and/or editors; no inference should be drawn that such authors or editors have any special or greater knowledge about the company or companies profiled or any particular expertise in the industries or markets in which the profiled company or companies compete. The reader should verify all claims and complete his own due diligence before investing in any securities of profiled company or companies. ON THE MARKET / Faessel Publications LLC makes no recommendation that the purchase of securities of company or companies profiled in this report are suitable or advisable for any person or that an investment such securities will be profitable. In general, given the nature of the company or companies profiled and the lack of an active trading   market for their securities, investing in such securities is highly speculative and carries a high degree of risk. An investor in such securities should be prepared and able to bear a loss of his or her entire investment. Nothing in this report should be construed as an offer or solicitation to buy or sell any securities of any profiled company. ON THE MARKET / Faessel Publications LLC undertakes no obligation to inform readers about the ownership or trading activities of it or its employees or affiliates in the securities of the profiled company or companies. We encourage you to review the investing information available at the Securities and Exchange Commission ("SEC") website (http://www.sec.gov) and the National Association of Securities Dealers ("NASD") website http://www.nasdr.com. You can review all public filings by the companies mentioned at the SEC's EDGAR page. The NASD website includes helpful investor awareness and educational information. The information, opinions and analysis contained herein are based on sources believed to be reliable but no representation, expressed or implied, is made as to its accuracy, completeness or correctness. Past performance is no guarantee of future results. This report should not be used as the basis for any investment decision. Information contained herein contains forward-looking statements and is subject to significant risks and uncertainties, which will affect the results.  The opinions contained herein reflect our current judgment and are subject to change without notice. Faessel Publications LLC and / or its affiliates, associates and employees from time to time may have either a long or short position in securities mentioned. Information contained herein may not be reproduced in whole or in part without the express written consent of Faessel Publications LLC.

     



    Disclosure: Long
    Themes: Tobacco Stocks: RCPI
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