On Friday, Star Scientific (cigx), suffered a knee dropping blow when it lost its 10 year battle with Reynolds American (RAI) over a patent infringement lawsuit that slashed hundreds of millions of dollars off the companies market cap. Friday's volume, the some 26 million shares, traded hands as the company's stock plummeted almost 50%.
For those who think this litigation loss on infringement was not MAJOR, I have pasted a clip from Star's 10Q posted Tuesday May 10th, 2011 here:
"Our success in promoting the sale of our low-TSNA dissolvable smokeless tobacco products and CigRx� as well as our ability to continue the research efforts by Rock Creek will in large part depend on our working capital constraints, ability to procure funding for these initiatives, and the successful outcome of our ongoing patent infringement litigation with RJR.
Over the last several years, we have expended significant time and resources on our ongoing patent infringement litigation with RJR, the development of ARIVA� and STONEWALL Hard Snuff�, our low-TSNA dissolvable smokeless tobacco products, the licensing of low-TSNA products and the technology behind, our StarCured� tobacco curing process, and the development efforts of Rock Creek, particularly with respect to our CigRx� dietary supplement. Our future success will largely depend on the successful results of these initiatives."
Apparently, some claimed the market got this one wrong; that this patent infringement lawsuit should have simply been a non-event and the company's true "crown jewels" are really hidden in what they believe is a "miracle" life saving supplement that will soon be sold over the counter called "Anatabloc".
Although Star's newest product on the market, CigRx, carries Anatabine Citrate, the compound found in this miracle supplement "Anatabloc", it hasn't made much progress in sales. In Fact, Star Scientific has yet to sell 1,000,000 of CigRx across the year since its launch (but it sure spends millions each quarter.)
It get's better...Today, Star's shares experienced what day traders consider a Major bounce, and a MAJOR bounce it was. What most investors have not realized, is that this can be typical for a stock to "bounce" from trader action after it loses roughly 50% per share the trading day before. The stock's trading volume today was just over 9,000,000 - about a two thirds less of what it was Friday.
So, where do we go from here? We have a stock that posted a quarterly loss of about 5 million dollars. Its high valued billion dollar lawsuit (potentially the largest patent infringement lawsuit in the world according to Dr. John Faessel here) is now over, and the company offers a few products on the market that just have not sold! Will this "Anatabloc" bury Star, or, will they Star sell millions worth of this "miracle" life changing tic-toc style supplement? A long time awaits and those who jumped in on today's massive spike, better be ready for a stomach turning journey. Thing's could really get ugly for Star Scientific and their forward looking statements, if they have not already.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.