Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Faessel Publishing LLC
Best Idea Update
Star Scientific Inc. (CIGX) $1.97 Nasdaq
Market-cap $237 million
There are several drivers to the (CIGX) story, but the short version is that it encapsulates 3 potentially rich and separate themes that taken individually could fire this stock into a moon shot; potentially it could be a stock for the ages.
1. Star Scientific (CIGX) may have a treatment for Alzheimer's disease.
2. Through their distributor (and partner) In Ventive Health (CIGX) is well into rolling out CigRx™ their Tic-Tac type lozenge that reduces the urge to smoke. I expect word about a national rollout soon. www.cigrx.com
3. The (CIGX) lawsuit against RJ Reynolds Tobacco Company (NYSE:RAI) could well be the largest patent infringement lawsuit ever.
Today I’ll focus on the Alzheimer's aspect of the story – more on the other aspects in a later report.
On 10-7-2010 the eminent research institution Roskamp Institute said that they will soon begin human clinical trials of a compound found in tobacco for the treatment of Alzheimer's disease. Star Scientific has said that, “extensive pre-clinical research has been conducted.” The compound was developed, patented and provided to Roskamp by a 100% owned subsidiary of Star Scientific.
While there has been no news re the Roskamp research** since the press release three weeks ago there is a significant buzz that’s beginning to surface from traders and institutions that are already in (CIGX) and a few major funds that are awaiting further data before they buy. Here is the essence of the story as I hear it: Beginning with the fact that the market-cap of (CIGX) is only $237 million and now assuming that the next Alzheimer press is positive and they see an immediate interest from Big Pharma and or Big Tobacco understand that it would be cheap, actually peanuts for them to partner up of acquire a major position or acquire them directly. The Pharma / Tobacco industry is following this story closely as the Roskamp researchers are hugely respected.* Now add into the equation the sizable short position of about 14 million shares. (Plus what may be 20 or 30 million more shares naked shorted) Note that the (CIGX) short position was down by about 100,000 shares over the last reporting period. A big option trader I know thinks that the “short” knows he is “cooked” but is trying to keep the stock in a narrow range. (This only works for awhile as the “other side” will squeeze this when they can).
There is other striking unsubstantiated rumors of anecdotal stories that I hear coming out of Florida that PET Scan studies show plaque “falling off” people’s brains.
More inside trader buzz; with all the industry interest and press already its “thought” that a major media entity is already well into development of a feature story about Roskamp / (CIGX) and their Alzheimer's thrust. The story is also supposed to include delving into results of (CIGX)’s CigRx™ lozenge that removes the urge to smoke (and from what I hear also even quells the appetite.) It’s also thought that when such a story with its broad national appeal (quitting smoking and Alzheimer) hits it would fire even more interest from other media and also set in motion a response from Roskamp with attendant explanations and updates on their research directions.
There’s more: because of the astonishing success of the Star Scientific compound in encouraging new neuronal cell growth and reducing B-amyloid at the cellular level, a major research university is instituting new uses of the compound in several other disease venues; cancers thyroid, arthritis and other diseases. Let's remember also that in 2007, researchers at the Harvard School of Public Health found that after analyzing 11 separate studies, smokers were 73% less likely to suffer from Parkinson's than those who didn’t smoke. Dr. Honglei Chen, the study's lead researcher said, “the information could guide the development of studies on various tobacco components ... to help understand the relationship between smoking and Parkinson's disease." The story went on to say the obvious that: “further research could determine which chemicals are responsible for bolstering the brain against the illness.”
Obviously, the market for an effective drug for Alzheimer's would be met with incredible acceptance. The Alzheimer drugs from Eli Lilly turned out to make Alzheimer’s worse, not better, and has been pulled off the market, and a dozen other company, including Pfizer and Johnson and Johnson have been met with a string of study failures.
There is no cure or even a treatment that’s really shown to be successful in treating the affliction and its woeful and grave prospects. According to a report from Alzheimer’s Disease International, around 35.6 million will be afflicted with Alzheimer’s and other dementias in 2010, rising to 115.4 million by 2050.
** Roskamp said recently that they will soon begin human clinical trials. Previously they said; “Preliminary testing of the compound has produced promising results when applied to cells, and the compound is being explored further for its application to treat a variety of neurological conditions, including Alzheimer's. Preliminary tests performed by the Roskamp Institute show that when the compound is applied to cells, B-amyloid is reduced. Also, the compound appears to encourage new neuronal cell growth.”
In addition to the new 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.
Some necessary credentials to process: Roskamp Institute Director, Dr. Michael Mullan is the researcher who more than a decade ago along with Dr. Fiona Crawford were key members of a pioneering team of scientists who discovered that the onset of Alzheimer’s was directly related to the accumulation of a protein called ß-amyloid. Dr. Mullan said recently that, "It's ironic that a compound with the potential medical benefits of RCP-006 [the (CIGX) compound] was hidden in tobacco."
I believe that it won't take long for the general public, especially early Alzheimer sufferers and their loved ones to avail themselves of this information regardless of the timetable that the U.S. Food and Drug Administration [FDA] mandates. One does not have to be a genius to understand that those "fruits from the same tree" are likely the same or nearly the same.
There's a certain amount connecting the dots necessary here but it appears that something momentous is about to break. It has the smell of a Nobel Prize kind of story and with a market cap of only $237 million one can only imagine how high shares could go if even one of the "maybes" come to fruition. Clearly, there are many believers out there who are jumping into the story en masse.
CIGX) website: http://www.starscientific.com
Disclosure: long CIGX
Disclosure: Long CIGX