Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Faessel Publishing LLC
(CIGX) in a Major Breakout! A stock for the age’s ― Maybe!
Star Scientific Inc. (CIGX) $2.38 Nasdaq
Market-cap $284 million
Yesterday, (CIGX) "A 2011 Best Idea" broke out of an 11-month based on a huge volume increase and closed up 16% on over 10 million shares. The shares are up to $2.38 from $1.65 over the last 10-trading days on skyscrapers of volume.
While there wasn't any pertinent news to account for the significant increase in activity the totality of this incredible bullish story is finally becoming recognized by the market. It should also be noted that there is a large short position of roughly 15% of the float that could be extremely worried and covering their bets based not only on the increase in "price" and “buy side” volume, but the growing tsunami of developing news that could have titanic market moving proportions for the (CIGX) shares.
I've written at length about some of these themes that are in the works for (CIGX), but let me today focus on a recent "new" page* from the Healthcare Professionals section of the Roskamp Institute website. The researchers at the Roskamp Institute (and many others) are interested in the role of inflammation in aging in particular diseases like Alzheimer's disease. This new page shows a graph of the effects of the naturally occurring compound anatabine (RCP006) on the inflammatory molecule released by bacteria that typically causes inflammation during infection. The chart demonstrates the dramatic effect of anatabine versus Lipitor which is known to have anti-inflammatory properties, about double the therapeutic effect from aspirin.
Today the study of inflammation is on the front burner of medical research for causing a multitude of pathologies and there are thousands of articles now referencing this “first” response of the immune system. To interrupt the negative cascade of the body’s response to this first insult is now a central focus of medical research.
If what we see here is indeed ‘valid in reality’ it becomes obvious why not only the Roskamp Institute, the Johns Hopkins University and a recently announced human clinical trial study** are ongoing. It's important to note that “the” graph shows data from human blood cells. Previous Roskamp research and press releases have spoken of the effect that their anatabine "compound" has on cells and in animal studies. The last sentence in “the page” says that, "Such results hold promise for the control of inflammation in many human conditions, and research is ongoing at the Roskamp Institute to bring this molecule into clinical studies to test its ability to regulate inflammation."
* Link the referenced graph / page at: http://www.rfdn.org/inflammaging.html
So, I believe that the reason for this major breakout in the (CIGX) shares has to with the inflammation studies being carried out in these prestigious institutions that are fast gaining traction not only in the medical and research community, but in financial institutions as an “inflammation” investment vehicle and certainly in the big Pharma community where patents are running out and the market cap of Star Scientific is so tiny by comparison. Big Pharma has to be vitally interested in this new research.
Isn't it interesting that it's possible that not only Big Pharma, but Big Tobacco may be in a bidding war for (CIGX). (See the recent “below detectable levels” [BDL] announcement regarding (CIGX)’s moist tobacco with cancer-causing agents removed.
In addition, 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.
Also: Last year Roskamp purchased 769,000 shares and the rights / warrants to buy another million shares for a $1.50.
I’d like to draw attention to a recent quote from Curtis Wright MD, MPH Medical/Clinical Director of Rock Creek Pharmaceuticals Inc., (a subsidiary of Star Scientific): Dr. Wright served at the FDA as Acting Director.
“It is an exciting indicator of progress that Roskamp is exploring the link between our nutritional supplements and balancing inflammation in both the laboratory and clinical settings. We believe this may provide both further understanding of the existing data and an effective way for physicians to nutritionally address reducing the risk associated with a variety of conditions."
In addition Dr Wright was Team Leader for Analgesics and Addictive Drugs at the FDA and was able to oversee nearly all of the functions of new drug review, and worked on the approvals for nearly all anesthetic, analgesic, and life support drugs from 1990 to 1997.
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. Wow! 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, plus the mega lawsuit against tobacco giant RJ Reynolds, that 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 last year.
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? “Big Tobacco” will have to license the BDL technology ASAP I believe. 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? Perhaps, Big Tobacco will also have an interest I’m sure. 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.)
Now, once again consider the names that hover over this story: Harvard University, Johns Hopkins University, Roskamp Institute, InVentiv Health, McColl Partners LLC and Thomas Lee Partners - and not least the mighty and prestigious law firm Sidley & Austin orchestrating the patent infringement law suit.
Also add that tobacco giant Brown & Williamson [now part of R. J. Reynolds (NYSE:RAI)] paid (CIGX) $80 million some years ago for their efforts in developing (CIGX)’s dissolvable tobacco products. That’s the lawsuit story—“for another time”…
I have purchased shares of Star Scientific in the open market.
If you missed any of my previous (CIGX) reports or for the complete list of my Best Ideas for 2011 send an e-mail request to: Dr.Faessel@onthemar.com