Wednesday, March 23, 2011

Star Scientific says 2 products outside tobacco law, shares rise

Very significant news out of my spec portfolio this morning about Star Scientific (CIGX):

(Reuters) - Star Scientific Inc said U.S. health regulators informed the company that two of its products do not come under a federal law that restricts the sale of tobacco products, clearing the way for Star to market them.

Star shares were up 5 percent at $3.83 in morning trade on Nasdaq. Earlier in the session, they rose as much as 16 percent to $4.19, their highest in nearly two years.

Star, which makes dissolvable tobacco products, said it plans to move forward with the marketing and distribution of the products, Ariva and Stonewall.

I'm wondering now if the reason there was a large amount of insider buying of CIGX shares earlier this month (click here to read my prior post on that) was that the folks at Star were advised earlier that their products fall outside of the scope of the regulations in question. I don't know what specific response deadlines would have been involved here, but I do know that the FDA must give responses to such things within stated time frames. It's entirely possible that all of that insider action was timed around both of these key pieces of information.

I was once part-owner of a nutrition supplement shop, and from that experience I know that such products that fall outside of FDA oversight need only avoid doing two things: 1) avoid making people ill, and 2) do not make specific claims of treating diseases or health-related conditions. Saying something on your label like "reduce tobacco cravings" and also stating "this product is not intended to diagnose, treat, cure or prevent any disease" would be fine. This gives Star Scientific a lot of room to maneuver and market within.

I continue to look forward to the future of this stock. There's no guarantees of success down the road - there never is - but this is a promising development. Star Scientific already has moved to tap social media by utilizing a Facebook group to promote one of their products, CigRx; hopefully this is an early indication of a move toward smart, cost efficient and effective promotion.

As always, do your own due diligence before buying or selling this stock or any sort of investment. I'm not giving advice to do either, here.

2 comments:

Evan Easton said...

Thanks for the great write up. We are heavily tapping the social media world with CiGRX, and have been accumulating a great following thus far.

We are currently running a drawing for a free iPad2 to show our appreciation to all of our friends. All you have to do is visit the CiGRX faceboook page (http://www.facebook.com/cigrx) and click "Like."

Find us on Twitter too under CiGRXLife.

Paul E. Zimmerman, M.A. said...

Sounds good, would love to participate, but I hit the "like" button on CigRx a long time ago. Am I already entered in the drawing? :)

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