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Star Scientific and Reynolds American Focus on New Tobacco Trends  

Tobacco stocks have been relatively flat in 2012 as the industry continues to negotiate strict regulations pushed by governments across the world. Tobacco manufacturers continue to focus more attention on their respective smokeless tobacco segments to offset the decline in cigarette demand. Thus far, this has benefitted margins industrywide. Five Star Equities examines investing opportunities in the tobacco industry and provides equity research on Star Scientific, Inc. (NASDAQ: CIGX - News) and Reynolds American, Inc. (NYSE: RAI - News). Access to the full company reports can be found at:

www.fivestarequities.com/CIGX www.fivestarequities.com/RAI

Global Industry Analytics, Inc. (GIA) recently issued a report, "Tobacco: A Global Outlook," arguing that dropping consumption of tobacco products across developed economies has prompted tobacco companies to augment their focus on developing markets, "which have been exhibiting positive trends." Moreover, GIA says that new Low Tar Cigarettes are expected to do well in the market with the industry being optimistic to "sail through" the disturbing phase.

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What 2012 Has in Store for Star Scientific (CIGX) 

As I discussed last month, Star Scientific put in solid gains in 2011 as the company got out in front of a shift toward cigarette alternatives. But increasingly, tobacco giants Altria (NYSE: MO ) and Reynolds American (NYSE: RAI ) have made pushes into the smokeless tobacco realm, threatening to take away any moat that Star Scientific may have started to build. Can the small company make good on its full potential and bring an even bigger payday for shareholders in 2012? Below, I'll take a closer look at what people expect from Star Scientific and its rivals. . . .

Even with those patents, tobacco will continue to be competitive, and Star Scientific will keep facing potential threats from Reynolds and Altria domestically. As international regulation starts to have a bigger impact on Philip Morris International (NYSE: PM ) and British American Tobacco (AMEX: BTI ) , Star may have new opportunities there as well. But even with some things in its favor, Star will still need to fight hard to keep an edge and repeat 2011's strong stock performance.

If you'd rather just skip the tobacco industry entirely, let us point you to an alternative. In its latest special report, you can learn the name of The Motley Fool's top stock for 2012.

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Magistrate Judge Appointed in Star Scientific Patent Infringement Lawsuit Against RJ Reynolds 

Star Scientific, Inc. /quotes/zigman/80562/quotes/nls/cigx CIGX +35.78% received an Order today from the US District Court for Maryland that refers the company's patent infringement litigation against RJ Reynolds Tobacco Company (RJR) to the Honorable Beth P. Gesner, US Magistrate Judge, for possible settlement. The Order of Reference was signed by Judge Marvin J. Garbis, who has overseen the litigation since August, 2004. Paul L. Perito, Esq., Star Scientific Chairman and President, commented, "We are pleased that after ten years of hard-fought litigation -- where both sides seldom agreed on issues -- the Court's decision to refer the litigation to a Magistrate Judge for settlement purposes was agreed to by the parties. We believe this augurs well for good faith negotiations by the parties that hopefully can lead to a mutually acceptable global resolution."

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• CORRECTED-UPDATE 1-Star Scientific, Reynolds American to explore patent settlement  

Star Scientific Inc, a maker of smokeless and dissolvable tobacco products, said a federal court referred its patent infringement case with a unit of Reynolds American Inc to a magistrate judge for possible settlement.

The news sent Star Scientific's shares up as much as 39 percent in afternoon trade on the Nasdaq.

The lawsuit concerns two of Star Scientific's patents on tobacco-leaf curing methods that claim to prevent the formation of cancer-causing chemicals during the process.

"We are pleased that after ten years of hard-fought litigation -- where both sides seldom agreed on issues -- the Court's decision to refer the litigation to a Magistrate Judge for settlement purposes was agreed to by the parties," Star Scientific Chairman Paul Perito said in a statement.

A Star Scientific spokeswoman told Reuters that this did not mean the companies were close to a settlement. However, both parties would explore whether there is a basis for discussion and resolution of the dispute, she said.

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Potential Role of Natural Alkaloids in Combatting Memory Loss 

Star Scientific, Inc. (NASDAQ: CIGX) - A study released in the January 9th issue of the Journal of Neurology suggests that nicotine patches may help individuals with early memory loss. Dr. Paul Newhouse, a professor of psychiatry at Vanderbilt University Medical Center, led a study which showed that six months of nicotine patch treatment among patients who had mild cognitive impairment - often a precursor to Alzheimer's disease - had a 46% improvement in their long-term memory for their age. The patient group who received a patch without nicotine showed a 26% decline in memory. Both patient groups were treated for six months.

Nicotine is only one of a family of related compounds known as alkaloids. Anatabine, another compound in the same family, has been actively pursued by Star Scientific for a variety of uses, including as a supporter for memory loss. Star Scientific subsidiary Rock Creek Pharmaceuticals also has a number of patents pending that relate to the administration of anatabine for treatment of a variety of neurological conditions, among other things.

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Star Scientific and Reynolds American Poised to Benefit from E-Cigarette Scrutiny 

With the start of a New Year, the tobacco industry is once again looking for alternative revenue drivers to cigarettes, which continue to fall out of favor with the general public. The Paragon Report examines investing opportunities in the tobacco industry and provides equity research on Star Scientific, Inc. (NASDAQ: CIGX) and Reynolds American, Inc. (NYSE: RAI). Access to the full company reports can be found at:

One of the latest reasons for the downturn of cigarettes had been the rising popularity of the electronic cigarette (e-cigarette). However, a new study finds electronic, or e-cigarettes, may not be as safe as advertised. In a new study in the medical journal "Chest," found participants who used the electronic cigarettes showed restricted airways and inflammation after only five minutes.

The study did not examine what the long-term effects of using e-cigarettes could be, and the lead researcher called for more studies into this.

The Paragon Report provides investors with an excellent first step in their due diligence by providing daily trading ideas, and consolidating the public information available on them. For more investment research on the tobacco industry register with us free at www.paragonreport.com and get exclusive access to our numerous stock reports and industry newsletters.

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Fed. Circ. Won't Rehear RJ Reynolds Patent Suit ($$) 

The Federal Circuit on Tuesday declined a request by R.J. Reynolds Tobacco Co. to rehear an appeal brought by tobacco product development company Star Scientific Inc. over a dispute covering patents for tobacco-curing technology. . . .

A spokesman for R.J. Reynolds, Bryan Hatchell, said the company is considering its options in light of Tuesday's ruling.

"It's important to note that the court has found that R.J. Reynolds did not infringe Star Scientific's patents," Hatchell said.

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• Federal Circuit Court Denies RJR Request for Rehearing of Decision in Star Scientific Patent Infringement Lawsuit  

Star Scientific, Inc. (NASDAQ: CIGX - News) has announced that the company is pleased to report that the United States Court of Appeals for the Federal Circuit today denied RJ Reynolds Tobacco Company's (RJR) petition for a rehearing of Star's appeal of its patent infringement lawsuit against RJR. On August 26 , the Federal Circuit Court issued a ruling on Star's appeal of the June, 2009 jury verdict in that lawsuit. The Court in its August decision affirmed the validity of each of the claims in the patents at issue in the prosecution of infringement against RJR, and specifically rejected each of the four invalidity defenses raised by RJR. The three-judge panel also reversed the district court's 2007 summary judgment ruling on priority date, which affirmed that the patents' claims deserve the September, 1998 priority date as originally claimed. The Federal Circuit ruling did not, however, reverse the jury verdict of non-infringement that Star had requested on appeal. RJR'S request for a rehearing of the August decision was based on its contention that the patents were indefinite.

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Star Scientific May Be 'One Up On Wall Street'  

Peter Lynch's legendary book "One Up on Wall Street" encourages retail investors to search for and find "tenbaggers" before they become widely known. He suggests that we, as individual investors, can occasionally find opportunities on Main Street USA before the investment professionals on Wall Street discover them. In his book, he encouraged investors to try the company's products for themselves and to ensure that the products worked "as advertised." He suggested that investors should try to find companies that have a niche market and preferably companies where people need to keep buying the product. He also suggested it would be good if insiders owned significant shares and were adding to their positions. With this article, I am sharing all my due diligence about how Star Scientific (CIGX) meets all these criteria and more. Star is not followed by a single analyst, and the company is flying well below Wall Street's radar. Furthermore, Star Scientific is definitely a candidate to be a tenbagger when sales of their new Anatabloc dietary supplement ramp up (more on that later).

I first got interested in Star because I follow litigation stocks and Star Scientific owns patents for a process to reduce Tobacco Specific Nitrosamines (TSNA's). . . .

One of my biggest concerns about Star Scientific is that "big pharma" or "big tobacco" will come along and try to buy the company for well below the potential market value. After reading the International patent application on Anatabine, and looking at all the diseases/ailments that are affected by NF-kB and could be treated by Anatabine, I don't think it will be long before a big pharma makes an acquisition run on Star Scientific. Also, the big tobacco companies now know that Star's tobacco curing patents are valid, so they could also be targeting CIGX. I think most Star Scientific investors are in for the long run, but if a big pharma or big Tobacco company came along and offered a significant premium, it's possible that a lot of investors would tender their shares. Although a poison pill typically is not favorable for investors, in this situation I am hoping the company reinstitutes the poison pill as it could prevent a cheap buyout.

Before I finish this article, it is worth taking one more look at the tobacco curing patents and what happened in the recent case against RJ Reynolds.

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Rock Creek Pharmaceuticals Announces Completion of Medical Conferences on Anatabloc™ Research, Comments on Research Presentation at American Thyroid Association Annual Meeting 

Rock Creek Pharmaceuticals, a wholly owned subsidiary of Star Scientific, Inc. (NASDAQ: CIGX) today announced the second presentation of research findings related to its Anatabloc™ dietary supplement. A poster presentation, titled "Anatabine, a Tobacco Alkaloid, Ameliorates Disease in a Mouse Model of Thyroiditis", was made at the 81st annual meeting of the American Thyroid Association in Indian Wells, CA. The four authors, all researchers at the Johns Hopkins University School of Medicine, included Paul W. Ladenson, MD and Patrizio Caturegli, MD. The presentation described the positive effect of anatabine supplementation in decreasing the incidence and severity of thyroiditis in animal models of the human disease. Anatabine is an alkaloid found in plants in the Solinacea family, such as green peppers, green tomatoes and eggplant.

Rock Creek also commented that research underlying the October 27 presentation has been one of the topics at three recent medical conferences hosted by the company for physicians and allied healthcare practitioners.

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Star Scientific Inc. (CIGX): Today's Featured Tobacco Loser  

The tobacco industry closed the day up 0.4%. Were all decliners today within the tobacco industry with Star Scientific Inc (CIGX) being today's featured tobacco loser. Star Scientific Inc fell 5 cents (-1.8%) to $2.80 on light volume. Throughout the day, 748,007 shares of Star Scientific Inc exchanged hands as compared to its average daily volume of 2.5 million shares.

Star Scientific, Inc., together with its subsidiaries, engages in the development, implementation, and licensing of tobacco curing technology that prevents the formation of carcinogenic toxins present in tobacco and tobacco smoke, primarily the tobacco-specific nitrosamines (TSNA). Star Scientific Inc has a market cap of $390.3 million and is part of the consumer goods sector. Shares are up 46.2% year to date as of the close of trading on Wednesday.

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Non-Traditional Tobacco Products Gaining Momentum 

Stocks throughout the cigarette industry are exceptionally volatile of late. While traditional cigarette companies are facing heightened FDA regulation, non-traditional tobacco products and smoking cessation products are facing less criticism. The Bedford Report examines the outlook for companies in the Cigarette Industry and provides investment research on Star Scientific, Inc. (NASDAQ: CIGX) and Reynolds American Inc. (NYSE: RAI). Access to the full company reports can be found at:

Bay Area anti-tobacco advocates have begun lobbying elected officials to urge the federal government to ban the use of menthol in cigarettes and other tobacco products. Menthol flavoring makes cigarettes more palatable to new smokers, increases the smoking rate among African-Americans and may make it harder for some people to quit, public health advocates say.

Meanwhile, cigarette makers continue to clash with regulators in federal court over new graphic labels and advertising that use pictures of rotting teeth and diseased lungs to warn consumers about the risks of smoking. The tobacco industry asked Judge Richard Leon last month for a temporary injunction to block the US Food and Drug Administration's requirement for the labels, pending a final decision on whether the labels are constitutional.

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• Star Scientific Reports First Peer-Reviewed Article on Anatabine and Alzheimer's Disease by Roskamp Institute  

Star Scientific, Inc. (Nasdaq: CIGX) reports today the publication of the first peer-reviewed article on the in-vitro and in-vivo activity of anatabine in Alzheimer's Disease. The article is authored by scientists at the Roskamp Institute and is electronically published in the European Journal of Pharmacology (2011 Sept 19). It states that anatabine lowers Alzheimer's A-beta production in-vitro and in-vivo.

In the article the authors describe the accumulation of an abnormal substance, called A-beta, the substance that leads to amyloid formation and damage to brain tissue. They studied the formation of A-beta and showed how anatabine lowers levels of two forms of A-beta (1-40 and 1-42) in a dose-dependent manner, possibly by preventing or reducing formation from the precursor protein. After showing the activity in the test tube, the researchers went on to show that when anatabine is given to mice vulnerable to accumulation of amyloid, treatment with anatabine lowers brain levels of both A-beta (1-40) and A-beta (1-42), postulated to be due to effects on NFKB activation. Michael Mullan, MD, Ph.D., Roskamp Institute co-director and one of the article's authors, commented, "This paper demonstrates anatabine's potential as an anti-inflammatory agent and shows it may have broad applications including for disorders like Alzheimer's Disease."

Anatabine citrate is one of the active ingredients in Anatabloc™, a dietary supplement developed by Star Scientific's subsidiary, Rock Creek Pharmaceuticals.

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Star Scientific and Altria Group Hedge Against Increased FDA Scrutiny  

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Traditional cigarette manufacturers have gone on the offensive of late, sharply criticizing the FDA, as well as the Department of Finance. Presently Tobacco companies are in court trying to prevent the government from imposing new regulations that will require bold warning labels on cigarette packages and advertisements. The Food and Drug Administration gained the authority to regulate tobacco products under a law passed in 2009.

Meanwhile, Associated Anglo-American Tobacco Corp recently criticized the Department of Finance for pushing for a uniform excise tax system on cigarette products. Vice-president Blake Clinton Dy explained that a uniform excise tax rate will push prices of its tobacco products to record highs, resulting in markedly lower sales and even lower revenue collections for the government.

The Paragon Report provides investors with an excellent first step in their due diligence

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Star Scientific Launches Anatabloc(TM) Dietary Supplement 

Star Scientific, Inc. (NASDAQ: CIGX) has announced that the company is pleased to initiate the launch today of Anatabloc™, a dietary supplement that is designed to support the immune system in maintaining healthy levels of inflammation. Anatabloc™, developed by the company's Rock Creek Pharmaceuticals subsidiary, is being launched via a dedicated website (www.anatabloc.com) where the product can be purchased. The product also can be purchased through a toll-free customer center (1-800-778-2031).

Anatabloc™ contains the dietary ingredient anatabine citrate. Anatabine is an alkaloid that is found in a variety of plants in the Solinaceae family including the tobacco plant as well as in eggplant, green peppers and green tomatoes. Anatabine citrate, combined with Vitamins A and D3, is believed to assist the body in maintaining anti-inflammatory support. Excess inflammation is linked with a variety of auto-immune conditions that include thyroid dysfunction and arthritis. A provisional patent application has been filed with the US Patent & Trademark Office for the Anatabloc™ product.

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