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Star Scientific Inc. (STSI.OB) Wins Round One with RJR Reynolds, Working Toward Low-TSNA Smokeless Tobacco Products

Source: http://Blog.QualityStocks.net/?p=11970
Posted on Tuesday, August 26th, 2008 | In Small & Micro Cap
Contributed by: QualityStocks (http://QualityStocks.net) -

Many investors are of the opinion that investing in morally questionable companies is not an option. Others maintain that morals have little to do with making an investment. If they don’t invest in that company, somebody else will, and profit by it regardless. There are arguments on both sides of the discussion, but in an increasing number of instances, options are beginning to be found. Investors are increasingly being offered alternatives for profitable investments where the underline moral ambiguity is somewhat less ambiguous.

Star Scientific Inc., a smokeless tobacco and nicotine reducing tobacco curing equipment manufacturer, works to offer products and processes that address the reduction of nicotine in smoked and chewed tobacco products. The company makes no apologies for putting nicotine in its products but emphasizes that those levels are included with the intent of helping smokers get to a place where they may quit more easily.

Although the company might be considered a smaller operator in the world of tobacco sales, it has developed tobacco curing processing machinery that effectively reduces the amount of nicotine in smoked and chewed tobacco products. This particular process has generated substantial interest by other major tobacco producers and a just decided patent infringement lawsuit – filed and found in favor by/for Star Scientific against RJR Reynolds Inc. Generally, it is assumed that this finding will be appealed by RJR Reynolds, but it does indicate that the company’s nicotine reduction curing process is of worthy note and a solid revenue possibility in the near term future.

Past the potential revenue that the company’s curing process brings, it markets and sells a full line of smokeless tobacco products. Cigarettes and chew tobacco products make up the bulk of these products, which are now beginning to find favor in many states. The products, however, are currently causing a slight drag on revenues as promotional giveaways inhibit positive sales growth. Given the current drive by states to reduce and eliminate smoking, the company may be able to capitalize over the nearer term future.

Star Scientific does very seriously point out, however, that they are very dedicated to the premise of deterring new smokers and aiding those that would rather quit. To this end, it develops products that are “less” oriented toward nicotine to give smokers options. From an investor’s point of view, if investing in big tobacco was a moral dilemma, Star Scientific might be an opportunity for a solid tobacco play that is less morally worrisome. Star Scientific is working from the inside out and is an option to be considered.

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