Star Scientific Statement on Ariva(R) and Stonewall Hard Snuff(R), Tobacco Products for the Twenty-First Century.
Recent announcements that Reynolds American and Philip Morris are entering the smokeless tobacco category underscore the beliefs of a growing body of researchers and public health advocates: that smokeless tobacco is a viable alternative to cigarette smoking that involves the intake of fewer toxins. These announcements also highlight the unique value of Star Tobacco's dissolvable smokeless tobacco products, Stonewall Hard Snuff(R) and Ariva(R), which were introduced in 2001 and 2003. These two brands have created a unique category of products that, unlike other smokeless products, do not require either spitting or the mess of a pouch. Moreover, the tobacco in Ariva and Stonewall Hard Snuff is 100% StarCured(R) tobacco, which has very low levels of tobacco specific nitrosamines (TSNAs) compared to other tobacco products. The patented StarCured(R) tobacco curing process yields a tobacco leaf with what Star believes are the lowest TSNA levels in the industry. TSNAs have been identified by leading scientists as the most significant group of carcinogens in smokeless tobacco. In addition, the moisture level in Star's dissolvable products is minimal: this feature, combined with the use of very low-TSNA tobacco, ensures a stable product for a minimum of 12 to 18 months.
While both Reynolds and Philip Morris claim that the snus products they will test market will not require spitting, we understand that they will require the user to insert a pouch into his/her mouth and then remove and discard the used pouch. Aside from the inconvenience, the use of a pouch may be considered to be esthetically off-putting, particularly to female smokers. By contrast, Ariva(R) and Stonewall Hard Snuff(R) are bits of powdered and compressed tobacco that dissolve away in the user's mouth, leave no residue, and require no spitting.
Stonewall Hard Snuff(R) and Ariva(R) were developed to avoid the inconvenience of smokeless tobacco use while reducing nicotine cravings for smokers and smokeless tobacco users. Unlike the new pouch products, Stonewall Hard Snuff(R) and Ariva(R) have been on the market for several years. Ariva(R), which was developed for use by adult smokers when they cannot or choose not to smoke, is available both at convenience stores and through the CVS and Rite Aid store chains. While smokeless product sales currently are only a small fraction of the company's total revenue, over 90% of wholesale sales of Ariva(R) are repurchases, a clear indication of a stable customer base.
Stonewall Hard Snuff(R) was designed to give adult users of traditional moist snuff an alternative smokeless tobacco product that did not require spitting. It is available in over 3000 stores in Texas, where over 50% of sales are made to repeat customers. Stonewall Hard Snuff(R) recently has been in test market in a selection of Rite Aid stores in the Louisville, Kentucky metro area, and it is sold in both chains and independent convenience stores in Virginia, Louisiana, Mississippi, Florida, Minnesota, Michigan and Indiana. Expansion of Stonewall Hard(R) distribution to other states also is underway.
Because of their unique characteristics, products like Stonewall Hard Snuff(R) and Ariva(R) have been described by market analysts as the tobacco product of the 21st century. We agree with those assessments, and we believe that these new entries to the smokeless product field further demonstrate where the tobacco market is headed. Star recognized this potential over six years ago when it began developing low-TSNA smokeless tobacco products that provide tobacco satisfaction to users and avoids exposing them or those around them to the toxins in cigarette smoke.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company has tried, whenever possible, to identify these forward-looking statements using words such as "anticipates", "believes", "estimates", "expects", "plans", "intends" and similar expressions. These statements reflect the Company's current beliefs and are based upon information currently available to it. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties and contingencies include, without limitation, the challenges inherent in new product development initiatives, particularly in the smokeless tobacco area, the uncertainties inherent in the progress of scientific research, the Company's ability to raise additional capital in the future necessary to maintain its business, potential disputes concerning the Company's intellectual property, risks associated with litigation regarding such intellectual property, potential delays in obtaining any necessary government approvals of the Company's low-TSNA tobacco products, market acceptance of the Company's new smokeless tobacco products, competition from companies with greater resources than the Company, the Company's decision not to join the Master Settlement Agreement ("MSA"), the effect of state statutes adopted under the MSA and any subsequent modification of the MSA, and the Company's dependence on key employees and on its strategic relationships with Brown & Williamson Tobacco Corporation in light of its combination with RJ Reynolds Tobacco Company, Inc. The impact of potential litigation, if initiated against or by individual states that have adopted the MSA, could be materially adverse to the Company.
See additional discussion under "Factors That May Affect Future Results" in the Company's Form 10-K/A for the year ended December 31, 2005, as filed with the SEC on March 22, 2006, and other factors detailed from time to time in the Company's other filings with the Securities and Exchange Commission, available at www.sec.gov. The Company undertakes no obligation to update or advise upon any such forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
About Star Scientific
Star Scientific is a technology-oriented tobacco company with a toxin reduction mission. It is engaged in the development of tobacco products that deliver fewer carcinogenic toxins (principally tobacco specific nitrosamines, or TSNAs), through the utilization of the innovative StarCured(R) tobacco curing technology, and in sublicensing that technology to others. Star Scientific has a Corporate and Sales Office in Chester, VA, an Executive, Scientific & Regulatory Affairs office in Bethesda, MD, and manufacturing and tobacco processing facilities in Chase City, VA and in Petersburg, VA.
See Star's website at: http://www.starscientific.com