Star Scientific reports wider quarterly loss, new lawsuit

Published May 10, 2013 by Robert Powell, III

Star Scientific Inc. reported Friday a wider loss in its first quarter and a third lawsuit filed against the company.

The Glen Allen-based pharmaceutical and dietary supplement company reported a loss of $8.2 million, or 5 cents per diluted share, compared with a loss of $5.2 million, or 4 cents per diluted share, during the first quarter of 2012.

Sales were up for the quarter, however, to $2.5 million, from $1.1 million, during the same period last year, mostly because of increased sales of Anatabloc, an anti-inflammatory dietary supplement. The company said it saw a jump in operating expenses, including marketing expenses related to Anatabloc and legal fees stemming from lawsuits filed by investors.

The company and its CEO, Jonnie Williams, have received intense recent media scrutiny for gifts Williams gave to Gov. Bob McDonnell, his family and Attorney General Ken Cuccinelli. The gifts included $15,000 used to pay for a wedding reception for McDonnell’s daughter at the Executive Mansion in 2011.

Star Scientific said in its filing with the Securities and Exchange Commission that a third investor had filed a lawsuit against the company alleging it misled investors. The most recent class-action lawsuit was filed May 8 in the U.S. District Court for the Eastern District of Virginia.

The lawsuits allege that the company misled investors about the involvement of Johns Hopkins University in the clinical testing of the company’s anatabine supplement, an active ingredient in Anatabloc. They also claim that Star Scientific did not disclose in a timely fashion a government investigation into company securities transactions.

“We intend to defend vigorously these claims,” Star Scientific said in its SEC filing. “However, at this time, we cannot predict the probable outcome of these claims.  Accordingly, no amounts have been accrued in our consolidated financial statements.”