B&W Enters a Multi-Year, Major Supply Contract With Star Scientific for Low Nitrosamine Tobacco
Star Scientific, Inc. announces a multi-year, major contract to supply low-nitrosamine (TSNA) tobacco to Brown & Williamson, the third largest U.S. tobacco company (B&W).
The long-term contract between Star and B&W also covers British American Tobacco, P.L.C. (``BAT'') and its affiliates (BAT is the second largest tobacco company in the world, and Brown & Williamson is BAT's largest affiliate). According to Malcolm ``Mac'' Bailey, Star Scientific's President (and a fifth generation Virginia farmer who is also the President of the Virginia Agricultural Grower's Association), B&W has informed Star that they have confirmed through their own internal testing what had earlier been verified for Star by the independent analytical testing of StarCure(TM) tobacco conducted at the University of Kentucky, under the direction of Professor Harold Burton. Dr. Burton and his colleagues determined that there were virtually undetectable levels of TSNAs measured in parts per billion of the StarCure(TM) tobacco delivered during this growing season. Under the contract, B&W will be purchasing 8 million pounds of StarCure(TM) processed tobacco in the years 2000 and 2001, with the expectation of extending purchases beyond 2001. Star has already delivered to B&W, under previous Purchase Orders, in excess of 2.2 million pounds of tobacco processed through Star's two-step curing method. According to the Canadian Health Ministry, tobacco specific ``nitrosamines cause cancer'' and ``they are the most active cancer-causing agent in tobacco''. (See Canadian Proposed Labeling Regulation issued under the Tobacco Act of 1996 ss.4.1.)
Mac Bailey said that the B&W long-term contract covers flue-cured, burley, and dark fired tobacco. Further, Mr. Bailey said that Star plans an additional 1,000 new curing barns within the next 12-15 months. Bailey stated that a new long-term exclusive contract between Star and Powell Manufacturing Company of Bennettsville, South Carolina (the largest manufacturer of curing barns in the U.S.), provides for an accelerated manufacturing schedule which is expected to allow Star to place its barns on additional farms in Virginia, North Carolina, South Carolina, Georgia, Florida, Kentucky and Ontario, Canada. Mr. Bailey said that Star had placed approximately 220 curing barns used during this season's harvest in Virginia, North Carolina, Florida, Georgia, and Ontario, Canada.
Professor Robert J. DeLorenzo, M.D., Ph.D., Star's Chairman and CEO, said that he was reassured by the responsible approach taken by Star and B&W in their long-term contract, which provides that neither company will make any health claims regarding the low-TSNA tobacco until there is sufficient good science to support these claims as interpreted by Star's independent Scientific Advisory Board, which will be composed of highly credentialed scientists, physicians, clinicians, epidemiologists and public health experts. The Board will be chaired, ex officio, by Dr. Jerome H. Jaffe, Star's Chief Medical and Scientific Consultant. Dr. DeLorenzo said that Star recently issued a comprehensive ``Policy Statement'' which unequivocally sets forth Star's view that the adult choice of using tobacco products intended for smoking necessarily involves a range of serious health risks. Star is committed to developing methods and technologies to allow tobacco products to be no more hazardous than available technology permits. Star continues to express strong interest in expanding its working relationship with public health experts, agencies and regulatory authorities to develop and implement methods for evaluating the potential public health benefits of low-nitrosamine tobacco products. Dr. DeLorenzo commented that he was pleased that an array of respected international scientists and clinicians who produced the Framework Convention on Tobacco Control (Technical Briefing Series Paper 2) in the Spring of this year noted that ``there are a number of potential opportunities to make products less dangerous than they are now.'' For example, an international committee of experts under the supervision of the World Health Organization ``could ... set a ceiling for yields of toxic ingredients, such as tobacco specific nitrosamines and specify progressive reduction.''
Paul L. Perito, Star Scientific, Inc.'s Executive Vice President and General Counsel, said that the multi-year Star/B&W contract also provides for a credit facility related to the construction of 1,000 new barns so that Star can be responsive to the anticipated needs of B&W and BAT affiliates for low TSNA tobacco. Mr. Perito said that this long-term contract between Star and B&W represents a seminal event in Star's continuing pursuit of its central focus, namely, reducing the health hazards associated with long-term tobacco use. Mr. Perito noted that Star has now demonstrated a proven ability to expand its low-TSNA tobacco into large scale production. To date, Star is not aware of any other company that can reduce tobacco specific nitrosamines (TSNAs) to virtually undetectable levels. Mr. Perito also commented that B&W has manifested a commitment to Star's reduced TSNA processed tobacco from the early stages of Star's developmental efforts. ``The support of B&W has enabled Star to move forward with this process on a rapid basis in order to develop tobacco products using StarCure(TM) tobacco to ultimately produce new products which are anticipated to be virtually nitrosamine-free,'' Mr. Perito said. Finally, Mr. Perito stated that Star plans on phasing StarCure(TM) tobacco into its four existing brands, but the Company has made a clear commitment to focusing on the development of a unique product using StarCure(TM) tobacco which is now in the development stage.
This press release reflects certain information previously included in Star's Forms 10-QSB and 10-KSB, as well as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company has tried, wherever 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 limitations, the continued development and commercialization of the Company's proprietary patented process for reducing and/or virtually eliminating TSNA's in the processing of tobacco leaf, potential disputes concerning the Company's intellectual property, potential delays in obtaining any necessary government approvals of the Company's proposed reduced risk tobacco products, market acceptance of the Company's products, competition from companies with greater resources than Star, the Company's decision not to join the Master Settlement Agreement, the adoption of required state statutes and any subsequent modification of the Master Settlement Agreement. The impact of potential litigation, if initiated against or by individual states that have adopted the MSA, is a risk factor to be considered by potential investors. The Company undertakes no obligation to update or advise upon any such forward-looking statements which may be made to reflect events or circumstances after the date of the filing of its most recent 10-KSB and 10-QSB or to reflect the occurrence of unanticipated events.