FDA Warns Star Scientific Amid Gift Scandal

WASHINGTONFDA warned a dietary supplement firm linked to a gift scandal involving a sitting governor that a substance in its products is a new dietary ingredient (NDI) that requires premarket notification. 

FDA also accused Star Scientific Inc. of making therapeutic claims that render its anti-inflammatory dietary supplement Anatabloc "a drug because it is intended for use in the cure, mitigation, treatment or prevention of disease."

The warning letter comes at a difficult time for Star Scientific, which finds itself at the center of a government investigation into whether Virginia Gov. Robert McDonnell improperly accepted gifts and loans from Star Scientific's former CEO Johnny Williams.

Star Scientific's Anatabloc and CigRx products contain anatabine as a dietary ingredient. Although the substance has been authorized as an investigational new drug (IND), anatabine also is a NDI that is subject to premarket approval, FDA said. Therefore, the products are adulterated, the agency said.

Anatabloc is marketed as a dietary supplement that is intended to help maintain lower levels of inflammation, while CigRx is designed to reduce the urge to smoke. Most of the company's revenues (USD $7.3 million for the nine months ended Sept. 30) derive from Anatabloc.

Star Scientific today acknowledged receiving the warning letter from FDA on Dec. 24. "The Company is responding to the letter and has already advised the agency that it intends to work cooperatively to resolve these issues, including undertaking a review of the company's websites," Star Scientific said in a press release.

According to a Dec. 18 article in The Washington Post, federal prosecutors planned to charge Virginia's governor McDonnell in connection with a gift scandal, but delayed the decision after his lawyers made a face-to-face appeal to senior Department of Justice officials in Washington. People familiar with the case told the newspaper that McDonnell and his wife Maureen would have been charged with working together to illegally promote Star Scientific in exchange for gifts and loans from Williams. Williams provided more than $165,000 in gifts and loans to the governor and his family, according to the Post.

Williams and Paul Perito, Star Scientific's president and COO, resigned following last week's shareholder meeting. The company previously said Williams would continue to serve as a non-executive for one year, while Perito would continue for the same period of time as vice president and senior counsel, legal and regulatory affairs.

The company is now led by Michael Mullan, M.D., Ph.D. Dr. Mullan has served as president and CEO of the Roskamp Institute, a developer of senior living facilities.

In a regulatory filing on Nov. 12, Star Scientific revealed the company and its directors received subpoenas early this year from the U.S. Attorney's Office in Virginia. The company also said an international law firm conducted an internal investigation that was completed in June 2013. Star Scientific expressed optimism that the investigations would not result in any prosecutions.

Star Scientific shareholders have filed a number of class action and derivative action lawsuits against the company, its subsidiary Rock Creek Pharmaceuticals Inc. and certain officers, according to the same filing.

Shares of Star Scientific (NASDAQ: STSI) fell nearly 9 percent to a 52-week low in late afternoon trading ($1.14).

In a separate announcement today, the company revealed entering into a letter of intent for a $15 million credit facility with Williams. The credit facility extends through April 2015.  

Star Scientific has been operating at a loss for 11 consecutive years, and the company has said investigations into its business have exacerbated its cash crunch.