Cytodyne Ordered To Pay $12.5 Million
SAN DIEGO—In a California class action lawsuit that began March 6, the San Diego Superior Court ruled Manasquan, N.J.-based Cytodyne Technologies misled consumers with false or misleading advertising for its Xenadrine RFA-1 ephedra-based weight-loss product. In a ruling announced May 30, the court also found the company had misrepresented study results in some circumstances, and that some before-and-after testimonials were false and misleading. Cytodyne has been ordered to pay $12.5 million in restitution to consumers who purchased the product during the class period (1997 to 2001), in addition to attorney’s fees and injunctive relief.
According to Cytodyne, which plans to appeal, this is a tentative ruling. “We continue to firmly believe that our advertising claims are truthful and accurate in all respects,” Cytodyne stated in a May 30 press release. “This ruling is a severe and inappropriate blow to the First Amendment rights of all companies that advertise their products in the State of California.”
The company added the state’s false advertising laws are lax, allowing any business that advertises to be sued. “Indeed, claims found to be misleading by this California Superior Court in its tentative decision had already been reviewed by a U.S. District Court and found to be substantiated,” Cytodyne reported. “Timothy Muris [the current chairman of the Federal Trade Commission] has testified favorably regarding our advertisements in the past, demonstrating the credibility of the advertisements.”
This and other lawsuits Cytodyne is facing may have led to the Evergood Products Corp. acquiring all licensing and marketing rights in mid-June to Cytodyne’s products, including Xenadrine and MyoBlast. According to Steve Stern, an executive with Evergood’s nutritional supplements division Phoenix Labs, the companies were in discussion for a while before finalizing the agreement May 23.
Under the agreement, all business and operations regarding Cytodyne will now be conducted and handled as Cytodyne LLC from the existing Phoenix Labs facility in Hicksville, N.Y. Phoenix Labs previously served as Cytodyne’s exclusive manufacturer of all products except powders and bars. Stern noted some personnel would be relocating from Manasquan, N.J., to work with Phoenix Labs; however, Cytodyne’s founder Robert Chinery will only assist in the transition of operations and Cytodyne will now exist only as a licensing entity.
“The philosophy of the old regime will continue as will all the good science and outstanding product efficacy,” Chinery said in a news release. “We expect Phoenix Labs to maintain the same high standards and continuity in the manufacturing, distribution, marketing, advertising and sales of Cytodyne brand products while adding to the mix their cutting-edge product development team.”
Evergood Products operates a number of businesses in the nutritional supplement industry. The company runs Phoenix Labs, Bodyonics (makers of Pinnacle brand dietary supplements) and Great Earth Companies.
Pharmavite Launches Herbal ABCs Program
NORTHRIDGE, Calif.—Pharmavite LLC, makers of Nature’s Resource® herbal supplements, launched Herbal ABCs™, an educational effort that features indepth product and safety information on product labels.
Developed in conjunction with the American Botanical Council’s (ABC) Safety Labeling Program, Pharmavite products have easy-to-peel labels that contain a multipage booklet with information about the herb.
“Knowledge is key to using herbal supplements responsibly,” said John Metz, senior product manager for Nature’s Resource (www.naturesresource.com).
“Our new Herbal ABCs labels put independent, scientifically based educational information at consumers’ fingertips, making safe and responsible herbal supplement selection and use much easier.”
In other news from ABC, the organization released The ABC Clinical Guide to Herbs, a comprehensive review of 29 commonly used herbs and 13 proprietary products. The guide includes a comprehensive monograph on each herb, a clinical overview of applications and use, and a consumer information sheet discussing descriptions, uses and safety. Health care professionals can earn continuing education credit by reading the book and completing a test; details on the program are available at www.herbalgram.org. The book can be purchased through ABC’s exclusive worldwide trade distributor, Thieme New York, (800) 782-3488, FAX (212) 947-1112, www.thieme.com.
NBTY Buys Rexall Sundown
BOHEMIA, N.Y.—The guessing game is over—Rexall Sundown, a supplement manufacturer owned by The Netherlands-based Royal Numico, was sold to NBTY Inc. for $250 million in cash. Industry insiders had speculated NBTY would buy the supplement line, especially after it signed a letter of intent to acquire Royal Numico’s European GNCs in February. For the year ended Dec. 31, 2002, Rexall had sales of $455 million.
With this acquisition, NBTY (NASDAQ:NBTY) is now owner of all Rexall brands, including CarbSolutions, MET-Rx and WORLDWIDE Sports Nutrition. The sale also brings with it Rexall’s production facilities and warehouses, as well as 290 employees. The transaction is subject to regulatory approvals and is expected to be finalized in the third quarter of 2003 (3Q03). NBTY did not foresee approval being a problem, since even with this acquisition, NBTY’s wholesale side will “still remain an insignificant share of the marketplace,” it said in a statement.
“Rexall Sundown will play a key role in the further growth of our wholesale business by allowing NBTY to offer a greater number and variety of products, expand manufacturing operations and enhance delivery and service to our growing customer base,” Scott Rudolph, NBTY chairman and chief executive officer (CEO), said in the statement.
According to Jan Bennink, Royal Numico CEO, this sale will help the company focus its attention and resources on its baby food and clinical nutrition divisions, in addition to the floundering sales of U.S. GNCs.
During a June 10 press conference held by NBTY, the company reported it would be assuming certain liabilities with the acquisition of Rexall Sundown, minus those liabilities concerning ephedra, which Royal Numico would be handling. NBTY was also guaranteed a certain amount of working capital with the sale, the sum of which was not disclosed.
NBTY met with Rexall staff early June 10 but did not have a plan of action yet for merging with the company. NBTY did not have many answers to questions raised by this acquisition, including whether staff at both companies would remain the same and whether executives would stay or be replaced. “Right now, we’re in the learning curve, not the decision curve,” Harvey Kamil, NBTY president and chief financial officer, said during the press conference. “Right now, we’re strengthening our numbers and increasing our sales. We don’t have a plan right now, and we’re learning what to do and how to do it.”
Kamil added NBTY would have more answers in a month’s time, when the company’s 3Q03 results are reported. In terms of increasing sales numbers, NBTY reported that one cash cow is certain—GNC has a contractual obligation to buy product from Rexall for the next five years.
In other GNC news, according to a May 6 story in The New York Post (www.nypost.com), the supplement chain is being auctioned off to the highest bidder. Its parent company, Royal Numico, reportedly hired New York-based investment bank Goldman Sachs to hold a formal auction of the vitamin chain. The spokesperson for Goldman Sachs said it had no comment on the sale, although added it is up to a company—in this case, GNC—to announce it is being sold.
The Post speculated Thomas H. Lee Partners, an investment firm that helped with the 1980s buyout of GNC, is a contender, as is Bain Capital, owners of Nutraceutical International. “But industry sources say the one to watch is J.W.
Childs,” reporter Erica Copulsky wrote. “The Boston investment firm has several important ties to GNC. Its founding partners, who hail from Thomas H. Lee, helped the buyout shop take the company private. And two of J.W. Childs’ partners, Jerry Horn and William Watts, are former GNC chief executives.”
In additional GNC news, the retailer has advised its suppliers not to release GNC customer data, which is obtained through its Gold Card loyalty program.
Reportedly, the site MrHealthList.com was able to obtain information on GNC’s most frequent shoppers, which number 4.8 million customers; the site has since removed memberships. According to the June 10 edition of the Pittsburgh Post- Gazette (www.post-gazette.com), GNC did not sell its list, but it did allow direct marketers to “rent” the list for a one-time use. The chain plans to continue allowing the list to be rented to qualified users.
Vitamin Relief Survey Shows Positive Impact
MURRIETA, Calif.—One out of three parents surveyed by The Healthy Foundation said their children earned higher grades since taking daily multivitamins through the Vitamin Relief USA program. In addition, 59 percent of parents said their children were eating better, and 48 percent said their children were feeling better and were more active.
“The results of this year’s observational survey are impressive,” said Michael Morton, executive director of The Healthy Foundation (www.vitaminrelief.org). “We look forward to presenting next year the conclusive results of The Better Student Research Initiative, which will substantiate the impact daily vitamins make on at-risk children and their academic performance.” The Vitamin Relief USA program currently distributes daily vitamins to more than 10,000 at-risk children in 40 states nationwide.
Consumers Linking Stress, Health
HARLEYSVILLE, Pa.—A recent survey of 1,028 Americans conducted by the Natural Marketing Institute (NMI) found 69 percent of consumers agreed personal health and wellness are more important than they used to be due to the state of the economy and current events. This is up from 60 percent who agreed with the statement in October 2002. NMI (www.nmisolutions.com) also found middle-aged consumers were the most stressed, with 41 percent stating they are more stressed and anxious than they used to be. Also, 56 percent of Americans in the Northeast were more stressed than before, compared to 28 percent of Americans in the Pacific states.
Germany Fights To Retain CAM Insurance
HAMBURG, Germany—According to a Reuters report, German doctors specializing in natural remedies are in opposition to their nation’s proposed cost-cutting health reforms.
At a press conference, the Central Association of Doctors for Natural Remedies (ZAeN) (www.zaen.de) opposed a section of the proposal that would end public health insurance coverage of non-prescription drugs, under which most dietary supplements fall in Germany. According to Antonius Pollman, ZAeN’s president, the public health insurance system paid 20 billion euros for prescriptions in 2002, compared to 1 billion for natural medicines. “The natural medicine market is not so big,” Pollman told Reuters. “But it is big enough to bother the big drug companies. They would like a piece of it.”
Company Reconsiders Oxygen- Promoting Herbal Product
SALT LAKE CITY—The International Olympic Committee (IOC) has banned any substance that increases an athlete’s blood oxygen. As a result, Basic Research issued a warning to Olympic hopefuls to stop using its Oxydrene immediately.
An herbal supplement manufactured by Klein- Becker and distributed by Basic Research, Oxydrene is still being used in places like China to help alleviate the effects of high altitude.
“Certainly, steroids and hormone-boosting products should be banned, but issuing blanket indictments about all compounds, including nutritional supplements, that help the body increase oxygen levels is neither prudent nor warranted,” said Daniel Mowrey, Klein-Becker’s director of scientific affairs. “We hope the IOC will reconsider its hard-line position.”
Nutraceutical Set To Acquire Arizona Health Foods
PARK CITY, Utah—Nutraceutical International Corp. (NASDAQ:NUTR) announced June 19 it entered into a purchase and sale agreement to acquire the operating assets of Phoenix-based Arizona Health Foods Inc. Closing is subject to certain contingencies, but the acquisition should be completed on or before June 30 and no later than July 31.
Purchase terms will be released following closing.
“Health food stores that focus on nutritional supplements are the heart and soul of our industry,” said Bill Gay, chairman and chief executive officer of Nutraceutical International (www.nutraceutical.com). “As a supplier to Arizona Health Foods for many years, we believe this acquisition is an important part of our overall business strategy and will help us better understand our core customers.”
Arizona Health Foods owns and operates a chain of 11 health food stores, which primarily sell branded nutritional supplements. Hal Cooper, president of the operation, noted his son, Greg, would remain with the company as vice president and general manager. He also stated the acquisition should help grow the Arizona Health Foods business. “We have been a leader in the sale of natural health products since 1968, and I believe Nutraceutical is the right partner to help us grow our business and serve our customers in today’s competitive market,” he said.
Nutraceutical is a large manufacturer and marketer of branded nutritional supplements sold to health and natural food stores. The company sells its branded products under several names, including Solaray® , NaturalMax® and, most recently, Nature’s Life® .
Nutraceutical’s acquisition of Nature’s Life was completed in mid-June. In addition, Nutraceutical publishes, prints and markets a line of books and booklets under the Woodland Publishing™ name. Nutraceutical also manufactures bulk materials for use in its own products and for sale to other manufacturers and marketers under the trade names Monarch Nutritional Laboratories™ and Great Basin Botanicals™.
Solae Sues ADM, Amerifit for Patent Infringement
ST. LOUIS—The Solae Co. filed suit June 3 in U.S. District Court for the Eastern District of Missouri against Archer Daniels Midland Co. (ADM) and Amerifit Nutrition. The lawsuit alleges ADM’s Novasoy isoflavone products and the Estroven dietary supplements made by Amerifit directly infringe on U.S. patents held by Solae.
“The Solae Co. has spent many years investing in soy isoflavone concentrates and will aggressively defend its associated intellectual property portfolio when it is threatened,”
said Stephan Tanda, chief executive officer of Solae (www.solae.com). “Our soy isoflavone patents are an extremely valuable corporate asset, and this suit reflects our determination to protect that value.”
Solae (formed in a merger of Bunge and DuPont Protein Technologies) holds a number of patents in this area and is the assignee for several patents from Novogen Research in Australia. The patents at issue are No. 6,562,380 ( issued on May 13, 2003), which relates to dietary supplements with isoflavones designed to treat PMS or menopause symptoms, and No. 5,990,291, covering methods of producing soy isoflavones; both patents are licensed from Stamford, Conn.-based Novogen Ltd. The court action alleges Amerifit and ADM have each infringed at least one claim on both patents, and has induced others to infringe the patents as well. Solae seeks a permanent injunction on ADM and Amerifit from infringing the patents, as well as extensive damages and attorneys fees.
An Amerifit spokesperson had no comment regarding the pending litigation, while calls to ADM had not been returned at press time.
CRN Launches Congressional Education Effort
WASHINGTON—The Council for Responsible Nutrition (CRN) initiated an educational outreach program to Congress to educate legislators about the benefits of dietary supplements. On a monthly basis, CRN will issue a one-page educational flier under the tagline “DSHEA: It Makes Sense, Let’s Make It Work.” The first flier focused on multivitamins and was sent out in May. A companion advertising campaign in Capitol Hill newspapers such as The Hill and Roll Call is being planned.
OCA Issues Complaint Against Avalon Natural Products
SACREMENTO, Calif.—The Organic Consumers Association (OCA) filed a complaint in early May with the Director of the California Department of Food and Agriculture State Organic Program and the California Department of Health and Human Services. The complaint asks both bodies to investigate the alleged false organic claims being made by Avalon Natural Products on more than 30 of its products.
OCA (www.organicconsumers.org) is charging that Avalon is counting non-agricultural water as “Organic Floral Water,” is using synthetic surfactants and preservatives, is not identifying the organic certifying agency on its packaging and is claiming to be “organic” even though products do not contain the minimum 70-percent organic content. “We are filing this claim because consumers have demanded stringent organic standards, and we cannot ignore Avalon’s misleading tactics any longer,” OCA reported.
According to Avalon’s Tim Schaeffer, the company claims its hydrosol (“Organic Floral Water”) is organic since it was certified organic by the California Certified Organic Farmers (CCOF). The company uses synthetics, but they are from naturally based ingredients, such as a coconut extract that makes shampoo bubble.
But the company also does not claim its shampoo is 100-percent organic, but rather 70-percent.
The reason an organic certifying agency is not on its products is because no agency certifies personal care products as organic, since the National Organic Program (NOP) did not allow for that in its final rule. “We’d like to see a voluntary standard or national rule, even if it was strict,” Schaeffer said. “We just want a level playing field so that consumers can make their own choices. If that means we can’t put organic on our label, great. But that means no one else can, either.”
Times Takes on Supplement Studies
NEW YORK—Clinical studies on nutraceutical ingredients are increasing; however, a story in The New York Times stated the industry is quashing unfavorable research and supporting less rigorous studies in an attempt to get positive results. In particular, the Times looked at several studies on ephedra that were funded by dietary supplement companies, including Cytodyne and Muscletech, as well as lawsuits against those companies alleging improper and exaggerated claims based on the findings.
“Documents from the lawsuits ... provide an inside look at how, for the supplement makers, the demands of marketing have sometimes compromised those of science,” wrote reporter Ford Fessenden in the June 23 Times article (www.nytimes.com). The story specifically looked at a judge’s finding in San Diego that Cytodyne had exaggerated results of clinical studies on its Xenadrine product, as well as a case in Oklahoma concerning Muscletech’s claims for Hydroxycut.
Steven Dentali, Ph.D., vice president for scientific and technical affairs at the American Herbal Products Association (AHPA) (www.ahpa.org), was quoted in the article, arguing the science being done on supplements is no worse than that being done on pharmaceuticals. “There’s an interest in making sure you do good science and representing it properly because there’s a spotlight on the industry,” he told the Times.
In a follow-up discussion with HSR, Dentali said he was unsurprised by the article’s spin. “It could have been worse,” he said. “The bottom line is science is complicated. If you’re doing scientific research and come in with the desire to see a particular result, you must be very careful to guard against bias. The supplement industry is no worse than the pharmaceutical industry in this. We obviously want good results.”
News Bytes
Roberto Crea, president of CreAgri Inc., will present “The Mediterranean Secret Uncovered—Hydroxytyrosol” on Friday, Sept. 5, 2003, at Natural Products Expo East 2003. Natrol reported its Complete Balance AM/PM Formula for Menopause experienced a 124-percent sales increase in 2002, while the natural menopause products category as a whole only grew 13.4 percent, according to statistics from IRI. ... NSF International certified Amerifit Nutrition’s Estroven® brand of dietary supplements. They met certification requirements that included label and formulation review, good manufacturing practice (GMP) plant audits, product testing and safety evaluation. ... On Oct. 8 and 9, the first Latin American Conference on Dietary/Food Supplements will take place in Rio de Janeiro, Brazil, sponsored by the International Alliance of Dietary/Food Supplements Associations (IADSA). ... Display Technologies launched the TechStoc Expandable Spring Loaded Tray. The injection-molded tray is spring-loaded to keep health foods and supplements forward and frontfaced. Pioneer Nutritional Formulas is offering a free 27-page booklet, Taking Health to Heart, packed with holistic, science-based approaches to cardiovascular health. ... Planet Dog announced its co-founder, Alex Fisher, received the 2002 Henry Bergh Children’s Book Award for his children’s book, A Kid’s Best Friend. The book illustrates children’s relationships with dogs. ... Longevity Through Prevention (LTP) launched a new Web site, www.ltponline.com. The site features a comprehensive overview of services offered by LTP, along with its client list, client comments and samples of its work. ... Twinlab launched a retailer newsletter, Retailer HealthLink. The newsletter will be produced on a bi-monthly basis, will be available online and in print, and will feature different health conditions. To sign up for the letter, visit www.twinlab.com/retailernews ... Whole Foods Market reported it is the first national grocer to have its retail operations designated as “Certified Organic” by Quality Assurance International. ... Healthnotes Inc. now has a new Healthnotes Pharmacy application for its touchscreen kiosks, complete with 2,000 patient education monographs covering more than 10,000 prescription and over-thecounter medications by both brand and generic names. ...Frontier Natural Products Co-op reported in early May that its Aura Cacia manufacturing facility in Weaverville, Calif., received organic certification. ... Jack Challem’s User’s Guides to Nutritional Supplements came out with five more books for topics that include allergies, sexual health, eye health and depression. ... The Healthy Beverage Co. appointed Liberty Richter as its exclusive distributor, sales & marketing partner for Steap Green Tea Soda. ... Betty Kamen, Ph.D., authored 1,001 Health Secrets, a 599-page book offering up-to-date nutritional information for various health conditions. ... Best of Health, by Sheldon Zerden, is now available. It is a compilation of the best books written on nutrition, diet and health by authors such as Andrew Weil, Dr. Robert Atkins and Linus Pauling. ... TUMS® partnered with the March of Dimes in early June to educate expectant mothers about maternal and infant calcium needs. ... The Natural Pregnancy Book, by Aviva Jill Romm, reports on the herbs that promote and maintain a healthy pregnancy, in addition to which herbals to avoid.