Herbalife Adds TCMs In JV: Health And Wellness Industry News Roundup

Herbalife adds traditional Chinese medicine to its portfolio as it reports 17.6% net income growth; PepsiCo's Naked Juice brand agrees to modify labeling in CSPI litigation; and House Health Subcommittee schedules hearing on improving sports' doping testing system.

TCMs and 17.6% income growth for Herbalife

Nutritional and weight loss supplement direct seller Herbalife Ltd. adds traditional Chinese medicine to its portfolio as it reports 17.6% net income growth in its second quarter since implementing changes to its business model required in a settlement with the Federal Trade Commission.

Herbalife on Feb. 23 reported 2016 fourth-quarter net income of $99.4m on net sales down 5% from the prior-year period to $1.05bn and on flat volume points growth, off 1% to 1.3bn. Adjusted earnings for the October-December period was $1 per diluted share compared to $1.17 in the 2015 fourth quarter. Currency exchange cut $9.5m from its net income and 11 cents from its earnings per share.

The Los Angeles-based firm full-year total net sales of $4.5bn were flat, though up 6% excluding a loss to foreign currency exchange, and it net income was $260m, or $3.02 per diluted share, down 23.3% from 2015. Its earnings release states currency exchange cut $82.2m from its full-year net income and 95 cents from its EPS.

Herbalife also announced an agreement to form a joint venture with Chinese firm Tasly Holding Group to develop and commercialize consumer health products based on Tasly's portfolio of proprietary TCM formulations and using Herbalife's scientific, regulatory and commercial development experience to distribute products globally through its distributor network.

Tasly, operating since 1994, manages a spectrum of pharmaceutical, consumer products, health care services and distribution channels in China and has created a manufacturing and development process using a comprehensive, standardized and digital system to produce its TCM products, according to Herbalife's release.

Additionally, the firm announced it would begin a three-year $1.5bn share buyback program funded through a $1.45bn senior secured credit facility announced Feb. 14. (Also see "Herbalife Share Repurchase Likely: Health And Wellness Industry News Roundup" - HBW Insight, 16 Feb, 2017.)

Herbalife branches out into TCM and reports quarterly net-income growth and a dip for the full year as while operating under a settlement to an FTC complaint that followed an investigation launched in 2013 on allegations that it inflated reported retail sales made through its network of independent distributors. The firm agreed to pay a $200m fine; determine compensation for its independent distributors based on actual end-user sales, rather than on sales to other distributors; limit distributors' initial and monthly purchases; allow more time for distributors to claim refunds; and hire an independent monitor to audit its compensation practices for seven years. The quarterly report was the first since CEO Michael Johnson announced he would step down in June and remain with the firm as executive chairman. (Also see "Herbalife CEO Plans Exit With FTC-Required Changes Underway" - HBW Insight, 3 Nov, 2016.)

Naked Juice adding label clarity

PepsiCo Inc.'s Naked Juice brand agrees to modify labeling and marketing for its pure fruit, veggie, protein and boosted juices and smoothies to more clearly state what the products contain, according to an agreement to litigation filed by the Center for Science in the Public Interest. The complaint that attorneys from New York firm Reese LLP filed for CSPI and three consumers in October in US District Court for the Eastern New York District alleged that labeling for Naked products did not sufficiently reflect some major ingredients, but focused on other ingredients consumers might perceive as higher value. PepsiCo, and its subsidiary making the products, Naked Juice of Glendora Inc., agreed to state on labels whether a product contains only “fruit juice” or “veggie juice” or “fruit and veggie juice.” Naked Juice also will revise its imagery when necessary to more clearly reflect predominant ingredients; changes the “no sugar added” claim to be clear that a product is not a low-calorie or low-sugar food; and the order of predominance of its juice ingredients as reflected on side panels of the products, according to a Feb. 14 letter stating the terms of the agreement submitted to CSPI and Reese by PepsiCo counsel Gibson, Dunn & Crutcher LLP of Washington.

Health Subcommittee looks at better doping testing

A House subcommittee schedules a Feb. 28 hearing on athletes' use of banned performance-enhancing drugs, hearing testimony on the doping testing system rather than on Congress' past focus on drug-spiked dietary supplements disqualifying athletes from competition. The Energy and Commerce Health Subcommittee's announcement for the hearing, "Ways to Improve and Strengthen the International Anti-Doping System," includes swimmer Mike Phelps, winner of the most Olympic gold medals, Olympic gold medal shot-putter Adam Nelson and the heads of the US and the world anti-doping agencies. The hearing rekindles congressional interest in athletes' use, intentionally or unknowingly, of PEDs or other banned substances that Senate committees and members previously showed in their push for tighter controls on supplement manufacturing to prevent products spiked with steroids or other drugs. They frequently linked their concern to reports of athletes, from professional sports leagues in addition to the country's Olympic team members and other elite-level competitors, being suspended from competition after testing positive for banned substances that they said they ingested in supplements that did not disclose the violative ingredients. (Also see "Hatch Flips Focus To NDI Guidance In McCain Steroid Bill Negotiations" - Pink Sheet, 15 Mar, 2010.) The hearing is scheduled for 10:15 a.m. at room 2123 in the Rayburn House Office Building.