Source: LOHAS Weekly Newsletter
Published: Sunday, November 01, 1998

SIMI VALLEY, CA—In a deal that takes supplements maker Pharmanex into the international marketplace, Nu Skin Enterprises (NUS), a worldwide direct marketer, has agreed to buy Generation Health Inc., Pharmanex’s parent, for up to $105.5 million in stock and assumed debt, plus other

considerations.

Specifically, the agreement calls for NUS to pay Generation Health about 4.1 million shares of its class A common stock and assume about $30 million of Pharmanex’s debt. An additional $33 million could be tacked on to the final purchase price, depending upon the performance of the capital markets and NUS stock during the year following closing. The deal closed Oct. 19.

Pharmanex will become the pharmaceutical division of NUS and will be headed by current Pharmanex President Bill McGlashan. Pharmanex Chairman and CEO Henry Burdick will consult with the new division.

Pharmanex, which spent more than $1 million successfully fighting in federal court an FDA ban on the red yeast rice it imports to make its cholesterol-lowering supplement Cholestin, had sales of about $12 million in the first three quarters of 1998, according to Burdick. Sales should reach the $20 million mark by the end of the year. NUS posted $890 million in 1997 sales.

Burdick says Pharmanex initially met with NUS to discuss product licensing. The current deal evolved from those discussions. Pharmaceutical companies also had been courting the company, Burdick says.

“Nu Skin really values our science. It is very interested in developing proprietary products with science to back up efficacy claims,” Burdick says

Cholestin makes up a significant portion of Pharmanex’s sales, but the company also makes CordyMax, an energy-enhancing supplement; BioGinkyo; TEGreen, an antioxidant; and Bio St. John’s Wort, and has manufacturing plants in China and Chile.

Until now, all of Pharmanex’s products have been sold through mass-market outlets. But that may change as a result of the company’s sale to NUS. Burdick says both companies are discussing whether or not to continue mass-market sales.

“It’s not that we’re not getting the job done in the mass market. We are. But we felt [the merger] was a good marriage in the sense that our products have a great story behind them, and it’s a hard story to tell in the channels we currently are in,” Burdick says.

The most compelling reason for the match, however, was the opportunity to almost immediately access the international marketplace, Burdick says.

According to NUS, Pharmanex’s principal stockholders, Chicago’s Pritzker family, Chase Venture Partners and Fidelity Ventures, approved the deal in early October.