Weekly News Update

November 8, 2001

FDA Seizes More Products Containing Ephedrine

U.S. Marshals have confiscated 140,000 bottles of AMP II Pro Drops, a dietary supplement allegedly containing ephedrine HCI, which FDA classifies as a drug. On Oct. 31, FDA published a public advisory stating that the products were ""in violation of the law because drug ingredients are prohibited in dietary supplements.""

The product is manufactured by St. George, Utah-based Biogenics Inc., dba E'OLA International, and its contract manufacturer, Pleasant Grove, Utah-based Nature's Energy Inc.

The American Herbal Products Association has issued a reminder to its members that AHPA's trade recommendation advises members not to use synthetically derived ephedrine alkaloids in any dietary supplement.

HAIN to Acquire Belgium Organic Foods Manufacturer/Distributor

The Hain Celestial Group (HAIN) announced that it has signed a letter of intent to acquire Lima NV, a Belgian manufacturer and marketer of natural and organic foods. Lima distributes fresh organic produce to Belgian supermarkets from its Biomarche operations in Europe. In its current fiscal year, Lima's and Biomarche's combined revenues are expected to exceed $20 million. Terms of the transaction were not disclosed.

Hain also reported 1Q02 revenues of $104.9 million, up 13.5 percent on a comparable basis over 1Q01. 1Q02 net income was posted at $5.4 million or $.16/share vs. $6.5 million or $.20/share in 1Q01.

Adams, Harkness & Hill analyst Scott Van Winkle upgraded HAIN from Market Perform to Buy with a target price of $20.35 based on attractive valuation, favorable current sales trends, improved earnings outlook and strengthened financial management.

Aquasearch Cuts Costs to Avoid Chapter 11 Proceedings

Aquasearch Inc. (AQSE), which develops and commercializes natural products from microalgae, announced it has embarked on a cost reduction plan in order to achieve profitability and has cut back personnel by almost 45 percent. According to the company, expenses have been reduced from approximately $4.8 million for FY01 to an estimated $2.4 million for FY02. According to Honolulu-based Pacific Business News, a Chapter 11 bankruptcy motion was involuntarily filed, meaning that creditors are seeking to force the company into reorganization. Aquasearch CEO Mark Huntley told PBN the filing was a complete surprise and that he will fight it in court because it was done ""in bad faith and without any attempt at an adult discussion.""

Environmentalists Disappointed with Harkin's Version of Farm Bill

Sen. Tom Harkin, D-Iowa, has come under criticism from environmentalists over his proposed version of the Farm Bill. Introduced on Nov. 1, the bill promotes conservation, expanded production of farm-based renewable energy, the protection of farm income, and the creation of new economic opportunities for rural communities, according to Harkin.

The bill includes $4.4 billion/year for agricultural conservation vs. the current $2 billion. A program called ""green payments"" would allocate $500 million/year for farmers who practice soil, water and wildlife conservation. The proposal also boosts funding for the Environmental Quality Incentives Program from $174 million/year to $950 million/year; creates a one million-acre Grassland Reserve to preserve prairie land; allows 250,000 acres/year to be purchased for the Wetlands Reserve; and expands the Farmland Protection Program to $250 million/year to purchase conservation easements to prevent urban sprawl.

Critics of the bill say it offers much less than what had been anticipated. Ken Cook of the Environmental Working Group in Washington told Reuters other Senate proposals would do a better job of protecting the land. And Tim Searchinger of New York-based Environmental Defense said Harkin's plan could potentially only spend $3.5 billion/year of the $4.4 billion proposed, an outcome similar to the House version of the bill that environmentalists opposed.

CRN Organizing Voluntary Industry Standards for Omega-3 EPA and DHA

The Washington-based Council for Responsible Nutrition (CRN) is in the process of developing voluntary standards that will cover methods of analysis, nomenclature, and quality standards for long-chain omega-3 EPA and DHA. Once completed, the proposal by CRN will be distributed for comment from standard-setting organizations, regulatory officials, industry members, consumer groups and health professionals. A working group on specific proposals for the standards will meet during SupplySide West in Las Vegas at the end of November. For information contact Annette Dickinson at 202.872.1488.

New Health and Wellness Oriented Pharmacy Looking to Expand

Pharmaca Integrative Pharmacy, based in Boulder, Colo., recently completed a private financing placement of ""several million dollars to further accelerate our growth plans,"" says Co-CEO Dale Schwartz. With two stores in Boulder and one each in Portland, Ore., and Mill Valley, Calif., the new integrative drug store chain is looking to expand during 2002 at a rate of about one store a month, aiming for a national presence of approximately 200 stores within four to five years, according to Schwartz.

Pharmaca combines the prescription drug services of a modern pharmacy with natural supplements and skin care products, as well as homeopathy and naturopathy products. Each store is staffed with trained professionals from alternative healthcare specialties to give customers access to knowledgeable experts, according to Co-CEO Barry Perzow.

Schwarz, formerly with Ribozyme Pharmaceuticals, a Boulder-based biotech company, also reports that Pharmaca has entered contracts to acquire two more independent pharmacies in the Pacific Northwest. In addition to Schwartz and Perzow, the company's cofounders include Don Summerfield, VP of merchandising, and Russell Precious, VP of design.

For more information visit www.epharmaca.com

Stocks & Financial News:

Hansen Natural Corp. (HANS) has reported 3Q01 sales of $26.2 million, up 15.3 percent from the same period last year. 3Q01 net income was $1.3 million or $.12/diluted share vs. 3Q00 net income of $1.4 million or $.13/diluted share.

Gum Tech International Inc. (GUMM) posted a 3Q01 net loss of $101,000 or $.01/share vs. a 3Q00 net loss of $476,000 or $.05/share. 3Q01 net sales reached $2.7 million, a 122 percent increase from the company's $1.2 million in sales in 3Q00.

Odwalla Inc. (ODWA) announced 4Q01 net sales of $30.6 million vs. 4Q00 net sales of $32.9 million. 4Q01 net income was posted at $534,000 or $.05/share vs. a 4Q00 net loss of $265,000 or $.02/share. Coca Cola Co. (KO) signed a deal in late October to acquire the natural juice company for approximately $181 million.

Pacific Laboratories Inc. (PHLI) posted 3Q01 net income of $19,714 or $.00/share vs. 3Q00 net income of $27,991 or $.01/share. Revenues were $1.3 million in 3Q01 vs. $1.5 million for the same period in 2000.

Nu Skin Enterprises Inc. (NUS) has announced a quarterly dividend of $.05/share for all classes of common stock, to be paid on Dec. 20 to all stockholders of record as of Dec. 4.

Spectrum Organic Products Inc. (SPOP) has reported a net income of $195,900 for 3Q01 vs. a net loss of $636,300 for the same period last year. Sales were $11.3 million vs. $11.4 million for 3Q00, a decrease of 0.7 percent. The company attributes the decline to the discontinuation of specific product lines.

A group of private investors has purchased $760,000 of stock in Cetalon Corp. (CETA).

Leiner Health Products of Carson, Calif., announced it has reached an agreement with its primary investors on terms of a new equity investment, and with its bank lenders on the terms of comprehensive financial restructuring. Under the agreement, a group of Leiner's equity investors, led by Greenwich, Conn.-based North Castle Partners, will invest $20 million in the company.

Advantage Marketing Systems Inc. (AMM) has reported a net income of $11,705 or $.00/share for 3Q01 vs. a net income of $95,972 or $.02.share in 3Q00. Net sales were $6.6 million vs. $6.8 million last year.

SafeScience Inc. (SAFS) has changed its name to GlycoGenesys Inc. Stock trading commenced under the new name and the symbol GLGS on Nov. 7.

Following the release of below-average 3Q01 profits, shares in Dutch food group Numico NV dropped 17.3 percent to $23.90 euros ($21.44 U.S) on Wednesday. The company attributes the drop to weak U.S. vitamin and nutritional supplement sales.

NBTY Inc. (NBTY) returned 4Q01 net income of $10 million or $.15/diluted share vs. an income of $13 million or $.19/diluted share in 4Q00. Net sales for 4Q01 rose 19 percent to $211 million vs. approximately $177 million a year ago. The company cites a number of new stores that have not yet had time to reach profitability as the reason for the income decline.

Briefs:

Zila Inc. (ZILA) is selling its Zila Dental Supply division to Henry Schein Inc. (HSIC) for approximately $13.8 million in cash and notes. The company has also signed a definitive agreement with Sacramento, Calif.-based PracticeWares Inc. by which the company will take possession of ZILA's mail-order operations.

United Natural Foods Inc. (UNFI) has announced that its subsidiary, Albert's Organics Inc., has purchased Louisville, Colo.-based Boulder Fruit Express, which provides organic produce and perishables to a market area that includes Colorado, New Mexico, Kansas, Nebraska and Iowa. Terms of the deal were not disclosed.

According to a report in Business Week Magazine, Vermont Pure Holdings Ltd. (VPS) may be a takeover target in the coming months. Shares of VPS closed at $3.92/share on Nov. 7. In related news, the company has begun a two-year program with the National Alliance of Breast Cancer Organizations (NABCO) by which the company will promote breast cancer awareness and early detection.

Berkeley, Calif.-based Clif Bar Inc. announced it would extend its two-year sponsorship deal with the U.S. Postal Service Pro Cycling Team until 2004. During the 2001 season U.S. Postal cyclists consumed 8,500 Clif Bars, 5,000 Luna Bars and 14,000 packs of Clif Shot.

PharmaNutrients Inc. of Lake Bluff, Ill., has entered into a licensing agreement with the Office of Technology Commercialization at Purdue University through which PharmaNutrients will be entitled to use the school's patent on the application of conjugated linoleic acid (CLA) in helping to maintain healthy blood-sugar levels.

At its October meeting, the National Organics Standards Board approved standards for mushrooms, greenhouse production, and apiculture. The board also approved a report of the Aquatic Animals Task Force but made no move to establish a committee to develop aquaculture standards. Additionally, NOSB has elected Dave Carter as chairman and Jim Riddle as vice-chairman of the board.

Immunex Corp. (IMNX) will begin operating a Rhode Island manufacturing facility recently purchased from American Home Products Corp., in January 2002.

San Antonio, Texas-based H-E-B Grocery has been awarded the 2001 Texas Community Forestry Award of Excellence for a Commercial Building Project for its new Brodie Lane Store, which surpassed local ordinance guidelines by utilizing only nine acres of a 60-acre site and leaving the rest of the land in its natural state. The move preserved approximately 2,676 live oak, cedar elm and hackberry trees. The store's site also features a re-irrigation pond and a roof-top water collection system designed to prevent non-point source pollution while conserving water. Additionally, the store was built with materials containing recycled content, such as framing made from the steel of recycled soup cans.

The 6th Annual Natural Living Benefit held in Boulder, Colo., on Nov. 2 attracted more than 450 natural and sustainable products industry members and raised more than $14,000 for the New York WTC Greenmarket Farmers Fund. The fund was established to assist farmers' market participants whose trucks, equipment and produce were destroyed in the Sept. 11 World Trade Center attacks. In all, 36 natural and sustainable products companies donated money to sponsor the event, and donations from attendees were matched by pledges from Horizon Organic Dairy (HCOW) and Frontier Natural Products Co-op. Other host sponsors included Merrill Lynch, New Hope Natural Media and Wild Oats Markets.

Legal Briefs:

According to AgBiotechBUZZ, governors nationwide signed a total of 22 state bills aimed at activists who destroy genetically modified crops. In general, the measures increase penalties for crop destruction. On the other side of the issue, 11 state legislatures introduced GM labeling measures, but Maine was the only state to pass a law, and that provision merely permits voluntary labeling of GM-free products. Additionally, Massachusetts, North Carolina and Hawaii considered bills to regulate growing and marketing certain GM crops, but passed no laws on the matter.

Following the recent defeat of a bill that would have required that GM foods be labeled, Greenpeace Canada has begun protesting outside a Loblaw Cos. grocery store in Toronto, demanding that the grocer take the initiative to label genetically modified foods sold there.

Research Briefs:

In a presentation at the 4th International Symposium on the Role of Soy in Preventing and Treating Chronic Disease, researchers revealed that a recent evaluation of 147 women concluded that soy protein is effective in reducing inflammation of breast tissue. The study was conducted using a new breast-imaging test that is said to be 15 percent more effective than the mammogram in identifying breast cancer.

According to research reported in the October issue of Cancer Epidemiology Biomarkers and Prevention, regular use of vitamin C may reduce risks of stomach cancer by as much as 40 percent.

According to a survey conducted by the Seattle-based Fred Hutchinson Cancer Research Center, more then 75 percent of pediatric cancer patients in western Washington use alternative therapies to help treat cancer or ease the side effects caused by standard cancer treatments.

The NPD Group's 16th Annual Report on Eating Patterns in America, released in October, shows that Americans are cooking at home more often. Meals eaten at a restaurant (per person per year) dropped from 66 in 1999 to 64 in 2000. Additionally, consumption of take-out meals dropped from 73 to 70 in 2000, while the number of supermarket-purchased frozen meals being served on American tables rose from 9.4 to 11.5 percent of dinners annually between 1999 and 2000.

International Brief:

Tesco Plc, one of the U.K.'s largest supermarkets, wants to grow sales of organic products to $1.45 billion/year within five years, according to Reuters. Tecso's organic sales are worth approximately $291 million/year and if it can reach its target, says Reuters, 5 percent of its sales will come from organic goods. The company plans to introduce new organic products in several categories and is prepared to invest heavily in reaching its goal.