Weekly News Update

December 6, 2001

President Bush Signs 2002 Appropriations Bill; FDA Gets Funding for Dietary Supplements

On Nov. 28, President Bush signed HR 2330, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act 2002, which allocates money for the aforementioned during FY02 ending Sept. 30, 2002. The bill also paves the way for increased funding for dietary supplements enforcement.

On Nov. 15, the Senate Agriculture Appropriations Committee had approved an amendment to HR 2330 offered by Sens. Tom Harkin, D-Iowa, and Orrin Hatch, R-Utah, which sought an increase of $3 million for upgrading the adverse reporting system for dietary supplements and $1 million for FDA's Center for Food Safety and Nutrition to enhance enforcement of requirements under the Dietary Supplement Health and Education Act of 1994 (DSHEA) specifically related to the accuracy of product labeling, as well as the truthfulness and substantiation of claims. (For further coverage of this legislation, see the December 2001 issue of Natural Business.)

South Dakota and Missouri Declare Ephedra a Controlled Substance

The South Dakota Department of Health and the Missouri attorney general have concluded that dietary supplements containing ephedra are controlled substances that are being sold in violation of state law, according to the Newport Beach, Calif.-based National Nutritional Foods Association (NNFA). Apparently, retailers in South Dakota are being asked to remove products containing ephedra from the shelves and while NNFA is voicing opposition, it is also warning retailers that there has been enforcement of the alleged violations. For more information visit: www.nnfa.org/services/government/sdephedra.htm and www.nnfa.org/services/government/moephedra.htm.

Codex Committee on Nutrition Doesn't Resolve Supplements Guidelines

After 10 years of discussion, the Codex Committee on Nutrition and Special Dietary Uses still has not been able to resolve two key requirements for establishing internationally acceptable guidelines for the worldwide manufacturing and distribution of dietary supplements. According to a release by the International Alliance of Dietary Supplements Associations (IADSA), the committee, at its November meeting in Berlin, could not resolve discussions surrounding issues such as potential confusion in interpretation of conflicts with regulatory frameworks in Europe, Japan and the U.S., which could lead to varying and more restrictive national regulations worldwide. Separately, there were disagreements about how maximum levels of vitamins and minerals contained in dietary supplements should be measured. IADSA expressed disappointment at the failure of the committee, and Simon Pettman, executive director of IADSA, expressed concern that another meeting had ""passed without substantial progress towards ensuring consumer access to safe supplements.""

Rexall Hires Former Nestle's Executive as CEO

Boca Raton, Fla.-based Rexall Sundown Inc., a wholly owned subsidiary of Dutch-based Royal Numico N.V., announced on Dec. 5 that it has named Ralph Denisco as Rexall's new CEO. Denisco follows interim CEO Greg Horn, chairman of Numico's North America Executive Committee, who replaced Damon DeSantis. Denisco formerly was president and CEO of Nestle Ice Cream Co. He led the management buy-out of Nestle's industrial baking business, Norse, L.P., which was sold to George Weston Ltd. He was also formerly with American Can and Unilever, where he supervised divisions in the food, household and personal care products categories.

Genetically Modified Corn Contaminates Wild Maize in Remote Region of Mexico

Reuters has reported that scientists from the University of California at Berkeley have discovered that wild maize grown in the Sierra Norte de Oaxaca in Mexico, a remote region in southeastern Mexico, has been contaminated by genetically modified (GM) corn. Ignacio Chapela and David Quist from UC Berkeley found traces of transgenic DNA in the native corn, which was reported for the first time in the science journal Nature. Chapela was quoted as saying, ""This is very serious because the regions where our samples were taken are known for their diverse varieties of native corn, which is something that absolutely needs to be protected."" The scientist noted that the nearest GM corn to the contaminated crop is 60 miles away.

Following the news of the discovery, environmentalists called for an immediate global moratorium on GM crops. Despite this, scientists from Britain's John Innis Institute, a plant-research laboratory, noted that further research was needed before a moratorium should be considered. Mexico banned planting transgenic maize in 1998 but it is still imported from the U.S., according to Reuters.

UNFI Shows 14 Percent Sales Increase for 1Q

United Natural Foods Inc. (UNFI) announced 1Q02 net sales of $280.3 million, up 14.8 percent from 1Q01 sales of $244.1 million. 1Q02 net income was posted at $4.9 million, or $.26/share vs. 1Q01 net income of $3.3 million, or $.18/share. Separately, UNFI held its annual shareholders meeting on Dec. 3 in Denver where it elected current directors Thomas B. Simone and Gordon D. Barker to three-year terms. Additionally, the appointment of independent accounting firm, KPMG LLP to examine the company's financial statements for FY02 was ratified.

Adams Harkness & Hill analyst Scott Van Winkle said that AHH reiterated its Strong Buy rating on UNFI with a $25 near-term price target and initiated a 12-month price target of 20x 2003 earnings of about $1.50 or $30, based on market-share gains, new business at Whole Foods Market (WFMI), acquisition opportunities in organic produce and new facilities coming on in early 2002.

More Stocks & Financial News:

London-based healthcare firm, Goldshield Group, says that despite a drop in U.S. sales, due to the anthrax scare, it has posted a 34 percent rise in first-half profits, according to Reuters. The sales of vitamins and nutritional products in the U.S. have dropped approximately 15 percent since anthrax spores were found in the U.S. The company's three U.S. offices are in regions where anthrax was found--Florida, Maryland and New Jersey.

Lifeway Foods Inc. (LWAY) announced a stock-repurchase program of up to 50,000 shares of the company's common stock.

Gardenburger Inc. (GBUR) posted 4Q01 revenues of $15.2 million vs. 4Q00 revenues of $16.6 million and a 4Q01 net loss of $1.2 million or $.13/share vs. a 4Q00 net loss of $20.4 million or $2.28/share. For FY01, GBUR announced a $7.2 million net loss vs. a FY00 net loss of $32.7 million.

Merger & Acquisition Activity:

Archer Daniels Midland Co. announced it has increased its ownership in the Hamburg, Germany-based Alfred C. Toepfer International, a merchandiser and supplier of oil seeds, fee grains and related products, and InTrade, a European holding company. The terms of the increased ownership will mean that ADM will acquire an additional 10 percent of InTrade stock, giving it 60 percent ownership of the company. ADM's ownership of Toepfer International increased to 80 percent.

Knowledge Networks Inc. (KWNR) has signed a letter of intent to acquire Essentia Water Inc. based in Phoenix. Essentia manufactures and distributes enhanced bottled water in 40 states nationwide and has projected year-end revenues of $2.9 million.

A.D.A.M. Inc. (ADAM) announced it has acquired Integrative Medicine Communications Inc., a wellness and alternative medicine-information company based in Newton, Mass. The terms of the deal provide that ADAM will issue 470,000 shares of its common stock for the outstanding shares of Integrative Medicine. ADAM shares closed at $2.82 on Dec. 5.

Harmony Trading Corp. (HRMY), a direct seller of women's apparel and accessories, has signed a letter of intent to acquire nutraceutical manufacturer Nuvo Way Inc. Terms of the deal were undisclosed.

Briefs:

After shutting its virtual doors in 2000, Mothernature.com has re-launched its website. The site is being run under new management-N.Y.-based Naturalist.com, an environmental-based online network of websites serving the Healthy Living market. At press time, calls to Naturalist.com were not returned.

Lake Bluff, Ill.-based PharmaNutrients Inc. announced it has entered into an exclusive licensing agreement with Oklahoma State University's Office of Intellectual Property and Technology for the institution's patent on the use of conjugated linoleic acid (CLA) preparation of phytosterol esters. CLA is a naturally occurring fatty acid found primarily in milk, beef and dairy products and is part of the omega-3 fatty-acid family.

Vancouver, Wash.-based Cardinal Nutrition announced it will include a certificate of manufacturing origin in all shipments MSM to assure purchasers that it is manufactured in the U.S. at a National Nutritional Foods Association Good Manufacturing Practices-certified facility.

Berkeley, Calif.-based Clif Bar Inc.'s energy bar, LUNA, is now the top-selling brand in the nutrition/energy bar category in grocery stores. Its market share has jumped to 11.6 percent for energy/nutrition bar sales in the 12-week period ending Oct. 20, according to AC Nielsen/SPINS data, while competitor PowerBar's market share declined to 11.3 percent for the same period. Gary Erickson, CEO of Clif Bar Inc., believes part of the company's success is its specific focus on LUNA as a bar that provides what women need, including soy protein, calcium and folic acid.

Northridge Calif.-based Pharmavite, manufacturer of Nature Made vitamins and Nature's Resource herbal supplements, was named the ""2001 Manufacturer of the Year"" by trade magazine Nutritional Outlook. Separately, the company received the ""Retail Excellence Award"" in the over-the-counter natural health category from Drug Store News.

The Minnesota Crop Improvement Association's application to become a ""Designated Certification Organization"" for organic-certification services has been approved by the Minnesota Department of Agriculture.

A new website, the World Initiative for Soy in Human Health (www.wishh.org), launched by the American Soybean Association and other state soybean organizations, is providing a searchable database of nutrition research and programs using soy for individuals with HIV/AIDS. The majority of the information is geared toward emerging-country efforts dealing with malnutrition and HIV infection and includes information on higher levels of protein for people who have HIV/AIDS.

San Diego-based herbal dietary supplements manufacturer Metabolife International Inc., has partnered with 30 radio stations nationwide to give away more than $450,000 worth of Target shopping-spree gift cards to ""American Heroes."" The project invites listeners to fax a letter or send an email nominating a person who puts his or her life on the line everyday in order for the rest of the country to ""live the American dream.""

Phoenix-based Naturally Vitamins has announced that in cooperation with Brunswick, Ga.-based MAP International, it will ship more than $5,000 worth of vitamins and other health supplements through MAP's ""Travel Pack"" program. The program, which the Georgia non-profit relief organization sponsors, collects and ships vitamins, supplements and medical supplies that are requested by relief workers in developing countries.

An article in the Nov. 27 edition of USA Today discusses the notion that purchasing organic products it not simply a way to shop, but a lifestyle choice. It cites several different ways organic marketers are reaching out to consumers, including through airline food, mass-merchants such as Walmart, and even via toys made with organic cotton. The full article can be viewed at: www.usatoday.com/money/general/2001/11/27/organic.htm

People News:

Norway, Iowa and Boulder, Colo.-based Frontier Natural Products Co-op has announced the addition of former Whole Foods Market Inc. (WFMI) President Peter Roy to its board of directors.

Legal & Regulatory Briefs:

The Perrigo Co. (PRGO) has received approval from FDA to manufacture and market two products, an over-the-counter tioconazole ointment used for vaginal yeast infections and migraine-formula tablets.

Nutrition 21 Inc. (NXXI) has filed suit against Designed Nutritional Products Inc. for patent infringement pertinent to the sale of chromium picolinate.

Research Briefs:

Two studies published in The New England Journal of Medicine assert that vitamin B could reduce the risk of heart attacks as well as surgery for individuals with coronary artery disease. One study found that subjects who had undergone angioplasty to unblock arteries and took supplements of vitamin B succeeded in keeping blood vessels from blocking again, while a separate study found that B vitamins combined with a cholesterol-lowering drug lowered rates of heart attacks in patients with coronary artery disease. It also found, however, that large doses of antioxidant vitamins, such as vitamin C and E, that had previously been believed to protect the heart, have no benefit. The studies were conducted at the University of Washington and at the University of California, San Diego.

A researcher at Stanford University, James D. Brooks, has found that men with low blood levels of selenium are more likely to contract prostate cancer. The study, which was federally sponsored, noted that blood selenium levels decreased with age and that older men with higher levels of the trace element were at lower risk of getting prostate cancer. For more information contact: Stanford University Medical Center at mbrandt@standford.edu.

Duke University released a study on the herb kava, concluding that the herb is safe and effective. The study, ""Adverse Effects Profile on Kava Kava"" published in the October issue of CNS Spectrum, noted that kava offers some advantages such as a better tolerability and lack of physiologic dependence and withdrawal when used for anxiety. The herb also was found to be safe with regard to adverse effects, withdrawal symptoms, heart rate, blood pressure and sexual function.

Researchers at Johns Hopkins University have found that chlorophyllin, a derivative of chlorophyll used as a dietary supplement and food colorant, may reduce the risk of liver cancer and other types of environmentally triggered cancers. For more information visit: www.jhsph.edu/pubaffairs/press/chlorophyllin.htm.