I read this on another list... Distributors of these products are not happy but
consumers have the right to know!
Elyse
http://www.mlmwatch.org/04C/Mannatech/evans.html
MLM Watch Home Page
Mannatech Consumers,
Investors Get Two Tales
David Evans
©1999 Bloomberg, LP
March 5, 1999
Mannatech Inc. tells consumers scientific studies show its nutritional
supplements are safe, promote good health and are even covered by a health
insurance plan.
Investors get another story. In documents for its initial public stock sale last
month, Mannatech told potential buyers it doesnt know if its products are safe,
or even if they work.
Stephen Boyd, a physician who is Mannatechs international medical director,
praises its supplements in a recorded message for prospective customers. He says
the products facilitate the bodys ability to heal itself and are inherently
non-toxic.
Coppell, Texas-based Mannatech warned in the share-sale prospectus, however,
that there is no assurance its products, even when used as directed, will have
the effects intended, or will not have harmful side effects. Why are they
telling consumers one thing and investors another, asked Stephen Barrett, a
medical doctor and chairman of Quackwatch Inc., a not-for-profit organization
that monitors healthcare fraud. A company has a responsibility to determine its
products are safe and effective before it sells them. Company executives
declined to comment about the products, which are sold through more than 400,000
independent agents nationwide and in Australia. The company, which has plans to
expand in the U.K. and Japan, had sales of $122.9 million for the first nine
months of 1998.
Mannatechs president, Sam Caster, speaks on a recorded message about a
patent-pending Mannatech product called Ambrotose, which is blended from eight
sugars and costs $39 for a bottle of 60 tablets.
Healing Aid
Ambrotose transcends all forms of malady because it supplies the body with
those unique components that truly allow the body to heal itself, Caster says.
In its IPO filing, Mannatech cautioned investors that its MVP product, marketed
for weight control, contains ephedrine, a substance the U.S. Food and Drug
Administration has linked to heart attacks, strokes and death. There are no
warnings in the companys literature for consumers about MVP.
The FDA, which has received more than 800 reports of adverse events associated
with ephedrine, has proposed banning its sale for weight control.
While Mannatech says it has an eight-member scientific team, its monthly
magazine recently said there are no double-blind, placebo-controlled studies of
the type used by drug companies establishing that its products work. It said it
spent 0.25 percent of sales on research and development between 1995 and 1997,
or about $667,000.
Mannatech offers consumers insurance called MannaCare that reimburses up to 50
percent of the cost of its supplements. It also provides full medical, dental
and vision coverage for premiums of up to $9,120 annually.
Last Resort
The insurance is offered through U.S. Alliance, a Crofton, Maryland, insurer
that said its not licensed in any state. There wasnt an insurer they met with
in the last three years that would reimburse for Mannatech products, said
Walter Nieves, president of U.S. Alliance. Thats why they came to me.
Nieves said he doesnt need a license because his plan is exempt from state
regulation. Regulators arent sure. Maryland insurance regulators yesterday
ordered Nieves to explain why he isnt violating state criminal law that forbids
insurance sales by unlicensed companies. We regard this as an urgent matter
requiring an immediate response, said Dennis Carroll, Deputy Insurance
Commissioner.
Mannatechs President Caster, 48, is no stranger to product promotion or the
inquires of state officials.
In 1991, his Eagle Shield Inc. claimed its Electracat device would repel insects
and other pests by emitting high-frequency vibrations. The Texas Attorney
General disagreed. The device is a hoax and stands on the same scientific
footing as a perpetual motion machine, said Assistant Attorney General William
Goodman, who won a permanent injunction against Caster and Eagle Shield in
Travis County District Court.
Caster agreed to stop selling the Electracat, not make unsupported scientific
claims about any other product and pay $125,000 in investigative costs.
Energy Product
Two years earlier, Caster and Eagle Shield were accused of deceiving consumers
by claiming their Eagle Shield Radiant Barrier was a scientific breakthrough in
home insulation and provided significant savings in energy costs.
The Texas Attorney General got a court order banning such claims after arguing
the product had been available for more than 40 years and that the energy-saving
claims were false. Caster and the company agreed not to make more false
statements, and Eagle Shield filed for Chapter 11 bankruptcy protection.
Caster co-founded Mannatech in 1993 and took it public last month. Nearly half
the 5.3 million shares went unsold at the self- underwritten initial public
offering on Feb. 11. Only 3.1 million shares were sold, half owned by insiders
including Caster.
So who drove up Mannatechs shares from $8 at the sale to 44 ½ two days later,
valuing the company at more than $1 billion?
John Coffee, professor of securities law at Columbia University Law School,
suspects they were so-called day traders, who bought because the stock was
moving up and they thought they could sell for a quick profit. They werent
interested in the fundamentals, he said.
Mannatechs fundamentals include current liabilities that exceeded assets on
Sept. 30 by $11.3 million. Its net tangible book value before the offering was
$493,000, or 2 cents a share.
Sales increased 11 percent in the first nine months of 1998 from the
year-earlier period. Thats down from the pace of 1996 to 1997, when sales grew
67 percent. Earnings fell 3 percent in the first nine months of 1998. From 1996
to 1997, earnings grew 48 percent annually, with profit in 1997 of $10.6
million, or 50 cents a share.
Mannatechs shares closed today at 11 ½, cutting the companys value to $270
million. Access More Information and Services Above
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