Leiner: Vitamin E is down, joint care is up

Related tags Vitamin e supplements Net income Revenue Generally accepted accounting principles Nutrition

Leiner Health Care buffered the impact of negative publicity about
vitamin E in fiscal 2005 by shifting its focus to joint care
products, writes Jess Halliday.

The manufacturer of store brand vitamins and nutritional supplements reported an overall 3.4 percent increase in sales for the year ended March 27 2005 - $684.9 million compared to $661 million in fiscal 2004.

"The company reacted well to product landscape changes caused by media reports during the third quarter. Sales of vitamin E, down more than 40% for the fourth quarter, were offset by the company's increasing share in the store brand natural joint care segment,"​ said CEO Robert Kaminski.

A meta-analysis published on the Annals of Internal Medicine website in November raised safety questions over the vitamin as it concluded that data from 19 studies demonstrated an increased risk of all-cause mortality from high dose (400IU) vitamin E supplements.

This report was followed in March by the publication of the Hope Too study in the Journal of the American Medical Association​ (vol 293, pp1338-1347), suggesting that vitamin E supplements seemed to raise risk of heart failure in some elderly diabetes and heart disease patients.

"The potential for harm suggested by our findings strongly supports the view that vitamin E supplements should not be used in patients with vascular disease or diabetes mellitus," wrote the study authors.

Dr Annette Dickinson, then-president of the Council for Responsible Nutrition, was one of the voices raised in defense of vitamin E. She noted that since these results have not been seen in other studies, the risks to heart health could be a chance effect.

Nonetheless, the reports brought about a protracted debate as to the safety of vitamin E supplements and have evidently dented consumer confidence and, consequently, Leiner's sales. But at the same time the company was already seeing the effects of media coverage on another, unrelated safety issue - this time to its benefit.

In September the worldwide voluntary withdrawal of Vioxx for arthritic pain, following a study showing a link between the Cox II inhibitor and an increased relative risk for cardiovascular events, caused another media sensation. American osteoarthritis sufferers began casting about for natural ways to ease the pain.

"Last autumn's (September 30, 2004) scientific findings and resulting media on Cox 2 inhibitors left millions of osteoarthritic Americans searching for answers. The need for retailers to ensure high quality reliable natural store brand joint care products for consumers in need of a solution for arthritic pain has led many retailers to turn to Leiner,"​ said Kaminski.

Despite weathering out the media storm in sales, however, heavy losses in operating income and net income suggest that the last 12 months were not all plain sailing.

Operating income took a dive from $69.4 million in 2004 to a loss of $16.6 million and net income fell from $39.06 million to a loss of $49.9 million. However the company said that $88 million of the net income drop was due to charges and income tax associated with its recapitalization in May 2004.

Without these, net income for the year would have been $25.5 million.

Kaminski called FY2005 a "rewarding year"​, but said: "We continue the careful management of operating expenses, which totaled 13.3% of net sales during the fourth quarter versus 16.8% of net sales in the prior-year period, and expect to maintain the fiscal 2005 run rate for the foreseeable future."

He predicted that the product landscape will continue throughout fiscal 2006, as the dust settles on two of Leiner's most definitive markets.

Leiner is not the only company to have been hit by falling sales of vitamin E products. In April GNC reported that sales for its wholesale division, which markets the Nature's Bounty and Sundown brands, fell four percent to $182,556 in 2Q - a decrease which it attributed to the combined effects of negative reports on vitamin E and waning market for low carb related products.

A report published recently by Frost and Sullivan Mass entitled Strategic Analysis of the US Nutraceutical Market​ drew attention to the strong influence of the media on Americans' helath awareness. It blamed controversial news surrounding the safety and efficacy of nutraceuticals for the general revenue decline in the herbal supplements industry between 2000 and 2003, and called on the industry to work to establish cordial relations with the media to ensure that they present an unbiased picture and report on emergent positive developments.

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